DEF 14A of TTM Technologies Inc
Filed Mar 16, 2023 · FY20220001193125-23-072000
THE STOCKHOLDER MEETING TO BE HELD ON MAY 10, 2023
| PROPOSAL ONE – ELECTION OF DIRECTORS | 4 | | DIRECTOR COMPENSATION | 20 | | Director Summary Compensation Table for Fiscal Year 2022 | 21 | | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT | 23 | | COMPENSATION DISCUSSION AND ANALYSIS | 26 | | Compensation Overview – Alignment of Compensation and Performance | 26 | | Executive Compensation Philosophy and Objectives | 31 | | Role of the Compensation Committee | 32 | | Compensation Structure | 33 | | COMPENSATION COMMITTEE REPORT | 48 | | EXECUTIVE COMPENSATION | 49 | | Fiscal Year 2022 Summary Compensation Table | 49 | | GRANTS OF PLAN-BASED AWARDS | 51 | | Fiscal Year 2022 Grants of Plan-Based Awards | 51 | | Outstanding Equity Awards at Fiscal Year-End | 52 | | Stock Vested In Fiscal Year 2022 | 53 | | 2022 Nonqualified Deferred Compensation Table | 53 | | Potential Payments Upon Change in Control or Termination | 54 | | CEO Pay Ratio | 56 | | EQUITY COMPENSATION PLAN INFORMATION | 57 | | PROPOSAL TWO – APPROVAL OF THE TTM TECHNOLOGIES, INC. 2023 INCENTIVE COMPENSATION PLAN | 58 | | PROPOSAL THREE – ADVISORY APPROVING NAMED EXECUTIVE OFFICER COMPENSATION | 67 | | PROPOSAL FOUR – RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | 68 | | REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS | 68 | | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS | 70 | | ELECTRONIC AVAILABILITY OF PROXY STATEMENT AND 2021 ANNUAL REPORT | 70 | | STOCKHOLDER PROPOSALS | 70 |
PROPOSAL ONE – ELECTION OF DIRECTORS
PROPOSAL ONE – ELECTION OF DIRECTORS
Directors and Nominees
Directors and Nominees Our Board of Directors is currently comprised of nine directors. Our Board of Directors is divided into three classes with each class of directors serving for a three-year term or until successors of directors serving in that class have been elected and qualified. Each director elected at the 2023 annual meeting will serve for a term expiring at the 2026 annual meeting or until a successor has been duly elected and qualified. At this annual meeting, our stockholders will be asked to elect three class I directors. Our Board of Directors has nominated Kenton K. Alder, Julie S. England and Philip G. Franklin as class II directors. Mr. Alder, Ms. England and Mr. Franklin currently serve as class II directors. Mr. Alder, Ms. England and Mr. Franklin will stand for re-election at the annual meeting. Rex D. Geveden, Pamela B. Jackson and John G. Mayer serve as class III directors and their terms will expire at the annual meeting of stockholders in 2024. Thomas T. Edman, Chantel E. Lenard and Dov S. Zakheim serve as class I directors and their terms will expire at the annual meeting of stockholders in 2025. TTM is a significant supplier of PCBs that are eventually integrated into products purchased by the United States Department of Defense. As such, over 464 TTM employees and Board members are cleared by the United States Government to receive confidential or secret classified information. Because TTM has been identified by the government of the United States as a key supplier in the electronics eco-system, TTM has engaged with the United States Defense Counterintelligence and Security Agency (the “DCSA”) for approval of facility security clearances at a number of its facilities. This clearance allows the DCSA to conduct audits and provide broad oversight to parts of TTM’s operation. As a condition of such clearance, and in connection with our engagement with the DCSA, in February of 2023, our Board of Directors adopted a Special Board Resolution (“SBR”), replacing the Special Security Agreement (“SSA”) that the Company had entered into with the DCSA in 2010. The replacement of the SSA with the SBR was the result of the significantly reduced foreign ownership of TTM. The company plans to maintain much of the robust infrastructure developed during the adoption of and compliance with the SSA. The SBR Agreement with DCSA codifies the standing Government Security Committee of TTM’s Board of Directors, consisting of at least 3 Board members that hold a National Security Clearance. In addition, the SBR dictates that TTM will maintain its policies and procedures that have been established pursuant to the provisions of the SSA to mitigate risks to TTM’s operations that serve the national security of the United States, including the maintenance of its cybersecurity plan that meets the requirements of NIST 800-171. DCSA will continue to review TTM’s compliance with the terms of the SBR annually at each of TTM’s sites which operate under a U.S. Department of Defense security clearance. In addition, all of TTM’s Board is currently comprised of U.S. citizens and per the terms of the SBR, no foreign citizen is allowed to sit on TTM’s Board in the future. As a natural mechanism to ensure continuity of its Board of Directors to satisfy our obligations under the SBR,TTM has continued the practice of providing for staggered elections of three classes of board members to serve three-year terms, such that our Board is comprised of U.S. Citizens, and at least three such members maintain national security clearance or would be eligible to be cleared by the United States Government to receive classified information and maintain oversight of TTM’s classified operations. Our Board of Directors has no reason to believe that any of its nominees standing for election will refuse or be unable to accept election. However, if any nominee is unable to accept election or if any other unforeseen contingencies should arise, our Board of Directors may designate a substitute nominee. If our Board of Directors designates a substitute nominee, the persons named as proxies will vote for the substitute nominee designated by our Board of Directors. Our Board of Directors recommends a vote “FOR” the nominees for Class II directors. The following table, together with the accompanying text, sets forth certain information with respect to each of our directors and director nominees as of the date of this Proxy Statement:
Directors and Nominees
| Name | Age | Class | Proposed Position(s) to be Held After Meeting | | Kenton K. Alder | 73 | II | Director | | Thomas T. Edman | 60 | I | Chief Executive Officer, President and Director | | Julie S. England | 65 | II | Director | | Philip G. Franklin | 71 | II | Director | | Rex D. Geveden | 62 | III | Chairman of the Board | | Pamela B. Jackson | 70 | III | Director | | Chantel E. Lenard | 53 | I | Director | | John G. Mayer | 72 | III | Director | | Dov S. Zakheim | 74 | I | Director |
Directors and Nominees
Kenton K. Alder has served as a director since March 1999. Mr. Alder also served as our President from March 1999 to January 2013 and as our Chief Executive Officer from our founding in 1998 through December 2013. Mr. Alder served on a part-time basis as a consultant and advisor to Mr. Edman for one year commencing on January 1, 2014 and provided counsel on strategy, attended certain meetings, and was involved in special projects. From January 1997 to July 1998, Mr. Alder served as Vice President of Tyco Printed Circuit Group, Inc., a PCB manufacturer. Prior to that time, Mr. Alder served as President and Chief Executive Officer of ElectroStar, Inc., previously a publicly held PCB manufacturing company, from December 1994 to December 1996. From January 1987 to November 1994, Mr. Alder served as President of Lundahl Astro Circuits Inc., a predecessor company to ElectroStar, Inc. In addition, Mr. Alder is a member of the Board of Directors of Campbell Scientific, Inc., and is Chairman of the Compensation Committee. Mr. Alder serves as Chairman of the Utah State University Board of Trustees and as Chairman of the Executive Committee for the Utah State University Board of Trustees. Mr. Alder also serves on the board of Blendtec, Inc. and Honeyville Inc. Mr. Alder holds a Bachelor of Science degree in finance and a Bachelor of Science degree in accounting from Utah State University. Our Board of Directors has determined that Mr. Alder is an independent director. Mr. Alder was nominated to stand for re-election to the Board of Directors because of his past experience as our Chief Executive Officer, which enables him to provide the board with insight based on his extensive knowledge about the Company and because of his significant operational expertise. Thomas T. Edman has served as a director of our Company since September 2004, as President of our Company since January 2013, and as our Chief Executive Officer since January 2014. From early 2011 to December 2012, Mr. Edman served as Group Vice President and General Manager of the AKT Display Business Group, which is a division of Applied Materials Inc., a publicly held provider of nanomanufacturing technology solutions. From 2006 to 2011, Mr. Edman served as Corporate Vice President of Corporate Business Development of Applied Materials, Inc. Prior to that, Mr. Edman served as President and Chief Executive Officer of Applied Films Corporation from May 1998 until Applied Materials, Inc., acquired Applied Films Corporation in July 2006. From June 1996 until May 1998, Mr. Edman served as Chief Operating Officer and Executive Vice President of Applied Films Corporation. From 1993 until joining Applied Films, Mr. Edman served as General Manager of the High Performance Materials Division of Marubeni Specialty Chemicals, Inc., a subsidiary of a major Japanese trading corporation. Since June 2015, Mr. Edman has served on the Board of Ultra Clean Holdings, Inc. (NASDAQ: UCTT), and is presently Chairman of the Compensation Committee and a member of the Audit Committee. Since March 2016, Mr. Edman has served on the Board of the IPC, an electronic industries association and is currently serving on its executive committee as Vice Chairman. Mr. Edman holds a Bachelor of Arts degree in East Asian Studies (Japan) from Yale University and a Master of Business Administration degree from The Wharton School at the University of Pennsylvania. Mr. Edman is an employee director. Mr. Edman was previously nominated to the Board of Directors because of his proven business acumen and experience in the technology industry, having served in numerous senior executive roles with sizeable technology companies, including as the Chief Executive Officer of a public company. Mr. Edman also has extensive experience in Asia and with compensation-related matters, which have proven valuable to our Board of Directors. Julie S. England has served as a director of our Company since October 2016. Ms. England is presently retired. Prior to her retirement in 2009, she served in various capacities with Texas Instruments Inc., most recently as Vice President and General Manager of the Radio Frequency Identification (“RFID”) division. She also served as Vice President of its microprocessor division from 1998 to 2004 and as Vice President of Quality for the Semiconductor Group from 1994 to 1998. Earlier, she held various engineering, manufacturing, quality, and business management positions. Ms. England is an experienced independent corporate director serving on both private and public company boards in the USA and Europe. Ms. England has served as a director of Smartrac Technology Group, N.V. from 2014 until May 2018. From 2010 until its acquisition by CCL Industries in May 2016, she served as a director of Checkpoint Systems, Inc., and chaired its Governance Committee. Ms. England served as a director of the Federal Reserve Bank of Dallas from 1997 to 2003 and as a director of Intelleflex Corporation from 2010 to 2013. Ms. England served on the Board of Trustees of the Georgia O’Keeffe Museum until July 2017, and served on the North Texas Chapter of the National Association of Corporate Directors (“NACD”). Ms. England served on the board of directors of McMillen Jacobs Associates from June 2021 until June 2022. Ms. England joined the board of directors of the Electricity Council of Texas (“ERCOT”) in January 2022. She has served on trade associations in the electronics industry including the American Electronics Association and AIM Global. Ms. England holds a Bachelor of Science degree in chemical engineering and graduate studies in business from Texas Tech University complemented with executive education at Harvard University and Stanford University. She earned a Bachelor of Fine Arts degree in studio art in 2018 from Southern Methodist University in Dallas, TX. Ms. England is an independent director. Ms. England was nominated to stand for re-election to the Board of Directors because of her extensive background in the technology industry and her experience serving on the boards of both private and public companies in the USA and Europe and to provide the Company with insight as she serves on our board. As a result of Ms. England’s significant involvement in director professionalism education, Ms. England has been designated a NACD Governance Fellow by the National Association of Corporate Directors. Philip G. Franklin has served as a director of our Company since November 2010. Mr. Franklin is presently retired. From 1998-2016, Mr. Franklin served in various capacities with Littelfuse, Inc. (NASDAQ: LFUS), a designer, manufacturer, and seller of circuit protection devices for use in electronics, automotive and electrical markets, most recently as Executive Vice President and Chief Financial Officer. Prior to joining Littelfuse, Inc., Mr. Franklin was Vice President and Chief Financial Officer for OmniQuip International, a construction equipment manufacturer, which he helped take public. Prior to that, Mr. Franklin served as Chief Financial Officer of Monarch Marking Systems and Hill Refrigeration. Mr. Franklin served as non-executive Chairman of the Board of Directors of Tribune Publishing Co., to 2021. Mr. Franklin holds a bachelor’s degree in economics from Dartmouth College and a Master of Business Administration degree from the Amos Tuck School at Dartmouth College. Our Board of Directors has determined that Mr. Franklin is an independent director and an “audit committee financial expert” as described in applicable SEC rules. Mr. Franklin was nominated to stand for re-election to the Board of Directors because of his financial and accounting expertise, including a deep understanding of accounting principles, financial reporting rules and regulations, and knowledge of audit procedures.
