OTHER CORPORATE GOVERNANCE MATTERS
The Board of Directors is responsible for overseeing the affairs of the company for the benefit of shareholders. The Board has approved
charters for the Audit, Compensation, Finance and Nominating & Governance Committees that are reviewed annually by each committee, corporate governance guidelines, an integrity manual (a code of business conduct and ethics applicable to all
directors, officers and employees), standards for determining the independence of directors, and stock ownership guidelines. These documents are available in the Investor Relations section of the companys website (
www.basco.com
).
Printed copies are available upon request to the Secretary.
Director Selection Criteria
The Nominating & Governance Committee recommends nominees for director whose background, knowledge, experience, expertise and
perspective will complement the qualifications of other directors and strengthen the Board of Directors. Nominees must meet the following minimum criteria:
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A strong commitment to integrity
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Common sense and good judgment
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Relevant professional or business knowledge
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A record of accomplishment in prior positions
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The time and interest to attend and participate in Board meetings and serve on Board committees
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In addition to the minimum criteria listed above and director independence considerations, the Nominating & Governance Committee has
identified the following 12 desired criteria with respect to the experience, qualifications, attributes and skills of directors and director nominees. These criteria, which are considered in the context of the Board of Directors as a whole and which
the Committee may modify from time to time to accommodate the evolving nature of the companys business and external environment, are:
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1.
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Significant chief executive officer experience
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2.
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Financial and accounting skills and experience, including at least one member with the ability to qualify as an audit committee financial expert under Securities and Exchange Commission requirements
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3.
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International experience with an understanding of conducting business on a global scale
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4.
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Relevant operations background
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5.
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Expertise involving the design and/or management of executive compensation plans and programs
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6.
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Legal and regulatory expertise
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7.
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Significant experience at, or working with, big-box retailers and/or the retail channel
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8.
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In-depth knowledge and significant practical experience in marketing and branding
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9.
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Diversity with respect to age, gender and ethnicity
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10.
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Significant experience developing and implementing successful business strategies
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11.
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Considerable organizational and human resources experience or expertise, including an understanding of benefit plans and experience managing succession planning and leadership development
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12.
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Expertise or experience in mergers and acquisitions activities
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Director Selection Procedures
The Nominating & Governance Committee selects director nominees in accordance with a procedure by which it:
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Reviews the experience, qualifications, attributes and skills of existing Board members
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Determines the experience, qualifications, attributes and skills desired in new director(s)
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Solicits suggestions from the Chief Executive Officer and directors on potential candidates
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Considers candidates recommended by shareholders
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Retains a search consultant as needed to identify candidates
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Evaluates the experience, qualifications, attributes and skills of all candidates recommended for consideration
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Contacts the preferred candidate(s) to assess their interest
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Interviews the preferred candidate(s) to assess their experience, qualifications, attributes and skills
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Recommends candidate(s) for consideration by the Board
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As noted, the Committee will consider
recommendations from shareholders concerning the nomination of directors. Recommendations should be submitted in writing to the Secretary of the company and state the shareholders name and address, the name and address of the candidate, and
the experience, qualifications, attributes and skills of the candidate. Recommendations must be received no later than May 12, 2017 to be considered for nomination by the company at the 2017 annual meeting. The direct nomination of a director
by a shareholder must be made in accordance with the advance written notice requirements of the companys Bylaws. A copy of the Bylaws may be obtained from the companys Secretary. Direct nominations must be received by the Secretary no
earlier than July 1, 2017, and no later than July 26, 2017, for consideration at the 2017 annual meeting.
Director Independence
A majority of directors must meet the criteria for independence established by the Board in accordance with the rules of the New York Stock
Exchange (the NYSE). A director will not qualify as independent unless the Board determines that the director has no material relationship with the company, either directly or as a partner, shareholder or officer of an organization that
has a relationship with the company. On the recommendation of the Nominating & Governance Committee, the Board has adopted the following categorical standards to form the basis for the Boards independence determinations.
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The Board makes determinations of director independence based on all relevant facts and circumstances concerning a directors relationships with the company, including commercial, banking, consulting, charitable
and family relationships. The Board shall not consider a director to be independent if the director has a relationship with the company that prevents independence under NYSE rules.
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The following commercial and charitable relationships will be considered to be immaterial relationships that do not impair a directors independence: (1) the director or an immediate family member is an
officer, employee, partner or significant owner of a company or organization that makes payments to, or receives payments from, Briggs & Stratton for property or services in an amount which, in any single fiscal year, is less than the
greater of $1,000,000 or 2% of such other companys consolidated gross revenues, and (2) the director is an officer, director or trustee of a charitable organization which receives contributions from Briggs & Stratton and the
Briggs & Stratton Corporation Foundation, Inc. that aggregate less than the greater of $1,000,000 or 2% of such organizations consolidated gross revenues in any single fiscal year out of the preceding three fiscal years.
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In August 2016, the Nominating & Governance Committee and the Board evaluated the relationships between each
director and the company and determined that Ms. Kampling and Messrs. Hennion, Humphrey, Jaehnert, McLoughlin, Slipsager, Story and Walker are independent. Mr. Teske, the companys Chairman, President and Chief Executive Officer, is
not an independent director.
Leadership Structure
The Board believes it is important to maintain flexibility to choose the leadership structure that is best able to meet the needs of the
company and its shareholders based on circumstances that exist at the time and the qualifications of available individuals.
The Chairman
of the Board is Mr. Teske, who also serves as President and CEO of the company. The Board currently believes that the company and its shareholders are best served by having Mr. Teske fill both the Chairman and CEO positions. He is most
familiar with the business and its challenges, and is best situated to set agendas and lead discussions in Board meetings on matters affecting the companys business. Mr. Teske has been with the company since 1996 and has served as
President and CEO since 2010; as a result, he has extensive knowledge of the companys strategy, operations and financial condition, which positions him to best
10
identify matters for Board review and discussion. In addition, the combined role of Chairman and CEO centralizes leadership in one individual. This circumstance prevents ambiguity about
accountability and the possibility that two leaders might communicate different messages.
The lead independent director is
Mr. Walker. He was selected by the Board based on his years of experience as the CEO of another public company, as a director of Briggs & Stratton and another public company, and as a member of several of the Boards committees.
The lead independent director (1) presides at all meetings of the Board at which the Chairman is not present, including executive sessions of independent directors, (2) serves as liaison between the Chairman and the independent directors,
(3) approves information sent to the Board, (4) approves meeting agendas for the Board, (5) approves meeting schedules to assure that there is sufficient time for discussion of all agenda items, (6) has the authority to call
meetings of the independent directors, and (7) if requested by major shareholders, ensures that he is available for consultation and direct communications.
The chairs of the Audit, Compensation, Finance and Nominating & Governance Committees are, respectively, Ms. Kampling and
Messrs. Walker, Story and McLoughlin. Each chair was selected because he or she is independent, has served as a member of the Board for a substantial number of years, and has expertise in areas related to the subject matter of the committee he or
she chairs. Committee chairs, as well as committee members, are nominated by the Nominating & Governance Committee and appointed by the Board. The Executive Committee has no chair. Its ex officio members are the CEO and the chairs of the
Audit, Compensation, Finance and Nominating & Governance Committees.
The Board conducts and discusses a self-evaluation of its
performance each year.
Board Oversight of Risk
The Board of Directors has overall responsibility for risk oversight with a focus on the most significant risks facing the company with respect
to its strategy, operations, financial reporting and legal compliance. Every six months, and more frequently if required, the Board reviews with management the companys strategy, and the Finance Committee reviews a list of key risks affecting
strategy, operations, reporting and compliance, the status of those risks, and how those risks are being managed.
Periodically throughout
the year, the committees to which the Board has delegated responsibility devote part of their regular meetings to the review and discussion of specific risk topics in greater detail, and each committee reports on its activities to the full Board at
each regular meeting of the Board. More specifically:
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The Audit Committee oversees the companys risk policies and processes relating to financial statements, financial reporting and legal compliance. As part of its risk oversight role, the committee receives periodic
reports from the companys Director of Internal Audit and its General Counsel, receives an annual report on the status of the companys Integrity Program from the chair of its Steering Committee, and receives periodic reports on any
complaint reported under the Integrity Program concerning an accounting, internal accounting control or auditing matter.
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The Compensation Committee oversees risks associated with the companys management succession plan and compensation structure. It reviews the management succession plan annually, and periodically engages an
independent compensation consultant to review and make recommendations concerning the structure of executive compensation. Each year, the Committee also reviews a report on compensation-related risk prepared by the companys internal audit
staff.
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The Finance Committee reviews the companys insurance and risk management programs, including programs designed to address financial risk such as the use of hedging and derivatives. The Committee also reviews the
companys policies regarding credit, liquidity and capital structure.
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The Nominating & Governance Committee oversees risks related to the companys governance structure. The Committee also receives an annual report on the Integrity Program from the chair of the
companys Integrity Program Committee
.
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11
Board Meetings
The Board has regularly-scheduled quarterly meetings, each of which ends with the independent directors of the Board meeting in executive
session, and special meetings. The Chairman of the Board presides at the regularly-scheduled Board meetings and special meetings, and the lead independent director presides at the executive sessions. In fiscal 2016, the Board held 4 regular
meetings, 4 executive sessions of independent directors and no special meetings.
Meeting Attendance
Directors are expected to attend the annual meeting of shareholders and all regularly-scheduled Board and committee meetings. All directors
attended the October 2015 annual meeting of shareholders and at least 75% of all meetings of the Board and the committee(s) on which he or she served during fiscal 2016.
Board Committees
The Board has
established five committees to assist it in fulfilling its responsibilities. Members of the Executive Committee are the CEO and the chairs of each of the four standing Board committees. Members of the other Board committees are nominated by the
Nominating & Governance Committee and appointed by the Board.
Audit Committee
The Audit Committee is composed of Ms. Kampling (Chair) and Messrs. Jaehnert and Slipsager. Each member of the Committee has been
determined by the Board to be independent under the rules of the SEC and the NYSE and to be an audit committee financial expert under SEC rules. The Committee held 8 meetings during fiscal 2016.
The Audit Committee is a separately designated committee of the Board, established in accordance with Section 3(a)(58)(A) of the
Securities Exchange Act of 1934. The Audit Committees primary duties and responsibilities are to (1) monitor the integrity of the companys financial statements and review with the independent accountants the audited financial
statements and their report, (2) retain independent public accountants to audit the companys books and accounts, (3) oversee the independence and performance of the companys internal and external auditors, (4) review and
approve non-audit services performed by the independent public accountants, (5) review the accountants recommendations on accounting policies and internal controls, (6) review internal accounting and auditing procedures, including
internal controls, the companys internal audit function and the monitoring of related party transactions, and (7) monitor the companys compliance with legal and regulatory requirements, including compliance by and the grant of any
waivers to directors, officers and employees with respect to the companys code of business conduct and ethics. The Committee may delegate pre-approval authority concerning audit and non-audit services to the Chair of the Committee, which if
exercised shall be reported to the Committee at its next scheduled meeting. The Committee conducts an annual evaluation of its performance.
Compensation Committee
The Compensation Committee is composed of Messrs. Walker (Chair), Hennion, Humphrey and Story. Each member of the Committee has been determined
by the Board to be independent under the rules of the NYSE and the SEC. The Committee held 6 meetings during fiscal 2016.
