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Items of Business | Board Recommendation | |||
Elect ten directors, each to serve for a one-year term | FOR | |||
Advisory vote to approve named executive officer compensation | FOR | |||
Approve the Amended KB Home 2014 Equity Incentive Plan | FOR | |||
Ratify the appointment of our independent registered public accounting firm | FOR |
• | ENERGY STAR® Partner of the Year – Sustained Excellence Award – Honoring organizations that make outstanding contributions to protecting the environment through energy efficiency. This was our fifth consecutive year of receiving the award. |
• | ENERGY STAR Partner of the Year – Climate Communications Award – Honoring organizations that raise public awareness of the impact of climate change. We are the first and only homebuilder to earn this distinction, and we have received the honor two years in a row. |
• | 2015 WaterSense® Sustained Excellence Award Winner – We are the first and only national homebuilder to be recognized with this award for our work in water efficiency innovation. |
Time and Date: | 9:00 a.m., Pacific Time, on Thursday, April 7, 2016. | |||||
Location: | The Fairmont Miramar Hotel, 101 Wilshire Boulevard, Santa Monica, CA 90401. | |||||
Items of Business: | (1) Elect ten directors, each to serve for a one-year term; | |||||
(2) Advisory vote to approve named executive officer compensation; | ||||||
(3) Approve the Amended KB Home 2014 Equity Incentive Plan; and | ||||||
(4) Ratify the appointment of our independent registered public accounting firm. | ||||||
The accompanying Proxy Statement describes these items in more detail. We have not received notice of any other matters that may be properly presented at the meeting. | ||||||
Record Date: | You can vote at the meeting and at any adjournment or postponement of the meeting if you were a stockholder of record on February 5, 2016. | |||||
Voting: | Please vote as soon as possible, even if you plan to attend the meeting, to ensure your shares will be represented. You do not need to attend the meeting to vote if you vote before the meeting. If you are a holder of record, you may vote your shares via the Internet, telephone or mail. If your shares are held by a broker or financial institution, you must vote your shares using a method the broker or financial institution provides. | |||||
Annual Report: | Copies of our Annual Report on Form 10-K for the fiscal year ended November 30, 2015 (“Annual Report”), including audited financial statements, are being made available to stockholders concurrently with the accompanying Proxy Statement. We anticipate these materials will first be made available on or about February 26, 2016. | |||||
Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting To Be Held on April 7, 2016: Our Proxy Statement and Annual Report are available at www.kbhome.com/investor/proxy. | ||||||
KB HOME 10990 Wilshire Boulevard Los Angeles, CA 90024 (NYSE:KBH) |
PROXY STATEMENT |
TABLE OF CONTENTS |
CORPORATE GOVERNANCE AND BOARD MATTERS |
• All directors are independent (except our President and Chief Executive Officer (“CEO”)), and elected annually under a majority voting standard. | • Non-employee directors meet in executive sessions at each in-person Board meeting, and any non-employee director can request additional executive sessions. | |
• Our standing Board Committees are entirely composed of independent directors. | • There is Board-level oversight of our political contributions, which are reported in our public Sustainability Reports. | |
• We have one class of voting securities and no supermajority voting requirements. | • All employees and non-employee directors are prohibited from pledging or hedging their holdings of our securities. | |
• Directors and senior executives are subject to stock ownership requirements. | • Seven of the eight directors serving at the time attended our 2015 Annual Meeting of Stockholders (held April 2, 2015). |
The Board is elected by our stockholders to oversee the management of our business and to assure that the long-term interests of our stockholders are being served. The Board carries out this role subject to Delaware law (our state of incorporation), and in accordance with our Certificate of Incorporation, By-Laws, Ethics Policy and Corporate Governance Principles. As of the date of this Proxy Statement, the Board has nine members. Jeffrey T. Mezger, our CEO, is the only director who is an employee. The Board held four meetings during 2015. Each director attended at least 75% of the meetings of the Board and of the Board Committees on which he or she served during the year. We expect directors to attend our annual stockholder meetings. | Key Governance Documents • Corporate Governance Principles: provide the primary framework within which we conduct our business and pursue our strategic goals. • Ethics Policy: establishes the ethical standards we expect our non-employee directors, senior executives and employees to follow when representing KB Home. To this end, all employees, including our senior executives, and our non-employee directors must comply with our Ethics Policy. |
• | Michael M. Wood’s independence was not impaired by, and he did not have a direct or indirect material interest in, our receipt of consulting services and research data in 2015 from a firm in which he owns a <1% passive equity interest. |
• | Kenneth M. Jastrow, II’s independence was not impaired by, and he did not have a direct or indirect material interest in, our considering in 2015 the purchase of land and land development-related rights from Forestar Group, Inc., where he served as non-executive chairman until September 2015 and as a director until December 2015. |
• | Director nominee Dr. Stuart A. Gabriel’s independence is not impaired by his participation on our national advisory board from 2009 to 2015, where he and other outside experts periodically provided advice on our sustainability initiatives. Dr. Gabriel was not paid for his participation other than reimbursement of travel-related expenses to attend meetings. Like other national advisory board participants, Dr. Gabriel could designate qualified charitable organizations to receive donations from us. Based on Dr. Gabriel’s participation from 2013 to 2015, he could designate up to $2,500 in donations to charitable organizations in each such year. Of this amount, we donated $1,500 in each such year to an organization for which he serves as a director. Dr. Gabriel no longer participates on our national advisory board. |
Audit Committee | FY2015 Meetings: 6 | |
Members | Primary Duties | |
Melissa Lora (Chair) Dr. Thomas W. Gilligan Robert L. Patton, Jr. Michael M. Wood Each member is financially literate. Ms. Lora is an “audit committee financial expert,” per NYSE listing standards and Securities and Exchange Commission (“SEC”) rules. | The Audit Committee is charged with the duties and responsibilities in its charter, which include general oversight of our accounting and reporting practices and audit process, including our independent registered public accounting firm’s qualifications, independence, retention, compensation and performance; and is authorized to act on the Board’s behalf with respect to our incurring, guaranteeing or redeeming debt and approving our entry into certain transactions. Per its charter, the Audit Committee reviewed and approved updates to our Ethics Policy that became effective as of October 31, 2015. The Audit Committee is a separately designated standing audit committee as defined in Section 3(a)(58)(A) of the Securities Exchange Act of 1934. |
Compensation Committee | FY2015 Meetings: 6 | |
Members | Primary Duties | |
Kenneth M. Jastrow, II (Chair) Stephen F. Bollenbach Timothy W. Finchem Robert L. Johnson Melissa Lora Each member is a “non-employee director” under SEC rules and is an “outside director” under Section 162(m) of the Internal Revenue Code (“Code”). | The Compensation Committee is charged with the duties and responsibilities in its charter, which include evaluating and compensating our CEO; determining our CEO’s direct reports’ compensation; and evaluating and recommending non-employee director compensation and benefits. The Compensation Committee receives assistance from our management and has retained an outside compensation consultant, Frederic W. Cook & Co., Inc. (“FWC”), as described below under the heading “Executive Compensation Decision-Making Process and Policies.” The Compensation Committee may delegate its duties and responsibilities to our management, excluding the authority to grant equity-based awards, or to a Board subcommittee. | Compensation Committee Interlocks and Insider Participation None of our directors or executive officers had any relationship that would constitute a “compensation committee interlock” as described under SEC rules. |
Nominating Committee | FY2015 Meetings: 4 | |
Members | Primary Duties | |
Timothy W. Finchem (Chair) Stephen F. Bollenbach Dr. Thomas W. Gilligan Robert L. Johnson Robert L. Patton, Jr. Michael M. Wood | The Nominating Committee is charged with the duties and responsibilities in its charter, which include overseeing our corporate governance policies and practices; reviewing “related party transactions,” as discussed below; overseeing annual Board and Board Committee performance evaluations; and identifying, evaluating and recommending qualified director candidates to the Board. The Nominating Committee also regularly evaluates the skills and characteristics of current and potential directors, and identified for each present director nominee certain specific skills and qualifications that supported the Board’s determination that each should serve as a director, as described below under the heading “Election of Directors.” |
