PHH CORPORATION 11333 MCCORMICK ROAD
HUNT VALLEY, MARYLAND 21031
PHH
July 15, 1994
To the Stockholders:
You are invited to attend the Annual Meeting of Stockholders of PHH
Corporation, which will be held on Monday, August 22, 1994, at 10 o'clock
a.m., at the PHH Corporation Headquarters Building, 11333 McCormick Road, Hunt
Valley, Maryland 21031. The accompanying Notice of Annual Meeting of
Stockholders and Proxy Statement describe in detail the matters to be
considered and acted upon, and you should read such material carefully.
We hope you will be able to attend the meeting, but, if you cannot do so,
it is important that your shares be represented. ACCORDINGLY, WE URGE YOU TO
MARK, SIGN, DATE AND RETURN THE ENCLOSED PROXY PROMPTLY. You may, of course,
withdraw your proxy if you attend the meeting and choose to vote in person.
Sincerely yours,
ROBERT D. KUNISCH
Chairman of the Board, Chief Executive
Officer and President
PHH CORPORATION 11333 MCCORMICK ROAD
HUNT VALLEY, MARYLAND 21031
PHH
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 22, 1994
To the Stockholders:
The Annual Meeting of Stockholders of PHH Corporation (the "Company") will
be held at the PHH Corporation Headquarters Building, 11333 McCormick Road,
Hunt Valley, Maryland 21031 on Monday, August 22, 1994, at 10 o'clock a.m.
(E.D.T.), for the following purposes:
1. To elect three Group B Directors of the Company to hold office for
three years, and until their successors are elected and qualified.
2. To act upon such other matters as may properly come before the meeting.
You are entitled to vote all shares of common stock of the Company
registered in your name at the close of business on June 24, 1994, the record
date fixed for the determination of the stockholders entitled to notice of and
to vote at the meeting. IF YOU CANNOT PERSONALLY ATTEND THE MEETING, WE URGE
YOU TO SIGN THE ENCLOSED PROXY AND RETURN IT IN THE ACCOMPANYING POSTPAID
ENVELOPE IN ORDER THAT YOUR SHARES MAY BE REPRESENTED AT THE MEETING.
By Order of the Board of Directors,
EUGENE A. ARBAUGH
Secretary
July 15, 1994
PROXY STATEMENT
---------------
GENERAL INFORMATION
This Proxy Statement is being sent or given to the stockholders of PHH
Corporation, 11333 McCormick Road, Hunt Valley, Maryland 21031 (410-771-3600)
on approximately July 15, 1994, in connection with the solicitation of proxies
by the Company to be used at the Annual Meeting of Stockholders which will be
held on August 22, 1994 (the ``Annual Meeting"). The solicitation of proxies
will generally be by mail, and in some instances, solicitation may be made by
telephone or telecopier, the cost of which will be borne by the Company. The
Company will supply proxies and proxy materials to brokerage houses and other
custodians, nominees and fiduciaries for transmission to the beneficial owners
of its stock, and the Company may reimburse them for reasonable out-of-pocket
and clerical expenses in so doing. The Company also has retained Georgeson &
Company, Inc., to aid in the solicitation of proxies and to verify certain
records related to the solicitation at a cost estimated to be $8,000 plus
expenses.
Any proxy given pursuant to this solicitation may be revoked by the
stockholder at any time prior to exercise of the proxy. Such right of
revocation is not limited or subject to compliance with any formal procedure.
As of June 24, 1994, the Company had issued and outstanding 17,320,943
shares of Common Stock. Each such outstanding share entitles the holder
thereof of record at the close of business on that date to one vote at the
meeting or any adjournment thereof. The shares represented by all properly
executed proxies will be voted in accordance with the terms thereof. The
election of Directors requires a plurality of the votes cast with a quorum
present. For purposes of the election of Directors, abstentions and broker
non-votes are not considered to be votes cast and have no effect on the
plurality vote required for the election of Directors.
It is the policy of the Company that all stockholder votes, whether by
proxy or in person, will be handled in a manner that protects individual
stockholder voting privacy. Only the proxy solicitor, independent tabulator
and the few other persons engaged in the receipt and tabulation of proxies and
ballots have access to them and such persons are required to keep all voting
information confidential. Under the policy, no vote of any individual
stockholder will be disclosed to the Company except when required by law, when
disclosure is voluntarily made or requested by a stockholder, in certain
circumstances in a proxy contest, or when there is a bona fide dispute as to
the authenticity or tabulation of votes.
ELECTION OF DIRECTORS
The Company's Charter and By Laws provide for a classified Board of
Directors consisting of 11 Directors to serve in three groups: Group A, Group
B and Group C.
At the meeting, three Group B Directors will be elected to hold office for
a three-year term and until their successors are elected at the 1997 Annual
Meeting of Stockholders. Each of the nominees named below for election is
currently a Director and was elected at the 1991 Annual Meeting of
Stockholders except for Mr. Kunisch who was elected at the 1993 Annual Meeting
of Stockholders for a three-year term expiring at the 1996 Annual Meeting of
Stockholders. Alan P. Hoblitzell, Jr., who served as a Director since 1970,
resigned from the Board of Directors effective March 1, 1994. Thomas V. King,
who has served as a Director since 1980, announced his retirement from the
Board of Directors effective August 19, 1994. In connection with the
resignation of Mr. Hoblitzell and the anticipated retirement of Mr. King (both
Group B Directors), Mr. Kunisch was recently reclassified as a Group B
Director in accordance with the Company's Charter requirement that the number
of Directors be apportioned among the classes as nearly equal as possible.
Management does not expect that any nominee will be unable to serve as a
Director, but if that should occur for any reason prior to the
2
meeting, the proxy holders reserve the right to vote for another person of
their choice. The nominees for election as Group B Directors are as follows:
NAME AND AGE PRINCIPAL OCCUPATION AND OTHER INFORMATION
- - ------------ ------------------------------------------
ANDREW F. BRIMMER, 67 President of Brimmer & Company, Inc., an
economic and financial consulting firm,
Washington, D.C., since 1976. Director of
BankAmerica Corporation, Connecticut Mutual
Life Insurance Company, BlackRock Investment
Income Trust, Inc., E. I. duPont de Nemours &
Company, Navistar International Corporation,
BellSouth Corporation, Gannett Company and UAL
Corporation. Director of the Company since
1990; member of the Finance Committee.
PAUL X. KELLEY, 65 Vice Chairman of Cassidy and Associates, Inc.,
a government relations firm, Washington, D.C.,
since 1987. Commandant of the United States
Marine Corps from 1983 to 1987. Director of
Allied-Signal, Inc., GenCorp, Inc., The
Wackenhut Corporation, The Holden Group, UST,
Inc., Sturm, Ruger & Company, Inc., and Saul
Centers, Inc. Director of the Company since
1987; Chairman of the Audit Committee and
member of the Nominating Committee.
ROBERT D. KUNISCH, 53 Chairman of the Board of the Company since
1989, Chief Executive Officer since 1988,
President since 1984. Formerly Chief Operating
Officer from 1984 to 1987, President of PHH
Homequity Corporation from 1976 to 1984.
