Sincerely,
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Martin A. Kaplan
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Alan S. Lowe
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Chairman of the
Board
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President and Chief
Executive Officer
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Table of
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LUMENTUM HOLDINGS INC.
400 NORTH MCCARTHY BLVD.
MILPITAS,
CALIFORNIA 95035
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held at 8:30 a.m. Pacific Time on
Thursday, November 2, 2017
Dear Stockholders of Lumentum Holdings
Inc.:
The 2017 Annual Meeting of stockholders
(the “Annual Meeting”) of Lumentum Holdings Inc., a Delaware corporation, will
be held virtually on
Thursday, November 2,
2017 at 8:30 a.m. Pacific Time.
The virtual
Annual Meeting can be accessed by visiting
www.virtualshareholdermeeting.com/LITE2017, where you will be able to listen to
the meeting live, submit questions and vote online.
We are holding the meeting for the
following purposes, as more fully described in the accompanying proxy statement:
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1.
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The election of six directors,
all of whom are currently serving on our board of directors, to serve
until our 2018 Annual Meeting of stockholders and until their successors
are duly elected and qualified;
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2.
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The approval, on a non-binding,
advisory basis, of the compensation of our named executive
officers;
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3.
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The approval, on a non-binding,
advisory basis, of the frequency of future advisory votes approving the
compensation of our named executive officers; and
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4.
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The ratification of the
appointment of Deloitte LLP as our independent registered public
accounting firm for our fiscal year ending June 30,
2018.
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In addition, stockholders may be asked to
consider and vote upon such other business as may properly come before the
meeting or any adjournments or postponements thereof.
Our board of directors has fixed the close
of business on September 11, 2017 as the record date for the Annual Meeting.
Only stockholders of record on September 11, 2017 are entitled to notice of and
to vote at the virtual Annual Meeting and any adjournments thereof.
YOUR VOTE IS IMPORTANT.
Whether or not you plan to virtually attend
the Annual Meeting, please cast your vote as soon as possible by Internet or
telephone. If you received a paper copy of the proxy materials by mail, you may
submit your proxy card in the postage-prepaid envelope provided. Your vote by
written proxy will ensure your representation at the Annual Meeting regardless
of whether you attend the virtual meeting or not. If you attend the virtual
Annual Meeting, you may revoke your proxy and vote via the virtual meeting
website. If you hold your shares through an account with a brokerage firm, bank
or other nominee, please follow the instructions you receive from your account
manager to vote your shares.
We thank you for your support and we hope
you are able to attend our virtual Annual Meeting.
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By order of the Board of Directors,
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Alan S.
Lowe
President and Chief
Executive Officer
Milpitas,
California
September 19, 2017
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Table of
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TABLE
OF CONTENTS
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Table of Contents
LUMENTUM HOLDINGS INC.
PROXY
STATEMENT FOR 2017 ANNUAL MEETING OF STOCKHOLDERS
To Be Held Virtually at 8:30 a.m.
Pacific Time on Thursday, November 2, 2017
The accompanying proxy is solicited on
behalf of the board of directors of Lumentum Holdings Inc. (“Lumentum” or the
“Company”) for use at the Lumentum 2017 Annual Meeting of Stockholders (“Annual
Meeting”) to be held virtually on November 2, 2017 at 8:30 a.m. (Pacific Time),
and any adjournment or postponement of the Annual Meeting. The virtual Annual
Meeting can be accessed by visiting www.virtualshareholdermeeting.com/LITE2017,
where you will be able to listen to the meeting live, submit questions and vote
online. The Notice of Internet Availability of
Proxy Materials and this proxy statement for the Annual Meeting (“Proxy
Statement”) and the accompanying form of proxy were first distributed and made
available on the Internet to stockholders on or about September 19, 2017.
Lumentum’s annual report on Form 10-K for the fiscal year ended July 1, 2017
filed on August 29, 2017 (“Annual Report”) will be available with this Proxy
Statement by following the instructions in the Notice of Internet Availability
of Proxy Materials.
INTERNET AVAILABILITY OF PROXY MATERIALS
In accordance with U.S. Securities and
Exchange Commission (“SEC”) rules, we are using the Internet as our primary
means of furnishing proxy materials to stockholders. Consequently, most
stockholders will not receive paper copies of our proxy materials. We will
instead send these stockholders a Notice of Internet Availability of Proxy
Materials with instructions for accessing the proxy materials, including our
Proxy Statement and
Annual Report, and voting via
the Internet. The Notice of Internet Availability of Proxy Materials also
provides information on how stockholders may obtain paper copies of our proxy
materials if they so choose. We believe this rule makes the proxy distribution
process more efficient and less costly and helps conserve natural
resources.
GENERAL INFORMATION ABOUT THE ANNUAL MEETING
The information provided in the “question
and answer” format below is for your convenience only and is merely a summary of
the information contained in this Proxy Statement. You should read this entire
Proxy Statement carefully. Information contained on, or that can be accessed
through, our website is not intended to be incorporated by reference into this
Proxy Statement and references to our website address in this Proxy Statement
are inactive textual references only.
What matters am I voting on?
You will be voting on:
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the election of six directors, all
of whom are currently serving on our board of directors, to serve until
our 2018 annual meeting of stockholders and until their successors are
duly elected and qualified;
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the approval, on a non-binding,
advisory basis, of the compensation of our named executive
officers;
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the approval, on a non-binding,
advisory basis, of the frequency of future advisory votes to approve the
compensation of our named executive officers;
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the ratification of the appointment
of Deloitte LLP as our independent registered public accounting firm for
our fiscal year ending June 30, 2018; and
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any other business as may properly
come before the Annual Meeting.
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How does the board of directors recommend I
vote on these proposals?
Our board of directors recommends a vote:
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“FOR” the election of Martin A.
Kaplan, Harold L. Covert, Penelope A. Herscher, Samuel F. Thomas, Brian J.
Lillie and Alan S. Lowe as directors of the
Company;
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“FOR” the approval of a non-binding,
advisory vote on the compensation of our named executive
officers;
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For “1 YEAR” on the approval of a
non-binding, advisory vote, for the frequency of our future advisory votes
to approve the compensation of our named executive officers; and
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“FOR” the ratification of the
appointment of Deloitte LLP as our independent registered public
accounting firm for our fiscal year ending June 30,
2018.
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Proxy Statement
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Who is entitled to vote?
Holders of our common stock as of the
close of business on September 11, 2017, the record date, may vote at the Annual
Meeting. As of the record date, there were 61,949,354 shares of our common stock
outstanding. In deciding all matters at the Annual Meeting, each stockholder
will be entitled to one vote for each share of our common stock held by them on
the record date. We do not have cumulative voting rights for the election of
directors.
Stockholder of Record: Shares
Registered in Your Name
. If, on the record
date, your shares were registered directly in your name with our transfer agent,
ComputerShare Investor Services, LLC, then you are considered the stockholder of
record with respect to those shares. As a stockholder of record, you may vote at
the virtual Annual Meeting or vote by telephone, by Internet, or by filling out
and returning the proxy card.
Beneficial Owner: Shares Registered in
the Name of a Broker or Nominee.
If, on the
record date, your shares were held on your behalf in a stock brokerage account
or by a bank or other nominee, then you are considered the beneficial owner of
those shares held in street name. Accordingly, the Notice of Internet
Availability, Proxy Statement and any accompanying documents have been provided
to your broker or nominee, who in turn provided the materials to you. As the
beneficial owner, you have the right to direct your broker or nominee how to
vote your shares by using the voting instruction card or by following their
instructions for voting on the Internet or by telephone.
How many votes are needed for approval of each
proposal?
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Proposal No. 1
: Each director must be elected by the affirmative vote
of a majority of the votes cast with respect to that director. This means
that the number of votes cast for a director must exceed the number of
votes cast against that director, with abstentions and broker non-votes
not counted as votes cast as either for or against such director’s
election.
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Proposal No. 2
: The approval of the non-binding advisory vote on the
compensation of the Company’s named executive officers requires the
affirmative vote of a majority of the shares of our common stock present
in person or by proxy at the Annual Meeting and entitled to vote thereon.
As a result, abstentions will have the same effect as votes against the
proposal. Broker non-votes will have no effect on the outcome of this
vote.
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Proposal No. 3
: The approval of the non-binding advisory vote on the
frequency of future advisory votes to approve the compensation of the
Company’s named executive officers requires the affirmative vote of a
majority of the shares of our common stock present in person or by proxy
at the Annual Meeting and entitled to vote thereon. As a result,
abstentions will have the same effect as votes against the proposal.
Broker non-votes will have no effect on the outcome of this
vote.
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Proposal No. 4
: The ratification of the appointment of Deloitte LLP
requires the affirmative vote of a majority of the shares of our common
stock present in person or by proxy at the Annual Meeting and entitled to
vote thereon. As a result, abstentions will have the same effect as votes
against the proposal. Brokers will have discretion to vote on this
proposal.
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What is a quorum?
A quorum is the minimum number of shares
required to be present at the Annual Meeting for the Annual Meeting to be
properly held under our amended and restated bylaws and Delaware law. The
presence, in person or by proxy, of a majority of all issued and outstanding
shares of our common stock entitled to vote at the Annual Meeting will
constitute a quorum at the Annual Meeting. Abstentions, withhold votes and
broker non-votes are counted as shares present and entitled to vote for purposes
of determining a quorum.
How do I vote?
If you are a stockholder of record, there
are four ways to vote:
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vote via the virtual meeting website
– any stockholder can attend the virtual Annual Meeting by visiting
www.virtualshareholdermeeting.com/LITE2017, where stockholders may vote
and submit questions during the meeting. The Annual Meeting starts at 8:30
a.m. (Pacific Time) on November 2, 2017. Please have your 16-digit control
number to join the Annual Meeting. Instructions on how to attend and
participate via the Internet, including how to demonstrate proof of stock
ownership, are posted at www.proxyvote.com;
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by Internet at
http://www.proxyvote.com, 24 hours a day, seven days a week, until 11:59
p.m. on November 1, 2017 (have your proxy card in hand when you visit the
website);
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by toll-free telephone at
1-800-690-6903 (have your proxy card in hand when you call);
or
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by completing and mailing your proxy
card (if you received printed proxy
materials).
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Proxy cards submitted by mail must be
received by November 1, 2017 to be voted at the Annual Meeting. Please note that
the Internet and telephone voting facilities will close at 11:59 p.m. (Eastern
Time) on November 1, 2017. Submitting your proxy, whether via Internet, by
telephone or by mail, will not affect your right to vote in person should you
decide to attend the virtual Annual Meeting. If you are not the stockholder of
record, please refer to the voting instructions provided by your nominee to
direct your nominee on how to vote your shares. Your vote is important. Whether
or not you plan to attend the virtual Annual Meeting, we urge you to vote by
proxy to ensure that your vote is counted.
All proxies will be voted in accordance
with the instructions specified on the proxy card. If you sign a physical proxy
card and return it without instructions as to how your shares should be voted on
a particular proposal at the Annual Meeting, your shares will be voted in
accordance with the recommendations of our board of directors stated in this
proxy.
Table of Contents
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Proxy Statement
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Can I change my vote?
Yes. If you are a stockholder of record,
you can change your vote or revoke your proxy any time before the Annual Meeting
by:
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entering a new vote by Internet or by
telephone;
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returning a later-dated proxy
card;
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delivering to the Secretary of Lumentum
Holdings Inc., by any means, a written notice stating that the proxy is
revoked; or
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attending and voting at the virtual Annual
Meeting (although attendance at the virtual Annual Meeting will not, by
itself, revoke a proxy).
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If you are a street name stockholder, your
broker, bank or other nominee can provide you with instructions on how to change
your vote.
How can I attend the Annual Meeting?
You are entitled to participate in the
virtual Annual Meeting if you were a holder of Lumentum shares as of the record
date of September 11, 2017. You will be able to attend online and submit your
questions during the meeting by visiting
www.virtualshareholdermeeting.com/LITE2017. You also will be able to vote your
shares electronically at the virtual Annual Meeting. To participate, you will
need the 16-digit control number included on your notice of Internet
availability of the proxy materials, on your proxy card or on the instructions
that accompanied the proxy materials.
What is the effect of giving a proxy?
Proxies are solicited by and on behalf of
our board of directors. Alan Lowe, Aaron Tachibana and Judy Hamel have been
designated as proxies by our board of directors. When proxies are properly
dated, executed and returned, the shares represented by such proxies will be
voted at the Annual Meeting in accordance with the instructions of the
stockholder. If no specific instructions are given, however, the shares will be
voted in accordance with the recommendations of our board of directors as
described above. If any matters not described in this Proxy Statement are
properly presented at the Annual Meeting, the proxy holders will use their own
judgment to determine how to vote the shares. If the Annual Meeting is
adjourned, the proxy holders can vote the shares on the new Annual Meeting date
as well, unless you have properly revoked your proxy instructions, as described
above.
Why did I receive a Notice of Internet Availability of Proxy Materials instead of a
full set of proxy materials?
In accordance with the rules of the SEC,
we have elected to furnish our proxy materials, including this Proxy Statement
and our Annual Report, primarily via the Internet. As a result, we are mailing
to many of our stockholders a notice of the Internet Availability of Proxy
Materials. All stockholders receiving the notice will have the ability to access
the proxy materials over the Internet and request to receive a paper copy of the
proxy materials by mail. Instructions on how to access the proxy materials over the Internet or to request
a paper copy may be found in the notice of Internet Availability of Proxy
Materials. In addition, the notice contains instructions on how you may request
access to proxy materials in printed form by mail or electronically on an
ongoing basis.
How are proxies solicited for the Annual
Meeting?
Our board of directors is soliciting
proxies for use at the Annual Meeting. All expenses associated with this
solicitation will be borne by us. We will reimburse brokers or other nominees
for reasonable expenses that they incur in sending our proxy materials to you if
a broker or other nominee holds shares of our common stock on your behalf. In
addition to using the Internet, our directors, officers and employees may
solicit proxies in person and by mailings, telephone, facsimile, or electronic
transmission, for which they will not receive any additional
compensation.
How may my brokerage firm or other
intermediary vote my shares if I fail to provide timely directions?
Brokerage firms and other intermediaries
holding shares of our common stock in street name for customers are generally
required to vote such shares in the manner directed by their customers. In the
absence of timely directions, your broker will have discretion to vote your
shares on our sole “routine” matter: the proposal to ratify the appointment of
Deloitte LLP. Your broker will not have discretion to vote on the election of
directors, approval of the non-binding, advisory vote on the compensation of our
named executive officers, and approval of the non-binding, advisory vote on the
frequency of future votes on the compensation of our named executive officers,
which are “non-routine” matters, absent direction from you.
Where can I find the voting results of the
Annual Meeting?
We will announce preliminary voting
results at the Annual Meeting. We will also disclose voting results on a Current
Report on Form 8-K that we will file with the SEC within four business days
after the Annual Meeting. If final voting results are not available to us in
time to file a Current Report on Form 8-K within four business days after the
Annual Meeting, we will file a Current Report on Form 8-K to publish preliminary
results and will provide the final results in an amendment to this Current
Report on Form 8-K as soon as they become available.
I share an address with another stockholder,
and we received only one paper copy of the proxy materials. How may I obtain an
additional copy of the proxy materials?
We have adopted a procedure called
“householding,” which the SEC has approved. Under this procedure, we deliver a
single copy of the Notice and, if applicable, our proxy materials to multiple
stockholders who share the same address unless we
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Proxy Statement
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have received contrary instructions from
one or more of the stockholders. This procedure reduces our printing costs,
mailing costs, and fees. Stockholders who participate in householding will
continue to be able to access and receive separate proxy cards. Upon written or
oral request, we will deliver promptly a separate copy of the Notice and, if
applicable, our proxy materials to any stockholder at a shared address to which
we delivered a single copy of any of these materials. To receive a separate
copy, or, if a stockholder is receiving multiple copies, to request that we only
send a single copy of the Notice and, if applicable, our proxy materials, such
stockholder may contact our Investor Relations at 1(408) 546-5483 or by mail at
the following address:
Lumentum Holdings Inc.
Attention: Investor Relations
400 North McCarthy
Blvd.
Milpitas, California 95035
Stockholders who beneficially own shares
of our common stock held in street name may contact their brokerage firm, bank,
broker-dealer or other similar organization to request information about
householding.
What is the deadline to propose actions for
consideration at next year’s Annual Meeting of stockholders or to nominate
individuals to serve as directors?
