The J. M. Smucker Company 20162019 Proxy Statement 29
ADVISORY VOTE ON EXECUTIVE COMPENSATION (“SAY-ON-PAY”)
(Proposal 3 on the proxy card)
The Dodd-Frank Wall Street Reform and Consumer Protection Act, enacted in July 2010, requires that we provide our shareholders with the opportunity to vote to approve, on a non-binding, advisory basis, the compensation of our Chief Executive Officer, Chief Financial Officer, and three other most highly compensated executive officers (collectively, the “Named Executive Officers”) as disclosed in this proxy statement in accordance with the compensation disclosure rules of the SEC under Section 14A of the Securities Exchange Act of 1934, as amended. In 2011, our shareholders voted to conduct this advisory vote on an annual basis until at least 2017.
As described in detail under the heading “Compensation Discussion and Analysis,” we seek to closely align the interests of the Named Executive Officers with the interests of our shareholders. Our compensation programs are designed to reward the Named Executive Officers for the achievement of short-term and long- term strategic and operational goals and the creation of long-term shareholder value, while at the same time avoiding the encouragement of unnecessary or excessive risk-taking. Some of our key compensation practices and recent modifications include:
| | | Performance-Based Pay | | | 31 | | We abide by a strong pay for performance philosophy. For fiscal year 2016, 71% to 83% of the target principal compensation components for the Named Executive Officers were variable and tied to financial performance. | No Tax Gross-Ups Policy | | We have a policy that prohibits tax gross-up payments to our executive officers. | Significant Stock
Ownership
| | We have a minimum stock ownership requirement for all of our executive officers. All of the Named Executive Officers significantly exceed the applicable minimum stock ownership requirement. | Clawback Policy | | We have a policy that allows us to recoup incentive-based compensation from our current or former executive officers under certain circumstances. | Compensation Risk
Assessment
| | We annually conduct a review of our compensation practices and policies and have concluded that our compensation policies and practices do not encourage excessive or unnecessary risk-taking and are not reasonably likely to have a material adverse effect on the Company. | Independent Compensation
Committee
| | Each member of the Compensation Committee is independent as defined in the corporate governance listing standards of the NYSE and our director independence standards. | Outside Compensation
Consultant
| | The Compensation Committee utilizes the services of an independent outside compensation consultant, which performs services solely in support of the Compensation Committee. | No-Hedging Policy | | We have a “no hedging” policy that prohibits Directors, executive officers, and employees from engaging in hedging transactions in our common shares or from purchasing our common shares “on margin.” | Use of Tally Sheets | | When approving changes in compensation for the Named Executive Officers, the Compensation Committee reviews a tally sheet for each Named Executive Officer. |
30 The J. M. Smucker Company 2016 Proxy Statement
ADVISORY VOTE ON EXECUTIVE COMPENSATION (“SAY-ON-PAY”)
| | | Four-Year Retention Period Despite Attaining Age and Service Requirements | | Beginning with grants made in June 2013, upon participants reaching the age of 60 with 10 years of service, all Restricted Stock Awards (as defined below) vest immediately (as was previously the case), with 50% of such Restricted Stock Awards available for settlement of taxes due and the remainder subject to a four-year retention period even in the event of retirement. | New Long-Term Incentive Award Performance Metrics | | Beginning with grants made in June 2016 for fiscal year 2016 performance, Restricted Stock Awards are based 75% on the achievement of our annual performance target for non-GAAP earnings per share and 25% on the achievement of our annual performance target for free cash flow, although no Restricted Stock Awards are granted if we do not achieve at least 80% of our non-GAAP earnings per share target. |
ADVISORY VOTE ON EXECUTIVE COMPENSATION(“SAY-ON-PAY”) (Proposal 3 on the proxy card) The Dodd-Frank Wall Street Reform and Consumer Protection Act, enacted in 2010 (the “Dodd-Frank Act”), requires that we provide our shareholders with the opportunity to vote to approve, on anon-binding, advisory basis, the compensation of our Chief Executive Officer, Chief Financial Officer, and three other most highly compensated executive officers (collectively, the “Named Executive Officers”) as disclosed in this proxy statement in accordance with the compensation disclosure rules of the SEC under Section 14A of the Securities Exchange Act of 1934, as amended. In 2017, our shareholders voted to conduct this advisory vote on an annual basis until at least 2023. As described in detail under the heading “Compensation Discussion and Analysis,” we seek to closely align the interests of the Named Executive Officers with the interests of our shareholders. Our compensation programs are designed to reward the Named Executive Officers for the achievement of short-term and long-term strategic and operational goals and the creation of long-term shareholder value, while at the same time avoiding the encouragement of unnecessary or excessive risk-taking. The vote on this resolution is not intended to address any specific element of compensation; rather, the vote relates to the compensation of the Named Executive Officers, as described in this proxy statement in accordance with the compensation disclosure rules of the SEC. The vote is advisory, which means that the vote is not binding on us, the Board, or the Compensation Committee. To the extent there is any significant vote against the Named Executive Officers’ compensation as disclosed in this proxy statement, the Board and the Compensation Committee will evaluate what actions, if any, may be necessary to address the concerns of shareholders. At our 2018 annual meeting, our executive compensation program received approval from approximately 95% of the votes cast on such proposal. We believe that this result demonstrates our shareholders’ endorsement of the Compensation Committee’s executive compensation decisions and policies. Nonetheless, we have continued to make improvements to our short-term and long-term incentive awards programs, as set forth in more detail below in the “Compensation Discussion and Analysis” section of this proxy statement. The affirmative vote of the holders of a majority of the votes cast on this proposal, based upon one vote for each common share owned as of the record date, is necessary to approve, on an advisory basis, our executive compensation. Abstentions, brokernon-votes, and shares not in attendance and not voted at the annual meeting will have no effect on the vote for this proposal. Unless otherwise directed, common shares represented by proxy will be voted “FOR” the approval of this proposal. Under our Amended Articles of Incorporation (the “Articles”), shareholders are entitled to cast ten votes per share on any matter relating to any stock option plan, stock purchase plan, executive compensation plan, executive benefit plan, or other similar plan, arrangement, or agreement. Because the vote on this proposal is anon-binding, advisory vote, we have determined that suchten-votes-per-share provisions will not apply to this proposal. Accordingly, we ask our shareholders to vote on the following resolution at our annual meeting: “RESOLVED, that our shareholders approve, on an advisory basis, the compensation of our Named Executive Officers, as disclosed in our proxy statement for the 2019 Annual Meeting of Shareholders pursuant to Item 402 of RegulationS-K, including the Compensation Discussion and Analysis, the 2019 Summary Compensation Table, and the other related tables and disclosures.” | | KEY COMPENSATION PRACTICES | ✓ Performance-based pay makes up 69% - 84% of Named Executive Officers’ target compensation ✓ Varied metrics for short-term and long-term incentive awards ✓ Officer stock ownership policy with significant stock ownership by all Named Executive Officers ✓ Compensation practices do not encourage excessive risk taking ✓ Compensation consultant only provides services to Compensation Committee ✓ Use of tally sheets to approve Named Executive Officers’ compensation as disclosed in this proxy statement, the Board and the Compensation Committee will evaluate what actions, if any, may be necessary to address the concerns of shareholders. At our 2015 annual meeting, our executive compensation program received approval from approximately 95% of the votes cast on such proposal. We believe that this result demonstrates our shareholders’ endorsement of the Compensation Committee’s executive compensation decisions and policies.
The affirmative vote of the holders of a majority of the votes cast on this proposal, based upon one vote for each common share owned as of the record date, is necessary to approve, on an advisory basis, our executive compensation. Abstentions, broker non-votes, and shares not in attendance and not voted at the annual meeting will have no effect on the vote for this proposal. Unless otherwise directed, common shares represented by proxy will be voted “FOR” the approval of this proposal. Under the Articles, shareholders are entitled to cast ten votes per share on any matter relating to any stock option plan, stock purchase plan, executive compensation plan, executive benefit plan, or other similar plan, arrangement, or agreement. Because the vote on this proposal is a non-binding, advisory vote, we have determined that such ten-votes-per- share provisions will not apply to this proposal.
Accordingly, we ask our shareholders to vote on the following resolution at our annual meeting:
“RESOLVED, that our shareholders approve, on an advisory basis, the compensation of our Named Executive Officers, as disclosed in our proxy statement for the 2016 Annual Meeting of Shareholders pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, the 2016 Summary Compensation Table, and the other related tables and disclosures.”
✓ No taxgross-ups policy ✓ Clawback policy ✓ No hedging and no pledging policies ✓ Changes to short-term incentive awards for fiscal year 2019 and long-term incentive awards for fiscal year 2020 |
| The Board unanimously recommends a vote FOR the approval of the compensation of our Named Executive Officers, as disclosed in this proxy statement. |
| | | 32 | | The J. M. Smucker Company 20162019 Proxy Statement |
EXECUTIVE COMPENSATION Compensation Discussion and Analysis The Compensation Committee regularly reviews our compensation philosophy and objectives. The Compensation Committee is also responsible for reviewing and approving compensation for our executive officers on an annual basis. A description of the Compensation Committee’s responsibilities is set forth in detail in its charter, which is posted on our website atwww.jmsmucker.com. Set forth below is a detailed discussion of our compensation program for our executive officers organized as follows: | | | | | | | Page | | COMPENSATION DISCUSSION AND ANALYSIS | | | | | Executive Summary | | | 33 | | Components of Our Compensation Program for Executive Officers | | | 38 | | Role of Our Outside Compensation Consultant | | | 39 | | Determination of Compensation for Executive Officers | | | 40 | | What Our Short-Term Incentive Compensation Program is Designed to Reward and How it Works | | | 43 | | What Our Long-Term Incentive Compensation Program (Performance-Based Restricted Stock) is Designed to Reward and How it Works | | | 45 | | Health Benefits | | | 49 | | Pension and Retirement Plans, theNon-Qualified 31
EXECUTIVE COMPENSATION
Supplemental Retirement Plan, and the Voluntary Deferred Compensation DiscussionPlan | | | 49 | | Other Benefits Executive Officers Receive | | | 52 | | Description of Agreements with Executive Officers | | | 52 | | Tax and AnalysisAccounting Considerations | | | 53 | | The Compensation Committee regularly reviews our compensation philosophy and objectives. The Compensation Committee is also responsible for reviewing and approving compensation for our executive officers on an annual basis. A description of the Compensation Committee’s responsibilities is set forth in detail in its charter, which is posted on our website at www.jmsmucker.com.Compensation-Related Risk Assessment
Set forth below is a detailed discussion of our compensation program for our executive officers organized as follows:
I. Executive Summary
We manage our business with the long-term objective of providing value to all of our constituents — namely, consumers, customers, employees, suppliers, communities in which we have a presence, and shareholders. Our compensation philosophy is that compensation for all employees, including our executive officers, should be: | | performance-based; |
| | fair and equitable when viewed both internally and externally; and |
| | competitive in order to attract, incentivize,reward, and retain the best qualified individuals. We have designed our compensation programs to reflect each of these characteristics. The performance- based incentives (comprised of corporate performance, and in some cases, individual performance and strategic business area performance) seek to reward both short-term and long-term results and to align the interests of our executive officers and other participants with the interests of our shareholders. Our executive officers receive a compensation package which
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We have designed our compensation programs to reflect each of these characteristics. The performance-based incentives (comprised of corporate performance, and in some cases, individual performance and strategic business area performance) seek to reward both short-term and long-term results and to align the interests of our executive officers and other participants with the interests of our shareholders. Our executive officers receive a compensation package that primarily consists of an annual base salary, short-term incentive awards, and long-term incentive awards. The Compensation Committee sets performance targets for participants, including executive officers, in June of each year for the fiscal year commencing the prior May 1st. We believe that the performance targets established by the Compensation Committee, based primarily on non-GAAP earnings per share (and, beginning with Restricted Stock Awards granted in June 2016 for fiscal year 2016, free cash flow) and, in some cases, strategic business area performance, require participants, including executive officers, to perform at a high level. During the ten-year period from fiscal year 2007 through fiscal year 2016, our annual compounded
The Compensation Committee sets performance targets for participants, including executive officers, in June of each year for the fiscal year commencing the prior May 1st. We believe that the performance targets established by the Compensation Committee, based on adjusted operating income, adjusted earnings per share, free cash flow, and, in some cases, strategic business area performance, require participants, including executive officers, to perform at a high level. During the five-year period from fiscal year 2015 through fiscal year 2019, our annual compounded growth rate in adjusted earnings per share (excluding the impacts described on the following page) was approximately 6%, with a total shareholder return of approximately 8%. In addition, we increased our dividend rate payable to shareholders every year during this period. | | | | | 32 The J. M. Smucker Company 20162019 Proxy Statement
EXECUTIVE COMPENSATION
| | | 33 | |
EXECUTIVE COMPENSATION In addition, beginning with awards made in June 2019 for fiscal year 2020, the Compensation Committee has approved significant changes to our long-term incentive compensation program in order to strengthen the alignment of our management incentives with our long-term business objectives, to better align the interests of management with the interests of our shareholders, and to increase the market competitiveness of our long-term plan design, as set forth below under the heading “Changes to Long-Term Incentive Compensation Program.” Fiscal Year 2019 Financial Performance The chart below summarizes our key financial results for fiscal year 2019 compared to fiscal year 2018. | | | | | | | | | | | | | Dollars in millions, except per share data | | Fiscal 2019 | | | Fiscal 2018 | | | Change (%) | | Net Sales | | $ | 7,838.0 | | | $ | 7,357.1 | | | | 7 | % | Adjusted Operating Income* | | $ | 1,492.3 | | | $ | 1,439.7 | | | | 4 | % | Adjusted Earnings Per Share (as modified)* | | $ | 8.29 | | | $ | 7.76 | | | | 7 | % | Free Cash Flow* | | $ | 781.4 | | | $ | 896.1 | | | | -13 | % | Fiscal Year End Stock Price | | $ | 122.63 | | | $ | 114.08 | | | | 7 | % |
| * | growth rate in non- GAAPAdjusted operating income and adjusted earnings per share (excluding the impacts described below) was approximately 9%, with a total shareholder return (“TSR”) of approximately 16%.exclude certain items affecting comparability, which include amortization expense and impairment charges related to intangible assets, integration and restructuring costs, and unallocated derivative gains and losses. In addition to these items affecting comparability, we increasedfurther expanded our dividend rate payable to shareholders every year during this period.
Fiscal Year 2016 Financial Performance
The chart below summarizes our key financial resultsadjusted earnings per share measure for fiscal year 2016 comparedyears 2019 and 2018 to also exclude certainone-time discrete tax adjustments. These adjustments include the effect of theone-time items associated with U.S. tax reform legislation enacted in December 2017, which includes certain adjustments related to the remeasurement of our U.S. deferred tax assets and liabilities and the recognition of the transition tax. Also included in theseone-time discrete tax adjustments are the permanent tax impacts related to the goodwill impairment charges that were recorded during fiscal year 2015.years 2019 and 2018.
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Generally, adjusted operating income, adjusted earnings per share, and free cash flow are calculated as defined for incentive compensation purposes, but, as permitted by the plan, may be modified to exclude other items as determined by the Compensation Committee to adjust for any undue benefit or unintended detriment as a result of significant unplannedone-time items. Fiscal year 2019 financial results have not been modified; however, in fiscal year 2018, adjusted earnings per share was modified to partially exclude the unplanned earnings benefit resulting from the lower effective tax rate associated with U.S. tax reform legislation. For fiscal year 2018, the Compensation Committee used the adjusted earnings per share (as modified) amount to evaluate our performance in relation to our adjusted earnings per share goal for the fiscal year. For a reconciliation of adjusted operating income, adjusted earnings per share (as modified), and free cash flow for fiscal years 2019 and 2018, seeAppendix A. For a description of how we calculate adjusted operating income, adjusted earnings per share, and free cash flow, see Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form10-K, which can be found on our website atwww.jmsmucker.com/investor-relations. | | | | | | | | | | | | | Fiscal 2016 | | | Fiscal 2015 | | | Change (%) | Net Sales (in millions) | | $ | 7,811.2 | | | $ | 5,692.7 | | | 37% | Non-GAAP Earnings Per Share (as adjusted)* | | $ | 6.26 | | | $ | 5.38 | | | 16% | Free Cash Flow (in millions) | | $ | 1,256.9 | | | $ | 485.5 | | | 159% | Fiscal Year End Stock Price | | $ | 126.98 | | | $ | 115.92 | | | 10% |
| | | 34 | | The J. M. Smucker Company 2019 Proxy Statement |
EXECUTIVE COMPENSATION | * | In addition to certain items affecting comparability (i.e., restructuring and merger and integration costs and unallocated derivative gains and losses), non-GAAP earnings per share (as adjusted) excludesOur fiscal year 2019 performance was one of the key factors in the impact of a significant net deferred tax benefit in fiscal year 2016 and the Big Heart acquisition and related purchase accounting and financing items in fiscal year 2015. For fiscal year 2016, the Compensation Committee used the non-GAAP earnings per share (as adjusted) amount to evaluate our performance in relation to our non-GAAP earnings per share goal for the fiscal year. Generally, non-GAAP earnings per share is calculated excluding the impact of restructuring and merger and integration charges and unallocated derivative gains and losses, and, according to the plan, may exclude other items as determined by the Compensation Committee. For a reconciliation of free cash flow to cash provided by operating activities and non-GAAP earnings per share (as adjusted) to GAAP earnings per share, seeAppendix A. For a description of how we calculate non-GAAP earnings per share and free cash flow, see Management’s Discussion and Analysis in our Annual Report to Shareholders, which can be found on our website at www.jmsmucker.com/investor-relations. |
Our fiscal year 2016 performance was one of the key factors the Compensation Committee considered in making its compensation decisions for the fiscal year, as more specifically discussed below.
Elements of Executive Officers’ Compensation for Fiscal Year 2019 Elements of Executive Officers’ Compensation for Fiscal Year 2016
Annual Base Salary Salary ranges are determined in the same manner for each of our salaried employees, including each executive officer. The base salaries paid to each executive officer are designedintended to fall within an established range based on market practice. Actual pay within the range reflects the experience of the executive officer, his or her performance, and the scope of his or her responsibility. Short-Term Incentive Awards for Fiscal Year 2019 (Cash-Based) Our short-term, performance-based incentive compensation program is cash-based and is designed to reward key employees, including executive officers, for their contributions to the Company based on clear, measurable criteria. The Compensation Committee evaluates the following criteria and information when approving the short-term incentive awards for executive officers: our performance in relation to our non-GAAP earnings per share goal for the fiscal year;
| | our performance in relation to our adjusted operating income goal for the fiscal year; | |
if an executive officer has responsibilities that include oversight of a strategic business area, a significant percentage of this short-term incentive award is tied to that strategic business area’s performance in relation to its annual segment profit goal.
| | in general, if an executive officer has responsibilities that include oversight of a strategic business area, a significant percentage of this short-term incentive award is tied to that strategic business area’s performance in relation to its annual segment profit goal; and | |
The J. M. Smucker Company 2016 Proxy Statement 33
EXECUTIVE COMPENSATION
| | an executive officer’s achievement of established objectives. | |
The Compensation Committee reviews attainment of relevant profit goals for these areas each year. Short- termShort-term incentive awards can range from 0% of the target award amount if we fail to achieve at least 80% of our non-GAAP earnings per shareadjusted operating income goal, to a maximum of 200% of the target award amount if we achieve or exceed 110% of our non-GAAP earnings per shareadjusted operating income goal. Executive officers’ target short-term incentive awards range from 45%40% to 110%125% of base salary depending on the responsibilities and experience of the executive officer. Specifically, with respect to fiscal year 2016,2019, the Compensation Committee approved the target corporate non-GAAP earnings per shareadjusted operating income goal of $5.75,$1,511 million, and we achieved non-GAAP earnings per share (as adjusted) (which, in addition to certain items affecting comparability, also excludes the impactadjusted operating income of a significant net deferred tax benefit) of $6.26,$1,492 million, representing 109%99% of the target amount. As a result of exceeding the non-GAAP earningsadjusted operating income threshold but not achieving the target, the corporate performance portion of the short-term incentive award wasawards paid at 190%95% of the target award for all participants. Short-Term Award Snapshot (Cash-Based)
34 The J. M. Smucker Company 2016 Proxy Statement | | | | | The J. M. Smucker Company 2019 Proxy Statement | | | 35 | |
EXECUTIVE COMPENSATION Long-Term Incentive Awards for Fiscal Year 2019 (Stock-Based) Our long-term, performance-based compensation is stock-based and is designed to align the interests of management with the interests of our shareholders. Beginning with grants made in June 2016 for fiscal year 2016 performance, actualActual long-term incentive awards are based 75% on our annual performance target for non-GAAPadjusted earnings per share and 25% on our annual performance target for free cash flow compared to plan, as established by the Compensation Committee the previous June, andJune. Awards can range from 0% of the restricted shares target award amount if we fail to achieve 80% of our non-GAAPadjusted earnings per share goal, to a maximum of 150% of the restricted shares target award amount if we achieve or exceed 120% of our non-GAAPadjusted earnings per share and free cash flow goals. For fiscal year 2016,2019, the Compensation Committee approved the target corporate non-GAAPadjusted earnings per share goal of $5.75$8.50 and the target corporate free cash flow goal of $850$825 million. Our executive officers’ long-term incentive award targets for fiscal year 20162019 range from 70%60% to 400%420% of base salary depending on the responsibilities and experience of the executive officer. Specifically, with respect to fiscal year 2016,2019, we achieved 109%98% of our non-GAAPadjusted earnings per share goal and 148%95% of our free cash flow goal, resulting in long-term incentive awards of 129.4%93.13% of the target. Long-Term Award Snapshot (Stock-Based)
Target Pay Mix Summary The J. M. Smucker Company 2016 Proxy Statement 35
| | | Target Pay Mix-CEO | | Target Pay Mix-NEOs | | | |
| | | 36 | | The J. M. Smucker Company 2019 Proxy Statement |
EXECUTIVE COMPENSATION Significant Compensation Practices and Recent Modifications Our compensation programs, practices, and policies are reviewed and reevaluated on an ongoing basis. We modify our compensation programs and practices to address evolving best practices and changing regulatory requirements. Listed below are some of our more significant practices and recent modifications. | | | Practices | | Recent Modifications | | | Performance-Based Pay | | As discussed above, we abide by a strong pay for performance philosophy. For fiscal year 2016, 71%2019, 69% to 83%84% of the target principal compensation components for the Named Executive Officers were variable and tied to financial performance. | | | | | No Tax Gross-Ups Policy Policy
| | In April 2012, we adopted a Payment of TaxGross-Ups Policy that prohibits taxgross-up payments to our executive officers. | | | | | Significant Stock Ownership | | All of the Named Executive Officers significantly exceed the minimum stock ownership guidelines, thereby strongly aligning each Named Executive Officer’s long-term interests with our shareholders. The minimum stock ownership requirement for our Executive Chairman and Chief Executive Officer is a multiple of six times their annual base salaries. Our other executive officers must own stock with a value of at least two times their annual base salaries. | | | | | Clawback Policy | | In April 2012, we adopted a Clawback of Incentive Compensation Policy that allows us to recoup incentive-based compensation from our current or former executive officers under certain circumstances. Pursuant to the policy, we may demand repayment of any incentive-based compensation paid or granted to an executive officer in the event of a required accounting restatement of a financial statement of the Company (whether or not based on misconduct) due to material noncompliance of the Company with any financial reporting requirement under the U.S. federal securities laws. | | | | | Compensation Risk Assessment | | With oversight from Frederic Cook & Co.,Semler Brossy, our independent compensation consultant, we conducted a compensation risk assessment and concluded that our compensation policies and practices do not encourage excessive or unnecessary risk-taking and are not reasonably likely to have a material adverse effect on the Company. | | | | | Independent Compensation Committee | | Each member of the Compensation Committee is independent as defined in the corporate governance listing standards of the NYSE and our director independence standards. | | | | | Outside Compensation Consultant | | The Compensation Committee utilizes the services of Frederic Cook & Co.,Semler Brossy, an independent outside compensation consultant, which performs services solely in support of the Compensation Committee. | | | | | No-HedgingNo Hedging Policy | | We have a “no hedging” policy that prohibits Directors, executive officers, and employees from engaging in hedging transactions in our common shares or from purchasing our common shares “on margin.” | | | | | No Pledging Policy | | We have a “no pledging” policy that prohibits Directors, executive officers, and employees from pledging any common shares as collateral for a margin loan or otherwise. | | | | | Use of Tally Sheets | | When approving compensation for the Named Executive Officers, theThe Compensation Committee annually reviews a tally sheet for each Named Executive Officer.Officer to inform total compensation decisions. | | | | | Four-Year Retention Period Despite Attaining Age and Service RequirementsNew Short-Term
Incentive Award Performance Metric | | Beginning with grantsawards made in June 2013, upon participants reaching the age of 60 with 10 years of service, all Restricted Stock Awards vest immediately (as was previously the case), with 50% of such Restricted Stock Awards available for settlement of taxes due and the remainder subject to a four-year retention period. This four year retention period continues regardless of retirement. | New Long-Term Incentive Award Performance Metrics | | Beginning with grants made in June 20162019 for fiscal year 20162019 performance, Restricted Stock Awardsshort-term cash incentive awards are based 75% on the achievement of our annual performance target for non-GAAPadjusted operating income, in replacement of the prior performance metric of adjusted earnings per share. No short-term cash incentive awards are made if we do not achieve at least 80% of our adjusted operating income target. |
| | | | | The J. M. Smucker Company 2019 Proxy Statement | | | 37 | |
EXECUTIVE COMPENSATION | | | Practices | | Recent Modifications | | | Changes to Long-Term Incentive Awards | | Beginning with awards made in June 2019 for fiscal year 2020, participants will receive two separate long-term incentive awards. The first award consists of performance units that will generally vest at the end of three years and will be based 75% on the achievement of our three-year performance target for adjusted earnings per share and 25% on the achievement of our annualthree-year performance target for free cash flow, although no Restricted Stock Awards are grantedreturn on invested capital. No performance units will be realized if we do not achieve at least 80%90% of our non-GAAPthe three-year performance target for adjusted earnings per share target.share. The second award consists of stock options for elected officers that will generally ratably vest in equal tranches over a three-year period. Elected officers will receive 75% of their long-term incentive award in performance units and 25% in stock options. | | |
201836 The J. M. Smucker Company 2016 Proxy StatementSay-on-Pay
EXECUTIVE COMPENSATION
2015 Say-on-Pay Advisory Vote Outcome
At our 20152018 annual meeting, our executive compensation program received approval from approximately 95% of the votes cast on such proposal. We believe that this result demonstrates our shareholders’ endorsement of the Compensation Committee’s executive compensation decisions and policies. SuchThis shareholder vote was one of many factors contributing to the Compensation Committee’s decision to refrain from making significant changes to our compensation mix, peer group, or target levels, performance metrics, or other compensation policies.levels. Nonetheless, we have continued to make improvements to our short-term and long-term incentive awards programs, as set forth in this “Compensation Discussion and Analysis” section of this proxy statement. The Compensation Committee will continue to consider results from future shareholder advisory votes, which will continue to be held annually until the next shareholder advisory vote on theunless shareholders select a different frequency of future votes on executive compensation, in its ongoing evaluation of our executive compensation programs and practices. II. Components of Our Compensation Program for Executive Officers
Our executive officers receive a compensation package which consists of the following components: | | | | | Cash Components | | Description | | | Cash | | • annual base salary; • annual holiday bonus equal to 2% of annual base salary, which is provided to all of our salaried and hourlynon-represented employees; and • short-term incentive compensation program, in the form of a potential annual cash award (“Cash Incentive Award”), which provides participants the opportunity, subject to meeting specified goals, to earn an annual cash bonus.bonus; and • periodically, and under very particular circumstances, executives are awarded additional cash awards for extenuating circumstances. | Equity Component | | • our long-term incentive compensation program for fiscal year 2019, in the form of a potential annual grant of restricted shares, restricted stock units, or performance units (“Restricted Stock Award”), provides participants the opportunity, subject to meeting specified goals, to earn a grant of shares of Company stock, which generally vests at the end of a four- yearfour-year period from the date of grant; and • special stock option grant which vestsbeginning with awards made in annual installments overJune 2019 for fiscal year 2020, participants will have the opportunity to earn two separate long-term incentive awards, consisting of performance units that will vest at the end of three years subject to meeting specified “synergy realization”three-year performance goals and EBITDAstock options or restricted stock that will ratably vest in equal tranches over such three-year period; and • periodically, and under very particular circumstances, executives are granted additional equity awards in the form of performance goals.or time-based options or restricted shares. |
| | | 38 | | The J. M. Smucker Company 2019 Proxy Statement |
EXECUTIVE COMPENSATION | | | | | Components | | Description | | | Health and Retirement Benefits | | • participation in health and welfare plans upon substantially the same terms as available to most of our other salaried employees; • participation in retirement plans (such as a 401(k) plan, defined benefit pension plan, and employee stock ownership plan) upon substantially the same terms as available to most of our other salariedsimilarly situated employees; • participation in one of three executive retirement plans, two of which have been closed to new participants;participants (one of which was closed to current participants on December 31, 2017); and • periodic physical examinations upon the same terms as available to all of our employees at or above the functional vice president levelVice President level. | Other Benefits | | • the right for executive officers to defer part of their salary or cash bonus under anon-qualified, voluntary, deferred compensation plan; and • Selectedselected perquisites for certain executive officers, such as use of our aircraft (primarily by the Executive Chairman and the Chief Executive Officer), financial and tax planning assistance, tickets to entertainment events, and select reimbursement for club dues and expenses. |
III. Role of Our Outside Compensation Consultant
Pursuant to the Compensation Committee charter, the Compensation Committee has the sole authority to (i) engage compensation consultants to assist in the evaluation ofnon-employee Director and executive officer compensation, (ii) set the fees and other retention terms of such compensation consultants, and (iii) assess the independence of such compensation consultants. Such consultants report directly to the Compensation Committee and do not perform any services directly on behalf of our management team. The J. M. Smucker Company 2016 Proxy Statement 37
EXECUTIVE COMPENSATION
Before selecting a compensation consultant, the Compensation Committee takes into account all factors relevant to assessing such compensation consultant’s independence, from management, including the following six factors: the provision of other services to the Company by the compensation consultant’s employer;
| | the provision of other services to the Company by the compensation consultant’s employer; | |
the amount of fees received from the Company by the compensation consultant’s employer, as a percentage of total revenues of the employer;
| | the amount of fees received from the Company by the compensation consultant’s employer, as a percentage of total revenues of the employer; | |
the policies and procedures of the compensation consultant’s employer that are designed to prevent conflicts of interest;
| | the policies and procedures of the compensation consultant’s employer that are designed to prevent conflicts of interest; | |
any business or personal relationship of the compensation consultant with a member of the Compensation Committee;
| | any business or personal relationship of the compensation consultant with a member of the Compensation Committee; | |
any stock of the Company owned by the compensation consultant; and
| | any stock of the Company owned by the compensation consultant; and | |
any business or personal relationship of the compensation consultant or the compensation consultant’s employer with one of our executive officers.
| | any business or personal relationship of the compensation consultant or the compensation consultant’s employer with one of our executive officers. | |
The Compensation Committee has retained Frederic Cook & Co.Semler Brossy as an outside consultant to assist, as directed, in the fulfillment of various aspects of its charter. Frederic Cook & Co.Semler Brossy reports directly to the Compensation Committee and participates in executive sessions with the Compensation Committee, without members of our management present. Our Executive Chairman, Chief Executive Officer, Senior Vice President, Human Resources and Corporate Communications, and Senior Vice President, General Counsel and Secretary also attend thenon-executive session portions of the Compensation Committee meetings. In accordance with its corporate governance model, the Compensation Committee makes all decisions concerning compensation and benefits for our executive officers, and the Compensation Committee relies on Frederic Cook & Co.Semler Brossy for advice, data, and market information regarding executive officer and director compensation. | | | | | The J. M. Smucker Company 2019 Proxy Statement | | | 39 | |
EXECUTIVE COMPENSATION During fiscal year 2016, Frederic Cook & Co.2019, Semler Brossy attended all Compensation Committee meetings, either in person or by telephone, and assisted the Compensation Committee with: providing updates on relevant trends and developments in executive officer and director compensation;
| | providing updates on relevant trends and developments in executive officer and director compensation; | |
assessing our peer group and the competitiveness of pay levels and practices;
| | assessing our peer group and the competitiveness of pay levels and practices; | |
evaluating programs and recommendations put forth by management against the Compensation Committee’s stated rewards objectives;
| | evaluating programs and recommendations put forth by management against the Compensation Committee’s stated rewards objectives; | |
reviewing the compensation of non-employee Directors;
| | reviewing the compensation ofnon-employee Directors; | |
reviewing information to be included in the compensation sections of our proxy statement; and
| | reviewing information to be included in the compensation sections of our proxy statement; and | |
reviewing our risk assessment of all of our compensation plans.
| | reviewing our risk assessment of all of our compensation plans. | |
The Compensation Committee authorized Frederic Cook & Co.Semler Brossy staff members working on the Compensation Committee’s behalf to interact with our management, as needed, to obtain or confirm information for presentation to the Compensation Committee. Frederic Cook & Co.Semler Brossy has never performed any additional services for the Company other than the types of services mentioned herein. IV. Determination of Compensation for Executive Officers
We believe that the compensation paid to our executive officers must be fair, and equitable, and competitive enough to attract and retain qualified individuals. We also believe that there are certain non- financial,non-financial, intangible elements of the overall compensation program that provide a positive work environment and provide value for our employees. 38 The J. M. Smucker Company 2016 Proxy Statement
EXECUTIVE COMPENSATION
Compensation BenchmarkingMarket Assessment In an effort to provide competitive, fair, and equitable compensation, target compensation opportunities for our executive officers are benchmarked, atevaluated annually based on a minimum, every other year.compensation market assessment. To inform its decisions regarding establishing target compensation opportunities for our executive officers for fiscal years 20162019 and 2017,2020, the Compensation Committee used market data for hundreds of general industry companies that participated in two major executive compensation surveys. The two survey databases used included the Willis Towers Watson 20142017 and 20152018 U.S. CDB General Industry Executive Database (the “Towers Survey”) and the AON Hewitt U.S. Total Compensation Measurement 20142017 and 20152018 Executive Survey (the “Hewitt Survey” and, together with the Towers Survey, the “Compensation Study”). The information for all companies reporting data for a specific job from the Compensation Study was used when the Compensation Committee reviewed compensation. This data was thensize-adjusted using regression analysis to reflect our annual revenues and, where appropriate, the size of a specific business area. The Compensation Study also included publicly available proxy data compiled by Frederic Cook & Co.Semler Brossy for the following peer group: | | | Campbell Soup Company | | Hormel Foods CorporationIngredion Incorporated | Church & Dwight Co., Inc. | | Ingredion IncorporatedKellogg Company | The Clorox Company | | Kellogg CompanyKeurig Dr Pepper Inc. | Colgate-Palmolive Company | | Keurig Green Mountain, Inc. | ConAgra Foods, Inc. | | The Kraft Heinz Company | Dean Foods CompanyConagra Brands, Inc. | | McCormick & Company, Incorporated | Dr. Pepper Snapple Group, Inc.Dean Foods Company | | Mead Johnson Nutrition CompanyPinnacle Foods Inc. | Flowers Foods, Inc. | | Spectrum Brands,Post Holdings, Inc. | General Mills, Inc. | | The WhiteWave Foods CompanySpectrum Brands Holdings, Inc. | The Hershey Company | | Treehouse Foods, Inc. | Hormel Foods Corporation | | |
| | | 40 | | The J. M. Smucker Company 2019 Proxy Statement |
EXECUTIVE COMPENSATION The peer group was selected by the Compensation Committee, with the assistance of Frederic Cook & Co.,Semler Brossy, using the following criteria: U.S. companies in the same or similar line of business;
| | U.S. companies in the same or similar line of business; | |
companies that are within a reasonable size range in revenue, operating income, assets, equity, and market capitalization;
| | companies that are within a reasonable size range in revenue, operating income, assets, equity, and market capitalization; | |
companies that compete for the same customers with similar products, have comparable financial characteristics that investors view similarly, and may be subject to similar external factors; and
| | companies that compete for the same customers with similar products, have comparable financial characteristics that investors view similarly, and may be subject to similar external factors; and | |
| | assessing each remaining company’s primary businesses and important key characteristics for relevancy and comparability. | |
assessing each remaining company’s primary businesses and important key characteristics for relevancy and comparability.
