TRIMBLE INC.
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
May 1, 2018
7, 2019
The enclosed proxy is solicited on behalf of the board of directors (“Board of Directors”) of Trimble Inc., a Delaware corporation (the“Company”), for use at the Company’s annual meeting of stockholders (“Annual Meeting”), to be held at Sunnyvale Theatre, Sunnyvale Community Center, 550 E. Remingtonthe Company’s offices at 10368 Westmoor Drive, Sunnyvale, CA 94087,Westminster, CO 80021, on Tuesday, May 1, 2018,7, 2019, at 5:3000 p.m. local time, and at any adjournment(s) or postponement(s) thereof, for the purposes set forth herein and in the accompanying Notice of Annual Meeting.
The Company’s principal executive offices are located at 935 Stewart Drive, Sunnyvale, California 94085. The telephone number at that address is(408) 481-8000.
A copy of the Company’s annual report on Form10-K may be obtained by sending a written request to the Company’s Investor Relations Department at 935 Stewart Drive, Sunnyvale, California 94085. Full copies of the Company’s annual report on Form10-K for the 20172018 fiscal year, and proxy statement, each as filed with the Securities and Exchange Commission (“SEC”) are available via the internet at the Company’s web site athttp://investor.trimble.com/annuals.cfmannuals-and-proxies.
INTERNET AVAILABILITY OF PROXY MATERIALS
Under the “notice and access” rules adopted by the SEC, we are furnishing proxy materials to our stockholders primarily via the internet, instead of mailing printed copies of those materials to each stockholder. As a result, on or about March 21, 2018,26, 2019, we mailed our stockholders a notice of internet availability of proxy materials (“Notice”) containing instructions on how to access our proxy materials, including our proxy statement and our annual report. The Notice also instructs you on how to access your proxy card to vote through the internet or by telephone. The Notice is not a proxy card and cannot be used to vote your shares.
This process is designed to expedite stockholders’ receipt of proxy materials, lower the cost of the Annual Meeting, and help minimize the environmental impact of the Annual Meeting. However, if you would prefer to receive printed proxy materials, please follow the instructions included in the Notice. If you have previously elected to receive our proxy materials electronically, you will continue to receive these materials viae-mail unless you elect otherwise.
INFORMATION CONCERNING SOLICITATION AND VOTING
Record Date and Shares Outstanding
Stockholders of record at the close of business on March 5, 201811, 2019 (the“Record Date”) are entitled to notice of, and to vote at, the Annual Meeting. At the Record Date, the Company had issued and outstanding 248,592,825252,343,799 shares of common stock, $0.001 par value (“Common Stock”).
Revocability of Proxies
Any proxy given pursuant to this solicitation may be revoked by the person giving it at any time before its use by delivering to the Company (Attn: Corporate Secretary) a written notice of revocation or a duly executed proxy bearing a later date (including a proxy by telephone or over the internet) or by attending the meeting and voting in person. Attendance at the meeting will not, by itself, revoke a proxy.
Voting
Each share of Common Stock outstanding on the Record Date is entitled to one vote on all matters. An automated system administered by the Company’s agent tabulates the votes.
Abstentions and brokernon-votes are each included in the determination of the presence or absence of a quorum at the Annual Meeting. The required quorum is a majority of the shares outstanding on the Record Date. Abstentions and brokernon-votes will be taken into account only for purposes of determining whether a quorum is present, and will not be taken into account in determining the outcome of any of the items submitted to a vote of the stockholders.
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A “brokernon-vote” occurs when a nominee holding shares for a beneficial owner does not vote on a particular item because the nominee does not have discretionary voting power with respect to that item and has not received instructions with respect to that item from the beneficial owner, despite voting on at least one other item for which it does have discretionary authority or for which it has received instructions. If your shares are held by your broker, bank or other agent as your nominee (that is, in “street name”), you will need to obtain a proxy form from the institution that holds your shares and follow the instructions included on that form regarding how to instruct your broker, bank or other agent to vote your shares. If you do not give instructions, under the rules that govern brokers who are record owners of shares that are held in street name for the beneficial owners of the shares, brokers who do not receive voting instructions from their clients have the discretion to vote uninstructed shares on routine matters but have no discretion to vote them onnon-routine matters. Items 1 and 2 arenon-routine matters. Item 3 is a routine matter.
A plurality of the votes cast will determine Item 1 (Election of Directors). However, since this is an uncontested election of directors, if any nominee for director in this election receives a greater number of votes “withheld” from such nominee than votes “for”, the nominee for director must tender his or her resignation to our Board of Directors, and within 90 days following the date of the Annual Meeting, the remaining members of our Board of Directors shall, through a process managed by the Nominating and Corporate Governance Committee and excluding the director nominee in question, determine whether to accept such resignation. Items 2 and 3 require the affirmative vote of the holders of the majority of the shares represented and voting at the Annual Meeting in person or by proxy on such item.
Voting via the Internet or by Telephone
Stockholders may vote by submitting proxies electronically either via the internet or by telephone or, if they request paper copies of the proxy materials, they may complete and submit a paper version of the proxy card. Please note that there are separate arrangements for voting via the internet and by telephone depending on whether shares are registered in the Company’s stock records directly in a stockholder’s name or whether shares are held in the name of a brokerage firm or bank. Detailed electronic voting instructions can be found on the Notice mailed to each stockholder.
In order to allow individual stockholders to vote their shares and to confirm that their instructions have been properly recorded, the internet and telephone voting procedures have been designed to authenticate each stockholder’s identity. Stockholders voting via the internet should be aware that there may be costs associated with electronic access, such as usage charges from internet access providers and telephone companies that will be borne solely by the individual stockholder.
Voting in Person
Registered Stockholders
If your shares are registered directly in your name with our transfer agent, American Stock Transfer & Trust Co., Inc., you are considered to be the registered stockholder with respect to those shares. A Notice for registered stockholders was mailed directly to you by our mailing agent, Broadridge Investor Communications, Inc. Registered stockholders have the right to vote in person at the meeting.
Beneficial Stockholders
If your shares are held in a brokerage account or by another nominee, you are considered to be a beneficial stockholder of those shares. A Notice for beneficial stockholders was forwarded to you together with voting instructions. In order to vote in person at the Annual Meeting, beneficial stockholders must obtain a “legal proxy” from the broker, trustee or nominee that holds their shares. Without a legal proxy, beneficial owners will not be allowed to vote in person at the Annual Meeting.
Solicitation of Proxies
The entire cost of this proxy solicitation will be borne by the Company. The Company has retained the services of Morrow Sodali LLC, 470 West Ave., Stamford, CT 06902, to solicit proxies, for which services the Company has agreed to pay approximately $8,000 as well as a solicitation charge per stockholder in the event individual holders are solicited. In addition, the Company will also reimburse certainout-of-pocket expenses in connection with such proxy solicitation. The Company may reimburse brokerage firms and other persons representing beneficial owners of shares for their expenses in forwarding soliciting materials to such beneficial owners. Proxies may also be solicited by certain of the Company’s directors, officers, and regular employees, without additional compensation, personally or by telephone, or facsimile.
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Deadline for Receipt of Stockholder Proposals for 20192020 Annual Meeting
Stockholders are entitled to present proposals for action at future stockholder meetings of the Company if they comply with the requirements of the appropriate proxy rules and regulations promulgated by the SEC.
Proposals of stockholders which are intended to be considered for inclusion in the Company’s proxy statement and form of proxy related to the Company’s 20192020 annual meeting of stockholders must be received by the Company at its principal executive offices (Attn: Corporate Secretary—Stockholder Proposals, Trimble Inc. at 935 Stewart Drive, Sunnyvale, California 94085) no later than November 21, 2018.27, 2019. Stockholders interested in submitting such a proposal are advised to retain knowledgeable legal counsel with regard to the detailed requirements of the applicable securities laws. The timely submission of a stockholder proposal to the Company does not guarantee that it will be included in the Company’s applicable proxy statement.
In addition, if the Company is not notified at its principal executive offices of a stockholder proposal at least 45 days prior to the one year anniversary of the mailing of the Notice, which will be February 4, 2019,10, 2020, then such proposal shall be deemed “untimely” and, therefore, the proxy holders for the Company’s 20192020 annual meeting of stockholders will have the discretionary authority to vote against any such stockholder proposal if it is properly raised at such annual meeting, even though such stockholder proposal is not discussed in the Company’s proxy statement related to that stockholder meeting.
Stockholders who wish to offer proposals at the Annual Meeting will be required to send notice to the Company with information concerning the proposal, the stockholder giving such notice, and any beneficial owner on whose behalf the proposal is made, as specified in the bylaws, which notice in order to be timely must be received by the Company not earlier than January 1, 20198, 2020 and not later than January 31, 2019,February 7, 2020, except if the annual meeting for 20192020 is called for a date earlier than April 1, 20197, 2020 or later than May 31, 2019,June 6, 2020, notice by the stockholder in order to be timely must be so received not later than the close of business on the tenth (10th) day following the day on which notice of the date of the annual meeting for 20192020 is mailed or the date the Company announces the date of the annual meeting for 2019,2020, whichever occurs first. Stockholders who wish to nominate one or more candidates for election as a director will be required to send notice to the Company with the information and undertakings concerning the nominee, the stockholder giving such notice, and any beneficial owner on whose behalf the nomination is made, as specified in the bylaws, which notice in order to be timely must be received by the Company not earlier than January 1, 20198, 2020 and not later than January 31, 2019,February 7, 2020, except if the annual meeting for 20192020 is called for a date earlier than April 6, 201912, 2020 or later than May 26, 2019,June 1, 2020, notice by the stockholder in order to be timely must be so received not later than the close of business on the tenth (10th) day following the day on which notice of the date of the annual meeting for 20192020 is mailed or the date the Company announces the date of the annual meeting for 2019,2020, whichever occurs first.
The proxy card provided in conjunction with this proxy statement, to be used in connection with the 20182019 Annual Meeting, grants the proxy holder discretionary authority to vote on any matter otherwise properly raised at such Annual Meeting.
Note Regarding Reincorporation
The Company changed its name from Trimble Navigation Limited (the“California Predecessor”) to Trimble Inc. and its state of incorporation from the State of California to the State of Delaware on October 1, 2016. References in this proxy to the Company shall also be deemed to refer to the California Predecessor where appropriate, including for example references to years of service in terms of eligibility under the employee stock purchase plan or for other benefits related to years of service.
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EXECUTIVE OVERVIEW
2018
2019 Annual Meeting of Stockholders
DATE AND TIME: May 1, 2018, 7, 2019, 5:30 pm00 p.m. local time
PLACE: Sunnyvale Theatre, Sunnyvale Community Center, 550 E. Remington10368 Westmoor Drive, Sunnyvale, CA 94087
Westminster, CO 80021
RECORD DATE: March 5, 2018
11, 2019
This overview highlights information contained elsewhere in this Proxy Statement, but does not contain all of the information that you should consider. You should read the entire Proxy Statement carefully before voting. For more complete information regarding the Company’s 20172018 performance, please review the Company’s Annual Report on Form10-K for the year ended December 29, 2017.
28, 2018.
Voting Matters
| Proposal | Description | Board Recommendation | ||||||
Proposal 1: | To elect directors to serve for the ensuing year and until their successors are elected | FOR | ||||||
Proposal 2: | To hold an advisory vote on approving the compensation for our Named Executive Officers | FOR | ||||||
Proposal 3: | To ratify the appointment of Ernst & Young LLP as the independent auditor of the Company for the current fiscal year ending | January 3, 2020 | FOR | |||||
Business Highlights
2017 Performance
2017 marked
2018 results represented a record level of performance over Trimble’s 40 year history, providing a strong platform for 2019 and beyond. We delivered record levels of significant improvementrevenue, profitability, operating cash flow and strong resultsearnings per share, while increasing the competitive strength of our core businesses. Furthermore, our business portfolio is better balanced with respect to end market exposure, geographic diversity and business model mix than at any point in Trimble’s history. The year was also notable for Trimble. the substantial progress we made in the Buildings & Infrastructure segment with the acquisitions of e-Builder and Viewpoint. With these acquisitions, Trimble now has a construction technology business with unmatched strengths and capabilities, generating over $1 billion in revenue annually.
In 2018, our offerings and revenue streams continued their evolution toward higher levels of software centricity. We finished 2018 with software, services, and recurring revenues representing approximately 52 percent of total Company revenue, and with recurring revenue representing approximately 30 percent of total revenue. Furthermore, we reached $1.05 billion in annualized recurring revenue at the end of the year. Demonstrative of the balance within our business, each of our reporting segments, and each of our major geographical regions grew in 2018.
Financial highlights for the year included:
Total year non-GAAP revenue was $3.132 billion; non-GAAP revenue increased 18 percent as compared to fiscal 2017, with significantly higher revenueorganic growth in the second half of the year.approximately 9 percent. See Appendix A to this Proxy Statement for a reconciliation of GAAP to non-GAAP financial measures.
Revenue grew in all segments, both in the United States and overseas.international markets.
Recent acquisitions, including e-Builder and Viewpoint, performed ahead of plan
Software, services and recurring revenue grew to 52 percent of total revenue, with annualized recurring revenue in the fourth quarter 2018 of $1.05 billion.
GAAP gross margin as a percentage of revenue was 54.1 percent, as compared to 52.1 percent in 2017. Non-GAAP gross margin as a percentage of revenue was 58.0 percent, as compared to 55.7 percent in 2017.
GAAP operating income of $246was $320.7 million wasin 2018, up 36 percent as compared to fiscal 2016. 2017.
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Non-GAAP operating income was $643.9 million in 2018, up 37 percent as compared to fiscal 2017.
GAAP operating income as a percentage of revenue was 9.310.3 percent of revenue as compared to 7.78.9 percent in 2017.
Non‑GAAP operating income as a percentage of revenue was 20.6 percent as compared to 17.8 percent in 2017.
GAAP diluted income per share was $1.12 as compared to $0.46 in fiscal 2016.2017.
Non-GAAP diluted income per share was $1.94 as compared to $1.45 in fiscal 2017.
Operating cash flow for fiscal 20172018 was $412 million.$486.7 million, up 13 percent as compared to fiscal 2017. During fiscal 2017,2018, Trimble repurchased $288$90 million of its common stock and spent $293 million on acquisitions.stock.
2017 was also a year of significant strategic development, with major product announcements, eight announced acquisitions, and significant channel development initiatives. Highlights included:
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Long-term performance
Trimble has an excellent record of performance and creating stockholder value over an extended period of time. Trimble’s compound average annual stockholder return has outperformed the S&P 500 Total Return index over each of the last 1, 2, 3, 10, 15, and 20 year periods ending 2017.
| 1 year | 2 years | 3 years | 5 years | 10 years | 15 years | 20 years | ||||||||
Trimble | 34.9% | 37.7% | 15.3% | 6.3% | 10.4% | 21.9% | 12.8% | |||||||
S&P 500 (TR) | 21.9% | 16.8% | 11.4% | 15.8% | 8.5% | 9.9% | 7.2% |
Trimble underperformed only2018. Despite record results in 2018, our stock closed the 5fiscal year period. In 2014 and 2015, our business was negativelyat $31.94, impacted by weaknessvolatility in our agriculture and geospatial businesses largely due to weakness inequity markets at the agriculture market andend of the effectsyear. As of significant declines in the price of oil.Record Date, Trimble’s stock price declined during that timeframe, along with many companies with meaningful exposurehad increased to those markets. In recent years, $38.76 per share, which reflects a much improved performance from the beginning of 2018 compared to the 1 year performance indicated in the table below.
| 1 year | 3 years | 5 years | 10 years | 15 years | 20 years | |
| Trimble | (18.9%) | 15.3% | (1.1%) | 11.8% | 11.8% | 18.0% |
| S&P 500 (TR) | (4.4%) | 9.3% | 8.5% | 13.1% | 7.8% | 5.6% |
Trimble’s share price has rebounded, driven by improved market conditions and management actions to increase growth and improve profitability.
Trimble’s significant outperformancetotal return over the 10, 15, and 20 year time horizonshorizon illustrates well the long-term outperformance through economic cycles. AsTrimble's cumulative total return has also significantly outperformed the S&P 500 over the twenty-year time horizon, as shown in the graph below, Trimble has more than tripled the S&P 500 cumulative total return over the twenty-year time horizon.
below.
Corporate Governance Highlights
Our Board of Directors recognizes that Trimble’s success over the long term requires a strong corporate governance framework. Below are highlights of our corporate governance framework:
Our directors are elected annually.
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Our Chairman and CEO positions are separate and our Chairman is an independent director.
In uncontested elections, our directors must be elected by a majority of the votes cast, and an incumbent director who fails to receive a majority is required to tender his or her resignation.
We have no supermajority voting requirements in our Certificate of Incorporation or Bylaws.
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We focus on board refreshment and diversity, as evidenced by the fact that one third of our directors have less than five years of tenure and one third of our directors are female:
A succession planning process is in place and we actively plan for executive succession on an ongoing basis.
We have double trigger change in control arrangements for new equity issuances, with no excise tax gross up.
We actively engage our stockholders for feedback.
Responsible Corporate Citizenship (RCC)
Since 1978, our industry-specific solutions have helped customers increase productivity while enhancing safety, maintaining compliance and reducing environmental impact. Trimble is a company driven by purpose. Our mission, Transforming the Way the World Works, drives our business to benefit all stakeholders, including employees, stockholders, customers, and the communities we serve.
Trimble has a rich history of philanthropy and environmental and social stewardship, and in 2017 codified these activities with the launch of our responsible corporate citizenship program. The program also includes policies and initiatives to ensure ethical behavior, supply chain compliance, environmental monitoring, and safe working conditions and inclusive work environments for our employees. More information about Trimble’s program is included in ouron the Responsible Corporate Citizenship report available in the “Investor Relations” section of our website at www.trimble.com.
Executive Compensation Highlights
Our executive compensation philosophy is based on our continuing effort of fostering and supporting apay-for-performance culture. We have designed our executive compensation programs to closely align with the interest of our stockholders. As discussed in detail under “Compensation Discussion and Analysis,” our executive compensation program provides short-term cash and long-term equity components, with a significant bias toward long-term equity awards tied closely to stockholder returns and long-term objectives.
objectives
.Key Policies and Practices
The following summarizes some of our key executive compensation and related policies and practices:
| What we do | What we don’t do | |
• Use apay-for-performance philosophy • Maintain an independent compensation committee • Retain an independent compensation advisor • Review executive compensation and conduct an overall compensation risk assessment annually • Place compensation “at risk,” with a majority of executive compensation in the form of performance-based incentives – 2018 • Maintain a stock ownership policy that requires our CEO and executive officers to hold a minimum ownership level of our common stock • the event of a material restatement of our financial results, allows for the recovery of certain compensation from our executive officers. • Hold an annual stockholder advisory vote on executive compensation | • No executive-only pension arrangements or retirement plans • No significant perquisites or other personal benefits for our executive officers • No tax reimbursements or “gross up” payments, other than related to standard relocation benefits • No special health or welfare benefits for executives • No hedging or pledging of our equity securities • No stock optionre-pricing | |
Stockholder Engagement
Trimble’s Board of Directors values the opinions of our stockholders and carefully considers feedback received with regard to our governance practices and executive compensation program. Over the past several years, our management team has engaged with a significant number of our largest stockholders to better understand their views
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regarding our approach to executive compensation. In recent years, we have made changes to our executive compensation programs in response to this input and the review of best practices. These changes have included:
Adopting a clawback policy
Extending stock ownership guidelines to our CFO and Named Executive Officers
Eliminating quarterly performance periods for executive bonus plans
Eliminating all single-trigger vesting in connection with new equity issuances
At our 20172018 Annual Meeting of Stockholders, we conducted anon-binding stockholder advisory vote on the compensation of our named executive officers (commonly known as a “Say on Pay” vote). Our stockholders approved the Say on Pay proposal with 79.8%95% of the votes cast in favor of the proposal.
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During 2017, our management team engaged with many of our largest stockholders to better understand their views regarding our approach to executive compensation. Our stockholders were generally supportive of our approach to pay, including the adoption of features in our compensation programs intended to align Trimble with best practices in incentive plan design and compensation governance.
Based in part on input from stockholders, the Compensation Committee determined in 2017 (1) to approve a clawback policy that is applicable to both cash and equity compensation; (2) to approve an extension of stock ownership guidelines to our CFO, our Named Executive Officers and other key executives; and (3) to eliminate quarterly performance periods for bonuses for 2017. In 2018, we adopted a policy prohibiting the pledging of our equity securities as collateral for loans, which complements the existing ban on hedging our securities that was already in place.
The Compensation Committee values the opinions of our stockholders and will continue to consider the outcome of future Say on Pay votes, as well as feedback received throughout the year, when making compensation decisions for our executive officers.
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ITEM 1
ELECTION OF DIRECTORS
Nominees
A board of eightnine directors is to be elected at the Annual Meeting. The Board of Directors has authorized the nomination at the Annual Meeting of the persons named below as candidates. All nominees currently serve on the Board of Directors. Each of the directors, except for Mr. Berglund, are independent directors as defined by Rule 5605(a)(2) of the NASDAQ Stock Market (“NASDAQ”) Marketplace Rules.
Each of the director nominees listed below was elected to be a director at the Company’s 20172018 annual meeting of stockholders, except for Mr. Wibergh,Ms. MacQuillan, who was appointed by the Board of Directors on February 1, 2018, when the number of Company directors was expanded from eight to nine in accordance with the Company’s bylaws. Mr. Vande Steeg will not seek election and will be retiring from the Board effective as of the date of the Annual Meeting, May 1,October 5, 2018. The Company intends to adopt an amendment to the Company’s bylaws reducing the number of Company directors from nine to eight, which will become effective concurrent with Mr. Vande Steeg’s retirement.
The names of the nominees and certain information about them, as of the Record Date, are set forth below:
| Name of Nominee | Age | Principal Occupation | Director Since | |||||
Steven W. Berglund
|
| 66
|
| President and Chief Executive Officer of the Company
| 1999
| |||
Kaigham (Ken) Gabriel (2)
|
| 62
|
| President and Chief Executive Officer of The Charles Stark Draper Laboratory
| 2015
| |||
Merit E. Janow (1)
|
| 59
|
| Dean of the Faculty, School of International and Public Affairs, Columbia University
| 2008
| |||
Ulf J. Johansson (2) (3)
|
| 72
|
| Business Consultant
| 1999
| |||
Meaghan Lloyd (3)
|
| 43
|
| Partner and Chief of Staff of Gehry Partners, LLP
| 2016
| |||
Ronald S. Nersesian (1) (3)
|
| 58
|
| President and Chief Executive Officer, Keysight Technologies
| 2011
| |||
Mark S. Peek (2)
|
| 60
|
| Managing Director andCo-Head, Workday Ventures
| 2010
| |||
Johan Wibergh
|
| 54
|
| Group Technology Officer and Chief Information Officer, Vodafone
| 2018
| |||
| Retiring Director | ||||||||
Nickolas W. Vande Steeg (1) *
|
| 75
|
| Venture Capital Investor and Business Consultant
| 2003
| |||
| Name of Nominee | Age | Principal Occupation | Director Since |
| Steven W. Berglund | 67 | President and Chief Executive Officer of the Company | 1999 |
| Kaigham (Ken) Gabriel (1) | 63 | President and Chief Executive Officer of The Charles Stark Draper Laboratory | 2015 |
| Merit E. Janow (2) | 60 | Dean of the Faculty, School of International and Public Affairs, Columbia University | 2008 |
| Ulf J. Johansson (1) (3) | 73 | Business Consultant | 1999 |
| Meaghan Lloyd (3) | 44 | Partner and Chief of Staff of Gehry Partners, LLP | 2016 |
| Sandra MacQuillan | 51 | Chief Supply Chain Officer and Senior Vice President of Kimberly-Clark Corporation | 2018 |
| Ronald S. Nersesian (2) (3) | 59 | President and Chief Executive Officer, Keysight Technologies | 2011 |
| Mark S. Peek (1) | 61 | Managing Director and Co-Head, Workday Ventures | 2010 |
| Johan Wibergh (2) | 55 | Group Technology Officer and Chief Information Officer, Vodafone | 2018 |
| (1) | Member of the Audit Committee |
| (2) | Member of the Compensation Committee |
| (3) | Member of the Nominating and Corporate Governance Committee |
Steven W. Berglund has served as president and chief executive officer and a director of Trimble since March 1999. Prior to joining Trimble, Mr. Berglund was president at Spectra Precision, a group within Spectra Physics AB. Mr. Berglund’s business experience includes a variety of senior leadership positions with Spectra Physics and manufacturing and planning roles at Varian Associates. He began his career as a process engineer at Eastman Kodak. He attended the University of Oslo and the University of Minnesota where he received a B.S. in chemical engineering. Mr. Berglund received his M.B.A. from the University of Rochester. Mr. Berglund serves on the board of the Silicon Valley Leadership Group and the Association of Equipment Manufacturers (AEM) and is chairman of AEM’s construction sector board. He is also a member of the board of directors of the Silicon Valley Leadership Group and is also a member of the board, as well as the construction sector board, of the Association of Equipment Manufacturers. In December 2013, Mr. Berglund was appointed to the board of directors and compensationaudit committee of Belden Inc., a global provider ofend-to-end signal transmission solutions.8
Mr. Berglund is qualified to serve as director of the Company because of his intimate knowledge and understanding of the Company’s business and operations, resulting from his service as director, president and chief executive officer of the Company since 1999. In addition, Mr. Berglund brings to the Board of Directors extensive industry experience.
Kaigham (Ken) Gabrielwas appointed to the Board of Directors in 2015. Dr. Gabriel is the president and chief executive officer of The Charles Stark Draper Laboratory, an independentnot-for-profit research institution that develops innovative technology solutions in the fields of national security, space, biomedical systems and energy. He has held that position since October 2014. Prior to that, Dr. Gabriel served as deputy director of the Advanced Technology and Projects (ATAP) group at Google from 2012 to 2014 and as corporate vice president at Google/Motorola Mobility. From 2009 to 2012, he was the deputy director, and then acting director, of the Defense Advanced Research Projects Agency (DARPA) in the Department of Defense. Between 2002 and 2009, Dr. Gabriel was theCo-Founder, Chairman Chairman
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and Chief Technology Officer of Akustica, a fabless semiconductor company that commercialized Micro Electro Mechanical Systems audio devices and sensors. Dr. Gabriel holds SM and ScD degrees in Electrical Engineering and Computer Science from the Massachusetts Institute of Technology.
Dr. Gabriel is qualified to serve as director of the Company because of his strong background and experience in management in technology companies, including in his current position as president and chief executive officer of Draper Laboratory. Dr. Gabriel also brings deep technological expertise and knowledge of the industry to the Company.
