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Time and Date | 9:00 a.m., Pacific Time, on Thursday, April 12, 2018. | |||||
Location | KB Home Corporate Office, 10990 Wilshire Boulevard, Los Angeles, CA 90024. | |||||
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 and Restated Rights Agreement. | ||||||
(4) Ratify Ernst & Young LLP’s appointment as KB Home’s independent registered public accounting firm for the fiscal year ending November 30, 2018. | ||||||
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 are entitled to vote at the meeting and at any adjournment or postponement of the meeting if you were a stockholder on February 9, 2018. | |||||
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. | |||||
Attending the Meeting | Only stockholders on February 9, 2018, authorized proxy holders of such stockholders and invited guests of the Board of Directors (“Board”) may attend the meeting in person. Picture identification and an admission ticket will be required to attend. The accompanying Proxy Statement describes how to request an admission ticket. We must receive written ticket requests by March 30, 2018. | |||||
Annual Report | Copies of our Annual Report on Form 10-K for the fiscal year ended November 30, 2017 (“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 March 2, 2018. | |||||
Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting To Be Held on April 12, 2018: 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 |
ANNUAL MEETING OVERVIEW |
Items of Business | Key Meeting Information | ||
Ø | Elect ten directors, each to serve for a one-year term. | Date Time Location To Attend | Thursday, April 12, 2018. 9:00 a.m., Pacific Time. KB Home Corporate Office Los Angeles, CA 90024. You must request an admission ticket to attend the Annual Meeting in person. We must receive written ticket requests by March 30, 2018, as described under “Admission to the Annual Meeting.” |
Ø | Advisory vote to approve named executive officer (“NEO”) compensation. | ||
Ø | Approve the Amended and Restated Rights Agreement. | ||
Ø | Ratify Ernst & Young LLP’s appointment as our independent registered public accounting firm (“Independent Auditor”) for the fiscal year ending November 30, 2018. |
Name | Year First Elected | Primary Occupation | Committee Membership |
Dorene C. Dominguez | 2017 | Chairwoman and Chief Executive Officer, Vanir Group of Companies, Inc. | ACC |
Timothy W. Finchem | 2005 | Board Chair, The First Tee; Former PGA TOUR Commissioner | MDCC NCGC (Chair) |
Dr. Stuart A. Gabriel | 2016 | Director, Richard S. Ziman Center for Real Estate at UCLA; and Professor of Finance and Arden Realty Chair, UCLA Anderson School of Management | ACC |
Dr. Thomas W. Gilligan | 2012 | Director, Hoover Institution on War, Revolution and Peace | ACC NCGC |
Kenneth M. Jastrow, II | 2001 | Former Chairman and CEO, Temple-Inland Inc. | MDCC (Chair) |
Robert L. Johnson | 2008 | Founder and Chairman, The RLJ Companies | MDCC NCGC |
Melissa Lora | 2004 | President, Taco Bell International | ACC (Chair) MDCC |
Jeffery T. Mezger | 2006 | Chairman, President and Chief Executive Officer (“CEO”), KB Home | N/A |
James C. Weaver | 2017 | Chief Executive Officer, McCombs Partners | ACC |
Michael M. Wood | 2014 | Founder and Chairman, Redwood Investments LLC | ACC NCGC |
Your Board recommends a vote “FOR” the election of each director nominee |
FY2017 KEY PERFORMANCE METRICS | |||
Stockholder Returns | Total Stockholder Return (“TSR”) Return on Equity | ñ | 99% 10% (+370 basis points) |
Financial Results | Total Revenues Homebuilding Operating Income Total Pretax Income Net Income | ñ | 22% 86% 94% 71% |
Operating Results | Net Order Value Year-End Backlog Value | ñ | 17% 9% |
Your Board recommends an advisory vote “FOR” approval of NEO compensation |
Your Board recommends a vote “FOR” approving the Amended and Restated Rights Agreement |
Your Board recommends a vote “FOR” ratifying Ernst & Young LLP’s appointment |
CORPORATE GOVERNANCE AND BOARD MATTERS |
Corporate Governance Highlights | |
• All directors are independent, except our CEO, and elected annually under a majority voting standard. | • There is Board-level oversight of our political contributions. |
• Our three standing Board committees are entirely composed of independent directors. | • All directors, senior executives and employees must comply with the standards of conduct in our Ethics Policy. |
• Non-employee directors meet in executive sessions at each in-person Board meeting, and any non-employee director can request additional executive sessions. | • Each director attended at least 75% of the meetings of the Board and Board committees on which they served during 2017. |
• All directors, senior executives and employees are prohibited from pledging or hedging their holdings of our securities. | • We expect all directors to attend our annual meeting of stockholders. All directors serving at the time attended our 2017 Annual Meeting of Stockholders on April 13, 2017. |
• Beginning with 2017 awards, employee equity award agreements require double-trigger vesting in a change in control. | • Executive officers are subject to an incentive compensation clawback policy. |
• Directors and senior executives are subject to strong stock ownership requirements. | • We have one class of voting securities and no supermajority voting requirements (except as provided by Delaware law). |
Lead Independent Director Duties | |
• Preside at all meetings of the Board at which the Chairman is not present, and at all executive sessions of the non-employee directors. | |
• Serve as liaison between the Chairman and the non-employee directors. | |
• Consult with the Chairman, Board committee chairs and other non-employee directors (as appropriate) regarding meeting agendas and schedules to assure that there is sufficient time for discussion of all agenda items, and regarding the content and flow of information to the Board. | |
• Organize and preside at meetings of the non-employee directors at any time and for any purpose. | |
• Provide Board leadership if there is (or there is perceived to be) a conflict of interest with respect to the role of a Chairman who is also the Chief Executive Officer. | |
• If requested by major stockholders, being available to them for consultation and communication as appropriate. | |
• Any such additional responsibilities, duties and functions as set forth in our Corporate Governance Principles or By-Laws, or as may otherwise be determined by the Board from time to time. |
Audit Committee | Compensation Committee | Nominating Committee | |||||||
Members | Lora (Chair) Dominguez Gabriel | Gilligan Weaver Wood | Jastrow (Chair) Finchem Johnson | Lora | Finchem (Chair) Gilligan Johnson | Wood | |||
FY2017 Meetings | 6 | 5 | 4 | ||||||