The Compensation
Committee (1) reviews and approves corporate goals and objectives relevant to CEO compensation, evaluates the CEOs performance and sets the CEOs compensation, (2) retains and oversees the work of compensation consultants, legal
counsel and other advisors and assesses their independence, (3) reviews and sets the salaries of all other elected officers, (4) reviews and approves employment agreements with elected officers, (5) reviews and recommends to the Board
the adoption or amendment of compensation and benefit plans and programs maintained for the executive officers and other key employees, (6) administers the companys incentive compensation plans for senior executives, (7) periodically
reviews the structure of executive compensation and makes recommendations to the Board as required to maintain the alignment of compensation with the companys strategy and mitigate compensation-based risk, (8) reviews the companys
management succession plan, (9) reviews and
12
recommends to the Board the compensation of directors, and (10) prepares an annual report on executive compensation for inclusion in the proxy statement. The Committee conducts an annual
evaluation of its performance.
The Compensation Committee has retained Meridian Compensation Partners, LLC (Meridian) as its
compensation consultant. The Committee assessed the independence of Meridian and does not believe that the work of Meridian has given rise to any conflict of interest under SEC or NYSE rules.
The Committee periodically reviews director compensation with its compensation consultant. The Committee makes recommendations to the Board
based on data provided by its compensation consultant and recommendations from the consultant and the CEO. An explanation of the compensation provided to nonemployee directors is located below in Director Compensation.
Finance Committee
The Finance Committee is composed of Messrs. Story (Chair), Jaehnert and Walker and Ms. Kampling. Each member of the Committee has been
determined by the Board to be independent under the rules of the NYSE. The Committee held 4 meetings during fiscal 2016.
The Finance
Committee (1) reviews the capital structure of the company and its subsidiaries, and approves the establishment of direct subsidiaries, (2) reviews the companys financial plan and treasury operations, (3) oversees the
companys usage of swap transactions, (4) reviews significant tax matters, (5) reviews the companys annual operating plan and approves capital expense budgets, (6) oversees the companys policies on dividends and share
repurchases, (7) reviews the companys insurance and risk management programs, (8) reviews the financial terms of investments, acquisitions and divestitures, and (9) monitors the financial condition of the companys
retirement plans. The Committee conducts an annual evaluation of its performance.
Nominating & Governance Committee
The Nominating & Governance Committee is composed of Messrs. McLoughlin (Chair), Hennion, Humphrey and Slipsager. Each
member has been determined by the Board to be independent under the rules of the NYSE. The Committee held 5 meetings during fiscal 2016.
The Nominating & Governance Committee (1) proposes to the Board a slate of nominees for election by the shareholders at the
annual meeting and recommends prospective director candidates in the event of the resignation, death or retirement of directors or change in Board composition requirements, (2) reviews candidates recommended by shareholders for election to the
Board, (3) develops plans regarding the size and composition of both the Board and committees, (4) oversees the orientation program for new directors and periodically reviews and informs the Board concerning director education
opportunities, (5) reviews and recommends guidelines and procedures to be used in evaluating the performance of the Board and individual directors, (6) identifies, reviews the qualifications of and recommends the individual to be
designated as lead director, (7) administers the process for evaluating CEO performance and oversees the process for electing and evaluating officers, (8) periodically reviews the companys directors and officers liability insurance,
and (9) monitors and makes recommendations to the Board concerning corporate governance matters. The Committee conducts an annual evaluation of its performance.
Executive Committee
The Executive Committee is composed of Messrs. McLoughlin, Story, Walker and Teske and Ms. Kampling. The Committee is authorized to
exercise the authority of the Board in the management of the business and the affairs of the company between meetings of the Board, except as provided in the Bylaws. The Committee held 4 meetings during fiscal 2016.
Communication with Directors
The Board
has established a process for interested parties to communicate with the Board, its non-management directors as a group or its lead independent director. Such communications should be
13
addressed to the Secretary of the company, who will forward the communication directly to the lead independent director.
Stock Ownership Guidelines
Nonemployee
directors are required to hold shares of the companys common stock with a value equal to five times the annual cash retainer paid to the director. Directors whose holdings are below this amount satisfy the guidelines by deferring their annual
stock grants until retirement from the Board of Directors. Compensation for serving as the lead director, a committee chair or a committee member is excluded. All directors comply with the guidelines.
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board of Directors consisted of the four directors listed below, each of whom was determined by the Board to
be independent under the rules of the NYSE.
Management of the company prepared the following Compensation Discussion and Analysis
(CD&A) for fiscal 2016. The Committee reviewed and discussed the CD&A with management and the Board of Directors.
Based on the review and discussions with management, the Committee recommended to the Board of Directors that the CD&A be included in this
proxy statement.
Brian C. Walker, Chairman
Jeffrey R. Hennion
James E.
Humphrey
Charles I. Story
COMPENSATION DISCUSSION AND ANALYSIS
The Compensation Discussion and Analysis that follows is intended to provide shareholders with an understanding of the objectives of the
companys compensation policies and practices applicable to the Chief Executive Officer and other executives named in the Summary Compensation Table (the named executive officers). In addition to Mr. Teske (the companys
Chief Executive Officer), the other named executive officers for fiscal 2016 are Mr. Schwertfeger, Mr. Rodgers, Mr. Reitman, Mr. Redman and Ms. Buono.
In August 2015, the Board appointed Mr. Rodgers, who had served as Senior Vice President and Chief Financial Officer since 2010, as
Senior Vice President and President Engines Group and Mr.
Schwertfeger as Senior Vice President and Chief Financial Officer.
Executive Summary
The principal objectives underlying the companys compensation program for its named executive officers are to:
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Attract and retain executives who perform at a high level and are important to the continued success of the company
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Link cash awards to achievement of the companys annual operating plan
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Provide strong financial incentives for named executive officers to increase shareholder value over the long term at reasonable cost to the shareholders
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To accomplish these objectives, the company has developed a program that combines traditional cash compensation with incentive-based and
retention-focused elements. Components of the program include:
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Long-term incentive awards
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Retirement and deferred compensation plans
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Employment and change of control agreements and benefits
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Driving the decisions of the
Compensation Committee is the belief that a significant portion of the named executive officers total compensation should be performance-based. Total compensation for this purpose includes the named executive officers base salary, annual
target cash incentives and long-term incentives. In fiscal 2016, 49% of Mr. Teskes total compensation was performance-based. The percentages for the other named executive officers were: Mr. Schwertfeger 35%, Mr. Rodgers 47%,
Mr. Reitman 29%, Mr. Redman 27% and Ms. Buono 21%.
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The company also recognizes that its compensation package must be in line with
market. For that reason, the company benchmarks target total compensation for the named executive officers against the compensation practices of a comparator group of companies that generally reflects the industrial and consumer segments
with which the company competes for executive talent.
Company Performance
It is important to understand the performance of the company and of the named executive officers during fiscal 2016 in order to assess the
appropriateness and effectiveness of the companys compensation program for that year.
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The companys fiscal 2016 financial results reflected many of the macro-economic factors that impacted the global economy during the year as well as the influence of weather patterns that occurred during the spring
selling season:
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Fiscal 2016 net sales were $1.8 billion, a decrease of 4.5% from the prior year (or 3.4% before currency impacts). Record sales of Ferris
®
and Billy Goat
®
products and commercial engine sales growth were offset by a $25 million reduction in sales of job site products, lower sales caused by cool spring weather in North America and Europe, and
economic uncertainty in many international markets, including Europe.
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The companys net income in fiscal 2016 was $26.6 million as compared to net income of $45.7 million in fiscal 2015, and adjusted net income, a non-GAAP financial measure, decreased from $64.8 million in fiscal
2015 to $55.0 million in fiscal 2016.
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Despite the challenging environment, the company made substantial progress in executing its strategy:
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Several new product innovations were launched, including Snapper
®
XD (a battery-powered lawn and garden system), quiet engines that do not require an oil change,
a new residential zero turn mower that includes a rear cargo bed for increased utility, a commercial stand-on mower with suspension and expanded electronic fuel injection (EFI) offerings.
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Products segment net sales decreased by $16.4 million as compared to fiscal 2015 and segment loss decreased by $12.7 million to $9.8 million. Adjusted segment income, a non-GAAP financial measure that excludes the
impact of $8.8 million of restructuring charges, $10.3 million in goodwill impairment and $0.3 million in acquisition-related charges in fiscal 2016, and the effects of $27.3 million of restructuring charges and $2.1 million of acquisition-related
charges in fiscal 2015, increased by $2.7 million to $9.7 million in fiscal 2016 compared to $7.0 million in fiscal 2016. While there was a decline in the companys job site business, the companys operating results in the other areas
comprising this segment, primarily turf and residential products, improved, in part a result of restructuring actions implemented over the last two years.
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Engines segment net sales decreased by 5.5% as compared to fiscal 2015 (or 4.8% before currency impacts). Unit shipments decreased 7% but reflected a favorable shift in sales mix to large engines in furtherance of the
companys strategy to expand its commercial business.
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The company generated cash from operations of $111.8 million and returned $61 million to shareholders by repurchasing an additional $37.4 million of common shares and paying out $23.6 million in dividends.
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Briggs Value Added (BVA), the companys measurement tool that drives annual cash incentive compensation, was $35.8 million for fiscal 2016, resulting in annual incentives paid at 66% of target. BVA is
operating income of the company, or a division or plant where applicable, less a capital charge.
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The total shareholder return (TSR) of the companys stock during the fiscal 2014 to fiscal 2016 performance period was at the 43.4 percentile of the comparator group, which resulted in payouts of the
performance shares granted in fiscal 2014 at 67% of target.
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The adjusted net income and adjusted segment income measures
used in the preceding paragraph are financial measures that are not based on Generally Accepted Accounting Principles (GAAP), which the company uses to prepare its financial statements. The company believes that the use of these measures
when comparing the companys financial performance for fiscal 2016 to fiscal 2015 aids investors in understanding the magnitude of the change in earnings between fiscal years due to recurring operations. The inclusion of non-GAAP financial
measures is intended to supplement, not replace, the presentation of financial results in accordance with GAAP. The following table reconciles the GAAP measure of net income to the non-GAAP measure of adjusted net income.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURE
(In Millions)
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2016
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2015
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Net Income
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$
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26.6
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$
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45.7
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Tax effected charges to reported net income:
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Restructuring Charges
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6.6
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17.7
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Acquisition-Related Charges
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0.2
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1.4
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Goodwill Impairment Charge
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7.7
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Trade Name Impairment Charge
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1.8
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Litigation Charges
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1.8
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Pension Settlement Charges
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13.1
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Gain on Sale of Investment in Marketable Securities
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(2.8
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Adjusted Net Income
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$
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55.0
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$
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64.8
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Executive Performance
Executive performance highlights during fiscal 2016 included the following:
Mr. Teske drove the companys continued focus on product innovation and diversification in furtherance of the
companys strategy to improve profitability in the Engines business, grow margins, and expand geographically. Through his leadership, the company managed through a year of macro-economic and weather challenges and maintained its disciplined
approach of using cash to invest in its business, integrate acquisitions that accelerate the companys strategy and return cash to shareholders through dividends and share buybacks.
Mr. Schwertfeger refinanced the companys revolving credit facility to extend its maturity date beyond the maturity
of the companys senior notes and oversaw the ongoing upgrade to the companys SAP system and execution of the companys capital strategy, which enabled the company to return $61 million to the shareholders in the form of dividends
and share repurchases and increase the dividend by 3.7% in August 2016.
Mr. Rodgers led the Engines Groups
continuing innovation efforts and focused on continued market penetration into higher margin commercial engines.