Director of Mercantile Bankshares Corporation,
CSX Corporation and GenCorp. Director of the
Company since 1984; Chairman of the Executive
Committee.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS APPROVE THE
PROPOSAL TO ELECT GROUP B DIRECTORS. APPROVAL OF THE ELECTION OF GROUP B
DIRECTORS REQUIRES THE AFFIRMATIVE VOTE OF A PLURALITY OF THE SHARES OF THE
COMPANY'S COMMON STOCK CAST WITH A QUORUM PRESENT.
CONTINUING DIRECTORS. The balance of the current 11-member Board of
Directors consists of four Group A Directors and four Group C Directors, none
of whom are nominees for election at the meeting and all of whom will continue
in office after the meeting for the terms shown below. All of the Group A
Directors were elected at the 1993 Annual Meeting of Stockholders, and all of
the Group C Directors were elected at the 1992 Annual Meeting of Stockholders.
Group A Directors--Term expiring at the 1996 Annual Meeting.
NAME AND AGE PRINCIPAL OCCUPATION AND OTHER INFORMATION
- - ------------ ------------------------------------------
GEORGE L. BUNTING, JR., 53 President, Bunting Management Group, a
financial services firm, since 1991. Formerly,
Chairman of the Board and Chief Executive
Officer of the Noxell Corporation, a wholly
owned subsidiary of The Procter & Gamble
Company, a proprietary drug, toiletries and
cosmetics manufacturer, Hunt Valley, Maryland,
from 1986 to 1990. Director of Bell Atlantic
Maryland, Inc., Crown Central Petroleum
Company, Mercantile Bankshares Corporation and
USF&G Corporation. Director of the Company
since 1989; member of the Audit, Executive and
Nominating Committees.
3
NAME AND AGE PRINCIPAL OCCUPATION AND OTHER INFORMATION
- - ------------ ------------------------------------------
BARBARA S. FEIGIN, 56 Executive Vice President of Grey Advertising,
Inc., a New York City advertising agency, since
1983. Director of VF Corporation and Circuit
City Stores, Inc. Director of the Company since
1992; member of the Audit Committee.
DONALD J. SHEPARD, 47 Chairman of the Board of AEGON USA, Inc., a
holding company owning insurance and
insurance-related companies, since 1992,
President and Chief Executive Officer since
1989, Executive Vice President and Chief
Operating Officer from 1985 to 1989. Member of
the Executive Committee of AEGON N.V. since
1992. Director of Mercantile Bankshares
Corporation. Director of the Company since
1993; member of the Executive and Finance
Committees.
ALEXANDER B. TROWBRIDGE, 64 President of Trowbridge Partners, Inc., a
Washington, D.C. consulting firm, since 1990.
President of the National Association of
Manufacturers from 1980 to 1990. Director of
New England Mutual Life Insurance Co., WMX
Technologies Inc., The Rouse Company,
SunResorts Inc., Harris Corp., The Sun Co., The
Gillette Company, ICOS Corporation, and the
Warburg-Pincus Counselors Funds. Director of
the Company since 1984; member of the
Nominating Committee.
Group C Directors--Term expiring at the 1995 Annual Meeting.
NAME AND AGE PRINCIPAL OCCUPATION AND OTHER INFORMATION
- - ------------ ------------------------------------------
JAMES S. BEARD, 53 Vice-President of Caterpillar Inc., a
manufacturer of earth-moving equipment, since
1990. Director and President of Caterpillar
Financial Services Corporation, a wholly owned
subsidiary of Caterpillar, Inc., Nashville,
Tennessee and its predecessor, Caterpillar
Leasing Co., from 1984 to present. Director of
the Company since 1992; member of the Audit and
Finance Committees.
L. PATTON KLINE, 65 Vice Chairman of Marsh & McLennan Incorporated,
an insurance services company, New York, New
York, from 1985 to 1988. Director of Marsh &
McLennan Companies, Inc. from 1975 to 1988;
President and Chairman of Marsh & McLennan,
Inc., from 1975 to 1980; President of Marsh &
McLennan Companies Inc. from 1980 to 1984.
Director of UtiliCorp United. Director of the
Company since 1983; Chairman of the
Compensation Committee.
FRANCIS P. LUCIER, 66 Chairman of the Board of Hartland & Co., a
pension finance consulting company, Cleveland,
Ohio, since 1989. Management consultant since
1984. Chairman of the Board and Chief Executive
Officer of Mohawk Data Sciences Corporation,
manufacturer of computer hardware and software
systems, from 1984 to 1985. Chairman of the
Board of Micom Systems, Inc., from January 1988
until its sale in September 1988. Chairman of
the Board of The Black & Decker Corporation
from 1979 to 1984 and President from 1972 to
1979. Director of Beckman Instruments, Inc.,
and Miami Subs Corporation. Director of the
Company since 1973; Chairman of the Nominating
Committee and member of the Compensation
Committee.
4
NAME AND AGE PRINCIPAL OCCUPATION AND OTHER INFORMATION
- - ------------ ------------------------------------------
KENT C. NELSON, 56 Chairman of the Board and Chief Executive
Officer of United Parcel Service of America,
Inc., a consolidated parcel delivery company,
Atlanta, Georgia, since 1989, Vice Chairman in
1989, Executive Vice President from 1986 to
1989 and Director and Senior Vice President
from 1983 to 1985. Director of the Company
since 1989; Chairman of the Finance Committee.
CERTAIN INFORMATION CONCERNING THE BOARD OF DIRECTORS
The Board of Directors held eight meetings during the fiscal year ended
April 30, 1994. All Directors, except Messrs. Brimmer and Hoblitzell, attended
at least 75% of the aggregate number of meetings of the Board and the
Committees on which they served during the fiscal year. Messrs. Brimmer and
Hoblitzell attended at least 50%, but less than 75%, of the aggregate number
of meetings of the Board and the Committees on which they served. Among the
standing committees of the Board of Directors of the Company are the Audit,
Compensation, Finance and Nominating Committees.
The Audit Committee, comprised of Messrs. Kelley (Chairman), Beard,
Bunting and Ms. Feigin, held three meetings during the fiscal year ended April
30, 1994. The duties of the Audit Committee include: making recommendations
concerning the appointment of the Company's independent auditors, their fees
and the scope of their audits; approving the performance of certain non-audit
services; conferring with the independent auditors; receiving and reviewing
reports of the independent auditors; and determining the duties and
responsibilities of the Company's internal auditing staff and monitoring the
adequacy of the Company's internal controls.
The Compensation Committee, comprised of Messrs. Kline (Chairman), King
and Lucier, held five meetings during the fiscal year ended April 30, 1994.
The duties of the Compensation Committee include: reviewing and approving the
policies concerning compensation of the directors and officers; making
recommendations concerning the salaries for officers of the Company; reviewing
and approving distributions made under certain incentive bonus plans;
administering the Company's Stock Compensation Plans, Annual and Long-Term
Incentive Plans, Executive Deferred Compensation Plan, Supplemental Executive
Retirement Plan, and Senior Executive Severance Plan; and appointing members
of the Employee Benefits Committee which administers the Company's Pension and
401(k) Plans.
