UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Amendment No. )
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Tejon Ranch Co.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
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Post Office Box 1000
Tejon Ranch, California 93243
March 30, 201528, 2018
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of Tejon Ranch Co. (“Company”(the “Company”) on Wednesday,Tuesday, May 6, 2015,8, 2018, at 9:10:30 A.M., Pacific Time, at the Balboa Bay Resort, 1221 West Coast Highway, Newport Beach, California 92663. Your Board of Directors and management look forward to greeting those stockholders who are able to attend. If you are planning to attend the meeting in person you will need to present proof that you own shares of the Company.Company, such as a government-issued photo identification and a proxy card or voting instruction form with your name on it.
The Notice of Annual Meeting and Proxy Statement, which contain information concerning the business to be transacted at the meeting, appear in the following pages.
It is important that your shares be represented and voted at the meeting, whether or not you plan to attend. Please vote on the enclosed proxy at your earliest convenience.
Your interest and participation in the affairs of the Company are greatly appreciated.
Sincerely,
Gregory S. Bielli,
President and Chief Executive Officer
Sincerely, |
Gregory S. Bielli, |
President and Chief Executive Officer |
TEJON RANCH CO.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
on
May 6, 20158, 2018
The Annual Meeting of Stockholders of Tejon Ranch Co. (the “Company” or “Tejon” or referred to as “we”, “us”, “our” or words of similar import in this Proxy Statement) will be held at the Balboa Bay Resort, 1221 West Coast Highway, Newport Beach, California, 92663 on Wednesday,Tuesday, May 6, 2015,8, 2018, at 9:10:30 A.M., Pacific Time, for the following purposes:
1. | To elect the |
2. | To ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for fiscal year |
3. | To |
4. | To transact such other business as may properly come before the meeting or any adjournment thereof. |
The nominees of the Board of Directors of the Company for election at the meeting are Anthony L. Leggio, Geoffrey L. Stack Frederick C. Tuomi, and Michael H. Winer.
The Board of Directors of the Company recommends that you vote (i) “FOR” the election of each of the nomineesnominees; (ii) “FOR” the ratification of the appointment of Ernst & Young LLP; and (iii) “FOR” the approval of each of the other proposals outlined in the Proxy Statement accompanying this notice.named executive officer compensation.
The Board of Directors has fixed the close of business on March 11, 2015,9, 2018 as the record date for the determination of stockholders entitled to notice of and to vote at the meeting.
Your attention is inviteddirected to the accompanying Proxy Statement. To ensure that your shares are represented at the meeting, please date, sign, and mail the enclosed proxy card, for which a return envelope is provided, or vote your proxy by phonetelephone or the internet,Internet, the instructions for which are provided on the enclosed proxy card.
Please note that if your shares are held by a broker, bank, or other holder of record, your broker, bank or other holder of record will NOT be able to vote your shares with respect to Proposal 1 or Proposal 3 unless you provide them with directions on how to vote. We strongly encourage you to return the voting instruction form provided by your broker, bank, or other holder of record or utilize your broker’s telephone or internetInternet voting if available and exercise your right to vote as a stockholder.
For the Board of Directors,
For the Board of Directors, |
NORMAN J. METCALFE, Chairman of the Board |
ALLEN E. LYDA, Chief Financial Officer, Assistant Secretary |
Tejon Ranch, California
March 30, 201528, 2018
PLEASE MARK YOUR INSTRUCTIONS ON THE ENCLOSED PROXY, SIGN AND DATE THE PROXY, AND RETURN IT IN THE ENCLOSED POSTAGE PAID ENVELOPE. ALTERNATIVELY, PLEASE VOTE YOUR PROXY BY PHONETELEPHONE OR THE INTERNET. PLEASE VOTE YOUR PROXY EVEN IF YOU PLAN TO ATTEND THE ANNUAL MEETING. IF YOU ATTEND THE MEETING AND WISH TO DO SO, YOU MAY VOTE YOUR SHARES IN PERSON EVEN IF YOU HAVE PREVIOUSLY SUBMITTED YOUR PROXY.
2018 | Notice of Annual Meeting of Stockholders and Proxy Statement |
Table of Contents of the Proxy Statement
TEJON RANCH CO.
Post Office Box 1000
Tejon Ranch, California 93243
PROXY STATEMENT
Annual Meeting of Stockholders
May 6, 20158, 2018
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders To Be Held on May 6, 20158, 2018
The Proxy Statement and accompanying Annual Report to Stockholders and Annual Report onForm 10-Kare available at www.tejonranch.com or at http://www.materials.proxyvote.com/materials.proxyvote.com/879080
This Proxy Statement is being furnished in connection with the solicitation of proxies by the Company for use at the Annual Meeting of Stockholders to be held on May 6, 20158, 2018 (the “2015“2018 Annual Meeting”).
It is anticipated that the mailing of this Proxy Statement and accompanying form of Proxy to stockholders will begin on or about March 31, 2015.30, 2018.
At the meeting, the stockholders of the Company will be asked to vote on the following matters: (1) the election of the fourtwo directors named in this Proxy Statement, (2) the ratification of the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for fiscal year 2015,2017, (3) an advisory vote to approve executive compensation, and (4) such other business as may properly come before the meeting. The Company’s Board of Directors (the “Board”) is asking for your proxy for use at the 20152018 Annual Meeting. Although management does not know of any other matter to be acted upon at the meeting, shares represented by valid proxies will be voted by the persons named on the proxy in accordance with their best judgment with respect to any other matters which may properly come before the meeting.
The costs for this proxy solicitation will be paid by the Company. Following the mailing of this Proxy Statement, directors, officers, and regular employees of the Company may solicit proxies by mail, telephone,e-mail, or in person; such persons will receive no additional compensation for such services. Brokerage houses and other nominees, fiduciaries and custodians nominally holding shares of record will be requested to forward proxy soliciting material to the beneficial owners of such shares and will be reimbursed by the Company for their charges and expenses in connection therewith at the rates approved by the New York Stock Exchange.Exchange (“NYSE”).
General Information
Holders of shares of the Company’s Common Stock, par value $0.50 (the “Common Stock”) of record at the close of business on March 11, 20159, 2018 (the “Record Date”) are entitled to notice of, and to vote at, the meeting. There were 20,645,547 shares25,908,039shares of Common Stock outstanding on the Record Date. Each stockholder is entitled to one vote for each share of Common Stock held as of the Record Date on all matters presented at the 2018 Annual Meeting other than the election of directors. Each stockholder may appoint only one proxy holder or representative to attend the meeting on his or her behalf. A stockholder of record giving a proxy may revoke it at any time before it is voted by filing with the Company’s Secretary a written notice of revocation or by submitting a later-dated proxy via the Internet, by telephone, or by mail. Unless a proxy is revoked, shares represented by a
proxy will be voted in accordance with the voting instructions on the proxy, and on matters for which no voting instructions are given, shares will be voted “for”“FOR” the nomineeselection of the Boardeach nominee and “for”“FOR” Proposals 2 and 3. If you hold shares in a stock brokerage account or by a bank or other holder of record, you must follow the instructions of your broker, bank, or other holder of record to change or revoke your voting instructions.
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BrokerNon-Votes
If your shares are held in a stock brokerage account or by a bank or other holder of record, you are considered to be the “beneficial owner” of those shares. As the beneficial owner, you have the right to instruct your broker, bank, or other holder of record how to vote your shares. If you do not provide instructions, your broker, bank or other holder of record will not have the discretion to vote with respect to certain matters and your shares will constitute “brokernon-votes” with respect to those matters. A “brokernon-vote” occurs when a nominee holding shares for a beneficial owner does not vote on a particular proposal because the nominee does not have discretionary voting power for that particular item and has not received instructions from the beneficial owner. Specifically, your broker, bank, or other holder of record will not have the discretion to vote with respect to Proposal 1 andor Proposal 3, but will have discretion to vote on Proposal 2. Therefore, we strongly encourage you to follow the voting instructions on the materials you receive.
Quorum
The holders of record of a majority of the Common Stock entitled to vote at the 20152018 Annual Meeting must be present at the 20152018 Annual Meeting, either in person or by proxy, in order for there to be a quorum at the 20152018 Annual Meeting. Shares of Common Stock with respect to which the holders are present in person at the 20152018 Annual Meeting but not voting, and shares of Common Stock for which we have received proxies but with respect to which the holders of the shares have abstained, will be counted as present at the 20152018 Annual Meeting for the purpose of determining whether or not a quorum exists. Brokernon-votes will also be counted as present for the purpose of determining whether a quorum exists. Stockholders cannot abstain in the election of directors, but they can withhold authority. Stockholders who withhold authority will be considered present for purposes of determining a quorum.
Voting Requirements
For Proposal 1 (election of directors), the four (4)two (2) candidates receiving the highest number of affirmative votes at the 20152018 Annual Meeting (also referred to as a plurality) will be elected as directors. Stockholders will be able to cumulate their vote in the election of directors. Cumulative voting means that each stockholder is entitled to a number of votes equal to the number of directors to be elected multiplied by the number of shares he or she holds. These votes may be cast for one nominee or distributed among two or more nominees. To exercise the right to cumulate votes, a stockholder must provide written instructions on the proxy card stating how the stockholder wishes to have his or her votes distributed. AbstentionsWithheld votes and brokernon-votes will not be counted as participating in the voting and will therefore have no effect for purposes of Proposal 1.
Approval of Proposal 2 (the ratification of Ernst & Young LLP as our independent registered public accounting firm) will require the affirmative vote of the holders of a majority of the shares of Common Stock present in person or represented by proxy and entitled to vote at the 20152018 Annual Meeting. Abstentions will be counted as present and will thus have the effect of a vote against Proposal 2.
Approval of Proposal 3 (advisory approval(the advisory vote onto approve executive compensation) will require the affirmative vote of the holders of a majority of the shares of Common Stock present in person or represented by proxy and entitled to vote at the 20152018 Annual Meeting. Abstentions will be counted as present and will thus have the effect of a vote against Proposal 3. Brokernon-votes will not be counted as participating in the voting and will therefore have no effect on the outcomefor purposes of the vote.Proposal 3.
Pursuant to Delaware corporate law, the actions contemplated to be taken at the 20152018 Annual Meeting do not create appraisal or dissentersdissenters’ rights.
Proxy Summary
2017 Performance Highlights
In determining 2017 compensation for our named executive officers, “NEOs”, the Compensation Committee of the Board considered the contributions of each of our executive officers to the Company’s strategy related to revenue, cash management, continued expansion of Tejon Ranch Commerce Center, and moving our residential development projects through the mapping and entitlement process. The Compensation Committee considered these items with a particular emphasis on the following areas:
2017 Company Highlights | ||||
• On October 27, 2017, the Company completed a rights offering, which raised $90 million in proceeds. The net proceeds of the offering are being used to provide additional working capital for general corporate purposes, including to fund general infrastructure costs and the development of buildings at Tejon Ranch Commerce Center, to continue forward with entitlement and permitting programs for the Centennial at Tejon Ranch and Grapevine at Tejon Ranch communities and costs related the preparation of the development of Mountain Village. | ||||
• Los Angeles County Department of Regional Planning finalized responses to comments received during the review of the Draft Environmental Impact Report for the Company’s Centennial master planned community reflecting an important milestone in the development of this community. The responses will become part of the Final Environmental Impact Report that will be considered first by the Los Angeles County Regional Planning Commission and later by the Board of Supervisors. | ||||
• TheTRC-MRC 1 joint venture completed a 480,000 square foot industrial building on time, on budget, and on vision. The new building is located in the Tejon Ranch Commerce Center – East master planned project. One half of the building was leased in March 2018 by Dollar General. | ||||
• In December 2017, Kern County approved a Tentative Tract Map for the first three phases of development for the Mountain Village master planned community. During January 2018, the Company submitted for approval to Kern County the design plan for the first phase of the commercial area of Mountain Village. | ||||
2017 Company Performance | ||||
• For 2017, the net loss attributable to common stockholders was $1,555,000, representing a loss per common share of $0.07, compared with $558,000, or earnings per common share of $0.03, for fiscal 2016. The year-over-year reduction was due to a decline in farming revenues of $2,214,000, a decrease in mineral resource revenues of $8,170,000, and reduced income from unconsolidated joint ventures of $2,871,000. Helping to offset these declines in revenue was a decrease of $10,282,000 in expense, as a result of reduced water cost of sales and our staff rightsizing initiatives. | ||||
• Revenues and other income were $40,499,000 in fiscal 2017, a decrease of $13,835,000, or 25%, compared to revenue and other income of $54,334,000 in fiscal 2016. Recurring Commercial revenues were flat year over year as recurring lease |
revenue from core assets offset the loss of lease revenue related to the sale of a real estate investment in 2016 and the recognition of a gain from the sale of land in 2016 within the Tejon Ranch Commerce Center. As noted above, farming revenues declined $2,214,000 in 2017 largely as a result of reduced pistachio production and the timing of the sale of 2017 crop almonds. During 2017, mineral resources saw a decline in revenues as a result of $8,347,000 reduction in water sales as opportunities for the sale of water were diminished due to the record level of rain and snow during 2017. Please refer to our 2017 Annual Report on Form10-K for additional details regarding our 2017 operations. See the following chart for a summary of revenues.
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2017 | 2016 | |||||||
Total operating revenues | $35,657,000 | $45,577,000 | ||||||
Total other income | 615,000 | 1,659,000 | ||||||
Equity in earnings of unconsolidated joint ventures | 4,227,000 | 7,098,000 | ||||||
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Total Revenue and Other Income | $40,499,000 | $54,334,000 | ||||||
Internally, our management’s performance is measured using anon-GAAP revenue number that includes total sales proceeds from real estate sales rather than the GAAP presentation of other income recognizing only the gain on sales from real estate. We believe disclosure of thisnon-GAAP information is useful to investors because it shows what results are taken into account in evaluating management. The adjustment is as follows: |
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2017 | 2016 | |||||||
Total Revenues and Other Income | $40,499,000 | $54,334,000 | ||||||
Gain on sale of real estate investment | — | (1,044,000) | ||||||
Sales proceeds from sale of real estate | — | 4,700,000 | ||||||
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Non-GAAP Total Revenues and Other Income | $40,499,000 | $57,990,000 | ||||||
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2017 Compensation Summary
Our 2017 compensation program reflects ourpay-for-performance philosophy. The short-term incentives paid to all our executives were well below target, ranging from 57%—70% of target. Adjusted EBITDA and adjusted revenue, the metrics used for purposes of our short-term incentives, declined from the previous year due to the declines in revenue as described above.
Three-year milestone grants were provided to our NEOs for the 2017-2019 plan cycle. These grants link compensation opportunities to strategic performance objectives important to the Company for the next three years. Milestone grants are awarded once every three years, which reflects the long-term nature of our business plan. Additional details on these grants are provided on page 45.
For the 2015-2017 three-year milestone grants, the goal for cumulative cash from operations was $32,292,000, and goal achievement was 118% of the target objective, with actual cash from operations of $38,197,000. These grants vested and were delivered in March after approval by the Compensation Committee.
Our CEO was granted a supplemental performance incentive in 2015, a portion of which was eligible to vest over atwo-year period ending on December 31, 2017, based on our performance relative to two components. The award opportunity was based in part on an increase in revenue of Tejon Ranch Commerce Center-East. The performance incentive was paid out at maximum for this component due to a 96.6% increase in revenue from the properties. A second component of the performance incentive was our total stockholder return (‘TSR’) compared
to our peer group. Based on our TSR performance relative to our peers over the performance period, no incentive was paid for the TSR component of the supplemental performance incentive, further demonstrating alignment with stockholders.
The realized pay for our executive team in 2017 was 30% below the value realized in 2016.
Stockholder Engagement
At our 2017 Annual Meeting, our stockholders expressed support for our executive compensation program, with 60.5% of stockholders casting votes in favor of the advisory vote proposal. Our stockholder outreach efforts are summarized below:
Our responses to investor feedback are provided on page 24.
Our Compensation Discussion and Analysis is on pages 20 to 49, and our Summary Compensation Table and other compensation tables are on pages 50 to 59.
23-year CEO Average SCT Pay vs. Realized $3,000,000 $2,000,000 $1,000,000 $0 $23,328 $1,642,740 $587,862 $584,722-21% $23,328 [VALUE] $587,862 $584,722 $1 $1 $1 $1 $0 $0 $03-Year Total SCT Pay3-Year Total Realized Pay Salary Value of Shares Vested Cash Incentives Paid All Other Compensation Value of Equity Granted
THE ELECTION OF DIRECTORS
The Board currently consists of elevennine directors divided into three classes based upon when their terms expire. The terms of fourthree current directors (Class I) will expire at the 20152018 Annual Meeting, the terms of three current directors (Class II) will expire at the 20162019 Annual Meeting, and the terms of fourthree current directors (Class III) will expire at the 20172020 Annual Meeting. The regular term of each director expires at the third Annual Meeting following the Annual Meeting at which that director was elected, so that each director serves a three-year term, although directors continue to serve until their successors are elected and qualified, unless the authorized number of directors has been decreased.
The nominees of the Board for election at the 20152018 Annual Meeting to serve as Class I directorsDirectors are Anthony L. Leggio, Geoffrey L. Stack Frederick C. Tuomi, and Michael H. Winer, all of whomboth are presently directors. Frederick C. Tuomi who has served as a Class I Director since 2014, informed the Board that he did not intend to stand for reelection at the 2018 Annual Meeting and as such was not nominated to stand for reelection.
Nominations of persons for election to the Board by stockholders must be made pursuant to timely notice in writing to the Secretary of the Company pursuant to and contained the information required by the Company’s Certificate of Incorporation.Incorporation and Bylaws. See “Stockholder Proposals for 20162019 Annual Meeting” for additional information on the procedure for stockholder nominations.
Except as noted below, each proxy solicited by and on behalf of the Board will be voted “FOR” the election of the nominees named above (unless such authority is withheld as provided in the proxy), and unless otherwise instructed, one-quarterone-third of the votes to which the stockholder is entitled will be cast for each of the nominees. All of the nominees of the Board have consented to being named in this proxy statementProxy Statement and to serve if elected. In the event that any one or more of the nominees shall become unable to serve or for good cause refuse to serve as director (an event which is not anticipated), the proxy holders will vote for substitute nominees in their discretion. If one or more persons other than those named below as nominees for the 20152018 Annual Meeting are nominated as candidates for director by persons other than the Board, the enclosed proxy may be voted in favor of any one or more of said nominees of the Board and in such order of preference as the proxy holders may determine in their discretion.
Brokers do not have discretion to vote on this proposal without your instruction. Therefore, if you are a beneficial owner and you do not instruct your broker how to vote on this proposal, your shares will not be voted on this proposal.
THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” EACH OF THE
NOMINEES NAMED ABOVE FOR ELECTION AS A DIRECTOR.
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THE RATIFICATION OF THE APPOINTMENT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee has selected Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2015.2018. Services provided to the Company and its subsidiaries by Ernst & Young LLP in fiscal years 20142017 and 20132016 are described under “Audit Fees” below. Additional information regarding the Audit Committee is provided in the Report of the Audit Committee below.
Representatives of Ernst & Young LLP are expected to be present at the 20152018 Annual Meeting and will have an opportunity to make a statement if they wish and will be available to respond to appropriate questions from stockholders.
Stockholder Ratification of the Appointment of Independent Registered Public Accountant.Accounting Firm.
We are asking our stockholders to ratify the selection of Ernst & Young LLP as our independent registered public accounting firm. Although ratification is not required by our certificate of incorporation, bylaws or otherwise, the Board is submitting the selection of Ernst & Young LLP to our stockholders for ratification as a matter of good corporate practice. In the event that stockholders do not ratify the appointment of Ernst & Young LLP, the appointment may be reconsidered by the Audit Committee and the Board. Even if the selection is ratified, the Audit Committee may, in its discretion, select a different independent registered public accounting firm at any time during the year if it determines that such a change would be in the best interests of the Company and our stockholders.
Independent Registered Public Accounting Firm
Ernst & Young LLP served as the Company’s independent registered public accounting firm for the year ended December 31, 20142017 and was selected by the Audit Committee to serve in that capacity for the fiscal year 20152018.
Audit Fees. The aggregate fees billed by Ernst & Young LLP for professional services rendered for the audit of the Company’s annual financial statements for the year ended December 31, 20142017 and for the reviews of the financial statements included in the Company’s Forms10-Q for the year ended December 31, 20142017 were $504,429.$615,800. The aggregate fees billed by Ernst & Young LLP for professional services rendered for the audit of the Company’s annual financial statements for the year ended December 31, 20132016 and for the reviews of the financial statements included in the Company’s Forms10-Q for the year ended December 31, 20132016 were $517,334.$548,579.
Audit-Related Fees. The aggregate fees billed for assurance and related services by Ernst & Young LLP that were reasonably related to the performance of the audit or review of the Company’s financial statements, including fees for the performance of audits and attest services not required by statute or regulations; audits of the Company’s employee benefit plans; due diligence activities related to investments; and accounting consultations about the application of generally accepted accounting principles to proposed transactions (collectively, the “Audit-Related Fees”), for the year ended December 31, 20142017 were $2,000.$56,500. The Audit-Related Fees billed by Ernst & Young LLP for the year ended December 31, 20132016 were $12,360.$38,341.
Tax Fees. The aggregate fees billed by Ernst & Young LLP for tax compliance, advice, and planning services for the year ended December 31, 20142017 were $101,070.$102,126. The aggregate fees billed by Ernst & Young LLP for tax compliance, advice and planning services for the year ended December 31, 20132016 were $85,544.$106,685. All fees billed for both 20142017 and 20132016 were solely related to compliance and planning services for tax return preparation.
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All Other Fees. Ernst & Young LLP did not bill for any services other than those listed above for the years ended December 31, 20142017 or December 31, 2013.2016.
The Audit Committee Charter requires that the Audit Committeepre-approve all services performed by the Company’s outside auditor. To fulfill this requirement, Ernst & Young LLP provides a proposal to the Audit Committee for all services it proposes to provide, and the Audit Committee then takes such action on the proposal as it deems advisable. During the years endingended December 31, 20142017 and 2013,2016, 100% of the services provided by Ernst & Young LLP werepre-approved by the Audit Committee.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR FISCAL YEAR 2015.2018.
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ADVISORY APPROVAL VOTE ONTO APPROVE EXECUTIVE COMPENSATION
In accordance with Section 14A of the Securities Exchange Act of 1934, or the Exchange Act,(the “Exchange Act”), we are asking stockholders to approve on an advisory basis the compensation paid to the Company’s named executive officers,NEOs, as disclosed in this proxy statementProxy Statement on pages 1620 to 42.59.
The Board recommends athat stockholders vote FOR this proposal because it believes that ourto approve, on an advisory basis, the compensation policies and practices are effective in achievingpaid to the Company’s goalsNEOs as described in this Proxy Statement, for the following reasons.
Sound Program Design
We design our executive officers’ compensation programs to attract, motivate, and retain the key executives who drive our success and industry leadership while considering individual and Company performance and alignment with the interest of rewarding financial and operating performance, aligning the executives’ long-term interests with thosestockholders. We achieve our objectives through compensation that:
✓ provides a competitive total pay opportunity, |
✓ consists primarily of performance-based compensation, |
✓ enhances retention through multi-year vesting of stock awards, and |
✓ does not encourage unnecessary and excessive risk-taking. |
Best Practices in Executive Compensation
Some of our stockholders and motivating the executives to remain with the Company.leading practices include
Our executive compensation programs have a number of features designed
✓ an executive compensation recovery policy, |
✓ an executive stock ownership policy, |
✓ a policy prohibiting pledging and hedging of Tejon stock, |
✓ no executive-only perquisites or benefits, |
✓ no guaranteed bonus programs, and |
✓ utilization of an independent compensation consultant who reports to |
Variable Compensation Committee evaluated the success in meeting defined cash and segment profit goals as well as the achievement of short-term goals that set the stage for the achievement of performance milestone goals.Fixed 29.3% Variable 70.7% 23.4% 18.9% 9.5% 18.9% Annual Incentive Performance Milestone Grants Performance Grants—Operating Cash Time-Based Grants
The advisory proposal, commonly referred to as a “say-on-pay”“say-on-pay” proposal, is not binding on the Board of Directors.Board. Although the voting results are not binding, the Board will review and consider them when evaluating our executive compensation program.
The Board’sBoard has adopted a policy going forward is to holdof holding an advisory vote on executive compensation every year, and accordingly,unless the Board modifies its policy, we expect that, after the 20152018 Annual Meeting, the next advisory vote on the compensation of our named executive officersNEOs will take place at our 20162019 Annual Meeting.
Brokers do not have discretion to vote on this proposal without your instruction. Therefore, if you are a beneficial owner and you do not instruct your broker how to vote on this proposal, your shares will not be voted on this proposal.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” APPROVAL OF THE COMPENSATION OF THE COMPANY’S NAMED EXECUTIVE OFFICERSNEOS AS DISCLOSED ON PAGES 1620 TO 4259 IN THE PROXY STATEMENT.
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Consideration of Director Nominees
The Board believes the Board, as a whole, should possess the requisite combination of skills, professional experience, and diversity of backgrounds to oversee the Company’s business. The Board also believes that there are certain attributes each individual director should possess certain attributes, as discussed below. Accordingly, the Board and the Nominating and Corporate Governance Committee (the “Nominating Committee”) consider the qualifications of directors and director candidates individually as well as in the broader context of the Board’s overall composition and the Company’s current and future needs.
The Nominating Committee is responsible for selecting nominees for election to the Board. In considering candidates for the Board, the Nominating Committee evaluates the entirety of each candidate’s credentials, attributes, and other factors (as described in greater detail in the Company’s Corporate Governance Guidelines), but does not have any specific minimum qualifications that a nominee must be met by a nominee.meet. However, the Nominating Committee seeks as directors, individuals with substantial management experience who possess the highest personal values, judgment, and integrity,integrity; an understanding of the environment in which the Company does businessbusiness; and diverse experience with the key business, financial, and other challenges that the Company faces. In addition, in considering the nomination of existing directors, the Nominating Committee takes into consideration (i) each director’s contribution to the Board; (ii) any material change in the director’s employment or responsibilities with any other organization; (iii) the director’s ability to attend meetings and fully participate in the activities of the Board and the committees of the Board on which the director serves; (iv) whether the director has developed any relationships with the Company or another organization, or other circumstances that may have arisen, that might make it inappropriate for the director to continue serving on the Board; and (v) the director’s age and length of service on the Board.
Because the Nominating Committee recognizes that a diversity of viewpoints and practical experiences can enhance the effectiveness of the Board, as part of its evaluation of each candidate, the Nominating Committee takes into account how each candidate’s background, experience, qualifications, attributes, and skills may complement, supplement, or duplicate those of other prospective candidates. The Nominating Committee reviews its effectiveness in balancing these considerations when assessing the composition of the Board, which as discussed below is one of the committee’s responsibilities.
Based on the parameters described above, the Board has determined that the directors standing for reelection and the remaining members of the Board have the qualifications, experience, and attributes appropriate for a director of the Company. As reflected below, each director has a varied background in the real estate industry, finance, and/or agriculture. These are all areas that are integral to the strategy, operations, and successful oversight of the Company.
Board Composition and Leadership Structure
The Board is grouped into three classes: (1) Class I Directors, whose terms will expire at the 20152018 Annual Meeting,Meeting; (2) Class II Directors, whose terms will expire at the 20162019 Annual Meeting,Meeting; and (3) Class III Directors, whose terms will expire at the 20172020 Annual Meeting. The Board currently consists of elevennine directors. The Board’s leadership is structured so that there is a separatethe Chairman of the Board and Chief Executive Officer.Officer are separate positions. The Chairman of the Board is also an independent director. The Board believes that this structure is appropriate for our Company and our shareholdersstockholders at this time because it provides an additional layer of oversight to management and management’s activities and allows the Board to act independentindependently of management.