Mr. Reitman oversaw the companys strategic investment in Power Distributors, LLC (PD), the construction
of the companys new European Distribution Center, the development of the companys Internet of Things strategy, and the introduction to the marketplace of consumable products such as Gas Off.
Mr. Redman oversaw the continued profit improvement in the companys turf business, completed the
integration of the Billy Goat acquisition and oversaw revenue growth of the Ferris
®
and Billy
Goat
®
product lines as well as expanded product offerings under the Simplicity
®
, Snapper
®
and Victa
®
brands.
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Ms. Buono oversaw the continuing expansion of the companys Integrity
Program, supported the Board of Directors in her role as Secretary, and coordinated the legal services required to support the initiatives and activities of the company.
Executive Compensation Program
At the 2015 annual meeting, shareholders approved an advisory vote on executive compensation. Of the votes cast, 95% approved the compensation
awarded to the named executive officers. The Compensation Committee believes the support for the say-on-pay vote affirmed its general approach to executive compensation, which it continued when administrating the companys compensation programs
and making related decisions for fiscal 2016.
Comparator Group
In the course of carrying out its duties, the Compensation Committee reviews a market analysis of executive officer compensation prepared by
Meridian every other year that compares the companys compensation practices to those of selected peer companies, as well as market trend updates periodically provided by Meridian. The comparator group referenced by the Compensation Committee
for its fiscal 2016 compensation decisions was composed of the following companies:
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A.O. Smith Corporation
Armstrong World
Industries, Inc.
Boise Cascade Company
Brady Corporation
Donaldson Company, Inc.
Graco Inc.
Harley-Davidson, Inc.
Herman Miller, Inc.
IDEX Corporation
John Bean Technologies Corporation
Joy Global Inc.
Lennox International Inc.
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The Manitowoc Company, Inc.
Martin Marietta
Materials, Inc.
Mueller Water Products, Inc.
Neenah Paper,
Inc.
Polaris Industries Inc.
Snap-on Incorporated
Tecumseh Products Company
The Toro Company
USG Corporation
Valmont Industries, Inc.
Vulcan Materials Company
Woodward Inc.
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These companies represent the consumer durables, industrial equipment, building products, forest and
paper products/packaging and other manufacturing segments with which the company believes it competes for executive talent. Annual revenues of the companies within the comparator group at the time it was compiled in June 2014 ranged from $660
million to $6.0 billion, with market capitalizations ranging from $183 million to $12.1 billion. The Committee periodically reviews the composition of the comparator group and will modify it as appropriate based on organizational or business
changes at those companies. The Committee evaluates the companys executive officer compensation levels with reference to the 50
th
percentile of the comparator group (market). It
considers an executive officers total cash compensation (i.e., base salary plus target annual incentive) within 10% of the 50
th
percentile to be at market and long-term incentive
compensation within 15% of the 50
th
percentile to be at market.
Annual
Salaries
The Compensation Committee determines executive salaries based on the value of the job and the amount required to attract
and retain key executives. The Committee generally targets annual salaries for company officers slightly above the 50
th
percentile of the comparator group, with individual salaries based on the
level of responsibility and individual performance. The Committee reviews salaries at the beginning of each fiscal year and normally sets revised salaries effective September 1.
After reviewing and considering the results of Meridians August 2014 market analysis and an April 2015 market trends update as well as
evaluating the individual performance of each of the named executive officers, the Compensation Committee increased annual salaries for the named executive officers effective September 1, 2015 as follows: Mr. Teskes annual salary was
increased by 3.2% to $935,000; Mr. Schwertfegers annual salary was increased by 32.7% to $325,000, which reflected his promotion from Vice President and Corporate Controller to Senior Vice President and Chief Financial Officer; and the
salaries for Messrs. Rodgers, Reitman
19
and Redman and Ms. Buono were increased by 3.0%, 3.0%, 3.0% and 3.1%, respectively, to $459,380, $386,250, $350,200 and $404,000. As a result of these adjustments, the salaries of
Mr. Teske, Mr. Redman and Ms. Buono remained near the 50
th
percentile of the comparator group and the salaries of Messrs. Rodgers and Reitman exceeded the 75
th
percentile (a reflection of the market salary of his prior position in the case of Mr. Rodgers and of tenure with the company and scope of responsibilities in the case of Mr. Reitman). The
salary of Mr. Schwertfeger fell below the 50
th
percentile, a reflection of his then-recent promotion, which the Compensation Committee intends to address by positioning
Mr. Schwertfegers salary to or near the 50
th
percentile over time.
Cash Incentive Awards
The goal of the companys Annual Incentive Plan (the AIP) is to further connect the named executive officers
decision-making and rewards with the companys objectives and strategic initiatives by:
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Providing above-market award opportunities for superior performance,
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Placing a greater emphasis on combined company-wide, group and business unit results,
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Providing a consistent emphasis on performance throughout the company,
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Recognizing as appropriate individual and non-financial factors that contribute to success, and
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Emphasizing teamwork and collaboration across all businesses and functions.
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To achieve these
objectives, target annual cash incentive awards are tied to results that consist of financial and, in some cases, individual performance metrics. The financial metric, referred to as Briggs Value Added or BVA, measures
operating income minus a capital charge on a company-wide, division and plant basis:
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The operating income component of the BVA calculation equals income from operations as reported on the companys financial statements for the plan year, adjusted for restructuring charges, joint venture income and
material non-recurring items approved by the Compensation Committee.
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The capital component of the BVA calculation equals the capital employed in the companys businesses multiplied by a cost of capital rate approved by the Compensation Committee.
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Each named executive officers opportunity for an annual cash incentive award is based on the named executive officers position,
comparator group data and annual salary. Actual annual cash incentive awards can range from 0% to 200% of the named executive officers target award, determined by the performance factor associated with the level of BVA achieved.
There are two caps on each cash award. As noted, one cap limits each cash award to 200% of the named executive officers target award. A second cap, stated in the 2014 Omnibus Incentive Plan, is $3.5 million. Once the cash awards are calculated
and approved by the Compensation Committee, they are paid to the named executive officers in August.
Target cash incentive awards for the
named executive officers were tied solely to company-wide BVA in fiscal 2016 and were intended to be comparable to opportunities customarily provided by other companies to executives having similar responsibilities. The target cash incentive award
for Mr. Teske as CEO was 110% of his annual salary, which was at the 50
th
percentile of the comparator group of companies described above. Target cash incentive awards were 60% of annual
salary for the other executives named in the Summary Compensation Table, other than Ms. Buono, whose target cash incentive award was 40% of her annual salary. These targets put Mr. Schwertfeger below the 50
th
percentile of the comparator group (again reflecting his recent promotion), Mr. Rodgers at the 50
th
percentile, Mr. Reitman at the 75
th
percentile, Mr. Redman between the 50
th
and 75
th
percentiles, and Ms. Buono below
the 50
th
percentile.
At its August 2015 meeting, the Committee established a
company-wide fiscal 2016 BVA target of $45.3 million for purposes of the AIP, which was assigned a performance factor of 1.0 and would have resulted in a payout equal to 100% of the named executive officers target award. Company-wide BVA had
to be greater than $17.3 million in fiscal 2016 in order for there to be a performance factor greater than zero (i.e., the threshold level). The fiscal 2016 BVA target was $7.1 million greater than the fiscal 2015 BVA target of $38.2 million and
$9.3 million greater than actual fiscal 2015 BVA of $36.0 million. The maximum company-wide BVA on which cash awards could have been paid in fiscal 2016 was $73.3 million, which was assigned a performance factor of 2.0 (i.e., a payout equal to 200%
of the named executive officers target) and was considered a significant stretch.
20
The companys actual BVA for fiscal 2016 was $35.8 million, producing a company performance
factor of 0.66 under the AIP. Consistent with past practice, and in accordance with the AIP, the Committee made the following discretionary adjustments to the companys financial results for purposes of the BVA calculation: a pre-tax pension
settlement charge of $20.2 million associated with the companys limited offer for former employees with vested benefits to elect to receive a lump sum payout was eliminated from the calculation; a pre-tax total of $23.7 million for other
expenses and non-cash charges relating to the restructuring of the companys Engines and Products businesses, acquisition integration activities, litigation, and goodwill and trade name impairments were also excluded; and $1.8 million of
earnings from joint venture investments were removed from the calculation following a reclassification thereof from other income to operating income. Cash incentive awards actually paid to the named executive officers for fiscal 2016 performance
based on this calculation were as follows: Mr. Teske $675,301, Mr. Schwertfeger $123,420, Mr. Rodgers $181,031, Mr. Reitman $178,943, Mr. Redman $138,006 and Ms. Buono $106,128. If none of the permitted adjustments to BVA
under the AIP had been made, the company performance factor would have been (0.91), resulting in no cash bonuses for the named executive officers.
Long-Term Incentive Awards
The goal of the companys long-term incentive compensation program is to align the most substantial component of executive compensation to
the creation of long-term shareholder value and the drivers of that value. In addition, the program is designed to retain key executive talent in a cyclical and competitive industry segment and to appropriately compensate company executives based on
market compensation levels. To achieve these goals in fiscal 2016, the company used a combination of stock option, restricted stock (or restricted stock unit (RSU)) and performance share unit (PSU) awards.
Stock option awards are intended to encourage a high performance focus and alignment of the named executive officers with the companys
shareholders since value is only realized if the stock price increases. A secondary benefit of stock options is that unvested options are generally forfeited if the named executive officer leaves the company. The purpose of restricted stock/RSU
awards is also to strengthen the alignment of executives with shareholders, motivate shareholder value creation and preserve the value of the company. Similar to stock options, should the executive terminate his or her employment prior to the
vesting of the restricted shares/RSUs, the award is generally forfeited, which provides long-term retention incentives. PSUs represent compensation that is at risk that rewards the named executive officers for superior performance relative to
target. The goal of PSUs is to incentivize the named executive officers to make decisions that improve operating income over a longer period of time, providing strong alignment with shareholders and promoting retention because unvested awards are
generally forfeited if an executive terminates his or her employment.
The Compensation Committee generally sets the aggregate target
value of each named executive officers equity awards at approximately the 50
th
percentile of market for comparable positions. However, the Committee also considers other factors when setting
the aggregate target value for the CEO, such as the CEOs experience and performance, and for the other named executive officers, recommendations by the CEO. The Committee increased each named executive officers aggregate target value in
fiscal 2016 from the prior year due to the companys continued focus on aligning the interests of named executive officers with those of shareholders. The increased target values averaged, in aggregate, 11% above the 50
th
percentile of the comparator group.
To derive the numbers of restricted shares/RSUs,
stock options and PSUs each named executive officer received in fiscal 2016, the Compensation Committee apportioned the overall equity incentive target value for each named executive officer among the three types of incentives based in part on
market data concerning the mix of equity incentives provided by the companies in the comparator group. For the equity award made in fiscal 2016 to Mr. Teske, 40% of the value was stock options, 30% was restricted stock and 30% was PSUs. For the
equity awards made to the other named executive officers, 40% of the value was restricted stock/RSUs, 30% was stock options and 30% was PSUs. The Committee believed this mix of equity would encourage performance and alignment with the interests of
shareholders, as awards are based on both absolute stock price growth and the achievement of operating results. Mr. Teskes equity award was more heavily weighted toward stock options and PSUs to amplify his value creation incentives.
21
The table below summarizes the total grant date value of the named executive officers
fiscal 2016 awards and the apportionment among stock options, restricted stock (or RSUs) and PSUs, which the Committee approved in August 2015.