With the acquisition of Big Heart, which increased our overall size and diversified our business profile, theThe Compensation Committee approved the removaladdition of The Hain Celestial Group, Inc. and TreeHouseTreehouse Foods, Inc. fromto the peer group and the addition of two size appropriate peers, Colgate-Palmolive Company and Spectrum Brands, Inc., for the Compensation Study conducted during fiscal year 2016.2019.
The Compensation Committee targets all compensation relative to a range around the 50th percentile of the competitive market data for the applicable fiscal year discussed above (the “Target Range”). We used the Target Range, plus or minus 20% of the midpoint, for assessing the pay for each salaried employee, including the Named Executive Officers, for fiscal year 2016.2019. The Compensation Committee’s objective is to progress the Named Executive Officers’ compensation, including our Chief Executive Officer’s compensation, to the 50th percentile of the competitive market over a reasonable period of time, with that progress being informed by our performance and other factors as noted below. The Compensation Study indicated that for fiscal year 2016,2019, total compensation for each of the Named Executive Officers was within the Target Range, (except for David J. West, who fell slightly above the Target Range), and the mix of compensation was in line with the market. In addition, the Compensation Study indicated that the current long-term incentive targets were below the market median for many of the executive officers. The J. M. Smucker Company 2016 Proxy Statement 39
EXECUTIVE COMPENSATION
Compensation Committee’s intent is to increase the long-term incentive targets and other compensation components that fall below the 50th percentile of the competitive market over time to ensure that we are providing a competitive, attractive, and retentive compensation opportunity to each of the Named Executive Officers. When approving compensation for executive officers, the Compensation Committee also considers: support of our Basic Beliefs of Quality, People, Ethics, Growth, and Independence;
| | support of ourBasic Beliefsand culture; | |
individual performance, including financial and operating results as compared to our corporate and strategic business areas’ financial plan and to prior year results, as well as achievement of personal development objectives;
| | individual performance, including financial and operating results as compared to our corporate and strategic business areas’ financial plan and to prior year results, as well as achievement of personal development objectives; | |
our overall performance, including sales and earnings results;
| | our overall performance, including sales and earnings results; | |
implementation of our strategy;
| | implementation of our strategy; | |
implementation of sound management practices; and
| | implementation of sound management practices; and | |
| | the role of appropriate succession planning in key positions. | |
| | | | | The J. M. Smucker Company 2019 Proxy Statement | | | 41 | |
the role of appropriate succession planning in key positions.EXECUTIVE COMPENSATION
Base Salary and Compensation Determination Salary ranges are determined in the same manner for each of our salaried employees, including each executive officer. The base salaries paid to each executive officer are designed to fall within an established range based on market practice. Actual base salary reflects the experience of the executive officer and the scope of his or her responsibility.
It is the normal practice that each April, the Compensation Committee requests that management submit compensation recommendations for executive officers, other than for the Executive Chairman and the Chief Executive Officer, using all of the considerations outlined above. In addition, the recommendations have been focused on increasing the market competitiveness of long-term incentive awards. These recommendations generally result in 40 The J. M. Smucker Company 2016 Proxy Statement
EXECUTIVE COMPENSATION
salary increases for the executive officers that are aligned with our salary increase budget for other salaried employees. The Compensation Committee reviews all of the above considerations with no single factor necessarily weighted more heavily than another. In setting and approving compensation for the Executive Chairman and the Chief Executive Officer, the Compensation Committee holds the Executive Chairman and the Chief Executive Officer responsible for ensuring that each of the objectives set forth above are achieved and each is assessed in their respective roles in regard to: setting the tone for corporate responsibility by adhering to our Basic Beliefs of Quality, People, Ethics, Growth, and Independence;
| | setting the tone for corporate responsibility by adhering to ourBasic Beliefs; | |
managing the business, over the long term, to serve all of our constituents, namely consumers, customers, employees, suppliers, communities in which we work, and our shareholders;
| | managing the business, over the long term, to serve all of our constituents, namely consumers, customers, employees, suppliers, communities in which we work, and our shareholders; | |
designing and implementing our long-term strategy;
| | designing and implementing our long-term strategy; | |
developing appropriate succession planning for key executive officer positions; and
| | developing appropriate succession planning for key executive officer positions; and | |
| | with respect to the Chief Executive Officer, delivering positive financial and operational results, including earnings results, as reflected in our financial plan, and achieving our sustainability goals. | |
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with respect to the Chief Executive Officer, delivering positive financial and operational results, including earnings results, as reflected in our financial plan.EXECUTIVE COMPENSATION
Richard K. Smucker was elected as the Executive Chairman, effective May 1, 2016.
At the Compensation Committee’s March 2016June 2019 meeting, the Compensation Committee, with input from the Nominating Committee, concluded that the Executive Chairman continues to exceed the above-mentioned performance objectives. The Compensation Committee considered these factors when determining the base salary, Cash Incentive Award target, and Restricted Stock Awardlong-term incentive award target for the Executive Chairman.Chairman and the Chief Executive Officer. The Compensation Committee determined that the fiscal year 20172020 salary for Mark T. Smucker would be $1,010,000, a 3.6% increase over his fiscal year 2019 salary, and that the fiscal year 2020 salary for Richard K. Smucker would be decreased to $750,000, due towhich is the same as his new title and responsibilities. Mark T. Smucker was elected as the President and Chief Executive Officer, effective May 1, 2016. Therefore, the Compensation Committee determined that the fiscal year 2017 salary for Mark T. Smucker would be increased to $900,000 due to his new title and responsibilities.2019 salary. V. What Our Short-Term Incentive Compensation Program Is Designed to Reward and How itIt Works
Our short-term, performance-based incentive compensation program is cash-based and is designed to reward key employees, including executive officers, for their contributions to the Company based on clear, measurable criteria. After the end of each fiscal year, the Compensation Committee reviews management’s recommendations for Cash Incentive Awards for executive officers (other than for the Executive Chairman and the Chief Executive Officer for whom management makes no recommendation). The Compensation Committee evaluates the following criteria and information in approving Cash Incentive Awards for executive officers: our performance in relation to our non-GAAP earnings per share goal for the fiscal year, a goal that is also approved by the Compensation Committee in June of each year for the fiscal year commencing the prior May 1st. The non-GAAP earnings per share goal is calculated excluding the impact of restructuring and merger and integration charges and unallocated derivative gains and losses, and, according to the plan, may exclude other items as determined by the Compensation Committee. The determination of our performance, excluding these charges, is consistent with the way management and the Board evaluates our business;
| | our performance in relation to our adjusted operating income goal for the fiscal year, a goal that is also approved by the Compensation Committee in June of each year for the fiscal year commencing the prior May 1st. The adjusted operating income goal is calculated excluding the impact of amortization expense and impairment charges related to intangible assets, integration and restructuring costs, and unallocated derivative gains and losses, and, according to the plan, may exclude other items as determined by the Compensation Committee. The determination of our performance, excluding these charges, is consistent with the way management and the Board evaluates our business; | |
if an executive officer has responsibility for a specific strategic business area, a percentage of the Cash Incentive Award is tied to that strategic business area’s performance in relation to its annual profit goal and the Compensation Committee reviews attainment of relevant profit goals for those areas each year; and
| | in general, if an executive officer has responsibility for a specific strategic business area, a percentage of the Cash Incentive Award is tied to that strategic business area’s performance in relation to its annual profit goal and the Compensation Committee reviews attainment of relevant profit goals for those areas each year; and | |
| | awards to each executive officer for the prior year, as well as base salary for the fiscal year just ended and target award information for each executive officer. | |
The J. M. Smucker Company 2016 Proxy Statement 41
EXECUTIVE COMPENSATION
awards to each executive officer for the prior three years, as well as base salary for the fiscal year just ended andIncentive target award information for each executive officer.
Target awards for executive officers under the short-term incentive compensation program are also approved by the Compensation Committee and are represented as a percentage of each executive officer’s base salary. The target award percentage for each executive officer is reviewed regularly by the Compensation Committee with input from Frederic Cook & Co.Semler Brossy. Executive officers’ target awards ranged from 45%40% to 110%125% of base salary depending on the responsibilities and experience of the executive officer. For fiscal year 2016,2019, the most an executive officer was eligible to receive in such fiscal year was twice the target award (i.e.,between 90%80% and 220%250% of base salary).
Participants in the short-term incentive compensation program receive a percentage of their target award based on our performance as shown in the following table. No awards are made unless we first achieve at least 80% of our non-GAAP earnings per shareadjusted operating income goal. | Ranges | | Performance Level Achieved | | Percentage of Target Award Earned | | | Performance Level Achieved | | Percentage of Target Award Earned | Below Threshold | | | <80 | % | | | 0 | % | | <80% | | 0% | Threshold | | | 80 | % | | | 25 | % | | 80% | | 25% | Target | | | 100 | % | | | 100 | % | | 100% | | 100% | Maximum | | | 110 | % | | | 200 | % | | 110% | | 200% |
In the event performance is between the ranges set forth in the table above, the Compensation Committee determines the percentage of the award that is earned by mathematical interpolation: (i) for each increase of 1% above the threshold performance level but at or below 90% of the target performance level, the percentage of the target award earned increases by 2.5%; (ii) for each increase of 1% above 90% of the target performance level but below the target performance level, the percentage of the target award earned increases by 5%; and (iii) for each increase of 1% above | | | | | The J. M. Smucker Company 2019 Proxy Statement | | | 43 | |
EXECUTIVE COMPENSATION the target performance level and up to the maximum performance level, the percentage of target award earned increases by 10%. For the Named Executive Officers, the target award is tied solely to the corporate performance target or a combination of the strategic business area and the corporate performance targets. If a Named Executive Officer manages or has significant influence over a strategic business area, 50% of the target award is generally tied to the performance of the strategic business area. In other words, individual performance is not a factor in determining Cash Incentive Awards for the Named Executive Officers. The Compensation Committee, however, does have discretion to reduce a Named Executive Officer’s award but did not reduce any Named Executive Officer’sOfficer award in fiscal year 2016.2019. A chart illustrating this allocation is as follows: | | | | | | | | | | | Weighting of Target Award for Named Executive Officers | | Performance Categories | | Corporate Participants | | | Strategic Business Area Participants | | Corporate Performance | | | 100 | % | | | 50 | % | Individual Performance | | | 0 | % | | | 0 | % | Strategic Business Area Performance | | | 0 | % | | | 50 | % | Total | | | 100 | % | | | 100 | % |
42 The J. M. Smucker Company 2016 Proxy Statement
EXECUTIVE COMPENSATION
| | | | | | | | | | | | | Weighting of Target Award For Named Executive Officers | Performance Categories | | Corporate Participants | | Strategic Business Area Participants | Corporate Performance | | | | 100% | | | | | 50% | | Individual Performance | | | | 0% | | | | | 0% | | Strategic Business Area Performance | | | | 0% | | | | | 50% | | Total | | | | 100% | | | | | 100% | |
For fiscal year 2016,2019, all of the executive officers included in the “Summary Compensation Table” were participants in the short-term incentive compensation program, and the weighting of the target award for each Named Executive Officer is set forth in the table below: Short-Term Incentive Compensation Program Weighting of Target Award for Named Executive Officers for Fiscal Year 2019 | | | | | | | | | | | | | Weighting of Target Award | For Named Executive Officers forOfficer
Fiscal Year 2016
| | | | | | | | | | | Weighting of Target Award | | Executive Officer | | Corporate Performance | | | Strategic Business Area Performance | | Richard K. Smucker | | | 100 | % | | | 0 | % | Mark R. Belgya | | | 100 | % | | | 0 | % | Vincent C. Byrd | | | 100 | % | | | 0 | % | Steven Oakland | | | 50 | % | | | 50 | % | David J. West | | | 50 | % | | | 50 | % |
Set forth below is an example of the calculation of a Cash Incentive Award for a corporate participant:
Example: An executive officer with corporate responsibilities, an annual base salary of $200,000, and a Cash Incentive Award target award of 50% of base salary would receive the following Cash Incentive Award based on achievement of target performance for all categories as shown below:
| | | | | | | | | | | | | Ranges | | Performance Level Achieved | | | Percentage of Target Award Earned | | | Cash Incentive Award Earned | | Below Threshold | | | <80 | % | | | 0 | % | | $ | 0 | | Threshold | | | 80 | % | | | 25 | % | | $ | 25,000 | | Target | | | 100 | % | | | 100 | % | | $ | 100,000 | | Maximum | | | 110 | % | | | 200 | % | | $ | 200,000 | |
Specifically, with respect to fiscal year 2016, the Compensation Committee approved the target corporate non-GAAP earnings per share goal of $5.75. In order to receive 100% of the target opportunity under the corporate component of the short-term incentive compensation program, we had to achieve non-GAAP earnings per share of $5.75, representing approximately 6.9% growth over the prior year. For fiscal year 2016, we achieved non-GAAP earnings per share (as adjusted) (which, in addition to certain items affecting comparability, also excludes the impact of a significant net deferred tax benefit) of $6.26, representing 109% of the target amount. As a result of exceeding the non-GAAP earnings per share target, the corporate performance portion of the awards was paid at 190% of the target award for all participants. The short-term incentive compensation program corporate performance goals for fiscal year 2016 were as shown in the following table:
Short-Term Incentive Compensation Program
Corporate Performance Goals
for Fiscal Year 2016
| | | | | | | Ranges | | Performance Level Achieved
(Non-GAAP Earnings per Share)
| | Percentage of Cash
Incentive Award
Opportunity Earned | | Below Threshold
| | Below $4.60 (80% of target) | | | 0 | % | Threshold
| | $4.60 (80% of target) | | | 25 | % | Target
| | $5.75 (target) | | | 100 | % | Maximum
| | $6.33 (110% target) | | | 200 | % |
Corporate Participants | | Strategic Business Area Participants | Mark T. Smucker | | | | 100% | | | | | 0% | | Mark R. Belgya | | | | 100% | | | | | 0% | | Jeannette L. Knudsen | | | | 100% | | | | | 0% | | David J. Lemmon | | | | 50% | | | | | 50% | | Richard K. Smucker | | | | 100% | | | | | 0% | |
Set forth below is an example of the calculation of a Cash Incentive Award for a corporate participant: Example: An executive officer with corporate responsibilities, an annual base salary of $200,000, and a Cash Incentive Award target award of 50% of base salary would receive the following Cash Incentive Award based on achievement of target performance for all categories as shown below: | | | | | | | | | | | | | | | | | | | | Ranges | | Performance Level Achieved | | Percentage of Target Award Earned | | Cash Incentive Award Earned | Below Threshold | | < 80% | | 0% | | | $ | 0 | | Threshold | | 80% | | 25% | | | $ | 25,000 | | Target | | 100% | | 100% | | | $ | 100,000 | | Maximum | | 110% | | 200% | | | $ | 200,000 | |
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EXECUTIVE COMPENSATION Specifically, with respect to fiscal year 2019, the Compensation Committee approved the target corporate-adjusted operating income goal of $1,511 million. In order to receive 100% of the target opportunity under the corporate component of the short-term incentive compensation program, we had to achieve adjusted operating income of $1,511 million, representing approximately 5% growth over the prior year. For fiscal year 2019, we achieved adjusted operating income of $1,492, representing 99% of the target amount. As a result of exceeding the adjusted operating income threshold but not the target, the corporate performance portion of the awards was paid at 95% of the target award for all participants. The short-term incentive compensation program corporate performance goals for fiscal year 2019 were as shown in the following table: Short-Term Incentive Compensation Program Corporate Performance Goals for Fiscal Year 2019 | | | | | | | | Ranges | | Performance Level Achieved (Adjusted Operating Income) (In Millions) | | Percentage of Cash Incentive Award Opportunity Earned | Below Threshold | | Below $1,209 (80% of Target) | | 0% | Threshold | | $1,209 (80% of Target) | | 25% | Target | | $1,511 | | 100% | Maximum | | $1,662 (110% of Target) | | 200% |
We believe that the performance targets established by the Compensation Committee for fiscal year 2019 required participants, including executive officers, to perform at a high level in order to achieve the target performance levels. During the five-year period from fiscal year 2015 through fiscal year 2019, we achieved performance in excess of the target level two times (and did not achieve the maximum performance level) and failed to achieve the target performance level three times. During the same time period, our annual compounded growth rate in adjusted earnings per share was approximately 6%, with a total shareholder return of approximately 8%. Generally, the Compensation Committee sets the minimum, target, and maximum levels such that the relative difficulty of achieving the target level is consistent from year to year. What Our Long-Term Incentive Compensation Program (Performance-Based Restricted Stock) Is Designed to Reward and How It Works Our long-term, performance-based compensation is stock-based and designed to align the interests of management with the interests of our shareholders. Restricted Stock Awards are currently issued under the 2010 Plan. We grant restricted stock units (in lieu of restricted shares) to certain participants who reside outside of the United States in order to comply with local laws and to We believe that the performance targets established by the Compensation Committee for fiscal year 2016 required participants, including executive officers, to perform at a high level in order to achieve the target performance levels. During the ten-year period from fiscal year 2007 through fiscal year 2016, we achieved performance in excess of the target level seven times (and achieved the maximum performance level two out of such seven times) and failed to achieve the target performance level three times. During the same time period, our annual compounded growth rate in non-GAAP earnings per share (excluding the impacts described on page 33) was approximately 9%, with a TSR of approximately 16%. Generally, the Compensation Committee sets the minimum, target, and maximum levels such that the relative difficulty of achieving the target level is consistent from year to year.
| | | | | VI. What Our Long-Term Incentive Compensation Program (Performance-Based Restricted Stock) Is Designed to Reward and How it WorksThe J. M. Smucker Company 2019 Proxy Statement Our long-term, performance-based compensation is stock-based and designed to align
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EXECUTIVE COMPENSATION provide favorable tax treatment to foreign recipients. For fiscal year 2019, none of the Named Executive Officers received restricted stock units. Discussion in this “Compensation Discussion and Analysis” relating to restricted shares also applies to the limited awards of restricted stock units granted to participants residing outside of the United States. For fiscal year 2019, the interests of management with the interests of our shareholders.
Restricted Stock Awards are currently issued under the 2010 Plan. We grant restricted stock units (in lieu of restricted shares) to certain participants who reside outside of the United States in order to comply with local laws and to provide favorable tax treatment to foreign recipients. None of the Named Executive Officers receive restricted stock units. Discussion in this “Compensation Discussion and Analysis” relating to restricted shares also applies to the limited awards of restricted stock units granted to participants residing outside of the United States. The long-term incentive compensation program is generally a five-year program, with a five-year program, with aone-year performance period followed by a four-year vesting period. In general, Restricted Stock Awards vest at the end of four years and, in certain limited circumstances, some or all shares will vest immediately upon a job or position elimination or upon a change of control. Restricted Stock Awards that have not yet vested are generally forfeited in the event that an employee voluntarily leaves employment with the Company. Pursuant to the terms of the West Employment Agreement (as defined below), David J. West’s Restricted Stock Award for fiscal year 2015 vests 25% each year over four years, subject to his continuous service with the Company. For purposes of vesting in the first year only, Mr. West’s service as a member of the Board is considered continuous service and, therefore, 25% of his Restricted Stock Award for fiscal year 2015 vested on June 12, 2016. The remainder of his Restricted Stock Award for fiscal year 2015 was cancelled as of April 30, 2016, on which date Mr. West ceased to be an employee of the Company.
The essential features of the Restricted Stock Awards are as follows: | | subject to Compensation Committee approval for executive officers and authorized executive officer approval for other participants, grants of Restricted Stock Awards are generally made each June provided the Company meets or exceeds the threshold performance goal for the prior fiscal year; | |
| | the number of restricted shares awarded in respect of the Restricted Stock Awards is based 75% on our non-GAAPadjusted earnings per share performance and 25% on our free cash flow performance as established by the Compensation Committee the previous June; 44 The J. M. Smucker Company 2016 Proxy Statement
EXECUTIVE COMPENSATION
| • | | target opportunities for Restricted Stock Awards (i.e., the amount of restricted shares a participant is eligible to receive) are computed based on a participant’s base salary level at the beginning of the fiscal year in which the Restricted Stock Award is made, and these targets are communicated to participants at the beginning of each fiscal year;
|
| | target opportunities for Restricted Stock Awards generally vest 100%(i.e., the number of restricted shares a participant is eligible to receive) are computed based on a participant’s base salary and long-term incentive target at the end of the four-year period followingfiscal year in which the grant date so long as a participant remains an employee of the Company. Restricted Stock Awards made prior to June 2013 to participants who reach the age of 60 and have a minimum of 10 years of service with the Company vest immediately. Beginning with grants made in June 2013, upon participants reaching the age of 60 with 10 years of service, all Restricted Stock Awards vest immediately, with 50% of such Restricted Stock Awards available for settlement of taxes due and the remainder subject to a four-year retention period. This retention period continues regardless of retirement;Award is being measured; | |
unvested Restricted Stock Awards are forfeited upon an employee’s voluntary departure from the Company; and
| | actual Restricted Stock Awards range from 0% of the restricted shares target award amount if we fail to achieve 80% of our non-GAAPadjusted earnings per share goal, to a maximum of 150% of the restricted shares target award amount if we achieve or exceed 120% of our goals for adjusted earnings per share and free cash flow as shown in the table below. In the event performance is between the ranges set forth below, the Compensation Committee determines the percentage of the Restricted Stock Award that is earned by mathematical linear interpolation: for each increase of 1% above the threshold performance level up to the maximum performance level, the percentage of target award increases by 2.5%.; | |
| | | | | Ranges | | Achievement of Target Performance* | | Percentage of Target Award Earned | Below Threshold | | <80% | | 0% | Threshold | | 80% | | 50% | Target | | 100% | | 100% | Maximum | | 120% | | 150% |
| | | | | | | | | Ranges | | Achievement of Target Performance* | | | Percentage of Target Award Earned | | Below Threshold | | | <80 | % | | | 0 | % | Threshold | | | 80 | % | | | 50 | % | Target | | | 100 | % | | | 100 | % | Maximum | | | 120 | % | | | 150 | % |
| * | | * | Based 75% on the achievement of our annual performance target for non-GAAP earnings per share and 25% on the achievement of our annual performance target for free cash flow, although no Restricted Stock Awards are granted if the Company does not achieve at least 80% of our non-GAAPBased 75% on the achievement of our annual performance target for adjusted earnings per share and 25% on the achievement of our annual performance target for free cash flow, although Restricted Stock Awards are only granted if we achieve at least 80% of our adjusted earnings per share target. | |
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EXECUTIVE COMPENSATION
In order to receive a Restricted Stock Award, participants must be employed by the Company at the time of the grant. In order to qualify the Restricted Stock Awards made to executive officers as performance-based awards under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”):
Followinggenerally vest 100% at the end of fiscal year 2016, the Compensation Committee determinedfour-year period following the number of performance units that were earned by the Named Executive Officers. Specifically, with respect to fiscal year 2016, we achieved 109% of our non-GAAP earnings per share goal and 148% of our corporate free cash flow goal, resulting ingrant date so long as a Restricted Stock Award of 129.4%participant remains an employee of the fiscal year 2016 performance unit award target. The performance units were paid in the form of restricted shares out of the 2010 Plan. The performance units, each worth $1.00, were converted to a number of restricted shares based on the average stock price for the final five trading days of fiscal year 2016 and the first five trading days of fiscal year 2017. The restricted shares earned were delivered to the Named Executive Officers pursuant to the same terms as the restricted shares granted to the otherCompany. Upon participants in the long-term incentive compensation program and are subject to a four-year vesting period. However, as with other participants, once any of the Named Executive Officers reachesreaching the age of 60 and has a minimum ofwith 10 years of service, with the Company, his or her restricted shares willall Restricted Stock Awards vest immediately, with 50% of such restricted sharesRestricted Stock Awards available for settlement of taxes due and the remainder subject to a four-year retention period. Based on age and length of service, the restricted shares granted to Richard K. Smucker and Vincent C. Byrd vested upon grant, with 50% of such shares available for settlement of taxes due and the remainder subject to the four-year retention period. This retention period continues into retirement. No grant was made to Mr. West for fiscal year 2016 as his employment withregardless of retirement; and
| |
| | unvested Restricted Stock Awards are generally forfeited upon an employee’s voluntary departure from the Company ceased on April 30, 2016.Company. Performance-based non-statutory stock options were awarded on March 19, 2015 (April 22, 2015 for David J. West), and approved by the Compensation Committee for certain eligible participants, including the Named Executive Officers. These awards were granted to support the work needed for the integration of the Big Heart
| |
| | | 46 | | The J. M. Smucker Company 20162019 Proxy Statement |
EXECUTIVE COMPENSATION In order to receive a Restricted Stock Award, participants must be employed by the Company at the time of the grant. With respect to the Restricted Stock Awards made to executive officers: Following the end of fiscal year 2019, the Compensation Committee determined the number of performance units that were earned by the Named Executive Officers. Specifically, with respect to fiscal year 2019, we achieved 98% of our adjusted earnings per share goal and 95% of our corporate free cash flow goal, resulting in a Restricted Stock Award of 93.13% of the fiscal year 2019 performance unit award target. The performance units were paid in the form of restricted shares out of the 2010 Plan. The performance units, each worth $1.00, were converted to a number of restricted shares based on the average closing stock price for the final five trading days of fiscal year 2019 and the first five trading days of fiscal year 2020. The restricted shares earned were delivered to the Named Executive Officers pursuant to the same terms as the restricted shares granted to the other participants in the long-term incentive compensation program and are subject to a four-year vesting period. However, as with other participants, once any of the Named Executive Officers reaches the age of 60 and has a minimum of 10 years of service with the Company, his or her restricted shares will vest immediately, with 50% of such restricted shares available for settlement of taxes due and the remainder subject to a four-year retention period. Based on age and length of service, the restricted shares granted to Richard K. Smucker vested immediately upon grant, with 50% of such shares available for settlement of taxes due and the remainder subject to the four-year retention period. This retention period continues into retirement. | | | | | The J. M. Smucker Company 2019 Proxy Statement | | | 47 | |
EXECUTIVE COMPENSATION Changes to Long-Term Incentive Compensation Program for Fiscal Year 2020 Beginning with awards made in June 2019 for fiscal year 2020, the Compensation Committee has approved significant changes to our long-term incentive compensation program in order to strengthen the alignment of our management incentives with our long-term business objectives, to better align the interests of management with the interests of our shareholders, and to increase the market competitiveness of our long-term plan design. For fiscal year 2020, participants will receive two separate long-term incentive awards. The first award consists of performance units that will generally vest at the end of three years and will be based 75% on the achievement of our three-year performance target for adjusted earnings per share and 25% on the achievement of our three-year performance target for return on invested capital. The table below summarizes the actual performance units which vest at various achievement levels. | | | | | | | | | | | Ranges | | Achievement of Target Performance* | | Percentage of Target Award Earned | Below Threshold | | <90% | | 0% | Threshold | | 90% | | 50% | Target | | 100% | | 100% | Maximum | | 115% | | 200% |
| * | Based 75% on the achievement of our three-year performance target for adjusted earnings per share and 25% on the achievement of our three-year performance target for return on invested capital, although awards are only vested if we achieve at least 90% of our adjusted earnings per share target. | |
The second award consists of stock options for elected officers and restricted stock for all othernon-elected officer participants (or restricted stock units for certainnon-elected officer participants who reside outside of the United States in order to comply with local laws and to provide favorable tax treatment to foreign recipients) that will not be performance based and will generally ratably vest in equal tranches over a three-year period. Elected officers will receive 75% of their long-term incentive award in performance units and 25% in stock options.Non-elected officer participants will receive a mix of performance units and restricted stock (or restricted stock units), depending on their respective level and award target. In addition, the new awards include restrictive covenants, including confidentiality obligations andnon-solicit,non-interference, andnon-competition covenants. In addition to other remedies which may be available, violations of those covenants may result in forfeiture of any awards and repayment of any proceeds from any awards. The table below provides a high-level summary of the changes to the long-term incentive compensation program: | | | | | Fiscal Year 2019 | | Fiscal Year 2020 | Performance Period | 1-Year Performance Period | | 3-Year Performance Period | Performance Metrics | 75% Adjusted Earnings Per Share | | 75% Adjusted Earnings Per Share | 25% Free Cash Flow | | 25% Return on Invested Capital | Types of Awards | One Award Vehicle | | Two Award Vehicles | Performance Measuredg Time-Based Restricted Stock Units | | Performance Units and Time-Based Stock Options or Restricted Stock | Other Award Characteristics | | | Performance Units3-Year Cliff Vest (no hold) | 4-Year Cliff Vest for Time-Based Restricted and Deferred Stock Units | | 3-Year Ratable Vest for Time-Based Stock Options and Restricted Stock | Performance Range: 80% to 120% | | Performance Range: 90% to 115% | Maximum Award Payout of 150% | | Maximum Award Payout of 200% | Dividends Paid on Unvested Shares | | Dividends Paid Only if Shares Vest or Performance Units Settle |
| | | 48 | | The J. M. Smucker Company 2019 Proxy Statement |
EXECUTIVE COMPENSATION One-Time Awards In June 2018, the Compensation Committee approved specialone-time awards to certain recipients, including Mark R. Belgya, Jeannette L. Knudsen, and David J. Lemmon, who had a significant role in one or more of the Company’s transformational strategic initiatives for fiscal year 2019, including, without limitation, the acquisition and integration of Ainsworth Pet Nutrition, LLC (“Ainsworth”), the divestiture and transition of the U.S. baking business, and the organization optimization program. Theone-time awards included a cash award, which was paid in July 2018, and aone-year performance-based restricted stock award target, which was to be awarded in June 2019 based 50% on the achievement of certain “synergy realization” and Earnings Before Interest, Taxes, Depreciation, and Amortization (“EBITDA”) performance criteria for fiscal year 2019 and 50% on the achievement of certain business performance criteria, although no portion of the business performance criteria would be awarded if we did not achieve the threshold EBITDA performance criteria. If such criteria were met and any portion of the restricted stock awards were granted, such restricted stock awards would vest 100% at the end of a three-year period so long as a participant remains an employee of the Company. We did not achieve the targeted performance criteria (although we did achieve the threshold performance criteria) for “synergy realization” or EBITDA for fiscal year 2019, but we did achieve substantially all of the business performance criteria, including the completion of the acquisition and integration of Ainsworth (with the plant and customer integration being completed in less than nine months from the closing date), the divestiture and continuing transition of the U.S. baking business, and the closure and consolidation of seven domestic and international office locations into our corporate headquarters in Orrville, Ohio. Therefore, in June 2019 (subsequent to fiscal year end), the Compensation Committee approved the grant of restricted stock awards up to 50% of the restricted stock award target amount to each participant in such special one time-awards, including the Named Executive Officers noted above as more specifically set forth in the below table: | | | | | | | | | | | | | | | Name | | Cash Award Paid in July 2018 | | Target Performance- Based Equity Award | | Synergy and EBITDA Target | | Synergy and EBITDA Award | | Business Achievement Target | | Business Achievement Award | | % of Target Performance- Based Equity Award | David J. Lemmon | | $62,589 | | $187,500 | | $ 93,750 | | $0 | | $93,750 | | $75,000 | | 40% | Mark R. Belgya | | $37,500 | | $112,500 | | $56,250 | | $0 | | $56,250 | | $50,625 | | 45% | Jeannette L. Knudsen | | $31,250 | | $ 93,750 | | $46,875 | | $0 | | $46,875 | | $42,188 | | 45% |
Stock Ownership Guidelines All of our executive officers are required to meet minimum stock ownership guidelines within a five-year period of being named an executive officer of the Company. The Executive Chairman and the Chief Executive Officer have a stock ownership guideline of six times their annual base salaries. Our other executive officers have a stock ownership guideline of two times their annual base salaries. All of the Named Executive Officers, including the Executive Chairman and the Chief Executive Officer, exceed these ownership requirements. Health Benefits We provide executive officers with health and welfare plans upon substantially the same terms as available to most of our other salaried employees. These benefit plans include medical, dental, vision, life, and disability insurance coverage. We also provide executive officers with periodic physical examinations upon the same terms as available to all of our employees at or above the functional vice president level. Pension and Retirement Plans, theNon-Qualified Supplemental Retirement Plan, and the Voluntary Deferred Compensation Plan The Named Executive Officers, except for David J. Lemmon, participate in The J. M. Smucker Company Employees’ Retirement Plan (the “Qualified Pension Plan”) and The J. M. Smucker Company Employee Savings Plan (the “401(k) Plan”). Participation in the 401(k) Plan (and, for employees hired prior to December 31, 2007, the Qualified Pension Plan) is an important component of the overall compensation package for substantially all of our employees, | | | | | The J. M. Smucker Company 2019 Proxy Statement | | | 49 | |
EXECUTIVE COMPENSATION including our executive officers. In addition, the Named Executive Officers, except for Jeannette L. Knudsen and David J. Lemmon, participate in The J. M. Smucker Company Top Management Supplemental Retirement Benefit Plan (as amended, the “SERP”) and are eligible to participate in The J. M. Smucker Company Voluntary Deferred Compensation Plan (the “Deferred Compensation Plan”). Certain other executive officers, including Jeannette L. Knudsen, participated in The J. M. Smucker Company Defined Contribution Supplemental Executive Retirement Plan (the “New SERP”). In August 2016, the Compensation Committee approved the closure of the previously frozen New SERP, effective December 31, 2017. On January 1, 2018, the participants in the New SERP, including Jeannette L. Knudsen, became eligible to participate in The J. M. Smucker Company Restoration Plan (the “Restoration Plan”). The Qualified Pension Plan was frozen for all participants on December 31, 2017. David J. Lemmon participated in The J. M. Smucker Company Canadian Merged Pension Plan (the “Canadian Registered Plan”), The Smucker Foods of Canada Corp. Restoration Plan (the “Canadian Restoration Plan”), and The Smucker Foods of CanadaNon-Registered Savings Plan (the “Canadian Savings Plan”) during his assignment in Canada. The following chart provides an overview of the key components of each of the plans: | | | | | Plan Name | | Components | | | 401(k) Plan | | • Is the primary Company-provided retirement plan for certain eligible employees, providing a 150% match on employees’ contributions on the first 2% of eligible earnings and 100% on contributions on the next 4% of pay (i.e., a maximum Company match of 7% of pay) | Qualified Pension Plan | | • Provides a pension benefit based upon years of service with the Company and upon final average pay (average base salary compensation for the five most highly compensated consecutive years of employment) business. The options have an exercise price equal• Benefits under the Qualified Pension Plan are 1% of final average earnings times the participant’s years of service with the Company
• Employees under the age of 40 as of December 31, 2007 will not earn future additional benefits under the Qualified Pension Plan, but employees age 40 and over as of December 31, 2007 will continue to $111.86 ($117.43 for David J. West), the fair market valueearn future benefits • Canadian employees who did not meet age and service provisions as of our common stock on the grant date. The one-year performance-based optionsDecember 31, 2012 were scheduledeligible to fully vest on April 30, 2016 if (i) we achieved certain “synergy realization” and EBITDA performance criteria (each, as definedparticipate in the applicable award agreement(s)Defined Contribution Pension Plan (the “DC Pension Plan”), which provided anon-elective contribution of 2% of eligible earnings and (ii) the participant remained employed by the Companyprovided matching contributions on such date. The three-year performance-based options will vest ratably on April 30th1% to 4% of 2016, 2017, and 2018 if (i) we achieve certain “synergy realization” and EBITDA performance criteria (each, as defined in the applicable award agreement(s)) and (ii) the participant is employed by the Company on the applicable vesting date. The terms of the three-year performance-based options also provide for catch-up vesting, such that if an option tranche fails to vest for a particular year dueemployee contributions; combined contributions are subject to the non-achievement of the performance criteria, such tranche will be eligible to vest if a specified cumulative performance goal is achieved with respect to the next applicable vesting date. We did not achieve the “synergy realization” or EBITDA performance criteria for fiscal year 2016. Therefore, the one-year performance based options were cancelled, and the first tranche of the three-year performance-based options did not vest on April 30, 2016. However, the first tranche of the three-year performance-based options will be eligible to vest on April 30, 2017 if the specified cumulative performance goal is achieved for fiscal year 2017. Stock Ownership Guidelines
All of our executive officers are required to meet minimum stock ownership guidelines within a five-year period of being named an executive officer of the Company. The Executive Chairman and the Chief Executive Officer have a stock ownership guideline of six times their annual base salaries. Our other executive officers have a stock ownership guideline of two times their annual base salaries. All of the Named Executive Officers, including the Executive Chairman and the Chief Executive Officer, significantly exceed these ownership requirements.
