Greenbrier Companies Inc DEFR14A, filed Nov 12, 2020
Greenbrier Companies Inc (GBX)
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant ☑
Filed by a Party other than the Registrant ☐
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| ☐ | Soliciting Material Pursuant to §240.14a-12 |
The Greenbrier Companies, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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Table of Contents
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FROM OUR BOARD
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Dear Shareholders:
Currently, the impact of COVID-19 is having a devastating effect on our global health and economies. We remain deeply committed to the health and well-being of our employees, their families and communities. We have successfully maintained manufacturing operations throughout the world and continued to deliver to our customers while taking swift action to adjust our operations to both safeguard our employees and keep our momentum in uncertain times.
We are also committed to meeting the needs of our shareholders and we thank you for your feedback on matters of ESG, executive compensation and succession planning. Your feedback has resulted in greater transparency and trust and we have made significant changes over the last few years as a result of your willingness to engage with us.
Your continued investment is important to us and we look forward to delivering strong operating results and shareholder value over the long term.
William A. Furman Chairman of the Board and Chief Executive Officer
Duane C. McDougall Lead Director
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Selected Accomplishments in 2020
COVID-19 Response Team engaged at all of our worldwide locations
| • | Weekly status reports to our Board, CEO and management team |
| • | Physical distancing, remote work and structured return to workplace protocols |
| • | Mandatory temperature readings at all plants and offices |
| • | Enhanced hygiene, cleaning and sanitizing protocols at all plants and offices |
| • | Contact tracing and quarantines (as needed) |
| • | Staggered/flexible work shifts for employees |
| • | Enhanced employee benefits and sick leave |
Direct actions to mitigate the current and potential negative economic impacts of COVID-19
| • | Operated at all locations worldwide as an essential infrastructure business |
| • | Set and achieved a goal of liquidity and cost savings exceeding $1 billion |
| • | Cut costs and reduced spending including: |
| • | Reduced global headcount by roughly 38% in 2020 |
| • | Reduced capital expenditures by approximately $131 million compared to fiscal 2019 |
| • | Production slowed, moved and/or closed |
Delivered solid financial results in an especially challenging year
| • | Outperformed our primary direct competitor on all key financial metrics for the year including total shareholder return |
| • | Strong financial performance despite COVID-19 challenges |
| • | 7th consecutive year of dividend payments and a record dividend amount in fiscal 2020 of $35.2 million |
| • | Gross margin of 12.6% compared to 12.1% in fiscal 2019, despite an 8% reduction in revenues |
| • | Achieved synergies of $15 million related to the ARI acquisition, meeting our stated goal |
Financial performance was fueled by meaningful accomplishments across our businesses
Manufacturing
| • | Successfully integrated manufacturing facilities acquired from American Railcar Industries, Inc. (ARI) |
| • | Negotiated financial accommodations with our joint venture partner at our GIMSA facility in Mexico |
| • | Negotiated accommodations from key suppliers in both pricing and deliveries |
Commercial
| • | Significantly increased market share in North America in fiscal 2020 |
| • | Have maintained major market share in the European Economic Area and in Brazil |
| • | Successfully integrated ARI railcar designs into our customer portfolio with strong engineering involvement |
| • | Seamless new customer transitions with manufacturing contracts assumed in the ARI acquisition |
Leasing
| • | Completed syndication transactions with existing strategic partners and equity sources despite an uncertain environment |
Repair and Parts
| • | Reduced turn times at repair facilities, down from 90 days to 75 |
Management Services
| • | Direct financial benefits realized from shared asset usage across operating groups |
| • | Developed time-saving automated approval process |
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
2021 ANNUAL MEETING INFORMATION
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| Meeting Date: Wednesday January 6, 2021 |
Meeting Access: www.virtualshareholder meeting.com/GBX2021 |
Meeting Time: 2:00 p.m. (Pacific Time) |
Record Date: November 5, 2020 |
PROXY VOTING
Your vote is very important. Whether or not you plan to virtually attend the Annual Meeting, please promptly vote by telephone or over the Internet, or by completing, signing, dating and returning your proxy card or voting instruction form so that your shares will be represented at the Annual Meeting.
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ONLINE
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BY PHONE
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BY MAIL
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Our Notice of Annual Meeting, Proxy Statement and Annual Report for the fiscal year ended August 31, 2020 are available at https://material.proxyvote.com/393657.
To protect the health and safety of our employees, directors and shareholders during these uncertain times, our Board has determined and authorized that the Annual Meeting be conducted virtually solely by remote communication beginning at 2:00 p.m. Pacific Time on January 6, 2021 via webcast at www.virtualshareholdermeeting.com/GBX2021. You may notify the Company of your desire to participate in the meeting by logging into the online site in advance of the meeting. The Annual Meeting is being held for the purpose of voting on the items set forth below and to transact such other business as may properly come before the meeting.
ITEMS TO BE VOTED ON
| Proposal 1 |
— | Election of Directors | Page 15 | |||
| Proposal 2 |
— | Advisory Approval of Executive Compensation | Page 43 | |||
| Proposal 3 |
— | Approval of 2021 Stock Incentive Plan | Page 46 | |||
| Proposal 4 |
— | Ratification of Appointment of Independent Auditors | Page 53 | |||
| Proposal 5 |
— | Shareholder Proposal | Page 55 | |||
As of the date of this notice, the Company has not received notice of any matters, other than those set forth above, that may properly be presented at the Annual Meeting. If any other matters are properly presented for consideration at the meeting, the persons named as proxies on the proxy card, or their duly constituted substitutes, are authorized to vote the shares represented by proxy or otherwise act on those matters in accordance with their judgment.
Holders of record of our Common Stock at the close of business on November 5, 2020 are entitled to notice of, and to vote at, the Annual Meeting and any adjournments or postponements thereof.
By Order of the Board of Directors,
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Christian M. Lucky Secretary October 23, 2020 |
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PROXY SUMMARY
This summary highlights information contained elsewhere in this Proxy Statement. This summary does not contain all of the information you should consider. Please read this entire proxy statement carefully before voting. This Proxy is first being released to shareholders on November 12, 2020.
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PROPOSAL 1 Election of Directors |
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The Board recommends a vote FOR all Director Nominees
Our Nominating and Corporate Governance Committee and our Board recommend that shareholders vote “FOR” all director nominees as they have determined that each of the nominees possesses the right experience and qualifications to effectively oversee Greenbrier’s business strategy and risk management. Each of the nominees is nominated for a three-year term.
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See “Proposal 1, Election of Directors” on page 15 of this Proxy Statement.
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DIRECTOR NOMINEES
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Summary of Basis for Recommendation | |
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William A. Furman |
As a co-founder of the Company, Mr. Furman’s demonstrated experience as a successful leader through difficult market cycles is of great value in the current unsettled business climate. Our Board has implemented a C-suite succession plan by which Mr. Furman will lead executive development and transitions until his planned retirement from the CEO position in September 2022. Mr. Furman’s significant standing in the industry and ability to create business and negotiate concessions is invaluable to the Company and its shareholders through these uncertain times created by the COVID-19 global pandemic. The Board recommends a vote “FOR” Mr. Furman. | |
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Charles J. Swindells |
The Board has determined in its discretion to waive its policy on director age limits in this individual case so that the Company may continue to benefit from Mr. Swindells’s key contributions to the Board. A former U.S. Ambassador, Mr. Swindells’s international expertise, security clearances and important government contacts benefit the Company amidst operating pressure on our international businesses due to the COVID-19 global pandemic and other challenges. The benefit of these contributions is best realized when Mr. Swindells acts in his capacity as a director. While Mr. Swindells qualifies as an independent director, the Board has not appointed him to any committees because he receives a consulting fee from the Company to advise on international affairs above and beyond ordinary board service. Mr. Swindells has agreed to continue serving and the Board recommends a vote “FOR” Mr. Swindells. | |
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Kelly M. Williams |
Ms. Williams brings deep leadership experience to the Board. As Chair of the Nominating and Corporate Governance Committee, Ms. Williams provides valuable insights and directly supports strategic priorities including executive transition planning, governance structuring and advances in environmental, social and governance priorities and initiatives. Ms. Williams also serves on the Audit Committee and Compensation Committee, promoting cross-functional coordination and communication on the Board. The Board recommends a vote “FOR” Ms. Williams. |
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PROPOSAL 2 Advisory Approval of Executive Compensation |
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The Board recommends a vote FOR this proposal
Our Board recommends that shareholders vote “FOR” the advisory approval of the compensation of our named executive officers for fiscal 2020.
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See “Proposal 2, Advisory Approval of Executive Compensation” on page 43 of this Proxy Statement.
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2021 Proxy Statement |
THE GREENBRIER COMPANIES |
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| Proxy Summary |
Executive Compensation At-a-Glance
We made no adjustments to our fiscal 2020 performance metrics due to the COVID-19 global pandemic and resulting market pressures, or in connection with our recent acquisition and continued integration of the manufacturing assets of American Railcar Industries, Inc. (ARI), the largest acquisition in Company history.
We also made significant changes to our compensation program based on shareholder feedback.
Performance Highlights
Below are the key financial metric results for our fiscal 2020 executive incentive programs.
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36-Month Cumulative EBITDA $871.5 MILLION Goal: $900 million |
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36-Month Return On Invested Capital (ROIC) 7.9% Goal: 14% |
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36-Month (Percentile Rank) 18th PERCENTILE Goal: 50th percentile |
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Annual Adjusted (Pre-Bonus) $298.2 MILLION Goal: $352 million |
Compensation Highlights
The Company’s payouts demonstrate rigor of performance targets set by the Compensation Committee and reflect the cyclical nature of our business.
| SHORT-TERM INCENTIVE | AVERAGE PAYOUT FOR ALL NEOs |
PRIOR YEAR AVERAGE PAYOUT FOR ALL NEOs | ||||||||||||||||||||||||
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1-year performance period |
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16.3% | BELOW TARGET |
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1.6% | BELOW TARGET |
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| LONG-TERM INCENTIVE | AVERAGE PAYOUT FOR ALL NEOs |
PRIOR YEAR AVERAGE PAYOUT FOR ALL NEOs | ||||||||||||||||||||||||
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36-month performance period
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71.4% | BELOW TARGET |
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1.4% | BELOW TARGET |
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PROPOSAL 3 Approval
of 2021 |
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The Board recommends a vote FOR this proposal
Our Board recommends that shareholders vote “FOR” approval of the 2021 Stock Incentive Plan which will replace the 2017 Amended and Restated Stock Incentive Plan.
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See “Proposal 3, Approval of 2021 Stock Incentive Plan” on page 46 of this Proxy Statement.
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THE GREENBRIER COMPANIES |
2021 Proxy Statement |
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Proxy Summary |
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PROPOSAL 4 Ratification of Appointment of Auditors |
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The Board recommends a vote FOR this proposal
Our Board recommends that shareholders vote “FOR” ratification of the appointment of KPMG LLP as auditors for fiscal 2021.
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See “Proposal 4, Ratification of Appointment of Auditors” on page 53 of this Proxy Statement.
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PROPOSAL 5 Shareholder Proposal |
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The Board recommends a vote AGAINST this proposal
Our Board recommends that shareholders vote “AGAINST” the shareholder proposal to require an independent Board Chair.
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See “Proposal 5, Shareholder Proposal” on page 55 of this Proxy Statement.
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2021 Proxy Statement |
THE GREENBRIER COMPANIES |
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CORPORATE GOVERNANCE
Our Board is composed of nine non-employee directors and our CEO and co-founder, Bill Furman. Below we have highlighted key areas of experience that qualify each director to serve on the Board. The Board has determined it is in the best interests of the Company and its shareholders for each director to continue serving on the Board subject to shareholder approval of each nominee at the Annual Meeting, and the Board recommends the election of Mr. Furman, Mr. Swindells and Ms. Williams.
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William A. Furman |
AGE: 76 POSITIONS: Chairman of the Board of Directors and Chief Executive Officer |
DIRECTOR SINCE: 1981
CURRENT TERM |
EXPERIENCE: Mr. Furman has served as a member of the Board since 1981 and as the Company’s Chief Executive Officer since 1994. He has served as the Chairman of the Board of Directors since January 2014. As a founder, Mr. Furman has been associated with the Company and its predecessor companies since 1974. He has led the Company through incredible growth over the last decade, including international expansion and significantly increased market share in North America. He is highly experienced in the cycles of our business and uniquely qualified to lead the Company. Prior to 1974, Mr. Furman was Group Vice President for the Leasing Group of TransPacific Financial Corporation. Earlier he was General Manager of the Finance Division of FMC Corporation. Mr. Furman formerly served as a director of Schnitzer Steel Industries, Inc., a steel recycling and manufacturing company.
QUALIFICATIONS: As a founder of the Company, Mr. Furman brings executive management and railcar industry experience to the Board as well as historical perspective on the Company’s origins and evolution.
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Charles J. Swindells |
AGE: 78 POSITION: Director |
DIRECTOR SINCE: 2005
CURRENT TERM EXPIRATION: 2021 |
EXPERIENCE: Mr. Swindells has served as a member of the Board since 2005. He also provides consulting services to the Company on international projects. Mr. Swindells is currently engaged as an advisor to Bessemer Trust, an independent provider of investment management and wealth planning to families and individuals. Mr. Swindells served as the Vice Chairman, Western Region of U.S. Trust, Bank of America, Private Wealth Management from August 2005 to January 2009. Mr. Swindells served as United States Ambassador to New Zealand and Samoa from 2001 to 2005. Before becoming Ambassador, Mr. Swindells was Vice Chairman of US Trust Company, N.A.; Chairman and Chief Executive Officer of Capital Trust Management Corporation; and Managing Director/Founder of Capital Trust Company. He also served as Chairman of World Wide Value Fund, a closed-end investment company listed on the NYSE. Mr. Swindells was one of five members on the Oregon Investment Council overseeing the $20 billion Public Employee Retirement Fund Investment Portfolio and was a member of numerous non-profit boards of trustees, including serving as Chairman of the Board for Lewis & Clark College in Portland, Oregon.
QUALIFICATIONS: Mr. Swindells brings financial and global business expertise, senior executive leadership, governance expertise and high ranking government experience to the Board.