Director Qualifications and Biographical Information
The Nominating Committee considered the character, experience, qualifications and skills of each director, including the current director nominees, when determining whether each should serve as a director of the Company. In keeping with its stated criteria for director nominees described in the section entitled
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“Consideration of Director Nominees” above, the Nominating Committee determined that each director, including the current director nominees, has substantial management experience, exhibits the highest personal values, judgment, and integrity, and possesses an understanding of the environment in which the Company does business and diverse experience with the key business, financial, and other challenges that the Company faces. Each director is or has been a leader in his respective field and brings diverse talents and perspectives to the Board. The Nominating Committee also considered the experience and qualifications outlined below in the biographical information for each director, including eachthe current director nominee,nominees, as well as other public company board service.
The Nominating Committee noted the following particular attributes and qualities it considers when evaluating director nominees. The Nominating Committee believes that nominees with business and strategic management experience gained from service as a chief executive officer or similar position is a critical leadership component to Board service. The Nominating Committee also seeks nominees with backgrounds in finance, banking, economics, and the securities and financial markets, in order to have directors who can assess and evaluate the Company’s financial and competitive position. The Nominating Committee emphasizes familiarity with the real estate and agricultural industries, and considers customer perspectives to be important when evaluating director nominees. Although the directors listed below each possess a number of these attributes, the Nominating and Corporate Governance Committee considered the specific areas noted below for each director when determining which of the director’s qualifications best suitedsuit the needs of the Company and qualify them to serve as a director of the Company.
The following table sets forth information regarding the nominees for Class I Directors and also regardingas well as the Class II Directors and the Class III Directors.
Nominees for Class I Directors Whose Terms Expire in 2015 and Principal Occupation, Employment, or Directorships | First Became Director | Age | ||||||
Anthony L. Leggio | 2012 | 63 | ||||||
Mr. Leggio has been President of Bolthouse Properties, LLC, a commercial and residential real estate development firm, since January 2006. Prior to serving at Bolthouse Properties, LLC, Mr. Leggio served as Vice President and General Counsel of Wm Bolthouse Farms from July 2001 until December 2005. Previously, Mr. Leggio was Managing Partner of the law firm of Clifford and Brown for nearly 25 years. Mr. Leggio has served as a director of Valley Republic Bank since 2008, Three Way Chevrolet Company since 2000, H.F. Cox Trucking since 1993, Mark Christopher Chevrolet since 2001, and W.B. Camp Companies since 2009. Mr. Leggio received his B.S. degree from University of the Pacific and his J.D. from University of the Pacific, McGeorge School of Law. Our Board believes Mr. Leggio’s real estate development and agricultural experience, his tenure as CEO of a real estate development company and his legal experience make him well qualified to serve as a director. | ||||||||
Geoffrey L. Stack | 1998 | 71 | ||||||
Mr. Stack has been the managing director of the Sares-Regis Group, a commercial and residential real estate development and management firm, since 1993. Mr. Stack is responsible for all residential operations of Sares-Regis including development, acquisitions, finance, and management activities. Mr. Stack graduated from Georgetown University and received a M.B.A. in Real Estate Finance at the Wharton School, University of Pennsylvania. Our Board believes Mr. Stack’s real estate development experience and his experience as the managing director of a real estate company make him well qualified to serve as a director. |
Class I Directors Whose Terms Expire in 2018 and Principal Occupation, Employment, or Directorships |
First | Age | ||||||
Geoffrey L. Stack | 1998 | 74 | ||||||
Mr. Stack has been the managing director of the Sares-Regis Group, a commercial and residential real estate development and management firm, since 1993. Mr. Stack is responsible for all residential operations of Sares-Regis, including development, acquisitions, finance, and management activities. Mr. Stack graduated from Georgetown University and received an M.B.A. in Real Estate Finance at the Wharton School, University of Pennsylvania. Mr., Stack is a past trustee of the Urban Land Institute (“ULI”) and the former Chairman of the ULI Foundation. He is also the past Chairman of the National Multifamily Housing Council. Our Board believes Mr. Stack’s real estate development experience and his experience as the managing director of a real estate company make him well qualified to serve as a director. | ||||||||
Michael H. Winer | 2001 | 62 | ||||||
Mr. Winer has been employed by the Third Avenue Management (or its predecessor) since May 1994. The Third Avenue Real Estate Value Fund is anopen-end mutual fund that invests in the securities of publicly-traded real estate and real estate-related companies in developed countries by adhering to a strict value-investing approach. Mr. Winer retired on February 28, 2018 and will thereafter have no affiliation with Third Avenue Management LLC. From 2009 through 2016, Mr. Winer served as a director of Newhall Holding Company LLC. In 2016, Newhall merged with two other California master-planned communities. Since the merger in May 2016, Mr. Winer has served as a director of the merged entity, Five Point Holdings LLC, where he is the Chair of the Compensation Committee and serves on the Audit Committee and Nominating and Corporate Governance Committee. He also has served as a director of 26900 Newport Inc. since 1998. Since 2016, Mr. Winer has been a member of the Board of Trustees of twonot-for-profit organizations: The Pacific Legal Foundation and the Future Citizens Foundation (dba The First Tee of Monterey County). Mr. Winer received a B.S. degree in accounting from San Diego State University and is a certified public accountant in California, inactive. Our Board believes that Mr. Winer’s investment industry background and specifically his experience with real estate investing make him very qualified to serve as a director on our Board. |
Class II Directors Whose Terms Expire in 2019 and Principal Occupation, Employment, or Directorships |
First | Age | ||||||
Robert A. Alter | 2014 | 67 | ||||||
Mr. Alter is currently President of Seaview Investors, LLC, a real estate investment company, in Newport Beach, CA, and has held that position since 2007. He is the Chairman Emeritus and Founder of Sunstone Hotel Investors (NYSE: SHO), a real estate investment company, where he served as Chief Executive Officer of the company (or its predecessor) from 1985 to 2007, after which he became Executive Chairman and remained on the board until 2012. He is one of the premier hotel investment and management executives in the hospitality industry. During the22-year period of Mr. Alter’s position as Chief Executive Officer, Sunstone acquired 125 hotel properties with over 20,000 guest rooms. Mr. Alter received a B.S. in Hotel Administration from the Cornell University School of Hotel Administration. Our Board believes that Mr. Alter’s hospitality background makes him very qualified to serve as a director. | ||||||||
Steven A. Betts | 2014 | 60 | ||||||
Mr. Betts is President and Founder of Betts Real Estate Advisors, a consulting company founded by Mr. Betts in 2017. He has served as strategic advisor to the Holualoa Companies, a commercial real estate investment company with three-quarters of a billion dollars in assets held all across the U.S. and in Europe, since 2015, as a Senior Advisor to the Southwest Division of Hines, one of the largest commercial investment and development companies in the world, since 2015 and as a strategic advisor to the Helios Education Foundation, the largest education foundation in Arizona and Florida, since 2016. He is also the Director of Development for Chanen Development Company, an affiliate of Chanen Construction, headquartered in Phoenix. Mr. Betts also served as the Senior Vice President and Managing Director of Assets for the ASU Foundation from March 2012 through May 2013. Previous to these endeavors, Mr. Betts was President and CEO of SunCor Development Company from 2005 to 2010, a half-billion dollar plus asset base subsidiary of the publicly traded Pinnacle West Capital Corporation. SunCor was a developer of master planned communities throughout the Mountainwest and large-scale commercial projects in Metropolitan Phoenix. Mr. Betts holds numerous private board and committee posts, including the executive committee of the Greater Phoenix Economic Council, the Governor’s Transportation and Trade Alliance, Past Chairman of the Interstate 11 Coalition, Past Chairman and Trustee of the Arizona Chapter of The Nature Conservancy, and a past-chair and current member of the Urban LandInstitute-Arizona District Council Governance Committee. Mr. Betts received his law degree with honors from DePaul University and a B.A. with honors from Augustana College. Our Board believes that Mr. Betts’ master planned community background makes him very qualified to serve as a director. | ||||||||
Daniel R. Tisch | 2012 | 67 | ||||||
Mr. Tisch has been the managing member of TowerView LLC, an investment fund of the Tisch Family, since 2001. Since January 2012, Mr. Tisch has also served as a director of Vornado Realty Trust. Mr. Tisch graduated from Brown University and has over 40 years of investing experience. Mr. Tisch worked for major Wall Street firms from 1973 to 1989 and since then has been managing investment partnerships. Our Board believes that Mr. Tisch’s investment industry background and his experience in capital raising and risk management make him well qualified to serve as a director. |
Class III Directors Whose Terms Expire in 2020 and Principal Occupation, Employment, or Directorships |
First | Age | ||||||
Gregory S. Bielli | 2013 | 57 | ||||||
Mr. Bielli is President and Chief Executive Officer of Tejon Ranch Co., a position he’s held since December 2013. Prior to this position, Mr. Bielli served as the Chief Operating Officer for the Company from September 2013 through November 2013. Mr. Bielli has over 26 years of experience in real estate, land acquisition, development, and financing. Prior to Tejon Ranch, he was a regional president of Newland Communities, one of the country’s largest and most successful master planned community developers. Mr. Bielli served as President of Newland’s Western Region from 2006 until September 2013. Mr. Bielli earned a bachelor’s degree in Political Science from the University of Arizona in 1983. Our Board believes Mr. Bielli’s experience in real estate operations, specifically master planned communities, and his position as Chief Executive Officer of the Company, make him well qualified to serve as director. | ||||||||
Anthony L. Leggio | 2012 | 65 | ||||||
Mr. Leggio has been President of Bolthouse Properties, LLC, a commercial and residential real estate development firm, since January 2006. Prior to serving at Bolthouse Properties, LLC, Mr. Leggio served as Vice President and General Counsel of Wm. Bolthouse Farms from July 2001 until December 2005. Previously, Mr. Leggio was Managing Partner of the law firm of Clifford and Brown for nearly 25 years. Mr. Leggio has served as a director of Valley Republic Bank since 2008, Three Way Chevrolet Company since 2000, H.F. Cox Trucking since 1993, Mark Christopher Chevrolet since 2001, and W.B. Camp Companies since 2009. Mr. Leggio received his B.S. degree from the University of the Pacific and his J.D. from the University of the Pacific, McGeorge School of Law. Our Board believes Mr. Leggio’s real estate development and agricultural experience, his tenure as Chief Executive Officer of a real estate development company and his legal experience make him well qualified to serve as a director. | ||||||||
Norman J. Metcalfe | 1998 | 75 | ||||||
Mr. Metcalfe has served as Chairman of the Company’s Board of Directors since 2014. Mr. Metcalfe has an extensive history and background in real estate development and homebuilding. He previously was Vice Chairman and Chief Financial Officer of The Irvine Company, one of the nation’s largest real estate and community development companies. Mr. Metcalfe retired from The Irvine Company in 1997. Prior to the Irvine Company, Mr. Metcalfe spent over 20 years in various real estate, corporate finance and investment positions with the Kaufman and Broad/SunAmerica family of companies. These positions included President and Chief Investment Officer of SunAmerica Investments and Chief Financial Officer of Kaufman and Broad Home Corporation (currently known as KB Home). Mr. Metcalfe served as a director of CalAtlantic Homes, from 2000 until February 2018. Mr. Metcalfe received a B.S. and an M.B.A. from the University of Washington. Our Board believes Mr. Metcalfe’s extensive financial experience, understanding of capital structure within the real estate industry, and experience in publicly held companies make him very qualified to serve as a director |
Class I Director not standing for reelection at the 2018 Annual Meeting First Frederick C. Tumoi None of the corporations or organizations described in the biographical information above are subsidiaries or other affiliates of the Company. There are no family relationships among any directors or executive officers of the Company.8
Became
Director Age 2014 63
Nominees for Class I Directors Whose Terms Expire in 2015 and Principal Occupation, Employment, or Directorships | First Became Director | Age | ||||||
Frederick C. Tuomi | 2014 | 60 | ||||||
Mr. Tuomi has been Chief Operating Officer for Colony American Homes, Inc., Scottsdale, AZ since July of 2013. In that capacity, he is responsible for the company’s operations including construction, renovation, marketing, leasing, property management, asset management, human resources, and information technology. Mr. Tuomi also served as Executive Vice President and President, Property Management for Equity Residential, a multi-family REIT from January 1994 through June 2013. He led the development of Equity Residential’s Property Management Group through years of rapid growth and expansion to become the nation’s largest apartment REIT. Mr. Tuomi received B.A. and M.B.A. degrees from Georgia State University. Our Board believes that Mr. Tuomi’s background and experience make him very qualified to serve as a director. | ||||||||
Michael H. Winer | 2001 | 59 | ||||||
Mr. Winer has been employed by Third Avenue Management LLC (or its predecessor) since May 1994. He is a senior member of the investment team. Mr. Winer has managed the Third Avenue Real Estate Value Fund since its inception in September 1998. Mr. Winer has served as a director of Newhall Holding Company LLC since 2009 and as a director of 26900 Newport Inc. since 1998. He retired as a director of Real Mortgage Systems Inc. in November 2009. Mr. Winer received a B.S. degree in accounting from San Diego State University and was formerly a certified public accountant in California. Our Board believes that Mr. Winer’s investment industry background and specifically his experience with real estate investing make him very qualified to serve as a director on our Board. |
Class II Directors Whose Terms Expire in 2016 and Principal Occupation, Employment, or Directorships | First Became Director | Age | ||||||
Robert A. Alter | 2014 | 64 | ||||||
Mr. Alter is currently President of Seaview Investors, LLC, Newport Beach, CA, and has held that position since 2007. He is the Chairman Emeritus and Founder of Sunstone Hotel Investors (NYSE: SHO), where he served as CEO of the company (or its predecessor) from 1985 to 2007 after which he became Executive Chairman and remained on the board until 2012. He is one of the premier hotel investment and management executives in the hospitality industry. During the 22-year period of Mr. Alter’s position as CEO, Sunstone acquired 125 hotel properties with over 20,000 guest rooms. Mr. Alter received a B.S. in Hotel Administration from Cornell University School of Hotel Administration. Our Board believes that Mr. Alter’s hospitality background makes him very qualified to serve as a director. | ||||||||
Robert A. Stine | 1996 | 68 | ||||||
Mr. Stine served as the President and Chief Executive Officer of Tejon Ranch Co. from May 1996 until December 2013. Mr. Stine has served as a director of Pacific Western Bancorp since 1996 and as a director of Valley Republic Bank since 2008. Mr. Stine also formerly served as a director of The Bakersfield Californian from 1999 until 2009. Mr. Stine received a B.S. from St. Lawrence University and a M.B.A. from the Wharton School of Business, University of Pennsylvania. Our Board believes Mr. Stine’s extensive real estate development background and his strategic and operational insight from managing the Company make him well qualified to serve as a director. |
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Class II Directors Whose Terms Expire in 2016 and Principal Occupation, Employment, or Directorships | First Became Director | Age | ||||||
Daniel R. Tisch | 2012 | 64 | ||||||
Mr. Tisch has been the managing member of TowerView LLC, an investment fund of the Tisch Family, since 2001. Since January 2012, Mr. Tisch has also served as a director of Vornado Realty Trust. Mr. Tisch graduated from Brown University and has over 39 years of investing experience. Mr. Tisch worked for major Wall Street firms from 1973-1989 and since then has been managing investment partnerships. Our Board believes that Mr. Tisch’s investment industry background and his experience in capital raising and risk management make him well qualified to serve as a director. |
Class III Directors Whose Terms Expire in 2017 and Principal Occupation, Employment, or Directorships | First Became Director | Age | ||||||
Steven A. Betts | 2014 | 57 | ||||||
Mr. Betts is President for Chanen Development Company, an affiliate of the award-winning, full-service construction organization, Chanen Construction, headquartered in Phoenix and operating throughout the U.S. He has served as President since November 2014. He also served as the Chief Executive Officer of PhoenixMart, a 1.7 million square foot multi-category, manufacturer product-sourcing center from June 2013 to October 2013 and served as the Senior Vice President and Managing Director of Assets for the ASU Foundation from March 2012 through May 2013. Previous to these endeavors, Mr. Betts was President and CEO of SunCor Development Company from 2005 to 2010, a half-billion dollar plus asset base subsidiary of the publicly traded Pinnacle West Capital Corporation. SunCor is a developer of master planned communities throughout the Mountainwest and large-scale commercial projects in Metropolitan Phoenix. Mr. Betts holds numerous board and committee posts, including Chairman of the Interstate 11 Coalition, and Chairman of the Urban Land Institute-Arizona District Council Governance Committee. Mr. Betts received his law degree with honors from DePaul University and a B.A. with honors from Augustana College. Our Board believes that Mr. Betts’ master planned community background makes him very qualified to serve as a director. | ||||||||
Gregory S. Bielli | 2013 | 54 | ||||||
Mr. Bielli has served as President and Chief Executive Officer of Tejon Ranch since December 2013. Prior to this position, Mr. Bielli served as the Chief Operating Officer for the Company since September 2013. Mr. Bielli has nearly 25 years experience in real estate, land acquisition, development and financing. He comes to Tejon Ranch most recently from Newland Communities, one of the country’s largest and most successful master planned community developers. Mr. Bielli served as President of Newland’s Western Region from 2006 until September 2013. Mr. Bielli earned a bachelor’s degree in Political Science from the University of Arizona in 1983. Our Board believes Mr. Bielli’s experience in real estate operations, specifically master planned communities and his position as CEO of the Company, make him well qualified to serve as director. |
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Class III Directors Whose Terms Expire in 2017 and Principal Occupation, Employment, or Directorships | First Became Director | Age | ||||||
John L. Goolsby | 1999 | 73 | ||||||
Mr. Goolsby served as President and Chief Executive Officer of the Howard Hughes Corporation from 1988 until his retirement in 1998. Howard Hughes Corporation is a real estate investment and development company that successfully developed several large-scale real estate projects in Nevada and California, the largest being the Summerlin community in Las Vegas, Nevada. Mr. Goolsby served as a director of Thomas Properties Group Inc. from 2006 until 2013. Mr. Goolsby formerly served as a director of America West Airlines from 1994 until 2005 and Sierra Pacific Corporation and its predecessor, Nevada Power Company, from 1989 until 2001. He served as a Trustee of The Donald W. Reynolds Foundation from 1994 until 2005. Mr. Goolsby received a B.B.A. from the University of Texas at Arlington and is a certified public accountant. Our Board believes Mr. Goolsby’s extensive real estate experience and his experience as a chief executive officer of a major real estate land and development company make him well qualified to serve as director. | ||||||||
Norman J. Metcalfe | 1998 | 72 | ||||||
Mr. Metcalfe has an extensive history and background in real estate development and homebuilding. He previously was Vice Chairman and Chief Financial Officer of The Irvine Company, one of the nation’s largest real estate and community development companies. Mr. Metcalfe retired from the Irvine Company in 1998. Prior to the Irvine Company, Mr. Metcalfe spent over 20 years in various real estate, corporate finance and investment positions with the Kaufman and Broad/SunAmerica family of companies. These positions included President and Chief Investment Officer of SunAmerica Investments and Chief Financial Officer of Kaufman and Broad Home Corporation (currently known as KB Homes). Mr. Metcalfe is currently a director of The Ryland Group, having served since 2000, and previously served as a director of Building Materials Holding Corp from 2005 until 2009. Mr. Metcalfe received a B.S. and a M.B.A. from the University of Washington. Our Board believes Mr. Metcalfe’s extensive financial experience, understanding of capital structure within the real estate industry, and experience in publicly held companies make him very qualified to serve as a director. |
None of the corporations or organizations described above are subsidiaries, or other affiliates of the Company. There are no family relationships among any directors or executive officers of the Company.
Corporate Governance MattersCORPORATE GOVERNANCE MATTERS
The Board has determined that all directors, except Mr. Bielli, and Mr. Stine, are “independent” under the listing standards of the New York Stock Exchange (the “NYSE”)NYSE and the Company’s categorical criteria used to determine whether a director is independent (the “Independence Standards”). The Independence Standards are set forth in Attachment A to the Company’s Corporate Governance Guidelines (the “Corporate Governance Guidelines”), and a copy of the Independence Standards is attached as Appendix A to this Proxy Statement. Thus, the Board determined that the following directors are independent: Robert A. Alter, Steven A. Betts, John L. Goolsby, Anthony L. Leggio, Norman J. Metcalfe, Geoffrey L. Stack, Daniel R. Tisch, Frederick C. Tuomi, and Michael H. Winer.
In addition, the Board also determined that John L. Goolsby, who served as a director through May 2017, was independent during the time he served as a director. Also, in making its independence determinations, the Board reviewed additional information provided by the directors and the Company with regard to any business or personal activities or associations as they may relate to the Company and the Company’s management. The Board considered this information in the context of the NYSE’s objective listing standards, the Independence Standards, and for directors serving on committees, the
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additional standards established for members of audit committees and compensation committees. In reaching a determination on these directors’ independence, the Board considered that neither the directors nor their immediate family members have within the past three years had any direct or indirect business or professional relationships with the Company other than in their capacity as directors.
The Board’s independence determinations included a review of business dealings at companies where the directors serve as directors or outside consultants, all of which were ordinary course business transactions. The Board also performs a review of the Company’s charitable contributions to any organization where a director serves as an executive officer and found no contributions in excess of the Independence Standards.
The independent directors of the Board meet regularly in executive sessions outside the presence of management. As Chairman of the Board, Mr. Metcalfe presides over these executive sessions.
During 2014,2017, there were sixfive meetings of the Board. During 20142017, all directors attended 75% or more of the aggregate total of such meetings of the Board and committees of the Board on which they served.
The Company’s policy is that all directors are expected to attend every annual stockholders meeting in person. All directors attended the 20142017 Annual Meeting of the Company.
Committees of the Board
Standing committees of the Board include the Executive, Audit, Compensation, Investment Policy, Real Estate, and Nominating and Corporate Governance Committees. The current members of the standing committees are set forth below:
Executive Committee | Audit Committee | Compensation Committee | Real Estate Committee | Nominating and Corporate Governance Committee | Investment Policy Committee | |||||||||
Robert A. Alter | ||||||||||||||
Steven A. Betts | ||||||||||||||
Gregory S. Bielli | ||||||||||||||
Anthony L. | ||||||||||||||
| ||||||||||||||
Norman J. Metcalfe | ||||||||||||||
Geoffrey L. Stack | ||||||||||||||
Daniel R. Tisch | ||||||||||||||
| ||||||||||||||
Frederick C. Tuomi | ||||||||||||||
Michael H. Winer |
Committee Chair | Committee Member |
During 2014,2017, there were no meetings of the Executive Committee, sevenfive of the Audit Committee, twofour of the Compensation Committee, twothree meetings of the Real Estate Committee, onetwo meetings of the Nominating and Governance Committee, and no meetings of the Investment Policy Committee. The major functions of each of these committees, including their role in oversight of risks that could affect the Company, are described briefly below.
Each year, the Board performs a self-evaluation to assess its effectiveness and the participation of each board member, in addition, on an annual basis, the Audit Committee, Real Estate Committee, Compensation Committee, and Nominating and Corporate Governance Committee all perform self-evaluations to measure their effectiveness.
The Executive Committee
Except for certain powers that, under Delaware law, may be exercised only by the full Board, or which, under the rules of the Securities and Exchange Commission (the “SEC”) or the NYSE, may only be exercised by committees composed solely of independent directors, the Executive Committee may exercise all powers and authority of the Board in the management of the business and affairs of the Company.
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The Audit Committee
The Audit Committee represents and assists the Board in fulfilling the Board’s oversight responsibility relating to (i) the accounting, reporting, and financial practices of the Company and its subsidiaries, including the integrity of the Company’s financial statements; (ii) the surveillance of administration and financial controls and the Company’s compliance with legal and regulatory requirements; (iii) the independent auditor’s qualifications and independence; and (iv) the performance of the company’sCompany’s internal audit function and the Company’s independent auditor. In addition, the Audit Committee is directly responsible for the retention, compensation and oversight of the independent auditor and approves all audit andnon-audit services the independent auditor performs. It also reviews and discusses the Company’s policies with respect to risk assessment and risk management. The Audit Committee reports regularly to the full Board with respect to its activities. The Audit
Committee is governed by a written charter adopted and approved by the Board. The Audit Committee’s current charter is available on the Company’s web site,web-site,www.tejonranch.com, in the Corporate Governance section of the Investor Relations webpage, and is available in print form upon request to the Corporate Secretary, P.O. Box 1000, Tejon Ranch, California 93243.
The Board has determined that each member of the Audit Committee is independent under the listing standards of the NYSE and under the Company’s Independence Standards, and that each member of the Audit Committee is financially literate and meets the requirements for Audit Committee Membershipaudit committee membership set forth inRule 10A-3 of the Exchange Act. The Board has further found that Mr. Leggio qualifies as an “audit committee financial expert” for the purposes of Item 407(d)(5) of RegulationS-K, and has “accounting or related financial management expertise” as described in the listing standards of the NYSE.
The Compensation Committee
The Compensation Committee oversees the Company’s overall compensation structure, policies, and programs, and it assesses whether the Company’s compensation structure establishes appropriate incentives for management and employees. It also reviews and approves corporate goals and objectives relevant to the compensation of top managerial and executive officers, evaluates their performance in light of those goals and objectives, and makes recommendations regarding their compensation. It administers and makes recommendations to the Board with respect to the Company’s incentive compensation and equity-based compensation plans and grants of awards thereunder. It also reviews and recommends to the Board the design of other benefit plans, employment agreements, and severance arrangements for top managerial and executive officers. The Compensation Committee oversees the assessment of the risks related to the Company’s compensation policies and programs applicable to officers and employees, reviews the results of this assessment, and also assesses the results of the Company’s most recent advisory vote on executive compensation. It approves, amends, or modifies the terms of any compensation or benefit plan that does not require shareholderstockholder approval, if delegated to the Committee by the Board. It reviews and recommends changes for the compensation of directors, and it reviews succession plans relating to positions held by senior executive officers. It reports regularly to the Board with respect to its activities.
The Compensation Committee is governed by a written charter adopted and approved by the Board. The Compensation Committee’s current charter is available on the Company’s web site,web-site,www.tejonranch.com, in the Corporate Governance section of the Investor Relations webpage, and is available in print form upon request to the Corporate Secretary, P.O. Box 1000, Tejon Ranch, California 93243. The Compensation Committee is authorized to delegate to a subcommittee consisting of not less than two members of the Compensation Committee the responsibility to review specific issues, meet with management on behalf of the committee regarding such issues, and prepare recommendations orfor reports or review by the committee.Committee. The Board has determined that each member of the Compensation Committee is independent under the listing standards of the NYSE for directors and compensation committee members and under the Company’s Independence Standards.
The CEO does not participate in the Compensation Committee’s deliberations with regard to his own compensation. At the Compensation Committee’s request, the CEO reviews with the Compensation Committee the performance of the other executive officers, but no other executive officers have any input in executive
13
compensation decisions. The Compensation Committee gives substantial weight to the CEO’s evaluations and recommendations, because he is particularly able to assess the other executive officers’ performance and contributions to the Company.
During 2013,2017, the Compensation Committee engaged Poe Consultingretained the POE Group to assistadvise the Committee on marketplace trends in executive compensation, analyze companies for peer company identification for the reviewbenchmarking of executive officerNEO compensation and NEO compensation decisions. POE consults with the Compensation Committee about its recommendations to the Board on Chief Executive Officer and other NEOs compensation. The decision to engage an outside compensation consultant was not recommended by management. Poe Consulting completed its 2013 engagement during March of 2014, and its fees were $55,000. Poe ConsultingPOE Group was used throughout 2017. POE Group did not provide any other services to the Company in 2014.2017, and its fees
were $32,450 for the year. The Compensation Committee has reviewed an assessment of any potential conflicts of interest raised by Poe Consulting’sPOE Group’s work for the Compensation Committee, which assessment considered the following six factors: (i) the provision of other services to the Company by Poe Consulting;POE Group; (ii) the amount of fees received from the Company by Poe Consulting,POE Group, as a percentage of Poe Consulting’sPOE Group’s total revenue; (iii) the policies and procedures of Poe ConsultingPOE Group that are designed to prevent conflicts of interest; (iv) any business or personal relationship of the Poe ConsultingPOE Group consultant with a member of the Compensation Committee; (v) any Company stock owned by the Poe ConsultingPOE Group consultants; and (vi) any business or personal relationship of the Poe ConsultingPOE Group consultant or Poe ConsultingPOE Group with any of the Company’s executive officers, andofficers. The Committee concluded that there are no such conflicts of interest.