LONG-TERM EQUITY AWARDS IN FISCAL 2016
(In Thousands)
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Name
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Total
Grant Date Value
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Stock Options
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Restricted
Stock/RSUs
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PSUs
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T.J. Teske
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$
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2,680
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$
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1,072
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$
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804
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$
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804
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M.A. Schwertfeger
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350
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105
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140
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105
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D.J. Rodgers
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646
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194
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258
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194
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W.H. Reitman
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278
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83
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111
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83
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H.L. Redman
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320
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96
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128
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96
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K.M. Buono
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420
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126
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168
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126
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In addition to the awards included in the table, Mr. Reitman received a grant of RSUs (valued at $52,680)
in November 2015 in accordance with his expatriate agreement.
Stock Options
. The number of stock options awarded to each
named executive officer in fiscal 2016 was determined by dividing (i) the portion of the aggregate target value of the named executive officers equity awards allocated to stock options by the (ii) Black-Scholes value of an option on
a share of the companys common stock based on the closing share price of the companys stock on the grant date. Each stock option had an exercise price of $19.90, which was equal to the fair market value of the companys stock on the
grant date calculated as the reported closing sales price on the NYSE on such date. The options generally vest on the third anniversary of their grant date and expire on the tenth anniversary of their grant date.
Restricted Stock/RSUs
. The aggregate number of shares of restricted stock/RSUs awarded to each named executive officer in fiscal
2016 was determined by dividing (i) the portion of the aggregate target value of the named executive officers equity awards allocated to restricted stock/RSUs by (ii) the closing share price of the companys stock on the date of
grant. Such awards vest three years after the date of grant, except that the vesting date may be accelerated in the case of death, disability, retirement or a change in control. If a named executive resigns his or her employment prior to the earlier
of retirement eligibility or the vesting date, the restricted stock/RSU is forfeited unless forfeiture is waived by the Committee. Cash dividends are paid on restricted stock during the vesting period and holders of RSUs are credited with additional
RSUs in lieu of cash dividends.
2016 PSU Grants
. The target number of PSUs awarded to each named executive officer in
fiscal 2016 was determined by dividing (i) the portion of the aggregate target value of each named executive officers equity awards allocated to PSUs by (ii) the closing share price of the companys stock on the date of grant.
The fiscal 2016 grants of PSUs are subject to the attainment of performance goals related to the companys operating income over a three-year performance period. The final number of earned PSUs can range from 0% to 200% of the target depending
on actual performance against pre-set operating income goals.
To achieve a payout at threshold (25% of target), the PSUs granted in
fiscal 2016 require operating income over the three-year performance period to be at least $315.2 million. Operating income of $360.5 million over the three-year performance period would achieve a 100% payout and a payout at 200% of target would be
achieved if the three-year operating income is equal to or greater than $395.3 million (which the Committee considered to be a significant stretch). Straight line interpolation is used to arrive at the payout percentage if the three-year operating
income does not fall squarely at one of the three thresholds.
Dividends declared during the performance period are credited to the
participants as additional PSUs subject to the same conditions as the underlying PSU award.
In August 2016, the company adjusted its
period-to-date financial results for purposes of its outstanding PSUs to reflect certain unanticipated events that were not taken into account when the PSU targets were established. Similar to the BVA adjustments described above, the PSU adjustments
removed charges incurred in fiscal 2016 associated with restructuring expenses, goodwill and trade name impairments, acquisition expenses, and pension and litigation settlements, and also removed certain joint venture earnings. The adjustments also
included in operating income a portion of equity in earnings ($1.4 million) from the companys
22
investment in PD which resulted from the companys loss of margin due to the shift from a dealer-direct model to a distributor model following the companys contribution of certain
distribution rights to PD.
Generally, the number of earned PSUs will vest upon the Compensation Committees certification of the
companys performance relative to the pre-set performance goals. However, the Compensation Committee has the discretion to accelerate vesting in the case of death, disability, retirement or a change in control.
See the Outstanding Equity Awards at 2016 Fiscal Year-End table for information regarding performance as of the end of fiscal 2016 of the PSUs
granted in fiscal 2016 and fiscal 2015.
In August 2016, the Committee broadened the long-term incentive award mix for fiscal 2017 to
include performance unit awards (PUAs). PUAs will work the same way as PSUs relative to vesting based on the level of operating income achieved in a three-year performance period; however, PUAs will be paid in cash at a rate of 0% to
200% of a target cash amount rather than in stock at a rate of 0% to 200% of a target stock award
.
The Committee believes PUAs will be an effective way to continue to drive long-term shareholder value creation and to manage potential
dilution.
2014 Performance Share Grants
.
For performance shares awarded in fiscal 2014 to those of the named executive
officers serving on the grant date, the number of performance shares earned was determined by the companys stock performance relative to a comparator group of public companies over the three-year performance period. The final earned award
would have equaled the target award if the TSR on company stock over the three-year performance period was at the 50
th
percentile of the comparator group companies. The final earned award would
have been 200% of the target award if the companys TSR was at or above the 80
th
percentile, 50% of the target award if TSR was at the
40
th
percentile, and zero if TSR was below the 40
th
percentile after three years.
The comparator group for TSR purposes was composed of public companies that are generally affected by many of the same external factors and
operate under broadly similar economic and business circumstances as the company. The comparator group was modified in fiscal 2016 to exclude Pall Corp. (no longer a listed company) and SPX Corp. (engaged in spin-off transaction). For purposes of
fiscal 2014 awards, the comparator group was composed of the following companies:
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Actuant Corp.
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Mueller Industries
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Clarcor Inc.
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Mueller Water Products, Inc.
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Crane Co.
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Nordson Corp.
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Donaldson Company, Inc.
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Pentair plc
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Dover Corp.
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Polaris Industries, Inc.
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Enpro Industries Inc.
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Snap-on Incorporated
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Flowserve Corp.
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Stanley Black & Decker Inc.
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Generac Holdings Inc.
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The Toro Company
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IDEX Corp.
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Valmont Industries, Inc.
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Kennametal Inc.
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Watts Water Technologies Inc.
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Lincoln Electric Holdings Inc.
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Whirlpool Corp.
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Makita Corp.
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The Compensation Committee evaluated performance of the fiscal 2014 performance share awards in August
2016 and determined that the TSR on the companys stock over the applicable performance period was at the 43.4 percentile of the comparator group, yielding a payout at 67% of target using straight line interpolation.
Retirement and Deferred Compensation Plans
Named executive officers participate in two retirement plans (a defined benefit pension plan in which benefits were frozen as of the end of
2013 and a supplemental executive retirement plan), two deferred compensation plans (a tax-qualified 401(k) plan and a supplemental defined contribution plan), and an executive life insurance program. The supplemental plans and life insurance
program provide enhanced benefits that are considered necessary to retain named executive officers and maintain aggregate compensation at competitive levels. The principal terms of these plans and program are described below.
23
Retirement Plans
.
The company has a defined benefit retirement plan covering
officers and certain other employees under which benefits were frozen effective December 31, 2013. Non-bargaining unit employees located in Wisconsin and other regional plant locations receive an annual pension payable on a monthly basis at
retirement equal to 1.6% of the employees average of the highest five years of compensation in the last 10 calendar years of service prior to retirement multiplied by the number of years of credited service. Compensation taken into account in
determining a pension includes salaries and cash awards. The amount of a pension is offset by 50% of Social Security payments. The Social Security offset is prorated if years of credited service are less than 30. Benefits under the plan were frozen
on December 31, 2013.
Company officers also participate in an unfunded plan that supplements benefits under the retirement plan. The
supplemental plan provides officers with an additional 0.5% of compensation per year of credited service over that presently payable under the retirement plan. In no event will a pension paid under the above-described plans exceed 70% of the
employees average monthly compensation as calculated in determining pension benefits. A trust has been established for deposit of the aggregate present value of the benefits provided to officers under the supplemental retirement plan upon a
change in control of the company.
Though the Summary Compensation Table reflects significant increases in the pension benefits of the
named executive officers, those increases did not result from any plan or benefit change. Rather, the present value of each named executive officers accumulated benefit increased predominantly due to declining interest rates which reduced the
discount rate from 4.55% to 3.75%.
Supplemental Defined Contribution Plan
.
Officers and key employees are eligible to
participate in a nonqualified defined contribution plan that supplements the companys 401(k) plan. In the 401(k) plan, a participant may defer up to 75% of his or her salary and cash award, subject to Internal Revenue Service limits. The
employer matching contribution for such deferrals is 100% of the participants first 2% of contributions and 50% of the participants next 4% of contributions. Under the supplemental defined contribution plan, the company matching
contribution is 50% of the participants deferrals or 4% of compensation, whichever is less.
The supplemental plan provides for
automatic company contributions on behalf of newly-elected officers in the retirement plans. These company contributions are (i) an annual contribution of 3% of the participants salary and cash award and (ii) an annual contribution
that increases over 20 years from 3% of the participants salary and cash award to 8% of the participants salary and cash award. The Board of Directors may also authorize a discretionary lump sum company contribution to the account of a
participant.
The same investment elections are available with respect to account balances in the supplemental defined contribution plan
as are available in the companys 401(k) plan. Distributions are made in a single lump sum or 10 annual installments beginning on the later of a participants retirement or age 62.
A trust has been established to fund the companys liabilities to participants in the supplemental defined contribution plan. The assets
of this trust as well as the separate trust for the supplemental retirement plan are subject to claims of the creditors of the company.
Employment and Change of Control Agreements and Other Benefits
Employment Agreements
.
Each named executive officer has a two-year employment agreement with the company. The agreement
automatically extends for an additional year each January 1 unless either party gives a 30-day notice that the agreement will not be renewed.
Under each employment agreement, the covered named executive officer agrees to perform the duties that may be assigned by the company from
time to time. The named executive officer also agrees for a period of two years following termination of employment for any reason to keep company information confidential, not to compete with the company and not to solicit the companys
employees for employment. The company agrees to pay the named executive officer a salary of not less than that of the previous year and to provide fringe benefits that are provided to all other salaried employees in comparable positions. In the
event of a termination other than for cause, the officers salary and certain fringe benefits (but not cash awards or long-term incentive compensation) are continued for the remaining term of the agreement.
Change of Control Agreements
.
Each named executive officer has a change of control agreement with the company. The agreement
becomes effective upon a defined change of control of Briggs & Stratton or if the
24
officers employment is terminated upon or in anticipation of such a change of control, and automatically supersedes any existing employment agreement. A change of control is defined to mean
the acquisition of 20% or more of the companys voting securities by any person in certain circumstances, replacement of a majority of the directors of the company in certain circumstances, shareholder approval and consummation of certain
mergers, or a liquidation or sale of the companys assets.
The purpose of the change of control agreements is to ensure that in
contemplating a potential change in ownership of the company the named executive officers are focused on the best interests of shareholders and not the potential impact on their employment. If during the employment term (three years from the change
of control) the officer is terminated other than for cause or if the officer voluntarily terminates his or her employment for good reason or during a 30-day window period one year after a change of control, the officer is entitled to specified
severance benefits. These benefits consist of:
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(1)
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a lump sum equal to the officers accrued salary and cash award for the current year, plus three times the officers current annual salary and highest annual cash award (which is the greater of the most recent
annual cash award received by the officer and the average of the top three cash awards received by the officer over the past five years),
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(2)
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the present value of a three-year enhancement of service under the retirement plan and supplemental executive retirement plan,
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(3)
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continuation of benefits for three years after termination of employment under the companys 401(k) plan, supplemental defined contribution and welfare benefit plans, including without limitation medical,
prescription, dental, disability, salary continuance, employee life, group health, accidental death and travel insurance,
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(4)
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outplacement services selected by the officer,
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(5)
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any benefits the officer is eligible to receive under any other plan, program, policy, practice or contract of the company,
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(6)
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a gross-up payment that will reimburse the officer for any amounts paid under federal excise taxes, and
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(7)
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immediate vesting of all outstanding stock options, restricted stock, RSUs and deferred stock pursuant to the companys incentive compensation plans; PSUs will be paid out pro rata as if the target was achieved.