Merit E. Janow was appointed to the Board of Directors in 2008. Professor Janow has been a professor at Columbia University’s School of International and Public Affairs (SIPA) since 1994. She has had a number of leadership positions at the University and became Dean of the Faculty at SIPA in July 2013. Previously, she directed the program in international finance and economic policy. Professor Janow regularly teaches advanced courses in international trade, World Trade Organization (WTO) law, and comparative antitrust at Columbia Law School, and international economic policy and China in the Global Economy at SIPA. She has published numerous articles and several books on international trade and economic matters. Professor Janow has had several periods of public service: she served as one of seven members of the WTO’s Appellate Body from 2003-2007, she served as the Executive Director of an international antitrust advisory committee to the attorney general from 1997-2000, and Deputy Assistant U.S. Trade Representative for Japan and China from 1990-1993. Professor Janow served on the board of directors of the Nasdaq Stock Markets LLC of the Nasdaq OMX Group from 2005 - 2016. Since 2001, Professor Janow has served on the board of directors of a cluster of the American Funds family comprising the Capital Income Builder (CIB) Fund, the World Growth and Income (WGI) Fund and the New Economy Fund (NEF). In 2007, she joined the board of another fund cluster of the American Funds family, the American Funds Insurance Series (AFIS), the American Fund Target Date Retirement Fund (AFTD) and the Fixed Income (FI) Fund. In June 2014, she joined the board of Mastercard. Professor Janow holds a B.A. in Asian Studies from the University of Michigan and a J.D. from Columbia Law School where she was a Stone Scholar.
Professor Janow is qualified to serve as director of the Company based on her extensive knowledge and experience in international trade and economics, which provide valuable insight to the Company given the global nature of its business. Professor Janow also brings to the Board of Directors significant investment management expertise through her experience serving on the boards of several mutual funds.
Ulf J. Johansson was appointed chairman of the board in 2007, and has served as a director of the Company since December 1999. Dr. Johansson is a Swedish national with a distinguished career in communications technology. Dr. Johansson currently serves as chairman of Acando AB, a management and IT consultancy company, and also on the boards of directors of several privately held companies. From 2005 until 2017, he served on the board of directors of Telefonaktiebolaget LM Ericsson (“Ericsson”), a telecommunications company. From 2012 until 2016, he was a member of the Governing Board of the European Institute of Innovation and Technology, an EU entity funding advanced technology development in Europe. From 1990 to 2005, Dr. Johansson served as chairman of Europolitan Vodafone AB, a GSM mobile telephone operator in Sweden. From 1998 to 2005, Dr. Johansson served on the board of directors of Novo Nordisk A/S, a Danish pharmaceutical/life science company, and from 2005 until 2013, he served as chairman of its majority owners, the Novo Nordisk Foundation and Novo A/S. During 1998 to 2003 Dr. Johansson served as chairman of the University Board of Royal Institute of Technology in Stockholm. He formerly also served as president and chief executive officer of Spectra-Physics AB, and executive vice president at Ericsson Radio Systems AB. Dr. Johansson received a Master of Science in Electrical Engineering, and a Doctor of Technology (Communication Theory) from the Royal Institute of Technology in Sweden.
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Dr. Johansson is qualified to serve as director of the Company because of his significant industry knowledge and experience resulting from his service on the boards of several telecommunications companies. In addition, Dr. Johansson has considerable knowledge of the Company’s business and operations, having served as a member of the Board of Directors since 1999.
Meaghan Lloyd was appointed to the Board of Directors in 2016. Ms. Lloyd is the chief of staff and a partner at Gehry Partners, LLP, a full service architectural firm with extensive international experience in the design and construction of academic, museum, theater, performance, and commercial projects. Founded in 1962 in Los Angeles, California, Gehry Partners’ mission is to raise architecture to the level of art, while creating buildings that meet the project’s functional and budgetary needs. She has held this position since 2009. Prior to this, she was a designer working with Frank Gehry in the firm. In addition to her duties at Gehry Partners, she served as chief executive officer of Gehry Technologies, Inc., a cloud-based software and service company for the architectural, engineering and construction sectors, from 2013 to 2014. Ms. Lloyd received her Bachelor of Science in Architectural Studies from the University of
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Illinois, Champaign-Urbana and her Masters of Architecture from Yale University. She is a board member of Turnaround Arts California.
Ms. Lloyd is qualified to serve as a director of the Company because she brings a valuable combination of operational and project management expertise, and because of her significant industry knowledge and experience in the areas of architecture, construction and design from her work with Gehry Partners, LLP.
Sandra MacQuillan was appointed to the Board of Directors on October 5, 2018. Ms. MacQuillan is currently senior vice president and chief supply chain officer at Kimberly-Clark Corporation with responsibility globally for procurement, manufacturing, logistics, quality, safety and sustainability. From 2009 to 2015, MacQuillan served as global vice president, supply chain for Global Petcare, a $15 billion business of Mars, Incorporated and was responsible for procurement, manufacturing, engineering and logistics. During her tenure at Mars, she also served in a variety of operations and supply chain roles since joining the company in 1994. MacQuillan has extensive international experience in procurement, technology and engineering, and has lived and worked in the UK, Czech Republic, Russia, Middle East, Belgium and now in the U.S. MacQuillan earned her bachelor's degree in mechanical engineering with honors from the University of Greenwich, UK and was awarded Chartered Engineer status from the Institution of Mechanical Engineers, London.
Ms. MacQuillan is qualified to serve as a director of the Company because of her extensive business operations experience, particularly in the areas of supply chain and logistics management, gained from her roles at several large multinational companies. Ms. MacQuillan also brings a strong international business perspective and broad domain knowledge and experience in procurement, technology and engineering.
Ronald S. Nersesian was appointed to the Board of Directors in 2011. Mr. Nersesian has been president and chief executive officer of Keysight Technologies, an electronic measurement company, since 2013, when Agilent Technologies announced the separation of its electronic measurement business and launched Keysight Technologies. From November 2012 to September 2013, he served as president and chief operating officer of Agilent Technologies. From November 2011 to November 2012, he served as Agilent Technologies’ executive vice president and chief operating officer. From March 2009 to November 2011, Mr. Nersesian served as president of Agilent’s Electronic Measurement group (EMG), and from February 2005 to March 2009, he served as the vice president and general manager of the Wireless Business Unit of EMG. Mr. Nersesian joined Agilent in 2002 as vice president and general manager of the company’s Design Validation Division. Mr. Nersesian began his career in 1982 with Computer Sciences Corporation as a systems engineer for satellite communications systems. In 1984, he joined Hewlett-Packard, and served in a range of management roles during his tenure. In 1996, Mr. Nersesian joined LeCroy Corporation as vice president of worldwide marketing and subsequently assumed other senior management roles, including senior vice president and general manager of the company’s digital storage oscilloscope business. Mr. Nersesian is a member of Georgia Tech’s Advisory Board. Mr. Nersesian holds a bachelor’sbachelor's degree in electrical engineering from Lehigh University and an MBA from New York University, Stern School of Business.
Mr. Nersesian is qualified to serve as director of the Company because of his strong business operational experience with technology companies and management expertise developed over three decades. This breadth of experience includes his current position as president and chief executive officer of Keysight Technologies. Mr. Nersesian has extensive experience in managing and growing international technology enterprises, which is directly relevant and valuable to the Company.
Mark S. Peek was appointed to the Board of Directors in 2010. Mr. Peek is a managing director andco-head of Workday Ventures, the strategic investment arm of Workday, Inc., a leading provider of enterprise cloud applications for finance and human resources. He has held this position since February 2018. From June 2015 to February 2018, Mr. Peek wasco-president of Workday. He joined Workday in June 2012 as chief financial officer and served in that capacity until April 2016. From December 2011 to June 2012, Mr. Peek also served on the board of directors of Workday. Prior to joining Workday, Mr. Peek was president, business operations and chief financial officer of VMware, Inc., a provider of business infrastructure virtualization solutions. From April 2007 to January 2011, Mr. Peek served as chief financial officer of VMware, Inc. From 2000 to 2007, Mr. Peek was senior vice president and chief accounting officer at Amazon.com. Prior to joining Amazon.com, Mr. Peek spent 19 years at Deloitte, the last ten years as a partner. Mr. Peek serves on the Advisory Board of the Foster School of Business at the University of Washington. Mr. Peek received a B.S. in accounting and international finance from Minnesota State University.
Mr. Peek is qualified to serve as director of the Company because of his strong background and years of experience in accounting and financial management, as well as his industry knowledge regarding “software as a service” (SaaS) and cloud computing. Mr. Peek brings key financial expertise gained through his service as chief
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financial officer at Workday, Inc., as chief financial officer at VMware, as chief accounting officer at Amazon.com, and his 19 years of
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experience at Deloitte. Mr. Peek brings valuable technology industry knowledge from his role as managing director andco-head of Workday Ventures and his prior service asco-president of Workday.
Johan Wibergh was appointed to the Board of Directors in February 2018. Mr. Wibergh is Group Technology Officer and Chief Information Officer of Vodafone, a global telecommunications provider. He has held that position since May 2015. He also serves as Chairmanon the board of the Next Generation Mobile Network, an alliance including many of the world’s leading telecommunications operators and other contributing technology companies. Before joining Vodafone, Mr. Wibergh held various management positions at Ericsson since 1997, including, from 2008, Executive Vice President and Head of Business Unit Networks. Prior to that, he held various management positions in other businesses in the information technology (IT) industry. Mr. Wibergh holds a Master in Computer Science from Linköping University in Sweden, and has attended various executive management programs during his career.
Mr. Wibergh is qualified to serve as director of the Company because he brings valuable expertise in technologies relevant to the Company, including network and wireless connectivity, cybersecurity and cloud computing. Mr. Wibergh also has a strong background in managing technology businesses and international operations, including as a result of his current position as Group Technology Officer and Chief Information Officer of Vodafone.
Nickolas W. Vande Steeg was appointed vice chairman in 2007, and has served as a director of the Company since 2003. Mr. Vande Steeg served as president and chief operating officer of Parker Hannifin Corporation until March 2007, where he began his career in 1971. Mr. Vande Steeg currently is on the board of University College of Azusa Pacific University and serves on the board of directors of Wabtec Corporation, a supplier of products and services to the rail transportation industry. In 2013 Mr. Vande Steeg joined the board of directors of Gardner Denver, Inc. and in 2015 Mr. Vande Steeg joined the board of directors of Pacific Design Technologies, a private company, of which he is also an equity holder. Mr. Vande Steeg began his career at Deere & Company serving as an industrial engineer and industrial relations manager from 1965 to 1970. Mr. Vande Steeg received his B.S. in Industrial Technology from California State University, Long Beach in 1968 and an M.B.A. from Pepperdine University in Malibu, California in 1985.
Vote Required
Directors are currently elected by a plurality of the votes cast by stockholders entitled to vote at the Annual Meeting. Accordingly, the nominees receiving the highest number of “for” votes at the Annual Meeting will be elected as directors. This is an uncontested election of directors because the number of nominees for director does not exceed the number of directors to be elected. Pursuant to our majority voting policy, if any nominee for director in this election receives a greater number of votes “withheld”"withheld" from such nominee than votes “for”, the nominee for director must tender his or her resignation to our Board of Directors within five days following the certification of the election results. Within 90 days following the date of the Annual Meeting, the remaining members of our Board of Directors shall, through a process managed by the Nominating and Corporate Governance Committee and excluding the director nominee in question, determine whether to accept such resignation. We will then publicly disclose the determination of the Board of Directors. Abstentions and brokernon-votes will be counted only for purposes of determining whether a quorum is present, but they will not be taken into account in determining the outcome of the election of directors.
Shares represented by executed proxies will be voted, if authority to do so is not withheld, for the nominees named above. If you return your proxy card or otherwise vote but do not make specific voting choices, your shares will be voted “for”"for" the election of all of the director nominees. In the event that any nominee is unable or declines to serve as a director at the time of the Annual Meeting, the proxies will be voted for a substitute nominee designated by the present Board of Directors to fill the vacancy. As of the date of this proxy statement, the Board of Directors has no reason to believe that any nominee will be unable or will decline to serve as a director. The directors elected will hold office until the next Annual Meeting of Stockholders and until their successors are duly elected and qualified.
Recommendation of the Board of Directors:
The Board of Directors recommends that stockholders vote FOR the election of the above-named nominees to the Board of Directors.
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ITEM 2
ADVISORY VOTE ON APPROVING THE COMPENSATION FOR
OUR NAMED EXECUTIVE OFFICERS
This proposal, commonly known as a “Say on Pay” proposal, provides our stockholders with the opportunity to cast an advisory vote on the compensation of the Company’s Named Executive Officers, as disclosed in this proxy statement. This proposal gives the Company’s stockholders the opportunity to approve, reject, or abstain from voting, with respect to our executive compensation programs and policies and the compensation paid to the Named Executive Officers.
The Say on Pay vote is anon-binding advisory vote on the compensation of the Company’s Named Executive Officers, as described in the Compensation Discussion and Analysis section, the tabular disclosure regarding such compensation, and the accompanying narrative disclosure. The Say on Pay vote on executive compensation is not a vote on the Company’s general compensation policies, compensation of the Company’s Board of Directors, or the Company’s compensation policies as they relate to risk management.
The Say on Pay vote allows our stockholders to express their opinions regarding the decisions of the Compensation Committee with respect to the 20172018 compensation of the Named Executive Officers. Because the Say on Pay vote is advisory in nature, it will not affect any compensation already paid or awarded to any Named Executive Officer, nor modify any terms of our existing compensation plans or awards. In addition, the Say on Pay vote will not be binding on, or overrule, any decisions by the Board of Directors. In addition, it will not create or imply any additional fiduciary duty on the part of the Board of Directors.
The Company is providing its stockholders with the opportunity to cast an advisory Say on Pay vote every year, until the next advisory vote on the frequency of such votes.
At the Company’s 20172018 Annual Meeting of Stockholders, 79.8%95% of the votes cast were in favor of the Say on Pay vote and our executive compensation program. In reviewing our executive compensation policies and practices since the vote, our Board of Directors and Compensation Committee have been mindful of the level of support that our stockholders expressed for our approach to executive compensation. Following their annual review of our executive compensation philosophy, the Board of Directors and Compensation Committee decided to retain our general approach to executive compensation.
Your advisory vote will serve as an additional tool to help guide the Board of Directors and the Compensation Committee in continuing to improve the alignment of the Company’s executive compensation programs with the interests of the Company and its stockholders. The Compensation Committee and the Board of Directors take into account the outcome of the vote as a part of their considerations in determining future compensation arrangements for our Named Executive Officers.
The Company and the Board of Directors believe that our compensation policies and practices for our Named Executive Officers are aligned with the long term interests of our stockholders because our policies emphasize pay for performance,pay-for-performance, and our mix of short- and long-term incentives provide a balance between the Company’s short-term goals and long-term performance. As such, the Board of Directors recommends a vote “For” the advisory approval of our compensation policies and practices as disclosed in this proxy statement.
Vote Required
Advisory approval of the compensation of our Named Executive Officers requires the affirmative vote of the holders of the majority of the shares represented and voting at the Annual Meeting in person or by proxy on this proposal.
Recommendation of the Board of Directors:
The Company’s Board of Directors recommends a vote FOR the approval of the compensation of our Named Executive Officers, as disclosed in this proxy statement.
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ITEM 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
AUDITOR
The Board of Directors intends to appoint Ernst & Young LLP (“EY”) as the Company’s independent auditors,registered public accounting firm to audit the financial statements of the Company for the current fiscal year ending December 28, 2018.January 3, 2020. EY has been the Company’s independent auditorserved in this role since 1986. The Company anticipates that a representative of EY will be present at the Annual Meeting, will have the opportunity to make a statement if he or she desires to do so, and will be available to answer any appropriate questions.
Principal Accounting Fees and Services
Audit Fees andNon-Audit Fees
The following table presents fees billed by EY for professional audit services and other services for the fiscal years ended December 28, 2018 and December 29, 2017 rendered for the audit of the Company’s annual financial statements for the Company's last two fiscal years, ended December 29, 2017 and December 30, 2016, and fees billed by EY for other services rendered during those periods (in thousands).
| Category | Fiscal Year Ended December 29, 2017 | Fiscal Year Ended December 30, 2016 | ||||||||
Audit Fees | $ | 6,256 | $ | 5,401 | ||||||
Audit-Related Fees (1) | $ | 25 | $ | 25 | ||||||
Tax Fees (2) | ||||||||||
Tax Compliance | $ | 422 | $ | 399 | ||||||
Tax Planning & Tax Advice | 673 | 537 | ||||||||
|
|
|
| |||||||
Total Tax Fees | $ | 1,095 | $ | 936 | ||||||
|
|
|
| |||||||
All Other Fees (3) | $ | 2 | $ | 2 | ||||||
| Category | Fiscal Year Ended December 28, 2018 | Fiscal Year Ended December 29, 2017 | ||||||
| Audit Fees (1) | $ | 6,765 | $ | 6,256 | ||||
| Audit-Related Fees (2) | $ | 253 | $ | 25 | ||||
| Tax Fees (3) | ||||||||
| Tax Compliance | $ | 391 | $ | 422 | ||||
| Tax Planning & Tax Advice | 744 | 673 | ||||||
| Total Tax Fees | $ | 1,135 | $ | 1,095 | ||||
| All Other Fees (4) | $ | — | $ | 2 | ||||
____________________
| (1) | Represents |
| (2) | Represents services in connection with the Company’s foreign filing relating to an employee benefits program, and acquisition due diligence services. |
| (3) | Represents various tax compliance and filing services with respect to U.S. and international tax matters, as well as tax planning advice related to acquisitions, integration activities and general matters. |
| (4) | Represents |
The Audit Committee has concluded that the provision of the January 3, 2020.Audit CommitteePre-Approval of Policies and ProceduresThe Audit Committee is responsible for appointing, approving the plan for audit and related services and fees, and overseeing the work of the independent auditor.registered public accounting firm. The Audit Committee has established apre-approval procedure for all audit and permissiblenon-audit other services to be performed by EY. Thepre-approval policy requires that requests for services by the independent auditorregistered public accounting firm be submitted to the Company’s chief financial officer (“CFO”) for review and approval. Any requests that are approved by the CFO are then aggregated and submitted to the Audit Committee for approval of services at a meeting of the Audit Committee. Requests may be made with respect to either specific services or a type of service for predictable or recurring services. All permissiblenon-auditservices performed by EY were approved by the Audit Committee.non-audit services listed above is compatible with maintaining EY’s independence.Vote RequiredRatification of the appointment of EY as the Company’s independent auditor for the current fiscal year will require the affirmative vote of the holders of a majority of the shares represented and voting at the Annual Meeting either in person or by proxy on this proposal. In the event that such ratification by the stockholders is not obtained, the Audit Committee and the Board of Directors will reconsider such selection.Recommendation of the Board of Directors:The Company’s Board of Directors recommends a vote FOR the ratification of the appointment of EY as the independent auditors forauditor of the Company for the current fiscal year ending December 28, 2018.13
BOARD MEETINGS AND COMMITTEES; DIRECTOR INDEPENDENCE
The Board of Directors held 78 meetings during the 20172018 fiscal year. No director attended fewer than 75% of the aggregate of all the meetings of the Board of Directors and the meetings of the committees if any, upon which such director also served duringin the 20172018 fiscal year other than Mr. Wibergh who joined(during the Board of Directorsperiods in 2018.which such director served in each such capacity). It is the Company’s policy to encourage directors to attend the Annual Meeting. All of the current members of the Board of Directors who were existing directors at the time of the 20172018 annual meeting attended the annual meeting.
As a result of its annual review and based upon information requested from and provided by each director concerning his or her background, employment and affiliations, including family relationships, the Board of Directors has determined that each of the directors, except for Mr. Berglund, are independent directors as defined by Rule 5605(a)(2) of the NASDAQ Marketplace Rules. In making this determination, the Board of Directors considered the current and prior relationships of eachnon-employee director, or any of his or her family members, has with the Company, our senior management and our independent auditors,registered public accounting firm, and all other facts and circumstances deemed relevant in determining their independence.
Stockholder Communications with Directors
The Board of Directors has established a process to receive communications from stockholders. Stockholders of the Company may communicate with one or more of the Company’s directors (including any board committee or group of directors)committee) by mail in care of Board of Directors, Trimble Inc., 935 Stewart Drive, Sunnyvale, California 94085. Such communications should specify the intended recipient or recipients. The Corporate Secretary periodically will forward such communications or provide a summary to the Board of Directors or the relevant members of the Board.
Board of Directors.
Board Leadership Structure; Oversight and Risk Management
The Company currently separates the positions of chief executive officer and chairman of the Board of Directors. Our chairman of the Board of Directors is responsible for setting the agenda for each meeting of the Board of Directors, in consultation with the chief executive officer, and presiding at executive sessions. The chairman of the Board of Directors is also responsible for recommending committee assignments to the Nominating and Corporate Governance Committee. Our chief executive officer is responsible for theday-to-day operations of the Company. Separating the positions of chief executive officer and chairman of the Board of Directors allows our chief executive officer to focus on ourday-to-day business, while allowing the chairman of the Board of Directors to lead the Board of Directors in its fundamental role of providing independent advice to, and oversight of, management. The Board of Directors believes that having an independent director serve as chairman is the appropriate leadership structure for the Company at this time.
The Board of Directors has overall responsibility for the oversight of risk management for the Company, and it exercises this oversight through committees and regular engagement with the Company’s senior management. The Board of Directors also directly oversees cybersecurity risk at the Company, including bywith the Audit Committee receiving regular updates on cybersecurity risk management and through escalation processes providingthat provide for timely notice with respect to the Audit Committee of any material developments. The Audit Committee has oversight of the Company’s financial matters, internal controls, financial reporting and internal investigations relating to financial misconduct. The Compensation Committee has oversight of our compensation policies and practices, and our Nominating and Corporate Governance Committee is responsible for the independence and qualification of the board members and the Company’s corporate governance principles. The committees report their activities back to the Board of Directors. In addition, members of the Company’s senior management attend meetings of the Board of Directors to discuss strategic planning and risks and opportunities for the Company’s business areas, in addition to answering any questions that the Board of Directors may raise.
Audit Committee
The Board of Directors has a separately-designated, standing Audit Committee, established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934. The Audit Committee is governed by a charter, a current copy of which is available on our corporate website athttp://investor.trimble.com/corporate-governance.cfmcorporate-governance.
The current members of the Audit Committee are directors Gabriel, Johansson and Peek, and director Peek currently serves as the committee chairman. The Audit Committee held 98 meetings during the 20172018 fiscal year. The purpose of the Audit Committee is to make such examinations as are necessary to monitor the corporate financial reporting and the internal and external audits of the Company, to provide to the Board of Directors the results of its
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examinations and recommendations derived therefrom, to outline to the Board of Directors improvements made, or to be made, in internal accounting controls, to nominate the independent auditors,registered public accounting firm, and to provide such additional information as the committee may deem necessary to make the Board of Directors aware of significant financial matters which require the Board of Directors’Directors' attention.
All Audit Committee members are independent directors as defined by applicable NASDAQ Marketplace Rules and listing standards.
All members of the Audit Committee are financially sophisticated and are able to read and understand fundamental financial statements, including a balance sheet, income statement and cash flow statement. The Board of Directors has determined that director Peek is a “financial expert” as that term is defined in the rules promulgated by the SEC. Mr. Peek has an extensive accounting and financial management background, which includes holding positions as chief financial officer and chief accounting officer with several leading publicly-traded technology companies, and almost two decades of experience with Deloitte.
Compensation Committee
The Board of Directors has a standing Compensation Committee, comprised of directors Janow, Nersesian and Vande Steeg.Wibergh. Director Vande SteegNersesian currently serves as the committee chairman. All Compensation Committee members are independent as defined by applicable NASDAQ Marketplace Rules and listing standards. The Compensation Committee is governed by a charter, a current copy of which is available on our corporate website athttp://investor.trimble.com/corporate-governance.cfmcorporate-governance. The Compensation Committee held 5 meetings during the 20172018 fiscal year. The Compensation Committee retains its own independent advisor to assist in committee matters and the Compensation Committee has the authority to hire and terminate this advisor at its discretion. The purpose of the Compensation Committee is to make decisions with respect to all forms of compensation to be paid or provided to the Company’s executive officers, in consultation with the full Board of Directors where appropriate. See “Compensation Discussion and Analysis.”
Compensation Committee Interlocks and Insider Participation
None of the Company’s executive officers serve on the board of directors or compensation committee of a company that has an executive officer that serves on our Board of Directors or the Compensation Committee.
Risk Assessment
In setting compensation, our Compensation Committee considers the risks to our stockholders, and the Company as a whole, arising out of our compensation programs. The Company’s management team has assessed the risk profile of our compensation programs. Their review considered risk-determining characteristics of the overall structure and individual components of our Company-wide compensation program, including our base salaries, cash incentive plans and equity plans. The management team provided its findings to the Board of DirectorsCompensation Committee for review and consideration. Following this ongoing assessment, the Board of DirectorsCompensation Committee concurred with management’s conclusions that the Company’s compensation policies were not reasonably likely to have a material adverse effect on the Company. For example:
Balance of Compensation: Across the Company, individual elements of our compensation program include base salaries, incentive compensation, and for certain of our employees, equity-based awards. By providing a mix of different elements of compensation that reward both short-term and long-term performance and that focus on varying performance metrics, the Company’s compensation programs as a whole provide a balanced approach to incentivizing and retaining employees, without placing an inappropriate emphasis on any particular form of compensation.
Objective Company Results andPre-established Performance Measures Dictate Annual Incentives: Under the Company’s cash incentive plans, payments are subject to the satisfaction of specific annual performance targets established by our Board of Directors.the Compensation Committee. These performance targets are directly and specifically tied to revenue and operating income performance for the Company and/or divisions for the applicable fiscal year. Payments are made based on actual achievement of Company performance goals, and not estimated performance.
Use of Long-Term Incentive Compensation: Equity-based long-term incentive compensation that vests over a period of years is a key component of total compensation of our executive employees. This vesting period encourages our executives to focus on sustaining the Company’s long-term performance. These grants are also made annually, so executives always have unvested awards that could decrease significantly in value if our business is not managed for the long-term. In addition, since 2015, a significant portion of equity awards granted to our executives includes
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performance-based vesting. These awards, for which vesting is based upon either our total stockholder return relative to
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the component stocks of the S&P 500 Index, or upon the achievement of specific financial objectives by the Company, further align the compensation of our executives with the long-term interests of our stockholders.
Internal Processes Further Limit Risk: The Company has in place additional processes to limit risk to the Company from our compensation programs. Specifically, payroll programs and financial results upon which incentive compensation payments are based are subject to regular review and audit, and our human resources executives meet periodically with our internal audit personnel to review various controls in place with respect to our compensation programs, including for our executives. In addition, the Company engages an external compensation consulting firm for design and review of our compensation programs, as well as external legal counsel to assist with the periodic review of our compensation plans to ensure compliance with applicable laws and regulations.