Key Duties | – Oversees our corporate accounting and reporting practices and audit process, including our Independent Auditor’s qualifications, independence, retention, compensation and performance. – Is authorized to approve our incurring, guaranteeing or redeeming debt, and our entry into certain transactions. | – Evaluates and determines our CEO’s compensation. – Determines the compensation of our CEO’s direct reports. – Oversees an annual review of leadership development and workforce succession plans at all management levels, including for the CEO. – Evaluates and recommends non-employee director compensation and benefits. | – Oversees our corporate governance policies and practices. – Reviews “related party transactions,” as discussed below. – Oversees annual Board and committee performance evaluations. – Identifies, evaluates and recommends qualified director candidates to the Board. | ||||||
Other Items | – Each member is financially literate, and an “audit committee financial expert,” per NYSE listing standards and Securities and Exchange Commission (“SEC”) rules. – It is a separately designated standing audit committee as defined in Section 3(a)(58)(A) of the Securities Exchange Act of 1934. – The Board determined that Dr. Gabriel’s simultaneous service on the audit committees of three other public companies does not impair his ability to serve effectively on the Audit Committee. | – Each member is a “non-employee director” under SEC rules and an “outside director” under Internal Revenue Code (“Code”) Section 162(m). – Is assisted with its duties by our management and an outside consultant, Frederic W. Cook & Co., Inc. (“FWC”). – May delegate its duties to our management, except the authority to grant equity-based awards, or to a Board subcommittee. | – Regularly evaluates the skills and characteristics of current and potential directors, and identified for each individual the Board has nominated for election at the Annual Meeting certain specific skills and qualifications that led to the Board’s determination that each such nominee should serve as a director, as described under “Election of Directors.” | ||||||
Compensation Committee Interlocks and Insider Participation None of our directors or executive officers had any relationship that would constitute a “compensation committee interlock” under SEC rules. |
Audit Committee Role. The Audit Committee oversees our management’s performance of an annual enterprise risk management assessment that identifies significant risks in our business and operations, along with corresponding mitigating factors, and receives periodic updates upon request or as deemed appropriate. The Audit Committee chair reports to the Board on significant risks as deemed appropriate. In addition, at each of its regular meetings, the Audit Committee receives reports from our senior finance, accounting, legal and internal audit executives, and conducts separate executive sessions with each of those executives and with our Independent Auditor to discuss matters relevant to their respective duties and roles, including risk areas. | Compensation Committee Role. The Compensation Committee oversees an annual employee compensation risk assessment performed by FWC together with our management that largely focuses on potential policy and program design and implementation risks. The Compensation Committee also reviews and, as appropriate, approves compensation arrangements developed by our senior human resources personnel. The Compensation Committee chair reports to the Board on significant risks as deemed appropriate. Based on this oversight approach and our 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. |
DIRECTOR COMPENSATION |
Non-Employee Director Compensation | |
Board Retainer | $100,000 |
Equity Grant (value) | $145,000 |
Lead Independent Director Retainer | $40,000* |
Committee Chair Retainers | $25,000 (Audit Committee) $18,000 (Compensation Committee) $15,000 (Nominating Committee) |
Committee Member Retainers | $10,000 (Audit Committee) $7,000 (Compensation Committee) $5,000 (Nominating Committee) |
Meeting Fees | $1,500 (for each additional non-regularly scheduled meeting) |
Name(a) | Fees Earned or Paid in Cash ($)(b) | Stock Awards ($)(c) | All Other Compensation ($) | Total ($) | ||||||||
Ms. Dominguez | $ | 55,000 | $ | 72,500 | $ | — | $ | 127,500 | ||||
Mr. Finchem | — | 267,000 | — | 267,000 | ||||||||
Dr. Gabriel | 110,000 | 145,000 | — | 255,000 | ||||||||
Dr. Gilligan | 115,000 | 145,000 | — | 260,000 | ||||||||
Mr. Jastrow | 118,000 | 145,000 | — | 263,000 | ||||||||
Mr. Johnson | 100,000 | 157,000 | — | 257,000 | ||||||||
Ms. Lora | 10,000 | 317,000 | — | 327,000 | ||||||||
Mr. Weaver | 36,250 | 27,500 | — | 63,750 | ||||||||
Mr. Wood | 100,000 | 160,000 | — | 260,000 |
(a) | Ms. Dominguez was elected to the Board on July 12, 2017, and Mr. Weaver was elected to the Board on October 5, 2017. Therefore, each received prorated compensation during 2017. |
(b) | Fees Earned or Paid in Cash. These amounts generally represent the cash retainers paid to directors per their elections. The amount for Ms. Lora reflects her Lead Independent Director retainer paid in the 2017 first quarter for the 2016–2017 Director Year. |
(c) | Stock Awards. These amounts represent the aggregate grant date fair value of the unrestricted shares of our common stock or stock units granted to our directors in 2017. The grant date fair value of each such award is equal to the closing price of our common stock on the date of grant. All such grants were made on April 13, 2017, except that Ms. Dominguez’s and Mr. Weaver’s grants were made on the respective dates on which they were elected to the Board. The table below shows the respective grants of unrestricted shares of our common stock and/or stock units to our directors in 2017 and each director’s total holdings of equity-based compensation awards as of February 16, 2018. |
Name | 2017 Common Stock Grants (#) | 2017 Stock Unit Grants (#) | Total Holdings (#)(i) | |||
Ms. Dominguez | 3,051 | — | 3,051 | |||
Mr. Finchem | — | 13,288 | 180,142 | |||
Dr. Gabriel | 7,217 | — | 17,251 | |||
Dr. Gilligan | 7,217 | — | 65,489 | |||
Mr. Jastrow | — | 7,217 | 153,018 | |||
Mr. Johnson | 7,814 | — | 156,682 | |||
Ms. Lora | — | 15,777 | 223,749 | |||
Mr. Weaver | 1,413 | — | 1,413 | |||
Mr. Wood | 746 | 7,217 | 44,314 |
(i) | Total Holdings. These amounts reflect the directors’ total respective outstanding holdings of equity-based compensation awards, consisting of grants of unrestricted shares of our common stock, stock units and stock options in the following amounts: Ms. Dominguez 3,051, 0 and 0; Mr. Finchem 0, 124,792 and 55,350; Dr. Gabriel 17,251, 0 and 0; Dr. Gilligan 17,251, 21,349 and 26,889; Mr. Jastrow 10,034, 87,634 and 55,350; Mr. Johnson 28,570, 34,769 and 93,343; Ms. Lora 0, 157,179 and 66,570; Mr. Weaver 1,413, 0 and 0; and Mr. Wood 1,784, 31,152 and 11,378. Director stock options were last granted in April 2014, as they ceased being a component of director compensation after that date; accordingly, no director stock options have been granted to Ms. Dominguez, Dr. Gabriel or Mr. Weaver. Some director stock options held by Mr. Johnson (37,993) and Ms. Lora (11,220) have 15-year terms. The remainder have ten-year terms. For directors who leave the Board due to retirement or disability (in each case as determined by the Compensation Committee), or death, their stock options will be exercisable for the options’ respective remaining terms. Otherwise, director stock options must be exercised by the earlier of their respective terms or the first anniversary of a director’s leaving the Board (for 15-year stock options), or the third anniversary of leaving the Board (for ten-year stock options). Based on the directors’ respective elections, each director 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 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”). No Director SARs held by current directors have been so settled. |
