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• | to elect eight directors to serve until the next annual meeting of stockholders or until their successors are duly elected or appointed and qualified; |
• | to ratify the appointment of Deloitte & Touche LLP as Archrock, Inc.’s independent registered public accounting firm for fiscal year 2019; |
• | to conduct an advisory vote to approve the compensation provided to Archrock, Inc.’s Named Executive Officers for 2018; and |
• | to transact such other business as may properly come before the meeting or any adjournment thereof. |
By Order of the Board of Directors, | |
Stephanie C. Hildebrandt | |
Secretary | |
Houston, Texas | |
March 14, 2019 |
Important Notice of Internet Availability of Proxy Materials for the Annual Meeting of Stockholders to be Held on April 24, 2019 If you received a Notice of Internet Availability of Proxy Materials by mail, you will not receive a printed copy of the proxy materials unless specifically requested. The Notice of Internet Availability of Proxy Materials is not a form for voting and presents only an overview of the matters for which your vote is requested. Stockholders are encouraged to access and carefully review the proxy materials before voting. This Proxy Statement and our 2018 Annual Report to Stockholders are available at www.proxyvote.com. |
BY INTERNET | BY TELEPHONE | BY MAILING YOUR PROXY CARD | ||
Visit 24/7 www.proxyvote.com | Dial toll-free 24/7 1-800-690-6903 or the number provided by your broker or other nominee | Cast your ballot, sign your proxy card and send by free post |
ANNUAL MEETING DETAILS | MEETING AGENDA | |||
Wednesday, April 24, 2019 9:30 a.m. Central Time Archrock Corporate Headquarters 9807 Katy Freeway, Suite 100 Houston, Texas 77024 For stockholders of record as of March 1, 2019 On March 14, we began mailing this Proxy Statement to stockholders who requested paper copies. | PROPOSAL Election of directors Ratification of appointment of independent auditors Advisory vote approving 2018 executive compensation | BOARD’S VOTING RECOMMENDATION FOR EACH NOMINEE FOR FOR | PAGE REFERENCE 4 21 24 |
Ø | Annual election of all directors |
Ø | Plurality vote standard which, pursuant to our Corporate Governance Principles, requires that any nominee for director who receives a greater number of “withheld” votes than “for” votes must submit his or her resignation for consideration by the Board |
Ø | Separate Chairman and Chief Executive Officer |
Ø | Majority independent board, with seven of eight directors being independent |
Ø | 100% independent board committees |
Ø | Independent directors meet regularly without management present |
Ø | 25% of board is female |
Ø | Officer and director stock ownership guidelines |
Ø | No hedging or pledging of company securities |
Ø | Annual board and committee evaluations |
Information Regarding the Annual Meeting | |
Meeting Time and Place | |
Meeting Agenda and Board’s Recommendation | |
Stockholders Entitled to Vote | |
How to Vote Your Proxy | |
Quorum and Required Votes | |
Broker Non-Votes | |
Changing Your Vote | |
Proxy Tabulator | |
Proxy Solicitation | |
Availability of Proxy Materials | |
Householding | |
Proposal 1 — Election of Directors | |
Nominees for Director | |
Corporate Governance | |
Director Independence | |
Board Leadership Structure and Tenure | |
Director Qualifications, Diversity and Nominations | |
Committees of the Board, Membership and Attendance | |
The Board’s Role in Risk Oversight | |
Compensation Committee Interlocks and Insider Participation | |
Management Succession Planning | |
Director Compensation | |
Executive Officers | |
Stock Ownership | |
Ownership of Certain Beneficial Owners | |
Ownership of Management | |
Section 16(a) Beneficial Ownership Reporting Compliance |
Related Party Transactions | |
Proposal 2 — Ratification of the Appointment of the Independent Registered Public Accounting Firm | |
Fees Paid to the Independent Registered Public Accounting Firm | |
Pre-Approval Policy | |
Report of the Audit Committee | |
Proposal 3 — Advisory Vote to Approve the Compensation of the Named Executive Officers | |
Compensation Discussion and Analysis | |
Executive Summary | |
Discussion of Our Fiscal 2018 Executive Compensation Program | |
Compensation Committee Report | |
Compensation Tables | |
Summary Compensation Table | 40 |
Grants of Plan-Based Awards | |
Outstanding Equity Awards at Fiscal Year-End | |
Option Exercises and Stock Vested | |
Non-Qualified Deferred Compensation | |
Potential Payments Upon Termination or Change of Control | 46 |
CEO Pay Ratio | |
Additional Information | |
2020 Annual Meeting of Stockholders | |
Communication with the Board | |
Company Documents | |
Company Contact Information | |
Proposal No. | Description of Proposal | Board’s Voting Recommendation | Page No. Where You Can Find More Information Regarding the Proposal |
1 | Election of eight directors to serve until the next annual meeting of stockholders or until their successors are duly elected or appointed and qualified | FOR | 4 |
2 | Ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for fiscal year 2019 | FOR | 21 |
3 | Advisory vote to approve the compensation provided to our Named Executive Officers for 2018 | FOR | 24 |
• | Forwarding the Notice of Internet Availability of Proxy Materials to beneficial owners; |
• | Forwarding printed proxy materials by mail to beneficial owners who specifically request them; and |
• | Obtaining beneficial owners’ voting instructions. |
Anne-Marie N. Ainsworth Age: 62 Director Since: April 2015 Archrock Committees: Audit and Nominating and Corporate Governance (Chair) Background: Ms. Ainsworth served as President, Chief Executive Officer and director of the general partner of Oiltanking Partners, L.P. (a provider of terminal, storage and transportation services to the crude oil, refined petroleum and liquefied petroleum gas industries) and as President and Chief Executive Officer of Oiltanking Holding Americas, Inc. from November 2012 to March 2014. She previously served as Senior Vice President of Refining of Sunoco, Inc. (a petroleum and petrochemical manufacturer) from November 2009 to March 2012. Prior to joining Sunoco, Ms. Ainsworth was employed by Motiva Enterprises, LLC, where she was the General Manager of the Motiva Norco refinery in Norco, Louisiana from 2006 to 2009. From 2003 to 2006, she was Director of Management Systems & Process Safety at Shell Oil Products U.S., and from 2000 to 2003 she was Vice President of Technical Assurance at Shell Deer Park Refining Company. Ms. Ainsworth holds a B.S. in Chemical Engineering from the University of Toledo and an M.B.A. from Rice University, where she served as an Adjunct Professor from 2000 to 2009. Anne-Marie is a graduate of the Institute of Corporate Directors Education Program (Rotman School of Management, University of Toronto/ Haskayne School of Business, University of Calgary), and holds the ICD.D designation. |
Wendell R. Brooks Age: 69 Director Since: November 2015 Archrock Committees: Audit and Compensation Background: Mr. Brooks currently serves as President and Chief Executive Officer of Axis Energy Services (an oil field services company). From 2015 to 2018, Mr. Brooks served as managing director to B29 Investments, L.P. (a Dallas-based private equity firm that specializes in oil field service investments). He served as an Executive Vice President and the President of the Production and Infrastructure Segment of Forum Energy Technologies (an international oil field products company) from August 2010 through December 2014, having previously served as Chief Executive Officer and President of Allied Technology, Inc. from October 2007 until August 2010 when Allied Technology was merged into Forum Energy Technologies. From 1996 to October 2007, he was the Group Director for the Well Support business of John Wood Group Plc. (a public Scottish international energy services company traded on the London Stock Exchange). Mr. Brooks was President of Del Norte Technology, Inc. (a provider of positioning systems) from 1984 to 1994. He was employed by Geosource, Inc. from 1975 to 1984 where he was involved in business development and served as President of two divisions. Mr. Brooks has a B.B.A. from the University of Texas at Arlington and an M.B.A. from the Harvard Business School. |
