UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act
of 1934
(Amendment No. )
Filed by the Registrant
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to §240.14a-12
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D.R. Horton, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy
Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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Title of each class of securities to which transaction applies:
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Aggregate number of securities to which transaction applies:
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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
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Proposed maximum aggregate value of transaction:
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Fee paid previously with preliminary materials.
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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.
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Form, Schedule or Registration Statement No.:
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held On
Thursday, January 19, 2017
Dear Fellow Stockholder of D.R. Horton:
You are invited to attend the 2017 Annual Meeting of Stockholders of D.R. Horton,
Americas Builder
. Our 2017 Annual Meeting
will be held at our corporate offices located at: D.R. Horton Tower, 301 Commerce Street, Fort Worth, Texas 76102, on Thursday, January 19, 2017, at 10:00 a.m., central time, for the following purposes:
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To elect the five directors named in our proxy statement;
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To seek an advisory vote on the approval of executive compensation;
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To ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm; and
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To conduct other business properly brought before the meeting.
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Only stockholders of record at the close of business on Monday, November 28, 2016, are entitled to notice of and to vote at the 2017
Annual Meeting or any adjournment thereof.
While we would like to have each of you attend the meeting and vote your shares in
person, we realize this may not be possible. However, whether or not you plan to attend the meeting, your vote is very important. For convenience of our stockholders, proxies may be given either by telephone, electronically through the Internet, or
by mail.
A form of proxy on which to indicate your vote by mail and an envelope, postage prepaid, in which to return your
proxy are enclosed. WE URGE YOU TO COMPLETE AND RETURN YOUR PROXY BY ONE OF THESE METHODS SO THAT YOUR SHARES WILL BE REPRESENTED. If you decide later to attend the 2017 Annual Meeting, you may revoke your proxy at that time and vote your shares in
person. If you desire any additional information concerning the 2017 Annual Meeting, we would be glad to hear from you.
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Very truly yours,
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DONALD R. HORTON
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Chairman of the Board
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Fort Worth, Texas
December 9, 2016
TABLE OF CONTENTS
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D.R. Horton Tower
301 Commerce Street
Fort Worth, Texas 76102
www.drhorton.com
PROXY STATEMENT
for the
2017 ANNUAL MEETING OF STOCKHOLDERS
To Be Held On January 19, 2017
GENERAL
Time, Place and Purposes of Meeting
Our 2017 Annual Meeting of Stockholders will be held on Thursday, January 19, 2017, at 10:00 a.m., central time, at our corporate offices
located at D.R. Horton Tower, 301 Commerce Street, Fort Worth, Texas. The purposes of the 2017 Annual Meeting are set forth in the Notice of Annual Meeting of Stockholders to which this Proxy Statement is attached. D.R. Horton, Inc. is referred
to as
D.R. Horton,
the
Company, we,
and
our
in this Proxy Statement.
Solicitation of Proxies
This Proxy Statement is furnished in connection with the solicitation of proxies by the Board
of Directors of D.R. Horton. D.R. Horton expects that this Proxy Statement and the accompanying form of proxy will first be released to our stockholders of record on or about December 9, 2016. The cost of this solicitation will be paid by D.R.
Horton. The solicitation of proxies will be made primarily by use of the mail. In addition, directors, officers and regular employees of D.R. Horton may make solicitations without special compensation by telephone, facsimile, e-mail or personal
interview. They may request banks, brokers, fiduciaries and other persons holding stock in their names, or in the names of their nominees, to forward proxies and proxy materials to their principals and obtain authorization for the execution and
return of such proxies to management. D.R. Horton will reimburse such banks, brokers and fiduciaries for their reasonable out-of-pocket expenses for this service.
Revocation and Voting of Proxies
Stockholders
may vote by marking, signing and dating each proxy card received and returning it in the prepaid envelope, by telephone or electronically through the Internet by following the instructions included on the enclosed proxy card or by casting votes in
person at the meeting. The telephone and Internet voting procedures are designed to authenticate votes cast by use of a personal identification number. The procedures, which are designed to comply with Delaware law, allow stockholders to appoint a
proxy to vote their shares and to confirm that their instructions have been properly recorded. Stockholders who hold shares in street name through a broker or other nominee may be able to vote by telephone or electronically through the
Internet in accordance with the voting instructions provided by that institution.
Any proxy given may be revoked by a
stockholder at any time before it is exercised by filing with D.R. Horton a notice in writing revoking it, by duly executing and returning a proxy bearing a later date or by voting by telephone or Internet. Proxies also may be revoked by any
stockholder present at the 2017 Annual Meeting who expresses a desire to vote his or her shares in person. Each shareholder may appoint only one proxy holder or representative to attend the meeting on his or her behalf. If you require directions to
our meeting, please contact Investor Relations at (817) 390-8200. Subject to such revocation and except as otherwise stated herein or in the form of proxy, all proxies duly executed and received prior to, or at the time of, the 2017 Annual
Meeting will be voted in accordance with the specifications of the proxies. If no specification is made, proxies will be voted as follows: (i) FOR each of the nominees for election of directors
(see Proposal
One on page 5),
(ii) FOR the adoption of the advisory resolution on executive compensation
(see Proposal
Two on page 54),
(iii) FOR ratification of the appointment of
PricewaterhouseCoopers LLP as our independent registered public accounting firm
(see Proposal Three on page
57),
and at the discretion of the proxy holders on all other matters properly brought before the 2017 Annual
Meeting or any adjournment or postponement thereof.
Outstanding Shares and Voting Rights
November 28, 2016 has been set as the record date for the purpose of determining stockholders entitled to notice of, and to vote at, the
2017 Annual Meeting. There were 373,225,734 shares of D.R. Hortons common stock, $.01 par value, issued and outstanding on the record date. On any matter submitted to a stockholder vote, each holder of common stock will be entitled to one
vote, in person or by proxy, for each issued and outstanding share of common stock registered in his or her name on the books of D.R. Horton as of the record date. A list of such stockholders will be available for examination by any stockholder at
the offices of D.R. Horton set forth above for at least ten days before the 2017 Annual Meeting.
Quorum
Requirement
The D.R. Horton Bylaws provide that there will be a quorum if the holders of a majority of the issued and
outstanding shares of common stock entitled to vote are present in person or represented by proxy. The aggregate number of votes entitled to be cast by all stockholders present in person or represented by proxy at the 2017 Annual Meeting, whether
those stockholders vote for, against or abstain from voting on any matter, will be counted for purposes of determining whether a quorum exists. Broker non-votes, which are described below under
Vote Required,
will be considered
present for purposes of determining whether a quorum exists.
Vote Required
NOTICE: Brokers and banks are not permitted to vote on certain non-routine
proposals without instructions from the beneficial owner, as discussed in more detail below. Proposal One and Proposal Two are non-routine proposals. Therefore, if your shares are held through a broker, bank or other nominee, your shares will not be
voted on Proposal One or Proposal Two unless you provide voting instructions to your broker or bank as described herein.
If your shares are held in a brokerage account or by a bank or other nominee, you are considered the
beneficial owner
of shares held in
street name.
If a broker or
bank holds your shares, you may have received this Proxy Statement directly from them, together with instructions as to how to direct the broker or bank to vote your shares. If you intend to have your vote counted, it is important that you return
your voting instructions to your broker or bank. Under the rules of the New York Stock Exchange
(NYSE),
a broker or bank has the authority to vote on certain
routine
proposals without voting instructions from
the beneficial owner. A
broker non
-vote
occurs when the broker or bank is unable to vote on a
non-routine
proposal because it does not have
discretionary authority and the beneficial owner has not provided voting instructions. Brokers or banks may not vote on Proposal One or Proposal Two at the 2017 Annual Meeting without voting instructions from the beneficial owner because those
proposals are
non-routine
proposals. Brokers and banks may vote on Proposal Three at the 2017 Annual Meeting without voting instructions from the beneficial owner because this proposal is
routine.
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The following table reflects the vote required for each proposal and the effect of broker
non-votes and abstentions on the vote, assuming a quorum is present at the meeting:
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Proposal
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Vote Required
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NYSE Routine and
Non-Routine Matters:
Effect of Broker Non-Votes and
Abstentions
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(1)
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Election of Directors
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(1)
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The number of shares voted for a director must exceed the number of shares voted against that director
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(1)
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Non-Routine:
Brokers and banks do not have discretionary authority to vote on this proposal in the event
voting instructions are not received from street-name holder
Broker
non-votes have no effect Abstentions have no effect
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(2)
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Advisory vote on the approval of executive compensation
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(2)
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An affirmative vote of the holders of a majority of our common stock which has voting power present in person or represented by proxy and is entitled to vote
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(2)
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Non-Routine:
Brokers and banks do not have discretionary authority to vote on this proposal in the event
voting instructions are not received from street-name holder
Broker
non-votes have no effect Abstentions have the same effect as a vote against the proposal
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(3)
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Ratification of PricewaterhouseCoopers LLP as our independent registered public accounting firm
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(3)
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An affirmative vote of the holders of a majority of our common stock which has voting power present in person or represented by proxy and is entitled to vote
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(3)
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Routine:
Brokers and banks have discretionary authority to vote on this proposal in the event voting
instructions are not received from street-name holder
Abstentions have the
same effect as a vote against the proposal
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Stockholders Sharing the Same Address
The broker, bank or other nominee of any stockholder who is a beneficial owner, but not the record holder, of the Companys common
stock may deliver only one copy of this Proxy Statement and our Annual Report to multiple stockholders sharing an address, unless the broker, bank or nominee has received contrary instructions from one or more of the stockholders.
In addition, with respect to record holders, in some cases, only one copy of this Proxy Statement and our Annual Report will be delivered
to multiple stockholders sharing an address, unless the Company has received contrary instructions from one or more of the stockholders. Upon written or oral request, the Company will deliver free of charge a separate copy of this Proxy Statement
and our Annual Report to a stockholder at a shared address to which a single copy was delivered. You can notify your broker, bank or other nominee (if you are not the record holder) or the Company (if you are the record holder) that you wish to
receive a separate copy of our proxy statements and annual reports in the future, or alternatively, that you wish to receive a single copy of the materials instead of multiple copies. The Companys contact information for these purposes is:
D.R. Horton, Inc., Attention: Thomas B. Montano, Vice President, Corporate and Securities Counsel, 301 Commerce Street, Suite 500, Fort Worth, Texas 76102, telephone number: (817) 390-8200, or e-mail:
tbmontano@drhorton.com
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Future Stockholder Communications through the Internet
Stockholders may elect to receive future notices of meetings, proxy materials and annual reports electronically through the Internet. The
consent of stockholders who have previously consented to electronic delivery will remain in effect until withdrawn. To consent to electronic delivery:
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stockholders whose shares are registered in their own name, and not in street name through a broker or other nominee, may simply log in to
www.proxyvote.com
, the Internet site maintained by Broadridge Financial Solutions, Inc. and follow the step-by-step instructions; and
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stockholders whose shares are registered in street name through a broker or other nominee must first vote their shares using the Internet
at:
www.proxyvote.com
, the Internet site maintained by Broadridge Financial Solutions, Inc., and immediately after voting, fill out the consent form that appears on-screen at the end of the Internet voting procedure.
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The consent to receive stockholder communications through the Internet may be withdrawn at any time to
resume receiving stockholder communications in printed form.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR
THE STOCKHOLDER MEETING TO BE HELD JANUARY 19, 2017
The Notice, Proxy Statement and Annual Report on Form 10-K are available at
https://materials.proxyvote.com/23331A
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PROPOSAL ONE
ELECTION OF DIRECTORS
Our Board of Directors currently consists of five members who were elected at the 2016 Annual Meeting and will serve until the 2017 Annual Meeting and until their successors have been elected and
qualified.
The Nominating and Governance Committee recommended to the Board of Directors our five current directors as
director nominees, each of whom is listed below under the heading
Nominees for Director
. After review and consideration by the Board of Directors, the Board nominated Donald R. Horton, Barbara K. Allen, Brad S. Anderson, Michael
R. Buchanan and Michael W. Hewatt, as recommended by the Nominating and Governance Committee, for election as directors of D.R. Horton at the 2017 Annual Meeting.
Unless otherwise specified in the accompanying proxy, the shares voted by proxy will be voted for each of the persons named below as nominees for election as directors. Nominees who are elected as
directors will be elected for one-year terms and will serve until the next annual meeting of stockholders and their successors have been elected and qualified. We do not know of any reason why any of the nominees would be unable to serve. However,
if any of the nominees is unable to serve or for good cause will not serve as a director at the time of the 2017 Annual Meeting, the Board may designate a substitute nominee or reduce the size of the Board. If the Board designates a substitute
nominee, the persons named as proxies may vote FOR that substitute nominee.
The D.R. Horton Bylaws require that to
be elected, a director nominee must receive a majority of the votes cast with respect to such nominee in uncontested elections (the number of shares voted for a director nominee must exceed the number of votes cast against
that nominee). In a contested election, where the number of nominees exceeds the number of directors to be elected (which is not the case at the 2017 Annual Meeting), the directors will be elected by a plurality of the shares present in person or by
proxy and entitled to vote on the election of directors. Under the Corporate Governance Principles of the Company, any director who is not elected is required to tender his or her resignation to the Chairman of the Board within a reasonable time
following certification of the vote. The Nominating and Governance Committee, which is composed of only independent directors, will consider the resignation offer and make a recommendation to the Board as to whether to accept or reject the
resignation offer, or whether other action should be taken. The Board will act on the Nominating and Governance Committees recommendation within 90 days following certification of the election results. Thereafter, the Board will promptly
publicly disclose in a report filed with the Securities and Exchange Commission
(SEC)
its decision regarding the directors resignation offer (including the reason(s) for rejecting the resignation offer, if applicable).
The Board of Directors Unanimously Recommends that Stockholders Vote
FOR
Each of the Following Director Nominees.
5
Nominees for Director
The following is a summary of certain information regarding the nominees for election as directors.
DONALD R. HORTON,
age 66, director since 1991.
Mr. Horton has been executive Chairman of the
Board of D.R. Horton since it was formed in July 1991, and he was President and CEO from July 1991 through November 1998. He has been involved in the real estate and homebuilding industries since 1972, and he was the founder, sole or principal
stockholder, director and president of each of D.R. Hortons predecessor companies since their respective organization, which date from 1978 to 1990.
Key Director Qualifications
.
Mr. Hortons 38 years of extensive experience in the homebuilding industry provides valuable leadership to the Board and to
the Company. Mr. Horton brings to the Board his experience as founder of the Company, Chairman of the Board and former CEO and President of the Company and its predecessor companies. Mr. Horton is also the largest individual stockholder of the
Company. As founder of the Company, Mr. Horton has a unique understanding of all phases of the homebuilding business. Mr. Hortons leadership and strategic vision provides the Board and the Company with distinct advantages in the homebuilding
industry.
BARBARA K. ALLEN,
age 70, director since 2014.
Ms. Allen has
significant experience researching, analyzing and making investment decisions related to housing-related companies. Ms. Allen retired from Avondale Partners in July 2006 where she was a Partner and Housing, Construction and Retailing Analyst. From
February 1997 through December 2004, she was the Home Construction, Building Materials, Home Furnishing and DIY (Do It Yourself) Retailing Analyst for Natexis Bleichroeder, Inc. Ms. Allen was a Vice President, Equity Research for Donaldson, Lufkin
& Jenrette from January 1993 through January 1996. She served in other roles at Oppenheimer & Company, Kidder, Peabody, Inc., and Prudential Securities prior to January 1993. Ms. Allen has been a member of the Audit, Compensation and
Nominating and Governance Committees since 2014.
Key Director Qualifications
. Ms.
Allens extensive experience working as an analyst and consultant with housing-related companies provides valuable knowledge to the Board with regard to strategic decisions, including investment, operating and financing matters.
BRAD S. ANDERSON,
age 55, director since 1998.
Mr. Anderson has been an Executive Vice
President of CBRE Group, Inc., formerly CB Richard Ellis, Inc., an international real estate brokerage company, since 2009, and he has held various positions in Phoenix, Arizona with its predecessor, CB Commercial Real Estate Group, Inc., since
January 1987. He served as Interim Chairman of the Board of Continental Homes Holding Corp. from October 1997 through April 1998, when it merged into D.R. Horton, and he became a director of D.R. Horton at that time. Mr. Anderson has been a member
of both the Audit and Compensation Committees since 1998, and he has been a member of the Nominating and Governance Committee since November 2003.
Key Director Qualifications
.
Mr. Andersons extensive experience working with an international real estate brokerage company allows him to bring beneficial
insight and perspective to the Board, as a number of factors that affect the real estate brokerage industry also affect the homebuilding industry. Mr. Anderson also brings to the Board his valuable experience of formerly serving on another public
homebuilding companys board and serving on the Companys Board and its Committees since 1998.
MICHAEL R.
BUCHANAN,
age 69, director since 2003.
Mr. Buchanan has significant commercial banking experience with several banking institutions serving the real estate and homebuilding sectors. He retired from commercial
banking in March 2002. From March 2002 to March 2003, Mr. Buchanan was engaged as a senior advisor to Banc of America Securities. From 1998 to March 2002, Mr. Buchanan was a Managing Director of Bank of America, an executive officer position in
which he was head of its national real estate banking group. From 1990 to 1998, Mr. Buchanan was an Executive Vice President of NationsBank, which later merged with Bank of America. Mr. Buchanan is also a member of the Board of Directors and a
member of the capital committee and the audit committee of Piedmont Office Realty Trust, Inc., a real estate investment trust publicly traded on the NYSE. Mr. Buchanan was appointed to our Boards Audit Committee in July 2003, Nominating and
Governance Committee in November 2003 and Compensation Committee in January 2004.
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Key Director Qualifications
.
Mr. Buchanan is a
highly experienced commercial banker who served the real estate and homebuilding sectors. His experience in these areas allows him to provide the Board with both a broad-based and a granular perspective on the homebuilding industry. Mr. Buchanan
also brings his experience of serving on the board of a real estate investment trust, thereby providing the Board with additional perspective on the real estate industry and serving on a board of directors.
MICHAEL W. HEWATT,
age 67, director since 2005.
Mr. Hewatt is a certified public accountant
performing auditing and tax services as a sole practitioner. He has worked for Hewatt & Associates or its predecessor firms since 1980. From 1971 to 1979, Mr. Hewatt worked in the tax and audit areas at Coopers & Lybrand (now
PricewaterhouseCoopers LLP) and was an audit manager for five years during that period. Mr. Hewatt is a member of the American Institute of Certified Public Accountants, former member of the board of directors of the Texas Society of Certified
Public Accountants and former President of the Texas Society of Certified Public Accountants Fort Worth Chapter. Mr. Hewatt has been a director of D.R. Horton since 2005 and has been a member of the Audit, Compensation and
Nominating and Governance Committees since that time.
Key Director
Qualifications
.
Mr. Hewatt has extensive experience working as a certified public accountant for a national and local firm. This experience enables Mr. Hewatt to provide valuable perspective on accounting,
auditing and tax matters to the Board and its Committees.
Other Executive Officers
DAVID V. AULD,
age 60
, is President and Chief Executive Officer of D.R. Horton, positions he has held since October
2014. Mr. Auld was Executive Vice President and Chief Operating Officer from November 2013 through October 2014. Mr. Auld was Region President overseeing the Companys homebuilding operations in Florida, North and South Carolina, Georgia and
Alabama from 2005 to 2013. From 1988 to 2005, Mr. Auld served as the Division President of the Company and its predecessors Orlando Division. Prior to 1988, Mr. Auld worked for Texas American Bank and General Dynamics. Mr. Auld graduated from
Texas Tech University in 1978 with a bachelor of business administration degree in accounting.
MICHAEL J. MURRAY,
age
50
, is Executive Vice President and Chief Operating Officer of D.R. Horton, positions he has held since October 2014. Mr. Murray served as Senior Vice President of Business Development from 2012 through October
2014. From 2004 to 2012, Mr. Murray served as the Companys Vice President and Controller after joining the Company in 2002 as the Director of Internal Audit. He began his career at Price Waterhouse LLP (now PricewaterhouseCoopers LLP) and then
worked at several other companies in finance and accounting roles prior to joining the Company. Mr. Murray graduated from the University of Texas at Arlington in 1988 with a bachelor of business administration degree in accounting.
BILL W. WHEAT,
age 50
, is Executive Vice President and Chief Financial Officer of D.R. Horton, positions he has held
since 2003. Mr. Wheat was the Companys Senior Vice President and Controller from 2000 through 2003, after joining the Company in 1998 as an Accounting Manager. Mr. Wheat also served as a member of the Board of Directors of the Company from
October 2003 through January 2011. Mr. Wheat began his career at Price Waterhouse LLP (now PricewaterhouseCoopers LLP) and then worked at The Bombay Company in several financial and accounting roles prior to joining the Company. Mr. Wheat graduated
from Baylor University in 1988 with a bachelor of business administration degree in accounting and finance.
7
CORPORATE GOVERNANCE AND BOARD MATTERS
Corporate Governance Standards
Our Board of Directors has adopted a number of standards to comply with requirements of the Sarbanes-Oxley Act of 2002
(the Sarbanes-Oxley Act)
and the final rules of the NYSE and SEC
relating to the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act
(the Dodd-Frank Act)
and other corporate governance matters. Our Board has adopted the D.R. Horton Corporate Governance Principles
which contain a number of corporate governance initiatives designed to comply with the NYSE listing standards
(the NYSE Rules)
and the rules and regulations of the SEC
(the SEC Rules)
relating to corporate
governance. The significant corporate governance initiatives adopted by the Board of Directors are discussed below. The Corporate Governance Principles can be found under the Investor Relations and Corporate Governance links on our website at
www.drhorton.com.
Qualifications and Characteristics for Directors
The Nominating and Governance Committee utilizes a variety of methods for identifying nominees for director, including considering
potential director candidates who come to the Committees attention through current officers, directors, professional search firms, stockholders or other persons. Once a potential nominee has been identified, the Nominating and Governance
Committee evaluates whether the nominee has appropriate qualifications and characteristics to become a director in light of the current make-up of the Board of Directors. We do not have a formal or informal diversity policy regarding the selection
or qualification of directors. We believe that appropriate director qualifications and characteristics include having directors with diverse backgrounds, education, experiences, expertise and perspectives. These qualifications and characteristics
are discussed below.
Key Qualifications and Experiences.
As a leading national
homebuilding company, we believe certain qualifications and experiences are important to the overall composition of our Board. We do not require that each director possess each of the qualifications listed below, but rather we look to whether our
Board as a whole possesses these qualifications.
Real Estate Experience
.
We seek to have
directors with expertise or key experience in the real estate industry, which includes experience in homebuilding, land development, real estate brokerage and sales, commercial development and leasing, financing and banking in the real estate
industry or experience in analyzing or consulting in these key areas. These key qualifications enable our Board to understand key operational aspects related to our business of running a national homebuilding company.
Business, Management, Accounting and Finance Experience
.
We seek to have directors with
expertise or key experience in business, management, accounting, finance or similar positions. We believe these key qualifications are important to the Board as it oversees risks in the Companys key functional areas of homebuilding operations,
financing and liquidity, financial reporting, internal control and regulatory compliance, and compensation.
Strategic
Vision and Leadership
.
We seek to have directors with expertise or key experiences in positions that require strategic vision, leadership and decision making. We believe directors acquire these key
qualifications through experience as executives, managers, entrepreneurs, business owners, directors, consultants, analysts or advisors. We believe these key qualifications are important to the Board, as directors with these attributes provide sound
business judgment, leadership and strategic vision to the Board and the Company.
The key qualifications possessed by our
nominees are discussed under each nominees name and profile beginning on page 6.
Key
Characteristics.
In addition to the key qualifications and experiences discussed above, we also believe each member of the Board of Directors should have the following minimum characteristics:
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high personal and professional ethical standards, integrity and values;
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commitment to representing the long-term interests of the stockholders;
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practical wisdom, mature judgment and collegiality;
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objectivity and inquisitiveness; and
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willingness to offer his or her resignation in the event of any significant change in personal circumstances that could affect the discharge of his or
her responsibilities as a director, including a change in his or her principal job responsibilities.
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Ordinarily, directors who serve as chief executive officers or in equivalent positions for other companies should not serve on more than
one other board of a public company in addition to the D.R. Horton Board, and other directors should not serve on more than two other boards of public companies in addition to the D.R. Horton Board. Because of the value the Board places on having
directors who are knowledgeable about the Company and its operations, neither the Board nor the Nominating and Governance Committee believes that an arbitrary term limit on director service is appropriate.