Directors and Nominees
Rex D. Geveden has served as a director of our Company since May 2018. The Company appointed Mr. Geveden as Chairman of our Board of Directors effective after the 2021 annual meeting of stockholders upon the retirement of Robert E. Klatell, our former Chairman. Mr. Geveden has served as President and Chief Executive Officer since January 1, 2017, and served as Chief Operating Officer from October 2016 until December 2016 of BWX Technologies, Inc. (NYSE:BWXT), a nuclear industrial conglomerate headquartered in Lynchburg, VA. Previously, Mr. Geveden was Executive Vice President at Teledyne Technologies Incorporated, a provider of electronic subsystems and instrumentation for aerospace, defense and other uses. He led two of Teledyne’s four operating segments from 2013 through 2016, and concurrently served as President of Teledyne DALSA, Inc., a Teledyne subsidiary, since 2014. Mr. Geveden also served as President and Chief Executive Officer of Teledyne Scientific and Imaging, LLC from 2011 to 2013 and President of both Teledyne Brown Engineering, Inc. and Teledyne’s Engineered Systems Segment from 2007 to 2011. Mr. Geveden is a former Associate Administrator of the National Aeronautics and Space Administration (“NASA”), where he was responsible for all technical operations within the agency’s $16 billion portfolio and served in various other positions with NASA in a career spanning 17 years. Mr. Geveden holds both a bachelor’s and master’s degrees in physics from Murray State University. Our Board of Directors has determined that Mr. Geveden is an independent director. Mr. Geveden was previously nominated to the Board of Directors and was then appointed as Chairman in 2021 because of his extensive experience in the aerospace and defense industry as well as his proven track record as an outstanding leader. Pamela B. Jackson has served as an independent director of our Company since her appointment to the Board of Directors in June 2021. She is a retired Vice President, Technology of Emerson Electric Company in St. Louis, Missouri. Ms. Jackson was with Emerson from April 2001 until October 2017 where her responsibilities included corporate oversight of technology development initiatives related to new and lean product development, portfolio and product life cycle management, and Emerson’s centers of excellence for software and human- centered design. She also served on the management boards for the Emerson Pune, India Innovation Center and the Emerson Xi’an, China Engineering Center. Over her career, Ms. Jackson led a breadth of global, technology intensive manufacturing businesses that included power supplies, energy systems, thin film hybrid integrated circuits, PCBs and other electronic components and assemblies. Before joining Emerson, Ms. Jackson worked at Lucent, AT&T and Western Electric for over twenty years where she held positions in research, engineering, operations, and marketing, eventually serving as Vice President and General Manager of several electronic component businesses including Lucent’s MicroPower division in Austin, Texas. Ms. Jackson received Bachelor and Master of Science degrees in chemistry and chemical engineering from Massachusetts Institute of Technology. She holds an Executive MBA from Boston University. She has served on several non-profit boards, including Ranken Technical College, in St Louis, Missouri where she chaired and currently serves on the Investment and Diversity Committees. Ms. Jackson is a member of Sigma Xi, Beta Gamma Sigma, the American Chemical Society, the American Institute of Chemical Engineers and is a Life Member of the Society of Women Engineers. Our Board of Directors has determined that Ms. Jackson is an independent director. Ms. Jackson was appointed to the Board of Directors due to her extensive experience and knowledge in the electronics, engineering and technology markets, where she has spent the vast majority of her exceptional career. Chantel E. Lenard has served as a director of our Company since September 2018. Ms. Lenard presently serves as a Lecturer of Marketing in the MBA program at the University of Michigan Ross School of Business. Ms. Lenard retired from Ford Motor Company (NYSE:F) in 2017, having served as the top marketing executive for Ford in both the U.S. and Asia. From 2013 to 2017, Ms. Lenard held the position of U.S. Chief Marketing Officer, leading the organization’s pricing, promotions, media, digital marketing, product strategy, and consumer experience activities. From 2010 to 2013, Ms. Lenard was based in Shanghai, China, as Vice President of Marketing for Ford’s Asia Pacific and Africa operations, where she led the marketing activities for 11 countries across the region. In addition to her marketing roles, Ms. Lenard held a number of leadership positions in strategy, sales, finance, and purchasing during her 25 year career with Ford. Ms. Lenard currently serves as a director and member of the HR, Compensation and Governance Committees of Uni-Select, Inc. (TSX: UNS), a director and member of the Audit and Compensation Committees of LSI Industries (NASDAQ: LYTS), and a director and member of the Audit and Governance Committees of Charge Enterprises (NASDAQ: CRGE). Ms. Lenard holds a bachelor’s degree in Industrial Engineering from Purdue University and a Master of Business Administration degree from Harvard University. Our Board of Directors has determined that Ms. Lenard is an independent director. Ms. Lenard was previously nominated to the Board of Directors because of her extensive background in the automobile industry and her lengthy and diverse experience in international marketing. John G. Mayer has served as a director of our Company since September 2000. Mr. Mayer is presently retired. From January 1997 to November 1999, Mr. Mayer served as Vice President of Tyco Printed Circuit Group, Inc., a PCB manufacturer. Mr. Mayer served as Chief Operating Officer of ElectroStar, Inc., previously a publicly held PCB manufacturing company, from December 1994 to December 1996. From April 1986 to November 1994, Mr. Mayer served as President of Electro-Etch Circuits, Inc., a predecessor company to ElectroStar, Inc. Mr. Mayer served on the board of trustees of the Cottonwood Gulch Foundation from 2008 to 2017. Mr. Mayer holds a Bachelor of Arts degree in history, the arts and letters from Yale University and a Juris Doctor from UCLA School of Law. Our Board of Directors has determined that Mr. Mayer is an independent director. Mr. Mayer was previously nominated to the Board of Directors because of his extensive experience in the PCB business and has demonstrated depth of business experience in our company’s industry, particularly in technology and operations.
Directors and Nominees
Dov S. Zakheim has served as a director of our Company since July 2010. Dr. Zakheim is currently a Senior Fellow at CNA, a federally funded think tank, and a Senior Advisor at the Center for Strategic and International Studies. From May 2004 to July 2010, Dr. Zakheim served as Vice President and subsequently as Senior Vice President of Booz Allen Hamilton, a global strategy and technology consulting firm, where he was a leader in the firm’s global defense practice. From May 2001 to April 2004, Dr. Zakheim was Under Secretary of Defense (Comptroller) and Chief Financial Officer for the United States Department of Defense. From October 2002 to April 2004, Dr. Zakheim served as the United States Department of Defense’s coordinator of civilian programs in Afghanistan. Dr. Zakheim serves as the Chairman of the Board of Directors of Secure Federal Operations LLC (previously Sprint Federal Operations LLC). Dr. Zakheim previously served as a member of the Board of Directors of Standard Aero Corp. from 2008 until 2015, and was a member of their Audit Committee from 2012 to 2015. In addition, Dr. Zakheim has served as a member of ISO Group, Inc.’s Board of Directors from 2010 to 2014. Dr. Zakheim also served as a board member of Chemonics International and was a member of their Audit Committee from 2013 to 2019. Dr. Zakheim also serves as a board member of the American Jewish Committee, the Foreign Policy Research Institute and the U.S. Naval Academy Athletic Association. Dr. Zakheim holds a Bachelor of Arts degree from Columbia College at Columbia University, was a General Course student at the London School of Economics, and holds a Doctor of Philosophy degree from St. Antony’s College at the University of Oxford. Our Board of Directors has determined that Dr. Zakheim is an independent director and an “audit committee financial expert” as described in applicable SEC rules. Dr. Zakheim was previously nominated to the Board of Directors because of his substantial financial and accounting experience acquired in the course of acting as Chief Financial Officer for the U.S. Department of Defense, his expertise and leadership skills in global defense, and his national security qualifications. There are no family relationships among any of our directors, director nominees, or executive officers.
DIRECTOR COMPENSATION
DIRECTOR COMPENSATION Commencing with the second quarter of 2022, our non-employee directors receive the following cash compensation on an annual basis: an annual cash retainer of $75,000, an annual cash retainer of $9,000 for each board committee of which such director is a member (except for the government security committee), and reimbursement of expenses relating to attendance at board and board committee meetings. In addition, the Chairman of the Board receives an annual cash retainer of an additional $70,000, and the chairmen of our various board committees receive annual cash retainers as follows: $22,000 to our audit committee chairman, $17,000 to our compensation committee chairman, $15,000 to our government security committee chairman, and $17,000 to our nominating and corporate governance committee chairman. Annually, our nominating and corporate governance committee, in consultation with our compensation consultant, reviews our board compensation against the board compensation of our peer companies to develop a reasonable board compensation package. In addition, commencing with the second quarter of 2022, our non-employee directors are granted the following equity compensation on an annual basis: the Chairman of the Board receives restricted stock units (“RSUs”) having a value on the award date of $180,000 and each non-employee director receives restricted stock units having a value on the award date of $140,000, in each case based upon the average closing price of our common stock over the six-month period preceding the grant date. In the instance where a Board Member serves a portion of the year, the compensation granted is prorated for the time served that year. The RSUs awarded to the non-employee directors vest in full on the first anniversary of the grant date; however, in an effort to further align Board Members’ interests with those of our stockholders, delivery of the shares of common stock underlying the RSUs is deferred until retirement from the Board of Directors (or until one year after retirement in the case of certain prior grants). Mr. Edman is not compensated for his service as a director. Mr. Edman’s compensation as our Chief Executive Officer and President is described below under “Compensation Discussion and Analysis” and “Executive Compensation”. Nonqualified Deferred Compensation. Our directors are permitted to defer 5% to 100% of annual director fees into our Executive and Director Deferred Compensation Plan. One of our directors participated in the Executive and Director Deferred Compensation Plan in 2022.
