SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
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Securities Exchange Act of 1934
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The ADT Corporation
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The ADT Corporation 1501 Yamato Road Boca Raton, Florida 33431 |
January 22, 2016
Dear ADT Stockholder:
You are cordially invited to attend The ADT Corporations 2016 Annual Meeting of Stockholders (the Annual Meeting), which will be held at 8:30 a.m. Eastern Time, on Tuesday, March 15, 2016 in the Grand Ballroom at the Farmers Table Event Center, 1901 N. Military Trail, Boca Raton, Florida 33431. Details of the business to be conducted at the Annual Meeting are given in the accompanying Notice of Annual Meeting and Proxy Statement, which provides information required by applicable laws and regulations.
In accordance with U.S. Securities and Exchange Commission rules, we are sending stockholders a Notice of Internet Availability of Proxy Materials (the Notice) with instructions for accessing the proxy materials and voting via the Internet. This Notice also provides information on how stockholders may obtain paper copies of our proxy materials if they so choose. We believe use of the Internet makes the proxy distribution process more efficient, less costly and helps in conserving natural resources.
Your vote is important and we encourage you to vote whether you are a registered owner or a beneficial owner (because your shares are held in a stock brokerage account or by a bank or other nominee), and whether or not you plan to attend the Annual Meeting. If you are a registered owner of ADT common stock and do not plan to vote in person at the Annual Meeting, you may vote via the Internet, by telephone or, if you receive a paper proxy card in the mail, by mailing the completed proxy card. Voting by any of these methods will ensure your representation at the Annual Meeting. If you are a beneficial owner, the registered owner will communicate with you about how to vote your shares.
Thank you for your continued interest in ADT.
Yours sincerely,
Bruce Gordon
Chairman of the Board of Directors
The ADT Corporation |
Notice of 2016 Annual Meeting of Stockholders
When: |
Tuesday, March 15, 2016 at 8:30 a.m. Eastern Time | |
Where: |
Grand Ballroom, Farmers Table Event Center, 1901 N. Military Trail, Boca Raton, Florida 33431 | |
Who Can Vote: |
Stockholders of ADT common stock at the close of business on January 15, 2016 | |
Date of Mailing or Availability Date: |
Beginning on or about January 22, 2016, this Notice of Annual Meeting and the 2016 Proxy Statement are being mailed or made available, as the case may be, to stockholders of record on January 15, 2016. | |
Items of Business: | To elect the members of our Board of Directors, each as named in the 2016 Proxy Statement.
To ratify the appointment of Deloitte & Touche LLP as our Independent Registered Public Accounting Firm for fiscal year 2016.
To approve, in a non-binding vote, the compensation of the Companys named executive officers.
To transact such other business as may properly come before the annual meeting or any adjournment or postponement thereof. | |
Proxy Voting: |
Your vote is important. Proxy voting permits stockholders unable to attend the Annual Meeting to vote their shares through a proxy. By appointing a proxy, your shares will be represented and voted in accordance with your instructions. Stockholders who do not receive paper copies of our proxy materials can vote their shares by following the voting instructions provided on the Notice of Internet Availability of Proxy Materials. If you are a registered owner and requested a paper copy of the proxy materials, you can vote your shares by proxy by completing and returning your proxy card or by following the Internet or telephone voting instructions provided on the proxy card. If you sign the proxy card and do not provide instructions on how to vote, the proxies will vote your shares as recommended by the Board of Directors. You can change your vote or revoke your proxy at any time prior to the Annual Meeting by following the instructions on page 2 of the 2016 Proxy Statement and on the proxy card. Beneficial owners should contact their broker. Beneficial owners who received or requested a paper copy of the proxy materials may submit voting instructions to their bank, broker or other nominee by completing and returning their voting instruction form or by following the Internet or telephone voting instructions provided on the voting instruction form. |
Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to be held on March 15, 2016. The Companys 2016 Proxy Statement and 2015 Annual Report are available online at www.proxyvote.com.
By Order of the Board of Directors,
Lorna R. Simms
Corporate Secretary
January 22, 2016
PROXY STATEMENT SUMMARY |
Proxy Statement Summary
This summary highlights certain information contained elsewhere in this Proxy Statement. This summary does not contain all of the information that you should consider. Please read the entire Proxy Statement before you vote.
Meeting Agenda
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Board & Governance Highlights
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ELECTION OF 9 DIRECTORS....page 15 |
Governance Changes Since 2015 Annual Meeting | |||||||
ü Your Board recommends a vote for each director nominee
MANAGEMENT PROPOSALS
Ratification of Deloitte & Touche LLP as our independent registered public accounting firm for FY2016...page 51
Approval, in a non-binding vote, of the compensation of our named executive officers...page 52
ü Your Board recommends a vote for both proposals |
Strengthened cybersecurity oversight with Audit Committee receiving frequent reports on cyber and product security
Enhanced investor outreach process by inviting our largest institutional investors to meet with our independent directors and adopted a stockholder communication and engagement policy
Increased corporate political spending oversight with the issuance of The ADT Corporation U.S. Political Activity Statement (see www.adt.com)
Enhanced ADTs environmental sustainability commitment with the release of its 2015 annual Sustainability Report (see www.adt.com)
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TABLE OF CONTENTS |
Table of Contents
TABLE OF CONTENTS |
INFORMATION ABOUT THIS PROXY STATEMENT AND THE ANNUAL MEETING |
INFORMATION ABOUT THIS PROXY STATEMENT AND THE ANNUAL MEETING
Questions and Answers about Voting Your Shares
The ADT Corporation | 2016 Proxy Statement 1 |
INFORMATION ABOUT THIS PROXY STATEMENT AND THE ANNUAL MEETINGCONTINUED |
2 | The ADT Corporation |
2016 Proxy Statement |
INFORMATION ABOUT THIS PROXY STATEMENT AND THE ANNUAL MEETINGCONTINUED |
The ADT Corporation | 2016 Proxy Statement 3 |
INFORMATION ABOUT THIS PROXY STATEMENT AND THE ANNUAL MEETINGCONTINUED |
The costs of solicitation of proxies will be paid by ADT. ADT has engaged MacKenzie Partners, Inc. as the proxy solicitor for the Annual Meeting for an approximate fee of $10,000, plus reasonable out-of-pocket expenses. In addition to the use of the mails, certain directors, officers or employees of ADT may solicit proxies by telephone, electronic communication or personal contact. Upon request, ADT will reimburse brokers, dealers, banks and trustees or their nominees for reasonable expenses incurred by them in forwarding proxy materials to beneficial owners of our common stock.
Returning Your Proxy or Voting Instruction Form
ADT stockholders of record who have received paper copies of the proxy materials should complete and return the proxy card as soon as possible. In order to assure that your proxy is received in time to be voted at the Annual Meeting, the proxy card must be completed in accordance with the instructions on it and received at the address set forth below by the times (being local times) and dates specified therein:
Vote Processing c/o Broadridge
51 Mercedes Way
Edgewood, NY 11717
If your shares are held in street name and you have received paper copies of the proxy materials, you should return your voting instruction form in accordance with the instructions on that form or as provided by the bank, brokerage firm or other nominee who holds shares of ADT common stock on your behalf.
4 | The ADT Corporation |
2016 Proxy Statement |
CORPORATE GOVERNANCE OF THE COMPANY |
CORPORATE GOVERNANCE OF THE COMPANY
The business of the Company is managed under the direction of its Board of Directors. The Board of Directors delegates its authority to management for managing the everyday affairs of the Company. Strong corporate governance is and has been a long-standing priority at ADT. The Board of Directors believes that sound corporate governance is the foundation for financial integrity, investor confidence and superior performance, and it is committed to recruiting and retaining directors and officers of proven leadership and personal integrity. To further these goals, the Board of Directors has adopted the ADT Board Governance Principles. The Board of Directors reviews these Principles, at least annually, and updates the Principles as necessary to reflect changing regulatory requirements, evolving practices and input from stockholders. The ADT Board Governance Principles are posted on the Companys website at http://investors.adt.com. A copy of the Principles is available to stockholders upon written request to the Corporate Secretary at The ADT Corporation, 1501 Yamato Road, Boca Raton, Florida 33431.
Board Leadership Structure
The Board of Directors does not have a formal policy regarding the separation of the roles of Chairman and Chief Executive Officer, as it believes it is in the best interests of the Company and its stockholders to make that determination based on the business needs of the Company and the membership of the Board at a given time. The Company has had an independent Chairman since it became a standalone publicly-traded company in September 2012, and the Board of Directors believes that having separate Chairman and Chief Executive Officer positions, and having an independent director serve as Chairman, continues to be the appropriate leadership structure for the Company at this time. The Board of Directors believes that the current leadership structure enables the Chief Executive Officer to focus on the operations of the Companys business, while the independent Chairman focuses on leading the Board in its responsibilities and helping the Board ensure that management is acting in the best interests of the Company and its stockholders.
The Boards Oversight of Risk Management
Risk is an inherent part of ADTs business activities and risk management is critical to the Companys innovation and success. The Companys compensation programs are designed to motivate employees to take appropriate levels of risks that are aligned with the Companys strategic goals, without encouraging or rewarding excessive risk. The Board of Directors is responsible for evaluating the Companys major risks and for determining that appropriate risk management and control procedures are in place and that senior executives take the appropriate steps to manage all major risks.
As part of its enterprise risk management (ERM) program, the Company conducts an annual risk assessment survey covering risks, among others, in finance, operations, strategy, compliance, information technology, human resources, environment, health, safety and welfare, brand reputation, innovation, litigation, risk management, public affairs and competition. The Board of Directors has delegated responsibility for the oversight of the ERM program to its Nominating and Governance Committee. The Company formed the Enterprise Risk Management Council (the ERMC), which is chaired by the Chief Legal Officer, and consists of other senior executives from Risk Management, Internal Audit, IT, Corporate Development, Operations, Finance, Innovation and Technology, Marketing and Environmental, Health & Safety. The ERMC meets periodically to (i) review the results of the annual risk assessment survey and to identify the top enterprise risks, (ii) determine specified risk owners, (iii) monitor the implementation of mitigation plans, and (iv) update and obtain direction from the Nominating and Governance Committee on a regular basis.
Throughout the year, the Board of Directors dedicates a portion of its meetings to review and discuss specific risks and mitigation processes in greater detail. Oversight of certain specific risks is delegated to the following committees of the Board of Directors:
Audit Committeeoversees risks relating to the Companys major financial risk exposures including financial statements and financial reporting and controls, internal controls, cybersecurity risk oversight and legal, regulatory and compliance risks, and steps taken by management to monitor and control such exposures.
Compensation Committeeoversees risks arising from the Companys compensation policies and programs for all employees and the non-management directors.
Nominating and Governance Committeeoversees risks related to the Companys governance structure and process as well as oversee the ERMC as described above.
The Boards Role in Strategy Oversight
The Board of Directors as a whole is constituted to be strong in its collective knowledge and has diversity of skills and experience with respect to vision and strategy, management and leadership, business operations, business judgment, crisis management, risk assessment, industry knowledge, accounting and finance, corporate governance, and global markets. Setting the strategic course of the Company involves a high level of constructive engagement between management and the Board of Directors. In addition to dedicating a multi-day meeting to strategy discussions annually, the Board of Directors receives information and updates from management with respect to strategy throughout the year and discusses strategy periodically at Board meetings.
The ADT Corporation | 2016 Proxy Statement 5 |
CORPORATE GOVERNANCE OF THE COMPANYCONTINUED |
Board Evaluations
The Board of Directors and committees conduct annual self-assessments to assess the qualifications, attributes, skills and experience represented on the Board and to determine the effectiveness of the Board and each committee. As part of this process, directors are asked to complete a written Board questionnaire and committee self-assessments. The questionnaire and self-assessments focus on the Boards and committees contribution to the Company and on areas in which the Board of Directors believes that the Board or any of its committees could improve. This process enables directors to provide anonymous and confidential feedback, which is then summarized and compiled into a report and reviewed by the Chairman of the Board. The Chairman then discusses the findings in a report with the full Board and oversees the full Boards review of its performance.
Attendance at Meetings
The Board of Directors met eight times during fiscal year 2015. ADT policy dictates that the Board of Directors meets at least five times a year, and additional meetings may be called in accordance with our By-laws. One of these meetings is scheduled in conjunction with the Companys annual meeting of stockholders, and Board members are required to be in attendance at the annual meeting of stockholders in person or, via exception, by telephone. No current director attended fewer than 75 percent of the board meetings held, including meetings held by all committees of the Board of Directors on which such director served. All of the current directors attended the 2015 Annual Meeting of Stockholders.
Executive Sessions
The non-management directors of the Company meet in executive sessions without management on a regular basis. The Chairman of the Board of Directors presides at such executive sessions (the Presiding Director). In the absence of the Presiding Director, the non-management directors will designate another director to preside over such executive sessions.
Investor Engagement
In 2015, the Board of Directors adopted the Stockholder Communication and Engagement Policy. The Stockholder Communication and Engagement Policy is posted on the Companys website at http://investors.adt.com. Consistent with this Policy, the Company instituted a process to provide an opportunity for certain institutional investors with substantial ownership positions to meet with one or more of the Companys independent directors. This allows directors to directly discuss and receive investors views on, among other topics, the Companys strategy, compensation philosophy and programs, Board structure and composition, and corporate governance practices and disclosure. A copy of the Stockholder Communication and Engagement Policy is available to stockholders upon written request to the Corporate Secretary at The ADT Corporation, 1501 Yamato Road, Boca Raton, FL 33431.
Communicating with the Board
Management speaks on behalf of the Company, and the Board of Directors normally communicates through management with outside parties, including stockholders, business journalists, equity analysts, rating agencies, and government regulators. Stockholders and all other interested parties can directly raise issues with the Board of Directors, including the non-management directors as a group, via email at directors@adt.com. The Board of Directors periodically reviews all pertinent communications from stockholders and other interested parties.
6 | The ADT Corporation |
2016 Proxy Statement |
CORPORATE GOVERNANCE OF THE COMPANYCONTINUED |
Board Committees
The Board of Directors maintains three standing committees: Audit, Compensation, and Nominating and Governance, and each of these committees is entirely composed of independent directors. The table below indicates the members of each Board committee:
| The independent directors as a group elect the members and the chair of the Nominating and Governance Committee. Assignments to, and chairs of, the Audit and Compensation Committees are recommended by the Nominating and Governance Committee and selected by the Board of Directors. All committees report regularly on their activities to the Board of Directors. |
| The Chairman of the Board of Directors may convene a special committee to review certain material matters being considered by the Board of Directors from time to time. The special committee will report their activities to the Board of Directors. |
| To ensure effective discussion and decision making while at the same time having a sufficient number of independent directors for its three standing committees, the Board of Directors is normally constituted of between seven and nine directors but may consist of as many as twelve directors as determined by the Board of Directors from time to time. Subject to ADTs certificate of incorporation, the number of directors shall be fixed by resolution of the Board of Directors, and vacancies occurring in the Board of Directors may be filled only by a majority of the vote of the remaining directors then in office. |
| The Nominating and Governance Committee annually reviews the organization of the Board of Directors and recommends appropriate changes to the full Board of Directors. |
Each of the committees operates under a written charter that is posted to our website at http://investors.adt.com. We will also provide a printed copy of the committee charters to stockholders upon written request to the Corporate Secretary at The ADT Corporation, 1501 Yamato Road, Boca Raton, Florida 33431.
The ADT Corporation | 2016 Proxy Statement 7 |
CORPORATE GOVERNANCE OF THE COMPANYCONTINUED |
Audit Committee
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The Audit Committee was established in accordance with Section 3(a)(58)(A) and Rule 10A-3 under the Exchange Act.
Primary Responsibilities
overseeing the quality and integrity of our annual audited and quarterly unaudited financial statements, accounting practices and financial information that we provide to the SEC or the public;
selecting our independent registered public accounting firm, such selection to be presented by our Board of Directors to our stockholders for their ratification at the annual meeting of stockholders;
pre-approving all services to be provided to us by our independent registered public accounting firm;
conferring with our independent registered public accounting firm to review the plan and scope of its proposed financial audits and quarterly reviews, as well as its findings and recommendations upon the completion of the audits and such quarterly reviews;
reviewing the independence of the independent registered public accounting firm;
overseeing our internal audit function;
meeting with the independent registered public accounting firm, our appropriate financial personnel and internal auditor regarding our internal controls, critical accounting policies and other matters; and
overseeing all of our compliance, internal controls, cybersecurity risk and risk management policies.
Financial Expertise, Independence and Financial Literacy
The Board of Directors has determined that the committee chairman, Mr. Colligan, and Ms. Hyle each qualify as an audit committee financial expert as defined by the rules of the SEC.
