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Section 1: DEF 14A (DEF 14A)

caci-def14a_20181005.htm

 

 

SCHEDULE 14A

 

(Rule 14a-101)

 

INFORMATION REQUIRED IN PROXY STATEMENT

 

SCHEDULE 14A INFORMATION

 

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934 (Amendment No. )

 

Filed by the Registrant [X]

 

Filed by a Party other than the Registrant [   ] 

 

 

 

 

 

Check the appropriate box:

      

 

[   ]

      

Preliminary Proxy Statement

[   ] 

Soliciting Material Under Rule 14a-12

[   ]

 

Confidential, For Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))

 

 

[X]

 

Definitive Proxy Statement

 

[   ]

 

Definitive Additional Materials

 

 

 

CACI INTERNATIONAL INC

 

 

(Name of Registrant as Specified In Its Charter)

 

 

 

 

 

   

 

 

(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

 

 

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Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

 

 

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Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

 

 

 

 

 

 

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[   ]

 

Fee paid previously with preliminary materials:

[   ]

 

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing.

 

 

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October 4, 2018

Dear Fellow Shareholder:

I cordially invite you to attend our 2018 Annual Meeting of Shareholders on November 15, 2018, at 9:30 a.m., local time. The meeting will be held at the Sheraton Tysons Hotel, 8661 Leesburg Pike, Tysons, VA 22182.

The scheduled matters to be considered and acted on at the meeting are: the election of directors; a non-binding advisory vote to approve our named executive officers’ compensation; and ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for fiscal year 2019. Detailed information concerning these matters is set forth in the attached Notice of Annual Meeting of Shareholders and Proxy Statement.

As a shareholder, your vote is important. I encourage you to execute and return your proxy promptly whether or not you plan to attend so that we may have as many shares as possible represented at the meeting. Returning your completed proxy will not prevent you from voting in person at the meeting if you wish to do so.

Thank you for your cooperation and continued support and interest in CACI International Inc.

 

Sincerely,

J.P. LONDON
Chairman of the Board and Executive Chairman

 

IMPORTANT: Even if you plan to attend the meeting, please complete, sign, date, and return promptly the form of proxy (you can vote via the Internet, by phone, or by using the return envelope if you received a physical copy) to ensure that your vote will be counted. You may vote in person if you so desire, even if you previously have sent in your proxy. Please note that if you execute multiple proxies, the last proxy you execute revokes all previous ones.

 

 

 


 

 

 

 

Notice of 2018 Annual Meeting of Shareholders

 

Location:

Sheraton Tysons Hotel, 8661 Leesburg Pike, Tysons, VA 22182

 

 

Date and Time:

Thursday, November 15, 2018, 9:30 a.m., local time

 

 

Items of Business:

(1)

Election of eleven nominees named in our proxy statement to our Board of Directors to hold office until the 2019 Annual Meeting or until their respective successors have been elected and qualified;

 

 

 

 

(2)

To approve on a non-binding, advisory basis the compensation of our named executive officers;

 

 

(3)

To ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for fiscal year 2019; and

 

 

 

 

(4)

To transact such other business as may otherwise properly come before the Annual Meeting or any adjournment thereof.

 

 

 

Record Date:

Shareholders of record as of September 17, 2018 are entitled to vote at the 2018 Annual Meeting of Shareholders.

 

 

Attendance:

All shareholders are invited to attend. If you wish to attend the meeting in person, please review the instructions provided under “Attending the Annual Meeting” on page 61 of our proxy statement.

 

 

Voting:

We encourage all shareholders to vote on the matters described in our proxy statement by Internet, phone or by using the return envelope if you received a physical copy. For additional instructions on voting your shares, please refer to the instructions under “Annual Meeting Information” on page 59 of our proxy statement. Our proxy statement and annual report are also available at http://investor.caci.com/annual_meeting_materials/Index?keyGenPage=1073752900.

 

1100 N. Glebe Road

By Order of the Board of Directors

Arlington, VA 22201
(703) 841-7800
www.caci.com

 

 

J. WILLIAM KOEGEL, JR.
Secretary
October 4, 2018

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE SHAREHOLDERS’ MEETING TO BE HELD ON NOVEMBER 15, 2018. Proxy materials are first being made available or mailed to our shareholders on or about October 4, 2018.  

 

 

 


 

Table of Contents

 

PROXY SUMMARY

1

 

Board of Directors and Executive Officers

5

 

Board of Directors

5

Director Nomination Procedures

5

Board Composition

5

2018 Nominees for Director

7

Executive Officers

11

 

CORPORATE GOVERNANCE

12

 

Governance Framework

12

Structure

12

Primary Governance Documents

12

Board of Directors

13

Board Leadership

13

Committee Membership and Attendance

14

Committee Responsibilities

14

Board and Committee Independence

17

Annual Board Evaluations

17

Risk Oversight

18

Shareholder and Interested Party Communications with Directors

18

 

Certain Relationships and Related Transactions

19

 

 

Related Party Transactions

19

Compensation Committee Interlocks and Insider Participation

19

 

SECURITIES OWNERSHIP

20

 

Principal Shareholders

20

Directors and Management

21

 

Section 16(a) Beneficial Ownership Reporting

21

 

EXECUTIVE COMPENSATION

22

 

Compensation Discussion and Analysis

22

Compensation Committee Report

43

Executive Compensation Tables

44

Summary Compensation Table

44

Grants of Plan-Based Awards

45

Outstanding Equity Awards at Fiscal Year-End

46

Option Exercises and Stock Vested

47

Non-Qualified Deferred Compensation

47

CEO Pay Ratio

47

Severance Agreements

48

Potential Payments on Termination or Change in Control

49

 

 


 

 

Director Compensation

51

 

Summary

51

Director Compensation Table

52

Director Stock Ownership Guidelines

52

 

EQUITY COMPENSATION PLAN INFORMATION

53

 

 

AUDIT INFORMATION

54

 

Principal Accounting Fees and Services

54

Pre-Approval Policies and Procedures

54

 

AUDIT COMMITTEE REPORT FOR FISCAL YEAR 2018

55

 

MANAGEMENT PROPOSALS

56

 

Proposal 1        Election of Directors

56

Proposal 2        Advisory Vote on Executive Compensation

57

Proposal 3         Ratification of Appointment of Independent Registered Public Accounting Firm

58

 

ANNUAL MEETING INFORMATION

59

 

 

 

 

 

 

 

 


 

 

 

PROXY SUMMARY

 

This proxy statement is being furnished in connection with the solicitation of proxies by the Board of Directors (the “Board”) of CACI International Inc (the “Company,” “CACI” or sometimes referred to as “we,” “us,” or “our”) to be used at the Company’s Annual Meeting of Shareholders to be held on November 15, 2018 (the “Annual Meeting”).

 

The summary below highlights the information contained elsewhere in this proxy statement. The summary does not contain all of the information that you should consider, and you should read the entire proxy statement carefully before voting.

 

 

Annual Meeting

 

The Annual Meeting will be held on November 15, 2018, at 9:30 a.m., local time, at the Sheraton Tysons Hotel, 8661 Leesburg Pike, Tysons, VA 22182.

 

 

Questions about the Annual Meeting

 

We encourage you to review “Annual Meeting Information” beginning on page 59 of this proxy statement for answers to common questions on the rules and procedures surrounding the Annual Meeting and the business to be conducted at the Annual Meeting.

 

 

Meeting Agenda

 

 

Board Recommendation

Vote Requirement

Page

Election of Directors

FOR each nominee

Majority of Votes Cast

56

Advisory Vote on Executive Compensation

FOR

Majority of Votes Cast

57

Ratification of Ernst & Young LLP

FOR

Majority of Votes Cast

58

 

 

1


PROXY SUMMARY

Board Nominees

 

The following table provides summary information about each director nominee as of September 17, 2018. The Board and the Corporate Governance and Nominating Committee believe that each of our directors brings a strong and unique background and set of skills to the Board, giving the Board the competence and experience necessary to fulfill its oversight role and to evaluate and advise management with respect to a wide variety of matters.

 

Nominee

Age

Director Since

Independent

Board Committees

Kenneth Asbury

President and Chief Executive Officer, CACI International Inc

63

2013

 

E

Michael A. Daniels

Former Chairman and Chief Executive Officer, Mobile 365, Inc.

72

2013

C, CG, IR, SRA, SA

James S. Gilmore, III

Former Governor, Commonwealth of Virginia

68

2009

A, C, CE*, IR, SA

William L.  Jews

Former President and Chief Executive Officer of CareFirst, Inc.

66

2013

A, C, CE, IR, SA

Gregory G. Johnson

Admiral, U.S. Navy (Ret.); Founder, Snow Ridge Associates

72

2006

C, CE, E, SRA, SA*

J.P. London

Executive Chairman and Chairman of the Board, CACI International Inc

81

1981

 

CE, E*, IR, SRA, SA

James L. Pavitt

President, JLP Associates, LLC

72

2008

A, C, CE, SRA*, SA

Warren R. Phillips

Former CFO, Albanian-Macedonia-Bulgarian Oil Pipeline Corp.

77

1974

A*, CG*, E, SRA, SA

Debora A. Plunkett

Former Director, Information Assurance Directorate, National Security Agency

58

2018

A, IR, SA

Charles P. Revoile

Independent Legal and Business Consultant

84

1993

A, C*, CG, E, IR

William S. Wallace

General, US Army (Ret.); Former Commander, Fifth U.S. Corps.

71

2009

A, CE, IR*, SRA, SA

A Audit

C  Compensation

CE  Culture, Character, Integrity & Ethics

CG  Corporate Governance and Nominating

E Executive

IR  Investor Relations

SA Strategic Assessment

SRA Security and Risk Assessment

* Chair

 

 

 

 

 

 

 

 

2


PROXY SUMMARY

Corporate Governance Practices

 

We are committed to high standards of corporate governance and have a robust corporate governance program intended to promote the long-term success of our Company. Some highlights of our corporate governance practices are listed below.

 

Practice

Description

Page

Independence

Board is over 80% independent and the Audit, Compensation and Corporate Governance and Nominating Committees are 100% independent.

17

Lead Independent Director

Dr. Phillips was elected to serve as the lead independent director to provide independent oversight of management.

13

Overboarding Policy

Our Corporate Governance Guidelines limit directors’ affiliations to help them dedicate the requisite time and attention to the Board.

5

Board Self-Evaluations

Our Board regularly evaluates its performance through self-evaluations, corporate governance reviews and periodic charter reviews.

17

Annual Election of Directors

All directors are elected annually, which reinforces our Board’s accountability to shareholders.

7

Majority Voting

Directors are elected under a “majority voting” standard.

61

Action by Written Consent

Shareholders may act by written consent.

(1)

Annual “Say-on-Pay”

Our shareholders provide non-binding approval of our named executive officers’ compensation on an annual basis.

57

Stock Ownership Guidelines

We require our executive officers and directors to hold a substantial amount of our stock to better align their interests with those of our shareholders.

41&52

“Clawback” Policy

We maintain a recoupment policy so that we can pursue “excess” compensation awarded to our executive officers.

41

(1)

See our By-laws located on our website under “Corporate Governance” at www.caci.com.

 

 

Executive Compensation

 

The Compensation Committee believes our executive compensation program should encourage and reward behaviors that build a foundation for our long-term performance and success while also supporting the achievement of annual objectives. Our performance assessment framework and executive compensation program are designed to reward such performance by linking our executives’ compensation to the achievement of both long- and short-term goals. Below is a summary of the principal components of our named executive officers’ target total direct compensation for fiscal year


3


PROXY SUMMARY

2018. For additional information please review “Compensation Discussion and Analysis” on page 22 of this proxy statement.

 

Name

 

Base Salary ($)

 

Annual Incentive Target ($)

 

Long-Term Incentive Target(1) (Equity) ($)

 

Long-Term Incentive Target(2) (Cash) ($)

 

 J.P. London

652,500

552,500

1,100,000

 Kenneth Asbury

924,500

1,335,000

3,505,000

 John S. Mengucci

630,100

942,000

1,500,000

2,826,000

 Thomas A. Mutryn

534,200

520,000

1,100,000

1,560,000

 DeEtte Gray

550,000

650,000

900,000

1,950,000

(1)

In order for the executive officers to receive the target number of shares granted, we must first attain a minimum one-year EPS threshold, after which shares are earned subject to a three-year performance period with the number of shares earned each year based on the growth or decline from the average stock price over the 90 calendar days immediately preceding the grant to the average stock price over the 90 calendar days immediately preceding the first, second and third anniversaries of the grant date. Once fully earned the shares vest equally on the third and fourth anniversaries of the grant date.

(2)

Aggregate three-year value at target performance which is established at performance levels that exceed the annual incentive plan.

 

 

4


 

Board of directors and Executive Officers

 

Board of Directors

 

Director Nomination Procedures

The Corporate Governance and Nominating Committee is responsible for reviewing potential Board nominees to determine whether they have the requisite qualifications, expertise and other characteristics for service on the Board and its committees and recommending qualified candidates to the Board for consideration at the Annual Meeting. In fulfillment of these responsibilities, the Corporate Governance and Nominating Committee considers the overall composition of the Board to determine whether the Board has a broad range of business experience, expertise, skills, perspectives, tenure and diversity, including gender, race and ethnicity, that allow the Board to draw upon many individual perspectives as the Board oversees, evaluates and advises management with respect to a wide variety of matters.

The Corporate Governance and Nominating Committee evaluates candidates recommended by Board members, management, shareholders or consultants utilizing the following standards:

 

Demonstrated judgment, intelligence and character;

 

Record of substantial business experience relevant to the Company;

 

Ability to represent the interests of our shareholders;

 

Understanding of executive leadership, marketing, finance and corporate strategy;

 

Ability to dedicate sufficient time, energy and attention to the performance of their duties; and

 

Contribution to the range of talent, skill, expertise and individual characteristics of the Board.

Any shareholder who wishes to formally nominate a person for election as a director must comply with the advance notice provisions of the Company’s By-laws which are described in this proxy statement under “Annual Meeting Information” on page 59.

 

 

Board Composition

In order to determine the appropriate mix of professional experiences, expertise and backgrounds for the Board, the Corporate Governance and Nominating Committee and the Board discuss the Board’s composition during the year, and while the Board does not have a formal diversity policy, the Corporate Governance Guidelines provide that the Board should be large enough to reflect a substantial diversity of perspectives, background and experiences and that the Board should consider the scope of diversity, inclusive of gender, race and ethnicity, represented on the Board.