D. Bradley Childers Age: 54 President and Chief Executive Officer, Archrock Director Since: April 2013 Archrock Committees: None Background. Mr. Childers was elected as our President and Chief Executive Officer in December 2011, after serving as our Interim President and Chief Executive Officer since November 2011. He also served as President, Chief Executive Officer and Chairman of the Board of Archrock GP LLC, the managing general partner of Archrock Partners, L.P., a master limited partnership in which we owned an equity interest (the “Partnership”) from November 2011 until the Partnership’s merger into a wholly-owned subsidiary of Archrock, Inc. in April 2018 (the “Partnership Merger”). Mr. Childers served as our Senior Vice President from August 2007 through November 2011. He served as an officer, including as President, North America of Exterran Energy Solutions, L.P., a predecessor subsidiary, from March 2008 through November 2011, and as Senior Vice President of the Partnership from June 2006 through November 2011. Mr. Childers joined Universal Compression Holdings, Inc., a predecessor company, in 2002 and served in a number of management positions, including as Senior Vice President and as President of the International Division of Universal Compression, Inc. (Universal’s wholly owned subsidiary). He held various positions with Occidental Petroleum Corporation (an international oil and gas exploration and production company) and its subsidiaries from 1994 to 2002. He also serves as an officer of certain other Archrock subsidiaries. Mr. Childers holds a B.A. from Claremont McKenna College and a J.D. from the University of Southern California. |
Gordon T. Hall Age: 59 Director Since: March 2002 Archrock Committees: Compensation and Nominating and Corporate Governance Background: Mr. Hall is Chairman of the Board, a position he assumed in November 2015. At predecessor companies to Archrock, Mr. Hall served as Vice Chairman and Lead Independent Director from April 2013 to November 2015, as Chairman of the Board of Exterran Holdings, Inc. from August 2007 through April 2013 and as Chairman of the Board of Hanover Compressor from May 2005 through August 2007. Prior to his retirement in 2002 from Credit Suisse (a brokerage services and investment banking firm), Mr. Hall served as Managing Director, Senior Oil Field Services Analyst and Co-Head of the Global Energy Group. Mr. Hall serves as a professor in the Master of Science in Financial Analysis program at Gordon College and served as the interim Chief Financial Officer of the College for four months during 2018. He holds a B.A. in Mathematics from Gordon College and an S.M. from the M.I.T. Sloan School of Management. |
Frances Powell Hawes Age: 64 Director Since: April 2015 Archrock Committees: Audit (Chair) and Nominating and Corporate Governance Background: Ms. Hawes has over twenty years of experience as a financial advisor and Chief Financial Officer (CFO) for both public and private companies. Most notably she served as CFO of New Process Steel, L.P. (a privately held steel distribution company) from September 2012 through December 2013. She was Senior Vice President and CFO of American Electric Technologies, Inc. (a publicly traded provider of power delivery solutions) from September 2011 to September 2012. Ms. Hawes served as CFO, Executive Vice President and Treasurer of NCI Building Systems, Inc. (a publicly traded firm providing engineered building solutions) from 2005 to 2008; as CFO and Treasurer of Grant Prideco, Inc. (a manufacturer of engineered tubular products for the energy industry) from 2000 to 2001; and as Chief Accounting Officer, Vice President Accounting and Controller of Weatherford International Ltd. (a multinational oil field service company), having advanced through a number of positions of increasing responsibility, from 1989 to 2000. Ms. Hawes is a Certified Public Accountant and holds a B.B.A. in Accounting from the University of Houston. |
J.W.G. “Will” Honeybourne Age: 67 Director Since: April 2006 Archrock Committees: Compensation and Nominating and Corporate Governance Background: As Managing Director of First Reserve (a private equity firm), a position he has held since January 1999, Mr. Honeybourne is responsible for deal origination, investment structuring and monitoring, with a particular emphasis on the equipment, manufacturing and services sector, upstream oil and gas and international markets. Prior to joining First Reserve, Mr. Honeybourne served as Senior Vice President of Western Atlas International (a seismic and wireline logging company) from 1996 to 1998. Mr. Honeybourne is a member of the Society of Petroleum Engineers and the Society of Exploration Geophysicists. Mr. Honeybourne holds a B.Sc. in Oil Technology from Imperial College, London University. |
James H. Lytal Age: 61 Director Since: April 2015 Archrock Committees: Compensation (Chair) and Nominating and Corporate Governance Background: Mr. Lytal has served as a Senior Advisor for Global Infrastructure Partners (a leading global, independent infrastructure investor) since April 2009. From 1994 to 2004, he served as President of Leviathan Gas Pipeline Partners, which later became El Paso Energy Partners, and then Gulfterra Energy Partners. In 2004, Gulfterra merged with Enterprise Products Partners (a North American midstream energy services provider), where he served as Executive Vice President until 2009. From 1980 to 1994, Mr. Lytal held a series of commercial, engineering and business development positions with various companies engaged in oil and gas exploration and production and gas pipeline services. Mr. Lytal received a B.S. in Petroleum Engineering from the University of Texas at Austin. |
Edmund P. Segner, III Age: 65 Director Since: July 2018 Archrock Committees: Audit Background: Mr. Segner is a Professor in the Practice of Engineering Management in the Department of Civil and Environmental Engineering at Rice University (Houston). In November 2008, Mr. Segner retired from EOG Resources, Inc. (EOG) (a publicly traded independent oil and gas exploration and production company). Among the positions he held at EOG was President and Chief of Staff and Director from 1999 to 2007. From March 2003 through June 2007, he also served as EOG’s principal financial officer. He is a Certified Public Accountant and holds a B.S. in civil engineering from Rice University and an M.A. in economics from the University of Houston. |
Our Code of Business Conduct requires all employees, officers and non-employee directors to avoid situations that may impact their ability to carry out their duties in an independent and objective fashion. Any circumstance that has the potential to compromise their ability to perform independently must be disclosed. This policy is made available to all employees. In addition, we distribute director and officer questionnaires at least annually to elicit related-party information. The questionnaire requires that responses be updated throughout the year to the extent circumstances change. The Nominating and Corporate Governance Committee assesses director independence each year by considering all direct and indirect business relationships between Archrock and each director (including his or her immediate family), as well as relationships with other for-profit concerns and charitable organizations. With the Nominating and Corporate Governance Committee’s recommendation, the Board makes a determination relating to the independence of each member, which is based on applicable laws, regulations, our Corporate Governance Principles and the rules of the NYSE. |
We separate the roles of Chairman of the Board and Chief Executive Officer. We believe this structure is currently in the best interests of our stockholders because by separating these positions: Ø our Chief Executive Officer can focus on the day-to-day operations and management of our business, and Ø the Chairman of the Board can lead the Board in its fundamental role of providing advice to and oversight of management. The Board recognizes the time, effort and energy that our Chief Executive Officer is required to devote to his position, as well as the commitment required to serve as our Chairman. The Board believes this structure is appropriate for the Company because of the size and composition of the Board, the scope of our operations and the responsibilities of the Board and management. |
The Nominating and Corporate Governance Committee believes that all Board candidates should be selected for their character, judgment, ethics, integrity, business experience, time commitment and acumen. The Board, as a whole, through its individual members, seeks to have competence in areas of particular importance to us such as finance, accounting, energy industry and relevant technical expertise. The Nominating and Corporate Governance Committee also considers issues of diversity in the director identification and nomination process. While the Nominating and Corporate Governance Committee does not have a formal policy with respect to diversity, it seeks nominees with a broad diversity of experience, professions, skills, education and backgrounds. The Nominating and Corporate Governance Committee does not assign specific weights to particular criteria and no particular criterion is necessarily applicable to all prospective nominees. The Nominating and Corporate Governance Committee believes that backgrounds and qualifications of the directors, considered as a group, should provide a significant composite mix of experience, knowledge and abilities that will allow the Board to fulfill its responsibilities. Nominees are not discriminated against on the basis of race, color, religion, sex, age, national origin, citizenship, veteran status, disability, sexual orientation, gender identity, genetic information or any other basis proscribed by law. |