Director Summary Compensation Table for Fiscal Year 2022
| Name | Fees Earned or Paid in Cash(1) | RSU Awards ($)(2) | Total | | Kenton K. Alder | $72,500 | $149,038 | $221,538 | | Julie S. England | $96,000 | $149,038 | $245,038 | | Philip G. Franklin | $103,500 | $149,038 | $252,538 | | Rex D. Geveden | $168,500 | $191,614 | $360,114 | | Pamela B. Jackson(3) | $86,000 | $149,038 | $235,038 | | Chantel E. Lenard | $90,500 | $149,038 | $239,538 | | John G. Mayer | $95,000 | $149,038 | $244,038 | | Dov S. Zakheim | $95,500 | $149,038 | $244,538 |
Outstanding Equity Awards Held by Non-Employee Directors at Fiscal 2022 Year End
Outstanding Equity Awards Held by Non-Employee Directors at Fiscal 2022 Year End
Outstanding Equity Awards Held by Non-Employee Directors at Fiscal 2022 Year End
| Name | RSUs Outstanding at Fiscal Year End | Number of RSUs that Have Not Vested(1) | Options Outstanding at Fiscal Year End(2) | Number of Options that Have Not Vested | | Kenton K. Alder | 91,259 | 10,043 | 0 | 0 | | Julie S. England | 61,263 | 10,043 | 20,000 | 0 | | Philip G. Franklin | 115,852 | 10,043 | 0 | 0 | | Rex D. Geveden | 54,465 | 12,912 | 20,000 | 0 | | Pamela B. Jackson | 18,628 | 10,043 | 0 | 0 | | Chantel E. Lenard | 45,166 | 10,043 | 20,000 | 0 | | John G. Mayer | 136,078 | 10,043 | 0 | 0 | | Dov S. Zakheim | 119,643 | 10,043 | 0 | 0 |
Outstanding Equity Awards Held by Non-Employee Directors at Fiscal 2022 Year End
| (1) The RSUs vest on May 17, 2023. |
Outstanding Equity Awards Held by Non-Employee Directors at Fiscal 2022 Year End
| (2) The options were granted to directors in fiscal years prior to 2019. The average remaining life is 5 years and the average option price is $14.32. |
COMPENSATION DISCUSSION AND ANALYSIS
| • | Pay Versus Performance (Page 29) |
ALIGNMENT OF PAY AND PERFORMANCE
| (1) Total compensation consists of salary paid, the value of RSUs that vested during the fiscal year, short-term incentive compensation for that fiscal year, and PRUs earned for the performance period during the fiscal year. |
2023 PAY VERSUS PERFORMANCE
2023 PAY VERSUS PERFORMANCE
2023 PAY VERSUS PERFORMANCE
| | | | | | Value of Initial Fixed $100 Investment Based On: | | | | | Year | Summary Compensation Table Total for PEO | Compensation Actually Paid to PEO (1) | Average Summary Compensation Table Total for Non-PEO NEOs (1) | Average Compensation Actually Paid to Non-PEO NEOs | Total Shareholder Return (9) | Peer Group Total Shareholder Return (8) | Net Income (Dollars in Thousands) | Operating Income (Dollars in Thousands) | | 2022 | $4,003,765 | $4,014,905 (2) | $1,783,084 | $1,791,224 (5) | $100 | $109 | $94,583 | $210,408 | | 2021 | $2,595,084 | $2,705,252 (3) | $1,453,843 | $1,530,561 (6) | $99 | $142 | $54,414 | $125,991 | | 2020 | $2,610,139 | $2,603,034 (4) | $1,367,753 | $1,377,114 (7) | $92 | $119 | $177,535 | $28,092 |
2023 PAY VERSUS PERFORMANCE
(1) The PEO for each of the years presented within this table is Thomas T. Edman, President, and Chief Executive Officer. The NEO’s for 2022 were Todd B. Schull, Chief Financial Officer; Douglas L. Soder, President Commercial Sector; Philip Titterton, Chief Operations Officer; and Catherine A. Gridley, President of A&D BU. The NEO’s for 2021 were Todd B. Schull, Chief Financial Officer; Douglas L. Soder, President Commercial Sector; Philip Titterton, Chief Operations Officer; and Daniel J. Weber, General Counsel. The NEO’s for 2020 were Todd B. Schull, Chief Financial Officer; Douglas L. Soder, President Commercial Sector; Philip Titterton, Chief Operations Officer; and Catherine A. Gridley, President of A& D BU. (2) For compensation actually paid to the PEO in 2022, the Summary Compensation Table total for the PEO is adjusted to reflect the changes in the value of equity awards and pension benefits, described in the following: (1) $1,064,521 was deducted from the total, representing the amount reported in the Stock Awards column of the Summary Compensation Table; (2) $1,181,032 was added representing the year-end 2022 valuation of the equity awards granted in 2022 that remained outstanding and unvested as of January 2, 2023; (3) $2,283 was deducted representing the decrease in fair value between the year end 2022 and 2021 for equity awards granted in prior years that remain outstanding and unvested at the end of 2022, and; (4) $103,089 was deducted representing the decrease in fair value for equity awards granted in prior years that vested during 2022. (3) For compensation actually paid to the PEO in 2021, the Summary Compensation Table total for the PEO is adjusted to reflect the changes in the value of equity awards and pension benefits, described in the following: (1) $1,017,226 was deducted from the total, representing the amount reported in the Stock Awards column of the Summary Compensation Table; (2) $1,042,869 was added representing the year-end 2021 valuation of the equity awards granted in 2021 that remained outstanding and unvested as of January 3, 2022; (3) $56,654 was added representing the increase in fair value between the year end 2021 and 2020 for equity awards granted in prior years that remain outstanding and unvested at the end of 2021 and; (4) $27,872 was added representing the increase in fair value for equity awards granted in prior years that vested during 2021. (4) For compensation actually paid to the PEO in 2020, the Summary Compensation Table total for the PEO is adjusted to reflect the changes in the value of equity awards and pension benefits, described in the following: (1) $861,985 was deducted from the total, representing the amount reported in the Stock Awards column of the Summary Compensation Table; (2) $1,017,220 was added representing the year-end 2020 valuation of the equity awards granted in 2020 that remained outstanding and unvested as of December 28, 2020; (3) $43,322 was deducted representing the decrease in fair value between the year end 2020 and 2019 for equity awards granted in prior years that remain outstanding and unvested at the end of 2020 and; (4) $119,017 was deducted representing the decrease in fair value for equity awards granted in prior years that vested during 2020. (5) For compensation actually paid to the NEO in 2022, the Summary Compensation Table total for the NEO is adjusted to reflect the changes in the value of equity awards and pension benefits, described in the following: (1) $551,625 was deducted from the total, representing the amount reported in the Stock Awards column of the Summary Compensation Table; (2) $629,596 was added representing the year-end 2022 valuation of the equity awards granted in 2022 that remained outstanding and unvested as of January 2, 2023; (3) $1,635 was deducted representing the decrease in fair value between the year end 2022 and 2021 for equity awards granted in prior years that remain outstanding and unvested at the end of 2022, and; (4) $68,195 was deducted representing the decrease in fair value for equity awards granted in prior years that vested during 2022. (6) For compensation actually paid to the NEO in 2021, the Summary Compensation Table total for the NEO is adjusted to reflect the changes in the value of equity awards and pension benefits, described in the following: (1) $566,086 was deducted from the total, representing the amount reported in the Stock Awards column of the Summary Compensation Table; (2) $584,523 was added representing the year-end 2021 valuation of the equity awards granted in 2021 that remained outstanding and unvested as of January 3, 2022; (3) $39,688 was added representing the increase in fair value between the year end 2021 and 2020 for equity awards granted in prior years that remain outstanding and unvested at the end of 2021 and; (4) $18,593 was added representing the increase in fair value for equity awards granted in prior years that vested during 2021. (7) For compensation actually paid to the NEO in 2020, the Summary Compensation Table total for the NEO is adjusted to reflect the changes in the value of equity awards and pension benefits, described in the following: (1) $470,373 was deducted from the total, representing the amount reported in the Stock Awards column of the Summary Compensation Table; (2) $580,857 was added representing the year-end 2020 valuation of the equity awards granted in 2020 that remained outstanding and unvested as of December 28, 2020; (3) $29,804 was deducted representing the decrease in fair value between the year end 2020 and 2019 for equity awards granted in prior years that remain outstanding and unvested at the end of 2020 and; (4) $71,319 was deducted representing the decrease in fair value for equity awards granted in prior years that vested during 2020. The peer group used in this calculation is defined as the “Executive Peer Group” on page 41. For purposes of calculating the cumulative total shareholder return, the measurement period is the market close on the last trading day before fiscal year 2020, through and including the end of the fiscal year for which cumulative total shareholder return is being calculated. * Assumes $100 invested at market close of 12/31/2019 in stock or index
Financial Performance Measures
Financial Performance Measures We believe that a significant portion of the Company’s named executive officers’ target total compensation should be dependent upon performance. At TTM, we use corporate, business unit and individual performance components to link compensation actually paid (as defined by SEC rules) to the Company’s named executive officers for the most recently completed fiscal year. The Company’s performance metric targets include the following:
Financial Performance Measures
| ☐ | Total Revenue |
Financial Performance Measures
| ☐ | Adjusted EBITDA |
Financial Performance Measures
| ☐ | Global Operating Income |
Financial Performance Measures
| ☐ | Global Cash Flow as a percentage of Revenue |
Financial Performance Measures
| ☐ | Business Unit Operating Income |
Financial Performance Measures
| ☐ | Individual Goals |
Relationship Between Executive Compensation Actually Paid to Executives and Financial Performance
Relationship Between Executive Compensation Actually Paid to Executives and Financial Performance
COMPENSATION PRACTICES
| • | We tie pay to performance, including through the use of performance share units |
COMPENSATION PRACTICES
| • | We use double triggers in our severance agreements and our equity awards |
COMPENSATION PRACTICES
| • | The Compensation Committee engages an independent compensation consultant |
COMPENSATION PRACTICES
| • | We do not permit the repricing of stock options without prior stockholder approval |
Executive Compensation Philosophy and Objectives
Executive Compensation Philosophy and Objectives Our executive compensation philosophy, which is established by the compensation committee of our Board of Directors, is intended to attract, motivate, and retain executives and reward the creation of stockholder value. We seek to provide executive compensation packages that are competitive with comparable companies and reward the achievement of short-term and long-term performance goals. We use a combination of fixed and variable compensation programs to reward and incentivize strong performance, as well as to align the interests of our executives with those of our stockholders. We generally target total compensation around the 50th percentile of comparable companies. We believe that this philosophy will continue to enable us to remain competitive in attracting and retaining qualified executive officers while avoiding paying amounts in excess of what we believe is necessary to attract and retain such executive officers. However, our compensation committee’s decisions on target compensation for specific individuals are also influenced by a variety of additional factors, including compensation practices of businesses acquired by us, and Company and individual performance. Each year our compensation committee, together with our senior management, establishes performance targets for short-term and long-term incentive plans that require the achievement of significant financial results. Each year our compensation committee determines compensation by assessing prior year performance against these established financial targets, as well as other factors such as the compensation paid by comparable companies, achievement of strategic objectives, improvements in market share and the professional development and potential of individual officers. Ultimately, the amount of compensation awarded to our executives is determined based on performance and what our compensation committee believes is in the best interests of our stockholders. We believe that our use of restricted stock units and performance-based restricted stock units, together with an annual incentive bonus program that is based on various combinations of global operating income, sector or business unit operating income, and global cash flow from operations as a percentage of revenue shows that we have closely linked executive officer pay to performance. Our pay mix consists primarily of base salary, annual performance-based cash bonuses, performance-based equity incentives and time-based equity incentives. We have no executive retirement plans except our 401(k) plan and deferred compensation plan available to North America employees; the company does not contribute to the deferred compensation plan.
