SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
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ARMSTRONG WORLD INDUSTRIES, INC.
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(Name of Person(s) Filing Proxy Statement, if other than Registrant)
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ARMSTRONG WORLD INDUSTRIES, INC. 2500 COLUMBIA AVE., LANCASTER, PA 17603 P.O. BOX 3001, LANCASTER, PA 17604
www.armstrongceilings.com
April 30, 2018 |
Thomas M. Armstrong Founder 1860
|
2018 ANNUAL MEETING OF SHAREHOLDERS
ARMSTRONG WORLD INDUSTRIES, INC.
Dear Fellow Shareholders:
We look forward to your attendance virtually via the Internet, in person, or by proxy at the 2018 Armstrong World Industries, Inc. Annual Shareholders Meeting. We will hold the meeting at 8:00 a.m. Eastern Time on Thursday, July 12, 2018.
In fiscal 2017, we continued to execute on our strategy, driving significant consolidated net sales growth and delivering strong adjusted EBITDA performance, in large part driven by our innovative product portfolio, including our Total Acoustics solutions and our new Sustain family of products.
We also addressed key strategic priorities through an agreement to sell our European, Middle East, African, and Pacific Rim businesses to Knauf International GmbH; the closure of our St. Helens plant; and the acceleration of our business development strategies, which resulted in the acquisition of Tectum, Inc. in early 2017.
As we look ahead to our future as an Americas-focused business, we are well-positioned and poised for growth as we focus on serving our customers, now and in the future, in both our Mineral Fiber and Architectural Specialties segments, with an experienced leadership team, industry-leading innovation and a strong financial position.
At this years Annual Shareholders Meeting, I will step down as a director and Chairman of the Board. It has been an honor to serve as Chairman since 2010, following my tenure as independent lead director. I have had the great pleasure to closely observe our Company emerge from bankruptcy, separate the flooring business into an independent publicly traded company and transition into an Americas-focused total ceilings and wall solutions provider.
At this years Annual Shareholders Meeting, we will vote on the election of directors, vote to ratify the selection of KPMG LLP as our independent registered public accounting firm, and vote on a non-binding advisory basis on the compensation of our named executive officers. Please refer to the proxy statement for detailed information on each of the matters to be acted on at the meeting. Your vote is important, and we strongly urge you to cast your vote. For most items, including the election of directors, your shares will not be voted if you do not provide voting instructions via the Internet, by telephone, or by returning a proxy or voting instruction card. We encourage you to vote promptly, even if you plan to attend the meeting.
On behalf of your Board of Directors, thank you for your continued support of Armstrong World Industries and your participation in this years Annual Meeting.
Very truly yours,
James J. OConnor
Chairman of the Board
NOTICE OF 2018 ANNUAL MEETING OF SHAREHOLDERS
Time and Date |
8:00 a.m. Eastern Time on Thursday, July 12, 2018 |
Attendance |
Online at www.virtualshareholdermeeting.com/awi2018, or in person at 2500 Columbia Avenue, Lancaster, Pennsylvania 17603 |
Record Date |
April 20, 2018 |
Agenda | Items of Business |
Board Recommendation | ||
1. Elect as directors the nine (9) nominees named in the attached proxy statement |
FOR EACH DIRECTOR NOMINEE | |||
2. Ratify the selection of KPMG LLP as our independent registered public accounting firm for 2018 |
FOR | |||
3. Approve, on an advisory basis, our executive compensation program |
FOR |
How To Vote |
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Please act as soon as possible to vote your shares, even if you plan to attend the annual meeting via the Internet or in person. |
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Your broker will not be able to vote your shares with respect to the election of directors unless you have given your broker specific instructions to do so. We strongly encourage you to vote. |
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You may vote via the Internet, by telephone, or, if you have received a printed version of these proxy materials, by mail. |
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See ADDITIONAL MEETING INFORMATION on page 57 of this proxy statement for further information. |
Attending the Meeting |
via the Internet: |
Instructions on how to attend and participate via the Internet, including how to demonstrate proof of stock ownership, are posted at www.virtualshareholdermeeting.com/awi2018. |
Shareholders may vote and submit questions while attending the meeting on the Internet. |
in person: |
Proof of Armstrong World Industries, Inc. stock ownership and photo identification will be required to attend the annual meeting. |
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF
PROXY MATERIALS FOR THE ANNUAL MEETING
TO BE HELD ON JULY 12, 2018:
The Notice of Annual Meeting, this Proxy Statement and
the Companys 2017 Annual Report are available at www.proxyvote.com.
TABLE OF CONTENTS
PROXY STATEMENT
This proxy statement was prepared under the direction of our Board of Directors (Board) to solicit your proxy for use at the 2018 Armstrong World Industries, Inc. annual meeting of shareholders (the Annual Meeting). When we refer to we, our, us, Armstrong and the Company in this proxy statement, we are referring to Armstrong World Industries, Inc. This proxy statement and the related materials are first being distributed to shareholders on or about May 7, 2018.
On November 20, 2017, we announced the sale of our businesses and operations in Europe, the Middle East, and Africa (including Russia) and the Pacific Rim (the International Business), including the corresponding businesses and operations conducted by Worthington Armstrong Venture, a Delaware general partnership (WAVE), in which we hold a fifty percent (50%) interest, to Knauf International GmbH (Knauf). Following the sale of our International Businesses, which we currently expect to close during the third quarter of 2018, Armstrong will be an Americas-focused ceilings and wall buildings products company, and the leader in the design, innovation and manufacturer of commercial and residential ceiling, wall and suspension solutions.
At the 2017 Annual Meeting of Shareholders (the 2017 Annual Meeting), which was held on July 13, 2017, our shareholders elected Stan A. Askren, Victor D. Grizzle, Tao Huang, Larry S. McWilliams, James C. Melville, James J. OConnor, John J. Roberts, Gregory P. Spivy, Roy W. Templin and Cherryl T. Thomas to the Board.
AWI 2018 Proxy Statement | 1 |
ITEM 1 ELECTION OF DIRECTORS (CONTINUED)
Each director nominees biography in the pages that follow includes notable skills and qualifications that contributed to his or her selection as a nominee. Director skills and qualifications are also featured in the chart immediately following the biographies.
OUR BOARD RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF THE FOLLOWING NOMINEES:
Name | Age | Director Since | Committee(s) | Independent^ | ||||||||
Stan A. Askren |
57 | 2008 | MDCC | ✓ | ||||||||
Victor D. Grizzle |
56 | 2016 | ||||||||||
Tao Huang |
55 | 2010 | AC, FC | ✓ | ||||||||
Larry S. McWilliams |
62 | 2010 | AC, MDCC | ✓ | ||||||||
James C. Melville |
66 | 2012 | FC, MDCC, NGC | ✓ | ||||||||
John J. Roberts |
73 | 2006 | AC, NGC | ✓ | ||||||||
Gregory P. Spivy |
49 | 2014 | FC, MDCC | ✓ | ||||||||
Roy W. Templin |
57 | 2016 | AC, FC, MDCC | ✓ | ||||||||
Cherryl T. Thomas |
71 | 2016 | AC, MDCC | ✓ |
| Committees: AC (Audit); FC (Finance); MDCC (Management Development & Compensation); NGC (Nominating & Governance) |
^ | As defined in NYSE listing standards and our Corporate Governance Principles |
| Denotes Chair of the Committee |
2 | AWI 2018 Proxy Statement |
ITEM 1 ELECTION OF DIRECTORS (CONTINUED)
All nominees currently serve as directors. Information concerning the nominees is provided below:
AWI 2018 Proxy Statement | 3 |
ITEM 1 ELECTION OF DIRECTORS (CONTINUED)
4 | AWI 2018 Proxy Statement |
ITEM 1 ELECTION OF DIRECTORS (CONTINUED)
AWI 2018 Proxy Statement | 5 |
ITEM 1 ELECTION OF DIRECTORS (CONTINUED)
6 | AWI 2018 Proxy Statement |
ITEM 1 ELECTION OF DIRECTORS (CONTINUED)
AWI 2018 Proxy Statement | 7 |
ITEM 1 ELECTION OF DIRECTORS (CONTINUED)
Skills and Qualifications of Board of Directors
8 | AWI 2018 Proxy Statement |
CORPORATE GOVERNANCE (CONTINUED)
10 | AWI 2018 Proxy Statement |
CORPORATE GOVERNANCE (CONTINUED)
AWI 2018 Proxy Statement | 11 |
CORPORATE GOVERNANCE (CONTINUED)
12 | AWI 2018 Proxy Statement |
CORPORATE GOVERNANCE (CONTINUED)
AWI 2018 Proxy Statement | 13 |
CORPORATE GOVERNANCE (CONTINUED)
14 | AWI 2018 Proxy Statement |
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information regarding individuals who serve as our executive officers as of April 1, 2018.
