WBC Wabco Holdings Inc

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.       Yes       No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.       Yes       No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.       Yes       No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).       Yes       No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a filer, smaller reporting company, or an emerging growth company. See the definitions of large accelerated filer, accelerated filer, smaller reporting company, and emerging growth company in Rule

12b-2

of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule of the Exchange Act).       Yes    ☒  No

The aggregate market value of the voting stock (Common Stock) held by of the registrant as of the close of business on June 30, 2019, the last business day of the registrant’s most recently completed second fiscal quarter, was approximately $6.8 billion based on the closing sale price of the common stock on the New York Stock Exchange on that date. The registrant does not have any common equity.

The company’s Code of Conduct and Ethics and Governance Principles, including our definition of director independence, as well as the charters for the Audit Committee and the CNG Committee are available on our web site under the caption “Investor Relations—Corporate Governance.” The foregoing information is available in print to any shareholder who requests it. Requests should be addressed to Chief Legal Officer and Company Secretary, WABCO Holdings Inc., 1220 Pacific Drive, Auburn Hills, Michigan 48326- 1589.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

We provided shareholders a advisory vote on our executive compensation in May 30, 2019, pursuant to the Dodd-Frank Wall Street Reform and Consumer Protect Act 2010 (“Dodd-Frank Act”) and SEC rules. At our 2019 Annual Meeting of Shareholders, shareholders expressed strong support for the compensation of our NEOs, with approximately 96% of the votes cast (disregarding abstentions) for approval of the pay” advisory vote. We received similar strong support at our two prior annual meetings.

The CNG Committee carefully evaluated the results of the 2019 annual advisory vote, and although the vote is advisory and is not binding on our Board of Directors, the CNG Committee took the strong level of approval into consideration in determining that our current compensation philosophy and objectives remain appropriate for use in determining the compensation of our NEOs.

We believe that our compensation program reinforces our philosophy, has the flexibility to adapt to market conditions and has resulted in pay outcomes that are well-aligned with our business performance.

Our peer group comprises 14 companies reflecting predominantly U.S.-based, publicly-traded companies that operate in the same industry sector, compete with us for executive talent and have executive positions similar in breadth, complexity and global responsibility. Our peer group is reviewed annually by the CNG Committee to ensure its ongoing relevance. Companies within our peer group generally have to three times our revenue, market value and enterprise value.

Our CNG Committee monitors our peer group and may adjust it as appropriate. We generally seek to compensate our executives at approximately the median level of total compensation among similarly-situated executives in our peer group when we set compensation levels for targeted levels of performance. Our compensation philosophy emphasizes incentive pay, including long-term cash incentives and equity-based incentives.

The main features of each NEO’s total compensation as of 2019 are summarized in the following table

(1)

:

As discussed above under “Executive Overview,” we measure and report our results on both a GAAP and a “performance” basis where we exclude unusual, extraordinary and items that may mask the underlying operating results of the company. Similarly, when setting, and measuring achievement against, our financial goals, the CNG Committee uses “performance” measures that exclude such items which include, but may not be limited to, expenses associated with separation, streamlining, acquisition, discrete and tax items and adjustments for foreign exchange rate fluctuations. While some of these costs can be anticipated generally when targets are set at the beginning of the applicable performance period and may be reflected in our annual Operating Plans, others cannot.

Our AIP is based upon achievement of financial and quantitative, performance goals that are primarily derived from our annual Operating Plan. AIP award opportunities are typically set so that achieving the target level of performance results in a cash payment that is approximately at the median or 50th percentile of annual incentives paid by our peer group. The actual payment under an AIP award may be above the 50th percentile in years of strong performance against objectives or below the 50th percentile or zero, depending on the actual level of performance achieved. The CNG Committee and the Board of Directors review and approve our annual Operating Plan to ensure that the AIP goals are sufficiently challenging and set at levels consistent with internal and external market performance expectations.

