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SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
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Exchange Act of 1934 (Amendment No. )
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Definitive Proxy Statement | |||
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Definitive Additional Materials | |||
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Martin Marietta Materials, 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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April 10, 2019 |
Dear Fellow Shareholder:
| On behalf of the Martin Marietta Board of Directors and executive officers, it is my pleasure to invite you to our 2019 Annual Meeting of Shareholders.
Continued to Deliver Strong Financial Results 2018 was another outstanding year of achievement at Martin Marietta. Our results benefitted from the successful acquisition and integration of Bluegrass Materials. We delivered top-line revenue growth and translated that growth into increased profitability. We outperformed our peers in 2018, and also outperformed the S&P 500 and S&P 500 Materials indices over the 3- and 5-year periods ended December 31, 2018. Our shareholders saw a total return of 29% and 81%, respectively, over these periods. We increased our dividend 9% in August 2018 and have returned $1.4 billion to shareholders since announcing a 20 million share repurchase authorization in February 2015.
Shareholder Engagement, Enhanced Corporate Governance and Refreshed Board Membership We stayed engaged with shareholders and other key stakeholders during 2018. In response to valuable feedback from shareholders and our 2018 Say On Pay vote of 78.9%, the Board eliminated the excise tax gross-up, walk-right and the value of perquisites in the severance calculation in the Employment Protection Agreements and eliminated the single-trigger vesting upon a change in control for equity grants beginning in 2019. Our investor outreach in 2018 extended to 111 meetings with 324 investor groups, and conversations with most of our top 30 shareholders. We visited with our shareholders across the United States and in Toronto, London, Edinburgh, Frankfurt, Geneva and Paris. |
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Over the past three years, we have added four new independent directors, including Dorothy M. Ables who joined the Board in November 2018. We are delighted that Ms. Ables is on our Board, as she brings a strong background and adds a new and diverse perspective to our Board mix. We will continue to recruit directors who offer diverse perspectives, strong business and professional experience, and unique skills to the Board. We are grateful to Dennis L. Rediker who will retire from the Board upon the expiration of his term at the 2019 Annual Meeting. Dennis made many valuable contributions to the Board during his tenure.
World-Class Safety Performance
In 2018, we continued our impressive safety performance. Through the hard work and focus of our employees, safety awareness has been elevated across the Company, yielding impressive results. Our employees know world-class safety performance is possible; and, importantly, 2018’s results demonstrate this goal is attainable. Our company-wide Lost Time Incident Rate (LTIR) was 0.20, a world-class LTIR for the second year in a row.
Sustainability
We also issued our fourth Sustainability Report in 2018 in response to our shareholders’ request that we share our story on the efforts and improvements we are making in this important aspect. In addition, we have enhanced our reporting in this document and the 2018 Annual Report to further describe our world-class safety programs and performance, targeted and intentional support of education and health, and environmental programs that ensure operational excellence. We have also discussed more fully the risks associated with various sustainability matters.
Your Vote Matters
I urge you to cast your vote promptly—even if you plan to attend the Annual Meeting. We encourage you to vote so that your shares will be represented at the meeting.
Thank you for your continued support of Martin Marietta.
Sincerely,
C. Howard Nye
Chairman of the Board, President and Chief Executive Officer
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MARTIN MARIETTA MATERIALS, INC.
2710 Wycliff Road, Raleigh, North Carolina 27607
Notice of Annual Meeting of Shareholders
To Be Held May 9, 2019
To Our Shareholders:
The Annual Meeting of Shareholders of Martin Marietta Materials, Inc. will be held on Thursday, May 9, 2019, at 11:30 a.m. at our principal office located at 2710 Wycliff Road, Raleigh, North Carolina. At the meeting, the holders of our outstanding common stock will act on the following matters:
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Election as Directors the nine (9) nominees named in the attached proxy statement, each to serve for a one-year term until 2020, and until their successors are duly elected and qualified; | |
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2 |
Ratification of the appointment of PricewaterhouseCoopers LLP as independent auditors for 2019; | |
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Advisory vote to approve the compensation of our named executive officers; and | |
| 4 |
Any other business that may properly come before the meeting. |
All holders of record of Martin Marietta common stock (NYSE: MLM) at the close of business on March 8, 2019 are entitled to notice of and to vote at the Annual Meeting and any adjournments or postponements of the meeting.
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The Board of Directors unanimously recommends that you vote FOR proposals 1, 2, and 3. |
This notice and the accompanying proxy statement are being first mailed to shareholders on or about April 10, 2019. We have enclosed our 2018 Annual Report to Shareholders. The report is not part of the proxy soliciting materials for the Annual Meeting.
Whether or not you expect to attend the meeting, we hope you will date and sign the enclosed proxy card and mail it promptly in the enclosed stamped envelope. Submitting your proxy now will not prevent you from voting your shares at the meeting, as your proxy is revocable at your option.
Sincerely,
Roselyn R. Bar
Executive Vice President, General Counsel and Secretary
Raleigh, North Carolina
April 10, 2019
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE
ANNUAL SHAREHOLDER MEETING TO BE HELD ON MAY 9, 2019:
Martin Marietta’s proxy statement, form of proxy card and 2018 Annual Report to Shareholders are also available at ir.martinmarietta.com/investor-relations/reports-filings.
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This Proxy Summary highlights information about Martin Marietta Materials, Inc. (“Martin Marietta” or the “Company”) that can be found elsewhere in this proxy statement. It does not contain all of the information you should consider in voting your shares. We encourage you to read the entire proxy statement for more detailed information on each topic prior to casting your vote. This proxy statement, the proxy card, and the notice of meeting are being sent commencing on approximately April 10, 2019 to shareholders of record on March 8, 2019.
2019 Annual Meeting of Shareholders
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Meeting Date: |
May 9, 2019 |
Place: |
2710 Wycliff Road, Raleigh, NC | |||||
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11:30 am ET
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Record Date:
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March 8, 2019
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Your vote is important. You may vote in person at the Annual Meeting or submit a proxy over the internet. If you have received a paper copy of the proxy card (or if you request a paper copy of the materials), you may submit a proxy by telephone or by mail.
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Via the Internet
www.voteproxy.com. |
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In Person
Attend the Annual Meeting and vote by ballot. | |||||
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By Telephone
1-800-PROXIES (1-800-776-9437) in the United States or 1-718-921-8500 from outside the United States. |
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By Mail
Sign, date and mail your proxy card in the envelope provided. | |||||
If you submit your proxy by telephone or over the internet, you do not need to return your proxy card by mail.
| PROPOSALS AND VOTING RECOMMENDATIONS
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| Proposal | Description | Board Voting Recommendation | Page | |||||
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Election of Nine Director Nominees |
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Ratification of the appointment of PricewaterhouseCoopers LLP as independent auditors |
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29 | |||||
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Advisory Vote on the Company’s Named Executive Officer Compensation |
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65 | |||||
FOR ALL DIRECTOR NOMINEES
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2019 PROXY STATEMENT
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Shareholders Benefit from Martin Marietta’s Record 2018 Performance
The past year was one of improved key financial metrics and disciplined capital allocation. In addition, through asset and portfolio rationalization, we strengthened our foundation for long-term financial success, including through our purchase of Bluegrass Materials Company in 2018. Largely driven by acquisitions, our record 2018 financial performance is a continuation of the growth in total revenues, gross profit, adjusted earnings before interest, tax, depreciation and amortization (EBITDA) and adjusted earnings per diluted share (EPS) since 2011. These trends, along with our record financial results, validate both our strategic plan and our ability to logically and successfully execute against that plan. Disciplined execution against our capital allocation priorities extended beyond strategic acquisitions in 2018 as we resumed our share repurchase program and meaningfully increased our dividend.