Retirement Age Policy
On January 25, 2007, our Board adopted a retirement policy for directors. Under the policy, directors may not stand for re-election after they have reached the age of 75. Directors serving on the
Board on January 25, 2007, which include all current directors other than Barbara K. Allen, are exempt from this policy.
Majority Vote Standard and Resignation Policy
The Companys Bylaws provide that in an uncontested election of directors, a director nominee must receive a majority of the votes cast to be elected. Any current director who is not re-elected is
required to tender his or her resignation to the Chairman of the Board within a reasonable time following certification of the vote. Details regarding the majority vote standard and resignation policy are discussed under
Proposal
One
Election of Directors
on page 5.
Procedures for Nominating or
Recommending for Nomination Candidates for Director
Our Bylaws provide that any stockholder may make nominations for
the election of directors if notice of such nominations is delivered to, or mailed and received at, the principal executive offices of D.R. Horton not later than the close of business on the 90th calendar day or earlier than the close of business on
the 120th calendar day prior to the first anniversary of the preceding years annual meeting. However, in the event that the date of the annual meeting is changed by more than 30 calendar days from the anniversary date of the preceding
years meeting, for notice by the stockholder to be timely, it must be so delivered not earlier than the close of business on the 120th calendar day prior to such meeting and not later than the close of business on the later of the 90th
calendar day prior to such meeting or the 10th calendar day following the day on which public disclosure of the date of such meeting is made. Such public disclosure is defined to mean a press release reported by the Dow Jones News Service,
Associated Press or a comparable national news service or a document publicly filed by the Company with the SEC pursuant to Sections 13, 14 or 15(d) of the Securities Exchange Act of 1934, as amended
(the Exchange Act).
In
addition, the notice must include information specified in our Bylaws, including information concerning the nominee, the stockholder and the beneficial owner, as the case may be. Because no such nominations have been made in accordance with our
Bylaws, only the nominations of the Board of Directors may be voted upon at the 2017 Annual Meeting.
In addition, the
Nominating and Governance Committee has adopted a policy permitting stockholders to recommend candidates for director for consideration by the committee. The Nominating and Governance Committee will consider candidates recommended by stockholders on
the same basis as candidates identified through other means. Stockholders wishing to recommend candidates for election must give notice to the Nominating and Governance Committee by following the same deadlines for notice to submit a nomination
outlined in our Bylaws and described above. Each notice must set forth the same information required by our Bylaws to submit a nomination. All recommended candidates shall, at a minimum, possess the characteristics for directors discussed above. The
Nominating and Governance Committee may request additional information to assist in the evaluation of the candidacy of such person.
9
Director Independence
Our Board of Directors is composed of a majority of independent directors in accordance with the NYSE Rules. Our Board made the
independence determination of its members based on the
Independence Standards
discussed below.
Our Board
has adopted a set of
Independence Standards,
consistent with the NYSE Rules, to aid it in determining whether a member of the Board is independent under the NYSE Rules. In accordance with these Independence Standards, a director
must not have a direct or indirect material relationship with the Company or its management, other than as a director. The Independence Standards specify the criteria by which the independence of our directors will be determined, including strict
guidelines for directors and their immediate family members with respect to past employment or affiliation with the Company, its management or its independent auditor.
The Independence Standards are contained in the Corporate Governance Principles set forth on our website, www.drhorton.com, under the Investor Relations and Corporate Governance links. These include the
following:
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A director who is an employee or whose immediate family member is an executive officer of D.R. Horton is not independent until three years after
the end of such employment relationship.
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A director who receives, or whose immediate family member receives, more than $120,000 per year in direct compensation from D.R. Horton, other than
director and committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service), is not independent until three years after he or she ceases to receive
more than $120,000 per year in compensation. Compensation received by an immediate family member for service as a non-executive employee or non-member of senior management of D.R. Horton will not be considered in determining independence under this
test.
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A director is not independent if (i) the director or an immediate family member is a current partner of D.R. Hortons external audit firm,
(ii) the director is a current employee of such firm, (iii) the directors immediate family member is a current employee of such firm and personally works on D.R. Hortons audit, or (iv) the director or an immediate
family member was within the last three years (but is no longer) a partner or employee of such firm and personally worked on D.R. Hortons audit within that time.
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A director who is employed, or whose immediate family member is employed, as an executive officer of another company where any of D.R. Hortons
present executives serves on that companys compensation committee is not independent until three years after the end of such service or employment relationship.
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A director who is an executive officer or an employee, or whose immediate family member is an executive officer, of a company that makes payments to,
or receives payments from, D.R. Horton for property or services in an amount which, in any single fiscal year, exceeds the greater of $1 million or 2% of such other companys consolidated gross revenues, is not independent until three
years after falling below such threshold.
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If a director serves as an executive officer, director or trustee of a charitable or educational organization and D.R. Hortons contributions to
the organization are less than $500,000, then the relationship will not be considered to be a material relationship that would impair a directors independence.
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For purposes of these Independence Standards, an
immediate family member
includes a directors spouse, parents,
children, siblings, mother and father-in-law, sons and daughters-in-law, brothers and sisters-in-law, and anyone (other than domestic employees) who shares the directors home.
Audit Committee Independence, Financial Literacy and Audit Committee Financial Expert
In addition to being independent based on the Independence Standards, the NYSE Rules require that each member of an audit committee
satisfy additional independence and financial literacy requirements and at least one of these members must satisfy the additional requirement of having accounting or related financial management expertise. This additional requirement can be
satisfied by the Board determining that at least one Audit Committee member is an
audit committee financial expert
within the meaning of the SEC Rules.
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Accordingly, the Corporate Governance Principles contain a set of standards that relate to audit committee independence, financial literacy and audit committee accounting and financial management
expertise. Generally, the additional independence standard provides that (i) a member of the Audit Committee or his or her immediate family members are prohibited from receiving any direct or indirect compensation or fee from the Company, its
subsidiaries or its affiliates, and (ii) he or she may not be an affiliated person of the Company or any of its subsidiaries. Generally, the financial literacy standard provides that the Board, in its business judgment, shall determine if each
member is financially literate, taking into account factors such as the members education, experience and ability to read and understand financial statements of public companies. Also, audit committee financial experts must have five
additional attributes, which are (i) an understanding of generally accepted accounting principles and financial statements, (ii) the ability to assess the general application of such principles in connection with the accounting for
estimates, accruals and reserves, (iii) experience preparing, auditing, analyzing or evaluating financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity
of issues that can reasonably be expected to be raised by the Companys financial statements, or experience actively supervising one or more persons engaged in such activities, (iv) an understanding of internal control over financial
reporting and (v) an understanding of audit committee functions. Altogether, attributes (i) through (v) are referred to as the
Financial Expert Attributes.
The audit committee financial expert standards are set
forth in the Corporate Governance Principles.
Compensation Committee Independence
In addition to being independent based on the Independence Standards, the NYSE Rules require that each member of a compensation committee
satisfy additional independence requirements. The NYSE Rules require that the Board consider all factors specifically relevant to determining whether a director has a relationship to the Company that is material to that directors ability to be
independent from management in connection with the duties of a compensation committee member, including, but not limited to (i) the source of compensation of such director, including any consulting, advisory or other compensatory fee paid by the
Company to such director and (ii) whether such director is affiliated with the Company, a subsidiary of the Company or an affiliate of a subsidiary of the Company.
Board Determinations
Based on the independence, financial literacy
and financial expert standards discussed above, the Board has determined that Barbara K. Allen, Brad S. Anderson, Michael R. Buchanan, and Michael W. Hewatt are (i) independent, for purposes of serving as independent members of the Board of
Directors and the Nominating and Governance Committees, (ii) independent, for purposes of serving as independent members on the Audit Committee and the Compensation Committee, and (iii) financially literate, for purposes of serving on the
Audit Committee. The Board has also determined, as set forth below, that Mr. Hewatt and Mr. Buchanan each have the Financial Expert Attributes described above.
Mr.
Hewatt.
Mr. Hewatt acquired the Financial Expert Attributes primarily through his 45 years of experience working as a certified public accountant
for Coopers & Lybrand LLP and Hewatt & Associates, CPAs and its predecessor and successor entities, as applicable. Mr. Hewatts experience as an auditor provided him active experience in designing and conducting audits and
reviewing financial statements, which developed his understanding of generally accepted accounting principles and financial statements as well as his abilities to assess the application of such principles in accounting for estimates, accruals and
reserves and to evaluate related internal control structures. Mr. Hewatts active status as a certified public accountant requires him to stay current on pronouncements and advisory notices issued by accounting, auditing and tax regulatory
boards and organizations. Mr. Hewatt has additional experience in providing management advisory, tax advisory and tax preparation services, which has provided him with a strong background in the Internal Revenue Code (the
Code
)
and in dealing with the Internal Revenue Service. Mr. Hewatt has prepared and issued audit and management advisory reports to the boards of directors of his clients, whereby he has gained an understanding of the functioning of boards of
directors and related committees. Mr. Hewatts clients have included public and private companies, governmental organizations and non-profit organizations.
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Mr. Buchanan.
Mr. Buchanan acquired the Financial Expert
Attributes primarily through his experience as a commercial banker in the real estate and homebuilding sectors, including serving as head of Bank of Americas national real estate group. Mr. Buchanans responsibilities as a banker
required him to analyze and evaluate financial statements to make credit and lending decisions. In this regard, he developed significant expertise in understanding the integrity of the financial information used to prepare financial statements and
how such information should be used to analyze and evaluate a companys financial condition and its ability to meet the companys debt obligations. As head of the national real estate group at Bank of America, Mr. Buchanan also
actively supervised others in conducting financial statement and financial condition analysis and evaluation.
As provided by
the safe harbor contained in the SEC Rules, our audit committee financial experts will not be deemed
experts
for any purpose as a result of being so designated. Such designation does not impose on such persons any duties,
obligations or liabilities that are greater than the duties, obligations and liabilities imposed on such persons as members of the Audit Committee or the Board of Directors in the absence of such designation, and such designation does not affect the
duties, obligations or liabilities of any other member of the Audit Committee or the Board of Directors.
The Board also
determined that Mr. Horton, a director nominee, is not independent because he is an executive officer.
Code of Ethical
Conduct for the CEO, CFO and Senior Financial Officers
In accordance with SEC Rules, the Audit Committee and the Board
have adopted the
Code of Ethical Conduct for the CEO, CFO and Senior Financial Officers
. The Board believes that these individuals must set an exemplary standard of conduct for D.R. Horton, particularly in the areas of accounting, internal
accounting control, auditing and finance. The ethics code sets forth ethical standards the designated officers must adhere to and other aspects of accounting, auditing and financial compliance. The full text of the
Code of Ethical Conduct for the
CEO, CFO and Senior Financial Officers
has been posted to the Companys website, www.drhorton.com, under the Investor Relations and Corporate Governance links. Information relating to any amendment to or waiver of a provision of the
Code
of Ethical Conduct for the CEO, CFO and Senior Financial Officers
will be disclosed on the website within four business days of such amendment or waiver.
Corporate Code of Business Conduct and Ethics
The Board of
Directors has adopted a
Corporate Code of Business Conduct and Ethics
for employees and directors of D.R. Horton in accordance with the NYSE Rules. The Board adopted the
Corporate Code of Business Conduct and Ethics
to provide guidance
to the Board and management in areas of ethical business conduct and risk and to provide guidance to employees and directors by helping them recognize and deal with ethical issues including, but not limited to, (i) conflicts of interest,
(ii) corporate opportunities, (iii) confidentiality, (iv) fair dealing, (v) protection of corporate assets, (vi) compliance with rules and regulations, including insider trading of securities, and (vii) confidential
reporting of unethical behavior and hotline telephone numbers. The
Corporate Code of Business Conduct and Ethics
can be found on the Companys website under the Investor Relations and Corporate Governance links.
Complaint Procedures For Accounting, Internal Control, Auditing and Financial Matters
In accordance with SEC Rules, the Audit Committee has established procedures for (i) the receipt, retention and treatment of
complaints regarding accounting, internal control, auditing or financial matters (collectively,
Accounting Matters
) and (ii) the confidential, anonymous submission by employees of concerns regarding questionable Accounting
Matters. The Audit Committee oversees treatment of complaints and concerns in this area. The full text of the
Complaint Procedures For Accounting, Internal Control, Auditing and Financial Matters
has been posted to the Companys website
under the Investor Relations and Corporate Governance links.
Executive Sessions of the Board of Directors
In accordance with the NYSE Rules, the non-management members of the Board of Directors have held and will continue to
hold regularly scheduled executive sessions of the non-management directors, each of whom is
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independent. Michael R. Buchanan, Chairman of the Nominating and Governance Committee, presides at these executive sessions. During fiscal 2016, the non-management directors met four times in
executive session, without members of management present.
Communications with the Board of Directors and Stockholder
Engagement
Stockholders and other interested parties can communicate with any member of our Board by sending the
communication to the Chairman of the Nominating and Governance Committee, who also serves as the Presiding Director. Currently, Mr. Buchanan serves as our Presiding Director. Send communications to: Presiding Director c/o Thomas B.
Montano, Vice President Corporate Counsel and Corporate Compliance Officer, D.R. Horton, Inc., 301 Commerce Street, Suite 500, Fort Worth, Texas 76102. Our Corporate Counsel will review the communications and determine if
such communications come within the purview of a Board committee or Board member(s). After such determination, these communications will be promptly forwarded to such Board member(s) or the Presiding Director as applicable. The Presiding Director
reports these communications to the Board on a quarterly basis. Further information may be obtained on the Companys website under the Investor Relations and Corporate Governance links.
Our executive management team actively engages in communications throughout the year with stockholders of all ownership levels. Generally
these communications involve participating in investor presentations and question and answer sessions, meeting with investors and stockholders one-on-one and in small groups, and responding to investor and stockholder letters, emails and telephone
calls. Managements discussions with stockholders and the investment community address numerous aspects of our business and matters of importance or concern to our stockholders. When investors or stockholders ask our executive team to share an
observation, question or comment with our Board, they do, so that the Board can then consider the matter as part of its governance responsibilities.
Board Leadership Structure, Boards Role in Risk Oversight and Board and Committee Meetings
Board Leadership Structure
Our Board of Directors operates under
the leadership of our executive Chairman of the Board and founder, Donald R. Horton. Mr. Horton has been executive Chairman of the Board of the Company and its predecessor companies since 1978. We do not have a policy that requires the positions of
Chairman of the Board and CEO be separated, but we have had a separate Chairman of the Board and CEO since 1998. We believe the separation of these positions is appropriate at this time as it allows our executive Chairman to focus on overall
strategy and vision while leading the Board and the Company in overseeing key risk and management issues facing the Board and the Company. We further believe that Mr. Hortons extensive experience in the homebuilding industry enables him to
provide valuable insight and leadership to both the Board and the Company. Mr. Hortons role as an executive officer also benefits the Board and the Company as he works with key officers of the Company to implement the Boards strategies
and oversight functions on a daily basis.
Our Nominating and Governance Committee, which is composed of four independent
directors, oversees our corporate governance, and we have taken a number of measures that collectively provide for our effective corporate governance. Our independent directors meet regularly throughout the year in executive session to encourage
open communication and discussion among the independent directors without the presence of management. The Presiding Director chairs these meetings. Overall, the Board is composed of four independent directors and one management director. The Board
has designated four primary committees that are responsible for various duties of the Board or its Committees, as applicable. The four committees of the Board are the Nominating and Governance Committee, Audit Committee, Compensation Committee, and
Executive Committee. The Committees of the Board are discussed in more detail under the heading
Committees of the Board
on page 16.
Boards Role in Risk Oversight
Our Board and Board Committees
have overall risk oversight responsibility of the Company, but do not provide day-to-day risk management of the Company which is the responsibility of our key officers and
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managers. The risk management process established and overseen by the Companys executive management includes centralized corporate review of the market, real estate, financial, legal and
environmental risks associated with each transaction and management approval of funds disbursed. Because of the manner in which the Board and Committees oversee risk, the Boards role in risk oversight does not have an effect on the
Boards leadership structure. Risk oversight is reviewed in the risk areas of the Company listed below.
Homebuilding Operations
.
Our ability to build and sell homes that meet buyer demand is
determined by our ability to control, buy and develop land and lots in a cost effective manner. As a result, we use substantial financial resources to control, buy and develop land and lots. We control the amount of financial resources used in the
acquisition of land and lots through a process which requires divisional, regional and corporate approval before financial resources are authorized for this purpose. Corporate approval includes review by corporate legal and accounting personnel and
approval by our Chairman, CEO or executive officers. Our chief financial officer and chief legal officer both report to the Board regarding our process of reviewing, approving and funding land and lot acquisitions. We believe this process adequately
manages the risk related to our land and lot acquisitions.
Financing and
Liquidity
.
Our financing and liquidity positions may fluctuate due to changes in the homebuilding industry and in home sales demand. Our Board oversees financing and liquidity risk by regularly monitoring our
financial and liquidity position to ensure we maintain the financial resources needed to fund our homebuilding operations and other financing and operating expenses. At each quarterly meeting, management reviews information related to the
Companys financial and liquidity position with the Board, which includes projected short and long-term financing and liquidity needs. To further manage risk in this area, the Board approves a limit on the amount of debt and equity that may be
repurchased each year. Any debt or equity issuance or debt or equity repurchase above the approved limit must be separately approved by the Board. We believe these procedures provide adequate risk oversight of financing and liquidity matters
affecting the Company.
Financial Reporting, Internal Control and Regulatory Compliance
.
Audit Committee Risk Oversight
.
The Audit Committee of the Board provides risk oversight with respect
to financial reporting, internal control over financial reporting, internal audit and related regulatory compliance matters. Each quarter, our Audit Committee discusses with our independent auditor its review of our interim financial information
and, after our fiscal year-end, discusses its audit of our annual consolidated financial statements, including our procedures on internal control over financial reporting. Also, during the fiscal year, our Audit Committee meets in private session
(without the presence of management) with our independent auditor to discuss any matters related to the audit of our annual consolidated financial statements and review of our internal control over financial reporting.
Each quarter, our Audit Committee meets with our director of internal audit and reviews the results of the internal audits of the
Companys operating divisions and other key control areas performed during the quarter. Each year, the Audit Committee reviews and approves the internal audit plan for the forthcoming fiscal year. The internal audit plan is designed using a
risk-based approach focusing on key risk areas in the Companys homebuilding and financial services operations and other key control areas. During the fiscal year, the Audit Committee meets in private session (without the presence of
management) with our internal audit director.
Throughout the fiscal year, our Audit Committee invites guest speakers to give
presentations on a variety of topics related to recent or anticipated changes to accounting rules and regulations, tax laws and regulations, corporate governance and financial reform rules and regulations. By staying informed, the Audit Committee is
able to oversee the Companys compliance with regulatory issues in these areas, and to discuss with management any actions necessary to maintain or become compliant with such regulatory matters.
Compensation Risk Oversight
.
The Compensation Committee provides risk oversight with respect
to compensation of the Companys employees, including the named executive officers and other key officers, with the assistance of the Board. We regularly review the Companys compensation policies and practices and believe that our
compensation policies and practices do not create risks that are reasonably likely to have a material adverse effect on the Company. We believe we have established a short and long-term compensation program
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that properly incentivizes desired performance and mitigates inappropriate risk-taking. We believe the following compensation components help us achieve this balance:
Base Salary:
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We set fixed base salaries in amounts that we believe are commensurate with the level of experience, responsibility and tenure of the executive. We believe that providing an appropriate base
salary mitigates inappropriate risk-taking by providing a fixed and certain level of semi-monthly income.
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Annual Bonus Plan:
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With respect to our Chairman, CEO and COO, we provide annual incentive bonus opportunities based on various performance goals. Recent performance goals were based on pre-tax income. Our CFO is
awarded an annual discretionary bonus based on his responsibilities. Final payout of these annual awards is at the discretion of the Compensation Committee. Their discretion can be used to reduce payouts when the Committee believes levels achieved
result in an inappropriately high level of annual pay when balanced with the total compensation package and taking into consideration the Companys and the executives performance. We believe we mitigate risk related to the annual
performance goals through the approval process with respect to the final payout of these awards, the quarterly review of our financial statements by our management and through our internal control over financial reporting.
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Long-Term Bonus Plan:
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With respect to our Chairman, CEO, COO and CFO, we use a combination of equity awards in the form of performance restricted stock units and time-based restricted stock units to incentivize
performance on key operational and financial goals important to the Company and its stockholders over a period longer than one fiscal year. We believe the long-term nature of these performance awards mitigates risk because the level of performance
achieved is analyzed over several fiscal years (typically three), thereby allowing us to take into account any short-term or one-time events that may not be sustainable over a longer period.
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Stock Options:
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We use stock options as a component of long-term compensation to incent performance and to serve as a retention tool. We believe time-based vesting of our stock options creates a continuing
incentive to grow value in the Company stock price, balancing out the risk taking incentives that might otherwise apply to performance-based options. We mitigate risk related to granting stock options by not granting stock options in coordination
with the release of material non-public information. Further, we have several levels of review when stock options are approved and granted, including approval by the Compensation Committee and review by corporate legal, human resources and
accounting personnel to ensure the terms of the stock options approved match the terms of the stock options issued.
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Restricted Stock Units:
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We use restricted stock units as a component of long-term compensation to incent performance and to serve as a retention tool. We believe time-based vesting of our restricted stock units
creates a continuing incentive to grow value in the Company stock price, balancing out the risk taking incentives that might otherwise apply to performance-based units. We mitigate risk related to granting restricted stock units by not granting
restricted stock units in coordination with the release of material non-public information. Further, we have several levels of review when restricted stock units are approved and granted, including approval by the Compensation Committee and review
by corporate legal, human
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resources and accounting personnel to ensure the terms of the restricted stock units approved match the terms of the restricted stock units issued.
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Performance Goals:
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The Compensation Committee has selected a variety of short and long-term operating and financial performance goals to incent performance and to drive increased Company operating and financial
results on these goals. The performance goals tied to the annual cash bonus and restricted stock unit bonus programs relate to consolidated pre-tax income, return on investment, gross profit, selling, general and administrative expense and total
shareholder return. The Company has established appropriate controls around the determination of the components that define these goals which mitigate risk related to monitoring the actual performance of these goals.
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Discretion and Clawback:
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We further mitigate compensation risk by giving the Compensation Committee sole discretion to
reduce the final payout on a portion of the total compensation awarded. The Compensation
Committee maintains sole discretion to reduce the final payout for the Annual Bonus Plan. The Committee does not have sole discretion with respect to the annual salary, stock options and time-based restricted stock units because these items are
fixed. Additionally, the Committee does not have discretion with respect to the performance-based restricted stock units.
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Our executive officers are subject to the clawback provisions of the Sarbanes-Oxley Act. Our executive officers that receive performance-based compensation are subject
to appropriate clawback provisions to comply with enacted federal legislation regarding clawback provisions on performance-based executive compensation.
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Hedging Company Securities:
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Our directors and executive officers are prohibited from engaging in short sales of our securities or from engaging in transactions designed to hedge the value of our securities held by them.
Our directors and executive officers have not pledged as collateral our securities held by them.
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Board
Meetings
During our fiscal year ended September 30, 2016
(fiscal 2016)
, our Board of Directors held
four meetings and acted once by written consent. Each current director attended all of the Board meetings and all of the committee meetings for the committees on which he or she served during fiscal 2016. Executive sessions of our non-management
directors, all of whom are independent, are regularly held. The sessions are scheduled and chaired by the Chairman of the Nominating and Governance Committee, who also acts as our Presiding Director. Although we do not have a policy with respect to
director attendance at our annual meeting of stockholders, the 2016 Annual Meeting was attended by each of our directors.
Committees of the Board
The Board of Directors has four committees: the Executive Committee, the Audit Committee, the Compensation Committee and the Nominating and Governance Committee. The Board of Directors has adopted
governing Charters for each of the Audit Committee, the Compensation Committee, and the Nominating and Governance Committee. Each of the Charters is posted on the Companys website under the Investor Relations and Corporate Governance links.
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Executive Committee
The Executive Committee, while the Board is not in session, possesses all of the powers and may carry out all of the duties of the Board
of Directors in the management of the business of D.R. Horton which by state or federal law or the NYSE Rules may be delegated to it by the Board of Directors. During fiscal 2016, the Executive Committee was composed of Donald R. Horton.
