UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant | þ | ||
Filed by a Party other than the Registrant | |||
Check the appropriate box: | ||
o | Preliminary Proxy Statement | |
o | Confidential, For Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |
þ | Definitive Proxy Statement | |
o | Definitive Additional Materials | |
o | Soliciting Material Under Rule 14a-12 | |
HYSTER-YALE MATERIALS HANDLING, INC.
(Name of Registrant as Specified in Its Charter)
Payment of Filing Fee (Check the appropriate box): | ||
þ | No fee required. | |
o | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. | ||
(1) | Title of each class of securities to which transaction applies: | ||
(2) | Aggregate number of securities to which transaction applies: | ||
(3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): | ||
(4) | Proposed maximum aggregate value of transaction: | ||
(5) | Total fee paid: | ||
o | Fee paid previously with preliminary materials: | ||
Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing. | |||
(1) | Amount Previously Paid: | ||
(2) | Form, Schedule or Registration Statement No.: | ||
(3) | Filing Party: | ||
(4) | Date Filed: | ||
TABLE OF CONTENTS |
5875 LANDERBROOK DRIVE; SUITE 300
CLEVELAND, OHIO 44124-4069
NOTICE OF ANNUAL MEETING
The Annual Meeting of stockholders of Hyster-Yale Materials Handling, Inc., which we refer to as the Company, will be held on Wednesday, May 8, 2013 at 9:30 A.M., at 5875 Landerbrook Drive, Cleveland, Ohio, for the following purposes:
1. | To elect nine directors for the ensuing year; |
2. | To act on the proposal to approve, for purposes of Section 162(m) of the Internal Revenue Code, the NACCO Materials Handling Group, Inc. Annual Incentive Compensation Plan (Amended and Restated Effective March 1, 2013); |
3. | To act on the proposal to approve, for purposes of Section 162(m) of the Internal Revenue Code, the NACCO Materials Handling Group, Inc. Long-Term Incentive Compensation Plan (Amended and Restated Effective March 1, 2013); |
4. | To act on the proposal to approve, for purposes of Section 162(m) of the Internal Revenue Code, the Hyster-Yale Materials Handling, Inc. Long-Term Equity Incentive Plan (Effective September 28, 2012); |
5. | To act on an advisory vote to approve the Company's executive compensation; |
6. | To act on an advisory vote on the frequency of the stockholder vote to approve the Company's executive compensation; |
7. | To confirm the appointment of the independent registered public accounting firm of the Company for the current fiscal year; and |
8. | To transact such other business as may properly come before the meeting. |
The Board of Directors has fixed the close of business on March 13, 2013 as the record date for the determination of stockholders entitled to notice of, and to vote at, the Annual Meeting or any adjournment thereof. The 2013 Proxy Statement and related form of proxy are being mailed to stockholders commencing on or about March 18, 2013.
Charles A. Bittenbender |
Secretary |
March 18, 2013
Important Notice Regarding the Availability of Proxy Materials for the
Annual Meeting of Stockholders To Be Held on May 8, 2013
The 2013 Proxy Statement and 2012 Annual Report are available, free of charge, at
http://www.hyster-yale.com by clicking on the “2013 Annual Meeting Materials” link and then clicking on either the “2013 Proxy Statement” link or the “2012 Annual Report” link, as appropriate.
If you wish to attend the meeting and vote in person, you may do so.
The Company's Annual Report for the year ended December 31, 2012 is being mailed to stockholders concurrently with the 2013 Proxy Statement. The 2012 Annual Report contains financial and other information about the Company, but is not incorporated into the 2013 Proxy Statement and is not deemed to be a part of the proxy soliciting material.
If you do not expect to be present at the Annual Meeting, please promptly fill out, sign, date and mail the enclosed form of proxy or, in the alternative, vote your shares electronically either over the internet (www.investorvote.com/HY) or by touch-tone telephone (1-800-652-8683). If you hold shares of both Class A Common Stock and Class B Common Stock, you only have to complete the single enclosed form of proxy or vote once via the internet or telephone. A self-addressed envelope is enclosed for your convenience. No postage is required if mailed in the United States.
5875 LANDERBROOK DRIVE; SUITE 300
CLEVELAND, OHIO 44124-4069
PROXY STATEMENT — MARCH 18, 2013
This Proxy Statement is furnished in connection with the solicitation by the Board of Directors of Hyster-Yale Materials Handling, Inc., a Delaware corporation, which we also refer to as the Company, Hyster-Yale, we, our or us, of proxies to be used at the annual meeting of stockholders of the Company to be held on May 8, 2013, which we refer to as the Annual Meeting. This Proxy Statement and the related form of proxy are being mailed to stockholders commencing on or about March 18, 2013.
If the enclosed form of proxy is executed, dated and returned or if you vote electronically, the shares represented by the proxy will be voted as directed on all matters properly coming before the Annual Meeting for a vote. Proxies that are properly signed without any indication of voting instructions will be voted as follows:
• | for the election of each director nominee; |
• | for the approval of each of the incentive compensation plans recommended by our Board of Directors; |
• | for an advisory vote to approve the Company's executive compensation, as described in this Proxy Statement; |
• | for an advisory vote to approve the Company's executive compensation to occur every three years; |
• | for the confirmation of the appointment of the independent registered public accounting firm; and |
• | as recommended by our Board of Directors with regard to any other matters or, if no recommendation is given, in the proxy holders' own discretion. |
The proxies may be revoked at any time prior to their exercise by giving notice to us in writing or by executing and delivering a later dated proxy. Attendance at the Annual Meeting will not automatically revoke a proxy, but a stockholder attending the Annual Meeting may request a ballot and vote in person, thereby revoking a previously granted proxy.
Stockholders of record at the close of business on March 13, 2013 will be entitled to notice of, and to vote at, the Annual Meeting. On that date, we had 12,477,678 outstanding shares of Class A Common Stock, par value $0.01 per share, which we refer to as the Class A Common, entitled to vote at the Annual Meeting and 4,283,324 shares of Class B Common Stock, par value $0.01 per share, which we refer to as the Class B Common, entitled to vote at the Annual Meeting. Each share of Class A Common is entitled to one vote for a nominee for each of the nine directorships to be filled and one vote on each other matter properly brought before the Annual Meeting. Each share of Class B Common is entitled to ten votes for each such nominee and ten votes on each other matter properly brought before the Annual Meeting. Class A Common and Class B Common will vote as a single class on all matters anticipated to be brought before the Annual Meeting.
At the Annual Meeting, in accordance with Delaware law and our Bylaws, the inspectors of election appointed by the Board of Directors for the Annual Meeting will determine the presence of a quorum and will tabulate the results of stockholder voting. As provided by Delaware law and our Bylaws, the holders of a majority of our stock, issued and outstanding, and entitled to vote at the Annual Meeting and present in person or by proxy at the Annual Meeting, will constitute a quorum for the Annual Meeting. The inspectors of election intend to treat properly executed proxies marked “abstain” as “present” for purposes of determining whether a quorum has been achieved at the Annual Meeting. The inspectors will also treat proxies held in “street name” by brokers that are voted on at least one, but not all, of the proposals to come before the Annual Meeting, which we refer to as broker non-votes, as “present” for purposes of determining whether a quorum has been achieved at the Annual Meeting.
In accordance with Delaware law, the nine director nominees receiving the greatest number of votes will be elected directors. Proposal two is to approve, for purposes of Section 162(m) of the Internal Revenue Code, which we refer to as Code Section 162(m), the NACCO Materials Handling Group, Inc. Annual Incentive Compensation Plan (Amended and Restated Effective March 1, 2013), which we refer to as the NMHG Short-Term Plan. Proposal three is to approve, for purposes of Code Section 162(m), the NACCO Materials Handling Group, Inc. Long-Term Incentive Compensation Plan (Amended and Restated Effective March 1, 2013), which we refer to as the NMHG Long-Term Plan. Proposal four is to approve, for purposes of Code Section 162(m), the Hyster-Yale Materials Handling, Inc. Long-Term Equity Incentive Plan (Effective September 28, 2012), which we refer to as the Hyster-Yale Equity Plan. The affirmative vote of a majority of the votes cast is required to approve proposals two, three and four for purposes of Code Section 162(m). For purposes of Code Section 162(m), abstentions and
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broker non-votes will not be treated as votes cast, so abstentions and broker non-votes will not affect the outcome of proposals two, three and four.
Proposal five is an advisory vote on executive compensation and proposal six is an advisory vote on how often the advisory vote will occur. Although both proposals are non-binding, the advisory votes allow our stockholders to express their opinions regarding our executive compensation and how frequently an advisory vote on executive compensation should occur. Abstentions and broker non-votes are not counted for purposes of the advisory votes on executive compensation. As a result, if you own shares through a bank, broker-dealer or similar organization, you must instruct your bank, broker-dealer or other similar organization to vote in order for them to vote your shares, so that your vote can be counted for these proposals.
In accordance with our Bylaws, the affirmative vote of the holders of a majority of the voting power of our stock that is present in person or represented by proxy and that is actually voted is required to approve all other proposals that are brought before the Annual Meeting. As a result, abstentions and broker non-votes in respect of any proposal will not be counted for purposes of determining whether a proposal has received the requisite approval by our stockholders.
In accordance with Delaware law and our Bylaws, we may, by a vote of the stockholders, in person or by proxy, adjourn the Annual Meeting to a later date or dates, without changing the record date. If we were to determine that an adjournment was desirable, the appointed proxies would use the discretionary authority granted pursuant to the proxy cards to vote in favor of such an adjournment.
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BUSINESS TO BE TRANSACTED
1. | Election of Directors |
Director Nominee Information
It is intended that shares represented by proxies in the enclosed form will be voted for the election of the nominees named in the following table to serve as directors for a term until the next annual meeting and until their successors are elected, unless contrary instructions are received. All of the nominees listed below presently serve as our directors and have served as our directors since at least September 28, 2012, the date on which Hyster-Yale was spun-off from NACCO Industries, Inc., which we refer to as NACCO, its former parent company. If an unexpected occurrence should make it necessary, in the judgment of the proxy holders, to substitute some other person for any of the nominees, shares represented by proxies will be voted for such other person as the proxy holders may select.
The disclosure below provides information as of the date of this Proxy Statement about each director nominee. The information presented is based upon information each director has given us about his or her age, all positions held, principal occupation and business experience for the past five years, and the names of other publicly-held companies for which he/she currently serves as a director or has served as a director during the past five years. In addition, we have presented information regarding each nominee's specific experience, qualifications, attributes and skills that led our Board of Directors to the conclusion that he/she should serve as a director. We also believe that the nomination of each of our director nominees is in the best long-term interests of our stockholders, as each individual possesses the highest personal and professional ethics, integrity and values, and has the judgment, skill, independence and experience required to serve as a member of our Board of Directors. Each individual has also demonstrated a strong commitment to service to the Company.
Name | Age | Principal Occupation and Business Experience During Last Five Years and other Directorships in Public Companies | Director Since* | ||||
J.C. Butler, Jr. | 52 | Senior Vice President, Finance, Treasurer and Chief Administrative Officer of NACCO (our former parent company that is an operating holding company with subsidiaries in the mining, small appliance and specialty retail industries). From prior to 2008 to September 2012, Vice President - Corporate Development and Treasurer of NACCO. From January 2010, Senior Vice President - Project Development and Administration of The North American Coal Corporation (referred to as NACoal). From August of 2011 to September 2012, Treasurer of NACCO Materials Handling Group, Inc., our principal operating subsidiary, referred to as NMHG. From May 2008 to January 2010, Senior Vice President - Project Development of NA Coal. With over 17 years of service as a member of management at NACCO while we were its wholly-owned subsidiary, Mr. Butler has extensive knowledge of the operations and strategies of our Company. | 2012 | ||||
Carolyn Corvi | 61 | Vice President and General Manager - Airplane Programs of The Boeing Company (an aerospace company) from prior to 2008 to January 2009. Retired January 2009. Director of United Continental Holdings, Inc. and Allegheny Technologies, Inc. From June 2009 to July 2012, Director of Goodrich Corporation. Ms. Corvi's experience in general management, including her service as vice president and general manager of a major publicly-traded corporation, enables her to make significant contributions to our Board. Through this past employment experience and her past and current service on the boards of publicly-traded corporations, she offers the Board a comprehensive perspective for developing corporate strategies and managing risks of a major publicly-traded corporation. | 2012 | ||||
John P. Jumper | 67 | President, Chief Executive Officer and Chairman of the Board of Science Applications International Corporation (a government technology solutions company). Retired Chief of Staff, United States Air Force. From prior to 2008, President, John P. Jumper & Associates (aerospace consulting). Also, Director of NACCO and Wesco Aircraft Holding, Inc. From prior to 2008 to 2012, Director of Goodrich Corporation. From prior to 2008 to 2009, Director of TechTeam Global and from prior to 2008 to 2010, Director of Somanectics Corp. From prior to 2008 to February 2012, Director of Jacobs Engineering, Inc. Through his extensive military career, including as the highest-ranking officer in the U.S. Air Force, General Jumper developed valuable and proven leadership and management skills that make him a significant contributor to our Board. In addition, General Jumper’s service on the boards of other publicly-traded corporations allows him to provide valuable insight to our Board on matters of corporate governance and executive compensation policies and practices. | 2012 | ||||
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Dennis W. LaBarre | 70 | Partner in the law firm of Jones Day. Mr. LaBarre also services as a Director of NACCO. Mr. LaBarre is a lawyer with broad experience counseling boards and senior management of publicly-traded and private corporations regarding corporate governance, compliance and other domestic and international business and transactional issues. In addition, he has over 30 years of experience as a member of senior management of a major international law firm. These experiences enable him to provide our Board with an expansive view of legal and business issues, which is further enhanced by his extensive knowledge of us as a result of his many years of service on NACCO’s board and through his involvement with its committees. | 1982 | ||||
Alfred M. Rankin, Jr. | 71 | Chairman, President and Chief Executive Officer of the Company and Chairman of NMHG. Chairman, President and Chief Executive Officer of NACCO. Chairman of the Board of each of NACCO’s principal subsidiaries: NA Coal, Hamilton Beach Brands, Inc. (referred to as HBB) and The Kitchen Collection, LLC (referred to as KC). Also, Director of The Vanguard Group. From prior to 2008 to 2012, Chairman of the Board of Directors of the Federal Reserve Bank of Cleveland. From prior to 2008 to 2012, Director of Goodrich Corporation. In over 40 years of service to NACCO, our former parent company, as a director and over 20 years in senior management of NACCO, Mr. Rankin has amassed extensive knowledge of all of our strategies and operations. In addition to his extensive knowledge of the Company, he also brings to our Board unique insight resulting from his service on the boards of other publicly-traded corporations and the Federal Reserve Bank of Cleveland. Additionally, through his dedicated service to many of Cleveland’s cultural institutions, he provides a valuable link between our Board, the Company and the community surrounding our corporate headquarters. | 1972 | ||||
Claiborne R. Rankin | 62 | Manager of NCAF Management, LLC, the managing member of North Coast Angel Fund, LLC (a private firm specializing in venture capital and investments). From 2010, Managing Member of Sycamore Partners, LLC, the manager of NCAF Management II, LLC and managing member of North Coast Angel Fund II, LLC (private firms specializing in venture capital and investments) from 2010. From prior to 2008, director of NMHG. Mr. Rankin is the grandson of the founder of NACCO. As a member of the board of NMHG for more than 19 years, Mr. Rankin has extensive knowledge of the lift truck industry and the Company. This experience and knowledge, his venture capital experience and the perspective of a long-term stockholder enable him to contribute to our Board. | 1994 | ||||
Michael E. Shannon | 76 | President of MEShannon & Associates, Inc. (a private firm specializing in corporate finance and investments). Retired Chairman, Chief Financial and Administrative Officer of Ecolab, Inc. (a specialty chemicals company). From prior to 2008 to April 2010, Director of CenterPoint Energy, Inc. Mr. Shannon formerly served as a Director of NACCO from 2002 to the spin-off date. Mr. Shannon’s experience in finance and general management, including his service as chairman and chief financial and administrative officer of a major publicly-traded corporation, enables him to make significant contributions to our Board. Through his past and current service on the boards of publicly-traded corporations, he has a broad and deep understanding of the financial reporting system, the challenges involved in developing and maintaining effective internal controls and the isolation of areas of focus for evaluating risks to the Company. | 2002 | ||||
Britton T. Taplin | 56 | Self-employed (personal investments). Mr. Taplin also serves as a Director of NACCO. Mr. Taplin is the grandson of the founder of NACCO and brings the perspective of a long-term stockholder to our Board. | 1992 | ||||
Eugene Wong | 78 | Professor Emeritus of the University of California at Berkeley. Dr. Wong formerly served as a Director of NACCO from 2005 to the spin-off date. Dr. Wong has broad experience in engineering, particularly in the areas of electrical engineering and software design, which are of significant value to the oversight of our information technology infrastructure, product development and general engineering. He has served as technical consultant to a number of leading and developing nations, which enables him to provide an up-to-date international perspective to our Board. Dr. Wong has also co-founded and managed several corporations, and has served as a chief executive officer of one, enabling him to contribute the administrative and management perspective of a corporate chief executive officer. | 2005 | ||||
*Includes serving as director of the predecessor to Hyster-Yale Materials Handling, Inc. Such predecessor was merged into the Company in connection with the spin-off.