Stockholder Proposals
Stockholders may present proper proposals
for inclusion in our Proxy Statement and for consideration at the next Annual
Meeting of stockholders by submitting their proposals in writing to our
Secretary in a timely manner. For a stockholder proposal to be considered for
inclusion in our Proxy Statement for our 2018 Annual Meeting of stockholders,
our Secretary must receive the written proposal at our principal executive
offices not later than May 22, 2018. In addition, stockholder proposals must
comply with the requirements of Rule 14a-8 regarding the inclusion of
stockholder proposals in company-sponsored proxy materials. Stockholder
proposals should be addressed to:
Lumentum Holdings Inc.
Attention: Secretary
400 North McCarthy Blvd.
Milpitas,
California 95035
Our amended and restated bylaws also
establish an advance notice procedure for stockholders who wish to present a
proposal before an annual meeting of stockholders but do not intend for the
proposal to be included in our Proxy Statement. Our amended and restated bylaws
provide that the only business that may be conducted at an annual meeting is
business that is (i) specified in our proxy materials with respect to such
meeting, (ii) otherwise properly brought before the annual meeting by or at the
direction
of our board of directors, or (iii)
properly brought before the annual meeting by a stockholder of record entitled
to vote at the annual meeting who has delivered timely written notice to our
Secretary, which notice must contain the information specified in our amended
and restated bylaws. To be timely for our 2018 Annual Meeting of stockholders,
our Secretary must receive the written notice at our principal executive
offices:
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not earlier than August 4, 2018;
and
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not later than the close of business on
September 3, 2018.
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In the event that we hold our 2018 Annual
Meeting of stockholders more than 30 days before or more than 60 days after the
one-year anniversary of the 2017 Annual Meeting, then notice of a stockholder
proposal that is not intended to be included in our Proxy Statement must be
received later than the close of business on the later of the following two
dates:
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the 90th day prior to such annual meeting;
or
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the 10th day following the day on which public
announcement of the date of such annual meeting is first
made.
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If a stockholder who has notified us of
his, her or its intention to present a proposal at an annual meeting does not
appear to present his, her or its proposal at such annual meeting, we are not
required to present the proposal for a vote at such annual meeting.
Nomination of Director Candidates
You may propose director candidates for
consideration by our governance committee. Any such recommendations should
include the nominee’s name and qualifications for membership on our board of
directors and should be directed to our Secretary at the address set forth
above. For additional information regarding stockholder recommendations for
director candidates, see “Corporate Governance—Governance Committee.”
In
addition, our amended and restated bylaws permit stockholders to nominate
directors for election at an annual meeting of stockholders. To nominate a
director, the stockholder must provide the information required by our amended
and restated bylaws. In addition, the stockholder must give timely notice to our
Secretary in accordance with our amended and restated bylaws, which, in general,
require that the notice be received by our Secretary within the time period
described above under “Stockholder Proposals” for stockholder proposals that are
not intended to be included in a Proxy Statement.
Availability of Bylaws
A copy of our amended and restated bylaws
may be obtained by accessing our public filings on the SEC’s website at
www.sec.gov. You may also contact our Secretary at our principal executive
offices for a copy of the relevant bylaw provisions regarding the requirements
for making stockholder proposals and nominating director candidates.
Table of Contents
CORPORATE GOVERNANCE
Our business affairs are managed under the
direction of our board of directors, which is currently composed of six members.
Five of our directors are independent within the meaning of the listing
standards of the NASDAQ Stock Market.
DIRECTOR INDEPENDENCE
Our board of directors consists of six
members. Our board of directors consists of a majority of independent directors
and committees of our board of directors consist solely of independent
directors, as required by NASDAQ listing standards.
Our board of directors has determined that
the following directors are independent under the NASDAQ listing standards:
Martin A. Kaplan, Harold L. Covert, Penelope A. Herscher, Brian J. Lillie and
Samuel F. Thomas.
BOARD LEADERSHIP
STRUCTURE
Our board of directors has determined that
it is in the best interests of the Company to maintain the board chairperson and
chief executive officer positions separately. The board believes that having an
outside, independent director serve as chairperson is the most appropriate
leadership structure, as this enhances its independent oversight of management
and the Company’s strategic planning, reinforces the board of director’s ability
to
exercise its independent judgment to represent
stockholder interests, and strengthens the objectivity and integrity of the
board. Moreover, we believe an independent chairperson can more effectively lead
the board in objectively evaluating the performance of management, including the
chief executive officer, and guide it through appropriate board governance
processes.
BOARD OVERSIGHT OF RISK
We take a comprehensive approach to risk
management. We believe risk can arise in every decision and action taken by the
Company, whether strategic or operational. We therefore seek to include risk
management principles in all of our management processes and in the
responsibilities of our employees at every level. Our comprehensive approach is
reflected in the reporting processes by which our management provides timely and
comprehensive information to the board of directors to support the board of
directors’ role in oversight, approval and decision-making.
Management is
responsible for the day-to-day supervision of risks the Company faces, while the
board of directors, as a whole and through its committees, has the ultimate
responsibility for the oversight of risk management. Senior management attends
board of directors meetings, provides presentations on operations including
significant risks, and is available to address any questions or concerns raised
by the board of directors. Additionally, our committees assist the board of
directors in
fulfilling its oversight
responsibilities in certain areas. Generally, the committee with subject matter
expertise in a particular area is responsible for overseeing the management of
risk in that area. For example, the Audit Committee coordinates the board of
directors’ oversight of the Company’s internal controls over financial reporting
and disclosure controls and procedures. Management regularly reports to the
Audit Committee on these areas. Additionally, the Compensation Committee assists
the board of directors in fulfilling its oversight responsibilities with respect
to the management of risks arising from our compensation policies and programs
as well as succession planning for senior executives. The Governance Committee
assists the board of directors in fulfilling its oversight responsibilities with
respect to the management of risks associated with board organization,
membership and structure, and corporate governance topics. When any of the
committees receives a report related to material risk oversight, the chairman of
the relevant committee reports on the discussion to the full board of
directors.
COMPENSATION PROGRAM RISK
ASSESSMENT
Consistent with SEC disclosure
requirements, in fiscal year 2017 a team composed of senior members of our human
resources, finance and legal departments and our compensation consultant, Semler
Brossy, inventoried and reviewed elements of our compensation policies and
practices. This team then reviewed these policies and practices with our
management team in an effort to assess whether any of our policies or practices
create risks that are reasonably likely to have a material adverse effect on the
Company. This assessment included a review of the primary design features of our
compensation policies and practices, the process for determining
executive and employee compensation and consideration of features of our
compensation program that help to mitigate risk. Management reviewed and
discussed the results of this assessment with the Compensation Committee, which
consulted with Semler Brossy. Based on this review, we believe that our
compensation policies and practices, individually and in the aggregate, do not
create risks that are reasonably likely to have a material adverse effect on the
Company.
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Corporate Governance
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BOARD COMMITTEES AND
MEETINGS
During fiscal year 2017, the board of
directors held eleven (11) meetings. The board of directors has three
committees: an Audit Committee, Compensation Committee, and Governance
Committee. The members of the committees during fiscal year 2017 are identified
below.
Each director attended at least 75% of the
aggregate of all meetings of the board of directors and any committees on which
he or she served during fiscal year 2017 after becoming a member of the board of
directors or after being appointed to a particular committee. The Company
encourages, but does not require, the members of its board of directors’ to
attend the Annual Meeting. We anticipate that all directors will attend the 2017
Annual Meeting.
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AUDIT COMMITTEE
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Members:
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Harold L. Covert (Chair)
Martin A.
Kaplan
Brian J. Lillie
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The Audit Committee is responsible
for assisting the full board of directors in fulfilling its oversight
responsibilities relative to:
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the Company’s financial
statements;
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financial reporting practices;
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systems of internal accounting and financial
control;
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internal audit function;
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annual independent audits of the Company’s
financial statements; and
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such legal and ethics programs as may be
established from time to time by the board of directors.
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Meetings:
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The Audit Committee is empowered to
investigate any matter brought to its attention with full access to all
books, records, facilities, and personnel of the Company and may retain
external consultants at its sole discretion. In addition, the Audit
Committee considers whether the Company’s independent auditors’ provision
of non-audit services is compatible with maintaining the independence of
the independent auditors. The board of directors has determined that all
members of the Audit Committee are “independent” as defined in the
applicable rules and regulations of the SEC and NASDAQ. The board of
directors has further determined that Harold L. Covert is an “audit
committee financial expert” as defined by Item 401(h) of Regulation S-K of
the Securities Exchange Act of 1934, as amended (the “Exchange Act”). A
copy of the Audit Committee charter can be viewed at the Company’s website
at
www.lumentum.com
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COMPENSATION COMMITTEE
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Members:
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Penelope A. Herscher (Chair)
Samuel F.
Thomas
Harold L. Covert
|
The Compensation Committee is
responsible for:
●
ensuring that the Company adopts and
maintains responsible and responsive compensation programs for its
employees, officers and directors consistent with the long-range interests
of stockholders;
●
the administration of the Company’s employee
stock purchase plan and equity incentive plans;
●
reviewing the Compensation Discussion and
Analysis section contained in our Proxy Statement and prepare the
Compensation Committee Report for inclusion in our Proxy Statement;
and
●
reviewing and considering the results of any
advisory stockholder votes on executive compensation.
|
|
|
Meetings:
|
7
|
|
|
|
|
|
|
|
|
The chair of the Compensation
Committee reports on the Compensation Committee’s actions and
recommendations at board of directors meetings. In addition, the
Compensation Committee has the authority to engage the services of outside
advisors, experts and others to provide assistance as needed. During
fiscal year 2017, the Compensation Committee engaged Semler Brossy, a
national compensation consulting firm, to assist with the Compensation
Committee’s analysis and review of the compensation of our executive
officers. Semler Brossy attends all Compensation Committee meetings, works
directly with the Compensation Committee Chair and Compensation Committee
members, and sends all invoices, including descriptions of services
rendered, to the Compensation Committee Chair for review and payment
approval. Semler Brossy performed no work for the Company that was not in
support of the Compensation Committee’s charter nor authorized by the
Compensation Committee Chair during fiscal year 2017. All members of the
Compensation Committee are “independent” as that term is defined in the
applicable NASDAQ rules and regulations. A copy of the Compensation
Committee charter can be viewed at the Company’s website at
www.lumentum.com
. Additional information on the Compensation Committee’s
processes and procedures for consideration of executive compensation are
addressed in the section entitled “Compensation Discussion and Analysis –
Compensation Practices.”
|
|
|
|
|
|
Table of Contents
|
|
|
Corporate Governance
|
|
|
|
|
|
|
|
|
GOVERNANCE COMMITTEE
|
|
|
|
|
|
|
|
|
|
Members:
|
Martin A. Kaplan (Chair)
Penelope A.
Herscher
Brian J. Lillie
|
The Governance Committee:
●
serves as the Company’s nominating committee;
●
reviews current trends and practices in corporate governance;
and
●
recommends to the board of directors the adoption of governance
programs.
|
|
|
Meetings:
|
4
|
|
|
|
|
|
|
|
|
As provided in the charter of the Governance Committee,
nominations for director may be made by the Governance Committee or by a
stockholder of record entitled to vote. The Governance Committee will
consider and make recommendations to the Board regarding any stockholder
recommendations for candidates to serve on the board of directors.
Stockholders wishing to recommend candidates for consideration by the
Governance Committee may do so by writing to the Company’s Corporate
Secretary at 400 North McCarthy Boulevard, Milpitas, California 95035.
Such writing must provide the candidate’s name, biographical data and
qualifications, a document indicating the candidate’s willingness to act
if elected, and evidence of the nominating stockholder’s ownership of
Company’s stock not less than 60 days nor more than 90 days prior to the
first anniversary of the date of the preceding year’s annual meeting to
assure time for meaningful consideration by the Governance Committee. Our
amended and restated bylaws specify in greater detail the requirements as
to the form and content of the stockholder’s notice. We recommend that any
stockholder wishing to nominate a director review a copy of our amended
and restated bylaws, which may be obtained by accessing our public filings
on the SEC’s website at
www.sec.gov
.
There are no differences in the manner in which the Governance Committee
evaluates nominees for director based on whether the nominee is
recommended by a stockholder. All members of the Governance Committee are
“independent” as that term is defined in the applicable NASDAQ rules and
regulations.
In identifying and reviewing
potential candidates for the board of directors, the Governance Committee
considers the individual’s experience in the Company’s industry, the
general business or other experience of the candidate, the needs of the
Company for an additional or replacement director, the personality of the
candidate, diversity, the candidate’s interest in the business of the
Company, as well as numerous other subjective criteria. Of greatest
importance is the individual’s integrity, willingness to be involved and
ability to bring to the Company experience and knowledge in areas that are
most beneficial to the Company. It is the Governance Committee’s goal to
nominate candidates with diverse backgrounds and capabilities, to reflect
the diverse nature of the Company’s stakeholders (security holders,
employees, customers and suppliers), while emphasizing core excellence in
areas pertinent to the Company’s long term business and strategic
objectives. The Governance Committee intends to continue to evaluate
candidates for election to the board of directors on the basis of the
foregoing criteria. While we do not have a formal written policy regarding
consideration of diversity in identifying candidates, as discussed above,
diversity is one of the numerous criteria that the Governance Committee
considers when reviewing potential candidates. A detailed description of
the criteria used by the Governance Committee in evaluating potential
candidates may be found in the charter of the Governance
Committee.
The Governance Committee operates under a written charter
setting forth the functions and responsibilities of the committee. A copy
of the charter can be viewed at the Company’s website at
www.lumentum.com
.
|
|
|
|
|
|
COMPENSATION
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of the members of our Compensation
Committee is or has been an officer or employee of our Company. None of our
executive officers currently serves, or in the past year has served, as a member
of the board of directors or Compensation
Committee (or other board committee performing equivalent functions) of
any entity that has one or more of its executive officers serving on our board
of directors or Compensation Committee.
|
|
13
|
Table of Contents
|
Corporate Governance
|
|
|
COMMUNICATIONS WITH
THE BOARD OF DIRECTORS
Interested parties wishing to communicate
with our board of directors or with an individual member or members of our board
of directors may do so by writing to our board of directors or to the particular
member or members of our board of directors, and mailing the correspondence to
our General Counsel at Lumentum Holdings Inc., 400 North McCarthy Boulevard,
Milpitas, California 95035. Each communication should set forth (i) the name and
address of the stockholder, as it appears on our books, and if the shares of our
common stock are held by a nominee, the name
and
address of the beneficial owner of such shares, and (ii) the number of shares of
our common stock that are owned of record by the record holder and beneficially
by the beneficial owner.
Our General Counsel, in consultation with appropriate
members of our board of directors as necessary, will review all incoming
communications and, if appropriate, all such communications will be forwarded to
the appropriate member or members of our board of directors, or if none is
specified, to the Chairman of our board of directors.
CORPORATE
GOVERNANCE GUIDELINES AND CODE OF BUSINESS CONDUCT
Our board of directors has adopted
Corporate Governance Guidelines that address items such as the qualifications
and responsibilities of our directors and director candidates and corporate
governance policies and standards applicable to us in general. In addition, our
board of directors has adopted a Code of Business Conduct that applies to all of
our employees, officers and directors, including our Chief Executive Officer,
Chief Financial Officer, and other executive and
senior financial officers. The full text of our Corporate Governance Guidelines
and our Code of Business Conduct are posted on the Investors page under the
Corporate Governance portion of our website at
www.lumentum.com
. We will post
amendments to our Code of Business Conduct or waivers of our Code of Business
Conduct for directors and executive officers on the same website.
RISK
MANAGEMENT
Risk is inherent with every business, and
we face a number of risks, including strategic, financial, business and
operational, legal and compliance, and reputational. We have designed and
implemented processes to manage risk in our operations. Management is
responsible for the day-to-day management of risks the company faces, while our
board of directors, as a whole and assisted by its committees, has
responsibility for the oversight of risk management. In its risk oversight role,
our board of directors has the responsibility to satisfy itself that the risk
management processes designed and implemented by management are appropriate and
functioning as designed.
Our board of directors believes that open
communication between management and our board of directors is essential for
effective risk management and oversight. Our board of directors meets with our
Chief Executive Officer and other members of the senior management team at
quarterly meetings of our board of directors, where, among other topics, they
discuss strategy and risks facing the company, as well as such other items as
they deem appropriate.