SKILL | TOTAL | |||||||||
ENERGY INDUSTRY EXPERTISE | 8 | |||||||||
Served in a leadership or significant operational role with a service provider, supplier or producer in the energy industry | ||||||||||
SENIOR LEADERSHIP EXPERIENCE | 8 | |||||||||
Served in a senior leadership role (principal executive, financial, operating or legal officer) at a publicly-traded company | ||||||||||
FINANCIAL EXPERTISE | 7 | |||||||||
Experience as a principal financial officer, principal accounting officer, controller, public accountant or auditor or experience actively supervising such functions | ||||||||||
HEALTH, SAFETY & ENVIRONMENTAL EXPERTISE | 3 | |||||||||
First hand or significant supervisory experience over the HSE function | ||||||||||
ENGINEERING OR TECHNOLOGY EXPERTISE | 5 | |||||||||
First hand or supervisory experience over the technology or engineering department of a company | ||||||||||
PUBLIC COMPANY BOARD EXPERIENCE | 8 | |||||||||
Currently or has previously served on the board of another public company |
Committee | Purpose | Composition | Committee Report |
Audit Committee | The Audit Committee’s purpose is to assist the Board in its oversight of the integrity of our financial statements, our compliance with legal and regulatory requirements, the independence, qualifications and performance of the independent auditor and our systems of disclosure controls and procedures and internal controls over financial reporting. | The Board has determined that each member of the Audit Committee is independent and possesses the requisite financial literacy to serve on the Audit Committee. The Board has also determined that each of Mdmes. Ainsworth and Hawes and Messrs. Brooks and Segner qualifies as an “audit committee financial expert” as that term is defined by the SEC. No member of the Audit Committee serves on the audit committee of more than two other public companies. | The Report is included in this Proxy Statement on page 22. |
Compensation Committee | The Compensation Committee’s purpose is to oversee the development and implementation of our compensation philosophy and strategy with the goals of attracting, developing, retaining and compensating the senior executive talent required to achieve corporate objectives and linking pay and performance. | The Board has determined that each member of the Compensation Committee is independent. | The Report is included in this Proxy Statement on page 39. |
Nominating and Corporate Governance Committee | The Nominating and Corporate Governance Committee’s purpose is to identify qualified individuals to become Board members, determine whether existing Board members should be nominated for re-election, review the composition of the Board and its committees, oversee the annual evaluation of the Board and its committees and develop, review and implement our Corporate Governance Principles. | The Board has determined that each member of the Nominating and Corporate Governance Committee is independent. |
Director | Independent Director | Audit Committee | Compensation Committee | Nominating and Corporate Governance Committee | |||
Anne-Marie N. Ainsworth | t | Member | Chair | ||||
Wendell R. Brooks | t | Member | Member | ||||
D. Bradley Childers | |||||||
Gordon T. Hall | t | Member | Member | ||||
Frances Powell Hawes | t | Chair | Member | ||||
J.W.G. Honeybourne | t | Member | Member | ||||
James H. Lytal | t | Chair | Member | ||||
Edmund P. Segner, III | t | Member | |||||
Number of Meetings Held in 2018 | 4 | 9 | 4 |
Full Board | Ø | Strategic, financial and execution risk associated with the annual performance plan and long-term plan, including major operational initiatives | |
Ø | Risks associated with capital management, including financing, dividends and capital expenditures | ||
Ø | Mergers, acquisitions and divestitures | ||
Ø | Major litigation, disputes and regulatory matters | ||
Ø | Management succession planning | ||
Ø | Cybersecurity risk and prevention | ||
Ø | Risks associated with safety and environmental, sustainability and social issues | ||
Audit Committee | Ø | Financial risks, including financial reporting, accounting, disclosure and internal controls | |
Ø | Compliance, litigation and tax regulatory matters | ||
Compensation Committee | Ø | Risks related to the overall effectiveness and cost of the Company’s compensation and benefit programs | |
Ø | Risks associated with the design of executive compensation, including a mix of short-term and long-term incentive compensation that does not encourage excessive risk-taking | ||
Ø | Performance management as it relates to our executive officers | ||
Nominating and Corporate Governance Committee | Ø | Risks associated with board effectiveness, continuing education, corporate governance and director succession planning |
Annual Amount ($) | ||||||||
Description of Remuneration | January 1 – September 30, 2018 | Effective as of October 1, 2018 | ||||||
Base Retainer | 82,000 | 90,000 | ||||||
Additional Retainers | ||||||||
Chairman of the Board | 100,000 | No change | ||||||
Audit Committee Chairman | 15,000 | 20,000 | ||||||
Compensation Committee Chairman | 15,000 | 20,000 | ||||||
Nominating and Corporate Governance Committee Chairman | 10,000 | 15,000 |
Name | Fees Earned in Cash ($) | Stock Awards ($)1 | Option Awards ($) | All Other Compensation ($) 2 | Total ($) | |||||||||||||||
Anne-Marie N. Ainsworth | 94,000 | 125,001 | — | 2,487 | 221,488 | |||||||||||||||
Wendell R. Brooks | 84,000 | 125,001 | — | 2,487 | 211,488 | |||||||||||||||
Gordon T. Hall | 184,000 | 125,001 | — | 2,487 | 311,488 | |||||||||||||||
Frances Powell Hawes | 99,625 | 125,001 | — | 2,487 | 227,113 | |||||||||||||||
J.W.G. Honeybourne | 84,000 | 125,001 | — | 2,487 | 211,488 | |||||||||||||||
James H. Lytal | 100,250 | 125,001 | — | 2,487 | 227,738 | |||||||||||||||
Mark A. McCollum 3 | 48,267 | 125,001 | — | 1,184 | 174,452 | |||||||||||||||
Edmund P. Segner, III 4 | 43,000 | 62,502 | — | 967 | 106,469 |
1 | Represents the grant date fair value of our common stock, calculated in accordance with ASC 718. |
2 | Represents the payment of dividends on unvested restricted stock. |
3 | Mr. McCollum resigned from the Board in July 2018. |
4 | Mr. Segner was elected to the Board in July 2018. |
Name and Address of Beneficial Owner | Number of Shares Beneficially Owned | Percent of Class 1 | ||||||
BlackRock, Inc. 55 East 52nd Street New York, New York 10055 | 19,868,483 | 2 | 15.2 | % | ||||
The Vanguard Group, Inc. 100 Vanguard Blvd. Malvem, Pennsylvania 19355 | 14,602,213 | 3 | 11.2 | % | ||||
Harvest Fun Advisors LLC 100 West Lancaster Avenue, Suite 200 Wayne, Pennsylvania 19087 | 9,933,116 | 4 | 7.6 | % | ||||
Dimensional Fund Advisors LP Palisades West, Building One 6300 Bee Cave Road Austin, Texas 78746 | 8,137,987 | 5 | 6.2 | % | ||||
OppenheimerFunds, Inc. 225 Liberty Street New York, New York 10281-1008 | 7,186,762 | 6 | 5.5 | % |
Name of Beneficial Owner | Shares Owned Directly 1 | Restricted Stock 2 | Right to Acquire Stock 3 | Indirect Ownership 4 | Total Ownership | Percent of Class | ||||||||||||||||||
Non-Employee Directors | ||||||||||||||||||||||||
Anne-Marie N. Ainsworth | 47,253 | 10,350 | — | — | 57,603 | * | ||||||||||||||||||
Wendell R. Brooks | 52,619 | 10,350 | — | — | 62,969 | * | ||||||||||||||||||
Gordon T. Hall | 138,081 | 10,350 | — | — | 148,431 | * | ||||||||||||||||||
Frances Powell Hawes | 47,253 | 10,350 | — | — | 57,603 | * | ||||||||||||||||||
J.W.G. Honeybourne | 89,559 | 10,350 | — | — | 99,909 | * | ||||||||||||||||||
James H. Lytal | 47,253 | 10,350 | — | 57,603 | * | |||||||||||||||||||
Edmund P. Segner, III | 49,825 | 10,350 | — | — | 60,175 | * | ||||||||||||||||||
Named Executive Officers | ||||||||||||||||||||||||
D. Bradley Childers | 578,252 | 609,479 | 198,938 | 1,176 | 1,387,845 | 1.06 | % | |||||||||||||||||
Douglas S. Aron | 25,500 | 96,539 | — | — | 122,039 | * | ||||||||||||||||||
Stephanie C. Hildebrandt | 13,664 | 128,105 | — | — | 141,769 | * | ||||||||||||||||||
Jason G. Ingersoll | 25,770 | 79,888 | 4,464 | — | 110,122 | * | ||||||||||||||||||
Sean K. Clawges | 23,011 | 60,205 | — | — | 83,216 | * | ||||||||||||||||||