The Finance Committee, comprised of Messrs. Nelson (Chairman), Beard,
Brimmer and Shepard, held five meetings during the fiscal year ended April 30,
1994. The duties of the Finance Committee include: reviewing and monitoring
policies underlying the financial plans and structure of the Company;
reviewing proposed capital plans and budgets; establishing and maintaining a
dividend policy, including such elements as a proper dividend payout ratio;
and reviewing proposed major financing activities and all offerings of equity
securities.
The Nominating Committee, comprised of Messrs. Lucier (Chairman), Bunting,
Kelley, King and Trowbridge, held three meetings during the fiscal year ended
April 30, 1994. The duties of the Nominating Committee include: selecting and
submitting to the Board qualified candidates to fill vacancies on the Board;
reviewing the slate of directors to be elected at the Company's annual
stockholders' meeting; receiving and reviewing the qualifications of
candidates for key corporate offices; acting as an advisory board to
management concerning manpower planning and reviewing policies concerning the
structure of the Board of Directors. The Nominating Committee will consider
nominees suggested by stockholders for election to the Board of Directors.
5
Recommendations by stockholders should be forwarded to the Secretary of the
Company and should identify the nominee by name and provide pertinent
information concerning the nominee's background and experience.
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company received, in fiscal year
1994, a $30,000 annual retainer fee plus $1,000 for each Board or Committee
meeting attended, and each Committee Chairman received an additional $3,000
annual fee. One-third of the annual retainer was paid in the Company's Common
Stock and deferred under the Directors Deferred Stock Retirement Plan (the
"Mandatory Deferral"). Directors may elect to have all or any part of the
remaining portion of the annual retainer as well as the meeting fees and
Committee Chairman retainer fee deferred either under the Company's Directors
Deferred Compensation Plan in one or more mutual funds or under the Directors
Deferred Stock Retirement Plan in the Company's Common Stock. Under the terms
of the Directors Deferred Stock Retirement Plan, the Company matched, in
shares of PHH Common Stock, a portion of the Directors' Mandatory Deferrals
for fiscal year 1994 based on the Company's achievement of the threshold
minimum earnings per share targets established by the Board of Directors upon
the effective date of the Plan. Under both Plans, amounts elected to be
deferred are not includable in a Director's gross income for Federal income
tax purposes until actually distributed to the Director.
Non-employee Directors are also eligible to receive stock options pursuant
to the PHH Corporation Outside Directors Stock Option Plan (the ``Directors
Option Plan"). Options to acquire shares of the Company's Common Stock have
been granted to the Directors pursuant to the Directors Option Plan which
became effective in August of 1990. The Directors Option Plan is administered
by the Compensation Committee of the Board of Directors and stock options
representing an aggregate of not more than 100,000 shares of Common Stock are
available to be granted under the Directors Option Plan.
Options to purchase 1,500 shares of Common Stock are granted to each
director under the Directors Option Plan upon the first anniversary of the
Director's election to the Board. In addition, on May 1 of each year, each
Director is automatically granted an option to purchase 500 shares of Common
Stock. The option exercise price per share is the fair market value of the
shares of Common Stock represented by the stock option on the date of grant.
The option may not be exercised prior to the first anniversary of the date of
grant and may not be exercised after the earlier of (a) 10 years following the
date of grant or (b) one year following the date the Director ceases to be a
director; provided that a stock option shall become immediately exercisable in
full upon either the retirement of the Director with the consent of the Board
or the death or permanent disability of the Director.
Payment of the option exercise price shall be made at the time the option
is exercised in cash or shares of the Company's Common Stock owned by the
optionee, or in a combination of cash and such owned shares. When the
Company's Common Stock is used in full or partial payment of the exercise
price, it is valued at its fair market value on the date of option exercise.
6
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The only persons known to the Company to be the beneficial owners of more
than five percent of the Company's Common Stock are:
NAME AND ADDRESS AMOUNT AND NATURE OF
TITLE OF CLASS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT OF CLASS
- - --------------- ------------------------ -------------------- ----------------
PHH Corporation Invesco Capital Manage-
Common Stock ment, Inc.
1315 Peachtree Street
N.E. 1,957,600 11.2% (1)
Atlanta, Georgia 30309
PHH Corporation Fund Asset Management,
Common Stock Inc.
800 Scudders Mills Road 1,670,400 9.6% (2)
Plainsboro, New Jersey
08536
- - ----------
1. Information reported is derived from Form 13F of Invesco Capital
Management, Inc., dated April 22, 1994, and filed with the Securities and
Exchange Commission. As reported in Form 13F, the person filing the
statement had (i) sole dispositive power as to 1,740,100 of such shares and
shared dispositive power as to 217,500 of such shares, (ii) sole voting
power as to 818,200 of such shares, (iii) shared voting power as to 468,700
of such shares and (iv) no voting power as to 670,700 of such shares. As
reported in Form 13F, the information is given as of March 31, 1994.
2. Information reported is derived from Form 13F of Fund Asset Management,
Inc., dated April 28, 1994, and filed with the Securities and Exchange
Commission. As reported in Form 13F, the person filing the statement had
(i) shared dispositive power as to 1,670,000 shares and sole dispositive
power as to 400 of such shares (ii) sole voting power as to 1,670,000
shares and (iii) no voting power as to 400 of such shares. As reported in
Form 13F, the information is given as of March 31, 1994.
7
The following table shows, as of June 2, 1994, the shares of Common Stock
of the Company beneficially owned by all Directors of the Company, by nominees
for director, by each of the executive officers named in the Summary
Compensation Table, by the Directors and executive officers as a group, and by
all employees:
NUMBER OF SHARES
AND NATURE OF
BENEFICIAL
----------
NAME OWNERSHIP(A)(B)
- - ---- ---------------
William F. Adler ...................................... 123,684 (c)(h)
James S. Beard ........................................ 3,905 (l)
Andrew F. Brimmer ..................................... 3,464 (l)
George L. Bunting, Jr. ................................ 5,946 (l)
Barbara S. Feigin ..................................... 823 (l)
Stephen A. Fragapane .................................. 131,074 (d)(h)
Paul X. Kelley. ....................................... 4,224 (e)(l)
Thomas V. King ........................................ 5,723 (f)(l)
L. Patton Kline ....................................... 3,923 (g)(l)
Robert D. Kunisch ..................................... 369,117 (h)(i)
Francis P. Lucier ..................................... 4,423 (j)(l)
Roy A. Meierhenry ..................................... 116,231 (h)
Kent C. Nelson ........................................ 4,535 (l)
H. Robert Nagel ....................................... 71,615 (h)
Donald J. Shepard ..................................... 1,367 (l)
Alexander B. Trowbridge ............................... 3,523 (l)
All Directors and executive officers as a group (23
persons) ............................................ 1,086,002 (h)
All employees (3,156 persons) ......................... 821,921 (k)
- - ----------
(a) Except for Mr. Kunisch, who beneficially owns 2.10% of the Company's
outstanding Common Stock, no individual Director, nominee or executive
officer beneficially owns more than 1% of the Company's outstanding Common
Stock. Directors and executive officers as a group beneficially own 5.98%
of the Company's outstanding Common Stock. Except as otherwise indicated,
all beneficial ownership is direct ownership.
