ASBURY AUTOMOTIVE GROUP INC
10-Ks and 10-Qs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
|
þ
|
Filed by the Registrant
|
|
¨
|
Filed by a Party other than the Registrant
|
|
Check the appropriate box:
|
|
|
¨
|
Preliminary Proxy Statement
|
|
¨
|
Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
|
|
þ
|
Definitive Proxy Statement
|
|
¨
|
Definitive Additional Materials
|
|
¨
|
Soliciting Material Pursuant to §240.14a-12
|
Asbury Automotive Group, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
|
Payment of Filing Fee (Check the appropriate box):
|
||
|
þ
|
No fee required
|
|
|
¨
|
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
|
|
|
(1)
|
Title of each class of securities to which transaction applies:
|
|
|
(2)
|
Aggregate number of securities to which transaction applies:
|
|
|
(3)
|
Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
|
|
|
(4)
|
Proposed maximum aggregate value of transaction:
|
|
|
(5)
|
Total fee paid:
|
|
|
¨
|
Fee paid previously with preliminary materials.
|
|
|
¨
|
Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
|
|
|
(1)
|
Amount Previously Paid:
|
|
|
(2)
|
Form, Schedule or Registration Statement No.:
|
|
|
(3)
|
Filing Party:
|
|
|
(4)
|
Date Filed:
|
|
1
March 19, 2020
Dear Stockholders,
On behalf of the Board of Directors and management of Asbury Automotive Group, Inc., we cordially invite you to attend our
2020
Annual Meeting of Stockholders.
As you know, an important aspect of the annual meeting process is the vote by stockholders on corporate business. The matters to be voted on are described in the notice of meeting and the proxy statement, which accompany this letter. We value your vote and urge you to exercise your rights as a stockholder to vote. Whether or not you plan to attend the meeting,
please read the enclosed proxy statement and complete, sign and date the enclosed proxy and return it as promptly as possible in the accompanying postage paid envelope or vote by telephone or the Internet
. This will ensure that your shares are represented at the meeting.
Sincerely,
David W. Hult
President, Chief Executive Officer and Director
YOUR VOTE IS IMPORTANT
2
ASBURY AUTOMOTIVE GROUP, INC.
2905 PREMIERE PARKWAY NW, SUITE 300
DULUTH, GEORGIA 30097
(770) 418-8200
NOTICE OF THE
2020
ANNUAL MEETING OF STOCKHOLDERS
AND IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON
APRIL 21, 2020
To Our Stockholders:
The
2020
Annual Meeting of Stockholders of Asbury Automotive Group, Inc. (the “
2020
Annual Meeting”) will be held at our corporate headquarters located at 2905 Premiere Parkway NW, Duluth, Georgia 30097 on
April 21, 2020
, at 8:00 a.m., Eastern Time, for the purpose of considering and acting upon the following proposals:
1.
election of
eight
director nominees to hold office until the
2021
Annual Meeting of Stockholders and until their successors are duly elected and qualified;
2.
approval, on an advisory basis, of the compensation of our named executive officers;
3.
ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the year ending
December 31, 2020
; and
4.
any other matters that may properly come before the
2020
Annual Meeting or any adjournments or postponements of the
2020
Annual Meeting.
Only stockholders of record, as of 5:00 p.m., Eastern Time, on
February 28, 2020
(the “Record Date”), are entitled to notice of, and to vote at, the
2020
Annual Meeting and any adjournments or postponements of the
2020
Annual Meeting. A complete list of stockholders entitled to notice of, and to vote at, the
2020
Annual Meeting will be available for inspection by stockholders during normal business hours during the ten day period immediately prior to the
2020
Annual Meeting at our corporate headquarters located at 2905 Premiere Parkway NW, Suite 300, Duluth, Georgia 30097, as well as at the
2020
Annual Meeting.
As part of our precautions regarding the coronavirus or COVID-19, we are planning for the possibility that the meeting may be held by means of remote communications, including, but not limited to, holding only a virtual meeting. If we take this step, we will announce the decision to do so in advance, and details on how to participate, including details on how to inspect a list of stockholders of record, will be posted on our website at
www.AsburyAuto.com/company/investor-relations/news-room
and filed with the SEC as proxy material.
Your vote is important. Please complete, date and sign the enclosed proxy. Then return it promptly in the enclosed envelope, or vote by telephone or the Internet, to ensure your shares are represented at the
2020
Annual Meeting. Any proxy you give will not be used if you thereafter choose to attend and vote in person at the
2020
Annual Meeting.
This proxy statement and the Company’s
2019
Annual Report on Form 10-K are available on the Internet at
www.edocumentview.com/ABG
BY ORDER OF THE BOARD OF DIRECTORS,
George A. Villasana
Senior Vice President, General Counsel & Secretary
3
TABLE OF CONTENTS
4
Asbury Automotive Group, Inc.
2905 Premiere Parkway NW, Suite 300
Duluth, GA 30097
PROXY STATEMENT
This proxy statement is furnished in connection with the solicitation of proxies by Asbury Automotive Group, Inc. (“Asbury”, the “Company”, “we”, “us” or “our”) on behalf of the Board of Directors (the “Board”) for the
2020
Annual Meeting of Stockholders (the "
2020
Annual Meeting"), including all adjournments or postponements of the
2020
Annual Meeting. The accompanying Notice of the
2020
Annual Meeting and Important Notice Regarding the Availability of Proxy Materials for the
2020
Annual Meeting to be held on
April 21, 2020
, this proxy statement and proxy card are first being mailed to stockholders, and made available on the Internet, on or about
March 19, 2020
. A copy of the Company’s Annual Report on Form 10-K for the year ended
December 31, 2019
is included with these materials.
INFORMATION ABOUT THE MEETING
What is the purpose of the
2020
Annual Meeting?
At the
2020
Annual Meeting, stockholders will be asked to consider and vote on the following proposals:
|
Proposal
|
Matter
|
Board Vote Recommendations
|
|
1
|
Election of Directors
|
FOR EACH NOMINEE
|
|
2
|
Approval, on an advisory basis, of the 2019 compensation of our named executive officers
|
FOR
|
|
3
|
Ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the year ending December 31, 2020
|
FOR
|
We will also transact any other business that may properly come before the
2020
Annual Meeting. Representatives from our independent registered public accounting firm, Ernst & Young LLP, are expected to be present at the meeting to make a statement if they so desire and to respond to appropriate questions from stockholders.
Who is entitled to vote?
The record date for the
2020
Annual Meeting is
February 28, 2020
(the "Record Date"). Only stockholders of record as of 5:00 p.m., Eastern Time, on the Record Date are entitled to notice of and to vote at the
2020
Annual Meeting. Attendance at the
2020
Annual Meeting will be limited to stockholders of record, their proxies, beneficial owners having evidence of ownership on the Record Date and our invited guests.
Our sole outstanding class of capital stock is our common stock, par value $0.01 per share. Except as otherwise required by law, or as described in this proxy statement, each holder of our common stock is entitled to one vote per share with respect to each director nominee and on each other matter submitted at the
2020
Annual Meeting. As of the Record Date, there were
19,278,564
shares of our common stock issued and outstanding and entitled to vote on each matter to be voted upon at the
2020
Annual Meeting, which number includes
116,811
shares of unvested restricted stock entitled to voting rights and that are held by our employees.
How do I vote?
1.
You may vote by mail
. If you properly complete and sign the accompanying proxy card and return it in the enclosed envelope, your shares will be voted in accordance with your instructions. The enclosed envelope requires no additional postage if mailed in the United States.
2.
You may vote by telephone or the Internet
. If you are a stockholder of record (your shares are registered directly in your name with our transfer agent), you may vote by telephone or the Internet by following the voting instructions on the proxy card. If your shares are held in “street name” by a bank, broker or other nominee, you may also be able to vote by telephone or the Internet. Please check the voting form provided by your bank, broker or other nominee to see if it offers such options.
1
3.
You may vote in person at the
2020
Annual Meeting
. If you are a stockholder of record and attend the
2020
Annual Meeting and wish to vote in person, you will be given a ballot at the meeting. However, if your shares are held in the name of your bank, broker or other nominee, you will need to obtain a proxy from the institution that holds your shares indicating that you were the beneficial owner of our common stock as of the Record Date for the
2020
Annual Meeting. Please contact the bank, broker or other nominee holding your shares directly if you would like to obtain a proxy to vote your shares directly at the
2020
Annual Meeting. Even if you plan to attend the
2020
Annual Meeting, please complete, sign and return your proxy card, or vote by telephone or the Internet, to ensure that your shares are represented. If you attend the
2020
Annual Meeting, any votes you cast at the meeting will supersede your proxy.
We intend to hold our annual meeting in person. However, as part of our precautions regarding the coronavirus or COVID-19, we are planning for the possibility that the meeting may be held by means of remote communications, including, but not limited to, holding only a virtual meeting. If we take this step, we will announce the decision to do so in advance, and details on how to participate will be posted on our website at
www.AsburyAuto.com/company/investor-relations/news-room
and filed with the SEC as proxy material.
How many shares must be present to hold the
2020
Annual Meeting?
A quorum must be present at the
2020
Annual Meeting for any business to be conducted. The presence at the
2020
Annual Meeting, in person or by proxy, of at least
9,639,283
shares, which represents a majority of the shares of common stock outstanding on the Record Date, will constitute a quorum. Proxies received but marked as abstentions or broker non-votes will be counted for the purpose of determining the presence of a quorum.
What if a quorum is not present at the
2020
Annual Meeting?
If a quorum is not present at the scheduled time of the
2020
Annual Meeting, the chairman of the
2020
Annual Meeting may adjourn or postpone the
2020
Annual Meeting until a quorum is present. The time and place of the adjourned or postponed
2020
Annual Meeting will be announced at the time the adjournment or postponement is taken, and, unless such adjournment or postponement is for more than 30 days, no other notice will be given. An adjournment or postponement will have no effect on the business that may be conducted at the
2020
Annual Meeting.
Can I change my vote after I submit my proxy?
Yes, you may revoke your proxy and change your vote at any time before the polls close at the
2020
Annual Meeting by:
|
•
|
signing and properly submitting another proxy with a later date;
|
|
•
|
voting by telephone or the Internet;
|
|
•
|
giving written notice of the revocation of your proxy, which must be received by our Secretary at our corporate headquarters prior to the
2020
Annual Meeting; or
|
|
•
|
voting in person at the
2020
Annual Meeting.
|
What if I return an executed proxy but do not specify how my shares are to be voted?
If you properly execute and return your proxy but do not indicate any voting instructions with respect to one or more matters to be voted upon at the
2020
Annual Meeting, or if your voting instructions are unclear, your shares will be voted in accordance with the recommendation of the Board as to all such matters.
Will any other business be conducted at the
2020
Annual Meeting?
The Board is aware of no other business that will be presented at the
2020
Annual Meeting. If any other business properly comes before the stockholders for a vote at the
2020
Annual Meeting, the proxy holders will vote the shares for which they have been granted a proxy as recommended by our Board, or if no recommendation is given, in accordance with their own discretion.
What are abstentions, broker non-votes and withheld votes, and how are they treated?
A share voted "abstain" with respect to any proposal is considered present and entitled to vote with respect to that proposal and will be included for purposes of calculating the presence of a quorum at the
2020
Annual Meeting. You may abstain from voting on any proposal to be voted on at the
2020
Annual Meeting other than the election of directors, which by virtue of the vote required to approve such proposal, does not provide for abstentions under applicable law.
A broker non-vote with respect to a proposal occurs when shares are held by a bank, broker or other nominee in "street name", and the bank, broker or other nominee does not receive voting instructions from the beneficial owner of these shares as to how to vote such shares, and the bank, broker or other nominee does not have the authority to exercise discretion to vote on such proposal. Banks, brokers and other nominees are only able to, but are not required to, exercise discretionary voting authority on routine matters. The proposal related to the ratification of our independent registered public accounting firm (Proposal
3
) is the only item on the agenda for the
2020
Annual Meeting that is considered a
2
routine matter. If a bank, broker or other nominee does not receive specific voting instructions with respect to one or more non-routine matters, such nominee may not cast a vote on the proposal, resulting in a broker non-vote. Broker non-votes will be included for purposes of calculating the presence of a quorum at the
2020
Annual Meeting.
With respect to the election of directors (Proposal
1
), our directors are elected by a plurality of the votes cast, but are subject to our director voting policy set forth in our Corporate Governance Guidelines. If you vote "withhold" with respect to the election of one or more nominees, your shares will not be voted with respect to those nominees. "Withheld" votes will be counted for purposes of determining whether there is a quorum and will have a similar effect as a vote "against" that director nominee under our director voting policy.
What vote is required to approve each proposal at the
2020
Annual Meeting?
The table below describes the vote required for approval of each matter to be brought before the
2020
Annual Meeting, as well as the treatment of abstentions, broker non-votes and withheld votes.
|
Proposal
|
Vote Required
|
Treatment
of
Abstentions
|
Treatment
of Broker
Non-Votes
|
Treatment of Withhold Votes
|
|
Election of Directors
|
Each nominee must receive the affirmative vote of a plurality of the votes cast*
|
Not Applicable
|
No Effect
|
Against
|
|
Advisory Approval of Executive Compensation
|
The affirmative vote of the holders of a majority of the voting power of shares present in person or represented by proxy and entitled to vote
|
Against
|
No Effect
|
Not Applicable
|
|
Ratification of Independent Registered Public Accounting Firm
|
The affirmative vote of the holders of a majority of the voting power of shares present in person or represented by proxy and entitled to vote
|
Against
|
No Effect
|
Not Applicable
|
*While directors are elected by a plurality of votes cast, our Corporate Governance Guidelines include a director voting policy. This policy provides that in an uncontested election, any nominee for director who is a current director and who receives a greater number of votes “withheld” from his or her election than votes “for” his or her election shall tender his or her resignation as a director to the Board promptly following the certification of the election results. The Governance & Nominating Committee will consider each resignation tendered and recommend to the Board whether to accept or reject it. The Board will act on each tendered resignation within 90 days following the certification of the election results.
Only votes “for” or “withheld” are counted in determining whether a plurality has been cast in favor of a director nominee. If you vote “Withhold” with respect to the election of one or more nominees, your shares will not be voted with respect to those nominees. For a “withheld” vote, your shares will be counted for purposes of determining whether there is a quorum and will have a similar effect as a vote “against” that director nominee under our director voting policy. Broker non-votes will not be deemed to be votes “for” or “against” a director nominee.
Who pays for the costs of soliciting proxies?
We will pay the cost of soliciting proxies, including the expenses of preparing, printing and mailing the proxy materials to stockholders. We have retained
Innisfree M&A
to aid in the broker search and the solicitation of proxies, for a fee of approximately $
15,000
, plus reasonable out-of-pocket expenses and disbursements. We will also reimburse brokerage firms and other custodians, nominees and fiduciaries for reasonable expenses incurred by them in sending proxy materials to the beneficial owners of our common stock. Our directors, officers and other employees may also solicit proxies without additional compensation. This solicitation may be in person or by telephone, email or other electronic communication methods.
3
SECURITIES OWNED BY MANAGEMENT & CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information with respect to the beneficial ownership of shares of the Company’s common stock by (1) each of our directors, (2) each of our named executive officers, and (3) our directors and executive officers as a group. In addition, the table sets forth information about all other persons known to the Company to be the beneficial owner of more than five percent of the Company’s common stock.
Except as set forth below, the following information is given as of the Record Date. In the case of percentage ownership, the information is based on
19,278,564
shares of the Company’s common stock being outstanding as of the Record Date, which number includes
116,811
shares of unvested restricted stock that have voting rights and are held by the Company’s employees. Shares issuable upon the vesting of performance share units within 60 days after the Record Date are deemed to be outstanding for the purpose of computing the beneficial ownership and overall voting power of each person deemed to beneficially own such securities, but are not deemed to be outstanding for the purpose of computing the voting power of any other person.
|
Name of Beneficial Owner
|
Shares Beneficially Owned
(†)
|
||||
|
Number
|
%
|
||||
|
Principal Stockholders
|
|||||
|
BlackRock, Inc.
(1)
|
3,364,465
|
|
17.45
|
%
|
|
|
The Vanguard Group
(2)
|
2,059,794
|
|
10.68
|
%
|
|
|
Abrams Capital Management, LLC
(3)
|
1,902,528
|
|
9.87
|
%
|
|
|
Neuberger Berman Group LLC
(4)
|
1,265,382
|
|
6.56
|
%
|
|
|
Current Directors, Including Director Nominees
|
|||||
|
Joel Alsfine
|
7,171
|
|
*
|
|
|
|
Thomas C. DeLoach, Jr.
|
17,114
|
|
*
|
|
|
|
David W. Hult
(5)
|
73,479
|
|
|||
|
Juanita T. James
|
8,031
|
|
*
|
|
|
|
Eugene S. Katz
|
21,039
|
|
*
|
|
|
|
Philip F. Maritz
|
10,509
|
|
*
|
|
|
|
Maureen F. Morrison
|
2,625
|
|
*
|
|
|
|
Thomas J. Reddin
|
7,777
|
|
*
|
|
|
|
Bridget Ryan-Berman
|
4,016
|
|
*
|
|
|
|
Named Executive Officers Who Are Not Directors
|
|||||
|
Sean D. Goodman
|
4,174
|
|
*
|
|
|
|
John S. Hartman
|
3,390
|
|
*
|
|
|
|
Jed Milstein
(6)
|
11,991
|
|
*
|
|
|
|
William F. Stax
(7)
|
3,809
|
|
*
|
|
|
|
George A. Villasana
(8)
|
10,792
|
|
*
|
|
|
|
Current Directors & Executive Officers
|
|||||
|
As a group (13 persons)
(9)
|
195,291
|
|
1.01
|
%
|
|
|
(†)
|
The number of shares beneficially owned is determined under rules promulgated by the Securities and Exchange Commission (the “SEC”), and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rules, beneficial ownership includes any shares as to which the individual has sole or shared voting power or investment power and also any shares which the individual has the right to acquire within 60 days after the Record Date. Inclusion in the table of such shares, however, does not constitute an admission that the director, director-nominee, named executive officer or other executive officer is a direct or indirect beneficial owner of such shares. Except as otherwise indicated, the persons listed in the table have sole voting and investment power with respect to the securities included in the table.
|
|
(*)
|
Denotes less than 1% of the Company’s common stock.
|
|
(1)
|
Based on a Schedule 13G/A filed with the SEC on February 4, 2020. BlackRock, Inc. has sole voting power with
|
4
respect to 3,242,584 shares and sole dispositive power with respect to 3,364,465 shares. The business address of Blackrock, Inc. is 55 East 52nd Street, New York, New York 10055.
|
(2)
|
Based on a Schedule 13G/A filed with the SEC on February 12, 2020. The Vanguard Group ("Vanguard") has sole voting power with respect to 40,900 shares, sole dispositive power with respect to 2,018,472 shares, shared voting power with respective to 3,181 shares and shared dispositive power with respect to 41,322 shares. Vanguard Fiduciary Trust Company, a wholly-owned subsidiary of Vanguard, is the beneficial owner of 38,141 shares. Vanguard Investments Australia, Ltd., a wholly-owned subsidiary of Vanguard, is the beneficial owner of 5,940 shares. The business address of Vanguard is 100 Vanguard Boulevard, Malvern, PA 19355.
|
|
(3)
|
Based on a Schedule 13G/A filed with the SEC on February 14, 2019 and a Schedule 13F with the SEC on February 14, 2020. Represents shares owned by and on behalf of each of Abrams Capital Partners II, L.P. (“ACP II”), Abrams Capital, LLC (“Abrams Capital”), Abrams Capital Management, LLC (“Abrams CM LLC”), Abrams Capital Management, L.P. (“Abrams CM LP”) and David Abrams. Abrams Capital serves as general partner for a number of private investment funds. Abrams CM LP serves as investment manager for a number of private investment funds. Abrams CM LLC is the general partner of Abrams CM LP. Mr. Abrams is the managing member of Abrams Capital and Abrams CM LLC and may be deemed to have voting and dispositive power over shares held for the accounts of the private investment funds managed by him. ACP II has shared voting and dispositive power with respect to 1,541,792 shares. Abrams Capital has shared voting and dispositive power with respect to 1,819,132 shares. Abrams CM LLC, Abrams CM LP and Mr. Abrams have shared voting and dispositive power with respect to all 1,902,528 shares. The business address of ACP II, Abrams Capital, Abrams CM LLC, Abrams CM LP and Mr. Abrams is 222 Berkeley Street, 21
st
Floor, Boston, MA 02116.
|
|
(4)
|
Based on a Schedule 13G/A filed with the SEC on February 13, 2020. Represents shares owned by and on behalf of each of Neuberger Berman Group LLC (“Neuberger Group”) and Neuberger Berman Investment Advisers LLC (“Neuberger Investment”). Neuberger Group and Neuberger Investment have shared voting power with respect to 1,255,822 shares and shared dispositive power with respect to 1,265,382 shares. The business address of Neuberger Group and Neuberger Investment is 1290 Avenue of the Americas, New York, NY 10104.