Nominating and Governance Committee
The members of the Nominating and Governance Committee are Michael R. Buchanan, Barbara K. Allen, Brad S. Anderson and Michael W. Hewatt, with Mr. Buchanan serving as Chairman. Each committee member
has been determined by the Board to be independent in accordance with the NYSE Rules. During fiscal 2016, the Nominating and Governance Committee met three times and took no action by written consent, and each current member attended all of the
meetings in person or by telephone conference.
The Nominating and Governance Committee Charter has been posted to the
Companys website under the Investor Relations and Corporate Governance links. The Nominating and Governance Committees primary purpose is to provide assistance to the Board of Directors in fulfilling its responsibility to the
stockholders by:
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identifying individuals qualified to become directors consistent with criteria approved by the Board and recommending to the Board the qualified
candidates for directorships to be filled by the Board or by the stockholders;
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developing and recommending to the Board a set of corporate governance principles applicable to the Company; and
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overseeing the evaluation of the Board and key management.
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Compensation Committee
The members of
the Compensation Committee are Brad S. Anderson, Barbara K. Allen, Michael R. Buchanan and Michael W. Hewatt, with Mr. Anderson serving as Chairman. Each Compensation Committee member has been determined to be independent under the NYSE
Rules, an outside director under Section 162(m) of the Code, and a non-employee director under Rule 16b-3 under the Exchange Act. During fiscal 2016, the Compensation Committee met seven times and took no action by
written consent, and each current member attended all of the meetings in person or by telephone conference.
The Compensation
Committee Charter has been posted to the Companys website under the Investor Relations and Corporate Governance links. The Charter provides that the Compensation Committee shall assist the Board of Directors in discharging its responsibility
to the stockholders with respect to the Companys compensation programs and compensation of the Companys executive officers.
The Compensation Committee Charter also sets forth the responsibilities and duties of the committee with regard to reviewing the compensation for the CEO and other executive officers, monitoring incentive
and equity-based compensation plans, preparing an annual report on executive compensation and reporting to the Board of Directors.
Audit Committee
The members of the Audit Committee are Michael W.
Hewatt, Barbara K. Allen, Brad S. Anderson and Michael R. Buchanan, with Mr. Hewatt serving as Chairman. During fiscal 2016, the Audit Committee met four times and took no action by written consent, and each current member attended all of the
meetings in person or by telephone conference.
As discussed under the heading
Corporate Governance Standards
on page 8 of this Proxy Statement, each member of the Audit Committee has been determined by the Board to be
independent
and
financially literate
in accordance with NYSE Rules, the SEC Rules, and the
corporate governance and independence
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standards adopted by the Board. Also, the Board has determined that both Mr. Buchanan and Mr. Hewatt are
audit committee financial experts
under such rules, regulations
and standards as set forth in the Companys Corporate Governance Principles posted on our website.
The Audit Committee
operates pursuant to an Audit Committee Charter, which was approved and adopted by the Board of Directors and posted to the Companys website under the Investor Relations and Corporate Governance links. The duties and responsibilities of the
Audit Committee are set forth in its Charter. The Audit Committees primary purposes are to:
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assist the Board in fulfilling its oversight responsibilities relating to the:
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integrity of the Companys financial statements;
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Companys compliance with legal and regulatory requirements;
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independent auditors qualifications and independence; and
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performance of the Companys internal audit function and independent auditor; and
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prepare an Audit Committee report to be included in the Companys annual proxy statement.
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Further discussion regarding the Audit Committees processes and procedures regarding the Companys audited consolidated
financial statements for the year ended September 30, 2016 and other matters are discussed in the Audit Committee Report on page 56 of this Proxy Statement.
Compensation of Directors
Our Board of
Directors approves the annual compensation and fees paid to our non-management directors, each of whom is listed in the
Director Compensation for Fiscal 2016
table. Traditionally, the Board has strived to set non-management
director compensation at a reasonable level of cash and equity compensation. Over the last three fiscal years, the total annual compensation of directors has varied primarily due to the granting of long-term equity awards in certain years. Our
Chairman, a member of executive management, does not receive any compensation for serving on the Board of Directors.
Director Fees Paid in Cash
.
In fiscal 2016, each non-management director received $15,000 for
each Board meeting attended in person or by telephone conference, paid quarterly and not to exceed $60,000 per year. In addition, each non-management director who served on a committee of the Board of Directors received an annual fee of $5,000 per
committee, paid quarterly, and each non-management director who served as the Chairman of a committee of the Board of Directors received an annual fee of $2,500 per committee, paid quarterly.
Director Retainer Fees Paid in Restricted Stock Units
. Our non-management directors received retainer
fees paid in the form of restricted stock units that vest annually in equal installments over three years. In January 2016, Ms. Allen, Mr. Anderson, Mr. Buchanan and Mr. Hewatt each received 12,000 restricted stock units as reflected in the Director
Compensation table on page 19.
Restricted Stock Units
.
When a new non-management
director joins our Board, the Board of Directors may award restricted stock units to the new non-management director. In addition to the initial grant received upon joining the Board, we have awarded restricted stock units to our non-management
directors at other times to balance the mix of non-management director compensation between cash and equity. Traditionally, these restricted stock units have vested over five years. There were no restricted stock units awarded to our non-management
directors during fiscal 2016 other than the retainer restricted stock units discussed above.
Stock
Options
.
When a new non-management director joins our Board, he or she traditionally has been awarded stock options. These stock options have an exercise price equal to the closing price of our common stock on
the date of approval and grant. Traditionally, these stock options have vested over five years and have a ten-year term. In addition to the initial grant received upon joining the Board, we have awarded stock options to non-management directors at
other times, which have ranged from one-year to five-year intervals. There were no stock options granted to non-management directors during fiscal 2016 or fiscal 2015.
18
Expenses and Health Care Plan
. Each non-management
director is entitled to reimbursement for reasonable expenses relating to their service on the Board and any committee, including travel, meals and other related expenses. Each non-management director is eligible to participate in the Companys
health care plan and Ms. Allen, Mr. Buchanan and Mr. Hewatt elected to participate in the plan in fiscal 2016.
Director Compensation for Fiscal 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
(1)
|
|
Fees Earned
or
Paid in Cash
(2)
|
|
|
Stock
Awards
(3)
|
|
|
Option
Awards
(4)
|
|
|
All Other
Compensation
(5)
|
|
|
Total
|
|
Barbara K. Allen
|
|
$
|
75,000
|
|
|
$
|
309,960
|
|
|
|
|
|
|
|
|
|
|
$
|
384,960
|
|
Brad S. Anderson
|
|
$
|
77,500
|
|
|
$
|
309,960
|
|
|
|
|
|
|
|
|
|
|
$
|
387,460
|
|
Michael R. Buchanan
|
|
$
|
77,500
|
|
|
$
|
309,960
|
|
|
|
|
|
|
|
|
|
|
$
|
387,460
|
|
Michael W. Hewatt
|
|
$
|
77,500
|
|
|
$
|
309,960
|
|
|
|
|
|
|
$
|
1,867
|
|
|
$
|
389,327
|
|
(1)
|
During fiscal 2016, the Company paid director fees only to non-management directors.
|
(2)
|
Amounts represent non-management director fees paid in cash during fiscal 2016.
|
(3)
|
Amount represents the grant date fair value of $25.83 per unit for the 12,000 restricted stock units granted to each non-management director on January 21, 2016. The
grant date fair value of the restricted stock units was determined in accordance with accounting guidance for share-based payments. The Company recognizes expense for this award over its three-year vesting period.
|
|
As of September 30, 2016, each non-management director held the following number of unvested restricted stock units:
|
|
|
|
Name
|
|
Unvested
Restricted Stock
Units
|
Barbara K. Allen
|
|
17,983
|
Brad S. Anderson
|
|
15,760
|
Michael R. Buchanan
|
|
15,760
|
Michael W. Hewatt
|
|
15,760
|
(4)
|
The non-management directors did not receive stock option awards during fiscal 2016. As of September 30, 2016, each non-management director held the following number of
outstanding vested and unvested stock options:
|
|
|
|
|
|
|
|
Outstanding Stock Options
|
Name
|
|
Vested
|
|
Unvested
|
Barbara K. Allen
|
|
|
|
5,000
|
Brad S. Anderson
|
|
38,000
|
|
2,000
|
Michael R. Buchanan
|
|
12,000
|
|
2,000
|
Michael W. Hewatt
|
|
18,000
|
|
2,000
|
(5)
|
Amount represents the participants portion of the group health care plan premium paid by the Company.
|
19
BENEFICIAL OWNERSHIP OF COMMON STOCK
Management
The following table shows the beneficial ownership of the common stock of D.R. Horton as of November 28, 2016 by (i) each director, (ii) each named executive officer, and (iii) all
directors and executive officers as a group. Unless stated otherwise, the shares are owned directly and the named beneficial owners possess sole voting and investment power with respect to the shares set forth in the table. The address for each
beneficial owner in the table below is c/o D.R. Horton, Inc., 301 Commerce Street, Suite 500, Fort Worth, Texas 76102.
|
|
|
|
|
|
|
|
|
|
|
Amount and Nature of
Common
Stock
Beneficially Owned
(1)
|
|
Name of Beneficial Owner
|
|
Number
of Shares
Beneficially Owned
|
|
|
Percent
of
Class
(2)
|
|
Donald R. Horton
|
|
|
26,162,879
|
(3)
|
|
|
6.99%
|
|
Barbara K. Allen
|
|
|
11,873
|
|
|
|
*
|
|
Brad S. Anderson
|
|
|
63,888
|
|
|
|
*
|
|
David V. Auld
|
|
|
261,287
|
|
|
|
*
|
|
Michael R. Buchanan
|
|
|
26,940
|
|
|
|
*
|
|
Michael W. Hewatt
|
|
|
27,000
|
|
|
|
*
|
|
Michael J. Murray
|
|
|
155,400
|
|
|
|
*
|
|
Bill W. Wheat
|
|
|
274,042
|
|
|
|
*
|
|
All directors and executive officers as a group (8 persons)
|
|
|
26,983,309
|
|
|
|
7.20%
|
|
|
A named executive officer.
|
(1)
|
Beneficial ownership includes the following shares which the executive officers and directors could acquire by exercising stock options on or within 60 days after
November 28, 2016: Mr. Horton: 1,150,000, Mr. Anderson: 38,000, Mr. Auld: 180,000, Mr. Buchanan: 12,000, Mr. Hewatt: 18,000, Mr. Murray: 145,000, and Mr. Wheat: 184,000.
|
The beneficial ownership also includes the following restricted stock units that vest on or within 60 days after November 28, 2016: Ms.
Allen: 6,223, Mr. Anderson: 4,000, Mr. Buchanan: 4,000, and Mr. Hewatt: 4,000.
For all directors and executive officers as a
group, these stock options and restricted stock units represent an aggregate of 1,745,223 shares.
(2)
|
The percentages are calculated based on 373,225,734 issued and outstanding shares on November 28, 2016. For each person, separately, his or her percentage was
calculated by including his or her stock options and restricted stock units set forth in note (1) in both the numerator and denominator, and for the group, the percentage was calculated by including the 1,745,223 stock options and restricted
stock units set forth in note (1) in both the numerator and denominator.
|
(3)
|
These shares do not include (i) 2,334,596 shares directly owned by Donald Ryan Horton, an adult son of Mr. Horton, (ii) 2,286,507 shares directly
owned by Douglas Reagan Horton, an adult son of Mr. Horton, (iii) 1,179,795 shares held by the Donald Ryan Horton Trust, (iv) 1,179,795 shares held by the Douglas Reagan Horton Trust, (v) 1,368,005 shares held by
the Martha Elizabeth Horton Trust, and (vi) 1,499,984 shares held by the Donald Ray Horton Trust. Mr. Horton disclaims any beneficial interest in these shares. These trusts were established by Mr. Horton and his wife for the
benefit of their descendants. Terrill J. Horton serves as the sole trustee of these trusts. Terrill J. Horton is a retired director of the Company and the brother of Donald R. Horton.
|
20
Certain Other Beneficial Owners
Based on Schedule 13G filings under the Exchange Act, available as of November 28, 2016, the only other known beneficial owners of more
than 5% of D.R. Horton common stock outstanding were the following.
|
|
|
|
|
|
|
|
|
|
|
Shares Beneficially Owned
|
|
Name and Address of Beneficial
Owner
|
|
Number
|
|
|
Percent
|
|
The Vanguard Group
(1)
|
|
|
29,670,164
|
|
|
|
8.02%
|
|
100 Vanguard Blvd.
|
|
|
|
|
|
|
|
|
Malvern, Pennsylvania 19355
|
|
|
|
|
|
|
|
|
|
|
|
BlackRock, Inc.
(2)
|
|
|
28,078,655
|
|
|
|
7.6%
|
|
55 East 52nd Street
|
|
|
|
|
|
|
|
|
New York, New York 10055
|
|
|
|
|
|
|
|
|
|
|
|
Sanders Capital, LLC
(3)
|
|
|
22,382,027
|
|
|
|
6.07%
|
|
390 Park Avenue
|
|
|
|
|
|
|
|
|
17th Floor
|
|
|
|
|
|
|
|
|
New York, New York 10022
|
|
|
|
|
|
|
|
|
(1)
|
Based solely upon information contained in the most recently filed Schedule 13G/A of The Vanguard Group, filed with the SEC on February 11, 2016, reflecting
beneficial ownership as of December 31, 2015. According to this Schedule 13G/A, The Vanguard Group had sole voting power for 602,786 of these shares, shared voting power for 32,400 of these shares, sole dispositive power for 29,019,836 of
these shares and shared dispositive power for 650,328 of these shares.
|
(2)
|
Based solely upon information contained in the most recently filed Schedule 13G/A of BlackRock, Inc., filed with the SEC on February 10, 2016, reflecting
beneficial ownership as of December 31, 2015. According to this Schedule 13G/A, BlackRock, Inc. had sole voting power for 25,028,303 of these shares, no shared voting power, sole dispositive power for 28,078,655 of these shares and no shared
dispositive power.
|
(3)
|
Based solely upon information contained in the Schedule 13G of Sanders Capital, LLC filed with the SEC on January 29, 2016, reflecting beneficial ownership as of
December 31, 2015. According to this Schedule 13G, Sanders Capital, LLC had sole voting power for 8,779,627 of these shares, no shared voting power, sole dispositive power for 22,382,027 of these shares and no shared dispositive power.
|
21
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
Overview
Our Compensation Committee strives to design a fair and
competitive compensation program for executive officers that will attract, motivate and retain highly qualified and experienced executives, reward superior performance and provide incentives that are based on performance of the Company, with an
overall emphasis on maximizing our long-term stockholder value. Our executive compensation program consists of several components, including base salaries, cash bonuses, performance-based equity awards, time-based equity awards, deferred
compensation plans and retirement benefits. This compensation discussion and analysis provides information regarding our compensation objectives, the relationship between the components of our compensation program and our objectives, and
factors considered by the Compensation Committee in establishing compensation levels for our named executive officers. Our fiscal 2016 named executive officers are:
|
|
|
Donald R. Horton, Chairman of the Board;
|
|
|
|
David V. Auld, President and Chief Executive Officer;
|
|
|
|
Michael J. Murray, Executive Vice President and Chief Operating Officer; and
|
|
|
|
Bill W. Wheat, Executive Vice President and Chief Financial Officer.
|
Executive Summary Key Operating and Financial Results
The homebuilding business requires long-term planning and implementation of operating strategies over several years
to deliver successful operating and financial results. Accordingly, in the table below and summary that follows, we set forth key operating and financial results of the Company for fiscal years 2016, 2015 and 2014. For the 15
th
consecutive fiscal year, we closed more homes than any other
homebuilder in the United States. Our pre-tax income increased in fiscal 2016 compared to fiscal 2015 and 2014, and we believe our business is well-positioned for the future based on our land and finished lot position, inventory of available homes,
strong balance sheet and liquidity position and broad geographic operating base. The fiscal 2016 compensation received by our executives reflects their contribution to the Companys improved financial and operating results.
Key results in fiscal years 2016, 2015 and 2014:
|
|
|
|
|
|
|
|
|
As of and for the Fiscal Year Ended September
30,
|
Key Result
|
|
2016
|
|
2015
|
|
2014
|
Homes Closed
|
|
40,309
|
|
36,648
|
|
28,670
|
Revenues
|
|
$12.2 billion
|
|
$10.8 billion
|
|
$8.0 billion
|
Pre-Tax Income
|
|
$1.4 billion
|
|
$1.1 billion
|
|
$814.2 million
|
Pre-Tax Income as % of Revenues
|
|
11.1%
|
|
10.4%
|
|
10.1%
|
SG&A Expense as % of Revenues
|
|
10.9%
|
|
11.0%
|
|
12.0%
|
Stockholders Equity
|
|
$6.8 billion
|
|
$5.9 billion
|
|
$5.1 billion
|
Stockholders Equity per Common Share
|
|
$18.21
|
|
$15.99
|
|
$14.03
|
Common Stock Price
|
|
$30.20
|
|
$29.36
|
|
$20.52
|
Cash Dividends Declared per Common Share
|
|
$0.32
|
|
$0.25
|
|
$0.1375
|
Key operating and financial results for fiscal 2016, as compared to fiscal 2015 were as follows:
|
|
|
Homes closed increased 10% to 40,309 homes in fiscal 2016 compared to 36,648 homes in fiscal 2015;
|
|
|
|
Revenues increased 12% to $12.2 billion in fiscal 2016 compared to $10.8 billion in fiscal 2015;
|
|
|
|
Pre-tax income increased 20% to $1.4 billion in fiscal 2016 from $1.1 billion in fiscal 2015;
|
|
|
|
Pre-tax income as a percentage of revenues improved to 11.1% in fiscal 2016 from 10.4% in fiscal 2015;
|
|
|
|
SG&A expense as a percentage of revenues improved to 10.9% in fiscal 2016 from 11.0% in fiscal 2015;
|
22
|
|
|
Homebuilding Return on Inventory (ROI) improved to 15.4% in fiscal 2016 from 12.8% in fiscal 2015. ROI is calculated as homebuilding
pre-tax income divided by average inventory (the sum of ending inventory balances for the trailing five quarters divided by five);
|
|
|
|
Stockholders equity increased 15% to $6.8 billion in fiscal 2016 compared to $5.9 billion in fiscal 2015;
|
|
|
|
Stockholders equity per common share (stockholders equity divided by the number of common shares outstanding at the end of each fiscal
year) increased 14% to $18.21 per share at September 30, 2016 from $15.99 per share at September 30, 2015; and
|
|
|
|
The Companys common stock price increased by 3% to $30.20 at September 30, 2016 from $29.36 at September 30, 2015. During fiscal 2016, our
stock price ranged between $22.97 and $34.56.
|
The improvement in our operating and financial results over
the last three fiscal years reflects a consistent focus on the fundamentals of our business in each of our communities across the markets in which we operate. We manage our business in each market to achieve an optimal balance of sales pace,
pricing, profit margins and inventory levels in each community to maximize the returns on our inventory investments.
Advisory Vote and Process for Determining Compensation
2016 Advisory Vote on Executive Compensation
At our last Annual Meeting of Stockholders held on January 21, 2016, our stockholders voted in favor of a resolution
to approve, on an advisory basis, the compensation of the Companys named executive officers disclosed in the Compensation Discussion and Analysis, the Summary Compensation Table and the related compensation tables, notes and narrative in our
Proxy Statement for the Companys 2016 Annual Meeting of Stockholders. Approximately 95.01% voted in favor of the advisory vote on executive compensation. The Compensation Committee evaluated the results of the 2016 advisory vote and did not
make any changes to our executive compensation program and policies as a result of the vote.
Authority and Role of
Compensation Committee
Our Compensation Committee evaluates performance and approves compensation for our Chairman and
our CEO and makes compensation recommendations to the Board with respect to other named executive officers. The Compensation Committee also administers our equity programs, which include awards under our 2006 Stock Incentive Plan and all other
compensation plans that are intended to qualify as performance-based
.
Our equity and compensation plans are discussed under the heading
Incentive Bonus Plans
Approved by
Stockholders
on page 38. The duties of the Compensation Committee are summarized under the heading
Compensation Committee
on page 17 and are more fully set forth in the Compensation Committee Charter, which is available
on our website under the Investor Relations and Corporate Governance links.
Compensation Committee Risk Oversight
The Compensation Committee provides risk oversight with respect to compensation of the Companys employees,
including the named executive officers and other key officers, with the assistance of the Board. The Compensation Committees risk oversight is discussed in more detail under the heading
Boards Role in Risk
Oversight
Compensation Risk Oversight
on page 14.
Role of
Chairman and Chief Executive Officer
Our Chairman and our CEO review and discuss salary and bonus compensation of our
other named executive officers and our Chairman makes recommendations to the Compensation Committee regarding our executive officers, other than for himself. The Compensation Committee considers these recommendations when making its recommendation
to the Board. At the request of the Compensation Committee, our Chairman also provides a recommendation concerning the annual base salary and incentive bonus program for our CEO, but not for himself.
23
Review of Compensation
We review the compensation of our executive officers on a regular basis. With respect to fiscal 2016 executive compensation, the
Compensation Committee formally met in October, November and December of 2015, and in January, February, April, July, November and December of 2016 to review and discuss compensation matters. In addition, the Compensation Committee has discussions
with management during the year regarding these matters. To assist the Compensation Committee, the Company engages the services of Equilar, a leading third-party provider of financial and executive compensation data. Utilizing the data provided by
Equilar, the committee reviews the compensation of executives of publicly-traded companies, including our peer group and other public companies within a range of our market capitalization and industrial classification code. The scope of
Equilars services during fiscal 2016 was limited to providing access to its database to the Compensation Committee and discussing database issues with the Compensation Committee. Equilar did not advise the Compensation Committee on its
executive compensation programs or decisions. The Compensation Committee does not otherwise engage any other compensation consultant to advise it on executive compensation matters.
The Compensation Committee believes it is appropriate to exercise its judgment when reviewing and setting the total mix of compensation
related to short and long-term awards and cash and equity awards rather than relying on a set formula or percentage allocation. The Compensation Committee believes an important part of an executives value is helping the Company achieve its
business objectives when housing market conditions change. Accordingly, when determining the mix of compensation, the Compensation Committee considers the ability of the executive to assist the Company in achieving its business objectives as well as
each executives experience and role at the Company.
Fiscal 2016 Outline of Executive
Compensation Actions
For fiscal 2016, the Compensation Committee took actions on matters related to executive compensation
as outlined below. These executive compensation components are discussed in more detail under the referenced headings in this
Compensation Discussion and Analysis
section.
Base Salaries
The Board and Compensation Committee set and paid base salaries. See the
heading
Base Salaries
Named Executive Officers
on page 26.
Short-Term Incentive Bonuses
The Compensation Committee established and approved annual
short-term incentive bonuses for Mr. Horton, Mr. Auld and Mr. Murray based on semi-annual pre-tax income. For fiscal 2016, Mr. Horton was eligible to earn annual short-term incentive bonuses up to a maximum of 0.6% of pre-tax income, which
resulted in payments to him of $3,251,016 for the semi-annual period ended March 31, 2016 and $4,869,714 for the semi-annual period ended September 30, 2016, for a total annual cash bonus of $8,120,730. For fiscal 2016, Mr. Auld was eligible to
earn annual short-term incentive bonuses up to a maximum of 0.35% of pre-tax income, which resulted in payments to him of $1,896,426 for the semi-annual period ended March 31, 2016 and $2,840,666 for the semi-annual period ended September 30, 2016,
for a total annual cash bonus of $4,737,092. For fiscal 2016, Mr. Murray was eligible to earn annual short-term incentive bonuses up to a maximum of 0.1% of pre-tax income, which resulted in payments to him of $541,836 for the semi-annual
period ended March 31, 2016 and $811,619 for the semi-annual period ended September 30, 2016, for a total annual cash bonus of $1,353,455. Mr. Wheat was paid semi-annual cash discretionary bonuses for the semi-annual periods ended March 31, 2016 and
September 30, 2016 in the amounts of $500,000 and $600,000 (of which $100,000 was settled in shares of common stock), respectively, for a total annual cash and stock bonus of $1,100,000. See the headings
2016 Fiscal
Year
Annual Incentive Bonus
on page 27 and
2016 Fiscal Year
Annual Incentive Bonus Results and Payout
on page 28.
