DEF 14A of Axalta Coating Systems Ltd.
Filed Apr 24, 2024 · FY20230001193125-24-110122
Our Board of Director Nominees
Our Board of Director Nominees
Our Board of Director Nominees
| Name | Age | Occupation | Standing Committees and Leadership Roles | Other Public Company Boards | | Director Nominees | | | | | | Rakesh Sachdev | 68 | Former chief executive officer | • Non-Executive Board Chair | 3 | | Jan A. Bertsch | 67 | Former financial executive | • Audit | 2 | | | | | • Compensation | | | William M. Cook | 70 | Former chief executive officer | • Audit | 1 | | | | | • Compensation (Chair) | | | Tyrone M. Jordan | 62 | Former business executive | • Environment, Health, Safety & Sustainability | 2 | | | | | • Nominating & Corporate Governance | | | Deborah J. Kissire | 66 | Former accounting firm partner | • Compensation | 3 | | | | | • Nominating & Corporate Governance (Chair) | | | Samuel L. Smolik | 71 | Former operations executive | • Environment, Health, Safety & Sustainability (Chair) | 0 | | | | | • Nominating & Corporate Governance | | | Kevin M. Stein | 58 | Chief executive officer | • Environment, Health, Safety & Sustainability | 1 | | | | | • Nominating & Corporate Governance | | | Chris Villavarayan | 53 | Chief Executive Officer and President of Axalta | | 1 | | Mary S. Zappone | 59 | Chief executive officer | • Audit | 0 | | | | | • Environment, Health, Safety & Sustainability | |
Our Board of Director Nominees
As previously announced, Steven M. Chapman and Robert M. McLaughlin are not standing for re-election to the Board at the Annual Meeting.
Executive Compensation Highlights
| • | Double Trigger Vesting Provisions – our equity plan also provides double trigger vesting provisions for long-term equity awards in the event of a Change-in-Control (as defined below). |
Nominees for Election as Directors to Serve Until the 2025 Annual General Meeting of Members
Nominees for Election as Directors to Serve Until the 2025 Annual General Meeting of Members
Nominees for Election as Directors to Serve Until the 2025 Annual General Meeting of Members
| | Rakesh Sachdev Age: 68 Axalta Board Service • Tenure: 3 years (August 2020) • Non-Executive Board Chair Independent |
DIRECTOR COMPENSATION
DIRECTOR COMPENSATION
Overview
| Compensation Component | Amount | | Annual equity retainer – restricted stock units (“RSUs”)(1) | $200,000 | | Annual cash retainer(2) | $75,000 | | Board Chair annual fee(2) | $125,000 | | Audit Committee Chair annual fee(2) | $20,000 | | Compensation Committee Chair annual fee(2) | $17,500 | | Other Committee Chair annual fee(2) | $15,000 |
Overview
| (1) RSUs vest 100% on the first anniversary of the grant date |
DIRECTOR COMPENSATION
DIRECTOR COMPENSATION
Director Compensation Table 2023
Director Compensation Table 2023 For the year ended December 31, 2023, we provided the compensation set out in the table below to our directors.
Director Compensation Table 2023
| Name | Fees Earned or Paid in Cash(1) ($) | Stock Awards(2) ($) | Total ($) | | Rakesh Sachdev | 200,000 | 199,988 | 399,988 | | Jan A. Bertsch | 75,000 | 199,988 | 274,988 | | Steven M. Chapman | 75,000 | 199,988 | 274,988 | | William M. Cook | 92,500 | 199,988 | 292,488 | | Tyrone M. Jordan | 75,000 | 199,988 | 274,988 | | Deborah J. Kissire | 90,000 | 199,988 | 289,988 | | Robert M. McLaughlin | 95,000 | 199,988 | 294,988 | | Samuel L. Smolik | 90,000 | 199,988 | 289,988 | | Kevin M. Stein(3) | 24,864 | 66,840 | 91,704 | | Chris Villavarayan(4) | — | — | — | | Mary S. Zappone(5) | 13,859 | 37,260 | 51,119 |
Director Compensation Table 2023
| (1) Amounts reflect the director cash retainer, Board Chair fee and committee chair fees earned in 2023. Such amounts are paid quarterly in arrears and prorated for partial service in any relevant period. |
Director Compensation Table 2023
| (2) The number of RSUs granted for each director in 2023 is calculated by dividing the value of the grant ($200,000 or a prorated portion of such amount for Mr. Stein and Ms. Zappone) by the closing price of our common shares on the grant date. The amounts in this column reflect the grant date fair value of directors’ stock awards for 2023 computed in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718, which is calculated using the number of shares granted multiplied by the closing price of our common shares on the date of grant. The grant date for Mr. Sachdev, Ms. Bertsch, Mr. Chapman, Mr. Cook, Mr. Jordan, Ms. Kissire, Mr. McLaughlin and Mr. Smolik was February 28, 2023. The grant date for Mr. Stein was September 1, 2023. The grant date for Ms. Zappone was October 25, 2023. The aggregate number of awarded RSUs outstanding at 2023 fiscal year-end for each non-employee director is as follows: Mr. Sachdev, 6,711; Ms. Bertsch, 6,711; Mr. Chapman, 6,711; Mr. Cook, 6,711; Mr. Jordan, 6,711; Ms. Kissire, 6,711; Mr. McLaughlin, 6,711; Mr. Smolik, 6,711; Mr. Stein, 2,361; and Ms. Zappone, 1,464. |
Director Compensation Table 2023
| (3) Mr. Stein was appointed to the Board effective September 2023. |
Director Compensation Table 2023
| (4) Mr. Villavarayan serves as our Chief Executive Officer and President, and, therefore, does not receive compensation for his service as an employee director. |
Director Compensation Table 2023
| (5) Ms. Zappone was appointed to the Board effective October 2023. |
Director Compensation Table 2023
As disclosed in our definitive proxy statement filed on April 25, 2023, a portion of the RSUs granted to Mr. Sachdev in connection with his service as our interim CEO became vested upon Mr. Villavarayan’s appointment as our CEO, effective January 1, 2023, and in January 2023 Mr. Sachdev vested in 155,337 common shares.
Pay Outcomes
| • | Based on the plan design set by the Compensation Committee under our 2023 annual bonus plan (“ABP”), the Company’s performance was above target for each of Adjusted EBIT and Adjusted EBIT margin and above the maximum for Free Cash Flow, resulting in an average payout to our applicable NEOs of 157% of target, with final NEO ABP payouts reflecting business performance, as applicable, and individual achievement. |
Pay Outcomes
| • | 2023 marked the end of the performance cycle for performance share unit (“PSU”) awards granted in |
Pay Outcomes
| • | For PSU awards granted in 2022, Adjusted EPS and ROIC for the 2023 performance period was below threshold, resulting in a banking of 0% of the target amount for such period; for details on the PSU awards granted in 2023, see “Performance-Based Stock Awards” beginning on page 54. |
Pay Outcomes
For further discussion of our ABP and PSU awards, see “Annual Performance-Based Compensation” beginning on page 50 and “Banking for 2022 PSU Awards” and “2021-2023 PSU Payout” beginning on page 56.
2024 Incentive Compensation Program Changes
2024 Incentive Compensation Program Changes In February 2024, the Compensation Committee approved a new plan design for our 2024 ABP. Like the 2023 ABP, the 2024 ABP includes Adjusted EBIT, Adjusted EBIT margin and Free Cash Flow as performance metrics, though individual performance will not serve as a specific performance metric, but rather will serve as an overall modifier to the payout. This means that an individual’s personal performance against their goals, as well as their contribution to the Company’s success, can result in an adjustment, which can range from 0% to 200% of the target award, to the 2024 ABP payout that is determined based on the Company’s achievement of the financial metrics. In addition, in general, all employees that are eligible for the 2024 ABP will be subject to the same company-wide ABP targets for the three performance metrics. While the performance metrics above continue to remain the key drivers of our performance and metrics by which we measure performance internally, this shift in plan design is intended to reinforce a “ONE Axalta” mindset within our workforce, reward business outcomes that benefit Axalta as a whole and further drive a performance-driven culture in which individual performance serves as a differentiator. Despite Adjusted EBIT being replaced with Adjusted EBITDA as one of our primary performance metrics for external financial reporting, Adjusted EBIT was retained as a component of the 2024 ABP for continuity, and this may be reassessed by the Compensation Committee in the future. During the last year, the Compensation Committee adopted retirement provisions that provide for prorated vesting of PSU awards for employees who have a “Qualifying Retirement.“ A “Qualifying Retirement” occurs when an employee voluntarily retires from the employ of the Company or is terminated by the Company without Cause, and at the time of such retirement or termination, is at least 55 years old and the sum of the employee’s age plus each year of service to the Company equals at least 65, subject to certain other requirements. Upon a Qualifying Retirement, the number of PSUs held by such employee is prorated by multiplying the target number of PSUs held by such employee by the percentage of the applicable period for which the employee remained employed, and all requirements for such employee to continue to provide services to the Company in order to vest in such PSUs are waived. In such event, the prorated target amount of PSUs would be earned based on the Company’s achievement of the underlying performance metrics and paid following the time that performance is approved by the Compensation Committee.