Nominating and Corporate Governance Committee
The Board of Directors has a standing Nominating and Corporate Governance Committee (“Nominating and Governance Committee”), comprised of directors Johansson, Lloyd and Nersesian. Director Johansson serves as committee chairman. The Nominating and Governance Committee is governed by a charter that is posted on the Company’s website athttp://investor.trimble.com/corporate-governance.cfmcorporate-governance. The purpose of the Nominating and Governance Committee is to recommend to the Board of Directors individuals qualified to serve as directors of the Company, and on committees, and to advise the Board of Directors with respect to composition, procedures and committees. Additionally, the Nominating and Governance Committee develops and recommends to the Board of Directors corporate governance principles applicable to the Company, and oversees the implementation of these principals. The Nominating and Governance Committee met 24 times during the 20172018 fiscal year.
The Nominating and Governance Committee will consider director candidates recommended by stockholders. In considering candidates submitted by stockholders, the Nominating and Governance Committee will take into consideration the needs of the Board of Directors and the qualifications of the candidate. To have a candidate be considered by the Nominating and Governance Committee, a stockholder must submit the recommendation in writing and the recommendation must include the following information and otherwise comply with Section 6 of Article II of our Bylaws:
The name of the stockholder and evidence of the stockholder’s ownership of Company shares, including the number of shares owned and the length of time of ownership, and information regarding all shares of stock of the Company owned by such stockholder’sstockholder's affiliates or associates;
The stockholder’sstockholder's representation that he or she intends to appear in person or by proxy at the Annual Meeting to nominate the persons named in its notice;
The name, age, business address and residence address of the candidate;
The principal occupation or employment of the candidate, the candidate’s resume or a listing of his or her qualifications to be a director of the Company, and information regarding all shares of stock of the Company, which are owned by the candidate or his or her affiliates or associates;
The candidate’scandidate's written representation and agreement that, if elected as a director of the Company, such person has not given any commitment or assurance to any person or entity as to how such person would act or vote on any issue or question and will not enter into any undisclosed agreement with any person or entity other than the Company with respect to any director or indirect compensation in connection with service or action as a director of the Company;
The candidate’s consent to be named as a director if selected by the Nominating and Governance Committee and nominated by the Board of Directors; and
An undertaking by both the nominating stockholder and the candidate to furnish promptly such other information as the Company may reasonably request.
The stockholder recommendation and information described above must be sent to the Committee Chairman in care of the Corporate Secretary at Trimble Inc., 935 Stewart Drive, Sunnyvale, California 94085 and must be received by the Corporate Secretary not earlier than January 1, 20198, 2020 and not later than January 31, 2019,February 7, 2020, except if the annual meeting for 20192020 is called for a date earlier than April 6, 201912, 2020 or later than May 26, 2019,June 1, 2020, notice by the stockholder in order to be timely must be so received not later than the close of business on the tenth (10th) day following the day on which notice
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of the date of the annual meeting for 20192020 is mailed or the date the Company announces the date of the annual meeting for 2019,2020, whichever occurs first.
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The Nominating and Governance Committee believes that the minimum qualifications for serving as a director of the Company are that a nominee demonstrate possession of such knowledge, experience, skills, expertise, international background, personal and professional integrity, character, business judgment, time availability in light of other commitments, dedication, potential conflicts of interest, and diversity, so as to enhance the Board of Directors’ ability to manage and direct the affairs and business of the Company, including, when applicable, to enhance the ability of committees of the Board of Directors to fulfill their duties and/or to satisfy any independence requirements imposed by law, regulation or NASDAQ listing requirement.
The Nominating and Governance Committee identifies potential nominees by asking current directors and executive officers to notify the Committee if they become aware of persons, meeting the criteria described above, who have had a change in circumstances that might make them available to serve on the Board of Directors. The Nominating and Governance Committee also, from time to time, may engage firms that specialize in identifying director candidates and pay any corresponding fees for such services. As described above, the Nominating and Governance Committee will also consider candidates recommended by stockholders.
Once a person has been identified by the Nominating and Governance Committee as a potential candidate, the Committee may collect and review publicly available information regarding the candidate to assess whether the candidate should be considered further. If the Nominating and Governance Committee determines that the candidate warrants further consideration, the chairman or another member of the Committee contacts the candidate. Generally, if the person expresses a willingness to be considered and to serve on the Board of Directors, the Nominating and Governance Committee requests information from the candidate, reviews the candidate’s accomplishments and qualifications, including in light of any other candidates that the Nominating and Governance Committee might be considering, and conducts one or more interviews with the candidate. In certain instances, Committee members may contact one or more references provided by the candidate or may contact other members of the business community or other persons that may have greater first-hand knowledge of the candidate’s accomplishments. The Nominating and Governance Committee’s evaluation process does not vary based on whether or not a candidate is recommended by a stockholder.
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NON-EMPLOYEE DIRECTOR COMPENSATION
Ournon-employee directors (“Outside Directors”) receive compensation according to the terms of the Board of Directors Compensation Policy (“Board Compensation Policy”). The description of the Board Compensation Policy below is qualified in its entirety by the text of the Board Compensation Policy, which was filed as exhibit 10.1 to the Company’s Current Report on Form8-K filed on May 11, 2015.
The current Board Compensation Policy was adopted on May 7, 2015. Under the current Board Compensation Policy, each Outside Director receives:
an annual cash retainer of $60,000, payable on a quarterly basis, for the period starting July 1 and ending June 30 of each year; and
upon election or re-election at the annual meeting of stockholders, a restricted stock unit (RSU) award for that number of shares of the Company’s common stock determined by dividing the target dollar amount of $277,000 by the fair market value of a share of common stock on the date of grant.
In addition, our Outside Directors are reimbursed for local travel expenses or paid a fixed travel allowance based on the distance to the meeting, and reimbursed for other necessary business expenses incurred in the performance of their services as directors of the Company. Our Outside Directors are also eligible to participate in the Company’sNon-Qualified Deferred Compensation Plan.
The RSU grantsawards vest in full after one year. If an Outside Director is appointed or elected to the Board of Directors at a time other than the annual meeting, the initial RSU grantaward will bepro-rated prorated to account for the number of months that have already elapsed since the last annual meeting. If an Outside Director resigns or voluntarily terminates service as a member of the Board of Directors, any unvested RSU grantaward shall vest at such time on a pro rata basis based upon the number of months of service since the last annual meeting of stockholders divided by twelve.
The target dollar amount for determining the number of RSU shares may be revised based upon appropriate compensation benchmarks presented to and approved by the Compensation Committee and the Board of Directors.
In 2017, Thethe Compensation Committee, with the assistance of its external compensation consultant, performed a review of the Board Compensation Policy with benchmarking against peer group companies and determined, with concurrence from the Board of Directors, not to amend the policy.
The Compensation Committee intends to perform its next review of the Board Compensation Policy in 2019.
Non-Employee Director Compensation Table
Except as noted below, the
The table below shows the compensation earned by each of the Outside Directors in the fiscal year endingended December 29, 2017. Mr. Wibergh was appointed after the end of fiscal 2017 and so is not included in the table.
| Director Compensation for the 2017 Fiscal Year (1) | ||||||||||||
| Name | Fees Earned or Paid in Cash (2) | Stock Awards (3) | Total | |||||||||
Börje Ekholm (4) | $30,000 | $— | $30,000 | |||||||||
Kaigham (Ken) Gabriel | $60,000 | $277,003 | $337,003 | |||||||||
Merit E. Janow | $60,000 | $277,003 | $337,003 | |||||||||
Ulf J. Johansson | $60,000 | $277,003 | $337,003 | |||||||||
Meaghan Lloyd | $60,000 | $277,003 | $337,003 | |||||||||
Ronald S. Nersesian | $60,000 | $277,003 | $337,003 | |||||||||
Mark S. Peek | $60,000 | $277,003 | $337,003 | |||||||||
Nickolas W. Vande Steeg | $60,000 | $277,003 | $337,003 | |||||||||
| Director Compensation for the 2018 Fiscal Year (1) | |||||
| Name | Fees Earned or Paid in Cash (2) | Stock Awards (3) | Total | ||
| Kaigham (Ken) Gabriel | $60,000 | $277,008 | $337,008 | ||
| Merit E. Janow | $60,000 | $277,008 | $337,008 | ||
| Ulf J. Johansson | $60,000 | $277,008 | $337,008 | ||
| Meaghan Lloyd | $60,000 | $277,008 | $337,008 | ||
| Sandra MacQuillan (4) | $15,000 | $161,580 | $176,580 | ||
| Ronald S. Nersesian | $60,000 | $277,008 | $337,008 | ||
| Mark S. Peek | $60,000 | $277,008 | $337,008 | ||
| Nickolas W. Vande Steeg (5) | $30,000 | $— | $30,000 | ||
| Johan Wibergh | $60,000 | $277,008 | $337,008 | ||
(1) | Mr. Berglund, the Company’s president and chief executive officer, receives no additional compensation for his service on the Board of Directors. Mr. Berglund’s compensation for service as president and chief executive officer is reported in the Summary Compensation Table and described in the Compensation Discussion and Analysis. |
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| (2) | For each Outside Director, the fees shown in this column represent a cash retainer, paid quarterly. |
| (3) | The dollar amounts in
|
| (4) | Ms. MacQuillan was appointed a director of the Company on |
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The following table shows the number of shares of the Company’s common stock subject to outstanding and unexercised option awards and the number of shares subject to outstanding RSUs held by each of the Outside Directors as of December 29, 2017. Mr. Wibergh was appointed after the end of fiscal 2017 and so is not included in the table.
| Director | Number of Shares Subject to Outstanding Options as of 12/29/2017 | Number of Shares Subject to Outstanding RSUs as of 12/29/2017 | ||||||
Börje Ekholm (1) | — | — | ||||||
Kaigham (Ken) Gabriel | — | 7,686 | ||||||
Merit E. Janow | 80,000 | 7,686 | ||||||
Ulf J. Johansson | 160,000 | 7,686 | ||||||
Meaghan Lloyd | — | 7,686 | ||||||
Ronald S. Nersesian | 25,000 | 7,686 | ||||||
Mark S. Peek | 89,481 | 7,686 | ||||||
Nickolas W. Vande Steeg | 80,000 | 7,686 | ||||||
| Mr. |
Non-Employee Director Stock Ownership GuidelinesIn February 2013, we adopted a policy that requires each Outside Director to own a minimum number of shares of the Company’s common stock equal to a value of $200,000 to help align the personal interests of the directors with the interests of stockholders. The shares counted toward the ownership guidelines include shares owned directly and indirectly, provided there is an economic interest in the shares. New directors have five years from appointment to meet the minimum stock ownership level. All of the Outside Directors to whom the minimum ownership levels apply have met the requirement.19EXECUTIVE COMPENSATIONThe executive compensation section of the proxy statement contains information about the Company’s compensation policies and practices, and the application of those policies and practices with respect to our Named Executive Officers. Under the SEC rules, the Company’s“Named Executive Officers” are the Company’s chief executive officer, chief financial officer, and the three other executive officers who received the highest amounts of compensation during the 20172018 fiscal year. The following is a brief description of each part of our Executive Compensation section:Compensation Discussion and Analysis. This section describes the elements of the Company’s compensation policies and the application of those policies to our Named Executive Officers.Compensation Committee Report. This section contains a report of the Compensation Committee of our Board of Directors regarding the Compensation Discussion and Analysis section of the proxy statement.Executive Compensation Tables. This section describes the amounts or values and types of compensation earned by our Named Executive Officers.Post-Employment Compensation. This section describes certain benefits and payments that our Named Executive Officers would be eligible for in the event of a change in control event, upon death, or, in the case of ourNon-Qualified Deferred Compensation Plan, payments that a Named Executive Officer may receive following termination of employment.20
Compensation Discussion and Analysis
This Compensation Discussion and Analysis describes the compensation program for our Named Executive Officers. During 2017,2018, these individuals were:
Steven W. Berglund, our President and Chief Executive Officer (our “CEO”)
Robert Painter, our Senior Vice President and Chief Financial Officer (our “CFO”)
Bryn Fosburgh, our Senior Vice President
James A. Kirkland, our Senior Vice President, General Counsel
Darryl R. Matthews, our Senior Vice President
This Compensation Discussion and Analysis describes the material elements of our executive compensation program during 2017.2018. It also provides an overview of our executive compensation philosophy and objectives. Finally, it analyzes how and why the Compensation Committee of our Board of DirectorDirectors (the“Compensation Committee”) arrived at the specific compensation decisions for our executive officers, including our Named Executive Officers, for 2017,2018, including the key factors that the Compensation Committee considered in determining their compensation.
Executive Summary
Business Highlights
2017 Performance
2017 marked
2018 results represented a record level of performance over Trimble’s 40 year history, providing a strong platform for 2019 and beyond. We delivered record levels of significant improvementrevenue, profitability, operating cash flow and strong resultsearnings per share, while increasing the competitive strength of our core businesses. Furthermore, our business portfolio is better balanced with respect to end market exposure, geographic diversity and business model mix than at any point in Trimble’s history. The year was also notable for Trimble. the substantial progress we made in the Buildings & Infrastructure segment with the acquisitions of e-Builder and Viewpoint. With these acquisitions, Trimble now has a construction technology business with unmatched strengths and capabilities, generating over $1 billion in revenue annually.
In 2018, our offerings and revenue streams continued their evolution toward higher levels of software centricity. We finished 2018 with software, services, and recurring revenues representing approximately 52 percent of total Company revenue, and with recurring revenue representing approximately 30 percent of total revenue. Furthermore, we reached $1.05 billion in annualized recurring revenue at the end of the year. Demonstrative of the balance within our business, each of our reporting segments, and each of our major geographical regions grew in 2018.
Financial highlights for the year included:
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Total year non-GAAP revenue was $3.132 billion; non-GAAP revenue increased 18 percent as compared to fiscal 2017, with significantly higher revenueorganic growth in the second half of the year.approximately 9 percent. See Appendix A to this Proxy Statement for a reconciliation of GAAP to non-GAAP financial measures.
Revenue grew in all segments, both in the United States and overseas.international markets.
Recent acquisitions, including e-Builder and Viewpoint, performed ahead of plan
Software, services and recurring revenue grew to 52 percent of total revenue, with annualized recurring revenue in the fourth quarter 2018 of $1.05 billion.
GAAP gross margin as a percentage of revenue was 54.1 percent, as compared to 52.1 percent in 2017. Non‑GAAP gross margin as a percentage of revenue was 58.0 percent, as compared to 55.7 percent in 2017.
GAAP operating income of $246was $320.7 million wasin 2018, up 36 percent as compared to fiscal 2016. 2017.
Non-GAAP operating income was $643.9 million in 2018, up 37 percent as compared to fiscal 2017.
GAAP operating income as a percentage of revenue was 9.310.3 percent of revenue as compared to 7.78.9 percent in 2017.
Non‑GAAP operating income as a percentage of revenue was 20.6 percent as compared to 17.8 percent in 2017.
GAAP diluted income per share was $1.12 as compared to $0.46 in fiscal 2016.2017.
Non-GAAP diluted income per share was $1.94 as compared to $1.45 in fiscal 2017.
Operating cash flow for fiscal 20172018 was $412 million.$486.7 million, up 13 percent as compared to fiscal 2017. During fiscal 2017,2018, Trimble repurchased $288$90 million of its common stock and spent $293 million on acquisitions.stock.
2017 was also a year of significant strategic development, with major product announcements, eight announced acquisitions, and significant channel development initiatives. Highlights included:
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Long-term performance
Trimble has an excellent record of performance and creating stockholder value over an extended period of time. Trimble’s compound average annual stockholder return has outperformed the S&P 500 Total Return index over each of the last 1, 2, 3, 10, 15, and 20 year periods ending 2017.
1 year
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2 years
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3 years
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5 years
|
10 years
|
15 years
|
20 years
| |||||||||||||||||||||||||||||
Trimble
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34.9%
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37.7%
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15.3%
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6.3%
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10.4%
|
21.9%
|
12.8%
| ||||||||||||||||||||||||||||
S&P 500 (TR)
|
21.9%
|
16.8%
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11.4%
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15.8%
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8.5%
|
9.9%
|
7.2%
| ||||||||||||||||||||||||||||
Trimble underperformed only2018. Despite record results in 2018, our stock price closed the 5fiscal year period. In 2014 and 2015, our business was negativelyat $31.94, impacted by weaknessvolatility in our agriculture and geospatial businesses largely due to weakness inequity markets at the agriculture market andend of the effectsyear. As of significant declines in the price of oil.Record Date, Trimble’s stock price declined during that timeframe, along with many companies with meaningful exposurehad increased to those markets. In recent years, $38.76 per share, which reflects a much improved performance from the beginning of 2018 compared to the 1 year performance indicated in the table below.
| 1 year | 3 years | 5 years | 10 years | 15 years | 20 years | |
| Trimble | (18.9%) | 15.3% | (1.1%) | 11.8% | 11.8% | 18.0% |
| S&P 500 (TR) | (4.4%) | 9.3% | 8.5% | 13.1% | 7.8% | 5.6% |
Trimble’s stock price has rebounded, driven by improved market conditions and management actions to increase growth and improve profitability.
Trimble’s significant outperformancetotal return over the 10, 15, and 20 year time horizonshorizon illustrates well the long-term outperformance through economic cycles. AsTrimble's cumulative total return has also significantly outperformed the S&P 500 over the twenty-year time horizon, as shown in the graph below, Trimble has more than tripled the S&P 500 cumulative total return over the twenty-year time horizon.
2017below.
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2018 Executive Compensation Highlights
Following are highlights regarding the compensation of our Named Executive Officers for 2017,2018, including key actions taken by the Compensation Committee and by the Board of Directors, in light of our overall operating environment and the results described above:
Our
CEO Compensation: total direct compensation was increased following greatly improved financial results.
As determined by the Compensation Committee, our CEO received a 3%13% increase in base salary in 2017, which was2018, primarily driven by the first increasedesire to keep CEO pay in line with a competitive market range, given the Company’s much improved financial performance. Over the preceding 4 years, the Compensation Committee had taken a very moderated approach to CEO base pay given the performance of the Company during that time. With much stronger Company performance in 2017, during which revenue increased by 12% and non‑GAAP operating income increased by 16% as compared to the prior year, the Compensation Committee determined it was appropriate to adjust our CEO’s base salary to the approximate 50th percentile as benchmarked against our peer group. The target bonus percentage for our CEO since May 2014. No changes were made in theis unchanged, though target annual cash incentive opportunity (ashas increased given the increase to base pay. In addition, our CEO received a percentage of salary), nor15% increase in the target valueannual equity award which is heavily weighted with performance based equity (72% of equity awards. As to long-term incentive equity awards, 75% of the target value is in the form of performance-based equity, which the Compensation Committee determined throughequity).
Base Salary of Other Named Executive Officers: general market increase to base pay and alignment with CFO peer group analysis is a greater weighting on performance-based compensation than is common among our peer companies.
data
.Our other Named Executive Officers received base salary increases of 3%between 3-5%, except for our CFO who received an increase of 11%25%. The increase for our CFO reflected an additional adjustment forthat moves our CFO closer to the assumption50th percentile of greater responsibilities associated with the CFO position and closer alignment of his compensation with the
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market for CFO compensation.our peer group. The remaining increases maintained alignment of our other NEOsNamed Executive Officers with the market, and we believe they were appropriate given our improved business performance ending 20162017 and moving into 2017.
2018.
Annual Cash Bonuses: incentive payments driven by better operating income results.
The 20172018 management incentive program (“(“MIP”) required an 8.5%a 19% increase in operating income for targetpay-out of cash bonuses. The Company achieved an 18.4%a 37% increase in operating income, and accordingly our Named Executive Officers received annual cash bonuses ranging from 155% to 250%220% of their target annual cash bonus opportunities, including an annual cash bonus for our CEO in the amount of $2,223,000,$2,760,510, equal to 201%220% of his target annual cash bonus opportunity. 20172018 bonus payments aligned with our strong 20172018 business performance, which aligns towith our pay for performancepay-for-performance compensation program strategy.
We moved our MIP plan for cash bonuses for our CEO, Named Executive Officers and other key executives from a combination of quarterly and annual scoring to exclusively annual scoring and payment.
bonus opportunity.
Long-Term Incentive Compensation: continued emphasis on performance-based pay.
A substantial portion of our long-term incentive compensation program is in the form of performance-based restricted stock unit (“PRSU”(“PRSU”) awards with the balance delivered in the form of time-based restricted stock unit (time-based“RSU”RSU”) awards. The PRSUs are measured partly against our relative total shareholder return (TSR) as compared to the components of the S&P 500 index, and partly against achievement of specific Trimble financial performance objectives. Approximatelyresults. Generally, approximately 50% of the 20172018 target long-term incentive value awarded to our Named Executive Officers (or 75% in the case of(besides our CEO) was awarded in the form of PRSUs, which directly aligns to our paypay-for-performance compensation strategy, and 72% of the 2018 target long-term incentive value awarded to our CEO was in the form of PRSUs, which is considerably above the level of long-term, performance-based equity compensation as a percentage of total compensation for other CEOs in our peer group. Performance objectives that determine value realized under the PRSU awards are based upon strong performance compensation strategy.
Our stock ownership guidelines were extendedrelative to the CFOcomponents of the S&P 500 index (in the case of TSR based awards), and other key executives.
We implemented a “claw back” policy for the potential forfeiture and returnachievement of incentive-based compensation inrigorous three year financial goals (in the eventcase of certain matters resulting in a material restatement of our financial results.
2017results based awards).
2018 Pay-for-Performance Philosophy
We believe our executive compensation program is competitive relative to the market and our peer group, and appropriately balances the goals of attracting, motivating, rewarding and retaining our executive officers with the goal of aligning their interests with those of our stockholders. To ensure this alignment, and to motivate and reward individual initiative and success, a substantial portion of our executive officers’ target annual total direct compensation opportunity is both performance-based and“at-risk. “at-risk.”
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We emphasize performance-based compensation that appropriately rewards our executive officers, including our Named Executive Officers, through two separate compensation elements:
First, our Named Executive Officers participate in our performance-based, annual cash bonus plan which provides cash payments if Trimble produces financial results that meet or exceed specified objectives tied to our annual operating plan.
Second, we grant PRSU awards that reward our executives based on two components: (1) driving total shareholder return (TSR) relative to an established stock price index, and (2) achieving or exceeding Trimble pre-established revenue and profitability goals over a multi-year period. We believe having two discrete measurements in our long-term incentive (“LTI”) equity program creates an effective balance by aligning performance both to a broad market index with a TSR target and to our own absolute financial performance, which collectively aligns directly to stockholder interests. As noted above the PRSU awards generally comprise approximately 50% of the value of LTI equity awards granted to our Named Executive Officers, and 72% in the case of our CEO.
These performance basedperformance-based variable pay elements ensure that, each year, a substantial portion of our executive officers’ total compensation is variable in nature, with the amounts ultimately payable subject to variability above or below target levels commensurate with our actual performance.
The pay mix for our CEO and our other Named Executive Officers during 20172018 reflected this “pay-for-performance” design, with 70%68% of our CEO’s target total compensation delivered in the form of PRSUs and target
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bonus, and an additional 19%21% in the form of time-based RSUs with multi-year vesting that directly align our CEO’s interests with those of stockholders.
 |  |
stockholders and facilitate our retention objectives.
Total target compensation in the pie charts above represent the sum of actual 20172018 base salary, the target annual cash incentive under the MIP, and the grant date target value of time-based RSUs and PRSUs granted during the year. The grant date target values of the PRSUs reflect the stock price of the shares on the grant date and, in the case of relative TSR PRSUs, differ from the values provided in the Summary Compensation Table reportedset forth later in this proxy statement, which represent the accounting value below.
using a Monte Carlo analysis as required by FASB ASC Topic 718.
We believe that this design provides balanced incentives for our executive officers to drive financial performance and long-term growth. To ensure consistency with our compensation philosophy, the Compensation Committee regularly evaluates the relationship between the reported values of the equity awards granted to our executive officers, the amount of realizable compensation from such awards in subsequent years and our total shareholder return over this period.
As shown below, our Compensation Committee determined that a 2018 base pay and LTI grant increase was warranted given the improved Company financial performance entering 2018 after completing a significantly improved 2017 fiscal year, including a 12% increase in revenue and a 16% increase in non-GAAP operating income versus the prior year. It was also determined that this increase to CEO compensation was required to keep our CEO’s pay in alignment with our CEO peer group pay data following the relatively flat level of our CEO base pay target bonus, and target LTI equity compensation for our Chief Executive Officer relatively flat from 2015 through 2017.since 2014. Changes included a 3%13% base salary increase in 2017,2018, while target LTI equity value was betweenincreased from $6.1 million and $6.2in 2017 to $7.0 million each year during this period.in 2018. The target bonus, expressed as a percent of base salary, was unchanged at 125% during all three years.
Chief Executive Officer Target Total Compensation
| Fiscal Year | Annual Base Salary Rate (1) | Target Bonus (2) | Target LTI Value (3) | Target Total Compensation | ||||||||||||||||
2017 | $886,000 | $1,107,500 | $6,116,173 | $8,109,673 | ||||||||||||||||
2016 | $860,000 | $1,075,000 | $6,081,152 | $8,016,152 | ||||||||||||||||
2015 | $860,000 | $1,075,000 | $6,172,158 | $8,107,158 | ||||||||||||||||
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| Chief Executive Officer Target Total Compensation | ||||
| Fiscal Year | Annual Base Salary Rate (1) | Target Bonus (2) | Target LTI Value (3) | Target Total Compensation |
| 2018 | $1,002,000 | $1,252,500 | $7,024,991 | $9,279,491 |
| 2017 | $886,000 | $1,107,500 | $6,116,173 | $8,109,673 |
| 2016 | $860,000 | $1,075,000 | $6,081,152 | $8,016,152 |
| (1) | Represents the base salary rate approved as of May of each fiscal year. |
| (2) | Represents bonus paid at 100% achievement of MIP targets approved by the Board of Directors as of May of each fiscal year. Actual bonus paid depends on performance against targets, and ranges from 0% if minimum thresholds are not achieved up to 300% of target if there is substantial overachievement relative to target. Actual bonuses paid were $2,760,510 in 2018, $2,222,837 in 2017, and $333,901 in |
| (3) | Reflects the grant date target value of equity. In the case of |
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The Compensation Committee’s decision to keep the overall structure ofincrease 2018 CEO base pay generally flatand target LTI value was made with consideration given to:
market data from companies included in our compensation peer group;
our CEO’s strong long-term track record at increasing stockholder value;value.