Role of the Compensation Committee
| • | the approval of annual and long-term incentive performance metrics as well as payouts thereunder; and |
Annual Incentive Bonus Plan
Annual Incentive Bonus Plan . Our compensation committee believes that annual performance-based cash bonuses play an important role in providing incentives to our executive officers to achieve near-term financial metrics and individual goals. The financial metrics comprise 90% while the individual goals are 10% of each NEO’s bonus plan. To support collaboration within our senior management team, our compensation committee rewards all of our executive officers for company-wide performance by tying bonus awards to our operating income and operating cash flow and rewards executives responsible for business unit performance by also tying awards to business unit performance. The compensation committee believes operating income and operating cash flow are good indicators for capturing our success given the market in which we compete and are measures that management can easily track and communicate to employees throughout the performance period. In addition, individual performance goals ensure that other important areas of our business are measured and emphasized. They may include but are not limited to customer satisfaction, market positioning and growth, structural and organizational improvements, specific organizational talent actions, and critical projects and assignments. In response to the recommendations of management, our compensation committee based the Company’s incentive bonus plan on several metrics that the committee believed most closely aligned the executive’s incentive pay with metrics that the executive is responsible for managing. For 2022, the below chart reflects the weight of each performance metric.
Annual Incentive Bonus Plan
| Name | Global Operating Income | Global Cash Flow as % of Revenue | Business Unit Operating Income | Individual Goals | | Thomas T. Edman | 70% | 20% | — | 10% | | Catherine A. Gridley | 30% | 20% | 40% | 10% | | Todd B. Schull | 70% | 20% | — | 10% | | Douglas L. Soder | 30% | 20% | 40% | 10% | | Philip Titterton | 70% | 20% | — | 10% |
Annual Incentive Bonus Plan
Each executive officer has a target annual incentive bonus opportunity, expressed as a percentage of base salary, with the ability to earn above or below that target based on our Company’s actual performance. The table below lists the 2022 base salaries and bonus levels for each of our current named executive officers at the different potential achievement outcomes. This table includes both the financial metrics as well as the individual goals.
Annual Incentive Bonus Plan
| Name | 2022 Base Salary | Annual Incentive Bonus Levels as % of Base Salary | | | | | | | 0-59% of Target | 60% of Target | 100% of Target | 120% of Target (1) | | Thomas T. Edman | $848,000 | 0% | 36% | 125% | 256% | | Catherine A. Gridley | $455,000 | 0% | 26% | 80% | 152% | | Todd B. Schull | $550,000 | 0% | 26% | 80% | 152% | | Douglas L. Soder | $515,000 | 0% | 26% | 80% | 152% | | Philip Titterton | $550,000 | 0% | 26% | 80% | 152% |
Annual Incentive Bonus Plan
| (1) Represents maximum potential bonus payout. Individual goals are capped at 100% of target. |
Annual Incentive Bonus for 2022
Annual Incentive Bonus for 2022 . In February 2023, our compensation committee reviewed our 2022 performance relative to the 2022 operating income and cash flow from operations as a percentage of revenue goals. The performance was certified at 121.8% of the global operating income target and 143.1% of our goal for global cash flow from operations as a percentage of revenue. The compensation committee also reviewed and assessed the performance achieved against the individual goals that had been established for each of the members of the Company’s executive team, including Messrs. Edman, Schull, Soder, Titterton, and Ms. Gridley. We use particular individual performance goals to ensure that other important areas of our business are measured and emphasized, which may include but are not limited to customer satisfaction, market positioning and growth, structural and organizational improvements, and critical projects and assignments. Performance goals do not payout unless our Company achieves its threshold financial performance metrics. As a result, our compensation committee authorized the payment of 2022 incentive bonuses as follows:
Annual Incentive Bonus for 2022
| Name | 2022 Incentive Bonus | Payout as % of Annualized Earnings (1) | | Thomas T. Edman | $2,103,044 | 255% | | Catherine A. Gridley | $600,173 | 140% | | Todd B. Schull | $797,463 | 152% | | Douglas L. Soder | $771,744 | 152% | | Philip Titterton | $791,785 | 151% |
Annual Incentive Bonus for 2022
| (1) Represents annualized base earnings to include salary adjustments in 2022 |
Annual Incentive Bonus for 2022
Because such a large percentage of executive officer compensation is performance-based, our compensation committee invests significant time determining the financial targets for our annual incentive bonus program. In general, management makes the initial recommendation for the financial target based upon our Company’s annual board-approved budget, as well as the bonus opportunity for each officer, and these recommendations are reviewed and discussed by the committee and its advisors. The major factors used in setting one or more targets for a particular year are the results for the most recently completed year and the budget for the current year. Other factors taken into account may include general economic and market conditions. Our compensation committee sets the final corporate performance goal during our first quarter, typically at a level our compensation committee believes is challenging, but reasonable, for management to achieve. At the end of each year, our compensation committee determines the level of achievement for the specified financial goal (after potentially making any appropriate adjustments to such goal for the effects of corporate events that were not anticipated in establishing the performance measure such as acquisitions or divestitures) and awards credit for the achievement of the goal as a percentage of the target bonus. Final determinations as to bonus levels are then based on that percentage. Actual bonuses are generally paid to the executives in the first quarter of the subsequent year. In setting annual incentive compensation financial targets and bonus opportunities for our executive officers, our compensation committee does not consider the effect of past changes in stock price. In addition, incentive compensation decisions are made without regard to length of service. For example, executive officers with longer service or who are eligible for retirement do not receive greater or lesser awards, or larger or smaller target amounts, in any given year than executives with shorter service.
Long-Term Equity Awards
Long-Term Equity Awards . We believe that providing a significant portion of our executive officers’ total compensation package in equity awards aligns the incentives of our executives with the interests of our stockholders and with our long-term success. By compensating our executives with our equity, executives receive a stake in our Company’s financial future, and the gains realized in the long term depend on the executives’ ability to drive our financial performance. Equity incentive awards are also a useful vehicle for attracting and retaining executive talent in a competitive market. Our compensation committee develops its equity award determinations based on its judgment as to whether the total compensation packages provided to our executive officers, including prior equity awards and the level of vested and unvested equity awards then held by each participating officer, are sufficient to retain, motivate, and adequately reward the executive officers. This judgment is based in part on information provided by benchmarking studies. In addition, our compensation committee considers the accounting costs that will be reflected in our financial statements when establishing the forms of equity to be granted and the size of the grants, as well as the potential dilution associated with the equity awards. We currently grant equity awards from the TTM Technologies, Inc. 2014 Incentive Compensation Plan (“2014 Plan”), which was adopted by our Board of Directors and approved by our stockholders and permits the granting of stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, and other stock-based awards to our officers, directors, employees, and consultants. Our year-to-date gross share run rate (calculated using granted restricted shares, options and performance shares at target as a percentage of our total outstanding shares) as of January 2, 2023 was 2.2%. As of January 2, 2023, our three-year average share run rate was 1.8%. We believe that these percentages demonstrate our commitment to careful and efficient use of the shares that stockholders have approved for issuance under our 2006 Plan and our 2014 Plan (and other equity compensation plans our stockholders approve from time to time). Since 2010, we have used two forms of equity for long-term equity incentive compensation for our executive officers: RSUs are weighted 45% and PRUs are weighted 55% for named executive officers and RSUs are weighted 30% and PRUs are weighted 70% for our CEO. Restricted Stock Units . RSUs represent the right to receive one share of our common stock for each RSU upon the settlement date, which is the date on which certain conditions, such as continued employment with us for a pre-determined length of time, are satisfied. RSU awards reflect both increases and decreases in stock prices from the grant-date market prices and thus tie compensation more closely to changes in stockholder value at all levels compared to options, whose intrinsic value changes only when the market price of shares is above the exercise price. RSUs also have retention value even during periods in which our trading price does not appreciate, which supports continuity in the senior management team. The vesting schedule for RSUs granted to our executive officers and other employees provides that each award vests in three equal annual installments, aimed at strengthening retention with our Company, except that recipients may be entitled to a pro-rata amount of RSUs in the case of the recipient’s death, disability or “retirement” (voluntary termination by an employee who is at least 62 and has at least five years of continuous service). In 2022, we granted time-vested RSUs for an aggregate of 1,931,406 shares of our common stock to a total of 1,548 employees and non-employee directors, of which time-vested RSUs for an aggregate of 164,767 shares were issued to Messrs. Edman, Schull, Soder, Titterton and Ms. Gridley. Performance RSUs . In order to strengthen pay-for-performance, our compensation committee approved a long-term incentive program for our executive officers and certain other members of our senior management team to drive achievement to specific pre-established financial performance goals and provide a long-term return to our stockholders relative to a broader market index. Our objective of the PRU program is to align total stockholder return and each executive’s compensation. Under the PRU Program, a target number of PRUs are awarded annually using a three-year performance period to encourage long-term retention of the executives of the Company. The number of shares of our common stock released at the end of the three-year performance period will range from zero to 2.4 times the target number of the PRUs granted to each executive depending on the Company’s performance during the period. The performance metrics of the PRU Program are (a) annual financial targets, which for each of the three years prior to the final vesting of the shares are based on total annual revenue and adjusted EBITDA (1) , each of which is equally weighted, and (b) an overall “modifier” based on our Company’s TSR over a three-year performance period relative to a TSR Peer Group of peer companies selected by our compensation committee each year. Recipients of PRU awards generally must remain employed by us on a continuous basis through the end of the relevant performance period of three years in order to receive shares of common stock at the end of the three-year performance period. Recipients may also be entitled to a pro-rata amount of PRUs in the case of the recipient’s death, disability or retirement.