VII. Health Benefits
We provide executive officers with health and welfare plans upon substantially the same terms as available to most of our other salaried employees. These benefit plans include medical, dental, vision, life, and disability insurance coverage. We also provide executive officers with periodic physical examinations upon the same terms as available to all of our employees at or above the functional vice president level.Money Purchase Plan Limit prescribed by Revenue Canada
VIII. Pension | and Retirement Plans, the Non-qualified Supplemental Retirement Plan, and the Voluntary Deferred Compensation Plan• Closed to new participants on December 31, 2007 • Effective December 31, 2017, benefits under the Qualified Pension Plan were frozen for all participants, including executive officers |
| SERP | | Our• In addition to retirement benefits under the Qualified Pension Plan and 401(k) Plan, certain of our executive officers, including the Named Executive Officers (other than(except for Jeannette L. Knudsen and David J. West)Lemmon), also participate in the Employee Stock Ownership Plan (the “ESOP”), The J. M. Smucker Company Employees’ Retirement Plan (the “Qualified Pension Plan”),SERP, entitling them to certain supplemental benefits upon their retirement
• Benefits are based upon years of service and The J. M. Smucker Company Employee Savings Plan (the “401(k) Plan”). Participation inare 55% (reduced for years of service less than 25) of the ESOPaverage of base salary, holiday bonus, and 401(k) Plan (and,Cash Incentive Award for employees hired prior to December 31, 2007,the five most highly compensated, consecutive years of employment, less any benefits received under the Qualified Pension Plan) is an important component of the overall compensation package for substantially all of our employees, including our executive officers. In addition, the Named Executive Officers (other than David J. West) participate in The J. M. Smucker Company Top Management Supplemental Retirement Benefit Plan (as amended, the “SERP”) and are eligible to participate in The J. M. Smucker Company Voluntary Deferred Compensation Plan (the “Deferred Compensation Plan”).Social Security • Frozen to new participants on May 1, 2008 |
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EXECUTIVE COMPENSATION | | | | | Plan Name 47
| | EXECUTIVE COMPENSATIONComponents
| New SERP | | The following chart provides an overview of the key components of each of the plans, as well as the Big Heart defined benefit pension plans in which David J. West participates:
| | | ESOP
| | • We make an annual allocation of our shares to eligible employee participants
• The value of the allocation is approximately 2% of each participant’s base salary
• Dividends received on shares held in participants’ accounts are used to purchase additional shares of Company stock or paid out, at the participant’s election
• We discontinued all future annual allocations of shares to eligible employee participants following the allocation in fiscal year 2016 for the plan year ended April 30, 2015. Big Heart employees (including David J. West) did not participate in the ESOP
| 401(k) Plan
| | • Is the primary Company-provided retirement plan for certain eligible employees, providing a 100% match on employees’ contributions of up to 2% of pay and 50% on contributions between 3% and 6% of pay (i.e., a maximum Company match of 4% of pay) for employees age 40 and over as of December 31, 2007
• 150% match on employees’ contributions of up to 2% and 100% on contributions between 3% and 6% of pay (i.e., a maximum Company match of 7% of pay) for employees under the age of 40 as of December 31, 2007, or those becoming new participants, regardless of age, on or after January 1, 2008
• All of the Named Executive Officers were over the age of 40 on December 31, 2007
| Qualified Pension Plan
| | • Provides a pension benefit based upon years of service with the Company and upon final average pay (average base salary compensation for the five most highly compensated consecutive years of employment)
• Benefits under the Qualified Pension Plan are 1% of final average earnings times the participant’s years of service with the Company
• Employees under the age of 40 as of December 31, 2007 will not earn future additional benefits under the Qualified Pension Plan, but employees age 40 and over as of December 31, 2007 will continue to earn future benefits
• Closed to new participants on December 31, 2007
| SERP
| | • In addition to retirement benefits under the Qualified Pension Plan, 401(k) Plan, and ESOP, certain of our executive officers, including the Named Executive Officers (other than David J. West), also participate in the SERP, entitling them to certain supplemental benefits upon their retirement
• Benefits are based upon years of service and are 55% (reduced for years of service less than 25) of the average of base salary, holiday bonus, and Cash Incentive Award for the five most highly compensated, consecutive years of employment, less any benefits received under the Qualified Pension Plan and Social Security
• Frozen to new participants• Became effective on May 1, 2008 and provides a benefit for certain executive officers not participating in the SERP. Frozen to new participants on May 1, 2012
• Entitles participants to certain supplemental benefits upon their retirement, based upon an annual contribution by the Company equal to 7% of the sum of the participant’s base salary, holiday bonus, and Cash Incentive Award, along with an interest credit made each year commencing on April 30, 2009 • Participants will be eligible for benefits upon the attainment of age 55 and 10 years of service with the Company • Jeannette L. Knudsen was the only Named Executive Officer to participate in the New SERP • In August 2016, the Compensation Committee approved the closure of the New SERP, effective December 31, 2017, at which time such participants were eligible to participate in the Restoration Plan | Restoration Plan | | • Became effective on May 1, 2012 and provides a benefit for certain executive officers not participating in the SERP or, prior to January 1, 2018, the New SERP • Restores contributions that would have been received under the 401(k) Plan but are not permitted due to federal tax limitations • Participants are entitled to contribute between 0% and 50% of their eligible pay over the qualified plan compensation limit and are entitled to receive a 401(k)-type match on contributions (i.e., a maximum Company match of 7% of pay over the compensation limit) • Members of the Canadian Leadership Team, including David J. Lemmon for calendar year 2018, are eligible to participate in the Canadian Restoration Plan once they meet the annual Canadian Income Tax Act maximum contribution limit under their registered pension plan; eligible participants receive anon-elective contribution of 2% of eligible earnings and receive company matching contributions on 1% to 4% of their contributions • Jeannette L. Knudsen became eligible to participate in the Restoration Plan on January 1, 2018, and David J. Lemmon became eligible to participate in the Restoration Plan on January 1, 2019 | Deferred Compensation Plan | | • U.S.-based executive officers who are not eligible to participate in the Restoration Plan may elect to defer up to 50% of salary and up to 100% of the Cash Incentive Award in the Deferred Compensation Plan • The amounts deferred are credited to notional accounts selected by the executive officer that mirror the investment alternatives available in the 401(k) Plan. At the time a deferral election is made, participants elect to receive payout of the deferred amounts upon termination of employment in the form of a lump sum or equal annual installments ranging from 2 to 10 years • The SERP, the New SERP, the Restoration Plan, and the Deferred Compensation Plan arenon-qualified deferred compensation plans and, as such, are subject to the rules of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), which restrict the timing of distributions |
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EXECUTIVE COMPENSATION | | | | | Plan Name
| | EXECUTIVE COMPENSATIONComponents
| | | The J. M. Smucker Company Defined Contribution Supplemental Executive Retirement Plan (the “New SERP”)
| | • Became effective on May 1, 2008 and provides a benefit for certain executive officers not participating in the SERP. Frozen to new participants on May 1, 2012
• Entitles participants to certain supplemental benefits upon their retirement, based upon an annual contribution by the Company equal to 7% of the sum of the participant’s base salary, holiday bonus, and Cash Incentive Award, along with an interest credit made each year commencing on April 30, 2009
• Participants will be eligible for benefits upon the attainment of age 55 and 10 years of service with the Company
• The Named Executive Officers are not participants in the New SERP but will continue to participate in the SERP (other than David J. West, who does not participate in either plan)
| The J.M. Smucker Company Restoration Plan (the “Restoration Plan”)
| | • Became effective on May 1, 2012 and provides a benefit for certain executive officers not participating in the SERP or the New SERP
• Restores contributions that would have been received under our qualified plans but for federal tax limitations
• Participants are entitled to contribute between 0% and 50% of their eligible pay over the qualified plan compensation limit and are entitled to receive a 401(k)-type match on contributions (i.e., a maximum Company match of 7% of pay over the compensation limit)
• The Named Executive Officers are not participants in the Restoration
| Canadian Registered Plan | | • Provides pension benefits based on earnings accumulated during a member’s career • The Canadian Registered Plan also covers prior plan benefits which are based on credited service with the Company in the prior plan and the final average pay (average base salary and commissions for the five highest compensation years of employment during the prior 10 years) • The Canadian Registered Plan was closed to new members on December 31, 2012; new members join the DC Pension Plan • Current members who were not age 50 with at least 10 years of continuous service ceased to accrue a defined benefit pension at December 31, 2012 and joined the DC Pension Plan | Deferred Compensation Plan
| | • Executive officers (other than David J. West) may elect to defer up to 50%
|
Other Benefits Executive Officers Receive For fiscal year 2019, the executive officers, like all of our salaried and hourlynon-represented employees, received an annual holiday bonus equal to 2% of their base salary. The executive officers are provided certain personal benefits not generally available to all employees. The Compensation Committee believes these additional benefits are reasonable and enable us to attract and retain outstanding employees for key positions. These benefits include personal use of our aircraft (primarily by the Executive Chairman and the Chief Executive Officer), periodic physical examinations (which are provided to all employees at or above the vice president level), financial and tax planning assistance, tickets to entertainment events, and reimbursement for specified club dues and expenses. The value of personal travel on our aircraft is calculated in accordance with applicable regulations under the Code and is included in the applicable individual’s taxable income for the year. The value of these personal benefits for each of the Named Executive Officers, to the extent the aggregate value based on incremental cost to us equaled or exceeded $10,000 for fiscal year 2019, is included in the “Summary Compensation Table” (and in the “2019 Director Compensation Table” for the Chairman Emeritus). The Compensation Committee reviews, on an annual basis, the types of perquisites and other benefits provided to executive officers, as well as the dollar value of each perquisite paid to executive officers. Description of Agreements with Executive Officers Employment Agreements Except as set forth below, we do not have employment agreements with any of our executive officers. If we have a change of control, all outstanding equity awards for all participants will immediately vest. The definition of change of control for purposes of accelerating the vesting of equity awards is set forth in the 2010 Plan. Change in Control Severance Agreements In connection with our ongoing efforts to align our compensation program with competitive market practices, we have entered into Change in Control Severance Agreements (the “Severance Agreement”) with several of our key employees, including all of the Named Executive Officers. The term of the Severance Agreement is two years, with automaticone-year renewals on eachone-year anniversary of the effective date. Subject to limited exceptions, the Board may terminate the Severance Agreement at its discretion. Generally, the Severance Agreement only entitles key employees to severance benefits upon a termination by the Company without “cause” or by the key employee for “good reason” in connection with a “change in control” (each as defined in the Severance Agreement), within a24-month period after a change in control event. Under those limited circumstances, an eligible employee will receive severance benefits consisting of: (i) alump-sum payment equal to two times the sum of annual base salary and the target annual bonus;(ii) pro-rata target bonus for the year of termination; (iii) a lump sum amount equal to COBRA premiums for 18 months; and (iv) if requested by the employee, outplacement services not to exceed $25,000. In order to receive severance payments, the employee must execute a general release of claims in favor of the Company. The Severance Agreement includesnon-competition andnon-solicitation of employee’s covenants, which apply during the employee’s term of salary and up to 100% of the Cash Incentive Award in the Deferred Compensation Plan • The amounts deferred are credited to notional accounts selected by the executive officer that mirror the investment alternatives available in the 401(k) Plan. At the time a deferral election is made, participants elect to receive payout of the deferred amounts upon termination of employment in the form of a lump sum or equal annual installments ranging from two to ten years
• The SERP, the New SERP, the Restoration Plan, and the Deferred Compensation Plan are non-qualified deferred compensation plans and, as such, are subject to the rules of Section 409A of the Code, which restrict the timing of distributions
| 52 | | The J. M. Smucker Company 20162019 Proxy Statement 49 |
EXECUTIVE COMPENSATION | | | Big Heart Defined Benefit Pension Plans
| | • Big Heart sponsors three defined benefit pension plans (collectively, the “Big Heart DB Plans”) in which David J. West participates (subject to the terms of the West Employment Agreement):
• the Del Monte Corporation Retirement Plan (the “Big Heart Qualified Pension Plan”), which provides funded, tax-qualified benefits up to the limits on compensation and benefits under the Code;
• the portion of the Del Monte Corporation Additional Benefits Plan (the “Big Heart ABP”) relating to the Big Heart Qualified Pension Plan, which provides unfunded, nonqualified benefits in excess of the limits applicable to the Big Heart Qualified Pension Plan; and
• the Del Monte Corporation Supplemental Executive Retirement Plan (the “Big Heart SERP”), which provides unfunded, nonqualified benefits that are reduced by benefits under the Big Heart Qualified Pension Plan and the portion of the Big Heart ABP relating to the Big Heart Qualified Pension Plan.
| Big Heart Savings Plan
| | • BigHeart employees (including David J. West) have continued to participate in the Big Heart Savings Plan and receive a 50% match on employees’ contributions of up to 6% of pay
|
IX. Other Benefits Executive Officers Receive
For fiscal year 2016, the executive officers, like all of our salaried and hourly non-represented employees, received an annual holiday bonus equal to 2% of their base salary.
The executive officers are provided certain personal benefits not generally available to all employees. The Compensation Committee believes these additional benefits are reasonable and enable us to attract and retain outstanding employees for key positions. These benefits include personal use of our aircraft (primarily by the Executive Chairman and the Chief Executive Officer), periodic physical examinations (which are provided to all employees at or above the functional vice president level), financial and tax planning assistance, tickets to entertainment events, reimbursement for specified club dues and expenses, and participation in the SERP or the New SERP and the Deferred Compensation Plan, or the Restoration Plan (or, with respect to David J. West, the Big Heart DB Plans). The Compensation Committee and the Board have strongly encouraged the Chairman Emeritus, the Executive Chairman, and the Chief Executive Officer and members of their immediate families to use our aircraft for all business, as well as personal, air travel for efficiency and security purposes. The value of personal travel on our aircraft is calculated in accordance with applicable regulations under the Code and is included in the Chairman Emeritus’, the Executive Chairman’s, and the Chief Executive Officer’s taxable income for the year. The value of these personal benefits for each of the Named Executive Officers, to the extent the aggregate value based on incremental cost to us equaled or exceeded $10,000 for fiscal year 2016, is included in the “Summary Compensation Table.” The Compensation Committee reviews, on an annual basis, the types of perquisites and other benefits provided to executive officers, as well as the dollar value of each perquisite paid to executive officers.
X. Description of Agreements with Executive Officers
Employment Agreements
Except as set forth below, we do not have employment agreements with any of our executive officers. If we have a change of control, all outstanding equity awards for all participants (other than the performance
50 The J. M. Smucker Company 2016 Proxy Statement
EXECUTIVE COMPENSATION
units for the executive officers) will immediately vest. The definition of change of control for purposes of accelerating the vesting of Restricted Stock Awards is set forth in the 2010 Plan.
Employment Agreement with David J. West
In connection with our acquisition of Big Heart, we entered into an employment agreement with David J. West (the “West Employment Agreement”). The West Employment Agreement became effective upon the closing of the transaction on March 23, 2015 and expired on April 30, 2016, at which time Mr. West ceased to be an employee of the Company, although he will continue to serve as a non-employee Director of the Company until his current term expires on August 17, 2016.
Compensation and Benefits
Mr. West’s base salary for fiscal year 2016 was $750,000. Under the West Employment Agreement, he was eligible to receive $1.1 million, representing the accrued amount under the Big Heart Annual Incentive Plan, plus $100,000, representing a pro-rata portion of his target bonus for fiscal year 2015 under his prior employment agreement. Effective May 2015, Mr. West was eligible to earn an annual Cash Incentive Award, targeted at 100% of base salary, with a maximum opportunity equal to 200% of base salary. The Cash Incentive Award was not guaranteed and was subject to the performance of the Company, the U.S. Retail Pet Foods strategic business area, and Mr. West’s individual achievements.
The West Employment Agreement also provided for a lump-sum deferred compensation payment in the amount of $4.8 million (the “Deferred Payment”). In addition, as an incentive to remain employed by the Company, Mr. West was eligible to receive $1.2 million in the event he remained employed through April 30, 2016 (the “Retention Award”). The Retention Award was required to be paid within ten business days after April 30, 2016. These benefits were provided to offset or pay for the benefits owed to Mr. West under his prior employment agreement. The Retention Award was paid on May 13, 2016, and the Deferred Payment will be paid in November 2016.
Stock Options
Pursuant to the terms of the West Employment Agreement, Mr. West received a one-time grant of 125,000 options with an exercise price equal to the fair market value of our common stock on the grant date. The options were subject to service-based and performance-based vesting. Since we did not achieve the “synergy realization” or EBITDA performance criteria for fiscal year 2016 and Mr. West’s employment with the Company ceased on April 30, 2016 and his tenure as a non-employee Director of the Company will cease on August 17, 2016, these options will be cancelled without consideration therefore.
Long-Term Incentive Award
Pursuant to the terms of the West Employment Agreement, Mr. West was eligible to earn a discretionary annual grant of restricted common shares in an amount equal to 150% of his annual base salary (the “LTIP Bonus”), conditioned on the achievement of performance objectives established by the Compensation Committee. Mr. West’s Restricted Stock Award for fiscal year 2015 vests 25% each year over four years, subject to his continuous service with the Company. For purposes of vesting in the first year only, Mr. West’s service as a member of the Board is considered continuous service with the Company and, therefore, 25% of his Restricted Stock Award for fiscal year 2015 vested on June 12, 2016. The remainder of his Restricted Stock Award for fiscal year 2015 was cancelled as of April 30, 2016, on which date Mr. West ceased to be an employee of the Company. Mr. West did not receive a Restricted Stock Award for fiscal year 2016.
The J. M. Smucker Company 2016 Proxy Statement 51
EXECUTIVE COMPENSATION
Severance upon Termination of Employment
In the event that, during the term of the West Employment Agreement, Mr. West’s employment was terminated by the Company without cause, or if Mr. West had resigned for good reason, he would have been eligible to receive certain severance benefits, including: (i) a lump sum payment equal to his base salary through the end of the fiscal year in which termination occurs (the “Base Salary Payment”); (ii) a pro-rata portion of his actual bonus for the year of termination and any bonus earned but unpaid with respect to the fiscal year prior to termination; (iii) the Retention Award, if not already paid; (iv) the Deferred Payment; (v) the accrued amount of Mr. West’s supplemental employee retirement plan balance, payable in a lump sum on the 60th day following the termination date; (vi) company-paid continuation of group medical, life and disability insurance plans for him, his spouse and his dependents, for three months (the “Welfare Continuation Benefit”); (vii) the stock option vesting and continued exercisability as described above; and (viii) accelerated vesting of the tranche of the LTIP Bonus that would have vested in the year of termination.
In the event that, during the term of the West Employment Agreement, Mr. West’s employment had been terminated due to Mr. West’s death or “disability” (as defined in the West Employment Agreement), Mr. West would have been entitled to the same severance benefits as described in the paragraph above, with the exception of the Base Salary Payment and the Welfare Continuation Benefit.
In addition, if Mr. West’s employment had been terminated for cause, or if Mr. West had resigned without good reason, Mr. West would have been entitled to (i) the Deferred Payment, (ii) the accrued amount of Mr. West’s supplemental retirement plan balance, and (iii) only if Mr. West had resigned without good reason between April 30, 2016 and the vesting date of the first tranche of the LTIP Bonus made in respect of the 2015 fiscal year, but continued to be a member of the Board, Mr. West was entitled to continued vesting of such tranche of the LTIP Bonus.
In order to receive certain of the above benefits, Mr. West is required to a sign a release of claims in favor of the Company.
Pursuant to the West Employment Agreement, Mr. West has agreed to certain restrictive covenants, including a perpetual confidentiality covenant and one-year post-termination non-competition and non-solicitation covenants.
Consulting Agreements
In April 2011, the Company and each of Timothy P. Smucker and Richard K. Smucker entered into amendments terminating substantially all of the provisions of their Amended and Restated Consulting and Noncompete Agreements, dated December 31, 2010 (together, the “Consulting Agreements”). The amendments are identical in all material respects, and provide that each of Timothy P. Smucker’s and Richard K. Smucker’s right to receive his monthly retirement benefit or death benefit under the SERP as of the third anniversary of his disability, death, or separation from service (without application of early retirement reduction factors) will remain in full force as provided in the Consulting Agreements. All other provisions of the Consulting Agreements, including all rights to continuation of salary, bonus, vesting of options and restricted shares, and each of Timothy P. Smucker’s and Richard K. Smucker’s confidentiality, non-solicitation, and noncompetition obligations following his separation from service, have been terminated. The amendments do not terminate any similar obligations Timothy P. Smucker and Richard K. Smucker may have arising under any other agreement, plan, program, or arrangement with us, or by operation of law.
Change in Control Severance Agreements
In connection with our ongoing efforts to align our compensation program with competitive market practices, we have entered into Change in Control Severance Agreements (the “Severance Agreement”) with several of our key employees, including all of the Named Executive Officers. The term of the Severance
52 The J. M. Smucker Company 2016 Proxy Statement
EXECUTIVE COMPENSATION
Agreement is two years, with automatic one-year renewals on each one-year anniversary of the effective date. Subject to limited exceptions, the Board may terminate the Severance Agreement at its discretion. Generally, the Severance Agreement only entitles key employees to severance benefits upon a termination by the Company without “cause” or by the key employee for “good reason” in connection with a “change in control” (each as defined in the Severance Agreement). Under those limited circumstances, an eligible employee will receive severance benefits consisting of: (i) a lump-sum payment equal to two times the sum of annual base salary and the target annual bonus; (ii) pro-rata target bonus for the year of termination; (iii) a lump sum amount equal to COBRA premiums for 18 months; and (iv) if requested by the employee, outplacement services not to exceed $25,000. In order to receive severance payments, the employee must execute a general release of claims in favor of the Company. The Severance Agreement includes an 18-month post-termination non-competition covenant.
The Severance Agreement does not provide for gross-up payments to be made in the event any payment or benefit due to an employee would be subject to the excise tax under Section 4999 of the Code, based on such payments being classified as “excess parachute payments” under Section 280G of the Code. However, in the event any payment or benefit due to an employee would be subject to such excise tax, then the amounts payable to such employee will be reduced to the maximum amount that does not trigger the excise tax, unless the applicable employee would be better off (on an after-tax basis) receiving all such payments and benefits and paying all applicable income and excise tax thereon.
XI. Tax and Accounting Considerations
The Compensation Committee has considered the potential impact on our compensation plans of the $1,000,000 cap on deductible compensation under Section 162(m) of the Code. Compensation that qualifies as performance-based compensation is exempt from the cap on deductible compensation. The Compensation Committee believes that executive compensation programs generally should be structured to provide for the deductibility of compensation paid to executive officers. To the extent, however, that the Compensation Committee from time to time believes it to be consistent with its compensation philosophy and in the best interests of the Company and our shareholders to award compensation that is not fully deductible, it may choose to do so.
During fiscal year 2016, the Compensation Committee continued to monitor the regulatory developments under Section 409A of the Code, which was enacted as part of the American Jobs Creation Act of 2004. Section 409A imposes additional limitations on non-qualified deferred compensation plans and subjects those plans to additional conditions.
XII. Compensation-Related Risk Assessment
During fiscal year 2016, the Compensation Committee oversaw the performance of a risk assessment of our compensation policies and practices to ascertain any material risks that may be created by our compensation programs. In March 2016, members of our human resources, internal audit, and legal departments, along with Frederic Cook & Co., reviewed and assessed the potential risks arising from our compensation policies and practices based on the risk assessment process developed and refined over the past several years, along with a comparison of current industry best practices. The assessment process included a review of risks related to strategy, culture, governance, pay-mix, performance measures, annual short-term and long-term incentives, equity ownership, and trading, along with other compensation risks and management of those risks. The results of management’s review and Frederic Cook & Co.’s assessment were presented to the Compensation Committee in April 2016 for its review and final assessment. Based on the Compensation Committee’s review of the risk assessment, we determined that our compensation policies and practices do not create any risks that are reasonably likely to have a material adverse effect on the Company. This conclusion was supported by our risk mitigating practices, including our clawback policy, “no hedging” policy, holdbacks of
The J. M. Smucker Company 2016 Proxy Statement 53
EXECUTIVE COMPENSATION
employment with the Company and for a period of 18 months following the date of the employee’s termination of employment for any reason, whether before or after a change in control. The Severance Agreement does not provide forgross-up payments to be made in the event any payment or benefit due to an employee would be subject to the excise tax under Section 4999 of the Code, based on such payments being classified as “excess parachute payments” under Section 280G of the Code. However, in the event any payment or benefit due to an employee would be subject to such excise tax, then the amounts payable to such employee will be reduced to the maximum amount that does not trigger the excise tax, unless the applicable employee would be better off (on anafter-tax basis) receiving all such payments and benefits and paying all applicable income and excise tax thereon. Tax and Accounting Considerations The Compensation Committee has considered the potential impact on our compensation plans of the $1,000,000 cap on deductible compensation under Section 162(m) of the Code. The exemption for performance-based compensation was repealed on December 22, 2017 for tax years beginning after December 31, 2017, such that compensation to our covered executive officers in excess of $1,000,000 will not be deductible unless it qualifies for transition relief applicable to certain arrangements in place as of November 2, 2017. Compensation-Related Risk Assessment During fiscal year 2019, the Compensation Committee oversaw a risk assessment of our compensation policies and practices to ascertain any material risks that may be created by our compensation programs. In March 2019, members of our human resources, internal audit, legal, and enterprise risk departments, along with Semler Brossy, reviewed and assessed the potential risks arising from our compensation policies and practices based on the risk assessment process developed and refined over the past several years, along with a comparison of current industry best practices. The assessment process included a review of risks related to strategy, culture, governance,pay-mix, performance measures, annual short-term and long-term incentives, equity ownership, and trading, along with other compensation risks and management of those risks. The results of management’s review and Semler Brossy’s assessment were presented to the Compensation Committee in April 2019 for its review and final assessment. Based on the Compensation Committee’s review of the risk assessment, we determined that our compensation policies and practices do not create any risks that are reasonably likely to have a material adverse effect on the Company. This conclusion was supported by our risk mitigating practices, including our clawback policy, “no hedging” policy, “no pledging” policy, holdbacks of a portion of incentive payments for certain sales team participants, caps on incentive compensation awards, incentive modifiers based upon business unit performance, and the use of discretionary adjustments. In addition, Restricted Stock Awards generally have a four-year vesting requirement or four-year retention requirement for retirement eligible employees meeting certain age and years of service requirements, and we have a stock ownership requirement for our executive officers. | | | | | 54 The J. M. Smucker Company 20162019 Proxy Statement | | | 53 | |
COMPENSATION TABLES
COMPENSATION TABLES
SUMMARY COMPENSATION TABLE The following table provides information concerning the compensation of the Named Executive Officers for fiscal year 2019 and, where required, fiscal years 2018 and 2017. Please read the “Compensation Discussion and Analysis” in conjunction with reviewing this table. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (a) | | (b) | | (c) | | (d) | | (e) | | (f) | | (g) | | (h) | | (i) | | (j) | | | | | | | | | | | Name and Principal Position (1) | | Fiscal Year | | Salary ($) (2) | | Bonus ($) (3) | | Stock Awards ($) (4) | | Option Awards ($) | | Non-Equity Incentive Plan Compensation ($) (5) | | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) (6) | | All Other Compensation ($) (7) (8) | | Total ($) | Mark T. Smucker President and Chief Executive Officer | | | | 2019 2018 2017 | | | | | 969,615 933,846 900,000 | | | | | 19,500 18,800 18,000 | | | | | 4,095,000 3,760,000 3,600,000 | | | | | — — — | | | | | 1,157,813 972,900 1,089,000 | | | | | 1,747,522 1,000,570 1,295,376 | | | | | 67,440 59,823 47,251 | | | | | 8,056,890 6,745,939 6,949,627 | | Mark R. Belgya Vice Chair and Chief Financial Officer | | | | 2019 2018 2017 | | | | | 621,154 596,154 618,125 | | | | | 50,000 12,000 11,500 | | | | | 1,406,250 1,200,000 1,150,000 | | | | | — — — | | | | | 534,375 486,000 569,250 | | | | | 816,054 428,354 861,358 | | | | | 33,905 20,651 30,969 | | | | | 3,461,738 2,743,159 3,241,202 | | Jeannette L. Knudsen Senior Vice President, General Counsel and Secretary | | | | 2019 2018 | | | | | 497,692 481,923 | | | | | 41,250 9,700 | | | | | 800,000 703,250 | | | | | — — | | | | | 308,750 283,725 | | | | | 4,301 500 | | | | | 41,000 60,558 | | | | | 1,692,993 1,539,656 | | David J. Lemmon President, Pet Food and Pet Snacks | | | | 2019 | | | | | 486,657 | | | | | 80,218 | | | | | 875,500 | | | | | — | | | | | 348,771 | | | | | 69,474 | | | | | 175,904 | | | | | 2,036,524 | | Richard K. Smucker Executive Chairman | | | | 2019 2018 2017 | | | | | 750,000 750,000 767,308 | | | | | 15,000 15,000 15,000 | | | | | 1,500,000 1,500,000 1,500,000 | | | | | — — — | | | | | 712,500 675,000 825,000 | | | | | 1,837,197 1,176,472 1,328,450 | | | | | 123,664 99,938 93,918 | | | | | 4,938,361 4,216,410 4,529,676 | |
(1) | David J. Lemmon assumed the position of President, Pet Food and Pet Snacks on June 25, 2018. Amounts for David J. Lemmon that were earned in Canadian dollars have been converted to U.S. dollars at an exchange ratio of 1.3109 Canadian dollars to one U.S. dollar. This ratio is the average of the published exchange rates for the portion of fiscal year 2019 during which he was compensated in Canadian dollars. |
(2) | The amounts shown in column (c) include aone-time payout of accrued vacation paid to the following Named Executive Officers in fiscal year 2017: Mark R. Belgya, $43,125 and Richard K. Smucker, $17,308. Beginning on January 1, 2017, any vacation accrued during a calendar year must be used by April of the following calendar year and will not be paid out in cash, subject to applicable law. |
(3) | Included in column (d) for all of the Named Executive Officers is a holiday bonus representing 2% of annual base salary at the time of payment. Also included in column (d) are specialone-time cash awards paid in fiscal year 2019 to certain recipients who had a significant role in one or more of our strategic initiatives for fiscal years 2016, 2015,year 2019, including, without limitation, the acquisition and 2014. Please readintegration of Ainsworth, the “Compensation Discussiondivestiture and Analysis”transition of the U.S. baking business, and the organization optimization program, including the following Named Executive Officers,: Mark R. Belgya, $37,500; Jeannette L. Knudsen, $31,250; and David J. Lemmon, $62,589. Also included for David J. Lemmon is a bonus of $7,500 paid under the Company’s relocation policy. |
(4) | The amounts reported in conjunctioncolumn (e) reflect the aggregate grant date fair value computed in accordance with reviewingASC Topic 718 of the performance unit awards granted during the reported years. For the performance-based performance unit awards reported in this table.column for fiscal year 2019 that were granted on June 14, 2018, such amounts are based on the probable outcome of the relevant performance conditions as of the grant date. Assuming that the highest level of performance was achieved for these awards, the grant date fair value of these awards would have been: Mark T. Smucker, $6,142,500; Mark R. Belgya, $2,109,375; Jeannette L. Knudsen, $1,200,000; David J. Lemmon, $1,313,250; and Richard K. Smucker, $2,250,000. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | (a) | | (b) | | | (c) | | | (d) | | | (e) | | | (f) | | (g) | | (h) | | (i) | | (j) | | Name and Principal Position(1) | | Fiscal Year | | | Salary ($)(3) | | | Bonus ($)(4) | | | Stock Awards ($)(5) | | | Option Awards ($)(6) | | Non-Equity Incentive Plan Compensation ($)(7) | | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(8) | | All Other Compensation ($)(9)(10) | | Total ($) | | Richard K. Smucker | | | 2016 | | | | 1,038,462 | | | | 20,000 | | | | 4,000,000 | | | — | | 2,090,000 | | — | | 93,135 | | | 7,241,597 | | Executive Chairman | | | 2015 | | | | 980,000 | | | | 19,600 | | | | 4,000,000 | | | 2,791,250 | | 490,000 | | 611,063 | | 133,924 | | | 9,025,837 | | | | | 2014 | | | | 950,000 | | | | 19,000 | | | | 2,940,000 | | | — | | 902,500 | | — | | 75,495 | | | 4,886,995 | | Mark R. Belgya | | | 2016 | | | | 545,962 | | | | 10,100 | | | | 1,150,000 | | | — | | 946,900 | | 1,114,529 | | 33,559 | | | 3,801,050 | | Vice Chair and | | | 2015 | | | | 475,000 | | | | 9,500 | | | | 858,500 | | | 1,674,750 | | 178,200 | | 744,022 | | 24,804 | | | 3,964,776 | | Chief Financial Officer | | | 2014 | | | | 460,000 | | | | 9,200 | | | | 1,831,600 | | | — | | 327,800 | | 26,141 | | 19,942 | | | 2,674,683 | | Vincent C. Byrd | | | 2016 | | | | 711,346 | | | | 13,700 | | | | 1,370,000 | | | — | | 1,301,500 | | 1,707,593 | | 36,359 | | | 5,140,498 | | Former Vice Chairman | | | 2015 | | | | 670,000 | | | | 13,400 | | | | 1,370,000 | | | 703,200 | | 335,000 | | 1,175,552 | | 34,589 | | | 4,301,741 | | | | | 2014 | | | | 650,000 | | | | 13,000 | | | | 2,364,100 | | | — | | 524,900 | | 146,084 | | 22,958 | | | 3,721,042 | | Steven Oakland | | | 2016 | | | | 623,077 | | | | 12,000 | | | | 1,147,500 | | | — | | 936,000 | | 1,195,309 | | 17,979 | | | 3,931,865 | | Vice Chair and President, | | | 2015 | | | | 526,000 | | | | 10,520 | | | | 1,020,000 | | | 1,674,750 | | 295,900 | | 651,647 | | 8,274 | | | 4,187,091 | | U.S. Food & Beverage | | | 2014 | | | | 510,000 | | | | 10,200 | | | | 1,918,300 | | | — | | 248,700 | | — | | 22,992 | | | 2,710,192 | | David J. West(2) | | | 2016 | | | | 729,327 | | | | 15,000 | | | | 1,125,000 | | | — | | 1,012,500 | | 1,749,542 | | 135,748 | | | 4,767,117 | | Former President, Big Heart Pet Food & Snacks | | | 2015 | | | | 101,260 | | | | — | | | | 1,125,000 | | | 2,433,750 | | 1,200,000 | | 34,417 | | 4,443 | | | 4,898,870 | |
(1) | Richard K. Smucker served as Chief Executive Officer for the entire fiscal year 2016. Effective May 1, 2016, Mark T. Smucker was elected President and Chief Executive Officer, and Richard K. Smucker was elected Executive Chairman. Since Mark T. Smucker was elected as President and Chief Executive Officer on the first day of fiscal year 2017 and he was not one of the three other most highly compensated executive officers for fiscal year 2016, he was not a Named Executive Officer for fiscal year 2016. |
(2) | David J. West’s compensation was determined pursuant to the West Employment Agreement. For a summary of the terms of the West Employment Agreement, please see pages 51-52 under the heading “Description of Arrangements with Executive Officers.” |
(3) | Based on the timing of the Company’s dates of bi-weekly pay, the Named Executive Officers (other than David J. West) were paid 27 times in fiscal year 2016 and 26 times in each of fiscal years 2014 and 2015. |
(4) | Included in the Bonus column (d) for all of the Named Executive Officers is a holiday bonus representing 2% of annual base salary at the time of payment. |
(5) | The amounts reported in column (e) reflect the aggregate grant date fair value computed in accordance with ASC Topic 718 of the performance unit awards granted during the reported years. For the performance-based performance unit awards reported in this column for fiscal year 2016 that were granted on June 12, 2015, such amounts are based on the probable outcome of the relevant performance conditions as of the grant date. Assuming that the highest level of performance was achieved for these awards, the grant date fair value of these awards would have been: Richard K. Smucker, $6,000,000; Mark R. Belgya, $1,725,000; Vincent C. Byrd, $2,055,000; Steven Oakland, $1,721,250; and David J. West, $1,687,500. |
Restricted shares generally vest at the end of the four-year period from the date of grant or, if earlier, upon the attainment of age 60 and 10 years of service with the Company (provided that for any grants made during or after June 2013, 50% of such restricted shares will be available for the settlement of taxes due and the remainder will be subject to a four-year retention period). Richard |
| | | 54 | | The J. M. Smucker Company 2019 Proxy Statement |
COMPENSATION TABLES | K. Smucker and Vincent C. Byrd werewas at least age 60 with 10 years of service at fiscalyear-end and, therefore, theirhis restricted shares The J. M. Smucker Company 2016 Proxy Statement 55
COMPENSATION TABLES
vested immediately upon grant, with 50% of such shares available for settlement of taxes due and the remainder subject to the four-year retention period. During the vesting period, the Named Executive Officers are the beneficial owners of the restricted shares and possess all voting and dividend rights. Dividends are payable at the same rate as is paid on our common shares generally. During fiscal year 2016,2019, we paid dividends at a rate of $2.68$3.33 per share. David J. West forfeited his performance unit award for fiscal year 2016 when his employment with the Company ended on April 30, 2016. In addition, the Compensation Committee approved special one-time grants of restricted shares to certain executive officers, including the following Named Executive Officers, on May 1, 2013 (fiscal year 2014) in recognition of their past leadership contributions and ability to provide continued leadership to the Company in key roles: 10,000 shares granted to Mark R. Belgya, which shares vest at the end of the five-year period from the date of grant; 10,000 shares to Vincent C. Byrd, which shares vested at the end of the three-year period from the date of grant (on May 1, 2016); and 10,000 shares to Steven Oakland, which shares vest at the end of the five-year period from the date of grant. Such restricted shares will not vest upon the attainment of age 60 and 10 or more years of service with the Company but will vest immediately upon (i) the death or permanent disability of the Named Executive Officer, (ii) a change of control of the Company, and (iii) in certain limited circumstances, a job or position elimination. Any of such restricted shares that have not yet vested are forfeited in the event that the Named Executive Officer voluntarily leaves employment with the Company.