The Real Estate Committee
The Real Estate Committee provides oversight, guidance and strategic input into management action plans and operations for development and entitlement of Company land, and it provides a review function to management regarding major decision points within the Company’s development projects. It reviews and either approves or recommends to the Board appropriate action on significant proposed real estate transactions and development pro formas and budgets. The Real Estate Committee also provides oversight and guidance toconsults with the Company’s Chief Executive Officer with regard to recruitment and employment of senior real estate executives. It reports regularly to the full Board with respect to its meetings. The Real Estate Committee’s current charter is available on the Company’s web site,web-site,www.tejonranch.com, in the Corporate Governance section of the Investor Relations webpage, and is available in print form upon request to the Corporate Secretary, P.O. Box 1000, Tejon Ranch, California 93243.
The Investment Policy Committee
The Investment Policy Committee reviews policies and activities related to the investment of the Company’s cash assets and works in coordination with the Real Estate Committee. It receives and reviews the marketable securities investment policy and data regarding marketable security investments and recommends approval of the Company’s investment security policy to the Board.
The Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee (“Nominating Committee”) is charged with assessing existing directors to determine whether to recommend them for reelection to the Board, identifying and recruiting potential new directors, establishing a procedure for consideration of candidates for director positions recommended by stockholders, and recommending candidates to be nominated by the Board or elected by the Board as necessary to fill vacancies and newly created directorships. It also reviews and makes recommendations to the Board respectingregarding the structure, composition, and functioning of the Board and its committees, and it evaluates and recommends changes to the Corporate Governance GuidelinesGuidelines. The Nominating Committee also annually reviews the independence of all directors and evaluates the Board’s performance.
The Board has determined that each member of the Nominating Committee is independent under the listing standards of the NYSE and under the Company’s Independence Standards. The Nominating Committee is governed by a written charter adopted and approved by the Board. The Nominating Committee’s current charter is available on the Company’s web site,web-site,www.tejonranch.com, in the Corporate Governance section of the Investor Relations webpage, and is available in print form upon request to the Corporate Secretary, P.O. Box 1000, Tejon Ranch, California 93243.
The Nominating Committee is pleased to consider any properly submitted recommendations of director candidates from stockholders. Stockholders may recommend a candidate for consideration by the Nominating Committee by sending written notice addressed to the Nominating and Corporate Governance Committee Chair,
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c/o Corporate Secretary, P.O. Box 1000, Tejon Ranch, California 93243. The Nominating Committee does not evaluate candidates differently based on who has made the recommendation. Stockholders may also nominate persons for election to the Board by providing timely notice in writing to the Secretary of the Company pursuant
to the procedures set forth in the Company’s Certificate of Incorporation.Incorporation and Bylaws. See “Stockholder Proposals for 20162019 Annual Meeting” for additional information on the procedure for stockholder nominations.
The Nominating Committee has the authority under its charter to hire and pay a fee to outside counsel, experts, or other advisors to assist in the process of identifying and evaluating candidates. No such outside advisors have beenwere used to dateduring 2017, and, accordingly, no fees have beenwere paid to such advisors during 2017. Past practice has been for the Nominating Committee to seek recommendations for new directors from current directors, the Chief Executive Officer, and outside advisors.
Code of Business Conduct and Ethics and Corporate Governance GuidelinesCODE OF BUSINESS CONDUCT AND ETHICS AND CORPORATE GOVERNANCE GUIDELINES
The Board has adopted a Code of Business Conduct and Ethics, which is applicable to all directors, officers, and employees. It also has adopted Corporate Governance Guidelines to guide its own operations. Both documents (including Attachment A to the Corporate Governance Guidelines, which constitutes the Company’s Independence Standards) are available on the Company web site,Company’sweb-site,www.tejonranch.com, in the Corporate Governance section of the Investor Relations webpage, and are available in print form upon request to the Corporate Secretary, P.O. Box 1000, Tejon Ranch, California 93243.
Succession PlanningSUCCESSION PLANNING
The Board, with the assistance of the Compensation Committee, oversees succession plans for the Chief Executive Officer and other senior executive officers. These plans relate both to succession in emergency situations and longer-term succession. As set forth in the Corporate Governance Guidelines and Compensation Committee Charter, the Compensation Committee reviews the Company’s succession planning for senior executive officers at least annually. The Chief Executive Officer also provides the Board with input regarding these matters.
Board’s Role in Risk OversightBOARD’S ROLE IN RISK OVERSIGHT
The full Board oversees the Company’s risk management process. The Board oversees a Company-wide approach to risk management, designed to enhance stockholder value, support the achievement of strategic objectives, and improve long-term organizational performance. The full Board determines the appropriate level of risk for the Company generally, assesses the specific risks faced by the Company, and reviews the steps taken by management to manage those risks. The full Board’s involvement in setting the Company’s business strategy facilitates these assessments and reviews, culminating in the development of a strategic plan that reflects both the Board’s and management’s consensus as to appropriate levels of risk and the appropriate measures to manage those risks. The full Board assesses risk throughout the enterprise, focusing on risks arising out of various aspects of the Company’s strategic plan and the implementation of that plan, including financial, legal/compliance, operational/strategic, and compensation risks. In addition to discussing risk with the full Board, the independent directors discuss risk management during executive sessions without management present.
While the full Board maintains the ultimate oversight responsibility for the risk management process, its committees oversee risk in certain specified areas. In particular, the Audit Committee focuses on financial risk, including internal controls, and discusses the Company’s risk profile with the Company’s internal auditors. The Audit Committee also reviews potential violations of the Company’s Code of Ethics and related corporate policies. The Compensation Committee periodically reviews compensation practices and policies to determine whether they encourage excessive risk taking.risk-taking. Finally, the Nominating Committee manages risks associated with the independence of directors and evaluates potential new Board nominees. Pursuant to the Board’s instruction, management regularly reports on applicable risks to the relevant committee or the full Board, as appropriate, withand additional review or reporting on risks beingis conducted as needed or as requested by the Board and its committees.
The Compensation Committee has also reviewed the design and operation of the Company’s compensation structures and policies as they pertain to risk and has determined that the Company’s compensation programs do not create or encourage the taking of risks that are reasonably likely to have a material adverse effect on the Company.
COMPENSATION DISCUSSION AND ANALYSIS
This Compensation Discussion and Analysis (“CD&A”) provides a detailed description of the objectives and principles of our executive compensation programs. It explains how compensation decisions are linked to performance as compared to Company performance and stockholder interests. The NEOs, for the 2017 fiscal year are as follows.
Name | Title | |
Gregory S. Bielli | Chief Executive Officer | |
Allen E. Lyda | Chief Financial Officer | |
Joseph N. Rentfro | Executive Vice President, Real Estate | |
Hugh F. McMahon | Executive Vice President, Real Estate | |
Michael R.W. Houston | Senior Vice President, General Counsel |
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COMPENSATION DISCUSSION & ANALYSISExecutive Summary
Our executive compensation program aligns with our strongpay-for-performance philosophy and ties a substantial portion of executive compensation to the achievement of annual and long-term strategic objectives directly tiedlinked to the creation of stockholder value. The following is a discussionobjectives of our executive compensation philosophy, process and components, and compensation decisions made with respectprogram are to the following NEOs as listed in the 2014 Summary Compensation Table:
Executive Summary
Our Compensation Committee has developed and maintains a compensation program that is intended(i) drive performance against critical strategic goals designed to reward performance, retain talent, and encourage actions that drive achievement of our business strategies.
Our executive compensation program features the following:
Our primary business objective is to maximize long-term stockholder value through the monetization of our land-based assets. This is accomplished by moving our assets up the value creation chain through the entitlement process, the mapping process, development, and ultimately to sales and leasing. A key element of our strategy is to provide entitled land for large scale residential andmixed-use real state communities to serve the growing population of Southern and Central California. We are currently engaged in commercial sales and leasing at our fully operational commercial/industrial center Tejon Ranch Commerce Center, or TRCC, and are in the mapping
Variable Compensation Fixed 29.3% Variable 70.7% 23.4% 18.9% 9.5% 18.9% Annual Incentive Performance Milestone Grants Performance Grants—Operating Cash Time-Based Grants
process and entitlement process for our three major residentialmixed-use master planned communities Centennial, Grapevine, and Mountain Village. All of these efforts are supported by diverse revenue streams generated from other operations, including farming, mineral resources, and our various joint ventures.
Currently our revenues are derived principally from commodity based businesses such as farming, and mineral resources including water sales, as well as commercial real estate. Our long-term business plan is for our commercial and residential real estate assets to produce the vast majority of our revenues. The time involved to develop real estate assets in California through the entitlement stage to development is a many year process. Therefore, the value of our company and ultimate realization of its asset value will not occur until future years.
The skill, knowledge, and experience required of our senior management in the early period of large scale residential andmixed-use real estate communities is significant. Only with highly talented executives managing early stage development, will our assets realize their potential and our stockholders realize the desired return on their investment.
The chart below is a continuum of the real estate development process highlighting each project’s current status and key milestones to be met in moving through the real estate development process in California. The real estate development process may be subject to delays arising from California’s complex regulatory structure and litigation environment.
Our long-term compensation opportunity that reflectsand short-term performance incentive plans are designed to reward the NEOs for success in moving projects forward along the above continuum. The progress is often measured based on milestone related goals rather than typical financial measures used by many companies. Success in achieving these performance objectives is critical to the creation of value within our land assets. Due to the long-term horizonnature of our business plan and performance goals;
2014 – Yearthe real estate development process in Review
For 2014, we had net income attributable to common stockholders of $5,655,000 compared to net income attributable to common stockholders of $4,165,000 for 2013. This improvement is driven by anCalifornia the increase in revenue, primarily from mineral resources revenue, as a resultvalue of 2014 water sales and improved equityland within our projects is not immediately recognized in earnings of unconsolidated joint ventures of $1,288,000. These increases in revenue were partially offset by an increase in operating expenses of $4,964,000, which wasstock market value largely driven by $4,523,000 in water cost of sales. During 2014, farming revenue declined due to lower quantities of orchard crops being sold, and revenues improved slightly in the commercial/industrial segment due primarily to the sale of a convenience store/gas station site and higher development fees. Equity in earnings of unconsolidated joint ventures improved primarily due to the earnings growth withintiming of revenue generation, which does not begin to occur until the TA/Petro and Rockefeller joint ventures.execution phase of development operations.
During 2014, three significant objectives were accomplished. First, the Company successfully guided the development of the Outlets at Tejon, which opened in August 2014 on time and within the construction budget. This development is part of
Grapevine Create a joint venture with the Rockefeller Development Group. Achievement of this goal was one of the short-term annual incentives objectives for 2014. Second, we received preliminary zoning for the Centennial project during the fourth quarter of 2014 when the Los AngelesPlan Prepare Environmental Impact Report Obtain Project Approval from County Board of Supervisors approved the Antelope Valley Area Plan, or AVAP. The AVAP is designedDetailed Maps / Engineering Level Designs for: Lot layouts Grading Amenities & Infrastructure, including Sewer & Water systems ENTITLEMENT STATE & FEDERAL PERMITS TRACTS / FINAL MAPS CONSTRUCTION PERMITS TRCC OPERATIONS Obtain Necessary Permits from: State Department of Fish and Wildlife Regional Water Quality Control Board US Army Corps of Engineers Obtain Permitting to guide future development and conservation inCommence Construction Centennial Mountain Village
2017 Company Highlights
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• On October 27, 2017, the Company completed a rights offering, which raised $90 million in proceeds. The net proceeds of the offering are being used to provide additional working capital for general corporate purposes, including to fund general infrastructure costs and the development of buildings at Tejon Ranch Commerce Center, to continue forward with entitlement and permitting programs for the Centennial at Tejon Ranch and Grapevine at Tejon Ranch communities and costs related the preparation of the development of Mountain Village at Tejon Ranch. |
• Los Angeles County Department of Regional Planning has finalized responses to comments received during the review of the Draft Environmental Impact Report for the Company’s Centennial master planned community, reflecting an important milestone in the development of this community. The responses will become part of the Final Environmental Impact Report that will be considered first by the Los Angeles County Regional Planning Commission and later by the Board of Supervisors. |
• TheTRC-MRC 1 joint venture completed a 480,000 square foot industrial building on time, on budget, and on vision. The new building is located in the Tejon Ranch Commerce Center – East master planned project. One half of the building was leased in March 2018 by Dollar General. |
• In December 2017, Kern County approved a Tentative Tract Map for the first three phases of development for the Mountain Village master planned community. During January 2018, the Company submitted for approval to Kern County the design plan for the first phase of the commercial area of Mountain Village. |
the region. We expect the Los Angeles County Counsel, per instruction from the Board of Supervisors, to prepare final documents and ordinance for the AVAP for the Board of Supervisors final approval in the first half of 2015. To take advantage of this momentum, our next steps would be to submit a specific plan for phase one entitlement and permits. Third, the Company acquired full ownership of TMV LLC through the purchase of DMB TMV LLC’s interest in the joint venture for $70,000,000. The decision to obtain full ownership of TMV LLC reflects the Company’s growth as a fully integrated real estate company and demonstrates our belief in the future success of the development. In connection with the acquisition of the membership interest, we entered into a new long-term debt facility of $70,000,000. The new debt has a ten-year term and a fixed rate of interest of 4.11%. These last two accomplishments are tied to the ultimate successful completion of our long-term performance milestones.Performance 2017
ImprovementsDeclines in total revenue and net income during 20142017 led to EBITDA and total revenues, the annual corporate incentive bonus quantitative metrics, being met at maximum level and abovebelow the target goal levellevels for the year, respectively.2017 and also below 2016 actuals. These metrics are discussed below under “Annual Performance-Based Incentive Bonuses.Incentives.” Revenue and operating profit goals for commercial/industrial real estate were abovealso below the target and at maximum goal level, respectively. Revenue and operating goals for farming were above target for revenue and at the maximum level for operating profits.level. The named executive officersNEOs met the 20122015 rolling three-year cash flow objectives at 103%118% of the target award level. The rolling three-year cash flow metric is described in the equity compensation section. The grants associated with the 20122015 three-year cash flow metric were paid out during March 2015.2018. The number of stock units that vested in 2015 are2018 is identified in the footnotes to the Outstanding Equity Awards at 20142017 FiscalYear-End table that begins on page 36.
For 2014, the Compensation Committee made the following decisions:53.
• For 2017, the net loss attributable to common stockholders was $1,555,000, representing a loss per common share of $0.07, compared with $558,000, or earnings per common share of $0.03, for fiscal 2016. The year-over-year reduction was due to a decline in farming revenues of $2,214,000, a decrease in mineral resource revenues of $8,170,000, and reduced income from unconsolidated joint ventures of $2,871,000. Helping to offset these declines in revenue was a decrease of $10,282,000 in expense, as a result of reduced water cost of sales and our staff rightsizing initiatives.
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• Revenues and other income were $40,499,000 in fiscal 2017, a decrease of $13,835,000 or 25%, compared to revenue and other income of $54,334,000 in fiscal 2016. Recurring Commercial revenues were flat year over year, as recurring lease revenue from core assets offset the loss of lease revenue related to the sale of a real estate investment in 2016 and the recognition of a gain from the sale of land in 2016 within the Tejon Ranch Commerce Center. As noted above, farming revenues declined $2,214,000 in 2017 largely as a result of reduced pistachio production and the timing of the sale of 2017 crop almonds. During 2017, mineral resources saw a decline in revenues as a result of $8,347,000 reduction in water sales as opportunities for the sale of water were diminished due to the record level of rain and snow during 2017. Please refer to our 2017 Annual Report on Form 10-K for additional details regarding our 2017 operations. See the following chart for a summary of revenues.
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2017 | 2016 | |||||||
Total operating revenues | $ | 35,657,000 | $ | 45,577,000 | ||||
Total other income | 615,000 | 1,659,000 | ||||||
Equity in earnings of unconsolidated joint ventures | 4,227,000 | 7,098,000 | ||||||
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Total Revenue and Other Income | $ | 40,499,000 | $ | 54,334,000 | ||||
Internally, our management’s performance is measured using a non-GAAP revenue number that includes total sales proceeds from real estate sales rather than the GAAP presentation of other income recognizing only the gain on sales from real estate. We believe disclosure of this non-GAAP information is useful to investors because it shows what results are taken into account in evaluating management. The adjustment is as follows: |
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2017 | 2016 | |||||||
Total Revenues and Other Income | $ | 40,499,000 | $ | 54,334,000 | ||||
Gain on sale of real estate investment | — | (1,044,000 | ) | |||||
Sales proceeds from sale of real estate | — | 4,700,000 | ||||||
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Non-GAAP Total Revenues and Other Income | $ | 40,499,000 | $ | 57,990,000 | ||||
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Pay-for- Performance
Consistent with ourpay-for-performance philosophy, Company performance in 2017, as well as over the 2015-2017 period, directly impacted payouts for 2017, as follows:
Consideration ofSay-on-Pay Results and Stockholder Feedback
At our 20142017 Annual Meeting, our stockholders expressed support for our executive compensation program, with 78%60.5% of shareholdersstockholders casting votes in favor of the advisory vote proposal. When designingStockholder engagement is an important process and our 2014directors and 2015 executive compensation programs,management recognize the Compensation Committee considered, among other things,benefits that come from this dialogue. We engage with stockholders throughout the 2011year in order to:
We provide stockholders and prospective stockholders with many opportunities to provide feedback to our Board and management throughone-on-one meetings and telephone calls. Throughout the year we have met with investors representing over 40% of shares outstanding. The feedback we received from stockholders. After careful consideration of these results, as well as other factors described herein, the Compensation Committee determined to make certain changes to the design of our executive compensation program in 2013 for 2014 and approved additional changes in early 2014 for 2014 and future compensation periods. The changes implemented centered on the design of performance milestone objectives for the Company, more quantitative annual incentive objectives, the use of peer companies in our analysis, and the establishment of executive officer stock ownership guidelines. These changes remain in effect for 2015 and have contributedrelated to our executivebusiness plans and compensation program discussed in this Compensation Discussion and Analysis.programs are presented below.
2015
What We Heard | How We Responded | |
Stockholders would like to get a better understanding of business model | Management evaluated past disclosures and for the 2017 Annual Report on Form10-K expanded disclosures related to our land entitlement and development programs | |
Stockholders favor the addition of total stock return measurements into performance based equity programs | The Compensation Committee has included a total stock return component within the CEO’s long term supplemental performance stock grants and in future years will evaluate including this as a component of other NEO’s performance based equity grants | |
Stockholders had concerns about annual cash incentive plan financial metrics being compared to budget rather than prior year financial metrics | Enhancement of disclosures to better illustrate the strategic alignment of the budget, which is tied to the current commodity-price environment |
2018 – The Year Ahead
The Company believes 20152018 will be a challenging but successful year in terms of the accomplishment of corporate objectives. The 2017-2018 winter weather has brought warmer temperatures than normal, which could possibly impact 2018 farm crop production and contribute to the challenges of 2015 relateaccomplishing corporate revenue objectives. There is also the potential for a decline in farm crop prices, especially almonds and pistachios. A potential positive for 2018, is that we expect water sales to farmingincrease over 2017 as a result of below normal rain and water managementsnow levels within the state and many counties in the state, including Kern County have again been designated as we allocate our water resources to our permanent crops of almonds, pistachios, and wine grapes and to real estate development, while at the same time selling any excess water we have. California isbeing in a severe drought and state water project allocations have been reduced to only a 20% allocation of state water project contracts. We willcondition. Our successes may also have challenges regarding oil
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royalty revenue, as prices have declined in excess of 50%come from the previous year’s levels. This will challenge us in meeting our 2015 revenue and cash flow objectives. In order to conserve cash going forward, the Compensation Committee’s compensation decisions will continue to be impacted by our anticipationapproval of the need to continue to fundspecific plan for our Centennial development, opportunities, future capital investment requirementsformal approval of a new Foreign Trade Zone designation for infrastructure at TRCC, and residential projects, and possible continued investment in water assets.the leasing of buildings within TRCC.
2014 Executive Compensation Plan Developments
During 2013, the Compensation Committee undertook a holistic review of the executive compensation program with the assistance of the POE Group. During the first quarter of 2014, the updated compensation program was approved by the Compensation Committee and the Board of Directors. The program was analyzed with respect to the following strategic principles:
Beginning in 2014, our annual incentive compensation plan, or AICP, has four primary performance measures:
The specific weight attached to each performance measure is dependent on each position’s responsibilities. Generally, corporate goals have a greater weight than divisional goals for all positions. This encourages mutual accountability among the executive team.
Beginning in 2014, our long-term incentive plan, or LTIP, consists of three equity delivery vehicles:
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The Compensation Committee believes that the changes to our executive compensation program approved in 2014 will encourage mutual accountability among our executive team while focusing the team on important goals in the short and long term. Furthermore, our new long-term design reflects the value creation process inherent in large-scale land development by first identifying and implementing projects, and then maximizing their respective financial returns.
General Objectives of theand Compensation Plan.Philosophy
The compensation program for our NEOs is designed to align management’s incentives with the long-term interests of our stockholders and to be competitive with comparable employers. Our compensation philosophy recognizes the value of rewarding our named executive officersNEOs for their past performance and motivating them to continue to excel in the future. The Compensation Committee has developed and maintains a compensation program that rewards superior performance and seeks to encourage actions that drive our business strategy. Our compensation strategy is to provide a competitive opportunity for senior executives, taking into account their total compensation packages, which include a combination of base salary, an annual cash- and stock-basedcash-based incentive bonus, (with the stock-based component taking the form of restricted stock subject to time-based vesting), and long-term performance-based and time-based equity awards. At the NEO level, a significate portion of our incentive compensation arrangements are designed to reward the achievement of long-term milestone objectives related to real estate development whichthat are measurable and instrumental to our success. This will drive the creation of value, as well as the achievement ofyear-to-year operating performance goals.
Overall Compensation Plan Design.Design and Core Tenets
The compensation policies developed by the Compensation Committee are based on the philosophy that compensation should reflect both financial and operational performance of the Company, the success of the
Company in achieving real estate development milestones, and the individual performance of theeach executive. The Compensation Committee also believes that long-term incentives should be a significant factor in the determination ofdetermining compensation, particularly because the business of real estate development, including obtaining complex entitlement approvals, andmanaging the litigation process, completing development, and many of the other actions and decisions of our named executive officers,NEOs requires a longan extended time horizon before the Company realizes a tangible financial benefit.
The Compensation Committee’s objectives when settingfollowing core tenets inform the design of our compensation for our named executive officers are:plan.
Competitive Pay Opportunity |
✓ We pay competitively to attract, motivate, and retain the executives who drive our success and industry leadership. |
Equity Incentives |
✓ A significant percentage of annual target pay opportunity is in equity to incentivize a long-term focus and promote strong alignment with stockholders. |
Sustainable Long-Term Performance |
✓ A large majority of total pay is subject to multi-year vesting or performance requirements. |
Explicit Pay and Performance Link |
✓ We explicitly tie pay to performance by delivering a large majority of pay through performance-based cash and equity incentives. |
Compensation Governance |
✓ We discourage unnecessary and excessive risk-taking through our vesting and stockholding requirements and clawback provisions. |
The principles of our pay philosophy influence the design and administration of our executive compensation levelsprograms. The Compensation Committee uses several components of pay that are sufficiently competitive withinlinked to both our long-term and short-term performance in the real estate industry, as compared toexecutive compensation programs, including long-term incentives, annual cash incentives, base pay, and benefits. The chart below illustrates the peer group,linkage between the vehicles of pay we use and based on the experienceour pay principles.
Pay Principles | Long–term Incentives | Annual Cash Incentives | Base Pay | Benefits | ||||
Total compensation should reinforce business objectives and values. | ● | ● | ● | ● | ||||
A significant portion of an NEO’s total compensation should be variable and based on performance | ● | ● | ||||||
Incentive compensation should balance long-term intermediate, and short-term performance. | ● | ● | ||||||
Incentive compensation should align the interests of NEO’s with stockholders. | ● | ● | ||||||
Compensation should foster a culture of collaboration which shares focus and commitment to our Company | ● | ● | ||||||
Compensation opportunities should be competitive. | ● | ● | ● | ● | ||||
A portion of compensation should provide NEOs with a stable predictable source of income and benefits. | ● | ● |
Our Executive Compensation Best Practices
WHAT WE DO | WHAT WE DO NOT DO | |
✓ Utilize multiple performance metrics in our incentive plans tied to our short- and long-term goals equity vehicles | × Provide taxgross-ups for executive officers on perquisites orchange-in-control severance payments | |
✓ Employ common short-term goals for the majority of our NEOs’ bonus opportunities | × Allow hedging of TRC stock | |
✓ Provide a majority of equity compensation opportunity through performance-based goals | × Allow pledging of TRC stock | |
✓ Align a significant portion of long-term equity opportunity to project milestones that are linked to stockholder value creation | × Allow holding of TRC stock in margin accounts | |
✓ Adhere to an executive compensation recovery, or clawback, policy to ensure accountability | × Reprice or replace equity awards | |
✓ Require executives and directors to own Company stock to reinforce the alignment of their interests with those of our stockholders | × Provide “single trigger” cash severance based solely upon a change in control of the Company | |
✓ Utilize an independent compensation consultant who reports directly to the Compensation Committee | × Provide large bonus payouts without justifiable performance linkage | |
✓ Recognize an independent Chairman of the Board in our corporate governance structure | × Provide guaranteed bonuses | |
✓ Provide an annual stockholder “say on pay” vote | × Time equity awards in coordination with the release of materialnon-public information |
The Role of the Compensation Committee such that they will motivate and reward the highest-quality individuals to contribute to our goals, objectives, and overall financial success;
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Pay Mix Analysis.
The mix of total compensation elements for our NEOs in 2014, as a percentage of total compensation, is set forth in the table below. Note that the 2014 CEO values represent the first full year of employment for our new CEO.
The pay component percentages illustrate that variable compensation comprises a significant percentage of total compensation. The emphasis on variable compensation supports the Compensation Committee’s goal of a pay-for-performance orientation with a significant percentage of total compensation at risk. Also evident in the table below is the importance placed by the Compensation Committee on long-term compensation elements. The Company’s business is long-term in nature. Therefore, the compensation program places strong emphasis on long-term pay opportunity to link the executive pay programs to the business strategy.
Named Executive Officer | Fixed Compensation (as a % of Total Compensation) | Variable Compensation (as a % of Total Compensation) | ||||||||||||||||||
Base Salary | Annual Incentives | LTIP - Time Vested Restricted Stock | LTIP - Project Milestones | LTIP - Performance Shares | ||||||||||||||||
CEO 2014 | 26 | % | 21 | % | 11 | % | 21 | % | 21 | % | ||||||||||
CEO 2015 Target | 33 | % | 27 | % | 13 | % | 1. | 27 | % | |||||||||||
Other NEOs 2014 (Average) | 34 | % | 21 | % | 9 | % | 18 | % | 18 | % | ||||||||||
Other NEOs 2015 Target (Average) | 43 | % | 26 | % | 10 | % | 1. | 21 | % |
The chart below compares the six-year change in CEO compensation and the change in value of $100 invested in the Company (indexed total stock return, or TSR). CEO compensation has decreased over the period, while the change in value of the $100 investment has increased over the period. 2010 CEO compensation is significantly higher than other years due to performance milestone grants awarded that year. The milestone grants, which comprised a significant portion of long-term compensation, represented long-term pay opportunity for 2004 – 2015.
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The Role of Compensation Committee in Setting Compensation.Compensation
The Compensation Committee of the Board approves all compensation and awards to senior management, including the Chief Executive Officer and the other named executive officers.NEOs. The Compensation Committee independently reviews and establishes the compensation levels of the Chief Executive Officer; it also reviews the performance of the Chief Executive Officer and discusses his performance with him. At the beginning of the year, the Chief Executive Officer works with the Compensation Committee to establish his goals and objectives to be evaluated throughout the year. For the remaining executive officers, the Chief Executive Officer makes recommendations as to compensation levels, including grants of equity awards, for final approval by the Compensation Committee, which then makes its recommendation to the full Board of Directors for its approval.Committee.