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Change of control agreements executed after October 14, 2009 are different from these agreements in three respects:
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(1)
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The agreements no longer have a provision that permits an officer to receive severance benefits if he or she voluntarily terminates employment during a 30-day window period one year after a change of control.
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(2)
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The agreements require that a named executive officer who intends to terminate his or her employment for good reason must provide the company with a written explanation and allow the company 30 days to address the
situation.
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(3)
|
The agreements provide that the company will reduce the lump sum payment that would be made to an officer to a level that does not invoke the federal excise tax imposed by Section 4999 of the Internal Revenue Code.
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With the exception of Mr. Schwertfeger and Ms. Buono, who entered into change of control agreements in 2014 and 2015,
respectively, change of control agreements with the officers named in the Summary Compensation Table were executed prior to October 2009.
25
Expatriate Agreement with Mr. Reitman
.
In September 2013, the company entered
into an Expatriate Agreement with Mr. Reitman related to his expatriate assignment in Freienbach, Switzerland, which concluded as of May 31, 2016.
Under the agreement, Mr. Reitman received an annual foreign service premium equal to 10% of his base salary and an award of 3,000 shares
of restricted stock/RSUs for completion of each full year of the assignment. In addition to the annual incentive award under the companys cash incentive plan, Mr. Reitmans foreign service made him eligible for an additional bonus of
5% of his annual salary (if certain performance goals were met), granted in the discretion of Briggs & Stratton International. Mr. Reitman was also entitled to an allowance of $62,000 upon completion of his assignment, prorated based
on the actual duration of the assignment versus the agreements original expiration date of December 31, 2015. The prorated amount of such allowance that was paid to Mr. Reitman in May 2016 was $67,500. Mr. Reitman continues to
be entitled to tax neutralization payments and reimbursement of his tax preparation expenses in relation to assignment-related tax exposures.
While on his international assignment, Mr. Reitman also participated in the companys compensation and benefit programs available to
officers generally, including life insurance, accidental death and personal loss insurance, health insurance coverage, and retirement plan and 401(k) plan participation. The companys international assignment policy required that the company
provide Mr. Reitman with an allowance to cover the amount by which the cost of foreign housing and utilities may exceed U.S. costs. Other benefits included certain relocation and repatriation expenses and household goods storage, a travel
related allowance, vacation, arrangement for work and residence visas, and certain medical-related expenses. Mr. Reitmans existing employment agreement and change of control agreement with the company remained in effect throughout the
term of the assignment.
Executive Life Insurance Program
.
The company provides a death benefit to its named executive
officers. The amount of the benefit during employment is two times annual salary, and the amount after retirement, for named executive officers elected before 2010, is $400,000. This coverage is consistent with the level of coverage provided by
other companies that offer this benefit. The annual cost to the company for providing the benefit to eligible named executive officers was approximately $89,000. The company will recover this cost from the cash value of the policy on a covered
executive when he retires or dies. The benefit will not be provided to future executives, and the amount of the benefit for current executives will not be increased.
Other Benefits
.
Each elected officer of the company may be reimbursed up to $5,000 annually for expenses incurred for personal
financial consulting, estate planning and tax preparation.
Other Aspects of the Executive Compensation Program
Clawback Policy
.
The companys incentive awards are subject to clawback rights. Cash and equity awards can be recovered by
the company for any plan year in which negligence or misconduct results in a material restatement of the financial statements included in the companys annual report that is filed with the SEC within three years after payment of the award (and
as to any subsequent plan year in which any such award was materially affected by the restatement). Gains on stock options can be recovered by the company if such gains are attributable to options that were exercised within 12 months after any such
material restatement.
Tax Policy
.
The companys compensation plans are designed generally to ensure tax deductibility
of the compensation paid under the plans. This includes compliance with Section 162(m) of the Internal Revenue Code, which limits the companys tax deduction for a named executive officers compensation to $1 million unless certain
conditions are met. The Compensation Committee believes, however, that shareholders interests are best served by not restricting its discretion and flexibility in structuring compensation programs, even though such programs may result in
certain non-deductible compensation expenses. For fiscal 2016, the company believes all compensation provided to all named executive officers was tax deductible to the company. However, because of ambiguities and uncertainties as to the application
and interpretation of Section 162(m) and related regulations, and the fact that such regulations and interpretations may change from time to time (with potentially retroactive effect), there is no certainty that compensation intended by the
Committee to satisfy the requirements for deductibility under Section 162(m) will be deductible.
For purposes of qualifying awards
of restricted stock (including RSUs) as performance-based compensation under Section
162(m) of the Internal Revenue Code, the Compensation Committee annually establishes a stock pool with respect to each fiscal year. The number of shares in the
pool is determined by
26
dividing (i) 10% of the companys adjusted operating income for the previously completed fiscal year by (ii) the fair market value of company stock on the award date determined by
the Committee, rounded up or down to the nearest 10 shares. The maximum portion of the stock pool that could have been allocated to a named executive officer in fiscal 2016 (out of the pool created in August 2014 with reference to fiscal 2015
operating income) in order to preserve the deductibility of such awards under Section 162(m) was 50% for the CEO and 10% for each of the other named executive officers. A similar allocation of the pool was made by the Committee in August 2015
to qualify awards of restricted stock and RSUs made to the CEO and the other named executive officers in August 2016, with the CEO limited to a maximum of 50% of the pool and each other elected officer who reports to the CEO limited to their
proportionate share of the remaining 50% of the pool.
Stock Ownership Guidelines
The CEO is required to hold five times his annual salary in company stock, senior vice presidents are required to hold three times their annual
salary in company stock and other elected officers are required to hold two times their annual salary in company stock. The guidelines also prohibit hedging transactions involving the companys stock and the pledging of company stock that is
held to fulfill the stock ownership guidelines. A copy of the stock ownership guidelines is available in the Investor Relations section of the companys website. All executives named in the Summary Compensation Table who were executive officers
of the company as of June 30, 2016 are in compliance with the guidelines.
Compensation-Related Risk
The companys internal audit staff conducts an annual assessment of the companys compensation plans and practices with respect to
risk and reviews the assessment with the Compensation Committee. The last such assessment and review occurred in August 2016. The assessment concluded that the companys compensation plans and practices are not reasonably likely to have a
material adverse effect on the company. The reasons for concluding that the companys compensation plans and practices do not create material risk for the company include that the company (i) sufficiently monitors the appropriateness of
the compensation and benefit plans that are available to company employees, (ii) leverages the expertise of third party service providers where necessary to ensure that the companys compensation and deferred compensation programs are
appropriate when compared to the market, and (iii) implements risk mitigation mechanisms such as a combination of short-term and long-term incentives, stock ownership guidelines, clawback provisions and administration of awards to officers and
key managers by independent directors serving as members of the Compensation Committee.
27
COMPENSATION TABLES
The following table shows salaries, bonuses, incentive awards, changes in the value of retirement benefits, and other compensation relating to
fiscal years 2014, 2015 and 2016 for the named executive officers.
SUMMARY COMPENSATION TABLE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name & Principal
Position
(a)
|
|
Year
(b)
|
|
|
Salary
($)(c)
|
|
|
Bonus
($) (d)
|
|
|
Stock
Awards
($) (e)
|
|
|
Option
Awards
($) (f)
|
|
|
Non-Equity
Incentive Plan
Compensation
($) (g)
|
|
|
Change in
Pension Value &
Nonqualified
Deferred
Compensation
Earnings
($) (h)
|
|
|
All Other
Compensation
($) (i)
|
|
|
Total
($) (j)
|
|
T.J. Teske
Chairman, Pres.
& CEO
|
|
|
2016
2015
2014
|
|
|
|
930,167
901,667
873,333
|
|
|
|
0
0
0
|
|
|
|
1,607,920
1,559,894
1,453,658
|
|
|
|
1,071,992
1,040,016
1,000,009
|
|
|
|
675,301
922,405
461,120
|
|
|
|
1,365,000
566,000
1,027,000
|
|
|
|
277,563
284,354
163,923
|
|
|
|
5,927,943
5,274,336
4,979,043
|
|
M.A. Schwertfeger
Sr. Vice Pres.
& CFO
|
|
|
2016
|
|
|
|
311,667
|
|
|
|
0
|
|
|
|
245,168
|
|
|
|
105,016
|
|
|
|
123,420
|
|
|
|
|
|
|
|
66,965
|
|
|
|
852,235
|
|
D.J. Rodgers
Sr. Vice Pres. &
Pres. Engines Group
|
|
|
2016
2015
2014
|
|
|
|
457,150
443,333
425,000
|
|
|
|
0
0
0
|
|
|
|
451,929
368,936
331,311
|
|
|
|
193,700
246,012
227,997
|
|
|
|
181,031
247,380
122,400
|
|
|
|
200,000
65,000
140,000
|
|
|
|
100,156
88,622
45,884
|
|
|
|
1,583,967
1,459,283
1,292,592
|
|
W.H. Reitman
Sr. Vice Pres. &
Pres. Global Support
|
|
|
2016
2015
2014
|
|
|
|
384,375
373,000
360,167
|
|
|
|
0
0
0
|
|
|
|
247,302
158,939
208,468
|
|
|
|
83,440
105,994
101,984
|
|
|
|
178,943
208,134
103,728
|
|
|
|
576,000
261,000
404,000
|
|
|
|
272,300
233,048
171,447
|
|
|
|
1,742,360
1,340,115
1,349,794
|
|
H.L. Redman
Sr. Vice Pres. &
Pres. Turf & Consumer Products
|
|
|
2016
2015
|
|
|
|
348,500
339,000
|
|
|
|
0
0
|
|
|
|
224,273
183,089
|
|
|
|
96,088
121,996
|
|
|
|
138,006
189,162
|
|
|
|
210,000
77,000
|
|
|
|
90,540
78,338
|
|
|
|
1,107,407
988,585
|
|
K.M. Buono
Vice President, General Counsel & Secretary
|
|
|
2016
|
|
|
|
402,000
|
|
|
|
0
|
|
|
|
293,923
|
|
|
|
125,996
|
|
|
|
106,128
|
|
|
|
|
|
|
|
70,143
|
|
|
|
998,190
|
|
Column (a): Effective August 17, 2015, Mr. Rodgers, who previously served as Senior Vice President
and Chief Financial Officer, was appointed Senior Vice President and President Engines Group and Mr. Schwertfeger was appointed Senior Vice President and Chief Financial Officer. Effective September 1, 2016, Mr. Reitmans
title changed from Senior Vice President and President Global Services to Senior Vice President and President Global Support.
