EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
Executive Summary
The Owens-Illinois’s Compensation and Talent Development Committee (“the Committee”) is committed to working with the Board of Directors and management to design compensation plans that motivate the Company’s executives and support business objectives that create share owner value. The Company’s compensation plans for 2017 generally follow the same framework used in 2016, as the Committee feels they remain appropriate, support the Company’s business objectives and reflect share owner interests.
The Foundation: The Strategic Plan for the Company
The strategic plan for the Company serves as the foundation for its pay program. Following a year focused on stabilizing the business, the strategy concentrated on one team, one enterprise and one plan. The
plan looks to expand the markets in which the Company competes by being recognized as the preferred glass supplier as well as being the most cost-effective producer of glass.
The Company is focusing its employees on understanding customer needs, managing costs of the total enterprise, improving flexibility, taking an integrated approach to problem solving and delivering on its commitments. The Company is doing this by emphasizing collaboration across the Company, leveraging its knowledge and expertise, increasing accountability and aligning incentives with the right results. The Company believes successful execution along these lines will lead to enhanced value for share owners, customers and employees.
Linking the Company’s Plan to Its Incentives
The Committee took several actions in 2017 to reinforce the links between the Company’s strategic plan and its compensation program.
The Committee simplified the Short-Term Incentive (“STI”) Plan by removing manufacturing indicators as incentive metrics, which accounted for 40% of STI awards in 2016. These metrics had accomplished the Company’s goal of increasing attention to these critical operating areas, which continued in 2017. As a result, the Committee increased the weight of Earnings Before Interest and Taxes (“EBIT”) (80%) used in determining STI payouts, strengthening the plan’s focus on profitability, need to control costs and accountability for delivering financial results. Aside from those changes, the Committee continued to place a meaningful weight on Free Cash Flow (“FCF”) (20%), critical for managing the Company’s financial obligations, deleveraging its balance sheet, investing in its business and returning value to share owners. Further, the Committee continued to base the STI awards of the Company’s Global Leadership Team on overall enterprise results, reinforcing the plan of one team, one plan.
The Committee also refined its approach to the Long-Term Incentives (“LTI”) Plan. The Committee eliminated stock options from the LTI program, which reduced share usage as well as dilution of share owners’ interests. In turn, the Committee adopted a balanced approach to delivering LTI by awarding 50% of target value in the form of performance stock units and 50% (versus 25% in 2016) in time-based restricted stock units (“RSU”). The increased role of RSUs will help build greater share ownership among the Company’s executives, increasing their alignment with share owners’ interests. Further, it will increase the Company’ ability to retain those executives, many of whom are new to their roles or the Company and all of whom are critical to the success of its strategy.
Finally, the Committee changed its approach for measuring long-term results associated with the performance stock units. Prior to 2017, performance stock units were based on Adjusted Net Earnings Per Share (“EPS”) and Return on Invested Capital (“ROIC”) results in the last year of the performance period. Starting in 2017, awards are based on the Company’s performance for the full three-year period as measured by cumulative EPS and average ROIC. The Committee believes these changes will enhance the program’s ties to delivering sustained, long-term financial results.
While there were changes to the program for 2017, the Committee continued to set reasonably demanding incentive goals consistent with the Board’s expectations of management and its commitments to share owners.
Incentive Plan Results: Reflect the Company’s Performance
The Company’s performance in 2017 marked a continued improvement in its resiliency. Despite various operating and economic headwinds, the Company’s results for 2017 were strong:
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Increased EPS (as defined on page 31) by 22% over prior year, though still falling below the threshold performance level for this performance share unit measure.
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Achieved ROIC (as defined on page 31) of 12.98%, generating a payout near the maximum performance level for this performance share unit measure.
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Delivered EBIT (as defined on page 26) aligned with prior year, falling between the threshold and target performance levels for this STI measure.
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Produced FCF (as defined on page 26) exceeding the target performance level for this STI measure.
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Made debt repayments of $350 million, which was $125 million more than the Company’s guidance had indicated.
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Achieved organic volume growth in line with its expectations for the year.
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Delivered strong Total Shareholders Returns (“TSR”) to share owners of 27% for the year, well above the medians of the S&P 500 and the companies used for pay benchmarking purposes.
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These strong results were reflected in the rewards earned for 2017 under its incentive plans, which required management to meet challenging goals. STI payouts approximated target levels (96% of target) as FCF results were well above target objective and partially offset EBIT results which were below target. The Company’s executives earned performance stock units for the 2015-17 period that also approximated target levels (93%) as strong ROIC results (near the outstanding or maximum performance level) mostly offset subpar EPS and revenue performances.
These payout levels and the associated stock price movement are consistent with a historical trend of being closely aligned with the returns earned by its investors relative to those of the S&P 500 or its pay benchmarking companies as more clearly seen in the realizable pay and performance analysis covered beginning on page 22.
No Problematic Pay Practices
The Committee regularly monitors the Company’s pay practices, which are consistent with good corporate governance and identified best practices. The Committee has established a clawback or recovery policy covering cash and equity incentives. Double triggers have been established for receiving any benefits associated with a change-in-control. The stock ownership guidelines are consistent with those of other large companies and are reinforced by stock holding requirements. The Committee also prohibits executives from hedging their positions in Owens-Illinois stock and require preclearance before they can pledge any of their holdings.
Closing Thoughts & Say on Pay
The Company’s Say on Pay proposal is found on page 60. The proposal has received overwhelmingly strong support from share owners and proxy advisors in past years. Further, investor outreach has not identified any issues with the alignment of the Company’s pay and performance or its pay practices. As a result, the Committee believes the Company’s executive compensation program continues to represent share owners’ interests in a responsible and reasonable fashion and warrants your support at this year’s annual meeting.
Compensation Principles
The Committee approves executive compensation programs that are designed to align executive pay with share owner interests and the annual and long‑term performance of the Company. The Company believes that its executive compensation program strikes the appropriate balance between using responsible, measured pay practices and providing rewards that effectively attract and retain executives while motivating them to create value for the share owners. Key elements of this pay strategy include:
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Targeting total direct compensation (overall and by element) for the Named Executive Officers (“NEOs”) at market median pay levels, while also considering internal equity, and regularly evaluating pay versus market practices using comparator company and survey comparisons;
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Ensuring that a majority of target compensation for each NEO is in the form of annual and long‑term incentives;
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Analyzing annually the relationship between executive pay and Company performance to ensure alignment; and
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Completing regular risk assessments, taking into consideration the Company’s business model, incentive plan design (including mix of incentive vehicles, balance of performance measures, target setting methodology, caps on payouts, etc.) and policies designed to reduce risk (such as share ownership and retention guidelines, clawback policy, and anti‑hedging policy), among other considerations, to evaluate if the Company’s compensation program promotes excessive risk taking.
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Say on Pay Vote and Share Owner Outreach
In the 2017 “Say on Pay” vote, the Company’s share owners approved its executive compensation program with a 97% approval rating. The Committee continues to believe that, overall, the Company’s compensation programs are well aligned with both share owners’ interests and the competitive market, and are designed to reward overall Company and individual performance. Nonetheless, the Committee and management regularly review compensation programs to ensure such alignment continues and make changes as appropriate or necessary.
As the Company believes that an annual “Say on Pay” vote encourages beneficial dialogue on compensation and provides the most consistent and clear communication channel for share owner concerns about executive compensation, the Company will again hold an annual advisory vote in 2018 to approve executive compensation. The Committee will continue to consider the results from this year’s and future advisory votes on executive compensation. The Company continues to actively engage major share owners and proxy advisory firms, ISS and Glass Lewis, regarding executive pay and its alignment with share owner interests, as well as the preferred frequency in which to conduct the “Say on Pay” vote.
Compensation and Governance Practices
The Company’s executive compensation programs are designed to reflect appropriate governance practices aligned with the needs of the business. Below is a summary of compensation practices the Company has adopted to drive performance and to align with share owner interests, followed by a list of practices the Company does not subscribe to because the Company does not believe they would serve their share owners’ long‑term interests.
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What the Company Does/Has
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What the Company Does Not Do/Have
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Pay for Performance
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Compensation Recovery (Clawback Policy)
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Stock Ownership and Retention Guidelines
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Anti Hedging Policy, as well as a Pre Clearance Policy regarding equity transactions (including pledging)
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Mitigation of Risk in Compensation Programs
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Annual Risk Assessment of Compensation Programs
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Annual Review of Independence of Committee’s Advisors
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Annual “Say on Pay” Vote
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Double Trigger (a change in control and an involuntary termination) requirement for equity awards to vest
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Independent Compensation and Talent Development Committee
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Balanced Compensation Structure: fixed vs. variable; annual vs. long term; cash vs. stock; service based equity vs. performance based awards
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Target Market Median Pay Levels and Consideration of Peer and Market Data in Setting Pay
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Alignment of Incentive Compensation with Strategic Objectives
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Significant Stock Ownership Levels among NEOs
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Common Annual Grant Date each Year to Minimize Perception of Market Timing
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Protective Noncompete, Nonsolicitation and Confidential Information Covenants Applicable to LTI Awards One-year minimum vesting requirement for equity awards (with up to 5% of shares being exempt from this requirement)
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Non-employee director award limit
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162(m) umbrella plan to preserve tax deductibility of incentives
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Excessive Perquisites or Tax Gross‑ups for Perquisites: See “Other Benefits” for details
Excise Tax Gross‑Ups upon Change in Control
Payment of Dividends or Dividend Equivalents on Unvested LTI awards
Repricing of Underwater Stock Options
Single Trigger Change in Control Severance Payments (beginning with awards granted in 2015)
Excessive Risk Taking
Liberal Share Recycling
Multi-Year Employment Contracts
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This Compensation Discussion and Analysis describes the material elements of the compensation of the Company’s NEOs, the objectives and principles underlying executive compensation programs, the Company’s recent compensation decisions, and the factors considered in making those decisions. The Company’s NEOs for 2017 were:
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Name
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Position
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Andres A. Lopez
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President and Chief Executive Officer (“CEO”)
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Jan A. Bertsch
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Senior Vice President and Chief Financial Officer (“CFO”)
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Miguel I. Alvarez (1)
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President, O-I North America and O-I Latin America
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James W. Baehren (2)
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Senior Vice President of Corporate Development and Special Advisor to the CEO
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Vitaliano Torno
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President, O-I Europe
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Paul A. Jarrell (3)
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Former Chief Administrative Officer
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(1)
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Mr. Alvarez assumed responsibility for managing operations in North America, in addition to Latin America, effective September 1, 2017. O-I North America and O-I Latin America were merged into the “Americas” effective January 1, 2018.
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(2)
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Effective January 1, 2017, in accordance with the succession plan, Mr. Baehren, who had served as Senior Vice President and General Counsel through the end of 2016, transitioned to the role of Senior Vice President of Corporate Development and Special Advisor to the CEO. Mr. Baehren retired effective January 1, 2018.
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(3)
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Mr. Jarrell
’s employment with the Company ended on
July 31, 2017.
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Assessment of Realizable Pay and Performance
The Committee annually compares the NEOs’ pay and the Company’s performance to the pay and performance of comparator companies in order to assess the alignment of the Company’s pay and performance.
In assessing pay and performance, the Company’s independent compensation advisors, Pay Governance, analyzed the Company’s realizable pay and performance relative to comparator companies. Unlike the results reported in the Summary Compensation Table reported on page 41, realizable pay looks at the pay an executive earned or could have earned for a period based on the actual financial performance against the Company’s incentive goals and the share price performance that drove those results. The Committee believes realizable pay is a better gauge for assessing pay and performance than the data found in the Summary Compensation Table, as the Summary Compensation Table definition of total pay includes a mix of some elements that are actual pay, such as salary and annual incentives, and other elements that are accounting estimates of future potential pay, such as performance stock units, restricted stock units and options. Further, annual changes in the discount rate for pension calculations are not part of the pay decisions made by the Committee and may significantly distort pay reported in the Summary Compensation Table and how it relates to the Company’s performance.
Realizable pay includes the actual rewards the Company’s CEO and CFO earned from 2014 to 2016: base salaries received by the executive, annual bonuses earned, vesting date value (as opposed to grant date or accounting value used in the Summary Compensation Table) of time‑based restricted awards granted during the period, any exercise gains realized on options granted during the period and the value of any long‑term performance awards made and earned in the three‑year period. In addition, realizable pay includes the value of any outstanding (unvested, unexercised or unearned) long‑term incentives awarded during the three‑year period based on the Company’s stock price as of December 31, 2016. The same approach is used to calculate the realizable pay of the CEOs and CFOs at comparator companies. This enables the Committee to compare the Company’s realizable pay levels with similar executives at comparator companies. As a result, realizable pay relies on information reported in comparator company proxies, the latest year for which pay is available being 2016.
In addition to assessing the Company’s realizable pay levels relative to comparator companies, the Committee also examined the Company’s annual and long‑term performance versus those companies. From a long‑term performance perspective, the analysis focused on TSR relative to those companies, which captures the principal goal of the Company’s long‑term incentive plans—creating value for investors. As shown in the following two exhibits, the Company’s pay program has produced realizable pay levels relative to peers that are directionally and reasonably aligned with the Company’s TSR performance relative to those companies.
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CEO ANNUALIZED REALIZABLE PAY & TSR
ALIGNMENT (2014-16)
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CFO ANNUALIZED REALIZABLE PAY & TSR
ALIGNMENT (2014-16)
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From an annual or short‑term performance perspective, the Company’s performance across several perspectives of EBIT and cash flow performance (growth, percent of revenue, percent of invested capital) was evaluated relative to similar metrics for comparator companies for each year of the past five years. These results captured the key drivers of the Company’s STI program, which support the Company’s strategic objectives as well as its value creation efforts. The Company’s rankings relative to comparator companies across these annual performance metrics were compared to rankings of the cash compensation (salary + actual bonus) earned by the Company’s CEO and CFO during the period. As with the Company’s realizable pay and TSR comparisons, the Company’s annual cash compensation was appropriately aligned with its annual performance rankings relative to peers.
From these perspectives, the Company believes the pay program produced acceptable outcomes with officers’ relative pay levels aligned with its relative annual and long‑term performance levels, supportive of share owners’ interests.
Compensation Benchmarking
While realizable pay examines the alignment of the Company’s performance and the pay actually realized or realizable by those results, the Committee also annually reviews the competitiveness of the target pay opportunities provided to the Company’s senior leadership team (including the CEO and his key direct reports). This review encompasses all elements of target direct compensation: base salary, annual incentives, cash compensation (base salary + annual incentives), LTI and direct compensation (base salary + annual incentives + LTI). In addition, the review examines the mix of total pay (fixed to variable pay, short to long‑term compensation and cash to stock compensation) and LTI mix (stock awards versus options and service versus performance‑based awards). The objectives of this review are to ensure the programs are aligned with the Company’s pay philosophy, which targets market median and also considers internal equity between senior leadership team members.
Market Data
In determining compensation levels for the senior leadership team, the Committee reviews competitive market remuneration data including:
Proxies of companies in the comparator group used to benchmark pay (shown below). Proxy data is only considered for the Company’s CEO and CFO.
Surveys published by Aon Hewitt, Mercer and Willis Towers Watson, which provide data reflecting the incumbent’s functional responsibilities and the appropriate revenue scope (corporate or region) of their operating unit, are used to assess the target compensation for other senior leaders.
Comparator Group Companies
While there is no other company of comparable size to O-I that also focuses purely on glass container production, the group of comparator companies used to benchmark executive pay practices and pay levels for select officers is selected primarily from companies in the packaging and manufacturing sectors that resemble the Company in size, business profile, global presence, asset intensity, and other relevant factors. After a review of the comparator group companies in 2017, the Committee elected not to make any changes to the comparator group from that used in 2016.
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Dollars in Millions
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% Revs.
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Total
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Mkt.
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Enterp.
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Outside
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# of
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Company
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Revs.(1)
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Assets(1)
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Cap(2)
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Value(2,3)
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U.S.(4)
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Emp.
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The Goodyear Tire & Rubber Company
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Tires and Rubber
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15,377
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17,064
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7,959
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13,767
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47
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%
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64,000
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WestRock Company
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Paper Packaging
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14,860
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25,089
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15,916
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22,221
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18
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%
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44,800
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Ingersoll-Rand Plc
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Industrial Machinery
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14,198
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18,173
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22,286
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25,158
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35
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%
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46,000
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Parker-Hannifin Corporation
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Industrial Machinery
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12,029
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15,490
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26,589
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31,553
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37
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%
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56,690
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Ball Corporation
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Metal and Glass Containers
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10,983
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17,169
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13,250
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20,359
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50
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%
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18,300
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Tenneco Inc.
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Auto Parts and Equipment
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9,274
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4,842
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3,020
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4,495
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61
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%
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32,000
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Crown Holdings Inc.
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Metal and Glass Containers
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8,698
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10,663
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7,553
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12,725
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78
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%
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24,000
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Dana Holding Corporation
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Auto Parts and Equipment
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7,209
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5,644
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4,637
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5,988
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55
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%
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30,100
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Avery Dennison Corporation
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Paper Packaging
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6,614
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5,137
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10,112
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11,539
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76
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%
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30,000
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Packaging Corporation of America
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Paper Packaging
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6,445
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6,198
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11,290
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13,553
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6
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%
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14,600
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Owens Corning
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Building Products
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6,384
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8,632
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10,227
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12,643
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30
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%
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17,000
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Sonoco Products Co.
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Paper Packaging
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5,037
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4,558
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5,282
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6,487
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35
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%
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21,000
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Sealed Air Corporation
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Paper Packaging
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4,462
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5,280
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8,893
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10,894
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49
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%
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15,000
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Graphic Packaging Holding Company
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Paper Packaging
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4,404
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4,863
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4,785
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7,043
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17
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%
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13,000
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Terex Corporation
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Construction Machinery and Heavy Trucks
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4,363
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3,463
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4,055
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4,448
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49
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%
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10,700
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Silgan Holdings Inc.
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Metal and Glass Containers
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4,090
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4,645
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3,244
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6,151
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24
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%
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12,515
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Bemis Company, Inc.
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Paper Packaging
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4,046
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3,700
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4,340
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5,846
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34
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%
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16,582
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Greif, Inc.
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Metal and Glass Containers
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3,638
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3,232
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3,091
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4,037
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54
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%
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13,000
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75th Percentile
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10,556
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14,283
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11,025
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13,713
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51
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%
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31,525
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50th Percentile
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6,529
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5,462
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7,756
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11,217
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42
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%
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19,650
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25th Percentile
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4,418
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4,695
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4,414
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6,029
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31
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%
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14,700
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Owens-Illinois, Inc.
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Metal and Glass Containers
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6,869
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9,756
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3,614
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9,018
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69
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%
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26,500
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O-I Percentile Rank
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55
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%
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68
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%
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14
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%
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44
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%
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91
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%
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61
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%
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(1)
Fiscal 2017 financial data
(2)
Data as of December 31, 2017
(3)
Enterprise value defined as market capitalization plus total debt plus total preferred equity plus minority interest less cash and short-term investments
(4)
Select companies data represent revenues for sales outside North America
Compensation Program Overview
Total Direct Compensation
Total direct compensation is the combination of base pay, annual incentive and long‑term incentives. Although the Company’s pay philosophy targets market median, while also considering internal equity, an NEO’s total direct compensation opportunity may be higher or lower than the market 50
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percentile based on individual performance, experience, past leadership roles, potential and Company performance. In making compensation decisions, the Committee considers each of these factors and the NEO’s total direct compensation to ensure overall alignment with the Company’s compensation philosophy and principles.
It is the Company’s philosophy that a significant portion of the target compensation opportunity provided to the NEOs be “variable” or “at risk”—based on Company performance and/or the price of the Company’s stock. Based on compensation packages in effect on December 31, 2017, the CEO had 86% of his target total direct compensation “at risk” and the other NEOs had approximately 65% of their target total direct compensation “at risk.” The Company has no prescribed pay mix that drives compensation decisions. The resulting pay mix is based on the Company’s pay philosophy, market pay data used to establish individual executive’s compensation, and internal equity pay considerations.
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Compensation Mix: CEO
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Compensation Mix: Other NEOS
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The Committee strives to achieve alignment between executive pay and performance by establishing and adhering to a fair and performance‑oriented rewards philosophy/strategy, setting appropriate performance objectives, and regularly testing the relationship between pay and performance.
Base Pay
The base pay program is designed to ensure the Company’s ability to attract and retain key executives. The Committee reviews NEO salaries and pay positioning at least once per year, and may adjust salaries according to current market conditions, Company performance, individual performance, previous experience, potential and the results of benchmarking against market data. Merit pay budgets are set annually based on external labor market trends, business performance, inflation, and other pertinent factors. In 2017, the Company’s merit budget was 3% for the United States and 1% for Switzerland. After considering the factors listed above, the Committee approved a base pay increase of 11.8% effective April 1, 2017 for Mr. Lopez (to reduce but not eliminate the differences between his salary and the median of the peer group), 3% for Ms. Bertsch and Mr. Baehren, and 4% for Messrs. Alvarez and Torno. Mr. Alvarez received an additional increase of 12% effective September 1, 2017 as recognition for assuming responsibility for managing operations in North America, in addition to Latin America, and to reflect his individual performance and development. The Committee elected to not provide an increase to Mr. Jarrell as his base salary was already market competitive.
Short-Term Incentive
The annual incentive is designed to promote the achievement of short‑term financial results and motivate individual performance.
Measures
The Committee reviews and approves the performance measures for the STI each year. For 2017, the Committee made the following changes:
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Modifying the STI program to support the second phase of the Company's transformation plan by eliminating key operating indicators (revenue from strategic customers, inventory days of sales (“IDS,”) total recordable injury rate (“TRIR”), pack to pull (“PTP”), and product loss and customer claims as a percentage of standard cost of production (“PLCC%”)) as performance measures, as their use in 2016 accomplished the Company’s goal of focusing management’s attention on these areas.