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 at the election of directors at our 2019 Annual Meeting of Stockholders. Each nominee has consented to being nominated and has agreed to serve as a director if elected. Each nominee is standing for re-election, except for Ms. Dominguez and Mr. Weaver, who were each elected to the Board in 2017. 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 Board’s nominees are elected, the Board will have ten directors. There are no term limits for directors. | Voting Standard To be elected, each 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 their 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 their 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 the Board’s consideration. The Board expects the director whose resignation is under consideration to abstain from participating in any decision on that resignation. The Nominating Committee and the Board may consider any relevant factors in deciding whether to accept a director’s resignation. |
Dorene C. Dominguez Chairwoman and Chief Executive Officer, Vanir Group of Companies, Inc. | Age: 55 Elected in 2017 | Other Professional Experience: –Board Member, California Chamber of Commerce (2017-Present) –Board Member, Pride Industries, nonprofit employer of individuals with disabilities (2009-Present) –Latino Studies Advisory Board Member, University of Notre Dame (2007-Present) | ||
Public Company Directorships: –KB Home –CIT Group Inc. | ||||
Dorene C. Dominguez has served since 2004 as Chairwoman and Chief Executive Officer of the Vanir Group of Companies, Inc. and its subsidiaries Vanir Construction Management, Inc. and Vanir Development Company, Inc., which provide a wide range of program, project and construction management services for clients in the healthcare, education, justice, water/wastewater, public buildings, transportation and energy markets throughout the United States. Ms. Dominguez also serves as Chair of The Dominguez Dream, a nonprofit organization that provides academic enrichment programs in math, science, language arts and engineering to elementary schools in underserved communities. Ms. Dominguez has extensive experience in executive management, finance, and civic engagement, as well as significant expertise in project and asset management and real estate development. She also has a substantial presence and is well-regarded in California, an important market for us. | ||||
Timothy W. Finchem Board Chair, The First Tee; Former PGA TOUR Commissioner | Age: 70 Director Since: 2005 | Other Professional Experience: –PGA TOUR Commissioner (1994-2016) –Deputy Advisor to the President, White House Office of Economic Affairs (1978-1979) –Co-founder, National Marketing and Strategies Group (1980-1986) | ||
Public Company Directorships: –KB Home | ||||
Mr. Finchem has been Board Chair of The First Tee, a nonprofit youth development organization providing educational programs through the game of golf, since it was founded in 1997. He previously served as Commissioner of the PGA TOUR, a membership organization for professional golfers, from 1994 until his retirement in December 2016. He joined the PGA TOUR in 1987, and was promoted to Deputy Commissioner and Chief Operating Officer in 1989. 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 Director, Richard S. Ziman Center for Real Estate at UCLA; and Professor of Finance and Arden Realty Chair, UCLA Anderson School of Management | Age: 64 Director Since: 2016 | Other Professional Experience: –Director and Lusk Chair, USC Lusk Center for Real Estate (1997-2007) –Associate Professor/Professor, Finance and Business Economics, USC Marshall School of Business (1990-1997) –Economics Staff Member, Federal Reserve Board (1986-1990) | ||
Public Company Directorships: –KB Home –KBS Real Estate Investment Trust, Inc. –KBS Real Estate Investment Trust II, Inc. –KBS Real Estate Investment Trust III, Inc. | ||||
Dr. Gabriel has been since 2007 the director of the Richard S. Ziman Center for Real Estate at UCLA, and Professor of Finance and Arden Realty Chair at the UCLA Anderson School of Management. With Dr. Gabriel’s significant professional experience in and distinguished study of macroeconomics and real estate, mortgage and finance markets, he has 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 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 Director, The Hoover Institution on War, Revolution and Peace | Age: 63 Director Since: 2012 | Other Professional Experience: –Dean, McCombs School of Business (2008-2015) –Interim Dean, USC Marshall School of Business (2006-2007) –Staff Economist, White House Council of Economic Advisors (1983-1984) | ||
Public Company Directorships: –KB Home –Southwest Airlines Co. | ||||
Dr. Gilligan has been the Tad and Dianne Taube Director of The Hoover Institution on War, Revolution and Peace at Stanford University since 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. 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 and his current position as the head of a prominent public policy institution. 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 Former Chairman and CEO, Temple-Inland Inc. | Age: 70 Director Since: 2001 | Other Professional Experience: –Non-Executive Chairman, Forestar Group Inc., a real estate and natural resources company (2007-2015) –Chairman and Chief Executive Officer, Temple-Inland Inc., a paper, forest products and financial services company (2000-2007) | ||
Public Company Directorships: –KB Home –MGIC Investment Corporation –Genesis Energy, LLC –Forestar Group Inc. (2007-2015) | ||||
Kenneth M. Jastrow, II has extensive experience and leadership in the paper, building products, forestry, real estate and mortgage lending industries, enabling him to provide critical perspective on businesses that impact the homebuilding industry, and on sustainability practices. He also brings significant corporate governance expertise from his service on several public company boards, and has a substantial presence in Texas, a key market for us. | ||||
Robert L. Johnson Founder and Chairman, The RLJ Companies | Age: 71 Director Since: 2008 | Other Professional Experience: –Founder and Chief Executive Officer, Black Entertainment Television (BET), a television and entertainment network (1979-2006) –Museum Council Member, Smithsonian Institution’s National Museum of African American History and Culture (2004-Present) | ||
Public Company Directorships: –KB Home –Lowe’s Companies, Inc. –RLJ Entertainment, Inc. –RLJ Lodging Trust –Strayer Education, Inc. (2003-2016) | ||||
Robert L. Johnson 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, investment banking, 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 BET, which was acquired by Viacom Inc. in 2001. He continued to serve as chief executive officer of BET until 2006. 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. | ||||
