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Section 1: DEF 14A (SPIRIT AEROSYSTEMS HOLDINGS, INC. - DEF 14A)

SPIRIT AEROSYSTEMS HOLDINGS, INC. - DEF 14A

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

SCHEDULE 14A

 

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.           )

 

 Filed by the Registrant  Filed by a Party other than the Registrant

 

Check the appropriate box:
Preliminary Proxy Statement
Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
Definitive Proxy Statement
Definitive Additional Materials
Soliciting Material under §240.14a-12

 

SPIRIT AEROSYSTEMS HOLDINGS, 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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DEAR FELLOW
STOCKHOLDERS

 

 

 

Thomas C. Gentile III

PRESIDENT AND

CHIEF EXECUTIVE OFFICER

 

 

 

 

 

 

Robert D. Johnson

CHAIRMAN

 

March 11, 2019

On behalf of the Board of Directors, we are delighted to invite you to attend the 2019 Annual Meeting of Stockholders (the “Annual Meeting”) of Spirit AeroSystems Holdings, Inc. (the “Company” or “Spirit”). Details of the business to be conducted at the Annual Meeting are included in the attached Notice of Annual Meeting of Stockholders and accompanying Proxy Statement.

While 2018 was a challenging year for Spirit, it was also a time of great learning and adaptation that has prepared us well for success in 2019 and beyond. The majority of issues impacted the Boeing 737 program, driven by rate increases, supplier limitations, and a learning curve transitioning to the 737 MAX. Likewise, on the A350 XWB program, we experienced weather delays and technology complications at our plant in Kinston, N.C. However, thanks to tremendous efforts on all programs by our employees and suppliers, we ended the year back on our master delivery schedule and met our financial targets.

Highlights of 2018 include:

Reported revenue of $7.222 billion, up 3% from 2017

Delivered on our 2018 capital deployment plan, returning significant value to investors through share repurchases and dividends (including a 20% increase in the quarterly cash dividend amount)

Received multiple innovation and supplier awards from our customers

Pursued commercial, defense, and fabrication growth opportunities

Increased research and development efforts and our use of digital technologies

Signed a new long-term contract with Boeing covering pricing on a range of programs into the next decade

Engaged with our stockholders and other constituents on various items including strategy, capital deployment, corporate governance, and operational performance

In 2019, we will be challenged to continue to meet rate increases and deliver on time and with high quality on all our programs, all while being relentless in safety and cost control. Yet, we remain confident in our ability to have a successful year.

We thank you for your continued support of Spirit and look forward to seeing you at the Annual Meeting.


 

Notice of
2019 Annual Meeting of Stockholders

 

3801 S. Oliver St.
Wichita, KS 67210-2112

 

March 11, 2019

 

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS

FOR THE STOCKHOLDER MEETING TO BE HELD ON APRIL 24, 2019

 

The Proxy Statement and Annual Report are available at http://www.proxyvote.com

 

The 2019 Annual Meeting of Stockholders (the “Annual Meeting”) of Spirit AeroSystems Holdings, Inc. (“Spirit” or the “Company”) will be held:

 

WEDNESDAY, APRIL 24, 2019

11:00 a.m. Eastern Time

Fairmont Hotel, Dumbarton Room

2401 M St. NW

Washington, DC 20037

 

Items of business include:

1.

Election of nine nominees as directors;

2.

Advisory vote to approve the compensation of the Company’s named executive officers;

3.

Ratification of the selection of Ernst & Young LLP as the Company’s independent registered public accounting firm for 2019;

4.

The stockholder proposal regarding enhancing proxy access described in this Proxy Statement, if properly presented at the meeting; and

5.

The transaction of any other business that properly comes before the meeting.

 

Stockholders of record of our Class A Common Stock (the “Common Stock”) as of February 25, 2019, are entitled to receive notice of, and may vote at, the Annual Meeting. We are furnishing proxy materials to our stockholders primarily over the internet rather than mailing paper copies. On March 11, 2019, we commenced distributing to our stockholders a Notice Regarding the Availability of Proxy Materials (the “Notice”) or a paper copy of the proxy materials and our Annual Report, along with a proxy card or voting information form. The Notice contains instructions on how to access and review the proxy materials, including this Proxy Statement and our Annual Report, on the internet and instructions on how to vote. Stockholders may vote in person at the Annual Meeting or by internet pursuant to the instructions set forth in the Proxy Statement. In addition, if you received a paper copy of the proxy materials, you may vote by completing and returning a proxy card or voting information form, as applicable, pursuant to the instructions set forth in the Proxy Statement.

 

Whether or not you plan to attend the Annual Meeting, we hope you will vote as soon as possible.

 

By order of the Board of Directors.

 

Sincerely,

 

 

Stacy Cozad

Senior Vice President, General Counsel, Chief Compliance Officer, and Corporate Secretary


Table of Contents

PROXY STATEMENT SUMMARY

7

Matters to Be Voted On at the Annual Meeting

7

Casting Your Vote

7

About Spirit

8

About Spirit’s Director Nominees and Governance Practices

11

About Spirit’s Executive Compensation Program and Practices

13

14

Overview

14

Director Nominees

14

Voting Standard

18

BOARD AND GOVERNANCE MATTERS

19

The Board’s Role

19

Board Leadership

19

Board Composition

20

Director Tenure and Refreshment

21

Director Education

22

Director Independence

22

Committees

23

The Board’s Role in Risk Oversight

24

Communications with the Board

25

Commitment to Stockholder Engagement and Responsiveness

25

2018 Board and Committee Meetings and Attendance

26

Executive Sessions

26

Code of Business Conduct

26

Succession Planning

26

Compensation of Non-Employee Directors

27

2018 Director Compensation Table

29

Related Person Transactions

30

STOCK OWNERSHIP

31

Beneficial Ownership of Directors and Executive Officers

31

Beneficial Ownership of Major Stockholders

32

Section 16(a) Beneficial Ownership Reporting Compliance

32

33

Overview

33

Voting Standard

33

COMPENSATION DISCUSSION AND ANALYSIS

34

Our 2018 Named Executive Officers

34

Compensation Overview

35

Aligning Pay with Performance

35

Our Pay Metrics

36

The Company’s Performance

37

CEO Target Pay Compared to Peers

37

Significant Program-Wide Compensation Decisions in 2018

38

2018 Compensation Program Elements

38

2018 NEO Performance and Compensation Decisions

42

The Compensation Decision-Making Process

44

Benchmarking

45

Independent Compensation Consultant

46

Consideration of Advisory Stockholder Vote on Executive Compensation

46

Compensation Risk Assessment

46

Other Compensation Elements and Information

47

Summary Compensation Table

50

Grants of Plan-Based Awards in 2018

53

Outstanding Equity Awards at 2018 Fiscal Year End

54

Option Exercises and Stock Vested for Fiscal Year 2018

56

Pension Benefits

57

Nonqualified Deferred Compensation

58

Potential Payments Upon Termination or Change-in-Control

58

2018 CEO Pay Ratio

64

Compensation Committee Report

64

65

Overview

65

Voting Standard

65

Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of the Independent Registered Public Accounting Firm

65

Audit and Other Fees

66

Audit Committee Report

66

67

Stockholder Proposal

67

The Board of Directors’ Statement in Opposition

67

Voting Standard

68

GENERAL INFORMATION REGARDING THE ANNUAL MEETING

69

Questions and Answers About the Annual Meeting and Voting

69

Stockholder Proposals and Director Nominations for the 2020 Annual Meeting

73

Annual Report

73

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

74

APPENDIX A

76

Non-GAAP Financial Measures

76


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PROXY STATEMENT SUMMARY

This summary highlights certain information contained elsewhere in the accompanying Proxy Statement. This summary does not contain all the information you should consider before voting your shares. For more complete information regarding the proposals to be voted upon at the Annual Meeting and our 2018 performance, please review the entire Proxy Statement and our Annual Report on Form 10-K for the fiscal year ended December 31, 2018.

We use the terms “Spirit,” the “Company,” “we,” “us,” and “our” in this Proxy Statement to refer to Spirit AeroSystems Holdings, Inc. and its consolidated subsidiaries.

Matters to Be Voted On at the Annual Meeting

Casting Your Vote

Stockholders of record of our Common Stock as of February 25, 2019, may vote their shares using any of the following methods:

BY INTERNET

VIA COMPUTER
Visit www.proxyvote.com

BY INTERNET

VIA TABLET OR SMARTPHONE

 

BY MAIL

If you received a paper copy
of the materials, complete
and return the enclosed
proxy card or voting
instruction form

IN PERSON

Vote in person at the
Annual Meeting; see
“General Information — How
Do I Attend the Annual
Meeting”

SPIRIT AEROSYSTEMS - 2019 Proxy Statement    7


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About Spirit

Quick Spirit Facts

 

HEADQUARTERS

Wichita, Kansas

PRODUCTS

Fuselages, wing structures, and propulsion systems for commercial and defense aircraft

WORLDWIDE EMPLOYEES

Approximately 17,500

LOCATIONS

Kansas, Oklahoma, North Carolina, Scotland, France, Malaysia

MAJOR CUSTOMERS

Airbus, Boeing, Bell Helicopter, Lockheed Martin (Sikorsky), Mitsubishi Aircraft Corporation, Northrop Grumman, Rolls-Royce

Business Overview

 

Spirit is a leading tier-one global aerostructures provider. We manufacture large aerostructures, including fuselages, wing structures, engine nacelles, pylons, fan cowls, thrust reversers, and systems integration for the world’s premier aircraft. Spirit’s capabilities include metal manufacturing and assembly, precision assembly, and composites manufacturing.

Our engineering capabilities, combined with our capacity for high-volume production, have positioned Spirit as a leading aerostructures supplier to both Airbus and Boeing. For Boeing, we manufacture the 737 fuselage, the front section of the 787 fuselage, and otherwise manufacture parts for every Boeing commercial aircraft currently in production. Further, for Airbus, we supply fuselage and wing aerostructures content on the A350 XWB and wing aerostructures content on the A320, A330, and A380. Spirit also supplies aerostructures for various regional and business jet programs, including pylons on the A220 and in-development Mitsubishi Regional Jet, as well as nacelles for Rolls-Royce engines used on Gulfstream aircraft.

In addition to producing aerostructures for commercial aircraft, Spirit designs, engineers, and manufactures structural components for military programs. We have been awarded a significant amount of work for Boeing’s P-8, C-40, and KC-46 tanker, all of which are commercial aircraft modified for military use. We are also involved in the development and production of various parts for the Sikorsky CH-53K heavy-lift helicopter and Bell V-280 tiltrotor aircraft. In addition, Spirit is proud to be a member of the Northrop Grumman B-21 Raider industry team. Spirit has invested heavily in research and development labs that enable us to deliver innovation and value on defense programs.

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Spirit Values and Fundamental Behaviors

 

Values

 

At Spirit, we believe that culture and values play a determining role in the success of corporate strategy. Values are demonstrated in the way we think, act, and ultimately achieve results.

Transparency

I am open, honest, and respectful with my communication. I speak up to share my ideas and build trust by making my intentions clear.

Collaboration

I align my actions with others, so we work together to achieve the best outcome in everything we do.

Inspiration

I encourage the best from others, and I lead by example to ensure innovation is a component of our success.

Fundamental Behaviors

 

 

 

 

 

Safety

Our employees are our greatest asset. We are committed to conducting our operations in a manner that prioritizes the safety and continued health of our employees and other workers. We are committed to continual assessment, training, and investment to execute our safety goals and reduce injuries and incidents.

 

Quality

We are committed to continually improving our quality and delivering on or exceeding our customers’ quality expectations.

 

 

 

 

On-Time Delivery

Aside from safety and quality, successful on-time delivery is our goal. The success of our customers depends on our ability to meet their delivery expectations consistently. 

 

 

 

 

Customer Focused

Being a trusted partner to our customers is essential to our ability to win profitable new business. We focus on our customers by meeting our operational commitments and working alongside our customers to develop innovative solutions to their challenges. We are committed to continually investing in new technologies to improve quality, lower costs, and increase production capabilities, in a mutually beneficial way.

 

 

 

 

 

 

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Corporate Citizenship

 

Spirit’s corporate values are demonstrated through commitments to key community initiatives, from volunteer activities to corporate- and employee-funded grants. Our values are demonstrated through the way we conduct our business and our commitments, which include the following:

 

 

Charitable Giving

We believe the opportunity to do business in a community comes with a responsibility to give back. In 2018, more than $2.9 million was donated by Spirit and $2.7 million by Spirit employees to nonprofit organizations supporting education, arts and culture, civic engagement, and health and human services.

Community Involvement

Whether it is serving on the board of a nonprofit or serving meals to the hungry, Spirit leaders and employees give generously of their time and talents. Recent Company-sponsored activities include:

Mentoring students interested in science, technology, engineering, or mathematics careers


Providing school supplies for thousands of U.S. children


Building homes for low-income families


Supporting an orphanage in Malaysia


Refurbishing a children’s respite facility in the U.K.


Creating memorial and recreational areas in local veterans’ centers


Global Diversity

We are committed to promoting diversity — not only because it is the right thing to do, but because it drives innovation and growth.

Environment, Health, and Safety

We conduct our business in a manner that protects the environment and promotes the health, safety, and well-being of our employees and our surrounding communities.

Ethics and Compliance

We uphold the highest ethical standards, and we are committed to complying with all laws and regulations applicable to our business and our Code of Business Conduct.

 

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About Spirit’s Director Nominees and Governance Practices

Director Nominees

 

Name

Age

Director

Since

 

Principal Occupation

Independent

Committee

Memberships

Charles L. Chadwell

78

2008

 

Retired VP/GM of Commercial Engine Operations, GE Aircraft Engines

Yes

Governance (Chair) Compensation

Irene M. Esteves

60

2015

 

Retired CFO, Time Warner Cable Inc.

Yes

Audit (Chair)

Risk

Paul E. Fulchino

72

2006

 

Retired Chairman, President and CEO, Aviall, Inc.

Yes

Compensation (Chair) Governance

Thomas C. Gentile III

54

2016

 

President and CEO, Spirit AeroSystems Holdings, Inc.

No

 

Richard A. Gephardt

78

2006

 

President and CEO, Gephardt Consulting Group

No

 

Robert D. Johnson, Chairman

71

2006

 

Retired CEO, Dubai Aerospace Enterprise Ltd.

Yes

Compensation Governance

Ronald T. Kadish

70

2006

 

Retired EVP, Booz Allen Hamilton

Yes

Risk (Chair)

Governance

John L. Plueger

64

2014

 

President and CEO, Air Lease Corporation

Yes

Audit

Risk

Laura H. Wright

59

2018

 

Retired SVP and CFO, Southwest Airlines

Yes

Audit

Risk

Nominee Qualifications

 
  Independent Public
Company

CEO
Experience
Public
Company
CFO Experience
Commercial
Aviation
Operations
Management
Experience
Defense
Aviation
Operations
Management
Experience
Public
Company
Board
Experience
Executive
Compensation
Experience
Risk
Management
Experience
M&A
Experience
Senior
Government
Experience
Chadwell  
Esteves  
Fulchino  
Gentile  
Gephardt
Johnson  
Kadish
Plueger  
Wright  

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Board Composition

 

 

 

 

 

Corporate Governance Highlights

 

Board Practices

 

Stockholder Protections

   Independent Chairman of the Board

 

   Proxy access right
   7 out of 9 director nominees are independent

 

   Right to call special meetings
   Overboarding policy

 

   Right to act by written consent
   Ongoing director education program

 

   Active stockholder engagement program
   Regular executive sessions of non-management directors

 

   Annual say-on-pay vote
   Annual board and committee evaluations

 

   Annual election of all directors
   Robust stock ownership requirements for directors

 

   Majority voting standard in uncontested director elections
   Anti-hedging and pledging policy

 

   No poison pill or similar plan
   Robust risk oversight process with Board and committee roles

 

 

 

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About Spirit’s Executive Compensation Program and Practices

Overview of Spirit’s Executive Compensation Program

 

We provide highlights of our executive compensation program below. For a full understanding of the compensation paid to our named executive officers, please review our Compensation Discussion and Analysis and the related compensation tables in this Proxy Statement.