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Returning to key financial measures, EBIT and FCF, as the only incentive measures for short term performance, allowing the Committee to increase the weight of EBIT from 40% to 80%, while maintaining 20% weight for FCF.
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Adopting an umbrella plan funded at 1% of Adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization, excluding items that management considers not representative of ongoing operations, (“Adjusted EBITDA”), to provide the Committee with enhanced flexibility in determining the STI payout based on justified rationale, while preserving the tax deductibility of incentives paid to the Company’s NEOs, excluding CFO, under IRC 162(m). See Appendix A for a calculation of this measure.
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The Committee has and will continue to review incentive support for evolving corporate strategies and to ensure incentive plan measures reflect the needs of the business as well as the drivers of share owner value.
For the 2017 STI, the Committee established an incentive pool under the Second Amended and Restated 2005 Incentive Award Plan (the “2005 Incentive Award Plan”) equal to 1% of Adjusted EBITDA, defined as consolidated earnings from continuing operations before net interest expense, provision for income taxes, depreciation and amortization, excluding charges for asbestos‑related costs, restructuring, asset impairment and other items that management considers not representative of ongoing operations, and adjusted for changes in foreign currency exchange rates and to exclude the impact of acquisitions and divestitures that occur during the performance period.
The Committee considered the following subordinate measures that the Committee considers when exercising negative discretion to determine actual award amounts under the plan:
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Measure
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Weight
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Definition
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Financial Measures:
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EBIT
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80
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%
|
Consolidated earnings from continuing operations before net interest expense and provision for income taxes, excluding charges for asbestos‑related costs, restructuring, asset impairment and other items that management considers not representative of ongoing operations, and adjusted for changes in foreign currency exchange rates and to exclude the impact of acquisitions and divestitures that occur during the performance period.
|
FCF
|
|
20
|
%
|
Cash provided by continuing operating activities less additions to property, plant and equipment from continuing operations, adjusted for changes in foreign currency exchange rates and for certain restructuring related payments that were not included in the Company’s budget. Results were further adjusted to include proceeds from asset sales.
|
The Committee believes these measures improved the balance between accounting (EBIT) versus value-based metrics (FCF) and reward results within management’s control versus those outside their ability to influence. These metrics also aligned with the Company’s strategic objectives for 2017 and supported both short and long-term share owner value creation based on discussions with its investors. In addition, by rewarding the senior leadership team, including Regional Presidents, based on enterprise performance, the senior leadership team is encouraged to leverage one region of the company to compensate for pressures in another region, for the good of the company.
While the Company is affected by broader macroeconomic trends, including currency and interest rate shifts, by measuring results on a constant currency basis, management is squarely focused on select key value drivers and delivering steady—and improving—performance on those metrics. The Company bases its incentive programs and sets core operating goals on metrics the executive team can influence and thus create increased long-term share owner value. This design drives motivation and retention despite cost headwinds and other external challenges that may be out of the executive team’s control.
Determining Performance Targets and Measure Weights
The Committee reviews and approves the financial targets and measure weightings set for subordinate metrics for each plan year after considering the overall Company budget (as approved by the Board of Directors), the state of the industry, and other external economic factors for the Company overall. Performance is based on absolute performance.
When setting the targets for the subordinate measures, the Company considers an assessment of the difficulty of its financial goals from various perspectives, including the Company’s historic payout results, as well as a comparison of proposed goals versus: previous goals, public guidance, analyst estimates for the Company and its peers, and historic performance of the Company and its peers. The assessment, conducted by the Committee’s independent executive compensation consultant, found the Company’s goals for 2017 to be challenging, overall.
Each subordinate measure stands alone for payment, up to the established performance maximum.
2017 Performance Results
For 2017, the STI awards for Messrs. Lopez, Alvarez, Baehren and Torno and Ms. Bertsch were determined by the financial results of the enterprise. Mr. Jarrell was not entitled to a 2017 STI award. The performance targets, results, and payouts for the enterprise are as follows (dollars in millions):
Funding Formula: 1% Adjusted EBITDA: $13.4 million (See Appendix A for a calculation of this measure).
Subordinate Measures:
|
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|
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|
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|
|
|
|
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|
|
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|
Performance Range
|
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|
|
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|
|
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|
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|
|
|
|
|
|
|
|
|
Payout
|
|
Weighted Payout
|
|
|
|
|
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
Adjusted
|
|
(as % of
|
|
(as % of
|
|
Weight
|
|
Measure
|
|
|
30%
|
|
|
100%
|
|
|
200%
|
|
|
Results
|
|
Target Award)
|
|
Target Award)
|
|
80
|
%
|
EBIT
|
|
$
|
740
|
|
$
|
820
|
|
$
|
850
|
|
$
|
792
|
(1)
|
75.9
|
%
|
60.8
|
%
|
20
|
%
|
FCF
|
|
$
|
223
|
|
$
|
250
|
|
$
|
278
|
|
$
|
272
|
(1)
|
177.1
|
%
|
35.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Payout:
|
|
96.2
|
%
|
(1)
See Appendix A for a calculation of this measure.
Individual Award Determination
At the end of the award period, the Committee considered the available award pool (based on the Adjusted EBITDA funding formula), the Company’s actual performance relative to the subordinate EBIT and FCF performance targets, and the individual performance of each NEO in determining individual payouts. Adjustments for individual performance are based on the achievement of personal objectives and are limited to +/‑20% of the payout generated by performance against the subordinate measures. However, the total amount of the pool (based on the Adjusted EBITDA funding formula) cannot be exceeded. For the 2017 STI awards, the Committee, with input from the Board of Directors, increased the award for Mr. Lopez by an additional 20% based on his strong performance during his second year as CEO, including his achievement of personal objectives, with consideration given to his total cash compensation compared to his peers. The Committee, with Mr. Lopez’s input, also increased the awards for Ms. Bertsch and Messrs. Alvarez and Torno by an additional 20% based on their contributions and achievement of personal objectives, with consideration given to the delivery of the strategic agenda and transformation of the Company.
Individual Target Opportunities and 2017 STI Payouts
Target awards for each NEO are expressed as a percentage of annual earnings based on market competitiveness and considering the Company’s overall median pay philosophy. Achievement of threshold financial performance against the subordinate performance measures would imply funding of 30% of the target opportunity, while maximum performance would yield a payout of 200% of the target.
Target bonuses are sufficient to produce median cash compensation (salary + annual incentives) if earned, with maximum bonuses capable of producing top quartile pay if maximum performance goals are achieved. If no bonus is paid, pay for the Company’s NEOs would rank in the market’s bottom quartile on a cash compensation basis.
For 2017, the individual target opportunities and payouts based on the 2017 performance were as follows:
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|
EBIT &
|
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|
Individual
|
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|
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|
|
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|
FCF
|
|
|
|
Performance
|
|
|
|
|
Actual
|
|
Actual
|
|
Actual
|
|
Name
|
|
Target
|
|
|
Target
|
|
|
|
Results
|
|
|
|
Factor
|
|
|
|
|
Payout
|
|
Payout
|
|
Payout
|
|
|
|
(% of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
annual
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(% of annual
|
|
(% of
|
|
|
|
earnings)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
earnings)
|
|
target)
|
|
Andres A. Lopez (1)
|
|
150
|
%
|
$
|
1,387,500
|
|
X
|
|
96.2
|
%
|
|
X
|
120
|
%
|
=
|
|
$
|
1,601,730
|
|
173.1
|
%
|
115.4
|
%
|
Jan A. Bertsch (1)
|
|
80
|
%
|
$
|
532,000
|
|
X
|
|
96.2
|
%
|
|
X
|
120
|
%
|
=
|
|
$
|
614,141
|
|
92.3
|
%
|
115.4
|
%
|
Miguel Alvarez (1)
|
|
65
|
%
|
$
|
284,646
|
|
X
|
|
96.2
|
%
|
|
X
|
120
|
%
|
=
|
|
$
|
328,595
|
|
75.0
|
%
|
115.4
|
%
|
James W. Baehren
|
|
65
|
%
|
$
|
299,813
|
|
X
|
|
96.2
|
%
|
|
X
|
100
|
%
|
=
|
|
$
|
288,420
|
|
62.5
|
%
|
96.2
|
%
|
Vitaliano Torno (1)
|
|
65
|
%
|
CHF
|
515,000
|
|
X
|
|
96.2
|
%
|
|
X
|
120
|
%
|
=
|
|
CHF
|
386,435
|
|
75.0
|
%
|
115.4
|
%
|
Paul A. Jarrell (2)
|
|
65
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
The payouts for Ms. Bertsch and Messrs. Lopez, Alvarez and Torno reflect an additional 20% payout based on their personal performance and contributions as described above.
(2)
Mr. Jarrell was not eligible for an STI payout for 2017.
The total payout for the NEOs, excluding CFO, was below the funded pool based on EBITDA performance.
Payout History
The Company has a history of setting reasonably demanding goals. Over the past five years, STI payouts for the enterprise have ranged from 63% to 145% of target, based on the performance levels achieved, with an average payout of 105%. Furthermore, the pay and performance analyses of the actual cash compensation earned by the Company’s CEO and CFO versus that of their peers has been aligned with the Company’s annual financial performance.
Long‑Term Incentives
Long‑term incentive compensation is delivered solely in the form of equity. This component of the executive compensation package rewards each NEO’s contributions to the Company, provides motivation to achieve the Company goals, builds stock ownership to strengthen the alignment with share owners’ interests, drives share owner value over time and is an important retention tool.
Equity Grant Practices
The Committee has established a formal process to govern equity grants. The same process is used for all employees receiving equity grants, including the NEOs. Each December, the Committee is asked to determine the overall pool (dollar value) of equity available for awards during the upcoming year’s grant cycle. In making a proposal to the Committee, the Company reviews the prior year grants, current competitive market data, annual share usage and total potential dilution data, as well as each executive officer’s overall compensation package in relation to the market.
Once the overall amount of equity available is determined, the CEO makes individual award recommendations for each senior executive. These recommendations are presented to the Committee for review and approval. The Committee works with the executive compensation consultant to determine the grant value for the CEO using the same general criteria.
Although the Committee did not grant any options in 2017, should it determine to grant options in the future the option strike price would be determined on the date the awards are approved by the Committee and is set at the closing price of the Company’s stock on the date of approval/grant (or the last business day prior to the grant date if the grant date falls on a non business day).
The Committee has established a common grant date of March 7 of each year as the date of grant for annual equity awards. This date falls outside of the quarterly blackout periods prescribed under the Addendum to Insider Trading Policy applicable to all NEOs. In addition, a common grant date for annual grants minimizes the perception of market timing. The Committee retains the discretion to make equity grants off-cycle for situations such as promotions and market compensation.
LTI Mix
Beginning in 2017, the Committee eliminated stock options from the LTI program, which reduced share usage as well as dilution of share owners’ interests. In turn, the Committee adopted a balanced approach to delivering LTI by awarding 50% of target value in the form of performance stock units and 50% in time-based restricted stock units. (In 2016, the LTI vehicle mix was 50% performance share units, 25% restricted stock units, and 25% stock options.) The increased role of RSUs will help build greater share ownership among the Company’s executives, increasing their alignment with share owners’ interests. Further, it will increase the Company’ ability to retain those executives, many of whom are new to their roles or the Company and all of whom are important to the success of its strategy.
To determine the number of performance stock units and restricted stock units to grant, 50% of the total LTI award value is divided by the Common Stock price on the date of grant. For example, assuming an overall LTI award with a value of $100,000 and a stock price of $20.00, the number of performance stock units and restricted stock units granted would be calculated as follows:
$100,000 X 50% = $50,000 / $20.00 = 2,500
If the performance goals are met at the end of the performance period, performance stock units are paid out in an equivalent number of shares.
Restricted stock units vest 25% on each of the four anniversaries following the grant date.
Also as the value of the shares received from vested performance stock units and restricted stock units is tied to the Company’s stock price, which provides share owner alignment, the Committee believes the LTI mix provides a balanced incentive program that also limits compensation plan risk.
Performance stock units have a strong pay for performance orientation and are a large enough portion of overall potential compensation to have a meaningful impact on the NEO’s total realized compensation depending on Company performance and total share owner return. Restricted stock units are intended to foster long‑term retention of the Company’s NEOs, while still providing alignment of compensation with share owners. The use and overall weighting of performance stock units focus executives on fundamental long‑term financial goals in addition to stock price performance. This combination of long‑term incentive awards, along with the Company stock ownership and retention guidelines (described below), promotes alignment with share owner interests.
Individual Award Opportunities
Each year, the Committee determines an overall equity award, expressed as a dollar amount, based on median market data for each NEO. Individual awards may vary based on performance, leadership, potential, time in the role, internal equity and other relevant factors. When making grant decisions, the Committee focuses on the dollar value of the award for each NEO, and also considers the overall dilutive impact of shares granted to the entire employee population.
Based on the market data, individual and Company performance (including relative share owner return and other relevant metrics) and executive retention concerns, the Committee approved the NEOs receiving equity grants with the following fair market values that approximate market median values and can produce target total direct compensation (salary + target annual incentives + target LTI award value) that also approximates market median:
|
|
|
|
|
|
Target
|
Name
|
|
Award Value
|
Andres A. Lopez (1)
|
|
$
|
4,660,500
|
Jan A. Bertsch
|
|
|
1,300,000
|
Miguel Alvarez (2)
|
|
|
425,000
|
James W. Baehren (3)
|
|
|
400,000
|
Vitaliano Torno (4)
|
|
|
400,000
|
Paul Jarrell (5)
|
|
|
450,000
|
|
(1)
|
|
The target award value for Mr. Lopez increased from $3,875,000 in 2016 to $4,660,500 in 2017, to more closely align the award value with the LTI market value for his role and to recognize his performance in the role.
|
(2)
The target award value for Mr. Alvarez increased from $350,000 (plus a special equity award with a grant date fair value of $100,000 to recognize him for assuming increased responsibility for managing O-I Mexico, his exceptional performance, and his potential for long-term contributions to the Company) in 2016 to $425,000 in 2017, which was more closely aligned with the market value for Mr. Alvarez’ expanded role, including responsibility for managing O-I Mexico.
(3)
Mr. Baehren’s award value was reduced from $600,000 in 2016 based on his new role and his transition out of the General Counsel role and was delivered solely in performance stock units, as any restricted stock units would be forfeited upon his upcoming retirement.
(4)
The award value for Mr. Torno increased from $350,000 in 2016 to more closely align his award value with the market value and to recognize his performance in the role.
(5)
Mr. Jarrell’s restricted stock units were forfeited upon his termination. He retained a prorated portion of the performance stock units.
The amount ultimately earned under this plan for restricted stock units will be a result of the performance of the Company’s stock. The amount earned for performance stock units will be a result of the performance of the Company’s stock as well as the Company’s performance against pre‑established three‑year financial goals.
Performance Stock Units
Performance stock units are meant to reward financial performance of the Company over a three‑year cycle. The performance stock units are entirely based on the financial performance of the Company as a whole (total or consolidated O‑I results), as this increases the focus on long‑term results that drive share owner value. Grants made in 2015 had a performance cycle of January 1, 2015—December 31, 2017; 2016 grants have a performance cycle of January 1, 2016—December 31, 2018; and 2017 grants have a performance cycle of January 1, 2017—December 31, 2019.
For 2017 grants, the Committee changed its approach for measuring long-term results associated with the performance stock units. Prior to 2017, performance stock units were based on performance results in the last year of the performance period. Starting in 2017, awards are based on the Company’s performance for the full three-year period as measured by cumulative EPS and average ROIC. The Committee believes these changes will enhance the program’s ties to delivering sustained, long-term financial results.
Aside from certain exceptions, performance stock units do not vest until the end of the related performance period, subject to achievement of the pre‑established goals. The performance criteria for each three‑year performance cycle are approved by the Committee at the grant date.
The performance stock units granted in 2017 measure the Company’s performance over the three‑year period based on the measures shown in the following table. The Committee elected to eliminate Organic Revenue Growth (previously weighted 10%) as a metric for the 2017-19 performance stock units and build growth into the performance goals established for EBIT under the STI plan and EPS under the performance stock unit program.
|
|
|
|
|
Measure
|
|
Weight
|
|
Definition
|
Three-Year Average Return on Invested Capital (“ROIC”)
|
|
50
|
%
|
EBIT (1), multiplied by one minus the Company’s tax rate (excluding items that management considers not representative of ongoing operations), divided by the sum of total debt and total share owners’ equity. For the three year performance period, the Committee elected to hold constant Accumulated Other Comprehensive Income (“AOCI”, which includes effects of currency and pension asset/liability changes).
|
Cumulative Adjusted Net Earnings per Share (“EPS”) for the Three-Years
|
|
50
|
%
|
Diluted earnings per share from continuing operations attributable to the Company before items that are not representative of ongoing operations also excluding the impact of acquisitions and divestitures, the impact of changes in foreign currency exchange rates and non service pension costs.
|
(1)
EBIT not adjusted for foreign exchange.
The performance stock units granted in 2015 and 2016 measure the Company’s performance over the three year period based on performance in the final year of the period for the measures shown in the following table.
|
|
|
|
|
Measure
|
|
Weight
|
|
Definition
|
Return on Invested Capital (“ROIC”) in Year 3 of the Period
|
|
45
|
%
|
EBIT (1), multiplied by one minus the Company’s tax rate (excluding items that management considers not representative of ongoing operations), divided by the sum of total debt and total share owners’ equity. For the three year performance period, the Committee elected to hold constant Accumulated Other Comprehensive Income (“AOCI”, which includes effects of currency and pension asset/liability changes).
|
Adjusted Net Earnings per Share (“EPS”) in Year 3 of the Period
|
|
45
|
%
|
Diluted earnings per share from continuing operations attributable to the Company before items that are not representative of ongoing operations also excluding the impact of acquisitions and divestitures, the impact of changes in foreign currency exchange rates and non service pension costs.
|
Organic Revenue Growth in Year 3 of the Period
|
|
10
|
%
|
Consolidated net sales adjusted to exclude the impact of acquisitions and divestitures as well as the impact of changes in foreign currency exchange rates.
|
(1)
EBIT not adjusted for foreign exchange.
The Committee excludes certain items from determining the Company’s performance relative to its performance stock unit metrics: changes in AOCI, non‑service pension costs, impact of acquisition/divestitures and changes in foreign currency exchange rates for organic revenue growth only. The exclusion of these items provides a more reasonable assessment of the Company’s performance and management’s success in meeting the Committee’s objectives.
For grants made in 2015 and 2016, the threshold, target and maximum values for the performance criteria were determined considering the Company’s true cost of capital and historical performance. For grants made in 2017, the threshold, target and maximum values for the performance criteria were determined considering the Company’s expected growth rates. When setting the targets, the Committee’s independent compensation advisor conducts a difficulty assessment from various perspectives, including the Company’s historic payout results, as well as a comparison of proposed goals versus: previous goals, public guidance, analyst estimates, historic performance, peer historic performance, and analyst estimates for peers.
No award is earned if performance against each of the measures is below the threshold performance level relative to the targets established by the Committee for the three‑year period. If performance for a given measure meets or exceeds the threshold level, NEOs can earn from 30% to 200% of target for the measure. Funding at threshold performance was
increased from 0% to 30% for 2015 grants to bring it more in line with market practices. The Committee felt this change was warranted given the difficulty associated with the Company’s annual incentive goals and the level of performance (relative to plan) required to achieve minimum results. Funding at maximum results (200% of target) was maintained as it continues to reflect market norms.
The Committee reviews audited financial results prior to determining the amount of any award earned under this plan, and there is no discretion applied to individual payout amounts.
Performance Stock Unit 2015‑17 cycle results
For the 2015‑2017 performance cycle, ROIC performance was just below the maximum payout level, Organic Revenue Growth performance was above the threshold payout level, but below target level, and EPS performance was below the minimum payout threshold. The total LTI payout was 93.3%.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payout
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payout
|
|
(as % of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(as % of Target
|
|
Target
|
|
|
|
Weight
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Actual
|
|
|
Award)
|
|
Award)
|
|
ROIC
|
|
45
|
%
|
|
9.40
|
%
|
|
12.50
|
%
|
|
13.00
|
%
|
|
12.98
|
%
|
(1)
|
195.6
|
%
|
88.0
|
%
|
EPS
|
|
45
|
%
|
$
|
2.64
|
|
$
|
2.67
|
|
$
|
2.72
|
|
$
|
2.43
|
|
(1)
|
—
|
%
|
—
|
%
|
Organic Revenue Growth
|
|
10
|
%
|
$
|
6,784
|
|
$
|
6,886
|
|
$
|
6,938
|
|
$
|
6,817
|
|
(1)
|
52.7
|
%
|
5.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Payout (as % of Target Award)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
93.3
|
%
|
(1)
See Appendix A for a calculation of these measures.
Performance Stock Unit Payout History
Since the Company’s Performance Stock Units are truly performance based, the target levels established at the beginning of each performance period represent goals that are challenging to achieve and incent improvement over prior years. For EPS and Revenue measures, threshold performance is set at or above prior period’s actual performance level, so no payout is generated if performance declines. For ROIC, threshold performance is set at prior period’s weighted average cost of capital (WACC), so no payout is generated unless the Company is creating value for share owners. Over the past five years, Performance Stock Unit payouts have ranged from 28% to 100% of target, based on the performance levels achieved. The payout average over the past five years was 61%, illustrating the difficulty associated with goals the Company historically has established for the program.
Double Trigger Change in Control Vesting for Equity Awards
The Company requires a “double‑trigger,” or both a change in control and an involuntary termination in order for equity awards to vest under the Company’s broad‑based equity plan for equity awards made in 2015 and going forward.
Stock Ownership and Share Retention Guidelines
The Company has stock ownership and retention guidelines for all of the NEOs, with the objective of better aligning executives’ interests with those of share owners.