| ✓ | Adjusted operating earnings growth1 of $33 million, or 5%, over 2017; reported 2018 gross profit of $966.6 million and earnings from operations of $690.7 million. |
| ✓ | Net earnings attributable to Martin Marietta of $470 million, as compared with 2017 net earnings of $713.3 million, which was an increase of 68% over 2016 and included a one-time, non-cash benefit of $258.1 million resulting from the Tax Cuts and Jobs Act of 2017 (2017 Tax Act). |
| ✓ | Record adjusted consolidated earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA) of $1.104 billion, resulting in a 26% Adjusted EBITDA margin.2 |
| ✓ | $150 million contribution to the qualified defined benefit pension plan, which is fully funded. |
| ✓ | Repurchase of 521,000 shares for $100.4 million. We have repurchased 5.9 million shares since announcing a 20 million share repurchase authorization in February 2015. |
| ✓ | Dividend increase of 9% in August 2018. |
| 1 | 2018 adjusted earnings from operations excludes an increase in cost of revenues from the impact of selling acquired inventory after its markup to fair value as part of acquisition accounting; asset and portfolio rationalization charges; and acquisition-related expenses, net. 2017 adjusted earnings from operations excludes acquisition-related expenses. See Appendix B for reconciliation to reported earnings from operations. |
| 2 | 2018 EBITDA has been adjusted to exclude the impacts of acquisition-related items and the charge related to asset and portfolio rationalization. See Appendix B for reconciliation to reported net earnings attributable to Martin Marietta. |
| 3 | 2018 adjusted gross profit excludes the $18.7 million impact of selling acquired inventory after its markup to fair value as part of acquisition accounting. See Appendix B for reconciliation to reported gross profit. |
| 4 | The 2017 earnings per diluted share has been adjusted to exclude from the $11.25 2017 diluted earnings per share the one-time $4.07 per diluted share tax benefit of the 2017 Tax Act. See Appendix B for reconciliation to reported earnings per diluted share. |
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Corporate Governance Highlights:
Creating Sustainable Long-Term Shareholder Value
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Recent Updates
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• Directors elected annually to serve one-year terms |
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• Elimination of excise tax gross-up, walk-right and value of perquisites in the severance calculation in Employment Protection Agreements |
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• Elimination of single-trigger vesting in equity award agreements for grants beginning in 2019
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• Adoption of Stock Ownership Guidelines |
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• Adoption of Hedging and Pledging Policy |
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• Adoption of Clawback Policy |
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• Our shareholders have the ability to nominate director candidates and have those nominees included in our proxy statement, subject to meeting the requirements in our Bylaws, a shareholder right known as proxy access |
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Board of Directors
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• Lead Independent Director who is a former public company CEO |
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• 10 current Directors; 9 or 90% are independent |
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• Key Committee Chairs are independent, consisting of independent Chairs of the Audit Committee, Management Development and Compensation Committee, and Nominating and Corporate Governance Committee |
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• Executive sessions of non-management Directors at each regularly-scheduled meeting |
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• All Directors attended 100% of all Board and Committee meetings during their term of service in 2018 |
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• Two women, or 20%, of our Board serve in leadership roles |
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• 90% of Board has experience on other public company boards and 60% are current or former public company CEOs |
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• Code of Ethical Business Conduct and ethics program that reports to a Board Committee |
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• Annual Board and individual performance evaluations are conducted, including Director peer review |
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• Risk oversight by full Board and Committees |
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• Chair/CEO is the only Board member who is currently also management |
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• Only two members of our 10-member Board of Directors are currently or formerly management of the Company |
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Shareholder Interest
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• Majority voting standard for uncontested Director elections |
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• No shareholder rights plan |
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• Annual advisory vote to ratify independent auditor |
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• Annual advisory vote to approve executive compensation |
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• Longstanding active shareholder engagement |
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• We publish annually a Sustainability Report that discusses our commitment to our shareholders, employees and the communities that we serve. We also created a new position to better focus on these important issues—Senior Vice President–Sustainability, Community Relations and Communications |
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• No shares with enhanced voting rights |
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2019 PROXY STATEMENT
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Board Composition
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| We seek to include a diverse group of Directors on our Board to provide different perspectives to the Board’s oversight responsibilities. Our nominees for Board election demonstrate diversity in the form of experience, geography, gender, ethnicity, age and tenure. We were recognized in 2019, 2017 and 2015 at the Women’s Forum of New York at its Biennial Breakfast of Corporate Champions for our Board diversity. We were also recognized by 2020 Women on Boards as a Winning ‘W’ Company for eight consecutive years for championing board diversity. With the addition of Ms. Ables in 2018, our Board has strengthened an important element of diversity: |
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• 33% of our Board nominees are women |
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• 44% of our Board nominees bring diversity in gender or ethnicity to our Board |
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• Our Board refreshment has resulted in a decrease of the average tenure, with a greater mix of Directors with long-term knowledge of the Company, its strategy, opportunities and challenges and those with new perspectives |
DIRECTOR NOMINEES
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Board Attendance
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In 2018, during their term of service, all directors attended 100% of the total Board and Committee meetings to which they were assigned. All directors then in office attended the May 2018 Annual Meeting and all directors expect to attend the May 2019 Annual Meeting.
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Proactively Engaging and Responding to Shareholders
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CORPORATE GOVERNANCE HIGHLIGHTS
✓ Eliminated staggered board—Directors elected for 1-year terms
✓ Eliminated gross-up, walk-right on Change of Control
✓ Eliminated single-trigger vesting for equity awards beginning in 2019
✓ Established robust stock ownership guideline for Officers and Directors
✓ Implemented hedging and pledging policy
✓ Adopted clawback policy
✓ Implemented majority voting standard
✓ Eliminated shareholder rights plan
✓ Adopted proxy access
✓ Added 4 new Board members since 2016
✓ Published Annual Sustainability Report | |||
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Our Compensation Approach
A substantial portion of compensation paid to our named executive officers (NEOs) is variable and performance-based. We use the 50th percentile of our comparator group as a reference point when determining target compensation, but target pay is set based on a variety of factors and actual pay realized by our NEOs is dependent on our financial, operational and other related performance. Based on our record levels of performance in 2018, variable compensation payable under both our short-term and long-term incentive plans exceeded the target amounts established for each NEO, which is consistent with our pay-for-performance philosophy. All compensation paid to our CEO and other NEOs in 2018 was performance-based other than base salary: 87% of our CEO’s compensation was performance-based and approximately 80% of our other NEOs’ compensation was performance based.*
| * | Based on grant date value of PSUs and RSUs. |
Will any other matters be presented at the Annual Meeting?