The Compensation Committee’s decision regarding CEO compensation also recognized the role of our annual incentive plan in aligning Trimble performance and actual total compensation. As shown in the table below, the increase in actualCEO total compensation during 20172018 was attributable primarily to two factors: an above-target actual bonus related to the strong financial performance delivered in 2018, combined with an increase in CEO target LTI equity value. The increase in target LTI equity value (from $6.1 million in 2017 to $7.0 million in 2018) reflected the Compensation Committee’s objective of providing a competitive overall pay package for our CEO with a strong focus on long-term value creation. The increase in CEO total compensation in 2017 was mainly attributable to the increased annual cash incentive bonus payment which was a function of our demonstrably improved operating performance and correlated with ourgiven the strong stockholder return during the year.2017 financial results. In 2015 and 2016, CEO compensation reflected weaker financial performance in the form of bonus payments that were significantly lower than the target bonuses established for those years.
bonus.
Total compensation in the chart above representrepresents the sum of base salary at the annual rate, the actual annual cash incentive earned under the MIP (which differs from the target bonus amount), and the grant date target value of time-based RSUs and PRSUs granted during each fiscal year. The target LTI value of equity depicted in the chart represents the value of the awarded equity incentives based on the closing price of our Common Stock on the grant date. InAs stated above, in the case of Relativerelative TSR PRSU awards this value is different than the grant values provided in the Summary Compensation Table, which represent the accounting value using a Monte Carlo analysis as required by FASB ASC Topic 718.
The actual value realized upon vesting of time-based RSUs and PRSUs can differ significantly from the initial target value of such awards, since the initial target value is determined by the price of Trimble stock at the grant date whereas the actual value realized upon vesting is determined by the price of Trimble stock at the time of vesting, as well as, for PRSUs, the actual performance of the Company's relative TSR and achievement of specific Trimble financial results.
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Executive Compensation Policies and Practices
We endeavor to maintain sound governance standards consistent with our executive compensation policies and practices, while also considering market best practices. The Compensation Committee evaluates our executive compensation program on a regular basis to ensure that it is consistent with our short-term and long-term goals given the dynamic nature of our business and the market in which we compete for executive talent.
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The following summarizes the key features of our executive compensation and related policies and practices:
| WHAT WE DO | WHAT WE DON’T DO | |
2018. officers. | ||
At our 20172018 Annual Meeting of Stockholders, we conducted anon-binding stockholder advisory vote on the compensation of our named executive officers (commonly known as a “Say on Pay” vote). Our stockholders approved the Say on Pay proposal with 79.8%95% of the votes cast in favor of the proposal.the presence of1-,2- and3-year scoring windows onprograms. Our alignment with stockholder interests continues to be supported by our relative TSR performance share plan;Trimble’s lack of a clawback policy; andthe use of quarterly performance periods inpay-for-performance philosophy that drives our annual incentive plan.
This was belowone of our historical levelhighest levels of support from stockholders in recent years, which we believe reflects their support and during the year we became aware of concerns regarding our compensation program. As part of our ongoing stockholder engagement efforts, we contacted stockholders representing ownership of a majority of our common stock to discuss our compensation policies and practices.
Our stockholders were generally supportive ofconfidence in our approach to pay, the decisions made by our Compensation Committee in response to a period of weaker operating performance during 2016, and features of our programs that align Trimble with best practices in incentive plan design and compensation governance. Our engagement efforts highlighted several questions regardingmanaging our executive compensation program, including:
As the Compensation Committee has reviewed our executive compensation policies and practices since the 2017 Say on Pay vote, it has been mindful of the level of support our stockholders have expressedplan designs for our approach to executive compensation. variable bonus and equity plans.
The Compensation Committee determined to maintain the same general approach to our compensation program during 2018 as it had in 2017. This includes the mix of financial results based and relative TSR based performance shares and the focus of the MIP on operating income as the primary funding metric. The Compensation Committee also maintained the
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design of the relative TSR performance shares, believing that multiple performance periods reliably measure our performance while mitigating the risk that the full value of an award will be influenced by a short-term fluctuation in our stock price relative to a larger more stable index. The shorterrelative TSR performance period is alsoequity awards contain 1-, 2- and 3-year scoring windows which are balanced by the3-year vesting time horizon on all fact that no shares earned.
Based in part on input from stockholders,will actually vest until the Compensation Committee determined to approve a clawback policy in 2017 that is applicable to both cash and equity compensation, and eliminated quarterlyend of the full three-year performance periods in the MIP in place for fiscal 2017.
period.
We value the opinions of our stockholders and will continue to consider the outcome of future Say on Pay votes, as well as feedback received throughout the year, when making compensation decisions for our executive officers.
At our 2017 Annual Meeting of Stockholders, we also conducted anon-binding stockholder advisory vote on the frequency of future Say on Pay votes (commonly known as a “Say When on Pay” vote). Our stockholders expressed a preference for holding future Say on Pay votes on an annual, rather than a biennial or triennial, basis. In recognition of this preference and other factors considered, our Board of Directors determined that we should continue to hold annual Say on Pay votes.
Executive Compensation Philosophy
Our executive compensation program is guided by our overarching philosophy of paying for demonstrable performance. Consistent with this philosophy, we have designed our executive compensation program to achieve the following primary objectives:
establish compensation opportunities that are competitive, reward performance and maintain internal equity;
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attract, motivate and retain highly-talented executive officers by providing compensation opportunities that are competitive and reward for performance; and
align the interests of our executive officers with the interests of our stockholders to drive the creation of sustainable long-term value.
Executive Compensation Program Design
Our current practice is to combine a mixture of compensation elements that balance achievement of our short-term goals with our long-term performance. We provide short-term incentive compensation opportunities in the form of an annual cash bonus plan, which focuses on our yearly operating results, and we provide long-term incentive compensation opportunities in the form of equity awards. We do not have a specific policy on the percentage allocation between short-term and long-term compensation elements.
The equity awards including:comprising our long-term compensation include:
TSR performance-based PRSU awards that are earned only if we deliver meaningful results over a multi-year period relative to the performance of the S&P 500 over that same time period;
financial results-based PRSU awards that are earned only if we achieve targeted absolute levels of operating income and revenue growth; and
time-based RSU awards that derive additional value from increases in our stock price over time and that are subject to multi-year vesting requirements.requirements, which also support our executive retention objectives.
We do not have a specific policy on the percentage allocation between short-term and long-term compensation elements.
We also believe that the compensation of our CEO and other executives should be primarilylargely influenced by our overall financial performance and total stockholder return. The Compensation Committee sets the compensationreturn, and this combination of our CEO withinelements yields a range of compensation provided to similarly-situated chief executive officers of the companies in our compensation peer group, as adjusted by its consideration of the particular factors influencing our performance.
balanced focus on short-term goals and long-term performance, both absolute and relative, that align with stockholder interests.
Governance of Executive Compensation Program
Role of the Compensation Committee
The Compensation Committee discharges many of the responsibilities of our Board of Directors relating to the compensation of our executive officers, including our Named Executive Officers, and thenon-employee members of our Board of Directors.TheDirectors.The Compensation Committee has overall responsibility for overseeing our compensation and benefits policies generally, and overseeing and evaluating the compensation plans, policies, and practices applicable to our CEO and our other executive officers. Historically, the Compensation Committee has made recommendations to our
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full Board of Directors regarding executive compensation, including the compensation of our CEO and our other executive officers, and our full Board of Directors (excluding our CEO) made all final decisions regarding executive compensation. As of November 2017, the Compensation Committee itself sets compensation for and makes equity awards to our CEO and our other executive officers. The Compensation Committee retains a compensation consultant (described below) to provide support to the Compensation Committee in its review and assessment of our executive compensation program.
Compensation-Setting Process
The Compensation Committee determines the target total direct compensation opportunities for our executive officers, including our Named Executive Officers. The Compensation Committee does not use a single method or measure in developingmaking its recommendations,determinations, nor does it establish specific targets for the total direct compensation opportunities of our executive officers.
When formulating its recommendations fordetermining the amount of each compensation element and approving each compensation element and the target total direct compensation opportunity for our executive officers, the Compensation Committee considered the following factors:
our performance against the financial and operational objectives established by the Compensation Committee and our Board of Directors;
each individual executive officer’s skills, experience and qualifications relative to other similarly-situated executives at the companies in our compensation peer group;
the scope of each executive officer’s role compared to other similarly-situated executives at the companies in our compensation peer group;
the performance of each individual executive officer, based on a subjective assessment of his or her contributions to our overall performance, ability to lead his or her business unit or function and work as part of a team, all of which reflect our core values;
compensation consistency among our executive officers;
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our financial performance relative to our peers;
the compensation practices of our compensation peer group and the positioning of each executive officer’s compensation in a ranking of peer company compensation levels; and
the recommendations provided by our CEO with respect to the compensation of our other executive officers.
These factors provide the framework for compensation decision-making and final decisions regarding the compensation opportunity for each executive officer. No single factor is determinative in setting pay levels, nor was the impact of any factor on the determination of pay levels quantifiable.
Compensation Review Cycle
The Compensation Committee reviews the base salary levels, annual cash bonus opportunities and long-term incentive compensation opportunities of our executive officers, including our Named Executive Officers, at the beginning of each fiscal year. Any changes in base salary are generally effective in May of each year. We grant performance basedperformance-based equity in May and time-based RSUs in November of each year. Our compensation peer group is reviewed and finalized by the Compensation Committee during the fourth quarter before the upcoming fiscal year. Other adjustments to executive pay are made during the year as circumstances warrant.
Role of Chief Executive Officer
In discharging its responsibilities, the Compensation Committee works with members of our management, including our CEO. Our management assists the Compensation Committee by providing information on corporate and individual performance, market compensation data, and management’s perspective on compensation matters. The Compensation Committee solicits and reviews our CEO’s recommendations and proposals with respect to adjustments to annual cash compensation, long-term incentive compensation opportunities, program structures, and other compensation-related matters for our executive officers (other than with respect to his own compensation).
The Compensation Committee reviews and discusses these recommendations and proposals with our CEO and considers them as one factor in formulating the recommendations fordetermining the compensation for our executive officers, including our other Named Executive Officers (other than our CEO). Our CEO recuses himself from all discussions and recommendations regarding his own compensation.
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Role of Compensation Consultant
The Compensation Committee engages an external compensation consultant to assist in providing information, analysis and other advice relating to our executive compensation program and the decisions resulting from its annual executive compensation review. For 2017,2018, the Compensation Committee engaged Compensia, Inc., a national compensation consulting firm (“Compensia”), as its compensation consultant to advise on executive compensation matters, including competitive market pay practices for senior executives, and with the data analysis and selection of the compensation peer group. For 2017,2018, the scope of Compensia’s engagement included:
the review and analysis of the compensation for our executive officers, including our Named Executive Officers;
supporting the design and implementation of changes to the executive long term incentive strategy;
providing analysis of market practice and support in the consideration and finalization of changes to thechange-in-control and severance arrangements for our Named Executive Officers and certain other executive officers;
supporting finalization of our compensation peer group; and
support on other ad hoc matters throughout the year.
The terms of Compensia’s engagement include reporting directly to the Compensation Committee and to the Compensation Committee Chairman. Compensia also coordinates with our management for data collection and job matching for our executive officers. In 2017,2018, Compensia did not provide any other services to us. The Compensation Committee has evaluated Compensia’s independence pursuant to the listing standards of the NASDAQ and the relevant SEC rules and has determined that no conflict of interest has arisen as a result of the work performed by Compensia.
Compensia in 2018.
In late 2018, the Compensation Committee considered the state of the market for external compensation consultants and issued a request for proposals for a new consultant. In January 2019, the Compensation Committee terminated the services of Compensia and hired Exequity. Exequity will now provide all consulting services listed above to the Compensation Committee, effective February 5, 2019. The Compensation Committee has evaluated Exequity’s
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independence pursuant to the listing standards of the NASDAQ and the relevant SEC rules and has determined there to be no apparent conflict of interest in their support of the Compensation Committee.
Competitive Positioning
For purposes of comparing our executive compensation against the competitive market, the Compensation Committee reviews and considers the compensation levels and practices of a group of peer companies. This compensation peer group consists of technology companies that are similar to us in terms of revenue, market capitalization, geographical location and number of employees. Our selection of peers also accounts for industry, targeting companies that are competitors and those with which we compete for talent. Within the technology sector, our peer group includes a relevant profile of companies across a range of technologysub-industries in order to match the diversity of our businesses. Specific Global Industry Classification Standard (GICS)sub-industries represented by companies included in our peer group include communications equipment, applications software, systems software, and electronic equipment and instruments. We compete for executive talent across many lines of business and therefore this diversity in our peer group keeps us informed and better aligned with pay practices across multiple relevantsub-industries.
In developing the compensation peer group for 2017,2018, the following target criteria were observed in identifying comparable companies:
similar industry and competitive market for talent;
within a range of 0.5x to 2.0x of our revenue; and
within a range of 0.3x to 3.0x of our market capitalization.
The Compensation Committee reviews our compensation peer group at least annually and makes adjustments to its composition if warranted, taking into account changes in both our business and that of the companies in the peer group.
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At the beginning of 2017,2018, the Compensation Committee used the following compensation peer group to assist with the determination of compensation for our executive officers. The Compensation Committee approved this peer group in November 20162017 following a review that included input from its compensation consultant.
| ARRIS Group | Keysight Technologies | Roper Technologies | ||||
| Autodesk | Commscope | Motorola Solutions | Synopsys | |||
| FLIR Systems | Nuance Communications | Teledyne Technologies | ||||
| Cadence Design Systems | Juniper Networks | PTC | Zebra Technologies | |||
| * | In November |
The Compensation Committee uses data drawn from our compensation peer group, as well as data from the Radford Global Technology executive compensation survey, to evaluate the competitive market when formulating its recommendation to the Board of Directors fordetermining the total direct compensation packages for our executive officers, including base salary, target annual cash bonus opportunities and long-term incentive compensation opportunities.
In addition, subsets of the Radford Global Technology executive compensation survey were incorporated into the competitive assessment prepared by Compensia and used by the Compensation Committee to evaluate the compensation of our executive officers. Radford Survey data incorporated in the analysis provided by Compensia were tailored to reflect companies from our compensation peer group as well as other companies identified on the basis of comparable industry, revenue and market capitalization profiles. The executive compensation survey data supplements the compensation peer group data and provides additional information for our Named Executive Officers and other vice president positions for which there is less public comparable data available.
It is important to note that the companies in our Company peer group, as well as the peer groups selected by proxy advisory services, consist of technology companies generally focused in the Electronics & Equipment, Application Software and Communications Equipment industries that are similar to Trimble in size, industry classification, and organizational scope. As such, the peers represent the group of companies with which we compete for talented employees, and therefore provide a reasonable basis for competitive market benchmarking in managing our executive compensation program. However, the stockholder returns for the peer group may provide an imperfect comparison at particular points in time because Trimble’sTrimble's mix of businesses creates concentrated exposure to specific
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sectors such as agriculture, construction, and oil and gas, and negative developments in those markets may affect Trimble’sTrimble's business performance in ways that differ from that of other technology companies in our peer group.
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Individual Compensation Elements
In 2017,2018, the principal elements of our executive compensation program, and the purposes for each element, were as follows:
| Compensation Component | ||||||
| Why We Provide it and in What Form? | How We Determine the Amount? | What is the Intended Outcome? | |||
| Base Salary | ||||||
• Consistent with competitive practice and provided in cash. | • Use of compensation peer group and other market compensation data within a competitive market | • Designed to attract and retain highly talented executives by providing market competitive pay aligned to business and leadership experience, responsibilities and performance. | ||||
| Annual Short Term Bonus Plan (“MIP”- Management Incentive Plan) | • Establish direct • Drive focus on annual business targets and objectives. • Reflect market competitive practice; provided in cash. | • Use of compensation peer group and other market compensation data within a competitive market median range for a target bonus percentage. • Payments are performance-based and calculated as a percentage of base salary. | • Within our | |||
| Long-term Incentives (including PRSUs and RSUs) | ||||||
| • Establish direct • Drive focus on the achievement of critical long-term business objectives and total shareholder return. • Align management’s interests with those of our stockholders. • Foster long-term retention of key executives. • Reflect market competitive practice; provided through equity awards. | • Use of compensation peer group and other market compensation data within a competitive market median range for annual equity award determination. • Amount of target annual equity awards also considers executive performance and responsibilities. • In fiscal | • Delivering market competitive equity awards that drive a longer term view of our business and targeted results that align with the interests of our stockholders. • Creating an effective mix of relative and absolute performance by awarding both PRSUs that are aligned to total shareholder return (TSR) and PRSUs that are aligned to • Create increased executive retention and focus on long-term share price appreciation through grants of time-based RSUs. | |||
| Executive Benefits and Perquisite Allowance | • CEO and other executives participate in the standard health & welfare and retirements benefits as all regular employees. Certain eligible executives may participate in the Age & Service Equity Vesting Program. • Little to no special perquisites provided to executives. | |||||
Base Salary
Base salary represents the fixed portion of the compensation of our executive officers, including our Named Executive Officers, and is an important element of compensation intended to attract and retain highly-talented individuals.
Using the competitive market data provided by its compensation consultant, the Compensation Committee reviews and adjusts the base salaries for each of our executive officers, including our Named Executive Officers, as part of its annual executive compensation review. In addition, the base salaries of our executive officers may be adjusted by the Compensation Committee in the event of a promotion or significant change in responsibilities.
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Generally, the Compensation Committee sets base salaries with reference to the competitive range of the market median of our compensation peer group and applicable executive compensation survey data. Although we set base salaries within a competitive range of the market median, the actual positioning will also be based on the Compensation Committee’s assessment of the factors described above.
In May 2017, consistent with the recommendation of our CEO, our Board of Directors determined to increase the base salaries of our executive officers, including our Named Executive Officers (other than our CEO). The increase to the base salary of our CEO was recommended by2018, the Compensation Committee performed its annual review and approved by the independent membersadjustment of our Board of Directors, based on the practice in place prior to November 2017. In making these decisions, the Compensation Committee and our Board of Directors consideredbase salaries, taking into account the factors described in “Governance of Executive Compensation Program –- Compensation-Setting Process”
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above. OurGiven the Company’s strong financial performance over the prior year, the Compensation Committee determined it was appropriate to adjust our CEO’s base salary to the approximate 50th percentile as benchmarked against our peer group. Over the preceding 4 years, the Compensation Committee had taken a very moderated approach to CEO base pay given the performance of the Company during that time. In fact, our CEO received no increase in base pay from 2014 until May 2017, when a modest increase of 3% was made to our CEO’s base pay following improving Company performance. With much stronger Company performance in 2017, during which revenue increased by 12% and operating income increased by 16% as compared to the prior year, the Compensation Committee felt it was necessary and appropriate to adjust CEO base pay to a more competitive market range. The Compensation Committee also determined to increase the base salaries of our other executive officers, consistent with recommendations of our CEO. The significant increase in base salary in 2017, which was the first increase in base pay for our CEO since May 2014. The increase for our CFO reflected an additional adjustment for the assumption of greater responsibilities associated with the CFO position and closer alignment ofneed to better align his compensationbase salary with the market for CFO compensation.compensation and ensure a competitive salary, recognition of improved business performance, and continued assumption of greater global responsibilities. The remaining increases maintained alignment of our other NEOsNamed Executive Officers with the market, and we believe they were appropriate given our improved business performance ending 20162017 and moving into 2017.2018. The base salaries of our Named Executive Officers for 20172018 were as follows:
| Named Executive Officer | Fiscal 2016 Base Salary Rate (1) | Fiscal 2017 Base Salary Rate (1) | Percentage Adjustment | |||||||||
Mr. Berglund | $860,000 | $886,000 | 3% | |||||||||
Mr. Painter | $375,000 | $415,000 | 11% | |||||||||
Mr. Kirkland | $387,229 | $400,000 | 3% | |||||||||
Mr. Matthews | $401,700 | $414,000 | 3% | |||||||||
Mr. Sankpal | $386,250 | $398,000 | 3% | |||||||||
| Named Executive Officer | Fiscal 2017 Base Salary Rate (1) | Fiscal 2018 Base Salary Rate (1) | Approximate Percentage Adjustment | ||
| Mr. Berglund | $886,000 | $1,002,000 | 13 | % | |
| Mr. Painter | $415,000 | $518,750 | 25 | % | |
| Mr. Fosburgh | $451,000 | $451,000 | — | % | |
| Mr. Kirkland | $400,000 | $420,000 | 5 | % | |
| Mr. Matthews | $414,000 | $426,420 | 3 | % | |
| (1) | Reflects the annual salary rate approved by the Compensation Committee. Annual changes to base salaries, if any, are generally effective in May of each fiscal year. The actual amounts paid to our Named Executive Officers as salary in |
Annual Cash BonusesWe use an annual cash bonus plan to motivate our executive officers and other key employees to achieve our annual business goals. In 2017,2018, our Board of DirectorsCompensation Committee adopted the Annual Management Incentive Plan for 20172018 (the “2017“2018 MIP”) to provide financial incentives for the Company as a whole and our individual business sectors and divisions to meet or exceed the annual target levels established under our 20172018 annual operating plan. Senior-level managers, our executive officers, including our Named Executive Officers, and certain other individual employees were eligible to participate, upon approval by our CEO, or by our Board of Directorsthe Compensation Committee with respect to our CEO, in the 20172018 MIP.2017 MIP PlanModificationsIn 2017, the Compensation Committee approved a change to the 2017 MIP plan, under which the CEO, Named Executive Officers and other key executives would be eligible only for annual MIP bonus payment instead of our past practice of quarterly payments based on performance.Target Annual Cash Bonus OpportunitiesFor purposes of the 20172018 MIP, cash bonuses were based upon a percentage of each participant’s fiscal 2018 base salary.salary rate. The target annual cash bonus opportunities for our executive officers, including our Named Executive Officers (other than our CEO) were recommended to the Compensation Committee by our CEO, and approved by our Board of Directors.the Compensation Committee. The target annual cash bonus opportunity for our CEO was recommendedreviewed and approved by the Compensation Committee and approved by the independent memberswas unchanged, remaining at 125% of our Board of Directors.base pay. The determination of annual cash bonus opportunities is based on the factors described in “Governance of Executive Compensation Program—Program - Compensation-Setting Process” above.32
For 2017,2018, the target annual cash bonus opportunities for our CEO and our Named Executive Officers were maintained at their 20162017 levels. Specifically, the target annual cash bonus opportunities for 20172018 were as follows:
| Named Executive Officer | percentage of base salary) | |||
| Mr. Berglund | 125% | |||
Mr. | 80% | |||
Mr. | Fosburgh | 80% | ||
| Mr. Kirkland | 60% | |||
| ||||
Mr. Matthews | 80% | |||
| ||||
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Potential annual cash bonuses for our executive officers, including our Named Executive Officers, under the 20172018 MIP could range from zero to 300% of their target annual cash bonus opportunity.
Bonus Performance Measure
For purposes of the 20172018 MIP, our Board of DirectorsCompensation Committee selected revenue and adjusted operating income as the corporate financial performance measures. For this purpose, “adjusted operating income” was determined as follows:
with respect to a sector or division, operating income for that sector or division; and
with respect to the Company as a whole, our operating income,
adjusted for
excludes the effects of purchase accounting adjustments to certain acquired deferred revenue and acquired capitalized commissions, restructuring costs,charges, amortization of purchased intangible assets, stock-based compensation, amortization of acquisition-related inventorystep-up, acquisition/divestiture costsitems associated with external and incremental costs resulting directly from merger and acquisition activities such as legal, due diligence, integration costs, and litigation expenses.other closing costs. For purposes of the 20172018 MIP, a “sector” is a grouping of divisions within the Company.
As a result of the consideration of the adjustments described in the preceding paragraph, the 20172018 MIP used anon-GAAP measure of operating income. References to operating income in the context of the 20172018 MIP targets refer to thisnon-GAAP measure, unless otherwise noted.
MIP
Bonus Plan Formula
For our CEO, CFO, and Mr. Kirkland, 20172018 MIP payments were dependent upon achievement ofpre-established revenue and operating income goals for the Company as a whole. For Mr. Matthews, and Mr. Sankpal, their 2017his 2018 MIP payments werepayment was dependent partly upon the achievement of thepre-established revenue and revenue andoperatingoperating income goals for the Company as a whole, constituting 50% of theirhis target annual cash bonus opportunities, and partly upon the performance of their respectivehis business sectors,sector, including achievement of revenue and operating goals. For Mr. Sankpal,Fosburgh, his 2018 MIP payment was dependent during the first 6 months of 2018 on pre-established revenue and operating income goals for the Company as a limited portionwhole, and for the last 6 months of 2018 partially dependent on his business sector bonus was based ontargets, including achievement of other specificrevenue and operating goals and on pre-established revenue and operating income goals for his business sector.
the Company as a whole.
Revenue and operating income target levels were established for the Company and for each business sector for the full fiscal year. Each Named Executive Officer was eligible to receive his full target annual cash bonus opportunity if full year revenue andoperatingandoperating income goals were achieved, except as to the limited portion of Mr. Sankpal’s sector bonus.
achieved.
At the end of the year, an annual cash bonus amount for each executive was determined based on full year revenue and operating income results, and, in the case of Mr. Matthews and for half the year for Mr. Sankpal,Fosburgh, on the annual revenue and operating income results of their respective business sector. Additionally, threshold levels of revenue andoperatingandoperating income based upon annual results for the Company and for the sectors applicable to each Named Executive Officer were to be met before any bonus payment towould be made based upon annual results.earned. The amount of this annual cash bonus amount could vary from zero to 300% of each Named Executive Officer’s target annual cash bonus opportunity for the full fiscal year, calculated on a sliding scale, as described below. A Named Executive Officer was required to remain continuously employed through the last day of the fiscal yearbonus payment date to be entitled to a payment for the applicable period.
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The following table sets forth the 20172018 MIP revenue and operating income target levels and the operating income results applicable to the bonus payment for each of the Named Executive Officers (in millions):
| Revenue | Revenue | Operating Income | Operating Income | Annual Threshold | ||||||||||||||||||||||||||||
| Threshold | Target | Maximum | Actual | Threshold | Target | Maximum | Actual | Achieved? (1) | ||||||||||||||||||||||||
Corporate | $2,278 | $2,489 | N/A | $2,654 | $400 | $440 | $530 | $480 | Y | |||||||||||||||||||||||
Sector (Matthews) | $373 | $406 | N/A | $444 | $117 | $127 | $143 | $146 | Y | |||||||||||||||||||||||
Sector (Sankpal) | $227 | $253 | N/A | $247 | $62 | $68 | $79 | $70 | Y | |||||||||||||||||||||||
| Revenue | Operating Income | Annual Thresholds Achieved? (2) | |||||
| Threshold | Actual | Threshold | Target | Maximum | Actual (1) | ||
| Corporate | $2,800 | $3,132 | $ 510 | $560 | $670 | $622 | Y |
| Sector (Fosburgh) (3) | $176 | $188 | $48 | $51 | $59 | $49 | Y |
| Sector (Matthews) | $558 | $597 | $ 179 | $196 | $221 | $199 | Y |
| (1) | Actual corporate operating income shown in the table and used for determining the MIP bonus payments is an adjusted figure which excludes certain acquisition results. |
| (2) | Payment of the annual portion of the bonus is contingent upon achievement of threshold revenue and operating income levels for the full fiscal year. |
| (3) | The numbers presented for Mr. |
The relationship between the minimum operating income threshold, target and maximum performance levels, and the bonus payment earned under the 20172018 MIP is set forth below. The target level of corporate operating income in
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the 20172018 MIP of $440$560 million represented approximately 8.5%19% growth relative to our 20162017 actual results. The target levels of operating income for Mr. Matthews’Matthews' and Mr. Sankpal’sFosburgh’s sectors also each represented significant growth relative to our 20162017 actual results. The design of the MIP and performance goals established for 20172018 ensure a rigorous relationship between pay and performance and an expectation of sustained positive operating performance in our Named Executive Officer compensation program. The level of performance required to achieve a 300% of targetpay-out represents substantial overachievement relative to our expected range of results.