The guidelines are as follows:
|
·
|
|
CEO—5 times base salary
|
|
·
|
|
Senior Business / Function Leaders—2.5 times base salary
|
|
·
|
|
Other Key Leaders (as designated by CEO)—1.5 times base salary
|
The guidelines state that the targeted level of ownership must be achieved within five years of the time the individual becomes subject to the guidelines. Under these guidelines, shares owned outright, outstanding restricted stock/units, performance stock units (at target) and 401(k) holdings all count as shares owned. In addition, the Committee has share retention guidelines. These guidelines state that until the stock ownership guidelines are met, NEOs are required to retain 75% of the “net profit shares” acquired from option exercises, or vested restricted stock units or performance stock units. Net profit shares are those shares remaining after payment of tax obligations and, if applicable, option exercise costs.
The Committee reviews ownership levels for executive officers on an annual basis. Failure to comply with the stock ownership and retention guidelines may result in delays in promotions and / or future compensation increases.
Ownership achievement against guidelines is measured at June 30 each calendar year, based on a 200‑day moving average of the stock price. For the 2017 review, all of the NEOs significantly exceeded their ownership guidelines, or were well on the way to fulfilling their obligations within the five year timeframe, as shown below:
|
|
|
|
|
|
|
Expected
Ownership Level
(as a multiple of salary)
|
|
Actual
Ownership Level
June 30, 2017
(as a multiple of salary)
|
Andres A. Lopez
|
|
5.0 × salary
|
|
10.9 × salary
|
Jan A. Bertsch
|
|
2.5 × salary
|
|
9.5 × salary
|
Miguel Alvarez
|
|
2.5 × salary
|
|
2.7 × salary
|
James W. Baehren
|
|
2.5 × salary
|
|
5.8 × salary
|
Vitaliano Torno (1)
|
|
2.5 × salary
|
|
2.3 × salary
|
Paul A. Jarrell
|
|
2.5 × salary
|
|
4.9 × salary
|
(1)
Mr. Torno was designated a Senior Business / Function Leader effective January 1, 2016 and has until January 1, 2021 to achieve an ownership level of 2.5 times base salary.
Anti‑Hedging and Pledging Policies
The Company’s Addendum to Insider Trading Policy prohibits the Company’s directors, executive officers and other covered personnel from hedging their ownership of Company stock, including trading in publicly‑traded options, puts, calls, or other derivative instruments related to Company stock or debt or from pledging the Company’s securities without first obtaining approval from the Company’s General Counsel (with notification to the Committee).
Compensation Recovery (Clawback) Policy
The Company’s Compensation Recovery Policy allows the Company to recoup cash and equity incentive compensation that was granted, received, vested or accrued during the prior three‑year period and based on inaccurate
financial performance resulting in a restatement of results, regardless of fault. This policy applies to any current or former officer of the Company or any of its subsidiaries who reports or reported to the CEO.
Risk Assessment
The Committee conducts an annual assessment of the Company’s executive compensation practices and the relationship between its executive compensation program design and organizational risk. Relative to last year, the Company made a few changes to its executive pay program for 2017, which included: (i) adopting a formula to fund bonuses for the Company’s NEOs in order to increase the Committee’s flexibility to pay bonuses to those executives while maintaining the tax deductibility of such awards under IRC 162(m); (ii) eliminating five operating measures (revenue from strategic customers, IDS, TRIR, PTP and PLCC%) from the STI metrics as management believed these key indicators of the first phase of the company’s transformation have become well engrained into the Company’s operating practices; (iii) eliminating stock options as part of the Company’s LTI program; (iv) increasing the weight of restricted stock units to 50% of target LTI value to strike a balance between performance and service-based awards and (v) basing performance stock units on ROIC and EPS results over the full three-year performance period. Other aspects of O-I’s program (e.g., performance ranges, incentive payout ranges, and LTI performance metrics) remained the same. As a result, the Committee did not believe these changes would encourage excessive risk taking amongst its executives.
This risk assessment concluded that the Company employed no executive compensation practices in relation to organizational risk that would cause significant share owner concern. In light of this study, the Company also conducted an enterprise risk assessment of its compensation programs and policies from legal, human resources, auditing and risk management perspectives, the results of which were reviewed and discussed with the Committee. Based on both of these assessments, the Company concluded that its compensation programs and practices are not reasonably likely to have a future material adverse effect on the Company.
In reaching this conclusion, the Company took into account several items that mitigate the Company’s level of risk exposure, such as:
|
·
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The Company’s business model and related incentive plans are generally consistent across all of its regions; none contributes more than half of the Company’s revenues or operating profits;
|
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·
|
|
The Company’s pay mix is generally consistent with peer practices;
|
|
·
|
|
There is a direct cap on payouts (i.e. 200% of target for the STI and for performance stock units) and the Committee has the ability to adjust performance goals and bonus payouts to help limit risk;
|
|
·
|
|
The Company’s incentive plans incorporate multiple performance measures that balance growth, profitability, cash generation, and capital efficiency;
|
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·
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|
Target setting considers internal budgeting and external market factors;
|
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·
|
|
Multiple LTI equity vehicles, stock ownership guidelines and share retention requirements align the interests of NEOs and share owners;
|
|
·
|
|
The compensation recovery (clawback) policy that allows the Company to recoup cash and equity incentive compensation that was earned based on inaccurate financial performance resulting in a restatement of results, regardless of fault;
|
|
·
|
|
The Company has double trigger change in control vesting for equity awards, beginning with awards made in 2015;
|
|
·
|
|
An anti‑hedging policy, as well as a pre‑clearance policy regarding equity transactions (including pledging), help prevent material adverse risk; and
|
|
·
|
|
The Committee regularly reviews executive stock ownership, plane usage and other governance policies that promote share owner interests.
|
Regulatory Considerations
The Company’s incentive compensation programs have been designed and administered in a manner generally intended to preserve federal income tax deductions. However, the Committee considers the tax and accounting consequences of utilizing various forms of compensation and retains the discretion to pay compensation that is not tax deductible or could have adverse accounting consequences for the Company.
Employment Agreements and Executive Severance Policy
All NEOs are eligible for severance under the Company’s Executive Severance Policy (“the Policy”) in the event that the executive is terminated without cause at any time, or if during the twenty‑four month period following a change in control (as determined under the 2005 Incentive Award Plan) he or she terminates for “good reason” (as defined in the Policy).
Upon a qualifying termination under the Policy, an eligible executive will receive a lump sum severance benefit equal to two times his or her base salary and target bonus, plus continued health benefits at the active employee cost for twenty‑four months. If the provision of health benefits, however, would cause a negative tax consequence for the Company under the Affordable Care Act, then the Company will pay the executive the value of the health benefits in cash. Executives will also be entitled to standard outplacement benefits offered by the Company from time to time.
If the severance benefits, along with any other payments occurring in connection with a change in control, were to cause the executive to be subject to the excise tax provisions of Sections 4999 of the Internal Revenue Code, then the amount of the severance benefits will either be reduced, such that the excise tax would not be applicable, or the executive will be entitled to retain his or her full severance benefits (with the executive responsible for paying any tax obligations), whichever results in the better after‑tax position to the executive.
In exchange for being eligible for the severance benefits under the Policy, an executive must enter into a restrictive covenant agreeing not to compete with the Company or solicit the Company’s employees for a period of three years following termination of employment for any reason, as well as, not to disclose confidential information or disparage the Company. An executive must sign a release of claims before receiving any severance under the Policy. If the executive is a party to an agreement providing severance benefits, he or she will receive benefits under either the Policy or such other agreement, whichever provides the greater benefit, but may not receive severance under both.
Health and Welfare and Retirement Benefits
The Company maintains a comprehensive health and welfare benefits plan for all its U.S.‑based employees. The benefits offered to U.S. executive officers under this plan are essentially the same as those offered to all U.S.‑based salaried employees of the Company.
The Company also maintains supplemental universal life insurance benefits for its designated executives prior to 2006, including Messrs. Lopez, Baehren and Torno. Six months and one day after retirement, the paid‑up policy is distributed to the NEO. The retiring NEO also receives a tax reimbursement for the value of the policy, based on the terms established prior to 2006. In 2006, the Company closed this plan to new entrants. As such, Ms. Bertsch and Mr. Alvarez are covered by a term life policy. The term life policy may be converted, at the participant’s expense, to an individual policy upon termination or retirement, subject to the terms and conditions of the insurance company.
The Owens‑Illinois Salary Retirement Plan (a defined benefit pension plan) was closed to new entrants after December 31, 2004. Also effective December 31, 2004, the Company changed the way that benefits can be paid for active participants. Benefits accrued at December 31, 2004 are eligible to be paid in a lump sum upon retirement at the option of the participant. Benefits accrued post‑December 31, 2004, however, are eligible to be paid only on an annuity basis. The Owens‑Illinois Salary Retirement Plan and International Pension Plan were frozen as of December 31, 2015. Participants maintain benefits accrued as of the freeze date, but will not accrue additional benefits beyond the freeze date. Also effective December 31, 2015, the lump sum payment option will now apply to the total accrued benefit for active and deferred vested participants who commence their benefit January 1, 2016 or later.
As a U.S. tax qualified plan, benefits under the Owens‑Illinois Salary Retirement Plan are limited by IRS regulations. For those U.S. employees who earn compensation in excess of IRS limits, the Company maintains an unfunded
Supplemental Retirement Benefit Plan (“SRBP”). This plan allows for benefits in excess of the IRS limits to be accrued and paid to participants upon retirement. In this way, it enables participants to earn the same retirement benefits (as a percentage of income) as other associates who earn compensation below the IRS limits. As a non‑qualified plan, all payments are made in a lump sum out of the general assets of the Company. Mr. Baehren’s benefit is funded by a secular trust life insurance policy designed to provide a cash accumulation equal, on an after‑tax basis, to 70% of the SRBP benefit at the later of three policy years or attainment of age 62.
Mr. Lopez is a participant in the International Plan, as he was employed abroad during a portion of his career with O-I. The International Plan benefit provides him with a retirement benefit equal to the O-I SRBP.
Mr. Torno is eligible for benefits under the Swiss Pension Plan. This pension plan is part of a collective foundation fully insured which provides occupational pension benefits. The benefits are provided under a cash balance structure, meaning each participant has an account balance which will increase with annual savings credits and a guaranteed interest credit each year. At hire, the participant will transfer their vested benefits from the previous employers into the account and may buy-back additional benefits during a certain year (subject to some limits). The savings credits are increasing with age as a percentage of insured salary. The pension plan also provides protection against disability, death and longevity risks.
The Stock Purchase and Savings Program (“SPASP”) is a defined contribution plan provided under Section 401(k) of the Internal Revenue Code. Contributions to the plan are subject to annual limits established by the IRS. While employees may direct their own contributions into a number of provided investments, the Company match of 50% of an eligible participant’s contribution up to the first 10% of the participant’s base salary plus annual incentive (up to the IRS maximum recognizable compensation level) is made in Common Stock. The match is immediately vested, and participants can move the match out of Common Stock, and into any of the other investments, at any time, subject to blackout periods and other trading window restrictions. The Company also makes a contribution of 3% of base salary to the SPASP each payroll period, which is invested in the same investment options selected by the participants for their own contributions.
For those U.S. employees who are limited in the amount that they may defer to the qualified SPASP due to the IRS limits and who meet certain base pay requirements, the Company maintains an unfunded Executive Deferred Savings Plan (“EDSP”). This plan allows for deferrals on a pre‑tax basis. The investment funds available are the same as those in the SPASP, with the exception of grandfathered deferrals into the cash account (for Mr. Baehren).
Other Benefits
The Company provides limited perquisites to the NEOs that the Committee has determined to be competitive with the practices of the comparator group companies. These perquisites include an annual executive physical and reimbursement for financial planning and tax preparation services up to $15,000 per year. Mr. Lopez is also eligible for restricted personal use of the Company aircraft. Mr. Baehren received an automobile allowance under a grandfathered arrangement and Mr. Torno receives a leased vehicle as part of his Swiss compensation package. Messrs. Lopez and Alvarez received relocation benefits (including certain tax gross-ups) in accordance with the Company’s standard relocation policy in connection with their moves from Florida to Ohio. In addition, Mr. Alvarez also received benefits under the Company’s permanent transfer policy in connection with his move to the United States from Brazil.
The following tables show the benefits and perquisites available to each NEO in 2017:
|
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|
Company Benefits & Perquisites
|
|
Value Provided by the
|
|
|
|
|
|
|
|
|
|
|
U.S. Executives
|
|
Company
|
|
Lopez
|
|
Bertsch
|
|
Alvarez
|
|
Baehren
|
|
Jarrell
|
Health & Welfare
|
|
|
|
|
|
|
|
|
|
|
|
|
Health, Dental, Vision, Short- & Long-Term Disability
|
|
Comprehensive coverage
|
|
X
|
|
X
|
|
X
|
|
X
|
|
X
|
Retiree Medical
|
|
|
|
X
|
|
|
|
|
|
|
|
|
Supplemental Universal Life (hired prior to 2006)
|
|
3x Base Salary
|
|
X
|
|
|
|
|
|
X
|
|
|
Supplemental Term Life (hired after 2006)
|
|
3x Base Salary
|
|
|
|
X
|
|
X
|
|
|
|
X
|
Retirement—Qualified
|
|
|
|
|
|
|
|
|
|
|
|
|
Salary Retirement Plan (DB
1
)
3
|
|
1.212% × Pay
4
× Service + 0.176% × Pay
5
× Service
|
|
X
|
|
|
|
|
|
X
|
|
|
Stock Purchase & Savings Program (DC
2
)
|
|
3% Base Salary
6
|
|
X
|
|
X
|
|
X
|
|
X
|
|
X
|
Stock Purchase & Savings Program (DC
2
)
|
|
50% up to first 10% Base Salary + annual incentive
8
|
|
X
|
|
X
|
|
X
|
|
X
|
|
X
|
Retirement—Non-Qualified
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Retirement Benefit Plan (DB
1
)
|
|
1.212% × Pay
4
× Service + 0.176% × Pay
5
× Service
|
|
X
|
|
|
|
|
|
X
|
|
|
Unfunded Executive Deferred Savings Plan (DC
2
)
|
|
Defer up to 100% Base Salary with Interest
7
|
|
X
|
|
X
|
|
X
|
|
X
|
|
X
|
Unfunded Executive Deferred Savings Plan (DC
2
)
|
|
3% Base Salary
6
|
|
X
|
|
X
|
|
X
|
|
X
|
|
X
|
Unfunded Executive Deferred Savings Plan (DC
2
)
|
|
50% up to first 10% Base Salary + annual incentive
8
|
|
X
|
|
X
|
|
X
|
|
X
|
|
X
|
Perquisites
|
|
|
|
|
|
|
|
|
|
|
|
|
Car Allowance
|
|
$2,000 per month
|
|
|
|
|
|
|
|
X
|
|
|
Financial Planning & Tax Preparation
|
|
Up to $15,000 per year
|
|
X
|
|
X
|
|
X
|
|
X
|
|
X
|
Physical Examination
|
|
Up to $3,500 per year
|
|
X
|
|
X
|
|
X
|
|
X
|
|
X
|
Personal Aircraft Usage
|
|
Up to 50 hours per year
9
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company Benefits & Perquisites
|
|
Value Provided by the
|
|
|
Swiss Executives
|
|
Company
|
|
Torno
|
Health & Welfare
|
|
|
|
|
Supplemental Universal Life (hired prior to 2006)
|
|
$200,000 death benefit
|
|
X
|
Retirement
|
|
|
|
|
Swiss Pension Plan (DB
1
)
10
|
|
|
|
X
|
Perquisites
|
|
|
|
|
Leased Automobile
|
|
|
|
X
|
Financial Planning & Tax Preparation
|
|
Up to $15,000 per year
|
|
X
|
Physical Examination
|
|
Up to $3,500 per year
|
|
X
|
(1)
DB = Defined Benefit (e.g., pension plan); Mr. Baehren has a secular trust arrangement for his Non‑qualified Supplemental Retirement Benefit Plan (DB).
(2)
DC = Defined Contribution (e.g., 401(k) plan)
(3)
Defined benefit pension plan was closed to new entrants after December 31, 2004, but participants continued to accrue benefits through December 31, 2015. Mr. Lopez’s Salary Retirement Plan benefit is based on his service from July 1, 2004 through July 1, 2009, which represents the time period that he was employed in the U.S. and covered under the qualified plan. Service for Mr. Lopez’s International Pension Plan benefit is from January 30, 1986 through December 31, 2015, which represents his original hire date with the Company, and provides him with a retirement benefit equal to the O-I SRBP, and includes US and non-US pay and service. The value of this benefit is shown as his SRBP.
(4)
Pay = average annual earnings for high three years of salary plus annual incentive (if applicable)
(5)
Pay = average annual earnings above the Social Security wage rate at retirement
(6)
The Company contributes 3% of the participant’s base salary plus annual incentive (up to the IRS maximum recognizable compensation level) to the qualified Stock Purchase & Savings Program. The Company contributes 3% of the participant’s base salary plus annual incentive in excess of the IRS maximum recognizable compensation level to the non‑qualified Executive Deferred Savings Plan.
(7)
For deferrals prior to January 1, 2009, interest is compounded monthly with annual rate equal to average annual yield on domestic corporate bonds of Moody’s A‑rated companies. For deferrals after December 31, 2008, accounts are credited with performance equivalent to the performance of the funds available under the Company’s qualified 401(k) plan based on individual investment elections.
(8)
The Company matches 50% of the participant’s contribution to the Stock Purchase & Savings Program up to the first 10% of the participant’s base salary plus annual incentive (up to the IRS maximum recognizable compensation level). The Company matches 50% of the participant’s contribution up to the first 10% of base salary plus annual incentive in excess of the IRS maximum recognizable compensation level to the non‑qualified Executive Deferred Savings Plan.
(9)
Pursuant to Board policy, for security reasons and to support efficient travel and maximize productivity, the Company’s CEO generally uses the Company aircraft for both business and personal travel. Personal use of the aircraft is limited to 50 hours per year.
(10)
Cash balance occupational benefits plan as required per Swiss pension laws.
Due to existing contractual arrangements, gross‑ups on payments made for executive life insurance and secular trust benefits have been continued only for those participants already covered by such benefits. Mr. Baehren is eligible for tax gross‑up on the annual economic value of an executive life insurance benefit and on payments made into his secular trust arrangement. Mr. Lopez is eligible for tax gross‑up on the annual economic value of an executive life insurance benefit. These benefits are not available to new entrants. The Committee had previously reviewed the existing arrangements and determined that it was not in the share owners’ best interest to incur the costs to eliminate these contractually based benefits for those who were eligible.
The Company previously eliminated all tax gross‑ups on taxable perquisites, including the personal use of Company aircraft and financial planning services.
Roles and Responsibilities
There are many inputs to the executive compensation process, as well as the appropriate governance and compliance mechanisms. In general, the Committee has primary responsibility for discharging the Board’s responsibilities relating to compensation of the Company’s executive officers. When appropriate, the Committee holds executive sessions without management present (including the CEO). See description of the Committee above under the heading “Board and Committee Membership.”
Executive Compensation Consultant
To assist the Committee in carrying out its duties and responsibilities, the Committee engages the services of an executive compensation consultant. The consultant provides the Committee with competitive market compensation data for senior executives and information on current issues and trends on executive compensation program design and governance; advises the Committee on the overall design and implementation of the Company’s executive compensation programs, and provides various analyses related to incentive plan structure and award levels; assists with proxy disclosure requirements; and provides ongoing advice to the Committee on regulatory and other technical developments that may affect the Company’s executive compensation programs.
For 2017, the Committee continued to engage Pay Governance as its executive compensation consultant. The Company does not engage Pay Governance or any of its affiliates with respect to any other consulting services.
During 2017 specifically, the compensation consultant supported the Committee by: (i) reviewing the comparator group used by the Committee for benchmarking; (ii) providing competitive market data on compensation for executives covered by the Committee’s charter; (iii) analyzing the historical alignment of the Company’s pay and performance versus the comparator group; (iv) providing advice with respect to executive compensation matters, including annual and long‑term incentive plan design, difficulty of the Company’s incentive plan goals, share utilization, pay mix as well as the impact of mergers, acquisitions, divestitures and other extraordinary items on the Company’s incentive goal achievement; (v) assisting the Company and Committee in considering and designing changes to the pay program; (vi) conducting a risk assessment of the Company’s compensation practices, as discussed previously; (vii) assisting the Company in its proxy disclosure, its Say‑on‑Pay proposal, development of its new equity plan for share owner approval and outreach to proxy advisors; (viii) advising the Committee about regulatory and legislative updates as well as market trends; (ix) assessing the competitiveness of the Company’s pay program for directors and proposing appropriate changes and (x) participating in the Committees meetings during the year.
In its capacity as the executive compensation consultant to the Committee, the consultant reports directly to the Committee and the Committee retains sole authority to retain and terminate the consulting relationship. In carrying out its responsibilities, the executive compensation consultant will typically collaborate with management to obtain data, provide background on program history and operation, and clarify pertinent information. Working under the Committee’s direction, both the Committee and management will review and discuss key issues and alternatives during the development of recommendations and prior to presentation for final approval.