Long-Term 2019 Performance and Time-Based Restricted Stock Units (RSUs)
In November 2016, the
Compensation Committee granted to Mr. Horton, Mr. Auld and Mr. Murray performance RSUs that may vest based on performance of four goals over the three-year performance period beginning October 1, 2016 and ending September 30, 2019. Mr. Horton
was awarded a target amount of 200,000 Performance RSUs, Mr. Auld was awarded a target amount of 100,000 Performance RSUs and Mr. Murray was awarded a target amount of 30,000 Performance RSUs. Mr. Wheat was awarded 30,000 time-based RSUs that vest
annually in equal
24
installments over a three-year period. See the heading
2017 Fiscal Year
Award of 2019 Performance Restricted Stock
Units
Potential Vesting at September 30, 2019 and Award of Restricted Stock Units
Time-Based Vesting
on page 38.
Long-Term Restricted Stock Units
The Compensation Committee approved and granted time-based
vesting restricted stock units to our executive officers and key employees in fiscal 2016. See the heading
2016 Fiscal Year
Award of Restricted Stock
Units
Time-Based Vesting
on page 37.
Settlement of Long-Term 2016
Performance Restricted Stock Units (RSUs)
Based on the three-year performance period from October 1, 2013 to September 30, 2016, Mr. Horton earned 325,000 shares (162.5% of target) of common stock. For
additional information on the 2016 Performance RSUs, see the heading
2016 Performance Restricted Stock Units
Ranking Results and Vesting at September
30, 2016
on page
30.
Executive Compensation Objectives
Our primary compensation objectives are to:
|
|
|
motivate and retain highly qualified and experienced executives;
|
|
|
|
award compensation that recognizes valuable short and long-term individual performance as well as the Companys overall performance; and
|
|
|
|
implement a compensation plan that aligns our executives interests with those of our stockholders with the goal of maximizing long-term
stockholder value.
|
As a leading national homebuilding company, we employ key executives who have delivered
strong results in a competitive and challenging homebuilding market. Our key executives have experience in both up and down cycles in the homebuilding industry. The Compensation Committee considers this type of experience to be very valuable due to
the cyclical nature of the homebuilding industry. Because of the performance of our key executives over the past several years, they may encounter other professional opportunities due to the extensive experience gained during their employment with
us. As a result, we provide competitive compensation packages to retain our executives. We believe that to maintain our position as a leader in the homebuilding industry and to serve our stockholders interests, the Company must provide
executive compensation programs that continually motivate and are effective in retaining our executives.
With the goal of
maximizing long-term stockholder value, we believe it is important to have a significant portion of executive compensation tied to attaining both short and long-term goals and performance. In addition to the financial performance of the Company, we
also considered certain subjective factors when reviewing an executives value. These factors include the number of years with the Company, significance of job function, ability to analyze and make effective decisions regarding significant
business and financial objectives, effectiveness of their work as part of the executive management team and their leadership to our employees. By placing importance on these qualities, we are aligning individual and corporate performance with the
compensation that is ultimately paid for performance. Due to the significant number of years of dedicated service our executives have with us, the Board of Directors and Compensation Committee have chosen not to pursue written employment agreements
with our executives. Based on the Compensation Committees continual review of market trends occurring in our industry, we believe our cash and equity compensation programs are effective in allowing us to motivate and retain our executives.
Use of Compensation Peer Group Data
The Compensation Committee utilizes compensation data from our peer group of publicly-traded homebuilding companies to analyze
compensation decisions in light of current market conditions and practices and to ensure that our compensation decisions are reasonable in comparison to our peer group and the value of
25
our executives to the Company. However, the Compensation Committee does not attempt to position compensation at any specified level or ranking within our peer group. In fiscal 2016, the peer
group compensation data was compiled by the Compensation Committee Chairman and the Companys legal counsel using information from Equilars database and from the data in executive compensation discussions and tables in publicly filed
proxy statements. When determining peer group averages, rankings and medians, we include our Company and each company in our peer group in the rankings and computations. Our peer group could change from year to year based on the discretion of the
Compensation Committee. Our Compensation Committee considers factors such as market capitalization, competition in our markets and mergers and consolidations when determining our peer group. For fiscal 2016, our peer group consisted of the following
publicly-traded homebuilding companies that had market capitalizations ranging from approximately $223 million to $9.5 billion at September 30, 2016. Our market capitalization on that date was $11.2 billion.
|
|
|
Peer Group Fiscal
2016
|
Beazer Homes USA
|
|
M.D.C. Holdings
|
CalAtlantic Group*
|
|
Meritage Homes
|
Hovnanian Enterprises
|
|
NVR
|
KB Home
|
|
PulteGroup
|
Lennar
|
|
Toll Brothers
|
*
|
New peer company following the merger of The Ryland Group and Standard Pacific Corp. The Ryland Group was a member of the peer group prior to the merger.
|
In November 2016, our Compensation Committee revised our Peer Group for fiscal 2017 and going forward to remove
Beazer Homes USA, Inc. and Hovnanian Enterprises, Inc. and to add Taylor Morrison Home Corporation and TRI Pointe Group, Inc. The primary reason for this change was to adjust our peer group to include the homebuilders with the largest market
capitalization.
|
|
|
Peer Group Fiscal
2017
|
CalAtlantic Group
|
|
NVR
|
KB Home
|
|
PulteGroup
|
Lennar
|
|
Taylor Morrison
|
M.D.C. Holdings
|
|
Toll Brothers
|
Meritage Homes
|
|
TRI Pointe Group
|
Components of Compensation
Base Salaries Named Executive Officers
Base salaries for our executive officers provide a fixed or base level of compensation. When setting base salaries for our executives, we
considered the following factors:
|
|
|
level of experience, responsibility and tenure;
|
|
|
|
amount of assets and national scope of the Companys operations;
|
|
|
|
contributions to achievements of the Companys operating objectives;
|
|
|
|
amount of fixed cash compensation to retain the executives services;
|
|
|
|
average and median base salaries of comparable executives in our peer group; and
|
|
|
|
recommendations of our Chairman and our CEO, other than for themselves.
|
26
Base salaries for our named executive officers for fiscal 2015, 2016, and 2017 are set forth
in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base Salary
|
|
Name
|
|
2015
|
|
|
2016
|
|
|
2017
|
|
Donald R. Horton
|
|
$
|
1,000,000
|
|
|
$
|
1,000,000
|
|
|
$
|
1,000,000
|
|
David V. Auld
|
|
$
|
700,000
|
|
|
$
|
700,000
|
|
|
$
|
700,000
|
|
Michael J. Murray
|
|
$
|
500,000
|
|
|
$
|
500,000
|
|
|
$
|
500,000
|
|
Bill W. Wheat
|
|
$
|
500,000
|
|
|
$
|
500,000
|
|
|
$
|
500,000
|
|
The base salary of Mr. Horton, our Chairman, was unchanged for fiscal years 2015, 2016 and 2017 and is
comparable to the base salaries of similar officers in our peer group. The base salary of our Chairman reflects his significant experience in the real estate and homebuilding industry and his tenure with the Company.
The base salary of Mr. Auld, our CEO, was unchanged for fiscal years 2015, 2016 and 2017. For fiscal 2015, the base salary of the chief
executive officer of each company in our peer group, including our company, ranged from $700,000 to $1,528,125 with an average of $1,040,827 and a median of $1,000,000, based on data contained in the most recently filed proxy statements of our peer
group. Mr. Aulds base salary is at the low end of the CEO base salaries in our peer group, but we believe his salary is at a competitive level of fixed compensation to incent and retain his services as our CEO.
Upon Mr. Murrays promotion to the COO position at the beginning of fiscal 2015, his base salary was increased to $500,000 and was
unchanged for fiscal years 2016 and 2017. For fiscal 2015, the base salary of the chief operating officer of each company in our peer group, including our company, ranged from $168,750 to $1,000,000 with an average of $624,328 and a median of
$634,044 based on data contained in the most recently filed proxy statements of our peer group. We believe his salary is at a competitive level of fixed compensation to incent and retain his services as our COO.
The base salary for Mr. Wheat, our CFO, was unchanged for fiscal years 2015, 2016 and 2017. For fiscal 2015, the base salary of the chief
financial officer of each company in our peer group, including our company, ranged from $341,923 to $933,333 with an average of $608,686 and a median of $634,044 based on data contained in the most recently filed proxy statements of our peer group.
We believe his salary is at a competitive level of fixed compensation to incent and retain his services as our CFO.
When
determining named executive officer base salaries, the Compensation Committee did not assign specific weight to the factors listed under the heading
Base Salaries
Named Executive
Officers,
did not assign a specific ranking that base salaries should be within the peer group and did not use a percentage or ratio that the base salaries should be in relation to total compensation.
2016 Fiscal Year Annual Incentive Bonus
Chairman, Chief Executive Officer and Chief Operating Officer.
During fiscal 2016, in furtherance of
our compensation philosophy to award incentive bonuses based on performance, Mr. Horton, Mr. Auld and Mr. Murray each had the opportunity to earn a performance bonus based on the amount of pre-tax income earned by the Company during the year.
Pre-tax income
means consolidated income before income taxes, as publicly reported by the Company in its
consolidated financial statements prepared in accordance with generally accepted accounting principles.
For fiscal 2016, we
believed that Mr. Horton, Mr. Auld and Mr. Murray should be incentivized to help the Company generate positive pre-tax income. The pre-tax income performance goal is intended to have our executives focus on improving important components of
pre-tax income, namely, increasing revenues and controlling our cost of sales and selling, general and administrative
(SG&A)
expenses.
27
The maximum percentage of pre-tax income that could be earned under the annual incentive
bonus opportunity was as follows:
|
|
|
|
|
|
|
|
|
|
|
Maximum Bonus Potential
|
Name
|
|
Fiscal 2016 Performance Goal
|
|
1st
Semi-Annual
Period
|
|
2nd
Semi-Annual
Period
|
Donald R. Horton
|
|
Pre-Tax Income
|
|
0.6%
|
|
0.6%
|
David V. Auld
|
|
Pre-Tax Income
|
|
0.35%
|
|
0.35%
|
Michael J. Murray
|
|
Pre-Tax Income
|
|
0.1%
|
|
0.1%
|
The 1
st
semi-annual period was the six months ended March 31, 2016 (first and second quarters of fiscal 2016) and the 2
nd
semi-annual period was the six months ended September 30, 2016
(third and fourth quarters of fiscal 2016). The hurdle or threshold for achieving an annual incentive bonus was the attainment of positive pre-tax income. If no positive pre-tax income was attained, then no bonus would be paid under the annual
incentive bonus opportunity.
At the beginning of fiscal 2016, the Compensation Committee made the subjective determination to
select 0.6% of pre-tax income for Mr. Horton, 0.35% for Mr. Auld and 0.1% for Mr. Murray as the maximum bonus under this performance goal based on its determination that if the maximum bonus was paid, the amount would be reasonable in relation to
the goal achieved and reasonable in relation to the Companys goal of containing overall SG&A expense.
The percentage
chosen for the annual incentive bonus opportunity is not based on any formulaic methodology. For fiscal 2016, the Compensation Committee believed that by using a percentage of pre-tax income, we would incent our Chairman, CEO and COO to achieve
positive pre-tax income and maintain competitive levels of revenues, cost of sales and SG&A expense, all of which align their interests with those of our stockholders. By using pre-tax income as a performance goal in fiscal 2016, we
balanced the mix of short-term performance period compensation with the long-term performance period compensation, which consisted of restricted stock units. Because the selection of 0.6%, 0.35% and 0.1% as the maximum percentages was a subjective
determination, and not one based on any formulaic method or benchmark other than as described herein, the Compensation Committee maintained the right to use its discretion in adjusting downward the amount to be paid for this award. The Compensation
Committee did not use its discretion to adjust the bonus payouts for fiscal 2016.
2016 Fiscal
Year Annual Incentive Bonus Results and Payout
Chairman
Mr. Horton
. The
table below sets forth the Companys pre-tax income and the annual incentive bonus paid for fiscal 2016 to Mr. Horton:
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Goal:
Semi-Annual Pre-Tax Income (
PTI
)
|
|
Semi-Annual Period
|
|
Maximum
Bonus
Percentage
|
|
PTI
|
|
|
Bonus
Paid
|
|
|
|
|
|
1st Semi-Annual Period Ended
March 31, 2016
|
|
0.6%
|
|
$
|
541,836,022
|
|
|
$
|
3,251,016
|
|
|
|
|
|
2nd Semi-Annual Period Ended
September 30, 2016
|
|
0.6%
|
|
$
|
811,618,921
|
|
|
$
|
4,869,714
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Amount
|
|
0.6%
|
|
$
|
1,353,454,943
|
|
|
$
|
8,120,730
|
|
|
|
|
|
|
|
|
|
|
|
|
28
Chief Executive
Officer
Mr. Auld.
The table below sets forth the Companys pre-tax income and the annual incentive bonus paid for fiscal 2016 to Mr. Auld:
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Goal: Semi-Annual Pre-Tax Income (
PTI
)
|
|
Semi-Annual Period
|
|
Maximum
Bonus
Percentage
|
|
PTI
|
|
|
Bonus
Paid
|
|
|
|
|
|
1st Semi-Annual Period Ended
March 31, 2016
|
|
0.35%
|
|
$
|
541,836,022
|
|
|
$
|
1,896,426
|
|
|
|
|
|
2nd Semi-Annual Period Ended
September 30, 2016
|
|
0.35%
|
|
$
|
811,618,921
|
|
|
$
|
2,840,666
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Amount
|
|
0.35%
|
|
$
|
1,353,454,943
|
|
|
$
|
4,737,092
|
|
|
|
|
|
|
|
|
|
|
|
|
Chief Operating
Officer
Mr. Murray.
The table below sets forth the Companys pre-tax income and the annual incentive bonus paid for fiscal 2016 to Mr.
Murray:
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Goal: Semi-Annual Pre-Tax Income
(
PTI
)
|
|
Semi-Annual Period
|
|
Maximum
Bonus
Percentage
|
|
PTI
|
|
|
Bonus
Paid
|
|
|
|
|
|
1st Semi-Annual Period Ended
March 31, 2016
|
|
0.1%
|
|
$
|
541,836,022
|
|
|
$
|
541,836
|
|
|
|
|
|
2nd Semi-Annual Period Ended
September 30, 2016
|
|
0.1%
|
|
$
|
811,618,921
|
|
|
$
|
811,619
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Amount
|
|
0.1%
|
|
$
|
1,353,454,943
|
|
|
$
|
1,353,455
|
|
|
|
|
|
|
|
|
|
|
|
|
2016 Fiscal Year Annual Discretionary Bonus
Chief Financial Officer
Mr.
Wheat
.
The Board of Directors approves a discretionary bonus for Mr. Wheat semi-annually. For the first semi-annual period ended March 31, 2016, Mr. Wheat received a $500,000 bonus paid in cash, and for the
second semi-annual period ended September 30, 2016, he received a $600,000 bonus, which included $100,000 paid in common stock of the Company for a total of $1,100,000 for fiscal 2016. Mr. Wheats fiscal 2016 discretionary bonuses totaling
$1,100,000 reflected a $150,000 increase from the bonuses he received in fiscal 2015.
The increase to Mr. Wheats bonus
was discretionary, but factors considered included the performance by the Company in fiscal 2016, including higher pre-tax income in fiscal 2016 compared to fiscal 2015 and the individual performance of Mr. Wheat in his areas of responsibility. The
process of awarding a discretionary bonus to Mr. Wheat includes review and consideration by our Chairman and CEO. Our Chairman then makes a recommendation to the Compensation Committee who then considers the recommendation and makes a
recommendation to the Board of Directors. The discretionary bonus was not based on specific quantitative formulas, percentages or numerical weightings, but rather was related to subjective evaluations of the Companys level of profitability
relative to the prior year, job performance and the level of retention risk related to the Companys ability to continue to employ Mr. Wheat as our CFO. The amount of discretionary bonus awarded to Mr. Wheat was not benchmarked or tied to
any other performance metrics or pay of similar executives at peer companies, although the Compensation Committee did review the pay of chief financial officers in our peer group.
Mr. Wheats responsibilities within the Company were considered when determining the amount of his discretionary bonus. As
Executive Vice President and CFO, Mr. Wheat works closely with our Chairman, CEO and COO in setting operational strategies for our homebuilding and financial services operations, communicating and implementing such strategies across the Company,
analyzing and monitoring the Companys performance
29
and reviewing and approving investments in land and lots. These operational strategies include our homebuilding and financial services business plans and incentive compensation, land and lot
investment criteria, level of homes in inventory, expense levels, capital structure and liquidity goals, among others. Mr. Wheat also provides executive management direction and oversight to the financial services operations and serves as a director
on the boards of the Companys mortgage and insurance subsidiaries.
Mr. Wheat has direct responsibility for the
Companys financial reporting process, including the effectiveness and integrity of the Companys financial, internal and disclosure controls and procedures, and compliance with all applicable financial reporting rules and regulations for
public companies. Mr. Wheat is also directly responsible for providing executive management oversight of the Companys accounting, management reporting, internal audit, finance, treasury and tax functions. Additionally, Mr. Wheat is directly
involved in the Companys investor relations process, including interactions with investors in the Companys equity and debt securities and industry research analysts. He also assists in the executive management oversight of the
Companys information technology, human resources, public communications, marketing and corporate purchasing functions.
2016 Performance Restricted Stock Units Ranking Results and Vesting at September 30, 2016
Chairman
. In November 2016, Mr. Horton was awarded 325,000 shares of common stock based on a target
number of 200,000 performance restricted stock units (
2016 Performance RSUs
) granted in November 2013. The performance period for the 2016 Performance RSUs was the three-year period of October 1, 2013 to September 30, 2016
(the
2016 Performance Period)
. The 2016 Performance RSUs vested based on the following four performance goals (
Performance Goals
):
|
|
|
|
|
Performance Goal
|
|
Performance
Comparison
|
|
Weighting to
Total Award
|
Relative TSR
|
|
S&P 500 Index TSR
|
|
25%
|
Relative ROI
|
|
Peer Group
|
|
25%
|
Relative SG&A
|
|
Peer Group
|
|
25%
|
Relative GP
|
|
Peer Group
|
|
25%
|
|
TSR:
|
means
total shareholder return
(stock price increases and decreases plus dividends) of the Company over the 2016 Performance Period as determined by
Standard and Poors using the same methodology used by Standard and Poors in preparing the stock performance graph included each year in the Companys Form 10-K.
|
|
ROI:
|
means
return on investment
which is consolidated pre-tax income or loss divided by average total assets over the 2016 Performance Period.
|
|
SG&A:
|
means consolidated
selling, general and administrative expense
(including corporate general and administrative expenses) as a percentage of
consolidated revenues over the 2016 Performance Period.
|
|
GP:
|
means
gross profit
defined as homebuilding revenues minus homebuilding cost of sales, including inventory and land option charges, divided by
homebuilding revenues over the 2016 Performance Period.
|
30
The following table sets forth the potential performance adjustments that may be made to the
2016 Performance RSUs based on the final performance rankings of the peer group and the Company.
2016 Performance RSUs
Potential Performance Adjustments as a Percentage of Target
Donald R. Horton
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TSR Portion of
Award
(weighted 25% of target award)
|
|
Company TSR
Relative to
S&P 500 Index TSR
|
|
|
|
|
Payout
|
|
|
|
|
|
Number of
Performance
RSUs Awarded
|
|
Percentage Points Below
Index:
|
|
|
|
|
|
|
|
|
|
10 Percentage Points
|
|
|
|
|
|
|
|
zero
|
|
9 Percentage Points
|
|
|
|
|
|
|
Threshold
|
|
|
|
|
|
|
|
5,000
|
|
8 Percentage Points
|
|
|
|
|
|
|
|
10,000
|
|
7 Percentage Points
|
|
|
|
|
|
|
|
15,000
|
|
6 Percentage Points
|
|
|
|
|
|
|
|
20,000
|
|
5 Percentage Points
|
|
|
|
|
|
|
|
25,000
|
|
4 Percentage Points
|
|
|
|
|
|
|
|
30,000
|
|
3 Percentage Points
|
|
|
|
|
|
|
|
35,000
|
|
2 Percentage Points
|
|
|
|
|
|
|
|
40,000
|
|
1 Percentage Point
|
|
|
|
|
|
|
|
45,000
|
|
Equal to S&P 500 Index TSR
|
|
|
Target
|
|
|
|
|
|
|
|
50,000
(1)
|
|
Percentage Points Above
Index:
|
|
|
|
|
|
|
|
|
|
1 Percentage Point
|
|
|
|
|
|
|
|
55,000
|
|
2 Percentage Points
|
|
|
|
|
|
|
|
60,000
|
|
3 Percentage Points
|
|
|
|
|
|
|
|
65,000
|
|
4 Percentage Points
|
|
|
|
|
|
|
|
70,000
|
|
5 Percentage Points
|
|
|
|
|
|
|
|
75,000
|
|
6 Percentage Points
|
|
|
|
|
|
|
|
80,000
|
|
7 Percentage Points
|
|
|
|
|
|
|
|
85,000
|
|
8 Percentage Points
|
|
|
|
|
|
|
|
90,000
|
|
9 Percentage Points
|
|
|
|
|
|
|
|
95,000
|
|
10 Percentage
Points
|
|
|
|
|
|
|
Maximum
|
|
|
|
|
|
|
|
100,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ROI, SG&A and GP Portions of Award
(each weighted 25% of
target award)
|
Performance Level
Compared to
Peer Group
|
|
|
|
Payout
|
|
|
|
|
|
Number
of
Performance
RSUs Awarded
|
11
th
Place
|
|
|
|
|
|
|
zero
|
10
th
Place
|
|
|
|
|
Threshold
|
|
|
|
|
|
|
25,000
|
9
th
Place
|
|
|
|
|
|
|
50,000
|
8
th
Place
|
|
|
|
|
|
|
75,000
|
7
th
Place
|
|
|
|
|
|
|
100,000
|
6
th
Place
|
|
|
|
|
|
|
125,000
|
5
th
Place
|
|
Target
|
|
|
|
|
|
|
150,000
(2)
|
4
th
Place
|
|
|
|
|
|
|
187,500
|
3
rd
Place
|
|
|
|
|
|
|
225,000
|
2
nd
Place
|
|
|
|
|
|
|
262,500
|
1
st
Place
|
|
|
|
|
Maximum
|
|
|
|
|
|
|
300,000
|
(1)
|
Target number listed is 25% of the total target number of 200,000 and other numbers are 25% of the other possible performance adjustments from the target.
|
(2)
|
Target number listed is 75% of the total target number of 200,000 and other numbers are 75% of the other possible performance adjustments from the target.
|
As set forth in the
rankings tables above, the target number of 2016 Performance RSUs could have been increased to a maximum of 400,000 for Mr. Horton upon maximum achievement of each of the four Performance Goals and decreased to a minimum of zero for Mr. Horton
upon minimum achievement of each of the four Performance Goals. Performance and percentages that fell between the ranking results in the tables were ranked using pro-rata linear interpolation as set forth in the tables above. For the 2016
Performance RSUs, the Companys peer group consisted of the nine publicly-traded homebuilding companies of the ten companies listed on page 26 in the table
Peer Group Fiscal 2016
. The CalAtlantic Group was not included in the
final results because during the performance period The Ryland Group merged with Standard Pacific Corp., becoming CalAtlantic Group. Each 2016 Performance RSU represented the contingent right to receive one share of common stock if vesting was
satisfied. The 2016 Performance RSUs had no rights to dividends or voting prior to vesting and payout in common stock.
Vesting
of the 2016 Performance RSUs with respect to the TSR Performance Goal was determined after the 2016 Performance Period based on a comparison of the Companys TSR to the S&P 500 Indexs TSR as computed by Standard and Poors using
their TSR methodology. Vesting of the 2016 Performance RSUs with respect to the ROI, SG&A and GP Performance Goals was determined after the 2016 Performance Period based on the relative ranking of the Companys performance on each
Performance Goal to each peer group companys performance on each Performance Goal. If any portion of the 2016 Performance RSUs did not vest due to inadequate relative performance, that portion would have been forfeited.
31
The hurdle or threshold for earning or vesting in 2016 Performance RSUs with respect to the
TSR goal was to perform better than ten percentage points below the S&P 500 Index. The hurdle or threshold for earning or vesting in the 2016 Performance RSUs with respect to the ROI, SG&A and GP Performance Goals is to perform no worse than
tenth place because in that event no bonus on that specific goal would be earned.