Raymond K. Guba | — | — | — | — | — | * | ||||||||||||||||||
Robert E. Rice | 93,348 | — | — | — | 93,348 | * | ||||||||||||||||||
All directors, named executive officers and current executive officers as a group (16 persons) | 1.99 | % |
Ø | whether the terms of the transaction are fair to the Company and would apply on the same basis if the transaction did not involve a related party; |
Ø | whether there are any compelling business reasons for the Company to enter into the transaction; |
Ø | whether the transaction would impair the independence of an otherwise independent director; and |
Ø | whether the transaction would present an improper conflict of interest for any director or executive officer of the Company, taking into account, among other factors the Audit Committee deems relevant, the size of the transaction, the overall financial position of the director, executive officer or other related party, that person’s interest in the transaction and the ongoing nature of any proposed relationship. |
Types of Fees | 2018 | 2017 | ||||||
(In thousands) | ||||||||
Audit fees 1 | $ | 1,697 | $ | 1,495 | ||||
Audit-related fees 2 | 242 | 160 | ||||||
Tax fees 3 | 659 | 123 | ||||||
All other fees | — | — | ||||||
Total fees: | $ | 2,598 | $ | 1,778 |
Named Executive Officer | Title | |
D. Bradley Childers | President and Chief Executive Officer | |
Douglas S. Aron | Senior Vice President and Chief Financial Officer | |
Stephanie C. Hildebrandt | Senior Vice President, General Counsel and Secretary | |
Jason G. Ingersoll | Senior Vice President, Marketing and Sales | |
Sean K. Clawges | Vice President, Operations Support | |
Raymond K. Guba | Former Interim Chief Financial Officer | |
Robert E. Rice | Former Senior Vice President and Chief Operating Officer |
Ø | improved disclosure regarding the mechanics of our annual Incentive Program; |
Ø | increased over the past two years the percentage of the total LTI Award value granted to our Chief Executive Officer that is based on performance metrics; |
Ø | moved from a one year to a three year performance period for 2019 long-term incentive awards based on cash available for distribution; and |
Ø | established a performance metric for the 2019 Incentive Program based on Adjusted EBITDA while the metrics for long-term incentive awards are based on total shareholder return and cash available for distribution over a three year performance period. |
Governance • 100% independent directors on the Compensation Committee • Independent compensation consultant engaged by the Compensation Committee • Annual review and approval of our compensation strategy and program design, including an annual market best practices and peer group review | Compensation • Includes a mix of compensation intended to reward performance while minimizing risk to the Company • Significant portion of executive compensation and director compensation is at risk based on company performance • Long-term incentive awards based on both growth in cash available for dividend and relative TSR performance • Caps on performance-based compensation |
Perquisites • The only executive officer perquisite provided is the taxable reimbursement of tax preparation and planning services (eliminated after 2018 tax reporting) • No “single trigger” change of control benefits • No tax gross-ups for change of control benefits or other executive compensation arrangements | Policies • Minimum of three-year equity award vesting periods for employees, including our executive officers • Stock ownership guidelines for executive officers and directors • Prohibition on short sales, hedging, or pledging of Company securities |
Financial Performance | In 2018, Adjusted EBITDA (described in our discussion of our STI and LTI Program performance factors) increased by 26% over 2017, our dividend increased by 10% and operating horsepower grew by 8.5%. Further, we were selective in deploying growth capital, focusing on the highest returns during this growth cycle. We remained highly focused on maintaining first-in-class field services, not only in the Permian Basin, which was marked with exceptional growth, but in every operating region in the U.S, and we strategically partnered with customers who were well-equipped to operate effectively in challenging conditions. |
Strategic Initiatives | In April 2018, we completed the Partnership Merger that was immediately accretive to our stockholders. This transaction simplified our capital structure, improved our dividend coverage and positioned us to focus on future growth opportunities. |
Operational Performance | We simplified our management structure and consolidated from 8 to 6 geographic business units, and we restructured our after-market services business to improve efficiencies. In addition, we planned in 2018 and launched in early 2019 an initiative that will ultimately streamline and modernize virtually every aspect of our business, from accounting processes to human resource systems and from inventory management to field service operations. |
Company Culture | We rolled out a new branding campaign in 2018, which communicates to our employees and customers our vision, mission and values. We continued to focus on our number one asset: Our People. We enhanced our medical benefits with a fully paid premium for employee-only coverage. For the 8th year in a row, we surveyed employee satisfaction using the Gallup® survey. We partnered with colleges and trade schools and we are committed to providing training and mentorship unequaled in our industry. |
Pay Competitively | To attract, retain and motivate an effective management team with the level of expertise and experience needed to achieve consistent growth, profitability and return for our stockholders, our Compensation Committee believes that Named Executive Officers’ total compensation should be competitive with that of comparably-sized companies within the oilfield services sector and, where applicable, across a variety of industries, as further described below in “How Our Compensation Committee Determines Executive Compensation.” |
Pay for Performance | Emphasis on performance-based, variable compensation is a critical component of our overall compensation philosophy. As shown in the graphs in our executive summary, 84% of our Chief Executive Officer’s 2018 target total direct compensation and approximately 67% of our other Named Executive Officers’ 2018 target total direct compensation was variable, with realized value primarily dependent upon annual financial performance or long-term stock price performance. |
Stockholder Alignment | Our Compensation Committee believes that alignment between our Named Executive Officers’ compensation and our stockholders’ expectations is essential to our long-term success. The Compensation Committee believes that a competitive base salary ensures that the Company can attract and retain the level of managerial talent necessary to achieve consistent growth and profitability and is, therefore, aligned with our stockholders’ interest. Emphasis on equity-based compensation and share ownership encourages executives to act strategically to drive sustainable long-term performance and enhance long-term stockholder value. |
Key Elements of Compensation | Description | Pay Competitively | Pay for Performance | Stockholder Alignment |
Base salary | Fixed cash income Establishes a base level of compensation that is essential to attract and retain talent | ✓ | ✓ | |
Annual performance-based incentive compensation | Variable cash incentive award earned annually Based upon achievement of key annual financial, operational, safety, and individual performance goals that contribute to long-term growth in stockholder value | ✓ | ✓ | ✓ |
Long-term incentive compensation (“LTI Awards”) | Provided through a combination of restricted shares and performance units vesting over multiple years Promotes stockholder alignment by tying a significant portion of executive compensation directly to growth in stockholder value | ✓ | ✓ | ✓ |
External Factors | Internal Factors | |
Data and analysis provided by the Compensation Committee’s independent compensation consultant | Current and past total compensation, including an annual review of base salary, short-term incentive pay and the value of LTI Awards received | |
Feedback provided from our stockholders and the results of our advisory say-on-pay vote | Company performance and operating unit performance (where applicable), as well as each executive’s impact on performance | |
Our Chief Executive Officer’s recommendations (other than with respect to his own compensation) | ||
Each executive’s relative scope of responsibility and potential | ||
Individual goal setting, performance and demonstrated leadership | ||
Internal pay equity considerations |