Long-Term Equity Awards
| (1) For the reconciliation of the use of the non-GAAP metric of adjusted EBITDA and the GAAP measures, please refer to Annex A attached hereto. |
Long-Term Equity Awards
The key financial metrics of total annual revenue and adjusted EBITDA are equally weighted under our PRU program. The metric of adjusted EBITDA is generally intended to focus our executives on tangible growth and cost reduction opportunities. Adjusted EBITDA is also a complementary metric to the total annual revenue metric used under the PRU program. The combination of the two performance metrics limits the ability of an executive to be rewarded for taking excessive risk on behalf of our Company by, for example, seeking revenue-enhancing opportunities at the expense of adjusted EBITDA, since performance is required on both metrics to maximize the issuance of common stock under the PRU program. The TSR modifier is intended to ensure that shares of common stock issued at the end of the three-year period are limited if our stock performance is significantly below the median TSR of our TSR Peer Group for each three-year performance period and such issuance of common stock would be enhanced if our stock performance is above the median TSR of our TSR Peer Group. Under the PRU program, annual financial goals are set in the first quarter of each year, and performance is reviewed after the end of each year. The percentage to be applied to each participant’s target award ranges from zero to 160%, based upon the extent to which the two annual performance goals are achieved for each of the three years in the performance period, resulting in a total of six measurements. If we do not achieve at least 60% threshold level of total annual revenue or adjusted EBITDA performance for any of the six measurements, the amount earned for that performance element of one-sixth of the award would be zero. If we achieve the 60% threshold for any of the targeted levels of total annual revenue and adjusted EBITDA performance for any of the six measurements, a percentage (ranging on a sliding scale from 40% to 160%) would be applied to one-sixth of the participant’s calculation of the number of units earned during such period. If we achieve 120% or more of the target level of total annual revenue or adjusted EBITDA for any of the six measurements, the amount earned for that performance element of the award would be 160% of one-sixth of the initial PRU award. The chart below is an example of the PRU units the participant would earn (and “bank,” pending application of the TSR modifier), if a named executive officer received a target award of 234,000 PRUs, and we achieve (i) 130% of the revenue target and 60% of the adjusted EBITDA target in the first year, (ii) 100% of each of the revenue and adjusted EBITDA targets in the second year, and (iii) 120% of the revenue target and 55% of the adjusted EBITDA target in the third year:
Long-Term Equity Awards
| | Total Grant | Year 1 | Year 2 | Year 3 | Earned Shares | | Assumptions | 234,000 | 234,000/6 = 39,000 | 234,000/6 = 39,000 | 234,000/6 = 39,000 | | | 130% of revenue target | | 160% x 39,000 | | | 62,400 | | 60% of adjusted EBITDA target | | 40% x 39,000 | | | 15,600 | | 100% of revenue target | | | 100% x 39,000 | | 39,000 | | 100% of adjusted EBITDA target | | | 100% x 39,000 | | 39,000 | | 120% of revenue Target | | | | 160% x 39,000 | 62,400 | | 55% of adjusted EBITDA target | | | | 0 x 39,000 | 0 | | | | | | | 218,400 |
Long-Term Equity Awards
At the end of the three-year performance period, the base calculations of the six performance metrics is then adjusted by applying a modifier to the PRU calculation of the six measurements against the goals set during the performance period. The TSR modifier measures our Company’s TSR based on stock price changes (using for each year’s awards the six-month trailing average closing price at the beginning of the year compared to the six-month trailing average closing price three years later), and assuming reinvestment of dividends, relative to the TSR of our TSR Peer Group for the same three-year period. If our TSR is below the 10th percentile of the TSR Peer Group, the modifier would be zero, and therefore, no shares would be released with respect to the PRU program subject to such three-year performance period. In the 2022 PRU program, if our TSR is between the 10th and 50th percentile at the end of the three-year performance period, the modifier would range between 0.6 and 1.0, if the TSR is greater than 50% and up to 80% the modifier will range from 1.0 and 1.5. If our TSR is at or above the 80th percentile of the applicable TSR Peer Group for the three-year performance period, the maximum modifier of 1.5 will apply, and the number of shares released will equal 150% of the number of units earned during the period with respect to annual financial metric performance. See the chart below which demonstrates the relationship between the TSR results and the calculation of the TSR modifier used for our PRU programs.
Long-Term Equity Awards
| 2022 Relative TSR | Maximum Modifier | | 80 th percentile & above | 150% | | 50 th percentile | 100% | | 10 th percentile (Threshold) | 60% | | Below 10 th percentile | 0% |
Long-Term Equity Awards
In order to finish our representative example set forth above, assuming that the participant was credited with 218,400 PRU units at the end of the performance period and our TSR for that three-year period was at the 80th percentile of the applicable group of comparable companies, a total of 327,600 shares of our common stock would be released to the participant for that period. The below chart provides the last step in the example calculation of our PRU program.
Long-Term Equity Awards
| Peer Ranking | Calculated Units | Modifier | Total Share Award | | Below 10 th percentile | 218,400 | 0 | 0 | | 50 th percentile | 218,400 | 60% to 100% | 131,040 to 218,400 | | 80 th percentile & above | 218,400 | 150% | 327,600 |
Long-Term Equity Awards
To achieve the maximum payout (240% of the initial PRU award), we must achieve the maximum annual financial goals for each of the three years in the relevant performance period and our TSR must meet or exceed the 80th percentile of the TSRs of the applicable group of comparable companies for that period. Award values will reflect changes in stock price (both increases and decreases) over the three-year period because awards are denominated in stock units and payable in shares. Equity Award Mix . Our compensation committee may in the future adjust the mix of equity award types or approve different awards as part of the overall long-term incentive award. Awards made in connection with a new, extended or expanded employment relationship may involve a different mix of performance and time-vested RSUs, options or other equity-related awards depending on our compensation committee’s assessment of the total compensation package being offered. Long-Term Equity Awards for 2022. Our compensation committee balances the mix of time-vested RSUs, which are designed to promote retention, and PRUs, which are designed to grow long-term value with our Company, in accordance with the overall philosophy valuing both components of equity compensation, with an emphasis on driving long-term value. In determining the ratio between PRU and time-vested RSU awards, the compensation committee reviewed and took into consideration compensation practices at other companies, our Compensation Consultants’ recommendations, and the compensation committee’s desire to ensure that a significant portion of equity compensation be tied to our Company’s performance against our peers. Additionally, the compensation committee desired to ensure that its equity program was competitive, provided long-term retention of critical leadership talent, and best aligned pay practices with the interests of our stockholders. The following table sets forth the value of our 2022 equity awards and the number of time-vested RSUs and (at target) PRUs awarded to our executive officers for 2022.
Long-Term Equity Awards
| Name | Dollar Value of Equity Grants | | | Number of Shares of Equity Grants (1) | | | | | Performance | Time-Vested | Total | Performance | Time-Vested (2) | Total | | Thomas T. Edman | $1,450,000 | $622,000 | $2,072,000 | 104,466 | 44,812 | 149,278 | | Catherine A. Gridley | $468,000 | $383,000 | $851,000 | 33,717 | 27,593 | 61,310 | | Todd B. Schull | $509,000 | $416,000 | $925,000 | 36,671 | 29,971 | 66,642 | | Douglas L. Soder | $509,000 | $416,000 | $925,000 | 36,671 | 29,971 | 66,642 | | Philip Titterton | $550,000 | $450,000 | $1,000,000 | 39,625 | 32,420 | 72,045 |
Long-Term Equity Awards
| (1) The number of RSUs awarded to each of our executive officers was calculated using a dollar value per share of $13.88, which was the six-month trailing average closing price of our common stock as of June 22, 2022, the grant date for those awards. On June 22, 2022, the closing sales price for our common stock was $12.48. |
Long-Term Equity Awards
| (2) One-third of the Time-Vested RSUs vest on each of the first three anniversaries of the grant date. |
Long-Term Equity Awards
The annual financial performance goal or goals for future years will be established in the first quarter of each of those subsequent years, and may or may not be based on our revenue and/or adjusted EBITDA in those years. Whether any units credited under our future grants will be paid out in shares at the end of the applicable three-year period will depend on future results and our TSR during that period, neither of which is determinable until the end of the three-year period. Settlement of PRUs for 2020-2022 Performance Period . The PRUs granted in 2020 have vested and resulted in the issuance of shares to some of our executive officers. The below charts detail the calculations of the PRUs that vested in 2022 and were paid out in 2023. The final TSR modifier was 93%, which was then applied against the financial results for each tranche resulting in the final shares released, which was 102.3% of the original granted shares.
Long-Term Equity Awards
| Name | Original # Granted Shares | # Shares ’20 Rev | # Shares ’20 Adjusted EBITDA | # Shares ’21 Rev | # Shares ’21 Adjusted EBITDA | # Shares ’22 Rev | # Shares ’22 Adjusted EBITDA | TSR Multiplier Final Shares Released | | % of Achievement vs Budget | | 87.9% | 83.8% | 105.8% | 89.2% | 101% | 146.3% | 102.3% | | Thomas T. Edman | 93,419 | 13,680 | 13,049 | 16,478 | 13,890 | 15,717 | 22,777 | 95,591 | | Catherine A. Gridley | 29,244 | 4,282 | 4,085 | 5,158 | 4,348 | 4,920 | 7,131 | 29,924 | | Todd B. Schull | 36,148 | 5,294 | 5,050 | 6,376 | 5,375 | 6,082 | 8,812 | 36,989 | | Douglas L. Soder | 36,148 | 5,294 | 5,050 | 6,376 | 5,375 | 6,082 | 8,812 | 36,989 | | Philip Titterton | 36,148 | 5,294 | 5,050 | 6,376 | 5,375 | 6,082 | 8,812 | 36,989 |
Long-Term Equity Awards
Compensation Levels and Benchmarking . Overall compensation levels for executive officers are determined based on one or more of the following factors: the individual’s duties and responsibilities within our global Company; the individual’s experience and expertise; the compensation levels for the individual’s peers within our Company; compensation levels for similar positions in the PCB industry or in the technology industry more generally; performance of the individual and our Company as a whole; and the levels of compensation necessary to recruit new executive officers. Our compensation committee reviewed the compensation of our officers and compared it with that of both our peer group companies and broader, composite global market survey data provided by our Compensation Consultant. Peer Groups . The compensation committee reviews the peer groups regularly and makes adjustments to account for events such as acquisitions, mergers and the like. For 2022, Mercer recommended, and the committee adopted, the same approach to our Executive Compensation Peer Group using the same criteria used in 2021 including (i) North America based companies with revenues between $1.0 billion and $3.0 billion, and (ii) companies with market capitalization between $250 million and $2.5 billion. For the fiscal year ended January 2, 2023, our revenue was $2.5 billion and our market capitalization was approximately $1.5 billion. For 2022, Mercer further recommended refinements to our Executive Compensation Peer Group, to account for companies who have substantially changed as a result of a transaction. As a result, one company was removed: Cubic Corporation, while seven were added: AAR Corp., Aerojet Rocketdyne Holdings, Crane Aerospace, Hexcel Corporation, Kimball Electronics, Methode Electronics, and Mercury Systems for industry fit. This resulted in a peer group that included the companies listed on the chart below, which along with the broader survey discussed below, were used for benchmarking purposes. Our compensation committee believes that the selected TSR Peer Group is more appropriate for determining TSR under our PRU program as it provides a comparison of our Company’s stock price performance against our global competitors. For a discussion regarding how the TSR Peer Group affects executive compensation, please see the “Long-Term Equity Awards” section on page 4 The following chart lists each of the companies that have been included by our compensation committee in the Executive Compensation Peer Group and TSR Peer Groups for 2021 and 2022:
Long-Term Equity Awards
| Companies | Executive Compensation Peer Group | | TSR Peer Group | | | | 2021 | 2022 | 2021 | 2022 | | AAR Corp. | | ✓ | | | | Advanced Micro Devices | ✓ | | | | | Aerojet Rockedyne Holdings | | ✓ | | | | Amphenol | | | ✓ | ✓ | | AT&S | | | ✓ | ✓ | | AVX | ✓ | | | | | Benchmark Electronics | ✓ | ✓ | ✓ | ✓ | | Celestica | ✓ | ✓ | ✓ | ✓ | | Chin Poon Industrial | | | ✓ | ✓ | | Cobham | | | ✓ | | | Crane Aerospace | | ✓ | ✓ | ✓ | | Cubic | ✓ | | | | | Curtiss-Wright | ✓ | ✓ | | | | Daeduck Electronics | | | ✓ | | | Fabrinet | ✓ | ✓ | | | | Firan Technology Group | | | ✓ | ✓ | | Flextronics International | | | ✓ | ✓ | | Gold Circuit Electronics | | | ✓ | ✓ | | Hexcel Corporation | | ✓ | | | | ISU Petasys | | | | ✓ | | Jabil | | | ✓ | ✓ | | Kimball Electronics | | ✓ | | | | Methode Electronics | | ✓ | | | | Mercury Systems | | ✓ | ✓ | ✓ | | Moog | ✓ | ✓ | | | | Nanya Technology | | | ✓ | ✓ | | ON Semiconductor | ✓ | ✓ | | | | Plexus | ✓ | ✓ | ✓ | ✓ | | Samsung Electro-Mechanics | | | ✓ | ✓ | | Sanmina | ✓ | ✓ | ✓ | ✓ | | Teledyne Technologies | ✓ | ✓ | | | | Trimble Navigation | ✓ | ✓ | | | | Tripod Technology | | | ✓ | ✓ | | Triumph Group | ✓ | ✓ | | | | Unimicron Technology | | | ✓ | ✓ | | Unitech Printed Circuit Board | | | ✓ | ✓ | | Vishay | ✓ | ✓ | | | | WUS Printed Circuit | | | ✓ | ✓ | | Zebra Technologies | ✓ | ✓ | | | | Zhen Ding Technology Holding | | | ✓ | ✓ |
Long-Term Equity Awards
