Realizable Total Direct Compensation (Realizable TDC) for each year is the sum of (i) base salary earned during the year, (ii) actual cash bonus earned for the year, and (iii) the value of equity awards granted at the beginning of the applicable year as of October 31, 2019.2020. Stock options are valued based on intrinsic value as of October 31, 2019.2020. RSUs and PRSUs are valued by multiplying the October 31, 20192020 closing share price by (a) in the case of RSUs, the number of shares granted, (b) in the case of Ops PRSUs, by the number of shares earned based on actual performance through the end of the applicable fiscal year and, (b)(c) in the case of TSR PRSUs, the target number projected to beof shares granted (for awards granted in fiscal 2019 and 2020) or the actual number of shares earned based on relative TSR performance through October 31, 20192020 (for TSR PRSUsawards granted in fiscal 2019, the amount earned is assumed to be target)2018). Although achievement levels are determined at the end of the first year for Ops PRSUs, these equity awards generally vest pro-rata over a four-year period and the shares underlying such award are delivered at the end of such period, subject to continued service.
Our executive compensation program is designed to incentivize our NEOs to improve performance and manage risk over the short- and long-term and align the interests of our NEOs with our stockholders.
Key Compensation Elements:
| | | | | | | | | | | | | | | | | | | | |
| | Element | | Time Horizon | | 2020 Performance Measure |
| | | | | | |
| | Element | | Time Horizon | | 2019 Performance Measure |
| | | | | | |
Fixed | | Base Salary | | Short (1 year) | | Individual Performance |
| | | | | | |
At Risk | | Annual Incentive Bonus | | Short (1 year) | | 70% Quantitative Component: Pre-tax Income (PTI Metric) 30% Qualitative Component: Individual/Company Performance |
| PRSUs | | Medium (3-4 years) | | PTI Metric (25%) Gross Margin (Margin Metric) (25%) Units Delivered (Units Metric) (25%) Relative TSR (25%) |
| Stock optionsRSUs | | LongMedium
(104 years) | | Stock Price Performance |
| | | | | | |
Fixed | | Retirement Benefits (SERP) | | Long (payable following retirement) | | Individual Performance |
Other Key Features of Our Executive Compensation Program: |
| |
| |
Strong pay-for-performance | No guaranteed incentive payments |
Extensive stockholder engagement | No tax gross-ups |
Annual Say on Pay vote | No employment agreements |
Individual caps on annual and long-term incentive awards | TSR PRSUs capped at 125% if TSR is negative |
No new single-trigger equity awards | No stock option repricing |
Fiscal 2020 Performance Metrics for Long-Term Incentive Compensation Awards
As described above, almost halfapproximately 42% of our CEO's annual targeted total direct compensation isin fiscal 2020 was in the form of PRSUs. Performance iswas measured under the PRSUs based on the metrics described in the table below.
|
| | | | | | | | | | | | | |
2019 PRSU Metrics | Weight | Performance Period | Vesting Period |
| | | | |
PTI Metric | The PTI metric is used because it captures the overall profitability of the enterprise before taxes and includes the results of our joint ventures and non-homebuilding activities, as well as SG&A expense. Certain adjustments are made to GAAP pre-tax income for compensation purposes.purposes (see page 42). | 25% | 1 Year | 4 Years |
Margin Metric | The homebuilding margin metric measures the gross margin of our homebuilding operations and reflects our ability to profitably and efficiently execute on this core business. Certain adjustments are made to GAAP gross margin for compensation purposes.purposes (see page 42). | 25% | 1 Year | 4 Years |
Units Metric | Units delivered measures the number of homes that are delivered to home buyers during the fiscal year. It is a measure of our ability to grow our core business. | 25% | 1 Year | 4 Years |
Relative TSR | Measures relative TSR compared to our Peer GroupTSR peer group over three consecutive fiscal years.years (see page 43) | 25% | 3 Years | 3 Years |
For our continuing NEOs, PRSUs based on operational metrics and relative TSR continue to constituteconstituted a key component of compensation.compensation in fiscal 2020. As it has done in the past, the Compensation Committee
continued to include a one-year performance period for awards of Ops PRSUs, although the awards generally vest on a pro-rata basis over four years and shares underlying the award are delivered at the end of such period, subject to continued service. The Compensation Committee believes that a one-year performance period is appropriate for these awards due to the cyclical nature of the residential real estatehomebuilding industry and the challenges inherent in making long-term forecasts. A one-year performance period also provides
executives a clear line of sight linking pay and performance, with the longer four-year vesting period requiring subsequent service to receive the benefit of the awards. TSR PRSUs vest and shares underlying such awards are delivered at the end of the three-year performance period.
Compensation Philosophy and Objectives
We face competition for talent from many other homebuilders in the markets in which we operate. It is vital to our success and long-term viability that our business continues to be managed by highly experienced, focused, and capable executives who possess the experience and vision to anticipate and respond to market developments. The Compensation Committee’s primary objectives in setting compensation for our NEOs are:
•Incentivize executives to manage risks appropriately while attempting to improve our financial results, performance, and condition over both the short-term and the long-term. The Compensation Committee, by seeking a balance of short-term and long-term compensation, seeks to motivate and reward our NEOs for decisions made today that may not produce immediate or short-term results, but are intended to have a positive long-term effect.
•Align executive and stockholder interests. The Compensation Committee believes that the use of equity compensation, including the use of PRSUs as a key component of executive compensation, is a valuable tool for aligning the interests of our NEOs with those of our stockholders and to reward actions that demonstrate long-term vision.
•Set compensation levels that are competitive to attract, motivate, and reward the highest quality individuals to contribute to our goals and overall financial success. By keeping compensation competitive during times of growth as well as contraction, the Compensation Committee attempts to retain executives through the phases of the real estatehomebuilding market cycle.
•Retain executives and encourage continued service. It is important that we concentrate on retaining and developing the capabilities of our current leaders and emerging leaders to ensure that we continue to have an appropriate depth of executive talent.
•Use pay practices that support good governance.
| |
◦ | We employ our NEOs at will and do not enter into individualized employment agreements. |
| |
◦ | We do not provide excise tax gross-ups. |
| |
◦ | We do not provide guaranteed incentive payments. |
| |
◦ | Perquisites are limited, and we do not provide tax gross ups on perquisites. |
| |
◦ | Incentive compensation, including stock-based compensation, is subject to a clawback policy. |
| |
◦ | We have policies that prohibit directors and NEOs from hedging and pledging Company shares (other than with respect to pledges of a portion of Mr. Toll's ownership interest). |
| |
◦ | We have stock ownership guidelines under which our NEOs and directors are expected to acquire and hold a meaningful level of stock ownership in the Company. |
| |
◦ | We have an independent Compensation Committee consultant. |
◦We employ our NEOs at will and do not enter into individualized employment agreements.
◦We regularly engage with stockholders to receive input on executive compensation matters.
◦We do not provide excise tax gross-ups.
◦We do not provide guaranteed incentive payments.
◦Perquisites are limited, and we do not provide tax gross ups on perquisites.
◦Incentive compensation, including stock-based compensation, is subject to a clawback policy.
◦Incentive awards are subject to individual caps.
◦Equity awards granted since December 2019 include double-trigger vesting protections.
◦Our Omnibus Incentive Plan prohibits option repricing without stockholder approval.
◦We have policies that prohibit NEOs from hedging and pledging Company shares.
◦We have stock ownership guidelines under which our NEOs are expected to acquire and hold a meaningful level of stock ownership in the Company.
◦We have an independent Compensation Committee consultant.
Consideration of Say on Pay Results
Our executive compensation program has consistently received strong support from our stockholders. See "Proposal Three—Advisory and Non-Binding Vote on Executive Compensation (Say on Pay)" on page 15 for the results of our annual Say on Pay votes held in the past five years. We conduct an annual outreach to our largest stockholders and proxy advisory firms to receive feedback regarding our executive compensation program. During fiscal 20192020 and 2020,2021, this effort included access to both management and, when requested,in certain instances, our Compensation Committee or Governance Committee chair, in order to better understand stockholder and other constituent views. Among other matters, we obtained feedback on the executive compensation design changes described below.
At our 20192020 Annual Meeting of Stockholders, 96%97% of stockholders voting on our Say on Pay proposal voted in support of the compensation of our NEOs. The Compensation Committee viewed the results of our 20192020 Say on Pay vote as an affirmation by our stockholders of the Company's executive compensation program.
The Compensation Committee continually assesses the effectiveness of our executive compensation program and from time to time makes changes - taking into account the business environment in which the Company operates and other factors impacting the Company, developments in pay practices, discussions with stockholders and other factors it deems appropriate.
Fiscal 20192020 Design Changes
For fiscal 2019,2020, the Compensation Committee approved the following significant changes to the design of the Company's executive compensation program:
Double-trigger change-of-control provision•Elimination of Stock Options in equity awards. Beginning with equity awards granted in December 2019, a double-trigger mechanism applies to each type of equity award, which requires an actual or constructive termination in connection with the occurrence of a change-in-control event for vesting of equity awards to accelerate.
For the annual incentive bonus, the formulaic component of the award was increased to 70%from 60%. Performance continues to be judged under the formulaic component based on achievement relative to the PTI Metric. TheLong-Term Incentive Compensation Committee determined that the increase in the formulaic portion of the award would enhance the objectivity and transparency of the award, while retaining for the Committee an appropriate level of discretion based on its qualitative judgment of individual and Company performance, which the Committee believes is important in light of the cyclical nature of the residential real estate industry.
The payout range for the annual incentive bonus and all PRSUs was conformed to 75% to 150% of target for all awards (assuming threshold performance is met). Previously, assuming threshold performance was met, the payout range was 80% to 120% of target for the annual incentive bonus, 90% - 110% of target for Ops PRSUs, and 50% - 200% of target for total TSR PRSUs. Conforming the payout ranges to 75% - 150% of target was intended to increase the leverage embedded in our incentive compensation vehicles and further strengthen the link between pay and performance. Additionally, except for TSR PRSUs (for which threshold performance remained unchanged at the 25th percentile), the minimum threshold for payout to occur under each incentive compensation vehicle is 80% of target, with maximum achievement determined at 120%. Previously, the performance range for the annual incentive bonus and Ops PRSUs were identical to the applicable payout range.
Adoption of a formal severance plan for key executives.Program. In recognition of the prevalence of severance plans among our peers, the need to attract and retain talented executives and to help ensure key executives' continued attention and dedication to the Company in connection with certain transactions, the Company adopted the Toll Brothers, Inc. Executive Severance Plan (the "Severance Plan") effective in March 2019. Under the Severance Plan, certain executives, including our NEOs, are entitled to cash severance payments upon specified separations from employment, with multiples for our NEOs ranging from 1.5 to 2.5 times base salary and target bonus, and with a double-trigger requirement for any benefits to be paid following a termination in
connection with a change of control. For more information on the Severance Plan, see "Benefits and Perquisites - Executive Severance Plan" on page 45.
Increased multiples in the Stock Ownership Guidelines. In December 2018, the Board approved an increase in the stock ownership multiples applicable to executive officers and directors:
| |
◦ | For our CEO, the multiple was increased from 3.0x to 6.0x base salary. |
| |
◦ | For our other NEOs, the multiple was increased from 1.0x to 3.0x base salary. |
| |
◦ | For our directors, the multiple was increased from 3.0x the total annual cash retainer to 5.0x the annual base cash retainer. |
As of October 31, 2019, all of our officers and directors were in compliance with our Stock Ownership Guidelines, taking into consideration applicable grace periods for recently appointed officers and directors.
Fiscal 2020 Changes
For fiscal 2020, the Compensation Committee replaced grantsapproved the replacement of stock optionsoption grants with grants of service-based RSUs. For fiscal 2020, these RSUs as part of the long-term incentive compensation program. These RSUs will continue to constituteconstituted approximately 30% of the grant date fair value of NEOeach NEO's long-term incentive compensation awards. The Compensation Committee believes that RSUs will better link executive compensation to the results earned by stockholders, help build executive stock ownership, and better attract, incentivize and retain executive talent. The remainder of each NEO's long-term incentive awards will continue to bewere granted in the form of PRSUs.
•Double-trigger change-of-control provision in equity awards. Equity awards granted in December 2019 and thereafter will be subject to double-trigger vesting, meaning an award holder must incur an actual or constructive termination of employment in connection with the occurrence of a change-in-control event for the award holder's equity awards to accelerate vesting.
Fiscal 2021 Design Changes
For fiscal 2021, the Compensation Committee approved the following significant changes:
•Change in performance metrics included in the long-term incentive compensation program. Beginning with equity awards granted in December 2020, the performance metrics used in the long-term incentive compensation program will consist of the following three metrics:
◦Units Metric (1/3 of PRSU target value). The Units Metric is the same metric as described above under "Fiscal 2020 Long-Term Incentive Compensation Awards."
◦Margin Metric (1/3 of PRSU target value). The Margin Metric is the same metric as described above under "Fiscal 2020 Long-Term Incentive Compensation Awards."
◦Return on Equity Metric (1/3 of PRSU target value). The ROE Metric measures the Company's return on equity over a three-year period. It is calculated by dividing the
Company's average GAAP net income over a three-year period by the Company's average GAAP stockholder's equity over the same timeframe.
In selecting these performance metrics, the Compensation Committee determined that the existing Units and Margin Metrics were effective vehicles in incentivizing management to profitably grow the Company's core homebuilding business at suitable gross margins. It decided to remove the PTI Metric because it is used as the primary metric in determining performance under the annual incentive compensation program. In replacing the TSR Metric with an ROE metric, the Compensation Committee determined that management is better positioned to influence the Company's ROE as compared to TSR and that the adoption of the ROE metric will better align management and stockholder interests in generating strong returns and increasing capital efficiency.
•Change in mix of equity awards. Beginning with equity awards granted in December 2020, equity awards in the long-term incentive compensation program will consist of 50% RSUs and 50% PRSUs. In addition to better aligning the design of our long-term incentive compensation program with that of our peers, the Compensation Committee believes that this mix strikes the right balance between performance-based awards and service-based awards while maintaining a strong link between executive compensation and the returns experienced by our stockholders.
FISCAL 20192020 COMPENSATION DECISIONS
Cash Compensation Decisions
Base Salary
When establishing annual base salaries, the Compensation Committee takes into account each NEO’s performance, considering their role and responsibilities and, to the extent useful, the range of compensation of comparable executives within our Peer Group.primary peer group. The Compensation Committee believes that its compensation objectives are more effectively met when most of an executive’s compensation package is composed of at-risk performance-based bonuses and long-term incentive compensation, rather than fixed compensation such as base salaries.
2019Salaries. In early fiscal 2019, the Compensation Committee determined that, for calendar year 2019, the base salary for Messrs. Connor and Hartman would remain unchanged at $1,000,000, and the base salary for Mr. Yearley would be increased by 5% to $1,050,000. The increase in the base salary for Mr. Yearley for calendar year 2019 was based on a review of peer salaries and consideration of Mr. Yearley's performance in fiscal 2018.
2020Salaries. In early fiscal 2020, the Compensation Committee determined that, for calendar year 2020, the base salary for Mr. Connor would remain unchanged at $1,000,000, and the base salary for Mr. Yearley would be increased by approximately 5% to $1,100,000. The increase in the base salary for Mr. Yearley for calendar year 2020 was based on a review of peer salaries and consideration of Mr. Yearley's performance in fiscal 2019. In connection with the promotion of Messrs. Boyd and Parahus to the roles of Co-Chief Operating Officer effective November 1, 2019, in fiscal 2019, the Compensation Committee reviewed and approved their respective compensation arrangements for fiscal 2020 and determined that Mr. Boyd would receive an annual base salary of $1,000,000 and Mr. Parahus an annual base salary of $850,000. During fiscal 2020, each NEO voluntarily agreed to a three-month partial reduction in salary during the period when the impact of the COVID-19 pandemic on the Company's operations and financial condition remained highly uncertain.
2021 Salaries. In early fiscal 2021, the Compensation Committee determined that, for calendar year 2021, the base salary for Mr. Yearley would be increased to $1,150,000. The increase in the base salary for Mr. Yearley for calendar year 2021 was based on a review of peer salaries and consideration of Mr. Yearley's performance in fiscal 2020. The Compensation Committee determined that the base salary for Mr.Messrs. Connor and Boyd would remain unchanged in fiscal 2020. No2021, and Mr. Parahus' annual base salary is reflected for Mr. Hartman, who retired effective December 31, 2019, or for Mr. McDonald, who resigned effective December 31, 2019.would be increased to $875,000, reflecting his significant contributions to the Company's operational performance in fiscal 2020 and more closely aligning the salaries of the Co-Chief Operating Officers.
| | | | Calendar 2020 Salary | | Calendar 2019 Salary | | Calendar 2018 Salary | | Calendar 2021 Salary | | Calendar 2020 Salary (Approved) | | Calendar 2020 Salary (Actual) | | Calendar 2019 Salary |
| | | | | | | | | | | | | | |
Douglas C. Yearley, Jr. | | $ | 1,100,000 |
| | $ | 1,050,000 |
| | $ | 1,000,000 |
| Douglas C. Yearley, Jr. | | $ | 1,150,000 | | | $ | 1,100,000 | | | $ | 1,060,769 | | | $ | 1,050,000 | |
James W. Boyd | | James W. Boyd | | $ | 1,000,000 | | | $ | 1,000,000 | | | $ | 973,077 | | | NA |
Martin P. Connor | | $ | 1,000,000 |
| | $ | 1,000,000 |
| | $ | 1,000,000 |
| Martin P. Connor | | $ | 1,000,000 | | | $ | 1,000,000 | | | $ | 973,077 | | | $ | 1,000,000 | |
Richard T. Hartman | | NA |
| | $ | 1,000,000 |
| | $ | 1,000,000 |
| |
John K. McDonald | | NA |
| | $ | 700,000 |
| | NA |
| |
Robert Parahus | | Robert Parahus | | $ | 875,000 | | | $ | 850,000 | | | $ | 822,500 | | | NA |
Incentive Awards
Fiscal 20192020 Performance Targets
In setting performance metric target levels for both the annual incentive bonus and for long-term incentive awards, at the beginning of each fiscal year, the Compensation Committee considers the Company's forecasted results and prior performance, economic and industry conditions, and the level of performance required by our NEOs to deliver against target levels, with the goal of appropriately aligning payout opportunities with performance expectations.