Pay for Performance
Pay for Performance Total compensation for our NEOs has been allocated between cash and equity compensation, taking into consideration the balance between providing near-term incentives and long-term incentives tied to our financial performance and stock price performance, to align the interests of management with the interests of our shareholders. The variable annual performance-based awards and the long-term equity awards, including the PSU awards, are designed to ensure that total compensation reflects our overall level of success and to motivate the NEOs to meet appropriate performance measures tied to maximizing shareholder value. The mix of base salary and performance-based compensation for our NEOs, including the annual bonus and long-term equity incentive compensation, is shown in the charts below. The Compensation Committee determined this mix, taking into account market compensation information and with the intention of balancing both long-term and near-term objectives and motivating each NEO to attain those objectives.
Role of the Independent Compensation Consultant
Role of the Independent Compensation Consultant The Compensation Committee engages an independent compensation consultant on executive compensation matters. The services provided by the independent compensation consultant include:
Role of the Independent Compensation Consultant
| • | attending Compensation Committee meetings, including executive sessions, to present and offer independent recommendations, insights and perspectives on compensation matters; |
Role of the Independent Compensation Consultant
| • | assessing how our executive compensation program aligns with our pay for performance philosophy; |
Role of the Independent Compensation Consultant
| • | informing the Compensation Committee of regulatory and other developments relating to executive compensation practices; |
Role of the Independent Compensation Consultant
| • | assessing the appropriateness of our peer group used to inform our executive compensation program; |
Role of the Independent Compensation Consultant
| • | advising on the design and structure of, as well as the performance targets set under, our annual and long-term compensation plans; |
Role of the Independent Compensation Consultant
| • | conducting an annual risk assessment of our compensation programs; |
Role of the Independent Compensation Consultant
| • | assessing the market competitiveness of our executive compensation program; |
Role of the Independent Compensation Consultant
| • | assessing the market competitiveness of our non-employee director compensation program; and |
Role of the Independent Compensation Consultant
| • | identifying potential changes to our executive compensation and non-employee director compensation programs to maintain market competitiveness and consistency with business strategies, good governance practices and alignment with shareholder interests. |
Role of the Independent Compensation Consultant
Pearl Meyer has served as the Compensation Committee’s independent compensation consultant since 2022 and the Compensation Committee determined that Pearl Meyer does not have a relationship with the Company that would present a conflict of interest with Pearl Meyer serving as the committee’s advisor or would impair its independence. In making this determination, the Compensation Committee considered, among other things, the following factors: (1) the amount of fees paid by the Company to Pearl Meyer as a percentage of its total revenue; (2) Pearl Meyer’s policies and procedures to prevent or mitigate conflicts of interest; (3) that there are no other business or personal relationships between Pearl Meyer and members of the Compensation Committee or Axalta executive officers; and (4) none of the representatives of Pearl Meyer who provide compensation services to the Company own any Axalta common shares.
Compensation Peer Group and Survey Data
Compensation Peer Group and Survey Data We believe that total compensation opportunities for our senior management (including the NEOs) should be competitive with comparable opportunities for individuals with similar positions, experience and responsibilities in our marketplace. We use median compensation data from our peer group as a reference point when setting individual compensation and calibrate variable compensation opportunities to provide actual compensation opportunities above peer data when Company and individual performances are strong, while providing for consequences when performance targets are not met. For purposes of setting 2023 compensation for our NEOs, Pearl Meyer provided the Compensation Committee with a comprehensive report that included publicly available compensation data relating to the peer group set forth in the table below as well as compensation data from Willis Towers Watson’s general industry survey. The Compensation Committee utilized the peer group set forth below as the primary reference point for setting the 2023 compensation for our current Chief Executive Officer and President, Mr. Villavarayan, our current Senior Vice President and Chief Executive Officer, Mr. Anderson, our former Senior Vice President and Chief Financial Officer, Mr. Lannon, and our former Senior Vice President, General Counsel and Corporate Secretary, Mr. Berube. The peer group broadly reflects the companies with which we compete for talent, business and investment capital based on the scope of our operations, as measured by revenue and market capitalization. The Company was positioned at the 40th percentile relative to the peer group on the basis of trailing twelve months revenue at the end of November 2022 and the 55th percentile on the basis of market capitalization as of November 30, 2022.
Compensation Peer Group and Survey Data
| Axalta Compensation Peer Group | | | Albemarle Corporation | Minerals Technologies, Inc. | | Ashland, Inc. | NewMarket Corporation | | Avient Corporation | Olin Corporation | | Cabot Corporation | PPG Industries Inc. | | Celanese Corporation | RPM International Inc. | | Eastman Chemical Co. | The Chemours Company | | Element Solutions Inc | The Sherwin-Williams Company | | FMC Corporation | Trinseo S.A. | | H.B. Fuller Company | Tronox Holdings plc | | Huntsman Corporation | Valvoline Inc. | | International Flavors & Fragrances Inc. | |
Compensation Peer Group and Survey Data
The Compensation Committee also utilized Willis Towers Watson’s general industry survey data for determining 2023 compensation as a secondary reference point for Messrs. Villavarayan, Anderson, Lannon and Berube, and as a primary reference point for Messrs. Awada and Weaver, as well as other executives.
Annual Performance-Based Compensation
Annual Performance-Based Compensation We structure our compensation programs to reward NEOs based on our performance and the individual executive’s relative contribution to our performance. To emphasize the importance of near-term performance, NEOs are generally eligible to receive annual performance-based awards under our ABP in the event certain specified performance measures are achieved. The ABP pool is determined by the Compensation Committee based upon a pre-established formula with reference to the achievement of corporate-level and business-level performance targets established annually by the Compensation Committee and based on the Company’s Board-approved budget and financial plan. For each NEO’s target ABP award, the financial performance measures are collectively weighted at 80% and each such NEO’s individual performance is weighted at 20%.
2023 Annual Bonus Plan Formula
2023 Annual Bonus Plan Formula Under the terms of the ABP, the NEOs’ annual incentive awards are based on a percentage of their base salaries. Once the achievement of corporate and business financial performance against targets has been determined, the Compensation Committee reviews and approves the individual performance component of each NEO’s ABP award, which is based on each respective NEO’s business impact, leadership and attainment of individual objectives, as well as other related factors. In addition, in determining the achievement of corporate and/or business financial performance targets, the Compensation Committee may account for unusual events such as significant foreign currency exchange rate fluctuations, extraordinary transactions, asset dispositions and purchases and mergers and acquisitions if, and to the extent, the Compensation Committee does not consider the effect of such events indicative of our performance.
2023 Annual Bonus Plan Target Percentages
2023 Annual Bonus Plan Target Percentages The 2023 target percentage under the ABP approved by the Compensation Committee for each of our NEOs is set forth in the table below. Target bonus opportunities as a percent of salary remained unchanged from 2022 for all NEOs that were employed by the Company in 2022.