Audit Committee Role. The Audit Committee oversees an annual enterprise risk management assessment performed by our management that identifies significant risk areas to our business and corresponding mitigating factors, and it requests or receives periodic updates as it or our management deem necessary or appropriate. The Audit Committee Chair reports to the Board regarding identified significant risks as deemed appropriate. In addition, at each of its regular meetings, the Audit Committee receives reports from each of our senior finance, accounting, legal and internal audit executives, and meets in separate executive sessions with each such executive and with representatives of our independent registered public accounting firm. | Compensation Committee Role. The Compensation Committee oversees an annual risk assessment of our employee compensation policies and programs that is performed by FWC in conjunction with our management and is focused on potential design and implementation risks. The Compensation Committee also carries out its risk oversight role on an ongoing basis through its review and, to the degree appropriate, specific approval of compensation arrangements as they are being developed by our senior human resources personnel. The Compensation Committee Chair reports to the Board regarding significant risks as deemed appropriate. Based on this oversight approach and the outcome of the most recent annual risk assessment, we do not believe that our present employee compensation policies and programs are likely to have a material adverse effect on us. |
Pursuant to its charter, the Nominating Committee must review and approve or ratify any transaction, arrangement or relationship (or series of similar transactions, arrangements or relationships) in which we participate and in which a director, a director nominee, an executive officer or a beneficial owner of five percent or more of our common stock (or, in each case, an immediate family member) had or will have a direct or indirect material interest (a “Covered Transaction”), except transactions within the categories described at right or as otherwise determined by the Board. Covered individuals and stockholders are expected to inform our Corporate Secretary of Covered Transactions, and we collect information from our directors, director nominees and executive officers about their affiliations and affiliations of their family members so that we can review our records for any such transactions. The Nominating Committee will approve or ratify a Covered Transaction if, based on a review of all material facts of the transaction and feasible alternatives, the Nominating Committee deems the transaction to be in our and our stockholders’ best interests. The Nominating Committee determined that there were no Covered Transactions during 2015. | Pre-Approved Transaction Categories • Any transaction in which the total amount involved is less than or equal to $120,000; • The employment and compensation (a) of a director or executive officer if the individual’s compensation is reported in our annual proxy statement, or (b) of any other executive officer who is not an immediate family member of one of the foregoing individuals or a director nominee if such executive officer’s compensation was approved, or recommended for approval, by the Compensation Committee; • Any transaction that would not (a) need to be reported under federal securities laws, (b) be deemed to impair a director’s independence under our Corporate Governance Principles or (c) be deemed to be a conflict of interest under our Ethics Policy; and • Any transaction where an individual’s interest therein arises solely from ownership of our common stock and all holders of our common stock received the same benefit on a pro-rata basis. |
DIRECTOR COMPENSATION |
Director Plan Compensation | |
Board Retainer | $100,000 |
Equity Grant (value) | $145,000 |
Committee Chair Retainers | $25,000 (Audit Committee) $18,000 (Compensation Committee) $15,000 (Nominating Committee) |
Committee Member Retainers | $10,000 (Audit and Compliance) $7,000 (Compensation Committee) $5,000 (Nominating Committee) |
Meeting Fees | $1,500 (for each additional meeting) |
Name(a) | Fees Earned or Paid in Cash ($)(b) | Stock Awards ($)(c) | Option Awards ($) | All Other Compensation ($)(d) | Total ($) | ||||||||||
Mr. Bollenbach | $ | 375,000 | $ | 145,000 | $ | — | $ | — | $ | 520,000 | |||||
Mr. Finchem | 20,000 | 267,000 | — | — | 287,000 | ||||||||||
Dr. Gilligan | 110,000 | 145,000 | — | — | 255,000 | ||||||||||
Mr. Jastrow | 110,250 | 145,000 | — | 13,545 | 268,795 | ||||||||||
Mr. Johnson | 95,000 | 157,000 | — | — | 252,000 | ||||||||||
Ms. Lora | — | 275,000 | — | — | 275,000 | ||||||||||
Mr. Patton | 28,750 | 72,500 | — | — | 101,250 | ||||||||||
Mr. Wood | 110,000 | 145,000 | — | — | 255,000 |
(a) | Mr. Patton was elected to the Board on July 15, 2015 and therefore received prorated compensation during 2015. |
(b) | Fees Earned or Paid in Cash. These amounts represent payments of Board and Board Committee retainers based on directors’ elections to receive the retainers in cash. The amount shown for Mr. Bollenbach also includes a $300,000 |
(c) | Stock Awards. These amounts represent the aggregate grant date fair value of the shares of our common stock or stock units granted to our directors in 2015 computed as described in Note 19. Employee Benefit and Stock Plans in the Notes to the Consolidated Financial Statements in our Annual Report, except that estimates of forfeitures related to service-based vesting conditions have been disregarded. All such grants were made on April 2, 2015, except that the grants to Mr. Patton were made on July 15, 2015, the date he was elected to the Board. Below are the number of shares of our common stock or stock units granted to each director in 2015 and each director’s total holdings of equity-based awards as of February 16, 2016. |
Name | 2015 Common Stock Grants (#) | 2015 Stock Unit Grants (#) | Total Holdings (#)(i) | |||
Mr. Bollenbach | 9,136 | — | 207,503 | |||
Mr. Finchem | — | 16,823 | 148,378 | |||
Dr. Gilligan | — | 9,136 | 48,238 | |||
Mr. Jastrow | — | 9,136 | 135,767 | |||
Mr. Johnson | 9,892 | — | 138,004 | |||
Ms. Lora | — | 17,327 | 188,804 | |||
Mr. Patton | 4,420 | — | 4,420 | |||
Mr. Wood | — | 9,136 | 25,279 |
(i) | Total Holdings. These amounts reflect the directors’ total respective outstanding holdings of equity-based awards, consisting of common stock, stock unit and stock option grants in the following respective amounts: Mr. Bollenbach 9,136, 54,264 and 144,103; Mr. Finchem 0, 93,028 and 55,350; Dr. Gilligan 0, 21,349 and 26,889; Mr. Jastrow 0, 80,417 and 55,350; Mr. Johnson 9,892, 34,769 and 93,343; Ms. Lora 0, 122,234 and 66,570; Mr. Patton 4,420, 0 and 0; and Mr. Wood 0, 13,901 and 11,378. All such stock options were granted prior to October 2014, when the current Director Plan terms were made effective and stock option awards ceased being a component of director compensation. Some of these stock options held by Messrs. Bollenbach (88,753) and Johnson (37,993) and Ms. Lora (11,220) have 15-year terms and generally must be exercised by the earlier of their respective terms or the first anniversary of their leaving the Board. The remainder have ten-year terms and generally must be exercised by the earlier of their respective terms or the third anniversary of the grantee leaving the Board. Based on the directors’ respective elections, each such stock option represents a right to receive shares of our common stock equal in value to the positive difference between the option’s stated exercise price and the fair market value of a share of our common stock on an exercise date, and are therefore settled in a manner similar to stock appreciation rights (and are referred to in this Proxy Statement as “Director SARs”). In 2014, the Board authorized us to repurchase shares of our common stock or issue stock payment awards under our 2014 Equity Incentive Plan to effect settlements of these previously granted Director SARs, though none have been so settled. |
(d) | All Other Compensation. This amount for Mr. Jastrow represents a premium we paid for a life insurance policy maintained to fund charitable donations under the Directors’ Legacy Program, which is described below. In 2015, we paid a total of $27,090 in premiums for program life insurance policies, including for the policy maintained with respect to Mr. Jastrow. Some of these life insurance policies did not require premium payments in 2015. Premium payments, where required, vary depending on participants’ respective ages and other factors. The total amount payable under the program at November 30, 2015 was $15.2 million. |
ELECTION OF DIRECTORS |