Our compensation objectives are to (i) attract, retain, and motivate highly qualified executive officers, (ii) pay for performance using short-term and long-term incentives, (iii) align interests of the Company’s executive officers with the Company’s stockholders by using compensation performance measures that are meaningful to our stockholders, and (iv) ensure compensation does not encourage inappropriate risk-taking by diversifying performance measures, using payment caps, and maintaining a clawback policy, among other things. The 2018 compensation structure (excluding perquisite or “other” compensation) for our CEO and the other named executive officers (“NEOs”) is below. As the charts below demonstrate, 87% of our CEO’s direct compensation was variable based on performance, while 77% of the other NEOs’ direct compensation was variable based on performance.

 

 

 

 

 

Compensation Practices Checklist

 

Best Practices

What the Company Doesn’t Do

   Align pay and performance — substantial portion of pay is delivered through variable, at-risk compensation    No ongoing new defined-benefit Supplemental Executive Retirement Plan accruals
   Clawback policy    No share recycling (other than in the context of forfeited shares)
   Robust stock ownership requirements    No tax gross-ups related to a change-in-control
   Performance goals are relevant and tied to creation of stockholder value    No enhanced health and welfare benefit plans for executives
   Double-trigger change-in-control provisions    No guaranteed payouts on performance-based compensation (except for upon death, disability, or retirement after the age of 62, beginning with equity awards granted in 2018)
   Offer market-competitive benefits    No dividend payments on time-based restricted stock awards until they vest
   Pay long-term incentives entirely in stock    No accumulation of dividends on unvested performance-based restricted stock awards

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PROPOSAL 1

ELECTION OF DIRECTORS

Overview

The Board of Directors is elected each year at the Company’s annual meeting of stockholders. Spirit currently has nine directors. Each director elected at the Annual Meeting will serve until the 2020 annual meeting of stockholders and until the election and qualification of his or her respective successor, subject to such director’s earlier death or disability.

Based on the recommendations of the Company’s Corporate Governance and Nominating Committee (the “Governance Committee”), the Board has nominated each of the persons listed below for election as directors. All nominees have served as directors of the Company since the 2018 annual meeting of stockholders.

Each of the nominees has agreed to serve if elected and, as of the date of this Proxy Statement, the Company has no reason to believe that any nominee will be unavailable to serve. If any nominee is unable or declines to serve as a director at the time of the Annual Meeting, the proxy holders’ intention is to vote the proxies for such other person as may be designated by the present Board to fill such vacancy.

The following information with respect to the nine nominees is based on information furnished to the Company by each nominee and highlights the specific experience, qualifications, attributes, and skills of the individual nominees that have led the Board to conclude that each should continue to serve on the Board.

Director Nominees

Charles L. Chadwell

Age 78

Director Since 2008

Independent Director

Professional Experience:

Former Public Company Directorships Held in the Past 7 Years:

Vice President and General Manager of Commercial Engine Operations, General Electric Aircraft Engines (“GE Aviation”)(1994-2002)

Vice President, Operations, GE Aviation (1990-1994)

B/E Aerospace (2007-2012)

Committee Assignments:

Governance (Chair)


Compensation

 

Qualifications, Experience, Key Attributes, and Skills: Mr. Chadwell brings to the Board critical supply chain and manufacturing operations expertise, and executive leadership expertise, within the commercial and defense aviation industry. Mr. Chadwell provides the Board with compensation, governance, and human resources expertise, and valuable insight and perspective into aviation industry trends, developments, and challenges. Mr. Chadwell also brings to the Board experience as a public company director.

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Irene M. Esteves

Age 60

Director Since 2015

Independent Director

Professional Experience:

Current Public Company Directorships:

Chief Financial Officer, Time Warner Cable Inc. (2011-2013)

Executive Vice President and Chief Financial Officer,
XL Group plc (2010-2011)

Senior Vice President and Chief Financial Officer, Regions Financial Corporation (2008-2010)

RR Donnelley (2017-present), Aramark (2014-present), KKR Real Estate Finance Trust Inc. (2018-present)

Former Public Company Directorships Held in Past 5 Years:

Level 3 Communications (2014-2017), TW Telecom Inc. (2014)

Committee Assignments:

Audit (Chair)


Risk

 

Qualifications, Experience, Key Attributes, and Skills: Ms. Esteves has experience in global finance, corporate strategy, human resources, treasury, accounting, tax, risk management, mergers and acquisitions, and investor relations across multiple industries. Ms. Esteves also brings to the Board experience as a public company director. In addition, Ms. Esteves qualifies as an audit committee financial expert under the rules of the Securities and Exchange Commission (the “SEC”).

 

Paul E. Fulchino

Age 72

Director Since 2006

Independent Director

Professional Experience:

Current Public Company Directorships:

Operating Partner, AE Industrial Partners (2015-present)


Senior Advisor, The Boeing Company (“Boeing”) (2010-2014)


Chairman, President and Chief Executive Officer, Aviall, Inc. (2000-2010) (Aviall became a wholly owned subsidiary of Boeing in September 2006.)


President and Chief Operating Officer, B/E Aerospace, Inc. (1996-1999)


President and Vice Chairman, Mercer Management Consulting (1990-1996)

Wesco Aircraft Holdings, Inc. (2008-present)

Committee Assignments:

Compensation (Chair)


Governance







 

Qualifications, Experience, Key Attributes, and Skills: Mr. Fulchino provides the Board with executive leadership experience, and extensive knowledge and expertise regarding the commercial aviation industry, the Company’s customers and supply base, compensation and human resource matters, and mergers and acquisitions. Mr. Fulchino also brings to the Board experience as a public company director.

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Thomas C. Gentile III

Age 54

Director Since 2016

Professional Experience:

Former Public Company Directorships Held in Past 5 Years:

President and Chief Executive Officer, Spirit AeroSystems Holdings, Inc. (2016-present)

Executive Vice President and Chief Operating
Officer, Spirit AeroSystems Holdings, Inc.
(April 2016-August 2016)

President and Chief Operating Officer, General Electric Capital Corporation (2014-2016)

President and Chief Executive Officer, General Electric Healthcare Systems (2011-2014)

President and Chief Executive Officer, General Electric Aviation Services (2008-2011)

Synchrony Financial Bank (2015)

 

Qualifications, Experience, Key Attributes, and Skills: Mr. Gentile has demonstrated success in managing large, complex global technology businesses across multiple industries. He brings to the Board a deep understanding of aviation program management, product development, strategy, and business development. Mr. Gentile also brings to the Board experience as a public company director.

 

Richard A. Gephardt

Age 78

Director Since 2006

Professional Experience:

Current Public Company Directorships:

President and Chief Executive Officer, Gephardt Consulting Group (2007-present)

President and Chief Executive Officer, Gephardt Governmental Affairs (2005-present)

Member, U.S. House of Representatives
(1977-2005). During this time, he served as the House Minority Leader (1995-2003) and House Majority Leader (1989-1995)

Centene Corporation (2006-present)

Former Public Company Directorships Held in Past 5 Years:

Century Link, Inc. (2007-2016), Ford Motor Company (2009-2015), U.S. Steel Corporation (2005-2015)

 

Qualifications, Experience, Key Attributes, and Skills: Mr. Gephardt brings governmental affairs and public relations expertise to the Board, along with labor management and union expertise. He provides the Board with a diverse perspective on public policy, political affairs, and the regulatory environment. Mr. Gephardt also brings to the Board experience as a public company director.

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Robert D. Johnson, Chairman

Age 71

Director Since 2006

Independent Director

Professional Experience:

Current Public Company Directorships:

Chief Executive Officer, Dubai Aerospace
Enterprise Ltd. (2006-2008)

Chairman, Honeywell Aerospace
(2005-2006)

President and Chief Executive Officer, Honeywell Aerospace (2000-2005)

Roper Technologies, Inc. (2005-present), Spirit Airlines, Inc. (2010-present)

Former Public Company Directorships Held in Past 7 Years:

Ariba, Inc. (2003-2012)

Committee Assignments:

Compensation


Governance

 

Qualifications, Experience, Key Attributes, and Skills: Mr. Johnson, Chairman of the Board, has aviation industry executive leadership experience, experience in executive compensation and human resource matters, and provides the Board with valuable insight and perspective resulting from his expertise in marketing, sales, supply chain, and production operations. Mr. Johnson also brings to the Board experience as a public company director.

 

Ronald T. Kadish

Age 70

Director Since 2006

Independent Director

Professional Experience:

Former Public Company Directorships Held in Past 5 Years:

Consultant, Raytheon (2018-Present)


Senior Executive Advisor, Booz Allen Hamilton (“Booz”) (2015-2018)


Executive Vice President, Booz (2005-2015)


Director, U.S. Missile Defense Agency (2002-2004)


Director, Ballistic Missile Defense Organization, Department of Defense (1999-2001)

Commander, Electronic Systems Center, Hanscom Air Force Base (1996-1999)

Orbital ATK (2015-2018), Orbital Sciences Corp. (2005-2015)

Committee Assignments:

Risk (Chair)


Governance

 

 

 

Qualifications, Experience, Key Attributes, and Skills: Mr. Kadish provides the Board with unique expertise in military, program management, security, international, and governmental matters, including having served three decades in the U.S. Air Force, rising to the rank of Lieutenant General. He delivers critical insight to the Board with respect to enterprise risk management, cybersecurity, global security, and our defense customers’ needs and expectations. Mr. Kadish also brings to the Board experience as a public company director.

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John L. Plueger

Age 64

Director Since 2014

Independent Director

Professional Experience:

Current Public Company Directorships:

Chief Executive Officer and President,
Air Lease Corporation (“ALC”) (2016-present)


President and Chief Operating Officer, ALC (2010-2016)


Chief Executive Officer, International Lease
Finance Corporation (“ILFC”) (2010)


President and Chief Operating Officer, ILFC (2002-2010)

ALC (2010-present)

Committee Assignments:

Audit


Risk

 

Qualifications, Experience, Key Attributes, and Skills: Mr. Plueger provides the Board with valuable insight into the aviation industry and aviation operations management stemming from his executive leadership roles at ILFC and ALC. In addition, Mr. Plueger has significant experience in finance and accounting matters as a certified public accountant, having received his training as an auditor from PricewaterhouseCoopers. Mr. Plueger qualifies as an audit committee financial expert under the rules of the SEC. Mr. Plueger also brings to the Board experience as a public company director.

 

Laura H. Wright

Age 59

Director Since 2018

Independent Director

Professional Experience:

Current Public Company Directorships:

Sole Member and Founder, GSB Advisory, LLC (2013-present)

Senior Vice President and Chief Financial Officer, Southwest Airlines Co. (“SWA”) (2004-2012)

Vice President, Finance, and Treasurer, SWA (2001-2004)

Treasurer, SWA (1998-2001)

TE Connectivity (2014-present), CMS Energy Corp. (and its wholly owned subsidiary, Consumers Energy Company) (2013-present)

Former Public Company Directorships Held in Past 5 Years:

Pebblebrook Hotel Trust (2009-2019)

Committee Assignments:

Audit


Risk

 

Qualifications, Experience, Key Attributes, and Skills: Ms. Wright has corporate finance and accounting experience, commercial aviation operations experience, risk management experience, and mergers and acquisitions experience, as a result of her position as Senior Vice President and Chief Financial Officer of SWA, and various other financial positions held during her 25-year career at SWA. Ms. Wright worked for Arthur Young & Co. in Dallas from 1982-1988 prior to joining SWA. Ms. Wright is a certified public accountant and qualifies as an audit committee financial expert under the rules of the SEC. Ms. Wright also brings to the Board experience as a public company director.

 

Voting Standard

The Company’s bylaws provide for simple majority voting in an uncontested election of directors. In order for a director nominee to be elected, the votes that stockholders cast “FOR” the director nominee must exceed the votes that stockholders cast “AGAINST” the director nominee. In the event that an incumbent nominee does not receive the requisite majority of votes cast in this election, the Company will follow the procedure described under “General Information Regarding the Meeting — What Happens if an Incumbent Director Nominee is Not Elected at the Annual Meeting?” Any shares not voted (whether by abstention, broker non-vote, or otherwise) will have no impact on the election of directors. Your broker may not vote your shares on this proposal unless you give voting instructions.

   The Board recommends that you vote FOR each of the director nominees.

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BOARD AND GOVERNANCE MATTERS

The Board’s Role

The Company is governed by its Board of Directors. Other than with respect to matters reserved to stockholders, the Board is the ultimate decision-making body of the Company. The Board is responsible for overseeing the Company’s strategy and performance, and protecting stockholder interests and value. Further, the Board is responsible for selecting and overseeing the Company’s executive officers, who set and execute the Company’s business strategy and handle the Company’s day-to-day operations.

In carrying out its responsibilities, the Board has created and delegated certain responsibilities to four standing committees: the Audit Committee, the Compensation Committee, the Governance Committee, and the Risk Committee. Additional information about these committees and their responsibilities is described under “Committees.”

Corporate Governance Guidelines

 

The Board is committed to maintaining corporate governance practices that maximize stockholder value. To further its commitment, the Board has adopted the Company’s Corporate Governance Guidelines (the “Governance Guidelines”) to ensure that the Board has the necessary authority and practices in place to effectively review and evaluate the Company’s strategy and operations, to make decisions that are independent of the Company’s management, to oversee management, and to monitor adherence to the Company’s standards and policies. The Governance Guidelines are available at http://investor.spiritaero.com/govdocs.

Size

 

Pursuant to our bylaws, the Board of Directors is required to consist of three or more directors and may be increased or decreased at any time by the Board of Directors. Currently, the Board of Directors consists of nine directors. Pursuant to its charter, the Governance Committee is responsible for reviewing the size of the Board and recommending to the Board any changes it deems appropriate with respect to Board size.

Board Leadership

The Company separates the roles of Chief Executive Officer (“CEO”) and Chairman of the Board in recognition of the differences between the two roles and the value of independent leadership oversight. The Board believes that separation of the roles maximizes the ability of the CEO to focus on Company strategy and operations without distraction, while benefiting from the Chairman’s perspective and insight. Because Mr. Johnson, the Chairman of the Board, is an independent director, the Board has not deemed it necessary to appoint a lead independent director.

While the CEO is responsible for setting the strategic direction of the Company and managing the day-to-day operations and performance of the Company, the Chairman of the Board performs the following duties:

Sets the agenda for Board meetings;


Presides over meetings of the full Board and executive sessions of independent directors;


Presides over stockholder meetings;


Serves as a liaison between the CEO and the independent directors;


Provides feedback to the CEO on behalf of the independent directors regarding business issues and Board management; and


Regularly speaks with the CEO between Board meetings to discuss Company performance and matters of significance.

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Board Composition

Selecting qualified individuals to serve as directors is key to the Board’s performance. The Governance Committee is responsible for evaluating qualified potential candidates to serve on the Board, and recommending to the Board for its selection nominees to stand for election as directors at the Company’s annual meeting of stockholders. This responsibility is further described in the Governance Committee’s charter, which is available at: http://investor.spiritaero.com/govdocs. In evaluating candidates, the Governance Committee and Board consider the qualifications and expertise of director candidates individually and in the broader context of the Board’s overall composition, taking into account any particular needs that the Company may have based on its strategic initiatives, risks, and opportunities. The Company has engaged a third-party international executive search firm to assist the Governance Committee in identifying and evaluating potential director candidates.

In evaluating individual candidates, the Governance Committee considers the personal ethics and values, experience, judgment, and diversity of the candidates, among other things. It is the policy of the Board that the Board reflect diversity of viewpoint, professional experience, education, skill, expertise, industry knowledge, and such other factors as the Governance Committee and Board believe would enhance the effectiveness of the Board. Nominees must have high standards of integrity and ethics, and convey a commitment to act in the best interest of the Company and its stockholders.