The following tables set forth the final
peer group rankings based on TSR, ROI, SG&A and GP for the peer group and the Company with respect to the 2016 Performance RSUs:
2016 Performance RSUs
Final Peer Group Rankings
|
|
|
|
|
|
|
|
|
Relative Total Shareholder Return
|
|
Company / Index Name
|
|
Base Period
9/30/2013
|
|
Year Ending
9/30/2016
|
|
D.R. Horton, Inc.
|
|
100
|
|
|
159.48
|
*
|
S&P 500 Index
|
|
100
|
|
|
137.36
|
|
*
|
Final performance goal ranking attained by the Company on the TSR performance goal was 22.12 points above the S&P 500 Index at September 30, 2016, as reflected in
the table above.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ROI, SG&A and GP Rankings
|
|
Performance Goal
|
|
10
th
Place
|
|
|
9
th
Place
|
|
|
8
th
Place
|
|
|
7
th
Place
|
|
|
6
th
Place
|
|
|
5
th
Place
|
|
|
4
th
Place
|
|
|
3
rd
Place
|
|
|
2
nd
Place
|
|
|
1
st
Place
|
|
Relative ROI
|
|
|
0.10%
|
|
|
|
1.49%
|
|
|
|
7.90%
|
|
|
|
13.38%
|
|
|
|
19.33%
|
|
|
|
25.04%
|
|
|
|
25.33%
|
|
|
|
25.53%
|
|
|
|
31.57%
|
*
|
|
|
65.39
|
%
|
Relative SG&A
|
|
|
20.47%
|
|
|
|
13.56%
|
|
|
|
13.05%
|
|
|
|
12.79%
|
|
|
|
11.96%
|
|
|
|
11.88%
|
|
|
|
11.65%
|
|
|
|
11.20%
|
*
|
|
|
10.98%
|
|
|
|
8.40
|
%
|
Relative GP
|
|
|
14.84%
|
|
|
|
16.30%
|
|
|
|
16.45%
|
|
|
|
16.84%
|
|
|
|
18.23%
|
|
|
|
19.38%
|
|
|
|
19.72%
|
*
|
|
|
21.65%
|
|
|
|
22.79%
|
|
|
|
24.26
|
%
|
*
|
Final performance goal ranking attained by the Company: 2
nd
place on ROI, 3
rd
place SG&A and 4
th
place on GP.
|
2016 Performance RSUs
Final Results Earned and Paid
Donald R. Horton
The final payout was based on the three-year performance period ended September 30, 2016.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Target Number of
RSUs Awarded
|
|
Final Company
Performance Rankings
|
|
Number of
RSUs Earned
|
|
|
Closing
Stock
Price at
9/30/2016
|
|
Value of
RSUs Earned
at 9/30/2016
|
|
Final
Payout
in
Common Stock
|
|
50,000 Units
|
|
TSR = 22.12 Points Above
|
|
|
100,000 Units
|
|
|
$30.20
|
|
$3,020,000
|
|
|
100,000 Shares
|
|
50,000 Units
|
|
ROI = 2nd Place
|
|
|
87,500 Units
|
|
|
$30.20
|
|
$2,642,500
|
|
|
87,500 Shares
|
|
50,000 Units
|
|
SG&A = 3rd Place
|
|
|
75,000 Units
|
|
|
$30.20
|
|
$2,265,000
|
|
|
75,000 Shares
|
|
50,000 Units
|
|
GP = 4th Place
|
|
|
62,500 Units
|
|
|
$30.20
|
|
$1,887,500
|
|
|
62,500 Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
200,000 Units
|
|
|
|
|
325,000 Units
|
|
|
$30.20
|
|
$9,815,000
|
|
|
325,000 Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A normalization adjustment was made to the final peer group rankings to include the results of
discontinued operations for one peer group member in calculating ROI, SG&A and GP so that all peer group members and the Company were treated consistently. The normalization adjustment did not change the Companys final ranking on the ROI,
SG&A or GP goals.
After reviewing the above final performance goal rankings for the 2016 Performance RSUs, the Compensation
Committee approved the issuance of 325,000 shares of common stock to Mr. Horton.
32
2016 Fiscal Year Award of 2018 Performance Restricted Stock
Units Potential Vesting at September 30, 2018 and Award of Restricted Stock Units Time-Based Vesting
Chairman, Chief Executive Officer and Chief Operating Officer
. Under our long-term incentive program, our Chairman, CEO and COO have the opportunity to earn incentive awards based on
performance over a period longer than one year. By awarding a portion of compensation over a longer time period, the interests of these executives are aligned with the interests of our stockholders.
In the first quarter of fiscal 2016, the Compensation Committee awarded performance restricted stock units
(the 2018 Performance
RSUs)
to Mr. Horton, Mr. Auld and Mr. Murray as follows:
|
|
|
Name
|
|
Target Number of
2018
Performance RSUs
|
Donald R. Horton
|
|
200,000
|
David V. Auld
|
|
100,000
|
Michael J. Murray
|
|
30,000
|
The 2018 Performance RSUs, based on four performance goals of total shareholder return, return on
investment, selling, general and administrative expense, and gross profit (
TSR, ROI, SG&A, and GP
), will vest, if at all, after the completion of the performance period, which is the
three-year period of October 1, 2015 through September 30, 2018
(the 2018 Performance Period)
, and based on final performance rankings. The four performance goals, weightings and performance goal definitions for the 2018
Performance RSUs are similar to those set forth on page 30 and discussed below in the tables and discussion on pages 34, 35 and 36.
The Compensation Committee chose the TSR performance goal because TSR takes into account changes in our stock price plus dividends paid during the 2018 Performance Period compared to the S&P 500
Indexs TSR. By comparing our TSR to the S&P 500 Indexs TSR, we have a goal that incents our executives to achieve a return to our stockholders that is better than the return achieved by a broad-based index of companies. We believe
the three performance goals of ROI, SG&A and GP are important internal operating metrics. ROI incents our executives to achieve operating profitability relative to our total assets which measures our efficiency at using our assets to generate
pre-tax income. SG&A incents our executives to control selling, general and administrative expenses. GP incents our executives to maximize our sales prices and control sales incentives and costs of sales, which are composed of the costs of land,
labor, materials and products used in building our homes.
In fiscal 2016, when determining the target number of 2018
Performance RSUs, the Compensation Committee reviewed the estimated annual compensation expense for these awards in relation to the Companys estimated annual financial metrics, such as revenue and pre-tax income. The Compensation Committee
chose to further incent these executive officers by potentially increasing the target up to the maximum, as set forth in the tables on pages 34, 35 and 36, in the event that maximum performance is achieved on the four Performance Goals. The
Compensation Committee subjectively chose the maximum of two times the target amount to further incent performance toward the top performance in the homebuilding industry. When the 2018 Performance RSUs were granted, the target and maximum amounts
were subjective determinations and not based on any formulaic method or benchmark.
33
The target number of the 2018 Performance RSUs may be increased or decreased based on
relative performance over the three-year 2018 Performance Period as set forth in the following tables.
2018 Performance
RSUs
Potential Performance Adjustments as a Percentage of Target
Donald R. Horton
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TSR Portion of Award
(weighted 25% of target
award)
|
|
Company TSR
Relative to
S&P 500 Index TSR
|
|
|
|
|
Payout
|
|
|
|
|
|
Number of
Performance
RSUs Awarded
|
|
Percentage Points Below
Index:
|
|
|
|
|
|
|
|
|
|
10 Percentage Points
|
|
|
|
|
|
|
|
zero
|
|
9 Percentage Points
|
|
|
|
|
|
|
Threshold
|
|
|
|
|
|
|
|
5,000
|
|
8 Percentage Points
|
|
|
|
|
|
|
|
10,000
|
|
7 Percentage Points
|
|
|
|
|
|
|
|
15,000
|
|
6 Percentage Points
|
|
|
|
|
|
|
|
20,000
|
|
5 Percentage Points
|
|
|
|
|
|
|
|
25,000
|
|
4 Percentage Points
|
|
|
|
|
|
|
|
30,000
|
|
3 Percentage Points
|
|
|
|
|
|
|
|
35,000
|
|
2 Percentage Points
|
|
|
|
|
|
|
|
40,000
|
|
1 Percentage Point
|
|
|
|
|
|
|
|
45,000
|
|
Equal to S&P 500 Index TSR
|
|
|
Target
|
|
|
|
|
|
|
|
50,000
(1)
|
|
Percentage Points Above
Index:
|
|
|
|
|
|
|
|
|
|
1 Percentage Point
|
|
|
|
|
|
|
|
55,000
|
|
2 Percentage Points
|
|
|
|
|
|
|
|
60,000
|
|
3 Percentage Points
|
|
|
|
|
|
|
|
65,000
|
|
4 Percentage Points
|
|
|
|
|
|
|
|
70,000
|
|
5 Percentage Points
|
|
|
|
|
|
|
|
75,000
|
|
6 Percentage Points
|
|
|
|
|
|
|
|
80,000
|
|
7 Percentage Points
|
|
|
|
|
|
|
|
85,000
|
|
8 Percentage Points
|
|
|
|
|
|
|
|
90,000
|
|
9 Percentage Points
|
|
|
|
|
|
|
|
95,000
|
|
10 Percentage
Points
|
|
|
|
|
|
|
Maximum
|
|
|
|
|
|
|
|
100,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ROI, SG&A and
GP Portions of Award
(each weighted 25% of target award)
|
Performance Level
Compared to
Peer Group
|
|
|
|
Payout
|
|
|
|
|
|
Number
of
Performance
RSUs Awarded
|
11
th
Place
|
|
|
|
|
|
|
zero
|
10
th
Place
|
|
|
|
|
Threshold
|
|
|
|
|
|
|
25,000
|
9
th
Place
|
|
|
|
|
|
|
50,000
|
8
th
Place
|
|
|
|
|
|
|
75,000
|
7
th
Place
|
|
|
|
|
|
|
100,000
|
6
th
Place
|
|
|
|
|
|
|
125,000
|
5
th
Place
|
|
Target
|
|
|
|
|
|
|
150,000
(2)
|
4
th
Place
|
|
|
|
|
|
|
187,500
|
3
rd
Place
|
|
|
|
|
|
|
225,000
|
2
nd
Place
|
|
|
|
|
|
|
262,500
|
1
st
Place
|
|
|
|
|
Maximum
|
|
|
|
|
|
|
300,000
|
(1)
|
Target number listed is 25% of the total target number of 200,000 and other numbers are 25% of the other possible performance adjustments from the target.
|
(2)
|
Target number listed is 75% of the total target number of 200,000 and other numbers are 75% of the other possible performance adjustments from the target.
|
34
2018 Performance RSUs
Potential Performance Adjustments as a Percentage of Target
David V. Auld
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TSR Portion of Award
(weighted 25% of target
award)
|
Company TSR
Relative to
S&P 500 Index TSR
|
|
|
|
|
Payout
|
|
|
|
|
|
Number
of
Performance
RSUs Awarded
|
Percentage Points Below
Index:
|
|
|
|
|
|
|
|
10 Percentage Points
|
|
|
|
|
|
|
zero
|
9 Percentage Points
|
|
|
|
|
|
|
Threshold
|
|
|
|
|
|
|
2,500
|
8 Percentage Points
|
|
|
|
|
|
|
5,000
|
7 Percentage Points
|
|
|
|
|
|
|
7,500
|
6 Percentage Points
|
|
|
|
|
|
|
10,000
|
5 Percentage Points
|
|
|
|
|
|
|
12500
|
4 Percentage Points
|
|
|
|
|
|
|
15,000
|
3 Percentage Points
|
|
|
|
|
|
|
17,500
|
2 Percentage Points
|
|
|
|
|
|
|
20,000
|
1 Percentage Point
|
|
|
|
|
|
|
22,500
|
Equal to S&P 500 Index TSR
|
|
|
Target
|
|
|
|
|
|
|
25,000
(1)
|
Percentage Points Above
Index:
|
|
|
|
|
|
|
|
1 Percentage Point
|
|
|
|
|
|
|
27,500
|
2 Percentage Points
|
|
|
|
|
|
|
30,000
|
3 Percentage Points
|
|
|
|
|
|
|
32,500
|
4 Percentage Points
|
|
|
|
|
|
|
35,000
|
5 Percentage Points
|
|
|
|
|
|
|
37,500
|
6 Percentage Points
|
|
|
|
|
|
|
40,000
|
7 Percentage Points
|
|
|
|
|
|
|
42,500
|
8 Percentage Points
|
|
|
|
|
|
|
45,000
|
9 Percentage Points
|
|
|
|
|
|
|
47,500
|
10 Percentage
Points
|
|
|
|
|
|
|
Maximum
|
|
|
|
|
|
|
50,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ROI, SG&A and GP Portions of Award
(each weighted 25% of
target award)
|
Performance Level
Compared to
Peer Group
|
|
|
|
Payout
|
|
|
|
|
|
Number
of
Performance
RSUs Awarded
|
11
th
Place
|
|
|
|
|
|
|
zero
|
10
th
Place
|
|
|
|
|
Threshold
|
|
|
|
|
|
|
12,500
|
9
th
Place
|
|
|
|
|
|
|
25,000
|
8
th
Place
|
|
|
|
|
|
|
37,500
|
7
th
Place
|
|
|
|
|
|
|
50,000
|
6
th
Place
|
|
|
|
|
|
|
62,500
|
5
th
Place
|
|
Target
|
|
|
|
|
|
|
75,000
(2)
|
4
th
Place
|
|
|
|
|
|
|
93,750
|
3
rd
Place
|
|
|
|
|
|
|
112,500
|
2
nd
Place
|
|
|
|
|
|
|
131,250
|
1
st
Place
|
|
|
|
|
Maximum
|
|
|
|
|
|
|
150,000
|
(1)
|
Target number listed is 25% of the total target number of 100,000 and other numbers are 25% of the other possible performance adjustments from the target.
|
(2)
|
Target number listed is 75% of the total target number of 100,000 and other numbers are 75% of the other possible performance adjustments from the target.
|
35
2018 Performance RSUs
Potential Performance Adjustments as a Percentage of Target
Michael J. Murray
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TSR Portion of
Award
(weighted 25% of target award)
|
Company TSR
Relative to
S&P 500 Index TSR
|
|
|
|
|
Payout
|
|
|
|
|
|
Number
of
Performance
RSUs Awarded
|
Percentage Points Below
Index:
|
|
|
|
|
|
|
|
10 Percentage Points
|
|
|
|
|
|
|
zero
|
9 Percentage Points
|
|
|
|
|
|
|
Threshold
|
|
|
|
|
|
|
750
|
8 Percentage Points
|
|
|
|
|
|
|
1,500
|
7 Percentage Points
|
|
|
|
|
|
|
2,250
|
6 Percentage Points
|
|
|
|
|
|
|
3,000
|
5 Percentage Points
|
|
|
|
|
|
|
3,750
|
4 Percentage Points
|
|
|
|
|
|
|
4,500
|
3 Percentage Points
|
|
|
|
|
|
|
5,250
|
2 Percentage Points
|
|
|
|
|
|
|
6,000
|
1 Percentage Point
|
|
|
|
|
|
|
6,750
|
Equal to S&P 500 Index TSR
|
|
|
Target
|
|
|
|
|
|
|
7,500
(1)
|
Percentage Points Above
Index:
|
|
|
|
|
|
|
|
1 Percentage Point
|
|
|
|
|
|
|
8,250
|
2 Percentage Points
|
|
|
|
|
|
|
9,000
|
3 Percentage Points
|
|
|
|
|
|
|
9,750
|
4 Percentage Points
|
|
|
|
|
|
|
10,500
|
5 Percentage Points
|
|
|
|
|
|
|
11,250
|
6 Percentage Points
|
|
|
|
|
|
|
12,000
|
7 Percentage Points
|
|
|
|
|
|
|
12,750
|
8 Percentage Points
|
|
|
|
|
|
|
13,500
|
9 Percentage Points
|
|
|
|
|
|
|
14,250
|
10 Percentage
Points
|
|
|
|
|
|
|
Maximum
|
|
|
|
|
|
|
15,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ROI, SG&A and
GP Portions of Award
(each weighted 25% of target award)
|
Performance Level
Compared to
Peer Group
|
|
|
|
Payout
|
|
|
|
|
|
Number
of
Performance
RSUs Awarded
|
11
th
Place
|
|
|
|
|
|
|
zero
|
10
th
Place
|
|
|
|
|
Threshold
|
|
|
|
|
|
|
3,750
|
9
th
Place
|
|
|
|
|
|
|
7,500
|
8
th
Place
|
|
|
|
|
|
|
11,250
|
7
th
Place
|
|
|
|
|
|
|
15,000
|
6
th
Place
|
|
|
|
|
|
|
18,750
|
5
th
Place
|
|
Target
|
|
|
|
|
|
|
22,500
(2)
|
4
th
Place
|
|
|
|
|
|
|
28,125
|
3
rd
Place
|
|
|
|
|
|
|
33,750
|
2
nd
Place
|
|
|
|
|
|
|
39,375
|
1
st
Place
|
|
|
|
|
Maximum
|
|
|
|
|
|
|
45,000
|
(1)
|
Target number listed is 25% of the total target number of 30,000 and other numbers are 25% of the other possible performance adjustments from the target.
|
(2)
|
Target number listed is 75% of the total target number of 30,000 and other numbers are 75% of the other possible performance adjustments from the target.
|
As set forth in the
rankings tables above, the target number of 2018 Performance RSUs may be increased to a maximum of 400,000 for Mr. Horton, 200,000 for Mr. Auld and 60,000 for Mr. Murray upon maximum achievement of each of the four Performance Goals and decreased to
a minimum of zero for Mr. Horton, Mr. Auld and Mr. Murray upon minimum achievement of each of the four Performance Goals. Performance and percentages that fall between the maximum and the minimum will be ranked using pro-rata linear
interpolation as set forth in the tables above. For the 2018 Performance RSUs, the Companys peer group consists of the ten publicly-traded homebuilding companies listed on page 26 in the table
Peer Group Fiscal 2016
. Each
2018 Performance RSU represents the contingent right to receive one share of common stock if vesting is satisfied. The 2018 Performance RSUs have no rights to dividends or voting.
Vesting of the 2018 Performance RSUs with respect to the TSR Performance Goal will be determined after the 2018 Performance Period based
on a comparison of the Companys TSR to the S&P 500 Indexs TSR as computed by Standard and Poors using their TSR methodology. Vesting of the 2018 Performance RSUs with respect to the ROI, SG&A and GP Performance Goals will
be determined after the 2018 Performance Period based on the relative ranking of the Companys performance on each Performance Goal to each peer group companys performance on each Performance Goal. Any portion of the Performance RSUs that
does not vest due to inadequate relative performance will be forfeited.
The hurdle or threshold for earning 2018 Performance
RSUs with respect to the TSR goal is to perform better than ten percentage points below the S&P 500 Index. The hurdle or threshold for earning 2018 Performance RSUs with respect to the ROI, SG&A and GP Performance Goals is to perform no
worse than tenth place because in that event no bonus on that specific goal would be earned. Additional information on the grant date fair value of the 2018 Performance RSUs is set forth in the
Summary Compensation Table
on
page 42 and the
Grants of Plan-Based Awards
table on page 44.
36
At the time of grant, the Compensation Committee made the subjective determination to set
the target and maximum number of 2018 Performance RSUs based on consideration that if the target or maximum amount were paid and the Companys stock price is at its current level, total compensation to our executive officers would remain within
the range of estimated total compensation paid to similar executives in the Companys peer group over the 2018 Performance Period. However, we cannot guarantee this result as it involves future compensation practices of our peer group. The
Compensation Committee further believed in the importance of setting a maximum that is significantly higher than the target to incentivize performance. If the maximum level for the performance goals was achieved, the Company would be in a stronger
competitive position than its peers and could create more value for our stockholders.
Chief Financial Officer
.
During the first quarter of fiscal 2016, the Compensation Committee approved and awarded the 2018 Restricted Stock Units
(2018 Time-Vesting RSUs)
to Mr. Wheat as follows:
|
|
|
Name
|
|
Number
of
2018 Time-Vesting RSUs
|
Bill W. Wheat
|
|
30,000
|
The 2018 Time-Vesting RSUs relate to a three-year period beginning on November 4, 2015 and ending on
November 4, 2018. Ten thousand of the Time-Vesting RSUs will vest annually on November 4.
2016 Fiscal
Year Award of Restricted Stock Units Time-Based Vesting
Chairman and Chief
Executive Officer.
Mr. Horton and Mr. Auld were awarded 94,000 and 37,600 restricted stock units, respectively, on February 12, 2016 by the Compensation Committee. These restricted stock units vest in equal installments over three years
on each grant date anniversary of February 12, subject to continued employment on each such date. In determining the number of restricted stock units to award, the Compensation Committee made a subjective determination based on each of the factors
listed on page 39 under the heading
2006 Stock Incentive Plan.
In addition to those factors, the Compensation Committee also reviewed the Companys stock price, the expected compensation expense related to the grant and the
number of restricted stock units and stock options outstanding for both Mr. Horton and Mr. Auld as a result of the new restricted stock units granted, without giving any formulaic effect to such factors. In addition, the Compensation Committee set
the vesting term at three years based on certain factors which include the tenure and role of each executive with the Company, the age of each executive, the retention value of restricted stock units based on a three-year vesting schedule and the
lack of an employment agreement between each executive and the Company. The terms of the restricted stock unit agreements provide that if the recipient reaches the age of 65 and retires from the Company, all unvested restricted stock units become
vested. Additional information on the annual compensation expense and grant date fair value of these restricted stock units is set forth in the
Summary Compensation Table
on page 42 and the
Grants of Plan-Based
Awards
table on page 44 of this Proxy Statement.
Chief Operating Officer and Chief Financial Officer.
Mr. Murray and Mr. Wheat were each awarded 32,900 restricted stock units on February 12, 2016 by the Compensation Committee. These restricted stock units vest in equal installments over five years from the grant date anniversary of
February 12, subject to continued employment on each such date. In determining the number of restricted stock units to award, the Compensation Committee made a subjective determination based on the factors listed on page 39 under the heading
2006 Stock Incentive Plan.
In addition to those factors, the Compensation Committee also reviewed the Companys stock price, the expected compensation expense related to the grant and the number of restricted stock units and
stock options outstanding for both Mr. Murray and Mr. Wheat as a result of the new restricted stock units granted, without giving any formulaic effect to such factors. In addition, the Compensation Committee set the vesting term at five years
based on certain factors which include the tenure and role of each executive with the Company, the retention value of restricted stock units based on a five-year vesting schedule and the lack of an employment agreement between each executive and the
Company. Additional information on the annual compensation expense and grant date fair value of these restricted stock units is set forth in the
Summary Compensation Table
on page 42 and the
Grants of Plan-Based
Awards
table on page 44 of this Proxy Statement.
37
2017 Fiscal Year Annual Incentive Bonus
Chairman, Chief Executive Officer, Chief Operating Officer and Chief Financial Officer
. The Compensation Committee has
decided to continue the short-term annual incentive bonus opportunity based on pre-tax income for Mr. Horton, Mr. Auld and Mr. Murray in fiscal 2017 and the discretionary bonus opportunity for Mr. Wheat.
|
|
|
|
|
|
|
Name
|
|
Fiscal 2017 Performance Goal
|
|
Maximum Bonus Potential
|
|
|
1st
Semi-Annual
Period
|
|
2nd
Semi-Annual
Period
|
Donald R. Horton
|
|
Pre-Tax Income
|
|
0.6%
|
|
0.6%
|
David V. Auld
|
|
Pre-Tax Income
|
|
0.35%
|
|
0.35%
|
Michael J. Murray
|
|
Pre-Tax Income
|
|
0.1%
|
|
0.1%
|
Mr. Wheats annual incentive bonus will be discretionary in nature and based on the performance of
his duties described under the heading
2016 Fiscal Year
Annual Discretionary Bonus
beginning on page 29.
2017 Fiscal Year Award of 2019 Performance Restricted Stock Units Potential Vesting at September 30, 2019 and Award of Restricted Stock
Units Time-Based Vesting
Chairman, Chief Executive Officer and Chief Operating Officer
.
During the first quarter of fiscal 2017, the Compensation Committee approved and awarded the 2019 Performance Restricted Stock Units
(2019 Performance RSUs)
to Mr. Horton, Mr. Auld and Mr. Murray as follows:
|
|
|
Name
|
|
Target Number of
2019
Performance RSUs
|
Donald R. Horton
|
|
200,000
|
David V. Auld
|
|
100,000
|
Michael J. Murray
|
|
30,000
|
The 2019 Performance RSUs will vest, if at all, after the completion of the three-year performance period,
which is the period of October 1, 2016 through September 30, 2019, and based on final performance rankings and operate in a similar manner to the 2018 Performance RSUs awarded in fiscal 2016, as discussed in the section
2016 Fiscal
Year
Award of 2018 Performance Restricted Stock Units
Potential Vesting at September 30, 2018 and Award of Restricted Stock Units Time-Based
Vesting
on page 33.