 

 

 

5


BOARD OF DIRECTORS AND EXECUTIVE OFFICERS

Qualifications, Attributes, Skills and Experience

 

The Board and the Corporate Governance and Nominating Committee believe that our directors bring strong and unique backgrounds, skills and perspective to the Board. As a whole, they believe the Board contains the qualifications, attributes, skills and experience necessary for the Board to fulfill its oversight role and evaluate and advise management with respect to a wide variety of matters. The following table summarizes certain key characteristics of our business and the associated qualifications, attributes, skills and experience that the Board believes is represented on our Board.

 

Qualifications

Business Characteristics

Strong Personal and Professional Ethics, Integrity and Values

 

We are committed to maintaining the highest level of integrity and ethics in our dealings with our employees, customers, suppliers, shareholders and the public.

Government Services and Information Technology Experience

We generate approximately 94% of our revenues from the federal government, and service in government or in senior military positions provides perspective into working constructively with our core customers.

Policymaking Experience in Business, Government, Education or Technology

We operate in a complex business environment and senior leaders bring experience in analyzing, shaping and overseeing the execution of important operation and policy issues.

Public Company Board Experience

We are a public company and experience on other public company boards provides insights into board operations, the relationship between the Board, Chairman and CEO and the Board’s oversight responsibilities.

Financial Expertise

Our business involves complex financial transactions and the Board advises and oversees our capital structure, financing and investment activities, financial reporting and internal controls.

Risk Oversight/Management Experience

We face security risks and operational risks that could materially affect our business, and experience understanding and overseeing various risks helps us to develop and implement appropriate policies and procedures designed to manage such risk.

 

Board Tenure

 

We believe that Board tenure diversity is important and careful consideration is made to achieve the appropriate balance of experience and fresh perspective. Our Board’s composition allows us to benefit both from the deep Company and industry knowledge of our longer-serving directors and the fresh perspectives brought by our newer directors. The following table outlines the various levels of tenure of the director nominees:

 

Tenure on Board

Number of

Director Nominees

  More than 10 years

4

  5 – 10 years

6

  Less than 5 years

1

 

 

6


BOARD OF DIRECTORS AND EXECUTIVE OFFICERS

2018 Nominees for Director

 

Each of our directors is elected by our shareholders on an annual basis to serve until the next annual meeting and until their respective successors are elected. The Board, upon the recommendation of the Corporate Governance and Nominating Committee, has nominated the following eleven individuals, each of whom is a current director, for election at the Annual Meeting.

 

 

Kenneth Asbury, 63

Director since: 2013

Non-Independent

 

 

A proven industry leader, Mr. Asbury has extensive experience in business development, including nearly 30 years leading highly successful systems, solutions, and services expansion programs.

Since February 20, 2013, Mr. Asbury has been the President and Chief Executive Officer of CACI International Inc. From May 2011 until February 2013, he was President and Chief Executive Officer of ASRC Federal Holding Company. As President and Chief Executive Officer of ASRC, Mr. Asbury was responsible for setting the strategic direction of the company’s Federal enterprise and driving growth and development for all of its subsidiaries. In 2011, the company saw an almost 100 percent increase in program capture rate in one year. Prior to that, Mr. Asbury was employed by Lockheed Martin for approximately 27 years where he oversaw Lockheed Martin’s Technical Operations, Mission Services and Civil businesses. As President of the Civil business, Mr. Asbury established five strategic growth campaigns focused on emerging government priorities – healthcare, energy, immigration reform, homeland security, and financial regulatory reform. With this focus, he led the business unit to more than $6 billion in new contract wins, and achieved $3.7 billion in sales in 2009. Mr. Asbury’s tenure for Mission Services also saw increased growth. There, he delivered double-digit sales and achieved a 75 percent new business win rate. The signature new business contracts included a $5 billion project with Special Operations Command and a $1 billion project with NASA. Similarly, Mr. Asbury delivered mission-critical services while overseeing Lockheed’s Technical Operations business. There, he transformed a $500 million internal business into a $1 billion external defense and intelligence operations entity. Under his leadership, the business unit developed, fielded, and operated a new tactical intelligence platform for the Army, the Persistent Threat Detection System. Mr. Asbury served in the U.S. Army Security Agency as a translator/interpreter. He is a graduate of the University of Oklahoma.

 

Michael A. Daniels, 72

Director since: 2013

Independent

 

 

Mr. Daniels brings to the Board extensive executive experience in the technology industry and experience serving as a director of public companies, including software and technology companies.

Mr. Daniels served as Chairman of the Board of Mobile 365, Inc. from May 2005 to November 2006 and served as its Chief Executive Officer from December 2005 to August 2006. Sybase acquired Mobile 365, Inc. in November 2006. Mr. Daniels was a director of Sybase (NYSE), a publicly-traded global enterprise software and services company, from 2007 until its acquisition by SAP in 2010. From December 1986 to May 2004, Mr. Daniels served in a number of senior executive positions at Science Applications International Corporation (SAIC), a publicly-traded scientific, technical, and professional services firm, including Sector Vice President from February 1994 to May 2004. Mr. Daniels served as Chairman and Chief Executive Officer of Network Solutions, Inc. (NASDAQ), an internet company, from March 1995 to June 2000 when Verisign purchased Network Solutions. From 2000 to 2001, Mr. Daniels served as a member of the Board of Directors of Verisign (NASDAQ).  From 1997 to 2003, Mr. Daniels served on the Board of Directors of Telcordia Technologies.  From 2007 to 2009, Mr. Daniels served on the Board of Directors of Luna Innovations.  From 2007 to 2013, Mr. Daniels served as Chairman of GlobalLogic.  Mr. Daniels currently serves as Chairman of Two Six Labs and the Logistics Management Institute, a non-profit consulting firm. He is also on the Board of Directors of Blackberry (NYSE) and Mercury Systems, Inc. (NASDAQ).

 

7


BOARD OF DIRECTORS AND EXECUTIVE OFFICERS

 

James S. Gilmore III, 68

Director since: 2009

Independent

 

 

Mr. Gilmore brings to the Board an exceptional history of leadership and distinguished service to the nation and particular knowledge and experience in legal, regulatory and governmental affairs.

Mr. Gilmore was the 68th Governor of the Commonwealth of Virginia, serving in that office from 1998 to 2002. Prior to serving as Governor, Mr. Gilmore was the 38th Attorney General of the Commonwealth of Virginia from 1994 to 1997. He was a partner in the law firm of Kelley Drye & Warren LLP from 2002 to 2008, where he served as the Chair of the firm’s Homeland Security Practice Group and where his practice also focused on corporate, technology, information technology and international matters. In 2003, President George W. Bush appointed Mr. Gilmore to the Air Force Academy Board of Visitors, and he was elected Chairman of the Air Force Board in the fall of 2003. Former Governor Gilmore served as the Chairman of the Republican National Committee from 2001 to 2002. He also served as Chairman of the Congressional Advisory Panel to Assess Domestic Response Capabilities for Terrorism Involving Weapons of Mass Destruction, a national panel established by Congress to assess federal, state and local government capabilities to respond to the consequences of a terrorist attack.  This panel, also known as the “Gilmore Commission,” was influential in developing the Office of Homeland Security. Mr. Gilmore is a graduate of the University of Virginia and the University of Virginia School of Law. He serves as President and CEO of the American Opportunity Foundation, an entity that offers bi-partisan conservative solutions to various domestic and national security challenges.  

 

 

William L. Jews, 66

Director since: 2013

Independent

 

 

Mr. Jews is a senior business and healthcare executive with over 25 years’ experience leading organizational growth, completing successful mergers and acquisitions, achieving profit goals, and delivering superior customer service.

Mr. Jews served as President and Chief Executive Officer of CareFirst, Inc. from January 1998 to December 2006. Previously, he served as President and Chief Executive Officer of CareFirst of Maryland, Inc. and Group Hospitalization and Medical Services, Inc. and served as Chief Executive Officer of Blue Cross Blue Shield of Delaware. He was formerly President and Chief Executive Officer of Blue Cross Blue Shield of Maryland, Inc., from April 1993 until January 1998. Mr. Jews is a director of Choice Hotels International, Inc.  In the past five years, Mr. Jews has also served as a director of Fortress International Group, Inc., the Ryland Group, Inc., and the CalAtlantic Group, Inc.

 

 

Gregory G. Johnson, 72

Director since: 2006

Independent

 

As the former Commander, U.S. Naval Forces Europe and Africa, and Commander in Chief, Allied (NATO) Forces Southern Europe, Admiral Johnson (Retired) brings to the Board valuable insights into the Department of Defense, intelligence and international communities.

 

Since retiring from the U.S. Navy in 2004, Admiral Johnson founded Snow Ridge Associates, a provider of strategic advice and counsel. During his 36-year naval career, Admiral Johnson rose through the ranks to Four-Star Admiral.  He commanded at every level. He was most recently responsible for naval operations throughout the 91 nations and adjacent seas of the European and African Areas of Responsibility.  He developed substantive policy-level relationships with many of those nations, particularly those with maritime equities. Admiral Johnson’s NATO duties included operational-level command of the peace support operations in Bosnia-Herzegovina and Kosovo, as well as NATO missions in Macedonia, Albania, and other Southeastern European nations. Admiral Johnson oversaw the successful implementation of NATO’s Operation Active Endeavor (Mediterranean maritime intercept operations), assumed command of the NATO Response Force at the Istanbul Summit in June 2004, oversaw NATO’s contributions to the Hellenic Republic of Greece’s security efforts during the 2004 Olympics, and was responsible for the establishment of NATO’s training support mission in Iraq. During his naval career, Admiral Johnson was assigned to several senior policy positions in Washington, most notably serving as the executive assistant to the Chairman, Joint Chiefs of Staff (1992 to 1993) and military assistant, first to the Deputy Secretary of Defense and subsequently to the Secretary of Defense (1997 to 2000). Admiral Johnson is active on numerous non-profit boards and serves in several civic and community organizations and institutions.

8


BOARD OF DIRECTORS AND EXECUTIVE OFFICERS

 

Dr. J. P. London, 81

Director since: 1981

Chairman of the Board and Executive Chairman

 

 

Under Dr. London’s leadership, CACI has grown from a small professional services consulting firm to a multi-billion dollar international information solutions and services company. CACI became a Fortune 1000 company in 2006.

Dr. London joined CACI in 1972.  He was appointed President and Chief Executive Officer in 1984 and Chairman of the Board in 1990.  On July 1, 2007, Dr. London was appointed Executive Chairman.  In this position, he oversees strategic initiatives to ensure shareholder value, advance client missions, cultivate key client relationships, and monitor major financial transactions, including CACI’s legacy mergers and acquisitions (M&A) program that Dr. London started in 1992.  He is also at the forefront of sustaining CACI’s public image and professional reputation for integrity. Dr. London’s efforts also focus on the evolution and transformation of defense, intelligence, information technology and network communications.  The founder of modern-era CACI, Dr. London is widely recognized in government and business as a leader in the industry.  He has received numerous national awards during his career for his business and civic accomplishments, including the Association of the U.S. Army’s John W. Dixon award for outstanding contributions to America’s defense and the U.S. Navy League’s Fleet Admiral Chester W. Nimitz Award for his exemplary contributions to the enhancement of U.S. maritime strength and national security.  Dr. London was inducted into the Greater Washington Business Hall of Fame in 2010.  In 2011, he was inducted into the Naval Postgraduate School Hall of Fame in Monterrey, California.  In 2012, he was the Hall of Fame Honoree of the Greater Washington Government Contractor Awards.  In 2013, he received the Nathan Hale Award from the Reserve Officers Association of the United States, the Ellis Island Medal of Honor from the National Ethnic Coalition of Organizations,  and was the recipient of the Admiral of the Navy George Dewey Award from the Naval Order of the United States for leadership in the Navy community.  In 2014, Dr. London received the Corporate Leadership Award from TechAmerica and the Semper Fidelis Award, Marine Corps Scholarship Foundation.  In 2016, he received the Lifetime Distinguished Service Award from the Northern Virginia Chamber of Commerce for leadership in helping America’s veterans succeed in business. In 2017, he received the Distinguished Service Award from the Naval Historical Foundation. In 2018, CACI opened the Dr. J.P. (Jack) London Shared Services Center in Oklahoma City, OK in his honor as a visionary business leader and Oklahoma City native. The HR Leadership Award of Greater Washington also presents the annual Dr. J.P. London Award for Promoting Ethical Behavior named in his honor.  Dr. London serves on the boards of the Friends of the National World War II Memorial, the U.S. Navy Memorial Foundation, the Naval Historical Foundation, and CAUSE (Comfort for America’s Uniformed Services), which serves the needs of wounded military personnel returning from Iraq and Afghanistan.  Dr. London is also a member of the National Military Intelligence Association, the Intelligence and National Security Alliance, the Association of the U.S. Army, the Navy League, the Naval Order of the U.S.A., the American Legion, and the Veterans of Foreign Wars.  Dr. London holds a B.S. in Engineering from the United States Naval Academy, a M.S. in Operations Research from the United States Naval Postgraduate School, and a Doctorate in Business Administration conferred “with distinction” from the George Washington University. Dr. London holds the rank of Captain, U.S. Navy (Retired), serving a combined 24 years active and reserve duty as a Naval Aviator and Aeronautical Engineering Duty Officer.

 

 

James L. Pavitt, 72

Director since: 2008

Independent

 

 

With over 35 years of experience in the intelligence community, Mr. Pavitt brings to the Board expertise in such areas as financial risk assessment, defense, information technology, homeland security, counterintelligence (insider threat) counterterrorism and human intelligence collection.

9


BOARD OF DIRECTORS AND EXECUTIVE OFFICERS

As the Deputy Director for Operations at the Central Intelligence Agency (CIA), he managed the CIA’s globally deployed personnel and a multi-billion dollar budget for human intelligence collection activities and operations.  Mr. Pavitt, as the head of America’s Clandestine Service, led the CIA’s operational response to the attacks of September 11, 2001.   His career at the CIA was multi-faceted and included creating and leading the CIA’s Counterproliferation Division, an entity created to counter the spread of weapons of mass destruction.  He managed and directed intelligence operations against global proliferation networks and human collection operations against a variety of hard targets. From 1990 to 1993, he served as Special Assistant to President George H.W. Bush for International Intelligence Programs.  He is a two-time recipient of the CIA’s Distinguished Intelligence Medal, the CIA Director’s Medal and the Donovan Award.  From 2004 to 2011, Mr. Pavitt served as a Principal of The Scowcroft Group in Washington, D.C., an international strategic business advisory firm.  He is the President and a Founding

Partner of JLP Associates, LLC, providing strategic risk advisory services to a variety of clients.