At the time this proxy statement was filed with the Securities and Exchange Commission, the Board of Directors was not aware that any matters not referred to herein would be presented for action at the Annual Meeting. If any other matters properly come before the meeting, it is intended that the persons named in the enclosed proxy will vote the shares represented by proxies on such matters in accordance with the recommendation of the Board of Directors, or, if no recommendation is given, in their own discretion. It is also intended that discretionary authority will be exercised with respect to the vote on any matters incident to the conduct of the meeting.
What are the Board’s recommendations?
Unless you give other instructions on your proxy card, the persons named as proxy holders on the proxy card will vote in accordance with the recommendations of the Board of Directors. The Board’s recommendation, as well as a description of each proposal, is set forth in this proxy statement. The Board recommends a vote:
| • | FOR the election of all Director Nominees; |
| • | FOR the ratification of the selection of PricewaterhouseCoopers LLP as independent auditors; and |
| • | FOR the approval, on a non-binding advisory basis, of the compensation of our NEOs as described in this proxy statement. |
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This proxy statement contains forward-looking statements as defined in the Securities Exchange Act of 1934 and is subject to the safe harbors created therein. The forward-looking statements contained herein are generally identified by the words “believe,” “project,” “expect,” “anticipate,” “estimate,” “intend,” “strategy,” “future,” “opportunity,” “plan,” “may,” “should,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. Forward-looking statements are based on the beliefs and assumptions of our management and on currently available information. A detailed discussion of risks and uncertainties that could cause actual results and events to differ materially from such forward-looking statements is included in our annual report on Form 10-K for the fiscal year ended December 31, 2018. We undertake no responsibility to publicly update or revise any forward-looking statement.
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The Board of Directors currently consists of ten members, nine of whom are non-employee Directors. At the 2016 Annual Meeting, shareholders approved the Board of Directors’ proposal to amend our Articles of Incorporation to phase out the classification of the terms of our Directors and to provide instead for the annual election of our Directors. Prior to the charter amendment, our Board of Directors was divided into three classes, with each class serving three-year terms. Commencing with the 2019 Annual Meeting of Shareholders, our Directors are elected to one-year terms of office.
Under our Bylaws, nominations of persons for election to the Board of Directors may be made at an Annual Meeting of Shareholders by the Board of Directors and by any shareholder who complies with the notice procedures set forth in the Bylaws. As described in the proxy statement for our 2018 Annual Meeting, for a nomination to be properly made by a shareholder at the 2019 Annual Meeting, the shareholder’s notice must have been sent to, and received by, our Secretary at our principal executive offices between January 18, 2019 and February 17, 2019. No such notice was received during this period.
The Bylaws of the Corporation provide that a Director will retire at the Annual Meeting of Shareholders following the Director’s 75th birthday. One of our current Directors, Dennis L. Rediker, reached this mandatory retirement age this year and is not eligible for election at the Annual Meeting for a new term. Mr. Rediker has stated that he intends to serve as a Director through the commencement of the 2019 Annual Meeting of Shareholders, after which he will retire from the Board. Mr. David Maffucci also retired from Board service in 2018. The Board extends its sincere appreciation to both Mr. Rediker and Mr. Maffucci for their years of service and thoughtful Board leadership. Mr. Rediker and Mr. Maffucci gave generously of their time and consistently provided the Board with independent insight and advice, which have been invaluable to the Board and to Martin Marietta. In light of the retirement of Mr. Rediker, the Board of Directors has set the size of the Board at nine effective upon the commencement of the 2019 Annual Meeting.
The Board of Directors has nominated nine persons for election as Directors to serve a one-year term expiring in 2020. Unless otherwise directed, proxies will be voted in favor of these nominees. Each nominee has agreed to serve if elected. Each of the nominees is currently serving as a Director. Should any nominee become unable to serve as a Director, the persons named in the enclosed form of proxy will, unless otherwise directed, vote for the election of such other person for such position as the present Board of Directors may recommend in place of such nominee. Proxies cannot be voted for a greater number of persons than the number of nominees named. Should any of the following nominees be unavailable for election by reason of death or other unexpected occurrence, the proxy, to the extent permitted by applicable law, may be voted with discretionary authority in connection with the nomination by the Board of Directors and the election of any substitute nominee.
BOARD EFFECTIVENESS AND REFRESHMENT
Board composition is one of the most critical areas of focus for the Board of Directors. Having the right mix of people who bring diverse perspectives, business and professional experiences, and skills provides a foundation for robust dialogue, informed advice and collaboration in the boardroom. The Nominating and Corporate Governance Committee develops criteria for open Board positions, taking into account a variety of factors, which may include current Board member skills, composition, age, tenure, other diversity factors, the range of talents and experience that would best complement those already represented on the Board, the need for specialized expertise, and anticipated retirements to define gaps that may need to be filled through the board refreshment process. The Board strives to ensure an environment that encourages diverse critical thinking and values innovative, strategic discussions to achieve a higher level of success for the Company.
The Nominating and Corporate Governance Committee screens and recommends candidates for nomination by the full Board. It uses a variety of methods to help identify potential Board candidates with the desired skills and background needed for the Company’s business, including from time to time informal networks, third party search firms and other channels. When the Committee is assisted from time to time with its recruitment efforts by an outside search firm, the firm recommends candidates that satisfy the criteria defined by the Board. The search firm provides background research and pertinent information regarding prospective candidates.
Once the Committee has identified a prospective nominee, it makes an initial determination as to whether to conduct a full evaluation. In making this determination, the Committee takes into account various information, including information provided at the time of the candidate recommendation, the Committee’s own knowledge, and information obtained through inquiries to third parties to the extent the Committee deems appropriate. The preliminary determination is based primarily on the need for additional Board members and the likelihood that the prospective nominee can satisfy the criteria that the Committee has established. If the Committee determines, in
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◆ The Board of Directors
consultation with the Chairman, President and CEO and other Directors as appropriate, that additional consideration is warranted, it may request management or a third-party search firm to gather additional information about the prospective nominee’s background and experience and to report its findings to the Committee. The Committee then evaluates the prospective nominee against the specific criteria that it has established for the position, as well as the standards and qualifications set out in the Company’s Corporate Governance Guidelines, including:
| • | the ability of the prospective nominee to represent the interests of the shareholders of the Company; |
| • | the prospective nominee’s standards of integrity, commitment and independence of thought and judgment; |
| • | the prospective nominee’s ability to dedicate sufficient time, energy and attention to the diligent performance of his or her duties, including the prospective nominee’s service on other public company boards, as specifically set out in the Company’s Corporate Governance Guidelines; |
| • | the extent to which the prospective nominee contributes to the range of talent, skill and expertise appropriate for the Board; and |
| • | the extent to which the prospective nominee helps the Board reflect the diversity of the Company’s shareholders, employees, customers and the communities in which it operates. |
If the Committee decides, on the basis of its preliminary review, to proceed with further consideration, members of the Committee, the Chairman, President and CEO, as well as other members of the Board as appropriate, interview the nominee. After completing this evaluation and interview, the Committee makes a recommendation to the full Board, which makes the final determination whether to nominate or appoint the new Director after considering the Committee’s report. A background check is completed before a final recommendation is made to the Board to appoint a candidate to the Board.