Name | Age | Present Position and Business Experience During the Last Five Years* | ||||
Victor D. Grizzle |
56 | Armstrong World Industries, Inc. President & CEO; Director since April 2016 Executive Vice President & CEO, Armstrong Building Products (2011 to March 2016) Valmont Industries Group President, Global Structures, Coatings and Tubing (2005) | ||||
Brian L. MacNeal |
51 | Armstrong World Industries, Inc. Chief Financial Officer since April 2016 Vice President, Global Finance and CFO, Armstrong Building Products (2014 to April 2016) Heartland Energy Solutions Interim Chief Financial Officer (2013 to 2014) Campbell Soup Company Vice President of Finance (2011 to 2013) | ||||
David S. Cookson |
60 | Armstrong World Industries, Inc. Senior Vice President, Americas since 2008 | ||||
Charles M. Chiappone** |
55 | Armstrong World Industries, Inc. Senior Vice President, Ceilings Solutions since March 2016 Vice President of Global Marketing & Commercial Excellence, Armstrong Building Products (January 2012 to March 2016) Alloy Polymers, Inc. President & CEO (2008 to 2012) | ||||
Mark A. Hershey |
48 | Armstrong World Industries, Inc. Senior Vice President, General Counsel since July 2011 Chief Compliance Officer since February 2012 Secretary (July 2011 to June 2014; since April 2016) Ricoh Americas Corporation Senior Vice President, General Counsel, Chief Compliance Officer & Secretary (2008) | ||||
Stephen F. McNamara |
51 | Armstrong World Industries, Inc. Vice President, Controller since July 2008 | ||||
Ellen R. Romano |
57 | Armstrong World Industries, Inc. Senior Vice President, Human Resources since May 2013 Vice President, Human Resources, Armstrong Building Products (2009) |
* | Information in parentheses regarding previously held positions indicates either the duration the Executive Officer held the position or the year in which service in the position began. |
** | In connection with the retirement of Mr. Cookson as of July 1, 2018, Mr. Chiappone was appointed as Senior Vice President, Ceiling and Wall Solutions, effective April 1, 2018. |
All executive officers are elected by the Board to serve in their respective capacities until their successors are elected or until their earlier resignation or removal by the Board.
AWI 2018 Proxy Statement | 15 |
The following table describes the elements of the compensation program for nonemployee directors in 2017:
Director Compensation Program
Element | Amount | Terms | ||
Annual Retainer (Cash) |
$90,000 $180,000 (Chair) |
paid in quarterly installments, in arrears | ||
Annual Retainer (Equity) |
$105,000 $185,000 (Chair) |
annual (or pro-rated) grant of Director RSUs 2016 Directors Stock Unit Plan 2016 and later grants vest at one year anniversary or earlier change in control if serving on such date** pre-2011 grants deliverable six months following end of service (except removal for cause) 2011 and later grants deliverable on date of end of service (except removal for cause) one share per one unit upon delivery no voting power until delivered dividend equivalent rights | ||
Committee Chair Fees* |
$20,000 (AC; MDCC) $10,000 (FC; NGC) |
paid in quarterly installments, in arrears | ||
Special Assignment Fees |
$2,500 per diem ($1,250 for less than four hours) |
may be paid in connection with: one-on-one meetings with the CEO plant visits other non-scheduled significant activities approved by the Chair |
* | Committees: AC (Audit); FC (Finance); MDCC (Management Development & Development); NGC (Nominating & Governance) |
** | In prior years, the Annual Retainer (Equity) grants were made pursuant to the 2011 Directors Stock Unit Plan, which did not provide for deferral of equity vesting, which would then vest at the one year anniversary or earlier change in control if serving on such date. Grants made under this plan pre-2011 grants were deliverable six months following end of service (except removal for cause), while grants made 2011 and later were deliverable on date of end of service (except removal for cause). |
16 | AWI 2018 Proxy Statement |
COMPENSATION OF DIRECTORS (CONTINUED)
Director Compensation Table 2017
Name (a) |
Fees Earned or Paid in Cash ($) (b) |
Stock Awards ($)(1) (c) |
Option Awards ($)(2) (d) |
Non-Equity Plan (e) |
Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(3)(f) |
All Other |
Total ($) (h) | ||||||||||||||||||||||||||||
S. Askren |
110,000 | 105,000 | | | | | 215,000 | ||||||||||||||||||||||||||||
T. Huang |
90,000 | 105,000 | | | | | 195,000 | ||||||||||||||||||||||||||||
L. McWilliams |
90,000 | 105,000 | | | | | 195,000 | ||||||||||||||||||||||||||||
J. Melville |
100,000 | 105,000 | | | | | 205,000 | ||||||||||||||||||||||||||||
J. OConnor |
180,000 | 185,000 | | | | | 365,000 | ||||||||||||||||||||||||||||
J. Roberts |
110,000 | 105,000 | | | | | 215,000 | ||||||||||||||||||||||||||||
G. Spivy(4) |
90,000 | 105,000 | | | | | 195,000 | ||||||||||||||||||||||||||||
R. Templin |
92,500 | 105,000 | | | | | 197,500 | ||||||||||||||||||||||||||||
C. Thomas |
90,000 | 105,000 | | | | | 195,000 |
(1) | Represents amounts that are in units of our shares of Common Stock. The amounts reported represent the aggregate grant date fair value for Director RSUs granted during the fiscal year, as calculated under the Financial Accounting Standards Boards Accounting Standards Codification Topic 718. Under ASC Topic 718, the grant date fair value is calculated using the closing market price of our shares of Common Stock on the date of the grant. For the number of Director RSUs credited to each directors account as of March 31, 2018, see SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, MANAGEMENT AND DIRECTORS, pages 18 and 19. |
(2) | Directors do not receive stock options as part of their compensation for service on our Board. |
(3) | Under the 2016 Directors Stock Unit Plan, directors may elect to defer the equity compensation that they receive as part of their compensation for services on our Board. |
(4) | Under an agreement with ValueAct Capital, Mr. Spivy is deemed to receive the cash portion of his retainer for Board service and hold the Director RSUs for the benefit of ValueAct Capital Master Fund, L.P. and indirectly for (i) VA Partners I, LLC as General Partner of ValueAct Capital Master Fund, L.P., (ii) ValueAct Capital Management, L.P. as the manager of ValueAct Capital Master Fund, L.P., (iii) ValueAct Capital Management, LLC as General Partner of ValueAct Capital Management, L.P., (iv) ValueAct Holdings, L.P. as the sole owner of the limited partnership interests of ValueAct Capital Management, L.P. and the membership interests of ValueAct Capital Management, LLC and as the majority owner of the membership interests of VA Partners I, LLC and (v) ValueAct Holdings GP, LLC as General Partner of ValueAct Holdings, L.P. |
AWI 2018 Proxy Statement | 17 |
The following table sets forth information regarding persons or groups known to us to be beneficial owners of more than 5% of our outstanding shares of Common Stock as of March 31, 2018 or the date of any applicable reports filed by such persons or groups prior to that date. Beneficial ownership is determined in accordance with applicable rules of the SEC.
Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership |
Percent of Class Outstanding(1) | ||||||||
ValueAct Capital Master Fund, L.P. One Letterman Drive, Building D, 4th Floor San Francisco, CA 94129 |
6,852,612 | (2) | 13.1 | % | ||||||
Iridian Asset Management LLC 276 Post Rd. W. Westport, CT 06880 |
5,739,634 | (3) | 11.0 | % | ||||||
The Vanguard Group 100 Vanguard Blvd. Malvern, PA 19355 |
3,601,807 | (4) | 6.9 | % | ||||||
T. Rowe Price Associates, Inc. 100 E. Pratt Street Baltimore, MD 21202 |
3,198,611 | (5) | 6.1 | % |
(1) | Based on 52,198,476 shares of the Companys Common Stock outstanding as of March 31, 2018, as reported to the NYSE (61,374,320 shares reported, less 9,175,844 shares held in treasury). |
(2) | On a Schedule 13D Amendment No. 2 filed with the SEC on March 14, 2018, ValueAct Master Fund, L.P. reported shared voting and dispositive power with respect to these shares of Common Stock. Shares reported as beneficially owned by ValueAct Master Fund are also reported as beneficially owned by (i) ValueAct Management L.P. as the manager of each such investment partnership, (ii) ValueAct Management LLC, as General Partner of ValueAct Management L.P., (iii) ValueAct Holdings, as the sole owner of the limited partnership interests of ValueAct Management L.P. and the membership interests of ValueAct Management LLC and as the majority owner of the membership interests of VA Partners I and (iv) ValueAct Holdings GP, as General Partner of ValueAct Holdings. Shares reported as beneficially owned by ValueAct Master Fund are also reported as beneficially owned by VA Partners I, as General Partner of ValueAct Master Fund. VA Partners I, ValueAct Management L.P., ValueAct Management LLC, ValueAct Holdings and ValueAct Holdings GP also, directly or indirectly, may own interests in one or more than one of the partnerships from time to time. By reason of such relationship ValueAct Master Fund is reported as having shared power to vote or to direct the vote, and shared power to dispose or direct the disposition of, these shares of Common Stock of the Company, with VA Partners I (only with respect to ValueAct Master Fund), ValueAct Management L.P., ValueAct Management LLC, ValueAct Holdings and ValueAct Holdings GP. |
(3) | On a Schedule 13G Amendment No. 2 filed with the SEC on February 6, 2018, Iridian Asset Management LLC, David L. Cohen and Harold L. Levy reported that, as of December 31, 2017, they had shared voting and dispositive power with respect to 5,734,634 shares of Common Stock of the Company, and David L. Cohen reported that, as of December 31, 2017, he had sole voting and dispositive power with respect to 5,000 shares of Common Stock of the Company. |
(4) | On a Schedule 13G Amendment No. 2 filed on with the SEC on February 12, 2018, the Vanguard Group23-1945930 reported, as of December 31, 2017, sole voting power with respect to 26,724 shares of Common Stock of the Company, shared voting power with respect to 5,067 shares of Common Stock, sole dispositive power with respect to 3,573,442 shares of Common Stock of the Company and shares dispositive power with respect to 28,365 shares of Common Stock as follows: Vanguard Fiduciary Trust Company, a wholly owned subsidiary of The Vanguard Group, Inc., is the beneficial owner of 23,298 shares or .04% of the shares of Common Stock outstanding of the Company as a result of its serving as investment manager of collective trust accounts, Vanguard Investments Australia, Ltd., a wholly owned subsidiary of The Vanguard Group, Inc., is the beneficial owner of 8,493 shares or 0.1% of the shares of Common Stock outstanding of the Company as a result of its serving as investment manager of Australian investment offerings. |
(5) | On a Schedule 13G filed on with the SEC on February 14, 2018, T. Rowe Price Associates, Inc. reported, as of December 31, 2017, that it had sole voting power with respect to 437,024 shares of Common Stock of the Company and sole dispositive power with respect to 3,198,611 shares of Common Stock of the Company, and T. Rowe Price New Horizons Fund, Inc. reported, as of December 31, 2017, that it had sole voting power with respect to 2,749,787 shares of Common Stock outstanding of the Company. |
18 | AWI 2018 Proxy Statement |
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, MANAGEMENT AND DIRECTORS (CONTINUED)
The following table sets forth, as of March 31, 2018, the amount of shares of Common Stock beneficially owned by all directors, the Companys named executive officers (NEOs) as identified in the COMPENSATION DISCUSSION AND ANALYSIS section on page 26 and all directors and executive officers as a group in accordance with applicable SEC rules.
Name | Number of Common Shares Beneficially Owned |
Number of Shares Subject to Options(1) Exercisable or Which Become Exercisable Within 60 Days |
Total Number of Shares Beneficially Owned(2) |
Restricted Stock Units(3) / Unvested Options |
Total Common Shares Beneficially Owned Plus Restricted Stock Units and Unvested Options |
|||||||||||||||
Stan A. Askren |
2,612 | * | * | 2,612 | 31,116 | 33,728 | ||||||||||||||
Charles M. Chiappone |
4,514 | 11,992 | 16,506 | 31,206 | 47,712 | |||||||||||||||
David S. Cookson |
20,869 | 27,336 | 48,205 | 30,027 | 78,232 | |||||||||||||||
Victor D. Grizzle |
35,990 | 130,309 | 166,299 | 228,233 | 394,532 | |||||||||||||||
Mark A. Hershey |
16,364 | 69,496 | 85,860 | 45,241 | 131,101 | |||||||||||||||
Tao Huang |
| * | * | | 26,097 | 26,097 | ||||||||||||||
Brian L. MacNeal |
2,222 | 3,740 | 5,962 | 42,770 | 48,732 | |||||||||||||||
Larry S. McWilliams |
| * | * | | 26,097 | 26,097 | ||||||||||||||
James C. Melville |
4,229 | * | * | 4,229 | 15,041 | 19,270 | ||||||||||||||
James J. OConnor |
7,000 | * | * | 7,000 | 55,484 | 62,484 | ||||||||||||||
John J. Roberts |
2,612 | * | * | 2,612 | 24,263 | 26,875 | ||||||||||||||
Gregory P. Spivy(6) |
2,612 | * | * | 2,612 | 5,737 | 8,349 | ||||||||||||||
Roy W. Templin |
4,816 | * | * | 4,816 | 2,298 | 7,114 | ||||||||||||||
Cherryl T. Thomas |
| * | * | | 5,592 | 5,592 | ||||||||||||||
Directors and Executive Officers as a group (16 persons)(5) |
118,439 | 281,041 | 399,480 | 610,291 | 1,009,771 |
(1) | Directors do not receive stock option grants under the 2008 Directors Stock Unit Plan, the 2016 Directors Stock Unit Plan or as part of the compensation program for directors. |
(2) | No individual director or executive officer beneficially owns 1% of the shares of Common Stock outstanding as of March 31, 2018. The directors and executive officers as a group beneficially own approximately 1.7% of the shares of Common Stock outstanding as of March 31, 2018. |
(3) | Represents, in the case of NEOs, unvested time-based restricted stock units (NEO RSUs) granted to them under the 2006, 2011 and 2016 Long-Term Incentive Plan, as applicable, and, in the case of nonemployee directors, vested and unvested stock units (Director RSUs) granted to them as part of their annual retainer for Board service that are not acquirable by the director within 60 days of March 31, 2018 under the terms of the 2008 Directors Stock Unit Plan and the 2016 Directors Stock Unit Plan. See Directors Aggregate Ownership table below for further information. Neither the unvested NEO RSUs nor the Director RSUs have voting power. |
(4) | Under the Nomination Agreement with ValueAct Capital, Mr. Spivy is deemed to hold the Director RSUs for the benefit of ValueAct Capital Master Fund, L.P. and indirectly for (i) VA Partners I, LLC as General Partner of ValueAct Capital Master Fund, L.P., (ii) ValueAct Capital Management, L.P. as the manager of ValueAct Capital Master Fund, L.P., (iii) ValueAct Capital Management, LLC as General Partner of ValueAct Capital Management, L.P., (iv) ValueAct Holdings, L.P. as the sole owner of the limited partnership interests of ValueAct Capital Management, L.P. and the membership interests of ValueAct Capital Management, LLC and as the majority owner of the membership interests of VA Partners I, LLC and (v) ValueAct Holdings GP, LLC as General Partner of ValueAct Holdings, L.P. |
(5) | Includes amounts for Ellen R. Romano, SVP, Human Resources and Stephen F. McNamara, VP, Controller. |
AWI 2018 Proxy Statement | 19 |
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, MANAGEMENT AND DIRECTORS (CONTINUED)
Directors Aggregate Ownership
The table below sets forth, as of March 31, 2018, additional detail as to each nonemployee directors ownership and rights to ownership in the Companys equity.