 

Dr. Warren R. Phillips, 77

Director since: 1974

Lead Independent Director

 

In addition to his experience as a senior-level technology executive, Dr. Phillips brings to the Board considerable expertise in the areas of information technology policy, public sector finance, and the provision of computer services. The Board also benefits from Dr. Phillips’ familiarity with the U.S. intelligence community and his understanding of international business issues. He is also recognized as an NACD Board Leadership Fellow.

 

Dr. Phillips served as the Chief Financial Officer for the Albanian-Macedonian-Bulgarian Oil Pipeline Corporation, a $1.5 billion crude oil pipeline developer for Caspian oil flows to the west. From February 2008 through 2011, Dr. Phillips served as the Chairman of the Board and Chief Executive Officer of Advanced Blast Protection, Inc., a research, development and manufacturing company that produces conventional and unconventional bullet resistant glass, modular vehicle armor, and specialized armored vehicles for military, law enforcement and civilian use. In November 2009, Advanced Blast Protection, Inc. filed a petition pursuant to Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Southern District of Florida.  From 1993 to 2001, Dr. Phillips was Executive Vice Chairman and Chief Financial Officer of Maryland Moscow, Inc., a 501(c)(3) educational and training venture that was involved in over $50 million in financial training to the newly evolving countries of the former Soviet Union. Dr. Phillips provided advice in developing financial systems (bank, stock exchange, pension, insurance, and government) in most of those countries. Between 1974 and 2003, Dr. Phillips was Professor of Government and Politics at the University of Maryland. During that time, he served in a number of administrative positions including Vice President for Academics at UMBC, and Assistant Vice President for Administration for the University System where he managed system-wide information technology, budgeting, and internal audit.

 

Debora A. Plunkett, 58

Director since: 2018

Independent

Ms. Plunkett has served in senior leadership positions in the National Security Agency (NSA) and brings to the Board more than 30 years of national security experience in critical mission areas, including cyber security and information assurance.

 

Ms. Plunkett served in positions of increasing responsibility at the NSA since 1984, most recently serving as Director, Information Assurance Directorate from April 2010 to November 2014, Deputy Director of Information Assurance from August 2008 to April 2010 and Senior Advisor to the Director of the United States National Security Agency (NSA) from November 2014 to January 2016. Ms. Plunkett currently serves as an Adjunct Professor at the University of Maryland University College since October 2014, a Senior Fellow at Harvard University’s Belfer Center since July 2017 and as the Principal of Plunkett Associates LLC, a cybersecurity consulting firm, since January 2016. Since February 2017, she has also served as a director of J.C. Penney Company, Inc. Prior to this, she served as Director, Office of Transnational Threats, United States National Security Council at the United States White House from 2000 to 2001.

 

 

Charles P. Revoile, 84

Director since: 1993

Independent

 

As an attorney and former senior-level executive, Mr. Revoile brings to the Board his considerable experience in the governance of publicly-held corporations and in contracting with the United States government. In addition, the Board values Mr. Revoile’s perspective in financial and management disciplines as an active private investor.

 

From 1985 to 1992, Mr. Revoile served as Senior Vice President, General Counsel, and Secretary of CACI International Inc. From 1971 to 1985, Mr. Revoile was Vice President and General Counsel of Stanwick Corporation. From 1964 to 1971, Mr. Revoile was counsel to the Communications division of Westinghouse Electric Corporation. From 1961 to 1964, he served as legislative counsel to the National Food Processors Association, representing the industry before Congress and the Executive agencies. Currently, Mr. Revoile is a legal and business consultant and an independent investor.

10


BOARD OF DIRECTORS AND EXECUTIVE OFFICERS

 

William S. Wallace, 71

Director since: 2009

Independent

 

 

General Wallace brings to the Board a 39-year record of military service and experience.

From 2005 to 2008, General Wallace led more than 50,000 soldiers and civilian employees at 33 Army schools.  He was the architect of the Army’s reorganization in continuation of military operations in Iraq and Afghanistan.  He developed the organizational, technical, and warfighting requirements for the Future Combat Systems and other Army modernization efforts. Prior to this, General Wallace was Commanding General of the Army Combined Arms Center from 2003 to 2005, Ft. Leavenworth, Kansas, where he was responsible for the development of new and emerging Army and Joint doctrine, providing the intellectual foundation for military leadership in the 21st century. As Commander of the Fifth U.S. Corps from 2001 to 2003, during the opening campaign of Operation Iraqi Freedom, General Wallace led 140,000 soldiers from Kuwait to Baghdad, and subsequently directed the occupation of Western and Northern Iraq. He served as Commander of the Joint Warfighting Center from 1999 to 2001; Commanding General of the 4th Infantry Division ─ the Army’s first "digitized" division that incorporated new C4ISR technologies ─ from 1997 to 1999; and Commanding General of the National Training Center from 1995 to 1997. General Wallace is a 1969 graduate of the United States Military Academy at West Point.

Executive Officers

 

As of September 17, 2018, the executive officers of the Company were J.P. London, Chairman of the Board and Executive Chairman, Kenneth Asbury, President and Chief Executive Officer, and the following five persons indicated in the table below. Biographical information for Messrs. Asbury and London is provided above under “2018 Nominees for Director” on page 7 of this proxy statement. The prior employers for each of our executive officers, except for Mr. Koegel, were aerospace, defense and security companies. Mr. Koegel’s previous experience was with a law firm.

 

Name and Current Position

Previous Experience

John S. Mengucci, 56

 Chief Operating Officer (July 2012 – Present)

Chief Operating Officer for U.S. Operations, February 2012 to June 2012; President, Lockheed Martin Information Systems and Global Solutions - Civil Product Line, 2010-2012; President, Lockheed Martin Information Systems and Global Solutions – Defense 2007-2010.

Thomas A. Mutryn, 64

  Executive Vice President, Chief Financial Officer and Treasurer (April 2007 – Present)

Acting Chief Financial Officer and Treasurer, January 2007 to April 2007; Executive Vice President, Corporate Development, September 2006 to January 2007; GTSI Corp., Senior Vice President, Finance, and Chief Financial Officer, 2003-2006; U.S. Airways, Inc., Senior Vice President, Finance, and Chief Financial Officer, 1998-2002.

DeEtte Gray, 49

  President, U.S. Operations (June 2017 – Present)

President, Intelligence & Security Sector for BAE Systems, Inc., 2012-2017; Vice President, Lockheed Martin Information Systems and Global Solutions - Defense Product Line 2007-2012.

Gregory R. Bradford, 69

  Chief Executive, CACI Limited, and President, U.K. Operations (2000 – Present)

Managing Director, CACI Limited, 1985-2000; President, U.K. Operations, since 1994; Executive Vice President, 1987-1994; Senior Vice President, 1986-1987; Vice President, 1983-1986.

 

J. William Koegel, Jr., 64

  Executive Vice President, General Counsel & Secretary (March 2014 – Present)

Steptoe & Johnson, 1981-March 2014 (Partner, 1987-March 2014).

 

 

11


 

CORPORATE GOVERNANCE

 

We are committed to strong corporate governance practices designed to maintain high standards of oversight, integrity and ethics while promoting long-term shareholder value.

 

Governance Framework

 

Structure

 

The Board is responsible for the oversight of management on behalf of our shareholders and the Board accomplishes this function acting directly and through Board committees. In accordance with the Corporate Governance Guidelines, the Board has eight standing committees: Audit; Compensation; Corporate Governance and Nominating; Culture, Character, Integrity & Ethics; Executive; Investor Relations; Security and Risk Assessment; and Strategic Assessment. This governance structure allows the Board to provide focused advice, insight and oversight in the interests of the Company and our shareholders. The Board and its committees discharge their duties at Board and committee meetings, through telephone contact and other communications with management and others regarding matters of concern and interest to the Company.

 

 

Primary Governance Documents

 

Our governance structure and processes are based on our key governance documents, which include the following documents which can either be found on our website under “Corporate Governance” at www.caci.com or are available upon written request to CACI International Inc, 1100 North Glebe Road, Arlington, Virginia 22201, Attention: Investor Relations:

 

 

 Amended and Restated Certificate of Incorporation

 

 Board Committee Charters

 

 By-laws

 

 Standards of Ethics and Business Conduct

 

 Corporate Governance Guidelines

 

 

 Directors’ Code of Business Ethics and Conduct

 

 

The Board reevaluates our policies and practices on an ongoing basis and all of our directors, executive officers and other employees are required to review their applicable code of conduct and certify compliance annually to ensure high standards of business conduct that facilitate the Board’s execution of its responsibilities. Additional information is provided below regarding key corporate governance and ethics policies and practices that we believe enable us to manage our business in accordance with the highest standards of business ethics and in the best interest of our shareholders.

We intend to disclose any waiver of compliance with any provision of our code of conduct covered by Item 406(b) of Regulation S-K that is granted to any principal executive officer, principal financial officer, principal accounting officer or controller, and any amendments to such code of conduct, in the “Corporate Governance” section of our website within four business days following the date of such amendment or waiver or amendment.

 

 

12


CORPORATE GOVERNANCE

Board of Directors

 

Board Leadership

 

The Board is responsible for determining the optimal leadership structure to provide independent oversight of senior management and evaluates the Board’s leadership structure on an annual basis. In evaluating its leadership structure, the Board considers our current operating and governance environment, governance best practices and feedback from our shareholders on how the Board can provide effective oversight of senior management on behalf of our shareholders. Based on these considerations, the Board has determined that separate positions for Chairman and CEO, coupled with a Lead Independent Director, provides an efficient and effective leadership model, fostering clear accountability, differing perspectives and effective decision making as the Chairman focuses on the Board activities while the CEO manages the day to day business. The chart below summarizes the roles and responsibilities of the Executive Chairman and Lead Independent Director:

 

 

J.P. London, Executive Chairman

Warren R. Phillips, Lead Independent Director

Independence:

Non-Independent

Independent

Appointment:

Appointed by Board (Annual)

Appointed by independent directors (Annual)

Presides at Meetings:

Board and Shareholder Meetings

Executive sessions of independent directors and Board meetings when Executive Chairman is absent

Authority to Call Meetings:

Board and Shareholder Meetings

Convenes meetings of independent directors as necessary and appropriate

Schedule, Agendas and Materials:

Prepares Board schedules, agendas and materials based on discussion with all directors and management

Works with Executive Chairman in the development and approval of Board schedules, agendas and materials

Liaison:

Between directors and senior management

Between independent directors and the Executive Chairman

Strategic/Governance Responsibilities:

Consults with senior management on strategic direction and key staffing; oversees corporate financial affairs and transactions; monitors all investor relations activities

Reviews and reports on oversight matters and organizes review of the Company’s annual strategic planning cycle

 

 

13


CORPORATE GOVERNANCE

Committee Membership and Attendance

Directors are expected to attend regular Board meetings, committee meetings and the annual shareholder meeting, in person or, if not possible, via teleconference. All currently serving directors attended the 2017 Annual Meeting of Shareholders held on November 16, 2017 and each incumbent director attended at least seventy-five percent of the aggregate of the total number of Board meetings and meetings of the committees on which the director served in fiscal year 2018. The Board held 19 meetings during fiscal year 2018. The standing committees of the Board, their membership and the number of meetings for each committee are outlined below.

 

Name

Audit

Compensation

Corporate

Governance

and

Nominating

Culture,

Character,

Integrity &

Ethics

Executive

Investor

Relations

Security

and Risk

Assessment

Strategic

Assessment

Mr. Asbury

 

 

 

 

 

 

 

Mr. Daniels (I)

 

 

 

Mr. Gilmore (I)

 

 

 

Mr. Jews (I)(A)

 

 

 

Adm. Johnson (I)

 

 

 

Dr. London

 

 

 

Mr. Pavitt (I)

 

 

 

Dr. Phillips (I)

 

 

 

Ms. Plunkett (I)

 

 

 

 

 

Mr. Revoile (I)

 

 

 

Gen. Wallace (I)

 

 

 

FY 2018 Meetings

6

7

6

4

6

4

4

Chairman     Chair                 Member               I – Independent             A – Audit Committee Financial Expert

 

Pursuant to NYSE requirements, two executive sessions of non-management directors were held during fiscal year 2018.

Committee Responsibilities

The specific roles and responsibilities of the Board’s committees are delineated in written charters adopted by the Board for each committee and are reviewed annually by the Corporate Governance and Nominating Committee in accordance with the Corporate Governance Guidelines. As provided in their charters, each committee is authorized to engage or consult from time to time, as appropriate, at our expense, with outside independent legal counsel or other experts or advisors it deems necessary, appropriate or advisable to discharge its duties. The charters for the Audit, Compensation, Corporate Governance and Nominating and Executive committees are available on our website under “Corporate Governance” at www.caci.com or a print copy of all of the standing committee charters is available upon shareholder request. Below is a summary of the primary responsibilities of each committee.

 

14


CORPORATE GOVERNANCE

Audit

 

The Audit Committee assists the Board in fulfilling its oversight of (i) the integrity of the Company’s financial statements; (ii) the effectiveness of the Company’s internal control over financial reporting, (iii) the Company’s compliance with applicable legal and regulatory requirements; (iv) the independence and qualifications of the Company’s independent auditor; and (v) the performance of the Company’s internal and independent auditors. The Audit Committee is comprised of only independent directors and fulfills its responsibilities by:

 

 

Appointing, evaluating and overseeing the independent auditor;

 

Reviewing and pre-approving audit and non-audit services and related fees for the independent auditor;

 

Discussing the Company’s audited financial statements and quarterly financial statements with management and the independent auditor;

 

Discussing the process for assessing the effectiveness of internal control over financial reporting and reviewing issues as to the adequacy and effectiveness of the Company’s internal control over financial reporting;

 

Reviewing the annual internal audit plan and any significant internal audit findings;

 

Reviewing and approving all related party transactions; and

 

Reviewing legal and regulatory matters that may have a material impact on the Company’s financial statements.