(b) Includes shares subject to stock options which may be exercised within 60
days of June 2, 1994, as follows: Mr. Kunisch, 291,920 shares; each other
Director with the exception of Messrs. Beard, King and Shepard and Ms.
Feigin, 3,000 shares; Mr. Beard, 2,500 shares; Mr. King, 1,000 shares and
Ms. Feigin 500 shares; Mr. Fragapane, 105,800 shares; Mr. Adler, 100,850
shares; Mr. Nagel, 61,550 shares; and Mr. Meierhenry, 93,150 shares; and
all Directors and executive officers as a group, 871,149 shares.
(c) Includes 18,000 shares which Mr. Adler owns jointly with his wife.
(d) Includes 20,000 shares which Mr. Fragapane owns jointly with his wife.
(e) Includes 309 shares which Mr. Kelley owns jointly with his wife.
(f) Includes 4,500 shares which Mr. King owns jointly with his wife.
(g) Includes 700 shares in an inter vivos trust in which Mr. Kline has a
beneficial interest.
(h) Includes shares in which all rights under the Company's Employee
Investment Plan had vested as of June 2, 1994.
(i) Includes 2,500 shares owned directly by Mr. Kunisch's wife.
(j) Includes 1,000 shares in a pension plan and trust in which Mr. Lucier has
a beneficial interest.
(k) Includes only those shares in which all rights under the Company's
Employee Investment Plan had vested as of June 2, 1994.
(l) Includes shares deferred under the Directors Stock Retirement Plan as of
June 2, 1994.
8
Section 16 of the Securities Exchange Act of 1934 requires the Company's
executive officers and Directors, and any persons owning more than 10% of the
Company's common stock, to file reports of ownership and changes in ownership
with the Securities and Exchange Commission and the New York Stock Exchange.
In fiscal year 1994, the Company's officers, Robert D. Kunisch, Stephen A.
Fragapane, William F. Adler, H. Robert Nagel, Roy A. Meierhenry, Eugene A.
Arbaugh, Nan A. Grant, Terry E. Kridler, Edwin F. Miller, Robert W. Mitchell,
Donna C. Startzel, and Samuel H. Wright were late in filing the annual report,
on Form 5, of acquisitions of Company Common Stock through the Company's
Employee Investment (401(k)) Plan. In addition, James S. Beard, a Director of
the Company, filed a late report reflecting shares of the Company's Common
Stock acquired upon the grant of a Company stock option.
EXECUTIVE COMPENSATION
The following table (the ``Summary Compensation Table") sets forth for the
Company's fiscal years ended April 30, 1994, 1993 and 1992, annual and
long-term compensation information as to the Chief Executive Officer and the
four other most highly compensated executive officers of the Company whose
salary and bonus exceeded $100,000 during fiscal year 1994. No stock
appreciation rights (SARs) were granted during fiscal years 1992-1994, nor
have any SARs been granted at any time in prior years.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
-----------------------------------------
LONG-TERM
COMPENSATION
--------------------
AWARDS
-----------
SECURITIES PAYOUTS
OTHER ANNUAL UNDERLYING -------- ALL OTHER
NAME AND FISCAL COMPENSATION OPTIONS LTIP COMPENSATION
PRINCIPAL POSITION YEAR SALARY BONUS(2) (3) (4) (5) (#) PAYOUTS (4) (6)
- - ------------------- ------ -------- ---------- -------------- ----------- -------- --------------
Robert D. Kunisch 1994 $658,462 $553,580 $0 20,000 $359,730 $8,283
President and Chief 1993 620,000 490,003 0 40,000 0 6,690
Executive Officer 1992 580,000 3,310 N/A 97,000 0 N/A
Stephen A. Fragapane 1994 309,615 243,139 12,815 6,000 128,475 28,516
Senior Vice 1993 300,000 209,046 16,094 12,000 0 234,378
President 1992 280,000 10,288 N/A 36,150 0 N/A
William F. Adler 1994 294,423 226,860 0 6,000 128,475 9,188
Senior Vice 1993 280,000 182,093 0 10,000 0 7,256
President 1992 260,000 0 N/A 36,150 0 N/A
H. Robert Nagel (1) 1994 278,846 250,986 4,699 32,000 42,825 9,209
Senior Vice 1993 250,000 219,485 1,074 10,000 0 7,110
President 1992 170,000 72,000 N/A 11,400 N/A N/A
Roy A. Meierhenry 1994 289,615 205,597 2,491 6,000 111,345 8,986
Senior Vice 1993 280,000 199,761 1,686 10,000 0 7,287
President 1992 258,000 0 N/A 31,150 0 N/A
and Chief Financial
Officer
- - ----------
<FN>
1. The Bonus paid to Mr. Nagel for fiscal year 1992 was in connection with the
Annual Incentive Plan of PHH US Mortgage Corporation, the Company's
subsidiary of which Mr. Nagel served as President during fiscal year 1992.
The Bonus paid to Mr. Nagel for fiscal year 1993 represents partial awards
under each of the Annual Incentive Plan of PHH Corporation and the Annual
Incentive Plan of PHH US Mortgage Corporation.
2. Except in the case of Mr. Nagel, amounts shown for fiscal year 1992
represent solely discretionary payments under the Annual Incentive Plans
for PHH Corporation in effect for those years.
3. For fiscal year 1994, perquisites and other personal benefits to the named
executive officers were less than either $50,000 or 10% of the total annual
Salary and Bonus reported for the named executive officers, and therefore,
information has not been included.
4. In accordance with the transitional provisions of the SEC's expanded rules
on executive compensation disclosure in proxy statements, amounts of Other
Annual Compensation and All Other Compensation have not been included for
fiscal year 1992.
5. Amounts shown represent reimbursement for taxes paid by the named executive
officers in connection with the use of a company-provided automobile and,
in addition in the case of Mr. Fragapane, in connection with the payment of
relocation expenses.
6. Amounts shown represent the value of the Company's matching cash
contribution to the PHH Corporation Employee Investment (401(k)) Plan, and
in addition, in the case of Mr. Fragapane, a relocation payment of $19,301.
9
STOCK OPTION GRANTS IN FY 1994
The following table provides information on option grants in fiscal year
1994 to the named executive officers.
PERCENT OF
NO. OF TOTAL POTENTIAL REALIZABLE VALUE
SECURITIES OPTIONS AT ASSUMED ANNUAL RATES OF
UNDERLYING GRANTED TO EXERCISE STOCK PRICE APPRECIATION GRANT DATE PRESENT
OPTIONS EMPLOYEES PRICE FOR OPTION TERM (10 VALUE(5)(6)
GRANTED IN FY ($/SHARE) EXPIRATION YEARS)(4)(5) -------------------
NAME (1)(#) 1994(2) (3) DATE 5% 10% 5 YRS. 10 YRS.