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THE GREENBRIER COMPANIES |
2021 Proxy Statement |
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Corporate Governance |
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Kelly M. Williams |
AGE: 56 POSITION: Director and Chair of the Nominating and Corporate Governance Committee |
DIRECTOR SINCE: 2015
CURRENT TERM EXPIRATION: 2021 |
EXPERIENCE: Ms. Williams has served as a member of the Board since 2015. Ms. Williams is the CEO of The Williams Legacy Foundation. Ms. Williams was a senior advisor of GCM Grosvenor Private Markets from June 2015 until January of 2019. Until June 1, 2015 Ms. Williams was President of GCM Grosvenor Private Markets, a member of its Management Committee and a member of its Investment Committee. Prior to joining GCM Grosvenor, Ms. Williams was a Managing Director, the Group Head and the chair of the compensation committee of the Customized Fund Investment Group of Credit Suisse Group AG from 2000 through 2014, after Credit Suisse acquired Donaldson, Lufkin and Jenrette, where Ms. Williams was Director of the Customized Fund Investment Group. She was with The Prudential Insurance Company of America from 1993 to 2000, where she was an Executive Director and a founder of the Customized Fund Investment Group in 1999. Prior to joining Prudential, Ms. Williams was an attorney at Milbank, Tweed, Hadley & McCloy LLP, where she specialized in global project finance. She graduated magna cum laude from Union College in 1986 with a Bachelor of Arts degree in Political Science and Mathematics and received her Juris Doctor from New York University School of Law in 1989. Ms. Williams serves in leadership positions on the boards of several for profit and non-profits, and has won numerous awards for leadership and public service. In addition, Ms. Williams was named as one of The Most Powerful Women in Finance by American Banker Magazine from 2011- 2014. Ms. Williams also serves as a board member of a number of non-profit institutions, President of the Nantucket Historical Association, and as a board member of Union College.
QUALIFICATIONS: Ms. Williams brings executive management, financial and investment expertise to the Board.
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Thomas B. Fargo |
AGE: 72 POSITION: Director and Chair of the Compensation Committee |
DIRECTOR SINCE: 2015
CURRENT TERM |
EXPERIENCE: Admiral Fargo has served as a member of the Board since 2015. Admiral Fargo is a retired military commander with subsequent private sector experience in maritime and other transportation industries. As commander of the U.S. Pacific Command from 2002 until 2005, Admiral Fargo led the world’s largest unified command while directing the joint operations of the Army, Navy, Marine Corps and Air Force. In this role Admiral Fargo acted as U.S. military representative for collective defense arrangements in the Pacific, ultimately responsible to the President and the Secretary of Defense through the chairman, Joint Chiefs of Staff. Admiral Fargo’s naval career included six tours in Washington, D.C. and extensive duties in the Pacific, Indian Ocean and Middle East including serving as Commander-in-Chief of the U.S. Pacific Fleet and Commander of the Naval Forces of the Central Command. Admiral Fargo serves as Chairman of Hawaiian Electric Industries and on the Board of Directors for Matson, and is the Chairman of USAA, which is a private company. Previously, he served on the Boards of Northrop Grumman Corporation, Alexander & Baldwin, Inc., Hawaiian Airlines and Huntington Ingalls Industries.
QUALIFICATIONS: Admiral Fargo brings executive leadership, operational and international expertise to the Board.
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| Corporate Governance |
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Duane C. McDougall |
AGE: 68 POSITIONS: Director and Lead Director |
DIRECTOR SINCE: 2003
CURRENT TERM EXPIRATION: 2022 |
EXPERIENCE: Mr. McDougall has served as a member of the Board since 2003 and as Lead Director since 2014. Mr. McDougall served as Chairman and Chief Executive Officer of Boise Cascade, LLC, a privately held manufacturer of wood products, from December 2008 to August 2009. He was President and Chief Executive Officer of Willamette Industries, Inc., an international forest products company, from 1998 to 2002. Prior to becoming President and Chief Executive Officer, he served as Chief Accounting Officer during his 23-year tenure with Willamette Industries, Inc. He also served as Chairman of the Board of Boise Cascade until April 2015 and still serves as a director on the Board and also serves as a Director of StanCorp Financial Group, which was acquired in March 2016 by a Japanese company, Meiji Yasuda Life Insurance Company. Mr. McDougall has also served as a Director of several non-profit organizations.
QUALIFICATIONS: Mr. McDougall brings executive leadership and accounting and financial reporting expertise to the Board.
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Donald A. Washburn |
AGE: 76 POSITION: Director |
DIRECTOR SINCE: 2004
CURRENT TERM EXPIRATION: 2022 |
EXPERIENCE: Mr. Washburn has served as a member of the Board since 2004. Mr. Washburn is a private investor. Mr. Washburn served as Executive Vice President of Operations of Northwest Airlines, Inc., an international airline, from 1995 to 1998. Mr. Washburn also served as Chairman and President of Northwest Cargo from 1997 to 1998. Prior to becoming Executive Vice President, he served as Senior Vice President for Northwest Airlines, Inc. from 1990 to 1995. Mr. Washburn served in several positions from 1980 to 1990 for Marriott Corporation, an international hospitality company, most recently as Executive Vice President. He also previously served on the boards of Key Technology, Inc. and Amedisys, Inc., and served as a trustee of LaSalle Hotel Properties as well as privately held companies and non-profit corporations. Mr. Washburn received his BBA, cum laude, from Loyola University of Chicago, an MBA from Northwestern University’s Kellogg School of Management and a J.D., cum laude, from Northwestern University’s Pritzker School of Law. He has continued his professional education in business and law attending Harvard Business School, Stanford Law School, Kellogg School of Management, Wharton Business School at the University of Pennsylvania and industry seminars, including the Boardroom Summit and Stanford Director’s College.
QUALIFICATIONS: Mr. Washburn brings executive management and operational expertise to the Board.
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Wanda F. Felton |
AGE: 62 POSITION: Director |
DIRECTOR SINCE: 2017
CURRENT TERM EXPIRATION: 2023 |
EXPERIENCE: Ms. Felton has served as a member of the Board since 2017. Ms. Felton has over 30 years of financial industry experience in commercial and investment banking. Ms. Felton was a Presidential Appointee and was confirmed twice by the U.S. Senate to serve on the board of the Export Import Bank of the United States as Vice Chair of the Board and First Vice President from June 2011 to November 2016. In that role, she was on the team of economic deputies that advised the National Security Staff and the President’s Export Council on trade and investment. Ms. Felton was actively engaged in helping U.S. companies penetrate international markets and develop pragmatic financing solutions to win sales. Ms. Felton had oversight responsibility for the Office of the Chief Financial Officer and enterprise risk management functions, and served on the bank’s credit committee, which was responsible for approving debt financings over $10 million for a broad range of financing types across a range of industries. A significant portion of such financings supported the export of U.S.-manufactured transportation equipment, including rail equipment and aircraft, to emerging markets. Ms. Felton serves as a Board Practice Advisor on Diversity to Spencer Stuart and as a Trustee of The Cooper Union for the Advancement of Science and Art.
QUALIFICATIONS: Ms. Felton brings her significant prior experience with emerging markets business development and capital raising to the Board.
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THE GREENBRIER COMPANIES |
2021 Proxy Statement |
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Corporate Governance |
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Graeme A. Jack |
AGE: 69 POSITION: Director and Chair of the Audit Committee |
DIRECTOR SINCE: 2006
CURRENT TERM EXPIRATION: 2023 |
EXPERIENCE: Mr. Jack has served as a member of the Board since 2006. He is a retired partner of PricewaterhouseCoopers LLP in Hong Kong. Mr. Jack is an independent non-executive director of COSCO Shipping Development Company Limited, the trustee manager of Hutchison Port Holdings Trust and Hutchison China Meditech Limited.
QUALIFICATIONS: Mr. Jack brings accounting and financial reporting expertise to the Board as well as extensive experience in international business transactions in Asia generally and in China in particular.
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David L. Starling |
AGE: 70 POSITION: Director |
DIRECTOR SINCE: 2017
CURRENT TERM EXPIRATION: 2023 |
EXPERIENCE: Mr. Starling has served as a member of the Greenbrier Board of Directors since 2017. Mr. Starling also serves as Chairman of the Board of Ports America, the largest port and terminal operator in the United States. Additionally, Mr. Starling is a Senior Advisor for Oaktree Infrastructure Fund, with nearly $2.5 billion assets under management, and a part of Oaktree Capital Management. The Fund invests in companies that provide products and services to support infrastructure assets. Previously, Mr. Starling served as Director, President and Chief Executive Officer of Kansas City Southern (KCS), a Class I railroad, from 2010 to 2016. He served as President and Chief Operating Officer of KCS from 2008 to 2010. Prior to that, he was Vice Chairman of the Board of Directors of Kansas City Southern de Mexico. Mr. Starling has served as Vice Chairman of the Board of Directors of Panama Canal Railway Company and Panarail and on the Board of Ferrellgas partners LP from 2014 to 2017. Before joining KCS, Mr. Starling served as President and Director General of Panama Canal Railway Company from 1999 through 2008.
QUALIFICATIONS: Mr. Starling’s more than 40 years of operating experience provides Greenbrier’s Board with unique railroading expertise in both North America and international markets.
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Wendy L. Teramoto |
AGE: 46 POSITION: Director |
DIRECTOR SINCE: 2019
CURRENT TERM EXPIRATION: 2023 |
EXPERIENCE: Ms. Teramoto has been a senior investment management professional with an affiliate of Fairfax Financial Holdings Limited since 2018. From 2017 to 2018, she served in a senior capacity at the United States Department of Commerce. Until 2017, Ms. Teramoto was a Managing Director and a senior investment management professional, and a founding partner, at a New York based private equity firm affiliated with Invesco Ltd. Ms. Teramoto has served as a board member for several companies in the transportation sector. In addition to serving on many private boards, Ms. Teramoto previously served on the Greenbrier Board from 2009 to 2017, and on the board for Navigator Holdings Ltd. from 2014 to 2017.
QUALIFICATIONS: Ms. Teramoto brings investment management and financial expertise, and experience with manufacturing and other heavy industry companies to the Board.
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2021 Proxy Statement |
THE GREENBRIER COMPANIES |
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| Corporate Governance |
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Independent Oversight |
• Greenbrier’s Board is composed of a 90% supermajority of independent directors and includes our CEO and co-founder Bill Furman who is the only member of management on the Board | |
| • Nine of our ten directors meet the NYSE and SEC standards for independence | ||
| • Eight of the nine independent directors, including all committee members, committee Chairs, and the Lead Director, meet a heightened standard of independence | ||
| • Regular executive sessions of independent directors are held at all Board meetings and regularly at committee meetings | ||
| • Ongoing review of independent directors’ committee roles, including the recent addition of two independent directors to the Compensation Committee and one independent director to the Audit Committee | ||
| • The Board actively oversees strategy and risk management | ||
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Board Refreshment |
• Appointed five new directors since 2014 | |
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• The Board promotes ongoing director education, including through our membership in the National Association of Corporate Directors | ||
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• The Company is active in the 2020 Women on Boards organization and received a top “W” rating for “Winning” as Greenbrier already exceeds the 20% target for board representation by women | ||
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• Board succession planning is an ongoing process with a focus on integrity, experience, diversity and mix of tenure of directors | ||
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• There is an ongoing process to identify highly qualified candidates for Board service | ||
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• Annual Board and committee reviews are conducted, including individual director reviews | ||
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• Policy that directors not stand for election after reaching age 77 absent an exception by the Board | ||
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High Governance Standards |
• Committed to shareholder engagement | |
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• Our Code of Business Conduct and Ethics is applicable to all directors and executives | ||
| • Average attendance of directors at Board and committee meetings exceeds 95% over the last five years | ||
| • In response to the impact of COVID-19, the Board voluntarily reduced the cash retainer each non-employee director received by 10% | ||
| • Director and executive stock ownership requirements are maintained | ||
| • Annual review of all directors’ independence | ||
| • Hedging of Company stock by directors and executives is prohibited | ||
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Recent Accomplishments |
• Adoption of a CEO succession plan including amending the Company’s employment agreement with the CEO to provide for his retirement in 2022 | |
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• Annual review of the Company’s succession planning process for key executive positions other than the CEO | ||
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• Continued development of the Company’s inclusion, diversity, equity, access and leadership (IDEAL) program with Board support | ||
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• Publication of the Company’s second annual Environmental, Social and Governance (ESG) Report, including increased metric reporting | ||
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• Increasing the percent of women on our Board from roughly 20% to 30% and ethnic diversity on our Board from 11% to 20% in fiscal 2020 | ||
All of our directors who serve on committees satisfy a heightened standard of independence as set forth in our Corporate Governance Guidelines available on the Company’s website at http://www.gbrx.com. This heightened standard prohibits directors from serving on a committee if they have any consulting or similar relationship with the Company whereby they receive compensation in addition to their compensation for Board service. Applying this standard further safeguards our Board’s autonomy and alignment with shareholders.
In fiscal 2020, the independent directors met without Company management present at all regularly scheduled meetings of the Board.
As a result of its annual review, the Board has determined that a majority of its directors qualify as independent pursuant to SEC and NYSE rules and standards as set forth in the table on page 11. In arriving at this determination, the Board thoroughly considered the consulting arrangement with Mr. Swindells and determined his independence and ability to exercise independent judgment. Due to the Board’s internal application of a heightened independence standard, Mr. Swindells does not serve on any Board committees.
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Corporate Governance |
Mr. Furman serves as Chairman of our Board, in addition to his role as Chief Executive Officer of the Company. At this time, in view of Mr. Furman’s long experience and service to the Company in his capacity as Chief Executive Officer and director, the Board believes the most appropriate Board leadership structure is for Mr. Furman to continue to serve as Chairman of the Board and Chief Executive Officer until his planned retirement in September 2022. In October 2020, the Board adopted a policy that upon the retirement of Mr. Furman, only independent directors will be eligible to serve as Chairman of the Board.