2023 Annual Bonus Plan Target Percentages
| Name(1) | 2022 Target-level % (of base salary) | Increase | 2023 Target-level % (of base salary) | 2023 Target Bonus Amount | | Chris Villavarayan | —% | —% | 125% | $1,250,000 | | Carl D. Anderson II | —% | —% | 90% | $598,500 | | Sean M. Lannon | 80% | —% | 80% | $510,658 | | Brian A. Berube | 70% | —% | 70% | $387,917 | | Troy D. Weaver | 70% | —% | 70% | $379,294 | | Hadi H. Awada | 70% | —% | 70% | $370,278 |
2023 Annual Bonus Plan Target Percentages
| (1) Messrs. Villavarayan and Anderson joined the Company in 2023 and Mr. Lannon was ineligible for a 2023 bonus after his separation in August 2023. |
2023 Annual Bonus Plan – Weighted Company Performance
2023 Annual Bonus Plan – Weighted Company Performance For the year ended December 31, 2023, for the non-business-lead NEOs, the financial performance metrics under the ABP were based upon Adjusted EBIT (as defined below), Adjusted EBIT Margin (as defined below) and Free Cash Flow (or FCF) (as defined below) on a corporate level, and for the business lead NEOs were based on corporate Adjusted EBIT and FCF and Adjusted EBIT and Adjusted EBIT Margin with respect to the respective businesses they oversee. For Mr. Berube, the FCF component was replaced with a strategic operating goal related to cost savings initiatives. We selected Adjusted EBIT because profitable growth is an important measure of the financial performance of our Company, Adjusted EBIT Margin because operating efficiency is essential to drive shareholder value, and Free Cash Flow because we believe the amount of free cash flow that we generate each year is essential for us to maintain appropriate working capital, complete acquisitions, pay down gross debt, and otherwise deploy capital, including returning capital to shareholders. For each performance year under the ABP, the Compensation Committee assigns a target, threshold and maximum payout level to each financial performance metric where the actual payout can range from 0% to 200% of the assigned target weighting depending on our achievement of such performance measures. The Compensation Committee sets these targets in order to challenge our executives, including our NEOs, to drive our financial and business performance, taking into account the state of our business, industry dynamics and other business conditions. When setting the ABP targets for 2023, the Compensation Committee considered how the targets compared to 2022 reported results as well as the amounts used for 2022 ABP payouts, which included adjustments for extraordinary events, as identified in our proxy statement filed on April 25, 2023. The Adjusted EBIT target under the 2023 ABP is lower than Adjusted EBIT determined for purposes of payout under the 2022 ABP, which included adjustments to externally-reported 2022 Adjusted EBIT, as previously disclosed. The Adjusted EBIT target under the 2023 ABP, however, represents an approximately $50 million increase, or nearly 9%, over 2022 externally-reported Adjusted EBIT. The following chart sets forth for the 2023 ABP the weighting of each financial performance metric and the threshold, target and maximum performance targets, as well as the actual performance achieved, for the year ended December 31, 2023:
2023 Annual Bonus Plan – Weighted Company Performance
| Metric(1) | Weighting (% of Target) | Threshold (50% Payout(2)) | Target (100% Payout(2)) | Maximum (200% Payout(2)) | Actual Achieved | Payout as % of Weighting | Payout (Weighted % of Total Payout) | | Adjusted EBIT | 40% | $523 | $615 | $695 | $664 | 158% | 63% | | Adjusted EBIT Margin | 20% | 11% | 11.7% | 13.4% | 12.8% | 165% | 33% | | FCF(3) | 20% | $255 | $300 | $339 | $447 | 200% | 40% |
2023 Annual Bonus Plan – Weighted Company Performance
| (1) The weighting for Messrs. Awada and Weaver is 30% Adjusted EBIT and 20% for the Adjusted EBIT Margin of the respective businesses they oversee, 10% Axalta Adjusted EBIT and 20% Axalta FCF. Business-level financial performance metric targets and actual performance under the ABP are not reported externally. All $ values are in $ millions. |
2023 Annual Bonus Plan – Weighted Company Performance
| (2) Achievement below threshold results in zero payout while achievement in excess of maximum performance is capped at 200% of target for each metric. Results between threshold and target and target and maximum are determined on a linear basis. |
2023 Annual Bonus Plan – Weighted Company Performance
| (3) For Mr. Berube, the FCF component was replaced with a strategic operating goal related to cost savings initiatives. |
2023 Annual Bonus Plan – Weighted Company Performance
Adjusted EBIT, for purposes of the 2023 ABP, differs from our Adjusted EBIT as externally reported for the year ended December 31, 2023 (a reconciliation of which is included in Appendix A), due to required expense recorded within U.S. GAAP to appropriately reflect final payouts in accordance with the 2023 ABP plan design. Adjusted EBIT Margin, for purposes of the 2023 ABP, is calculated by dividing Adjusted EBIT, as defined above, by Axalta’s 2023 net sales. Free Cash Flow, for purposes of the 2023 ABP, is defined as Free Cash Flow as externally reported for the year ended December 31, 2023 (a reconciliation of which is included in Appendix A).
2023 Annual Bonus Plan – Individual Performance
2023 Annual Bonus Plan – Individual Performance For the individual performance component, the Compensation Committee approves an individual performance factor for each NEO, which reflects each NEO’s performance, business impact, contributions and leadership, among other factors. The individual performance factor is assigned a weight of 20% of each NEO’s target ABP award, and the actual payout can range from 0 to 200% of the weighting depending on the NEO’s individual contributions during the performance period. For 2023, the Compensation Committee considered the following key achievements in approving the individual performance component for each of our NEOs, with the exception of Mr. Lannon.
2023 Annual Bonus Plan – Individual Performance
| Name | Individual Performance Payout | Weighted % of Total Payout | 2023 Performance Considerations | | Chris Villavarayan | 95% | 19% | • Successfully integrated into the Company and Board during first year as CEO • Oversaw record financial results in net sales and Adjusted EBITDA • Oversaw development and execution of operations excellence projects related to procurement, operations and inventory | | Carl D. Anderson II | 95% | 19% | • Quickly integrated into the Company and developed strong relationships with investors and analysts • Drove strong results focusing on reducing net leverage to 2.9x and refinancing the Company’s 2025 senior notes • Refined internal finance policies to simplify decision-making and enable more agile decisions within the business | | Brian A. Berube | 100% | 20% | • Provided strong support in connection with our CEO and CFO transitions and addition and onboarding of multiple Directors • Provided strong support for the transformation initiative announced in February 2024 | | Troy D. Weaver | 95% | 19% | • Oversaw strong results for the Refinish business globally • Drove significant price-mix improvement • Oversaw the acquisition of André Koch AG, a long-time refinish products distribution partner in Switzerland | | Hadi H. Awada | 105% | 21% | • Led strong recovery for the global Mobility Coatings business with significant improvement in overall profitability and margin • Drove significant price-mix improvement • Oversaw new business wins globally, including significant growth in the Asia Pacific region with OEMs in China |
2023 Annual Bonus Plan – Results
2023 Annual Bonus Plan – Results Based on the considerations described above, our level of performance in relation to the corporate and/or business financial performance targets and each NEO’s individual performance component, the weighted bonus payout percentage and the ABP awards earned by our NEOs, with the exception of Mr. Lannon, are set forth in the table below.
2023 Annual Bonus Plan – Results
| Name | 2023 Target Bonus Amount | Weighted Financial Performance (80%) | Weighted Individual Performance (20%) | Weighted Bonus Payout % (of Target Bonus) | Actual Award | | Chris Villavarayan | $1,250,000 | 136% | 19% | 155% | $1,940,000 | | Carl D. Anderson II | $598,500 | 136% | 19% | 155% | $928,872 | | Brian A. Berube | $387,917 | 136% | 20% | 156% | $605,926 | | Troy D. Weaver | $379,294 | 122% | 19% | 141% | $535,980 | | Hadi H. Awada | $370,278 | 156% | 21% | 177% | $654,578 |
Long-Term Equity Incentive Awards
Long-Term Equity Incentive Awards Our NEOs are eligible to receive long-term equity incentive awards, which comprise a majority of their compensation opportunity. In 2023, our NEOs received long-term incentive awards under our equity incentive plan, which were allocated 60% in PSUs and 40% in RSUs in order to motivate and retain our executives and align their interests with those of our shareholders. All equity types are subject to a risk of forfeiture should the executive’s employment terminate prior to the vesting date absent certain exceptions. Annual awards under our long-term incentive program were granted (at target value) in 2023 as follows:
Long-Term Equity Incentive Awards
| Name(1) | PSUs ($) | RSUs ($) | Total ($) | | Chris Villavarayan | 3,390,000 | 2,260,000 | 5,650,000 | | Brian A. Berube | 660,000 | 440,000 | 1,100,000 | | Troy D. Weaver | 600,000 | 400,000 | 1,000,000 | | Hadi H. Awada | 480,000 | 320,000 | 800,000 |
Long-Term Equity Incentive Awards
| (1) Mr. Anderson joined the Company in August 2023 and therefore was not employed at the time of the 2023 annual equity grant. Mr Anderson received a sign-on award in connection with the commencement of his employment, as described below. RSUs and PSUs granted to Mr. Lannon in 2023 were forfeited without payment in connection with Mr. Lannon’s separation in August 2023. |
Performance-Based Stock Awards
Performance-Based Stock Awards 2023 Target PSUs The target number of annual PSUs granted to our NEOs during the year ended December 31, 2023 is listed below.
