comm-10ka_20181231.htm

 

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K/A

(Amendment No. 1)

(Mark One)

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2018

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from            to            

Commission file number: 001-36146

 

CommScope Holding Company, Inc.

(Exact name of registrant as specified in its charter)

 

Delaware

27-4332098

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

 

1100 CommScope Place, SE

Hickory, North Carolina

28602

(Zip Code)

(828) 324-2200

(Telephone number)

(Address of principal executive offices)

 

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Name of each exchange on which registered

Common Stock, par value $.01 per share

 

Nasdaq

Securities registered pursuant to Section 12(g) of the Act: NONE

Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes   No  

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes      No  

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted  pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes      No  

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.   

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

Emerging growth company

 

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2).  Yes      No  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.      

The aggregate market value of the shares of Common Stock held by non-affiliates of the registrant was approximately $5,530 million as of June 30, 2018. For purposes of this computation, shares held by affiliates and by directors and officers of the registrant have been excluded.

As of April 12, 2019 there were 193,467,296 shares of the registrant’s Common Stock outstanding.

Documents Incorporated by Reference:     None

 

 

 

 

 

 


 

EXPLANATORY NOTE

 

This Amendment No. 1 on Form 10-K/A (Amendment No. 1) amends the Annual Report on Form 10-K for the fiscal year ended December 31, 2018 (the 2018 Annual Report) of CommScope Holding Company, Inc. filed with the Securities and Exchange Commission (the SEC) on February 21, 2019. In this Amendment No. 1, unless the context indicates otherwise, references to “CommScope Holding Company, Inc.,” “CommScope,” “the Company,” “we,” “us” or “our” refer to CommScope Holding Company, Inc. and its wholly-owned subsidiaries.

 

This Amendment No. 1 is being filed solely to include the information required by Items 10 - 14 of Part III of Form 10-K. The reference on the cover page of the 2018 Annual Report to the incorporation by reference of portions of our definitive proxy statement into Part III of the 2018 Annual Report is hereby deleted. Items 10, 11, 12, 13 and 14 of Part III of the 2018 Annual Report are amended and restated in their entirety as set forth in this Amendment No. 1. In addition, pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended (the Exchange Act), we are including with this Amendment No. 1 certain currently dated certifications. Because no financial statements have been included in this Amendment No. 1 and this Amendment No. 1 does not contain or amend any disclosure with respect to Items 307 and 308 of Regulation S-K, paragraphs 3, 4 and 5 of the certifications have been omitted. We are not including the certifications under Section 906 of the Sarbanes-Oxley Act of 2002 as no financial statements are being filed with this Amendment No. 1.

 

Except as described above, no other amendments are being made to the 2018 Annual Report. This Amendment No. 1 does not reflect events occurring after the February 21, 2019 filing of the 2018 Annual Report or modify or update the disclosure contained in the 2018 Annual Report in any way other than as required to reflect the amendments discussed above and reflected below. Accordingly, this Amendment No. 1 should be read in conjunction with the 2018 Annual Report and our other filings with the SEC.

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PART III

 

Item 10. Directors, Executive Officers and Corporate Governance

 

EXECUTIVE OFFICERS

The following table provides information regarding our executive officers:

Name

 

Age

 

Position

Marvin (Eddie) S. Edwards, Jr.

 

70

 

President, Chief Executive Officer and Director

Bruce W. McClelland

 

52

 

Executive Vice President and Chief Operating Officer

Alexander W. Pease

 

47

 

Executive Vice President and Chief Financial Officer

Morgan C.S. Kurk

 

49

 

Executive Vice President and Chief Technology Officer

Frank (Burk) B. Wyatt, II

 

56

 

Senior Vice President, Chief Legal Officer and Secretary

Brooke B. Clark

 

44

 

Senior Vice President and Chief Accounting Officer

Robyn T. Mingle

 

53

 

Senior Vice President and Chief Human Resources Officer

 

Marvin (Eddie) S. Edwards, Jr.

Mr. Edwards has been our President and Chief Executive Officer and a member of our Board of Directors since 2011. From 2010 to 2011, Mr. Edwards was our President and Chief Operating Officer. Prior to that, Mr. Edwards served as our Executive Vice President of Business Development and General Manager, Wireless Network Solutions from 2007 to 2010. From 2005 to 2007, he served as our Executive Vice President of Business Development. Mr. Edwards also served as President and Chief Executive Officer of OFS Fitel, LLC and OFS BrightWave, LLC, a joint venture between our Company and The Furukawa Electric Co. Mr. Edwards has also served in various capacities with Alcatel, including President of Alcatel North America Cable Systems and President of Radio Frequency Systems.

Bruce W. McClelland

Mr. McClelland became our Executive Vice President and Chief Operating Officer upon close of the acquisition of ARRIS International plc (ARRIS). Mr. McClelland was the Chief Executive Officer of ARRIS and a member of the ARRIS board of directors prior to the acquisition from 2016 to 2019. Mr. McClelland joined ARRIS in 1999, and his prior roles at ARRIS also included President of ARRIS’ Network & Cloud and Global Services business, ARRIS’ Group President for Products and Services, Vice President and General Manager for ARRIS’ Customer Premises Equipment Unit, and Vice President of Engineering. Prior to joining ARRIS, Mr. McClelland was responsible for the development of Nortel’s Signaling System #7 and Signal Transfer Point product lines as well as several development roles within Nortel’s Class 4/5 DMS switching product line. Mr. McClelland received a Bachelor of Electrical Engineering from the University of Saskatchewan.

Alexander W. Pease

Mr. Pease has been our Executive Vice President and Chief Financial Officer since 2018. From 2016 to 2018, Mr. Pease served as Executive Vice President and Chief Financial Officer of Snyder’s-Lance, Inc. Mr. Pease served as a principal at McKinsey & Company as a leader in their global corporate finance and business functions practice from 2015 to 2016. From 2011 to 2015, he was Senior Vice President and Chief Financial Officer at EnPro Industries, Inc., overseeing six operating divisions in addition to finance, accounting, strategy and development, global supply chain and information technology. Before joining EnPro, Mr. Pease worked at McKinsey & Company and served in the US Navy as a SEAL Platoon commander.

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Morgan C.S. Kurk

Mr. Kurk became our Executive Vice President and Chief Technology Officer upon close of the ARRIS acquisition, a position he previously held from 2016 to 2017. Mr. Kurk most recently served as our Executive Vice President and Chief Operating Officer in 2018 and 2019. Prior to 2016, he served as Senior Vice President of the Wireless segment, with responsibility for indoor, outdoor, and backhaul businesses from 2012 to 2015. Mr. Kurk joined CommScope in 2009 as Senior Vice President of the Enterprise business unit. From 1997 to 2009, Mr. Kurk held a variety of positions at Andrew Corporation and one of its successors, including Director of Business Development, Vice President of R&D, PLM, and Strategy and Vice President and General Manager of the Wireless Innovations Group. Prior to joining Andrew, Mr. Kurk worked for Motorola, where he was a hardware development engineer for cellular base stations and a product manager for a CDMA base station product line.

Frank (Burk) B. Wyatt, II

Mr. Wyatt has been Senior Vice President, Chief Legal Officer and Secretary of CommScope since 2000. Prior to joining our Company as General Counsel and Secretary in 1996, Mr. Wyatt was an attorney in private practice with Bell, Seltzer, Park & Gibson, P.A. (now Alston & Bird LLP).

Brooke B. Clark

Ms. Clark has been our Senior Vice President, Chief Accounting Officer since September 2018. Ms. Clark previously served as Vice President, Corporate Accounting since 2013. She served in various positions within our finance organization since joining CommScope in 2004. Prior to joining CommScope, Ms. Clark was employed by Deloitte & Touche, LLP. Ms. Clark is a Certified Public Accountant in North Carolina.

Robyn T.  Mingle

Ms. Mingle became our Senior Vice President, Chief Human Resources Officer, in 2016. Prior to joining CommScope, she was the Chief Human Resource Officer at Xylem Inc. from 2011 to 2015, where she was a founding executive team member for the global water Company spin-off from ITT Corp. From 2003 to 2011, Ms. Mingle was the Senior Vice President, Human Resources at Hovnanian Enterprises, Inc., one of the nation’s largest homebuilders. She spent the first 14 years of her career with The Black & Decker Corporation in various human resource roles.

 

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BOARD OF DIRECTORS

Our Company is governed by a board of directors. Pursuant to our certificate of incorporation, the precise number of directors shall be fixed, and may be altered from time to time, exclusively by a Board resolution adopted by the affirmative vote of a majority of the total number of directors then in office. The number of directors constituting our whole Board is currently fixed at eleven. Two directors are designated by The Carlyle Group (Carlyle) per the Investment Agreement and our remaining directors are divided into three classes with staggered three-year terms so that the term of one class expires at each annual meeting of stockholders.

The professional experience and skills and qualifications highlighted in the nominee and continuing directors’ biographies below summarize the experience, qualifications, areas of expertise or skills that the Board of Directors used to determine that the person should serve as a director.