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| For a description of the assumptions made in the valuation of such awards, see the note entitled “Share-Based Payments” to the Consolidated Financial Statements in our Annual Report to Shareholders.on Form 10-K. (6) | On March 19, 2015 (April 22, 2015 for David J. West), we granted performance-based non-statutory stock options to certain eligible participants, including the Named Executive Officers. The options have an exercise price equal to $111.86 ($117.43 for David J. West), the fair market value of our common stock on the grant date. The amounts reported in column (f) reflect the aggregate grant date fair value computed in accordance with ASC Topic 718 of the option awards granted during fiscal year 2015. The one-year performance-based options were scheduled to fully vest on April 30, 2016 if (i) we achieved certain “synergy realization” and EBITDA performance criteria (each, as defined in the applicable award agreement(s)), and (ii) the participant remained employed by the Company on such date. The three-year performance-based options will vest ratably on April 30 of 2016, 2017, and 2018 if (i) we achieve certain “synergy realization” and EBITDA performance criteria (each, as defined in the applicable award agreement(s)) and (ii) the participant is employed by the Company on the applicable vesting date. The terms of the three-year performance-based options also provide for catch-up vesting, such that if an option tranche fails to vest for a particular year due to the non-achievement of the performance criteria, such tranche will be eligible to vest if a specified cumulative performance goal is achieved with respect to the next applicable vesting date. We did not achieve the “synergy realization” or EBITDA performance criteria for fiscal year 2016. Therefore, the one-year performance based options were cancelled, and the first tranche of the three-year performance-based options did not vest on April 30, 2016. However, the first tranche of the three-year performance-based options will be eligible to vest on April 30, 2017 if the specified cumulative performance goal is achieved for fiscal year 2017. For a description of the assumptions made in the valuation of such awards, see the note entitled “Share-Based Payments” to the Consolidated Financial Statements in our Annual Report to Shareholders. |
(7) | Amounts shown in column (g) represent performance-based awards under the short-term incentive compensation program. The incentive payment was based on achievement of performance targets established for fiscal year 2016 and was paid in June 2016, subsequent to the end of the fiscal year for which such payment relates. Performance criteria under the short-term incentive compensation program relate to our performance and, in some cases, strategic business area performance, and are discussed in detail under the heading “What Our Short-Term Incentive Compensation Program Is Designed to Reward and How it Works.” |
(8) | Amounts shown in column (h) represent the increase in present value of accumulated benefits accrued under the Qualified Pension Plan and the SERP. The present value of benefits decreased for Richard K. Smucker by $110,678. This amount is shown as zero in the table. A discussion of the assumptions made in determining this increase is included below under the heading “Pension Benefits.” |
(5) | 56 The J. M. Smucker Company 2016 Proxy Statementamounts shown in column (g) represent performance-based awards under the short-term incentive compensation program. The incentive payment was based on achievement of performance targets established for fiscal year 2019 and was paid in June 2019, subsequent to the end of the fiscal year for which such payment relates. Performance criteria under the short-term incentive compensation program relate to our performance and, in some cases, strategic business area performance, and are discussed in detail under the heading “What Our Short-Term Incentive Compensation Program Is Designed to Reward and How it Works.”
COMPENSATION TABLES
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(6) | The amounts shown in column (h) represent the increase in present value of accumulated benefits accrued under the Qualified Pension Plan and the SERP. A discussion of the assumptions made in determining this increase is included below under the heading “Pension Benefits.” (9) | Column (i) includes payments made by us to defined contribution plans, life insurance and accidental death and dismemberment insurance premiums related to the Named Executive Officers, and charitable matching gifts under our matching gift program, which is available to all of our full-time employees and Directors. We match gifts of up to $1,000 per calendar year to accredited colleges and universities that offer four-year degree programs. Additionally, perquisites were included in this column based on their incremental cost to us for any Named Executive Officer whose total equaled or exceeded $10,000. This column includes payouts of unused vacation and holidays of $100,962 paid to David J. West during fiscal year 2016 as a result of the termination of his employment. |
(10) | The Named Executive Officers received various perquisites provided by or paid by the Company. These perquisites included personal use of our aircraft (primarily by the Executive Chairman and the Chief Executive Officer), reimbursement of specified club dues and expenses, periodic physical examinations, financial and tax planning assistance, and tickets to entertainment events. The Board strongly encourages the Chairman Emeritus, the Executive Chairman, and the Chief Executive Officer and their immediate families to use our aircraft for all air travel for efficiency and security purposes. |
(7) | Column (i) includes payments made by us to defined contribution plans for the Named Executive Officers, as well as charitable matching gifts under our gift matching program, which is available to all of our full-time employees and Directors. We match gifts of up to $2,500 per calendar year to accredited colleges and universities that offer four-year degree programs, as well as gifts to certain other charitable organizations. Column (i) also includes a monthly housing allowance of $10,000 and reimbursement of moving expenses for David J. Lemmon for fiscal year 2019 in connection with his relocation to Orrville, Ohio to serve as President, Pet Food and Pet Snacks. Additionally, perquisites were included in this column based on their incremental cost to us for any Named Executive Officer whose total equaled or exceeded $10,000. |
(8) | The Named Executive Officers received various perquisites provided by or paid by the Company. These perquisites included personal use of our aircraft (primarily by the Executive Chairman and the Chief Executive Officer), reimbursement of specified club dues and expenses, periodic physical examinations, financial and tax planning assistance, and tickets to entertainment events. |
| All Named Executive Officers, except Steven Oakland,Jeannette L. Knudsen, received perquisites in excess of $10,000 for fiscal year 2016.2019. The incremental value of the perquisites for these executive officers is included in column (i). The aggregate value of each perquisite or other personal benefit exceeding the greater of $25,000 or 10% of the total amount of perquisites and personal benefits for executive officers is as follows: Richard K. Smucker’s personal use of our aircraft totaled $40,386.$67,935. In valuing personal use of our aircraft in fiscal year 2016,2019, we used aggregate incremental costs incurred, including costs related to fuel, landing fees, crew meals, and other miscellaneous costs. 2016 GRANTS OF PLAN-BASED AWARDS
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards(2) | | | Estimated Possible Payouts Under Equity Incentive Plan Awards(3) | | | Exercise or Base Price of Option | | Grant Date Fair Value of Stock and Option | | (a) | | (b) | | | (c) | | | (d) | | | (e) | | | (f) | | | (g) | | | (h) | | | | Name | | Grant Date | | | Threshold ($) | | | Target ($) | | | Maximum ($) | | | Threshold ($) | | | Target (#) | | | Maximum (#) | | | Awards ($/SH) | | Awards ($)(4) | | Richard K. Smucker | | | — | | | $ | 275,000 | | | $ | 1,100,000 | | | $ | 2,200,000 | | | | — | | | | — | | | | — | | | — | | | — | | | | | 6/12/2015 | | | | — | | | | — | | | | — | | | | 2,000,000 | | | | 4,000,000 | | | | 6,000,000 | | | — | | $ | 4,000,000 | | Mark R. Belgya | | | — | | | $ | 124,583 | | | $ | 498,333 | | | $ | 996,667 | | | | — | | | | — | | | | — | | | — | | | — | | | | | 6/12/2015 | | | | — | | | | — | | | | — | | | | 575,000 | | | | 1,150,000 | | | | 1,725,000 | | | — | | $ | 1,150,000 | | Vincent C. Byrd | | | — | | | $ | 171,250 | | | $ | 685,000 | | | $ | 1,370,000 | | | | — | | | | — | | | | — | | | — | | | — | | | | | 6/12/2015 | | | | — | | | | — | | | | — | | | | 685,000 | | | | 1,370,000 | | | | 2,055,000 | | | — | | $ | 1,370,000 | | Steven Oakland | | | — | | | $ | 120,000 | | | $ | 480,000 | | | $ | 960,000 | | | | — | | | | — | | | | — | | | — | | | — | | | | | 6/12/2015 | | | | — | | | | — | | | | — | | | | 573,750 | | | | 1,147,500 | | | | 1,721,250 | | | — | | $ | 1,147,500 | | David J. West(1) | | | — | | | $ | 187,500 | | | $ | 750,000 | | | $ | 1,500,000 | | | | — | | | | — | | | | — | | | — | | | — | | | | | 6/12/2015 | | | | — | | | | — | | | | — | | | | 562,500 | | | | 1,125,000 | | | | 1,687,500 | | | — | | $ | 1,125,000 | |
(1) | David J. West forfeited his June 12, 2015 performance unit award upon the expiration of the West Employment Agreement on April 30, 2016. |
(2) | Estimated possible payouts included in the Non-Equity Incentive Plan Awards columns relate to cash payments eligible under our short-term incentive compensation program. Except as set forth below, the amounts in column (c) reflect 25% of the target amount in column (d), while the amounts in column (e) reflect 200% of such target amounts. The amounts are based on salaries in effect as of April 30, 2016 for each Named Executive Officer, which is the basis for determining the actual payments to be made subsequent to year end. |
| | | | | The J. M. Smucker Company 20162019 Proxy Statement 57 | | | 55 | |
COMPENSATION TABLES 2019 GRANTS OF PLAN-BASED AWARDS | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards (1) | | Estimated Possible Payouts Under Equity Incentive Plan Awards (2) | | Exercise or Base Price of Option Awards ($/SH) | | Grant Date Fair Value of Stock and Option Awards ($) (3) | (a) | | (b) | | (c) | | (d) | | (e) | | (f) | | (g) | | (h) | Name (3) | These numbers reflect the number of performance units granted in June 2015 (March 2015 for David J. West). The amounts are based on salaries in effect as of May 1, 2016 for each Named Executive Officer (except for Richard K. Smucker, whose amount is based on his salary in effect as of April 30, 2016, the last day of his tenure as the Chief Executive Officer), which is the basis for determining the actual Restricted Stock Award made in June 2016. Each performance unit is equal in value to $1.00 and has a one-year performance period. The actual dollar amount earned, as determined by the Compensation Committee in June 2016 based on our fiscal year 2016 performance, was converted into restricted shares using $127.77, the average closing share price for the final five trading days of fiscal year 2016 and the first five trading days of fiscal year 2017, and rounded up to the nearest share. The restricted shares were granted on June 8, 2016 (i.e., subsequent to fiscal year end) and were issued out of the 2010 Plan. The grant date fair value for the Restricted Stock Awards based on the probable outcome of the relevant performance conditions as of the grant date is included in the “Summary Compensation Table” in column (e). | | Grant Date | | Threshold ($) | | Target ($) | | Maximum ($) | | Threshold ($) | | Target ($) | | Maximum ($) | Mark T. Smucker | | — 6/14/2018 | | | | 304,688 — | | | | | 1,218,750 — | | | | | 2,437,500 — | | | | | — 2,047,500 | | | | | — 4,095,000 | | | | | — 6,142,500 | | | | | — — | | | | | — 4,095,000 | | Mark R. Belgya | | — 6/14/2018 | | | | 140,625 — | | | | | 562,500 — | | | | | 1,125,000 — | | | | | — 703,125 | | | | | — 1,406,250 | | | | | — 2,109,375 | | | | | — — | | | | | — 1,406,250 | | Jeannette L. Knudsen | | — 6/14/2018 | | | | 81,250 — | | | | | 325,000 — | | | | | 650,000 — | | | | | — 400,000 | | | | | — 800,000 | | | | | — 1,200,0000 | | | | | — — | | | | | — 800,000 | | David J. Lemmon | | — 6/14/2018 | | | | 90,125 — | | | | | 360,500 — | | | | | 721,000 — | | | | | — 437,750 | | | | | — 875,500 | | | | | — 1,313,250 | | | | | — — | | | | | — 875,500 | | Richard K. Smucker | | — 6/14/2018 | | | | 187,500 — | | | | | 750,000 — | | | | | 1,500,000 — | | | | | — 750,000 | | | | | — 1,500,000 | | | | | — 2,250,000 | | | | | — — | | | | | — 1,500,000 | |
(1) | Estimated possible payouts included in theNon-Equity Incentive Plan Awards columns relate to cash payments eligible under our short-term incentive compensation program. Except as set forth below, the amounts in column (c) reflect 25% of the target amount in column (d), while the amounts in column (e) reflect 200% of such target amounts. The amounts are based on salaries in effect as of April 30, 2019 for each Named Executive Officer, which is the basis for determining the actual payments to be made subsequent to year end. |
(2) | These numbers reflect the number of performance units granted in June 2018. The amounts are based on salaries in effect as of April 30, 2019 for each Named Executive Officer, which is the basis for determining the actual Restricted Stock Award made in June 2019. Each performance unit is equal in value to $1.00 and has aone-year performance period. The actual dollar amount earned, as determined by the Compensation Committee in June 2019 based on our fiscal year 2019 performance, was converted into restricted shares using $123.03, the average closing share price for the final five trading days of fiscal year 2019 and the first five trading days of fiscal year 2020 and rounded up to the nearest share. The restricted shares were granted on June 13, 2019 (i.e., subsequent to fiscal year end) and were issued out of the 2010 Plan. The grant date fair value for the Restricted Stock Awards based on the probable outcome of the relevant performance conditions as of the grant date is included in the “Summary Compensation Table” in column (e). |
| Subsequent to fiscal year end, the actual numbers of Restricted Stock Awards granted to each Named Executive Officer (as a result of earning the awards referred to above) were as set forth below. The Named Executive Officer must be employed by the Company on the date of grant in order to be eligible to receive the earned restricted shares. |
| | | | | | Name | | Restricted Shares Earned on June 13, 2019 | Mark T. Smucker | | | | 30,998 | | Mark R. Belgya | | | | 10,645 | | Jeannette L. Knudsen | | | | 6,056 | | David J. Lemmon | | | | 6,628 | | Richard K. Smucker | | | | 11,355 | |
| | | Name | | Restricted Shares
Earned on
June 8, 2016
| Richard K. Smucker
| | 40,505 | Mark R. Belgya
| | 11,645 | Vincent C. Byrd
| | 13,873 | Steven Oakland
| | 11,620 | David J. West
| | 0 |
Restricted shares generally vest at the end of the four-year period from the date of grant or, if earlier, upon the attainment of age 60 and 10 or more years of service with the Company (provided that for any grants made during or after June 2013, 50% of such restricted |
| | | 56 | | The J. M. Smucker Company 2019 Proxy Statement |
COMPENSATION TABLES | shares will be available for settlement of taxes due and the remainder will be subject to a four-year retention period). The Restricted Stock Awards issued to Richard K. Smucker and Vincent C. Byrd vested immediately (subject to the four-year retention period for 50% of such shares), because they are bothhe is over the age of 60 and havehas more than 10 years of service with the Company. (4) | Amounts disclosed in this column for the restricted stock and option awards are computed in accordance with ASC Topic 718 based on the probable outcome of the performance conditions as of the grant date. |
(3) | Amounts disclosed in this column for the restricted stock and option awards are computed in accordance with ASC Topic 718 based on the probable outcome of the performance conditions as of the grant date. |
OUTSTANDING EQUITY AWARDS AT 2019 FISCAL YEAR END | | | | | | | | | | | | | | | | | | | | | | | 58 The J. M. Smucker Company 2016 Proxy StatementOption Awards
| | | | COMPENSATION TABLESStock Awards
| (a) OUTSTANDING EQUITY AWARDS AT 2016 FISCAL YEAR ENDName
| | (b) | | (c) | | (d) | | (e) | | (f) | | | | (g) | | (h) | | (i) | | (j) | | Number of Securities | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Option Awards | | | Stock Awards | | (a) | | (b) | | (c) | | | (d) | | (e) | | | (f) | | | (g) | | | (h) | | | (i) | | | (j) | | Name | | Number of Securities Underlying Unexercised Options Exercisable (#) | | Number of Securities Underlying Unexercised Options Unexercisable (#)(1) | | | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | | Option Exercise Price ($) | | | Option Expiration Date | | | Number of Shares or Units of Stock That Have Not Vested (#)(2)(3) | | | Market Value of Shares or Units of Stock That Have Not Vested ($)(4) | | | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(5)(6) | | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | | Richard K. Smucker | | — | | | 125,000 | | | — | | | 111.86 | | | | 3/19/2025 | | | | — | | | | — | | | | 4,000,000 | | | | 6,000,000 | | Mark R. Belgya | | — | | | 75,000 | | | — | | | 111.86 | | | | 3/19/2025 | | | | — | | | | — | | | | 1,150,000 | | | | 1,725,000 | | | | — | | | — | | | — | | | — | | | | — | | | | 39,132 | | | | 4,968,981 | | | | — | | | | — | | Vincent C. Byrd | | — | | | 40,000 | | | — | | | 111.86 | | | | 3/19/2025 | | | | — | | | | — | | | | 1,370,000 | | | | 2,055,000 | | | | — | | | — | | | — | | | — | | | | — | | | | 10,000 | | | | 1,269,800 | | | | | | | | | | Steven Oakland | | — | | | 75,000 | | | — | | | 111.86 | | | | 3/19/2025 | | | | — | | | | — | | | | 1,147,500 | | | | 1,721,250 | | | | — | | | — | | | — | | | — | | | | — | | | | 43,087 | | | | 5,471,187 | | | | — | | | | — | | David J. West | | — | | | 125,000 | | | — | | | 117.43 | | | | 4/22/2025 | | | | 1,809 | | | | 229,707 | | | | 1,125,000 | | | | 1,687,500 | |
Underlying Unexercised Options Exercisable (#) | Number of Securities Underlying Unexercised Options Unexercisable (#) (1) | | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | | Option Exercise Price ($) | | Option Expiration Date | | | | Number of Shares or Units of Stock That Have Not Vested (#) (2) (3) | | Market Value of Shares or Units of Stock That Have Not Vested ($) (4) | | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) (5) (6) | | On March 19, 2015 (April 22, 2015 for David J. West), we granted performance-based non-statutory stock options to certain eligible participants, including the Named Executive Officers. The options have an exercise price equal to $111.86 ($117.43 for David J. West), the fair market value of our common stock on the grant date. The one-year performance-based options were scheduled to fully vest on April 30, 2016 if (i) we achieved certain “synergy realization” and EBITDA performance criteria (each, as defined in the applicable award agreement(s)), and (ii) the participant remained employed by the Company on such date. The three-year performance-based options will vest ratably on April 30 of 2016, 2017, and 2018, if (i) we achieve certain “synergy realization” and EBITDA performance criteria (each, as defined in the applicable award agreement(s)) and (ii) the participant is employed by the Company on the applicable vesting date. The terms of the three-year performance-based options also provide for catch-up vesting, such that if an option tranche fails to vest for a particular year due to the non-achievement of the performance criteria, such tranche will be eligible to vest if a specified cumulative performance goal is achieved with respect to the next applicable vesting date. We did not achieve the “synergy realization” or EBITDA performance criteria for fiscal year 2016. Therefore, the one-year performance based options were cancelled, and the first tranche of the three-year performance-based options did not vest on April 30, 2016. However, the first tranche of the three-year performance-based options will be eligible to vest on April 30, 2017 if the specified cumulative performance goal is achieved for fiscal year 2017. |
(2) | Restricted shares outstanding at year end have vested or will vest on the following dates: |
| | | | | | | | | | | | | | | | | | | | | | | Name | | 5/1/2016 | | 6/8/2016 | | 6/12/16 | | 6/7/2017 | | | 5/1/2018 | | | 6/6/2018 | | | 6/12/2019 | | Richard K. Smucker | | — | | — | | — | | | — | | | | — | | | | — | | | | — | | Mark R. Belgya | | — | | 7,075 | | — | | | 8,420 | | | | 10,000 | | | | 8,115 | | | | 5,522 | | Vincent C. Byrd | | 10,000 | | — | | — | | | — | | | | — | | | | — | | | | — | | Steven Oakland | | — | | 8,205 | | — | | | 9,336 | | | | 10,000 | | | | 8,986 | | | | 6,560 | | David J. West | | — | | — | | 1,809 | | | — | | | | — | | | | — | | | | — | |
The J. M. Smucker Company 2016 Proxy StatementEquity 59
IncentiveCOMPENSATION TABLESPlan Awards:
Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | | | | | | | | | | | | Mark T. Smucker | | 30,000
— | | —
— | | —
— | | 111.86
— | | 3/19/2025
— | | | | —
82,705 | | —
10,142,114 | | 4,095,000
— | | 6,142,500
— | | | | | | | | | | | | Mark R. Belgya | | 37,500
— | | —
— | | —
— | | 111.86
— | | 3/19/2025
— | | | | —
36,881 | | —
4,522,717 | | 1,406,250
— | | 2,109,375
— | | | | | | | | | | | | Jeannette L. Knudsen | | 10,000
— | | —
— | | —
— | | 111.86
— | | 3/19/2025
— | | | | —
24,292 | | —
2,978,928 | | 800,000
— | | 1,200,000
— | | | | | | | | | | | | David J. Lemmon | | 5,000
— | | —
— | | —
— | | 111.86
— | | 3/19/2025
— | | | | —
10,656 | | —
1,306,745 | | 875,500
— | | 1,313,250
— | | | | | | | | | | | | Richard K. Smucker | | 62,500
— | | —
— | | —
— | | 111.86
— | | 3/19/2025
— | | | | —
0 | | —
0 | | 1,500,000
— | | 2,250,000
— |
(1) | On March 19, 2015, we granted performance-basednon-statutory stock options to certain eligible participants, including the Named Executive Officers. The options have an exercise price equal to $111.86, the fair market value of our common shares on the grant date. The three-year performance-based options vested ratably as of April 30 of 2016, 2017, and 2018, if (i) we achieved certain “synergy realization” and EBITDA performance criteria (each, as defined in the applicable award agreement(s)) and (ii) the participant was employed by the Company on the applicable vesting date. As of April 30, 2018, the “synergy realization” target for the award was achieved, resulting in the vesting of the “synergy realization” portion of the award. The EBITDA target for the award was not achieved; and therefore, the EBITDA portion of the award was cancelled. |
(2) | Restricted shares or units outstanding at year end have vested or will vest on the following dates: |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name | | 6/12/2019 | | | 6/8/2020 | | | 8/2/2020 | | | 6/15/2021 | | | 6/14/2022 | | | 9/1/2026 | | | | | | | | | Mark T. Smucker | | | 5,467 | | | | 15,493 | | | | — | | | | 26,759 | | | | 34,986 | | | | — | | | | | | | | | Mark R. Belgya | | | 5,522 | | | | 11,645 | | | | 19,714 | | | | — | | | | — | | | | — | | | | | | | | | Jeannette L. Knudsen | | | 3,087 | | | | 6,122 | | | | — | | | | 4,839 | | | | 6,544 | | | | 3,700 | | | | | | | | | David J. Lemmon | | | 1,304 | | | | 2,380 | | | | — | | | | 1,666 | | | | 3,406 | | | | 1,900 | | | | | | | | | Richard K. Smucker | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
(3) | Restricted shares generally vest at the end of the four-year period from the date of grant or, if earlier, upon the attainment of age 60 and 10 years of service with the Company (provided that for grants made during or after June 2013, 50% of such restricted shares will be available for settlement of taxes due and the remainder will be subject to a four-year retention period). Pursuant to the terms of the 2010 Plan, Vincent C. Byrd’s special one-time grant of 10,000 restricted shares vested on Friday, April 29, 2016 since the scheduled vest date (May 1, 2016) was a Sunday. Pursuant to the terms of the West Employment Agreement, David J. West’s Restricted Stock Award for fiscal year 2015 vests 25% each year over four years, subject to his continuous service with the Company. For purposes of vesting in the first year only, Mr. West’s service as a member of the Board is considered continuous service and, therefore, 25% of his Restricted Stock Award for fiscal year 2015 (1,809 shares) vested on June 12, 2016. The remainder of his Restricted Stock Award for fiscal year 2015 was cancelled as of April 30, 2016, on which date Mr. West ceased to be an employee of the Company.
(3) | The Compensation Committee also approved special one-time grants of restricted shares to certain executive officers, including the following Named Executive Officers, on May 1, 2013 in recognition of their past leadership contributions and ability to provide continued leadership to the Company in key roles: 10,000 shares granted to Mark R. Belgya, which shares vest at the end of the five-year period from the date of grant; 10,000 shares to Vincent C. Byrd, which shares vested at the end of the three-year period from the date of grant (on May 1, 2016); and 10,000 shares to Steven Oakland, which shares vest at the end of the five-year period from the date of grant. Such restricted shares will not vest upon the attainment of age 60 and 10 or more years of service with the Company but will vest immediately upon (i) the death or permanent disability of the Named Executive Officer, (ii) a change of control of the Company, and (iii) in certain limited circumstances, a job or position elimination. Any of such restricted shares that have not yet vested are forfeited in the event that the Named Executive Officer voluntarily leaves employment with the Company. |
(4) | The market value of restricted shares was computed using $126.98, the closing share price of our common shares on April 30, 2016, the last business day of the fiscal year. |
(5) | The Named Executive Officer must be employed by us at the time the Compensation Committee determines the number of restricted shares earned in order to be eligible to receive the earned equity awards. |
(6) | This number reflects the performance units outstanding at year end. Each performance unit has a value of $1.00. The actual dollars earned, based upon achievement of fiscal year 2016 performance goals, were converted to restricted shares in June 2016. The restricted shares issued to Richard K. Smucker (with a value of $5,175,200), and Vincent C. Byrd (with a value of $1,772,506) vested immediately due to their age and years of service with the Company, with 50% of such restricted shares available for settlement of taxes due and the remainder subject to the four-year retention period. The restricted shares are expected to vest on June 10, 2020 for Mark R. Belgya and Steven Oakland. Restricted shares were not issued to David J. West due to expiration of the West Employment Agreement on April 30, 2016. The number of the restricted shares was computed using the average closing share price for the final five trading days of fiscal year 2016 and the first five trading days of fiscal year 2017 and rounded up to the nearest share. In accordance with published SEC guidance, because we exceeded the threshold goals for fiscal year 2016, the amounts reported in column (i) represent the maximum number of performance units that could have been earned for fiscal year 2016. |
| | | | | 60 The J. M. Smucker Company 20162019 Proxy Statement | | | 57 | |
COMPENSATION TABLES (4) | 2016 OPTION EXERCISES AND STOCK VESTEDThe market value of restricted shares was computed using $122.63, the closing share price of our common shares on April 30, 2019, the last business day of the fiscal year.
|
| | | | | | | | | | | | | Option Awards | | Stock Awards | | (a) | | (b) | | (c) | | (d) | | (e) | | Name | | Number of Shares Acquired on Exercise (#) | | Value Realized on Exercise ($) | | Number of Shares Acquired on Vesting (#) | | Value Realized On Vesting ($)(1) | | Richard K. Smucker | | — | | — | | 25,725(2) | | | 2,866,022 | | Mark R. Belgya | | — | | — | | 7,095 | | | 791,660 | | Vincent C. Byrd | | — | | — | | 18,811(3) | | | 2,251,834 | | Steven Oakland | | — | | — | | 8,220 | | | 917,188 | | David J. West | | — | | — | | — | | | — | |
(5) | (1) | The market price used in determining the value realized was calculated using the average of the high and low share prices on the NYSE on the date of vesting. |
(2) | This number represents 25,725 restricted shares, which vested immediately upon date of grant in June 2015 due to the participant being 60 years of age and having 10 years of service with the Company; however, 12,862 shares ($1,432,955) remain subject to a four-year holding period. These restrictions will lapse on June 12, 2019. |
(3) | This number includes 8,811 restricted shares, which vested immediately upon date of grant in June 2015 due to the participant being 60 years of age and having 10 years of service with the Company; however, 4,405 shares ($490,761) remain subject to a four-year holding period. These restrictions will lapse on June 12, 2019. This number also includes the special one-time grant of 10,000 restricted shares, which vested on Friday, April 29, 2016 since the scheduled vest date (May 1, 2016) was a Sunday. |
PENSION BENEFITS
We maintain two defined benefit plans that cover the Named Executive Officers (other thanOfficer must be employed by us at the time the Compensation Committee determines the number of restricted shares earned in order to be eligible to receive the earned equity awards.
|
(6) | This number reflects the performance units outstanding at year end. Each performance unit has a value of $1.00. The actual dollars earned, based upon achievement of fiscal year 2019 performance goals, were converted to restricted shares in June 2019. The restricted shares issued to Richard K. Smucker (with a value of $1,396,950) vested immediately due to his age and years of service with the Company, with 50% of such restricted shares available for settlement of taxes due and the remainder subject to the four-year retention period. The restricted shares are expected to vest on June 13, 2023 for Mark T. Smucker, David J. West). One isLemmon, and Jeannette L. Knudsen. The restricted shares are expected to vest on August 2, 2020 for Mark R. Belgya due to his age and years of service with the Qualified Pension Plan, which provides funded, tax-qualified benefits (up to the limits on compensation and benefits under the Code) to some of our salaried employees as discussed in the “Qualified Pension Plan” summary on page 48.Company. The second is the SERP, which provides unfunded, non-qualified benefits to certain executive officers. Allnumber of the Named Executive Officers (other than David J. West) included inrestricted shares was computed using the 2016 Pension Benefits Table participate in bothaverage closing share price for the final five trading days of these plans. In addition, Big Heart sponsorsfiscal year 2019 and the Big Heart DB Plans in which David J. West participates: (i) the Big Heart Qualified Pension Plan, which provides funded, tax-qualified benefitsfirst five trading days of fiscal year 2020 and rounded up to the limits on compensationnearest share. In accordance with published SEC guidance, because we exceeded the threshold and benefits undertarget goals for fiscal year 2019, the Code; (ii)amounts reported in column (j) represent the portionmaximum number of performance units that could have been earned for fiscal year 2019.
|
2019 OPTION EXERCISES AND STOCK VESTED | | | | | | | | | (a) Name | | Option Awards | | Stock Awards | | (b) Number of Shares Acquired on Exercise (#) | | (c) Value Realized on Exercise ($) | | (d) Number of Shares Acquired on Vesting (#) | | (e) Value Realized on Vesting ($) (1) | Mark T. Smucker | | — | | — | | 8,115 | | 855,727 | Mark R. Belgya | | — | | — | | 8,115 | | 855,727 | Jeannette L. Knudsen | | — | | — | | 4,409 | | 464,929 | David J. Lemmon | | — | | — | | 2,189 | | 230,830 | Richard K. Smucker | | — | | — | | 13,958 (2) | | 1,449,678 |
(1) | The market price used in determining the value realized was calculated using the average of the Big Heart ABP relatinghigh and low share prices on the NYSE on the date of vesting. |
(2) | This number represents 13,958 restricted shares, which vested immediately upon date of grant in June 2018 due to the Big Heart Qualified Pension Plan, which provides unfunded, nonqualified benefits in excess of the limits applicable to the Big Heart Qualified Pension Plan; and (iii) the Big Heart SERP, which provides unfunded, nonqualified benefits that are reduced by benefits under the Big Heart Qualified Pension Plan and the portion of the Big Heart ABP relating to the Big Heart Qualified Pension Plan. Qualified Pension Plan
The benefit provided under the Qualified Pension Plan is defined as an annuity beginning at normal retirement age, which is 65. It can be paid out in the form of an annuity or lump sum. The Qualified Pension Plan benefit expressed as an annual single life annuity at normal retirement age is 1% times final average earnings timesparticipant being 60 years of service. Final average earnings are equal to average base salary over the five consecutiveage and having 10 years of employment which producesservice with the highest average.
