Our Compensation Committee took into account a number of factors in determining executive compensation for 2018,2019, including our business strategy, financial and business results, management performance and competitive data. In light of these considerations, the Compensation Committee made the following executive compensation decisions in fiscal year 2018:2019:
Granted long-term restricted stock to certain of our named executive officers as a long-term retention tool.
| · | Granted long-term restricted stock to certain of our named executive officers as a long-term retention tool. |
We believe that our executive compensation program is reasonable, competitive and focused on pay for performance principles. We emphasizeIn particular, we believe that our compensation opportunities thatprogram is designed to reward our executives when they successfully achieve strategic objectives. The compensation of our named executive officers varies depending upon thefor their achievement of pre-establishedboth short- and long-term performance goals. goals that effectively carry out the Company’s business strategy and result in the creation of shareholder value.
Through equity incentives and stock ownership requirements, and equity incentives, we also align the interests of our executives with those of our stockholdersshareholders and the long-term interests of the Company. We have not engaged in any of the most frequently criticized pay practices such as re-pricing of stock options or SARs without stockholdershareholder approval, excessive perquisites or tax gross-ups, or agreements with change-in-control provisions unreasonably favorable to our executives. Our executive compensation policies have enabled the Company to attract and retain talented and experienced executives and have benefited the Company over time. We believe that the compensation earned by each of our named executive officers in 2018 was reasonable and appropriate and aligned with the Company’s financial results and achievement of the objectives of our executive compensation program.
Say-on-Pay Vote
In compliance withAt our 2019 Annual Meeting, our shareholders had the Dodd-Frank Act, we included a non-binding,opportunity to vote, on an advisory stockholder vote in our 2018 Proxy Statement(non-binding) basis, to approve the compensation paid to our named executive officers in 20172018 (referred to as a “say-on-pay” vote).
Our say-on-pay proposal was approved by approximately 97%86% of the votes cast at the 2019 Annual Meeting, demonstrating significant support for our 2018 annual meeting of stockholders.compensation program. The Compensation Committee views this result as confirmation that our compensation program, including our emphasis on pay-for-performance, is structured and designed in alignment with shareholder interests. We will continue to emphasize pay-for-performance alignment,consider shareholder feedback and the results of our say-on-pay votes when making future compensation program for the named executive officers reflects this philosophy.
decisions. Because our stockholdersshareholders expressed a preference for an annual say-on-pay vote, our stockholdersshareholders have the opportunity at our 20192020 Annual Meeting to vote on a non-binding, advisory basis, to approve the compensation paid to our named executive officers in 2018.2019.
Primary Responsibilities of our Compensation Committee
Our Compensation Committee is responsible for, among other things:
| · | reviewing the overall goals, policies, objectives and structure of our executive compensation and benefit programs and assessing whether any of the components thereof may present unreasonable risks to the Company; |
| · | approving the compensation packages of the Company’s Chief Executive Officer and our other executive officers; and |
| · | administering our equity incentive plans. |
approving the compensation packages of the Company’s Chief Executive Officer and our other executive officers; and
administering our equity incentive plans.
Compensation Philosophy and Primary Objectives
Philosophy. The Compensation Committee is responsible for establishing and reviewing the overall compensation philosophy of the Company. The Compensation Committee believes that the compensation paid to executives should be structured to provide our executives with meaningful rewards, while maintaining alignment with stockholdershareholder interests, corporate values and management’s strategic initiatives.
In accordance with this philosophy, the Compensation Committee believes that the executive compensation program should consist of a mix of base salary, annual cash incentive compensation, long-term incentive compensation (that may include cash or equity components, in the Compensation Committee’s discretion), perquisites and other benefits.
The Compensation Committee uses its judgment and discretion in establishing compensation and strives to avoid the use of highly leveraged incentives that may drive overly risky short-term behavior on the part of executives. Our equity programs, combined with our executive share ownership requirements, reward long-term stock performance. In particular, our contingent performance share awards, which vest only at the end of a three-year performance period, reward longer-term financial and operating performance.
Objectives. The Compensation Committee generally considers the following objectives in establishing compensation programs and setting pay levels:
providing the Company with the ability to attract, motivate and retain exceptional talent whose abilities and leadership skills are critical to the Company’s long-term success;
maintaining a significant portion of each executive’s total compensation at risk, tied to achievement of annual and long-term strategic, financial, organizational and management performance goals, that are intended to improve shareholder return;
providing variable compensation incentives directly linked to the performance of the Company and improvement in shareholder return so that executives manage from the perspective of owners with an equity stake in the Company;
ensuring that our executives hold Company Common Stock to align their interests with the interests of our shareholders; and
ensuring that compensation and benefit programs are both fair and competitive in consideration of each executive’s level of responsibility and contribution to the Company and reflect the size and financial resources of the Company in order to maintain long-term viability.
| · | providing the Company with the ability to attract, motivate and retain exceptional talent whose abilities and leadership skills are critical to the Company’s long-term success; |
| · | maintaining a significant portion of each executive’s total compensation at risk, tied to achievement of annual and long-term strategic, financial, organizational and management performance goals, that are intended to improve stockholder return; |
| · | providing variable compensation incentives directly linked to the performance of the Company and improvement in stockholder return so that executives manage from the perspective of owners with an equity stake in the Company; |
| · | ensuring that our executives hold Company Common Stock to align their interests with the interests of our stockholders; and |
| · | ensuring that compensation and benefit programs are both fair and competitive in consideration of each executive’s level of responsibility and contribution to the Company and reflect the size and financial resources of the Company in order to maintain long-term viability.
|
How We Set Compensation. On an annual basis, the Compensation Committee reviews and approves the compensation of our named executive officers, including the amounts of salary, cash incentive awards and equity-based compensation provided to each executive. In determining total executive compensation packages, the Compensation Committee generally considers various measures of Company and industry performance including revenue, operating income, gross margin and total stockholdershareholder return. The Compensation Committee does not assign these performance measures relative weights. The Compensation Committee considers these performance measures as good indicators of Company performance and exercises its business judgment in determining compensation after considering all of these measures, collectively, as well as taking into account the market data and peer group information discussed below.
The Compensation Committee also evaluates the total compensation of each executive, and each element of compensation separately, to ensure that it will be effective in motivating, retaining and incentivizing the executive. The Compensation Committee’s evaluation takes into consideration, among other factors, each executive’s individual performance, both in general and against specific goals and targets established for the executive, and the desire to maintain internal pay equity and consistency among our executives.
Our named executive officers generally participate in the same executive compensation plans and arrangements available to our other executive officers; however, the contingent annual cash incentive awards and performance share awards utilize targets that are based upon the Company’s achievement of short-term and long-term strategic goals.
The Compensation Committee divides executive officers into three separate categories for the purposes of establishing the levels of cash and equity incentive awards. Each category consists of one or more officers who are grouped together for incentive compensation purposes and receive the same target incentive awards. For example, with respect to our annual restricted stock awards, in 2018, our Executive Chairman and members of the Office of Chief Executive Officer, Chief Financial Officer and Chief Commercial Officer wereare in the first category; our Senior Vice President General Counsel wasis in the second category; and our other executives wereare in the third category. One purpose of the categories is to equalize incentive opportunities for individuals with similar levels of responsibility. This practice is intended to improve internal pay equity among our executives. Considerations of internal pay equity among executives are also factored into the Compensation Committee’s consideration of the market data and peer group information discussed below with respect to base salary and target bonus compensation.
Benchmarking. In establishing total compensation for our executives, the Compensation Committee generally targets the median of the market, which it considers to be equivalent to the domestic market for executive talent within USU.S. industrial companies with gross revenues in the approximate range of $500 million to $1 billion. Our Senior Vice President Human Resources conducts periodic benchmark reviews within the above-referenced market of the aggregate level of executive compensation, as well as the mix of elements used to compensate executive officers at such companies, and provides this market data to the Compensation Committee for its consideration. The Compensation Committee believes that compensation targeted at the median of the market reflects consideration of our stockholders’shareholders’ interests in paying what is necessary, but not significantly more than necessary, to achieve our corporate goals.
In addition, the Compensation Committee also reviews the practices of specific peer group companies to compare the Company’s compensation programs with other manufacturing companies of comparable size and stature. Our Executive Chairman, our Chief Executive Officer and other members of management provide input on the selection of the peer group companies, and the Compensation Committee makes the final determination of which companies to include. Executive compensation information for the market data and peer group companies is compiled by management from proxy statements and other public filings, as well as surveys and other databases to which we subscribe, such as those from Aon and ADP.The Compensation Committee may, from time to time, engage an independent consultant to establish comparable peer groups to benchmark the Company’s executive compensation program. However, the Compensation Committee did not engage an independent consultant to review executive compensation in 2018.2019.
Our Compensation Committee believes that benchmarking is a useful tool because it is a reflection of the market in which we compete for talent and provides credibility for our compensation programs with both our employees and our stockholders.shareholders. The Compensation Committee also reviews this information for context and a frame of reference for decision-making; but it is not the sole source of information on which executive compensation is determined. Other factors such as internal equity, individual and business performance, and the perceived degree of alignment between the job duties of our executive with the benchmark job description to which his or her compensation is being compared are also considered.
Role of Management. The Compensation Committee seeks and considers input from senior management in many of its decisions. Annually, our Executive Chairman and our Chief Executive Officer review with the Compensation Committee annual salary, annual incentive plan targets and long-term incentive compensation for each of our executives (excluding our Executive Chairman and our CEO). In addition, following the end of each fiscal year, our Executive Chairman and our Chief Executive Officer evaluate each executive officer’s performance for the prior fiscal year (other than his own performance) and discuss the results of their evaluations with the Compensation Committee. Other members of the Office of Chief Executive also assist in the evaluations for those officers reporting to them. In addition to considering an individual’s attainment of the business goals and objectives established for him or her by the Compensation Committee for the prior year, the Executive Chairman’s and Chief Executive Officer’s evaluations of each executive officer’s performance may be based in part upon subjective factors, including the Executive Chairman’s and Chief Executive Officer’s evaluations of the contributions made by the executive officer to the Company’s overall results and achievement of its strategic goals. These evaluations include consideration of the level of responsibility of each executive officer and the percentage of total Company revenue and/or expense that each individual officer is responsible for, where applicable. The Executive Chairman and the Chief Executive Officer then make specific recommendations to the Compensation Committee for adjustments of base salary and incentive plan targets as part of the compensation package for each executive officer (other than himself) for the next fiscal year.
The Compensation Committee reviews the performance of the Executive Chairman and the Chief Executive Officer and determines the compensation for all executive officers for the next fiscal year, considering the recommendations from the Executive Chairman and the Chief Executive Officer, as well as the benchmark and peer group information described above and any other information available to it that it considers relevant. The Compensation Committee discusses the recommendations of the Executive Chairman and the Chief Executive Officer in executive session without any members of management present and may modify the Executive Chairman’s and the Chief Executive Officer’s recommendations when approving final compensation packages.
Tally Sheets. When reviewing executive compensation, the Compensation Committee has historically reviewed management-provided materials which highlight the base salary, target cash incentive award, and actual cash incentive award to each of our executive officers for prior fiscal years. The Compensation Committee uses this information to review compensation trends, to compare increases or decreases year over year, and to ensure that compensation decisions are made with a view to the total compensation package awarded to each executive officer over time. No specific weight is assigned by the Compensation Committee to the tally sheets or any specific items which may appear on such tally sheets.