Ø | provide data and analysis to inform the Compensation Committee in selecting an appropriate peer group; |
Ø | provide a review of market trends in executive compensation, including base salary, annual incentives, LTI Awards and total direct compensation; and |
Ø | provide information on how trends in best practices, new rules, regulations and laws impact executive and director compensation practice and administration. |
Enlink Midstream, LLC | NOW Inc. | SemGroup Corporation | ||
Forum Energy Technologies, Inc. | Oceaneering International, Inc. | Superior Energy Services, Inc. | ||
Frank’s International N.V. | Oil States International, Inc. | TETRA Technologies, Inc. | ||
Helmerich & Payne, Inc. | Patterson-UTI Energy, Inc. | USA Compression Partners, L.P. | ||
McDermott International, Inc. | Pioneer Energy Services Corp. | Willbros Group, Inc. | ||
Newpark Resources, Inc. | RPC, Inc. |
Ø | recommending compensation programs, compensation policies, compensation levels and incentive opportunities that are based on analysis provided by our independent compensation consultant and are consistent with our business strategies; |
Ø | preparing and distributing materials for Compensation Committee review and consideration; |
Ø | recommending corporate performance goals on which performance-based compensation will be based; and |
Ø | assisting in the evaluation of employee performance. |
Executive Officer | Title | 2017 Base Salary ($) | 2018 Base Salary ($) | |||||||
Childers | President and Chief Executive Officer | 800,000 | 825,000 | |||||||
Aron 1 | Senior Vice President and Chief Financial Officer | — | 425,000 | |||||||
Hildebrandt | Senior Vice President, General Counsel and Secretary | 390,000 | 400,000 | |||||||
Ingersoll | Senior Vice President, Marketing and Sales | 300,000 | 340,000 | |||||||
Clawges | Vice President, Operations Support | 230,000 | 285,000 | |||||||
Guba 2 | Former Interim Chief Financial Officer | — | — | |||||||
Rice 3 | Former Senior Vice President and Chief Operating Officer | 400,000 | 415,000 |
Executive Officer | 2018 Cash Incentive Target (% of base salary) | 2018 Cash Incentive Target 1 ($) | ||||||
Childers | 110 | 900,096 | ||||||
Aron 2 | 75 | 116,466 | ||||||
Hildebrandt | 65 | 258,250 | ||||||
Ingersoll | 65 | 214,000 | ||||||
Clawges 3 | 60 | 102,897 | ||||||
Guba 4 | — | — | ||||||
Rice 5 | 70 | 290,500 |
Performance Factor | Target Achievement (100%) | Performance Achieved $ | Payout Factor | |||
Cash Available for Dividend 1 calculated as Adjusted EBITDA,2 minus maintenance and other capital expenditures, minus cash tax (payment)/refund, minus cash interest expense | $171 million | $189.8 million | 127 | % |
Applicable Operating Unit Results | ||||||||||||
Executive | Sales Unit | Services Unit | Non-Operational Function Support Unit | |||||||||
Hildebrandt | 100 | % | ||||||||||
Ingersoll | 119 | % | ||||||||||
Clawges | 81 | % | ||||||||||
Rice | 91 | % |
Executive Officer | 2018 Cash Incentive Target 1 ($) | x | Company Performance Factor Achieved | x | Operating Unit Performance Factor Achieved | x | Individual Performance Factor Achieved | = | Payout Earned | = | Payout Earned ($) | |||||||||||||||||||||||||||
Childers | 900,096 | 127 | % | N/A | 100 | % | 127 | % | 1,140,122 | |||||||||||||||||||||||||||||
Aron 2 | 116,466 | 127 | % | N/A | 100 | % | 127 | % | 150,000 | |||||||||||||||||||||||||||||
Hildebrandt | 258,250 | 127 | % | 100 | % | 100 | % | 127 | % | 330,000 | ||||||||||||||||||||||||||||
Ingersoll | 214,000 | 127 | % | 119 | % | 105 | % | 159 | % | 340,000 | ||||||||||||||||||||||||||||
Clawges 3 | 102,897 | 127 | % | 81 | % | 100 | % | 103 | % | 108,000 | ||||||||||||||||||||||||||||
Guba 4 | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
Rice 5 | 290,500 | 127 | % | 91 | % | — | — | — |
Award Type | LTI Mix CEO | LTI Mix Other NEOs | Features | |
Restricted Stock | 60% | 70% | Ø Time-vested awards that vest one-third per year Ø Encourages retention and incentivizes employees to work toward long-term performance goals by aligning their interests with stockholder interests Ø Dividends are paid on unvested shares as and when they are paid to our stockholders | |
CAD Performance Units | 25% | 20% | Ø Performance-based awards that are earned based upon achievement of cash available for dividend during 2018; the Compensation Committee considered this to be a transitional period for CAD Performance Units and determined that future awards will be based on a three year performance period Ø Performance goals are intended to drive long-term growth in stockholder value Ø Earned units vest one-third per year Ø Units are denominated in shares but settled in cash based on the stock price at each vesting date in order to help control dilution Ø Dividend equivalents are accrued during the performance period and are paid based on the actual number of units earned | |
TSR Performance Units | 15% | 10% | Ø Performance-based awards that are earned based upon achievement of total stockholder return performance relative to our peers over a three-year performance period, January 1, 2018 through December 31, 2020 Ø Performance goals are intended to drive long-term growth in stockholder value Ø Earned units cliff-vest following conclusion of the three-year performance period Ø Units are denominated in shares and settled in shares, complimentary to the underlying performance criteria and the value creation aspect of the award Ø Dividend equivalents are accrued during the performance period and are paid based on the actual number of units earned |
Executive | Target Long- Term Incentive Grant Value ($) | Archrock Restricted Shares (#) | Archrock CAD Performance Units 1 (#) | Archrock TSR Performance Units 1 (#) | ||||||||||||
Childers | 3,400,000 | 214,737 | 89,474 | 53,685 | ||||||||||||
Aron | 500,000 | 39,215 | — | — | ||||||||||||
Hildebrandt | 600,000 | 44,211 | 12,638 | 6,310 | ||||||||||||
Ingersoll | 425,000 | 31,316 | 8,952 | 4,470 | ||||||||||||
Clawges | 235,000 | 22,869 | — | — | ||||||||||||
Guba 2 | — | — | — | — | ||||||||||||
Rice | 850,000 | 62,632 | 17,904 | 8,939 |
Performance Factor | Target Achievement (100%) | Performance Achieved | Payout Factor | |||
2018 Cash Available for Dividend 1 Adjusted EBITDA,2 minus maintenance and other capital expenditures, minus cash tax (payment)/refund, minus cash interest expense | $ 171 million | $ 189.8 million | 154 | % |
Performance Factor | Threshold (30%) | Target (100%) | Maximum (200%) |
Total Stockholder Return The Average Fair Market Value1 at the end of the period plus dividends paid over the performance period divided by the Average Fair Market Value at the beginning of the performance period | TSR rank = 16th | TSR rank = 9th 2 | TSR rank = 1st |
Name and Title | Year | Salary ($)(1) | Bonus ($) | Stock Awards ($)(2) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($)(3) | All Other Compensation ($)(4) | Total ($) | |||||||||||||||||||||
D. Bradley Childers | 2018 | 818,269 | �� | — | 3,612,605 | — | 1,140,422 | 377,916 | 5,949,212 | ||||||||||||||||||||
President and Chief | 2017 | 750,769 | — | 3,299,968 | — | 836,000 | 395,452 | 5,282,189 | |||||||||||||||||||||
Executive Officer | 2016 | 769,231 | — | 2,999,997 | — | 753,000 | (5) | 383,376 | 4,905,604 | ||||||||||||||||||||
Douglas S. Aron (6) | 2018 | 155,288 | — | 499,991 | — | 150,000 | 13,440 | 818,719 | |||||||||||||||||||||
Senior Vice President and | |||||||||||||||||||||||||||||
Chief Financial Officer | |||||||||||||||||||||||||||||
Stephanie C. Hildebrandt | 2018 | 397,308 | — | 624,998 | — | 330,000 | 73,027 | 1,425,333 | |||||||||||||||||||||
Senior Vice President, | 2017 | 150,000 | — | 549,998 | — | 100,000 | 21,005 | 821,003 | |||||||||||||||||||||
General Counsel and Secretary | |||||||||||||||||||||||||||||
Jason G. Ingersoll | 2018 | 329,231 | — | 442,712 | — | 340,000 | 63,184 | 1,175,127 | |||||||||||||||||||||
Senior Vice President, | 2017 | 281,539 | 76,160 | 349,961 | — | 234,897 | 53,224 | 995,781 | |||||||||||||||||||||
Marketing and Sales | 2016 | 288,462 | 73,920 | 299,999 | — | 130,000 | 40,260 | 832,641 | |||||||||||||||||||||
Sean K. Clawges | 2018 | 244,992 | — | 235,004 | — | 108,000 | 36,468 | 624,464 | |||||||||||||||||||||
Vice President, | |||||||||||||||||||||||||||||
Operations Support | |||||||||||||||||||||||||||||
Raymond K. Guba (7) | 2018 | — | — | — | — | — | — | — | |||||||||||||||||||||
Former Interim Chief Financial Officer | 2017 | — | — | — | — | — | — | — | |||||||||||||||||||||
Robert E. Rice (8) | 2018 | 315,192 | — | 885,411 | — | — | 71,271 | 1,271,874 | |||||||||||||||||||||
Former Senior Vice President | 2017 | 375,385 | — | 674,993 | — | 229,026 | 104,639 | 1,384,043 | |||||||||||||||||||||
and Chief Operating Officer | 2016 | 384,616 | — | 600,005 | — | 225,000 | 104,523 | 1,314,144 |