As noted above, as a resultat the outset of macroeconomic conditions impacting the housing industry, late in fiscal 2018 and into fiscal 2019, we, along with many of our competitors, saw a moderation in demand for new homes as well as margin compression on contracts signed during this period. These conditions created a wide range of possible scenarios for the Company's full year results, and, as a result,2020 when the Compensation Committee delayedapproved the setting of performance goalsmetrics applicable to the fiscal year, conditions were favorable for the annual incentive awardhome building industry, with solid economic fundamentals such as low interest rates, healthy consumer confidence, strong household formations and Ops PRSUs until January 28, 2019. In setting performance goals,a limited supply of homes underlying the market. Within this context, the
Compensation Committee approved target performance metrics that it considered a number of factors, including prior year results, economic and industry uncertainty existing at the time, the Company's backlog, and forecasted results.challenging yet achievable.
Fiscal 20192020 Annual Incentive Bonus
In JanuaryDecember 2019, the Compensation Committee determined that, in calculating the annual incentive bonus amounts to be paid for fiscal 20192020 performance, payout of 70% of the annual incentive bonus would be based ontargeted to achievement of the formulaic PTI Metric target described below. Each NEO, other than Mr. McDonald (who did not become an executive officer until after the annual incentive program was approved), would be eligible to earn theThe remaining 30% of the target-level bonus throughwould be targeted to the Compensation Committee's qualitative assessment of individual and Company performance infor fiscal 2019. 2020. Based on the Compensation Committee's review of the fiscal year 2019 performance of each executive, as well as a review of each executive's compensation relative to peers, the Compensation Committee approved increases of approximately 12% to the target bonus opportunity for each of Messrs. Yearley and Connor for fiscal 2020.
As detailed below, based on the formulaic results and qualitative assessment, the total bonuses paid to Messrs. Yearley,
Boyd and Connor for fiscal 20192020 were approximately 106%100% of target, and the total for Mr. HartmanParahus was approximately 104%107% of target. Mr. McDonald resigned effective December 31, 2019 and did not receive an annual incentive award in respect of fiscal 2019.
Formulaic Bonus Component. The Compensation Committee met in early fiscal 20202021 and certified that the PTI Metric was achieved at 99.8291.1% of target for fiscal 20192020 performance, as set forth below:in the table below. The PTI Metric is calculated in the same manner for both the annual incentive bonus and for PRSUs (see page 42).
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2020 Annual Incentive Bonus Formulaic Bonus Component |
| | Minimum (80%) | | Target (100%) | | Maximum (120%) | | Actual |
| | | | | | | | |
PTI Metric: | | $ | 579,200,000 | | | $ | 724,000,000 | | | $ | 868,800,000 | | | $ | 659,837,000 | |
|
| | | | | | | | | | | | | | | | |
| | 2019 Annual Incentive Bonus Formulaic Bonus Component |
| | Minimum (80%) | | Target (100%) | | Maximum (120%) | | Actual |
| | | | | | | | |
PTI Metric | | $ | 664,000,000 |
| | $ | 830,000,000 |
| | $ | 996,000,000 |
| | $ | 828,516,000 |
|
Based on achievementthe performance level achieved at 99.82%91.1% of target, the Compensation Committee determined thatPTI target, the formulaic component of the annual incentive bonus amounts for fiscal 20192020 for each NEO werewas earned at 88.9% of their target award amount, as follows:
| | | | Target Formulaic Bonus Component Amount | | Actual Formulaic Bonus Component Award | | Target Formulaic Bonus Component Amount | | Actual Formulaic Bonus Component Award |
| | | | | | | | |
Douglas C. Yearley, Jr. | | $ | 2,065,000 |
| | $ | 2,060,457 |
| Douglas C. Yearley, Jr. | | $ | 2,310,000 | | | $ | 2,054,052 | |
Richard T. Hartman | | $ | 749,700 |
| | $ | 748,051 |
| |
James W. Boyd | | James W. Boyd | | $ | 840,000 | | | $ | 746,928 | |
Martin P. Connor | | $ | 749,700 |
| | $ | 748,051 |
| Martin P. Connor | | $ | 840,000 | | | $ | 746,928 | |
Robert Parahus | | Robert Parahus | | $ | 560,000 | | | $ | 497,952 | |
Qualitative Assessment Bonus Component. In its qualitative evaluation of performance for fiscal 2019, the Compensation Committee considered actual results as compared to performance targets set at the beginning of the fiscal year. As part of this assessment,2020, the Compensation Committee considered the performance of each NEO during the year. As noted above, fiscal year 2020 was particularly challenging due to the impacts of the COVID-19 pandemic and required extraordinary efforts from our NEOs. The Compensation Committee considered these efforts, along with the fact that the pandemic and its consequences were not anticipated by the Compensation Committee at the time performance targets were determined and were generally outside of the NEOs' control. The Compensation Committee also considered the following factors, including each NEO's contribution to these results:factors:
Delivery•Despite the impacts of 8,107the COVID-19 pandemic and the related widespread reductions in economic activity, which adversely affected business during March and April, the Company delivered 8,496 homes to its customers in fiscal 2019, which exceeded internal projections and analyst consensus estimates.2020, up 5% compared to the prior year period.
•Once the economy absorbed the initial impacts of the pandemic, demand for new homes rebounded in the second half of the fiscal year. The Company entered foursuccessfully adapted to this changing demand environment and produced record net signed contracts of $8.00 billion, or 9,932 homes, the highest value in its history, and ended the fiscal year with a backlog of $6.37 billion and 7,791 homes, the highest totals in 15 years.
•During the year, the Company quickly adapted its operations to respond to the pandemic. It developed ways of operating remotely, communicating virtually with customers, and incorporating new stateshealth and sevensafety practices into all aspects of the business. The Company's priority was to keep employees, trade partners and customers safe while continuing to sell, build and deliver homes. It developed virtual processes to maintain the high-quality home buying experience that defines the Toll Brothers brand. Many of the innovations that were implemented during this time are expected to have a lasting impact on the efficiency of the Company.
•Throughout the year, the NEOs maintained their focus on the Company's strategic priorities, continuing to expand geographically and by product line and price point. Over the past two years, the Company has expanded into nine new markets in fiscal 2019, includingthe South and West: Atlanta, Georgia through the acquisition of Sharp Residential, LLC,Colorado Springs, Nashville, Portland, Salt Lake City, Tampa, and three South Carolina markets—Charleston, Greenville and Myrtle Beach, South Carolina throughBeach. As the acquisition of Sabal Homes LLC. The Company also opened its first communities in Salt Lake City, Utah, and Portland, Oregon.
Management successfully navigated a challenging market during the first half of the fiscal year while continuingentered new markets, it has continued to diversify the Company's price points and product lines, including by expandingincrease its affordable luxury and active adult communities.product line across its footprint to better capitalize on the growing number of millennials now purchasing homes—many for the first time. Affordable luxury totaled 2,989 homes, or 38.4% of the Company's fiscal year-end 2020 backlog versus 1,756 homes, or 28.8% of backlog at fiscal year-end 2018.
•The Company successfully transitioned the Chief Operating Officer role to its two new co-Chief Operating Officers and continued to integrate, refresh itsand align various other senior management teampositions, including with recent appointments of a new chief marketing officer, president of TBI Mortgagerespect to the Regional and chief accounting officer.
Divisional President structure and the Chief Marketing Officer and General Counsel roles. In connection with the Chief Operating Officer transition, the Company realigned its regional operating structure and appointed three new Regional Presidents and four new Group Presidents.
•In light of the uncertainties presented by the pandemic, the Company accelerated its efforts to improve efficiencies and rationalize overhead expenses by reducing general and administrative expenses. These actions included, among other things, a temporary salary reduction for each NEO, a hiring freeze, and reductions to payroll through a combination of job eliminations and employee furloughs. While these decisions were difficult to make, we believe they will make the Company more efficient in the long term. During fiscal 2020, selling, general and administrative expenses were reduced by $11.8 million compared to fiscal 2019, while the number of homes delivered increased by 5% and net signed contract units increased by 23%.
•The Company also madecontinued to make progress implementing new enterprise resource planning and customer resource management systems.
The Company continued to refine its business portfolio by completing•During a period of great disruption in capital markets, the sale of its golf business and entering the purpose-built single-family rental market in partnership with an experienced operator and a major financial institution.
The Company responsibly managed itsCompany's balance sheet and liquidity.liquidity were responsibly managed, while approximately $690 million was returned to stockholders through dividends and share buybacks in fiscal 2020. The Company ended fiscal 2020 with a solid balance sheet and $3.16 billion in liquidity, including $1.37 billion of cash and $1.79 billion available under the Company's $1.9 billion revolving bank facility. During fiscal 2019,2020, the Company increased its bankmaturity of each of the Company's $1.9 billion revolving credit facility from $1.295 billion to $1.905 billion and extended its maturity to five years along with that of our $800.0$800 million term loan facility. The Company also raised $400.0 million of ten-year 3.8% debt in the public capital markets, a portion of whichfacility was later used to retire $250.0 million of more expensive maturing public debt.extended by one year.
Based on this qualitative assessment of Company performance and each NEO's contributions to these accomplishments, the Compensation Committee determined that the qualitative assessment componentformulaic results were not a fair representation of the annual incentive bonuses forCompany's performance and financial achievements during fiscal 2019
performance would be awarded at2020. It therefore used its judgment to approve awards consistent with the extraordinary efforts of the NEOs in fiscal 2020. The Compensation Committee approved the amounts set forth below.below to bring the total bonus for fiscal 2020 to 100% of target for each of Messrs. Yearley, Boyd and Connor, and to 107% for Mr. Parahus. In increasing Mr. Parahus' total award, the Compensation Committee considered his significant contributions to the Company's operational performance during the pandemic.
| | | | Target Qualitative Assessment Bonus Component Amount | | Actual Qualitative Assessment Bonus Component Award | | Target Qualitative Assessment Bonus Component Amount | | Actual Qualitative Assessment Bonus Component Award |
| | | | | | | | |
Douglas C. Yearley, Jr. | | $ | 885,000 |
| | $ | 1,062,000 |
| Douglas C. Yearley, Jr. | | $ | 990,000 | | | $ | 1,245,948 | |
Richard T. Hartman | | $ | 321,300 |
| | $ | 369,495 |
| |
James W. Boyd | | James W. Boyd | | $ | 360,000 | | | $ | 453,072 | |
Martin P. Connor | | $ | 321,300 |
| | $ | 385,560 |
| Martin P. Connor | | $ | 360,000 | | | $ | 453,072 | |
Robert Parahus | | Robert Parahus | | $ | 240,000 | | | $ | 360,000 | |
Total Fiscal 20192020 Cash Compensation
Total cash compensation (base salary and annual incentive bonus) paid to or earned by our NEOs for fiscal 20192020 is set forth below.
| | | | | | | | | | | | | | | | | | | | |
| | Base Salary | | Annual Incentive Bonus | | Total Cash Compensation |
| | | | | | |
Douglas C. Yearley, Jr. (1) | | $ | 1,060,769 | | $ | 3,300,000 | | $ | 4,360,769 |
James W. Boyd | | $ | 973,077 | | $ | 1,200,000 | | $ | 2,173,077 |
Martin P. Connor | | $ | 973,077 | | $ | 1,200,000 | | $ | 2,173,077 |
Robert Parahus | | $ | 822,500 | | $ | 857,952 | | $ | 1,680,452 |
|
| | | | | | | | | | | | |
| | Base Salary | | Annual Incentive Bonus | | Total Cash Compensation |
| | | | | | |
Douglas C. Yearley, Jr. (1) | | $ | 1,041,667 |
| | $ | 3,122,457 |
| | $ | 4,164,124 |
|
Richard T. Hartman | | $ | 1,000,000 |
| | $ | 1,117,546 |
| | $ | 2,117,546 |
|
Martin P. Connor | | $ | 1,000,000 |
| | $ | 1,133,611 |
| | $ | 2,133,611 |
|
John K. McDonald | | $ | 691,667 |
| | NA |
| | $ | 691,667 |
|
(1) Reflects base salary earned during fiscal 2020. Base salary is paid on a calendar year basis. Mr. Yearley's annual base salary was increased to $1,100,000 effective January 1, 2020. | |
(1) | Reflects base salary earned during fiscal 2019. Base salary is paid on a calendar year basis. Mr. Yearley's annual base salary was increased to $1,050,000 and Mr. McDonald's to $700,000 effective January 1, 2019. |
Fiscal 20192020 Long-Term Incentive Compensation
The design and structure of our long-term incentive compensation program is reviewed annually to ensure that it is appropriate for the size and scope of the Company. In recent years,fiscal 2020, the Compensation Committee has awarded equity compensation to ourthe NEOs in the form of stock optionsRSUs and PRSUs based on a fixed-dollar approach. For awards granted in fiscal 20192020 to Messrs. Yearley and Connor,each NEO, the mix of equity awards was fixed at approximately 70% PRSUs and 30% stock options,RSUs, which reflects a change from the 60%70% PRSU / 40%30% stock option weighting used in the prior year. These revised weightings reflect a heavier orientation towards objective performance criteria in the long-term incentive performance plan. For fiscal 2020,2021, the Compensation Committee determined that it would bea 50% / 50% mix between PRSUs and RSUs strikes the appropriate to grant RSUs in lieu of stock options.balance between performance-based awards and service-based awards while maintaining a strong link between executive compensation and the returns experienced by our stockholders.
For Mr. Hartman, the equity mix described below includes an RSU award that was approved in October 2019 in the amount of approximately $1.5 million. The Compensation Committee approved this award in recognition of Mr. Hartman's performance in fiscal 2019, which included successfully mentoring his two successors and transitioning his Chief Operating Officer responsibilities to them, as well as in recognition of the contributions he has made to the growth and success of the Company over his 40-year tenure.
Mr. McDonald was not an executive officer at the time of the annual equity award grant in December 2018 and therefore did not receive any PRSUs as part of his long-term incentive compensation award. Instead, he received a mix of stock options and RSUs.
The mix of equity awards granted in fiscal 2019 (measured based on grant date fair value as reported in the "Grants of Plan Based Awards" table on page 53) for our NEOs was (in thousands):
| |
(1) | The mix of PRSUs and stock options reflected in the charts above differs from the 70% / 30% mix approved by the Compensation Committee for Messrs. Yearley and Connor primarily because, when determining the number of stock options that are subject to an award, the Company values the stock options for such purpose based on relative grant date fair values of prior stock option awards, as described further under "Fiscal 2019 Long Term Incentive Awards - Stock Options" on page 41. |
Fiscal 2020 Performance Based RSUs
In fiscal 2019,2020, the Compensation Committee approved the grant of PRSUs to each NEO (other than Mr. McDonald). Theseof PRSUs consistedconsisting of Ops PRSUs which comprised 75%(75% of the award,award), and TSR PRSUs which comprised(comprising the remaining 25%).
OpsFiscal 2020 Operational PRSU Performance Metrics
Ops PRSUs are designed to align NEO compensation with the achievement of pre-established growth and profitability goals and accomplishin recent years have accomplished this through the following three equally weighted operational performance metrics:metrics.
•PTI Metric, which captures the overall profitability of the enterprise before taxes and includes the results of our joint ventures and non-homebuilding activities, as well as SG&A expense;
•Margin Metric, which measures the gross margin of our homebuilding operations and reflects our ability to profitably and efficiently execute on this core business; and
•Units Metric, which measures the number of homes that are delivered to home buyers during the fiscal year and is a measure of our ability to grow our core business.
As described above, for fiscal 2021, the Compensation Committee adjusted the performance metrics to eliminate the PTI Metric as an element of the long-term incentive compensation program. However, it remains the performance metric used in our annual incentive compensation program.