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Directors' Meetings and Committees
The Board of Directors has an Audit Review Committee, a Compensation Committee, a Nominating and Corporate Governance Committee, a Finance Committee and an Executive Committee. The members of such committees are as follows:
Audit Review Committee | Compensation Committee |
Carolyn Corvi | Carolyn Corvi |
John P. Jumper | John P. Jumper (Chairperson) |
Michael E. Shannon (Chairperson) | Michael E. Shannon |
Eugene Wong | Eugene Wong |
Finance Committee | Nominating and Corporate Governance Committee |
J.C. Butler, Jr. | John P. Jumper |
Carolyn Corvi (Chairperson) | Dennis W. LaBarre |
Dennis W. LaBarre | Michael E. Shannon (Chairperson) |
Alfred M. Rankin, Jr. | |
Claiborne R. Rankin | Executive Committee |
Britton T. Taplin | John P. Jumper |
Dennis W. LaBarre | |
Alfred M. Rankin, Jr. (Chairperson) | |
Michael E. Shannon | |
The services provided by the NMHG audit review committee prior to the spin-off are, as of the spin-off date, provided by the Hyster-Yale Audit Review Committee, which is referred to as the Audit Review Committee. The Audit Review Committee held eight meetings in 2012. The Audit Review Committee has the responsibilities set forth in its charter with respect to:
• | the quality and integrity of our financial statements; |
• | our compliance with legal and regulatory requirements; |
• | the adequacy of our internal controls; |
• | our guidelines and policies to monitor and control our major financial risk exposures; |
• | the qualifications, independence, selection and retention of the independent registered public accounting firm; |
• | the performance of our internal audit function and independent registered public accounting firm; |
• | assisting our Board of Directors and us in interpreting and applying our Corporate Compliance Program and other issues related to corporate and employee ethics; and |
• | preparing the Annual Report of the Audit Review Committee to be included in our Proxy Statement. |
Our Board of Directors has determined that Michael E. Shannon, the Chairman of the Audit Review Committee, qualifies as an audit committee financial expert as defined in Section 407(d) of Regulation S-K under the Securities Exchange Act of 1934, which we refer to as the Exchange Act. Our Board has also determined that Carolyn Corvi, John P. Jumper, Michael E. Shannon and Eugene Wong are independent, as such term is defined in Section 303A.02 of the listing standards of the New York Stock Exchange, which is referred to as the NYSE, and Rule 10A-3(b)(1) under the Exchange Act. Our Board believes that all members of our Audit Review Committee should have a high level of financial knowledge. Accordingly, our Board has reviewed the membership of our Audit Review Committee and determined that each of the individuals is financially literate as defined in Section 303A.07(a) of the NYSE’s listing standards and has accounting or related financial management expertise as defined in Section 303A.07(a) of the NYSE’s listing standards and, therefore, may qualify as an audit committee financial expert. No members who serve on our Audit Review Committee serve on more than three public company audit committees.
The services provided by the NMHG compensation committee prior to the spin-off are, as of the spin-off date, provided by the Hyster-Yale Compensation Committee, which is referred to as the Compensation Committee. The
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Compensation Committee held six meetings in 2012. The Compensation Committee has the responsibilities set forth in its charter with respect to the administration of our policies, programs and procedures for compensating our employees, including our executive officers and directors. Among other things, the Compensation Committee's responsibilities include:
• | the review and approval of corporate goals and objectives relevant to compensation; |
• | the evaluation of the performance of the Chief Executive Officer and other executive officers in light of these goals and objectives; |
• | the determination and approval of Chief Executive Officer and other executive officer compensation levels; |
• | the consideration of whether the risks arising from our employee compensation policies and practices are reasonably likely to have a material adverse effect on us; |
• | the making of recommendations to our Board of Directors, where appropriate or required, and the taking of other actions with respect to all other compensation matters, including incentive compensation plans and equity-based plans; and |
• | the review and approval of the Compensation Discussion and Analysis and the preparation of the annual Compensation Committee Report to be included in our Proxy Statement. |
Consistent with applicable laws, rules and regulations, the Compensation Committee may, in its discretion, delegate all or a portion of its duties and responsibilities to one or more subcommittees of the Compensation Committee or, in appropriate cases, to our senior managers. The Compensation Committee retains and receives assistance in the performance of its responsibilities from an internationally recognized compensation consulting firm, discussed further below under the heading “Executive Compensation - Compensation Discussion and Analysis - Compensation Consultants.” Each member of the Compensation Committee is independent, as defined in the listing standards of the NYSE.
The services provided by the NMHG nominating and corporate governance committee prior to the spin-off are, as of the spin-off date, provided by the Hyster-Yale Nominating and Corporate Governance Committee, which is referred to as the Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee held three meetings in 2012. The Nominating and Corporate Governance Committee has the responsibilities set forth in its charter. Among other things, the Nominating and Corporate Governance Committee's responsibilities include:
• | the review and making of recommendations to our Board of Directors of the criteria for membership on our Board of Directors; |
• | the review and making of recommendations to our Board of Directors of the optimum number and qualifications of directors believed to be desirable; |
• | the establishment and monitoring of a system to receive suggestions for nominees to directorships of the Company; and |
• | the identification and making of recommendations to our Board of Directors of specific candidates for membership on our Board of Directors. |
The Nominating and Corporate Governance Committee will consider director candidates recommended by our stockholders. See “- Procedures for Submission and Consideration of Director Candidates” on page 8. In addition to the foregoing responsibilities, the Nominating and Corporate Governance Committee is responsible for reviewing our Corporate Governance Guidelines and recommending changes to the Corporate Governance Guidelines, as appropriate; overseeing evaluations of the Board of Directors' effectiveness; and annually reporting to the Board of Directors the Nominating and Corporate Governance Committee's assessment of our Board of Directors' performance. Each member of the Nominating and Corporate Governance Committee is independent, as defined in the listing standards of the NYSE. However, the Nominating and Corporate Governance Committee may, from time to time, consult with other members of the Taplin and Rankin families, including Alfred M. Rankin, Jr., regarding the composition of our Board of Directors.
The services provided by the NMHG finance committee prior to the spin-off are, as of the spin-off date, provided by the Hyster-Yale Finance Committee, which is referred to as the Finance Committee. The Finance Committee held five meetings in 2012. The Finance Committee reviews our financing and financial risk management strategies and those of our principal subsidiaries and makes recommendations to our Board of Directors on matters concerning finance.
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The services provided by the NMHG executive committee prior to the spin-off are, as of the spin-off date, provided by the Hyster-Yale Executive Committee, which is referred to as the Executive Committee. The Executive Committee did not hold any meetings in 2012. The Executive Committee may exercise all of the powers of our Board of Directors over the management and control of our business during intervals between meetings of our Board of Directors.
Our Board of Directors held seven meetings in 2012. The seven meetings include Board of Directors meetings that were held by NMHG prior to the spin-off date. In 2012, all of the directors attended at least 75 percent of the total meetings held by our Board of Directors and by the committees on which they served during their tenure.
Our Board of Directors has determined that, based primarily on the ownership of Class A Common and Class B Common by the members of the Taplin and Rankin families and their voting history, we have the characteristics of, and may be, a “controlled company,” as that term is defined in Section 303A of the NYSE listing standards. Accordingly, our Board of Directors has determined that we could be characterized as a “controlled company.” However, our Board of Directors has elected not to make use at the present time of any of the exceptions to the requirements of the listing standards of the NYSE that are available to controlled companies. Accordingly, at least a majority of the members of our Board of Directors is independent, as defined in the listing standards of the NYSE. In making a determination as to the independence of our directors, our Board of Directors considered Section 303A of the listing standards of the NYSE and broadly considered the materiality of each director's relationship with us. Based upon the foregoing criteria, our Board of Directors has determined that the following directors are independent as defined in the listing standards of the NYSE: Carolyn Corvi, John P. Jumper, Dennis W. LaBarre, Michael E. Shannon, Britton T. Taplin and Eugene Wong.
In accordance with the rules of the NYSE, following the spin-off, our non-management directors are scheduled to meet in executive session, without management, once a year. The Chairman of the Compensation Committee will preside at such meeting. Additional meetings of the non-management directors may be scheduled from time to time when the non-management directors believe such meetings are desirable. The determination of the director who should preside at such additional meetings will be made based upon the principal subject matter to be discussed at each such meeting. A meeting of the non-management directors was held on February 13, 2013.
Beginning in 2013, we will hold a regularly scheduled meeting of our Board of Directors in conjunction with our annual meeting of stockholders. Directors are expected to attend the annual meeting of stockholders absent an appropriate excuse.
We have adopted a code of ethics, entitled “Code of Corporate Conduct,” applicable to all of our personnel, including the principal executive officer, principal financial officer, principal accounting officer and controller and other persons performing similar functions. Waivers of our code of ethics for our directors or executive officers, if any, may be disclosed on our website, by press release or by filing a Current Report on Form 8-K with the Securities and Exchange Commission, which we refer to as the SEC. We have also adopted Corporate Governance Guidelines, which provide a framework for the conduct of our Board of Directors' business. The Code of Corporate Conduct, the Corporate Governance Guidelines and the Independence Standards for Directors, as well as each of the charters of the Audit Review Committee, the Compensation Committee and the Nominating and Corporate Governance Committee, are available free of charge on our website at http://www.Hyster-Yale.com, under the heading “Corporate Governance.” The information contained on or accessible through our website other than this Proxy Statement is not incorporated by reference into this Proxy Statement, and you should not consider such information contained on or accessible through our website as part of this Proxy Statement.
The Audit Review Committee reviews all relationships and transactions in which we and our directors and executive officers or their immediate family members are participants to determine whether such persons have a direct or indirect material interest in such transactions. Our legal department is primarily responsible for the development and implementation of processes and controls to obtain information from the directors and executive officers with respect to related person transactions in order to enable the Audit Review Committee to determine, based on the facts and circumstances, whether we have or a related person has a direct or indirect material interest in the transaction. As set forth in the Audit Review Committee's charter, in the course of the review of a potentially material related-person transaction, the Audit Review Committee considers:
• | the nature of the related person's interest in the transaction; |
• | the material terms of the transaction, including, without limitation, the amount and type of transaction; |
• | the importance of the transaction to the related person; |
• | the importance of the transaction to us; |
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• | whether the transaction would impair the judgment of a director or executive officer to act in our best interest; and |
• | any other matters the Audit Review Committee deems appropriate. |
Based on this review, the Audit Review Committee will determine whether to approve or ratify any transaction that is directly or indirectly material to us or a related person.
Any member of the Audit Review Committee who is a related person with respect to a transaction under review may not participate in the deliberations or vote with respect to the approval or ratification of the transaction; however, such director may be counted in determining the presence of a quorum at a meeting of the Audit Review Committee that considers the transaction.
Procedures for Submission and Consideration of Director Candidates
Stockholder recommendations for nominees for election to our Board of Directors must be submitted to Hyster-Yale Materials Handling, Inc., 5875 Landerbrook Drive, Suite 300, Cleveland, Ohio 44124-4069, Attention: Secretary, and must be received at our offices on or before December 31 of each year in anticipation of the following year's annual meeting of stockholders. The Nominating and Corporate Governance Committee will consider such recommendations if they are in writing and set forth the following information:
1. | the name and address of the stockholder recommending the candidate for consideration as such information appears on our records, the telephone number where such stockholder can be reached during normal business hours, the number of shares of Class A Common and Class B Common owned by such stockholder and the length of time such shares have been owned by the stockholder; if such person is not a stockholder of record or if such shares are owned by an entity, reasonable evidence of such person's beneficial ownership of such shares or such person's authority to act on behalf of such entity; |
2. | complete information as to the identity and qualifications of the proposed nominee, including the full legal name, age, business and residence addresses and telephone numbers and other contact information, and the principal occupation and employment of the candidate recommended for consideration, including his or her occupation for at least the past five years, with a reasonably detailed description of the background, education, professional affiliations and business and other relevant experience (including directorships, employments and civic activities) and qualifications of the candidate; |
3. | the reasons why, in the opinion of the recommending stockholder, the proposed nominee is qualified and suited to be one of our directors; |
4. | the disclosure of any relationship of the candidate being recommended has with us or any of our subsidiaries or affiliates, whether direct or indirect; |
5. | a description of all relationships, arrangements and understandings between the proposing stockholder and the candidate and any other person(s) (naming such person(s)) pursuant to which the candidate is being proposed or would serve as a director, if elected; and |
6. | a written acknowledgment by the candidate being recommended that he or she has consented to being considered as a candidate, has consented to our undertaking of an investigation into that individual's background, education, experience and other qualifications and, in the event that the Nominating and Corporate Governance Committee desires to do so, has consented to be named in our Proxy Statement and to serve as one of our directors, if elected. |
We do not require our directors to possess any specific qualifications or specific qualities or skills. In evaluating director nominees, the Nominating and Corporate Governance Committee will consider such factors as it deems appropriate, and other factors identified from time to time by our Board of Directors. The Nominating and Corporate Governance Committee will consider the entirety of each proposed director nominee's credentials. As a general matter, the Nominating and Corporate Governance Committee will consider a diverse number of factors such as judgment, skill, ethics, integrity, values, independence, possible conflicts of interest, experience with businesses and other organizations of comparable size or character, the interplay of the candidate's experience and approach to addressing business issues with the experience and approach of incumbent members of our Board of Directors and other new director candidates. The Nominating and Corporate Governance Committee's goal in selecting directors for nomination to our Board of Directors is generally to seek a well-balanced membership that combines a diversity of experience and skill in order to enable us to pursue our strategic objectives.
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The Nominating and Corporate Governance Committee will consider all information provided to it that is relevant to a candidate's nomination as one of our directors. Following such consideration, the Nominating and Corporate Governance Committee may seek additional information regarding, and may request an interview with, any candidate who it wishes to continue to consider. Based upon all information available to it and any interviews it may have conducted, the Nominating and Corporate Governance Committee will meet to determine whether to recommend the candidate to our Board of Directors. The Nominating and Corporate Governance Committee will consider candidates recommended by stockholders on the same basis as candidates from other sources.
The Nominating and Corporate Governance Committee utilizes a variety of methods for identifying and evaluating nominees for directors. The Nominating and Corporate Governance Committee regularly reviews the appropriate size of our Board of Directors and whether any vacancies on our Board of Directors are expected due to retirement or otherwise. In the event vacancies are anticipated, or otherwise arise, the Nominating and Corporate Governance Committee may consider various potential candidates. Candidates may be recommended by current members of our Board of Directors, third-party search firms or stockholders. No search firm was retained by the Nominating and Corporate Governance Committee during the past fiscal year. The Nominating and Corporate Governance Committee generally does not consider recommendations for director nominees submitted by individuals who are not affiliated with us. In order to preserve its impartiality, the Nominating and Corporate Governance Committee may not consider a recommendation that is not submitted in accordance with the procedures set forth above.
Board Leadership Structure and Risk Management
The Board of Directors believes that it is prudent and in the best interest of stockholders that the Chief Executive Officer and Chairman positions be combined and that such combination has no negative effect on the operation or direction of the Company. Our Chief Executive Officer is the most appropriate person to serve as our Chairman because he possesses in-depth knowledge of the issues, opportunities and challenges facing our business. Because of this knowledge and insight, the Board of Directors believes that he is in the best position to effectively identify strategic opportunities and priorities and to lead the discussion for the execution of the Company's strategies and achievement of its objectives. As Chairman, our Chief Executive Officer is able to:
• | focus our Board of Directors on the most significant strategic goals and risks of our business; |
• | utilize the individual qualifications, skills and experience of the other members of the Board of Directors in order to maximize their contributions to our Board of Directors; |
• | ensure that each other member of our Board of Directors has sufficient knowledge and understanding of our business to enable them to make informed judgments; |
• | provide a seamless flow of information to our Board of Directors; |
• | facilitate the flow of information between our Board of Directors and our management; and |
• | provide the perspective of a long-term stockholder. |
We do not assign a lead independent director but the Chairman of our Compensation Committee presides at the regularly scheduled meetings of non-management directors.