Column (b): Mr. Schwertfeger has been employed by the Company since 2008 but is a named executive officer for the first time in fiscal
2016. Ms. Buono has been employed by the Company since February 2015 but is also a named executive officer for the first time in fiscal 2016. In accordance with SEC rules and related guidance, information for fiscal years 2015 and 2014 is not
required to be presented for Mr. Schwertfeger or Ms. Buono. Mr. Redman has been employed by the company (or a predecessor) since 1995 but was a named executive officer for the first time in fiscal 2015. In accordance with SEC rules
and related guidance, information for fiscal year 2014 is not required to be presented for Mr. Redman.
Column (c): Officers received
base salary increases for fiscal 2016.
Column (e): Stock awards made in each year included restricted stock (or RSUs), deferred stock,
performance shares and PSUs. Restricted stock, RSUs and deferred stock are valued at the grant date value of the award. Performance shares granted in fiscal 2014 are valued based on the probable outcome of performance conditions using the Monte
Carlo simulation methodology and PSUs granted in fiscal 2015
28
and fiscal 2016 are valued using the fair market value of the companys common stock on the date of grant, as more fully discussed in Note 14 of the Notes to the Consolidated Financial
Statements of the companys Form 10-K. The value of the performance share and PSU awards at the fiscal 2016, fiscal 2015 and fiscal 2014 grant dates, respectively, assuming the highest level of performance is achieved, would be $1,607,920,
$1,559,877 and $1,407,302 for Mr. Teske, $387,254, $369,068 and $320,746 for Mr. Rodgers, and $166,762, $158,925 and $143,501 for Mr. Reitman. The value of the PSUs at the fiscal 2015 and fiscal 2016 grant dates, assuming the highest
level of performance is achieved, would be $183,028 and $192,234 for Mr. Redman. The value of the PSUs at the fiscal 2016 grant date, assuming the highest level of performance is achieved, would be $210,144 and $251,934, respectively, for
Mr. Schwertfeger and Ms. Buono. As noted in the CD&A, the fiscal 2014 performance shares paid out at 67% of target.
Column
(f): The reported amounts are the grant date values of the awards. For the stock option grants made in August 2015, the assumptions made in determining the Black-Scholes value included an exercise price and fair market value of $19.90 per share, an
expected life of 5.5 years, an interest rate of 1.69%, a daily stock price volatility of 25.12%, and an expected dividend yield of 2.51%. Assumptions used in valuing fiscal 2015 and fiscal 2014 stock options are stated in Note 14 of the Notes to the
Consolidated Financial Statements of the companys Form 10-K.
Column (h): The reported amounts include changes in the present value
of pension benefits for the relevant fiscal year. The increase in present value from fiscal 2015 did not result from any plan or benefit change; rather, it was predominantly attributable to declining interest rates, which reduced the discount rate
from 4.55% to 3.75%. Earnings on account balances in the companys supplemental defined contribution plan are not included because the applicable interest rate is not above-market or preferential.
Column (i): Amounts include professional fees for financial advice, company contributions to 401(k) and nonqualified deferred compensation
plans, premiums paid by the company for life insurance, expenses related to an expatriate assignment, and private use of the company plane by the CEO. Of these items, those exceeding $10,000 for fiscal 2016 include company contributions to
retirement plans of $250,728 for Mr. Teske, $66,965 for Mr. Schwertfeger, $93,856 for Mr. Rodgers, $104,351 for Mr. Reitman, $80,690 for Mr. Redman and $70,143 for Ms. Buono, life insurance premiums paid by the company
totaling $22,162 for Mr. Teske and $12,350 for Mr. Reitman, and expatriate expenses totaling $155,599 for Mr. Reitman. In addition, the amounts include $4,673 for use of the company plane by Mr. Teske. Dividends and dividend
equivalents on restricted stock/RSUs and deferred stock were not included in fiscal years 2014, 2015 or 2016.
All of the compensation
paid to the named executive officers was calculated and paid pursuant to the companys compensation and benefit plans rather than the companys standard change of control agreement.
29
Cash and Stock Awards
The following tables show cash and stock awards made to the named executive officers for fiscal 2016, their outstanding equity awards at the
end of fiscal 2016, and the gains attributable to stock options they exercised or stock awards that vested during fiscal 2016. The companys fiscal 2016 financial statements include expenses associated with stock awards granted in August 2015
and cash awards paid in August 2016.
GRANTS OF PLAN-BASED AWARDS IN FISCAL YEAR 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Future Payouts Under
Non-Equity Incentive Plan Awards
|
|
|
Estimated Future Payouts Under
Equity Incentive Plan Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
(a)
|
|
Grant
Date
(b)
|
|
|
Approval
Date
(c)
|
|
|
Threshold
($) (d)
|
|
|
Target
($) (e)
|
|
|
Maximum
($) (f)
|
|
|
Threshold
(#) (g)
|
|
|
Target
(#) (h)
|
|
|
Maximum
(#) (i)
|
|
|
All Other
Stock
Awards:
Number of
Shares of
Stock or
Units
(#) (j)
|
|
|
All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#) (k)
|
|
|
Exercise
or Base
Price of
Option
Awards
($/Share)
(l)
|
|
|
Grant
Date Fair
Value of
Stock &
Option
Awards
($) (m)
|
|
T.J. Teske
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Award
|
|
|
8/31/15
|
|
|
|
8/7/15
|
|
|
|
|
|
|
|
1,028,500
|
|
|
|
2,057,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Option
|
|
|
8/18/15
|
|
|
|
8/11/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
288,170
|
|
|
|
19.90
|
|
|
|
1,071,992
|
|
Stock Award
|
|
|
8/18/15
|
|
|
|
8/11/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,400
|
|
|
|
|
|
|
|
|
|
|
|
803,960
|
|
PSUs
|
|
|
8/18/15
|
|
|
|
8/11/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,100
|
|
|
|
40,400
|
|
|
|
80,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
803,960
|
|
|
|
|
|
|
M.A. Schwertfeger
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Award
|
|
|
8/31/15
|
|
|
|
8/7/15
|
|
|
|
|
|
|
|
195,000
|
|
|
|
390,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Option
|
|
|
8/18/15
|
|
|
|
8/11/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28,230
|
|
|
|
19.90
|
|
|
|
105,016
|
|
Stock Award
|
|
|
8/18/15
|
|
|
|
8/11/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,040
|
|
|
|
|
|
|
|
|
|
|
|
140,096
|
|
PSUs
|
|
|
8/18/15
|
|
|
|
8/11/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,320
|
|
|
|
5,280
|
|
|
|
10,560
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
105,072
|
|
|
|
|
|
|
D.J. Rodgers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Award
|
|
|
8/31/15
|
|
|
|
8/7/15
|
|
|
|
|
|
|
|
275,628
|
|
|
|
551,256
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Option
|
|
|
8/18/15
|
|
|
|
8/11/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
52,070
|
|
|
|
19.90
|
|
|
|
193,700
|
|
Stock Award
|
|
|
8/18/15
|
|
|
|
8/11/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,980
|
|
|
|
|
|
|
|
|
|
|
|
258,302
|
|
PSUs
|
|
|
8/18/15
|
|
|
|
8/11/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,433
|
|
|
|
9,730
|
|
|
|
19,460
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
193,627
|
|
|
|
|
|
|
W.H. Reitman
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Award
|
|
|
8/31/15
|
|
|
|
8/7/15
|
|
|
|
|
|
|
|
231,750
|
|
|
|
463,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Option
|
|
|
8/18/15
|
|
|
|
8/11/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,430
|
|
|
|
19.90
|
|
|
|
83,440
|
|
Stock Award
|
|
|
8/18/15
|
|
|
|
8/11/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,590
|
|
|
|
|
|
|
|
|
|
|
|
111,241
|
|
Stock Award
|
|
|
11/4/15
|
|
|
|
10/19/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,000
|
|
|
|
|
|
|
|
|
|
|
|
52,680
|
|
PSUs
|
|
|
8/18/15
|
|
|
|
8/11/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,048
|
|
|
|
4,190
|
|
|
|
8,380
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
83,381
|
|
|
|
|
|
|
H.L. Redman
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Award
|
|
|
8/31/15
|
|
|
|
8/7/15
|
|
|
|
|
|
|
|
210,120
|
|
|
|
420,240
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Option
|
|
|
8/18/15
|
|
|
|
8/11/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,830
|
|
|
|
19.90
|
|
|
|
96,088
|
|
Stock Award
|
|
|
8/18/15
|
|
|
|
8/11/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,440
|
|
|
|
|
|
|
|
|
|
|
|
128,156
|
|
PSUs
|
|
|
8/18/15
|
|
|
|
8/11/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,208
|
|
|
|
4,830
|
|
|
|
9,660
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
96,117
|
|
|
|
|
|
|
K.M. Buono
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Award
|
|
|
8/31/15
|
|
|
|
8/7/15
|
|
|
|
|
|
|
|
161,600
|
|
|
|
323,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Option
|
|
|
8/18/15
|
|
|
|
8/11/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33,870
|
|
|
|
19.90
|
|
|
|
125,996
|
|
Stock Award
|
|
|
8/18/15
|
|
|
|
8/11/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,440
|
|
|
|
|
|
|
|
|
|
|
|
167,956
|
|
PSUs
|
|
|
8/18/15
|
|
|
|
8/11/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,583
|
|
|
|
6,330
|
|
|
|
12,660
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
125,967
|
|
Column (b): The Grant Date is the day when a cash award was paid to a named executive officer or an equity
award was granted to a named executive officer.
Column (c): The Approval Date is the day when the Compensation Committee approved an
award.
Columns (d) thru (f): The Threshold is the cash award the named executive officer would have received if the performance
factor had been 0. The Target is the cash award the named executive officer would have received if the performance factor had been 1. The Maximum is the cash award the named executive officer would have received if the performance factor had been 2
or more.
30
Columns (g) thru (i): The vesting of PSUs is based on targets related to the companys
operating income over the three-year performance period (fiscal years 2016, 2017 and 2018). The number of PSUs earned, if any, depends on actual company performance and can range between 0% and 200% of the amount reported in the Target column above
plus PSUs attributable to any dividends that are declared on the companys common stock during the performance period. Any PSUs earned will vest at the end of the three-year performance period, and, upon vesting, will be converted into shares
of the companys common stock.
Column (j): Awards were made in restricted stock, except that the awards to Mr. Reitman were made
in RSUs. These awards vest three years from the date of grant, as previously discussed.