---- ----------- ---------- ------------- ---------- ------------ -------------- --------- ---------
R.D. Kunisch ...................... 20,000 10.10% $39.50 05/03/03 $496,827 $1,259,057 $132,200 $196,800
S.A. Fragapane .................... 6,000 3.03 39.50 05/03/03 149,048 377,717 39,660 59,040
W. F. Adler ....................... 6,000 3.03 39.50 05/03/03 149,048 377,717 39,660 59,040
H.R. Nagel ........................ 12,000 6.06 39.50 05/03/03 298,096 755,434 79,320 118,080
20,000(7) 10.10 42.00 01/10/04 528,271 1,338,744 132,800 197,399
R.A. Meierhenry ................... 6,000 3.03 39.50 05/03/03 149,048 377,717 39,660 59,040
All Stockholders(8) ............... N/A N/A N/A N/A $427,143,299 $1,082,474,666 N/A N/A
- - ----------
<FN>
(1) The stock options were granted for a ten-year term under the PHH
Corporation Amended and Restated Stock Compensation Plan (the "Stock
Option Plan"). The stock options were granted on May 3, 1993, with the
exception of the January 10, 1994 grant to Mr. Nagel of an option to
purchase 20,000 shares. The stock options become exercisable one year
after the date of grant, except that in the event of a change in control
(as defined in the Stock Option Plan) the options shall become immediately
exercisable.
(2) Includes options granted to employees which have been canceled due to
termination of employment.
(3) Exercise price equals the market price of PHH stock at date of grant.
(4) The 5% and 10% appreciation over 10 years option valuation method assumes
a stock price of $64.34 and $102.45, respectively, at May 3, 2003, the
expiration date of the options granted in FY 1994, except that for the
option grant of 20,000 shares on January 10, 1994 to Mr. Nagel at an
exercise price of $42.00 per share, the 5% and 10% appreciation over 10
years option valuation method assumes a stock price of $68.41 and $108.94,
respectively, at January 10, 2004, the expiration date of that option
grant.
(5) The potential realizable value and grant date present value of options
have been calculated in conformity with Securities and Exchange Commission
regulations, and are not intended to either forecast possible future
appreciation or to provide a true assessment of present option values,
respectively. The Company is not aware of any formula, except for the
actual market price, which will either predict or determine with
reasonable accuracy the future appreciation or present value based on
future unknown or volatile factors. No gain to optionees is possible
without stock price appreciation, which will benefit all stockholders
commensurately. A zero percent gain in stock price appreciation will
result in zero dollars for the optionee.
(6) The present value of options granted has been reported using the
Black-Scholes option pricing model. With the exception of the January 10,
1994 option grant to Mr. Nagel, these values assume: (a) a grant date of
May 3, 1993; (b) an exercise price of $39.50 (the closing market price on
the date of grant); (c) an exercise date of May 3, 1998 (based on a
five-year exercise period) and May 3, 2003 (based on a ten-year exercise
period), respectively; (d) a risk-free interest rate of 5% (based on a
five-year exercise period) and 6% (based on a ten-year exercise period),
respectively; (e) a dividend yield of 3.04%; and (f) volatility of .0289,
resulting in an option pricing value of $6.61 (based on a five-year
exercise period) and $9.84 (based on a ten-year exercise period),
respectively. In the case of the January 10, 1994 option grant to Mr.
Nagel, these values assume: (a) a grant date of January 10, 1994; (b) an
exercise price of $42.00 (the closing market price on the date of grant);
(c) an exercise date of January 10, 1999 (based on a five-year exercise
period) and January 10, 2004 (based on a ten-year exercise period),
respectively; (d) a risk-free interest rate of 5% (based on a five-year
exercise period) and 5.63% (based on a ten-year exercise period),
respectively; (e) a dividend yield of 2.78%; and (f) volatility of .1440,
resulting in an option pricing value of $6.64 (based on a five-year
exercise period) and $9.87 (based on a ten-year exercise period),
respectively.
(7) In addition to the annual (May 3, 1993) option grant, Mr. Nagel received
an additional mid-fiscal year grant on January 10, 1994 of 20,000 shares
in order to bring his total compensation in line with the competitive
range approved by the Compensation Committee of the Board of Directors,
and in recognition of his increased responsibilities as a Senior Officer
of the Corporation.
(8) Based on 17,195,785 shares outstanding on May 3, 1993.
10
AGGREGATE OPTION/EXERCISES IN FY 1994 AND FY-END OPTION VALUES
The following table provides information on option exercises in fiscal
year 1994 by the named executive officers and the value of such officers'
unexercised options.
NO. OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT APRIL 30, 1994 IN-THE-MONEY OPTIONS AT
(#) APRIL 30, 1994 (1)
SHARES ACQUIRED VALUE --------------------------- --------------------------
NAME ON EXERCISE (#) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ---------------- -------- ------------ -------------- ------------ -------------
Robert D. Kunisch ................................ 3,000 $45,000 292,920 20,000 $1,148,980 0
Stephen A. Fragapane ............................. 12,400 148,000 99,800 6,000 361,013 0
William F. Adler ................................. 0 0 98,850 6,000 416,200 0
H. Robert Nagel .................................. 0 0 49,550 32,000 160,725 0
Roy A. Meierhenry ................................ 0 0 91,480 6,000 370,114 0
- - ----------
<FN>
(1) An "In-the-Money" option is an option for which the option price of the
underlying stock is less than the market price at April 30, 1994, and all
of the value shown reflects stock price appreciation since the granting of
the option.
PENSION PLANS
The Company has a non-contributory Pension Plan for employees providing
for fixed benefits commencing at normal retirement age of 65. The Pension Plan
benefits paid to executives are supplemented by the PHH Corporation Excess
Benefit Plan, which provides for the payment to executives, commencing at the
time benefits are paid under the Pension Plan, of benefits that would
otherwise be paid to them under the Pension Plan but for certain limitations
imposed by the Internal Revenue Code. The Company also maintains a
Supplemental Executive Retirement Plan (the "SERP") which provides for
supplemental retirement income benefits payable as early as age 60 (or earlier
upon death, early retirement (with reduced payments) or disability) after
completing at least five credited years of executive service. Aggregate
benefits under these plans are computed on the basis of a straight-life
annuity and are offset by Social Security benefits and any benefits payable
under retirement plans of former employers acquired by the Company.
PENSION TABLE
The following table shows the estimated aggregate benefits payable under
the Pension Plan, the Excess Benefit Plan and the SERP for persons retiring at
age 60, calculated on a straight life annuity basis under various assumptions
as to years of credited service and final average compensation and without
regard to offsets for Social Security benefits or any benefits payable under
former employers' plans.