The Committee also reviewed the nature of and extent of the relationship between the Committee, the Company and its compensation consultant and the individuals at the consulting firm providing advice to the Committee and the Company with respect to any potential conflicts of interest. The Committee considered the following six factors in its evaluation:
|
·
|
|
provision of other services by the consulting firm;
|
|
·
|
|
amount of fees paid by the Company to the consulting firm, and those fees as a percentage of total revenue paid to all affiliates;
|
|
·
|
|
the policies and procedures that each consultant has in place to prevent conflicts of interest;
|
|
·
|
|
any business or personal relationships of the consultant with any members of the Committee;
|
|
·
|
|
any Company stock held by any of the individual consultants responsible for providing compensation advice to the Committee; and
|
|
·
|
|
any business or personal relationships between Company executives and the compensation consulting firm.
|
Based on that review, the Committee believes that there are no conflicts of interest or potential conflicts of interest that would unduly influence Pay Governance’s ability to provide the Committee candid, direct and objective advice that is independent of management, and that the advice received by the Committee is not influenced by any other economic relationship that either firm, or any of the individuals at either firm responsible for providing compensation advice to the Committee, has with the Company. To ensure ongoing independence and objectivity of advice, the executive compensation consultant:
|
·
|
|
is engaged by and reports directly to the Committee and its Chair;
|
|
·
|
|
can be terminated only by the Committee or its Chair;
|
|
·
|
|
meets as needed with the Committee in executive sessions that are not attended by any of the Company’s officers;
|
|
·
|
|
has direct access to all members of the Committee during and between meetings;
|
|
·
|
|
does not permit the individuals responsible for providing compensation advice to the Committee to act as the client relationship manager of his/her firm with regards to other business for the Company; and
|
|
·
|
|
cannot directly, or indirectly, through a member of the consulting team, participate in any activities related to other consulting services provided to the Company.
|
Chief Executive Officer
The Company’s CEO attends Committee meetings and is responsible for providing relevant input on the compensation elements of the executive officers, including individual performance input, and making specific recommendations on base salaries, annual and long‑term incentives and promotions.
The CEO is also responsible for discussing the key business drivers behind the executive compensation results, including the establishment of the plan metrics, and periodically discussing the results achieved against those metrics. The CEO is excluded from executive sessions and from discussions involving his compensation.
Senior Vice President, Chief Human Resource Officer
The Senior Vice President and Chief Human Resource Officer (“SVP CHRO”) is responsible for coordinating Committee activities including: proposing meeting agendas based on the Committee’s planning calendar and decision‑making responsibility; arranging for meetings outside of the normal meeting cycle as appropriate; assisting with
the coordination of the work done by the Committee’s executive compensation consultant; and preparing appropriate materials for review by the Committee. The SVP CHRO follows up on meeting action items and other assignments from the Committee and is available for consultation with the Committee as needed.
In this role, the SVP CHRO normally consults with the Chief Executive Officer, Chief Financial Officer, and General Counsel and Corporate Secretary. Each may be asked to prepare information for Committee review, attend Committee meetings as appropriate, and provide relevant background information for inclusion in Committee materials.
Other Executive Officers
The Company’s Chief Financial Officer prepares and provides all financial results to the Committee as necessary to determine achievement against goals in the various incentive compensation plans. At the Committee’s request, the Chief Financial Officer provides commentary, discusses overall results providing appropriate information relative to achievement (or under or over achievement as may be the case), and plays a role in development of the goals presented for approval in incentive compensation plan design.
The General Counsel participates in Committee meetings and is responsible for providing relevant legal advice to the Committee on its executive compensation plans, and ensuring compliance with all appropriate regulations, including SEC and IRS regulations, that impact executive compensation. When appropriate, the Committee engages the services of outside legal counsel for providing advice where regular internal Company counsel may have conflicts.
The Corporate Secretary also participates in Committee meetings, taking appropriate minutes to preserve a record of discussion and actions.
COMPENSATION AND TALENT DEVE
LOPMENT COMMITTEE REPORT
The Compensation and Talent Development Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S‑K with management. Based on such review and discussions, the Compensation and Talent Development Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement and incorporated by reference into the Company’s Annual Report on Form 10‑K for the year ended December 31, 2017.
Hari N. Nair, Chair
Gary F. Colter
Peter S. Hellman
Hugh H. Roberts
Dennis K. Williams
2017 SUMMARY COMPENSATION TABLE
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
and Non-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
Qualified
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option
|
|
Incentive Plan
|
|
Deferred Comp
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Awards
|
|
Awards
|
|
Compensation
|
|
Earnings
|
|
Compensation
|
|
Total
|
Name and Principal Position
|
|
Year
|
|
Salary ($)
|
|
Bonus ($)
|
|
($)(1)
|
|
($)(2)
|
|
($)(3)
|
|
($)(4)
|
|
($)(5)
|
|
($)
|
Andres A. Lopez
|
|
2017
|
|
$
|
925,000
|
|
$
|
—
|
|
$
|
4,660,651
|
|
$
|
—
|
|
$
|
1,601,730
|
|
$
|
486,039
|
|
$
|
420,544
|
|
$
|
8,093,964
|
Chief Executive Officer ("CEO")
|
|
2016
|
|
|
850,000
|
|
|
—
|
|
|
2,906,260
|
|
|
968,749
|
|
|
1,767,150
|
|
|
255,613
|
|
|
190,734
|
|
|
6,938,506
|
|
|
2015
|
|
|
591,667
|
|
|
—
|
|
|
1,598,358
|
|
|
499,998
|
|
|
327,255
|
|
|
399,164
|
|
|
315,211
|
|
|
3,731,653
|
Jan A. Bertsch
|
|
2017
|
|
$
|
665,000
|
|
$
|
—
|
|
$
|
1,300,006
|
|
$
|
—
|
|
$
|
614,141
|
|
$
|
—
|
|
$
|
96,933
|
|
$
|
2,676,080
|
Senior Vice President and
|
|
2016
|
|
|
650,000
|
|
|
—
|
|
|
974,999
|
|
|
325,000
|
|
|
720,720
|
|
|
—
|
|
|
64,216
|
|
|
2,734,935
|
Chief Financial Officer ("CFO")
|
|
2015
|
|
|
69,167
|
|
|
—
|
|
|
3,475,002
|
|
|
324,999
|
|
|
34,915
|
|
|
—
|
|
|
83,176
|
|
|
3,987,259
|
Miguel I. Alvarez
|
|
2017
|
|
$
|
437,917
|
|
$
|
—
|
|
$
|
425,006
|
|
$
|
—
|
|
$
|
328,595
|
|
$
|
—
|
|
$
|
406,088
|
|
$
|
1,597,606
|
President, O-I North America and O-I Latin America
|
|
2016
|
|
|
380,467
|
|
|
—
|
|
|
337,498
|
|
|
112,499
|
|
|
342,762
|
|
|
—
|
|
|
297,702
|
|
|
1,470,928
|
James W. Baehren
|
|
2017
|
|
$
|
461,250
|
|
$
|
500,000
|
|
$
|
400,000
|
|
$
|
—
|
|
$
|
288,420
|
|
$
|
73,602
|
|
$
|
93,896
|
|
$
|
1,817,168
|
Senior Vice President of Corporate
|
|
2016
|
|
|
450,000
|
|
|
—
|
|
|
450,010
|
|
|
149,998
|
|
|
368,550
|
|
|
—
|
|
|
98,069
|
|
|
1,516,627
|
Development and Special Advisor to the CEO
|
|
2015
|
|
|
446,750
|
|
|
—
|
|
|
543,565
|
|
|
150,002
|
|
|
183,235
|
|
|
280,177
|
|
|
70,399
|
|
|
1,674,128
|
Vitaliano Torno (6)
|
|
2017
|
|
$
|
524,018
|
|
$
|
—
|
|
$
|
402,005
|
|
$
|
—
|
|
$
|
393,202
|
|
$
|
367,167
|
|
$
|
91,674
|
|
$
|
1,778,066
|
President, O-I Europe
|
|
2016
|
|
|
507,305
|
|
|
—
|
|
|
258,439
|
|
|
86,149
|
|
|
457,031
|
|
|
250,635
|
|
|
37,699
|
|
|
1,597,258
|
Paul A. Jarrell
|
|
2017
|
|
$
|
243,250
|
|
$
|
—
|
|
$
|
449,993
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
1,443,532
|
|
$
|
2,136,775
|
SVP Chief Administrative Officer
|
|
2016
|
|
|
417,000
|
|
|
—
|
|
|
337,496
|
|
|
112,498
|
|
|
273,218
|
|
|
—
|
|
|
61,822
|
|
|
1,202,034
|
|
|
2015
|
|
|
417,000
|
|
|
—
|
|
|
426,254
|
|
|
112,502
|
|
|
171,033
|
|
|
—
|
|
|
44,926
|
|
|
1,171,715
|
(1)
Amounts in this column reflect the grant date fair market value of restricted stock units and performance stock units granted in the year indicated as computed in accordance with FASB ASC 718. For a discussion of the assumptions made in the valuation reflected in this column, See Note 14 to the Consolidated Financial Statements for 2017 contained in the Annual Report Form 10-K filed with the SEC on February 14, 2018.
In the event the performance stock units pay out at maximum value, the total grant date values for grants of restricted stock units and performance stock units are:
For Mr. Lopez for 2017, $6,910,655; 2016, $4,843,767; 2015, $2,598,357.
For Ms. Bertsch for 2017, $1,950,009; 2016, $1,624,994; 2015, $4,125,006.
For Mr. Alvarez for 2017, $637,510, 2016, $562,497.
For Mr. Baehren for 2017, $800,001; 2016, $750,017; 2015, $843,560.
For Mr. Torno for 2017, $603,007; 2016, $430,731.
For Mr. Jarrell for 2017,
$674,990; 2016, $562,494; 2015, $651,257. Mr. Jarrell forfeited all the restricted stock units and a portion of the performance stock units upon his termination.
(2)
Amounts in this column reflect the grant date fair market value of options granted in the year indicated as computed in accordance with FASB ASC 718. The Company did not grant stock options in 2017.
(3)
Amounts in this column reflect STI awards made pursuant to the 2005 Incentive Award Plan for the year indicated. Mr. Jarrell was not eligible for an STI award for 2017.
(4)
Amounts in this column reflect the increase in the present value of the accumulated benefits under the following: Mr. Lopez—the Salary Retirement Plan, the Supplemental Retirement Benefit Plan, and the International Pension Plan; Mr. Baehren—the Salary Retirement Plan and the Supplemental Retirement Benefit Plan; Mr. Torno – the Swiss Pension Plan.
The Company closed participation to the Salary Retirement Plan and the Supplemental Retirement Benefit Plan effective December 31, 2004. As a result, Ms. Bertsch and Messrs. Alvarez and Jarrell do not participate in these plans.
The Salary Retirement Plan and the International Pension Plan were frozen as of December 31, 2015. Participants maintain benefits accrued as of the freeze date, but will not accrue additional benefits beyond the freeze date.
The Company’s NEOs did not accrue any preferential or above market earnings on their non-qualified deferred compensation.
(5)
All other compensation for 2017 is summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company
|
|
Company
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contributions
|
|
Contributions to
|
|
|
|
|
Payments in
|
|
|
|
|
|
|
|
|
|
|
|
Executive
|
|
|
|
|
to Qualified
|
|
Non- Qualified
|
|
|
|
|
Regard to
|
|
|
|
|
|
|
|
|
|
|
|
Life
|
|
|
|
|
Stock
|
|
Executive
|
|
|
|
|
Termination
|
|
|
|
|
|
|
|
|
|
|
|
Insurance
|
|
Personal Use
|
|
Purchase &
|
|
Deferred
|
|
International
|
|
of
|
|
Other
|
|
|
|
|
|
|
|
|
Premium
|
|
of Company
|
|
Savings
|
|
Savings
|
|
Assignment /
|
|
Employment
|
|
Miscellaneous
|
|
Tax
|
|
|
|
|
|
(a)
|
|
Aircraft (b)
|
|
Program (c)
|
|
Program (d)
|
|
Relocation (e)
|
|
(f)
|
|
Income (g)
|
|
Payments (h)
|
|
Total
|
Andres A. Lopez
|
|
$
|
9,404
|
|
$
|
203,240
|
|
$
|
20,100
|
|
$
|
142,258
|
|
$
|
27,110
|
|
$
|
—
|
|
$
|
4,412
|
|
$
|
14,020
|
|
$
|
420,544
|
Jan A. Bertsch
|
|
|
4,225
|
|
|
383
|
|
|
20,100
|
|
|
65,860
|
|
|
—
|
|
|
—
|
|
|
6,365
|
|
|
—
|
|
$
|
96,933
|
Miguel I. Alvarez
|
|
|
2,670
|
|
|
—
|
|
|
20,100
|
|
|
30,514
|
|
|
172,364
|
|
|
—
|
|
|
—
|
|
|
180,440
|
|
$
|
406,088
|
James W. Baehren
|
|
|
16,686
|
|
|
—
|
|
|
20,100
|
|
|
16,800
|
|
|
—
|
|
|
—
|
|
|
24,000
|
|
|
16,310
|
|
$
|
93,896
|
Vitaliano Torno
|
|
|
4,458
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
87,216
|
|
|
—
|
|
$
|
91,674
|
Paul A. Jarrell
|
|
|
2,715
|
|
|
—
|
|
|
19,298
|
|
|
13,823
|
|
|
—
|
|
|
1,392,139
|
|
|
15,557
|
|
|
—
|
|
$
|
1,443,532
|
(
a)
For Messrs. Lopez and Baehren these amounts are attributable to premiums paid during 2017 by the Company in connection with life insurance policies issued pursuant to the Owens Illinois Executive Life Insurance Plan and participation agreements entered into with the Company. For Mr. Torno this amount represents actual premium payments for executive life insurance policy with death benefits of $200,000. For the other NEOs, the amounts represent the actual premium payments for executive life insurance policies with a face value equal to three times base annual salary for the NEO plus $60,000 for accidental death and dismemberment coverage.
(b)
The amount shown in this column represents the variable costs for personal use of Company aircraft by the NEOs. Variable costs were calculated based on a methodology that reflects average costs of operating each aircraft, such as fuel costs, trip related maintenance, crew travel expenses, trip related fees and storage costs, on board catering and communications charges, and other miscellaneous variable costs. Since the aircraft are used primarily for business travel, fixed costs that do not change based on usage such as pilot compensation, the purchase or lease costs of the aircraft, and maintenance not related to travel are excluded.
(c)
The amount shown in this column for Ms. Bertsch and Messrs. Lopez, Alvarez and Baehren represents the Company match of $12,000 plus the 3% Company base salary contribution of $8,100 to the qualified Stock Purchase & Savings Program.
The amount shown in this column for Mr. Jarrell represents the Company match of $12,000 plus the 3% Company base salary contribution of $7,298 to the qualified Stock Purchase & Savings Program.
As Mr. Torno is based in Switzerland, he is not a participant in these plans.
(d)
The amount shown in this column for Mr. Lopez represents the Company match of $122,608 plus the 3% Company base salary contribution of $19,650 to the nonqualified Executive Deferred Savings Plan.
The amount shown in this column for Ms. Bertsch represents the Company match of $54,010 plus the 3% Company base salary contribution of $11,850 to the nonqualified Executive Deferred Savings Plan.
The amount shown in this column for Mr. Alvarez represents the Company match of $25,476 plus the 3% Company base salary contribution of $5,038 to the nonqualified Executive Deferred Savings Plan.
The amount shown in this column for Mr. Baehren represents the Company match of $11,063 plus the 3% Company base salary contribution of $5,738 to the nonqualified Executive Deferred Savings Plan.
The amount shown in this column for Mr. Jarrell represents the Company match of $13,823 to the nonqualified Executive Deferred Savings Plan.
As Mr. Torno is based in Switzerland, he is not a participant in these plans.
(e)
The amount shown in this column for Mr. Lopez represents amounts related to his relocation to Ohio (from Florida) and includes $4,847 for new home purchase costs, $8,414 for household goods insurance, $4,692 for permanent storage and $9,157 for surface shipment.
The amount shown in this column for Mr. Alvarez represents amounts related to his relocation to Ohio (from Florida) upon assuming responsibility for O-I North America, in addition to O-I Latin America, and includes $124,000 for transition payment, $7,362 temporary living expenses, $5,500 miscellaneous expense allowance, $610 for new home purchase inspections, $5,102 for miscellaneous home sale expenses, $1,676 for auto shipment, $24,659 for household goods shipment, $1,050 for transportation for final move and $2,405 for new home purchase closing costs.
(f)
The amount shown in this column for Mr. Jarrell represents $1,376,100 for severance and $16,039 for the payout of unused vacation time upon his termination of employment.
(g)
The amount shown in this column for Mr. Lopez represents $1,500 for reimbursement of professional advice related to tax, estate planning and financial planning; $2,450 for the cost of an annual executive physical; and $462 for the personal use of a car service.
The amount shown in this column for Ms. Bertsch represents $6,365 for reimbursement of professional advice related to tax, estate planning and financial planning.
The amount shown in this column for Mr. Baehren represents an automobile allowance of $24,000.
The amount shown in this column for Mr. Torno represents $29,311 for lease cost of automobile, $3,169 for reimbursement of professional advice related to tax, estate planning and financial planning, and $54,736 for vacation accrual payout.
The amount shown in this column for Mr. Jarrell represents $15,000 for reimbursement of professional advice related to tax, estate planning and financial planning and $557 for the personal use of a car service.
(h)
With respect to Messrs. Lopez and Baehren, the amounts shown in this column include $9,372 and $16,310 respectively, for tax gross ups on life insurance benefits.
These amounts are attributable to premiums paid during 2017 by the Company in connection with life insurance policies issued pursuant to the Owens Illinois Executive Life Insurance Plan and participation agreements entered into with the Company.
For Mr. Lopez, the amount also includes $4,648 for gross up on new home purchase relocation benefit.
For Mr. Alvarez, the amount includes $118,899 for gross up on the transition payment, $7,500 for gross up on relocation expenses, $35,308 for tax equalization, and $18,733 for gross up on tax assistance.
(6)
For Mr. Torno, amounts paid in Swiss Francs were translated to U.S. Dollars at the average of the exchange rates as published by Bloomberg on the last business day of each month during 2017.
GRANTS OF PLAN-BASED AWARDS IN 201
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
Option
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
Awards:
|
|
Exercise or
|
|
Grant Date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
Number of
|
|
Base Price
|
|
Value of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
Securities
|
|
of Option
|
|
Stock and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares or
|
|
Underlying
|
|
Awards
|
|
Option
|
|
|
|
|
Estimated Future Payouts Under Non
|
|
Estimated Future Payouts Under Equity
|
|
Units
|
|
Options
|
|
($ Per
|
|
Awards
|
|
|
|
|
Equity Incentive Plan Awards (1)
|
|
Incentive Plan Awards (2)
|
|
(#)(3)
|
|
(#)(4)
|
|
Share)(4)
|
|
($)(5)
|
|
|
Grant
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Date
|
|
($)
|
|
($)
|
|
($)
|
|
(#)
|
|
(#)
|
|
(#)
|
|
|
|
|
|
|
|
|
|
|
Andres A. Lopez
|
|
3/7/2017
|
|
$
|
416,250
|
|
$
|
1,387,500
|
|
$
|
2,775,000
|
|
34,687
|
|
115,622
|
|
231,244
|
|
123,877
|
|
—
|
|
$
|
—
|
|
$
|
4,660,651
|
Jan A. Bertsch
|
|
3/7/2017
|
|
$
|
159,600
|
|
|
532,000
|
|
|
1,064,000
|
|
10,021
|
|
33,402
|
|
66,804
|
|
33,402
|
|
—
|
|
|
—
|
|
|
1,300,006
|
Miguel I. Alvarez
|
|
3/7/2017
|
|
$
|
85,394
|
|
|
284,646
|
|
|
569,292
|
|
3,276
|
|
10,920
|
|
21,840
|
|
10,920
|
|
—
|
|
|
—
|
|
|
425,006
|
James W. Baehren
|
|
3/7/2017
|
|
$
|
89,944
|
|
|
299,813
|
|
|
599,625
|
|
6,167
|
|
20,555
|
|
41,110
|
|
—
|
|
—
|
|
|
—
|
|
|
400,000
|
Vitaliano Torno
|
|
3/7/2017
|
|
$
|
102,184
|
|
|
340,612
|
|
|
681,224
|
|
3,099
|
|
10,329
|
|
20,658
|
|
10,329
|
|
—
|
|
|
—
|
|
|
402,005
|
Paul A. Jarrell
|
|
3/7/2017
|
|
$
|
—
|
|
|
—
|
|
|
—
|
|
3,469
|
|
11,562
|
|
23,124
|
|
11,562
|
|
—
|
|
|
—
|
|
|
449,993
|
(1)
These columns show the amounts representing the annual incentive opportunity available under the STI. See “Compensation Discussion and Analysis—Annual Incentive” for further discussion. Amounts indicated are based on a percentage of the base salary earned in 2017. Actual payouts vary based on final performance results and range from 30% to 200% of target. Mr. Jarrell was not eligible for an STI award for 2017.
(2)
These columns show the performance stock units granted in 2017 to each of the NEOs under the 2005 Incentive Award Plan. See “Compensation Discussion and Analysis—Long-Term Incentives” for further discussion regarding the awards. Actual payouts vary based on final performance results and range from 30% to 200% of target. Earned performance stock units will be paid in shares of Common Stock in March 2020. Mr. Jarrell forfeited 9,910 of the performance stock units granted in 2017 upon his termination.
(3)
These columns show the restricted stock units granted in 2017 to each of the NEOs under the 2005 Incentive Award Plan. See “Compensation Discussion and Analysis—Long-Term Incentives” for further discussion regarding the awards. In addition to his annual LTI grant with a grant date value of $4,500,000 (split equally between restricted stock units and performance stock units), Mr. Lopez received a grant of restricted stock units with a grant date fair value of $160,650, to recognize him for his performance in his role, his shortfall in target direct compensation (in particular, LTI) versus peers, and the Committee’s desire to reduce that shortfall in the near-term. Mr. Jarrell forfeited all the restricted stock units granted in 2017 upon his termination.
(4)
The Company did not grant stock options in 2017.
(5)
The full grant date fair value was computed in accordance with FASB ASC 718 and the assumptions set forth in Note 14 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K filed with the SEC on February 14, 2018. There can be no assurances that the amounts shown in the table will be realized by the NEO.
In the event the performance stock units pay out at maximum value, the total grant date value of stock and option awards are:
For Mr. Lopez: $6,910,655.
For Ms. Bertsch: $1,950,009.
For Mr. Alvarez: $637,510.
For Mr. Baehren: $800,001.
For Mr. Torno: $603,007.