Chief Financial Officer
. During the first quarter of fiscal 2017, the
Compensation Committee approved and awarded the 2019 Restricted Stock Units
(2019 Time-Vesting RSUs)
to Mr. Wheat as follows:
|
|
|
Name
|
|
Number
of
2019 Time-Vesting RSUs
|
Bill W. Wheat
|
|
30,000
|
The 2019 Time-Vesting RSUs relate to a three-year period beginning on November 2, 2016 and ending on
November 2, 2019. Ten thousand of the Time-Vesting RSUs will vest annually on November 2.
Incentive Bonus
Plans Approved by Stockholders
We believe that performance-based bonuses should continue to represent
a significant portion of the compensation of our Chairman, CEO and COO. We seek to structure our performance-based awards in a manner that may permit such awards to be tax deductible under Section 162(m) of the Code to the extent reasonably
feasible and to the extent that such structure is in line with our operational and financial objectives. The
38
Compensation Committee believes that a balanced executive compensation program is best served by providing compensation plans that allow for a mix and balance of short and long-term compensation
components, including (i) a short-term or annual bonus performance plan, (ii) a long-term (more than one year) bonus performance plan, and (iii) a short-term and long-term equity plan. In furtherance of this objective, the
Compensation Committee and our stockholders have previously approved the following incentive plans:
|
|
|
D.R.
Horton 2000 Incentive Bonus Plan
our primary short-term or annual bonus plan.
|
|
|
|
D.R.
Horton 2006 Stock Incentive Plan
our primary short and long-term equity plan.
|
The amended and restated 2000 Incentive Bonus Plan and the amended and restated 2006 Stock Incentive Plan
were approved by our stockholders most recently on January 24, 2013 and January 22, 2015, respectively. The Compensation Committee will continue to evaluate the most effective way to use these two plans.
2000 Incentive Bonus Plan
. The amended and restated 2000 Incentive Bonus Plan is the primary plan
under which our Chairman, CEO and COO are awarded short-term annual incentive cash bonuses. We generally intend for awards issued to covered employees under the 2000 Incentive Bonus Plan to qualify for the performance-based compensation deduction
allowed by Section 162(m). However, there can be no assurance that these awards will satisfy the requirements for deductibility under Section 162(m), and the Company and the Compensation Committee reserve the right to pay bonuses outside
of this plan.
2006 Stock Incentive Plan.
We use our Amended and Restated 2006 Stock
Incentive Plan to issue restricted stock units, stock options and other equity based awards. From 2000 to 2016, the Compensation Committee awarded stock options or restricted stock units to its executive officers and key employees as a group in
twelve to thirty month intervals. Since 2013, the Compensation Committee has awarded either stock options or restricted stock units annually. Consistent with this practice, the executive officers and key employees as a group were last granted stock
options in March 2014 and March 2013 and awarded time-based restricted stock units in March 2016 and February 2015. The Compensation Committees decision to award restricted stock units in recent years was based on providing a mix of equity
awards (stock options and restricted stock units), reducing the number of common shares issued each year and the strong employee retention value of restricted stock units.
The Compensation Committee will continue to evaluate when to make equity awards to its executives and key employees based on the total mix of compensation for these individuals and other factors.
Generally, when the Compensation Committee decides to grant equity awards to executive officers, in determining the number and material terms of equity awards to grant the Committee makes a subjective evaluation of:
|
|
|
the overall performance of the Company in comparison to its peer group;
|
|
|
|
an analysis of recent compensation of senior executive officers in the Companys peer group;
|
|
|
|
recommendations of the Chairman, other than for himself;
|
|
|
|
contributions the executive officer made and is anticipated to make to the Companys success;
|
|
|
|
level of experience and responsibility of the executive officer; and
|
|
|
|
number of equity awards previously granted to executive officers and other employees.
|
There is no relationship between the timing of the granting of equity-based awards and our release of material non-public information.
We will continue to evaluate the type and mix of equity awards to be awarded to our executives and other employees in the
future. Restricted stock, restricted stock units, stock options and stock appreciation rights are among the types of equity awards to be considered in the future and may be awarded under our 2006 Stock Incentive Plan. When considering whether to
issue restricted stock (including restricted stock units) or stock options (including stock appreciation rights), the Compensation Committee will review the following factors (in addition to the previously listed factors):
|
|
|
difference in compensation expense of issuing restricted stock units versus that of issuing stock options;
|
|
|
|
retention value achieved by issuing restricted stock units versus that of issuing stock options; and
|
39
|
|
|
value to employee of receiving restricted stock units versus stock options.
|
The Compensation Committee believes that restricted stock, restricted stock units and stock options should be available alternatives when
considering equity awards. Restricted stock units provide strong retentive value by providing an award that upon vesting has immediate value at the current stock price, and results in lower dilution of our outstanding common shares because fewer
shares are issued compared to stock options. Stock options also have unique and valuable features to our company and our employees because of the potential for strong returns if the stock price increases and the ability of the recipient to defer
paying the exercise price and related taxes until the stock options are exercised. The Compensation Committee has not made definitive decisions regarding the awarding of equity awards in fiscal 2017, other than those discussed on page 38, but it
will continue to evaluate making such equity awards during the current fiscal year.
Compliance with Internal Revenue
Code Section 162(m)
When reviewing and setting compensation awards to our executives, we consider the tax
deductibility of their compensation under Section 162(m). Section 162(m) generally does not allow a tax deduction to publicly-held companies for compensation over $1 million paid in any fiscal year to the companys named
executive officers (other than the chief financial officer). However, Section 162(m) exempts qualified performance-based compensation from this $1 million limit if certain requirements are met. We generally intend for awards to our
executive officers under the amended and restated 2000 Incentive Bonus Plan and the amended and restated 2006 Stock Incentive Plan to qualify for the performance-based compensation exemption under Section 162(m). However, there can be no
assurance that these awards will satisfy the requirements for deductibility under Section 162(m). Further, we exercise judgment and may award compensation that does not qualify for tax deductibility under Section 162(m) to meet corporate
objectives or to adapt to changing circumstances.
Retirement Benefits
Our executive officers do not participate in any qualified pension plans or defined benefit plans, but they do participate in the
retirement plans below. We believe that it is important to offer these retirement plans to our executive officers as part of a competitive long-term compensation program that encourages saving for retirement and that promotes long-term retention.
Profit Sharing Plus Plan (401(k) plan).
Our executive officers participate in
our Company-wide 401(k) plan. Under this plan, executive officers, like all other eligible employees, may contribute from 1% to 75% of their earnings, on a pre-tax basis, into the 401(k) plan. For 2016, the maximum that could be contributed was
$18,000 ($24,000 for participants 50 years or older). The Company makes a matching contribution to the participants account in an amount of $0.50 for each $1.00 contributed by the participant up to 6% of his or her salary. The matching
contributions made by the Company on behalf of the executive officers are included in the
All Other Compensation
column in the
Summary Compensation Table
on page 42.
Deferred Compensation Plan.
The Company established the Deferred Compensation Plan effective as of
June 15, 2002 and amended and restated it on December 10, 2008
(the Deferred Compensation Plan)
. The Deferred Compensation Plan is a nonqualified deferred compensation plan maintained primarily to provide deferred
compensation benefits for a select group of management or highly compensated employees as defined by the Employee Retirement Income Security Act of 1974, as amended. The Deferred Compensation Plan, as amended and restated, was adopted
and approved by the Compensation Committee and ratified by the Board of Directors.
SERP
2.
The Supplemental Executive Retirement Plan 2
(SERP
2),
as amended and restated December 10, 2008, a nonqualified plan, was originally adopted by the Company in 1994 to permit eligible participants, which include our executive officers, region
presidents, division presidents and other key employees, to accrue supplemental Company-funded benefits payable upon retirement, separation of service, death or disability. The SERP 2 provides that if the executive is employed by the Company on
the last day of the fiscal year, the Company will establish a liability to such executive equal to 10% of his or her annual base salary as of the first day of such fiscal year. This liability will accrue earnings in future years at a rate
established by the
40
administrative committee for the SERP 2. Amounts payable under the SERP 2 are not secured or held in trust and the plan participants rights to enforce payment are the same as a
general unsecured creditor.
In connection with our risk oversight related to the retention and compensation of our named
executive officers, the Compensation Committee has determined that an appropriate compensation package should include a reasonable amount of fixed compensation for both salary and retirement compensation. The Compensation Committee believes that a
fixed component of compensation helps mitigate inappropriate risk taking because the executive can count on a certain level of fixed compensation. In this regard, in fiscal 2016, the Compensation Committee reviewed the amounts listed in the column
titled
Change in Pension Value and Nonqualified Deferred Compensation Earnings
in the
Summary Compensation Table
on page 42. For the Company, these amounts represent the above-market portion of earnings on
outstanding SERP 2 balances for the named executive officers. As part of this analysis, we reviewed the data of each company in our peer group related to the dollar amounts disclosed in the same column titled
Change in Pension Value and
Nonqualified Deferred Compensation Earnings
in the
Summary Compensation Tables
for each of the CEOs or principal executive officers in our peer group from their most recently filed proxy statements for their fiscal 2015. The dollar
amounts listed under this heading ranged from zero to approximately $360,000. For fiscal 2016, the amount for our Chairman was $204,524 and the amount for our CEO was $90,361. We believe the amounts accrued for above-market earnings on SERP 2
balances are reasonable when compared to our peer group and reasonable when considered in relation to the total compensation packages offered to our named executive officers. Also, we considered other factors such as the Company does not provide our
named executive officers with employment agreements or severance agreements or other forms of guaranteed retirement benefits other than the 401(k) matching contribution discussed above. As a result, our SERP 2 program continues to serve as a useful
and reasonable fixed compensation component of our overall compensation package.
Compensation Committee Report
The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis contained
in this Proxy Statement. Based on our review and discussions with management, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement and incorporated by
reference in the Annual Report on Form 10-K of D.R. Horton, Inc. for the fiscal year ended September 30, 2016 filed with the Securities and Exchange Commission.
COMPENSATION COMMITTEE:
Brad S. Anderson, Committee Chairman
Barbara K. Allen
Michael R. Buchanan
Michael W. Hewatt
The Compensation Committee Report does not constitute soliciting material, and shall not be deemed to be filed or incorporated by
reference into any other company filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that the company specifically incorporates the Compensation Committee Report by reference
therein.
41
Executive Compensation Tables
The following tables show, with respect to our Chairman, Chief Executive Officer, Chief Operating Officer and Chief Financial Officer, the
compensation awarded, earned or paid for all services rendered in all capacities to D.R. Horton during our fiscal years ended September 30, 2016, 2015 and 2014. Mr. Murray was not a named executive officer in fiscal 2014.
Summary Compensation Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name and
Principal Position
|
|
Year
|
|
|
Salary
|
|
|
Bonus
(1)
|
|
|
Stock
Awards
(2)
|
|
|
Option
Awards
(3)
|
|
|
Non-Equity
Incentive
Plan
Compen-
sation
(4)
|
|
|
Change in
Pension
Value and
Non-
Qualified
Deferred
Compen-
sation
Earnings
(5)
|
|
|
All
Other
Compen-
sation
(6)
|
|
|
Total
|
|
Donald R. Horton
|
|
|
2016
|
|
|
$
|
1,000,000
|
|
|
|
|
|
|
$
|
8,360,660
|
|
|
|
|
|
|
$
|
8,120,730
|
|
|
$
|
204,524
|
|
|
$
|
111,263
|
|
|
$
|
17,797,177
|
|
Chairman of the Board
|
|
|
2015
|
|
|
$
|
1,000,000
|
|
|
|
|
|
|
$
|
7,204,660
|
|
|
|
|
|
|
$
|
6,740,552
|
|
|
$
|
169,627
|
|
|
$
|
110,207
|
|
|
$
|
15,225,046
|
|
|
|
|
2014
|
|
|
$
|
1,000,000
|
|
|
|
|
|
|
$
|
3,928,000
|
|
|
$
|
1,681,500
|
|
|
$
|
4,885,110
|
|
|
$
|
132,323
|
|
|
$
|
110,048
|
|
|
$
|
11,736,981
|
|
|
|
|
|
|
|
|
|
|
|
David V. Auld
|
|
|
2016
|
|
|
$
|
700,000
|
|
|
|
|
|
|
$
|
3,960,464
|
|
|
|
|
|
|
$
|
4,737,092
|
|
|
$
|
90,361
|
|
|
$
|
77,950
|
|
|
$
|
9,565,867
|
|
President and Chief Executive Officer
|
|
|
2015
|
|
|
$
|
700,000
|
|
|
|
|
|
|
$
|
2,409,464
|
|
|
|
|
|
|
$
|
3,931,989
|
|
|
$
|
73,317
|
|
|
$
|
77,950
|
|
|
$
|
7,192,720
|
|
|
|
2014
|
|
|
$
|
500,000
|
|
|
|
|
|
|
|
|
|
|
$
|
672,600
|
|
|
$
|
2,035,463
|
|
|
$
|
56,810
|
|
|
$
|
57,800
|
|
|
$
|
3,322,673
|
|
|
|
|
|
|
|
|
|
|
|
Michael J. Murray
|
|
|
2016
|
|
|
$
|
500,000
|
|
|
|
|
|
|
$
|
1,680,013
|
|
|
|
|
|
|
$
|
1,353,455
|
|
|
$
|
29,306
|
|
|
$
|
57,950
|
|
|
$
|
3,620,724
|
|
Executive Vice President and Chief Operating Officer
|
|
|
2015
|
|
|
$
|
500,000
|
|
|
|
|
|
|
$
|
1,566,303
|
|
|
|
|
|
|
$
|
1,123,425
|
|
|
$
|
22,059
|
|
|
$
|
57,950
|
|
|
$
|
3,269,737
|
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bill W. Wheat
|
|
|
2016
|
|
|
$
|
500,000
|
|
|
$
|
1,100,000
|
|
|
$
|
1,625,113
|
|
|
|
|
|
|
|
|
|
|
$
|
49,607
|
|
|
$
|
57,950
|
|
|
$
|
3,332,670
|
|
Executive Vice President and Chief Financial Officer
|
|
|
2015
|
|
|
$
|
500,000
|
|
|
$
|
950,000
|
|
|
$
|
1,514,103
|
|
|
|
|
|
|
|
|
|
|
$
|
39,522
|
|
|
$
|
57,950
|
|
|
$
|
3,061,575
|
|
|
|
2014
|
|
|
$
|
500,000
|
|
|
$
|
600,000
|
|
|
|
|
|
|
$
|
672,600
|
|
|
|
|
|
|
$
|
29,321
|
|
|
$
|
57,800
|
|
|
$
|
1,859,721
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The dollar amounts listed represent discretionary cash bonuses paid to Mr. Wheat. More information on fiscal 2016 discretionary bonuses is set forth under the caption
2016 Fiscal Year
Annual Discretionary Bonus
beginning on page 29.
|
For Mr. Wheat, $100,000 of each amount listed was paid in common stock. That amount represents 3,495 shares of common stock valued at $28.61 per share paid for fiscal 2016, 3,355 shares of common stock
valued at $29.80 per share paid for fiscal 2015 and 4,359 shares of common stock valued at $22.94 per share paid for fiscal 2014. More information on fiscal 2016 discretionary bonuses is set forth under the caption
2016 Fiscal
Year
Annual Discretionary Bonus
beginning on page 29.
(2)
|
For fiscal 2016, the dollar amount for Mr. Horton, Mr. Auld and Mr. Murray represents the grant date fair value, determined in accordance with accounting guidance for
share-based payments, of the fiscal 2016 awards of time-vesting RSUs and the grant date fair value of the target number of 2018 Performance RSUs. If the maximum number of 2018 Performance RSUs that potentially could be earned were used rather than
the target number, the total grant date fair value of the award would be $12,324,000 for Mr. Horton, $6,162,000 for Mr. Auld and $1,848,600 for Mr. Murray. The dollar amount for Mr. Wheat represents the grant date fair value of the fiscal 2016
awards of time-vesting RSUs. Additional information on the time-vesting and performance RSUs and the grant date fair value is set forth in footnote 2 to the
Grants of Plan-Based Awards
table on page 44.
|
For fiscal 2015, the dollar amount for Mr. Horton, Mr. Auld and Mr. Murray represents the grant date fair value, determined in accordance
with accounting guidance for share-based payments, of the fiscal 2015 awards of time-vesting RSUs and the grant date fair value of the target number of 2017 Performance RSUs. If the maximum number of 2017 Performance RSUs that potentially could be
earned were used rather than the target number, the total grant date fair value of the award would be $9,448,000 for Mr. Horton, $2,834,400 for Mr. Auld and $1,417,200 for Mr. Murray. The dollar amount for Mr. Wheat represents the grant date
fair value of the fiscal 2015 awards of time-vesting RSUs.
42
For fiscal 2014, the dollar amount for Mr. Horton represents the grant date fair value,
determined in accordance with accounting guidance for share-based payments, of the target amount of 2016 Performance RSUs. If the maximum number of 2016 Performance RSUs that potentially could be earned were used rather than the target number, the
total grant date fair value of the award would be $7,856,000 for Mr. Horton.
(3)
|
For fiscal 2014, the dollar amount represents the grant date fair value of the number of stock options granted in the fiscal year. The grant date fair value of the
options was determined using a Black-Scholes option pricing model in accordance with accounting guidance for share-based payments. Assumptions used in the calculation of these amounts are included in Note J to our audited financial statements
included in our Form 10-K for the year ended September 30, 2016. The Company recognizes expenses for these awards over their vesting period. Stock options were not granted in fiscal 2015 or fiscal 2016.
|
(4)
|
For fiscal 2016, Mr. Horton was paid $8,120,730, Mr. Auld was paid $4,737,092 and Mr. Murray was paid $1,353,455 based on the consolidated pre-tax income earned by the
Company in fiscal 2016. Additional information on the fiscal 2016 annual incentive bonus is discussed under the heading
2016 Fiscal Year
Annual Incentive Bonus Results and Payout
on page 28.
For fiscal 2015, Mr. Horton was paid $6,740,552, Mr. Auld was paid $3,931,989 and Mr. Murray was paid $1,123,425 based on the consolidated pre-tax income earned by the Company in fiscal 2015. For fiscal 2014, Mr. Horton was paid $4,885,110 and
Mr. Auld was paid $2,035,463 based on the consolidated pre-tax income earned by the Company in fiscal 2014.
|
(5)
|
Amounts represent the above-market portion of earnings on each executive officers outstanding balance under the SERP 2. This amount is further discussed under the
heading
SERP 2
on page 40.
|
(6)
|
For fiscal 2016, the amounts under
All Other Compensation
include the following components:
|
|
(a)
|
Credits made by the Company of $100,000, $70,000, $50,000 and $50,000 to the respective accounts of Mr. Horton, Mr. Auld, Mr. Murray and Mr. Wheat under the SERP 2
plan.
|
|
(b)
|
Matching contributions of $7,950 to the respective accounts of Mr. Horton, Mr. Auld, Mr. Murray and Mr. Wheat under the D.R. Horton 401(k) plan.
|
|
(c)
|
The participants portion of group health plan premiums of $3,313 paid by the Company for the benefit of Mr. Horton.
|
43
Grants of Plan-Based Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grant
Date
|
|
|
Estimated Future
Payouts
Under Non-Equity Incentive Plan
Awards
(1)
|
|
Estimated Future Payouts
Under Equity Incentive Plan
Awards
(2)
|
|
|
All Other
Stock
Awards:
Number of
Securities
Underlying
Stock
Awards
(#)(3)
|
|
Grant
Date
Fair
Value of
Stock and
Option
Awards
($)(2)
|
|
Name
|
|
|
Threshold
|
|
Target
|
|
|
Maximum
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
|
Donald R. Horton
|
|
|
11/4/2015
|
|
|
|
|
$
|
8,120,730
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11/4/2015
|
|
|
|
|
|
|
|
|
|
|
|
30,000
|
|
|
|
200,000
|
|
|
|
400,000
|
|
|
|
|
$
|
6,162,000
|
|
|
|
|
2/12/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
94,000
|
|
$
|
2,198,660
|
|
David V. Auld
|
|
|
11/4/2015
|
|
|
|
|
$
|
4,737,092
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11/4/2015
|
|
|
|
|
|
|
|
|
|
|
|
15,000
|
|
|
|
100,000
|
|
|
|
200,000
|
|
|
|
|
$
|
3,081,000
|
|
|
|
|
2/12/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37,600
|
|
$
|
879,464
|
|
Michael J. Murray
|
|
|
11/4/2015
|
|
|
|
|
$
|
1,353,455
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11/4/2015
|
|
|
|
|
|
|
|
|
|
|
|
4,500
|
|
|
|
30,000
|
|
|
|
60,000
|
|
|
|
|
$
|
924,300
|
|
|
|
|
2/12/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32,900
|
|
$
|
755,713
|
|
Bill W. Wheat
|
|
|
11/4/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,000
|
|
$
|
869,400
|
|
|
|
|
2/12/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32,900
|
|
$
|
755,713
|
|
(1)
|
Represents the performance bonus paid based on consolidated pre-tax income earned by the Company in fiscal 2016. Additional information related to the pre-tax income
bonus award is discussed under the heading
2016 Fiscal Year
Annual Incentive Bonus Results and Payout
on page 28.
|
(2)
|
Mr. Horton, Mr. Auld and Mr. Murray were awarded a target amount of 200,000, 100,000 and 30,000 2018 Performance RSUs, respectively. The threshold, target and
maximum amounts reflect the number of 2018 Performance RSUs each executive could earn based on the level of performance attained for the three-year performance period and based on relative performance on four performance goals ranked against our
peer group and the S&P 500 index.
|
The grant date fair value of the 2018 Performance RSUs is $30.81 per unit
and was determined in accordance with accounting guidance for share-based payments. These 2018 Performance RSUs are discussed under the heading
2016 Fiscal Year
Award of 2018 Performance
Restricted Stock Units
Potential Vesting at September 30, 2018 and Award of Restricted Stock Units Time-Based Vesting
on page 33 and the related grant date fair value of $6,162,000 for
Mr. Horton, $3,081,000 for Mr. Auld and $924,300 for Mr. Murray is reflected in the
Stock Awards
column in the
Summary Compensation Table
on page 42.
(3)
|
On November 4, 2015, Mr. Wheat was awarded 30,000 time-vesting RSUs under the 2006 Stock Incentive Plan, as amended and restated. The RSUs vest in three equal annual
installments on each successive anniversary date beginning November 4, 2016.
|
The grant date fair value of the
November 4, 2015 RSUs is $28.98 per unit and was determined in accordance with accounting guidance for share-based payments. The related grant date fair value of $869,400 for Mr. Wheat is reflected in the
Stock Awards
column in
the
Summary Compensation Table
on page 42.
On February 12, 2016, Mr. Horton, Mr. Auld, Mr. Murray and
Mr. Wheat were awarded 94,000, 37,600, 32,900 and 32,900 time-vesting RSUs, respectively, under the 2006 Stock Incentive Plan, as amended and restated. The RSUs for Mr. Horton and Mr. Auld vest in three equal annual installments on each
successive anniversary date beginning February 12, 2017. The RSUs for Mr. Murray and Mr. Wheat vest annually in five equal installments on each successive anniversary date beginning February 12, 2017.
The grant date fair value of the February 12, 2016 RSUs vesting in three years is $23.39 per unit and for the RSUs vesting in five years
is $22.97 per unit. The grant date fair values were determined in accordance with accounting guidance for share-based payments. The related grant date fair value of $2,198,660 for Mr. Horton, $879,464 for Mr. Auld, $755,713 for Mr. Murray and
$755,713 for Mr. Wheat is reflected in the
Stock Awards
column in the
Summary Compensation Table
on page 42.