|
|
(5)
|
Includes 15,954 shares of unvested restricted stock. Mr. Hult has the right to vote, but no right to dispose of, the shares of unvested restricted stock. Also includes 5,455 shares of common stock vested in March 2020 under the 2019 performance share unit program, net of shares of common stock forfeited for the payment of taxes upon vesting of such award. Mr. Hult has the right to dispose of these shares issued to him under the 2019 performance share unit program, but no right to vote such shares at the 2020 Annual Meeting, as such shares were not outstanding and entitled to vote on the Record Date.
|
|
(6)
|
Includes 4,665 shares of unvested restricted stock. Mr. Milstein has the right to vote, but no right to dispose of, the shares of unvested restricted stock. Also includes 940 shares of common stock vested in March 2020 under the 2019 performance share unit program, net of shares of common stock forfeited for the payment of taxes upon vesting of such award. Mr. Milstein has the right to dispose of these shares issued to him under the 2019 performance share unit program, but no right to vote such shares at the
2020
Annual Meeting, as such shares were not outstanding and entitled to vote on the Record Date.
|
|
(7)
|
Includes 1,983 shares of unvested restricted stock. Mr. Stax has the right to vote, but no right to dispose of, the shares of unvested restricted stock. Also includes 210 shares of common stock vested in March 2020 under the 2019 performance share unit program, net of shares of common stock forfeited for the payment of taxes upon vesting of such award. Mr. Stax has the right to dispose of these shares issued to him under the 2019 performance share unit program, but no right to vote such shares at the 2020 Annual Meeting, as such shares were not outstanding and entitled to vote on the Record Date.
|
|
(8)
|
Includes 3,239 shares of unvested restricted stock. Mr. Villasana has the right to vote, but no right to dispose of, the shares of unvested restricted stock. Also includes 1,140 shares of common stock vested in March 2020 under the 2019 performance share unit program, net of shares of common stock forfeited for the payment of taxes upon vesting of such award. Mr. Villasana has the right to dispose of these shares issued to him under the 2019 performance share unit program, but no right to vote such shares at the
2020
Annual Meeting, as such shares were not outstanding and entitled to vote on the Record Date.
|
|
(9)
|
Includes 38,542 shares of unvested restricted stock. The group has the right to vote, but no right to dispose of, the shares of unvested restricted stock. Also includes 8,376 shares of common stock vested in March 2020 under the 2019 performance share unit program, net of shares of common stock forfeited for the payment of taxes upon vesting of such award. The group has the right to dispose of these shares issued under the 2019 performance share unit program, but no right to vote such shares at the
2020
Annual Meeting, as such shares were not outstanding and entitled to vote on the Record Date.
|
5
Equity Ownership Guidelines
We have adopted equity ownership guidelines that are applicable to our directors and named executive officers. Under our guidelines:
|
•
|
each director is expected to own at least five times his or her annual retainer in value of Asbury shares;
|
|
•
|
our Chief Executive Officer is expected to own at least five times his base salary in value of Asbury shares;
|
|
•
|
our Chief Financial Officer is expected to own at least three times his or her base salary in value of Asbury shares; and
|
|
•
|
our other named executive officers are expected to own at least two times his or her base salary in value of Asbury shares. (other than Mr. Stax, that is expected to own at least one times his base salary in value of Asbury shares.)
|
Equity ownership, for the purposes of these guidelines, includes the following:
|
•
|
owned shares;
|
|
•
|
unvested restricted shares and unvested restricted share units; and
|
|
•
|
earned, but unvested, performance share units.
|
We expect our directors and named executive officers to comply with these guidelines within five years after the date of their election or appointment. All of our current directors and named executive officers have achieved their ownership requirements or have additional time to achieve them.
Our equity ownership guidelines are contained in our Corporate Governance Guidelines, which can be found on our website at
www.AsburyAuto.com/company/investor-relations/
under “Corporate Governance.”
Asbury Policy Regarding Hedging or Pledging of Asbury Stock
Insiders of Asbury are strongly discouraged from trading in Asbury common stock on a short-term basis. In addition, Asbury prohibits its directors and officers who are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), from pledging Asbury common stock or otherwise hedging or subjecting Asbury common stock to margin calls or the ability to be sold outside of the owner’s control. All insiders of Asbury are prohibited from engaging in hedging activities involving Asbury common stock.
Delinquent Section 16(a) Reports
Section 16(a) of the Exchange Act requires the Company’s directors, executive officers and persons who beneficially own more than 10% of a registered class of the Company’s equity securities to file with the SEC reports on Forms 3, 4 and 5 concerning their ownership of, and transactions in, the Common Stock and other equity securities of the Company. As a practical matter, the Company assists its directors and executives by monitoring transactions, and completing and filing reports on their behalf.
Based solely on the Company’s review of copies of such reports filed with the SEC and written representations that no other reports are required, the Company believes that all of its executive officers, directors and those greater-than-10% stockholders that filed any reports for the year ended December 31,
2019
reported all transactions on a timely basis, with the exception of one Form 4 for Mr. Alsfine that inadvertently omitted the withholding by the Company of 754 shares for the payment of tax that was subsequently reported on a Form 5.
6
PROPOSAL 1 - ELECTION OF DIRECTORS
Nominees for Election as Directors
Directors are elected by a plurality of the votes cast. This means that each of the
eight
director-nominees will be elected if they receive more affirmative votes than any other person. The director voting policy in our Corporate Governance Guidelines states that in an uncontested election, any nominee for director who is a current director and who receives a greater number of votes “withheld” from his or her election than votes “for” his or her election shall tender his or her resignation as a director to the Board promptly following the certification of the election results. The Governance & Nominating Committee
will consider each resignation tendered and recommend to the Board whether to accept or reject it. The Board will act on each tendered resignation within 90 days following the certification of the election results.
Eugene S. Katz will retire at the
2020
Annual Meeting as a result of the service limitations set forth in the Company’s Corporate Governance Guidelines. The Company thanks Mr. Katz for his years of service. Pursuant to the Amended and Restated Certificate and resolution of the Board, upon the completion of Mr. Katz' term, the size of the Board will be set at
eight
directors.
Each director-nominee, has consented to being named in this proxy statement and has agreed to serve if elected. Management has no reason to believe that the director-nominees will not serve if elected. If a director-nominee is unable or unwilling to stand for election, the Board may designate a substitute director-nominee or may choose to reduce the size of the Board. If a substitute director-nominee is designated, the proxy holders will vote your shares for the substitute director-nominee, unless you have withheld authority for the director-nominee who is not standing for election.
Below is certain information about our directors and director-nominees, their principal occupation, business experience as well as other matters, and if a director-nominee, the Board’s assessment of their individual qualifications to serve on our Board. For certain additional information regarding the directors and director-nominees, see the sections entitled “Securities Owned by Management and Certain Beneficial Owners,” and “Governance of the Company” in this proxy statement.
Upon the recommendation of the Governance & Nominating Committee, our Board has nominated each of the
eight
director-nominees listed below to stand for election for a term expiring at the
2021
Annual Meeting of Stockholders or until their successors are duly elected and qualified. All of the director-nominees are current directors of the Company.
|
Thomas J. Reddin
|
Mr. Reddin
(age 58)
has served as our Non-Executive Chairman since April 2019. Mr. Reddin has served as a member of the Board and a member of the Audit Committee and Capital Allocation & Risk Management Committee since May 2014, and as member of the Governance & Nominating Committee since April 2018, of which he was Chair until April 2019. Mr. Reddin is currently the managing partner of Red Dog Ventures LLC, a venture capital and advisory firm he founded in 2007. Red Dog Ventures focuses on helping grow early stage digital companies, and its portfolio includes positions in data, data analytics, content marketing, internet lead generation, search engine optimization, AI/machine learning and data center maintenance. In 2008 and 2009, Mr. Reddin served as the Chief Executive Officer of Richard Petty Motorsports. From 1999 to 2007, he held various senior executive positions, including Chief Executive Officer, President & Operating Officer, and Chief Marketing Officer, at LendingTree, LLC, a leader in online lending and e-commerce. Mr. Reddin also previously worked in the consumer goods industry, spending 5 years at Coca-Cola USA where he was responsible for the Coca-Cola brand along with other duties, and 12 years at Kraft General Foods in various capacities related to brand management and finance. Mr. Reddin serves as a director, Chair of the Compensation Committee, and member of the Audit Committee and Nominating & Governance Committee of Tanger Factory Outlet Centers Inc. He also serves as a director and Chair of the Compensation Committee, and member of the Risk Committee of Deluxe Corporation. Mr. Reddin previously served on the board of Premier Farnell plc from September 2010 to October 2016, on the Board of Valassis Communications Inc. from July 2010 to February 2014 and on the board of R.H. Donnelley from July 2007 to January 2010.
Mr. Reddin brings over 30 years of executive and management experience in consumer marketing, e-commerce and lending, and has spent 17 years in brand management and finance capacities in his previous roles. His extensive experience in emerging digital technology provides a significant insight into sales and marketing which are critical to the automotive retail industry. In addition, given his current and past experience serving as a director of public companies, the Board has determined that he has a broad range of experience as a director and a deep understanding of board oversight upon which to draw as he serves as the Non-Executive Board Chairman, Chair of the Executive Committee, and as a member of our Governance & Nominating Committee, Audit Committee, Capital Allocation & Risk Management Committee and Transaction Committee.
7
|
Joel Alsfine
|
Mr. Alsfine (age 50) has served as a member of the Board, and as a member of both our Audit Committee and Capital Allocation & Risk Management Committee since January 2015, as Chair of the Capital Allocation & Risk Management Committee since April 2018 and as a member of the Transaction Committee since October 2019. Mr. Alsfine is a partner at MSD Capital L.P. in New York, the investment firm formed in 1998 to exclusively manage the capital of Michael Dell and his family, which he joined in 2002. From 2000 to 2002, Mr. Alsfine was Managing Director of TG Capital Corp. in Miami. Prior to 2000, he held the post of Engagement Manager with McKinsey & Co. in New York and also worked with Fisher Hoffman Stride in Johannesburg, South Africa.
With his extensive capital markets experience and financial and investment experience as a partner at MSD Capital, the Board has determined that Mr. Alsfine has an astute understanding of market complexities that provide valuable insight into effective strategy, including within the automotive retail industry. In addition, the Board believes that Mr. Alsfine’s years of financial and risk management related experience at various private equity firms appropriately positions him to be Chair of the Capital Allocation & Risk Management Committee, and a valuable member of both our Audit Committee and Transaction Committee, and to provide valuable insight into audit, capital allocation and risk management issues.
|
Thomas C. DeLoach, Jr.
|
Mr. DeLoach (age 72) has served as a member of our Board and as a member of the Audit Committee since January 2007, a member of the Capital Allocation & Risk Management Committee since January 2009, of which he was Chair until February 2011, a member of the Compensation & Human Resources Committee since April 2019, and as a member of the Transaction Committee since October 2019. He served as our Non-Executive Chairman from August 2011 to April 2019 and, prior to that time, served as our Lead Independent Director from February 2011 to August 2011. Mr. DeLoach also served as Chair of the Succession Planning Committee from October 2010 until February 2011, when such Committee was disbanded, and a member of the Executive Committee from February 2011 to April 2019, of which he was Chair from May 2013 until April 2019, and as a member of the Governance & Nominating Committee from April 2012 to April 2018. He is a former executive of Mobil Corporation (“Mobil”) and served in various positions at Mobil from July 1969 until March 2000. From 1998 to 2000, Mr. DeLoach was the president of the Global Midstream Division at Mobil. From 1994 to 1998, Mr. DeLoach served as the Chief Financial Officer of Mobil. From May 2000 to July 2002, Mr. DeLoach was a member of management of a NASCAR racing team owned principally by Roger Penske. In September 2002, he formed PIT Instruction & Training, LLC, of which he is a principal and a managing member. In addition, from June 2005 until May 2017, Mr. DeLoach served as a principal and a managing member of Red Horse Racing II, LLC, a NASCAR Camping World Truck Series race team. Mr. DeLoach served as a member of the Board of Trustees, the Corporate Governance & Nominating Committee and the Audit Committee of Liberty Property Trust, a self-managed real estate investment trust, until February 2, 2020, after which Liberty Property Trust was acquired by ProLogis. Mr. DeLoach was also formerly the Chair of the Audit Committee and of the Compensation Committee of Liberty Property Trust.
With his extensive board and management experience, the Board has determined that Mr. DeLoach brings to the Board demonstrated critical leadership skills. In addition, as the former Chief Financial Officer of Mobil, coupled with his former position as Chair of the Audit Committee of Liberty Property Trust, Mr. DeLoach has experience with complex accounting, financial and risk-related issues, such as the application of accounting principles and financial reporting rules and regulations, and evaluation of financial results and general oversight of the financial reporting processes and risk analyses of large businesses. As a result of his broad accounting, financial and executive experience, the Board believes that Mr. DeLoach is a valuable member of our Board, Compensation & Human Resources Committee, Capital Allocation & Risk Management Committee and of our Transaction Committee, and is well-qualified to assist in the auditor oversight function as an Audit Committee member.
|
David W. Hult
|
Mr. Hult
(age 54)
has served as our President & Chief Executive Officer and as a member of our Board since January 2018. Prior to becoming our President & Chief Executive Officer, Mr. Hult served as our Executive Vice President & Chief Operating Officer since November 2014 after holding the position of Chief Operating Officer at RJL-McLarty-Landers Automotive Holdings, LLC, an automotive franchise and dealership operator, from January 2013 to November 2014. From June 2004 to July 2012, Mr. Hult held several roles with Group One Automotive, Inc., including Vice President of Fixed Operations and Marketing, Regional Vice President - East Region, and Market Director for New England. He has been an operator at the General Manager level as well as the regional level for a number of large automotive dealership groups. After serving our country in the U.S. Army, Mr. Hult started his career as a retail sales associate within the automotive industry.
Mr. Hult has over 20 years of experience as an operations executive at large auto retail companies. In his role as our President & Chief Executive Officer, Mr. Hult has primary responsibility for the day-to-day operations of the Company. Mr.
8
Hult’s in-depth knowledge of the Company allows him to effectively identify strategic priorities, provide valuable input during Board discussions, and execute the Company’s strategy and business plans. Because of Mr. Hult's position and significant experience in overseeing auto retail operations at the Company, the Board has determined that it is appropriate for Mr. Hult to also serve on the Board.
|
Juanita T. James
|
Ms. James
(age 67)
has served as a member of the Board since October 2007, as a member of the Compensation & Human Resources Committee since May 2008, as a member of the Governance & Nominating Committee and as Chair of the Compensation & Human Resources Committee since April 2015. Ms. James also served as a member of the Audit Committee from January 2009 to April 2015 and as a member of the Capital Allocation & Risk Management Committee from October 2012 until May 2014. Ms. James has served as the President & Chief Executive Officer of the Fairfield County's Community Foundation (“FCCF”) since October 2011. Prior to joining FCCF, Ms. James served as the Vice President and Chief Marketing and Communications Officer for Pitney Bowes, Inc. from May 2007 until November 2010, during which time she also served on its Chief Executive Officer Council and its Corporate Social Responsibility Committee. From October 2006 to May 2007, Ms. James served as the Vice President and Chief Communications Officer for Pitney Bowes. From October 2004 until October 2006, Ms. James served as the Vice President of Direct Marketing Strategy and Business Development for Pitney Bowes. From 2002 until 2004, Ms. James served as the Vice President, Project Leader of Human Resources Transformation for Pitney Bowes, where she led a global SAP Human Resources and Payroll implementation and launched the company’s first shared services initiative. Prior to joining Pitney Bowes in 1999, Ms. James was the Executive Vice President, Marketing and Editorial of Doubleday Direct, Inc. Ms. James had a distinguished 20-year career at Time Warner, Inc., including 12 years in senior management positions. Ms. James also formerly served as the Chair of the Compensation Committee of the Board of Trustees of the University of Connecticut.
Based on her management experience at FCCF, Pitney Bowes and Doubleday Direct, the Board has determined that Ms. James brings to the Board demonstrated senior-level leadership experience. Through her various positions at Pitney Bowes, Ms. James also brings to the Board a broad understanding of sales, marketing, brand management, investor relations and general communications matters that affect large companies, which are areas that are critical to the automotive retail business and to which she can provide valuable insight. As a former member of the audit committee of The Rouse Company, the Board believes that Ms. James has valuable experience dealing with accounting principles, financial reporting rules and regulations, evaluating financial results and generally overseeing public company financial reporting processes. In addition, the Board also believes that Ms. James’ service as former Chair of the Nominating and Governance Committee of The Rouse Company, as well as her prior and current service on numerous not-for-profit boards, provides her with additional experience upon which she can draw upon as a member of our Board, as Chair of the Compensation & Human Resources Committee, and as a member of the Governance & Nominating Committee.
|
Philip F. Maritz
|
Mr. Maritz (age 59) has served as a member of the Board since April 2002, as a member of the Capital Allocation & Risk Management Committee since April 2012, of which he was Chair until April 2018, as a member of the Governance & Nominating Committee since June 2014, as Chair of the Governance & Nominating Committee since April 2019, as a member of the Executive Committee since April 2015, and as a member of the Transaction Committee since October 2019. He is the co-founder and President of Maritz, Wolff & Co., which manages the Hotel Equity Fund, a private equity investment fund that invests in luxury hotels and resorts. In 1990, he founded Maritz Properties, a commercial real estate development and investment firm where he serves as President. He is also the Managing Director of Broadreach Capital Partners, a private equity real estate investment fund.
With his significant real estate investment and management, strategic and operational experience as President of Maritz, Wolff & Co. and Maritz Properties, along with his financial and investment experience as a Managing Director of Broadreach Capital Partners, the Board has determined that Mr. Maritz has valuable insight into the effective strategic management of businesses, including with respect to the evaluation of operational, financial and transactional risks. In addition, Mr. Maritz’s experience in marketing and sales of luxury goods and services and his strategic management of luxury brands is relevant to our Company and our business. Mr. Maritz’s leadership positions at these various companies demonstrate his management abilities and his understanding of business and financial strategy and operations, making him a valuable member of our Capital Allocation & Risk Management Committee, Governance & Nominating Committee Executive Committee and Transaction Committee. Furthermore, Mr. Maritz is, or has been, a director of a number of privately-held companies, including Rosewood Hotels and Resorts and Dolce Hotels and Resorts, and a number of non-profit organizations, including Princeton University Art Museum Advisory Council, Stanford Business School Management Board, the American University of Cairo, the Metropolitan Museum of Art, and the New York Landmarks Conservancy, which the Board believes provides additional insight into Board functions, including appropriate oversight, risk management and fiduciary obligations.
9
|
Maureen F. Morrison
|
Ms. Morrison
(age 65)
has served as a member of the Board, as a member of both our Audit Committee and Capital Allocation & Risk Management Committee since January 2019, and as a member of the Accounting Committee since October 2019. Ms. Morrison is a former partner of PricewaterhouseCoopers (“PwC”), where she began her career in 1976, and became a partner in 1987. Ms. Morrison retired from PwC in 2015. From 2004 and through 2010, Ms. Morrison led the Atlanta, Georgia Technology Audit Practice of PwC. In addition, Ms. Morrison served as Chair of the Nominating Committee for Board of Partners, and as a member of the National Admissions Committee, and as Chief Auditor at PwC. Ms. Morrison currently serves as a director and Chair of the Audit Committee, and member of both the Nominating & Corporate Governance Committee and Compensation Committee of Safeguard Scientifics, Inc. She also serves as a director, Chair of the Audit Committee and member of the Nominating and Corporate Governance Committee of ePlus inc.