For Mr. Jarrell: $674,990.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END 2017
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Option Awards
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Stock Awards
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Equity
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Equity Incentive
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Incentive Plan
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Plan Awards:
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Number of
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Number of
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Awards:
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Market or Payout
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Securities
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Securities
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Number of
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Market Value
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Number of
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Value of
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Underlying
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Underlying
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Shares or
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of Shares or
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Unearned
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Unearned Shares,
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Unexercised
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Unexercised
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Units of
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Unit that
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Shares, Units
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Units or Other
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Options:
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Options:
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Option
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Option
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Stock that
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Have Not
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or Other Rights
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Rights that Have
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Exercisable
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Unexercisable
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Exercise
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Expiration
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Have Not
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Vested ($)
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that Have Not
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Not Vested ($)
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Name
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(#)
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(#)
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Price ($)
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Date
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Vested (#)
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(31)
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Vested (#)
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(31)
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Andres A. Lopez
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2017
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123,877
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(12)
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$
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2,746,353
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115,622
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(25)
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$
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2,563,340
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2016
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48,632
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(2)
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145,896
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15.05
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3/7/2023
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48,276
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(14)
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1,070,279
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128,738
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(27)
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2,854,121
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2015
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31,486
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(5)
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31,486
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23.99
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3/7/2022
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10,420
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(18)
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231,011
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41,684
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(30)
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924,134
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2014
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5,476
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(6)
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1,825
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25.73
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11/3/2021
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607
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(19)
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13,457
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2014
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7,033
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(7)
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2,344
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33.62
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3/7/2021
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929
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(20)
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20,596
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2013
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10,097
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(8)
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—
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26.07
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3/7/2020
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2012
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8,162
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(9)
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—
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22.69
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3/7/2019
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2011
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10,160
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(11)
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—
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29.89
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3/7/2018
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2004
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1,000
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(21)
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22,170
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1999
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3,000
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(24)
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66,510
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Jan A. Bertsch
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2017
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33,402
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(12)
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740,522
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33,402
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(25)
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740,522
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2016
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16,316
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(2)
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48,945
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15.05
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3/7/2023
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16,196
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(14)
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359,065
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43,189
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(27)
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957,500
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2015
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26,684
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(3)
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26,682
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19.19
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11/23/2022
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8,468
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(15)
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187,736
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33,872
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(28)
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750,942
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2015
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130,276
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(16)
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2,888,219
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Miguel I. Alvarez
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2017
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10,920
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(12)
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242,096
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10,920
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(25)
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242,096
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2016
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1,105
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(1)
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3,312
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17.78
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9/7/2023
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1,054
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(13)
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23,367
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2,812
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(26)
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62,342
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2016
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4,393
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(2)
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13,177
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15.05
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3/7/2023
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4,360
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(14)
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96,661
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11,628
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(27)
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257,793
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2015
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3,936
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(5)
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3,936
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23.99
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3/7/2022
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1,302
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(18)
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28,865
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5,211
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(30)
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115,528
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2014
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1,266
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(7)
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422
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33.62
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3/7/2021
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167
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(20)
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3,702
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2013
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1,817
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(8)
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—
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26.07
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3/7/2020
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2012
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1,632
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(9)
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—
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22.69
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3/7/2019
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2011
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2,032
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(11)
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—
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29.89
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3/7/2018
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James W. Baehren
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2017
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20,555
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(25)
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455,704
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2016
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7,530
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(2)
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22,590
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15.05
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3/7/2023
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7,475
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(14)
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165,721
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19,934
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(27)
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441,937
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2015
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9,446
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(5)
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9,446
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23.99
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3/7/2022
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3,126
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(18)
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69,303
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12,505
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(30)
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277,236
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|
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2014
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8,440
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(7)
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2,813
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33.62
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3/7/2021
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1,115
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(20)
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24,720
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|
|
|
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|
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2013
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12,116
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(8)
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—
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26.07
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3/7/2020
|
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|
|
|
|
|
|
|
|
|
|
|
2012
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13,993
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(9)
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—
|
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22.69
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|
3/7/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
2011
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13,208
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(11)
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—
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29.89
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3/7/2018
|
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2004
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|
|
|
|
|
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15,000
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(21)
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332,550
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2003
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|
|
|
|
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12,000
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(22)
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266,040
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2002
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|
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10,000
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(23)
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221,700
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1999
|
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3,000
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(24)
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66,510
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|
|
|
|
|
Vitaliano Torno
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2017
|
|
|
|
|
|
|
|
|
|
10,329
|
(12)
|
|
228,994
|
|
10,329
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(25)
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|
228,994
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|
|
2016
|
|
4,325
|
(2)
|
12,974
|
|
15.05
|
|
3/7/2023
|
|
4,293
|
(14)
|
|
95,176
|
|
11,448
|
(27)
|
|
253,802
|
|
|
2015
|
|
1,536
|
(4)
|
1,535
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|
24.92
|
|
5/4/2022
|
|
501
|
(17)
|
|
11,107
|
|
2,006
|
(29)
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|
44,473
|
|
|
2015
|
|
2,362
|
(5)
|
2,361
|
|
23.99
|
|
3/7/2022
|
|
781
|
(18)
|
|
17,315
|
|
3,126
|
(30)
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|
69,303
|
|
|
2014
|
|
1,548
|
(7)
|
515
|
|
33.62
|
|
3/7/2021
|
|
204
|
(20)
|
|
4,523
|
|
|
|
|
|
|
|
2013
|
|
2,201
|
(8)
|
—
|
|
26.07
|
|
3/7/2020
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
2,332
|
(9)
|
—
|
|
22.69
|
|
3/7/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
2,903
|
(11)
|
—
|
|
29.89
|
|
3/7/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
2004
|
|
|
|
|
|
|
|
|
|
2,000
|
(21)
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|
44,340
|
|
|
|
|
|
|
|
2003
|
|
|
|
|
|
|
|
|
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1,000
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(22)
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22,170
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|
|
|
|
|
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|
2002
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|
|
|
|
|
|
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|
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1,000
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(23)
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22,170
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|
|
|
|
|
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|
1999
|
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|
|
|
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|
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3,000
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(24)
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66,510
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Paul A. Jarrell (32)
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2017
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|
|
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—
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—
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1,652
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(25)
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36,625
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2016
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|
—
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—
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—
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7,439
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(27)
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164,923
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|
|
2015
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|
7,085
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(5)
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—
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|
23.99
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|
8/1/2018
|
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—
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|
|
—
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|
7,995
|
(30)
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|
177,249
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|
|
2014
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6,330
|
(7)
|
—
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|
33.62
|
|
8/1/2018
|
|
—
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|
|
—
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|
|
|
|
|
|
|
2013
|
|
8,078
|
(8)
|
—
|
|
26.07
|
|
8/1/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
9,328
|
(9)
|
—
|
|
22.69
|
|
8/1/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
10,160
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(10)
|
—
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|
30.17
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6/6/2018
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OPTION AWARD VESTING SCHEDULE
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Vesting Dates
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Option Grant Date
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Option Price
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25%
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25%
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25%
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25%
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(1) September 1, 2016
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$
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17.78
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9/1/17
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9/1/18
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9/1/19
|
|
9/1/20
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(2) March 7, 2016
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$
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15.05
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3/7/17
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|
3/7/18
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|
3/7/19
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|
3/7/20
|
(3) November 23, 2015
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$
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19.19
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11/23/16
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|
11/23/17
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|
11/23/18
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|
11/23/19
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(4) May 4, 2015
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$
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24.92
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5/4/16
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|
5/4/17
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|
5/4/18
|
|
5/4/19
|
(5) March 7, 2015
|
|
$
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23.99
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|
3/7/16
|
|
3/7/17
|
|
3/7/18
|
|
3/7/19
|
(6) November 3, 2014
|
|
$
|
25.73
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|
11/3/15
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|
11/3/16
|
|
11/3/17
|
|
11/3/18
|
(7) March 7, 2014
|
|
$
|
33.62
|
|
3/7/15
|
|
3/7/16
|
|
3/7/17
|
|
3/7/18
|
(8) March 7, 2013
|
|
$
|
26.07
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|
3/7/14
|
|
3/7/15
|
|
3/7/16
|
|
3/7/17
|
(9) March 7, 2012
|
|
$
|
22.69
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|
3/7/13
|
|
3/7/14
|
|
3/7/15
|
|
3/7/16
|
(10) June 6, 2011
|
|
$
|
30.17
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|
6/6/12
|
|
6/6/13
|
|
6/6/14
|
|
6/6/15
|
(11) March 7, 2011
|
|
$
|
29.89
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|
3/7/12
|
|
3/7/13
|
|
3/7/14
|
|
3/7/15
|
RESTRICTED STOCK VESTING SCHEDULE
|
|
|
Grant Date
|
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Vesting Terms
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(12) March 7, 2017
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The restriction on these shares lapse in equal annual installments on each of the first four anniversaries of the grant date.
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(13) September 1, 2016
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The restriction on these shares lapse in equal annual installments on each of the first four anniversaries of the grant date.
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(14) March 7, 2016
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|
The restriction on these shares lapse in equal annual installments on each of the first four anniversaries of the grant date.
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(15) November 23, 2015
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|
The restriction on these shares lapse in equal annual installments on each of the first four anniversaries of the grant date.
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(16) November 23, 2015 (Special)
|
|
The restriction on these shares lapse in full on the third anniversary of the grant date.
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(17) May 4, 2015
|
|
The restriction on these shares lapse in full on the third anniversary of the grant date.
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(18) March 7, 2015
|
|
The restriction on these shares lapse in equal annual installments on each of the first four anniversaries of the grant date.
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(19) November 3, 2014
|
|
The restriction on these shares lapse in equal annual installments on each of the first four anniversaries of the grant date.
|
(20) March 7, 2014
|
|
The restriction on these shares lapse in equal annual installments on each of the first four anniversaries of the grant date.
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(21) March 10, 2004
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|
The restrictions on these shares lapse upon the later to occur of (a) the third anniversary of the grant date, and (b) either (i) the grantee’s retirement from the Company, or (ii) a termination of employment that is not initiated by, and not voluntary on the part of the grantee other than for cause.
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(22) February 17, 2003
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|
The restrictions on these shares lapse upon the later to occur of (a) the third anniversary of the grant date, and (b) either (i) the grantee’s retirement from the Company, or (ii) a termination of employment that is not initiated by, and not voluntary on the part of the grantee other than for cause.
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(23) February 2, 2002
|
|
The restrictions on these shares lapse upon the later to occur of (a) the third anniversary of the grant date, and (b) either (i) the grantee’s retirement from the Company, or (ii) a termination of employment that is not initiated by, and not voluntary on the part of the grantee other than for cause.
|
(24) May 17, 1999
|
|
The restrictions on these shares lapse upon the later to occur of (a) the third anniversary of the grant date, and (b) either (i) the grantee’s retirement from the Company, or (ii) a termination of employment that is not initiated by, and not voluntary on the part of the grantee other than for cause.
|
PERFORMANCE SHARE VESTING SCHEDULE
|
|
|
Grant Date
|
|
Vesting Terms
|
(25) March 7, 2017
|
|
Performance shares for the grant period of 2017-2019. The terms of these performance shares are described in the section entitled "Compensation Discussion and Analysis."
|
(26) September 1, 2016
|
|
Performance shares for the grant period of 2016-2018. The terms of these performance shares are described in the section entitled "Compensation Discussion and Analysis."
|
(27) March 7, 2016
|
|
Performance shares for the grant period of 2016-2018. The terms of these performance shares are described in the section entitled "Compensation Discussion and Analysis."
|
(28) November 23, 2015
|
|
Performance shares for the grant period of 2015-2017. The terms of these performance shares are described in the section entitled "Compensation Discussion and Analysis."
|
(29) May 4, 2015
|
|
Performance shares for the grant period of 2015-2017. The terms of these performance shares are described in the section entitled "Compensation Discussion and Analysis."
|
(30) March 7, 2015
|
|
Performance shares for the grant period of 2015-2017. The terms of these performance shares are described in the section entitled "Compensation Discussion and Analysis."
|
(31) Market value is computed based on the closing price of the Company's Common Stock on the New York Stock Exchange on December 31, 2017 ($22.17), the last business day of the year.
|
(32) Mr. Jarrell forfeited all restricted stock units and a prorated portion of the performance stock units upon his termination. Options remain exercisable the earlier of one year from termination date or original expiration date.
|
OPTION EXERCISES AND STOCK VESTED IN 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
|
|
Number
|
|
|
|
|
|
|
|
|
|
|
Of Shares
|
|
Value
|
|
Number of
|
|
Value
|
|
|
Acquired on
|
|
Realized
|
|
Shares Acquired
|
|
Realized
|
Name
|
|
Exercise (#)
|
|
on Exercise ($)
|
|
On Vesting (#)
|
|
on Vesting ($)
|
Andres A. Lopez
|
|
|
|
|
|
|
29,641
|
|
$
|
594,268
|
Jan A. Bertsch
|
|
|
|
|
|
|
9,633
|
|
$
|
206,597
|
Miguel I. Alvarez
|
|
|
|
|
|
|
3,226
|
|
$
|
66,067
|
James W. Baehren
|
|
|
|
|
|
|
11,137
|
|
$
|
222,406
|
Vitaliano Torno
|
|
|
|
|
|
|
3,011
|
|
$
|
60,521
|
Paul A. Jarrell
|
|
5,648
|
|
$
|
53,975
|
|
8,620
|
|
$
|
172,141
|
PENSION BENEFITS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017
|
|
|
|
|
Number of
|
|
|
|
|
Payments
|
|
|
|
|
Years of
|
|
Present value of
|
|
During Last
|
|
|
|
|
Credited
|
|
Accumulated
|
|
Fiscal Year
|
Name (1)
|
|
Plan Name
|
|
service (#)
|
|
Benefit ($)(2)
|
|
($)
|
Andres A. Lopez
|
|
Salary Retirement Plan
|
|
5.00
|
|
$
|
149,696
|
|
$
|
—
|
|
|
Supplemental Retirement Benefit Plan
|
|
29.92
|
|
|
3,538,127
|
|
|
—
|
|
|
Total
|
|
|
|
|
3,687,823
|
|
|
|
James W. Baehren
|
|
Salary Retirement Plan
|
|
23.67
|
|
|
1,928,174
|
|
|
—
|
|
|
Supplemental Retirement Benefit Plan
|
|
23.67
|
|
|
1,686,718
|
|
|
—
|
|
|
Total
|
|
|
|
|
3,614,892
|
|
|
|
Vitaliano Torno
|
|
Swiss Pension Plan
|
|
11.42
|
|
|
1,642,525
|
|
|
—
|
|
|
Total
|
|
|
|
|
1,642,525
|
|
|
|
(1)
Ms. Bertsch, Mr. Alvarez and Mr. Jarrell are not participants in the Salary Retirement Plan or the Supplemental Retirement Benefit Plan.
Additionally, Mr. Alvarez is not a participant in any other foreign pension plan.
Mr. Lopez is a participant in the International Plan, as he was employed abroad during a portion of his career with O-I. The International Plan benefit provides him with a retirement benefit equal to the O-I SRBP, and includes US and non-US pay and service. The value of this benefit is shown as his SRBP.
(2) The
Owens‑Illinois Salary Retirement Plan and International Pension Plan were frozen as of December 31, 2015. Participants maintain benefits accrued as of the freeze date, but will not accrue additional benefits beyond the freeze date.
In general,
the present values increased as a result of lower interest rates.
Assumptions for Salary Retirement Plan and Supplemental Retirement Benefit Plan:
No preretirement mortality is assumed. After retirement, for the portion of the benefit assumed to be received as an annuity, mortality is RP-2014 projected generationally using MP-2016 scale for December 31, 2016, and RP-2014 projected generationally using MP-2017 scale for December 31, 2017. For the portion of the benefit assumed to be received as a lump sum, mortality is a blended RP-2014 annuitant mortality table with MP-2016 generational projection for December 31, 2016, and a blended RP-2014 annuitant mortality table with MP-2017 generational projection for December 31, 2017.
Lump Sum Rate - Salary Retirement Plan: 3.68%
Lump Sum Rate - Supplemental Retirement Benefit Plan: 3.69%
Annuity Rate - Salary Retirement Plan: 3.68%
Annuity Rate - Supplemental Retirement Benefit Plan: N/A
Benefits are deferred to the earliest unreduced retirement age, which is the later of the executive’s age or age 65.
All SRBP and International Plan benefits are assumed to be taken as a lump sum; 80% of Salary Retirement Plan benefits are assumed to be taken as a lump sum with the remaining 20% taken as an annuity.
The International Plan has been offset for the US SRBP and Salary Retirement Plan only.
Assumptions for Swiss Pension Plan:
No preretirement mortality is assumed. After retirement, mortality is calculated according to mortality table BVG 2015 Generational (generated for the calendar year 2017).
December 31, 2017 Exchange Rate (USD/CHF): 1.02619
Discount Rate: 0.50%
Interest Crediting Rate: 0.50%
Salary Increase: 1.25%
Mandatory Conversion rate at 65: 6.80%
Supplementary Conversion rate at 65: 5.000%
Non-Qualified Deferred Compensation (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 Values
|
|
|
Executive
|
|
Registrant
|
|
Aggregate
|
|
Aggregate
|
|
Aggregate
|
|
|
Contributions
|
|
Contributions
|
|
Earnings
|
|
Withdrawals /
|
|
Balance at
|
|
|
in Last FY ($)
|
|
in Last FY ($)
|
|
in Last FY
|
|
Distributions
|
|
Last FYE
|
|
|
(2)
|
|
(3)
|
|
($) (4)
|
|
($)
|
|
($) (5)
|
Andres A. Lopez
|
|
$
|
245,215
|
|
$
|
142,258
|
|
$
|
48,013
|
|
$
|
—
|
|
$
|
435,486
|
Jan A. Bertsch
|
|
|
108,020
|
|
|
65,860
|
|
|
36,070
|
|
|
—
|
|
|
297,397
|
Miguel I. Alvarez
|
|
|
50,952
|
|
|
30,514
|
|
|
6,815
|
|
|
—
|
|
|
88,281
|
James W. Baehren
|
|
|
22,125
|
|
|
16,800
|
|
|
11,698
|
|
|
—
|
|
|
381,810
|
Vitaliano Torno
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
Paul A. Jarrell (6)
|
|
|
27,647
|
|
|
13,823
|
|
|
28,369
|
|
|
—
|
|
|
203,245
|
(1)
Participants may defer up to 100% of base salary into the Executive Deferred Savings Plan. Deferrals made prior to January 1, 2009, including the Company match on such deferrals, could be credited to a “cash deferral account” or a “stock deferral account” at the individual’s election. Interest is credited in the “cash” account, compounded monthly, at a rate equal to the average annual yield on domestic corporate bonds of Moody’s A- rated companies. The “stock” account is credited with a number of stock units equal in value to the amount specified to be credited to each respective account, and the value of such account is determined by reference to the closing price of the Company’s stock on the principal exchange on which Company stock is traded on the day before the date on or as of which such value is being determined or, if no Company stock was traded on such day, then on the next preceding trading day on which Company stock was so traded. Deferrals after December 31, 2008, including the Company match on such deferrals, are credited to the same funds available under the Company’s qualified 401(k) plan. Upon any termination of employment, the account balance is paid out in its entirety as soon as practical following such termination.
As Mr. Torno is based in Switzerland, he is not a participant in this program.
(2)
Amounts in this column are included in the NEO’s base salary on the “Summary Compensation Table.”
(3)
Amounts in this column are included in the “All Other Compensation” column on the “Summary Compensation Table.”
(4)
Amounts in this column are not included in any of the amounts reported on the “Summary Compensation Table.”
(5)
Of the total amounts listed in this column, the following amounts have been included in the “Salary” or “All Other Compensation” columns on the “Summary Compensation Table” since 2006: for Mr. Lopez - $387,473, for Ms. Bertsch—$261,201, for Mr. Alvarez-$81,465, for Mr. Baehren—$202,112, and for Mr. Jarrell $158,983.
(6)
The aggregate balance for Mr. Jarrell was paid out in 2018.
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
The following tables show the amount of compensation that may be paid to each NEO upon voluntary termination, retirement, involuntary termination not for cause, Change in Control, for cause termination, disability, and death. The amounts shown assume a termination date effective December 31, 2017, the last business day of the year. For payments made pursuant to stock options, restricted stock units, or performance stock units, the amount earned by each NEO upon retirement may differ based on whether they are eligible for early or normal retirement. As a result, the table reflects only that amount they were eligible for at December 31, 2017.
Unless specifically noted, each of the payments described below is the same for any salaried employee of the Company.
Payments Made Upon Termination
Payments made upon termination for any reason include:
Amounts accrued and vested through the Salary Retirement Plan (SRP), Supplemental Retirement Benefit Plan (SRBP), International Pension Plan and Swiss Pension Plan.
Equity awards that become vested at the date of termination; stock option awards that were vested but unexercised as of December 31, 2017 were excluded from the values shown.
Payments Made Upon Retirement
In addition to the above:
Upon retirement (defined as at least age 60 with at least ten years of service, or, for grants made in 2014 and after, age 65 with no service requirement):
Unvested stock options continue normal vesting and are exercisable through their original term.
Unvested restricted stock units continue normal vesting if granted at least one year prior to the retirement date; restricted stock units granted less than one year prior to the retirement date are forfeited.
Unvested performance stock units immediately vest and any payout earned based on company performance will be paid following the related three‑year cycle.
Mr. Lopez is eligible to participate in the Company’s retiree medical plan as he became eligible to retire at age 55 with at least 10 years of service. This plan provides pre‑age 65 coverage to employees and their spouse. As Mr. Baehren is now over age 65, he is no longer eligible for retiree medical. The plan is only available to U.S. employees hired prior to January 1, 2003; as a result, the other NEOs are not eligible to participate in this plan.
Payments Made Upon Involuntary Termination Not For Cause
In addition to that noted under Payments Made upon Termination, upon an Involuntary Termination Not for Cause:
Unvested stock options are forfeited. Vested stock options can be exercised through the earlier of one year from the termination date or the end of the grant term.