Risk Management Considerations. As mentioned earlier, the Compensation Committee strives to avoid the use of highly leveraged incentives that may drive overly risky short-term behavior on the part of executives. The Compensation Committee structures our cash incentive awards and equity incentive awards as highlighted below to promote the creation of long-term value and discourage behavior that may lead to excessive risk:
| · | The Company’s annual cash incentive award (as more fully described under “Elements of Compensation – Annual Cash Incentive Awards” below) is based in part on company-level financial objectives, designed to align executive compensation to continuous improvements in corporate performance and increases in stockholder value. This portion of the cash incentive award is structured such that, year-over-year improvements that are favorable for the Company’s stockholders, are also made favorable for those executives whose compensation is based on the achievement of those improvements. In addition, an executive’s actual award is capped on an annual basis at 200% of the applicable target, no matter how much financial performance exceeds the range established for the award, thereby limiting the incentive for excessive risk-taking. However, any award in excess of the 200% target may be carried forward into the following year, subject to the risk of forfeiture depending upon the following year’s performance. In addition, since these awards are based on overall corporate performance, rather than individual performance, the ability of an individual executive to increase his own compensation through excessive risk taking is constrained. |
The Company’s annual cash incentive award (as more fully described under “Elements of Compensation – Annual Cash Incentive Awards” below) is based in part on company-level financial performance, designed to align executive compensation to year-over-year improvements in corporate performance and increases in shareholder value. This portion of the cash incentive award is structured such that, year-over-year improvements that are favorable for the Company’s shareholders, are also made favorable for our executives whose compensation is based on the achievement of those improvements. In addition, an executive’s actual award is capped on an annual basis at 200% of the applicable target, no matter how much financial performance exceeds the range established for the award, thereby limiting the incentive for excessive risk-taking. However, any award in excess of the 200% target may be carried forward into the following year, subject to the risk of forfeiture depending upon the following year’s performance. In addition, since these awards are based on overall corporate performance, rather than individual performance, the ability of an individual executive to increase his own compensation through excessive risk taking is constrained.
| · | The target company-level financial performance award represents 70% of an executive’s total target cash incentive award in any year. Management performance, or MBO bonuses (as more fully described under “Elements of Compensation – Annual Cash Incentive Awards” below), which are based upon the achievement of management goals and objectives, and thus are more susceptible to individual risk taking, represent only 30% of an executive’s total target cash incentive award, thus reducing the incentive for any executive to take excessive risks. |
The target company-level financial performance award represents 70% of an executive’s total target cash incentive award in any year. Management performance, or MBO bonuses (as more fully described under “Elements of Compensation – Annual Cash Incentive Awards” below), which are based upon the achievement of management goals and objectives, and thus are more susceptible to individual risk taking, represent only 30% of an executive’s total target cash incentive award, thus reducing the incentive for any executive to take excessive risks.
The measures used to determine whether performance share awards vest are based on at least three years of financial performance. The Compensation Committee believes that the longer performance period encourages executives to attain sustained performance over several years, rather than performance in a single annual period.
| · | The measures used to determine whether performance share awards vest are based on at least three years of financial performance. The Compensation Committee believes that the longer performance period encourages executives to attain sustained performance over several years, rather than performance in a single annual period. |
Restricted stock awards generally vest at the end of a three year or longer period and an executive must hold any vested restricted stock (except long-term retention awards) for an additional two-year period following vesting pursuant to the terms of our Stock Ownership Guidelines, thereby encouraging executives to look to long-term appreciation in equity values.
| · | Restricted stock awards generally vest at the end of a three year or longer period and an executive must hold any vested restricted stock for an additional two-year period following vesting pursuant to the terms of our Stock Ownership Guidelines, thereby encouraging executives to look to long-term appreciation in equity values. |
Base Salary. The Compensation Committee generally reviews base salaries for executive officers at the beginning of each fiscal year. Annual salary is based upon an evaluation of each individual’s performance, an executive’s level of pay compared to that for similar positions at peer group companies, the responsibilities of the position, the experience of the individual, internal pay equity considerations, and Company performance. Base salaries may also be adjusted at the time of a promotion, upon a change in level of responsibilities, or when competitive circumstances may require review.
We believe that our base salaries are an important element of our executive compensation program because they provide our executives with a steady income stream that is not contingent upon our overall performance or stockholdershareholder return. We believe that maintaining base salary amounts generally in the median to 75% range of our peer group minimizes competitive disadvantage, while avoiding paying amounts in excess of what we believe to be necessary to motivate executives to meet corporate goals.
Annual Cash Incentive Awards. The Compensation Committee utilizes annual cash incentive awards to reward each of our executive officers whenbased on the executive officer achieves certainexecutive’s achievement of management performance objectives (or MBO goals), and when we achieve certain company-level financial objectives.the Company’s achievement of year-over-year improvement in the weighted average of our earnings per share over a three-year period. Our annual cash incentive awards are designed to more immediately reward our executives for their performance during the most recent year. We believe that the immediacy of these cash awards, in contrast to our equity awards which vest over a three year or longer period of time, provide a significant incentive to our executives to achieve their respective management objectives and, thus, our company-level objectives. We believe our cash awards are an important motivating factor for our executives, in addition to being a significant factor in attracting and retaining our executives.
Our cash incentive awards utilize a target that is a percentage of each executive officer’s total cash compensation for the fiscal year. The target is set at levels that are approximately 32% - 39% of an executive’s expected total cash compensation for the year. They are set at levels which, assuming achievement of 100% of the applicable target amount, the Compensation Committee believes are likely to result in an annual cash award at or near the median for target cash awards in the market. Actual awards may be higher or lower, however, based upon the degree of achievement of MBO goals and company-level financial objectives.performance.
Management Performance. At the beginning of each year, the Compensation Committee reviews and approves a detailed set of MBO goals for our executives (which are generally aligned with the Company’s short-term and long-term strategic goals) initially prepared by management. At the beginning of the following year, the Compensation Committee determines, in its discretion, with the input of the Executive Chairman and Chief Executive Officer, the level of achievement of each MBO goal by our executives during the prior year and the percentage of the target MBO award earned by such executives. The target MBO award represents 30% of an executive’s total target cash incentive award for the applicable year.
Company-Level Financial Performance. With respect to company-level financial objectives,performance, the Company utilizes performance measures to align closely executive compensation to continuousyear-over-year improvements in corporate performance and increases in stockholdershareholder value. The target company-level financial performance award represents 70% of an executive’s total target cash incentive award for the applicable year. During the three-year period reported in the Summary Compensation Table below, we utilizedFor 2019, the performance measure “Economic Value Added” or “EVA”, which measures the year-over-year difference in net operating profit after tax, less a charge for the cost of capital. EVA recognizes the productive use of capital assets and, therefore, wise, responsible decision-making regarding capital investments.
In October 2018,selected by the Compensation Committee reviewed alternative performance measures, including those utilized by our peer group, and determined that the benefits of an EVA-based measure could be achieved, in addition to others, through the use of a performance measurewas based on athe year-over-year improvement in the weighted average of our earnings per share for theover a three-year period, then ended (“Weighted Average EPS”). The cash incentive award will be based on the year-over-year improvement in Weighted Average EPS, where the most recent year of the three-year period will beis weighted more heavily than the prior two years. The Compensation Committee approved the use of the Weightedyears (referred to as “Weighted Average EPS for 2019.
Depending on the Company’s financial plan for the year, the Board of Directors may modify the target amounts that are used to determine whether our executive officers achieve a threshold 100% payout and a maximum 200% payout of the company-level financial performance award.EPS”).
In addition, in order to promote longer-term stockholdershareholder improvement and to keep part of an executive’s cash incentive award at risk, the company-level financial performance award is capped on an annual basis at 200% of the applicable target. To the extent that an executive could have received an award in excess of the cap, the excess amounts are carried forward into the next year’s calculation of an executive’s award. However, any award that is carried forward is subject to risk of forfeiture depending upon the following year’s performance.
Long-Term Equity Incentive Programs. As part of the Company’s compensation program, the Compensation Committee grants equity awards to the Company’s executive officers. We believe that equity awards provide our executive officers with a strong link to our long-term performance goals, create an ownership culture, and closely align the interests of our executive officers and our stockholders.shareholders. In addition, the vesting feature of our equity awards is designed to aid officer retention because this feature provides an incentive to our executive officers to remain in our employ throughout the vesting period, which is typically three years or longer. In determining the size and type of equity awards granted to our executive officers in 2018,2019, the Compensation Committee awarded different amounts to: (a) our Executive Chairman and members of the Office of Chief Executive Officer, Chief Operating Officer and Chief Commercial Officer;Executive; (b) our Senior Vice President General Counsel; and (c) our other executives, in recognition of their differing levels of responsibility. The specific amounts awarded were based on recommendations of management, but the Compensation Committee had discretion to award different amounts. The Compensation Committee may also consider our company-level performance, the applicable executive officer’s performance, the amount of equity previously awarded to the applicable executive officer, the vesting of such prior awards, and the recommendations of management and any other advisor that the Compensation Committee may choose to consult.
Our primary form of equity compensation consists of restricted stock awards and performance share awards. We believe that these awards provide a motivating form of incentive compensation, while permitting us to issue fewer shares than stock options. Because shares of restricted stock have a defined value at the time the restricted stock awards are issued, restricted stock awards are often perceived as having more immediate value than stock options, which have a value less easily determinable when issued. In addition, we provide performance shares to our executive officers because we believe that their contributions to the Company have a direct relationship to the achievement of the Company’s strategic goals.
We grant our executive officers two types of restricted stock (standard awards and long-term retention awards) and performance shares generally once per year at a regularly scheduled meeting of the Board. Our 2016 Omnibus Incentive Plan also permits us to grant incentive and nonqualified stock options, stock appreciation rights, restricted stock units, and other stock-based awards to our officers, directors, employees and consultants. However, our Compensation Committee currently intends to grant only restricted stock and performance shares under the 2016 Omnibus Incentive Plan.
Each standard restricted stock award issued under our 2016 Omnibus Incentive Plan is subject to a three-year vesting period. Each long-term retention restricted stock award issued under our 2016 Omnibus Incentive Plan is subject to an incremental vesting period based upon the participant reaching the age of 60 (25% vests), 63 (25% vests) and 65 (balance vests). If an executive officer ceases employment before the end of any vesting period, he or she forfeits the entire unvested portion of the restricted stock award. Restricted stock awards may become immediately vested in full in the event of death, retirement at or after age 65, total disability (as determined by the Compensation Committee in its sole discretion), or upon a “change in control” of the Company. Grants of long-term retention restricted stock awards to participants over the age of 65 are subject to a one-year vesting period.
We also award our executive officers performance shares in amounts comparable to the number of shares of standard restricted stock awards issued to such executives, although the actual number of performance shares ultimately issued to an executive may be higher or lower, depending upon the level of achievement of the applicable performance goals. In order for the performance shares to vest, the Company must achieve a certain level of earnings from continuing operations before taxes, excluding special items, on a cumulative basis for the three-year performance period covered by the award. A new performance period begins each January 1 and ends three years later on December 31. As a result, up to three performance periods may overlap in any given year. The level of earnings from continuing operations is tied to financial goals contained in the Company’s three-year strategic plan, which is updated annually and approved by our Board. The Compensation Committee selected this performance measure because improvement in earnings from continuing operations is a key strategic focus for the Company and is believed to help the Company achieve higher margins, stronger cash flow and debt reduction.
The performance share awards are subject to a three-year vesting period. If an officer ceases to be an employee of the Company before the end of the vesting period, the entire performance share award is forfeited. The performance goals are scaled so that the recipient can receive part of an award in the event that acceptable, but not the desired, results are achieved.
It is our policy to ensure that we do not grant equity awards in connection with the release, or the withholding, of material non-public information, and that the grant value of all equity awards is equal to the fair market value on the date of grant.
Defined Contribution Plan. The Company has established a defined contribution Supplemental Executive Retirement Plan (SERP) for our executive officers (and other eligible employees). The purpose of this plan is to enable the executive officers to supplement their benefits under the Company’s Profit Sharing 401(K) Capital Accumulation Plan as well as to provide a means whereby certain amounts payable by the Company to our executive officers may be deferred to some future period. Eligible employees may irrevocably elect to defer receipt of a portion of their annual base salary and annual bonus payments earned in that plan year up to a maximum of 50% of their annual base salary and 100% of their annual bonus payments. In addition, the Company generally makes an annual cash contribution into the SERP on behalf of each participant.