Melissa Lora President, Taco Bell International | Age: 55 Director Since: 2004 Lead Independent Director Since: 2016 | Other Professional Experience: –Global Chief Financial and Development Officer, Taco Bell Corp. (2012-2014) –Chief Financial Officer, Taco Bell Corp. (2001-2012) –Regional Vice President and General Manager, Taco Bell Corp. (1998-2000) | ||
Public Company Directorships: –KB Home –MGIC Investment Corporation | ||||
Melissa Lora 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. Taco Bell Corp. recently announced that Ms. Lora will retire from her position in summer 2018. 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. In November 2016, the Board elected Ms. Lora as Lead Independent Director. | ||||
Jeffrey T. Mezger Chairman, President and Chief Executive Officer, KB Home | Age: 62 Director Since: 2006 Chairman Since: 2016 | Other Professional Experience: –Executive Board Member, USC Lusk Center for Real Estate (2000-2017) –Policy Advisory Board Member, Fisher Center for Real Estate and Urban Economics at UC Berkeley Haas School of Business (2010-present) –Policy Advisory Board Member, Harvard Joint Center for Housing Studies (2004 -2017; Board Chair 2015-2016) –Founding Chairman, Leading Builders of America (2009-2013; Executive Committee member until 2016) | ||
Public Company Directorships: –KB Home | ||||
Jeffrey T. Mezger has been our President and Chief Executive Officer since November 2006, and was elected Chairman of the Board in 2016. 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. In 2012, Mr. Mezger was inducted into the California Homebuilding Foundation Hall of Fame. As our CEO, Mr. Mezger has demonstrated consistently strong operational 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. | ||||
James C. Weaver Chief Executive Officer, McCombs Partners | Age: 42 Elected in 2017 | Other Professional Experience: –Board Member and Current Chair Pro Tem, San Antonio Branch, Federal Reserve Bank of Dallas (Member 2014-Present; Chair 2016-Present) –Member, The University of Texas System Board of Regents (2017-Present) –Member, The McCombs School of Business Advisory Board (2014-Present) –San Antonio Chamber of Commerce Board of Directors (Member 2014-2017; Chairman 2016-2017) | ||
Public Company Directorships: –KB Home | ||||
James C. Weaver has been since 2006 the Chief Executive Officer of McCombs Partners, the investment management division of McCombs Enterprises, overseeing the implementation of the firm’s investment strategies, including management of its direct investments in private operating businesses. He began his career at McCombs as an investment analyst in 2000. Mr. Weaver also serves as a director of several private companies, including Circuit of the Americas, Cox Enterprises, Inc. and Southern Towing Company. Mr. Weaver has considerable experience in executive leadership, business strategy and execution, financial planning and analysis, and asset/investment management across a broad range of industries, and brings critical insight on governance and economic and regulatory policymaking. In addition, with his professional achievements and significant community involvement, he has a substantial presence and is well-regarded in Texas, a core market for us. | ||||
Michael M. Wood Founder and Chairman, Redwood Investments LLC | Age: 70 Director Since: 2014 | Other Professional Experience: –Chairman, Winsight, LLC, a business-to-business publishing company (2012-2017) –U.S. Ambassador to Sweden (2006-2009) –Co-Founder and Chief Executive Officer, Hanley Wood LLC, a business-to-business publishing company (1976-2005) | ||
Public Company Directorships: –KB Home | ||||
Michael M. Wood is founder and chairman of Redwood Investments LLC, a Washington, D.C.-based investment company established in 2005 and concentrating in media, real estate and alternative energy. In 2009, Mr. Wood received from the King of Sweden the insignia of Commander Grand Cross, Order of the Polar Star medal given by Sweden’s Royal Family to people of foreign birth who make significant contributions to Sweden. Prior to becoming the U.S. Ambassador to Sweden, 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 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 our longstanding commitment to sustainability. He also has a distinguished policymaking background. |
OWNERSHIP OF KB HOME SECURITIES |
Non-Employee Directors | Total Ownership(a) | Stock Options(b) | Restricted Stock(b) | |||
Dorene C. Dominguez | 3,051 | — | — | |||
Timothy W. Finchem | 180,142 | 55,350 | — | |||
Dr. Stuart A. Gabriel | 17,251 | — | — | |||
Dr. Thomas W. Gilligan | 65,489 | 26,889 | — | |||
Kenneth M. Jastrow, II | 153,018 | 55,350 | — | |||
Robert L. Johnson | 156,682 | 93,343 | — | |||
Melissa Lora | 225,792 | 66,570 | — | |||
James C. Weaver | 1,413 | — | — | |||
Michael M. Wood | 44,314 | 11,378 | — | |||
Named Executive Officers | ||||||
Jeffrey T. Mezger | 4,256,314 | 3,495,027 | — | |||
Jeff J. Kaminski | 388,991 | 262,559 | 25,273 | |||
Albert Z. Praw | 298,883 | 187,606 | 17,875 | |||
Brian J. Woram | 576,551 | 437,461 | 17,155 | |||
William R. Hollinger | 584,747 | 429,772 | 10,170 | |||
All directors and executive officers as a group (15 people) | 7,201,141 | 5,308,769 | 78,898 |
(a) | No non-employee director or NEO owns more than 1% of our outstanding common stock, except for Mr. Mezger, who owns 4.3%. All non-employee directors and executive officers as a group own 8.6% of our outstanding common stock. The total ownership amounts reported for each non-employee director includes their respective aggregate equity-based compensation awards, as described under “Director Compensation.” Dr. Gabriel, Ms. Lora, Mr. Wood and Mr. Kaminski each hold their respective reported total ownership amounts in family trusts over which they have shared voting and investment control with their respective spouses. The amounts reported in this column for directors include 2,043 shares of our common stock that Ms. Lora directly owns. |
(b) | The reported stock option amounts are the shares of our common stock that can be acquired within 60 days of February 16, 2018 through the exercise of Director SARs (as described under “Director Compensation”), or common stock option awards (for the NEOs). The respective reported Director SAR/stock option and restricted common stock amounts are included in the total ownership amounts reported for each non-employee director and NEO. |
Stockholder(a) | Total Ownership | Percent of Class | |
BlackRock, Inc. 55 East 52nd Street, New York, NY 10055 | 10,649,861 | 12% | |
The Vanguard Group, Inc. 100 Vanguard Blvd., Malvern, PA 19355 | 9,394,663 | 11% | |
KB Home Grantor Stock Ownership Trust(b) Wells Fargo Retirement and Trust Executive Benefits, One West Fourth Street, Winston-Salem, NC 27101 | 8,897,954 | 9% |
(a) | The stockholders’ respective voting and dispositive power with respect to their reported ownership is presented below, excluding the GSOT. |
Blackrock, Inc.(i) | The Vanguard Group, Inc.(ii) | |||
Sole voting power | 10,476,648 | 108,498 | ||
Shared voting power | — | 11,562 | ||
Sole dispositive power | 10,649,861 | 9,280,566 | ||
Shared dispositive power | — | 114,097 |