Unvested restricted stock units are forfeited.
Unvested performance stock units immediately vest on a pro rata basis and any payout earned based on company performance will be paid following the related three‑year cycle
In the event of Involuntary Termination Not for Cause, under the terms of the Executive Severance Policy, the NEOs are eligible to receive a lump sum severance benefit equal to two times annual base salary plus target bonus, plus continued health benefits for twenty‑four months at the same rate as active employees. If the provision of health benefits, however, would cause a negative tax consequence for the Company under the Affordable Care Act, then the Company will pay the executive the value of the health benefits in cash. Executives will also be entitled to standard outplacement benefits. Severance benefits are subject to the executive entering into a restrictive covenant agreeing not to compete with the Company or solicit the Company’s employees for a period of three years following termination of employment for any reason, as well as, not to disclose confidential information or disparage the Company. An executive must sign a release of claims before receiving any severance under the Policy. If the executive is a party to an agreement providing severance benefits, then he or she will receive benefits under either the Policy or such other agreement, whichever provides the greater benefit, but may not receive severance under both.
Payments Made Upon Change in Control
In the event of a Change in Control (with award assumed by acquirer):
Unvested stock options granted in 2015 or later will remain outstanding and continue to vest according to their normal vesting schedule. If the Employee is terminated within two years of the Change in Control without “cause” or for “good reason”, the options will fully vest and be paid out. If not assumed by acquirer, the options become fully exercisable prior to the effective date of a Change in Control and will be paid out. Options granted prior to 2015, become fully exercisable upon the Change in Control and must be exercised or will expire on the effective date of such Change in Control.
Unvested restricted stock units and performance stock units granted in 2015 or later will remain outstanding and continue to vest according to their normal vesting schedule. If the Employee is terminated within two years of the Change in Control without “cause” or for “good reason”, the units will fully vest and be paid out (at target level for performance stock units). Unvested restricted stock units granted prior to 2015 will fully vest and be paid out prior to the Change in Control (at target level for performance stock units).
In the event of an Involuntary Termination Not for Cause, including a termination for “good reason”, during the twenty four month period following a Change in Control, under the terms of the Executive Severance Policy, the NEOs are eligible to receive those benefits noted above in the event of Involuntary Termination Not for Cause. If the severance benefits, along with any other payments occurring in connection with a Change in Control, were to cause the executive to be subject to the excise tax provisions of Sections 4999 of the Internal Revenue Code, then the amount of the severance benefits will either be reduced, such that the excise tax would not be applicable, or the executive will be entitled to retain his or her full severance benefits, whichever results in the better after tax position to the executive.
Payments Made Upon Death or Total Disability
Upon Death or Total Disability:
Unvested stock options immediately vest and can be exercised through the earlier of one year from the date of death/disability or the end of the grant term.
Unvested restricted stock units and performance stock units immediately vest and any performance stock unit payout earned based on company performance will be paid following the related three‑year cycle.
In the event of Disability, each NEO with at least one year of service at the time of disability is eligible to participate in the Company’s long‑term disability plan for salaried employees. This plan pays participants approximately 60% of their base salary plus target bonus in combination with other types of income replacement benefits, such as Social Security or workers’ compensation, capped at $15,000 per month, for the duration of their disability, or until age 65.
In the event of Disability, each NEO receives continued coverage under the Company’s health care plan for active employees for the duration of their coverage under the Company’s long‑term disability plan.
The NEOs based in the U.S. participate in a life insurance program that differs from that offered to most salaried employees of the Company. For these NEOs, the benefit payable to the beneficiary upon death is three times annual base salary.
The following tables represent potential payments to the NEOs under the various termination scenarios. The values assume termination on December 31, 2017.
Andres A. Lopez
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change In
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary
|
|
Control
|
|
Change In
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination Not
|
|
Without
|
|
Control With
|
|
For Cause
|
|
|
|
|
|
|
|
|
Retirement
|
|
For Cause
|
|
Termination
|
|
Termination
|
|
Termination
|
|
Disability
|
|
Death
|
Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 Annual Incentive (STI)
|
|
$
|
—
|
|
$
|
—
|
|
$
|
1,601,730
|
|
$
|
—
|
|
$
|
—
|
|
$
|
1,601,730
|
|
$
|
1,601,730
|
Annual Incentive (STI)
|
|
|
—
|
|
|
2,850,000
|
|
|
—
|
|
|
2,850,000
|
|
|
—
|
|
|
—
|
|
|
—
|
Stock Options
|
|
|
—
|
|
|
—
|
|
|
1,038,780
|
|
|
1,038,780
|
|
|
—
|
|
|
1,038,780
|
|
|
1,038,780
|
Performance Shares
|
|
|
—
|
|
|
3,510,699
|
|
|
6,341,595
|
|
|
6,341,595
|
|
|
—
|
|
|
6,341,595
|
|
|
6,341,595
|
Restricted Stock Awards
|
|
|
88,680
|
|
|
88,680
|
|
|
4,170,377
|
|
|
4,170,377
|
|
|
—
|
|
|
4,170,377
|
|
|
4,170,377
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefits and Perquisites
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement Plans (SRP, SRBP & International)
|
|
|
3,333,000
|
|
|
3,333,000
|
|
|
3,333,000
|
|
|
3,333,000
|
|
|
3,333,000
|
|
|
3,333,000
|
|
|
2,831,000
|
Health & Welfare Benefits
|
|
|
2,022,000
|
|
|
2,037,832
|
|
|
—
|
|
|
2,037,832
|
|
|
2,022,000
|
|
|
2,032,840
|
|
|
47,000
|
Disability Income
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,395,228
|
|
|
—
|
Life Insurance Benefits
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,850,000
|
Cash Severance
|
|
|
—
|
|
|
1,900,000
|
|
|
—
|
|
|
1,900,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
280G Tax Adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustment from Modified Cap
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
Total
|
|
$
|
5,443,680
|
|
$
|
13,720,211
|
|
$
|
16,485,482
|
|
$
|
21,671,584
|
|
$
|
5,355,000
|
|
$
|
19,913,550
|
|
$
|
18,880,482
|
Assumptions
No preretirement mortality is assumed. After retirement, for the portion of the benefit assumed to be received as an annuity, mortality is RP‑2014 projected generationally using MP‑2017 scale. For the portion of the benefit assumed to be received as a lump sum, mortality is a blended RP‑2014 annuitant mortality table with MP‑2017 generational projection.
Executive life insurance benefits (included in health and welfare) include assumed tax gross up of 39.6% for Federal and 4.997% for Ohio state taxes.
All SRBP and International Plan benefits are assumed to be taken as a lump sum. Eighty percent of Salary Retirement Plan benefits are assumed to be taken as a lump sum with the remaining twenty percent as an annuity. The Salary Retirement Plan interest rate is 3.68%, the interest rate used for lump sums in the SRBP and International Plan is 3.69% and the Salary health and welfare benefits is 3.56%.
Benefits Payable
Termination benefits represent the value of the pension benefits as if the participant terminated employment on December 31, 2017 and commences payment immediately. The value of the post-retirement medical and executive retiree life insurance benefits assume the participant terminated as of December 31, 2017 and immediately elected coverage.
Retirement benefits represent the value of the pension benefits as if the participant terminated on December 31, 2017 and commenced payment as soon as possible. Since Mr. Lopez is currently eligible to retire, this value represents commencement at December 31, 2017. The health and welfare benefits represent the value of the postretirement medical and executive retiree life insurance benefits as if the participant terminated as of December 31, 2017 and immediately elected coverage.
Involuntary Termination Not for Cause severance benefits are subject to the executive entering into a restrictive covenant agreeing not to compete with the Company or solicit the Company’s employees for a period of three years following termination of employment for any reason, as well as, not to disclose confidential information or disparage the Company. An executive must sign a release of claims before receiving any severance under the Policy. Involuntary
termination not for cause termination reflects two times the sum of current base salary plus target annual incentive, two years of health and welfare benefits and outplacement services. Retiree medical benefits are deferred until 24 months after termination.
Change In Control With Termination reflects two times the sum of current base salary plus target annual incentive, two years of health and welfare benefits and outplacement services. The executives are entitled to receive the greater after-tax benefit between 1) reducing the payments to their respective 280G safe harbor limit, and 2) no reduction of benefits, such that the executive would be subject to a 20% excise tax. Mr. Lopez’s benefits do not reflect a cutback.
Disability benefits represent the value of benefits as if the participant became disabled on December 31, 2017 and received disability benefits until age 65. Pension benefits reflect accrued benefits payable immediately. Health and welfare benefits represent continued coverage until age 65 and the value of the executive retiree life insurance benefits as if the participant terminated as of December 31, 2017.
Death benefits represent the value of benefits as if the participant became deceased on December 31, 2017. Pension benefits reflect an immediate lump‑sum payable to the spouse equal to the greater of the lump‑sum value of the pre-retirement 50% Joint and Survivor spouse benefit, or the lump-sum value of 25% of the participant’s base pay. Salary Retirement Plan benefits reflect a 50% Joint and Survivor benefit payable at the participant’s earliest retirement date. Health and welfare benefits represent retiree medical benefits for the spouse if the participant was retirement eligible as of December 31, 2017.
Retiree medical benefits are not available post age 65.
Jan A. Bertsch
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change In
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary
|
|
Control
|
|
Change In
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary
|
|
Termination Not
|
|
Without
|
|
Control With
|
|
For Cause
|
|
|
|
|
|
|
|
|
Resignation
|
|
For Cause
|
|
Termination
|
|
Termination
|
|
Termination
|
|
Disability
|
|
Death
|
Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 Annual Incentive (STI)
|
|
$
|
—
|
|
$
|
—
|
|
$
|
614,141
|
|
$
|
—
|
|
$
|
—
|
|
$
|
614,141
|
|
$
|
614,141
|
Annual Incentive (STI)
|
|
|
—
|
|
|
1,072,000
|
|
|
—
|
|
|
1,072,000
|
|
|
—
|
|
|
—
|
|
|
—
|
Stock Options
|
|
|
—
|
|
|
—
|
|
|
427,999
|
|
|
427,999
|
|
|
—
|
|
|
427,999
|
|
|
427,999
|
Performance Shares
|
|
|
—
|
|
|
1,583,980
|
|
|
2,448,965
|
|
|
2,448,965
|
|
|
—
|
|
|
2,448,965
|
|
|
2,448,965
|
Restricted Stock Awards
|
|
|
—
|
|
|
—
|
|
|
4,175,542
|
|
|
4,175,542
|
|
|
—
|
|
|
4,175,542
|
|
|
4,175,542
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefits and Perquisites
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement Plans
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
Health & Welfare Benefits
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
Disability Income
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
591,508
|
|
|
—
|
Life Insurance Benefits
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,010,000
|
Cash Severance
|
|
|
—
|
|
|
1,340,000
|
|
|
—
|
|
|
1,340,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
280G Tax Adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustment from Modified Cap
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
Total
|
|
$
|
—
|
|
$
|
3,995,980
|
|
$
|
7,666,647
|
|
$
|
9,464,506
|
|
$
|
—
|
|
$
|
8,258,155
|
|
$
|
9,676,647
|
Benefits Payable
Ms. Bertsch is not eligible for a retirement plan.
As Ms. Bertsch declined Health and Welfare benefits for 2017, she does not receive any of those benefits under the termination scenarios.
Involuntary Termination Not for Cause severance benefits are subject to the executive entering into a restrictive covenant agreeing not to compete with the Company or solicit the Company’s employees for a period of three years following termination of employment for any reason, as well as, not to disclose confidential information or disparage the Company. An executive must sign a release of claims before receiving any severance under the Policy. Involuntary termination not for cause termination reflects two times the sum of current base salary plus target annual incentive and outplacement services.
Change In Control With Termination reflects two times the sum of current base salary plus target annual incentive, two years of health and welfare benefits and outplacement services. The executives are entitled to receive the greater after-tax benefit between 1) reducing the payments to their respective 280G safe harbor limit, and 2) no reduction of benefits, such that the executive would be subject to a 20% excise tax. Ms. Bertsch’s benefits do not reflect a cutback.
Disability benefits represent the value of benefits as if the participant became disabled on December 31, 2017 and received disability benefits until age 65.
Miguel I. Alvarez
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change In
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary
|
|
Control
|
|
Change In
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary
|
|
Termination Not
|
|
Without
|
|
Control With
|
|
For Cause
|
|
|
|
|
|
|
|
|
Resignation
|
|
For Cause
|
|
Termination
|
|
Termination
|
|
Termination
|
|
Disability
|
|
Death
|
Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 Annual Incentive (STI)
|
|
$
|
—
|
|
$
|
—
|
|
$
|
328,595
|
|
$
|
—
|
|
$
|
—
|
|
$
|
328,595
|
|
$
|
328,595
|
Annual Incentive (STI)
|
|
|
—
|
|
|
617,500
|
|
|
—
|
|
|
617,500
|
|
|
—
|
|
|
—
|
|
|
—
|
Stock Options
|
|
|
—
|
|
|
—
|
|
|
108,362
|
|
|
108,362
|
|
|
—
|
|
|
108,362
|
|
|
108,362
|
Performance Shares
|
|
|
—
|
|
|
387,828
|
|
|
677,759
|
|
|
677,759
|
|
|
—
|
|
|
677,759
|
|
|
677,759
|
Restricted Stock Awards
|
|
|
—
|
|
|
—
|
|
|
394,693
|
|
|
394,693
|
|
|
—
|
|
|
394,693
|
|
|
394,693
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefits and Perquisites
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement Plans
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
Health & Welfare Benefits
|
|
|
—
|
|
|
29,068
|
|
|
—
|
|
|
29,068
|
|
|
—
|
|
|
165,928
|
|
|
7,267
|
Disability Income
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,626,204
|
|
|
—
|
Life Insurance Benefits
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,425,000
|
Cash Severance
|
|
|
—
|
|
|
950,000
|
|
|
—
|
|
|
950,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
280G Tax Adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustment from Modified Cap
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
Total
|
|
$
|
—
|
|
$
|
1,984,396
|
|
$
|
1,509,409
|
|
$
|
2,777,382
|
|
$
|
—
|
|
$
|
3,301,541
|
|
$
|
2,941,676
|
Mr. Alvarez is not eligible for a retirement plan.
Involuntary Termination Not for Cause severance benefits are subject to the executive entering into a restrictive covenant agreeing not to compete with the Company or solicit the Company’s employees for a period of three years following termination of employment for any reason, as well as, not to disclose confidential information or disparage the Company. An executive must sign a release of claims before receiving any severance under the Policy. Involuntary termination not for cause termination reflects two times the sum of current base salary plus target annual incentive, two years of health and welfare benefits and outplacement services.
Change In Control With Termination reflects two times the sum of current base salary plus target annual incentive, two years of health and welfare benefits and outplacement services. The executives are entitled to receive the greater after-tax benefit between 1) reducing the payments to their respective 280G safe harbor limit, and 2) no reduction of benefits, such that the executive would be subject to a 20% excise tax. Mr. Alvarez’s benefits do not reflect a cutback.
Disability benefits represent the value of benefits as if the participant became disabled on December 31, 2017 and received disability benefits until age 65. Health and welfare benefits represent continued coverage until age 65 for the participant and all eligible dependents, subject to dependent limiting age of 26.
Death benefits represent the value of benefits as if the participant became deceased on December 31, 2017. Health and welfare benefits represent continued coverage for eligible dependents, subject to dependent limiting age of 26, for 6 months.
James W. Baehren
Mr. Baehren retired from the Company effective January 1, 2018.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change In
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary
|
|
Control
|
|
Change In
|
|
|
|
|
|
|
|
|
|
|
|
Normal
|
|
Termination Not
|
|
Without
|
|
Control With
|
|
For Cause
|
|
|
|
|
|
|
|
|
Retirement
|
|
For Cause
|
|
Termination
|
|
Termination
|
|
Termination
|
|
Disability
|
|
Death
|
Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 Annual Incentive (STI)
|
|
$
|
288,420
|
|
$
|
—
|
|
$
|
288,420
|
|
$
|
—
|
|
$
|
—
|
|
$
|
288,420
|
|
$
|
288,420
|
Annual Incentive (STI)
|
|
|
—
|
|
|
604,500
|
|
|
—
|
|
|
604,500
|
|
|
—
|
|
|
—
|
|
|
—
|
Stock Options
|
|
|
160,841
|
|
|
—
|
|
|
160,841
|
|
|
160,841
|
|
|
—
|
|
|
160,841
|
|
|
160,841
|
Performance Shares
|
|
|
1,174,877
|
|
|
1,174,877
|
|
|
1,174,877
|
|
|
1,174,877
|
|
|
—
|
|
|
1,174,877
|
|
|
1,174,877
|
Restricted Stock Awards
|
|
|
1,146,544
|
|
|
1,146,544
|
|
|
1,146,544
|
|
|
1,146,544
|
|
|
—
|
|
|
1,146,544
|
|
|
1,146,544
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefits and Perquisites
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement Plans (SRP & SRBP Benefit)
|
|
|
3,615,000
|
|
|
3,615,000
|
|
|
3,615,000
|
|
|
3,615,000
|
|
|
3,615,000
|
|
|
3,615,000
|
|
|
1,612,000
|
Health & Welfare Benefits
|
|
|
1,326,000
|
|
|
1,326,000
|
|
|
1,326,000
|
|
|
1,326,000
|
|
|
1,326,000
|
|
|
1,326,000
|
|
|
—
|
Disability Income
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
Life Insurance Benefits
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,395,000
|
Cash Severance
|
|
|
—
|
|
|
930,000
|
|
|
—
|
|
|
930,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
280G Tax Adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustment from Modified Cap
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
Total
|
|
$
|
7,711,682
|
|
$
|
8,796,921
|
|
$
|
7,711,682
|
|
$
|
8,957,762
|
|
$
|
4,941,000
|
|
$
|
7,711,682
|
|
$
|
5,777,682
|
Assumptions
No preretirement mortality is assumed. After retirement, for the portion of the benefit assumed to be received as an annuity, mortality is RP‑2014 projected generationally using MP‑2017 scale. For the portion of the benefit assumed to be received as a lump sum, mortality is a blended RP‑2014 annuitant mortality table with MP‑2017 generational projection.
Executive life insurance benefits (included in health and welfare) include assumed tax gross up of 39.6% for Federal and 4.997% for Ohio state taxes.
All SRBP benefits are assumed to be taken as a lump sum. Eighty percent of Salary Retirement Plan benefits are assumed to be taken as a lump sum with the remaining twenty percent as an annuity. The interest rate used for lump sums and annuities for the Salary Retirement Plan is 3.68%, the interest rate used for lump sums in the SRBP is 3.69% and the interest rate used for the Salary health and welfare benefits is 3.56%. Mr. Baehren’s SRBP benefit reflects a $103,000 offset for payments previously received.
Benefits Payable
Termination benefits represent the value of the pension and executive retiree life insurance benefits (including the tax gross up) as if the participant terminated employment on December 31, 2017 and commences payment immediately (since he is past his normal retirement date). No post‑retirement medical benefits are included since he and his spouse are over age 65. There are no provisions in the pension plans that are contingent on the type of termination.
Earliest retirement benefits represent the value of the pension benefits and executive retiree life insurance (including the tax gross up) benefits as if the participant terminated on December 31, 2017 and commenced payment as soon as possible. Since Mr. Baehren is currently eligible to retire, this value represents commencement at December 31, 2017. The health and welfare benefits represent the value of the executive retiree life insurance benefits as if the participant retired as of December 31, 2017 and immediately elected coverage. No postretirement medical benefits are included since he and his spouse are over age 65.
Involuntary Termination Not for Cause severance benefits are subject to the executive entering into a restrictive covenant agreeing not to compete with the Company or solicit the Company’s employees for a period of three years following termination of employment for any reason, as well as, not to disclose confidential information or disparage the Company. An executive must sign a release of claims before receiving any severance under the Policy. Involuntary termination not for cause termination reflects two times the sum of current base salary plus target annual incentive, two years of health and welfare benefits and outplacement services.
Change In Control With Termination reflects two times the sum of current base salary plus target annual incentive, two years of health and welfare benefits and outplacement services. The executives are entitled to receive the greater after-
tax benefit between 1) reducing the payments to their respective 280G safe harbor limit, and 2) no reduction of benefits, such that the executive would be subject to a 20% excise tax. Mr. Baehren’s benefits do not reflect a cutback.
Disability benefits represent the value of benefits as if the participant became disabled on December 31, 2017. Pension benefits reflect accrued benefits payable at age 65. Health and welfare benefits represent life insurance benefits commencing at age 65 for those eligible to retire at December 31, 2017. No post-retirement medical benefits are included since he and his spouse are over age 65.
Death benefits represent the value of benefits as if the participant became deceased on December 31, 2017. Pension benefits reflect an immediate lump sum payable to the spouse equal to the greater of the lump‑sum value of the pre-retirement 50% Joint and Survivor spouse benefit, or the lump‑sum value of 25% of the participant’s base pay. Retiree medical benefits are not available post age 65.