The Audit Committee is comprised of directors who meet the independence requirements set forth in the listing standards of the NYSE, our Board Governance Principles and in accordance with the Audit Committee charter, are financially literate as defined by the NYSE rules and have accounting or related financial management expertise as such terms are interpreted by the Board of Directors in its business judgment. None of our Audit Committee members simultaneously serves on more than two other public company audit committees.
Report
The Audit Committee Report is set forth on page 50 of this Proxy Statement.
Charter
The Audit Committee charter is posted to our website at http://investors.adt.com. A printed copy of the Audit Committee charter is available to stockholders upon written request to the Corporate Secretary at The ADT Corporation, 1501 Yamato Road, Boca Raton, Florida 33431. | |||||
Met nine times in FY 2015
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Committee Members Thomas Colligan (Chairman) Bridgette Heller Kathleen Hyle Christopher Hylen |
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8 | The ADT Corporation |
2016 Proxy Statement |
CORPORATE GOVERNANCE OF THE COMPANYCONTINUED |
Compensation Committee
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The Compensation Committee oversees the Companys overall compensation structure, policies and programs, including strategic compensation programs for our executive officers that align the interests of our executive officers with those of our stockholders, and assesses whether the Companys compensation structure establishes appropriate incentives for management and employees.
Primary Responsibilities
proposing to our Board of Directors incentive compensation plans and equity-based plans, including performance objectives and metrics associated with these plans, on an annual basis for the CEO;
reviewing annually the CEOs performance and proposing to our independent directors CEO compensation (including salary, bonus, equity-based grants and any other long-term cash compensation);
reviewing annually talent development and succession plans for executive officers other than the CEO and making recommendations to our Board of Directors;
administering the Companys equity incentive plans, including the review and grant of stock options and other equity incentive grants to executive officers;
establishing, in collaboration with the Nominating and Governance Committee, compensation for non-management directors;
monitoring compliance by officers and directors with the Companys stock ownership guidelines;
conducting an annual risk assessment of the Companys compensation programs; and
reviewing and approving employment, retirement, severance and change-in-control agreements/arrangements for our executive officers.
For more information on the Compensation Committee, please see the Compensation Discussion and Analysis in this Proxy Statement.
Independence
The Compensation Committee is comprised of directors who meet the independence requirements, including the heightened independence criteria, set forth in the listing standards of the NYSE, our Board Governance Principles and in accordance with the Compensation Committee charter, are non-employee directors (within the meaning of Rule 16b-3 of the Exchange Act) and outside directors (within the meaning of Section 162(m) of the Internal Revenue Code (the Code)).
Report
The Report of the Compensation Committee is set forth on page 38 of this Proxy Statement.
Charter
The Compensation Committee charter is posted to our website at http://investors.adt.com. A printed copy of the Compensation Committee charter is available to stockholders upon written request to the Corporate Secretary at The ADT Corporation, 1501 Yamato Road, Boca Raton, Florida 33431. | |||||
Met six times in FY 2015
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Committee Members Timothy Donahue (Chairman) Richard Daly Robert Dutkowsky |
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Independent Compensation Consultant
The Compensation Committee has engaged Farient Advisors LLC (Farient) as its independent external advisor. For more information on Farient, please see page 34 of the Compensation Discussion and Analysis in this Proxy Statement.
The ADT Corporation | 2016 Proxy Statement 9 |
CORPORATE GOVERNANCE OF THE COMPANYCONTINUED |
Nominating and Governance Committee
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The Nominating and Governance Committee plays a leadership role in the Companys corporate governance policies and any related matters required by federal securities laws.
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Met five times in FY 2015
Committee Members Bruce Gordon (Chairman) Thomas Colligan Timothy Donahue |
Primary Responsibilities
dveloping and recommending to our Board of Directors our corporate governance principles and otherwise taking a leadership role in shaping our corporate governance;
reviewing and evaluating the adequacy of and recommending to our Board of Directors amendments to our By-laws, certificate of incorporation, committee charters and other governance policies;
reviewing and making recommendations to our Board of Directors regarding the purpose, structure and operations of our various board committees;
identifying, reviewing and recommending to our Board of Directors individuals for election or re-election to the Board of Directors, consistent with criteria approved by the Board of Directors;
overseeing the Chief Executive Officer succession planning process, including an emergency succession plan, and making recommendations to our Board of Directors;
establishing, in collaboration with the Compensation Committee, compensation for non-management directors;
establishing criteria and qualifications for board membership, including standards for assessing independence;
overseeing the Companys Environmental, Health & Safety management program;
ensuring the appropriate process is in place to perform and review the Companys enterprise-wide risk assessments;
overseeing the Board of Directors annual self-evaluation; and
overseeing and monitoring general governance matters including communications with stockholders, regulatory developments relating to corporate governance and our corporate social responsibility activities.
Independence
The Nominating and Governance Committee is comprised of directors who meet the independence requirements set forth in the listing standards of the NYSE, our Board Governance Principles and in accordance with the Nominating and Governance Committee charter.
Charter
The Nominating and Governance Committee charter is posted to the Companys website at http://investors.adt.com. A printed copy of the Nominating and Governance Committee charter is available to stockholders upon written request to the Corporate Secretary at The ADT Corporation, 1501 Yamato Road, Boca Raton, Florida 33431. | |||||
10 | The ADT Corporation |
2016 Proxy Statement |
CORPORATE GOVERNANCE OF THE COMPANYCONTINUED |
To maintain its objective oversight of management, the Board of Directors currently consists of all independent directors, with the exception of Mr. Gursahaney, the current Chief Executive Officer of the Company. The Board of Directors has adopted categorical standards designed to assist it in assessing director independence (the Independence Standards). The Independence Standards are included in our Board Governance Principles which can be found on our website at http://investors.adt.com. The Independence Standards have been designed to comply with the standards required by the NYSE. In addition, committee members are subject to any additional independence requirements that may be required by law, regulation or NYSE listing standards.
Based on an annual evaluation performed by, and recommendations made by, the Nominating and Governance Committee, our Board of Directors annually determines the independence of each director. Under our Board Governance Principles and NYSE listing standards, a director is not independent unless the Board of Directors makes an affirmative determination that such director has no material relationships with the Company (either directly or indirectly as a partner, stockholder or officer of an organization that has a relationship with the Company).
Material relationships can include commercial, industrial, banking, consulting, legal, accounting, charitable, and familial relationships, among others.
Our Board of Directors has affirmatively determined that each of Mr. Colligan, Mr. Daly, Mr. Donahue, Mr. Dutkowsky, Mr. Gordon, Ms. Heller, Ms. Hyle and Mr. Hylen has satisfied the Independence Standards as well as the independence requirements of the NYSE. Mr. Gursahaney, the current Chief Executive Officer of the Company, is not independent because of his role as an executive officer of the Company.
In making its independence determinations, the Board of Directors considered and reviewed the various commercial and employment transactions and relationships known to the Board of Directors (including those identified through annual directors questionnaires) that exist between us and our subsidiaries and the entities with which certain of our directors are, or have been, affiliated. Specifically, the Boards independence determinations included reviewing the following transactions:
As stated in his biography on page 16 of this Proxy Statement, Richard Daly is the Chief Executive Officer and President of Broadridge and a member of the board of directors of Broadridge. During fiscal year 2015, Broadridge provided proxy processing and mailing services, including conduit payments to banks and brokers (collectively, the ADT Proxy Payments) provided by Broadridge to the Company. The ADT Proxy Payments totaled $328,316 in 2015 and since the ADT Proxy Payments were less than the greater of $1 million or 2% of Broadridges consolidated gross revenues in any of the last three fiscal years, and were below the thresholds set forth under our Independence Standards, the Nominating and Governance Committee determined that Mr. Daly satisfied the Independence Standards, including the independence requirements of the NYSE.
During fiscal year, 2013, ADT Security Services Canada, Inc., a subsidiary of the Company entered into a service contract for equipment, materials and services with Tech Data Canada Corporation, a subsidiary of Tech Data Corporation (collectively, Tech Data). As stated in his biography on page 17 of this Proxy Statement, Robert Dutkowsky is the Chief Executive Officer and a member of the board of directors of Tech Data Corporation. During fiscal year 2015, ADT or one of its subsidiaries paid a total of $18,588,122CAD ($15,206,943USD) to Tech Data for purchases and warehousing of security equipment. Since these payments were less than the greater of $1 million or 2% of Tech Data Corporations consolidated gross revenues in any of the last three fiscal years, and were below the thresholds set forth under our Independence Standards, the Nominating and Governance Committee determined that Mr. Dutkowsky satisfied the Independence Standards, including the independence requirements of the NYSE.
As stated in his biography on page 17 of the Proxy Statement, Bruce Gordon is a member of the board of directors of CBS Corporation. During fiscal year 2015, ADT or one of its subsidiaries paid a total of $22,500 to CBS Radio for advertising services. Since these payments were less than the greater of $1 million or 2% of CBS Corporations consolidated gross revenues in any of the last three fiscal years, and were below the thresholds set forth under our Independence Standards, the Nominating and Governance Committee determined that Mr. Gordon satisfied the Independence Standards, including the independence requirements of the NYSE.
On January 8, 2015, in connection with its recommendation to the Board of Directors to appoint Christopher Hylen to the Board of Directors, the Nominating and Governance Committee considered Mr. Hylens current position with the Citrix SaaS Division (Citrix) and the amounts paid by the Company during fiscal year 2015 for telecom, IT support services and web collaboration (collectively, the Citrix Payments) provided by Citrix to the Company. Mr. Hylens biography is on page 19 of this Proxy Statement. During fiscal year 2015, ADT paid $88,880 to Citrix for network services, telecom, IT support services and web collaboration. Since the Citrix Payments were less than the greater of $1 million or 2% of Citrixs consolidated gross revenues in any of the last three fiscal years, and were below the thresholds set forth under our Independence Standards, the Nominating and Governance Committee determined that Mr. Hylen satisfied the Independence Standards, including the independence requirements of the NYSE.
The Board of Directors determined that the transactions identified above were not material and did not affect the independence of such director under the Independence Standards, including the independence requirements of the NYSE.
The ADT Corporation | 2016 Proxy Statement 11 |
CORPORATE GOVERNANCE OF THE COMPANYCONTINUED |
Experiences, Qualifications, Attributes and Skills of Director Nominees
When evaluating potential director nominees, the Nominating and Governance Committee utilizes a diverse group of experiences, qualifications, attributes and skills, including diversity in gender, ethnicity and race that the Nominating and Governance Committee believes enables a director nominee to make significant contributions to the Board of Directors, ADT and our stockholders. The Nominating and Governance Committee works with the Board of Directors to determine the appropriate mix of backgrounds and experiences in order to establish and maintain a Board that is strong in its collective knowledge and that can fulfill its responsibilities, perpetuate our long term success, and represent the interests of our stockholders. These experiences, qualifications, attributes and skills are more fully described in the following table:
ADTs Board Governance Principles provide the following:
| Directors are elected by an affirmative vote of a majority of the votes cast by stockholders at the annual meeting and they serve for one-year terms. Any nominee for director who does not receive a majority of votes cast from the stockholders is not elected to the Board of Directors, however, such nominee will remain in office until a new director is elected, which shall take place in a timely manner. |
| Directors are not eligible to stand for re-election to the Board of Directors at the annual meeting following their 75th birthday. However, the Board of Directors may ask the director to continue his or her service on the Board when it is deemed to be in the best interests of the Company. |
| The Nominating and Governance Committee is responsible for the review of all directors, and where necessary will take action to remove a director for performance, which requires the unanimous approval of the Board of Directors. This unanimous approval does not include the approval of the director whose removal is sought. |
| Directors inform the Nominating and Governance Committee of any significant change in their employment or professional responsibilities and will offer their resignation to the Board of Directors. This allows for discussion with the Nominating and Governance Committee to determine if it is in the mutual interest of both parties for the director to continue on the Board of the Directors. |
12 | The ADT Corporation |
2016 Proxy Statement |
CORPORATE GOVERNANCE OF THE COMPANYCONTINUED |
| Committee chairs will serve in their respective roles for five years, and rotate at the time of the annual meeting of stockholders following the completion of their fifth year of service. |
| When the Chairman of the Board of Directors steps down, he or she simultaneously resigns from the Board of Directors, unless the remaining members of the Board of Directors decides that his or her services are in the best interests of the Company. It is only in unusual circumstances that the Board of Directors decides that the retired Chairman continues to serve. |
Certain Relationships and Related Party Transactions
The Board of Directors has adopted written Guidelines for Related Party Transactions. These Guidelines provide a process for compliance with the related party provisions of the ADT Board Governance Principles, the Companys Code of Conduct, and the Companys By-laws, as well as the disclosure obligations under the SEC rules. The Nominating and Governance Committee monitors, reviews and approves, if necessary, any material related party transactions between ADT and its subsidiaries (collectively, the Company) and its senior officers and directors. ADTs Guidelines for Related Party Transactions state that on an annual basis, the Nominating and Governance Committee will receive a list of related parties (the Related Party List) for each senior officer and director and such list will include any entity that employs a director, any entity (including charitable organizations) for which the director or executive officer serves on the board of directors, and any entity in which the senior officer or director owns more than a 10% interest. There are three types of material related party transactions covered by the Guidelines for Related Party Transactions with specific review procedures:
| Type 1transactions involving the purchase by or from the Company of products or services in the ordinary course of business in arms-length transactions. |
| Type 2transactions involving the provision of consulting, legal, accounting or financial advisory services to the Company that could compromise a directors independence. |
| Type 3transactions in which a director or officer has a direct or indirect personal interest or that create a conflict of interest for the director or officer. |
Ordinary course of business, arms-length transactions with entities on the Related Party List are deemed pre-approved by the Nominating and Governance Committee, in amounts in the aggregate for each such entity of less than 1% of the revenue of such entity or the Company. For Type 1, the Guidelines for Related Party Transactions provide that the Nominating and Governance Committee, prior to filing the Companys proxy statement, annually reviews the Related Party List, including the amount of payments to or from each related party, in comparison to the 1% threshold to ensure that the directors meet the director independence requirement. Any proposed related party transaction involving a member of the Board of Directors must be reviewed and approved by a majority of the disinterested members of the Board. All related party transactions involving potential conflicts of interest must be reported to the Nominating and Governance Committee and approved or ratified by such Committee.
During fiscal year 2015, there were no related party transactions that exceeded the 1% threshold under the Companys Guidelines for Related Party Transactions, nor were there any related party transactions required to be disclosed pursuant to Item 404(a) of Regulation S-K.
ADTs corporate culture is built on the premise that the Company seeks to draw the best from its employees, and that every employee, without exception, is responsible for the conduct and success of the enterprise. This includes full, accurate, candid, and timely disclosure of information and compliance with all laws and regulatory standards. The Board of Directors is responsible for setting the ethical tenor for management and the Company, and that ethical tenor works on the expectation that employees will act legally and ethically while performing work for the Company.
The Board of Directors has adopted a written Code of Conduct for directors, executive officers, and employees that is designed to deter wrongdoing and to promote, among other things:
| honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; |
| full, fair, accurate, timely and understandable disclosure in reports and documents that we file with the SEC and other regulators and in our other public communications; |
| compliance with applicable laws, rules and regulations, including insider trading compliance; and |
| accountability for adherence to the Code of Conduct and prompt internal reporting of violations of the Code, including illegal or unethical behavior regarding accounting or auditing practices. |
The Code of Conduct is reviewed periodically by all directors, executive officers, and employees, and they affirm in writing on an annual basis that they understand and are fully in compliance with it. A copy of our Code of Conduct is posted on our website at http://investors.adt.com. A copy of the Code of Conduct is available to stockholders upon written request to the Corporate Secretary at The ADT Corporation, 1501 Yamato Road, Boca Raton, Florida 33431.
The ADT Corporation | 2016 Proxy Statement 13 |
CORPORATE GOVERNANCE OF THE COMPANYCONTINUED |
In accordance with our governance principles, the Nominating and Governance Committee seeks to create a Board of Directors that as a whole is strong in its collective knowledge and has a diversity of skills and experience with respect to vision and strategy, management and leadership, business operations, business judgment, crisis management, risk assessment, industry knowledge, accounting and finance, corporate governance and global markets. Our Board of Directors does not have a specific policy regarding diversity. Instead, the Nominating and Governance Committee considers the Board of Directors overall composition when considering a potential new candidate, including whether the Board of Directors has an appropriate combination of professional experience, skills, knowledge and variety of viewpoints and backgrounds in light of our current and expected future needs. We believe that it is desirable for new candidates to contribute to a variety of viewpoints on the Board of Directors, which may be enhanced by a mix of different professional and personal backgrounds and experiences. Forty-four percent of our director nominees are women or ethnically diverse individuals.