Performance-Based Stock Awards
| Name(1) | Target Number of PSUs Granted in 2023 | | Chris Villavarayan | 113,758 | | Brian A. Berube | 22,146 | | Troy D. Weaver | 20,134 | | Hadi H. Awada | 16,106 |
Performance-Based Stock Awards
| (1) Mr. Anderson joined the Company in August 2023 and therefore was not employed at the time of the 2023 annual PSU grant. Mr Anderson received a sign-on award in connection with the commencement of his employment, as described below. PSUs granted to Mr. Lannon in 2023 were forfeited without payment in connection with Mr. Lannon’s separation in August 2023. |
Performance-Based Stock Awards
2023 PSUs 50% of the target amount of PSUs granted in 2023 may be earned based on the Company’s performance relative to Adjusted EBITDA and 50% may be earned based on the Company’s relative total shareholder return (“Relative TSR”). The 2023 PSUs with Adjusted EBITDA as the performance metric have a three-year performance period comprising January 1, 2023 through December 31, 2025. The 2023 PSUs with Relative TSR as the performance metric have a three-year performance period commencing on the day immediately prior to the grant date and ending on the day immediately prior to the third anniversary of the grant date. Adjusted EBITDA, for purposes of the 2023 PSUs, means the Company’s earnings before interest, taxes, depreciation and amortization, adjusted for (i) certain non-cash items included within net income, (ii) certain items not indicative of ongoing operating performance or (iii) certain nonrecurring, unusual or infrequent items that have not occurred within the last two years or are not reasonably likely to recur within the next two years, each as determined by the Compensation Committee and subject to certain other adjustments made in the Compensation Committee’s discretion. Relative TSR compares the Company’s total shareholder return against that of companies in the S&P 400 MidCap Index. The maximum number of shares that may be earned with respect to the 2023 PSUs is 200% of the target number. The Compensation Committee selected Adjusted EBITDA and Relative TSR, each determined over the applicable performance periods, as the performance metrics for the 2023 PSUs because they believe these metrics are important indicators of financial performance and shareholder value creation over such periods. The Compensation Committee believes that this PSU design incentivizes management to focus on driving both sustainable financial performance and shareholder value. The Compensation Committee set threshold, target and maximum Adjusted EBITDA and Relative TSR performance targets for the applicable performance periods in February 2023 when the 2023 PSUs were awarded, with the performance targets selected based on the Company’s long-term strategic growth plan. The Compensation Committee will determine Adjusted EBITDA and Relative TSR following the applicable performance periods, with the results being measured against that period’s pre-established targets. In making such determinations, the Compensation Committee has discretion to account for unusual events such as significant foreign currency exchange rate fluctuations, extraordinary transactions, asset dispositions and purchases and mergers and acquisitions if, and to the extent, the Compensation Committee does not consider the effect of such events indicative of our performance. Accelerated vesting may occur upon certain terminations of employment following a Change-in-Control as described below under the section “Severance Arrangements.” The table below sets forth the PSUs, as a percentage of the target PSU grant, that would be earned, based on the Company’s achievement of Adjusted EBITDA and Relative TSR, respectively, for the applicable performance periods.
Performance-Based Stock Awards
| 2023 PSU Vesting Schedules | | | | | Adjusted EBITDA Performance | PSUs that would vest as % of target (Adjusted EBITDA) | Relative TSR Performance | PSUs that would vest as % of target (Relative TSR) | | <Threshold | 0% | <25th percentile | 0% | | Threshold | 50% | 25th percentile | 50% | | Target | 100% | 50th percentile | 100% | | Maximum | 200% | 75th percentile | 200% |
Performance-Based Stock Awards
Earned awards, if any, will vest upon the Compensation Committee’s determination (in 2026) of the Company’s achievement of Adjusted EBITDA and Relative TSR, for the applicable performance periods, subject to the executive’s continued employment as of the date of such determination (or such executive’s “Qualifying Retirement” as discussed above). Where performance for Adjusted EBITDA and Relative TSR is achieved at a level between threshold and target or target and maximum, the number of PSUs eligible to vest is calculated using straight-line interpolation. 2021 & 2022 PSU Awards PSUs granted in each of 2021 and 2022 may be earned based on the Company’s performance relative to adjusted earnings per share (“Adjusted EPS”) and return on invested capital (“ROIC”) targets, which may be banked in accordance with the below schedule. Such awards are also subject to TSR modifiers.
Performance-Based Stock Awards
| PSU Banking for each Annual Performance Period and Cumulative Three-Year Performance Period for the 2021 and 2022 PSUs | | | | | Actual Performance | PSUs that may be banked (as a percentage of the target award) based on Adjusted EPS actual performance | PSUs that may be banked (as a percentage of the target award) based on ROIC actual performance | Total PSUs that may be banked as a percentage of the target award | | <Threshold | 0% | 0% | 0% | | Threshold | 4.375% | 1.875% | 6.25% | | Target | 17.5% | 7.5% | 25% | | Maximum | 35% | 15% | 50% |
Performance-Based Stock Awards
Adjusted EPS, for purposes of the PSUs granted in each of 2021 and 2022, is defined as Adjusted Net Income divided by diluted weighted average shares outstanding. Adjusted Net Income is GAAP net income adjusted for (i) certain non-cash items included within net income, (ii) certain items we do not believe are indicative of ongoing operating performance and (iii) certain nonrecurring, unusual or infrequent items that have not occurred within the last two years or we believe are not reasonably likely to recur within the next two years. ROIC is calculated as Adjusted EBIT (the same amount determined for purposes of the ABP) divided by invested capital. Invested capital is calculated as equity plus debt less cash and cash equivalents. Banking for 2022 PSU Awards In February 2024, the Compensation Committee reviewed and approved the Company’s performance relative to the Adjusted EPS and ROIC performance targets that the Committee set for the 2023 performance period under the plan design for the 2022 PSUs (targets set in February 2022). The Adjusted EPS and ROIC results for the 2023 performance period for the 2022 PSUs were each below threshold, resulting in 0% of the target number of PSUs banked for such performance period. Results for the 2024 performance period and cumulative three-year performance period (2022-2024) will be determined by the Compensation Committee in 2025. 2021-2023 PSU Payout For PSUs granted in 2021 to our then-serving NEOs, the Compensation Committee reviewed in February 2024 the Company’s performance relative to the Adjusted EPS and ROIC performance targets that the Compensation Committee set for the 2023 performance period and the cumulative performance period, as well as the Company’s Relative TSR against the S&P 400 Materials index over the cumulative three-year performance period, under the Company’s 2021 PSUs (targets set in March 2021). The below table sets forth the relevant Adjusted EPS and ROIC thresholds, targets and maximums, as well as the actual results, in each case for each of the relevant performance periods. For the 2023 performance period and the cumulative three-year performance period, Adjusted EPS and ROIC were below threshold and therefore no PSUs were earned for such performance periods, as shown below. The PSUs banked in the 2021 performance period are the only PSUs that were earned for the 2021 PSUs. The Company’s TSR over the period was 16.13%, which resulted in a relative TSR at the 38th percentile of the peer group and therefore no modification to the number of PSUs earned.
Performance-Based Stock Awards
| (1) Adjusted EPS for 2023 for purposes of the 2021 PSUs is greater than publicly-reported Adjusted EPS for 2023 ($1.57). The net impacts of our 2022 term loan refinancing and the refinancing of our 2025 Senior Notes in 2023 were added back to publicly-reported Adjusted EPS because such impacts were not contemplated at the time targets were set for the 2021 PSUs. Adjusted EPS for 2023 and the cumulative 3-year performance period were each below threshold notwithstanding such adjustment. |
RSUs
RSUs RSUs granted under our equity incentive plan generally have vesting schedules that are designed to encourage a recipient’s continued employment and to drive shareholder value. The annual RSUs granted to our NEOs in 2023 vest in three substantially equal annual installments on each of the first three anniversaries of the grant date, subject to the executive’s continued employment on each applicable vesting date. Accelerated vesting may occur upon certain terminations of employment following a Change-in-Control as described below under the section “Severance Arrangements.” The number of annual RSUs granted to our NEOs during the year ended December 31, 2023 is listed below.
RSUs
| Name(1) | Number of RSUs Granted in 2023 | | Chris Villavarayan | 75,839 | | Brian A. Berube | 14,766 | | Troy D. Weaver | 13,423 | | Hadi H. Awada | 10,739 |
RSUs
| (1) Mr. Anderson joined the Company in August 2023 and therefore was not employed at the time of the 2023 annual RSU grant. Mr. Anderson received a sign-on award in connection with the commencement of employment, as described below. RSUs granted to Mr. Lannon in 2023 were forfeited without payment in connection with his separation from Axalta in August 2023. |
Sign-On Awards
Sign-On Awards In connection with the commencement of Mr. Anderson’s employment in August 2023, in order to align his interests with those of our shareholders and ensure he was incentivized to achieve the same performance goals as our other executive officers, Mr. Anderson received a sign-on award with a grant date value of $3,500,000, consisting of 50% RSUs and 50% PSUs. The RSUs vest in three equal amounts on each of the first three anniversaries of the grant date and the PSUs vest on the same terms as the PSUs granted to the other senior executives of the Company in the annual PSU grant in 2023. In determining the value of the sign-on equity awards and other compensation offered to Mr. Anderson, the Company considered, among other things, the value of the compensation Mr. Anderson would be required to forfeit from his prior employer.