The formula provides for paymentsa two-step payment calculation process based first upon partial achievement of the threshold revenue andlevel, otherwise no bonus payments will be made. If this first step is satisfied, then the next step measures the achievement of operating income goals above the minimum threshold shown below on a linear interpolated basis between zero and 100% achievement of the goals, and on an upward sloping linear interpolated basis between 100% and 300% achievement of the goals.
| Operating Income Goals (in millions) | ||||||||||||
| Incentive Payout as a % of Target | Company | Sector (Matthews) | Sector (Sankpal) | |||||||||
0% | $400 | $117 | $62 | |||||||||
100% | $440 | $127 | $68 | |||||||||
200% | $480 | $135 | $75 | |||||||||
300% | $530 | $143 | $79 | |||||||||
| Operating Income Goals (in millions) | |||||||
| Incentive Payout as a % of Target | Company | Sector (Fosburgh) | Sector (Matthews) | ||||
| 0% | $510 | $48 | $179 | ||||
| 100% | $560 | $51 | $196 | ||||
| 200% | $610 | $55 | $208 | ||||
| 300% | $670 | $59 | $221 | ||||
Bonus Payments
The actual cash bonus payments earned by our Named Executive Officers under the 20172018 MIP ranged from 155% to 250%220% of their target annual cash bonus opportunities. The following table sets forth the target annual cash bonus opportunities, weighting of corporate and sector revenue and operating income target levels, the actual achievement level relative to these target levels, and the actual cash bonus payments made to our Named Executive Officers for 2017 (for Mr. Sankpal, a portion his sector bonus is based on achievement of other specific goals for his sector.):
| Target Bonus | Bonus Weighting | % Achievement | Actual Bonus | |||||||||||||||||||||||||||||
Named Executive Officer | % of Base | Value ($K) | Corporate | Sector | Corporate | Sector | % of Target Bonus | Earned Value ($K) | ||||||||||||||||||||||||
Steven W. Berglund | 125% | $1,108 | 100% | —% | 201% | N/A | 201% | $2,223 | ||||||||||||||||||||||||
Robert Painter | 80% | $332 | 100% | —% | 201% | N/A | 201% | $667 | ||||||||||||||||||||||||
James A. Kirkland | 60% | $240 | 100% | —% | 201% | N/A | 201% | $482 | ||||||||||||||||||||||||
Darryl Matthews | 80% | $331 | 50% | 50% | 201% | 300% | 250% | $830 | ||||||||||||||||||||||||
Sachin Sankpal | 80% | $318 | 50% | 50% | 201% | 137% | 155% | $494 | ||||||||||||||||||||||||
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| Target Bonus | Bonus Weighting | % Achievement (rounded) | Earned Value ($K) | ||||||||||||||||
| Named Executive Officer | % of Base | Value ($K) | Corporate | Sector | Corporate | Sector | Weighted Average | ||||||||||||
| Steven W. Berglund | 125 | % | $1,253 | 100 | % | — | % | 220 | % | N/A | 220 | % | $2,761 | ||||||
| Robert Painter | 80 | % | $415 | 100 | % | — | % | 220 | % | N/A | 220 | % | $915 | ||||||
| Bryn Fosburgh (1) | 80 | % | $361 | 60 | % | 40 | % | 220 | % | 56 | % | 155 | % | $558 | |||||
| James A. Kirkland | 60 | % | $252 | 100 | % | — | % | 220 | % | N/A | 220 | % | $555 | ||||||
| Darryl Matthews | 80 | % | $341 | 50 | % | 50 | % | 220 | % | 124 | % | 172 | % | $588 | |||||
| (1) | Mr. Fosburgh's weighting percentages are shown as averaged for 2018. In the first half of the year his bonus was based 100% on corporate goals, and in the second half of the year his bonus was based 20% on corporate goals and 80% on sector goals. |
The actual cash bonus payments made to our Named Executive Officers for 20172018 are set forth in the “Summary Compensation Table” below.
Long-Term Incentive Compensation
We view long-term incentive compensation in the form of equity awards as a critical element of our executive compensation program. The realized value of these equity awards bears a direct relationship to our stock price, and, therefore, these awards are an incentive for our executive officers, including our Named Executive Officers, to create value for our stockholders. Equity awards also help us retain qualified executive officers in a competitive market.
Long-term incentive compensation opportunities in the form of equity awards are determined and since November 2017, granted by the Compensation Committee. The amount and forms of such equity awards are determined by the Compensation Committee after considering the factors described in “Governance of Executive Compensation Program—Program - Compensation-Setting Process” above. The amounts of the equity awards are also intended to providecompetitively-sized awards and resulting target total direct compensation opportunities within a competitive range of the market median relative to our
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compensation peer group and Radford survey data for similar roles and positions for each of our executive officers, taking into consideration business results, internal equity, experience and individual performance.
In May 2017,2018, the Compensation Committee determined that the long-term incentive equity awards to be granted to our executive officers should be in the form of a combination of PRSU awards and time-based RSU awards for shares of our common stock. In 2017,2018, our Named Executive Officers received PRSU awards with two different performance measurement designs, as well as time-based RSU awards, as summarized here and described in greater detail below:
A portion of the PRSU awards granted are to be earned based on our TSR relative to the components of the S&P 500 Index over a three-year performance period with three annual scoring windows of 12, 24 and 36 months respectively. No PRSU awards vest until the end of the full three-year performance period (the “TSR PRSU Awards”). This portion generally comprised 25% of the total long-term incentive equity value granted for designated Named Executive Officers (or 48% in the case of our CEO).
The remaining portion of the PRSU awards granted are to be earned to the extent that we achieve pre-established target levels of Trimble revenue and operating income growth as of the end of our fiscal 2020 (the “Financial Results PRSU Awards”). This portion generally comprised 25% of the total long-term incentive equity value granted to each Named Executive Officer (or 24% in the case of our CEO).
The remaining long-term incentive compensation value granted to our executive officers was delivered in the form of time-based RSU awards, which were granted in November 2017.2018. These grants generally comprised approximately 50% of the total long-term incentive equity value granted to each Named Executive Officer (or 25%28% in the case of our CEO). Mr. Fosburgh was also granted a time-based RSU in February 2018 in order to bring his total time-based RSU awards in line with those of his peers within the Company. As a result of this award, the mix of awards granted to him in 2018 was approximately 1/3 PRSU awards (split evenly, based on number of shares, between TSR PRSU Awards and Financial Results PRSU Awards) and 2/3 time-based RSU awards.
The Compensation Committee approved the mix of 20172018 long-term incentive equity awards based on an assessment of our compensation objectives and historical practice, input from the Compensation Committee’s independent compensation consultant, and market practice among companies in our peer group. The mix of time and performance-based vesting equity awards is competitive with market practice for our Named Executive Officers. The Compensation Committee determined through peer group analysis that the equity awards to our CEO, for which approximately 75% of target value was in the form of performance-based awards, included a greater weighting on performance-based compensation than is common among peer companies. This weighting was established to reinforce our strongpay-for-performance culture.
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The Compensation Committee recommended, and our Board of Directors approved the following aggregate equity awards for our Named Executive Officers in 2017:
| Named Executive Officer | Restricted Stock Unit Awards (# of shares) |
Performance Stock | Grant Date Target Value of Equity ($) (1) | Aggregate Grant Date Fair Value of Equity Awards ($) | ||||||||||||
Mr. Berglund | 37,599 | 126,942 | $6,116,173 | $7,537,924 | ||||||||||||
Mr. Painter | 16,451 | 21,000 | $1,424,093 | $1,600,493 | ||||||||||||
Mr. Kirkland | 14,884 | 19,000 | $1,288,455 | $1,448,055 | ||||||||||||
Mr. Matthews | 14,884 | 19,000 | $1,288,455 | $1,448,055 | ||||||||||||
Mr. Sankpal | 14,884 | 19,000 | $1,288,455 | $1,448,055 | ||||||||||||
(1) The grant date target value of equity represents awards valued based on the closing price of our Common Stock on the grant date. In the case of Relative TSR PRSU awards, this value is different than the grant values provided in the Summary Compensation Table, which represent the accounting value using a Monte Carlo analysis as required by FASB ASC Topic 718.
Relative 2018:
| Named Executive Officer | Restricted Stock Unit Awards (# of shares) | Performance Stock Unit Awards (# of shares at target) | Aggregate Grant Date Target Value of Equity ($) (1) | Aggregate Grant Date Fair Value (as shown in Summary Compensation Table) ($) | ||
| Mr. Berglund | 52,924 | 145,231 | $7,024,991 | $7,452,939 | ||
| Mr. Painter | 19,844 | 21,184 | $1,482,871 | $1,529,688 | ||
| Mr. Fosburgh | 25,128 | 15,532 | $1,560,254 | $1,594,580 | ||
| Mr. Kirkland | 12,992 | 15,532 | $1,028,375 | $1,062,701 | ||
| Mr. Matthews | 14,128 | 15,532 | $1,071,305 | $1,105,630 | ||
| (1) | The grant date target value of equity represents awards valued based on the closing price of our Common Stock on the grant date. In the case of relative TSR PRSU awards, this value is different than the grant values provided in the Summary Compensation Table, which represent the accounting value using a Monte Carlo analysis as required by FASB ASC Topic 718. |
TSR PRSU Awards
The Relative TSR PRSU Awards may become earned based on our relative TSR compared to components of the S&P 500 Index as measured overone-year,two-year and three-year performance periods beginning on May 2, 20171, 2018 (the“Performance Periods”), with equal portions eligible to become earned at the end of each of the Performance Periods, although no shares will actually vest until the end of the three-year period. The number of shares of our common stock
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for which these awards may be settled varies based on our TSR relative to the TSR of components of the S&P 500 Index over the Performance Periods.
The Compensation Committee selected the S&P 500 Index as the most appropriate reference from which to evaluate our performance because it represents a reliable indicator of the general economy and reflects the unique and diverse nature of our operations. The formula used to measure TSR for the Company and for the components of the S&P 500 Index is the60-trading day average stock price through the final day of the Performance Period and the60-trading day average stock price prior to the commencement of the Performance Period, including the reinvestment of dividends where applicable.
For purposes of the Relative TSR PRSU Awards, the payment range based on our TSR relative to the S&P 500 Index over the Performance Periods is as follows:shown in the chart below. Attainment among the percentile rankings is subject to interpolation on a linear basis.
Relative TSR Compared to Percentile Ranking across S&P 500 Member Companies |
| |
Maximum: 80th percentile or above | 200% | |
Target: 50th percentile | 100% | |
Threshold: 25th percentile | 50% | |
Below threshold | 0% | |
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Financial PerformanceResults PRSU Awards
In addition to the Relativerelative TSR PRSU Awards, our Board of Directors approved the grant of PRSU awards to be earned based on our absolute revenue and adjusted operating income performance during 2019.2020. For purposes of the Financial PerformanceResults PRSU Awards, the adjustments to operating income reflected the samenon-GAAP measure of operating income as used for purposes of the 20172018 MIP.
The number of shares of our common stock that could be earned under the Financial PerformanceResults PRSU Awards will vary from 0% to 200% of the target number of units granted, with the earned shares (if any) to vest at the end of fiscal 2019.2020. The levels of performance required to earn the targetvarying number of units was based onare set forth in a matrix which was reviewed and recommendedapproved by the Compensation Committee and approved by the Board of Directorsatat the time of the grant,grant. These levels reward achievement of rigorous three-year financial goals which translate into leveraged outcomes aligned with stockholder interests. The matrix achievement levels are defined at the intersection of revenue growth and were viewed to be achievable but also challenging. In addition,change in profitability, the two primary metrics of value creation. The threshold levels of revenue and adjusted operating income required to earn any pay outpayout under the terms of the Financial PerformanceResults PRSU Awards exceed our performance during fiscal 2016,2017, ensuring that no compensation will be earned under the awards for performance that does not represent growth over time and significant progress toward achieving the objectives established in our long-term strategic plan. In addition, no shares will be earned if the threshold levels of both revenue andnon-GAAP operating income are not achieved.
Attainment in between the performance levels of the matrix is determined by interpolation on a linear basis.
The decision to link these long term awards to our revenue growth and operating income performance was aligned with our long-term strategic plan and reflected our focus on profitable growth as a key driver of stockholder value. The Compensation Committee believes that the use of a3-year performance and vesting period ensures a long-term view of performance that is aligned with the interests of our stockholders. In addition, this approach is competitive with market practice among companies in the Trimble compensation peer group and supports the retention of our executive team.
Time-Based RSU Awards
The time-based RSU awards vest in equal annual installments over the three-year period, with the first installment vesting after one year (approximately one year from the date of grant), contingent upon an executive officer remaining continuously employed by us through each applicable vesting date. Upon vesting, the RSU awards may be settled by issuing the number of shares of our common stock, or by a cash payment equal to the fair market value of the shares on the vesting date, or a combination of shares and cash, as determined in the discretion of our Board of Directors.
the Compensation Committee.
The equity awards granted to our Named Executive Officers in 20172018 are set forth in the “Summary Compensation Table” and the “Grants of Plan-Based Awards Table” below.
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Welfare and Health Benefits
Our executive officers, including our Named Executive Officers, are eligible to receive the same employee benefits that are generally available to all of our full-time employees, subject to the satisfaction of certain eligibility requirements. These benefits include health and welfare benefits generally available to all U.S. employees.
In addition, our employees, including our executive officers, are eligible to participate in our Section 401(k) retirement plan. Participants in the Section 401(k) plan in general may receive up to $3,000 per year in matching Company contributions.
Also, commencing in 2017, a new post-employment arrangement was adopted for certain eligible executive officers, including each of the Named Executive Officers, participate in a post-employment equity vesting arrangement (see the description under “Post-Employment Compensation—"Post-Employment Compensation - Trimble Age & Service Equity Vesting Program”" later in this Proxy Statement).
In structuring these benefit programs, we seek to provide an aggregate level of benefits that are comparable to those provided by similar companies. Certain of our Named Executive Officers also participate in ourNon-Qualified Deferred Compensation Plan, further discussed in “Post-Employment Compensation” below.
In addition, we pay basic life insurance premiums on behalf of our Named Executive Officers, as part of our general death benefits for full time employees.
Perquisites and Other Personal Benefits
Currently, we do not view perquisites or other personal benefits as a significant component of our executive compensation program. Accordingly, we do not provide significant perquisites or other personal benefits to our executive officers, including our Named Executive Officers, except as generally made available to our employees. During 2017,2018, none of our Named Executive Officers received perquisites or other personal benefits that were, in the aggregate, $10,000 or more for each individual.
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In the future, we may provide perquisites or other personal benefits, subject to review and approval by the Compensation Committee.
Employment Arrangements
We have entered into a written employment agreement with our CEO and have written employment offer letters with each of our other executive officers, including our other Named Executive Officers. In filling each of our executive positions, we recognized the need to develop competitive compensation packages to attract qualified candidates in a dynamic labor market. At the same time, in formulating these compensation packages, we were sensitive to the need to integrate new executive officers into the executive compensation structure that we were seeking to develop, balancing both competitive and internal equity considerations. Each of these arrangements provides for “at will” employment.
Change-in-Control Compensation Arrangements
We have entered into executive severance and change in control severance agreements (the “Severance“Severance Agreements”) with each of our executive officers, including our CEO and our other Named Executive Officers. Thepost-employment post‑employment compensation arrangements provided under the Severance Agreements are intended to supersede any post-employment arrangements provided to the Named Executive Officers in their employment agreements or offer letters. We believe that having in place reasonable and competitive post-employment compensation arrangements are essential to attracting and retaining highly-qualified executive officers. The Severance Agreements are designed to provide reasonable compensation to executive officers who leave our employ under certain circumstances to facilitate their transition to new employment. Further, in some instances, we seek to mitigate any potential employer liability and avoid future disputes or litigation by requiring a departing executive officer to sign a separation and release agreement acceptable to us as a condition to receiving post-employment compensation payments or benefits.
On February 2, 2017, as recommended by the Compensation Committee, our Board of Directors approved amended and restated executive severance andchange-in-control severance arrangements with our CEO, CFO and our other Named Executive Officers, as well as certain other executive officers. When approving the amended arrangements, the Compensation Committee considered an analysis of market practice among the companies in our compensation peer group as well as input from its compensation consultant. The terms and conditions of these arrangements are described in “Post-Employment Compensation” below.
The Compensation Committee does not consider the specific amounts payable under the executive severance andchange-in-control severance arrangements when establishing annual compensation. We do believe, however, that these arrangements are necessary to offer compensation packages that are competitive.
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We believe that these arrangements are designed to align the interests of our executive officers and our stockholders when considering our long-term future. The primary purpose of these arrangements is to keep our most senior executive officers focused on pursuing all corporate transaction activity that is in the best interests of our stockholders regardless of whether those transactions may result in their own job loss. Reasonable post-acquisition payments and benefits should serve the interests of both the executive officer and our stockholders.
For detailed descriptions of the post-employment compensation arrangements we maintained with our Named Executive Officers for 2017,2018, as well as an estimate of the potential payments and benefits payable under these arrangements, see “Post-Employment Compensation” below.
Other Compensation Policies and Practices
Equity Awards Grant Policy
Due to the fact that our Compensation Committee’s and Board of Directors’ regular meetings are timed to coincide with the preparation of our quarterly financial results, equity awards have and will be granted shortly before an earnings release. The Compensation Committee or our Board of Directors may also grant equity awards at a special meeting, or by unanimous written consent, in special circumstances, such as to facilitate the hiring of a key executive officer. Accordingly, our Compensation Committee or Board of Directors may grant equity awards while the directors are in possession of material,non-public information.
Stock Ownership Policy
We have historically maintainedmaintain a stock ownership policy for our CEO andexecutives, as well as thenon-employee members of our Board of Directors, to further align their respective interests with the interests of our stockholders, and to further promote
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our commitment to sound corporate governance.
This policy requires our CEO to own a minimum number of shares of our common stock equal to a value of five times his or her annualized base salary.
Thesalary; our other officers who were subject to Section 16 of the Securities Exchange Act of 1934, including our CFO and other Named Executive Officers, to own a minimum number of shares necessary to meet the minimum ownership level may be accumulated during the first five years after becoming chief executive officer or a member of our Boardcommon stock equal to a value of Directors, as applicable.two times his or her annualized base salary; and our Chief Accounting Officer to own a minimum number of shares of our common stock equal to a value of one times his or her annualized base salary. The shares of our common stock counted toward the ownership guidelines include shares owned directly and indirectly, provided there is an economic interest in the shares. For our CEO, this ownership level must be attained within five years from the date the policy was adopted.
Mr. Berglund has achieved his required ownership level.
As of May 1, 2017, we expanded our stock ownership policy to include our CFO, Named Executive Officers and Section 16 officers. The updated policy requires these For the other executives, to own a minimum number of shares of our common stock equal to a value of two times his or her annualized base salary. In addition, our Chief Accounting Officer also is required to own a minimum number of shares of our common stock equal to a value of one times his or her annualized base salary. Thethe number of shares necessary to meet the minimum ownership level may be accumulated during the first five years after the Maydate the policy became applicable to them (May 1, 2017 effective date. The shares2017) or five years from the date they assume one of our common stock counted toward the ownership guidelines include shares owned directly and indirectly, provided there is an economic interest in the shares.
roles listed.
Compensation Recovery (“Clawback”) Policy
In May 2017, our Board of Directors adopted
We also maintain a policy providing that in the event of a material restatement of our financial results, we may require that incentive-based compensation paid to our executive officers who were subject to Section 16 of the Securities Exchange Act of 1934 during the three fiscal years prior to the restatement be forfeited and repaid to us. In addition, if material dishonesty, fraud or misconduct by any such executive officer directly caused or materially contributed to the need for the restatement, the full amount of incentive-based compensation paid to him or her during the prior three fiscal years may be subject to forfeiture or reimbursement. If any such executive officer did not engage in any misconduct, the amount subject to forfeiture or reimbursement will be based on the difference between the amount of incentive-based compensation that was paid based on the results as originally reported and the amount of incentive-based compensation that would have been paid based on the results as restated, calculated without regard to any taxes paid.
Our Board of Directors will determine the amount, form and timing of any recovery in its discretion, based on the circumstances. Each of our executive officers who is subject to Section 16 of the Securities Exchange Act of 1934 is required to sign an acknowledgment making them subject to the policy.
Policy Prohibiting Hedging or Pledging of Company Securities
We have a policy that prohibits all hedging or monetization transactions, which could result in an employee, including an executive officer, or a member of our Board of Directors to continue to own the covered securities at issue, but without the full risks and rewards of ownership. If that were to occur, the employee or director may no longer have the same objectives as our other stockholders. We consider it improper and inappropriate for our employees, including our Named Executive Officers, to engage in such transactions, and have expressly prohibited such activity under our Insider Trading Policy.
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While use of companyCompany securities as collateral for margin accounts or other transactions does not directly create a misalignment with stockholders’ interests, it raises potential risks to stockholder value, particularly if the pledge is significant. Based on these potential risks, we have prohibited pledging transactions as well.
Tax and Accounting Considerations
Deductibility of Executive Compensation
Generally, Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”) disallows public companies a tax deduction for federal income tax purposes of remuneration in excess of $1 million paid to their chief executive officer and each of the three other most highly-compensated executive officers (other than the chief financial officer) whose compensation is required to be disclosed to our stockholders under the Exchange Act in any taxable year. Historically, remuneration in excess of $1 million was only deductible if it was “performance-based compensation” within the meaning of Section 162(m) or qualifies for one of the other exemptions from the deduction limit. However, on December 22, 2017, the Tax Cuts and Jobs Act (the“Tax Act”) became law, significantly amending Section 162(m). The Tax Act eliminated the performance-based compensation exception with respect to tax years beginning January 1, 2018, but included a transition rule with respect to compensation that is provided pursuant to a written binding contract in effect on November 2, 2017 and not
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materially modified after that date. Accordingly, commencing in 2018, the Company’s tax deduction with regard to compensation of covered employees generally will be limited to $1 million per taxable year for each officer.
To maintain flexibility in compensating our Named Executive Officers in a manner designed to promote varying corporate goals, the Compensation Committee had not adopted a policy that all compensation payable to our Named Executive Officers that is subject to Section 162(m) had to be deductible for federal income tax purposes. In accordance with the transition rule applicable to binding contracts in effect on November 2, 2017, to the extent practicable and in the best interests of the Company and its stockholders, the Company will generally seek to preserve the deductibility ofperformance-based performance‑based compensation by meeting the requirements of Section 162(m), as amended by the Tax Act.
Accounting for Stock-Based Compensation
We follow the Financial Accounting Standard Board’s Accounting Standards Codification Topic 718 (“FASB ASC Topic 718”) for our stock-based compensation awards. FASB ASC Topic 718 requires us to measure the compensation expense for all share-based payment awards made to our employees andnon-employee members of our Board of Directors, including options to purchase shares of our common stock and other stock awards, based on the grant date “fair value” of these awards. This calculation is performed for accounting purposes and reported in the executive compensation tables required by the federal securities laws, even though the recipient of the awards may never realize any value from their awards.
Compensation Committee Report
The information contained in this Compensation Committee Report shall not be deemed to be “soliciting material” or “filed” or incorporated by reference in future filings with the SEC, or subject to the liabilities of Section 18 of the Securities Exchange Act of 1934, except to the extent that it is specifically incorporated by reference into a document filed under the Securities Act of 1933 or the Securities Exchange Act of 1934.
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with the Company’s management, and, based on this review and discussion, has recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Company’s proxy statement.
Submitted by the Compensation Committee of the Company’s Board of Directors,
Merit E. Janow,Member | Ronald S. Nersesian, |
Johan Wibergh, Member | ||
Compensation Committee | Compensation Committee | Compensation Committee | ||
Also submitted by the Company’s Board of Directors other than with respect to the Tax and Accounting Treatment section of the Compensation Discussion and Analysis,
Steven W. Berglund Kaigham (Ken) Gabriel Ulf J. Johansson Meaghan Lloyd Mark S. Peek Johan Wibergh
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| Steven W. Berglund | Kaigham (Ken) Gabriel | Ulf J. Johansson | Meaghan Lloyd | Sandra MacQuillan | Mark S. Peek |
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Executive Compensation Tables
This section includes the executive compensation tables required by Item 402 of RegulationS-K, promulgated under the Securities Act of 1933, as amended.