In light of market conditions prevailing
When considering appropriate performance metric targets at the beginning of fiscal 2019,2020, the Compensation Committee set the PTI Metric and UnitsMargin Metric performance targets for fiscal 20192020 below target levels for fiscal 20182019 and the Units Metric above the fiscal 2019 target. These targets were intended to reflect lower expected unit sales while continuing to incentivizecontinue incentivizing management to balance sales pace and profitability. In addition,profitability and took into account the Company's 2019 fiscal 2019 Margin Metric reflected a projected increase in sales incentivesyear-end backlog as well as the Company'sits strategic focus on expanding its geographic footprint and diversifying its product offerings to include homes at lowerlines and price points with lower margins.points.
|
| | | | | | | | | | | | | |
| | Ops PRSU Metric(1) Performance Compared to Target |
| | Target (100%) | | Actual |
| | | | | | |
| 2019 | | 2018 | | 2019 | % of Target |
PTI Metric (2)(3) | | $ | 830,000,000 |
| | $ | 931,000,000 |
| | $ | 828,516,000 |
| 99.82% |
% Change vs. Prior Year | | -10.8% | | +8.3% | | | |
Margin Metric (2)(4) | | 23.50% | | 24.00% | | 23.01% | 97.91% |
Change vs. Prior Year | | -50 bps | | -100 bps | | | |
Units Metric | | 7,700 | | 8,200 | | 8,107 | 105.29% |
% Change vs. Prior Year | | -6.1% | | +17.1% | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | Operational PRSU Metric(1) Performance Compared to Target |
| | Target (100%) | | Actual |
| | | | | | |
| 2020 | | 2019 | | 2020 | % of Target |
PTI Metric (2) | | $ | 724,000,000 | | | $ | 830,000,000 | | | $ | 659,837,000 | | 91.14% |
Margin Metric (2)(3)(4) | | 22.00% | | 23.50% | | 21.55% | 97.95% |
Units Metric | | 8,900 | | 7,700 | | 8,496 | 95.46% |
(1) Each performance metric had a threshold level that, if achieved, would earn 75% of the Ops PRSUs allocated to that metric; a target level that, if achieved, would earn 100% of the Ops PRSUs allocated to that metric; and a maximum level that, if achieved, would earn 150% of the Ops PRSUs allocated to that metric. To the extent that actual performance results fell between these levels, the Ops PRSUs earned would be determined by linear interpolation between those levels. If the minimum threshold performance level of 80% of target performance was not achieved for any individual metric, none of the Ops PRSUs would have been earned for that metric.
(2) Subject to certain exclusions, each of the PTI Metric and Margin Metric is calculated in accordance with U.S. generally accepted accounting principles—pre-tax income in the case of the PTI Metric, and revenue and cost of home sales revenues in the case of the Margin Metric. The exclusions consist of the items listed below to the extent not budgeted, disclosed in a press release or conference call and, with respect to the Margin Metric, to the extent included in cost of home sales revenues. These exclusion categories were approved by the Compensation Committee on the grant date of the award:
| |
(1) | Each performance metric had a threshold level that, if achieved, would earn 75% of the Ops PRSUs allocated to that metric; a target level that, if achieved, would earn 100% of the Ops PRSUs allocated to that metric; and a maximum level that, if achieved, would earn 150% of the Ops PRSUs allocated to that metric. To the extent that actual performance results fell between these levels, the Ops PRSUs earned would be determined by linear interpolation between those levels. If the minimum threshold performance level of 80% of target performance was not achieved for any individual metric, none of the Ops PRSUs would have been earned for that metric. |
| |
(2) | The following items, to the extent disclosed in a press release or conference call, are excluded from these performance metrics: |
•Restructuring and severance costs pursuant to a plan approved by the Board, CEO and/or President and Chief Operating OfficerOfficers
•Gains or losses from litigation or claims, natural disasters, or terrorism
•Effect of changes in laws, regulations, or accounting principles
•The gain or loss from the sale or discontinuance of a business segment, division, or unit and the corresponding budgeted, unrecognized pre-tax income and margin for this business segment, division, or unit
In addition,The following exclusion categories, to the following items areextent not budgeted, were also excluded from these performance metrics:approved by the Compensation Committee on the grant date:
•Write-down or impairment of assets or joint venture investments
•Stock-based compensation overages or underages compared to budget
•Expense of an acquisition
•Gains or losses from derivative transactions or the early retirement of debt
| |
(3) | Includes a gain of approximately $23 million related to the sale of the Company's golf business, which the Compensation Committee determined was appropriate to include in both the annual incentive plan and Ops PRSU results as the sale had been included in the target setting process. |
| |
(4) | Excludes interest expense in homebuilding cost of revenues |
(3) The Compensation Committee also pre-approved the exclusion of interest expense in home sales cost of revenues from the Margin Metric.
(4) In the fourth quarter of fiscal 2020, the Company reclassified third-party brokerage commissions from cost of home sales revenue to selling, general & administrative expense ("SG&A"). Because all targets were approved prior to the reclassification, the Target and Actual amounts for the Margin Metric are stated before the reclassification in all periods presented. For fiscal year 2020, the reclassification resulted in an increase of 2 percentage points to the Company's home sales gross margin, and an increase of 2 percentage points to SG&A as a percentage of revenue. For a detailed reconciliation of the impact of this reclassification, see the Form 8-K and related exhibits filed by the Company with the SEC on December 7, 2020.
Based on fiscal 20192020 performance, the Compensation Committee certified that the blended average payout percentage of target shares earned for these metrics was 103.45%93.56% of target. One-fourth of the earned 20192020 Ops PRSUs vested on January 28,December 18, 2020, the first anniversary of the grant date, and the remaining three-fourths remain subject to service-based vesting over the next three anniversaries of the grant date. No shares will be delivered until the fourth anniversary of the grant date.
We believe this demonstrates appropriate target setting by the Compensation Committee. The Compensation Committee believes that it has set Ops PRSU performance targets at levels that have incentivized our NEOs to grow the Company while maintaining a focus on profitability. Historical performance for the Ops PRSU performance metrics are set forth below.
| | | | | | | | | | | | | | | | | |
| Historical Ops PRSU Performance Achievement as a % of Target |
| PTI Metric | | Margin Metric | | Units Metric |
| | | | | |
2020 Ops PRSUs | 91.14% | | 97.95% | | 95.46% |
2019 Ops PRSUs | 99.82% | | 97.91% | | 105.29% |
2018 Ops PRSUs | 103.86% | | 98.38% | | 100.79% |
|
| | | | | |
| Historical Ops PRSU Performance as a % of Target |
| PTI Metric | | Margin Metric | | Units Metric |
| | | | | |
2019 Ops PRSUs | 99.82% | | 97.91% | | 105.29% |
2018 Ops PRSUs | 103.86% | | 98.38% | | 100.79% |
2017 Ops PRSUs | 96.24% | | 99.08% | | 102.16% |
TSR PRSUs
TSR PRSUs measure relative TSR performance over a three-year period, with vesting and settlement of the award occurring upon the conclusion of the three-year performance period. Following the conclusion of the performance period, the number of TSR PRSUs earned is determined by multiplying the target award by the TSR multiplier. For fiscal 2019,2020, the TSR multiplier was based on the TSR percentile ranking of the Company as follows:
|
| | | | | | | |
Relative TSR Percentile Rank | | TSR Multiplier (1) |
| | |
Less than 25th Percentile | | 0% |
25th Percentile | | 75% (threshold) |
50th Percentile | | 100% (target) |
75th Percentile or Above | | 150% (maximum) |
(1) The TSR Multiplier is determined by linear interpolation for any achievement of the Relative TSR Percentile Rank which falls between the target percentages above.
| |
(1) | The TSR Multiplier is determined by linear interpolation for any achievement of the Relative TSR Percentile Rank which falls between the target percentages above. |
Relative TSR is calculated by comparing the difference between our 20-day trailing average closing stock price on the first day of the performance period and the last day of the performance period plus any dividends paid during the performance period (assuming such dividends had been reinvested) against the same metric for each company in the TSR peer group. The Company’s relative TSR percentile rank is determined by ranking the companies in our Peer GroupTSR peer group from the highest to the lowest according to their respective TSR for the performance period, then calculating the TSR percentile ranking of the Company relative to other companies in our Peer Group.these companies. In no event will the payout for the TSR PRSUs be greater than 125% if the Company’s own TSR is negative for the performance period. As noted above, TSR PRSUs granted in December 2016,2017, with respect to which the three-year performance period ended on October 31, 2019,2020, did not pay out because the Company's relative TSR compared to our Peer GroupTSR peer group fell below the 25th percentile.
All PRSUs earn dividend equivalents at the same time and in the same amount as dividends paid on the Company’s common stock; dividend equivalents are subject to the same vesting, settlement, and other terms and conditions as the PRSUs to which the dividend equivalents relate. Shares subject to PRSUs held by aan NEO fully vest and all restrictions immediately lapse upon an NEO’s termination of his employment due to death or disability. In addition, all shares subject to PRSUs granted prior to December 2019 fully vest and all restrictions lapse upon a change of control of the Company. Starting with awards granted in December 2019, PRSUs willwould vest in connection with a change of control of the Company only if there is an actual or constructive termination of the executive (i.e., a "double trigger") within the time periods set forth in the applicable award agreement. Awards granted between December 2016 and November 2019 will continue to vest upon qualified retirement following ten years of service. Starting in December 2019, retirement is defined as a voluntary resignation after achieving either (i) age fifty-eight and ten years of service or (ii) age sixty-two and five years of service, and an award will continue to vest
upon such a qualifying retirement. All vested and unvested PRSUs are subject to forfeiture in the event that, after the NEO retires or otherwise leaves the Company, the NEO breaches certain post-termination covenants. See “Potential Payments upon Termination or Change of Control” on page 58.60.
Stock Options
Stock options granted to our NEOs have a term of ten years from the date of the grant and generally vest in equal annual installments over a four-year period beginning on the first anniversary of the grant date. For stock options granted prior to December 2019, in the event of an executive's death, disability or retirement after age 62 with at least ten years of service, stock options will continue to vest and be exercisable for the remainder of their ten-year term. Starting in December 2019, retirement is defined as a voluntary resignation after achieving either (i) age 58 and ten years of service or (ii) age 62 and five years of service, and stock options will continue to vest and remain exercisable for the remainder of their ten-year term upon such a qualifying retirement. Stock options granted prior to December 2019 generally vest upon the occurrence of a change of control of the Company, while stock options granted on or after December 2019 are "double trigger" as described above. All unexercised stock options, vested and unvested, are subject to forfeiture in the event that, after the NEO retires or otherwise leaves the Company, the NEO breaches certain post-termination covenants. See “Potential Payments upon Termination or Change of Control” on page 58.
For purposes of determining the number of shares that are subject to a stock option award, the stock option value is determined by multiplying the closing price of the Company's common stock on the grant date of such award by the average of the “Fair Value Quotient” for the three immediately previous fiscal years of the Company. The “Fair Value Quotient” for a prior fiscal year is the fraction in which (x) the denominator is the closing price the Company's common stock on the grant date of the awards for such fiscal year, and (y) the numerator is the grant date fair value of the stock options granted for such fiscal year in accordance with ASC 718. Assumptions used in the calculation of these amounts are included in Note 10 to our audited financial statements included in the Form 10-K, excluding the effect of estimated forfeitures.
Service-Based Restricted Stock Units
Service-based RSUs granted to our NEOs (which, in fiscal 2019, only included Mr. McDonald) generally vest in equal installments over a four-year period beginning on or about the first anniversary of the grant date. Although the awards vest over a four-year period, shares underlying vested RSUs generally are not delivered until the fourth anniversary of the grant date. For RSUs granted prior to December 2019, in the event of an executive's death, disability or retirement after age 62 with at least ten years of service, RSUs
will continue to vest following such event. Starting in December 2019, retirement is defined as a voluntary resignation after achieving either (i) age 58 and ten years of service or (ii) age 62 and five years of service, and an RSU will continue to vest upon such a qualifying retirement. RSUs granted prior to December 2019 generally vest upon the occurrence of a change of control of the Company, while RSUs granted on or after December 2019 are "double trigger" as described above. All undelivered RSUs, vested and unvested, granted to NEOs are subject to forfeiture in the event that, after the NEO retires or otherwise leaves the Company, the NEO breaches certain post-termination covenants. See “Potential Payments upon Termination or Change of Control” on page 58.60.
Compensation for New Co-Chief Operating OfficersIn connection with the promotion of Messrs. Boyd and Parahus to the roles of Co-Chief Operating Officer effective November 1, 2019, the Compensation Committee reviewed and approved their respective compensation arrangements for fiscal 2020. As an Executive Vice President and Co-Chief Operating Officer of the Company, Mr. Boyd will receive an annual base salary of $1,000,000 and Mr. Parahus will receive an annual base salary of $850,000. Each of Mr. Boyd and Mr. Parahus will participate in the annual cash incentive program on the same terms as described above for Messrs. Yearley and Connor, with target bonuses of $1,200,000 and $800,000, respectively. Messrs. Boyd and Parahus also received equity awards granted in fiscal 2020 in the same mix and with the same terms as those applicable to Messrs. Yearley and Connor, with total grant date fair values of approximately $600,000 each. Messrs. Boyd and Parahus are also eligible to participate in the Company’s other regular compensation arrangements for the Company’s executive officers, including participation as an “Executive Officer Other than the Chief Executive Officer” under the Severance Plan and participation in the SERP.
COMPENSATION FRAMEWORK
Compensation Decision-Making Process
Compensation Decision-Making Timeline
The Compensation Committee reviews and determines base salary, annual incentive bonuses, and long-term incentive compensation, as well as benefits and perquisites, on an annual basis. For compensation relating to fiscal 2019,2020, the primary steps taken by the Compensation Committee to establish and award compensation to our NEOs were as follows: | | | | | | | | |
| | Compensation Committee Action Taken |
| | |
Fiscal 2020 | | |
| | |
| | Compensation Committee Action Taken |
| | |
FiscalDecember 2019 | | |
| | |
December 2018 | | Set calendar year 2019 base salaries for the NEOs. Reviewed compensation levels for each executive officer |
| | |
January 2019 | | officer. Set calendar year 2020 base salaries and incentive compensation opportunity levels for the NEOs. Set performance goals for fiscal 20192020 annual incentive bonus and Ops PRSU awards and fixed target value and number of 2019 Ops2020 PRSU awards for NEOs |
| | |
June 20192020 | | Reviewed the impact of actions taken in response to the pandemic on the Company's workforce |
| | Reviewed the year-to-date performance of the Company compared to peers and relative to fiscal 2020 incentive compensation performance metrics |
| | Reviewed fiscal 2019 NEO compensation compared to our peers |
| | Reviewed 2019 Say on Pay voting results fromfor the 2019 Annual Meeting of Stockholders,Company as well as feedback received from stockholders and proxy advisory firms on our executive compensation programpeers |
| | Reviewed fiscal 2018 NEO compensation compared to our Peer Group |
| | Reviewed a market assessment preparedof peer company pay practices and performance metrics utilized by the Compensation Committee's independentpeers in their incentive compensation consultant of fiscal 2018 NEO pay versus performance for the Company compared to our Peer Groupprograms |
| | Consulted with the independent compensation consultant regarding industry trends in executive compensation, including the potential impact of the pandemic on executive compensation |
| | |
September 2020 | | Reviewed the impact of actions taken in response to the pandemic on the Company's workforce |
| | Reviewed the year-to-date performance of the Company compared to peers and relative to fiscal 2020 incentive compensation performance metrics |
| | Reviewed potential changes to the annual and long-term incentive compensation programs |
| | |
Fiscal 2021 | | |
| | |
November 20192020 | | Reviewed market assessment prepared by the independent compensation consultant of Company fiscal 20192020 NEO projected pay versus projected Company fiscal 20192020 performance compared to our Peer Groupprimary peer group |
| | Began engagement of our largest stockholders and proxy advisory firms to gain their input on, among other things, our executive compensation program |
| | Held preliminary discussions regarding NEO individual performance during fiscal 20192020 |
| | |
Fiscal 2020 | | |
| | |
December 20192020 | | Reviewed market assessment prepared by the independent compensation consultant of fiscal 2019 Company NEO pay versus actual Company fiscal 2019 performance compared to our Peer Group |
| | Reviewed each NEO’s individual performance during fiscal 2019 |
| | Reviewed fiscal 20192020 performance goals and certified the level of performance attained for the annual incentive bonus and PRSU payouts |
| | DeterminedApproved fiscal 20192020 annual incentive bonuses for the NEOs |
| | Approved changes to the Company's Peer Group, as described belowReviewed tally sheets and each NEO’s individual performance during fiscal 2020 |
Performance Assessment Process
Throughout the fiscal year, the full Board monitored our financial performance in relation to our recent historical performance and in relation to our Peer Group. Thepeers. As described above, the Compensation Committee also reviewed and considered management's response to the COVID-19 pandemic, our overall financial performance during the fiscal year, and individual performance when making final fiscal 20192020 compensation decisions at the beginning of fiscal 2020.2021. As part of its evaluation of individual performance, the Compensation Committee considered the contributions of each NEO to the Company's achievements during fiscal 20192020 as described above on page 37.39.
Participation by Management
The Compensation Committee worked with management to establish its meeting agendas and determine meeting participants. Throughout the year, the Compensation Committee requested information from management and the Compensation Committee’s independent compensation consultant, including information about the compensation practices and financial performance of other companies in the homebuilding industry and other industries. Our CEO and Chief Financial Officer were invited byattended certain meetings of the Compensation Committee to attend certain of its meetings in order to provide information and answer questions regarding the Company’s strategic objectives, financial performance and, financial performance.in the case of the CEO, to provide input on the performance of the other NEOs during the year. Our other NEOs were also available to Compensation Committee members and to attend Compensation Committee meetings upon request. Our CEO submitted recommendations to the Compensation Committee regarding salary, bonus, equity compensation, and overall compensation levels for the President and Chief Operating Officer and the Chief Financial Officerother NEOs for both fiscal 20192020 and fiscal 2020, and also submitted compensation recommendations for our newly appointed executive officers for fiscal 2020.2021. The Compensation Committee, after consideration of all of these inputs, determined actual compensation levels for each NEO.
Use of Independent Compensation Consultant
The Compensation Committee engaged Compensation Advisory Partners LLC (“CAP”) to serve as its independent compensation consultant for fiscal 2019.2020. CAP received instructions from, and reported to, the Compensation Committee on an independent basis.