In selecting nominees for Director, the Board seeks to achieve a mix of members who together bring experience and personal backgrounds relevant to the Company’s strategic priorities and the scope and complexity of the Company’s business. The Board also seeks demonstrated ability to manage complex issues that involve a balance of risk and reward. The background information on current nominees beginning on page 15 and the skills matrix on page 9 set out how each of the current nominees contributes to the mix of experience and qualifications the Board seeks. In making its recommendations with respect to the nomination for re-election of existing Directors at the annual shareholders meeting, the Committee assesses the composition of the Board at the time and considers the extent to which the Board continues to reflect the criteria set forth above.
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The Board of Directors ◆
The following sets forth certain information for each nominee for election regarding age, gender, diversity, tenure and skills that are important to the Board of Directors.
| Demographics and Background
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| Age |
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Gender |
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M |
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F |
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| Ethnic Diversity |
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| Tenure |
<1 |
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15 |
11 |
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| Qualifications and Experience
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Why is this important to Martin Marietta? |
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Corporate Governance/Legal
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• | • | • | • | • | • | • | • | • | Ensures background and knowledge necessary to provide effective oversight and governance |
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Current or Former CEO of Public Company
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• | • | • | • | • | Strong leadership skills and critical experience with demands and challenges with managing a large public organization |
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Financial or Accounting
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• | • | • | • | • | • | • | • | Enables in-depth analysis of our financial statements, capital structure, financial transactions, and financial reporting process |
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Government Relations/ Regulatory/ Sustainability
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• | • | • | • | • | • | • | • | • | Critical for understanding complex regulatory and governmental environment that impacts our business and our strategic goals relating to sustainability |
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Logistics/ Operations
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• | • | • | • | • | Necessary in overseeing a sustainable company that relies heavily on logistics |
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Other Public Boards
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• | • | • | • | • | • | • | • | Adds perspective important to shareholders and public company governance |
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| Risk Management |
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Facilitates understanding of the risks facing the Company and appropriate process and procedures for managing them
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Supports setting of long-term corporate vision, disciplined strategic development and integration to facilitate company’s growth
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| Technology |
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Important to facilitate business objectives and security of Company’s proprietary and confidential data
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The Board has implemented a number of processes to assist it in refreshing the Board in an appropriate manner that helps create shareholder value.
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◆ The Board of Directors
Board Refreshment Elements
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Review of Board Candidates |
The Board seeks a diverse group of candidates who, at a minimum, possess the background, skills, expertise and time to make a significant contribution to the Board, the Company and its shareholders. The Corporate Governance Guidelines list criteria against which candidates may be judged. In addition, the Nominating and Corporate Governance Committee considers, among other things:
• input from the Board’s self-assessment process to prioritize areas of expertise that were identified;
• investor feedback and perceptions;
• the candidates’ skills and competencies to ensure they are aligned with the Company’s future strategic challenges and opportunities; and
• the needs of the Board in light of recent and anticipated Board vacancies.
During the process of identifying and selecting director nominees, the Nominating and Corporate Governance Committee screens and recommends candidates for nomination by the full Board. The Bylaws provide that the size of the Board may range from 9 to 11 members.
Director candidates also may be identified by shareholders and will be evaluated under the same criteria applied to other director nominees and considered by the Nominating and Corporate Governance Committee. Information on the process and requirements for shareholder nominees may be found in our Bylaws on the Corporation’s website at ir.martinmarietta.com/investor-relations/corporate-governance.
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Board Assignments |
In February, the Nominating and Corporate Governance Committee reviews the membership, tenure, leadership and commitments of each of the Committees and considers possible changes given the qualifications and skill sets of members on the Board or a desire for committee rotation or refreshment. The Nominating and Corporate Governance Committee also takes into consideration the membership requirements and responsibilities set forth in each of the respective Committee charters and the Corporate Governance Guidelines as well as any upcoming vacancies on the Board due to our mandatory retirement age. The Nominating and Corporate Governance Committee recommends to the Board any proposed changes to Committee assignments and leadership to be made effective at the next annual meeting of shareholders. The Nominating and Corporate Governance Committee also reviews the operation of the Board generally.
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Refreshment |
The Board has added four new directors in the past three years. Mr. Rediker will retire at the Annual Meeting and Mr. Zelnak is expected to retire in May 2020, providing further opportunity for refreshment. At the same time, obtaining a detailed understanding of the Corporation’s business takes time. We believe that implementing term limitations may prevent the Board from taking advantage of insight that longer tenure brings.
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Annual Performance Assessment |
The Board conducts a self-assessment of its performance and effectiveness as well as that of its Committees on an annual basis. The self-assessment helps the Nominating and Corporate Governance Committee track progress in certain areas targeted for improvement from year-to-year and to identify ways to enhance the Board’s and its Committees’ effectiveness. For 2018, each director completed a written questionnaire. The questions were open-ended to solicit candid feedback. The collective ratings and comments are compiled and summarized and then discussed by the Nominating and Corporate Governance Committee and the full Board.
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Onboarding and Continuing Education |
New directors are provided with an orientation about the Company, including our business operations, strategy and governance. Directors also are provided continuing education by subject matter experts and/or continuing education programs sponsored by educational and other institutions to assist them in staying abreast of developments in corporate governance and critical issues relating to the operation of public company boards. Members of our senior management regularly review with the Board the operating plan of each of our business segments and the Company as a whole. The Board also conducts periodic visits to our facilities as part of its regularly scheduled Board meetings.
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Tenure Guidelines
|
Mandatory Retirement Age |
Directors must retire at the annual meeting following his or her 75th birthday. | |
| Employment Change |
Directors must report to the Chairman of the Board and Chairman of the Nominating and Corporate Governance Committee regarding any significant change in principal employment or responsibilities to assure he/she can commit the appropriate time to Board service.
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10
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2019 PROXY STATEMENT
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Table of Contents
The Board of Directors ◆
BOARD, COMMITTEE AND INDIVIDUAL
DIRECTOR EVALUATIONS
Below is a summary of our current Committee structure and membership information.
| Director | Independent Director |
Audit Committee |
Ethics, Environment, Health Committee |
Executive Committee |
Finance Committee |
Management and Compensation |
Nominating Governance | ||||||||||||||||||||||||||||
| Dorothy M. Ables Financial Expert |
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| Sue W. Cole |
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Chair | ||||||||||||||||||||||||||||||||
| Smith W. Davis |
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| John J. Koraleski Financial Expert |
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| C. Howard Nye* |
Chair | ||||||||||||||||||||||||||||||||||
| Laree E. Perez Financial Expert |
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Chair
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| Michael J. Quillen Lead Independent Director |
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Chair
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| Dennis L. Rediker Financial Expert |
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Chair
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| Donald W. Slager |
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| Stephen P. Zelnak, Jr. |
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Chair | ||||||||||||||||||||||||||||||||
| Number of Meetings |
8 |
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2 |
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0 |
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4 |
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4 |
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6 | |||||||||||||||||||||||
| * | Mr. Nye is the only member of management who sits on the Board. |
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2019 PROXY STATEMENT
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11
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Table of Contents
The Board of Directors ◆ Board Committees
The primary responsibilities, membership and meeting information for our other standing Committees are summarized below.
|
AUDIT COMMITTEE | ||||
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Current Members: Laree E. Perez (Chair) Dorothy M. Ables John J. Koraleski Dennis L. Rediker |
Meetings in 2018: 8 |
Average Attendance in 2018: 100% | ||
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Primary Responsibilities:
• Reviews our significant accounting principles, policies and practices in reporting our financial results under generally accepted accounting principles.