In March 2019, our CNG Committee determined the maximum amounts payable to our executive officers for AIP awards for the 2019 performance year by establishing a pool equal to 10% of company earnings before interest and taxes with 35% of the pool allocated to our Chief Executive Officer at maximum, subject to any applicable limits under the Omnibus Incentive Plan, and the remainder allocated evenly among the other executive officers at maximum. The AIP pool established by the formula described above represented the maximum amount that the CNG Committee could approve for payment – not the expected amount. Our CNG Committee generally exercises its discretion to pay less than the maximum amount after considering the financial and quantitative, performance goals described below.

The 2019 AIP was designed so that the achievement of financial goals received 80% weighting and the achievement of quantitative, goals received 20% weighting, which is the same weighting as in all prior AIPs since 2008. AIP payouts equal the percentage of the performance goal achieved multiplied by the participant’s annual target AIP percentage. Annual target AIP percentages under this program are established for each participant as a percentage of base salary. Each financial and quantitative, goal may be overachieved and funded up to 200%. The resulting award amounts are then adjusted by an individual performance score ranging from Thus, while the maximum possible overachievement is 400% of target, the highest award we have ever paid to an NEO was 222% of target. In between threshold and maximum performance, achievement levels and payouts are interpolated using a performance curve. Below threshold performance results in a zero payout for the specific metric.

: The AIP performance goals established by the CNG Committee for 2019 included the following financial goals (measured after excluding the impact of foreign exchange), each weighted at 20% of target:

The CNG Committee believes that this mix of financial goals is complementary and well-balanced so that business tradeoffs are appropriately reflected, , sales growth vs. profitability, profit margin vs. additional investment, earnings before taxes vs. cash flow, etc. The 80% weighting on financial goals also ensures that these key drivers of value for shareholders are the primary focus for management. Each year, the target financial goals are set based on our annual Operating Plan, which is designed to represent challenging – but attainable – performance levels. In setting AIP goals, the CNG Committee also considers internal and external performance expectations, the potential impact of global economic conditions on the variability of performance outcomes, the degree to which prior year results were atypical, changes in corporate tax rates and other legislation that may impact the company’s business prospects and other factors that may be relevant in a specific year.

: The AIP performance goals established by the CNG Committee for 2019 included the following quantitative, goals, each weighted at 10% of target:

: For the 2019 AIP, based on our 2019 Operating Plan, our CNG Committee established the following financial goals and quantitative, performance goals in February 2019 and certified the following achievement levels and scores in February 2020:

As a result, the company’s aggregate performance score for the 2019 AIP (applying an 80% weighting for the financial performance goals and 20% for the quantitative, performance goals) was 74.35%. The CNG Committee exercised its discretion to increase payout to 85.0% to recognize the impact on our employees and executives of the announced merger with ZF Friedrichshafen AG and the exceptional additional work that was required of everyone in the company, especially the company’s senior leadership, in executing the potential merger and plan for the future potential integration of the two companies. The 85.0% aggregate performance score was applied to each NEO’s target award.

Lastly, the CNG Committee considered discretionary adjustments to each executive’s calculated award to reflect such executive’s individual performance. The CNG Committee considered individual performance adjustments for each of the other NEOs based on the recommendations of Mr. Esculier. Mr. Esculier’s performance adjustment was determined by the CNG Committee and the independent directors as a group. The CNG Committee approved an individual performance adjustment of an additional 7.22% for Mr. Esculier to recognize his leadership and greater contribution to delivering shareholder value, including the potential merger with ZF Friedrichshafen AG. The CNG Committee approved the individual performance adjustments for the other NEOs based on Mr. Esculier’s assessment of their performance during 2019. The table below shows each target annual incentive award, as adjusted by the company’s achievement of the financial and quantitative corporate goals, adjusted up to 85.0%, and as further adjusted to reflect the individual performance evaluation for each NEO who received an AIP payment for fiscal 2019.