The Role of the Compensation Consultant.Consultant
During the second half of 2013,In accordance with its Charter, the Compensation Committee hired an outside consultant,has the sole authority to retain and terminate independent consultants on matters of executive compensation and benefits, including sole authority to approve the consultant’s fees and other retention terms. The Compensation Committee also has the authority to obtain advice and assistance for internal and external legal, accounting, or other advisors. The Compensation Committee utilizes the POE Group, Inc. as its compensation consultant. The POE Group reports directly to prepare a newthe Compensation Committee. The POE Group was not engaged to perform any additional services beyond its support of the Compensation Committee.
In reviewing conflicts of interest, our Compensation Committee considered the following six factors with respect to the POE Group:
• The provision of other services to the Company. |
• The amount of fees received from the Company as a percentage of the POE Group’s total revenue. |
• The policies and procedures of the POE Group that are designed to prevent conflicts of interest. |
• Any business or personal relationship of the POE Group with a member of the Compensation Committee. |
• Any Company stock owned by the POE Group. |
• Any business or personal relationship of the POE Group with any of the Company’s executive officers. |
Upon consideration of these factors, our Compensation Committee concluded that the engagement of the POE Group did not present any conflicts of interest.
In connection with its engagement by the Compensation Committee, the POE Group has:
• Provided information, insights, and advice regarding compensation philosophy, objectives, and strategy. |
• Recommended peer group selection criteria and identified and recommended potential peer companies. |
• Provided preliminary analysis of competitive compensation practices for NEOs. |
• Consulted with the Compensation Committee on long-term incentive and equity plan design. |
• Reviewed and commented on recommendations regarding CEO and NEO compensation. |
• Advised the Compensation Committee on specific issues as they arose. |
The POE Group has worked with compensation committees and senior management teams in real estate development companies for over fifteen years.
Compensation Risk Assessment
As part of its risk assessment process, the Compensation Committee reviewed material elements of executive officerandnon-executive employee compensation. The Compensation Committee requestedconcluded these policies and practices do not create risk that is reasonably likely to have a material adverse effect on the POE Group’s adviceCompany.
The structure of our compensation program for NEOs does not incentivize unnecessary or excessive risk-taking. The base salary component of compensation does not encourage risk taking because it is a fixed amount. The incentive plan awards have the following risk limiting characteristics:
✓ Annual incentive awards for each NEO are limited to the fixed maximum specified in the incentive plan. Cash awards under the annual incentive plan are limited to 150% of the target cash award. |
✓ Annual incentive awards are based on a review of a variety of performance factors, thus diversifying the risk associated with any single aspect of performance, while amounts received from performance stock awards are based on Company results rather than an individual executive officer’s performance. |
✓ The variable compensation program places a greater weight on long-term pay opportunity as compared to short-term opportunity. |
✓ The annual incentive plans allocates the highest weighting on overall corporate performance. |
✓ Stock awards are not tied to formulas that could focus our NEOs on specific short-term outcomes. |
✓ The Compensation Committee, which is composed of independent members of our Board, approves final incentive plan cash and stock awards in its discretion after reviewing executive and corporate performance. |
✓ Awards are subject to our clawback policy. |
✓ The majority of long-term value is delivered in shares of the Company with a multi-year vesting schedule, which aligns the interests of our NEOs to the long-term interests of stockholders. |
✓ NEOs are subject to our executive stock ownership requirements. |
2017 Executive Compensation Plan Developments
Our annual incentive compensation plan (“AICP”) has four primary performance measures:
1. | Achievement of targeted adjusted (“EBITDA”). |
2. | Achievement of targeted corporate revenue. |
3. | Achievement of short-term milestone goals, which are defined each year. |
4. | Divisional quantitative/individual measures. |
The specific weight attached to each performance measure is dependent on each NEO’s responsibilities. Corporate goals have a varietygreater weight than divisional goals for all positions, which encourages mutual accountability among the executive team.
Our long-term incentive plan (“LTIP”) consists of matters, includingthree equity delivery vehicles:
1. | Project-related milestone grants reflect the first phase of stockholder value creation. Project-related milestones are awarded once every three years and are tied to specific business objectives. The Compensation Committee believes that accomplishing these goals are paramount to achieving our long-term real estate development goals. The value of the milestones grants are three times that of an award that would normally be granted every year. The performance milestone focus is on identifying projects, securing entitlement, permit, and mapping approvals, and project implementation of our real estate holdings. These milestone performance units have specific defined goals that are measurable and not subjective. This component of our LTIP delivers 40% of the long-term compensation opportunity. New performance milestone grants were determined by the Compensation Committee for the next three-year measurement period beginning in 2017 and are described in more detail below. |
2. | Three-year performance share grants capture the second phase of value creation: the management and creation of cash flow. The Compensation Committee has selected three-year cumulative corporate operating cash flow as the performance share plan metric. These grants are made on an annual basis. This component of our LTIP delivers 40% of the long-term compensation opportunity. |
3. | Time-vested restricted stock units are the final component of our LTIP. This element in the plan design recognizes the inherent risk in large-scale land development. Time-vested restricted stock units help balance the performance orientation of our approach with the objective of retaining our executive team. The grants vestone-third each year for three years. This component of our LTIP delivers 20% of the long-term compensation opportunity. |
The Compensation Committee believes that long-term performance award design reflects the formvalue creation process inherent in large-scale land development by first identifying projects, securing complex entitlements, managing litigation, mapping projects, and then developing the projects to maximize financial returns. Please refer to earlier graphic describing the land entitlement and development process within California.
Pay Mix Analysis
The target mix of total direct compensation elements for our NEOs, as a percentage of total compensation, is set forth in the table below. The first set of exhibits illustrates the three-year direct compensation target selected by the Compensation Committee. We show a three-year period to account for the granting of project milestone equity performance grants that occurs once every three years. A project milestone grant was most recently made in March 2017. For comparison purposes, the second set of exhibits shows the 2015 – 2017 actual direct compensation granted pay mix. The actual to target direct comparison shows that we are in line with the three-year target and that the CEO’s long-term equity portion has increased as a percentage of his total direct compensation. This increase in the CEO’s long-term equity compensation is consistent with the intent of the Compensation Committee to have a greater percentage of pay tied to equity performance milestones.
Variable Compensation | |||||||||||||||
Named Executive Officer—Target Mix | Base Salary | Annual Incentives | (2) Long-Term Equity | ||||||||||||
CEO3-Year Target (1)
|
| 25%
|
|
| 25%
|
|
| 50%
|
| ||||||
Other NEOs3-Year Target (1)
|
| 33%
|
|
| 22%
|
|
| 45%
|
|
CEO PAY MIX 3-YR TARGETLong-Term Equity, 50% Salary, 25% Variable Cash, 25%OTHER NEO PAY MIX 3-YR TARGETLong-Term Equity, 45% Salary, 33% Variable Cash, 22%
In comparison to the above three-year target pay mix the actual granted pay mix is shown in the chart and table below:
Named Executive Officer – Actual Granted Pay Mix | Base Salary | Annual Incentives | (2) Long-Term Equity | ||||||||||||
CEO3-Year Target (1)
|
| 21%
|
|
| 21%
|
|
| 58%
|
| ||||||
Other NEOs3-Year Target (1)
|
| 31%
|
|
| 17%
|
|
| 52%
|
|
1. | The three-year measurement period covers 2015 – 2017. LTIP milestone equity grants were made in 2017. |
2. | Includes LTIP milestone equity grants that are made once every three years and are tied to specific milestones that lead to the achievement of development objectives. For this three-year period, the grants were made in 2017. |
Realized vs. Summary Compensation Table Pay
The Summary Compensation Table (“SCT”) summarizes executive compensation, compensation strategy, market comparisons,pay but does not account for the final payout of performance shares, if any, or the impact of changes to stock price on the value of restricted stock. Since the majority of awards under the Company’s LTIP do not fully vest until after three years, it can be difficult to assess the link between pay and performance alignment versus peers,by reviewing the SCT alone. For this reason, we also consider realized pay. Realized pay trends,demonstrates theactual impact on executive pay of changes in our share price during the performance period, as well as the payout of performance shares. Shares of restricted stock that vest during the applicable time period are valued at the date of vesting, and potentialperformance shares, if any, are valued at the date of payout.
CEO PAY MIX 3-YR ACTUALLong-Term Equity, 58% Salary, 21% Variable Cash, 21%OTHER NEO PAY MIX 3-YR ACTUALLong-Term Equity, 52% Salary, 31% Variable Cash, 17%
Realized vs. Summary Compensation Table Pay for the CEO: 2015 through 2017
The graph below illustrates three-year average SCT (“SCT Pay”) total compensation plan designscompared to three-year average realized total compensation for our CEO for the 2015-2017 period. The graph illustrates no differences between the comparisons for salary, cash incentives, or other annual compensation. However, the difference between long-term compensation values is significant, and modifications. the amount realized from the vesting of shares is considerably less than the value of equity grants reported in the SCT.
3-year CEO Average SCT Pay vs. Realized $3,000,000 $2,000,000 $1,000,000 $0 $23,328 $1,642,740 $587,862 $584,722-21% $23,328 [VALUE] $587,862 $584,7223-Year Total SCT Pay3-Year Total Realized Pay Salary Value of Shares Vested Cash Incentives Paid All Other Compensation Value of Equity Granted
Realized vs. Summary Compensation Table Pay for NEOs (other than the CEO): 2015 through 2017
Average NEO realized compensation over the three-year period ended December 31, 2017 was significantly lower than SCT Pay over the same period. Again, the difference between long-term compensation values is significant, and the amount realized from the vesting of shares is considerably less than the value of equity grants reported in the SCT.
3-year Average NEO SCT Pay vs. Realized $1,200,000 $1,000,000 $800,000 $600,000 $400,000 $200,000 $0 $129,404 $399,044 $186,470 $251,410-20% $129,404 $205,599 $186,470 $251,4103-Year Average SCT Pay3-Year Average Realized Pay Salary Value of Shares Vested Cash Incentives Paid All Other Compensation Value of Equity Granted
CEO Compensation vs. TSR: 2012 through 2017
The POE Group met withchart below compares the five-year change in CEO SCT pay and the change in value of $100 invested in the Company (indexed total stock return, or TSR). CEO compensation has increased over the period, while the change in value of the $100 investment has decreased over the period. CEO compensation in 2014 and 2017 was higher than in other years due to three-year performance milestone grants being awarded during those years, and 2016 compensation increased as a result of supplemental performance milestone award grants that have measurement periods at the end of 2017 and 2019. The 2014 and 2017 milestone grants, which comprised a significant portion of long-term compensation, represented long-term pay opportunity for 2014 – 2016 and 2017 – 2019.
CEO Total Compensation $4,000,000 $3,000,000 $2,000,000 $1,000,000 $0 2012 2013 2014 2015 2016 2017 $200 $150 $100 $50 $0 Indexed TSR CEO Total Compensation Indexed TSR Linear (CEO Total Compensation) Linear (Indexed TSR)
CEO Realized Pay vs. TSR: 2012 through 2017
The Compensation Committee withcontinues to emphasize ourpay-for-performance philosophy, and without management on several occasions during lateconsiders the relationship between realized pay and TSR. The decline in value realized by our CEO demonstrates the strong link between pay actually delivered and stockholder returns. The chart below compares the five-year change in our CEO’s realized compensation and the change in value of $100 invested in the Company (indexed total stock return, or TSR). While the change in value of the $100 investment decreased over the period, CEO realized compensation also decreased, demonstrating strong alignment between TSR and CEO pay actually realized.
Note: Pay values in 2012 and 2013 and early 2014 with respect to 2014 compensation plans.are for our previous CEO, Robert Stine. Pay value for 2014-2017 are for our current CEO, Gregory Bielli.
Market Comparison Review.Review – 2017 Peer Group
Although the Compensation Committee does not believe that it is appropriate to establish compensation levels based solely on market comparisons or industry practices, the Compensation Committee believes that information regarding pay practices at other companies is useful in three respects. First, marketplace information is one of the many factors that the Compensation Committee considers in assessing the reasonableness of compensation. Second, it recognizes that our compensation practices must be generally competitive for executive talent in the real estate, land development, and agriculture industries and the market overall. Third, it recognizes that marketplace information reflects emerging and changing components and forms of compensation. While the Compensation Committee considers peer compensation levels and practices when making its compensation decisions, it does not target compensation at any particular point within a range established by a comparison of the financial performance or compensation levels of our peer companies.
In 2014,2016, the Compensation Committee, with guidance from our independent compensation consultant, the POE Group, reviewed companies for inclusion in our 2017 peer group. The goal was to identify companies that are engaged in real estate development activities and are appropriate for comparison purposes based on revenues and market capitalization. The Compensation Committee compared NEOs’ total compensation against athe peer group when evaluating 2017 compensation. In comparison to the peer group, TRC CEO pay is at the top of publicly tradedthe rankings as a result of 2017 performance milestone grants as described in the Equity Compensation section beginning on page 44. The performance milestone grants at TRC differ from peers because the business model causes the need to incent executives long-term to identify projects, secure entitlements, permit, map approvals,
CEO Realized Pay $7,000,000 $6,000,000 $5,000,000 $4,000,000 $3,000,000 $2,000,000 $1,000,000 $0 2012 2013 2014 2015 2016 2017 $0 $50 $100 $150 $200 Indexed TSR CEO Realized Pay Indexed TSR Linear ( CEO Realized Pay) Linear (Indexed TSR)
and project implementation of real estate landholdings. Long-term payouts, once achieved, sometimes lead to a perceived misalignment between pay and performance because the actual benefits are not seen until years after. This differs from other real estate companies (the 2014that are able to have a much quicker turn around in profit.
Note in the table below that TRC’s revenue is below the majority of the peer group, but market capitalization is at the peer group median. The Compensation Report).Committee believes that market capitalization is a more appropriate criterion for comparison to peer companies, considering that our primary assets are under development and are not yet producing their projected revenues. The peer companies have monetized their majority of their real estate assets and are comparatively producing greater revenues as a percentage of market capitalization.
The 2017 peer group data is shown below. The related comparison statistics are based on 2014 and 2013 results and consisted of2016 financial data which was relied on by the following companies:Compensation Committee in approving the 2017 peer group.
Company Name | YE Revenues ($MM) | YE Net Income ($MM) | Market Capitalization ($MM) | Location | ||||
Alexander & Baldwin | 568 | 61 | 1,921 | Honolulu, HI | ||||
Alico | 94 | 8 | 370 | La Belle, FL | ||||
Campus Crest Communities * | 78 | (135) | 475 | Charlotte, NC | ||||
Consolidated-Tomoka Land | 36 | 6 | 335 | Daytona Beach, FL | ||||
Cousins Property | 372 | 52 | 2,495 | Atlanta, GA | ||||
Deltic Timber | 227 | 20 | 888 | El Dorado, AR | ||||
Excel Trust | 139 | 9 | 817 | San Diego, CA | ||||
Forestar Group | 324 | 17 | 570 | Austin, TX | ||||
Limoneira | 104 | 7 | 321 | Santa Paula, CA | ||||
Monmouth RE Investment | 71 | 20 | 481 | Freehold, NJ | ||||
Pope Resources | 132 | 12 | 252 | Poulsbo, WA | ||||
St. Joe Company | 719 | 406 | 1,692 | WaterSound, FL | ||||
Stratus Properties | 95 | 13 | 110 | Austin, TX | ||||
Tejon Ranch Company | 57 | 6 | 608 | Tejon Ranch, CA | ||||
TRC Percentile Rank | 8% | 8% | 62% |
Agree Realty | Forestar Group | |||||
Alexander & Baldwin | Kite Realty Group | |||||
Alico | Limoneira | |||||
AV Homes | One Liberty Properties | |||||
BRT Realty Trust | Retail Opportunity Investments | |||||
Consolidated-Tomoka Land | Saul Centers | |||||
Cousins Properties | St. Joe Co. | |||||
First Industrial Trust | Stratus Properties |
Peer Company Data Comparison
(Dollars in Millions) | Peer Median (1) | Tejon (2) | Tejon Percent Rank | |||||||
Total Revenues
| $
| 171
|
| $
| 54
|
| 3%
| |||
Market Capitalization
| $
| 879
|
| $
| 529
|
| 44%
| |||
Net Income
| $
| 28
|
| $
| .6
|
| 13%
|
(1) | Peer company data as of December 31, 2016; September 30, |
(2) | Tejon company data as of December 31, 2016. |
(3) | Tejon 2017 Company data: Total revenues $41; Market capitalization $538; and Net loss $1.6. |
21
Elements of Compensation.Compensation
The Compensation Committee seeks to create a compensation plan that is balanced in its use of short-term and long-term compensation elements in order to align management’s incentives with the long-term interests of our stockholders. In developing the compensation plan, the Compensation Committee seeks to be aware of changing economic and industry conditions, andas well as changing compensation trends. In achievingTo achieve these objectives, the plan uses a variety of compensation elements are used as described below.
Compensation Component | Objective | Characteristics | ||
Base Salary | Provide a fundamental level of compensation to the NEOs for performing their roles and assuming their levels of responsibility. | Fixed cash component, annually reviewed | ||
Annual Incentive Bonus | Drive the achievement of performance goals in a particular fiscal | Annual incentive bonuses are paid | ||
Long-Term Incentive Compensation | Promote the achievement of our long-term financial goals and development milestone goals to create value by aligning NEO and stockholder interests, promoting NEO retention, and rewarding NEOs for performance over time. | Long-term incentive compensation is in the form of performance | ||
22
Base Salaries.Salaries
When establishing base salaries, the Compensation Committee takes into account each NEO’s performance of his role and responsibilities and, to the extent useful, the range of compensation of comparable executives in aour peer group. The Compensation Committee believes that compensation objectives are effectively met when a majority of an executive’s compensation is composed of performance-based bonuses and long-term incentive compensation, rather than fixed compensation such as base salaries. We believe that having the overall compensation emphasis on long-term equity incentives instead of short-term fixed compensation better aligns management with stockholders.
In 2013, the
The Compensation Committee approved the following 20142016 and 2017 base salaries for our NEOs.
Name | 2013 Base Salary | 2014 Base Salary | Percent Increase | 2016 Salary | 2017 Salary | Percent Increase | Peer Group Rank | |||||||||||||
Gregory S. Bielli | $ | 475,000 | $ | 475,000 | 0 | % | $600,000
| $625,000
| 4.2%
| 58%
| ||||||||||
Allen E. Lyda | $ | 275,000 | $ | 283,250 | 3 | % | $300,245
| $309,252
| 3%
| 55%
| ||||||||||
Joseph E Drew | $ | 231,750 | $ | 250,000 | 8 | % | ||||||||||||||
Dennis J. Atkinson | $ | 190,556 | $ | 196,260 | 3 | % | ||||||||||||||
Gregory Tobias | $ | 242,050 | $ | 249,300 | 3 | % | ||||||||||||||
Joseph N. Rentfro
| $256,250
| $261,375
| 2%
| 20%
| ||||||||||||||||
Hugh F. McMahon
| $240,875
| $248,101
| 3%
| 13%
| ||||||||||||||||
Michael R.W. Houston |
$250,000 |
$255,000 |
2% |
17% |
In deciding to keep Mr. Bielli’s 2014 base salary at $475,000, theThe Compensation Committee determined thatat the total compensation package for the Chief Executive Officer, includingend of 2016 to provide Mr. Bielli with an increase in base salary is competitive withfor 2017. The Compensation Committee approved the market, based onincrease in light of the following considerations: a reviewcomparison of CEO salaries in the peer group, information,recognition of Mr. Bielli’s leadership and contribution to our long-term goals related to land entitlement and master planned community development, the general experience of the Compensation Committee’s members in our industry, the Company’s current stage within the land development process, the current economic environment, the status of the current real estate industry and market, and how these factors impact current compensation levels.
The base salaries for Mr. Lyda, Mr. Atkinson, and Mr. Tobias were increased by 3%, while Mr. Drew’s base salary was increased by 8%. When granting thesethe salary increases for 2017 for the other NEOs, the Compensation Committee, along with the Chief Executive Officer, performed an annual review of each of the other named executive officers’NEOs’ salaries and evaluated possible changes to base salary for each of the other named executive officers for 2014. The Compensation Committee also took into accountsalary. This review considered several factors, including peer group information, in evaluating salary increases. Mr. Drew’s 8% increase also reflects increased operational responsibilities.the market for similar job functions, the economic environment, and the general experience of the Compensation Committee members.
In December 2014,2017, the Compensation Committee determined that for 2015,2018, our Chief Executive Officer’s salary would be increased by 5% to $500,000remain at $625,000 and the base salaries of the other NEOs would be increased by 0% to 3%. for 2018. The exception being Mr. Lyda who received at 5.1% increase due to the addition of new job responsibilities. In determining the 20152018 salary levels, the Compensation Committee evaluated overall companyCompany performance, peer group information, base salary compensation in relation to total compensation, and information from the PoePOE Group, aour compensation consultant.
Annual Performance-Based Incentive Bonuses.
Tejon’s practice is to award annual incentive bonuses based upon the achievement of performance objectives established at the beginning of each year. Each named executive officer at a minimum hasAt least 50% of the annual incentive bonus for each NEO is based upon adjusted total company revenues and adjusted EBITDA. Each NEO also has atAt least 20% to 30% of the annual incentive bonus for each NEO is tied to corporate short-term objectives that are defined and measureable.measurable. The remaining 20% to 30% of the annual incentive is tied to divisional revenues and earnings and identified individual objectives that the Compensation Committee believes are important for the particular named executive officerNEO to focus on in the context of achieving the Company’s long-term strategicshort-term goals and creating stockholder value.generating revenue and EBITDA. Annual incentive bonuses are paid in restricted stock (which is subject to time-based vesting conditions following the award of the annual bonus) and cash, with restricted stock equaling at least one-quarter of the annual incentive payment. Vesting of restricted stock issued in settlement of 2014 annual bonuses will occur in two installments, one-half each year, beginning in March 2016 and ending in March 2017. cash.
The attainment of each year’s quantitative financial goals for each of the named executive officersNEOs is uncertain and is dependent upon factors such as real estate sales and leasing programs, the timing of entitlement activities for our developments, and the uncertainty
23
inherent in our farming and mineral operations due to the commodity nature of the products we produce and the fact that we do not know the pricesultimate price we will receive for our products until harvest begins for a particulareach year. The achievement of individual objectives tied to land entitlement, development, and conservation efforts are veryis highly dependent on working with groups outside of the Company, such as government agencies, local county planning departments, and environmental resource groups, all of which make the timing of achieving specific steps in the process very complicated. Accordingly, goal achievement under the annual bonus plan is not guaranteed.
The following chart provides the performance level weightings for the Chief Executive Officer and the other named executive officers who were employed for the entire fiscal year and were eligible to receive an annual performance-based incentive bonus.NEOs.
Weighted Measures | Gregory S. Bielli - Chief Executive Officer | Allen E. Lyda - Chief Financial Officer | Joseph E. Drew - SVP Real Estate | Dennis Atkinson - SVP- Agriculture | Greg J. Tobias - VP General Counsel | Gregory S. Bielli - Chief Executive Officer | Allen E. Lyda - Chief Financial Officer | Joseph Rentfro - EVP Real Estate | Hugh F. Estate | Michael R. W. Houston SVP General Counsel | ||||||||||||||||||||
Corporate Quantitative Measurements | Corporate Quantitative Measurements
| |||||||||||||||||||||||||||||
EBITDA | 45 | % | 45 | % | 40 | % | 40 | % | 45 | % | ||||||||||||||||||||
Total Company Revenue | 15 | % | 15 | % | 10 | % | 10 | % | 15 | % | ||||||||||||||||||||
Adjusted EBITDA
| 40%
| 40%
| 40%
| 40%
| 40%
| |||||||||||||||||||||||||
Adjusted Total Company Revenue
| 10%
| 10%
| 10%
| 10%
| 10%
| |||||||||||||||||||||||||
|
|
|
|
| ||||||||||||||||||||||||||
Corporate Quantitative Measurements | 60 | % | 60 | % | 50 | % | 50 | % | 60 | % | 50%
| 50%
| 50%
| 50%
| 50%
| |||||||||||||||
Corporate Short-Term Objectives | ||||||||||||||||||||||||||||||
Establish Water Operations | 10 | % | 10 | % | 10 | % | 10 | % | 10 | % | ||||||||||||||||||||
Outlet Center Development | 20 | % | 20 | % | 10 | % | 10 | % | 20 | % | ||||||||||||||||||||
Corporate Short-Term Objectives
| ||||||||||||||||||||||||||||||
Grapevine Business Plan approval
| 6%
| 6%
| 6%
| 4%
| 6%
| |||||||||||||||||||||||||
Completion of building for lease on time and budget
| 12%
| 12%
| 12%
| 8%
| 12%
| |||||||||||||||||||||||||
Approval of tentative tract map – Mountain Village | 12% | 12% | 12% | 8% | 12% | |||||||||||||||||||||||||
|
|
|
|
| ||||||||||||||||||||||||||
Corporate Short-Term Objectives | 30 | % | 30 | % | 20 | % | 20 | % | 30 | % | 30%
| 30%
| 30%
| 20%
| 30%
| |||||||||||||||
Divisional Quantitative / Qualitative Measurements: | Divisional Quantitative / Qualitative Measurements
| |||||||||||||||||||||||||||||
Division Revenue | 0 | % | 0 | % | 6 | % | 6 | % | 0 | % | 0%
| 0%
| 0%
| 6%
| 0%
| |||||||||||||||
Division Net Operating Income | 0 | % | 0 | % | 9 | % | 9 | % | 0 | % | 0%
| 0%
| 0%
| 9%
| 0%
| |||||||||||||||
Individual Objectives | 10 | % | 10 | % | 15 | % | 15 | % | 10 | % | 20% | 20% | 20% | 15% | 20% | |||||||||||||||
Divisional Qualitative/Qualitative Weighting | 10 | % | 10 | % | 30 | % | 30 | % | 10 | % | ||||||||||||||||||||
|
|
|
|
| ||||||||||||||||||||||||||
Divisional Quantitative/Qualitative Weighting | 20% | 20% | 20% | 30% | 20% | |||||||||||||||||||||||||
|
|
|
|
| ||||||||||||||||||||||||||
Total Weighting | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | 100% | 100% | 100% | 100% | 100% | |||||||||||||||
|
|
|
|
|
Generally, the Chief Executive Officer’s individual objectives are tied to land entitlement, public outreach in support of entitlement, and development and conservation goals as well as operational, strategic planning, and staffing objectives. The individual objectives for the other NEOs are generally related to land entitlement, development, and operational goals that support the achievement of corporate entitlement and development goals. The Compensation Committee, after taking into account the Chief Executive Officer’s recommendations, sets the specific weighting for the individual objectives of each NEO at 10%15% to 15%20% of the total annual bonus.bonus opportunity. This judgment is based on the relative importance of a specific objective in moving the Company forward in achieving its long-term goals and objectives, and also each NEO’s direct role in achieving such objective.
The annual incentive plan is structured and bonus levels are determined based upon the level of achievement of threshold, target, and maximum performance of quantitative and qualitative objectives. If achievement of a performance objective is below threshold, no incentive bonus is earned for that objective, and if achievement is greater than maximum, the maximum bonus level is earned. The Chief Executive Officer and the other NEOs have different cash incentive payopportunity levels (expressed as a percentage of base salary) for achievement at the threshold, target, and maximum levels. These percentage levels are based onin line with information provided by the POE Group, a 2014compensation consulting group reporting to the Compensation Report that compared prior target bonus levels with market levels and determined that the Company was below competitive levels. Committee.
The target percentage levels below are based on a range of 80% to 90% of the competitive ranges determined in the 2014 Compensation Report.outlined below.