Severance Arrangements
Severance Arrangements Since 2020, the Company has utilized a Restrictive Covenant and Severance Policy (the “Severance Policy”) with respect to all new members of senior leadership, except for the CEO. Messrs. Anderson, Awada and Weaver are all subject to the Severance Policy. Mr. Villavarayan is party to an Executive Restrictive Covenant and Severance Agreement with the Company (the “Executive Agreement”). The rights of our NEOs under the Executive Agreement and the Severance Policy (as applicable), which are described in the graphic below, are substantially similar, and, as used in this Compensation Discussion and Analysis, references to “Severance Arrangements” should be read to include the Executive Agreement and the Severance Policy, except where otherwise noted. Messrs. Lannon and Berube, both of whom have ceased employment with the Company, were parties to agreements similar to the Executive Agreement, as described in our definitive proxy statement filed with the SEC on April 25, 2023. The foregoing amounts are in addition to the payment of all earned but unpaid base salary through the termination date and any other vested benefits to which the executive is entitled under the Company’s benefit plans and arrangements.
Senior Vice President and Chief Financial Officer Employment Matters
| • | A sign-on cash bonus in the amount of $500,000, which is repayable in full if, before the second anniversary of his start date, Mr. Anderson terminates his employment or the Company terminates his employment for Cause (as defined in the Severance Policy). |
Senior Vice President and Chief Financial Officer Employment Matters
| • | Sign-on equity awards in the aggregate amount of $3,500,000 comprised of 50% RSUs and 50% PSUs, with the PSUs subject to the same terms as the PSUs granted to the other senior executives of the Company in the annual PSU grant in 2023 and |
Senior Vice President and Chief Financial Officer Employment Matters
| the RSUs vesting in three equal amounts on each of the first, second and third anniversaries of the grant date, in each case subject to Mr. Anderson’s continued employment. |
Senior Vice President and Chief Financial Officer Employment Matters
| • | 2024 long-term equity incentive awards with an aggregate target grant date value of $1,750,000, to be granted on the same terms and at the same time as the annual long-term equity incentive awards provided to the Company’s senior management. |
Lannon Separation Agreement
Lannon Separation Agreement In connection with Mr. Lannon and the Company mutually agreeing that Mr. Lannon resign from his position as Senior Vice President and Chief Financial Officer, the Company and Mr. Lannon entered into a Separation and Release Agreement pursuant to the terms of the Executive Restrictive Covenant and Severance Agreement, dated as of December 10, 2018 (the “Lannon Executive Agreement”), by and among Mr. Lannon, the Company and Axalta Coating Systems, LLC. Under the Lannon Executive Agreement, because the termination of Mr. Lannon’s employment was a “Qualifying Termination,” Mr. Lannon was entitled to, subject to his execution and non-revocation of a general release of claims and compliance with certain restrictive covenants, including non-competition obligations, (1) a cash severance payment in the amount of $1,148,980, payable over 12 months in regular installments and (2) certain other benefits under the terms of the Lannon Executive Agreement, including a lump sum cash payment in an aggregate amount equal to 12 months of the applicable monthly premium cost that Mr. Lannon would be required to pay to continue qualifying health coverage under COBRA. Pursuant to the award agreement covering the 2022 retention RSUs, Mr. Lannon received accelerated vesting of the unvested portion of such 2022 retention RSUs, with a vesting date value of $830,820 (determined based on the unvested portion of the RSUs and the closing share price on the date the shares were determined to have vested), and, pursuant to the letter agreement covering his 2022 cash retention bonus, Mr. Lannon was not required to repay any of such 2022 cash retention bonus. All of Mr. Lannon’s unvested annual equity awards, including the 30,200 PSUs (target value $900,000) and 20,135 RSUs (target value $600,000) granted as part of the 2023 annual equity grant to our executive officers, were forfeited without payment upon the termination of his employment. Mr. Lannon was not entitled to a bonus under our 2023 ABP.
Berube Retirement
Berube Retirement In September 2023, Mr. Berube, the Company’s then Senior Vice President, General Counsel & Corporate Secretary, informed the Board of his decision to retire from such positions, effective as of December 31, 2023. In connection with his retirement, Mr. Berube and the Company entered into a Consulting Agreement pursuant to which Mr. Berube is providing certain consulting services as requested by the Company following the effectiveness of his retirement through July 31, 2024 (the “Consulting Agreement”). Under the Consulting Agreement, Mr. Berube will receive, among other things, a monthly retainer of $27,000 and his outstanding equity awards will continue to vest during the term of the Consulting Agreement in accordance with the terms of the agreements governing such equity awards and the terms and conditions of the Company’s equity incentive plan. At the end of the term of the Consulting Agreement, all outstanding and unvested equity awards will be forfeited other than any outstanding performance-based equity awards held by Mr. Berube, which will be prorated for service through such date and remain outstanding and eligible to vest based on the Company’s actual performance under such awards. In addition, any vested but unexercised options held by Mr. Berube at the end of the term of the Consulting Agreement will be exercisable by Mr. Berube until the earlier of 12 months after the end of the term of the Consulting Agreement and the expiration date.
Summary Compensation Table
Summary Compensation Table The following table sets forth certain information with respect to the compensation paid to our NEOs for the years ended December 31, 2023, 2022 and 2021.
Summary Compensation Table
| Name and Principal Position | Year | Salary ($)(1) | Bonus ($)(2) | Stock Awards ($)(3) | Option Awards ($)(4) | Non-Equity Incentive Compensation Plan ($)(5) | All Other ($)(6) | Total ($) | | Chris Villavarayan | 2023 | 1,000,000 | — | 6,397,949 | — | 1,940,000 | 356,056 | 9,694,005 | | Chief Executive Officer | 2022(7) | — | — | — | — | — | — | — | | and President | 2021(7) | — | — | — | — | — | — | — | | Carl D. Anderson II | 2023 | 255,769 | 500,000 | 3,756,528 | — | 928,872 | 84,942 | 5,526,111 | | Senior Vice President and | 2022(7) | — | — | — | — | — | — | — | | Chief Financial Officer | 2021(7) | — | — | — | — | — | — | — | | Sean M. Lannon | 2023 | 410,399 | — | 1,698,548 | — | — | 2,052,533 | 4,161,480 | | Former Senior Vice President and | 2022 | 604,413 | 3,500,000 | 3,056,507 | — | 333,418 | 46,879 | 7,541,217 | | Chief Financial Officer | 2021 | 569,135 | — | 1,206,882 | — | 352,728 | 43,511 | 2,172,255 | | Brian A. Berube | 2023 | 550,392 | — | 1,245,588 | — | 605,926 | 48,361 | 2,450,267 | | Former Senior Vice President, | 2022 | 529,948 | — | 2,241,406 | — | 253,278 | 43,454 | 3,068,086 | | General Counsel & Corporate Secretary | 2021 | 515,323 | — | 997,000 | — | 278,352 | 43,976 | 1,834,651 | | Troy D. Weaver | 2023 | 536,524 | — | 1,132,380 | — | 535,980 | 46,918 | 2,251,802 | | President, Global Refinish | 2022 | 504,554 | — | 2,037,654 | — | 286,131 | 44,228 | 2,872,567 | | | 2021 | 471,923 | — | 839,588 | — | 460,514 | 27,905 | 1,799,930 | | Hadi H. Awada | 2023 | 525,366 | — | 905,878 | — | 654,578 | 45,345 | 2,131,167 | | President, Global Mobility Coatings | 2022 | 505,852 | — | 1,630,116 | — | 232,287 | 38,985 | 2,407,240 | | | 2021 | 495,000 | — | 839,588 | — | 180,380 | 36,749 | 1,551,717 |
Summary Compensation Table
| (1) Reflects base salary actually paid to each NEO for the applicable calendar year. The 2023 base salary rates as approved by the Compensation Committee, effective as of March 13, 2023, were as follows: Mr. Lannon, $638,322; Mr. Berube, $554,167; Mr. Weaver, $541,848; and Mr. Awada $528,969. Messrs. Villavarayan’s and Anderson’s base salary rates, $1,000,000 and $665,000, respectively, were set pursuant to their respective offer letters. For additional information, see “Compensation Discussion and Analysis – Base Salary.” |
Summary Compensation Table
| (2) Reflects a cash sign-on bonus of $500,000 which is subject to repayment conditions as described above under the heading “Senior Vice President and Chief Financial Officer Employment Matters” in “Compensation Discussion and Analysis” above. |
Summary Compensation Table