Supplemental SERPDefined Benefit Pension Plan. The Company maintains ana defined benefit unfunded Supplemental SERP.Executive Retirement Plan. The benefits under this plan are in addition to any benefits payable to participants under the Company’s Profit Sharing 401(K) Capital Accumulation Plan and the defined contribution SERP. As of the date of this Proxy Statement, there are no participants in the Supplemental SERP.defined benefit Supplement Executive Retirement Plan.
ESOP. Our executive officers are eligible to receive Company Common Stock pursuant to our Employee Stock Ownership Plan, which is available for all eligible employees. This stock grant plan gives our executives an opportunity to share directly in the growth of the Company through stock ownership. The Company’s stock contributions for a particular calendar year are made in the first quarter of such year. Under the plan, each participant is subject to a six-year vesting schedule.
Compensation Actions in 20182019
After careful analysis, the Compensation Committee determined to use the following companies for peer group comparisons in setting 20182019 compensation:
Altra Industrial Motion Corp. | EnPro Industries, Inc. | Modine Manufacturing Co. |
CIRCOR International, Inc. | Gentherm Inc. | Stoneridge Inc. |
Columbus McKinnon Corp. | LCI Industries, Inc. | SunCoke Energy, Inc. |
Dorman Products, Inc. | NN, Inc. | Tennant Company |
In determining executive compensation for 2018,2019, our Compensation Committee evaluated and made its determinations in the context of the Company’s 20182019 financial and business performance and the business conditions of the automotive aftermarket generally. The Compensation Committee also took into consideration each executive’s performance of their respective prior year’s MBO objectives and the Company’s ability to continue to make changes and introduce strategic initiatives critical to positioning the Company for future long-term growth.
Base Salary. Based on the foregoing, in February 20182019 the Compensation Committee approved salary modifications for our executives for 2018.2019. In addition, in view of the executives contributions to the Company as well as to motivate and assist in the retention of these individuals, in February 20192020 the Compensation Committee set the salaries of the following named executive officers to the levels indicated: Lawrence I. Sills, $412,000,$425,000, Eric P. Sills, $619,000;$647,000; James J. Burke, $619,000;$637,000; Dale Burks, $510,000;$525,000; Nathan R. Iles, $503,000; and Carmine J. Broccole, $465,000.$480,000.
Annual Cash Incentive Awards. For 2018, theThe Compensation Committee established among other things, the following MBO goals for our named executive officers:officers in 2019 for the purpose of determining the MBO portion of their annual cash incentive award: (a) achieving milestonesoperational improvements relating to productivity in our plant rationalization initiatives,wire and cable business and distribution expenses in our temperature control business, (b) executingmargin improvement in certain product categories, and (c) the Company’s business strategy relating toachievement of specific growth and diversification initiatives. In February 2019,2020, the Compensation Committee determined that the named executive officers had successfully attained their MBO goals, and as a result, the Compensation Committee authorized MBO cash incentive awards at percentages of 126%114% of the target amountMBO award for 2018.2019.
For 2018, theThe Compensation Committee established a year-over-year improvement in EVA, and set target amounts for payouts, based on the Company’s forecasted financial goals. Due to the year-over-year decrease in net earnings, the Company did not achieve the threshold year-over-year improvement in EVA, resulting in a 0% EVA bonus for our executives for 2018. Despite not achieving the threshold year-over-year improvement in EVA, the Compensation Committeealso approved a 25% EVA bonus for our named executive officers in recognition of their successful execution of certain initiatives in 2018 designed to reduce cost and increase productivity, resulting in the creation of long-term value going forward. The total amount of all cash incentive awards earned in 2018 is reflected in the Summary Compensation Table. For 2019, the Compensation Committee approved year-over-year improvement in our Weighted Average EPS as the performance measure for 2019 for the purpose of determining company-level financial performance awards. Based on the year-over-year improvement in our Weighted Average EPS, and the payout scale established by the Compensation Committee, our named executive officers were entitled to receive cash incentive awards at 120% of the target company-level financial performance award for 2019.
The total amount of all cash incentive awards earned in 2019 is reflected in the Summary Compensation Table. For further discussion of this performance measure, see “Elements of Compensation–Annual Cash Incentive Awards” above.
Restricted Stock Awards. In October 2018,2019, the Compensation Committee awarded the following shares of restricted stock (standard awards): (a) 2,000 shares to each of Lawrence I. Sills, our Executive Chairman, Eric P. Sills, our Chief Executive Officer, James J. Burke, our Chief FinancialOperating Officer, and Dale Burks, our Chief Commercial Officer, and Nathan R. Iles, our Chief Financial Officer; and (b) 1,500 shares to Carmine J. Broccole, our Senior Vice President General Counsel. These restricted stock awards vest after three years. The amount of these restricted stock awards was based upon the Compensation Committee’s subjective evaluation of each executive’s contribution to the Company during 2018,2019, as well as their respective levels of responsibility.
In addition, in October 20182019 the Compensation Committee granted an additional award of 2,000awarded the following shares of restricted stock (long-term retention awards): (a) 2,500 shares to Nathan R. Iles, and (b) 2,000 shares to each of Dale Burks and Carmine Broccole. These awards vest in increments when the executive reaches the ages of 60 (25% vests), 63 (25% vests) and 65 (balance vests), respectively. The Compensation Committee granted these restricted stock awards as a long-term retention tool and to incentivize executive performance through a long-term capital accumulation award.
Performance Share Awards. In October 2018,2019, the Compensation Committee also awarded performance shares to our named executive officers with each receiving a targeted share amount equal to the number of shares of standard restricted stock awards issued to such executive, although actual award payouts may vary from 0% to 200% of the target award amount, depending upon the level of achievement of the performance goal for the three-year measurement period. In order for a named executive officer to receive an actual payout of all or a portion of the performance shares awarded in 2018,2019, the Company must achieve earnings from continuing operations before taxes, excluding special items, on a cumulative basis for the three year period from January 1, 20182019 to December 31, 2020,2021, of approximately $226.8$244.1 million (i.e., the threshold amount) or more, with a maximum award resulting from achievement of earnings from continuing operations of approximately $340.2$366.1 million or more during the specified period.
In 2015,2016, performance shares were awarded to each of our named executive officers in accordance with the same practices described above. In order for an executive to receive an actual payout of all or a portion of the 20152016 performance shares, the Company needed to achieve earnings from continuing operations before taxes, excluding special items, on a cumulative basis for the three year period from January 1, 20152016 to December 31, 2017,2018, of approximately $227.1$276.3 million (i.e., the threshold amount) or more, with a maximum award resulting from achievement of earnings from continuing operations of approximately $340.7$414.5 million or more during the specified period. At the end of the three-year period, the Company exceeded the threshold financial goal during the measuring period, resulting in the issuance of performance shares in 20182019 at the payout level of 95.3%55.4%.
Clawback Policy
In March 2011, the Compensation Committee instituted a “clawback” policy with respect to incentive-based compensation. The clawback policy provides that, in the event of a restatement of the Company’s financial results due to a material noncompliance with any financial reporting requirements, the Compensation Committee is entitled to recover from current and former executive officers any incentive-based compensation that would not otherwise have been awarded to such persons under the as-restated financials during the three years preceding the date of the restatement. The Compensation Committee will reevaluate and, if necessary, revise the Company’s clawback policy to comply with the Dodd-Frank Act once the rules implementing the clawback requirements have been finalized by the SEC.
Stock Ownership Guidelines
To align directly the interests of executive officers with the interests of our stockholders,shareholders, we established stock ownership guidelines for our executive officers. Our stock ownership guidelines provide that executive officers are expected to own and hold a number of shares of Company Common Stock with a value that represents: (a) six times the base salary, with respect to our Executive Chairman of the Board and our Chief Executive Officer, (b) 100 percent of the base salary, with respect to our Chief Operating Officer, Chief Financial Officer and any Executive Vice President, (c) 50 percent of the base salary, with respect to any Senior Vice President, and (d) 30 percent of their base salary, with respect to each of our other executive officers of the Company. Stock ownership levels are expected to be achieved by each executive officer within a period of time determined at the discretion of the Compensation Committee. We do not allow our directors or executive officers to hedge the economic risk
37
Our stock ownership guidelines also include a mandatory stock holding period policy which requires our executive officers to hold for a period of two years any stock acquired by them upon the exercise of stock options or lapse of restrictions on restricted stock or performance shares, net of the funds necessary to pay the exercise price of stock options or for payment of applicable taxes. The mandatory stock holding period does not apply to long-term retention restricted stock awards.
Termination-Based Compensation
In December 2001, we entered into a change in control or severance agreement with James J. Burke, our Chief Operating Officer and Chief Financial Officer. Neither our Chief Executive Officer nor any of our other executive officers has a change in control or severance agreement. As discussed in more detail under “Severance and Change of Control Arrangements” below, Mr. Burke is entitled to severance payments and continued health and life insurance coverage for a limited period of time, among other benefits, upon the termination of his employment pursuant to his Severance Compensation Agreement.
The Compensation Committee may adopt and maintain such agreements where it believes the arrangement will protect the interests of senior executives when a potential change of control could affect their job security. Since the agreements mitigate any concern these executive officers may have in connection with a termination of their employment by us, or a potential loss of employment as a result of a change in control, they promote the interests of stockholdersshareholders by assuring that these executive officers focus on evaluating opportunities that are in our best interests, without concentrating on individual personal interests.
In addition, as discussed in more detail under “Severance and Change of Control Arrangements” below, our executive officers are eligible to receive termination-related benefits under the Company’s Supplemental Executive Retirement Plan. Our 2006 Omnibus Incentive Plan and 2016 Omnibus Incentive Plan also contain provisions that would accelerate the vesting of restricted stock upon certain events, including a change of control of the Company. We believe these severance and change of control benefits are an essential element of our executive compensation package and assist us in recruiting and retaining talented individuals.
Limitations on Tax Deductibility of Executive Compensation
The Compensation Committee has considered the potential impact of Section 162(m) of the Internal Revenue Code on the compensation paid to the Company’s executive officers. Section 162(m) generally limits our ability to claim a tax deduction for individual compensation exceedingpaid to our executive officers that exceeds $1 million in any taxable yearyear. In approving the amount and form of compensation for any of ourthe Company’s executive officers. For 2017 and prior years, performance-based compensation meeting certain requirements under Section 162(m) was fully deductible; however, the Tax Cuts and Jobs Act eliminated the exemption for performance-based compensation beginning in 2018, subject to certain transitional relief.
In general,officers, the Compensation Committee structured its executives’ compensationconsiders the potential impact of Section 162(m), in addition to avail itself of the benefits of deductibility under applicable tax laws, but deductibility was only one of manythose factors taken into consideration. Other factors include those discussed more fully in our “Compensation Discussion and Analysis” section above, under the heading “Compensation Philosophy and Primary Objectives”.
In approving the amount and form of compensation for the Company’s executive officers, the Compensation Committee will continue to consider all elements of the cost to the Company of providing such compensation, including the potential impact of Section 162(m).
Perquisites and Other Benefits
We provide our executive officers certain perquisites and other benefits. We provide these benefits as an additional incentive for our executives and to remain competitive in the general marketplace for executive talent. The primary perquisite for our executive officers is an allowance for leasing an automobile and reimbursement of related expenses. In addition, our executives are also offered broad-based benefits that are provided to all employees, including health insurance, life and disability insurance, accidental death and dismemberment insurance, Profit Sharing 401(K) Capital Accumulation Plan, and ESOP.