The Board will present as nominees at the Annual Meeting, and recommends our stockholders elect to the Board, each of the individuals named below for a one-year term ending with the election of directors at our 2017 Annual Meeting. Each nominee has consented to being nominated and has agreed to serve as a director if elected. Other than Dr. Gabriel and Mr. Patton, each nominee is standing for re-election. Dr. Gabriel is not currently a director. Mr. Patton was elected to the Board on July 15, 2015. Should any of the nominees become unable to serve as a director prior to the Annual Meeting, the individuals named as proxies for the meeting will, unless otherwise directed, vote for the election of another person as the Board may recommend. On the date of the Annual Meeting, if the individuals nominated by the Board are elected as directors, the Board will have ten members. There are no term limits for directors. | Voting Standard To be elected, each director nominee must receive a majority of votes cast in favor (i.e., the votes cast for a nominee’s election must exceed the votes cast against the nominee’s election). |
Director Resignation Policy Our Corporate Governance Principles provide that a director nominee who fails to win election to the Board in an uncontested election is expected to tender his or her resignation from the Board (or to have previously submitted a conditional tender). An “uncontested election” is one in which there is no director nominee that has been nominated by a stockholder in accordance with our By-Laws. This election is an uncontested election. If an incumbent director fails to receive the required vote for election in an uncontested election, the Nominating Committee will act promptly to determine whether to accept the director’s resignation and will submit its recommendation for consideration by the Board. The Board expects the director whose resignation is under consideration to abstain from participating in any decision regarding that resignation. The Nominating Committee and the Board may consider any relevant factors in deciding whether to accept a director’s resignation. |
Stephen F. Bollenbach, age 73, is our Non-Executive Chairman of the Board. He was the Co-Chairman and Chief Executive Officer of Hilton Hotels Corporation, a hotel developer and operator, positions he held from May 2004 and February 1996, respectively. He retired from Hilton in October of 2007. Prior to joining Hilton, Mr. Bollenbach was Senior Executive Vice President and Chief Financial Officer for The Walt Disney Company from 1995 to 1996. Before Disney, Mr. Bollenbach was President and Chief Executive Officer of Host Marriott Corporation from 1993 to 1995, and served as Chief Financial Officer of Marriott Corporation from 1992 to 1993. From 1990 to 1992, Mr. Bollenbach was Chief Financial Officer of the Trump Organization. Mr. Bollenbach serves as a director of Time Warner Inc., Macy’s, Inc., and Mondelēz International, Inc. He previously served as a director of American International Group Inc., Moelis & Company, and Harrah’s Entertainment, Inc. Mr. Bollenbach joined the Board in 2007 and has since served as its Non-Executive Chairman. Mr. Bollenbach has several years of experience and expertise as a senior corporate executive and public company board member, including as a lead independent director, and has demonstrated exemplary leadership as Non-Executive Chairman of the Board. | ||
Timothy W. Finchem, age 68, has been Commissioner of the PGA TOUR, a membership organization for professional golfers, since 1994. He joined the TOUR staff as Vice President of Business Affairs in 1987, and was promoted to Deputy Commissioner and Chief Operating Officer in 1989. Mr. Finchem served in the White House as Deputy Advisor to the President in the Office of Economic Affairs in 1978 and 1979, and in the early 1980’s, co-founded the National Marketing and Strategies Group in Washington, D.C. He joined the Board in 2005. Mr. Finchem has demonstrated success in broadening the popularity of professional golf among the demographic groups that make up our core homebuyers, and has experience in residential community development. He also has a substantial presence in Florida, one of our key markets. | ||
Dr. Stuart A. Gabriel, age 62, is the director of the Richard S. Ziman Center for Real Estate at the University of California, Los Angeles (UCLA), and Professor of Finance and Arden Realty Chair at the UCLA Anderson School of Management. Prior to joining UCLA in 2007, he was director and Lusk Chair in Real Estate at the USC Lusk Center for Real Estate, and was Professor of Finance and Business Economics at the Marshall School of Business at the University of Southern California (USC). Dr. Gabriel serves as a director of KBS Real Estate Investment Trust, Inc., KBS Real Estate Investment Trust II, Inc. and KBS Real Estate Investment Trust III, Inc., and is a consultant to corporate and governmental entities. He holds a Ph.D. in Economics from the University of California, Berkeley. Dr. Gabriel previously served on the economics staff of the Federal Reserve Board in Washington D.C., as a visiting scholar at the Federal Reserve Bank of San Francisco, and as President of the American Real Estate and Urban Economics Association. Dr. Gabriel’s significant professional experience in and distinguished study of macroeconomics and real estate, mortgage and finance markets provides considerable knowledge and insight with respect to the economic, regulatory and financial drivers that affect housing and homebuilding at local, regional and national levels. In addition, with his nearly two decades of service in leadership roles at two of the most preeminent academic institutions in the country—UCLA and USC—he has substantial management and administrative expertise, and is highly respected for his perspective on housing and land use matters in California, an important market for us, and nationally. | ||
Dr. Thomas W. Gilligan, age 61, is the Tad and Dianne Taube Director of the Hoover Institution on War, Revolution and Peace at Stanford University, a position he was appointed to in September 2015. The Hoover Institution is a public policy research center devoted to the advanced study of economics, politics, history, and political economy, as well as international affairs. From 2008 until his appointment at the Hoover Institution, Dr. Gilligan served as the Dean of the McCombs School of Business at The University of Texas at Austin. Prior to his appointment at the McCombs School of Business, Dr. Gilligan held several key administrative roles at the Marshall School of Business at the University of Southern California (USC), including as interim Dean, as the Vice-Dean of Undergraduate Education, as director of the Ph.D. program, and as the Chair of the Finance and Business Economics Department. He is a director of Southwest Airlines Co., and has served as a consultant to businesses in the entertainment, agriculture, service and construction industries, dealing with antitrust and contract issues, as well as pricing strategies. He joined the Board in 2012. Dr. Gilligan has deep knowledge of and significant academic credentials in the fields of finance, economics and business administration, and brings extensive leadership skills and experience from his many years of service as a dean at two of the premier post-graduate business schools in the country. In addition, he is well-known and highly regarded, professionally and personally, in both Texas and California, which are key markets for us. | ||
Kenneth M. Jastrow, II, age 68, has been since 2009 the lead director of MGIC Investment Corporation, a provider of private mortgage insurance, and also serves as a director of Genesis Energy, LLC, the general partner of Genesis Energy, L.P., a publicly traded master limited partnership. He joined the KB Home Board in 2001. Mr. Jastrow previously served as the Non-Executive Chairman of Forestar Group Inc., a real estate and natural resources company, from December 2007 to September 2015 and as a director until December 2015. Mr. Jastrow has several years of experience and leadership in the paper, building products, forestry, real estate and mortgage lending industries, providing critical perspective in businesses that impact the homebuilding industry, and on sustainability practices. He also brings a significant knowledge of corporate governance matters from his service on a number of public company boards, and has a substantial presence in Texas, a key market for us. | ||
Robert L. Johnson, age 69, is founder and chairman of The RLJ Companies, an innovative business network that owns or holds interests in a diverse portfolio of companies in the consumer financial services, private equity, real estate, hospitality, professional sports, film production, gaming, and automobile dealership industries. Prior to forming The RLJ Companies in 2004, Mr. Johnson was founder and chief executive officer of Black Entertainment Television (BET), which was acquired by Viacom Inc. in 2001. He continued to serve as chief executive officer of BET until 2006. In July 2007, Mr. Johnson was named by USA Today as one of the 25 most influential business leaders of the past 25 years. Mr. Johnson currently serves on the board of directors or trustees of the Lowe’s Companies, Inc., RLJ Entertainment, Inc., RLJ Lodging Trust, and Strayer Education, Inc. He previously served as a director of RLJ Acquisition, Inc. He joined the Board in 2008. Mr. Johnson has significant experience in real estate, finance, mortgage banking and brand-building enterprises and a unique and diverse background in a number of industry sectors. He also has a substantial presence in Washington D.C. and the mid-Atlantic region, which is an important market for us. |