The peer groups are not used for the stock price performance graph included in our Annual Report on Form 10-K for the year ended January 2, 2023. That Form 10-K performance graph compares the cumulative total stockholder return on our common stock against the cumulative total return on the NASDAQ Composite Index and the Dow Jones U.S. Electrical Components & Equipment Index. Mercer recommended the use of peer group data (where available) combined with data obtained from a broader compensation survey conducted by Radford (the “Radford Survey”) for comparing compensation of our executive officers. Mercer recommended the use of the Radford Survey for companies in the semiconductor, computer storage and peripherals, and communications equipment industries with approximate annual revenues between $1.0 billion and $3.0 billion, in order to align with the criteria used to select our 2022 Peer Group. As discussed above, our compensation philosophy targets the compensation levels of our executive officers around the 50th percentile of comparable officers at comparable companies, as derived from both peer group data and broader composite survey data. Our compensation committee may have varied from this target range for various elements of compensation depending on the executive officer’s job performance, skill set, level of responsibilities, prior compensation and business conditions. The compensation for our executive officers discussed herein for 2022 falls generally within this targeted range. Our compensation committee intends to continue its practice of retaining consultants from time to time, as it deems appropriate, to advise it with respect to its policies and to provide compensation data from comparable companies. Risk Management Considerations . Our compensation committee believes that our performance-based bonus and equity programs for all eligible employees, including our executive officers, provide incentives to create long-term stockholder value. Several elements of the programs are also designed to discourage behavior that leads to excessive risk:
Long-Term Equity Awards
| • | Annual incentive bonus compensation programs for management personnel are based on a combination of consolidated company, business unit and/or facility results, as well as individual goals that are established with input from the specific employee and their supervisors. This type of program design motivates business units to work together to achieve greater returns for our stockholders. In any one year, because we are comprised of a number of different business units, managers in high-performing business units may receive significantly more compensation than managers in business units that do not perform as well. |
Long-Term Equity Awards
| • | Our compensation committee believes that operating income and operating cash flow as a percentage of revenues, the financial metrics used to determine the amount of an executive’s annual incentive bonus, are measures that drive long-term stockholder value. Moreover, the committee attempts to set ranges for these metrics that encourage success without encouraging excessive risk taking to achieve short-term results. |
Long-Term Equity Awards
| • | The use and equal weighting of both revenue and adjusted EBITDA performance metrics in our PRU program limits the ability of an executive to be rewarded for taking excessive risk on behalf of our Company by, for example, seeking revenue-enhancing opportunities at the expense of adjusted EBITDA, since performance is required on both metrics to maximize payout under the Company’s PRU program. |
Long-Term Equity Awards
| • | The metrics used to determine vesting of our PRUs are based on rolling three-year performance periods of our Company’s performance and the price of the stock of the Company over a six-month average. The committee believes that these extended performance periods encourage executives to attain sustained performance over several periods, rather than performance in a more limited period. |
Long-Term Equity Awards
| • | Our time-vested RSUs vest over a three-year period, encouraging executives to strive for long-term appreciation in equity values. |
Long-Term Equity Awards
| • | Our management incentive plan provides that executives will only receive payments if the Company achieves at least 60% of the target operating income set by our Board of Directors in any given year. Similarly, our PRU program provides that executives will “bank” PRU shares if we achieve at least 60% of the revenue and adjusted EBITDA targets. The committee believes that these minimum thresholds discourage management from taking excessive risk to achieve performance at a higher percentage of the established target. |
Long-Term Equity Awards
| • | Our management incentive plan and PRU program both have maximum caps which limit payouts while also recognizing exceptional performance. Maximum caps encourage management to exceed established performance targets however mitigate risk by limiting payouts which avoid excessive risk-taking or the sacrificing of future period performance. |
Long-Term Equity Awards
| • | Our PRU program uses a modifier of our TSR which is based on stock price fluctuations over a three-year period (using for each year’s awards the six-month trailing average closing price of the beginning of each year compared to the six-month trailing average closing sales price three years later) relative to the TSR of peer companies selected by our compensation committee. Our compensation committee believes that the use of a six-month trailing average closing stock price mitigates the potential risks of basing potential PRU payments on changes in stock prices that may not be reflective of long-term performance. |
Long-Term Equity Awards
| • | Because each of our executives is subject to our insider trading policy, among other restrictions, our executives are prohibited from pledging and hedging their shares of our stock. |
Long-Term Equity Awards
| • | Our Chief Executive Officer and his direct reports are subject to stock ownership guidelines. The guidelines provide that the Chief Executive Officer shall attain stock ownership with a value of five times salary within five years of tenure and that the direct reports of the Chief Executive Officer shall attain stock ownership with a value of three times salary within five years of the adoption of the policy or the executive’s tenure. |
Other Compensation Elements
Other Compensation Elements Nonqualified Deferred Compensation . We have a deferred compensation plan that allows our directors, executive officers and other eligible employees to voluntarily defer receipt, on a pre-tax basis, of some of the compensation they have earned. This plan allows eligible employees to defer more compensation than they otherwise would be permitted to defer under our 401(k) savings plan. Our compensation committee approved the deferred compensation plan as a competitive practice to help us attract and retain top talent, and we expect to re-evaluate the plan from time to time. Amounts credited under the plan are credited with deemed earnings, but we do not provide matching or other employer contributions under this plan. Due to its conservative design, the benefits provided under our deferred compensation plan are not considered a material element of an executive officer’s overall compensation package. Other Compensation . All of our executive officers are eligible to participate in our employee benefit plans, including medical, dental, life insurance, and 401(k) plans. These plans are available to all of our employees and do not discriminate in favor of executive officers. It is generally our policy to not extend significant perquisites to executives that are not broadly available to our other employees. In designing these elements, we seek to provide an overall level of benefits that is competitive with that offered by similarly situated companies in the markets in which we operate based upon our general understanding of industry practice. These benefits are not considered by our compensation committee in determining the compensation of our executive officers. Severance Payments and Accelerated Vesting of Equity Awards Upon Termination and/or a Change in Control. All Employees We provide, in the event of a voluntary termination of employment in connection with retirement, our termination of a retirement-eligible employee without cause, or termination by reason of death or disability, for the acceleration of vesting of a pro-rated amount of RSUs based upon the number of months the retired, retirement-eligible, deceased or disabled employee was employed with us during the vesting period. In all other terminations of employment, including termination without cause, all unvested RSUs will be forfeited. Executive Officers and Certain Senior Officers Our Board of Directors has approved Executive Change in Control Severance Agreements (“Severance Agreements”) for each of our executive officers and several other senior officers. Each of the Severance Agreements are “double trigger” severance agreements which provide that, subject to our Company receiving a general release of claims from the executive, in the event the executive’s employment is terminated (i) by our Company without “Cause” during a “Pending Change in Control” (as such terms are defined in the Severance Agreement) or within 12 months following a “Change in Control” (as defined in the Severance Agreement) or (ii) by the executive for “Good Reason” (as defined in the Severance Agreement) within 12 months following a Change in Control, the executive will be entitled to receive payments without gross-ups as set forth in the disclosure provided on the Potential Payments Upon Change in Control or Termination chart on page 5 4 . The incentive equity agreements provided to each executive that has received RSUs and PRUs provide that upon a change in control, so long as the acquiring entity assumes the equity awards, the executives would continue to vest in their previously granted equity awards. However, if upon a change in control the executive’s employment is terminated within twelve months of the change in control or, if the acquiring entity does not assume the equity awards granted to executives prior to the change in control, the unvested awards of RSUs and PRUs then outstanding would immediately vest, in full and at target, at the time of the change in control. Calculations of the payments due to our named executive officers upon certain terminations of employment and/or in connection with a change in control are set forth under “Potential Payments Upon Change in Control or Termination.”
Approval Process for Equity Grants
Approval Process for Equity Grants Executives and other employees currently receive long-term equity awards pursuant to the terms of our 2014 Plan. Awards may also be granted outside of the 2014 Plan to the extent those grants are permitted by the NASDAQ rules. Our compensation committee administers the 2014 Plan and establishes the rules for all awards granted thereunder, including grant guidelines, vesting schedules, and other provisions. The compensation committee reviews these rules from time to time and considers, among other things, the interests of our stockholders, market conditions, information provided by our compensation consultant and legal advisor, performance objectives, and recommendations made by our Chief Executive Officer. Our compensation committee reviews awards for all employees. The compensation committee has established a process in which our compensation committee reviews the recommendations of our Chief Executive Officer for executives (other than himself) and other employees, modifies the proposed grants in certain circumstances, and approves the awards effective as of the date of its approval. Equity awards are granted at scheduled board meetings. We have no practice of timing board meetings or grants of equity awards to coordinate with the release of material non-public information, and we have not timed the release of material non-public information for the purpose of affecting the value of named executive officer compensation. In addition, our practice of calculating the number of equity awards based on the six-month trailing average closing price of our common stock mitigates the effects of both our stock price volatility and the impact of grant timing.
Impact of Tax and Accounting
Impact of Tax and Accounting As a general matter, our compensation committee takes into account the various tax and accounting implications of the compensation vehicles employed by us. However, while structuring compensation programs that result in more favorable tax and financial reporting treatment is a general principle, our compensation committee balances these goals with other business needs that may be inconsistent with obtaining the most favorable tax and accounting treatment for each component of compensation. Under the Tax Cuts and Jobs Act and subject to certain grandfathering rules, effective 2018, the performance-based compensation exception has been eliminated and the definition of “covered employee” has been expanded (before 2018, the Chief Financial Officer and individuals who were covered employees in past years were not treated as covered employees). As a result, the Company generally will not be able to obtain a tax deduction for compensation paid to a covered employee in excess of $1 million. However, in establishing the cash and equity incentive compensation programs for our executive officers, our compensation committee believes that the potential deductibility of the compensation payable under those programs should be only one of a number of relevant factors taken into consideration, and not the sole or primary factor. The compensation committee believes that cash and equity incentive compensation must be maintained at the requisite level to attract and retain the executive officers essential to our financial success, even if all or part of that compensation may not be deductible by reason of the limitations of Section 162(m) of the Code. Tax Implications for Officers . Certain types of deferred compensation for executive officers that do not comply with Section 409A of the Code may be subject to additional income taxes. We attempt in good faith to structure compensation so that it either conforms to the requirements of, or qualifies for an exception under Code Section 409A. Section 280G of the Code imposes an excise tax on payments to executives of severance or change in control compensation that exceed the levels specified in the Section 280G rules. Our executive officers could receive the amounts shown in the section entitled “Potential Payments Upon Change in Control or Termination” below as severance or change in control payments that could trigger this excise tax. We do not offer our officers as part of their change in control benefits any gross ups related to this excise tax under Code Section 4999. Accounting Considerations . When determining amounts of long-term incentive grants to executives and employees, our compensation committee examines the accounting cost associated with the grants. Under ASC Topic 718, Compensation – Stock Compensation, grants of stock options and restricted stock units result in an accounting charge equal to the grant date fair value of those securities. For time-vested RSUs, the accounting cost is generally equal to the fair market value of the underlying shares of common stock on the grant date of the award. The cost is then amortized over the requisite service period. For PRUs, the accounting cost is calculated using a Monte Carlo simulation model. Our compensation committee believes that the many advantages of equity compensation, as discussed above, more than compensate for the non-cash accounting expense associated with them.