The information appearing in this Compensation Discussion and Analysis, and elsewhere in this Proxy Statement, as to performance metrics, objectives and targets relates only to incentives established for the purpose of motivating executives to achieve results that will help to enhance stockholdershareholder value. This information is not related to the Company’s expectations of future financial performance, and should not be mistaken for or correlated with any guidance that may be issued by the Company regarding its future earnings, free cash flow or other financial measures.
Report of the Compensation and Management Development Committee
The Compensation and Management Development Committee of the Board of Directors has reviewed and discussed with management the Compensation Discussion and Analysis included in this Proxy Statement. Based on this review and discussion, the Compensation Committee recommended that the Board of Directors include the Compensation Discussion and Analysis in this Proxy Statement and that it be incorporated by reference into our Annual Report on Form 10-K for the fiscal year ended December 31, 2018.2019.
Compensation and Management Development Committee
Roger M. Widmann (Chair) | | Alisa C. Norris |
Pamela Forbes Lieberman | | Frederick D. Sturdivant |
Patrick S. McClymont | |
William H. Turner | Richard S. Ward |
Joseph W. McDonnell | | Richard S. Ward |
Executive Compensation and Related Information
The following table sets forth the annual compensation paid by the Company during fiscal years 2019, 2018 2017 and 20162017 to our “named executive officers.” Under SEC rules, our named executive officers were: Lawrence I. Sills, Executive Chairman; Eric P. Sills, Chief Executive Officer and President; James J. Burke, Chief Operating Officer and Chief Financial Officer; Dale Burks, Executive Vice President and Chief Commercial Officer; Nathan R. Iles, Chief Financial Officer; and Carmine J. Broccole, Senior Vice President General Counsel and Secretary.
Summary Compensation Table for 20182019
Name and Principal Position | | Year | | Salary | | | Bonus (1) | | | Stock Awards (2) | | | Non-Equity Incentive Plan Compensation (3) | | | All Other Compensation (4) | | | Total | | Year | | Salary (1) | | | Bonus (2) | | | Stock Awards (3) | | | Non-Equity Incentive Plan Compensation (4) | | | All Other Compensation (5) | | | Total | |
Lawrence I. Sills | | 2018 | | $ | 400,000 | | | $ | ─ | | | $ | 146,520 | | | $ | 138,025 | | | $ | 48,706 | | | $ | 733,251 | | 2019 | | $ | 412,000 | | | $ ─ | | | $ | 157,520 | | | $ | 303,924 | | | $ | 45,519 | | | $ | 918,963 | |
Executive Chairman of the | | 2017 | | | 400,000 | | |
| ─ | | | | 158,800 | | | | 169,000 | | | | 75,316 | | | | 803,116 | | |
Board | | 2016 | | | 437,500 | | |
| ─ | | | | 160,640 | | | | 487,250 | | | | 56,809 | | | | 1,142,199 | | |
Executive Chairman of the Board | | 2018 | | 400,000 | | | ─ | | | 146,520 | | | 138,025 | | | 48,706 | | | 733,251 | |
| | 2017 | | 400,000 | | | ─ | | | 158,800 | | | 169,000 | | | 75,316 | | | 803,116 | |
| | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Eric P. Sills | | 2018 | | $ | 600,000 | | | $ | ─ | | | $ | 146,520 | | | $ | 212,006 | | | $ | 85,831 | | | $ | 1,044,357 | | 2019 | | $ | 619,000 | | | $ ─ | | | $ | 157,520 | | | $ | 465,310 | | | $ | 82,185 | | | $ | 1,324,015 | |
Chief Executive Officer & | | 2017 | | | 580,000 | | |
| ─ | | | | 158,800 | | | | 253,500 | | | | 120,892 | | | | 1,113,192 | | 2018 | | 600,000 | | | ─ | | | 146,520 | | | 212,006 | | | 85,831 | | | 1,044,357 | |
President | | 2016 | | | 532,500 | | |
| ─ | | | | 160,640 | | | | 691,895 | | | | 65,206 | | | | 1,450,241 | | 2017 | | 580,000 | | | ─ | | | 158,800 | | | 253,500 | | | 120,892 | | | 1,113,192 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
James J. Burke | | 2018 | | $ | 590,000 | | | $ | 963,000 | | | $ | 146,520 | | | $ | 207,590 | | | $ | 77,548 | | | $ | 1,984,658 | | 2019 | | $ | 619,000 | | | $ ─ | | | $ | 157,520 | | | $ | 465,310 | | | $ | 74,843 | | | $ | 1,316,673 | |
Chief Operating Officer & | | 2017 | | | 573,000 | | |
| ─ | | | | 158,800 | | | | 246,740 | | | | 115,772 | | | | 1,094,312 | | 2018 | | 590,000 | | | 963,000 | | | 146,520 | | | 207,590 | | | 77,548 | | | 1,984,658 | |
Chief Financial Officer | | 2016 | | | 555,000 | | |
| ─ | | | | 160,640 | | | | 691,895 | | | | 68,754 | | | | 1,476,289 | | |
Former Chief Financial Officer | | 2017 | | 573,000 | | | ─ | | | 158,800 | | | 246,740 | | | 115,772 | | | 1,094,312 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Dale Burks | | 2018 | | $ | 495,000 | | | $ | ─ | | | $ | 222,560 | | | $ | 172,807 | | | $ | 67,825 | | | $ | 958,192 | | 2019 | | $ | 510,000 | | | $ ─ | | | $ | 237,840 | | | $ | 380,494 | | | $ | 64,684 | | | $ | 1,193,018 | |
Executive Vice President & | | 2017 | | | 480,000 | | |
| ─ | | | | 262,425 | | | | 205,504 | | | | 78,905 | | | | 1,026,834 | | 2018 | | 495,000 | | | ─ | | | 222,560 | | | 172,807 | | | 67,825 | | | 958,192 | |
Chief Commercial Officer | | 2016 | | | 475,000 | | |
| ─ | | | | 328,560 | | | | 438,525 | | | | 48,679 | | | | 1,290,764 | | 2017 | | 480,000 | | | ─ | | | 262,425 | | | 205,504 | | | 78,905 | | | 1,026,834 | |
| | | | | | | | | | | | | | | | | | | | |
Nathan R. Iles | | 2019 | | $ | 148,333 | | | $ ─ | | | $ | 257,920 | | | $ | 94,240 | | | $ | 61,472 | | | $ | 561,965 | |
Chief Financial Officer | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Carmine J. Broccole | | 2019 | | $ | 465,000 | | | $ ─ | | | $ | 198,460 | | | $ | 253,270 | | | $ | 52,615 | | | $ | 969,345 | |
Senior Vice President | | 2018 | | 452,000 | | | ─ | | | 185,930 | | | 114,837 | | | 55,988 | | | 808,755 | |
General Counsel & Secretary | | 2017 | | 452,000 | | | ─ | | | 222,725 | | | 140,608 | | | 76,150 | | | 891,483 | |
Name and Principal Position | | Year | | Salary | | | Bonus (1) | | | Stock Awards (2) | | | Non-Equity Incentive Plan Compensation (3) | | | All Other Compensation (4) | | | Total | |
Carmine J. Broccole | | 2018 | | $ | 452,000 | | | $ | ─ | | | $ | 185,930 | | | $ | 114,837 | | | $ | 55,988 | | | $ | 808,755 | |
Senior Vice President | | 2017 | | | 452,000 | | |
| ─ | | | | 222,725 | | | | 140,608 | | | | 76,150 | | | | 891,483 | |
General Counsel & Secretary | | 2016 | | | 435,000 | | |
| ─ | | | | 288,400 | | | | 389,800 | | | | 49,140 | | | | 1,162,340 | |
| (1) | With respect to Nathan Iles, the amount in this column represents that portion of his annual base salary of $500,000 that he earned in 2019 following his appointment as Chief Financial Officer in September 2019. |
| (2) | The amount in this column represents the retention bonus earned by James Burke pursuant to his Retention Bonus and Insurance Agreement. See “Severance and Change of Control Arrangements—Retention Bonus and Insurance Agreements” below.Agreement, which expired in 2018. The Company has no further obligations to Mr. Burke under the agreement. |
| (2)(3) | The amounts in this column represent the grant date fair value of stock awards in the applicable year computed in accordance with ASC Topic 718 for restricted stock awards and performance share awards. The fair value of the performance share awards assumes the achievement of the target level of performance shares as the probable outcome. Assuming the achievement of the maximum level of performance shares, the above amounts for each person would be increased by the following fair value amounts in each of 2019, 2018 and 2017, respectively: $78,760, $73,260 and 2016, respectively: $73,260, $79,400 and $80,320 for Lawrence Sills, Eric Sills, James Burke, and Dale Burks and Nathan Iles, and $59,070, $54,945 $59,550 and $60,240$59,550 for Carmine Broccole. The amounts listed in the table do not reflect whether the named executive officers have actually realized a financial benefit from these awards. For a discussion of the valuation assumptions, see Note 1514 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2018.2019. See “Grants of Plan-Based Awards” and “Outstanding Equity Awards at Fiscal Year-End” below for more information regarding our stock awards. In accordance with SEC regulations, the amounts shown exclude the impact of estimated forfeitures related to vesting conditions. |
| (3)(4) | The amounts in this column constitute annual cash incentive awards. The annual cash incentive award granted to Nathan Iles was pro-rated for 2019 based on his appointment as Chief Financial Officer in September 2019. See “Grants of Plan-Based Awards” below for more information regarding annual incentive bonus awards. |
| (4)(5) | The amounts in this column represent car allowances for leased automobiles, and Company contributions to the Profit Sharing 401(K) Capital Accumulation Plan, ESOP and SERP programs on behalf of the named executive officers.officers, and relocation benefits paid to Nathan Iles in the amount of $59,692 for establishing a new residence in the New York City area following his appointment as Chief Financial Officer in September 2019. The Company contributions that were earned in 20182019 (but paid in March 2019)2020) into the individual 401(K), ESOP and SERP accounts of our named executive officers are set forth below: |
Name | | | 401(K) |
| | ESOP | | | SERP | |
Lawrence Sills | | | 17,875 | | | | 5,473 | | | | 24,402 | |
Eric Sills | | | 17,875 | | | | 5,473 | | | | 48,016 | |
James Burke | | | 17,875 | | | | 5,473 | | | | 46,624 | |
Dale Burks | | | 17,875 | | | | 5,473 | | | | 35,320 | |
Carmine Broccole | | | 17,875 | | | | 5,473 | | | | 26,361 | |
Name | | | 401(K) |
| | ESOP | | | SERP | |
Lawrence Sills | | $ | 18,200 | | | $ | 3,840 | | | $ | 22,412 | |
Eric Sills | | $ | 18,200 | | | $ | 3,840 | | | $ | 45,734 | |
James Burke | | $ | 18,200 | | | $ | 3,840 | | | $ | 45,367 | |
Dale Burks | | $ | 18,200 | | | $ | 3,840 | | | $ | 33,436 | |
Nathan Iles | | | - | | | | - | | | | - | |
Carmine Broccole | | $ | 18,200 | | | $ | 3,840 | | | $ | 24,886 | |
Excluding the SERP contributions and the relocation benefits described above, the amount attributable to each perquisite for each named executive officer does not exceed the greater of $25,000 or 10% of the total amount of perquisites received by such officer.
The following table sets forth certain information with respect to stockplan-based awards granted to the named executive officers during 2018.2019.
