The performance measure for the third level is Global EBITDA. For fiscal year 2008, a tentative minimum level for Global EBITDA was established by the Board in October 2007. After all bonus amounts earned for the first and second levels are calculated, the Global EBITDA result is measured. The maximum amount of Global EBITDA is then established by means of a formula that is based on all Performance Incentive bonus payouts under the first and second levels and that results in the maximum payout under the third level of the Performance Incentive program. This formula effects a sharing of increased earnings over the established minimum among all of the Company’s employees and the Company’s shareholders.
In October 2007, the Board approved specific performance targets, including the minimum and maximum amounts for Segment EBITDA, Gross Margin, ROIC and Global EBITDA. There were no changes from the prior year Performance Incentive program in the weightings or formulas to be applied in calculating the bonus payouts for any of the NEOs for fiscal year 2008. The target and maximum payout amounts for each of the NEOs for the 2008 Performance Incentive program are provided in the Grants of Plan-Based Awards table on page 26 of this proxy statement.
The following table sets forth the performance measures applicable to each of the NEOs for each of the three levels of the Performance Incentive program:
| Executive Officer | Title | First Level Performance Measure |
Second Level Performance Measure |
Third Level Performance Measure |
||||
|---|---|---|---|---|---|---|---|---|
| Garry O. Ridge | Chief Executive Officer | Segment | ROIC | Global | ||||
| EBITDA | EBITDA | |||||||
| (3 Segments) | ||||||||
| Jay Rembolt | Vice President, Finance and Chief Financial Officer | Segment | ROIC | Global | ||||
| EBITDA | EBITDA | |||||||
| (3 Segments) | ||||||||
| Michael J. Irwin | Executive Vice President, Strategic Development | Segment | ROIC | Global | ||||
| EBITDA | EBITDA | |||||||
| (3 Segments) | ||||||||
| Graham P. Milner | Executive Vice President, Global Development, Chief Branding Officer | Segment | Segment | Global | ||||
| EBITDA | EBITDA | EBITDA | ||||||
| (Americas) | (3 Segments) | |||||||
| Michael L. Freeman | Division President, the Americas | Segment | Gross | Global | ||||
| EBITDA | Margin | EBITDA | ||||||
| (Americas) | (Americas) | |||||||
| William B. Noble | Managing Director, Europe | Segment | Gross | Global | ||||
| EBITDA | Margin | EBITDA | ||||||
| (Europe) | (Europe) |
The following table sets forth the minimum and maximum amounts for the Gross Margin, ROIC and Global EBITDA performance measures applicable for the Company’s fiscal year 2008 Performance Incentive program together with actual results for fiscal year 2008 with respect to each such performance measure:
| Performance Measure | Minimum for FY 2008 Performance Incentive Program |
Maximum for FY 2008 Performance Incentive Program |
Actual FY 2008 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Gross Margin (Americas) | 47.69 | % | 48.19 | % | 45.27 | % | ||||||
| Gross Margin (Europe) | 51.18 | % | 51.68 | % | 50.72 | % | ||||||
| ROIC | 18.75 | % | 19.25 | % | 15.50 | % | ||||||
| Global EBITDA1 | $ | 52,437,000 | $ | 63,237,000 | $ | 46,546,000 | ||||||
- The maximum Global EBITDA amount is an approximate amount calculated by reference to a formula that would have resulted in a maximum payout of bonus to all employees of the Company under the third level of the Performance Incentive program. The actual Global EBITDA amounts for fiscal years 2008 and 2007 equal the Company’s earnings for each year on a consolidated basis before interest, taxes, depreciation and amortization and before the expense of bonus payouts under the third level of the Company’s Performance Incentive program.
The following table sets forth the minimum and maximum Segment EBITDA results for the first level under the Company’s Performance Incentive program for each of the Company’s reporting segments and the actual fiscal year 2008 results as a percentage of the actual fiscal year 2007 results:
| Performance Measure | Minimum for FY 2008 (as % of 2007 Actual) |
Maximum for FY 2008 (as % of 2007 Actual) |
Actual FY 2008 (as % of 2007 Actual) |
||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Segment EBITDA (Americas) | 97.9 | % | 97.9 | % | 77.9 | % | |||||
| Segment EBITDA (Europe)1 | 100 | % | 112.3 | % | 122.9 | % | |||||
| Segment EBITDA (Asia-Pacific) | 100 | % | 117.8 | % | 135.3 | % | |||||
- Gross Margin (Europe) percentages are based on the Europe segment’s results reported in U.S. dollars. Bonus payouts for Mr. Noble are calculated based on results reported in pounds sterling.