Name | Common Shares |
Vested Restricted Stock Units(1) |
Unvested Restricted Stock Units(2) |
Phantom Stock Units(3) |
Total Equity |
Total Value(4) |
||||||||||||||||||
Stan A. Askren |
2,612 | 28,818 | 2,298 | | 33,728 | $ | 1,898,886 | |||||||||||||||||
Tao Huang |
| 23,799 | 2,298 | | 26,097 | $ | 1,469,261 | |||||||||||||||||
Larry S. McWilliams |
| 23,799 | 2,298 | | 26,097 | $ | 1,469,261 | |||||||||||||||||
James C. Melville |
4,229 | 12,743 | 2,298 | | 19,270 | $ | 1,084,901 | |||||||||||||||||
James J. OConnor |
7,000 | 51,435 | 4,049 | | 62,484 | $ | 3,517,849 | |||||||||||||||||
John J. Roberts |
2,612 | 21,965 | 2,298 | 11,773 | 26,875 | $ | 2,175,882 | (5) | ||||||||||||||||
Gregory P. Spivy(6) |
2,612 | 3,439 | 2,298 | | 8,349 | $ | 470,049 | |||||||||||||||||
Roy W. Templin |
4,816 | | 2,298 | | 7,114 | $ | 400,518 | |||||||||||||||||
Cherryl T. Thomas |
| 3,294 | 2,298 | | 5,592 | $ | 314,830 | |||||||||||||||||
Total |
23,881 | 169,292 | 22,433 | 11,773 | 215,606 | $ | 12,801,438 |
(1) | Under the terms of the 2008 Directors Stock Unit Plan, the Director RSUs granted to each director as part of his or her retainer for Board service are not acquirable by the director until (i) for those Director RSUs granted prior to June 2011, the earlier of the six-month anniversary of the directors separation from the Board for any reason other than a removal for cause or the date of a Change in Control Event (as defined in the 2008 Directors Stock Unit Plan); or (ii) for those Director RSUs granted during and after June 2011, on the date of the directors separation from the Board for any reason other than a removal for cause or the date of a Change in Control Event (as defined in the 2008 Directors Stock Unit Plan). Under the terms of the 2016 Directors Stock Unit Plan, the Director RSUs granted to each director as part of his or her retainer for Board Service shall vest (contingent upon the Directors continued service as of such date) on the earlier of (i) the one-year anniversary of the grant; (ii) the death or total and permanent disability of the Director; or (iii) the date of any Change in Control Event (as defined in the Plan). |
(2) | Under the terms of the 2008 Directors Stock Unit Plan, Director RSUs vest on the first anniversary of the grant date. Under the terms of the 2016 Directors Stock Unit Plan, the vested units will be acquirable by the Director, at the election of the Director: (i) at the vesting of the units at the one-year anniversary of the grant or (ii) at the time of the Directors termination of service. All of the director RSUs listed in this column will vest on July 13, 2018. |
(3) | Phantom Stock Units awarded under the Companys 2006 Phantom Stock Unit Plan (Phantom Stock Unit Plan) become payable (Phantom Units Payment Date) in cash on the earlier of the six-month anniversary of the directors separation from the Board for any reason other than a removal for cause or the date of a Change in Control Event (as defined in the Phantom Stock Unit Plan). The cash payment amount will be equal to the number of units multiplied by the closing price of the shares of Common Stock on the stock exchange on which such shares are traded on the Phantom Units Payment Date. |
(4) | Represents an amount equal to the sum of the number of shares of Common Stock beneficially owned, plus the number of vested and unvested Director RSUs, plus the number of Phantom Stock Units held, as applicable, multiplied by $56.30, which was the closing price of the shares of Common Stock of the Company on the NYSE on March 29, 2018. |
(5) | Amount excludes $276,151.32 in accrued dividends (non-interest bearing). |
(6) | Under the Nomination Agreement with ValueAct Capital, Mr. Spivy is deemed to hold the Director RSUs for the benefit of ValueAct Capital Master Fund, L.P. and indirectly for (i) VA Partners I, LLC as General Partner of ValueAct Capital Master Fund, L.P., (ii) ValueAct Capital Management, L.P. as the manager of ValueAct Capital Master Fund, L.P., (iii) ValueAct Capital Management, LLC as General Partner of ValueAct Capital Management, L.P., (iv) ValueAct Holdings, L.P. as the sole owner of the limited partnership interests of ValueAct Capital Management, L.P. and the membership interests of ValueAct Capital Management, LLC and as the majority owner of the membership interests of VA Partners I, LLC and (v) ValueAct Holdings GP, LLC as General Partner of ValueAct Holdings, L.P. |
20 | AWI 2018 Proxy Statement |
The Audit Committee engaged KPMG LLP as the Companys independent registered public accounting firm for 2018. In making this selection, the Audit Committee considered KPMG LLPs qualifications, discussed with KPMG LLP its independence, and reviewed the audit and non-audit services provided by KPMG LLP to the Company.
Management of the Company has primary responsibility for preparing the Companys financial statements and establishing effective internal control over financial reporting. KPMG LLP is responsible for auditing those financial statements and expressing an opinion on the conformity of the Companys audited financial statements with accounting principles generally accepted in the United States and on the effectiveness of the Companys internal control over financial reporting based on the criteria established in 2013 by the Committee of Sponsoring Organizations of the Treadway Commission. Accordingly, the Audit Committee reviewed and discussed the audited consolidated financial statements for fiscal 2017 with the Companys management. The Audit Committee reviewed and discussed with management the critical accounting policies applied by the Company in the preparation of those financial statements. The Audit Committee also discussed with KPMG LLP the matters required to be discussed by applicable standards of the Public Company Accounting Oversight Board, and had the opportunity to ask KPMG LLP questions relating to such matters. The discussions included the quality, and not just the acceptability, of the accounting principles utilized, the reasonableness of significant accounting judgments, and the clarity of disclosures in the financial statements.
The Audit Committee regularly considers the independence, qualifications and performance of KPMG LLP. Such consideration includes reviewing the written disclosures and the letter received from KPMG LLP required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent registered public accountants communications with the Audit Committee concerning independence, and discussing with KPMG LLP their independence.
Based on the reviews and discussions referred to above, the Audit Committee recommended to the Board that the audited consolidated financial statements be included in the Companys Annual Report on Form 10-K for the year ended December 31, 2017. The Audit Committee and the Board believe that the continued retention of KPMG LLP to serve as the Companys independent registered public accounting firm is in the best interests of the Company and its shareholders and have recommended that shareholders ratify the appointment of KPMG LLP as the Companys independent registered public accounting firm for the fiscal year 2018.
Submitted by the Audit Committee
John J. Roberts (Chair)
Tao Huang
Larry S. McWilliams
Roy W. Templin
Cherryl T. Thomas
AWI 2018 Proxy Statement | 23 |
The following table presents fees for professional audit services rendered by KPMG LLP for the audit of our annual consolidated financial statements for 2017 and 2016, as well as fees billed for other services rendered by KPMG LLP. All fees in 2017 and 2016 were pre-approved by the Audit Committee.
(amounts in thousands) | 2017 | 2016 | ||||||
Audit Fees(1) |
$ | 3,444 | $ | 2,625 | ||||
Audit Related Fees(2) |
1,823 | 91 | ||||||
Audit and Audit Related Fees Subtotal |
5,267 | 2,716 | ||||||
Tax Fees(3) |
983 | 1,833 | ||||||
All Other Fees |
| | ||||||
Total Fees |
$ | 6,250 | $ | 4,549 |
(1) | Audit Fees are for services rendered in connection with the integrated audit of Armstrongs consolidated financial statements as of and for the year, for which a portion of the billings occurred the following year. Audit fees were also incurred for reviews of consolidated financial statements included in the Companys quarterly reports on Form 10-Q and services normally provided in connection with statutory and regulatory filings. Audit Fees in 2017 also include fees associated with the impact of U.S. tax reform, resegmentation of the business, and the adoption of FASB ASC 606. |
(2) | Audit-Related Fees consisted principally of fees for audits of financial statements of certain employee benefit plans, accounting research assistance on technical topics and other matters with respect to non-U.S. statutory financial statements. Audit-Related Fees in 2017 also include fees associated with sell-side due diligence activities in connection with the sale of the Companys International Business. |
(3) | Tax Fees were primarily for preparation of tax returns in non-U.S. jurisdictions, assistance with tax audits and appeals and other tax consultation and compliance services. |
The Audit Committee has considered whether the provision by KPMG LLP of the non-audit services described above was allowed under Rule 2-01(c)(4) of Regulation S-X and was compatible with maintaining auditor independence, and has concluded that KPMG LLP was and is independent of the Company in all respects.
Audit Committee Pre-Approval Policy
The Audit Committee adheres to a policy that requires the Audit Committees prior approval of any audit, audit-related and non-audit services provided by the firm that serves as our independent registered public accounting firm. Pursuant to this policy, management cannot engage the firm for any services without the Audit Committees pre-approval. The Audit Committee delegates to the Audit Committee Chair the authority to pre-approve non-audit services for purposes of handling immediate needs, with a report to the full Audit Committee of such approvals at its next meeting. The policy complies with Section 10A(i) of the Exchange Act.
Auditor Tenure
Through more than 90 years of experience with Armstrong, KPMG LLP has gained institutional knowledge of and deep expertise regarding Armstrongs global operations and businesses, accounting policies and practices, and internal control over financial reporting. We believe KPMG LLPs aggregate fees are competitive with peer companies.