Grants of Plan-Based Awards for
2018 2019
Name | Grant Date | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards (1) | | | Estimated Future Payouts Under Equity Incentive | | | All Other Stock Awards: Number of Shares of Stock or Units (#) (3) | | | Grant Date Fair Value (4) | | |
| | Estimated Future Payouts Under Non-Equity Incentive Plan Awards (1) | | Estimated Future Payouts Under Equity Incentive | | All Other Stock Awards: Number of | | | |
Name | Grant Date | | Threshold ($) | | | Target ($) | | | Maximum ($) | | | Threshold (#) | | | Target (#) | | | Maximum (#) | | | All Other Stock Awards: Number of Shares of Stock or Units (#) (3) | | | Grant Date Fair Value (4) | | Grant Date | Threshold ($) | | Target ($) | | Maximum ($) | | Threshold (#) | | Target (#) | | Maximum (#) | | Shares of Stock or Units (#) (3) | | Grant Date Fair Value (4) | |
| ─ | | | ─ | | | ─ | | | | 1,000 | | | | 2,000 | | | | 4,000 | | | | | | 9/24/19 | ─ | | ─ | | ─ | | | | 1,000 | | | | 2,000 | | | | 4,000 | | ─ | | | $ | 78,760 | |
| 10/11/18 | | ─ | | | ─ | | | ─ | | | ─ | | | ─ | | | ─ | | | | 2,000 | | | | 73,260 | | 9/24/19 | ─ | | ─ | | ─ | | ─ | | ─ | | ─ | | | | 2,000 | | | | 78,760 | |
| | | $ | 0 | | | $ | 250,000 | | | $ | 500,000 | | | ─ | | | ─ | | | ─ | | | ─ | | | ─ | | | | $ | 0 | | | $ | 258,000 | | | $ | 516,000 | | ─ | | ─ | | ─ | | ─ | | ─ | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Eric P. Sills | 10/11/18 | | ─ | | | ─ | | | ─ | | | | 1,000 | | | | 2,000 | | | | 4,000 | | | ─ | | | $ | 73,260 | | 9/24/19 | ─ | | ─ | | ─ | | | | 1,000 | | | | 2,000 | | | | 4,000 | | ─ | | | $ | 78,760 | |
| 10/11/18 | | ─ | | | ─ | | | ─ | | | ─ | | | ─ | | | ─ | | | | 2,000 | | | | 73,260 | | 9/24/19 | ─ | | ─ | | ─ | | ─ | | ─ | | ─ | | | | 2,000 | | | | 78,760 | |
| | | $ | 0 | | | $ | 384,000 | | | $ | 768,000 | | | ─ | | | ─ | | | ─ | | | ─ | | | ─ | | | | $ | 0 | | | $ | 395,000 | | | $ | 790,000 | | ─ | | ─ | | ─ | | ─ | | ─ | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
James J. Burke | 10/11/18 | | ─ | | | ─ | | | ─ | | | | 1,000 | | | | 2,000 | | | | 4,000 | | | ─ | | | $ | 73,260 | | 9/24/19 | ─ | | ─ | | ─ | | | | 1,000 | | | | 2,000 | | | | 4,000 | | ─ | | | $ | 78,760 | |
| 10/11/18 | | ─ | | | ─ | | | ─ | | | ─ | | | ─ | | | ─ | | | | 2,000 | | | | 73,260 | | 9/24/19 | ─ | | ─ | | ─ | | ─ | | ─ | | ─ | | | | 2,000 | | | | 78,760 | |
| | | $ | 0 | | | $ | 376,000 | | | $ | 752,000 | | | ─ | | | ─ | | | ─ | | | ─ | | | ─ | | | | $ | 0 | | | $ | 395,000 | | | $ | 790,000 | | ─ | | ─ | | ─ | | ─ | | ─ | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Dale Burks | 10/11/18 | | ─ | | | ─ | | | ─ | | | | 1,000 | | | | 2,000 | | | | 4,000 | | | ─ | | | $ | 73,260 | | 9/24/19 | ─ | | ─ | | ─ | | | | 1,000 | | | | 2,000 | | | | 4,000 | | ─ | | | $ | 78,760 | |
| 10/11/18 | | ─ | | | ─ | | | ─ | | | ─ | | | ─ | | | ─ | | | | 2,000 | | | | 73,260 | | 9/24/19 | ─ | | ─ | | ─ | | ─ | | ─ | | ─ | | | | 2,000 | | | | 78,760 | |
| 10/11/18 | | ─ | | | ─ | | | ─ | | | ─ | | | ─ | | | ─ | | | | 2,000 | | | | 76,040 | | 9/24/19 | ─ | | ─ | | ─ | | ─ | | ─ | | ─ | | | | 2,000 | | | | 80,320 | |
| | | $ | 0 | | | $ | 313,000 | | | $ | 626,000 | | | ─ | | | ─ | | | ─ | | | ─ | | | ─ | | | | $ | 0 | | | $ | 323,000 | | | $ | 646,000 | | ─ | | ─ | | ─ | | ─ | | ─ | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Nathan R. Iles | | 9/24/19 | ─ | | ─ | | ─ | | | | 1,000 | | | | 2,000 | | | | 4,000 | | ─ | | | $ | 78,760 | |
| | 9/24/19 | ─ | | ─ | | ─ | | ─ | | ─ | | ─ | | | | 2,000 | | | | 78,760 | |
| | 9/24/19 | ─ | | ─ | | ─ | | ─ | | ─ | | ─ | | | | 2,500 | | | | 100,400 | |
| | | | $ | 0 | | | $ | 320,000 | | | $ | 640,000 | | ─ | | ─ | | ─ | | ─ | | ─ | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Carmine J. Broccole | 10/11/18 | | ─ | | | ─ | | | ─ | | | | 750 | | | | 1,500 | | | | 3,000 | | | ─ | | | $ | 54,945 | | 9/24/19 | ─ | | ─ | | ─ | | | | 750 | | | | 1,500 | | | | 3,000 | | ─ | | | $ | 59,070 | |
| 10/11/18 | | ─ | | | ─ | | | ─ | | | ─ | | | ─ | | | ─ | | | | 1,500 | | | | 54,945 | | 9/24/19 | ─ | | ─ | | ─ | | ─ | | ─ | | ─ | | | | 1,500 | | | | 59,070 | |
| 10/11/18 | | ─ | | | ─ | | | ─ | | | ─ | | | ─ | | | ─ | | | | 2,000 | | | | 76,040 | | 9/24/19 | ─ | | ─ | | ─ | | ─ | | ─ | | ─ | | | | 2,000 | | | | 80,320 | |
| | | $ | 0 | | | $ | 208,000 | | | $ | 416,000 | | | ─ | | | ─ | | | ─ | | | ─ | | | ─ | | | | $ | 0 | | | $ | 215,000 | | | $ | 430,000 | | ─ | | ─ | | ─ | | ─ | | ─ | |
| (1) | Represents possible threshold, target and maximum payout levels for fiscal year 20182019 under our cash incentive bonus programs. Bonuses paid to the named executive officers are dependent on the level of achievement of certain management and company performance objectives. The actual bonuses paid to each named executive officer for 20182019 are reported in the Summary Compensation Table for 20182019 above. Additional information regarding our cash incentive bonus program is included in “Compensation Discussion and Analysis” above. |
| (2) | These columns reflect threshold, target and maximum payout levels for performance share awards granted under our 2016 Omnibus Incentive Plan. The performance share awards have a three-year vesting period and performance target goals relating to the Company’s earnings from continuing operations before taxes, excluding special items, measured at the end of a three-year period. To the extent that the Company does not achieve the threshold level of earnings before taxes at the end of the measuring period, these performance shares will not be issued. Performance shares were issued to the named executive officers in 20182019 at a 95.3%55.4% payout level with respect to the performance share awards granted in 2015,2016, because the Company achieved the applicable financial goals for the 2015-20172016-2019 measuring period. Holders of performance share awards are not entitled to stockholdershareholder rights, including voting rights or dividends. To the extent that an officer ceases to be an employee of the Company before the end of the vesting period, the entire performance share award will be forfeited. Additional information regarding our 2016 Omnibus Incentive Plan is included in the “Compensation Discussion and Analysis” section above. |
| (3) | This column reflects the number of shares of both standard and long-term retention restricted stock awards issued under our 2016 Omnibus Incentive Plan. Shares of restricted stock have a three-year or longer vesting period and are not entitled to dividends; however, holders of restricted stock are entitled to voting rights. To the extent that an officer ceases to be an employee of the Company before the end of the vesting period, the entire unvested portion of the restricted stock award will be forfeited. See related discussion in “Compensation Discussion and Analysis” above. These awards are also described in “Outstanding Equity Awards at Fiscal Year-End” below. |
| (4) | The ASC Topic 718 per share value of the standard restricted stock and long-term retention restricted stock awards granted on October 11, 2018September 24, 2019 is $36.63$39.38 per share and $38.02$40.16 per share, respectively. |
The following table summarizes the equity awards that we have made to our named executive officers, which awards were outstanding as of December 31, 2018.2019.