Summary Compensation Table
The following table sets forth the compensation information for the 2018, 2017 2016 and 20152016 fiscal years, respectively, by: (i) all persons who served as the Company’s chief executive officer during the last completed fiscal year; (ii) all persons who served as the Company’s chief financial officer during the last completed fiscal year; and (iii) the three other most highly compensated executive officers of the Company serving at the end of the last completed fiscal year.
| SUMMARY COMPENSATION TABLE | ||||||||||||||||||||||||||||
| Name and Principal Position | Year | Salary (1) | Stock Awards (2) | Option Awards (3) | Non-Equity (1)(4) | All Other Compensation (5) | Total | |||||||||||||||||||||
Steven W. Berglund | 2017 | $876,900 | $7,537,924 | $— | $2,222,837 | $— | $10,637,661 | |||||||||||||||||||||
President & Chief | 2016 | $860,000 | $6,506,882 | $— | $333,901 | $— | $7,700,783 | |||||||||||||||||||||
Executive Officer | 2015 | $860,000 | $7,721,770 | $— | $173,654 | $— | $8,755,424 | |||||||||||||||||||||
Robert Painter | 2017 | $401,000 | $1,600,493 | $— | $666,625 | $3,000 | $2,671,118 | |||||||||||||||||||||
Chief Financial Officer | 2016 | $365,428 | $1,811,101 | $271,350 | $90,803 | $3,000 | $2,541,682 | |||||||||||||||||||||
James A. Kirkland (6) | 2017 | $395,530 | $1,448,055 | $— | $482,007 | $1,500 | $2,327,092 | |||||||||||||||||||||
Senior Vice President, General Counsel | ||||||||||||||||||||||||||||
Darryl Matthews | 2017 | $409,695 | $1,448,055 | $— | $829,507 | $1,500 | $2,688,757 | |||||||||||||||||||||
Senior Vice President | 2016 | $397,605 | $1,160,060 | $— | $167,321 | $3,000 | $1,727,986 | |||||||||||||||||||||
Sachin Sankpal (6) | 2017 | $393,887 | $1,448,055 | $— | $494,157 | $3,000 | $2,339,099 | |||||||||||||||||||||
Senior Vice President | ||||||||||||||||||||||||||||
| SUMMARY COMPENSATION TABLE | |||||||||||||||||||
| Name and Principal Position | Year | Salary (1) | Stock Awards (2) | Option Awards (3) | Non-Equity Incentive Plan Compensation (1)(4) | All Other Compensation (5) | Total | ||||||||||||
| Steven W. Berglund | 2018 | $961,400 | $7,452,939 | $— | $2,760,510 | $2,323 | $11,177,172 | ||||||||||||
| President & Chief Executive Officer | 2017 | $876,900 | $7,537,924 | $— | $2,222,837 | $— | $10,637,661 | ||||||||||||
| 2016 | $860,000 | $6,506,882 | $— | $333,901 | $— | $7,700,783 | |||||||||||||
| Robert Painter | 2018 | $482,437 | $1,529,688 | $— | $914,660 | $8,211 | $2,934,996 | ||||||||||||
| Chief Financial Officer | 2017 | $401,000 | $1,600,493 | $— | $666,625 | $3,000 | $2,671,118 | ||||||||||||
| 2016 | $365,428 | $1,811,101 | $271,350 | $90,803 | $3,000 | $2,541,682 | |||||||||||||
| Bryn Fosburgh | 2018 | $451,000 | $1,594,580 | $— | $557,805 | $750 | $2,604,135 | ||||||||||||
| Senior Vice President | 2017 | $446,362 | $888,800 | $— | $724,419 | $1,494 | $2,061,075 | ||||||||||||
| 2016 | $433,287 | $1,643,102 | $— | $74,728 | $3,000 | $2,154,117 | |||||||||||||
| James A. Kirkland (6) | 2018 | $413,000 | $1,062,701 | $— | $555,408 | $750 | $2,031,859 | ||||||||||||
| Senior Vice President, General Counsel | 2017 | $395,530 | $1,448,055 | $— | $482,007 | $1,500 | $2,327,092 | ||||||||||||
| Darryl Matthews | 2018 | $422,073 | $1,105,630 | $— | $587,771 | $750 | $2,116,224 | ||||||||||||
| Senior Vice President | 2017 | $409,695 | $1,448,055 | $— | $829,507 | $1,500 | $2,688,757 | ||||||||||||
| 2016 | $397,605 | $1,160,060 | $— | $167,321 | $3,000 | $1,727,986 | |||||||||||||
| (1) | The Salary amounts shown are for actual amounts |
| (2) | The amounts in |
| (3) | The amounts in this column represent the grant date fair value of stock options |
| (4) | The amounts shown consist of cash bonuses earned under the Management Incentive |
| (5) | The amount shown for Mr. Berglund in 2018 represents reimbursement of fitness dues. The amount shown for Mr. Painter in 2018 includes $1,000 for a patent award and $4,961 for reimbursement of tax services related to a previous international assignment. All other amounts represent |
| (6) |
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Grants of Plan-Based Awards
The table below lists the cash bonus incentive opportunities, stock option grants, and restricted stock unit awards, for each of the Named Executive Officers during the fiscal year ended December 29, 2017.
| GRANTS OF PLAN-BASED AWARDS | ||||||||||||||||||||||||||||||||||||||||||||
Estimated Future Payouts Under Non-Equity | Estimated Possible Payout Under Equity | |||||||||||||||||||||||||||||||||||||||||||
| Name | Award Type | Grant Date | Threshold | Target | Maximum | Threshold | Target | Maximum | All Other Stock Awards: Number of Shares of Stock or Units (#) | All Other Option Awards: Number of Underlying Options (#) | Exercise ($/ | Grant Date Fair Value of Stock and Option Awards (2) | ||||||||||||||||||||||||||||||||
| Steven W. Berglund | Cash Incentive | $1,107,500 | $3,322,500 | |||||||||||||||||||||||||||||||||||||||||
| Relative TSR PRSU Award | 5/2/17 (3) | 42,314 | 84,628 | 169,256 | $4,471,744 | |||||||||||||||||||||||||||||||||||||||
| Financial Performance PRSU Award | 5/2/17 (4) | 21,157 | 42,314 | 84,628 | $1,524,997 | |||||||||||||||||||||||||||||||||||||||
| RSU Award | 11/13/17 (5) (6) | 37,599 | $1,541,183 | |||||||||||||||||||||||||||||||||||||||||
| Robert Painter | Cash Incentive | $332,000 | $996,000 | |||||||||||||||||||||||||||||||||||||||||
| Relative TSR PRSU Award | 5/2/17 (3) | 5,250 | 10,500 | 21,000 | $554,820 | |||||||||||||||||||||||||||||||||||||||
| Financial Performance PRSU Award | 5/2/17 (4) | 5,250 | 10,500 | 21,000 | $378,420 | |||||||||||||||||||||||||||||||||||||||
| RSU Award | 11/09/17 (5) | 16,451 | $667,253 | |||||||||||||||||||||||||||||||||||||||||
| James A. Kirkland | Cash Incentive | $240,000 | $720,000 | |||||||||||||||||||||||||||||||||||||||||
| Relative TSR PRSU Award | 5/2/17 (3) | 4,750 | 9,500 | 19,000 | $501,980 | |||||||||||||||||||||||||||||||||||||||
| Financial Performance PRSU Award | 5/2/17 (4) | 4,750 | 9,500 | 19,000 | $342,380 | |||||||||||||||||||||||||||||||||||||||
| RSU Award | 11/09/17 (5) | 14,884 | $603,695 | |||||||||||||||||||||||||||||||||||||||||
| Darryl Matthews | Cash Incentive | $331,200 | $993,600 | |||||||||||||||||||||||||||||||||||||||||
| Relative TSR PRSU Award | 5/2/17 (3) | 4,750 | 9,500 | 19,000 | $501,980 | |||||||||||||||||||||||||||||||||||||||
| Financial Performance PRSU Award | 5/2/17 (4) | 4,750 | 9,500 | 19,000 | $342,380 | |||||||||||||||||||||||||||||||||||||||
| RSU Award | 11/09/17 (5) | 14,884 | $603,695 | |||||||||||||||||||||||||||||||||||||||||
| Sachin Sankpal | Cash Incentive | $318,400 | $955,200 | |||||||||||||||||||||||||||||||||||||||||
| Relative TSR PRSU Award | 5/2/17 (3) | 4,750 | 9,500 | 19,000 | $501,980 | |||||||||||||||||||||||||||||||||||||||
| Financial Performance PRSU Award | 5/2/17 (4) | 4,750 | 9,500 | 19,000 | $342,380 | |||||||||||||||||||||||||||||||||||||||
| RSU Award | 11/09/17 (5) | 14,884 | $603,695 | |||||||||||||||||||||||||||||||||||||||||
| GRANTS OF PLAN-BASED AWARDS | ||||||||||||||||
| Name | Award Type | Grant Date | Estimated Future Payouts Under Non-Equity Incentive Plan Awards (1) | Estimated Possible Payout Under Equity Incentive Plan Awards | ||||||||||||
| Threshold | Target | Maximum | Threshold (#) | Target (#) | Maximum (#) | All Other Stock Awards: Number of Shares of Stock or Units (#) | All Other Option Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards ($/Share) | Grant Date Fair Value of Stock and Option Awards (2) | |||||||
| Steven W. Berglund | Cash Incentive | $1,252,500 | $3,757,500 | |||||||||||||
| TSR PRSU Award | 5/1/18 (3) | 48,411 | 96,821 | 193,642 | $3,777,955 | |||||||||||
| Fin. Results PRSU Award | 5/1/18 (4) | 24,205 | 48,410 | 96,820 | $1,674,986 | |||||||||||
| RSU Award | 11/8/18 (5)(6) | 52,924 | $1,999,998 | |||||||||||||
| Robert Painter | Cash Incentive | $415,000 | $1,245,000 | |||||||||||||
| TSR PRSU Award | 5/1/18 (3) | 5,296 | 10,592 | 21,184 | $413,300 | |||||||||||
| Fin. Results PRSU Award | 5/1/18 (4) | 5,296 | 10,592 | 21,184 | $366,483 | |||||||||||
| RSU Award | 11/8/18 (5) | 19,844 | $749,905 | |||||||||||||
| Bryn Fosburgh | Cash Incentive | $360,800 | $1,082,400 | |||||||||||||
| TSR PRSU Award | 5/1/18 (3) | 3,883 | 7,766 | 15,532 | $303,029 | |||||||||||
| Fin. Results PRSU Award | 5/1/18 (4) | 3,883 | 7,766 | 15,532 | $268,704 | |||||||||||
| RSU Award | 2/1/18 (5)(6) | 11,000 | $488,950 | |||||||||||||
| RSU Award | 11/8/18 (5)(6) | 14,128 | $533,897 | |||||||||||||
| James A. Kirkland | Cash Incentive | $252,000 | $756,000 | |||||||||||||
| TSR PRSU Award | 5/1/18 (3) | 3,883 | 7,766 | 15,532 | $303,029 | |||||||||||
| Fin. Results PRSU Award | 5/1/18 (4) | 3,883 | 7,766 | 15,532 | $268,704 | |||||||||||
| RSU Award | 11/8/18 (5)(6) | 12,992 | $490,968 | |||||||||||||
| Darryl R. Matthews | Cash Incentive | $341,136 | $1,023,408 | |||||||||||||
| TSR PRSU Award | 5/1/18 (3) | 3,883 | 7,766 | 15,532 | $303,029 | |||||||||||
| Fin. Results PRSU Award | 5/1/18 (4) | 3,883 | 7,766 | 15,532 | $268,704 | |||||||||||
| RSU Award | 11/8/18 (5) | 14,128 | $533,897 | |||||||||||||
| (1) | The annual target cash incentive opportunities under the MIP for the |
| (2) | The fair value of performance-based restricted stock units with vesting tied to our total shareholder return are valued as of the grant date using a Monte Carlo simulation, which results in a value greater than the price of |
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| common stock on the date of grant and the total expense associated with the performance-based awards is based upon the probable achievement of the underlying |
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are valued as of the grant date using the binomial valuation model. The fair values were calculated in accordance with FASB ASC 718. For a description of the assumptions used in determining the values described in these columns, please refer to “Note 15: Employee Stock Benefit Plans” of the Company’s Annual Report on Form 10-K filed on February 22, 2019. These amounts do not necessarily represent actual value that may be realized.
| (3) | These |
| (4) | These Financial |
| (5) | These time-based RSU grants |
| (6) | These time-based RSUs will vest upon retirement under |
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Outstanding Equity Awards at FiscalYear-End
The table below shows the stock options and stock awards outstanding for each of the Named Executive Officers as of the fiscal year ended December 29, 2017.
| OUTSTANDING EQUITY AWARDS | ||||||||||||||||||||||||||||||||||
| Name | Option Awards | Stock Awards | ||||||||||||||||||||||||||||||||
| Grant Date | Number of | Number of securities underlying unexercised options unexercisable (#) | Option exercise price | Option expiration date | Number of shares or units of stock that have not vested (#) | Market value of shares or units of stock that have not vested (11) | Equity Incentive plan number of shares, units or | Equity Incentive payout value of shares, units or | ||||||||||||||||||||||||||
Steven W. Berglund | 10/28/2011 (1) | 400,000 | — | $20.64 | 10/28/2018 | |||||||||||||||||||||||||||||
| 5/1/2012 (1) | 250,000 | — | $26.98 | 5/1/2019 | ||||||||||||||||||||||||||||||
| 10/29/2012 (1) | 200,000 | — | $23.53 | 10/29/2019 | ||||||||||||||||||||||||||||||
| 5/7/2013 (2) | 166,675 | — | $28.08 | 5/7/2020 | ||||||||||||||||||||||||||||||
| 10/29/2013 (2) | 215,000 | — | $28.20 | 10/29/2020 | ||||||||||||||||||||||||||||||
| 5/9/2014 (2) | 115,181 | 13,394 | $35.02 | 5/9/2021 | ||||||||||||||||||||||||||||||
| 11/6/2014 (2) | 138,750 | 41,250 | $27.48 | 11/6/2021 | ||||||||||||||||||||||||||||||
| 7/8/2015 (5) | 100,000 | $4,064,000 | ||||||||||||||||||||||||||||||||
| 11/6/2015 (6) | 75,370 | $3,063,037 | ||||||||||||||||||||||||||||||||
| 11/6/2015 (4) | 32,107 | $1,304,828 | ||||||||||||||||||||||||||||||||
| 5/3/2016 (7) | 123,400 | $5,014,976 | ||||||||||||||||||||||||||||||||
| 6/29/2016 (8) | 61,700 | $2,507,488 | ||||||||||||||||||||||||||||||||
| 11/10/2016 (4) | 41,339 | $1,680,017 | ||||||||||||||||||||||||||||||||
| 5/2/2017 (9) | 84,628 | $3,439,282 | ||||||||||||||||||||||||||||||||
| 5/2/2017 (10) | 42,314 | $1,719,641 | ||||||||||||||||||||||||||||||||
| 11/13/2017 (4) (13) | 37,599 | $1,528,023 | ||||||||||||||||||||||||||||||||
Robert Painter | 5/1/2012 (1) | 8,000 | — | $26.98 | 5/1/2019 | |||||||||||||||||||||||||||||
| 5/7/2013 (2) | 5,300 | — | $28.08 | 5/7/2020 | ||||||||||||||||||||||||||||||
| 10/29/2013 (2) | 6,000 | — | $28.20 | 10/29/2020 | ||||||||||||||||||||||||||||||
| 5/9/2014 (2) | 3,135 | 365 | $35.02 | 5/9/2021 | ||||||||||||||||||||||||||||||
| 11/6/2014 (2) | 4,046 | 1,204 | $27.48 | 11/6/2021 | ||||||||||||||||||||||||||||||
| 5/7/2015 (2) (3) | 1,717 | 943 | $25.29 | 5/7/2022 | 1,770 | $71,933 | ||||||||||||||||||||||||||||
| 11/6/2015 (3) | 5,000 | $203,200 | ||||||||||||||||||||||||||||||||
| 2/1/2016 (2) (4) | 45,000 | $19.28 | 2/1/2023 | 20,100 | $816,864 | |||||||||||||||||||||||||||||
| 5/3/2016 (7) | 24,750 | $1,005,840 | ||||||||||||||||||||||||||||||||
| 6/29/2016 (8) | 12,750 | $518,160 | ||||||||||||||||||||||||||||||||
| 11/10/2016 (4) | 6,282 | $255,300 | ||||||||||||||||||||||||||||||||
| 5/2/2017 (9) | 10,500 | $426,720 | ||||||||||||||||||||||||||||||||
| 5/2/2017 (10) | 10,500 | $426,720 | ||||||||||||||||||||||||||||||||
| 11/9/2017 (4) | 16,451 | $668,569 | ||||||||||||||||||||||||||||||||
James A. Kirkland | 5/1/2012 (1) | 40,000 | — | $26.98 | 5/1/2019 | |||||||||||||||||||||||||||||
| 10/29/2012 (1) | 430 | — | $23.53 | 10/29/2019 | ||||||||||||||||||||||||||||||
| 5/7/2013 (2) | 25,400 | — | $28.08 | 5/7/2020 | ||||||||||||||||||||||||||||||
| 10/29/2013 (2) | 26,000 | — | $28.20 | 10/29/2020 | ||||||||||||||||||||||||||||||
| 5/9/2014 (2) | 11,197 | 1,303 | $35.02 | 5/9/2021 | ||||||||||||||||||||||||||||||
| 11/6/2014 (2) | 23,125 | 6,875 | $27.48 | 11/6/2021 | ||||||||||||||||||||||||||||||
| 7/8/2015 (5) | 12,500 | $508,000 | ||||||||||||||||||||||||||||||||
| 11/6/2015 (6) | 11,250 | $457,200 | ||||||||||||||||||||||||||||||||
| 11/6/2015 (4) | 8,075 | $328,168 | ||||||||||||||||||||||||||||||||
| 5/3/2016 (7) | 23,600 | $959,104 | ||||||||||||||||||||||||||||||||
| 6/29/2016 (8) | 11,800 | $479,552 | ||||||||||||||||||||||||||||||||
| 11/10/2016 (4) | 7,906 | $321,300 | ||||||||||||||||||||||||||||||||
| 5/2/2017 (9) | 9,500 | $386,080 | ||||||||||||||||||||||||||||||||
| 5/2/2017 (10) | 9,500 | $386,080 | ||||||||||||||||||||||||||||||||
| 11/9/2017 (4) | 14,884 | $604,886 | ||||||||||||||||||||||||||||||||
Darryl Matthews | 9/1/2015 (4) | 8,656 | $351,780 | |||||||||||||||||||||||||||||||
| 11/6/2015 (4) (6) | 2,550 | $103,632 | 7,500 | $304,800 | ||||||||||||||||||||||||||||||
| 5/3/2016 (7) | 22,000 | $894,080 | ||||||||||||||||||||||||||||||||
| 6/29/2016 (8) | 11,000 | $447,040 | ||||||||||||||||||||||||||||||||
| 11/10/2016 (4) | 7,370 | $299,517 | ||||||||||||||||||||||||||||||||
| 5/2/2017 (9) | 9,500 | $386,080 | ||||||||||||||||||||||||||||||||
| 5/2/2017 (10) | 9,500 | $386,080 | ||||||||||||||||||||||||||||||||
| 11/9/2017 (4) | 14,884 | $604,886 | ||||||||||||||||||||||||||||||||
Sachin Sankpal | 11/6/2015 (4) (6) | 850 | $34,544 | 2,500 | $101,600 | |||||||||||||||||||||||||||||
| 11/6/2015 (4) | 9,866 | $400,954 | ||||||||||||||||||||||||||||||||
| 5/3/2016 (7) | 22,000 | $894,080 | ||||||||||||||||||||||||||||||||
| 6/29/2016 (8) | 11,000 | $447,040 | ||||||||||||||||||||||||||||||||
| 11/10/2016 (4) | 7,370 | $299,517 | ||||||||||||||||||||||||||||||||
| 5/2/2017 (9) | 9,500 | $386,080 | ||||||||||||||||||||||||||||||||
| 5/2/2017 (10) | 9,500 | $386,080 | ||||||||||||||||||||||||||||||||
| 11/9/2017 (4) | 14,884 | $604,886 | ||||||||||||||||||||||||||||||||
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40
| OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END | |||||||||||||
| Name | Grant Date | Option Awards | Stock Awards | ||||||||||
| Number of securities underlying unexercised options exercisable (#) | Number of securities underlying unexercised options unexercisable (#) | Option exercise price | Option expiration date | Number of shares or units of stock that have not vested (#) | Market value of shares or units of stock that have not vested (1) | Equity Incentive Plan Awards: Number of unearned shares, units or other rights that have not vested (#) (2) | Equity Incentive Plan Awards: market or payout value of unearned shares, units or other rights that have not vested (2) | ||||||
| Steven W. Berglund | 5/7/2013 | (4) | 166,675 | — | $28.08 | 5/7/2020 | |||||||
| 10/29/2013 | (4) | 215,000 | — | $28.20 | 10/29/2020 | ||||||||
| 5/9/2014 | (4) | 128,575 | — | $35.02 | 5/9/2021 | ||||||||
| 11/6/2014 | (4) | 180,000 | — | $27.48 | 11/6/2021 | ||||||||
| 5/3/2016 | (6) | 246,800 | $7,882,792 | ||||||||||
| 11/10/2016 | (5) | 20,978 | $670,037 | ||||||||||
| 5/2/2017 | (7) | 169,256 | $5,406,037 | ||||||||||
| 5/2/2017 | (8) | 84,628 | $2,703,018 | ||||||||||
| 11/13/2017 | (5) (11) | 25,192 | $804,632 | ||||||||||
| 5/1/2018 | (9) | 193,642 | $6,184,926 | ||||||||||
| 5/1/2018 | (10) | 48,410 | $1,546,215 | ||||||||||
| 11/8/2018 | (5)(11) | 52,924 | $1,690,393 | ||||||||||
| Robert G. Painter | 5/1/2012 | (3) | 8,000 | — | $26.98 | 5/1/2019 | |||||||
| 5/7/2013 | (4) | 5,300 | — | $28.08 | 5/7/2020 | ||||||||
| 10/29/2013 | (4) | 6,000 | — | $28.20 | 10/29/2020 | ||||||||
| 5/9/2014 | (4) | 3,500 | — | $35.02 | 5/9/2021 | ||||||||
| 11/6/2014 | (4) | 5,250 | — | $27.48 | 11/6/2021 | ||||||||
| 5/7/2015 | (4) | 2,382 | 278 | $25.29 | 5/7/2022 | ||||||||
| 2/1/2016 | (4) | 31,875 | 13,125 | $19.28 | 2/1/2023 | ||||||||
| 2/1/2016 | (5) | 10,200 | $325,788 | ||||||||||
| 5/3/2016 | (6) | 49500 | $1,581,030 | ||||||||||
| 11/10/2016 | (5) | 3,188 | $101,825 | ||||||||||
| 5/2/2017 | (7) | 21,000 | $670,740 | ||||||||||
| 5/2/2017 | (8) | 21,000 | $670,740 | ||||||||||
| 11/9/2017 | (5) | 11,023 | $352,075 | ||||||||||
| 5/1/2018 | (9) | 21,184 | $676,617 | ||||||||||
| 5/1/2018 | (10) | 10,592 | $338,308 | ||||||||||
| 11/08/2018 | (5) | 19,844 | $633,817 | ||||||||||
| Bryn Fosburgh | 10/29/2012 | (3) | 1 | — | $23.53 | 10/29/2019 | |||||||
| 5/9/2014 | (4) | 2,322 | — | $35.02 | 05/09/2021 | ||||||||
| 11/6/2014 | (4) | 11,250 | — | 27.48 | 11/06/2021 | ||||||||
| 5/3/2016 | (6) | 58,400 | $1,865,296 | ||||||||||
| 12/9/2016 | (5) | 5,780 | $184,613 | ||||||||||
| 5/2/2017 | (7) | 20,000 | $638,800 | ||||||||||
| 5/2/2017 | (8) | 20,000 | $638,800 | ||||||||||
| 2/1/2018 | (5)(11) | 11,000 | $351,340 | ||||||||||
| 5/1/2018 | (9) | 15,532 | $496,092 | ||||||||||
| 5/1/2018 | (10) | 7,766 | $248,046 | ||||||||||
| 11/08/2018 | (5)(11) | 14,128 | $451,248 | ||||||||||
| James A. Kirkland | 10/29/2012 | (3) | 430 | — | $23.53 | 10/29/2019 | |||||||
| 5/7/2013 | (4) | 25,400 | — | $28.08 | 5/7/2020 | ||||||||
| 10/29/2013 | (4) | 26,000 | — | $28.20 | 10/29/2020 | ||||||||
| 5/9/2014 | (4) | 12,500 | — | $35.02 | 5/9/2021 | ||||||||
| 11/6/2014 | (4) | 30,000 | — | $27.48 | 11/6/2021 | ||||||||
| 5/3/2016 | (6) | 47,200 | $1,507,568 | ||||||||||
| 11/10/2016 | (5) | 4,012 | $128,143 | ||||||||||
| 5/2/2017 | (7) | 19,000 | $606,860 | ||||||||||
| 5/2/2017 | (8) | 19,000 | $606,860 | ||||||||||
| 11/9/2017 | (5)(11) | 9,973 | $318,538 | ||||||||||
| 5/1/2018 | (9) | 15,532 | $496,092 | ||||||||||
| 5/1/2018 | (10) | 7,766 | $248,046 | ||||||||||
| 11/8/2018 | (5)(11) | 12,992 | $414,964 | ||||||||||
| Darryl R. Matthews | 5/3/2016 | (6) | 44,000 | $1,405,360 | |||||||||
| 11/10/2016 | (5) | 3,740 | $119,456 | ||||||||||
| 5/2/2017 | (7) | 19,000 | $606,860 | ||||||||||
| 5/2/2017 | (8) | 19,000 | $606,860 | ||||||||||
| 11/9/2017 | (5) | 9,973 | $318,538 | ||||||||||
| 05/01/2018 | (9) | 15,532 | $496,092 | ||||||||||
| 05/01/2018 | (10) | 7,766 | $248,046 | ||||||||||
| 11/08/2018 | (5) | 14,128 | $451,248 | ||||||||||
| (1) | The market value of the unvested portion of these RSU awards was calculated using the closing price of the Company’s Common Stock on December 28, 2018, which was $31.94. |
| (2) | As described under “Executive Compensation—Compensation Discussion and Analysis,” between 0% and 200% of the PRSU awards vest depending on: (i) for TSR PRSU awards, our TSR relative to the TSRs of the component stocks of |
41
the S&P 500 Index over the relevant performance period and (ii) for Financial Results PRSU awards, the Company’s attainment of certain 2018 through 2021 operating income and revenue performance, in each case based upon linear interpolation between threshold and maximum achievement. In accordance with SEC rules, the number and value shown for these PRSU awards reflect either (x) target achievement in the case of awards tracking at or below target level, which is the case for the Financial Results PRSU awards granted on May 1, 2018, or (y) maximum achievement in the case of awards tracking above target level, which is the case for all other awards showing values in this column. In each case, the value is based on the closing price of the Company’s Common Stock on December 28, 2018, which was $31.94.
| (3) | These stock options granted in 2012 vest 40% on the second anniversary of the date of the grant and 1/60th each month thereafter such that the stock options become fully vested five years from the date of grant. |
| (4) | These stock options granted after 2012 vest 50% on the second anniversary of the date of the grant and 1/48th each month thereafter such that the stock options become fully vested four years from the date of grant. |
| (5) | These time-based RSU awards vest |
| (6) | These |
| (7) | These |
| (8) | These Financial |
| (9) | These TSR PRSU awards granted on May 1, 2018 will vest after the completion of the performance period which ends May 15, 2021, with an annual scoring window on May 15, 2019, May 15, 2020 and May 15, 2021, subject to satisfaction of performance conditions |
| (10) | These Financial Results PRSU awards granted on May 1, 2018 will vest after the completion of the performance period which ends January 1, 2021, subject to subject to satisfaction of performance conditions as |
45
| These time-based RSU awards will vest upon retirement under |
Steven W. Berglund Robert Painter James A. Kirkland Darryl Matthews Sachin SankpalOption Exercises and Stock VestedThe table below shows the aggregate number of shares subject to stock options that were exercised by each of the Named Executive Officers and the aggregate number of shares acquired through vesting of RSU awards, during the fiscal year ended December 29, 2017.OPTION EXERCISES AND STOCK VESTED Option Awards Stock Awards Name Number of shares
acquired on
exercise (#)Value realized
on exercise (1)Number of shares
acquired on
vesting (#)Value realized
on vesting (2) 200,000 $3,784,343 154,381 $6,056,454 39,000 $702,033 15,910 $530,867 115,570 $1,552,571 25,899 $1,030,952 — $— 14,506 $572,103 — $— 14,030 $574,665 OPTION EXERCISES AND STOCK VESTED Option Awards Stock Awards Name Number of shares
acquired on
exercise (#)Value realized
on exercise (1)Number of shares
acquired on
vesting (#)Value realized
on vesting (2)Steven W. Berglund 850,000 $11,805,313 496,548 $17,933,951 Robert G. Painter — $— 44,190 $1,751,643 Bryn A. Fosburgh — $— 99,498 $3,609,689 James A. Kirkland 40,000 $507,213 80,587 $2,930,742 Darryl R. Matthews — $— 51,137 $1,946,218 (1) The value realized on exercise of stock option awards is determined by multiplying the difference between the closing price of a share of our Common Stock on the NASDAQ on the exercise date and the option exercise price by the number of shares exercised.(2) The value realized on vesting of stock awards is determined by multiplying the closing price of a share of our Common Stock on the distribution date of vesting by the number of shares vesting. Includes PRSU awards vested on 12/28/2018 and settled on 2/21/2019.