Melissa Lora, age 53, has been since 2013 the President of Taco Bell International, a segment of Taco Bell Corp., which is a division of Yum! Brands, Inc., one of the world’s largest restaurant companies. Ms. Lora joined Taco Bell in 1987, serving as Taco Bell Corp.’s Chief Financial Officer from 2001 to 2012, and then as its Global Chief Financial and Development Officer from 2012 to 2014. Ms. Lora also was Regional Vice President and General Manager from 1998 to 2000 for Taco Bell Corp.’s operations throughout the Northeastern United States. She joined the Board in 2004. Ms. Lora is very knowledgeable of and has substantial experience and expertise in financial matters as well as in managing real estate assets. She has made significant contributions to the work of the Audit Committee since joining the Board and has provided strong leadership as its Chair since 2008 | ||
Jeffrey T. Mezger, age 60, has been our President and Chief Executive Officer since November 2006. Prior to becoming President and Chief Executive Officer, Mr. Mezger served as our Executive Vice President and Chief Operating Officer, a position he assumed in 1999. From 1995 until 1999, Mr. Mezger held a number of executive posts in our southwest region, including Division President, Arizona Division, and Senior Vice President and Regional General Manager over Arizona and Nevada. Mr. Mezger joined us in 1993 as president of the Antelope Valley Division in Southern California. He joined the Board in 2006. He is a member of the Executive Board of the USC Lusk Center for Real Estate, is a member of the Policy Advisory Board for the Fisher Center for Real Estate and Urban Economics at the University of California, Berkeley Haas School of Business, serves as Chairman of the Policy Advisory Board for the Harvard Joint Center for Housing Studies and was the founding Chairman of the Executive Committee for the Leading Builders of America. In 2012, Mr. Mezger was inducted into the California Homebuilding Foundation Hall of Fame. As our CEO, Mr. Mezger has demonstrated dedicated and effective leadership, and ownership of our business strategy and its results. He has also established himself as a leading voice in the industry through his nearly 40 years of experience in the public homebuilding sector. | ||
Robert L. Patton, Jr., age 53, has been a partner of Guggenheim Baseball Management since 2012. He became part owner of the Los Angeles Dodgers on May 1, 2012. Mr. Patton principally operates oil and gas properties in Texas and Kansas and has additional investments in many other sectors, including ranching and insurance. He serves on the board of Security Benefit Corporation and the Advisory Council of the University of Texas, College of Liberal Arts. Mr. Patton received a B.B.A. from the University of Texas as well as a J.D. from St. Mary’s University and LLM from Southern Methodist University. Mr. Patton has several years of experience in a wide range of industries as well as in real estate development, providing significant expertise and insight on investment management, financial planning, operational execution and regulatory compliance. He also has a substantial presence in Southern California and Texas, which are key markets for us. | ||
Michael M. Wood, age 68, is Founder and Chairman of Redwood Investments LLC, a Washington, D.C. investment company established in 2005 and concentrating in media, real estate and alternative energy. From 2006-2009, Mr. Wood was the U.S. Ambassador to Sweden where he made cooperation between the U.S. and Sweden in alternative energy technology his top priority. In recognition for this work, in 2009, the King of Sweden bestowed on Mr. Wood the insignia of Commander Grand Cross, Order of the Polar Star, a medal given by Sweden’s Royal Family to people of foreign birth who make significant contributions to Sweden. Prior to becoming ambassador, Mr. Wood was co-founder and CEO of Hanley Wood LLC, the leading media company in the construction industry and one of the ten largest business-to-business media companies in the U.S. Mr. Wood is also Chairman of Winsight, LLC, a private business-to-business publishing company serving the convenience retailing, restaurant, and on-the-go food industries, and serves on the Board of Directors of Capital Partners for Education in Washington, D.C. Mr. Wood has extensive knowledge of the homebuilding industry and significant experience in real estate and alternative energy investing, providing substantial insight and expertise with respect to our business operations and longstanding commitment to sustainability. He is also a prominent and respected professional in Washington D.C., an important market for us, and has a distinguished policymaking background. |
OWNERSHIP OF KB HOME SECURITIES |
Stockholder(a) | Total Beneficial Ownership(b) | Percent of Class | Stock Options(c) | Restricted Common Stock(d) | |||
FMR LLC(e) 245 Summer Street, Boston, MA 02210 | 12,908,200 | 14.0% | — | — | |||
BlackRock, Inc.(f) 55 East 52nd Street, New York, NY 10055 | 10,308,470 | 11.2% | — | — | |||
KB Home Grantor Stock Ownership Trust(g) Wells Fargo Retirement and Trust Executive Benefits One West Fourth Street, Winston-Salem, NC 27101 | 10,135,461 | 10.7% | — | — | |||
The Vanguard Group, Inc.(h) 100 Vanguard Blvd., Malvern, PA 19355 | 5,916,507 | 6.4% | — | — | |||
Donald Smith & Co., Inc.(i) 152 West 57th Street, New York, NY 10019 | 4,603,214 | 5.0% | — | — | |||
Directors(j) | |||||||
Stephen F. Bollenbach | 207,503 | * | 144,103 | — | |||
Timothy W. Finchem | 148,378 | * | 55,350 | — | |||
Dr. Thomas W. Gilligan | 48,238 | * | 26,889 | — | |||
Kenneth M. Jastrow, II | 135,767 | * | 55,350 | — | |||
Robert L. Johnson | 138,004 | * | 93,343 | — | |||
Melissa Lora | 190,847 | * | 66,570 | — | |||
Robert L Patton, Jr. | 204,420 | * | — | — | |||
Michael M. Wood | 13,901 | * | — | — | |||
Named Executive Officers | |||||||
Jeffrey T. Mezger | 5,527,932 | 5.5% | 5,031,216 | — | |||
Jeff J. Kaminski | 463,752 | * | 357,482 | 61,572 | |||
Brian J. Woram | 477,085 | * | 351,986 | 46,403 | |||
Albert Z. Praw | 298,174 | * | 201,457 | 46,403 | |||
Nicholas S. Franklin | 29,000 | * | — | 24,000 | |||
Directors/executive officers as a group (15 people) | 8,763,927 | 8.6% | 7,079,341 | 226,307 |
(a) | Except for FMR LLC and the Grantor Stock Ownership Trust (“GSOT”), the beneficial ownership and percent of class figures for the listed stockholders are taken from their respective Schedule 13G or Schedule 13G/A filings with the SEC and reflect their respective determinations of their ownership as of December 31, 2015. The beneficial ownership and percent of class figure for FMR LLC are taken from its Schedule 13G/A filing with the SEC, as described below, and reflect its determination of its ownership at January 29, 2016. The percent of class figure for the GSOT is relative to the total number of shares of our common stock entitled to vote at the Annual Meeting, as described below under the heading “Annual Meeting, Voting and Other Information.” |
(b) | The amounts reported in this column for the directors include the following directly owned shares of our common stock: Ms. Lora 2,043; and Mr. Patton 200,000. The amounts reported in this column for the named executive officers include the following directly owned shares of our common stock: Mr. Mezger 496,716; Mr. Kaminski 44,698; Mr. Woram 78,696; Mr. Praw 50,314; and Mr. Franklin 5,000; and all executives officers as a group 812,826. |
(c) | The amounts reported in this column are the shares of our common stock that can be acquired within 60 days of February 16, 2016 through the exercise of Director SARs (as described above under the heading “Director Compensation”), or common stock option awards (for the named executive officers). These amounts are included in the |
(d) | The amounts reported in this column for the named executive officers are shares of restricted common stock. These amounts are included in the amounts reported for each named executive officer in the Total Beneficial Ownership column. |
(e) | The stock holding information is based solely on a Schedule 13G/A dated February 9, 2016 that FMR LLC, a parent holding company, filed with the SEC to report the beneficial ownership of FMR LLC and its direct and indirect subsidiaries and affiliates, and Ms. Abigail P. Johnson, a director and the vice chairman, chief executive officer and president of FMR LLC. Of the reported amount, FMR LLC and its direct and indirect subsidiaries and affiliates and Ms. Johnson had sole voting power as to 204,200 shares and had sole dispositive power as to 12,908,200 shares. A wholly-owned FMR LLC subsidiary, Fidelity Management & Research Company, an investment adviser to various investment companies, votes the shares held by the investment companies under guidelines established by its Boards of Trustees. |
(f) | The stock holding information is based solely on a Schedule 13G/A dated January 8, 2016 that BlackRock, Inc., a parent holding company, filed with the SEC to report its beneficial ownership. Of the reported amount, BlackRock, Inc. subsidiaries, collectively, had sole voting power as to 10,124,683 shares and had sole dispositive power as to 10,308,470 shares, and a subsidiary, BlackRock Fund Advisors, beneficially owned more than 5% of our outstanding shares. |