 

Compensation

 

The Compensation Committee assists the Board in overseeing the Company’s compensation policies and practices. The Compensation Committee is comprised of only independent directors and fulfills its responsibilities by:

 

 

Recommending to the Board the compensation arrangements for the Company’s executive officers and directors;

 

 

Reviewing and approving the compensation, including incentive and equity-based compensation, of the chief executive officer;

 

Approving grants of equity compensation to all eligible individuals in the Company’s service;

 

Reviewing and recommending changes in the Company’s fringe benefit programs;

 

Oversight of the Company’s Affirmative Action and Small, Disadvantaged and Minority Subcontracting activities;

 

Preparing an annual report for inclusion in the Company’s proxy statement; and

 

Overseeing and reporting to the Board on the Company’s policies concerning compensation, employee award and recognition programs, employee benefits, affirmative action, equal opportunity, expense reimbursement and human resources.

 

Corporate Governance and Nominating

 

The Corporate Governance and Nominating Committee assists the Board in overseeing the Company’s corporate governance practices. The Corporate Governance and Nominating Committee is comprised of only independent directors and fulfills its responsibilities by:

 

 

Recommending to the Board the general criteria and qualifications for membership on the Board;

 

Identifying and selecting individuals to be nominated for election to the Board;

15


CORPORATE GOVERNANCE

 

Recommending the number of directors to be elected each year (within the bounds established by the Company’s By-laws);

 

Developing and recommending to the Board a set of general corporate governance principles; and periodically reviewing, evaluating, and proposing revisions thereto; and

 

Reviewing policies and practices of the Company and monitoring compliance in areas of corporate governance.

 

Culture, Character, Integrity & Ethics

 

The Culture, Character, Integrity and Ethics Committee assists the Board in overseeing the Company’s efforts to foster and institutionalize the Company’s culture of character, ethics and integrity and safeguard and advance the Company’s reputation. The Culture, Character, Integrity and Ethics Committee must include at least three independent directors and fulfills its responsibilities by:

 

 

Assessing whether the Code of Conduct and the Standards of Ethics and the Company’s other internal ethics policies instill appropriate ethical behavior in the Company’s culture, business practices and employees, and making recommendations to the Board concerning the adoption and amendment of these policies;

 

Reviewing the material risks and liabilities relating to the provisions of the Code of Conduct and the Standards of Ethics and the Company’s other internal ethics policies and ensuring that such risks are managed or mitigated as part of the Company’s risk management program;

 

Reviewing the adequacy and effectiveness of the Company’s engagement and interaction with its stakeholders; and

 

Reviewing any political and/or lobbying activities performed on behalf of the Company.

 

Executive

 

The Executive Committee assists the Board in providing the necessary input and authorization in between full Board meetings, and for identifying those items which merit consideration or action by the entire Board.

 

Investor Relations

 

The Investor Relations Committee assists the Board in its oversight of the Company’s investor relations program. The Investor Relations Committee must include at least three independent directors and fulfills its responsibilities by:

 

 

Reviewing the investor relations program on an annual basis and providing suggestions to management;

 

Reviewing policies and procedures with regard to “guidance” provided by the Company to the investment community; and

 

Reviewing the Company’s shareholder profile.

 

16


CORPORATE GOVERNANCE

Security and Risk Assessment

 

The Security and Risk Assessment Committee assists the Board in its oversight of the Company’s security as well as monitoring the contract and business risks associated with classified and sensitive high-risk work supporting defense, intelligence and international clients. All members of the Security and Risk Assessment Committee must have the requisite security clearances to carry out their responsibilities and at least one member must have experience in cyber security and information technology. The Security and Risk Assessment Committee fulfills its responsibilities by:

 

 

Overseeing selected classified and sensitive high-risk work that is unprecedented, unusual, or that may otherwise pose particular risks;

 

Assessing business risks concerning classified and sensitive high-risk work from an operating standpoint;  

 

Monitoring risks to the Company’s security by gauging risks related to threats to the Company’s corporate IT systems, personnel, and facilities as well as business operations and reputation; and

 

Ensuring best practices in the areas of risk management and security regarding classified and sensitive high-risk work.

 

Strategic Assessment

 

The Strategic Assessment Committee assists the Board in its oversight of (i) the Company’s strategic planning process; (ii) the Company’s future growth; (iii) the Company’s key performance metrics; and (iv) the Company’s shareholder value. The Strategic Assessment Committee must include at least three directors who are experienced in the Company’s business and customer base and fulfills its responsibilities by:

 

 

Reviewing, monitoring and evaluating the business environment for the Company and the effectiveness of the Company’s strategy and advising on the Company’s strategic planning process;

 

 

Reviewing the Company’s mergers and acquisitions strategy, business development strategies and the management of its growth strategy;

 

 

Reviewing key performance metrics used inside and outside the Company to monitor Company performance and recommending the future use of key performance metrics; and

 

 

Evaluating the “shareholder value proposition.”

Board and Committee Independence

 

In accordance with our Corporate Governance Guidelines, a majority of our Board must be independent as defined by the NYSE listing rules and the Securities Exchange Act of 1934, as amended (the “Exchange Act”). On August 9, 2018, the Board affirmatively determined that nine of its eleven current members (82%) are independent.  In making the determination, the Board considered the relationships described below in “Certain Relationships and Related Transactions.” The Audit Committee, Compensation Committee and Corporate Governance and Nominating Committee are comprised entirely of independent directors.

 

 

Annual Board Evaluations

 

The Board and each of its committees perform annual evaluations of their performance. The evaluation process is managed by the Corporate Governance and Nominating Committee and specifically focuses on areas for improvement. In order to ensure independence during the evaluation process, the evaluation of the Corporate Governance and Nominating Committee is conducted by the Executive Committee.  

 

 

17


CORPORATE GOVERNANCE

Risk Oversight

 

Our Board has an active role, as a whole and at the committee level, in overseeing the management of our risks. The Board regularly reviews information regarding the results of operations and any related trends and other factors contributing to or affecting our results, long-term strategy, financial reporting systems and processes, as well as the risks associated with these aspects of the Company’s business. The Board has also approved Standards of Ethics and Business Conduct that establish standards of conduct for employees that are designed to mitigate risks associated with compliance, foster ethical conduct by our employees and protect company assets. We require all employees to receive annual training related to our Standards of Ethics and Business Conduct and related policies in order to ensure that employees are familiar with those standards of conduct and to mitigate the risks associated with employees’ failure to meet those standards.

 

The Board’s committees are involved in the assessment of risks relevant to their area of responsibility and the implementation of actions designed to address or mitigate those risks. The types of risks that are considered by the committees include:

 

Audit:

 

Risks related to our tax, accounting, financial reporting systems and processes, and legal and regulatory compliance.

 

Compensation:

 

Risks related to our compensation and benefit programs.

Corporate Governance and Nominating:

 

Risks related to our corporate governance and management.

Culture, Character, Integrity & Ethics:

 

Risks related to our internal ethics policies.

 

Investor Relations:

 

Risks related to capital markets and engagement with our shareholders and the investment community.

 

Security and Risk Assessment:

Risks related to classified and sensitive high-risk work, supporting defense, intelligence, and international clients, and the performance of personnel, information and industrial security.

 

Strategic Assessment:

 

Risks related to our growth initiatives and strategic and operating plans.

 

 

 

Shareholder and Interested Party Communications with Directors

Shareholders and interested parties may communicate directly with the Board or any director or committee member, including Audit Committee members, by sending correspondence to such individual c/o CACI International Inc, 1100 North Glebe Road, Arlington, Virginia 22201, Attn: J. William Koegel, Jr., Corporate Secretary. It is our policy to forward directly to the directors all such communications addressed to them and delivered to the Company at the above stated address.

18


 

Certain Relationships and Related Transactions

 

Related Party Transactions

 

We review all relationships and transactions in which we and our directors and executive officers or their immediate family members are participants, as well as in which greater than 5% shareholders, nominees for director, immediate family members of greater than 5% shareholders and nominees for director, and persons (other than a tenant or employee) sharing the household of a director, executive officer, nominee for director, or greater than 5% beneficial owner are participants, to determine whether such persons have a direct or indirect material interest. The Company’s legal staff is responsible for obtaining information through questionnaires and other appropriate procedures from the directors and executive officers with respect to related party transactions and then determining whether the Company or a related person has a direct or indirect material interest in the transaction. Transactions that are determined to be material to the Company or a related person are disclosed in the Company’s proxy statement. In addition, the Audit Committee is charged with reviewing and approving or ratifying any related party transaction. The Audit Committee considers, among other matters, the nature, timing and duration of the transaction, the relationships of the parties to the transaction, whether the transaction is in the ordinary course of the Company’s business, the dollar value of the transaction, and whether the transaction is in the interest of the Company.

 

Upon review by the Audit Committee, no transactions concerning our directors, executive officers or greater than 5% shareholders or immediate family members of these persons require disclosure under Item 404(a).

 

Compensation Committee Interlocks and Insider Participation

 

During fiscal year 2018, the members of the Compensation Committee had no relationships with the Company other than their relationships as directors, their entitlement to the receipt of standard compensation as directors and members of certain committees of the Board, and their relationships to the Company as shareholders. During fiscal year 2018, no person serving on the Compensation Committee or on the Board was an executive officer of another entity for which any of our executive officers served on the compensation committee.

 

 

 

 

 

 

 

19


 

 

SECURITIES OWNERSHIP

 

Principal Shareholders

 

The following table provides the latest available information as of September 17, 2018 with respect to beneficial ownership of the Company’s common stock held by each person known by the Company to be the beneficial owner of more than 5% of the outstanding common stock.

 

Beneficial Owner

Amount of Beneficial Ownership of Common Stock

Percent of Common Stock(1)

Blackrock, Inc.(2)

3,174,153

12.83%

The Vanguard Group, Inc.(3)

2,777,501

11.23%

Dimensional Fund Advisors LP(4)

2,050,503

8.29%

(1)

Based on 24,732,207 shares of common stock outstanding as of September 17, 2018, the record date.

(2)

The number of shares beneficially held by BlackRock, Inc. (BlackRock) is based solely on information in a Schedule 13G/A filed with the SEC by BlackRock on January 19, 2018 on behalf of itself and certain entities under its control. The report states that BlackRock has sole voting power over 3,122,810 shares and sole dispositive power over all shares. The address of Blackrock, Inc. is 55 East 52nd Street, New York, NY 10055.

(3)

The number of shares beneficially held by The Vanguard Group, Inc. (Vanguard) is based solely on information in a Schedule 13G/A filed with the SEC by Vanguard on February 8, 2018 on behalf of itself and certain entities under its control. The report states that Vanguard has sole dispositive power over 2,749,670 shares, shared dispositive power over 27,831 shares, sole voting power over 26,798 shares and shared voting power over 2,985 shares. The address of The Vanguard Group, Inc. is 100 Vanguard Blvd., Malvern, PA 19355.

(4)

The number of shares beneficially held by Dimensional Fund Advisors LP (Dimensional) is based solely on information in a Schedule 13G/A filed with the SEC by Dimensional on February 9, 2018 on behalf of itself and certain entities under its control. The report states that Dimensional has sole voting power over 2,004,885 shares and sole dispositive power over all 2,050,503 shares. The address of Dimensional Fund Advisors LP is Building One, 6300 Bee Cave Road, Austin, TX 78746.

 

20


SECURITIES OWNERSHIP

 

Directors and Management

 

The following table provides information as of September 17, 2018 with respect to beneficial ownership of the Company’s common stock for each executive officer, each director, and for all current executive officers and directors of the Company as a group.

 

Beneficial Owner

Amount of Beneficial Ownership of Common Stock(1)

Percent of Common Stock(2)(3)

J. P. London

84,476

*

Kenneth Asbury

58,700

*

John S. Mengucci

38,774

*

Thomas A. Mutryn

38,250

*

DeEtte Gray

3,037

*

Gregory R. Bradford

49,095

*

J. William Koegel, Jr.

10,935

*

Michael A. Daniels

6,245(4)

*

James S. Gilmore

13,879(4)

*

William L. Jews

6,245(4)

*

Gregory G. Johnson

5,343(4)

*

James L. Pavitt

6,601(4)

*

Warren R. Phillips

6,188(4)

*

Debora A. Plunkett

Charles P. Revoile

32,159(4)

*

William S. Wallace

9,747(4)

*

All Current Executive Officers and Directors as a Group (16 in number)

374,564

1.51%

(1)

All Restricted Stock Units (RSUs) vesting as of September 17, 2018 or within 60 days after that date are treated as shares of common stock that are beneficially owned.

(2)

Based on 24,732,207 shares of common stock outstanding as of the September 17, 2018 record date.

(3)

The asterisk (*) denotes that the individual holds less than one percent of outstanding common stock. This stock is included in the total percentage of outstanding common stock held by the Executive Officers and Directors as a Group shown above.

(4)

Includes 269 shares obtainable upon vesting of RSUs within 60 days after September 17, 2018.  

Section 16(a) Beneficial Ownership Reporting

Section 16(a) of the Exchange Act requires the Company’s officers and directors and persons who own more than ten percent of a registered class of the Company’s equity securities to file reports of ownership and changes in ownership with the Securities and Exchange Commission (“SEC”). Such officers, directors, and shareholders are required by SEC regulations to furnish the Company with copies of all such reports that they file.

Based solely on a review of copies of reports filed with the SEC and of written representations by certain Officers and Directors, all persons subject to the reporting requirements of Section 16(a) filed the required reports on a timely basis during the fiscal year ended June 30, 2018, with the exception of Mr. Asbury who had one late filing with respect to a transaction.


21


 

EXECUTIVE COMPENSATION

 

Compensation Discussion and Analysis

 

This Compensation Discussion and Analysis provides the principles, objectives, structure, analyses and determinations of the Compensation Committee with respect to the fiscal year 2018 compensation of the following named executive officers (NEOs):

 

J.P. London, Executive Chairman and Chairman of the Board

Kenneth Asbury, President and Chief Executive Officer

John S. Mengucci, Chief Operating Officer

Thomas A. Mutryn, Executive Vice President, Chief Financial Officer and Treasurer

DeEtte Gray, President of U.S. Operations

 

The principles, objectives and structure of our fiscal year 2018 executive compensation were established in June 2017, at the quarterly meeting when our Compensation Committee traditionally makes executive compensation decisions. The Compensation Committee’s fiscal year 2018 compensation decisions reflect the Company’s performance as well as our executives’ individual performance in the prior fiscal year.

 

Executive Summary

Who We Are

 

For more than 56 years, we have delivered innovation, expertise, and excellence in support of our customers’ vital national missions to defeat global terrorism, secure the homeland, and improve government services. Through our long-standing customer relationships across the federal marketplace, we have become a trusted provider of high-value solutions and services for our nation’s highest priorities.