Achievement of the maximum levels for Segment EBITDA, Gross Margin, ROIC and Global EBITDA are intended to be attainable through the concerted efforts of all management teams working in their own regions and areas of responsibility and for the Company as a whole. Use of the same Performance Incentive program performance measures for all employees over many years has served to focus the entire Company on steady growth of quality earnings.
Based on the Company’s performance for fiscal year 2008 and the relative attainment of each of the performance measures under the Company’s Performance Incentive program, the Committee approved the calculation of NEO incentive award payouts, including the calculated payout for the CEO. The calculated incentive award payout for Mr. Ridge was $111,280, or 20% of his annual opportunity amount. Mr. Ridge expressed his view to the Committee that the overall performance of the Company was so far below the goals and expectations for the Company established at the beginning of the fiscal year that he would waive payment of his entire calculated payout. The committee, respecting Mr. Ridge’s decision, did not award the calculated payout to Mr. Ridge under the Company’s Performance Incentive program for fiscal year 2008. Mr. Ridge’s waiver of the calculated payout is not a deferral. He has no future right to receive a fiscal year 2008 Performance Incentive program payout.
On October 14, 2008, the Committee approved payment of the following incentive bonus amounts for fiscal year 2008 performance:
| Executive Officer | Title | FY2008 Annual Incentive Opportunity (As % of Base Salary) |
FY2008 Actual Bonus (As % of Base Salary) |
FY2008 Bonus Paid ($) |
||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Garry O. Ridge | Chief Executive Officer | 100 | % | 0 | % | $ | 0 | |||||||
| Jay Rembolt | Vice President, Finance and Chief Financial Officer | 50 | % | 10 | % | $ | 19,156 | |||||||
| Michael J. Irwin | Executive Vice President, Strategic Development | 60 | % | 12 | % | $ | 33,419 | |||||||
| Graham P. Milner | Executive Vice President, Global Development, Chief Branding Officer | 60 | % | 0 | % | $ | 0 | |||||||
| Michael L. Freeman | Division President, the Americas | 60 | % | 0 | % | $ | 0 | |||||||
| William B. Noble1 | Managing Director, Europe | 60 | % | 18 | % | $ | 65,480 | |||||||
- Mr. Noble’s bonus has been converted from pounds sterling at an average annual exchange rate for fiscal year 2008 of $2.0059 per pound.
To provide an example of the application of the Company’s Performance Incentive program to one of the NEOs, Mr. Rembolt’s bonus payout for fiscal year 2008 was computed as follows:
- Mr. Rembolt’s annual opportunity is 50% of his base salary for 2008. His base salary, computed on a weighted basis to account for the increase in his salary effective as of May 1, 2008, was $191,558. His annual opportunity was 50% of that amount, or $95,779.
- For the first level of the Performance Incentive program, Mr. Rembolt’s bonus potential was 30% of his annual opportunity. Since the applicable performance measure for the first level for Mr. Rembolt was Segment EBITDA for all three of the Company’s reporting segments, his bonus potential was weighted equally among the three reporting segments, or 10% of his annual opportunity with respect to each segment. Based on the relative attainment of the Segment EBITDA goals for each of the Company’s reporting segments as set forth in the table above (exceeding the maximum target amounts for Europe and Asia-Pacific, but less than the minimum target amount for the Americas), Mr. Rembolt was entitled to a bonus equal to 20% of his annual opportunity for the first level of the Performance Incentive program, or $19,156.
- For the second level, Mr. Rembolt’s bonus potential for the second level was 20% of his annual opportunity. The performance measure for Mr. Rembolt’s second level was ROIC. Since the actual ROIC percentage for the fiscal year did not reach the minimum target amount as set forth in the table above, Mr. Rembolt was not entitled to a bonus for the second level of the Performance Incentive program.
- For the third level, Mr. Rembolt’s bonus potential was 50% of his annual opportunity. No employees were eligible for a bonus under the third level since the Company’s Global EBITDA, after accrual of bonus payouts to all employees under the first and second levels of the Performance Incentive program, did not reach the minimum target amount for Global EBITDA as set forth in the table above. Mr. Rembolt did not receive a bonus for the third level of the Performance Incentive program.