Class I Directors

Frank M. Drendel

Age: 74

Director Since: 2011

Chairman of the Board Since: 2011

Committees:

-None

Professional Experience

Chairman of the Board and CEO of CommScope (1976–2011)

Cable Television Hall of Fame Inductee (2002)

Other Directorships

National Cable & Telecommunications Association (1982-present)

Tyco International, Ltd. (NYSE: TYC) (acquired by Johnson Controls International) (Former director)

General Instrument Corporation (Former director)

Sprint Nextel Corporation (Former director)

Nextel Communications (Former director)

Skills and Qualifications:

Leadership / Management

Extensive experience with our business

Industry Experience

Directorship

Merger and Integration Experience

 

4

 


 

Joanne M. Maguire

Age: 65

Director Since: 2016

Committees:

-Nominating and Corporate Governance (Chair)

 

Professional Experience

EVP of Lockheed Martin Space Systems Company (SSC), a provider of advanced-technology systems for national security, civil and commercial customers (2006–2013)

Various other positions at Lockheed Martin (2003–2006)

Progressively responsible positions at TRW’s Space & Electronics sector (now part of Northrop Grumman) from engineering analyst to VP and Deputy to the sector’s CEO, serving in leadership roles over programs as well as engineering, advanced technology, manufacturing and business development

Other Directorships

Visteon Corporation (NASDAQ: VC) (2015-present)

Tetra Tech, Inc. (NASDAQ: TTEK) (2016-present)

Charles Stark Draper Laboratory (2013-present)

Freescale Semiconductor, Ltd. (Former director)

Skills and Qualifications

Leadership / Management

Governance

Strategic Planning

Risk Management

Industry Experience

Directorship

 

5

 


 

 

 

 

Thomas J. Manning

 

Age: 63

Director Since: 2014

Committees:

-Audit

 

 

 

 

 

Professional Experience

Lecturer in Law at the University of Chicago Law School teaching courses on corporate governance, private equity and U.S.-China relations, and innovative solutions (2012-present)

Executive-in-Residence at the Booth School of Business (2018-present)

2019 Fellow in the Advanced Leadership Initiative at Harvard University

CEO of Dun & Bradstreet (Aug 2018- Feb 2019)

Chairman & Interim CEO of Dun & Bradstreet (Feb 2018-Aug 2018)

CEO of Cerberus Asia Operations & Advisory Limited, a subsidiary of Cerberus Capital Management, a global private equity firm (2010–2012)

CEO of Indachin Limited, an incubator which developed early-stage information-based companies in China and India (2005–2009)

Senior partner with Bain & Company and head of Bain’s information technology strategy practice in the Silicon Valley and Asia (2003–2005)

Global Managing Director of the Strategy & Technology Business of Capgemini and CEO of Capgemini Asia Pacific and CEO of Ernst & Young Consulting Asia Pacific, led the development of consulting and IT service and outsourcing businesses across Asia (1996–2003)

Various positions in McKinsey & Company, Buddy Systems, Inc., a telemedicine company he founded, and CSC Index in early career

Other Directorships

Clear Media Limited (Chairman of the Remuneration Committee) (2016-present)

Cresco Labs (Chairman) (2016-present)

Dun & Bradstreet (NYSE: DNB) (Former Lead Director and Chair of the Nominating and Corporate Governance Committee)

China Board of Directors Ltd. (Former Chairman)

Bain & Company’s China Board (Former director)

iSoftStone Holdings Limited (Former director)

GOME Electrical Appliances Company (Former director)

AsiaInfo-Linkage, Inc. (Former director)

Bank of Communications Co., Ltd. (Former director)

Skills and Qualifications:

Leadership / Management

Governance

Finance / Accounting

Strategic Planning

Regulatory Matters

Directorship

Information Technology

Audit Committee Financial Expert

 

 

6

 


 

Class II Directors

 

Austin A. Adams

Age: 76

Director Since: 2014

Committees:

-Audit

 

 

Professional Experience

EVP and Corporate CIO of JPMorgan Chase upon merger of JPMorgan Chase and Bank One Corporation (2004–2006)

EVP and CIO of Bank One (2001–2004)

EVP and CIO at First Union Corporation (now Wells Fargo & Co.) (1985– 2001)

Other Directorships

KeyCorp (NYSE: KEY) (Former director)

First Niagara Financial Group, Inc. (NASDAQ: FNFG) (now KeyCorp) (Former director)

Spectra Energy, Inc. (NYSE: SE) (now Enbridge Inc.) (Former director)

The Dun & Bradstreet Corporation (NYSE: DNB) (Former director)

CommunityOne Bancorp (NASDAQ: COB) (Former director)

Skills and Qualifications:

Leadership / Management

Information Technology

Finance / Accounting

Directorship

Strategic Planning

Audit Committee Financial Expert

Merger and Integration Experience

 

7

 


 

Stephen (Steve) C. Gray

Age: 60

Director Since: 2011

Committees:

-Compensation (Chair)

 

 

 

 

 

Professional Experience

Founder and Chairman of Gray Venture Partners, LLC, a private investment Company (2009-present)

President and CEO of Syniverse Holdings, Inc. (2014–2018)

Senior Advisor to The Carlyle Group (2007–2015)

President of McLeodUSA Incorporated (1992–2004)

VP of Business Services at MCI Inc. (1990–1992)

SVP of National Accounts and Carrier Services for TelecomUSA (1988–1990)

Various sales management positions with WilTel Network Services and the Clayton W. Williams Companies, including ClayDesta Communications Inc. (1986-1988)

Other Directorships

Syniverse Holdings, Inc. (2011-present)

ImOn Communications, LLC (Current Vice Chairman, Former Chairman) (2007-present)

SecurityCoverage, Inc. (Chairman) (2005-present)

Involta, LLC (Chairman) (2010-present)

HH Ventures, LLC (Chairman) (2009-present)

Insight Communications, Inc. (Former director)

Skills and Qualifications:

Leadership / Management

Merger and Integration Experience

Finance / Accounting

Strategic Planning

Directorship

Industry Experience

 

 

8

 


 

L. William (Bill) Krause

Age: 76

Director Since: 2011

Committees:

-Compensation

-Nominating and Corporate Governance

 

 

 

 

 

Professional Experience

President of LWK Ventures, a private advisory and investment (1991–present)

Senior Advisor to The Carlyle Group (2010-present)

Board Partner at Andreesen Horowitz (2014-present)

CEO (1981-1990) and Chairman (1987-1993) of 3Com Corporation, a global data networking Company

Other Directorships

Veritas Holding, Ltd. (2016-present)

Coherent, Inc., (NASDAQ: COHR) (Former director)

Brocade Communication Systems, Inc. (NASDAQ: BRCD) (now Broadcom Inc.) (Former director)

Core-Mark Holding Company, Inc. (NASDAQ: CORE) (Former director)

Sybase, Inc (Former director)

3Com Corporation (Former Chairman)

Skills and Qualifications:

Leadership / Management

Directorship

Industry Experience

Merger and Integration Experience

Information Technology

Strategic Planning

 

 

 

9

 


 

Class III Directors

 

Marvin (Eddie) S.

Edwards, Jr.

Age: 70

Director Since: 2011

Committees:

-None

 

 

Professional Experience

President and CEO of CommScope (2011–present)

President and COO of CommScope (2010–2011)

EVP of Business Development and General Manager, CommScope Wireless Network Solutions of CommScope (2007–2010)

EVP of Business Development of CommScope (2005–2007)

President and CEO of OFS Fitel, LLC and OFS BrightWave, LLC, a joint venture between CommScope and The Furukawa Electric Co.

Various capacities with Alcatel including President of Alcatel North America Cable Systems and President of Radio Frequency Systems

Other Directorships

OFS Fitel, LLC (Former director)

OFS BrightWave, LLC (Former director)

Skills and Qualifications:

Leadership / Management

Industry Experience

Merger and Integration Experience

Directorship

Governance

Strategic Planning

 

 

 

 

Claudius (Bud) E.

Watts IV

Age: 57

Director Since: 2011

Lead Independent Director Since: 2017

Committees:

-Compensation

-Nominating and Corporate Governance

 

Professional Experience

Private investor and Senior Advisor to The Carlyle Group (2017-present)

Partner with The Carlyle Group (2000–2017)

Founded and led Carlyle’s Technology Buyout business (2004–2014)

Managing Director in the M&A group of First Union Securities, Inc. (1998-2000)

Principal at Bowles Hollowell Conner & Co. (1994-1998)

Fighter Pilot, United States Air Force (1984-1992)

Other Directorships

Carolina Financial Corporation – Chairman (NASDAQ: CARO) (2015-present)

Former director on boards of numerous other public and private companies, including service as Chairman and Lead Independent Director

Skills and Qualifications:

Leadership / Management

Industry Experience

Finance / Accounting

Directorship

Governance

Merger and Integration Experience

 

10

 


 

Timothy T. Yates

Age: 71

Director Since: 2013

Committees:

-Audit (Chair)

 

 

 

 

Professional Experience

Various positions including EVP, CFO, and CEO at Monster Worldwide, Inc. (2007–2016)

Led integration of Symbol into Motorola, Inc.’s Enterprise Mobility business (2007)

Various positions including independent consultant and SVP, CFO at Symbol Technologies, Inc. (2005–2007)

Co-Founder, Partner and CFO of Saguenay Capital, a boutique investment firm (2002–2005)

Partner at Cove Harbor Partners, a private investment and consulting firm, which he founded (1996–2002)

Various senior leadership roles at Bankers Trust New York Corporation, including serving as Chief Financial and Administrative Officer (1971–1995)

Other Directorships

Monster Worldwide, Inc. (NASDAQ: MWW) (Former director)

Symbol Technologies, Inc. (Former director)

Skills and Qualifications:

Leadership / Management

Directorship

Finance / Accounting

Audit Committee Financial Expert

Strategic Planning

 

 

 

 


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Directors Designated by Carlyle

 