While our board of directors is ultimately
responsible for risk oversight, our board committees assist our board of
directors in fulfilling its oversight responsibilities in certain areas of risk. Our Audit Committee assists our board of
directors in fulfilling its oversight responsibilities with respect to risk
management in the areas of internal control over financial reporting and
disclosure controls and procedures, legal and regulatory compliance, and
discusses with management and the independent auditor guidelines and policies
with respect to risk assessment and risk management. Our Audit Committee also
reviews our major financial risk exposures and the steps management has taken to
monitor and control these exposures. Our Audit Committee also monitors certain
key risks on a regular basis throughout the fiscal year, such as liquidity risk
and cybersecurity risk. Our Governance Committee assists our board of directors
in fulfilling its oversight responsibilities with respect to the management of
risk associated with board organization, membership and structure, and corporate
governance. Our Compensation Committee assesses risks created by the incentives
inherent in our compensation policies. Finally, our full board of director’s
reviews strategic and operational risk in the context of reports from the
management team, receives reports on all significant committee activities at
each regular meeting, and evaluates the risks inherent in significant
transactions.
Table of Contents
PROPOSAL NO. 1 ELECTION OF DIRECTORS
Six directors have been nominated by our
board of directors for election at the Annual Meeting, each to serve a one-year
term until the 2018 Annual Meeting of Stockholders and until their successors
are elected and qualified. All of the nominees are currently members of the
board of directors. All of the director nominees are independent under the
listing standards of the NASDAQ Stock Market except for Mr. Lowe.
Each of our current directors joined the
Company in August 2015 in connection with the separation from JDS Uniphase
Corporation (now known as Viavi Solutions Inc. and referred to herein as “Viavi”) on July 31, 2015 (the “Separation”). Ms.
Herscher and Messrs. Covert and Kaplan were members of Viavi’s board of
directors and resigned at the time of the Separation and joined Lumentum’s board
of directors. Messrs. Thomas and Lillie were recommended by the Governance
Committee of Viavi prior to the Separation and joined the Lumentum board of
directors upon the completion of the Separation.
We have no reason to believe that the
nominees named below will be unable or unwilling to serve as a director if
elected.
DIRECTOR NOMINEES
The Governance Committee selects nominees
from a broad base of potential candidates and seeks qualified candidates with
diverse backgrounds and experience, who possess the highest ethical and
professional character and will exercise sound business judgment. The Governance
Committee seeks people who are accomplished in their respective fields and have
superior credentials. A candidate must have an employment and professional
record which demonstrates, in the committee’s judgement, that the candidate has
sufficient and relevant experience and background, taking into account positions
held and industries, markets and geographical locations served.
Our Governance Committee and our board of
directors have evaluated each of the director nominees. Based on this
evaluation, the Governance Committee and the board of directors have concluded
that it is in the best interest of Lumentum and its stockholders for each of the
proposed director nominees listed below to continue to serve as a director of
Lumentum. The nominee’s individual biographies below contain information about
their experience, qualifications and skills that led our board of directors to
nominate them.
|
|
|
|
|
|
MARTIN A. KAPLAN
|
|
|
Age 79
Director
Since August 2015
|
|
|
|
|
Experience:
|
|
|
|
Mr. Kaplan serves on the board and compensation, audit
and governance (chair) committees of Superconductor Technologies, a
company specializing in superconductor materials and related technologies
and was named chairman of the Board in October 2010. Mr. Kaplan is also a
member of the board of directors of Sentinels of Freedom Foundation which
assists severely wounded veterans transition to civilian life. He was a
member of the board of directors of Viavi from 2000 until the completion
of the Separation in 2015. In a career spanning 40 years, Mr. Kaplan last
served as Executive Vice-President of the Pacific Telesis Group., parent
of Pacific Bell, a telecommunications company, responsible for integration
following the merger of SBC Communications, Inc. (“SBC”), a
telecommunications company, and Pacific Telesis Group, Inc., followed by
the same role for other SBC mergers. Mr. Kaplan holds a Bachelor of
Science degree in Engineering.
|
|
|
|
Committee
Membership:
Audit and Governance
(Chair)
|
|
|
|
Qualifications:
|
|
|
|
●
extensive business leadership
●
operational and technical experience in the
telecommunications industry, including substantial experience in mergers
and acquisitions
●
valuable corporate governance experience from service on
the boards and committees of public and private companies
|
|
|
|
|
|
|
|
15
|
Table of Contents
|
Proposal No.
1
|
|
|
|
|
|
|
|
|
HAROLD L. COVERT
|
|
|
Age 70
Director
Since August 2015
|
|
|
|
|
Experience:
|
|
|
|
As of June 2017, Mr. Covert is an independent business
consultant. From October 2015 until June 2017, Mr. Covert was chief
financial officer of Harmonic Inc., a provider of video delivery
infrastructure equipment, and served on the board of directors from July
2007 to October 2015. From 2014 to 2015, Mr. Covert was an independent
business consultant. From 2011 to 2014, he served as executive vice
president and chief financial officer of Lumos Networks Corporation, a
fiber-based service provider. From 2010 to 2011, Mr. Covert was an
independent business consultant. From 2007 to 2010, Mr. Covert was
president, chief financial officer and chief operating officer of Silicon
Image, Inc., a provider of semiconductors for storage, distribution and
presentation of high-definition content. Within the past five years he was
also a board member of Viavi until the completion of the Separation, and
Solta Medical, Inc., which was acquired in 2014. Mr. Covert holds a
Bachelor of Science degree in Business Administration from Lake Erie
College and a Masters degree in Business Administration from Cleveland
State University and is also a Certified Public Accountant.
|
|
|
|
Committee
Membership:
Audit (Chair) and
Compensation
|
|
|
|
Qualifications:
|
|
|
|
●
significant experience and service in
leadership roles in finance and accounting
●
in-depth financial knowledge obtained
through service as chief financial officer of several publicly traded
technology companies
●
valuable insight and experience from serving
on the board of public companies
|
|
|
|
|
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|
|
|
|
|
|
PENELOPE A. HERSCHER
|
|
|
Age 57
Director
Since August 2015
|
|
|
|
|
Experience:
|
|
|
|
Ms. Herscher serves on four public company boards,
Faurecia SA, Rambus, Verint Systems and Lumentum and chairs the board at
Savonix, a private company. She was also a member of the board of
directors of Viavi until the completion of the Separation. Previously Ms.
Herscher was president and CEO of FirstRain, an enterprise software
company, from 2004 thru 2015 and continued on the board thru July 2017.
She held the position of Executive Vice President and Chief Marketing
Officer at Cadence Design Systems, an electronic design automation
software company, from 2002 to 2003. From 1996 to 2002, she was President
and Chief Executive Officer of Simplex Solutions, taking the company
public in 2001 prior to its acquisition by Cadence in 2002. Ms. Herscher
holds a BA HONS, MA degree with honors in Mathematics from Cambridge
University in in England.
|
|
|
|
Committee
Membership:
Compensation (Chair) and
Governance
|
|
|
|
Qualifications:
|
|
|
|
●
experience as chief executive officer of
several technology companies
●
extensive marketing and technical
background
●
valuable insight and experience from serving
on the board and committees of public companies, including prior service
as chair of the Compensation Committee at Viavi
|
|
|
|
|
|
Table of Contents
|
|
|
Proposal No. 1
|
|
|
|
|
|
|
SAMUEL F. THOMAS
|
|
|
Age 66
Director
Since August 2015
|
|
|
|
|
Experience:
|
|
|
|
Mr. Thomas is executive chairman of the board of
directors of Chart Industries, Inc., an engineered cryogenic equipment
manufacturer serving the natural gas and industrial gas industries, and
has served as chief executive officer and as a member of its board of
directors since October 2003. From 1998 to 2003, Mr. Thomas was executive
vice president of Global Consumables at ESAB Holdings Ltd., a provider of
welding consumables and equipment. Mr. Thomas holds a Bachelor of Science
degree in Mechanical Engineering from Rensselaer Polytechnic
Institute.
|
|
|
|
Committee
Membership:
Compensation
|
|
|
|
Qualifications:
|
|
|
|
●
strong leadership and business experience in
manufacturing, sales and marketing and operations
●
significant international experience gained over a
39-year career with several companies.
|
|
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|
|
|
|
BRIAN J. LILLIE
|
|
|
Age 53
Director
Since August 2015
|
|
|
|
|
Experience:
|
|
|
|
Mr. Lillie is the Chief Customer Officer (“CCO”) and
Executive Vice President of Technology Services for Equinix, Inc., a
global provider of data center and interconnection services. As CCO, Mr.
Lillie directly leads the Global Customer Success Organization, which
includes Global Customer Care, Global Customer Experience, Global Customer
Process, and Global Technology Services. Prior to this assignment, for the
past eight years, Mr. Lillie served as global Chief Information Officer
for Equinix. Prior to joining Equinix, Mr. Lillie held several
executive-level roles at VeriSign, Inc., a provider of intelligent
infrastructure services, including vice president of global information
systems and vice president of global sales operations. Mr. Lillie holds a
Master of Science degree in Management from Stanford University’s Graduate
School of Business, a Master of Science degree in Telecommunications
Management from Golden Gate University and a Bachelor of Science degree in
Mathematics from Montana State University.
|
|
|
|
Committee
Membership:
Audit and
Governance
|
|
|
|
Qualifications:
|
|
|
|
●
extensive executive-level experience in the technology
industry and specifically in the data center markets
|
|
|
|
|
|
|
|
|
|
|
|
ALAN S. LOWE
|
|
|
Age 55
Director
Since August 2015
|
|
|
|
|
Experience:
|
|
|
|
Mr. Lowe has served as Lumentum’s president and chief
executive officer since July 2015. Prior to joining Lumentum, Mr. Lowe was
employed by Viavi. Mr. Lowe joined Viavi in September 2007 as senior vice
president of the Lasers business, and became executive vice president and
president of Viavi’s CCOP business in October 2008. Prior to joining
Viavi, Mr. Lowe was senior vice president, Customer Solutions Group at
Asyst Technologies, Inc. a leader in automating semiconductor and flat
panel display fabs. From 2000 to 2003, he was president and chief
executive officer of Read-Rite Corporation, a manufacturer of thin-film
recording heads for disk and tape drives. From 1989 to 2000, Mr. Lowe
served in roles of increasing responsibility at Read-Rite, including
president and chief operating officer, and senior vice president of
customer business units. Mr. Lowe holds Bachelor of Arts degrees in
computer science and business economics from the University of California,
Santa Barbara and completed the Stanford Executive Program in
1994.
|
|
|
|
Committee
Membership:
None
|
|
|
|
Qualifications:
|
|
|
|
●
extensive business, management, and leadership skills
from his roles at Viavi, Asyst Technologies and Read-Rite
●
broad and deep experience with Lumentum and its
businesses
|
|
|
|
|
|
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|
17
|
Table of Contents
|
Proposal No. 1
|
|
|
VOTE REQUIRED
Each director will be elected by the
affirmative vote of a majority of the votes cast, meaning that the numbers of
votes cast “FOR” a director nominee exceeds the number of votes cast “AGAINST”
that nominee. This means that the number of votes cast for a director must
exceed the number of votes cast against that director, with abstentions and
broker non-votes not counted as votes cast as either for or against such
director’s election.
|
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ELECTION TO THE BOARD OF
EACH OF THE NOMINEES NAMED ABOVE.
|
Table of Contents
DIRECTOR
COMPENSATION
Compensation for our non-employee
directors (“Outside
Directors”) is designed to
attract and retain high quality directors and to align director interests with
those of our stockholders. Outside Director compensation is reviewed annually by
the board
of directors upon recommendation from
the Compensation Committee. Our Outside Directors receive compensation in the
form of equity granted under the terms of our 2015 Equity Incentive Plan (the
“2015 Plan”) and cash, as described below:
EQUITY
AWARDS
Initial Award
. Each Outside Director is granted an initial award of
restricted stock units (“RSUs”) with a grant date fair value equal to $200,000
(the “Initial RSU Award”). These awards are granted on the date of the first
meeting of our board of directors or Compensation Committee occurring on or
after the date on which the individual first became an Outside Director. The
Initial RSU Award vests in three annual installments from the commencement of
the individual’s service as an Outside Director, subject to continued service as
a director through the applicable vesting date. If a director’s status changes
from an employee director to an Outside Director, he or she does not receive an
Initial RSU Award.
Annual Awards
. On the date of each annual meeting of our stockholders, each
Outside Director who has served on our board of directors for at least the
preceding six months is granted an award of RSUs with a grant date fair value
equal to $175,000 (the “Annual RSU Award”). The Annual RSU Award vests upon the
earlier of (i) the day prior to the next year’s annual meeting of stockholders
or (ii) one year from grant, subject to continued service as a director through
the applicable vesting date.
Severance Provisions for Equity
Awards
. Upon retirement of an Outside
Director, all unvested RSUs automatically vest in full. The treatment of
unvested RSUs held by an Outside Director upon a change in control is determined
by the terms of the 2015 Plan.
CASH
COMPENSATION
Annual Fee
. Each Outside Director receives an annual cash retainer of $85,000 for
serving on our board of directors (the “Annual Fee”), paid quarterly. In
addition to the Annual Fee, the non-employee board chair receives an additional
cash retainer of $60,000.
Committee Service
. The chairpersons of the three standing committees of our
board of directors receives the following annual cash retainers, paid
quarterly:
|
Board Committee
|
|
Chairperson Fee
($)
|
|
Audit Committee
|
|
25,000
|
|
Compensation Committee
|
|
20,000
|
|
Governance Committee
|
|
15,000
|
|
|
19
|
Table of Contents
|
Director Compensation
|
|
|
OUTSIDE
DIRECTOR COMPENSATION FOR FISCAL YEAR 2017
The following table provides information
regarding the total compensation that was granted to each of our non-management
directors in fiscal year 2017. Directors who are also our employees receive no
additional compensation for their service as directors. During fiscal year 2017,
Mr. Lowe was an employee. See “Executive Compensation” for additional
information about his compensation.
|
Name
|
|
Fees Earned or
Paid in Cash
($)
|
|
Stock Awards
($) (1)
|
|
Total
($)
|
|
Martin A. Kaplan (2)
|
|
160,000
|
|
156,062
|
|
316,062
|
|
Penelope A. Herscher (3)
|
|
105,000
|
|
156,062
|
|
261,062
|
|
Harold L. Covert (4)
|
|
110,000
|
|
156,062
|
|
266,062
|
|
Samuel F. Thomas (5)
|
|
85,000
|
|
156,062
|
|
241,062
|
|
Brian J. Lillie (6)
|
|
85,000
|
|
156,062
|
|
241,062
|
|
(1)
|
The amounts shown in this column
are the grant date fair value in the period presented as determined in
accordance with FASB ASC Topic 718. Such grant-date fair value does not
take into account any estimated forfeitures related to service-vesting
conditions. The assumptions used to calculate these amounts are set forth
under “Note 16. Stock Based Compensation and Stock Plans” in our Annual
Report on Form 10-K for the fiscal year ended July 1, 2017.
|
|
|
|
(2)
|
Mr. Kaplan held 9,601 RSUs as of
July 1, 2017.
|
|
|
|
(3)
|
Ms. Herscher held 9,601 RSUs as
of July 1, 2017.
|
|
|
|
(4)
|
Mr. Covert held 9,601 RSUs as of
July 1, 2017.
|
|
|
|
(5)
|
Mr. Thomas held 7,546 RSUs as of
July 1, 2017.
|
|
|
|
(6)
|
Mr. Lillie held 7,546 RSUs as of
July 1, 2017.
|
Table of Contents
PROPOSAL
NO. 2 ADVISORY VOTE TO APPROVE COMPENSATION OF OUR NAMED EXECUTIVE
OFFICERS
As required by the Dodd-Frank Wall Street
Reform and Consumer Protection Act of 2010 and SEC rules, we are seeking the
approval of the Company’s stockholders on an advisory or non-binding basis, the
compensation of our named executive officers (“NEOs”) as disclosed in this Proxy
Statement.
Our compensation program is designed to
attract, retain and motivate employees and to serve the long-term interests of
our stockholders. Our compensation program promotes performance-based
compensation and has evolved to align compensation with recognized best
practices and to address market realities.
The items below contain a few highlights
from our compensation program:
|
●
|
A significant portion of
compensation is subject to our financial and/ or share price
performance.
Mr. Lowe, our chief
executive officer, received 86% in total target pay (base salary, annual
incentive bonus and long-term equity awards) in fiscal 2017 through either
incentive cash or equity, and the other NEOs received 72% on average. This
reflected a 42% and 43% increase for CEO and all other NEOs, respectively,
which corresponded with the Company’s 135% growth in total shareholder
return since the Separation.
|
|
|
|
|
●
|
Pay levels and practices are
regularly reviewed against external market best practices.
Our Compensation Committee regularly
reviews both pay levels and practices against the external market to
ensure that our approach to compensation is consistent with current
industry best practices, while also supporting our business strategy and
objectives.
|
|
|
|
|
●
|
Performance-based components of
pay are expected to be increased for fiscal year 2018.
