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DEF 14A
KOPPERS HOLDINGS INC. filed this Form DEF 14A on 04/04/2017
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Table of Contents

EXECUTIVE COMPENSATION

 

Our Compensation-Setting Process

Through the course of our compensation-setting process:

 

 

The independent members of our board make CEO compensation decisions, based on the recommendation of the committee;

 

 

The independent members of the board make compensation decisions regarding the other NEOs, based on the recommendation of the committee and the CEO; and

 

 

The committee is advised by an independent compensation consultant.

 

 

As in prior years, the fiscal year 2016 compensation decisions for our executive officers were made in three steps.

 

Steps    When

1. Design Program – The program for the year is approved (including targeted levels of annual and long-term pay, fixed and incentive compensation, and any base salary adjustment).

 

   Beginning of fiscal year

2. Establish Range of Compensation Opportunities – Incentive compensation opportunities are set based on corporate and business unit performance. Minimum, target, and maximum performance levels and payouts are established for incentive awards, including the adjusted EPS threshold under our Cash Bonus Program.

 

   Beginning of fiscal year

3. Review Performance – Performance is reviewed and incentive pool amounts are approved which leads to decisions about annual cash incentive awards.

 

   End of fiscal year

 

The committee may use its judgment to supplement, reduce or modify at any time the compensation intended to be paid or awarded to the NEOs, with the exception of annual cash incentives under our 2016 Cash Bonus Program, where the committee may only award annual cash incentives if the level of 2016 adjusted EPS meets or exceeds the threshold specified in the program, and may only reduce the maximum annual cash incentives specified under the program. The committee believes that it is in the best interest of the company and its shareholders that the committee have sufficient latitude to recognize and reward superior performance, which is important to attract and retain talented executives, and to adjust awards to reflect the quality of the company’s financial performance.

Compensation Program Modifications for 2016

The committee approved the following changes to our compensation program in early 2016:

 

 

Under our 2016 annual incentive plan, 100% of participants’ incentive opportunity was based on company and, if applicable, business unit adjusted EBITDA performance.

 

 

Performance-based RSUs granted in 2016 will vest, if at all, based upon the company’s total shareholder return (“TSR”) relative to the S&P Small Cap 600 Materials Index.

 

 

While the default is to settle 2016 performance-based RSUs in shares, the committee has the discretion to provide for the payment of vested performance-based RSUs in cash or shares.

Overview of 2016 Operating Performance and Summary of Annual Cash Incentive Determinations

Our 2016 results reflected our success in advancing our company’s strategy to be the global leader in wood-preservation based technologies, expanding our profitability and driving shareholder value.

Specifically, we achieved the following operational milestones in 2016:

 

 

We continued our transformation into a global leader in wood-based technologies and successfully executed a strategic shift to focus on more fundamentally stable and healthier end markets. Wood related revenues now make up 69% of our top line at the end of 2016 compared to 46% at the end of 2014.

 

 

We achieved our best safety performance year ever. Nine of our 31 operating facilities were accident-free in 2016 and the number of recordable incidents was reduced by more than 15% year-over-year.

 

 

We achieved EPS of $1.39 for fiscal year 2016. As adjusted for compensation purposes, EPS was $2.60, which represented year-over-year growth of approximately 72%.

 

 

Net income attributable to Koppers for 2016 was $29.3 million. As adjusted for compensation purposes, EBITDA was $174.2 million, which represented year-over-year growth of approximately 16%.

 

 

We continued to improve the health of our balance sheet, paying down $179 million in debt over the past two years.

 

 

We leveraged our historically strong relationships in our Railroad and Utility Products (RUPS) and Performance Chemicals (PC) segments to extend sales commitments out several years, solidifying a critical base of business.

 

 

We significantly reduced our exposure in China by ceasing distillation at our majority held joint venture, KCCC, in February 2016 and closing on the sale of our minority held joint venture, TKK, in November 2016.

 

 

KOPPERS HOLDINGS INC. - 2017 Proxy Statement    19