General criteria specified in our Board Governance Principles for the nomination of director candidates include:
| the highest ethical standards and integrity; |
| a willingness to act on and be accountable for board decisions; |
| an ability to provide wise, informed and thoughtful counsel to top management on a range of issues; |
| a history of achievement that reflects superior standards for themselves and others; |
| loyalty and commitment to driving the success of ADT; |
| an ability to take tough positions while at the same time working as a team player; and |
| individual backgrounds that provide a portfolio of experience and knowledge commensurate with our needs. |
Invitations to director nominees to become a member of the Board of Directors will be extended by the Chair of the Nominating and Governance Committee after discussion with the Chairman of the Board of Directors and the Chief Executive Officer and agreement by the other members of the Board of Directors. The Board of Directors will consider nominations submitted by stockholders. The Nominating and Governance Committee may also, from time to time, utilize the services of a professional search firm, including during fiscal year 2015, to help identify potential director candidates.
14 | The ADT Corporation |
2016 Proxy Statement |
PROPOSAL NUMBER ONEELECTION OF DIRECTORS |
PROPOSAL NUMBER ONEELECTION OF DIRECTORS
Current Directors Nominated for Re-Election
Thomas Colligan
- - - - - - - - - - -
|
Director since: 2012 |
Age: 71 | Independent | |||
PRIOR BUSINESS EXPERIENCE Vice Dean, Wharton Schools Aresty Institute of Executive Education at the University of Pennsylvania (20072010) Managing Director, Duke Corporate Education (20042007) Vice Chairman (20012004) and Partner (19692004), PricewaterhouseCoopers LLC
|
CURRENT PUBLIC COMPANY BOARDS The ADT Corporation Central Garden & Pet Company
EDUCATION BS, Fairleigh Dickinson University (accounting) Certified Public Accountant |
SELECTED PAST PUBLIC COMPANY BOARDS Schering Plough Corporation (20052009) Office Depot, Inc. (20102013) CNH Global (20102013)
OTHER MEMBERSHIPS American Institute of Certified Public Accountants | ||||
Director Qualifications: |
Mr. Colligans qualifications include his 38 years as a Certified Public Accountant, his PwC experience, his extensive experience with audit and financial issues and his past service on public company audit committees.
|
The ADT Corporation | 2016 Proxy Statement 15 |
PROPOSAL NUMBER ONEELECTION OF DIRECTORSCONTINUED |
Richard Daly
- - - - - - - - - - -
|
Director since: 2014 | Age: 62 | Independent | |||
CURRENT ROLE Chief Executive Officer and President of Broadridge Financial Solutions, Inc.
PRIOR BUSINESS EXPERIENCE Group President, Brokerage Services Group, Executive Committee Member & Corporate Officer, ADP (19962007) Senior Vice President, Brokerage Services Group, ADP (19891996) Senior Vice President of Operations and a director, Thomson McKinnon Securities (19861989)
|
CURRENT PUBLIC COMPANY BOARDS The ADT Corporation Broadridge Financial Solutions, Inc.
EDUCATION BS, New York Institute of Technology (accounting) Harvard Business Schools Young Presidents Program, Leadership Certified Public Accountant |
OTHER DIRECTORSHIPS National Association of Corporate DirectorsAdvisory Board | ||||
Director Qualifications: |
Mr. Dalys qualifications include his experience as the chief executive officer of the largest independent processor of corporate governance related activities, his significant leadership experience and his extensive experience in the financial services industry.
|
Timothy Donahue
- - - - - - - - - - -
|
Director since: 2012 | Age: 67 | Independent | |||
PRIOR BUSINESS EXPERIENCE Executive Chairman, Sprint Nextel Corporation (20052006) President and CEO, Nextel Communications, Inc. (19992005) Northeast Regional President, AT&T Wireless Services (19911996) President, Paging Division (1986-1989) and President, U.S. Central Region (19891991), McCaw Cellular Communications
|
CURRENT PUBLIC COMPANY BOARDS The ADT Corporation NVR, Inc.
EDUCATION BA, John Carroll University (english literature) |
SELECTED PAST PUBLIC COMPANY BOARDS Tyco International Ltd. (20082012) Covidien Ltd. (20092012) Eastman Kodak Company (20032013)
OTHER DIRECTORSHIPS UCT Coatings, Inc. (private; non-executive chairman) Radius Networks, Inc. (private) Cerberus (advisor) Houlihan Lockey (advisor) | ||||
Director Qualifications: |
Mr. Donahues qualifications include his extensive experience and demonstrated leadership in the wireless communications industry, his M&A experience, his experience in service-oriented industries and as an executive and board member of several publicly traded companies.
|
16 | The ADT Corporation |
2016 Proxy Statement |
PROPOSAL NUMBER ONEELECTION OF DIRECTORSCONTINUED |
Robert Dutkowsky
- - - - - - - - - - -
|
Director since: 2012 | Age: 61 | Independent | |||
CURRENT ROLE Chief Executive Officer, Tech Data Corporation
PRIOR BUSINESS EXPERIENCE President, CEO and Chairman, Egenera, Inc. (20042006) President, CEO and Chairman, J.D. Edwards & Co. (20022004) President, CEO and Chairman, GenRad, Inc. (20002002) PresidentData General (1999-2000) and Executive Vice PresidentMarkets & Channels (19971999), EMC Corporation
|
CURRENT PUBLIC COMPANY BOARDS The ADT Corporation Tech Data Corporation
EDUCATION BS, Cornell University (industrial and labor relations) |
SELECTED PAST PUBLIC COMPANY BOARDS J.D. Edwards & Co. (20022004) GenRad, Inc. (20002002)
OTHER DIRECTORSHIPS Egenera, Inc. (private; 20042006) | ||||
Director Qualifications: |
Mr. Dutkowskys qualifications include his experience as a chief executive officer and extensive executive experience with technology companies and solutions providers.
|
Bruce Gordon
- - - - - - - - - - -
|
Director and Chairman since: 2012 |
Age: 69 | Independent | |||
PRIOR BUSINESS EXPERIENCE President and Chief Executive Officer, NAACP (20052007) PresidentRetail Markets Group, Verizon Communications, Inc. (20002003) Group PresidentEnterprise Business (1998-2000), Group PresidentConsumer and Small Business Services (19931997), Group PresidentRetail (19971998), Bell Atlantic Corporation (Verizons predecessor)
|
CURRENT PUBLIC COMPANY BOARDS The ADT Corporation CBS Corporation Northrup Grumman Corporation
EDUCATION BA, Gettysburg College MS, Massachusetts Institute of Technology |
SELECTED PAST PUBLIC COMPANY BOARDS Tyco International Ltd. (20032012) Southern Company (19942006)
OTHER DIRECTORSHIPS MarketCast (private) | ||||
Director Qualifications: |
Mr. Gordons qualifications include his significant leadership experience as the head of a large non-profit, his in-depth experience as an executive in the service-oriented communications industry and his corporate governance experience as a director of several publicly traded companies.
|
The ADT Corporation | 2016 Proxy Statement 17 |
PROPOSAL NUMBER ONEELECTION OF DIRECTORSCONTINUED |
Naren Gursahaney
- - - - - - - - - - -
|
Director since: 2012 | Age: 54 | ||||
CURRENT ROLE President and Chief Executive Officer, The ADT Corporation (2012-present)
PRIOR BUSINESS EXPERIENCE President, Tycos ADT North American Residential business segment (2011-2012) President, Tyco Security Solutions (2007-2011) PresidentTyco Engineered Products & Services, PresidentTyco Flow Control (2005-2007) Senior Vice PresidentOperational Excellence, Tyco International Ltd. (2003-2005) President and CEOGE Medical Systems-Asia, Chief Information OfficerGE Medical Systems, Vice President, ServiceGE Medical Systems Asia, Various roles, General Electric (1993-2003)
|
CURRENT PUBLIC COMPANY BOARDS The ADT Corporation NextEra Energy, Inc.
EDUCATION BS, Pennsylvania State University (mechanical engineering) MBA, University of Virginia/Darden School |
|||||
Director Qualifications: | Mr. Gursahaneys qualifications include his experience as a chief executive officer and extensive executive experience with Tyco and ADT in the security services industry and his leadership roles in services, marketing, operations and information management.
|
Bridgette Heller
- - - - - - - - - - -
|
Director since: 2012 | Age: 54 | Independent | |||
PRIOR BUSINESS EXPERIENCE Executive Vice President, Merck & Co., Inc. and President, Merck Consumer Care (20102014) President, Johnson & Johnson, Global Baby Business Unit (20072010) President, Johnson & Johnson, Global Baby Kids and Wound Care (20052007) Heller Associates (Founding and Managing Partner) (2002-2005) Executive Vice President and General Manager, Kraft Foods, North American Coffee portfolio (1985-2002)
|
CURRENT PUBLIC COMPANY BOARDS The ADT Corporation
EDUCATION BA, Northwestern University MBA, Northwestern Universitys Kellogg School of Management |
OTHER DIRECTORSHIPS PCA International, Inc. (1998-2005) | ||||
Director Qualifications: | Ms. Hellers qualifications include her significant experience in leadership positions at consumer products companies.
|
18 | The ADT Corporation |
2016 Proxy Statement |
PROPOSAL NUMBER ONEELECTION OF DIRECTORSCONTINUED |
Kathleen Hyle
- - - - - - - - - - -
|
Director since: 2012 | Age: 57 | Independent | |||
PRIOR BUSINESS EXPERIENCE Senior Vice President and Chief Operating Officer, Constellation Energy Resources (20082012) Chief Financial Officer, Constellation Energy Nuclear Group and UniStar Nuclear Energy LLC (20072008) Senior Vice PresidentFinance, Constellation Energy (2005-2007) Senior Vice PresidentFinance, IT, Risk & Ops (2005), Chief Financial Officer (2003-2005), Constellation NewEnergy Chief Financial Officer, ANC Rental Corp. (19992001)
|
CURRENT PUBLIC COMPANY BOARDS The ADT Corporation Bunge Limited AmerisourceBergen
EDUCATION BA, Loyola College (accounting) Certified Public Accountant |
OTHER DIRECTORSHIPS Board of Trustees, Center Stage, Baltimore, MD | ||||
Director Qualifications: |
Ms. Hyles qualifications include her extensive experience as a leader in developing the business and financial strategy of retail divisions in various companies, as a Certified Public Accountant and service as chief financial officer in public companies.
|
Christopher Hylen
- - - - - - - - - - -
|
Director since: 2015 | Age: 55 | Independent | |||
CURRENT ROLE Senior Vice President and General Manager, Citrix SaaS Division
PRIOR BUSINESS EXPERIENCE Senior Vice President & General ManagerPayment Solutions, Vice PresidentSmall Business Marketing, Vice PresidentGrowth, Intuit (20062013) Executive marketing and business positions, ADP (20012005) Various leadership positions, Business.com (19992002) Vice PresidentBusiness Development, American Express (1995-1999)
|
CURRENT PUBLIC COMPANY BOARDS The ADT Corporation
EDUCATION BS, Widener University (engineering) MBA, Harvard Business School of Management |
|||||
Director Qualifications: |
Mr. Hylens qualifications include his more than 21 years of senior general management experience in leadership positions at technology companies.
|
The Board of Directors unanimously recommends that stockholders vote FOR the election of all of the above listed director nominees to serve until the 2017 Annual Meeting.
The ADT Corporation | 2016 Proxy Statement 19 |
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT |
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table provides information regarding the beneficial ownership of our common stock as of December 31, 2015 by (i) all directors and director nominees, (ii) each of our named executive officers, and (iii) our directors and executive officers as a group.
Except as otherwise noted, each person identified in the table below has sole voting and investment power with respect to the shares listed. To the extent indicated in the table below, shares beneficially owned by a person include shares of which the person has the right to acquire beneficial ownership within 60 days after December 31, 2015. As of December 31, 2015, there were 165,293,772 shares of our common stock issued and outstanding.
Shares of Common Stock Beneficially Owned
Name of Beneficial Owner | Common Stock Beneficially Owned Directly or Indirectly |
Common Stock Acquirable within 60- Days |
Total Common Stock Beneficially Owned |
% of Shares of Common Stock Outstanding |
||||||||||||
N. David Bleisch |
40,608 | 116,861 | 157,469 | * | ||||||||||||
Thomas Colligan |
16,648 | 0 | 16,648 | * | ||||||||||||
Richard Daly |
7,869 | 0 | 7,869 | * | ||||||||||||
Jerri DeVard |
2,426 | 28,900 | 31,326 | * | ||||||||||||
Timothy Donahue |
14,610 | 0 | 14,610 | * | ||||||||||||
Robert Dutkowsky |
8,148 | 0 | 8,148 | * | ||||||||||||
Alan Ferber |
11,707 | 37,400 | 49,107 | * | ||||||||||||
Michael Geltzeiler |
16,223 | 60,925 | 77,148 | * | ||||||||||||
Bruce Gordon |
22,252 | 0 | 22,252 | * | ||||||||||||
Naren Gursahaney |
230,635 | 1,128,686 | 1,359,321 | * | ||||||||||||
Bridgette Heller |
8,148 | 0 | 8,148 | * | ||||||||||||
Kathleen Hyle |
8,148 | 0 | 8,148 | * | ||||||||||||
Christopher Hylen |
0 | 572 | 572 | * | ||||||||||||
Directors and Executive Officers as a Group (20 persons) |
463,479 | 1,563,847 | 2,027,326 | 1.23% |
* | Less than 1.0% |
The following table sets forth the information indicated for persons or groups known to us to be beneficial owners of more than 5% of our outstanding common stock.
Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership |
Percentage of Class | ||||||
Dodge & Cox 555 California Street, 40th Floor San Francisco, CA 94104 |
27,884,826(1) | 16.87% | ||||||
The Vanguard Group 100 Vanguard Boulevard Malvern, PA 19355 |
13,070,486(2) | 7.91% | ||||||
Clearbridge Investments, LLC 620 8th Avenue New York, NY 10018 |
12,064,357(3) | 7.30% | ||||||
BlackRock, Inc. 40 East 52nd Street New York, NY 10022 |
10,387,719(4) | 6.28% |
1) | Information shown is based on information reported on Schedule 13G/A filed with the SEC on February 13, 2015, in which Dodge and Cox reported that it has sole voting power over 26,788,064 shares of our common stock and sole dispositive power of 27,884,826 shares of our common stock. |
20 | The ADT Corporation |
2016 Proxy Statement |
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENTCONTINUED |
2) | Information shown is based on information reported on Schedule 13G/A filed with the SEC on February 10, 2015, in which The Vanguard Group reported that it has sole voting power over 294,654 shares of our common stock, sole dispositive power of 12,785,571 shares of our common stock and shared dispositive power over 284,915 shares of our common stock. |
3) | Information shown is based on information reported on Schedule 13G filed with the SEC on February 17, 2015, in which Clearbridge Investments, LLC reported that it has sole voting power over 11,793,073 shares of our common stock and sole dispositive power of 12,064,354 shares of our common stock. |
4) | Information shown is based on information reported on Schedule 13G/A filed with the SEC on January 30, 2015 in which BlackRock, Inc. reported that it has sole voting power over 8,808,608 shares of our common stock and sole dispositive power of 10,387,719 shares of our common stock. |
The ADT Corporation | 2016 Proxy Statement 21 |
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE |
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Companys directors, certain of its officers and any persons beneficially owning more than 10% of a registered class of the Companys equity securities to file reports of their ownership of ADT common stock and of changes in such ownership with the SEC and the NYSE within specified time periods. Regulations also require ADT to identify in this Proxy Statement any person subject to this requirement who failed to file any such report on a timely basis. To the Companys knowledge, based solely on a review of the copies of such reports furnished to the Company and written representations from reporting persons that no other reports were required, we believe that all of our directors, officers, and greater than 10% stockholders complied with all Section 16(a) filing requirements applicable to them during the fiscal year ended September 25, 2015.
22 | The ADT Corporation |
2016 Proxy Statement |
EXECUTIVE OFFICERS |
The ADT Corporation | 2016 Proxy Statement 23 |
EXECUTIVE OFFICERSCONTINUED |
24 | The ADT Corporation |
2016 Proxy Statement |
EXECUTIVE OFFICERSCONTINUED |
Certain Legal Proceedings
In March 2007, The Readers Digest Association, Inc. (RDA) was acquired by a private equity firm. Following the sale of RDA, Mr. Geltzeiler, our Chief Financial Officer, and Ms. Martin, our President of Canadian operations, served in general management roles at RDA. Mr. Geltzeiler then left RDA in June 2008. On August 24, 2009, RDA and its U.S. subsidiaries filed voluntary petitions for relief under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of New York. As such, Mr. Geltzeiler and Ms. Martin previously served as executive officers of a company that filed a petition under the federal bankruptcy laws at or within two years prior to the time of such filing.
The ADT Corporation | 2016 Proxy Statement 25 |
COMPENSATION OF EXECUTIVE OFFICERS |
COMPENSATION OF EXECUTIVE OFFICERS
Compensation Discussion and Analysis
This Compensation Discussion and Analysis section of the Proxy Statement describes in detail the Companys executive compensation philosophy and programs, as well as the compensation decisions made by the Compensation Committee and the factors which were considered in making those decisions. This Compensation Discussion and Analysis focuses on the compensation of our Named Executive Officers (the NEOs) who, for fiscal year 2015, are listed below.