FINAL YEARS OF CREDITED SERVICE
AVERAGE ------------------------------------------------
COMPENSATION 15 20 25 30 35
- - ------------ -------- -------- -------- ---------- ----------
$ 250,000 $150,000 $150,000 $150,000 $150,000 $150,000
300,000 180,000 180,000 180,000 180,000 180,000
350,000 210,000 210,000 210,000 210,000 210,000
400,000 240,000 240,000 240,000 240,000 240,000
450,000 270,000 270,000 270,000 270,000 270,000
500,000 300,000 300,000 300,000 300,000 300,000
550,000 330,000 330,000 330,000 330,000 330,000
600,000 360,000 360,000 360,000 360,000 360,000
650,000 390,000 390,000 390,000 390,000 390,000
700,000 420,000 420,000 420,000 420,000 420,000
750,000 450,000 450,000 450,000 450,000 450,000
800,000 480,000 480,000 480,000 480,000 480,000
1,000,000 600,000 600,000 600,000 600,000 600,000
1,200,000 720,000 720,000 720,000 720,000 720,000
11
Final Average Compensation for purposes of computing aggregate benefits
under the plans generally is the average, for the five years of service prior
to retirement or other termination of employment, of base salary and bonus as
reported under the "Salary" and "Bonus" columns in the Summary Compensation
Table, although the grant-date cash-equivalent value of stock options granted
in 1992 in lieu of merit salary increases or annual bonuses is also included.
The Company has entered into supplemental executive retirement agreements with
the executive officers named in the Summary Compensation Table which establish
a floor for Final Average Compensation and, in some cases, grant additional
years of credited service for purposes of calculating benefits under the SERP.
Taking into account these supplemental agreements, for purposes of the SERP
and for purposes of calculating aggregate pension benefits under the Pension
Table, the executive officers named in the Summary Compensation Table are
deemed to have Final Average Compensation as follows: Mr. Kunisch $1,110,003;
Mr. Fragapane $509,046; Mr. Meierhenry $479,761; Mr. Nagel $469,485 and Mr.
Adler $462,093. The SERP provides a maximum benefit of 60% of Final Average
Compensation for participants with 15 or more years of credited service. Each
of the executive officers named in the Summary Compensation Table has or is
deemed to have at least 15 years of credited service other than Mr. Fragapane
who has 8 years of credited service and Mr. Adler who has 10 years of credited
service.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT
AND CHANGE IN CONTROL ARRANGEMENTS
The Company has entered into agreements with six executives, including the
five named in the Summary Compensation Table, pursuant to its Senior Executive
Severance Plan originally adopted in 1984 and subsequently amended. The
Company's obligations under each agreement are triggered if the executive's
employment is terminated either (a) within two years of a change in control
(as defined) by the Company without cause (as defined) or by the executive for
good reason (as defined) or (b) within the 30-day period following the first
anniversary of a change in control by the executive for any reason (other than
death, disability or normal retirement). Under each agreement, the terminated
executive would receive a cash severance payment equal to the sum of (a) three
times the highest amount of salary and incentive compensation (as defined)
paid to the executive during any consecutive 12 months in the three-year
period preceding termination, (b) the maximum amount to which the executive
would have been entitled assuming attainment of certain corporate performance
levels (as specified) under the current long-term incentive plans in which the
executive was participating, and (c) the value of three additional years'
worth of retirement benefits. The agreements also provide for the continuation
for up to three years of health care and life insurance and certain other
benefits, and protect the executives against the assessment of certain income
and excise taxes. In addition, in the event of an actual or potential change
in control, the Company would be required to fund a grantor trust in an amount
sufficient to cover the Company's possible obligations during the agreements'
two-year employment protection period. The monies in the trust would revert to
the Company if or to the extent such obligations were not triggered.
For purposes of these agreements, a change in control would occur when a
third party or group becomes the owner of stock of the Company entitled to
cast 20% or more of general voting power of the Company's stock or where, as a
result of one or more tender offers, mergers, other acquisitions or proxy
contests, a majority of the Board of Directors has changed.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No director or executive officer of the Company is a director or executive
officer of any other corporation that has a director or executive officer who
is a member of the Compensation Committee of the Company.
12
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee") is
composed entirely of independent outside directors who are not eligible to
participate in any of the executive compensation plans that it administers.
The Committee is responsible for establishing the Company's executive
compensation philosophy and the compensation of executives in accordance with
that philosophy in a manner designed to attract and retain qualified,
motivated executives and to closely align their financial interests with those
of the Company's stockholders. Prior to the commencement of each fiscal year
of the Company, the Committee reviews the Company's executive compensation
philosophy and strategic business plan performance goals and establishes the
executive compensation structure, the targets for awards under the Company's
incentive plans, and the range of potential individual payments in accordance
with that philosophy and those goals. The Committee considers the
recommendations of the Company's Human Resources Department, the Chief
Executive Officer (except with regard to his own compensation) and outside
compensation consultants. The Committee also reviews the factors on which such
recommendations are based, including previous Company performance and
strategic business objectives, performance of individual executives, and data
on executive compensation paid by similarly situated companies in comparable
industries. The Committee reviews with the Board of Directors on an annual
basis the executive compensation structure and programs, and submits for Board
approval its recommendations as to compensation of executive officers.
Company performance is generally expressed in terms of the Company's
return on beginning equity ("ROBE") for the relevant fiscal year based upon
the Committee's belief that ROBE is the best measure of achieving long-term
shareholder value. ROBE is determined by dividing (a) the Company's net
income, including a deduction for the amount of any incentive to be paid, by
(b) the beginning shareholders' equity for the relevant fiscal year.
Individual executive performance is generally evaluated on the basis of the
executive's attainment of performance objectives identified at the beginning
of the fiscal year. Other measures of Company and individual performance may
also be taken into account; however, except as specifically noted in the
description of the Annual Incentive Plan below, no specific weightings are
assigned to any particular factor.
The competitive nature of the Company's executive compensation is
determined by reference to publicly available data on companies in the
business and financial services industries, including those in the leasing and
mortgage banking industries, and to published executive compensation surveys.
The report of the Company's independent compensation consultants compares this
data to the compensation of the Company's executives, in terms of total cash
compensation, financial performance, executive officer stock ownership levels
and stock option grant practices. Certain of the companies in the Company's
comparison group for executive compensation purposes (the "Comparison Group")
are included either in the S&P Midcap Commercial Services (Specialized) Index
or the Value Line Industrial Services Industry Index shown in the Stock
Performance Chart on p. 18. The Committee believes that the companies included
in the Comparison Group are the Company's most direct competitors for
executive talent, and therefore serve as better indicators of competitive
levels of executive compensation than those companies included in either the
S&P Midcap Commercial Services (Specialized) Index or the Value Line
Industrial Services Industry Index used in the Stock Performance Chart.
New limits on the deductibility of compensation in excess of $1 million
paid to the Chief Executive Officer and other named executive officers of
public companies under Section 162 of the Internal Revenue Code have been
imposed by the Omnibus Budget Reconciliation Act of 1993. The Company will
first become subject to these limitations in the fiscal year beginning May 1,
1994. Accordingly, the Committee will consider the Company's alternatives with
respect to adjustment of its compensation programs to qualify for certain
exemptions to the deductibility limitation as ultimately defined in final
Internal Revenue Service regulations, and the
13
desirability of those alternatives in terms of their ability to meet the
executive compensation philosophy and strategy established by the Committee.