The Board of Directors oversees our risk management. The full Board of Directors (as supplemented by the appropriate board committee in the case of risks that are overseen by a particular committee) regularly reviews information provided by management in order for our Board of Directors to oversee the risk identification, risk management and risk mitigation strategies. Our board committees assist the full Board of Directors' oversight of our material risks by focusing on risks related to the particular area of concentration of the relevant committee. For example, our Compensation Committee oversees risks related to our executive compensation plans and arrangements, our Audit Review Committee oversees the financial reporting and control risks, our Finance Committee oversees financing and other financial risk management strategies and our Nominating and Corporate Governance Committee oversees risks associated with the independence of the Board of Directors and potential conflicts of interest. Each committee reports on these discussions of the applicable relevant risks to the full Board of Directors during the Board of Directors meetings. The full Board of Directors incorporates the insight provided by these reports into its overall risk management analysis.
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Compensation Committee Interlocks and Insider Participation
None of our executive officers serves or has served on the compensation committee of any entity that has one or more of its executive officers serving as a member of our Compensation Committee.
Certain Business Relationships
Dennis W. LaBarre, one of our directors, is a partner in the law firm of Jones Day. Jones Day provided legal services on our behalf during 2012 on a variety of matters, and it is anticipated that such firm will provide similar services in 2013. Mr. LaBarre does not receive any direct compensation from legal fees we pay to Jones Day and these legal fees do not provide any material indirect compensation to Mr. LaBarre.
J.C. Butler, Jr., one of our directors, is the son-in-law of Alfred M. Rankin, Jr. As indicated on the Director Compensation Table on page 11, in 2012, Mr. Butler received $39,839 in total compensation from us as a director. He also earned $1,170,187 in total compensation as an employee for services rendered during the first nine months of 2012 prior to the spin-off of Hyster-Yale from NACCO.
Report of the Audit Review Committee
The Audit Review Committee has reviewed and discussed with our management and Ernst & Young LLP, our independent registered public accounting firm, our audited financial statements contained in our Annual Report to Stockholders for the year ended December 31, 2012. The Audit Review Committee has also discussed with our independent registered public accounting firm the matters required to be discussed by the Statement on Auditing Standards No. 61, as amended (AICPA, Professional Standards, Vol. 1 AU Section 380), as adopted by the Public Company Accounting Oversight Board in Rule 3200T.
The Audit Review Committee has received and reviewed the written disclosures and the independence letter from Ernst & Young LLP required by applicable requirements of the Public Company Accounting Oversight Board regarding Ernst & Young LLP's communications with the Audit Review Committee concerning independence, and has discussed with Ernst & Young LLP its independence.
Based on the review and discussions referred to above, the Audit Review Committee recommended to the Board of Directors (and the Board of Directors subsequently approved the recommendation) that the audited financial statements be included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2012, filed with the SEC.
MICHAEL E. SHANNON, CHAIRPERSON
CAROLYN CORVI
JOHN P. JUMPER
EUGENE WONG
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Director Compensation
The following table sets forth all compensation of each director for services as our directors and as directors of our operating company NMHG, other than Alfred M. Rankin, Jr. In addition to being a director, Mr. Rankin currently serves as Chairman, President and Chief Executive Officer of the Company and Chairman of NMHG. Mr. Rankin does not receive any compensation for his services as a director. Mr. Rankin's compensation for services as one of our executive officers is shown in the Summary Compensation Table on page 44.
DIRECTOR COMPENSATION
For Fiscal Year Ended December 31, 2012
Name | (A) Fees Earned or Paid in Cash(1) ($) | (B) Stock Awards(2) ($) | (C) All Other Compensation(3) ($) | Total($) | ||||
J.C. Butler, Jr. | $18,530 | $17,221 | $4,088 | $39,839 | ||||
Carolyn Corvi | $24,030 | $17,221 | $355 | $41,606 | ||||
John P. Jumper (4) | $79,853 | $17,221 | $4,652 | $101,726 | ||||
Dennis W. LaBarre (4) | $80,603 | $17,221 | $4,644 | $102,468 | ||||
Claiborne R. Rankin (5) | $35,280 | $17,221 | $4,355 | $56,856 | ||||
Michael E. Shannon (4) | $83,603 | $17,221 | $4,627 | $105,451 | ||||
Britton T. Taplin (4) | $69,603 | $17,221 | $4,832 | $91,656 | ||||
Eugene Wong (4) | $72,353 | $17,221 | $627 | $90,201 | ||||
(1) | For all directors, the amounts in this column reflect (i) the portion of the annual retainers and other fees earned by our directors and (ii) payment for certain fractional shares of Class A Common that were earned and cashed out under the Hyster-Yale Materials Handling, Inc. Non-Employee Directors' Plan, which we refer to as the Non-Employee Directors Plan, described below. |
(2) | Under the Non-Employee Directors Plan, the directors are required to receive a portion of their annual retainer in shares of Class A Common, which we refer to as the Mandatory Shares. Beginning with amounts earned on or after January 1, 2013, they will also be permitted to elect to receive all or part of the remainder of the retainer and all fees in the form of shares of Class A Common, which we refer to as the Voluntary Shares. Amounts in this column reflect the aggregate grant date fair value of the Mandatory Shares that were granted to directors under the Non-Employee Directors Plan, determined pursuant to the Financial Accounting Standards Board Accounting Standards Codification Topic 718, which we refer to as FASB ASC Topic 718. See Note (2) of the consolidated financial statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2012 for more information regarding the accounting treatment of our equity awards. |
(3) | The amount listed includes: (i) $31.50 for each director in Company-paid premium payments for life insurance for the benefit of the directors; (ii) other Company-paid premium payments for accidental death and dismemberment insurance for the director and spouse; and (iii) personal excess liability insurance for the director and immediate family members. The amount listed also includes charitable contributions made in our name on behalf of the director and spouse under our matching charitable gift program in the amount of $4,000 for Messrs. Butler, Jumper, LaBarre, C. Rankin, Shannon and Taplin. |
(4) | Messrs. Jumper, LaBarre, Shannon, Taplin and Wong were directors of NACCO and NMHG before the spin-off. For the period from January 1, 2012 through September 28, 2012, they received a retainer of $93,750 from NACCO for their services as a director, $41,250 of which was attributable to service on the NMHG board of directors. This portion of their NACCO retainer, along with the applicable portion of their meeting fees for pre-spin service, is included in Column (A) of this table and the pre-spin portion of their NACCO-provided benefit costs are included in Column (C) of this table. |
(5) | Mr. Claiborne Rankin was a director of NMHG before the spin-off. For the period from January 1, 2012 through September 28, 2012, he received a cash retainer of $15,000, as well as various meeting fees and benefits for this service. The amounts Mr. Rankin received for pre-spin service as a director of NMHG are also included in Columns (A) and (C) of this table. |
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Description of Material Factors Relating to the Director Compensation Table
Each non-employee director is entitled to receive the following annual compensation for service on our Board of Directors and on our subsidiaries' boards of directors:
• | a retainer of $125,000 ($69,000 of which is required to be paid in the form of shares of Class A Common, as described below); |
• | attendance fees of $1,000 for each meeting attended (including telephonic meetings) of our Board of Directors or a subsidiary board of directors, but not exceeding $2,000 per day; |
• | attendance fees of $1,000 for each meeting attended (including telephonic meetings) of a committee of our Board of Directors on which the director served or a committee of a subsidiary's board of directors on which the Director served; |
• | a retainer of $5,000 for each committee of our Board of Directors on which the director served (other than the Executive Committee); |
• | an additional retainer of $5,000 for each committee of our Board of Directors on which the director served as chairman (other than the Audit Review Committee); and |
• | an additional retainer of $10,000 for the chairman of the Audit Review Committee of our Board of Directors. |
The amounts the directors actually received for 2012 were pro-rated to reflect post-spin service only. The retainers are paid quarterly in arrears and the meeting fees are paid following each meeting. Each director is also reimbursed for expenses incurred as a result of attendance at meetings. We also occasionally make our private aircraft available to directors for attendance at meetings of our Board of Directors and our subsidiaries' boards of directors.
Under the Non-Employee Directors Plan, each director who was not an officer of the Company or of any of our subsidiaries receives $69,000 of the $125,000 retainer in whole shares of Class A Common. Any fractional shares are paid in cash. The actual number of shares of Class A Common issued to a director is determined by the following formula:
the dollar value of the portion of the $69,000 retainer that was earned by the director each quarter
divided by
the average closing price of shares of Class A Common on the NYSE for each week during such quarter.
These shares are fully vested on the date of grant, and the director is entitled to all rights of a stockholder, including the right to vote and receive dividends. However, the shares cannot be assigned, pledged, hypothecated or otherwise transferred by the director, voluntarily or involuntarily, other than:
• | by will or the laws of descent and distribution; |
• | pursuant to a qualifying domestic relations order; or |
• | to a trust for the benefit of the director or his spouse, children or grandchildren. |
The foregoing restrictions on transfer lapse upon the earliest to occur of:
• | the date which is ten years after the last day of the calendar quarter for which such shares were earned; |
• | the date of the death or permanent disability of the director; |
• | five years (or earlier with the approval of our Board of Directors) from the date of the retirement of the director from our Board of Directors; |
• | the date that a director is both retired from our Board of Directors and has reached 70 years of age; or |
• | at such other time as determined by the Board of Directors in its sole discretion. |
Effective January 1, 2013, each director may elect under the Non-Employee Directors Plan to receive shares of Class A Common in lieu of cash for up to 100% of the balance of their retainers and meeting attendance fees. The number of
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shares issued is determined under the same formula stated above. However, these Voluntary Shares are not subject to the foregoing transfer restrictions.
Each director also receives (i) Company-paid life insurance in the amount of $50,000; (ii) Company-paid accidental death and dismemberment insurance for the director and spouse; (iii) personal excess liability insurance in the amount of $10 million for the director and immediate family members who reside with the director and (iv) up to $4,000 per year in matching charitable contributions.
Director Compensation Program for 2013
The Compensation Committee periodically evaluates and recommends changes to our compensation program for directors. After receiving advice from the Hay Group, our compensation consultant, the Compensation Committee and our Board of Directors reviewed our director compensation program. The only change made to the program for 2013 is that the directors will only receive the $1,000 meeting fee for one meeting of our Board of Directors or our subsidiary board of directors per day.
Executive Compensation
Hyster-Yale Spin-Off
Prior to September 28, 2012, Hyster-Yale was a wholly-owned subsidiary of NACCO. On September 28, 2012, NACCO spun-off Hyster-Yale, including NMHG, its principal operating subsidiary, to the NACCO stockholders. The spin-off resulted in changes to our compensation program for the remainder of 2012. Specifically:
• | After the spin-off, Alfred M. Rankin, Jr. provided services to both NACCO and Hyster-Yale and was employed and compensated by both NACCO and NMHG. In addition to reflecting post-spin compensation that was paid to Mr. Rankin from Hyster-Yale, this Proxy Statement includes compensation earned by Mr. Rankin during the first nine months of 2012 prior to the spin-off date while Hyster-Yale and NMHG were wholly-owned subsidiaries of NACCO. |
• | Kenneth C. Schilling, Hyster-Yale's Vice President and Chief Financial Officer, was the principal financial officer of Hyster-Yale before and after the spin-off date. Mr. Schilling was also Vice President and Controller of NACCO during the first nine months of 2012. Mr. Schilling's compensation for the entire 2012 calendar year is described in this Proxy Statement. |
SEC rules require that NACCO also disclose in its 2013 proxy statement compensation earned by Messrs. Rankin and Schilling during the first nine months of 2012 prior to the spin-off date. As a result, the disclosure of pre-spin compensation contained in this Proxy Statement is duplicative of the pre-spin compensation shown in NACCO's 2013 proxy statement. Hyster-Yale and NACCO did not each pay Messrs. Rankin and Schilling for services provided prior to the spin-off and Messrs. Rankin and Schilling were not compensated twice for the same duties. As a result, the information contained in this Proxy Statement and NACCO's 2013 proxy statement should be read carefully to avoid double-counting of such amounts.
Compensation Discussion and Analysis
The following describes the material elements of our compensation objectives and policies as they relate to those individuals named in the Summary Compensation Table on page 44, whom we refer to as the Named Executive Officers. This discussion and analysis of our compensation program should be read in conjunction with the accompanying tables, footnotes and text disclosing the compensation awarded to, earned by or paid to the Named Executive Officers during 2012. Although the information below focuses primarily on compensation provided by Hyster-Yale and NMHG after the spin-off, it includes information regarding pre-spin compensation provided by NACCO where required.
Executive Compensation Governance
For the portion of 2012 preceding the spin-off, the NMHG compensation committee established and oversaw the administration of the policies, programs and procedures for compensating our Named Executive Officers, with assistance from the NACCO compensation committee with respect to issues relating to Mr. Rankin and any NACCO equity compensation. The NMHG compensation committee was replaced by the Hyster-Yale Compensation Committee as of the spin-off date. The members of each compensation committee consist solely of independent directors.
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The Compensation Committee's responsibilities include:
• | review and approval of corporate goals and objectives relevant to compensation for our Chief Executive Officer and other executive officers; |
• | evaluation of the performance of our Chief Executive Officer and other executive officers in light of these performance goals and objectives; |
• | determination and approval of the compensation levels of our Chief Executive Officer and other executive officers based on this evaluation; |
• | consideration of whether the risks arising from our employee compensation policies and practices are reasonably likely to have a material adverse effect on us; |
• | making recommendations to our Board of Directors, where appropriate or required, with respect to non-equity-based compensation matters; and |
• | taking other actions with respect to all other compensation matters, including equity-based and other incentive compensation plans. |
Named Executive Officers for 2012
The Named Executive Officers for 2012 are listed on the table below:
Name | Post-Spin Titles | Employer | ||
Alfred M. Rankin, Jr. | Chairman, President and Chief Executive Officer - Hyster-Yale Chairman - NMHG | NMHG (effective 1/2012)(1)(2) | ||
Kenneth C. Schilling | Vice President and Chief Financial Officer – Hyster-Yale Vice President and Chief Financial Officer – NMHG | NMHG (effective 1/2012)(1) | ||
Michael P. Brogan | President and Chief Executive Officer – NMHG | NMHG | ||
Colin Wilson | Vice President, Chief Operating Officer and President, Americas – NMHG | NMHG | ||
Ralf A. Mock | Vice President, Managing Director, Europe, Middle East and Africa (EMEA) – NMHG | NACCO Materials Handling Limited | ||
(1) | Although Messrs. Rankin and Schilling were employed by NMHG since January 1, 2012, they continued to provide services to NACCO and all of its subsidiaries for periods prior to the spin-off. |
(2) | Following the spin-off, Mr. Rankin also remained in his role as Chairman, President and Chief Executive Officer of NACCO, and Chairman of the other principal NACCO subsidiaries. |
Compensation Consultants
The Compensation Committee receives assistance and advice from the Hay Group, an internationally-recognized compensation consulting firm. The Hay Group is engaged by and reports to the Compensation Committee. The Hay Group also provides advice and discusses compensation issues directly with management.
Throughout 2012, the Hay Group prepared, presented and made recommendations regarding substantially all aspects of compensation for our directors and senior management employees, including the Named Executive Officers. For 2012, the Hay Group was engaged to:
• | make recommendations regarding Hay point levels, salary midpoints and incentive targets for all new senior management positions and/or changes to current senior management positions; |
• | make recommendations regarding 2012 salary midpoints, short-term and long-term incentive compensation targets (calculated as a percentage of salary midpoint) and target total compensation for all senior management positions; |
• | make recommendations regarding 2012 salary midpoints and/or range movement for all other employee positions; and |
• | evaluate and provide recommendations regarding the compensation program for our non-employee directors. |
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At the direction of the Compensation Committee, all Hay point recommendations for new senior management positions and/or changes to current positions are determined by the Hay Group through the consistent application of the Hay point methodology, which is a proprietary method that takes into account the know-how, problem solving and accountability requirements of the position.
Representatives of the Hay Group attended one of the compensation committee meetings in 2012 by telephone and, during that meeting, consulted with the compensation committee in executive session without management present.
The Hay Group did not provide any other services to us or the compensation committees in 2012. The Compensation Committee has considered and assessed all relevant factors, including but not limited to those set forth in Rule 10C-1(b)(4)(i) through (vi) under the Exchange Act, that could give rise to a potential conflict of interest with respect to the Hay Group. Based on this review, we are not aware of any conflict of interest that has been raised by the work performed by the Hay Group.