Threshold | Target | Maximum | ||||||||||
Gregory S. Bielli, Chief Executive Officer | 40.00 | % | 80.00 | % | 120.00 | % | ||||||
Allen E. Lyda, Chief Financial Officer | 30.00 | % | 60.00 | % | 90.00 | % | ||||||
Joseph E. Drew, Senior Vice President, Real Estate | 35.00 | % | 70.00 | % | 105.00 | % | ||||||
Dennis J. Atkinson, Senior Vice President, Agriculture | 30.00 | % | 60.00 | % | 90.00 | % | ||||||
Gregory J. Tobias, Vice President, General Counsel | 30.00 | % | 60.00 | % | 90.00 | % |
Threshold | Target | Maximum | ||||||||||
Gregory S. Bielli, Chief Executive Officer
|
|
50.00
|
%
|
|
100.00
|
%
|
|
150.00
|
%
| |||
Allen E. Lyda, Chief Financial Officer
|
|
35.00
|
%
|
|
70.00
|
%
|
|
105.00
|
%
| |||
Joseph N. Rentfro, EVP, Real Estate
|
|
35.00
|
%
|
|
70.00
|
%
|
|
105.00
|
%
| |||
Hugh F. McMahon, EVP, Real Estate
|
|
35.00
|
%
|
|
70.00
|
%
|
|
105.00
|
%
| |||
Michael R.W. Houston SVP, General Counsel
|
|
30.00
|
%
|
|
60.00
|
%
|
|
90.00
|
%
|
24
The following chart provides a breakdown of 2014 annual incentive award measurement by performance measurement categories and the total 2014 incentive award as a percentage of salary. Final award measurement for the named executive officers reflect actual results. The award measurement percentage for each NEO for each category is a number between target and maximum or maximum achievement for 2014. As an example, if the EBITDA goal achievement for a particular year was 25% in excess of target, then the award measurement for the CEO would be 100% for that year, or 1.25 times his target level of 80%:
Weighted Measures | Gregory S. Bielli - Chief Executive Officer | Allen E. Lyda - Chief Financial Officer | Joseph E. Drew - SVP Real Estate | Dennis Atkinson - SVP Agriculture | Greg J. Tobias - VP General Counsel | |||||||||||||||
Corporate Quantitative Measurements | ||||||||||||||||||||
EBITDA | 45.00 | % | 45.00 | % | 40.00 | % | 40.00 | % | 45.00 | % | ||||||||||
Incentive Payout Factor | 120.00 | % | 90.00 | % | 105.00 | % | 90.00 | % | 90.00 | % | ||||||||||
Weighted Total | 54.00 | % | 40.50 | % | 42.00 | % | 36.00 | % | 40.50 | % | ||||||||||
Total Company Revenue | 15.00 | % | 15.00 | % | 10.00 | % | 10.00 | % | 15.00 | % | ||||||||||
Incentive Payout Factor | 85.60 | % | 64.20 | % | 74.90 | % | 64.20 | % | 64.20 | % | ||||||||||
Weighted Total | 12.84 | % | 9.63 | % | 7.49 | % | 6.42 | % | 9.63 | % | ||||||||||
Corporate Short-Term Objectives | ||||||||||||||||||||
Blended Short-term Objectives | 30.00 | % | 30.00 | % | 20.00 | % | 20.00 | % | 30.00 | % | ||||||||||
Incentive Payout Factor | 87.15 | % | 65.37 | % | 83.45 | % | 60.00 | % | 65.37 | % | ||||||||||
Weighted Total | 26.14 | % | 19.61 | % | 16.69 | % | 12.00 | % | 19.61 | % | ||||||||||
Divisional Quantitative / Qualitative Measurements | ||||||||||||||||||||
Blended Revenue/Net Operating Income | 0.00 | % | 0.00 | % | 15.00 | % | 15.00 | % | 0.00 | % | ||||||||||
Incentive Payout Factor | 0.00 | % | 0.00 | % | 92.60 | % | 79.68 | % | 0.00 | % | ||||||||||
Weighted Total | 0.00 | % | 0.00 | % | 13.89 | % | 11.95 | % | 0.00 | % | ||||||||||
Individual Objectives | 10.00 | % | 10.00 | % | 15.00 | % | 15.00 | % | 10.00 | % | ||||||||||
Incentive Payout Factor | 175.42 | % | 75.00 | % | 70.00 | % | 90.00 | % | 60.00 | % | ||||||||||
Weighted Total | 17.54 | % | 7.500 | % | 10.50 | % | 13.50 | % | 6.00 | % | ||||||||||
Total | ||||||||||||||||||||
Total Incentive Award as a Percent of Salary | 110.53 | % | 77.24 | % | 90.57 | % | 79.87 | % | 75.74 | % |
Quantitative Financial Goal – Corporate
Because the achievement of entitlemententitlements and the beginning of development for our real estate projects is a very important long-term goal, and because Tejon does not generate significant revenue at this time, its short-term objectives, both quantitative and qualitative, are tied to metrics that are critical for the accomplishment of long-term goals. For our annual incentive, two corporate budgeted financial goals are considered: adjusted EBITDA and adjusted total corporate revenue. Total adjusted corporate revenue includes revenue from operations, gross sales of investment property, other income, and equity in earnings of unconsolidated joint ventures. Our definition of adjusted EBITDA is earnings before interest, taxes, depreciation, amortization, andnon-cash stock compensation. We believe this is a more accurate measurement of the cash used in the operations of the Company. Each named executive officer’s weighting is different based on whether or not they have division revenue and operating income responsibility and the emphasis placed each year on division performance.Adjusted EBITDA is being used with adjusted total revenue because at this stage in the Company’s business, adjusted EBITDA provides a better indicator of management’s creation of operating cash, which is critical to the funding of our entitlement and overall financial performance,development efforts, since the Company has significantnon-cash expenses each year. The following table outlines adjusted EBITDA and adjusted total revenue results for 2014:2017. Adjusted EBITDA for compensation purposes includes only company specific operations and not the add back of our share of unconsolidated joint venture depreciation, amortization and interest expense. Therefore, this number does not agree to the numbers shown in the 2017 Annual Report and Form10-K,Non-GAAP measures.
Corporate Quantitative Goal | Threshold | Target | Maximum | Actual | % of Target | |||||||||||||||
EBITDA | $ | 7,406,000 | $ | 9,874,000 | $ | 14,811,000 | $ | 16,168,000 | 164 | % | ||||||||||
Total Revenue | $ | 40,358,000 | $ | 53,811,000 | $ | 80,717,000 | $ | 57,585,000 | 107 | % |
Corporate Quantitative Goal | 2016 Actual | 2017 Threshold | 2017 Target | 2017 Maximum | 2017 Actual | % of Target | ||||||||||||||||||
Adjusted EBITDA *
|
$
|
9,528,000
|
|
$
|
6,851,000
|
|
$
|
9,134,000
|
|
$
|
13,701,000
|
|
$
|
4,939,000
|
|
|
36.51
|
%
| ||||||
Adjusted Total Revenue **
|
$
|
57,990,000
|
|
$
|
39,715,000
|
|
$
|
52,953,000
|
|
$
|
79,430,000
|
|
$
|
40,499,000
|
|
|
76.48
|
%
|
These performance measurement numbers are determined based on calculations within the Company’s 20142017 business plan and operating budget. The Compensation Committee uses data from each year’s annual budget because it is a reflection of what the Company believes will happen in the coming year based on an analysis of the commodity markets we operate in, anticipated weather patterns that impact our agricultural operations, and sales/leasing activity within TRCC. Our operating budgets we believe are a better predictor of each year’s revenue creation compared to prior year actual numbers, because our forecasting process attempts to pick up trends in the commodity markets we operate in that may not be reflected in the prior year actual numbers.
Using prior year numbers as a target level for comparison to the next year can unfairly benefit or hurt plan participants due to the nature of commodity markets. As you see above the target goal numbers and the 2017 actual numbers are not significantly different. The budgeted target goal for 2017 is less than the prior year actuals due largely to the sale in 2016 of investment real estate that resulted in the receipt of $4,700,000 in proceeds. The 2017 actual results are significantly below target goal numbers and prior year numbers due to the unfavorable variances described earlier in this section on page 23. The tables below reflect actual achievement shown in the format used by the Company internally to measure NEOs performance compared to the approved 2017 operating budget.
* Adjusted EBITDA Actual 2017 Calculation(non-GAAP): | ||||
Loss before income tax benefit | $ | (2,702,000 | ) | |
Interest, net | (462,000 | ) | ||
Depreciation and amortization | 4,551,000 | |||
Stock compensation expense | 3,552,000 | |||
Total Adjusted EBITDA | $ | 4,939,000 | ||
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** Total Adjusted Revenue: | ||||
Real Estate Commercial /Industrial (includes equity in earnings of joint ventures) | $ | 13,630,000 | ||
Mineral Resources | 5,983,000 | |||
Farming | 16,434,000 | |||
Ranch Operations | 3,837,000 | |||
Other Revenue | 615,000 | |||
Total Adjusted Revenue and Other Income (1) | $ | 40,499,000 | ||
(1) | As shown in the 2017 Annual Report filed on Form10-K. |
Quantitative Financial Goal – Division
The following are the division financial results for the SeniorExecutive Vice President, Real Estate and Senior Vice President, Agriculture.Estate.
Name and Principal Position | Threshold | Target | Maximum | Actual | % of Target | |||||||||||||||
Mr. Drew - SVP Real Estate Revenue Goal | $ | 5,530,000 | $ | 7,373,000 | $ | 11,060,000 | $ | 7,762,000 | 105 | % | ||||||||||
Mr. Drew - SVP Real Estate Net Income Goal | $ | 470,000 | $ | 626,000 | $ | 939,000 | $ | 1,333,000 | 213 | % | ||||||||||
Mr. Atkinson - SVP Agriculture Revenue Goal | $ | 16,388,000 | $ | 21,851,000 | $ | 32,777,000 | $ | 23,435,000 | 107 | % | ||||||||||
Mr. Atkinson - SVP Agriculture Net Income Goal | $ | 3,155,000 | $ | 4,206,000 | $ | 6,309,000 | $ | 7,185,000 | 171 | % |
Name and Principal Position | Threshold | Target | Maximum | Actual | % of Target | |||||||||||||||
Mr. McMahon – EVP Real Estate | ||||||||||||||||||||
Revenue Goal – Commercial/ Industrial | $ | 13,624,000 | $ | 18,165,000 | $ | 27,248,000 | $ | 13,630,000 | 75% | |||||||||||
Net Income Goal – Commercial / Industrial | $ | 8,177,000 | $ | 10,903,000 | $ | 16,355,000 | $ | 7,101,000 | 65% |
The Senior Vice President, Real Estate, Joe Drew, has quantitative goals related to revenue and income that complement the overall corporate objective. Commercial/industrial real estate revenues and net income targets do not include grazing leases, land management ancillary revenues, and joint venture revenues from the TA/Petro joint venture. Mr. Drew’s blended performance percentage is shown in the table above.
The Senior Vice President, Agriculture, Dennis J. Atkinson, had 2014 quantitative goals related to farming revenues and net income. For 2014, the Company recognized farming revenue that was greater than target but less than the maximum level. Mr. Atkinson also had a target net income goal for the year that was achieved at greater than the maximum level. Both goals were achieved at a greater than budgeted target level due to increases in pistachio, grape and hay revenues, and lower cost of sales when compared to the 2014 operating budget. In the setting of quantitative division goals each year, ourwe develop target goals are developed through our annual budgeting process, and weprocess. We believe these are realistically attainable goals and that maximum achievement levels will be difficult to attain without significant effort and development of new business opportunities. As an example, the 2017 commercial real estate budget included a forecasted lot sale within TRCC that was not achieved, which was the primary factor in the unfavorable variance when comparing actual revenue and net income goals to target.
Short-Term Objectives – Corporate
Annual short-term milestone corporate objectives are generally those items identified each year that are critical to successfully moving forward the Company’s long-term objectives related to land entitlement and development within our four development projects.
For 2017 the short-term objectives were as follows:
Individual Performance Objectives
In addition to the quantitative goals described above, the Chief Executive Officer’s annual incentive bonus in 20142017 was based upon the achievement of individual performance objectives proposed by the Chief Executive Officer and agreed upon and approved by the Compensation Committee. These objectives are tied to business development and organizational goals that move the Company forward in achieving its long-term objectives, (includingincluding the achievement of strategic milestones related to land development and entitlement efforts that the Compensation Committee and the Board believe to be critical to the achievement of the Company’s long-term business plan).plan. Individual goals for 20142017 specifically related to leading and directing a ranch-wide strategy to facilitate future successful entitlement of our development projects, overseeing a publican outreach strategy to build support for our entitlement programs overseeingin Los Angeles County and Kern County, obtaining tentative tract map approval in Kern County for the continued implementation of our water strategy, andMountain Village master planned community, completion of outlet center development.an equity offering, overseeing succession plans for key departments, and overseeing a cost control program that included a rightsizing initiative. Based on achieving preliminary zoninga successful rights offering, completion of the response phase of the environmental impact report for the Centennial project, internal integration of all management functionsand a reduction in operating costs for TMV and the Grapevine Development, completion and opening of the new outlet center at the Tejon Ranch Commerce Center, and the continued strengthening of the Company’s water investment,year, the Compensation Committee determined that the Chief Executive Officer achievedindividual performance was at a level above target achievement but below maximum level of performance. In addition, the Compensation Committee approved a discretionary bonus of $25,000 based on the successes just mentioned and the overall progress made in transitioning the Company to internal management of all development projects.achievement.
The other named executive officersNEOs have more diverse individual performance goals than the CEO,Chief Executive Officer. These goals are generally tied to individual areas of responsibility, which focus on both on short-term and long-term goals (including improving operational efficiencies and achieving short-term milestones and other goals with respect to the
26
Company’s long-term business strategy related to land entitlement, development, and conservation). Generally, the qualitative goals covered: (1) coordination regarding entitlement and permitting activity milestones for our Tejon Mountain Village community, Centennial community, and Grapevine community; (2) guiding the Company in working with various government agencies as a part of the entitlement process; (3) acquiring and managing new water resources; (4) management of oil leases on ranch lands; (5) oversight of the construction of the new outlet center; (6) implementation of the approved ten-year farm management program; (7) implementing new capital funding activities and financing corporate operations; and (8) coordination
• Coordination regarding entitlement and permitting activity milestones for our Mountain Village community, Centennial community, and Grapevine community. |
• Guiding the Company in working with various government agencies as a part of the entitlement process. |
• Acquiring and managing water resources to include the drilling of new water wells. |
• Completion of development of speculative building for lease within Tejon Ranch Commerce Center. |
• Completion of successful equity offering for the Company. |
• Meeting implementation dates related to farm developments. |
• Analysis of future staffing requirements to meet near-term and long-term needs as the Company moves forward with its land entitlement and development plans. |
• Coordination with key Resource Organizations and the Tejon Ranch Conservancy to allow for successful entitlement of our development projects. |
The Chief Executive Officer and the Compensation Committee evaluate the success of the named executive officersNEOs (other than the CEO)Chief Executive Officer) in meeting their individual performance objectives, with final approval provided by the Compensation Committee. In evaluating the success of meeting specific individual objectives, the Chief Executive Officer and the Compensation Committee review the objective and identify whether or not the objective was accomplished or if the proper amount of progress has been made in achieving the objective. The Chief Executive Officer and the Compensation Committee note forwhether each objective if the objective was accomplished in the time frame designated and if the outcome achieved was as specified in the original objective. Based on each named executive officer’s achievement
2017 Performance Achievement
The following chart provides a breakdown of his and her goals and objectives2017 annual incentive award measurement by performance measurement category and the qualitative goals listed above, the Compensation Committee approved achievementtotal 2017 incentive award as a percentage of the qualitative goals for 2014salary. Final award measurement for the named executive officers at the levels shown in the above table.NEOs reflect actual results. The award measurement percentage for each NEO for each category varies this year from zero to a number between threshold and maximum achievement.
Weighted Measures | Gregory S. Bielli - Chief Executive Officer | Allen E. Lyda - Chief Financial Officer | Joseph Rentfro - EVP Real Estate | Hugh F. McMahon - EVP Commercial | Michael R.W SVP/ | |||||||||||||||
Corporate Quantitative Measurements | ||||||||||||||||||||
Adjusted EBITDA | 40.00 | % | 40.00 | % | 40.00 | % | 40.00 | % | 40.00 | % | ||||||||||
Results as % of Target | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | ||||||||||
Weighted Total (1) | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | ||||||||||
Adjusted Total Company Revenue | 10.00 | % | 10.00 | % | 10.00 | % | 10.00 | % | 10.00 | % | ||||||||||
Results as % of Target | 50.40 | % | 50.40 | % | 50.40 | % | 50.40 | % | 50.40 | % | ||||||||||
Weighted Total (1) | 5.04 | % | 5.04 | % | 5.04 | % | 5.04 | % | 5.04 | % | ||||||||||
Corporate Short-Term Objectives | ||||||||||||||||||||
Blended Short-Term Objectives | 30.00 | % | 30.00 | % | 30.00 | % | 20.00 | % | 30.00 | % | ||||||||||
Results as % of Target | 130.00 | % | 130.00 | % | 130.00 | % | 130.00 | % | 130.00 | % | ||||||||||
Weighted Total (1) | 39.00 | % | 39.00 | % | 39.00 | % | 26.00 | % | 39.00 | % | ||||||||||
Divisional Quantitative / Qualitative Measurements: | ||||||||||||||||||||
Blended Revenue/Net Operating Income | 0.00 | % | 0.00 | % | 0.00 | % | 15.00 | % | 0.00 | % | ||||||||||
Results as % of Target | 0.00 | % | 0.00 | % | 0.00 | % | 59.10 | % | 0.00 | % | ||||||||||
Weighted Total (1) | 0.00 | % | 0.00 | % | 0.00 | % | 8.87 | % | 0.00 | % | ||||||||||
Individual Objectives | 20.00 | % | 20.00 | % | 20.00 | % | 15.00 | % | 20.00 | % | ||||||||||
Results as % of Target | 130.02 | % | 112.50 | % | 91.00 | % | 115.49 | % | 112.13 | % | ||||||||||
Weighted Total (1) | 26.00 | % | 22.50 | % | 18.20 | % | 17.32 | % | 22.43 | % | ||||||||||
Total | ||||||||||||||||||||
Total Incentive Award as a Percentage of Target | 70.04 | % | 66.54 | % | 62.24 | % | 57.23 | % | 66.47 | % | ||||||||||
Total Incentive Award as a Percentage of Salary | 70.04 | % | 46.58 | % | 43.57 | % | 40.06 | % | 39.88 | % | ||||||||||
(1) | Weighted total is calculated as the performance objective times the performance achievement factor. |
Equity Compensation.Compensation
The Compensation Committee believes that the long-term value of the Company will be driven by the execution of its long-term strategies. Accordingly, Tejon uses long-term equity incentives to align senior management’s interests with stockholders’ interests. The Compensation Committee believes that management should own stock and that teamwork among the management group is important in meeting business goals.
Therefore, long-term milestone incentives are goal-based, with common performance measures for all participants thatto encourage teamwork.
The
Long-Term Equity Compensation Vehicle | Grant Frequency | Target Long- Term Vehicle Weight | Vesting | Purpose | ||||
Performance Related Milestone Grants | Every three years, new grant in 2017 | 40% | Cliff vesting at the end ofthe three-year period | To tie equity compensation to longer-term real estate development milestones | ||||
Three-Year Cash Flow Performance Grants | Annually | 40% | Cliff vesting at the end of the three-year period | To measure and tie equity compensation opportunity to ongoing cash flow of our business, which is needed to fund our real estate development activities | ||||
Time-Vested Restricted Stock | Annually | 20% | Three-year prorated vesting | To encourage share ownership and retention of executives |
At the end of 2016, the Board of the Company, on the recommendation of the Compensation Committee, approved the 2017-2019 performance milestone measurement objectives that will be used to measure the vesting of equity grants issued since 2004 has been tied to the achievement of specific goals and objectives. The Company grants long-term milestone performance units that are tied to the achievement of several objectives related to our land entitlement and real estate development activities, including our success in achieving entitlements for our planned communities. The performance milestone units currently outstandinggrants. The objectives are:
1. | Provide assistance in obtaining approval of and/or be a part of an approved ground water sustainability agency for the White Wolf Basin and the Castac Lake Basin. Grant date value of award equals 40% of total. The achievement of this goal is important to our ability to work with local water districts in the management of groundwater on our lands. |
2. | Create a destination retail development program on land adjacent to the Outlets of Tejon and begin construction of that program. Grant Date value of award equals 35% of total. This objective is important to our ongoing development of TRCC and the expansion of retail services in order to expand our offerings and draw more consumers to our development. |
3. | Develop a program for the development of one of our residential master plans through a joint venture agreement, a letter of intent with a potential joint venture partner, or a program to develop the identified community ourselves. Grant date value of award equals 25% of total. This goal is key to the next step in the land development process as we move past entitlement and permitting and begin preparation to begin development activities. |
Shares were granted in March 2017 with a target vesting date of December 2019. Maximum award achievement is 150% of target and occurs if performance objectives are relatedachieved ten months prior to our three development projectstarget date. Threshold award achievement is 50% of target and occurs if objectives are tied to successful entitlement and approval of development plans. Due to their strategic significance, we believe that disclosing specific milestones and time frames might result in competitive harm or delay achievement of long-term strategic objectives. We believe that the achievement ofachieved no more than ten months after the target level of performance will require significant effortvesting date. The following table identifies the target value and substantial progress over the next three years in light of the current entitlement environment in California.target shares granted:
With respect to the grant of the annual
Target Value | Target Shares | |||||||
Gregory S. Bielli
|
$
|
1,483,198
|
|
|
64,347
|
| ||
Allen E. Lyda
|
|
556,658
|
|
|
24,150
|
| ||
Joseph N. Rentfro
|
|
472,779
|
|
|
20,511
|
| ||
Hugh F. McMahon
|
|
444,404
|
|
|
19,280
|
| ||
Michael R.W. Houston
|
|
307,510
|
|
|
13,341
|
|
When granting three-year cash flow performance shares, the Company’s practice is to determine annually a dollar amount of equity compensation that it wishes to providebe provided, and to grant a number of performance shares that have a fair market value equal to that amount on the date of grant. Vesting of these annual grants is tied to the achievement of a rolling three-year cash metric. The rolling three-year cash metric is budgeted cash provided from operations as calculated per GAAP for cash flow statements.operations. For 2014,2017, the dollar amount attributed to performance shares for the Chief Executive Officer was $380,000,$500,000, and for the other named executive officersNEOs it ranged from $80,000$100,000 to $170,000$184,000, depending on the importance of theeach NEO’s input from each of the other named executive officers to the successful achievement of the goal. The level of the target dollar amount for each named executive officerNEO is based on a report from the 2013 Compensation ReportPOE Group that recommended long-term compensation goals for each position. The number of shares of stock is based on a ninety-day average stock price divided into each named executive officer’s dollar amount of value. The shares granted are expensed based on the closing price of the stock on grant date.
27
The annual performance shares are tied to the achievement of the rolling three-year cash flow metric, described above. This performance metric was selected by the Compensation Committee as a measurement of management’s ability to create operating cash over an extended period at a time when cash demands will be high and net income will not be significant. For 2014,2017, this cash flow measure covers the years 20142017 through 20162019 and has a cumulative cash from operations target of $36,374,000.$28,251,000. The Company believes that achievement of this target level of performance will require significant effort and is dependent on the continued absorption of land at Tejon Ranch Commerce Center, improvement in oil and mineral revenues, maintenance of farm revenues at current levels, sales of water, and progress with respect topre-development activities at Tejon Mountain Village and entitlement activities at Centennial and Grapevine. Please refer to our Annual Report on Form10-K for the year ended December 31, 20142017 for additional information regarding entitlement and development activities. This target assumes we are moving forward in a positive manner with respect to our development projects. These grants vest after three years, and theyears. The number of shares to be received is determined by the extent of performance achievement and can range from zero shares to the maximum award amount, which is 150% of the target award.
The goals for years prior to 2014 were tied to cumulative cash usage, which is defined as cash provided from operations less cash used for capital investments, excluding activities within marketable securities. For the 2012–20142015 – 2017 period, the goal for cumulative cash usagefrom operations was $50,154,000, and the goal for the 2013–2015 period is cumulative cash usage of $107,207,000.$32,292,000. For the 2012–20142015 – 2017 period, goal achievement was 103%118% of the target objective, with actual cash usagefrom operations at $46,800,000.$38,197,000. These grants, which are referenced in footnote 2 to the Outstanding Equity Awards at 20142017 FiscalYear-End table that begins on page 36,53, vested and were delivered in early March after approval by the March 2015 BoardCompensation Committee.
Actual shares earned in respect of Directors meeting. 2015-2017 three-year cash flow performance shares are as follows:
Name | 2015-2017 Performance Grants Cash from Operations | |||
Gregory S. Bielli, Chief Executive Officer | 18,881 | |||
Allen E. Lyda, Chief Financial Officer | 8,269 | |||
Joseph N. Rentfro, EVP, Real Estate | 7,081 | |||
Hugh F. McMahon EVP, Real Estate | 6,655 | |||
Michael R.W. Houston SVP, General Counsel | N/A* |
* | Mr. Houston was not employed by the Company in 2015. |
See the 20142017 Grants of Plan Based Awards Table on page 3452 for the number of shares granted to each named executive officerNEO for the 2014–20162017-2019 rolling three-year period. The table below summarizes the outstanding (as of the end of 2014)2017) cash flow performance share measurement goals.
(Dollars in thousands) | Threshold | Target | Maximum | Actual | ||||||||||||
2012-2014 Cash Flow Objective- Cumulative cash usage | (75,231 | ) | (50,154 | ) | (25,077 | ) | (46,800 | ) | ||||||||
2013-2015 Cash Flow Objective- Cumulative cash usage | (160,811 | ) | (107,207 | ) | (53,604 | ) | n/a | |||||||||
2014-2016 Cash Flow Objective- Cash from operations | 18,187 | 36,374 | 54,561 | n/a |
(Dollars in thousands) Performance Grants | Threshold | Target | Maximum | Actual | ||||||||||||
2015-2017 Cash Flow Objective - Cash From Operations | $ | 16,146 | $ | 32,292 | $ | 48,438 | $ | 38,197 | ||||||||
2016-2018 Cash Flow Objective - Cash From Operations | $ | 17,462 | $ | 34,924 | $ | 52,386 | N/A | |||||||||
2017-2019 Cash Flow Objective - Cash From Operations | $ | 14,126 | $ | 28,251 | $ | 42,377 | N/A |
During 2014, with the approval of the new LTIP,2017, the Compensation Committee granted time-vested restricted stock to the NEO’s.NEOs. This new element is seen as a balance to the strong performance orientation of both the LITPLTIP and the annual incentive program, with the objective of retaining our executive team. The dollar value attributed to these shares isone-half the annual performance share grant. For 2014,2017, the dollar amount for the Chief Executive Officer was $190,000,$250,000, and for the other NEOs it ranged from $40,000$50,000 to $85,000.$92,000.
CEO Supplemental Long-Term Performance Stock Grant
As discussed in further detail in last year’s proxy statement, the Board of Directors approved a supplemental performance stock grant in 2016. Potential awards are based on the achievement of specific performance goals with measurement periods of two years and four years. This supplemental incentive opportunity was provided outside our standard compensation plans and therefore does not recur regularly. The purpose of the supplemental grant was to increase our CEO’s stock ownership opportunity, by achieving performance results, and encourage his retention with the Company.
There are two award opportunities in the grant; the first vested in 2017 and the second potentially vests in 2019. Each opportunity has quantifiable performance metrics associated with our business plans and relative TSR compared to our peer group.
The Company doesfirst opportunity, which partially vested and was settled in 2017, was eligible to vest based on two components. The first component was increasing the revenue of Tejon Ranch Commerce Center East. The performance incentive was paid out at maximum due to a 96.6% increase in revenue from the properties. The second performance component was the Company’s TSR compared to the peer group during thetwo-year period. This part of the 2017 supplemental grant was not have any program, plan, or practice to time equity awards in coordination withearned as the releaseCompany’s TSR was below the 51st percentile of material non-public information, nor does the Company timepeer group, which was the release of material non-public information for the purpose of affecting the value of executive compensation.performance threshold.