The Compensation Committee has decided to increase the
performance-based components of executive pay in future years now that the
Separation occurred more than two years ago. The Compensation Committee
decided that our executive officers will receive a portion of their equity
pay tied to performance shares for fiscal year 2018. This step reinforces
our commitment to align compensation with the competitive market and tie
executive pay to company performance.
|
Lumentum maintains the following policies
to ensure sound compensation practices and corporate governance:
|
●
|
Maintain a Clawback Policy: Provides
for the recapture of awards in the event of a restatement caused by
fraudulent or illegal conduct
|
|
|
|
|
●
|
Require “Double-Trigger” for equity
acceleration upon change in control
|
|
|
|
|
●
|
Employ an independent chairman of
the board of directors
|
|
|
|
|
●
|
Engage an independent compensation
advisor
|
|
|
|
|
●
|
Conduct an annual risk review of our
compensation programs
|
|
|
|
|
●
|
Avoid excessive perquisites to
executive officers
|
|
|
|
|
●
|
Avoid tax gross-ups upon change in
control
|
|
|
|
|
●
|
Prohibit hedging or pledging of our
securities by employees or directors
|
The Compensation Discussion and Analysis
section of the proxy contains a detailed discussion of our compensation
philosophy and the alignment of our NEOs compensation to our
performance.
We are asking our stockholders to vote on
an advisory basis to approve the compensation paid to our NEOs, as described in
the Compensation Discussion and Analysis and the compensation table sections of
this Proxy Statement.
The board of directors recommends that
stockholders vote “FOR” the following resolution:
“RESOLVED, that the Company’s stockholders
approve, on an advisory basis, the compensation of the Company’s named executive
officers, as disclosed in this Proxy Statement for the 2017 Annual Meeting of
stockholders pursuant to the compensation disclosure rules of the SEC, including
the Compensation Discussion and Analysis, the FY2017 Summary Compensation Table,
and other related tables and disclosures.”
VOTE
REQUIRED
The approval of the non-binding advisory
vote on the compensation of the Company’s named executive officers requires the
affirmative vote of a majority of the shares of our common stock present in
person or by proxy at the Annual Meeting and entitled to vote thereon. As a
result, abstentions will have the same effect as votes against the proposal.
Broker non-votes will have no effect on the outcome of this vote.
This “say on pay” vote is advisory and
therefore not binding on the Company, the board of directors or the Compensation
Committee. However, the board of directors and the Compensation Committee value
the opinions of our stockholders and will take into account the outcome of this
vote in considering future compensation arrangements.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR”
THE APPROVAL, ON AN ADVISORY BASIS,
OF THE COMPENSATION OF THE
COMPANY’S NAMED EXECUTIVE OFFICERS.
|
|
|
21
|
Table of Contents
PROPOSAL
NO. 3 ADVISORY VOTE ON THE FREQUENCY OF THE STOCKHOLDER ADVISORY VOTE TO APPROVE
COMPENSATION FOR NAMED EXECUTIVE OFFICERS
In addition to providing stockholders with
the opportunity to cast a “say on pay” advisory vote on the compensation of our
named executive officers, in accordance with SEC rules, we are asking our
stockholders to vote, on an advisory basis, on how frequently we should seek an
advisory vote on the compensation of our named executive officers in the future.
This non-binding advisory vote is commonly referred to as a “say-on-frequency”
vote. Under this proposal, our stockholders may indicate whether they would
prefer to have an advisory vote on executive compensation every one year, two
years or three years.
The Compensation Committee and our board
of directors believe that the advisory vote on executive compensation should be
conducted every year because we believe this frequency will
enable our stockholders to vote, on an advisory basis, on the
most recent executive compensation information that is presented in our Proxy
Statement, leading to more meaningful and timely communication between the
Company and our stockholders on the compensation of our named executive
officers.
Stockholders are not voting to approve or
disapprove the board of director’s recommendation. Instead, you may cast your
vote on your preferred voting frequency by choosing any of the following four
options with respect to this proposal: “one year”, “two years”, “three years” or
“abstain”.
For the reasons discussed above, our board
of directors is recommending a vote for a frequency of “one year”.
VOTE
REQUIRED
The approval of the non-binding advisory
vote on the frequency of future advisory votes approving the compensation of the
Company’s named executive officers requires the affirmative vote of a majority
of the shares of our common stock present in person or by proxy at the Annual
Meeting and entitled to vote thereon. As a result, abstentions will have the
same effect as votes against the proposal. Broker non-votes will have no effect
on the outcome of this vote.
The say on frequency vote is advisory and
therefore not binding on the Company, the board of directors or the Compensation
Committee. However, the board of directors and the Compensation Committee value
the opinions of our stockholders in their vote on this proposal and will
consider the option that receives the most votes in determining the frequency of
future advisory votes to approve the compensation of our named executive
officers.
|
THE BOARD OF DIRECTORS
RECOMMENDS A VOTE FOR “ONE YEAR”.
|
Table of Contents
PROPOSAL
NO. 4 RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
Our independent registered public
accounting firm for the fiscal year ended July 2, 2016 was
PricewaterhouseCoopers LLP (“PWC”). After considering a change in our
independent registered accounting firm, our Audit Committee appointed Deloitte
LLP (“Deloitte”) as our independent registered public accounting firm to audit
our consolidated financial statements for our fiscal year ending July 1, 2017,
and we are asking our stockholders to ratify this appointment. Although
ratification by stockholders is not required by law, our Audit Committee is
submitting the appointment of Deloitte to our stockholders because we value our
stockholders’ views on our independent registered public accounting firm and as
a matter of good corporate governance. In the event that Deloitte is not
ratified by our stockholders, the Audit Committee will review its future
selection of Deloitte as our independent registered public accounting
firm.
Representatives of Deloitte are expected
to be present at the virtual Annual Meeting, in which case they will be given an
opportunity to make a statement at the Annual Meeting if they desire to do so,
and will be available to respond to appropriate questions. Representatives of
PWC are not expected to be present at the virtual Annual Meeting.
Change in Independent Registered Public
Accounting Firm
On December 27, 2016, the Audit Committee
dismissed PWC as our independent registered public accounting firm effective as
of that date and approved the appointment of Deloitte as
our new independent registered public accounting firm subject to
clearance of Deloitte’s internal acceptance process. PWC had served as the
Company’s independent registered public accounting firm since 2015. PWC’s
reports on our financial statements for the fiscal years ended June 27, 2015 and
July 2, 2016 did not contain any adverse opinion or disclaimer of opinion and
were not qualified or modified as to uncertainty, audit scope or accounting
principles.
During the fiscal years ended June 27,
2015 and July 2, 2016, and through December 27, 2016, there was no
“disagreement” (as contemplated by Item 304(a)(1)(iv) of Regulation S-K and the
related instructions to Item 304 of Regulation S-K) with PWC on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure, which disagreements, if not resolved to the satisfaction of
PWC, would have caused PWC to make reference to the subject matter of such
disagreements in connection with its reports on the financial statements for
such years.
During the fiscal years ended June 27,
2015 and July 2, 2016, and through December 27, 2016, there was no “reportable
event” (as defined in Item 304(a)(1)(v) of Regulation S-K).
PWC furnished us with a letter addressed
to the SEC stating that it agrees with the above statements, a copy of which was
filed as Exhibit 16.1 with our Current Report on Form 8-K filed with the SEC on
January 3, 2017.
FEES
PAID TO THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The following table presents fees for
professional audit services and other services rendered to our Company by PWC
for the fiscal year ended July 2, 2016 and the fees billed by Deloitte, our
independent registered public accounting firm for the fiscal year ended July 1,
2017.
|
|
|
Fiscal
2017
|
|
Fiscal
2016
|
|
|
|
(In Thousands)
|
|
Audit Fees (1)
|
|
$
|
1,398,070
|
|
$
|
1,217,820
|
|
Audit-Related Fees (2)
|
|
$
|
—
|
|
$
|
200,000
|
|
Tax
Fees (3)
|
|
$
|
994,679
|
|
$
|
195,000
|
|
All
Other Fees
|
|
$
|
13,550
|
|
$
|
—
|
|
Total
|
|
$
|
2,406,299
|
|
$
|
1,612,820
|
|
(1)
|
Audit Fees include fees related
to professional services rendered in connection with the audit of
Lumentum’s annual financial statements, the audit of internal control over
financial reporting in accordance with Section 404 of the Sarbanes-Oxley
Act of 2002, reviews of financial statements included in Lumentum’s
Quarterly Reports on Form 10-Q, and audit services provided in connection
with other statutory and regulatory filings.
|
|
|
|
(2)
|
Audit-Related Fees for Fiscal
2016 include fees related to services rendered in connection with the
Separation.
|
|
|
|
(3)
|
Tax Fees include fees for
professional services rendered in connection with transfer pricing tax
consulting, compliance, and planning services and other tax consulting and
for Fiscal 2017 include fees for professional services rendered by
Deloitte, prior to their engagement as our independent registered public
accounting firm.
|
|
|
23
|
Table of Contents
|
Proposal No. 4
|
|
|
AUDITOR
INDEPENDENCE
In our fiscal year ended July 1, 2017,
there were no other professional services provided by Deloitte, other than those
listed above, that would have required our Audit Committee to consider their
compatibility with maintaining the independence of Deloitte.
AUDIT
COMMITTEE POLICY ON PRE-APPROVAL OF AUDIT AND PERMISSIBLE NON-AUDIT SERVICES OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Our Audit Committee has established a
policy governing our use of the services of our independent registered public
accounting firm. Under the policy, our Audit Committee is required to
pre-approve all audit and non-audit services performed by our independent registered public accounting firm in order
to ensure that the provision of such services does not impair the public
accountants’ independence. All fees paid to Deloitte for our fiscal year ended
July 1, 2017 were pre-approved by our Audit Committee.
VOTE
REQUIRED
The ratification of the appointment of
Deloitte requires the affirmative vote of a majority of the shares of our common
stock present in person or by proxy at the Annual Meeting and entitled to vote
thereon. Abstentions will have the effect of a vote AGAINST the proposal and
broker non-votes will have no effect.
|
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE
RATIFICATION OF THE APPOINTMENT OF DELOITTE
LLP.
|
Table of Contents
REPORT
OF THE AUDIT COMMITTEE
The Audit Committee is a committee of the
board of directors comprised solely of independent directors as required by the
listing standards of the NASDAQ Stock Exchange and rules and regulations of the
SEC. The Audit Committee operates under a written charter approved by the board
of directors, which is available on our website at
www.lumentum.com
. The composition of
the Audit Committee, the attributes of its members and the responsibilities of
the Audit Committee, as reflected in its charter, are intended to be in
accordance with applicable requirements for corporate audit committees. The
Audit Committee reviews and assesses the adequacy of its charter and the Audit
Committee’s performance on an annual basis.
With respect to the Company’s financial
reporting process, the management of the Company is responsible for (1)
establishing and maintaining internal controls and (2) preparing the Company’s
consolidated financial statements. Our independent registered public accounting
firm, Deloitte, is responsible for auditing these financial statements. It is
the responsibility of the Audit Committee to oversee these activities. It is not
the responsibility of the Audit Committee to prepare our financial statements,
which are the fundamental responsibilities of management. In the performance of
its oversight function, the Audit Committee has:
|
●
|
reviewed and discussed the audited
financial statements with management and Deloitte;
|
|
|
|
|
●
|
discussed with Deloitte the matters
required to be discussed by Auditing Standard No. 1301;
and
|
|
|
|
|
●
|
received the written disclosures and
the letter from Deloitte required by applicable requirements of the Public
Company Accounting Oversight Board regarding the independent accountant’s
communications with the Audit Committee concerning independence, and has
discussed with Deloitte its independence.
|
Based on the Audit Committee’s review and
discussions with management and Deloitte, the Audit Committee recommended to the
board of directors that the audited financial statements be included in the
Company’s Annual Report on Form 10-K for the fiscal year ended July 1, 2017 for
filing with the Securities and Exchange Commission.
Respectfully submitted by the members of
the Audit Committee of the board of directors:
Harold L. Covert (Chair)
Martin A.
Kaplan
Brian J. Lillie
This report of the Audit Committee is
required by the Securities and Exchange Commission (“SEC”) and, in accordance
with the SEC’s rules, will not be deemed to be part of or incorporated by
reference by any general statement incorporating by reference this Proxy
Statement into any filing under the Securities Act of 1933, as amended
(“Securities Act”), or under the Securities Exchange Act of 1934, as amended
(“Exchange Act”), except to the extent that we specifically incorporate this
information by reference, and will not otherwise be deemed “soliciting material”
or “filed” under either the Securities Act or the Exchange Act.
|
|
25
|
Table of Contents
EXECUTIVE OFFICERS
The following table sets forth information
regarding individuals who serve as our executive officers. The position titles
refer to each executive officer’s title at Lumentum as of September 19, 2017.
Our executive officers are elected by our board of directors to hold office
until their successors are elected and qualified.
|
Name
|
|
Age
|
|
Position
|
|
Alan Lowe
|
|
55
|
|
President and Chief Executive Officer
|
|
Aaron Tachibana
|
|
57
|
|
Chief Financial Officer and Executive Vice
President
|
|
Vincent Retort
|
|
63
|
|
Chief Operations Officer and Executive Vice
President
|
|
Jason Reinhardt
|
|
43
|
|
Executive Vice President, Global Sales and Product Line
Management
|
|
Judy Hamel
|
|
51
|
|
Vice President, General Counsel and
Secretary
|
For Mr. Lowe’s biography, see “Director
Nominees.”
Aaron Tachibana
has served as Lumentum’s chief financial officer since July
2015. Prior to joining Lumentum, Mr. Tachibana was employed by Viavi. Mr.
Tachibana joined Viavi in November 2013 as vice president of finance and
corporate controller. Prior to joining Viavi, Mr. Tachibana served as chief
financial officer at Pericom Semiconductor Corp., a supplier of performance
connectivity and timing solutions, from March 2010 to October 2013 where he led
finance and human resources. From 1992 to 2010, he held executive and senior
management positions with Asyst Technologies, Inc., Allied Telesis, Inc.,
TapCast Inc. and TeraStor Corporation. Mr. Tachibana holds a Bachelor of Science
degree in Business Administration and Finance from San Jose State
University.
Vincent Retort
has served as Lumentum’s chief operations officer and
executive vice president since February 2016, and was previously our senior vice
president, research and development from July 2015 through February 2016. Prior
to joining Lumentum, Mr. Retort was employed by Viavi. Mr. Retort joined Viavi
in 2008 as vice president of research & development, CCOP, and became senior
vice president of research & development of CCOP in 2011. From 2004 to 2008,
Mr. Retort was vice president of product engineering, reliability and quality at
NeoPhotonics Corporation, a designer and manufacturer of photonic integrated
circuit based modules and subsystems. From 2002 to 2004, Mr. Retort served as
senior director of development engineering, magnetic recording performance at
Seagate Technologies PLC, an international manufacturer and distributor of
computer disk drives. From 2000 to 2002, Mr. Retort served as vice president of
product engineering at Lightwave Microsystems Corporation, a communications
equipment company. Mr. Retort holds a Masters of Science degree in Biological
Sciences from Stanford University and a Bachelor of Arts degree in Biology from
West Virginia University.
Jason Reinhardt
has served as Lumentum’s executive vice president, global
sales and product line management, since February 2016, and was previously our
senior vice president, sales from July 2015 through February 2016. Prior to
joining Lumentum, Mr. Reinhardt was employed by Viavi. Mr. Reinhardt joined
Viavi in May 2008 as Director of Sales for North America. He was subsequently
promoted to Senior Director of North America Sales, VP and Senior VP of Global
Sales, holding that position from August 2010 until January 2014, after which he
focused on charitable humanitarian work while holding a part-time business
development position. Mr. Reinhardt returned to a full-time role in June 2015,
serving again as Viavi’s Senior VP of Global Sales. Before joining Viavi, Mr.
Reinhardt served as Deputy Country Director of HOPE worldwide Afghanistan,
Senior Director of North America Sales at Avanex Corporation and Account Manager
and Production Engineer at Corning Incorporated. He also served as an officer in
the United States Air Force prior to those roles. Mr. Reinhardt holds a Bachelor
of Science degree in Electrical Engineering from Montana State University, and a
Master of Business Administration degree from Babson College’s Franklin W. Olin
Graduate School of Business.
Judy Hamel
has served as Lumentum’s vice president, general counsel and
secretary since July 2015. Prior to joining Lumentum, Ms. Hamel was employed by
Viavi. Ms. Hamel joined Viavi in August 2012 as senior corporate counsel. Prior
to joining Viavi, from September 2006 to August 2012, Ms. Hamel served as vice
president legal affairs at Cortina Systems, Inc., a global communications
supplier of port connectivity solutions to the networking and telecommunications
sector. Previously, Ms. Hamel worked as a corporate associate at Silicon Valley
law firms Cooley Godward LLP and Wilson Sonsini Goodrich and Rosati PC. Ms.