Vitaliano Torno
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change In
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary
|
|
Control
|
|
Change In
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary
|
|
Termination Not
|
|
Without
|
|
Control With
|
|
For Cause
|
|
|
|
|
|
|
|
|
Resignation
|
|
For Cause
|
|
Termination
|
|
Termination
|
|
Termination
|
|
Disability
|
|
Death
|
Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 Annual Incentive (STI)
|
|
$
|
—
|
|
$
|
—
|
|
$
|
414,719
|
|
$
|
—
|
|
$
|
—
|
|
$
|
414,719
|
|
$
|
414,719
|
Annual Incentive (STI)
|
|
|
—
|
|
|
687,838
|
|
|
—
|
|
|
687,838
|
|
|
—
|
|
|
—
|
|
|
—
|
Stock Options
|
|
|
—
|
|
|
—
|
|
|
92,377
|
|
|
92,377
|
|
|
—
|
|
|
92,377
|
|
|
92,377
|
Performance Shares
|
|
|
—
|
|
|
344,091
|
|
|
596,573
|
|
|
596,573
|
|
|
—
|
|
|
596,573
|
|
|
596,573
|
Restricted Stock Awards
|
|
|
—
|
|
|
—
|
|
|
512,304
|
|
|
512,304
|
|
|
—
|
|
|
512,304
|
|
|
512,304
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefits and Perquisites
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement Plans
|
|
|
1,642,525
|
|
|
1,642,525
|
|
|
1,642,525
|
|
|
1,642,525
|
|
|
1,642,525
|
|
|
1,468,000
|
|
|
7,476,000
|
Health & Welfare Benefits
|
|
|
300,000
|
|
|
300,000
|
|
|
300,000
|
|
|
300,000
|
|
|
300,000
|
|
|
300,000
|
|
|
—
|
Disability Income
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,112,300
|
|
|
—
|
Life Insurance Benefits
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
300,000
|
Cash Severance
|
|
|
—
|
|
|
1,058,212
|
|
|
—
|
|
|
1,058,212
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
280G Tax Adjustments
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
Adjustment from Modified Cap
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
Total
|
|
$
|
1,942,525
|
|
$
|
4,032,666
|
|
$
|
3,558,498
|
|
$
|
4,889,829
|
|
$
|
1,942,525
|
|
$
|
5,496,273
|
|
$
|
9,391,973
|
Benefits Payable
Assumptions
No preretirement mortality is assumed. After retirement, mortality is calculated according to mortality table BVG 2015 Generational (generated for the calendar year 2017).
|
|
|
|
|
|
|
|
December 31, 2016 Exchange Rate
|
|
|
|
(USD/CHF):
|
|
1.02619
|
|
Discount Rate:
|
|
0.50
|
%
|
Interest Crediting Rate:
|
|
0.50
|
%
|
Salary Increase:
|
|
1.25
|
%
|
Mandatory Conversion rate at 65:
|
|
6.80
|
%
|
Supplementary Conversion rate at 65
|
|
5.00
|
%
|
Benefits Payable
Termination benefits represent the value of the pension and executive retiree life insurance benefits (including the tax gross up) as if the participant terminated employment on December 31, 2017 and commenced at age 65. There are no provisions in the pension plans that are contingent on the type of termination.
Earliest retirement benefits represent the value of the pension benefits and executive retiree life insurance as if the participant terminated on December 31, 2017 and commenced at age 65. The health and welfare benefits represent the value of the executive retiree life insurance benefits (including the tax gross up) as if the participant retired as of December 31, 2017.
Involuntary Termination Not for Cause severance benefits are subject to the executive entering into a restrictive covenant agreeing not to compete with the Company or solicit the Company’s employees for a period of three years following termination of employment for any reason, as well as, not to disclose confidential information or disparage the Company. An executive must sign a release of claims before receiving any severance under the Policy. Involuntary termination not for cause termination reflects two times the sum of current base salary plus target annual incentive, two years of health and welfare benefits and outplacement services.
Change In Control With Termination reflects two times the sum of current base salary plus target annual incentive, two years of health and welfare benefits and outplacement services. The executives are entitled to receive the greater after-tax benefit between 1) reducing the payments to their respective 280G safe harbor limit, and 2) no reduction of benefits, such that the executive would be subject to a 20% excise tax. Mr. Torno’s benefits do not reflect a cutback as he is not subject to the 280G provisions.
Disability benefits represent the value of pension and executive retiree life insurance benefits (including the tax gross up) as if the participant became disabled on December 31, 2017. Under the pension plan he would receive 40% of his pensionable salary until CHF 126,000 plus 65% of the pensionable salary above CHF 126,000 payable as a pension until age 65. The health and welfare benefits represent the value of the executive retiree life insurance benefits (including the tax gross up) as if the participant retired as of December 31, 2017.
Death benefits represent the value of benefits as if the participant became deceased on December 31, 2017. Pension benefits reflect a lump sum payment equal to at least 200% of his annual pensionable salary plus a pension equal to 26% of his pensionable salary until CHF 126,000 plus 40% of the pensionable salary above CHF 126,000 payable for the lifetime of his eligible spouse. The health and welfare benefits represent the value of the executive retiree life insurance benefits (including the tax gross up) as if the participant retired as of December 31, 2017.
Paul A. Jarrell
Mr. Jarrell was involuntarily terminated from the Company effective July 31, 2017. He continues to be eligible to earn his equity awards in accordance with their terms. He received $16,039 for the payout of unused vacation time. In addition, Mr. Jarrell received a lump sum severance payment of $1,376,100 in 2017.
CEO Pay Ratio
As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 402(u) of Regulation S-K, the Company is providing the following information regarding the ratio of the total annual compensation of Mr. Andres Lopez, the Chief Executive Officer (“CEO”), to the total annual compensation of its median employee for its last completed fiscal year, 2017.
In 2017, the total annual compensation of the CEO as reported in the Summary Compensation Table, was $8,093,964. The total annual compensation of the median employee, calculated in the same manner as the CEO’s, was $40,989. As a result, for 2017, the estimate of the ratio of the CEO’s total annual compensation to the total annual compensation of the median employee was approximately 197 to 1.
The Company identified its median employee by examining compensation information derived from payroll records for all approximately 26,500 employees, excluding the CEO, who were employed by the Company worldwide on December 31, 2017. In identifying the median employee, the Company used all earnings for 2017 (salary, wages, overtime, bonuses, etc.) as reported by local payroll records. The Company annualized compensation for permanent employees who were employed for less than the full year, but otherwise did not make any other adjustments permitted by Item 402(u) of Regulation S-K.
AUDIT COMMIT
TEE REPORT
As part of its ongoing activities, which are described under “Board and Committee Membership”, (see page 12) the Audit Committee has:
|
·
|
|
discussed with the Company’s vice-president of internal audit and Ernst & Young LLP, the Company’s independent registered public accounting firm, the overall scope and plans for their respective audits;
|
|
·
|
|
reviewed and discussed with management and the independent registered public accounting firm the Company’s audited financial statements and the independent registered public accounting firm’s evaluation of the Company’s system of internal control over financial reporting contained in the Annual Report on Form 10‑K for the year ended December 31, 2017;
|
|
·
|
|
discussed with the independent registered public accounting firm the matters required to be discussed by Auditing Standard No. 1301 (Communications with Audit Committees) as adopted by the Public Company Accounting Oversight Board and other professional standards;
|
|
·
|
|
received from the independent registered public accounting firm the written disclosures and the letter required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent registered public accounting firm’s communications with the Audit Committee concerning independence;
|
|
·
|
|
discussed with the independent registered public accounting firm its independence from the Company and its management; and
|
|
·
|
|
met with the vice-president of internal audit and the independent registered public accounting firm, with and without management present, to discuss the above matters and the overall quality of the Company’s financial reporting.
|
On the basis of the review and discussions referred to above, 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 year ended December 31, 2017, for filing with the Securities and Exchange Commission. Also, the Audit Committee has selected Ernst & Young LLP as the Company’s independent registered public accounting firm for 2018.
The Audit Committee also concluded that the independent registered public accounting firm’s provision of non‑audit services to the Company and its affiliates as described in the following section is compatible with the independent registered public accounting firm’s independence.
Alan J. Murray, Chair
Peter S. Hellman
Hari N. Nair
Joseph D. Rupp
Dennis K. Williams
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
In accordance with the SEC’s auditor independence rules, the Audit Committee has adopted procedures for pre‑approving all non‑audit services performed by Ernst & Young LLP. Those procedures are set forth below under the heading “Pre‑Approval of Independent Registered Public Accounting Firm Services.”
Fees Paid to Ernst & Young LLP
The Audit Committee is responsible for the audit fee negotiations associated with the Company’s retention of Ernst & Young LLP
.
The aggregate fees for professional services provided by Ernst & Young LLP to the Company in 2017 and 2016 for these various services were:
|
|
|
|
|
|
|
Type of Fees
|
|
2017
|
|
|
2016
|
|
|
($ in millions)
|
Audit fees
|
|
$
|
5.99
|
|
$
|
6.18
|
Audit‑related fees
|
|
|
0.27
|
|
|
0.22
|
Tax fees
|
|
|
0.18
|
|
|
0.27
|
All other fees
|
|
|
—
|
|
|
0.02
|
Total
|
|
$
|
6.44
|
|
$
|
6.69
|
In the above table: (a) “audit fees” were for the audit and quarterly reviews of the consolidated accounts, attestation report on internal control required by Section 404 of the Sarbanes‑Oxley Act of 2002, statutory audits of international subsidiaries, audits of subsidiaries whose securities are pledged as collateral and services related to SEC filings and non‑SEC offerings; (b) “audit‑related f
ees” were for audits of employee benefit plans, agreed‑upon procedures for third parties and other accounting consultations; (c) “tax fees” were for tax return preparation, federal, state and local tax planning, international tax planning and advice as well as for services related to a significant acquisition by the Company; and (d) “all other fees” were for other projects throughout the year. All fees for professional services by Ernst & Young LLP were approved in advance under the Board’s pre‑approval policy.
Pre‑Approval of Independent Registered Public Accounting Firm Services
No services will be provided to the Company that are specifically prohibited by the Sarbanes‑Oxley Act of 2002. Permitted services will be pre‑approved by the Audit Committee as follows:
Statement of Principles
The Audit Committee is required to pre‑approve the audit and non‑audit services performed by the independent registered public accounting firm in order to assure that they do not impair the firm’s independence from the Company. Unless a type of service has received pre‑approval, it will require separate pre‑approval by the Audit Committee if it is to be provided by the independent registered public accounting firm. Any proposed services exceeding pre‑approved cost levels will also require separate pre‑approval by the Audit Committee.
A description of the audit, audit‑related, tax, and all other services that have the pre‑approval of the Audit Committee are found below. For non‑audit services, Company management will submit to the Audit Committee for approval a list of non‑audit services that it recommends the Audit Committee engage the independent registered public accounting firm to provide for the fiscal year. The term of any pre‑approval is for 12 months, unless the Audit Committee considers a different period and states otherwise. The Audit Committee will from time to time review and, if necessary, revise the list of pre‑approved services based on subsequent determinations.
Delegation
The Audit Committee may delegate either type of pre‑approval authority to one or more of its members. The member or members to whom such authority is delegated must report, for informational purposes only, any pre‑approval decisions to the Audit Committee at its next scheduled meeting. The Audit Committee does not delegate its responsibilities to pre‑approve services performed by the independent registered public accounting firm to management.
Audit Services
The annual audit services engagement terms and fees will be subject to separate pre‑approval of the Audit Committee. The Audit Committee will approve, if necessary, any changes in terms, conditions and fees resulting from changes in audit scope, Company structure or other items.
In addition to the annual audit services engagement approved by the Audit Committee, the Audit Committee may grant pre‑approval for other audit services, which are those services that only the independent registered public accounting firm reasonably can provide. Company management will submit to the Audit Committee for approval the list of Audit services that it recommends the Audit Committee engage the independent registered public accounting firm to provide for the fiscal year. All other audit services not pre‑approved must be separately pre‑approved by the Audit Committee.
Audit‑Related Services
Audit‑related services are assurance and related services that are reasonably related to the performance of the audit of the Company’s financial statements and that are traditionally performed by the independent registered public accounting firm. The Audit Committee believes that the provision of audit‑related services does not impair the independence of the firm and is consistent with the SEC’s rules on auditor independence.
Company management will submit to the Audit Committee for approval the list of audit‑related services that it recommends the Audit Committee engage the independent registered public accounting firm to provide for the fiscal year. All other audit‑related services not pre‑approved must be separately pre‑approved by the Audit Committee.
Tax Services
The Audit Committee believes that the independent registered public accounting firm can provide tax services to the Company such as tax compliance, tax planning and tax advice without impairing the firm’s independence.
Company management will submit to the Audit Committee for approval the list of tax services that it recommends the Audit Committee engage the independent registered public accounting firm to provide for the fiscal year. All tax services involving large and complex transactions not pre‑approved must be separately pre‑approved by the Audit Committee.
All Other Services
The Audit Committee will separately pre‑approve those permissible non‑audit services classified as “all other services” that it believes are routine and recurring services and would not impair the independence of the firm.
A list of the SEC’s prohibited non‑audit services is set forth below. The SEC’s rules and relevant guidance should be consulted to determine the precise definitions of these services and the applicability of exceptions to certain of the prohibitions.
Pre‑Approval Fee Levels or Budgeted Amounts
Pre‑approval fee levels or budgeted amounts for all services to be provided by the independent registered public accounting firm will be established periodically by the Audit Committee. Any proposed services exceeding these levels or amounts will require separate pre‑approval by the Audit Committee.
Procedures
Requests or applications to provide services that require separate approval by the Audit Committee will be submitted to the Audit Committee by the Chief Financial Officer or his designee and must include a statement as to whether the request or application is consistent with the SEC’s rules on auditor independence. The Audit Committee will be informed routinely as to the non‑audit services actually provided by the independent registered public accounting firm pursuant to this policy.
Supporting Documentation
With respect to each proposed pre‑approval service, the independent registered public accounting firm will provide to the Audit Committee, as requested, detailed back‑up documentation regarding the specific services to be provided.
Prohibited Non‑Audit Services
|
·
|
|
Bookkeeping or other services related to the accounting records or financial statements of the audit client
|
|
·
|
|
Financial information systems design and implementation
|
|
·
|
|
Appraisal or valuation services, fairness opinions or contribution‑in‑kind reports
|
|
·
|
|
Internal audit outsourcing services
|
|
·
|
|
Broker‑dealer, investment adviser or investment banking services
|
|
·
|
|
Expert services unrelated to the audit
|
PROPOSAL 2:
RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee has selected and appointed Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2018. The Audit Committee of the Board of Directors is directly responsible for the appointment, compensation, retention and oversight of the independent registered public accounting firm retained to audit the Company’s consolidated financial statements. In conjunction with the mandated rotation of Ernst & Young LLP’s lead engagement partner, the Audit Committee and its chairperson are directly involved in the selection of Ernst & Young LLP’s new lead engagement partner.
Although the Board is not required to submit the Audit Committee’s selection of Ernst & Young LLP as the Company’s independent registered public accounting firm for share owner approval, the Board has elected to seek ratification by the share owners of the Audit Committee’s selection of Ernst & Young LLP as the Company’s independent registered public accounting firm for 2018. In the event the Company’s share owners do not ratify the selection of Ernst & Young LLP, the Audit Committee will reconsider its use of Ernst & Young LLP.
A representative of Ernst & Young LLP is expected to attend the Annual Meeting, and the representative will have an opportunity to make a statement if he or she so desires, and will also be available to respond to appropriate questions from share owners. The members of the Audit Committee and the Board of Directors believe that the continued
retention of Ernst & Young LLP to serve as the Company’s independent registered public accounting firm is in the best interests of the Company and its stockholders.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” THE RATIFICATION OF THE SELECTION OF ERNST & YOUNG LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2018.
PROPOSAL 3:
ADVISORY VOTE TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION
The Company is asking its share owners to provide advisory approval of the compensation of its NEOs as described above under the heading “Executive Compensation.” While this vote is advisory, and not binding on the Company, it will provide information to the Compensation and Talent Development Committee regarding investor sentiment about the Company’s executive compensation philosophy, policies and practices which the Compensation and Talent Development Committee will consider when determining executive compensation for the remainder of 2018 and beyond. The Compensation and Talent Development Committee approves executive compensation programs that are designed to align executive pay with share owners’ interests, as well as with the annual and longer‑term performance of the Company. This alignment is evidenced by the executive officers receiving a 2017 annual incentive plan payout at slightly below target payout level based on below target performance against EBIT and above target performance for FCF (both on a constant currency basis) metrics, as well as a 2015‑2017 long‑term incentive plan performance share unit payout also slightly below the target payout level based on above target performance for return on invested capital, below target performance for organic revenue growth and lower than threshold performance for adjusted net earnings per share.
The Company believes that its executive compensation program strikes the appropriate balance between using responsible, measured pay practices and providing rewards that effectively attract and retain executives while motivating them to create value for the share owners. The rigor in the Company’s management processes, as well as balance in rewards programs, are evidenced by the following:
A major portion of target compensation for each NEO is “at risk”.
Formal reviews are conducted annually of market survey data and proxy data for comparator group companies, the results of which are used as input into NEO compensation decisions.
The relationship between executive pay and Company performance is analyzed annually to ensure alignment over time.
Regular “risk assessment” analyses are completed to evaluate the Company’s overall executive compensation practices and processes.
Annual and long‑term incentive funding is driven entirely through a balance of financial metrics that are aligned with share owner value creation. The annual STI Program measures EBIT and FCF, while the long‑term incentive programs place a significant emphasis on Company performance and share owner value creation through performance share units. The performance share units measure return on invested capital, adjusted net earnings per share, and organic revenue growth (constant currency).
The Company develops challenging performance standards for the annual and long‑term incentives. Payouts against performance standards are formulaic and have resulted in no award when performance is not up to minimum thresholds and larger awards when performance exceeds expectations.
Individual performance and rewards are differentiated based on business unit results and/or specific contributions by the executive.
The Company’s senior executives have stock ownership and share retention guidelines that promote alignment with share owners.
The Board strongly endorses the Company’s executive compensation program and recommends that the share owners vote in favor of the following resolution:
RESOLVED, that the compensation paid to the Company’s NEOs, as disclosed pursuant to Item 402 of Regulation S‑K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion, is hereby APPROVED.
Because the vote is advisory, it will not be binding on the Board or the Compensation and Talent Development Committee and neither the Board nor the Compensation and Talent Development Committee will be required to take any action as a result of the outcome of the vote on this proposal. However, the Compensation and Talent Development Committee will carefully consider the outcome of the vote when determining future executive compensation arrangements. Because the Company has determined to hold future advisory votes on executive compensation annually, the next such vote will occur at the 2019 Annual Meeting of Share Owners.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” THE APPROVAL OF THE COMPANY’S EXECUTIVE COMPENSATION.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial ownership of Common Stock as of March 14, 2018 (except as otherwise noted in the footnotes below) by each beneficial owner of more than five percent of the outstanding Common Stock known to the Company, each of the Company’s directors, director nominees, named executive officers and all directors and executive officers as a group.
|
|
|
|
|
|
|
|
Amount and
|
|
|
|
|
|
Nature of Beneficial
|
|
|
|
Name and Address of Beneficial Owner
|
|
Ownership(1)
|
|
Percentage
|
|
The Vanguard Group, Inc.(2)
|
|
17,753,113
|
|
10.9
|
|
100 Vanguard Blvd
|
|
|
|
|
|
Malvern, Pennsylvania 19355
|
|
|
|
|
|
BlackRock, Inc.(3)
|
|
15,312,596
|
|
9.4
|
|
55 East 52nd Street
|
|
|
|
|
|
New York, New York 10055
|
|
|
|
|
|
First Pacific Advisors, LLC(4)
|
|
9,802,770
|
|
6.0
|
|
11601 Wilshire Blvd.
|
|
|
|
|
|
Suite 1200
|
|
|
|
|
|
Los Angeles, CA 90025
|
|
|
|
|
|
Miguel I. Alvarez(5)(8)
|
|
40,391
|
|
—
|
*
|
Arnaud Aujouannet (5)
|
|
2,218
|
|
—
|
*
|
James W. Baehren(5)(8)(9)
|
|
138,515
|
|
—
|
*
|
Jan A. Bertsch(5)(8)
|
|
105,412
|
|
—
|
*
|
Tim M. Connors(5)(8)
|
|
25,500
|
|
—
|
*
|
Gary F. Colter(7)
|
|
47,059
|
|
—
|
*
|
Giancarlo Currarino(5)(8)
|
|
44,732
|
|
—
|
*
|
Joseph J. DeAngelo(7)
|
|
5,411
|
|
—
|
*
|
Sergio B.O. Galindo(5)(8)
|
|
56,167
|
|
—
|
*
|
Gordon Hardie(7)
|
|
17,701
|
|
—
|
*
|
John A. Haudrich(5)(8)
|
|
55,931
|
|
—
|
*
|
Peter S. Hellman(7)
|
|
42,265
|
|
—
|
*
|
Paul A. Jarrell(5)(8)
|
|
40,981
|
|
—
|
*
|
Anastasia D. Kelly(7)
|
|
50,352
|
|
—
|
*
|
Andres A. Lopez(5)(6)(8)
|
|
275,798
|
|
—
|
*
|
John J. McMackin, Jr.(7)
|
|
62,732
|
|
—
|
*
|
Alan J. Murray(7)
|
|
14,301
|
|
—
|
*
|
Hari N. Nair(7)
|
|
19,125
|
|
—
|
*
|
Hugh H. Roberts(7)
|
|
40,777
|
|
—
|
*
|
Joseph D. Rupp
|
|
—
|
|
—
|
*
|
Vitaliano Torno(5)(6)
|
|
49,337
|
|
—
|
*
|
John C. Webb(5)(8)
|
|
558
|
|
—
|
*
|
Mary Beth Wilkinson(5)(8)
|
|
28,664
|
|
—
|
*
|
Carol A. Williams(7)
|
|
17,711
|
|
—
|
*
|
Dennis K. Williams(7)
|
|
40,106
|
|
—
|
*
|
All directors and executive officers as a group (25 persons)(5)(6)(7)(8)
|
|
1,221,744
|
|
0.7
|
|
*
Indicates less than one percent (1%) ownership.
(1)
For purposes of this table, a person or group of persons is deemed to have “beneficial ownership” of any shares as of a given date if such person has the right to acquire such shares within 60 days after such date. For purposes of computing the percentage of outstanding shares held by each person or group of persons named above on a given date, any security that such person or persons has the right to acquire within 60 days after such date is deemed to be outstanding, but is not deemed to be outstanding for the purpose of computing the percentage ownership of any other person.