Daniel F. Akerson

Age: 70

Director Since: 2019

Committees:

-Nominating and Corporate Governance

 

 

 

Professional Experience

Vice Chairman of The Carlyle Group (2014-2015)

CEO of General Motors Company (2010-2014)

Managing Director – Head of Global Buyout at The Carlyle Group LP (2009-2010)

Managing Director – Co-Head of U.S. Buyout at The Carlyle Group LP (2003-2009)

Other Directorships

Lockheed Martin Corporation (NYSE: LMT) (2014-present)

General Motors Company (NYSE: GM) Chairman (2011-2014) and Director (2009-2014)

United States Naval Academy Foundation Chairman (2015-present) and Director (2010-present)

KLDiscovery (KLD) Chairman (2015-present)

Skills and Qualifications:

Leadership / Management

Directorship

Finance / Accounting

Risk Management

Strategic Planning

Merger and Integration Experience

 

12

 


 

Campbell (Cam) R. Dyer

Age: 44

Director Since: 2019

Former Director: 2011-2016

Committees:

-Compensation

 

 

 

Professional Experience

Co-Head of Global TMT Sector at The Carlyle Group LP (2017-present)

Partner at The Carlyle Group LP (2013-present)

Various other positions including Managing Director and Principal at The Carlyle Group LP (2002–2013)

Consultant with Bain & Company’s private equity group (2001)

Associate at William Blair Capital Partners, LLC (now Chicago Growth Partners) (1998-2000)

Investment Banking Analyst in the M&A group of Bowles, Hollowell, Conner & Co. (1996-1998)

Other Directorships

CommScope Inc. (NASDAQ: COMM) (2011-2016)

SS&C Technology (NASDAQ: SSNC) (2008-2014)

Workforce Logiq (2017-present)

ION Investment (2016-present)

ProKarma (2016-present)

Veritas Technologies LLC (2016-present)

Dealogic Limited (2014-present)

Skills and Qualifications:

Leadership / Management

Directorship

Finance / Accounting

Governance

Industry Experience

Merger and Integration Experience

 

 

 

policies on corporate governance

Our Board believes that good corporate governance is important to ensure our business is managed for the long-term benefit of our stockholders. We have adopted a Code of Conduct that applies to all our directors, executive officers and senior financial and accounting officers, as well as a Code of Ethics and Business Conduct that applies to all of our employees. We have also adopted Corporate Governance Guidelines. Current versions of the Code of Conduct, the Code of Ethics and Business Conduct and the Corporate Governance Guidelines, are available on our website at www.commscope.com and will also be provided upon request to any person without charge. Requests should be made in writing to our Corporate Secretary at CommScope Holding Company, Inc., 1100 CommScope Place, SE, Hickory, NC 28602, or by phone at (828) 324-2200. In the event of any amendment or waiver of our Code of Conduct or Code of Ethics and Business Conduct applicable to our directors or executive officers, such amendment or waiver will be posted on our website.

board leadership structure

The Company currently has separate individuals serving in the positions of Chairman of the Board and Chief Executive Officer. The Board of Directors does not have a set policy with respect to the separation of the offices of Chairman of the Board and Chief Executive Officer, as the Board believes it is in the best interests of the Company to make that determination based on the position and direction of the Company and the membership of the Board. The Board regularly evaluates whether the roles of Chairman of the Board and Chief Executive Officer should be separate and, if they are to be separate, whether the Chairman of the Board should be selected from the non-employee directors or be an employee of the Company. The Board believes these issues should be considered as part of the Board’s broader oversight and succession planning process. The Board continues to believe that Mr.

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Drendel is appropriate to serve as non-executive Chairman as he is a founder of the Company and has significant experience in the Company’s industry and in managing through challenging business environments.

Mr. Watts was appointed as Lead Independent Director in 2017. Among other things, our Lead Independent Director presides at all meetings of the independent directors and any Board meeting when the Chairman is not present, advises the Chairman as to the Board’s agenda and information to be provided to the Board, and serves as the principal liaison and facilitator between the independent directors and the Chairman and Chief Executive Officer. In addition, our Lead Independent Director has the authority to convene special meetings of the independent directors, responds to stockholder questions directed to the independent directors and is available to major stockholders for consultation and direct communication.

The Board’s Role in Management’s Succession Planning

As reflected in our Corporate Governance Guidelines, the Board’s primary responsibilities include planning for Chief Executive Officer succession and monitoring and advising on management’s succession planning for other executive officers. The Board’s goal is to have a long-term and continuing program for effective senior leadership development and succession. The Board is actively engaged in these endeavors and has a contingency plan in place for emergencies such as the departure, death or disability of the Chief Executive Officer or other executive officers.  

The Chief Executive Officer and Chief Human Resources Officer report to the Board at least twice a year on succession planning and management development.


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The board’s role in risk oversight

While risk management is primarily the responsibility of our management, the Board provides overall risk oversight focusing on the most significant risks facing the Company. The Board oversees the risk management processes that have been designed and are implemented by our executives to determine whether those processes are functioning as intended and are consistent with our business and strategy. The Board executes its oversight responsibility for risk management directly and through its committees. The Board’s role in risk oversight has not affected its leadership structure.

The Audit Committee is specifically tasked with reviewing with management, the independent auditors and our legal counsel, as appropriate, our compliance with legal and regulatory requirements and any related compliance policies and programs. The Audit Committee is also tasked with reviewing our financial and risk management policies and oversight of our enterprise risk management program, which is our comprehensive assessment of key risks related to finance, operations and management information systems, including those related to cybersecurity. Members of our management who have responsibility for designing and implementing our risk management processes regularly meet with the Audit Committee. Additionally, the Nominating and Corporate Governance Committee is tasked with overseeing our environmental and corporate responsibility efforts and any related risks. The Board’s other committees oversee risks associated with their respective areas of responsibility.

The full Board considers specific risk topics, including risk-related issues pertaining to laws and regulations enforced by the United States (U.S.) and foreign government regulators and risks associated with our business plan and capital structure. In addition, the Board receives reports from members of our management that include discussions of the risks and exposures involved with their respective areas of responsibility, and the Board is routinely informed of developments that could affect our risk profile or other aspects of our business.

 

director qualifications

The Nominating and Corporate Governance Committee is responsible for reviewing the qualifications of potential director candidates and recommending to the Board of Directors those candidates to be nominated for election. In reviewing such candidates, our Corporate Governance Guidelines, which are available on our website as described above, set forth criteria that the Nominating and Corporate Governance Committee must consider when evaluating a director candidate for membership on the Board of Directors. These criteria are as follows:

 

Integrity:  reputation for integrity, honesty and adherence to high ethical standards;

 

Sound business judgment:  demonstrated business acumen, experience and ability to exercise sound judgments in matters that relate to our current and long-term objectives and a willingness to contribute positively to the decision-making process;

 

Ability and willingness to commit sufficient time to the Board:  commitment to understand us and our industry and to regularly attend and participate in meetings of the Board of Directors and its committees; and

 

Ethics and independence:  ability to understand the sometimes-conflicting interests of our various constituencies, which include stockholders, employees, customers, governmental units, creditors and the general public, and to act in the interests of all stakeholders.

The Nominating and Corporate Governance Committee does not assign specific weights to particular criteria and no particular criterion is a prerequisite for any prospective nominee.

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Our Corporate Governance Guidelines also require the Nominating and Corporate Governance Committee to consider the mix of backgrounds and qualifications of the directors in order to assure that the Board of Directors has the necessary experience, knowledge and abilities to perform its responsibilities effectively and to consider the value of diversity on the Board of Directors, including diversity of experience, gender, race, ethnicity and age. While diversity and variety of experiences and viewpoints represented on the Board should always be considered, a director nominee should not be chosen or excluded solely or largely because of race, religion, national origin, gender, sexual orientation or disability.

board composition

Our Board of Directors currently consists of eleven members. Frank M. Drendel has been our Chairman of the Board of Directors since 2011. Claudius E. Watts IV was appointed as Lead Independent Director in 2017.

 

As of April 4, 2019, per the Investment Agreement between Carlyle and CommScope and effective with the closing of the acquisition of ARRIS, Carlyle designated two directors to our Board and they will each serve a one-year term expiring in 2020 or until their successors are duly elected and qualified. These directors will be on the slate of nominees recommended by the Board for election in 2020 and expiring at the next annual meeting. These directors will be designated by Carlyle and voted on by the holders of Series A Convertible Preferred Stock as a single class in 2020 and at each annual meeting thereafter until certain beneficial ownership conditions are no longer met as detailed in the Investment Agreement. 

 

The remainder of our Board is divided into three classes whose members serve three-year terms expiring in successive years. These directors hold office until their successors have been duly elected and qualified or until the earlier of their respective death, resignation or removal. At each annual meeting of stockholders, the successors to the directors whose terms will then expire will be elected to serve from the time of election and qualification until the third annual meeting of stockholders following such election. The number of members on our Board of Directors may be modified from time to time exclusively by resolution of our Board of Directors. Any additional directorships resulting from an increase in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the directors.

 

When considering whether directors and nominees have the experience, qualifications, attributes or skills, taken as a whole, to enable the Board of Directors to satisfy their oversight responsibilities effectively in light of our business and structure, the Board of Directors focused primarily on each person’s background and experience as reflected in the information discussed in each of the director’s individual biographies set forth above. We believe that our directors provide an appropriate diversity of experience and skills relevant to the size and nature of our business.