The Board continues to maintain a Lead Director position effective while the Chairman of the Board is not an independent director. The Lead Director is appointed by the independent directors. The Board has appointed Duane C. McDougall to serve as Lead Director. The Lead Director serves shareholder interests by:
| • | Presiding at all Board meetings at which the Chairman is not present, including executive sessions of the independent directors which are held at every regularly scheduled Board meeting |
| • | Approval of Board schedules, meeting agendas and other matters |
| • | Making requests of the CEO and providing feedback regarding Board needs and concerns |
| • | Consulting with the CEO on Company strategy and providing advice and feedback |
| • | Implementation and response in the Board self-assessment process |
| • | Acting as a liaison between the independent directors and the Chairman and CEO and generally representing the independent directors on the Board |
| • | Engaging with shareholders and supporting committee Chairs in engagements as appropriate |
| • | Guiding the Board’s consideration of CEO succession |
Our Board conducts an annual evaluation of itself, its committees and each director, individually, to ensure effective functioning. In addition:
| • | The Lead Director and Chair of the Nominating and Corporate Governance Committee meet individually with each director to discuss goals, solicit feedback and address important matters |
| • | The Lead Director works with each committee chair to assess development opportunities and implement changes based on feedback received |
| • | Directors certify each year that they understand and comply with the Company’s Code of Business Conduct and Ethics |
| • | The Board receives regular anti-corruption and Foreign Corrupt Practices Act training |
We believe our Board best serves the Company and its shareholders when there is a balance between fresh perspectives and longer serving directors who bring continuity in a cyclical business. To promote thoughtful board refreshment we have:
| • | Appointed five new directors since 2014 and recently expanded the Board from nine to ten directors to enhance diversity of experience and prepare for future retirements |
| • | Appointed two of the five recently appointed directors to serve in committee leadership positions: Admiral Fargo as Chair of the Compensation Committee and Ms. Williams as Chair of the Nominating and Corporate Governance Committee |
| • | Appointed the Chair of the Nominating and Corporate Governance Committee to serve on the Compensation Committee and the Chair of the Compensation Committee to serve on the Nominating and Corporate Governance Committee to promote an integrated approach to leadership, succession and compensation matters |
| • | Required that directors must meet a heightened standard of independence to serve on a committee |
| • | Appointed our newest director, Ms. Teramoto, to serve on the Audit and Compensation Committees |
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| Corporate Governance |
In accordance with our governing documents, the Company has determined that a total of ten members on our Board is the appropriate size at this time.
Following are key metrics reflecting the balance of skills, qualifications and experience on our Board.
In addition to maintaining a comprehensive orientation program for all new directors, Greenbrier supports continuing education programs and performs annual evaluations to ensure the Board operates at the highest level. These measures, including a membership with the National Association of Corporate Directors, contribute to increased levels of Board skills and knowledge and understanding of best practices and current trends. The Company is continually seeking to improve Board performance including additional training when a director assumes a new leadership role. The Company pays the reasonable expenses of directors who attend continuing education programs.
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Corporate Governance |
Board Committees, Meetings and Charters
Below is a general overview of the role of each committee.
|
Compensation Committee |
Audit Committee |
Nominating and Corporate Governance Committee
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|
The Compensation Committee is focused on increasing shareholder value by setting compensation for senior management and is responsible for:
1) Oversight of compensation strategy and incentive plans design, metrics and targets for Company executives
2) Evaluating CEO performance and recommending CEO compensation to the Board
3) Reviewing policies relating to director compensation and stock ownership guidelines
4) Assessing the independence of any compensation consultants
5) Engaging with shareholders to solicit feedback and understand compensation priorities |
The Audit Committee safeguards our shareholders’ investment in the Company by overseeing:
1) The integrity and public reporting of the Company’s financial statements
2) Company compliance with legal and regulatory requirements
3) Performance of the Company’s internal audit plan and functions and internal controls
4) Engagement and oversight of independent registered public accounting firm
5) Cybersecurity and information technology resilience and security |
The Nominating and Corporate Governance Committee works to ensure that shareholders are effectively represented by overseeing:
1) Board refreshment including the identification of director nominees
2) The process and protocols regarding CEO succession
3) The structure and composition of Board committees
4) Annual evaluations of the Board and its committees
5) Risk mitigation, except if specifically reserved to another committee
6) The Company’s inclusion, diversity, equity, access and leadership (IDEAL) program
7) Environmental, social and governance (ESG) matters and reporting
8) Shareholder engagement to solicit feedback and understand governance priorities
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During fiscal 2020, the Board at large held 5 meetings, the Audit Committee held 4 meetings, the Nominating and Corporate Governance Committee held 6 meetings, and the Compensation Committee held 6 meetings. All directors are invited and encouraged to attend all committee meetings. The independent directors met without Company management present at all regularly scheduled meetings of the Board. All of our directors attended 100% of the Board and committee meetings on which they served during the year. The Company’s policy is to encourage Board members to attend the Company’s Annual Meetings of Shareholders. All of the Company’s directors attended the Annual Meeting of Shareholders held on January 8, 2020. The composition of each of the Board committees is set out below.
| Name |
Independent | Audit Committee | Compensation Committee |
Nominating and Corporate Governance Committee | ||||
| William A. Furman |
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| Thomas B. Fargo |
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Chair |
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| Wanda F. Felton |
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, F |
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| Graeme A. Jack |
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Chair, F |
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| Duane C. McDougall (Lead Director) |
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, F |
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| David L. Starling |
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| Charles J. Swindells |
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| Wendy L. Teramoto |
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, F |
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| Donald A. Washburn |
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| Kelly M. Williams |
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Chair | ||||
Independent
Member F Audit Committee Financial Expert
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| Corporate Governance |
The Board has determined that Mses. Felton and Teramoto and Messrs. McDougall and Jack qualify as “audit committee financial experts” under federal securities laws. Each of our Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee maintains a written charter. These charters, along with the Company’s Corporate Governance Guidelines and Code of Business Conduct and Ethics, are available to shareholders on the Company’s website at www.gbrx.com.
The Board considers the selection, retention and succession planning for the CEO to be a top priority. In July 2020 Mr. Furman agreed to continue in his current offices for two more years, retiring in September 2022. This important step in the CEO succession process is a product of the Board’s measured approach to this transition and Mr. Furman’s focus on assisting in the selection, development and retention of a qualified successor. The Board has and continues to actively plan and prepare for Mr. Furman’s retirement from all executive offices in September 2022. In September 2021, a determination will be made regarding any potential internal successor to the CEO.
In addition to the CEO succession plan, the Board is focused on transitions for other key executive positions. Our President and head of Human Resources oversee the talent pipeline initiative for these key positions. This initiative includes creating talent profiles for potential succession candidates and implementing tailored development plans with specific actions. The Board annually reviews our talent pipeline initiative and meets formally and informally with our CEO, key executives, and other high-potential members of senior management.
The Board has delegated to the Nominating and Corporate Governance Committee primary responsibility for risk oversight except where specifically reserved to a separate committee, such as the Compensation Committee’s oversight of compensation risk and the Audit Committee’s oversight of certain financial controls risk.
The Compensation Committee evaluates the Company’s compensation programs and has concluded risk is effectively mitigated, including by balancing between short-term and long-term incentives and establishing multiple and strategically weighted performance measures. Based on the results of its evaluation, the Compensation Committee concluded that any risks associated with the Company’s compensation programs are not reasonably likely to have a material adverse effect on the Company.
Our Code of Business Conduct and Ethics and FCPA Compliance
We observe the highest ethical standards in all of our business dealings. Our Code of Business Conduct and Ethics (available at https://investors.gbrx.com/corporate-governance) guides our Board, executives and employees in the work they do for the Company. We work diligently to ensure that all of our employees fully understand and are empowered to implement ethical practices and promptly report any suspicious activity. The Company maintains the right to require any employee to supply a written statement certifying compliance with our Code of Business Conduct and Ethics. The Code of Business Conduct and Ethics applies to all of the Company’s directors, employees and consultants, including its principal executive officer, principal financial officer and principal accounting officer.
Our Code of Business Conduct and Ethics is closely tied to our FCPA and Anti-Corruption Policy. We are an international company, and as such compliance with all anti-bribery and anti-corruption laws is a key component of our ethics focus. We conduct ongoing compliance training at all of our locations across the globe.
We maintain an active shareholder engagement process soliciting feedback on matters important to our shareholders. Our Lead Director, Board committee chairs and management team are directly involved in these efforts, which are reported to the Board at large.
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Corporate Governance |
We engaged with eight of our top 10 shareholders, and many other shareholders outside of our top 10, throughout the 2020 fiscal year. Over half of the shareholders we engaged with were primarily focused on governance and compensation matters, approaching 30% of outstanding shares. Depending on availability and specific shareholder requests, Greenbrier was represented at these engagements by the Chairs of our Compensation and Nominating and Corporate Governance Committees and by senior executives including our President, head of Human Resources and Treasurer.
WHAT WE DISCUSSED
| • | Best practices in corporate governance |
| • | Shareholder rights and appropriate take-over protections for smaller cap companies |
| • | CEO succession planning and compensation |
| • | Compensation plan design process and strategy (for details see Compensation Discussion and Analysis section below) |
| • | Effective alignment of shareholder and executive interests |
| • | Total shareholder return alignment |
| • | Environmental, social and diversity priorities |
Where committee Chairs participated in meetings, they reported shareholder feedback directly to the Board. Where committee Chairs did not participate, management reported shareholder feedback directly to the Board.
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ELECTION OF DIRECTORS
The three nominees recommended by our Nominating and Corporate Governance Committee and by the Board of Directors for election as Class III directors are William A. Furman, Charles J. Swindells and Kelly M. Williams. The nominees are nominated to serve until the Annual Meeting of Shareholders in 2024, or until their respective successors are elected and qualified. If a nominee is unable or unwilling to serve as a director at the date of the Annual Meeting or any adjournment or postponement thereof, the proxies may be voted for a substitute nominee, designated by the proxy holders or by the present Board of Directors to fill such vacancy, or for the other nominees named without nomination of a substitute, or the number of directors may be reduced accordingly. The Board of Directors has no reason to believe that any of the nominees will be unwilling or unable to serve if elected a director.
Under Oregon law, the directors who receive the greatest number of votes cast will be elected directors. Abstentions and broker non-votes will have no effect on the results of the vote.
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THE BOARD OF DIRECTORS HAS REVIEWED THE QUALIFICATIONS FOR MR. SWINDELLS AND, NOTWITHSTANDING THAT HE IS PAST THE AGE OF 77, DUE TO HIS CRITICAL INTERNATIONAL ROLE AT THE COMPANY, THE BOARD RECOMMENDS A VOTE FOR THE ELECTION OF MR. SWINDELLS AND FOR MR. FURMAN AND MS. WILLIAMS. UNLESS MARKED OTHERWISE, PROXIES RECEIVED WILL BE VOTED FOR THE ELECTION OF THE THREE NOMINEES.
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Directors are divided into three classes, with four directors in Class II and three directors in each of Classes I and III. One class is elected each year for a three-year term. The following table sets forth certain information about each nominee for election to the Board and each continuing director.
| Name |
Age | Independent | Positions | Director Since |
Committee Memberships |
Expiration of Current Term | ||||||||||||||||||||||||
| Nominees / Class III Directors |
|
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|
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|
|
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|
|
|
|
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| William A. Furman |
76 | |
Chairman of the Board and Chief Executive Officer |
1981 | 2021 | |||||||||||||||||||||||||
| Charles J. Swindells |
78 |
|
Director | 2005 | 2021 | |||||||||||||||||||||||||
| Kelly M. Williams |
56 |
|
Director | 2015 | A, C, G Chair | 2021 | ||||||||||||||||||||||||
| Class I Directors |
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
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| Thomas B. Fargo |
72 |
|
Director | 2015 | C Chair, G | 2022 | ||||||||||||||||||||||||
| Duane C. McDougall |
68 |
|
Director and Lead Director | 2003 | A, F, C, G | 2022 | ||||||||||||||||||||||||
| Donald A. Washburn |
76 |
|
Director | 2004 | A, C, G | 2022 | ||||||||||||||||||||||||
| Class II Directors |
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| Wanda F. Felton |
62 |
|
Director | 2017 | A, F, G | 2023 | ||||||||||||||||||||||||
| Graeme A. Jack |
69 |
|
Director | 2006 | A Chair, F, C, G | 2023 | ||||||||||||||||||||||||
| David L. Starling |
70 |
|
Director | 2017 | C, G | 2023 | ||||||||||||||||||||||||
| Wendy L. Teramoto |
46 |
|
Director | 2019 | A, C, F | 2023 | ||||||||||||||||||||||||
Independent A Audit Committee C Compensation Committee F
Audit Committee Financial Expert G Nominating and Corporate Governance Committee
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The following table summarizes the compensation of the non-employee Board members for fiscal 2020.
| Name |
Fees Earned or Paid in Cash ($) |
Stock Awards ($)(1) |
All Other Compensation ($)(2) |
Total ($) | ||||
| Thomas B. Fargo |
108,000 |
134,765 |
4,739 |
247,504 | ||||
| Wanda F. Felton |
95,500 |
134,765 |
4,739 |
235,004 | ||||
| Graeme A. Jack |
123,000 |
134,765 |
4,739 |
262,504 | ||||
| Duane C. McDougall |
173,000 |
134,765 |
4,739 |
312,504 | ||||
| David L. Starling |
93,000 |
134,765 |
4,739 |
232,504 | ||||
| Charles J. Swindells |
78,000 |
134,765 |
124,739 |
337,504 | ||||
| Wendy Teramoto |
64,667 |
134,765 |
3,875 |
203,307 | ||||
| Donald A. Washburn |
103,000 |
134,765 |
4,739 |
242,504 | ||||
| Kelly M. Williams |
118,000 |
134,765 |
4,739 |
257,504 | ||||
| (1) | Amounts are calculated based upon the aggregate grant date fair value computed in accordance with FASB ASC Topic 718. Such amounts may not correspond to the actual value that will be realized if and when the restricted stock awards vest. Each director received 4,784 shares as stock awards during fiscal 2020. As of August 31, 2020, each director held 4,784 shares of unvested restricted stock. |
| (2) | Amounts represent dividends on Greenbrier shares of restricted stock during fiscal 2020, and for Mr. Swindells also include $120,000 in consulting fees he received in fiscal 2020 pursuant to a consulting agreement with the Company entered into in January 2016. |
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Compensation Discussion and Analysis
We have a very short window to engage with shareholders between the publication of proxy advisor reports and the Annual Meeting. We encourage shareholders to reach out to us as early as possible at investorrelations@gbrx.com if you would like a meeting with our Board or management to discuss this Proxy Statement.
This section discusses material information relating to our executive compensation program and plans for our named executive officers or “NEOs” for fiscal 2020:
This Compensation Discussion and Analysis makes reference to financial data derived from our financial statements prepared in accordance with generally accepted accounting principles (“GAAP”) and certain other financial data prepared using non-GAAP components. For a reconciliation of these non-GAAP components to the most comparable GAAP components, see Reconciliation of Non-GAAP Financial Measures set forth in Appendix C.