24 | AWI 2018 Proxy Statement |
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE COMPANYS COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS AS DISCLOSED IN THE COMPENSATION DISCUSSION AND ANALYSIS SECTION AND THE ACCOMPANYING COMPENSATION TABLES CONTAINED IN THIS PROXY STATEMENT.
AWI 2018 Proxy Statement | 25 |
In this compensation discussion and analysis (CD&A) section, we review the objectives and elements of our executive compensation philosophy, as well as the alignment of our program with the Companys performance and compensation decisions in 2017 relating to our named executive officers (NEOs).
EXECUTIVE SUMMARY
Business Overview
26 | AWI 2018 Proxy Statement |
COMPENSATION DISCUSSION AND ANALYSIS (CONTINUED)
Named Executive Officers
The Companys named executive officers for the fiscal year ended December 31, 2017 were:
Victor D. Grizzle President and CEO
Brian L. MacNeal Senior Vice President and CFO
Charles Chiappone Senior Vice President, Ceiling Solutions(1)
David S. Cookson Senior Vice President, Americas
Mark A. Hershey Senior Vice President, General Counsel and Chief Compliance Officer
(1) | In connection with the retirement of Mr. Cookson as of July 1, 2018, Mr. Chiappone was appointed as Senior Vice President, Ceiling and Wall Solutions, effective April 1, 2018 |
AWI 2018 Proxy Statement | 27 |
COMPENSATION DISCUSSION AND ANALYSIS (CONTINUED)
28 | AWI 2018 Proxy Statement |
COMPENSATION DISCUSSION AND ANALYSIS (CONTINUED)
Compensation Elements
In 2017, we executed our compensation philosophy through a combination of: (a) fixed compensation, including (i) base salaries, (ii) benefits and (iii) limited perquisites; and (b) performance-based compensation, including (i) cash incentive awards under our annual incentive plan, and (ii) grants of PSU under our 2016 Long-Term Incentive Plan, our omnibus equity award plan.
Type | Compensation Elements |
Form and Objective | Further Information | Key 2017 NEO Actions | ||||
Fixed |
Base Salary | Delivered in cash
Provides reasonable, market competitive fixed pay delivered to each NEO, and reflects his or her role, responsibility, individual performance and contribution to the Company
Generally set at market median
|
Base Salary changes for our NEOs are presented on page 34 |
NEOs received merit increases, effective April 1, 2017 | ||||
Benefits | Standard range of health, welfare, and retirement benefits generally similar to those provided to other salaried employees, except that executives:
are eligible to receive enhanced Company-paid long-term disability benefits;
are eligible for non-qualified retirement benefits |
|||||||
Limited Perquisites |
Very limited perquisites or personal benefits
Personal financial counseling at a cost generally less than $4,500 per NEO
Executive physicals at a cost generally less than $5,000 per NEO
Executive long-term disability at a cost generally less than $5,000 per NEO
|
|||||||
Performance-Based |
Annual Incentive Plan (AIP) | Delivered in cash
Provides an annual incentive opportunity for achieving financial results based on performance goals tied to our annual operating plan
Drives selected target metric performance
Awards tied to Company, region and individual performance, including leadership behaviors
Target opportunity generally set at market median
|
AIP was based on revenue and EBITDA global Company results and regional results (as described on page 34) |
NEOs received AIP payments for 2017 performance ranging from 74% to 84% of target | ||||
Long-Term Incentive Program (LTIP) | Delivered in 100% PSUs
Drives and promotes long- term value-creation for our shareholders, and fosters retention, by rewarding execution and achievement of goals linked to our longer term strategic initiatives and stock performance
Target opportunity generally set at market median
In 2017, our Compensation Committee awarded 3-year PSUs tied to Absolute TSR and FCF |
LTI performance goals were based on FCF and Absolute TSR (as described on page 35) |
NEOs received annual PSU awards with values ranging from 75% to 317% of base. |
AWI 2018 Proxy Statement | 29 |
COMPENSATION DISCUSSION AND ANALYSIS (CONTINUED)
30 | AWI 2018 Proxy Statement |
COMPENSATION DISCUSSION AND ANALYSIS (CONTINUED)
The following table illustrates how our executive compensation elements align with our compensation objectives.
Executive Compensation Element | Attract Talented Employees |
Align Management and Shareholder Interests |
Pay for Performance |
Motivate and Retain Management |
||||||||||||
Base Salary |
✓ | ✓ | ||||||||||||||
Annual Incentive Plan (AIP) |
✓ | ✓ | ✓ | ✓ | ||||||||||||
Long-Term Incentive Program (LTIP) |
✓ | ✓ | ✓ | ✓ |
Roles of Key Participants
Compensation Committee |
Sets the philosophy and principles that guide the executive compensation program;
Oversees the design of our executive compensation program in context of our culture, competitive practices, legal and regulatory landscape and governance trends;
Reviews and approves short- and long-term incentive compensation design, including performance goals and the reward consequences for delivering above or below target performance;
Reviews and approves corporate goals and individual objectives relevant to the compensation of the CEO, evaluates the CEOs performance relative to those goals and objectives, and recommends CEO compensation to be ratified by the independent directors based on the evaluation; and
Oversees the evaluation of the other executive officers and approves their compensation in collaboration with the CEO.
| |
Independent Members of the Board | Participate in the performance assessment process for the CEO; and
Review decisions regarding CEO compensation, including base salary, AIP and LTIP awards for the CEO.
| |
Committee Consultant Willis Towers Watson | Provides analysis, advice and recommendations with regard to executive compensation;
Attends Compensation Committee meetings, as requested, and communicates between meetings with the Compensation Committee Chair and other Committee members;
Advises the Compensation Committee on market trends, regulatory issues and developments and how they may impact our executive compensation programs; and
| |
CEO |
Provides input to the Compensation Committee on senior executive performance and compensation recommendations. |
AWI 2018 Proxy Statement | 31 |
COMPENSATION DISCUSSION AND ANALYSIS (CONTINUED)
32 | AWI 2018 Proxy Statement |
COMPENSATION DISCUSSION AND ANALYSIS (CONTINUED)
Peer Group
The Compensation Committee uses compensation data compiled from a group of peer companies based on a number of pre-established criteria, including business model comparability, company size measured by revenue (approximately one-half to two times the Companys revenue) and market capitalization, global presence, and investor capital.
During 2016, our Compensation Committee conducted an in-depth review of our Peer Group and the related selection criteria taking into consideration the impact of the separation. The resulting 2016 Peer Group consisted of 20 manufacturing companies. In 2017, our Compensation Committee reviewed the Peer Group and removed Headwaters Incorporated and Nortek, Inc., both of which were acquired by third parties subsequent to the 2016 Peer Group being developed.
For 2017, our Peer Group consisted of 18 manufacturing companies, including:
Allegion PLC | Herman Miller Inc. | PH Glatfelter Inc. | ||
AO Smith Corp. | Interface, Inc. | Ply Gem Holdings, Inc. | ||
Apogee Enterprises, Inc. | Knoll, Inc. | Quanex Building Products Corp | ||
Ferro Corporation | Kraton Performance Polymers Inc. | Simpson Manufacturing Co., Inc. | ||
Gibraltar Industries, Inc. | Louisiana-Pacific Corp | |||
Griffon Corporation | Masonite International Corporation | |||
HB Fuller Co. | OMNOVA Solutions Inc. |
AWI 2018 Proxy Statement | 33 |
COMPENSATION DISCUSSION AND ANALYSIS (CONTINUED)
2017 AIP Design
Base Salary $
|
x | Target AIP Opportunity % |
= | Target AIP $ |
x | Company and Regional Performance % |
x | Individual Performance % |
= | Annual AIP Payout $ |
2017 Target AIP Opportunity
34 | AWI 2018 Proxy Statement |
COMPENSATION DISCUSSION AND ANALYSIS (CONTINUED)
Our Compensation Committee established the following performance ranges and associated payout ranges for the 2017 AIP. The Companys global and regional performance were converted to a corresponding payout factor on a straight line basis between Threshold and Target and between Target and Maximum. AIP payout factors are capped at 200%. The Compensation Committee approved AIP design consisting of two leadership tiers. The AIP design for the senior executive tier (Tier I), namely Messrs. Grizzle, MacNeal, Chiappone and Cookson paid 100% for achieving operating targets. Considering the degree of difficulty built into the 2017 operating plan targets, the Compensation Committee established a payout factor of 110% for achieving target performance for Tier II, which includes Mr. Hershey.