Board and Committee Evaluations

Each year, our Board and committees conduct self-evaluations to assess the qualifications, attributes, skills and experience represented on the Board; to assess their effectiveness and adherence to our Corporate Governance Guidelines and committee charters; and to identify opportunities to improve Board and committee performance.

stockholder communications with board of directors

The Board of Directors provides a process for stockholders to send communications to the Board of Directors or any of the directors. Stockholders may send written communications to the Board of Directors, or any of the individual directors, c/o our Corporate Secretary at CommScope Holding Company, Inc., 1100 CommScope Place, SE, Hickory, North Carolina 28602. All communications will be compiled by the Corporate Secretary of the Company and submitted to the Board of Directors or the individual directors, as applicable, on a periodic basis.

 

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Committee

Primary Responsibilities

Audit(1)

 

Members: Messrs. Yates (Chair), Adams and Manning

 

 

   Assists the Board of Directors in its oversight of (i) our accounting and financial reporting processes and other internal control processes, (ii) the audits and integrity of our financial statements, and (iii) our compliance with legal and regulatory requirements.

   Approves the independent registered public accounting firm’s appointment, compensation, retention and provides oversight of their work as well as annually assesses their qualifications and independence.

   Considers and reviews the adequacy and effectiveness of our internal controls over financial reporting and any related significant findings of our independent auditor and internal audit.

   Reviews our Code of Ethics and recommends changes as well as reviews and assesses any violations.

   Reviews and approves any proposed related person transactions.

   Reviews our financial and risk management policies, including approval of decisions to enter swaps or other derivatives.

   Reviews our enterprise risk management program.

Compensation(2)

 

Members: Messrs. Gray (Chair), Dyer, Krause and Watts

 

 

   Reviews and approves the compensation philosophy for our Chief Executive Officer.

   Reviews and approves all forms of compensation and benefits provided to our other executive officers.

   Reviews and oversees the administration of our equity incentive plans.

   May engage independent compensation advisors to provide advice regarding our executive compensation program.

(1)

The Board of Directors has determined that each of member of the Audit Committee is an “audit committee financial expert” as such term is defined under the applicable regulations of the Commission and has the requisite accounting or related financial management expertise and financial sophistication under the applicable rules and regulations of Nasdaq. The Board of Directors has also determined that each member of the Audit Committee is independent under Rule 10A-3 under the Exchange Act and the enhanced independence standards for audit committee members as defined in the rules of Nasdaq and the Commission. All members of the Audit Committee can read and understand fundamental financial statements, are familiar with finance and accounting practices and principles and are financially literate.

(2)

The Compensation Committee’s processes for fulfilling its responsibilities and duties with respect to executive compensation and the role of executive officers and management in the compensation process are each described under the heading “Determination of Compensation Awards.” The Board of Directors has determined that each member of the Compensation Committee satisfies the enhanced independence standards for compensation committee members as defined in the rules of Nasdaq and the Commission.

 

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

The Exchange Act requires our directors, executive officers and beneficial owners of more than 10% of our capital stock to file reports of ownership and changes of ownership with the Commission and Nasdaq. Based on our records and other information, we believe that during the year ended December 31, 2018 all applicable Section 16(a) filing requirements were met in a timely fashion.

 

ITEM 11. EXECUTIVE COMPENSATION

 

INTRODUCTION

 

This Compensation Discussion and Analysis (CD&A) describes our compensation philosophy, process, plans and practices for our NEOs. Our executive compensation program is intended to incent and reward our leadership to produce financial results that our Compensation Committee believes align with the interests of our stockholders.


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Our NEOs for 2018, whose compensation is discussed in this CD&A, are as follows:

Name

Title

Marvin S. Edwards, Jr.

President and Chief Executive Officer (principal executive officer)

Alexander W. Pease

Executive Vice President and Chief Financial Officer (principal financial officer)(1)

Mark A. Olson

Former Executive Vice President and Chief Financial Officer (principal financial officer)(2)

Morgan C.S. Kurk

Executive Vice President and Chief Operating Officer

Peter U. Karlsson

Senior Vice President, Global Sales(3)

Frank B. Wyatt, II

Senior Vice President, Chief Legal Officer and Secretary

Frank M. Drendel

Chairman of the Board

(1)

Mr. Pease became our Executive Vice President and Chief Financial Officer effective April 2, 2018, succeeding Mr. Olson, who retired.

(2)

Mr. Olson retired on May 1, 2018.

(3)

Mr. Karlsson became Senior Vice President, Business Transformation in December of 2018 and is no longer a Section 16 Officer upon close of the ARRIS acquisition on April 4, 2019.

 

EXECUTIVE SUMMARY

 

Key 2018 Financial Performance Highlights

CommScope Holding Company, Inc. is a global provider of infrastructure solutions for communication networks. The Company’s solutions and services for wired and wireless networks enable high-bandwidth data, video and voice applications. CommScope’s global leadership position is built upon innovative technology, broad solution offerings, high-quality and cost-effective customer solutions and global manufacturing and distribution scale.

 

Like others in the network infrastructure industry, CommScope faced challenges in 2018 due to difficult market conditions including pricing pressures and higher material costs. We missed our revenue guidance and experienced negative stockholder returns. Our team worked diligently throughout the year to reduce business costs and remain profitable, while laying the groundwork for future growth opportunities. We believe our position in the overall market is strong, and the need for the network bandwidth we enable continues to expand.

 

Key measures of our 2018 financial performance include the following:

 

Revenue flat year over year with $4,569 million in 2018 compared to $4,561 million in 2017

 

Operating Income of $450.0 million, down $22.0 million year over year and AOI(1) of $838.0 million, down $38.7 million year over year

 

EPS of $0.72, down $0.27 year over year and Adjusted EPS(1) of $2.27, up $0.13 year over year

 

Cash Flow from Operations of $494.1 million, down 15.7% year over year

 

Adjusted Free Cash Flow(1) of $411.8 million, down 27.5% year over year

 

 

(1)

See reconciliation of Non-GAAP financial measures included in Appendix A hereto.

Although our 2018 results did not meet our expectations, we did achieve some noteworthy goals toward our business strategy with the announcement on November 8, 2018 of our agreement to acquire ARRIS for approximately $7.4 billion. CommScope and ARRIS will bring together a unique set of complementary assets and capabilities that enable end-to-end wired and wireless communication infrastructure solutions.

 

Our compensation program is designed to retain key executives with competitive levels of compensation based on our industry but also to provide a strong link between executive pay and the Company’s performance. A significant portion of our executives’ compensation for 2018 was tied to the achievement of performance goals that align management’s objectives with key drivers of long-term stockholder value, including free cash flow, increased profitability, revenue growth and stock price appreciation. Our 2018 financial performance was below expectations and we did not achieve our financial objectives, resulting in well below target incentive payouts and reduced equity value.

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2018 Executive Compensation Highlights

The following are highlights regarding the compensation of our NEOs for 2018, including key actions taken by the Compensation Committee and outcomes of incentive plans in place during the year. Overall, the Compensation Committee retained the core design of our executive compensation program for 2018, with an emphasis on short- and long-term incentive compensation that rewards our senior executives when they successfully implement our business plan and, in turn, deliver value for our stockholders.

The 2018 target compensation opportunities for our NEOs were generally maintained at the levels in place in 2017, with our NEOs receiving salary increases between 3% and 3.85% in early 2018 and no changes to either annual or long-term incentive target opportunities. Our Summary Compensation Table shows modest increases in total compensation for our NEOs (other than Mr. Pease, who was a newly hired executive, and Mr. Kurk, for whom only one year of pay is reported due to his promotion to an executive officer position during 2018) primarily due to an increase in the value of earned annual incentives in our 2018 Annual Incentive Plan relative to the result in 2017. The incentive earned by our NEOs in both years was significantly below target, which we believe is aligned with our results over time and reinforces our pay for performance approach. After consideration of the Company’s 2018 performance, the Compensation Committee held the base salaries for our NEOs flat for 2019.

As described below, our 2018 executive compensation program also incorporated modifications approved by our Compensation Committee to reinforce our pay for performance objectives and maintain a strong governance profile with respect to compensation decision-making and oversight. These modifications include:

 

Added a stretch revenue goal in our Annual Incentive Plan: The maximum potential payout for the 10% revenue weighting in our AIP was increased from 210% to 400% of target. The revenue performance required to achieve this new maximum payout was increased from 103% to 106%.

 

Introduced new performance award structure measuring cumulative revenue for 2018 through 2020: Following an extensive review of our business strategy and approach to executive pay, the Compensation Committee approved a change in the approach to performance-based equity with the introduction of PSUs with vesting tied to our cumulative three-year revenue achievement. The Committee determined to focus on a multi-year revenue goal to acknowledge the importance of growth in stockholder value creation. One-half of the PSUs granted in 2018 are subject to this three-year cumulative revenue vesting requirement. The remainder of the PSUs are subject to a one-year AOI achievement and vest on the second anniversary of the grant date.  

 

Adopted a “clawback” policy: The Compensation Committee adopted a “clawback” policy that provides for the recoupment of cash and equity incentive compensation from executive officers in the event of an accounting restatement.

 

Enhanced our Insider Trading Policy to Prohibit Hedging and Pledging: All persons subject to our Insider Trading policy, including our NEOs and directors, are prohibited from entering into hedging or monetization transactions involving CommScope securities and from purchasing CommScope securities on margin, holding CommScope securities in a margin account or pledging CommScope securities.