In addition, Named Executive Officers who, priorCompany; however, 6,979 shares ($724,839) remain subject to 1991, participated in the old employee contributory portion of the Qualified Pension Plan may also have a frozen contributory benefit basedfour-year holding period. These restrictions will lapse on their participantJune 14, 2022.
|
PENSION BENEFITS We maintain two defined benefit plans in the U.S. and one in Canada that cover the Named Executive Officers. One is the Qualified Pension Plan, which provides funded,tax-qualified benefits (up to the limits on compensation and benefits under the Code) to some of our salaried employees as discussed in the “Qualified Pension Plan” summary on page 50 of this proxy statement. The second is the SERP, which provides unfunded,non-qualified benefits to certain executive officers. All of the Named Executive Officers included in the “2019 Pension Benefits Table” participate in both of these plans, except for Jeannette L. Knudsen and David J. Lemmon, who do not participate in the SERP. Qualified Pension Plan The benefit provided under the Qualified Pension Plan is defined as an annuity beginning at normal retirement age, which is 65. It can be paid out in the form of an annuity or lump sum. The Qualified Pension Plan benefit expressed as an annual single life annuity at normal retirement age is 1% times final average earnings times years of service. All accrued benefits under the Qualified Pension Plan have been frozen for all participants, including the Named Executive Officers, effective December 31, 2017. | | | 58 | | The J. M. Smucker Company 20162019 Proxy Statement 61 |
COMPENSATION TABLES In addition, Named Executive Officers who, prior to 1991, participated in the old employee contributory portion of the Qualified Pension Plan may also have a frozen contributory benefit based on their participant contributions made prior to April 30, 1991. Those frozen benefits, included as part of the total Qualified Pension Plan benefit, are as follows: $48,100 for Richard K. Smucker and $1,400 for Mark R. Belgya. Early retirements under the Qualified Pension Plan are subject to the following rules: contributions made prior to April 30, 1991. Those frozen benefits, included as part of the total Qualified Pension Plan benefit, are as follows: $48,100 for Richard K. Smucker; $1,400 for Mark R. Belgya; $7,900 for Vincent C. Byrd; and $4,000 for Steven Oakland.
Early retirements under the Qualified Pension Plan are subject to the following rules:
if the participant terminates employment prior to normal retirement age without completing five years of service, no benefit is payable from the Qualified Pension Plan;
| | if the participant terminates employment after completing five years of service but prior to attaining age 65, the Qualified Pension Plan benefit is calculated based on final average earningsfrozen accrued benefits and service at the time the Named Executive Officer leaves employment; | |
| | terminating participants have the option of receiving a lump sum payment or an immediate annuity at the time of termination; | |
terminating participants who do not receive a lump sum payment or an immediate annuity at the time of termination from the Qualified Pension Plan can begin receiving annuity payments upon reaching age 55 and with 10 years of service rather than the five years required for vesting;
| | early payments are reduced actuarially for benefits that commence before age 65; | |
| | if the participant has more than 10 years of service and has reached age 55 at the time of retirement, early payments are reduced 4% per year that the benefits start before age 65; and | |
| | if the participant has more than 30 years of service at the time hetheir employment terminates, employment, early payments are reduced 4% per year from age 62. As of April 30, 2016,
| |
As of April 30, 2019, each of Richard K. Smucker and Mark R. Belgya Vincent C. Byrd, and Steven Oakland had already completed 30 years of service with the Company. All accrued benefits under the Qualified Pension Plan have been frozen for all participants, including the Named Executive Officers, effective December 31, 2017. David J. Lemmon participated in the Canadian Registered Plan during his assignment in Canada. This plan provides the following benefits: | | provides pension benefits based on earnings accumulated during a member’s career; | |
| | covers prior plan benefits which are based on credited service with the Company.Company in the prior plan and based on the final average pay (average base salary and commissions for the five most highly compensation years of employment during the prior 10 years; | |
| | the Canadian Registered Plan was closed to new members on December 31, 2012; new members joined the DC Pension Plan; and | |
| | current members who were not age 50 with at least 10 years of continuous service ceased to accrue a defined benefit pension at December 31, 2012 and joined the DC Pension Plan. | |
SERP The benefit provided under the SERP is defined as an annuity beginning at normal retirement age. It can be paid out in the form of an annuity or lump sum. The SERP benefit expressed as an annual single life annuity is equal to (A) 2.5% times final average earnings, times years of service up to 20 years, plus (B) 1.0% times final average earnings, times years of service from 20 to 25 years, minus (C) the basic benefit provided under the Qualified Pension Plan, minus (D) the Company paid portion of the contributory benefit in the Qualified Pension Plan that was frozen April 30, 1991, and minus (E) an estimate of the Social Security benefit that would be payable at the later of age 62 or actual retirement. Final average earnings are equal to average compensation (base salary, holiday bonus, and Cash Incentive Award) over the five consecutive years of employment that produces the highest average. Early retirements under the SERP are subject to the following rules: | | if the participant terminates employment before normal retirement age without completing 10 years of service, no SERP benefit is payable; | |
| | if the participant terminates employment after completing 10 years of service but before age 65, the gross SERP benefit ((A) plus (B) in the prior paragraph) is calculated based on final average earnings and service at the time the participant leaves employment. Asemployment (as of April 30, 2016,2019, Mark T. Smucker and Mark R. Belgya Vincent C. Byrd, and Steven Oakland are eligible for such early retirement benefit;benefit); and | |
| | | | | The J. M. Smucker Company 2019 Proxy Statement | | | 59 | |
COMPENSATION TABLES | | the gross SERP benefit will be reduced by 4% per year that the benefit commences prior to age 62 and then offset by the Qualified Pension Plan benefit, frozen contributory benefit, enhanced contribution to the 401(k) Plan, and estimate of Social Security benefit. 62 The J. M. Smucker Company 2016 Proxy Statement
COMPENSATION TABLES
On April 21, 2011, we amended the SERP to provide that, to the extent payment of any benefit under the SERP is delayed beyond the latter of the participant reaching age 55 or the participant’s separation from service, such benefit will be adjusted (i) with interest, if payable as a lump sum, and (ii) actuarially, if payable as an annuity, all as determined in accordance with the SERP. This change takes into account the fact that Section 409A of the Code imposes a delay on benefit commencement in certain cases.
Also, in connection with Richard K. Smucker’s transition from Chief Executive Officer to Executive Chairman, which became effective on May 1, 2016, we amended the SERP to freeze Mr. Richard Smucker’s benefits under the SERP on April 1, 2016. The Company chose to freeze Mr. Richard Smucker’s benefits under the SERP a month prior to the transition in recognition of his past and continued service to the Company and in order to ensure that he was not unnecessarily penalized for the timing of the transition. The SERP benefit will generally begin to be paid 3 years after separation of service but no later than April 1 of the calendar year after Mr. Richard Smucker reaches age 70 1/2. When Mr. Richard Smucker is eligible to begin receiving the SERP benefit, he will receive monthly annuity payments under the SERP, which are approximately the same monthly annuity payments he would have received under the SERP had he retired on March 31, 2016.
Big Heart Defined Benefit Pension Plans
Big Heart sponsors the following Big Heart DB Plans in which David J. West participates:
Big Heart Qualified Pension Plan. The Big Heart Qualified Pension Plan is a non-contributory, cash balance defined benefit retirement plan covering eligible employees of Big Heart. Under the plan, a participant becomes fully vested in his or her benefits after completing three years of service, and from that time, a participant is entitled to receive benefits upon termination of employment for any reason. In general, a non- seasonal salaried employee becomes a participant in the Big Heart Qualified Pension Plan after completion of one year of service. Monthly credits equal to a percentage of eligible compensation are made to each participant’s Personal Retirement Account (“PRA”) within the Big Heart Qualified Pension Plan. The PRA, which is a hypothetical account, accumulates these compensation credits as well as interest credits on the participant’s account balance. Upon becoming a participant, a “catch-up” amount is credited. This catch-up amount is the sum of compensation credits and interest credits that would have been made under the Big Heart Qualified Pension Plan if the participant had been eligible to participate starting at his or her date of employment with Big Heart. The contribution rate varies based on the age of the participant. For David J. West, the contribution rate is 10% of base pay and annual incentive awards up to the annual compensation limit under the Code (which was $265,000 for the 2015 calendar year).
Big Heart ABP. The portion of the Big Heart ABP that relates to the Big Heart Qualified Pension Plan is a nonqualified benefit plan that provides supplemental benefits equal to certain benefits that cannot be paid under the Big Heart Qualified Pension Plan due to Code limits.Additionally, the Big Heart ABP provides benefits with respect to awards under the Big Heart incentive plans that were deferred under the Del Monte Corporation AIP Deferred Compensation Plan or the Del Monte Foods Company Deferred Compensation Plan, because such deferred amounts are not included as eligible compensation under the Big Heart Qualified Pension Plan. Benefits under the Big Heart ABP vest at the same time as benefits under the Big Heart Qualified Pension Plan and are determined using a hypothetical account balance as in the Big Heart Qualified Pension Plan. Participation in the Big Heart ABP does not begin until the employee is a participant in the Qualified Pension Plan. Vested benefits under the Big Heart ABP are paid in the seventh full calendar month after termination of employment for any reason (including death). Benefits are paid as a lump sum equal to the participant’s hypothetical account balance under the Big Heart ABP Plan. For David J. West, the 10% retirement contribution is extended to earnings beyond the IRS limit.
Big Heart SERP. The Big Heart SERP is a nonqualified benefit plan in which Big Heart employees at the level of vice president and above are eligible to participate. No funds are set aside in a trust for payment of benefits under the Big Heart SERP. Rather, benefits are paid from Big Heart’s general assets. Accordingly, participants in the Big Heart SERP are general creditors of Big Heart with respect to the payment of these
The J. M. Smucker Company 2016 Proxy Statement 63
COMPENSATION TABLES
benefits. A participant vests in his or her Big Heart SERP benefit upon attaining age 55 and at least 5 years of service. Additionally, in order to vest in his or her Big Heart SERP benefit, a participant must be employed at the level of vice president or higher for at least three years.
As applied to David J. West, the terms of the Big Heart SERP are modified by the terms of the West Employment Agreement, which provide for an initial Big Heart SERP value, as of May 13, 2011, of $7.1 million, which is fully vested. The initial benefit will accrue interest at a rate of 11.8% annually, compounded at the end of each 3-month period of the 60-month period following his employment start date, such that as of the fifth anniversary of his start date, his benefit will equal $12.4 million. No actions or calculations under the Big Heart SERP occurring after the fifth anniversary of his start date will reduce the benefit from $12.4 million. Mr. West will continue to accrue interest on his vested Big Heart SERP benefit until the earlier of termination of his employment with the Company or the value of the benefit reaching $12.4 million, and such benefit will not be subject to forfeiture. Upon any termination of Mr. West’s employment, Mr. West is entitled to receive a lump sum payment equal to his initial benefit, plus any interest accrued prior to such termination of employment, but with a maximum of $12.4 million. Any payment of the Mr. West’s Big Heart SERP benefit will be subject to tax withholding.
Determination of Value
The amounts shown in the 2016 Pension Benefits Table are based on the value at age 62 or the current age if older,
| |
On April 21, 2011, we amended the SERP to provide that, to the extent payment of any benefit under the SERP is delayed beyond the latter of the participant reaching age 55 or the participant’s separation from service, such benefit will be adjusted (i) with interest, if payable as a lump sum, and (ii) actuarially, if payable as an annuity, all as determined in accordance with the SERP. This change takes into account the fact that Section 409A of the Code imposes a delay on benefit commencement in certain cases. Richard K. Smucker’s benefits under the SERP were frozen in 2016. Richard K. Smucker began receiving the SERP benefit on April 1, 2019, and he receives monthly annuity payments under the SERP, which are approximately the same monthly annuity payments he would have received under the SERP had he retired on March 31, 2016. Determination of Value The amounts shown in the “2019 Pension Benefits Table” are based on the value at age 62 (a prior date for Richard K. Smucker), which is the earliest age at which an unreduced retirement benefit is payable under both plans. Other key assumptions used to determine the amounts are as follows: | | an interest rate of 4%4.03%, the Financial Accounting Standards Board Accounting Standards Codification Topic 715 (“ASC Topic 715”) discount rate as of April 30, 2016.2019. The ASC Topic 715 discount rate as of April 30, 20152018 was 4.2%4.22% and April 30, 20142017 was 4.6%4.07%; |
| | for the SERP, 50% are assumed to elect a lump sum (except Richard K. Smucker, who has chosen his benefit form) with Revenue Ruling2001-62 mortality used for life expectancy and 50% elect an annuity with the mortality assumption based on a version of theRP-2014 table with mortality improvements projected into the future; and |
| | for the Qualified Pension Plan, 50% are assumed to elect an annuity and 50% a lump sum using the mortality prescribed by the IRS.Internal Revenue Service. The Qualified Pension Plan uses the same mortality assumption as described above for the SERP annuity elections to determine life expectancy.expectancy; and |
| | The present value of accumulated benefits offor the Canadian Registered Plan, David J. West’s Big Heart SERPLemmon is equalassumed to his account balance at April 30, 2016.elect an annuity. Mortality is assumed to follow the 2014 Canadian Pensioners Mortality Table and include future mortality improvements based on theMI-2017 improvement scale. The amount reported reflects interest accrued on an initial Big Heart SERP balance of $7.1 million provided pursuant to the West Employment Agreement plus accrued interest at aASC Topic 715 discount rate of 11.8% annually compounded at the end of each three-month period following June 10, 2011. The balance, including any interest accrued, vested on June 10, 2014.
The present value of accumulated benefits for David J. West’s Big Heart Qualified Pension Plan and Big Heart ABP represents the lump sum amount that would be required to be invested as of April 30, 2016 at a fixed interest rate of 3.9% per annum for the Big Heart Qualified Pension Plan2019 was 3.21% and 3.5% per annum for the Big Heart ABP in order to pay a lump sum upon retirement at age 65 equal to the accrued benefit under the applicable plan as of April 30, 2016 and interest credits on such accrued benefit amount until age 65, calculated at 4.5% per annum.
The years of credited service2018 was 3.57% for the Named Executive Officers (other than David J. West) are based only on their years of service while an employee of the Company. The years of credited service for David J. West include service while employed by Big Heart.this plan.
|
The years of credited service for the Named Executive Officers are based only on their years of service while an employee of the Company during the time they were eligible participants in the plans. | | | 60 | | 64 The J. M. Smucker Company 20162019 Proxy Statement
COMPENSATION TABLES
The 2016 Pension Benefits Table
|
COMPENSATION TABLES The “2019 Pension Benefits Table” below shows the Named Executive Officers’ number of years of credited service, present value of accumulated benefit, and payments during the last fiscal year under each of the plans. 2019 Pension Benefits | | | | | | | | | | | | | | | (a) | | (b) | | (c) | | (d) | | | (e) | | | | Name | | Plan Name | | Years of Credited Service (#) | | Present Value of Accumulated Benefit ($) | | | Payments During Last Fiscal Year ($) | | | | | | | | | | Mark T. Smucker | | Qualified Pension Plan
SERP Total | | 10.3
21.6 | |
| 179,068
6,546,018 6,725,086 |
| |
| —
— |
| | | | | | | | | | | | | | | Mark R. Belgya | | Qualified Pension Plan
SERP Total | | 32.8
34.1 | |
| 1,156,753
6,414,777 7,571,530 |
| |
| —
— |
| | | | | | | | | | | | | | | Jeannette L. Knudsen | | Qualified Pension Plan
SERP Total | | 5.3
— | |
| 53,602
— 53,602 |
| |
| —
— |
| | | | | | | | | | | | | | | David J. Lemmon | | Canadian Registered Plan
SERP Total | | 18.8
— | |
| 522,489
— 522,489 | (1)
| |
| —
— |
| | | | | | | | | | | | | | | Richard K. Smucker | | Qualified Pension Plan
SERP Total | | 45.2
43.6 | |
| 2,029,141
11,402,886 13,432,027 |
| |
| 58,158
5,400,646 5,458,804 |
| | |
| (1) | The present value of accumulated benefit and payments duringshown for David J. Lemmon has been converted to U.S. dollars at an exchange ratio of 1.3390 Canadian dollars to one U.S. dollar, which is the last fiscal year under eachpublished exchange rate as of the plans.April 30, 2019. 2016 Pension Benefits
| | | | | | | | | | | | | | | (a) | | (b) | | (c) | | | | (d) | | | | | (e) | Name | | Plan Name | | Years of Credited Service (#) | | | | Present Value of Accumulated Benefit ($) | | | | | Payments During Last Fiscal Year ($) | Richard K. Smucker | | Qualified Pension Plan | | 43.6 | | | | | 1,988,912 | | | | | — | | | SERP | | 43.6 | | | | | 12,559,800 | | | | | | | | Total | | | | | | | 14,548,712 | | | | | | Mark R. Belgya | | Qualified Pension Plan | | 31.1 | | | | | 933,610 | | | | | — | | | SERP | | 31.1 | | | | | 4,532,154 | | | | | | | Total | | | | | | | 5,465,764 | | | | | | Vincent C. Byrd | | Qualified Pension Plan | | 39.3 | | | | | 1,545,418 | | | | | — | | | SERP | | 39.3 | | | | | 8,491,072 | | | | | | | Total | | | | | | | 10,036,490 | | | | | | Steven Oakland | | Qualified Pension Plan | | 33.6 | | | | | 1,014,432 | | | | | — | | | SERP | | 33.6 | | | | | 4,779,043 | | | | | | | | Total | | | | | | | 5,793,475 | | | | | | David J. West | | Big Heart Qualified | | | | | | | | | | | | — | | | Pension Plan | | 4.9 | | | | | 153,412 | | | | | | | | Big Heart ABP | | 4.9 | | | | | 885,501 | | | | | | | | Big Heart SERP | | 4.9 | | | | | 12,400,000 | | | | | | | | Total | | | | | | | 13,438,913 | | | | | |
2016 NONQUALIFIED DEFERRED COMPENSATION
| | | | | | | | | | | | | (a) | | (b) | | (c) | | (d) | | (e) | | (f) | | Name | | Executive Contributions in Last Fiscal Year ($)(1) | | Registrant Contributions in Last Fiscal Year ($) | | Aggregate Earnings (Loss) in Last Fiscal Year ($)(2) | | Aggregate Withdrawals/ Distributions ($) | | Aggregate Balance at Last Fiscal Year End ($) | | Richard K. Smucker | | | | | | | | | | | | | Deferred Compensation Plan | | — | | — | | (165,763) | | — | | | 4,151,184 (3) | | Vested but unreleased shares | | — | | — | | | | — | | | 5,578,866 (4) | | Mark R. Belgya | | — | | — | | — | | — | | | — | | Vincent C. Byrd | | — | | — | | — | | — | | | — | | Vested but unreleased shares | | — | | — | | — | | — | | | 2,311,163 (4) | | Steven Oakland | | — | | — | | — | | — | | | — | | David J. West | | | | | | | | | | | | | Big Heart ABP | | — | | 17,562 | | — | | 17,562 | | | — (5) | | Deferred Compensation Payment | | — | | — | | — | | — | | | 4,800,000 (6) | |
(1) | There were no deferrals related to fiscal year 2016. Compensation related to any deferrals would have been included in compensation in the “Summary Compensation Table.” |
(2) | No portion of the amounts shown in column (d) are reported in the “Summary Compensation Table” as no earnings are considered to be above market. |
| | | | | The J. M. Smucker Company 20162019 Proxy Statement 65 | | | 61 | |
COMPENSATION TABLES 2019 NONQUALIFIED DEFERRED COMPENSATION | | | | | | | | | | | | | | | | | | | | | | | | | | | | (a) | | (b) | | (c) | | (d) | | (e) | | (f) | | | Name | | Executive Contributions in Last Fiscal Year ($) | | Registrant Contributions in Last Fiscal Year ($) | | Aggregate Earnings (Loss) in Last Fiscal Year ($)(1) | | Aggregate Withdrawals/ Distributions ($) | | Aggregate Balance at Last Fiscal Year End ($) | | | | | | | | | | Mark T. Smucker | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | | | | | | | | | | | | | | Mark R. Belgya | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | | | | | | | Jeannette L. Knudsen New SERP (2) Restoration Plan (3) | | |
| —
17,475 |
| | |
| —
20,387 |
| | |
| 38,426
3,645 |
| | |
| —
— |
| | |
| 563,830
74,167 |
| | | | | | | | | | | | | | | | | David J. Lemmon Canadian Nonqualified Plans (4) | | | | 16,966 | | | | | 36,592 | | | | | 23,110 | | | | | — | | | | | 503,478 | | | | | | | | | | | | | | | | | | Richard K. Smucker Deferred Compensation Plan Vested but Unreleased Shares | | |
| —
— |
| | |
| —
— |
| | |
| 412,136
— |
| | |
| —
— |
| | |
| 6,037,318
7,177,657 | (5)
(6) | | |
(1) | No portion of the amounts shown in column (d) are reported in the “Summary Compensation Table” as no earnings are considered to be above market. |
(2) | The New SERP is anon-qualified deferred compensation plan and, as such, is subject to the rules of Section 409A of the Code, which restrict the timing of distributions. The Company contributes 7% of eligible participants’ compensation. At the time a deferral election is made, participants elect to receive payout of the deferred amounts upon termination of employment in the form of a lump sum or in monthly installments ranging from 5 to 20 years. No contributions will be made to the New SERP for compensation earned after December 31, 2017. |
(3) | The Restoration Plan is anon-qualified deferred compensation plan and, as such, is subject to the rules of Section 409A of the Code, which restrict the timing of distributions. Participants in the Restoration Plan may elect to contribute up to 50% of their eligible compensation in excess of federal tax limitations. The Company matches 7% of the first 6% of participant contributions. At the time a deferral election is made, participants elect to receive payout of the deferred amounts upon termination of employment in the form of a lump sum or in annual installments ranging from 2 to 10 years. Jeannette L. Knudsen became eligible to participate in the Restoration Plan on January 1, 2018. David J. Lemmon became eligible to participate in the Restoration Plan on January 1, 2019. Compensation related to any deferrals has been included as compensation in the “Summary Compensation Table.” |
(4) | David J. Lemmon participated in two nonqualified plans during his Canadian assignment. Participants in the Canadian Savings Plan may elect to contribute up to 5% of eligible compensation, and the Company matches 50% of participant contributions. Participants in the Canadian Restoration Plan may elect to contribute up to 4% of eligible compensation in excess of federal tax limitations, and the Company contributes 2% of eligible compensation and matches 100% of participant contributions. Contribution and earnings amounts have been converted from Canadian dollars to U.S. dollars at an exchange ratio of 1.3109 Canadian dollars to one U.S. dollar. This ratio is the average of the published exchange rates for the portion of fiscal year 2019 during which Mr. Lemmon was compensated in Canadian dollars. The aggregate balance has been converted from Canadian dollars to U.S. dollars at an exchange ratio of 1.3390 Canadian dollars to one U.S. dollar, which is the published exchange rate as of April 30, 2019. |
(5) | This aggregate balance includes the amounts reported as compensation in the “Summary Compensation Table” in previous fiscal years. For Richard K. Smucker, this amount is $2,475,085. This aggregate balance also includes earnings on prior contributions. |
| | | 62 | | The J. M. Smucker Company 2019 Proxy Statement |
COMPENSATION TABLES Executive officers who do not participate in the Restoration Plan may elect to defer up to 50% of salary and up to 100% of the Cash Incentive Award in the Deferred Compensation Plan. The amounts deferred are credited to notional accounts selected by the executive officer that mirror the investment alternatives available in the 401(k) Plan. The Deferred Compensation Plan is anon-qualified deferred compensation plan and, as such, is subject to the rules of Section 409A of the Code, which restrict the timing of distributions. At the time a deferral election is made, participants elect to receive payout of the deferred amounts upon termination of employment in the form of a lump sum or in annual installments ranging from 2 to 10 years. (6) | (3) | This aggregate balance includes the amounts reported as compensation in the “Summary Compensation Table” in previous fiscal years. For Richard K. Smucker, this amount is $2,457,805. This aggregate balance also includes earnings on prior contributions. |
| Executive officers (other than David J. West) may elect to defer up to 50% of salary and up to 100% of the Cash Incentive Award in the Deferred Compensation Plan. The amounts deferred are credited to notional accounts selected by the executive officer that mirror the investment alternatives available in the 401(k) Plan. |
| The Deferred Compensation Plan is a non-qualified deferred compensation plan and, as such, is subject to the rules of Section 409A of the Code, which restrict the timing of distributions. At the time a deferral election is made, participants elect to receive payout of the deferred amounts upon termination of employment in the form of a lump sum or in equal annual installments ranging from 2 to 10 years. |
(4) | Beginning with grants made in June 2013, uponUpon participants reaching the age of 60 with 10 years of service, all Restricted Stock Awards vest immediately, with 50% of such Restricted Stock Awards available for settlement of taxes due and the remainder subject to a four-year retention period. Shares subject to this retention requirement are held by Richard K. Smucker (43,935) and Vincent C. Byrd (18,201) from the 2013, 2014, and 2015 grants. The market value of restricted shares was computed using $126.98, the closing share price of our common shares on April 30, 2016, the last business day of the fiscal year. |
(5) | The portion of the Big Heart ABP that relates to the Big Heart Savings Plan is a nonqualified benefit plan that provides supplemental benefits equal to certain benefits that cannot be paid under the Big Heart Savings Plan due to Code limits. |
(6) | The West Employment Agreement provides for a lump-sum deferred compensation payment in the amount of $4.8 million, which will be paid in November 2016. |
66 The J. M. Smucker Company 2016 Proxy Statement
POTENTIAL PAYMENTS TO EXECUTIVE OFFICERS UPON TERMINATION OR CHANGE IN CONTROL
Consulting Agreements with Timothy P. Smucker and Richard K. Smucker
In April 2011, the Company and each of Timothy P. Smucker and Richard K. Smucker entered into amendments terminating substantially all of the provisions of their Consulting Agreements. The amendments are identical in all material respects and provide that each of Timothy P. Smucker’s and Richard K. Smucker’s right to receive his monthly retirement benefit or death benefit under the SERP as of the third anniversary of his disability, death, or separation from service (without application of early retirement reduction factors) will remain in full force as provided in the Consulting Agreements.
Employment Agreement with David J. West
In connection with our acquisition of Big Heart, we entered into the West Employment Agreement. The West Employment Agreement became effective upon the closing of the transaction on March 23, 2015 and expired on April 30, 2016, at which time Mr. West ceased to be an employee of the Company, although he will continue to serve as a non-employee Director of the Company until his current term expires on August 17, 2016.
In the event that, during the term of the West Employment Agreement, Mr. West’s employment was terminated by the Company without cause, or if Mr. West had resigned for good reason, he would have been eligible to receive certain severance benefits, including: (i) the Base Salary Payment; (ii) a pro-rata portion of his actual bonus for the year of termination and any bonus earned but unpaid with respect to the fiscal year prior to termination; (iii) the Retention Award, if not already paid; (iv) the Deferred Payment; (v) the accrued amount of Mr. West’s supplemental employee retirement plan balance, payable in a lump sum on the 60th day following the termination date; (vi) the Welfare Continuation Benefit; (vii) the stock option vesting and continued exercisability as described above; and (viii) accelerated vesting of the tranche of the LTIP Bonus that would have vested in the year of termination. In the event that, during the term of the West Employment Agreement, Mr. West’s employment was terminated due to Mr. West’s death or “disability” (as defined in the West Employment Agreement), Mr. West would have been entitled to the same severance benefits as described in the paragraph above, with the exception of the Base Salary Payment and the Welfare Continuation Benefit. In addition, if Mr. West’s employment was terminated by the Company for cause, or if Mr. West had resigned without good reason, Mr. West would have been entitled to (i) the Deferred Payment, (ii) the accrued amount of Mr. West’s supplemental retirement plan balance, and (iii) only if Mr. West had resigned without good reason between April 30, 2016 and the vesting date of the first tranche of the LTIP Bonus made in respect of the 2015 fiscal year, but continued to be a member of the Board, Mr. West was entitled to continued vesting of such tranche of the LTIP Bonus.
For a more detailed summary of the West Employment Agreement, please see pages 51-52 under the heading “Description of Agreements with Executive Officers.”
Broad-Based Severance Plan
All of the Named Executive Officers are eligible for benefits under a broad-based severance plan (other than David J. West, whose severance benefits are provided in the West Employment Agreement summarized above). If a Named Executive Officer is terminated without cause, he will be eligible for a severance benefit of up to one year of base salary based on certain age and service requirements.
Long-Term Disability
In the event of a qualified long-term disability, participants continue to earn Qualified Pension Plan benefit service up to the earlier of age 65 or the end of the disability period. Also, 60% of base salary is continued, up to $20,000 per month, until the earlier of age 65 or the end of the disability period.
The J. M. Smucker Company 2016 Proxy Statement 67
POTENTIAL PAYMENTS TO EXECUTIVE OFFICERS UPON TERMINATION OR CHANGE IN CONTROL
Termination Payments
The Severance values in the following tables represent potential payments to the Named Executive Officers based on certain possible termination events. These payments are based on the broad-based severance plan that covers substantially all of our salaried employees.
The Cash Incentive Award values in the following tables represent potential payments to each Named Executive Officer who is eligible to receive an award under the short-term incentive compensation program based on our actual performance if he is actively employed on the last day of the fiscal year. Named Executive Officers who are not eligible to retire must be employed by the Company on the date of payment in order to receive an award.
The Value of Restricted Shares in the following tables reflect the immediate vesting of outstanding equity awards based on the type of termination that has occurred or in the event of a change in control. If we have a change in control, all outstanding equity awards (other than performance units for executive officers described above) will immediately vest based on the terms of the existing equity plans. No restricted shares are awarded if an employee is not actively employed with us on the date of the grant. The Restricted Stock Award for fiscal year 2016 that would have been forfeited based on the assumed April 30, 2016 termination date is not reflected in the termination scenario tables.
The Retiree Healthcare Benefit values in the following tables are shown only for those Named Executive Officers who are eligible for retirement as of the end of the fiscal year. These values represent the balance as of April 30, 2016 of the employee’s Healthcare Retirement Account. The Named Executive Officer may use this balance in retirement to cover healthcare costs and premiums.
Potential Change in Control Payments
We have entered into Severance Agreements with several of our key employees, including all of the Named Executive Officers, as a retention tool in order to provide for severance benefits in connection with a change in control. The term of the Severance Agreement is two years, with automatic one-year renewals on each one-year anniversary of the effective date. Subject to limited exceptions, the Board may terminate the Severance Agreement at its discretion.
Generally, the Severance Agreement only entitles the Named Executive Officers to severance benefits upon a termination by the Company without “cause” or by the Named Executive Officer for “good reason” in connection with a change in control (each as defined in the Severance Agreement). If so terminated, a Named Executive Officer will receive severance benefits consisting of: (i) a lump-sum payment equal to two times the sum of the Named Executive Officer’s annual base salary and the target annual bonus; (ii) pro-rata target bonus for the year of termination; (iii) a lump sum amount equal to the cost of COBRA coverage for 18 months; and (iv) if requested by the Named Executive Officer, outplacement services not to exceed $25,000. In order to receive severance payments, the Named Executive Officer must execute a general release of claims in favor of the Company. The Severance Agreement includes an 18-month post-termination non-competition covenant.
In the event that any payment or benefit due to a Named Executive Officer would be subject to the excise tax under Section 4999 of the Code, based on such payments being classified as “excess parachute payments” under Section 280G of the Code, then the amounts payable to such Named Executive Officer will be reduced to the maximum amount that does not trigger the excise tax, unless the Named Executive Officer would be better off (on an after-tax basis) receiving all such payments and benefits and paying all applicable income and excise tax thereon.
Termination Analysis Tables
The following tables illustrate the estimated potential payment obligations under various termination events. The tables assume termination of employment occurs on the last day of the fiscal year. A closing stock price of $126.98, as of the last business day of the fiscal year, is assumed for all equity values.