| (3) Amounts represent the aggregate grant date fair value of stock awards determined in accordance with FASB ASC Topic 718. Refer to Note 8 in the Notes to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023 for information regarding the assumptions used to value these awards. These values do not represent amounts paid to or realized by the applicable NEO. Stock awards granted in 2023 include both time-based RSUs and performance-based PSUs, and the grant date fair value included for PSUs is based on performance at target levels, which was the assumed probable outcome of such conditions as of the grant date. Assuming that the highest level of performance conditions will be achieved for the PSUs, the grant date values of the total stock awards made in the fiscal year ended December 31, 2023 are as follows: Mr. Villavarayan, $9,039,979; Mr. Anderson, $5,249,957; Mr. Lannon, $2,399,943; Mr. Berube, $1,759,928; Mr. Weaver, $1,599,991; and Mr. Awada, $1,279,939. Stock awards for 2023 include the RSUs and PSUs granted to Mr. Anderson pursuant to his offer letter as described under “Senior Vice President and Chief Financial Officer Employment Matters” in “Compensation Discussion and Analysis” above. The 2023 RSUs and PSUs granted to Mr. Lannon were forfeited without payment in connection with his separation in August 2023. |
Summary Compensation Table
| (4) The Consulting Agreement entered into between Mr. Berube and the Company in connection with Mr. Berube’s retirement provided that outstanding options held by Mr. Berube at the end of the term of the Consulting Agreement will be exercisable by Mr. Berube until the earlier of 12 months (previously 6 months) after the end of the term of the Consulting Agreement or the expiration date of the applicable options, resulting in a modification of Mr. Berube’s outstanding options. It was determined, using Black-Scholes option pricing model analysis, that the modification did not result in expense incremental to grant date expense for the Company. |
Summary Compensation Table
| (5) Amounts represent awards earned under our ABP. For additional information, see “Annual Performance-Based Compensation” in “Compensation Discussion and Analysis” above. Mr. Lannon was not entitled to a bonus under our ABP in 2023 due to his separation in August 2023. |
Summary Compensation Table
| (6) Other compensation for the year ended December 31, 2023 includes (i) the value of certain perquisites provided to the NEOs, (ii) our contributions to the NEOs’ 401(k) and deferred compensation plan accounts, and (iii) severance payments and benefits provided to Mr. Lannon in connection with his separation in August 2023, in each case as set forth in the following table. |
Summary Compensation Table
| Name | Year | Transportation Related ($) | Individual Liability Insurance ($) | Individual Disability Insurance ($) | Employer Contribution to 401(k) ($) | Employer Contribution to Nonqualified Deferred Compensation Plan ($) | Executive Physicals ($) | Other Payments ($)(i) | Total ($)(ii) | | Chris Villavarayan | 2023 | — | 2,226 | 3,345 | 23,100 | — | — | 327,385 | 356,056 | | Carl D. Anderson II | 2023 | — | 2,226 | 810 | 6,906 | — | — | 75,000 | 84,942 | | Sean M. Lannon | 2023 | — | — | 2,580 | 13,200 | — | — | 2,036,753 | 2,052,533 | | Brian A. Berube | 2023 | — | 2,226 | 4,367 | 23,100 | 15,368 | 3,300 | — | 48,361 | | Troy D. Weaver | 2023 | — | 2,226 | 3,919 | 23,100 | 14,373 | 3,300 | — | 46,918 | | Hadi H. Awada | 2023 | — | 2,226 | 3,100 | 23,100 | 13,619 | 3,300 | — | 45,345 |
Summary Compensation Table
| (i) With respect to Mr. Villavarayan, represents relocation assistance in connection with his appointment as Chief Executive Officer and President, including a one-time relocation bonus of $15,000 and reimbursement of expenses incurred in connection with his relocation, including temporary housing and travel expenses, commissions and other closing costs in connection with a home sale and shipment of household goods. With respect to Mr. Anderson, represents a lump sum payment for relocation assistance in connection with his appointment as Senior Vice President and Chief Financial Officer. With respect to Mr. Lannon, represents severance payments made to Mr. Lannon in connection with his departure as our Senior Vice President and Chief Financial Officer, consisting of (a) cash severance in the amount of $1,148,980, payable over 12 months, (b) $24,837 for 12 months of COBRA premiums and (c) $830,820 the vesting date value associated with the accelerated vesting of the unvested portion of his 2022 retention RSUs. |
Summary Compensation Table
| (ii) From time to time the Company allows its employees, including the NEOs, the personal use of tickets for sporting and cultural events previously acquired by the Company for business entertainment purposes. In addition, from time to time an executive’s spouse may accompany him or her on a business-related flight aboard a private aircraft. There is no incremental cost to the Company for the use of such tickets or such flights and therefore such items are not reflected in the amounts above. |
Summary Compensation Table
| (7) Executive was not an employee for such year. |
Grants of Plan-Based Awards
Grants of Plan-Based Awards
Grants of Plan-Based Awards
| | | | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards(1) | | | Estimated Possible Payouts Under Equity Incentive Plan Awards(2) | | | All Other Stock Awards: Number of Shares of Stock or Units (#)(3) | Grant Date Fair Value of Stock Awards ($)(4) | | Name | Type of Award | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | | | | Chris Villavarayan | ABP | | 625,000 | 1,250,000 | 2,500,000 | | | | | | | | PSU | 2/28/2023 | | | | 56,879 | 113,758 | 227,516 | | 4,137,947 | | | RSU | 2/28/2023 | | | | | | | 75,839 | 2,260,002 | | Carl D. Anderson II | ABP | | 299,250 | 598,500 | 1,197,000 | | | | | | | | PSU | 8/14/2023 | | | | 30,984 | 61,968 | 123,936 | | 2,006,524 | | | RSU | 8/14/2023 | | | | | | | 61,969 | 1,750,005 | | Sean M. Lannon | ABP | | 255,329 | 510,658 | 1,021,316 | | | | | | | | PSU | 2/28/2023 | | | | 15,100 | 30,200 | 60,400 | | 1,098,525 | | | RSU | 2/28/2023 | | | | | | | 20,135 | 600,023 | | Brian A. Berube(5) | ABP | | 193,959 | 387,917 | 775,834 | | | | | | | | PSU | 2/28/2023 | | | | 11,073 | 22,146 | 44,292 | | 805,561 | | | RSU | 2/28/2023 | | | | | | | 14,766 | 440,027 | | Tory D. Weaver | ABP | | 189,647 | 379,294 | 758,588 | | | | | | | | PSU | 2/28/2023 | | | | 10,067 | 20,134 | 40,268 | | 732,374 | | | RSU | 2/28/2023 | | | | | | | 13,423 | 400,005 | | Hadi H. Awada | ABP | | 185,139 | 370,278 | 740,556 | | | | | | | | PSU | 2/28/2023 | | | | 8,053 | 16,106 | 32,212 | | 585,856 | | | RSU | 2/28/2023 | | | | | | | 10,739 | 320,022 |
Grants of Plan-Based Awards
| (1) The amounts shown for the ABP represent estimated possible payouts depending on the Company’s financial performance and the participants’ individual performance. Threshold payout reflects threshold Company performance and a 50% individual performance payout. Target payout reflects target Company performance and a 100% individual performance payout. Maximum payout reflects maximum Company performance and a 200% individual performance payout. The amount that can be earned ranges from 0 to 200% of the target payout amount. The actual amounts earned for 2023 are reported in the Summary Compensation Table. For a full description of the ABP, see the heading “Annual Performance-Based Compensation” in “Compensation Discussion and Analysis” above. Mr. Lannon was not paid a bonus under our ABP in 2023 due to his separation in August 2023. |
Grants of Plan-Based Awards
| (2) Represents annual and, with respect to Mr. Anderson, sign-on PSUs awarded in 2023, with the number of PSUs equal to the target award value divided by the closing stock price on the grant date. The 2023 PSUs cover a three-year performance period and can vest between 0% to 200% of the target award value. See the “Long-Term Equity Incentive Awards – Performance-Based Stock Awards” section in “Compensation Discussion and Analysis” above for more detail. |
Grants of Plan-Based Awards
| (3) Represents annual and, with respect to Mr. Anderson, sign-on RSUs awarded in 2023, with the number of RSUs equal to the target award value divided by the closing stock price on the grant date. The RSUs vest in equal annual installments on each of the first, second and third anniversaries of the grant date. See the “Long-Term Equity Incentive Awards – RSUs” section in “Compensation Discussion and Analysis” above for more detail. |
Grants of Plan-Based Awards
| (4) The grant date fair values for RSUs and PSUs were determined in accordance with FASB ASC Topic 718. The grant date fair value for RSUs equaled the closing stock price on the date of the grant. The grant date fair value for PSUs was determined using a valuation methodology (Monte Carlo simulation model) to account for the market conditions linked to these awards. Refer to Note 8 in the Notes to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023 for additional information regarding the assumptions used to value these awards. |
Grants of Plan-Based Awards
| (5) The Consulting Agreement entered into between Mr. Berube and the Company in connection with Mr. Berube’s retirement provided that outstanding options held by Mr. Berube at the end of the term of the Consulting Agreement will be exercisable by Mr. Berube until the earlier of 12 months (previously 6 months) after the end of the term of the Consulting Agreement or the expiration date of the applicable options, resulting in a modification of Mr. Berube’s outstanding options. It was determined, using Black-Scholes option pricing model analysis, that the modification did not result in expense incremental to grant date expense for the Company. |
Outstanding Equity Awards
Outstanding Equity Awards The following table provides information regarding the equity awards held by the NEOs as of December 31, 2023.