The Compensation Committee requested CAP’s advice on a variety of matters, such as the amount and form of executive compensation, compensation strategy, market comparisons, pay and performance alignment versus industry peers, executive pay trends, including with respect to the COVID-19 pandemic, compensation best practices, compensation-related regulatory developments, and potential compensation plan designs and modifications. The Compensation Committee consulted with CAP, both with and without management, on several occasions during fiscal 2019,2020, and also in early fiscal 20202021 with respect to compensation decisions for fiscal 20192020 performance. During fiscal 2019,2020, CAP did not provide any services to the Company or its affiliates other than advising on executive compensation, as approved by the Compensation Committee.
The Compensation Committee conducts a formal evaluation of the independence of CAP annually in the first quarter of the fiscal year. Based on this review, the Compensation Committee did not identify any conflict of interest raised by the work CAP performed in fiscal 2019.2020. When conducting this evaluation, the Compensation Committee took into consideration the factors set forth in Rule 10C-1 under the Exchange Act and the NYSE’s listing standards.
Market Comparisons
Although the Compensation Committee does not believe that it is appropriate to establish compensation levels based solely on market comparisons or industry practices, it believes that information regarding pay practices at other companies is useful in three respects. First, marketplace information is one of many factors considered in assessing the reasonableness of compensation. Second, our compensation practices must be generally competitive for executive talent in the homebuilding industry and in the overall market. Third, marketplace information reflects emerging and changing components and forms of compensation. While the Compensation Committee considers peer
compensation levels and practices when making its compensation decisions, it does not target
compensation at any particular point within a range established by a comparison of the compensation levels of our peer companies.
In 2019,For fiscal 2020, the Compensation Committee with guidance from CAP, reviewed our NEOs’ compensation againstutilized a peer group consisting of publicly-traded homebuilding companieshomebuilders with trailing twelve month revenues above $3.0 billion to benchmark NEO pay levels and practices (the “Peer Group”"primary peer group"), which was expanded in fiscal 2019 to include the public homebuilders LGI Homes, Inc. and Century Communities, Inc. The Peer Group consisted of the following companies:
| | | | | | | | |
Primary Peer Group |
| | |
D. R. Horton, Inc. | | PulteGroup, Inc. |
KB Home | | Taylor Morrison Home Corporation |
Lennar Corporation | | Tri Pointe Group, Inc. |
M. D. C. Holdings, Inc. | | Meritage Homes Corporation |
NVR, Inc. | | |
For purposes of determining the Company's relative TSR performance for TSR PRSUs granted in fiscal 2020, the Compensation Committee referenced substantially all of the publicly traded homebuilders, which consisted of the following companies:
| | | | | | | | | | | | | | |
TSR Performance Peer Group |
| | | | |
Peer Group of Publicly-Traded Homebuilding Companies |
| | | | |
Beazer Homes USA, Inc. | | Lennar Corporation*Corporation | | NVR, Inc.* |
Century Communities, Inc. | | LGI Homes, Inc. | | PulteGroup, Inc.* |
D. R. Horton, Inc.* | | M. D. C. Holdings, Inc.* | | Taylor Morrison Home Corporation*Corporation |
Green Brick Partners, Inc | | M/I Homes, Inc. | | Tri Pointe Group, Inc. |
Hovnanian Enterprises, Inc. | | M/IMeritage Homes Inc.Corporation | | Tri Pointe Group, Inc.* |
KB Home*Home | | Meritage Homes Corporation*New Home Company Inc. | | |
Early in fiscal 2020,Because TSR PRSUs were removed from the long-term incentive compensation program, the Compensation Committee approvedexpects to focus on the addition of two additional companies to the Peer Groupprimary peer group for purposes of determining the Company's relative TSR performance in the future: Green Brick Partners, Inc. and The New Home Company Inc. For purposes of future pay benchmarking (beginning with fiscal 2020), the Compensation Committee limited the Peer Group to those homebuilders with trailing twelve month revenues above $3.0 billion. These companies are identified with an asterisk in the table above.benchmarking.
Benefits and Perquisites
We provide all of our employees, including our NEOs, with specified employee benefits programs. These include the opportunity to save for retirement through the Toll Brothers 401(k) Savings Plan (the “401(k) Plan”) and various health and welfare benefit programs, including medical, dental, life insurance, and long-term disability insurance. These programs are intended to promote the health and financial security of our employees and are provided at competitive market levels to attract, retain, and reward employees. We share the cost of these programs with our employees and our NEOs participate in these programs on the same terms as our other employees.
The 401(k) Plan is a qualified retirement savings plan under the tax code. Participants in the 401(k) Plan may contribute a portion of their compensation, subject to IRS regulations and specified limitations applicable to “highly compensated employees,” as such term is defined in the tax code. AfterFor fiscal 2020 and prior years, following a year of service, we may matchmatched a portion of each participant’s contribution and, in certain years, also may make an annualmade discretionary contributioncontributions to each active participant’s account. All of the NEOs were participants in the 401(k) Plan during fiscal 2019.2020. Going forward, the one year waiting period for Company matches will be eliminated for new employees.
Supplemental Executive Retirement Plan
We also maintain a SERP, which provides retirement benefits to our NEOs. The Board’s intention when adopting the SERP wasis intended to provide competitive retirement benefits, to protect against reductions in retirement benefits due to tax law limitations on qualified plans, and to encourage continued employment or service with the Company. For a discussion of the material terms of the SERP, see “Pension Benefits During Fiscal 2019—2020—Supplemental Executive Retirement Plan” on page 56.58.
The Compensation Committee did not increase the SERP annual benefit payment amounts to our continuing NEOs in fiscal 2019, although it did approve (i) lowering the normal retirement age in the SERP from age 622020. In connection with their promotions to 58 and (ii) the addition of newly promoted executive officers to the SERP (withCo-Chief Operating Officers, Messrs. Boyd and Parahus beingwere added as participants in the SERP with annual benefit amounts of $125,000 each). Mr. McDonald was also added as a participant to the SERP but relinquished any benefits in connection with his resignation.
beginning November 1, 2019. The annual benefit amounts to our NEOs under the SERP as of the end of fiscal 20192020 are set forth in the table under “Pension Benefits During Fiscal 2019—2020—Supplemental Executive Retirement Plan” on page 56.58.
Executive Severance Plan
As described above, since March 2019The Company maintains the Company has maintained theToll Brothers, Inc. Executive Severance Plan ("Severance Plan"), which provides certain cash severance benefits to eligible employees of the Company who experience a “covered termination” of employment, both in the context of a “change of control” transaction and otherwise. A “covered termination” under the Severance Plan means a participant’s employment is terminated by the Company without “cause” or the participant resigns with “good reason,” in each case as described below, and subject to the limitations described therein.
Under the terms of the Severance Plan, “Cause” includes a participant’s (i) substantial failure or refusal to perform the duties or responsibilities of his job, (ii) material violation of any fiduciary duty, (iii) conviction of (including a plea of nolo contendere) a felony, (iv) conviction of (including a plea of nolo contendere) a misdemeanor which involves dishonesty, fraud or morally repugnant behavior, (v) dishonesty, (vi) theft, (vii) material violation of Company rules or policy, or (viii) other egregious or morally repugnant conduct that has, or could have, a serious and detrimental impact on the Company. “Good Reason” includes (i) a material diminution in the participant’s authorities, duties, job responsibilities, status or reporting relationships, (ii) (A) a reduction in base salary or target bonus opportunity, (B) failure to pay base salary or the applicable bonus when due, or (C) for the two-year period following a change of control, a reduction in equity compensation opportunity, (iii) the relocation of the principal place of employment by more than fifty miles, (iv) the material breach of an existing agreement between the participant and the Company, or (v) the failure of any purchaser to assume any agreement between the participant and the Company.
If a participant, including each of our continuing NEOs, experiences a “covered termination” not in connection with a change of control of the Company, the Company will provide certain severance payments and benefits, subject to the participant’s continued compliance with the Non-Interference Agreement, as described below, and the execution and non-revocation of a release of claims. For our continuing NEOs, these payments and benefits are as follows: (i) an amount equal to 1.5 times (2.0 times for the CEO) the sum of the participant’s annual base salary and target annual bonus, (ii) a prorated annual bonus for the year of termination of employment based on actual performance, (iii) an amount equal to 18 months (24 months for the CEO) of the participant’s monthly COBRA premium for continued health insurance coverage, and (iv) reasonable outplacement services for a period corresponding to the time period that is the lesser of (x) 18 months (24 months for the CEO) and (y) the period beginning on the date of the covered termination and ending on the two-year anniversary of the covered termination.
If a participant experiences a “covered termination” within two years after the occurrence of a change of control of the Company or within six months prior to a change of control of the Company, and such termination is reasonably demonstrated to be in connection with or in anticipation of a change of control or is at the request of a third party who has reasonably calculated or intended to effect a change of control of the Company, the Company will provide the participant with certain severance payments and benefits, subject to his or her continued compliance with the Non-Interference Agreement and the execution and non-revocation of a release of claims. For our continuing NEOs, these payments and benefits are as
follows: (i) an amount equal to 2.0 times (2.5 times for the CEO) the sum of the participant’s annual base salary and target annual bonus, (ii) a prorated target annual bonus for the year of termination of employment, (iii) an amount equal to 24 months (30 months for the CEO) of the participant’s monthly COBRA premium for continued health insurance coverage, and (iv) reasonable outplacement services for a period equal to the lesser of (x) 24 months (30 months for the CEO) or (y) the period beginning on the date of the covered termination and ending on the two-year anniversary of the covered termination.
Participants who receive severance benefits under the Severance Plan will be bound by certain restrictive covenants in favor of the Company, including the confidentiality, non-disparagement, non-
competitionnon-competition and non-solicitation covenants included in the Non-Interference Agreement attached to the Severance Plan. Pursuant to the Non-Interference Agreement (which each NEO has executed), each executive officer of the Company is subject to non-compete and non-solicitation periods of one year following the executive officer's termination of employment for any reason. The Severance Plan provides that if payments and benefits provided to the participant would constitute an “excess parachute payment” for purposes of Section 280G of the tax code, the participant will either have his or her payments and benefits reduced to the highest amount that could be paid without triggering Section 280G or receive the after-tax amount of his or her payment and benefits, whichever results in the greater after-tax benefit, taking into account the excise tax imposed under Section 4999 of the tax code and any applicable federal, state and local taxes.
The severance benefits available to our NEOs under the Severance Plan as of the end of fiscal 20192020 are set forth in the table under “Potential Payments upon Termination or Change of Control” on page 58.60.
Deferred Compensation Plan
The Toll Bros., Inc. Nonqualified Deferred Compensation Plan (the “Deferred Compensation Plan” or "DCP") was designed to enable certain management and highly compensated employees, including our NEOs, to defer a portion of their annual cash compensation. The Deferred Compensation Plan was frozen with respect to compensation earned after December 31, 2011. However, in December 2014, the Company amended and restated the Deferred Compensation Plan (as amended, the "2015 Plan") to enable employees to defer a portion of their annual cash compensation starting on January 1, 2015. Messrs. Yearley, HartmanConnor and ConnorParahus were participants in the 2015 Plan during fiscal 2019.2020.
Amounts deferred prior to January 1, 2015, which are not re-deferred under the 2015 Plan, continue to be governed by the terms of the Deferred Compensation Plan in effect prior to January 1, 2015. Mr. HartmanParahus is the only NEO who participated in the Deferred Compensation Plan prior to January 1, 2015. We have the right under the 2015 Plan to make discretionary contributions for the benefit of any participant in the 2015 Plan. We did not make discretionary contributions to any NEO under the 2015 Plan in fiscal 2019.2020.
Interest earned during fiscal 20192020 on NEO deferred compensation that is considered above-market interest under SEC rules is included in the amount reported under “Change in Pension Value and Nonqualified Deferred Compensation Earnings” in the Summary Compensation Table on page 51,53, and further information about NEO deferred compensation is contained in the Nonqualified Deferred Compensation During Fiscal 20192020 table on page 57.59.
Perquisites
Perquisites did not constitute a material portion of the compensation paid to our NEOs for fiscal 2019.2020. We provide our NEOs with limited perquisites and personal benefits that the Compensation Committee believes are consistent with our executive compensation philosophy and objectives, and we do not provide tax gross ups on perquisites. Each fiscal year, the Compensation Committee reviews and approves those perquisites that are provided to our NEOs.
The Compensation Committee believes the perquisites for fiscal 2019,2020, which included auto and gas allowances, insurance, and tax and financial statement preparation assistance, as more fully described in
the footnotes to the Summary Compensation Table on page 51,53, are reasonable, consistent with our past practices, and consistent with general practices in our industry.
Other Compensation Practices and Policies
Employment Agreements, Severance Payments and Change of Control Provisions
We employ our NEOs at will and do not have individualized employment agreements. As described above, the Company adopted the Severance Plan in March 2019, which provides for cash severance payments and other benefits to certain eligible employees of the Company, including our NEOs, who experience a termination of employment under certain conditions. For a description of the severance benefits available under the Severance Plan to our NEOs, see "Benefits and Perquisites - Executive Severance Plan" on page 4648 and "Potential Payments upon Termination or Change of Control" on page 58.60.
In addition, our outstanding equity award agreements and the SERP include provisions relating to the occurrence of a change of control of the Company. Under our equity plans, if there is a change of control of the Company, outstanding stock options and RSUs (in each case awarded prior to December 2019), deferred cash, or other plan awards will generally immediately vest, and any applicable restrictions will immediately lapse. Equity awards granted in December 2019 and thereafter are subject to "double trigger" accelerated vesting as described above. Under the SERP, if there is a change of control of the Company, all participants become fully vested in their SERP benefits and become eligible for a lump sum payout. See “Potential Payments upon Termination or Change of Control” on page 58.60.
Stock Ownership Guidelines
We maintain Stock Ownership Guidelines ("Guidelines") pursuant to which our executive officers and non-management directors are expected to acquire a meaningful level of stock ownership in the Company to further align their interests with those of our stockholders. Under the Guidelines, the executive officers and non-management directors are expected to own shares equivalent in value to a multiple of his or her base salary or annual base cash retainer. As noted above, these multiples were increased in December 2018. The multiples currently in effect areretainer, as set forth below:
|
| | | | | | | |
Position | | Multiple |
| | |
Chairman and CEO | | 6.0 x base salary |
Other Executive Officers | | 3.0 x base salary |
Directors | | 5.0 x annual base cash retainer |
Executive officers and directors are expected to achieve compliance with these levels of ownership within five years from the date he or she assumes the position of executive officer or director, and may not sell net shares of stock received upon the exercise of stock options (that is, shares other than those sold to pay withholding taxes, brokerage fees, and the exercise price) unless and until he or she has met these required levels of ownership. In connection with the revisions to the Guidelines approved in December 2018, officers and directors were given additional time commensurate with the increase in the multiple applicable to him or her to achieve compliance with the revised Guidelines.
On an annual basis, the Governance Committee reviews adherence to the Guidelines. For purposes of the Guidelines, the following are included as “owned”:
•shares of stock owned by the executive officer or director, including shares held in a trust controlled by the executive officer or director, by a spouse or by minor children that are deemed beneficially owned by the executive officer or director under Rule 13d-3 under the Exchange Act;
•one-third of the shares underlying vested stock options that were “in the money” at the beginning of the fiscal year of review; and
•shares of stock underlying vested performance stock units, RSUs, and restricted stock awards, regardless of provisions relating to delivery.
Specifically excluded from ownership under the Guidelines as “owned” shares are any shares of stock or other equity-based awards which are pledged as collateral to a third party so long as such pledge remains in effect.
If an executive officer or director satisfies these Guidelines, they are generally deemed satisfied for subsequent annual review periods, regardless of decreases in the Company’s stock price as long as the executive officer or director continues to hold the shares originally included in determining compliance. At the time of the Governance Committee's annual review of adherence to the Guidelines in December 2019,2020, the Governance Committee determined that each NEO and director washad either met the minimum shareholding guideline, or were otherwise within the timeframe permitted to meet such levels, and were in compliance with the Guidelines.
Hedging Policy
We have an insider trading policy that sets forth guidelines and restrictions applicable to employees’ transactions involving our stock. Among other things, this policy prohibits our employees from engaging in puts, calls, or similar options on our stock or in any derivative equity securities of the Company, or selling our stock short. In addition, this policy prohibits directors and executive officers from entering into hedging arrangements with respect to our equity securities that are designed to offset or reduce the risk of price fluctuations in the underlying security (such as covered calls, collars, or other transactions that sever the ultimate alignment with our stockholders’ interests).
Pledging Policy
We have a pledging policy that prohibits any pledging of the Company’s equity securities by executive officers and directors, with an exception for the Company's founder, Mr. Robert I. Toll, given his substantial ownership of the Company’s equity securities.
With respect to Mr. Toll, any increase in the aggregate number of shares of Company stock that he has pledged is prohibited under the policy except in situations, and on conditions, pre-approved by the Company’s Legal Department. Approvals will be based on the particular facts and circumstances of the request, including, but not limited to:
•the percentage of Mr. Toll's equity holdings that are currently pledged;
•the percentage of the Company’s outstanding class of equity securities represented by the number of securities of that class being pledged;
•the market value of the securities being pledged and the total market value of the Company’s outstanding equity securities;
•the historical trading volume of the Company’s equity securities; and
•any compelling needs of Mr. Toll justifying the pledge transaction under the circumstances.
The Legal Department's decisions are reviewed by the Governance Committee.
As a result of this policy, no executive officer or director, other than Mr. Toll, has Company shares that are pledged as of the date of this proxy statement. The number of shares pledged by Mr. Toll as of the Record Date represents 3.4%3.7% of the Company’s outstanding stock. Since adoption of the policy, the number of shares pledged by Mr. Toll has decreased by over 33%36%. The Governance Committee continues to monitor the shares pledged by Mr. Toll.