Hamel holds a Juris Doctor degree from Santa Clara University School of Law, a
Masters degree in Business Administration from San Jose State University and a
Bachelor of Science degree in Economics and Finance from Southern New Hampshire
University.
Table of Contents
COMPENSATION DISCUSSION AND ANALYSIS
This discussion of our executive
compensation program is designed to provide our stockholders with an
understanding of our compensation program in effect for our named executive
officers (“NEOs”) who consisted of the following executive officers for fiscal
year 2017:
|
●
|
Alan Lowe, our President and Chief
Executive Officer
|
|
|
|
|
●
|
Aaron Tachibana, our Chief Financial
Officer and Executive Vice President
|
|
|
|
|
●
|
Vincent Retort, our Chief Operations
Officer and Executive Vice President
|
|
|
|
|
●
|
Jason Reinhardt, our Executive Vice
President, global sales and product line management
|
|
|
|
|
●
|
Judy Hamel, our Vice President,
General Counsel and Secretary
|
FISCAL
YEAR 2017 BUSINESS PERFORMANCE
We posted strong results in our second
year as an independent, publicly–traded company. Highlights of our fiscal year
2017 financial performance in several of our key metrics, along with comparable
measures during fiscal years 2016 and 2015, are set forth in this
section:
Net Revenue
($Ms)
Performance
|
|
Total Shareholder
Returns
Performance
|
|
|
|
|
|
|
|
|
Gross Margin
Performance
|
|
Operating Margin
Performance
|
|
|
|
EXECUTIVE COMPENSATION HIGHLIGHTS
|
●
|
Increases to Executive
Compensation due to Strong Fiscal Year 2017 Performance
. In light of our strong performance in fiscal year
2017, and the continued success two years after the completion of the
Separation, the Compensation Committee increased total target pay for our
CEO (excluding the value of one-time awards) by approximately 42% and
total target pay for our NEOs by approximately 43% on average, in each
case as compared to their respective target pay levels in fiscal year
2016.
|
|
|
|
|
●
|
Above Target Payout of Cash
Annual Incentive Program for Fiscal Year 2017
. The fiscal year 2017 annual cash incentive plan was based on
revenue and operating income. Due to solid financial and operational
performance, during fiscal year 2017, our NEOs received payouts under our
fiscal year 2017 annual cash incentive plan at 109.2% of
target.
|
|
|
|
|
●
|
Introduction of Strategic
Modifier in Annual Cash Incentive Plan for Fiscal Year
2017
: The Compensation Committee
believed that focusing on specific operational objectives was important
for measuring the Company’s annual performance. As a result, the
Compensation Committee introduced a strategic modifier into our annual
cash incentive plan for fiscal year 2017 which resulted in a 10% reduction
to the Annual Cash Incentive Plan payout. The Compensation Committee may
decrease or increase cash incentive pay as a result of performance on
defined strategic measures by up to 20%.
|
|
|
|
|
●
|
Introduction of PSAs for Fiscal
Year 2018
. Our Compensation Committee
decided to introduce performance shares as a key component of our
executives’ total compensation package going forward. These shares will
make up one-third of the NEO’s annual equity award for fiscal year 2018,
whereas RSUs will be comprised of two-thirds of each individual’s annual
equity grant.
|
COMPENSATION PHILOSOPHY
Our executive compensation program is
guided by our overarching philosophy of paying for demonstrable performance.
Consistent with this philosophy, we have designed our executive compensation
program to achieve the following primary objectives:
|
●
|
Total compensation should attract,
motivate and retain the talent necessary to achieve our business
objectives in order to increase long-term value and drive stockholder
returns.
|
|
|
|
|
●
|
Superior executive talent is
motivated and retained through a strong pay for performance compensation
system that provides the opportunity to earn above-average compensation in
return for achieving business and financial success.
|
|
|
|
|
●
|
Our compensation practices continue
to evolve to align compensation with recognized best practices and to
address current market realities.
|
Table of Contents
|
|
|
CD&A
|
To further these objectives, we seek to
adhere to best practice for compensation and corporate governance purposes.
These provisions protect our stockholders’ interests, as follows:
|
|
|
|
|
|
WHAT WE
DO
|
|
|
|
|
|
|
|
●
Pay for Performance: 86% of our CEO’s and 72% of our other NEOs’
fiscal year 2017 target compensation was subject to Lumentum’s financial
and/or share price performance
●
Emphasize Long-Term Company Performance: Over 55% of our NEOs’
fiscal year 2017 target compensation is in equity that vests over three
years
●
Maintain Stock Ownership Guidelines: 3x salary for our CEO and 1x
for other NEOs
●
Maintain a Clawback Policy: Provides for the recapture of awards in
the event of a restatement caused by fraudulent or illegal
conduct
●
Require “Double-Trigger” for equity acceleration in connection with
a change in control
●
Employ an independent chairman of the board
●
Engage an independent compensation advisor
●
Conduct an annual risk review of our compensation
programs
|
|
|
|
|
|
|
|
|
|
|
|
WHAT WE
DON’T DO
|
|
|
|
|
|
|
|
●
No excessive perquisites awarded to Executive Officers
●
No tax gross-ups upon a change in control
●
No hedging or pledging of Lumentum securities by employees or
directors
|
|
|
|
|
|
ELEMENTS
OF OUR FISCAL YEAR 2017 COMPENSATION PROGRAM
In fiscal year 2017, compensation that we
provided to our NEOs primarily consisted of salary, annual cash incentive, and
equity awards according to the following structure:
|
|
29
|
Table of Contents
|
CD&A
|
|
|
COMPENSATION DECISION PROCESSES
The Compensation Committee administers and
determines the parameters of the executive compensation program. In carrying out
its functions, the Compensation Committee seeks input from Semler Brossy, the
independent compensation advisor to the Compensation Committee and our
management (other than with respect to their own compensation).
Semler Brossy provides advice relating to
our compensation peer group selection as well as provides support and specific
analysis with regard to compensation data and formulation of recommendations for
executive compensation. Semler Brossy reports directly to our Compensation
Committee and is independent from our management.
Our CEO and Senior Vice President of Human
Resources presents to the Compensation Committee performance reviews and
compensation recommendations for our NEOs (other than our CEO). Our management
team references the materials that Semler Brossy prepared for the Compensation
Committee in developing NEO compensation recommendations for the Compensation
Committee’s consideration.
The Compensation Committee approves all
compensation for our NEOs (other than our CEO). The Compensation Committee
reviews and recommends to the board of directors our CEO’s compensation which
was approved by the board of directors and the CEO was not present for these
discussions.
PEER
GROUP
The Compensation Committee, with input
from Semler Brossy, reviews the compensation practices at similarly situated
companies that comprise our 2017 peer group. The characteristics and details
around the 2017 peer group are listed below.
|
|
|
|
|
|
|
|
|
|
Primary Uses of Peer Group
|
|
Peer Group
Companies
|
|
Peer Group Financial
Positioning
|
|
|
|
Characteristics: Companies similar
in revenue, size, and business operations to Lumentum:
●
Performance and pay relationship
●
NEO compensation levels
●
Annual and long-term incentive plan design
●
Independent director compensation
●
Equity plan and share usage
●
Change in control and severance
●
Benefits and perquisites
|
|
Ciena
Coherent
Finisar
FLIR Systems
Infinera
IPG Photonics
Newport
Oclaro
Polycom
Qorvo
Viavi
Xilinx
Xura
|
|
Lumentum and Peer Financial Positioning
Note:
Excludes Newport, Polycom and Xura as they are no longer trading
companies
|
|
|
|
|
|
|
|
|
|
In addition, the Compensation Committee
also reviews market data from the US Radford Survey for companies with
comparable revenue size to assess the competitiveness of our executive
compensation programs.
Though its review of competitive market
data of the peer group companies and the survey data informs its decisions, the
Compensation Committee also applies its judgment in determining
the pay levels of NEOs. Additional factors the Compensation
Committee considers when making its compensation decisions include input from
our management team, Company performance, individual performance and experience,
each NEO’s role and/or retention and incentive objectives.
Table of Contents
|
|
|
CD&A
|
Base salary represents the fixed portion
of our NEOs compensation and is intended to attract and retain highly talented
individuals. In determining base compensation levels, our Compensation Committee
analyzes base salary information for similar positions and titles at companies
in our compensation
peer group and the survey
data, and also considers the input from our management team as described above.
In fiscal year 2017, the Compensation Committee, after taking into account
Company performance and the individual NEO’s performance, increased the base
salaries of each of our NEOs.
|
|
|
Fiscal Year 2017
($)
(1)
|
|
Fiscal Year 2016
($)
(1)
|
|
Alan Lowe
|
|
700,000
|
|
625,000
|
|
Aaron Tachibana
|
|
400,000
|
|
365,000
|
|
Vincent Retort
|
|
430,000
|
|
415,000
|
|
Jason Reinhardt
|
|
410,000
|
|
370,000
|
|
Judy Hamel
|
|
290,000
|
|
270,000
|
|
(1)
|
Amounts in this table reflect
annualized base salaries. Actual salaries paid during these periods are
described below under the section titled “— Summary Compensation Table.”
For fiscal year 2016, the base salary increases were effective August 1,
2015, and for fiscal year 2017, the base salary increases were effective
October 16, 2016.
|
ANNUAL
CASH INCENTIVE PLAN
We operate an annual cash incentive plan
(“CIP”) under our Executive Officer Performance-based Incentive Plan (the
“Incentive Plan”), which plan is intended to reward our NEOs for achieving
annual financial goals.
The Compensation Committee approved
consolidated revenue and adjusted operating income percent margin as the primary
performance measures under the CIP for determining cash incentive amounts for
our NEOs in fiscal year 2017. These measures reflect the Company’s success in
maintaining and growing the customer base while maintaining profitability, which
the Compensation Committee believes are critical measures in the first few years
following the Separation.
For fiscal year 2017, the Compensation
Committee determined that an aggregate bonus pool would be created under the CIP
if we achieve positive operating income. If we achieved positive operating
income for the fiscal year 2017, then the funding of the CIP would be reduced
(but not increased) based on our achievements as follows: 80% measured on
adjusted operating income percent margin and 20% measured on revenue. Operating
income continues to be measured in two six-month periods, whereas revenue is
measured as a full-year performance measurement. For Mr. Reinhardt, the funding
as it relates to his assigned bonus opportunity in fiscal year 2017 would be
reduced (but not increased) based on our
achievement under the same bonus scheme for operating income percent margin as
other participants described above (weighted approximately 40%) and revenue
(weighted approximately 60%). We believe a different weighting for Mr.
Reinhardt, our top sales executive, was appropriate to provide additional
incentives for him to drive growth through sales.
The Compensation Committee also added a
strategic measure to the CIP for fiscal year 2017 that acts as a modifier to CIP
payout. The Compensation Committee believed that focusing on specific
operational objectives was important to measuring success. The Compensation
Committee has the discretion to adjust payouts by up to 20% in either direction
for achievement of the strategic modifier based on the Compensation Committee’s
subjective assessment with management’s input of certain operation measures in
our business during fiscal year 2017. The modifier impacts adjusted operating
income for the first half of the year separately from adjusted operating income
for the second half of the year and full year revenue.
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31
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Table of Contents
|
CD&A
|
|
|
The chart below illustrates the general
structure of the CIP for fiscal year 2017.
Fiscal Year 2017 CIP Measure
Leverage Curves and Structure
If the threshold performance is achieved,
the CIP generally will fund with respect to any performance measure based on a
linear interpolation between threshold performance (50% funding) and maximum
performance (200% funding), with the exception of the flat range around target
to help provide some flexibility as shown below.
|
Op. Income (% of target)
|
|
Payout
|
|
157% or more
|
|
200%
|
|
95% - 105%
|
|
100%
|
|
71%
|
|
50%
|
|
Less than 71%
|
|
0%
|
|
|
|
Revenue (% of target)
|
|
Payout
|
|
111% or more
|
|
200%
|
|
98% - 102%
|
|
100%
|
|
84%
|
|
50%
|
|
Less than 84%
|
|
0%
|
FY17 Annual Cash Incentive Plan
Target Bonus Opportunities
In approving each NEO’s fiscal year 2017
target bonus opportunities under the CIP, the Compensation Committee considered
each NEO’s role at Lumentum and competitive market data from the compensation
peer group and survey data.
|
|
|
Fiscal Year 2017
CIP
Target
|
|
|
|
Target
($)
|
|
% of Salary
(%)
|
|
Alan Lowe
|
|
700,000
|
|
100
|
|
Aaron Tachibana
|
|
280,000
|
|
70
|
|
Vincent Retort
|
|
344,000
|
|
80
|
|
Jason Reinhardt (1)
|
|
328,000
|
|
80
|
|
Judy Hamel
|
|
145,000
|
|
50
|
|
(1)
|
Mr. Reinhardt’s target bonus is
based on two components: (i) 80% of half of his base salary for
achievement of revenue target; and (ii) 80% of half of his base salary for
achievement of the CIP targets.
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Table of Contents
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|
|
CD&A
|
Fiscal Year 2017 Annual Cash
Incentive Plan Achievement
Following the end of fiscal year 2017, the
Compensation Committee reviewed the achievement of the performance measures
under the CIP and determined that we achieved positive operating income and the
following results for the primarily performance measures:
|
|
|
Minimum
|
|
Target
|
|
Maximum
|
|
Performance as
% of Target
|
|
1st
Half Adjusting Operating Income Margin % – 40% weight
|
|
|
7.5%
|
|
|
10%-11%
|
|
|
16.5%
|
|
149%
|
|
2nd
Half Adjusted Operating Income Margin % – 40% weight
|
|
|
7.5%
|
|
|
10%-11%
|
|
|
16.5%
|
|
100%
|
|
Full Year Consolidated Revenue – 20% weight
|
|
|
$840
|
|
$
|
980-1,020
|
|
|
$1,110
|
|
100%
|
In approving each NEO’s fiscal year 2017
target bonus opportunities under the CIP, the Compensation Committee considered
each NEO’s role at Lumentum and external competitive market data from
compensation peer group and survey data. In fiscal year 2017, our first half
operating income margin was 13.7%, resulting in our cash incentive plan funding
at 149% of target. We then applied the strategic modifier under the CIP to
adjust plan payouts downward by 10% for the first half of fiscal year 2017. For
the second half of fiscal year 2017, our
operating income margin was 11% and our full year consolidated revenue
was $1,001.6 million, resulting in our cash incentive plan funding at 100% of
target. We then applied the strategic modifier under the CIP to adjust plan
payouts downward by 10% for the operating income margin objective as well as
downward by 10% for the full year consolidated revenue objective for the second
half of fiscal year 2017. Total fiscal year 2017 individual cash incentive plan
payouts for our NEOs were as follows:
|
|
|
Fiscal Year 2017
CIP
Target
|
|
Fiscal Year 2017
CIP
Payouts
|
|
|
|
Target
($)
|
|
% of Salary
(%)
|
|
Payout
($)
|
|
% of Salary
(%)
|
|
Alan Lowe
|
|
700,000
|
|
100
|
|
754,040
|
|
107.7%
|
|
Aaron Tachibana
|
|
280,000
|
|
70
|
|
301,616
|
|
75.4%
|
|
Vincent Retort
|
|
344,000
|
|
80
|
|
370,557
|
|
86.2%
|
|
Jason Reinhardt
|
|
328,000
|
|
80
|
|
379,775
|
|
92.6%
|
|
Judy Hamel
|
|
145,000
|
|
50
|
|
156,194
|
|
53.9%
|
EQUITY
INCENTIVE AWARDS
We use annual equity awards to deliver
long-term incentive compensation opportunities to our NEOs and one-time equity
awards to address special situations that may arise from time to time, such as
promotions and retention arrangements. Our equity incentive awards are intended
to align the interests of our NEOs with those of our stockholders. Equity awards
are generally
subject to vesting restrictions to
encourage ownership and retention of equity interests in Lumentum. To determine
annual equity awards for our NEOs, the Compensation Committee reviews each
executive’s role, performance, and current competitive market information from
both the compensation peer group and survey data.