Target $ (in millions) | Performance as % of Target | Payout | ||||||||||||||||||||||||||||||||||
Threshold | Target | Maximum | Threshold | Target | Maximum | Threshold | Target | Maximum | ||||||||||||||||||||||||||||
Global Revenue (Senior Executive Tier) |
1,254.0 | 1,318.0 | 1,412.0 | 93 | % | 100 | % | 105 | % | 50 | % | 100 | %* | 200 | % | |||||||||||||||||||||
Global EBITDA (Senior Executive Tier) |
317.0 | 363.0 | 403.0 | 87 | % | 100 | % | 111 | % | 50 | % | 100 | %* | 200 | % | |||||||||||||||||||||
Americas Revenue |
855.0 | 933.0 | 964.0 | 92 | % | 100 | % | 103 | % | 50 | % | 100 | % | 200 | % | |||||||||||||||||||||
Americas EBITDA |
298.0 | 345.0 | 383.0 | 86 | % | 100 | % | 111 | % | 50 | % | 100 | % | 200 | % |
* | Equates to a 110% payout for Mr. Hershey |
AWI 2018 Proxy Statement | 35 |
COMPENSATION DISCUSSION AND ANALYSIS (CONTINUED)
36 | AWI 2018 Proxy Statement |
COMPENSATION DISCUSSION AND ANALYSIS (CONTINUED)
AWI 2018 Proxy Statement | 37 |
COMPENSATION DISCUSSION AND ANALYSIS (CONTINUED)
38 | AWI 2018 Proxy Statement |
COMPENSATION DISCUSSION AND ANALYSIS (CONTINUED)
AWI 2018 Proxy Statement | 39 |
COMPENSATION DISCUSSION AND ANALYSIS (CONTINUED)
40 | AWI 2018 Proxy Statement |
COMPENSATION DISCUSSION AND ANALYSIS (CONTINUED)
AWI 2018 Proxy Statement | 41 |
The Management Development and Compensation Committee of our Board has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with our management. Based on this review and discussion, the Management Development and Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement.
Submitted by the Management Development and Compensation Committee
Stan A. Askren, Chair
Larry S. McWilliams
James C. Melville
Gregory P. Spivy
Roy W. Templin
Cherryl T. Thomas
This report shall not be deemed to be soliciting material or to be filed with the SEC, nor incorporated by reference into any future SEC filing under the Securities Act of 1933 or the Exchange Act, except to the extent that the Company specifically incorporates it by reference therein.
42 | AWI 2018 Proxy Statement |
The table below sets forth the total compensation for our NEOs during fiscal 2017, 2016 and 2015.
Name and Principal Position |
Year | Salary ($) |
Bonus(3) ($) |
Stock Awards(1) ($) |
Option Awards(1) ($) |
Non-Equity Incentive Plan ($) |
Change in Pension Value & Nonqualified Deferred Compensation Earnings ($) |
All Other Compensation(4) ($) |
Total ($) |
|||||||||||||||||||||||||||
Mr. Grizzle |
2017 | 718,750 | | 2,300,000 | | 567,820 | | 92,921 | 3,679,491 | |||||||||||||||||||||||||||
President and Chief | 2016 | 650,050 | | 5,250,000 | | 754,930 | | 68,977 | 6,723,957 | |||||||||||||||||||||||||||
Executive Officer |
2015 | 496,558 | | 874,000 | | 424,560 | | 88,951 | 1,884,069 | |||||||||||||||||||||||||||
Mr. MacNeal |
2017 | 402,563 | | 375,000 | | 190,820 | | 32,642 | 1,001,025 | |||||||||||||||||||||||||||
Senior Vice |
2016 | 347,875 | | 1,125,000 | | 238,400 | | 21,339 | 1,732,614 | |||||||||||||||||||||||||||
President and Chief Financial Officer | ||||||||||||||||||||||||||||||||||||
Mr. Chiappone |
2017 | 366,985 | | 266,300 | | 144,960 | | 23,122 | 801,367 | |||||||||||||||||||||||||||
Senior Vice President, | ||||||||||||||||||||||||||||||||||||
Ceiling Solutions | ||||||||||||||||||||||||||||||||||||
Mr. Cookson |
2017 | 368,615 | | 270,400 | | 136,390 | 615,964 | 9,982 | 1,401,351 | |||||||||||||||||||||||||||
Senior Vice President | 2016 | 371,315 | | 811,200 | | 211,650 | 375,379 | 9,331 | 1,778,875 | |||||||||||||||||||||||||||
Americas | ||||||||||||||||||||||||||||||||||||
Mr. Hershey |
2017 | 418,200 | | 506,300 | | 252,940 | | 48,413 | 1,225,853 | |||||||||||||||||||||||||||
Senior Vice President, | 2016 | 415,675 | 671,550 | 1,071,300 | | 304,280 | | 57,373 | 2,520,178 | |||||||||||||||||||||||||||
General Counsel and Chief Compliance Officer | 2015 | 443,925 | | 605,600 | | 388,880 | | 69,627 | 1,508,032 |
(1) | The amounts reflect the aggregate grant date fair value of stock units granted in the fiscal year, computed in accordance with the Financial Accounting Standards Boards Accounting Standards Codification Topic 718. Under ASC Topic 718, the grant date fair value is calculated using the closing price of the Companys shares of Common Stock ($46.00) on the date of grant (February 28, 2017). The 2017 LTIP awards consist of PSUs only. The target and maximum payouts for the PSUs are as follows: target of $2,300,000 and maximum of $6,325,000 for Mr. Grizzle, target of $375,000 and maximum of $1,031,250 for Mr. MacNeal, target of $266,300 and maximum of $732,325 for Mr. Chiappone, target of $270,400 and maximum of $743,600 for Mr. Cookson (maximums are 275% of target), target of $506,300 and maximum of $1,139,175 for Mr. Hershey (maximums are 225% of target). |
(2) | The 2017 amounts disclosed are the awards under the 2017 AIP. |
(3) | Amounts payable under retention agreements that were entered in 2015 and were contingent on the successful separation of AFI. The retention payments were made upon the successful execution of the separation in April 2016. |
(4) | The amounts shown in the All Other Compensation column include: (i) Company matching contribution to the Savings and Investment 401(k) Plan and to the NQDCP; (ii) premiums for long-term disability insurance; (iii) termination payments (severance); (iv) relocation expenses; and (v) personal benefits (perquisites) consisting of medical examinations and financial planning expense reimbursements to the extent the total perquisite value is $10,000 or greater per individual. For each person the total value of all such perquisites did not reach $10,000. |
AWI 2018 Proxy Statement | 43 |
(5) | The following table provides the detail for the amounts reported in the All Other Compensation for 2017 for each NEO: |
Name | Perquisites and Other Benefits ($) |
Company Match Savings Plan Contributions ($) |
Executive Long- Term Disability ($) |
All Other Compensation ($) |
||||||||||||
Mr. Grizzle |
92,921 | 0 | 92,921 | |||||||||||||
Mr. MacNeal |
32,642 | 0 | 32,642 | |||||||||||||
Mr. Chiappone |
23,122 | 23,122 | ||||||||||||||
Mr. Cookson |
8,152 | 1,830 | 9,982 | |||||||||||||
Mr. Hershey |
46,583 | 1,830 | 48,413 |
CEO Pay Ratio
Countries and number of employees (162 in total) excluded:
Mexico 3 | Brazil 4 | Australia 38 | Hong Kong 10 | |||
Taiwan 1 | Indonesia 2 | Malaysia 1 | Philippines 2 | |||
Singapore 1 | Thailand 1 | Vietnam 2 | Czech Republic 35 | |||
United Arab Emirates 10 | Italy 6 | Spain 5 | Portugal 1 | |||
Ireland 2 | Turkey 2 | Netherlands 35 | Kazakhstan 1 |
44 | AWI 2018 Proxy Statement |
The table below shows information on AIP awards and PSUs granted to each NEO in 2017. There is no assurance that the grant date fair value of PSU/RSU awards will be realized by the executive.