EXECUTIVE COMPENSATION PHILOSOPHY
The Company's philosophy is to respond to the interests of stockholders in
the payment of executive compensation, and specifically, to link the interests
of executives to the interests of stockholders. The Company's executive
compensation is structured to (a) align executive compensation with Company
and individual performance, (b) ensure fairness and consistency in executive
compensation in accordance with both competitive market levels and individual
responsibilities and performance, (c) promote flexibility for growth in new
markets and/or services, (d) ensure the maintenance of sound and adequate
financial reporting and accounting controls on executive compensation, and (e)
emphasize both short and long-term Company performance.
Consistent with this philosophy, the Company is committed to providing
total executive compensation which attracts and retains executives qualified
and motivated to fulfill the Company's business strategy and to deliver
enhanced stockholder value. Accordingly, the Company has consistently adhered
in both principle and practice to the concept of pay-for-performance and
relies heavily on incentive compensation programs designed to motivate
executives to achieve the Company's short and long-term business objectives.
EXECUTIVE COMPENSATION STRUCTURE
The executive compensation structure consists of salary, annual
incentives, long-term incentives, stock options and other benefits generally
available to all employees. Each component is offered to executives in
combinations designed to meet strategic business objectives and to provide
risk-based pay opportunities which reflect individual and Company performance.
Within this structure, total compensation, including base salary, for
individual executives varies equitably with their individual responsibilities
and performance.
BASE SALARY
The base salary is determined in accordance with that paid to persons
holding similar positions in the Comparison Group companies. In assessing the
competitive position of the Company's salaries for fiscal year 1994, the
target level used was the median (50th percentile) of competitive rates.
Actual salaries for each position are based on the positioning of base salary
within the competitive range, individual performance in relation to the
executive's responsibilities during the previous year, the value each
executive is expected to contribute to the Company during the next fiscal
year, and the financial performance of the operations, as measured by net
income, directed by the executive in relation to that provided for in the
annual financial plan for those operations. In general, the financial
performance of the operations directed by the executives named in the Summary
Compensation Table achieved the goals provided for in the annual financial
plan for those operations. The Committee does not assign specific weightings
to any particular factor, but rather applies its collective business judgment
to recommend for approval by the full Board of Directors a base salary that it
deems fair to the Company and its stockholders. For fiscal year 1994, actual
base salaries paid to the executive officers named in the Summary Compensation
Table, other than the Chief Executive Officer, were at 5.2% above the median
of competitive rates.
ANNUAL INCENTIVE PROGRAM
Annual incentive awards are targeted between the 50th and 75th percentile
of competitive incentive targets and vary with measures of Company and
individual performance.
14
Executives designated by the Committee are eligible to participate in an
annual cash incentive plan (the "Annual Incentive Plan") which is designed
both to encourage the achievement of the Company's short-term strategic
business objectives and to recognize specific contributions by executives to
the attainment of the Company's performance goals by providing direct cash
incentives. The level of payout for executive officers is expressed as a
percentage of base salary, which increases for higher positions within the
Company, thereby placing a greater percentage of compensation at risk for
those with greater responsibilities.
The annual incentive award to executives is based primarily on the
attainment of specific business performance objectives expressed in terms of
the Company's ROBE (the "formula-derived award"). Before any formula-derived
award can be paid out under the Annual Incentive Plan, the Company must
achieve a threshold minimum ROBE, with increasing amounts to be awarded if the
Company achieves or exceeds the target ROBE. A portion of the formula-derived
award is attributable to the Committee's collective subjective evaluation of
individual performance provided that the Company's net income targets in
addition to ROBE targets have been attained. The Chief Executive Officer (and,
with respect to the Chief Executive Officer's award, the Committee without any
input from the Chief Executive Officer) is given discretionary authority under
the Annual Incentive Plan to adjust individual formula-derived awards based on
his or its subjective determination of individual performance and the level of
ownership of the Company's common stock. No particular weightings are accorded
to any one factor; the Committee instead applies its collective subjective
business judgment to reach a decision on compensation that it deems fair to
the Company and its stockholders.
For fiscal year 1994, the Company achieved a ROBE of 14.11% and net income
of $64.6 million, which exceeded the target objectives under the Annual
Incentive Plan. Based on these results and the Committee's collective
subjective evaluation of individual performance against personal objectives
established at the beginning of the fiscal year, the Committee approved annual
incentive awards to the named executive officers, as reflected in the Summary
Compensation Table on page 9.
LONG-TERM INCENTIVE PROGRAM
The Company's long-term incentive program consists of both long-term
incentive awards based on the Company's performance over the three-year period
designated by the Committee and stock options. Awards and stock option grants
to executives under the long-term incentive program are targeted between the
50th and 75th percentile of competitive incentive targets, including the level
of stock option grants. Awards to executives under the long-term incentive
plan vary with measures of Company and individual performance. Stock option
grants are based upon position level and individual performance.
Long-Term Incentive Plan
Executives designated by the Committee participate in biennial long-term
incentive plans (collectively the "Long-Term Incentive Plans") which are
designed to encourage the achievement of the Company's long-term objectives by
providing direct cash, stock grants or stock option incentives. Incentives
awarded under each Long-Term Incentive Plan are based wholly on the Company's
achievement of threshold minimum business performance objectives, expressed in
terms of the Company's average annual ROBE, which are established by the
Committee under the Long-Term Incentive Plan for the relevant award period
consisting of three complete fiscal years of the Company. As with the Annual
Incentive Plan, the level of payout for executive officers under the Long-Term
Incentive Plan is expressed as a percentage of base salary, which increases
for higher positions within the Company, thereby placing a greater percentage
of compensation at risk for those with greater responsibilities.
15
The Company achieved an average ROBE during fiscal years 1992 through 1994
of 13.39%, which exceeded the threshold minimum objectives, but was less than
the target objectives under the Long-Term Incentive Plan for fiscal years
1992-93-94 (the "FY'94 Long-Term Incentive Plan"). Based on these results, the
Committee approved long-term incentive awards to the named executive officers
equal to 85% of target under the FY'94 Long-Term Incentive Plan, as reflected
in the Summary Compensation Table.
Stock Option Grants
Both nonqualified stock options and incentive stock options, as defined in
the Internal Revenue Code of 1986, are granted periodically to executive
officers designated by the Committee as a means of further aligning the
interests of executives with the long-term interests of stockholders.
Executives are encouraged to exercise options and to hold those shares
received upon the exercise of options. It is the Company's objective to
achieve a significant level of stock ownership by executives through this
program.
The options are granted pursuant to the Amended and Restated Stock
Compensation Plan of 1990 (the "1990 Compensation Plan"). Options generally
may not be exercised prior to the first anniversary of the date of grant and
expire ten years after the date of grant. Options granted by the Company have
a per share exercise price of 100% of the fair market value of a share of
Common Stock on the date of grant and, accordingly, the value of the option
will be dependent on the appreciation in the market value of the Company's
Common Stock.