Ms. Morrison has over 35 years of experience in public accounting, with extensive experience in accounting, finance, mergers and acquisitions and capital markets transactions. She has led audit engagements with prominent multibillion dollar, global, technology corporations, both public and private, and has diversified experience in software, IT-enabled solutions and consulting, hardware, and manufacturing. The Board has determined that as a result of her broad experience with complex accounting, financial and risk-related issues, Ms. Morrison is well-qualified to assist in the auditor oversight function as an Audit Committee member and as a member of both our Capital Allocation & Risk Management Committee and Accounting Committee.
|
Bridget Ryan-Berman
|
Ms. Ryan-Berman (age 59) has served as a member of the Board, and as a member of both our Compensation & Human Resources Committee and our Governance & Nominating Committee since April 2018. Ms. Ryan-Berman is an independent consultant advising multi-channel brands and companies on business innovation and large-scale transformation designed around the consumer experience. From June 2016 to December 2017, Ms. Ryan-Berman served as Chief Experience and Strategy Officer of Enjoy Technology, Inc., a company that provides delivery and setup services for tech products. From 2011 to 2015, Ms. Ryan-Berman served as Chief Executive Officer of Victoria's Secret Direct, LLC, an online and catalog division of Victoria's Secret, a specialty retailer of women's lingerie, beauty, apparel and accessories. She was formerly an independent consultant advising clients in the retail, wholesale and financial investment sectors providing strategic planning, business development and executive coaching services. Ms. Ryan-Berman served as Chief Executive Officer of Giorgio Armani Corp., the wholly owned U.S. subsidiary of Giorgio Armani S.p.A., a provider of fashion and luxury goods products, from 2006 to 2007 and Vice President/Chief Operating Officer of Apple Computer Retail from 2004 to 2005. Ms. Ryan-Berman also served in various executive positions with Polo Ralph Lauren Corporation, including Group President of Polo Ralph Lauren Global Retail, from 1992 to 2004 and held various capacities at The May Department Stores Company, Federated Department Stores, Inc. and Allied Stores Corp. from 1982 to 1992. In addition, Ms. Ryan-Berman was a member of the board of directors, and served on the audit committee of J. Crew Group, Inc. from 2005 to 2006. Ms. Ryan-Berman serves as a member of the Board, Compensation Committee and as Chair of the Nominating and Corporate Governance Committee of Tanger Factory Outlet Centers, Inc. Ms. Ryan-Berman also serves as a director and member of the Nominating/Governance Committee of Newell Brands, Inc., chairs the Board of Directors for BH Cosmetics, Inc., and is a Director of Tegra Global Manufacturing.
Ms. Ryan-Berman has over 35 years of experience in the retail business and as a senior level executive has helped oversee the strategies and operations of some of the leading fashion and luxury goods groups in the world. The Board believes that Ms. Ryan-Berman’s extensive experience in retailing and other related industries, as well as her prior and current service as a director of both private and public companies, provides her with additional experience upon which she can draw upon as a member of our Board, the Compensation & Human Resources Committee, and the Governance & Nominating Committee.
|
The Board recommends you vote
FOR
each of these nominees.
|
10
Retiring Director
|
Eugene S. Katz
|
Mr. Katz
(age 74)
has served as a member of the Board and a member of the Audit Committee since January 2007, a member of the Compensation & Human Resources Committee since February 2011, a member of the Accounting Committee since October 2019 and Chair of the Audit Committee since January 2009. Mr. Katz also served as a member of the Capital Allocation & Risk Management Committee from January 2009 until February 2011. He is a former partner of PricewaterhouseCoopers (“PwC”), where he began his career in 1969, and became a partner in July 1980. Mr. Katz retired from PwC in June 2006. From 2002 and through his retirement in June 2006, Mr. Katz served as the west region risk management leader of PwC. In addition, Mr. Katz was a member of the PwC Governing Board from 1992 to 1997, and from 2001 to 2005. Mr. Katz currently serves as a member of the Board, Compensation Committee and Nominating and Governance Committee and as a member of the Board, Chair of the Audit Committee and member of the Governance Committee of Workiva Inc.
11
GOVERNANCE OF THE COMPANY
Board Leadership Structure
The Chairman of the Board provides leadership to the Board and works with the Board to define its structure and activities in the fulfillment of its responsibilities. The Company believes that the members of the Board possess considerable experience and unique knowledge of the challenges and opportunities the Company faces, and therefore are in the best position to evaluate the needs of the Company and how best to organize the capabilities of our directors and senior executives to meet those needs. As a result, the Company believes that the decision as to who should serve as Chairman and as President & Chief Executive Officer, and whether the offices should be combined or separate, is properly the responsibility of the Board, to be exercised from time to time in appropriate consideration of then-existing facts and circumstances. Our Corporate Governance Guidelines provide the Board the flexibility to determine whether or not the separation or combination of the Chairman and President & Chief Executive Officer offices is in the best interests of the Company at any time.
Currently, we maintain separate positions of Chairman and President & Chief Executive Officer, as the Board believes that, based on the skills and responsibilities of the various Board members, our current business environment and other considerations, such separation enhances (i) appropriate oversight of management by the Board, (ii) Board independence, (iii) the accountability to our stockholders by the Board and (iv) our overall leadership structure. We believe this structure is presently appropriate because we compete in an industry with many external forces that may affect our viability and profitability, therefore presenting significant challenges requiring extensive oversight and management capability. As such, we believe that by maintaining a separate Chairman function from that of the President & Chief Executive Officer, our President & Chief Executive Officer can properly focus on managing the business, rather than diverting his efforts to also overseeing the Board. The independent directors have designated Thomas J. Reddin as non-executive Chairman of the Board.
In order to ensure a significant voice within our non-management directors and to reinforce effective, independent leadership on the Board, the Board has created the position of Lead Independent Director. Under the Company’s Corporate Governance Guidelines, a Lead Independent Director is appointed when the Chairman is the Chief Executive Officer or any other officer or employee of the Company, or if the Chairman is not otherwise independent. Since Mr. Reddin is currently our Chairman of the Board and is not an employee of the Company, we do not currently have a Lead Independent Director. We believe that the foregoing structure, policies, and practices, when combined with the Company’s other governance policies and procedures, provide appropriate opportunities for oversight, discussion, and evaluation of decisions and direction from the Board.
Independence of Directors
The Board has determined that all of the directors qualify as independent directors under the rules of the New York Stock Exchange ("NYSE") and the Company’s Corporate Governance Guidelines, other than Mr. Hult, who is an employee of the Company. In order to qualify as an independent director of the Company, the Board must affirmatively determine, based upon all relevant facts and circumstances, that the director does not have a material relationship with the Company that would affect his or her independence, either directly or as a partner, stockholder or officer of an organization that has a relationship with the Company.
The Board has adopted the categorical independence standards set forth in the Company’s Corporate Governance Guidelines to assist it in making determinations of director independence. These standards comply with, and in some respects are more stringent than, the NYSE’s categorical standards for director independence. Our Corporate Governance Guidelines can be found on our website at
www.asburyauto.com/company/investor-relations/
under “Corporate Governance.”
Furthermore, in order for a director to qualify as independent for Audit Committee purposes, the director also must satisfy the additional independence criteria specified in Rule 10A-3 under the Exchange Act. In order for a director to qualify as independent for Compensation & Human Resources Committee purposes, the director must meet the Company’s categorical independence standards described above, and must also be (i) a “non-employee director” for purposes of Rule 16b-3 under the Exchange Act, and (ii) an “outside director” under the legacy provisions of Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”).
In making its independence determinations, the Board considered relationships and transactions pursuant to which any of our non-employee directors or director-nominees, entities associated with those individuals, or members of their immediate families purchased or leased a vehicle at a Company dealership. The Board determined that none of the relationships and transactions it considered impaired the independence of our non-employee directors or director-nominees or disqualified any of our non-employee directors or director-nominees from serving as independent directors under our categorical independence standards set forth in our Corporate Governance Guidelines and the NYSE listing standards.
12
Committees of the Board
The Board has established five separately designated standing committees to assist the Board in discharging its responsibilities: the Audit Committee, the Capital Allocation & Risk Management Committee, the Compensation & Human Resources Committee, the Governance & Nominating Committee and the Executive Committee. The charter for each Committee is available on our website at
www.asburyauto.com/company/investor-relations/
under “Corporate Governance.”
The following table sets forth the current membership of each of the standing Committees of the Board:
|
Director
|
Audit Committee
|
Capital Allocation & Risk Management Committee
|
Compensation
& Human Resources Committee
|
Governance & Nominating Committee
|
Executive Committee
|
|
Thomas J. Reddin
(†)
|
ü
|
ü
|
ü
|
Chair
|
|
|
Joel Alsfine
|
ü
|
Chair
|
|||
|
Thomas C. DeLoach, Jr.
|
ü
|
ü
|
ü
|
||
|
David W. Hult
|
ü
|
||||
|
Juanita T. James
|
Chair
|
ü
|
|||
|
Eugene S. Katz
|
Chair
|
ü
|
|||
|
Philip F. Maritz
|
ü
|
Chair
|
ü
|
||
|
Maureen Morrison
|
ü
|
ü
|
|||
|
Bridget Ryan-Berman
|
ü
|
ü
|
|||
|
(†)
|
Chairman of the Board of Directors
|
Audit Committee
The Audit Committee assists the Board in fulfilling its responsibility to oversee management’s conduct of the Company’s financial reporting process, including the development and maintenance of systems of internal accounting and financial controls, the integrity of the Company’s financial statements, the Company’s compliance with certain legal and regulatory requirements, the qualifications, independence and performance of the Company’s outside auditors and the performance of the Company’s internal audit functions. The Audit Committee also is directly responsible for the appointment, retention, compensation, termination and oversight of the Company's outside auditors.
Our Board has determined that each member of the Audit Committee meets the requisite independence and other qualification requirements for audit committee membership and qualifies as an “audit committee financial expert” within the meaning of Item 407(d)(5) of Regulation S-K under the Exchange Act. Designation or identification of a person as an “audit committee financial expert” does not impose any duties, obligations or liability that are greater than the duties, obligations and liability imposed on such person as a member of the Audit Committee and the Board of Directors in the absence of such designation or identification.
The Audit Committee held
eight
meetings in
2019
, one of which was a joint meeting with the Capital Allocation & Risk Management Committee.
Capital Allocation & Risk Management Committee
The Capital Allocation & Risk Management Committee (i) assists the Board in the oversight, review and evaluation of the Company's capital allocation strategy, (ii) assists management in the evaluation of major financial transactions, including acquisitions and divestitures, and (iii) assists the Board in fulfilling its responsibility of overseeing the identification, assessment and management of our key operational risks.
The Capital Allocation & Risk Management Committee held
four
meetings in
2019
, one of which was a joint meeting with the Audit Committee and one of which was a joint meeting with the Compensation & Human Resources Committee.
Compensation & Human Resources Committee
The Compensation & Human Resources Committee establishes and reviews our general compensation philosophy with the input of management, oversees the development and implementation of our compensation philosophy to ensure that our compensation plans are consistent with our general compensation philosophy, establishes the compensation to be paid to the Chief Executive Officer, reviews the recommendations of the Chief Executive Officer as to the appropriate compensation of our other corporate officers, generally administers and issues awards under our equity incentive plans from time to time in effect, oversees our other benefit plans and assists the Board in succession planning. See “Compensation Discussion & Analysis” for a discussion of our compensation philosophy and how the Compensation & Human Resources Committee determines the compensation of our executive officers.
13
Our Board has determined that each member of the Compensation & Human Resources Committee meets the requisite independence requirements for Compensation Committee membership, including qualifying as a “non-employee director” within the meaning of Rule 16b-3 under the Exchange Act and as an “outside director” under the legacy provisions of Section 162(m) of the Code, which has been amended to eliminate the "performance-based" compensation exemption to the deduction limitation.
The Compensation & Human Resources Committee held
seven
meetings in
2019
, one of which was a joint meeting with the Capital Allocation & Risk Management Committee. The Compensation & Human Resources Committee took one action by written consent.
Governance & Nominating Committee
The Governance & Nominating Committee assists the Board by identifying qualified individuals to become directors, recommending the composition of the Board and its committees, and the compensation to be paid to the directors. It is also responsible for monitoring the process to assess the Board’s effectiveness, developing and implementing our Corporate Governance Guidelines and many of our corporate governance policies, including the oversight of compliance under our Equity Ownership Guidelines, our Code of Business Conduct and Ethics and our Related Party Transaction Policy.
Our Board has determined that each member of the Governance & Nominating Committee meets the requisite independence requirements for Governance & Nominating Committee membership under NYSE listing standards and the categorical independence standards set forth in the Corporate Governance Guidelines.
The Governance & Nominating Committee held
four
meetings in
2019
.
Executive Committee
The Executive Committee has exercised and may exercise all the authority of the Board when the Board is not in session, except that it does not have the authority to: (i) approve or propose to stockholders actions required by the Delaware General Corporation Law to be approved by stockholders; (ii) adopt, amend or repeal our Bylaws; (iii) authorize distributions; (iv) fill vacancies on the Board or any of its committees; (v) approve a plan of merger, consolidation or reorganization not requiring stockholder approval; (vi) authorize or approve the reacquisition of shares, except according to a formula or method prescribed by the Board; or (vii) authorize or approve the issuance or sale or contract for sale of shares or determine the designation and relative rights, preferences and limitations of a class or series of shares.
The Executive Committee held no meetings in
2019
.
Code of Business Conduct and Ethics and Corporate Governance Guidelines
In accordance with the NYSE’s rules and the rules and regulations adopted by the SEC pursuant to the Sarbanes-Oxley Act of 2002, the Board has adopted Corporate Governance Guidelines and a Code of Business Conduct and Ethics applicable to all of our directors, officers and employees. The Corporate Governance Guidelines, the Code of Business Conduct and Ethics as well as our Audit Committee, Compensation & Human Resources Committee, Governance & Nominating Committee and Capital Allocation & Risk Management Committee charters are available on our website at
www.asburyauto.com/company/investor-relations/
under “Corporate Governance.”
We will provide our stockholders with copies of the above-mentioned documents free of charge, if you call 770-418-8212 or submit a request in writing to Investor Relations, Asbury Automotive Group, Inc., 2905 Premiere Parkway NW, Suite 300, Duluth, GA 30097.
The Board’s Risk Oversight Role
The Board maintains oversight responsibility for management of the Company’s risks. The Board has delegated oversight responsibility for certain areas of potential risk exposure to its committees. Each committee reports to the Board at regular intervals or more frequently, if appropriate, with respect to the risks and matters for which it maintains responsibility. The Company’s Capital Allocation & Risk Management Committee is responsible for further assisting the Board in fulfilling its oversight role by (i) reviewing and evaluating the Company's capital allocation strategy, (ii) identifying, assessing and managing key financial, strategic and operational risks of the Company and (iii) providing management with assistance in evaluating major financial transactions, including acquisitions and divestitures. Management annually reviews with the Capital Allocation & Risk Management Committee our key risks to help evaluate the Company’s risk profile and related risk management processes. In this review, management highlights for the Capital Allocation & Risk Management Committee our most significant risks to facilitate the Capital Allocation & Risk Management Committee’s evaluation of our long-term financial plans, budgets and strategic initiatives. The Capital Allocation & Risk Management Committee, based on such review, considers the appropriate process for managing or mitigating material risks and the appropriate allocation of resources related to such material risks.
14
Recognizing that the Capital Allocation & Risk Management Committee’s role complements the Audit Committee’s role in risk oversight, our Capital Allocation & Risk Management Committee charter mandates that at least one member of the Audit Committee be a member of the Capital Allocation & Risk Management Committee. Currently, our Capital Allocation & Risk Management Committee consists of
five
members,
four
of whom are members of our Audit Committee, Ms. Morrison, Mr. Alsfine, Mr. DeLoach and Mr. Reddin.
The Compensation & Human Resources Committee is primarily responsible for the design and oversight of our executive compensation policies, programs and practices. A key objective of the Compensation & Human Resources Committee, together with the Capital Allocation & Risk Management Committee, is to oversee the implementation and development of our compensation programs to ensure such programs are consistent with the Company’s general philosophy after accounting for the Company’s key risk profile. In
2019
, the Compensation & Human Resources Committee and the Capital Allocation & Risk Management Committee reviewed the Company’s risk profile and related risk management processes and concluded that our then-current compensation policies and practices for our employees did not create risks reasonably likely to have a material adverse effect on us.
Corporate Responsibility - Environmental, Social & Governance Matters
The Board and its committees oversee the development and execution of our environmental, social and governance (“ESG”) strategy. The Board and management recognize the importance of transparent disclosure concerning our governance and ethics policies, and our commitment to our employees, the environment and the communities in which we operate. For information concerning our ESG strategy, please visit
https://socialresponsibility.asburyauto.com/
.
Nomination of Directors
The Governance & Nominating Committee evaluates, and recommends to the full Board, nominees to serve as directors on our Board. The nominees for election at the
2020
Annual Meeting are current directors and were originally recommended to the Board by various sources, including other directors and a third-party executive search firm engaged by the Company. Candidates are evaluated in light of the then-current composition of the Board, the operating requirements of the Company and the long-term interests of the stockholders. In performing this evaluation, the Governance & Nominating Committee considers the diversity, age, skills and other experience of the candidate, and other factors it deems appropriate, given the needs of the Board and the Company at the appropriate time, to maintain what it considers to be an appropriate balance of knowledge, experience and capabilities. Qualified director-nominees are expected to possess an appropriate balance of the following qualities: high moral character and personal integrity, a high level of leadership or managerial experience, experience and knowledge relative to matters affecting the Company, the ability and willingness to contribute to the Board, the ability to exercise sound, independent business judgment, a long-term commitment to the interests of stockholders and growth of the Company, freedom from conflicts of interest, the ability to dedicate sufficient time, energy and attention to Board activities and the diligent performance of his or her duties, and should reflect the diversity of the Company’s stockholders, employees, customers and communities.
The Board will consider director candidates recommended by the Company’s stockholders. In order to make such a nomination, the stockholder must (i) be a record holder of shares of common stock at the time of giving notice as described below, (ii) be entitled to vote for the election of such director(s) and (iii) comply with the notice procedures set forth in the Company’s Bylaws. Our Bylaws can be found on our website at
www.asburyauto.com/company/investor-relations/
under “Corporate Governance.”
Notice of a stockholder’s recommendation with regard to nominees for election to the Board must be delivered to, or mailed to and received by, the Secretary of the Company not later than 90 days or earlier than 120 days prior to the anniversary date of the preceding year’s Annual Meeting of Stockholders. If the Annual Meeting of Stockholders for which the recommendation is submitted is more than 30 days before or more than 60 days after the first anniversary of the preceding year’s Annual Meeting of Stockholders, such recommendation must be received by the Secretary of the Company not earlier than 120 days prior to the Annual Meeting of Stockholders and not later than 90 days prior to such annual meeting or the 10th day following the day on which public announcement of the annual meeting date is first made by the Company.
The stockholder’s notice shall be signed by the stockholder of record who intends to recommend a nominee, and shall set forth:
|
(A)
|
as to each person whom the stockholder proposes to nominate for election or reelection as a director: (1) all information relating to such person that is required to be set forth in the notice pursuant to Section 2.07 of the Company’s Bylaws (and Items 403 and 404 under Regulation S-K); (2) a written questionnaire with respect to identity, background and qualification of the proposed nominee, (3) a written representation and agreement that the proposed nominee (i) is not and will not become a party to (x) any agreement or similar understanding that the nominee, if elected, will adopt a specific voting commitment on any issue or question that has not been disclosed to the Company or, (y) any voting commitment that could limit or interfere with
|
15
such person’s fiduciary duty under applicable law, (ii) is not and will not become a party to any agreement or similar understanding with respect to any direct or indirect compensation, reimbursement or indemnification in connection with service as a director, that has not been disclosed to the Company, and (iii) if elected, will comply with all applicable publicly disclosed corporate governance, conflict of interest, confidentiality, stock ownership and trading policies of the Company, and (4) all other information relating to such person that is required to be disclosed in solicitation of proxies for the election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Exchange Act, including, the nominee’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected; and
|
(B)
|
as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made (1) the name and address of such stockholder, as they appear on the Company’s books, and of such beneficial owner, (2) the number of shares of the Company which are owned of record and beneficially by such stockholder and such beneficial owner, (3) a representation that such stockholder is entitled to vote at the meeting and intends to appear in person or by proxy at the meeting to nominate the person specified in the notice, (4) a representation whether the stockholder or beneficial owner, if any, intends or is part of a group that intends (x) to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the Company’s outstanding capital stock required to elect the nominee and/or (y) otherwise to solicit proxies from stockholders in support of such nomination, (5) a description of any Derivative Interest (as defined in the Bylaws), (6) any proxy, contract, or similar understanding that increases or decreases the voting power of such stockholder or beneficial owner, (7) any dividend rights held of record or beneficially by the stockholder on shares of the Company that are separated or severable from the underlying shares, (8) any performance-related fees (other than an asset-based fee) to which the stockholder or beneficial owner may be entitled as a result of any increase or decrease in the value of shares of the Company or Derivative Interests; and (9) any other information relating to such stockholder or beneficial owner that would be required to be disclosed in a proxy statement or other filing required pursuant to Section 14(a) of the Exchange Act.
|
Service Limitations
Under the Company’s Corporate Governance Guidelines, a director may not stand for re-election if he or she would be age 74 years or older at the date of the election, but need not resign until the end of his or her term. However, the Board may waive this age limitation, on an annual basis, upon the recommendation of the Governance & Nominating Committee if, in light of all of the circumstances, a director’s continued service is in the best interests of the Company and its stockholders. In no event may the Board waive the requirement more than twice for any individual director. In addition, our Corporate Governance Guidelines provide that the Chairman of the Board and the chair of each committee will not serve greater than five years in their respective chair roles, subject to exceptions approved by the Board. In April 2019, upon the recommendation of the Governance & Nominating Committee, the Board made an exception to this policy in order to permit Mr. Katz to serve an additional year as Chair of the Audit Committee to ensure an orderly succession.