• Reviews our annual audited financial statements and related disclosures.
• Reviews management letters or internal control reports, and reviews our system of internal control over financial reporting.
• Appoints, retains and oversees the work of the independent accountants.
• Reviews the effectiveness of the independent audit effort.
• Pre-approves audit and permissible non-audit services provided by the independent registered public accounting firm.
• Reviews our interim financial results for each fiscal quarter.
• Reviews the qualifications and the plan and scope of work of the corporate internal audit function.
• Reviews and discusses the reports of our internal audit group.
• Reviews and discusses management’s assessment of the effectiveness of Martin Marietta’s system of internal control over financial reporting.
• Discusses Martin Marietta’s earnings press releases, as well as financial information and earnings guidance provided to analysts, investors and rating agencies.
• Discusses matters related to risk assessment and risk management and how the process is handled by management.
• Reviews and oversees related party transactions.
• Reviews complaints regarding accounting, internal controls or auditing matters.
• Considers allegations of possible financial fraud or other financial improprieties.
• Reviews annually the adequacy of the Committee charter and recommends proposed changes to the Board.
• Prepares the annual Audit Committee Report to be included in the proxy statement.
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Other Governance Matters: All four members of the Audit Committee, including the Chair, are audit committee financial experts under applicable SEC regulations.
The Chair of the Audit Committee is an independent Director.
The Chair of the Audit Committee has experience serving as a Chair and member of other public company Audit Committees.
All members satisfy the audit committee experience and independence standards required by the New York Stock Exchange (NYSE). | ||||
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2019 PROXY STATEMENT
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Table of Contents
Board Committees ◆ The Board of Directors
| ||||
|
Current Members: Dennis L. Rediker (Chair) Smith W. Davis Laree E. Perez Stephen P. Zelnak, Jr. |
Meetings in 2018: 2 |
Average Attendance in 2018: 100% | ||
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Primary Responsibilities:
• Monitors compliance with our Code of Ethical Business Conduct and reviews all matters presented to it by the Corporate Ethics Officer concerning the ethical practices of Martin Marietta and its Directors, officers, and employees, including conflicts or potential conflicts of interest between Martin Marietta and any of its Directors, officers, and employees.
• Reviews and discusses our sustainability efforts and annual Sustainability Report.
• Reviews and monitors the adequacy of our policies and procedures and organizational structure for ensuring compliance with environmental laws and regulations.
• Reviews matters relating to our health and safety programs and performance.
• Reviews annually the adequacy of the Committee charter and recommends proposed changes to the Board. | ||||
ETHICS, ENVIRONMENT, SAFETY AND HEALTH COMMITTEE
| ||||
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Current Members: Stephen P. Zelnak, Jr. (Chair) Michael J. Quillen Donald W. Slager |
Meetings in 2018: 4 |
Average Attendance in 2018: 100% | ||
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Primary Responsibilities: • Provides general oversight relating to the management of our financial affairs.
• Reviews and approves establishment of lines of credit or other short-term borrowing arrangements and investing excess working capital funds on a short-term basis.
• Reviews and makes recommendations to the Board concerning changes to capital structure, including the incurrence of long-term debt, issuance of equity securities, share repurchases, and the payment of dividends, as well as capital expenditures.
• Approves our charitable contributions budget.
• Reviews annually the adequacy of the Committee charter and recommends proposed changes to the Board. | ||||
FINANCE COMMITTEE
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2019 PROXY STATEMENT
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13
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Table of Contents
The Board of Directors ◆ Board Committees
|
MANAGEMENT DEVELOPMENT AND COMPENSATION COMMITTEE | ||||
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Current Members: Michael J. Quillen (Chair) Sue W. Cole John J. Koraleski |
Meetings in 2018: 4 |
Average Attendance in 2018: 100% | ||
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Primary Responsibilities:
• Establishes an overall strategy with respect to compensation for officers and management to enable Martin Marietta to attract and retain qualified employees.
• Reviews and oversees executive succession and management development plans.
• Reviews and approves management’s assessment of the performance of executive officers, and reviews and approves the salary, incentive compensation, and other compensation of such officers.
• Approves and administers our equity and other plans relating to compensation of Martin Marietta’s directors and executive officers.
• Reviews and discusses the Compensation Discussion and Analysis and produces a compensation committee report as required by the SEC to be included in this proxy statement.
• Provides oversight of our Benefit Plan Committee, which administers Martin Marietta’s defined benefit and contribution plans.
• Reviews and approves the goals and objectives for the CEO’s compensation, evaluates the CEO’s performance in light of those goals and objectives, and determines and approves the CEO’s compensation.
• Makes recommendations to the Board on changes in the compensation of non-employee directors.
• Reviews annually the adequacy of the Committee charter and recommends proposed changes to the Board.
• Has the authority, in its sole discretion, to retain, pay, and terminate any consulting firm, if any, used to assist in evaluating director, chief executive officer, or senior executive compensation.
| ||||
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Other Governance Matters: All members are non-employee, independent Directors, as required by the rules of the NYSE, the Martin Marietta Guidelines for Director’s Independence, applicable rules of the Securities and Exchange Commission (SEC), and the Committee’s charter. | ||||
| ||||
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Current Members: Sue W. Cole (Chair) Smith W. Davis Donald W. Slager |
Meetings in 2018: 6 |
Average Attendance in 2018: 100% | ||
|
Primary Responsibilities:
• Develops criteria for nominating and appointing directors, including Board size and composition, corporate governance policies, and individual director expertise, attributes and skills.
• Recommends to the Board the individuals to be nominated as directors.
• Recommends to the Board the appointees to be selected for service on the Board Committees.
• Oversees an annual review of the performance of the Board and each Committee.
• Reviews annually the adequacy of the Committee charter and recommends proposed changes to the Board.
• Oversees the development and implementation of a set of corporate governance principles applicable to Martin Marietta.
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Other Governance Matters: All members are non-employee, independent Directors, as required by the rules of the NYSE.
Upon recommendation of this Committee, the Board of Directors has adopted a set of Corporate Governance Guidelines for Martin Marietta. The Guidelines are posted and available for public viewing on our website at ir.martinmarietta.com/investor-relations/corporate-governance. A copy may also be obtained upon request from Martin Marietta’s Corporate Secretary.
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NOMINATING AND CORPORATE GOVERNANCE COMMITTEE
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14
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2019 PROXY STATEMENT
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Table of Contents
Election of Directors
The following sets forth the age, experience, key attributes and other biographical information for each member of the Board of Directors who is a nominee for election for a one-year term until 2020.
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◆DOROTHY M. ABLES
Director Since: 2018
Age: 61
Committees:
|
Ms. Ables joined the Martin Marietta Board in November 2018. Ms. Ables held a number of executive positions with Spectra Energy and predecessor companies, including serving from 2008 to 2017 as the Chief Administrative Officer of Spectra Energy Corp., a global energy infrastructure company, where she was responsible for human resources, information technology, support services, community relations and audit services. Prior to that, she served as Vice President of Audit Services and Chief Ethics and Compliance Officer for Spectra Energy and Senior Vice President and Chief Financial Officer for Duke Energy Gas Transmission. Spectra Energy was a Fortune 500 Company and one of North America’s leading pipeline and midstream companies prior to its acquisition by Enbridge Inc. in 2017. Ms. Ables started her career in the audit department of Peat, Marwick, Mitchell & Co.