Our executive compensation program is designed to align executive interests with those of our stockholders. During the year, we experienced negative stockholder return and missed our revenue guidance. As a result, and as described in more detail below, total compensation of our NEOs was meaningfully below target during 2018. The variable features of our compensation program are:

 

Base Salary: In early 2018, base salaries of our NEOs were increased between 3% and 3.85%. This range does not include Mr. Kurk, who was promoted during the year, and Mr. Olson, who retired during the year. Mr. Pease’s salary was established upon his hiring as our Chief Financial Officer in 2018. After consideration of the Company’s performance in 2018, the Compensation Committee held the base salaries of our NEOs flat for 2019.

 

Annual Incentive Payment: We did not meet target but did exceed threshold performance for the AOI performance metric. We did not achieve threshold performance on the Adjusted Free Cash Flow or the

 

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Corporate Revenue performance metrics for 2018, resulting in AIP payouts equal to 37.64% of the AIP overall target opportunity.

 

 

Achievement of 2018 AOI PSUs: We did not meet target but did exceed threshold AOI goals for 2018. As a result, the PSU AOI performance factor for units granted in 2018 was 62.7%.

Pay for Performance Approach

The Compensation Committee generally approves annual compensation decisions for our executive officers in the first quarter of each year. The Committee’s approvals in the first quarter address target annual incentives adjustments effective as of January 1, base salary effective as of April 1, as well as equity awards that are granted March 1. In the timeline leading up to the annual approval of compensation decisions, the Compensation Committee undertakes a review process that spans several meetings and is intended to evaluate our approach to setting executive pay from multiple perspectives. This review begins in the third quarter of the prior year and takes into consideration our strategic business plan, market data, trends in executive compensation, the input of the Committee’s independent compensation consultant, and input from stockholders, where applicable.

For 2018, this review process resulted in several changes to our compensation strategy and incentive plan design, as described in more detail below, intended to strengthen our pay for performance profile. In particular, the Committee put increased emphasis on revenue growth as a contributor to long-term stockholder value creation, our annual incentive plan and performance share design were modified to increase the prominence of corporate revenue in our performance measurement process, and the Committee introduced performance awards with a multi-year performance measurement period.

Our AIP bonus awards are paid in cash and are conditioned upon achievement of Board-established performance goals. AIP bonus awards for the NEOs in 2018 were based upon achievement of an AOI goal, which was weighted at 60%, an Adjusted Free Cash Flow goal, which was weighted at 30%, and a Corporate Revenue goal, which was weighted at 10%. The long-term equity awards granted to the NEOs in 2018 were a combination of stock options, RSUs and PSUs. All stock option and RSU awards vest evenly on the first, second and third anniversary of the grant date, subject to continuous service. Half of the PSU awards granted in 2018 are subject to achievement of an AOI goal for 2018 and they vest on the second anniversary of the grant date subject to continuous service. The other half of the PSU awards granted in 2018 are subject to achievement of cumulative revenue goals for a three-year performance period (2018-2020) and vest on the third anniversary of the grant date subject to continuous service. The AIP bonus awards and the long-term equity awards are designed to ensure that total compensation reflects the overall level of success of the Company, and AIP bonus awards and PSUs are also intended to motivate the NEOs to meet and exceed pre-established target levels of performance for each measure.

 

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As shown on the following chart, a significant portion of target compensation for each of our NEOs in 2018 was at-risk as it could vary based on Company performance against pre-established goals and/or changes in our stock price.

 

 

Our Compensation Committee generally does not vary target incentives applicable to our executives based on short-term variability in our performance. Because of the prominence of variable, at-risk compensation in our executive compensation program, we emphasize alignment of pay-and-performance over a longer-term time horizon and based on the realized value under incentive programs. AIP bonus awards and long-term equity awards are designed to ensure that total compensation reflects the overall level of success of the Company. AIP bonus awards and PSUs are also intended to motivate the NEOs to meet and exceed pre-established target levels of performance for each measure.

In the case of our Chief Executive Officer, the short-term incentive target for 2018 was maintained at 125% of base salary while the target grant date value of equity granted in 2018 was equal to the value granted in 2017. The Compensation Committee determined to maintain these incentive targets for our Chief Executive Officer following analysis of market data and taking into consideration the opportunity for increased realized compensation conditioned on strong performance of our Company over time. As of the end of 2018:

 

Stock options granted in 2018 were “underwater”

 

37% of the target number of PSUs with AOI as a performance metric granted in 2018 were forfeited

 

The value of RSUs, earned PSUs with AOI as a performance metric and outstanding PSUs with cumulative revenue as a performance metric granted during the annual grant in 2018 decreased 61%

 

The AIP bonus award for the year related to the AOI performance metric was earned at 85% of target with Adjusted Free Cash Flow and Corporate Revenue metrics below threshold

Although our results for the year did not meet our expectations, the Compensation Committee believes that the outcomes of our incentive programs reflect a strong alignment of pay and performance in our compensation program and an emphasis on accountability for our financial performance and stockholder return for our executive team.


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Say on Pay Results and Consideration of Stockholder Support

At the Annual Meeting of Stockholders on May 4, 2018, over 98% of the votes cast were in favor of the advisory vote to approve the executive compensation of the NEOs. The Compensation Committee acknowledged this positive result and concluded that our stockholders continue to support the compensation paid to our executive officers and the Company’s overall pay practices, given their direct alignment with the performance of the Company.

Executive Compensation-Related Policies and Practices

We endeavor to maintain sound executive compensation policies and practices, including compensation-related corporate governance standards, consistent with our executive compensation philosophy. The following summarizes our executive compensation and related governance policies and practices during 2018:

What We Do

What We Don’t Do

Use a Pay for Performance philosophy

ûBackdating or spring-loading of equity awards

Significant portion of executive pay is at-risk

ûHedging of shares

“Clawback” policy to recover cash and equity payments from executives in certain circumstances

ûPledging of shares

Multi-year vesting for equity awards

ûGuaranteed bonuses

Regular stockholder engagement with annual Say-on-Pay vote

ûIncentives that encourages excessive risk taking

Use of independent compensation consultant

ûExcessive severance or change in control agreements

Meaningful equity ownership guidelines

ûExcessive perquisite practices

Blend of equity awards, including some that are performance based

ûRepricing of stock options or stock appreciation rights without stockholder approval

Executive Compensation Philosophy and Elements

We intend for our NEOs’ total compensation to reflect our pay for performance compensation philosophy. This philosophy includes both compensating our NEOs competitively when we meet or out-perform our goals as well as placing large portions of their compensation at-risk based on both the Company’s financial performance and our stock price performance. This assures that the financial incentives of our executives are in alignment with the interests of our stockholders. Furthermore, by delivering a significant portion of compensation in the form of at-risk incentives (including equity compensation), the compensation realized by our NEOs will be reduced if the Company does not achieve performance goals.

The principal objectives of our NEO compensation include the following:

 

Competitive pay - providing compensation opportunities that enable us to attract superior talent in a highly competitive industry and retain key employees by rewarding outstanding achievement.

 

Pay for performance – creating incentives that reward management for outstanding financial results that our Compensation Committee believes will enhance near-term performance and drive sustainable performance over the longer term.

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Alignment with stockholders – aligning our executives’ interests with those of our stockholders through our pay for performance philosophy and by encouraging our executives to have a meaningful equity stake in the Company.

The following table summarizes the primary elements of our executive compensation program for 2018.o

Compensation Element

Purpose

Base Salary

Recognize performance of job responsibilities as well as attract and retain individuals with superior talent.

Annual Incentive Plan (AIP) Bonus Awards

Provide short-term incentives linked directly to achievement of financial objectives.

Stock Options

Directly link senior management’s and stockholders’ interests by tying long-term incentive to stock price appreciation.

Restricted Stock Units (RSUs)

Provide a strong retention element of compensation while providing alignment of executive and stockholders’ interests.

Performance Share Units (PSUs)

Provide a strong retention element along with aligning compensation with our business strategy and the long-term creation of stockholder value.

2018 Compensation Decision-Making process

Determination of Compensation Awards

Our Compensation Committee has the primary authority to determine and approve the compensation of our NEOs. The Committee is charged with reviewing our executive compensation policies and practices annually to ensure that the total compensation paid to our NEOs is fair, reasonable, competitive to our peers and commensurate with the level of expertise and experience of our NEOs. To aid our Compensation Committee in making its determinations, our Chief Executive Officer provided recommendations to our Compensation Committee regarding the compensation of all officers who report directly to him.

Our Compensation Committee reviews and approves the total amount of compensation for our NEOs and the allocation of total compensation among each of the components of compensation based principally on the following factors:

 

Their compensation levels from prior years

 

Individual and Company performance

 

Each executive’s scope of responsibility and experience

 

The Compensation Committee’s judgment and general industry knowledge obtained through years of service with comparably-sized companies in our industry and other similar industries

 

Input about competitive market practices from our independent compensation consultant

We believe that direct ownership in CommScope provides our NEOs with a strong incentive to increase the value of the Company. We encourage equity ownership by our NEOs and other employees through direct stock holdings and the award of various equity-based awards. We believe that equity awards granted to our NEOs substantially align their interests with those of our stockholders. In addition, we maintain formal stock ownership guidelines. See the “Stock Ownership Guidelines” section below for more information.

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Role of the Compensation Consultant

The Compensation Committee relies on its independent compensation consultant to provide advice on matters relating to the compensation of our executives and non-employee directors. Compensia, a national compensation consulting firm, has served in this capacity since 2016.