Outstanding Equity Awards at Fiscal Year-End for 20182019
| | | | Stock Awards | | | | Stock Awards | |
Name | Grant Date | | | Number of Shares or Units of Stock that Have Not Vested | | | Market Value of Shares or Units of Stock That Have Not Vested (1) | | | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (2) | | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested (1) | | Grant Date | | Number of Shares or Units of Stock that Have Not Vested | | Market Value of Shares or Units of Stock That Have Not Vested (1) | | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (2) | | Equity Incentive Plan
Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested (1) | |
Lawrence I. Sills | 10/20/2016 | | | 2,000 | (3)
| | $ | 96,860 | | | 2,000 | | | $ | 96,860 | | 10/20/2017 | | | 2,000 | (3) | | $ | 106,440 | | | | 2,000 | | | $ | 106,440 | |
| 10/20/2017 | | | 2,000 | (3) | | $ | 96,860 | | | 2,000 | | | $ | 96,860 | | 10/11/2018 | | | 2,000 | (3) | | $ | 106,440 | | | | 2,000 | | | $ | 106,440 | |
| 10/11/2018 | | | 2,000 | (3) | | $ | 96,860 | | | 2,000 | | | $ | 96,860 | | 9/24/2019 | | | 2,000 | (3) | | $ | 106,440 | | | | 2,000 | | | $ | 106,440 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Eric P. Sills | 12/1/2010 | | | 5,000 | (4)
| | $ | 242,150 | | | — | | | $ | — | | 12/1/2010 | | | 5,000 | (4) | | $ | 266,100 | | | | — | | | $ | — | |
| 9/20/2011 | | | 5,000 | (4) | | $ | 242,150 | | | — | | | $ | — | | 9/20/2011 | | | 5,000 | (4) | | $ | 266,100 | | | | — | | | $ | — | |
| 10/9/2012 | | | 5,000 | (4) | | $ | 242,150 | | | — | | | $ | — | | 10/9/2012 | | | 5,000 | (4) | | $ | 266,100 | | | | — | | | $ | — | |
| 10/8/2013 | | | 5,000 | (4) | | $ | 242,150 | | | — | | | $ | — | | 10/8/2013 | | | 5,000 | (4) | | $ | 266,100 | | | | — | | | $ | — | |
| 10/7/2014 | | | 5,000 | (4) | | $ | 242,150 | | | — | | | $ | — | | 10/7/2014 | | | 5,000 | (4) | | $ | 266,100 | | | | — | | | $ | — | |
| 10/13/2015 | | | 4,000 | (4) | | $ | 193,720 | | | — | | | $ | — | | 10/13/2015 | | | 4,000 | (4) | | $ | 212,880 | | | | — | | | $ | — | |
| 10/20/2016 | | | 2,000 | (3) | | $ | 96,860 | | | 2,000 | | | $ | 96,860 | | 10/20/2017 | | | 2,000 | (3) | | $ | 106,440 | | | | 2,000 | | | $ | 106,440 | |
| 10/20/2017 | | | 2,000 | (3) | | $ | 96,860 | | | 2,000 | | | $ | 96,860 | | 10/11/2018 | | | 2,000 | (3) | | $ | 106,440 | | | | 2,000 | | | $ | 106,440 | |
| 10/11/2018 | | | 2,000 | (3) | | $ | 96,860 | | | 2,000 | | | $ | 96,860 | | 9/24/2019 | | | 2,000 | (3) | | $ | 106,440 | | | | 2,000 | | | $ | 106,440 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
James J. Burke | 10/20/2016 | | | 2,000 | (3)
| | $ | 96,860 | | | 2,000 | | | $ | 96,860 | | 10/20/2017 | | | 2,000 | (3) | | $ | 106,440 | | | | 2,000 | | | $ | 106,440 | |
| 10/20/2017 | | | 2,000 | (3) | | $ | 96,860 | | | 2,000 | | | $ | 96,860 | | 10/11/2018 | | | 2,000 | (3) | | $ | 106,440 | | | | 2,000 | | | $ | 106,440 | |
| 10/11/2018 | | | 2,000 | (3) | | $ | 96,860 | | | 2,000 | | | $ | 96,860 | | 9/24/2019 | | | 2,000 | (3) | | $ | 106,440 | | | | 2,000 | | | $ | 106,440 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Dale Burks | 12/1/2010 | | | 5,000 | (4)
| | $ | 242,150 | | | — | | | $ | — | | 12/1/2010 | | | 5,000 | (4) | | $ | 266,100 | | | | — | | | $ | — | |
| 9/20/2011 | | | 5,000 | (4) | | $ | 242,150 | | | — | | | $ | — | | 9/20/2011 | | | 5,000 | (4) | | $ | 266,100 | | | | — | | | $ | — | |
| 10/9/2012 | | | 5,000 | (4) | | $ | 242,150 | | | — | | | $ | — | | 10/9/2012 | | | 5,000 | (4) | | $ | 266,100 | | | | — | | | $ | — | |
| 10/8/2013 | | | 5,000 | (4) | | $ | 242,150 | | | — | | | $ | — | | 10/8/2013 | | | 5,000 | (4) | | $ | 266,100 | | | | — | | | $ | — | |
| 10/7/2014 | | | 5,000 | (4) | | $ | 242,150 | | | — | | | $ | — | | 10/7/2014 | | | 5,000 | (4) | | $ | 266,100 | | | | — | | | $ | — | |
| 10/13/2015 | | | 4,000 | (4) | | $ | 193,720 | | | — | | | $ | — | | 10/13/2015 | | | 4,000 | (4) | | $ | 212,880 | | | | — | | | $ | — | |
| 10/20/2016 | | | 4,000 | (4) | | $ | 193,720 | | | — | | | $ | — | | 10/20/2016 | | | 4,000 | (4) | | $ | 212,880 | | | | — | | | $ | — | |
| 10/20/2016 | | | 2,000 | (3) | | $ | 96,860 | | | 2,000 | | | $ | 96,860 | | 10/20/2017 | | | 2,500 | (4) | | $ | 133,050 | | | | — | | | $ | — | |
| 10/20/2017 | | | 2,500 | (4) | | $ | 121,075 | | | — | | | $ | — | | 10/20/2017 | | | 2,000 | (3) | | $ | 106,440 | | | | 2,000 | | | $ | 106,440 | |
| 10/20/2017 | | | 2,000 | (3) | | $ | 96,860 | | | 2,000 | | | $ | 96,860 | | 10/11/2018 | | | 2,000 | (4) | | $ | 106,440 | | | | — | | | $ | — | |
| 10/11/2018 | | | 2,000 | (4) | | $ | 96,860 | | | — | | | $ | — | | 10/11/2018 | | | 2,000 | (3) | | $ | 106,440 | | | | 2,000 | | | $ | 106,440 | |
| 10/11/2018 | | | 2,000 | (3) | | $ | 96,860 | | | 2,000 | | | $ | 96,860 | | 9/24/2019 | | | 2,000 | (4) | | $ | 106,440 | | | | — | | | $ | — | |
| | | | | | | | | | | | | | | | 9/24/2019 | | | 2,000 | (3) | | $ | 106,440 | | | | 2,000 | | | $ | 106,440 | |
| | | | | | | | | | | | | | | | | | |
Nathan R. Iles | | 9/24/2019 | | | 2,500 | (4) | | $ | 133,050 | | | | — | | | $ | — | |
| | 9/24/2019 | | | 2,000 | (3) | | $ | 106,440 | | | | 2,000 | | | $ | 106,440 | |
| | | | | | | | | | | | | | | | | | |
Carmine J. Broccole | 12/1/2010 | | | 5,000 | (4)
| | $ | 242,150 | | | — | | | $ | — | | 12/1/2010 | | | 5,000 | (4) | | $ | 266,100 | | | | — | | | $ | — | |
| 9/20/2011 | | | 5,000 | (4) | | $ | 242,150 | | | — | | | $ | — | | 9/20/2011 | | | 5,000 | (4) | | $ | 266,100 | | | | — | | | $ | — | |
| 10/9/2012 | | | 5,000 | (4) | | $ | 242,150 | | | — | | | $ | — | | 10/9/2012 | | | 5,000 | (4) | | $ | 266,100 | | | | — | | | $ | — | |
| 10/8/2013 | | | 5,000 | (4) | | $ | 242,150 | | | — | | | $ | — | | 10/8/2013 | | | 5,000 | (4) | | $ | 266,100 | | | | — | | | $ | — | |
| 10/7/2014 | | | 5,000 | (4) | | $ | 242,150 | | | — | | | $ | — | | 10/7/2014 | | | 5,000 | (4) | | $ | 266,100 | | | | — | | | $ | — | |
| 10/13/2015 | | | 4,000 | (4) | | $ | 193,720 | | | — | | | $ | — | | 10/13/2015 | | | 4,000 | (4) | | $ | 212,880 | | | | — | | | $ | — | |
| 10/20/2016 | | | 4,000 | (4) | | $ | 193,720 | | | — | | | $ | — | | 10/20/2016 | | | 4,000 | (4) | | $ | 212,880 | | | | — | | | $ | — | |
| 10/20/2016 | | | 1,500 | (3) | | $ | 72,645 | | | 1,500 | | | $ | 72,645 | | 10/20/2017 | | | 2,500 | (4) | | $ | 133,050 | | | | — | | | $ | — | |
| 10/20/2017 | | | 2,500 | (4) | | $ | 121,075 | | | — | | | $ | — | | 10/20/2017 | | | 1,500 | (3) | | $ | 79,830 | | | | 1,500 | | | $ | 79,830 | |
| 10/20/2017 | | | 1,500 | (3) | | $ | 72,645 | | | 1,500 | | | $ | 72,645 | | 10/11/2018 | | | 2,000 | (4) | | $ | 106,440 | | | | — | | | $ | — | |
| 10/11/2018 | | | 2,000 | (4) | | $ | 96,860 | | | — | | | $ | — | | 10/11/2018 | | | 1,500 | (3) | | $ | 79,830 | | | | 1,500 | | | $ | 79,830 | |
| 10/11/2018 | | | 1,500 | (3) | | $ | 72,645 | | | 1,500 | | | $ | 72,645 | | 9/24/2019 | | | 2,000 | (4) | | $ | 106,440 | | | | — | | | $ | — | |
| | 9/24/2019 | | | 1,500 | (3) | | $ | 79,830 | | | | 1,500 | | | $ | 79,830 | |
| (1) | The market value is based on the closing price of the Company’s Common Stock of $48.43$53.22 per share as of December 31, 2018.2019. |
| (2) | Performance share awards vest on the third anniversary of the date of grant, provided that certain performance goals have been met at the end of the three-year measuring period. Please refer to “Compensation Discussion and Analysis” above for additional information regarding equity awards granted under our 2016 Omnibus Incentive Plan. |
| (3) | This standard restricted stock award vests on the third anniversary of the date of grant. |
| (4) | This long-term retention restricted stock award vests in increments upon the executive reaching 60 (25% vests), 63 (25% vests) and 65 (balance vests) years of age. |
The following table provides additional information relating to the vesting of standard restricted stock and performance shares previously granted to the named executive officers during the year ended December 31, 2018.2019. None of the named executive officers has outstanding options to purchase shares of Company Common Stock.
Stock Vested for 20182019
| | Stock Awards | | | Stock Awards | |
Name(1) | | Number of Shares Acquired on Vesting | | | Value Realized on Vesting (1) | | | Number of Shares Acquired on Vesting | | | Value Realized on Vesting (2) | |
Lawrence I. Sills | | | 3,906 | | | $ | 172,528 | | | 3,108 | | | $ | 153,193 | |
Eric P. Sills | | | 2,441 | | | $ | 107,819 | | | 3,108 | | | $ | 153,193 | |
James J. Burke | | | 3,662 | | | $ | 161,751 | | | 3,108 | | | $ | 153,193 | |
Dale Burks | | | 2,441 | | | $ | 107,819 | | | 3,108 | | | $ | 153,193 | |
Nathan R. Iles | | | - | | | - | |
Carmine J. Broccole | | | 2,441 | | | $ | 107,819 | | | 2,331 | | | $ | 114,895 | |
| (1) | Nathan R. Iles did not have restricted stock or performance shares vest in 2019. |
| (1)(2) | The market value of the restricted stock and the performance shares is based on the closing price of the Company’s Common Stock of $49.29 per share on October 18, 2019, the last trading day before the vesting date of such stock awards, which was $44.17 per share on October 12, 2018.awards. |
The following table shows the aggregate earnings and balances for each of our named executive officers under our Supplemental Executive Retirement Plan as of December 31, 2018.2019.
Nonqualified Deferred Compensation for 20182019
Name | | Executive Contributions in Last FY (1) | | | Registrant Contributions in Last FY (1) | | | Aggregate Earnings in Last FY (2) | | | Aggregate Withdrawals/ Distribution | | | Aggregate Balance at Last FYE | | | Executive Contributions in Last FY (1) | | | Registrant Contributions in Last FY (1) | | | Aggregate Earnings in Last FY (2) | | | Aggregate Withdrawals/ Distribution | | | Aggregate Balance at Last FYE | |
Lawrence I. Sills | | $ | 149,531 | | | $ | 51,232 | | | $ | (351,042 | ) | | $ | — | | | $ | 7,568,874 | | | $ | 120,666 | | | $ | 24,402 | | | $ | 1,009,974 | | | $ | — | | | $ | 8,723,915 | |
Eric P. Sills | | | 34,140 | | | | 83,157 | | | | (29,985 | ) | | | — | | | | 361,622 | | | 45,620 | | | 48,016 | | | 94,273 | | | — | | | 549,532 | |
James J. Burke | | | — | | | | 82,576 | | | | (133,682 | ) | | | — | | | | 1,111,276 | | | — | | | 46,624 | | | 315,472 | | | — | | | 1,473,372 | |
Dale Burks | | | — | | | | 53,831 | | | | (47,027 | ) | | | — | | | | 467,609 | | | — | | | 35,320 | | | 144,994 | | | — | | | 647,923 | |
Nathan R. Iles | | | — | | | — | | | — | | | — | | | — | |
Carmine J. Broccole | | | — | | | | 47,459 | | | | (31,596 | ) | | | — | | | | 348,419 | | | — | | | 26,361 | | | 98,046 | | | — | | | 472,826 | |
(1) | The amounts shown in this column reflect amounts contributed in 2018.2019. |
(2) | Earnings are not above market and therefore are not reportable in the Summary Compensation Table. See “Severance and Change of Control Arrangements—Supplemental Executive Retirement Plan (SERP)”Defined Contribution Plan” below for further information. |
The following table presents information on our existing equity plans as of December 31, 2018,2019, under which shares of the Company’s Common Stock are authorized for issuance.