(1) | Amounts reported in this column reflect base salaries earned on a fiscal year basis. |
(2) | The amounts in this column for 2018 represent the grant date fair value of (i) restricted shares of our common stock, (ii) CAD Performance Units at target level and (iii) TSR Performance Units at target level. The grant date fair values of the 2018 Performance Units at maximum potential payout were as follows: |
Named Executive Officer | CAD Performance Units (based on $9.50 grant date fair value) ($) | TSR Performance Units (based on $13.46 grant date fair value) ($) | ||||||
Childers | 1,700,006 | 1,445,200 | ||||||
Aron | — | — | ||||||
Hildebrandt | 240,122 | 169,865 | ||||||
Ingersoll | 170,088 | 120,332 | ||||||
Clawges | — | — | ||||||
Guba | — | — | ||||||
Rice | 340,176 | 240,638 |
(3) | For Ms. Hildebrandt and Messrs. Childers, Aron, Ingersoll and Clawges, the amounts in this column for 2018 represent cash payments under the 2018 Incentive Program, which covered the compensation measurement and performance year ended December 31, 2018, and were paid during the first quarter of 2019. Mr. Aron’s payment under the 2018 Incentive Program is prorated based on his August 13, 2018 hire date. Mr. Rice resigned on September 21, 2018 and was therefore ineligible for a payment under the 2018 Incentive Program. |
(4) | The amounts in this column for 2018 include the following: |
Name | 401(k) Plan Company Contribution ($)(a) | Deferred Compensation Plan Company Contribution ($)(b) | DERs / Dividends ($)(c) | Other ($)(d) | Total ($) | |||||||||||||||
Childers | 13,750 | 4,750 | 353,016 | 6,400 | 377,916 | |||||||||||||||
Aron | 7,764 | — | 5,176 | 500 | 13,440 | |||||||||||||||
Hildebrandt | 13,750 | 4,750 | 49,377 | 5,150 | 73,027 | |||||||||||||||
Ingersoll | 13,750 | 4,750 | 40,144 | 4,540 | 63,184 | |||||||||||||||
Clawges | 13,750 | 3,241 | 17,977 | 1,500 | 36,468 | |||||||||||||||
Guba | — | — | — | — | — | |||||||||||||||
Rice | 13,750 | — | 52,711 | 4,810 | 71,271 |
(a) | The amounts shown represent the Company’s matching contributions for 2018. |
(b) | Our Named Executive Officers could contribute up to 100% of their base pay and bonus to the Deferred Compensation Plan, and the Company made certain matching contributions designed to serve as a make-up for the portion of the employer matching contributions that cannot be made under our 401(k) Plan due to Code limits. |
(c) | Represents cash payments pursuant to (i) dividends on unvested restricted shares of the Company’s common stock awarded under the 2013 Stock Incentive Plan, as amended, (ii) dividend equivalents accrued in 2018 which will be paid in 2019 on CAD Performance Units awarded under the 2013 Stock Incentive Plan as finally determined by the Compensation Committee following conclusion of the 2018 performance period, (iii) dividend equivalents accrued during 2018 on TSR Performance Units awarded in 2017 based on target performance, the payment of which will be dependent on the number of such units earned during the three-year performance period ending on December 31, 2019, subject also to vesting on August 20, 2020; (iv) dividend equivalents accrued during 2018 on TSR Performance Units awarded in 2018 based on target performance, the payment of which will be dependent on the number of such units earned units earned during the three-year performance period ending December 31, 2020, subject also to vesting on August 20, 2021; and (v) DERs on unvested Partnership phantom units prior to the Partnership Merger and, thereafter, Converted RSUs. |
(d) | Represents (i) the taxable reimbursement of tax preparation and financial planning services (ranging from $3,540 to $6,400, based on actual charges incurred) and (ii) a payment by the Company (ranging from $500 to $1,500, based on plan enrollment) to the individual’s health savings accounts, provided on the same basis to all employees who elected to open such an account. |
(5) | The amount in this column for 2016 represents the payment Mr. Childers would have received had he not voluntarily waived payment under the 2016 Incentive Program. Mr. Childers received no payment for the compensation measurement and performance period ended December 31, 2016. |
(6) | Mr. Aron has served as our Senior Vice President and Chief Financial Officer since August 13, 2018. |
(7) | Mr. Guba served as our Interim Chief Financial Officer through July 2018 pursuant to the terms of the Services Agreement between Archrock and Tatum and was compensated for his services by Tatum; as such, Mr. Guba was not paid a salary or bonus or granted equity by Archrock. See “Agreements with Executive Officers – Service Agreement – Raymond K. Guba” in the Compensation Discussion and Analysis. |
(8) | Mr. Rice resigned effective on September 21, 2018. |
Estimated Possible Payouts Under Non-Equity Incentive Plan Awards(1) | Estimated Possible Payouts Under Equity Incentive Plan Awards(2) | All Other Stock Awards: Number of Shares of Stock or Units (#)(3) | All Other Option Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards ($/SH) | Grant Date Fair Value of Stock and Option Awards ($)(4) | ||||||||||||||||||||||||||||||||||||||
Name | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | ||||||||||||||||||||||||||||||||||||
Childers | 3/2/2018 | — | 900,096 | 1,800,192 | — | 89,474 | 178,948 | — | — | — | 850,003 | ||||||||||||||||||||||||||||||||
3/2/2018 | — | 53,685 | 107,370 | 722,600 | |||||||||||||||||||||||||||||||||||||||
3/2/2018 | 214,737 | 2,040,002 | |||||||||||||||||||||||||||||||||||||||||
Aron | 8/13/2018 | — | 116,466 | 232,932 | — | — | — | 39,215 | — | — | 499,991 | ||||||||||||||||||||||||||||||||
Hildebrandt | 3/2/2018 | — | 258,250 | 516,500 | — | 12,638 | 25,276 | — | — | — | 120,061 | ||||||||||||||||||||||||||||||||
3/2/2018 | — | 6,310 | 12,620 | 84,932 | |||||||||||||||||||||||||||||||||||||||
3/2/2018 | 44,211 | 420,005 | |||||||||||||||||||||||||||||||||||||||||
Ingersoll | 3/2/2018 | — | 214,000 | 428,000 | — | 8,952 | 17,904 | — | — | — | 85,044 | ||||||||||||||||||||||||||||||||
3/2/2018 | — | 4,470 | 8,940 | 60,166 | |||||||||||||||||||||||||||||||||||||||
3/2/2018 | 31,316 | 297,502 | |||||||||||||||||||||||||||||||||||||||||
Clawges | 3/2/2018 | — | 102,897 | 205,794 | — | — | — | 14,211 | — | — | 135,005 | ||||||||||||||||||||||||||||||||
5/31/2018 | 8,658 | 100,000 | |||||||||||||||||||||||||||||||||||||||||
Guba | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
Rice | 3/2/2018 | — | 290,500 | 581,000 | — | 17,904 | 35,808 | — | — | — | 170,088 | ||||||||||||||||||||||||||||||||
3/2/2018 | — | 8,939 | 17,878 | 120,319 | |||||||||||||||||||||||||||||||||||||||
3/2/2018 | 62,632 | 595,004 |
(1) | The amounts in these columns show the range of potential payouts under the 2018 Incentive Program. The actual payouts under the plan were determined in February 2019 and paid in March 2019, as shown in the Summary Compensation Table for 2018. |
(2) | The amounts in these columns show the range of potential payouts of performance units awarded as part of the 2018 LTI Award. “Target” is 100% of the number of 2018 Performance Units awarded. “Threshold” is the lowest possible payout (0% of the grant), and “Maximum” is the highest possible payout (200% of the grant). See also “2018 Performance-based Long-Term Incentive Awards – CAD Performance Units” and “– TSR Performance Units” for more information regarding these awards. |
(3) | Shares of restricted stock awarded under the 2013 Stock Incentive Plan that vest one-third per year over a three-year period, subject to continued service through each vesting date. |
(4) | The grant date fair value of performance units (at target) and restricted stock is calculated in accordance with ASC 718. For a discussion of valuation assumptions, see Note 18 (Stock-Based Compensation) to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2018. |
Option Awards | Stock Awards | |||||||||||||||||||||||||
Name | Number of Securities Underlying Unexercised Options (#) Exercisable (1) | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($) (2) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Yet Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Yet Vested ($) (2) | ||||||||||||||||||
Childers | 90,404 | 15.32 | 3/4/2020 | 361,072(3 | ) | 2,704,429 | 49,680(4 | ) | 372,103 | |||||||||||||||||
63,891 | 25.18 | 3/4/2021 | 82,480(5 | ) | 617,775 | 33,320(6 | ) | 249,567 | ||||||||||||||||||
137,790(7 | ) | 1,032,047 | ||||||||||||||||||||||||
36,131(8 | ) | 270,621 | ||||||||||||||||||||||||
53,685(9 | ) | 402,101 | ||||||||||||||||||||||||
Aron | 39,215(3 | ) | 293,720 | |||||||||||||||||||||||
Hildebrandt | 80,335(3 | ) | 601,709 | 19,463(7 | ) | 145,774 | ||||||||||||||||||||
6,310(9 | ) | 47,262 | ||||||||||||||||||||||||