In February 2020, our CNG Committee approved a cash AIP award opportunity based on the achievement of certain defined financial and quantitative, performance goals. The financial performance goals established by our CNG Committee are related to sales/sales growth, performance gross profit margin, and performance Earnings Before Interests & Taxes. One quantitative, performance goal, technical quality ppm was also selected to promote quality production. Each of the financial goals is equally weighted and together they comprise 90% of the plan funding. The quantitative, goal comprises 10% of the plan funding. Each financial and quantitative, goal may be overachieved and funded up to 200%, and resulting award amounts will be further adjusted by an individual performance score ranging from

The performance goals for the Cash LTIP are established on a rolling basis and generally include three to four of the following measures: sales, revenues, earnings (before or after tax), internal rate of return, return on equity, ROIC, income, assets or earnings, earnings per share (on a fully diluted or undiluted basis), profit margin, incremental operating margin, operating expense ratios, income, cash flow, free cash flow, working capital targets, funds from operations or similar measures, capital expenditures, market share, share price, total shareholder return, appreciation in the fair market value or book value of our common stock, economic value added (net operating profit after tax minus the sum of capital multiplied by the cost of the capital), debt to equity ratios, debt levels, management of accounts and debt, acquisitions or strategic transactions, budget achievement, expense reduction or cost savings and inventory control / efficiency and costs. As discussed above, we also use “performance” versions of the financial measures referred to above which exclude separation and streamlining costs, discrete, tax and other items and other items that may mask the underlying operating results of the company, as appropriate, such as foreign exchange fluctuations.

Our CNG Committee awarded the 2017-2019 Cash LTIP using long-term financial performance goals relating to sales/sales growth, performance earnings per share and ROIC that excluded the impact of certain significant events (e.g., plant closings, streamlining costs, acquisitions and other major investments, separation- related expenses), and the impact of foreign exchange rates.

All of our outstanding equity award agreements permit the company to recoup equity compensation in the event a recipient breaches certain confidentiality, and other contractual arrangements during employment or within twelve months after termination of employment.

The minimum number of shares to be held by each officer is calculated annually on the first business day of March using the average of the stock prices of the company’s common stock on the NYSE for the past month. The stock price for each trading day within the time period will be the average of the high and low sales prices on the NYSE on that date. In the event of a base salary change or a promotion to a higher executive level, the executive will have five years from the date the change was implemented to acquire additional shares needed to fulfill the stock ownership guidelines. During the first five years, the CNG Committee will review annually each executive’s company stock ownership. After the initial five-year period, the CNG Committee may review these guidelines to include specific penalties for failing to adhere to the recommendations. There may be instances in which the stock ownership guidelines would place a substantial hardship on an executive or unusual circumstances may prevent the executive from complying with the guidelines. These circumstances may apply to all executives in the company, such as a financial crisis impacting the entire stock market or circumstances generating unusual volatility of the company’s share price, or be particular to an individual, such as a court order in the case of a divorce settlement or estate planning transactions. In such circumstances, the guidelines may be waived or modified in the sole discretion of the CNG Committee.

Under our Change of Control Severance Plan, we also provide certain payments or other benefits to our executive officers, including our NEOs, in the event of a change of control in order to allow them to act in the best interests of shareholders without the distraction of potential negative repercussions of a change of control on their own position with the company. Severance benefits payable in connection with a change of control are triggered only in the event of both (i) a change of control and (ii) an NEO’s loss of job or resignation on account of material diminution in terms and conditions of employment. This is sometimes referred to as a “double trigger” change of control provision. Our Omnibus Incentive Plan includes similar double trigger default vesting provisions for equity awards granted after January 1, 2017. We do not provide for excise tax payments under our Change of Control Severance Plan. An estimate of the amount of change of control benefits that each NEO would receive upon a termination of service in connection with a change of control event as of December 31, 2019, is included under “Change of Control Severance Plan and Omnibus Incentive Plan” below.