Ms. Ables serves as an Independent Director of Cabot Oil & Gas Corporation, an independent oil and gas company, where she is a member of the Audit Committee and Compensation Committee. She served as a Director of Spectra Energy Partners, an affiliate of Spectra Energy Corp., from 2013 to 2017. Ms. Ables attended the University of Texas at Austin where she earned a Bachelor of Business Administration degree in Accounting. |
Key attributes, experience and skills:
• Financial expertise acquired through serving as CFO of Duke Energy Gas Transmission and as Vice President of Audit Services of Spectra Energy Corp.
• Valuable business leadership in human resources, information technology, community relations, finance and financial statements
• Strong leadership skills and familiarity with Texas, an important state for the Company |
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◆SUE W. COLE
Director Since: 2002
Age: 68
Committees:
Chair |
Ms. Cole is the managing partner of SAGE Leadership & Strategy, LLC, an advisory firm for businesses, organizations and individuals relating to strategy, governance and leadership development. Ms. Cole was previously a principal of Granville Capital Inc., a registered investment advisor, from 2006 to 2011, and before that she was the Regional CEO, Mid-Atlantic Region, of U.S. Trust Company, N.A., where she was responsible for the overall strategic direction, growth, and leadership of its North Carolina, Philadelphia and Washington, D.C. offices. Ms. Cole previously held various positions in the U.S. Trust Company, N.A. and its predecessors. Ms. Cole serves as Chair of the Compensation Committee of Biscuitville, Inc., where she was previously Chairman of the Board. Ms. Cole has previously served on the public-company board of UNIFI, Inc. She has also been active in community and charitable organizations, including previously serving as Chairman of the North Carolina Chamber of Commerce, on the Investment Committee of the University of North Carolina at Greensboro and as a member on the North Carolina Economic Development Board. Ms. Cole attended the University of North Carolina at Greensboro where she earned a Bachelor of Science degree in Business Administration and a Masters in Business Administration in Finance. |
Key attributes, experience and skills:
• Valuable experience in executive compensation, corporate governance, human resources, finance and financial statements, and customer service
• Chief executive officer of several financial services businesses as well as several non-profit organizations
• Strong leadership skills and familiarity with North Carolina, an important state for the Company |
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2019 PROXY STATEMENT
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15
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Table of Contents
Proposal 1: Election of Directors ◆ Director Nominees
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◆SMITH W. DAVIS
Director Since: 2018
Age: 71
Committees:
|
Mr. Davis is a senior partner at Akin Gump Strauss Hauer & Feld LLP, an international law firm, where he provides counsel on a wide variety of legislative and regulatory matters, including those before a variety of congressional committees. Mr. Davis joined Akin Gump in 1979 and his practice has included advising on legal matters relating to environmental issues, financial institutions, mergers and acquisitions, and pension reform. Mr. Davis also has served on the law firm’s compensation and management committees. Prior to joining Akin Gump, Mr. Davis served as a counsel to the House Judiciary Committee. Mr. Davis attended Yale University where he received a Bachelors of Arts degree, magna cum laude and Yale Law School where he received his Juris Doctor degree. |
Key attributes, experience and skills:
• Extensive experience in legal, compliance, and corporate governance
• Strong leadership skills and expertise in governmental and regulatory issues, safety, health and environmental matters, mergers and acquisitions, executive compensation, financial affairs, and risk assessment
• Brings new perspective to the Board on diversity and corporate citizenship |
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◆JOHN J. KORALESKI
Director Since: 2016
Age: 68
Committees:
|
Mr. Koraleski joined the Martin Marietta Board in 2016. Mr. Koraleski served from February 2015 through his retirement in September 2015 as executive Chairman of the Board of the Union Pacific Corporation (UP), which through its subsidiaries operates North America’s premier railroad franchise, covering 23 states across the western two-thirds of the United States. Prior to that, he was named President and Chief Executive Officer of the UP in March 2012, elected as a Director of the UP in July 2012 and appointed Chairman of the Board in 2014. Since joining the Union Pacific (Railroad) in 1972, Mr. Koraleski held a number of executive positions in the UP and the Railroad, including, Executive Vice President – Marketing and Sales from 1999 to 2012, Executive Vice President – Finance and Information Technology, Chief Financial Officer and Controller. Mr. Koraleski served as the Chairman of The Bridges Investment Fund, Inc., a general equity fund whose primary investment objective is to seek long-term capital appreciation, from 2005 through March 2012 and is a past Chairman of the Association of American Railroads. Mr. Koraleski earned a Bachelor’s and Master’s degree in business administration from the University of Nebraska at Omaha. |
Key attributes, experience and skills:
• Experience with the demands and challenges associated with managing a large publicly-traded organization from his experience as Chairman and CEO of Union Pacific
• Extensive knowledge of financial system management, public company accounting, disclosure requirements and financial markets
• Valuable expertise in talent management, compensation, governance and succession planning
• Understanding of complex logistic operations, safety and rail operations
• Broad strategic analysis and experience with acquisitions, integration, marketing and information technologies |
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2019 PROXY STATEMENT
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Table of Contents
Director Nominees ◆ Proposal 1: Election of Directors
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◆C. HOWARD NYE
Director Since: 2010
Age: 56
Chairman of the Board
Committees:
Chair |
Mr. Nye has served as Chairman of the Board since 2014 and as President and Chief Executive Officer of Martin Marietta since January 1, 2010. He previously served as President and Chief Operating Officer of Martin Marietta from August 2006 to 2009. From 2003 to 2006, Mr. Nye served as Executive Vice President of Hanson Aggregates North America, a producer of aggregates for the construction industry, and in other managerial roles since 1993. Mr. Nye is also currently an independent Director of General Dynamics (NYSE: GD), an American aerospace and defense multinational corporation and the world’s fifth-largest defense contractor. Mr. Nye has also been active in a number of various business, civic, and education organizations, including serving as Chairman of the Steering Committee, as a member of the Executive Committee and Nominating & Leadership Development Committee and past Chairman of the Board of Directors of the National Stone, Sand & Gravel Association, Vice Chairman of the Board of Directors of the American Road & Transportation Builders Association (ARTBA), and a member of the Board of Directors of the United States Chamber of Commerce. Mr. Nye was previously a member of the Board of CREE, Inc., until October 2018. Mr. Nye has also been a gubernatorial appointee to the North Carolina Mining Commission. Mr. Nye received a Bachelor’s degree from Duke University and a Juris Doctor degree from Wake Forest University. |
Key attributes, experience and skills:
• Extensive knowledge of the construction aggregates industry
• Extensive leadership, business, operating, marketing, mergers and acquisitions, legal, customer-relations, and safety and environmental experience