Say-on-Pay Vote and Shareholder Engagement on Compensation
After six years of overwhelming shareholder support exceeding 93% every year, our say on pay resolution received approximately 58% approval at our 2020 Annual Meeting. As a result, we expanded our usual shareholder outreach program with a focus on understanding shareholder concerns regarding compensation practices. We reached out expressly on compensation matters to our top shareholders representing nearly 40% of the Company’s outstanding shares and engaged with shareholders representing nearly 30% of outstanding shares on compensation matters. Through these engagements, some of which included the Chairs of our Compensation and Nominating and Corporate Governance Committees, we received important feedback that led to several changes to our compensation practices by the Compensation Committee. These changes are responsive to what we heard from shareholders, as summarized in the chart below. For more details on our 2020 shareholder engagement program see the “Shareholder Engagement” section beginning on page 12.
| WHAT WE HEARD |
HOW WE RESPONDED | |
| Some shareholders expressed interest in better understanding the overall compensation design process. |
Over the past several years we have increased disclosures in our annual proxy statements to provide a more robust explanation of our compensation practices. | |
| Evaluate whether the stock ownership requirements for executives continue to be appropriate. |
In fiscal 2020 the Company’s stock ownership guidelines for executive officers were increased as follows: • CEO increased from 5.0x to 6.0x base salary • President increased from 3.5x to 4.0x base salary • EVP increased from 2.5x to 3.0x base salary | |
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| Executive Compensation |
| WHAT WE HEARD |
HOW WE RESPONDED | |
| Some shareholders requested additional background regarding certain executive base pay increases in recent years. |
The executive officers did not receive base pay increases in fiscal 2020 and, as discussed below, CEO base and bonus compensation were substantially reduced and the form of CEO annual bonuses was changed from cash to company stock.
When discussed, shareholders acknowledged the current emphasis on compensating for successful executive transitions, particularly in light of recent promotions and expanded responsibilities such as the promotions of Lorie Tekorius to President and COO and Adrian Downes to CFO.
| |
| Continue to focus on alignment of total shareholder return (TSR) with executive performance incentives. |
We added a relative TSR modifier to our 2020 long-term incentive program that allows for adjustments to executive awards based on performance relative to the designated peer group. | |
| Ensure rigorous goal setting for annual and long-term performance incentives. |
The EBITDA performance target for our 2020 long-term performance program is the highest in the Company’s history (a 30% increase from the prior year) and for our 2020 annual performance program is both the highest it has been in the last three years and higher than actual performance in 2019.
In 2020 many companies adjusted performance payouts in light of the COVID-19 global pandemic. Our Compensation Committee made no such adjustments. Cyclical businesses can be challenging however, we believe this year’s goals were appropriately rigorous as reflected in the low payout levels.
| |
| Ensure time-based and performance-based compensation elements of Restricted Stock Unit (RSU) grants are appropriately weighted relative to Company peers and current market practices. |
RSU grants in our long term incentive program are weighted 60% performance-based and 40% time-based going forward versus our longstanding practice of 50:50 weighting.
RSU grants in fiscal 2021 for our CEO will be weighted 70% performance-based and 30% time-based.
In 2018 we increased the measurement period for our long-term incentives from 30 months to 36 months based on feedback from our shareholders. | |
| Consider disclosing performance targets in advance. |
We do not publicly disclose quantitative targets in advance because these are confidential and disclosure could cause competitive harm. Disclosure of these targets in advance could give competitors strategic and planning insights with predictive value. We set these targets at challenging but achievable levels and consistent with our corporate-wide strategic priorities.
We have included in this Proxy additional information regarding our annual incentive metrics and goal setting for both the 2020 and 2021 fiscal years (see Goal Setting for Fiscal 2021 on page 25). | |
Payouts and Pay-for-Performance Alignment
Our compensation program is designed to reward our executives for contributing to the achievement of our annual and long-term objectives through the business cycles. We set robust financial and strategic goals in order to align executive awards with the creation of long-term value for our shareholders.
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Executive Compensation |
PLAN GOALS AND PAYOUTS
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Under our 2020 annual incentive plan the Compensation Committee set a rigorous Adjusted EBITDA goal of $352 million, which significantly exceeded both the 2019 goal and actual results of $313.2 million and $308.6 million respectively. 2020 Adjusted EBITDA before bonus was $298.2 million, resulting in a payout of 80.8%, which accounts for 85% of the payout determination, and 100% for Strategic Goals, which account for 15% of the payout determination. This resulted in a blended payout of 83.7% of the target award level to the NEOs.
For fiscal 2020, our Board set the strategic goals for the annual incentive plan of the NEOs. The NEOs can receive between 0% and 150% payout on these strategic goals. The Compensation Committee determined that a 100% payout was appropriate acknowledging that management has over-achieved on some goals and under-achieved on others. The strategic goals and management’s achievements are listed below.
| (1) Optimize North American Railcar Production Network and Designs |
| Accomplishments |
|
• Manufacturing and commercial teams integrated railcar designs following the acquisition of the manufacturing assets of American Railcar Industries, Inc.
• Standardized production control scheduling achieved across all facilities
• Orders were split across plants to manage labor shortages
• Work was relocated to maintain scheduling and utilize the most efficient facility
• Slowed and closed manufacturing lines due to COVID-19 related pressures |
| (2) Evolve and Adapt Leasing and Syndication Model |
| Accomplishments |
|
• The COVID-19 global pandemic slowed progress in this area
• Despite challenges management executed with existing equity sources and strategic partners
• Management developed a strong foundation to execute on this priority as the market normalizes |
| (3) Advance Management Services (GMS) and Repair Business Models |
| Accomplishments |
|
• Developed automated approval process significantly reducing estimate approval timing
• Direct financial benefits realized from shared asset usage across operating groups
• Continuing improvements including reduced turn times at repair facilities, down from 90 days to 75 days |
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| Executive Compensation |
LONG-TERM PERFORMANCE EQUITY PLAN GOALS AND VESTING
The Compensation Committee sets rigorous targets for our long-term performance equity awards. This is demonstrated in vesting percentages over the last three years.
The 2020 long-term performance equity awards are the first awards vesting under our extended 36 month performance period. For these awards the Compensation Committee’s rigorous targets replaced ROE with ROIC and introduced relative EBITDA growth as a new metric. Actual results for the awards vesting in 2020 nearly met the target performance goal for Adjusted EBITDA and did not meet the threshold goal for either ROIC or relative EBITDA growth, as seen below.
| Metric |
Weighting |
Goal |
Actual | |||
| Adjusted EBITDA |
30% | $900 M | $871.5 M | |||
| ROIC |
40% | 14% | 7.9% | |||
| Relative EBITDA Growth |
30% | 50th percentile | 18th percentile | |||
The resulting vesting was 28.6% of the performance-based restricted stock units as of the determination date, October 20, 2020. The new relative EBITDA growth metric measured the Company’s EBITDA growth performance against its compensation peer group setting a goal of performing at the 50th percentile, with a maximum payout for performance at the 75th percentile and threshold performance, below which no payout on this metric is earned, at the 35th percentile.
We made no adjustments to our performance metrics due to the COVID-19 global pandemic and resulting market pressures, or in connection with our recent acquisition and continued integration of the manufacturing assets of American Railcar Industries, Inc. (ARI), the largest acquisition in Company history.
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Executive Compensation |
PERFORMANCE AGAINST DIRECT PEERS
The Compensation Committee and full Board regularly review our performance compared to our direct competitors in the railcar manufacturing industry. The charts below provide performance comparisons between Greenbrier and our primary competitor, Trinity Industries, Inc. (ticker: TRN), for several important metrics. For the most recent one and five year periods Greenbrier has outperformed Trinity on every metric. We have not included Freightcar America, Inc. (ticker: RAIL) in this analysis although they are a direct competitor in freight railcar manufacturing. We do not believe a comparison to Freightcar is instructive at this time due to their negative metric performance and market cap recently ranging between $15 million and $50 million. Trinity is the most comparable and appropriate direct peer for Greenbrier.
1-Year Metrics
(in percent)
|
Company |
ROE | ROA | ROIC |
Revenue Growth |
EBITDA Growth | |||||
| The Greenbrier Companies |
5.8 | 2.9 | 3.8 | 9.3 | 49.0 | |||||
| Trinity Industries |
1.1 | 0.3 | 0.4 | 4.0 | 5.7 | |||||
Source: Compustat and IBES.
5-Year Metrics
(in percent)
|
Company |
ROE | ROA | ROIC |
Revenue Growth |
EBITDA Growth | |||||
| The Greenbrier Companies |
11.7 | 6.0 | 8.7 | 4.5 | (2.1) | |||||
| Trinity Industries |
8.2 | 3.7 | 3.1 | (15.6) | (16.4) | |||||
Source: Compustat and IBES. Trinity completed the spin-off of Arcosa, Inc. in November 2018 and publicly available filings only reflect results from
discontinued operations starting in 2016; adjustments to prior years are not confirmed.
In addition to strong fundamental performance, Greenbrier has significantly increased its share of the North American freight railcar market’s industry backlog over the last five years. Comparatively, Trinity’s share of the North American industry backlog has decreased over that same period. We have been competing with Trinity for market share for many years and following our acquisition of the manufacturing assets of ARI at the end of 2019, we have become the leader of freight railcar manufacturing in North America.
Source: SEC EDGAR filings and Railway Supply Institute’s American Railway Car Institute Report.
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TOTAL SHAREHOLDER RETURN (TSR) PERFORMANCE
Measured by Total Shareholder Return, the Company has outperformed the Russell 3000 and S&P 600 Small Cap indices, and our primary competitor, Trinity, over the one year period from September 1, 2019 to August 31, 2020. Greenbrier has also outperformed or held pace with Trinity on many fundamental financial metrics for each company’s 2019 fiscal year (the last full year for which Trinity data is publicly available).
| Company / Index |
One-Year TSR (9/1/19 – 8/31/20) |
Manufacturing Revenue (in millions) |
EPS |
Net |
||||||||
| The Greenbrier Companies, Inc. |
22.2% | $2,431 | $ | 2.14 | $105.8 | |||||||
| Russell 3000 |
21.4% | — | — | — | ||||||||
| S&P 600 Small Cap |
(0.5)% | — | — | — | ||||||||
| Trinity Industries, Inc. |
21.9% | $1,889 | $ | 1.09 | $136.1 | |||||||
Source: SEC EDGAR filings, Compustat and IBES.
Greenbrier’s profile as a company has significantly changed following the acquisition of the manufacturing assets of ARI at the end of 2019. We believe that the Company’s strong performance and growth through the railcar manufacturing industry’s challenging and cyclical markets is not reflected in three and five year TSR performance making those measurements less relevant to the company Greenbrier is today.
Despite fluctuations in the market, Greenbrier has returned $146.5 million to shareholders through dividends over the last five fiscal years and sustained a strong balance sheet and profitability in a highly cyclical business. Fiscal 2020 marks seven consecutive years of dividend payments by the Company and saw record dividend payments of $35.2 million.
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Executive Compensation |
In fiscal 2020, Mr. Furman led Greenbrier through a challenging economic and competitive environment, successfully navigating fallout from the COVID-19 global pandemic while improving liquidity, reducing general and administrative expenses and effectively integrating the manufacturing business of ARI acquired at the end of 2019. At the same time, he made significant progress in reinforcing our capacity for continued growth and customer expansion in our core North American market.
Mr. Furman is a founder CEO and has been working closely with the Board and executive management team to position both the Company and its executive leadership for the future. His continued commitment to our talent pipeline initiative has resulted in meaningful progress toward our succession and leadership bench goals, positioning the Company for smooth transitions. The Board is keenly aware that appropriately incentivizing Mr. Furman is key for stability in the most significant leadership transition in the history of the Company further complicated by the effects of COVID-19.
Leading by example in an environment of cost-cutting and focus on liquidity, Mr. Furman has made substantial concessions in his own compensation.
| VOLUNTARY ACTION TAKEN BY OUR CEO TO ALIGN HIS COMPENSATION WITH SHAREHOLDER INTERESTS |
|
• Reduced his base salary actually paid by nearly 25% (from $1,050,000 per year to $800,000 per year) in the fourth quarter of 2020, which reduction continues in 2021 |
|
• Reduced by 20% the amount of his earned annual incentive award that he will actually receive (from $1,010,333 to $808,266) |
|
• Agreed to receive his annual incentive awards for fiscal 2020 and 2021 in stock instead of cash in order to conserve cash |
|
• Purchased nearly $1.7 million worth of Company stock on the open market |
|
• Agreed to remain with the Company until September 2022 to manage current challenges in succession until his retirement date
|
Greenbrier operates in a cyclical industry which is accentuated by the overarching economic turmoil of the COVID-19 global pandemic. This can at times appear to result in misalignments between our CEO’s compensation and our total shareholder return. Stock market fluctuations that are disconnected from fundamentals can inappropriately discount the long-term trends at Greenbrier, including strong liquidity and revenue and market share growth. Our compensation program is designed to align the CEO’s compensation with Company performance. Stock grants provide a direct incentive for improved share performance. The CEO’s total equity risk as of August 31, 2020 was 618,328 shares, valued at $16,812,338, an increase of over 50% in the number of shares from the prior year. Although the Company’s industry remains cyclical following the acquisition of the manufacturing assets of ARI, the largest in the Company’s history, historical performance and compensation does not reflect the current scale and trajectory of the Company.
The following tables show Mr. Furman’s cash compensation and his equity compensation relative to the Company’s share price as of the long-term incentive vesting date.
CEO CASH COMPENSATION
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The Board and the CEO are aware of the impact significant market volatility in our share price has had on total shareholder return performance. It is of note that the value of the long-term equity grants to Mr. Furman are also significantly impacted by share price performance as well as the 100,000 additional Company shares Mr. Furman purchased on May 15, 2020 at a total cost of nearly $1.7 million. The actual value of Mr. Furman’s 2018, 2019 and 2020 long-term equity incentives as of the end of fiscal 2020 were 57%, 47% and 80%, respectively, as compared to the grant date fair value of each when granted. This translates into a roughly $9 million total value at the close of fiscal 2020 relative to a combined grant date fair value for fiscal 2018, 2019 and 2020 of roughly $15 million.
CEO EQUITY COMPENSATION VALUES
As shown below, volatility in our stock price impacts both TSR and executive stock grant values.