Clawback Policy
In January 2017, the Board adopted a policy regarding the recoupment of incentive compensation from executives in specified situations involving fraud or intentional misconduct. The policy provides that, subject to the discretion and approval of the Board, the Company will, to the extent permitted by
governing law, in all appropriate cases as determined by the Board, require reimbursement and/or cancellation of any cash bonus or other incentive compensation subject to the policy, including vested and
unvested stock-based compensation, awarded to an executive officer where all of the following factors are present: (a) the award was predicated upon the achievement of specified financial results that were subsequently the subject of a restatement, (b) in the Board’s view, the executive engaged in fraud or intentional misconduct that was a substantial contributing cause to the need for the restatement, and (c) a lower award would have been made to the executive based upon the restated financial results. Under this policy, the Board may seek to recover payments of incentive compensation if the financial results leading to the award of incentive compensation are subsequently the subject of a restatement. The Board may use its judgment in determining the amount to be recovered where the incentive compensation was awarded on a discretionary basis.
Tax and Accounting Implications
When making decisions about executive compensation, the Compensation Committee considers both tax and accounting implications of the various elements of our compensation program, including the impact on our financial results and the dilutive impact to stockholders of various forms of compensation.
For equity compensation grants, ASC 718 requires us to recognize compensation expense for all share-based payment arrangements based upon the grant date fair value of those awards and period of vesting. The aggregate expense estimated to be recognized over the period of vesting is included in the Summary Compensation Table contained in this proxy statement as part of the NEOs’ total compensation in the fiscal year of the grant. This number, while required by the SEC rules and important for understanding the impact of granting equity on our financial statements, does not represent the value ultimately realized by the NEO.
COMPENSATION COMMITTEE REPORT
The Compensation Committee has reviewed and discussed with our management the Compensation Discussion and Analysis section of this proxy statement. Based on such review and discussion, the Compensation Committee has recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement and incorporated by reference in the Form 10-K .
Respectfully submitted by the members of the Compensation Committee of the Board of Directors.
Carl B. Marbach (Chair)
John A. McLean
Stephen A. Novick
Paul E. Shapiro
EXECUTIVE COMPENSATION TABLES
Summary Compensation Table
|
| | | | | | | | | | | | | | | | | | | | | | | |
Name and Principal Position | | Year | | Salary ($) | | Stock Awards ($)(1) | | Option Awards ($)(1) | | Non-Equity Incentive Plan Compensation ($)(2) | | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(3) | | All Other Compensation ($)(4) | | Total ($) |
| | | | | | | | | | | | | | | | |
Douglas C. Yearley, Jr. | | 2019 | | 1,041,667 |
| | 4,545,620 |
| | 1,471,226 |
| | 3,122,457 |
| | 519,322 |
| | 43,913 |
| | 10,744,205 |
|
Chief Executive Officer | | 2018 | | 1,000,000 |
| | 4,499,838 |
| | 1,465,602 |
| | 2,957,027 |
| | 3,926 |
| | 38,854 |
| | 9,965,247 |
|
2017 | | 1,000,000 |
| | 3,713,862 |
| | 2,345,860 |
| | 2,749,344 |
| | 8,680 |
| | 37,658 |
| | 9,855,404 |
|
Richard T. Hartman (5) | | 2019 | | 1,000,000 |
| | 2,763,985 |
| | 457,774 |
| | 1,117,546 |
| | 601,805 |
| | 33,628 |
| | 5,974,738 |
|
President and Chief Operating Officer | | 2018 | | 1,000,000 |
| | 1,363,787 |
| | 444,180 |
| | 1,094,669 |
| | 33,909 |
| | 30,084 |
| | 3,966,629 |
|
| 2017 | | 1,000,000 |
| | 1,124,167 |
| | 712,306 |
| | 1,017,786 |
| | 56,255 |
| | 30,566 |
| | 3,941,080 |
|
Martin P. Connor | | 2019 | | 1,000,000 |
| | 1,164,373 |
| | 376,855 |
| | 1,133,611 |
| | 422,754 |
| | 32,816 |
| | 4,130,409 |
|
Chief Financial Officer | | 2018 | | 995,192 |
| | 1,123,124 |
| | 365,803 |
| | 1,094,669 |
| | 589 |
| | 30,021 |
| | 3,609,398 |
|
2017 | | 975,000 |
| | 923,400 |
| | 588,829 |
| | 1,017,786 |
| | — |
| | 24,160 |
| | 3,529,175 |
|
John K. McDonald (6) | | 2019 | | 691,667 |
| | 162,521 |
| | 140,400 |
| | — |
| | 810,391 |
| | 26,174 |
| | 1,831,153 |
|
General Counsel | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Name and Principal Position | | Year | | Salary ($) | | Stock Awards ($)(1) | | Option Awards ($)(1) | | Non-Equity Incentive Plan Compensation ($)(2) | | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(3) | | All Other Compensation ($)(4) | | Total ($) |
| | | | | | | | | | | | | | | | |
Douglas C. Yearley, Jr. | | 2020 | | 1,060,769 | | | 5,328,994 | | | — | | | 3,300,000 | | | 298,357 | | | 35,902 | | | 10,024,022 | |
President and Chief Executive Officer | | 2019 | | 1,041,667 | | | 4,545,620 | | | 1,471,226 | | | 3,122,457 | | | 519,322 | | | 43,913 | | | 10,744,205 | |
2018 | | 1,000,000 | | | 4,499,838 | | | 1,465,602 | | | 2,957,027 | | | 3,926 | | | 38,854 | | | 9,965,247 | |
James W. Boyd | | 2020 | | 973,077 | | | 491,851 | | | — | | | 1,200,000 | | | 180,558 | | | 24,374 | | | 2,869,860 | |
Executive Vice President and Co-Chief Operating Officer | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Martin P. Connor | | 2020 | | 973,077 | | | 1,448,060 | | | — | | | 1,200,000 | | | 249,461 | | | 24,638 | | | 3,895,236 | |
Chief Financial Officer | | 2019 | | 995,192 | | | 1,123,124 | | | 365,803 | | | 1,094,669 | | | 589 | | | 30,021 | | | 3,609,398 | |
2018 | | 975,000 | | | 923,400 | | | 588,829 | | | 1,017,786 | | | — | | | 24,160 | | | 3,529,175 | |
Robert Parahus | | 2020 | | 822,500 | | | 509,265 | | | — | | | 857,952 | | | 225,761 | | | 23,625 | | | 2,439,103 | |
Executive Vice President and Co-Chief Operating Officer | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| |
(1) | These columns present the aggregate grant date fair value of RSUs, PRSUs and stock options, respectively, granted in the indicated fiscal year, calculated in accordance with ASC 718 utilizing the assumptions discussed in Note 10 in the Notes to Consolidated Financial Statements in the Form 10-K, excluding the effect of estimated forfeitures. The amounts shown in these columns do not reflect compensation actually received by the NEOs. The actual value, if any, that an NEO may realize from an award is contingent upon the satisfaction of the conditions to vesting in that award, including, for PRSUs, any applicable performance conditions, and, for stock options, upon the excess of the share price over the exercise price, if any, on the date the stock options are exercised. Thus, the value, if any, eventually realized by the NEOs is unlikely to equal amounts shown in these columns. |
(1)These columns present the aggregate grant date fair value of RSUs, PRSUs and stock options in the indicated fiscal year, calculated in accordance with ASC 718 utilizing the assumptions discussed in Note 10 in the Notes to Consolidated Financial Statements in the Company's Form 10-K, excluding the effect of estimated forfeitures and including the impact of a liquidity discount for post-vesting transfer restrictions applicable to retirement eligible employees. The amounts shown in these columns do not reflect compensation actually received by the NEOs. The actual value, if any, that an NEO may realize from an award is contingent upon the satisfaction of the conditions to vesting in that award, including, for PRSUs, any applicable performance conditions, and, for stock options, upon the excess of the share price over the exercise price, if any, on the date the stock options are exercised. Thus, the value, if any, eventually realized by the NEOs is unlikely to equal amounts shown in these columns.
With respect to the PRSUs granted in fiscal 2019,2020, the estimate of the grant date fair value determined in accordance with ASC 718 assumes the vesting of 100% of the PRSUs granted. Assuming the highest level of performance is achieved (which would result in the vesting of 150% of the PRSUs granted), the aggregate grant date fair value of the PRSUs set forth in the stock awards column above for fiscal 20192020 would be: Mr. Yearley—$6,818,467;5,611,191; Mr. Hartman—Boyd—$3,387,574;517,906; Mr. Connor—$1,530,003; and Mr. Connor—Parahus—$1,746,595.536,444. The actual performance achieved for fiscal 20192020 resulted in 103.45%93.56% of the Ops PRSUs granted being earned, which awards remain subject to service-based vesting.
| |
(2) | The annual incentive bonuses for Messrs. Yearley, Hartman and Connor for fiscal 2019 were earned based on target bonus amounts established by the Compensation Committee for PTI Metric performance (70% of bonus amount) and its qualitative assessment of individual and Company performance (30% of bonus amount) as more fully described under "Cash Compensation Decisions—Fiscal 2019 Annual Incentive Bonus" starting on page 36. |
| |
(3) | The amounts in this column represent the increase in the actuarial present value of accumulated benefits under the SERP for each NEO and the amount of above-market interest earned on their respective balances, if applicable, in the Deferred Compensation Plan and the 2015 Plan. Mr. McDonald did not participate in the 2015 Plan during the fiscal years indicated in the table above. The amounts attributed to the increase or decrease in actuarial present value of SERP benefits and above-market interest on deferred compensation are as follows (see also the Pension Benefits During Fiscal 2019 table on page 56). Although an amount is presented for Mr. McDonald in these tables, Mr. McDonald relinquished any entitlement to benefits under the SERP in connection with his resignation. |
vesting conditions.
(2)The annual incentive bonuses for each NEO for fiscal 2020 was earned based on performance relative to target bonus amounts established by the Compensation Committee at the outset of the fiscal year for PTI Metric performance (70% of bonus target) and a qualitative assessment of individual and Company performance (30% of bonus target) as more fully described under "Cash Compensation Decisions—Fiscal 2020 Annual Incentive Bonus" starting on page 39.
(3)The amounts in this column represent the increase in the actuarial present value of accumulated benefits under the SERP for each NEO and the amount of above-market interest earned on their respective balances, if applicable, in the Deferred Compensation Plan and the 2015 Plan. Mr. Boyd did not participate in the 2015 Plan during the fiscal year indicated in the table above. The amounts attributed to the increase or decrease in actuarial present value of SERP benefits and above-market interest on deferred compensation are as follows (see also the Pension Benefits During Fiscal 2020 table on page 58).
| | Name | | Fiscal Year | | Increase (Decrease) in Actuarial Present Value of Accumulated SERP Benefits ($) | | Above-Market Interest Earned on Deferred Compensation ($) | | Total ($) | Name | | Fiscal Year | | Increase (Decrease) in Actuarial Present Value of Accumulated SERP Benefits ($) | | Above-Market Interest Earned on Deferred Compensation ($) | | Total ($) |
Douglas C. Yearley, Jr. | | 2019 | | 514,162 |
| | 5,160 |
| | 519,322 |
| Douglas C. Yearley, Jr. | | 2020 | | 288,893 | | 9,464 | | 298,357 |
| | 2018 | | (174,685 | ) | | 3,926 |
| | (170,759 | ) | | 2019 | | 514,162 | | 5,160 | | 519,322 |
| | 2017 | | 7,559 |
| | 1,121 |
| | 8,680 |
| | 2018 | | (174,685) | | 3,629 | | (171,056) |
Richard T. Hartman | | 2019 | | 566,322 |
| | 35,483 |
| | 601,805 |
| |
James W. Boyd | | James W. Boyd | | 2020 | | 180,558 | | — | | 180,558 |
| | 2018 | | (167,038 | ) | | 33,909 |
| | (133,129 | ) | |
| | 2017 | | 18,700 |
| | 37,555 |
| | 56,255 |
| |
Martin P. Connor | | 2019 | | 421,859 |
| | 895 |
| | 422,754 |
| Martin P. Connor | | 2020 | | 245,030 | | 4,431 | | 249,461 |
| | 2018 | | (163,907 | ) | | 589 |
| | (163,318 | ) | | 2019 | | 421,859 | | 895 | | 422,754 |
| | 2017 | | (8,832 | ) | | 437 |
| | (8,395 | ) | | 2018 | | (163,907) | | 589 | | (163,318) |
John K. McDonald | | 2019 | | 810,391 |
| | — |
| | 810,391 |
| |
Robert Parahus | | Robert Parahus | | 2020 | | 211,232 | | 14,529 | | 225,761 |
| |
(4) | Fiscal 2019 “All Other Compensation” consists of: |
(4) Fiscal 2020 “All Other Compensation” consists of:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | |
| | Douglas C. Yearley, Jr. | | James W. Boyd | | Martin P. Connor | | Robert Parahus |
Tax and financial statement preparation assistance | | $ | 6,091 | | | $ | — | | | $ | — | | | $ | — | |
Company contribution to 401(k) Plan | | 5,700 | | | 5,700 | | | 5,700 | | | 5,700 | |
Executive long-term disability insurance premiums | | 2,511 | | | 2,958 | | | 2,798 | | | 2,209 | |
Auto and gas allowance | | 15,900 | | | 15,716 | | | 15,900 | | | 15,716 | |
Non-business use of cars and drivers | | 5,700 | | | — | | | 240 | | | — | |
Total | | $ | 35,902 | | | $ | 24,374 | | | $ | 24,638 | | | $ | 23,625 | |
|
| | | | | | | | | | | | | | | | |
| | | | |
| | Douglas C. Yearley, Jr. | | Richard T. Hartman | | Martin P. Connor | | John K. McDonald |
Tax and financial statement preparation assistance | | $ | 6,091 |
| | $ | — |
| | $ | — |
| | $ | — |
|
Company contribution to 401(k) Plan | | 11,200 |
| | 11,200 |
| | 11,200 |
| | 11,200 |
|
Executive long-term disability and life insurance premiums | | 5,022 |
| | 5,688 |
| | 5,596 |
| | 5,074 |
|
Auto and gas allowance | | 15,900 |
| | 15,900 |
| | 15,900 |
| | 9,900 |
|
Non-business use of cars and drivers | | 5,700 |
| | 840 |
| | 120 |
| | — |
|
Total | | $ | 43,913 |
| | $ | 33,628 |
| | $ | 32,816 |
| | $ | 26,174 |
|
54
| |
(5) | Mr. Hartman stepped down from the role of President and Chief Operating Officer effective October 31, 2019 and retired from the Company on December 31, 2019. |
| |
(6) | Mr. McDonald resigned from the Company effective December 31, 2019. |
Grants of Plan-Based Awards During Fiscal 20192020
| | | | | | | | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards | | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | | All Other Stock Awards: Number of Shares of Stock or Units (#) | | All Other Option Awards: Number of Securities Underlying Options (#)(3) | | Exer- cise or Base Price of Option Awards ($/Sh) | | Grant Date Fair Value of Stock and Option Awards ($)(4) | | | | | | | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards | | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | | All Other Stock Awards: Number of Shares of Stock or Units (#) | | All Other Option Awards: Number of Securities Underlying Options (#) | | Exer- cise or Base Price of Option Awards ($/Sh) | | Grant Date Fair Value of Stock and Option Awards ($)(3) |
Name/ Award Type | | Grant Date | | Action Date(1) | | Thres- hold ($) | | Target ($)(6) | | Maximum ($) | | Threshold (#) | | Target (#) | | Maximum (#) | | Name/ Award Type | | Grant Date | | Action Date(1) | | Thres- hold ($) | | Target ($)(5) | | Maximum ($) | | Threshold (#) | | Target (#) | | Maximum (#) | |
Douglas C. Yearley, Jr. | Douglas C. Yearley, Jr. | | (5) | | 2,950,000 | | 8,500,000 |
| | | | | | | | | | | | | | | Douglas C. Yearley, Jr. | | | | (4) | | 3,300,000 | | 8,500,000 | | | | | | | | | | | | | | | |
Ops PRSUs | | 1/28/2019 | | 1/28/2019 | | | | 73,418 |
| | 97,891 |
| | 146,837 |
| | | | | | | | 3,412,480 |
| Ops PRSUs | | 12/18/2019 | | 12/17/2019 | | 64,778 | | | 86,370 | | | 129,555 | | | 2,779,387 | |