(i) | Blackrock, Inc. is a parent holding company. A BlackRock, Inc. subsidiary, BlackRock Fund Advisors, beneficially owned five percent or more of our outstanding shares. |
(ii) | The Vanguard Group, Inc. is an investment adviser to various investment companies. Its subsidiaries, Vanguard Fiduciary Trust Company and Vanguard Investments Australia, Ltd., beneficially own 102,535 and 17,525 shares, respectively. |
(b) | The GSOT’s percent of class figure is relative to the total number of shares of our common stock entitled to vote at the Annual Meeting, as described under “Annual Meeting, Voting and Other Information.” 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 NEOs can direct the vote of the following amounts of GSOT shares: Mr. Kaminski 749,737; Mr. Praw 531,055; Mr. Woram 1,052,597; and Mr. Hollinger 986,370; and all current executive officers as a group (excluding Mr. Mezger) 3,781,395. |
COMPENSATION DISCUSSION AND ANALYSIS |
2017 Fiscal Year Performance Highlights In our 2017 fiscal year, we made great progress on our aggressive performance goals under our Returns-Focused Growth Plan, as discussed in our Annual Report, and produced strong financial and operational results. These results were achieved across several short-term and long-term metrics, with many demonstrating considerable growth compared to the previous year and over the last three years. We also generated significant returns for our stockholders in 2017 with a substantial rise in our TSR. | Stockholder Returns | One-Year TSR | ñ | 99% | |
One-Year Return on Equity | 10% (+370bps) | ||||
Short-Term Financial Results | Total Revenues Homebuilding Operating Income Total Pretax Income Net Income | ñ | 22% 86% 94% 71% | ||
Short-Term Operating Results | Annual Net Order Value Year-End Backlog Value | ñ | 17% 9% | ||
Long-Term Performance Results | Three-Year Revenue Growth Three-Year Pretax Income Growth Three-Year Cumulative Pretax Income | ñ | 82% 205% $566M |
Pay for Performance — CEO Compensation | ||||
• Our CEO’s compensation was nearly 90% performance-based. • 100% of our CEO’s long-term incentives were performance-based restricted stock units (“PSUs”). • Our CEO’s annual incentive award of $4.38 million was performance-based and formula-driven, and reflected our profitability growth and improved asset efficiency in 2017. | ||||
Listening to our Stockholders In 2017, we continued our longstanding practice of reaching out to our stockholders, including nearly all of our 25 largest stockholders, directly engaging with holders representing over 50% of our outstanding shares ahead of our 2017 Annual Meeting. We also engaged with stockholders in early 2018 to solicit additional feedback on our executive compensation programs. In evaluating our executive compensation programs during 2017, the Compensation Committee considered the strong support stockholders have expressed through our annual NEO compensation advisory votes over the past few years for our approach to executive compensation. Therefore, for 2017, the Compensation Committee decided to retain the core components of our executive compensation programs and to apply the same general principles and philosophy as in the prior fiscal year with respect to its executive compensation decisions. In addition, taking stockholder views into account, the Compensation Committee approved in 2017 employee equity award agreements that require double-trigger vesting in a change in control, and, at its recommendation, the Board adopted in January 2018 an executive officer incentive compensation claw-back policy. The Compensation Committee welcomes and will continue to consider stockholders’ perspectives on executive compensation in the future. |
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. | x | Do not allow re-pricing or cash-out of underwater stock options without stockholder approval. |
ü | Link annual NEO incentive pay to objective, pre-established financial performance goals, which are three-year goals for long-term incentives. | x | Do not provide any new excise tax “gross-ups” to any officer or employee. |
ü | Grant all of our NEOs’ long-term incentives in performance-based restricted stock units. | x | Do not allow our NEOs (or any employees or non-employee directors) to hedge or pledge their holdings of our securities. |
ü | Beginning with 2017 awards, employee equity award agreements require double-trigger vesting in a change in control. | x | Do not, without stockholder approval, enter into new severance arrangements with executive officers above the limits specified in a longstanding policy, as described under “Severance Arrangements.” |
ü | Subject our executive officers to an incentive compensation claw-back policy. | x | Do not provide excessive perquisites. Perquisites are generally limited to market-competitive medical benefits and the opportunity to participate in a deferred compensation plan. |
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. | x | Do not pay dividends or dividend equivalents on performance-based equity awards before they vest. |
ü | Engage, at the sole direction of the Compensation Committee, an independent compensation consultant. | ||
ü | Maintain robust stock ownership requirements for all NEOs. | ||
ü | Maintain a relevant industry peer group. |
COMPENSATION 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 | • Our NEOs’ 2017 annual incentive payouts were performance-based and formula-driven, focused on pretax income and asset efficiency measures. | • Motivates achievement of core strategic short-term financial results. | |
LONG-TERM INCENTIVE PROGRAM | PSUs | • Constituted 100% of total grant date fair value for our NEOs, a shift from prior years’ grants, which included other long-term incentive vehicles. | • Focuses executives on achievement of long-term results and encourages retention. |
• 2017 grants have three separate three-year performance measures: cumulative adjusted earnings per share, average adjusted return on invested capital, and revenue growth versus our peer group. | • Establishes strong alignment with long-term stockholder interests through performance-based payouts in shares of our common stock. | ||
RETIREMENT PROGRAMS AND PERQUISITES | • A 401(k) plan in which all eligible employees may participate. | • Programs are aligned with market practices. | |
• 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. | • Focuses executives on earning rewards through performance pay elements, not through entitlements. |
2017 API Performance Levels and Payout Summary | |||
Threshold | Target | Actual Result | |
API Performance Levels | $195.0 million | $260.0 million | $356.2 million |
API Performance Levels Relative to Target | 75% | 100% | 137% |
Payout Level Ratios | 50% | 100% | 100% |
NEO | 2017 NEO Individual Performance Contributions | IPF |
Mr. Mezger | Mr. Mezger provided excellent leadership in establishing and driving performance against our Returns-Focused Growth Plan objectives. In 2017, our pretax income grew by 94% and our net income rose 71%, with total revenues increasing 22%, in each case compared to 2016 levels. We delivered 99% total stockholder return and 10% return on equity in 2017, a 370 basis point improvement from 2016. Mr. Mezger also continued to play a critical role in promoting the KB Home brand as both a premier homebuilder and company in sustainability and innovation. | 58.5% |