Benefits and Perquisites
Retirement Plans.Plans
The Compensation Committee believes that retirement programs are important to the Company, as they contribute to the Company’s ability to be competitive with its peers and are consistent with Tejon’s philosophy of preferring long-term pay to short-term pay.peers. For many of our employees, including the Chief Financial Officer, the Seniorand one of our Executive Vice PresidentPresidents of Real Estate and the Senior Vice President Agriculture, Tejon provides a pension plan and a 401(k) plan. In addition, for these three NEOs, the Company also provides the Chief Financial Officer a supplemental executive retirement plan, or SERP. Based on their hiring dates, the Chief Executive OfficeOfficer, an Executive Vice President of Real Estate, and theour Senior Vice President and General Counsel are not included in the pension plan or SERP, which were frozen for entrance as of February 1, 2007, but are included in the 401(k) plan. The Compensation Committee believes that retirement benefits are an important piece of the overall compensation package for the named executive officers.
Benefits to be received fromDuring 2017, both the pension plan upon retirement are determined by an employee’s highest five-year final average annual compensation out of the last ten years, length of service with the Company, and
28
age at retirement. Average annual compensation consists only of base salary and annual incentive bonuses paid in either cash or stock. Benefits from the pension plan can be limited for the named executive officers who participate in the pension plan due to Internal Revenue Service compensation ceilings that are used in the calculation of pension benefits. Because of the Internal Revenue Service limits within the pension plan, the Company established a SERP in 1992 to replace any pension benefit these officers might lose based on the benefit calculations within the pension plan. Without the SERP, our named executive officers who participate in the pension plan would not otherwise be eligible to receive pension benefits that are comparable in percentage based on compensationwere frozen as to the benefits received by other employees generally. The benefit in the SERP is calculated using the same criteria as the pension plan, except that total average compensation is used and the difference between the SERP calculation and the pension calculation is the valueaccrual of the SERP benefit.
In order to manage the costs of and liabilities from the pension and SERP plans, the Company restructured the pension plan in early 2007 to lower the benefit accrual rate, change the retirement age to match Social Security retirement age, and freeze new employee participation effective February 1, 2007. These changes were made not only to manage costs but also to allow the Company to continue to reward long-term service. The Company also offers a 401(k) program to its employees, which offers a matching contribution equal to 1% of salary, for employees in the pension plan, if the employee contributes at least 4% of salary to the plan. Tied to the changes in the pension plan described above, we increased the match for employees who will not be eligible for the pension plan to 2% of salary if they contribute at least 4% of salary to the plan.future benefits.
The named executive officersNEOs may elect to defer cash- and equity-based compensation payable to them pursuant to the Company’s deferred compensation plan. This plan is designed to allow for retirement savings above the limits imposed by the IRS for 401(k) plans on an incometax-deferred basis. Cash amounts deferred into the plan are held in accounts with values indexed to the performance of selected mutual funds. Stock awards deferred into the plan can be converted to cash or kept in the Company’s stock. All participants to date have only deferred stock awards and have maintained stock in the plan. The Company does not provide a match on executive deferrals under the deferred compensation plan.
Clawback Policy.
The Company has a policy requiring a fixed course of action with respect to compensation adjustments following restatements of our financial statements. In the event that our Board of Directors, or Board, determines there has been a restatement due to material noncompliance with any financial reporting requirement under the securities laws, the Board will review all incentive payments that were made to executive officers and all performance-based equity awards granted to executive officers that were vested in each case, on the basis of having met or exceeded such performance targets in grants or awards made during the three full fiscal years prior to the filing of the Current Report on Form 8-K announcing the restatement.
If such payments and/or vesting would have been lower had they been calculated based on such restated results, the Board will, to the extent permitted by governing law, seek to recoup for the benefit of the Company stockholders such payments to and/or equity awards held by executive officers who are found personally responsible for the material restatement, as determined by the Board, by requiring executive officers to pay such amounts to the Company by set-off, by reducing future compensation, or by such other means or combination of means as the Board determines to be appropriate.
29
Stock Ownership Guidelines.
The Company has stock retention guidelines as follows:
|
| |
| ||
| ||
|
All named executive officers were expected to make reasonably steady progress toward these ownership guidelines by the end of December 2014, with the exception of the Chief Executive Officer, who has until 2018 to meet the guidelines, and the Vice President, General Counsel, who has until 2016 to meet the guideline based on dates of hiring. The three NEOs who were scheduled to meet stock ownership guidelines by the end of 2014 achieved those objectives. The Compensation Committee reviews such progress annually. Since these guidelines are not a contractual basis for remaining in the employment of the Company, the success or lack of success in meeting the guidelines will be evaluated by the Compensation Committee and reflected in each named executive officer’s annual review for that year. The Board of Directors strongly discourages hedging transactions or the pledging of stock as collateral for loans. For approval of these types of transactions, an NEO must request a pre-clearance from the Chief Financial Officer and General Counsel and then approval by the Compensation Committee.
Change in Control Benefits.Benefits
The Compensation Committee believes that stockholders’ interests will be best served if the interests of executive management are aligned with them, and that providing management with change in control benefits supports that objective by focusing executives on stockholder interests when considering strategic alternatives.
Except for accelerated vesting of equity awards, available to all NEOs, pursuant to our equity compensation plan, change in control benefits, as provided in a severance agreement with each of our named executive officers,selected NEOs, are only provided upon a termination of employment without cause or a resignation for good reason in connection with a change in control. Please refer to the Potential Payments uponUpon Termination or Change in Control table on page 4157 of this proxy statementProxy Statement for a more detailed description and an estimate of value of these benefits. None of the agreements with our named executive officersNEOs or other compensation plans or arrangements provide for agross-up payment or re-imbursementreimbursement for excise taxes that could be imposed on the executives under Section 4999 of the Internal Revenue.executives.
In addition to the foregoing change in control severance benefits, the named executive officersNEOs who participate in the pension plan and SERP will also continue to be entitled to benefits under any existing pension plan and SERP as determined in accordance with the terms of those plans. If a named executive officer has been credited with more than 15 years of service, as of the effective date of termination, he or she shall also be credited with additional years of service under the plans for the period of salary continuation referred to above.
Separation or Severance Benefits.Benefits
During 2013, the Company entered into an Employment Agreement with the Chief Financial Officer, which provides for severance benefits outside of a change in control context. For detailed information regarding the Employment Agreement, please refer to our Quarterly Report on Form 10-Q for the period ending March 31, 2013.
30
In some circumstances, the Compensation Committee believes it is in the Company’s best interest to provide a severance benefit in order to provide a smooth transition period for the Company when an executive leaves, even if the Company does not have a contractual obligation to provide a separation package. Separation benefits in the form of salary continuation and health benefits may be provided to departing executives on acase-by-case basis. These benefits have historically endured for approximately one year.
Unless the Compensation Committee determines otherwise, if an NEO’s employment with the Company is terminated for any reason, including death or disability, prior to vesting of all or any part of a restricted stock award or performance unit award, the NEO will forfeit to the Company the portion of the award whichthat has not vested.
Perquisites and Other Personal Benefits.Benefits
The Compensation Committee reviews annually the perquisites that named executive officersNEOs receive. The primary benefits for the named executive officersNEOs are Company vehicles and related maintenance. In addition, the Chief Executive Officer receives additional life insurance in excess of the insurance that is part of the Company’s broad-based life insurance policy. This additional insurance supplement is necessary to provide the same three-timesthree-time salary benefit that other employees receive. These benefits are provided to attract and retain highly qualified executives, and because executives often place a higher value on these benefits relative to cost to the Company as compared to increases in cash compensation. In addition, the automobile benefit is provided to executives as well as other Company employees because the Company’s location and the size of the Company’s property necessitate extensive car travel.
Senior management also participates in the Company’s other benefit plans on the same terms as other employees. These plans include medical, dental, and life insurance.
Other Compensation Practices and Policies
Clawback Policy
The Company has a policy requiring a fixed course of action with respect to compensation adjustments following restatements of our financial statements. In the event that our Board determines there has been a restatement due to material noncompliance with any financial reporting requirement under the securities laws, the Board will review all incentive payments that were made to executive officers and all performance-based equity awards granted to executive officers that were vested in each case, on the basis of having met or exceeded such performance targets in grants or awards made during the three full fiscal years prior to the filing of the Current Report on Form8-K announcing the restatement.
If such payments and/or vesting would have been lower had they been calculated based on such restated results, the Board will, to the extent permitted by governing law, seek to recoup for the benefit of the Company’s stockholders such payments to and/or equity awards held by executive officers who are found personally responsible for the material restatement, as determined by the Board, by requiring such executive officers to pay such amounts to the Company byset-off, by reducing future compensation, or by such other means or combination of means as the Board determines to be appropriate.
Stock Ownership Guidelines
The Company’s stock retention guidelines are as follows:
Position | Stock Multiple | |
Chief Executive Officer | 5.0 x Base Salary | |
Chief Financial Officer | 3.0 x Base Salary | |
Other NEOs | 2.0 x Base Salary |
All NEOs are expected to make reasonably steady progress toward these ownership guidelines each year. The Chief Executive Officer has through 2018 to meet the guidelines, the Executive Vice Presidents of Real Estate have until 2020, and the Senior Vice President General Counsel has through 2021 to reach their guidelines, based on their participation dates in 2015 and 2016. The Chief Financial Officer has met the stock ownership guidelines. The Compensation Committee reviews such progress annually. Since these guidelines are not a contractual basis for remaining in the employment of the Company, the success or lack of success in meeting the guidelines will be evaluated by the Compensation Committee and reflected in each NEO’s annual review for that year.
Securities Trading Policy
The Company has a policy that prohibits executive officers and directors from trading in Company stock while in the possession of nonpublic information. Executive officers and directors are also prohibited from trading in options, puts, calls, or other derivative instruments related to the Company’s stock. They are also prohibited from purchasing stock on margin, borrowing against the Company’s stock held in a margin account, or pledging stock as collateral for a loan.
Tax Considerations.Considerations
For 2017 and prior years, Section 162(m) of the Internal Revenue Code imposesimposed a $1 million limit on the deductibility of compensation paid to certain executive officers of public companies, unless the compensation meets certain requirements for “performance-based” compensation. Changes to the tax laws that became effective for the Company as of January 1, 2018 are anticipated to have an impact on Section 162(m) deductibility for the Company going forward. In determining executive compensation, the Compensation Committee considers, among other factors, the possible tax consequences to the Company and to the executives. However, tax consequences, including but not limited to tax deductibility by the Company, are subject to many factors (such as changes in the tax laws and regulations or interpretations thereof and the timing and nature of various decisions by executives regarding options and other rights) that are beyond our control. In addition, the Compensation Committee believescontinues to believe that it is important for us to retain maximum flexibility in designing compensation programs that meet our stated objectives. For these reasons, although the Compensation Committee will continue to consider tax deductibility as one of the factors in determining executive compensation, it will not necessarily limit compensation to those levels or types of compensation that will be deductible. We will, of course, consider alternative forms of compensation consistent with our compensation goals that preserve deductibility as much as possible.
31
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATIONCompensation Committee Interlocks and Insider Participation
Directors Betts, Goolsby, Leggio, Metcalfe, Stack, and Tuomi Winer, and Stack compriseserved on the Compensation Committee.Committee during 2017. No member of the Compensation Committee is or has been an officer or employee of the Company, or has had any relationship with the Company requiring disclosure under Item 404 of RegulationS-K.
COMPENSATION COMMITTEE REPORT
The Compensation Committee has reviewed the Compensation Discussion and Analysis and discussed that Compensation Discussion and Analysis with management. Based on its review and discussions with management, the Compensation Committee recommended to our Board that the Compensation Discussion and Analysis be included in the Company’s 20152018 Proxy Statement and incorporated by reference into the Company’s Annual Report on Form10-K for the year ended December 31, 2015.2017. This report is provided by the following independent directors, who comprised the Compensation Committee for 2014.2017.
Geoffrey L. Stack (Chairman), Steven A. Betts John L. Goolsby, (Chairman),
Anthony L. Leggio,
Norman J. Metcalfe,
Geoffrey L. Stack,
Frederick C. Tuomi Michael Winer
Members of the Compensation Committee
Fiscal Year 20142017 Summary Compensation Table
The following table summarizes the total compensation awarded to, earned by, or paid to each of the named executive officersNEOs for the fiscal years ended December 31, 2014, 2013,2017, 2016, and 2012.2015.
Name and Principal Position | Year | Salary ($) | Bonus ($) | (1) Stock Awards ($) | (2) Non-Equity Incentive Plan Compensation ($) | (3) Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) | (4) All Other Compensation ($) | Total ($) | ||||||||||||||||||||||||
Gregory S. Bielli(6) | 2014 | 475,000 | 1,710,000 | 525,000 | — | 21,982 | 2,731,982 | |||||||||||||||||||||||||
Chief Executive Officer | 2013 | 138,542 | 300,000 | 1,193,600 | — | — | 5,062 | 1,637,204 | ||||||||||||||||||||||||
Allen E. Lyda | 2014 | 283,250 | — | 764,753 | 218,777 | (85,625 | ) | 14,797 | 1,195,951 | |||||||||||||||||||||||
Chief Financial Officer | 2013 | 275,000 | — | 739,194 | 140,752 | 241,430 | 23,016 | 1,409,392 | ||||||||||||||||||||||||
2012 | 250,000 | — | 143,389 | 191,250 | 360,083 | 14,568 | 959,290 | |||||||||||||||||||||||||
Joe Drew(5) | 2014 | 250,000 | — | 644,490 | 226,420 | 21,962 | 15,854 | 1,158,726 | ||||||||||||||||||||||||
Senior Vice President, Real Estate | 2013 | 231,750 | — | 132,551 | 128,520 | 99,281 | 26,835 | 618,937 | ||||||||||||||||||||||||
2012 | 225,000 | — | 146,476 | 157,781 | 174,863 | 18,631 | 722,751 | |||||||||||||||||||||||||
Dennis J. Atkinson | 2014 | 196,267 | — | 353,275 | 156,762 | 274,138 | 29,929 | 1,010,371 | ||||||||||||||||||||||||
Senior Vice President, Agriculture | 2013 | 190,550 | — | 91,263 | 127,449 | — | 31,795 | 441,057 | ||||||||||||||||||||||||
2012 | 185,000 | — | 99,443 | 136,530 | 51,865 | 21,916 | 494,754 | |||||||||||||||||||||||||
Gregory Tobias | 2014 | 249,312 | — | 448,740 | 188,824 | — | 17,850 | 904,726 | ||||||||||||||||||||||||
Vice President, General Counsel | 2013 | 242,050 | — | 129,502 | 156,613 | — | 20,461 | 548,626 | ||||||||||||||||||||||||
2012 | 235,000 | — | 141,126 | 167,438 | — | 17,706 | 561,270 |
Name and Principal Position | Year | Salary ($) | Bonus ($) | (1) Stock Awards ($) | (2) Non-Equity Incentive Plan Compensation ($) | (3) Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) | (4) All Other Compensation ($) | Total ($) | ||||||||||||||||||||||||||||||||
Gregory S. Bielli | 2017 | 625,000 | — | 2,233,199 | 437,770 | — | 19,364 | 3,315,333 | ||||||||||||||||||||||||||||||||
Chief Executive Officer | 2016 | 600,000 | — | 2,095,008 | 611,671 | — | 21,642 | 3,328,321 | ||||||||||||||||||||||||||||||||
2015 | 529,167 | — | 600,012 | 714,145 | — | 28,979 | 1,872,303 | |||||||||||||||||||||||||||||||||
Allen E. Lyda | 2017 | 309,252 | — | 834,986 | 144,043 | 175,874 | 9,857 | 1,474,012 | ||||||||||||||||||||||||||||||||
Chief Financial Officer | 2016 | 300,245 | — | 270,227 | 204,495 | 262,181 | 15,608 | 1,052,756 | ||||||||||||||||||||||||||||||||
2015 | 291,500 | — | 262,804 | 231,789 | (22,602 | ) | 13,988 | 777,479 | ||||||||||||||||||||||||||||||||
Hugh F. McMahon | 2017 | 248,101 | — | 667,689 | 99,388 | 57,075 | 8,867 | 1,081,120 | ||||||||||||||||||||||||||||||||
Executive Vice President, Real Estate | 2016 | 240,875 | — | 216,791 | 144,121 | 44,685 | 15,204 | 661,676 | ||||||||||||||||||||||||||||||||
2015 | 235,000 | — | 211,481 | 154,217 | (3.273 | ) | 24,147 | 621,572 | ||||||||||||||||||||||||||||||||
Joseph N. Rentfro (5) | 2017 | 261,375 | — | 708,027 | 113,876 | — | 12,200 | 1,095,478 | ||||||||||||||||||||||||||||||||
Executive Vice President, Real Estate | 2016 | 256,250 | — | 465,981 | 160,314 | — | 20,292 | 902,837 | ||||||||||||||||||||||||||||||||
2015 | 209,295 | — | 444,014 | 144,218 | — | 15,097 | 812,624 | |||||||||||||||||||||||||||||||||
Michael R.W. Houston | 2017 | 255,000 | — | 460,516 | 101,694 | — | 9,407 | 826,617 | ||||||||||||||||||||||||||||||||
Senior Vice President, General Counsel | 2016 | 166,667 | — | 199,500 | 95,446 | — | 9,407 | 471,020 |
32
1. | The figures in this column represent |
Name | Time Base Restricted Stock Award | Milestone Performance Shares | Fair Value of the Three-Year Rolling Performance Shares | Total Actual Award | ||||||||||||
Gregory S. Bielli | $ | 190,000 | $ | 1,140,000 | $ | 380,000 | $ | 1,710,000 | ||||||||
Allen E. Lyda | $ | 84,961 | $ | 509,835 | $ | 169,956 | $ | 764,752 | ||||||||
Joseph E. Drew | $ | 71,599 | $ | 429,660 | $ | 143,231 | $ | 644,490 | ||||||||
Dennis J. Atkinson | $ | 39,256 | $ | 235,505 | $ | 78,513 | $ | 353,274 | ||||||||
Gregory Tobias | $ | 49,860 | $ | 299,160 | $ | 99,720 | $ | 448,740 |
Time Based Restricted Stock Award | Three-Year Rolling Performance Shares | Performance Milestone Grants | Total Actual Award | |||||||||||||
Gregory S. Bielli
|
$
|
250,000
|
|
$
|
500,001
|
|
$
|
1,483,198
|
|
$
|
2,233,199
|
| ||||
Allen E. Lyda
|
$
|
92,776
|
|
$
|
185,552
|
|
$
|
556,658
|
|
$
|
834,986
|
| ||||
Hugh F. McMahon
|
$
|
74,428
|
|
$
|
148,857
|
|
$
|
444,404
|
|
$
|
667,689
|
| ||||
Joseph N. Rentfro
|
$
|
78,416
|
|
$
|
156,832
|
|
$
|
472,779
|
|
$
|
708,027
|
| ||||
Michael R. W. Houston
|
$
|
51,010
|
|
$
|
101,996
|
|
$
|
307,510
|
|
$
|
460,516
|
|
At maximum achievement, the value received under the three-year rolling performance shares awards granted in 20142017 would be $570,000$750,000 for Mr. Bielli, $254,934$278,328 for Mr. Lyda, $149,580, $223,285 for Mr. Tobias, $214,846McMahon, $235,248 for Mr. Drew,Rentfro, and $117,769$152,994 for Mr. Atkinson.Houston. The maximum achievement value forof performance milestone performance shares granted in 2014 would be $1,710,000grants for Mr. Bielli $764,752,is $2,224,797, for Mr. Lyda $644,490is $834,987, for Mr. Drew, $353,257McMahon is $666,606, for Mr. Atkinson,Rentfro is $709,169, and $448,740 for Mr. Tobias. Houston is $461,265.
The value of stock awards is the grant date fair value of awards computed in accordance with FASB ASC Topic 718. The grant date fair value for grants with performance conditions includes the estimated probable outcome of the performance condition. Further information regarding stock awards can be found in Note 11, Stock Compensation Plan, to the Consolidated Financial Statements in the Company’s Annual Report onForm 10-K for the year ended December 31, 2014.2017. The stock awards granted did not vest during 20142017 and will only vest in future years based on the achievement of cash flow targets, milestone performance objectives tied to development activities, andmilestones and/or continued employment with the Company.
2. |
3. | The change in pension value is based upon the same assumptions and measurements that are used for the audited financial statements for the current year. See Note 15, Retirement Plan, to the Consolidated Financial Statements in the Company’s Annual Report on Form10-K for the year ended December 31, |
4. | Except with respect to Mr. Bielli, for whom “All Other Compensation” also includes $3,720 for life insurance premiums, each of the |
5. | Mr. |
6. | Mr. |
33
Grants of Plan-Based Awards in Fiscal Year 20142017
The following table provides information about awards granted to the named executive officersNEOs in the fiscal year ended December 31, 2014 pursuant to our 2004 Stock Incentive Program.2017.
Estimated Future Payouts Under Non-Equity Incentive Plan Awards
| Estimated Future Payouts Under Equity Incentive Plan Awards
| All Other Stock Awards: Number of Shares of Stock or Units (#) | Grant Date Fair Value of Stock Awards ($) | |||||||||||||||||||||||||||||||||||||
Name | Year | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | ||||||||||||||||||||||||||||||||
Gregory S. Bielli: | ||||||||||||||||||||||||||||||||||||||||
Performance grants, cash flow objectives(1) | 2014 | 3/28/14 | 7,621 | 11,432 | 17,148 | 380,000 | ||||||||||||||||||||||||||||||||||
Annual incentive plan(2) | 12/12/14 | 285,000 | 427,500 | 393,750 | ||||||||||||||||||||||||||||||||||||
Annual incentive restricted stock grant | 12/12/14 | 4,686 | 131,255 | |||||||||||||||||||||||||||||||||||||
Time vested stock grant | 3/28/14 | 5,716 | 190,000 | |||||||||||||||||||||||||||||||||||||
Milestone performance grant(3) | 3/28/14 | 17,148 | 34,296 | 51,444 | 1,140,000 | |||||||||||||||||||||||||||||||||||
Allen E. Lyda: | ||||||||||||||||||||||||||||||||||||||||
Performance grants, cash flow objectives(1) | 2014 | 3/28/14 | 3,409 | 5,113 | 7,670 | 169,956 | ||||||||||||||||||||||||||||||||||
Annual incentive plan(2) | 12/12/14 | 63,731 | 127,463 | 191,194 | ||||||||||||||||||||||||||||||||||||
Annual incentive restricted stock grant | 12/12/14 | 1,952 | 54,676 | |||||||||||||||||||||||||||||||||||||
Time vested stock grant | 3/28/14 | 2,556 | 84,961 | |||||||||||||||||||||||||||||||||||||
Milestone performance grant(3) | 3/28/14 | 7,669 | 15,338 | 23,007 | 509,835 | |||||||||||||||||||||||||||||||||||
Joe Drew: | ||||||||||||||||||||||||||||||||||||||||
Performance grants, cash flow objectives(1) | 2014 | 3/28/14 | 2,873 | 4,309 | 6,464 | 143,231 | ||||||||||||||||||||||||||||||||||
Annual incentive plan(2) | 12/12/14 | 65,625 | 131,250 | 196,875 | ||||||||||||||||||||||||||||||||||||
Annual incentive restricted stock grant | 12/12/14 | 2,021 | 56,608 | |||||||||||||||||||||||||||||||||||||
Time vested stock grant | 3/28/14 | 2,154 | 71,599 | |||||||||||||||||||||||||||||||||||||
Milestone performance grant(3) | 3/28/14 | 6,463 | 12,926 | 19,389 | 429,660 | |||||||||||||||||||||||||||||||||||
Dennis Atkinson: | ||||||||||||||||||||||||||||||||||||||||
Performance grants, cash flow objectives(1) | 2014 | 3/28/14 | 1,575 | 2,362 | 3,543 | 78,513 | ||||||||||||||||||||||||||||||||||
Annual incentive plan(2) | 12/12/14 | 44,160 | 88,320 | 132,480 | ||||||||||||||||||||||||||||||||||||
Annual incentive restricted stock grant | 12/12/14 | 1,399 | 39,186 | |||||||||||||||||||||||||||||||||||||
Time vested stock grant | 3/28/14 | 1,181 | 39,256 | |||||||||||||||||||||||||||||||||||||
Milestone performance grant(3) | 3/28/14 | 3,542 | 7,085 | 10,628 | 235,505 | |||||||||||||||||||||||||||||||||||
Gregory Tobias: | ||||||||||||||||||||||||||||||||||||||||
Performance grants, cash flow objectives(1) | 2014 | 3/28/14 | 2,000 | 3,000 | 4,500 | 99,720 | ||||||||||||||||||||||||||||||||||
Annual incentive plan(2) | 12/12/14 | 56,095 | 112,190 | 168,286 | ||||||||||||||||||||||||||||||||||||
Annual incentive restricted stock grant | 12/12/14 | 1,685 | 47,197 | |||||||||||||||||||||||||||||||||||||
Time vested stock grant | 3/28/14 | 1,500 | 49,860 | |||||||||||||||||||||||||||||||||||||
Milestone performance grant(3) | 3/28/14 | 4,500 | 9,000 | 13,500 | 299,160 |
Estimated Future Payouts UnderNon-Equity Incentive Plan Awards |
Estimated Future Payouts | All Other Stock Awards: Number of Shares of Stock or Units (#) | Grant Date Fair Value of Stock Awards ($) | |||||||||||||||||||||||||||||||||||||
Name | Year | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | ||||||||||||||||||||||||||||||||
Gregory S. Bielli
| ||||||||||||||||||||||||||||||||||||||||
Annual Incentive Plan
|
| 2017
|
|
| 312,500
|
|
| 625,000
|
|
| 937,500
|
| ||||||||||||||||||||||||||||
Time Vested Stock Grant
|
| 3/09/17
|
|
| 10,846
|
|
| 250,000
|
| |||||||||||||||||||||||||||||||
Performance Grants, Cash Flow Objective
|
| 3/09/17
|
|
| 10,846
|
|
| 21,692
|
|
| 32,538
|
|
| 500,001
|
| |||||||||||||||||||||||||
Milestone Performance Grants
|
| 3/09/17
|
|
| 32,174
|
|
| 64,347
|
|
| 96,521
|
|
| 1,483,198
|
| |||||||||||||||||||||||||
Allen E. Lyda
| ||||||||||||||||||||||||||||||||||||||||
Annual Incentive Plan
|
| 2017
|
|
| 108,238
|
|
| 216,476
|
|
| 324,714
|
| ||||||||||||||||||||||||||||
Time-Vested Stock Grant
|
| 3/09/17
|
|
| 4,025
|
|
| 92,776
|
| |||||||||||||||||||||||||||||||
Performance Grants, Cash Flow Objective
|
| 3/09/17
|
|
| 4,025
|
|
| 8,050
|
|
| 12,075
|
|
| 185,552
|
| |||||||||||||||||||||||||
Milestone Performance Grants
|
| 3/09/17
|
|
| 12,075
|
|
| 24,150
|
|
| 36,225
|
|
| 556,658
|
| |||||||||||||||||||||||||
Hugh F. McMahon
| ||||||||||||||||||||||||||||||||||||||||
Annual Incentive Plan
|
| 2017
|
|
| 86,836
|
|
| 173,671
|
|
| 260,507
|
| ||||||||||||||||||||||||||||
Time-Vested Stock Grant
|
| 3/09/17
|
|
| 3,229
|
|
| 74,428
|
| |||||||||||||||||||||||||||||||
Performance Grants, Cash Flow Objective
|
| 3/09/17
|
|
| 3,229
|
|
| 6,458
|
|
| 9,687
|
|
| 148,857
|
| |||||||||||||||||||||||||
Milestone Performance Grants
|
| 3/09/17
|
|
| 9,640
|
|
| 19,280
|
|
| 28,920
|
|
| 444,404
|
| |||||||||||||||||||||||||
Joseph N. Rentfro
| ||||||||||||||||||||||||||||||||||||||||
Annual Incentive Plan
|
| 2017
|
|
| 91,481
|
|
| 182,962
|
|
| 274,443
|
| ||||||||||||||||||||||||||||
Time-Vested Stock Grant
|
| 3/09/17
|
|
| 3,402
|
|
| 78,416
|
| |||||||||||||||||||||||||||||||
Performance Grants, Cash Flow Objective
|
| 3/09/17
|
|
| 3,402
|
|
| 6,804
|
|
| 10,206
|
|
| 156,832
|
| |||||||||||||||||||||||||
Milestone Performance Grants
|
| 3/09/17
|
|
| 10,256
|
|
| 20,511
|
|
| 30,767
|
|
| 472,779
|
| |||||||||||||||||||||||||
Michael Houston
| ||||||||||||||||||||||||||||||||||||||||
Annual Incentive Plan
|
| 2017
|
|
| 76,500
|
|
| 153,000
|
|
| 229,500
|
| ||||||||||||||||||||||||||||
Time Vested Stock Grant
|
| 3/09/17
|
|
| 2,213
|
|
| 51,010
|
| |||||||||||||||||||||||||||||||
Performance Grants, Cash Flow Objective
|
| 3/09/17
|
|
| 2,213
|
|
| 4,425
|
|
| 6,638
|
|
| 101,996
|
| |||||||||||||||||||||||||
Milestone Performance Grants
|
| 3/09/17
|
|
| 6,671
|
|
| 13,341
|
|
| 20,102
|
|
| 307,510
|
|
1. | The annualnon-equity incentive award is based on the achievement of both quantitative and qualitative annual business objectives. The objectives vary based on the NEO’s responsibilities. For 2017, based upon the percentage of achievement shown in the “Annual Performance-Based Incentives” section of the Compensation Discussion and Analysis, Mr. Bielli earned an incentive of $437,770; Mr. Lyda $144,013; Mr. McMahon 99,388; Mr. Rentfro $113,876; and Mr. Houston $101,694. |
2. | The equity incentive award program provides for performance unit grants, which vest upon achievement of a cash flow objective over a three-year time frame. The objective is based upon meeting targeted cash from operations |
|
34
35
Outstanding Equity Awards at 20142017 FiscalYear-End
The following table provides information on the current holdings of stock options, restricted stock, and performance unit awards of the named executive officers.NEOs. This table includes unvested stock grants, andas well as performance share grants with performance conditions that have not yet been satisfied. Each equity grant is shown separately for each named executive officer thatNEO who had outstanding equity as of December 31, 2014.2017. The market value of the stock awards is based on the closing market price of Tejon stock as of December 31, 2014,2017, which was $29.46$20.76 per share. The market value as of December 31, 20142017 shown below assumes satisfaction of performance objectives at the target level of achievement.