68 The J. M. Smucker Company 2016 Proxy Statement
POTENTIAL PAYMENTS TO EXECUTIVE OFFICERS UPON TERMINATION OR CHANGE IN CONTROL
Termination Analysis for Richard K. Smucker
| | | | | | | | | | | | | | | | | | | | | | | Termination Scenario for Fiscal Year Ending April 30, 2016 | | Compensation Components | | Voluntary ($)(1) | | | Death ($) | | | Involuntary for Cause ($) | | | Involuntary w/o Cause ($) | | | Change in Control ($) | | Severance(2) | | | — | | | | — | | | | — | | | | 1,000,000 | | | | 4,200,000 | | Medical & Outplacement Benefits | | | — | | | | — | | | | — | | | | — | | | | 40,214 | | Cash Incentive Award | | | 2,090,000 | | | | 2,090,000 | | | | — | | | | 2,090,000 | | | | 2,090,000 | | Value of Restricted Shares | | | — | | | | — | | | | — | | | | — | | | | — | | Retirement Benefits(3) | | | 14,548,712 | | | | 7,745,144 | | | | 14,548,712 | | | | 14,548,712 | | | | 14,548,712 | | Retiree Healthcare Benefits(4) | | | 55,043 | | | | — | | | | 55,043 | | | | 55,043 | | | | 55,043 | | | | | | | | | | | | | | | | | | | | | | | Total Benefits to Employee | | | 16,693,755 | | | | 9,835,144 | | | | 14,603,755 | | | | 17,693,755 | | | | 20,933,969 | |
(1) | The Named Executive Officer is currently eligible for retirement. This amount assumes the Named Executive Officer voluntarily terminates or retires. |
(2) | In the event of an involuntary termination without cause, the amount equals up to a maximum of 52 weeks of pay based on the provisions of the broad-based severance plan. In the event of a change in control, the amount equals two times the sum of the annual base salary and the target annual bonus. |
(3) | Retirement Benefits represent the total value of such benefits assuming the termination event occurs on April 30, 2016. Such amounts may differ from the comparable value shown on the “Pension Benefits Table” since these benefits are assumed to be payable immediately and the “Pension Benefits Table” assumes payments are deferred to the earliest unreduced retirement age. Death benefits assume that the surviving spouse receives half of the 50% joint and survivor benefit. There is a three-year waiting period before SERP payments begin. |
(4) | This amount includes the current balance of the Named Executive Officer’s employer provided Healthcare Retirement Account. |
Termination Analysis for Mark R. Belgya
| | | | | | | | | | | | | | | | | | | | | | | Termination Scenario for Fiscal Year Ending April 30, 2016 | | Compensation Components | | Voluntary ($)(1) | | | Death ($) | | | Involuntary for Cause ($) | | | Involuntary w/o Cause ($) | | | Change in Control ($) | | Severance(2) | | | — | | | | — | | | | — | | | | 575,000 | | | | 2,185,000 | | Medical & Outplacement Benefits | | | — | | | | — | | | | — | | | | — | | | | 47,834 | | Cash Incentive Award | | | — | | | | 946,900 | | | | — | | | | 946,900 | | | | 946,900 | | Value of Restricted Shares(3) | | | — | | | | 4,968,981 | | | | — | | | | 4,968,981 | | | | 4,968,981 | | Retirement Benefits(4) | | | 5,827,073 | | | | 3,041,446 | | | | 5,827,073 | | | | 5,827,073 | | | | 5,827,073 | | Retiree Healthcare Benefits(5) | | | 42,212 | | | | — | | | | 42,212 | | | | 42,212 | | | | 42,212 | | | | | | | | | | | | | | | | | | | | | | | Total Benefits to Employee | | | 5,869,285 | | | | 8,957,327 | | | | 5,869,285 | | | | 12,360,166 | | | | 14,018,000 | |
(1) | The Named Executive Officer is not currently eligible for retirement. |
(2) | In the event of an involuntary termination without cause, the amount equals up to a maximum of 52 weeks of pay based on the provisions of the broad-based severance plan. In the event of a change in control, the amount equals two times the sum of the annual base salary and the target annual bonus. |
(3) | In the event of a change in control, death, or permanent disability, all unvested equity awards would automatically vest. In the event of an involuntary termination without cause, the Compensation Committee has the discretion to vest all outstanding unvested restricted shares. The amount under the column “Involuntary w/o Cause” assumes that all unvested restricted shares become vested. |
The J. M. Smucker Company 2016 Proxy Statement 69
POTENTIAL PAYMENTS TO EXECUTIVE OFFICERS UPON TERMINATION OR CHANGE IN CONTROL
(4) | Retirement Benefits represent the total value of such benefits assuming the termination event occurs on April 30, 2016. Such amounts may differ from the comparable value shown on the “Pension Benefits Table.” Death benefits assume that the surviving spouse receives half of the 50% joint and survivor benefit. |
(5) | This amount includes the current balance of the Named Executive officer’s employer provided Healthcare Retirement Account. |
Termination Analysis for Vincent C. Byrd
| | | | | | | | | | | | | | | | | | | | | | | Termination Scenario for Fiscal Year Ending April 30, 2016 | | Compensation Components | | Voluntary ($)(1) | | | Death ($) | | | Involuntary for Cause ($) | | | Involuntary w/o Cause ($) | | | Change in Control ($) | | Severance(2) | | | — | | | | — | | | | — | | | | 685,000 | | | | 2,740,000 | | Medical & Outplacement Benefits | | | — | | | | — | | | | — | | | | — | | | | 40,214 | | Cash Incentive Award | | | 1,301,500 | | | | 1,301,500 | | | | — | | | | 1,301,500 | | | | 1,301,500 | | Value of Restricted Shares(3) | | | — | | | | — | | | | — | | | | — | | | | — | | Retirement Benefits(4) | | | 10,190,043 | | | | 5,355,555 | | | | 10,190,043 | | | | 10,190,043 | | | | 10,190,043 | | Retiree Healthcare Benefits(5) | | | 47,914 | | | | — | | | | 47,914 | | | | 47,914 | | | | 47,914 | | | | | | | | | | | | | | | | | | | | | | | Total Benefits to Employee | | | 11,539,457 | | | | 6,657,055 | | | | 10,237,957 | | | | 12,224,457 | | | | 14,319,671 | |
(1) | This amount assumes the Named Executive Officer voluntarily terminates or retires. The Named Executive Officer was eligible for retirement on April 30, 2016 and retired as an executive officer of the Company on June 10, 2016. |
(2) | In the event of an involuntary termination without cause, the amount equals up to a maximum of 52 weeks of pay based on the provisions of the broad-based severance plan. In the event of a change in control, the amount equals two times the sum of the annual base salary and the target annual bonus. |
(3) | Pursuant to the terms of the 2010 Plan, Vincent C. Byrd’s special one-time grant of 10,000 restricted shares vested on Friday, April 29, 2016 since the scheduled vest date (May 1, 2016) was a Sunday. |
(4) | Retirement Benefits represent the total value of such benefits assuming the termination event occurs on April 30, 2016. Such amounts may differ from the comparable value shown on the “Pension Benefits Table” since these benefits are assumed to be payable immediately and the “Pension Benefits Table” assumes payments are deferred to the earliest unreduced retirement age. Death benefits assume that the surviving spouse receives half of the 50% joint and survivor benefit. |
(5) | This amount includes the current balance of the Named Executive officer’s employer provided Healthcare Retirement Account. |
70 The J. M. Smucker Company 2016 Proxy Statement
POTENTIAL PAYMENTS TO EXECUTIVE OFFICERS UPON TERMINATION OR CHANGE IN CONTROL
Termination Analysis for Steven Oakland
| | | | | | | | | | | | | | | | | | | | | | | Termination Scenario for Fiscal Year Ending April 30, 2016 | | Compensation Components | | Voluntary ($)(1) | | | Death ($) | | | Involuntary for Cause ($) | | | Involuntary w/o Cause ($) | | | Change in Control ($) | | Severance(2) | | | — | | | | — | | | | — | | | | 600,000 | | | | 2,160,000 | | Medical & Outplacement Benefits | | | — | | | | — | | | | — | | | | — | | | | 47,834 | | Cash Incentive Award | | | — | | | | 936,000 | | | | — | | | | 936,000 | | | | 936,000 | | Value of Restricted Shares(3) | | | — | | | | 5,471,187 | | | | — | | | | 5,471,187 | | | | 5,471,187 | | Retirement Benefits(4) | | | 6,181,303 | | | | 3,224,042 | | | | 6,181,303 | | | | 6,181,303 | | | | 6,181,303 | | Retiree Healthcare Benefits(5) | | | 42,212 | | | | — | | | | 42,212 | | | | 42,212 | | | | 42,212 | | | | | | | | | | | | | | | | | | | | | | | Total Benefits to Employee | | | 6,223,515 | | | | 9,631,229 | | | | 6,223,515 | | | | 13,230,702 | | | | 14,838,536 | |
(1) | The Named Executive Officer is not currently eligible for retirement. |
(2) | In the event of an involuntary termination without cause, the amount equals up to a maximum of 52 weeks of pay based on the provisions of the broad-based severance plan. In the event of a change in control, the amount equals two times the sum of the annual base salary and the target annual bonus. |
(3) | In the event of a change in control, death, or permanent disability, all unvested equity awards would automatically vest. In the event of an involuntary termination without cause, the Compensation Committee has the discretion to vest all outstanding unvested restricted shares. The amount under the column “Involuntary w/o Cause” assumes that all unvested restricted shares become vested. |
(4) | Retirement Benefits represent the total value of such benefits assuming the termination event occurs on April 30, 2016. Such amounts may differ from the comparable value shown on the “Pension Benefits Table.” Death benefits assume that the surviving spouse receives half of the 50% joint and survivor benefit. |
(5) | This amount includes the current balance of the Named Executive officer’s employer provided Healthcare Retirement Account. |
Termination Analysis for David J. West
| | | | | | | | | | | | | | | | | | | | | | | Termination Scenario for Fiscal Year Ending April 30, 2016 | | Compensation Components | | Voluntary ($)(1) | | | Death ($) | | | Involuntary for Cause ($) | | | Involuntary w/o Cause ($)(2) | | | Change in Control ($) | | Severance(3) | | | — | | | | — | | | | — | | | | — | | | | 3,000,000 | | Medical & Outplacement Benefits | | | — | | | | — | | | | — | | | | 3,084 | | | | 33,771 | | Cash Incentive Award | | | 1,012,500 | | | | 1,012,500 | | | | — | | | | 1,012,500 | | | | 1,012,500 | | Value of Restricted Shares(4) | | | — | | | | 918,827 | | | | — | | | | 229,707 | | | | 918,827 | | Retention Award | | | 1,200,000 | | | | 1,200,000 | | | | — | | | | 1,200,000 | | | | 1,200,000 | | Retirement Benefits(5) | | | 13,438,913 | | | | 13,438,913 | | | | 13,438,913 | | | | 13,438,913 | | | | 13,438,913 | | Deferred Compensation Payment(6) | | | 4,800,000 | | | | 4,800,000 | | | | 4,800,000 | | | | 4,800,000 | | | | 4,800,000 | | Retiree Healthcare Benefits | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | Total Benefits to Employee | | | 20,451,413 | | | | 21,370,240 | | | | 18,238,913 | | | | 20,684,204 | | | | 24,404,011 | |
(1) | The Named Executive Officer was not eligible for retirement on April 30, 2016, but his employment with the Company ended upon expiration of the West Employment Agreement on such date. |
(2) | Pursuant to the terms of the West Employment Agreement, Mr. West would have been entitled to these benefits if he had resigned for good reason. |
The J. M. Smucker Company 2016 Proxy Statement 71
POTENTIAL PAYMENTS TO EXECUTIVE OFFICERS UPON TERMINATION OR CHANGE IN CONTROL
(3) | In the event that Mr. West’s employment was terminated by the Company without cause, or if Mr. West had resigned for good reason, he would have been entitled to receive a lump sum payment equal to his base salary through the end of the fiscal year in which termination occurred. In addition, in the event of a change in control, Mr. West would have been entitled to receive two times the sum of his annual base salary and target annual bonus. |
(4) | In the event of a change in control, death, or permanent disability, all unvested equity awards would automatically vest. In the event of an involuntary termination without cause, the Compensation Committee has the discretion to vest all outstanding unvested restricted shares. The amount under the column “Involuntary w/o Cause” assumes that all unvested restricted shares become vested. |
(5) | Retirement Benefits represent the total value of such benefits assuming the termination event occurs on April 30, 2016. Such amounts may differ from the comparable value shown on the “Pension Benefits Table.” |
(6) | The West Employment Agreement provides for a lump-sum deferred compensation payment in the amount of $4.8 million, which will be paid in November 2016. |
72 The J. M. Smucker Company 2016 Proxy Statement
TOTAL SHAREHOLDER RETURN GRAPH
In the “Compensation Discussion and Analysis” portion of this proxy statement describing the short-term incentive compensation program, we noted that, from fiscal year 2007 through fiscal year 2016, we achieved an annual compounded growth rate in non-GAAP earnings per share (excluding the impacts described on page 33) of approximately 9%.
Set forth in the table below is a graph comparing the cumulative total shareholder return for the five years ended April 30, 2016, for our common shares, the S&P 500 Index, and the S&P Packaged Foods and Meats Index. These figures assume all dividends are reinvested when received and are based on $100 invested in our common shares and the referenced index funds on April 30, 2011.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among The J. M. Smucker Company, the S&P 500 Index and
the S&P Packaged Foods & Meats Index
| | | | | | | | | | | | | | | | | | | | | | | | | | | 4/11 | | | 4/12 | | | 4/13 | | | 4/14 | | | 4/15 | | | 4/16 | | The J. M. Smucker Company | | $ | 100.00 | | | $ | 108.73 | | | $ | 144.50 | | | $ | 138.29 | | | $ | 169.87 | | | $ | 190.34 | | S&P 500 | | | 100.00 | | | | 104.76 | | | | 122.45 | | | | 147.48 | | | | 166.62 | | | | 168.63 | | S&P Packaged Foods & Meats | | | 100.00 | | | | 113.07 | | | | 144.77 | | | | 159.30 | | | | 183.17 | | | | 213.44 | |
* | $100 invested on April 30, 2011, in stock or index, including reinvestment of dividends. Fiscal year ending April 30. |
Copyright© 2016 Standard & Poor’s, a division of The McGraw-Hill Companies Inc. All rights reserved.
The J. M. Smucker Company 2016 Proxy Statement 73
COMPENSATION COMMITTEE REPORT
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management. Based on such review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement and incorporated by reference into our Annual Report on Form 10-K for the year ended April 30, 2016.
EXECUTIVE COMPENSATION COMMITTEE
Elizabeth Valk Long, Chair
Kathryn W. Dindo
Paul J. Dolan
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Each of the following non-employee Directors served as a member of the Compensation Committee during fiscal year 2016: Kathryn W. Dindo, Paul J. Dolan, and Elizabeth Valk Long. During fiscal year 2016, no Company executive officer or Director was a member of the board of directors of any other company where the relationship would be construed to constitute a committee interlock within the meaning of the rules of the SEC.
Paul J. Dolan, a member of the Compensation Committee, is Chairman and Chief Executive Officer of the Cleveland Indians, the Major League Baseball team operating in Cleveland, Ohio. Mr. Dolan’s family also owns the Cleveland Indians organization. We incurred approximately $236,000 in advertising and promotional activities expenses related to our sponsorship with the Cleveland Indians organization, along with purchases of season tickets and a partial season for a luxury box, in fiscal year 2016.
74 The J. M. Smucker Company 2016 Proxy Statement
SHAREHOLDER PROPOSAL TO ISSUE A RENEWABLE ENERGY SOURCING AND/OR PRODUCTION REPORT
(Proposal 4 on the proxy card)
By letter dated March 2, 2016, Trillium Asset Management Corporation, Two Financial Center, 60 South Street, Suite 1100, Boston, MA 02111 (“Trillium”, also known as the “Proponent”) notified us of its intention to present the following proposal on behalf of the Environmental League of Massachusetts for consideration of the Company’s shareholders at the annual meeting. In its March 2, 2016 letter, the Proponent informed us that the Environmental League of Massachusetts held, and will continue to hold continuously through the date of the annual meeting, at least $2,000 worth of the Company’s common shares. This proposal will be voted on at the annual meeting only if it is properly presented by or on behalf of the Proponent.
Shareholder Proposal to Issue a Renewable Energy Sourcing and/or Production Report
“Resolved: Shareholders request The J.M. Smucker Company Board of Directors, issue a public report, at reasonable cost and excluding confidential information, by January 2017 analyzing and proposing how the company can increase its renewable energy sourcing and/or production.
Whereas: By setting goals to source renewable energy, our company would demonstrate a proactive approach to reducing exposure to volatile energy prices; enhancing U.S. energy security; creating jobs in the United States; enhancing JM Smucker’s reputation; achieving its greenhouse gas (GHG) reduction targets; and meeting the global need for cleaner energy.
The private sector is critical for driving the change in the demand and consumption of clean energy necessary to meet these targets. Although energy efficiency is crucial for reducing emissions, there is a limit to how far operational efficiencies can carry a company relative to the reductions needed to mitigate the worst impacts of climate change. Sourcing renewable energy is essential to achieve the greatest emissions reductions.
A growing number of companies with strong GHG targets are turning to renewable energy to power their operations and meet these targets. Eric Schmidt of Google recently stated: “Much of corporate America is buying renewable energy in some form or another, not just to be sustainable, because it makes business sense, helping companies diversify their power supply, hedge against fuel risks, and support innovation in an increasingly cost-competitive way.”
A report by the Carbon Disclosure Project found that four out of five companies earn a higher return on carbon reduction investments than on their overall corporate capital expenditures. While generating savings, investing in renewable energy enhances a company’s role as a corporate citizen and strengthens its license to operate—a proactive response to reputational risk associated with climate impacts.
Companies are in a unique position to shift the marketplace for renewable energy. In 2015 corporations signed renewable energy deals equivalent to 3.4 gigawatts—a strong indication of the growing demand for clean, economical energy. The average price paid by all types of end users of electricity nationwide in 2014 was 10.45 cents per kWh according to the U.S. Energy Information Administration. The average price of wind energy installed in 2014 was 2.5 cents per kWh according to Lawrence Berkeley National Laboratory.
Smucker does not currently have renewable energy targets or information regarding the company’s evaluation of renewable energy opportunities. However, the company currently operates in several states with strong renewable portfolio standards and incentives for renewable energy investment including Ohio, Pennsylvania, New York, California and Louisiana.
We are concerned our company may be lagging behind peers with renewable energy goals. For example, Campbell’s Soup will source 40% of electricity needs from renewable sources by 2020 and Mars will use renewable sources to meet 100% of its energy needs by 2020. These companies have already demonstrated the feasibility of investing in renewable energy to reduce emissions and power their businesses.”
The J. M. Smucker Company 2016 Proxy Statement 75
SHAREHOLDER PROPOSAL TO ISSUE A RENEWABLE ENERGY SOURCING AND/OR PRODUCTION REPORT
Board of Directors’ Statement in Opposition to Shareholder Proposal to Issue a Renewable Energy Sourcing and/or Production Report
The Board unanimously recommends that shareholders vote AGAINST this proposal. We consider environmental, economic, and social sustainability to be among our many responsibilities as a good corporate citizen. We have recently issued our sixth corporate responsibility report that includes, among other matters, a discussion of our renewable energy investments.
We view renewable energy as just one component of our overall corporate responsibility and sustainability strategy. As discussed in the report, renewable energy is an area in which we have made investments, including solar arrays and methane turbines at our natural foods campus in Chico, California. Two of our brands,Santa Cruz Organic® andSahale Snacks®, also purchase renewable energy credits and place renewable energy seals or statements on their products. As with other capital projects, we will continue to periodically consider the benefits of renewable energy projects throughout our operations.
We do not believe that additional reporting isolated on this particular issue is necessary or appropriate. We submit that our ongoing efforts to both responsibly evaluate renewable energy and to report on our renewable energy initiatives in our corporate responsibility report appropriately address shareholder concerns in this area. Accordingly, we believe that adoption of this proposal would result in unnecessary and duplicative reporting, and is not in the best interests of the Company and its shareholders. In addition, the Proponent presented a substantially similar shareholder proposal at our 2015 annual meeting, and such proposal received approval from approximately 20% of the votes cast.
The affirmative vote of the holders of a majority of the votes cast on this proposal, based upon one vote for each common share owned as of the record date, is necessary to approve this proposal. Abstentions, broker non-votes, and shares not in attendance and not voted at the annual meeting will have no effect on the vote for this proposal. Unless otherwise directed, common shares represented by proxy will be voted “AGAINST” the approval of this proposal.
The Board unanimously recommends a vote AGAINST this shareholder proposal to issue a
renewable energy sourcing and/or production report.
76 The J. M. Smucker Company 2016 Proxy Statement
RELATED PARTY TRANSACTIONS
The Board has long recognized that transactions with Related Persons (as defined below) present a potential for conflict of interest (or the perception of a conflict) and, together with our senior management, the Board has enforced the conflict of interest provisions set forth in the Code of Conduct. All employees and members of the Board sign and agree to be bound by the Code of Conduct. Ethics has been, and will continue to be, one of our Basic Beliefs.
Related Party Transaction Approval Policy
In order to formalize the process by which we review any transaction with a Related Person, the Board has adopted a written policy addressing our procedures with respect to the review, approval, and ratification of “related person transactions” that are required to be disclosed pursuant to Item 404(a) of Regulation S-K. Under the policy, our General Counsel initially determines if a transaction or relationship constitutes a transaction that requires compliance with the policy. The policy provides that any transaction, arrangement, or relationship, or series of similar transactions, with any Director, nominee for Director, executive officer, 5% beneficial owner, or any of their immediate family members, or any entity which is owned or controlled by such persons, or in which such persons have a substantial ownership interest or control of such entity (collectively, “Related Persons”) in which we have or will have a direct or indirect material interest and which exceeds $120,000 in the aggregate will be subject to review, approval, or ratification by the Nominating Committee. In its review of related person transactions, the Nominating Committee will review the material facts and circumstances of the transaction.
Transactions with Directors and Executive Officers
Timothy P. Smucker, Chairman Emeritus for the Company, is the brother of our Executive Chairman, Richard K. Smucker, and the father of our President and Chief Executive Officer, Mark T. Smucker. He earned approximately $2,539,110 in compensation in fiscal year 2016 (including salary, Cash Incentive Award earned in fiscal year 2016 and paid subsequent to year end, financial and tax planning services, and other W-2 reportable items). He was also granted 6,765 restricted shares in June 2016 based on our performance for the fiscal year ended April 30, 2016. Timothy P. Smucker was at least age 60 with 10 years of service at fiscal year-end and, therefore, his restricted shares vested immediately upon grant, with 50% of such shares available for settlement of taxes due and the remainder subject to thea four-year retention period. Shares subject to this retention requirement are held by Richard K. Smucker (58,531) from the 2015 through 2018 grants. The market value of restricted shares were granted pursuant towas computed using $122.63, the 2010 Plan.
Mark T. Smucker, Chief Executive Officer for the Company, is the sonclosing share price of our Chairman Emeritus, Timothy P. Smucker, andcommon shares on April 30, 2019, the nephewlast business day of our Executive Chairman, Richard K. Smucker. He earned approximately $2,029,612 in compensation in fiscal year 2016 (including salary, Cash Incentive Award earned in fiscal year 2016 and paid subsequent to year end, financial and tax planning services, and other W-2 reportable items). He was also granted 15,493 restricted shares in June 2016 based on our performance for the fiscal year ended April 30, 2016. The restricted shares were granted pursuant to the 2010 Plan.year.
Paul J. Dolan, a member of the Board, is Chairman and Chief Executive Officer of the Cleveland Indians, the Major League Baseball team operating in Cleveland, Ohio. Mr. Dolan’s family also owns the Cleveland Indians organization. We incurred approximately $236,000 in advertising and promotional activities expenses related to our sponsorship with the Cleveland Indians organization, along with purchases of season tickets and a partial season for a luxury box, in fiscal year 2016.
Jay L. Henderson, a nominee for Director, retired as Vice Chairman, Client Service at PricewaterhouseCoopers on June 30, 2016, and is no longer an active partner with PricewaterhouseCoopers as of such date. We incurred approximately $2,753,000 in expenses for professional advisory and consulting services provided to us by PricewaterhouseCoopers in fiscal year 2016.
Related party transactions regarding members of the Compensation Committee are also disclosed under the “Compensation Committee Interlocks and Insider Participation” section of this proxy statement.
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| | | | | The J. M. Smucker Company 20162019 Proxy Statement 77
RELATED PARTY TRANSACTIONS
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POTENTIAL PAYMENTS TO EXECUTIVE OFFICERS UPON TERMINATION OR CHANGE IN CONTROL Broad-Based Severance Plan All of the Named Executive Officers are eligible for benefits under a broad-based severance plan. If a Named Executive Officer is terminated without cause, he or she will be eligible for a severance benefit of up to one year of base salary based on service requirements. Long-Term Disability In the event of a qualified long-term disability, participants continue to earn Qualified Pension Plan benefit service up to the earlier of age 65 or termination of employment. Also, 60% of base salary is continued, up to $20,000 per month, until the earlier of age 65 or the end of the disability period. Termination Payments The Severance values in the following table represent potential payments to the Named Executive Officers based on certain possible termination events. These payments are based on the broad-based severance plan that covers substantially all of our salaried employees. The Cash Incentive Award values in the following table represent potential payments to each Named Executive Officer who is eligible to receive an award under the short-term incentive compensation program based on our actual performance if he or she is actively employed on the last day of the fiscal year. Named Executive Officers who are not eligible to retire must be employed by the Company on the date of payment in order to receive an award. The Value of Restricted Shares amounts in the following table reflect the immediate vesting of outstanding equity awards based on the type of termination that has occurred or in the event of a change in control. If we have a change in control, all outstanding equity awards will immediately vest based on the terms of the existing equity plans and the applicable award agreements. No restricted shares are awarded if an employee is not actively employed with us on the date of the grant. The Restricted Stock Award for fiscal year 2019 that would have been forfeited based on the assumed April 30, 2019 termination date is not reflected in the termination scenario tables. The Retiree Healthcare Benefit values in the following table are shown only for those Named Executive Officers who are eligible for retirement as of the end of the fiscal year. These values represent the balance as of April 30, 2019 of the employee’s Healthcare Retirement Account. The Named Executive Officer may use this balance in retirement to cover healthcare costs and premiums. Potential Change in Control Payments We have entered into Severance Agreements with several of our key employees, including all of the Named Executive Officers, as a retention tool in order to provide for severance benefits in connection with a change in control. The term of the Severance Agreement is two years, with automaticone-year renewals on eachone-year anniversary of the effective date. Subject to limited exceptions, the Board may terminate the Severance Agreement at its discretion. Generally, the Severance Agreement only entitles the Named Executive Officers to severance benefits upon a termination by the Company without “cause” or by the Named Executive Officer for “good reason” in connection with a “change in control” (each as defined in the Severance Agreement), within a24-month period after a change in control event. If so terminated, a Named Executive Officer will receive severance benefits consisting of: (i) alump-sum payment equal to two times the sum of the Named Executive Officer’s annual base salary and the target annual bonus;(ii) pro-rata target bonus for the year of termination; (iii) a lump sum amount equal to the cost of COBRA coverage for 18 months; and (iv) if requested by the Named Executive Officer, outplacement services not to exceed $25,000. In order to receive severance payments, the Named Executive Officer must execute a general release of claims in favor of the Company. The Severance Agreement includesnon-competition andnon-solicitation of employee’s covenants, which apply during the Named Executive Officer’s term of employment with the Company and for a period of 18 months following the date of the Named Executive Officer’s termination of employment for any reason, whether before or after a change in control. | | | Transactions with Shareholders64 | | Merger AgreementIn connection with the closing of the transactions contemplated by the Agreement and Plan of Merger (the “Merger Agreement”), dated as of February 3, 2015, among the Company, Blue Acquisition Group, Inc. (the then parent of Big Heart, “BAG”), SPF Holdings I, Inc. (“SPF Holdings I”), SPF Holdings II, LLC (“SPF Holdings II”), and for the limited purposes set forth therein, Blue Holdings I, L.P. (“Blue Holdings”), as the stockholder representative, pursuant to which, among other things, SPF Holdings I merged with and into BAG, with BAG continuing as the surviving corporation and a wholly owned subsidiary of the Company, and BAG subsequently merged with and into SPF Holdings II, with SPF Holdings II continuing as the surviving entity and a wholly owned subsidiary of the Company, on March 23, 2015, Blue Holdings received, in exchange for its 312,829,237 shares of common stock of BAG, an aggregate of 17,061,079 shares of our common stock.
Shareholders Agreement
In connection with the transaction referenced above, we entered into a Shareholders Agreement (the “Shareholders Agreement”) with Blue Holdings, Kohlberg Kravis Roberts & Co. L.P. (“KKR”), Vestar Capital Partners (“Vestar”), Centerview Capital Management LLC (“Centerview”), AlpInvest Partners US Holdings, LLC (“AlpInvest”), and certain of their affiliated investment funds. The Shareholders Agreement sets forth certain governance arrangements and contains various provisions relating to, among other things, board observer rights, the acquisition of additional equity interests in the Company, prohibitions on taking certain actions relating to the Company, transfer restrictions, voting arrangements, and registration rights.
The Shareholders Agreement contains a customary standstill provision as well as a non-solicitation provision relating to certain members of Big Heart’s management team. The standstill provision is effective until (A) in the case of KKR, Vestar, and Centerview, the later of (1) one year after the applicable shareholder no longer has a board observer and (2) the date on which the applicable shareholder owns less than 25% of the common shares initially owned by such shareholder upon completion of the Transaction; (B) in the case of AlpInvest, the date on which AlpInvest owns less than 50% of the common shares initially owned by it upon completion of the Transaction; and (C) with respect to Blue Holdings, the date on which the standstill expires with respect to each shareholder. The non-solicitation provision is effective for either 18 months or two years after the closing of the Transaction depending on the identity of the applicable member of the management team.
Except as provided above, the Shareholders Agreement terminated with respect to Centerview and AlpInvest on July 15, 2015, with respect to KKR on September 25, 2015, and with respect to Blue Holdings and Vestar on November 30, 2015 (the date that each such shareholder beneficially owned less than 1% of the Company’s outstanding voting power).
Pittsburgh Office Space Lease
Our leased administrative space in Pittsburgh, Pennsylvania is primarily owned by an affiliate of KKR. As a result, the KKR affiliate is the beneficiary of future lease payments made by the Company through the remaining term of the lease. In fiscal year 2016, the Company paid approximately $2.9 million of rent to the KKR affiliate.
78 The J. M. Smucker Company 20162019 Proxy Statement
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POTENTIAL PAYMENTS TO EXECUTIVE OFFICERS UPON TERMINATION OR CHANGE IN CONTROL In the event that any payment or benefit due to a Named Executive Officer would be subject to the excise tax under Section 4999 of the Code, based on such payments being classified as “excess parachute payments” under Section 280G of the Code, then the amounts payable to such Named Executive Officer will be reduced to the maximum amount that does not trigger the excise tax, unless the Named Executive Officer would be better off (on anafter-tax basis) receiving all such payments and benefits and paying all applicable income and excise tax thereon. Termination Analysis Table The following table and footnotes describe the estimated potential payment obligations under various termination events. The table assumes termination of employment occurs on the last day of the fiscal year. A closing stock price of $122.63, as of the last business day of the fiscal year, is assumed for all equity values. | | | | | | | | | | | | | | | | | | | | | | | Voluntary ($) (1) | | | Death ($) | | | Involuntary for Cause ($) | | | Involuntary w/o Cause ($) | | | Change in Control ($) | | Mark T. Smucker | | | | | | | | | | | | | | | | | | | | | Severance (2) | | | — | | | | — | | | | — | | | | 792,000 | | | | 4,387,500 | | Medical & Outplacement Benefits | | | — | | | | — | | | | — | | | | — | | | | 54,278 | | Cash Incentive Award | | | — | | | | 1,157,813 | | | | — | | | | 1,157,813 | | | | 1,157,813 | | Value of Restricted Shares (3) | | | — | | | | 10,142,144 | | | | — | | | | 10,142,144 | | | | 10,142,144 | | Retirement Benefits (4) | | | 7,321,948 | | | | 3,686,650 | | | | 7,321,948 | | | | 7,321,948 | | | | 7,321,948 | | | | | | | | | | | | | | | | | | | | | | | TOTAL | | | 7,321,948 | | | | 14,986,607 | | | | 7,321,948 | | | | 19,413,905 | | | | 23,063,683 | | Mark R. Belgya | | | | | | | | | | | | | | | | | | | | | Severance (2) | | | — | | | | — | | | | — | | | | 629,500 | | | | 2,375,000 | | Medical & Outplacement Benefits | | | — | | | | — | | | | — | | | | — | | | | 50,808 | | Cash Incentive Award | | | — | | | | 534,375 | | | | — | | | | 534,375 | | | | 534,375 | | Value of Restricted Shares (3) | | | — | | | | 4,522,717 | | | | — | | | | — | | | | — | | Retirement Benefits (4) | | | 7,941,102 | | | | 3,989,400 | | | | 7,941,102 | | | | 7,941,102 | | | | 7,941,102 | | Retiree Healthcare Benefits (5) | | | 47,750 | | | | 47,750 | | | | 47,750 | | | | 47,750 | | | | 47,750 | | | | | | | | | | | | | | | | | | | | | | | TOTAL | | | 7,988,852 | | | | 9,094,242 | | | | 7,988,852 | | | | 9,152,727 | | | | 10,949,035 | | Jeannette L. Knudsen | | | | | | | | | | | | | | | | | | | | | Severance (2) | | | — | | | | — | | | | — | | | | 312,192 | | | | 1,650,000 | | Medical & Outplacement Benefits | | | — | | | | — | | | | — | | | | — | | | | 54,278 | | Cash Incentive Award | | | — | | | | 308,750 | | | | — | | | | 308,750 | | | | 308,750 | | Value of Restricted Shares (3) | | | — | | | | 2,978,928 | | | | — | | | | 2,978,928 | | | | 2,978,928 | | Retirement Benefits (4) | | | 45,166 | | | | 16,586 | | | | 45,166 | | | | 45,166 | | | | 45,166 | | | | | | | | | | | | | | | | | | | | | | | TOTAL | | | 45,166 | | | | 3,304,264 | | | | 45,166 | | | | 3,645,036 | | | | 5,037,122 | | David J. Lemmon | | | | | | | | | | | | | | | | | | | | | Severance (2) | | | — | | | | — | | | | — | | | | 496,692 | | | | 1,751,000 | | Medical & Outplacement Benefits | | | — | | | | — | | | | — | | | | — | | | | 33,635 | | Cash Incentive Award | | | — | | | | 348,771 | | | | — | | | | 348,771 | | | | 348,771 | | Value of Restricted Shares (3) | | | — | | | | 1,306,745 | | | | — | | | | 1,306,745 | | | | 1,306,745 | | Retirement Benefits (4) | | | 624,482 | | | | 624,482 | | | | 624,482 | | | | 677,596 | | | | 677,596 | | | | | | | | | | | | | | | | | | | | | | | TOTAL | | | 624,482 | | | | 2,279,998 | | | | 624,482 | | | | 2,829,804 | | | | 4,117,747 | |
| | | | | The J. M. Smucker Company 2019 Proxy Statement | | | 65 | |
POTENTIAL PAYMENTS TO EXECUTIVE OFFICERS UPON TERMINATION OR CHANGE IN CONTROL | | | | | | | | | | | | | | | | | | | | | | | Voluntary ($) (1) | | | Death ($) | | | Involuntary for Cause ($) | | | Involuntary w/o Cause ($) | | | Change in Control ($) | | Richard K. Smucker | | | | | | | | | | | | | | | | | | | | | Severance (2) | | | — | | | | — | | | | — | | | | 753,000 | | | | 3,000,000 | | Medical & Outplacement Benefits | | | — | | | | — | | | | — | | | | — | | | | 42,234 | | Cash Incentive Award | | | 712,500 | | | | 712,500 | | | | — | | | | 712,500 | | | | 712,500 | | Value of Restricted Shares (3) | | | — | | | | — | | | | — | | | | — | | | | — | | Retirement Benefits (4) | | | 13,432,027 | | | | 11,480,833 | | | | 13,432,027 | | | | 13,432,027 | | | | 13,432,027 | | Retiree Healthcare Benefits (5) | | | 61,515 | | | | 61,515 | | | | 61,515 | | | | 61,515 | | | | 61,515 | | | | | | | | | | | | | | | | | | | | | | | TOTAL | | | 14,206,042 | | | | 12,254,848 | | | | 13,493,542 | | | | 14,959,042 | | | | 17,248,276 | |
(1) |
OWNERSHIP OF COMMON SHARES
Beneficial OwnershipThis amount assumes the Named Executive Officer voluntarily terminates or retires. Other than Richard K. Smucker, none of the Named Executive Officers are currently eligible for retirement.