In addition, the Governance Committee considers the candidates’ employment and other commitments, and evaluates whether the candidates have sufficient time available to efficiently and effectively carry out the duties of directors. For example, the Governance Guidelines limit the number of boards that any director may serve on to five (including the Company’s Board), or three boards (including the Company’s Board) in the case of a director who is an active chief executive officer at another public company.

Director Selection Process

 

 

Stockholder Candidates

 

It is the Governance Committee’s policy to consider candidates nominated by stockholders in compliance with applicable laws, regulations, and the procedures described in the Company’s bylaws and Proxy Statement. If a stockholder desires to recommend a director candidate for nomination by the Governance Committee, the stockholder should follow the procedures described under “Stockholder Proposals and Director Nominations for the 2020 Annual Meeting.” Director candidates recommended by stockholders will be considered and evaluated in the same manner as candidates discovered through other sources.

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Director Tenure and Refreshment

While the Company has added four new directors to its Board in the past five years, five of the nominees have served on the Board for more than ten years. Through its annual evaluation process, the Board has determined that each of these five nominees provides diversity of experience and perspective, and plays an integral and necessary role in the boardroom. The Board has periodically evaluated age and term limits along with retirement policies, and has determined that such limits and policies may arbitrarily restrict valuable Board members from service and, thus, reduce stockholder value. Instead, the Board has determined to continue evaluating its members on their merits based on the contributions they make in the boardroom and their ability to enhance overall Board effectiveness. The Board is committed to routine Board and director refreshment as needed to enhance Board effectiveness, and primarily uses rigorous board and committee evaluations and composition discussions as its refreshment mechanisms.

Board and Committee Evaluations

 

Each year, the Governance Committee oversees an evaluation of the Board and each committee. The 2018 evaluation covered the following topics, among other things:

Composition of the Board and committees and whether the composition is appropriate in light of the Company’s strategic priorities;

Effectiveness of Board and committee leadership;

Strengths of the Board and committees and opportunities for improvement;

Quality of information provided to the Board;

Effectiveness of structures and practices;

Quality of the directors’ relationships with each other; and

Quality of the Board’s relationship with management.

A summary of the evaluation process is below:

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Director Education

Our director education program is multifaceted and includes site visits and tours, in-depth education seminars on topics of interest by senior management and external advisors, background material on the Company’s operations and strategy, and the regular provision of resources from various educational institutions to directors. Each new Board member receives onboarding programming that involves meetings with senior management, business overviews, and presentations on the Code of Business Conduct, insider trading, and various other policies and procedures. We encourage our directors to attend reputable director education programs sponsored by external advisors and educational institutions.

Director Independence

The Company’s Common Stock is listed on the New York Stock Exchange (the “NYSE”), and the Company uses the NYSE’s listing standards to determine director independence. Under the NYSE’s listing standards and the Governance Guidelines, the Board must consist of a majority of independent directors. For a director to qualify as independent, the Board must determine that the director has no material relationship with the Company (either directly, or as a partner, stockholder, or officer of an organization that has a relationship with the Company). The Board performs an independence assessment of each director annually and as circumstances may otherwise require.

In assessing the existence of a material relationship with the Company, the Board considers all relevant transactions, relationships, and arrangements required by the NYSE’s independence standards. The Board examined each director’s involvement through directorships, employment, consulting relationships, or otherwise, with entities the Company does business with. In particular, the Board evaluated the following:

 

Topic

Transaction Evaluated

Outcome

Paul E. Fulchino

When considering the independence of Mr. Fulchino, the Board considered his role as an operating partner of AE Industrial Partners (“AEI”), a private equity firm that has ownership interests in four of the Company’s suppliers. For three of such suppliers, all work with the Company was won as a result of the suppliers submitting the most competitive proposal in competitive bidding situations. With respect to the fourth supplier, AEI is a minority owner and the percentage of the supplier’s revenue that is attributable to the Company is insignificant.

 

In his role at AEI, Mr. Fulchino assists with the acquisition, development, and value creation of portfolio companies. Mr. Fulchino receives a retainer from AEI and does not own any equity in AEI. Mr. Fulchino has no agreements with AEI, is not covered under AEI’s benefit plans or programs, receives a Form 1099 from AEI, and is free to be employed by other companies.

The Board affirmatively determined, based on available facts and circumstances, that Mr. Fulchino was not an employee of AEI (for purposes of the independence determination). Further, with respect to the Company’s transactions with three of the suppliers, each transaction arose as a result of the respective entity submitting the most competitive bid out of all bidding suppliers, and, thus, the transactions were not reportable under Item 404 of Regulation S-K. Finally, with respect to the fourth supplier, the Board determined that Mr. Fulchino’s relationship with AEI did not give rise to a material interest. For these and other reasons, the Board determined that Mr. Fulchino’s relationship with AEI does not give rise to a material relationship that impacts his independence or creates a related person transaction.

Richard A. Gephardt

When considering Mr. Gephardt’s independence, the Board considered his role as President and Chief Executive Officer of the Gephardt Consulting Group, a consulting firm that provides services to the Company in connection with labor matters (the “Gephardt Group”). Mr. Gephardt holds a 40% equity interest in the Gephardt Group, and Mr. Gephardt’s son, Chief Operating Officer of the Gephardt Group, holds a 10% equity interest. The Company’s transactions with the Gephardt Group in 2018 amounted to $275,604.

The Board affirmatively determined that, in light of Mr. Gephardt’s significant ownership and involvement in the Gephardt Group, Mr. Gephardt has a material relationship with the Company and is, therefore, not independent.

 

Based on this analysis, the Board has determined that all the director nominees are independent under the NYSE’s criteria, with the exclusion of Messrs. Gentile and Gephardt. All the committees of the Board are comprised solely of independent directors.

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Committees

The Board has four committees: the Audit Committee, Compensation Committee, Governance Committee, and Risk Committee. The Board has adopted written charters for each committee, which are available at http://investor.spiritaero.com/govdocs. Information on each committee is set forth in the table below.

Committee

Members

Primary Responsibilities

No. of

Meetings

in

2018

Audit Committee*

Irene M. Esteves (Chair)

John L. Plueger

Laura H. Wright

(1)

Oversee the quality and integrity of the Company’s financial reporting.

(2)

Oversee the Company’s compliance with legal and regulatory requirements.

(3)

Engage, compensate, and oversee the independent auditor’s performance.

(4)

Oversee performance of the Company’s internal audit function.

(5)

Review and discuss with management and the independent auditors the Company’s earnings releases and quarterly and annual reports on Forms 10-Q and 10-K.

(6)

Consider the effectiveness of the Company’s internal controls over financial reporting.

(7)

Collaborate with the Risk Committee and oversee financial-related risk exposures, and related policies and processes attempting to mitigate such risks.

(8)

Oversee the Company’s Code of Business Conduct and the Company’s ethics and compliance program.

9

Compensation Committee

Paul E. Fulchino (Chair)

Robert D. Johnson

Charles L. Chadwell

(1)

Review and approve the compensation of the Company’s executive officers.

(2)

Oversee the administration of the Company’s compensation plans, policies, and programs.

(3)

Prepare the Compensation Committee Report in this Proxy Statement.

(4)

Collaborate with the Risk Committee and oversee compensation-related risk exposures, and related policies and processes attempting to mitigate such risks.

(5)

Review and make recommendations to the Board with respect to non-employee director compensation.

5

Governance Committee

Charles L. Chadwell (Chair)

Robert D. Johnson

Paul E. Fulchino

Ronald T. Kadish

(1)

Assist the Board in identifying qualified individuals to become Board members.

(2)

Determine the composition of the Board and its committees.

(3)

Lead the Board in its annual review of the Board’s performance.

(4)

Develop and implement the Governance Guidelines and recommend to the Board any changes thereto.

(5)

Review and approve, deny, or ratify transactions under the Company’s Related Person Transaction Policy.

(6)

Collaborate with the Risk Committee and oversee risks related to the Company’s governance structure.

5

Risk Committee

Ronald T. Kadish (Chair)

John L. Plueger

Irene M. Esteves

Laura H. Wright

(1)

Provide oversight of management’s guidelines, policies, and processes for assessing, monitoring, and mitigating the Company’s critical enterprise risks, including the major strategic, operational, financial, and compliance risks inherent in the Company’s business and core strategies, and collaborate with other committees regarding the same.

(2)

Oversee the effectiveness of the Company’s cybersecurity programs and its practices for identifying, assessing, and mitigating cybersecurity risks.

(3)

Oversee management’s review and assessment of key risks that have the potential to significantly affect the Company’s ability to execute its strategy, and determine which risks should be included on the Board’s agenda for discussion.

4

*

The Board has determined that Ms. Esteves, Mr. Plueger, and Ms. Wright are “audit committee financial experts,” as such term is defined in Item 407(d)(5) of Regulation S-K.

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The Board’s Role in Risk Oversight

 

Management’s Role in Risk Management

 

The Company’s management is responsible for the identification, assessment, mitigation, and management of risks relating to the Company’s strategy and operations. Apart from reporting to the Board, management engages in a robust enterprise risk management process that involves: (i) semi-annual risk-assessment surveys and interviews; (ii) reviewing, repositioning, and prioritizing identified risks by a risk council composed of executive leadership (the “Risk Council”); (iii) assigning risks to risk owners based on responsibilities with respect to the Company’s strategic objectives; (iv) developing and reporting mitigation plans by the risk owners and risk management team to the Risk Council; and (v) oversight by the Company’s internal audit function. On a quarterly basis, the status of the top risks identified in management’s enterprise risk management process, along with their associated mitigation plans, are presented to the Risk Committee.

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Cybersecurity

 

The Risk Committee of the Board is charged with oversight of the Company’s cybersecurity matters. The Company hired a Chief Information Security Officer (“CISO”) in early 2018 to oversee the Company’s cybersecurity practices and procedures. The CISO reports to the Risk Committee quarterly regarding such practices and procedures. The Company took several steps in 2018 to mitigate cybersecurity risks, such as upgrading operating and monitoring systems, hiring specialized personnel, and reviewing and improving applicable policies and procedures. The Company requires cybersecurity education at all levels of the organization.

Communications with the Board

Stockholders and other interested persons may communicate with the Board, the Chairman of the Board, individual members of the Board, members of any committee of the Board, or one or more non-employee directors through the following:

BY EMAIL

to [email protected]

BY MAIL

to Corporate Secretary

Spirit AeroSystems Holdings, Inc.

3801 S. Oliver St.

Wichita, KS 67210-2112

IN PERSON

at the Annual Meeting

(we expect all of our directors to attend)

 

The Corporate Secretary will forward communications received to the appropriate party. Receipt of communications clearly not appropriate for consideration by members of the Board, such as unsolicited advertisements, inquiries concerning the Company’s products and services, and harassing communications, are not forwarded to members of the Board.

Commitment to Stockholder Engagement and Responsiveness

Engagement

 

The Company’s management and subject-matter experts frequently meet with investors to discuss Company performance, governance practices, strategy, operations, and other matters of importance to our stockholders. In 2018, members of the Company’s management held more than 560 in-person and telephonic meetings with investors and analysts, and traveled through the continental U.S. and to the U.K. to attend the meetings. The Company is committed to maintaining a robust stockholder outreach program in addition to regular participation at investor and community events and meeting with analysts. The Company welcomes feedback from all stockholders. Stockholders can contact the Company’s Investor Relations team by calling 316-523-7040 or emailing [email protected]

Responsiveness

 

At the 2018 annual meeting, two proposals were put forth regarding the stockholders’ right to call special meetings. Proposal 4 was a proposal from the Company’s Board to reduce the threshold required to call a special meeting from a majority of stockholders to 25%. Proposal 5 was a stockholder proposal to reduce the threshold required to call a special meeting from a majority of stockholders to 10%. At the 2018 annual meeting, stockholders voted overwhelmingly in favor of Proposal 5. After the 2018 annual meeting, the Company’s management engaged with several stockholders on the matter and reported the conclusions from the engagement efforts to the Board. On July 23, 2018, after careful consideration of the matter, the Board amended the Company’s bylaws to lower the threshold required to call a special meeting from a majority of stockholders to 10%, consistent with Proposal 5. The Board also adopted a number of customary protections around the right to protect against misuse. The bylaws, as amended, are available on the Company’s website at http://investor.spiritaero.com/govdocs.

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2018 Board and Committee Meetings and Attendance

During 2018, there were four in-person meetings and seven telephonic meetings of the Board. All the Company’s directors attended 75% or more of the aggregate of all meetings of the Board and of committees on which they served in 2018. The Company’s Governance Guidelines provide that director attendance is expected at annual meetings of stockholders, and all the Company’s directors attended the 2018 annual meeting of stockholders.

In addition to scheduled Board meetings, the Board receives monthly reports from Mr. Gentile detailing financial results, operational highlights and challenges, and updates on strategic initiatives.

Executive Sessions

As part of each quarterly in-person Board meeting in 2018, the Company’s non-employee directors met without management present in an executive session. During executive sessions, the non-employee directors reviewed management’s performance, compensation, talent development and succession planning, strategic considerations, corporate governance matters, and other matters of importance.

Code of Business Conduct

The Company is committed to the highest ethical standards and to complying with all laws and regulations applicable to the Company’s business. To support and articulate its commitment and personal responsibility in this regard, the Company has adopted the Code of Business Conduct (the “Code”). The Code addresses a number of topics, including the Foreign Corrupt Practices Act, conflicts of interest, safeguarding assets, insider trading, and general adherence to laws and regulations. All directors and employees, including executive officers, must comply with the Code. The Code is available on the Company’s website at http://investor.spiritaero.com/govdocs.

Succession Planning

The Board is responsible for overseeing management succession planning. At least annually, the Board reviews candidates for succession with respect to the CEO role and other senior management roles. Succession plans have been developed for both ordinary course succession and contingency planning due to an unforeseen event. The Board receives updates on the development of the succession candidates regularly. Directors engage with potential succession candidates during formal presentations at Board and committee meetings, and informal events with directors and candidates present.

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Compensation of Non-Employee Directors

Overview

 

Non-employee directors receive annual cash and equity compensation as described below. Equity compensation is granted under the Director Stock Program adopted under the 2014 Omnibus Incentive Plan, as amended (the “OIP”). The Compensation Committee reviews and approves non-employee director compensation amounts and practices annually. As part of their review, the Compensation Committee evaluates non-employee director compensation data from the companies in Spirit’s proxy peer group, including data regarding the size of equity awards. In addition, the Compensation Committee confers with its independent compensation consultant on the magnitude and type of non-employee director compensation, and reviews market data and benchmarking surveys provided by the consultant. Based upon that information, the Compensation Committee makes a recommendation to the Board. The Board approves the form and amount of compensation after considering the Compensation Committee’s recommendation.

In developing its recommendations, the Compensation Committee is guided by the following goals with respect to non-employee director compensation:

Compensation should be market-competitive in relation to comparably-situated companies, including the Company’s proxy peer group;

Compensation should align directors’ interests with the long-term interests of the Company’s stockholders; and

The compensation structure should be simple, transparent, and easy for stockholders to understand.

Compensation Elements

 

The following table describes the elements of the 2018 non-employee director compensation program:

Element

Amount

Annual Board Cash Retainer

$105,000

Annual Board Equity Retainer

$125,000

Additional Retainer for Chairman of the Board

$100,000

Additional Retainer for Chairman of the Audit Committee

$25,000

Additional Retainer for Chairman of the Compensation Committee

$18,000

Additional Retainer for Chairmen of Other Committees

$12,000

 

Cash Retainers

Each Board member receives an annual cash retainer, which is paid quarterly. Further, the Chairman of the Board and each committee chairman receives an additional cash retainer. Directors may elect to have their retainers received in shares of restricted stock or restricted stock units (“RSUs”) in lieu of cash.