Estimated Future Payouts Under Non-Equity Incentive Plan Awards |
Estimated Future Payouts Under Equity Incentive Plan Awards |
All Other Stock Awards: Number of Shares of Stock or Units (#) |
All Other Option Awards: Number of Securities Under-Lying Options (#) |
Exercise or Base Price of Option Awards ($/Sh) |
Grant Date Fair Value of Stock and Option Awards ($) |
|||||||||||||||||||||||||||||||||||||||||
Name | Grant Date |
Threshold ($) |
Target ($) |
Maximum ($) |
Threshold (#) |
Target (#) |
Maximum (#) |
|||||||||||||||||||||||||||||||||||||||
Mr. Grizzle |
(1 | ) | N/A | 359,375 | 718,750 | 1,437,500 | ||||||||||||||||||||||||||||||||||||||||
(2 | ) | 2/28/2017 | 12,500 | 50,000 | 137,500 | 2,300,000 | ||||||||||||||||||||||||||||||||||||||||
Mr. MacNeal |
(1 | ) | N/A | 120,769 | 241,538 | 483,075 | ||||||||||||||||||||||||||||||||||||||||
(2 | ) | 2/28/2017 | 2,038 | 8,153 | 22,421 | 375,000 | ||||||||||||||||||||||||||||||||||||||||
Mr. Chiappone |
(1 | ) | N/A | 91,746 | 183,493 | 366,985 | ||||||||||||||||||||||||||||||||||||||||
(2 | ) | 2/28/2017 | 1,448 | 5,790 | 15,923 | 270,400 | ||||||||||||||||||||||||||||||||||||||||
Mr. Cookson |
(1 | ) | N/A | 92,154 | 184,308 | 368,615 | ||||||||||||||||||||||||||||||||||||||||
(2 | ) | 2/28/2017 | 1,470 | 5,879 | 16,167 | 266,300 | ||||||||||||||||||||||||||||||||||||||||
Mr. Hershey |
(1 | ) | N/A | 125,460 | 250,920 | 501,840 | ||||||||||||||||||||||||||||||||||||||||
(2 | ) | 2/28/2017 | 5,504 | 11,007 | 24,766 | 506,300 |
(1) | The amounts shown represent the 2017 AIP threshold, target and maximum opportunity for each NEO. Actual payouts are included in the Non-Equity Incentive Plan Compensation column of the SCT. |
(2) | In 2017, the Companys LTI program for NEOs included PSUs that have a three-year performance period based on Absolute TSR and FCF; participants earn up to 275% of target for Messrs. Grizzle, MacNeal, Chiappone and Cookson and up to 225% of target for Mr. Hershey if the Company achieves the established performance goals. Any cash dividends declared on shares underlying PSUs will be accrued in a non-interest bearing account and paid when the restrictions on the underlying shares lapse. |
AWI 2018 Proxy Statement | 45 |
The table below shows the number of shares covered by exercisable and unexercisable stock options, and unvested RSUs and PSUs held by each NEO on December 31, 2017. Market or payout values in the table below are based on the closing price of our shares of Common Stock on that date, $60.55. Equity awards held by NEOs at the time of the separation were adjusted to reflect the separation, consistent with equity awards held by other Company employees, and the table below includes outstanding adjusted awards as of December 31,2017.
Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||
Grant Date |
Number of Securities Underlying Unexercised Options (#) |
Number of Securities Underlying Unexercised Options (#) |
Option Exercise Price ($) |
Option Expiration Date |
Number of Shares or Units of Stock That Vested (#) |
Market Value of Shares or Units of Stock That Have Not Vested ($) |
Equity Incentive Plans Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) |
Equity Incentive Plans Awards Market or Payout Value of Unearned Shares or Other Rights That Have Not Vested ($) |
||||||||||||||||||||||||||||
Name | Exercisable | Unexercisable(1) | ||||||||||||||||||||||||||||||||||
Mr. Grizzle |
1/17/2011 | 19,158 | 32.03 | 01/17/21 | ||||||||||||||||||||||||||||||||
3/2/2011 | 31,200 | 31.15 | 03/02/21 | |||||||||||||||||||||||||||||||||
2/28/2012 | 31,348 | 37.83 | 02/28/22 | |||||||||||||||||||||||||||||||||
2/20/2013 | 25,689 | 45.32 | 02/20/23 | |||||||||||||||||||||||||||||||||
2/25/2014 | 22,914 | 47.17 | 02/25/24 | |||||||||||||||||||||||||||||||||
2/25/2015 | 5,983 | (1) | 362,271 | |||||||||||||||||||||||||||||||||
4/11/2016 | 31,445 | (3) | 475,995 | |||||||||||||||||||||||||||||||||
2/28/2017 | 12,500 | (4) | 189,219 | |||||||||||||||||||||||||||||||||
Mr. MacNeal |
6/24/2014 | 3,740 | 49.96 | 06/24/24 | ||||||||||||||||||||||||||||||||
2/24/2015 | 980 | (1) | 59,339 | |||||||||||||||||||||||||||||||||
4/11/2016 | 6,738 | (3) | 102,000 | |||||||||||||||||||||||||||||||||
2/28/2017 | 2,038 | (4) | 30,854 | |||||||||||||||||||||||||||||||||
Mr. Chiappone |
2/28/2012 | 2,307 | 37.83 | 02/28/22 | ||||||||||||||||||||||||||||||||
2/20/2013 | 3,781 | 45.32 | 02/20/23 | |||||||||||||||||||||||||||||||||
2/25/2014 | 5,904 | 47.17 | 02/25/24 | |||||||||||||||||||||||||||||||||
2/25/2015 | 1,519 | (1) | 91,975 | |||||||||||||||||||||||||||||||||
4/11/2016 | 4,785 | (3) | 72,433 | |||||||||||||||||||||||||||||||||
2/28/2017 | 1,448 | (4) | 21,912 | |||||||||||||||||||||||||||||||||
Mr. Cookson |
2/28/2012 | 12,412 | 37.83 | 02/28/22 | ||||||||||||||||||||||||||||||||
2/20/2013 | 7,218 | 45.32 | 02/20/23 | |||||||||||||||||||||||||||||||||
2/25/2014 | 7,706 | 47.17 | 02/25/24 | |||||||||||||||||||||||||||||||||
2/25/2015 | 1,798 | (1) | 108,869 | |||||||||||||||||||||||||||||||||
4/11/2016 | 4,859 | (3) | 73,549 | |||||||||||||||||||||||||||||||||
2/28/2017 | 1,470 | (4) | 22,248 | |||||||||||||||||||||||||||||||||
Mr. Hershey |
7/1/2011 | 15,454 | 35.29 | 07/01/21 | ||||||||||||||||||||||||||||||||
2/28/2012 | 20,319 | 37.83 | 02/28/22 | |||||||||||||||||||||||||||||||||
2/20/2013 | 17,539 | 45.32 | 02/20/23 | |||||||||||||||||||||||||||||||||
2/25/2014 | 16,184 | 47.17 | 02/25/24 | |||||||||||||||||||||||||||||||||
2/25/2015 | 4,145 | (1) | 250,980 | |||||||||||||||||||||||||||||||||
4/11/2016 | 13,537 | (2) | 819,665 | |||||||||||||||||||||||||||||||||
4/11/2016 | 6,065 | (3) | 183,618 | |||||||||||||||||||||||||||||||||
2/28/2017 | 5,504 | (4) | 166,618 |
(1) | Grant will vest in three equal installments one, two and three years from the date of grant. |
(2) | Grant will vest in three equal installments two, three and four years from the date of grant. |
(3) | The number of shares of Common Stock represents the amount that vests if threshold is achieved for the 2016 PSU grant (based on Absolute TSR and FCF goals). The awards would vest on December 31, 2018. Participants can earn up to 275% of target for Messrs. Grizzle, MacNeal, Chiappone and Cookson and 225% of target for Mr. Hershey. |
(4) | The number of shares of Common Stock represents the amount that vests if threshold is achieved for the 2017 PSU grant (based on Absolute TSR and FCF goals). The awards would vest on December 31, 2019. Participants can earn up to 275% of target for Messrs. Grizzle, MacNeal, Chiappone and Cookson and 225% of target for Mr. Hershey |
46 | AWI 2018 Proxy Statement |
The following table shows the exercise of stock options by each NEO during 2017, as well as stock awards held by each NEO that became free of restrictions during 2017.