Equity Compensation Plan Information
Plan Category | | Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights | | | Weighted Average Exercise Price of Outstanding Options, Warrants and Rights | | | Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans | | | Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights | | | Weighted Average Exercise Price of Outstanding Options, Warrants and Rights | | | Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans | |
Equity compensation plans approved by security holders | | | 870,041 | (1) | | $ | 34.59 | | | | 493,121 | (2) | | 852,540 | (1) | | $ | 35.26 | | | 321,929 | (2) |
| | | | | | | | | | |
Equity compensation plans not approved by security holders | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
All plans | | | | | | | | | | | | | | | | | | | | | | | | |
(1) | Represents shares covered by outstanding unvested long-term retention restricted stock awards issued under our 2006 Omnibus Incentive Plan, and outstanding unvested awards of restricted stock (standard awards and long-term retention awards) and performance shares issuable under our 2006 Omnibus Incentive Plan and 2016 Omnibus Incentive Plan. |
(2) | Represents shares of the Company’s Common Stock issuable under our 2016 Omnibus Incentive Plan. |
Pay Ratio
The median of the annual compensation paid by the Company during fiscal year 20182019 to all employees (excluding our Chief Executive Officer) is estimated to be approximately $32,332$28,141 (referred to as the “2018“2019 Median Compensation”). The ratio of the 20182019 Median Compensation to the annual compensation paid by the Company toof Eric P. Sills, our Chief Executive Officer and President, duringfor fiscal year 2018,2019, which is described in the Summary Compensation Table for 20182019 above, is estimated to be one to thirty-two.forty-seven.
We identified our median employee as of December 31, 2017,2019, using payroll records that reflected total wages and other compensation paid to our employees during fiscal year 2017,2019, as reported to the U.S. Internal Revenue Service on Form W-2 and the equivalent for our non-U.S. employees. Adjustments were made to annualize the compensation of all permanent employees (full-time or part-time) who were employed for less than the full fiscal year, and to convert to U.S. dollars any compensation paid to our employees in currencies other than U.S. dollars using the relevant exchange rate at year-end.
We believe that there have been no changes in our employee population or employee compensation arrangements that would significantly impact our pay ratio for 2018. Nevertheless, we believe that it would not be appropriate to use the same median employee that we identified for 2017 as our median employee for 2018 because the original median employee’s compensation significantly increased for 2018, and the increase would result in a significant change in our pay ratio for 2018. Therefore, for purposes of determining the 2018 Median Compensation, we identified another employee whose compensation was substantially similar to the original median employee’s compensation. The resulting ratio is a reasonable estimate calculated in a manner consistent with the compensation disclosure rules of the Securities and Exchange Commission.SEC.
Severance and Change of Control Arrangements
Severance Compensation Agreement
In December 2001, we entered into a Severance Compensation Agreement with James J. Burke. Mr. Burke’s Severance Compensation Agreement provides that if a change in control of the Company occurs and, within 12 months thereafter, Mr. Burke’s employment is terminated by the Company without cause or by Mr. Burke for certain specific reasons, then he will receive severance payments and certain other benefits. The specific reasons which allow Mr. Burke to resign and receive the benefits are: (1) a reduction in status, position or reporting responsibility; (2) a reduction in his annual rate of base salary; and (3) relocation of more than 15 miles from the Company’s current office.
If Mr. Burke resigns for one of the specific reasons, or is terminated without cause, he will be entitled to receive: (1) a severance payment equal to three times his base salary plus standard bonus, payable over a two year period on a pro rata, semi-monthly basis; (2) continued participation for a period of 36 months in group medical, dental and/or life insurance plans; (3) exclusive use of a company automobile for the duration of the lease then in effect; and (4) outplacement services.
For purposes of the agreement, a change in control of the Company means the occurrence of any of the following events: (1) a sale of all or substantially all of the assets of the Company to any person or group other than certain designated individuals; or (2) any person or group, other than certain designated individuals, become the beneficial owner or owners of more than 50% of the total voting stock of the Company, including by way of merger, consolidation or otherwise.
Retention Bonus and Insurance Agreements
In December 2006, the Company entered into a Retention Bonus and Insurance Agreement with James J. Burke, which provided, among other things, that (1) Mr. Burke will remain an employee of the Company for a term of not less than three additional years after he reaches the age of 60 (the “Extension Period”); (2) Mr. Burke will receive additional compensation comprised of one year’s salary plus any applicable bonus at par payable in a lump sum; and (3) Mr. Burke will receive an extension of his life insurance policy during the Extension Period. The additional compensation payable under the agreement would have been forfeited in the event that Mr. Burke’s employment terminated for any reason, other than a disability, in which case Mr. Burke would have been entitled to a pro rata bonus calculated as provided in the agreement. In 2019, upon completing three years of service after reaching age 60, Mr. Burke received his full payout under the agreement. See Summary Compensation Table for further information. The Company has no further obligations to Mr. Burke under the agreement.
Supplemental Executive RetirementDefined Contribution Plan (SERP)
The Company has established a defined contribution Supplemental Executive Retirement Plan (SERP) for our executive officers and other eligible employees. The purpose of this plan is to enable the Company to supplement the benefits under the Company’s Profit Sharing 401(K) Capital Accumulation Plan as well as to provide a means whereby certain amounts payable by the Company to our executive officers may be deferred to some future period. To the extent that an eligible employee retires or is terminated, their accounts in the SERP shall be paid either in a lump sum or over a period of time, at the election of the employee. In the event of a change of control of the Company, the Company shall, as soon as possible, but in no event longer than 60 days following the change of control event, make an irrevocable contribution to a rabbi trust established under the plan in an amount that is sufficient to pay each SERP participant or beneficiary the benefits to which SERP participants or their beneficiaries would be entitled pursuant to the terms of the SERP as of the date on which the change of control event occurred. Upon a change of control event, each participant’s account shall be fully vested.
Supplemental SERPDefined Benefit Pension Plan
The Company maintains ana defined benefit unfunded Supplemental SERP.Executive Retirement Plan. The benefits under this plan are in addition to any benefits payable to participants under the Company’s Profit Sharing 401(K) Capital Accumulation Plan and the defined contribution SERP. As of the date of this Proxy Statement, there are no participants in the defined benefit Supplemental SERP.Executive Retirement Plan.
2016 Omnibus Incentive Plan
As previously discussed under “Compensation Discussion and Analysis” above, we grant our named executive officers shares of restricted stock. Under the terms of the 2016 Omnibus Incentive Plan, any unvested shares of restricted stock will immediately vest upon death, retirement at or after the age of 65, total disability, or upon a change in control of the Company. For purposes of the Incentive Plan, a “change of control” means any of the following events:
| (a) | Any person, other than certain designated persons, becomes the beneficial owner of 30% or more of the total voting stock of the Company; |
| (b) | Individuals who constituted the Board as of May 19, 2016 cease for any reason to constitute at least a majority of the Board, other than in certain circumstances; |
| (c) | Consummation of a reorganization, merger, or consolidation of the Company, in each case unless, all or substantially all of the beneficial owners of the Company before such event hold more than 50% of the voting stock after such event; or |
| (d) | Any person, other than certain designated persons, acquires assets from the Company that have a total gross fair market value equal to or more than 40% of the total gross fair market value of all of the assets of the Company. |
The following table shows the estimated benefits payable to our named executive officers following both a change in control of the Company and a hypothetical termination of employment as of December 31, 20182019 under the severance and change in control arrangements discussed immediately above.
Estimated Benefits upon Termination Following a Change in Control
Name | | Severance Compensation Agreement Amount (1) | | | SERP Amount (2) | | | Early Vesting of Restricted Stock (3) | | | Other (4) | | | Total | | | Severance Compensation Agreement Amount (1) | | | SERP Amount (2) | | | Early Vesting of Restricted Stock (3) | | | Other (4) | | | Total | |
Lawrence I. Sills | | $ ─ | | | $ | 7,568,874 | | | $ | 290,580 | | | $ ─ | | | $ | 7,859,454 | | | $ ─ | | | $ | 8,723,915 | | | $ | 319,320 | | | $ ─ | | | $ | 9,043,235 | |
Eric P. Sills | | ─ | | | | 361,622 | | | | 1,695,050 | | | ─ | | | | 2,056,672 | | | ─ | | | 549,532 | | | 1,862,700 | | | ─ | | | 2,412,232 | |
James J. Burke | | | 2,898,000 | | | | 1,111,276 | | | | 290,580 | | | | 93,843 | | | | 4,393,707 | | | 3,042,000 | | | 1,473,372 | | | 319,320 | | | 130,845 | | | 4,965,545 | |
Dale Burks | | ─ | | | | 467,609 | | | | 2,106,705 | | | ─ | | | | 2,574,314 | | | ─ | | | 647,923 | | | 2,421,510 | | | ─ | | | 3,069,433 | |
Nathan R. Iles | | | ─ | | | ─ | | | 239,490 | | | ─ | | | 239,490 | |
Carmine J. Broccole | | ─ | | | | 348,419 | | | | 2,034,060 | | | ─ | | | | 2,382,479 | | | ─ | | | 472,826 | | | 2,341,680 | | | ─ | | | 2,814,506 | |
(1) | This amount represents three times the sum of the executive officer’s 20182019 base salary and standard bonus and would be payable over a two year period on a semi-monthly basis. |
(2) | This amount represents contributions under the SERP that would be made upon a change of control. Absent a change of control, if the executive officer retired or was terminated at December 31, 2018,2019, this amount would be paid either in a lump sum or over a period of time, at the election of the officer. |
(3) | This amount represents the closing price of our Common Stock on December 31, 20182019 of $48.43$53.22 per share multiplied by the outstanding number of shares of restricted stock for each executive as follows: Lawrence Sills – 6,000 shares; Eric P. Sills – 35,000 shares; James Burke – 6,000 shares,shares; Dale Burks – 43,50045,500 shares; Nathan Iles – 4,500; and Carmine Broccole – 42,00044,000 shares. Absent a change of control, if Lawrence I. Sills resigned or retired at December 31, 2018,2019, his restricted stock award would immediately vest under the terms of the award because the executive officer has reached the age of 65. |
(4) | For James J. Burke, this amount represents Company payments for (a) group medical, dental and/or life insurance plans for a 36 month period, (b) use of a company automobile for the duration of the lease then in effect, and (c) the cost of outplacement services, pursuant to the terms of the Severance Compensation Agreement. |
Risk Considerations in our Compensation Program
Our Compensation and Management Development Committee has analyzed the concept of risk as it relates to our compensation program for all employees. The Compensation Committee does not believe our compensation program encourages excessive or inappropriate risk taking because the Company does not use highly leveraged incentives that drive risky short-term behavior. As we discussed previously with respect to our named executive officers in the Compensation Discussion and Analysis, we structure our incentive bonus programs and equity award programs to promote the creation of long-term value and discourage behavior that leads to excessive risk:
| · | We structure our pay to consist of both fixed and variable compensation. The fixed (or salary) portion of compensation is designed to provide a steady income regardless of the Company’s stock price so that employees do not feel pressured to focus exclusively on stock price performance to the detriment of other important business goals. The variable (cash bonus and equity) portions of compensation are designed to reward both short-term and long-term corporate performance. For short-term performance, our cash bonus is awarded based on the achievement of both company-level financial objectives and management performance goals. For long-term performance, our restricted stock and performance share awards vest over three years or a longer period of time. |
We structure our pay to consist of both fixed and variable compensation. The fixed (or salary) portion of compensation is designed to provide a steady income regardless of the Company’s stock price so that employees do not feel pressured to focus exclusively on stock price performance to the detriment of other important business goals. The variable (cash bonus and equity) portions of compensation are designed to reward both short-term and long-term corporate performance. For short-term performance, our cash bonus is awarded based on the achievement of both company-level financial objectives and management performance goals. For long-term performance, our restricted stock and performance share awards vest over three years or a longer period of time.