(g) | The GSOT holds these shares pursuant to a trust agreement, with Wells Fargo Bank, N.A. as trustee. Both the GSOT and the trustee disclaim beneficial ownership of the shares. Under the trust agreement, our employees who hold unexercised common stock options under our employee equity compensation plans determine the voting of the GSOT shares. The number of GSOT shares that any one employee can direct the vote of depends on how many eligible employees submit voting instructions to the trustee. Employees who are also directors cannot vote GSOT shares; therefore, Mr. Mezger cannot direct the vote of any GSOT shares. If all eligible employees submit voting instructions, our other named executive officers can direct the vote of the following amounts of GSOT shares: Mr. Kaminski 986,275; Mr. Woram 871,182; Mr. Praw 606,736; and Mr. Franklin 202,029; and all current executive officers as a group (excluding Mr. Mezger) 4,164,383. |
(h) | The stock holding information is based solely on a Schedule 13G/A dated February 10, 2016 that The Vanguard Group, Inc., an investment adviser to various investment companies (“VGI”), filed with the SEC to report its beneficial ownership. Of the reported amount, VGI had sole voting power as to 106,367 shares, had sole dispositive power as to 5,808,340 shares, had shared voting power as to 6,800 shares and had shared dispositive power as to 108,167 shares. Vanguard Fiduciary Trust Company and Vanguard Investments Australia, Ltd., each VGI subsidiaries, beneficially own 101,367 and 11,800 shares, respectively. |
(i) | The stock holding information is based solely on a Schedule 13G dated February 8, 2016 that Donald Smith & Co., Inc., an investment adviser to various institutional clients, filed with the SEC to report its beneficial ownership and beneficial ownership on behalf of the Donald Smith Long/Short Equities Fund, L.P., a partnership. Of the reported amount, Donald Smith & Co., Inc. had sole voting power as to 3,757,823 shares and had sole dispositive power as to 4,603,214 shares. The Donald Smith Long/Short Equities Fund, L.P. had sole voting power as to 14,974 shares and had sole dispositive power as to 4,603,214 shares. |
(j) | Ms. Lora holds the amount reported for her in the Total Beneficial Ownership column in a trust in which she and her spouse are trustees and beneficiaries and over which they jointly exercise voting and investment power. Mr. Wood holds the amount reported for him in the Total Beneficial Ownership column in a trust in which he and his spouse are trustees and over which they jointly exercise voting and investment power, and he is the sole beneficiary as to the reported securities. Dr. Gabriel does not beneficially own any shares of our common stock. |
COMPENSATION DISCUSSION AND ANALYSIS |
Our Named Executive Officers (“NEOs”) Jeffrey T. Mezger President and Chief Executive Officer Jeff J. Kaminski Executive Vice President and Chief Financial Officer Brian J. Woram Executive Vice President and General Counsel Albert Z. Praw Executive Vice President, Real Estate and Business Development Nicholas S. Franklin Executive Vice President, Strategic Operations | 2015 Performance Highlights As a national homebuilder, we operate in a dynamic, complex and challenging business environment, and we produced robust results in 2015 against our aggressive performance goals. These results were achieved across several short-term and long-term financial, operating and strategic metrics, and demonstrate strong growth compared to a year ago as well as over the last three years. | ||||
Short-Term Operating Results | Total Revenues Homebuilding Operating Income Total Pretax Income | ñ | 26.0% 20.0% 34.0% | ||
Strategic Performance Indicators | |||||
Annual Net Orders Year-End Backlog Value | ñ | 22.0% 40.0% | |||
Long-Term Performance Results | 3-Yr. Revenue Growth 3-Yr. Cumulative Operating Income 3-Yr. Cumulative Net Income | Up | 94.0% $371M $1.04B | ||
2015 CEO Compensation Summary • Our CEO’s base salary has remained the same since 2006. • Our CEO’s performance-based and formula-driven 2015 annual cash incentive payout of ~$2.49M was higher than his 2014 payout, driven by our increased pretax profitability in 2015. • Our CEO earned 149% of his target award, or ~$1.49M, under a 2012 three-year performance cash program, based on our generating over $507M of adjusted operating income during the performance period. • Our CEO’s 2015 long-term incentives were solely performance-oriented equity awards — performance-based restricted stock units (“PSUs”) and common stock options. The PSUs comprised more than 50% of the total grant date fair value, and the total grant date fair value was 31% lower than in 2014. | Pay for Performance | ||||
Our CEO’s compensation decreased in 2015, primarily due to a reduction in his long-term incentives, demonstrating alignment with total stockholder return (“TSR”). | |||||
2015 Say On Pay Result — 87% Approval Our stockholders were highly supportive of our executive pay program at our 2015 Annual Meeting. As a result, we have not materially changed our program, though we have taken several actions based on stockholder feedback. | Total Year-Over-Year CEO Compensation Down ~15% Total 2015 Pay: $8,856,923 ~90% performance-based Total 2014 Pay: $10,349,483 ~90% performance-based |
Topic | Stockholder Feedback | Action Taken |
CEO Long-Term Incentive Grant | The CEO’s total grant value in 2014 was too large or increased too much from the prior-year grant. | Reduced our CEO’s 2015 total grant date fair value by 31% from 2014. |
Long-Term Incentive Measures | Provide more information about performance goals. | Additional disclosure on performance goals is provided below under the heading “Long-Term Incentives.” |
Short-Term Incentive Measures | • Remove revenue as a stand-alone performance measure.• Minimize use of subjective components. | • Revenue is not a measure in the 2015 or 2016 annual incentive plans.• Plan funding is formula-based and payout decisions are more transparent. |
Stock Ownership Requirements | Remove 10%/year for 5 years reduction in required ownership for executives who reach age 60. | Eliminated the reduction feature from the stock ownership requirements. |
Tax Restoration Payments | Maintain 2011 policy not to provide tax restoration payment benefits to newly hired executives. | Did not extend tax restoration payment benefits to Executive Vice President hired during 2015. |
KEY FEATURES OF OUR EXECUTIVE COMPENSATION PROGRAMS | |||
What We Do | What We Don’t Do | ||
ü | Engage with and consider stockholder input in designing our executive pay programs. | × | Do not allow re-pricing of stock options without stockholder approval. |
ü | Grant all of our CEO’s total long-term incentives in performance-oriented vehicles. | × | Do not provide new tax “gross-ups” to any officer or employee. |
ü | Perform under Compensation Committee oversight, annual risk assessments to determine that our employee compensation policies and programs are not likely to have a material adverse effect on us. | × | Do not, without stockholder approval, enter into new severance arrangements with executive officers above the limits specified in a longstanding policy, as described below under the heading “Severance Arrangements.” |
ü | Link annual NEO incentive pay to objective, pre-established financial performance goals. | × | Do not allow our NEOs (or any employees or non-employee directors) to hedge or pledge their holdings of our securities. |
ü | Engage at the sole direction of the Compensation Committee an independent compensation consultant. | × | Do not provide perquisites to our NEOs beyond those offered to all employees, other than market-competitive medical, dental and vision benefits and the opportunity to participate in a deferred compensation plan. |
ü | Maintain stock ownership requirements for all NEOs. | ||
ü | Maintain a relevant peer group. | ||
ü | Maintain clawback policies consistent with the Sarbanes-Oxley Act of 2002 and the 2010 Dodd-Frank Wall Street Reform Act (when effective). |
REWARD TYPE | DESCRIPTION | RATIONALE | |
BASE SALARY | • Fixed compensation delivered in cash on a semi-monthly basis. | • A market-aligned component of the overall pay package to provide a baseline level of pay; key to attracting and retaining highly-qualified executives. | |
ANNUAL INCENTIVE PROGRAM | • The funding of our NEOs’ 2015 annual incentives was formula-driven, based on pretax income and asset efficiency measures. | • Motivates achievement of key short-term financial results. | |
LONG-TERM INCENTIVE PROGRAM | Performance-Based Restricted Stock Units | • 52% of total grant date fair value for our CEO, and nearly 20% for our other NEOs. • 2015 grants have three, long-term performance measures: three-year cumulative earnings per share, three-year average return on invested capital, and three-year revenue growth versus our peer group. | • Focuses executives on achievement of long-term operating results. • Establishes strong alignment with long-term stockholder interests through performance-based payouts in shares of our common stock. |
Stock Options | • 48% of total grant date fair value for our CEO and approximately 50% for our other NEOs. | • Value realized only with share price appreciation, which is strongly influenced by performance. | |
Restricted Stock | • Approximately 30% of total grant date fair value for our NEOs other than our CEO. | • Encourages retention and provides additional alignment with stockholder interests in conjunction with stock ownership requirements. | |