Option Awards | Restricted Stock Awards |
|||||||||||||||
Name | Number of Shares Acquired on Exercise (#) |
Value Realized on Exercise ($) |
Number Acquired on Vesting (#) |
Value Realized on Vesting ($)(1) |
||||||||||||
Mr. Grizzle |
| | 9,511 | 387,392 | ||||||||||||
Mr. MacNeal |
| | 1,551 | 63,169 | ||||||||||||
Mr. Chiappone |
| | 2429 | 98,950 | ||||||||||||
Mr. Cookson |
| | 2,983 | 121,636 | ||||||||||||
Mr. Hershey |
| | 6,638 | 270,424 |
(1) | Represents the number of RSUs/ PSUs that vested in 2017. The value realized upon vesting is computed by multiplying the number of units by the value of the underlying shares on the vesting date. |
AWI 2018 Proxy Statement | 47 |
The table below shows the present value of accumulated benefits payable to each of the NEOs, including the number of years of service credited to each such NEO, under the RIP and the RBEP as of December 31, 2017. The amounts were determined using the same interest rate and mortality rate assumptions used in the Companys Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2017. Information regarding the RIP and RBEP can be found in Note 16 to the Companys Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2017.
Name | Plan Name | Number of Years (#) |
Present Value of ($) |
Payments During ($) |
||||||||||
Mr. Grizzle |
Not eligible | |||||||||||||
Mr. MacNeal |
Not eligible | |||||||||||||
Mr. Chiappone |
Not eligible | |||||||||||||
Retirement Income Plan for Employees of Armstrong World Industries, Inc. | 38.5 | 2,176,702 | 0 | |||||||||||
Mr. Cookson |
||||||||||||||
Retirement Benefit Equity Plan of Armstrong World Industries, Inc. | 38.5 | 1,662,945 | 0 | |||||||||||
Mr. Hershey |
Not eligible |
48 | AWI 2018 Proxy Statement |
PENSION BENEFITS (CONTINUED)
AWI 2018 Proxy Statement | 49 |
The table below shows the executive contributions, earnings and account balances for each NEO who participates in the NQDCP.
Name | Executive Contributions in 2017 ($)(1) |
Registrant Contributions in 2017 ($)(2) |
Aggregate Earnings in 2017 ($) |
Aggregate Withdrawals/ Distributions ($) |
Aggregate Balance at 12/31/17 ($) |
|||||||||||||||
Mr. Grizzle |
99,894 | 74,921 | 61,881 | | 509,128 | |||||||||||||||
Mr. MacNeal |
33,277 | 24,958 | 17,398 | | 122,026 | |||||||||||||||
Mr. Chiappone |
6,829 | 5,122 | 6,508 | | 48,549 | |||||||||||||||
Mr. Cookson |
Not Eligible | |||||||||||||||||||
Mr. Hershey |
39,798 | 29,849 | 60,644 | | 455,483 |
(1) | The amount in this column is also reported as either Salary or Non-Equity Incentive Plan Compensation in the SCT. |
(2) | The amount in this column is also reported in the All Other Compensation column of the SCT. |
(3) | The table below reflects amounts reported in the aggregate balance at last fiscal year end that were previously reported as compensation to the NEO in the SCT for previous years. |
Name | Amount Previously Reported ($) |
|||
Mr. Grizzle |
254,818 | |||
Mr. MacNeal |
32,036 | |||
Mr. Hershey |
239,736 |
50 | AWI 2018 Proxy Statement |
The tables below summarize the estimated value of the potential payments and benefits under the Companys plans and arrangements to which each NEO would be entitled upon termination of employment under the circumstances indicated. Except for the continuation of health and welfare benefits and outplacement support, amounts would be paid as a lump sum at termination. The amounts shown assume that such termination was effective December 31, 2017.
The Change in Control column assumes that there is no limitation on payments under the best net provision in each CIC agreement relating to tax under Section 4999 of the Internal Revenue Code. Amounts in the Change in Control column are double trigger payments and are therefore applicable only in the event both a change in control (CIC) event and either an involuntary (without cause) termination or a termination for Good Reason under the CIC agreement occur. The PSUs are valued at target.
Mr. Grizzle | ||||||||||||||||||||
Reason for Termination | ||||||||||||||||||||
Program Element | Resignation | Involuntary for Cause |
Involuntary without Cause |
Termination for Good Reason |
Change in Control |
|||||||||||||||
Cash Severance |
| | $ | 2,900,000 | $ | 2,900,000 | $ | 3,625,000 | ||||||||||||
Health & Welfare Benefit Continuation |
| | | | 93,383 | |||||||||||||||
Outplacement Support |
| | 30,000 | 30,000 | 30,000 | |||||||||||||||
Pro-rated Bonus |
| | 725,000 | 725,000 | 725,000 | |||||||||||||||
Accelerated Long-Term Incentives |
||||||||||||||||||||
Performance Shares |
| | | | 10,643,418 | |||||||||||||||
Restricted Stock |
| | | | 362,271 | |||||||||||||||
Stock Options |
| | | | | |||||||||||||||
|
|
|||||||||||||||||||
Total |
| | $ | 3,655,000 | $ | 3,655,000 | $ | 15,479,072 |
Mr. MacNeal | ||||||||||||||||||||
Reason for Termination | ||||||||||||||||||||
Program Element | Resignation | Involuntary for Cause |
Involuntary without Cause |
Termination for Good Reason |
Change in Control |
|||||||||||||||
Cash Severance |
| | $ | 988,200 | $ | 988,200 | $ | 1,317,600 | ||||||||||||
Health & Welfare Benefit Continuation |
| | | | 74,903 | |||||||||||||||
Outplacement Support |
| | 30,000 | 30,000 | 30,000 | |||||||||||||||
Pro-rated Bonus |
| | 247,050 | 247,050 | 247,050 | |||||||||||||||
Accelerated Long-Term Incentives |
||||||||||||||||||||
Performance Shares |
| | | | 2,125,668 | |||||||||||||||
Restricted Stock |
| | | | 59,339 | |||||||||||||||
Stock Options |
| | | | | |||||||||||||||
|
|
|||||||||||||||||||
Total |
| | $ | 1,265,250 | $ | 1,265,250 | $ | 3,854,560 |
AWI 2018 Proxy Statement | 51 |
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL (CONTINUED)
Mr. Chiappone | ||||||||||||||||||||
Reason for Termination | ||||||||||||||||||||
Program Element | Resignation | Involuntary for Cause |
Involuntary without Cause |
Termination for Good Reason |
Change in Control |
|||||||||||||||
Cash Severance |
| | $ | 834,705 | $ | 834,705 | $ | 1,112,940 | ||||||||||||
Health & Welfare Benefit Continuation |
| | | | 79,167 | |||||||||||||||
Outplacement Support |
| | 30,000 | 30,000 | 30,000 | |||||||||||||||
Pro-rated Bonus |
| | 185,490 | 185,490 | 185,490 | |||||||||||||||
Accelerated Long-Term Incentives |
||||||||||||||||||||
Performance Shares |
| | | | 1,509,512 | |||||||||||||||
Restricted Stock |
| | | | 91,975 | |||||||||||||||
Stock Options |
| | | | | |||||||||||||||
|
|
|||||||||||||||||||
Total |
| | $ | 1,050,195 | $ | 1,050,195 | $ | 3,009,084 |
Mr. Cookson | ||||||||||||||||||||
Reason for Termination | ||||||||||||||||||||
Program Element | Resignation | Involuntary for Cause |
Involuntary without Cause |
Termination for Good Reason |
Change in Control |
|||||||||||||||
Cash Severance |
| | $ | 835,470 | $ | 835,470 | $ | 1,113,960 | ||||||||||||
Health & Welfare Benefit Continuation |
| | | | 70,832 | |||||||||||||||
Outplacement Support |
| | 30,000 | 30,000 | 30,000 | |||||||||||||||
Pro-rated Bonus |
| | 185,660 | 185,660 | 185,660 | |||||||||||||||
Accelerated Long-Term Incentives |
||||||||||||||||||||
Performance Shares |
| | | | 1,532,763 | |||||||||||||||
Restricted Stock |
| | | | 108,869 | |||||||||||||||
Stock Options |
| | | | | |||||||||||||||
|
|
|||||||||||||||||||
Total |
| | $ | 1,051,130 | $ | 1,051,130 | $ | 3,042,084 |
Mr. Hershey | ||||||||||||||||||||
Reason for Termination | ||||||||||||||||||||
Program Element | Resignation | Involuntary for Cause |
Involuntary without Cause |
Termination for Good Reason |
Change in Control |
|||||||||||||||
Cash Severance |
| | $ | 972,000 | $ | 972,000 | $ | 1,296,000 | ||||||||||||
Health & Welfare Benefit Continuation |
| | | | 71,152 | |||||||||||||||
Outplacement Support |
| | 30,000 | 30,000 | 30,000 | |||||||||||||||
Pro-rated Bonus |
| | 243,000 | 243,000 | 243,000 | |||||||||||||||
Accelerated Long-Term Incentives |
||||||||||||||||||||
Performance Shares |
| | |