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Item 5.02
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Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers
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2018 Annual Management Incentive Program
On February 27, 2018, the Compensation Committee (the “Committee”) of the Board of Directors of LCI Industries (“LCII” or the “Company”) approved the 2018 Annual Incentive Program for the Company’s senior officers (the “2018 Program”), pursuant to the LCI Industries Equity Award and Incentive Plan, as amended and restated (the “Plan”). Under the 2018 Program, participants can earn cash incentive compensation based on the results of Company financial performance measures for the program year, which for 2018 is based on goals for Return on Invested Capital (as it may be adjusted as described therein, “ROIC”) and, for certain participants, gross margin improvement.
With respect to the Company’s Chief Executive Officer (CEO) and President, the 2018 Program provides the potential for cash bonus payments for 2018 ROIC performance per the schedule below. When ROIC performance is between inflection points, linear interpolation will be used to determine cash bonus payouts.
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ROIC Performance
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Multiple of Base Salary
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20% (Threshold)
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0.25x
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25%
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0.50x
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30%
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1.0x
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35%
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2.0x
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40% (Maximum)
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3.0x
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Up to 10% of the cash incentive award that is calculated based on the formula above is subject to achievement of gross margin improvement targets.
With respect to the Company’s other senior officers participating in the 2018 Program, the 2018 Program provides the potential for cash bonus payments for 2018 ROIC performance per the schedule below. When ROIC performance is between inflection points, linear interpolation will be used to determine cash bonus payouts.
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ROIC Performance
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Multiple of Target Cash
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20% (Threshold)
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0.25x
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25%
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0.50x
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30%
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1.0x
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35%
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2.0x
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40% (Maximum)
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3.0x
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The “Target Cash” for each of the participating senior officers mentioned above is set as a percentage of his or her base salary. Up to 10% of the cash incentive award that is calculated based on the formula above is subject to achievement of gross margin improvement targets.
The 2018 Program includes, among other provisions, termination and clawback provisions.
The description of the 2018 Program contained herein is a summary of the material terms of the 2018 Program, does not purport to be complete, and is qualified in its entirety by reference to the 2018 Program, which is attached to this Current Report on Form 8-K as Exhibit 10.1 and incorporated herein by reference.
Performance Stock Units and Restricted Stock Units
Also on February 27, 2018, the Committee approved terms and conditions for additional incentive grants of performance stock units and restricted stock units for certain of the Company’s senior officers pursuant to the Plan. Two types of performance stock units were awarded: (1) performance stock units subject to the Company’s ROIC performance and (2) performance stock units subject to the Company’s Earnings Per Share (“EPS”) performance.
The 2018 performance stock units tied to ROIC provide that the number of performance stock units that will be earned will be based on whether and to what extent ROIC performance goals for 2018 are satisfied, and that any earned performance stock units will vest on March 1, 2020. The Company’s ROIC (as it may be adjusted) for fiscal 2018 must be 30% in order for the target number of ROIC performance stock units to be earned, and must be 45% for fiscal 2018 for the maximum number of ROIC performance stock units to be earned, which maximum amount is 400% of the target number of ROIC performance stock units.
The 2018 performance stock units tied to EPS provide that the number of performance stock units that will be earned will be based on whether and to what extent cumulative growth of adjusted EPS exceeds a benchmark determined by the Committee over the two-year performance period of 2018-2019, and that any earned performance stock units will vest on March 1, 2021. The number of EPS performance stock units that can be earned is: (i) if a threshold annualized growth percentage of approximately 7% is achieved, 50% of the target number of performance stock units will be earned; (ii) if a target annualized growth percentage of approximately 14% is achieved, 100% of the target number of performance stock units will be earned; and (iii) if a maximum annualized growth percentage of approximately 22% is achieved, 150% of the target number of performance stock units will be earned.
The 2018 restricted stock units vest over a 3-year period, with one-third vesting each year on the anniversary of the grant date.
The description of the terms of the ROIC performance stock units, the EPS performance stock units, and the restricted stock units contained herein is a summary of the material terms of those awards, does not purport to be complete, and is qualified in its entirety by reference to the
applicable forms of award agreements, which are attached to this Current Report on Form 8-K as Exhibits 10.2, 10.3, and 10.4, respectively, and are incorporated herein by reference.
Form Award Agreements
On February 27, 2018, the Committee also approved new form award agreements under the Plan for equity awards to executive officers and directors, substantially in the form filed as Exhibits 10.2, 10.3, 10.4, and 10.5 to this Current Report on Form 8-K.