Hay Group's All Industrials Survey - Salary Midpoint
As a starting point for setting target total compensation, the Compensation Committee directed the Hay Group to use their proprietary survey of a broad group of domestic industrial organizations from almost all segments of industry ranging in size from under $150 million to over $5 billion in annual revenues, which we refer to as the All Industrials survey. Organizations that satisfy the consultant's quality assurance controls voluntarily participate in the All Industrials survey by submitting data to the consultant. For 2012, participants in the All Industrials survey included 298 parent organizations and 360 independent operating units representing almost all segments of industry, including the light and heavy manufacturing, consumer products and mining segments.
The Compensation Committee chose this particular survey as its benchmark because (1) the use of a broad-based survey reduces volatility and lessens the impact of cyclical upswings or downturns in any one industry that could otherwise skew the survey results in any particular year and (2) it provides a competitive framework for recruiting employees from outside of our industry.
Using its proprietary Hay point methodology, the Hay Group compares positions of similar scope and complexity with the data obtained in the All Industrials survey. The Hay Group then derives a median salary level for each Hay point level, including those positions occupied by the Named Executive Officers, which is targeted at the 50th percentile of the All Industrials survey. We refer to the 50th percentile median target as the salary midpoint. For 2012, the Compensation Committee used:
• | 100% of the salary midpoints recommended by the Hay Group for (i) employees in EMEA and (ii) non-EMEA employees in Hay salary grades 25 and above, including the Named Executive Officers; and |
• | 97.5% of the salary midpoints for all employees in salary grades 24 and below (except those in EMEA). |
Because salary midpoints are based on each Hay point level, all of the employees at a particular Hay point level generally have the same salary midpoint. This process assures internal equity in pay among the executives across all business units.
Executive officers' compensation levels are set at (or slightly below) the salary midpoint recommended by the Hay Group because the Compensation Committee believes that the use of salary midpoints ensures that the compensation program provides sufficient compensation to attract and retain talented executives and maintain internal pay equity, without overcompensating our executive officers.
The salary midpoint provided by the Hay Group is then used to calculate the total target compensation of all senior management employees, including the Named Executive Officers.
Compensation Policies and Objectives - Total Target Compensation
The guiding principle of the compensation program for senior management employees, including Named Executive Officers, is the maintenance of a strong link between an employee's compensation, individual performance and the performance of the Company or the business unit for which the employee has responsibility. The primary objectives of our compensation program are:
• | to attract, retain and motivate talented management; |
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• | to reward management with competitive total compensation for achievement of specific corporate and individual goals; and |
• | to make management long-term stakeholders in the Company. |
The Compensation Committee establishes comprehensively defined “target total compensation” for each senior management employee following rigorous evaluation standards to ensure internal equity. Target total compensation is determined explicitly in dollar terms as the sum of: (i) salary midpoint, as determined by the Hay Group, (ii) for U.S. employees, target cash in lieu of perquisites, (iii) target short-term incentives, and (iv) target long-term incentives. The target short-term incentives and long-term incentives are generally determined by multiplying each employee's salary midpoint by a specified percentage of that midpoint, as determined by the Hay Group for each Hay salary grade.
The following table sets forth target total compensation for the Named Executive Officers, as recommended by the Hay Group and approved by the Compensation Committee for 2012:
Named Executive Officer | (A) Salary Midpoint ($)(%) | (B) Cash in Lieu of Perquisites ($)(%) | (C) Short-Term Plan Target ($)(%) | (D) Long-Term Plan Target ($)(%) | (A)+(B)+(C)+(D) Target Total Compensation ($) | ||||||
Alfred M. Rankin, Jr. (1) | $1,001,400 | 18% | $50,000 | 1% | $1,001,400 | 18% | $3,641,967 | 63% | (2) | $5,694,767 | |
Kenneth C. Schilling (3) | $349,400 | 43% | $20,000 | 2% | $157,230 | 20% | $281,267 | 35% | (2) | $807,897 | |
Michael P. Brogan | $665,100 | 31% | $40,000 | 2% | $465,570 | 21% | $997,650 | 46% | $2,168,320 | ||
Colin Wilson | $501,100 | 38% | $32,000 | 2% | $275,605 | 21% | $526,155 | 39% | $1,334,860 | ||
Ralf A. Mock(4) | $404,820 | 48% | N/A | (5) | $182,169 | 22% | $258,930 | 30% | $845,919 | ||
(1) | Mr. Rankin's salary midpoint, perquisite allowance and short-term plan target amount were established before the spin-off. The long-term plan target amount shown on the above table is the sum of his $3,166,928 target under the NACCO Industries, Inc. Executive Long-Term Incentive Compensation Plan, referred to as the NACCO Long-Term Plan, and his $475,039 target under the new Hyster-Yale Equity Plan, which was awarded to compensate Mr. Rankin solely for post-spin service with Hyster-Yale. |
(2) | The amounts include a 15% increase from the Hay-recommended long-term plan target awards that the Compensation Committee applies each year to account for the immediately taxable nature of the long-term equity plan awards. See “- Long-Term Incentive Compensation - Equity-Based Long-Term Incentive Compensation for Messrs. Rankin and Schilling” beginning on page 34. |
(3) | Mr. Schilling was promoted to Vice President and Chief Financial Officer of Hyster-Yale as of the spin-off date and his salary midpoint and short-term and long-term plan targets were increased as a result of the promotion. The amounts shown above reflect the annualized post-spin amounts, although he was actually paid based on pro-rated pre-spin and post-spin target amounts as shown on the Summary Compensation Table on page 44. |
(4) | Throughout this Proxy Statement, Mr. Mock’s compensation for 2012 has been converted from British pounds to U.S. dollars using a conversion rate of 1.584423 U.S. dollars to 1 British pound, which is the average of the daily closing rates during 2012 as published by Thomson Reuters. The conversion was not required for Mr. Mock’s long-term plan award or payout, however, since that award is calculated in U.S. dollars. |
(5) | Non-U.S. executives do not receive a cash allowance in lieu of perquisites. Rather, as is customary, certain non-U.S. executives receive a car allowance. Mr. Mock’s car allowance for 2012 was $21,114. |
In addition to the target total compensation shown on the table above, we provide employees in the U.S. and the U.K., including the Named Executive Officers, with competitive retirement benefits and the opportunity for additional profit sharing benefits if the Company attains better than forecasted results.
The design of our compensation program offers opportunities for employees to earn truly superior compensation for outstanding results. It also includes significantly reduced compensation for results that do not meet or exceed the previously established performance targets for the year. In years when we have weaker financial results, payouts under the incentive compensation plans will generally be lower. In years when we have stronger financial results, payouts under the incentive compensation plans will generally be greater. We believe that our program encourages Named Executive Officers to earn incentive pay significantly greater than 100% of target over time by delivering outstanding managerial performance.
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In most years, incentive compensation payments made to the Named Executive Officers exceed their base salary plus perquisite allowance for the year. See “- Hay Group's All Industrials Survey - Salary Midpoint.” With the exception of Mr. Mock, each of the Named Executive Officer's incentive compensation exceeded the sum of his base salary and perquisite allowance for 2012.
Overview of Executive Compensation Methodology
We seek to achieve the foregoing policies and objectives through a mix of base salaries and incentive plans. Base salaries are set at levels appropriate to allow the incentive plans to serve as significant motivating factors. The Compensation Committee carefully reviews each of these components in relation to our performance.
Incentive-based compensation plans are designed to provide significant rewards for achieving or surpassing annual operating and financial performance objectives, as well as to align the compensation interests of the senior management employees, including the Named Executive Officers, with our short-term and long-term interests.
The Compensation Committee views the various components of compensation as related but distinct. While a significant percentage of total target compensation is allocated to incentive compensation as a result of the policies and objectives discussed above, there is no pre-established policy or target for the allocation between either cash and non-cash or short-term and long-term incentive compensation. The Compensation Committee does not believe that significant compensation derived from one component of compensation should negate or reduce compensation from other components. Rather, the Compensation Committee reviews information provided from the Hay Group All Industrials survey to determine the appropriate level for each component and mix of compensation.
The Compensation Committee reviews and takes into account all elements of executive compensation in setting policies and determining compensation levels. In this process, the Compensation Committee reviews “tally sheets” with respect to target total compensation for the Named Executive Officers and other senior management employees. The tally sheets list each officer's title, Hay points, salary midpoint, base salary, perquisite allowance (for U.S. employees), short-term and long-term incentive compensation targets and target total compensation for the current year, as well as those that are being proposed for the subsequent year.
In November 2011, the NACCO and NMHG compensation committees reviewed the tally sheets for each of our Named Executive Officers to decide whether they should make changes to the 2012 compensation program. The committees determined that the overall program continued to be consistent with our compensation objectives and did not make any material changes for 2012.
Impact of Hyster-Yale Spin-Off on 2012 Compensation: However, as a result of the Hyster-Yale spin-off, the following changes were made to the compensation of Messrs. Rankin and Schilling:
• | Job Duties: Mr. Schilling resigned as the principal financial officer of NACCO on the spin-off date. As of the spin-off date, he continued in his role as Vice President and Chief Financial Officer of NMHG and assumed the role of Vice President and Chief Financial Officer of Hyster-Yale. Mr. Rankin continues to be employed by NMHG with respect to the services he provides as Chairman, President and Chief Executive Officer of Hyster-Yale and Chairman of NMHG. |
• | Base Salary and Perquisite Allowances: The NACCO compensation committee and our Compensation Committee allocated Mr. Rankin's 2012 base salary and perquisite allowance for periods following the spin-off 60% to the Company and 40% to NACCO, to reflect the fact that his time was divided between the companies after the spin-off. The pre-spin portion of the salary and perquisite allowance for Messrs. Rankin and Schilling is disclosed in this Proxy Statement and in NACCO's 2013 proxy statement. |
• | Short-Term Incentive Compensation: Mr. Schilling retained his 2012 target award under our NMHG Short-Term Plan and received his entire short-term award under that plan. As a result of Mr. Schilling's services to NACCO during the first nine months of 2012, 75% of his 2012 short-term award takes into account the performance of NACCO's three principal subsidiaries for pre-spin service: NA Coal; HBB and KC. Mr. Rankin's 2012 short-term incentive target award of $1,001,400 under our NMHG Short-Term Plan remained in effect following the spin-off but, as explained in more detail under "-NMHG Short-Term Incentive Compensation For Mr. Rankin" below, our Compensation Committee reduced the post-spin portion of the award to reflect the division of his duties between NACCO and Hyster-Yale. As a result of Mr. Rankin's services to NACCO for the first nine months of 2012, 75% of his 2012 short-term award under the NMHG Short-Term Plan took into account the performance of NA Coal, |
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HBB and KC for pre-spin service. The pre-spin portion of the short-term awards for Messrs. Rankin and Schilling is disclosed in this Proxy Statement and in NACCO's 2013 proxy statement.
• | Long-Term Incentive Compensation: Mr. Schilling received his entire 2012 long-term award under our Hyster-Yale Equity Plan. As a result of Mr. Schilling's services to NACCO for the first nine months of 2012, 75% of his 2012 long-term award took into account the performance of NA Coal, HBB and KC for pre-spin service. Mr. Rankin's 2012 long-term incentive target of $3,166,928 under the NACCO Long-Term Plan remained in effect and the NACCO compensation committee used negative discretion to reduce the amount of the actual payment to reflect the post-spin division of his duties between NACCO and Hyster-Yale. Mr. Rankin was also granted a separate, pro-rata award under our new Hyster-Yale Equity Plan for post-spin Hyster-Yale service. The pre-spin portion of the long-term awards for Messrs. Rankin and Schilling is disclosed in this Proxy Statement and in NACCO's 2013 proxy statement. |
Components of Named Executive Officers' Compensation. As discussed above, compensation for senior management employees primarily includes the following components:
• | base salary; |
• | cash in lieu of perquisites for U.S. executives; |
• | short-term incentives; and |
• | long-term incentives. |
Target total compensation is supplemented by retirement benefits, which consist mainly of the qualified plans and U.S. nonqualified deferred compensation arrangements described below, and other benefits, such as health and welfare benefits. In addition, from time to time, the Compensation Committee may award discretionary cash and equity bonuses to employees, including the Named Executive Officers.
Base Salary. The Compensation Committee fixes an annual base salary intended to be competitive in the marketplace to recruit and retain talented senior management employees. Base salary is intended to provide employees with a set amount of money during the year with the expectation that they will perform their responsibilities to the best of their ability and in our best interests.
Each year, the Compensation Committee determines the base salary for each senior management employee, including the Named Executive Officers, by taking into account the employee's individual performance for the prior year and the relationship of the employee's prior year's base salary to the new salary midpoint for the employee's Hay point level. The Committee also takes into account any other relevant information, including:
• | general inflation, salary trends and economic forecasts provided by the Hay Group; |
• | general budget considerations and business forecasts provided by management; and |
• | any extraordinary personal or corporate events that occurred during the prior year. |
The potential for larger salary increases exists for individuals with lower base salaries relative to their salary midpoint and/or superior performance. The potential for smaller increases or even no increase exists for those individuals with higher base salaries relative to their salary midpoint and/or who have performed poorly during the performance period.
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The following table sets forth the salary midpoint, salary range and base salary determined for each Named Executive Officer for 2012, as well as the percentage of increase from the 2011 base salary:
Named Executive Officer | Salary Midpoint Determined by the Hay Group ($) | Salary Range (Compared to Salary Midpoint) Determined by the Compensation Committee (%) | Base Salary For 2012 and as a Percentage of Salary Midpoint ($)(%) | Change Compared to 2011 Base Salary (%) | |||||
Alfred M. Rankin, Jr. (1) | $1,001,400 | 80% - 130% | $1,202,010 | 120% | 3.0% | ||||
Kenneth C. Schilling (2) | $349,400 | 80% - 120% | $298,687 | 85% | 7.8% | ||||
Michael P. Brogan | $665,100 | 80% - 120% | $566,590 | 85% | 6.0% | ||||
Colin Wilson | $501,100 | 80% - 120% | $469,063 | 94% | 5.0% | ||||
Ralf A. Mock | $404,820 | 80% - 120% | $400,258 | 99% | 4.5% | ||||
(1) | NMHG paid Mr. Rankin's entire base salary through the spin-off date ($901,508). The unpaid portion of his salary as of the spin-off date ($300,502) was allocated 60% to NMHG and 40% to NACCO to reflect the post-spin division of Mr. Rankin's time between the companies. Therefore, NMHG paid $1,081,809 in base salary to Mr. Rankin during 2012, which is the amount shown on the Summary Compensation Table on page 44. |
(2) | Mr. Schilling was promoted to Vice President and Chief Financial Officer of Hyster-Yale as of the spin-off date and received a corresponding Hay point adjustment and salary increase as of such date. The base salary shown above and on the Summary Compensation Table is the blended amount actually received by Mr. Schilling in 2012. |
Cash in Lieu of Perquisites. In addition to providing car allowances to executives in EMEA and other perquisites to a limited number of employees in unique circumstances, U.S. senior management employees are paid a fixed dollar amount of cash in lieu of perquisites. The amount of the perquisite allowance is equal to a flat dollar amount, based on the employee's Hay point level.
The applicable dollar amounts were recommended by the Hay Group based on an analysis of the 2010 data from its proprietary Benefits Report, which contains employee benefits data from a survey conducted by the Hay Group. For the 2010 Benefits Report, the organizations that submitted information included 852 organizations or operating units representing almost all areas of industry, including the light and heavy manufacturing, consumer products and mining segments, as well as other organizations from the health care, service and financial sectors. Consistent with the use of the All Industrials survey, the Compensation Committee determined that the Benefits Report was an appropriate benchmark because using a broad-based survey reduces volatility and lessens the impact of cyclical upswings or downturns in any industry that could otherwise affect the survey results in a particular year.
For this study, the Compensation Committee did not seek identical comparisons. Rather, it merely requested an indication of the cost of perquisites that would represent a reasonable competitive level of perquisites for our various executive positions, which are reflected in the Hay points assigned to each position.
The table below sets forth the 2012 perquisite allowances approved by the Compensation Committee for each of the Named Executive Officers. These amounts were paid in cash ratably throughout the year. This approach satisfied our objective of providing competitive total compensation to its Named Executive Officers while recognizing that many perquisites are largely just another form of compensation.