• Understands the competitive nature of the business and has strong management skills, broad executive experience, and corporate governance expertise
• Broad strategic vision for the future growth of Martin Marietta |
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◆LAREE E. PEREZ
Director Since: 2004
Age: 65
Committees:
Chair |
Ms. Perez is an investment consultant with DeRoy & Devereaux, an independent investment adviser, where she has provided client consulting services since 2015. She was previously Owner and Managing Partner of The Medallion Company, LLC, a consulting firm, from 2003 to 2015. Ms. Perez was previously a Director of GenOn Energy, Inc., one of the largest power producers in the United States, from 2002 to 2012, and served as the Chairman of the Audit Committee of GenOn Energy, Inc. from 2002 to 2007 and a member of its Audit and Risk and Finance Oversight Committees from 2008 to 2012. Previously, she was Vice President of Loomis, Sayles & Company, L.P. and co-founder, President and Chief Executive Officer of Medallion Investment Company, Inc. In addition to civic and charitable organizations, Ms. Perez recently served as Vice Chairman of the Board of Regents at Baylor University and previously served on the Board of Trustees of New Mexico State University, where she was also Chairman of the Board. Ms. Perez earned a Bachelor’s degree from Baylor University in Finance and Economics. |
Key attributes, experience and skills:
• Significant business, financial and private investment experience
• Significant expertise with respect to financial statements, corporate finance, accounting and capital markets, mergers and acquisitions, and strategic analysis
• Insight into auditing best practices
• Familiarity with the southwestern United States |
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2019 PROXY STATEMENT
|
17
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Table of Contents
Proposal 1: Election of Directors ◆ Director Nominees
|
◆MICHAEL J. QUILLEN
Director Since: 2008
Age: 70
Lead Independent Director
Committees:
Chair |
Mr. Quillen was the founder and served as Chief Executive Officer of Alpha Natural Resources, Inc. (ANR), a leading Appalachian coal supplier, since its formation in 2004 until its merger with Foundation Coal Holdings, Inc. in July 2009, and served as President and Chairman of ANR from 2006 to 2009, and non-Executive Chairman until May 2012. Mr. Quillen held senior executive positions in the coal industry throughout his career at Pittston/Pittston Coal Sales Corp., AMVEST Corporation, NERCO Coal Corporation, Addington, Inc. and Mid-Vol Leasing, Inc. He has also served as Chairman (Rector) of the Board of Visitors of Virginia Polytechnic Institute and State University from July 2012 to June 2018. He was Chairman of the Audit and Finance Committee of Virginia Polytechnic Institute and State University from July 2010 to June 2012. He also served on the Virginia Port Authority from 2003 to 2012 and as Chairman from July 2011 to December 2012. Mr. Quillen attended Virginia Polytechnic Institute and State University, earning both Bachelor’s and Master’s degrees in Civil Engineering. |
Key attributes,
• Valuable business, leadership, management, financial, and mergers and acquisitions experience
• Extensive experience related to mining companies, governmental and regulatory issues, safety, health and environmental matters
• Tremendous insight and expertise with respect to strategic analysis, the natural resources industry, and energy
• Wealth of knowledge related to transportation |
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◆DONALD W. SLAGER
Director Since: 2016
Age: 57
Committees:
|
Mr. Slager serves as President and Chief Executive Officer of Republic Services, Inc., a service provider in the non-hazardous solid waste industry, holding this position since January 2011. Prior to this, he served as President and Chief Operating Officer of Republic from December 2008 until his promotion to CEO. Prior to that, Mr. Slager served in the same capacity for Allied Waste Industries, Inc. (Allied Waste), from 2005 to 2008, prior to its merger with Republic Services. Mr. Slager was Executive Vice President and Chief Operating Officer of Allied Waste between 2003 and 2004. Prior to that, Mr. Slager held varying positions of increasing responsibility with Allied Waste. Mr. Slager also has served as a Director of Republic since 2010. Mr. Slager previously served as an independent Director of UTi Worldwide Inc. (UTi) from 2009 to January 2016, where he served as Chairman of the Nominating and Corporate Governance Committee and as a member of both the Compensation and Risk Committees. UTi, a former NYSE listed company, was an international, non-asset-based supply chain services and solutions company providing air and ocean freight forwarding, contract logistics, customs brokerage, distribution, inbound logistics, truckload brokerage and other supply chain management services until it was acquired by DSV A/S, a third-party logistics services provider, in January 2016. Mr. Slager has completed the Northwestern University Kellogg School Advanced Executive Program and holds a certificate from the Stanford University Board Consortium Development Program. |
Key attributes, experience and skills:
• More than 14 years of C-Suite experience
• More than 27 years of general management experience in a complex, capital intensive and logistics business
• Extensive experience in mergers and acquisitions, integration, and strategic development and analysis
• Valuable experience from his membership on two publicly-traded board of directors |
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2019 PROXY STATEMENT
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Table of Contents
Director Nominees ◆ Proposal 1: Election of Directors
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◆STEPHEN P. ZELNAK, JR.
Director Since: 1993
Age: 74
Committees:
Chair |
Mr. Zelnak currently serves as Chairman of the Board of Beazer Homes USA, Inc., a geographically diversified homebuilder with active operations in 13 states within three geographic regions in the United States. He previously served as Chief Executive Officer of Martin Marietta from 1993 to 2009, President from 1993 to 2006, Chairman of the Board from 1997 through 2009, Executive Chairman from January 2010 to May 2010, and non-Executive Chairman from May 2010 until May 2014. Mr. Zelnak joined Martin Marietta Corporation in 1981 and was responsible for the aggregates operations since 1982. Mr. Zelnak is also Chairman and majority owner of ZP Enterprises, LLC, a private investment firm. In addition to community and charitable organizations, Mr. Zelnak has served as Chairman of the North Carolina Chamber and the National Stone, Sand and Gravel Association. He currently serves on the Advisory Board of the College of Management at North Carolina State University and is a Trustee Emeritus of the Georgia Tech Foundation Board. Mr. Zelnak received a Bachelor’s degree from Georgia Institute of Technology and Master’s degrees in Administrative Science and Business Administration from the University of Alabama system. |
Key attributes, experience and skills:
• Former Chairman and CEO of Martin Marietta
• Extensive mentorship, business and operating experience
• Knowledge of all aspects of Martin Marietta and the construction aggregates industry
• Broad strategic and financial experience
• Knowledge of the homebuilding industry and factors that impact construction |
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The Board Unanimously Recommends a Vote “FOR” All Nominees for Election to the Board of Directors on this Proposal 1 |
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2019 PROXY STATEMENT
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19
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Table of Contents
Proposal 1: Election of Directors ◆ Director Compensation
|
20
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2019 PROXY STATEMENT
|
|
Table of Contents
Director Compensation ◆ Proposal 1: Election of Directors
Director Compensation Table
The table below summarizes the compensation paid by Martin Marietta to each person who served as a non-employee Director during the fiscal year ended December 31, 2018.