Annual equity awards for fiscal year 2017
consisted of restricted stock awards (“RSAs”) that vest ratably over three
years. Each RSA represents a right to receive one share of common stock upon
vesting. The Compensation Committee determined that RSAs or RSUs were the best
vehicle to create stability during our first two
years as an independent public company in light of the uncertainty regarding our
stock price. Annual equity awards granted to our NEOs with respect to fiscal
year 2017 are set forth in the table below. The size of these annual equity
awards was determined taking into account the factors stated above.
|
|
|
Annual Equity
|
|
|
|
Target Value
of RSAs
($) (1)
|
|
Number
of RSAs
|
|
Alan Lowe
|
|
3,700,000
|
|
139,370
|
|
Aaron Tachibana
|
|
750,000
|
|
28,250
|
|
Vincent Retort
|
|
1,700,000
|
|
64,034
|
|
Jason Reinhardt
|
|
850,000
|
|
32,017
|
|
Judy Hamel
|
|
325,000
|
|
12,241
|
|
(1)
|
The number of actual shares per
RSA is determined based on the average of the daily volume weighted
average price for the month prior to the month in which the RSA is
granted.
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|
|
33
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Table of Contents
|
CD&A
|
|
|
|
CEO One-time Equity
Award
|
Mr. Lowe was awarded a one-time grant of
73,854 RSUs on August 1, 2015 in recognition of his promotion to CEO in
connection with the Separation. 50% of the award vests ratably over three years
and 50% vests over three years based on the achievement of certain performance
measures (the “performance-based component”).
The performance-based component would have
vested if Lumentum had achieved 10% organic revenue growth in fiscal year 2016.
This target was not met in fiscal year 2016 and 50% of
the performance-based component of the award (18,463 shares) was
forfeited. The remaining 50% of the performance-based component was eligible to
vest in fiscal year 2017 if Lumentum achieved 10% organic revenue growth. This
target was met in fiscal year 2017 and 50% of the performance-based shares
(18,464 shares) were earned. Upon certification of the financial performance,
50% of the earned performance-based shares vested on the two year anniversary of
the grant date and the remaining 50% will vest on the three year anniversary of
the grant date.
|
Changes for Fiscal Year
2018
|
Beginning in fiscal year 2018, our
Compensation Committee introduced performance shares as a key component of our
executives’ total compensation package. We intend for performance shares to
represent one-third of each NEO’s
annual equity
award for fiscal year 2018, and time-based RSUs to represent two-thirds of each
NEO’s annual equity award for fiscal year 2018.
EMPLOYMENT AGREEMENT WITH MR. LOWE
Lumentum entered into an employment
agreement with Alan Lowe in August 2015. The employment agreement has an initial
term of three years and will automatically renew for one year terms unless
either party provides written notice of non-renewal at least 90 days prior to
the end of the term. The employment agreement generally provides Mr. Lowe an
annual base salary, an annual target bonus, and equity awards. The agreement
makes Mr. Lowe eligible to participate in the employee benefit
plans maintained by Lumentum or Lumentum Operations LLC (the
“LLC”), its subsidiary, and generally applicable to the senior executives of the
LLC. The employment agreement also provides Mr. Lowe lump sum cash payments and
vesting acceleration of outstanding Lumentum equity awards under certain
terminations of his employment. For additional information concerning Mr. Lowe’s
change of control benefits, see “Potential Payments Upon a Termination or Change
in Control”.
SHARE
OWNERSHIP GUIDELINES
Our share ownership guidelines require all
executive officers and directors maintain a significant equity investment in
Lumentum based upon a multiple of his or her base salary or annual cash
retainer, respectively.
|
Title
|
Ownership Requirement
|
|
CEO
|
3x
base salary
|
|
All
Other Executive Officers
|
1x
base salary
|
|
Directors
|
3x
annual cash retainer
|
Shares owned outright and unvested and
vested restricted stock and restricted stock units and any stock options
exercisable within 60 days count toward the ownership requirements. These
ownership levels must be attained within five years from the date of initial
election or appointment to the board of directors, in the
case of non-employee directors, or within five years following
the appointment of executive officers. At the time the Compensation Committee
reviewed the policy in February 2017, all directors and executive officers were
in compliance or on track to achieve compliance with the guidelines.
The Compensation Committee approved a
clawback policy in August 2016 that allows our board of directors the discretion
to recover cash incentive plan awards and performance-based equity awards that
are earned based on financial results, if those
results are restated within three years of being earned as a result of
fraudulent or illegal conduct. The policy covers our executive officers.
Table of Contents
|
|
|
CD&A
|
|
Federal Income Tax
Consequences
|
The Incentive Plan and the 2015 Plan each
were approved by our stockholders in 2016, and are intended to permit (but not
require) the payment of compensation that qualifies as “performance-based”
compensation under Section 162(m). Under Section 162(m), we may not receive a
federal income tax deduction for compensation paid to our chief executive
officer or any of our other three most highly compensated executive officers
(other than our chief financial officer) to the extent that any of these persons
receives more than $1,000,000 in any one year. However, “performance-based”
compensation that qualifies under Section 162(m) is exempt from this $1,000,000
limitation. The Incentive Plan and the 2015 Plan each allow us the opportunity to choose to pay incentive compensation
that is intended to be performance-based and therefore potentially fully tax
deductible on our federal income tax return (subject to future changes in tax
laws and other circumstances). We also may choose to pay other or additional
compensation outside of the Incentive Plan or the 2015 Plan, as applicable, that
is not intended to qualify as performance-based compensation (and that,
therefore, may not be tax deductible for us). For example, base salaries do not
qualify as performance-based compensation and any bonuses paid outside of the
Incentive Plan likely would not qualify as performance-based
compensation.
|
Compensation Risk
Assessment
|
The Compensation Committee, with the
assistance of Semler Brossy, analyzed the potential risks arising from our
compensation policies and practices and determined that there are no such risks
that are reasonably likely to have a material adverse effect on us.
|
Compensation Committee
Report
|
The Compensation Committee has reviewed
the Compensation Discussion and Analysis section and discussed it with
management. Based on its review and discussions with management, the committee
recommended to our board of directors that the Compensation Discussion and
Analysis be included in this Proxy Statement and incorporated by reference into
our Annual Report on Form 10-K for the fiscal year ended July 1,
2017.
The Compensation Committee:
Penelope A.
Herscher (Chair)
Harold L. Covert
Samuel F. Thomas
SUMMARY COMPENSATION
TABLE
The following table provides certain
summary information concerning the compensation awarded to, earned by or paid to
each of our NEOs for the fiscal year ended July 1, 2017 and, to the extent
required under the SEC executive compensation rules, the fiscal years ended July
2, 2016 and June 27, 2015.
As discussed in this Proxy Statement,
Lumentum separated from Viavi and became an independent public company effective
July 31, 2015. The information provided below includes compensation earned by
our NEOs for services provided to Viavi prior to the Separation.
|
Name and Principal Position
|
|
Year
|
|
Salary
($) (1)
|
|
Stock Award
($) (2)(3)
|
|
Non-Equity
Incentive
Plan
Compensation
($) (4)
|
|
All Other
Compensation
($) (5)
|
|
Total
($)
|
|
Alan Lowe
|
|
2017
|
|
700,962
|
|
4,459,840
|
|
754,040
|
|
4,000
|
|
5,918,842
|
|
President and
Chief Executive Officer
|
|
2016
|
|
652,577
|
|
3,853,775
|
|
597,775
|
|
7,678
|
|
5,111,805
|
|
President, CCOP, JDS
Uniphase
|
|
2015
|
|
562,000
|
|
1,195,001
|
|
205,135
|
|
4,000
|
|
1,966,136
|
|
Aaron Tachibana
|
|
2017
|
|
403,269
|
|
927,448
|
|
301,616
|
|
8,541
|
|
1,640,874
|
|
Chief
Financial Officer
|
|
2016
|
|
362,138
|
|
990,966
|
|
209,460
|
|
6,738
|
|
1,569,303
|
|
Corporate Controller, JDS
Uniphase
|
|
2015
|
|
284,123
|
|
233,520
|
|
48,468
|
|
9,236
|
|
575,347
|
|
Vincent Retort
|
|
2017
|
|
441,346
|
|
2,102,236
|
|
370,557
|
|
6,596
|
|
2,920,735
|
|
Chief
Operations Officer and Executive Vice President
|
|
2016
|
|
406,442
|
|
800,778
|
|
254,499
|
|
7,446
|
|
1,469,166
|
|
Vice President, R&D, JDS
Uniphase
|
|
2015
|
|
338,077
|
|
677,565
|
|
86,641
|
|
4,000
|
|
1,106,283
|
|
Jason Reinhardt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Vice
President, Global Sales and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product Line
Management
|
|
2017
|
|
411,923
|
|
1,051,118
|
|
379,775
|
|
4,000
|
|
1,846,817
|
|
Judy Hamel
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vice President, General Counsel
and Secretary
|
|
2017
|
|
294,231
|
|
401,872
|
|
156,194
|
|
9,754
|
|
862,051
|
|
|
35
|
Table of Contents
|
CD&A
|
|
|
|
(1)
|
Actual salary earned during
fiscal years 2017, 2016 or 2015, as applicable.
|
|
|
|
(2)
|
Amounts shown do not reflect
compensation actually received by the NEO. Instead, the amounts shown are
the grant date fair value in the period presented as determined pursuant
to stock-based compensation accounting rule FASB ASC Topic 718, excluding
the effect of estimated forfeitures. The assumptions used to calculate
these amounts are set forth under “Note 16. Stock Based Compensation and
Stock Plans” in our Annual Report on Form 10-K for the fiscal year ended
July 1, 2017. As required by SEC rules, the amounts shown exclude the
impact of estimated forfeitures related to service-based vesting
conditions.
|
|
|
|
(3)
|
The stock awards for Mr. Lowe
includes an MSU award granted in fiscal year 2016 for 36,927 shares, of
which 18,463 shares did not vest and were cancelled in fiscal year 2016,
and 18,464 shares with a value of $1,053,371 that will vest due to
achievement of performance measures. 50% of these shares vested on August
15, 2017 and 50% will vest on August 15, 2018. See “—Market Stock Units”
for further information about the MSUs.
|
|
|
|
(4)
|
Non-Equity Incentive Plan
Compensation for fiscal year 2015 was paid pursuant to the JDSU Variable
Pay Plan and for fiscal years 2017 and 2016 was paid pursuant to the
Lumentum Cash Incentive Plan. See “-Annual Cash Incentive Plan” for an
additional discussion.
|
|
|
|
(5)
|
All amounts represent 401(k)
matching contributions by Viavi or Lumentum, as
applicable.
|
2017
GRANTS OF PLAN-BASED AWARDS TABLE
The following table sets forth information
with respect to plan-based compensation in fiscal year 2017 to each NEO,
including cash incentive opportunities under the CIP (and Sales Incentive Plan
(“SIP”) with regard to Mr. Reinhardt) and equity in the form of RSAs. The terms
of the CIP opportunities are described in “Compensation Discussion and Analysis
– Annual Cash Incentive
Plan,” and the material
terms of the equity awards are described in “Compensation Discussion and
Analysis – Equity Incentive Awards”. See “Compensation Discussion and Analysis”
for a description of the material factors necessary to an understanding of the
information disclosed below.
|
|
|
|
|
|
|
|
Estimated Future Payouts Under
Non-Equity Incentive
Plan Awards
|
|
All Other
Stock Awards:
Number
of
Shares of
Stock or Units
(#)
|
|
Grant Date Fair
Value of Stock
and
Option
Awards ($)
|
|
Name
|
|
|
|
|
Grant Date
|
|
Threshold
($)
|
|
Target
($)
|
|
Maximum
($)
|
|
Alan Lowe
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8/17/2016
|
|
|
|
|
|
|
|
139,370
|
|
4,459,840
|
|
|
|
|
|
|
N/A
|
|
350,000
|
|
700,000
|
|
1,400,000
|
|
|
|
|
|
Aaron Tachibana
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8/16/2016
|
|
|
|
|
|
|
|
28,250
|
|
927,448
|
|
|
|
|
|
|
N/A
|
|
140,000
|
|
280,000
|
|
560,000
|
|
|
|
|
|
Vincent Retort
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8/16/2016
|
|
|
|
|
|
|
|
64,034
|
|
2,102,236
|
|
|
|
|
|
|
N/A
|
|
172,000
|
|
344,000
|
|
688,000
|
|
|
|
|
|
Jason Reinhardt (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8/16/2016
|
|
|
|
|
|
|
|
32,017
|
|
1,051,118
|
|
|
|
CIP
|
|
|
N/A
|
|
82,000
|
|
164,000
|
|
328,000
|
|
|
|
|
|
|
|
SIP
|
|
|
N/A
|
|
(2)
|
|
164,000
|
|
(2)
|
|
|
|
|
|
Judy Hamel
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8/16/2016
|
|
|
|
|
|
|
|
12,241
|
|
401,872
|
|
|
|
|
|
|
N/A
|
|
72,500
|
|
145,000
|
|
290,000
|
|
|
|
|
|
(1)
|
Mr. Reinhardt’s non-equity
incentive plan award is composed of two components: (i) one component
based on achievement of a revenue target under the SIP; and (ii) one
component based on achievement of the CIP targets.
|
|
|
|
(2)
|
There is no minimum or maximum
award amounts under the SIP for Mr. Reinhardt.
|
Table of
Contents
|
|
|
CD&A
|
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END TABLE
The following table provides information
regarding outstanding equity awards and applicable market values at the end of
fiscal year 2017.
All references in the following table to
stock options and RSUs granted by Viavi prior to the Separation relate to awards
in respect of Viavi common shares. In connection with the
Separation, these stock options and restricted stock units
were converted into Lumentum stock options and restricted stock units, subject
to the adjustments described below under “-Treatment of Equity Awards at
Separation.”
|
|
|
Option Awards
|
|
Stock Awards
|
|
Name
|
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
|
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
|
|
Option
Exercise
Price
($)
|
|
Option
Expiration
Date
|
|
Number
of
Shares
or Units of
Stock That
Have Not
Vested
(#) (5)
|
|
Market
Value
of Shares
or Units of
Stock That
Have Not
Vested
($) (1)
|
|
Equity
Incentive
Plan Awards:
Number of
Unearned
Shares, Units
or Other Rights
That Have Not
Vested
(#)
|
|
Equity
Incentive
Plan
Awards:
Market or
Payout Value
of Unearned
Shares, Units
or Other Rights
That Have Not
Vested
($)
(1)
|
|
Exercisable
|
Unexercisable
|
|
Alan Lowe
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,098
|
(3)
|
|
519,041
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,464
|
(4)
|
|
1,053,371
|
|
|
|
|
|
|
|
|
|
|
|
|
139,370
|
|
7,951,059
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,286
|
|
130,416
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
63,915
|
|
3,646,351
|
|
|
|
|
|
|
Aaron Tachibana
|
|
|
|
|
|
|
|
|
|
|
28,250
|
|
1,611,663
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
960
|
|
54,768
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,459
|
|
311,436
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,370
|
|
705,709
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,801
|
|
730,297
|
|
|
|
|
|
|
Vince Retort
|
|
10,235
|
(2)
|
|
—
|
|
45.89
|
|
8/15/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
20,471
|
(2)
|
|
—
|
|
45.89
|
|
2/15/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
64,034
|
|
3,653,140
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,296
|
|
73,937
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,493
|
|
940,926
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,158
|
(3)
|
|
294,264
|
|
Jason Reinhardt
|
|
|
|
|
|
|
|
|
|
|
32,017
|
|
1,826,570
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,276
|
|
529,196
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,847
|
|
561,771
|
|
|
|
|
|
|
Judy Hamel
|
|
|
|
|
|
|
|
|
|
|
12,241
|
|
698,349
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
230
|
|
13,122
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
910
|
|
51,916
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,575
|
|
146,904
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,385
|
|
421,314
|
|
|
|
|
|
|
(1)
|
Amounts reflecting market value
of RSUs are based on the price of $57.05 per share, which was the closing
price of our common stock as reported on NASDAQ on June 30,
2017.
|
|
(2)
|
Fully vested stock
option.
|
|
(3)
|
MSUs that vest based upon the
Company’s performance in fiscal year 2016 relative to a revenue target set
by the Compensation Committee. The actual number of shares that vest range
from 0% to 150% of the target amount for each vesting
tranche.
|
|
|
37
|
Table of
Contents
|
CD&A
|
|
|
|
(4)
|
Performance based stock units
which vest 1/2 of the awarded units on the second and third anniversaries
of the grant date based upon the Company’s performance in fiscal year 2017
relative to a revenue target set by the Compensation
Committee.
|
|
(5)
|
Time-based RSAs and RSUs that
vest 1/3 of the awarded units on the first anniversary of the grant date
and the remainder of the units in equal quarterly installments for two
years thereafter.
|
Each of the options and other equity
awards granted prior to the Separation and reflected in the above table were
issued under the JDSU 2003 Equity Incentive Plan and converted to the 2015
Plan.