SHARE PRICE AT VESTING OF CEO EQUITY
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GOAL SETTING FOR FISCAL 2021
Looking forward to fiscal 2021, we continue to focus on Total Shareholder Return (TSR) alignment and our commitment to pay-for-performance.
| 2021 Annual Incentive Metrics |
2021-2023 Long-Term Incentive Metrics | |||
|
• Introducing an earnings per share (EPS) metric to our short-term incentive plan, which accounts for 40% of the payout weighting, since EBITDA and EPS do not always correlate
• Changing the adjusted EBITDA metric, which accounts for 50% of the payout weighting, to after bonus instead of before bonus to align better with published financial information
• Placing more emphasis on financial metrics by increasing the weighting to 90% financial metrics and 10% strategic goals (as opposed to 85:15)
• Strategic goals will include a diversity and inclusion component consistent with the Company’s inclusion, diversity, equity, access and leadership (IDEAL) program
|
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• Continuing a relative TSR modifier to performance shares that allows for adjustments to executive awards based on performance relative to the designated peer group
• Weighting more heavily performance-based with 70% performance-based and 30% time-based for our CEO and 60% performance-based and 40% time-based for our other NEOs
• Utilizing Adjusted EBITDA and ROIC to incentivize earnings and operational cash flow in the current environment |
Executive Compensation Program for 2020
EXECUTIVE COMPENSATION PRINCIPLES
The Compensation Committee designed the Company’s executive compensation program to be consistent with the goals of its executive compensation philosophy: to drive performance and increase shareholder value. The current compensation strategy is designed to strengthen the link between pay and performance.
The objectives of our executive compensation program are to:
| • | Align the interests of key executives with the long-term interests of shareholders |
| • | Attract, develop, retain and motivate key executives to drive our business and financial performance |
| • | Link a significant amount of executive compensation to achievement of pre-established financial metrics and business goals that are directly tied to our overall business strategy |
| • | Incentivize the management team to create long-term shareholder value by balancing growth and return on capital at all points in the business cycle |
Our compensation principles state that:
| • | A significant portion of compensation should be performance-based |
| • | Total direct compensation is based on the complexity of an executive’s assignment, years and depth of experience, and readiness for leadership in the CEO and key executive succession plan |
| • | Annual incentive awards should be aligned with the Company’s operating, financial and strategic objectives while considering the cyclical nature of our business |
| • | Long-term incentive plans should promote retention and reward absolute performance as well as relative performance to appropriate peers |
| • | A meaningful equity stake helps ensure that executive and shareholder interests are aligned |
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EXECUTIVE COMPENSATION PLAN DESIGN
The following table provides a snapshot of the elements of pay for NEOs and explains why each element is provided.
| Incentive Type | Compensation Element | What the Element Rewards | Key Features & Purpose | Form of Settlement | ||||
| Fixed |
Base Salary | Individual performance while considering market pay levels, specific responsibilities and experience of each NEO
|
• Attract and retain talent
• Provide financial certainty |
Cash | ||||
| Performance- Based |
Annual Incentive | Achievement of specific financial and strategic goals | • Drive achievement of key business results on an annual basis
|
Cash | ||||
|
Long-Term Equity |
Achievement of specific financial goals including relative financial performance |
• Reward achievement of long-term objectives over a 36 month performance period
• Directly ties interests of our NEOs to those of our shareholders
|
GBX Shares | |||||
| Time-Based |
Long-Term Equity |
Creation of long-term shareholder value | • Retain talent
• Vest ratably over a three-year period at then stock price
|
GBX Shares | ||||
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EXECUTIVE COMPENSATION PRACTICES
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WHAT WE DO | ||
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New Limits on Awards Upon shareholder approval of the 2021 Stock Incentive Plan, we cap the number of shares or dollar value of awards an employee may receive in any fiscal year
| |
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Pay-for-Performance Nearly 55% of our NEOs’ total possible direct compensation is performance-based
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Robust Stock Ownership Guidelines We have stock ownership guidelines of 6.0x base salary for our CEO, 4.0x base salary for our President, 3.0x base salary for EVPs and 5.0x annual cash retainer for Directors
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Performance Weighting RSU grants are weighted 60% performance-based and 40% time-based
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Stock Retention Requirements Our NEOs are expected to retain 50% of the after-tax value of compensatory awards until stock ownership guidelines are met
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Annual “Say-on-Pay” Vote Our shareholders are given an annual advisory vote to approve our executive compensation programs
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Clawback Policy Our policy provides for recovery of performance-based equity awards and incentive compensation paid to executive officers in the event of an accounting restatement due to material noncompliance with financial reporting requirements under federal securities laws
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Independent Compensation Consultant The Compensation Committee retains an independent compensation consultant and reassesses independence annually
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Annual Review of Compensation Program The Compensation Committee reviews all our compensation programs annually for best practices with input from our compensation consultant
| |
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Annual Compensation Risk Assessment The Compensation Committee conducts an annual risk assessment of our compensation programs to ensure that they do not promote undue risk taking
| |
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Limited Perquisites We maintain a moderate perquisite program of automobile allowances, club memberships and financial planning services as is the practice in our industry, as well as relocation costs when appropriate
| |
|
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Grandfathered Employment Agreements We no longer enter into employment agreements with new executive officers. The legacy employment agreements with three NEOs (including our CEO) were originally entered into before 2010
| |
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Minimum Vesting Requirements All awards under the plan have a minimum vesting period of at least one year
| |
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Maximum Term of SARs Stock appreciation rights are subject to a maximum term of 10 years
| |
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Measurement Period Beginning in fiscal 2018 the measurement period for long-term incentives was extended from 30 to 36 months
| |
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Relative Metric We have incorporated a relative performance metric into our long-term incentive grant program
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Responsible Share Usage The Compensation Committee reviews share usage for RSU awards annually with an independent consultant
| |
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WHAT WE DON’T DO | ||
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Hedging/Pledging of Company Stock We prohibit our officers and directors and insider employees from hedging and short selling our publicly traded stock. Our directors and executive officers are prohibited from margining our publicly traded stock and prohibited from pledging our publicly traded stock without advance clearance
| |
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Single-Trigger Change of Control Vesting We do not provide single-trigger acceleration of vesting for equity or cash severance payments upon a change of control. We require both a change of control and termination of an executive’s employment before vesting is accelerated or severance payments are made (double-trigger)
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Tax Gross-Ups We do not provide tax gross-ups
| |
|
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Option Repricing We do not allow option repricing
| |
|
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Dividends on Unvested Shares We do not pay dividends on unearned shares or RSUs
| |
|
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Change of Control (“COC”) We do not accelerate equity awards upon a COC so long as the acquiring company assumes or continues the awards. Performance-based awards vest only based on actual results measured against performance goals as of the COC. The COC definition excludes transactions with affiliates and corporate reorganizations
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PEER GROUP
Our peer group referred to when developing our fiscal 2020 compensation program included the 18 companies listed below. The Compensation Committee relies on Mercer, our independent compensation consultant, to periodically review and recommend changes to our peer group for approval. Mercer performs this review and makes recommendations annually, providing substantial detail and support to the compensation committee for consideration. For fiscal 2021, the Compensation Committee made no changes to our peer group. Our fiscal 2020 peer group is:
| Astec Industries
Crane
GATX
H&E Equipment Services
Hub Group
Hyster-Yale Materials Handling |
Meritor
Manitowoc
Oshkosh
REV Group
Schnitzer Steel Industries
Terex |
Timken
Trinity Industries
Triton International
Wabash National
WABCO Holdings
Westinghouse Air Brake |
Peer group companies are chosen based on whether they have comparable revenue or market capitalization, are in a comparable industry or compete with Greenbrier for executive talent. The current peer group includes companies in the following sectors: railcar manufacturing; heavy manufacturing; other related manufacturing; after-market products; transportation services; and high-value equipment leasing. Annual revenue of the peer group companies range from approximately one-third to three times Greenbrier’s annual revenue, with Greenbrier approximating the peer group median revenue size.
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SUMMARY COMPENSATION TABLE FOR FISCAL YEAR 2020
The following table summarizes the compensation of the NEOs for fiscal year 2020.
| Name and Principal Position |
Year | Salary ($) |
Stock Awards(1) ($) |
Non-equity Incentive Plan Compensation(2) ($) |
All
Other Compensation(3) ($) |
Total ($) |
||||||||||||
| William A. Furman |
2020 |
|
945,833 |
|
|
4,827,285 |
|
808,266(4) |
341,993 |
|
6,923,377 |
| ||||||
| Chairman and Chief Executive Officer |
2019 |
|
1,016,667 |
|
|
5,290,000 |
|
1,150,881 |
393,898 |
|
7,851,446 |
| ||||||
| 2018 |
|
950,000 |
|
|
4,790,000 |
|
1,419,516 |
314,128 |
|
7,473,644 |
| |||||||
| Lorie L. Tekorius |
2020 |
|
625,000 |
|
|
2,749,066 |
|
549,094 |
149,676 |
|
4,072,836 |
| ||||||
| President and Chief Operating Officer |
2019 |
|
609,417 |
|
|
1,035,000 |
|
573,810 |
147,887 |
|
2,366,114 |
| ||||||
| 2018 |
|
479,400 |
|
|
1,077,750 |
|
529,463 |
121,834 |
|
2,208,447 |
| |||||||
| Mark J. Rittenbaum |
2020 |
|
565,000 |
|
|
1,439,869 |
|
449,107 |
267,523 |
|
2,721,499 |
| ||||||
| Executive Vice President Commercial and Leasing |
2019 |
|
548,027 |
|
|
920,000 |
|
485,510 |
304,774 |
|
2,258,311 |
| ||||||
| 2018 |
|
501,387 |
|
|
958,000 |
|
586,319 |
237,319 |
|
2,283,025 |
| |||||||
| Alejandro Centurion |
2020 |
|
620,000 |
|
|
1,110,269 |
|
492,825 |
369,485 |
|
2,592,579 |
| ||||||
| Executive Vice President and President of Global Manufacturing Operations |
2019 |
|
605,933 |
|
|
1,840,000 |
|
536,811 |
422,752 |
|
3,405,496 |
| ||||||
| 2018 |
|
563,533 |
|
|
— |
|
658,993 |
441,351 |
|
1,663,877 |
| |||||||
|
|
||||||||||||||||||
| Adrian J. Downes |
2020 |
|
425,000 |
|
|
416,343 |
|
284,483 |
72,323 |
|
1,198,149 |
| ||||||
| Senior Vice President, Chief Financial Officer and Chief Accounting Officer |
2019 |
|
397,441 |
|
|
345,000 |
|
273,858 |
75,990 |
|
1,092,289 |
| ||||||
| 2018 |
|
331,509 |
|
|
359,250 |
|
279,981 |
70,076 |
|
1,040,816 |
| |||||||
|
|
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|
|
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| (1) | Represents the aggregate grant date fair value of the RSUs computed in accordance with FASB ASC Topic 718, excluding the effect of estimated forfeitures. For purposes of valuation of RSU awards, we assume that no RSUs will be forfeited and performance goals will be achieved at target levels. These amounts reflect the grant date fair value and may not correspond to the actual value that will be recognized by the NEOs. For the performance-vested RSUs, the grant date fair value is calculated based on the target number of shares which, as of the grant date, was the estimated number of shares to be issued upon vesting of RSUs, and reflects the effect of the relative TSR modifier calculated using a Monte Carlo simulation. The estimated grant date fair value for the RSUs granted during 2020 if the maximum number of shares issuable under the performance-vested RSU awards are earned is $7,774,994 for Mr. Furman; $3,761,766 for Ms. Tekorius; $2,117,835 for Mr. Rittenbaum; $1,788,235 for Mr. Centurion; and $670,589 for Mr. Downes. |