 

We serve intelligence, defense, and federal civilian customers in 12 market areas: Business Systems, Command and Control (C2), Communications, Cyber Security, Enterprise Information Technology (IT), Health, Intelligence Services, Intelligence Systems and Support, Investigation and Litigation Support, Logistics Systems and Services, Space Operations and Resiliency and Surveillance and Reconnaissance. Our solutions and services in all of these markets deliver the quality and efficiency customers require to advance their capabilities and complete their missions.

 

Our Mission

CACI’s mission is to be a leader in providing the information solutions and services America needs to defeat global terrorism, secure our homeland and improve government services. We are ever vigilant in aligning our solutions with the nation’s highest priorities.

 

 

 

 

22


ExeCutive Compensation

 

CACI At-A-Glance

 

~$4.47 billion annual revenue

Fortune 1000 Largest Companies in America

Consistently recognized as a top employer of veterans;

Veterans represent ~35% of our workforce

A Fortune World’s Most Admired Company in IT Services

Approximately 19,800 employees;

~65% with security clearances

Character-based culture of ethics, integrity, and operational excellence

 

Growth Strategy

 

In fiscal year 2018, we continued executing upon our growth strategy via initiatives focused on delivering long-term value to our customers and shareholders such as:

 

 

OUR GROWTH STRATEGY

 

WINNING NEW BUSINESS

     Market aligned, focused on government’s high-priority missions

     Optimizing business development

     Bidding selectively and winning larger contracts

     Increasing solutions and fixed price content

 

DRIVING OPERATIONAL EXCELLENCE

     Credentialing value delivery systems

     Efficient, effective, ethical program management

 

DEPLOYING CAPITAL IN SUPPORT OF FUTURE GROWTH

     M&A is our first priority for capital deployment

     Add capability and customers to accelerate growth

     Deliver long-term shareholder value

 

 

Financial Performance Summary

 

Fiscal Year 2018 Performance

 

Below are charts outlining our performance over the last three fiscal years for the primary performance metrics used by the Compensation Committee in determining our NEOs’ compensation. The performance metrics are shown without the impact of the Tax Cuts and Jobs Act of 2017 (the “TCJA”) that occurred during fiscal year 2018, as that did

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ExeCutive Compensation

 

not affect NEO compensation (i.e., payouts were determined without the increases to earnings per share (“EPS”) and net after tax profit (“NATP”) caused by the legislation). The performance metrics were otherwise determined in accordance with U.S. generally accepted accounting principles (“GAAP”).

 

The growth depicted in the performance charts had a substantial impact on our NEOs’ earned compensation over the course of this period. For fiscal year 2018, this resulted in an average achievement of 222% of the targeted annual incentive plan value and the growth of the Company’s stock price over the same period resulted in achievement of 143% of the performance-based equity awards granted to the NEOs during the fiscal year.

 

 

 

 

2017 Say on Pay Vote

 

 

DECISION SUPPORT

As the Compensation Committee made its fiscal year 2018 compensation decisions, it considered that 99% of the votes cast on the Company’s fiscal year 2017 executive compensation program (the “Say on Pay” proposal) were voted in favor of the “Say on Pay” proposal at the Company’s 2017 Annual Meeting. This continued the strong support as shown in 2016’s 99% approval rate. The Company also actively engages with our shareholders to understand our shareholders’ views towards the programs and reviews comments from shareholder advisory services.

 

 

Pay for Performance Philosophy

 

The Compensation Committee believes our executive compensation program should incent and reward behaviors that build a foundation for our long-term performance and success while also supporting the achievement of annual

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ExeCutive Compensation

 

objectives. Our performance assessment framework and executive compensation program are designed to reward such performance by linking our executives’ compensation to the achievement of both long- and short-term goals. For example, the annual incentives paid to each of our NEOs vary with performance, including our annual financial results.  Additionally, the NEOs receive two types of long-term incentive plan awards that will result in payouts only if we achieve targeted growth in such measures as stock price performance, EPS, NATP and revenue.

 

Executive Compensation Program Design

 

The substantial majority of our NEOs’ compensation is directly tied to our performance with short-term and long-term incentives comprising an average of approximately 80% of our NEOs’ target total direct compensation (“TDC”). The following is a list of the principal components of our executive compensation program:

 

Character

Component

Description

Fixed

Base Salary

   Annual fixed portion of NEOs’ TDC designed to attract and retain experienced executives, comprising only approximately an average of 20% of our executives’ target TDC.

At Risk

Annual Incentives

   Cash bonus plan that rewards NEOs for achieving quarterly and annual performance objectives based on EPS, NATP, Total CACI Revenue and Direct Labor, calculated as described below.

Long-Term Incentives

   Performance-based Restricted Stock Units (“PRSUs”) earned based on achievement of a minimum one-year EPS threshold, adjusted for annual changes in stock price over a three-year period, and vesting on the third and fourth grant anniversaries.

  Cash-based long-term incentive plan (“LTIP”) provides value to the executive only to the extent NATP and revenue significantly outperformed plan over a three-year period.

 

Performance Assessment

 

Compensation Committee

The Compensation Committee uses a comprehensive process to assess performance on an ongoing basis, which includes frequent dialogue with management about financial performance relative to our goals and competitors, and assessment of corporate and individual executive accomplishments.

Independent Consultant

The Compensation Committee also asks its independent compensation consultant to assess our pay-for-performance alignment, which includes an analysis of our NEOs’ realizable pay relative to our peer group and an analysis of operational and shareholder returns relative to our peer group.

 

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ExeCutive Compensation

 

Historical Pay for Performance Results

 

Our pay for performance philosophy is reflected in the compensation that has been earned by our NEOs over the past three years. The chart below summarizes our performance against the Compensation Committee performance metrics and the impact such performance had on our NEOs’ compensation:

 

Fiscal Year of Grant

Performance

Average Annual Incentive Payouts (Cash)

Long-Term

Incentives (Equity)

Long-Term

Incentives (Cash)

2018

NATP > Target

Total CACI Revenue > Target

EPS > Target

Direct Labor > Target

1-Year Average Stock Price +43%

222% of Target

143% PRSUs Earned Through Completion of First Year of Measurement

 

30% Earned Through Completion of First Year of Measurement

2017

NATP > Target

Total CACI Revenue < Target

EPS = Target

U.S. Operations Organic Revenue > Target

1-Year Average Stock Price +34%

2-Year Average Stock Price +91%

124% of Target

163% PRSUs Earned Through Completion of Second Year of Measurement

 

30% Earned Through Completion of Second Year of Measurement

2016

NATP > Target

Revenue > Target

EPS > Target

ROIC < Target

New Business Awards < Threshold

UK NATP > Target

1-Year Average Stock Price +18%

2-Year Average Stock Price +58%

3-Year Average Stock Price +126%

111% of Target

167% PRSUs Earned Through Completion of Third Year of Measurement

 

70% Earned

 

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ExeCutive Compensation

 

Executive Compensation Practices

 

We also maintain certain executive compensation practices designed to strengthen the connection between our executives’ interests and the interests of our shareholders. The following chart is a summary of the compensation practices that we do and do not employ to advance our shareholders’ long-term interests:

 

What We Do

What We Don’t Do

   ~80% of NEO Compensation “At-Risk”

   No Excessive Perquisites

   100% of Equity Compensation Performance-Based

   No Repricings

   Rigorous Stock Ownership Guidelines

   No Tax Gross-ups Approved Since 2007

   Clawback Policy

   No Automatic Single Trigger

Equity Vesting on Change of Control

   Extended Service-Based Vesting on PRSUs

 

 

 

Compensation Governance, Process and Incentive Decisions

 

Decision Making

 

The Decision Makers

 

The Compensation Committee, composed solely of independent directors, is responsible for our executive officer compensation decisions. The Compensation Committee works very closely with its independent consultant and management to examine pay and performance matters during the year. The Compensation Committee held seven meetings over the course of fiscal year 2018, and all four quarterly meetings either ended or started with executive sessions without management present. The Compensation Committee’s charter may be accessed through the “Corporate Governance” link found on our website at http://investor.caci.com/corporate_governance.

 

Compensation Committee’s Independent Compensation Consultant

 

The Compensation Committee retained Frederic W. Cook & Co., Inc. (“FW Cook”) as its independent compensation consultant. With respect to fiscal year 2018, the compensation consultant attended Compensation Committee meetings, met with the Compensation Committee in executive sessions, reviewed and provided recommendations on the components of the Company’s executive compensation program and provided compensation advice independent of the Company’s management.

 

FW Cook reports directly to the Committee and performs no work for management other than providing advice on executive compensation pursuant to its engagement by the Committee. The Compensation Committee assessed the independence of FW Cook pursuant to SEC rules and concluded that its work for the Compensation Committee did not raise any conflicts of interest.

 

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ExeCutive Compensation

 

Making Decisions

 

The Compensation Committee has both a strategic and administrative role in managing the compensation structure of the Company, with an emphasis on compensation of top management.  Strategically, the Compensation Committee considers how the achievement of the overall goals and objectives of the Company can be aided through

adoption of an appropriate compensation philosophy and effective program elements.

 

Administratively, the Compensation Committee reviews compensation paid, salary progressions, incentive compensation allocations, benefits and perquisites provided to all employees, and equity awards granted under all shareholder-approved plans.

 

The Compensation Committee is responsible for setting the compensation, including incentive and equity-based compensation, of the Company’s executive officers, including NEOs.

 

The Committee reviews corporate performance each quarter, and assesses progress for each goal in the annual incentive program and active long-term incentive programs from current and prior fiscal years. The Committee uses a performance assessment framework to make CEO compensation decisions. For the other NEOs, the Committee, with input from the CEO, reviews (1) business unit/staff group performance against the objectives set for the fiscal year, and (2) each NEO’s Leadership Assessment based on individual performance with regard to key leadership attributes. The Committee evaluates each NEO’s relative compensation and changes in responsibilities, and considers current pay practices for comparable positions at peer companies. The Committee also considers the CEO’s recommendations, succession planning, retention, and advice of its independent compensation consultant. Finally, before making pay decisions, the Committee reviews the pay mix to ensure that it is competitively positioned and performance-based. The Committee also discusses other information relevant to executive compensation, such as trends, regulatory updates, and shareholder feedback.

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ExeCutive Compensation

 

Process

The Compensation Committee followed the process outlined below to determine and assess NEO compensation in fiscal year 2018:

 

Q4 FY2017 | ending 6/30/2017

•     Finalized fiscal year 2018 compensation program design

•     Finalized metrics and goals for the fiscal year 2018 annual incentive plan

•     Set total target direct compensation for the NEOs

 

Q1 FY2018 | ending 9/30/2017

•     Set the metrics and goals for the PRSUs and LTIP

•     Certified PRSU performance for completed measurement periods

 

DETERMINE TDC TARGETS FOR THE NEOs

 

At the end of fiscal year 2017, the Compensation Committee determined fiscal year 2018 TDC targets for the CEO and each of the other NEOs employed at the time based on the following process:

     Leadership Evaluation: The Compensation Committee uses a performance assessment framework to make CEO compensation decisions. For the other NEOs, the Compensation Committee, with input from the CEO, reviews (1) business unit/staff group performance against the objectives set in fiscal year 2017, and (2) each NEO’s Leadership Assessment based on individual performance with regard to key leadership attributes.

     Risk-Balancing and Performance: In evaluating the performance of the NEOs, the Compensation Committee seeks to understand what was accomplished relative to established objectives, how it was accomplished, the quality of financial results and the Company’s strategic positioning for future competitive advantage.

     Market Practices: The Compensation Committee evaluates each NEO’s relative compensation and changes in responsibilities, and considers current pay practices for comparable positions at peer companies.

     Independent Consultant Recommendation: The Compensation Committee receives input from its independent compensation consultant.

     Other Factors: For the other NEOs, the Compensation Committee also considers the CEO’s recommendations, succession planning and retention. Finally, before making pay decisions, the Compensation Committee reviews the pay mix to ensure that it is competitively positioned and performance-based.

 

PROGRAM DESIGN AND GOAL SETTING

 

At the end of fiscal year 2017, the Compensation Committee also finalized the fiscal year 2018 annual incentive plan. Early in fiscal year 2018, they also reviewed and approved the metrics and goals for the PRSUs and LTIP.

Q2, Q3, and Q4 FY2018 | ending 12/31/2017, 3/31/2018 and 6/30/2018

•     Reviewed the Company’s performance and assess progress toward objectives

•     Assessed progress toward NEO objectives

•     Discussed potential program changes considering feedback from shareholders, regulatory guidance, and external trends

 

REVIEW OF PROGRESS AGAINST GOALS

 

The Compensation Committee reviews corporate performance each quarter, and assesses progress against each of the incentive plan’s goals.  The Compensation Committee also discusses other information relevant to executive compensation, such as trends, regulatory updates, and shareholder feedback.

 

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ExeCutive Compensation

 

Q1 FY2019 | ending 9/30/2018

•     Evaluate and discuss NEO performance

Determine payouts for the NEOs based on achievement of the performance metrics for the annual incentive plan, PRSUs and LTIP

FINAL EVALUATION OF FISCAL YEAR 2018 GOALS

 

At the conclusion of fiscal year 2018, the Compensation Committee reviewed and approved the payouts for the annual incentive plan, PRSU plan and LTIP plan.

FY 2017/2018 FY 2019

 

Assessing Competitive Practice

 

FW Cook assists the Committee by reviewing comparative market data on compensation practices and programs within the Company’s peer group.

 

During fiscal year 2018, FW Cook was responsible for providing information on new laws and regulations, general industry compensation practices, and recommendations for director compensation and compensation for management positions under the Committee’s purview, and for performing independent assessments of management recommendations brought before the Committee. FW Cook participated in all meetings of the Committee during the fiscal year.

 

For fiscal year 2018, peer comparisons were performed against 17 publicly traded companies which were selected based on similarities to CACI in size and/or industry as well as operational similarities. The selected companies were as follows:

 

Acxiom Corporation

Alliance Data Systems Corporation

Booz Allen Hamilton Holding Corporation

Broadridge Financial Solutions, Inc.

Cognizant Technology Solutions Corporation

Convergys Corporation

CSRA Inc.

Fidelity National Information Services, Inc.

Fiserv, Inc.

Harris Corporation

Leidos Holdings, Inc.

ManTech International Corporation

MAXIMUS, Inc.

Science Applications International Corporation

Sykes Enterprises, Inc.

Tetra Tech, Inc.