Communications with the Board
We have a Stockholder Communication Policy with established procedures for stockholders and interested parties to communicate directly with the Board, with our non-management directors, or with a particular director. The stockholder or interested party should send any written communications to (i) the Lead Independent Director, if applicable, (ii) the Chairman of the Board or Chair of the appropriate committee, (iii) the non-management directors, or (iv) an individual director, each in care of the Corporate Secretary, at Asbury Automotive Group, Inc., 2905 Premiere Parkway NW, Suite 300, Duluth, GA 30097. Any communications relating to the Company’s auditing, accounting, internal controls, fraud or unethical behaviors should be directed to the attention of the Chair of the Audit Committee in care of the Corporate Secretary, at the foregoing address. The Audit Committee will respond to such communication, if appropriate, in accordance with the procedures established with respect to such matters.
Any written communication should include the name and address of the stockholder or interested party sending such communication so that a response can be provided, if necessary or appropriate. Stockholders and interested parties may, however, remain anonymous. If the stockholder or interested party desires that such communication be kept confidential from management, the envelope must be clearly marked “confidential,” and the Corporate Secretary will then forward the communication, unopened, to the individual addressee.
Related Person Transactions
We have adopted a written policy relating to related person transactions, which sets out the criteria for review of transactions between the Company and our affiliates and members of their immediate families. This policy covers our directors and officers, and each stockholder that holds directly or indirectly, more than 5% of our common stock. In addition, we have adopted a written Delegation of Authority Policy, which establishes an executive approval process for many of the Company’s transactions in which certain related person transactions would be included. In reviewing and
16
approving related person transactions under these policies and procedures, senior management and the Board considers, among other things:
|
•
|
the nature of the related person’s interest in the transaction;
|
|
•
|
whether the related person has a direct or indirect material interest in the transaction;
|
|
•
|
the material terms of the transaction, including the amount and type of transaction;
|
|
•
|
the significance of the transaction to the Company and to the related person;
|
|
•
|
whether the terms of the transaction are arms-length; and
|
|
•
|
whether the transaction would violate the “Conflicts of Interest” provisions of our Code of Business Conduct and Ethics for Directors, Officers and Employees.
|
Vehicle Purchases and Leases
We maintain an employee vehicle purchase program for our officers, directors and other employees, and their respective friends and family members pursuant to which they may purchase or lease vehicles from us at a discount to our advertised prices. This program is designed to incent additional vehicle sales while ensuring that we earn a measure of gross profit on all vehicles sold pursuant to the program. From time to time, including in
2019
, certain of our directors and executive officers, or their respective family members, purchased or leased vehicles from us under this program, which vehicles may be valued at over $120,000.
17
DIRECTOR COMPENSATION
Director Fees
Directors who are employees of the Company do not receive a retainer or any other fees for service on the Board or its committees. All other directors (“non-management directors”) received the annual retainer and meeting fees in
2019
described below. In addition, in
2019
, the non-management directors (i) received a grant of common stock valued at approximately $
135,000
, that vested immediately upon grant and (ii) were offered the use of a motor vehicle (including transporting the vehicle to the director, any taxes payable relating to the vehicle and repair, maintenance and service of the vehicle). In
2019
, our directors also received expense reimbursements in connection with Board and committee meeting attendance.
In
2019
, compensation paid to the non-management directors was as follows:
Annual Retainers (paid quarterly in advance)
|
Position
|
Annual Retainer
|
||
|
Non-Management Directors
|
$
|
55,000
|
|
|
Non-Executive Chairman
|
$
|
120,000
|
|
|
Audit Committee Chair
|
$
|
25,000
|
|
|
Capital Allocation & Risk Management Committee Chair
|
$
|
15,000
|
|
|
Compensation & Human Resources Committee Chair
|
$
|
20,000
|
|
|
Governance & Nominating Committee Chair
|
$
|
15,000
|
|
Meeting Fees (paid quarterly in arrears)
|
Meeting Type
|
Per Meeting Fee
|
||
|
Board, Audit Committee, Compensation & Human Resources Committee, Governance & Nominating Committee and Capital Allocation & Risk Management Committee in person meetings
|
$
|
2,000
|
|
|
Board, Compensation & Human Resources Committee, Governance & Nominating Committee and Capital Allocation & Risk Management Committee, telephonic meetings
|
$
|
1,000
|
|
|
Audit Committee telephonic meetings and all Accounting Committee and Transaction Committee meetings
|
$
|
1,500
|
|
|
Executive Committee meetings, in person or telephonic (payable to the Executive Committee chair only)
|
$
|
1,500
|
|
Meeting Attendance
During
2019
, the Board held seven meetings. Each current director attended at least 75% of the total meetings of the Board and committees on which he or she served. In accordance with the NYSE’s rules requiring that non-management directors meet at regularly scheduled executive sessions, our non-management directors held
five
executive sessions without management present during
2019
. Mr. Reddin, as the Non-Executive Chairman, presided over Board meetings, including executive sessions of the Board.
We do not have a formal policy with regard to the attendance of the members of the Board at Annual Meeting of Stockholders, however, we expect each member of the Board and director-nominees to attend our Annual Meeting of Stockholders. All of the members of the Board attended our
2019
Annual Meeting of Stockholders in person.
18
2019
Director Compensation Table
The following table shows compensation earned by the non-management directors for
2019
. For information concerning the compensation of Mr. Hult, see “Summary Compensation Table.”
|
Name
|
Fees Earned
in Cash (1) |
Stock
Awards
(2)
|
All Other Compensation
(3)
|
Total
|
||||||||
|
Joel Alsfine
|
$
|
106,750
|
|
$
|
134,970
|
|
$
|
17,999
|
|
$
|
259,719
|
|
|
Dennis E. Clements
(4)
|
$
|
34,250
|
|
$
|
134,970
|
|
$
|
9,670
|
|
$
|
178,890
|
|
|
Thomas C. DeLoach, Jr.
|
$
|
156,750
|
|
$
|
134,970
|
|
$
|
25,935
|
|
$
|
317,655
|
|
|
Juanita T. James
|
$
|
101,500
|
|
$
|
134,970
|
|
$
|
24,486
|
|
$
|
260,956
|
|
|
Eugene S. Katz
|
$
|
118,500
|
|
$
|
134,970
|
|
$
|
25,213
|
|
$
|
278,683
|
|
|
Philip F. Maritz
|
$
|
93,250
|
|
$
|
134,970
|
|
$
|
14,675
|
|
$
|
242,895
|
|
|
Maureen Morrison
|
$
|
91,750
|
|
$
|
134,970
|
|
$
|
23,957
|
|
$
|
250,677
|
|
|
Thomas J. Reddin
|
$
|
167,250
|
|
$
|
134,970
|
|
$
|
29,108
|
|
$
|
331,328
|
|
|
Bridget Ryan-Berman
|
$
|
82,750
|
|
$
|
134,970
|
|
$
|
33,353
|
|
$
|
251,073
|
|
|
(1)
|
Includes fees earned during 2019 by members of the Transaction Committee established by the Board in connection with the process to review the terms and financing arrangements related to the recently announced agreement to acquire the Park Place dealership group (the “Park Place Acquisition”). Messrs. Reddin, Alsfine, DeLoach and Maritz served as members of the Transaction Committee, attended four meetings during 2019 and earned $1,500 per meeting. Also includes fees earned during 2019 by members of the Accounting Committee established by the Board in connection with the process to review certain financial accounting considerations in connection with the Park Place Acquisition. Mr. Katz and Ms. Morrison were members of the Accounting Committee, attended four
meetings during 2019 and earned $1,500 per meeting.
|
|
(2)
|
The amount in this column for each director represents the grant date fair value of
1,951
shares of common stock granted to each non-management director on
February 7, 2019
. Amounts were calculated in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718. For a more detailed discussion of the assumptions used to determine the valuation of the stock awards set forth in this column please see a discussion of such valuation in Note 21 of the Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31,
2019
filed with the SEC on
3/2/2020
.
|
|
(3)
|
Represents the incremental cost to us for the use of a vehicle. We calculate incremental costs of personal use vehicles as all direct costs (excluding fuel), including without limitation, the cost of transporting the vehicle to the director, any taxes associated with the vehicle, any repairs to the vehicle, and any maintenance and service of the vehicle. In addition, we include the difference between our cost for the vehicle and the ultimate sale price of the vehicle or the anticipated sale price, pro-rated for the amount of time the director had possession of the vehicle during the fiscal year, plus an estimate of lost interest income calculated as our initial cash outlay for the vehicle multiplied by our weighted average interest rate on invested cash. We do not estimate lost margin on an ultimate sale of a vehicle.
|
|
(4)
|
Mr. Clements retired from the Board and all committees on April 17, 2019.
|
19
EXECUTIVE OFFICERS
Set forth below is information regarding the Company’s executive officers as of
March 19, 2020
. All of our executive officers are elected by and serve at the discretion of the Board.
|
Name
|
Age
|
Position
|
|
David W. Hult
|
54
|
President & Chief Executive Officer
|
|
William F. Stax
|
48
|
Interim Principal Financial Officer, Vice President, Controller, & Chief Accounting Officer
|
|
Daniel Clara
|
40
|
Senior Vice President, Operations
|
|
Jed M. Milstein
|
51
|
Senior Vice President & Chief Human Resources Officer
|
|
George A. Villasana
|
52
|
Senior Vice President, General Counsel & Secretary
|
Set forth below is a brief description of the business experience of the Company’s executive officers.
David W. Hult
Please see Mr. Hult’s biographical information under “Nominees for Election as Directors” above.
William F. Stax
(age 48)
has served as our Interim Principal Financial Officer since November 16, 2019 (a position he previously held from
March 8, 2017 to July 4, 2017),
as Vice President, Controller & Chief Accounting Officer since January 2018 and as Controller & Chief Accounting Officer since July 2015. Mr. Stax served as the Company’s Assistant Corporate Controller from December 2011 until July 2015. Prior thereto, Mr. Stax served in various finance and accounting roles at the Company, including Manager of Financial Reporting from 2008 to 2011, Corporate Controller-South Region from 2003 to 2008 and Manager of Internal Audit from 2002 to 2003. Prior to joining the Company, Mr. Stax spent 6 years as a Certified Public Accountant with Arthur Andersen LLP.
Daniel Clara
(age 40)
has served as our Senior Vice President, Operations since January 2020. Mr. Clara joined the Company in 2002 and has held many positions with the Company including Vice President of Market Operations, Managing Market Director, General Manager, General Sales Manager, Used Car Manager, New Car Sales Manager, F&I Manager and Client Advisor. Mr. Clara received his bachelor’s degree in International Business from Northwood University.
Jed M. Milstein
(age 51)
has served as our Senior Vice President & Chief Human Resources Officer since January 2018. Mr. Milstein joined the Company in July 2016 as Vice President & Chief Human Resources Officer. Prior to joining the Company, Mr. Milstein served as Executive Vice President & Chief Human Resources Officer of AmeriCold Logistics, LLC from May 2013 to July 2016. From December 2011 to May 2013, Mr. Milstein served as Executive Vice President of Human Resources of TransCentra, Inc. From January 2008 to May 2013 Mr. Milstein held various executive management positions at Cerberus Operations & Advisory Company, LLC. Mr. Milstein also served as Vice President HR Shared Services of Broadridge Financial Solutions, Inc. from 2007 to 2008 and ADP from 1998 to 2007.
Earlier in his career, Mr. Milstein served as a Deputy Attorney General for the State of New Jersey prior to joining the labor and employment law practice at Carpenter, Bennett and Morrissey in Newark, New Jersey.
Mr. Milstein holds a J.D. from George Washington University Law School and a BBA from the University of Michigan.
George A. Villasana
(age 52)
has served as our Senior Vice President, General Counsel & Secretary since January 2016. Mr. Villasana joined the Company in April of 2012 as our Vice President, General Counsel & Secretary. From February 2011 to April 2012, Mr. Villasana served as Senior Vice President and General Counsel of Swisher Hygiene Inc., which was later acquired by Ecolab, Inc. and from June 2007 to July 2010, Mr. Villasana served as Executive Vice President and General Counsel of Pet DRx Corporation, which he helped take public and which was later acquired by VCA Antech, Inc. From August 2000 to June 2007, he served as Senior Corporate Counsel of AutoNation, Inc., the largest automotive retailer in the United States. Prior thereto, he was a corporate attorney with Holland & Knight, LLP, and Shutts & Bowen, LLP in Miami, Florida. Mr. Villasana began his career as an attorney with the SEC in Washington, D.C. Mr. Villasana holds a LL.M. (Tax) from Georgetown University Law Center, a J.D. from American University, Washington College of Law, a Master of Accounting from Florida International University and a B.S. in Accounting from The Pennsylvania State University.
20
COMPENSATION DISCUSSION & ANALYSIS
This compensation discussion and analysis (“CD&A”) provides detail on the Company's compensation philosophy, policies and programs as they relate to our executive officers, with certain additional detail about the compensation paid, or payable, to our “named executive officers” in
2019
. Our named executive officers ("NEOs") in
2019
were as follows:
|
•
|
David W. Hult, President & Chief Executive Officer;
|
|
•
|
William F. Stax, Vice President, Controller & Chief Accounting Officer and who, during a portion of 2019, served as our Interim Principal Financial Officer;
|
|
•
|
Sean D. Goodman, former Senior Vice President & Chief Financial Officer, who departed from all positions with the Company effective November 15, 2019;
|
|
•
|
George A. Villasana, Senior Vice President, General Counsel & Secretary;
|
|
•
|
Jed Milstein, Senior Vice President & Chief Human Resources Officer; and
|
|
•
|
John S. Hartman, former Senior Vice President, Operations, who departed from all positions with the Company effective January 2, 2020.
|
The Compensation & Human Resources Committee of the Board (also referred to in this CD&A as the “Committee”) is charged with various matters concerning the compensation of our executive officers including the development and implementation of our compensation philosophy relating to those individuals. Our philosophy emphasizes a pay-for-results culture designed to align the interests of our executive officers with those of our stockholders through the use of incentive based pay opportunities. With respect to decisions directly impacting executive compensation, the Committee’s primary responsibilities are to:
|
•
|
within the constructs of our philosophy and guidelines, establish all aspects of compensation for our executive officers, including the named executive officers, and, subject to Board ratification, approve awards to the Chief Executive Officer, under our incentive-based compensation plans;
|
|
•
|
oversee the development, implementation and administration of our compensation and benefit plans; and
|
|
•
|
prepare the Compensation & Human Resources Committee Report and review and discuss with management the CD&A, as required to be included in our annual proxy statement or annual report on Form 10-K filed with the SEC.
|
For additional information regarding the Committee’s function and composition, see “Governance of the Company—Committees of the Board—Compensation & Human Resources Committee.”
Overview
We believe that fostering an entrepreneurial spirit is essential to our success. Consistent with our overall business strategy of driving operational excellence through the attraction and retention of the best talent, we encourage our executive officers to manage our Company in a way that preserves the appropriate decision-making authority with our dealership general managers. The general manager of each of our dealerships generally is responsible for the operations, personnel and financial performance of that dealership, as well as other day-to-day operations. We believe our general managers' familiarity with their respective markets enables them to effectively run day-to-day operations, market to customers and recruit, train and retain new employees. Consistent therewith, we have centralized a number of administrative activities at our corporate headquarters to allow our dealership general managers to focus on dealership operations. We seek to implement these principles with an executive compensation philosophy focused on the following objectives:
|
•
|
supporting the attainment of our vision, business strategy and operating imperatives;
|
|
•
|
guiding the design and implementation of effective executive compensation and benefit plans;
|
|
•
|
reinforcing our business values; and
|
|
•
|
further aligning management and stockholder interests by providing appropriate opportunities for meaningful compensation based upon the achievement of various corporate goals set from time to time and generally related to corresponding increases in earnings and stockholder value, subject to limitations designed to discourage unnecessary or excessive risk-taking.
|
As it has done in prior years, the Committee engaged an independent executive compensation consultant, Pay Governance LLC (“Pay Governance”), to assist with the development and implementation of our executive compensation program for
2019
, as described in more detail below.
21
In determining and setting compensation levels and opportunities for our named executive officers, the Committee generally considers a number of factors. For
2019
executive compensation, the Committee considered, among other things, the nature and scope of the individual’s responsibilities to the Company and other individual factors, such as skills, experience, tenure and historical and expected contributions to the Company. The Committee also analyzed comparative data provided by Pay Governance on compensation paid to executive officers in similar positions within a Peer Group (as defined below) of companies, although the Committee did not specifically benchmark executive compensation against the Peer Group or other companies. In addition, the Committee also acknowledged the achievements of our management team in
2018
(as compared to
2017
), including the following:
|
•
|
our adjusted earnings before interest, taxes, depreciation and amortization (“adjusted EBITDA”), a metric used by management and that the Committee believes is often used by investors and market analysts in comparing performance and determining enterprise value, was $315.1 million;
|
|
•
|
our adjusted earnings per share ("EPS") was $8.41, an increase of 31%;
|
|
•
|
our 3 year adjusted EPS growth relative to the Automotive Peer Group ranked 1st, at 15.2%; and
|
|
•
|
our adjusted operating margin was 4.6%.
|
For
2019
, the Committee approved and implemented incentive compensation programs designed to appropriately reward and incentivize our executive management team to focus on the long-term interests of our stockholders and further improve the measurable financial metrics described below, which remain a focus of the Board and the Committee when analyzing our financial results and success. In evaluating Peer Group data, selecting metrics and setting appropriate performance targets in connection with the implementation of the Company’s executive compensation programs in
2019
, the Committee acknowledged that, as a result of the significant variable components of compensation described in more detail elsewhere in this CD&A, total executive compensation may be significantly above or below target compensation and/or the actual compensation paid to executives in similar positions within the Peer Group based on our actual performance when compared to target performance.
The following results and achievements in
2019
impacted actual payouts and the overall compensation of our executive officers under our incentive compensation programs for
2019
:
|
•
|
our adjusted EBITDA was $332.5 million;
|
|
•
|
our adjusted EPS was $9.46, an increase of 12% over 2018;
|
|
•
|
our 3 year adjusted EPS growth relative to the Automotive Peer Group ranked 2nd, at 16.3%;
|
|
•
|
our same-store parts and service customer pay gross profit improved by 6% over
2018
;
|
|
•
|
our same store used vehicle retail revenue improved by 5% over
2018
; and
|
|
•
|
our adjusted operating margin was 4.6%.
|
Compensation Philosophy & Guidelines
The Committee, with the input of Pay Governance, has developed an executive compensation philosophy that sets forth certain general guidelines that the Committee considers in making decisions and recommendations related to executive compensation (including our named executive officers’ compensation). The key principles and considerations underlying our compensation philosophy are the following:
|
•
|
create a “pay-for-results” culture with clear emphasis on pay-for-performance and accountability through the grant of cash and equity award opportunities;
|
|
•
|
effectively manage the cost of compensation programs by providing that a substantial portion of executive pay opportunity is in the form of performance-based compensation;
|
|
•
|
set performance goals that are clearly communicated and understood, and are challenging, yet obtainable;
|
|
•
|
provide the opportunity for above market total compensation upon the achievement of performance significantly above target performance;
|
|
•
|
consider total compensation opportunities in light of competitive market practices, internal equity considerations, the individual’s experience, skills, tenure and how critical the individual's role is to the Company, historical and expected individual performance and significant contributions, and the nature and scope of the individual’s responsibilities;
|
|
•
|
provide a balanced total compensation program to ensure management is not encouraged to take unnecessary or excessive risks;
|
22
|
•
|
further align management and stockholder interests by requiring specified levels of equity ownership by management;
|
|
•
|
reinforce teamwork and internal alignment of management; and
|
|
•
|
consider stakeholder perceptions and governance practices when formulating pay plans and actions.
|
In order to effectively communicate expectations regarding our performance and incentivize executive officers to achieve specified performance objectives, we generally make compensation program decisions in the first quarter of a year. All such compensation decisions for our executive officers for
2019
were made at the Committee’s regularly scheduled meeting in the first quarter of
2019
. All compensation decisions were consistent with our overall compensation philosophy and guidelines.