Ingersoll | 48,041(3 | ) | 359,827 | 4,968(4 | ) | 37,210 | ||||||||||||||||||||
8,476(5 | ) | 63,485 | 2,826(6 | ) | 21,167 | |||||||||||||||||||||
13,786(7 | ) | 103,258 | ||||||||||||||||||||||||
2,554(8 | ) | 19,129 | ||||||||||||||||||||||||
4,470(9 | ) | 33,480 | ||||||||||||||||||||||||
Clawges | 37,913(3 | ) | 283,968 |
(1) | Because the options in this column were fully vested as of December 31, 2018, the vesting schedules are not reported. |
(2) | Based on the market closing price of our common stock on December 31, 2018: $7.49. |
(3) | Includes shares of restricted stock that vest at the rate of one-third per year beginning on the initial vesting date shown below, subject to continued service through each vesting date. |
Name | Unvested Shares | Initial Vesting Date | ||||||
Childers | 82,102 | 3/4/2017 | ||||||
64,233 | 8/20/2018 | |||||||
214,737 | 8/20/2019 | |||||||
Aron | 39,215 | 8/20/2019 | ||||||
Hildebrandt | 36,124 | 8/20/2018 | ||||||
44,211 | 8/20/2019 | |||||||
Ingersoll | 8,210 | 3/4/2017 | ||||||
8,515 | 8/20/2018 | |||||||
31,316 | 8/20/2019 | |||||||
Clawges | 5,473 | 3/4/2017 | ||||||
6,569 | 8/20/2018 | |||||||
3,002 | 8/20/2018 | |||||||
14,211 | 8/20/2019 | |||||||
8,658 | 8/20/2019 |
(4) | Earned performance units that vest at the rate of one-third per year beginning on March 4, 2017, subject to continued service through each vesting date. |
(5) | Converted RSUs that vest at the rate of one-third per year beginning on the initial vesting date shown below, subject to continued service through each vesting date. |
Name | Unvested Units | Initial Vesting Date | ||||||
Childers | 44,643 | 3/4/2017 | ||||||
37,837 | 8/20/2018 | |||||||
Ingersoll | 4,464 | 3/4/2017 | ||||||
4,012 | 8/20/2018 |
(6) | Earned performance units that vest at the rate of one-third per year beginning on August 20, 2018, subject to continued service through each vesting date. |
(7) | CAD Performance Units that vest at the rate of one-third per year beginning on August 20, 2019, subject to continued service through each vesting date. Amounts shown are the actual number of units earned, as determined by the Compensation Committee following the conclusion of the 2018 performance period. |
(8) | Unearned TSR Performance Units that cliff vest on August 20, 2020, subject to continued service through the vest date. Amounts shown are the number of units awarded at target performance. The number of actual units paid will be determined by the Compensation Committee following the conclusion of the three-year performance period, January 1, 2017 through December 31, 2019. |
(9) | Unearned TSR Performance Units that cliff vest on August 20, 2021, subject to continued service through the vest date. Amounts shown are the number of units awarded at target performance. The number of actual units paid will be determined by the Compensation Committee following the conclusion of the three-year performance period, January 1, 2018 through December 31, 2020. |
Option Awards | Stock Awards | |||||||||||||||
Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares and Units Acquired on Vesting (#)(1) | Value Realized on Vesting ($)(2) | ||||||||||||
Childers | 219,258 | 742,622 | 285,282 | 3,063,291 | ||||||||||||
Aron | — | — | — | — | ||||||||||||
Hildebrandt | — | — | 18,063 | 226,691 | ||||||||||||
Ingersoll | — | — | 28,055 | 301,417 | ||||||||||||
Clawges | — | — | 12,052 | 129,094 | ||||||||||||
Guba | — | — | — | — | ||||||||||||
Rice | 29,855 | 88,371 | 58,159 | 626,900 |
(1) | Includes our restricted stock and cash-settled performance units that vested during 2018 and Partnership phantom units that were scheduled to and vested in March 2018, prior to the Partnership Merger. |
(2) | The value realized for vested awards was determined by multiplying the fair market value of our common stock (the market closing price of our common stock on the vesting date) or Partnership phantom units (the market closing price of the Partnership’s common units on the vesting date) by the number of shares or units that vested. Shares and units vested on various dates throughout the year; therefore, the value listed represents the aggregate value of all shares and units that vested for each Named Executive Officer in 2018. |
Name | Executive Contributions in Last Fiscal Year ($) | Company Contributions in Last Fiscal Year ($)(1) | Aggregate Earnings (Losses) in Last Fiscal Year ($) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last Fiscal Year End ($) | |||||||||||||||
Childers | — | 4,750 | (21,328) | — | 293,843 | |||||||||||||||
Aron | 12,115 | — | (883) | — | 11,232 | |||||||||||||||
Hildebrandt | — | 4,750 | 10 | — | 5,510 | |||||||||||||||
Ingersoll | — | 4,750 | (95) | — | 34,421 | |||||||||||||||
Clawges | — | 3,241 | (638) | — | 15,932 | |||||||||||||||
Guba | — | — | — | — | — | |||||||||||||||
Rice | — | — | 371 | — | 22,127 |
(1) | The amounts in this column represent Company contributions to each of Ms. Hildebrandt and Messrs. Childers, Ingersoll and Clawges’ Deferred Compensation Plan account earned in 2018 but paid in the first quarter of 2019. These amounts are included in “All Other Compensation” in the Summary Compensation Table for 2018 and in “Aggregate Balance at Last Fiscal Year End” in this table. |
· | for lump sum payments, on the earlier of: (x) in the case of a specified in-service date, January 1 of such year and (y) in the case of a separation from service or disability, the date of the participant’s separation of service or, if earlier, disability and |
· | for installment payments, the earlier of: (x) in the case of a specified in-service date, January 1 of such year and (y) in the case of a separation from service or disability, January 1 of the calendar year immediately following the date of the participant’s separation of service or, if earlier, disability. |
· | his or her annual base salary then in effect plus the target annual incentive bonus opportunity; plus |
· | a pro-rated portion of his or her target annual incentive bonus opportunity for the termination year based on the length of time during which he or she was employed during such year; plus |
· | any earned but unpaid annual incentive award for the fiscal year ending prior to the termination date; plus |
· | a payment equal to twelve months of the portion of the monthly premiums that would be payable by us under our group health plan had the executive’s employment not terminated, based on the executive’s elections as in effect on the termination date, together with the monthly administrative fee that would be assessed under COBRA. |
· | In the case of outstanding performance shares or units which are based in common stock of Archrock and subject to ratable three year vesting based on a one-year performance period (including the CAD Performance Units), such shares or units shall vest based on the actual number of units earned, the determination of which will be made by the Committee upon conclusion of the performance period. |
· | In the case of outstanding performance shares or units which are based in common stock of Archrock and subject to time-based cliff vesting at the end of a three-year performance period (including the TSR Performance Units), such shares or units shall vest as follows: if the termination date occurs in the first year of the performance period, one-third of the performance units payable at target; if the termination date occurs in the second year of the performance period, two-thirds of the performance units payable at target; or if the termination date occurs in the third year of the performance period, depending on whether performance has been determined, (i) 100% of the performance units payable at target or (ii) a percentage of the performance units payable at target based on actual performance. |
· | two times (three times in the case of Mr. Childers) his or her current annual base salary plus two times (three times in the case of Mr. Childers) his or her target annual incentive bonus opportunity for that year; plus |
· | a pro-rated portion of the target annual incentive bonus opportunity for the termination year based on the length of time during which the executive was employed during such year; plus |
· | any earned but unpaid annual incentive award for the fiscal year ending prior to the termination date; plus |
· | two times the total of the Company contributions that would have been credited to him or her under the Archrock 401(k) Plan and any other deferred compensation plan had he or she made the required amount of elective deferrals or contributions during the twelve months immediately preceding the termination month; plus |
· | a lump-sum cash payment equal to twenty-four months of the portion of the monthly premiums that would be payable by us under our group health plan had the executive’s employment not terminated, based on the executive’s elections as in effect on the termination date, together with the monthly administrative fee that would be assessed under COBRA. |