44
Outstanding Equity Awards at Fiscal Year-End
The following table shows information about outstanding equity awards at September 30, 2016.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
|
|
|
Stock Awards
|
|
Name
|
|
Grant
Date
|
|
|
Number of
Securities
Underlying
Unexercised
Options
Exercisable
|
|
|
Number of
Securities
Underlying
Unexercised
Options
Unexercisable
|
|
|
Option
Exercise
Price
|
|
|
Option
Expiration
Date
|
|
|
|
|
|
Number of
Shares or
Units of
Stock That
Have Not
Vested
|
|
|
Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units
or Other
Rights That
Have Not
Vested
|
|
|
Equity
Incentive
Plan
Awards:
Market or
Payout
Value
of Unearned
Shares, Units
or Other
Shares
of
Stock That
Have Not
Vested
|
|
Donald R. Horton
(1)
|
|
|
2/12/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
94,000
|
(3)
|
|
|
|
|
|
$
|
2,838,800
|
(3)
|
|
|
|
11/4/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
200,000
|
(4)
|
|
$
|
6,040,000
|
(5)
|
|
|
|
3/5/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
59,008
|
(3)
|
|
|
|
|
|
$
|
1,782,042
|
(3)
|
|
|
|
11/5/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
200,000
|
(6)
|
|
$
|
6,040,000
|
(7)
|
|
|
|
3/6/2014
|
|
|
|
100,000
|
|
|
|
50,000
|
|
|
$
|
23.86
|
|
|
|
3/6/2024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/5/2013
|
|
|
|
150,000
|
|
|
|
|
|
|
$
|
23.80
|
|
|
|
3/5/2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9/2/2011
|
|
|
|
300,000
|
|
|
|
|
|
|
$
|
9.97
|
|
|
|
9/2/2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/9/2009
|
|
|
|
300,000
|
|
|
|
|
|
|
$
|
9.03
|
|
|
|
2/9/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/11/2008
|
|
|
|
300,000
|
|
|
|
|
|
|
$
|
14.50
|
|
|
|
2/11/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David V. Auld
(2)
|
|
|
2/12/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37,600
|
(3)
|
|
|
|
|
|
$
|
1,135,520
|
(3)
|
|
|
|
11/4/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000
|
(4)
|
|
$
|
3,020,000
|
(5)
|
|
|
|
3/5/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,066
|
(3)
|
|
|
|
|
|
$
|
756,993
|
(3)
|
|
|
|
11/5/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60,000
|
(6)
|
|
$
|
1,812,000
|
(7)
|
|
|
|
3/6/2014
|
|
|
|
24,000
|
|
|
|
36,000
|
|
|
$
|
23.86
|
|
|
|
3/6/2024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/5/2013
|
|
|
|
36,000
|
|
|
|
24,000
|
|
|
$
|
23.80
|
|
|
|
3/5/2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9/2/2011
|
|
|
|
72,000
|
|
|
|
|
|
|
$
|
9.97
|
|
|
|
9/2/2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/9/2009
|
|
|
|
24,000
|
|
|
|
36,000
|
|
|
$
|
9.03
|
|
|
|
2/9/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/11/2008
|
|
|
|
24,000
|
|
|
|
24,000
|
|
|
$
|
14.50
|
|
|
|
2/11/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael J. Murray
(2)
|
|
|
2/12/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32,900
|
(3)
|
|
|
|
|
|
$
|
993,580
|
(3)
|
|
|
|
11/4/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,000
|
(4)
|
|
$
|
906,000
|
(5)
|
|
|
|
3/5/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,320
|
(3)
|
|
|
|
|
|
$
|
794,864
|
(3)
|
|
|
|
11/5/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,000
|
(6)
|
|
$
|
906,000
|
(7)
|
|
|
|
3/6/2014
|
|
|
|
24,000
|
|
|
|
36,000
|
|
|
$
|
23.86
|
|
|
|
3/6/2024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/5/2013
|
|
|
|
36,000
|
|
|
|
24,000
|
|
|
$
|
23.80
|
|
|
|
3/5/2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9/2/2011
|
|
|
|
69,000
|
|
|
|
|
|
|
$
|
9.97
|
|
|
|
9/2/2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/9/2009
|
|
|
|
8,000
|
|
|
|
24,000
|
|
|
$
|
9.03
|
|
|
|
2/9/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/11/2008
|
|
|
|
8,000
|
|
|
|
16,000
|
|
|
$
|
14.50
|
|
|
|
2/11/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bill W. Wheat
(2)
|
|
|
2/12/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32,900
|
(3)
|
|
|
|
|
|
$
|
993,580
|
(3)
|
|
|
|
11/4/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,000
|
(3)
|
|
|
|
|
|
$
|
906,000
|
(3)
|
|
|
|
3/5/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,320
|
(3)
|
|
|
|
|
|
$
|
794,864
|
(3)
|
|
|
|
11/5/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
(3)
|
|
|
|
|
|
$
|
604,000
|
(3)
|
|
|
|
3/6/2014
|
|
|
|
24,000
|
|
|
|
36,000
|
|
|
$
|
23.86
|
|
|
|
3/6/2024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/5/2013
|
|
|
|
36,000
|
|
|
|
24,000
|
|
|
$
|
23.80
|
|
|
|
3/5/2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9/2/2011
|
|
|
|
88,000
|
|
|
|
|
|
|
$
|
9.97
|
|
|
|
9/2/2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/9/2009
|
|
|
|
24,000
|
|
|
|
36,000
|
|
|
$
|
9.03
|
|
|
|
2/9/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/11/2008
|
|
|
|
12,000
|
|
|
|
24,000
|
|
|
$
|
14.50
|
|
|
|
2/11/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
All stock option awards granted to Mr. Horton prior to September 2011 vest annually in five equal installments. Stock option awards granted in September 2011 and
thereafter vest annually in three equal installments. All stock options have a ten-year term.
|
45
(2)
|
All stock option awards granted to Mr. Auld, Mr. Murray and Mr. Wheat prior to September 2011 vest in ten equal annual installments on each successive anniversary of
the grant date commencing on the first anniversary date for nine years with the final installment vesting on the date that is 9.75 years following the grant date. Stock option awards granted in September 2011 and thereafter vest annually in
five equal installments. All stock options have a ten-year term.
|
(3)
|
Represents the time-vesting RSUs granted to Mr. Horton, Mr. Auld, Mr. Murray and Mr. Wheat. The value of the time-vesting RSUs is based on the closing price of our
common stock on September 30, 2016 of $30.20.
|
(4)
|
Represents the target number of 2018 Performance RSUs awarded. The maximum number of 2018 Performance RSUs that can be earned is 400,000 for Mr. Horton, 200,000 for Mr.
Auld and 60,000 for Mr. Murray upon maximum achievement of the performance goals. These 2018 Performance RSUs are described under
2016 Fiscal Year
Award of 2018 Performance Restricted Stock
Units
Potential Vesting at September 30, 2018 and Award of Restricted Stock Units Time-Based Vesting
on page 33.
|
(5)
|
The value of the 2018 Performance RSUs is based on the closing price of our common stock on September 30, 2016 of $30.20. The maximum market value of these 2018
Performance RSUs based on the stock price at September 30, 2016 is $12,080,000 for Mr. Horton, $6,040,000 for Mr. Auld and $1,812,000 for Mr. Murray if maximum performance is achieved. These 2018 Performance RSUs are described under
2016
Fiscal Year
Award of 2018 Performance Restricted Stock Units
Potential Vesting at September 30, 2018 and Award of Restricted Stock Units Time-Based
Vesting
on page 33.
|
(6)
|
Represents the target number of 2017 Performance RSUs awarded. The maximum number of 2017 Performance RSUs that can be earned is 400,000 for Mr. Horton, 120,000 for Mr.
Auld and 60,000 for Mr. Murray upon maximum achievement of the performance goals.
|
(7)
|
The value of the 2017 Performance RSUs is based on the closing price of our common stock on September 30, 2016 of $30.20. The maximum market value of these 2017
Performance RSUs based on the stock price at September 30, 2016 is $12,080,000 for Mr. Horton, $3,624,000 for Mr. Auld and $1,812,000 for Mr. Murray if maximum performance is achieved.
|
Option Exercises and Stock Vested
The following table shows information about option exercises and stock vested during our fiscal year ended September 30, 2016.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
Name
|
|
Number of
Shares Acquired
on Exercise
|
|
|
Value
Realized
on
Exercise
(1)
|
|
|
Number of
Shares Acquired
on Vesting
(2)
|
|
|
Value
Realized
on
Vesting
(3)
|
|
Donald R. Horton
|
|
|
150,000
|
|
|
$
|
65,794
|
|
|
|
359,992
|
|
|
$
|
10,825,709
|
|
David V. Auld
|
|
|
30,000
|
|
|
$
|
51,000
|
|
|
|
12,534
|
|
|
$
|
355,966
|
|
Michael J. Murray
|
|
|
3,000
|
|
|
$
|
2,703
|
|
|
|
6,580
|
|
|
$
|
186,872
|
|
Bill W. Wheat
|
|
|
40,000
|
|
|
$
|
37,053
|
|
|
|
16,580
|
|
|
$
|
480,872
|
|
(1)
|
Amounts represent the difference in the aggregate market value and the aggregate exercise price of the shares at the time of exercise.
|
(2)
|
For Mr. Horton, the aggregate amount represents the 325,000 units related to the final number of 2016 Performance RSUs vested on September 30, 2016, 3,658 units of
time-based RSUs vested on December 1, 2015 for payment of certain withholding taxes, and 31,334 units of time-based RSUs vested on March 5, 2016. The 2016 Performance RSUs were granted in November 2013 and the time-based RSUs were granted in March
2015.
|
46
For Mr. Auld and Mr. Murray the amounts represent the number of time-based RSUs vested on
March 5, 2016 that were granted in March 2015.
For Mr. Wheat, the aggregate amount represents the 10,000 units of time-based
RSUs vested in November 2015 and 6,580 units of time-based RSUs vested on March 5, 2016. Mr. Wheat deferred the settlement of the 10,000 time-based RSUs vested in November 2015 until November 2017.
(3)
|
For Mr. Horton, the amount represents the number of 2016 Performance RSUs vested multiplied by the closing stock price on September 30, 2016 of $30.20 per share,
the number of time-based RSUs vested in December 2015 multiplied by the closing stock price on December 1, 2015 of $33.03 per share, and the number of time-based RSUs vested in March 2016 multiplied by the closing stock price on March 4, 2016 of
$28.40 per share.
|
For Mr. Auld and Mr. Murray, the amounts represent the number of time-based RSUs vested in
March 2016 multiplied by the closing stock price on March 4, 2016 of $28.40 per share.
For Mr. Wheat, the amount represents the
number of time-based RSUs vested in November 2015 multiplied by the closing stock price on November 5, 2015 of $29.40 per share and the number of time-based RSUs vested in March 2016 multiplied by the closing stock price March 4, 2016 of $28.40 per
share.
Nonqualified Deferred Compensation Plans
D.R. Horton has established the following nonqualified deferred compensation plans:
Deferred Compensation Plan.
The Deferred Compensation Plan permits participants, including D.R.
Hortons executive officers and directors, to voluntarily defer receipt of up to 100% of bonus or director fee compensation from D.R. Horton and up to 90% of base salary from D.R. Horton. The participants earn a rate of return on their deferred
amounts based on their selection from a variety of independently managed funds. The Company does not provide a guaranteed rate of return on these deferred amounts. The rate of return realized depends on the participants fund selections and
market performance of these funds. Upon his or her annual election, a participants Deferred Compensation Plan benefit will be paid, or commence to be paid, upon separation from service or on a fixed date. Specified employees, as defined in
Code Section 409A, generally cannot be paid until six months after separation from service (or, if earlier, upon a change in control). Payment may also be made upon death, disability or an unforeseeable emergency. Payments are made in a lump sum
unless installments are elected. Amounts payable under the plan are not secured or held in trust, and the plan participants rights to enforce payment are the same as a general unsecured creditor. However, upon a change in control (as defined
in the Deferred Compensation Plan), all plan benefits will be fully funded through an irrevocable grantor trust (also known as a Rabbi trust). The participants, at their election, may choose to have the deferred amounts paid out through
scheduled in-service distributions (in a lump sum or annual installments of between two and five years) or following the later of termination of employment, director service or attaining the age of 62. The Deferred Compensation Plan was adopted and
approved by the Compensation Committee and ratified by the Board of Directors.
SERP
2.
Unlike the Deferred Compensation Plan, these are not elective deferrals, but rather the Company credits an amount to each participants account. Participation in the SERP 2 is considered by the
Compensation Committee annually at the beginning of the fiscal year. Pursuant to the SERP 2, if the executive is employed by the Company on the last day of a fiscal year, then the Company will establish a liability to such executive equal to
10% of his or her annual base salary as of the first day of such fiscal year. This liability will accrue earnings in future years at a rate established by the administrative committee for the SERP 2. Amounts payable under the SERP 2 are
not secured or held in trust, and the plan participants rights to enforce payment are the same as a general unsecured creditor. Amounts deferred under the SERP 2 are payable within 60 days following the retirement or termination of
employment of the participant, the death or disability of the participant or a change in control of the Company. Provided however, specified employees, as defined in Code Section 409A, generally cannot be paid until six months after
separation from service (or, if earlier, upon a change in control). The definition of change in control is described in
Potential Payments Upon Termination or Change in Control
on page 48. The form of distribution may be in a lump
sum, or in quarterly installments over a period not to exceed five years, as elected by the participant.
47
The following table shows, for each named executive officer, aggregate contributions,
earnings and withdrawals/distributions during fiscal 2016 and outstanding balances as of September 30, 2016 under all of our nonqualified deferred compensation plans.
Nonqualified Deferred Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive
Contributions in
Fiscal 2016
|
|
Company
Contributions
in
Fiscal 2016
|
|
|
Aggregate Earnings
in Fiscal
2016
|
|
|
Aggregate Withdrawals/
Distributions
|
|
Aggregate Balance at
September 30, 2016
|
|
Name
|
|
Deferred
Cash
Compensation
|
|
SERP
|
|
Deferred
Cash
Compensation
|
|
SERP
(1)
|
|
|
Deferred
Cash
Compensation
(2)
|
|
|
SERP
(3)
|
|
|
Deferred
Cash
Compensation
|
|
SERP
|
|
Deferred
Cash
Compensation
(4)
|
|
|
SERP
(5)
|
|
Donald R. Horton
|
|
|
|
|
|
|
|
$
|
100,000
|
|
|
$
|
406,645
|
|
|
$
|
290,007
|
|
|
|
|
|
|
$
|
8,397,000
|
|
|
$
|
3,183,564
|
|
David V. Auld
|
|
|
|
|
|
|
|
$
|
70,000
|
|
|
|
|
|
|
$
|
128,128
|
|
|
|
|
|
|
|
|
|
|
$
|
1,432,350
|
|
Michael J. Murray
|
|
|
|
|
|
|
|
$
|
50,000
|
|
|
$
|
4,265
|
|
|
$
|
41,555
|
|
|
|
|
|
|
$
|
50,281
|
|
|
$
|
491,841
|
|
Bill W. Wheat
|
|
|
|
|
|
|
|
$
|
50,000
|
|
|
|
|
|
|
$
|
70,341
|
|
|
|
|
|
|
|
|
|
|
$
|
797,917
|
|
(1)
|
Represents the amount of unfunded, unsecured liabilities created by the Company on behalf of each participant in fiscal 2016 under the SERP 2. Such amount is also
included in the
All Other Compensation
column of the
Summary Compensation Table
on page 42.
|
(2)
|
Represents the net amount of earnings on the balance of the participants account that is the result of the performance of a variety of independently managed funds
available to and selected by each participant under the Deferred Compensation Plan. The Company does not provide a guaranteed or fixed rate of return on these funds. The rate of return on these funds depends on the participants investment
selections and on the market performance of these funds. These amounts are not included in the
Summary Compensation Table
on page 42 because such amount was not preferential or above-market.
|
(3)
|
Represents the amount of earnings on the balance of the participants account at a rate determined by the SERP 2 plan administrative committee, typically 10% per
annum. The portion of earnings considered above-market are included in the
Change in Pension Value and Nonqualified Deferred Compensation Earnings
column of the
Summary Compensation Table
on page 42. The
above-market portion of earnings for each of the above individuals for fiscal 2016 is: Mr. Horton: $204,524; Mr. Auld: $90,361; Mr. Murray: $29,306; and Mr. Wheat: $49,607.
|
(4)
|
These balances of deferred compensation represent compensation earned in prior years and were included in the Summary Compensation Table in prior year proxy statements
in the year earned, to the extent applicable.
|
(5)
|
Includes amounts of unfunded, unsecured liabilities and the related earnings accrued by the Company on behalf of each participant with respect to the current and prior
fiscal years under the SERP 2.
|
Potential Payments Upon Termination or Change in Control
None of our named executive officers has employment or change in control agreements with us specifically providing for
payments upon involuntary termination of their employment. However, certain of our benefit and incentive plans contain various provisions regarding termination of employment or change in control. Any additional severance payments would be at the
discretion of the Compensation Committee and determined at the time of termination. The following is a summary of the treatment of benefits under our benefit plans for various reasons for termination, including upon a change in control.
Generally, our benefit plans define cause as a violation of the standards of employee conduct set forth in our employee manual
and change in control as the occurrence of any of the following events:
(i) Our merger, consolidation or
reorganization into another entity if our stockholders immediately before such transaction do not, immediately after such transaction, own more than 50% of the combined voting power of the outstanding voting securities resulting from such
transaction and in substantially the same proportion as their stock ownership prior to the transaction;
48
(ii) We sell all or substantially all of our assets to another entity or we completely
liquidate or dissolve;
(iii) A person (as defined by Section 13(d)(3) or Section 14(d)(2) of the Exchange Act)
becomes the beneficial owner (as the term beneficial owner is defined under Rule 13d-3 or any successor rule or regulation promulgated under the Exchange Act) of securities representing 20% or more of the combined voting power of the
then outstanding voting securities (the threshold for amounts deposited under our SERP 2 plan on or after January 1, 2005 is 50% or 35% acquired in a single transaction or series of transactions in any 12-month period); and
(iv) During any two-year period, a majority of the members of the Board serving at the date of the most recent approval
of our benefit plan by stockholders is replaced by members of the Board who are not nominated and approved by the Board.
For
purposes of calculating beneficial ownership pursuant to this paragraph, no voting securities held by our Chairman, Donald R. Horton, as of the date of the adoption of the plan in question or received in any merger transaction shall be included in
the calculation.
With regard to our amended and restated 2000 Incentive Bonus Plan, the definition of change in
control differs from the generally applicable provisions described above in two ways. It includes one additional change in control event relating to board composition and it uses a different threshold for and a different exclusion from
beneficial ownership for the change in control event described in paragraph (iii) above. Additionally, under the 2000 Incentive Bonus Plan, the threshold for a persons acquisition of beneficial ownership to trigger a change in
control event is 50%, and this definition explicitly excludes from the group of persons that may trigger this change in control the Company, Donald R. Horton, Terrill J. Horton, their respective wives, children, grandchildren, and other
descendants, and any trust or other entity formed or controlled by any such individuals.
2006 Stock Incentive Plan
Our D.R. Horton 2006 Stock Incentive Plan provides for accelerated vesting of all outstanding unvested restricted
stock units and options granted under the plan in the event of a change in control or in the event of a participants death, disability or retirement at the retirement age specified in the plan and the participant or his or her beneficiary, as
applicable, will be entitled to exercise such options for a period of one year in the event of retirement or two years in the event of death or disability. In the event the participants employment is terminated by the Company without cause or
by the participant voluntarily, the participant will be entitled to exercise any options vested as of the date of termination for a period of three months following such termination. If the participant is terminated by the Company for cause, all
options will immediately terminate and the participant will forfeit all vested options.
Amended and Restated
Supplemental Executive Retirement Plan No. 2 (SERP 2)
Under the SERP 2, all amounts deferred shall be paid
(either in lump sum or in quarterly installments as elected by the participant) within 60 days following the date of the participants retirement or termination of employment, disability, death or change in control of the Company;
provided, however, specified employees, as such term is defined in Section 409A of the Internal Revenue Code, must wait six months following termination of employment before payments accrued on or after January 1, 2005 can be
made. In the event the Company terminates a participant for cause, all benefits under the SERP 2 will be forfeited and no payments will be made to the participant. In the event of a change in control, all amounts deferred shall be paid (in
accordance with the participants election) within 60 days following the date of the change in control.
Notwithstanding the foregoing, a participants election as to form of payment (lump sum or installment) must have been made at least
12 months prior to distribution. If a termination event occurs and no election has been made, the distributions of pre-2005 accruals will be made on the first day of the 13th month following the date of election, and the distribution of
post-2004 accruals will be made in a lump sum upon termination of employment (or six months later for specified employees).
49
Table Potential Payments Upon Termination or Change in Control
The following table reflects amounts of compensation to be paid to each of the named executive officers in the event
of termination of employment or change in control. Because neither the Company nor any of its plans provides for additional benefits related to a change in control termination, if such a termination is triggered, the payments would be as set forth
under the applicable column under
Termination of Employment.
The amounts in the table assume a termination date of
September 30, 2016, the last day of our fiscal year, and, if applicable, are based on the closing price of our common stock of $30.20 on September 30, 2016. Because only Mr. Horton was at the normal retirement age (65 years old) on
September 30, 2016, we only included amounts payable upon retirement for him. These amounts are estimates of payments to executives upon termination of employment or a change in control. Actual amounts can only be determined at the time of such
executives actual separation from the Company or change in control. Factors that could affect these amounts include the timing during the year of any such event, the companys stock price and the executives age. Amounts to be
provided to an executive under arrangements that do not discriminate in scope, terms or operation in favor of our executive officers and are available to all salaried employees are not included in the following table in accordance with SEC
regulations.
In addition to the amounts set forth below, each of the named executive officers would be entitled to receive,
upon certain termination events or a change in control, a distribution of his or her outstanding balance of compensation earned in prior years and deferred, at the executive officers option, under our Deferred Compensation Plan. The balances
of such accounts are set forth and explained in the
Nonqualified Deferred Compensation
table on page 48.
50
The table reflects compensation to be paid based on the listed events if such events
occurred on September 30, 2016.