Elements of Compensation
The elements of the Company's compensation program, when considered collectively, are intended to implement our executive compensation philosophy and objectives by (i) allowing us to attract and retain executive-level talent, (ii) providing an appropriate level of financial certainty through non-variable compensation, (iii) providing opportunities for above market compensation based upon the achievement of specified financial and other appropriate performance objectives, and rewarding such achievement, and (iv) balancing short-term and long-term incentives. The key elements of our executive compensation program are outlined below, together with a summary of the purposes and considerations underlying each compensation element.
|
Pay Element
|
Form
|
Philosophy
|
Performance Alignment
|
||
|
Base Salary
|
Cash
|
ü
|
Fixed pay to recognize an individual's role and responsibilities
|
ü
|
Reviewed annually and set based on a review versus the external market, individual performance, and internal equity
|
|
Annual Incentive
|
Cash
|
ü
|
Achieve annual goals linked to operating results
|
ü
|
Rewards and recognizes annual accomplishment of key operating and strategic objectives
|
|
ü
|
Provide competitive total cash compensation opportunity
|
||||
|
ü
|
Encourage internal alignment and teamwork
|
||||
|
Long-Term Incentives
|
Performance
Share Units/Restricted
Stock
|
ü
|
Align NEOs' interests with shareholders
|
ü
|
Shareholder value creation
|
|
ü
|
Balance short-term orientation of other pay elements
|
ü
|
Achievement of key value drivers
|
||
|
ü
|
Retain executive talent
|
ü
|
Increase in share price
|
||
|
Other
|
Employment/Severance
Agreements
|
ü
|
Ensure management objectivity regarding potential CIC transactions
|
ü
|
Align NEOs' interests with shareholders by providing competitive total remuneration allowing us to attract and retain top executive talent
|
|
ü
|
Protect our interests through appropriate restrictive post-employment covenants
|
||||
|
Health & Welfare
|
ü
|
To be competitive in the markets where we compete for executive talent
|
ü
|
Align NEOs' interests with shareholders by providing competitive total remuneration allowing us to attract and retain top executive talent
|
|
|
ü
|
To avoid materially different approaches to benefits among executive and non-executive employees
|
||||
|
Limited Perquisites
|
ü
|
Provide limited job-related and market-driven perquisites in line with our corporate governance philosophies
|
ü
|
Align NEOs' interests with shareholders by providing competitive total remuneration allowing us to attract and retain top executive talent
|
|
23
Total Compensation Program Supporting Attainment of Operating & Strategic Imperatives
Our overall compensation program is implemented in a manner supporting the attainment of various operating and strategic goals set from time to time. The Committee believes the program is appropriately managed by delivering compensation predominantly through variable performance-based compensation elements. As indicated below, during
2019
, 80% of target total compensation
(1)
of our President & Chief Executive Officer and an average of 69% of our other named executive officers target total compensation was delivered through at-risk compensation elements that were subject to vesting and/or performance conditions.
|
(*)
|
Long-term equity incentive included in these charts for
2019
consists of regular annual awards of performance share units and restricted stock with vesting as described below. These charts also include special restricted stock awards that were granted to Mr. Goodman and Mr. Hartman in 2019, as further described below.
|
|
(1)
|
Target total compensation is defined as annualized base salary plus cash incentive award opportunities at target level plus regular annual long-term equity award opportunities granted for the year (at target level when such opportunities have the potential for variable payout levels) and includes special restricted stock grants awarded to Mr. Goodman and Mr. Hartman in 2019. Other benefits are generally excluded from this term as they do not constitute a material part of compensation paid to our named executive officers.
|
24
Policies and Practices
Our compensation philosophy and guidelines are implemented through a number of policies and practices described below. The Committee continually monitors and, as appropriate, adjusts our compensation policies and practices to ensure that they are consistent with our philosophy and, as appropriate, emphasize and reward executives for results that are aligned with long-term stockholder interests and corporate governance best practices. A listing of “what we do” and “what we don’t do” is presented below:
|
What We Do
|
What We Don't Do
|
|||
|
ü
|
Pay‑for‑Performance
: Majority of pay is performance- based and not guaranteed
|
û
|
No Excise Tax Gross‑Ups
: The Company will not enter into any new agreements, or materially amend any existing employment agreements with its executives that provide excise tax gross-ups in the event of a change in control of the Company
|
|
|
ü
|
Multiple Performance Metrics and Time Horizon
: Use multiple performance metrics and multi‑year vesting and measurement periods for long‑term incentives
|
|||
|
ü
|
Capped Maximum Incentives:
Short- and long-term incentive programs cap the maximum amount payable to help mitigate the potential risk of our programs
|
û
|
No Repricing or Buyouts of Stock Options
: The Company’s equity plan prohibits repricing or buyouts of underwater stock options
|
|
|
ü
|
Annual Compensation Risk Review
: Annually assess risk in compensation programs
|
û
|
No Hedging or Pledging
: NEOs are prohibited from hedging their ownership or pledging Company stock as collateral
|
|
|
ü
|
Double‑Trigger Change in Control.
Cash severance payments and equity acceleration require both a change in control of the Company and constructive termination (“double-trigger”)
|
û
|
No Dividends on Unearned PSUs
: No dividends or dividend equivalents are paid on PSUs until they become vested and earned
|
|
|
ü
|
Share Ownership Guidelines
: NEOs must comply with share ownership requirements
|
|||
|
ü
|
Clawback Policy:
We maintain a clawback policy that provides for recovery of incentive compensation in the event of a financial restatement due to fraud or intentional misconduct
|
|||
|
ü
|
Challenging Performance Objectives
: Set challenging performance objectives for Annual and Long-Term Incentives
|
|||
|
ü
|
Use of Independent Consultant
: The Compensation Committee has retained an independent compensation consultant that performs no other consulting services for the Company and has no conflicts of interest
|
|||
|
ü
|
Limited Perquisites:
We provide our executive officers with only limited perquisites, such as those which we consider appropriate and typical in our industry
|
|||
The Role of Stockholder Say-on-Pay Votes and Related Considerations
We provide our stockholders with the opportunity to vote annually, on an advisory basis, on the compensation of our named executive officers (the “say-on-pay vote”). At our
2019
Annual Meeting of Stockholders, approximately 97.9% of the votes cast by stockholders’ on the say-on-pay vote were in favor of the compensation of our named executive officers. The Committee has considered the results of the say-on-pay vote and believes this favorable vote affirms our stockholders’ support of its approach to executive compensation. Stockholders must be given the opportunity to vote, on an advisory basis, on the frequency of future say-on-pay votes at least every six years. The next required advisory vote on the frequency of future say-on-pay votes will occur no later than our 2023 Annual Meeting of Stockholders.
In addition to consideration given to the results of the say-on-pay vote, at various times throughout the year the Committee considers direct and indirect input from stockholders and other stakeholders, and more general developments in executive compensation principles, in the development and implementation of the Company’s executive compensation philosophy, policies and practices. For additional information on how these considerations impacted
2019
compensation decisions, see “Policies and Practices” above.
25
Compensation Consultant
In
2019
, as in prior years, the Committee retained Pay Governance as its independent executive compensation consultant. At least annually, the Committee conducts a review of its compensation consultant's performance and potential conflicts of interest. In accordance with applicable SEC and NYSE requirements the Committee reviewed the compensation consultant's independence, taking into account the six compensation consultant independence factors adopted by the SEC to guide companies in determining the independence of compensation consultants, and concluded that the work of the compensation consultant, including certain work for the Governance & Nominating Committee described below, did not raise any conflicts of interest.
Pay Governance provides advice to the Committee on matters related to the fulfillment of the Committee’s responsibilities under its charter and on a wide range of executive compensation and related governance matters. As advisor to the Committee, Pay Governance reviews the Company's overall compensation strategy and pay levels for the Company’s executive officers, examines all aspects of the Company’s executive compensation programs to ensure their ongoing support of the Company’s business strategy, informs the Committee of developing legal and regulatory considerations affecting executive compensation and benefit programs, and provides general advice to the Committee with respect to compensation decisions pertaining to the Chief Executive Officer and other executive officers.
During
2019
, at the Committee’s request, Pay Governance (i) reviewed our annual proxy statement disclosures, (ii) provided the Committee with an analysis of the compensation of our named executive officers as reported in the Company’s
2019
proxy statement as compared to the compensation of the named executive officers of companies within our Peer Group as reported in their proxy statements, (iii) provided the Committee with advice regarding various tax and regulatory issues related to executive compensation, (iv) reviewed our Peer Group to ensure it continues to represent appropriately comparable companies for evaluating executive pay, (v) assisted in the development of our 2019 Equity & Incentive Compensation Plan, and (v) reviewed our executive and director stock ownership guidelines.
In
2019
, the Committee also retained Pay Governance to provide advice with respect to the types, amount and competitiveness of the compensation paid to non-employee directors of the Company for their service on the Board. Such advice was delivered to the Governance & Nominating Committee, which is the committee responsible for recommending to the Board the compensation of directors.
Reviewing Executive Compensation
With the input and analysis of its independent compensation consultant, the Committee considers a peer group for purposes of evaluating our compensation levels (the “Peer Group”) against executives in similar positions. From time to time, the Committee and its independent compensation consultant evaluate the Peer Group to ensure that the Committee is evaluating appropriately comparable companies. For purposes of
2019
compensation decisions, the Peer Group consisted of the following companies:
|
•
|
Automotive Retailers
: AutoNation, Inc., Group 1 Automotive, Inc., Lithia Motors Inc., Penske Automotive Group, Inc. and Sonic Automotive Inc. (collectively, the "Automotive Peer Group")
|
|
•
|
Non-Automotive Retailers
: Aaron's, Inc., Big Lots, Inc., Burlington Stores, Inc., DSW, Inc., LKQ Corporation, RH, Sally Beauty Holdings, Inc., Tailored Brands, Inc., Tiffany & Co., Tractor Supply Company and Williams-Sonoma, Inc., which have a median annual revenue of approximately $4 billion.
|
The Committee reviewed the executive compensation data of the Peer Group in order to evaluate and confirm whether our executive compensation was within a reasonably competitive range, but did not set
2019
executive compensation levels at a specific target percentile within the Peer Group or any other comparator group. Rather, executive compensation decisions were based on the full consideration of all of the elements discussed above, together with the additional considerations discussed below, all of which provide input into the Committee’s deliberations and inform its decisions.
Additional Considerations in Making Executive Compensation Decisions
As described above, while we do not specifically benchmark our executive compensation, the Committee generally aims to establish total compensation for our executive officers at levels it considers competitive with executives in similar positions within our Peer Group. Notwithstanding this, given the Committee's focus on the alignment of management and stockholder interests and the related use of short-term cash incentives and time-vested and performance-based equity compensation as the principal components of compensation, the Committee expects that when our performance exceeds targeted performance levels, the actual payouts received by our executive officers may be above competitive median levels. In addition to considering the evaluations and analyses prepared by Pay Governance, to help evaluate our executive compensation against that of our Peer Group, the Committee considered a number of other factors when setting executive officer compensation for
2019
, including:
26
|
•
|
the executive’s knowledge, skills, abilities, experience, tenure and how critical the individual's role is to the Company;
|
|
•
|
the nature and scope of the individual’s responsibilities;
|
|
•
|
our financial condition and recent operating results; and
|
|
•
|
internal equity considerations.
|
Review of
2019
Total Compensation
For
2019
, each named executive officer was initially eligible to receive compensation consisting of the following four primary elements: (i) a base salary; (ii) a short-term (annual) incentive in the form of a cash bonus opportunity pursuant to our Amended and Restated Key Executive Incentive Compensation Plan; (iii) long-term incentives in the form of equity awards under the 2012 Plan; and (iv) certain limited perquisites and other benefits.
Base Salaries
On an annual basis, absent a change in circumstances at another time of year that would make reconsideration appropriate at that time, the Chief Executive Officer makes recommendations to the Committee regarding increases, if any, in base salaries for named executive officers other than himself. The Committee reviews increases in base salary for the Chief Executive Officer, if any. In setting base salary, the Committee takes into account the named executive officer’s experience, skills, tenure and importance to us, historical individual performance and significant contributions, and the nature and scope of the individual’s responsibilities and internal equity considerations. The Committee also considers our financial health and the compensation data from our Peer Group received from its independent executive compensation consultant.
Following the regular, annual review of base salaries by the Committee at its regularly scheduled meeting in the first quarter of
2019
, the Committee awarded market-based adjustments in base salaries to certain of the named executive officers. Annual base salaries for
2019
for our named executive officers were as follows.
|
Name
|
Current Position
|
2019 Annualized Base Salary
|
||
|
David W. Hult
|
President & Chief Executive Officer
|
$
|
1,000,000
|
|
|
William F. Stax
|
Vice President, Controller & Chief Accounting Officer
(1)
|
$
|
229,500
|
|
|
Sean D. Goodman
|
Former Senior Vice President, Chief Financial Officer
(2)
|
$
|
600,000
|
|
|
George A. Villasana
|
Senior Vice President, General Counsel & Secretary
|
$
|
575,000
|
|
|
Jed Milstein
|
Senior Vice President & Chief Human Resources Officer
|
$
|
475,000
|
|
|
John S. Hartman
|
Former Senior Vice President, Operations
(3)
|
$
|
600,000
|
|
|
(1)
|
Mr. Stax has served as Interim Principal Financial Officer since November 16, 2019.
|
|
(2)
|
Mr. Goodman departed from all positions with the Company effective November 15, 2019.
|
|
(3)
|
Mr. Hartman departed from all positions with the Company effective January 2, 2020.
|
Annual Cash Incentive Opportunity
As described above, in order to motivate management toward the achievement of certain pre-established corporate goals and to remain competitive in the industry, we believe that a significant portion of each executive officer’s total compensation should be performance-based. We also believe that management is motivated by the opportunity to earn incremental cash compensation based upon the achievement of annual or similar shorter-term performance objectives, and that such opportunity properly fosters effective management, innovative thinking and, in some instances, the implementation of effective cost-saving measures by our executive officers, which may enable us to further enhance our stockholder value. Cash awards paid to our executive officers are paid under the terms of our Amended and Restated Key Executive Incentive Compensation Plan.
For
2019
, the Committee decided it was appropriate to use substantially the same cash incentive plan structure that was used in
2018
, with potential payouts under the cash incentive plan being dependent upon the achievement of EBITDA (subject to adjustment as described below) correlated with actual United States Annual Automotive Sales (“USAAS”) as reported by Motor Intelligence. We define EBITDA as earnings before non-floor plan interest, income taxes and depreciation and amortization. The selection of EBITDA as the performance benchmark for payouts under the annual cash incentive plan reflected the Committee’s continued belief that EBITDA is an important metric used by management from time to time to evaluate and analyze results and the impact on the Company of strategic decisions and actions relating to, among other things, events outside of normal, or “core,” business operations, and is often used by investors and market analysts in comparing performance and in determining enterprise value. Further, the Committee believed it
27
was appropriate to establish award opportunities at various levels of actual USAAS, which is highly uncertain and is beyond the control of management. As a result, the Committee believed it was appropriate to increase target EBITDA at higher levels of USAAS.
In connection with the determination of EBITDA as the appropriate performance metric under the annual cash incentive plan, the Committee further believed it was appropriate to provide for certain potential adjustments to the traditional measure of EBITDA to account for the impact on our financial results of certain potential extraordinary items that are considered outside of normal, or core, business operations.
Under the annual cash incentive plan, to account for the potential for different levels of
2019
USAAS, three EBITDA performance goals were established: (i) a “threshold” level; (ii) a “target” level; and (iii) a “maximum” level at varying levels of USAAS. Under the terms of the annual cash incentive plan, if EBITDA did not meet the established “threshold” level at the actual USAAS, no payouts would be made under the plan. Further, if EBITDA exceeded the established “maximum” level at the actual USAAS, payout under the annual cash incentive plan would be limited as if performance had equaled the maximum performance goal. If actual USAAS was between two established levels, or if the achievement of EBITDA performance goals was between threshold and target levels, or target and maximum levels, participants would be entitled to a ratable portion of any payment due based upon linear interpolation.
In determining what it considered an appropriate “target” performance goal at the various levels of USAAS, the Committee consulted with management and evaluated various internally-prepared models and forecasts. The Committee approved the threshold and maximum performance goals at 85% and 115% of target, respectively.
The table below sets out the threshold, target and maximum EBITDA performance goals approved for
2019
.
|
EBITDA Performance Goals (in millions)
|
|||||||||
|
Actual USAAS
(in millions)
|
Threshold (85% of Target) 50% Payout
|
Target (100%)
100% Payout
|
Maximum (115% of Target) 200% Payout
|
||||||
|
13.7 & lower
|
$
|
232.8
|
|
$
|
273.9
|
|
$
|
315.0
|
|
|
14.7
|
$
|
244.4
|
|
$
|
287.5
|
|
$
|
330.6
|
|
|
15.7
|
$
|
255.9
|
|
$
|
301.1
|
|
$
|
346.3
|
|
|
16.7
|
$
|
267.4
|
|
$
|
314.6
|
|
$
|
361.8
|
|
|
17.7
|
$
|
279.0
|
|
$
|
328.2
|
|
$
|
377.4
|
|
|
18.7 & above
|
$
|
290.5
|
|
$
|
341.8
|
|
$
|
393.1
|
|
The Committee also has the discretion to increase the bonus payout by up to ten percentage points based on the Committee's subjective evaluation of the achievement of strategic initiatives, including operational initiatives, acquisitions, divestitures and others in furtherance of the Company's long-term interests.
The Committee established incentive opportunities, as a percentage of base salary, for each named executive officer dependent upon each named executive officer’s respective current and expected positions, skills, and experience, as well as other factors described above, including the degree of responsibility assumed and expected to be assumed by such individual for aspects of the organization that impact our financial performance.
For
2019
, actual USAAS as reported by Motor Intelligence was 17.0 million. Based on this level of USAAS, EBITDA levels for the purpose of determining payouts under the annual cash incentive plan were calculated by interpolation as follows: threshold: $270.9 million; target: $318.7 million; and maximum: $366.5 million. The Company reported adjusted EBITDA of $332.5 million in 2019, which after the application of the Committee's discretion under the plan to determine the actual payout based on performance and operational results, resulted in a formulaic payout of 125%. Based on the Committee's discretionary evaluation of our 2019 performance with respect to strategic initiatives (as described above), it determined to increase the payout to 135% in recognition of the efforts of the named executive officers in rebalancing the Company's dealership portfolio through strategic acquisitions and divestitures and entering into an agreement to complete the Park Place Acquisition. The various incentive opportunities (as a percentage of base salary) and actual dollar amounts paid pursuant to the
2019
annual cash incentive plan are detailed in the table below.
28
|
Name
|
Threshold Opportunity
|
Target Opportunity
|
Maximum Opportunity
|
Actual Payment (135% of Target)
|
||
|
David W. Hult
|
62.5%
|
125%
|
250%
|
$
|
1,687,500
|
|
|
William F. Stax
|
17.5%
|
35%
|
70%
|
$
|
108,439
|
|
|
Sean D. Goodman
(1)
|
37.5%
|
75%
|
150%
|
$
|
—
|
|
|
George A. Villasana
|
37.5%
|
75%
|
150%
|
$
|
582,188
|
|
|
Jed Milstein
|
37.5%
|
75%
|
150%
|
$
|
480,938
|
|
|
John S. Hartman
|
37.5%
|
75%
|
150%
|
$
|
607,500
|
|
|
(1)
|
Due to his departure from the Company on November 15, 2019, Mr. Goodman was not eligible for a payout under the annual cash incentive plan for 2019.
|
Equity-Based Compensation Opportunities
As described elsewhere in this CD&A, the Committee believes it is appropriate that a significant portion of executive officer compensation opportunity be in the form of at-risk equity awards, the payment of which is dependent upon the achievement of either or both of: (i) certain predetermined financial metrics and (ii) continued employment. The Committee generally does not use a specific formula for allocating equity-based compensation opportunity as a percentage of total compensation for the named executive officers. For
2019
, consistent with prior years, the Committee considered a number of factors in establishing the level of long-term equity-based compensation opportunity for each named executive officer, primarily:
|
•
|
Peer Group compensation pay practices and norms for comparable executives;
|
|
•
|
general industry pay levels for comparable executives as gathered from publicly-available sources;
|
|
•
|
historical individual performance and responsibility of the executive;
|
|
•
|
knowledge, skills, abilities, experience, tenure and how critical the individual's role is to the Company;
|
|
•
|
expected future responsibilities of the executive;
|
|
•
|
the impact of recent historical equity-based compensation decisions, awards and payouts to each executive; and
|
|
•
|
internal pay equity considerations.
|
Annual Equity Awards Program
In evaluating the structure of equity-based compensation awards and type of equity award opportunities, the Committee designed equity-based awards for executive officers in
2019
that are intended to address both the long-term performance and retention objectives of our equity compensation philosophy, while at the same time promoting the achievement of operational excellence. The Committee determined that the value of the annual grant for executives who were employed by the Company when the grants were approved in the first quarter of
2019
, assuming target level performance, would consist of:
|
•
|
60% performance share units (except in the case of Mr. Stax, for whom 50% of the award was in the form of performance share units for the reasons described below); the vesting of which is subject to our achievement of certain financial performance metrics, as described below, as well as the passage of time, which the Committee believes provides an appropriate balance of executive officer focus on our financial success, and economic benefit for continued employment; and
|
|
•
|
40% time-vesting restricted stock (except in the case of Mr. Stax, for whom 50% of the award was in the form of time-vesting restricted stock); which the Committee believes enhances executive officer retention.
|
2019
Annual Restricted Stock Award Terms
The annual restricted stock awards granted to the named executive officers by the Committee generally vest ratably over three years beginning on the first anniversary of the grant date, as the Committee believes that this provides appropriate officer retention benefits and, assuming the continued employment of the executive, also provides for a level of consistency in future compensation.