Mr. Kaminski | Mr. Kaminski effectively managed our corporate liquidity and balance sheet, as we generated more than $500 million of net operating cash and reduced our debt by over $300 million. He also played a large role in the successful execution to date of our Returns-Focused Growth Plan, as we are on target to achieve its primary profitability, returns, and balance sheet goals by 2019. | 11.0% |
Mr. Praw | Mr. Praw led our land investment and asset management efforts, allowing us to achieve 11% growth in deliveries as compared to 2016, and positioning us to meet our 2018 delivery goals, in a very competitive land market. He also spearheaded our initiatives to reduce land held for future development via strategic land sales and activations. | 8.3% |
Mr. Woram | Mr. Woram achieved significant cost recoveries via settlements and mediations and ensured responsive and skillful transactional support to our divisions. He also led efforts to reduce risk in the areas of construction-defect litigation, regulatory impacts and environmental issues. | 8.3% |
Mr. Hollinger | Mr. Hollinger played a primary and critical role in our efforts to improve the profitability of the business and key financial metrics. He also continued to work collaboratively with our Information Technology department to lead the implementation of new technology and systems designed to improve efficiency across the entire enterprise. | 4.7% |
2017 Annual Incentive Program Payout Levels and Actual Payouts(a) | |||||||||||||
NEO | API Performance Component Payout(a) | Asset Efficiency Component Payout | Total Payout | ||||||||||
Mr. Mezger | $ | 1,725,000 | $ | 4,112,900 | $ | 4,378,425 | |||||||
Mr. Kaminski | 700,000 | 773,366 | 1,473,366 | ||||||||||
Mr. Praw | 585,000 | 584,946 | 1,169,946 | ||||||||||
Mr. Woram | 585,000 | 584,946 | 1,169,946 | ||||||||||
Mr. Hollinger | 333,600 | 333,563 | 667,163 |
(a) | Annex 1 to this Proxy Statement contains a reconciliation of our pretax income calculated in accordance with U.S. generally accepted accounting principles (“GAAP”) to the non-GAAP financial measure of API. |
NEO Long-Term Incentives Granted in 2017 | |||||
NEO | PSUs | ||||
# | $ | ||||
Mr. Mezger | 156,006 | $ | 3,999,994 | ||
Mr. Kaminski | 46,802 | 1,200,003 | |||
Mr. Praw | 32,176 | 824,993 | |||
Mr. Woram | 30,226 | 774,995 | |||
Mr. Hollinger | 18,526 | 475,007 |
PSU Measures | Weight | Purpose |
• Cumulative Adjusted Earnings Per Share (“AEPS”) | 50% | Measures profitability trajectory over the period |
• Average Adjusted Return on Invested Capital (“AROIC”) | 20% | Measures profitability relative to capital deployed |
• Revenue Growth Rank Versus Peers | 30% | Measures top-line growth relative to peers |
Performance Measure | PSU Grant Year | Threshold Goal | Target Goal | Maximum Goal |
AEPS | 2015 | $2.73 | $3.31 | $4.36 |
2016 | $3.00 | $3.64 | $4.77 | |
2017 | $4.13 | $5.16 | $6.19 | |
AROIC | 2015 | 3.0% | 3.5% | 4.3% |
2016 | 3.1% | 3.6% | 4.4% | |
2017 | 3.3% | 3.8% | 4.6% |
2014—2015 PSU Awards | 2016—2017 PSU Awards | |||
Performance Measure | Performance (Rank) | Target Award Multiplier | Performance (Rank) | Target Award Multiplier |
Relative Revenue Growth (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) | 1 or 2 | 200% | 1 or 2 | 200% |
3 | 178% | 3 | 180% | |
4 | 156% | 4 | 160% | |
5 | 134% | 5 | 140% | |
6 | 113% | 6 | 120% | |
7 | 90% | 7 | 100% | |
8 | 67% | 8 | 80% | |
9 | 44% | 9 | 60% | |
10 | 21% | 10 | 40% | |
11 or 12 | 0% | 11 | 20% | |
12 or 13 | 0% |
2014 PSU Performance Measure | 2014 PSU Performance Goals | 2014 PSU Target Award Multiplier |
AEPS | $4.00 and above | 200% |
$3.04 | 100% | |
$2.52 | 25% | |
Below $2.52 | 0% | |
AROIC | 4.0% and above | 200% |
3.3% | 100% | |
2.8% | 25% | |
Below 2.8% | 0% |
2014 PSU Award Determinations | |||
Performance Measure | Average Annual Performance | Aggregate Total Performance | Target Award Multiplier |
AEPS (50% weight) | N/A | $4.43 | 200% |
AROIC (20% weight) | 3.3% | N/A | 100% |
Relative Revenue Growth (30% weight) | N/A | 1st in the peer group | 200% |
Weighted Cumulative Multiplier | 180% |
2014 PSU Awards(a) | ||
NEO | Target Award(#) | Actual Award(#) |
Mr. Mezger | 195,622 | 352,120 |
Mr. Kaminski | 15,048 | 27,086 |
Mr. Praw | 10,602 | 19,084 |
Mr. Woram | 10,602 | 19,084 |
Mr. Hollinger | 6,156 | 11,081 |
(a) | Annex 1 to this Proxy Statement contains a reconciliation of our pretax income calculated in accordance with GAAP to the non-GAAP financial measure of adjusted pretax income, adjusted net income and adjusted earnings per share used in computing the AEPS and AROIC performance measures. |
Our Peer Group | ||
• Beazer Homes USA, Inc. • Hovnanian Enterprises, Inc. • Meritage Homes Corp. • Taylor Morrison Home Corp. | • CalAtlantic Group, Inc. • Lennar Corp. • NVR, Inc. • Toll Brothers, Inc. | • D.R. Horton, Inc. • M.D.C. Holdings, Inc. • PulteGroup, Inc. • Tri Pointe Group, Inc. |
Executive | Ownership Guideline |
Mr. Mezger | 6.0 times base salary |
Messrs. Kaminski, Praw and Woram | 2.0 times base salary |
Mr. Hollinger | 1.0 times base salary |
MANAGEMENT DEVELOPMENT AND COMPENSATION COMMITTEE REPORT |
Management Development and Compensation Committee | |||
Kenneth M. Jastrow, II, Chair | Timothy W. Finchem | Robert L. Johnson | Melissa Lora |
Name and Principal Position | Fiscal Year | Salary ($)(a) | Bonus ($) | Stock Awards ($)(b) | Option Awards ($)(b) | Non-Equity Incentive Plan Compensation ($)(c) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(d) | All Other Compensation ($)(e) | Total ($) | ||||||||||||||||
Jeffrey T. Mezger Chairman, President and Chief Executive Officer | 2017 | $ | 1,062,500 | $ | — | $ | 3,999,994 | $ | — | $ | 4,378,425 | $ | 428,586 | $ | 75,008 | $ | 9,944,513 | ||||||||
2016 | 1,000,000 | — | 2,400,004 | 1,600,001 | 3,771,237 | 115,539 | 70,078 | 8,956,859 | |||||||||||||||||
2015 | 1,000,000 | — | 1,984,360 | 1,828,403 | 3,974,964 | — | 69,196 | 8,856,923 | |||||||||||||||||
Jeff J. Kaminski Executive Vice President and Chief Financial Officer | 2017 | 688,333 | — | 1,200,003 | — | 1,473,366 | — | 56,048 | 3,417,750 | ||||||||||||||||
2016 | 671,250 | — | 719,999 | 480,003 | 1,100,285 | — | 52,893 | 3,024,430 | |||||||||||||||||
2015 | 656,250 | — | 566,960 | 631,431 | 1,386,191 | — | 51,156 | 3,291,988 | |||||||||||||||||
Albert Z. Praw Executive Vice President, Real Estate and Business Development | 2017 | 573,333 | — | 824,993 | — | 1,169,946 | — | 48,740 | 2,617,012 | ||||||||||||||||
2016 | 556,250 | — | 495,005 | 330,001 | 951,323 | — | 45,585 | 2,378,164 | |||||||||||||||||
2015 | 541,250 | — | 417,760 | 439,256 | 1,200,439 | — | 43,803 | 2,642,508 | |||||||||||||||||
Brian J. Woram Executive Vice President and General Counsel | 2017 | 576,250 | — | 774,995 | — | 1,169,946 | — | 49,518 | 2,570,709 | ||||||||||||||||
2016 | 564,167 | — | 464,984 | 310,000 | 913,869 | — | 46,468 | 2,299,488 | |||||||||||||||||
2015 | 554,166 | — | 417,760 | 439,256 | 1,188,560 | — | 44,731 | 2,644,473 | |||||||||||||||||