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(2) | In the event of an involuntary termination without cause, the amount equals up to a maximum of 52 weeks of pay based on the provisions of the broad-based severance plan. In the event of a change in control, the amount equals two times the sum of the annual base salary and the target annual bonus. |
(3) | In the event of a change in control, death, or permanent disability, all unvested equity awards would automatically vest. In the event of an involuntary termination without cause, the Compensation Committee has the discretion to vest all outstanding unvested restricted shares. The amount under the column “Involuntary w/o Cause” assumes that all unvested restricted shares become vested. |
(4) | Retirement Benefits represent the total value of such benefits assuming the termination event occurs on April 30, 2019. Such amounts may differ from the comparable value shown in the “2019 Pension Benefits Table.” Death benefits assume that the surviving spouse receives half of the 50% joint and survivor benefit. The SERP includes a provision indicating that the participant will not receive his or her benefit if the participant’s employment with the Company Common Shares is terminated due to his or her dishonest or fraudulent conduct. The following table sets forth,present value of accumulated benefit shown for David J. Lemmon has been converted to U.S. dollars at an exchange ratio of 1.3390 Canadian dollars to one U.S. dollar, which is the published exchange rate as of June 20, 2016April 30, 2019. |
(5) | This amount includes the current balance of the Named Executive Officer’s employer-provided Healthcare Retirement Account. |
| | | 66 | | The J. M. Smucker Company 2019 Proxy Statement |
2019 CEO PAY RATIO The SEC requires us to disclose the annual total compensation of Mark T. Smucker, our Chief Executive Officer, and our median employee, as well as the ratio of their respective annual total compensation to each other. The annual total compensation values are calculated in accordance with SEC rules applicable to the Summary Compensation Table. The values are as follows for fiscal year 2019, our last completed fiscal year: | | Mark T. Smucker’s annual total compensation: $8,056,890 |
| | Our median employee’s annual total compensation: $71,045 |
| | Ratio of Mark T. Smucker’s annual total compensation to our median employee’s annual total compensation: 113:1 |
Pay Ratio Methodology To prepare the pay ratio analysis, SEC rules allow us to select a methodology for identifying our median employee in a manner that is most appropriate based on our size, organizational structure, and compensation plans, policies, and procedures. As permitted under SEC rules and regulations, we may identify our median employee for purposes of providing pay ratio disclosure once every three years, provided that there has been no change in the employee population or employee compensation arrangements that we reasonably believe would result in a significant change to the 2018 pay ratio disclosure. Due to the acquisition of Ainsworth and the divestiture of the U.S. baking business, we performed the pay ratio analysis of our employee population for fiscal year 2019. In determining our median employee, we chose April 1, 2019 as the determination day to review our global employee population, which date is within the last three months of our last completed fiscal year. We selected this date to allow us sufficient time to identify the median employee. As of that date, we employed 7,539 persons in 5 countries. Consistent with our approach used last year, our median employee was selected using wages received by each employee (excluding our Chief Executive Officer), as reflected in our payroll records and reported to the Internal Revenue Service on FormW-2 and the Canada Revenue Agency on Form T4 for the calendar year ended December 31, 2018. As permitted under SEC rules, we excluded 4 employees in Brazil, 2 employees in Hong Kong, and 2 employees in Vietnam, as they represent less than 1% of our total employee population. In determining our median employee, we did not use any of the other exemptions permitted under SEC rules, and we used the employee population as of April 1, 2019 to determine eligibility to identify the median employee. Similarly, we did not rely on any material assumptions, adjustments (e.g.,cost-of-living adjustments), or estimates (e.g., statistical sampling) to identify our median employee or to determine annual total compensation or any elements of annual total compensation for our median employee or Mark T. Smucker. Once we identified our median employee, we calculated such employee’s annual total compensation as described above for purposes of determining the ratio of Mark T. Smucker’s annual total compensation to such employee’s annual total compensation. | | | | | The J. M. Smucker Company 2019 Proxy Statement | | | 67 | |
COMPENSATION COMMITTEE REPORT The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of RegulationS-K with management. Based on such review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement and incorporated by reference into our Annual Report on Form10-K for the year ended April 30, 2019. EXECUTIVE COMPENSATION COMMITTEE Paul J. Dolan, Chair Elizabeth Valk Long Gary A. Oatey Kirk L. Perry COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION Each of the followingnon-employee Directors served as a member of the Compensation Committee during fiscal year 2019: Paul J. Dolan, Elizabeth Valk Long, Gary A. Oatey, and Kirk L. Perry. During fiscal year 2019, no Company executive officer or Director was a member of the board of directors of any other company where the relationship would be construed to constitute a committee interlock within the meaning of the rules of the SEC. Paul J. Dolan, the Chair of the Compensation Committee, is Chairman and Chief Executive Officer of the Cleveland Indians, the Major League Baseball team operating in Cleveland, Ohio. Mr. Dolan’s family also owns the Cleveland Indians organization, but the Company has determined that the Dolan family’s ownership interest in the Cleveland Indians does not disqualify Mr. Dolan from being an “outside director” under Section 162(m) of the Code. We incurred approximately $371,000 in advertising and promotional activities expenses related to our sponsorship with the Cleveland Indians organization, along with purchases of season tickets and a partial season for a luxury box, in fiscal year 2019. Kirk L. Perry, a member of the Compensation Committee, is the President, Brand Solutions of Google Inc. We incurred approximately $12,257,000 in expenses for advertising services provided to us by Google Inc. in fiscal year 2019. | | | 68 | | The J. M. Smucker Company 2019 Proxy Statement |
RELATED PARTY TRANSACTIONS The Board has long recognized that transactions with Related Persons (as defined below) present a potential conflict of interest (or the perception of a conflict) and, together with our senior management, the Board has enforced the conflict of interest provisions set forth in the Code of Conduct. All employees and members of the Board sign and agree to be bound by the Code of Conduct.Ethics has been, and will continue to be, one of ourBasic Beliefs. Related Party Transaction Approval Policy In order to formalize the process by which we review any transaction with a Related Person, the Board has adopted a written policy addressing our procedures with respect to the review, approval, and ratification of “related person transactions” that are required to be disclosed pursuant to Item 404(a) of RegulationS-K. Under the policy, our General Counsel initially determines if a transaction or relationship constitutes a transaction that requires compliance with the policy. The policy provides that any transaction, arrangement, or relationship, or series of similar transactions, with any Director, nominee for Director, executive officer, 5% beneficial owner, or any of their immediate family members, or any entity which is owned or controlled by such persons, or in which such persons have a substantial ownership interest or control of such entity (collectively, “Related Persons”) in which we have or will have a direct or indirect material interest and which exceeds $120,000 in the aggregate will be subject to review, approval, or ratification by the Audit Committee. In its review of related person transactions, the Audit Committee will review the material facts and circumstances of the transaction. Transactions with Directors and Executive Officers Timothy P. Smucker, Chairman Emeritus for the Company, is the brother of our Executive Chairman, Richard K. Smucker, and the father of our President and Chief Executive Officer, Mark T. Smucker. For fiscal year 2019, Timothy P. Smucker was compensated as anon-employee Director, and such compensation is included in the “2019 Director Compensation Table.” Paul J. Dolan, a member of the Board, is Chairman and Chief Executive Officer of the Cleveland Indians, the Major League Baseball team operating in Cleveland, Ohio. Mr. Dolan’s family also owns the Cleveland Indians organization, but the Company has determined that the Dolan family’s ownership interest in the Cleveland Indians does not disqualify Mr. Dolan from being an “outside director” under Section 162(m) of the Code. We incurred approximately $371,000 in advertising and promotional activities expenses related to our sponsorship with the Cleveland Indians organization, along with purchases of season tickets and a partial season for a luxury box, in fiscal year 2019. Kirk L. Perry, a member of the Board, is the President, Brand Solutions of Google Inc. We incurred approximately $12,257,000 in expenses for advertising services provided to us by Google Inc. in fiscal year 2019. Related party transactions regarding members of the Compensation Committee are also disclosed under the “Compensation Committee Interlocks and Insider Participation” section of this proxy statement. | | | | | The J. M. Smucker Company 2019 Proxy Statement | | | 69 | |
OWNERSHIP OF COMMON SHARES Beneficial Ownership of Company Common Shares The following table sets forth, as of June 17, 2019 (unless otherwise noted), the beneficial ownership of our common shares by: | | each person or group known to us to be the beneficial owner of more than 5% of our outstanding common shares; | |
| | each Director, each nominee for Director listed in this proxy statement, and each Named Executive Officer; and | |
| | all of our Directors and executive officers as a group. Unless otherwise noted, the shareholders listed in the table below have sole voting and investment powers with respect to the common shares beneficially owned by them. The address of each Director, nominee for Director, and executive officer is One Strawberry Lane, Orrville, Ohio 44667. As of June 20, 2016, there were 116,426,335
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Unless otherwise noted, the shareholders listed in the table below have sole voting and investment powers with respect to the common shares beneficially owned by them. The address of each Director, nominee for Director, and executive officer is One Strawberry Lane, Orrville, Ohio 44667. As of June 17, 2019, there were 114,039,401 common shares outstanding. | | | | | | | Name | | Number of Common Shares Beneficially Owned (1)(2)(3)(4)(5) | | | Percent of Outstanding Common Shares | The Vanguard Group, Inc. | | | 13,119,485 (6) | | | 11.5% | BlackRock, Inc. | | | 10,239,722 (7) | | | 9.0% | State Street Corporation | | | 7,513,115 (8) | | | 6.6% | Richard K. Smucker | | | 2,575,521 | | | 2.3% | Timothy P. Smucker | | | 1,942,675 | | | 1.7% | Mark R. Belgya | | | 106,442 | | | * | Kathryn W. Dindo | | | 41,114 | | | * | Paul J. Dolan | | | 35,867 | | | * | Tina R. Floyd | | | 16,894 | | | * | Amy C. Held | | | 26,924 | | | * | Jay L. Henderson | | | 6,701 | | | * | Kevin G. Jackson | | | 38,734 | | | * | Jeannette L. Knudsen | | | 43,538 | | | * | David J. Lemmon | | | 23,211 | | | * | Elizabeth Valk Long | | | 63,920 | | | * | Gary A. Oatey | | | 45,402 | | | * | Jill R. Penrose | | | 47,288 | | | * | Kirk L. Perry | | | 4,356 | | | * | Sandra Pianalto | | | 6,490 | | | * | Nancy Lopez Russell | | | 20,873 | | | * | Alex Shumate | | | 14,724 | | | * | Mark T. Smucker | | | 245,915 | | | * | Joseph Stanziano | | | 15,176 | | | * | Dawn C. Willoughby | | | 3,195 | | | * | 21 Directors and executive officers as a group | | | 4,167,301 | | | 3.7% |
| | | | | Name | | Number of Common Shares Beneficially Owned(1)(2)(3)(4)(5) | | Percent of Outstanding Common Shares | The Vanguard Group, Inc. | | 10,692,386(6) | | 9.2% | BlackRock, Inc. | | 6,930,328(7) | | 6.0% | Richard K. Smucker | | 2,498,153 | | 2.2% | Timothy P. Smucker | | 1,911,555 | | 1.6% | Mark R. Belgya | | 56,677 | | * | Vincent C. Byrd | | 80,442 | | * | Kathryn W. Dindo | | 34,502 | | * | Paul J. Dolan | | 26,971 | | * | Robert B. Heisler, Jr. | | 3,506 | | * | Jay L. Henderson | | — | | — | Nancy Lopez Knight | | 15,477 | | * | Elizabeth Valk Long | | 51,958 | | * | Steven Oakland | | 59,005 | | * | Gary A. Oatey | | 31,633 | | * | Sandra Pianalto | | 2,342 | | * | Alex Shumate | | 10,165 | | * | Mark T. Smucker | | 133,161 | | * | David J. West | | 208,599 | | * | 19 Directors and executive officers as a group | | 4,063,101 | | 3.5% |
(1) | In accordance with SEC rules, each beneficial owner’s holdings have been calculated assuming full exercise of outstanding stock options covering common shares, if any, exercisable by such owner within 60 days after June 20, 2016. The beneficial ownership information set forth above does not include any common shares that may be acquired upon the exercise of such options, since no beneficial owner has any outstanding stock options covering common shares exercisable within 60 days after June 20, 2016. |
| | | 70 | | The J. M. Smucker Company 20162019 Proxy Statement 79 |
OWNERSHIP OF COMMON SHARES (1) | In accordance with SEC rules, each beneficial owner’s holdings have been calculated assuming full exercise of outstanding stock options covering common shares, if any, exercisable by such owner within 60 days after June 17, 2019. The common share numbers include such options as follows: Mark T. Smucker, 30,000; Mark R. Belgya, 37,500; Jeannette L. Knudsen, 10,000; David J. Lemmon, 5,000; Richard K. Smucker, 62,500; and all Directors and executive officers as a group, 200,000. |
(2) | The beneficial ownership information set forth above also includes the following number of restricted shares beneficially owned by the persons identified below: Mark T. Smucker, 108,236; Mark R. Belgya, 42,004; Jeannette L. Knudsen, 27,261; David J. Lemmon, 15,980; Richard K. Smucker, 64,187; Mark R. Belgya, 43,702; Vincent C. Byrd, 25,137; Steven Oakland, 46,502; David J. West, 0;44,162; and all Directors and executive officers as a group, 305,107.307,111. |
(3) | Beneficial ownership of the following common shares included in the table is disclaimed by Richard K. Smucker: 1,433,392 common shares held by trusts for the benefit of family members (including Timothy P. Smucker) of which Richard K. Smucker is a trustee with sole investment power or aco-trustee with shared investment power; 202,062 common shares owned by the Willard E. Smucker Foundation of which Richard K. Smucker is a trustee with shared investment power; and 187,067195,918 common shares with respect to which Richard K. Smucker disclaims voting or investment power. |
| Beneficial ownership of the following common shares included in the table is disclaimed by Timothy P. Smucker: 477,798 common shares held by trusts for the benefit of family members of which Timothy P. Smucker is a trustee with sole investment power or aco-trustee with shared investment power; 202,062 common shares owned by the Willard E. Smucker Foundation of which Timothy P. Smucker is a trustee with shared investment power; and 181,626200,791 common shares with respect to which Timothy P. Smucker disclaims voting or investment power. |
| Beneficial ownership of the following common shares included in the table is disclaimed by Mark T. Smucker: 10,96912,641 common shares with respect to which Mark T. Smucker disclaims voting or investment power. |
| The number of common shares beneficially owned by all Directors and executive officers as a group has been computed to eliminate duplication of beneficial ownership. |
(4) | This number includes common shares held for the benefit of the individual named under the terms of the Amended and Restated Nonemployee Director Stock Plan (“Nonemployee Director Stock Plan”), the Nonemployee Director Deferred Compensation Plan, The J. M. Smucker Company 2006 Equity Compensation Plan (the “2006 Plan”), and the 2010 Plan as follows: Kathryn W. Dindo, 34,502;41,114; Paul J. Dolan, 26,971; Robert B. Heisler, Jr., 3,506; Nancy Lopez Knight, 15,477;35,867; Jay L. Henderson, 3,701; Elizabeth Valk Long, 51,958;62,975; Gary A. Oatey, 31,633;39,401; Kirk L. Perry, 4,355; Sandra Pianalto, 2,342; and6,241; Nancy Lopez Russell, 20,484; Alex Shumate, 10,165.14,724; Timothy P. Smucker, 4,557; and Dawn C. Willoughby, 3,195. The common shares indicated are held in trust for the Directors named and are voted pursuant to their direction. |
(5) | Because, under the Articles, shareholders may be entitled, on certain matters, to cast ten votes per share with regard to certain common shares and only one vote per share with regard to others, there may not be a correlation between the percentage of outstanding common shares owned and the voting power represented by those common shares. The total voting power of all the common shares can be determined only at the time of a shareholder meeting due to the need to obtain certifications as to beneficial ownership of common shares not held as of record in the name of individuals. There are no proposals on this year’s ballot for which theten-votes-per-share provisions apply. |
(6) | The number of shares beneficially owned is based on information set forth in a Schedule 13G/A of The Vanguard Group, Inc. (“Vanguard”), 100 Vanguard Blvd., Malvern, PA 19355, filed with the SEC on February 10, 2016.11, 2019. Vanguard is a U.S. company organized under the laws of the Commonwealth of Pennsylvania. TheVanguard’s Schedule 13G/A indicated that, as of December 31, 2015,2018, Vanguard had sole voting power as to 219,771130,755 common shares, shared voting power as to 40,869 common shares, sole dispositive power as to 10,457,90412,948,048 common shares, and shared dispositive power as to 234,482171,437 common shares. |
(7) | The number of shares beneficially owned is based on information set forth in a Schedule 13G/A of BlackRock, Inc. (“BlackRock”), 55 East 52nd Street, New York, NY 10055, filed with the SEC on February 5, 2019. BlackRock is a |
| | | | | The J. M. Smucker Company 2019 Proxy Statement | | | 71 | |
OWNERSHIP OF COMMON SHARES | U.S. company organized under the laws of the State of Delaware. BlackRock’s Schedule 13G/A indicated that, as of December 31, 2018, BlackRock had sole voting power as to 8,932,124 common shares and sole dispositive power as to 10,239,722 common shares. |
(8) | The number of shares beneficially owned is based on information set forth in a Schedule 13G of BlackRock, Inc.State Street Corporation (“BlackRock”State Street”), 55 East 52ndState Street New York, NY 10055,Financial Center, One Lincoln Street, Boston, MA 02111, filed with the SEC on January 22, 2016. BlackRockFebruary 11, 2019. State Street is a U.S. company organized under the laws of the Commonwealth of Massachusetts. State of Delaware. TheStreet’s Schedule 13G indicated that, as of December 31, 2015, BlackRock2018, State Street had soleshared voting power as to 5,835,4256,837,433 common shares and soleshared dispositive power as to 6,930,3287,511,520 common shares. |
80 The J. M. Smucker Company 2016 Proxy Statement
OWNERSHIP OF COMMON SHARES
Delinquent Section 16(a) Beneficial Ownership Reporting ComplianceReports Under the U.S. securities laws, our Directors, executive officers, and beneficial owners of more than 10% of our common shares are required to report their initial ownership of common shares and any subsequent changes in that ownership to the SEC and the NYSE. Due dates for the reports are specified by those laws, and we are required to disclose in this proxy statement any failure in the past year to file by the required dates. Based solely on written representations of our Directors and executive officers and on copies of the reports that they have filed with the SEC, it is our belief that all of our Directors and executive officers complied with all Section 16(a) filing requirements applicable to them with respect to transactions in our equity securities during fiscal year 2016,2019, except that a Form 43 for David J. West to report the forfeiture of certain restricted stock upon Mr. West’s last day of employment with the Company on April 30, 2016Amy C. Held was filed two days late due to a system reporting error.failure to receive her EDGAR codes on a timely basis and a Form 5 for Nancy Lopez Russell was filed late due to a delay in notifying the Company of an open market purchase of the Company’s common shares by her husband. The J. M. Smucker Company 2016 Proxy Statement 81 | | | 72 | | The J. M. Smucker Company 2019 Proxy Statement |
EQUITY COMPENSATION PLAN INFORMATION The table below sets forth certain information with respect to the following equity compensation plans of the Company as of April 30, 2016:2019: The J. M. Smucker Company 1998 Equity and Performance Incentive Plan (the “1998 Plan”), the 2006 Plan, the 2010 Plan, the Nonemployee Director Stock Plan, and the Nonemployee Director Deferred Compensation Plan. All of these equity compensation plans have been approved by our shareholders, with the exception of the Nonemployee Director Deferred Compensation Plan, which was initially adopted by the Board on January 1, 2007 and amended and restated on January 1, 2014. | Plan Category | | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (a) | | Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights (b) | | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a))(1)(2)(3) (c) | | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (a) | | Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights (b) | | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) (1)(2)(3) (c) | | Equity compensation plans approved by security holders (4)(5) | | 1,660,248 | | $113.23 | | 5,214,911 | | | 1,519,167 | | | | $112.84 | | | | 5,380,499 | | Equity compensation plans not approved by security holders (6) | | 34,274 | | 0 | | — | | | 50,800 | | | | — | | | | — | | Total | | 1,694,522 | | $113.23 | | 5,214,911 | | | 1,569,967 | | | | $112.84 | | | | 5,380,499 | |
(1) | As of April 30, 2016,2019, there were 5,214,9115,380,499 common shares remaining available for grant as awards. The weighted-average exercise price of outstanding options, warrants, and rights in column (b) does not take restricted shares, restricted stock units, or othernon-option awards into account. |
(2) | Upon approval of the 2010 Plan by shareholders, no further awards could be made under the 1998 Plan, the Nonemployee Director Stock Plan, and the 2006 Plan, except that the provisions relating to the deferral of Director retainers and fees under the Nonemployee Director Stock Plan continued to apply to services rendered through December 31, 2006. |
(3) | There is no established pool of authorized common shares under the Nonemployee Director Deferred Compensation Plan. |
(4) | This amount includes 213,312289,013 deferred stock units and restricted stock units outstanding under the Nonemployee Director Stock Plan, the 2006 Plan, and the 2010 Plan. The weighted-average exercise price of outstanding options, warrants, and rights in column (b) does not take these deferred stock units and restricted stock units into account. |
(5) | In June 2015,2018, we granted several executive officers performance units with aone-year performance period, payable in restricted shares in June 2016.2019. The actual number of performance units earned was not known as of April 30, 2016.2019. Subsequent to April 30, 2016,2019, the performance units earned were converted into 121,93685,154 restricted shares. The actual number of restricted shares earned was included in column (a) for purposes of including the performance units outstanding at April 30, 2016.2019. The weighted-average exercise price of outstanding options, warrants, and rights in column (b) does not take these performance units into account. |
(6) | This row includes 34,274Includes 50,800 outstanding deferred stock units related to retainer and meeting fees voluntarily deferred bynon-employee Directors under the Nonemployee Director Deferred Compensation Plan. The Nonemployee Director Deferred Compensation Plan provides each of ournon-employee Directors with an opportunity to defer receipt of any portion of the cash compensation he or she receives for his or her service as a Director. The weighted-average exercise price of outstanding options, warrants, and rights in column (b) does not take these deferred stock units into account. |
82 The J. M. Smucker Company 2016 Proxy Statement | | | | | The J. M. Smucker Company 2019 Proxy Statement | | | 73 | |
ANNUAL REPORT Our annual report for the fiscal year ended April 30, 20162019 was mailed to each shareholder on or about July 1, 2016.June 28, 2019. 20172020 SHAREHOLDER PROPOSALS
Any shareholder who intends to present a proposal at the Company’s 20172020 annual meeting and who wishes to have the proposal included in our proxy statement and form of proxy for that annual meeting must deliver the proposal to our Corporate Secretary so that it is received no later than March 3, 2017.February 29, 2020. In addition, according to the Regulations, if a shareholder intends to present a proposal (including with respect to Director nominations) at our 20172020 annual meeting without the inclusion of that proposal in our proxy materials, the shareholder must deliver the proposal to our Corporate Secretary so that it is received no later than May 19, 2017,16, 2020, which is 90 calendar days before the first anniversary of the date of the preceding year’s annual meeting, and no earlier than April 19, 2017,16, 2020, which is 120 days before the first anniversary of the date of the preceding year’s annual meeting. After May 19, 2017,16, 2020, the notice would be considered untimely. If, however, the date of our 20172020 annual meeting of shareholders is more than 30 days before or more than 60 days after the first anniversary of the date of the preceding year’s annual meeting, then the deadline for shareholders to notify us will be no earlier than the close of business on the 120th day prior to the date of such annual meeting and no later than the close of business on the later of the 90th day prior to the date of such annual meeting or, if the first public announcement of the date of such annual meeting is less than 100 days prior to the date of such annual meeting, the 10th day following the day on which public announcement of the date of such meeting is first made by us. OTHER MATTERS We do not know of any matters to be brought before the meeting except as indicated in this notice. However, if any other matters properly come before the meeting for action, it is intended that the person authorized under solicited proxies may vote or act thereon in accordance with his or her own judgment. “HOUSEHOLDING” OF PROXY MATERIALS In accordance with the notices we have sent to registered shareholders, we are sending only one copy of our annual report and proxy statement to shareholders who share the same last name and mailing address, unless they have notified us that they want to continue receiving multiple copies. Each shareholder will continue to receive a separate proxy card or Notice of Internet Availability of Proxy Materials. We understand that the brokerage community has mailed similar notices to holders of common shares who hold their common shares in street name. This practice, known as “householding,” is permitted by the SEC and is designed to reduce duplicate mailings and save printing and postage costs, as well as conserve natural resources. Shareholders who currently receive multiple copies of the annual report and proxy statement at their address and would like to request “householding” of their communications should contact their broker if they are a street name shareholder or, if they are a registered shareholder, should contact Computershare Investor Services, LLC (“Computershare”) by calling1-800-456-1169, or inform them in writing at Computershare Investor Services, P.O. Box 30170, College Station, Texas 77842-3170.505000, Louisville, Kentucky 40233. Shareholders who are “householding” their communications, but who wish to begin to receive separate copies of the annual report and proxy statement in the future, may also notify their broker or Computershare. We will promptly deliver a separate copy of the annual report and proxy statement at a shared address to which a single copy was delivered upon written or oral request to Shareholder Services, The J. M. Smucker Company, One Strawberry Lane, Orrville, Ohio 44667, 330-684-3838. 1-330-684-3838. The J. M. Smucker Company 2016 Proxy Statement 83 | | | 74 | | The J. M. Smucker Company 2019 Proxy Statement |
ELECTRONIC DELIVERY OF COMPANY SHAREHOLDER COMMUNICATIONS If you are a registered shareholder, we encourage you to conserve natural resources, as well as reduce printing and mailing costs, by signing up to receive your shareholder communications from us electronically. Through participation in the eTree program sponsored by Computershare, we will have a tree planted on your behalf if you elect to receive your shareholder materials and documents electronically. The tree will be planted by American Forests, a leading conservation organization, to support revegetation and reforestation efforts in the United States. You will receive your shareholder information faster and will be able to access your documents, reports, and informationon-line at the Investor Centre on Computershare’s website. Access www.eTree.com/smucker to enroll in electronic communications.website at www.computershare.com/investor. With your consent, we will stop mailing paper copies of these documents and will notify you bye-mail when the documents are available to you, where to find them, and how to quickly submit your voteon-line. Your election to receive shareholder communications electronically will be effective until you cancel it. Please note that, although there is no charge for accessing our annual meeting materialson-line, you may incur costs from service providers such as your Internet access provider and your telephone company. If you have any questions or need assistance, please call1-866-602-0762. VOTING RIGHTS OF COMMON SHARES Under Article Fourth of the Articles, the holder of each outstanding common share is entitled to one vote on each matter submitted to a vote of our shareholders, except for the following specific matters: any matter that relates to or would result in the dissolution or liquidation of the Company;
| | any matter that relates to or would result in the dissolution or liquidation of the Company; | |
the adoption of any amendment to the Articles or the Regulations, or the adoption of amended Articles, other than the adoption of any amendment or amended Articles that increases the number of votes to which holders of our common shares are entitled or expands the matters to which time phased voting applies;
| | the adoption of any amendment to the Articles or the Regulations, or the adoption of amended Articles, other than the adoption of any amendment or amended Articles that increases the number of votes to which holders of our common shares are entitled or expands the matters to which time phased voting applies; | |
any proposal or other action to be taken by our shareholders relating to the Rights Agreement, dated as of May 20, 2009, between us and Computershare Trust Company, N.A. or any successor plan;
| | any proposal or other action to be taken by our shareholders relating to any successor plan to the Rights Agreement, dated as of May 20, 2009, between us and Computershare Trust Company, N.A.; | |
any matter relating to any stock option plan, stock purchase plan, executive compensation plan, executive benefit plan, or other similar plan, arrangement, or agreement;
| | any matter relating to any stock option plan, stock purchase plan, executive compensation plan, executive benefit plan, or other similar plan, arrangement, or agreement; | |
the adoption of any agreement or plan of or for the merger, consolidation, or majority share acquisition of us or any of our subsidiaries with or into any other person, whether domestic or foreign, corporate or noncorporate, or the authorization of the lease, sale, exchange, transfer, or other disposition of all, or substantially all, of our assets;
| | the adoption of any agreement or plan of or for the merger, consolidation, or majority share acquisition of us or any of our subsidiaries with or into any other person, whether domestic or foreign, corporate or noncorporate, or the authorization of the lease, sale, exchange, transfer, or other disposition of all, or substantially all, of our assets; | |
any matter submitted to our shareholders pursuant to Article Fifth (which relates to procedures applicable to certain business combinations) or Article Seventh (which relates to procedures applicable to certain proposed acquisitions of specified percentages of our outstanding common shares) of the Articles, as they may be further amended, or any issuance of our common shares for which shareholder approval is required by applicable stock exchange rules; and
| | any matter submitted to our shareholders pursuant to Article Fifth (which relates to procedures applicable to certain business combinations) or Article Seventh (which relates to procedures applicable to certain proposed acquisitions of specified percentages of our outstanding common shares) of the Articles, as they may be further amended, or any issuance of our common shares for which shareholder approval is required by applicable stock exchange rules; and | |
any matter relating to the issuance of our common shares or the repurchase of our common shares that the Board determines is required or appropriate to be submitted to our shareholders under the Ohio Revised Code or applicable stock exchange rules.
| | any matter relating to the issuance of our common shares or the repurchase of our common shares that the Board determines is required or appropriate to be submitted to our shareholders under the Ohio Revised Code or applicable stock exchange rules. | |
On the matters listed above, common shares are entitled to ten votes per share if they meet the requirements set forth in the Articles. Common shares entitled to ten votes per share must meet one of the following criteria: common shares for which there has not been a change in beneficial ownership in the past four years; or
| | common shares for which there has not been a change in beneficial ownership in the past four years; or | |
common shares received through our various equity plans which have not been sold or otherwise transferred.
84 The J. M. Smucker Company 2016 Proxy Statement | | | | | The J. M. Smucker Company 2019 Proxy Statement | | | 75 | |
VOTING RIGHTS OF COMMON SHARES | | common shares received through our various equity plans which have not been sold or otherwise transferred. | |
In the event of a change in beneficial ownership, the new owner of that common share will be entitled to only one vote with respect to that share on all matters until four years pass without a further change in beneficial ownership of the share. There are no proposals on this year’s ballot for which theten-votes-per-share provisions apply. The express terms of the common shares provide that a change in beneficial ownership occurs whenever any change occurs in the person or group of persons who has or shares voting power, investment power, the right to receive sale proceeds, or the right to receive dividends or other distributions in respect of those common shares. In the absence of proof to the contrary, a change in beneficial ownership will be deemed to have occurred whenever common shares are transferred of record into the name of any other person. Moreover, corporations, general partnerships, limited partnerships, voting trustees, banks, trust companies, brokers, nominees, and clearing agencies will be entitled to only one vote per share on common shares held of record in their respective names unless written proof is provided to establish that there has been no change in the person or persons who direct the exercise of any of the rights of beneficial ownership of such shares, including the voting of common shares. Thus, shareholders who hold common shares in street name or through any of the other indirect methods mentioned above must be able to submit written proof of beneficial ownership in form and substance satisfactory to us in order to be entitled to exercise ten votes per share. The foregoing is merely a summary of the voting terms of the common shares and this summary should be read in conjunction with, and is qualified in its entirety by reference to, the express terms of those common shares, as set forth in the Articles. A copy of the Articles is posted on our website atwww.jmsmucker.com and is available free of charge to any shareholder submitting a written request to the Corporate Secretary, The J. M. Smucker Company, One Strawberry Lane, Orrville, Ohio 44667. The J. M. Smucker Company 2016 Proxy Statement 85PROXY SOLICITATION AND COSTS
We are furnishing this document to you in connection with the solicitation by the Board of the enclosed form of proxy for our annual meeting to be held on August 14, 2019. In addition to solicitation by mail, we may solicit proxies in person, by telephone, facsimile, ore-mail. We will bear all costs of the proxy solicitation and have engaged a professional proxy solicitation firm, D.F. King & Co., Inc., to assist us in soliciting proxies. We will pay a fee of approximately $20,000 (including expenses) for such services.We pay for the preparation and mailing of the Notice of 2019 Annual Meeting of Shareholders and proxy statement, and we have also made arrangements with brokerage firms and other custodians, nominees, and fiduciaries for the forwarding of this proxy statement and other annual meeting materials to the beneficial owners of our common shares at our expense. This proxy statement is dated June 28, 2019 and is first being mailed to our shareholders on or about June 28, 2019. Appendix AQUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING
Why did I receive these proxy materials? | | | | | | | | | | | Year Ended April 30, | | (Dollars in millions, except per share data) | | 2016 | | | 2015 | | Reconciliation to net income: | | | | | | | | | Net income | | | $688.7 | | | $ | 344.9 | | Income taxes | | | 289.2 | | | | 178.1 | | Unallocated derivative (gains) losses | | | (12.0 | ) | | | 24.5 | | Cost of products sold - special project costs | | | 12.2 | | | | 6.2 | | Other special project costs | | | 135.9 | | | | 56.6 | | Non-GAAP income before income taxes | | $ | 1,114.0 | | | $ | 610.3 | | Income taxes, as adjusted(A) | | | 329.4 | | | | 207.8 | | Non-GAAP income | | | $784.6 | | | $ | 402.5 | | Weighted-average shares - assuming dilution | | | 119,477,312 | | | | 103,697,261 | | Non-GAAP income per common share - assuming dilution | | | $6.57 | | | | $3.88 | | Reconciliation to non-GAAP income per common share - assuming dilution: | | | | | | | | | Non-GAAP income per common share - assuming dilution | | | $6.57 | | | | $3.88 | | Adjust to exclude net deferred tax benefit | | | (0.31 | ) | | | | | Impact of adjusted effective income tax rate(B) | | | | | | | 0.05 | | Adjust for impact of Big Heart transaction and results, net of adjusted effective income tax rate:(C) | | | | | | | | | Big Heart operating loss | | | | | | | 0.17 | | Other debt costs | | | | | | | 1.14 | | Incremental interest expense | | | | | | | 0.07 | | Incremental shares issued(D) | | | | | | | 0.07 | | Non-GAAP earnings per share (as adjusted) | | | $6.26 | | | | $5.38 | | Free cash flow: | | | | | | | | | Net cash provided by operating activities | | $ | 1,458.3 | | | $ | 733.2 | | Additions to property, plant, and equipment | | | (201.4 | ) | | | (247.7 | ) | Free cash flow | | $ | 1,256.9 | | | $ | 485.5 | |
(A) | Income taxes, as adjusted is based upon our GAAP effective tax rate and reflects the impact of items excluded from GAAP net income to derive non-GAAP income. |
You received these proxy materials because you are a shareholder of the Company. The Board is providing these proxy materials to you in connection with our annual meeting to be held on August 14, 2019. As a shareholder of the Company, you are entitled to vote on the important proposals described in this proxy statement. Since it is not practical for all shareholders to attend the annual meeting and vote in person, the Board is seeking your proxy to vote on these matters. What is a proxy? A proxy is your legal designation of another person (“proxy”) to vote the common shares you own at the annual meeting. By completing and returning the proxy card(s), which identifies the individuals or trustees authorized to act as your proxy, you are giving each of those individuals authority to vote your common shares as you have instructed. By voting via proxy, each shareholder can cast his or her vote without having to attend the annual meeting in person. (B) | Adjust actual fiscal year results to reflect an estimated effective tax rate of 33.3% for the full year before Big Heart transaction and results. | | 76 | | The J. M. Smucker Company 2019 Proxy Statement |
(C) | Impact of Big Heart transaction and results are net of tax using an estimated effective tax rate of 33.3% for the full year. |
(D) | Adjust to 101.8 million weighted average common shares outstanding for the fiscal year. |
QUESTIONS AND ANSWERS ABOUT THE J. M. SMUCKER COMPANYANNUAL MEETING AND VOTING ATTN: JEANNETTE KNUDSEN
ONE STRAWBERRY LANE
ORRVILLE, OH 44667-0280
VOTE BY INTERNET -www.proxyvote.comWhy did I receive more than one proxy card?
Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. Eastern Time on August 16, 2016. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.
ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS
If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements,You will receive multiple proxy cards and annual reports electronically via e-mailif you hold your common shares in different ways (e.g.,trusts, custodial accounts, joint tenancy) or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate thatin multiple accounts. If your common shares are held by a broker or bank (i.e., in “street name”), you agree towill receive or access proxy materials electronically in future years.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m. Eastern Time on August 16, 2016. 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 other voting information from your broker, bank, trust, or other nominee. It is important that you complete, sign, date, and return iteach proxy card you receive, or vote using the telephone, or by using the Internet (as described in the postage-paid envelopeinstructions included with your proxy card(s) or in the Notice of Internet Availability of Proxy Materials).