Name | Title | |
Naren Gursahaney |
President and Chief Executive Officer (CEO) | |
Michael Geltzeiler |
Senior Vice President and Chief Financial Officer (CFO) | |
Jerri DeVard |
Senior Vice President and Chief Marketing Officer | |
Alan Ferber |
President, Residential Business Unit | |
N. David Bleisch |
Senior Vice President and Chief Legal Officer |
26 | The ADT Corporation |
2016 Proxy Statement |
COMPENSATION OF EXECUTIVE OFFICERSCONTINUED |
* | For a definition of non-GAAP financial measures and a reconciliation to GAAP measures, see Reconciliation of Non-GAAP Measures to GAAP Measures and Selected Definitions on page 53 of this Proxy Statement. |
The ADT Corporation | 2016 Proxy Statement 27 |
COMPENSATION OF EXECUTIVE OFFICERSCONTINUED |
Metric | Weighting | Target | Actual Results |
Payout as % of Target |
||||||||||||
Recurring Revenue Growth (Compound Annual Growth Rate or CAGR) |
60% | 6.8% | 5.1% | 57.8% | ||||||||||||
Adjusted Free Cash Flow Growth (CAGR) |
40% | 7.7% | 1.1% | 0% | ||||||||||||
Total Payout (rounded) |
|
35% |
28 | The ADT Corporation |
2016 Proxy Statement |
COMPENSATION OF EXECUTIVE OFFICERSCONTINUED |
Overview of Executive Compensation Program and Practices
The Companys executive compensation program is designed with the primary purpose of promoting long-term value creation for our stockholders. We believe that the design of the executive compensation program and the compensation practices support this goal. The graphic below provides an overview of the Companys executive compensation program and practices, as well as a list of practices the Company does not adhere to.
WHAT WE DO
|
WHAT WE DONT DO
|
We align executive compensation with the interests of the Companys stockholders | ü | Pay clearly aligned with performance (page 26) | ||||||||
ü |
Executive compensation program designed to ensure majority of value is at risk (page 30) |
|||||||||
ü |
Double-trigger change in control provisions for cash and equity awards (page 37) |
|||||||||
We design the Companys executive compensation program to avoid excessive risk and promote sustainable growth
|
ü |
Mitigation of undue risk (page 37) |
||||||||
ü |
Mix of compensation components (fixed and variable pay, short- and long-term incentives) that encourage focus on both the short- and long-term interests of the Company and its stockholders (page 30) |
|||||||||
ü |
Incentive awards with payouts based upon a variety of financial and operational objectives, which minimizes the risk associated with any single performance measure (page 31) |
|||||||||
ü |
Share ownership guidelines (page 36) |
|||||||||
ü |
Share retention policy (page 36) |
|||||||||
We adhere to executive compensation best practices |
ü |
Independent compensation consultant (page 34) |
× |
No repricing of underwater stock options | ||||||
ü |
Executive Officers and Directors required to obtain pre-approval for all equity transactions (page 37) |
× |
No inclusion of the value of equity awards in severance calculations | |||||||
ü |
Reasonable post-employment/change in control provisions (page 46) |
× |
No excise tax gross-ups upon change in control | |||||||
ü |
Limited perquisites (page 36) |
The ADT Corporation | 2016 Proxy Statement 29 |
COMPENSATION OF EXECUTIVE OFFICERSCONTINUED |
Elements of Executive Compensation
The Companys total direct compensation program is comprised of three elements: base salary, annual incentive and equity-based long-term incentives. A significant majority of Executive Officers total direct compensation is performance-based and at risk. The Company also provides various benefit and retirement programs, as well as an annual executive physical for Executive Officers. The dashboard below provides an overview of the elements of the Companys executive compensation program, a brief description of each compensation element and the reason for inclusion in the executive compensation program.
Base Salary
30 | The ADT Corporation |
2016 Proxy Statement |
COMPENSATION OF EXECUTIVE OFFICERSCONTINUED |
For fiscal year 2016, the Compensation Committee approved base salary increases for two of the NEOs based upon its review of each of the NEOs performance, as well as other factors such as the NEOs experience, compensation benchmark market data and relative internal pay positioning. Effective October 1, 2015, the increases to base salaries approved by the Compensation Committee are as follows:
Name | Prior Base Salary |
New Base Salary |
Increase % | |||||||||
Mr. Ferber |
$ | 500,000 | $ | 520,000 | 4.0% | |||||||
Mr. Bleisch |
$ | 480,000 | $ | 490,000 | 2.1% |
Annual Incentive Compensation
Executive Officers of the Company, including each of the NEOs, are eligible to earn annual incentives under the Officer Short-Term Bonus Plan (Officer Bonus Plan). Under the Officer Bonus Plan, which is intended to comply with Section 162(m) of the Internal Revenue Code, funding of annual incentives is based upon Company achievement against an annual Operating Income target, which is determined annually by the Compensation Committee. This funding of annual incentives represents the maximum bonus any individual Executive Officer may earn under the Officer Bonus Plan. For fiscal year 2015, each of the Companys Executive Officers was eligible for a maximum bonus under the Officer Bonus Plan equal to 0.5% of the Companys Operating Income.
After determining the Companys performance against the Operating Income criterion and the maximum bonus any individual Executive Officer may earn under the Officer Bonus Plan, the Compensation Committee may apply negative discretion to the calculated maximum incentive amount to determine the bonus to be paid to each individual Executive Officer. In exercising its negative discretion, the Compensation Committee generally utilizes a guideline formula which is based upon the Companys AIP, which is the plan upon which a majority of incentive-eligible employees annual incentives are based.
The design of the Companys AIP, and the guideline formula under the Officer Bonus Plan, reflects the Companys focus as a subscriber-based business with significant recurring monthly revenues, and the metrics utilized have been selected to drive results in those categories which have the most significant impact on the success of our business. The AIP design is reviewed annually by both management and the Compensation Committee, along with input from the Compensation Committees independent compensation consultant (see page 34 for a detailed description of the role of the Compensation Committees independent compensation consultant) to determine whether any changes are warranted. Based upon this annual review, the Company adjusted the fiscal year 2015 AIP and guideline formula to incorporate several changes which were intended to strengthen the alignment between the Companys stockholders interests and those of its executives, as well as further improve the line-of-sight for its employees.
Changes to AIP and Guideline Formula for Fiscal Year 2015
For fiscal year 2015, the Company made several changes to the AIP, which are described below in the charts comparing the design changes in the AIP for fiscal year 2015 to the design in place in fiscal year 2014, as well as the rationale for the changes made to the plan design:
Fiscal Year 2014 Plan Design |
Fiscal Year 2015 Plan Design | |||||||||||||||||
Weighting | ||||||||||||||||||
Category | Metrics | Weighting | Alignment | Metrics | Corporate Participants |
Business Unit Participants |
||||||||||||
Financial (measured at Corporate level) |
Recurring Revenue Growth |
30% |
Results
measured |
Recurring Revenue |
|
33 1/3% |
|
|
16 2/3% |
| ||||||||
Net Attrition | 20% | Customer Retention | 33 1/3% | 16 2/3% | ||||||||||||||
Steady State Free Cash Flow | 30% | EBITDA before special items | 33 1/3% | 16 2/3% | ||||||||||||||
Strategic Modifiers | Small Business Recurring Revenue Growth | +/-20% Adjustment to Overall Financial Results |
Results measured at Business Unit level |
Recurring Revenue | 16 2/3% | |||||||||||||
Corporate Recurring Revenue Margin | Customer Retention | 16 2/3% | ||||||||||||||||
Individual | Individual Objectives | 20% | Business Unit-specific metric | 16 2/3% |
The ADT Corporation | 2016 Proxy Statement 31 |
COMPENSATION OF EXECUTIVE OFFICERSCONTINUED |
What was changed from Fiscal Year 2014 | Why changes were made for Fiscal Year 2015 | |
Replaced the Steady-State Free Cash Flow (SSFCF) metric with EBITDA |
We believe that EBITDA captures a greater level of impact of the value drivers of the Companys business than SSFCF. We exclude special items in order to eliminate the impact of items management believes are not indicative of the Companys core operating performance. EBITDA is a more commonly utilized metric in incentive plans in our peer group and the broader market, and is more easily understood by both investors and plan participants. | |
Repositioned the Net Attrition metric as a Customer Retention metric (the inverse of Net Attrition) |
We believe that Customer Retention provides the Companys employees with a stronger positive focus of increasing the number of customers retained compared to the positioning as a Net Attrition metric, where messaging is focused on reducing the number of customers lost. | |
Eliminated the concept of Strategic Modifiers and introduced Business Unit-level metrics for those employees (including certain of the Companys Executive Officers) who support one of the Companys Business Units, while maintaining a level of alignment to overall corporate results 50% of the funding of the annual incentive for employees supporting one of the Companys Business Units is aligned to the results of the Business Unit, with the other 50% of the funding aligned to overall corporate results |
The Strategic Modifiers in place in fiscal year 2014 were intended to focus on growth in the Companys Small Business channel and on controlling the costs related to serving customers. The introduction of Business Unit-level metrics across all of the Companys Business Units is intended to focus employees on driving results which they have more ability to impact within their respective Business Unit, while still maintaining the focus on the results of the Company as a whole. The introduction of the EBITDA before special items (Corporate) metric is intended to focus attention on controlling costs across the organization, eliminating the need for the Recurring Revenue Margin modifier. | |
Eliminated the individual objective component from the plan design and replaced with an individual performance modifier |
This change was designed to focus participants in both the Officer Bonus Plan and the AIP on overall Company (and, as applicable, Business Unit) results as the funding mechanism for annual incentives. The individual performance modifier allows management to recognize individual contributions to the overall results by adjusting incentives for individual participants up or down within the overall pool. For participants in the Officer Bonus Plan, the individual performance modifier is limited to +/-20% of their incentive target (as adjusted for business performance). |
For fiscal year 2015, the funding of annual incentive awards for Messrs. Gursahaney, Geltzeiler and Bleisch and Ms. DeVard was based solely on overall corporate results. For Mr. Ferber, President of the Residential Business Unit, and other participants in the AIP who support the Residential Business Unit, the funding of annual incentive awards was based on both overall corporate results and the results of the Residential Business Unit. For the Residential Business Unit, the Business Unit-specific metric noted in the plan design chart above was Creation Multiple, which is a metric that measures the length of time in months, on average, it takes the Company to break even on its investment in acquiring a customer account.
32 | The ADT Corporation |
2016 Proxy Statement |
COMPENSATION OF EXECUTIVE OFFICERSCONTINUED |
Determination of Annual Incentive Awards for Fiscal Year 2015
The financial performance measures and targets utilized in the AIP and Officer Bonus Plan guideline formulas for fiscal year 2015, as well as the actual results for each metric, are summarized in the table below. For Messrs. Gursahaney, Geltzeiler and Bleisch and Ms. DeVard, only the performance against overall corporate results is applicable, while for Mr. Ferber both overall corporate results and the results for our Residential Business Unit apply in equal weighting.
Performance Metric | Weighting | Performance Target |
Actual Performance |
Payout as a % of Target |
Overall Weighted Business Performance |
|||||||||||||||
Messrs. Gursahaney, Geltzeiler and Bleisch and Ms. DeVard |
| |||||||||||||||||||
Recurring Revenue (Corporate)* |
33 1/3% | $ | 3,325.0M | $ | 3,337.5M | * | 119.8% | 39.93% | ||||||||||||
Customer Retention (Corporate) |
33 1/3% | 87.0% | 87.8% | 200% | 66.67% | |||||||||||||||
EBITDA before special items (Corporate)* |
33 1/3% | $ | 1,851.0M | $ | 1,848.2M | * | 97.3% | 32.43% | ||||||||||||
TOTAL (rounded) |
|
139% | ||||||||||||||||||
Mr. Ferber |
| |||||||||||||||||||
Recurring Revenue (Corporate)* |
16 2/3% | $ | 3,325.0M | $ | 3,337.5M | * | 119.8% | 19.97% | ||||||||||||
Customer Retention (Corporate) |
16 2/3% | 87.0% | 87.8% | 200% | 33.33% | |||||||||||||||
EBITDA before special items (Corporate)* |
16 2/3% | $ | 1,851.0M | $ | 1,848.2M | * | 97.3% | 16.22% | ||||||||||||
Recurring Revenue (Residential BU) |
16 2/3% | $ | 2,762.0M | $ | 2,773.3M | 119.5% | 19.92% | |||||||||||||
Customer Retention (Residential BU) |
16 2/3% | 87.0% | 87.7% | 200% | 33.33% | |||||||||||||||
Creation Multiple |
16 2/3% | 30.9 months | 30.5 months | 128.6% | 21.43% | |||||||||||||||
TOTAL (rounded) |
|
144% |
* | For a definition of non-GAAP financial measures and a reconciliation to GAAP measures, see Reconciliation of Non-GAAP Measures to GAAP Measures and Selected Definitions on page 53 of this Proxy Statement. |
The following table summarizes the calculation of bonuses for fiscal year 2015 paid to each of the NEOs. In determining the awards for the NEOs, the Compensation Committee determined that each of the NEOs met or exceeded their individual objectives for fiscal year 2015, which in turn drove above-target business performance at both the Company and Residential Business Unit levels. The Compensation Committee elected to apply individual performance adjustments at target for each of the NEOs.
Name | Base Salary |
Bonus Target % |
Bonus Target |
Business Performance |
Performance Adjusted Bonus Target |
Individual Performance Adjustment |
Actual Bonus Paid for Fiscal Year 2015 |
|||||||||||||||||||||||||||||
Mr. Gursahaney |
$ | 900,000 | X | 100% | = | $ | 900,000 | X | 139% | = | $ | 1,251,000 | 100% | $ | 1,251,000 | |||||||||||||||||||||
Mr. Geltzeiler |
750,000 | X | 100% | = | 750,000 | X | 139% | = | 1,042,500 | 100% | 1,042,500 | |||||||||||||||||||||||||
Ms. DeVard |
500,000 | X | 70% | = | 350,000 | X | 139% | = | 486,500 | 100% | 486,500 | |||||||||||||||||||||||||
Mr. Ferber |
500,000 | X | 70% | = | 350,000 | X | 144% | = | 504,000 | 100% | 504,000 | |||||||||||||||||||||||||
Mr. Bleisch |
480,000 | X | 70% | = | 336,000 | X | 139% | = | 467,040 | 100% | 467,040 |
The ADT Corporation | 2016 Proxy Statement 33 |
COMPENSATION OF EXECUTIVE OFFICERSCONTINUED |
Grant Type | Weighting | |
PSUs |
50% | |
Stock Options |
25% | |
RSUs |
25% |
The following table describes the general terms and conditions applicable to each of the equity-based grant type:
Grant Type | Vesting | Other Terms & Conditions | ||
PSUs |
On the 3rd anniversary of the grant date, subject to satisfaction of performance conditions. Vesting subject to performance against EBITDA (75% weighting) and TSR (25% weighting). The performance range for PSUs subject to TSR is set with a threshold of the 25th percentile (representing a 40% payout) and maximum of the 75th percentile (representing a 200% payout). |
PUs accumulate dividend equivalent units with respect to dividends, which vest in accordance with (and only to the extent of) the vesting of the underlying PSU award. | ||
Stock Options |
25% per year over 4 years |
Granted with an exercise price equal to the closing price of the Companys common stock on the date of grant. Expire on the 10th anniversary of the grant date unless forfeited earlier. | ||
RSUs |
25% per year over 4 years |
RSUs accumulate dividend equivalent units with respect to dividends, which vest in accordance with the vesting of the underlying RSU award. |
34 | The ADT Corporation |
2016 Proxy Statement |
COMPENSATION OF EXECUTIVE OFFICERSCONTINUED |
The ADT Corporation | 2016 Proxy Statement 35 |
COMPENSATION OF EXECUTIVE OFFICERSCONTINUED |
How Peer Group Companies are Selected | How Peer Group Data is Utilized | |
Similar or related industry sector
Generally focused on generating subscription-based recurring revenue, with operations and revenues primarily in the United States and Canada
Primarily business-to-consumer (B2C) focused, although companies that are business-to-business (B2B) focused also considered
Generally between $1 and $10 billion in revenue, with compensation data size-adjusted for the Companys revenue |
As an input in determining base salaries, annual incentive targets and long-term incentive award targets (CEO and CFO)
As an input in the design of compensation plans
To validate whether our Executive Compensation program is aligned with Company performance
To benchmark the form and mix of equity awards granted to our employees
To benchmark share ownership guidelines |
The Compensation Committee reviews the peer group periodically to determine whether any significant changes to the business condition of the Company or any of its peers would warrant any changes to the peer group. No changes were made to the peer group for fiscal year 2015. The peer group utilized for fiscal year 2015 was:
Allegion plc |
EarthLink Holdings Corporation | Stanley Black & Decker, Inc. | ||
Cablevision Systems Corporation |
Frontier Communications Corporation | Telephone & Data Systems, Inc. | ||
CenturyLink, Inc. |
Netflix, Inc. | The Brinks Co. | ||
Charter Communications, Inc. |
Rollins, Inc. | Tyco International Ltd. | ||
Cincinnati Bell |
SIRIUS XM Radio, Inc. | Windstream Corporation |
In addition to the peer group noted above, the Compensation Committee also considers design and practice information from a number of reference peers, including: DIRECTV, T-Mobile US, Ascent Capital Group, Diebold Inc., US Cellular Corporation and ServiceMaster. While these companies meet the subscription-based recurring revenue and primary B2C screening criteria, most of the reference peer companies have annual revenues outside the range used in the screening process.