(2)
The Schedule 13G/A dated December 31, 2017 filed with SEC by the Vanguard Group, Inc. (“Vanguard”) on February 9, 2018 indicated that Vanguard is the beneficial owner of 17,753,113 shares of Common Stock, with the sole power to vote or to direct the vote on 89,189 shares, the shared power to vote or to direct the vote on 18,575
shares, the sole power to dispose or to direct the disposition of 17,657,771 shares and the shared power to dispose or to direct the disposition of 95,342 shares.
(3)
The Schedule 13G/A dated December 31, 2017 filed with SEC by BlackRock, Inc. (“BlackRock”) on January 29, 2018 indicated that BlackRock is the beneficial owner of 15,312,596 shares of Common Stock, with the sole power to vote or to direct the vote on 14,721,772 shares and the sole power to dispose or to direct the disposition of 15,312,596 shares.
(4)
The Schedule 13G/A dated December 31, 2017 filed with SEC by First Pacific Advisors, LLV (“FPA”) on February 14, 2018 indicated that FPA is the beneficial owner of 9,802,770 shares of Common Stock, with the shared power to vote or to direct the vote on 889,870 shares and the shared power to dispose or to direct the disposition of 9,802,770 shares.
(5)
The number of shares beneficially owned includes the following currently exercisable options:
|
|
|
Director/Officer
|
|
Options
|
Miguel I. Alvarez
|
|
20,932
|
Arnaud Aujouannet
|
|
1,256
|
James W. Baehren
|
|
66,591
|
Jan A. Bertsch
|
|
59,315
|
Tim M. Connors
|
|
16,472
|
Giancarlo Currarino
|
|
32,400
|
Sergio B.O. Galindo
|
|
29,981
|
John A. Haudrich
|
|
25,963
|
Paul A. Jarrell
|
|
40,981
|
Andres A. Lopez
|
|
177,605
|
Vitaliano Torno
|
|
20,325
|
John C. Webb
|
|
—
|
Mary Beth Wilkinson
|
|
15,975
|
All directors and executive officers as a group
|
|
507,796
|
(6)
The number of shares shown as beneficially owned includes the following number of shares of unvested restricted stock over which the following persons or group had voting, but not investment, power as of March 14, 2018:
|
|
|
|
|
Restricted
|
Officer
|
|
Stock
|
Andres A. Lopez
|
|
1,000
|
Vitaliano Torno
|
|
7,000
|
All directors and executive officers as a group
|
|
8,000
|
(7)
The number of shares shown as beneficially owned includes the following number of unvested restricted stock units that will vest within 60 days of March 14, 2018:
|
|
|
|
|
Restricted
|
Director
|
|
Stock Unit
|
Gary F. Colter
|
|
5,002
|
Joseph J. DeAngelo(a)
|
|
854
|
Gordon J. Hardie
|
|
5,002
|
Peter S. Hellman
|
|
5,002
|
Anastasia D. Kelly
|
|
5,002
|
John J. McMackin, Jr.
|
|
5,002
|
Alan J. Murray
|
|
5,002
|
Hari Nair
|
|
5,002
|
Hugh H. Roberts
|
|
5,002
|
Carol A. Williams
|
|
5,002
|
Dennis K. Williams
|
|
5,002
|
All directors and executive officers as a group
|
|
50,874
|
(a)
Mr. DeAngelo resigned as a Director on July 13, 2017 and therefore his 2017 stock
award was prorated to reflect his days of service prior to his termination date.
Of the 5,002 unvested restricted stock units granted, Mr. DeAngelo received 854 restricted stock units and forfeited 4,148 unvested restricted stock units.
(8)
The table includes the number of shares of Common Stock that Mr. Alvarez, Mr. Baehren, Ms. Bertsch, Mr. Connors, Mr. Currarino, Mr. Galindo, Mr. Haudrich, Mr. Lopez, Mr. Webb and Ms. Wilkinson and all directors and executive officers as a group held in the Stock Purchase and Savings Program.
(9)
Mr. Baehren retired from the Company effective January 1, 2018. The information presented herein is based on the Form 4 filed by Mr. Baehren on March 9, 2017 except to the extent more current information is known to the Company.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the Company’s directors, certain officers and persons who own more than ten percent of a registered class of the Company’s equity securities, to file reports of ownership and changes in ownership (Forms 3, 4 and 5) with the SEC with a copy to the New York Stock Exchange. These reporting persons are required by SEC regulation to furnish the Company with copies of all such forms which they file. To the Company’s knowledge, based solely on review of the copies of such reports furnished to the Company and written representations that no reports were required, all of these reporting persons made all required filings Miguel Alvarez filed a late Form 4 on September 29, 2017 for a grant of restricted shares of Common Stock.
2019 ANNUAL MEETING OF SHARE OWNERS
A share owner desiring to submit a proposal for inclusion in the Company’s Proxy Statement for the 2019 Annual Meeting may do so by following the procedures prescribed in Rule 14a‑8 of the Exchange Act. Any such proposal must be received by the Company no later than November 29, 2018
. The Company requests that all such proposals be addressed to the “Corporate Secretary” at Owens‑Illinois, Inc., One Michael Owens Way, Perrysburg, Ohio 43551‑2999, and be mailed by certified mail, return receipt requested.
Share owners wishing to submit proposals or director nominations outside the procedures prescribed in Rule 14a‑8 of the Exchange Act must give timely notice thereof in writing to the Corporate Secretary and follow the procedures contained in the Company’s By-Laws. To be timely, a share owner’s proposal or nomination must be received by the Company no earlier than January 10, 2019 and no later than February 9, 2019, and must otherwise satisfy the requirements of the Company’s By‑Laws as then in effect. If the date of the 2019 Annual Meeting is more than thirty days before or more than sixty days after the one-year anniversary of the 2018 Annual Meeting, a share owner’s proposal or nomination must be received by the Company not less than ninety days prior to the date of the 2019 Annual Meeting or, if later, not less than ten days following the day on which public disclosure of the date of the 2019 Annual Meeting was first made.
FORWARD LOOKING STATEMENTS
This Proxy Statement contains “forward looking statements” (as defined in the Private Securities Litigation Reform Act of 1995). These statements are based on the Company’s current expectations and involve risks and uncertainties, which may cause results to differ materially from those set forth in the statements. The forward looking statements may include statements regarding actions to be taken by the Company. The Company undertakes no obligation to publicly update any forward looking statement, whether as a result of new information, future events or otherwise. Forward looking statements should be evaluated together with the many uncertainties that affect the Company’s business, particularly those mentioned in the risk factors in Item 1A of the Company’s Annual Report on Form 10‑K for the year ended December 31, 2017 and in the Company’s quarterly reports on Form 10‑Q.
PROXY SOLICITATION
The Company will pay the cost of preparing and mailing this Proxy Statement and other costs of the proxy solicitation made by the Board. Certain of the Company’s officers and employees may solicit the submission of proxies authorizing the voting of shares in accordance with the Board’s recommendations, but no additional remuneration will be paid by the Company for the solicitation of those proxies. Such solicitations may be made by personal interview, telephone and telegram. Arrangements have also been made with brokerage firms and others for the forwarding of proxy solicitation materials to the beneficial owners of Common Stock, and the Company will reimburse them for reasonable out‑of‑pocket expenses incurred in connection therewith.
The Company has made this Proxy Statement, the Company’s 2017 Annual Report to share owners and the Stakeholder Letter available to each share owner entitled to vote at the Annual Meeting. These materials may be accessed on the Internet at www.proxyvote.com. Included in the Annual Report to share owners are the Company’s consolidated financial statements for the year ended December 31, 2017.
A copy of the Company’s Annual Report on Form 10‑K, including the financial statement schedules, as filed with the SEC, may be obtained without charge by sending a written request therefor to Owens‑Illinois, Inc., Investor Relations, One Michael Owens Way, Perrysburg, Ohio 43551‑2999. The Annual Report on Form 10‑K is also available without charge on the Company’s website at www.o‑i.com.
March 29, 2018
Perrysburg, Ohio
Appendix A
CALCULATION OF TARGET MEASURES
The Company’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The Company has also provided certain non-GAAP financial measures, as described below, which were considered by the Compensation and Talent Development Committee as part of its short-term and long-term incentive compensation decisions. Management believes that its presentation and use of certain non-GAAP financial measures, including earnings before interest and taxes, free cash flow, adjusted earnings before interest, taxes, depreciation and amortization, adjusted net earnings, adjusted net earnings per share, return on invested capital and organic revenue growth, provide relevant and useful supplemental financial information, which is widely used by analysts and investors, as well as by the Compensation and Talent Development Committee as part of its incentive compensation decisions. These non-GAAP measures are calculated from the most directly comparable GAAP measures and should be considered supplemental in nature and should not be considered in isolation or be construed as being more important than comparable GAAP measures. Management uses these non‑GAAP measures principally for internal reporting, forecasting, budgeting and incentive compensation. Management believes that the non‑GAAP presentation allows the Board of Directors, management, investors and analysts to better understand the Company’s financial performance in relation to core operating results and business outlook. The Company’s method of determining non-GAAP financial measures may differ from other companies’ methods and therefore may not be comparable to those used by other companies.
Consolidated earnings before net interest expense and provision from income taxes, excludes items management considers not representative of ongoing operations, as well as foreign exchange currency impacts and excludes the impact of acquisitions and divestitures that occur during the performance period, because such items are not reflective of the Company’s principal business activity, which is glass container production. Management uses earnings before interest and taxes to evaluate its period-over-period operating performance because it believes this provides a useful supplemental measure of the results of operations of its principal business activity by excluding items that are not reflective of such operations.
Free cash flow relates to cash provided by continuing operating activities less additions to property, plant and equipment from continuing operations, adjusted for changes in foreign currency exchange rates, for certain restructuring payments that were not included in the Company’s budget and for proceeds from asset sales. Free cash flow does not conform to GAAP. It should not be construed as an alternative to the reported results determined in accordance with GAAP. Management has included this non‑GAAP information to assist in understanding the comparability of cash flows.
Adjusted consolidated earnings before net interest expense, provision from income taxes, depreciation and amortization, and excludes items management considers not representative of ongoing operations, as well as foreign exchange currency impacts and excludes the impact of acquisitions and divestitures that occur during the performance period, because such items are not reflective of the Company’s principal business activity. Management uses adjusted earnings before interest, taxes, depreciation and amortization as another method to evaluate its period-over-period operating performance because it believes this provides a useful supplemental measure of the results of operations of its principal business activity by excluding items that are not reflective of such operations.
Adjusted net earnings relates to net earnings from continuing operations attributable to the Company, exclusive of items management considers not representative of ongoing operations, also excluding the impact of acquisitions and divestitures, the impact of changes in foreign currency exchange rates and non service pensions costs, because such items are not reflective of the Company’s principal business activity. Adjusted net earnings are divided by weighted average shares outstanding (diluted) to derive adjusted net earnings per share. Management uses adjusted net earnings and adjusted net earnings per share to evaluate its period-over-period operating performance because it believes this provides a useful supplemental measure of the results of operations of its principal business activity by excluding items that are not reflective of such operations.
Return on invested capital relates to earnings before interest and taxes, not adjusted for foreign exchange, multiplied by one minus the Company’s tax rate (excluding items that management considers not representative of ongoing operations), divided by the sum of total debt and total share owners’ equity. For the three‑year performance period, the Compensation and Talent Development Committee elected to hold constant Accumulated Other Comprehensive Income, which includes effects of currency and pension asset and liability changes. Return on invested capital is not a measure of financial performance under generally accepted accounting principles (“GAAP”) and should be considered in addition to,
and not as a substitute for, return on assets, net earnings, total assets or other financial measures prepared in accordance with GAAP.
Organic revenue growth relates to total consolidated net sales, excluding the impact of acquisitions and divestitures, as well as the impact of foreign currency exchange rates. Management uses organic revenue growth to evaluate its period-over-period performance because it believes this provides a useful supplemental measure of growth.
CALCULATION OF EARNINGS BEFORE INTEREST AND TAXES (EBIT)
|
|
|
|
|
|
|
|
|
Year ended
|
|
Year ended
|
|
|
December 31,
|
|
December 31,
|
(Dollars in millions)
|
|
2017
|
|
2016
|
Earnings from continuing operations before income taxes
|
|
$
|
275
|
|
$
|
356
|
Interest expense, net
|
|
|
268
|
|
|
272
|
Items management considers not representative of ongoing operations
|
|
|
295
|
|
|
156
|
Changes in foreign currency exchange rates (1)
|
|
|
(46)
|
|
|
14
|
EBIT
|
|
$
|
792
|
|
$
|
798
|
|
|
|
|
|
|
|
(1)
Represents amount to adjust actual foreign exchange rates to budgeted amounts.
CALCULATION OF FREE CASH FLOW (FCF)
|
|
|
|
|
|
Year ended
|
|
|
December 31,
|
(Dollars in millions)
|
|
2017
|
Cash provided by continuing operating activities
|
|
$
|
724
|
Additions to property, plant and equipment—continuing operations
|
|
|
(441)
|
Certain restructuring related payments (1)
|
|
|
32
|
Proceeds related to asset sales (2)
|
|
|
14
|
Changes in foreign currency exchange rates (3)
|
|
|
(57)
|
FCF
|
|
$
|
272
|
(1) Represents adjustments for certain restructuring related payments that were not included in the Company’s budget.
(2)
Represents adjustments for proceeds related to asset sales.
(3)
Represents amount to adjust actual foreign exchange rates to budgeted amounts.
CALCULATION OF ADJUSTED EARNINGS BEFORE INTEREST, TAXES,
DEPRECIATION AND AMORTIZATION (Adjusted EBITDA)
|
|
|
|
|
|
Year ended
|
|
|
December 31,
|
(Dollars in millions)
|
|
2017
|
Earnings from continuing operations before income taxes
|
|
$
|
275
|
Interest expense, net
|
|
|
268
|
Items management considers not representative of ongoing operations
|
|
|
295
|
Depreciation
|
|
|
387
|
Amortization
|
|
|
114
|
Adjusted EBITDA
|
|
$
|
1,339
|
CALCULATION OF ADJUSTED NET EARNINGS PER SHARE (EPS)
|
|
|
|
|
|
|
|
|
Year ended
|
|
Year ended
|
|
|
December 31,
|
|
December 31,
|
(Dollars in millions, except per share amounts)
|
|
2017
|
|
2016
|
Earnings from continuing operations attributable to the Company
|
|
$
|
183
|
|
$
|
216
|
Less: Earnings related to acquisitions and divestitures (1)
|
|
|
(37)
|
|
|
(50)
|
Add: Items that management considers not representative of ongoing operations
|
|
|
254
|
|
|
160
|
Adjusted net earnings
|
|
$
|
400
|
|
$
|
326
|
Diluted shares outstanding (millions)
|
|
|
164.6
|
|
|
162.8
|
Earnings per share from continuing operations (diluted)
|
|
$
|
1.11
|
|
$
|
1.32
|
EPS
|
|
$
|
2.43
|
|
$
|
2.00
|
(1)
Represents net earnings for the year ended December 31, 2017 related to acquisitions that are excluded from the target measure since they were earned subsequent to the
Compensation and Talent Development
Committee’s establishment of the LTI criteria for the three-year performance period.
CALCULATION OF RETURN ON INVESTED CAPITAL (ROIC)
|
|
|
|
|
|
|
Year ended
|
|
|
|
December 31,
|
|
(Dollars in millions)
|
|
2017
|
|
Earnings from continuing operations before income taxes
|
|
$
|
275
|
|
Interest expense, net
|
|
|
268
|
|
Items management considers not representative of ongoing operations
|
|
|
295
|
|
Less: Acquisition related earnings before interest and taxes (1)
|
|
|
(156)
|
|
Less: Income tax impact (2)
|
|
|
(136)
|
|
|
|
$
|
546
|
|
|
|
|
|
|
Consolidated debt
|
|
$
|
5,283
|
|
Less: Acquisition related debt (3)
|
|
|
(2,250)
|
|
Less: Accumulated other comprehensive income (4)
|
|
|
(1,494)
|
|
Add: Other share owner’s equity (5)
|
|
|
2,753
|
|
Less: Acquisition related share owner’s equity (6)
|
|
|
(87)
|
|
|
|
$
|
4,205
|
|
ROIC
|
|
|
12.98
|
%
|
(1)
Represents earnings before interest and taxes related to acquisitions for the year ended December 31, 2017 that are excluded from the target measure since they were earned subsequent to the
Compensation and Talent Development
Committee’s establishment of the LTI criteria for the three-year performance period.
(2)
Represents EBIT not adjusted for foreign exchange multiplied by one minus the Company’s tax rate (excluding items that management considers not representative of ongoing operations).
(3)
Represents debt incurred related to acquisitions that is excluded from the target measure since it was incurred subsequent to the
Compensation and Talent Development
Committee’s establishment of the LTI criteria for the three-year performance period.
(4)
Accumulated Other Comprehensive Income balance for the year ended December 31, 2014. For the three‑year performance period, the
Compensation and Talent Development
Committee elected to hold constant Accumulated Other Comprehensive Income.
(5)
Total share owner’s equity less Accumulated Other Comprehensive Income for the year ended December 31, 2017.
(6)
Represents share owner’s equity related to acquisitions for the year ended December 31, 2017 that is excluded from the target measure since it was generated subsequent to the Compensation and Talent Development Committee’s establishment of the LTI criteria for the three-year performance period.
CALCULATION OF ORGANIC REVENUE GROWTH
|
|
|
|
|
|
Year ended
|
|
|
December 31,
|
(Dollars in millions)
|
|
2017
|
Net Sales
|
|
$
|
6,869
|
Less: Net sales related to acquisitions and divestitures (1)
|
|
|
(902)
|
Changes in foreign currency exchange rates (2)
|
|
|
850
|
Organic Revenue Growth
|
|
$
|
6,817
|
|
(1)
|
|
Represents net sales related to acquisitions for the year ended December 31, 2017 that are excluded from the target measure since they were generated subsequent to the
Compensation and Talent Development
Committee’s establishment of the LTI criteria for the three-year performance period.
|
|
(2)
|
|
Represents amount to adjust actual foreign exchange rates to 2014 budgeted amounts.
|
|
|
|
VOTE BY INTERNET - 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 on May 9, 2018. 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. ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. VOTE IN PERSON This card serves as an admission ticket for one shareholder as of March 14, 2018 and must be presented at the door for admittance to the Annual Meeting of Share Owners. At the meeting, you will need to request a ballot to vote these shares. 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 on May 9, 2018. 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. OWENS-ILLINOIS, INC. ONE MICHAEL OWENS WAY PERRYSBURG, OH 43551 TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: E39984-P00985 KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. OWENS-ILLINOIS, INC. The Board of Directors recommends you vote FOR the following: For Withhold For All AllAllExcept To withhold authority to vote for any individual nominee(s), mark "For All Except" and write the number(s) of the nominee(s) on the line below. ! ! ! 1. Election of Directors Nominees: 01) 02) 03) 04) 05) 06) Gordon J. Hardie Peter S. Hellman John Humphrey Anastasia D. Kelly Andres A. Lopez John J. McMackin, Jr. 07) 08) 09) 10) 11) 12) Alan J. Murray Hari N. Nair Hugh H. Roberts Joseph D. Rupp Carol A. Williams Dennis K. Williams The Board of Directors recommends you vote FOR proposals 2 and 3: For Against Abstain ! ! ! ! ! ! 2. To ratify the selection of Ernst & Young LLP as the Company's independent registered public accounting firm for 2018. 3. To approve, by advisory vote, the Company's named executive officer compensation. NOTE: In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the meeting or any adjournment(s) or postponement(s) thereof. Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, administrator, executor, guardian or trustee, 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
|
|
|
|
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: Stakeholder Letter, Notice and Proxy Statement and Annual Report on Form 10-K are available at www.proxyvote.com. E39985-P00985 OWENS-ILLINOIS, INC. Annual Meeting of Share Owners May 10, 2018 9:00 AM EDT This proxy is solicited on behalf of the Board of Directors The undersigned hereby appoint(s) Jan A. Bertsch, Mary Beth Wilkinson and John A. Haudrich and each of them, or if more than one present and acting then a majority thereof, as Proxies with full power of substitution, and hereby authorize(s) them to represent and to vote, as designated on the reverse side hereof, all shares of common stock of Owens-Illinois, Inc. held of record by the undersigned on March 14, 2018, at the Annual Meeting of Share Owners to be held on May 10, 2018, or at any adjournment(s) or postponement(s) thereof. The undersigned also provides directions to John Hancock Trust Company, as Trustee, to vote all shares of common stock of Owens-Illinois, Inc. allocated to the account(s) of the undersigned as of March 14, 2018, in the Owens-Illinois, Inc. Stock Purchase and Savings Program or the Owens-Illinois, Inc. Long-Term Savings Plan (the "Plans"), at the aforesaid Annual Meeting or any adjournment(s) or postponement(s) thereof, as specified on the reverse side of this card. This proxy, when properly executed, will be voted in the manner directed herein by the undersigned Share Owner. If no direction is made: This proxy will be voted FOR the election of the director nominees, FOR Proposal 2, and FOR Proposal 3. John Hancock Trust Company, as Trustee, will vote all such shares allocated to the Plan account(s) of the undersigned on all proposals in accordance with the majority of Plan shares for which voting instructions are received. PLEASE EXECUTE THIS PROXY WHETHER OR NOT YOU PLAN TO ATTEND IN PERSON, AND RETURN THE PROXY PROMPTLY IN THE ENVELOPE PROVIDED SO THAT STOCK HELD WILL BE REPRESENTED IN ALL EVENTS AND SO THAT WE MAY HAVE A QUORUM. PLEASE SIGN YOUR NAME ON THE REVERSE SIDE. WHEN SIGNING AS ATTORNEY, ADMINISTRATOR, EXECUTOR, GUARDIAN OR TRUSTEE, PLEASE GIVE FULL TITLE AS SUCH. JOINT OWNERS SHOULD EACH SIGN PERSONALLY. Continued and to be signed on reverse side
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