Named Executive Officer | 2012 Perquisites Allowance ($) | |
Alfred M. Rankin, Jr. (1) | $50,000 | |
Kenneth C. Schilling | $20,000 | |
Michael P. Brogan | $40,000 | |
Colin Wilson | $32,000 | |
Ralf A. Mock (2) | N/A | |
(1) | NMHG paid $37,500 of Mr. Rankin's perquisite allowance through the spin-off date. The unpaid portion of his perquisite allowance as of the spin-off date ($12,500) was allocated 60% to NMHG and 40% to NACCO. The $45,000 perquisite allowance included in the Summary Compensation Table on page 44 for Mr. Rankin is the sum of his pre-spin allowance plus 60% of his post-spin allowance. |
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(2) | Mr. Mock received a car allowance of $21,114 in 2012. |
Incentive Compensation of Named Executive Officers
Applicable Incentive Compensation Plans. As described in more detail under the heading “- Compensation Policies and Objectives - Total Target Compensation,” one of the principles of our compensation program is that senior management employees, including Named Executive Officers, are compensated based on the performance of the business unit for which they are responsible. As a result, for 2012:
• | the incentive compensation of Messrs. Rankin and Schilling was based on the performance of (A) NMHG, NA Coal, HBB and KC for pre-spin services and (B) NMHG for post spin services; |
• | the incentive compensation of Messrs. Brogan and Wilson was based on the performance of NMHG as a whole; and |
• | the incentive compensation of Mr. Mock was based on the performance of NMHG with an emphasis on the performance of the EMEA region. |
The table below identifies the incentive compensation plans in which the Named Executive Officers participated during 2012.
Name | Incentive Compensation Plans | |
Alfred M. Rankin, Jr. | NMHG Short-Term Plan NACCO Long-Term Plan (pre-spin) Hyster-Yale Equity Plan (post-spin) | |
Kenneth C. Schilling | NMHG Short-Term Plan Hyster-Yale Equity Plan | |
Michael P. Brogan | NMHG Short-Term Plan NMHG Long-Term Plan | |
Colin Wilson | NMHG Short-Term Plan NMHG Long-Term Plan | |
Ralf A. Mock | NMHG Short-Term Plan NMHG Long-Term Plan | |
Overview. A significant portion of the compensation of each Named Executive Officer is linked directly to the attainment of specific corporate financial and operating targets. The Compensation Committee believes that the Named Executive Officers should have a material percentage of their compensation contingent upon the performance of the Company and/or the business unit for which they are responsible.
The performance criteria and target performance levels for the incentive plans are established within the Compensation Committee's discretion, and are generally based upon management's recommendations as to our performance objectives for the year. Two types of performance targets are used in the incentive compensation plans:
• | Targets Based on Annual Operating Plan. Certain performance targets are based on forecasts contained in the 2012 annual operating plan. With respect to these targets, there is an expectation that these performance targets will be met during the year. If they are not, the participants will not receive all or a portion of the award that is based on these performance criteria. |
• | Targets Based on Long-Term Goals. Other performance targets are not based on the 2012 annual operating plan. Rather, they are based on long-term goals established by the Compensation Committee. Because these targets are not based on the annual operating plan, it is possible in any given year that the level of expected performance may be above or below the specified performance target for that year. Return on total capital employed, which we refer to as ROTCE, is an example of a target that is based on long-term goals (see below). |
Each Named Executive Officer is eligible to receive a short-term incentive award and a long-term incentive award based on a target incentive amount that is expressed as a percentage of salary midpoint. However, the final payout may be higher or lower than the targeted amount, as explained in further detail below.
Design of Incentive Program: Use of ROTCE and Underlying Performance Metrics. Code Section 162(m) provides that we may not deduct compensation of more than $1 million that is paid to the Named Executive Officers (other than Mr. Schilling) unless that compensation consists of “qualified performance-based compensation.” Subject to certain transitional
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rules, the performance-based exception to Code Section 162(m) requires that deductible compensation be paid under a plan that has been approved by NACCO's or our stockholders. In order to comply with Code Section 162(m) during 2012, stockholder approval was previously obtained for the following incentive compensation plans which provide benefits to the Named Executive Officers, which we collectively refer to as the 162(m) Plans:
• | The NACCO Long-Term Plan; |
• | The NMHG Short-Term Plan; and |
• | The NMHG Long-Term Plan. |
The Code Section 162(m) transitional rules allow the Hyster-Yale Equity Plan to also qualify for the qualified performance based exception for 2012. See “- Tax and Accounting Implications - Deductibility of Executive Compensation” on page 41 for additional information about our philosophy on structuring our incentive compensation plans for tax purposes.
In order for all or a portion of the incentive compensation payments to the Named Executive Officers to be deductible under Code Section 162(m), the Compensation Committee adopted performance targets under the 162(m) Plans that were designed to meet the requirements for qualified performance-based compensation under Code Section 162(m). For 2012, the Compensation Committee adopted minimum and maximum ROTCE performance targets under each of the 162(m) Plans. In each case, ROTCE is calculated as described below or in the same manner as described below under “- Incentive Compensation of Named Executive Officers - ROTCE Methodology and Explanation,” including the adjustments for non-recurring and special items.
For each 162(m) Plan, we establish a payment pool based on actual results against the ROTCE performance targets. The minimum ROTCE target must be met in order for any payment to be permitted, and any payment pool to be created, under a particular 162(m) Plan. The maximum ROTCE target is used to establish a maximum limit, and a maximum payment pool, for awards that can be paid to each covered employee under Code Section 162(m) under a particular 162(m) Plan for the 2012 performance period. For 2012, ROTCE results were at or above the applicable maximum ROTCE target and resulted in a maximum payment pool of 150% of target under all 162(m) Plans other than the NACCO Long-Term Plan and the Hyster-Yale Equity Plan which had maximum payment pools of 200% for the Named Executive Officers. The ROTCE target used under the NACCO Long-Term Plan for 2012 was also used under the NMHG Short-Term Plan for 2012. Different ROTCE targets were adopted under the NMHG Long-Term Plan and the Hyster-Yale Equity Plan.
The Compensation Committee then considered actual results against underlying financial and operating performance measures and exercised “negative discretion,” as permitted under Code Section 162(m), to determine the final, actual incentive compensation payment for each participant. These underlying financial and operating performance measures reflect the achievement of specified business goals for 2012 (for those targets that are based on the annual operating plan) or for future years (for those targets that are based on long-term goals), as further described below.
ROTCE Methodology and Explanation. For 2012, a substantial portion of the short-term incentive compensation and long-term incentive compensation for our employees depended on the extent to which the applicable ROTCE performance met long-term financial objectives. The Compensation Committee views the ROTCE performance targets as stockholder protection rates of return. They reflect the Compensation Committee's belief that our stockholders are entitled to at least a certain rate of ROTCE for the Company. Accordingly, as a measure of protection for our stockholders, performance against the ROTCE rates of return, rather than based on cyclical movements in our stock price, should determine the payouts for a portion of our incentive compensation plans.
The ROTCE targets used for incentive compensation purposes reflect long-term corporate objectives. They are not based on ROTCE operating targets established by management and contained in our or, as applicable, NACCO's, five-year long-range business plan or long-term financial objectives (although there is a connection between them). The ROTCE performance targets that were established to determine the final payments under the 2012 incentive compensation plans represent the financial performance that the applicable compensation committee believes should be delivered over the long-term, not the performance expected in the current year or the near-term.
The compensation committees consider the following factors together with their general knowledge of our industry and business, including the historical results of operations and financial positions, to determine the ROTCE performance targets:
• | forecasts of future operating results and the business models for the next several years (including the annual operating plan for the current fiscal year and five-year long-range business plans); |
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• | anticipated changes in our industry and business that affect ROTCE (e.g., the amount of capital required to generate a projected level of sales); and |
• | the potential impact a change in the ROTCE performance target would have on the ability to incentivize employees. |
The compensation committees review these factors annually and, unless they conclude that changes in these factors warrant an increase or decrease in the ROTCE performance targets, the ROTCE performance targets generally remain the same from year to year. The ROTCE performance targets have been adjusted in the past from time to time. When made, these periodic adjustments generally have reflected:
• | management's expected ability to take advantage of anticipated changes in industry dynamics over the longer term; |
• | the anticipated impact of programs (such as layoffs and restructurings) on future profitability; |
• | the anticipated impact of economic conditions on our business; |
• | major accounting changes; and |
• | the anticipated impact over time of changes in our business model on our business. |
The ROTCE targets that were used in the 162(m) Plans to establish the minimum and maximum incentive payment pools for purposes of Code Section 162(m), as well as the underlying negative discretion ROTCE targets used to determine final payouts for participants under the 162(m) Plans, remained essentially unchanged from the targets that were used by NACCO in 2011, except that:
• | with respect to Messrs. Rankin and Schilling for pre-spin incentive compensation, the HBB ROTCE targets were reduced to reflect the economic climate and better incentivize employees; |
• | a new post-spin Hyster-Yale ROTCE target was adopted for the new Hyster-Yale Equity Plan; and |
• | the NMHG Short-Term Plan used an overall NACCO ROTCE target rather than a NMHG ROTCE target. |
After year-end financial results are finalized, actual ROTCE performances are compared against the ROTCE performance targets and, using the pre-established formulas, used to determine both (i) the maximum payment pool under the 162(m) Plans and the Hyster-Yale Equity Plan for the year and (ii) the final incentive compensation payouts under the incentive plans for the year. As a result, ROTCE serves as both a metric for tax deductibility to establish maximum potential incentive amounts and as a metric for underlying performance to determine final incentive compensation payout amounts.
ROTCE is calculated for both of these purposes as follows:
Earnings Before Interest After-Tax after adjustments
divided by
Total Capital Employed after adjustments
Earnings Before Interest After-Tax is equal to the sum of interest expense, net of interest income, less 38% for taxes, plus net income from continuing operations attributable to stockholders, which we refer to as net income. Total Capital Employed is equal to (i) the sum of the average debt and average stockholders' equity less (ii) average consolidated cash. For purposes of the NACCO Long-Term Plan, the NMHG Long-Term Plan and NMHG Short-Term Plan, average debt, stockholders' equity and consolidated cash are calculated by taking the sum of the balance at the beginning of the year and the balance at the end of each of the next twelve months divided by thirteen.
The consolidated ROTCE of NMHG and the consolidated ROTCE of NACCO, as applicable, is calculated from the financial statements using average debt, average stockholders' equity and average cash based on the sum of the balance at the beginning of the year and the balance at the end of each quarter divided by five, which is then adjusted for any non-recurring or special items.
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Following is the calculation of NACCO's consolidated ROTCE for purposes of determining the minimum and maximum incentive payment pools under the NMHG Short-Term Plan and NACCO Long-Term Plan for 2012:
2012 NACCO income from continuing operations | $ | 42.2 | |
Plus: 2012 Interest expense, net | 5.9 | ||
Less: Income taxes on 2012 interest expense, net at 38% | (2.2 | ) | |
Earnings Before Interest After-Tax | $ | 45.9 | |
2012 Average stockholders' equity (12/31/2011 and each of 2012's quarter ends) | $ | 474.9 | |
2012 Average debt (12/31/2011 and each of 2012's quarter ends) | 162.5 | ||
Less: 2012 Average cash (12/31/2011 and each of 2012's quarter ends) | (144.5 | ) | |
Total Capital Employed | $ | 492.9 | |
ROTCE (Before Adjustments) | 9.3 | % | |
Plus: Adjustments to Earnings Before Interest After-Tax | $ | 277.7 | |
Plus: Adjustments to Total Capital Employed | $ | 7.7 | |
NACCO Consolidated ROTCE (After Adjustments) | 64.6 | % | |
Following is the calculation of NMHG's consolidated ROTCE for purposes of determining the minimum and maximum payment pool under the NMHG Long-Term Plan for 2012:
2012 NMHG Net income | $ | 98.0 | |
Plus: 2012 Interest expense, net | 10.9 | ||
Less: Income taxes on 2012 interest expense, net at 38% | (4.1 | ) | |
Earnings Before Interest After-Tax | $ | 104.8 | |
2012 Average stockholders' equity (12/31/2011 and each of 2012's quarter ends) | $ | 333.3 | |
2012 Average debt (12/31/2011 and each of 2012's quarter ends) | 175.9 | ||
Less: 2012 Average cash (12/31/2011 and each of 2012's quarter ends) | (165.2 | ) | |
Total Capital Employed | $ | 344.0 | |
ROTCE (Before Adjustments) | 30.5 | % | |
Plus: Adjustments to Earnings Before Interest After-Tax | $ | 1.1 | |
Plus: Adjustments to Total Capital Employed | $ | 1.7 | |
NMHG Consolidated ROTCE (After Adjustments) | 30.6 | % | |
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Following is the calculation of Hyster-Yale's post-spin consolidated ROTCE for purposes of determining the minimum and maximum payment pool under the Hyster-Yale Equity Plan for 2012:
2012 Hyster-Yale Post-Spin Net income | $ | 32.4 | |
Plus: 2012 Post-Spin Interest expense, net | 2.4 | ||
Less: Income taxes on 2012 Post-Spin interest expense, net at 38% | (0.9 | ) | |
Earnings Before Interest After-Tax | $ | 33.9 | |
2012 Average stockholders' equity (9/30/2012 and 12/31/2012) | $ | 353.1 | |
2012 Average debt (9/30/2012 and 12/31/2012) | 143.5 | ||
Less: 2012 Average cash (9/30/2012 and 12/31/2012) | (148.2 | ) | |
Total Capital Employed | $ | 348.4 | |
ROTCE (Before Adjustments) | 9.7 | % | |
Plus: Adjustments to Earnings Before Interest After-Tax | $ | 0.7 | |
Less: Adjustments to Total Capital Employed | $ | (0.6 | ) |
Hyster-Yale Post-Spin Consolidated ROTCE (After Adjustments) | 9.9 | % | |
Adjustments to the ROTCE calculation under our incentive plans are non-recurring or special items that are generally established by the compensation committees at the time the ROTCE targets are set. For 2012, the ROTCE adjustments related to (i) the effect of the Hyster-Yale spin-off; (ii) the after-tax impact of subsidiary acquisition, disposition or related costs and expenses and (iii) the following costs or expenses only if they were in excess of the amounts included in the 2012 annual operating plans:
• | the after-tax cost of any tangible or intangible asset impairment; |
• | the after-tax impact of subsidiary restructuring costs including reduction in force charges; |
• | the after-tax impact of environmental expenses or early lease termination expenses; and |
• | the after-tax impact of refinancing costs. |
The Compensation Committee determined that these non-recurring or special items would be incurred in connection with improving our operations and, as a result, these items should not adversely affect incentive compensation payments, as the actions or events were beneficial to us or were generally not within the employees' control.
We do not disclose the ROTCE performance targets that were established for purposes of the 2012 incentive compensation plans because they would reveal competitively sensitive long-term financial information, as well as long-range business plans, to both competitors and customers. The compensation committees expected that all ROTCE targets (other than the KC ROTCE targets and the NA Coal consolidated operations ROTCE target) would be met in 2012, but such targets were not so low that the result was guaranteed.
Short-Term Incentive Compensation
In General. Awards under the NMHG Short-Term Plan are determined as follows:
• | target awards for each executive are equal to a specified percentage of the executive's 2012 salary midpoint, based on the number of Hay points assigned to the position and the Hay Group's recommendations regarding an appropriate level of short-term incentive compensation at that level; |
• | the plan has a one-year performance period; |
• | generally, payments under the plan may not exceed 150% of the target award levels; |
• | payouts are determined after year-end by comparing actual performance to the pre-established performance targets that were set by the Compensation Committee; |
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• | the Compensation Committee, in its discretion, may decrease awards; |
• | for participants other than the Named Executive Officers, the Compensation Committee, in its discretion, may also increase awards and may approve the payment of awards where performance would otherwise not meet the minimum criteria set for payment of awards, although it rarely does so; and |
• | awards are paid annually in cash and are immediately vested when paid. |
For 2012, the NMHG Short-Term Plan was designed to provide target short-term incentive compensation to the Named Executive Officers of between 45% and 100% of salary midpoint, depending on the Named Executive Officer's position.