Stock Ownership Guidelines and Share Retention Policy
The Compensation Committee believes that requiring executives to own and hold a significant amount of Company stock aligns the executives interests with those of its stockholders. The Compensation Committee has established the following stock ownership guidelines:
Level | Ownership Guideline (as a multiple of base salary) | |
Chief Executive Officer |
6x | |
Other Executive Officers |
3x |
36 | The ADT Corporation |
2016 Proxy Statement |
COMPENSATION OF EXECUTIVE OFFICERSCONTINUED |
The ADT Corporation | 2016 Proxy Statement 37 |
REPORT OF THE COMPENSATION COMMITTEE |
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee has reviewed and discussed with management the Companys Compensation Discussion and Analysis for the year ended September 25, 2015 as required by Item 407(e)(5) of Regulation S-K promulgated by the SEC. Based on such review and discussions, the Compensation Committee recommended to the Board of Directors, and the Board of Directors approved, the inclusion of the Compensation Discussion and Analysis for the year ended September 25, 2015 in the Companys 2016 Proxy Statement and its incorporation by reference into the Companys Annual Report on Form 10-K for the year ended September 25, 2015.
Submitted by the Compensation Committee of the Board of Directors:
Timothy Donahue, Chair
Richard Daly
Robert Dutkowsky
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Donahue (Chairman), Daly and Dutkowsky served as members of the Compensation Committee in fiscal year 2015. None of such committee members (i) was, during fiscal year 2015, an officer or employee of the Company or any of its subsidiaries; (ii) was formerly an officer of the Company or any of its subsidiaries; or (iii) had any relationship requiring disclosure by the Company pursuant to any paragraph of Item 404 of Regulation S-K promulgated by the SEC. No executive officer of the Company served as an executive officer, director or member of a compensation committee of any other entity of which an executive officer or director of such entity is a member of the Compensation Committee of the Company or the Companys Board of Directors.
38 | The ADT Corporation |
2016 Proxy Statement |
FISCAL YEAR 2015 NEO COMPENSATION |
FISCAL YEAR 2015 NEO COMPENSATION
The information set forth in the following table reflects compensation paid or earned by the NEOs for the fiscal years 2015, 2014 and 2013. The table reflects total compensation earned beginning in the later of fiscal year 2013 or the year an individual first became an NEO.
Name and Principal Position |
Year | Salary ($) |
Bonus (3) ($) |
Stock / Unit (4) Awards ($) |
Option (4) Awards ($) |
Non-Equity (5) Incentive Plan Compensation |
Change
in ($) |
All Other (6) Compensation ($) |
Total ($) |
|||||||||||||||||||||||||||
(a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | (j) | |||||||||||||||||||||||||||
Naren Gursahaney President and Chief Executive Officer |
2015 | 900,009 | | 2,778,962 | 1,004,154 | 1,251,000 | | 76,502 | 6,010,627 | |||||||||||||||||||||||||||
2014 | 900,026 | | 2,716,602 | 1,148,360 | 630,000 | | 70,400 | 5,465,388 | ||||||||||||||||||||||||||||
2013 | 900,000 | | 2,708,100 | 2,602,377 | 693,000 | | 267,286 | 7,170,763 | ||||||||||||||||||||||||||||
Michael Geltzeiler (1) SVP, Chief Financial Officer |
2015 | 750,007 | | 1,387,852 | 502,077 | 1,042,500 | | 81,156 | 3,763,592 | |||||||||||||||||||||||||||
2014 | 661,953 | | 1,853,414 | 1,186,135 | 538,125 | | 102,057 | 4,341,684 | ||||||||||||||||||||||||||||
Jerri DeVard (2) SVP, Chief Marketing Officer |
2015 | 500,000 | | 739,445 | 267,438 | 486,500 | | 63,736 | 2,057,119 | |||||||||||||||||||||||||||
2014 | 251,924 | | 520,078 | 665,952 | 126,594 | | 90,552 | 1,655,100 | ||||||||||||||||||||||||||||
Alan Ferber President, Residential Business Unit |
2015 | 500,000 | | 739,445 | 267,438 | 504,000 | | 35,714 | 2,046,597 | |||||||||||||||||||||||||||
2014 | 500,002 | 75,000 | 718,401 | 305,222 | 235,200 | | 22,975 | 1,856,800 | ||||||||||||||||||||||||||||
2013 | 204,545 | 115,000 | 498,064 | 498,456 | 90,383 | | 47,843 | 1,454,291 | ||||||||||||||||||||||||||||
N. David Bleisch SVP, Chief Legal Officer |
2015 | 434,171 | | 438,901 | 160,631 | 467,040 | | 42,811 | 1,543,554 | |||||||||||||||||||||||||||
2014 | 425,012 | | 580,489 | 182,831 | 211,374 | | 337,531 | 1,737,237 | ||||||||||||||||||||||||||||
2013 | 391,667 | | 417,690 | 320,529 | 191,221 | | 126,404 | 1,447,511 |
(1) | Mr. Geltzeiler was appointed by the Companys Board of Directors on October 14, 2013, with an effective start date of November 11, 2013. |
(2) | Ms. DeVard was appointed by the Companys Board of Directors on March 24, 2014, with an effective start date of March 31, 2014. |
(3) | Bonus: The amounts shown in column (d) in fiscal years 2014 and 2013 for Mr. Ferber represent portions of a sign-on bonus paid when he joined the Company in April 2013, and on the first anniversary of his hire. |
(4) | Stock/Unit Awards and Option Awards: The amounts in columns (e) and (f) reflect the fair value of equity awards granted in fiscal years 2015, 2014 and 2013, which consisted of stock options, RSUs and PSUs. These amounts represent the fair value of the entire amount of the award calculated in accordance with Financial Accounting Standards Board ASC Topic 718 (ASC Topic 718), excluding the effect of estimated forfeitures. Amounts were calculated based upon the price of the Companys common stock (including the impact on the value of options under the Black-Scholes option pricing model). For stock options, amounts are computed by multiplying the fair value of the award (as determined under the Black-Scholes option pricing model) by the total number of options granted. For RSUs, fair value is computed by multiplying the total number of shares subject to the award by the closing market price of the Companys common stock on the date of grant. For PSUs, fair value is based on a model that considers the closing market price of the Companys common stock on the date of grant, the range of shares subject to such stock award and the estimated probabilities of vesting outcomes. The value of PSUs included in the table assumes target performance. The following amounts represent the maximum potential performance share value by individual for fiscal year 2015, determined at the time of grant (200% of the target award): Mr. Gursahaney$3,499,868; Mr. Geltzeiler$1,746,676; Ms. DeVard$931,995; Mr. Ferber$931,995; and Mr. Bleisch$553,982. |
Amounts in columns (e) and (f) for fiscal year 2014 for Mr. Geltzeiler include, in addition to the value of awards granted with respect to our annual long-term incentive plan, the value of awards representing grants of RSUs and stock options with respect to a sign-on equity award. The value of these sign-on grants included in columns (e) and (f) are $497,313 and $611,955, respectively. Amount in column (e) for fiscal year 2014 for Mr. Bleisch also includes the value of awards representing a grant of RSUs with respect to a one-time equity award in recognition of Mr. Bleischs critical role in supporting various Company governance issues. The value of this award included in column (e) is $146,853.
(5) | Non-Equity Incentive Plan Compensation: The amounts reported in column (g) for each NEO reflect annual cash incentive compensation for the applicable fiscal year. Annual incentive compensation for fiscal year 2015 is discussed in further detail above under the heading Annual Incentive Compensation. |
(6) | All Other Compensation: The amounts reported in column (i) represent the Companys contributions to its 401(k) RSIP and SSRP, taxable relocation benefits and associated tax gross-ups, and the value of the executive physical, as applicable. Details with respect to the amounts in this column are set forth below, in the All Other Compensation table. |
The ADT Corporation | 2016 Proxy Statement 39 |
FISCAL YEAR 2015 NEO COMPENSATIONCONTINUED |
Summary Compensation TableAll Other Compensation
The components of the All Other Compensation column in the Summary Compensation Table for each NEO are shown in the following table.
Named Executive | Fiscal Year |
Tax ($) (a) |
Retirement Plan Contributions ($) (b) |
Miscellaneous ($) (c) |
Total All Other Compensation ($) |
|||||||||||||||
Naren Gursahaney |
2015 | | 76,502 | | 76,502 | |||||||||||||||
2014 | | 68,400 | 2,000 | 70,400 | ||||||||||||||||
2013 | 52,165 | 53,607 | 161,514 | 267,286 | ||||||||||||||||
Michael Geltzeiler |
2015 | 14,632 | 64,664 | 1,860 | 81,156 | |||||||||||||||
2014 | 20,391 | 17,972 | 63,694 | 102,057 | ||||||||||||||||
Jerri DeVard |
2015 | 29,184 | 14,695 | 19,857 | 63,736 | |||||||||||||||
2014 | 18,189 | 6,458 | 65,905 | 90,552 | ||||||||||||||||
Alan Ferber |
2015 | | 33,218 | 2,496 | 35,714 | |||||||||||||||
2014 | | 20,873 | 2,102 | 22,975 | ||||||||||||||||
2013 | 5,699 | 7,500 | 34,644 | 47,843 | ||||||||||||||||
N. David Bleisch |
2015 | 10,971 | 31,840 | | 42,811 | |||||||||||||||
2014 | 75,140 | 29,415 | 232,976 | 337,531 | ||||||||||||||||
2013 | 4,993 | 24,868 | 96,543 | 126,404 |
(a) | The amounts shown in this column as tax gross-up payments for Messrs. Gursahaney, Geltzeiler, Ferber and Bleisch and Ms. DeVard represent tax gross-up payments made with respect to taxable relocation expenses. |
(b) | Amounts represent matching contributions made by the Company on behalf of each NEO to its tax-qualified 401(k) RSIP and to its non-qualified SSRP, as applicable. |
(c) | Miscellaneous compensation in fiscal year 2015 includes the value of taxable relocation benefits for Ms. DeVard (totaling $17,638), as well as the value of an executive physical for Messrs. Geltzeiler and Ferber and Ms. DeVard. Miscellaneous compensation in fiscal year 2014 includes the value of taxable relocation benefits for Messrs. Geltzeiler, Ferber and Bleisch and Ms. DeVard (totaling $63,244; $2,102; $232,976; and $65,905, respectively), as well as the value of an executive physical for Messrs. Gursahaney and Geltzeiler. In fiscal year 2013, miscellaneous compensation for Messrs. Gursahaney, Ferber and Bleisch includes the value of taxable relocation benefits (totaling $161,514; $34,644; and $95,293, respectively), as well as the value of an executive physical for Mr. Bleisch. |
40 | The ADT Corporation |
2016 Proxy Statement |
FISCAL YEAR 2015 NEO COMPENSATIONCONTINUED |
Grants of Plan-Based Awards Table
The following table summarizes the number of RSUs and Stock Options granted to the NEOs in fiscal year 2015 pursuant to The ADT 2012 Stock and Incentive Plan (the SIP), as well as the grant date fair value of these awards. The table also summarizes the range of potential payouts for the NEOs under the Officer Bonus Plan and the PSU awards granted under the SIP. Actual bonus awards under the Officer Bonus Plan are reported in the Summary Compensation Table under the heading Non-Equity Incentive Plan Compensation. All numbers have been rounded to the nearest whole dollar, share or unit, with the exception of the exercise price of Stock Option awards.
Board
or (c) |
Estimated Future Possible |
Estimated Future Possible Payouts Under Equity Incentive Plan Awards (2) |
All (j) |
All
Other (k) |
Exercise (l) |
Grant (m) |
||||||||||||||||||||||||||||||||||||||||||||
Name (a) |
Award Type | Grant Date (b) |
Threshold (d) |
Target (e) |
Maximum (f) |
Threshold (g) |
Target (h) |
Maximum (i) |
||||||||||||||||||||||||||||||||||||||||||
Naren Gursahaney | Performance Bonus | 12/08/2014 | 12/08/2014 | 450,000 | 900,000 | 1,800,000 | ||||||||||||||||||||||||||||||||||||||||||||
Performance Share Unit (4)(5) |
11/14/2014 | 11/14/2014 | 20,137 | 40,275 | 80,550 | 1,291,217 | ||||||||||||||||||||||||||||||||||||||||||||
Performance Share Unit (4)(6) |
11/14/2014 | 11/14/2014 | 5,370 | 13,425 | 26,850 | 458,717 | ||||||||||||||||||||||||||||||||||||||||||||
Restricted Stock Unit (4) |
11/14/2014 | 11/14/2014 | 28,600 | 1,029,028 | ||||||||||||||||||||||||||||||||||||||||||||||
Stock Option (4) | 11/14/2014 | 11/14/2014 | 119,400 | 35.98 | 1,004,154 | |||||||||||||||||||||||||||||||||||||||||||||
Michael Geltzeiler |
Performance Bonus | 12/08/2014 | 12/08/2014 | 375,000 | 750,000 | 1,500,000 | ||||||||||||||||||||||||||||||||||||||||||||
Performance Share Unit (4)(5) |
11/14/2014 | 11/14/2014 | 10,050 | 20,100 | 40,200 | 644,406 | ||||||||||||||||||||||||||||||||||||||||||||
Performance Share Unit (4)(6) |
11/14/2014 | 11/14/2014 | 2,680 | 6,700 | 13,400 | 228,932 | ||||||||||||||||||||||||||||||||||||||||||||
Restricted Stock Unit (4) |
11/14/2014 | 11/14/2014 | 14,300 | 514,514 | ||||||||||||||||||||||||||||||||||||||||||||||
Stock Option (4) | 11/14/2014 | 11/14/2014 | 59,700 | 35.98 | 502,077 | |||||||||||||||||||||||||||||||||||||||||||||
Jerri DeVard | Performance Bonus | 12/08/2014 | 12/08/2014 | 175,000 | 350,000 | 700,000 | ||||||||||||||||||||||||||||||||||||||||||||
Performance Share Unit (4)(5) |
11/14/2014 | 11/14/2014 | 5,362 | 10,725 | 21,450 | 343,844 | ||||||||||||||||||||||||||||||||||||||||||||
Performance Share Unit (4)(6) |
11/14/2014 | 11/14/2014 | 1,430 | 3,575 | 7,150 | 122,154 | ||||||||||||||||||||||||||||||||||||||||||||
Restricted Stock Unit (4) |
11/14/2014 | 11/14/2014 | 7,600 | 273,448 | ||||||||||||||||||||||||||||||||||||||||||||||
Stock Option (4) | 11/14/2014 | 11/14/2014 | 31,800 | 35.98 | 267,438 | |||||||||||||||||||||||||||||||||||||||||||||
Alan Ferber |
Performance Bonus | 12/08/2014 | 12/08/2014 | 175,000 | 350,000 | 700,000 | ||||||||||||||||||||||||||||||||||||||||||||
Performance Share Unit (4)(5) |
11/14/2014 | 11/14/2014 | 5,362 | 10,725 | 21,450 | 343,844 | ||||||||||||||||||||||||||||||||||||||||||||
Performance Share Unit (4)(6) |
11/14/2014 | 11/14/2014 | 1,430 | 3,575 | 7,150 | 122,154 | ||||||||||||||||||||||||||||||||||||||||||||
Restricted Stock Unit (4) |
11/14/2014 | 11/14/2014 | 7,600 | 273,448 | ||||||||||||||||||||||||||||||||||||||||||||||
Stock Option (4) | 11/14/2014 | 11/14/2014 | 31,800 | 35.98 | 267,438 | |||||||||||||||||||||||||||||||||||||||||||||
N. David Bleisch |
Performance Bonus | 12/08/2014 | 12/08/2014 | 168,000 | 336,000 | 672,000 | ||||||||||||||||||||||||||||||||||||||||||||
Performance Share Unit (4)(5) |
11/14/2014 | 11/14/2014 | 3,187 | 6,375 | 12,750 | 204,383 | ||||||||||||||||||||||||||||||||||||||||||||
Performance Share Unit (4)(6) |
11/14/2014 | 11/14/2014 | 850 | 2,125 | 4,250 | 72,609 | ||||||||||||||||||||||||||||||||||||||||||||
Restricted Stock Unit (4) |
11/14/2014 | 11/14/2014 | 4,500 | 161,910 | ||||||||||||||||||||||||||||||||||||||||||||||
Stock Option (4) | 11/14/2014 | 11/14/2014 | 19,100 | 35.98 | 160,631 |
The ADT Corporation | 2016 Proxy Statement 41 |
FISCAL YEAR 2015 NEO COMPENSATIONCONTINUED |
(1) | Amounts reported in columns (d) through (f) represent potential annual performance bonuses that the NEOs could have earned under the Companys Officer Bonus Plan for fiscal year 2015. The range of potential payouts is based upon the guideline formula the Compensation Committee uses to exercise its available negative discretion under the plan. The Compensation Committee established a maximum payout of 200% of target. Threshold amounts assume minimum performance levels are achieved with respect to each performance measure. |
(2) | Amounts reported in columns (g) through (i) represent potential share payouts with respect to PSU awards that were made in connection with the fiscal year 2015 long-term incentive grant. PSU awards will vest at the end of the three-year performance period, based upon the Companys performance against its EBITDA and TSR targets. The threshold amounts shown above reflect the number of shares which would be delivered assuming that threshold attainment was met for the performance metrics. The maximum amounts shown assume maximum attainment against performance metrics. PSUs accrue dividend equivalent units, but these equivalents are ultimately delivered to the recipient only to the extent that the underlying awards vest based upon performance. |
(3) | Amounts reported in column (m) show the grant date fair value of the Stock Option, RSU and PSU awards granted to the NEOs. These amounts represent the fair value of the entire amount of the award calculated in accordance with ASC Topic 718, excluding the effect of estimated forfeitures. For grants of Stock Options, amounts are computed by multiplying the fair value of the award (as determined under the Black-Scholes option pricing model) by the total number of options granted. For grants of RSUs, fair value is computed by multiplying the total number of shares subject to the award by the closing price of the Companys common stock on the date of grant. For grants of PSUs, fair value is based on a model that considers the closing price of the Companys common stock on the date of grant, the range of shares subject to such stock award, and the estimated probabilities of vesting outcomes. The value of PSUs included in the table assumes target performance. However, the actual number of shares that will be delivered with respect to the PSUs will be determined based on performance through the end of the three-year performance period. |
(4) | Amounts represent grants of PSUs, RSUs and/or Stock Options with respect to the Companys annual long-term incentive plan. |
(5) | PSUs which vest subject to the Companys EBITDA performance relative to target. |
(6) | PSUs which vest subject to the Companys TSR performance relative to target. |
The Company made its annual grant of equity for fiscal year 2015 in November 2014. The annual award for each of the NEOs consisted of a mix of PSUs, RSUs and Stock Options. For Stock Options, the exercise price equals the closing price of the Companys common stock on the date of grant. Stock Options granted as part of the annual award process generally vest in equal installments over a period of four years. Each option holder has 10 years to exercise his or her Stock Option from the date of grant, unless forfeited earlier. PSUs generally vest at the end of a three-year performance period, with the number of shares delivered dependent on the achievement of applicable performance criteria. Anywhere between zero and 200% of the target number of shares may be delivered based on performance. PSUs generally accrue dividend equivalent units, which are subject to the same performance conditions applicable to the underlying award, but do not carry voting rights. RSUs granted as part of the annual award process generally vest in equal installments over four years, accrue dividend equivalent units subject to the same vesting restrictions as the underlying award, and do not carry voting rights.