Stock Awards | ||||||||||||||||
Name | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units, or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | ||||||||||||
Gregory S. Bielli: | ||||||||||||||||
Time Based Restricted Stock Units(5) | 30,000 | 883,800 | ||||||||||||||
Time Based Stock Awards(1) | 5,716 | 168,393 | ||||||||||||||
Annual Stock Incentive Award(2) | 4,686 | 138,050 | ||||||||||||||
Performance Shares(3) | 11,432 | 336,787 | ||||||||||||||
Milestone Performance Units(4) | 34,296 | 1,140,000 | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||
Totals Gregory S. Bielli | 35,716 | 1,052,193 | 50,191 | 1,608,267 | ||||||||||||
Allen E. Lyda: | ||||||||||||||||
Time Based Restricted Stock Units(6) | 20,000 | 589,200 | ||||||||||||||
Time Based Stock Awards(1) | 2,556 | 75,300 | ||||||||||||||
Annual Stock Incentive Award(2) | 5,053 | 148,861 | ||||||||||||||
Performance Shares(3) | 13,247 | 390,257 | ||||||||||||||
Milestone Performance Units(4) | 15,338 | 509,835 | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||
Totals Allen E. Lyda | 22,556 | 664,500 | 33,638 | 1,048,953 | ||||||||||||
Joe Drew: | ||||||||||||||||
Time Based Stock Awards(1) | 2,154 | 63,457 | ||||||||||||||
Annual Stock Incentive Award(2) | 4,730 | 139,346 | ||||||||||||||
Performance Shares(3) | 12,849 | 378,532 | ||||||||||||||
Milestone Performance Units(4) | 12,926 | 429,660 | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||
Totals Joe Drew | 2,154 | 63,457 | 30,505 | 947,538 | ||||||||||||
Dennis J. Atkinson: | ||||||||||||||||
Time Based Stock Awards(1) | 1,181 | 34,792 | ||||||||||||||
Annual Stock Incentive Award(2) | 3,940 | 116,072 | ||||||||||||||
Performance Shares(3) | 7,979 | 235,061 | ||||||||||||||
Milestone Performance Units(4) | 7,085 | 235,505 | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||
Totals Dennis J. Atkinson | 1,181 | 34,792 | 19,004 | 586,639 | ||||||||||||
Gregory Tobias: | ||||||||||||||||
Time Based Stock Awards(1) | 1,500 | 44,190 | ||||||||||||||
Restricted Stock | 2,500 | 73,650 | ||||||||||||||
Annual Stock Incentive Award(2) | 4,803 | 141,496 | ||||||||||||||
Performance Shares(3) | 11,134 | 328,008 | ||||||||||||||
Milestone Performance Units(4) | 9,000 | 299,160 | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||
Totals Gregory Tobias | 4,000 | 117,840 | 24,937 | 768,664 |
Stock Awards | ||||||||||||||||||||
Name | Number of Shares or (#) | Market Value of Not Vested ($) | Equity Incentive Plan (#) | Equity Incentive Plan Awards: Market of Payout Unearned Shares, Not Vested ($) | ||||||||||||||||
Gregory S. Bielli: | ||||||||||||||||||||
Time-Based Stock Awards (1) | 21,646 | 449,371 | ||||||||||||||||||
Performance Shares (2) | 64,988 | 1,349,151 | ||||||||||||||||||
Milestone Performance Units (3) | 64,347 | 1,350,978 | ||||||||||||||||||
Supplemental Milestone Performance Units (4) | 49,550 | 1,028,658 | ||||||||||||||||||
Totals Gregory S. Bielli | 21,646 | 449,371 | 179,614 | 3,728,787 | ||||||||||||||||
Allen E. Lyda: | ||||||||||||||||||||
Time-Based Restricted Stock Units (5) | 10,000 | 207,600 | ||||||||||||||||||
Time-Based Stock Awards (1) | 8,246 | 171,187 | ||||||||||||||||||
Performance Shares (2) | 25,482 | 529,006 | ||||||||||||||||||
Milestone Performance Units (3) | 24,150 | 501,354 | ||||||||||||||||||
Totals Allen E. Lyda | 18,246 | 378,787 | 49,632 | 1,030,360 | ||||||||||||||||
Hugh McMahon: | ||||||||||||||||||||
Time-Based Stock Awards (1) | 6,617 | 137,369 | ||||||||||||||||||
Performance Shares (2) | 20,464 | 424,833 | ||||||||||||||||||
Milestone Performance Units (3) | 19,280 | 402,204 | ||||||||||||||||||
Totals Hugh McMahon | 6,617 | 137,369 | 39,838 | 827,037 | ||||||||||||||||
Joseph N. Rentfro: | ||||||||||||||||||||
Restricted Stock Grant (1) | 5,000 | 103,800 | ||||||||||||||||||
Time Based Stock Awards (6) | 7,006 | 145,445 | ||||||||||||||||||
Performance Shares (2) | 21,705 | 450,596 | ||||||||||||||||||
Milestone Performance Units (3) | 20,511 | 423,732 | ||||||||||||||||||
Totals Joseph Rentfro | 12,006 | 249,245 | 42,116 | 874,328 | ||||||||||||||||
Michael R.W. Houston: | ||||||||||||||||||||
Time-Based Restricted Stock Units (7) | 7,500 | 155,700 | ||||||||||||||||||
Time-Based Stock Awards (1) | 2,213 | 45,942 | ||||||||||||||||||
Performance Shares (2) | 4,425 | 91,863 | ||||||||||||||||||
Milestone Performance Units (3) | 13,341 | 276,959 | ||||||||||||||||||
Totals Michael R.W. Houston | 9,713 | 201,642 | 17,766 | 368,822 |
36
1. | Time-based stock |
Name | 2015 Time Grants | 2016 Time Based Grants | 2017 Time Based Grants | Total Time-Based Stock Awards | ||||||||||||||||
Gregory S. Bielli
|
| 2,661
|
|
| 8,139
|
|
| 10,846
|
|
| 21,646
|
| ||||||||
Allen E. Lyda
|
| 1,166
|
|
| 3,055
|
|
| 4,025
|
|
| 8,246
|
| ||||||||
Hugh F. McMahon
|
| 937
|
|
| 2,451
|
|
| 3,229
|
|
| 6,617
|
| ||||||||
Joseph N. Rentfro
|
| 997
|
|
| 2,607
|
|
| 3,402
|
|
| 7,006
|
| ||||||||
Michael R. W. Houston
|
| 0
|
|
| 0
|
|
| 2,213
|
|
| 2,213
|
|
2. |
Performance shares consist of shares that may vest during March |
Name | 2015 Performance Share Awards that Have Vested | 2016 Performance Share Awards not Vested | 2017 Performance Share Awards not Vested | Total Performance Share Awards | 2018 Performance Share Awards Not | 2019 Performance Share Awards Not Vested | 2020 Performance Share Awards Not Vested | Total Performance Awards | ||||||||||||||||||||||||||||
Gregory S. Bielli | 0 | 0 | 11,432 | 11,432 |
| 18,881
|
|
| 24,415
|
|
| 21,692
|
|
| 64,988
|
| ||||||||||||||||||||
Allen E. Lyda | 4,285 | 3,849 | 5,113 | 13,247 |
| 8,269
|
|
| 9,163
|
|
| 8,050
|
|
| 25,482
|
| ||||||||||||||||||||
Joseph E. Drew | 4,499 | 4,041 | 4,309 | 12,849 | ||||||||||||||||||||||||||||||||
Dennis J. Atkinson | 2,959 | 2,658 | 2,362 | 7,979 | ||||||||||||||||||||||||||||||||
Gregory Tobias | 4,285 | 3,849 | 3,000 | 11,134 | ||||||||||||||||||||||||||||||||
Hugh F. McMahon
|
| 6,655
|
|
| 7,351
|
|
| 6,458
|
|
| 20,464
|
| ||||||||||||||||||||||||
Joseph N. Rentfro
|
| 7,081
|
|
| 7,820
|
|
| 6,804
|
|
| 21,705
|
| ||||||||||||||||||||||||
Michael R. W. Houston
|
| 0
|
|
| 0
|
|
| 4,425
|
|
| 4,425
|
|
Milestone performance units consist of shares that may vest upon achievement of specific milestone objectives related to our residential development. For additional detail, see the “Equity Compensation” section of the Compensation Discussion and Analysis beginning on page |
4. | Supplemental milestone grants vest upon the achievement of specific goals related to the Mountain Village and Grapevine projects. Goal measurement is December 31, 2019. |
5. | The RSUs granted to Mr. |
6. | The RSUs granted to Mr. |
7. | The RSUs granted to Mr. Houston will vest ratably over a three-year period beginning in May 15, 2017. |
37
Stock Vested in Fiscal Year 20142017
The following table provides information for the named executive officers, onNEOs regarding the value realized and the number of shares acquired upon the vesting of stock awards, as well as the value realized before payment of any applicable withholding tax and broker commissions.
OPTION EXERCISES AND STOCK VESTED
Name | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) | ||||||
Gregory S. Bielli | ||||||||
Time-based Restricted Stock Grants | 10,000 | $ | 282,100 | |||||
|
|
|
| |||||
Total Gregory S. Bielli | 10,000 | $ | 282,100 | |||||
Allen E. Lyda: | ||||||||
Annual Incentive Grants | 3,826 | $ | 130,849 | |||||
Performance Share Grants(1) | 6,204 | 212,177 | ||||||
|
|
|
| |||||
Total Allen E. Lyda | 10,030 | $ | 343,026 | |||||
Joseph E. Drew: | ||||||||
Annual Incentive Grants | 3,355 | $ | 114,741 | |||||
Performance Share Grants(1) | 6,515 | 222,813 | ||||||
|
|
|
| |||||
Total Joseph Drew | 9,870 | $ | 337,554 | |||||
Dennis J. Atkinson: | ||||||||
Stock Options | ||||||||
Annual Incentive Grants | 2,837 | $ | 97,025 | |||||
Performance Share Grants(1) | 4,286 | 146,581 | ||||||
|
|
|
| |||||
Total Dennis Atkinson | 7,123 | $ | 243,607 | |||||
Gregory Tobias: | ||||||||
Restricted Stock Grants | 2,500 | $ | 75,775 | |||||
Annual Incentive Grant | 2,171 | 74,248 | ||||||
|
|
|
| |||||
Total Gregory Tobias | 4,671 | $ | 150,023 |
Name | Number of Shares Acquired on Vesting (#) | Value Realized on ($) | ||||||
Gregory S. Bielli | ||||||||
Time Grant | 8,635 | 185,566 | ||||||
Annual Incentive Grant | 2,343 | 50,351 | ||||||
Performance Grants (1) | 11,242 | 241,591 | ||||||
Supplemental Performance Grants | 37,789 | 799,993 | ||||||
Total Gregory S. Bielli | 60,009 | $ | 1,277,501 | |||||
Allen E. Lyda | ||||||||
Restricted Stock Grants | 5,000 | $ | 118,050 | |||||
Time Grants | 3,544 | 76,161 | ||||||
Annual Incentive Grant | 976 | 20,974 | ||||||
Performance Share Grants (1) | 5,028 | 108,052 | ||||||
Total Allen E. Lyda | 14,548 | $ | 323,237 | |||||
Hugh F. McMahon | ||||||||
Time Grants | 2,360 | 50,716 | ||||||
Performance Share Grants (1) | 1,161 | 24,950 | ||||||
Total Hugh F. McMahon | 3,521 | $ | 75,666 | |||||
Joseph N. Rentfro | ||||||||
Restricted Stock Grants | 2,500 | 56,425 | ||||||
Time Grant | 2,301 | 49,448 | ||||||
Total Joseph F. Rentfro | 4,801 | $ | 105,873 | |||||
Michael R.W. Houston | ||||||||
Restricted Stock Grants | 2,500 | 51,450 | ||||||
Time Grant | ||||||||
Total Michael R. W. Houston | 2,500 | $ | 51,450 |
1. | The performance share grants that vested during |
Pension Benefits in Fiscal Year 20142017
The Company’s pension plan is atax-qualified retirement program that covers eligible employees of the Company. Effective January 31, 2007, the pension plan was frozen so that anyone hired on or after February 1, 2007, is not allowed to participate in the plan. An employee is eligible for normal retirement benefits on the first day of the month coinciding with or next following the employee’s Social Security retirement date. The amount of annual benefit, payable monthly, is based upon an employee’s average monthly compensation, which is based upon the employee’s highest five consecutive calendar years of compensation out of the employee’s final ten years of compensation. The amount of the annual benefit payable monthly is 1.45% of the average monthly compensation, offset by .65% of the final average compensation not in excess ofone-twelfth of covered compensation, multiplied by total years of service (up to a maximum of 25 years); or. Effective April 2017, the sumCompany froze the pension plan and SERP as it relates to the accrual of the accrued benefit as of December 31, 1988 and the benefit as calculated above with total years of service, reduced by the years of service prior to January 1, 1989.future benefits.
38
The named executive officers’NEOs’ annual earnings taken into account under this formula include base salary and any annual cash or stock incentive payments, if any, but may not exceed anIRS-prescribed limit applicable totax-qualified plans ($260,000270,000 for 2014)2017).
Pension benefits fully vest after the completion of five years of service. Prior to that time, the benefit is not vested.
The supplemental executive retirement plan, or SERP, was established for the named executive officersNEOs to replace any pension benefit the named executive officersNEOs might lose due to theIRS-prescribed limit applicable totax-qualified plans. The SERP benefit is calculated based on the same formula as the defined benefit plan.
Name | Plan Name | Number of Years Credited Service (#) | (1) Present Value of Accumulated Benefit ($) | Payments During Last Fiscal Year ($) | Plan Name | Number of Years Credited Service (#) | (1) Present Value ($) | Payments ($) | |||||||||||||||||||||||
Gregory S. Bielli | None | — |
None
| ||||||||||||||||||||||||||||
Allen E. Lyda | Defined Benefit Plan | 25 | 658,145 | — |
Defined Benefit Plan
|
|
28
|
|
|
797,226
|
|
|
—
|
| |||||||||||||||||
Supplemental Executive Retirement Plan | 25 | 533,328 | — |
Supplemental Executive Retirement Plan
|
|
28
|
|
|
898,397
|
|
|
—
|
| ||||||||||||||||||
Joe Drew | Defined Benefit Plan | 14 | 520,077 | — | |||||||||||||||||||||||||||
Supplemental Executive Retirement Plan | 14 | 249,053 | — | ||||||||||||||||||||||||||||
Dennis Atkinson | Defined Benefit Plan | 25 | 958,055 | — | |||||||||||||||||||||||||||
Supplemental Executive Retirement Plan | 25 | 113,915 | — | ||||||||||||||||||||||||||||
Greg Tobias | None | — | |||||||||||||||||||||||||||||
Hugh F. McMahon
|
Defined Benefit Plan
|
|
17
|
|
|
326,512
|
|
|
—
|
| |||||||||||||||||||||
Joseph N. Rentfro
|
None
| ||||||||||||||||||||||||||||||
Michael R. W. Houston
|
None
|
1. | The present value of the accumulated benefit is based upon the same assumptions and measurements that are used in the preparation of the audited financial statements for the current year. See Note 15, Retirement Plans, to the Consolidated Financial Statements in the Company’s Annual Report on Form10-K for the fiscal year ended December 31, |
Fiscal Year 20142017 Nonqualified Deferred Compensation Table
The nonqualified deferred compensation plan allows the deferral of salary, bonuses, and vested restricted stock or performance units, and there are no limits on the extent of deferral permitted. The plan is available for the named executive officersNEOs and directors of the Company. Each of the named executive officersNEOs with deferred compensation has elected to defer payment until termination of employment, at which time payment will be made in a lump sum in accordance with Internal Revenue Code Section 409A. Withdrawals are providedThe plan provides for withdrawals in the plan forevent of unforeseeable emergencies such as financial hardship from illness or accident, loss of property due to casualty, or other similar extraordinary circumstancecircumstances arising as a result of events beyond the control of the employee, each as determined by the Company. A distribution based on an unforeseeable emergency is made only with the consent of the Company.
39
The decision by each named executive officerNEO to defer future compensation and the distribution date of any deferral is determined at the end of each fiscal year for awards that may be received in the coming year. The Company does not contribute to the nonqualified deferred compensation plan for the benefit of any named executive officerNEO or director. Earnings from any cash contributed or stock that is converted to cash by a named executive officerNEO or director are based upon the market return of the investment in which such officer or director directed his or her contribution. All holdings in the nonqualified deferred compensation plan are in the form of Company stock. No shares have been converted to cash within the plan.
Name | Executive Contributions in Last FY ($) | Aggregate Earnings (Loss) in Last FY(2) ($) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last FYE(1) ($) | Executive ($) | Aggregate Earnings FY (2) ($) | Aggregate Distributions ($) | Aggregate Balance ($) | ||||||||||||||||||||||||||||
Gregory S. Bielli | — | — | — | — |
—
|
|
—
|
|
—
|
|
—
|
| ||||||||||||||||||||||||
Allen E. Lyda | — | (74,423 | ) | — | 300,345 |
—
|
|
(47,611
|
)
|
—
|
|
211,648
|
| |||||||||||||||||||||||
Joe Drew | — | (74,423 | ) | — | 300,345 | |||||||||||||||||||||||||||||||
Dennis Atkinson | — | (21,520 | ) | — | 86,848 | |||||||||||||||||||||||||||||||
Greg Tobias | — | — | — | — | ||||||||||||||||||||||||||||||||
Hugh F. McMahon
|
—
|
|
—
|
|
—
|
|
—
|
| ||||||||||||||||||||||||||||
Joseph N. Rentfro
|
—
|
|
—
|
|
—
|
|
—
|
| ||||||||||||||||||||||||||||
Michael R. W. Houston
|
—
|
|
—
|
|
—
|
|
—
|
|
1. | All amounts reported in the aggregate balance at last fiscal |
2. | Aggregate earnings in the last fiscal year are based on the change in price of the Company’s stock from the prioryear-end to December 31, |
Fiscal Year 20142017 Potential Payments Upon Termination or Change in Control
The Company has entered into an agreement with each of the named executive officersselected NEOs that provides for specified benefits upon a change in control and/or upon certain terminations outside of a change in control. A change in control is deemed to have occurred if (i) there is an acquisition by any person or group (excluding current ownership) of 20% or more of the outstanding shares of the Company; (ii) the Company sells all or substantially all of its assets; or (iii) the Company merges or consolidates with another entity.
Benefits are payable to a named executive officeran NEO as a result of termination of employment in connection with a change in control if the named executive officerNEO is terminated without cause during the two years after the occurrence of a change in control or the named executive officerNEO is terminated prior to a change in control at the request of a third party who has taken steps to effect a change in control. The named executive officerNEO will also receive benefits if he or she voluntarily terminates employment after a change in control if the named executive officerNEO has been assigned substantial reductions in duties and responsibilities, received a reduction in base salary, or had an annual bonus opportunity eliminated or significantly reduced (i.e., a resignation for good reason). A named executive officer’sAn NEO’s employment shall be deemed to have been terminated forwith cause if employment is terminated as a result of failure to perform his or her duties, willful misconduct or breach of fiduciary duty, fraud, or wrongful disclosure of confidential information.
40
Change in control benefits include a continuation of base salary for a period of 36 months for the Chief Executive Officer and 30 months for the other named executive officers,NEOs, and a lump sum payment of two andone-half times the named executive officer’sNEO’s average bonus for the previous three years. The named executive officersNEOs are also entitled to receive a continuation of health and other insurance benefits over the salary continuation period. Each named executive officerNEO also has the right forto a three-month period to continue use of any perquisites he or she may have had prior to the change in control. Generally,For all NEOs unvested performance unit awards will vest at target achievement levels and other time-based awards will vest in full upon a change in control whether or not the named executive officerNEO is terminated.terminated as outlined in the equity compensation plan. During the period of time described above during which benefits are to be received in connection with a change
in control, the named executive officerNEO must agree not to solicit any employees of the Company or disclose any confidential information related to the Company.
Before Change in Control(3) | After Change in Control(1) | |||||||||||||
Name | Benefit | Termination w/o Cause or for Good Reason ($) | Termination w/o Cause or for Good Reason ($) | Change in Control No Termination ($) | ||||||||||
Gregory S. Bielli | Salary Continuation | 1,425,000 | ||||||||||||
Bonus – Target | 950,000 | |||||||||||||
Health Insurance | 46,800 | |||||||||||||
Other Compensation(2) | 57,106 | |||||||||||||
Equity Compensation | 2,537,390 | 2,537,390 | ||||||||||||
|
|
|
|
|
| |||||||||
Total Value | 5,016,296 | 2,537,390 | ||||||||||||
Allen E. Lyda(3) | Salary Continuation | 566,500 | 708,125 | |||||||||||
Bonus – Target | 356,728 | 424,875 | ||||||||||||
Health Insurance | 31,200 | 39,000 | ||||||||||||
Other Compensation(2) | 145,324 | 145,324 | ||||||||||||
Equity Compensation | 213,762 | 1,655,475 | 1,655,475 | |||||||||||
|
|
|
|
|
| |||||||||
Total Value | 1,313,514 | 2,972,799 | 1,655,475 | |||||||||||
Joe Drew | Salary Continuation | 625,000 | ||||||||||||
Bonus – Target | 437,500 | |||||||||||||
Health Insurance | 39,000 | |||||||||||||
Other Compensation(2) | 72,353 | |||||||||||||
Equity Compensation | 898,677 | 898,677 | ||||||||||||
|
|
|
|
|
| |||||||||
Total Value | 2,072,530 | 898,677 | ||||||||||||
Dennis Atkinson | Salary Continuation | 490,668 | ||||||||||||
Bonus – Target | 294,401 | |||||||||||||
Health Insurance | 39,000 | |||||||||||||
Other Compensation(2) | 88,114 | |||||||||||||
Equity Compensation | 559,858 | 559,858 | ||||||||||||
|
|
|
|
|
| |||||||||
Total Value | 1,472,040 | 559,858 | ||||||||||||
Gregory Tobias | Salary Continuation | 623,280 | ||||||||||||
Bonus – Target | 373,968 | |||||||||||||
Health Insurance | 39,000 | |||||||||||||
Other Compensation(2) | 26,517 | |||||||||||||
Equity Compensation | 852,484 | 852,484 | ||||||||||||
|
|
|
|
|
| |||||||||
Total Value | 1,915,249 | 852,484 |
Before Change in Control | After Change in Control (1) | ||||||||||||||||||||
Name | Benefit | Termination w/o Cause or for Good Reason ($) | Termination w/o Cause or for Good Reason ($) | Change in No Termination ($) | |||||||||||||||||
Gregory S. Bielli
| Salary Continuation
|
| 1,875,000
|
| |||||||||||||||||
Bonus – Target
|
| 1,562,500
|
| ||||||||||||||||||
Health Insurance
|
| 50,400
|
| ||||||||||||||||||
Other Compensation (2)
|
| 129,841
|
| ||||||||||||||||||
Equity Compensation
|
| 4,178,158
|
|
| 4,178,158
|
| |||||||||||||||
|
|
|
|
|
| ||||||||||||||||
Total Value
|
| 7,795,899
|
|
| 4,178,158
|
| |||||||||||||||
Allen E. Lyda (3)
| Salary Continuation
|
| 309,252
|
|
| 773,130
|
| ||||||||||||||
Bonus – Target
|
| 216,476
|
|
| 541,191
|
| |||||||||||||||
Health Insurance
|
| 16,800
|
|
| 42,000
|
| |||||||||||||||
Other Compensation (2)
|
| 157,090
|
|
| 157,090
|
| |||||||||||||||
Equity Compensation
|
| 436,500
|
|
| 1,409,147
|
|
| 1,409,147
|
| ||||||||||||
|
|
|
|
|
| ||||||||||||||||
Total Value
|
| 1,136,118
|
|
| 2,922,558
|
|
| 1,409,147
|
| ||||||||||||
Hugh F. McMahon (4)
| Equity Compensation
|
| 964,406
|
|
| 964,406
|
| ||||||||||||||
|
|
|
|
|
| ||||||||||||||||
Total Value
|
| 964,406
|
|
| 964,406
|
| |||||||||||||||
Joseph Rentfro (4)
| Equity Compensation
|
| 1,123,573
|
|
| 1,123,573
|
| ||||||||||||||
|
|
|
|
|
| ||||||||||||||||
Total Value
|
| 1,123,573
|
|
| 1,123,573
|
| |||||||||||||||
Michael R.W. Houston
| Salary Continuation
|
| 637,500
|
| |||||||||||||||||
Bonus – Target
|
| 382,500
|
| ||||||||||||||||||
Health Insurance
|
| 58,200
|
| ||||||||||||||||||
Other Compensation (2)
|
| 22,307
|
| ||||||||||||||||||
Equity Compensation
|
| 570,464
|
|
| 570,464
|
| |||||||||||||||
|
|
|
|
|
| ||||||||||||||||
Total Value
|
| 1,670,971
|
|
| 570,464
|
|
1. | Restricted stock and performance units vest upon a change in control. For purposes of this table, it is assumed allnon-vested performance units and milestone units vest immediately at the target level. The value for vesting of performance unit awards and milestone performance awards is the closing market price on the last business day of |
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2. | “Other Compensation” consists of accrued and unused vacation and personal paid leave at the time of termination and, if the |
3. | If Mr. Lyda is involuntarily terminated by the Company without cause or voluntarily terminates employment for good reason, |
4. | Mr. McMahon and Mr. Rentfro at this time only have change in control benefits related to |
Director Compensation in Fiscal Year 20132017
In 2014, 2017,non-employee directors received 1,000 shares of stock and an annual retainer of $60,000 payable quarterly in the form of common stock in arrears, based on the closing price of the Company’s common shares at each quarter end. In addition, the Chairman of the Board received an annual retainer of $25,000 payable in common stock, and the Chairman of each of the Audit, Compensation, and Real Estate, and Nominating and Corporate Governance Committees received an annual retainer of $15,000 payable in common stock. Directors affiliated with a person or entity owning 10% or more of the Company’s total shares outstanding could elect to receive their entire annual retainer in cash. Directors are not paid any fees for board or committee meeting
attendance. During 2012, theThe Compensation Committee has approved stock retention guidelines fornon-employee directors; the target retention value is five times the value of the annual director retainer.