| (2) | Represents annual incentive bonuses earned by each NEO under the fiscal 2020 short-term incentive plan for executive officers. |
| (3) | See “All Other Compensation Table for Fiscal Year 2020” below for detail on amounts included in this column. |
| (4) | Pursuant to Mr. Furman’s amended employment agreement, his fiscal 2020 Non-equity Incentive Plan Compensation will be paid in fully vested RSUs. |
ALL OTHER COMPENSATION TABLE FOR FISCAL YEAR 2020
| Name |
Perquisites |
NQ Deferred Compensation Plan Contributions ($)(2) |
401(k) Matching Contributions ($)(3) |
Dividends ($) |
Life Insurance ($) |
Total ($) | ||||||
| William A. Furman |
20,840 | 132,053 | — | 189,100 | — | 341,993 | ||||||
| Lorie L. Tekorius |
17,749 | 71,929 | 11,200 | 39,098 | 9,700 | 149,676 | ||||||
| Mark J. Rittenbaum |
13,200 | 187,507 | 11,200 | 40,466 | 15,150 | 267,523 | ||||||
| Alejandro Centurion |
18,580 | 265,772 | 11,200 | 37,583 | 36,350 | 369,485 | ||||||
| Adrian J. Downes |
— | 41,231 | 11,200 | 15,762 | 4,130 | 72,323 | ||||||
| (1) | Includes payments made on behalf of: Mr. Furman of $12,000 for financial, investment and tax advisors, $7,607 for club dues and $1,233 for use of a Company car; Ms. Tekorius of $13,200 for car allowance and $4,549 for club dues; Mr. Rittenbaum of $13,200 for car allowance, and Mr. Centurion of $13,200 for car allowance and $5,380 for club dues. On occasion during fiscal 2020, certain of the named executive officers were accompanied by a spouse or significant other on business trips using an aircraft chartered by the Company, but no amounts are included because there was no incremental cost to the Company. Employees of the Company, including our named executive officers, occasionally use Company-owned properties for personal use. No amounts with respect to any such use are included because there was no incremental cost to the Company. |
| (2) | These amounts represent (i) the Company’s contributions for Mr. Rittenbaum and Mr. Centurion under the target benefit component of the Company’s Nonqualified Deferred Compensation Plan made in January 2020 on behalf of the NEOs, with respect to the plan year ended December 31, 2019; and (ii) the Company’s contributions for Mr. Furman and Mr. Downes and Ms. Tekorius to the Non-qualified Deferred Compensation Plan for executive officers who do not participate in the target benefit plan. |
| (3) | These amounts represent the Company’s matching contribution to each NEO’s 401(k) plan account. |
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GRANTS OF PLAN-BASED AWARDS IN FISCAL YEAR 2020
|
|
Grant Date |
Possible Future Payouts Under |
|
Estimated Future Payouts Under Equity Incentive Plan Awards |
All Other |
Grant RSU | ||||||||||||||
| Name |
Threshold ($) |
Target ($) |
Maximum ($) |
|
Threshold (#) |
Target (#) |
Maximum (#) | |||||||||||||
| William A. Furman |
10-23-19 |
42,770 |
85,540 |
171,080 |
2,947,708 | |||||||||||||||
| 10-23-19 |
57,026(4) |
1,879,577 | ||||||||||||||||||
| 905,625 |
1,207,500 |
2,324,438 |
||||||||||||||||||
| Lorie L. Tekorius |
10-23-19 |
11,067 |
22,133 |
44,266 |
762,703 | |||||||||||||||
| 10-23-19 |
14,756 |
486,358 | ||||||||||||||||||
| 7-7-20 |
N/A |
22,925 |
34,388 |
499,994 | ||||||||||||||||
| 7-7-20 |
45,851(5) |
1,000,010 | ||||||||||||||||||
| 493,750 |
656,250 |
1,263,281 |
||||||||||||||||||
| Mark J. Rittenbaum |
10-23-19 |
9,837 |
19,674 |
39,348 |
677,966 | |||||||||||||||
| 10-23-19 |
13,116(4) |
432,303 | ||||||||||||||||||
| 10-23-19 |
10,000(6) |
329,600 | ||||||||||||||||||
| 402,563 |
536,750 |
1,033,244 |
||||||||||||||||||
| Alejandro Centurion |
10-23-19 |
9,837 |
19,674 |
39,348 |
677,966 | |||||||||||||||
| 10-23-19 |
13,116 |
432,303 | ||||||||||||||||||
| 441,750 |
589,000 |
1,133,825 |
||||||||||||||||||
| Adrian J. Downes |
10-23-19 |
3,689 |
7,378 |
14,746 |
254,246 | |||||||||||||||
| 10-23-19 |
4,918 |
162,097 | ||||||||||||||||||
| 255,000 |
340,000 |
654,500 |
||||||||||||||||||
| (1) | All amounts reported in these columns represent potential annual incentive award payout amounts under the fiscal year 2020 short-term incentive plan for executive officers, if performance had been achieved at the threshold, target and stretch goal levels. Actual short-term incentive awards earned during fiscal year 2020 are reported in the Summary Compensation Table in the “Non-Equity Incentive Plan Compensation” column. Pursuant to his amended employment agreement, Mr. Furman’s Non-equity Incentive Plan Compensation for fiscal 2020 will be paid in fully vested RSUs. |
| (2) | Represents time-vested RSUs, which generally vest ratably over three years, subject to continued employment. |
| (3) | Represents the aggregate grant date fair value of RSU awards computed in accordance with FASB ASC Topic 718, excluding the effect of estimated forfeitures. The grant date fair value of the performance-vested RSUs is based on the target under the award, estimated to be the probable outcome of the performance conditions as of the grant date, multiplied by the closing market price of the Company’s Common Stock on the grant date, and reflects the effect of the relative TSR modifier calculated using a Monte Carlo simulation. |
| (4) | Mr. Furman’s and Mr. Rittenbaum’s time-vested RSU award will vest in two equal installments on the first and second anniversaries of the grant date, based on continued employment with the Company. |
| (5) | Ms. Tekorius’ time-vested RSU award will vest in two equal installments on the second and third anniversaries of the grant date, based on continued employment with the Company. |
| (6) | Mr. Rittenbaum’s award RSU award will vest in full on the second anniversary of the grant date, based on continued employment with the Company. |
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OUTSTANDING EQUITY AWARDS AT AUGUST 31, 2020
| Stock Awards | |||||||||||||||||||||||||
| Name |
Number of Shares of Stock or RSUs that Have Not Vested (#) |
Market Value of Shares of Stock or RSUs that Have Not Vested ($) |
Equity Incentive Plan Awards: Number of Unearned Shares, RSUs or Other Rights that Have Not Vested (#) |
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, RSUs or Other Rights that Have Not Vested ($) |
|||||||||||||||||||||
|
William A. Furman |
16,666 | (1) | 453,149 | ||||||||||||||||||||||
| 23,000 | (4) | 625,370 | |||||||||||||||||||||||
| 57,026 | (6) | 1,550,537 | |||||||||||||||||||||||
| 50,000 | (2) | 1,359,500 | |||||||||||||||||||||||
| 46,000 | (3) | 1,250,740 | |||||||||||||||||||||||
| 85,540 | (5) | 2,325,833 | |||||||||||||||||||||||
|
Lorie L. Tekorius |
3,750 | (7) | 101,963 | ||||||||||||||||||||||
| 6,000 | (8) | 163,140 | |||||||||||||||||||||||
| 14,756 | (9) | 401,216 | |||||||||||||||||||||||
| 45,851 | (11) | 1,246,689 | |||||||||||||||||||||||
| 11,250 | (2) | 305,888 | |||||||||||||||||||||||
| 9,000 | (3) | 244,710 | |||||||||||||||||||||||
| 22,133 | (5) | 601,796 | |||||||||||||||||||||||
| 22,925 | (10) | 623,331 | |||||||||||||||||||||||
|
Mark J. Rittenbaum |
3,333 | (7) | 90,624 | ||||||||||||||||||||||
| 5,333 | (8) | 145,004 | |||||||||||||||||||||||
| 13,116 | (6) | 356,624 | |||||||||||||||||||||||
| 10,000 | (12) | 271,900 | |||||||||||||||||||||||
| 10,000 | (2) | 271,900 | |||||||||||||||||||||||
| 8,000 | (3) | 217,520 | |||||||||||||||||||||||
| 19,674 | (5) | 534,936 | |||||||||||||||||||||||
|
Alejandro Centurion |
5,333 | (8) | 145,004 | ||||||||||||||||||||||
| 8,000 | (13) | 217,520 | |||||||||||||||||||||||
| 13,116 | (9) | 356,624 | |||||||||||||||||||||||
| 16,000 | (3) | 435,040 | |||||||||||||||||||||||
| 19,674 | (5) | 534,936 | |||||||||||||||||||||||
|
Adrian J. Downes |
1,250 | (7) | 33,988 | ||||||||||||||||||||||
| 2,000 | (8) | 54,380 | |||||||||||||||||||||||
| 4,918 | (9) | 133,720 | |||||||||||||||||||||||
| 3,750 | (2) | 101,963 | |||||||||||||||||||||||
| 3,000 | (3) | 81,570 | |||||||||||||||||||||||
| 7,378 | (5) | 200,608 | |||||||||||||||||||||||
| (1) | Time-based RSU award for Mr. Furman granted on April 4, 2018 and vest in equal increments on April 4, 2019, April 4, 2020 and October 4, 2020. |
| (2) | Performance-based RSU awards for each of Messrs. Furman, Rittenbaum, and Downes and Ms. Tekorius granted on April 4, 2018 and subject to vesting contingent on the achievement of performance targets as of August 31, 2020. The number of shares and payout value for these awards are calculated based on achieving target performance goals, which would result in 100% of the subject shares vesting. These RSUs vested on October 20, 2020. |
| (3) | Performance-based RSU awards for each of Messrs. Furman, Rittenbaum, Centurion, and Downes and Ms. Tekorius granted on October 23, 2018 and subject to vesting contingent on the achievement of performance targets as of August 31, 2021. The number of shares and payout value for these awards are calculated based on achieving target performance goals, which would result in 100% of the subject shares vesting. |
| (4) | Time-based RSU award for Mr. Furman, granted on October 23, 2018 and vests over a period of two years in annual increments of 50% of each award beginning one year from grant date. |
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| (5) | Performance-based RSU awards for each of Messrs. Furman, Rittenbaum, Centurion, and Downes and Ms. Tekorius granted on October 23, 2019 and subject to vesting contingent on the achievement of performance targets as of August 31, 2022. The number of shares and payout value for these awards are calculated based on achieving target performance goals, which would result in 100% of the subject shares vesting. |
| (6) | Time-based RSU award for each of Messrs. Furman and Rittenbaum, granted on October 23, 2019, and vest over a period of two years in annual increments of 50% of each award beginning one year from grant date. |
| (7) | Time-based RSU awards for each of Messrs. Rittenbaum, and Downes and Ms. Tekorius, granted on April 4, 2018, and vest over a period of three years in annual increments of 33 1/3% of each award beginning one year from grant date. |
| (8) | Time-based RSU awards for each of Messrs. Rittenbaum, Centurion, and Downes and Ms. Tekorius, granted on October 23, 2018, and vest over a period of three years in annual increments of 33 1/3% of each award beginning one year from grant date. |
| (9) | Time-based RSU awards for each of Messrs. Centurion, and Downes and Ms. Tekorius, granted on October 23, 2019, and vest over a period of three years in annual increments of 33 1/3% of each award beginning one year from grant date. |
| (10) | Performance-based RSU awards for Ms. Tekorius granted on July 7, 2020 and subject to vesting contingent on the achievement of performance targets as of June 30, 2021. The number of shares and payout value for these awards are calculated based on achieving target performance goals, which would result in 100% of the subject shares vesting. |
| (11) | Time-based RSU award for Ms. Tekorius, granted on July 7, 2020, vests over a period of two years in annual increments of 50% on the second and third anniversary of the grant date. |
| (12) | Time-based RSU award for Mr. Rittenbaum, granted on October 23, 2019, vests on the second anniversary of the grant date. |
| (13) | Time-based RSU award for Mr. Centurion, granted on October 23, 2018, vests on the third anniversary of the grant date. |
STOCK VESTED DURING FISCAL YEAR 2020
|
Stock Awards |
|||||||||||||||
| Name |
Number of
Shares Acquired on Vesting (#) |
Value Realized On Vesting of Shares During the Year Ended ($) |
| ||||||||||||
| William A. Furman |
91,448 | 2,373,924 | |||||||||||||
| Lorie L. Tekorius |
17,903 | 451,308 | |||||||||||||
| Mark J. Rittenbaum |
18,148 | 462,608 | |||||||||||||
| Alejandro Centurion |
16,320 | 460,274 | |||||||||||||
| Adrian J. Downes |
7,036 | 179,821 | |||||||||||||
NONQUALIFIED DEFERRED COMPENSATION
| Name |
Executive |
Registrant Contributions in Last Fiscal Year(1) ($) |
Aggregate Last Fiscal
Year |
Aggregate Withdrawals/ Distributions ($) |
Aggregate Fiscal Year-End | ||||||||||||||||||||
| William A. Furman |
— | 132,053 | 214,133 | — | 1,399,545 | ||||||||||||||||||||
| Lorie L. Tekorius |
— | 71,929 | 50,069 | — | 427,270 | ||||||||||||||||||||
| Mark J. Rittenbaum |
— | 187,507 | 275,692 | — | 2,813,981 | ||||||||||||||||||||
| Alejandro Centurion |
— | 265,772 | 537,777 | — | 2,998,058 | ||||||||||||||||||||
| Adrian J. Downes |
19,125 | 41,231 | 283,941 | — | 1,712,459 | ||||||||||||||||||||
| (1) | All contribution amounts shown in this column are reported as fiscal year 2020 compensation in the Summary Compensation Table, under “All Other Compensation.” |
| (2) | The Nonqualified Deferred Compensation Plan does not pay above-market or preferential earnings, therefore no earnings reported in this column are reported as fiscal year 2020 compensation in the Summary Compensation Table. |
POTENTIAL POST-TERMINATION PAYMENTS
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Executive Compensation |
The following table shows the estimated change of control benefits that would have been payable to the NEOs if a change of control (as defined in the applicable agreement) had occurred on August 31, 2020 and, except as noted, each officer’s employment had been terminated on that date either by us without “cause” or by the officer with “good reason.”