42 | The ADT Corporation |
2016 Proxy Statement |
FISCAL YEAR 2015 NEO COMPENSATIONCONTINUED |
Outstanding Equity Awards at Fiscal Year-End Table
The following table shows outstanding Stock Option awards classified as exercisable and unexercisable and the number and value of any unvested or unearned equity awards outstanding as of September 25, 2015 for each of the NEOs. The value of any unvested or unearned equity awards outstanding is calculated based on a market value of $30.70, which was the NYSE closing price per share of the Companys common stock on September 25, 2015.
Option Awards (1) | Stock Awards | |||||||||||||||||||||||||||||||
Name | Number of Securities Underlying Unexercised Options: (#) Exercisable |
Number of Securities Underlying Unexercised Options: (#) UnExercisable |
Option ($) |
Option Expiration Date |
Number of Shares or Units of Stock That Have Not Vested (#) (2) |
Market ($) (3) |
Equity (#) (4) |
Equity ($) (3) |
||||||||||||||||||||||||
Naren |
14,741 | | 31.1718 | 1/11/2016 | 83,686 | 2,569,160 | 99,012 | 3,039,668 | ||||||||||||||||||||||||
Gursahaney |
137,587 | | 30.8309 | 11/20/2016 | ||||||||||||||||||||||||||||
110,850 | | 34.1771 | 7/2/2017 | |||||||||||||||||||||||||||||
54,644 | | 28.4959 | 8/17/2018 | |||||||||||||||||||||||||||||
201,873 | | 18.5745 | 10/6/2018 | |||||||||||||||||||||||||||||
148,633 | | 21.6169 | 9/30/2019 | |||||||||||||||||||||||||||||
123,965 | | 23.8843 | 10/11/2020 | |||||||||||||||||||||||||||||
78,219 | 26,074 | 28.3870 | 10/11/2021 | |||||||||||||||||||||||||||||
65,700 | 65,700 | 45.9000 | 11/29/2022 | |||||||||||||||||||||||||||||
43,800 | 21,900 | 45.9000 | 11/29/2022 | |||||||||||||||||||||||||||||
19,000 | 57,000 | 44.0100 | 11/21/2023 | |||||||||||||||||||||||||||||
| 119,400 | 35.9800 | 11/13/2024 | |||||||||||||||||||||||||||||
Michael |
9,500 | 28,500 | 44.0100 | 11/21/2023 | 34,601 | 1,062,251 | 49,454 | 1,518,238 | ||||||||||||||||||||||||
Geltzeiler |
13,500 | 27,000 | 44.0100 | 11/21/2023 | ||||||||||||||||||||||||||||
| 59,700 | 35.9800 | 11/13/2024 | |||||||||||||||||||||||||||||
Jerri DeVard |
16,600 | 33,200 | 31.3300 | 5/6/2024 | 23,402 | 718,441 | 14,549 | 446,654 | ||||||||||||||||||||||||
4,350 | 13,050 | 31.3300 | 5/6/2024 | |||||||||||||||||||||||||||||
| 31,800 | 35.9800 | 11/13/2024 | |||||||||||||||||||||||||||||
Alan Ferber |
19,350 | 19,350 | 44.4700 | 5/7/2023 | 18,003 | 552,692 | 26,319 | 807,993 | ||||||||||||||||||||||||
5,050 | 15,150 | 44.0100 | 11/21/2023 | |||||||||||||||||||||||||||||
| 31,800 | 35.9800 | 11/13/2024 | |||||||||||||||||||||||||||||
N. David |
10,515 | | 30.8309 | 11/20/2016 | 16,021 | 491,845 | 15,730 | 482,911 | ||||||||||||||||||||||||
Bleisch |
11,491 | | 34.1771 | 7/2/2017 | ||||||||||||||||||||||||||||
14,410 | | 18.5745 | 10/6/2018 | |||||||||||||||||||||||||||||
10,523 | | 21.6169 | 9/30/2019 | |||||||||||||||||||||||||||||
20,468 | | 23.8843 | 10/11/2020 | |||||||||||||||||||||||||||||
13,559 | 4,520 | 28.3870 | 10/11/2021 | |||||||||||||||||||||||||||||
6,200 | 3,100 | 45.9000 | 11/29/2022 | |||||||||||||||||||||||||||||
7,500 | 7,500 | 45.9000 | 11/29/2022 | |||||||||||||||||||||||||||||
3,025 | 9,075 | 44.0100 | 11/21/2023 | |||||||||||||||||||||||||||||
| 19,100 | 35.9800 | 11/13/2024 |
(1) | Stock Options granted to the NEOs generally vest and become exercisable one-fourth per year on each anniversary of the grant date, with the exception of certain one-time or sign-on grants. Stock Options granted to the NEOs expire on the day prior to the tenth anniversary of the grant date. |
(2) | The amounts shown in this column represent unvested awards of RSUs, including outstanding dividend equivalent units associated with the underlying RSU awards. For Messrs. Gursahaney and Bleisch, also included are the earned portion of the PSU awards granted in fiscal year 2013, which at September 25, 2015 remain unvested. The three-year performance period for the fiscal year 2013 grant ended on September 25, 2015, the last day of fiscal year 2015. The vesting period for the fiscal year 2013 grant, however, did not end until November 30, 2015, which was the third anniversary of the grant date. |
(3) | The amounts shown in these columns represent the market value of the unvested RSU and PSU awards calculated using a price of $30.70, which was the closing price of the Companys common stock on the NYSE on September 25, 2015. |
(4) | The amounts shown in this column represent outstanding and unvested awards of PSUs. The number of PSUs is based on the number granted (target amount) and includes outstanding dividend equivalent units associated with the underlying award. Dividend equivalent units will vest only to the extent the underlying awards vest based upon the Companys performance against its performance targets. The three-year performance period for the fiscal year 2015 grant ends on September 30, 2017, the last day of fiscal year 2017. The three-year performance period for the fiscal year 2014 grant ends on September 30, 2016, the last day of fiscal year 2016. |
The ADT Corporation | 2016 Proxy Statement 43 |
FISCAL YEAR 2015 NEO COMPENSATIONCONTINUED |
Vesting dates for each outstanding Stock Option award, as of September 25, 2015, for the NEOs are as follows:
Number of Shares Underlying Vesting Awards | ||||||||||||||||||||||||
Year | Exercise Price ($) | Naren Gursahaney | Michael Geltzeiler | Jerri DeVard | Alan Ferber | N. David Bleisch | ||||||||||||||||||
2015 |
||||||||||||||||||||||||
10/12/2015 |
28.3870 | 26,074 | | | | 4,520 | ||||||||||||||||||
11/14/2015 |
35.9800 | 29,850 | 14,925 | 7,950 | 7,950 | 4,775 | ||||||||||||||||||
11/22/2015 |
44.0100 | 19,000 | 23,000 | | 5,050 | 3,025 | ||||||||||||||||||
11/30/2015 |
45.9000 | 54,750 | | | | 6,850 | ||||||||||||||||||
2016 |
||||||||||||||||||||||||
5/7/2016 |
31.3300 | | | 20,950 | | | ||||||||||||||||||
5/8/2016 |
44.4700 | | | | 9,675 | | ||||||||||||||||||
11/14/2016 |
35.9800 | 29,850 | 14,925 | 7,950 | 7,950 | 4,775 | ||||||||||||||||||
11/22/2016 |
44.0100 | 19,000 | 23,000 | | 5,050 | 3,025 | ||||||||||||||||||
11/30/2016 |
45.9000 | 32,850 | | | | 3,750 | ||||||||||||||||||
2017 |
||||||||||||||||||||||||
5/7/2017 |
31.3300 | | | 20,950 | | | ||||||||||||||||||
5/8/2017 |
44.4700 | | | | 9,675 | | ||||||||||||||||||
11/14/2017 |
35.9800 | 29,850 | 14,925 | 7,950 | 7,950 | 4,775 | ||||||||||||||||||
11/22/2017 |
44.0100 | 19,000 | 9,500 | | 5,050 | 3,025 | ||||||||||||||||||
2018 |
||||||||||||||||||||||||
5/7/2018 |
31.3300 | | | 4,350 | | | ||||||||||||||||||
11/14/2018 |
35.9800 | 29,850 | 14,925 | 7,950 | 7,950 | 4,775 |
44 | The ADT Corporation |
2016 Proxy Statement |
FISCAL YEAR 2015 NEO COMPENSATIONCONTINUED |
Vesting dates for each outstanding RSU award, including outstanding dividend equivalent units, as of September 25, 2015, for the NEOs are as follows:
Number of Shares Underlying Vesting Awards | ||||||||||||||||||||
Year | Naren Gursahaney | Michael Geltzeiler | Jerri DeVard | Alan Ferber | N. David Bleisch | |||||||||||||||
2015 |
||||||||||||||||||||
10/12/2015 |
3,783 | | | | 1,310 | |||||||||||||||
11/14/2015 |
7,275 | 3,638 | 1,934 | 1,934 | 1,145 | |||||||||||||||
11/22/2015 |
5,547 | 2,761 | | 1,459 | 886 | |||||||||||||||
11/30/2015 |
20,075 | | | | 3,407 | |||||||||||||||
12/9/2015 |
| | | | 1,926 | |||||||||||||||
2016 |
||||||||||||||||||||
5/7/2016 |
| | 1,417 | | | |||||||||||||||
5/8/2016 |
| | | 2,948 | | |||||||||||||||
11/14/2016 |
7,275 | 3,637 | 1,933 | 1,933 | 1,144 | |||||||||||||||
11/22/2016 |
5,546 | 14,530 | | 1,458 | 885 | |||||||||||||||
11/30/2016 |
| | | | 554 | |||||||||||||||
2017 |
||||||||||||||||||||
5/7/2017 |
| | 12,835 | | | |||||||||||||||
5/8/2017 |
| | | 2,947 | | |||||||||||||||
11/14/2017 |
7,275 | 3,638 | 1,933 | 1,933 | 1,145 | |||||||||||||||
11/22/2017 |
5,546 | 2,760 | | 1,458 | 885 | |||||||||||||||
2018 |
||||||||||||||||||||
5/7/2018 |
| | 1,417 | | | |||||||||||||||
11/14/2018 |
7,275 | 3,637 | 1,933 | 1,933 | 1,144 |
Vesting dates for each outstanding PSU award, including outstanding dividend equivalent units, as of September 25, 2015, for the NEOs are as follows:
Number of Shares Underlying Vesting Awards | ||||||||||||||||||||
Year | Naren Gursahaney | Michael Geltzeiler | Jerri DeVard | Alan Ferber | N. David Bleisch | |||||||||||||||
2015 |
||||||||||||||||||||
11/30/2015 |
14,089 | | | | 1,590 | |||||||||||||||
2016 |
||||||||||||||||||||
11/22/2016 |
44,374 | 22,186 | | 11,770 | 7,082 | |||||||||||||||
2017 |
||||||||||||||||||||
11/14/2017 |
54,638 | 27,268 | 14,549 | 14,549 | 8,648 |
The number of PSUs vesting on November 30, 2015 for Messrs. Gursahaney and Bleisch are shown net of the impact of Company performance.
The ADT Corporation | 2016 Proxy Statement 45 |
FISCAL YEAR 2015 NEO COMPENSATIONCONTINUED |
Option Exercises and Stock Vested Table
The following table sets forth information regarding option awards exercised and stock awards vested during fiscal year 2015 for the NEOs. Values have been rounded to the nearest dollar, where applicable.
Option Awards | Stock Awards | |||||||||||||||
Name | Number of Shares Acquired on Exercise (#) |
Value Realized on Exercise ($) (1) |
Number of Shares Acquired on Vesting (#) |
Value Realized on Vesting ($) (2) |
||||||||||||
Naren Gursahaney |
52,447 | 481,473 | 11,575 | 397,570 | ||||||||||||
Michael Geltzeiler |
| | 2,713 | 98,536 | ||||||||||||
Jerri DeVard |
| | 1,398 | 51,894 | ||||||||||||
Alan Ferber |
| | 4,338 | 161,071 | ||||||||||||
N. David Bleisch |
20,144 | 177,806 | 5,066 | 169,044 |
(1) | The amounts shown in this column reflect the value realized upon the exercise of vested stock options. The value realized is the difference between the sale price of the shares acquired via the exercise of the options and the exercise price of the options. |
(2) | The amounts shown in this column reflect the value of stock awards that vested based on the NYSE closing price per share of the Companys common stock on the date of vesting. |
Non-Qualified Deferred Compensation Table
The following table presents information related to the non-qualified deferred compensation accounts of each of our NEOs as of September 25, 2015.