The actual number of stock options granted to each executive in fiscal
year 1994 is based on the executive's position level, the Committee's
collective subjective evaluation of the executive's performance and the
executive's existing level of stock ownership. No particular weighting is
accorded to any one factor, nor does the Committee directly consider past
Company performance in determining the option grants.
OTHER EMPLOYEE BENEFITS
Executive officers are also eligible to participate in other benefit plans
generally available to all employees (including medical, dental, 401(k) and
pension), as well as certain other perquisites and benefits designed to
promote business development and financial planning, and to replace benefit
opportunities lost due to regulatory limits on qualified pension plan
participation. The Committee believes that these benefits are competitive with
those offered in the marketplace and are essential to attract and retain key
executives.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
The Committee meets without the Chief Executive Officer to evaluate his
performance and to determine his total annual compensation. The Committee
determined Mr. Kunisch's fiscal year 1994 total compensation in a manner
consistent with the structure and guidelines discussed above. Specifically,
the Committee considered the report of the Company's outside compensation
consultant on the competitiveness of the Chief Executive Officer's total
compensation with that offered to other chief executive officers of companies
in the Comparison Group. The Committee also considered the Company's
achievement of strategic business performance and financial objectives, and
Mr. Kunisch's performance in meeting those objectives. In reviewing the
Company's performance, the Committee takes into account the Company's revenue,
net income, earnings per share and ROBE. The Committee does not assign
specific weightings to any particular factor, but rather applies its
collective business judgment to reach a decision on compensation that it deems
fair to the Company and its stockholders.
16
The Committee determined that an increase in Mr. Kunisch's salary for
fiscal year 1994 was warranted in view of both Mr. Kunisch's and the Company's
performance for fiscal year 1993. The Committee also determined that an
increase in Mr. Kunisch's salary should be made to bring it within competitive
market levels. Mr. Kunisch's salary for fiscal year 1994 was at 3.6% above the
median of competitive rates. The Committee considered the extensive efforts
and dedication of the Chief Executive Officer in managing the Company's core
businesses, resulting in the development of significant opportunities for
expansion. The leadership vision provided by Mr. Kunisch was recognized as
well as his fulfillment of the key roles of Chief Executive Officer and
President of the Company in addition to that of Chairman of the Board of
Directors. The Committee also considered the achievement of increased
financial returns to the Company's stockholders, largely as a result of
strategic business decisions made by Mr. Kunisch. The Company's net income for
fiscal year 1993 grew to $56.4 million, an increase of 13% over fiscal year
1992, and earnings per share increased 11% to $3.25.
The award paid to Mr. Kunisch under the Fiscal Year 1994 Annual Incentive
Plan was based primarily upon the Company's achievement of a ROBE of 14.11%,
which exceeded the Company performance target objectives for fiscal year 1994.
The award paid to Mr. Kunisch under the FY'94 Long-Term Incentive Plan was
based wholly upon the Company's achievement of an average ROBE of 13.39% for
fiscal years 1992-93-94, which average was slightly less than the target
objectives under the FY'94 Long-Term Incentive Plan. The level of awards under
the incentive plans as a percentage of Mr. Kunisch's salary are consistent
with the executive compensation structure to place a greater percentage of
compensation at risk for those with greater responsibility.
The fiscal year 1994 stock options granted to Mr. Kunisch reflect the
stated desire of the Committee to increase his stock-based compensation
relative to other aspects in order to further align his total compensation
with the interests of stockholders. Mr. Kunisch's total compensation for
fiscal year 1994 is set forth in the Summary Compensation Table appearing on
p. 9.
PHH CORPORATION
COMPENSATION COMMITTEE
L. Patton Kline, Chairman
Thomas V. King
Francis P. Lucier
17
STOCK PERFORMANCE GRAPH
The graph below compares the total return of the Company's Common Stock,
the S&P 500 Index, the S&P Midcap Commercial Services (Specialized) Index and
the Value Line Industrial Services Industry Index during the five fiscal years
ended April 30, 1994. The cumulative total return is calculated assuming $100
was invested on April 30, 1989, in the Company's Common Stock and in each of
the foregoing indices. The graph also assumes that all dividends were
reinvested.
There can be no assurance as to the future trends in the cumulative total
return of the Company's Common Stock or of the following indices. The Company
does not make nor does it endorse any predictions as to future stock
performance.
CUMULATIVE TOTAL RETURN CHART
(1) The Company has selected the S&P Midcap Commercial Services (Specialized)
Index as the industry index to which to compare the total return of the
Company's Common Stock on the belief that information concerning the
composite companies is more readily available to stockholders than that of
the Value Line Industrial Services Industry Index to which the Company
compared the performance of its Common Stock in its 1993 Proxy Statement.
In accordance with Securities and Exchange Commission regulations, the
Company has compared the performance of its Common Stock to both that of
the S&P Midcap Commercial Services (Specialized) Index and the Value Line
Industrial Services Industry Index. The Company is a composite company in
both of the industry indices and expresses no opinion as to the
appropriateness of using one industry index over the other for purposes of
comparing the performance of its Common Stock.
18
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Certain Directors and officers of the Company, members of their immediate
families or entities with which they are associated, entered into transactions
with the Company, including the Company's services for obtaining residential
mortgage loans, home relocation and vehicle leasing and/or management, during
fiscal year 1994. All such transactions were made in the ordinary course of
business on substantially the same terms, including interest rates and
collateral, that prevailed at the time for comparable transactions with other
persons and did not involve more than the normal risk of collectibility or
have other features unfavorable to the Company.
ACCOUNTING MATTERS
KPMG Peat Marwick served as the independent auditors of the Company for
the fiscal year ended April 30, 1994, and the Board of Directors has selected
that firm to continue as the Company's independent auditors for the current
fiscal year. Representatives of KPMG Peat Marwick are expected to be present
at the Annual Meeting, will have an opportunity to make a statement if they
desire to do so, and will be available to respond to appropriate questions.
DEADLINE FOR STOCKHOLDERS' PROPOSALS
FOR 1995 ANNUAL MEETING
All stockholder proposals for action at the 1995 Annual Meeting must be
received by the Secretary of PHH Corporation, 11333 McCormick Road, Hunt
Valley, Maryland 21031 by March 10, 1995, and must otherwise comply with the
rules of the Securities and Exchange Commission in order to be eligible to be
included in the Company's proxy statement for the 1995 Annual Meeting.
ANNUAL REPORT
The Annual Report of the Company for the fiscal year ended April 30, 1994,
which does not constitute a part of this Proxy Statement, is being mailed to
all persons who were Stockholders of record on June 24, 1994, together with
the mailing of this Notice of Annual Meeting and Proxy Statement.
OTHER MATTERS
The Board of Directors does not know of any matters which will be brought
before the meeting other than those set forth in the notice thereof. However,
if any matter properly comes before the meeting, it is intended that the
persons named in and acting under the enclosed form of proxy will vote thereon
in accordance with their best judgment.