A representative of Compensia attended all Compensation Committee meetings in 2018 and provided the following assistance to the Compensation Committee:

 

Analyzed the compensation levels and practices of the companies in our compensation peer group

 

Reviewed the competitiveness of compensation paid to our NEOs including base salary, annual cash awards and long-term incentive awards

 

Reviewed and provided input on the design of the annual and long-term incentives provided to our NEOs and other executives

 

Reviewed the competitiveness of compensation paid to our non-employee directors

 

Reviewed and provided input on the CD&A section of our Proxy Statement

 

Provided ad hoc advice and support

Compensia reports directly to the Compensation Committee and provided no services to us other than the consulting services to the Committee. The Compensation Committee reviews the objectivity and independence of the advice provided by Compensia. In 2018, the Committee considered the specific independence factors adopted by the SEC and the NASDAQ Global Select Market and determined that Compensia is independent and that its work did not raise any conflicts of interest.

Compensation Peer Group

In 2017, with the assistance of Compensia, the Compensation Committee developed and approved a compensation peer group as a source of competitive market data for evaluating the compensation of our executive officers and to support pay decisions for 2018.

The compensation peer group consisted of 16 companies deemed to be representative of the types of companies with which we compete for executive talent.

Companies included in our peer group were identified based primarily on the following target selection criteria:

 

Companies with a status as an independent, publicly traded company

 

Companies with revenue between approximately 0.5 times to 2.0 times our revenue on a trailing twelve-month basis using publicly reported information available in 2017

 

Companies with a market capitalization between approximately 0.33 times to 3.0 times our market capitalization in 2017

 

Companies with a similar industry profile, prioritizing direct competitors and companies that operate in the Communications Equipment sector

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Companies included in the peer group did not need to meet all of the selection criteria above. Our Compensation Committee evaluated each company against all selection criteria in order to identify a peer group that, as a whole, was considered to be a strong representation of our competitive market for talent.

The companies included in the peer group are as follows:

Peer Companies

Amphenol Corporation

Keysight Technologies

ARRIS International

Motorola Solutions, Inc.

Belden Inc.

NCR Corporation

Ciena Corporation

NetApp, Inc.

Corning Inc.

Rockwell Automation, Inc.

Harris Corporation

TE Connectivity Limited

Hubbell Inc.

Trimble Navigation Limited

Juniper Networks, Inc.

Zebra Technologies, Inc.

 

We supplement information from the peer group public filings with the data from the Radford Global Technology Survey. The data from this research, which is provided annually by Compensia, is a factor in determining executive compensation, as described above. When evaluating executive compensation relative to practices among our peers, the Compensation Committee generally seeks to align with the market median. While peer group and other market research data provides the framework for our compensation decisions, adjustments are also made by the Compensation Committee on an individual basis to account for individual performance and each executive’s scope of responsibility and experience.

2018 compensation actions

Base Salary Adjustments

Base salaries for our NEOs are generally set at a level deemed necessary to attract and retain individuals with superior talent. In addition to considering industry and market practices, our Compensation Committee and Board of Directors annually review our NEOs’ performance. Adjustments in base salary are generally based on the factors noted above, including each NEO’s individual performance, scope of responsibility, experience and competitive pay practices.

After considering our Chief Executive Officer’s recommendations (other than with respect to his own compensation) and consistent with past practices, in early 2018 our Compensation Committee increased base salaries for each of our NEOs.

The base salaries for our NEOs as established as of April 1, 2017 and April 1, 2018 are set forth in the following table.

Name

 

2017 Base Salary

 

2018 Base Salary

 

Percent

Increase

Marvin S. Edwards, Jr.

 

$1,065,000

 

$1,100,000

 

3.29%

Alexander W. Pease(1)

 

 

 

$625,000

 

 

Mark A. Olson(2)

 

$640,000

 

$640,000

 

0.00%

Morgan C.S. Kurk(3)

 

 

 

$575,000

 

 

Peter U. Karlsson

 

$555,000

 

$575,000

 

3.60%

Frank B. Wyatt, II

 

$520,000

 

$540,000

 

3.85%

Frank M. Drendel

 

$595,000

 

$615,000

 

3.36%

(1)

Mr. Pease became our Executive Vice President and Chief Financial Officer effective April 2, 2018, succeeding Mr. Olson.

(2)

Mr. Olson retired on May 1, 2018.

(3)

Mr. Kurk became our Executive Vice President and Chief Operating Officer effective January 1, 2018.

After consideration of the Company’s performance in 2018, the Compensation Committee held the base salaries for our NEOs flat for 2019.

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Annual Incentive Plan

Historically, the Company’s consolidated financial performance has been the primary factor used in determining payouts for our NEOs under the AIP. As described in more detail below, payouts for 2018 performance were based on the level of achievement of AOI, Adjusted Free Cash Flow and Corporate Revenue goals. The AIP performance measures and each of the NEO’s target awards, expressed as a percentage of base salary for the year, are approved by our Compensation Committee during the first quarter of the relevant performance year.

 

Our Compensation Committee determined that AOI, Adjusted Free Cash Flow and Corporate Revenue were meaningful measures of the Company’s financial performance. These financial measures exclude items that could have a disproportionately negative or positive impact on our results in a particular period.

Performance Metric

Weighting

Rationale

Adjusted Operating Income

60%

Measures the profitability of our business, incorporating our ability to generate revenue and manage our expenses. AOI growth has historically been a key driver of long-term stockholder returns, and as a result, represents the greatest weighting in our AIP.

Adjusted Free Cash Flow

30%

Measures our ability to translate earnings into cash, indicating the health of our business and allowing the Company to invest for the future.

Corporate Revenue

10%

Introduced to the AIP design in 2017 following an extensive review of our business strategy undertaken in 2016. In 2018, extended the upper payout maximum from 210% at 103% to 400% at 106% of target performance. In making this change, our Compensation Committee considered the importance of revenue as a driver of long-term stockholder return and reward for outstanding results.

For purpose of the AIP, AOI consists of operating income as reported on the Consolidated Statement of Operations and Comprehensive Income (Loss), increased or reduced by each of the following to the extent that any such item is used to determine operating income:

 

amortization of intangible assets

 

certain unusual or non-recurring charges, expenses or losses

 

certain restructuring costs and integration costs

 

equity-based compensation expenses

 

transaction fees and expenses and purchase accounting adjustments

 

certain unusual or non-recurring income or gains

Adjusted Free Cash Flow consists of net cash provided by operating activities, less additions to property, plant and equipment, both as reported in the Company’s Consolidated Statement of Cash Flows, increased or reduced for unusual cash items as approved by the Compensation Committee.

Corporate Revenue consists of net sales as reported on the Consolidated Statement of Operations and Comprehensive Income (Loss) subject to equitable adjustments related to acquisitions or divestitures as the Committee may approve.

Our Compensation Committee retains the authority to change target award percentages or performance measures, as appropriate, to account for extraordinary business circumstances that are out of the Company’s control. In addition, the Compensation Committee may, at its sole discretion, decrease the amount of an award that would otherwise be payable to the NEO. If a change in control of the Company occurs, we will pay each participant a cash award equal to the participant’s target award for the AIP plan cycle then underway (with the payout prorated to the date of the change in control). We believe this is appropriate since the impact of a change in control is unpredictable and could potentially adversely affect participant awards under the AIP. The Compensation Committee did not exercise its discretion to reduce the payouts under the AIP.

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The levels of performance required to achieve target payout were tied to our annual operating plan and represent goals that were considered achievable but difficult to accomplish. Although our targets for 2018 are reduced from the goals established under the terms of our 2017 AIP, the targets required improvement relative to our actual 2017 results. In particular, our 2018 $984.9 million AOI target performance goal, which accounts for a majority of the target annual incentive for our executives, represented 11.6% growth relative to our actual 2017 performance.

Our Compensation Committee also approved a stretch goal for the revenue component of the AIP bonus awards that included a 400% of target opportunity. This has the overall effect of increasing the maximum payout of the AIP from 210% to 229% of target. This feature was added to the AIP in correlation with the introduction of PSUs with a performance metric based on three-years of cumulative revenue, as described below. The Compensation Committee considered the opportunity for a meaningful increase in earned compensation based on one-year revenue performance to be an effective complement to the multi-year performance measurement of the newly introduced PSU.

The following charts shows the weighting of each performance metric, the levels of performance required to earn threshold, target and maximum payouts, and the actual performance achieved under our AIP for the year ended December 31, 2018 (dollars in millions):

Performance Metric

Weighting

Level

Threshold

Target

Maximum

Stretch Goal

Adjusted Operating Income

60%

 

 

 

 

 

Goal

$787.9

$984.9

$1,181.8

n/a

% of Target Performance

80%

100%

120%

n/a

% of Target Payout

50%

100%

210%

n/a

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted Free Cash Flow

30%

Goal

$456.8

$571.0

$685.2

n/a

% of Target Performance

80%

100%

120%

n/a

% of Target Payout

50%

100%

210%

n/a

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate Revenue

10%

Goal

$4,696.2

$4,841.4

$4,986.7

$5,132.0

% of Target Performance

97%

100%

103%

106%

% of Target Payout

50%

100%

210%

400%

 

 

 

 

 

 

 

 

Performance Metric

Weighting

Actual Achievement ($M)

% of Target Actual Performance

% of Target Actual Payout

Adjusted Operating Income

60%

$838.0

85.09%

62.73%

Adjusted Free Cash Flow

30%

$411.8

72.12%

Corporate Revenue

10%

$4,568.5

94.36%

Total

100%

 

 

37.64%

 

 

27

 


 

The following table sets forth the threshold, target and maximum annual incentive award potential (assuming minimum, target, and maximum performance for all three performance metrics) and the actual payout amount for each of our NEOs for 2018.