Name | Executive Contributions in Last Fiscal Year ($) (1) |
Registrant Contributions in Last Fiscal Year ($) (1) |
Aggregate Earnings in Last Fiscal Year ($) (2) |
Aggregate Withdrawals/ Distributions ($) |
Aggregate Balance at Last Fiscal Year End ($) |
|||||||||||||||
(a) | (b) | (c) | (d) | (e) | (f) | |||||||||||||||
Naren Gursahaney |
107,401 | 67,127 | (147,122) | | 5,841,075 | |||||||||||||||
Michael Geltzeiler |
64,726 | 51,414 | (6,653) | | 109,487 | |||||||||||||||
Jerri DeVard |
| | | | | |||||||||||||||
Alan Ferber |
73,187 | 28,010 | (7,155) | | 120,918 | |||||||||||||||
N. David Bleisch |
22,695 | 19,319 | (2,944) | (30,220) | 176,406 |
(1) | The amounts shown in columns (b) and (c) reflect employee and Company contributions, respectively, under the SSRP, the Companys non-qualified retirement savings plan. All of the amounts in column (c) are included in the Summary Compensation Table under the column heading All Other Compensation. Under the terms of the SSRP, an eligible executive may elect to defer up to 50% of his or her base salary and up to 100% of his or her performance bonus. |
(2) | The amounts shown in this column include earnings (or losses) on the NEOs notional account in the SSRP. |
Potential Payments Upon Termination or Change in Control
46 | The ADT Corporation |
2016 Proxy Statement |
FISCAL YEAR 2015 NEO COMPENSATIONCONTINUED |
The ADT Corporation | 2016 Proxy Statement 47 |
FISCAL YEAR 2015 NEO COMPENSATIONCONTINUED |
The following table summarizes the severance benefits that would have been payable to each of the NEOs upon termination of employment or upon a qualifying termination in connection with a change in control, assuming that the triggering event or events occurred on September 25, 2015. Equity award amounts are calculated using a price of $30.70, which was the closing price of the Companys common stock on the NYSE on September 25, 2015.
Change in Control | Other Termination | |||||||||||||||||||||||
Name/Form of Compensation (a) | Without Qualified Termination ($) (b) |
With Qualified |
With Cause ($) (d) |
Without ($) (e) |
Resignation/ Retirement ($) (f) |
Death or Disability ($) (g) |
||||||||||||||||||
Naren Gursahaney |
||||||||||||||||||||||||
Cash Severance |
| 3,600,000 | | 3,600,000 | | | ||||||||||||||||||
Benefit Continuation & Outplacement |
| 21,395 | | 21,395 | | | ||||||||||||||||||
Accelerated Vesting of Equity Awards |
| 5,669,138 | | 60,309 | | 5,669,138 | ||||||||||||||||||
Total |
| 9,290,533 | | 3,681,704 | | 5,669,138 | ||||||||||||||||||
Michael Geltzeiler |
||||||||||||||||||||||||
Cash Severance |
| 3,000,000 | | 2,250,000 | | | ||||||||||||||||||
Benefit Continuation & Outplacement |
| 17,304 | | 17,304 | | | ||||||||||||||||||
Accelerated Vesting of Equity Awards |
| 2,580,489 | | | | 2,580,489 | ||||||||||||||||||
Total |
| 5,597,792 | | 2,267,304 | | 2,580,489 | ||||||||||||||||||
Jerri DeVard |
||||||||||||||||||||||||
Cash Severance |
| 1,700,000 | | 1,275,000 | | | ||||||||||||||||||
Benefit Continuation & Outplacement |
| 21,027 | | 21,027 | | | ||||||||||||||||||
Accelerated Vesting of Equity Awards |
| 1,165,096 | | | | 1,165,096 | ||||||||||||||||||
Total |
| 2,886,123 | | 1,296,027 | | 1,165,096 | ||||||||||||||||||
Alan Ferber |
||||||||||||||||||||||||
Cash Severance |
| 1,700,000 | | 1,275,000 | | | ||||||||||||||||||
Benefit Continuation & Outplacement |
| 21,395 | | 21,395 | | | ||||||||||||||||||
Accelerated Vesting of Equity Awards |
| 1,360,685 | | | | 1,360,685 | ||||||||||||||||||
Total |
| 3,082,080 | | 1,296,395 | | 1,360,685 | ||||||||||||||||||
N. David Bleisch |
||||||||||||||||||||||||
Cash Severance |
| 1,632,000 | | 1,224,000 | | | ||||||||||||||||||
Benefit Continuation & Outplacement |
| 21,395 | | 21,395 | | | ||||||||||||||||||
Accelerated Vesting of Equity Awards |
| 985,210 | | 465,337 | 464,465 | 985,210 | ||||||||||||||||||
Total |
| 2,638,606 | | 1,710,732 | 464,465 | 985,210 |
48 | The ADT Corporation |
2016 Proxy Statement |
COMPENSATION OF NON-MANAGEMENT DIRECTORS |
COMPENSATION OF NON-MANAGEMENT DIRECTORS
Compensation for our non-management directors consists of an annual cash retainer in the amount of $80,000 per year, paid on a quarterly basis, and an annual equity award of RSUs with a grant date fair value of approximately $120,000 and a one-year vesting term. In addition, the non-executive chairman of our Board of Directors receives an additional cash retainer in the amount of $150,000 per year, paid quarterly. The chairs of the Audit, Compensation and Nominating and Governance Committees receive an additional cash retainer in the amount of $25,000, $20,000 and $15,000 per year, respectively, each of which is paid quarterly.
The following table sets forth information concerning the fiscal year 2015 compensation paid to our non-management directors.
Name | Fees Earned or Paid in Cash ($) |
Stock Awards ($) (1) |
All Other Compensation ($) (2) |
Total ($) |
||||||||||||
Thomas Colligan |
105,000 | 120,012 | | 225,012 | ||||||||||||
Timothy Donahue |
100,000 | 120,012 | 353 | 220,365 | ||||||||||||
Richard Daly |
80,000 | 120,012 | | 200,012 | ||||||||||||
Robert Dutkowsky |
80,000 | 120,012 | 2,486 | 202,498 | ||||||||||||
Bruce Gordon |
245,000 | 120,012 | | 365,012 | ||||||||||||
Bridgette Heller |
80,000 | 120,012 | 1,224 | 201,236 | ||||||||||||
Kathleen Hyle |
80,000 | 120,012 | 338 | 200,350 | ||||||||||||
Christopher Hylen (3) |
58,444 | 140,047 | | 198,491 |
(1) | This column reflects the fair value of the awards granted to our non-management directors calculated in accordance with ASC Topic 718, excluding estimated forfeitures. The fair value of RSUs is computed by multiplying the total number of shares subject to the award by the closing price of the Companys common stock per share on the NYSE on the date of grant. RSUs granted to non-management directors generally vest and the underlying units are converted to shares and delivered to non-management directors on the first anniversary of the grant date. The value of dividend equivalent units granted in connection with dividends paid on the Companys common stock during fiscal year 2015 are excluded. |
(2) | This column reflects the value of the discount on security monitoring services provided by the Company, as well as the value of system installation, where applicable. |
(3) | The value of stock awards includes, in addition to the annual grant awarded to all non-management directors in conjunction with the Companys Annual Meeting on March 17, 2015, the value of a stub grant made to Mr. Hylen. This stub grant represented a pro-rated grant covering the period from the date of his appointment to the Board of Directors (January 9, 2015) until the Annual Meeting on March 17, 2015. |
The ADT Corporation | 2016 Proxy Statement 49 |
AUDIT COMMITTEE REPORT |
The Audit Committee of the Board of Directors oversees ADTs financial reporting process on behalf of the Board of Directors. Management has the primary responsibility for the financial statements and the reporting process, including the systems of internal controls. The Audit Committee meets separately with management, the senior internal auditor, the independent auditors and the general counsel. The Audit Committee operates under a written charter approved by the Board of Directors, a copy of which is available on our website at www.adt.com. The charter, among other things, provides that the Audit Committee has direct responsibility to appoint, compensate, oversee, evaluate, and recommend termination of, when appropriate, the independent auditor. In this context, the Audit Committee:
| reviewed and discussed the audited financial statements in ADTs annual report on Form 10-K with management; |
| reviewed with Deloitte & Touche LLP, ADTs independent auditors, who are responsible for expressing an opinion on the conformity of those audited financial statements with generally accepted accounting principles, their judgments as to the quality and acceptability of ADTs accounting principles and such other matters as are required to be discussed with the Audit Committee under generally accepted auditing standards; |
| received the written disclosures and the letter from Deloitte & Touche LLP required by applicable requirements of the Public Company Accounting Oversight Board regarding Deloitte & Touche LLPs communications with the Audit Committee concerning independence; |
| discussed with Deloitte & Touche LLP its independence from management and ADT and considered whether Deloitte & Touche LLP could also provide non-audit services without compromising the firms independence; |
| discussed with Deloitte & Touche LLP the matters required to be discussed by statement on Auditing Standard No. 16, Communications with Audit Committees; and |
| discussed with ADTs internal auditors and Deloitte & Touche LLP the overall scope and plans for their respective audits, and then met with the internal auditors and Deloitte & Touche LLP, with and without management present, to discuss the results of their examinations, their evaluations of ADTs internal controls and the overall quality of ADTs financial reporting. |
Based on the foregoing reviews and discussions, the Audit Committee recommended to the Board of Directors that the Companys audited financial statements be included in the Companys Annual Report on Form 10-K for the fiscal year ended September 25, 2015 filed with the SEC.
Submitted by the Audit Committee of the Board of Directors:
Thomas Colligan, Chair
Bridgette Heller
Kathleen Hyle
Christopher Hylen
50 | The ADT Corporation |
2016 Proxy Statement |
PROPOSAL NUMBER TWO |
PROPOSAL NUMBER TWORATIFICATION OF THE APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee is directly responsible for the appointment, compensation, retention, oversight and evaluation of the performance of the work of the Companys independent registered public accounting firm. The Audit Committee reviews and evaluates the performance of the work of the Companys independent auditors lead audit partner, and as required by law, ensures the regular rotation of the lead audit partner having primary responsibility for the audit and the regular rotation of the audit partner responsible for reviewing the audit. On January 7, 2016, the Audit Committee appointed the firm of Deloitte & Touche LLP (D&T), as the Companys independent registered public accounting firm to audit its financial statements for fiscal year 2016. D&T has served as the Companys independent registered public accounting firm continually since September 2012. The Audit Committee and the Board of Directors believe that the continued retention of D&T as the Companys independent registered public accounting firm is in the best interests of the Company and its stockholders, and recommends that stockholders ratify the appointment of D&T as the Companys independent registered public accounting firm for fiscal year 2016. Stockholder approval of the appointment of D&T is not required, but the Audit Committee and the Board of Directors are submitting the selection of D&T for ratification to obtain our stockholders views. In the event the stockholders do not ratify the appointment of D&T as the Companys independent auditors for fiscal year 2016, the Audit Committee and the Board of Directors will consider the voting results and evaluate whether to select a different independent auditor.
Representatives of D&T will attend the Annual Meeting and will be available to respond to appropriate questions. Although D&T has indicated that no statement will be made, an opportunity for a statement will be provided.
The Audit Committee approves, in advance, all audit engagement fees and the terms of all audit services to be provided by the independent auditor. Set forth below are the aggregate audit and non-audit fees billed to the Company by D&T for fiscal years 2014 and 2015:
2014 | 2015 | |||||||
Audit Fees |
$ | 2,687,850 | $ | 2,687,028 | ||||
Audit-Related Fees |
40,800 | 29,685 | ||||||
Tax Fees |
128,945 | 321,623 | ||||||
All Other Fees |
2,000 | 2,000 | ||||||
Total: |
2,859,595 | 3,040,336 |
Audit Fees: These amounts represent fees of D&T for the audit of our annual consolidated financial statements, the review of financial statements included in our quarterly Form 10-Q reports, the audit of internal control over financial reporting, and the services that an independent auditor would customarily provide in connection with regulatory filings and similar engagements for the fiscal year.
Audit-Related Fees: Audit-related fees consist of fees billed for services performed by D&T that are reasonably related to the performance of the audit or review of the Companys financial statements, including the audits of employee benefit plans.
Tax Fees: Tax fees consist of fees billed for professional services performed by D&T with respect to tax compliance, tax planning and tax advice for U.S. and Canadian operations.
All Other Fees: All Other Fees consist of permitted services other than those that meet the criteria above and relate to accounting research subscriptions.
Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors
The Audit Committee adopted a pre-approval policy that provides guidelines for the audit, audit-related, tax and other permissible non-audit services that may be provided by the independent auditors. The policy identifies the guiding principles that must be considered by the Audit Committee in approving services to ensure that the auditors independence is not impaired. Under the policy, the Audit Committee annually, and from time to time, pre-approves the audit engagement fees and terms of all audit and permitted non-audit services to be provided by the independent auditor.
The Audit Committee considered whether providing the non-audit services shown in the table above was compatible with maintaining D&Ts independence and concluded that it was.
The Audit Committee and the Board of Directors unanimously recommend that stockholders vote FOR the ratification of Deloitte & Touche LLP as our Independent Registered Public Accounting Firm for fiscal year 2016.
The ADT Corporation | 2016 Proxy Statement 51 |
PROPOSAL NUMBER THREE |
PROPOSAL NUMBER THREENON-BINDING ADVISORY VOTE ON COMPENSATION OF THE NAMED EXECUTIVE OFFICERS
In accordance with Section 14A of the Exchange Act, we request our stockholders non-binding advisory vote on the compensation of our named executive officers as disclosed in accordance with the SECs rules in the section of this Proxy Statement under Compensation of Executive Officers on pages 26 to 48.
The Company currently intends to hold such votes annually. Accordingly, the next such vote will be held at the Companys 2017 Annual Meeting of Stockholders.
In considering their vote, stockholders should know that our compensation objectives, policies, practices and programs are designed to attract and retain the talent needed to align with the strategic mission of ADT and to drive financial performance and incentivize execution of our business strategy. Our compensation programs and practices are intended to reward our named executive officers for their performance in implementing our strategy to grow our business and create long-term stockholder value. We believe our programs effectively link executive pay to the financial performance of the Company while also aligning our named executive officers interests with the interests of our stockholders.
We are seeking our stockholders support for our executive officer compensation as detailed in this Proxy Statement. This proposal conforms to SEC requirements and seeks our stockholders views on our executive compensation, compensation philosophy, pay principles and pay practices as described in this Proxy Statement. The advisory vote is non-binding and it will not be binding on the Board of Directors or obligate it to take any compensation actions, or to adjust our executive compensation programs or policies, as a result of the vote. However, the Board of Directors will take into account the outcome of the vote when considering future executive compensation decisions for executive officers.
The Board of Directors unanimously recommends that stockholders support this proposal and vote FOR the following resolution:
RESOLVED, that the compensation paid to The ADT Corporations named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion is hereby APPROVED.
52 | The ADT Corporation |
2016 Proxy Statement |
OTHER MATTERS |
Registered and Principal Executive Offices
The registered and principal executive offices of The ADT Corporation are located at 1501 Yamato Road, Boca Raton, Florida 33431 and its telephone number is (561) 988-3600.
Householding of Proxy Materials
SEC rules permit companies and intermediaries such as brokers to satisfy delivery requirements for proxy statements and notices with respect to two or more stockholders sharing the same address by delivering a single proxy statement or a single notice addressed to those stockholders. This process, which is commonly referred to as householding, provides cost savings for companies. Some brokers household proxy materials, delivering a single proxy statement or notice to multiple stockholders sharing an address unless contrary instructions have been received from an affected stockholder. Once you have received notice from your broker that they will be householding materials to your address, householding will continue until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in householding and would prefer to receive a separate proxy statement or notice, or if your household is receiving multiple copies of these documents and you wish to request that future deliveries be limited to a single copy, please notify your broker. You can request prompt delivery of a copy of the proxy materials by writing to: Broadridge, Attention Householding Dept., 51 Mercedes Way, Edgewood, NY 11711 or by calling 1-800-542-1061.
RECONCILIATION OF NON-GAAP MEASURES TO GAAP MEASURES AND SELECTED DEFINITIONS
Recurring revenue in constant currency, earnings before interest, taxes, depreciation and amortization (EBITDA), EBITDA in constant currency, EBITDA Margin, pre-SAC EBITDA, pre-SAC EBITDA margin, and steady-state free cash flow (SSFCF), in each case before special items, are non-GAAP measures that may be used from time to time and should not be considered replacements for GAAP results.
Recurring revenue in constant currency is a useful measure because it provides transparency to the underlying performance in markets outside the United States by excluding the effect that foreign currency exchange rate fluctuations have on comparability. Recurring revenue in constant currency as presented herein may not be comparable to similarly titled measures reported by other companies. The difference between revenue (the most comparable GAAP measure) and recurring revenue in constant currency (the non-GAAP measure) is the exclusion of the impact of foreign currency exchange fluctuations. This is also the primary limitation of this measure, which is best addressed by using recurring revenue in constant currency in combination with GAAP revenue.
EBITDA is a useful measure of the Companys success in acquiring, retaining and servicing our customer base and ability to generate and grow recurring revenue while providing a high level of customer service in a cost-effective manner. The difference between Net Income (the most comparable GAAP measure) and EBITDA (the non-GAAP measure) is the exclusion of interest expense, the provision for income taxes, depreciation and amortization expense. Excluding these items eliminates the impact of expenses associated with our capitalization and tax structure as well as the impact of non-cash charges related to capital investments.