42Non-Qualified Deferred CompensationThe Company has adopted aNon-Qualified Deferred Compensation Plan (“DCP”) in which certain employees, officers and members of the Board of Directors may participate. Participants in the DCP may elect to defer a portion of their salary, bonus or director fees in accordance with the terms of the DCP. Participation in the DCP is voluntary. A participant in the DCP may defer a minimum of 5% of the participant’s base salary and a maximum of: 90% of base salary, 85% of bonus or 100% of director’sdirector fees.The Company has not made any contributions to the DCP on behalf of the members of the Board of Directors or the Named Executive Officers, even though the Company has the ability to do so under the terms of the DCP.Contributions by participants are held in an irrevocable grantor trust for the benefit of the participants, and are subject to claims by the Company’s general creditors. Upon enrollment in the DCP, participants may choose from a selection of measurement funds in which to place their contributions. The DCP’s measurement funds are similar to the funds available to employees who participate in the Company’s 401(k) retirement plan. Participants may elect to receive withdrawals from the DCP in the form of scheduled distributions, retirement benefits, or in the event of a change in control, as defined in the DCP. The DCP also provides for distributions in the event of a participant’s termination of employment, disability or death. In addition, participants may request withdrawals from the DCP in the event of a severe financial hardship.46
The table below shows contributions to the DCP by, or on behalf of, each of the Named Executive Officers during the fiscal year ended December 29, 2017.
| NON-QUALIFIED DEFERRED COMPENSATION | ||||||||||||||||||||
| Name | Executive Contributions in 2017 (1) | Company Contributions in 2017 (2) | Aggregate Earnings in 2017 (3) | Aggregate Withdrawals/ Distributions in 2017 | Aggregate Balance at 12/29/2017 | |||||||||||||||
| Steven W. Berglund | $— | $— | $— | $— | $— | |||||||||||||||
| Robert Painter | $— | $— | $8,037 | $— | $37,354 | |||||||||||||||
| James A. Kirkland | $— | $— | $— | $— | $— | |||||||||||||||
| Darryl Matthews | $— | $— | $— | $— | $— | |||||||||||||||
| Sachin Sankpal | $— | $— | $— | $— | $— | |||||||||||||||
| NON-QUALIFIED DEFERRED COMPENSATION | |||||||||||||||
| Name | Executive contributions in last FY (1) | Company contributions in last FY (2) | Aggregate earnings (losses) in last FY (3) | Aggregate withdrawals/ distributions in last FY | Aggregate balance at last FYE | ||||||||||
| Steven W. Berglund | $— | $— | $— | $— | $— | ||||||||||
| Robert Painter | $— | $— | ($2,287 | ) | $— | $35,067 | |||||||||
| Bryn A. Fosburgh | $— | $— | $— | $— | $— | ||||||||||
| James A. Kirkland | $— | $— | $— | $— | $— | ||||||||||
| Darryl Matthews | $— | $— | $— | $— | $— | ||||||||||
| (1) | The amount of each Named Executive Officer’s contribution to the DCP, if any, is included in the |
| (2) | The amount of the |
| (3) | Amounts included in this column are not reported as compensation in the Summary Compensation Table. |
47
43
Post-Employment Compensation
Potential Payments upon Termination or a Change in Control
The Company’s Board of Directors approved a standard form of change in control and severance agreement for executive officers in 2003, and modified this form in 2008 to comply with Section 409A of the Code. In 2017, in order to align the terms with current market practices, these agreements were superseded by new “Executive Severance Agreements” and “Change In Control Severance Agreements,” entered into with the Named Executive Officers.Officers, other than Mr. Berglund. Mr. Berglund entered into a new Executive Severance Agreement and Change in Control Severance Agreement on February 20, 2019, as described further below. The post-employment compensation arrangements provided under these agreements are intended to supersede any post-employment arrangements provided to the Named Executive Officers in their employment agreements or offer letters.
Under the Executive Severance Agreements, if the executive’s employment is terminated by the Company other than for “cause” or if the executive terminates his employment for “good reason” (as such terms are defined in the agreements), and such termination is not covered by thechange-in-control provisions described below and provided the executive has executed a release of any claims against the Company, the executive will receive:
100% (200% in the case of Mr. Berglund) of the sum of (A) the executive’s annual base salary and (B) the amount of the executive’s target bonus under the Company’sCompany's management incentive plan, which is an amount equal to a percentage of the executive’s annual base salary;
a prorated portion (based on the number of days of service completed during the performance period) of the actual bonus amount payable for the year in which the termination occurs;
alump-sum cash payment approximating the cost of COBRA premiums for 14 months (18 months in the case of Mr. Berglund) of continued health coverage; and
pro rata vesting of outstanding equity awards based on the length of time from the date of the grant to the date of termination, with the pro rata portion of any performance basedperformance-based awards settled after the end of the applicable performance period and based additionally on actual attainment of the performance goals. For Mr. Berglund, any time-based equity awards (stock options or time-based restricted stock units) would be subject to an additional 12 months service credit toward vesting of the awards in addition to the pro rata vesting described in the prior sentence.
In addition to these severance provisions, certain past equity awards that were granted subject to terms providing for acceleration upon termination without cause or with good reason are grandfathered. For Mr. Matthews, his initial restricted stock unit award granted on September 1, 2015 would vest in full. For Mr. Painter, 50% of the awards granted to him upon his promotion to CFO on February 1, 2016 would vest.
Under the Change in Control Severance Agreements, if the executive’s employment is terminated as described above and the termination occurs within 12 months following a change in control, or within three months prior to the change in control if such termination is in connection with the change in control (collectively referred to as “double trigger” provisions), the executive will instead receive:
150% (200% in the case of Mr. Berglund) of the sum of (A) the executive’s annual base salary and (B) the amount of the executive’s target bonus;
a prorated portion (based on the number of days of service completed during the performance period) of the actual bonus amount payable for the year in which the termination occurs;
alump-sum cash payment approximating the cost of COBRA premiums for 14 months (18 months in the case of Mr. Berglund) of continued health coverage; and
accelerated vesting of outstanding equity awards, with settlement and/or conversion of performance basedperformance-based awards based on performance to date at the time of the change of control (to the extent the performance-based vesting condition is satisfied, performance stock units will vest on a pro rata basis based on the length of time since the date of the grant, with vested units being paid out and any remaining unvested units to be converted into time-based restricted stock units of the acquirer).
In addition to these “double trigger” provisions, any past stock options that were granted subject to terms providing for acceleration upon a change in control regardless of termination or continued employment are grandfathered. Further, vesting of any stock options held by Mr. Berglund, and any stock options granted to Mr. Kirkland prior to the date of his Change in Control Severance Agreement (June 5, 2017), will accelerate upon a change in control and, to the extent assumed or substituted by the acquirer, will remain outstanding for one year following the change in control.
48
In the event that the benefits payable under these arrangements constitute “parachute payments” within the meaning of Section 280G of the Code and would be subject to the excise tax imposed by Section 4999 of the Code (the“Excise Tax”), then the executive’s benefits under the change in control and severance agreement shall be either: (i) delivered in full, or (ii) delivered as to such lesser extent as would result in no portion of such benefits being subject
44
to the Excise Tax, whichever of the foregoing amounts results in the receipt by the executive on anafter-tax basis, of the greatest amount of benefits. The foregoing shall take into account the applicable federal, state and local income taxes and the Excise Tax, notwithstanding that all or some portion of such benefits may be taxable under Section 4999 of the Code. None of the Executive Severance Agreements or Change In Control Severance Agreements provide for a tax“gross-up” “gross-up” obligation by the Company in the event that any excise tax becomes payable by a Named Executive Officer.
The foregoing description is qualified in its entirety by the description of these agreements reported on Form8-K 8‑K filed by the Company on February 7, 2017, and by the forms of Executive Severance Agreement and Change in Control Severance Agreement filed as exhibits 10.1 and 10.2 to the Company’s Report on Form 10-Q filed on June 30, 2017.
2017 and exhibits 10.1 and 10.2 to the Company’s Report on Form 10-K filed on February 22, 2019.
Termination without a Change in Control
The table below sets forth the estimated cash benefits that each respective Named Executive Officer would receive under the Executive Severance Agreements based upon the assumption that a qualifying termination event occurred on the last day of the fiscal year ended December 29, 2017 (except as otherwise indicated)28, 2018, and such termination was not in connection with a change in control.
POTENTIAL PAYMENTS UPON A QUALIFYING TERMINATION
| ||||||||||||||||||||
| Name | Multiple of Salary and Target Bonus (1) | Bonus accrued but unpaid as of 12/29/2017 (2) | Health Benefits (3) | Accrued vacation | Total | |||||||||||||||
Steven W. Berglund | $3,987,000 | $2,222,837 | $40,000 | $— | $6,249,837 | |||||||||||||||
Robert Painter | $747,000 | $666,625 | $35,000 | $63,846 | $1,512,471 | |||||||||||||||
James A. Kirkland | $640,000 | $482,007 | $35,000 | $14,727 | $1,171,734 | |||||||||||||||
Darryl Matthews | $745,200 | $829,507 | $35,000 | $— | $1,609,707 | |||||||||||||||
Sachin Sankpal | $716,400 | $494,157 | $35,000 | $— | $1,245,557 | |||||||||||||||
| POTENTIAL PAYMENTS UPON A QUALIFYING TERMINATION | |||||||||||||||
| Name | Multiple of Salary and Target Bonus (1) | Bonus accrued but unpaid as of fiscal year end (2) | Health Benefits (3) | Accrued vacation | Total | ||||||||||
| Steven W. Berglund | $4,509,000 | $2,760,510 | $16,964 | $— | $7,286,474 | ||||||||||
| Robert Painter | $933,750 | $914,660 | $25,706 | $67,837 | $1,941,953 | ||||||||||
| Bryn Fosburgh | $811,800 | $557,805 | $16,964 | $— | $1,386,569 | ||||||||||
| James A. Kirkland | $672,000 | $555,408 | $25,909 | $5,771 | $1,259,088 | ||||||||||
| Darryl Matthews | $767,556 | $587,771 | $25,909 | $— | $1,381,236 | ||||||||||
| (1) | The multiple for Mr. Berglund is 200%. The multiple for the other Named Executive Officers is 100%. |
| (2) | The bonus amount represents the amount of incentive bonus accrued under the MIP as of |
| (3) | Reflects alump-sum cash payment approximating the cost of COBRA premiums for 14 months (18 months in the case of Mr. Berglund) of continued health coverage. |
The amounts shown below reflect an estimate of the aggregate number of shares underlying each executive’s unvested equity awards that would have vested if a qualifying termination event had occurred on December 29, 201728, 2018 and such termination was not in connection with a change in control.
POTENTIAL ACCELERATION OF EQUITY UPON A QUALIFYING TERMINATION
| ||||||||||||||||||||||||
| Name | Accelerated Vesting of (1) | Aggregate market value of accelerated in-the-money options as of 12/29/2017 (3) | Aggregate market of accelerated | Total | ||||||||||||||||||||
| Options (#) | Time-Based RSUs (#) | Performance-Based RSUs (#) (2) | ||||||||||||||||||||||
| Steven W. Berglund (4) | 54,644 | 64,875 | 493,913 | $618,124 | $22,709,130 | $23,327,254 | ||||||||||||||||||
| Robert Painter (5) | 23,371 | 22,624 | 65,961 | $482,469 | $3,600,097 | $4,082,566 | ||||||||||||||||||
| James A. Kirkland | 6,593 | 9,783 | 104,710 | $77,820 | $4,653,033 | $4,730,853 | ||||||||||||||||||
| Darryl Matthews (6) | — | 15,011 | 71,849 | $— | $3,529,957 | $3,529,957 | ||||||||||||||||||
| Sachin Sankpal | — | 11,470 | 62,899 | $— | $3,022,351 | $3,022,351 | ||||||||||||||||||
| POTENTIAL ACCELERATION OF EQUITY UPON A QUALIFYING TERMINATION | |||||||||||||
| Name | Accelerated Vesting of (1) | Aggregate market value of accelerated in-the-money options as of fiscal year end | Aggregate market value of accelerated RSUs and PRSUs as of fiscal year end | Total | |||||||||
| Options (#) | RSUs and PRSUs (#) | ||||||||||||
| Steven W. Berglund | — | 488,848 | $— | $15,613,821 | $15,613,821 | ||||||||
| Robert Painter (2) | 3,757 | 49,967 | $47,306 | $1,595,958 | $1,643,264 | ||||||||
| Bryn Fosburgh | — | 44,845 | $— | $1,432,336 | $1,432,336 | ||||||||
| James A. Kirkland | — | 36,963 | $— | $1,180,584 | $1,180,584 | ||||||||
| Darryl Matthews (3) | — | 35,592 | $— | $1,136,815 | $1,136,815 | ||||||||
| (1) | Reflects |
49
| Under Mr. |
| (3) | In addition to the standard provisions in his executive severance agreement, Mr. |
Change in Control without Termination
Under the terms of the Change In Control Severance Agreements for Messrs. Berglund and Kirkland, any unvested stock options held by them would accelerate upon a change in control and, to the extent assumed or substituted by the acquirer, will remain outstanding for one year following the change in control. If such change in control occurred on December 29, 2017, the number of options accelerated and the aggregate marketin-the-money value thereof on such date (based on the closing price of $40.64) for Mr. Berglund would be 54,644 options with a value of $618,124, and for Mr. Kirkland would be 8,178 options with a value of $97,798.
POTENTIAL PAYMENTS UPON ACHANGE-IN-CONTROL AND QUALIFYING TERMINATION Multiple of (1)45Termination in Connection with a Change in ControlThe table below sets forth the estimated cash benefits that each respective Named Executive Officer would receive under the Change In Control Severance Agreements based upon the assumption that a change in control event occurred on December 29, 201728, 2018 (except as otherwise indicated), and the Named Executive Officer’s employment terminated upon or immediately following such event. Name
Salary and
Target
Bonus Bonus accrued
but unpaid as of
12/29/2017
(2) Health
Benefits (3) Accrued
vacation Total Steven W. Berglund $3,987,000 $2,222,837 $40,000 $— $6,249,837 Robert Painter $1,120,500 $666,625 $35,000 $63,846 $1,885,971 James A. Kirkland $960,000 $482,007 $35,000 $14,727 $1,491,734 Darryl Matthews $1,117,800 $829,507 $35,000 $— $1,982,307 Sachin Sankpal $1,074,600 $494,157 $35,000 $— $1,603,757 POTENTIAL PAYMENTS UPON A CHANGE-IN-CONTROL AND QUALIFYING TERMINATION Name Multiple of Salary and Target Bonus (1) Bonus accrued but unpaid as of fiscal year end (2) Health Benefits (3) Accrued
vacationTotal Steven W. Berglund $4,509,000 $2,760,510 $16,964 $— $7,286,474 Robert Painter $1,400,625 $914,660 $25,706 $67,837 $2,408,828 Bryn Fosburgh $1,217,700 $557,805 $16,964 $— $1,792,469 James A. Kirkland $1,008,000 $555,408 $25,909 $5,771 $1,595,088 Darryl Matthews $1,151,334 $587,771 $25,909 $— $1,765,014 (1) The multiple for Mr. Berglund is 200%. The multiple for the other Named Executive Officers is 150%. (2) The bonus amount represents the amount of incentive bonus accrued under the MIP as of December 29, 2017.28, 2018.(3) Reflects alump-sum cash payment approximating the cost of COBRA premiums for 14 months (18 months in the case of Mr. Berglund) of continued health coverage.
50
The amounts shown below reflect an estimate of the aggregate number of shares underlying each executive’s unvested equity awards that would have vested if a change in control event had occurred on December 29, 2017,28, 2018, and the Named Executive Officer’s employment terminated upon or immediately following such event.
POTENTIAL ACCELERATION OF EQUITY UPON ACHANGE-IN-CONTROL AND QUALIFYING TERMINATION
| ||||||||||||||||||||||||||||
| Name | Accelerated Vesting of | Aggregate market value of accelerated in-the-money options as of 12/29/2017 (2) | Aggregate market value of accelerated PRSUs as of 12/29/2017 (3) | Aggregate
| Total | |||||||||||||||||||||||
Options (#) | Time-Based RSUs (#) | Performance- Based RSUs (#) (1) | ||||||||||||||||||||||||||
Steven W. Berglund | 54,644 (4) | 111,045 | 664,450 | $618,124 | $27,003,264 | $4,512,867 | $32,134,255 | |||||||||||||||||||||
Robert Painter | 47,512 | 26,870 | 65,961 | $993,571 | $2,680,674 | $2,015,866 | $5,690,111 | |||||||||||||||||||||
James A. Kirkland | 8,178 (4) | 14,884 | 104,710 | $97,798 | $4,255,433 | $1,254,354 | $5,607,585 | |||||||||||||||||||||
Darryl Matthews | — | 33,460 | 71,849 | $— | $2,919,929 | $1,359,815 | $4,279,744 | |||||||||||||||||||||
Sachin Sankpal | — | 32,970 | 62,899 | $— | $2,556,211 | $1,339,901 | $3,896,112 | |||||||||||||||||||||
| POTENTIAL ACCELERATION OF EQUITY UPON A CHANGE-IN-CONTROL AND QUALIFYING TERMINATION | |||||||||||||
| Name | Accelerated Vesting of (1) | Aggregate market value of accelerated in-the-money options as of fiscal year end | Aggregate market value of accelerated RSUs and PRSUs as of fiscal year end | Total | |||||||||
| Options (#) | RSUs and PRSUs (#) | ||||||||||||
| Steven W. Berglund | — | 602,937 | $— | $19,257,796 | $19,257,796 | ||||||||
| Robert Painter | 13,403 | 133,243 | $168,011 | $4,255,774 | $4,423,785 | ||||||||
| Bryn Fosburgh | — | 120,537 | $— | $3,849,942 | $3,849,942 | ||||||||
| James A. Kirkland | — | 106,333 | $— | $3,396,267 | $3,396,267 | ||||||||
| Darryl Matthews | — | 104,708 | $— | $3,344,368 | $3,344,368 | ||||||||
| (1) | Reflects accelerated vesting of each option and time-based RSU award and pro-rata vesting of PRSU awards based on |
Under the terms of the Company’s 2002 Stock Plan, (i) if, in connection with a change in control, the then-unvested restricted stock units for the Named Executive Officers are not assumed by an acquiring company, the restricted stock units would immediately vest or (ii) if the restricted stock units are assumed by an acquiring company, and a Named Executive Officer is terminated for certain qualifying reasons following a change in control (or prior to a change in control if such termination was at the request of the potential acquirer), the then-unvested restricted stock units would immediately vest.
Trimble Age & Service Equity Vesting Program
Commencing in 2017, a new post-employment arrangement was adopted for certain eligible executive officers, including each of the Named Executive Officers. The Trimble Age & Service Equity Vesting Program (the “Vesting Program”) provides for the vesting of certain equity awards, as well as certain medical benefit payments, to eligible participants upon retirement. Program eligibility requires a minimum age of 55, a minimum of 10 years of total service, and a “combined 70” requirement that the sum of the participant’s years of age and years of service combines to total at least 70 years. Participants must also agree to a general release of claims and tonon-solicitation andnon-competition obligations. Under the plan,Vesting Program, eligible equity awards, which are equity awards granted after the time a participant is selected by the Compensation Committee to participate in the Vesting Program, will vest upon retirement of an eligible participant. Time-based restricted stock units and other time-based equity will fully vest, and performance
46
stock units will vest on a pro rata basis, subject to the satisfaction of any performance-based vesting conditions. In addition, upon a qualifying retirement of a participating executive, the executive will receive a lump sum medical and dental benefit in the amount of $50,000.
Mr. Berglund, Mr. Fosburgh, and Mr. Kirkland currently meetsmeet the criteria for a qualifying retirement and Mr. Kirkland will meet the criteria later in 2018.
retirement.
Death Benefits
The Company provides certain death benefits generally to its full time employees, including to the Named Executive Officers. In the event of the death of a Named Executive Officer, the following payments and benefits would become payable in a lump sum to, or provided to, such Named Executive Officer’s estate (unless otherwise noted): (i) payment of six months’ base salary to the surviving spouse/dependents of the Named Executive Officer, (ii) with respect to equity awards granted on or after July 30, 2012, vesting of a portion of those awards that would have vested within the two years following the death of the Named Executive Officer but for such death, (iii) payout under the life insurance
51
policy (with base coverage of 2 times base salary) pertaining to the Named Executive Officer, (iv) 12 months’ of continued health insurance coverage for the surviving spouse/dependents of the Named Executive Officer, and (v) a pro rata payment under the MIP based on the date of the Named Executive Officer’s death. The table below sets forth the value of the foregoing, assuming that the triggering event occurred on December 29, 201728, 2018 (except as otherwise indicated):
| Name | Six Months Base Salary | Aggregate Market Value of Accelerated Vesting of Options and RSUs (# of Shares) (1) | Life Insurance (2) | Health Benefits (3) | Pro Rata Bonus (4) | Total (5) | ||||||||||||||||||
Steven W. Berglund | $443,000 | $31,624,916 | $1,100,000 | $11,306 | $2,222,837 | $35,402,059 | ||||||||||||||||||
Robert Painter | $207,500 | $5,482,536 | $750,000 | $19,446 | $666,625 | $7,126,107 | ||||||||||||||||||
James A. Kirkland | $200,000 | $5,405,956 | $775,000 | $16,503 | $482,007 | $6,879,466 | ||||||||||||||||||
Darryl Matthews | $207,000 | $4,024,544 | $804,000 | $16,530 | $829,507 | $5,881,581 | ||||||||||||||||||
Sachin Sankpal | $199,000 | $3,710,000 | $773,000 | $19,468 | $494,157 | $5,195,625 | ||||||||||||||||||
| Name | Six Months Base Salary | Aggregate Market Value of Accelerated Vesting of Options, PRSUs and RSUs (# of Shares) (1) | Life Insurance (2) | Health Benefits (3) | Pro Rata Bonus (4) | Total (5) |
| Steven W. Berglund | $501,000 | $18,842,474 | $1,100,000 | $7,957 | $2,760,510 | $23,211,941 |
| Robert Painter | $259,375 | $4,162,323 | $830,000 | $15,850 | $914,660 | $6,182,208 |
| Bryn Fosburgh | $225,500 | $3,816,242 | $902,000 | $14,248 | $557,805 | $5,515,795 |
| James A. Kirkland | $210,000 | $3,362,567 | $800,000 | $15,456 | $555,408 | $4,943,431 |
| Darryl Matthews | $213,210 | $3,157,244 | $828,000 | $15,456 | $587,771 | $4,801,681 |
| (1) | The market value of the accelerated portion of the restricted stock units was calculated by using the closing price of the Company’s common stock. The market value of the accelerated portion of options was calculated by using the closing price of the |
| (2) | Life insurance payouts are based on the Named Executive Officer’s “benefit salary” which is defined as his or her base salary as of September 1st of the previous fiscal year. Mr. Berglund’s life insurance payout is capped at $1,100,000. |
| (3) | Health benefits reflect twelve months of COBRA premiums for the Named Executive Officer’s spouse and/or dependents, and are calculated as of December |
| (4) | The incentive bonus amount represents the amount of bonus accrued but unpaid under the MIP as of December |
| (5) | Named Executive Officers are also entitled to additional death benefits due to a death caused by an accident while working for the Company or while traveling on Company business. Officers and vice presidents of the Company are entitled to an additional $500,000 if they die while traveling on Company business. An employee of the Company who dies in an accident while working for the Company will be entitled to receive an additional |
52
47
CEO PAY RATIO
Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, we are required to disclose the median of the annual total compensation of all our employees, the annual total compensation of our President and Chief Executive Officer, Steven W. Berglund, and the ratio of these two amounts.
We have determined the median of the annual total compensation of all our employees, excluding Mr. Berglund, for 20172018 to be $83,151.$94,591. The annual total compensation of Mr.��Berglund, our CEO, was $11,177,172 for 2017 was $10,637,661.2018, as reported in our Summary Compensation Table. The ratio of the annual total compensation of Mr. Berglund to the median of the annual total compensation of all our employees was 128118 to 1. This ratio is a reasonable estimate calculated in a manner consistent with Item 402(u) of RegulationS-K under the Securities Exchange Act of 1934.
As permitted by SEC rules, for purposes of calculating the pay ratio set forth above, we used the same median employee that we identified for purposes of our prior year’s pay ratio disclosure, based on our determination that there was no change in our employee population or employee compensation arrangements that we believe would significantly impact the pay ratio. In this regard, we excluded from this determination approximately 1,460 employees (or approximately 13% of our total employee population) who, in the aggregate, were hired in connection with five separate acquisition transactions that we completed in fiscal 2018.
Having determined to use the same median employee that we identified for purposes of our 2017 pay ratio disclosure, we totaled all of the elements of the employee’s annual total compensation for 2018 in accordance with the requirements of the applicable SEC rules, using the same methodology we use for our named executive officers as set forth in our Summary Compensation Table.
The process that we used in 2017 to identify our median employee weis set forth below:
We selected the base salaries in effect as of October 1, 2017 and profit-sharing amounts for the period from October 1, 2016 through September 30, 2017 as the compensation measure to be used to compare the compensation of our employees.
We selected October 1, 2017, which iswas within the last three months of 2017,the year, as the date upon which we would identify the “median employee,” because it enabled us to make such identification in a reasonably efficient and economical manner.