Equity Retainer

Each Board member receives an annual equity retainer, which may be paid annually in the form of restricted stock or RSUs. Both types of awards vest if the non-employee director remains continuously in service for the entire term to which the grant relates. If the non-employee director incurs a termination for any reason before the end of the term (before the annual meeting of stockholders following the grant), the awards are forfeited without any payment. The Board may, in its discretion, waive this one-year service condition (in whole or in part) if it deems it to be appropriate and in the best interests of the Company to do so. Upon vesting, shares of restricted stock are delivered to the directors; however, vested RSUs are not paid to the director until the date that the director leaves the Board. Restricted stock confers voting and dividend rights; dividends accrue during the restricted period and are paid out upon vesting. RSUs confer dividend equivalent rights; dividend equivalents accrue during the restricted period and thereafter, and are paid out upon settlement. If the awards are forfeited, dividends or dividend equivalents, as applicable, are also forfeited.

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Board and Committee Meeting Fees

Until April 25, 2018, Board and committee meeting fees of $1,000 per meeting were paid for attendance at formal meetings where notice was duly given, a quorum was present, a matter was presented for consideration, the Board or committee took action on the matter, and minutes were taken. Meeting fees were paid in cash in arrears at the end of the quarter for which the fees were earned. Directors could choose to receive fees in the form of cash, restricted stock, or RSUs. A director was required to attend a majority of his or her required Board and committee meetings to receive any meeting fees. On April 25, 2018, the Board of Directors terminated the practice of paying meeting fees and changed the annual board equity retainer from $105,000 to $125,000.

Other Compensation

Directors are reimbursed for out-of-pocket expenses incurred in connection with their Board services. The Company does not provide perquisite allowances to non-employee directors.

Non-Employee Director Stock Ownership Requirements

 

Non-employee directors are required to own stock equal to five times the annual Board cash retainer, which currently amounts to $525,000. Non-employee directors have four years of Board service to meet the minimum stockholder requirements. RSUs held by directors are counted in determining whether the minimum stockholding requirements are satisfied. Information regarding the current stock ownership of the Company’s non-employee directors can be found below under “Stock Ownership — Beneficial Ownership of Directors and Executive Officers.”

As of February 25, 2019, all non-employee directors other than Ms. Wright were in compliance with the stock ownership requirements. Ms. Wright, who joined our Board on February 20, 2018, has until February 20, 2022, to meet the requirements.

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2018 Director Compensation Table

The following table sets forth non-employee director compensation for the fiscal year ended December 31, 2018.

Name

Fees Earned or Paid

in Cash

($)

(1) 

 

Stock

Awards

($)

(2) 

 

All Other

Compensation

($)

(3) 

 

Total

($)

Charles L. Chadwell

125,000

 

125,039

 

 

 

250,039

Irene M. Esteves

 

 

271,099

(4) 

 

 

271,099

Paul E. Fulchino

 

 

262,054

(5) 

 

 

262,054

Richard A. Gephardt

108,000

 

125,039

 

275,604

 

508,643

Robert D. Johnson

205,000

 

125,039

 

 

 

330,039

Ronald T. Kadish

124,000

 

125,039

 

 

 

249,039

John L. Plueger

 

 

245,053

(6) 

 

 

245,053

Francis Raborn(7) 

61,500

 

 

 

 

 

61,500

Laura H. Wright

72,148

 

168,205

(8) 

 

 

240,353

(1)

Includes cash retainer, additional Committee chairmen retainers, and meeting fees paid until April 25, 2018. Please refer to “Compensation of Non-Employee Directors — Compensation Elements — Board and Committee Meeting Fees.”

(2)

Except for Ms. Wright (see footnote (8) below): Represents the aggregate grant date fair value of the stock awards computed in accordance with authoritative guidance on stock-based compensation accounting issued by the Financial Accounting Standards Board (the “FASB”). On May 7, 2018, each non-employee director received an annual grant of 1,493 shares of restricted stock or RSUs with an aggregate value of $125,000 based on $83.75 per share, the average of the opening and closing prices of Common Stock on the grant date. As a result of rounding up fractional share amounts, the grants were valued at $125,039. In addition, certain directors elected to defer a portion or all of their annual cash retainer. Please see footnotes (4), (5), and (6), for more information. As of February 25, 2019, the balance of each non-employee director’s unvested restricted stock or unvested RSUs was as follows: Mr. Chadwell: 1,493 shares of restricted stock; Ms. Esteves: 3,237 RSUs (includes 1,744 RSUs for deferred retainer, committee chair, and meeting fees); Mr. Fulchino: 3,129 shares of restricted stock (includes 1,636 shares of restricted stock for deferred retainer, committee chair, and meeting fees); Mr. Gephardt: 1,493 shares of restricted stock; Mr. Johnson: 1,493 shares of restricted stock; Mr. Kadish: 1,493 shares of restricted stock; and Mr. Plueger: 2,926 shares of restricted stock (includes 1,493 shares of restricted stock for deferred retainer and meeting fees).

(3)

The amount of perquisites and other personal benefits has been excluded for all non-employee directors other than Mr. Gephardt, as the total value of each director’s perquisites and other personal benefits was less than $10,000. For Mr. Gephardt, this amount reflects consulting fees paid to the Gephardt Group for labor consulting services rendered in 2018, as further described under “Director Independence.”

(4)

Includes $105,000 in deferred cash retainer, $25,000 in deferred Committee chair cash retainer, and $16,000 in deferred meeting fees per Ms. Esteves’ election to receive her cash retainers and meeting fees in RSUs.

(5)

Includes $105,000 in deferred cash retainer, $18,000 in deferred Committee chair cash retainer, and $14,000 in deferred meeting fees per Mr. Fulchino’s election to receive his cash retainers and meeting fees in restricted stock.

(6)

Includes $105,000 in deferred cash retainer and $15,000 in deferred meeting fees per Mr. Plueger’s election to receive his cash retainer and meeting fees in restricted stock.

(7)

Mr. Raborn was a non-employee director of the Company until April 25, 2018, when he retired. Mr. Raborn’s fees were prorated to reflect his service in 2018.

(8)

Represents the aggregate grant date fair value of two stock awards computed in accordance with authoritative guidance on stock-based compensation accounting issued by the FASB: (a) The first stock award was issued on February 20, 2018, the date Ms. Wright joined the Board. On this date, Ms. Wright received a pro rata grant of 243 shares of restricted stock with an aggregate value of $22,094 based on $91.13, the average of the opening and closing prices of Common Stock on February 20, 2018. As a result of rounding up fractional share amounts, the grant was valued at $22,145. The amount of Ms. Wright’s stock award included $3,683 in deferred cash retainer. (b) The second stock award was issued on May 7, 2018, when the annual Board equity awards were granted. On this date, Ms. Wright received a grant of 1,493 shares of restricted stock with an aggregate value of $125,000 based on $83.75 per share, the average of the opening and closing prices of Common Stock on the grant date. As a result of rounding up fractional share amounts, the grant was valued at $125,039. Ms. Wright also elected to defer $21,000 representing an additional 251 shares of restricted stock per Ms. Wright’s election to receive a portion of her cash retainer in restricted stock. As of February 25, 2019, the balance of Ms. Wright’s unvested restricted stock is 1,744 shares of restricted stock (including 251 shares of restricted stock for deferred cash retainer).

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Related Person Transactions

Related Person Transaction Policy and Process

 

The Board has adopted a written Related Person Transaction Policy (the “RPT Policy”) that can be found on the Company’s website at http://www.investor.spiritaero.com/govdocs. The purpose of the RPT Policy is to ensure the proper evaluation, approval or ratification, and reporting of related person transactions. Such transactions are only appropriate if they are fair to, and in the best interests of, the Company.

Under the RPT Policy, a related person transaction is any transaction in which the Company was, is, or will be a participant, where the amount involved exceeds $120,000, and in which a Related Person has, had, or will have a direct or indirect material interest. A Related Person is a director, director nominee, officer, or 5% stockholder, or any of their immediate family members. The existence of a direct or indirect material interest depends upon individual facts and circumstances and is determined by our General Counsel or Governance Committee.

The Governance Committee is responsible for reviewing these transactions and determining whether they are fair to, and in the best interests of, the Company. After review of the relevant facts and circumstances, if the Governance Committee concludes the related person transaction is fair to, and in the best interests of, the Company, it may approve or ratify the transaction.

If the Governance Committee declines to approve or ratify any related person transaction, the Company’s General Counsel will review the transaction, determine whether it should be terminated or amended in a manner that is acceptable to the Governance Committee, and advise the Governance Committee of their recommendation. The Governance Committee will then consider the recommendation at its next meeting. If the General Counsel does not ultimately recommend the transaction to the Governance Committee or if the Governance Committee does not approve the transaction, the proposed transaction will not be pursued; or, if the transaction has already been entered into, the Governance Committee will determine an appropriate course of action with respect to the transaction.

Certain Related Person Transactions

 

Below are the transactions that occurred between January 1, 2018, and February 25, 2019, and fall within the definition of related person transaction in the RPT Policy or under Item 404 of Regulation S-K. With respect to each transaction, the Governance Committee reviewed the transaction in accordance with the RPT Policy and approved it on the basis that it was fair to, and in the best interests of, the Company.

Related Person

Facts

Richard A. Gephardt

As described under “Board and Governance Matters — Director Independence,” above, the Company entered into an agreement with the Gephardt Group for labor consulting services in 2018 and paid $275,604 pursuant to this agreement during 2018.

John A. Pilla

John Pilla, Senior Vice President and Chief Technology and Quality Officer, has two sons employed by the Company, Anthony Pilla, Cyber Protection Specialist (employed with the Company since June 3, 2016), and Nicolas Pilla, Systems Engineer (employed with the Company since May 31, 2013). Combined, Mr. Pilla’s sons received $204,171 in compensation from the Company in 2018 (this number includes a stock award with a grant date fair value of $45,553); such compensation was established in accordance with the Company’s compensation practices applicable to employees with equivalent responsibilities, experience, and qualifications. Mr. Pilla’s sons are also eligible to participate in employee benefit programs in the same manner as other eligible employees.

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STOCK OWNERSHIP

Beneficial Ownership of Directors and Executive Officers

The following table sets forth, as of February 25, 2019, the shares of Common Stock beneficially owned by each director and named executive officer, individually, and by all the Company’s directors and executive officers as a group. Individually and together, they own less than 1% of our Common Stock. The table also includes information about RSUs credited to the accounts of certain non-employee directors. For purposes of the table, shares are considered to be beneficially owned if the person, directly or indirectly, has sole or shared voting or investment power with respect to the shares. In addition, a person is deemed to beneficially own shares if that person has the right to acquire such shares within 60 days after February 25, 2019.

 

Name

Common Stock

Beneficially

Owned

 

Shares Vesting

in 60 Days of

Record Date

Time-Based and

Performance-

Based Restricted

Stock

(1) 

Total Common

Stock

Beneficially

Owned

RSUs

(2) 

Total Common

Stock Beneficially

Owned Including

RSUs

DIRECTORS

Charles L. Chadwell

 

12,328

 

 

 

 

1,493

 

 

13,821

 

4,884

 

 

18,705

Irene M. Esteves

 

 

 

 

 

 

15,465

 

15,465

Paul E. Fulchino

9,105

 

 

3,129

 

12,234

 

 

12,234

Richard A. Gephardt

1,251

 

 

1,493

 

2,744

5,790

 

8,534

Robert D. Johnson

12,742

 

 

1,493

 

14,235

 

 

14,235

Ronald T. Kadish

17,180

 

 

1,493

 

18,673

 

 

18,673

John L. Plueger

6,358

 

 

2,926

 

9,284

13,026

 

22,310

Laura H. Wright

1,443 

 

 

1,744

 

3,187

 

 

3,187

EXECUTIVE OFFICERS

Thomas C. Gentile III

 

65,645

 

 

 

 

182,921

 

 

248,566

 

 

 

 

248,566

Sanjay Kapoor(3)

87,488

 

 

36,240

 

123,728

 

 

123,728

Samantha J. Marnick

43,739

 

 

31,122

 

74,861

 

 

74,861

Duane F. Hawkins

30,125

 

 

35,536

 

65,661

 

 

65,661

John A. Pilla(4)

80,950

 

 

31,126

 

112,076

 

 

112,076

All directors and executive officers as a group (18 persons)

430,551

 

 

421,417

 

851,968

39,165

 

891,133

(1)

With respect to executive officers, includes unvested time-based and performance-based restricted stock awards that are forfeitable until the vesting date or performance certification date, as applicable. Performance-based restricted stock awards are included in the table at target amounts. With respect to directors, includes unvested restricted stock awards that are forfeitable until the vesting date. Such awards are included herein as they confer voting rights and, therefore, are deemed to be beneficially owned under Rule 13d-3(a)(1) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

(2)

RSUs vest after one year of service as a director. However, RSUs are not payable until the director’s termination of service. At such time, the RSUs will be paid, at the Board’s option, in cash or shares of Common Stock based on the market value of Common Stock upon termination of service. All RSUs reflected are currently vested except for 3,237 RSUs held by Ms. Esteves.

(3)

Mr. Kapoor retired from the position of Executive Vice President and Chief Financial Officer on February 9, 2019. The values shown in the table assume no transactions have taken place since February 9, 2019, when Mr. Kapoor ceased to be an executive officer of the Company.

(4)

Excludes 16,023 phantom stock units Mr. Pilla is entitled to receive upon his retirement from the Company under the frozen Supplement Executive Retirement Plan.

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Beneficial Ownership of Major Stockholders

The following table sets forth information with respect to beneficial owners of more than 5% of our outstanding securities as of February 25, 2019. The information set forth below is based on ownership statements filed with the SEC pursuant to Section 15(d) or 13(g) of the Exchange Act.

Name

Amount of

Shares

Beneficially

Owned

Percentage of

Common Stock

Sole

Voting

Shares

Shared

Voting

Shares

Sole

Investment

Shares

Shared

Investment

Shares

5% STOCKHOLDERS

The Vanguard Group(1)

100 Vanguard Blvd.

Malvern, PA 19355

 

10,560,087

 

9.91%

 

82,406

 

21,149

 

10,462,132

 

97,955

Blackrock, Inc.(2)

55 E. 52nd St.

New York, NY 10005

7,376,265

7.0%

6,606,277

 

7,376,265

 

Darsana Capital Partners LP(3)

Darsana Capital Partners GP LLC

Darsana Master Fund LP

Darsana Capital GP LLC

Anand Desai

40 West 57th Street, 15th Floor

New York, NY 10019

6,750,104

6.4%

 

6,750,104

 

6,750,104

(1)

Information is based on an amended Schedule 13G filed with the SEC on February 11, 2019.

(2)

Information is based on an amended Schedule 13G filed with the SEC on February 6, 2019.

(3)

Information is based on an amended Schedule 13G filed with the SEC on February 14, 2019.

 

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires directors, executive officers, and persons who own more than 10% of any registered class of a company’s equity securities to file beneficial ownership reports with the SEC. Such reports are filed on Form 3, Form 4, and Form 5 under the Exchange Act, as appropriate. To the Company’s knowledge, based solely on a review of these reports and the reporting persons’ written representations, the Company believes that all filings required to be made by reporting persons holding the Company’s stock were timely filed in accordance with Section 16(a) in 2018, except for one Form 4 for Mr. Johnson (the “Late Form”). The Late Form regarded a sale of 500 shares on March 1, 2018, and was filed on May 9, 2018. The Late Form was not filed on a timely basis because the appropriate staff of the Company did not receive information about the sale until several weeks after it occurred.

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PROPOSAL 2

ADVISORY VOTE ON COMPENSATION OF NAMED EXECUTIVE OFFICERS

Overview

Stockholders are being asked to approve, on an advisory basis, the compensation of the named executive officers, or NEOs, as set forth under the heading “Compensation Discussion and Analysis.” This vote, which is referred to as the “say-on-pay” vote, is not intended to address any specific item of compensation, but rather the overall compensation of the Company’s NEOs and the objectives, policies, and practices described in this Proxy Statement. We conduct a say-on-pay vote annually. The Board believes that executive compensation, as disclosed in this Proxy Statement, aligns with the Company’s peer group pay practices and furthers the Company’s compensation objectives.