Pre-SAC EBITDA is useful because it measures the Companys operational profits from its existing customer base by excluding certain revenue and expenses related to acquiring new customers. The difference between Net Income (the most comparable GAAP measure) and pre-SAC EBITDA (the non-GAAP measure) is the exclusion of interest expense, the provision for income taxes, depreciation expense, amortization expense, gross subscriber acquisition cost expenses and revenue associated with the sale of equipment. Excluding these items eliminates the impact of expenses associated with our capitalization and tax structure, the impact of non-cash charges related to capital investments and the impact of growing our subscriber base.
In addition, from time to time, the Company may present EBITDA and pre-SAC EBITDA before special items, which are the respective measures adjusted to exclude the impact of the items highlighted below. These numbers provide information to investors regarding the impact of certain items management believes are useful to identify, as described below. EBITDA and pre-SAC EBITDA may also be presented at constant currency. Constant currency presentation is useful because it provides transparency to the underlying performance in markets outside the U.S. by excluding the effect that foreign currency exchange rate fluctuations have on comparability.
There are material limitations to using EBITDA and pre-SAC EBITDA. EBITDA and pre-SAC EBITDA may not be comparable to similarly titled measures reported by other companies. Furthermore, EBITDA and pre-SAC EBITDA does not take into account certain significant items, including depreciation and amortization, interest expense and tax expense, which directly affect our net income. Additionally, pre-SAC EBITDA does not take into account expenses related to acquiring new customers. These limitations are best addressed by considering the economic effects of the excluded items independently, and by considering EBITDA and pre-SAC EBITDA in conjunction with net income as calculated in accordance with GAAP. The EBITDA and pre-SAC EBITDA discussion above is also applicable to the respective margin measures.
The ADT Corporation | 2016 Proxy Statement 53 |
RECONCILIATION OF NON-GAAP MEASURES TO GAAP MEASURES AND SELECTED DEFINITIONSCONTINUED |
SSFCF is a useful measure of pre-levered cash that is generated by the Company after the cost of replacing recurring revenue lost to attrition, but before the cost of new subscribers that drive recurring revenue growth. The difference between Net Income (the most comparable GAAP measure) and SSFCF (the non-GAAP measure) consists of the factors discussed above regarding pre-SAC EBITDA, on a quarter-to-date basis. Pre-SAC EBITDA is then annualized and adjusted for additional factors, described in the reconciliation below, required to maintain the steady-state. Certain components of these inputs are determined using trailing twelve month information or information from the most recent quarter.
In addition, from time to time the Company may present SSFCF before special items, which is SSFCF adjusted to exclude the impact of the special items highlighted below. These numbers provide information to investors regarding the impact of certain items management believes are useful to identify, as described below.
The limitation associated with using SSFCF is that they adjust for certain items that are ultimately within managements and the Board of Directors discretion to direct, and therefore, may imply that there is less or more cash that is available than the most comparable GAAP measure. This limitation is best addressed by using SSFCF in combination with other GAAP financial measures.
SSFCF as presented herein may not be comparable to similarly titled measures reported by other companies. This measure should be used in conjunction with other GAAP financial measures. Investors are urged to read the Companys financial statements as filed with the U.S. Securities and Exchange Commission, as well as the accompanying reconciliations below that show the elements of the GAAP measure.
The Company has presented EBITDA, EBITDA Margin, pre-SAC EBITDA, SSFCF and other measures (such as recurring revenue) before special items. Special items include charges and gains related to acquisitions, integrations, restructurings, impairments, and other income or charges that may mask the underlying operating results and/or business trends of the Company. The Company utilizes these measures to assess overall operating performance, as well as to provide insight to management in evaluating overall operating plan execution and underlying market conditions. These measures may be used as components in the Companys incentive compensation plans in which case may include other adjustments which were not contemplated in the annual incentive plan target setting process. These measures are useful for investors because they may permit more meaningful comparisons of the Companys underlying operating results and business trends between periods. The difference between the measures before and after special items and/or the results of recent acquisitions is the impact of those items. The limitation of these measures is that they exclude the impact (which may be material) of items that increase or decrease the Companys reported operating income, operating margin, net income and EPS. This limitation is best addressed by using the non-GAAP measures in combination with the most comparable GAAP measures in order to better understand the amounts, character and impact of any increase or decrease on reported results.
54 | The ADT Corporation |
2016 Proxy Statement |
GAAP TO NON-GAAP RECONCILIATIONS |
THE ADT CORPORATION
GAAP to Non-GAAP Reconciliations
(Unaudited)
EBITDA and Pre-SAC EBITDA Before Special Items
For the Twelve Months Ended |
For the Twelve Months Ended |
For the Twelve Months Ended |
||||||||||
($ in millions) | September 25, 2015 |
September 26, 2014 |
September 27, 2013 |
|||||||||
Net Income (GAAP) |
$ | 296 | $ | 304 | $ | 421 | ||||||
Interest expense, net |
205 | 192 | 117 | |||||||||
Income tax expense |
141 | 128 | 221 | |||||||||
Depreciation and intangible asset amortization |
1,124 | 1,040 | 942 | |||||||||
Amortization of deferred subscriber acquisition costs |
141 | 131 | 123 | |||||||||
Amortization of deferred subscriber acquisition revenue |
(163) | (151) | (135) | |||||||||
|
|
|
|
|
|
|||||||
EBITDA |
$ | 1,744 | $ | 1,644 | $ | 1,689 | ||||||
Restructuring and other, net |
6 | 17 | (1) | |||||||||
Acquisition and integration costs |
4 | 7 | 2 | |||||||||
Radio conversion costs |
55 | 44 | 0 | |||||||||
Separation costs |
0 | 17 | 23 | |||||||||
Separation related other expense (income) (1) |
(1) | 38 | (23) | |||||||||
|
|
|
|
|
|
|||||||
EBITDA before special items |
$ | 1,808 | $ | 1,767 | $ | 1,690 | ||||||
|
|
|
|
|
|
|||||||
EBITDA Margin before special items |
50.6% | 51.8% | 51.1% | |||||||||
Foreign exchange impact (2) |
15 | |||||||||||
Other adjustments (3) |
25 | |||||||||||
|
|
|||||||||||
EBITDA before specials, at constant currency, excluding other adjustments |
$ | 1,848 | ||||||||||
|
|
|||||||||||
EBITDA before special items |
$ | 1,808 | ||||||||||
Subscriber acquisition cost expenses, net of related revenue |
434 | |||||||||||
|
|
|||||||||||
Pre-SAC EBITDA before special items |
$ | 2,242 | ||||||||||
|
|
(1) | Relates to the 2012 Tax Sharing Agreement between Tyco, ADT and Pentair. |
(2) | Constant currency results above are calculated by translating current period amounts in local currency using a budgeted currency conversion rate. |
(3) | Adjustments related to items which were not contemplated in the annual incentive plan target setting process. |
The ADT Corporation | 2016 Proxy Statement 55 |
GAAP TO NON-GAAP RECONCILIATIONSCONTINUED |
(Unaudited)
SSFCF Before Special Items
For the Quarters Ended | ||||||||
($ in millions) | September 25, 2015 |
September 26, 2014 |
||||||
Last quarter, annualized pre-SAC EBITDA before special items |
$ | 2,268 | $ | 2,264 | ||||
SAC required to maintain recurring revenue (1) |
(1,262) | (1,288) | ||||||
Maintenance capital expenditures |
(10) | (10) | ||||||
|
|
|
|
|||||
SSFCF before special items |
$ | 996 | $ | 966 | ||||
|
|
|
|
|||||
|
|
|
|
(1) | SAC required to maintain recurring revenue is calculated as follows: |
For the Quarters Ended | ||||||||
($ in millions) | September 25, 2015 |
September 26, 2014 |
||||||
Last quarter average recurring revenue under contract for the period |
$ | 278 | $ | 273 | ||||
Trailing twelve month disconnects net of price escalation (2) |
14.5% | 14.7% | ||||||
Last quarter gross recurring revenue creation multiple (3) |
31.3 | 32.1 | ||||||
|
|
|
|
|||||
SAC required to maintain recurring revenue |
$ | 1,262 | $ | 1,288 | ||||
|
|
|
|
|||||
|
|
|
|
(2) | Average trailing twelve month recurring revenue disconnected net of price escalations. Disconnects account for dealer chargebacks. |
(3) | Gross creation cost includes amount held back from dealers for chargebacks. |
56 | The ADT Corporation |
2016 Proxy Statement |
GAAP TO NON-GAAP RECONCILIATIONSCONTINUED |
(Unaudited)
EBITDA and Pre-SAC EBITDA Before Special Items
For the Three Months Ended |
For the Three Months Ended |
|||||||
($ in millions) | September 25, 2015 |
September 26, 2014 |
||||||
Net Income (GAAP) |
$ | 81 | $ | 82 | ||||
Interest expense, net |
52 | 50 | ||||||
Income tax expense |
36 | 27 | ||||||
Depreciation and intangible asset amortization |
285 | 273 | ||||||
Amortization of deferred subscriber acquisition costs |
36 | 33 | ||||||
Amortization of deferred subscriber acquisition revenue |
(41) | (40) | ||||||
|
|
|
|
|||||
EBITDA |
$ | 449 | $ | 425 | ||||
Restructuring and other, net |
1 | 2 | ||||||
Acquisition and integration costs |
1 | 4 | ||||||
Radio conversion costs |
8 | 17 | ||||||
Separation costs |
| 7 | ||||||
Separation related other expense (income) (1) |
1 | 3 | ||||||
|
|
|
|
|||||
EBITDA before special items |
$ | 460 | $ | 458 | ||||
|
|
|
|
|||||
EBITDA Margin before special items |
51.2% | 51.9% | ||||||
Subscriber acquisition cost expenses, net of related revenue |
107 | 108 | ||||||
|
|
|
|
|||||
Pre-SAC EBITDA before special items |
$ | 567 | $ | 566 | ||||
|
|
|
|
|||||
|
|
|
|
(1) | Relates to the 2012 Tax Sharing Agreement between Tyco, ADT and Pentair. |
The ADT Corporation | 2016 Proxy Statement 57 |
GAAP TO NON-GAAP RECONCILIATIONSCONTINUED |
(Unaudited)
Recurring Revenue, at Constant Currency, Excluding Other Adjustments
For the Twelve Months Ended |
||||
($ in millions) | September 25, 2015 |
|||
Recurring revenue |
$ | 3,323 | ||
Other revenue |
251 | |||
|
|
|||
Total revenue |
$ | 3,574 | ||
|
|
|||
Recurring revenue |
$ | 3,323 | ||
Foreign exchange impact (1) |
31 | |||
Other adjustments (2) |
(16) | |||
|
|
|||
Recurring Revenue, at constant currency, excluding other adjustments |
$ | 3,338 | ||
|
|
(1) | Constant currency results above are calculated by translating current period amounts in local currency using a budgeted currency conversion rate. |
(2) | Adjustments related to items which were not contemplated in the annual incentive plan target setting process. |
(Unaudited)
Constant Currency Reconciliations
For the Twelve Months Ended | ||||||||
($ in millions) | September 25, 2015 |
September 26, 2014 |
||||||
Recurring Revenue: |
||||||||
Recurring revenue as reported |
$ | 3,323 | $ | 3,152 | ||||
Recurring revenue at constant currency using budgeted rates (1) |
$ | 3,354 | $ | 3,152 | ||||
Recurring revenue at constant currency (2) |
$ | 3,356 | $ | 3,152 | ||||
EBITDA before special items: |
||||||||
EBITDA before special items as reported |
$ | 1,808 | $ | 1,767 | ||||
EBITDA before special items at constant currency using budgeted rates (1) |
$ | 1,823 | $ | 1,767 | ||||
EBITDA before special items at constant currency (2) |
$ | 1,824 | $ | 1,767 | ||||
Steady-state free cash flow before specials: |
||||||||
Steady-state free cash flow before special items |
$ | 996 | $ | 966 | ||||
Steady-state free cash flow before specials at constant currency (2) |
$ | 1,006 | $ | 966 |
(1) | Constant currency results above are calculated by translating current period amounts in local currency using a budgeted currency conversion rate. |
(2) | Constant currency results above are calculated by translating current period amounts in local currency using the prior comparable periods currency conversion rate. |
58 | The ADT Corporation |
2016 Proxy Statement |
INCORPORATION BY REFERENCE |
The Report of the Compensation Committee and the Audit Committee Report are not deemed filed with the SEC and shall not be deemed incorporated by reference into any prior or future filings made by ADT under the Securities Act of 1933, as amended or the Exchange Act, except to the extent that ADT specifically incorporates such information by reference. In addition, the website addresses contained in this Proxy Statement are intended to provide inactive, textual references only. The information on these websites is not part of this Proxy Statement.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This Proxy Statement contains certain information that may constitute forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. While we have specifically identified certain information as being forward-looking in the context of its presentation, we caution you that all statements contained in this Proxy Statement that are not clearly historical in nature are forward-looking. Without limiting the generality of the preceding sentence, any time we use the words anticipate, estimate, expect, project, intend, plan, believe and similar expressions, we intend to clearly express that the information deals with possible future events and is forward-looking in nature. However, the absence of these words or similar expressions does not mean that a statement is not forward-looking.
Forward-looking information involves risks, uncertainties and other factors that could cause actual results to differ materially from those expressed or implied in, or reasonably inferred from, such statements. Therefore, caution should be taken not to place undue reliance on any such forward-looking statements. Much of the information in this Proxy Statement that looks towards future performance of the Company is based on various factors and important assumptions about future events that may or may not actually occur. As a result, our operations and financial results in the future could differ materially and substantially from those we have included in this Proxy Statement. We assume no obligation (and specifically disclaim any such obligation) to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
WEBSITE ACCESS TO REPORTS AND OTHER INFORMATION
We file our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements, and other documents electronically with the SEC under the Exchange Act. You may read and copy any materials that we file with the SEC at the SECs Public Reference Room at 100 F Street, N.E., Washington, DC 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 obtain such reports from the SECs website at www.sec.gov.
Our website is www.adt.com. We make available free of charge through the Investor Relations tab of our website our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Sections 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. Our Board Governance Principles, Board committee charters, the ADT Code of Conduct, and the Stockholder Communication and Engagement Policy are also available on our website. We will provide, free of charge, a copy of any of our corporate documents listed above upon written request to the Corporate Secretary at The ADT Corporation, 1501 Yamato Road, Boca Raton, Florida 33431.
By order of the Board of Directors,
Lorna R. Simms
Corporate Secretary
Boca Raton, Florida
January 22, 2016
The ADT Corporation | 2016 Proxy Statement 59 |
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
M99063-P71817 | KEEP THIS PORTION FOR YOUR RECORDS |
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. |
DETACH AND RETURN THIS PORTION ONLY |
THE ADT CORPORATION
The Board of Directors recommends you vote FOR each of the following: |
||||||||||||||||
1. Election of Directors |
Annual Meeting of Stockholders
The ADT Corporation
March 15, 2016
8:30 a.m., Eastern Time
Grand Ballroom
Farmers Table Event Center
1901 N. Military Trail
Boca Raton, FL 33431
In order to assure that your votes are tabulated on time to be voted at the Annual Meeting, you
must submit your proxy card or vote by phone or the Internet so that your votes are received by
11:59 p.m., Eastern Time on March 14, 2016.
This proxy card also serves as an admission ticket to our Annual Meeting. This ticket admits only the
stockholder(s) listed on the reverse side and is not transferable.
Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting
To Be Held on March 15, 2016:
The Notice, Proxy Statement and Annual Report are available at www.proxyvote.com.
M99064-P71817
THE ADT CORPORATION
Annual Meeting of Stockholders
March 15, 2016 8:30 a.m., Eastern Time
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE ADT CORPORATION
The undersigned hereby appoints Michael S. Geltzeiler and N. David Bleisch, and each of them, with power to act without the other and with power of substitution, as proxies and attorneys-in-fact and hereby authorizes them to represent and vote, as provided on the other side of this proxy, all the shares of The ADT Corporation Common Stock which the undersigned is entitled to vote and, in their discretion, to vote upon such other business as may properly come before the Annual Meeting of Stockholders of The ADT Corporation to be held on March 15, 2016 or any adjournment or postponement thereof, with all powers which the undersigned would possess if present at the Annual Meeting. The undersigned hereby revoke(s) all proxies heretofore given by the undersigned to vote at the Annual Meeting and any adjournments or postponements thereof.
THIS PROXY CARD, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED. IF NO DIRECTION IS MADE BUT THE CARD IS SIGNED, THIS PROXY CARD WILL BE VOTED FOR THE ELECTION OF ALL NOMINEES UNDER PROPOSAL 1, FOR PROPOSAL 2 AND FOR PROPOSAL 3 AND IN THE DISCRETION OF THE PROXIES WITH RESPECT TO SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT OR POSTPONEMENT THEREOF.
(Continued and to be signed on reverse side)