OPTION
EXERCISES AND STOCK VESTED IN 2017
The following table sets forth information
on exercises of stock options and vesting of RSUs during fiscal year 2017 for
each NEO. The table includes: (i) the number of shares of underlying options
exercised; (ii) the aggregate dollar value realized upon exercise of
such options; (iii) the number of shares received
from the vesting of RSUs, and payout of MSUs and PSUs; and (iv) the aggregate
dollar value realized upon the vesting of such RSUs.
|
|
|
Option Awards
|
|
Stock Awards
|
|
Name
|
|
Number of Shares
Acquired on
Exercise
(#)
|
|
Value Realized
on
Exercise
($) (1)
|
|
Number of Shares
Acquired on
Vesting
(#)
|
|
Value Realized
on
Vesting
($) (2)
|
|
Alan Lowe
|
|
89,389
|
|
1,602,494
|
|
120,620
|
|
4,799,702
|
|
Aaron Tachibana
|
|
0
|
|
0
|
|
32,871
|
|
1,266,552
|
|
Vincent Retort
|
|
24,565
|
|
286,428
|
|
38,927
|
|
1,567,649
|
|
Jason Reinhardt
|
|
0
|
|
0
|
|
25,086
|
|
957,186
|
|
Judy Hamel
|
|
0
|
|
0
|
|
10,694
|
|
397,419
|
|
(1)
|
Represents the amounts realized
based on the difference between the market price of our Common Stock on
NASDAQ on the date of exercise and the exercise price.
|
|
(2)
|
Represents the amounts realized
based on the product of the number of units vested and the closing price
of our Common Stock on NASDAQ on the vesting
day.
|
|
Treatment of Equity
Awards at Separation
|
At the time of the Separation, Viavi had
outstanding equity awards relating to its common stock in the form of stock
options, RSUs and MSUs under its Amended and Restated 2003 Equity Incentive Plan
and 2005 Acquisition Equity Incentive Plan (the “JDSU Equity Plans”). The JDSU
Equity Plans require adjustments to Viavi equity awards outstanding at the time
of the Separation in the event of certain transactions, including the
distribution of our common stock in connection with the Separation.
Generally, Viavi equity awards held by our
employees, including our named executive officers, immediately prior to the
Separation were converted into awards for shares of our common stock under the
2015 Plan described below, with specific adjustments to these awards to reflect
the Separation depending on the type of award. The following discussion
describes the treatment of Viavi equity awards held by our employees, including
our named executive officers. This treatment became effective as of the
distribution date of shares of our common stock to Viavi stockholders in
connection with the Separation (the “distribution date”).
|
Service-Vesting Stock
Options
|
Viavi options that vest based solely on
their holder’s service and that were outstanding on the distribution date and
held by our employees were converted into Lumentum options, without any changes
to the original terms of the Viavi options, other than
appropriate adjustments to the number of shares of our common stock
subject to each Lumentum option and to the exercise price payable per share in
order to preserve the economic value of the Viavi options immediately prior to
the Separation.
|
Stock Options with Market
Conditions
|
Certain outstanding Viavi options held by
our employees prior to the Separation were scheduled to vest based upon the
holder’s continued service with Viavi but would not become exercisable until
Viavi’s common stock price exceeded a stated threshold for 30 consecutive
trading days. These options were adjusted in the
same manner described for service-vesting options, except that, for
purposes of determining whether the share price requirement is satisfied during
the 30 days following the distribution date, our share price (as adjusted to
reflect the distribution) was combined with the Viavi share price.
Table of
Contents
|
|
|
CD&A
|
Viavi RSUs held by our employees on the
distribution date were converted into RSUs for shares of our common stock,
without any changes to the original terms of the Viavi RSUs, other than
appropriate adjustments to the number of shares of our
common stock subject to the Lumentum RSU awards in order to preserve the
economic value of these awards immediately prior to the Separation.
Viavi MSU awards held by our employees
prior to the Separation were scheduled to vest based upon their holder’s
continued service and the relative Viavi TSR in comparison to the TSR range of
the companies included in the Index during a specified measurement period. Viavi
MSU awards held by our employees on the distribution date were converted into
Lumentum awards in
the same manner described for
Viavi MSUs. In connection with the Separation, the 2015 measurement period, as
well as the vesting and performance goals applicable to the remaining Lumentum
MSU awards were adjusted by the Compensation Committee as shown in the table
below.
|
Original Viavi MSU Award
|
|
Vesting Terms of Converted
Lumentum MSU Award
|
|
2012 Viavi MSU Award
|
|
The number of Lumentum MSUs that
vested was based on Viavi’s TSR relative to the performance of those
companies in the Index measured over a 60-day period ending on July 31,
2015, with a vesting date of September 25, 2015. 81.2% of the awarded
units vested based on the performance measurement.
|
|
2013 Viavi MSU Award
|
|
For 50% of the unvested Viavi MSUs:
the number of corresponding Lumentum MSUs that vested was based on Viavi’s
TSR relative to the performance of those companies in the Index measured
over a 60-day period ending on July 31, 2015, with a vesting date of
September 25, 2015. 66.6% of the awarded units vested for this tranche
based on the performance measurement.
For the remaining 50% of unvested
Viavi MSUs: the number of corresponding Lumentum awards that vested was
based on Lumentum’s performance in fiscal year 2016 relative to a revenue
target set by the Compensation Committee, with the holder being eligible
to earn up to 150% of the target amount based on certain levels of
achievement in excess of the revenue target, with a vesting date of
September 25, 2016. 100% of the awarded units vested for this tranche
based on the performance measurement.
|
|
2014 Viavi MSU Award
|
|
For 1/3 of the unvested Viavi MSUs:
the number of corresponding Lumentum MSUs that vested was based on Viavi’s
TSR relative to the performance of those companies in the Index measured
over a 60-day period ending on July 31, 2015, with a vesting date of
September 25, 2015. 122.6% of the awarded units vested on September 25,
2015 for this tranche based on the performance measurement.
For the remaining 2/3 of the
unvested Viavi MSUs: the number of corresponding Lumentum awards that
vested was based on Lumentum’s performance in fiscal year 2016 relative to
a revenue target set by the Compensation Committee, with the holder being
eligible to earn up to 150% of the target amount based on certain levels
of achievement in excess of the revenue target. 100% of the awarded units
vested for this tranche based on the performance measurement, with vesting
dates of September 25, 2016 (50% of any earned Lumentum awards) and
September 25, 2017 (50% of any earned Lumentum
awards).
|
|
Continued Service-Vesting
|
The service-vesting requirements in effect
for each Viavi award held by our employees prior to the Separation remained
unchanged in connection with the Separation from Viavi and are measured in terms
of both service prior to the Separation and continued service with Lumentum
after the Separation.
|
CEO Change in Control
Benefits
|
If Mr. Lowe’s employment is terminated
without “cause”, he resigns for “good reason,” (each as defined in his
employment agreement) or his employment terminates due to death or disability,
during a period between a potential change in control date and ending 18 months
following the consummation of a change in control (the “Coverage Period”), Mr.
Lowe will receive from the LLC (subject to Mr. Lowe signing and not revoking a
release of claims with Lumentum and the LLC that becomes effective in accordance
with the agreement):
|
(i)
|
a lump sum cash
payment of 200% of his base salary for the year in which his employment is
terminated plus 200% of his target annual bonus for the year in which his
employment was terminated,
|
|
(ii)
|
vesting acceleration
of 100% of any of Mr. Lowe’s outstanding Lumentum equity awards (effective
the later of the date of termination or the date of the consummation of
the change in control), and
|
|
|
39
|
Table of
Contents
|
CD&A
|
|
|
|
(iii)
|
a lump sum cash payment of 24
multiplied by the monthly health insurance continuation premiums for the
health, dental, and vision insurance options in which Mr. Lowe and his
eligible dependents are enrolled on the termination
date.
|
If Mr. Lowe’s employment is terminated
without “cause” or he resigns for “good reason,” (each as defined in his
employment agreement) in either case, outside the Coverage Period, he will
receive from the LLC (subject to Mr. Lowe signing and not revoking a release of
claims with Lumentum and the LLC that becomes effective in accordance with the
agreement):
|
(i)
|
a lump sum cash payment equal to
150% of his base salary for the year in which his employment is
terminated,
|
|
(ii)
|
acceleration of any of Mr. Lowe’s
outstanding Lumentum equity awards such that Mr. Lowe will be vested in
the number of Lumentum equity awards that Mr. Lowe would have been vested
in had Mr. Lowe remained continuously employed for an additional 12
months, and
|
|
(iii)
|
a lump sum cash payment equal to
12 multiplied by the monthly health insurance continuation premiums for
the health, dental, and vision insurance options in which Mr. Lowe and his
eligible dependents are enrolled on the termination
date.
|
|
2015
Change in Control Benefits Plan
|
In April 2015, the board of directors of
Viavi approved the Lumentum 2015 Change in Control Benefits Plan (the “Lumentum
CIC Plan”), which was amended by the Lumentum Compensation Committee in August
2015. Pursuant to the plan, eligible executives, including the NEOs (except for
the CEO), will receive cash payments and accelerated vesting of options,
restricted stock units and other securities under the following circumstances.
In the event an eligible executive’s employment is terminated without “cause”
(as defined in the Lumentum CIC Plan) or the eligible executive resigns for
“good reason” (as defined in the Lumentum CIC Plan), in either case, occurring
outside the date beginning on the public announcement of an intent to consummate
a change in control of Lumentum and ending 12 months following the consummation
of the change in control, the eligible executive will be entitled to receive
from the LLC (subject to the executive signing and not revoking a release of
claims that become effective in accordance with the Lumentum CIC
Plan):
|
(i)
|
accelerated vesting of unvested
Lumentum equity awards held at the time of termination as to the number of
shares that otherwise would vest over the nine-month period following the
termination date,
|
|
(ii)
|
a lump sum payment (less
applicable tax and other withholdings) equal to nine months of base
salary, and
|
|
(iii)
|
reimbursement of COBRA premiums
for the lesser of 9 months or the maximum allowable COBRA
period.
|
In the event of a qualifying termination
(as defined below), each of the eligible executives will be entitled to receive
|
(i)
|
accelerated vesting in full of
any unvested equity awards held at the time of termination (including
accelerated vesting of any performance-based awards at 100% of the target
achievement level),
|
|
(ii)
|
a lump sum payment (less
applicable tax and other withholdings) equal to two years’ base salary,
and
|
|
(iii)
|
reimbursement of COBRA premiums
for the lesser of 12 months or the maximum allowable COBRA
period.
|
A qualifying termination under the
Lumentum CIC Plan is (i) any involuntary termination without cause or
resignation for good reason during the period beginning upon the public
announcement of an intent to consummate a change in control of Lumentum and
ending 12 months following the consummation of the change in control, or (ii)
any termination due to disability or death occurring within 12 months following
a change in control of Lumentum.
A change in control of Lumentum includes
the acquisition by any person of more than 50% of the fair market value or
voting power of outstanding Lumentum voting stock, a merger of Lumentum unless
the Lumentum stockholders retain more than 50% of the voting power of the
securities of the surviving entity and the Lumentum directors constitute a
majority of the surviving entity’s board of directors, or sale of substantially
all of the assets of Lumentum.
Eligible executives are those employed in
the United States or Canada who are (a) at the level of Senior Vice President or
above and who (i) hold one or more of the following positions or their
functional equivalents: Chief Financial Officer, Chief Administrative Officer,
Chief Legal Officer, Chief Information Officer, Chief Marketing Officer, Chief
Research & Development Officer, Chief Operations Officer, Global Sales
Officer and the senior executive responsible for Human Resources, or (ii) are
designated in writing by the Chief Executive Officer as being an eligible
executive, subject to subsequent review and ratification by the Compensation
Committee at its discretion, or (b) are at the level of Vice President or above
and who hold the position of VP Laser Product Line Management, VP Optical
Communications Product Line Management, VP Datacom Product Line Management, VP
Strategy and Corporate Development, or VP General Counsel.
The Lumentum CIC Plan is administered by
the Compensation Committee of our board of directors. It will terminate on June
30, 2018 if no change in control of Lumentum has occurred by that
date.
Table of
Contents
|
|
|
CD&A
|
POTENTIAL PAYMENTS UPON A TERMINATION OR CHANGE IN
CONTROL
The following table describes potential
payments and benefits that would have been received or receivable by each NEO if
employment had been terminated under various circumstances on July 1, 2017, the
last day of our most recent fiscal year. For equity awards, we used $57.05, the
closing stock price on June 30, 2017, the last trading day of our most recent
fiscal year.
|
Potential
Payments Upon Termination or Change in Control Table
|
|
|
|
|
|
Before Change
in Control
|
|
Within Twelve
Months After
Change in
Control
|
|
Name
|
|
Benefit
|
|
Termination w/o
Cause or for
Good
Reason
($) (1)
|
|
Termination w/o
Cause or for
Good
Reason
($) (2)
|
|
Alan Lowe
|
|
Salary
|
|
1,050,000
|
|
2,800,000
|
|
|
|
Securities
|
|
8,714,844
|
|
13,300,238
|
|
|
|
COBRA
|
|
20,867
|
|
41,734
|
|
Aaron Tachibana
|
|
Salary
|
|
300,000
|
|
800,000
|
|
|
|
Securities
|
|
1,956,644
|
|
3.413.872
|
|
|
|
COBRA
|
|
15,656
|
|
20,875
|
|
Vincent Retort
|
|
Salary
|
|
322,500
|
|
860,000
|
|
|
|
Securities
|
|
2,750,323
|
|
6,714,043
|
|
|
|
COBRA
|
|
11,718
|
|
15,624
|
|
Jason Reinhardt
|
|
Salary
|
|
307,500
|
|
820,000
|
|
|
|
Securities
|
|
1,507,261
|
|
2,917,537
|
|
|
|
COBRA
|
|
12,704
|
|
16,938
|
|
Judy Hamel
|
|
Salary
|
|
217,500
|
|
580,000
|
|
|
|
Securities
|
|
711,356
|
|
1,331,604
|
|
|
|
COBRA
|
|
11,472
|
|
15,296
|
|
(1)
|
Mr. Lowe’s benefits in the column
represent (a) a cash payment (less applicable tax and other withholdings)
equivalent to 150% of his annual base salary as of the date of termination
of employment; (b) accelerated vesting of any unvested stock options,
restricted stock awards and restricted stock units held at the time of
termination that would have vested over the 12 months following the
termination date; and (c) a cash payment (less applicable tax and other
withholdings) equal to 12 times the monthly health insurance continuation
premiums. For the NEOs other than Mr. Lowe, the benefits in the column
represent (a) a cash payment (less applicable tax and other withholdings)
equivalent to 9 months of their annual base salary as of the date of
termination of employment; (b) accelerated vesting of any unvested stock
options, restricted stock awards and restricted stock units held at the
time of termination that would have vested over the 9 months following the
termination date and (c) reimbursement of COBRA premiums for up to 9
months.
|
|
(2)
|
All benefits in this column
except for Mr. Lowe’s represent (a) accelerated vesting of any unvested
stock options, restricted stock units and restricted stock awards held at
the time of termination (including accelerated vesting of any
performance-based awards at 100% of the target achievement level), (b) a
cash payment (less applicable tax and other withholdings) equal to two
year’s base salary and (c) reimbursement of COBRA premiums for up to one
year. Mr. Lowe’s benefits in this column represent (x) a cash payment
(less applicable tax and other withholdings) equivalent to two times his
annual base salary as of the date of termination and two times his target
cash incentive amount under the CIP; (y) accelerated vesting of any
unvested options, restricted stock units, or restricted stock awards which
have been granted or issued as of the date of termination of his
employment; and (z) a cash payment (less applicable tax and other
withholdings) equal to 24 times the monthly health insurance continuation
premiums. Mr. Lowe’s employment agreement and the Lumentum CIC Plan
provide for these benefits if a termination due to death or disability
occurs within twelve months following a change in
control.
|
|
|
41
|
Table of
Contents
|
CD&A
|
|
|
EQUITY
COMPENSATION PLAN INFORMATION
The following table sets forth information
about shares of Lumentum’s common stock that may be issued under Lumentum’s
equity compensation plans, including compensation plans that were not approved
by Lumentum’s stockholders. Information in the table is as of July 1,
2017.
|
Plan
Category
|
|
(a)
Number of
Securities to be Issued
Upon Exercise of
Outstanding Options,
Warrants and Rights
|
|
(b)
Weighted-
average Exercise
Price of Outstanding
Options, Warrants
and Rights
($) (1)
|
|
(c)
Number of
Securities Remaining
Available for Future
Issuance Under Equity
Compensation Plans
(excluding securities
reflected
in column (a))
|
|
Equity compensation plans approved by security
holders
|
|
2,210,086
|
(2)
|
|
36.75
|
|
6,604,850
|
|
Equity compensation plans not approved by security
holders
|
|
0
|
|
|
—
|
|
0
|
|
Total
|
|
2,210,086
|
|
|
$36,75
|
|
6,604,850
|
|
(1)
|
The weighted average
exercise price is calculated based solely on the exercise prices of the
outstanding options and does not reflect the shares that will be issued
upon the vesting of outstanding awards of RSUs, which have no exercise
price.
|
|
(2)
|
This number includes
44,784 shares subject to outstanding options, 365,368 shares were subject
to outstanding RSA awards and 1,799,934 shares were subject to outstanding
RSU and RSA awards.
|
Table of Contents
|
Fiscal Year 2017 Annual Report
and SEC Filings
|
Our financial statements for our fiscal
year ended July 1, 2017 are included in our Annual Report on Form 10-K, which we
will make available to stockholders at the same time as this Proxy Statement.