Accordingly, the Board asks the Company’s stockholders to vote “FOR” the following resolution at the Annual Meeting:

“RESOLVED, that the Company’s stockholders approve, on an advisory basis, the compensation of the named executive officers, as disclosed by the Company pursuant to the compensation disclosure rules of the SEC, including the Compensation Discussion and Analysis, the Summary Compensation Table, and other related tables and disclosures.”

The Board will review the voting results of Proposal 2 and take them into consideration when making future decisions regarding executive compensation.

Voting Standard

The affirmative vote of a majority of stockholders present, in person or by proxy, will constitute the stockholders’ non-binding approval with respect to Proposal 2.

With respect to Proposal 2, a stockholder may vote “FOR,” “AGAINST,” or “ABSTAIN.” Abstentions and broker non-votes will not be counted as votes “FOR” or “AGAINST” Proposal 2. However, because abstentions and broker non-votes will be counted as present at the Annual Meeting, they will have the effect of votes “AGAINST” Proposal 2.

Under the rules of the NYSE, brokers are prohibited from giving proxies to vote on executive compensation matters unless the beneficial owner of such shares has given voting instructions on the matter. This means that, if your broker is the record holder of your shares, you must give voting instructions to your broker with respect to Proposal 2 if you want your broker to vote your shares on the matter.

 The Board recommends you vote FOR the resolution approving the compensation of our named executive officers.

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COMPENSATION DISCUSSION AND ANALYSIS

 

TABLE OF CONTENTS

 
   

Our 2018 Named Executive Officers

34

Compensation Overview

35

Aligning Pay with Performance

35

Our Pay Metrics

36

The Company’s Performance

37

CEO Target Pay Compared to Peers

37

Significant Program-Wide Compensation Decisions in 2018

38

2018 Compensation Program Elements

38

2018 NEO Performance and Compensation Decisions

42

The Compensation Decision-Making Process

44

Benchmarking

45

Independent Compensation Consultant

46

Consideration of Advisory Stockholder Vote on Executive Compensation

46

Compensation Risk Assessment

46

Other Compensation Elements and Information

47

Summary Compensation Table

50

Grants of Plan-Based Awards in 2018

53

Outstanding Equity Awards at 2018 Fiscal Year End

54

Option Exercises and Stock Vested for Fiscal Year 2018

56

Pension Benefits

57

Nonqualified Deferred Compensation

58

Potential Payments Upon Termination or Change-in-Control

58

2018 CEO Pay Ratio

64

Compensation Committee Report

64

Our 2018 Named Executive Officers

The following Compensation Discussion and Analysis describes the 2018 compensation of our NEOs. Our 2018 NEOs were:

THOMAS C.
GENTILE III

President and Chief Executive Officer

SANJAY KAPOOR

Executive Vice President
and Chief Financial Officer

SAMANTHA J. MARNICK

Executive Vice President,
Chief Administration Officer and Strategy

DUANE F. HAWKINS

Senior Vice President; President, Defense and Fabrication Division

JOHN A. PILLA

Senior Vice President, Chief Technology and Quality Officer

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Compensation Overview

Our executive compensation program is designed to enable us to attract, retain, and incentivize executive officers who can deliver short-term performance results and longer-term stockholder value. The following highlights the key items the Compensation Committee considers in the development, review, and approval of the NEOs’ compensation.

Our Compensation Objectives

 

The Company’s executive compensation program is designed to:

1.

Attract, retain, and motivate highly qualified executive officers. The Company aims to deliver compensation that is market-competitive and designed to retain qualified, experienced, and motivated executives in the competitive aerospace and defense industry.

2.

Reward/pay-for-performance. A substantial portion of total compensation for executive officers should be variable and deliver rewards based on Company and individual performance. Variable compensation motivates executives to perform. Company performance is measured against established metrics. Individual performance is measured against pre-established objectives and contributions to Company successes.

3.

Align interests of executive officers with those of the Company’s stockholders. In order to align such interests, metrics for determining Company performance should be aligned to the Company’s financial results and the creation of stockholder value. Variable compensation should focus on the achievement of financial targets such as revenue, free cash flow, and total shareholder return.

4.

Ensure compensation does not encourage inappropriate risk-taking. We mitigate risk-taking by balancing short- and long-term incentives, placing caps on potential payments, incorporating challenging performance goals, diversifying the metrics we use to measure performance, enforcing our stock ownership requirements, and maintaining our clawback policy.

Setting Target Pay

 

The Compensation Committee reviews and approves the target pay levels for our NEOs with respect to salary, our annual cash incentive, and our long-term incentives. In setting these levels, the Compensation Committee reviews peer group compensation levels and broad survey samples provided by the Compensation Committee’s independent compensation consultant. In addition, the Compensation Committee reviews the individual responsibilities, goals, and challenges with respect to the position in question, along with the experience, prior performance, and potential of the individual in question. The Company generally sets total annual direct compensation of the NEOs (consisting of base salary, the annual cash incentive, and long-term incentives) at a target level that is at or around the market median, subject to individual circumstances and exceptions. Additional information about the Company’s peer group and compensation-setting process can be found under “The Compensation Decision-Making Process,” and “Benchmarking” sections.

Aligning Pay with Performance

The Company’s success depends largely on the efforts and contributions of its executives and their teams to deliver strong business results and increase stockholder value. The Company uses a balance of short- and long-term incentives as well as cash and non-cash compensation to reward NEOs for their roles in meeting Company objectives. For either short- or long-term incentives, executive officers have the opportunity to earn in excess of market median levels when performance exceeds expectations. Conversely, if performance falls below expectations, the incentives pay below target levels, if at all.

In 2018, we linked pay with performance through the following variable pay:

Annual Cash Incentive (the “ACI”): a short-term incentive, which is paid in cash annually based on Company and individual performance. Company performance goals include revenue, earnings before interest and taxes, adjusted for certain items (“Adjusted EBIT”), and annual free cash flow, adjusted for certain items (“Adjusted FCF”), each over a one-year period.

Time-Based Restricted Stock: a long-term incentive consisting of an award of restricted Common Stock vesting ratably over three years. While vesting is not tied to performance, the increase or decrease in value that the executive receives between the award’s grant date and vesting date is tied to stock performance.

Performance-Based Restricted Stock: a long-term incentive consisting of an award of restricted Common Stock that will be earned at the end of a three-year performance period based on the Company’s total shareholder return relative to its peer group (“TSR”) and on free cash flow as a percentage of revenue (“FCF Percentage”) over such period.

Additional information on our incentives can be found under “2018 Compensation Program Elements.”

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Our Pay Metrics

The table below explains the metrics we used to measure performance with respect to the Company’s compensation.

Program

Metric

Percentage of

Component /

Opportunity

How Performance is Calculated

Reason for Using Metric

ACI (Company Performance Component)

Revenue

20%

Top-line revenue in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”), measured over a one-year period

Aligns with the Company’s strategy to grow the top line through winning new business with existing and new customers and the Company provides guidance on this metric

Adjusted EBIT*

30%

Adjusted EBIT* consists of earnings before interest and taxes, adjusted for non-core earnings impact, measured over a one-year period

Adjusted EBIT* is a common short-term measure of earnings, demonstrating growth in revenue and ability to control costs

Adjusted FCF*

50%

Adjusted FCF* is calculated by subtracting capital expenditures from GAAP cash from operating activities, measured over a one-year period and adjusted for certain items

Adjusted FCF* is used to align management incentives with the current-year guidance provided to stockholders

Long-Term Incentive Program (Total Award Opportunity)

Stock Price

60%

This portion of the long-term incentive is calculated using a dollar amount, which results in a number of shares based on the price of Common Stock on the third trading day following the earnings call immediately after the grant is approved. Accordingly, the value received upon vesting is directly related to the change in the stock price between the grant date and the vesting date

This metric ties performance of executives’ restricted stock awards directly to stock price performance, thus aligning the interests of executives and stockholders

TSR

20%

Performance is measured based on the ranking of the Company’s TSR, expressed as a percentile, relative to the TSR of the Company’s peer group over a three-year performance period as compared to threshold, target, and maximum performance goals

This metric ties executive interests to stockholder interests and aligns with proxy advisory policies and market trends

FCF Percentage*

20%

Performance is measured based on the Company’s free cash flow* as a percentage of revenue over a three-year performance period as compared to threshold, target, and maximum performance goals

This metric is used to align long-term incentives with a key valuation driver of our business, which is free cash flow.* Since the Company does not provide multi-year free cash flow* guidance, a percentage of sales is used to drive sustained free cash flow* performance consistent with our established long-term goal of 7-9% of sales; hence, the measurement is over a three-year period

* Please see Appendix A for an explanation and reconciliation of these non-GAAP metrics.

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The Company’s Performance

The Company’s one- and three-year total shareholder return compared to its peer group, the Russell 3000 index, and S&P 500 index, is set forth below.

 

Note: TSR is calculated in the chart above using adjusted close prices. Peer TSR is market-cap weighted at the beginning of each period. Three-year TSR is cumulative. The chart above includes data from all members of the Company’s 2016–18 proxy peer group, excluding companies that were acquired during such period (Orbital ATK, B/E Aerospace, Rockwell Collins). For additional information on the companies within our peer group, see “2018 Proxy Peer Group.” Source: S&P’s Capital IQ.

CEO Target Pay Compared to Peers

The target pay of our CEO as compared to the target pay of other CEOs in our peer group is set forth below:

 

Note: Represents 2017 target CEO pay for companies within our peer group and 2018 target CEO pay for the Company.

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Significant Program-Wide Compensation Decisions in 2018

The Compensation Committee met in January 2018 to discuss and implement changes to the Company’s compensation program for the year. In large part, from a programmatic standpoint, the 2018 executive compensation program remained the same as the 2017 program except for the following:

What Changed

Why

Updated vesting terms for Time-Based Restricted Stock awards on retirement, death, and disability:

On retirement, death, or disability, the grantee will fully vest in his or her outstanding restricted stock. Retirement means termination on or after the date when the grantee reaches age 62

To be competitive with market practices

Updated vesting terms for Performance-Based Restricted Stock awards on retirement, death, and disability:

On retirement, the grantee will vest in a prorated portion of his or her award based on the number of days continuously employed during the performance period, as calculated and certified by the Compensation Committee at the end of the applicable performance period. Retirement means termination on or after the date when the grantee reaches age 62. On death or disability, the grantee will vest in a prorated portion of his or her target award based on the number of days continuously employed during the performance period

To be competitive with market practices

Increased threshold, target, and maximum goals on Performance-Based Restricted Stock awards tied to FCF Percentage:*

In 2017, the threshold, target, and maximum goals with respect to FCF Percentage* were 6.0%, 6.7%, and 7.4%, respectively. In 2018, the threshold, target, and maximum goals with respect to FCF Percentage* were 7.0%, 7.75%, and 9.0%, respectively

Incentivize higher levels of performance; better align with market expectations; better align with Company performance targets

*

Please see Appendix A for an explanation and reconciliation of these non-GAAP metrics.

2018 Compensation Program Elements

There are three major components to the Company’s compensation program for NEOs:

Pay Structure

 

 

Compensation

Element

Description

Purpose

FIXED COMPENSATION

Base Salary

Cash compensation based on day-to-day responsibilities

Attracts and retains executive officers


Recognizes responsibilities, experience, and performance

VARIABLE, AT-RISK COMPENSATION

Short-Term ACI

Annual cash incentive paid upon the achievement of Company performance goals relating to revenue, Adjusted EBIT,* and Adjusted FCF,* and individual objectives, each over a one-year period; no guaranteed payout

Motivates and rewards executives with respect to short-term performance


Aligns executive interests with stockholder interests

Long-Term Incentives

Time-Based Restricted Stock Award (60%)

Time-based award vesting over three years

Aids in retention


Aligns executive interests with long-term stockholder value creation


Promotes stock ownership

 

Performance-Based Restricted Stock Awards (40%)

Awards vest on achievement of two equally represented goals: relative TSR and FCF Percentage,* each over a three-year period; no guaranteed payout

Motivates and rewards executives with respect to long-term performance


Aligns executive interests with long-term stockholder value creation


Aids in retention

*

Please see Appendix A for an explanation and reconciliation of these non-GAAP metrics.

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Base Salary

 

Base salary is a fixed cash amount designed to attract, retain, and motivate executive officers. In determining base salary, the Compensation Committee considers market data for comparable roles, experience, skill set, prior positions held, performance, and responsibility level. The Company reviews each NEO’s base salary annually in January (and as circumstances or changes in responsibilities may require) and makes appropriate adjustments to account for performance, additional responsibilities, and market movement. We set base salary amounts as set forth under “Setting Target Pay.”

Annual Cash Incentive

 

The ACI is an annual cash award granted under the Company’s Short-Term Incentive Plan (the “STIP”) under the 2014 Omnibus Incentive Plan, as amended (the “OIP”). Each individual receives a total target ACI that is equal to a percentage of his or her total base salary. For 2018, this target amount was equal to 140% of our CEO’s base salary, and 100% of the other NEOs’ (the “Other NEOs”) base salaries. We set ACI target amounts as set forth under “Setting Target Pay.”

Payout of the ACI depends on the attainment of individual and Company performance goals. Depending on the level of performance achieved, payout can be between 0 — 200% of target. The objectives of the ACI are to support our pay-for-performance philosophy, align the awards with stockholder interests, and motivate executives to achieve the Company’s near-term focus on safety, quality, delivery, and customer focus that drives the Company’s long-term performance.

The performance weighting for the NEOs’ ACIs are as follows:

CEO: 80% Company performance; 20% individual performance

Other NEOs: 75% Company performance; 25% individual performance

With respect to the measurement of the performance components, the Compensation Committee used a scoring scale of 0.0 to 2.0, with 0.0 for unacceptable performance and 2.0 for exceptional performance. Individual scores are calibrated to the Company’s performance score as further described below.

Company Performance

The Company Performance component of each NEO’s 2018 ACI is scored based on the performance of the Company with respect to three quantitative metrics, each over a one-year period:

Revenue, representing 20% of total Company performance

Adjusted EBIT, representing 30% of total Company performance

Adjusted FCF, representing 50% of total Company performance

The manner in which Adjusted EBIT and Adjusted FCF are calculated is described in Appendix A.

In 2018, the Company exceeded its target performance goal with respect to revenue and Adjusted FCF, but did not reach its threshold goal with respect to Adjusted EBIT. As a result, the Compensation Committee determined a 0.89 score had been achieved with respect to Company performance, representing a weighted score of 0.712 for the CEO (representing 80% of his total ACI score), and 0.6675 for each of the Other NEOs (representing 75% of their total ACI scores). The following table summarizes the Company’s actual performance relative to the Company’s threshold, target, and maximum performance goals for 2018:

2018 ACI Company Metrics Performance

Measure

Weighting

Threshold

Target

Maximum

Actual Result

Assessment

Revenue

20%

$7.10 billion

$7.20 billion

$7.30 billion

$7.22 billion

Exceeded Target

Adjusted EBIT*

30%

$975 million

$1.025 billion

$1.075 billion

$880 million

Below Threshold

Adjusted FCF*

50%

$535 million

$550 million

$600 million

$565 million

Exceeded Target

* The manner in which Adjusted EBIT and Adjusted FCF are calculated is described in Appendix A.

Individual Performance

The Individual Performance component of the ACI is intended to further align executive compensation with performance in the Company’s focus areas in any given year by establishing relevant individual performance metrics that relate to each NEO’s assignments. This component was scored based on the achievement of such individual performance goals. Individual scores were calibrated to reflect the Company’s score, which was under the established target of 1.0 for 2018. For example, Mr. Gentile met expectations; however, because the Company score was a 0.89, his individual score was also a 0.89.