OUTSTANDING EQUITY
AWARDS AT 2016 FISCAL YEAR-END
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
Name (a)
|
|
No. of
Securities
Underlying
Unexercised
Options
Exercisable
(#) (b)
|
|
|
No. of
Securities
Underlying
Unexercised
Options
Unexercisable
(#) (c)
|
|
|
Option
Exercise
Price ($/
Share)
(d)
|
|
|
Option
Expiration
Date
(e)
|
|
|
No. of
Shares or
Units of
Stock That
Have Not
Vested
(#) (f)
|
|
|
Market
Value of
Shares or
Units of
Stock That
Have Not
Vested
($) (g)
|
|
|
Equity
Incentive
Plan
Awards:
No. of
Unearned
Shares,
Units or
Other Rights
That Have
Not Vested
(#) (h)
|
|
|
Equity
Incentive
Plan
Awards
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights
that
Have
Not Vested
($) (i)
|
|
T.J. Teske
|
|
|
6,788
|
|
|
|
|
|
|
|
16.20
|
|
|
|
8/31/16
|
|
|
|
41,060
|
|
|
|
865,545
|
|
|
|
28,610
|
|
|
|
603,099
|
|
|
|
|
156,340
|
|
|
|
|
|
|
|
18.85
|
|
|
|
8/31/17
|
|
|
|
39,360
|
|
|
|
829,709
|
|
|
|
10,835
|
|
|
|
228,402
|
|
|
|
|
|
|
|
|
192,680
|
|
|
|
20.82
|
|
|
|
8/31/18
|
|
|
|
39,620
|
|
|
|
835,190
|
|
|
|
10,374
|
|
|
|
218,684
|
|
|
|
|
|
|
|
|
272,970
|
|
|
|
18.83
|
|
|
|
10/21/24
|
|
|
|
37,390
|
|
|
|
788,181
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
288,170
|
|
|
|
19.90
|
|
|
|
8/18/25
|
|
|
|
40,400
|
|
|
|
851,632
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
M.A. Schwertfeger
|
|
|
|
|
|
|
16,270
|
|
|
|
18.83
|
|
|
|
10/21/24
|
|
|
|
1,250
|
|
|
|
26,350
|
|
|
|
2,860
|
|
|
|
60,289
|
|
|
|
|
|
|
|
|
28,230
|
|
|
|
19.90
|
|
|
|
8/18/25
|
|
|
|
3,790
|
|
|
|
79,893
|
|
|
|
646
|
|
|
|
13,618
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,960
|
|
|
|
83,477
|
|
|
|
1,356
|
|
|
|
28,584
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,230
|
|
|
|
47,008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,040
|
|
|
|
148,403
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
D.J. Rodgers
|
|
|
20,705
|
|
|
|
|
|
|
|
18.85
|
|
|
|
8/31/17
|
|
|
|
9,270
|
|
|
|
195,412
|
|
|
|
6,520
|
|
|
|
137,442
|
|
|
|
|
|
|
|
|
43,930
|
|
|
|
20.82
|
|
|
|
8/31/18
|
|
|
|
8,750
|
|
|
|
184,450
|
|
|
|
2,563
|
|
|
|
54,028
|
|
|
|
|
|
|
|
|
64,570
|
|
|
|
18.83
|
|
|
|
10/21/24
|
|
|
|
9,030
|
|
|
|
190,352
|
|
|
|
2,498
|
|
|
|
52,658
|
|
|
|
|
|
|
|
|
52,070
|
|
|
|
19.90
|
|
|
|
8/18/25
|
|
|
|
8,840
|
|
|
|
186,347
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,980
|
|
|
|
273,618
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
W.H. Reitman
|
|
|
19,300
|
|
|
|
|
|
|
|
18.85
|
|
|
|
8/31/17
|
|
|
|
4,520
|
|
|
|
95,282
|
|
|
|
2,920
|
|
|
|
61,554
|
|
|
|
|
|
|
|
|
19,650
|
|
|
|
20.82
|
|
|
|
8/31/18
|
|
|
|
4,080
|
|
|
|
86,006
|
|
|
|
1,104
|
|
|
|
23,272
|
|
|
|
|
|
|
|
|
27,820
|
|
|
|
18.83
|
|
|
|
10/21/24
|
|
|
|
4,040
|
|
|
|
85,163
|
|
|
|
1,076
|
|
|
|
22,682
|
|
|
|
|
|
|
|
|
22,430
|
|
|
|
19.90
|
|
|
|
8/18/25
|
|
|
|
3,000
|
|
|
|
63,240
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,015
|
|
|
|
84,643
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,741
|
|
|
|
121,028
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,060
|
|
|
|
64,502
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
H.L. Redman
|
|
|
22,530
|
|
|
|
|
|
|
|
18.85
|
|
|
|
8/31/17
|
|
|
|
5,050
|
|
|
|
106,454
|
|
|
|
3,320
|
|
|
|
69,986
|
|
|
|
|
|
|
|
|
22,350
|
|
|
|
20.82
|
|
|
|
8/31/18
|
|
|
|
4,760
|
|
|
|
100,341
|
|
|
|
1,271
|
|
|
|
26,793
|
|
|
|
|
|
|
|
|
32,020
|
|
|
|
18.83
|
|
|
|
10/21/24
|
|
|
|
4,600
|
|
|
|
96,968
|
|
|
|
1,240
|
|
|
|
26,139
|
|
|
|
|
|
|
|
|
25,830
|
|
|
|
19.90
|
|
|
|
8/18/25
|
|
|
|
4,390
|
|
|
|
92,541
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,440
|
|
|
|
135,755
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
K.M. Buono
|
|
|
|
|
|
|
33,870
|
|
|
|
19.90
|
|
|
|
8/18/25
|
|
|
|
8,000
|
|
|
|
168,640
|
|
|
|
1,625
|
|
|
|
34,255
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,440
|
|
|
|
177,915
|
|
|
|
|
|
|
|
|
|
Column (b): Options that expired on August 31, 2016 vested on August 16, 2014 and options that expire
on August 31, 2017 vested on August 14, 2015.
Column (c): Options that expire on August 31, 2018 vested on August 20,
2016; options that expire on October 21, 2024 vest on October 21, 2017; and options that expire on August 18, 2025 vest on August 18, 2018.
31
Column (f): All restricted stock awards and RSUs reported above were granted, in descending order
as shown in the table, on August 16, 2011, August 14, 2012, August 20, 2013, August 19, 2014 and August 18, 2015, and vest on August 16, 2016, August 14, 2017, August 20,
2018, August 19, 2019 and August 18, 2018, respectively. In connection with his Expatriate Agreement, Mr. Reitman was granted 3,000 RSUs on December 2, 2013, which will vest on December 2, 2018, and 3,000 RSUs on
November 4, 2015, which will vest on November 4, 2018. The amounts above include dividend equivalents on RSUs.
Column (g): Based
on the $21.08 per share closing price of a share of the companys common stock as of the last business day of fiscal 2016.
Column
(h) and (i): The amounts in these columns are related to the performance share awards made in fiscal 2014 and to PSUs awarded in fiscal 2015 and 2016. The amounts above include dividend equivalents on performance shares and PSUs. Vesting of
performance shares granted in fiscal 2014 depended on performance of the companys stock price relative to a comparator group of companies over a three-year performance period. Vesting of PSUs granted in fiscal 2015 and fiscal 2016 will depend
on the companys aggregate operating income during fiscal years 2015, 2016 and 2017 for the fiscal 2015 grants and during fiscal years 2016, 2017 and 2018 for the fiscal 2016 grants, in each case relative to a cumulative operating income target
for each performance period. For all awards, the final earned award can range from 0% to 200% of the target depending on performance. For the three-year performance period that concluded at the end of fiscal 2016, the performance share awards
granted in fiscal 2014 vested at 67% of target. The amounts listed above for the fiscal 2015 and fiscal 2016 PSUs are based on the threshold value of each award (25%) multiplied by the $21.08 per share closing price of a share of the
companys common stock as of last business day of fiscal 2016.
OPTION EXERCISES AND STOCK VESTED DURING
FISCAL YEAR 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
Name
(a)
|
|
No. of Shares
Acquired on Exercise
(#) (b)
|
|
|
Value Realized on
Exercise
($) (c)
|
|
|
No. of Shares
Acquired on Vesting
(#) (d)
|
|
|
Value Realized on
Vesting
($) (e)
|
|
T.J. Teske
|
|
|
350,008
|
|
|
|
976,244
|
|
|
|
67,710
|
|
|
|
1,354,200
|
|
M.A. Schwertfeger
|
|
|
0
|
|
|
|
0
|
|
|
|
750
|
|
|
|
16,785
|
|
D.J. Rodgers
|
|
|
66,665
|
|
|
|
286,591
|
|
|
|
10,790
|
|
|
|
215,800
|
|
W.R. Reitman
|
|
|
33,839
|
|
|
|
79,733
|
|
|
|
20,160
|
|
|
|
403,200
|
|
H.L. Redman
|
|
|
65,450
|
|
|
|
106,248
|
|
|
|
25,400
|
|
|
|
508,000
|
|
K.M. Buono
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Pensions and Other Benefits
The company provides officers with pension benefits under a defined benefit retirement plan and a supplemental retirement plan. The present
value of these benefits and certain other information for each participating named executive officer is shown in the following table.
32
PENSION BENEFITS FOR FISCAL YEAR 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
(a)
|
|
Plan Name
(b)
|
|
Number of
Years
Credited
Service
(#) (c)
|
|
|
Present Value
of Accumulated
Benefit
($) (d)
|
|
|
Payments
During Last
Fiscal Year
($) (e)
|
|
T.J. Teske
|
|
B&S Retirement Plan
|
|
|
|
|
|
|
654,000
|
|
|
|
|
|
|
|
B&S Supplemental Executive Retirement Plan
|
|
|
|
5,753,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
20.10
|
|
|
|
6,407,000
|
|
|
|
0
|
|
D.J. Rodgers
|
|
B&S Retirement Plan
|
|
|
|
|
|
|
165,000
|
|
|
|
|
|
|
|
B&S Supplemental Executive Retirement Plan
|
|
|
|
548,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
9.60
|
|
|
|
713,000
|
|
|
|
0
|
|
W.H. Reitman
|
|
B&S Retirement Plan
|
|
|
|
|
|
|
1,036,000
|
|
|
|
|
|
|
|
B&S Supplemental Executive Retirement Plan
|
|
|
|
2,427,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
23.38
|
|
|
|
3,463,000
|
|
|
|
0
|
|
H.L. Redman
|
|
B&S Retirement Plan
|
|
|
|
|
|
|
214,000
|
|
|
|
|
|
|
|
B&S Supplemental Executive Retirement Plan
|
|
|
|
718,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
9.52
|
|
|
|
932,000
|
|
|
|
0
|
|
Column (a): Mr. Schwertfeger and Ms. Buono were each hired after the January 1, 2008 plan
eligibility freeze.
The amounts in the preceding table show the present value of accumulated benefits as of July 1, 2016. The
amounts were calculated using the RP2014 mortality table backed off to 2007 projected generationally using projection scale 2007 and a discount rate of 3.75%. Material assumptions used in determining values include that the beneficiaries receive
life only annuities at the earliest age at which unreduced benefits are payable (age 62 or 30 years of service), and that no beneficiary dies prior to retirement. For more detailed information about this calculation see Retirement and Deferred
Compensation Plans in the CD&A.
Mr. Reitman is eligible for early retirement under the companys Retirement Plan and
Supplemental Executive Retirement Plan. Early retirement is available to employees who (1) attain 30 years of service with the company, (2) reach age 55 with 10 or more years of service with the company, or (3) attain age 65. If an
employee retires with 30 years of service, there is no reduction in the retirement benefit, and such retiree is eligible to continue medical coverage for up to 10 years but not beyond age 65 as long as the retiree pays the same premiums as active
employees. If an employee retires after reaching age 55 and with at least 10 years of service, the benefit is reduced by 4% for each year of age less than age 62 or each year of service less than 30, whichever is less. The benefit is not reduced if
the employee is at least age 62 with 10 years of service or age 65.
* * * * *
The following table shows contributions and earnings during fiscal 2016 and fiscal year-end balances in the companys nonqualified
deferred compensation plan for each named executive officer. A named executive officer may defer under the plan up to 75% of his or her salary and bonus, reduced by assumed deferrals of 6% of base salary under the companys 401(k) plan. Company
contributions to a participants account are described in Retirement and Deferred Compensation Plans in the CD&A. Distributions are made in a single lump sum or 10 annual installments beginning on the later of a
participants retirement or age 62.