Unisys Corporation

 

 

 

 

The companies used for peer comparisons are reviewed annually and adjusted as necessary due to changes at the selected company (e.g., acquisitions, bankruptcies, etc.) or changes in the comparability of the selected company to CACI. For fiscal year 2018, Ciber, Inc. was removed from the list of peer companies due to its filing for bankruptcy in April 2017.

 

General industry market information for NEO and other senior executive compensation was also provided for the Compensation Committee by Willis Towers Watson, which did not provide advice or analysis regarding the data provided.

 

 

Determining Executive Compensation

 

Executive Compensation Objectives

Our NEO compensation programs are designed to attract, retain and reward the management talent that we need to maintain and strengthen our position in the industry and to achieve our business objectives.

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ExeCutive Compensation

 

 

 

OUR COMPENSATION PRINCIPLES

 

Our compensation programs for NEOs are guided by three basic principles:

 

Link compensation to performance. We believe that compensation levels should reflect performance - both the performance of CACI and the performance of the recipient.

 

Maintain competitive compensation levels.  We strive to offer programs and levels of compensation that are competitive with those offered by the Company’s peer group to attract, retain and reward our NEOs.

 

Align management’s interests with those of shareholders.  We seek to implement programs that will align management’s interests with those of shareholders and increase long-term shareholder value by granting long-term equity incentive awards each year.

 

 

Principal Elements of Compensation

 

Component

Average Percentage of TDC1

Role

Fixed

Base Salary

20%

• To provide a stable, reliable monthly income

 

• Set at levels that should generally comprise a low percentage of total target compensation

At Risk

Annual Incentive Compensation

22%

• To reward the achievement of quarterly and annual financial goals

 

• Links compensation to short-term performance since award amounts are determined after each quarter and the fiscal year based on actual results

 

• Time horizon: 1 year

Performance-Based Restricted Stock Units

47%

• Aligns executive interests with those of shareholders as potential value of awards increases or decreases with stock price

 

• Retains executive officers through multi-year vesting

 

• Time horizon: 4 years

Cash-based Long-Term Incentive Plan (LTIP) Awards

 

11%

• To reward achievement of longer-term high growth goals over a three-year performance period

 

• To retain executives through three-year performance period

 

• Time horizon: 3 years

 

1 

Percentages are based on the target amounts for the individual components described in the “Fiscal Year 2018 Base Salaries,” “Fiscal Year 2018 Annual Incentives,” and “Fiscal Year 2018 Long-Term Incentives” sections below.

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ExeCutive Compensation

 

Other

Management Stock Purchase Program

N/A

• Aligns executive interests with those of shareholders

 

• Helps executives to meet their mandated stock ownership requirements

Other Compensation

N/A

• To allow executive officers to participate in other employee benefit plans

 

• To provide select supplemental benefits that are competitive within the industry

 

• To provide opportunity for deferring income taxes on a portion of annual income

 

Fiscal Year 2018 Base Salaries

In June 2017, the Compensation Committee reviewed our NEOs’ base salaries compared to the median of base salaries for comparable executives among our peer group and to reflect individual performance in fiscal year 2017. In addition, the Company’s overall annual fiscal year 2018 merit increase guidance applicable to all employees was considered. After consideration the Committee decided to provide base salary adjustments for most NEOs equal to the Company’s average fiscal year 2018 raise percentage, as all salaries were in line with the competitive median of the Company’s peer group and the general industry market analysis. Due to timing of Ms. Gray’s hiring late in fiscal year 2017, the Committee determined that her salary was still reasonable for fiscal year 2018 and decided not to make an adjustment; at the time the offer of employment was made to Ms. Gray, the salary offered was evaluated against her current salary, the competitive median for her offered position, and other internal executive officer salaries.

 

The adjustments approved by the Compensation Committee became effective August 1, 2017.  

 

Name

FY2017

Base Salary ($)

FY2018

Base Salary ($)

Percentage Change

J.P. London

630,400

652,500

3.5%

 Kenneth Asbury

893,100

924,500

3.5%

 John S. Mengucci

608,800

630,100

3.5%

 Thomas A. Mutryn

516,100

534,200

3.5%

 DeEtte Gray

550,000

550,000

 

Fiscal Year 2018 Annual Incentives

 

Target Annual Incentives

 

Our annual incentive program is a cash incentive plan designed to motivate our executive officers to achieve pre-established quarterly and annual performance objectives. In establishing target annual incentives for fiscal year 2018, the Compensation Committee reviewed our NEOs’ total target cash compensation relative to our peers and made certain adjustments to more closely align our NEOs’ total target cash compensation to the Company’s peer group. The table below shows the fiscal year 2018 NEO target annual incentive levels that were approved by the Compensation Committee in June 2017.

 

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ExeCutive Compensation

 

Due to timing of Ms. Gray’s hiring late in fiscal year 2017, she did not participate in the fiscal year 2017 annual incentive plan. In determining fiscal year 2018 target annual incentives, the Committee determined that the target annual incentive offered to Ms. Gray at the time of her employment was still reasonable for fiscal year 2018 and decided not to make an adjustment; at the time the offer of employment was made to Ms. Gray, the target annual incentive offered was evaluated against her current compensation, the competitive incentive levels for her offered position, and other internal executive officer compensation.

 

Name

FY2017

Target Annual Incentive ($)

FY2018 Target Annual Incentive ($)

FY2018 Percentage of Base Salary

Percentage Change

J.P. London

527,500

552,500

85%

4.7%

 Kenneth Asbury

1,275,000

1,335,000

144%

4.7%

 John S. Mengucci

900,000

942,000

150%

4.7%

 Thomas A. Mutryn

500,000

520,000

97%

4.0%

DeEtte Gray

N/A

650,000

118%

N/A

 

Design

 

The annual incentive plan has both annual and quarterly components to ensure that executives are focused on performance throughout the fiscal year. These components are described below:

 

Component

Determination

Annual

Established at the beginning of the fiscal year and may be modified by the Compensation Committee during the fiscal year due to changes in business conditions (e.g., acquisitions, major corporate events, etc.). During fiscal year 2018, no modifications were made.

Quarterly

Established at the beginning of the fiscal year and reviewed at the beginning of each quarter, with each quarter representing 10% of the annual incentive program for each NEO.

 

Fiscal Year 2018 Targets

 

At the beginning of each fiscal year, the Compensation Committee establishes the performance metrics applicable to the annual and quarterly components of the annual incentive program. The performance metrics are selected to incent the Company’s growth and meet the needs of the Company’s shareholders, and are applied to each executive based on their responsibilities. For fiscal year 2018, the Compensation Committee selected the following performance metrics for our NEOs:

 

Performance Metric

Purpose

 

NATP

 

NATP is the primary indicator of our performance that is controlled by us and is used as the primary incentive metric to ensure our executives’ focus on overall profitability.  

EPS

EPS is a measure of profitability that is commonly used by our shareholders in evaluating our performance.

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ExeCutive Compensation

 

Performance Metric

Purpose

 

CACI Total Revenue

Revenue is our primary measure of growth which requires expansion of current business and the capture of new business. To incent organic growth, the Committee decided to evaluate whether to include acquired revenue in the measurement of this metric after the completion of each acquisition. For fiscal year 2018, CACI Total Revenue was computed in accordance with GAAP and included revenue from all acquisitions.

CACI Direct Labor

Direct labor is a measure of the amount of work performed by employees, as opposed to costs from other sources. It is also a measure of the quality of revenue, as increased direct labor can lead to organic growth and margin improvement.

 

The following is a summary of the performance metrics applicable to each NEO for the annual and quarterly components of the annual incentive program.

 

Annual

Quarterly

Metrics

Weight

Metrics

Weight

EPS

50%

NATP

50%

CACI Total Revenue

30%

CACI Total Revenue

30%

CACI Direct Labor

20%

CACI Direct Labor

20%

 

 

 

 

2018 Changes

For fiscal year 2018, the Compensation Committee replaced US Operations Organic Revenue with CACI Direct Labor as a metric in the annual incentive program. US Operations Organic Revenue was defined as revenue generated only from the Company’s US-based operations and excluded all revenue from US-based acquisitions through the second anniversary of such acquisition, as a growth incentive. The Committee determined that direct labor provided incentive to grow organically via the hiring of new employees, while also incenting margin expansion. Further, as the fiscal year 2018 revenue plan included organic growth, it was determined there was not a need to have a separate organic revenue metric.

 

 

 

After determining the appropriate performance metrics and weights applicable to the annual incentive program, the Compensation Committee establishes the target performance levels for each performance metric at the beginning of the fiscal year. The performance targets for each metric are established based on the Company’s five-year strategic plan, current business environment, review of the competitive market, historical performance against targets and the Company’s desire for growth.

 

Once performance targets are established for each performance metric, the Compensation Committee determines appropriate lower, or “Cut,” threshold levels for each metric and upper, or “Stretch,” threshold levels. For performance below Cut levels, no bonus is awarded. For performance at or above Cut levels, bonus payouts are prorated on a straight-line basis. For performance goals that represent profit metrics, bonus payouts for performance above Stretch levels are calculated as a percentage of the NEOs’ respective metric performance.  Total payment for the annual incentive program is capped at 250% of the target payout for each NEO.

 

The ranges between Cut, Target and Stretch thresholds are based upon multiple factors assessed by the Compensation Committee, including historical ranges and historical performance against Target, Cut, and Stretch thresholds. For fiscal year 2018, for NATP and EPS, the Committee set the Cut thresholds at 94% of Target and Stretch thresholds at 104% of Target. For CACI Total Revenue and Direct Labor, the Committee set the Cut thresholds at 96% of Target and Stretch thresholds at 104% of Target. The higher Cut threshold for Total Revenue and Direct Labor was set to incent management to achieve targets for organic growth, as a 94% threshold would have provided an incentive payout even for a reduction in performance compared to fiscal year 2017.

 

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ExeCutive Compensation

 

 

Fiscal Year 2018 Performance

 

Performance relative to each metric used in calculating our NEOs’ annual incentive payout is delineated below for fiscal year 2018 (in millions, except for EPS). The performance metrics do not include the impact of the TCJA, which was enacted during fiscal year 2018; the targets were set without anticipation of the TCJA, and the benefits of the TCJA were removed from the actual results when calculating incentive amounts. No benefit was provided to NEO payouts from the increases to NATP and EPS that resulted from the TCJA.

 

 

Annual Metrics

Target

Actual

Result

NATP

$173.4

$197.9

Above Stretch

EPS

$6.86

$7.84

Above Stretch

CACI Total Revenue

$4,419

$4,468

Between Target and Stretch

CACI Direct Labor

$1,344

$1,333

Between Cut and Target

 

Performance relative to each quarterly metric used in calculating our NEOs’ annual incentive payout is delineated below on a quarterly basis for fiscal year 2018 (in millions).

 

 

CACI NATP ($)

CACI Total Revenue ($)

CACI Direct Labor ($)

Q1

Target

34.4

1,083

334.2

Actual

42.0

1,086

321.6

Result

Above Stretch

Between Target and Stretch

Between Cut and Target

Q2

Target

39.2

1,107

332.8

Actual

50.5

1,088

321.6

Result

Above Stretch

Between Cut and Target

Between Cut and Target

Q3

Target

46.7

1,098

331.6

Actual

58.8

1,124

341.1

Result

Above Stretch

Between Target and Stretch

Between Target and Stretch

Q4

Target

53.2

1,131

343.0

Actual

46.5

1,170

349.2

Result

Below Cut

Between Target and Stretch

Between Target and Stretch

 

In consideration of the performance outlined above, the table below provides a summary of the annual incentives actually earned by our NEOs. The differences in the payouts as a percentage of target despite all NEOs having the same metrics is due to the impact of performing above Stretch for the NATP metric. Dr. London and Mr. Asbury receive 2.0% of the amount that NATP exceeds the Stretch level up to a total earned annual incentive of 250% of their target payout, and the other NEOs receive 1.5% of the amount that NATP exceeds the Stretch level up to a total earned annual incentive of 250% of their target payout.

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ExeCutive Compensation

 

 

Name

Total Target Annual Incentive ($)

Total Earned Annual Incentive ($)

Payout as a

Percentage of Target

J.P. London

552,500

1,381,250

250%

 Kenneth Asbury

1,335,000

2,529,666

189%

 John S. Mengucci

942,000

1,824,317

194%

 Thomas A. Mutryn

520,000

1,300,000

250%

DeEtte Gray

650,000

1,462,176

225%

 

Fiscal Year 2018 Long-Term Incentives

 

Performance-Based Restricted Stock Units (PRSUs)

A significant portion of our NEOs’ TDC is granted in the form of PRSUs that are designed to improve shareholder value and contribute to the growth and financial success of the Company. To receive any shares granted under the award, the Company must reach a minimum one-year EPS threshold. If the minimum threshold is met, then any earned shares are earned over a three-year performance period with the number of shares earned each year adjusted by the percentage growth or decline from the average stock price over 90 calendar days immediately preceding the grant to the average stock price over 90 calendar days immediately preceding the first, second and third anniversaries of the grant date, subject to an overall cap of 200% of the target number of PRSUs granted. Once earned, the shares vest ratably on the third and fourth anniversaries of the grant date. Below is a hypothetical example of how PRSUs are earned and vested:

 

Grant: 3,000 Shares

(all earned amounts assume 10% annual stock price growth)

 

One-Year Trigger

1st Grant

Anniversary

2nd Grant Anniversary

3rd Grant Anniversary

4th Grant Anniversary

EPS Target Achieved

1,100 Earned

1,200 Earned

1,300 Earned

 

 

 

1,800 Vest

1,800 Vest

EPS Target Not Achieved

N/A

N/A

N/A

N/A

 

The EPS threshold for fiscal year 2018 was set at $5.00. This was based on anticipated potential delays from new business awards compared to what was in the fiscal year 2018 plan, which was considered to be a realistic possibility given the dynamics of the government services industry.

 

During the annual review of the equity program, the Compensation Committee considered other formats, such as stock options, stock appreciation rights, non-performance-based RSUs, performance-based equity that leverages other financial metrics approved within the CACI 2016 Amended and Restated Incentive Compensation Plan, and performance-based equity based on relative performance metrics against a defined peer group or stock market index. Regarding the use of relative performance metrics, it was determined that the existing and anticipated turnover of companies in the competitive market due to acquisitions, spin-offs, privatization, new public offerings and other similar transactions made the measurement over a three-year period unfeasible at this time. Further, feedback from our investors in recent years about the potential usage of a stock market index for a relative performance metric indicated that such a metric would receive little support.