In the event that dividends are paid on shares of our common stock at any time when restricted stock awards remain unvested, any such dividends will accrue and be payable to the grantee upon vesting of the underlying restricted shares. In the event such shares do not vest, no such dividends will be paid.
2019
Annual Performance Share Unit Award Terms
The annual performance share unit awards granted to the named executive officers had a performance period based on
29
our fiscal year
2019
performance (described below). Based on achievement against the applicable performance goals, the earned portion of these awards (if any) vests ratably over three-years, generally subject to continued employment through the vesting period. These performance share unit awards, if earned, will be paid in shares of our common stock. In developing the structure of the annual performance share unit award program, the Committee believed it was important to set what it considered challenging yet attainable targets for the performance period.
The Committee determined that it would be appropriate to measure our performance against multiple performance metrics (including one metric with a three-year performance horizon) during 2019. The Committee believes that the blend of fiscal 2019 performance goals along with vesting restrictions over a longer time horizon appropriately recognizes the difficulty in forecasting performance results in the automotive industry, while also promoting alignment with shareholder interests, retention of executives, and the achievement of operational excellence.
The annual performance share unit awards provide each executive with a target number of performance share units that may be earned based on a mix of our absolute performance and our performance relative to our Automotive Peer Group (generally referencing each entity's most recent publicly available financial results) with respect to performance metrics approved by the Committee in the first quarter of the year as described below.
Notwithstanding our performance relative to the Automotive Peer Group, the Committee determined that, if our EPS growth was negative for the performance year, payout under the annual performance share unit awards would be limited to 100%. In addition, payout under the annual performance share unit awards is subject to the following total shareholder return (“TSR”) modifiers: (i) if the Company’s TSR increases by more than ten percent (10%), then payout will increase by ten percentage points (10%)
(for example, if TSR increases by greater than 10%, then an otherwise earned payout of 120% would be increased to 130%)
; (ii) if the Company’s TSR decreases by more than ten percent (-10%), then payout will decrease by ten percentage points (-10%)
(for example, if TSR decreases by greater than 10%, then an otherwise earned payout of 120% would be decreased to 110%)
; and (iii) if the Company’s TSR decreases by more than twenty percent (20%), then payout would be limited to 100%. Regardless of the amount of the increase in the Company’s TSR, the maximum payout is limited to 150%. The metrics used in the 2019 performance share unit award program were selected because of their relative importance to our financial success.
The number of performance share units awarded to each executive (other than the Chief Executive Officer) was recommended to the Committee by the Chief Executive Officer based on the factors described above in “Equity Based Compensation Opportunity,” and included but were not limited to each executive’s past performance and level of responsibility. The number of performance share units awarded to the Chief Executive Officer was determined by the Committee and awarded to the Chief Executive Officer based on these same factors.
Under our
2019
annual performance share unit award program, our performance, and the actual number of shares to be earned, was to be determined or scored based upon the following performance elements, and weightings, which were chosen because the Committee determined them to be key drivers of growth, operational efficiency, stockholder value and long-term performance in our industry, as follows:
|
Performance
|
Weighting
|
Minimum
|
Maximum
|
|
|
Relative
|
||||
|
Same Store Use Car Revenue Growth vs. Peers
|
20%
|
Lowest
|
|
Highest
|
|
Operating Margin vs. Peers
|
20%
|
Lowest
|
|
Highest
|
|
3-Year EPS Growth vs. Peers
|
40%
|
Lowest
|
|
Highest
|
|
Absolute
|
||||
|
Same Store Parts and Service Customer Pay Gross Profit Growth
|
20%
|
6%
|
|
11%
|
|
Total Potential Payout as % of Target
|
0%
|
|
150%
|
|
Notwithstanding our performance relative to the Automotive Peer Group, the Committee determined that, if our EPS growth was negative for the performance year, payout under the annual performance share unit awards would be limited to 100%. In addition, payout under the annual performance share unit awards is subject to the following total shareholder return (“TSR”) modifiers: (i) if the Company’s TSR increases by more than ten percent (10%), then payout will increase by ten percentage points (10%); (ii) if the Company’s TSR decreases by more than ten percent (10%), then payout will decrease by ten percentage points (10%); and (iii) if the Company’s TSR decreases by more than twenty percent (20%), then payout would be limited to 100%. Regardless of the amount of the increase in the Company’s TSR, the maximum payout is limited to 150%. The metrics used in the 2019 performance share unit award program were selected because of their relative importance to our financial success.
30
The Committee reserved the right to adjust performance results under the 2019 performance share unit awards for the Company and each member of the Automotive Peer Group for material, publicly disclosed non-core items.
The scores for each performance element are accumulated, such that the highest achievable score would result in a payout at 150% of target, the lowest achievable score would result in a payout at 0% of target and a score in between would be interpolated.
The actual number of performance share units earned was determined after the end of the 2019 fiscal year based on the Committee’s evaluation of our performance against the applicable metrics. After evaluating our performance on a cumulative basis, under each of the four performance metrics discussed above, including as compared to the performance of the Automotive Peer Group and general market conditions, as applicable, the Committee determined the actual payout based on performance and operational results and established a payout of a number of performance share units at 115% of target. In addition, the Committee determined that the Company's 2019 total shareholder return was 63%, which, after the application of the TSR modifier (described above), resulted in an increase in the payout to 125% of target. Payments of awards pursuant to the
2019
annual performance share unit award program were earned as set forth below.
|
Name
|
Target Number of PSUs Granted
|
Number of Shares of Common Stock Awarded Under the 2019 Annual Performance Share Unit Award Program
|
|
David W. Hult
|
23,850
|
29,813
|
|
William F. Stax
|
723
|
904
|
|
Sean D. Goodman
(1)
|
5,203
|
—
|
|
George A. Villasana
|
4,987
|
6,234
|
|
Jed Milstein
|
3,469
|
4,337
|
|
John S. Hartman
(1)
|
4,770
|
—
|
|
(1)
|
Mr. Goodman and Mr. Hartman departed from the Company and, therefore, are not eligible to receive a payout of 2019 performance share units.
|
In accordance with the terms of the
2019
annual performance share unit award program, one-third of the award earned by each named executive officer was eligible to vest on the later of the first anniversary of the grant date and the date the payout of a number of shares of our common stock is established by the Committee, with the remainder of the award vesting in equal amounts on the second and third anniversaries of the grant date, subject generally in each case to the executive’s continued employment.
Special Restricted Stock Grants
In 2019, in order to better align Mr. Goodman and Mr. Hartman's compensation with direct competitor levels based on our Automotive Peer Group, the Committee approved an additional, special grant of 11,564 restricted shares to each of Mr. Goodman and Mr. Hartman. In order to avoid overweighting a payout in any single fiscal period, the Committee approved a vesting schedule for these awards that differs from our regular annual restricted grants, with 20% of the special restricted stock grants vesting on each of the first five anniversaries of the grant date, subject in each case to Mr. Goodman and Mr. Hartman's continued employment.
Deferred Compensation Plan
On October 17, 2017, the Company adopted the Asbury Automotive Group, Inc. Deferred Compensation Plan, an unfunded deferred compensation plan (the “DCP”). Pursuant to the DCP, certain of our key employees, including each of the named executive officers, may elect to defer the receipt of a portion of their compensation. Any amounts deferred by a named executive officer under the DCP are credited to the named executive officer’s account and treated as invested in investments selected by the named executive officer from those made available from time to time under the DCP. Each account will be adjusted for any gains or losses attributable to the investments selected by the named executive officer, and each named executive officer will be 100% vested in his or her deferred compensation and any deemed earnings thereon. The Company does not make any matching or discretionary contributions under the DCP. Under the DCP, the Company is obligated to make payment at a future date of the deferred compensation credited to the named executive officer’s bookkeeping account, adjusted for any gains or losses attributable to the investments selected by the named executive officer. Distributions under the DCP will be made according to the named executive officer’s elections and the provisions of the DCP. Any deferred compensation obligations under the DCP will be our general unsecured obligations. The DCP is intended to conform with the requirements of Section 409A of the Code, and will be administered by an investment committee of the Company.
31
In July 2019, the Board, upon the recommendation of the Committee, terminated the DCP effective December 31, 2019. No new deferrals will be credited to the DCP after such date and all participants in the DCP will receive a lump sum payment of the full balance of their respective accounts as of a date selected by the Committee that is between 12 and 24 months after the Company has taken all necessary action to terminate and liquidate the DCP.
Other Benefits
In
2019
, our executive officers were eligible to participate in the employee benefit plans generally available to all of our employees in the corporate office, including medical, dental, life and disability insurance plans, as well as to participate in our 401(k) plan.
In the automobile retailing industry, senior executives are typically provided with the use of one or more demonstrator vehicles from a retailer’s inventory of new vehicles in order to, among other things, show support for the retailer’s offered brands. Executives are typically entitled to these vehicles for business and personal use. Management has limited the number of demonstrator vehicles provided to our employees due to the risks associated with the use of such vehicles. To provide a similar benefit, we provide a cash car allowance of $800 per month to certain of our corporate officers, including our named executive officers (except for Mr. Goodman and Mr. Hartman, each of whom received the use of one demonstrator vehicle in lieu of a cash car allowance). Additionally, in
2019
, Mr. Hult was entitled to use one demonstrator vehicle pursuant to the terms of his employment agreement.
Employment, Severance and Change in Control Arrangements
General Provisions of Employment, Severance and Separation Agreements
We have entered into an employment agreement with Mr. Hult. In addition, we are party to certain agreements relating to severance and/or separation arrangements with each of Mr. Milstein, Mr. Stax, Mr. Villasana, Mr. Goodman and Mr. Hartman. These agreements provide for the allocation of certain benefits in the event of involuntary termination of the employment of the named executive officer without cause or by the named executive officer where good reason exists, and in the case of Mr. Stax, in the event of either of these qualifying terminations within two years following a change in control.
Mr. Goodman and Mr. Hartman departed from the Company in November 2019 and January 2020, respectively, and the actual benefits they received in connection with their departures are described below under "Potential Payments Upon Termination or Change in Control." The Company will have no other severance obligations under their severance arrangements, but the non-competition and other restrictive covenants in the arrangements will remain in effect according to their terms.
We believe that our severance arrangements serve as appropriate retention and motivational tools for our continuing named executive officers by generally providing a measure of financial security in the event of an unplanned termination of employment, with the exception of a termination for cause. Furthermore, from time to time, we examine various strategic alternatives, and the provisions of these agreements are important to retain these key people whose continued employment might be at risk in certain changes of control, although such transactions may otherwise be in the best interests of our stockholders. As a corporate policy, we believe that it may be difficult to attract and retain talented executives with provisions in our severance arrangements that deny severance benefits in the event of a termination for other than performance-related issues.
A description of the terms of our named executive officers' employment, severance and separation agreements, including the potential payouts to these individuals pursuant to applicable severance provisions thereof, are summarized in the “Potential Payments Upon Termination or Change in Control” section of this proxy statement.
Tax Treatment of Certain Compensation
In making decisions about executive compensation, we continue to consider the impact of regulatory provisions, including the provisions of Section 409A regarding non-qualified deferred compensation and the “golden parachute” provisions of Section 280G of the Code. We also consider how various elements of compensation will impact our financial results. In this regard, we consider the impact of applicable stock compensation accounting rules, which determine how we recognize the cost of employee services received in exchange for awards of equity instruments.
32
COMPENSATION & HUMAN RESOURCES COMMITTEE REPORT
The Compensation & Human Resources Committee has reviewed and discussed with management the "Compensation Discussion & Analysis" section of the proxy statement required by Item 402(b) of Regulation S-K of the Exchange Act and, based on such review and discussions, the Compensation & Human Resources Committee recommended to the Board that the "Compensation Discussion & Analysis" section be included in this proxy statement and incorporated by reference in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31,
2019
.
Members of the Compensation & Human Resources Committee
Juanita T. James (Chair)
Thomas C. DeLoach, Jr.
Eugene S. Katz
Bridget Ryan-Berman
COMPENSATION COMMITTEE INTERLOCKS & INSIDER PARTICIPATION
During
2019
, Ms. James (Chair), Mr. Clements, Mr. DeLoach, Mr. Katz and Ms. Ryan-Berman, none of whom is or was formerly an officer or employee of the Company, served as members of the Compensation & Human Resources Committee of our Board. None of the Compensation & Human Resources Committee members or other members of the Board serves as an executive officer of any entity for which one of the Company’s executive officers serves as a director or member of such other entity’s compensation committee.
33
EXECUTIVE COMPENSATION
The following table shows the compensation for fiscal years
2019
,
2018
and
2017
to our named executive officers. For a more detailed discussion about the compensation arrangements for these executive officers, see “Compensation Discussion & Analysis.”
Summary Compensation Table
|
Name and Principal Position
|
Year
|
Salary
|
Stock
Awards
(1)
|
Non-Equity Incentive Plan Compensation
(2)
|
All Other Compensation
|
Total
|
|||||||||||
|
David W. Hult
President & Chief Executive
Officer
|
2019
|
$
|
1,000,000
|
|
$
|
2,749,974
|
|
$
|
1,687,500
|
|
$
|
21,834
|
|
(3)
|
$
|
5,459,308
|
|
|
2018
|
$
|
1,000,000
|
|
$
|
2,750,001
|
|
$
|
1,212,500
|
|
$
|
20,915
|
|
$
|
4,983,416
|
|
||
|
2017
|
$
|
750,000
|
|
$
|
999,981
|
|
$
|
675,000
|
|
$
|
20,915
|
|
$
|
2,445,896
|
|
||
|
William F. Stax
Vice President, Controller &
Chief Accounting Officer
(4)
|
2019
|
$
|
229,154
|
|
$
|
100,034
|
|
$
|
108,439
|
|
$
|
—
|
|
$
|
437,627
|
|
|
|
2018
|
$
|
223,846
|
|
$
|
100,010
|
|
$
|
76,388
|
|
$
|
—
|
|
$
|
400,244
|
|
||
|
2017
|
$
|
208,273
|
|
$
|
249,995
|
|
$
|
56,701
|
|
$
|
—
|
|
$
|
514,969
|
|
||
|
Sean D. Goodman
Former Senior Vice
President & Chief Financial
Officer
(5)
|
2019
|
$
|
530,769
|
|
$
|
1,399,996
|
|
$
|
—
|
|
$
|
14,404
|
|
(6)
|
$
|
1,945,169
|
|
|
2018
|
$
|
600,000
|
|
$
|
599,992
|
|
$
|
436,500
|
|
$
|
13,280
|
|
$
|
1,649,772
|
|
||
|
2017
|
$
|
295,037
|
|
$
|
599,990
|
|
$
|
202,500
|
|
$
|
155,733
|
|
$
|
1,253,260
|
|
||
|
George A. Villasana
Senior Vice President,
General Counsel & Secretary
|
2019
|
$
|
571,154
|
|
$
|
575,024
|
|
$
|
582,188
|
|
$
|
9,600
|
|
(7)
|
$
|
1,737,966
|
|
|
2018
|
$
|
519,231
|
|
$
|
524,984
|
|
$
|
381,938
|
|
$
|
9,600
|
|
$
|
1,435,752
|
|
||
|
2017
|
$
|
450,000
|
|
$
|
450,031
|
|
$
|
243,000
|
|
$
|
9,640
|
|
$
|
1,152,671
|
|
||
|
Jed Milstein
Senior Vice President &
Chief Human Resources
Officer
|
2019
|
$
|
471,154
|
|
$
|
399,999
|
|
$
|
480,938
|
|
$
|
9,840
|
|
(8)
|
$
|
1,361,931
|
|
|
2018
|
$
|
421,154
|
|
$
|
570,057
|
|
$
|
247,350
|
|
$
|
9,840
|
|
$
|
1,248,401
|
|
||
|
John S. Hartman
Former Senior Vice
President, Operations
(9)
|
2019
|
$
|
600,000
|
|
$
|
1,349,979
|
|
$
|
607,500
|
|
$
|
14,526
|
|
(10)
|
$
|
2,572,005
|
|
|
2018
|
$
|
600,000
|
|
$
|
349,967
|
|
$
|
436,500
|
|
$
|
9,000
|
|
$
|
1,395,467
|
|
||
|
(1)
|
The amounts in this column represent the aggregate grant date fair value computed in accordance with FASB ASC Topic 718 for awards of performance share units and shares of restricted stock for the fiscal years ended December 31,
2019
,
2018
and
2017
, as described in the “Compensation Discussion & Analysis—Review of
2019
Compensation—Equity-Based Compensation Opportunities” discussion and in footnotes 2 and 3 of the “
2019
Grants of Plan-Based Awards" table below. For a more detailed discussion of the assumptions used to determine the valuation of the stock awards set forth in this column, please see a discussion of such valuation in Note
21 in the Notes to the Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31,
2019
, filed with the SEC on
March 2, 2020
. The maximum possible value of performance awards at the grant date (based on the assumption that the highest level of performance is achieved) granted to each of our named executive officers in
2019
was as follows: Mr. Hult: $2,474,915; Mr. Stax: $75,026; Mr. Goodman: $539,915; Mr. Villasana: $517,501; Mr. Milstein: $359,978; and Mr. Hartman: $494,983. For additional information on the actual number of performance share unit awards granted, see the discussion under “Compensation Discussion & Analysis–Review of
2019
Compensation–Equity-Based Compensation Opportunities” above.
|
|
(2)
|
The amounts in this column represent the actual amount earned by, and paid to, the named executive officers under the applicable year’s annual cash incentive plan.
|
|
(3)
|
Represents (i) the aggregate incremental cost of $12,234 associated with the use of one demonstrator vehicle; and (ii) an automobile allowance.
|
|
(4)
|
Mr. Stax has served as Interim Principal Financial Officer since November 16, 2019 and previously served in that role from March 8, 2017 to July 4, 2017.
|
|
(5)
|
Mr. Goodman departed from all positions with the Company effective November 15, 2019.
|
|
(6)
|
Represents the aggregate incremental cost of $14,404 associated with the use of one demonstrator vehicle.
|
|
(7)
|
Represents an automobile allowance.
|
|
(8)
|
Represents (i) an automobile allowance; and (ii) a gym membership subsidy.
|
34
|
(9)
|
Mr. Hartman departed from all positions with the Company effective January 2, 2020.
|
|
(10)
|
Represents the aggregate incremental cost associated with the use of one demonstrator vehicle.
|
2019
Grants of Plan-Based Awards
|
Name
|
Grant Date
|
Approval Date
|
Estimated Possible Payouts Under Non-Equity Incentive Plan Awards
(1)
|
Estimated Future Payouts Under Equity Incentive Plan Awards
(2)
(# of shares)
|
All Other
Stock Awards: Number of Shares of Stock or Units
(3)
|
Grant Date Fair Value of Stock and Option Awards
|
||||||||||||||||
|
50% Threshold
|
100% Target
|
200% Maximum
|
Threshold
|
Target
|
Maximum
|
|||||||||||||||||
|
David W. Hult
|
1/23/19
|
1/23/19
|
$
|
625,000
|
|
$
|
1,250,000
|
|
$
|
2,500,000
|
|
|||||||||||
|
2/7/19
|
1/23/19
|
4,770
|
|
23,850
|
|
35,775
|
|
$
|
1,649,943
|
|
||||||||||||
|
2/7/19
|
1/23/19
|
15,901
|
|
$
|
1,100,031
|
|
||||||||||||||||
|
William F. Stax
|
1/23/19
|
1/23/19
|
$
|
40,163
|
|
$
|
80,325
|
|
$
|
160,650
|
|
|||||||||||
|
2/7/19
|
1/23/19
|
145
|
|
723
|
|
1,085
|
|
$
|
50,017
|
|
||||||||||||
|
2/7/19
|
1/23/19
|
723
|
|
$
|
50,017
|
|
||||||||||||||||
|
Sean D. Goodman
|
1/23/19
|
1/23/19
|
$
|
225,000
|
|
$
|
450,000
|
|
$
|
900,000
|
|
|||||||||||
|
2/7/19
|
1/23/19
|
1,041
|
|
5,203
|
|
7,805
|
|
$
|
359,944
|
|
||||||||||||
|
2/7/19
|
1/23/19
|
3,470
|
|
$
|
240,055
|
|
||||||||||||||||
|
2/7/19
|
1/23/19
|
11,564
|
|
$
|
799,998
|
|
||||||||||||||||
|
George A. Villasana
|
1/23/19
|
1/23/19
|
$
|
215,625
|
|
$
|
431,250
|
|
$
|
862,500
|
|
|||||||||||
|
2/7/19
|
1/23/19
|
997
|
|
4,987
|
|
7,481
|
|
$
|
345,001
|
|
||||||||||||
|
2/7/19
|
1/23/19
|
3,325
|
|
$
|
230,024
|
|
||||||||||||||||
|
Jed Milstein
|
1/23/19
|
1/23/19
|
$
|
178,125
|
|
$
|
356,250
|
|
$
|
712,500
|
|
|||||||||||
|
2/7/19
|
1/23/19
|
694
|
|
3,469
|
|
5,204
|
|
$
|
239,985
|
|
||||||||||||
|
2/7/19
|
1/23/19
|
2,313
|
|
$
|
160,013
|
|
||||||||||||||||
|
John S. Hartman
|
1/23/19
|
1/23/19
|
$
|
225,000
|
|
$
|
450,000
|
|
$
|
900,000
|
|
|||||||||||
|
2/7/19
|
1/23/19
|
954
|
|
4,770
|
|
7,155
|
|
$
|
329,989
|
|
||||||||||||
|
2/7/19
|
1/23/19
|
3,180
|
|
$
|
219,992
|
|
||||||||||||||||
|
2/7/19
|
1/23/19
|
11,564
|
|
$
|
799,998
|
|
||||||||||||||||
|
(1)
|
Represents potential payouts under our annual cash incentive plan for each named executive officer. For a more detailed discussion of the annual cash incentive plan and the actual awards paid under this plan, see the section of this proxy statement entitled, “Compensation Discussion & Analysis—Review of
2019
Compensation—Annual Cash Incentive Opportunity” and the “Summary Compensation Table” above.