RETIREMENT PROGRAMS AND PERQUISITES | • A 401(k) plan in which all eligible employees may participate. • Legacy executive retirement and death benefit plans have been closed to new participants for over a decade. • Market-competitive medical, dental and vision benefits and the opportunity to participate in a deferred compensation plan. | • Programs are aligned with market practices. • Focuses executives on earning rewards through performance pay elements, not through entitlements. |
CEO Long-Term Incentives Intrinsic Value | ||||||||||||||
Grant Year | Grant Price | Grant Date Fair Value | Intrinsic Value at November 30, 2015 | Intrinsic Value Relative to Grant Date Fair Value | ||||||||||
2015 | $ | 14.92 | $ | 3,812,763 | $ | 1,873,970 | 49% | |||||||
2014 | 14.62 | 5,500,000 | 2,756,314 | 50% | ||||||||||
2013 | 16.63 | 2,707,660 | 1,409,000 | 52% | ||||||||||
Three-Year Total | $ | 12,020,423 | $ | 6,039,284 | 50% |
2015 API Performance Levels and Payout Summary | |||
Threshold | Target | Actual Result | |
API Performance Levels | $137.3 million | $183.0 million | $166.5 million |
API Performance Levels Relative to Target | 75% | 100% | 91% |
Payout Level Ratios | 50% | 100% | 82% |
2015 Asset Efficiency Performance Pool Potential Payout Ranges | |
Position | Potential Payout Range (Percent of Total Pool Funding) |
CEO | 43% — 50% |
Other NEOs | 12% — 15% |
NEO | 2015 NEO Individual Performance Contributions | IPF |
Mr. Mezger | Mr. Mezger provided outstanding leadership in setting and driving performance against our top strategic objectives. In 2015, our year-over-year pretax income grew by 34%, ending backlog value rose by 40%, and net orders grew by 22%. Mr. Mezger also played a critical role in promoting the continued enhancement of the KB Home brand as a leader in innovation in sustainable building practices. | 47.0% |
Mr. Kaminski | Mr. Kaminski oversaw the successful completion of a comprehensive three-year strategic plan that measurably enhanced our capital structure and liquidity. He continued his strong leadership in managing our balance sheet through refinancing senior notes and expanding our revolving credit facility. In addition, he drove further improvements in our operating divisions’ financial performance. | 14.8% |
Mr. Woram | In 2015, Mr. Woram’s major accomplishments included successes in transactional support, litigation management and significant litigation cost recoveries via mediations and settlements. He continued to provide strong oversight to our legal team, and he was successful in strategically addressing risk mitigation opportunities in our business. | 12.3% |
Mr. Praw | Mr. Praw led our efforts in driving land investment and community count growth through successful land acquisitions, allowing us to achieve nearly 14% year-over-year growth in deliveries in 2015 and positioning us to meet our 2016 delivery goals. He also drove asset optimization strategies to balance our portfolios in several markets, resulting in more than $110 million of land sale revenues in 2015. | 13.0% |
Mr. Franklin | Mr. Franklin joined our team during 2015. Since joining, he has driven greater coordination across key corporate functions, improving efficiency and support for our operating divisions. In addition, he assumed operational leadership responsibilities for a significant division within our Southern California homebuilding business and was paid a bonus of $106,400 for that contribution. | N/A |
2015 Annual Incentive Program Payout Levels and Actual Payouts | |||||||||||||||||||||
NEO | Target | Maximum | API Performance Component Payout(a) | Asset Efficiency Component Payout | Total Payout | ||||||||||||||||
Mr. Mezger | $ | 1,500,000 | $ | 6,000,000 | $ | 1,230,000 | $ | 1,258,297 | $ | 2,488,297 | |||||||||||
Mr. Kaminski | 665,000 | 1,995,000 | 545,300 | 394,891 | 940,191 | ||||||||||||||||
Mr. Woram | 560,000 | 1,120,000 | 459,200 | 327,960 | 787,160 | ||||||||||||||||
Mr. Praw | 550,000 | 1,100,000 | 451,000 | 348,039 | 799,039 | ||||||||||||||||
Mr. Franklin | 480,000 | 960,000 | 393,600 | — | 393,600 |
NEO Long-Term Incentives Granted in 2015 | |||||||||||||||||||||
NEO | PSUs | Restricted Stock | Stock Options | Total ($) | |||||||||||||||||
# | $ | # | $ | # | $ | ||||||||||||||||
Mr. Mezger | 133,000 | $ | 1,984,360 | — | $ | — | 333,000 | $ | 1,828,403 | $ | 3,812,763 | ||||||||||
Mr. Kaminski | 14,000 | 208,880 | 24,000 | 358,080 | 115,000 | 631,431 | 1,198,391 | ||||||||||||||
Mr. Woram | 10,000 | 149,200 | 18,000 | 268,560 | 80,000 | 439,256 | 857,016 | ||||||||||||||
Mr. Praw | 10,000 | 149,200 | 18,000 | 268,560 | 80,000 | 439,256 | 857,016 | ||||||||||||||
Mr. Franklin | 14,000 | 208,880 | 24,000 | 358,080 | 115,000 | 631,431 | 1,198,391 |
• Cumulative Earnings Per Share (“EPS”): | 50% weight, measures our profitability trajectory over the three-year period |
• Average Return on Invested Capital (“ROIC”): | 20% weight, measures our profitability relative to the capital deployed |
• Revenue Growth Rank Versus Peers: | 30% weight, measures our ability to grow our top-line relative to our peers |
Performance Measure | PSU Year | Threshold Goal | Target Goal | Maximum Goal |
Average ROE | 2013 | 10.0% | 15.0% | 20.0% |
Cumulative EPS | 2014 | $2.52 | $3.04 | $4.00 |
2015 | $2.73 | $3.31 | $4.36 | |
Average ROIC | 2014 | 2.8% | 3.3% | 4.0% |
2015 | 3.0% | 3.5% | 4.3% |
Performance Measure | Performance (Rank) | Target Award Multiplier |
Relative Revenue Growth Applies to 2013, 2014 and 2015 PSUs (Adjustments to ranking levels and multipliers will be made if there are changes in the peer group composition over time, per the terms of the PSUs) | First or Second | 200% |
3 | 178% | |
4 | 156% | |
5 | 134% | |
6 | 113% | |
7 | 90% | |
8 | 67% | |
9 | 44% | |
10 | 21% | |
Bottom 2 | 0% |
2012 PSU Award Determinations | |||
Performance Measure | Average Annual Performance | Aggregate Total Performance | Target Award Multiplier |
ROE (60% weight) | 33.4% | N/A | 200% |
Relative Revenue Growth (40% weight) | N/A | 6th out of 12 peer companies | 113% |
Cumulative Multiplier | 165% |
2012 PSU Awards | ||
NEO | Target Award(#) | Actual Award(#) |
Mr. Mezger | 152,495 | 251,617 |
Mr. Kaminski | 17,868 | 29,482 |
Mr. Woram | 16,636 | 27,449 |
Mr. Praw | 16,636 | 27,449 |
2012 Performance Cash Awards – Measures, Goals and Results | |||||
Financial Performance Measure | Performance Goals | Actual Performance Result | Actual Payout Result to Target | ||
Threshold | Target | Maximum | |||
Adjusted Operating Income, FY13 | $68.0 million | $100.0 million | $116.0 million | $128.8 million | 200% |
Adjusted Operating Income, FY14 | $149.0 million | $170.0 million | $191.0 million | $189.0 million | 182% |
Adjusted Operating Income, FY15 | $159.8 million | $213.0 million | $239.6 million | $189.7 million | 69% |
Total | 150% |
2012 Performance Cash Award Payouts | ||||||
NEO | Target | Overall Payment | ||||
Mr. Mezger | $ | 1,000,000 | $ | 1,486,667 | ||
Mr. Kaminski | 300,000 | 446,000 | ||||
Mr. Woram | 270,000 | 401,400 | ||||
Mr. Praw | 270,000 | 401,400 |
Our Peer Group | ||
• Beazer Homes • Hovnanian Enterprises • M/I Homes • PulteGroup | • CalAtlantic Group • Lennar Corporation • Meritage Homes • Toll Brothers | • DR Horton • MDC Holdings • NVR Incorporated |
Executive Position | Ownership Guideline |
CEO | 6.0 times base salary |
Other NEOs | 2.0 times base salary |
MANAGEMENT DEVELOPMENT AND COMPENSATION COMMITTEE REPORT |
Management Development and Compensation Committee | ||||
Kenneth M. Jastrow, II, Chair | Stephen F. Bollenbach | Timothy W. Finchem | Robert L. Johnson | Melissa Lora |
Name and Principal Position | Fiscal Year | Salary ($)(a) | Bonus ($)(b) | Stock Awards ($)(c) | Option Awards ($)(c) | Non-Equity Incentive Plan Compensation ($)(d) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(e) | All Other Compensation ($)(f) | Total ($) | ||||||||||||||||
Jeffrey T. Mezger President and Chief Executive Officer | 2015 | $ | 1,000,000 | $ | — | $ | 1,984,360 | $ | 1,828,403 | $ | 3,974,964 | $ | — | $ | 69,196 | $ | 8,856,923 | ||||||||
2014 | 1,000,000 | 125,000 | 2,860,000 | 2,640,000 | 2,824,750 | 830,924 | 68,809 | 10,349,483 | |||||||||||||||||
2013 | 1,000,000 | 500,000 | 1,663,000 | 1,044,660 | 2,725,500 | — | 67,884 | 7,001,044 | |||||||||||||||||
Jeff J. Kaminski Executive Vice President and Chief Financial Officer | 2015 | 656,250 | — | 566,960 | 631,431 | 1,386,191 | — | 51,156 | 3,291,988 | ||||||||||||||||
2014 | 620,833 | 62,500 | 550,000 | 550,000 | 1,280,316 | — | 47,459 | 3,111,108 | |||||||||||||||||
2013 | 570,833 | 260,000 | 498,900 | 348,220 | 952,200 | — | 45,848 | 2,676,001 | |||||||||||||||||
Brian J. Woram Executive Vice President and General Counsel | 2015 | 554,166 | — | 417,760 | 439,256 | 1,188,560 | — | 44,731 | 2,644,473 | ||||||||||||||||
2014 | 544,167 | 62,500 | 387,500 | 387,500 | 1,144,114 | — | 43,459 | 2,569,240 | |||||||||||||||||
2013 | 531,250 | 242,000 | 415,750 | 271,612 | 800,820 | — | 42,356 | 2,303,788 | |||||||||||||||||
Albert Z. Praw Executive Vice President, Real Estate and Business Development | 2015 | 541,250 | — | 417,760 | 439,256 | 1,200,439 | — | 43,803 | 2,642,508 | ||||||||||||||||
2014 | 529,167 | 62,500 | 387,500 | 387,500 | 1,123,683 | — | 42,979 | 2,533,329 | |||||||||||||||||
2013 | 510,417 | 100,000 | 415,750 | 271,612 | 780,675 | — | 12,376 | 2,090,830 | |||||||||||||||||