Outstanding Equity Awards
| Name | Date | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock that Have Not Vested (#)(1) | Market Value of Shares or Units of Stock That Have Not Vested ($)(2) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(3) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(4) | | Chris Villavarayan | 2/28/2023 | | | | | 75,839 | 2,576,251 | | | | | 2/28/2023 | | | | | | | 56,879 | 1,932,180 | | Carl D. Anderson II | 8/14/2023 | | | | | 61,969 | 2,105,087 | | | | | 8/14/2023 | | | | | | | 30,984 | 1,052,526 | | Sean M. Lannon | 2/25/2019 | 38,580 | | 27.01 | 2/25/2024 | | | | | | | 2/5/2018 | 9,884 | | 29.81 | 2/25/2024 | | | | | | | 2/6/2017 | 9,765 | | 29.48 | 2/25/2024 | | | | | | | 2/2/2016 | 12,106 | | 23.24 | 2/25/2024 | | | | | | | 5/12/2015 | 14,939 | | 32.50 | 2/25/2024 | | | | | | Brian A. Berube | 2/28/2023 | | | | | 14,766 | 501,601 | | | | | 2/28/2023 | | | | | | | 11,073 | 376,150 | | | 7/27/2022 | | | | | 22,367 | 759,807 | | | | | 2/15/2022 | | | | | 10,178 | 345,747 | | | | | 2/15/2022 | | | | | | | 5,725 | 194,478 | | | 3/3/2021 | | | | | 4,566 | 155,107 | | | | | 3/3/2021 | | | | | 2,610(5) | 88,662(6) | | | | | 6/14/2019 | 29,205 | | 26.08 | 6/14/2029 | | | | | | | 6/14/2019 | 37,387 | | 26.08 | 6/14/2029 | | | | | | Troy D. Weaver | 2/28/2023 | | | | | 13,423 | 455,979 | | | | | 2/28/2023 | | | | | | | 10,067 | 341,976 | | | 7/27/2022 | | | | | 20,333 | 690,712 | | | | | 2/15/2022 | | | | | 9,254 | 314,358 | | | | | 2/15/2022 | | | | | | | 5,205 | 176,797 | | | 3/3/2021 | | | | | 3,845 | 130,615 | | | | | 3/3/2021 | | | | | 2,198(5) | 74,666(6) | | | | | 2/25/2019 | 11,574 | | 27.01 | 2/25/2029 | | | | | | | 2/5/2018 | 8,768 | | 29.81 | 2/5/2028 | | | | | | | 2/6/2017 | 8,951 | | 29.48 | 2/6/2027 | | | | | | | 2/2/2016 | 11,006 | | 23.24 | 2/2/2026 | | | | | | | 5/12/2015 | 10,457 | | 32.50 | 5/12/2025 | | | | | | Hadi H. Awada | 2/28/2023 | | | | | 10,739 | 364,804 | | | | | 2/28/2023 | | | | | | | 8,053 | 273,560 | | | 7/27/2022 | | | | | 16,266 | 552,556 | | | | | 2/15/2022 | | | | | 7,403 | 251,480 | | | | | 2/15/2022 | | | | | | | 4,164 | 141,434 | | | 3/3/2021 | | | | | 3,845 | 130,615 | | | | | 3/3/2021 | | | | | 2,198(5) | 74,666(6) | | |
Outstanding Equity Awards
| (1) Annual RSUs granted in March 2021, February 2022 and February 2023 vest one-third on the first, second and third anniversaries of the respective grant dates. The sign-on RSUs granted to Mr. Anderson in August 2023 vest one-third on the first, second and third anniversaries of the grant date, as described in more detail in “Senior Vice President and Chief Financial Officer Employment Matters” in “Compensation Discussion and Analysis” above. The July 2022 retention RSU awards vest 50% on each of the first and second anniversaries of the grant date. |
Outstanding Equity Awards
| (2) These values equal the number of RSUs multiplied by the closing price of our common shares ($33.97) on December 29, 2023. The actual value of awards at the end of the applicable performance or vesting cycle, as applicable, may vary from the valuations indicated above. |
Outstanding Equity Awards
| (3) Based on performance through December 31, 2023, PSUs for the 2022-2024 performance cycle (granted in February 2022) reflect a threshold performance payout level (25%) and PSUs for the 2023-2025 performance cycle (granted in February 2023) reflect a threshold performance payout level (50%). PSUs for the 2022-2024 and 2023-2025 performance cycles will vest, if at all, following the Compensation Committee’s determination of PSUs earned in 2025 and 2026, respectively. |
Outstanding Equity Awards
| (4) These values equal the number of PSUs indicated multiplied by the closing price of our common shares ($33.97) on December 29, 2023. The actual value of awards at the end of the applicable performance cycle may vary from the valuations indicated above. |
Outstanding Equity Awards
| (5) Represents PSUs for the 2021-2023 performance cycle, reflecting the actual performance payout level of 12.7%, which, as of December 31, 2023, were subject only to service-based vesting requirements as the performance period has ended. In February 2024, the Compensation Committee determined that based on performance through December 31, 2023, the PSUs for the 2021-2023 performance cycle vested at 12.7% of target. |
Outstanding Equity Awards
| (6) These values equal the number of 2021 PSUs indicated multiplied by the closing price of our common shares ($33.97) on December 29, 2023. The actual value of awards at the date they were determined to vest varied from this value because the price of our common shares was different on such date than it was at December 29, 2023. |
Pension Benefits for 2023
Pension Benefits for 2023 Our NEOs do not participate in any defined benefit pension plans and received no pension benefits during the year ended December 31, 2023.
Nonqualified Deferred Compensation
Nonqualified Deferred Compensation The following table provides information on the Company’s defined contribution deferred compensation plan, the Axalta Coating Systems, LLC Nonqualified Deferred Compensation Plan (the “NDCP”). Messrs Villavarayan and Anderson did not participate in this plan during 2023. For additional information, see the discussion above under “Defined Contribution Plans — Deferred Compensation Plans.”