To determine the score for the CEO, the Compensation Committee reviewed his annual performance and personal contributions to the Company’s financial and operational results. With respect to the Other NEOs, the Compensation Committee first considered the report and recommendation of the CEO with respect to each person’s performance and score and, subsequently, the Compensation Committee conducted a subjective review of each NEO’s

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contributions to the Company during the fiscal year. With respect to 2018 performance, the NEOs received the following individual performance scores: Gentile: 0.89, Kapoor: 0.89, Marnick: 1.09, Hawkins: 0.75, and Pilla: 1.04.

For additional payout information, please see “2018 ACI Payouts.” Descriptions of the NEOs’ 2018 individual performance contributions are set forth in “2018 NEO Performance and Compensation Decisions.”

2018 ACI Payouts

The formula for determining the 2018 ACIs and the resulting payouts are reflected in the table below:

NEO

Base Salary

($)

(1) 

×

Target

(Percentage

of Base

Salary)

(%)

=

Target

Award

($)

×

Company

Performance

(80% weighting

for CEO; 75%

weighting for

Other NEOs)

 

(2) 

+

Individual

Performance

(20% weighting

for CEO; 25%

weighting for

Other NEOs)

(3) 

=

2018 Total

Payout

($)

Mr. Gentile

1,241,233

 

 

140

 

1,737,726

 

0.7120

 

 

0.1780

 

 

1,546,576

Mr. Kapoor

650,000

 

 

100

 

650,000

 

0.6675

 

 

0.2225

 

 

578,500

Ms. Marnick

522,877

 

 

100

 

522,877

 

0.6675

 

 

0.2725

 

 

491,504

Mr. Hawkins

533,685

 

 

100

 

533,685

 

0.6675

 

 

0.1875

 

 

456,301

Mr. Pilla

456,041

 

 

100

 

456,041

 

0.6675

 

 

0.2600

 

 

422,978

(1)

With respect to all NEOs other than Mr. Kapoor (his salary did not change in 2018), the ACI payout was calculated using a weighted-average base salary that takes into account their salary changes in 2018.

(2)

Reflects a Company score of 0.89 multiplied by the weighting percentage.

(3)

Reflects individual performance scores multiplied by the weighting percentage.

 

Based on Company and individual performance results, the Compensation Committee believes the 2018 NEO ACIs were appropriate and achieved the objectives of the executive compensation program. While the ACIs were earned based on performance in 2018, they were paid out in January 2019. The ACIs are reported as 2018 compensation in the “Non-Equity Incentive Plan Compensation” column of the “Summary Compensation Table.”

Long-Term Incentives

 

Long-term incentives are an important component of compensation, as they provide long-term, equity-based variable incentive compensation in keeping with the Company’s pay-for-performance philosophy for the entire executive group. Long-term incentives are delivered under the Company’s Long-Term Incentive Plan (the “LTIP”) under the OIP. Under the OIP, the Compensation Committee selects eligible persons to receive such awards and determines the nature and amount of each such award. For 2018, each NEO received an annual target LTIP award equal to the percentage of his or her total base salary, at the time of the award, as provided in the table below:

NEO

Base Salary

($)

x

Target (Percentage of Base

Salary)

(%)

=

Target

Award

($)

Mr. Gentile

1,250,000

 

500

 

6,250,000

Mr. Kapoor

650,000

 

300

 

1,950,000

Ms. Marnick

520,000

 

200

 

1,040,000

Mr. Hawkins

535,000

 

230

 

1,230,500

Mr. Pilla

455,000

 

190

 

864,500

The total annual target LTIP award consists of three components:

Time-Based Restricted Stock, representing 60% of the total target award amount;

Performance-Based Restricted Stock tied to relative TSR over a three-year performance period, representing 20% of the total target award amount; and

Performance-Based Restricted Stock tied to FCF Percentage over a three-year performance period, representing 20% of the total target award amount.

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Time-Based Restricted Stock

In 2018, 60% of the target award amount was delivered in the form of a Time-Based Restricted Stock award vesting in three equal installments on each of the first, second, and third anniversaries of the grant date, subject to the recipient being employed by the Company on the vesting date. The Compensation Committee grants Time-Based Restricted Stock awards to assist in retaining NEOs and increase their stock ownership, which further aligns our NEOs’ interests with those of stockholders. Awards are approved by the Compensation Committee in January and granted in February of each year. The number of shares granted is determined based on the average of the opening and closing Common Stock prices on the third trading day after the Company’s earnings release immediately following the date the award is approved by the Compensation Committee.

Dividends on Time-Based Restricted Stock awards accrue from the grant date and are paid out on vesting. If the underlying award is forfeited, the accrued dividends are forfeited as well.

Performance-Based Restricted Stock Tied to Total Shareholder Return

In 2018, 20% of the target award amount was delivered in the form of a Performance-Based Restricted Stock award tied to TSR. Payout of the award is based on the ranking of the Company’s TSR, expressed as a percentile, relative to the TSR of a group of the Company’s peers over a three-year tracking period as compared to threshold, target, and maximum performance goals. Participants are initially granted a number of unvested shares equal to the number of vested shares to which the participant would be entitled upon achievement of the target performance goal. The table below sets forth these performance goals and vesting percentages:

 

 

Threshold*

Target

Maximum

Performance Goal

(Percentile Ranking in Peer Group)

25th

50th

90th

Vesting Percentage

(% of Target Award)

25%

100%

200%

*

If performance is below threshold, payout is zero.

 

For grants made in 2018, the performance period runs from January 1, 2018, to December 31, 2020, and the vesting of the awards is dependent upon the Compensation Committee’s certification of the performance goal being achieved. An individual must be continuously performing services (or deemed to be continuously performing services) throughout the entire performance period, or none of the award will be earned.

For grants made in 2018, the TSR for the Company and each member of its peer group for the tracking period will be determined by calculating the percentage increase in the dividend-adjusted average closing share price for the 20 trading days ending December 31, 2017, and the 20 trading days ending December 31, 2020. If the Company’s TSR percentile ranking falls between the threshold and the target performance goals or the target and the maximum performance goals, the percentage of the award that a participant will receive is interpolated on a straight-line basis. If the Company’s TSR percentile ranking is below the threshold performance goal, the participant will not be entitled to any vested shares, and if the Company’s TSR percentile ranking is equal to or higher than the maximum performance goal, the participant will be entitled to a number of vested shares equal to 200% of the target award. The Compensation Committee may apply negative discretion to the award payout. Dividends on Performance-Based Restricted Stock awards tied to TSR do not accrue until the award vests.

Performance-Based Restricted Stock Tied to FCF Percentage

In 2018, 20% of the target award amount was delivered in the form of a Performance-Based Restricted Stock award tied to FCF Percentage. Payout of the award is based on the Company’s free cash flow as a percentage of revenue over a three-year tracking period as compared to threshold, target, and maximum performance goals. FCF Percentage is a measure of long-term cash generation driven by increasing revenue, reducing costs, improving productivity, and efficiently using capital. Participants are initially granted a number of unvested shares equal to the number of vested shares to which the participant would be entitled on achievement of the target performance goal. The table below sets forth these performance goals and vesting percentages:

 

 

Threshold*

Target

Maximum

Performance Goal

FCF Percentage

7.0%

7.75%

9.0%

Vesting Percentage

(% of Target Award)

25%

100%

200%

*

If performance is below threshold, payout is zero.

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For grants made in 2018, the performance period runs from January 1, 2018, to December 31, 2020, and the vesting of the awards is dependent on the Compensation Committee’s certification of the performance goal being achieved. An individual must be continuously performing services through the entire performance period, or none of the award will be earned.

FCF Percentage will be calculated on a cumulative basis over a three-year period (total free cash flow over three years divided by total revenue over three years). If the calculated percentage falls between the threshold and the target performance goals or the target and the maximum performance goals, the percentage of the award that a participant will receive is interpolated on a straight-line basis. If the Company’s percentage is below the threshold performance goal, the participant will not be entitled to any vested shares, and if the Company’s percentage is equal to or greater than the maximum performance goal, the participant will be entitled to a number of vested shares equal to 200% of the target award. The Compensation Committee may apply negative discretion to the award payout. Dividends on Performance-Based Restricted Stock awards tied to FCF Percentage do not accrue until the award vests.

For an explanation and reconciliation of FCF Percentage, please see Appendix A.

2018 NEO Performance and Compensation Decisions

Mr. Gentile, President and Chief Executive Officer

 

2018 Performance: Mr. Gentile’s 2018 individual performance met expectations. He led the Company to overcome multiple supply chain challenges and achieve financial and operational results that aligned with our original plans. He reduced Company risk and strengthened our partnership with Boeing by securing a long-term contract that extends into the next decade, executed a new growth strategy by securing newly contracted work content on several programs, and continued to drive significant improvement in supply chain costs.

2018 Compensation Decisions:

Salary: In January 2018, the Compensation Committee approved an increase from $1,150,000 to $1,250,000, effective February 2, 2018. The increase was based on an evaluation of Mr. Gentile’s performance and target compensation as compared to the Company’s peer group.

Annual Cash Incentive: No changes were made to Mr. Gentile’s target during 2018. Mr. Gentile’s target was 140% of salary. In January 2019, based on a review of Mr. Gentile’s and the Company’s performance during 2018, the Compensation Committee approved an ACI of $1,546,576.

Long-Term Incentives: The Compensation Committee approved an increase of Mr. Gentile’s target amount from 450% to 500% effective February 2, 2018. The increase was based on an evaluation of Mr. Gentile’s performance and target compensation as compared to the Company’s peer group. In February 2018, Mr. Gentile was granted awards with an aggregate grant date fair value of $6,250,140. Aggregate grant date fair values were determined as set forth in footnote (6) to the “Summary Compensation Table.”

Mr. Kapoor, Executive Vice President and Chief Financial Officer

 

2018 Performance: Mr. Kapoor’s 2018 individual performance met expectations. Mr. Kapoor delivered significant improvements in working capital, refinanced our debt, and drove stockholder value by executing an accelerated share repurchase plan. Mr. Kapoor retired from the position of Executive Vice President and Chief Financial Officer on January 9, 2019.

2018 Compensation Decisions:

Salary: Mr. Kapoor’s salary remained at $650,000.

Annual Cash Incentive: No changes were made to Mr. Kapoor’s target during 2018. Mr. Kapoor’s target was 100% of salary. In January 2019, based on a review of Mr. Kapoor’s and the Company’s performance during 2018, the Compensation Committee approved an ACI of $578,500.

Long-Term Incentives: The Compensation Committee approved an increase of Mr. Kapoor’s target amount from 280% to 300% effective February 2, 2018. The increase was based on an evaluation of Mr. Kapoor’s performance and target compensation as compared to the Company’s peer group. In February 2018, Mr. Kapoor was granted awards with an aggregate grant date fair value of $1,950,174. Aggregate grant date fair values were determined as set forth in footnote (6) to the “Summary Compensation Table.”

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Ms. Marnick, Executive Vice President and Chief Administration Officer

 

2018 Performance: Ms. Marnick’s 2018 individual performance exceeded expectations. She successfully executed the Company’s growth strategy and delivered substantial new business wins, realigned and developed senior talent, significantly improved fringe costs, secured critical government incentives for growth, executed significant union contract extensions, led Company culture change, and improved key stakeholder relationships.

2018 Compensation Decisions:

Salary: In January 2018, the Compensation Committee approved an increase from $490,000 to $520,000, effective February 2, 2018. The increase was based on an evaluation of Ms. Marnick’s performance, level of responsibility, and target compensation as compared to the Company’s peer group. In October 2018, the Compensation Committee approved an increase from $520,000 to $550,000, effective October 23, 2018. The increase was based on the addition of responsibilities to Ms. Marnick’s role, including strategy and business and regional jets.

Annual Cash Incentive: No changes were made to Ms. Marnick’s target during 2018. Ms. Marnick’s target was 100% of salary. In January 2019, based on a review of Ms. Marnick’s and the Company’s performance during 2018, the Compensation Committee approved an ACI of $491,504.

Long-Term Incentives: The Compensation Committee approved an increase of Ms. Marnick’s target amount from 190% to 200% effective February 2, 2018. The increase was based on an evaluation of Ms. Marnick’s performance, level of responsibility, and target compensation as compared to the Company’s peer group. In February 2018, Ms. Marnick was granted awards with an aggregate grant date fair value of $1,040,241. Aggregate grant date fair values were determined as set forth in footnote (6) to the “Summary Compensation Table.” In October 2018, the Compensation Committee approved an increase of Ms. Marnick’s target amount from 200% to 215% effective October 23, 2018 (to affect the long-term incentives to be granted in future years). The increase was based on the addition of responsibilities to Ms. Marnick’s role, including strategy and business and regional jets.

Mr. Hawkins, Senior Vice President; President, Defense and Fabrication Division

 

2018 Performance: Mr. Hawkins’ 2018 individual performance met expectations overall. Despite multiple challenges in the Boeing 737 production line in 2018, he helped the line recover and ended the year strong on deliveries. He successfully exceeded expectations on defense programs, resulting in growth to the Company’s defense business.

2018 Compensation Decisions:

Salary: In January 2018, the Compensation Committee approved an increase from $520,000 to $535,000, effective February 2, 2018. The increase was based on an evaluation of Mr. Hawkins’ performance, level of responsibility, and target compensation as compared to the Company’s peer group.

Annual Cash Incentive: No changes were made to Mr. Hawkins’ target during 2018. Mr. Hawkins’ target was 100% of salary. In January 2019, based on a review of Mr. Hawkins’ and the Company’s performance during 2018, the Compensation Committee approved an ACI of $456,301.

Long-Term Incentives: The Compensation Committee approved an increase of Mr. Hawkins’ target amount from 220% to 230% effective February 2, 2018. The increase was based on an evaluation of Mr. Hawkins’ performance, level of responsibility, and target compensation as compared to the Company’s peer group. In February 2018, Mr. Hawkins was granted awards with an aggregate grant date fair value of $1,230,603. Aggregate grant date fair values were determined as set forth in footnote (6) to the “Summary Compensation Table.”

Mr. Pilla, Senior Vice President, Chief Technology and Quality Officer

 

2018 Performance: Mr. Pilla’s 2018 individual performance exceeded expectations. He established new research and technology strategies positioning Spirit to take on new commercial and defense packages. Mr. Pilla also led Spirit engineering and quality teams in factory automation efforts and initiatives that increased the factories’ ability to manage rate growth in the future.

2018 Compensation Decisions:

Salary: In January 2018, the Compensation Committee approved an increase from $425,000 to $455,000, effective February 2, 2018. The increase was based on an evaluation of Mr. Pilla’s performance, level of responsibility, and target compensation as compared to the Company’s peer group. In October 2018, the Compensation Committee approved an increase from $455,000 to $475,000, effective October 23, 2018. The increase was based on an evaluation of Mr. Pilla’s performance, additional level of responsibility, and target compensation as compared to the Company’s peer group.

Annual Cash Incentive: No changes were made to Mr. Pilla’s target during 2018. Mr. Pilla’s target was 100% of salary. In January 2019, based on a review of Mr. Pilla’s and the Company’s performance during 2018, the Compensation Committee approved an ACI of $422,978.

Long-Term Incentives: No changes were made to Mr. Pilla’s target during 2018. Mr. Pilla’s target amount was 190%. In February 2018, Mr. Pilla was granted awards with an aggregate grant date fair value of $864,680. In October 2018, Mr. Pilla was granted a Time-Based Restricted Stock award with an aggregate grant date fair value of $500,064. Aggregate grant date fair values were determined as set forth in footnote (6) to the “Summary Compensation Table.”