The table below shows the short-term target awards and payouts approved by the Compensation Committee under the NMHG Short-Term Plan for each Named Executive Officer for 2012:
Named Executive Officer | (A) 2012 Salary Midpoint | (B) Short-Term Plan Target as a % of Salary Midpoint (%) | (C) = (A) x (B) Short-Term Plan Target ($) | Short-Term Plan Payout as a % of Salary Midpoint (%) | Short-Term Plan Payout ($) | |||||
Alfred M. Rankin, Jr. (1)(2) | $1,001,400 | 100% | $1,001,400 | 86.6% | $866,862 | |||||
Kenneth C. Schilling (2)(3) | $349,400 | 45% | $157,230 | 37.0% | $129,119 | |||||
Michael P. Brogan | $665,100 | 70% | $465,570 | 67.3% | $447,413 | |||||
Colin Wilson | $501,100 | 55% | $275,605 | 52.9% | $264,856 | |||||
Ralf A. Mock | $404,820 | 45% | $182,169 | 40.8% | $165,227 | |||||
(1) | Mr. Rankin's target award under the NMHG Short-Term Plan was established at the beginning of 2012 before the Hyster-Yale spin-off. His final payout was reduced to reflect the post-spin division of his duties between Hyster-Yale and NACCO. See "-NMHG Short-Term Incentive Compensation for Mr. Rankin" on page 28. |
(2) | 75% of the awards for Messrs. Rankin and Schilling was based on pre-spin service from January through September of 2012 while NMHG was a subsidiary of NACCO and was calculated based on the performance of all NACCO subsidiaries. The pre-spin portion of their awards is also disclosed in NACCO's 2013 proxy statement. The remaining 25% of the awards was based solely on post-spin performance of NMHG. |
(3) | Mr. Schilling was promoted to Vice President and Chief Financial Officer of Hyster-Yale as of the spin-off date and received a corresponding Hay point adjustment and short-term target increase as of such date. The target shown above is the annualized post-spin target amount. His 2012 final short-term payout was pro-rated based on his initial salary midpoint and short-term target for the portion of 2012 before the spin-off and the increased salary midpoint and target for the portion of 2012 after the spin-off. |
As described in more detail below, the Compensation Committee considered the factors described under “- Overview of Executive Compensation Methodology” above and adopted performance criteria and target performance levels upon which the short-term plan awards were based.
Refer to “- Employment and Severance Agreements and Change in Control Payments” below for a description of the impact of a change in control on short-term plan awards.
The following tables show the performance criteria established by the Compensation Committee for 2012 under the NMHG Short-Term Plan to determine final incentive compensation payments for the Named Executive Officers. The performance objectives and payout percentages are different for different groups of employees, depending on their category of participation. When reviewing the tables, note the following:
(1) | Achievement Percentages. The achievement percentages are based on the formulas contained in underlying performance guidelines adopted by the compensation committees. The formulas do not provide for straight-line interpolation from the performance target to the maximum payment target. The minimum achievement percentage is 0% and the maximum achievement percentage is 150%. |
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(2) | ROTCE Performance Factors: ROTCE is calculated as shown above under “- Incentive Compensation of Named Executive Officers - ROTCE Methodology and Explanation” (including the adjustments for the non-recurring or special items). ROTCE targets and results are not disclosed for the reasons stated in that section. |
(3) | NMHG Performance Factors. These tables do not disclose the NMHG operating profit percentage or market share targets or results due to the competitively sensitive nature of that information. The operating profit target used for incentive compensation purposes reflects long-term corporate objectives and is not based on the target established by management and contained in our five-year long-range business plan or our long-term financial objectives (although there is a connection between them). The 2012 operating profit percent target was the same as the 2011 target. For 2012, the Compensation Committee did not expect us to meet the operating profit percentage target or the Brazil and EMEA market share targets. |
(4) | NA Coal Performance Factors: The NA Coal ROTCE performance factor is based on 2012 ROTCE performance of the Mississippi Lignite Mining Company, the Florida Dragline Operations and NA Coal Royalty Company, each of which require capital investment by NA Coal and which we refer to collectively as the Consolidated Operations. The ROTCE performance target for 2012 was the same as that in effect for 2011. For 2012, the compensation committee did not expect the Consolidated Operations ROTCE performance to exceed the target. The tables do not disclose the NA Coal New Project Development goals or targets due to their competitively sensitive nature. The new project development goals are highly specific, task-oriented goals. They identify specific future projects, customers and contracts. |
(5) | HBB Performance Factors. The 2012 HBB ROTCE target was reduced from the 2011 ROTCE target to reflect the economic climate and better incentivize employees. For 2012, the compensation committee expected the HBB ROTCE performance to exceed the target. The tables do not disclose the HBB operating profit percent target or result due to the competitively sensitive nature of that information. The operating profit target used for incentive compensation purposes reflects long-term corporate objectives and is not based on the target established by management and contained in HBB's five-year long-range business plan or the long-term HBB financial objectives (although there is a connection between them). For 2012, the compensation committee did not expect HBB to meet the operating profit percent target. |
(6) | KC Performance Factors: The 2012 KC ROTCE target was the same as the 2011 ROTCE target. For 2012, the compensation committee did not expect KC ROTCE performance to exceed the target. The tables do not disclose the KC operating profit percent target or results due to the competitively sensitive nature of that information. The operating profit target used for incentive compensation purposes reflects long-term corporate objectives and is not based on the target established by management and contained in KC's five-year long-range business plan or the long-term KC financial objectives (although there is a connection between them). The 2012 KC operating profit percent target was the same as the 2011 target. For 2012, the compensation committee did not expect KC to meet the operating profit percent target. Due to the extraordinary effort of management employees in a difficult retail climate, the compensation committee increased the KC incentive compensation payouts by 10% to better incentivize employees. |
(7) | Maximum Payout Percentage. As required under the 2012 guidelines adopted by the Compensation Committee under the NMHG Short-Term Plan, payments to all participants, including the Named Executive Officers, did not exceed 150% of their target awards. |
NMHG Short-Term Incentive Compensation for Messrs. Brogan and Wilson. The following table summarizes the performance criteria established by the Compensation Committee for 2012 under the NMHG Short-Term Plan to determine
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final, actual incentive compensation payments for corporate executives in the U.S., including Messrs. Brogan and Wilson:
Performance Criteria | (A) Weighting | Performance Target | Performance Result | (B) Achievement Percentage | (B) x (C) Payout Factor | |||||||
NMHG Adjusted Operating Profit Dollars - Global | 30% | $94,579,000 | $115,106,000 | 134.2% | 40.3% | |||||||
NMHG Operating Profit Percentage - Global | 20% | — | — | 78.3% | 15.7% | |||||||
NMHG ROTCE - Global | 20% | — | — | 150.0% | 30.0% | |||||||
Market Share - Americas w/o Brazil | 12% | — | — | 35.3% | 4.2% | |||||||
Market Share - Brazil | 3% | — | — | 13.1% | 0.4% | |||||||
Market Share - EMEA | 9% | — | — | —% | —% | |||||||
Market Share - Asia | 2% | — | — | 100.0% | 2.0% | |||||||
Market Share - Pacific | 3% | — | — | 100.0% | 3.0% | |||||||
Market Share - Japan | 1% | — | — | 50.0% | 0.5% | |||||||
Final Payout Percentage U.S. Corporate | 96.1 | % | (1) | |||||||||
(1) | Mr. Brogan's 2012 award was $447,413 (his 2012 short-term target of $465,570 multiplied by 96.1%) and Mr. Wilson's 2012 award was $264,856 (his 2012 short-term target of $275,605 multiplied by 96.1%). |
NMHG Short-Term Incentive Compensation for Mr. Mock. The following table summarizes the performance criteria established by the Compensation Committee for 2012 under the NMHG Short-Term Plan to determine final, actual incentive compensation payments for corporate executives in the EMEA region, including Mr. Mock:
Performance Criteria | (A) Weighting | Performance Target | Performance Result | (B) Achievement Percentage | (B) x (C) Payout Factor | ||||||||
NMHG Adjusted Operating Profit Euros - EMEA | 30% | €5.411M | €24.836M | 150.0% | 45.0% | ||||||||
NMHG Operating Profit Percentage - Global | 20% | — | — | 78.3% | 15.7% | ||||||||
NMHG ROTCE - Global | 20% | — | — | 150.0% | 30.0% | ||||||||
Market Share - EMEA | 30% | — | — | —% | —% | ||||||||
Final Payout Percentage EMEA | 90.7 | % | (1) | ||||||||||
(1) | Mr. Mock's 2012 award was $165,227 (his 2012 short-term target of $182,169 multiplied by 90.7%). |
NMHG Short-Term Incentive Compensation for Mr. Schilling. The following table summarizes the performance criteria established by the Compensation Committee for 2012 under the NMHG Short-Term Plan to determine final incentive compensation payments for Mr. Schilling. The pre-spin portion of his 2012 short-term award is based on the performance factors shown in the table below which were in effect while NMHG was a subsidiary of NACCO and the remainder of his 2012 short-term award is based solely on the performance factors of NMHG shown on page 26 under "-NMHG Short-Term Incentive
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Compensation for Messrs. Brogan and Wilson":
Pre-Spin Performance Criteria | (A) Initial Weighting at Subsidiary Level | (B) Pre-Spin Weighting for Mr. Schilling | (C)=(A) x (B) Payment Factor | Performance Target | Performance Result | (D) Achievement Percentage | (C) x (D) Payout Factor | |||||||||
NMHG Adjusted Operating Profit Dollars | 30% | 82% | 24.60% | $94,579,000 | $115,106,000 | 134.2% | 33.0% | |||||||||
NMHG Operating Profit Percentage | 20% | 82% | 16.40% | — | — | 78.3% | 12.8% | |||||||||
NMHG ROTCE | 20% | 82% | 16.40% | — | — | 150.0% | 24.6% | |||||||||
NMHG Market Share - Americas w/o Brazil | 12% | 82% | 9.84% | — | — | 35.3% | 3.5% | |||||||||
NMHG Market Share - Brazil | 3% | 82% | 2.46% | — | — | 13.1% | 0.3% | |||||||||
NMHG Market Share - EMEA | 9% | 82% | 7.38% | — | — | —% | —% | |||||||||
NMHG Market Share - Asia | 2% | 82% | 1.64% | — | — | 100.0% | 1.6% | |||||||||
NMHG Market Share - Pacific | 3% | 82% | 2.46% | — | — | 100.0% | 2.5% | |||||||||
NMHG Market Share - Japan | 1% | 82% | 0.82% | — | — | 50.0% | 0.4% | |||||||||
NMHG Total | 78.7% | |||||||||||||||
HBB Adjusted Net Income | 30% | 8% | 2.40% | $21,139,000 | $22,454,165 | 116.4% | 2.8% | |||||||||
HBB ROTCE | 15% | 8% | 1.20% | — | — | 132.0% | 1.6% | |||||||||
HBB Operating Profit Percent | 25% | 8% | 2.00% | — | — | 85.0% | 1.7% | |||||||||
HBB Net Sales | 30% | 8% | 2.40% | $526,476,000 | $521,567,465 | 92.6% | 2.2% | |||||||||
HBB Total | 8.3% | |||||||||||||||
KC Adjusted Net Income | 30% | 2% | 0.60% | $2,820,000 | $(2,842,136) | —% | —% | |||||||||
KC ROTCE | 15% | 2% | 0.30% | — | — | —% | —% | |||||||||
KC Operating Profit Percent | 25% | 2% | 0.50% | — | — | —% | —% | |||||||||
KC Net Sales | 30% | 2% | 0.60% | $236,005,000 | $224,695,287 | 52.1% | 0.3% | |||||||||
KC Positive Discretion | 10.0% | 0.2% | ||||||||||||||
KC Total | 0.5% | |||||||||||||||
NA Coal Adjusted Net Income | 50% | 8% | 4.00% | $34,923,000 | $38,007,984 | 117.7% | 4.7% | |||||||||
NA Coal Consolidated Operations ROTCE | 20% | 8% | 1.60% | — | — | 65.0% | 1.0% | |||||||||
NA Coal New Project Development | 30% | 8% | 2.40% | — | — | 114.0% | 2.7% | |||||||||
NA Coal Total | — | — | 8.4% | |||||||||||||
Final Pre-Spin Payout Percentage | 95.9 | % | (1) | |||||||||||||
(1) | Mr. Schilling's incentive compensation payment under the NMHG Short-Term Plan for 2012 is calculated as follows: |
Calculation for Pre-Spin Services: Multiply Mr. Schilling's pre-spin 2012 salary midpoint by his pre-spin incentive target compensation percentage to determine his target dollar amount: $317,500 multiplied by 40% = $127,000. Allocate the target dollar amount between pre-spin service (75% or $95,250) and post-spin service (25% or $31,750). Multiply the pre-spin target dollar amount by the applicable payment percentage, based on performance criteria and results for NMHG, NA Coal, HBB and KC, which was 95.9% as shown on the table above: $95,250 multiplied by 95.9% = $91,345.
Calculation for Post-Spin Services: Multiply Mr. Schilling's post-spin 2012 salary midpoint by his post-spin incentive target compensation percentage to determine his target dollar amount: $349,400 multiplied by 45% = $157,230. Allocate the target dollar amount between pre-spin service (75% or $117,922) and post-spin service (25% or $39,308). Multiply the post-spin service target dollar amount by the applicable payment percentage, based on performance criteria and results for NMHG, which was 96.1% as shown on the table on page 27: $39,308 multiplied by 96.1% = $37,774.
Calculation of Total 2012 Short-Term Incentive Compensation: Add the pre-spin and post-spin amounts together, resulting in a 2012 award of $129,119 to Mr. Schilling under the NMHG Short-Term Plan.
NMHG Short-Term Incentive Compensation for Mr. Rankin. The following table summarizes the performance criteria established by the Compensation Committee for 2012 under the NMHG Short-Term Plan to determine final incentive compensation payments for Mr. Rankin. 75% of his 2012 short-term award is based on the pre-spin performance factors shown
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in the table below which were in effect while NMHG was a subsidiary of NACCO and 25% of his 2012 short-term award is based solely on the post-spin performance factors of NMHG shown on page 26 under "-NMHG Short-Term Incentive Compensation for Messrs. Brogan and Wilson":
Pre-Spin Performance Criteria | (A) Initial Weighting at Subsidiary Level | (B) Pre-Spin Weighting for Mr. Rankin | (C)=(A) x (B) Payment Factor | Performance Target | Performance Result | (D) Achievement Percentage (1) | (C) x (D) Payout Factor | |||||||||
NMHG Adjusted Operating Profit Dollars - Global | 30% | 55% | 16.50% | $94,579,000 | $115,106,000 | 134.2% | 22.1% | |||||||||
NMHG Operating Profit Percentage-Global | 20% | 55% | 11.00% | — | — | 78.3% | 8.6% | |||||||||
NMHG ROTCE - Global | 20% | 55% | 11.00% | — | — | 150.0% | 16.5% | |||||||||
Market Share - Americas w/o Brazil | 12% | 55% | 6.60% | — | — | 35.3% | 2.3% | |||||||||
Market Share - Brazil | 3% | 55% | 1.65% | — | — | 13.1% | 0.2% | |||||||||
Market Share - EMEA | 9% | 55% | 4.95% | — | — | —% | —% | |||||||||
Market Share - Asia | 2% | 55% | 1.10% | — | — | 100.0% | 1.1% | |||||||||
Market Share - Pacific | 3% | 55% | 1.65% | — | — | 100.0% | 1.7% | |||||||||
Market Share - Japan | 1% | 55% | 0.55% | — | — | 50.0% | 0.3% | |||||||||
NMHG Total | 52.8% | |||||||||||||||
HBB Adjusted Net Income | 30% | 20% | 6.00% | $21,139,000 | $22,454,165 | 116.4% | 7.0% | |||||||||
HBB ROTCE | 15% | 20% | 3.00% | — | — | 132.0% | 4.0% | |||||||||
HBB Operating Profit Percent | 25% | 20% | 5.00% | — | — | 85.0% | 4.3% | |||||||||
HBB Net Sales | 30% | 20% | 6.00% | $526,476,000 | $521,567,465 | 92.6% | 5.6% | |||||||||
HBB Total | 20.9% | |||||||||||||||
KC Adjusted Net Income | 30% | 5% | 1.50% | $2,820,000 | $(2,842,136) | —% | —% | |||||||||
KC ROTCE | 15% | 5% | 0.75% | — | — | —% | —% | |||||||||
KC Operating Profit Percent | 25% | 5% | 1.25% | — | — | —% | —% | |||||||||
KC Net Sales | 30% | 5% | 1.50% | $236,005,000 | $224,695,287 | 52.1% | 0.8% | |||||||||
KC Positive Discretion | 10.0% | 0.5% | ||||||||||||||
KC Total | 1.3% | |||||||||||||||
NA Coal Adjusted Net Income | 50% | 20% | 10.00% | $34,923,000 | $38,007,984 | 117.7% | 11.8% | |||||||||
NA Coal Consolidated Operations ROTCE | 20% | 20% | 4.00% | — | — | 65.0% | 2.6% | |||||||||
NA Coal New Project Development | 30% | 20% | 6.00% | — | — | 114.0% | 6.8% | |||||||||
NA Coal Total | 21.2% | |||||||||||||||
Final Pre-Spin Payout Percentage | 96.2 | % | (1) | |||||||||||||
(1) Mr. Rankin's incentive compensation payment under the NMHG Short-Term Plan for 2012 is calculated as follows:
Calculation for Pre-Spin Services: Multiply Mr. Rankin's 2012 salary midpoint by his incentive target compensation percentage to determine his target dollar amount: $1,001,400 multiplied by 100% = $1,001,400. Allocate the target dollar amount between pre-spin service (75% or $751,050) and post-spin service (25% or $250,350). Multiply the pre-spin service target dollar amount by the applicable payment percentage, based on performance criteria and results for NMHG, NA Coal, HBB and KC which was 96.2% as shown on the above table: $751,050 multiplied by 96.2% = $722,510.