Nicholas S. Franklin Executive Vice President, Strategic Operations | 2015 | 379,615 | 106,400 | 566,960 | 631,431 | 393,600 | — | 22,861 | 2,100,867 |
(a) | Salary. As discussed above under the heading “Base Salaries,” the annual base salaries of our NEOs other than our CEO and Mr. Franklin were increased in July 2015 to the following levels: Mr. Kaminski $665,000; Mr. Woram $560,000; and Mr. Praw $550,000. Mr. Franklin joined us on April 4, 2015, with an annual base salary of $600,000. The salary amount reported in the table reflects what he was paid in 2015 after his hire. |
(b) | Bonus. In 2015, Mr. Franklin received a bonus in recognition of his assuming additional operational leadership responsibilities for a significant division within our Southern California homebuilding business. For 2014, these amounts reflect additional payments related to a 2011 performance cash award program. For 2013, these amounts reflect payments |
(c) | Stock Awards and Option Awards. These amounts represent the aggregate grant date fair value of stock awards (consisting of both restricted stock and PSUs) and option awards (consisting of common stock options) computed as described in Note 19. Employee Benefit and Stock Plans in the Notes to the Consolidated Financial Statements in our Annual Report, except that estimates of forfeitures related to service-based vesting conditions have been disregarded. They do not represent realized compensation. The 2015 stock awards represent the grant date fair value of restricted stock and the probable award of shares of our common stock underlying the PSUs granted. The grant date fair value of the PSUs if maximum performance is achieved is as follows: Mr. Mezger $3,968,720; Mr. Kaminski $417,760; Mr. Woram $298,400; Mr. Praw $298,400; and Mr. Franklin $417,760. |
(d) | Non-Equity Incentive Plan Compensation. The amounts for 2015 include the sum of 2015 annual incentive and 2012 performance cash award payouts, as applicable. The amounts for 2014 include the same two types of compensation elements. The 2013 amounts reflect only annual incentive payouts. The table below summarizes each component for 2014 and 2015. |
NEO | Year | Annual Incentive Payout | Performance Cash Award Payout | Total Non-Equity Incentive Plan Compensation | ||||||
Mr. Mezger | 2015 | $ | 2,488,297 | $ | 1,486,667 | $ | 3,974,964 | |||
2014 | 2,034,750 | 790,000 | 2,824,750 | |||||||
Mr. Kaminski | 2015 | 940,191 | 446,000 | 1,386,191 | ||||||
2014 | 885,316 | 395,000 | 1,280,316 | |||||||
Mr. Woram | 2015 | 787,160 | 401,400 | 1,188,560 | ||||||
2014 | 749,114 | 395,000 | 1,144,114 | |||||||
Mr. Praw | 2015 | 799,039 | 401,400 | 1,200,439 | ||||||
2014 | 728,683 | 395,000 | 1,123,683 | |||||||
Mr. Franklin | 2015 | 393,600 | — | 393,600 |
(e) | Change in Pension Value and Nonqualified Deferred Compensation Earnings. These amounts (as applicable) reflect the increase in the actuarial present value of accumulated benefits under our Retirement Plan. These changes are tied to interest rate fluctuations and do not reflect any cash or other compensation received by Mr. Mezger. The respective amounts attributed to the change in actuarial present value in 2015, 2014 and 2013 were $(84,667), $830,924 and $(709,566). |
(f) | All Other Compensation. The amounts shown consist only of the following items — no other perquisites were provided to our NEOs: |
• | 401(k) Plan and DCP Matching Contributions. The respective aggregate 2015, 2014 and 2013 401(k) Plan and DCP matching contributions we made to our NEOs were as follows: Mr. Mezger $55,900, $55,600 and $55,300; Mr. Kaminski $39,375, $35,750 and $32,425; Mr. Woram $32,950, $31,750 and $28,613; Mr. Praw $32,475, $29,125 and $0; and Mr. Franklin $15,900, $0 and $0. |
• | Premium Payments. The respective aggregate premiums we paid for our NEOs in 2015, 2014 and 2013 on supplemental medical expense reimbursement plans and life insurance policies, as described above under the heading “Other Benefits,” were as follows: Mr. Mezger $13,296, $13,209 and $12,582; Mr. Kaminski $11,781, $11,709 and $11,099; Mr. Woram $11,781, $11,709 and $11,099; Mr. Praw $11,328, $11,241 and $10,614; and Mr. Franklin $6,961, $0 and $0. |
Name | Grant Date(a) | Type of Award | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards | Estimated Possible Payouts Under Equity Incentive Plan Awards(b) | All Other Stock Awards: Number of Shares of Stock or Units (#) | All Other Option Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Option Awards ($)(c) | |||||||||||||||||||
Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | ||||||||||||||||||||||
Mr. Mezger | 2/11/2015 | Annual Incentive | $ | 750,000 | $ | 1,500,000 | $ | 6,000,000 | |||||||||||||||||||
10/8/2015 | PSUs | 31,255 | 133,000 | 266,000 | $ | 1,984,360 | |||||||||||||||||||||
10/8/2015 | Stock Options | 333,000 | $ | 14.92 | 1,828,403 | ||||||||||||||||||||||
Mr. Kaminski | 2/11/2015 | Annual Incentive | 332,500 | 665,000 | 1,995,000 | ||||||||||||||||||||||
10/8/2015 | PSUs | 3,290 | 14,000 | 28,000 | 208,880 | ||||||||||||||||||||||
10/8/2015 | Restricted Stock | 24,000 | 358,080 | ||||||||||||||||||||||||
10/8/2015 | Stock Options | 115,000 | 14.92 | 631,431 | |||||||||||||||||||||||
Mr. Woram | 2/11/2015 | Annual Incentive | 280,000 | 560,000 | 1,120,000 | ||||||||||||||||||||||
10/8/2015 | PSUs | 2,350 | 10,000 | 20,000 | 149,200 | ||||||||||||||||||||||
10/8/2015 | Restricted Stock | 18,000 | 268,560 | ||||||||||||||||||||||||
10/8/2015 | Stock Options | 80,000 | 14.92 | 439,256 | |||||||||||||||||||||||
Mr. Praw | 2/11/2015 | Annual Incentive | 275,000 | 550,000 | 1,100,000 | ||||||||||||||||||||||
10/8/2015 | PSUs | 2,350 | 10,000 | 20,000 | 149,200 | ||||||||||||||||||||||
10/8/2015 | Restricted Stock | 18,000 | 268,560 | ||||||||||||||||||||||||
10/8/2015 | Stock Options | 80,000 | 14.92 | 439,256 | |||||||||||||||||||||||
Mr. Franklin | 4/14/2015 | Annual Incentive | 240,000 | 480,000 | 960,000 | ||||||||||||||||||||||
10/8/2015 | PSUs | 3,290 | 14,000 | 28,000 | 208,880 | ||||||||||||||||||||||
10/8/2015 | Restricted Stock | 24,000 | 358,080 | ||||||||||||||||||||||||
10/8/2015 | Stock Options | 115,000 | 14.92 | 631,431 |
(a) | Grant Date. The date shown for each award is the date the Compensation Committee approved the award. |
(b) | Estimated Possible Payouts Under Equity Incentive Plan Awards. If there is a payout of the PSUs, “Threshold” represents the lowest possible payout if threshold performance is achieved for each performance measure, and “Maximum” reflects the highest possible payout (200% of the target award of shares granted). The performance measures are described above under the heading “Performance-Based Restricted Stock Units.” If threshold performance is not achieved on all three measures, the NEOs will not receive any payout of the PSUs. |
(c) | Grant Date Fair Value of Stock and Option Awards. The grant date fair value for each award is computed as described in footnote (c) to the Summary Compensation Table. The 2015 stock awards represent the grant date fair value of restricted stock and the probable award of shares of our common stock underlying the PSUs granted as of the grant date. |
Name | Grant Date | Option Awards | Stock Awards | |||||||||||||||||||||
Number of Securities Underlying Unexercised Options Exercisable (#) | Number of Securities Underlying Unexercised Options Unexercisable (#)(a) | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#)(b) | Market Value of Shares or Units of Stock That Have Not Vested ($)(c) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(d) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(d) | ||||||||||||||||
Mr. Mezger | 10/30/2001 | 431,122 | $ | 13.95 | 10/30/2016 | |||||||||||||||||||
10/30/2001 | 68,878 | 13.95 | 10/30/2016 | |||||||||||||||||||||
2/13/2002 | 102,090 | 20.07 | 2/13/2017 | |||||||||||||||||||||
5/8/2002 | 44,516 | 25.63 | 5/8/2017 | |||||||||||||||||||||
10/7/2002 | 400,000 | 21.51 | 10/7/2017 | |||||||||||||||||||||
10/24/2003 | 74,667 | 33.24 | (e) | 10/24/2018 | ||||||||||||||||||||
10/24/2003 | 149,333 | 34.05 | (e) | 10/24/2018 | ||||||||||||||||||||
10/22/2004 | 80,750 | 40.90 | 10/22/2019 | |||||||||||||||||||||
10/22/2004 | 119,250 | 40.90 | 10/22/2019 | |||||||||||||||||||||
7/12/2007 | 325,050 | 36.19 | 11/30/2016 | (f) | ||||||||||||||||||||
7/12/2007 | 325,050 | 36.19 | 7/12/2017 | |||||||||||||||||||||
10/4/2007 | 137,500 | 28.10 | 10/4/2017 | |||||||||||||||||||||
10/1/2009 | 489,258 | 15.44 | 10/1/2019 | |||||||||||||||||||||
8/13/2010 | 397,818 | 19.90 | 10/2/2018 | (g) | ||||||||||||||||||||
10/7/2010 | 240,000 | 11.06 | 10/7/2020 | |||||||||||||||||||||
10/7/2010 | 260,000 | 11.06 | 10/7/2020 | |||||||||||||||||||||
11/9/2010 | 412,500 | 28.10 | 10/4/2017 | (g) | ||||||||||||||||||||
10/6/2011 | 335,000 | 6.32 | 10/6/2021 | |||||||||||||||||||||
10/6/2011 | 365,000 | 6.32 | 10/6/2021 | |||||||||||||||||||||
11/8/2012 | 251,617 | $ | 3,545,284 | |||||||||||||||||||||
10/10/2013 | 100,000 | 50,000 | 16.63 | 10/10/2023 | ||||||||||||||||||||
10/10/2013 | 100,000 | $ | 1,409,000 | |||||||||||||||||||||
10/9/2014 | 173,434 | 346,866 | 14.62 | 10/9/2024 | ||||||||||||||||||||
10/9/2014 | 195,622 | 2,756,314 | ||||||||||||||||||||||
10/8/2015 | 333,000 | 14.92 | 10/8/2025 | |||||||||||||||||||||
10/8/2015 | 133,000 | 1,873,970 | ||||||||||||||||||||||
Mr. Kaminski | 7/15/2010 | 45,017 | 11.26 | 7/15/2020 | ||||||||||||||||||||
10/7/2010 | 118,000 | 11.06 | 10/7/2020 | |||||||||||||||||||||