Fiscal Year 2022 Summary Compensation Table
| Name and Principal Position | Year | Salary(6) | Stock Awards (1) | Non- Equity Incentive Plan Compensation (2) | All Other Compensation(3) | Total | | Thomas T. Edman | 2022 | $824,000 | $1,064,521 | $2,103,044 | $12,200 | $4,003,765 | | President, Chief Executive | 2021 | $762,500 | $1,017,226 | $803,758 | $11,600 | $2,595,084 | | Officer | 2020 | $752,885 | $861,985 | $983,869 | $11,400 | $2,610,139 | | Todd B. Schull | 2022 | $525,000 | $551,403 | $797,463 | $13,300 | $1,887,166 | | Executive Vice President and | 2021 | $492,500 | $590,618 | $335,989 | $11,600 | $1,430,707 | | Chief Financial Officer | 2020 | $503,654 | $492,837 | $408,499 | $11,400 | $1,416,390 | | Douglas L. Soder | 2022 | $507,500 | $551,403 | $771,744 | $(63,551) | $1,767,096 | | Executive Vice President and | 2021 | $492,500 | $590,618 | $509,762 | $292,860 | $1,885,740 | | President Commercial Sector | 2020 | $503,654 | $492,837 | $423,226 | $224,395 | $1,644,112 | | Philip Titterton | 2022 | $525,000 | $596,255 | $791,679 | $17,723 | $1,930,763 | | Executive Vice President and | 2021 | $440,000 | $590,618 | $291,121 | $11,600 | $1,333,339 | | Chief Operating Officer(4) | 2020 | $394,690 | $492,837 | $300,649 | $11,400 | $1,199,576 | | Catherine A. Gridley | 2022 | $427,500 | $507,439 | $600,173 | $12,200 | $1,547,312 | | Executive Vice President and | 2021 | $387,500 | $492,488 | $202,225 | $11,600 | $1,093,813 | | President, A&D Sector | 2020 | $389,423 | $402,982 | $248,187 | $170,344 | $1,210,936 |
GRANTS OF PLAN-BASED AWARDS
GRANTS OF PLAN-BASED AWARDS
Fiscal Year 2022 Grants of Plan-Based Awards
Fiscal Year 2022 Grants of Plan-Based Awards The following table provides information on awards granted under our annual management incentive plan for fiscal year 2022 and awards of PRUs and awards of time-based RSUs granted as part of 2022 long-term incentive compensation.
Fiscal Year 2022 Grants of Plan-Based Awards
| | Type of | Grant | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | | | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | | | All Other Stock Awards: Number of Shares of Stock | Fair Value of Stock Awards | Grant- Date Fair Value of Stock | | Name | Award | Date | Threshold | Target | Maximum | Threshold | Target | Maximum | or Units(3) | ($/Sh) | Awards(4) | | Thomas T. Edman | Incentive Bonus | | $302,100 | $1,060,000 | $2,173,032 | | | | | | | | | PRU | 6/22/2022 | | | | 25,072 | 104,466 | 250,718 | | $14,51 | $505,267 | | | RSU | 6/22/2022 | | | | | | | 44,812 | $12.48 | $559,254 | | Catherine A. Gridley | Incentive Bonus | | $120,120 | $364,000 | $691,600 | | | | | | | | | PRU | 6/22/2022 | | | | 8,092 | 33,717 | 80,921 | | $14.51 | $163,078 | | | RSU | 6/22/2022 | | | | | | | 27,593 | $12.48 | $344,361 | | Todd B. Schull | Incentive Bonus | | $145,200 | $440,000 | $836,000 | | | | | | | | | PRU | 6/22/2022 | | | | 8,801 | 36,671 | 88,010 | | $14.51 | $177,365 | | | RSU | 6/22/2022 | | | | | | | 29,971 | $12.48 | $374,039 | | Douglas L. Soder | Incentive Bonus | | $135,960 | $412,000 | $782,800 | | | | | | | | | PRU | 6/22/2022 | | | | 8,801 | 36,671 | 88,010 | | $14.51 | $177,365 | | | RSU | 6/22/2022 | | | | | | | 29,971 | $12.48 | $374,038 | | Philip Titterton | Incentive Bonus | | $145,200 | $440,000 | $836,000 | | | | | | | | | PRU | 6/22/2022 | | | | 9,510 | 39,625 | 95,100 | | $14.51 | $191,653 | | | RSU | 6/22/2022 | | | | | | | 32,420 | $12.48 | $344,361 |
Fiscal Year 2022 Grants of Plan-Based Awards
| (1) Amounts represent the range of possible cash payouts for 2022 awards under our management incentive bonus plan. |
Fiscal Year 2022 Grants of Plan-Based Awards
| (2) Amounts represent the range of shares that may be released at the end of the three-year performance period applicable to the PRU award assuming achievement of threshold performance. If our revenue and EBITDA performance is below threshold for each year during the performance period or if our TSR for the period is in the bottom 10th percentile of the TSR Peer Group, no shares will be released at the end of the period. See the discussion of PRU awards under “Compensation Discussion and Analysis — Equity Awards.” |
Fiscal Year 2022 Grants of Plan-Based Awards
| (3) The RSU awards vest one-third on each of the first, second and third anniversaries of the date of grant. |
Fiscal Year 2022 Grants of Plan-Based Awards
| (4) See footnote (1) to the Fiscal Year 2022 Summary Compensation Table for a description of the method used to determine the grant date fair value of stock awards. |
Outstanding Equity Awards at Fiscal Year-End
Outstanding Equity Awards at Fiscal Year-End The following table sets forth the outstanding equity awards held by our named executive officers as of January 2, 2023.
Outstanding Equity Awards at Fiscal Year-End
| Name | Grant Date | Number of Shares or Units of Stock that Have Not Vested | Market Value of Shares or Units of Stock that Have Not Vested(1) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights that Have Not Vested | Equity Incentive Plan Awards: Market Value of Unearned Shares, Units or Other Rights that Have Not Vested(1) | | Thomas T. Edman(2) | 6/22/2020 | 13,268(3) | $200,081 | 95,591(6) | $1,441,512 | | | 6/22/2021 | 24,776(4) | $373,622 | 97,640(7) | $1,472,411 | | | 6/22/2022 | 44,812(5) | $675,765 | 115,932(8) | $1,748,255 | | Catherine A. Gridley | 6/22/2020 | 8,123(3) | $122,495 | 29,924(6) | $451,254 | | | 6/22/2021 | 15,508(4) | $233,861 | 31,926(7) | $481,444 | | | 6/22/2022 | 27,593(5) | $416,102 | 37,418(8) | $564,263 | | Todd B. Schull | 6/22/2020 | 9,883(3) | $149,036 | 36,989(6) | $557,794 | | | 6/22/2021 | 18,582(4) | $280,217 | 38,357(7) | $578,424 | | | 6/22/2022 | 29,971(5) | $451,963 | 40,696(8) | $613,696 | | Douglas L. Soder | 6/22/2020 | 9,883(3) | $149,036 | 36,989(6) | $557,794 | | | 6/22/2021 | 18,582(4) | $280,217 | 38,357(7) | $578,424 | | | 6/22/2022 | 29,971(5) | $451,963 | 40,696(8) | $613,696 | | Philip Titterton | 6/22/2020 | 9,883(3) | $149,036 | 36,989(6) | $557,794 | | | 6/22/2021 | 18,582(4) | $280,217 | 38,357(7) | $578,424 | | | 6/22/2022 | 32,420(5) | $488,894 | 43,975(8) | $663,143 |
Outstanding Equity Awards at Fiscal Year-End
| (1) Based on the closing price of our common stock on January 2, 2023. |
Outstanding Equity Awards at Fiscal Year-End
| (2) Mr. Edman has 35,261 shares issuable upon delivery of shares underlying vested RSUs, of which the delivery of 18,826 shares is deferred until retirement and the delivery of 16,435 shares is deferred until one year after retirement from our Board of Directors. |
Outstanding Equity Awards at Fiscal Year-End
| (3) Such RSUs vested on June 20, 2023. |
Outstanding Equity Awards at Fiscal Year-End
| (4) Such RSUs will vest 50% on each of June 22, 2023 and 2024. |
Outstanding Equity Awards at Fiscal Year-End
| (5) Such RSUs will vest one-third on each of June 22, 2023, 2024, and 2025. |
Outstanding Equity Awards at Fiscal Year-End
| (6) Represents the number of PRUs granted in fiscal 2020, adjusted for actual achievement during 2020, 2021 and 2022 on the annual metrics of revenue and EBITDA (each of which is equally weighted) with respect to the first one-third portion of the award attributable to 2020 performance, the second one-third portion of the award attributable to 2021 performance and the remaining one-third portion of the award attributable to 2022 performance. For 2020, performance on the annual revenue metric was 96.3% of target and performance on the annual EBITDA metric was 93.4% of target, resulting in a blended multiplier of 92.3% for the 2020 performance period. For 2021, performance on the annual revenue metric was 104.6% of target and performance on the annual EBITDA metric was 97.3% of target, resulting in a blended multiplier of 104.9% for the 2021 performance period. For 2022, performance on the annual revenue metric was 102.9% of target and performance on the annual EBITDA metric was 119.1% of target, resulting in a blended multiplier of 132.9% for the 2022 performance period. The blended multiplier of 92.3% for the 2020 performance period applies to the first one-third of the PRUs; the blended multiplier of 104.9% for the 2021 performance period applies to the second one-third of the PRUs; and the blended multiplier of 132.9% for the 2022 performance period applies to the remaining one-third of the PRUs. Total PRUs credited at the conclusion of 2022 are adjusted by our performance on TSR as compared to the TSR Peer Group, which determines the number of shares, if any, released at the end of the three-year performance period. Our TSR performance over such three-year performance period was at the 43th percentile, which resulted in a TSR modifier of 93.0% that applies to the shares banked under the 2020 PRU Awards. As a result, final payout under the 2020 PRU awards was 102.3% of the target number of shares granted. Such PRUs vested on February 22, 2023. |
Outstanding Equity Awards at Fiscal Year-End
| (7) Represents the number of PRUs granted in fiscal 2021, adjusted for actual achievement during the annual metrics of revenue and EBITDA (each of which is equally weighted) with respect to the first one-third portion of the award attributable to 2021 performance and the second one-third portion of the award attributable to 2022 performance and the remaining one-third portion of the award attributable to 2023 performance. For 2021, performance on the annual revenue metric was 104.6% of target and performance on the annual EBITDA metric was 97.3% of target, resulting in a blended multiplier of 104.9% for the 2021 performance period. For 2022, performance on the annual revenue metric was 102.9% of target and performance on the annual |
Outstanding Equity Awards at Fiscal Year-End
| EBITDA metric was 119.1% of target, resulting in a blended multiplier of 132.9% for the 2022 performance period. The blended multiplier of 104.9% for the 2021 performance period applies to the first one-third of the PRUs; the blended multiplier of 132.9% for the 2022 performance period applies to the second one-third of the PRUs; and the remaining units are reported at target and will be adjusted based on actual revenue and EBITDA performance during the 2023 performance period. Total PRUs credited at the conclusion of 2023 will be adjusted by our performance on TSR as compared to the TSR Peer Group, which will determine the number of shares, if any, released at the end of the three- year performance period. |
Outstanding Equity Awards at Fiscal Year-End
| (8) Represents the number of PRUs granted in fiscal 2022, adjusted for actual achievement during 2022 on the annual metrics of revenue and EBITDA (each of which is equally weighted) with respect to the first one-third portion of the award attributable to 2022 performance. For 2022, performance on the annual revenue metric was 102.9% of target and performance on the annual EBITDA metric was 119.1% of target, resulting in a blended multiplier of 132.9% for the 2022 performance period. The blended multiplier of 132.9% for the 2022 performance period applies to the first one-third of the PRUs granted for 2022; and the remaining units are reported at target and will be adjusted based on actual revenue and EBITDA performance during the applicable performance periods. Total PRUs credited at the conclusion of 2024 will be adjusted by our performance on TSR as compared to the TSR Peer Group, which will determine the number of shares, if any, released at the end of the three-year performance period. |
Stock Vested In Fiscal Year 2022
Stock Vested In Fiscal Year 2022 The following table sets forth information concerning the value realized by each of our named executive officers upon the vesting of stock awards during Fiscal Year 2022.