Calculation for Post-Spin Services: Reduce the post-spin target to 60% ($150,210) to reflect the division of Mr. Rankin's time between Hyster-Yale and NACCO following the spin-off. Multiply the adjusted post-spin service target dollar amount by the applicable payment percentage based on performance criteria and results for NMHG, which was 96.1%, as shown on the table on page 27: $150,210 multiplied by 96.1% = $144,352.
Calculation of Total 2012 Short-Term Incentive Compensation: Add the pre-spin and post-spin amounts together, resulting in a 2012 award of $866,862 to Mr. Rankin for 2012 under the NMHG Short-Term Plan.
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Long-Term Incentive Compensation
In General. The purpose of our long-term incentive compensation plans is to enable senior management employees to accumulate capital through future managerial performance, which the Compensation Committee believes contributes to the future success of our business. Our long-term incentive compensation plans generally require long-term commitment on the part of our senior management employees, and cash withdrawals or stock sales are generally not permitted for a number of years. Rather, the awarded amount is effectively invested in the Company for an extended period to strengthen the tie between stockholders' and the Named Executive Officers' long-term interests.
The Compensation Committee believes that awards under our long-term plans promote a long-term focus on our profitability due to the holding periods under the long-term plans. Those individual Named Executive Officers who have a greater impact on our long-term strategy receive a higher percentage of their compensation as long-term compensation. In 2012, only certain executives who performed services at the global headquarters were entitled to receive equity-based compensation from Hyster-Yale and/or NACCO. The Compensation Committee does not consider a Named Executive Officer's long-term incentive awards for prior periods when determining the value of a long-term incentive award for the current period because it considers those prior awards to represent compensation for past services.
Each long-term incentive compensation plan follows the same basic pattern for award determination:
• | Except for Mr. Rankin's 2012 award under the Hyster-Yale Equity Plan, which is based solely on post-spin service, target awards for each executive are equal to a specified percentage of the executive's 2012 salary midpoint, based on the number of Hay points assigned to the position and the Hay Group's recommendations regarding an appropriate level of long-term incentive compensation at that level; |
• | each long-term plan has a one-year performance period; |
• | awards under the long-term plans are determined after year-end by comparing actual performance to the pre-established long-term performance targets; |
• | the Compensation Committee, in its discretion, may decrease awards; and |
• | for participants other than the Named Executive Officers in the 162(m) Plans, the Compensation Committee, in its discretion, may also increase awards and may approve the payment of awards where business unit performance would otherwise not meet the minimum criteria set for payment of awards, although it rarely does so. |
For 2012, the long-term plans were designed to provide target long-term incentive compensation to the Named Executive Officers of between 70% and 316.25% depending on the Named Executive Officer's position.
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The table below shows the long-term target awards and payouts approved by the compensation committees for each Named Executive Officer for 2012:
Named Executive Officer and Long-Term Plan | (A) Salary Midpoint ($) | (B) Long-Term Plan Target as a Percentage of Salary Midpoint ($) | (C)=(A) x (B) Long-Term Plan Target ($) | (D) Cash-Denominated Long-Term Plan Payout(4)(5) | (E)=(D)/(A) Cash-Denominated Long- Term Plan Payout as a Percentage of Salary Midpoint (%) | (F) Fair Market Value of Long-Term Plan Payout (4)(5) | ||||||
Alfred M. Rankin, Jr. (NACCO Long-Term Plan - pre-spin) | $1,001,400 | 316.25% | (1) | $3,166,928 | (2) | $2,695,847 | (6) | 269.21% | $4,726,094 | |||
Alfred M. Rankin, Jr. (Hyster-Yale Equity Plan - post-spin) | $1,001,400 | N/A | (2) | $475,039 | (2) | $370,055 | 36.95% | $588,012 | ||||
Kenneth C. Schilling (Hyster-Yale Equity Plan) | $349,400 | 80.5% | (1) | $281,267 | (3) | $180,745 | (6) | 51.73% | $287,200 | |||
Michael P. Brogan (NMHG Long-Term Plan) | $665,100 | 150% | $997,650 | $777,169 | 116.85% | N/A | ||||||
Colin Wilson (NMHG Long-Term Plan) | $501,100 | 105% | $526,155 | $409,875 | 81.80% | N/A | ||||||
Ralf A. Mock (NMHG Long-Term Plan) | $369,900 | 70% | $258,930 | (7) | $203,519 | 55.02% | N/A | |||||
(1) | The target percentages for participants in the NACCO Long-Term Plan and the Hyster-Yale Equity Plan include a 15% increase from the Hay-recommended long-term plan target awards that the compensation committees apply each year to account for the immediately taxable nature of the equity awards. See “Long-Term Incentive Compensation - Equity-Based Long-Term Incentive Compensation for Messrs. Rankin and Schilling" beginning on page 34. |
(2) | Mr. Rankin's target award under the NACCO Long-Term Plan was established at the beginning of 2012 before the Hyster-Yale spin-off. 75% of the target amount ($2,375,196) is attributable to pre-spin service while NMHG was a subsidiary of NACCO. The compensation committees used negative discretion to allocate the remaining $791,732 for post-spin service 40% to NACCO ($316,693) and 60% to Hyster-Yale ($475,039) to reflect Mr. Rankin's division of duties following the spin-off. |
(3) | Mr. Schilling received his entire 2012 long-term award under the Hyster-Yale Equity Plan. He was promoted to Vice President and Chief Financial Officer of Hyster-Yale as of the spin-off date and received a corresponding Hay point adjustment and long-term target increase as of such date. The target shown above is the annualized post-spin target amount. His 2012 long-term payout was pro-rated based on his initial salary midpoint and long-term target for the portion of 2012 before the spin-off and the increased salary midpoint and target for the portion of 2012 after the spin-off. |
(4) | Awards under the NMHG Long-Term Plan are calculated and paid in dollars. There is no difference between the amount of the cash-denominated awards and the fair market value of the awards under that plan. |
(5) | Awards under the NACCO Long-Term Plan and the Hyster-Yale Equity Plan are initially denominated in dollars. The amounts shown in columns (D) and (E) reflect (i) the dollar-denominated awards that were earned under the Hyster-Yale Equity Plan by Messrs. Rankin and Schilling for services performed in 2012 and (ii) the dollar-denominated award that was earned by Mr. Rankin under the NACCO Long-Term Plan for pre-spin services while NMHG was a subsidiary of NACCO. This is the amount that is used by the Compensation Committee when analyzing the total compensation of the Named Executive Officers who receive equity compensation. As described in “- Long-Term Incentive Compensation - Equity Based Long-Term Incentive Compensation for Messrs. Rankin and Schilling” beginning on page 34, the dollar-denominated awards are then paid to the participants in a combination of restricted stock and cash. For Messrs. Rankin and Schilling, 35% of the 2012 award was distributed in cash, to approximate their income tax withholding obligations for the shares, and the remaining 65% was distributed in whole shares of restricted stock. The actual number of shares of stock issued would normally be determined by taking the dollar value of the stock component of the award and dividing it by the lower of the average share price during the 2012 performance period or the preceding calendar year. For 2012, however, due to the impact of the Hyster-Yale spin-off on the price of NACCO stock and Hyster-Yale Class A Common, the Compensation Committee defined the "average share price" for this purpose as the lower of (i) the average NACCO class A common share price for 2011, which was $91.54 or (ii) $115.37 which is the sum of (A) the average NACCO class A common share price for the period from January 1, 2012 through September 28, 2012 plus (B) the average share price of a hypothetical "Hyster-Yale/NACCO composite share" for the last three months of 2012, which was calculated by adding the weekly closing value of one |
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share of NACCO class A common plus the weekly closing value of two shares of Hyster-Yale Class A Common stock for such time period. The number of shares of Hyster-Yale Class A Common and NACCO stock actually distributed under the long-term equity plans was also adjusted using similar methodology and to reflect the extraordinary dividends paid by NACCO and Hyster-Yale in December, 2012. The amounts shown in column (F) reflect the sum of (i) the cash distributed and (ii) the grant date fair value of the stock that was distributed for the 2012 long-term awards. This amount is computed in accordance with FASB ASC Topic 718 and is the same as the amount that is disclosed in the Summary Compensation Table on page 44. The shares were valued using the date on which the long-term plan awards were approved by the applicable compensation committee. The difference in the amounts disclosed in columns (D) and (F) is due to the fact that the number of shares issued was calculated using a price of $91.54 and the grant date fair value was calculated using the average of the high and low share price on the day the shares were granted, as well as the adjustments made by the compensation committees in determining the number of shares to be issued as a result of the Hyster-Yale spin-off and the extraordinary dividends.
(6) | The portion of the awards for Messrs. Rankin and Schilling that is attributable to pre-spin service when NMHG was a subsidiary of NACCO is also disclosed in NACCO's 2013 proxy statement. |
(7) | Target awards under the NMHG Long-Term Plan for non-U.S. employees are based on the Hay-recommended percentage of the U.S. salary midpoint for their salary grades, not on the local midpoint and are denominated in U.S. dollars rather than local currency. Therefore, Mr. Mock's long-term target award is based on 70% of $369,900 (his U.S. salary midpoint) rather than 70% of $404,820 (his EMEA salary midpoint for 2012 converted to U.S. dollars). |
Due to the nature of the NMHG Long-Term Plan, the awards and payments under the plan are described in both the Grants of Plan-Based Awards Table on page 47 and the Nonqualified Deferred Compensation Table on page 51. Also refer to “- Employment and Severance Agreements and Change in Control Payments” below for a description of the impact of a change in control on long-term plan awards.
The following tables show the performance criteria established by the compensation committees for 2012 under the long-term plans to determine final, actual incentive compensation payments for the Named Executive Officers. The applicable plan, performance objectives and payout percentages are different for different groups of employees, depending on their category of participation. When reviewing the tables, please note the following:
(1)Achievement Percentages. The achievement percentages are based on the formulas contained in underlying performance guidelines adopted by the Compensation Committee. The formulas do not provide for straight-line interpolation from the performance target to the maximum payment target. The minimum achievement percentage is 0% and the maximum achievement percentage is 150%.
(2)ROTCE Performance Factors: ROTCE is calculated as shown above under “- Incentive Compensation of Named Executive Officers - ROTCE Methodology and Explanation” (including the adjustments for the non-recurring or special items). ROTCE targets and results are not disclosed for the reasons stated in that section.
(3)NMHG, HBB and KC Performance Factors. These tables do not disclose the HBB adjusted standard margin target or result due to the competitively sensitive nature of that information. The target for 2012 was higher than the target for 2011. The compensation committee expected that HBB would meet its adjusted standard margin target in 2012. Also see page 26 for an explanation of the reasons for non-disclosure of other performance targets and results due to the competitively sensitive nature of that information.
(4)NA Coal Performance Factors: The NA Coal long-term performance factors are based on the economic value of income of current and new projects because the compensation committee believes it is a more accurate reflection of the rate of return in NA Coal's business, where a substantial portion of revenue is based on long-term contracts and projects. The tables do not include the NA Coal performance targets or results due to the competitively sensitive nature of that information. The compensation committee did not expect that any of the NA Coal performance targets would be met in 2012. NA Coal performance is measured on three component targets: new project factor (40%); annual factor (30%); and cumulative factor (30%). Each of these components is described in detail below.
• | New Project Factor. When the NA Coal long-term plan was established in 2006, the NA Coal compensation committee set a target dollar level of the “present value appreciation” that was to be earned by new projects obtained during the entire ten-year plan term. Value appreciation for a new project is determined based on the economics of the project. For example, the present value appreciation will be determined based on the forecasted net income and cost of capital over the life of the contract (which could be 40 years) based on the contract terms, including a present value calculation over the life of the contract. During the year the new project comes into existence, the value appreciation of that project for the ten-year term (or the remainder thereof) is taken into |
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account under the NA Coal new project factor and compared to the target that was initially set by the committee in 2006.
• | Annual Factor. When the NA Coal long-term plan was established, the NA Coal compensation committee listed each NA Coal project that was in effect at that time. Using the existing contractual terms for each project, as shown in NA Coal's five-year business plan that was in effect in 2006 and forecasting the results out for another five years, the NA Coal compensation committee established annual net income targets and forecasted capital expenditure targets for each project for each year from 2006 through 2015. Each year, the committee compares the actual net income and actual capital charges for each project against these previously established targets to determine whether the pre-established targets have been satisfied. |
• | Cumulative Factor. When the NA Coal long-term plan was established, the NA Coal compensation committee used the same five-year business plan and forecasting for the same projects to establish cumulative net income targets and cumulative forecasted capital expenditure targets for the same projects for each and every year during the ten-year term of the plan. Each year, the committee compares the actual cumulative net income and actual capital charges for each project against these previously established targets to determine whether the pre-established targets have been satisfied. |
(5)Maximum Payout Percentage. As required under the 2012 guidelines adopted by the compensation committees for the long-term plans, (i) payments to Messrs. Brogan, Wilson and Mock under the NMHG Long-Term Plan did not exceed 150% of their target awards and (ii) the cash-denominated payments to Messrs. Rankin and Schilling under the NACCO Long-Term Plan and/or the Hyster-Yale Equity Plan did not exceed 200% of their target awards.
NMHG Long-Term Incentive Compensation for Messrs. Brogan and Wilson. The following table summarizes the performance criteria established by the Compensation Committee for 2012 under the NMHG Long-Term Plan to determine final incentive compensation payments for corporate executives in the U.S., including Messrs. Brogan and Wilson:
Performance Criteria | (A) Weighting | Performance Target | Performance Result | (B) Achievement Percentage | (A) x (B) Payout Factor | ||||||||
NMHG Operating Profit Percent- Global | 40% | — | — | 76.4% | 30.6% | ||||||||
NMHG ROTCE -Global | 30% | — | — | 150% | 45.0% | ||||||||
Americas Market Share w/o Brazil | 12% | — | — | —% | —% | ||||||||
Brazil Market Share | 3% | — | — | —% | —% | ||||||||
EMEA Market Share | 9% | — | — | 10.0% | 0.9% | ||||||||
Asia Market Share | 2% | — | — | 25.0% | 0.5% | ||||||||
Pacific Market Share | 3% | — | — | 25.0% | 0.8% | ||||||||
Japan Market Share | 1% | — | — | 12.5% | 0.1% | ||||||||
Final Payout Percentage - U.S. Corporate | 77.9 | % | (1) | ||||||||||
(1) Mr. Brogan's 2012 award was $777,169 (his 2012 long-term target of $997,650 multiplied by 77.9%) and Mr. Wilson's 2012 award was $409,875 (his 2012 long-term target of $526,155 multiplied by 77.9%).
NMHG Long-Term Incentive Compensation for Mr. Mock. The following table summarizes the performance criteria established by the Compensation Committee for 2012 under the NMHG Long-Term Plan to determine final incentive compensation payments for corporate executives in the EMEA region, including Mr. Mock:
Performance Criteria | (A) Weighting | Performance Target | Performance Result | (B) Achievement Percentage | (A) x (B) Payout Factor | ||||||||
NMHG Operating Profit Percent- Global | 40% | — | — | 4.7% | 30.6% | ||||||||
NMHG ROTCE -Global | 30% | — | — | 30.0% | 45.0% | ||||||||
EMEA Market Share | 30% | — | — | 6.3% | 3.0% | ||||||||
Final Payout Percentage - EMEA | 78.6 | % | (1) | ||||||||||
(1) Mr. Mock's 2012 award was $203,519 (his 2012 long-term target of $258,930 multiplied by 78.6%).