Nonqualified Deferred Compensation
| Name | Year | Executive Contributions in Last FY ($)(2) | Company Contributions in Last FY ($)(3) | Aggregate Earnings in Last FY ($)(4) | Aggregate Withdrawals in Last FY ($)(5) | Aggregate Balance at Last FYE ($)(6) | | Sean M. Lannon(1) | 2023 | 100,025 | — | 31,626 | -41,437 | 422,248 | | Brian A. Berube | 2023 | 12,788 | 15,368 | 19,827 | — | 125,222 | | Troy D. Weaver | 2023 | 20,007 | 14,373 | 9,295 | — | 81,442 | | Hadi H. Awada | 2023 | 14,242 | 13,619 | 5,507 | — | 99,233 |
Nonqualified Deferred Compensation
| (1) The Company previously offered the Axalta Coating Systems, LLC Retirement Savings Restoration Plan (the “RSRP”) that provided for deferrals of compensation on a basis that is not tax-qualified. The RSRP was frozen in 2014 and Mr. Lannon is the only NEO that participated in the RSRP. In 2023, Mr. Lannon had de minimis RSRP earnings in 2023 and a de minimis aggregate balance at December 31, 2023 in his RSRP. |
Nonqualified Deferred Compensation
| (2) Reflects elective deferrals of base salary and annual bonus. These amounts, if any, are also reflected in the Summary Compensation Table in the Salary and/or Bonus columns, as applicable. |
Nonqualified Deferred Compensation
| (3) These amounts are also reflected in the Summary Compensation Table in the All Other compensation column. |
Nonqualified Deferred Compensation
| (4) Earnings represent returns on investments in investment alternatives elected by the participant. The investment alternatives are the same investment alternatives available to employees under the 401(k) Plan, except that the 401(k) Plan offers a Federal Money Market fund investment that is not offered under the NDCP. |
Nonqualified Deferred Compensation
| (5) Under the NDCP, participants may elect to receive all or a portion of the vested balance of the participant’s account as soon as practicable (but no longer than 90 days) following the earlier of the January 1st or July 1st following the participant’s death, disability or other separation from service, with payment in a lump sum or up to 10 annual installments. A participant may also elect to receive all or a portion of the vested balance of the participant’s account while still providing services, in a lump sum in the calendar month designated by the participant, provided, that, if the participant’s death, disability or separation from service precedes the in-service distribution date elected by the participant, the vested balance of the participant’s account will be distributed in connection with the participant’s death, disability or other separation from service. |
Nonqualified Deferred Compensation
| (6) All or a portion of these amounts have been reported in the Summary Compensation Table for Messrs. Lannon, Berube, Weaver and Awada in previous years. |
Potential Payments upon Termination or Change-in-Control
Potential Payments upon Termination or Change-in-Control
CEO PAY RATIO
CEO PAY RATIO The following is a reasonable estimate, prepared in accordance with SEC rules, of the ratio of the annual total compensation of our CEO to that of our median employee, utilizing the methodology described below. Please note that SEC rules and guidance permit a variety of methodologies, exclusions, estimates and assumptions to be used in determining median employee compensation. In addition, employee populations and compensation programs differ by company. Therefore, the pay ratio reported by other companies may not be comparable to our pay ratio reported below. For fiscal year 2023, our median employee’s annual total compensation was $67,823. As set forth in the Summary Compensation Table, our CEO’s annual total compensation for fiscal year 2023 was $9,694,005. Accordingly, the ratio of the annual total compensation of our CEO to our median employee was 143:1. To identify our median employee in 2023, we collected data as of October 15, 2023 for all employees globally and used “base salary” as our Consistently Applied Compensation Measure. As of October 15, 2023, we had a global employee population of approximately 12,155 individuals. We then excluded 594 employees in 15 countries under the 5% de minimis exemption as permitted under SEC rules, where employee counts were as follows: Argentina (11), Colombia (31), Costa Rica (16), Dominican Republic (13), El Salvador (16), Ecuador (8), Guatemala (224), Honduras (21), Indonesia (88), Malaysia (111), Morocco (18), Nicaragua (9), Panama (12), Philippines (8), and Vietnam (8). From the remaining 11,561 employees, we considered the base salary of the remaining population, annualizing base salary for employees hired during 2023 and approximating annual base salary for hourly workers using hourly rates and reasonable estimates of hours worked. We then calculated fiscal year 2023 compensation for the median employee using the same methodology we use for our NEOs as set forth in the Summary Compensation Table. As required by Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(v) of Regulation S-K, we are providing the following information about the relationship between executive compensation actually paid (as computed in accordance with SEC rules) and certain financial performance of the Company. For further information concerning the Company’s compensation philosophy and how the Company aligns executive compensation with the Company’s performance, refer to “Compensation Discussion and Analysis” above.
Pay Versus Performance Table
Pay Versus Performance Table
Pay Versus Performance Table
| Year | Summary Compensation Table Total for First PEO ($) (1) | Summary Compensation Table Total for Second PEO ($) (1) | Compensation Actually Paid to First PEO ($) (1) | Compensation Actually Paid to Second PEO ($) (1) | Average Summary Compensation Table Total for Non-PEO NEOs ($) (2) | Average Compensation Actually Paid to Non-PEO NEOs ($) (2) | Value of Initial Fixed $100 Investment Based On: | | Net Income ($ millions) | Selected Measure: Adjusted EBIT ($ millions) (4) | | | | | | | | | Total Shareholder Return | Peer Group Total Shareholder Return (3) | | | | (a) | (b)(1) | (b)(2) | (c)(1) | (c)(2) | (d) | (e) | (f) | (g) | (h) | (i) | | 2023 | 9,694,005 | N/A | 11,810,556 | N/A | 3,304,165 | 3,703,188 | $111.74 | $165.83 | $269 | $664 | | 2022 | 10,614,474 | 6,602,134 | 1,261,318 | 4,482,433 | 3,972,278 | 2,812,149 | $83.78 | $142.31 | $192 | $633 | | 2021 | 6,775,219 | N/A | 4,817,133 | N/A | 2,255,922 | 2,040,574 | $108.95 | $146.30 | $264 | $620 | | 2020 | 6,473,355 | N/A | 2,367,048 | N/A | 2,257,115 | 799,916 | $93.91 | $118.05 | $122 | $537 |
Pay Versus Performance Table
| (1) The first PEO for 2023 was Mr. Villavarayan, our CEO, and the only PEO during 2023. The first PEO for 2022, 2021 and 2020 was Robert Bryant who served as our CEO for the full years of 2020 and 2021 and through August 31, 2022 for 2022. The second PEO for 2022 was our current Board Chair, Mr. Sachdev, who served as our interim CEO from August 31, 2022 through December 31, 2022. The dollar amounts reported in column (b)(1) for the first PEO are the amounts of total compensation reported for Mr. Villavarayan for 2023 and for Mr. Bryant for 2022, 2021 and 2020 in the “Total” column of the Summary Compensation Table in the Company’s proxy statement for each such applicable year. The dollar amount reported in column (b)(2) for the second PEO is the amount of total compensation reported for Mr. Sachdev for 2022 in the “Total” column of the Summary Compensation Table in the Company’s proxy statement for such year. Reconciliation of Compensation Actually Paid for all PEOs reported in columns (c)(1) and (c)(2) are set forth below. |
Pay Versus Performance Table
| (2) The dollar amounts reported in column (d) represent the average of the amounts reported for the Company’s NEOs as a group, excluding Mr. Villavarayan for 2023, Mr. Bryant for 2022, 2021 and 2020 and Mr. Sachdev for 2022 in the “Total” column of the Summary Compensation Table in each applicable year. The NEOs (excluding Messrs. Villavarayan, Bryant and Sachdev) for purposes of calculating the average amounts in each applicable year are as follows: (a) for 2023, Messrs. Anderson, Lannon, Berube, Weaver and Awada; (b) for 2022, Messrs. Lannon, Weaver, Berube and Awada; (c) for 2021, Messrs. Lannon and Berube and Shelley Bausch, current President, Global Industrial Coating (then our Senior Vice President, Global Industrial Coatings), and Jacqueline Scanlan, former Senior Vice President and Chief Human Resources Officer; and (d) for 2020, Messrs. Lannon, Berube, Weaver and Awada and Steven Markevich, former Executive Vice President and President, Transportation Coatings and Greater China. A reconciliation of Average Compensation Actually Paid to Non-PEO NEOs reported in column (e) is set forth below. |
Pay Versus Performance Table
| (3) For each year, total shareholder return for the Company and the peer group was calculated in accordance with Item 201(e) and Item 402(v) of Regulation S-K. For purposes of this pay versus performance disclosure, our peer group is the same peer group used for purposes of the performance graph included in the Company’s Annual Reports on Form 10-K and reflects the S&P 400 Materials index for the fiscal years ended December 31, 2023, 2022 and 2021 and the S&P 500 Chemicals Index for the fiscal year ended December 31, 2020. |
Pay Versus Performance Table
| (4) The Company has determined that Adjusted EBIT is the financial performance measure that, in the Company’s assessment, represents the most important performance measure (that is not otherwise required to be disclosed in the table) used by the Company to link compensation actually paid to the Company’s NEOs for the most recently completed fiscal year. As described in “Compensation Discussion and Analysis” above, Adjusted EBIT for compensation purposes is Adjusted EBIT, as externally reported for the applicable fiscal year, further adjusted to reflect certain items for each such fiscal year as described in the “Compensation Discussion and Analysis” above for 2023. For consistency of presentation, Adjusted EBIT for 2020 and 2021 is shown as defined for each year, both as described in the Company’s definitive proxy statements filed on April 22, 2022 and March 29, 2021 for 2021 and 2020, respectively, in each case plus step-up depreciation and amortization. |
Pay Versus Performance Table
A reconciliation of the PEO Summary Compensation Table total compensation to the Compensation Actually Paid (“CAP”) is provided in the following tables for each PEO shown in the table above.
Most Important Measures Used by Axalta to Link Executive Compensation Actually Paid to Company Performance
Most Important Measures Used by Axalta to Link Executive Compensation Actually Paid to Company Performance Adjusted EBIT Free Cash Flow Adjusted EBIT Margin Adjusted EBITDA Relative Total Shareholder Return Adjusted EPS Return on Invested Capital Please see “Annual Performance-Based Compensation” and “Long-Term Equity Incentive Awards” beginning on pages 50 and 53, respectively, for descriptions of how these metrics are used in our executive compensation program.
Pay Versus Performance Relationships
Pay Versus Performance Relationships The following graphical comparisons describe the relationships between certain figures included in the Pay Versus Performance Table for each of 2023, 2022, 2021, and 2020, including: (a) a comparison between our cumulative total shareholder return and the total shareholder return of the peer group; and (b) comparisons between (i) the compensation actually paid to the PEOs and the average compensation actually paid to our non-PEO NEOs and (ii) each of Axalta’s total shareholder return, net income and Adjusted EBIT.
Pay Versus Performance Relationships
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