 

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ExeCutive Compensation

 

The Compensation Committee used market data provided by its compensation consultants to set the dollar value of equity for the NEOs. Based on this review, the Compensation Committee made certain adjustments to align our NEOs with the median of our peer group.

 

For Dr. London, it was determined that his equity compensation was significantly below that of the peer group and his target equity value merited an increase to bring his compensation in line with other comparable executives.

 

Due to the timing of Ms. Gray’s hiring, she did not participate in the fiscal year 2017 PRSU grant.

 

Name

2017 Target Equity Value ($)

2018 Target

Equity Value ($)

Percentage Change

J.P. London

935,000

1,100,000

17.7%

 Kenneth Asbury

3,300,000

3,505,000

6.2%

 John S. Mengucci

1,450,000

1,500,000

3.4%

 Thomas A. Mutryn

1,100,000

1,100,000

DeEtte Gray

N/A

900,000

N/A

 

Special PRSU Grant

During fiscal year 2018 the Compensation Committee approved a special PRSU grant to Mr. Mengucci. This grant was valued at $5,000,000 at the time of grant, and was provided to help ensure Mr. Mengucci’s retention, while also incenting performance. The grant will be earned only upon satisfying a defined minimum EPS threshold at the conclusion of Company’s fiscal year 2019. If the performance condition is satisfied, the PRSUs will then vest ratably on the second, third, and fourth anniversary of the grant.

 

Long-Term Incentive Plan (LTIP) (Cash)

 

The LTIP is a separate plan, independent of other incentive programs administered by the Compensation Committee.  The LTIP is a cash-based plan, designed to incent long-term growth and profitability, with performance metrics set at very challenging levels. The Compensation Committee selected NATP and revenue as performance metrics for the LTIP to incent higher levels of long-term growth along these important metrics. Although performance under our annual incentive plan is evaluated along these same metrics, the LTIP targets are set well above the annual incentive plan levels. For fiscal year 2018, metrics were set 6% higher than the annual incentive plan target (a total of 10% above the Company’s plan).

 

 

The Compensation Committee has sole discretion in selecting participants in the LTIP, with participation intended to be limited to people most directly able to impact the achievement of the metrics in the line, business development, and key staff organizations. Among the NEOs, Mr. Mengucci, Mr. Mutryn and Ms. Gray participated in the LTIP for fiscal year 2018.

 

 

The cash incentives under the LTIP are distributed at the end of a three-year period, with a third of the value earned on a one-year performance period, a third of the value earned on a cumulative two-year performance period and a third of the value earned on a cumulative three-year performance period that are each established at the time the target award is determined. To ensure that our participating NEOs are challenged, the performance required for payouts under the LTIP are set beyond the Stretch levels established under the annual incentive plan.

 

37


ExeCutive Compensation

 

The Compensation Committee generally sets the LTIP target value for each participant to match his or her aggregate annual incentive plan target bonus levels over the thee-year period. As the metrics were intended to have a high level of difficulty to achieve, the Compensation Committee determined that market data provided by its compensation consultants did not directly apply to the determination of the bonus potential. For Mr. Mengucci, Mr. Mutryn, and Ms. Gray, the Compensation Committee set their annual bonus potential equal to:

 

Name

 

Target Aggregate

3-Year LTIP Value ($)

 John S. Mengucci

 

2,826,000

 Thomas A. Mutryn

 

1,560,000

DeEtte Gray

 

1,950,000

 

At the conclusion of each fiscal year after grant, CACI’s performance against the metrics will be measured. If both the NATP and revenue metrics are achieved for that fiscal year, each participant would earn 100% of their LTIP potential for that year. If only NATP or revenue is achieved, only a portion of the annual potential would be earned. The performance metrics, weightings and targets for the 2018 performance periods for the 2016 LTIP, 2017 LTIP, and the 2018 LTIP are below (in millions):

 

Metric

2016-2018 LTIP:

Metric Weights

 

2016 LTIP:

FY18 Period Target ($)

2017 LTIP:

FY18 Period Target ($)

2018 LTIP:

FY18 Period Target ($)

NATP

90%

190.1

189.0

190.8

Revenue

10%

3,998

4,569

4,861

 

Fiscal year 2018 performance relative to the 2016 LTIP, 2017 LTIP, and the 2018 LTIP is set forth below (in millions). For the 2016 LTIP plan, performance was above both thresholds, resulting in 100% of the annual potential earned for each eligible participant. For the 2017 LTIP and 2018 LTIP, only NATP performance was above the threshold, resulting in 90% of the annual potential earned for each eligible participant under each plan.

 

Metric

FY18 Results ($)

 

2016 LTIP

FY18 Period Payout:

2017 LTIP

FY18 Period Payout:

2018 LTIP

FY18 Period Payout:

NATP

197.9

90%

90%

90%

Revenue

4,468

10%

 

 

Other Compensation Policies and Practices

 

Benefits and Executive Perquisites

 

All NEOs are entitled to receive a Company-provided automobile or an allowance to obtain an automobile. In fiscal year 2018 the Compensation Committee also approved a new benefit for Dr. London to receive a full-time car service; this benefit will take effect during fiscal year 2019. All automobile benefits are fully taxable as ordinary income; no tax gross-up is provided.

 

38


ExeCutive Compensation

 

All NEOs are also eligible for annual financial planning services. The value of these services are also fully taxable as ordinary income; no tax gross-up is provided.

 

In addition, we provide a $25,000 discretionary benefit allowance per calendar year to the President and Chief Executive Officer and to the Chairman of the Board and Executive Chairman. This allowance can be used for business or personal expenses. All personal benefit received from this allowance is fully taxable as ordinary income; no tax gross-up is provided.

 

Furthermore, Dr. London has a medical agreement that provides lifetime participation in the Company’s executive medical plan for him and his spouse to the extent permitted by law, with such participation on the same basis that existed just prior to any merger, consolidation, or change in control of the Company.

 

Executives are also permitted to participate in the Company’s other employee benefit plans on substantially the same terms as other employees. For example, the Company makes matching contributions to our 401(k) plan based on employee contributions, and executives receive the same benefit.

 

All amounts related to perquisites for NEOs are disclosed in column (i) of the Summary Compensation Table, along with details on their valuations.

 

Severance and Change in Control Benefits

 

The Company currently maintains severance agreements with all NEOs except for Ms. Gray, for whom the Committee anticipates completing a severance agreement in fiscal year 2019. The purpose of the agreements is to provide those executives with a degree of security and to mitigate concern that they might have regarding their continued employment prior to or following a change in control, thereby allowing the executive to focus their undivided attention to serving the interests of the Company and our shareholders. The Company believes that appropriate severance arrangements are necessary to attract and retain these key executives and are an important part of a competitive overall compensation program for the NEOs.

 

In the event of a change in control, the severance benefits are generally payable only upon a “double trigger,” meaning that severance benefits are triggered when an eligible executive is involuntarily terminated without cause by the Company or resigns for “good reason” within one year following a change in control. This “double trigger” provision was implemented to be consistent with good market practices. We believe this program encourages retention in the face of an actual or potential change in control and aligns executive and shareholder interests. Furthermore, the program allows top executives to review corporate transactions that are in the best interests of our shareholders without concern over whether the transactions may adversely impact the executive’s employment.

 

Per the terms of his employment agreement, Dr. London is entitled to severance benefits if he voluntarily terminates his employment for any reason within one year of a change in control; this term was negotiated in good faith with Dr. London in 2007 and was part of prior employment agreements, and the Compensation Committee has decided that new employment agreements will contain a “double trigger” provision as outlined in the preceding paragraph.

 

All equity awards granted since 2010 have provided for “double trigger” vesting acceleration in the event of a change in control, under which vesting accelerates only upon a change in control and involuntary termination without cause or resignation for good reason within one year after the change of control.

 

The following separation terms also apply to the Company’s long-term incentive programs:

 

 

RSU Grants:

Grant recipients over age 62 as of July 1, 2008 (“grandfathered employees”) who retire at or above age 65 vest in all RSUs upon retirement unless the RSUs are still in the first year of their measurement period, in which case they are forfeited upon retirement. Non-grandfathered executives who retire at age 62 or older vest in a prorated portion of the RSUs based upon their number of months of service after the grant date divided by the full vesting timeframe; the numbers of RSUs received are still subject to the results of the performance conditions. A grantee

39


ExeCutive Compensation

 

 

terminated without cause is entitled to the same treatment as a non-grandfathered executive retiring at age 62 or older. Dr. London is the only grandfathered executive among the NEOs.

 

 

LTIP:

In the event of a change in control during the three-year performance period, participants will receive payment for bonuses earned for completed fiscal years as well as for the annual bonus potential for the current fiscal year at the time the change in control event is legally consummated and binding (subject to IRS regulations or other laws/regulations).

 

Calculations for various termination scenarios are included in the “Potential Payments on Termination or Change in Control” section of this proxy statement.

 

Retirement Plans

 

The Company offers a non-qualified deferred compensation plan to encourage employees to save for their retirement. Eligible employees, which include all NEOs, may elect to contribute up to 50% of their U.S. base salary and 100% of their U.S. bonuses and commissions to this plan on a pre-tax basis. The Company contributes 5% of all cash compensation over the compensation limit in IRC section 401(a)(17) to participants, subject to plan vesting conditions, and may make a supplemental discretionary contribution to a participant’s account in any amount it elects. No discretionary contributions were made in fiscal year 2018.

 

In the past, Supplemental Executive Retirement Plans (“SERP”) have been provided to NEOs to offset the loss of benefits from previous employers to acquire their services and are, therefore, consistent with the Company’s philosophy of attracting and retaining critical talent. Mr. Mengucci was offered a SERP as part of his employment offer, and it will become effective upon its finalization. The Company provides no other executive a SERP and does not anticipate doing so in the future.

 

Management Stock Purchase Plan

 

The Company offers a Management Stock Purchase Plan (“MSPP”) to promote the long-term growth and profitability of the Company by providing executives with incentives to improve shareholder value and to contribute to the growth and financial success of the Company. The MSPP also helps executives to meet their mandated stock ownership requirements. The Board believes that the MSPP serves these goals, encouraging executives to convert a higher percentage of their cash compensation into Company equity.

 

The MSPP provides for equity ownership in the Company by senior officers by allowing the voluntary deferral of up to 100% of the annual portion of their annual incentive plan compensation into RSUs. All deferred shares are bought at a discount of up to 15%, as determined annually by the Compensation Committee, of fair market value. The Company may grant matching awards in an amount not to exceed 25% of the participant’s deferrals and subject to such vesting or other restrictions or conditions as the Compensation Committee determines.

 

The amount of the discount to fair market value and matching grant is determined by the Compensation Committee no later than December 31st of the fiscal year in which the bonus is earned (or as otherwise specified in the MSPP for matching awards that qualify under IRC section 162(m)). During fiscal year 2018, the Compensation Committee approved a 15% discount with no matching.

 

The benefit provided from MSPP purchases for each NEO is listed in column (i) of the Summary Compensation Table.

 

40


ExeCutive Compensation

 

Stock Ownership Requirements

 

The Compensation Committee maintains executive stock ownership requirements for its senior officers to focus those executives on the long-term growth in value of the Company and to ensure they act as owners of the Company. The stock ownership requirements are based on a multiple of the executive’s salary as set forth below and the number of shares required to be held is determined annually based on the 90-day average stock price on July 1. The required multiple for each executive is reviewed annually by the Compensation Committee to ensure that it provides enough incentive to properly align the interests of senior management with those of our shareholders.

 

Until an executive meets the required number of shares, they are limited with respect to the number of shares they are allowed to sell, and are only allowed to sell one-half of the vested RSUs remaining after payment of taxes (standard practice is to sell a portion of shares that vest to cover the tax burden caused by the vesting); the other one-half that must be retained is used to determine the interim ownership requirement until the full number of shares is reached, with each successive vesting being added to the prior interim requirement in order to establish the new requirement.

 

Based on the requirements, the full number of shares required to be held by each of our NEOs, the multiple of each executive’s base salary full ownership would represent, and the requirement as of July 1, 2018 is in the table below. The Compensation Committee believes these salary multiples are robust and above comparable peer levels.

 

Name

Full Share Requirement

 

Multiple of Salary

Requirement as of July 1, 2018

J.P. London

36,300

7x

36,300

 Kenneth Asbury

58,700

8x

58,700

 John S. Mengucci

35,100

7x

16,951

 Thomas A. Mutryn

29,700

7x

29,700

DeEtte Gray

31,700

7x

 

Stockholdings are measured annually as of July 1st to determine compliance with the requirements, which are based upon the prior year’s level plus one-half of all vested restricted stock and/or restricted stock units after taxes are withheld since the prior July 1st. Only fully owned shares count in the measurement; unvested restricted stock and restricted stock units do not count, nor do any other unvested and/or unexercised instruments.

 

To encourage compliance, a noncompliant senior officer is required to participate in the MSPP with 100% of the annual portion of their annual incentive plan compensation going toward the purchase of RSUs until such time that they meet the required holding level.

 

All NEOs are in compliance with their respective stock ownership requirements as of July 1, 2018.

 

Compensation Clawback Policy

 

We maintain a formal “clawback” policy for incentive awards that is broader in its reach than that imposed by Section 304 of the Sarbanes-Oxley Act (SOX). The policy covers incentive awards to “officers” (as defined in Section 16 of the Exchange Act), and was adopted in fiscal year 2010. Under the policy, in the event of a restatement of previously reported financial results, the Compensation Committee may require reimbursement of the incremental portion of incentive awards paid to executive officers in excess of the awards that should properly have been paid based on the restated financial results.

 

41


ExeCutive Compensation

 

By way of comparison, the clawback imposed by Section 304 of SOX (which applies to CACI) is limited to the CEO and CFO and is based on material noncompliance by the issuer, as a result of misconduct, with any financial reporting obligation under the federal securities laws where such noncompliance requires the issuer to restate its financials. The SOX provision looks back one year and requires the issuer to recover all bonus or incentive-based or equity-based compensation paid to the CEO and CFO (in cases of misconduct). The Securities and Exchange Commission enforces Section 304; there is no private right of action.

 

The Compensation Committee is monitoring this policy to ensure that it remains consistent with applicable laws, including emerging requirements under the Dodd-Frank Wall Street Reform and Consumer Protection Act.