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The Compensation Decision-Making Process

The Compensation Committee is responsible for establishing, implementing, and monitoring compliance with the Company’s compensation objectives. Further, the Compensation Committee is responsible for setting compensation for, and reviewing performance of, the Company’s executive officers. Pursuant to its charter, the Compensation Committee has the authority to delegate its responsibilities to such subcommittees as it deems appropriate, so long as the subcommittee is solely comprised of one or more members of the Compensation Committee. In setting executive officer compensation, the Compensation Committee takes into consideration the following:

The CEO’s self-assessment and performance review of the Other NEOs;

The Compensation Committee’s and Board’s views of the NEOs’ performance;

The counsel and recommendations of the Company’s CEO and Chief Administration Officer;

Recommendations of other members of the Compensation Committee;

Results from benchmarking against the Company’s peer group and survey data; and

The analysis and consulting advice of its independent compensation consultant.

Generally, the Compensation Committee strives for internal equity among the Company’s NEOs and accordingly, the types of compensation and benefits offered to the Company’s NEOs are consistent among the group. The Compensation Committee continues to examine existing and new compensation programs and practices to ensure that the Company’s compensation programs remain appropriate and consistent with the Company’s overall objectives and market practice.

The chart below reflects the annual compensation-setting process by regularly scheduled meeting of the Compensation Committee. In addition to the following, the CEO’s performance, along with all Company performance metrics used in the ACI or long-term incentives, are monitored and discussed quarterly.

 

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Benchmarking

Each year, the Compensation Committee, with the assistance of management and the independent compensation consultant, reviews external market data in order to determine the competitiveness of our compensation packages, highlight trends and regulatory implications, and develop incentive plan design alternatives. The market data reviewed is from the Company’s peer group and nationally recognized published survey data.

2018 Proxy Peer Group 

 

The Company uses its peer group as a reference point for compensation design and award decisions. The Company’s peer group consists of companies similar to Spirit in size and operations (emphasizing aerospace and defense and auto-component manufacturers) and/or companies that compete with Spirit for executive talent. For 2018, the Company’s peer group was as follows (the companies are ranked by revenue and all ticker symbols are for the NYSE):

Company Name

2017 Revenue

($ in billions)

Market Cap as of 12/31/2017

($ in billions)

Textron (TXT)

14.2

14.9

Ingersoll-Rand (IR)

14.2

22.3

Arconic (ARNC)

13.0

13.1

Parker-Hannifin Corporation (PH)

12.0

26.6

Borg Warner (BWA)

9.8

10.8

L3 Technologies (LLL)

9.6

15.5

Tenneco (TEN)

9.3

3.0

Huntington Ingalls (HII)

7.4

10.7

Spirit AeroSystems Holdings (SPR)

7.0

10.1

Harris Corp (HRS)

5.9

16.9

Terex (TEX)

4.4

4.1

Triumph Group (TGI)

3.5

1.4

Teledyne Technologies (TDY)

2.6

6.4

Moog (MOG-A)

2.5

3.1

Curtiss-Wright (CW)

2.3

5.4

Esterline Technologies Corporation (ESL)

2.0

2.2

Changes to Proxy Peer Group for 2019

 

In January 2019, the Compensation Committee evaluated the Company’s peer group and added Hexcel (HXL) to the peer group, effective with the Performance-Based Restricted Stock awards tied to TSR that were granted in February 2019.

Survey Data

 

In addition to benchmarking using the peer group, the Company also uses a broad survey sample from the independent compensation consultant’s executive compensation survey. The survey analysis considers companies in relevant industries (aerospace and defense, machinery, auto-component, and electrical equipment) as well as companies in other industries, when necessary, to complement data limitations. Survey data was size-adjusted to approximate the Company’s revenue either through regression or by limiting the survey sample to comparably sized companies. This information was used by the Compensation Committee in establishing the compensation packages and target goals for the NEOs.

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Independent Compensation Consultant

The Compensation Committee’s Charter allows the committee to engage an independent compensation consultant to advise on executive compensation matters. For 2018, the Compensation Committee engaged Willis Towers Watson directly for the purpose of providing analysis and advice with respect to compensation matters. The Compensation Committee has determined, after considering criteria from the SEC and NYSE, that Willis Towers Watson does not have any conflicts of interest that would prevent objectivity.

Consideration of Advisory Stockholder Vote on Executive Compensation

The Company believes it is appropriate to seek and reflect the views of its stockholders on the design and effectiveness of the Company’s executive compensation program. Accordingly, consistent with the Company’s most recent say-on-pay frequency vote in April 2017, the Company holds an annual say-on-pay vote. At the Company’s 2018 annual meeting of stockholders, approximately 90% of stockholders present in person or by proxy voted in favor of the Company’s executive compensation programs. The Compensation Committee takes the annual say-on-pay proposal voting results into consideration when making future decisions regarding executive compensation.

Compensation Risk Assessment

In October each year, and as otherwise deemed necessary, the Compensation Committee assesses risks presented by our compensation program and award structures. This assessment is used to determine whether any of our compensation components incentivize executives to take risks that are not in the Company’s or stockholders’ best interests. In 2018, our Compensation Committee reviewed the following risk factors relative to our current compensation programs:

Senior talent acquisition and the ability to recruit and retain talent at market-based compensation levels.

Senior talent loss due to misalignment of strategic decisions and incentives, including balancing long-term incentives with the investment requirement for long-term objectives.

Matching compensation to Company performance in relation to meeting stockholder expectations to balance short- and long-term incentives to achieve growth strategies.

Potential for material restatement of earnings to impact incentive plan calculations.

Clawback policy requirements aligned with market in regard to talent recruitment and retention.

Potential for unforeseen one-time events beyond management’s control that affect incentive plan calculations.

Potential for management decisions based on short-term objectives unbalanced with long-term Company performance.

Potential for unrealized talent investment due to underperforming individuals.

After reviewing our current compensation program and award structures, the Compensation Committee determined that our program does not incentivize executives to take such risks in light of the following features:

We diversify the compensation delivered to executives — the individual components and performance goals each incentivize different behaviors (short-term focus, long-term focus, etc.) in an attempt to balance our executives’ interests;

We have maximum payouts, or caps, on our performance-based compensation — the highest amount that can be paid with respect to our ACIs or performance-based long-term incentives is 200%;

The Compensation Committee reserves the right to exercise negative discretion over performance-based awards;

We deliver compensation using several vehicles, including cash, stock, and perquisites;

We maintain a clawback policy that allows us to recover compensation awarded based on certain improper conduct by executives;

Our NEOs and other executives must comply with stringent stock ownership requirements; and

We have engaged an independent compensation consultant to advise us on compensation practices.

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Other Compensation Elements and Information

Benefits and Perquisites

 

In addition to the four basic compensation elements, we provide our NEOs with the additional benefits and perquisites described below. Benefits and perquisites received by NEOs are included in the “All Other Compensation” column of the “Summary Compensation Table.” These benefits are based on an assessment of benefits offered by our peers and competitors and are important for retaining the Company’s executive officers.

Benefit/Perquisite

Explanation

Retirement and Savings Plan (the “RSP”)

The RSP is a tax-qualified defined contribution plan for certain eligible salaried employees. The Company makes both matching and non-matching contributions under the RSP.


Matching: The Company matches 75% of the employee’s contributions up to a maximum of 6% of the employee’s base pay (provided the employee contributes 8%). The matching contributions are immediately 100% vested.


Non-Matching: The Company makes an additional, non-matching contribution following the end of each calendar year based on an employee’s age and vesting service, provided that the employee is employed by the Company on December 31 of the applicable year and has earned a year of vesting service. If age plus vesting service totals less than 60, employees receive a contribution equal to 1.5% of base salary; if age plus vesting service totals at least 60 but less than 80, employees receive a contribution equal to 3% of base salary; and if age plus vesting service totals 80 or more, employees receive a contribution equal to 4.5% of base salary. These contributions are 25% vested at two years, 50% vested at three years, 75% vested at four years, and 100% vested at five years of vesting service.


Transition Contribution: An additional contribution is available to employees who were previously Boeing employees and meet certain other requirements. Other than Mr. Pilla, none of the NEOs is eligible for this additional contribution. Mr. Pilla receives an annual transition contribution amount of 3.5% of base salary. All such contributions are vested immediately as Mr. Pilla has met the five-year service requirement. The transition contribution will cease after 2020, with final payment for the first six months of 2020 made in 2021.

Deferred Compensation Plan (the “DCP”)

This nonqualified plan allows eligible Spirit employees, including each of our NEOs, to defer receipt of a portion of their base salary or ACI. In addition, the DCP allows for discretionary contributions by the Company into a separate account in the DCP. Deferred amounts and discretionary Company contributions are credited with a rate of return equal to 120% of the applicable federal long-term rate for October of the prior fiscal year. For 2019, the interest crediting rate is 3.59%.

Perquisite Allowance Plan

Under the Company’s Perquisite Allowance Plan, the CEO receives an annual allowance of $25,000, while the Other NEOs receive an annual allowance of $13,000. Participants may select the perquisite items to be funded from their allowances subject to certain limitations set forth in the Perquisite Allowance Plan. Any portion of a participant’s annual allowance not used by the end of the applicable calendar year is forfeited except upon a qualifying termination in a change-in-control. See “Potential Payments Upon Termination or Change-in-Control.”

Executive Security

Some of our NEOs receive personal or home security provisions. These provisions are based on business-related security concerns and have been assessed by an independent security consulting firm and deemed necessary and appropriate for the protection of the Company’s NEOs.

Personal Corporate Aircraft Use

For security reasons, the Company’s CEO and certain executives are authorized to use the corporate aircraft for a limited amount of personal travel. Other NEOs do not use the corporate aircraft for personal travel unless approved by the CEO. No tax gross-ups are provided for this benefit.

Relocation Benefits

We provide relocation assistance to employees including our NEOs. In 2018, the Company provided Mr. Gentile relocation assistance for certain qualified relocation expenses. Where appropriate, the Company provides a gross-up to cover tax liabilities associated with relocation assistance.

Post-Retirement Medical Coverage

The Company has two programs for post-retirement medical coverage. Under the first program, benefits are available to employees who were previously Boeing employees and who retire from the Company between the ages of 62 and 65 (and who meet certain other requirements). Under the second program, benefits are available to (i) employees who retire from the Company at age 55 or later with ten years of service to the Company, and (ii) employees who retire from the Company at age 60 or later with five years of service to the Company. Under either program, benefits cease at age 65. Other than Mr. Pilla, none of our NEOs is currently eligible for this coverage.

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Discontinued and Frozen Benefit Plans and Arrangements

 

The Company pays certain benefits through discontinued and frozen benefit plans and arrangements, which include the Supplemental Executive Retirement Plan (the “SERP”) and the Pension Value Plan (the “PVP”). A significant portion of Spirit’s operations related to Boeing aerostructures was owned and controlled by Boeing until 2005. In connection with the acquisition of these assets from Boeing, the Company adopted the SERP in order to attract certain employees from Boeing. The SERP provides supplemental, nonqualified retirement benefits to executives who (1) had their benefits transferred from a Boeing nonqualified plan to the SERP, and (2) did not elect to convert their SERP benefit into phantom stock units as of June 17, 2005. Benefits under this plan were frozen as of the date of the Boeing acquisition. There are no SERP annuity benefits presently payable to any of the NEOs. Mr. Pilla elected to convert his SERP benefit as of June 17, 2005, into 16,023 phantom stock units.

Also in connection with the Boeing acquisition, the Company adopted the PVP for certain eligible employees of Boeing, and allowed for the transfer of pension values from Boeing pension plans. The PVP is a frozen plan and no additional employees are becoming participants in the PVP and no current participants are accruing any additional benefits (other than interest credits). The PVP is fully paid for by the Company, and the Company’s employees are vested after reaching five years of service. Other than Mr. Pilla, none of the NEOs received benefits under the PVP or SERP in 2018 or is eligible to participate in such plans. Mr. Pilla’s participation in the PVP is detailed under “Pension Benefits.” Mr. Pilla’s phantom stock units under the SERP are described under “Nonqualified Deferred Compensation.”

Post-Termination Payments and Change-in-Control Compensation

 

The Company believes competitive severance protection is an appropriate incentive in attracting and retaining executive talent. The Company has provided for post-termination severance compensation through certain individual employment agreements and has also agreed to individual severance arrangements at the time of termination of employment, taking into account the specific facts and circumstances of termination. Certain of our employment agreements provide benefits upon a change-in-control.

Further, certain of the Company’s benefit plans provide for compensation upon termination or in connection with a change-in-control. Beginning in 2018, the ACI, long-term incentives, and Perquisite Allowance Plan are subject to a double trigger change-in-control provision.

You can find additional information regarding the Company’s practices in providing compensation in connection with termination of employment under the heading “Potential Payments Upon Termination or Change-in-Control.”

Stock Ownership Requirements

 

The Company maintains stock ownership requirements for its NEOs and other senior executives to further promote alignment of management and stockholder interests. The ownership requirements (measured by the value of the Company’s stock required to be held) are based on a multiple of base salary tied to pay grade. The stock ownership requirements establish the following target levels for Company stock ownership:

Officer Level

Target Level

(Multiple of Annual Base Salary)

Chief Executive Officer

5x

Executive Vice Presidents/Senior Vice Presidents

3x

Vice Presidents

1x

 

The stock ownership requirements mandate that the CEO and other senior officers accumulate their required positions within the later of: (i) five years after the adoption of the guidelines, or (ii) five years after being hired or promoted into the officer position. The Company believes that five years provides a reasonable goal for executives to accumulate shares through earned incentive awards.

During the five-year accumulation period, all NEOs are expected to continuously accumulate qualifying equity until they meet the minimum stock ownership guideline.

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The Company reviews ownership positions on an annual basis. Based on the review conducted in 2018, the Company determined that the NEOs own appropriate amounts of Company stock in light of the minimum stock ownership requirements and the portions of their respective accumulation periods that have passed. The Company may restrict any officer from liquidating any of his or her then-current holdings in Company stock, except for those shares that are sold to meet Company tax-withholding requirements. The Company may modify or waive the requirements of the guidelines at its discretion if it determines that compliance would result in severe hardship for an officer. Note that the Company’s insider trading policy prohibits Company employees from engaging in short sales of the Company’s securities and entering into short-term trades involving the Company’s securities. Further, the Company’s insider trading policy also prohibits employees from pledging the Company’s securities as collateral for a loan.

Accounting and Tax Treatment of Compensation

 

When evaluating the Company’s compensation programs, the Company takes into account the various accounting, tax, and disclosure rules associated with such matters, including Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”) and Section 409A of the Code. Section 162(m) generally imposes a $1 million limit on the amount that a public company may deduct for compensation paid to “covered employees” each year. The Compensation Committee generally seeks to award compensation that would allow it to preserve tax deductions; however, the Compensation Committee reserves the right to set compensation at the levels and in the manner (tax-deductible or not) that it determines to be in the best interests of the Company and its stockholders.

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Summary Compensation Table

The following table summarizes the compensation of the NEOs for the last three fiscal years.

Name and

Principal Position

Year

Salary

($)

(4) 

Bonus

($)

(5) 

Stock

Awards

($)

(6) 

Non-Equity

Incentive Plan

Compensation

($)

(7) 

Change in

Pension Value

and

Nonqualified

Deferred

Compensation

Earnings

(8) 

All Other

Compensation

($)

(9) 

Total

($)

Thomas C. Gentile III

President and CEO(1)

2018

1,241,233

 

 

 

6,250,140

 

1,546,576

 

 

 

861,744

 

9,899,693

2017

1,144,223

 

 

 

5,175,087

 

2,578,703

 

 

 

1,009,385

 

9,907,398

2016

770,773

 

 

 

3,000,045

 

2,234,460

 

 

 

169,476

 

6,174,754

Sanjay Kapoor

EVP and CFO

2018

650,000

 

 

 

1,950,174

 

578,500

 

 

 

81,541

 

3,260,215

2017

650,000

 

 

 

1,820,067

 

1,046,500

 

 

 

39,148

 

3,555,715

2016

624,229

 

 

 

2,696,650

 

973,882

 

 

 

127,208

 

4,421,969

Samantha J. Marnick

EVP, CAO and Strategy

2018

522,877

 

 

 

1,040,241

 

491,504

 

 

 

149,309

 

2,203,930

2017

490,006

 

 

 

931,048

 

788,410

 

 

 

141,475

 

2,350,939

2016

460,465

 

 

 

1,405,583

 

719,204

 

 

 

213,332

 

2,798,584

Duane F. Hawkins

SVP; President, Defense and Fabrication Division(2)

2018

533,685

 

 

 

1,230,603

 

456,301

 

 

 

45,630

 

2,266,218

2017

517,691

 

 

 

1,144,036

 

831,827

 

 

 

33,657

 

2,527,211

2016

497,684

 

 

 

1,000,076

 

756,097

 

 

 

57,905

 

2,311,762

John A. Pilla

SVP, Chief Technology and Quality Officer(3)

2018

456,041

 

 

 

1,364,744

 

422,978

 

 

 

61,064

 

2,304,827

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

                
(1)

Mr. Gentile was appointed Executive Vice President and Chief Operating Officer of the Company effective April 1, 2016.