Each of our NEOs has an employment, business manager agreement or offer letter with the company or one of its subsidiaries. Messrs. Esculier and Brenneke relocated to Switzerland. Their Belgium “business manager” agreements were terminated and they moved onto a local Swiss employment contract. Ms. Brown and Mr. Rens continued their employment under a “business manager” agreement. Mr. Deason operates under an offer letter with one of our U.S. subsidiaries and continued to do so after his appointment as CFO & Controller.

On March 28, 2019, Roberto Fioroni provided notice of his voluntary resignation from the company, effective April 1, 2019. As a result, Mr. Fioroni was not entitled to any severance or change in control benefits, and in connection with his departure, Mr. Fioroni forfeited his 2019 AIP award, his cash LTIP award for the 2017-2019, 2018-2020 and 2019-2021 performance periods, as well as all unvested RSUs and PSUs.

On April 1, 2019, the Board of Directors appointed Sean Deason, the Company’s Vice President Controller and Investor Relations, to serve as CFO & Controller of the Company, effective April 1, 2019.

In July 2019, pursuant to the terms of the special retention award granted to her in July 2018, the Company paid Lisa Brown $2,000,000.

For twenty-four months after the effective time of the Merger, ZF has agreed to provide WABCO employees, including the NEOs, who continue employment with ZF after the effective time, with (i) at least the same base salary and wage rate as provided immediately prior to the effective time, (ii) incentive compensation opportunities (excluding equity awards) that are no less favorable in the aggregate than those provided immediately prior to the effective time and (iii) employee benefits which are no less favorable in the aggregate than those provided immediately prior to the effective time. In place of the equity-based component of compensation provided by WABCO immediately prior to the effective time, ZF has agreed to establish, promptly after the effective time, a cash-based retention program for the benefit of certain WABCO employees, including WABCO executive officers. Awards under the equity replacement program will consist of cash-based grants equal to two times the value of the target equity compensation award for the applicable employee for 2019, and if the effective time has not occurred as of January 1, 2020, for 2020. Awards will vest in full on the second anniversary of the effective time, subject to continued service through that date, or if earlier, upon a termination of employment by ZF, the surviving corporation or their respective subsidiaries without cause, resignation by the employee for good reason, or upon death or disability. 2019 target equity compensation for NEOs is as follows: $3,300,000 for Mr. Esculier; $500,000 for Mr. Rens; $400,000 for Mr. Deason; $400,000 for Ms. Brown; and $300,000 for Mr. Brenneke.

non-compliance

As part of our corporate headquarters relocation from Brussels, Belgium to Bern, Switzerland, which is intended to globalize WABCO’s advanced technology strategy, the company has conducted extensive research on the local market cost of living and competitive compensation levels. Based on this study, the CNG Committee approved adjustments to 2019 base salaries and cash incentive targets for certain executives, including Mr. Brenneke, subject to their relocation to Switzerland. These adjustments are aligned with our philosophy of offering target compensation at approximately the median or 50th percentile for similarly-situated executives. Mr. Esculier received no compensation adjustment further to his relocation to Switzerland.

None of Messrs. Gross, Montupet or Smith, each of the members of the CNG Committee, has ever been an officer or employee of WABCO or any of its subsidiaries or affiliates. None of our Executive Officers has served on the board of directors or on the compensation committee of any other entity where any officer of such entity served either on the Company’s Board or on its CNG Committee.

10-K

10-K

 

In 2019, the NEOs were granted annual and long-term cash incentive award opportunities, PSUs and RSUs. The columns under the “Estimated Future Payouts under Incentive Plan Awards” heading show the target and maximum amounts that were established for cash-based awards on the grant date. Actual payouts for the 2019 annual incentive are reflected in the Incentive Compensation Plan” column of the Summary Compensation Table. The columns under the “Estimated Future Payouts under Equity Incentive Plan Awards” heading show the number of PSUs that would be earned upon achieving performance at target and at the maximum level. The “All Other Stock Awards” column shows the amount of RSUs granted to each NEO. We did not grant stock options during 2019.