|
|
(2)
|
Represents performance share unit awards. For a more detailed discussion of the Company’s performance share unit award program, see the section of this proxy statement entitled, “Compensation Discussion & Analysis—Review of
2019
Compensation—Annual Equity Awards Program” and the "Summary Compensation Table" above.
|
|
(3)
|
Represents grants of restricted stock. For a more detailed discussion of the Company's restricted stock awards, see the section of this proxy statement entitled, “Compensation Discussion & Analysis—Review of
2019
Compensation—Annual Equity Awards Program” and the “Summary Compensation Table” above.
|
35
Outstanding Equity Awards at
2019
Fiscal Year-End
|
Stock Awards
(1)
|
||||||||||||||
|
Name
|
Grant Date
|
Number of Shares or Units of Stock That Have Not Vested
|
Market Value of Shares or Units of Stock That Have Not Vested
(2)
|
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested
|
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested
(3)
|
|||||||||
|
David W. Hult
|
2/5/16
|
|
17,145
|
|
(4)
|
$
|
1,916,640
|
|
||||||
|
2/8/17
|
|
5,916
|
|
(5)
|
$
|
661,350
|
|
|||||||
|
2/7/18
|
|
32,786
|
|
(6)
|
$
|
3,665,147
|
|
|||||||
|
2/7/19
|
|
15,901
|
|
(7)
|
$
|
1,777,573
|
|
35,775
|
|
(8)
|
$
|
3,999,287
|
|
|
|
William F. Stax
|
2/8/17
|
|
1,600
|
|
(9)
|
$
|
178,864
|
|
||||||
|
2/8/17
|
|
578
|
|
(5)
|
$
|
64,615
|
|
|||||||
|
2/7/18
|
|
1,157
|
|
(6)
|
$
|
129,341
|
|
|||||||
|
2/7/19
|
|
723
|
|
(7)
|
$
|
80,824
|
|
1,086
|
|
(8)
|
$
|
121,404
|
|
|
|
Sean D. Goodman
|
—
|
|
—
|
|
$
|
—
|
|
—
|
|
$
|
—
|
|
||
|
George A. Villasana
|
2/5/16
|
|
4,287
|
|
(4)
|
$
|
479,244
|
|
||||||
|
2/8/17
|
|
2,663
|
|
(5)
|
$
|
297,697
|
|
|||||||
|
2/7/18
|
|
6,260
|
|
(6)
|
$
|
699,805
|
|
|||||||
|
2/7/19
|
|
3,325
|
|
(7)
|
$
|
371,702
|
|
7,481
|
|
(8)
|
$
|
836,301
|
|
|
|
Jed Milstein
|
2/8/17
|
|
1,184
|
|
(5)
|
$
|
132,359
|
|
||||||
|
7/26/17
|
|
310
|
|
(7)
|
$
|
34,655
|
|
|||||||
|
2/7/18
|
|
2,920
|
|
(10)
|
$
|
326,427
|
|
|||||||
|
2/7/18
|
|
3,816
|
|
(6)
|
$
|
426,591
|
|
|||||||
|
2/7/19
|
|
2,313
|
|
(7)
|
$
|
258,570
|
|
5,204
|
|
(8)
|
$
|
581,755
|
|
|
|
John S. Hartman
|
9/25/17
|
|
1,386
|
|
(7)
|
$
|
154,941
|
|
||||||
|
2/7/18
|
|
4,173
|
|
(6)
|
$
|
466,500
|
|
|||||||
|
2/7/19
|
|
11,564
|
|
(10)
|
$
|
1,292,740
|
|
|||||||
|
2/7/19
|
|
3,180
|
|
(7)
|
$
|
355,492
|
|
7,155
|
|
(8)
|
$
|
799,857
|
|
|
|
(1)
|
All information in the “Stock Awards” portion of the table relates to awards of shares of restricted stock and performance share unit awards.
|
|
(2)
|
Based on a stock price of $111.79, the closing price of our common stock on December 31,
2019
, the last business day of fiscal
2019
.
|
|
(3)
|
Represents the aggregate payout value of performance shares underlying each award of performance share units that has not yet been earned as of fiscal year-end, calculated by multiplying the maximum number of performance share units by $
111.79
, the closing price of our common stock on December 31,
2019
, the last business day of fiscal
2019
.
|
|
(4)
|
This unvested portion of the earned performance share units generally vests in substantially equal installments on each of the fourth and fifth anniversaries of the grant date.
|
|
(5)
|
This unvested portion of the restricted shares and earned performance share units generally vests on the third anniversary of the grant date.
|
|
(6)
|
This unvested portion of the restricted shares and earned performance share units generally vests in substantially equal installments on each of the second and third anniversaries of the grant date.
|
|
(7)
|
These restricted stock awards generally vest in substantially equal installments on each of the first three anniversaries of the grant date.
|
|
(8)
|
These performance share units can be earned based on performance achievement during the 2019 performance period, as further described in the “Compensation Discussion and Analysis.” One-third of the earned award generally vests on the later of the first anniversary of the grant date and the date on which the Committee determines performance achievement for the award. The remaining portion of the earned award generally vests in substantially
|
36
equal installments on each of the second and third anniversaries of the date of grant. The amount in this column assumes payout at the maximum level of performance.
|
(9)
|
This unvested portion of the restricted stock award generally vests as follows on each of the third, fourth and fifth anniversaries of the grant date, respectively: 15%; 25%; and 30%.
|
|
(10)
|
This restricted stock grant generally vests in substantially equal installments on each of the first five anniversaries of the grant date.
|
2019
Option Exercises and Stock Vested
|
Stock Awards
|
|||||
|
Name
|
Number of Shares Acquired on Vesting
|
Value Realized on Vesting
(1)
|
|||
|
David W. Hult
|
39,720
|
|
$
|
2,799,358
|
|
|
William F. Stax
|
2,354
|
|
$
|
165,370
|
|
|
Sean D. Goodman
|
7,141
|
|
$
|
545,515
|
|
|
George A. Villasana
|
11,915
|
|
$
|
843,056
|
|
|
Jed Milstein
|
5,323
|
|
$
|
391,672
|
|
|
John S. Hartman
|
3,471
|
|
$
|
284,477
|
|
|
(1)
|
The value realized on the vesting of shares of restricted stock or performance share units represents the number of shares acquired multiplied by the closing price of our common stock, as reported on the NYSE, on the vesting date of the restricted stock or the payout date of the performance share units, as applicable.
|
2019
Nonqualified Deferred Compensation
(1)
|
Name
|
Executive Contributions in Last FY
(2)
|
Registrant Contributions in Last FY
|
Aggregate Earnings in Last FY
(3)
|
Aggregate Withdrawals/Distributions
|
Aggregate Balance at Last FYE
(4)
|
||||||||||
|
David W. Hult
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
|
William F. Stax
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
|
Sean D. Goodman
|
$
|
48,363
|
|
$
|
—
|
|
$
|
14,308
|
|
$
|
—
|
|
$
|
95,023
|
|
|
George A. Villasana
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
|
Jed Milstein
|
$
|
173,927
|
|
$
|
—
|
|
$
|
22,207
|
|
$
|
—
|
|
$
|
218,872
|
|
|
John S. Hartman
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
|
(1)
|
This table sets forth certain information with respect to the DCP for our named executive officers during the fiscal year ended December 31,
2019
. For additional information about the DCP, see the section of this proxy statement entitled "Deferred Compensation Plan".
|
|
(2)
|
Amounts reflect participant deferrals under the DCP during the fiscal year ended December 31,
2019
and all of these amounts are reported as compensation to the respective named executive officer in the Summary Compensation Table in the "Salary" and "Non-Equity Incentive Plan Compensation" columns.
|
|
(3)
|
None of these amounts were reported as compensation to the respective named executive officer in the Summary Compensation Table.
|
|
(4)
|
Amounts related to executive contributions, $36,000 for Mr. Goodman and $25,269 for Mr. Milstein, were reported as compensation in the Summary Compensation Table in prior years.
|
37
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
Employment Agreement with David W. Hult
We have entered into an employment agreement with David W. Hult, which agreement was amended on August 21, 2017 in connection with the announcement that, effective January 1, 2018, Mr. Hult would begin to serve as our President & Chief Executive Officer (such agreement, as amended, the “Hult Agreement”). The Hult Agreement was originally scheduled to expire on November 3, 2018, but provides for automatic extensions for successive one-year periods, unless either party provides notice of termination to the other. Upon any termination, Mr. Hult will cease to be an officer and director of the Company and any of its affiliates.
Under the Hult Agreement, Mr. Hult’s base salary beginning January 1, 2018 is set at $1.0 million per year, subject to periodic review and increase, and he is entitled to receive an annual bonus (which includes a non-equity incentive compensation award opportunity) based on a target of 125% of his then-current base salary. Mr. Hult is also eligible to receive annual equity or other long-term incentive awards granted under the Company’s long-term equity incentive plans and is entitled to a monthly automobile allowance and the use of a Company owned demonstrator vehicle.
Under the terms of the Hult Agreement, if (i) the Company elects not to extend the Hult Agreement and, at its expiration, Mr. Hult will not have attained age 65, or (ii) the Company terminates the Agreement without “cause” or (iii) Mr. Hult terminates the Hult Agreement for “good reason” when no “change in control” has occurred (any of the foregoing, a “Hult Non-Change in Control Qualifying Termination”), Mr. Hult will be entitled to the following:
|
•
|
100% of his base salary, plus 100% of his target annual bonus (which includes any non-equity incentive plan compensation);
|
|
•
|
a pro-rated bonus (which includes any non-equity incentive plan compensation) based on actual performance for the year of termination;
|
|
•
|
continued participation for 12 months in all health and welfare plans of the Company in effect immediately prior to the termination of employment; and
|
|
•
|
accelerated vesting of all unvested equity and other long-term incentive awards that would have vested in the 364 days following the termination of the Hult Agreement.
|
Also under the terms of the Hult Agreement, if Mr. Hult is terminated without cause or resigns for good reason within two years following a change in control (a “Hult Change in Control Qualifying Termination” and, together with a Hult Non-Change in Control Qualifying Termination, as the case may be, a “Hult Qualifying Termination”), Mr. Hult will be entitled to the following:
|
•
|
200% of his base salary, plus 200% of his target annual bonus (which includes any non-equity incentive plan compensation);
|
|
•
|
a pro-rated bonus (which includes any non-equity incentive plan compensation) based on target performance for the year of termination;
|
|
•
|
continued participation for 24 months in all health and welfare plans of the Company in effect immediately prior to the termination of employment; and
|
|
•
|
vesting of all unvested equity and other long-term incentive awards, effective on the date of the change in control.
|
The foregoing severance payments are conditioned upon Mr. Hult executing a general release in favor of the Company. The Hult Agreement also contains certain confidentiality, non-compete and non-solicit obligations. In the event of a breach of these obligations, the Company may stop paying any amounts due, as described above, and demand repayment of 50% of the severance amounts paid prior to the breach of such obligations.
The Hult Agreement also provides that, if Mr. Hult retires after reaching age 65, then upon such retirement, all of his equity and long-term incentive awards not vested as of his effective retirement date will continue to vest without regard to such retirement.
38
Severance Agreements with Jed Milstein, William F. Stax, George A. Villasana, Sean D. Goodman and John S. Hartman
The Company is party to a severance agreement (each, a “Severance Agreement”) with each of Jed Milstein, William F. Stax, George A. Villasana, Sean D. Goodman and John S. Hartman. The Severance Agreements provide for one year of base salary, one year of benefits continuation, and a pro-rated bonus (which includes any payment under a non-equity incentive compensation plan) in the amount that the affected executive would have received had he not been terminated during such year (collectively, the “Severance Payment”) if (i) the affected executive is terminated by the Company without “cause,” or (ii) with respect to (x) Mr. Stax if Mr. Stax terminates his employment with the Company due to the occurrence of certain events (described below) specified in his Severance Agreement within two years following a change in control or (y) Messrs. Goodman, Hartman, Milstein and Villasana if the affected executive terminates his employment for any of the following reasons: (a) mandatory relocation of the affected executive's current principal place of business to a location more than 50 miles away; (b) any material diminution in the affected executive's base salary; and (c) any material diminution in the affected executive's authority, duties or responsibilities.
The Severance Agreements require the affected executive to execute a general release in favor of the Company as a condition to receiving any Severance Payments. The Severance Agreements also contain certain confidentiality, non-compete and non-solicit obligations and provides that, if such obligations are breached by the affected executive, the Company has the right to stop making any otherwise required Severance Payments. Additionally, the Severance Agreements provide that the affected executive will not receive any Severance Payment in the event of termination due to death, disability, retirement, voluntary resignation or termination by the Company for cause.
Mr. Goodman and Mr. Hartman departed from the Company in November 2019 and January 2020, respectively, and the actual benefits they received in connection with their departures are described below under "Potential Payments Upon Termination or Change in Control." The Company will have no other severance obligations under their severance arrangements, but the non-competition and other restrictive covenants in the arrangements will remain in effect according to their terms.
Equity Incentive Plan Payout Provisions
In addition to the payments required to be made in connection with certain qualifying separations from service described above, the Company's 2012 Plan provides that awards
made thereunder, subject to the terms of any individual employment or severance agreements, will be accelerated in connection with a change in control transaction only if: (i) the acquiror does not replace or substitute an equivalent award, or (ii) a participant holding replacement awards is involuntarily terminated within two years following a Change of Control (as defined in the Company’s 2012 Plan). Under the 2019 Plan, equity awards are generally subject to double trigger vesting, unless otherwise determined by the Committee.
Certain Defined Terms
Cause
Under the Hult Agreement, “cause” generally means any of the following: (i) the executive’s willful misconduct, failure to follow a lawful directive of the Board, gross negligence or blatant violation of Company policy, (ii) the executive’s commission of fraud, misappropriation, dishonesty or embezzlement against the Company or an affiliate, (iii) a conviction of, or entry of a plea of nolo contendere to, a felony or misdemeanor (other than traffic violations and similar offenses), or (iv) the executive’s commission of a material breach of the applicable employment agreement.
Under the Severance Agreements with Messrs. Goodman, Hartman, Milstein, Villasana and Stax, “cause” generally means any of the following: (i) the executive’s gross negligence or serious misconduct (including criminal, fraudulent and dishonest conduct) that is or may be injurious to the Company, (ii) the executive’s conviction of, or entry of a plea of nolo contendere to, a felony or other crime that involves moral turpitude, (iii) the executive’s breach of the confidentiality, non-compete and non-solicit obligations contained in the Severance Agreement, (iv) the executive’s willful and continued failure to perform his duties on behalf of the Company, or (v) the executive’s material breach of certain Company policies.
Good Reason
Under the Hult Agreement, “good reason” is defined as the occurrence of any of the following without the executive’s consent, but only after notice of, and an opportunity to cure, such event: (i) the nature or scope of the executive’s duties or responsibilities are materially diminished, (ii) the Company changes the location of the executive’s employment to a place more than 50 miles from its present location, (iii) the Company’s material breach of the applicable employment agreement, or (iv) a change in the executive’s salary below the base amount specified in the applicable employment agreement.
39
Change in Control
A “change in control” generally means the occurrence of any of the following events:
|
•
|
any person becomes the beneficial owner of 35% or more of the Company’s securities entitled to vote in the election of directors, provided, in the case of the 2012 Plan, the 2019 Plan, the Hult Agreement and the Severance Agreement with Mr. Stax that such an acquisition will not be considered a change in control if it is made by (x) the Company or any subsidiary, (y) an employee benefit plan sponsored or maintained by the Company or any subsidiary, or (z) a person that reports such acquisition on Schedule 13G under the Exchange Act, so long as such person does not later become required to report on Schedule 13D while beneficially owning 35% or more of the Company’s securities entitled to vote in the election of directors;
|
|
•
|
in the case of the 2012 Plan, the 2019 Plan and the Hult Agreement, the Company’s completion of a merger, consolidation or other business combination transaction in which the Company’s securities outstanding immediately prior to such transaction represent less than 50% of the combined voting power of the Company or other surviving entity after such transaction, except where the transaction agreement provides that members of the Company’s Board serving at the time of the first public announcement of the transaction will constitute at least a majority of the directors of the resulting entity;
|
|
•
|
individuals who, as of the date specified in the applicable agreement or plan, constitute the Board cease to constitute at least a majority of the Board, provided, in the case of the Company’s 2012 Plan, the 2019 Plan, the Hult Agreement and the Severance Agreement with Mr. Stax, that any individual whose election or nomination for election by the Company’s stockholders was approved by at least 2/3 of the directors then comprising the incumbent Board will be considered to be incumbent members of the Board, but excluding any individual who first assumes office as a director of the Company as a result of an actual or threatened election contest; or
|
|
•
|
approval by the Company’s stockholders of the liquidation or dissolution of the Company.
|
Hartman Separation Agreement
Mr. Hartman's employment with the Company was terminated without cause effective as of January 2, 2020. In connection with his departure, the Company entered into a Separation Agreement and General Release with Mr. Hartman (the “Hartman Separation Agreement”). The Hartman Separation Agreement includes the following severance payments in exchange for a customary release:
|
•
|
his 2019 base salary of $600,000, payable in equal installments over 52 weeks;
|
|
•
|
a lump sum annual cash incentive payment for 2019, to be paid under such terms and at such time as annual cash incentives are paid to executive officers generally; and
|
|
•
|
a cash bonus in the amount of $222,183, payable in equal installments over 52 weeks, as consideration for his continued cooperation and assistance to the Company.
|
Under the Hartman Separation Agreement, Mr. Hartman is also entitled to continued health and dental insurance for 12 months (valued at $2,564). In addition, the Hartman Separation Agreement contains a release and certain restrictive covenants that are binding upon Mr. Hartman.
Goodman Separation
As noted above, Mr. Goodman departed from the Company effective November 15, 2019. He was not entitled to any severance compensation or benefits in connection with his departure.