(2)

Mr. Hawkins served as the Company’s SVP and GM, Boeing, Defense, Regional/Jet Programs, and Global Customer Support until October 1, 2018. Effective October 1, 2018, Mr. Hawkins was given responsibility for defense and fabrication operations.

(3)

Mr. Pilla was not an NEO in the fiscal years ended December 31, 2017 and 2016. Accordingly, no information is displayed for those years.

(4)

For NEOs who received salary increases during the fiscal year, these numbers reflect a weighted amount based on the portions of the years for which their new compensation arrangements applied.

(5)

Because the Annual Cash Incentive (“ACI”) has mandatory performance measures that must be achieved for any payout, the ACI is shown in the “Non-Equity Incentive Plan Compensation” column of the table.

(6)

Amounts shown represent the aggregate grant date fair value of awards granted to NEOs during the applicable year, as determined in accordance with FASB ASC Topic 718. These grant date fair values represent the accounting expense to be recorded for the award and are not reflective of the actual value that may be recognized by an NEO with respect to the award. In 2018, each NEO received a Time-Based Restricted Stock award (“RS”), a Performance-Based Restricted Stock award tied to TSR (“PB-TSR”), and a Performance-Based Restricted Stock award tied to FCF Percentage (“PB-FCF”). The assumptions made by the Company in calculating these amounts are incorporated herein by reference to Note 18 to the Company’s consolidated financial statements in the Company’s Annual Report on Form 10-K for 2018. The grant date fair value of the RSs is equal to the number of shares granted multiplied by $89.32, the average of the opening and closing prices of Common Stock on February 7, 2018, the grant date. The grant date fair value of the PB-TSRs is equal to the number of shares granted at target multiplied by $112.55, which was determined using a Monte Carlo simulation model based on the probable ranking of the Company’s TSR relative to the TSR of a group of the Company’s peers. If it is assumed that the maximum level of performance is achieved with respect to the PB-TSRs (and thus the maximum number of shares are awarded to the NEOs), using the average of the opening and closing prices of Common Stock on the grant date, the value of the PB-TSRs would be as follows: Mr. Gentile: $1,984,154; Mr. Kapoor: $619,166; Ms. Marnick: $330,305; Mr. Hawkins: $390,686; and Mr. Pilla: $274,570. The grant date fair value of the PB-FCFs is equal to the number of shares granted at target multiplied by $89.18, the average of the opening and closing prices of Common Stock on the grant date, adjusted for dividends (as dividends do not accrue on PB-FCFs until vesting). If it is assumed that the maximum level of performance is achieved with respect to the PB-FCFs (and thus the maximum number of shares are awarded to the NEOs), using the average of the opening and closing prices of Common Stock on the grant date, the value of the PB-FCFs would be as follows: Mr. Gentile: $2,503,997; Mr. Kapoor: $781,371; Ms. Marnick: $416,767; Mr. Hawkins: $493,046; and Mr. Pilla: $346,383. For additional information on the awards, see “2018 Compensation Program Elements.” In addition, Mr. Pilla’s amount includes the grant date fair value of an RS of 6,135 shares of Common Stock received on October 23, 2018. The same assumptions set forth above apply. The grant date fair value of this RS is equal to the number of shares granted multiplied by $81.51, the average of the opening and closing prices of Common Stock on October 23, 2018, the grant date.

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(7)

Represents ACIs earned by the NEOs.

(8)

With respect to change in pension value, no amount is shown for Mr. Pilla as there was an aggregate decrease of $28,983 in the actuarial present value of Mr. Pilla’s accumulated benefits under the Pension Value Plan during the year. This amount was determined using interest rate and mortality rate assumptions consistent with those used in our audited financial statements. For 2018, Mr. Pilla’s decrease is due largely to the increase in the applicable discount rate from December 31, 2017, to December 31, 2018. Additional information regarding our Pension Value Plan is set forth in “Pension Benefits.” With respect to nonqualified deferred compensation earnings, none of the NEOs received any earnings on their deferred compensation based on above-market or preferential rates.

(9)

The following table shows “All Other Compensation” amounts for our NEOs in 2018:

 

Name

Life

Insurance

($)

(a) 

 

Financial

and Tax

Services

($)

(b) 

 

Personal

Aircraft

Usage

($)

(c) 

 

Personal

Travel

Expenses

($)

(d) 

 

Personal

Security

($)

(e) 

 

Relocation

Expenses

and

Gross-Ups

($)

(f) 

 

Deferred

Compensation

Plan

Contributions

($)

(g) 

 

Company

Contributions

Under Tax-

Qualified

Contribution

Plan

($)

(h) 

 

Other(i)

($)

 

Total

($)

Thomas C. Gentile III

816

 

16,600

 

56,376

 

 

 

 

 

124,843

 

600,000

 

30,375

 

32,734

 

861,744

Sanjay Kapoor

816

 

 

 

32,257

 

13,000

 

1,091

 

 

 

 

 

33,375

 

1,002

 

81,541

Samantha J. Marnick

816

 

975

 

4,068

 

12,025

 

10,200

 

 

 

100,000

 

21,224

 

 

149,309

Duane F. Hawkins

816

 

13,000

 

4,068

 

 

 

1,091

 

 

 

 

 

26,654

 

 

 

45,630

John A. Pilla

743

 

 

 

 

 

9,463

 

 

 

 

 

 

 

47,322

 

3,537

 

61,064

(a)

Amounts shown reflect Company contributions toward group life insurance.

(b)

Amounts shown reflect financial, tax-preparation, and other related services paid for by the Company.

(c)

Amounts shown reflect the incremental cost to the Company of personal usage of its corporate aircraft. The incremental cost to the Company for personal aircraft usage is determined by dividing direct operating costs per aircraft by the total number of flight hours per aircraft, resulting in a cost per hour, and multiplying the cost per hour by the hours of personal usage. Direct operating costs include variable costs less revenue derived from charter flights. Variable costs include fuel, maintenance expenses, parts and supplies, landing fees, ground services, catering, and crew expenses associated with such use, including those associated with “deadhead” flights related to such use. Because corporate aircraft is used primarily for business travel, the methodology excludes fixed costs that do not change based on usage. Fixed costs include pilot salaries, the purchase or lease costs of the aircraft, and the cost of maintenance not related to personal travel. Executives, their families, and invited guests occasionally fly on the corporate aircraft as additional passengers on business flights. In those cases, the aggregate incremental cost to the Company is a de minimis amount, and as a result, no amount is reflected in the Summary Compensation Table. Executives, directors, their families, and invited guests also occasionally fly on the corporate aircraft as additional passengers on personal flights that are attributed to another executive, in which case the entire incremental cost is allocated to the executive who arranged for the personal flight. The Company does not grant bonuses to cover, reimburse, or “gross-up” any income tax owed for personal travel on corporate aircraft.

(d)

Amounts shown reflect the NEOs’ personal travel expenses (or travel expenses of their spouses) and personal commercial flights paid for by the Company.

(e)

Amounts shown reflect the incremental cost of personal or home security services for the NEOs that were deemed to be necessary and appropriate based on risk assessments performed by an independent security firm.

(f)

Amounts shown reflect relocation expenses reimbursed by the Company and associated tax gross-ups.

(g)

Amounts shown reflect Company contributions to the accounts of its eligible NEOs under the DCP. See “Other Compensation Elements and Information — Benefits and Perquisites.”

(h)

Amounts shown reflect matching and non-matching contributions made by the Company under the RSP. See “Other Compensation Elements and Information — Benefits and Perquisites.”

(i)

For Mr. Gentile, amounts shown reflect executive physical costs of $2,750, costs relating to personal use of country club memberships of $5,036, personal driving fees of $16,548, and $8,400 for the value of forfeited shares in connection with Mr. Gentile’s resignation from a private company’s board of directors (such value was claimed by Mr. Gentile through the Company’s Perquisite Allowance Plan). For Messrs. Kapoor and Pilla, amounts shown reflect costs relating to personal use of a country club membership.

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Employment Agreements

 

Spirit has employment agreements with all of its NEOs except for Mr. Pilla. A brief description of certain material terms is below.

Mr. Gentile’s Employment Agreement

On February 13, 2016, we entered into an employment agreement, effective April 1, 2016, with Mr. Gentile with respect to his position as Executive Vice President and Chief Operating Officer. Pursuant to the employment agreement, Mr. Gentile received a base salary of $1,000,000 per year, which could be changed based on performance. In addition, Mr. Gentile was eligible for an ACI equal to 140% of his base salary and an annual target LTIP award equal to 300% of his base salary. Mr. Gentile was also entitled to participate in the executive relocation program and receive an annual DCP Company contribution of $600,000.

The Company granted Mr. Gentile a sign-on award of $3,000,000 in shares of restricted stock. Half of the award vested on April 1, 2017, and the other half vested on April 1, 2018.

Effective August 1, 2016 (in recognition of Mr. Gentile’s appointment as President and CEO), Mr. Gentile’s base salary was increased to $1,100,000 and his annual target LTIP award was increased to 400% of his annual base salary. Effective February 3, 2017, Mr. Gentile’s base salary was increased to $1,150,000, and his annual target LTIP award was increased to 450% of his base salary. In January 2018, Mr. Gentile’s salary was increased to $1,250,000, and his annual target LTIP award was increased to 500%. In January 2019, Mr. Gentile’s salary was increased to $1,300,000, his annual target ACI award was increased to 145% of his annual base salary, and his annual target LTIP award was increased to 550% of his annual base salary.

Potential payments and termination events under Mr. Gentile’s employment agreement are described under “Potential Payments Upon Termination or Change-in-Control — Employment Agreements.”

Mr. Kapoor’s Employment Agreement

On August 23, 2013, we entered into an employment agreement, effective September 23, 2013, with Mr. Kapoor with respect to his position as Senior Vice President and Chief Financial Officer. The agreement provided for a three-year initial term and would be automatically extended for successive one-year periods thereafter. Pursuant to the employment agreement, Mr. Kapoor was entitled to a base salary of $525,000, which could be changed based on performance. In addition, Mr. Kapoor was eligible for an ACI equal to 100% of his base salary, an annual target LTIP award of 200% of his base salary, and, from time to time, a target discretionary bonus in the form of cash or equity of 10% of earned base salary. Mr. Kapoor was also entitled to participate in the executive relocation program.

The Company granted Mr. Kapoor $2,000,000 in restricted stock as a sign-on award, which fully vested in 2017. In addition, Mr. Kapoor received a cash signing bonus of $150,000 to be paid within 30 days of the effective date, and an additional cash signing bonus of $100,000 to be paid on the first pay period following the first anniversary of the effective date.

Effective January 30, 2015, Mr. Kapoor’s base salary was increased to $565,000. Effective February 5, 2016, Mr. Kapoor’s base salary was increased to $600,000, and his annual target LTIP award was increased to 220% of his base salary. In May 2016, the Board increased Mr. Kapoor’s base salary to $650,000 and his annual target LTIP award to 280% of his base salary. On July 26, 2016, Mr. Kapoor’s title was changed to Executive Vice President and Chief Financial Officer. In January 2018, Mr. Kapoor’s annual target LTIP award was increased to 300% of his base salary.

Potential payments and termination events under Mr. Kapoor’s employment agreement are described under “Potential Payments Upon Termination or Change-in-Control — Employment Agreements.” Mr. Kapoor retired from the position of Executive Vice President and Chief Financial Officer on January 9, 2019.

Other Employment Agreements

Both Ms. Marnick and Mr. Hawkins have employment agreements with the Company. However, both of their roles have changed significantly since the employment agreements were entered into, and all termination benefits expressly provided by the agreements have expired. Accordingly, the Company does not believe a description of the terms of such agreements is necessary to understand the information disclosed in the “Summary Compensation Table.”

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Grants of Plan-Based Awards in 2018

The following table presents information regarding grants of plan-based awards to the NEOs during the fiscal year ended December 31, 2018. For more information on the terms applicable to the awards reflected below, please see “2018 Compensation Program Elements.”

 

 

 

Estimated Future Payouts

Under Non-Equity Incentive

Plan Awards

 

Estimated Future Payouts

Under Equity Incentive Plan

Awards

 

All Other Stock

Awards

Name

Grant Date

Date

Award

Approved

by Board

Threshold

($)

Target

($)

Maximum

($)

 

Threshold

(#)

Target

(#)

Maximum

(#)

 

Number

of Shares

of Stock

(#)

Grant Date

Fair Value

of Stock

Awards

($)

Thomas C. Gentile III

ACI(1)

 

 

434,432

1,737,726

3,475,452

 

 

 

 

 

 

 

RS(2)

2/7/2018

1/23/2018

 

 

 

 

 

 

 

 

41,984

3,750,011

PB-TSR(3)

2/7/2018

1/23/2018

 

 

 

 

2,777

11,107

22,214

 

 

1,250,093

PB-FCF(4)

2/7/2018

1/23/2018

 

 

 

 

3,505

14,017

28,034

 

 

1,250,036

Sanjay Kapoor

 

 

 

 

 

 

 

 

 

 

 

ACI(1)

 

 

162,500

650,000

1,300,000

 

 

 

 

 

 

 

RS(2)

2/7/2018

1/23/2018

 

 

 

 

 

 

 

 

13,099

1,170,003

PB-TSR(3)

2/7/2018

1/23/2018

 

 

 

 

867

3,466

6,932

 

 

390,098

PB-FCF(4)

2/7/2018

1/23/2018

 

 

 

 

1,094

4,374

8,748

 

 

390,073

Samantha J. Marnick

 

 

 

 

 

 

 

 

 

 

 

ACI(1)

 

 

130,719

522,877

1,045,753

 

 

 

 

 

 

 

RS(2)

2/7/2018

1/23/2018

 

 

 

 

 

 

 

 

6,987

624,079

PB-TSR(3)

2/7/2018

1/23/2018

 

 

 

 

463

1,849

3,698

 

 

208,105

PB-FCF(4)

2/7/2018

1/23/2018

 

 

 

 

584

2,333

4,666

 

 

208,057

Duane F. Hawkins

 

 

 

 

 

 

 

 

 

 

 

ACI(1)

 

 

133,421

533,685

1,067,370

 

 

 

 

 

 

 

RS(2)

2/7/2018

1/23/2018

 

 

 

 

 

 

 

 

8,266

738,319

PB-TSR(3)

2/7/2018

1/23/2018

 

 

 

 

547

2,187

4,374

 

 

246,147

PB-FCF(4)

2/7/2018

1/23/2018

 

 

 

 

690

2,760

5,520

 

 

246,137

John A. Pilla

 

 

 

 

 

 

 

 

 

 

 

ACI(1)

 

 

114,010

456,041

912,083

 

 

 

 

 

 

 

RS(2)

2/7/2018

1/23/2018

 

 

 

 

 

 

 

 

5,808

518,771

PB-TSR(3)

2/7/2018

1/23/2018

 

 

 

 

385

1,537

3,074

 

 

172,989

PB-FCF(4)

2/7/2018