William R. Hollinger Senior Vice President and Chief Accounting Officer | 2017 | 410,000 | — | 475,007 | — | 667,163 | 95,241 | 34,140 | 1,681,551 |
(a) | Salary. As discussed under “Base Salaries,” NEO annual base salary levels were increased in July 2017 to the following amounts: Mr. Mezger $1,150,000; Mr. Kaminski $700,000; Mr. Praw $585,000; Mr. Woram $585,000; and Mr. Hollinger $417,000. |
(b) | 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 common stock options (for those granted in 2015 and 2016) 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 2017 stock awards represent the grant date fair value of 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 $7,999,988; Mr. Kaminski $2,400,006; Mr. Praw $1,649,986; Mr. Woram $1,549,990; and Mr. Hollinger $950,014. |
(c) | Non-Equity Incentive Plan Compensation. The 2017 and 2016 amounts reflect only annual incentive payouts. The 2015 amounts include the sum of the annual incentive and three-year performance cash award payouts made in that year, as summarized below. Performance cash awards have not been granted to senior executive officers, including our NEOs, since 2012. |
NEO | Year | Annual Incentive Payout ($) | Performance Cash Award Payout ($) | Total Non-Equity Incentive Plan Compensation ($) | ||||||
Mr. Mezger | 2015 | $ | 2,488,297 | $ | 1,486,667 | $ | 3,974,964 | |||
Mr. Kaminski | 2015 | 940,191 | 446,000 | 1,386,191 | ||||||
Mr. Praw | 2015 | 799,039 | 401,400 | 1,200,439 | ||||||
Mr. Woram | 2015 | 787,160 | 401,400 | 1,188,560 |
(d) | 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 or Mr. Hollinger. The respective amounts attributed to the change in |
(e) | All Other Compensation. The amounts shown consist of minimal incremental costs associated with spousal travel expenses in connection with a business-related event for each NEO other than Mr. Hollinger, and the following items: |
• | 401(k) Plan and DCP Matching Contributions. The respective aggregate 2017, 2016 and 2015 401(k) Plan and DCP matching contributions we made to our NEOs were as follows: Mr. Mezger $58,700, $55,900 and $55,900; Mr. Kaminski $41,300, $40,275 and $39,375; Mr. Praw $34,400, $33,375 and $32,475; Mr. Woram $34,575, $33,850 and $32,950; and Mr. Hollinger $24,601. |
• | Premium Payments. The respective aggregate premiums we paid for our NEOs in 2017, 2016 and 2015 for a supplemental medical expense reimbursement plan and life insurance policies, as described under “Other Benefits,” were as follows: Mr. Mezger $14,742, $14,178 and $13,296; Mr. Kaminski $13,182, $12,618 and $11,781; Mr. Praw $12,774, $12,210 and $11,328; Mr. Woram $13,182, $12,618 and $11,781; and Mr. Hollinger $9,539. |
Name | Grant Date(a) | Type of Award | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards(b) | Estimated Possible Payouts Under Equity Incentive Plan Awards(c) | Grant Date Fair Value of Stock and Option Awards ($)(d) | |||||||||||||||
Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | |||||||||||||||
Mr. Mezger | 2/15/2017 | Annual Incentive | $ | 862,500 | $ | 1,725,000 | $ | 6,900,000 | ||||||||||||
10/5/2017 | PSUs | 63,962 | 156,006 | 312,012 | $ | 3,999,994 | ||||||||||||||
Mr. Kaminski | 2/15/2017 | Annual Incentive | 350,000 | 700,000 | 2,100,000 | |||||||||||||||
10/5/2017 | PSUs | 19,189 | 46,802 | 93,604 | 1,200,003 | |||||||||||||||
Mr. Praw | 2/15/2017 | Annual Incentive | 292,500 | 585,000 | 1,170,000 | |||||||||||||||
10/5/2017 | PSUs | 13,192 | 32,176 | 64,352 | 824,993 | |||||||||||||||
Mr. Woram | 2/15/2017 | Annual Incentive | 292,500 | 585,000 | 1,170,000 | |||||||||||||||
10/5/2017 | PSUs | 12,393 | 30,226 | 60,452 | 774,995 | |||||||||||||||
Mr. Hollinger | 2/15/2017 | Annual Incentive | 166,800 | 333,600 | 667,200 | |||||||||||||||
10/5/2017 | PSUs | 7,596 | 18,526 | 37,052 | 475,007 |
(a) | Grant Date. The date shown for each award is the date the Compensation Committee approved the award. |
(b) | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards. The 2017 target payouts were set at 150% of base salary for our CEO and at 80% – 100% of base salary for each of our other NEOs. Maximum payouts were limited to a multiple of target, with our CEO at four times, our CFO at three times and our other NEOs at two times. “Threshold” represents the lowest possible payout if threshold performance is achieved for each performance measure. The performance measures are described under “2017 Annual Incentives.” |
(c) | 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 under “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. |
(d) | Grant Date Fair Value of Stock and Option Awards. The grant date fair value for each award is computed as described in footnote (b) to the Summary Compensation Table. The 2017 stock awards represent the grant date fair value of 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 | 10/24/2003 | 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 | |||||||||||||||||||||
10/1/2009 | 489,258 | 15.44 | 10/1/2019 | |||||||||||||||||||||
8/13/2010 | 397,818 | 19.90 | 10/2/2018 | (f) | ||||||||||||||||||||
10/7/2010 | 240,000 | 11.06 | 10/7/2020 | |||||||||||||||||||||
10/7/2010 | 260,000 | 11.06 | 10/7/2020 | |||||||||||||||||||||
10/6/2011 | 335,000 | 6.32 | 10/6/2021 | |||||||||||||||||||||
10/6/2011 | 365,000 | 6.32 | 10/6/2021 | |||||||||||||||||||||
10/10/2013 | 150,000 | 16.63 | 10/10/2023 | |||||||||||||||||||||
10/9/2014 | 520,300 | 14.62 | 10/9/2024 | |||||||||||||||||||||
10/9/2014 | 352,120 | $ | 11,042,483 | |||||||||||||||||||||
10/8/2015 | 222,000 | 111,000 | 14.92 | 10/8/2025 | ||||||||||||||||||||
10/8/2015 | 133,000 | $ | 4,170,880 | |||||||||||||||||||||
10/6/2016 | 91,651 | 183,301 | 16.21 | 10/6/2026 | ||||||||||||||||||||
10/6/2016 | 148,057 | 4,643,068 | ||||||||||||||||||||||
10/5/2017 | 156,006 | 4,892,348 | ||||||||||||||||||||||
Mr. Kaminski | 10/6/2011 | 125,000 | 6.32 | 10/6/2021 | ||||||||||||||||||||
10/10/2013 | 50,000 | 16.63 | 10/10/2023 | |||||||||||||||||||||
10/9/2014 | 108,396 | 14.62 | 10/9/2024 | |||||||||||||||||||||
10/9/2014 | 27,086 | 849,417 | ||||||||||||||||||||||
10/8/2015 | 76,667 | 38,333 | 14.92 | 10/8/2025 | ||||||||||||||||||||
10/8/2015 | 8,000 | 250,880 | 14,000 | 439,040 | ||||||||||||||||||||
10/6/2016 | 27,496 | 54,990 | 16.21 | 10/6/2026 | ||||||||||||||||||||
10/6/2016 | 17,273 | 541,681 | 18,507 | 580,380 | ||||||||||||||||||||
10/5/2017 | 46,802 | 1,467,711 |
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. Praw | 10/10/2013 | 39,000 | $ | 16.63 | 10/10/2023 | |||||||||||||||||||
10/9/2014 | 76,370 | 14.62 | 10/9/2024 | |||||||||||||||||||||
10/9/2014 | 19,084 | $ | 598,474 | |||||||||||||||||||||
10/8/2015 | 53,333 | 26,667 | 14.92 | 10/8/2025 | ||||||||||||||||||||
10/8/2015 | 6,000 | 188,160 | 10,000 | $ | 313,600 | |||||||||||||||||||
10/6/2016 | 18,903 | 37,806 | 16.21 | 10/6/2026 | ||||||||||||||||||||
10/6/2016 | 11,875 | 372,400 | 12,724 | 399,025 | ||||||||||||||||||||
10/5/2017 | 32,176 | 1,009,039 | ||||||||||||||||||||||
Mr. Woram | 7/15/2010 | 30,000 | 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 | |||||||||||||||||||||
10/10/2013 | 39,000 | 16.63 | 10/10/2023 | |||||||||||||||||||||
10/9/2014 | 76,370 | 14.62 | 10/9/2024 | |||||||||||||||||||||
10/9/2014 | 19,084 | 598,474 | ||||||||||||||||||||||