TSR PRSUs | | 12/20/2018 | | 12/3/2018 | | | | 23,309 |
| | 31,079 |
| | 46,619 |
| | | | | | | | 1,133,140 |
| TSR PRSUs | | 12/18/2019 | | 12/17/2019 | | 19,535 | | | 26,047 | | | 39,071 | | | 961,395 | |
Stock Options | | 12/20/2018 | | 12/3/2018 | | | | | | | | | | | | 130,197 |
| | 32.42 |
| | 1,471,226 |
| |
Richard T. Hartman | | (5) | | 1,071,000 | | 8,500,000 |
| | | | | | | | | | | | | | | |
RSUs | | RSUs | | 12/18/2019 | | 12/17/2019 | | 49,354 | | | 1,588,212 | |
James W. Boyd | | James W. Boyd | | (4) | | 1,200,000 | | 8,500,000 | | |
Ops PRSUs | | 1/28/2019 | | 1/28/2019 | | | | 22,844 |
| | 30,459 |
| | 45,689 |
| | | | | | | | 894,581 |
| Ops PRSUs | | 12/18/2019 | | 12/17/2019 | | 5,979 | | | 7,972 | | | 11,958 | | | 256,539 | |
TSR PRSUs | | 12/20/2018 | | 12/3/2018 | | | | 7,253 |
| | 9,670 |
| | 14,505 |
| | | | | | | | 352,568 |
| TSR PRSUs | | 12/18/2019 | | 12/17/2019 | | 1,803 | | | 2,404 | | | 3,606 | | | 88,732 | |
RSUs | | 10/29/2019 | | 10/29/2019 | | | | | | | | | | 38,246 |
| | | | | | 1,516,836 |
| RSUs | | 12/18/2019 | | 12/17/2019 | | 4,555 | | | 146,580 | |
Stock Options | | 12/20/2018 | | 12/3/2018 | | | | | | | | | | | | 40,511 |
| | 32.42 |
| | 457,774 |
| |
Martin P. Connor | Martin P. Connor | | (5) | | 1,071,000 | | 8,500,000 |
| | | | | | | | | | | | | | | Martin P. Connor | | (4) | | 1,200,000 | | 8,500,000 | | |
Ops PRSUs | | 1/28/2019 | | 1/28/2019 | | | | 18,806 |
| | 25,075 |
| | 37,613 |
| | | | | | | | 874,115 |
| Ops PRSUs | | 12/18/2019 | | 12/17/2019 | | 16,593 | | | 22,124 | | | 33,186 | | | 749,119 | |
TSR PRSUs | | 12/20/2018 | | 12/3/2018 | | | | 5,971 |
| | 7,961 |
| | 11,942 |
| | | | | | | | 290,258 |
| TSR PRSUs | | 12/18/2019 | | 12/17/2019 | | 5,004 | | | 6,672 | | | 10,008 | | | 270,883 | |
Stock Options | | 12/20/2018 | | 12/3/2018 | | | | | | | | | | | | 33,350 |
| | 32.42 |
| | 376,855 |
| |
John K. McDonald | | | | | | | | | | | | | | | | | |
RSUs | | 12/20/2018 | | 12/3/2018 | | | | | | | | | | 5,013 |
| | | | | | 162,521 |
| RSUs | | 12/18/2019 | | 12/17/2019 | | 12,642 | | | 428,058 | |
Stock Options | | 12/20/2018 | | 12/3/2018 | | | | | | | | | | | | 16,250 |
| | 32.42 |
| | 140,400 |
| |
Robert Parahus | | Robert Parahus | | (4) | | 800,000 | | 8,500,000 | | |
Ops PRSUs | | Ops PRSUs | | 12/18/2019 | | 12/17/2019 | | 5,979 | | | 7,972 | | | 11,958 | | | 265,388 | |
TSR PRSUs | | TSR PRSUs | | 12/18/2019 | | 12/17/2019 | | 1,803 | | | 2,404 | | | 3,606 | | | 92,241 | |
RSUs | | RSUs | | 12/18/2019 | | 12/17/2019 | | 4,555 | | | 151,636 | |
| |
(1) | The Compensation Committee met on January 28, 2019 to make determinations for our NEOs with respect to Ops PRSU grants for our NEOs for fiscal 2019. All other grants of equity compensation under our annual long-term incentive compensation program were made on December 20, 2018, which is consistent with our practice of awarding equity compensation described under “Fiscal 2019 Long-Term Incentive Compensation” on page 38. |
| |
(2) | Reflects PRSUs the Compensation Committee awarded to our NEOs under the 2014 Stock Incentive Plan for Employees (the "2014 SIP"). PRSUs earn dividend equivalents at the same time and in the same amount as dividends paid on the Company’s common stock; dividend equivalents are subject to the same vesting, settlement, and other terms and conditions as the PRSUs to which the dividend equivalents relate. See “Fiscal 2019 Long-Term Incentive Compensation—Performance-Based RSUs” on page 39 for further information. |
| |
(3) | See “Fiscal 2019 Long-Term Incentive Compensation—Stock Options" on page 41 for a discussion of these stock option grants, which were awarded under the 2014 SIP. The exercise price of the stock options granted in fiscal 2019 is the closing price of the Company's common stock on the grant date. |
| |
(4) | Amount represents the aggregate grant date fair value of PRSUs and stock options, respectively, granted in fiscal 2019, calculated in accordance with ASC 718 utilizing the assumptions discussed in Note 10 in the Notes to Consolidated Financial Statements in the Form 10-K. The calculation of these amounts disregards the estimate of forfeitures related to time-based vesting conditions. With respect to PRSUs, the estimate of the grant date fair value is determined in accordance with ASC 718 assuming the vesting of 100% of the PRSUs awarded. |
| |
(5) | See "Fiscal 2019 Annual Incentive Bonus" on page 36. The formulaic portion of the annual incentive award had a threshold level that, if achieved, would earn 75% of target; a target level that, if achieved, would have earned 100% of target; and a maximum level that, if achieved, would have earned 150% of target. To the extent that actual performance results fell between these levels, the amount earned would have been determined by linear interpolation between those levels. If the minimum threshold performance level of 80% was not achieved, no amount would have been earned with respect to the formulaic portion of the award. |
| |
(6) | The annual incentive bonuses for fiscal 2019 were earned based on target bonus amounts established by the Compensation Committee on January 28, 2019 for PTI Metric performance (70% of bonus amount) and its qualitative assessment of individual and Company performance (30% of bonus amount), as more fully described under “Fiscal 2019 Annual Incentive Bonus” on page 36. |
(1)The Compensation Committee met on December 17, 2019 to make final determinations for our NEOs with respect to equity award grants for fiscal 2020. All grants of equity compensation under our annual long-term incentive compensation program were made on December 18, 2019. Our equity award compensation practices are described under “Fiscal 2020 Long-Term Incentive Compensation” on page 41.
(2)Reflects PRSUs the Compensation Committee awarded to our NEOs under the 2019 Omnibus Incentive Plan. PRSUs earn dividend equivalents at the same time and in the same amount as dividends paid on the Company’s common stock; dividend equivalents are subject to the same vesting, settlement, and other terms and conditions as the PRSUs to which the dividend equivalents relate. See “Fiscal 2020 Long-Term Incentive Compensation—Performance-Based RSUs” on page 41 for further information.
(3)Amount represents the aggregate grant date fair value of PRSUs and RSUs granted in fiscal 2020, calculated in accordance with ASC 718 utilizing the assumptions discussed in Note 10 in the Notes to Consolidated Financial Statements in the Company's Form 10-K. The calculation of these amounts disregards the estimate of forfeitures related to time-based vesting conditions and reflects a liquidity discount for post-vesting transfer restrictions applicable to retirement eligible employees. With respect to PRSUs, the estimate of the grant date fair value is determined in accordance with ASC 718 assuming the vesting of 100% of the PRSUs awarded.
(4)See "Fiscal 2020 Annual Incentive Bonus" on page 39. The formulaic portion of the annual incentive award had a threshold level that, if achieved, would earn 75% of target; a target level that, if achieved, would have earned 100% of target; and a maximum level that, if achieved, would have earned 150% of target. To the extent that actual performance results fell between these levels, the amount earned would have been determined by linear interpolation between those levels. If the minimum threshold performance level of 80% was not achieved, no amount would have been earned with respect to the formulaic portion of the award.
(5)The annual incentive bonuses for fiscal 2020 were earned based on target bonus amounts established by the Compensation Committee on December 17, 2019 related to pre-tax income (70% of bonus amount) and its qualitative assessment of individual and Company performance (30% of bonus amount), as more fully described under “Fiscal 2020 Annual Incentive Bonus” on page 39.
Outstanding Equity Awards at October 31, 20192020
| | | | Option Awards | | Stock Awards | | | Option Awards | | Stock Awards |
Name | | Grant Date | | Number of Securities Underlying Unexercised Options (#) Exercisable (16) | | Number of Securities Underlying Unexercised Options (#) Unexercisable | | Option Exercise Price ($) | | Option Expiration Date | | Number of Shares or Units of Stock That Have Not Vested (#) | | | Market Value of Shares or Units of Stock That Have Not Vested ($)(17) | | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | Name | | Grant Date | | Number of Securities Underlying Unexercised Options (#) Exercisable (14) | | Number of Securities Underlying Unexercised Options (#) Unexercisable | | Option Exercise Price ($) | | Option Expiration Date | | Number of Shares or Units of Stock That Have Not Vested (#) | | | Market Value of Shares or Units of Stock That Have Not Vested ($)(15) | | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) |
Douglas C. Yearley, Jr. | | 12/20/2010 | | 120,000 |
| | | | 19.32 |
| | 12/20/2020 | | | | | | | Douglas C. Yearley, Jr. | | 12/17/2012 | | 150,000 | | | | | 32.22 | | | 12/17/2022 | | | | | | | | |
| | 12/20/2011 | | 120,000 |
| | | | 20.50 |
| | 12/20/2021 | | | | | | | | 12/20/2013 | | 159,000 | | | 35.16 | | | 12/20/2023 | |
| | 12/17/2012 | | 150,000 |
| | | | 32.22 |
| | 12/17/2022 | | | | | | | | 12/19/2014 | | 160,000 | | | 32.49 | | | 12/19/2024 | |
| | 12/20/2013 | | 159,000 |
| | | | 35.16 |
| | 12/20/2023 | | | | | | | | 12/18/2015 | | 137,584 | | | 32.85 | | | 12/18/2025 | |
| | 12/19/2014 | | 160,000 |
| | | | 32.49 |
| | 12/19/2024 | | | | | | | | 12/20/2016 | | 112,565 | | | 37,522 | | (1) | | 31.61 | | | 12/20/2026 | | 21,762 | | (4) | | | 920,097 | | |
| | 12/18/2015 | | 103,188 |
| | 34,396 |
| (1) | | 32.85 |
| | 12/18/2025 | | 19,985 |
| (5 | ) | | 794,803 |
| | | | 12/18/2017 | | 40,175 | | | 40,176 | | (2) | | 47.84 | | | 12/18/2027 | | 35,907 | | (5) | | | 1,518,148 | | |
| | 12/20/2016 | | 75,043 |
| | 75,044 |
| (2) | | 31.61 |
| | 12/20/2026 | | 43,524 |
| (6 | ) | | 1,730,949 |
| | | | 12/20/2018 | | 32,549 | | | 97,648 | | (3) | | 32.42 | | | 12/20/2028 | | 15,540 | | (12) | | 657,031 | |
| | 12/18/2017 | | 20,087 |
| | 60,264 |
| (3) | | 47.84 |
| | 12/18/2027 | | 53,860 |
| (7 | ) | | 2,142,012 |
| | 10,440 |
| (9 | ) | 415,199 |
| | 1/28/2019 | | 75,954 | | (6) | | | 3,211,335 | | |
| | 12/20/2018 | |
|
| | 130,197 |
| (4) | | 32.42 |
| | 12/20/2028 | |
|
| | |
|
| | 15,540 |
| (10 | ) | 618,026 |
| | 12/18/2019 | | 80,808 | | (7) | | | 3,416,562 | | | 26,047 | | (13) | | 1,101,267 | |
| | 1/28/2019 | | | | | | | | 101,271 |
| (8 | ) | | 4,027,548 |
| | | | 12/18/2019 | | 49,354 | | (8) | | | 2,086,687 | | |
Richard T. Hartman | | 10/20/2010 | | 10,000 |
| | | | 19.32 |
| | 12/20/2020 | | | | | | | |
| | 12/20/2011 | | 30,000 |
| | | | 20.50 |
| | 12/20/2021 | | | | | | | |
| | 12/17/2012 | | 40,000 |
| | | | 32.22 |
| | 12/17/2022 | | | | | | | |
| | 12/20/2013 | | 42,000 |
| | | | 35.16 |
| | 12/20/2023 | | | | | | | |
| | 12/19/2014 | | 43,000 |
| | | | 32.49 |
| | 12/19/2024 | | | | | | | |
James W. Boyd | | James W. Boyd | | 12/19/2014 | | 2,125 | | | 32.49 | | | 12/19/2024 | |
| | 12/18/2015 | | 31,454 |
| | 10,485 |
| (1) | | 32.85 |
| | 12/18/2025 | | 6,024 |
| (5 | ) | | 239,574 |
| | | | 12/18/2015 | | 6,000 | | | 32.85 | | | 12/18/2025 | |
| | 12/20/2016 | | 22,786 |
| | 22,787 |
| (2) | | 31.61 |
| | 12/20/2026 | | 13,175 |
| (6 | ) | | 523,970 |
| | | | 12/20/2016 | | 2,135 | | (9) | | | 90,268 | | |
| | 12/18/2017 | | 6,088 |
| | 18,264 |
| (3) | | 47.84 |
| | 12/18/2027 | | 16,323 |
| (7 | ) | | 649,166 |
| | 3,164 |
| (9 | ) | 125,832 |
| | 12/18/2017 | | 2,927 | | (10) | | | 123,754 | | |
| | 12/20/2018 | |
|
| | 40,511 |
| (4) | | 32.42 |
| | 12/20/2028 | |
|
| | |
|
| | 4,835 |
| (10 | ) | 192,288 |
| | 12/20/2018 | | 6,478 | | (11) | | | 273,890 | | |
| | 1/28/2019 | | | | | | | | 31,510 |
| (8 | ) | | 1,253,153 |
| | | | 12/18/2019 | | 7,458 | | (7) | | | 315,324 | | | 2,404 | | (13) | | 101,641 | |
| | 10/29/2019 | | | | | | | | 38,246 |
| (11 | ) | | 1,521,043 |
| | | | 12/18/2019 | | 4,555 | | (8) | | | 192,585 | | |
Martin P. Connor | | 12/17/2012 | | 30,000 |
| | | | 32.22 |
| | 12/17/2022 | | | | | | | Martin P. Connor | | 12/17/2012 | | 30,000 | | | 32.22 | | | 12/17/2022 | |
| | 12/20/2013 | | 33,000 |
| | | | 35.16 |
| | 12/20/2023 | | | | | | | | 12/20/2013 | | 33,000 | | | 35.16 | | | 12/20/2023 | |
| | 12/19/2014 | | 34,000 |
| | | | 32.49 |
| | 12/19/2024 | | | | | | | | 12/19/2014 | | 34,000 | | | 32.49 | | | 12/19/2024 | |
| | 12/18/2015 | | 25,993 |
| | 8,665 |
| (1) | | 32.85 |
| | 12/18/2025 | | 4,954 |
| (5 | ) | | 197,021 |
| | | | 12/18/2015 | | 34,658 | | | 32.85 | | | 12/18/2025 | |
| | 12/20/2016 | | 18,836 |
| | 18,837 |
| (2) | | 31.61 |
| | 12/20/2026 | | 10,822 |
| (6 | ) | | 430,391 |
| | | | 12/20/2016 | | 28,254 | | | 9,419 | | (1) | | 31.61 | | | 12/20/2026 | | 5,411 | | (4) | | | 228,777 | | |
| | 12/18/2017 | | 5,013 |
| | 15,042 |
| (3) | | 47.84 |
| | 12/18/2027 | | 13,443 |
| (7 | ) | | 534,628 |
| | 2,606 |
| (9 | ) | 103,641 |
| | 12/18/2017 | | 10,027 | | | 10,028 | | (2) | | 47.84 | | | 12/18/2027 | | 8,962 | | (5) | | | 378,913 | | |
| | 12/20/2018 | |
|
| | 33,350 |
| (4) | | 32.42 |
| | 12/20/2028 | |
|
| | |
|
| | 3,981 |
| (10 | ) | 158,324 |
| | 12/20/2018 | | 8,337 | | | 25,013 | | (3) | | 32.42 | | | 12/20/2028 | | 3,981 | | (12) | | 168,317 | |
| | 1/28/2019 | | | | | | | | 25,940 |
| (8 | ) | | 1,031,634 |
| | | | 1/28/2019 | | 19,455 | | (6) | | | 822,557 | | |
John K. McDonald | | 12/20/2013 | | 7,000 |
| | | | 35.16 |
| | 12/20/2023 | | | | | | | |
| | | 12/18/2019 | | 20,699 | | (7) | | | 875,154 | | | 6,672 | | (13) | | 282,092 | |
| | | 12/18/2019 | | 12,642 | | (8) | | | 534,504 | | |
Robert Parahus | | Robert Parahus | | 12/17/2012 | | 3,750 | | | 32.22 | | | 12/17/2022 | |
| | 12/19/2014 | | 7,500 |
| | | | 32.49 |
| | 12/19/2024 | | | | | | | | 12/20/2013 | | 4,000 | | | 35.16 | | | 12/20/2023 | |
| | 12/18/2015 | | 7,500 |
| | 2,500 |
| (1) | | 32.85 |
| | 12/18/2025 | | 571 |
| (12 | ) | | 22,709 |
| | | | 12/19/2014 | | 4,250 | | | 32.49 | | | 12/19/2024 | |
| | 12/20/2016 | | 5,324 |
| | 5,325 |
| (2) | | 31.61 |
| | 12/20/2026 | | 1,714 |
| (13 | ) | | 68,166 |
| | | | 12/18/2015 | | 9,000 | | | 32.85 | | | 12/18/2025 | |
| | 12/18/2017 | | | | | | | | 3,920 |
| (14 | ) | | 155,898 |
| | | | 12/20/2016 | | 2,231 | | (9) | | | 94,327 | | |
| | 12/20/2018 | |
|
| | 16,250 |
| (4) | | 32.42 |
| | 12/20/2028 | | 5,013 |
| (15 | ) | | 199,367 |
| | | | 12/18/2017 | | 2,613 | | (10) | | | 110,478 | | |
| | | 12/20/2018 | | 5,784 | | (11) | | | 244,548 | | |
| | | 12/18/2019 | | 7,458 | | (7) | | | 315,324 | | | 2,404 | | (13) | | 101,641 | |
| | | 12/18/2019 | | 4,555 | | (8) | | | 192,585 | | |
Generally, unvested equity awards are canceled upon termination of employment with the Company, and the right to exercise vested stock options terminates within a specified period of time after termination of employment; however, under specified circumstances, such as retirement, death, disability, or a change of control, special vesting rules apply, as described below under "Potential Payments upon Termination or Change of Control."
| |
(1) | 100% of the stock options vested on December 18, 2019. |
| |
(2) | 50% of the stock options vest on each of December 20, 2019 and 2020. |
| |
(3) | 33.33% of the stock options vest on each of December 18, 2019, 2020, and 2021. |
| |
(4) | 25% of the stock options vest on each of December 20, 2019, 2020, 2021, and 2022. |
| |
(5) | 100% of these Ops PRSUs vested on December 18, 2019. |
| |
(6) | 50% of these Ops PRSUs vest on each of December 20, 2019 and 2020. |
(1)100% of these stock options vested on December 20, 2020.