 

 

 

Threshold  Award

 

Target Award

 

Maximum Award

 

Actual 2018 Award

Name

 

(% of 2018

Salary) (1)

 

(% of 2018

Salary)

 

(% of 2018

Salary) (2)

 

% of 2018

Salary

 

Payout

Amount

 

 

 

 

 

 

 

 

 

 

 

 

 

Marvin S. Edwards, Jr.

 

62.5%

 

125.0%

 

286.3%

 

47.05%

 

$513,406

 

 

 

 

 

 

 

 

 

 

 

 

 

Alexander W. Pease

 

42.5%

 

85.0%

 

194.7%

 

31.99%

 

$149,964

 

 

 

 

 

 

 

 

 

 

 

 

 

Mark A. Olson

 

42.5%

 

85.0%

 

194.7%

 

31.99%

 

$68,250

 

 

 

 

 

 

 

 

 

 

 

 

 

Morgan C.S. Kurk

 

42.5%

 

85.0%

 

194.7%

 

31.99%

 

$183,956

 

 

 

 

 

 

 

 

 

 

 

 

 

Peter U. Karlsson

 

42.5%

 

85.0%

 

194.7%

 

31.99%

 

$182,356

 

 

 

 

 

 

 

 

 

 

 

 

 

Frank B. Wyatt, II

 

35.0%

 

70.0%

 

160.3%

 

26.35%

 

$140,954

 

 

 

 

 

 

 

 

 

 

 

 

 

Frank M. Drendel

 

25.0%

 

50.0%

 

114.5%

 

18.82%

 

$114,796

 

(1)

The threshold award reflects minimum performance of all three performance metrics (AOI, Adjusted Free Cash Flow and Corporate Revenue).

(2)

The maximum award reflects achievement of the stretch goal for the corporate revenue metric.


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Equity Incentive Awards

The Compensation Committee believes that key employees who are in a position to make a substantial contribution to the long-term success of the Company and to build stockholder value should have a significant and on-going stake in the Company’s success. In determining equity incentive award grants, the Committee considered market practices among comparable companies as well as our compensation objectives and the desired role of equity compensation in the total compensation of our NEOs. Based on this review, the Compensation Committee decided to grant our NEOs an equally weighted mix of stock options, RSUs and PSUs. The key features of our 2018 NEO equity awards are described in greater detail below.

 

  Vehicle

Target Value
as a Percent
of Total
Equity Awards

Overview of Key Terms

Stock Options

33.33%

   Vest and become exercisable in equal installments annually over three years subject to continuous service of the NEO

   Stock options have a 10-year term and an exercise price equal to the closing price of our common stock on the grant date

   Pro rata vesting upon retirement

RSUs

33.33%

   Vest in equal installments annually over three years, subject to the continuous service of the NEO

   Convertible into shares of common stock upon vesting

AOI PSUs

16.67%

NEOs can earn between 0% and 200% of the granted units based on 2018 AOI

Earned PSUs will vest on the second anniversary of the grant date subject to the continuous service of the NEO

Convertible into shares of common stock upon vesting

Revenue PSUs

16.67%

NEOs can earn between 0% and 200% of the granted units based on cumulative revenue for 2018-2020

Earned PSUs will vest in full on the third anniversary of the grant date subject to the continuous service of the NEO

Convertible into shares of common stock upon vesting

 

Our Compensation Committee believes that our approach to executive equity grants supports our compensation objectives and effectively aligns the interests of our executives with those of our stockholders. In particular, RSUs reinforce retention objectives and support a clear ownership mentality among executives, with long-term alignment with investors’ interests. In addition, PSUs granted in 2018 provide a targeted form of performance measurement over both a one-year time horizon (with an additional year of service required to vest) and a three-year time horizon, while stock options are tied to our performance over a longer-term time horizon. These performance equity vehicles reward executives for strong execution of our strategic plan as well as an ability to adapt to changing market conditions and generate sustained growth in stockholder value.

Our Compensation Committee generally approves the target value of executive equity grants in February of each year. Target grants are established as a dollar value, which is then converted into a number of stock options, RSUs and PSUs based on the closing price of our stock on the day prior to the grant date. In the case of stock options, the conversion of a target value into options relies on the Black Scholes value of our options as determined under ASC 718 accounting standards.

29

 


 

The target units granted to the NEOs by equity vehicle and the total grant date value are shown in the following table.

Name

 

Options (#)

 

RSUs (#)

 

AOI PSUs (#)

 

Revenue PSUs (#)

 

Total Grant Date Value ($)

Marvin S. Edwards, Jr.

 

157,232

 

60,858

 

30,429

 

30,429

 

6,999,914

Alexander W. Pease

 

32,916

 

12,671

 

6,336

 

6,335

 

1,499,989

Mark A. Olson

 

 

 

 

 

Morgan C.S. Kurk

 

33,692

 

13,041

 

6,521

 

6,520

 

1,499,972

Peter U. Karlsson

 

28,077

 

10,867

 

5,434

 

5,433

 

1,249,945

Frank B. Wyatt, II

 

20,215

 

7,824

 

3,912

 

3,912

 

899,935

Frank M. Drendel

 

25,157

 

9,737

 

4,869

 

4,868

 

1,119,963

As illustrated below, the AOI threshold, target and maximum performance levels for the 2018 PSUs with the AOI performance metric were equal to the performance goals approved for the 2018 AIP. Based on 2018 AOI of $838.0 million, the performance factor was 62.7% for the 2018 PSU awards.

Performance Metric

Weighting

 

Threshold

Target

Maximum

Adjusted Operating Income

100%

Value

$787.9

$984.9

$1,181.8

% of Target Performance

80%

100%

120%

% of Target Payout

50%

100%

200%

PSUs based on the three-year cumulative revenue achievement granted in 2018 will be earned based on our cumulative revenue during 2018, 2019 and 2020. Targets were established and approved by the Compensation Committee prior to the grant date and actual performance will be evaluated and disclosed following the end of 2020.

Supplemental Executive Retirement Plan

We maintain a nonqualified Supplemental Executive Retirement Plan (SERP) that is intended to provide retirement benefits to certain of our executive officers. This plan has been closed to new participants since 2005. Messrs. Edwards, Karlsson, Wyatt and Drendel participate in the SERP. For additional information regarding the SERP, see below under “Nonqualified Deferred Compensation Plans for 2018.”

Employee Benefits and Perquisites

Our NEOs are eligible to participate in the same plans as substantially all other of our U.S. employees which include medical, dental, vision and short-term and long-term disability insurance and a Health Savings Plan. We also maintain the CommScope, Inc. Retirement Savings Plan, or the 401(k) plan, in which substantially all our U.S. employees, including our NEOs, are eligible to participate. We currently contribute 2% of the participant’s base salary and bonus to the 401(k) plan and provide matching contributions of up to 4% of the participant’s base salary and bonus, which provides for up to a maximum of 6% of the participant’s base salary and bonus, subject to certain statutory limitations ($275,000 for 2018). In addition, we provide our NEOs with a supplemental term life insurance policy. We provide these benefits due to their relatively low cost and the high value they provide in attracting and retaining talented executives.

Deferred Compensation Plan

We offer a voluntary non-qualified deferred compensation plan (DCP) that permits a group of our management, including the NEOs, to defer up to 90% of their annual compensation (including base salary, AIP and Sales Incentive Plan (SIP) awards). For additional information regarding the DCP, see below under “Nonqualified Deferred Compensation.”

Employment, Severance and Change in Control Arrangements

Each of Messrs. Edwards and Drendel has an employment agreement, and each of Messrs. Pease, Kurk, Karlsson and Wyatt has a severance protection agreement. The employment agreements entitle the executives to certain compensation and benefits, and both the employment agreements and severance protection agreements entitle the executives to receive certain payments and benefits upon a qualifying termination of employment, including a

30

 


 

qualifying termination of employment in connection with a change in control of the Company, as described below under “—Potential Payments upon Termination or Change in Control.”

Other Compensation policies

Compensation Recoupment (“Clawback”) Policy

We have a compensation recoupment policy that provides that, in the event of an accounting restatement due to material noncompliance with financial reporting requirements, the Company will, as directed by the Compensation Committee in its discretion, require executive officers to reimburse compensation in an amount deemed appropriate by the Compensation Committee. The policy applies to executive officers of the Company, including our NEOs, who, at any time during the three-year period preceding the accounting restatement, received payment of non-equity incentive compensation or realized compensation from equity incentive awards, based on the erroneous financial data.

Hedging and Pledging Policies

We have an Insider Trading policy to guide our employees and directors in complying with securities laws and avoid the appearance of improper conduct. In 2018, we amended our Insider Trading policy to strengthen the restrictions on hedging and pledging activities. Our amended policy specifically prohibits all persons subject to the policy, including our NEOs and directors, from entering into hedging or monetization transactions involving CommScope securities such as covered calls, collars and forward sale contracts, and from purchasing CommScope securities on margin, holding CommScope securities in a margin account or pledging CommScope securities. In addition, all of our Section 16 officers and directors, and certain other designated employees, are prohibited from trading in exchange traded options of CommScope securities.

Stock Ownership Guidelines

We maintain stock ownership guidelines for our executive officers and the non-employee members of our Board of Directors. These guidelines were established to align with industry practice and to affirm to stockholders that our executives and directors have a meaningful long-term position in the Company and a longer-term view of its performance. The following table summarizes our stock ownership guidelines, which were based on market and peer group data and were adopted following consultation with our independent compensation consultant.