As of October 1,such date in 2017, our employee population consisted of approximately 9,228 individuals, with approximately 3,924 employees in the United States and approximately 5,304 employees outside the United States. In determining this population, we considered the employees of our subsidiaries and all of our worldwide employees other than the CEO, whether employed on a full-time, part-time, or seasonal basis, except for our employees in Peru (1 employee), Qatar (1 employee), Romania (1 employee), Bulgaria (2 employees), Ghana (2 employees), Ukraine (3 employees), Estonia (4 employees), Saudi Arabia (4 employees), Argentina (4 employees), Chile (5 employees), Denmark (5 employees), Austria (6 employees), Indonesia (8 employees), Italy (8 employees), Poland (10 employees) and Japan (12 employees) (a total of 76 individuals, and less than 1% of our employee population) who were excluded pursuant to thede minimis exemption provided under Item 402(u). Thede minimisexception permits a company to exclude up to 5% of its total employees who are located in countries outside the United States.
We did not include any contractors or othernon-employee workers in our employee population.
We annualized the compensation for any full-timefulltime and part-time employees who commenced work during 2017.mid-year. We did not make any cost of living adjustments.
Using this approach, we selected the individual at the median of our employee population, who was a Customer Support Representative based in the United States. Once we identified this median employee, we totaled all of the elements of the employee’s annual total compensation for 2017 in accordance with the requirements of the applicable SEC rules, using the same methodology we use for our named executive officers as set forth in our Summary Compensation Table. We determined that such individual’s annual total compensation for the fiscal year ended December 31, 2017 was $83,151 (excludingexcluded any estimated retirement and health benefits).
During 2017, Mr. Berglund served as our President and Chief Executive Officer. We determined his annual total compensation for the fiscal year ended December 31, 2017 was $10,637,661, as reported in our 2017 Summary Compensation Table.
benefits.
Because the SEC rules for identifying the median of the annual total compensation of all our employees and calculating the pay ratio based on that employee’s annual total compensation allow companies to use a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their employee populations and compensation practices, the pay ratio reported by other companies may not be comparable to the pay ratio we are reporting, as those companies have different employee populations and compensation practices and may use different methodologies, exclusions, estimates and assumptions in calculating their pay ratios.
53
48
AUDIT COMMITTEE REPORT
The information contained in this Audit Committee Report shall not be deemed to be “soliciting material” or “filed” or incorporated by reference in future filings with the SEC, or subject to the liabilities of Section 18 of the Securities Exchange Act of 1934, except to the extent that it is specifically incorporated by reference into a document filed under the Securities Act of 1933 or the Securities Exchange Act of 1934.
The Audit Committee is a separately-designated standing committee of the Board of Directors, established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, and operates under a written charter adopted by the Board of Directors. Among its other functions, the Audit Committee recommends to the Board of Directors, subject to stockholder ratification, the selection of the Company’s independent auditor.
registered public accounting firm.
The Audit Committee has reviewed and discussed the Company’s consolidated financial statements and financial reporting process with the Company’s management, which has the primary responsibility for the Company’s consolidated financial statements and financial reporting processes, including establishing and maintaining adequate internal controls over financial reporting and evaluating the effectiveness of such internal controls. EY, the Company’s current independent auditor,registered public accounting firm, is responsible for performing an audit and expressing an opinion on the conformity of the Company’s audited financial statements to U.S. generally accepted accounting principles and performing an audit and expressing an opinion on the effectiveness of internal control over financial reporting. The Audit Committee has reviewed and candidly discussed with EY the overall scope and plans of its audits, its evaluation of the Company’s internal controls, the overall quality of the Company’s financial reporting processes and accounting principles and judgment, and the clarity of disclosures in the Company’s consolidated financial statements.
The Audit Committee has discussed with EY those matters required to be discussed by Auditing Standard No. 16,1301, “Communications with Audit Committees” issued by the Public Company Accounting Oversight Board (“PCAOB”). EY has provided the Audit Committee with the written disclosures and the letter required by the PCAOB. The Audit Committee has also discussed with EY its independence from management, and the Company and has also determined that EY’s provision ofnon-audit services (such astax-related services) to the Company and its affiliates is compatible with maintaining the independence of EY with respect to the Company and its management.
Based on the Audit Committee’s discussion with management and the independent auditors,registered public accounting firm, and the Audit Committee’s review of the representation of management and the report of the independent auditorregistered public accounting firm to the Audit Committee, the Audit Committee recommended that the Board of Directors include the audited consolidated financial statements in the Company’s annual report on Form10-K for the fiscal year ended December 29, 2017.
28, 2018.
Submitted by the Audit Committee of the Company’s Board of Directors,
Kaigham (Ken) Gabriel,Member | Ulf J. Johansson,Member | Mark S. Peek,Chair | ||
| Audit Committee | Audit Committee | Audit Committee | ||
54
49
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Security Ownership of Certain Beneficial Owners
The following table sets forth the shares of the Company’s Common Stock beneficially owned as of March 5, 2018,11, 2019, the Record Date, by the persons known to the Company to be the beneficial owners of more than five percent of the Company’s outstanding Common Stock. The applicable percentage of share ownership in the table is based on 248,592,825252,343,799 shares of the Company’s Common Stock outstanding at the Record Date.
We have computed beneficial ownership in accordance with the rules of the SEC. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, shares of Common Stock subject to options or warrants held by that person that are exercisable within 60 days of the Record Date are deemed outstanding. Such shares, however, are not deemed outstanding for purposes of computing the ownership of any other person. To our knowledge, except as indicated in the footnotes to this table and pursuant to applicable community property laws, each stockholder named in the table has sole voting and investment power with respect to the shares set forth opposite such stockholder’s name.
| Name and Address | Amount and Nature of Beneficial Ownership | Percent of Class | ||||||
| BlackRock, Inc. 55 East 52nd Street, New York, New York, 10055 (1) | 23,195,889 | 9.3% | ||||||
| The Vanguard Group 100 Vanguard Boulevard, Malvern, Pennsylvania 19355 (2) | 21,837,517 | 8.8% | ||||||
| Capital Research Global Investors 335 South Hope Street, Los Angeles, California 90071 (3) | 16,463,351 | 6.6% | ||||||
| Name and Address | Amount and Nature of Beneficial Ownership | Percent of Class | ||
BlackRock, Inc. 55 East 52nd Street, New York, New York, 10055 | 26,381,357 | (1) | 10.5 | % |
| The Vanguard Group 100 Vanguard Boulevard, Malvern, Pennsylvania 19355 | 22,706,805 | (2) | 9.0 | % |
Capital International Investors 11100 Santa Monica Boulevard, 16th Floor, Los Angeles, California 90025 | 16,651,236 | (3) | 6.6 | % |
| AMCAP Fund 335 South Hope Street, Los Angeles, California 90071 | 13,942,011 | (4) | 5.5 | % |
| Capital Research Global Investors 335 South Hope Street, Los Angeles, California 90071 | 13,936,171 | (5) | 5.5 | % |
| (1) | The information is based upon, and is included solely in reliance upon, and without independent investigation of, the disclosures contained in the Schedule 13G/A |
| (2) | The information is based upon, and is included solely in reliance upon, and without independent investigation of, the disclosures contained in the Schedule 13G/A |
| (3) | The information is based upon, and is included solely in reliance upon, and without independent investigation of, the disclosures contained in the Schedule 13G filing with the SEC on February 14, 2019 by Capital International Investors (CII). CII is a division of Capital Research and Management Company (CRMC). CII divisions of CRMC and Capital Bank and Trust Company, along with certain CRMC subsidiaries, collectively provide investment management services under the name “Capital International Investors.” CII has sole voting power over 15,985,944 shares and sole dispositive power over 16,651,236 shares. |
| (4) | The information is based upon, and is included solely in reliance upon, and without independent investigation of, the disclosures contained in the Schedule 13G filing with the SEC on February 14, 2019 by AMCAP Fund. AMCAP Fund is advised by CRMC, which manages equity assets for various investment companies through three divisions, Capital Research Global Investors (CRGI), Capital World Investors, and CII. AMCAP Fund reports no voting or dispositive power over these shares but under certain circumstances may vote 13,942,011 shares, which may also be reflected in the filings made by CRGI, CII and/or Capital World Investors. |
| (5) | The information is based upon, and is included solely in reliance upon, and without independent investigation of, the disclosures contained in the Schedule 13G/A |
50Security Ownership of ManagementThe following table sets forth the shares of the Company’s Common Stock beneficially owned as of March 5, 2018,11, 2019, the Record Date, (unless otherwise noted below) by: (i) all directors and nominees; (ii) all executive officers of the Company named in the Summary Compensation Table presented in this Proxy Statement; and (iii) all directors and executive officers of the Company, as a group. The applicable percentage share ownership is based on shares of the Company’s Common Stock outstanding at March 5, 2018.55
We have computed beneficial ownership in accordance with the rules of the SEC. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, shares of Common Stock subject to options, restricted stock units, or warrants held by that person that are exercisable within 60 days of the Record Date are deemed outstanding. Such shares, however, are not deemed outstanding for purposes of computing the ownership of any other person. To our knowledge, except as indicated in the footnotes to this table and pursuant to applicable community property laws, each stockholder named in the table has sole voting and investment power with respect to the shares set forth opposite such stockholder’s name.
| Name and Address (1) | Amount and Nature of Beneficial Ownership | Percent of Class (%) | |||||
Berglund, Steven | 556,204 | * | |||||
Fosburgh, Bryn | 24,941 | * | |||||
Gabriel, Kaigham (Ken) | 12,362 | * | |||||
| 38,362 | * | |||||
| 38,362 | * | |||||
| 40,972 | * | |||||
| 27,409 | * | |||||
| 3,886 | * | |||||
Matthews, Darryl | 20,845 | * | |||||
Nersesian, Ronald | 32,512 | * | |||||
Painter, Robert | 39,656 | * | |||||
Peek, Mark | 41,080 | * | |||||
| 9,564 | * | |||||
| |||||||
| |||||||
| |||||||
All directors and executive officers, as a group | 983,015 | * | |||||
| * | Indicates less than 1%. |
| (1) | The business address of each of the persons named in this table is: c/o Trimble Inc, 935 Stewart Drive, Sunnyvale, California 94085. |
| (2) | Includes |
| (3) | Includes |
| (4) | Includes |
| (5) | Includes |
56
51
Equity Compensation Plan Information
The following table sets forth, as of December 29, 2017, the total number of securities outstanding under28, 2018, certain information regarding the Company’s equity plans, the weighted average exercise price of such options, and the number of options available for grant under suchcompensation plans. For a complete description of the Company’s equity compensation plans, please see Note 1315 to the Company’s audited consolidated financial statements for the fiscal year ended December 29, 2017,28, 2018, included in the Company’s annual report onForm 10-K filed with the SEC on February 26, 2018.22, 2019.
| Equity Compensation Plan Information | ||||||||||||
| Plan Category | Number of securities to be issued outstanding options, warrants and rights (a)(1) | Weighted-average exercise price of outstanding options, warrants and rights (2) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) | |||||||||
Equity compensation plans
|
|
11,528,958
|
|
|
$26.07
|
|
|
23,467,615 (3)
|
| |||
| Equity Compensation Plan Information | |||||
| Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)(1) | Weighted-average exercise price of outstanding options, warrants and rights (2) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) | ||
| Equity compensation plans approved by security holders | 8,745,912 | $28.26 | 18,910,194 (3) | ||
| (1) | The amount in this column reflects the number of shares underlying outstanding stock options |
| (2) | The weighted-average exercise price in this column relates to the outstanding stock options included in column (a). |
| (3) | This number includes |
Section 16(a) Beneficial Ownership Reporting ComplianceSection 16(a) of the Securities Exchange Act of 1934, as amended, requires that the Company’s executive officers and directors, as well as persons who beneficially own more than 10% of a registered class of the Company’s equity securities during the fiscal year ended December 29, 2017,28, 2018, file reports of initial ownership on Form 3 and changes in ownership on Form 4 or 5 with the SEC. Such officers, directors and 10% stockholders are also required by SEC rules to furnish the Company with copies of all Section 16(a) reports they file.To the Company’s knowledge, based solely on its review of the copies of such forms received by the Company, all Section 16(a) filing requirements applicable to its officers, directors and 10% stockholders were complied with on a timely basis during the fiscal year ended December 29, 2017.57
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company reviews all relationships and transactions between the Company, on the one hand, and our directors, executive officers or their immediate family members, on the other hand, to determine whether such persons have a direct or indirect material interest. The Company’s legal staff is primarily responsible for the development and implementation of processes and controls to obtain information from the directors and executive officers with respect to related person transactions and for then determining, based on the facts and circumstances, whether a related person has a direct or indirect material interest in the transaction with the Company. On an annual basis, all directors and executive officers must respond to a questionnaire requiring disclosure about any related person transactions, arrangements or relationships (including indebtedness). As required under SEC rules, any transactions with the Company that are determined to be directly or indirectly material to a related person are disclosed in the Company’s applicable SEC filings.
In addition, certain aspects of such types of transactions are the subject of the Company’s Business Ethics and Conduct Policy (the“Policy”). The Policy applies to all of the Company’s employees, directors and officers and is available in the “Investors” section ofon the Company’s website athttp://investor.trimble.com under the heading “Corporate Governance—Governance Documents.”investor.trimble.com/corporate-governance. Pursuant to the Policy all employees must seek a waiver or approval from the Company’s Compliance Officer for all actual or apparent conflicts of interests. Waivers affecting the Company’s officers or members of the Board of Directors must be approved by the Board of Directors. The Company’s officers must report any violations of the Policy to the Company’s Compliance Officer or the Chairman of the Board of Directors. The Company’s compliance officer is the Company’s general counsel, the chairman of the Audit Committee in the general counsel’s absence, or such other person as the Board of Directors may designate.
In determining whether to approve or ratify a related party transaction, the compliance officer may consider all relevant facts and circumstances, including the following factors:
the nature of the related person’s interest in the transaction;
the material terms of the transaction, including the amount involved and type of transaction and whether the terms are at least as favorable to the Company as those available fromnon-related parties;
the importance of the transaction to the related person and to the Company;
whether the transaction would impair the judgment of a director or executive officer to act in the best interest of the Company and its stockholders; and
any other matters the Audit Committee or other committee, as applicable, deems appropriate.
2018Certain Disclosures Related to Determination of Director Independence for Fiscal 2017The Board of Directors has determined that each of the directors, except for Mr. Berglund, are independent directors as defined by Rule 5605(a)(2) of the NASDAQ Marketplace Rules. In making such determination for Ms. Lloyd, the Board of Directors considered the following:In September 2014, the Company purchased Gehry Technologies, Inc. ("GT," subsequently renamed Trimble Group Consulting Inc.), a provider of construction related professional services and solutions, (“GT”), from various selling stockholders, including Gehry Partners, LLP, in which Meaghan Lloyd is a partner. Prior to the acquisition closing, the Digital Project software business of GT was divested into a separate company, Digital Project, Inc. (“DPI”"DPI"), which continued to be owned by the selling stockholders. Ms. Lloyd is a director, President and CEO of DPI, but does not receive compensation for such roles. DPI licenses and supports the Digital Project software, which is utilized by Gehry Partners, as well as GT. DPI receives annual license fees from GT for use of the Digital Project software. GT also provides professional services to Gehry Partners, LLP.The foregoing disclosure reflects information that the Board considered in determining director independence, and is not intended to constitute disclosure of transactions with related persons.58
HOUSEHOLDING
As permitted by the Securities Exchange Act of 1934, we may deliver only one Notice or one paper copy of this proxy statement to stockholders residing at the same address, unless such stockholders have notified the Company of their desire to receive multiple copies of the Notice or the paper version of the proxy statement, respectively, as applicable. Stockholders that reside at the same address and receive multiple copies of the Notice of the paper version of
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the proxy statement may request delivery of only one copy of the Notice or proxy statement, as applicable, by directing a notice to the Company’s Investor Relations department at the address below.
The Company will promptly deliver, upon oral or written request, a separate copy of the Notice or this proxy statement to any stockholder residing at an address to which only one copy was mailed. Requests for additional copies should be directed to the Company at its principal executive offices, Attention: Investor Relations, at 935 Stewart Drive, Sunnyvale, California 94085,(408) 481-8000.
OTHER MATTERS
The Company knows of no other matters to be submitted for consideration at the Annual Meeting. If any other matters properly come before the Annual Meeting, it is the intention of the persons named in the enclosed proxy to vote the shares they represent as the Board of Directors may recommend. Discretionary authority with respect to such other matters is granted by the execution of the enclosed proxy.
It is important that your shares be represented at the meeting, regardless of the number of shares which you hold. You are, therefore, urged to vote electronically via the internet or by telephone or, if you have requested a paper copy of the proxy materials, complete and return the accompanying proxy in accordance with the detailed instructions on your individual proxy card.
For the Board of Directors |
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ULF J. JOHANSSON
Chairman of the Board
Dated: March 21, 2018
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APPENDIX A
Reconciliation of GAAP to non-GAAP financial measure tonon-GAAP financial measure
measures
This Proxy Statement contains information regarding a financial measure,non-GAAP operating income,measures that isare not calculated in accordance with GAAP. Our non-GAAP measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures. The non-GAAP financial measures included in this Proxy Statement, and the adjustments to comparable GAAP measures, are set forth below:
Non-GAAP revenue
We believe this measure helps investors understand the performance of our business as non-GAAP revenue excludes the effects of certain acquired deferred revenue that was written down to fair value in purchase accounting. Management believes that excluding fair value purchase accounting adjustments more closely correlates with the ordinary and ongoing course of the acquired company’s operations and facilitates analysis of revenue growth and business trends.
Non-GAAP gross margin
We believe our investors benefit by understanding ournon-GAAP operating income trends which are driven by revenue, gross margin as a way of understanding how product mix, pricing decisions and spending.manufacturing costs influence our business. Non-GAAP operating income gross margin excludes the effects of certain acquired deferred revenue that was written down to fair value in purchase accounting, restructuring charges, amortization of purchased intangible assets, stock-based compensation, amortization of acquisition-related inventorystep-up and acquisition/divestiture items associated with externalfrom GAAP gross margin. We believe that these adjustments offer investors additional information that may be useful to view trends in our gross margin performance.
Non-GAAP operating income
We believe our investors benefit by understanding our non-GAAP operating income trends which are driven by revenue, gross margin, and incremental costs resulting directlyspending. Non-GAAP operating income excludes the effects of purchase accounting adjustments to certain acquired deferred revenue and acquired capitalized commissions, restructuring charges, amortization of purchased intangible assets, stock-based compensation, amortization of acquisition-related inventory step-up, and acquisition/divestiture items from merger and acquisition activities such as legal, due diligence, integration, and other required closing costs, and executive transition costs.GAAP operating income. We believe that these exclusions offer an alternative means for our investors to evaluate current operating performance compared to results of other periods. We believe that thisnon-GAAP financial measure also helps investors enhance their overall understanding of our fiscal 20172018 performance in relation to the principal elements of our annual executive compensation as described in this Proxy Statement.
Our
Non-GAAP diluted net income per share
We believe our investors benefit by understanding our non-GAAP measures are not meant to be considered operating performance as reflected in isolation ora per share calculation as a substitute for comparable GAAP measures. Theway of measuring non-GAAP financial measures included operating performance by ownership in this Proxy Statement, and the Company. Non-GAAP diluted net income per share excludes the effects of purchase accounting adjustments to comparablecertain acquired deferred revenue and acquired capitalized commissions, restructuring charges, amortization of purchased intangible assets, stock-based compensation, amortization of acquisition-related inventory step-up, acquisition/divestiture items, debt issuance costs and non-GAAP tax adjustments from GAAP measures, are set forth below:
GAAP TONON-GAAP RECONCILIATION
(dollars in millions)
(unaudited)
| Fiscal Year | ||||||||||||||||
| 2017 | 2016 | |||||||||||||||
| Dollar Amount | % of Revenue | Dollar Amount | % of Revenue | |||||||||||||
OPERATING INCOME: | ||||||||||||||||
GAAP operating income: | $ 246.0 | 9.3% | $ 181.0 | 7.7% | ||||||||||||
Restructuring charges | 10.5 | 0.3% | 13.3 | 0.6% | ||||||||||||
Amortization of purchased intangible assets | 148.8 | 5.6% | 150.8 | 6.4% | ||||||||||||
Stock-based compensation | 64.8 | 2.5% | 52.6 | 2.2% | ||||||||||||
Amortization of acquisition-related inventorystep-up | 2.8 | 0.1% | — | —% | ||||||||||||
Acquisition / divestiture items | 7.4 | 0.3% | 6.8 | 0.3% | ||||||||||||
Executive transition costs | — | —% | 1.0 | —% | ||||||||||||
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Non-GAAP operating income: | $ 480.3 | 18.1% | $ 405.5 | 17.2% | ||||||||||||
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TRIMBLE INC. 935 Stewart Drive Sunnyvale, CA 94085 VOTE BY INTERNET - www.proxyvote.com Use the Internetdiluted net income per share. We believe that these adjustments offer investors a useful view of our diluted net income per share compared to transmit your voting instructions and for electronic delivery of information. Vote by 11:59 P.M. ET on 04/30/2018. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. 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. Vote by 11:59 P.M. ET on 04/30/2018. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. For Withhold For All To withhold authority to vote for any All All Except individual nominee(s), mark “For All Except” and write the number(s) of the The Board of Directors recommends you vote FOR all the nominees listed in proposal 1. nominee(s) on the line below. 0 0 0 1. Election of Directors Nominees 01 Steven W. Berglund 02 Kaigham (Ken) Gabriel 03 Merit E. Janow 04 Ulf J. Johansson 05 Meaghan Lloyd 06 Ronald S. Nersesian 07 Mark S. Peek 08 Johan Wibergh The Board of Directors recommends you vote FOR proposals 2 and 3. For Against Abstain 2. To hold an advisory vote on approving the compensation for our Named Executive Officers. 0 0 0 3. To ratify the appointment of Ernst & Young LLP as the independent auditor of the Company for the current 0 0 0 fiscal year ending December 28, 2018. NOTE: This proxy, when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy will be voted in accordance with the Board of Directors’ recommendations, and in the discretion of the persons named above as proxies upon such other matters as may properly come before the meeting. . 17 Yes No . 1 . 0 Please indicate if you plan to attend this meeting 0 0 R1 _ 1 Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or 0000364390 partnership, please sign in full corporate or partnership name, by authorized officer. Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date 0000364390_1 R1.0.1.17
past diluted net income per share.
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Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice & Proxy Statement, 10K/Annual Report is/are available at www.proxyvote.com . TRIMBLE INC. Annual Meeting of Stockholders May 1, 2018 5:30 PM This proxy is solicited by the Board of Directors The stockholder(s) hereby appoint(s) Steven W. Berglund and James Kirkland, or each of them, as proxies, each with the power to appoint his substitute, and hereby authorizes them to represent and to vote, as designated on the reverse side of this ballot, all of the shares of common stock of TRIMBLE INC. that the stockholder(s) is/are entitled to vote at the Annual Meeting of Stockholders to be held at 5:30 PM, Pacific Time on May 1, 2018, at Sunnyvale Theatre, Sunnyvale Community Center, 550 E. Remington Drive, Sunnyvale, California, 94087 and any adjournment or postponement thereof. This proxy, when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy will be voted in accordance with the Board of Directors’ recommendations. Continued and to be signed on reverse side 0000364390_2 R1.0.1.17
| GAAP TO NON-GAAP RECONCILIATION | |||||||||||||
| (dollars in millions, except per share data) | |||||||||||||
| (unaudited) | |||||||||||||
| Fiscal Years | |||||||||||||
| 2018 | 2017 | ||||||||||||
| * As Adjusted | |||||||||||||
| Dollar | % of | Dollar | % of | ||||||||||
| Amount | Revenue | Amount | Revenue | ||||||||||
| REVENUE: | |||||||||||||
| GAAP revenue: | $ | 3,108.4 | $ | 2,646.5 | |||||||||
| Acquired deferred revenue adjustment | 23.6 | 2.8 | |||||||||||
| Non-GAAP Revenue: | $ | 3,132.0 | $ | 2,649.3 | |||||||||
| GROSS MARGIN: | |||||||||||||
| GAAP gross margin: | $ | 1,681.0 | 54.1 | % | $ | 1,377.6 | 52.1 | % | |||||
| Acquired deferred revenue adjustment | 23.6 | 2.8 | |||||||||||
| Restructuring charges | 0.5 | 3.6 | |||||||||||
| Amortization of purchased intangible assets | 103.2 | 85.8 | |||||||||||
| Stock-based compensation | 4.5 | 3.9 | |||||||||||
| Amortization of acquisition-related inventory step-up | 0.2 | 2.8 | |||||||||||
| Acquisition / divestiture items | 2.0 | — | |||||||||||
| Non-GAAP gross margin: | $ | 1,815.0 | 58.0 | % | $ | 1,476.5 | 55.7 | % | |||||
| OPERATING INCOME: | |||||||||||||
| GAAP operating income: | $ | 320.7 | 10.3 % | $ | 235.7 | 8.9 % | |||||||
| Acquired deferred revenue adjustment | 23.6 | 2.8 | |||||||||||
| Restructuring charges | 8.7 | 10.5 | |||||||||||
| Amortization of purchased intangible assets | 179.6 | 148.8 | |||||||||||
| Stock-based compensation | 76.9 | 64.8 | |||||||||||
| Amortization of acquisition-related inventory step-up | 0.2 | 2.8 | |||||||||||
| Acquisition / divestiture items | 38.9 | 7.4 | |||||||||||
| Amortization of acquired capitalized commissions | (4.7 | ) | (1.3) | ||||||||||
| Non-GAAP operating income: | $ | 643.9 | 20.6 % | $ | 471.5 | 17.8 % | |||||||
| DILUTED NET INCOME PER SHARE: | |||||||||||||
| GAAP diluted net income per share attributable to Trimble Inc.: | $ | 1.12 | $ | 0.46 | |||||||||
| Acquired deferred revenue adjustment | 0.09 | 0.01 | |||||||||||
| Restructuring charges | 0.04 | 0.04 | |||||||||||
| Amortization of purchased intangible assets | 0.71 | 0.58 | |||||||||||
| Stock-based compensation | 0.30 | 0.25 | |||||||||||
| Amortization of acquisition-related inventory step-up | — | 0.01 | |||||||||||
| Acquisition / divestiture items | 0.15 | 0.03 | |||||||||||
| Amortization of acquired capitalized commissions | (0.02) | — | |||||||||||
| Debt issuance costs | 0.03 | — | |||||||||||
| Non-GAAP tax adjustments | (0.48) | 0.07 | |||||||||||
| Non-GAAP diluted net income per share attributable to Trimble Inc.: | $ | 1.94 | $ | 1.45 | |||||||||
| * | Prior-period information has been restated for the adoption of ASC 606, Revenue from Contracts with Customers. |
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