33
NONQUALIFIED DEFERRED COMPENSATION FOR FISCAL YEAR 2016
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|
Name
(a)
|
|
Executive
Contributions
in Last Fiscal
Year
($) (b)
|
|
|
Registrant
Contributions
in Last Fiscal
Year
($) (c)
|
|
|
Aggregate
Earnings
(Loss) in
Last
Fiscal
Year
($) (d)
|
|
|
Aggregate
Withdrawals/
Distributions
($) (e)
|
|
|
Aggregate
Balance at
Last Fiscal
Year End
($) (f)
|
|
T.J. Teske
|
|
|
112,537
|
|
|
|
213,628
|
|
|
|
(1,331
|
)
|
|
|
0
|
|
|
|
1,666,692
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|
M.A. Schwertfeger
|
|
|
11,674
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|
|
|
29,865
|
|
|
|
997
|
|
|
|
0
|
|
|
|
77,866
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|
D.J. Rodgers
|
|
|
40,677
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|
|
|
56,756
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|
|
|
(5,425
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)
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|
|
0
|
|
|
|
471,000
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|
W.H. Reitman
|
|
|
60,089
|
|
|
|
67,251
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|
|
|
6,027
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|
|
|
0
|
|
|
|
595,229
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|
H.L. Redman
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|
|
82,266
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|
|
|
45,547
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|
|
|
9,488
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|
|
|
0
|
|
|
|
407,519
|
|
K.M. Buono
|
|
|
30,143
|
|
|
|
33,043
|
|
|
|
3,098
|
|
|
|
0
|
|
|
|
78,974
|
|
Column (b): Amounts reported as executive contributions are included in the Salary column of the Summary
Compensation Table. These amounts include the following contributions by the named executive officers related to compensation earned in fiscal 2016 and deferred subsequent to the end of fiscal 2016: Mr. Teske $54,024, Mr. Schwertfeger
$9,874, Mr. Rodgers $10,862, Mr. Reitman $35,789, Mr. Redman $11,040 and Ms. Buono $10,613.
Column (c): The company
contributions include 401(k) plan restoration matching and non-elective contributions equal to 100% of the named executive officers first 2% of contributions plus 50% of the named executive officers next 4% of contributions plus a
non-elective contribution of 3% of each named executive officers salary and non-equity incentive compensation. Each officer also receives a contribution ranging from 3% to 8% of salary and non-equity incentive compensation based on years of
service as an elected officer. These amounts include the following contributions by the company related to compensation earned in fiscal 2016 and deferred subsequent to the end of fiscal 2016: Mr. Teske $101,955, Mr. Schwertfeger $16,061,
Mr. Rodgers $20,649, Mr. Reitman $25,852, Mr. Redman $20,856 and Ms. Buono $13,673.
Columns (d) and (f): The
aggregate balances include the following amounts that were previously reported as compensation for the named executive officers in the Summary Compensation Table for previous years: Mr. Teske $1,103,401, Mr. Rodgers $263,402,
Mr. Reitman $308,423 and Mr. Redman $97,926. Mr. Schwertfeger and Ms. Buono are named executive officers for the first time in fiscal 2016 and, therefore, they have not been included in the companys prior Summary
Compensation Tables.
AGREEMENTS WITH EXECUTIVES
As described in more detail in the CD&A above, under Employment and Change of Control Agreements and Other Benefits, the
company has entered into employment agreements and change of control agreements with each of the executives named in the Summary Compensation Table and an Expatriate Agreement with Mr. Reitman.
Assuming the executives named in the Summary Compensation Table were terminated other than for cause on July 1, 2016 (the last business
day of fiscal 2016), each named executive officer would have been entitled under his or her employment agreement to continue to receive a base salary through December 31, 2017 and the same medical plan coverage that would have been available to
other salaried employees. The aggregate amount of the salary continuation payments that would have been made to each named executive officer are: Mr. Teske $1,403,000, Mr. Schwertfeger $488,000, Mr. Rodgers $689,000, Mr. Reitman
$579,000, Mr. Redman $525,000 and Ms. Buono $606,000. The value of continued medical plan coverage for each named executive officer would have been as follows: Mr. Teske $17,249, Mr. Schwertfeger $5,390, Mr. Rodgers $17,249,
Mr. Reitman $12,398, Mr. Redman $17,249 and Ms. Buono $12,398.
The employment agreements terminate upon a named executive
officers death or disability. In the event of an officers disability, the officer will continue to receive compensation for six months following termination, reduced by any disability payments which the officer is entitled to receive.
The payments that would have been made to each named executive officer, assuming a termination for disability on July 1, 2016, are as follows: Mr.
34
Teske $468,000, Mr. Schwertfeger $163,000, Mr. Rodgers $230,000, Mr. Reitman $175,000, Mr. Redman $193,000 and Ms. Buono $202,000.
The named executive officers are not entitled to a death benefit under their employment agreements, but the companys executive life
insurance program provides life insurance equal to two times the named executive officers annual base salary if the named executive officer dies while employed by the company. In addition, named executive officers elected prior to 2010 (i.e.,
Messrs. Teske, Rodgers, Reitman and Redman) are also entitled to a death benefit of $400,000 following retirement. The death benefits that would have been paid with respect to each named executive officer, assuming the named executive officer died
on July 1, 2016, are as follows: Mr. Teske $1,870,000, Mr. Schwertfeger $650,000, Mr. Rodgers $919,000, Mr. Reitman $773,000, Mr. Redman $700,000 and Ms. Buono $808,000.
A named executive officers termination of employment due to death results in the immediate vesting of all stock options, restricted
stock and RSUs. For PSUs, the award is paid on a pro rata basis. A named executive officers termination of employment due to disability results in the immediate vesting of all restricted stock and RSUs. Stock options remain subject to vesting
in the case of a termination due to disability; provided that the Compensation Committee may elect to accelerate such vesting. For PSUs, the award is paid on a pro rata basis due to disability. Restricted stock and RSUs are not forfeited in the
event of a named executive officers retirement, but continue to vest in accordance with the terms of the grants to which they relate. An executive who retires may request that the Compensation Committee vest the named executive officers
stock options upon retirement, and such a request is normally granted. In addition, the Committee may allow performance shares and PSUs to be forfeited on retirement or may authorize payment to the named executive officer at the end of the
performance period of all or a portion of the award. The value of the unvested stock options, restricted stock, RSUs, performance shares and PSUs for each named executive officer as of July 1, 2016 was Mr. Teske $6,677,870,
Mr. Schwertfeger $589,558, Mr. Rodgers $1,599,997, Mr. Reitman $847,775, Mr. Redman $816,682 and Ms. Buono $431,748, based upon the same assumptions used to calculate change of control payments.
If the change of control agreements had become effective on July 1, 2016, the executives named in the Summary Compensation Table would
have been entitled to receive the following amounts:
CHANGE IN CONTROL PAYMENTS
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|
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|
|
Name
|
|
Severance
Payment
|
|
|
Pension
Enhancements
|
|
|
Outplacement
Services
|
|
|
Tax
Gross-up
|
|
|
Early Stock
Vesting
|
|
|
Other
Benefits
|
|
|
Total
|
|
T.J. Teske
|
|
$
|
5,408,127
|
|
|
$
|
296,000
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|
|
$
|
12,000
|
|
|
$
|
6,463,083
|
|
|
$
|
6,677,870
|
|
|
$
|
956,022
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|
|
$
|
19,813,102
|
|
M.A. Schwertfeger
|
|
|
1,420,260
|
|
|
|
|
|
|
|
12,000
|
|
|
|
|
|
|
|
589,558
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|
|
|
130,707
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|
|
|
2,152,525
|
|
D.J. Rodgers
|
|
|
1,530,384
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|
|
|
74,000
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|
|
|
12,000
|
|
|
|
1,540,176
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|
|
|
1,599,997
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|
|
|
214,944
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|
|
|
4,971,502
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|
W.H. Reitman
|
|
|
1,828,628
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|
|
|
121,000
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|
|
|
12,000
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|
|
|
1,199,543
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|
|
|
847,775
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|
|
|
295,754
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|
|
|
4,304,700
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|
H.L. Redman
|
|
|
1,629,864
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|
|
|
97,000
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|
|
|
12,000
|
|
|
|
1,250,102
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|
|
|
816,682
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|
|
|
270,129
|
|
|
|
4,075,777
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|
K.M. Buono
|
|
|
2,089,126
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|
|
|
|
|
|
|
12,000
|
|
|
|
|
|
|
|
431,748
|
|
|
|
211,608
|
|
|
|
2,744,483
|
|
The Pension Enhancements values in the preceding table show the increase in the present value of each named
executive officers accumulated retirement benefit under the companys non-qualified retirement plan if a defined change of control had occurred on July 1, 2016. The valuation assumes a three-year addition to each named executive
officers credited years of service, survival of each named executive officer until he reaches the earlier of age 62 or 30 years of service, and payment of a life-only annuity. The valuation is based on the RP2014 mortality table backed off to
2007 projected generationally using projection scale 2007 and a discount rate of 3.75%.
In the Early Stock Vesting column, the value of
accelerating the exercise date of stock options was determined for options that were not exercisable on July 1, 2016, but were in the money on that date. The number of such options was multiplied by the difference between the market price of
the stock on July 1, 2016 and the exercise price of the options. The value of accelerating the vesting date of restricted stock and RSUs was calculated by multiplying the number of such shares that were subject to restrictions on July 1,
2016 by the fair market value of the companys common stock on that date. The value of performance shares reflects the actual payout of these awards at 67% of target. For PSUs, the value of the award was calculated as if target performance was
achieved on July 1, 2016 and the award was paid on a pro rata basis.
35
The amounts in the Other Benefits column consist of the following for each of the executives
named in the Summary Compensation Table:
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Deferred
Compensation
|
|
|
Life
Insurance
|
|
|
Financial
Planning
|
|
|
Medical
Insurance
|
|
|
Company
Plane (a)
|
|
|
Total
|
|
T.J. Teske
|
|
$
|
720,038
|
|
|
$
|
66,486
|
|
|
$
|
15,000
|
|
|
$
|
34,498
|
|
|
$
|
120,000
|
|
|
$
|
956,022
|
|
M.A. Schwertfeger
|
|
|
104,926
|
|
|
|
0
|
|
|
|
15,000
|
|
|
|
10,781
|
|
|
|
|
|
|
|
130,707
|
|
D.J. Rodgers
|
|
|
146,546
|
|
|
|
18,900
|
|
|
|
15,000
|
|
|
|
34,498
|
|
|
|
|
|
|
|
214,944
|
|
W.H. Reitman
|
|
|
218,908
|
|
|
|
37,050
|
|
|
|
15,000
|
|
|
|
24,796
|
|
|
|
|
|
|
|
295,754
|
|
H.L. Redman
|
|
|
191,081
|
|
|
|
29,550
|
|
|
|
15,000
|
|
|
|
34,498
|
|
|
|
|
|
|
|
270,129
|
|
K.M. Buono
|
|
|
171,813
|
|
|
|
0
|
|
|
|
15,000
|
|
|
|
24,796
|
|
|
|
|
|
|
|
211,608
|
|
(a)
|
The Compensation Committee has authorized Mr. Teske as CEO to use the company plane for private use up to 20 hours per calendar year. The purpose of the authorization is to permit Mr. Teske to spend time on
company-related business that he would otherwise spend in transit for personal business or vacation. The amount listed in the table represents the estimated incremental cost to the company for three years of benefits under this policy. The estimated
cost was derived by multiplying 20 hours/year of plane use by $2,000/hour to cover the cost of fuel, oil and maintenance.
|
36
IV. OTHER MATTERS