 

 

Multiple of Salary Target

CEO

5x annual base salary

Chairman, CFO & COO

3x annual base salary

Designated Executive Officers

2x annual base salary

Non-Employee Directors

5x base retainer (excluding committee fees)

 

The value of an executive’s or non-employee director’s stock ownership is measured as of December 31 of each year by reference to the 30-day average closing price of our stock on the Nasdaq Stock Market and using each individual’s base salary or base retainer then in effect.

Current and new executive officers and non-employee directors who are subject to these guidelines are expected to reach their target ownership level within five years of the date on which the guidelines were adopted or the date on which they became subject to the guidelines and to hold at least such minimum value in shares of our common stock, RSUs or vested stock options for so long as applicable.  All our executive officers and directors have met or are on track to meet their ownership requirements within the five-year period.

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Compensation Tables

 

Summary Compensation Table for 2018

The following table provides information regarding the compensation that we paid our NEOs for services rendered during the fiscal years ended December 31, 2018, 2017 and 2016.

Name and Principal Position

Year

 

Salary

($)

 

Bonus

($)(1)

 

Stock

Awards

($)(2)

 

Option

Awards

($)(2)

 

Non-Equity

Incentive Plan

Compensation

($)(3)

 

Change in

Pension Value

and

Nonqualified

Deferred

Compensation

Earnings

($)(4)

 

All Other

Compensation

($)(5)

 

Total

($)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Marvin S. Edwards, Jr.

2018

 

1,091,250

 

 

4,666,591

 

2,333,323

 

513,406

 

58,843

 

229,932

 

8,893,345

President and Chief

2017

 

1,056,250

 

 

4,666,664

 

2,333,328

 

215,594

 

47,318

 

180,211

 

8,499,365

Executive Officer

2016

 

1,022,500

 

 

2,666,635

 

1,440,581

 

2,007,551

 

44,566

 

444,142

 

7,625,975

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Alexander W. Pease

2018

 

468,750

 

 

999,995

 

499,994

 

149,964

 

 

5,838

 

2,124,541

Executive VP and

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Chief Financial Officer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mark A. Olson

2018

 

213,333

 

1,900

 

 

 

68,250

 

 

169,093

 

452,576

Former Executive VP and

2017

 

634,995

 

 

999,978

 

499,986

 

88,135

 

 

16,560

 

2,239,654

Chief Financial Officer (6)

2016

 

614,985

 

 

799,975

 

428,677

 

821,063

 

 

16,260

 

2,680,960

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Morgan C.S. Kurk

2018

 

575,000

 

 

999,983

 

499,989

 

183,956

 

 

60,425

 

2,319,353

Executive VP and

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Chief Operating Officer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Peter U. Karlsson

2018

 

570,000

 

 

833,282

 

416,663

 

182,356

 

20,004

 

95,793

 

2,118,098

Senior VP

2017

 

549,994

 

 

833,290

 

416,661

 

76,337

 

15,915

 

83,510

 

1,975,707

Global Sales (7)

2016

 

531,232

 

 

519,999

 

280,641

 

584,084

 

15,044

 

157,057

 

2,088,057

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Frank B. Wyatt, II

2018

 

535,000

 

 

599,944

 

299,991

 

140,954

 

28,659

 

90,753

 

1,695,301

Senior VP, Chief Legal

2017

 

516,249

 

 

599,926

 

299,998

 

59,009

 

23,358

 

75,849

 

1,574,389

Officer and Secretary

2016

 

501,246

 

500

 

489,971

 

265,066

 

551,114

 

23,407

 

147,614

 

1,978,918

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Frank M. Drendel

2018

 

610,000

 

1,100

 

746,633

 

373,330

 

114,796

 

101,366

 

97,863

 

2,045,088

Chairman of the Board

2017

 

590,000

 

 

746,642

 

373,332

 

48,171

 

84,765

 

85,070

 

1,927,980

of Directors

2016

 

571,250

 

 

746,654

 

404,874

 

448,631

 

91,115

 

142,526

 

2,405,050

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)      Amounts represent payments for service award and retiree gift in 2018 for Mr. Olson (25 years), service award in 2018 for Mr. Drendel (45 years) and service award in 2016 for Mr. Wyatt (20 years).

(2)

Amounts represent the grant date fair value of equity awards, which was computed in accordance with FASB ASC Topic 718 without regard to estimated forfeitures related to service-based vesting conditions. Refer to Note 12 in the Notes to our consolidated financial statements included in our annual report on Form 10-K for the year ended December 31, 2018 for information regarding the assumptions used to value these awards. The grant date fair value of the 2018 RSUs and PSUs was determined by reference to the $38.34 closing price of our common stock on the March 1, 2018 grant date and $39.46 on the April 2, 2018 grant date. The grant date fair value of the PSU awards considered the target number of units awarded to each NEO and the anticipated performance outcome as of the grant date. The actual 2018 performance factor for the AOI PSUs was 62.7%. Assuming that the highest level of performance conditions had been achieved, the grant date fair values of the 2018 PSUs would have increased by $2,333,296 for Mr. Edwards, $499,998 for Mr. Pease, $499,992 for Mr. Kurk, $416,641 for Mr. Karlsson, $299,972 for Mr. Wyatt and $373,317 for Mr. Drendel.

(3)

Amount represents AIP bonus payments by performance year. The AIP bonus payments for our NEOs in 2018, 2017 and 2016 were 37.6%, 16.3%, and 157.1% of target, respectively.

(4)

Amounts represent the portion of the aggregate earnings under the SERP that are “above market.”

32

 


 

(5)

The following table shows all amounts included in the “All Other Compensation” column for 2018 for each NEO:

 

 

All Other Compensation

 

Name

 

Company

Contribution

to 401(k)

Plan ($)

 

Company

Contribution

under SERP

($)

 

Life

Insurance

Premiums

($)

 

Relocation

Reimbursement ($)

 

Retiree Premiums

($)

 

Vacation

Payout

($)

 

Total

($)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Marvin S. Edwards, Jr.

 

16,500

 

213,198

 

 

234

 

 

 

 

229,932

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Alexander W. Pease

 

5,500

 

 

 

338

 

 

 

 

5,838

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mark A. Olson

 

16,500

 

 

 

135

 

 

50,000

 

102,458

 

169,093

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Morgan C.S. Kurk

 

16,500

 

 

 

360

 

43,565

 

 

 

60,425

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Peter U. Karlsson

 

10,080

 

85,353

 

 

360

 

 

 

 

95,793

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Frank B. Wyatt, II

 

16,500

 

73,893

 

 

360

 

 

 

 

90,753

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Frank M. Drendel

 

16,500

 

81,219

 

 

144

 

 

 

 

97,863

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Note: Retiree Premiums reflects total cost to the Company assuming Mr. Olson continues coverage under a legacy retiree health benefit program for a maximum of five years.

(6)

Mr. Olson retired from his position as Executive Vice President and Chief Financial Officer May 1, 2018.

(7)

Mr. Karlsson became Senior Vice President, Business Transformation in December of 2018 and is no longer a Section 16 Officer upon close of the ARRIS acquisition on April 4, 2019.

 

 

33

 


 

Grants of Plan-Based Awards in 2018

 

 

Estimated Possible

Payouts Under

Non-Equity Incentive Plan

Awards

Estimated Future

Payouts

Under Equity Incentive

Plan

Awards

All Other

Stock

Awards:

Number of

Shares of

All Other

Option

Awards:

Number of

Securities

Exercise

or Base

Price of

Grant

Date Fair

Value of Stock and

Name

Grant

Date

(1)

Threshold

($)

Target

($)

Maximum

($)

Threshold

(#)

Target

(#)

Maximum

(#)

Stock or Units

(#)

Underlying Options

(#)

Option Awards

($/sh)

Option

Awards

($)

 

 

 

 

 

 

 

 

 

 

 

 

Marvin S. Edwards, Jr.

 

 

 

 

 

 

 

 

 

 

 

2018 AIP(2)

 

682,031

1,364,063

3,123,703

2018 RSU(3)

3/1/2018

60,858

2,333,295

2018 PSU - AOI(4)

3/1/2018

15,215

30,429

60,858

1,166,648

2018 PSU - Revenue(5)

3/1/2018

15,215

30,429

60,858

1,166,648

2018 Stock Option(6)

3/1/2018

157,232

38.34

2,333,323

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Alexander W. Pease

 

 

 

 

 

 

 

 

 

 

 

2018 AIP(2)

 

199,219

398,438

912,422

2018 RSU(3)

4/2/2018

12,671

499,997

2018 PSU - AOI(4)

4/2/2018

3,168

6,336

12,672

250,019

2018 PSU - Revenue(5)

4/2/2018

3,168

6,335

12,670

249,979

2018 Stock Option(6)

4/2/2018

32,916

39.46

499,994

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mark A. Olson

 

 

 

 

 

 

 

 

 

 

 

2018 AIP(2)

 

90,667

181,333

415,253

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Morgan C.S. Kurk

 

 

 

 

 

 

 

 

 

 

 

2018 AIP(2)

 

244,375

488,750

1,119,238

2018 RSU(3)

3/1/2018

13,041

499,991

2018 PSU - AOI(4)

3/1/2018

3,261

6,521

13,042

250,015

2018 PSU - Revenue(5)

3/1/2018

3,260

6,520

13,040

249,977

2018 Stock Option(6)

3/1/2018

33,692

38.34

499,989