10/6/2011 | 125,000 | 6.32 | 10/6/2021 | |||||||||||||||||||||
11/8/2012 | 29,482 | 415,401 | ||||||||||||||||||||||
10/10/2013 | 33,333 | 16,667 | 16.63 | 10/10/2023 | ||||||||||||||||||||
10/10/2013 | 15,000 | 211,350 | 15,000 | 211,350 | ||||||||||||||||||||
10/9/2014 | 36,132 | 72,264 | 14.62 | 10/9/2024 | ||||||||||||||||||||
10/9/2014 | 22,572 | 318,039 | 15,048 | 212,026 | ||||||||||||||||||||
10/8/2015 | 115,000 | 14.92 | 10/8/2025 | |||||||||||||||||||||
10/8/2015 | 24,000 | 338,160 | 14,000 | 197,260 |
Name | Grant Date | Option Awards | Stock Awards | |||||||||||||||||||||
Number of Securities Underlying Unexercised Options Exercisable (#) | Number of Securities Underlying Unexercised Options Unexercisable (#)(a) | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#)(b) | Market Value of Shares or Units of Stock That Have Not Vested ($)(c) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(d) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(d) | ||||||||||||||||
Mr. Woram | 7/15/2010 | 79,529 | 11.26 | 7/15/2020 | ||||||||||||||||||||
10/7/2010 | 111,000 | 11.06 | 10/7/2020 | |||||||||||||||||||||
10/6/2011 | 110,000 | 6.32 | 10/6/2021 | |||||||||||||||||||||
11/8/2012 | 27,449 | $ | 386,756 | |||||||||||||||||||||
10/10/2013 | 26,000 | 13,000 | 16.63 | 10/10/2023 | ||||||||||||||||||||
10/10/2013 | 12,500 | 176,125 | 12,500 | $ | 176,125 | |||||||||||||||||||
10/9/2014 | 25,457 | 50,913 | 14.62 | 10/9/2024 | ||||||||||||||||||||
10/9/2014 | 15,903 | 224,073 | 10,602 | 149,382 | ||||||||||||||||||||
10/8/2015 | 80,000 | 14.92 | 10/8/2025 | |||||||||||||||||||||
10/8/2015 | 18,000 | 253,620 | 10,000 | 140,900 | ||||||||||||||||||||
Mr. Praw | 10/6/2011 | 150,000 | 6.32 | 10/6/2021 | ||||||||||||||||||||
11/8/2012 | 27,449 | 386,756 | ||||||||||||||||||||||
10/10/2013 | 26,000 | 13,000 | 16.63 | 10/10/2023 | ||||||||||||||||||||
10/10/2013 | 12,500 | 176,125 | 12,500 | 176,125 | ||||||||||||||||||||
10/9/2014 | 25,457 | 50,913 | 14.62 | 10/9/2024 | ||||||||||||||||||||
10/9/2014 | 15,903 | 224,073 | 10,602 | 149,382 | ||||||||||||||||||||
10/8/2015 | 80,000 | 14.92 | 10/8/2025 | |||||||||||||||||||||
10/8/2015 | 18,000 | 253,620 | 10,000 | 140,900 | ||||||||||||||||||||
Mr. Franklin | 10/8/2015 | 115,000 | 14.92 | 10/8/2025 | ||||||||||||||||||||
10/8/2015 | 24,000 | 338,160 | 14,000 | 197,260 |
(a) | Number of Securities Underlying Unexercised Options-Unexercisable. Stock option awards generally vest in equal installment amounts (i.e., ratably) over a three-year period. |
(b) | Number of Shares or Units of Stock That Have Not Vested. Includes restricted stock grants and the shares of our common stock the Compensation Committee approved for grant on February 12, 2016 pursuant to the 2012 PSUs based on our performance through the end of the three-year performance period, as described above under the heading “2012 PSU Awards.” Upon their approval for grant to the recipients, the earned 2012 PSU-related shares became fully vested, with no restrictions on transferability or otherwise. The restricted stock awards granted in 2013 and 2014 will vest at the conclusion of the three-year vesting period from the grant date. The 2015 restricted stock awards will vest in three equal annual installments on October 25, 2016, 2017 and 2018. |
(c) | Market Value of Shares That Have Not Vested. The market value shown is based on the price of our common stock on November 30, 2015, which was $14.09. |
(d) | Equity Incentive Plan Awards: Number and Market Value of Unearned Units. The awards shown are the PSUs granted to our NEOs in 2013, 2014 and 2015, reflecting target award amounts as of November 30, 2015 and the market price of our common stock on November 30, 2015, which was $14.09. These PSUs will vest based on our achievement of certain performance measures over an applicable three-year performance period. |
(e) | As a result of an internal review of our employee stock option grant practices in 2006, we adjusted the exercise prices of certain of our employee stock options in order to comply with Section 409A of the Code. The exercise price for a certain portion of the stock option grant made on October 24, 2003 was not adjusted. |
(f) | The expiration date for these stock options is set under Mr. Mezger’s Employment Agreement. |
(g) | Through participation in two exchange offers that we conducted in 2010, these common stock options replaced cash-settled stock appreciation right awards that had been previously granted to the NEO as long-term incentives. Each common stock option has an exercise price equal to the replaced award’s exercise price, and the same number of underlying shares, vesting schedule and expiration date as each replaced award. The exchange offers did not include a re-pricing or any other changes impacting the value of the awards to the NEO, no additional grants or awards were made to the NEO, and the issuance of the common stock options did not result in any incremental fair value to the NEO. |
Name | Option Awards | Stock Awards | ||||||||
Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#)(a) | Value Realized on Vesting ($)(b) | |||||||
Mr. Mezger | — | $ | — | — | $ | — | ||||
Mr. Kaminski | — | — | 4,826 | 64,041 | ||||||
Mr. Woram | — | — | 4,826 | 64,041 | ||||||
Mr. Praw | — | — | 4,826 | 64,041 | ||||||
Mr. Franklin | — | — | — | — |
(a) | Number of Shares Acquired on Vesting. The shares reported reflect the total number of shares each NEO acquired upon the vesting of one-third of a restricted stock grant made on November 8, 2012. |
(b) | Value Realized on Vesting. The amount shown is the total gross dollar value realized upon the vesting of the restricted stock described above in footnote (a) to this table. Due to tax withholding obligations, however, the NEOs actually realized a lower total value. |
Name* | Plan Name | Number of Years Credited Service (#)(a) | Present Value of Accumulated Benefit ($)(b) | Payments During Last Fiscal Year ($) | ||||
Mr. Mezger | Retirement Plan | 22 | $ | 10,046,734 | $ | — |
(a) | Number of Years of Credited Service. This is as of the valuation date. As of November 30, 2015, Mr. Mezger is fully vested in his respective Retirement Plan benefit. |
(b) | Present Value of Accumulated Benefit. This amount represents the actuarial present value of the total retirement benefit that would be payable to Mr. Mezger under the Retirement Plan as of November 30, 2015. The payment of Retirement Plan benefits is described above under the heading “Retirement Programs.” The following key actuarial assumptions and methodologies were used to calculate this present value: the base benefit is assumed to begin as of the earliest possible date (generally the later of age 55 or the tenth anniversary of the commencement of participation); the base benefit is adjusted by past and future cost of living adjustments including no increase for fiscal year ending November 30, 2016 and an assumed 2.5% increase thereafter, until the last benefits are paid. The discount rate used to calculate the present value of the accumulated benefit shown in table was 3.59%. Mr. Mezger is entitled to receive a lump sum payment of the actuarial value (as specified under the Retirement Plan) of his plan benefits in the event of a change in control or death. If any such event occurred on November 30, 2015, the payment to Mr. Mezger would be $11,067,404 using a 2.57% Applicable Federal Rate discount rate, as specified under the Retirement Plan. |
* | Messrs. Kaminski, Woram, Praw and Franklin are not participants in the Retirement Plan, as the plan was open for a limited period of time and closed to new participants in 2004. |
Name | Executive Contributions in Last Fiscal Year ($)(a) | Registrant Contributions in Last Fiscal Year ($)(b) | Aggregate Earnings in Last Fiscal Year ($)(c) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last Fiscal Year End ($)(d) | ||||||||||
Mr. Mezger | $ | 40,000 | $ | 40,000 | $ | 33,334 | $ | — | $ | 1,531,532 | |||||
Mr. Kaminski | 39,375 | 23,475 | 775 | — | 203,039 | ||||||||||
Mr. Woram | 33,250 | 17,350 | (4,382 | ) | — | 263,580 | |||||||||
Mr. Praw | 42,408 | 16,575 | 1,542 | — | 106,263 | ||||||||||
Mr. Franklin | — | — | — | — | — |
(a) | Executive Contributions in Last Fiscal Year. These amounts reflect compensation the NEOs earned in 2015 that they have voluntarily deferred and are included in the Summary Compensation Table. |
(b) | Registrant Contributions in Last Fiscal Year. These amounts are matching contributions we made to the NEOs’ voluntary contributions to our DCP and are included in the Summary Compensation Table. |
(c) | Aggregate Earnings in Last Fiscal Year. These amounts do not include any above-market or preferential earnings. Accordingly, these amounts are not reported in the Summary Compensation Table. |
(d) | Aggregate Balance at Last Fiscal Year End. These amounts reflect compensation the NEOs earned in 2015 or in prior years, but which they voluntarily elected to defer receipt, adjusted for changes in the value of their investments and distributions, if any. Messrs. Mezger, Kaminski, Woram and Praw are all vested in the full amount of their respective balances. |
Post-Employment Payments — Mr. Mezger | ||||||||||||||||||||||||||||
Executive Payments and Benefits upon Termination or Change in Control | Voluntary Termination | Involuntary Termination for Cause | Involuntary Termination Without Cause/ Termination |