Name | Fees Earned or Paid in Cash ($) | (1) Stock Awards ($) | Total($) | |||||||||
Robert Alter | —�� | 27,150 | 27,150 | |||||||||
Steven Betts | — | 27,150 | 27,150 | |||||||||
John Goolsby | — | 105,880 | 105,880 | |||||||||
Anthony Leggio | — | 90,880 | 90,880 | |||||||||
Norman Metcalfe | — | 105,880 | 105,880 | |||||||||
George G. C. Parker(2) | — | 105,880 | 105,880 | |||||||||
Kent G. Snyder(2) | — | 105,880 | 105,880 | |||||||||
Geoffrey L. Stack | — | 105,880 | 105,880 | |||||||||
Robert Stine | — | 90,880 | 90,880 | |||||||||
Daniel R. Tisch | — | 90,880 | 90,880 | |||||||||
Fred Tuomi | — | 27,150 | 27,150 | |||||||||
Michael H. Winer | 90,880 | — | 90,880 |
Name | Fees Earned or Paid in Cash ($) | (1) Stock Awards ($) | Total ($) | ||||||||||||
Robert A. Alter |
|
— |
|
|
81,159 |
|
|
81,159 |
| ||||||
Steven A. Betts |
|
— |
|
|
96,161 |
|
|
96,161 |
| ||||||
John L. Goolsby |
|
— |
|
|
36,451 |
|
|
36,451 |
| ||||||
Anthony L. Leggio |
|
— |
|
|
96,161 |
|
|
96,161 |
| ||||||
Norman J. Metcalfe |
|
— |
|
|
106,183 |
|
|
106,183 |
| ||||||
Geoffrey L. Stack |
|
— |
|
|
84,895 |
|
|
84,895 |
| ||||||
Daniel R. Tisch |
|
81,159 |
|
|
81,159 |
| |||||||||
Frederick C. Tuomi |
|
— |
|
|
81,159 |
|
|
81,159 |
| ||||||
Michael H. Winer |
|
96,110 |
|
|
— |
|
|
96,110 |
|
1. | The amounts reported reflect the grant date fair value of stock awards granted in |
PAY RATIO DISCLOSURE
As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(u) of RegulationS-K, we are providing the following information about the relationship of the annual total compensation of our President and Chief Executive Officer (the “CEO”) and the annual total compensation of our medium compensated employees:
The 2017 annual total compensation of the median compensated of all our employees who were employed as of December 31, 2017, other than our CEO, was $51,547; our CEO’s 2017 annual total compensation was $3,315,333 as reflected in the Summary Compensation Table on page 50, and the ratio of these amounts was 64 to 1. The median compensated employee was identified as one of our professional staff working in our commercial/industrial operating segment.
The pay ratio reported above is a reasonable estimate calculated in a manner consistent with SEC rules based on our payroll and employment records and the methodology described below. Pay elements that were included in the annual total compensation for each employee in determining the median compensated employee were:
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This is the same approach used to determine total annual compensation of our CEO reflected in the summary compensation table.
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table lists the stock ownership of stockholders known to the Company to be the beneficial owners of more than 5% of the shares of the Company’s Common Stock outstanding as of March 25, 2015.26, 2018. As of March 26, 2018, we had 25,944,891 shares of Common Stock outstanding. The table also provides the stock ownership as of the same date of all directors, each executive officerNEO named in the above Summary Compensation Table, (the “named executive officers”), and all directors and executive officers as a group.
Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership(1) | Percent of Class(2) | Amount and Nature of Beneficial Ownership (1) | Percent of Class (2) | ||||||||||||
TowerView LLC 460 Park Avenue, 20th Floor New York, NY 10022 | 3,672,659 | (3) | 14.16 | % | ||||||||||||
Third Avenue Management LLC 622 Third Avenue, 32nd Floor New York, NY 10017 | 2,741,264 | (3) | 12.47 | % | 2,653,982 | (4) | 10.23 | % | ||||||||
TowerView LLC 500 Park Avenue New York, NY 10022 | 2,984,046 | (4) | 13.58 | % | ||||||||||||
The London Company 1801 Bayberry Court, Suite 301 Richmond, Virginia 23226 | 2,251,453 | (5) | 10.24 | % | ||||||||||||
Royce & Associates LLC 745 Fifth Avenue New York, NY 10151 | 1,724,091 | (6) | 7.84 | % | ||||||||||||
Royce & Associates LP 745 Fifth Avenue New York, NY 10151 | 1,857,815 | (6) | 7.16 | % | ||||||||||||
The Vanguard Group 100 Vanguard Blvd. Malvern, PA. 19355 | 1,516,405 | (7) | 5.84 | % | ||||||||||||
Directors | ||||||||||||||||
Robert A. Alter | 4,930 | (8) | below 1 | % | 25,968 | (8) | below 1 | % | ||||||||
Steven A. Betts | 930 | (8) | below 1 | % | 16,280 | (8) | below 1 | % | ||||||||
Gregory S. Bielli | 5,321 | (9) | below 1 | % | 95,190 | (10) | below 1 | % | ||||||||
John L. Goolsby | 26,646 | (7) | below 1 | % | ||||||||||||
Anthony Leggio | 7,252 | (8) | below 1 | % | ||||||||||||
Anthony L. Leggio | 23,678 | (8) | below 1 | % | ||||||||||||
Norman J. Metcalfe | 38,659 | (8) | below 1 | % | 52,241 | (8) | below 1 | % | ||||||||
Geoffrey L. Stack | 37,979 | (9) | below 1 | % | 60,565 | (9) | below 1 | % | ||||||||
Robert A. Stine | 73,725 | (10) | below 1 | % | ||||||||||||
Daniel R. Tisch | 3,830,979 | (4) | 17.43 | % | 4,643,336 | (3) | 17.90 | % | ||||||||
Frederick C. Tuomi | 5,930 | (8) | below 1 | % | 17,968 | (8) | below 1 | % | ||||||||
Michael H. Winer | 2,741,264 | (3) | 12.47 | % | — | (5) | below 1 | % | ||||||||
Executive Officers | ||||||||||||||||
Dennis J. Atkinson | 45,466 | (9) | below 1 | % | ||||||||||||
Michael Houston | 2,298 | (8) | below 1 | % | ||||||||||||
Allen E. Lyda | 93,075 | (9) | below 1 | % | 126,758 | (9) | below 1 | % | ||||||||
Hugh F. McMahon, IV | 147 | (8) | below 1 | % | 10,048 | (8) | below 1 | % | ||||||||
Joseph E. Rentfro | 0 | (11) | below 1 | % | 18,783 | (9) | below 1 | % | ||||||||
Gregory Tobias | 5,271 | (8) | below 1 | % | ||||||||||||
All executive officers and directors as a group (16 persons) | 6,917,574 | 31.48 | % | |||||||||||||
Robert Velasquez | 4,398 | (8) | below 1 | % | ||||||||||||
All executive officers and directors as a group (14 persons) | 5,097,511 | 19.65 | % |
(1) | In each case, the named stockholder in the above table has the sole voting and investment power as to the indicated shares, except as set forth in the footnotes below, and except that all options, restricted stock, and restricted stock units are held by directors and officers individually. For purposes of this table, “beneficial ownership” is determined in accordance with Rule13d-3 under the Exchange Act, pursuant to which a person or group of persons is deemed to have “beneficial ownership” of any shares that such person owns or has the right to acquire within 60 days. As a result, we have included in the “Amount and Nature of |
Beneficial Ownership” column shares of vested and unvested restricted stock granted to a beneficial owner |
43
and warrants granted to a beneficial owner. Such restricted stock has voting rights, irrespective of vesting. In addition, we have included restricted stock units that could possibly vest within 60 days of March |
(2) | For purposes of computing the “Percent of Class” column, any |
(3) |
TowerView LLC has sole voting power and investment power over |
(4) | Based on data supplied by Third Avenue Management LLC (“TAM”), TAM beneficially owns 2,653,982shares. Third Avenue Real Estate Value Fund holds 1,129,952 common shares, and the Third Avenue Real Estate Value Fund UCITS holds 81,956 common shares. Third Avenue Value Fund holds 1,359,121 common shares, and the Third Avenue Value Fund UCITS holds 4,368 common shares. Third Avenue Value Portfolio of |
(5) | At December 31, 2017, Mr. Winer was portfolio manager of TAM, which has dispositional authority over all these shares. Mr. Winer disclaimed beneficial ownership of these shares owned by said entities for all other purposes. Mr. Winer retired from TAM on February 28, 2018 and thereafter will have no affiliation with TAM. As a portfolio manager of TAM, Mr. Winer was not permitted to personally own shares in the Company prior to his retirement |
(6) | A Schedule 13G/A filed on |
(7) | A Schedule 13G/A filed on February 12, 2018 by The |
(8) | The shares owned by Mr. Leggio include |
44
investment accounts and |
(9) | The shares owned by Mr. Stack include |
(10) |
45
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
The Audit Committee of the Board has furnished the following report:
The Audit Committee reviewed Tejon Ranch Co.’s (the “Company’s”) financial reporting process on behalf of the Board of Directors (the “Board”). Management has the primary responsibility for the financial statements and the reporting process. The Company’s independent auditors are responsible for expressing an opinion on the conformity of the Company’s audited financial statements to generally accepted accounting principles.
In this context, the Audit Committee has reviewed and discussed with management and Ernst & Young LLP, the Company’s independent registered public accounting firm, the audited financial statements included in the Company’s Annual Report on Form10-K for the year ended December 31, 2014.2017. The Audit Committee has also discussed with Ernst & Young LLP the matters required to be discussed by Statement on Auditing Standards No. 61, as amended (AICPA, Professional Standards, Vol. 1 AU section 380), as adopted byapplicable standards of the Public Company Accounting Oversight Board, or PCAOB, in Rule 3200T.PCAOB. In addition, the Audit Committee has received the written disclosures and the letter from Ernst & Young LLP required by applicable requirements of the PCAOB regarding Ernst & Young LLP’s communications with the Audit Committee concerning independence, and has discussed with the independent auditors their independence from the Company and its management. The Audit Committee has also considered whether Ernst & Young LLP’s provision ofnon-audit services to the Company is compatible with theirits independence.
Based on the reviews and discussions referred to in the preceding paragraphs, the Audit Committee recommended to the Board, and the Board has approved, that the audited financial statements be included in the Company’s Annual Report on Form10-K for the year ended December 31, 20142017 for filing with the Securities and Exchange Commission.
Anthony L. Leggio (Chairman), John L. Goolsby, Geoffrey L. Stack,
Frederick C. Tuomi, and Norman J. Metcalfe
Members of the Audit Committee
46
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the Company’s directors and officers as well as and persons who beneficially own more than 10% of the Company’s outstanding Common Stock, to file reports of ownership and changes in beneficial ownership of the Company’s Common Stock on Form 3, Form 4, and Form 5, as appropriate, with the SEC and to furnish the Company with copies of all such Section 16(a) reports that they file. Based solely on the review of copies of such reports and amendments thereto and other information furnished to the Company, the Company believes that, during 2014,2017, all officers, directors, and persons who beneficially own more than 10% of the Company’s Common Stock complied in a timely manner with all filing requirements with the exception of one late filing of a Form 4 related to a sale of securities by Mr. Drew on December 23, 2014. The filing was made on January 5, 2015.requirements.
Related Person Transactions
The Board follows certain written policies and procedures developed for the review and approval of all transactions with related persons, pursuant to which the Board reviews the material facts of, and either approves or disapproves of, the Company’s entry into any transaction, arrangement or relationship or any series thereof in which (i) the aggregate amount involved will or may be expected to exceed $120,000 in any calendar year, or over the term of the contract; (ii) the Company is a participant,participant; and (iii) any related person has or will have a direct or indirect material interest (other than solely as a result of being a director or less than ten percent10% beneficial owner of another entity).
The Board reviews all relationships and transactions in which both the Company and any related person are participants to determine whether such related persons have a direct or indirect material interest in such transaction. A “related person” is any executive officer, director, or director nominee of the Company, or any beneficial owner of more than five percent5% of the Company’s Common Stock, or any immediate family member of any of the foregoing. The Company discloses transactions in its proxy statements with related persons in accordance with Item 404 of RegulationS-K.
In the course of the Board’s review and approval or ratification of a related party transaction, the Board considers:
Any member of the Board who is a related person with respect to a transaction under review may not participate in the deliberation or vote respecting approval or ratification of the transaction, provided that such director may be counted in determining the presence of a quorum at a meeting that considers the transactions. There have been no related party transactions since the beginning of 2014.2017.
Financial Information
Both the Company’s Annual Report to Stockholders and the Company’s Annual Report on Form10-K (including the financial statements and financial statement schedules but without exhibits) as filed with the SEC accompany this Proxy Statement.Both reports may be obtained without charge by calling (661) 248-3000, or by written request to the Corporate Secretary, Tejon Ranch Co., Post OfficeP.O. Box 1000, Tejon Ranch, California 93243.
47
Notice of Internet Availability
You can now access the 20142017 Annual Report to Stockholders, the 20142017 Annual Report on Form10-K, and the Proxy Statement for the 20152018 Annual Meeting via the Internet at the following address:http://materials.proxyvote.com/879080.
The enclosed information has been provided to you to enable you to cast your vote in one of three convenient ways: (1) via the Internet, (2) by telephone, or (3) by returning it in the enclosed postage-paid envelope. Whichever method you choose, you are encouraged to vote.
You can also eliminate the mailing of this information in the future by electing to receive this data through the internetInternet and by an email directing you to vote electronically. ThisYou can make this election can be made as you vote your proxy via the Internet by providing your email address when prompted.
Communications with Directors
Any stockholder or other party interested in communicating with members of the Board, any of its committees, the independent directors as a group, or any of the independent directors individually may send written communications to Tejon Ranch Co., P.O. Box 1000, Tejon Ranch, California 93243, Attention: Corporate Secretary, or via the “Contact” link on the Company’s website,web site,www.tejonranch.com. Communications received in writing are forwarded to the Board, committee, or to any individual director or directors to whom the communication is directed, unless the communication is unduly hostile, threatening, or illegal, does not reasonably relate to the Company or its business, or is similarly inappropriate. The Corporate Secretary has the authority to discard or disregard any inappropriate communications or to take other appropriate actions with respect to any such inappropriate communications.
Stockholder Proposals for 20162019 Annual Meeting
Stockholder proposals to be presented at the 20162019 Annual Meeting, pursuant to Rule14a-8 under the Exchange Act, must be received by the Company no later than December 2, 2015November 30, 2018 in order to be considered for inclusion in the Company’s proxy materials for that meeting. Such proposals must be submitted in writing to the principal executive offices of the Company at the address set forth on the first page of this Proxy Statement.
In addition, the Company’s Certificate of Incorporation and Bylaws require that the Company be given advance written notice of stockholders nominating for election to the Company’s Board and of other matters which stockholders wish to present for action at an annual meeting of stockholders other than matters included in the Company’s proxy materials in accordance with Rule14a-8 under the Exchange Act, as discussed above, specified information be provided in connection with such proposals. The Company’s Certificate of Incorporation requires that the Company be given advance written notice of stockholder nominations for election to the Company’s Board and of other matters which stockholders wish to present for action at an annual meeting of stockholders (other than matters included in the Company’s proxy materials in accordance with Rule14a-8 under the Exchange Act, as discussed above). Such nomination or other proposal will be considered at the 20162019 Annual Meeting only if it is delivered to or mailed and received at the principal executive offices of the Company at the address set forth on the first page of this Proxy Statement not less than 30 days nor more than 60 days prior to the meeting as originally scheduled, butscheduled. However, if less than 40 days’ notice or prior public disclosure of the date of the meeting is given or made to the stockholders, then the notice must be received not later than the close of business on the tenth (10th) day following the day on which the Notice of Annual Meeting of Stockholders was mailed or the public disclosure was made.
A stockholder’s notice to the Secretary must set forth (i) as to the stockholder giving the notice and the beneficial owners, if any, on whose behalf the nomination or proposal is made: (A) the name and address of the stockholder, as they appear on the Company’s books, and of such beneficial owner, (B) the class and number of
shares of the Company which are owned beneficially and of record by such stockholder and such beneficial owner, and (C) a representation that the stockholder is a holder of record of stock of the Company entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to propose such business: and (ii) as to the stockholder giving notice, or, if the nomination or proposal is made on behalf of a beneficial owner, as to the beneficial owner, and if such stockholder or beneficial owner is an entity, as to each director, executive, managing member or control person of such entity (each a “control person”): (A) the class and the number of shares beneficially owned, (B) a description of any agreement with respect to the nomination or proposal between or among the stockholder, beneficial owner or control person and any other person, (C) a description of any agreement entered into by, or on behalf of, such stockholder, beneficial owner or control person, the effect of which is to mitigate loss, manage risk or benefit from changes in the share price of any class of the Corporation’s shares, or maintain, increase or decrease the voting power of the stockholder, beneficial owner, or control person with respect to the Company’s securities: and (D) a representation whether the stockholder or beneficial owner, if any, intends or is part of a group which intends (I) to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the Company’s outstanding capital stock required to approve a proposal (other than a nomination) and/or (II) otherwise to solicit proxies from stockholders in support of such proposal or nomination.
A stockholder’s notice to the Secretary regarding a nomination for election to the Company’s Board must set forth: (i)forth, as to each person whom the stockholder proposes to nominate for election or re-electionreelection as a director, (i) all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required pursuant to the Securities Exchange Act of 1934, as amended (including such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected); and, (ii) a statement as to whether a nominated person is receiving compensation, reimbursement or remuneration to be a nominee or serve as a director and, if so, disclosure of all material terms and identity of persons providing such compensation, reimbursement or remuneration, (iii) a statement by such nominee indicating a current intention to serve the stockholder giving notice, (A)full term if elected and (iv) a statement by such nominee stating whether or not the stockholder’s name and address,nominee has any agreement, arrangement or understanding or given a commitment or assurance to any person or entity as they appear on the Company’s books, and (B) the class and number of shares of the Company which are beneficially owned by the stockholder. to how such nominee will act or vote, if elected.
A stockholder’s notice to the Secretary regarding matters other mattersthan nomination for election to the Company’s Board must set forth as to each matter the stockholder proposes to bring before the Annual Meeting: (i) a brief description of the business desired to be brought before the Annual Meeting, (ii) the name and record addresstext of the stockholder proposingproposal or business (including the text of any resolutions or amendments to the Bylaws proposed for consideration), (iii) the reasons for conducting such business, (iii) the class and number of shares of the Company which are beneficially owned by the stockholder, and (iv)(ivi) any material interest of the stockholder in such business.
48
Stockholders Sharing the Same Last Name and Address
To reduce the expense of delivering duplicate proxy materials to stockholders who may have more than one account holding the Company’s Common Stock but who share the same address, we have adopted a procedure approved by the SEC called “householding.” Under this procedure, certain stockholders of record who have the same address and last name will receive only one copy of our annual report and proxy statement that are delivered until such time as one or more of these stockholders notifies us that they want to receive separate copies. This procedure reduces duplicate mailings and saves printing costs and postage fees, as well as natural resources. Stockholders who participate in householding will continue to have access to and utilize separate proxy voting instructions.
If you receive a single set of proxy materials as a result of householding, and you would like to have separate copies of our annual report and/or proxy statement mailed to you, please submit a request to our Corporate Secretary at Tejon Ranch Co., P.O. Box 1000, Tejon Ranch, California 93243;93243, telephone661-248-3000, and we will promptly send you what you have requested. You can also contact our Corporate Secretary if you received multiple copies of the annual meeting materials and would prefer to receive a single copy in the future, or if you would like to opt out of householding for future mailings.
Other Business
Management does not know of any matter to be acted upon at the 20152018 Annual Meeting other than those described above, but if any other matter properly comes before the meeting, the persons named on the enclosed proxy will vote thereon in accordance with their best judgment.
Stockholders are urged to sign and return their proxies without delay.
For the Board of Directors,
NORMAN J. METCALFE, Chairman of the Board
ALLEN E. LYDA, Chief Financial Officer, Assistant Secretary
49
APPENDIX A
ATTACHMENT A TO CORPORATE GOVERNANCE GUIDELINES
The Nominating and Corporate Governance Committee annually reviews the independence of all directors and reports its findings to the Board of Directors. Based upon the report and the directors’ consideration, the Board of Directors determines which directors shall be deemed independent.
A director will be deemed independent if it is determined that he or she has no material relationship with the corporation, either directly or through an organization that has a material relationship with the corporation. A relationship is “material” if, in the judgment of the Board of Directors, it might reasonably be considered to interfere with the exercise of independent judgment. Ownership of stock of the corporation is not, in itself, inconsistent with a finding of independence. In addition, an Audit Committee member must also be independent within the meaning of the New York Stock Exchange’s listing requirements for audit committees and the requirements set forth in Rule10A-3 of the Securities Exchange Act of 1934, as amended, and a Compensation Committee member must also be independent within the meaning of the New York Stock Exchange’s listing requirements for compensation committees. The following specific standards are utilized in determining whether a director shall be deemed independent:
For purposes of thisAttachment A, an “immediate family member” means a person’s spouse, parents, children, siblings, mothers- andfathers-in-law, sons- anddaughters-in-law, brothers- andsisters-in-law, and anyone (other than an employee) who shares such person’s home.
A-1
. MMMMMMMMMMMM TEJON RANCH CO.
MMMMMMMMMMMMMMM C123456789 IMPORTANT ANNUAL MEETING INFORMATION 000004ENDORSEMENT LINE SACKPACKMR A SAMPLEDESIGNATION (IF ANY) ADD 1 ADD 2 ADD 3 ADD 4 ADD 5 ADD 6C123456789
000000000.000000 ext 000000000.000000 ext ENDORSEMENT_LINE______________ SACKPACK_____________ 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext
MR A SAMPLE Electronic Voting Instructions
DESIGNATION (IF ANY) Available 24 hours a day, 7 days a week!
ADD 1 ADD 2 Instead of mailing your proxy, you may choose one of the voting ADD 3 methods outlined below to vote your proxy.
ADD 4 VALIDATION DETAILS ARE LOCATED BELOW IN THE TITLE BAR.
MMMMMMMMM ADD 5 Proxies submitted by the Internet or telephone must be received by ADD 6 11:59 p.m., Eastern Time, on May 5, 2015
7, 2018 Vote by Internet
• Go to www.investorvote.com/trc
• Or scan the QR code with your smartphone
• Follow the steps outlined on the secure website
Vote by telephone
• Call toll free1-800-652-VOTE (8683) within the USA, US territories & Canada on a touch tone telephone
• Follow the instructions provided by the recorded message
Using a black ink pen, mark your votes with an X as shown in X this example. Please do not write outside the designated areas.
Annual Meeting Proxy Card
1234 5678 9012 345IF qIF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.
q A Proposals — The Board of Directors recommends a vote FOR alleach of the nominees listed in Proposal 1, FOR Proposal 2 and FOR Proposals 2 andProposal 3.
1. Election of Directors:- Anthony For Withhold For Withhold + 01—Geoffrey L. Leggio- Stack 02—Michael H. Winer
For Withhold02—Geoffrey L. Stack
Against Abstain For Withhold03—Frederick C. TuomiFor Withhold
Against Abstain 2. Ratification of appointment of Ernst & Young LLP as the 3. Approval of named executive officer compensation on an Company’s independent registered public accounting firm for advisory basis. fiscal year 2015.
2018. 4. To transact such other business as may properly come before the meeting or any adjournment thereof. BNon-VotingFor Against AbstainAdvisory vote to approve named executive officers compensation.For Against AbstainB Non-Voting Items
Change of Address — Please print new address below.
Comments — Please print your comments below.
C Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below
NOTE: Please sign as name appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such.
Date (mm/dd/yyyy) — Please print date below.
Signature 1 — Please keep signature within the box.
Signature 2 — Please keep signature within the box.021C3B
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MR A SAMPLE (THIS AREA IS SET UP TO ACCOMMODATE 140 CHARACTERS) MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MMMMMMM1UPX 3682531 MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND
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IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.
q Proxy — TEJON RANCH CO.
2018 Annual Meeting of Stockholders – May 6, 2015
8, 2018 THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY
The undersigned hereby appoints Norman J. Metcalfe and Gregory S. Bielli, and each of them, with power to act without the other and with power of substitution, as proxies andattorneys-in-fact and hereby authorizes them to represent and vote, as provided on the other side, all the shares of Tejon Ranch Co. Common Stock which the undersigned is entitled to vote, and, in their discretion, to vote upon such other business as may properly come before the 2018 Annual Meeting of Stockholders of the Company to be held May 6, 20158, 2018 or at any adjournment or postponement thereof, with all powers which the undersigned would possess if present at the 20152018 Annual Meeting.
This proxy, when properly executed, will be voted in the manner directed by the undersigned. If no such directions are made, this proxy will be voted FOR the election of each of the nominees listed in Proposal 1 and FOR Proposals 2 and 3. If any other matters properly come before the 20152018 Annual Meeting, the persons named in this proxy will vote on such matters in their discretion.(Continued (Continued and to be marked, dated and signed, on the other side)
TEJON RANCH CO.IMPORTANT ANNUAL MEETING INFORMATIONUsing a black ink pen, mark your votes with an X as shown in this example. Please do not write outside the designated areas.Annual Meeting Proxy CardPLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.A Proposals — The Board of Directors recommends a vote FOR all the nominees listed and FOR Proposals 2 and 3.1. Election of Directors:01—Anthony L. Leggio04—Michael H. WinerFor Withhold02—Geoffrey L. StackFor Withhold03—Frederick C. TuomiFor Withhold+2. Ratification of Ernst & Young LLP, as the Company’s independent registered public accounting firm for fiscal year 2015.4. To transact such other business as may properly come before the meeting or any adjournment thereof.For Against Abstain3. Advisory vote to approve named executive officers compensation.For Against AbstainB Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign BelowNOTE: Please sign as name appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such.Date (mm/dd/yyyy) — Please print date below.Signature 1 — Please keep signature within the box.Signature 2 — Please keep signature within the box.021C4B1UPX 2336622+
PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.Proxy — TEJON RANCH CO.Annual Meeting of Stockholders – May 6, 2015THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANYThe undersigned hereby appoints Norman J. Metcalfe and Gregory S. Bielli, and each of them, with power to act without the other and with power of substitution, as proxies and attorneys-in-fact and hereby authorizes them to represent and vote, as provided on the other side, all the shares of Tejon Ranch Co. Common Stock which the undersigned is entitled to vote, and, in their discretion, to vote upon such other business as may properly come before the Annual Meeting of Stockholders of the Company to be held May 6, 2015 or at any adjournment or postponement thereof, with all powers which the undersigned would possess if present at the 2015 Annual Meeting.This proxy, when properly executed, will be voted in the manner directed by the undersigned. If no such directions are made, this proxy will be voted FOR the election of each of the nominees listed in Proposal 1 and FOR Proposals 2 and 3. If any other matters properly come before the 2015 Annual Meeting, the persons named in this proxy will vote on such matters in their discretion.(Continued and to be marked, dated and signed, on the other side)