| Name |
Cash |
Annual Insurance Continuation(2) ($) |
Restricted Stock/RSU Acceleration(3) ($) |
Supplemental Retirement Benefits(4) ($) |
Other(5) ($) |
Total ($) |
280G Capped Amount(6) ($) | ||||||||||||||||||||||||||||
| William A. Furman |
7,005,596 | 16,157 | 4,893,439 | — | 26,400 | 11,941,592 | 20,432,780 | ||||||||||||||||||||||||||||
| Lorie L. Tekorius |
2,941,591 | 21,030 | 3,064,150 | — | — | 6,026,771 | 4,855,028 | ||||||||||||||||||||||||||||
| Mark J. Rittenbaum |
2,752,286 | 24,553 | 1,333,343 | 546,639 | 26,400 | 4,683,221 | 6,321,870 | ||||||||||||||||||||||||||||
| Alejandro Centurion |
3,044,755 | 51,843 | 1,325,648 | 542,150 | 26,400 | 4,990,796 | 7,209,474 | ||||||||||||||||||||||||||||
| Adrian J. Downes |
1,052,879 | 19,623 | 398,034 | — | — | 1,470,536 | 2,150,241 | ||||||||||||||||||||||||||||
| (1) | The employment agreement with Mr. Furman provides for a payment equal to three times the sum of his current base salary plus the average of the two most recent annual bonuses received by Mr. Furman. The employment agreements with Messrs. Rittenbaum and Centurion and Ms. Tekorius provide for a payment equal to two and one half times the sum of their current base salary plus the average of the two most recent annual bonuses received by the executive. The change of control agreement with Mr. Downes provide for a payment equal to one and one half times the sum of his current base salary plus the average of the two most recent annual bonuses received by Mr. Downes. All payments are to be made in a single lump sum within 30 days after the date of termination, unless a delay in payment is required in order to comply with the requirements of section 409A of the Internal Revenue Code of 1986, as amended (the “Code”). |
| (2) | If cash severance benefits are triggered, the employment agreements with Messrs. Furman, Rittenbaum and Centurion also provide that the Company will pay the cost of life, accident and health insurance benefits paid for by the Company at the time of termination for up to 24 months following the termination of employment. The change of control agreements with Ms. Tekorius and Mr. Downes provide that the Company will pay the cost of all health and welfare benefits paid for by the Company at the time of termination for up to 18 months following the termination of employment. The amounts in the table above represent 12 months of life and health insurance premium payments at the rates paid by the Company for each of these executives as of August 31, 2020. |
| (3) | For grants made prior to fiscal year 2018, under the terms of the applicable RSU agreement and each executive’s employment or change of control agreement, as applicable, in the event of the Company’s termination of the executive other than for “cause” or, for those executives with change of control agreements, disability, or in the event of the executive’s termination of his or her employment for “good reason,” in each case during the two-year period following a change of control of the Company: (i) all unvested time-based shares and RSUs held by the executive will vest; (ii) all performance-based restricted stock awards will vest at the target performance level; and (iii) all performance-based RSUs will convert into time-based RSUs upon change of control, which as-converted time-based RSUs will become fully vested upon termination, and if the level of performance against performance goals through the date of the change of control exceeds target(goal) level, the executive will receive additional time-based RSUs based on achievement in excess of target(goal) as determined by the Compensation Committee, which as-converted time-based RSUs will become fully vested upon the executive’s termination. Commencing with 2018 grants, equity awards do not accelerate upon COC if they are assumed or continued by the acquiring company. Time-based equity awards that are not assumed or continued accelerate and become fully vested upon COC, and performance-based equity awards that are not assumed or continued accelerate and become vested based on actual results measured against performance goals as of the COC. Upon termination following COC, time-based awards that were assumed or continued accelerate and become fully vested, and performance-based awards that were assumed or continued accelerate and become vested at target pursuant to the terms of the executive’s employment agreement or change of control agreement, as applicable. The amounts in the table above assume that no equity awards are assumed or continued by the acquiring company and represent the number of shares of unvested restricted stock and RSUs and any additional RSUs issuable to the executive, if any, based on performance through August 31, 2020 multiplied by a stock price of $27.19 per share, which was the closing price of our Common Stock on August 31, 2020. The expense that the Company would record would differ from the amount above under FASB ASC Topic 718 because the amount of unamortized expense is based upon the stock price as of the date of grant, rather than as of the date of vesting. |
| (4) | The Company provides supplemental retirement benefits under the terms of the target benefit program under the Company’s Nonqualified Deferred Compensation Plan. Under the terms of the program, in the event that employment of a participant in the target benefit program is terminated within 24 months following a change of control of the Company by the Company other than for “cause” or by the executive for “good reason”, the Company is obligated to contribute to the program on behalf of each such terminated participant an amount equal to the discounted present value of the contributions that would have been required had the participant remained employed until age 65. The amount shown in the table above is the amount that would be required to be contributed to the program on behalf of each participating NEO, assuming that the executive terminated employment as of August 31, 2020 following a change of control. Such amounts are based on the discounted present value of the average amount of contributions made on behalf of each executive during the most recent three-year period. |
| (5) | Pursuant to their employment agreements, the Company will provide Messrs. Furman, Rittenbaum and Centurion with continuation of the Company’s customary automobile benefit at the Company’s expense, for a period of two years following termination of employment. For each of them, the amount above represents the cost of the post-termination automobile benefit for two years, based on the current or estimated future annual cost of the executive’s leased car or other automobile benefit. |
| (6) | Under all of the change of control provisions described above, the amount of change of control benefits each officer will receive is capped at an amount that will prevent any payments being non-deductible under section 280G of the Code or subject to excise tax under Code section 4999. The amounts shown in this column are the capped amounts, which are equal to one dollar less than the product of three-times the amount of the officers “base amount,” which, as calculated under Code section 280G, is equal to the average of the officer’s W-2 wages over the five-year period preceding the change of control event (or such shorter period as the officer has been employed by the Company). |
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Benefits Triggered on Involuntary Termination of Employment without Cause
The following table shows the estimated benefits that would have been paid to each of Messrs. Furman, Rittenbaum and Centurion if the officer’s employment had been terminated on August 31, 2020, either by us other than for “cause” or by the officer with “good reason,” pursuant to the terms of such officer’s individual agreement with the Company. Mr. Downes and Ms. Tekorius do not have employment agreements with the Company.
| Name |
Cash |
Annual Insurance Continuation(2) ($) |
Restricted Stock/RSU Acceleration(3) ($) |
Supplemental Retirement Benefits(4) ($) |
Other(5) ($) |
Total ($) | ||||||||||||||||||||||||
| William A. Furman |
4,670,397 | 16,157 | 4,893,439 | — | 39,600 | 9,619,593 | ||||||||||||||||||||||||
| Lorie L. Tekorius |
N/A | N/A | N/A | N/A | N/A | N/A | ||||||||||||||||||||||||
| Mark J. Rittenbaum |
2,201,829 | 24,553 | 1,333,343 | 375,014 | 26,400 | 3,961,139 | ||||||||||||||||||||||||
| Alejandro Centurion |
2,435,804 | 51,843 | 1,325,648 | 531,544 | 26,400 | 4,371,239 | ||||||||||||||||||||||||
| Adrian J. Downes |
N/A | N/A | N/A | N/A | N/A | N/A | ||||||||||||||||||||||||
| (1) | Employment agreements with each of Messrs. Furman, Rittenbaum and Centurion provide for lump sum cash severance payments equal to two times the sum of base salary plus the average bonus amount. Messrs. Furman, Rittenbaum and Centurion also are entitled to receive a pro-rated bonus for the year of termination, based on the greater of the average bonus amount or the executive’s target bonus amount, and the number of days worked during the year of termination. Since it is assumed that termination is on August 31, 2020, the cash severance benefit amount includes 100% of the average bonus amount, in addition to the multiples of salary and bonus described above. All payments are to be made in a single lump sum within 30 days after the executive signs a release of claims against the Company, subject to the potential application of the six-month delay requirement applicable to “specified employees” under Code Section 409A. |
| (2) | Employment agreements with each of Messrs. Furman, Centurion and Rittenbaum provide for continuation of life, accident and health insurance benefits paid by the Company for up to 24 months following the termination of employment by the Company other than for “cause” or by the executive for “good reason,” except to the extent similar benefits are provided by a subsequent employer. The amounts in the table above represent 12 months of life, accident and health insurance premium payments at the rates paid by the Company for each of these officers as of August 31, 2020. |
| (3) | Under the terms of employment agreements with each of Messrs. Furman, Rittenbaum and Centurion, in the event of termination of the executive’s employment by the Company without “cause” or the executive’s termination of his employment for “good reason,” all unvested time-based shares and RSUs will vest; all performance-based restricted stock awards will vest at the target performance level, and all performance-based RSUs will continue to vest based on performance during the applicable performance period and the executive will become entitled to receive the number of shares issuable under the RSUs, if any, based upon the level of performance achieved during the entire performance period. Information regarding unvested restricted stock and RSUs held by the NEOs is set forth in the Outstanding Equity Awards table above. The amounts in the table above represent the number of shares of unvested restricted stock and RSUs multiplied by a stock price of $27.19 per share, which was the closing price of our Common Stock on August 31, 2020, and, with respect to performance-based RSUs held by each of Messrs. Furman, Rittenbaum and Centurion, vesting at currently forecasted levels as of the vesting date. The expense that the Company would record would differ from the amount above as, under FASB ASC Topic 718, the amount of unamortized expense is based upon the stock price as of the date of grant, rather than as of the date of vesting. |
| (4) | The Company provides supplemental retirement benefits under the target benefit program under the Company’s Nonqualified Deferred Compensation Plan. Under the terms of their employment agreements, Messrs. Rittenbaum and Centurion will continue to be treated as participants in the supplemental retirement plan for two years following termination of employment. The amount shown in the table above for Messrs. Rittenbaum and Centurion is the estimated amount of two years’ additional contributions under the target benefit program for each participating executive, assuming that the executive’s employment was involuntarily terminated as of August 31, 2020. |
| (5) | Pursuant to their employment agreements, the Company will provide Messrs. Rittenbaum and Centurion with continued participation in the Company auto program, at the Company’s expense, for a period of two years following termination of employment. Pursuant to his employment agreement, Mr. Furman will continue to receive the Company’s customary automobile benefit for three years following termination of employment. The amount above represents the current annual cost of the employees’ participation in the Company’s automobile program for the applicable period, based on the current or estimated future annual cost of the executive’s leased car or other automobile benefit. |
The Company’s obligation to pay severance benefits is, in all cases, contingent upon the officer executing a release of claims in favor of the Company. The Company’s obligation to pay severance benefits to each of Messrs. Rittenbaum and Centurion is contingent upon the officer’s compliance with the terms of a covenant not to compete in favor of the Company for one year following termination of employment.
Benefits Triggered on Retirement
The following table shows estimated benefits that would have been payable by the Company to the NEOs if each officer’s employment terminated on August 31, 2020 by reason of retirement, excluding amounts payable under the Company’s 401(k) Plan.
| Name |
Annual |
Restricted Stock/RSU Acceleration(1) ($) |
Annual Retirement Benefit ($) |
Total ($) | ||||||||||||||||
| William A. Furman |
16,157 | (2) | 841,422 | N/A | 857,579 | |||||||||||||||
| Lorie L. Tekorius |
N/A | N/A | N/A | N/A | ||||||||||||||||
| Mark J. Rittenbaum |
N/A | N/A | N/A | N/A | ||||||||||||||||
| Alejandro Centurion |
N/A | N/A | N/A | N/A | ||||||||||||||||
| Adrian J. Downes |
N/A | N/A | N/A | N/A | ||||||||||||||||
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Executive Compensation |
| (1) | Under the terms of the Company’s standard forms of agreements for restricted shares and RSUs applicable to grants prior to fiscal 2019, all unvested time-based shares and RSUs become fully vested upon retirement. Performance-based RSUs granted prior to fiscal 2019 will continue to vest based upon performance during the measurement period, and the recipient will be entitled to receive a prorated number of shares, at the end of the measurement period. Retirement age is 65 for purposes of restricted stock and RSU vesting on retirement, in each case issued prior to fiscal 2019, except as otherwise determined at the discretion of the CEO. Only Mr. Furman is eligible to retire. The amounts in the table above represent the number of unvested time-based shares and RSUs granted prior to fiscal year 2019 multiplied by a stock price of $27.19 per share, which was the closing price of our Common Stock on August 31, 2020, plus the value of the pro rata portion of performance-based shares and RSUs granted prior to fiscal year 2019 that would have accelerated if the executive had retired on August 31, 2020, in each case assuming that performance goals had been met at currently forecasted levels as of the vesting date. The expense that the Company would record would differ from the amount above as, under FASB ASC Topic 718, the amount of unamortized expense is based upon the stock price on the date of grant and not on the vesting date. |
| (2) | Mr. Furman’s employment agreement provides for continuation of life, accident and health insurance benefits paid by the company for up to 24 months following the termination of employment by the company other than for “cause” or by Mr. Furman for “good reason,” except to the extent similar benefits are provided by a subsequent employer. The amount in the table above represents 12 months of life, accident and health insurance premium payments at the rates paid by the company for Mr. Furman as of August 31, 2020. |
Benefits Triggered on Disability or Death
The following table shows estimated benefits that would have been payable by the Company to the NEOs if each officer’s employment terminated on August 31, 2020 by reason of death or disability.
| Name |
Estimated |
Annual Insurance Continuation ($) |
Restricted Stock/RSU Acceleration(2) ($) |
Annual Retirement Benefit ($) |
Total ($) | ||||||||||||||||||||
| William A. Furman |
1,285,199 | 16,157 | (3) | 7,565,128 | N/A | 8,866,484 | |||||||||||||||||||
| Lorie L. Tekorius |
N/A | N/A | 3,688,731 | N/A | 3,688,731 | ||||||||||||||||||||
| Mark J. Rittenbaum |
N/A | N/A | 1,888,509 | N/A | 1,888,509 | ||||||||||||||||||||
| Alejandro Centurion |
N/A | N/A | 1,689,124 | N/A | 1,689,124 | ||||||||||||||||||||
| Adrian J. Downes |
N/A | N/A | 606,228 | N/A | 606,228 | ||||||||||||||||||||
| (1) | Under the terms of his employment agreement, in the event of termination due to death or disability, Mr. Furman (or his estate) is entitled to receive an amount equal to the prorated portion of the cash bonus which would have been payable to him for the portion of the fiscal year during which he was employed by the Company. Since it is assumed that the triggering event occurs on August 31, 2020, the amount of estimated cash benefit is equal to a full year’s cash bonus, estimated to be the amount of the average of the most recent two years’ cash bonuses actually paid to Mr. Furman. |
| (2) | Under the terms of the Company’s standard forms of agreements, all unvested shares of restricted stock and RSUs become fully vested upon termination due to death or disability, with performance-based shares and RSUs vesting at the target level. The amounts in the table above represent the number of shares of unvested restricted stock and RSUs (with performance shares and RSUs at target level) multiplied by a stock price of $27.19 per share, which was the closing price of our Common Stock on August 31, 2020. The expense that the Company would record would differ from the amount above as, under FASB ASC Topic 718, the amount of unamortized expense is based upon the stock price as of the date of grant rather than as of the vesting date. |
| (3) | Mr. Furman’s employment agreement provides for continuation of life, accident and health insurance benefits paid by the company for up to 24 months following the termination of employment by the company other than for “cause” or by Mr. Furman for “good reason,” except to the extent similar benefits are provided by a subsequent employer. The amount in the table above represents 12 months of life, accident and health insurance premium payments at the rates paid by the company for Mr. Furman as of August 31, 2020. |
Pay Ratio Disclosure
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As required by Item 407(e)(5) of Regulation S-K, the Compensation Committee reviewed and discussed with the Company’s management the above section entitled “Compensation Discussion and Analysis” prepared by the Company’s management as required by Item 402(b) of Regulation S-K. Based on the review and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement and incorporated by reference into the Company’s Annual Report on Form 10-K for the year ended August 31, 2020.