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Equity-Based Long-Term Incentive Compensation for Messrs. Rankin and Schilling. NACCO and Hyster-Yale maintain two types of equity-based long-term incentive compensation plans:
• | Standard Long-Term Equity Plans: |
◦ | Hyster-Yale. For 2012, the Hyster-Yale Equity Plan used Hyster-Yale's post-spin consolidated ROTCE to determine the minimum and maximum payment pools, which reflects the Compensation Committee's belief that the Company and its stockholders are entitled to at least a certain rate of ROTCE for the Company overall and that our performance against that rate of return should determine the long-term incentive compensation payouts under the Hyster-Yale Equity Plan. Although the Compensation Committee expected that the ROTCE target would be met in 2012, the target was not set so low that the result was guaranteed. For 2012, ROTCE results at or above the maximum consolidated ROTCE performance target resulted in a maximum payment pool of 200% of target for all participants, including Messrs. Rankin and Schilling. The Compensation Committee then used negative discretion using our financial and operating measures to determine the final payouts under the Hyster-Yale Equity Plan as shown on the tables below. Mr. Schilling received his entire long-term award for 2012 under the Hyster-Yale Equity Plan. Mr. Rankin's 2012 award under the Hyster-Yale Equity Plan was for post-spin service only. |
◦ | NACCO. For 2012, the NACCO Long-Term Plan used NACCO's consolidated ROTCE to determine the minimum and maximum payment pools. Although the NACCO compensation committee expected that the ROTCE target would be met in 2012, the target was not set so low that the result was guaranteed. For 2012, ROTCE results at or above the maximum consolidated ROTCE performance target resulted in a maximum payment pool at a level of 200% for Mr. Rankin. The NACCO compensation committee then used negative discretion comparing the performance of NACCO's subsidiaries to the performance criteria established under the subsidiary long-term plans to determine the final payouts under the NACCO Long-Term Plan, as shown on the tables below. Mr. Rankin received a 2012 award under the NACCO Long-Term Plan, 75% of which took into account pre-spin performance while NMHG was a subsidiary of NACCO. The pre-spin portion of his award under the NACCO Long-Term Plan is required to be disclosed in this Proxy Statement as well as NACCO's 2013 proxy statement. Mr. Schilling did not receive a 2012 award under the NACCO Long-Term Plan. |
• | Supplemental Long-Term Equity Plans. The NACCO supplemental equity plan and the Hyster-Yale Supplemental Equity Plan give the applicable compensation committee the flexibility to provide discretionary additional equity compensation. The compensation committees did not grant any awards under the supplemental equity plans for services performed in 2012. |
Under each of the long-term equity plans, the executive is effectively required to invest the non-cash portion of the payout in NACCO or Hyster-Yale common stock, as applicable, for up to ten years. This is because, as discussed below, the shares awarded generally may not be transferred for ten years following the last day of the award year. During the holding period, the ultimate value of the shares is subject to change based upon the value of the shares of stock. The value of the award is enhanced as the value of the stock increases or is reduced as the value of the stock decreases. Thus, the awards provide the executives with an incentive over the ten-year period to increase the value of the applicable company, which is expected to be reflected in the increased value of the stock awarded. As a result of the annual equity grants under the long-term equity plans and the corresponding transfer restrictions, the number of shares of stock that an executive holds generally increases each year. Consequently, the Hyster-Yale executives will continue to have or accumulate exposure to long-term Company performance notwithstanding any short-term changes in the price of shares of Class A Common. This increased exposure strongly aligns the long-term interests of the Named Executive Officers with those of other stockholders.
Target awards under the long-term equity plans are initially expressed in a dollar amount equal to a percentage of the participant's salary midpoint based on the number of Hay points assigned to the executive's position and the Hay Group's long-term incentive compensation recommendations for that Hay point level. These amounts are then increased by 15% to account for the immediately taxable nature of the long-term equity plan awards. The dollar-denominated payments generally may not exceed 200% of the award target. The compensation committees retain discretionary authority to increase or decrease the amount of any award that would otherwise be payable to a participant or to approve the payment of awards where performance would otherwise not meet the minimum criteria set for payment of awards (except awards for covered employees under Code Section 162(m), which may only be decreased).
Final awards are paid to the participants in a combination of restricted stock and cash, with the cash amount approximating the income tax withholding obligations of the participants for the stock. For 2012, approximately 65% of each
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award was distributed in shares of restricted stock and 35% in cash. The actual number of shares of stock issued to a participant is determined by taking the dollar value of the stock component of the award and dividing it by the average share price. For this purpose, the average share price is generally calculated as the lesser of:
• | the average closing price of stock on the NYSE at the end of each week during the year preceding the start of the performance period (or such other previous calendar year as determined by the compensation committee no later than the 90th day of the performance period); or |
• | the average closing price of stock on the NYSE at the end of each week during the performance period. |
For 2012 awards, however, a modified calculation was required as a result of the impact of the Hyster-Yale spin-off on the price of NACCO and Hyster-Yale stock following the spin-off. See "Long-Term Incentive Compensation" above.
Awards under the long-term equity plans are fully vested when granted and the participants have all of the rights of a stockholder, including the right to vote, upon receipt of the shares. The participants also have the right to receive dividends that are declared and paid after they receive the award shares. The full amount of each final award, including the fair market value of the award shares on the date of grant, is fully taxable to the participant.
The award shares that are issued are subject to transfer restrictions that generally lapse on the earliest to occur of:
• | the date which is ten years after the last day of the performance period; |
• | the date of the participant's death or permanent disability; or |
• | five years (or earlier with the approval of the applicable compensation committee) from the date of retirement. |
The compensation committees have the right to release the restrictions at an earlier date, but rarely do so.
Hyster-Yale Equity Plan. As of the spin-off date, our Compensation Committee took the following actions under the Hyster-Yale Equity Plan:
•set a consolidated post-spin Hyster-Yale ROTCE performance target to determine the minimum and maximum payment pool;
•set a performance period of one year (for Mr. Schilling) and three months (for Mr. Rankin) for the awards under the Hyster-Yale Equity Plan;
•designated the participants for 2012 which included only Messrs. Rankin and Schilling and certain other senior executive employees who were participants in the NACCO Long-Term Plan before the spin-off date;
•set dollar-denominated award targets for all participants other than Mr. Rankin that were equal to a percentage of the participant's 2012 salary midpoint based on the number of Hay points assigned to the executive's position and the Hay Group's long-term incentive compensation recommendations for that Hay point level; and
•set a post-spin dollar denominated award target of $475,039 for Mr. Rankin that was equal to 60% of his post-spin 2012 long-term award target ($3,166,928 multiplied by 25% multiplied by 60%).
Before any post-spin adjustments, long-term plan award targets for Messrs. Rankin and Schilling were designed to provide target long-term incentive compensation of 275% and 70% of their salary midpoints, respectively. These amounts are then increased by 15% to 316.25% and 80.50%, respectively, to account for the immediately taxable nature of the long-term plan awards.
Hyster-Yale Equity Plan Calculation for Mr. Schilling. The following table summarizes the performance criteria established by the Compensation Committee for 2012 under the Hyster-Yale Equity Plan to determine final incentive compensation payments for Mr. Schilling.
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The pre-spin portion of his 2012 long-term award is based on the pre-spin performance factors shown on the table below and the remainder of his 2012 award is based on the performance factors shown on the table on page 33 under "-NMHG Long-Term Incentive Compensation for Messrs. Brogan and Wilson."
Pre-Spin Performance Criteria | (A) Initial Weighting at Subsidiary Level | (B) Pre-Spin Weighting for Mr. Schilling | (C)=(A) x (B) Payment Factor | Performance Target | Performance Result | (D) Achievement Percentage | (C) x (D) Payout Factor | |||||||||
NMHG Operating Profit Percentage | 40% | 82% | 32.80% | — | — | 76.4% | 25.1% | |||||||||
NMHG ROTCE | 30% | 82% | 24.60% | — | — | 150.0% | 36.9% | |||||||||
NMHG Market Share - Americas w/o Brazil | 12% | 82% | 9.84% | — | — | —% | —% | |||||||||
NMHG Market Share - Brazil | 3% | 82% | 2.46% | — | — | —% | —% | |||||||||
NMHG Market Share - EMEA | 9% | 82% | 7.38% | — | — | 10.0% | 0.7% | |||||||||
NMHG Market Share - Asia | 2% | 82% | 1.64% | — | — | 25.0% | 0.4% | |||||||||
NMHG Market Share - Pacific | 3% | 82% | 2.46% | — | — | 25.0% | 0.6% | |||||||||
NMHG Market Share - Japan | 1% | 82% | 0.82% | — | — | 12.5% | 0.1% | |||||||||
NMHG Total | 63.8% | |||||||||||||||
HBB Adjusted Standard Margin | 15% | 8% | 1.20% | — | — | 46.8% | 0.6% | |||||||||
HBB ROTCE | 25% | 8% | 2.00% | — | — | 129.5% | 2.6% | |||||||||
HBB Operating Profit Percent | 45% | 8% | 3.60% | — | — | 64.0% | 2.3% | |||||||||
HBB Net Sales | 15% | 8% | 1.20% | $526,476,000 | $521,567,465 | 85.3% | 1.0% | |||||||||
HBB Total | 6.5% | |||||||||||||||
KC Adjusted Gross Profit | 15% | 2% | 0.30% | $106,145,000 | $95,831,716 | —% | —% | |||||||||
KC ROTCE | 25% | 2% | 0.50% | — | — | —% | —% | |||||||||
KC Operating Profit Percent | 45% | 2% | 0.90% | — | — | —% | —% | |||||||||
KC Net Sales | 15% | 2% | 0.30% | $236,005,000 | $224,695,287 | 52.1% | 0.2% | |||||||||
KC Positive Discretion | 10.0% | 0.2% | ||||||||||||||
KC Total | 0.4% | |||||||||||||||
NA Coal Annual Factor | 30% | 8% | 2.40% | — | — | — | —% | |||||||||
NA Coal Cumulative Factor | 30% | 8% | 2.40% | — | — | — | 0.2% | |||||||||
NA Coal New Project Factor | 40% | 8% | 3.20% | — | — | — | 21.1% | |||||||||
NA Coal Total | 21.3% | |||||||||||||||
Final Pre-Spin Payout Percentage | 92.0 | % | (1) | |||||||||||||
(1) | Mr. Schilling's incentive compensation payment under the Hyster-Yale Equity Plan for 2012 was calculated as follows: |
Calculation for Pre-Spin Services: Multiply his pre-spin off 2012 salary midpoint by his pre-spin-off long-term incentive target compensation percentage to determine his target dollar amount: $317,500 multiplied by 57.5% = $182,563. Allocate the target dollar amount between pre-spin service (75% multiplied by $182,563 = $136,922) and post-spin service. Then multiply the pre-spin amount by the applicable payment percentage, based on performance criteria and results for NMHG, NA Coal, HBB and KC, which was 92.0% as shown on the above table: $136,922 multiplied by 92.0% = $125,968.
Calculation for Post-Spin Services: Multiply his post-spin service target dollar amount ($281,267) by 25% to reflect his post-spin service ($70,317). Multiply the post-spin target of $70,317 by the post-spin payment percentage based on the NMHG performance criteria and results, which was 77.9%, as shown on the table on page 33: $70,317 multiplied by 77.9% = $54,777.
Total 2012 Long-Term Compensation: Add the pre-spin and post-spin amounts together, resulting in a cash denominated award of $180,745 to Mr. Schilling for 2012 under the Hyster-Yale Equity Plan. This amount was then paid partially in cash and partially in restricted shares of Hyster-Yale Class A Common.
Long-Term Incentive Compensation for Mr. Rankin. The 2012 long-term compensation that is reflected in the Summary Compensation Table on page 44 for Mr. Rankin is the sum of (i) his award under the NACCO Long-Term Plan that was earned for pre-spin service while NMHG was a subsidiary of NACCO (which is paid partially in restricted shares of
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NACCO stock) and (ii) his award under the Hyster-Yale Equity Plan for post-spin services (which is paid partially in restricted shares of Hyster-Yale Class A Common), both as described in further detail below.
NACCO Long-Term Plan Award for Mr. Rankin for Pre-Spin Service. Mr. Rankin was a participant in the NACCO Long-Term Plan for 2012. The NACCO Long-Term Plan functions in a manner substantially similar to the Hyster-Yale Equity Plan except that awards are paid out in the form of restricted shares of NACCO class A common stock. 75% of Mr. Rankin's 2012 long-term award under the NACCO Long-Term Plan is based on the pre-spin performance factors shown below that were in effect when NMHG as a subsidiary of NACCO:
Pre-Spin Performance Criteria | (A) Initial Weighting at Subsidiary Level | (B) Pre-Spin Weighting for Mr. Rankin | (C)=(A) x (B) Payment Factor | Performance Target | Performance Result | (D) Achievement Percentage | (C) x (D) Payout Factor | |||||||||
NMHG Operating Profit Percentage | 40% | 55% | 22.00% | __ | __ | 76.4% | 16.8% | |||||||||
NMHG ROTCE | 30% | 55% | 16.50% | __ | __ | 150.0% | 24.8% | |||||||||
NMHG Market Share - Americas w/o Brazil | 12% | 55% | 6.60% | __ | __ | —% | —% | |||||||||
NMHG Market Share - Brazil | 3% | 55% | 1.65% | __ | __ | —% | —% | |||||||||
NMHG Market Share - EMEA | 9% | 55% | 4.95% | __ | __ | 10.0% | 0.5% | |||||||||
NMHG Market Share - Asia | 2% | 55% | 1.10% | __ | __ | 25.0% | 0.3% | |||||||||
NMHG Market Share - Pacific | 3% | 55% | 1.65% | __ | __ | 25.0% | 0.4% | |||||||||
NMHG Market Share - Japan | 1% | 55% | 0.55% | __ | __ | 12.5% | 0.1% | |||||||||
NMHG Total | 42.9% | |||||||||||||||
HBB Adjusted Standard Margin | 15% | 20% | 3.00% | __ | __ | 46.8% | 1.4% | |||||||||
HBB ROTCE | 25% | 20% | 5.00% | __ | __ | 129.5% | 6.5% | |||||||||
HBB Operating Profit Percent | 45% | 20% | 9.00% | __ | __ | 64.0% | 5.8% | |||||||||
HBB Net Sales | 15% | 20% | 3.00% | $526,476,000 | $521,567,465 | 85.3% | 2.6% | |||||||||
HBB Total | 16.3% | |||||||||||||||
KC Adjusted Gross Profit | 15% | 5% | 0.75% | $106,145,000 | $95,831,716 | —% | —% | |||||||||
KC ROTCE | 25% | 5% | 1.25% | __ | __ | —% | —% | |||||||||
KC Operating Profit Percent | 45% | 5% | 2.25% | __ | __ | —% | —% | |||||||||
KC Net Sales | 15% | 5% | 0.75% | $236,005,000 | $224,695,287 | 52.1% | 0.4% | |||||||||
KC Positive Discretion | 10.0% | 0.5% | ||||||||||||||
KC Total | 0.9% | |||||||||||||||
NA Coal Annual Factor | 30% | 20% | 6.00% | __ | __ | __ | —% | |||||||||
NA Coal Cumulative Factor | 30% | 20% | 6.00% | __ | __ | __ | 0.5% | |||||||||
NA Coal New Project Factor | 40% | 20% | 8.00% | __ | __ | __ | 52.9% | |||||||||
NA Coal Total | 53.4% | |||||||||||||||
Final Pre-Spin Payout Percentage | 113.5 | % | (1) | |||||||||||||
(1) | The portion of Mr. Rankin's incentive compensation payment under the NACCO Long-Term Plan for 2012 that is for pre-spin service and is required to be reported in this Proxy Statement as well as NACCO's 2013 proxy statement was calculated as follows: Multiply his 2012 salary midpoint by his incentive target compensation percentage to determine his target dollar amount: $1,001,400 multiplied by 316.25% = $3,166,928. Allocate the target dollar amount between pre-spin service (75% or $2,375,196) and post-spin service (25% or $791,732). Multiply the pre-spin service target dollar amount by the applicable payment percentage, based on performance criteria and results for NMHG, NA Coal, HBB and KC, which was 113.5% as shown on the above table resulting in a cash-denominated amount of $2,695,847 ($2,375,196 multiplied by 113.5%). This amount was then paid partially in cash and partially in restricted shares of NACCO class A common stock. |
Hyster-Yale Equity Plan Award for Mr. Rankin for Post-Spin Services. Mr. Rankin's incentive compensation payment under the Hyster-Yale Equity Plan for 2012 was calculated as follows: Multiply his 2012 salary midpoint by his initial long-term incentive target compensation percentage to determine his target dollar amount: $1,001,400 multiplied by 316.25% = $3,166,928. Allocate the target dollar amount between pre-spin service (75% or $2,375,196) and post-spin service (25% or $791,732) and then multiply the post-spin amount by 60% to reflect the portion of time