(2)50% of these stock options vest on each of December 18, 2020 and 2021.
(3)33.33% of these stock options vest on each of December 20, 2020, 2021, and 2022.
(4)100% of these earned Ops PRSUs (performance has been determined), vested on December 20, 2020.
| |
(7) | 33.33% of these Ops PRSUs vest on each of December 18, 2019, 2020, and 2021. |
| |
(8) | 25% of these Ops PRSUs vest on each of January 28, 2020, 2021, 2022, and 2023. |
| |
(9) | 100% of these TSR PRSUs vest on October 31, 2020. Based on TSR PRSU performance through October 31, 2019, amounts are shown assuming threshold number of shares (50% of target) are delivered. |
| |
(10) | 100% of these TSR PRSUs vest on October 31, 2021. Based on TSR PRSU performance through October 31, 2019, amounts are shown assuming threshold number of shares (50% of target) are delivered. |
| |
(11) | 100% of these RSUs vested on January 1, 2020. |
| |
(12) | These RSUs were forfeited. |
| |
(13) | 50% of these RSUs vested on December 1, 2019. The remainder were forfeited. |
| |
(14) | 33.33% of these RSUs vested on December 1, 2019. The remainder were forfeited. |
| |
(15) | 25% of these RSUs vested on December 1, 2019. The remainder were forfeited. |
| |
(16) | Stock options that are reflected in the table above as fully exercisable vested in equal installments on the first four anniversaries of the grant date. |
| |
(17) | Market value was calculated based on the closing price of the Company's common stock on the NYSE on October 31, 2019 of $39.77 per share. |
(5)50% of these earned Ops PRSUs (performance has been determined) vest on each of December 18, 2020 and 2021.
(6)33.33% of these earned Ops PRSUs (performance has been determined) vest on each of January 28, 2021, 2022, and 2023.
(7)25% of these earned Ops PRSUs (performance has been determined) vest on each of December 18, 2020, 2021, 2022, and 2023.
(8)25% of these service-based RSUs vest on each of December 1, 2020, 2021, 2022, and 2023.
(9)100% of these service-based RSUs vested on December 1, 2020.
(10)50% of these service-based RSUs vest on each of December 1, 2020 and 2021.
(11)33.33% of these service-based RSUs vest on each of December 1, 2020, 2021, and 2022.
(12)100% of these unearned TSR PRSUs (performance has not been determined) vest on October 31, 2021. Based on TSR PRSU performance through October 31, 2020, amounts are shown assuming threshold number of shares (50% of target) are delivered.
(13)100% of these unearned TSR PRSUs (performance has not been determined) vest on October 31, 2022. Based on TSR PRSU performance through October 31, 2020, amounts are shown assuming target number of shares are delivered.
(14)Stock options that are reflected as fully exercisable vested in equal installments on the first four anniversaries of the grant date.
(15)Market value was calculated based on the closing price of the Company's common stock on the NYSE on October 30, 2020 of $42.28 per share.
Option Exercises and Stock Vested During Fiscal 20192020
| | | | Option Awards | | Stock Awards | | | Option Awards | | Stock Awards |
Name | | Number of Shares Acquired on Exercise (#) | | Value Realized on Exercise ($)(1) | | Number of Shares Acquired on Vesting (#)(2) | | Value Realized on Vesting ($)(3) | Name | | Number of Shares Acquired on Exercise (#) | | Value Realized on Exercise ($)(1) | | Number of Shares Acquired on Vesting (#)(2) | | Value Realized on Vesting ($)(3) |
Douglas C. Yearley, Jr. | | 54,375 |
| | 1,027,050 |
| | 85,684 |
| | 2,762,648 |
| Douglas C. Yearley, Jr. | | 240,000 | | | 3,879,900 | | | 85,017 | | | 3,530,264 | |
Richard T. Hartman | | 10,000 |
| | 187,800 |
| | 25,847 |
| | 833,383 |
| |
James W. Boyd | | James W. Boyd | | — | | | — | | | 6,519 | | | 291,358 | |
Martin P. Connor | | 28,000 |
| | 513,360 |
| | 21,343 |
| | 688,138 |
| Martin P. Connor | | — | | | — | | | 21,331 | | | 886,575 | |
John K. McDonald | | — |
| | — |
| | 3,208 |
| | 107,785 |
| |
Robert Parahus | | Robert Parahus | | 3,500 | | | 92,750 | | | 6,036 | | | 271,263 | |
| |
(1) | “Value Realized on Exercise” equals the difference between the closing price of the Company's common stock on the NYSE on the various dates of exercise and the exercise price, multiplied by the number of shares of common stock acquired upon exercise of the stock options. |
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(2) | With the exception of TSR RSUs, all RSUs, whether or not performance-based generally vest in equal installments on the first four anniversaries of the grant date, with delivery of the shares underlying such RSUs deferred until the fourth anniversary (in each case, subject to a six-month delay in delivery if required to comply with Section 409A of the tax code). Accordingly, the "Number of Shares Acquired on Vesting" for Messrs. Yearley, Hartman and Connor includes (a) the portion of the Ops PRSUs granted in fiscal 2015 that vested and were delivered on December 19, 2018, (b) the portion of the Ops PRSUs granted in fiscal 2016 that vested on December 18, 2018 and were delivered on December 18, 2019, (c) the portion of Ops PRSUs granted in fiscal 2017 that vested on December 20, 2018 but will not be delivered until December 20, 2020, and (d) the portion of Ops PRSUs granted in fiscal 2018 that vested on December 18, 2018 but will not be delivered until December 18, 2021. For Mr. McDonald, the amount includes (a) the portion of RSUs granted to him in fiscal 2015, 2016, 2017 and 2018 that vested during fiscal 2019 and which were delivered on January 5, 2019 (or which will be delivered following a six-month delay following his termination of employment on December 31, 2019). |
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(3) | “Value Realized on Vesting” is based on the number of shares of the Company's common stock underlying the RSUs that vested during fiscal 2019 multiplied by the closing price of the Company's common stock on the NYSE on the vesting date. |
(1)“Value Realized on Exercise” equals the difference between the closing price of the Company's common stock on the NYSE on the various dates of exercise and the exercise price, multiplied by the number of shares of common stock acquired upon exercise of the stock options.
(2)With the exception of TSR PRSUs, all RSUs, whether or not performance-based generally vest in equal installments on the first four anniversaries of the grant date, with delivery of the shares underlying such RSUs deferred until the fourth anniversary (in each case, subject to a six-month delay in delivery if required to comply with Section 409A of the tax code). Accordingly, the "Number of Shares Acquired on Vesting" for Messrs. Yearley and Connor includes (a) the portion of Ops PRSUs granted in fiscal 2016 that vested and were delivered on December 18, 2019, (b) the portion of Ops PRSUs granted in fiscal 2017 that vested on December 20, 2019 (which were delivered on December 20, 2020), (c) the portion of Ops PRSUs granted in fiscal 2018 that vested on December 18, 2019 (which are not scheduled to be delivered until December 18, 2021), and (d) the portion of Ops PRSUs granted in fiscal 2019 that vested on January 28, 2020 (which are not scheduled to be delivered until January 28, 2023). For Messrs. Boyd and Parahus, the amount includes (a) the portion of RSUs granted in fiscal 2016 that vested and were delivered on January 5, 2020, (b) the portion of RSUs granted in fiscal 2017 that vested on December 1, 2019 (which were delivered on December 1, 2020), (c) the portion of RSUs granted in fiscal 2018 that vested on December 1, 2019 (which are not scheduled to be delivered until December 1, 2021), and (d) the portion of RSUs granted in fiscal 2019 that vested on December 1, 2019 (which are not scheduled to be delivered until December 1, 2022).
(3)“Value Realized on Vesting” is based on the number of shares of the Company's common stock underlying the RSUs that vested during fiscal 2020 multiplied by the closing price of the Company's common stock on the NYSE on the vesting date.
Pension Benefits During Fiscal 20192020
The following table provides information regarding the pension benefits for our NEOs under the SERP.
| | Name | | Plan Name(1) | | Number of Years of Credited Services (#)(1) | | Present Value of Accumulated Benefit ($)(2) | | Payments During Last Fiscal Year ($) | Name | | Plan Name(1) | | Number of Years of Credited Service (#)(1) | | Present Value of Accumulated Benefit ($)(2) | | Payments During Last Fiscal Year ($) |
Douglas C. Yearley, Jr. | | SERP | | 29.5 |
| | 2,959,045 |
| | — |
| Douglas C. Yearley, Jr. | | SERP | | 30.5 | | | 3,247,938 | | | — | |
Richard T. Hartman | | SERP | | 38.8 |
| | 2,486,083 |
| | — |
| |
James W. Boyd | | James W. Boyd | | SERP | | 27.3 | | | 2,029,961 | | | — | |
Martin P. Connor | | SERP | | 10.8 |
| | 1,932,961 |
| | — |
| Martin P. Connor | | SERP | | 11.8 | | | 2,177,991 | | | — | |
John K. McDonald (3) | | SERP | | 17.2 |
| | 1,666,346 |
| | — |
| |
Robert Parahus | | Robert Parahus | | SERP | | 34.5 | | | 1,877,578 | | | — | |
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(1) | In order to be vested in benefits under the SERP, participants generally must have reached age 58, except participants will be vested in SERP benefits in the event of death or disability prior to age 58 after five years of service. The number of years of credited services does not impact SERP benefits, except for the five-year service requirement for vesting in death or disability benefits prior to age 58. |
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(2) | For a description of the assumptions used in the calculation of the present value of plan benefits, see Note 13, “Employee Retirement and Deferred Compensation Plans” in the notes to the Consolidated Financial Statements contained in the Form 10-K. The change in the actuarial present value of accumulated benefits under the SERP reflected in the Summary Compensation Table on page 51 is due to a change in the discount rate used for actuarial purposes and the passage of time. We use the Citigroup yield curve as our discount rate for calculating the actuarial present value of accumulated SERP benefits. This rate was 3.19% for fiscal 2017, 4.07% for fiscal 2018, and 2.64% for fiscal 2019. When the discount rate increases, as it did in fiscal 2018 and fiscal 2017, the actuarial present value of accumulated SERP benefits decreases. When the discount rate decreases, as it did in fiscal 2019, the actuarial present value of accumulated SERP benefits increases. |
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(3) | In connection with his resignation, Mr. McDonald relinquished any entitlement to benefits under the SERP. |
(1)In order to be vested in benefits under the SERP, participants generally must have reached age 58, except participants will be vested in SERP benefits in the event of death or disability prior to age 58 after five years of service. The number of years of credited service does not impact SERP benefits, except for the five-year service requirement for vesting in death or disability benefits prior to age 58.
(2)For a description of the assumptions used in the calculation of the present value of plan benefits, see Note 13, “Employee Retirement and Deferred Compensation Plans” in the notes to the Consolidated Financial Statements contained in the Company's Form 10-K. The change in the actuarial present value of accumulated benefits under the SERP reflected in the Summary Compensation Table on page 53 is due to a change in the discount rate used for actuarial purposes and the passage of time. We use the Citigroup yield curve as the discount rate for calculating the actuarial present value of accumulated SERP benefits. This rate was 4.07% for fiscal 2018, 2.64% for fiscal 2019, and 1.97% for fiscal 2020. When the discount rate decreases, as it did in fiscal 2020 and 2019, the actuarial present value of accumulated SERP benefits increases, and vice versa.
Supplemental Executive Retirement Plan
The SERP, which is an unfunded plan, generally provides for an annual cash benefit, payable for 20 years following retirement, once a participant has reached “normal retirement age,” which is age 58 under the SERP. The SERP does not have a service requirement, except that a participant must have five or more years of service in order to be vested in a death or disability benefit prior to age 58.
Beginning in fiscal 2008 and continuing through fiscal 2010, the SERP also provided for 10% increases in annual retirement benefits to the NEOs for each year of service to the Company after age 62. During fiscal 2010, the Company discontinued any 10% increases beyond fiscal 2010; except that the annual benefit amount for Messrs. Yearley Hartman and Connor will be subject to such increase for the first three years of service to the Company after they reach age 62.
The Compensation Committee did not increase the SERP annual benefit payment amounts to the continuing NEOs in fiscal 2019, although it did (i) approve lowering2020. In connection with their promotions to Co-Chief Operating Officers, Messrs. Boyd and Parahus were added as participants in the normal retirement age from age 62 to age 58 and (ii) approved the addition of newly promoted executive officers to the plan. In addition, Mr. Hartman qualified for the 10% increase in his benefit inSERP beginning November 1, 2019. The annual benefits to our NEOs under the SERP as of the end of fiscal 20192020 are set forth in the table below:
|
| | | | |
Participant | | Annual Benefit Amount at October 31, 2019 |
Douglas C. Yearley, Jr. | | $ | 200,000 |
|
Richard T. Hartman | | $ | 145,000 |
|
Martin P. Connor | | $ | 145,000 |
|
John K. McDonald | | $ | 125,000 |
|
| | | | | | | | |
Participant | | Annual Benefit Amount at October 31, 2020 |
Douglas C. Yearley, Jr. | | $ | 200,000 | |
James W. Boyd | | $ | 125,000 | |
Martin P. Connor | | $ | 145,000 | |
Robert Parahus | | $ | 125,000 | |
Messrs. Yearley and HartmanBoyd have both reached normal retirement age and are fully vested. Neither Mr. Connor has notnor Mr. Parahus have reached normal retirement age and isare not vested in his SERP benefits. Mr. McDonald resigned in fiscal 2019 and, as a result, is no longer entitled totheir SERP benefits. Benefits under the SERP cease if any participant competes with us following retirement.
Nonqualified Deferred Compensation During Fiscal 20192020
The Deferred Compensation Plan was frozen with respect to compensation earned after December 31, 2011. Until January 1, 2015, no new contributions to the Deferred Compensation Plan by employees or NEOs were allowed for compensation earned after December 31, 2011. In December 2014, the Company reinstated the Deferred Compensation Plan in the form of the 2015 Plan to enable employees to defer a portion of their annual cash compensation starting on January 1, 2015. Under the 2015 Plan, NEOs can elect, six months prior to the end of the calendar year for which any bonus may be earned, to defer a portion of their cash compensation. Compensation that is deferred under the 2015 Plan earns various rates of return, depending on the length of time of the deferral. Interest rates are established by the board of directors of a wholly owned subsidiary that administers the 2015 Plan and are reviewed and adjusted annually for new deferrals. When establishing interest rates, the directors of the subsidiary review the rates charged to us for borrowings, as well as interest rates generally available in the market. During fiscal 2019,2020, interest rates for amounts deferred under the 2015 Plan ranged from 4%3.5% to 5.5%, based upon when the compensation was deferred and the length of time it had been or was to be deferred. For more information on the Deferred Compensation Plan and the 2015 Plan, see “Benefits and Perquisites—Deferred Compensation Plan” on page 47.49.