Stock Vested In Fiscal Year 2022
| Name | Stock Awards | | | | Number of Shares Acquired on Vesting | Value Realized on Vesting(1) | | Thomas T. Edman | 96,954 | $1,202,699 | | Catherine A. Gridley | 27,540 | $374,490 | | Todd B. Schull | 51,859 | $645,419 | | Douglas L. Soder | 51,859 | $645,419 | | Philip Titterton | 51,859 | $645,419 |
Stock Vested In Fiscal Year 2022
| (1) The value realized equals the fair market value of our common stock on the date of vesting multiplied by the number of shares released on vest date. |
2022 Nonqualified Deferred Compensation Table
2022 Nonqualified Deferred Compensation Table Under our nonqualified deferred compensation plan, our named executive officers are permitted to defer up to 100% of annual incentive bonuses received in a particular plan year. Interest on contributions is based on the valuation funds selected by our compensation committee and subsequently chosen by the participant. Funds held under the plan are paid out six months following the separation of any participant from service with our Company. The payout term will be in the form selected by the individual participant, unless the participant’s separation from service with our Company is prior to retirement (which is considered under the plan to be on or after attainment of age 62 with at least five years of continuous service with our Company). If separation occurs prior to retirement or the participant’s account balance is under $25,000, the payout will be made in the form of a lump sum. The following table sets forth information concerning our named executive officers’ contributions, earnings, and balances under our nonqualified deferred compensation plan for the fiscal year 2022. We do not contribute to the deferred compensation plan.
2022 Nonqualified Deferred Compensation Table
| Name | Aggregate Beginning Balance | Executive Contributions in Last Fiscal Year(1) | Employer Contributions in Last Fiscal Year | Aggregate Earnings in Last Fiscal Year(2) | Aggregate Withdrawals/ Distributions | Aggregate Balance in Last Fiscal Year End | | Thomas T. Edman | $2,241,837 | $784,870 | — | $(400,343) | — | $2,626,363 | | Catherine A. Gridley | — | — | — | — | — | — | | Todd B. Schull | $3,987,229 | $251,991 | — | $(760,618) | — | $3,478,602 | | Douglas L. Soder | $979,002 | — | — | $(167,055) | — | $811,947 | | Philip Titterton | — | — | — | — | — | — |
2022 Nonqualified Deferred Compensation Table
| (1) Reflects amounts of the Non-Equity Incentive Compensation earned and reported in the Summary Compensation Table for Fiscal Year 2022, but were deferred from payment in fiscal 2022. |
2022 Nonqualified Deferred Compensation Table
| (2) We do not provide above-market or preferential earnings on contributions to our nonqualified deferred compensation plan, so these amounts were not reported in the Fiscal Year 2022 Summary Compensation Table. |
Potential Payments Upon Change in Control or Termination
Potential Payments Upon Change in Control or Termination We have entered into “Severance Agreements” with each of Messrs. Edman, Schull, Soder, Titterton and Ms. Gridley. Each Severance Agreement provides that, in the event the executive’s employment is terminated by (1) our Company without cause during a pending change in control or within 12 months following a change in control, or (2) by the executive for good reason within 12 months following a change in control, the executive will be entitled to receive a lump sum in cash equal to two times the sum of (a) the executive’s annual base salary and (b) the amount of the executive’s annual target bonus for the fiscal year during which the executive is terminated assuming the achievement of 100% of the performance target levels associated with such annual target bonus. In addition, the unvested portions of all of such executive’s RSUs and PRUs then outstanding would immediately vest, in full, as of the date of termination. The Severance Agreements also provide for a twelve-month non-solicitation covenant and customary confidentiality obligations. The change in control severance payments and accelerated vesting of equity awards are intended to provide a level of transition assistance in the event of an involuntary termination of employment and to keep our executives focused on our business rather than their personal circumstances. Our compensation committee believes these provisions are fair and reasonable based on its understanding of market practices among industry competitors and within the broader environment of technology companies and similarly sized businesses. We believe that it is appropriate to require a termination of employment within one year following a change in control before full vesting is accelerated and the cash severance amounts become payable. We presume that such a termination would likely be due to the change in control and not the employee’s performance. For executives not terminated within one year of a change in control, as long as the acquiring entity assumes such awards, the executives would continue to vest in their awards as they contribute to the success of the surviving company. We also believe these severance benefits are an essential element of our compensation package for executive officers and assist us in recruiting and retaining talented individuals. If upon a change in control the acquiring entity does not assume the equity awards granted to executives prior to the change in control, the unvested awards of RSUs and PRUs then outstanding would immediately vest at the time of the change in control. With respect to PRU vesting, the recipient would be eligible to receive the greater of: (i) the target amount of shares subject to the PRU Award, or (ii) the calculation of the PRU that would have been granted if the financial results and TSR results were measured as such results were at the time of the Change in Control on a pro-forma basis plus the remainder of the target amount of shares that would have vested. In the event of a termination “without cause” and if such recipient satisfies certain conditions for early retirement (as such term is defined in the form of RSU Agreement), the Agreement provides for the acceleration of vesting of a number of RSUs equal to the product obtained by multiplying the number of unvested RSUs that would vest in the 12-month period commencing on the date of grant, or if later occurring, the most recent anniversary of the date of grant, by a fraction, the numerator of which is the number of whole months since the date of grant, or if later occurring, the most recent anniversary of the date of grant, and the denominator of which is 12 months, rounded down to the nearest whole share. In the event of a termination “without cause” as defined in the PRU Agreement after a change in control, the recipient would be eligible to receive, the greater of: (i) the target amount of shares subject to the PRU Award, or (ii) in the event of a change in control the calculation of the PRU that would have been granted if the financial results and TSR results were measured as such results were at the time of the change in control on a pro-forma basis, prorated for the amount of the performance period elapsed plus the remainder of the target amount of shares that would have vested. The following tables set forth certain information regarding potential payments and other benefits that would be payable to each of our named executive officers upon a change in control of our Company and/or upon a termination of our named executive officer’s employment. In the case of retirement, death or long term disability, this will result in a pro-rated award for equity and a pro-rated annual cash incentive. The tables below assume that the termination or change in control event took place on January 2, 2023.
Potential Payments Upon Change in Control or Termination
| Name | Executive Benefits(1) | Termination Without Cause | Change in Control (No Termination)(2) | Change in Control (No Termination)(3) | Termination Without Cause Pending a Change in Control | Termination Without Cause or for Good Reason, each Within 12 Months Following a Change in Control(3) | | Thomas T. Edman | Accelerated RSUs(4) Accelerated PRUs(4) Severance(5) | — — — | $1,249,468 $4,291,798 — | — — — | $1,249,468 — $3,816,000 | $1,249,468 $4,291,798 $3,816,000 | | Catherine A. Gridley | Accelerated RSUs(4) Accelerated PRUs(4) Severance(5) | — — — | $772,458 $1,377,060 — | — — — | $772,458 — $1,638,000 | $772,458 $1,377,060 $1,638,000 | | Todd B. Schull | Accelerated RSUs(4) Accelerated PRUs(4) Severance(5) | — — — | $881,215 $1,611,841 — | — — — | $881,215 — $1,980,000 | $881,215 $1,611,841 $1,980,000 | | Douglas L. Soder | Accelerated RSUs(4) Accelerated PRUs(4) Severance(5) | — — — | $881,215 $1,611,841 — | — — — | $881,215 — $1,854,000 | $881,215 $1,611,841 $1,854,000 | | Philip Titterton | Accelerated RSUs(4) Accelerated PRUs(4) Severance(5) | — — — | $918,146 $1,656,387 — | — — — | $918,146 — $1,980,000 | $918,146 $1,656,387 $1,980,000 |
Potential Payments Upon Change in Control or Termination
| (1) Amounts represented in the table do not include restricted stock units or performance-based restricted units that are fully vested, earned salary, and accrued vacation, as those items are earned and due to the named executive officer regardless of such termination or change in control events. It also does not include amounts payable under life insurance coverage, our accidental death and dismemberment coverage or our business travel accident coverage, which are programs available to all of our full-time employees. The amounts listed assume that the termination or change in control event took place on January 2, 2023. |
Potential Payments Upon Change in Control or Termination
| (2) Assumes that the RSUs and PRUs are not assumed by the acquiring entity in connection with the change in control. |
Potential Payments Upon Change in Control or Termination
| (3) Assumes that the RSUs and PRUs are assumed by the acquiring entity in connection with the change in control. |
Potential Payments Upon Change in Control or Termination
| (4) The amount listed for accelerated RSUs and PRUs is based on the closing price of our common stock on January 2, 2023. |
Potential Payments Upon Change in Control or Termination
| (5) The amount listed is calculated with the formula described above using an annual target bonus of 125% of base salary for Mr. Edman and 80% of base salary for each of Messrs. Schull, Soder, Titterton and Ms. Gridley for fiscal year 2022, which represents the percentage of base salary payable as a bonus upon achievement of 100% of the performance target levels associated with such annual target bonus, as set forth in the Severance Agreements. |
CEO Pay Ratio
CEO Pay Ratio In determining the CEO pay ratio for the Company, it is important to note that the Company has approximately 17,800 total employees around the world, and approximately 11,900 of such employees reside in Asia with pay that is generally lower than the pay of our North American based employees.