Why didn’t I receive paper copies of the proxy materials? As permitted by the SEC, we are making this proxy statement and our annual report available to our shareholders electronically via the Internet. We believe this delivery method expedites your receipt of materials, while also lowering costs and reducing the environmental impact of our annual meeting. The Notice of Internet Availability of Proxy Materials contains instructions on how to access this proxy statement and our annual report and how to vote online. If you received a Notice of Internet Availability of Proxy Materials by mail, you will not receive a printed copy of the proxy materials unless you request one in accordance with the instructions provided in the notice. The Notice of Internet Availability of Proxy Materials has been mailed to shareholders on or about June 28, 2019 and provides instructions on how you may access and review the proxy materials on the Internet. What is the record date and what does it mean? The Board has established June 17, 2019 as the record date for the annual meeting of shareholders to be held on August 14, 2019. Shareholders who own common shares of the Company at the close of business on the record date are entitled to notice of and to vote at the annual meeting. What is the difference between a “registered shareholder” and a “street name shareholder”? These terms describe how your common shares are held. If your common shares are registered directly in your name with Computershare, our transfer agent, you are a “registered shareholder.” If your common shares are held in the name of a brokerage, bank, trust, or other nominee as a custodian, you are a “street name shareholder.” How many common shares are entitled to vote at the annual meeting? As of the record date, there were 114,039,401 common shares outstanding and entitled to vote at the annual meeting. How many votes must be present to hold the annual meeting? A majority of the Company’s outstanding common shares as of the record date must be present in order for us to hold the annual meeting. This is called a quorum. Broker“non-votes” and abstentions are counted as present for purposes of determining whether a quorum exists. A broker“non-vote” occurs when a nominee, such as a bank or broker holding shares for a beneficial owner, does not vote on a particular proposal because the nominee does not have provideddiscretionary voting power for the particular item and has not received instructions from the beneficial owner. Proposal 2 is the only routine matter on this year’s ballot that may be voted on by brokers. Who will count the votes? A representative from Broadridge Financial Solutions, Inc. (“Broadridge”), or return itits designee, will determine if a quorum is present, tabulate the votes, and serve as our inspector of election at the annual meeting. What vote is required to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.approve each proposal? Under our Articles, shareholders may be entitled, on certain matters, to cast ten votes per share with regard to certain common shares and only one vote per share with regard to others. The total voting power of all of the common shares can be determined only at the time of a shareholder meeting due to the need to obtain certifications as to beneficial ownership of common shares not held as of record in the name of individuals. There are no proposals on this year’s ballot for which theten-votes-per-share provisions apply. | | | | | The J. M. Smucker Company 2019 Proxy Statement | | | 77 | |
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING Abstentions, brokernon-votes, and shares not in attendance and not voted at the annual meeting will not be counted as votes cast “for” or “against” a candidate and will have no effect with regard to the election of Directors in Proposal 1 (See “Corporate Governance—Director Resignation Policy”). In addition, abstentions, brokernon-votes (if any), and shares not in attendance and not voted at the annual meeting will not be counted as votes cast “for” or “against” Proposals 2 and 3 and, therefore, will have no effect on the vote for those proposals. Proposal 1: Because this is an uncontested election, a candidate will be elected as a Director only if the votes cast for the candidate exceed the votes cast against the candidate, based upon one vote for each common share owned as of the record date. A plurality voting standard would be used if this were a contested election. Under the plurality voting standard, the candidates receiving the most “for” votes would be elected. Under our Director resignation policy, in an uncontested election, any nominee for Director who receives a greater number of “against” votes than “for” votes is required to tender his or her resignation for consideration by the Nominating Committee. We have provided more information about our Director resignation policy under the heading “Corporate Governance—Director Resignation Policy.” Proposal 2: The affirmative vote of the holders of a majority of the votes cast on this proposal, based upon one vote for each common share owned as of the record date, is necessary to ratify the appointment of the Independent Registered Public Accounting Firm (the “Independent Auditors”). Proposal 3: The affirmative vote of the holders of a majority of the votes cast on this proposal, based upon one vote for each common share owned as of the record date, is necessary to approve, on an advisory basis, the Company’s executive compensation. This vote is advisory and not binding on the Company, the Board, or the Compensation Committee in any way. To the extent there is any significant vote against the executive compensation as disclosed in this proxy statement, the Board and the Compensation Committee will evaluate what actions, if any, may be necessary to address the concerns of shareholders. Under the Articles, shareholders are entitled to cast ten votes per share on any matter relating to any stock option plan, stock purchase plan, executive compensation plan, executive benefit plan, or other similar plan, arrangement, or agreement. Because the vote on this proposal is anon-binding, advisory vote, we have determined that suchten-votes-per-share provisions will not apply to this proposal. Where will I be able to find voting results of the annual meeting? We will announce preliminary voting results at the annual meeting. We will also publish final voting results in a Current Report on Form8-K to be filed with the SEC within four business days after the annual meeting. How do I vote my common shares? If you are aregistered shareholder and you received your proxy materials by mail, you can vote your shares in one of the following manners: | | by attending the annual meeting and voting; |
| | by completing, signing, dating, and returning the enclosed proxy card(s); |
| | by telephone, by calling1-800-690-6903; or |
| | by using the Internet and accessing www.proxyvote.com. |
Please refer to the specific instructions set forth on the proxy card(s) that you received. If you are a registered shareholder and you received a Notice of Internet Availability of Proxy Materials, you can vote your shares in one of the following manners: | | by attending the annual meeting and voting; |
| | by using the Internet and accessing www.proxyvote.com; or |
| | by mail if you request a paper copy of the materials by calling1-800-579-1639. |
Please refer to the specific instructions set forth in the Notice of Internet Availability of Proxy Materials. | | | 78 | | The J. M. Smucker Company 2019 Proxy Statement |
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING If you are a street name shareholder, your broker, bank, trustee, or other nominee will provide you with materials and instructions for voting your common shares. If you wish to vote in person at the annual meeting, you must contact your broker and request a document called a “legal proxy.” You must bring this legal proxy obtained from your broker, bank, trust, or other nominee to the annual meeting in order to vote in person. Can I change my vote after I have mailed in my proxy card(s) or submitted my vote using the Internet or telephone? Yes, if you are aregistered shareholder and you received your proxy materials by mail, you can change your vote in any one of the following ways: | | sending a written notice to our Corporate Secretary that is received prior to the annual meeting and stating that you revoke your proxy; |
| | signing, dating, and submitting a new proxy card(s) to Broadridge so that it is received prior to the annual meeting; |
| | voting by telephone or by using the Internet prior to the annual meeting in accordance with the instructions provided with the proxy card(s); or |
| | attending the annual meeting and voting in person. |
Yes, if you are aregistered shareholder and you received a Notice of Internet Availability of Proxy Materials, you can change your vote in any one of the following ways: | | sending a written notice to our Corporate Secretary that is received prior to the annual meeting and stating that you revoke your proxy; |
| | voting by using the Internet prior to the annual meeting, in accordance with the instructions provided in the Notice of Internet Availability of Proxy Materials; |
| | attending the annual meeting and voting in person; or |
| | requesting a paper copy of the materials by calling1-800-579-1639, and then signing and dating the proxy card(s) and submitting the proxy card(s) to Broadridge so that it is received prior to the annual meeting. |
Your mere presence at the annual meeting will not revoke your proxy. You must vote in person at the annual meeting in order to revoke your proxy. If you are a street name shareholder, you must contact your broker, bank, trust, or other nominee in order to revoke your proxy. How will my proxy be voted? If you complete, sign, date, and return your proxy card(s) or vote by telephone or by using the Internet, your proxy will be voted in accordance with your instructions. If you sign and date your proxy card(s) but do not indicate how you want to vote, your common shares will be voted for each of the proposals as the Board recommends. What if my common shares are held in “street name” by my broker? You should instruct your broker how you would like to vote your shares by using the written instruction form and envelope provided by your broker. If you do not provide your broker with instructions, under the rules of the NYSE, your broker may, but is not required to, vote your common shares with respect to certain “routine” matters. However, on other matters, when the broker has not received voting instructions from its customers, the broker cannot vote the shares on the matter and a “brokernon-vote” occurs. Proposal 2 is the only routine matter on this year’s ballot to be voted on by our shareholders. Proposals 1 and 3 are not considered routine matters under the NYSE rules. This means that brokers may not vote your common shares on such proposals if you have not given your broker specific instructions as to how to vote. Please be sure to give specific voting instructions to your broker so that your vote can be counted. If you hold your common shares in your broker’s name and wish to vote in person at the annual meeting, you must contact your broker and request a document called a “legal proxy.” You must bring this legal proxy to the annual meeting in order to vote in person. | | | | | The J. M. Smucker Company 2019 Proxy Statement | | | 79 | |
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING What are the Board’s recommendations on how I should vote my common shares? The Board recommends that you vote your common shares as follows: | | | | | | | | | | | Proposal | | Proposal Summary | | FOR | | | AGAINST | | 1 | | Election of the Board nominees named in this proxy statement with terms expiring at the 2020 annual meeting of shareholders | | ✓ | | | | | | | 2 | | Ratification of appointment of Ernst & Young LLP as the Company’s Independent Registered Public Accounting Firm for the 2020 fiscal year | | ✓ | | | | | | | 3 | | Advisory approval of the Company’s executive compensation | | ✓ | | | | | | |
Does the Company have cumulative voting? No. In 2009, the shareholders of the Company amended the Articles to eliminate cumulative voting. Who may attend the annual meeting? All shareholders are eligible to attend the annual meeting. However, only those shareholders of record at the close of business on June 17, 2019 are entitled to vote at the annual meeting. Do I need an admission ticket to attend the annual meeting? Admission tickets are not required to attend the annual meeting. If you are a registered shareholder, properly mark your proxy to indicate that you will be attending the annual meeting. If you hold your common shares through a nominee or you are a street name shareholder, you are required to bring evidence of share ownership to the annual meeting (e.g.,account statement, broker verification). Seating at the annual meeting will be on a first-come, first-served basis, and we cannot guarantee seating for all shareholders. What type of accommodations can the Company make at the annual meeting for people with disabilities? We can provide reasonable assistance to help you participate in the annual meeting if you notify the Corporate Secretary in writing at The J. M. Smucker Company, One Strawberry Lane, Orrville, Ohio 44667, or by telephone, by calling330-684-3838 at least two weeks prior to the annual meeting about your disability and how you plan to attend. Who can answer my questions? If you need additional copies of the proxy materials, you should contact: | | Broadridge Financial Solutions, Inc. 51 Mercedes Way Edgewood, New York 11717 Call Toll Free:1-800-579-1639 |
If you have any questions about the proxy materials or the annual meeting, or need assistance in voting your common shares, you should contact: | | D.F. King & Co., Inc. 48 Wall Street New York, New York 10005 Call Toll Free:1-866-342-4883 Call Collect:212-269-5550 |
| | | 80 | | The J. M. Smucker Company 2019 Proxy Statement |
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING If you have any questions about the proxy materials or the annual meeting, you may also contact: | | Shareholder Services The J. M. Smucker Company One Strawberry Lane Orrville, Ohio 44667 Telephone:330-684-3838 Call Toll Free:1-866-362-5369 |
| | | | | The J. M. Smucker Company 2019 Proxy Statement | | | 81 | |
APPENDIX A: RECONCILIATION OF ADJUSTED OPERATING INCOME, ADJUSTED EARNINGS PER SHARE, AND FREE CASH FLOW TO THE RELATED GAAP MEASURES | | | | | | | | | | | Year Ended April 30, | | (Dollars and shares in millions, except per share data) | | 2019 | | | 2018 | | Operating income reconciliation: | | | | | | | | | Operating income | | $ | 928.6 | | | $ | 1,044.0 | | Amortization | | | 240.3 | | | | 206.8 | | Goodwill impairment charges | | | 97.9 | | | | 145.0 | | Other intangible assets impairment charges | | | 107.2 | | | | 31.9 | | Unallocated derivative losses (gains) | | | 54.2 | | | | (37.3) | | Cost of products sold - special project costs | | | - | | | | 3.9 | | Other special project costs | | | 64.1 | | | | 45.4 | | Adjusted operating income | | $ | 1,492.3 | | | $ | 1,439.7 | | | | | | | | | | | Net income reconciliation: | | | | | | | | | Net income | | $ | 514.4 | | | $ | 1,338.6 | | Income tax expense (benefit) | | | 187.2 | | | | (477.6) | | Amortization | | | 240.3 | | | | 206.8 | | Goodwill impairment charges | | | 97.9 | | | | 145.0 | | Other intangible assets impairment charges | | | 107.2 | | | | 31.9 | | Unallocated derivative losses (gains) | | | 54.2 | | | | (37.3) | | Cost of products sold - special project costs | | | - | | | | 3.9 | | Other special project costs | | | 64.1 | | | | 45.4 | | Adjusted income before income taxes | | $ | 1,265.3 | | | $ | 1,256.7 | | Income taxes, as adjusted(A) | | | 322.6 | | | | 352.1 | | Adjusted income | | $ | 942.7 | | | $ | 904.6 | | Weighted-average shares - assuming dilution | | | 113.7 | | | | 113.6 | | Adjusted earnings per share - assuming dilution | | $ | 8.29 | | | $ | 7.96 | | Adjusted earnings per share - assuming dilution reconciliation: | | | | | | | | | Adjusted earnings per share - assuming dilution | | $ | 8.29 | | | $ | 7.96 | | Less: Partial earnings benefit from reduced effective tax rate | | | - | | | | 0.20 | | Adjusted earnings per share (as modified) | | $ | 8.29 | | | $ | 7.76 | | | | | | | | | | | Free cash flow reconciliation: | | | | | | | | | Net cash provided by (used for) operating activities | | $ | 1,141.2 | | | $ | 1,218.0 | | Additions to property, plant, and equipment | | | (359.8) | | | | (321.9) | | Free cash flow | | $ | 781.4 | | | $ | 896.1 | |
(A) Income taxes, as adjusted is based upon our GAAP effective tax rate and reflects the impact of items excluded from GAAP net income to derive adjusted income. Income taxes, as adjusted has been further adjusted to reflect the exclusion of certainone-time discrete tax adjustments related to U.S. tax reform and the goodwill impairment charges recorded during fiscal years 2019 and 2018. A-1
| | | THE J. M. SMUCKER COMPANY ATTN: JEANNETTE KNUDSEN ONE STRAWBERRY LANE ORRVILLE, OH 44667-0280 | | VOTE BY INTERNET -www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. Eastern Time on August 13, 2019. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m. Eastern Time on August 13, 2019. 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: | | | E81899-P25489-Z75066 | | E12177-P80864-Z68133 KEEP THIS PORTION FOR YOUR RECORDS | — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — | | THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. | | DETACH AND RETURN THIS PORTION ONLY |
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
| | | | | | | | | | | | | THE J. M. SMUCKER COMPANY | | | | | | | | | The Board of Directors recommends you vote “FOR” thefollowing proposals: | | | | | | | 1. | | Election of Directors whose term of office will expire in 2017.2020. | | For | | Against | | Abstain | | | Nominees: | | | | | | | | | | | | | | | 1a. | | Nominees:Kathryn W. Dindo | | For☐ | | Against☐ | | Abstain☐ | | | | | | | | | 1b. | | Paul J. Dolan | | ☐ | | ☐ | | ☐ | | | | | | | | | 1c. | | Jay L. Henderson | | ☐ | | ☐ | | ☐ | | | | | | | | | 1d. | | Gary A. Oatey | | ☐ | | ☐ | | ☐ | | | | | | | | | 1e. | | Kirk L. Perry | | ☐ | | ☐ | | ☐ | | | | | | | | | 1f. | | Sandra Pianalto | | ☐ | | ☐ | | ☐ | | | | | | | | | 1g. | | Nancy Lopez Russell | | ☐ | | ☐ | | ☐ | | | | | | | | | 1h. | | Alex Shumate | | ☐ | | ☐ | | ☐ | | | | | | | | | 1i. | | Mark T. Smucker | | ☐ | | ☐ | | ☐ | | | | | | | | | 1j. | | Richard K. Smucker | | ☐ | | ☐ | | ☐ | | | | | | | | | 1k. | | Timothy P. Smucker | | ☐ | | ☐ | | ☐ | | | | | | | | | 1l. | | Dawn C. Willoughby | | ☐ | | ☐ | | ☐ |
| | | | | | | | | | | | | | | 1a. | | Kathryn W. Dindo | | ¨ | | ¨ | | ¨ | | | | | | | | | | | | 1b. | | Paul J. Dolan | | ¨ | | ¨ | | ¨ | | | | | | | | | | | | 1c. | | Jay L. Henderson | | ¨ | | ¨ | | ¨ | | | | | | | | | | | | 1d. | | Nancy Lopez Knight | | ¨ | | ¨ | | ¨ | | | | | | | | | | | | 1e. | | Elizabeth Valk Long | | ¨ | | ¨ | | ¨ | | | | | | | | | | | | 1f. | | Gary A. Oatey | | ¨ | | ¨ | | ¨ | | | | | | | | | | | | 1g. | | Sandra Pianalto | | ¨ | | ¨ | | ¨ | | | | | | | | | | | | 1h. | | Alex Shumate | | ¨ | | ¨ | | ¨ | | | | | | | | | | | | 1i. | | Mark T. Smucker | | ¨ | | ¨ | | ¨ | | | | | | | | | | | | 1j. | | Richard K. Smucker | | ¨ | | ¨ | | ¨ | | | | | | | | | | | | 1k. | | Timothy P. Smucker | | ¨ | | ¨ | | ¨ | | | | | Please sign your name EXACTLY as it appears on this proxy. Joint owners should each sign. When signing as attorney, trustee, executor, administrator, guardian or corporate officer, please provide your FULL title.
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | For | | Against | | Abstain | | | | | | 2. | | Ratification of appointment of Ernst & Young LLP as the Company’s Independent Registered Public Accounting Firm for the 20172020 fiscal year. | | ¨☐ | | ¨☐ | | ¨☐ | | | | | | 3. | | Advisory approval of the Company’s executive compensation. | | ¨☐ | | ¨☐ | | ¨ | | | | | The Board of Directors recommends you vote “AGAINST” the following proposal: | | | | | | ☐ | | | | | | 4. | | Shareholder proposal requesting the Company issue a report on renewable energy. | | ¨ | | ¨ | | ¨ | | | | | NOTE:Such other business as may properly come before the meeting or any adjournment or postponement thereof. | | | | | | | | | | | | | | | | Yes | | Yes
| | No | | | | | | | Please indicate if you plan to attend this meeting. | | ¨☐ | | ¨☐ | | | | |
Please sign your name EXACTLY as it appears on this proxy. Joint owners should each sign. When signing as attorney, trustee, executor, administrator, guardian or corporate officer, please provide your FULL title. | | | | | | | | | | | | | | | | Signature [PLEASE SIGN WITHIN BOX] | | Date | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Signature [PLEASE SIGN WITHIN BOX] | | Date | | | | | | | | | Signature (Joint Owners) | | | | | | Date | | | | |
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The J. M. Smucker Company Notice of 20162019 Annual Meeting and Proxy Statement and 20162019 Annual Report are available at www.proxyvote.com. | | | | | — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — |
E81900-P25489-Z75066 E12178-P80864-Z68133
| Proxy — THE J. M. SMUCKER COMPANY |
THE J. M. SMUCKER COMPANY
One Strawberry Lane, Orrville, Ohio 44667-0280
Solicited by the Board of Directors for the Annual Meeting of Shareholders to be Held on August 17, 2016
The authorized party as herein noted (the “Authorized Party”) hereby appoints Richard K. Smucker, Mark T. Smucker, and Jeannette L. Knudsen, or any of them, proxies with full power of substitution to vote, as designated on the reverse side, all common shares that the Authorized Party is entitled to vote and, in their discretion, to vote upon such other business as may properly come before the Annual Meeting of Shareholders of The J. M. Smucker Company to be held on August 17, 2016
THE J. M. SMUCKER COMPANY One Strawberry Lane, Orrville, Ohio 44667-0280 Solicited by the Board of Directors for the Annual Meeting of Shareholders to be Held on August 14, 2019 The authorized party as herein noted (the “Authorized Party”) hereby appoints Mark T. Smucker and Jeannette L. Knudsen, or either of them, proxies with full power of substitution to vote, as designated on the reverse side, all common shares that the Authorized Party is entitled to vote and, in their discretion, to vote upon such other business as may properly come before the Annual Meeting of Shareholders of The J. M. Smucker Company to be held on August 14, 2019 or at any adjournment or postponement thereof. When properly executed, this proxy will be voted in the manner directed. If properly executed, but if no direction is given, this proxy will be voted in accordance with the Board of Directors’ recommendations. Please mark, date, sign, and return this proxy card promptly, using the enclosed envelope. No postage is required if mailed in the United States. |
THE J. M. SMUCKER COMPANY
ATTN: JEANNETTE KNUDSEN
ONE STRAWBERRY LANE
ORRVILLE, OH 44667-0280
VOTE BY INTERNET -www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. Eastern Time on August 12, 2016. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.
ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS
If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m. Eastern Time on August 12, 2016. 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.
| | | THE J. M. SMUCKER COMPANY ATTN: JEANNETTE KNUDSEN ONE STRAWBERRY LANE ORRVILLE, OH 44667-0280 | | VOTE BY INTERNET -www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. Eastern Time on August 9, 2019. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m. Eastern Time on August 9, 2019. 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: | | E81901-P25489-Z75066 | E12179-P80864-Z68133 | KEEP THIS PORTION FOR YOUR RECORDS | | | DETACH AND RETURN THIS PORTION ONLY— — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — | THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. | | DETACH AND RETURN THIS PORTION ONLY |
| | | | | | | | | | | THE J. M. SMUCKER COMPANY | | | | | | | The Board of Directors recommends you vote “FOR” thefollowing proposals: | | | | | 1. | | 1. Election of Directors whose term of office will expire in 2017.
| | | | | | | | Nominees: 2020. | | For | | Against | | Abstain | | | Nominees: | | | | | | 1a. | | Kathryn W. Dindo
| | ¨
| | ¨
| | ¨
| | | | | | | | | 1b.1a. | | Paul J. Dolan Kathryn W. Dindo | | ¨ ☐ | | ¨ ☐ | | ¨ ☐ | | | | | | | | | 1c.1b. | | Jay L. Henderson Paul J. Dolan | | ¨ ☐ | | ¨ ☐ | | ¨ ☐ | | | | | | | | | 1d.1c. | | Nancy Lopez Knight Jay L. Henderson | | ¨ ☐ | | ¨ ☐ | | ¨ ☐ | | | | | | | | | 1e.1d. | | Elizabeth Valk Long Gary A. Oatey | | ¨ ☐ | | ¨ ☐ | | ¨ ☐ | | | | | | | | | 1f.1e. | | Gary A. Oatey Kirk L. Perry | | ¨ ☐ | | ¨ ☐ | | ¨ ☐ | | | | | | | | | 1g.1f. | | Sandra Pianalto | | ¨ ☐ | | ¨ ☐ | | ¨ ☐ | | | | | | | | | 1h.1g. | | Alex Shumate Nancy Lopez Russell | | ¨ ☐ | | ¨ ☐ | | ¨ ☐ | | | | | | | | | 1i.1h. | | Mark T. Smucker Alex Shumate | | ¨ ☐ | | ¨ ☐ | | ¨ ☐ | | | | | | | | | 1j.1i. | | Richard K.Mark T. Smucker
| | ¨ ☐ | | ¨ ☐ | | ¨ ☐ | | | | | | | | | 1k.1j. | | Timothy P.Richard K. Smucker
| | ¨ ☐ | | ¨ ☐ | | ¨ ☐ | | | | | | | | | Please sign your name EXACTLY as it appears on this proxy. Joint owners should each sign. When signing as attorney, trustee, executor, administrator, guardian or corporate officer, please provide your FULL title.1k. | | Timothy P. Smucker | | ☐ | | ☐ | | ☐ | | | | | | | | | 1l. | | Dawn C. Willoughby | | ☐ | | ☐ | | ☐ |
| | | | | | | | | | | | | For | | Against | | Abstain | | | | | | 2. | | Ratification of appointment of Ernst & Young LLP as the Company’s Independent Registered Public Accounting Firm for the 20172020 fiscal year. | | ¨ ☐ | | ¨ ☐ | | ¨ ☐ | | | | | | 3. | | Advisory approval of the Company’s executive compensation. | | ¨ ☐ | | ¨ ☐ | | ¨
| | | | | The Board of Directors recommends you vote “AGAINST” the following proposal: | | | | | | | | | | | | 4. | | Shareholder proposal requesting the Company issue a report on renewable energy. | | ¨
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| | ¨ ☐ | | | | | Instructions regarding Non-Directed Shares and/or Unallocated SharesShares: | | Yes | | No | | | | | | | | | | I wish to direct the Trustee to vote the Non-Directed Shares and Unallocated Shares in the same way as my Allocated Shares. | | ¨☐ | | ¨☐ | | | | | | | | NOTE:Such other business as may properly come before the meeting or any adjournment or postponement thereof. | | | | | | | | | | | | | | | | Yes | | No | | | | | | | Please indicate if you plan to attend this meeting. | | ¨ ☐ | | ¨ ☐ | | | | |
Please sign your name EXACTLY as it appears on this proxy. Joint owners should each sign. When signing as attorney, trustee, executor, administrator, guardian or corporate officer, please provide your FULL title. | | | | | | | | | | | | | | | | Signature [PLEASE SIGN WITHIN BOX] | | Date | | |
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Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The J. M. Smucker Company Notice of 20162019 Annual Meeting and Proxy Statement, 20162019 Annual Report, and Plan Letter are available at www.proxyvote.com. | | | | | — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — ��� |
E81902-P25489-Z75066 E12180-P80864-Z68133
| Proxy — THE J. M. SMUCKER COMPANY |
THE J. M. SMUCKER COMPANY
One Strawberry Lane, Orrville, Ohio 44667-0280
Solicited by the Board of Directors for the Annual Meeting of Shareholders to be Held on August 17, 2016
THE J. M. SMUCKER COMPANY One Strawberry Lane, Orrville, Ohio 44667-0280 Solicited by the Board of Directors for the Annual Meeting of Shareholders to be Held on August 14, 2019 VOTING INSTRUCTIONS TO: Fidelity Management Trust Company, Trustee (the “Trustee”) under The J. M. Smucker Company Employee Savings Plan (referred to hereinafter as the “Plan”) I, the authorized party as herein noted, as a participant in or a beneficiary of the above-referenced Plan, hereby instruct the Trustee to vote (in person or by proxy), in accordance with my confidential instructions on the reverse side of this card and the provisions of the Plan, all common shares of The J. M. Smucker Company (the “Company”) allocated to my account under the Plan (“Allocated Shares”) as of the record date for the Annual Meeting of Shareholders of the Company to be held on August 14, 2019 (or at any adjournment or postponement thereof), and in the Trustee’s discretion to vote upon such other business as may properly come before the Annual Meeting of Shareholders. In addition to voting the Allocated Shares, you may also use this card to vote non-directed shares held in the Plan (“Non-Directed Shares”), as determined in accordance with the terms of the Plan. For more information concerning voting Non-Directed Shares, please refer to the reverse side of this card and the enclosed instructions. The Trustee will vote any shares allocated to your account for which timely instructions are received from you by 11:59 p.m. Eastern Time on August 9, 2019, in accordance with the Plan. When properly executed, this proxy will be voted in the manner directed. If properly executed, but if no direction is given, this proxy will be voted in accordance with the Board of Directors’ recommendations and for Allocated Shares only. Please mark, date, sign, and return this proxy card promptly, using the enclosed envelope. No postage is required if mailed in the United States. |
| | | THE J. M. SMUCKER COMPANY ATTN: JEANNETTE KNUDSEN ONE STRAWBERRY LANE ORRVILLE, OH 44667-0280 | | VOTE BY INTERNET -www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. Eastern Time on August 9, 2019. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m. Eastern Time on August 9, 2019. 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: | | E81903-P25489-Z75066 | | KEEP THIS PORTION FOR YOUR RECORDS | — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — | THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. | | DETACH AND RETURN THIS PORTION ONLY |
| | | | | | | | | | | THE J. M. SMUCKER COMPANY | | | | | | | The Board of Directors recommends you vote “FOR” thefollowing proposals: | | | | | | | 1. | | Election of Directors whose term of office will expire in 2020. | | For | | Against | | Abstain | | | Nominees: | | | | | | | | | | | | | | | 1a. | | Kathryn W. Dindo | | ☐ | | ☐ | | ☐ | | | | | | | | | 1b. | | Paul J. Dolan | | ☐ | | ☐ | | ☐ | | | | | | | | | 1c. | | Jay L. Henderson | | ☐ | | ☐ | | ☐ | | | | | | | | | 1d. | | Gary A. Oatey | | ☐ | | ☐ | | ☐ | | | | | | | | | 1e. | | Kirk L. Perry | | ☐ | | ☐ | | ☐ | | | | | | | | | 1f. | | Sandra Pianalto | | ☐ | | ☐ | | ☐ | | | | | | | | | 1g. | | Nancy Lopez Russell | | ☐ | | ☐ | | ☐ | | | | | | | | | 1h. | | Alex Shumate | | ☐ | | ☐ | | ☐ | | | | | | | | | 1i. | | Mark T. Smucker | | ☐ | | ☐ | | ☐ | | | | | | | | | 1j. | | Richard K. Smucker | | ☐ | | ☐ | | ☐ | | | | | | | | | 1k. | | Timothy P. Smucker | | ☐ | | ☐ | | ☐ | | | | | | | | | 1l. | | Dawn C. Willoughby | | ☐ | | ☐ | | ☐ |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | For | | Against | | Abstain | | | | | | 2. | | Ratification of appointment of Ernst & Young LLP as the Company’s Independent Registered Public Accounting Firm for the 2020 fiscal year. | | ☐ | | ☐ | | ☐ | | | | | | 3. | | Advisory approval of the Company’s executive compensation. | | ☐ | | ☐ | | ☐ | | | | | | NOTE:Such other business as may properly come before the meeting or any adjournment or postponement thereof. | | | | | | | | |
Please sign your name EXACTLY as it appears on this proxy. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Signature [PLEASE SIGN WITHIN BOX] | | Date | | | | | | Signature (Joint Owners) | | Date | | |
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The J. M. Smucker Company Employee Stock Ownership Plan and The J. M. Smucker Company Employee Savings Plan
(each referred to hereinafter as the “Plan”)
I, the authorized party as herein noted, as a participant in or a beneficiaryNotice of one or more of the above-referenced Plans, hereby instruct the Trustee to vote (in person or by proxy), in accordance with my confidential instructions on the reverse side of this card and the provisions of the Plan(s), all common shares of The J. M. Smucker Company (the “Company”) allocated to my account under the Plan(s) (“Allocated Shares”) as of the record date for the2019 Annual Meeting of Shareholders of the Company to be held on August 17, 2016 (orand Proxy Statement and 2019 Annual Report
are available at any adjournment or postponement thereof), and in the Trustee’s discretion to vote upon such other business as may properly come before the Annual Meeting of Shareholders.www.proxyvote.com. In addition to voting the Allocated Shares, you may also use this card to vote unallocated shares held in the ESOP Suspense Account (“Unallocated Shares”), if applicable, and/or non-directed shares held in the Plan(s) (“Non-Directed Shares”), as determined in accordance with the terms of the Plan(s). For more information concerning voting Unallocated Shares and Non-Directed Shares, please refer to the reverse side of this card and the enclosed instructions.
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The Trustee will vote any shares allocated to your account for which timely instructions are received from you by 11:59 p.m. Eastern Time on August 12, 2016, in accordance with the Plan(s).E81904-P25489-Z75066
When properly executed, this proxy will be voted in the manner directed. If properly executed, but if no direction is given, this proxy will be voted in accordance with the Board of Directors’ recommendations and for Allocated Shares only.
Please mark, date, sign, and return this proxy card promptly, using the enclosed envelope. No postage is required if mailed in the United States.
| Proxy — THE J. M. SMUCKER COMPANY THE J. M. SMUCKER COMPANY One Strawberry Lane, Orrville, Ohio 44667-0280 Solicited by the Board of Directors for the Annual Meeting of Shareholders to be Held on August 14, 2019 VOTING INSTRUCTIONS TO: Fidelity Management Trust Company, Trustee (the “Trustee”) under The J. M. Smucker Company Non-Employee Director Deferred Compensation Plan (the “Plan”) I, the authorized party as herein noted, as a participant in or a beneficiary of the Plan, hereby instruct the Trustee to vote (in person or by proxy), in accordance with my confidential instructions on the reverse side of this card and the provisions of the Plan, all common shares of The J. M. Smucker Company (the “Company”) allocated to my account under the Plan as of the record date for the Annual Meeting of Shareholders of the Company to be held on August 14, 2019 (or at any adjournment or postponement thereof), and in the Trustee’s discretion to vote upon such other business as may properly come before the Annual Meeting of Shareholders. The Trustee will vote any shares allocated to your account for which timely instructions are received from you by 11:59 p.m. Eastern Time on August 9, 2019, in accordance with the Plan. When properly executed, this proxy will be voted in the manner directed. If properly executed, but if no direction is given, this proxy will be voted in accordance with the Board of Directors’ recommendations. Please mark, date, sign, and return this proxy card promptly, using the enclosed envelope. No postage is required if mailed in the United States. |
THE J. M. SMUCKER COMPANY LETTER TO ALL PARTICIPANTS OR BENEFICIARIES IN THE J. M. SMUCKER COMPANY EMPLOYEE STOCK OWNERSHIP PLAN AND THE J. M. SMUCKER COMPANY EMPLOYEE SAVINGS PLAN Enclosed are materials relating to the Annual Meeting of Shareholders of The J. M. Smucker Company (the “Company”), which will be held on August 17, 2016.14, 2019 (the “Annual Meeting”). You are receiving these materials because you were a participant or beneficiary in one or both of the benefit plansplan listed above as of the June 20, 201617, 2019 record date. As a participant or beneficiary in one of the plans,such plan, you are also a beneficial owner of common shares of the Company that are held in the plans.plan. As a beneficial owner, you are entitled to direct the trustee under each of the plansplan on how to vote those shares with respect to issues being submitted to the shareholders at the Company’s Annual Meeting. The trustee of both of the above referenced plansplan is Fidelity Management Trust Company. The purpose of this letter is to give you information on how to provide voting direction to the trustee on shares allocated to your account under one or both of the plans.plan. This letter also discusses a right that you have under the plansplan to provide direction to the trustee on how to vote certain other shares that are allocated to other participants and beneficiaries but are not voted, or that are not yet allocated to anyone.voted. This letter also outlines what it means if you exercise your right with respect to those other shares. Before making a decision on how to instruct the trustee, you should carefully read this letter and the enclosed materials. HOW DO I PROVIDE DIRECTION TO THE TRUSTEE? As a participant or beneficiary in one or both of the above referenced plans,plan, you may direct the trustee how to vote all shares allocated to your account. You may also direct the trustee how to vote the following other plan shares: Sharesshares allocated to the accounts of other participants and beneficiaries who do not themselves provide direction to the trustee on how to vote those shares (these are “Non-Directed Shares”); and
If you are a participant or beneficiary in the Employee Stock Ownership Plan (“ESOP”), shares in that plan that have not been allocated to participants or beneficiaries (these are “Unallocated“Non-Directed Shares”).
If you do not direct the trustee how to vote the shares which are allocated to your account, those shares will be voted by the trustee in accordance with the direction of other participants and beneficiaries. The trustee will vote shares under a particularthe plan based upon the direction of participants and beneficiaries in the plan who timely return voting instruction cards like the one that is enclosed. If you are a participant or beneficiary in both plans, you will receive one voting instruction card listing the shares for all plans in which you participate. To direct the trustee how to vote shares allocated to your account under the plans in which you participate,plan, simply mark your choices on the enclosed voting instruction card. In addition, you may, by marking the appropriate squarebox on the voting instruction card, direct the trustee to vote theNon-Directed Shares and/or Unallocated Shares in the same way as you direct the trustee to vote your allocated shares. If you elect to direct the trustee how to vote your allocated shares and/or theNon-Directed Shares and the Unallocated Shares, you must follow the voting instructions summarized on the voting instruction card. In order for the trustee to be able to vote the shares at the Company’s Annual Meeting, the trustee must receive your voting instructions by the deadline indicated on the voting instruction card.
Your decision whether or not to direct the trustee to vote shares in the plansplan will be treated confidentially by the trustee and will not be disclosed to the Company or any of its employees, officers, or directors.
VOTING RIGHTS OF SHARES The Company’s Amended Articles of Incorporation provide generally that each common share will entitle the holder to one vote on each matter properly submitted to shareholders, except for certain matters listed in the Amended Articles of Incorporation. On those listed matters, shareholders are entitled to exercise ten votes per share unless there has been a change in beneficial ownership of the common share in the past four years. In the event of a change in beneficial ownership, the new owner of that common share will be entitled to only one vote with respect to that common share on all matters until four years pass without a further change in beneficial ownership of the share.Theten-votes-per-share provisions do not apply to any of the proposals to be voted on at the Company’s Annual Meeting. FIDUCIARY STATUS Each plan participant or beneficiary is a “named fiduciary” (as defined in Section 402(a)(2) of the Employee Retirement Income Security Act of 1974, as amended) with respect to a decision to direct the trustee how to vote the shares allocated to his or her account. Individuals considered to be named fiduciaries are required to act prudently, solely in the interest of the participants and beneficiaries of the plans,plan, and for the exclusive purpose of providing benefits to participants and beneficiaries of the plans.plan. A named fiduciary may be subject to liability for his or her actions as a fiduciary. By marking, signing, dating, and returning the enclosed voting instruction card, or by submitting your vote online or by phone, you are accepting your designation under the plansplan as a named fiduciary. You should, therefore, exercise your voting rights prudently. You should mark, sign, date, and return the voting instruction card, or submit your vote online or by phone, only if you are willing to act as a named fiduciary. If you direct the trustee how to vote theNon-Directed Shares and/or Unallocated Shares, you will be a named fiduciary with respect to that decision also. You are similarly required to act prudently, solely in the interest of the participants and beneficiaries of the plans,plan, and for the exclusive purpose of providing benefits to participants and beneficiaries of the plansplan in giving direction on theNon-Directed Shares and/or Unallocated Shares, if you choose to do so. All questions and requests for assistance should be directed to the Company’s Shareholder Services department at (330)684-3838. |
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