Thomas B. Fargo, Chairman
Duane C. McDougall
Graeme A. Jack
David L. Starling
Donald A. Washburn
Kelly M. Williams
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COMMON STOCK
Stock Ownership of Certain Beneficial Owners and Management
The following table sets forth information with respect to beneficial ownership of the Company’s Common Stock (the only outstanding class of voting securities of the Company) by each of our directors or nominees for director, by each of our Named Executive Officers, by all of our current directors and executive officers as a group, and by each person who is known to the Company to be the beneficial owner of more than five percent of the Company’s outstanding Common Stock. We believe the persons and entities named below hold sole voting and investment power with respect to the shares shown opposite their respective names, unless otherwise indicated in the footnotes. The information with respect to each person or entity specified is as supplied or confirmed by such person or entity, is based upon statements filed with the SEC or is based upon our knowledge, and is as of September 30, 2020, unless otherwise indicated in the footnotes.
| Name and Address of Beneficial Owner |
Amount and Nature of Beneficial Ownership(1) |
|
Percent of Class(2) |
| |||||||||||||
| William A. Furman |
408,275 | (3) | 1.25 | % | |||||||||||||
| One Centerpointe Drive, Suite 200 Lake Oswego, Oregon 97035 |
|||||||||||||||||
| Thomas B. Fargo |
18,060 | (3) | (4) | ||||||||||||||
| Wanda F. Felton |
11,081 | (3) | (4) | ||||||||||||||
| Graeme A. Jack |
53,545 | (3) | (4) | ||||||||||||||
| Duane C. McDougall |
40,156 | (3) | (4) | ||||||||||||||
| David L. Starling |
8,839 | (3) (5) | (4) | ||||||||||||||
| Charles J. Swindells |
38,107 | (3) | (4) | ||||||||||||||
| Wendy L. Teramoto |
19,766 | (3) | (4) | ||||||||||||||
| Donald A. Washburn |
38,329 | (3) | (4) | ||||||||||||||
| Kelly M. Williams |
11,579 | (3)(6) | (4) | ||||||||||||||
| Alejandro Centurion |
29,502 | (3) | (4) | ||||||||||||||
| Mark J. Rittenbaum |
73,062 | (3) | (4) | ||||||||||||||
| Lorie L. Tekorius |
71,520 | (3) | (4) | ||||||||||||||
| Adrian J. Downes |
11,869 | (3)(7) | (4) | ||||||||||||||
| All directors and executive officers as a group (16 persons)(9) |
899,756 | (8) | 2.74 | % | |||||||||||||
| BlackRock, Inc. |
5,221,881 | (10) | 15.97 | % | |||||||||||||
| 55 East 52nd Street New York, NY 10055 |
|||||||||||||||||
| The Vanguard Group |
3,708,946 | (11) | 11.34 | % | |||||||||||||
| 100 Vanguard Blvd. Malvern, PA 19355 |
|||||||||||||||||
| Dimensional Fund Advisors LP |
2,688,589 | (12) | 8.22 | % | |||||||||||||
| Building One 6300 Bee Cave Road Austin, TX 78746 |
|||||||||||||||||
| (1) | More than one person may be deemed to be a beneficial owner of the same securities as determined in accordance with the rules of the SEC. In certain cases, voting and investment power may be shared by spouses under applicable law. The inclusion of shares in this table shall not be deemed an admission of beneficial ownership of any of the reported shares for purposes of Sections 13(d) or 13(g) of the Exchange Act or for any other purpose. |
| (2) | Calculated based on number of outstanding shares as of September 30, 2020, which is 32,700,933 plus the total number of shares of which the reporting persons have the right to acquire beneficial ownership within 60 days following September 30, 2020. |
| (3) | Includes: (a) time-vesting RSUs that vest within 60 days after September 30, 2020 in the amount of 68,179 for Mr. Furman, 7,039 for Mr. Centurion, 9,225 for Mr. Rittenbaum, 7,919 for Ms. Tekorius and 2,640 for Mr. Downes; (b) shares held in the Nonqualified Deferred Compensation Plan that the individual has a right to acquire within 60 days after September 30, 2020 in the amount of 7,408 for Mr. Fargo, 2,842 for Ms. Felton, 23,352 for Mr. Jack and 6,795 for Ms. Williams; and shares of restricted stock that are currently not vested and will not vest within 60 days after September 30, 2020, in the amount of 4,784 shares for each of Messrs. Fargo, Jack, McDougall, Starling, Swindells, and Washburn and Mses. Felton, Teramoto and Williams. |
| (4) | Less than one percent. |
| (5) | Excludes 2,842 shares held in the Nonqualified Deferred Compensation Plan that are not acquirable within 60 days after September 30, 2020. |
| (6) | Excludes 6,481 shares held in the Nonqualified Deferred Compensation Plan that are not acquirable within 60 days after September 30, 2020. |
| (7) | Excludes 39,518 shares held in the Nonqualified Deferred Compensation Plan that will be settled solely in cash. |
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Ownership of Greenbrier Common Stock |
| (8) | Includes 104,813 time-vesting RSUs that vest within 60 days after September 30, 2020 and/or 40,397 shares held in the Nonqualified Deferred Compensation Plan that the applicable individual has a right to acquire within 60 days after September 30, 2020. |
| (9) | A portion of these shares for certain of the individuals is subject to certain vesting requirements. |
| (10) | As reported in Amendment No. 4 to Schedule 13G dated December 31, 2019 and filed with the SEC on February 10, 2020. BlackRock has sole voting power over 5,088,402 shares reported and sole dispositive power over all 5,221,881 shares reported. BlackRock does not have shared voting power or shared dispositive power over any of the shares reported. |
| (11) | As reported in Amendment No. 9 to Schedule 13G dated December 31, 2019 and filed with the SEC on February 12, 2020. The Vanguard Group has sole voting power with respect to 32,724 shares reported and sole dispositive power with respect to 3,676,084 shares reported. The Vanguard Group has shared power to vote or direct to vote 5,855 shares reported and shared dispositive power with respect to 32,862 shares reported. |
| (12) | As reported in Amendment No. 11 to Schedule 13G dated December 31, 2019 and filed with the SEC on February 12, 2020. Dimensional Fund Advisors LP (“Dimensional”) has sole voting power with respect to 2,615,489 shares reported and sole dispositive power with respect to all 2,688,589 reported. Dimensional, an investment advisor registered under Section 203 of the Investment Advisors Act of 1940, furnishes investment advice to four investment companies registered under the Investment Company Act of 1940, and serves as investment manager or sub-adviser to certain other commingled funds, group trusts and separate accounts (such investment companies, trusts and accounts, collectively referred to as the “Funds”). In certain cases, subsidiaries of Dimensional may act as an adviser or sub-adviser to certain Funds. In its role as investment advisor, sub-advisor and/or manager, Dimensional or its subsidiaries may possess voting and/or investment power over the securities of the Company that are owned by the Funds, and may be deemed to be the beneficial owner of the shares of the Company held by the Funds. However, all securities reported in the Amendment No. 11 to Schedule 13G are owned by the Funds. Dimensional disclaims beneficial ownership of such securities. In addition, the filing of the Schedule 13G shall not be construed as an admission that the reporting person or any affiliate of the reporting person is the beneficial owner of any securities covered by the Schedule 13G for any other purposes than Section 13(d) of the Securities Exchange Act of 1934. |
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE 2021 STOCK INCENTIVE PLAN. UNLESS MARKED OTHERWISE, PROXIES RECEIVED WILL BE VOTED FOR THIS PROPOSAL.
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Equity Compensation Plan Information
The following table provides certain information as of August 31, 2020 with respect to our equity compensation plans under which our equity securities are authorized for issuance.
| Plan Category |
Number of securities to |
Weighted average exercise price of outstanding options, warrants, and rights |
Number of securities remaining available for future issuance under equity compensation plans |
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| Equity compensation plans approved by security holders |
883,933 | (1) | N/A | 1,096,037 | (2) | ||||||||||||
| Equity compensation plans not approved by security holders |
None | N/A | None | ||||||||||||||
| (1) | For performance-based awards, represents number of shares issuable at target levels of performance. |
| (2) | Represents shares available for grant under the Amended and Restated 2017 Stock Incentive Plan, in addition to 630,401 shares available to purchase under the 2014 Employee Stock Purchase Plan. |
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RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE APPOINTMENT OF KPMG LLP AS THE COMPANY’S INDEPENDENT AUDITORS FOR FISCAL 2021. UNLESS MARKED OTHERWISE, PROXIES RECEIVED WILL BE VOTED FOR THIS PROPOSAL.
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| Proposal 4 - Ratification of Appointment of Independent Auditors |
Board of Directors
The Greenbrier Companies, Inc.
The Audit Committee of the Board of Directors is established pursuant to the Company’s Bylaws, as amended, and the Audit Committee Charter adopted by the Board of Directors. A copy of the Charter, as amended, is available to shareholders without charge upon request to: Investor Relations, The Greenbrier Companies, Inc., One Centerpointe Drive, Suite 200, Lake Oswego, Oregon 97035 or on the Company’s website at www.gbrx.com.
Management is responsible for the Company’s internal controls and the financial reporting process. The independent auditors are responsible for performing an independent audit of the Company’s consolidated financial statements in accordance with auditing standards generally accepted in the United States of America and for issuing a report thereon. The Audit Committee’s responsibility is generally to monitor and oversee these processes, as described in the Charter.
For fiscal 2020, the members of the Audit Committee of the Board of Directors were Graeme A. Jack (Chairman), Wanda F. Felton, Duane C. McDougall, Donald A. Washburn and Kelly M. Williams. Each member of the Audit Committee who served during fiscal 2020 is, or during the time of their service was, an independent director as defined under the rules of the New York Stock Exchange (NYSE). The Board annually reviews applicable standards and definitions of independence for Audit Committee members and has determined that each member of the Audit Committee meets such standards.
With respect to the year ended August 31, 2020, in addition to its other work, the Audit Committee:
| • | Reviewed and discussed with the Company’s management and independent auditors the effectiveness of the Company’s internal controls and the audited financial statements of the Company as of August 31, 2020, and for the year then ended; |
| • | Discussed with the independent auditors the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board and the Commission; and |
| • | Received from the independent auditors written disclosures and a letter required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the audit committee concerning independence and discussed with the auditors the firm’s independence. |
Based upon the review and discussions summarized above, together with the Committee’s other deliberations and Item 8 of SEC Form 10-K, and subject to the limitations on the Audit Committee’s role and responsibilities referred to above, the Audit Committee recommended to the Board of Directors that the audited financial statements of the Company, as of August 31, 2020 and for the year then ended, be included in the Company’s Annual Report on Form 10-K for the year ended August 31, 2020 for filing with the SEC.
Graeme A. Jack, Chairman
Wanda F. Felton
Duane C. McDougall
Donald A. Washburn
Kelly M. Williams
The above shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the Company specifically incorporates it by reference.
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SHAREHOLDER PROPOSAL
The Company has received a shareholder proposal to require an independent Board Chair. After careful consideration, the Board recommends that shareholders vote “AGAINST” this proposal. The proposal and supporting statement are presented below as received. The Company is not responsible for their content. If requested by a shareholder, the Company will promptly provide the name, address and, to our knowledge, shareholdings of the proponent of this proposal.
COMPANY OPPOSING STATEMENT TO SHAREHOLDER PROPOSAL:
The Company’s current Board structure provides for strong independent leadership and oversight, rendering this proposal unnecessary. In addition, the Board adopted a policy in October 2020 that upon the retirement of Mr. Furman only independent directors will be eligible to serve as Chairman of the Board. Our Lead Director, designated by our independent directors, will continue to serve shareholder interests exercising his authorities and responsibilities, including:
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| Proposal 5 - Shareholder Proposal |
We believe effective shareholder representation is facilitated by our strong Lead Director role in conjunction with the substantial majority of our Board, 90%, being independent, all of our Board committees being comprised exclusively of independent directors and an executive session of the independent directors being scheduled at every Board meeting. See the “Corporate Governance” section of this Proxy Statement for more details. We do not believe that requiring an independent Chairman at this time will provide appreciable improvements but could cause inefficiency in Board and management functions during an especially challenging time.
In order for this Proposal 5 to be approved, the number of votes cast “FOR” approval must exceed the number of votes cast “AGAINST” approval. Broker discretionary voting of uninstructed shares is not permitted on this Proposal 5. Abstentions and broker non-votes of uninstructed shares will not affect the outcome of voting on this Proposal 5.
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE SHAREHOLDER PROPOSAL. UNLESS MARKED OTHERWISE, PROXIES RECEIVED WILL BE VOTED AGAINST THIS PROPOSAL.
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| Annual Meeting Information |
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APPENDIX A
DEFINITIONS
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RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
Reconciliation of Net Earnings to Adjusted EBITDA and Adjusted EBITDA (Pre-Bonus)
(in thousands)
| Year Ended August 31, | ||||||||||||
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2020 | 2019 | 2018 | |||||||||
| Net earnings |
$87,586 | $106,705 | $172,063 | |||||||||
| Interest and foreign exchange |
43,619 | 30,912 | 29,368 | |||||||||
| Income tax expense |
40,184 | 41,588 | 32,893 | |||||||||
| Depreciation and amortization |
109,850 | 80,535 | 74,356 | |||||||||
| GBW goodwill impairment |
— | — | 9,493 | |||||||||
| GRS Repair goodwill impairment |
— | 10,025 | — | |||||||||
| ARI transaction costs |
— | 18,820 | — | |||||||||
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| Adjusted EBITDA |
$281,239 | $288,585 | $318,173 | |||||||||
| Bonus expense |
16,961 | 20,001 | 20,486 | |||||||||
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| Adjusted EBITDA (Pre-Bonus) |
$298,200 | $308,586 | $338,659 | |||||||||
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THE GREENBRIER COMPANIES, INC. ONE CENTERPOINTE DRIVE, STE 200 LAKE OSWEGO, OR 97035 VOTE BY INTERNET Before The Meeting - Go to www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. During The Meeting - Go to www.virtualshareholdermeeting.com/GBX2021 You may attend the meeting via the Internet and vote during the meeting. Have the information that is printed in the box marked by the arrow available and follow the instructions. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: D24903-P44927 KEEP THIS PORTION FOR YOUR RECORDS THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. DETACH AND RETURN THIS PORTION ONLY THE GREENBRIER COMPANIES, INC. The Board of Directors recommend a vote FOR all the nominees listed and FOR Proposals 2, 3 and 4. 1. Election of Directors 1a. William A. Furman 1b. Charles J. Swindells 1c. Kelly M. Williams For Withhold 2. Advisory approval of the compensation of the Company’s named executive officers. 3. Approval of the Company’s 2021 Stock Incentive Plan. 4. Ratification of the appointment of KPMG LLP as the Company’s independent auditors for 2021. The Board of Directors recommend a vote AGAINST Proposal 5: 5. A shareholder proposal entitled “Independent Board Chair”. NOTE: Such other business as may properly come before the meeting or any adjournment thereof. For Against Abstain Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
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Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice and Proxy Statement and Annual Report/10-K are available at www.proxyvote.com. D24904-P44927 THE GREENBRIER COMPANIES, INC. Annual Meeting of Shareholders January 6, 2021 2:00 PM PST This proxy is solicited by the Board of Directors The shareholder(s) hereby appoint(s) William A. Furman, Duane C. McDougall and Kelly M. Williams, or any of them, as proxies, each with the power to appoint a substitute, and hereby authorize(s) them to represent and to vote, as designated on the reverse side of this ballot, all of the shares of (Common/Preferred) stock of THE GREENBRIER COMPANIES, INC. that the shareholder(s) is/are entitled to vote at the Annual Meeting of Shareholders to be held at 2:00 PM, PST on January 6, 2021, virtually at www.virtualshareholdermeeting.com/GBX2021, and any adjournment or postponement thereof. This proxy, when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy will be voted in accordance with the recommendations of the Board of Directors. Continued and to be signed on reverse side