The table below provides information regarding contributions, earnings, and balances for our NEOs. Messrs. Yearley, HartmanConnor and ConnorParahus participate in the 2015 Plan and Mr. HartmanParahus also participates in the Deferred Compensation Plan. The table below also includes performance- and service-based RSUs granted to our NEOs that have vested, but the delivery of which has been deferred pursuant to the terms of the awards and the applicable stock incentive plan ("SIP").
| | Name | Plan | | Executive Contributions in Last FY ($) | | Registrant Contributions in Last FY ($)(1) | | Aggregate Earnings in Last FY ($)(2) | | Aggregate Withdrawals/ Distributions ($) | | Aggregate Balance at Last FYE ($)(3) | Name | Plan | | Executive Contributions in Last FY ($) | | Registrant Contributions in Last FY ($)(1) | | Aggregate Earnings in Last FY ($)(2) | | Aggregate Withdrawals/ Distributions ($) | | Aggregate Balance at Last FYE ($)(3) |
Douglas C. Yearley, Jr. | SIP | | — |
| | 2,762,648 |
| | 873,187 |
| | — |
| | 4,829,271 |
| Douglas C. Yearley, Jr. | SIP | | — | | | 3,530,264 | | | 218,866 | | | — | | | 5,348,801 | |
| DCP | | 295,703 |
| | — |
| | 32,451 |
| | — |
| | 885,178 |
| | DCP | | 312,246 | | | — | | | 46,383 | | | — | | | 1,243,807 | |
Richard T. Hartman | SIP | | — |
| | 833,383 |
| | 263,816 |
| | — |
| | 1,458,962 |
| |
James W. Boyd | | James W. Boyd | SIP | | — | | | 291,358 | | | 33,375 | | | — | | | 485,797 | |
| DCP | | 314,200 |
| | — |
| | 177,935 |
| | — |
| | 4,544,296 |
| | DCP | | — | | | — | | | — | | | — | | | — | |
Martin P. Connor | SIP | | — |
| | 688,138 |
| | 216,934 |
| | — |
| | 1,199,662 |
| Martin P. Connor | SIP | | — | | | 886,575 | | | 53,926 | | | — | | | 1,339,430 | |
| DCP | | 63,846 |
| | — |
| | 5,153 |
| | — |
| | 157,566 |
| | DCP | | 181,477 | | | — | | | 14,337 | | | — | | | 353,380 | |
John K. McDonald | SIP | | — |
| | 107,785 |
| | 31,779 |
| | — |
| | 188,192 |
| |
Robert Parahus | | Robert Parahus | SIP | | — | | | 271,263 | | | 32,601 | | | — | | | 474,889 | |
| | | DCP | | 135,759 | | | — | | | 55,562 | | | — | | | 1,358,992 | |
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(1) | For Messrs. Yearley, Hartman and Connor, "Registrant Contributions in Last FY" column represents the value of (a) the portion of the Ops PRSUs granted in fiscal 2015 that vested and were delivered on December 19, 2018, (b) the portion of the Ops PRSUs granted in fiscal 2016 that vested on December 18, 2018 but were delivered on December 18, 2019, (c) the portion of Ops PRSUs granted in fiscal 2017 that vested on December 19, 2018 but were not scheduled to be delivered until December 19, 2020, and (d) the portion of Ops PRSUs granted in fiscal 2018 that vested on December 18, 2018 but were not scheduled to be delivered until December 18, 2021, in each case based on the closing price of the Company's common stock on the applicable vesting date. For Mr. McDonald, the amount includes (a) the portion of RSUs granted to him in fiscal 2015, 2016, 2017 and 2018 that vested during fiscal 2019 and which were delivered on January 5, 2019. The grant date fair value of these awards was reported in the "Stock Awards" column of the Summary Compensation Table in the fiscal year granted (if an executive was a named executive officer in the year of grant). |
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(2) | “Aggregate Earnings in Last FY” column includes unrealized earnings/(losses), including dividends, on performance- or service-based RSUs granted in fiscal 2016, 2017 and 2018 that had vested as of fiscal year end, but were not scheduled to be delivered until the fourth anniversary of their respective grant dates. |
(1)For Messrs. Yearley and Connor, "Registrant Contributions in Last FY" column represents the value of (a) the portion of Ops PRSUs granted in fiscal 2016 that vested and were delivered on December 18, 2019, (b) the portion of Ops PRSUs granted in fiscal 2017 that vested on December 20, 2019 (which were delivered on December 20, 2020), (c) the portion of Ops PRSUs granted in fiscal 2018 that vested on December 18, 2019 (which are not scheduled to be delivered until December 18, 2021), and (d) the portion of Ops PRSUs granted in fiscal 2019 that vested on January 28, 2020 (which are not scheduled to be delivered until January 20, 2023), in each case based on the closing price of the Company's common stock on the applicable vesting date. For Messrs. Boyd and Parahus, the amount includes (a) the portion of RSUs granted in fiscal 2016 that vested and were delivered on January 5, 2020, (b) the portion of RSUs granted in fiscal 2017 that vested on December 1, 2019 (which were delivered on December 1, 2020), (c) the portion of RSUs granted in fiscal 2018 that vested on December 1, 2019 (which are not scheduled to be delivered until December 1, 2021), and (d) the portion of RSUs granted in fiscal 2019 that vested on December 1, 2019 (which are not scheduled to be delivered until December 1, 2022). in each case based on the closing price of the Company's common stock on the applicable vesting date. The grant date fair value of these awards was reported in the "Stock Awards" column of the Summary Compensation Table in the fiscal year granted (if an executive was a named executive officer in the year of grant).
(2)“Aggregate Earnings in Last FY” column includes unrealized earnings/(losses), including dividends, on performance- or service-based RSUs granted in fiscal 2017, 2018 and 2019 that had vested as of fiscal year end, but are not scheduled to be delivered until the fourth anniversary of their respective grant dates.
This column also includes unrealized earnings on Messrs. Yearley's, Hartman'sConnor's and Connor'sParahus' account balances in the Deferred Compensation Plan, of which $5,160, $35,483$9,464, $4,431 and $895,$14,529, respectively, represents above-market earnings and was accordingly reported as compensation in fiscal 20192020 in the “Change in Pension Value and Nonqualified Deferred Compensation Earnings” column of the Summary Compensation Table on page 51.53.
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(3) | “Aggregate Balance at Last FYE” column includes the value, based on the closing price of the Company's common stock on October 31, 2019, of performance- and service-based RSUs granted in fiscal years 2016, 2017 and 2018 that had vested as of fiscal year end, but were not scheduled to be delivered until until the fourth anniversary of their respective grant dates. The grant date fair value of these awards was reported in the "Stock Awards" column of the Summary Compensation Table in the fiscal year granted (if an executive was a named executive officer in the year of grant). |
(3)“Aggregate Balance at Last FYE” column includes the value, based on the closing price of the Company's common stock on October 30, 2020, of performance- and service-based RSUs granted in fiscal years 2017, 2018 and 2019 that had vested as of fiscal year end, but which are not scheduled to be delivered until the fourth anniversary of their respective grant dates. The grant date fair value of these awards was reported in the "Stock Awards" column of the Summary Compensation Table in the fiscal year granted (if an executive was a named executive officer in the year of grant).
This column also includes the net balance of compensation that was earned and deferred by Messrs, Yearley, HartmanConnor and ConnorParahus under the Deferred Compensation Plan and the interest accrued on such amounts. In addition to the above-market earnings for fiscal 2019,2020, above-market earnings in fiscal 20182019 and 20172018 in the amounts of $3,926$5,160 and $1,121,$3,629, respectively, for Mr. Yearley $33,909 and $37,555, respectively, for Mr. Hartman,$895 and $589, and $437, respectively, for Mr. Connor are reported
as compensation for the applicable fiscal year in the “Change in Pension Value and Nonqualified Deferred Compensation Earnings” column of the Summary Compensation Table on page 51.53.
Potential Payments upon Termination or Change of Control
In addition to the Severance Plan, which was adopted in March 2019, we currently maintain equity compensation plans and retirement plans that provide for the continuation or acceleration of benefits in the event of specified separations from employment with us or a change of control of the Company.
The dollar amounts or dollar values of the potential payments or benefits to the continuing NEOs in the event of a termination of employment or change of control of the Company under each of these plans are disclosed in the tables below. The amounts and values shown assume that such termination of employment or change of control occurred on the last business day of fiscal 2019,2020, or October 31, 2019,30, 2020, and are based on a share price of $39.77,$42.28, the closing price of the Company's common stock on the NYSE on such date. These amounts and values do not necessarily reflect the amounts and values that would be paid to the NEOs upon termination of employment or a change of control in the future. The actual amounts and values can only be determined at the time of such NEO’s separation or a change of control.
The descriptions of the payments and benefits below are qualified by reference to the applicable plan documents and, unless otherwise noted, are applicable to all of the tables. In accordance with SEC regulations, we do not report in the tables below any amount to be provided to an NEO under any arrangement which does not discriminate in scope, terms or operation in favor of our NEOs and which is available generally to all salaried employees. We also do not report in the tables below any items disclosed in the Nonqualified Deferred Compensation table above, or any distributions of plan balances under our 401(k) Plan. See “Benefits and Perquisites” on page 4547 for information about the 401(k) Plan.
With respect to Messrs. Hartman and McDonald, we have described the actual payments and benefits received by them, if any, in connection with their respective departures from the Company, which occurred after the end of our fiscal year but prior to the date of this proxy statement.
Retirement
Vesting of Long-Term Incentive Compensation Awards. With respect to awards granted prior to December 2019, retirement means a voluntary resignation by, or termination without cause of, an executive who has reached age 62 and who has a minimum of ten years of service. These awards generally provide that if an executive retires, the executive is entitled to continued vesting and, with respect to stock options, continued exercisability of any unvested and/or unexercised stock options. Generally, these awards do not automatically vest upon retirement, but continue to vest on their normal vesting schedule as if the executive were still employed by us. In addition, with respect to stock options, the executive will have the remainder of the stock option term to exercise. This continued vesting and exercisability is conditioned upon the executive complying with certain post-termination restrictive covenants in the applicable award agreement. Starting with grants made in December 2019, awards will continue to vest if any of our NEOs retiresretire after reaching either (i) age 62 with at least five years of service or (ii) age 58 with at least ten years of service. As of October 31, 2019, Messrs. Yearley and HartmanBoyd were retirement-eligible with respect to all such awards. The tables below do not reflect an amount for unvested awards that continue to vest post-retirement because vesting is not accelerated at retirement.
Vesting of SERP Benefits. For purposes of the SERP, retirement means a voluntary resignation by, or termination without cause of, an executive howwho has reached normal retirement age as defined in the plan. Effective October 29, 2019, the Compensation Committee approved an amendment to the SERP to lower the normal retirement age in the plan from age 62 to age 58. Except as described below in the case of death or disability, the SERP does not have a service requirement. As of October 31, 2019,2020, Messrs. Yearley and HartmanBoyd had reached age 58 and, as a result, were fully vested in their respective SERP benefits. See "Benefits and Perquisites — Supplemental Executive Retirement Plan" on page 4548 and "Pension Benefits During Fiscal 2019"2020" on page 57.58.
Involuntary Termination of Employment Not for Cause (Not in Connection with a Change of Control).
Severance Plan Benefits. Under the terms of the Severance Plan, if executives experiencean executive experiences a “covered termination” not in connection with a change of control of the Company, the Company will provide certain severance payments and benefits, subject to the executive's continued compliance with the Non-Interference Agreement and the
execution and non-revocation of a release of claims. For our continuing NEOs, these payments and benefits include (i) a cash payment equal to 1.5 times (2.0 times for Mr. Yearley) the sum of the executive's annual base salary and target annual bonus, (ii) a prorated annual bonus for the year of termination based on actual performance, (iii) an amount equal to 18 months (24 months for Mr. Yearley) of the executive’s monthly COBRA premium for continued health insurance coverage, and (iv) reasonable outplacement services for a period up to 18 months (24 months for Mr. Yearley). For more information about the Severance Plan, see “Benefits and Perquisites — Executive Severance Plan” on page 45.48.
Treatment of Long-Term Incentive Compensation Awards. Generally, unvested equity awards are canceled upon any termination of employment with the Company by any executive, including our NEOs, and the right to exercise vested stock options terminates within a specified period of time (depending on the terms of the applicable grant documents) after a termination of employment. With respect to retirement-eligible executives, see "Potential Payments Upon Termination or Change of Control — Retirement — Vesting of Long-Term Compensation Awards" on page 58.60.
Vesting of SERP Benefits. If an executive were terminated by the Company without cause, if not already fully vested, the executive would become fully vested in his SERP benefits, and the benefits would be paid in bi-weekly installments over a 20-year period following the date on which he would have reached age 58. With respect to retirement-eligible executives, see "Potential Payments Upon Termination or Change of Control — Retirement — Vesting of SERP Benefits" on page 58.60.
Involuntary Termination for Cause
Upon a termination for cause, (i) all equity awards, whether vested or unvested, terminate immediately and (ii) all SERP benefits are subject to forfeiture, regardless of whether the executive is fully vested.
Death or Disability
Vesting of Long-Term Incentive Compensation Awards. Stock options granted prior to December 2019 generally provide that, if an executive’s employment terminates due to death or disability, the executive (or his or estate) is entitled to continued vesting of such stock options and continued exercisability of any unvested and/or unexercised stock options. These awards would not immediately vest upon death or disability, but would continue to vest on their normal vesting schedule as if the executive were still employed by us. In addition, the executive (or his or her estate) would have the remainder of the stock option term to exercise the stock option. This continued vesting and exercisability are conditioned upon, in the event of a disability, the executive complying with certain post-termination restrictive covenants in the applicable award agreement. The tables below do not reflect an amount for unvested stock options that continue to vest post-death or post-disability because vesting is not accelerated upon these events.
Starting with stock options and RSUs granted to NEOs in December 2019, and with respect to all outstanding PRSUs, in the event of such executive’s death or disability, any unvested awards will immediately vest (in the case of PRSUs, based on target level performance) and become deliverable, and any vested but undelivered shares will become deliverable. In addition, with respect to stock options, the executive (or his or her estate) would have the remainder of the stock option term to exercise the stock option. The tables below include the value of all unvested awards that would have vested as a result of the death or disability of the executive based upon the closing price of the Company’s common stock on the NYSE on October 31, 2019.2020.
Vesting of SERP Benefits. If an executive in the SERP has completed five years of service (which each of our continuing NEOs has), upon his death or disability, he will become fully vested in his SERP benefits, and the benefits will be paid in bi-weekly installments over a 20-year period following the date on which he would have reached age 58.
Termination of Employment In Connection with a Change of Control
Severance Plan Benefits. Under the terms of the Severance Plan, if an executive experiences a covered termination (i) within two years after the occurrence of a change of control of the Company or (ii) within six months prior to a change of control, and such termination is reasonably demonstrated to be in connection with or in anticipation of a change of control, or is at the request of a third party who has reasonably calculated or intended to
effect a change of control of the Company, the Company will provide the executive with certain severance payments and benefits, subject to his or her continued compliance with the Non-Interference Agreement and the execution and non-revocation of a release of claims. For our continuing NEOs, these payments and benefits include: (a) a cash
payment equal to 2.0 times (2.5 times for Mr. Yearley) the sum of the executive’s annual base salary and target annual bonus, (b) a prorated annual bonus for the year of termination based on actual performance, (c) an amount equal to 24 months (30 months for Mr. Yearley) of the executive’s monthly COBRA premium for continued health insurance coverage, and (d) reasonable outplacement services for a period up to 24 months (30 months for Mr. Yearley). For more information about the Severance Plan, see “Benefits and Perquisites — Executive Severance Plan” on page 46.48. The tables below reflect the severance payments and benefits that would be available to our NEOs if a change of control had occurred on October 31, 2019.2020.
Vesting of Long-Term Incentive Compensation Awards. For equity awards granted prior to December 2019, upon a change of control of the Company, all unvested outstanding stock options will fully vest and become exercisable. In addition, all PRSUs fully vest, based on (i) deemed target level performance if the change of control occurs during the performance period or (ii) actual performance if the change of control occurs following the end of the performance period, and all restrictions lapse. Starting with awards granted in December 2019, all equity awards will vest in connection with a change of control of the Company only if there is an actual or constructive termination of the executive (i.e., a “double trigger”) within the time periods and subject to the other terms and conditions set forth in the applicable award agreement, which time periods and terms and conditions are consistent with those set forth above in the description of the Severance Plan. The tables below reflect the amounts of previously unvested PRSUs and stock options that would have vested if a change of control had occurred on October 31, 2019.2020.
Vesting of SERP Benefits. Under the SERP, upon a change of control of the Company, all executives in the SERP (that are not already fully vested) would become fully vested in their SERP benefits and eligible for a lump-sum payout equal to the actuarial equivalent present value of their benefits as of the payment date. The tables below reflect the benefits payable in a lump sum under the SERP as if a change of control had occurred on October 31, 2019.2020.
Tables
Douglas C. Yearley, Jr. The following table describes the potential payments and benefits to Douglas C. Yearley upon termination of his employment or a change of control of the Company had such termination or change of control occurred on October 31, 2019,30, 2020, based on a closing share price of $39.77$42.28 on such date.
| | | | Termination of Employment ($) | | | | | Termination of Employment ($) | |
Payments and Benefits | | Voluntary Resignation (1) | |
Retirement (2) | | Involuntary Not for Cause (3) | | Involuntary For Cause | | Death | | Disability | | Change of Control (4) | Payments and Benefits | | Voluntary Resignation (1) | | Retirement (2) | | Involuntary Not for Cause (3) | | Involuntary For Cause | | Death | | Disability | | Change of Control (4) |
Severance Plan Benefits (5) | | — |
| | — |
| | 8,104,048 |
| | — |
| | — |
| | — |
| | 10,117,560 |
| Severance Plan Benefits (5) | | — | | | — | | | 8,904,048 | | | — | | | — | | | — | | | 11,117,560 | |
Accelerated vesting of unvested equity awards: | | | | | | | | | | | | | | | |
Accelerated vesting of unvested equity awards (6): | | Accelerated vesting of unvested equity awards (6): | |
Stock options | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 1,807,327 |
| Stock options | | — | | | — | | | — | | | — | | | — | | | — | | | 1,363,169 | |
RSUs | | RSUs | | — | | | — | | | — | | | — | | | 2,086,687 | | | 2,086,687 | | | 2,086,687 | |
PRSUs (6) | | — |
| | — |
| | — |
| | — |
| | 10,761,682 |
| | 10,761,682 |
| | 10,761,682 |
| | — | | | — | | | — | | | — | | | 11,481,429 | | | 11,481,429 | | | 11,481,429 | |
Acceleration of SERP benefits (7) | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 4,000,000 |
| Acceleration of SERP benefits (7) | | — | | | — | | | — | | | — | | | — | | | — | | | 4,000,000 | |
Total: | | — |
| | — |
| | 8,104,048 |
| | — |
| | 10,761,682 |
| | 10,761,682 |
| | 26,686,569 |
| Total: | | — | | | — | | | 8,904,048 | | | — | | | 13,568,116 | | | 13,568,116 | | | 30,048,845 | |