Potential Payments Upon Separation from Service or Change in Control
The following tables detail the amounts that would have been payable to each of our named executive officers (other than Mr. Goodman, whose actual separation arrangement is described above) had each such officer been separated from service with the Company as of the last business day of fiscal
2019
: (i) involuntarily and without cause or for good reason (a "Qualifying Termination") and without a Change in Control of the Company; (ii) pursuant to a Qualifying Termination and a Change in Control of the Company; and (iii) as the result of death or disability, in each case after taking into account the following assumptions as applicable:
|
•
|
no payment value was ascribed to any presently vested and exercisable equity incentive awards, as such awards would not be impacted by a separation from service or change in control;
|
|
•
|
all equity incentive awards that would accelerate in connection with a separation from service, change in control, or upon death or disability pursuant to the terms of applicable agreements were accelerated and cash valued as of December 31,
2019
by multiplying the number of vesting shares by the closing price per share of our common stock on the NYSE on December 31,
2019
($111.79);
|
40
|
•
|
each of the named executive officers continued to be entitled to participate in the Company’s health and dental insurance plans (no such officer obtained other employment which provided at least equal benefits), and the cost thereof was cash valued at the cost to the Company;
|
|
•
|
all parties complied with any required release and notice provisions in the applicable agreement;
|
|
•
|
all amounts due to the named executive officers were paid immediately;
|
|
•
|
each of the named executive officers continued to comply with any restrictive or other covenant applicable to him that may have otherwise resulted in the repayment or withholding of severance amounts due; and
|
|
•
|
all outstanding equity incentive awards were accelerated upon death or disability and cash valued as of December 31,
2019
by multiplying the number of vesting shares by the closing price per share of our common stock on the NYSE on December 31,
2019
($111.79).
|
Qualifying Termination Assuming No Change in Control
|
Named Executive Officer
|
Base Salary Continuation
(1)
|
Bonus
(1)
|
Benefits Continuation
|
Performance Share/ Restricted Stock/ Restricted Stock Unit Acceleration
|
Total
|
||||||||||
|
David W. Hult
|
$
|
1,000,000
|
|
$
|
2,937,500
|
|
$
|
1,455
|
|
$
|
4,933,404
|
|
$
|
8,872,359
|
|
|
William F. Stax
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
|
George A. Villasana
|
$
|
575,000
|
|
$
|
582,188
|
|
$
|
1,783
|
|
$
|
—
|
|
$
|
1,158,971
|
|
|
Jed Milstein
|
$
|
475,000
|
|
$
|
480,938
|
|
$
|
4,679
|
|
$
|
—
|
|
$
|
960,617
|
|
|
John S. Hartman
|
$
|
600,000
|
|
$
|
607,500
|
|
$
|
2,564
|
|
$
|
—
|
|
$
|
1,210,064
|
|
|
(1)
|
Based upon the actual or target amounts of salary and non-equity incentive plan compensation paid in
2019
, which are described above in the "Compensation Discussion & Analysis" section of this proxy statement.
|
Qualifying Termination Assuming Change in Control
|
Named Executive Officer
|
Base Salary Continuation
(1)
|
Bonus
(1)
|
Benefits Continuation
|
Performance Share/ Restricted Stock/ Restricted Stock Unit Acceleration
|
Total
|
||||||||||
|
David W. Hult
|
$
|
2,000,000
|
|
$
|
4,187,500
|
|
$
|
2,910
|
|
$
|
10,686,900
|
|
$
|
16,877,310
|
|
|
William F. Stax
|
$
|
229,500
|
|
$
|
80,325
|
|
$
|
5,261
|
|
$
|
534,468
|
|
$
|
849,554
|
|
|
George A. Villasana
|
$
|
575,000
|
|
$
|
582,188
|
|
$
|
1,783
|
|
$
|
2,405,944
|
|
$
|
3,564,915
|
|
|
Jed Milstein
|
$
|
475,000
|
|
$
|
480,938
|
|
$
|
4,679
|
|
$
|
1,566,401
|
|
$
|
2,527,018
|
|
|
John S. Hartman
|
$
|
600,000
|
|
$
|
607,500
|
|
$
|
2,564
|
|
$
|
2,802,911
|
|
$
|
4,012,975
|
|
|
(1)
|
Based upon the actual or target amounts of salary and non-equity incentive plan compensation paid in
2019
, which are described above in the "Compensation Discussion & Analysis" section of this proxy statement.
|
Separation from Service Upon Death or Disability
|
Named Executive Officer
|
Base Salary
Continuation
|
Bonus
|
Benefits Continuation
|
Performance Share Units/ Restricted Stock/ Restricted Stock Units Acceleration
|
Total
|
||||||||||
|
David W. Hult
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
10,686,900
|
|
$
|
10,686,900
|
|
|
William F. Stax
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
534,468
|
|
$
|
534,468
|
|
|
George A. Villasana
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
2,405,944
|
|
$
|
2,405,944
|
|
|
Jed Milstein
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
1,566,401
|
|
$
|
1,566,401
|
|
|
John S. Hartman
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
2,802,911
|
|
$
|
2,802,911
|
|
41
CEO PAY RATIO
For the
2019
fiscal year, the Pay Ratio (the "Pay Ratio") of the annual total compensation of Mr. Hult, our President & Chief Executive Officer during
2019
(“CEO Compensation”), to the median of the annual total compensation of all of our employees other than our Chief Executive Officer (“Median Annual Compensation”) was 109
to 1. This ratio is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K using the data and assumptions summarized below. In this summary, we refer to the employee who received such Median Annual Compensation as the “Median Employee.” We did not use the same Median Employee in our calculation of the Pay Ratio for the
2019
fiscal year as we did in our calculation of the Pay Ratio for the
2018
fiscal year because we determined it was appropriate to identify a new Median Employee due to our highly variable pay practices. The date used to identify the Median Employee for the
2019
fiscal year was December 31,
2019
(the “Determination Date”).
CEO Compensation for purposes of this disclosure was $5,459,308, which represents the total compensation reported for Mr. Hult under "Summary Compensation Table” for the
2019
fiscal year. For purposes of this disclosure, Median Annual Compensation was $50,000, and was calculated by totaling for our Median Employee all applicable elements of compensation for the
2019
fiscal year in accordance with Item 402(c)(2)(x) of Regulation S-K.
To identify the Median Employee for the
2019
fiscal year, we first determined our employee population as of the Determination Date. We had 8,500 employees, representing all full-time, part-time, seasonal and temporary employees of us and our consolidated subsidiaries as of the Determination Date. This number does not include any independent contractors or “leased” workers, as permitted by the applicable SEC rules. We then measured compensation for the period beginning on January 1,
2019
and ending on December 31,
2019
for these employees. This compensation measurement was calculated by totaling, for each employee, gross taxable earnings, including salary, wages, commissions, bonuses, the value of equity awards that vested during the measurement period and other compensation as shown in our payroll and human resources records for
2019
. A portion of our employee workforce (full-time and part-time) worked for less than the full fiscal year due to commencing employment after the beginning of the fiscal year. In determining the Median Employee, we annualized the compensation for such individuals.
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
The securities outstanding under our equity compensation plans and the number of securities remaining available for issuance under our equity compensation plans, as of December 31,
2019
, were as follows:
|
Plan Category
|
Number of Securities to be Issued Upon Exercise of Outstanding Options,
Warrants and Rights (a)
|
Weighted Average Exercise Price of Outstanding Options, Warrants and Rights (b)
|
Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (excluding securities reflected in column (a)) (c)
|
|||
|
Equity compensation plans approved by security holders
|
205,290
(1)
|
(2)
|
1,597,221
(3)
|
|||
|
Equity compensation plans not approved by security holders
|
-
|
-
|
-
|
|||
|
Total
|
205,290
|
(2)
|
1,597,221
|
|||
|
(1)
|
Represents 205,290 the number reported in this table assumes, with respect to each performance-based equity award that is unearned, that we attain the maximum performance goals associated with such award (which may overstate potential dilution associated with the awards.).
|
|
(2)
|
Performance-based equity awards granted under our equity compensation plans have no exercise price.
|
|
(3)
|
We only have the ability to make grants of additional securities under our 2019 Plan.
|
42
PROPOSAL 2 - ADVISORY APPROVAL OF NAMED EXECUTIVE OFFICER COMPENSATION
Pursuant to Section 14A of the Exchange Act, our stockholders have the right to vote to approve, on an advisory (non-binding) basis, the compensation of our named executive officers. The advisory stockholder vote is commonly referred to as the “say-on-pay” vote. At the
2019
Annual Meeting of Stockholders, approximately 97.9% of the shares voted on this proposal were voted in favor of the Company’s named executive officer compensation. We currently hold this vote annually, so our Board is again submitting a non-binding stockholder vote on our named executive officer compensation.
As described in the “Compensation Discussion & Analysis” section of this proxy statement, our compensation program is designed to appropriately reward our executive officers for their individual and collective performance and for our collective performance in achieving specified financial and other appropriate performance objectives. Please read the “Compensation Discussion & Analysis” section of this proxy statement for additional details about our executive compensation philosophy and programs, including information about the fiscal year
2019
compensation of our named executive officers as set out in the tables and accompanying narrative.
This proposal gives you as a stockholder the opportunity to express your views on the compensation of our named executive officers. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers and the philosophy, policies and practices described in this proxy statement. Accordingly, we are asking stockholders to approve the following resolution:
"RESOLVED, that the compensation paid to the Company’s named executive officers, as disclosed pursuant to the compensation disclosure rules of the U.S. Securities and Exchange Commission, including the ‘Compensation Discussion & Analysis,’ compensation tables and any related material disclosed in this proxy statement, is hereby APPROVED.”
Because your vote is advisory, it will not be binding on our Board and may not be construed as overruling any decision by the Board, nor will it create or imply any additional fiduciary duty of the Board. However, the Board will review the voting results and may, in its sole discretion, take into account the outcome of the vote when considering future executive compensation arrangements.
Our Board and our Compensation & Human Resources Committee believe that our commitment to responsible compensation practices justifies a vote by stockholders for the resolution approving the compensation of our named executive officers as disclosed in this proxy statement.
|
The Board recommends you vote
FOR
the approval, on an advisory basis, of the compensation of our named executive officers, as disclosed in this proxy statement pursuant to the compensation disclosure rules of the U.S. Securities and Exchange Commission.
|
43
AUDIT COMMITTEE REPORT
The primary purpose of the Audit Committee is to assist the Board in fulfilling its responsibility to oversee: (i) management’s conduct of the Company’s financial reporting process (including the development and maintenance of systems of internal accounting and financial controls); (ii) the integrity of the Company’s financial statements; (iii) the Company’s compliance with certain legal and regulatory requirements; (iv) the qualifications, independence and performance of the Company’s outside auditors; and (v) the performance of the Company’s internal audit functions. The Committee also is directly responsible for the appointment, retention, compensation, termination and oversight of the Company's outside auditors. The charter of the Audit Committee is available on the Company’s website at
www.asburyauto.com/company/investor-relations/
under “Corporate Governance."
The Audit Committee comprises Eugene S. Katz (Chair), Joel Alsfine, Thomas C. DeLoach, Jr., Maureen F. Morrison and Thomas J. Reddin. The Board has determined that each member of the Audit Committee meets the requisite independence and other qualification requirements for Audit Committee membership under SEC rules, the listing standards of the NYSE, the Audit Committee charter and the independence standards set forth in the Company’s Corporate Governance Guidelines. The Board has also determined that each member of the Audit Committee is an “audit committee financial expert” within the meaning of Item 407(d)(5) of Regulation S-K under the Exchange Act.
In fulfilling its oversight role, the Audit Committee reviewed and discussed the Company’s audited consolidated financial statements for the year ended December 31,
2019
with the Company’s management and Ernst & Young LLP, the Company's independent registered public accountants. Management represented to the Audit Committee that the Company’s consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States. The Audit Committee also discussed with Ernst & Young LLP matters deemed significant by Ernst & Young LLP, including those matters required to be discussed pursuant to
Auditing Standard No. 1301
, “Communications with Audit Committees,” adopted by the Public Company Accounting Oversight Board and the SEC.
In addition, the Audit Committee has received and reviewed the written disclosures and the letter from Ernst & Young LLP pursuant to the applicable requirements of the Public Company Accounting Oversight Board regarding Ernst & Young LLP’s communications with the Audit Committee concerning independence and discussed with Ernst & Young LLP matters relating to its independence, and considered whether their provision of certain non-audit services is compatible with maintaining their independence. In the letter, Ernst & Young confirmed its independence, and the Audit Committee determined that Ernst & Young’s provision of non-audit services to the Company is compatible with maintaining their independence.
Based on the Audit Committee’s review with management and Ernst & Young LLP of the Company’s audited financial statements and Ernst & Young LLP’s report on such financial statements, and based on the discussions and written disclosures described above, the Audit Committee recommended to the Board of Directors that the audited consolidated financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31,
2019
.
Members of the Audit Committee:
Eugene S. Katz (Chair)
Joel Alsfine
Thomas C. DeLoach, Jr.
Maureen F. Morrison
Thomas J. Reddin
44
PROPOSAL 3 - RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee has appointed Ernst & Young LLP as our independent registered public accounting firm for the year ending December 31,
2020
. If the stockholders fail to ratify this appointment, the Audit Committee may, but is not required to, reconsider whether to retain that firm. Representatives from Ernst & Young LLP are expected to be present at the
2020
Annual Meeting and, if present, will have the opportunity to make a statement if they desire to and to answer appropriate questions.
Independent Registered Public Accounting Firm Fees
The following table summarizes the aggregate fees billed to us by Ernst & Young LLP for fiscal years
2019
and
2018
.
|
2019
|
|
2018
|
|
|||
|
Audit Fees
|
$
|
2,393,000
|
|
$
|
2,150,000
|
|
|
Tax Fees
|
$
|
93,000
|
|
$
|
85,000
|
|
|
Non-Audit Fees
|
$
|
450,000
|
|
$
|
75,000
|
|
|
Total
|
$
|
2,936,000
|
|
$
|
2,310,000
|
|
Audit fees are composed of fees for professional services rendered by Ernst & Young LLP for the fiscal years ended December 31,
2019
and
2018
, for the audits of our annual financial statements, and for the reviews of the financial statements included in our Quarterly Reports on Form 10-Q for the fiscal years ended
2019
and
2018
, respectively. The audit fees also included fees associated with the audit of the effectiveness of our internal controls over financial reporting as required by Section 404 of the Sarbanes-Oxley Act. Audit fees for
2019
included $751,000 of fees primarily related to various transactions as well as fees related to the Company's adoption of of ASU 2016-02,
Leases.
Audit fees for
2018
include $553,000 of fees primarily related to various transactions as well as fees related to the Company's adoption of ASU 2014-09,
Revenue from Contracts with Customers,
the impact of the Tax Cuts and Jobs Act and the pending adoption of ASU 2016-02,
Leases.
Tax fees for
2019
and 2018 relate to tax compliance services. Non-audit fees for
2019
and 2018 relate to due diligence fees related to a potential acquisition and cyber-security diagnostic services, respectively.
Included in the
2019
audit fees was approximately $326,000 that had not been billed to us as of December 31,
2019
. Included in the
2018
audit fees was approximately $350,000 that had not been billed to us as of December 31,
2018
.
Audit Committee’s Pre-Approval Policies and Procedures
The Audit Committee has policies and procedures that require the pre-approval by the Audit Committee of all fees paid to, and all services performed by, our independent registered public accounting firm. Each year, the Audit Committee approves the proposed services, including the nature, type and scope of services to be performed by our independent registered public accounting firm during the fiscal year and the related fees. Audit Committee pre-approval is also required for those engagements that may arise during the course of the year that are outside the scope of the initial services and fees pre-approved by the Audit Committee. The Audit Committee has delegated to the Audit Committee chair the ability to approve non-audit work of our independent registered public accounting firm.
Pursuant to the requirements of the Sarbanes-Oxley Act, the fees and services provided as noted in the table above were authorized and approved by the Audit Committee in compliance with the pre-approval policies and procedures described herein.
|
The Board recommends you vote
FOR
the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the year ending December 31, 2020.
|
45
OTHER MATTERS
Management is not aware of any other matters to be brought before the
2020
Annual Meeting, but if other matters come before the meeting, the proxy holders intend to take such action as in their judgment is in the best interest of the Company and its stockholders.
Stockholder Proposals for the
2020
Annual Meeting
This proxy statement relates to the Company’s
2020
Annual Meeting, which will take place on
April 21, 2020
. The Company currently expects that its
2021
Annual Meeting of Stockholders will be held in April
2021
. In order to be eligible for inclusion in the Company’s proxy materials for the
2021
Annual Meeting of Stockholders, any stockholder proposal must be submitted in writing to the Company’s Corporate Secretary and received at the Company’s executive offices at 2905 Premiere Parkway NW, Suite 300, Duluth, GA 30097 by the close of business on November 19,
2020
, or such later date as the Company may determine and announce in connection with the actual scheduling of the
2021
Annual Meeting of Stockholders. To be considered for presentation at the
2021
Annual Meeting of Stockholders, although not included in the Company’s proxy statement, any stockholder proposal, including nominations of directors, must be received at the Company’s executive offices at the foregoing address not earlier than December 22,
2020
, but on or before the close of business on January 21,
2021
, or such later date as the Company may determine and announce in connection with the actual scheduling of the
2020
Annual Meeting of Stockholders and must comply with the notice procedures set forth in the Company's Bylaws. The procedure for nominating directors is described above under “Governance of the Company—Nomination of Directors.”
All stockholder proposals for inclusion in the Company’s proxy materials will be subject to the requirements of the proxy rules adopted under the Exchange Act and, as with any stockholder proposal (regardless of whether it is included in the Company’s proxy materials), including nominations of directors, the Company’s Restated Certificate of Incorporation, the Company’s Bylaws and Delaware law.
Delivery of Proxy Materials to Households
Under the rules of the SEC, the Company is permitted to use a method of delivery, often referred to as “householding.” Householding permits the Company to mail a single set of proxy materials to any household in which two or more different stockholders reside and are members of the same household or in which one stockholder has multiple accounts. The Company did not household materials for the
2020
Annual Meeting. If the Company households materials for future meetings, then only one copy of the Company’s annual report and proxy statement will be sent to multiple stockholders of the Company who share the same address and last name, unless the Company has received contrary instructions from one or more of those stockholders. In addition, the Company has been notified that certain intermediaries (
i.e.
, banks, brokers or other nominees) will household proxy materials for the
2020
Annual Meeting. For voting purposes, a separate proxy card will be included for each account at the shared address. The Company will deliver promptly, upon oral or written request, a separate copy of the annual report and proxy statement to any stockholder at the same address. If you wish to receive a separate copy of the annual report and proxy statement, you may contact the Company’s Investor Relations Department (a) by mail at 2905 Premiere Parkway NW, Suite 300, Duluth, GA 30097, (b) by telephone at 770-418-8212, or (c) by e-mail at
ir@asburyauto.com
. You may also contact your bank, broker or other nominee to make a similar request. Stockholders sharing an address who now receive multiple copies of the Company’s annual report and proxy statement may request delivery of a single copy by contacting the Company as indicated above, or by contacting their bank, broker or other nominee, provided the broker, bank or other nominee has elected to household proxy materials.
Additional Information
The Company files annual, quarterly and current reports, proxy materials and other information with the SEC. You may read and copy any document that the Company files at the Public Reference Room of the SEC at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. You may also inspect the Company’s filings at the regional offices of the SEC or over the Internet at the SEC’s website at
www.SEC.gov
. Additional information can also be found on the Company’s website at
www.AsburyAuto.com
. Information contained on any website referenced in this proxy statement is not incorporated by reference in this proxy statement.
If you would like to receive a copy of any exhibits listed in the Company’s Annual Report on Form 10-K for the year ended December 31,
2019
, please contact Investor Relations, Asbury Automotive Group, Inc. (a) by mail at 2905 Premiere Parkway NW, Suite 300, Duluth, GA 30097, (b) by telephone at 770-418-8212, or by email at
ir@asburyauto.com
and the exhibits will be provided to you upon the payment of a nominal fee (which fee will be limited to the expenses the Company incurs in providing you with the requested exhibits).
46
47
48
TABLE OF CONTENTS
INFORMATION ABOUT THE MEETINGSECURITIES OWNED BY MANAGEMENT & CERTAIN BENEFICIAL OWNERSEquity Ownership GuidelinesPolicy Regarding Hedging or Pledging of Asbury StockPROPOSAL 1 - ELECTION OF DIRECTORSGOVERNANCE OF THE COMPANYBoard Leadership StructureIndependence of DirectorsCommittees of the BoardCode of Business Conduct and Ethics and Corporate Governance GuidelinesThe Boards Risk Oversight RoleCorporate Responsibility - Environmental, Social & Governance MattersNomination of DirectorsService LimitationsCommunications with the BoardRelated Person TransactionsDIRECTOR COMPENSATIONDirector FeesMeetings Attendance2019 Director Compensation TableEXECUTIVE OFFICERSCOMPENSATION DISCUSSION & ANALYSISOverviewCompensation Philosophy and GuidelinesElements of CompensationTotal Compensation Program Supporting Attainment of Operating & Strategic ImperativesPolicies and PracticesThe Role of Stockholder Say-on-Pay Votes and Related ConsiderationsCompensation ConsultantReviewing Executive CompensationAdditional Considerations in Making Executive Compensation DecisionsReview of 2019 Total CompensationEmployment, Severance and Change in Control ArrangementsTax Treatment of Certain CompensationCOMPENSATION & HUMAN RESOURCES COMMITTEE REPORTCOMPENSATION COMMITTEE INTERLOCKS & INSIDER PARTICIPATIONEXECUTIVE COMPENSATIONSummary Compensation Table2019 Grants of Plan-Based AwardsOutstanding Equity Awards at 2019 Fiscal Year-End2019 Option Exercises and Stock Vested2019 Nonqualified Deferred CompensationPOTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROLCEO PAY RATIOSECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANSPROPOSAL 2 - ADVISORY APPROVAL OF NAMED EXECUTIVE OFFICER COMPENSATIONAUDIT COMMITTEE REPORTPROPOSAL 3 - RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMIndependent Registered Public Accounting Firm FeesAudit Committees Pre-Approval Policies and ProceduresOTHER MATTERSStockholder Proposals for the 2020 Annual MeetingDelivery of Proxy Materials to HouseholdsAdditional Information