We cap our annual cash incentive awards at 200% of the applicable target, which we believe also mitigates excessive risk taking by limiting payouts. Moreover, any awards in excess of the 200% target may be carried into the following year but is subject to the risk of forfeiture depending upon the following year’s performance. With respect to company-level financial performance awards, since bonuses are based on overall corporate performance, rather than individual performance, the ability of an individual executive to increase his or her own bonus compensation through excessive risk taking is constrained.
| · | We cap our annual cash incentive awards at 200% of the applicable target, which we believe also mitigates excessive risk taking by limiting payouts. Moreover, any awards in excess of the 200% target may be carried into the following year but is subject to the risk of forfeiture depending upon the following year’s performance. With respect to company-level financial performance awards, since bonuses are based on overall corporate performance, rather than individual performance, the ability of an individual executive to increase his or her own bonus compensation through excessive risk taking is constrained.
|
Certain Relationships and Related Person Transactions
Our Board has adopted a written policy relating to the review, approval or ratification of transactions between the Company or its subsidiaries and related persons. Under SEC rules, a related person is a director, officer, nominee for director, or five percent or greater stockholdershareholder of the Company since the beginning of the last fiscal year and their immediate family members. The Company’s policies and procedures apply to any transaction or series of transactions in which the Company or a subsidiary is a participant, the amount involved exceeds $120,000, and a related person has a direct or indirect material interest.
Our policy requires that all related person transactions be disclosed to the Nominating and Corporate Governance Committee (with respect to directors) or the Audit Committee (with respect to executive officers). The applicable Committeecommittee then reviews the material facts of such related person transactions and either approves or disapproves of the entry into or ratifies the related person transaction. In determining whether to approve or ratify a related person transaction, the applicable Committeecommittee will take into account, among other factors it deems appropriate, whether the related person transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances and the extent of the related person’s interest in the transaction. In addition, our policy provides that any related person transaction may be consummated or continue if (1) the transaction is approved by the disinterested members of the Board or (2) the transaction involves compensation approved by the Company’s Compensation and Management Development Committee. No director shall participate in the approval of a transaction for which he or she is the related person but may participate in any discussion regarding such transaction if requested by the Chair of the applicable Committee.committee.
The Nominating and Corporate Governance Committee reviewed and approved of the Company’s entry into a consulting agreement in April 20162018 with John P. Gethin, a director of the Company, and our former Chief Operating Officer (the “2016 Agreement”).Officer. Pursuant to the 2016 Agreement,terms of the agreement, Mr. Gethin has advisedadvises our senior management, primarily in the development of customer relationships and corporate strategy. In consideration for such services, Mr. Gethin receivedreceives a monthlyquarterly consulting fee of approximately $44,000,$25,000, the reimbursement of reasonable and customary out-of-pocket expenses incurred in performing such services, and a monthly allowance for leasing an automobile and reimbursement of related expenses. The 2016 Agreement expired pursuant to its terms in March 2018.
In April 2018, the Nominating and Corporate Governance Committee reviewed and approved of the Company’s entry into a second consulting agreement with Mr. Gethin (the “2018 Agreement”) on substantially all of the same terms as the 2016 Agreement, except that the monthly consulting fee has been reduced to approximately $8,333. The term of the 2018 Agreement was for an initial period of one year, andagreement renews automatically in April each year for successive one-year periods, subject to termination by either the Company or Mr. Gethin at any time, with or without cause, on ninety days’ advance written notice.
Report of the Audit Committee
The Audit Committee oversees the Company’s financial reporting process on behalf of the Board of Directors. The Audit Committee is currently comprised of eightseven directors who are “independent” as defined under the listing standards of the New York Stock Exchange. The Audit Committee met four times in 20182019 and operates under a written charter adopted by the Board of Directors. Management has the primary responsibility for the financial statements and the reporting process, including the Company’s systems of internal controls. In fulfilling its oversight responsibilities, the Audit Committee reviewed with management the audited financial statements in the Annual Report on Form 10-K for the fiscal year ended December 31, 2018,2019, including a discussion of the quality and the acceptability of the Company’s financial reporting and controls.
The Audit Committee also reviewed with KPMG LLP, the Company’s independent registered public accounting firm, that is responsible for expressing an opinion on the conformity of those audited financial statements with generally accepted accounting principles, their judgments as to the quality and the acceptability of the Company’s financial reporting, and such other matters as are required to be discussed with the Audit Committee under the auditing standardsapplicable requirements of the Public Company Accounting Oversight Board and the SEC, including the scope of the auditor’s responsibilities and whether there are any significant accounting adjustments or any disagreements with management. In addition, the Audit Committee discussed with KPMG LLP the auditors’ independence from management and the Company, including the matters in the auditors’ written disclosures required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the Audit Committee concerning independence.
The Audit Committee also discussed with the Company’s internal and independent auditors the overall scope and plans for their respective audits. The Audit Committee meets periodically with the internal and the independent auditors, with and without management present, to discuss the results of their examinations, their evaluations of the Company’s internal controls, and the overall quality of the Company’s financial reporting.
In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in the Annual Report on Form 10-K for the fiscal year ended December 31, 20182019 for filing with the Securities and Exchange Commission.
Audit CommitteeSEC.
Audit Committee | |
| |
William H. Turner (Chair) | Alisa C. Norris |
Pamela Forbes Lieberman | Frederick D. SturdivantRichard S. Ward |
Patrick S. McClymont | Richard S. WardRoger M. Widmann |
Joseph W. McDonnell | Roger M. Widmann |
StockholderShareholder Proposals for the 20202021 Annual Meeting
To be considered for inclusion in next year’s Proxy Statement pursuant to the provisions of Rule 14a-8 of the Exchange Act, stockholdershareholder proposals must be received at the Company’s offices no later than the close of business on December 18, 2019.2020. Proposals should be addressed to Carmine J. Broccole, Secretary, Standard Motor Products, Inc., 37-18 Northern Blvd., Long Island City, New York 11101.
For any stockholdershareholder proposal that is not submitted for inclusion in the next year’s Proxy Statement, but is instead sought to be presented directly at the 20202021 annual meeting, rules of the Securities and Exchange CommissionSEC permit management to vote proxies in its discretion if the Company: (1) receives notice of the proposal before close of business on March 2, 2020,1, 2021, and advises stockholdersshareholders in the 20202021 Proxy Statement about the nature of the matter and how management intends to vote on such matter; or (2) does not receive notice of the proposal prior to the close of business on March 2, 2020.1, 2021. Notice of intention to present proposals at the 20202021 annual meeting should be addressed to Carmine J. Broccole, Secretary, Standard Motor Products, Inc., 37-18 Northern Blvd., Long Island City, New York 11101.
Annual Report on Form 10-K
The Company’s 20182019 Annual Report has been mailed to stockholders.shareholders. A copy of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 20182019 is included in the 20182019 Annual Report and will also be furnished to any stockholdershareholder who requests the same free of charge (except for exhibits thereto for which a nominal fee covering reproduction and mailing expenses will be charged). Requests should be addressed to the Secretary of the Company at 37-18 Northern Blvd., Long Island City, NY 11101. The 20182019 Annual Report is also available at our website at www.smpcorp.comir.smpcorp.com under “Investor Relations – Financial Reporting – “Financial Reports—Annual Reports.”
“Householding” of Proxy Materials and Annual Reports for Record Owners
The SEC rules permit us, with your permission, to deliver a single proxy statement and annual report to any household at which two or more shareholders of record reside at the same address. Each shareholder will continue to receive a separate proxy. This procedure, known as “householding,” reduces the volume of duplicate information you receive and helps to reduce our expenses and our environmental footprint. Shareholders of record voting by mail can choose this option by marking the appropriate box on the proxy included with this Proxy Statement and shareholders of record voting by telephone or over the Internet can choose this option by following the instructions provided by telephone or over the Internet, as applicable. Once given, a shareholder’s consent will remain in effect until such shareholder revokes it by notifying our Secretary as described above. If you revoke your consent, we will begin sending you individual copies of future mailings of these documents within 30 days after we receive your revocation notice. Shareholders of record who elect to participate in householding may also request a separate copy of future proxy statements and annual reports by contacting the Secretary of the Company as described above.
On the date this Proxy Statement went to press, management knew of no other business that will be presented for action at the Annual Meeting. In the event that any other business should come before the Annual Meeting, it is the intention of the proxy holders named by proxy to take such action as shall be in accordance with their best judgment.
| By Order of the Board of Directors |
| |
| /s/ Carmine J. Broccole |
| |
| Carmine J. Broccole |
| Senior Vice President |
| General Counsel and Secretary |
| |
Dated: April 17, 2020 | |
Dated: April 16, 2019
5251
STANDARD MOTOR PRODUCTS, INC. 37-18 NORTHERN BOULEVARD LONG ISLAND CITY, NY 11101 VOTE BY INTERNET Before The Meeting - Go to www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information. Vote by 11:59 P.M. ETEastern Time on 05/15/2019May 18, 2020 for shares held directly and by 11:59 P.M. ETEastern Time on 05/13/2019May 16, 2020 for shares held in a Plan. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would likeDuring The Meeting - Go to reducewww.virtualshareholdermeeting.com/SMP2020 You may attend the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronicallymeeting via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and when prompted, indicatevote during the meeting. Have the information that you agree to receive or access proxy materials electronicallyis printed in future years. the box marked by the arrow available and follow the instructions. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions. Vote by 11:59 P.M. ETEastern Time on 05/15/2019May 18, 2020 for shares held directly and by 11:59 P.M. ETEastern Time on 05/13/2019May 16, 2020 for shares held in a Plan. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.TO11717. TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: KEEPD12977-P37731KEEP THIS PORTION FOR YOUR RECORDS THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. DETACH AND RETURN THIS PORTION ONLY The Board of Directors recommends you vote FOR the following: For WithholdSTANDARD MOTOR PRODUCTS, INC. For All Withhold All For All Except To withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the line below. The Board of Directors recommends you vote FOR the following: 1. Election of Directors 0 0 0 Nominees Nominees: 01) John P. Gethin 02) Pamela Forbes Lieberman 03) Patrick S. McClymont 04) Joseph W. McDonnell 05) Alisa C. Norris 06) Eric P. Sills 07) Lawrence I. Sills 08) William H. Turner 09) Richard S. Ward 10) Roger M. Widmann The Board of Directors recommends you vote FOR proposals 2 and 3. For Against Abstain 2. Ratification of the appointment of KPMG LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2019. 0 0 02020. 3. Approval of non-binding, advisory resolution on the compensation of our named executive officers. 0 0 0 NOTE: In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the meeting or any adjournment or postponement thereto. For Against Abstain For address change/changes and/or comments, mark here. (see reverse for instructions) 0please check this box and write them on the back where indicated. Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Proxy Statement and Annual Report are available at www.proxyvote.com. D12978-P37731 www.proxyvote.comSTANDARD MOTOR PRODUCTS, INC. Annual Meeting of StockholdersShareholders May 16, 201919, 2020 at 2:3:00 p.m. This proxy is solicited by the Board of Directors The undersigned stockholder(s)shareholder(s) of STANDARD MOTOR PRODUCTS, INC. (the “Company”) hereby appoint(s) ERIC P. SILLS, JAMES J. BURKE and DALE BURKSNATHAN R. ILES as Proxies, each with the power to appoint his substitute, and hereby authorize(s) them to represent and vote, as designated on this Proxy, all of the shares of the Company’s Common Stock held of record by the undersigned on April 5, 20197, 2020 at the Annual Meeting of StockholdersShareholders of the Company, to be held at the offices of Kelley Drye & Warren LLP, 101 Park Avenue,Standard Motor Products Building, 37-18 Northern Boulevard, 6th Floor, Long Island City, New York NY 10178,11101, and online at www.virtualshareholdermeeting.com/SMP2020, on May 16, 2019,19, 2020, or at any adjournment or postponement thereof. THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS PROXY WILL BE VOTED “FOR ALL” OF THE NOMINEES LISTED IN PROPOSAL NO. 1 AND “FOR” PROPOSALS NO. 2 AND 3. AT THE PRESENT TIME, THE BOARD OF DIRECTORS KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT THE ANNUAL MEETING. Address change/comments: (IfChanges/Comments: (If you noted any Address Changes and/or Changes/Comments above, please mark corresponding box on the reverse side.) Continued and to be signed on reverse side