· | any amount previously deferred, or earned but not paid, by him or her under the incentive and nonqualified deferred compensation plans or programs as of the termination date; and |
· | the accelerated vesting of all his or her unvested LTI Awards. |
Name | Termination Due to Death or Disability ($)(1) | Termination Without Cause or Resignation with Good Reason ($)(2) | Change of Control Without a Qualifying Termination ($) | Change of Control with a Qualifying Termination ($) | |||||||||||
D. Bradley Childers | |||||||||||||||
Cash Severance | — | 2,640,000 | (3 | ) | — | 6,105,000 | (4) | ||||||||
Stock Options | — | — | — | — | |||||||||||
Restricted Stock (5) | 2,704,429 | 1,391,623 | — | 2,704,429 | |||||||||||
Restricted Stock Units (6) | 617,775 | 476,076 | — | 617,775 | |||||||||||
Performance Awards (7) | 2,326,439 | 1,110,246 | — | 2,326,439 | |||||||||||
Other Benefits (8) | — | 12,055 | — | 61,109 | |||||||||||
Total Pre-Tax Benefit | 5,648,643 | 5,630,000 | — | 11,814,752 | |||||||||||
Douglas S. Aron | |||||||||||||||
Cash Severance | — | 1,062,500 | (3 | ) | — | 1,806,250 | (4) | ||||||||
Stock Options | — | — | — | — | |||||||||||
Restricted Stock (5) | 293,720 | 97,907 | — | 293,720 | |||||||||||
Restricted Stock Units (6) | — | — | — | — | |||||||||||
Performance Awards (7) | — | — | — | — | |||||||||||
Other Benefits (8) | — | 14,967 | — | 45,463 | |||||||||||
Total Pre-Tax Benefit | 293,720 | 1,175,374 | — | 2,145,433 | |||||||||||
Stephanie C. Hildebrandt | |||||||||||||||
Cash Severance | — | 920,000 | (3 | ) | — | 1,580,000 | (4) | ||||||||
Stock Options | — | — | — | — | |||||||||||
Restricted Stock (5) | 601,709 | 245,665 | — | 601,709 | |||||||||||
Restricted Stock Units (6) | — | — | — | — | |||||||||||
Performance Awards (7) | 193,036 | 64,345 | — | 193,036 | |||||||||||
Other Benefits (8) | — | 14,967 | — | 66,934 | |||||||||||
Total Pre-Tax Benefit | 794,745 | 1,244,977 | — | 2,441,679 | |||||||||||
Jason G. Ingersoll | |||||||||||||||
Cash Severance | — | 782,000 | (3 | ) | — | 1,343,000 | (4) | ||||||||
Stock Options | — | — | — | — | |||||||||||
Restricted Stock (5) | 359,827 | 171,567 | — | 359,827 | |||||||||||
Restricted Stock Units (6) | 63,485 | 48,460 | — | 63,485 | |||||||||||
Performance Awards (7) | 214,244 | 102,938 | — | 214,244 | |||||||||||
Other Benefits (8) | — | 16,902 | — | 70,804 | |||||||||||
Total Pre-Tax Benefit | 637,556 | 1,121,867 | — | 2,051,360 | |||||||||||
Sean K. Clawges | |||||||||||||||
Cash Severance | — | — | — | 627,000 | |||||||||||
Stock Options | — | — | — | — | |||||||||||
Restricted Stock (5) | 283,968 | — | — | 283,968 | |||||||||||
Restricted Stock Units (6) | — | — | — | — | |||||||||||
Performance Awards (7) | — | — | — | — | |||||||||||
Other Benefits (8) | — | — | — | 14,967 | |||||||||||
Total Pre-Tax Benefit | 283,968 | — | — | 925,935 |
(1) | “Disability” is defined in the 2013 Stock Incentive. |
(2) | “Cause” and “Good Reason” are defined in the severance benefit agreements. |
(3) | If the executive had been terminated without Cause or resigned with Good Reason on December 31, 2018, under the executive’s severance benefit agreement (applicable to each executive officer except for Mr. Clawges), his or her cash severance would consist of (i) the sum of the executive’s base salary and target annual incentive bonus (calculated as a percentage of annual base salary for 2018), plus (ii) the executive’s target annual incentive bonus (calculated as a percentage of annual base salary for 2018). |
(4) | If the Company consummated a change of control that was followed by the Executive’s Qualifying Termination (as defined in the executive’s change of control agreement, applicable to each executive officer except Mr. Clawges) on December 31, 2018, under such agreement, his or her cash severance would consist of (i) two times (three times for Mr. Childers) the sum of the executive’s base salary and target annual incentive bonus (calculated as a percentage of annual base salary for 2018), plus (ii) the executive’s target annual incentive bonus (calculated as a percentage of his or her annual base salary for 2018). |
(5) | The amounts in this row represent the value of the accelerated vesting of the executive’s unvested restricted stock based on the December 31, 2018 market closing price of our common stock. |
(6) | The amounts in this row represent the value of the accelerated vesting of the executive’s unvested Converted RSUs based on the December 31, 2018 closing price of our common stock. |
(7) | The amounts in this row represent the value of the accelerated vesting of the executive’s unvested performance awards based on the December 31, 2018 market closing price of our common stock. |
(8) | The amounts in this row represent each Named Executive Officer’s right to the payment, as applicable, of (i) in the event of a termination without Cause or voluntary resignation for Good Reason, a lump sum payment comprised of the executive’s medical benefit premiums for a one-year period and the amount of the administrative fee assessed under COBRA, or (ii) in the event of a Qualifying Termination in connection with a change of control, a lump sum payment comprised of the executive’s medical benefit premiums for a two-year period, the amount of the administrative fee assessed under COBRA and two times the Company contributions for the preceding 12 months under the 401(k) Plan and deferred compensation plan. |
Ø | a description of the material terms of certain derivative instruments to which the stockholder or the beneficial owner, if any, on whose behalf the nomination or proposal is being made is a party, a description of the material terms of any proportionate interest in our shares or derivative instruments held by a general or limited partnership in which such person is a general partner or beneficially owns an interest in a general partner, and a description of the material terms of any performance-related fees to which such person is entitled based on any increase or decrease in the value of our shares or derivative instruments; and |
Ø | with respect to a nomination of a director, a description of the material terms of all direct and indirect compensation and other material monetary arrangements during the past three years, and any other material relationships between or among the proponent of the nomination and his or her affiliates, on the one hand, and each proposed nominee and his or her affiliates, on the other hand, including all information that would be required to be disclosed pursuant to Rule 404 promulgated under the SEC’s Regulation S-K if the proposing person were the “registrant” for purposes of such rule and the nominee were a director or executive officer of such registrant. |
Ø | include the name and address of the stockholder, and the number of our shares that are, directly or indirectly, owned beneficially and of record by the stockholder; |
Ø | state whether the stockholder intends to deliver a proxy statement and form of proxy to holders of a sufficient number of voting shares to carry the proposal or to elect the nominee or nominees, as applicable; |
Ø | be a stockholder of record as of the time of giving the notice and at the time of the meeting at which the proposal or nomination will be considered and include a representation to that effect; and |
Ø | update and supplement the required information 10 business days prior to the date of the meeting. |
ARCHROCK, INC. | For All | Withhold All | For all Except | ||||
The Board of Directors recommends that you vote FOR the following: | |||||||
Vote on Directors | |||||||
1. | Election of the following persons to serve as directors of Archrock, Inc. until the 2020 Annual Meeting of Stockholders or until their respective successors are duly elected and qualified | ☐ | ☐ | ☐ | |||
01) | Anne-Marie N. Ainsworth | 05) | Frances Powell Hawes | ||||
02) | Wendell R. Brooks | 06) | J.W.G. Honeybourne | ||||
03) | D. Bradley Childers | 07) | James H. Lytal | ||||
04) | Gordon T. Hall | 08) | Edmund P. Segner, III | ||||
To withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the line below: | |||||||
Vote on Proposals | |||||||
The Board of Directors recommends that you vote FOR the following proposals: | For | Against | Abstain | ||||
2. | Ratification of the appointment of Deloitte & Touche LLP as Archrock, Inc.’s independent registered public accounting firm for fiscal year 2019 | ☐ | ☐ | ☐ | |||
3. | Advisory, non-binding vote to approve the compensation provided to our Named Executive Officers for 2018 | ☐ | ☐ | ☐ |
Signature [PLEASE SIGN WITHIN BOX] | Date | Signature (Joint Owners) | Date |