This Proxy Statement and our Annual Report are posted on our website at
www.lumentum.com
and are available from the SEC at its website at www.sec.gov. You may
also obtain a copy of our Annual Report without charge by sending a written
request to Lumentum Holdings Inc., Attention: Investor Relations, 400 North
McCarthy Blvd, Milpitas, California 95035.
* * *
The board of directors does not know of
any other matters to be presented at the Annual Meeting. If any additional
matters are properly presented at the Annual Meeting, the persons named in
the enclosed proxy card will have discretion to
vote the shares of our common stock they represent in accordance with their own
judgment on such matters.
It is important that your shares of our
common stock be represented at the Annual Meeting, regardless of the number of
shares that you hold. You are, therefore, urged to vote by telephone or by using
the Internet as instructed on the enclosed proxy card or execute and return, at
your earliest convenience, the enclosed proxy card in the envelope that has also
been provided.
THE BOARD OF DIRECTORS
Milpitas, California
September 19,
2017
|
|
45
|
Table of Contents
APPENDIX
A
RECONCILIATION OF GAAP AND NON-GAAP FINANCIAL MEASURES
Lumentum provides investors with gross
margin, operating margin, net income, and net income (loss) per share on a
non-GAAP basis. Lumentum believes this non-GAAP financial information provides
additional insight into the Company’s on-going performance and has therefore
chosen to provide this information to investors for a more consistent basis of
comparison and to help them evaluate the results of the Company’s on-going
operations and enable more meaningful period to period comparisons.
Specifically, the Company believes that providing this information allows
investors to better understand the Company’s financial performance and,
importantly, to evaluate the efficacy of the methodology and information used by
management to evaluate and measure such operating performance. However, these
measures may be different from non-GAAP measures used by other companies,
limiting their usefulness for comparison purposes. The non-GAAP financial
measures used in this Proxy Statement should not be considered in isolation from
measures of financial performance prepared in accordance with GAAP. Investors
are cautioned that there are material limitations associated with the use of
non-GAAP financial measures as an analytical tool. In particular, many of the
adjustments to our GAAP financial measures reflect the exclusion of items that
are recurring and will be reflected in our financial results for the foreseeable
future. Further, these non-GAAP financial measures may not be comparable to
similarly titled measurements reported by other companies.
Non-GAAP gross margin, non-GAAP operating
margin, non-GAAP net income, and non-GAAP net income per share, Adjusted EBITDA,
non-GAAP gross profit, non-GAAP operating income, non-GAAP income (loss) before
income taxes and non-GAAP expenses exclude (i) workforce related charges such as
severance, retention bonuses and employee relocation costs related to formal
restructuring plans, (ii) costs for facilities not required for ongoing
operations, and costs related to the relocation of certain equipment from these
facilities and/or contract manufacturer facilities, (iii) stock-based
compensation, (iv) amortization of intangibles, (v) amortization of acquired
developed technologies, (vi) non-cash interest expense, (vii) unrealized loss on
derivative liabilities, and (viii) warranty charges related to our vendor
quality issues with expected future recoveries and (ix) other charges comprising
mainly of one-time provision for excess and obsolete inventory, acquisition,
integration, litigation and other costs and contingencies unrelated to current
and future operations including post-separation activities such as small site
consolidations, reorganizations, insourcing or outsourcing of activities,
severance related costs and transition related costs for the separation from
Viavi Solutions Inc. (formerly JDS Uniphase Corporation) on July 31, 2015. In
the fiscal third quarter of 2017, the Company issued $450 million in aggregate
principal amount of convertible senior notes (the “convertible notes”). During
the fourth quarter of 2017, prior to the satisfaction of certain conditions set
forth more fully in the indenture governing the convertible notes (the “TMA
settlement condition”), the Company would have been required to satisfy its
conversion obligation solely in cash. Accordingly, the conversion option of the
convertible notes was accounted for as a derivative liability under GAAP and
thus, fluctuated with the fair market value of the stock price until the Company
satisfied the TMA settlement condition on June 29, 2017. As of the last day of
the fourth quarter of 2017, the Company met the requirements to account for the
conversion option as equity and the conversion option will no longer be marked
to market. Management does not believe that these non-GAAP items are reflective
of the Company’s underlying operating performance. The presentation of these and
other similar items in Lumentum’s non-GAAP financial results should not be
interpreted as implying that these items are non-recurring, infrequent or
unusual.
A quantitative reconciliation between GAAP
and non-GAAP financial data with respect to historical periods is included in
the table below.
Table of Contents
|
|
|
Appendix A
|
LUMENTUM HOLDINGS INC.
RECONCILIATION OF GAAP MEASURES TO
NON-GAAP MEASURES
(in millions, except
per share data)
(unaudited)
|
|
|
Twelve Months
Ended
|
|
|
|
July 1, 2017
|
|
July 2, 2016
|
|
Gross profit on GAAP basis
|
|
$
|
318.1
|
|
|
$
|
277.3
|
|
|
Stock-based
compensation
|
|
|
7.5
|
|
|
|
6.1
|
|
|
Other charges related to
non-recurring activities
|
|
|
15.1
|
|
|
|
7.5
|
|
|
Amortization of acquired
developed technologies
|
|
|
6.5
|
|
|
|
6.8
|
|
|
Gross profit on non-GAAP basis
|
|
$
|
347.2
|
|
|
$
|
297.7
|
|
|
|
|
Research and development on GAAP basis
|
|
$
|
148.3
|
|
|
$
|
141.1
|
|
|
Stock-based
compensation
|
|
|
(11.6
|
)
|
|
|
(9.0
|
)
|
|
Other charges related to
non-recurring activities
|
|
|
(1.0
|
)
|
|
|
(0.7
|
)
|
|
Research and development on non-GAAP basis
|
|
$
|
135.7
|
|
|
$
|
131.4
|
|
|
|
|
Selling, general and administrative on GAAP
basis
|
|
$
|
110.2
|
|
|
$
|
117.3
|
|
|
Stock-based
compensation
|
|
|
(13.6
|
)
|
|
|
(11.8
|
)
|
|
Other charges related to
non-recurring activities
|
|
|
(9.1
|
)
|
|
|
(21.9
|
)
|
|
Amortization of acquired
developed technologies
|
|
|
(0.3
|
)
|
|
|
(0.4
|
)
|
|
Selling, general and administrative on non-GAAP
basis
|
|
$
|
87.2
|
|
|
$
|
83.2
|
|
|
|
|
Income (loss) from operations on GAAP basis
|
|
$
|
47.6
|
|
|
$
|
11.5
|
|
|
Stock-based
compensation
|
|
|
32.7
|
|
|
|
26.9
|
|
|
Other charges related to
non-recurring activities
|
|
|
25.2
|
|
|
|
30.1
|
|
|
Amortization of acquired
developed technologies
|
|
|
6.8
|
|
|
|
7.2
|
|
|
Restructuring and related
charges
|
|
|
12.0
|
|
|
|
7.4
|
|
|
Income (loss) from operations on non-GAAP
basis
|
|
$
|
124.3
|
|
|
$
|
83.1
|
|
|
|
|
Interest and other (expense) income, net on GAAP
basis
|
|
$
|
(3.2
|
)
|
|
$
|
(1.2
|
)
|
|
Non-cash other
income
|
|
|
(1.7
|
)
|
|
|
—
|
|
|
Effective interest expense
on convertible debt
|
|
|
5.1
|
|
|
|
—
|
|
|
Interest and other (expense) income, net on non-GAAP
basis
|
|
$
|
0.2
|
|
|
$
|
(1.2
|
)
|
|
|
|
Income (loss) before income taxes on GAAP
basis
|
|
$
|
(59.8
|
)
|
|
$
|
9.7
|
|
|
Stock-based
compensation
|
|
|
32.7
|
|
|
|
26.9
|
|
|
Other charges related to
non-recurring activities
|
|
|
25.2
|
|
|
|
30.1
|
|
|
Amortization of acquired
developed technologies
|
|
|
6.8
|
|
|
|
7.2
|
|
|
Restructuring and related
charges
|
|
|
12.0
|
|
|
|
7.4
|
|
|
Non-cash other
income
|
|
|
(1.7
|
)
|
|
|
—
|
|
|
Effective interest expense
on convertible debt
|
|
|
5.1
|
|
|
|
—
|
|
|
Unrealized (gain) loss on
derivative liability
|
|
|
104.2
|
|
|
|
0.6
|
|
|
Income (loss) before income taxes on non-GAAP
basis
|
|
$
|
124.5
|
|
|
$
|
81.9
|
|
|
|
|
Provision for income taxes on GAAP basis
|
|
$
|
42.7
|
|
|
$
|
0.4
|
|
|
Impact of non-GAAP income
tax (benefit) expense
|
|
|
(40.6
|
)
|
|
|
2.6
|
|
|
Provision (benefit) for income taxes on non-GAAP
basis
|
|
$
|
2.1
|
|
|
$
|
3.0
|
|
|
|
47
|
Table of Contents
|
Appendix
A
|
|
|
|
|
|
Twelve Months
Ended
|
|
|
|
July 1, 2017
|
|
July 2, 2016
|
|
Net income (loss) on GAAP basis
|
|
$
|
(102.5
|
)
|
|
$
|
9.3
|
|
|
Stock-based
compensation
|
|
|
32.7
|
|
|
|
26.9
|
|
|
Other charges related to
non-recurring activities
|
|
|
25.2
|
|
|
|
30.1
|
|
|
Amortization of acquired
developed technologies
|
|
|
6.8
|
|
|
|
7.2
|
|
|
Restructuring and related
charges
|
|
|
12.0
|
|
|
|
7.4
|
|
|
Non-cash other income
|
|
|
(1.7
|
)
|
|
|
—
|
|
|
Effective interest expense on
convertible debt
|
|
|
5.1
|
|
|
|
—
|
|
|
Unrealized (gain) loss on
derivative liability
|
|
|
104.2
|
|
|
|
0.6
|
|
|
Impact of non-GAAP income tax
(benefit) expense
|
|
|
40.6
|
|
|
|
(2.6
|
)
|
|
Net income on non-GAAP basis
|
|
$
|
122.4
|
|
|
$
|
78.9
|
|
|
|
|
Net income per share on non-GAAP basis
|
|
$
|
1.94
|
|
|
$
|
1.29
|
|
|
|
|
Shares used in per share calculation - diluted on GAAP
basis
|
|
|
60.6
|
|
|
|
61.2
|
|
|
Non-GAAP adjustment
(a)
|
|
|
2.5
|
|
|
|
—
|
|
|
Shares used in per share calculation - diluted on non-GAAP
basis
|
|
|
63.1
|
|
|
|
61.2
|
|
|
(a)
|
This adjustment represents
weighted-average potentially dilutive securities excluded from the
computation of diluted net loss per share attributable to common
stockholders on a GAAP basis because the effect would have been
antidilutive. This adjustment amount is added for the computation of
diluted net income per share on a non-GAAP basis as we had net income on a
non-GAAP basis for all periods presented.
|
Table of Contents
LUMENTUM HOLDINGS INC.
400 NORTH MCCARTHY BLVD.
MILPITAS, CA
95035
VOTE BY
INTERNET
Before The Meeting
- Go to
www.proxyvote.com
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.
During The Meeting
- Go to
www.virtualshareholdermeeting.com/LITE2017
You may attend the Meeting via the
Internet and vote during the Meeting. Have the information that is printed in
the box marked by the arrow available and follow the instructions.
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.
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:
|
|
E32798-P97480
|
KEEP THIS PORTION FOR YOUR
RECORDS
|
|
|
DETACH AND
RETURN THIS PORTION ONLY
|
|
THIS PROXY CARD IS
VALID ONLY WHEN SIGNED AND DATED.
|
|
LUMENTUM HOLDINGS INC.
|
|
|
|
|
|
|
|
|
|
|
The Board of Directors
recommends you vote FOR the following:
|
|
|
|
|
|
|
|
|
|
1. Election of
Directors
|
|
|
|
|
|
|
|
|
|
|
|
Nominees:
|
|
For
|
|
Against
|
|
Abstain
|
|
|
|
|
|
|
|
|
|
|
|
|
1a.
|
Martin A. Kaplan
|
|
☐
|
|
☐
|
|
☐
|
|
|
|
|
|
|
|
|
|
|
|
|
1b.
|
Harold L. Covert
|
|
☐
|
|
☐
|
|
☐
|
|
|
|
|
|
|
|
|
|
|
|
|
1c.
|
Penelope A. Herscher
|
|
☐
|
|
☐
|
|
☐
|
|
|
|
|
|
|
|
|
|
|
|
|
1d.
|
Samuel F. Thomas
|
|
☐
|
|
☐
|
|
☐
|
|
|
|
|
|
|
|
|
|
|
|
|
1e.
|
Brian J. Lillie
|
|
☐
|
|
☐
|
|
☐
|
|
|
|
|
|
|
|
|
|
|
|
|
1f.
|
Alan S. Lowe
|
|
☐
|
|
☐
|
|
☐
|
|
|
|
|
|
|
|
|
|
|
|
The Board of Directors recommends you vote FOR
proposals 2 and 4 and for “1 YEAR” on proposal 3.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.
|
To approve, on a non-binding advisory basis, the
compensation of our named executive officers
|
|
☐
|
|
☐
|
|
☐
|
|
|
|
|
1
Year
|
|
2 Years
|
|
3 Years
|
|
Abstain
|
|
|
|
|
|
|
|
|
|
|
|
|
3.
|
To approve, on a
non-binding advisory basis, of the frequency of future advisory votes
approving the compensation of our named executive officers
|
|
☐
|
|
☐
|
|
☐
|
|
☐
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For
|
|
Against
|
|
Abstain
|
|
|
|
|
|
|
|
|
|
|
|
|
4.
|
To ratify the
appointment of Deloitte LLP as our independent registered public
accounting firm for the fiscal year ending June 30, 2018
|
|
|
|
☐
|
|
☐
|
|
☐
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE:
In their discretion, the proxies are authorized to vote
on such other business as may properly come before the meeting or any
adjournment thereof.
|
|
|
|
|
|
|
|
|
|
Please sign exactly as your
name(s) appear(s) hereon. When signing as attorney, executor,
administrator, or other fiduciary, please give full title as such. Joint
owners should each sign personally. All holders must sign. If a
corporation or partnership, please sign in full corporate or partnership
name by authorized officer.
|
|
|
|
|
|
|
|
Signature [PLEASE SIGN
WITHIN BOX]
|
Date
|
|
Signature (Joint
Owners)
|
Date
|
Table of Contents
Important Notice Regarding the
Availability of Proxy Materials for the Annual Meeting:
The Notice and Proxy Statement and Annual Report are available
at www.proxyvote.com.
|
LUMENTUM HOLDINGS
INC.
Annual Meeting of Stockholders
November 2, 2017 8:30
AM
This proxy is solicited by the
Board of Directors
The stockholder(s) hereby
appoint(s) Alan Lowe, Aaron Tachibana and Judy Hamel, or any of them, as
proxies, each with the power to appoint his/her substitute, and hereby
authorize(s) them to represent and to vote, as designated on the reverse
side of this ballot, all of the shares of Common stock of LUMENTUM
HOLDINGS INC. that the stockholder(s) is/are entitled to vote at the
Annual Meeting of Stockholders which will be a virtual only meeting
conducted via the Internet, to be held at 8:30 AM, PDT on November 2,
2017, at www.virtualshareholdermeeting.com/LITE2017, and any adjournment or
postponement thereof.
This proxy, when properly
executed, will be voted in the manner directed herein. If no such
direction is made, this proxy will be voted in accordance with the Board
of Directors' recommendations.
Continued and to be
signed on reverse side
|
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