Potential Payments Upon Termination or Change in Control
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination of Employment
|
|
|
|
|
Name
|
|
Payments and Benefits
|
|
Voluntary
($)
|
|
|
Normal
Retirement
($)(4)
|
|
|
Without
Cause
($)
|
|
|
With
Cause
($)
|
|
Death
or
Disability
($)
|
|
|
Change
in
Control
($)
|
|
Donald R. Horton
|
|
Severance Pay:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 Restricted
Stock Units
(1)
|
|
|
4,026,657
|
|
|
|
4,026,657
|
|
|
|
4,026,657
|
|
|
|
|
|
4,026,657
|
|
|
|
4,026,657
|
|
|
|
2018 Restricted
Stock Units
(2)
|
|
|
2,013,313
|
|
|
|
2,013,313
|
|
|
|
2,013,313
|
|
|
|
|
|
2,013,313
|
|
|
|
2,013,313
|
|
|
|
Vesting of Equity Awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options
|
|
|
|
|
|
|
317,000
|
|
|
|
|
|
|
|
|
|
317,000
|
|
|
|
317,000
|
|
|
|
Time-Vesting Restricted
Stock Units
(3)
|
|
|
|
|
|
|
4,620,842
|
|
|
|
|
|
|
|
|
|
4,620,842
|
|
|
|
4,620,842
|
|
|
|
Payments of SERP 2 Contributions
|
|
|
3,183,564
|
|
|
|
3,183,564
|
|
|
|
3,183,564
|
|
|
|
|
|
3,183,564
|
|
|
|
3,183,564
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
9,223,534
|
|
|
|
14,161,376
|
|
|
|
9,223,534
|
|
|
|
|
|
14,161,376
|
|
|
|
14,161,376
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David V. Auld
|
|
Severance Pay:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 Restricted
Stock Units
(1)
|
|
|
1,208,000
|
|
|
|
|
|
|
|
1,208,000
|
|
|
|
|
|
1,208,000
|
|
|
|
1,208,000
|
|
|
|
2018 Restricted
Stock Units
(2)
|
|
|
1,006,657
|
|
|
|
|
|
|
|
1,006,657
|
|
|
|
|
|
1,006,657
|
|
|
|
1,006,657
|
|
|
|
Vesting of Equity Awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,520,760
|
|
|
|
1,520,760
|
|
|
|
Time-Vesting Restricted
Stock Units
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,892,513
|
|
|
|
1,892,513
|
|
|
|
Payments of SERP 2 Contributions
|
|
|
1,432,350
|
|
|
|
|
|
|
|
1,432,350
|
|
|
|
|
|
1,432,350
|
|
|
|
1,432,350
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
3,647,007
|
|
|
|
|
|
|
|
3,647,007
|
|
|
|
|
|
7,060,280
|
|
|
|
7,060,280
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael J. Murray
|
|
Severance Pay:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 Restricted
Stock Units
(2)
|
|
|
604,000
|
|
|
|
|
|
|
|
604,000
|
|
|
|
|
|
604,000
|
|
|
|
604,000
|
|
|
|
2018 Restricted
Stock Units
(2)
|
|
|
302,000
|
|
|
|
|
|
|
|
302,000
|
|
|
|
|
|
302,000
|
|
|
|
302,000
|
|
|
|
Vesting of Equity Awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,141,120
|
|
|
|
1,141,120
|
|
|
|
Time-Vesting Restricted
Stock Units
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,788,444
|
|
|
|
1,788,444
|
|
|
|
Payments of SERP 2 Contributions
|
|
|
491,841
|
|
|
|
|
|
|
|
491,841
|
|
|
|
|
|
491,841
|
|
|
|
491,841
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,397,841
|
|
|
|
|
|
|
|
1,397,841
|
|
|
|
|
|
4,327,405
|
|
|
|
4,327,405
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bill W. Wheat
|
|
Severance Pay:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vesting of Equity Awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,520,760
|
|
|
|
1,520,760
|
|
|
|
Time-Vesting Restricted
Stock Units
(3)
|
|
|
604,000
|
|
|
|
|
|
|
|
604,000
|
|
|
|
|
|
3,298,444
|
|
|
|
3,298,444
|
|
|
|
Payments of SERP 2 Contributions
|
|
|
797,917
|
|
|
|
|
|
|
|
797,917
|
|
|
|
|
|
797,917
|
|
|
|
797,917
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,401,917
|
|
|
|
|
|
|
|
1,401,917
|
|
|
|
|
|
5,617,121
|
|
|
|
5,617,121
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
51
(1)
|
Under the 2006 Stock Incentive Plan, Mr. Horton, Mr. Auld and Mr. Murray were awarded a target number of 200,000, 60,000 and 30,000 2017 Performance RSUs, respectively,
for the performance period of October 1, 2014 through September 30, 2017. Pro-rata vesting may occur based on the number of months served from October 1, 2014 in the event of voluntary termination, normal retirement or without cause termination
after completion of the performance period. With respect to death or disability, the 2017 Performance RSUs vest pro-rata based on time passed. Upon a change in control, the Committee may accelerate vesting of part or all of the 2017 Performance
RSUs. With respect to an event of voluntary termination, normal retirement, without cause termination, death, disability or a change in control, the 2017 Performance RSUs are valued at $30.20 per unit, the closing price of our stock on September 30,
2016. The value in the table reflects pro-rata vesting (two of three years completed) based on time passed as if an event of voluntary termination, normal retirement, without cause termination, death, disability or a change in control had occurred
on September 30, 2016.
|
(2)
|
Under the 2006 Stock Incentive Plan, Mr. Horton, Mr. Auld and Mr. Murray were awarded a target number of 200,000, 100,000 and 30,000 2018 Performance RSUs,
respectively, for the performance period of October 1, 2015 through September 30, 2018. Pro-rata vesting may occur based on the number of months served from October 1, 2015 in the event of voluntary termination, normal retirement or without cause
termination after completion of the performance period. With respect to death or disability, the 2018 Performance RSUs vest pro-rata based on time passed. Upon a change in control, the Committee may accelerate vesting of part or all of the 2018
Performance RSUs. With respect to an event of voluntary termination, normal retirement, without cause termination, death, disability or a change in control, the 2018 Performance RSUs are valued at $30.20 per unit, the closing price of our stock on
September 30, 2016. The value in the table reflects pro-rata vesting (one of three years completed) based on time passed as if an event of voluntary termination, normal retirement, without cause termination, death, disability or a change in control
had occurred on September 30, 2016. The 2018 Performance RSUs are discussed in more detail under the heading
2016 Fiscal Year
Award of 2018 Performance Restricted Stock
Units
Potential Vesting at September
30, 2018 and Award of Restricted Stock Units Time-Based Vesting
on page 33.
|
(3)
|
Under the 2006 Stock Incentive Plan, in November 2014 Mr. Wheat was awarded 30,000 time-vesting RSUs, in March 2015 Mr. Horton, Mr. Auld, Mr. Murray and Mr. Wheat
were awarded 94,000, 37,600, 32,900 and 32,900 time-vesting RSUs, respectively, in November 2015 Mr. Wheat was awarded 30,000 time-vesting RSUs and in February 2016 Mr. Horton, Mr. Auld, Mr. Murray and Mr. Wheat were awarded 94,000, 37,600,
32,900 and 32,900 time-vesting RSUs, respectively. The time-vesting RSUs are valued at $30.20 per unit, the closing price of our stock on September 30, 2016. The value in the table reflects accelerated vesting if an event of voluntary termination,
normal retirement, termination without cause, death or disability, or change in control had occurred on September 30, 2016. Additional information on the time-vesting RSUs is set forth in footnote 3 to the
Grants of Plan-Based
Awards
table on page 44.
|
(4)
|
Because only one of our named executive officers has reached the normal retirement age (65 years old) under our applicable plans on September 30, 2016, we only included
amounts under the
Normal Retirement
column for that one officer.
|
52
CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS
We have a written Corporate Code of Business Conduct and Ethics. It requires that all directors and employees are
expected to avoid relationships that present a potential or actual conflict between his or her personal interest and the interest of the Company. We generally review related-party transactions regarding our directors and executive officers in a
similar manner as we review relationships that may give rise to a conflict of interest, provided there may be certain related-party transactions that may be approved, ratified, or in compliance with Company programs we make available to our
directors, officers and employees. Generally, a
conflict of interest
exists whenever an individuals personal or private interests interfere or conflict in any way with the interests of the Company. A conflict situation can
arise when a director or employee takes action or has personal interests that may make it difficult to perform Company work or make Company decisions objectively or effectively. Conflicts of interest may also arise when a director or employee, or
member of his or her immediate family receives improper personal benefits as a result of his or her position with the Company, whether received from the Company or a third party.
To avoid conflicts of interest, or improper related-party transactions, each director or executive officer must disclose to the
Companys Chief Legal Officer or Corporate Compliance Officer any transaction or relationship that reasonably could be expected to give rise to a conflict of interest or related-party transaction. The Chief Legal Officer or Corporate Compliance
Officer then reviews the transaction, and if necessary, reports the transaction to a committee of the Board of Directors composed of independent directors. Related-party transactions that comply with Company programs and that do not present an
improper conflict of interest do not require independent committee approval or ratification provided the transaction is reviewed by our Chief Legal Officer or Corporate Compliance Officer for compliance. If it is determined that the related-party
transaction is in compliance with the applicable Company program and does not present an improper conflict of interest, the transaction is authorized.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During our fiscal year ended September 30, 2016, D.R. Hortons Compensation Committee was composed of Barbara K. Allen, Brad S. Anderson, Michael R. Buchanan and Michael W. Hewatt, with
Mr. Anderson serving as its Chairman. None of the members of the Compensation Committee has served the Company in any capacity other than as a member of our board or a member of a committee thereof.
53
PROPOSAL TWO
ADVISORY VOTE ON THE APPROVAL OF EXECUTIVE COMPENSATION
Our stockholders are being asked to approve a non-binding advisory resolution on the compensation of our named executive officers, as disclosed in this Proxy Statement. Although this
say-on-pay resolution is non-binding, our Board of Directors and Compensation Committee welcome your opinion and will consider the result of the vote when making future compensation decisions.
At our Annual Meeting of Stockholders held on January 21, 2016, our stockholders voted in favor of a resolution to approve, on an advisory
basis, the compensation of the Companys named executive officers disclosed in the Compensation Discussion and Analysis, the Summary Compensation Table and the related compensation tables, notes and narrative in our Proxy Statement for the
Companys 2016 Annual Meeting of Stockholders. Approximately 95.01% voted in favor of the advisory resolution on executive compensation.
At our Annual Meeting of Stockholders held on January 26, 2012, our stockholders elected to have an advisory vote on executive compensation every year. At our Annual Meeting of Stockholders to be held in
January 2018, we intend to include a proposal to give our stockholders the option on whether to have an advisory vote on executive compensation every year, every second year or every third year.
We encourage you to read the Compensation Discussion and Analysis beginning on page 22 of this Proxy Statement, which describes in detail
how our executive compensation policies and procedures operate and are designed to achieve our compensation objectives, as well as the Summary Compensation Table and other related compensation tables, notes and narrative, appearing on pages 42
through 52, which provide detailed information on the compensation of our named executive officers.
We believe that our
current executive compensation program achieves an appropriate mix of short-term and long-term compensation incentives, reinforces the link between executive pay and the Companys long-term performance and stock value, and thereby aligns the
interests of our named executive officers with those of stockholders.
In accordance with Section 14A of the Exchange Act, and
as a matter of good corporate governance, we are asking stockholders to approve the following advisory resolution at the 2017 Annual Meeting:
RESOLVED
, that the stockholders of D.R. Horton, Inc.
(the Company)
approve, on an advisory basis, the compensation of the Companys named executive officers disclosed in the
Compensation Discussion and Analysis, the Summary Compensation Table and the related compensation tables, notes and narrative in the Proxy Statement for the Companys 2017 Annual Meeting of Stockholders.
The Board of Directors Unanimously Recommends that Stockholders Vote
FOR
Approval of the Advisory Resolution on Executive Compensation.
54
INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS
PricewaterhouseCoopers LLP, D.R. Hortons independent auditor for the fiscal year ended September 30, 2016, has been engaged by
the Audit Committee to continue to serve through our fiscal year ending September 30, 2017. A representative of PricewaterhouseCoopers LLP is expected to be present at the 2017 Annual Meeting and will have an opportunity to make a statement and
to respond to appropriate questions from stockholders.
Audit Fees and All Other Fees
The following table shows the fees paid or accrued by the Company for the audit and other services provided by PricewaterhouseCoopers LLP
for fiscal years 2015 and 2016.
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended September 30,
|
|
Fees
|
|
2015
(3)
|
|
|
2016
|
|
Audit fees
|
|
$
|
1,908,500
|
|
|
$
|
1,683,000
|
|
Audit-related fees
(1)
|
|
|
79,400
|
|
|
|
900
|
|
Tax fees
|
|
|
|
|
|
|
|
|
All other fees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
(2)
|
|
$
|
1,987,900
|
|
|
$
|
1,683,900
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Related primarily to audits of employee benefit plans and audit-related services.
|
(2)
|
Of the fees listed above, all of which were approved by the Audit Committee, none were approved based on waiver of pre-approval under Rule 2-01(c)(7)(i)(C) of
Regulation S-X.
|
(3)
|
The amounts shown for fiscal 2015 have been revised to reflect additional fees paid for audit and audit-related services.
|
Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services
The Audit Committee has responsibility for appointing, setting compensation and overseeing the work of the independent auditor. In
recognition of this responsibility, the Audit Committee has established a policy to pre-approve audit and permissible non-audit services provided by the independent auditor.
In connection with the engagement of the independent auditor for fiscal 2017, the Audit Committee pre-approved the services listed below by category of service, including the pre-approval of fee limits.
The Audit Committees pre-approval process by category of service also includes a review of specific services to be performed and fees expected to be incurred within each category of service. The term of any pre-approval is 12 months from
the date of the pre-approval, unless the Audit Committee specifically provides for a different period. During fiscal 2017, circumstances may arise when it may become necessary to engage the independent auditor for additional services not
contemplated in the original pre-approval. In those instances, the Audit Committee requires separate pre-approval before engaging the independent auditor.
The services pre-approved by the Audit Committee, which may be performed by the independent auditor during fiscal 2017, include the following:
Audit Services
include audit work performed related to the Companys financial statements (including quarterly reviews), as
well as work that generally only the independent auditor can reasonably be expected to provide, including comfort letters, statutory audits, and attest services and consultation regarding financial accounting and/or reporting standards.
Audit-Related Services
are for assurance and related services that are traditionally performed by the independent auditor,
including due diligence related to mergers and acquisitions, employee benefit plan audits, and special procedures required to meet certain regulatory requirements.
55
Tax Services
include all services performed by the independent auditors tax
personnel except those services specifically related to the audit of the financial statements, and include fees in the areas of tax compliance, tax planning, and tax advice. The Audit Committee has not yet pre-approved any fee limits or specific Tax
Services for fiscal 2017.
All Other Fees
are those associated with permitted services not included in the other
categories. The Company generally does not request such services from the independent auditor.
The Audit Committee may
delegate pre-approval authority to one or more of its members. The member or members to whom such authority is delegated shall report any pre-approval decisions to the Audit Committee at its next scheduled meeting. The Audit Committee may not
otherwise delegate its responsibilities to pre-approve services performed by the independent auditor to management.
Audit Committee Report
The Audit Committee has reviewed and discussed with management D.R. Hortons audited
consolidated financial statements for the fiscal year ended September 30, 2016. Further, the Audit Committee has discussed with D.R. Hortons independent auditor the matters required to be discussed by Auditing Standard No. 16,
Communications with Audit Committees, including D.R. Hortons audited consolidated financial statements for the fiscal year ended September 30, 2016, the auditors responsibility under generally accepted auditing standards,
significant accounting policies, managements judgments and accounting estimates, any audit adjustments, other information in documents containing audited financial statements and other matters. Finally, the Audit Committee has received and
reviewed the written disclosures and the letter from the independent auditor required by the applicable requirements of the Public Company Accounting Oversight Board regarding the independent auditors communications with the Audit Committee
concerning independence, and has discussed the auditors independence with the auditor.
Based on its review and
discussion described above, the Audit Committee has recommended to the Board of Directors that the audited consolidated financial statements for fiscal 2016 be included in D.R. Hortons Annual Report on Form 10-K for the fiscal year ended
September 30, 2016. Further, the Audit Committee approved the engagement of PricewaterhouseCoopers LLP as D.R. Hortons independent auditor for the fiscal year ending September 30, 2017.
|
AUDIT COMMITTEE:
|
|
Michael W. Hewatt, Committee Chairman
|
|
Barbara K. Allen
|
|
Brad S. Anderson
|
|
Michael R. Buchanan
|
56
PROPOSAL THREE
RATIFICATION OF APPOINTMENT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee has appointed
PricewaterhouseCoopers LLP as our independent registered public accounting firm to audit our consolidated financial statements for our fiscal year ending September 30, 2017. During fiscal 2016, PricewaterhouseCoopers LLP served as our independent
registered public accounting firm and also provided certain other audit-related services, as further discussed above under the heading
Audit Fees and All Other Fees
on page 55. A representative of PricewaterhouseCoopers LLP is
expected to attend the 2017 Annual Meeting, be available to respond to appropriate questions and, if he or she desires, make a statement.
Although we are not required to do so, we are seeking stockholder ratification of PricewaterhouseCoopers LLPs appointment as our independent registered public accounting firm. If
PricewaterhouseCoopers LLPs appointment is not ratified, the Audit Committee will reconsider whether to retain PricewaterhouseCoopers LLP, but still may retain them. Even if the appointment of PricewaterhouseCoopers LLP is ratified, the Audit
Committee, in its discretion, may change the appointment at any time during the year if it determines that such a change would be in our and our stockholders best interests.
Vote Required
Approval of the ratification of the appointment of
PricewaterhouseCoopers LLP as our independent registered public accounting firm for our fiscal year ending September 30, 2017 requires the affirmative vote of the majority of shares of common stock present or represented, and entitled to vote
thereon, at the 2017 Annual Meeting.
The Board of Directors Unanimously Recommends that Stockholders Vote
FOR
the Ratification
of the Appointment of PricewaterhouseCoopers LLP as our Independent Registered
Public
Accounting Firm for our Fiscal Year Ending September 30, 2017.
57
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act, requires D.R. Hortons directors, certain of its officers, and persons who
own more than 10% of a registered class of D.R. Hortons equity securities to file reports of ownership and changes in ownership with the SEC. Such officers, directors and greater than 10% stockholders are required by SEC regulations to furnish
D.R. Horton with copies of all forms they file pursuant to Section 16(a). Based solely on its review of the copies of such forms received by it and on written representations from certain reporting persons that no Form 5 reports were
required for those persons, D.R. Horton believes that all filing requirements applicable to its officers, directors and greater than 10% beneficial owners were complied with during the year ended September 30, 2016 on a timely basis.
STOCKHOLDER PROPOSALS FOR 2018 ANNUAL MEETING
Any stockholder who intends to present a proposal for action at D.R. Hortons 2018 Annual Meeting of Stockholders and to have D.R.
Horton include such proposal in its proxy soliciting materials pursuant to Rule 14a-8 under the Exchange Act must deliver a copy of the proposal to D.R. Horton not later than August 11, 2017.
In addition, apart from the Rule 14a-8 process as described below, the Bylaws of D.R. Horton provide that any stockholder intending to
propose any business at our 2018 Annual Meeting must submit written notice of that proposal in a timely manner to Corporate Counsel of D.R. Horton for such proposal to be acted upon at the meeting of stockholders. To be timely, a stockholders
notice for our 2018 Annual Meeting must be delivered to, or mailed and received at, the principal executive offices of D.R. Horton not later than the close of business on October 21, 2017 and not earlier than the close of business on
September 21, 2017. In the event that the date of the 2018 Annual Meeting is changed by more than 30 calendar days from the anniversary date of the 2017 Annual Meeting, notice by the stockholder to be timely must be so delivered not earlier
than the close of business on the 120th calendar day prior to such meeting and not later than the close of business on the later of the 90th calendar day prior to such meeting or the 10th calendar day following the day on which public disclosure of
the date of such meeting is made. In no event shall public disclosure of an adjournment or postponement of an annual meeting commence a new time period (or extend any time period) for the giving of a stockholders notice as described above. The
notice must include the information specified in our Bylaws, including information concerning the nominee or the proposal, and the stockholder and the beneficial owner, as the case may be. We will not entertain any such proposals at the annual
meeting that do not meet the requirements set forth in our Bylaws. The Bylaws provide that the foregoing notice requirements do not apply to a proposal proposed to be made by a stockholder if the stockholder has notified the Company of his or her
intention to present a proposal at the 2018 Annual Meeting pursuant to and in compliance with Rule 14a-8, or any other rule promulgated under Section 14 of the Exchange Act and such proposal is included in the Companys proxy statement for such
annual meeting.
REQUESTING DOCUMENTS FROM THE COMPANY
On our website, at www.drhorton.com, under the Investor Relations and Corporate Governance links, you will find the following:
(i) Corporate Governance Principles, (ii) Audit Committee Charter, (iii) Compensation Committee Charter, (iv) Nominating and Governance Committee Charter, (v) Code of Ethical Conduct for the CEO, CFO, and Senior Financial
Officers, (vi) Complaint Procedures for Accounting, Internal Control, Auditing and Financial Matters and Complaint Procedures for Employee Matters, and (vii) Corporate Code of Business Conduct and Ethics for Employees and Directors.
You
may obtain a copy of any of these documents at no charge through our website or by contacting us for a printed set. In addition, a copy of our Annual Report on Form 10-K for the fiscal year ended September 30, 2016, including the financial
statements and the financial statement schedules included therein, is available without charge. The exhibits of the Annual Report on Form 10-K are available upon payment of charges that approximate our cost of reproduction.
You may contact us
for these purposes at: Attention: Thomas B. Montano, Vice President, Corporate and Securities Counsel, D.R. Horton, Inc., 301 Commerce Street, Suite 500, Fort Worth, TX 76102, (817) 390-8200 or e-mail: tbmontano@drhorton.com.
58
OTHER MATTERS
Management knows of no other matters to be voted upon at the 2017 Annual Meeting. If any other matter is properly brought before the 2017
Annual Meeting, it is the intention of the persons named as proxies in the form of proxy to vote in their discretion upon such matters in accordance with their judgment. The persons named as proxies are Donald R. Horton, Chairman, and David V. Auld,
President and Chief Executive Officer.
You are urged to sign, date and return the enclosed proxy in the envelope provided. No
postage is required if the envelope is mailed from within the United States. If you subsequently decide to attend the 2017 Annual Meeting and wish to vote your shares in person, you may do so. Your cooperation in giving this matter your prompt
attention is appreciated.
|
By Order of the Board of Directors,
|
|
|
THOMAS B. MONTANO
|
Vice President and Assistant Secretary
|
Fort Worth, Texas
December 9, 2016
59
301 Commerce Street
Suite 500
Fort Worth, Texas 76102
(817) 390-8200
www.drhorton.com
|
|
|
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|
AMERICAN STOCK TRANSFER & TRUST COMPANY
6201 15TH AVENUE
BROOKLYN, NY
11219
|
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|
VOTE BY INTERNET -
www.proxyvote.com
|
|
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|
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|
|
Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the
web site and follow the instructions to obtain your records and to create an electronic voting instruction form.
|
|
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|
|
ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS
If you would like to reduce the costs incurred by our company in mailing proxy materials,
you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when
prompted, indicate that you agree to receive or access proxy materials electronically in future years.
|
|
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|
|
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M.
Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions.
|
|
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|
|
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have
provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
|
|
|
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
|
|
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|
|
E15620-P84208
|
|
KEEP THIS PORTION FOR YOUR RECORDS
|
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|
DETACH AND RETURN THIS PORTION ONLY
|
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
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D.R. HORTON, INC.
|
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Vote on Directors
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The Board of Directors recommends a vote
FOR
each
Nominee for Director.
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1.
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Proposal One: Election of directors.
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Nominees:
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For
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Against
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Abstain
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Vote on Other Proposals
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1a. Donald R. Horton
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¨
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¨
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¨
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The Board of Directors recommends a vote
FOR
Proposal Two and Proposal Three as proposed below.
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For
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Against
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Abstain
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1b. Barbara K. Allen
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¨
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¨
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¨
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2.
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Proposal Two: Approval of the advisory resolution on
executive compensation.
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¨
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¨
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¨
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1c. Brad S. Anderson
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¨
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¨
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¨
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3.
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Proposal Three: Ratify the appointment of
PricewaterhouseCoopers LLP as our independent registered public accounting firm.
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¨
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¨
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¨
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1d. Michael R. Buchanan
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¨
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¨
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¨
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1e. Michael W. Hewatt
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¨
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¨
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¨
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PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY, USING THE ENCLOSED ENVELOPE.
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Note:
Please sign exactly as name(s) appear(s) herein. When shares are held by joint tenants,
both should sign. When signing as attorney, executor, administrator, trustee, or guardian, please give full titles as such. If a corporation, please sign in full corporate name by President or other authorized officer. If a partnership, please sign
in partnership name by an authorized person.
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Signature [PLEASE SIGN WITHIN BOX]
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Date
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Signature (Joint Owners)
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Date
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Important Notice
Regarding the Availability of Proxy Materials for the Stockholder Meeting
to be held January 19, 2017:
The Notice, Proxy Statement, Telephone/Internet insert (Company supplied) and Annual Report on Form 10-K are
available at www.proxyvote.com.
E15621-P84208
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D.R. HORTON, INC.
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2017 ANNUAL MEETING OF STOCKHOLDERS
D.R. Horton Tower, 301 Commerce Street, Suite 500, Fort Worth, Texas 76102
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS
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The undersigned hereby nominates,
constitutes and appoints Donald R. Horton and David V. Auld, and each of them, attorneys, agents and proxies of the undersigned, with full power of substitution to each and hereby authorizes them to represent and to vote, as designated on the
reverse side of this card, all shares of Common Stock of D.R. Horton, Inc. (
the
Company
) held of record by the undersigned at the close of business on November 28, 2016, at the 2017 Annual Meeting of
Stockholders to be held on January 19, 2017 at 10:00 a.m. central time, or any adjournment thereof.
The Board of Directors recommends a vote
FOR
Proposals One, Two and Three. This proxy when properly executed will be voted in
the manner directed herein by the undersigned stockholder.
If no direction is made, this proxy will be voted as recommended by the Board of Directors in this paragraph
. In addition, if any other matter should be properly brought before the
meeting, the persons named as proxies will vote on such matters in accordance with their best judgment.
The undersigned hereby ratifies and confirms all that said attorneys and proxies, or any of them, or their substitutes, shall lawfully do
or cause to be done by virtue hereof and hereby revokes any and all proxies heretofore given by the undersigned to vote at said meeting. The undersigned acknowledges receipt of the notice of said annual meeting and the proxy statement accompanying
said notice.
PLEASE SIGN AND DATE ON THE REVERSE SIDE.
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