 

Impact of Regulatory Requirements

 

The Compensation Committee seeks regular updates on changes in regulations affecting compensation and how they impact executive compensation. The Compensation Committee considers applicable regulatory requirements when making compensation decisions and seeks to ensure that Company compensation plans continue to meet such requirements.

 

Prior to its amendment by the TCJA, which was enacted December 22, 2017, section 162(m) of the Internal Revenue Code of 1986, as amended (“Section 162(m)”), disallowed a tax deduction to public companies for compensation paid in excess of $1 million to “covered employees” under Section 162(m) (generally, such company’s chief executive officer and its three other highest paid executive officers other than its chief financial officer). Prior to this amendment, there was an exception to this $1 million limitation for performance-based compensation if certain requirements were met. The Compensation Committee has historically designed its compensation programs based on its belief that a substantial portion of the compensation payable to NEOs should be based on the achievement of performance-based targets or otherwise be designed with the intent that such compensation qualify as deductible performance-based compensation under Section 162(m).

 

The TCJA generally amended Section 162(m) to eliminate the exception for performance-based compensation, effective for taxable years following December 31, 2017.  The $1 million compensation limit was also expanded to apply to a public company’s chief financial officer and apply to certain individuals who were covered employees in years other than the then-current taxable year.  Although certain transition relief may apply with respect to compensation paid pursuant to certain contracts in effect as of November 2, 2017, ambiguities in the TCJA prevent the Compensation Committee from being able to definitively determine what compensation, if any, payable to the covered employees in excess of $1 million will be deductible in future years.  Interpretations of and changes in applicable tax laws and regulations as well as other factors beyond the control of the Compensation Committee can affect deductibility of compensation, and there can be no assurance that compensation paid to our executive officers who are covered by Section 162(m) will be deductible. As in prior years, the Compensation Committee will continue to take into account the tax and accounting implications (including with respect to the expected lack of deductibility under the revised Section 162(m)) when making compensation decisions, but reserves its right to make compensation decisions based on other factors as well if the Compensation Committee determines it is in its best interests to do so.  Further, taking into account the elimination of the exception for performance-based compensation, the Compensation Committee may determine to make changes or amendments to its existing compensation programs in order to revise aspects of our programs that were initially designed to comply with Section 162(m) but that may no longer serve as an appropriate incentive measure for our executive officers.

 

Risk Assessment

 

The Company has a Chief Risk Officer and among his tasks are attending meetings of the Compensation Committee and performing an annual assessment of the Company’s overall compensation risk profile. The Compensation Committee also engages FW Cook to perform an independent risk assessment of the Company’s executive and non-executive compensation programs.

 

42


ExeCutive Compensation

 

As a part of these risk assessments, the Chief Risk Officer and FW Cook have made the following findings about CACI’s compensation programs:

 

 

the Board and the Compensation Committee exercise close oversight over the performance measures utilized by the Annual Incentive Plan and the Long-Term Incentive Plan, which in combination serve to balance short-term and long-term performance requirements, and enhance shareholder value;

 

the performance objectives of the plans are linked such that achievement of annual incentive plan measures serves to enhance the performance of the Company while also supporting the goals established for the long-term incentive plan;

 

the balance of total compensation is more heavily weighted to long-term incentives, and increasing the stock price over the long-term provides the maximum incentive value; and

 

the Company has a rigorous system of internal controls designed to prevent any individual employee from creating adverse material risk in pursuit of short- or long-term compensation.  For example, the Board must approve all capital outlays of $10 million or more, as well as all acquisitions and divestitures of $5 million or more.

 

Based on these analyses, the Compensation Committee believes that the Company’s compensation programs do not encourage excessive risk-taking.

 

Compensation Committee Report

The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis for the fiscal year ended June 30, 2018. Based upon such review and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis for the fiscal year ended June 30, 2018 be included in the Company’s proxy statement on Schedule 14A filed with the Securities and Exchange Commission.

RESPECTFULLY SUBMITTED BY THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS

Charles P. Revoile, Chair

Michael A. Daniels

James S. Gilmore III

William L. Jews

Gregory G. Johnson

James L. Pavitt

43


 

 

Executive Compensation Tables

Summary Compensation Table for Fiscal Year 2018

The following table summarizes the compensation of the NEOs for the fiscal years 2018, 2017 and 2016. Annual compensation includes amounts awarded to, earned by, or paid to the Company’s Chief Executive Officer, Chief Financial Officer, and the three other highest paid executive officers, including amounts deferred at an Executive Officer’s election.

Name and Principal Position

 

Year

 

Salary(1)

($)

 

Bonus(2)
($)

 

Stock
Awards(3)
($)

 

Non-Equity
Incentive Plan
Compensation(4)
($)

 

All Other
Compensation(5)
($)

 

Total
($)

J.P. London

Chairman of the Board and

Executive Chairman

 

 

2018

 

650,658

 

 

1,099,351

 

1,381,250

 

254,135

 

3,385,394

 

2017

 

627,333

 

 

934,788

 

726,045

 

200,161

 

2,488,327

 

2016

 

609,000

 

 

899,796

 

566,465

 

182,583

 

2,257,844

Kenneth Asbury

President and Chief Executive Officer

 

 

 

2018

 

921,883

 

 

3,504,468

 

2,529,694

 

165,719

 

7,121,764

 

2017

 

888,750

 

 

3,299,461

 

1,511,841

 

129,990

 

5,830,042

 

2016

 

862,750

 

 

 

1,187,215

 

102,194

 

2,152,159

John S. Mengucci

Chief Operating Officer

 

 

2018

 

628,325

 

 

6,499,953

 

4,327,137

 

178,649

 

11,634,064

 

2017

 

605,933

 

 

1,449,924

 

1,999,747

 

128,969

 

4,184,473

 

2016

 

583,250

 

 

1,400,025

 

843,503

 

135,261

 

2,962,039

Thomas A. Mutryn

Executive Vice President,

Chief Financial Officer and Treasurer

 

 

2018

 

532,692

 

 

1,099,351

 

2,658,000

 

158,817

 

4,448,860

 

2017

 

513,583

 

 

1,099,820

 

1,130,578

 

124,199

 

2,868,180

 

2016

 

496,750

 

 

1,100,349

 

499,047

 

114,475

 

2,210,621

DeEtte Gray

 

2018

 

550,000

 

 

900,581

 

2,047,200

 

56,755

 

3,554,536

President of U.S. Operations

 

2017

 

45,833

 

250,000

 

1,700,078

 

 

 

1,995,911

(1)

Amounts reported in the Salary column represent base salary earned in fiscal years 2018, 2017, or 2016.

(2)

The Company made a $250,000 sign-on bonus to Ms. Gray in fiscal year 2017. The Company did not make any other non-performance based bonus payments to any NEOs in fiscal years 2018, 2017, or 2016.

(3)

The amounts reported in the Stock Awards column represent the aggregate grant date fair value of each restricted stock unit granted during such year, as computed in accordance with ASC 718. See Note 21 of the Company’s audited financial statements for the fiscal year ended June 30, 2018, included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on August 20, 2018. RSUs awarded to all NEOs were in the form of performance-based RSUs (PRSUs). The grant date fair value of Mr. Mengucci’s November 28, 2017 grant was equal to the closing stock price on that day ($129.85). The grant date fair value of all other PRSU awards was calculated using the Monte Carlo simulation method. Mr. Mengucci’s November 28, 2017 grant is based on the Company’s EPS performance in the year ending June 30, 2019. All other PRSUs granted are based on the Company’s performance during the year ended June 30, 2018 and the Company’s average stock price for the 90-day period ended September 15, 2018 as compared to the Company’s average stock price for the 90-day period ended September 15, 2017. The award is currently at 143% of the target award; if we achieve maximum performance conditions for this grant (200% of the target amount of PRSUs due to growth in the Company’s stock price), then the cash value of the resulting awards would be 332% of the amounts shown in the table. Based on the Company’s performance during the year ended June 30, 2017 and the Company’s average stock price for the 90-day period ended September 30, 2018 and September 30, 2017 as compared to the Company’s average stock price for the 90 day period ended September 30, 2016, the award is currently at 163% of the target award; if we achieve maximum performance conditions for this grant (200% of the target amount of PRSUs due to growth in the Company’s stock price), then the cash value of the resulting awards would be 328% of the amounts shown in the table. Based on the Company’s performance during the year ended June 30, 2016 and the Company’s average stock price for the 90-day period ended September 18, 2018, September 18, 2017 and September 18, 2016 as compared to the Company’s average stock price for the 90-day period ended September 18, 2015, the PRSUs granted in fiscal year 2016 resulted in 167% of the target award level.

(4)

Amounts reported in the Non-Equity Incentive Plan Compensation column represent performance-based incentive compensation earned in fiscal years 2018, 2017, or 2016.  Mr. Mengucci’s, Mr. Mutryn’s and Ms. Gray’s Non-Equity Incentive Plan Compensation includes amounts earned under the LTIP that will be paid in fiscal years 2019 and 2020. For more information regarding these awards and the amounts thereof, see “Compensation Discussion and Analysis – Fiscal Year 2018 Annual Incentives” and “- Fiscal Year 2018 Long-Term Incentives – Long Term Incentive Plan (LTIP)(Cash).”

(5)

The table below describes the elements included in All Other Compensation:

 

44


COMPENSATION TABLES

Name

 

Non-Qualified
Deferred
Compensation
Contribution(a)

($)

 

Vacation
Sold Back
to
Company(b)

($)

 

Long-Term
Care
Premiums(c)

($)

 

401(k)
Match(d)

($)

 

MSPP
Discount(e)

($)

 

Perquisites(f)

($)

 

Dr. London

 

78,464

 

74,875

 

11,923

 

8,100

 

 

80,773

 

Mr. Asbury

 

129,368

 

 

4,165

 

8,100

 

 

24,086

 

Mr. Mengucci

 

91,554

 

54,247

 

2,288

 

8,100

 

 

22,460

 

Mr. Mutryn

 

62,062

 

61,402

 

3,379

 

8,100

 

 

23,874

 

Ms. Gray

 

46,058

 

 

  —

 

  8,100

 

 

2,597

 

 

(a)

Represents the Company’s contribution, net of forfeitures, of 5% of compensation in excess of the limit provided in IRC section 401(a)(17), which limit may be adjusted annually.

 

(b)

Represents cash-out of vacation accrual balance.

 

(c)

Represents premiums paid by the Company for a long-term care insurance policy.

 

(d)

Represents a 50% Company match of the first 6% of contributions by the executive officer under the Company’s 401(k) plan (401(k) Match).

 

(e)

Represents the value of the discount on the stock price at the grant date (15% for fiscal year 2018) for purchases under the Company’s Management Stock Purchase Plan.

 

(f)

For Dr. London, includes a perquisite allowance of $25,000, tax and investment services of $19,460 and automobile expenses of $36,313;

For Mr. Asbury, includes automobile expenses of $24,086; For Mr. Mengucci, includes tax and investment services of $17,772 and automobile expenses of $4,688; For Mr. Mutryn, includes automobile expenses of $23,874; For Ms. Gray, includes automobile expenses of $2,597.

 

 

Grants of Plan-Based Awards for Fiscal Year 2018

 

 

 

 

Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards(1)

 

Estimated Future Payouts
Under Equity Incentive
Plan Awards(2)

 

All Other Stock Awards: Number of Shares of Stock or Units

Grant Date
Fair Value
of Stock

Name

 

Grant
Date

 

Threshold

($)(3)

 

Target

($)

 

Maximum

($)

 

Threshold

(#)(3)

 

Target

(#)

 

Maximum

(#)

 

and
Option
Awards
($)(4)

Dr. London

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

     Bonus

 

N/A

 

152,000

 

552,500

 

1,381,250

 

 

 

 

     Performance RSUs

 

9/15/2017

 

 

 

 

 

7,190

 

14,380

 

1,099,351

Mr. Asbury

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

     Bonus

 

N/A

 

367,000

 

1,335,000

 

3,337,500

 

 

 

 

     Performance RSUs

 

9/15/2017

 

 

 

 

 

22,920

 

45,840

 

3,504,468

Mr. Mengucci

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

     Bonus

 

N/A

 

259,000

 

942,000

 

2,355,000  

 

 

 

 

     LTIP

 

N/A

 

 

2,826,000

 

2,826,000

 

 

 

 

 

 

 

 

     Performance RSUs

 

9/15/2017

 

 

 

 

 

9,810

 

19,620

 

1,499,949

     Performance RSUs

 

11/28/2017

 

 

 

 

 

38,506

 

38,506

 

5,000,004

Mr. Mutryn

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

     Bonus

 

N/A

 

143,000

 

520,000

 

1,300,000

 

 

 

 

     LTIP

 

N/A

 

 

1,560,000

 

1,560,000

 

 

 

 

     Performance RSUs

 

9/15/2017

 

 

 

 

 

7,190

 

14,380

 

1,099,351

Ms. Gray(5)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

     Bonus

 

N/A

 

178,750

 

650,000

 

1,625,000

 

 

 

 

     LTIP

 

N/A

 

 

1,950,000

 

1,950,000

 

 

 

 

     Performance RSUs

 

9/15/2017

 

 

 

 

 

5,890

 

11,780

 

900,581

(1)

These amounts represent potential payouts under the 2018 annual incentive plan and 2018 LTIP.  With respect to the 2018 annual incentive plan, for performance above Stretch, NEOs are entitled to additional bonus payouts calculated as a percentage of the Company’s NATP above Stretch, up to a cap of 250% of the Target amount.  Actual payouts earned are reflected in the Non-Equity Incentive Plan Compensation column of the Summary Compensation Table.

(2)

These amounts represent PRSU grants to NEOs in fiscal year 2018.  

(3)

There are no threshold performance levels under the 2018 LTIP or for the PRSU grants to the NEOs in fiscal year 2018, as described in the Compensation Discussion and Analysis.

45


COMPENSATION TABLES

(4)

Amounts represent the grant date fair value of the stock awards granted to the named executive officer during fiscal year 2018 determined pursuant to ASC 718.

 

Outstanding Equity Awards at Fiscal Year-End

 

 

 

 

 

Stock Awards

Name

 

Grant Date

 

 

Number
of Shares
or Units of
Stock
That
Have Not
Vested
(#)

 

Market
Value
of Shares or
Units of
Stock
That Have
Not Vested
($)(1)

 

Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units
or Other
Rights That
Have Not
Vested
(#)

 

Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights That Have
Not Vested
($)

Dr. London

 

9/23/2014

 

 

7,463

(2