10/8/2015 | 53,333 | 26,667 | 14.92 | 10/8/2025 | ||||||||||||||||||||
10/8/2015 | 6,000 | 188,160 | 10,000 | 313,600 | ||||||||||||||||||||
10/6/2016 | 17,758 | 35,514 | 16.21 | 10/6/2026 | ||||||||||||||||||||
10/6/2016 | 11,155 | 349,821 | 11,952 | 374,815 | ||||||||||||||||||||
10/5/2017 | 30,226 | 947,887 | ||||||||||||||||||||||
Mr. Hollinger | 10/24/2003 | 9,334 | 33.24 | (e) | 10/24/2018 | |||||||||||||||||||
10/24/2003 | 18,666 | 34.05 | (e) | 10/24/2018 | ||||||||||||||||||||
10/22/2004 | 24,000 | 40.90 | 10/22/2019 | |||||||||||||||||||||
10/1/2009 | 68,147 | 15.44 | 10/1/2019 | |||||||||||||||||||||
8/13/2010 | 79,564 | 19.90 | 10/2/2018 | (f) | ||||||||||||||||||||
10/7/2010 | 60,000 | 11.06 | 10/7/2020 | |||||||||||||||||||||
10/6/2011 | 60,000 | 6.32 | 10/6/2021 | |||||||||||||||||||||
10/10/2013 | 21,500 | 16.63 | 10/10/2023 | |||||||||||||||||||||
10/9/2014 | 44,344 | 14.62 | 10/9/2024 | |||||||||||||||||||||
10/9/2014 | 11,081 | 347,500 | ||||||||||||||||||||||
10/8/2015 | 33,333 | 16,667 | 14.92 | 10/8/2025 | ||||||||||||||||||||
10/8/2015 | 3,333 | 104,523 | 6,000 | 188,160 | ||||||||||||||||||||
10/6/2016 | 10,884 | 21,767 | 16.21 | 10/6/2026 | ||||||||||||||||||||
10/6/2016 | 6,837 | 214,408 | 7,326 | 229,743 | ||||||||||||||||||||
10/5/2017 | 18,526 | 580,975 |
(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 14, 2018 pursuant to the 2014 PSUs based on our performance through the performance period, as described under “2014 PSU Awards.” Upon the shares being approved for grant to the recipients, the earned 2014 PSU-related shares became fully vested, with no restrictions on transferability or otherwise. The 2015 and 2016 restricted stock awards vest in three equal annual installments, with the remaining vesting dates of October 25, 2018 and 2019, respectively, subject to the recipients being employed through each vesting date. |
(c) | Market Value of Shares That Have Not Vested. The market value shown is based on the closing price of our common stock on November 30, 2017, which was $31.36. |
(d) | Equity Incentive Plan Awards: Number and Market Value of Unearned Units. The awards shown are the PSUs granted to our NEOs in 2015, 2016 and 2017, reflecting target award amounts as of November 30, 2017 and the closing price of our common stock on November 30, 2017, which was $31.36. These PSUs will vest based on our achievement of certain performance measures over an applicable three-year performance period and subject to the recipients being employed through the date that the Compensation Committee determines the number of shares that were earned pursuant to the PSUs. |
(e) | As a result of an internal review of our employee stock option grant practices in 2006, we adjusted the exercise prices of certain of our employee stock options in order to comply with Section 409A of the Code. The exercise price for a certain portion of the stock option grant made on October 24, 2003 was not adjusted. |
(f) | Through participation in two exchange offers that we conducted in 2010, these common stock options replaced cash-settled stock appreciation right awards that had been previously granted to the NEO as long-term incentives. Each common stock option has an exercise price equal to the replaced award’s exercise price, and the same number of underlying shares, vesting schedule and expiration date as each replaced award. The exchange offers did not include a re-pricing or any other changes impacting the value of the awards to the NEO, no additional grants or awards were made to the NEO, and the issuance of the common stock options did not result in any incremental fair value to the NEO. |
Name | Option Awards | Stock Awards | ||||||||
Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($)(a) | Number of Shares Acquired on Vesting (#)(b) | Value Realized on Vesting ($)(c) | |||||||
Mr. Mezger | 400,000 | $ | 521,013 | 352,120 | $ | 11,137,556 | ||||
Mr. Kaminski | 163,017 | 2,002,382 | 66,295 | 1,898,859 | ||||||
Mr. Praw | 150,000 | 2,929,785 | 46,925 | 1,343,684 | ||||||
Mr. Woram | 49,529 | 785,134 | 46,565 | 1,333,990 | ||||||
Mr. Hollinger | 60,000 | 101,088 | 27,067 | 775,363 |
(a) | The value realized on exercise is the difference between the closing price of our common stock at exercise and the exercise price of each award. |
(b) | The shares reported are the total number of shares each NEO acquired upon the following vesting events with respect to 2017: |
Name | 2014 PSUs | Restricted Stock | Restricted Stock | Restricted Stock | Total Shares | |||||||||||||
Granted on October 9, 2014 | Vested on February 14, 2018 | Granted on October 9, 2014 | Vested on October 9, 2017 | Granted on October 8, 2015 | Vested on October 25, 2017 | Granted on October 6, 2016 | Vested on October 25, 2017 | |||||||||||
Mr. Mezger | 195,622 | 352,120 | — | — | — | — | — | — | 352,120 | |||||||||
Mr. Kaminski | 15,048 | 27,086 | 22,572 | 22,572 | 24,000 | 8,000 | 25,910 | 8,637 | 66,295 | |||||||||
Mr. Praw | 10,602 | 19,084 | 15,903 | 15,903 | 18,000 | 6,000 | 17,813 | 5,938 | 46,925 | |||||||||
Mr. Woram | 10,602 | 19,084 | 15,903 | 15,903 | 18,000 | 6,000 | 16,733 | 5,578 | 46,565 | |||||||||
Mr. Hollinger | 6,156 | 11,081 | 9,234 | 9,234 | 10,000 | 3,333 | 10,256 | 3,419 | 27,067 |
(c) | The amount shown is the total gross dollar value realized upon the vesting of the restricted stock and PSUs, based on the closing price of our common stock on the vesting date, and the applicable Dividend Equivalents paid on the earned PSUs. |
Name* | Plan Name | Number of Years Credited Service (#)(a) | Present Value of Accumulated Benefit ($)(b) | Payments During Last Fiscal Year ($) | ||||
Mr. Mezger | Retirement Plan | 24 | $ | 10,590,859 | $ | — | ||
Mr. Hollinger | Retirement Plan | 30 | 2,353,524 | — |
(a) | Number of Years of Credited Service. This is as of the valuation date. As of November 30, 2017, Mr. Mezger and Mr. Hollinger are fully vested in their 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 and Mr. Hollinger under the Retirement Plan as of November 30, 2017. The payment of Retirement Plan benefits is described under “Retirement Programs.” The following key actuarial assumptions and methodologies were used to calculate this |
* | Messrs. Kaminski, Praw and Woram 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 | $ | 42,500 | $ | 42,500 | $ | 315,303 | $ | — | $ | 2,115,094 | |||||
Mr. Kaminski | 41,300 | 25,100 | 51,602 | — | 404,214 | ||||||||||
Mr. Praw | 35,392 | 18,200 | 42,155 | — | 276,017 | ||||||||||
Mr. Woram | 34,575 | 18,375 | 64,081 | — | 456,096 | ||||||||||
Mr. Hollinger | 41,000 | 13,463 | 96,402 | — | 2,028,441 |
(a) | Executive Contributions in Last Fiscal Year. These amounts reflect compensation the NEOs earned in 2017 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. The DCP is discussed under “Retirement Programs.” |
(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 2017 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. All of the NEOs are fully vested in their respective balances. A portion of these amounts was previously reported as deferred compensation in the Summary Compensation Tables in our proxy statements for our 2015 and 2016 Annual Meetings of Stockholders. |