| Name1 (a) |
Fees Paid in Cash ($)2 (b) |
Stock ($)3 (c) |
Change in Pension Earnings ($)4 (f) |
All Other ($)5 (g) |
Total ($) (h) |
|||||||||
| Dorothy M. Ables |
31,250 |
|
130,073 |
|
0 |
357 |
|
161,680 |
| |||||
| Sue W. Cole |
128,250 |
|
130,027 |
|
17,666 |
52,922 |
|
328,935 |
| |||||
| Smith W. Davis |
93,750 |
|
130,027 |
|
13 |
1,280 |
|
225,070 |
| |||||
| John J. Koraleski |
120,000 |
|
130,027 |
|
133 |
9,887 |
|
260,047 |
| |||||
| David G. Maffucci6 |
60,000 |
|
130,027 |
|
4,600 |
17,075 |
|
211,702 |
| |||||
| Laree E. Perez |
137,000 |
|
130,027 |
|
8,287 |
26,381 |
|
301,695 |
| |||||
| Michael J. Quillen |
158,625 |
|
130,027 |
|
8,054 |
38,895 |
|
335,601 |
| |||||
| Dennis L. Rediker |
126,000 |
|
130,027 |
|
13,625 |
37,034 |
|
306,686 |
| |||||
| Donald W. Slager |
115,000 |
|
130,027 |
|
142 |
2,652 |
|
247,821 |
| |||||
| Stephen P. Zelnak, Jr. |
128,250 |
|
130,027 |
|
6,340 |
29,984 |
|
294,601 |
| |||||
| 1 | Mr. Nye, who is the Chief Executive Officer of Martin Marietta and a member of the Board of Directors, is not included in this table because he is not compensated separately for his service as a Director. The compensation received by Mr. Nye as an employee of Martin Marietta is shown in the Summary Compensation Table on page 54. |
| 2 | The amounts in column (b) reflect fees earned in 2018. Some of these fees were deferred pursuant to the Common Stock Purchase Plan for Directors in the form of common stock units. The number of units of common stock credited in 2018 to each of the Directors under the Common Stock Purchase Plan for Directors and the grant date fair value for these awards determined in accordance with FASB ASC Topic 718, which includes the 20% discount for the February 28, 2018 payment, are as follows: Ms. Ables, 0; Ms. Cole, 665 units and $108,211 value, respectively; Mr. Davis, 463 units and $75,276 value, respectively; Mr. Koraleski, 624 units and $101,543, respectively; Mr. Maffucci, 64 units and $10,850 value, respectively; Ms. Perez, 0; Mr. Quillen, 824 units and $133,950 value, respectively; Mr. Rediker, 132 units and $21,477 value, respectively; Mr. Slager, 0; and Mr. Zelnak, 333 units and $54,182 value, respectively. The number of units credited to each of the Directors as of December 31, 2018, including units accumulated under the plan for all years of service as a Director, is as follows: Ms. Ables, 0; Ms. Cole, 15,917; Mr. Davis, 463; Mr. Koraleski, 624; Mr. Maffucci, 0; Ms. Perez, 5,258; Mr. Quillen, 7,266; Mr. Rediker, 9,965; Mr. Slager, 0; and Mr. Zelnak, 6,530. The 20% discount from the market price of Martin Marietta’s common stock used in converting to common stock units is reported in column (g). Ms. Ables joined the Board in November 2018 and her fees were prorated. |
| 3 | Each Director who was serving immediately following the 2018 Annual Meeting of Shareholder received 609 RSUs in May 2018. Ms. Ables received 744 RSUs upon joining the Board in November 2018. The amounts in column (c) reflect the grant date fair value for these awards determined in accordance with FASB ASC Topic 718. The RSUs fully vested upon award and will be distributed to the Director upon retirement, except Mr. Maffucci, Ms. Perez and Mr. Quillen each received a distribution of 305 unrestricted shares of common stock and deferred the distribution of 304 RSUs until retirement. As of December 31, 2018, each Director held RSUs in the amounts as follows: Ms. Ables, 744; Ms. Cole, 9,553; Mr. Davis, 609; Mr. Koraleski, 1,548; Ms. Perez, 9,029; Mr. Quillen, 9,029; Mr. Rediker, 9,553; Mr. Slager, 1,587; and Mr. Zelnak, 8,174. As of December 31, 2018, none of the Directors held options for common stock. Mr. Maffucci’s RSUs were distributed upon his retirement. |
| 4 | The amounts in column (f) reflect interest paid on fees deferred in cash under the Common Stock Purchase Plan for Directors. |
| 5 | The amounts in column (g) reflect for each Director: (i) an amount equal to the 20% discount from the market price of Martin Marietta’s common stock used in converting fees deferred on February 28, 2018 into common stock units pursuant to the Common Stock Purchase Plan for Directors, and (ii) the dollar value of dividend equivalents paid in 2018 on common stock units held under the plan. The Directors did not receive perquisites or other personal benefits in 2018. |
| 6 | Mr. Maffucci resigned as a Director on June 5, 2018. |
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Beneficial Owners and Management
How much stock do Martin Marietta’s Directors and executive officers own?
The following table sets forth information as of March 8, 2019 with respect to the shares of common stock that are beneficially owned by the Directors, the Chief Executive Officer, the Chief Financial Officer, and the three other named executive officers who are listed in the Summary Compensation Table on page 54 of this proxy statement, individually, and by all Directors and executive officers of Martin Marietta as a group.
| Name of Beneficial Owner |
Amount and Nature of Beneficial Ownership1 |
Deferred and Restricted Units5 |
Total | ||||||||||||
| Dorothy M. Ables |
744 | 2 |
|
— |
|
|
744 |
| |||||||
| Roselyn R. Bar |
48,006 | 3 |
|
18,905 |
|
|
66,911 |
| |||||||
| Sue W. Cole |
30,776 | 2,4 |
|
— |
|
|
30,776 |
| |||||||
| Smith W. Davis |
1,232 | 2 |
|
— |
|
|
1,232 |
| |||||||
| Daniel L. Grant |
7,826 | 3 |
|
12,391 |
|
|
20,217 |
| |||||||
| John J. Koraleski |
6,239 | 2 |
|
— |
|
|
6,239 |
| |||||||
| Donald A. McCunniff |
8,527 | 3 |
|
13,510 |
|
|
22,037 |
| |||||||
| James A. J. Nickolas |
1,430 | 3 |
|
9,246 |
|
|
10,676 |
| |||||||
| C. Howard Nye |
148,104 | 3 |
|
64,293 |
|
|
212,397 |
| |||||||
| Laree E. Perez |
14,811 | 2 |
|
— |
|
|
14,811 |
| |||||||
| Michael J. Quillen |
18,738 | 2 |
|
— |
|
|
18,738 |
| |||||||
| Dennis L. Rediker |
19,554 | 2 |
|
— |
|
|
19,554 |
| |||||||
| Donald W. Slager |
1,587 | 2 |
|
— |
|
|
1,587 |
| |||||||
| Stephen P. Zelnak, Jr. |
22,144 | 2 |
|
— |
|
|
22,144 |
| |||||||
| All Directors and executive officers as a group |
331,400 | 2,4 | 126,972 | 458,372 | |||||||||||
| 1 | As to the shares reported, unless indicated otherwise, (i) beneficial ownership is direct, and (ii) the person indicated has sole voting and investment power. None of the Directors or named executive officers individually own in excess of one percent of the shares of common stock outstanding. All Directors and executive officers as a group own 0.73% of the shares of common stock outstanding as of March 8, 2019. None of the shares reported are pledged as security. |
| 2 | Amounts reported include (1) compensation paid on an annual basis that Directors have received in common stock units that are deferred pursuant to the Amended and Restated Martin Marietta Materials, Inc. Common Stock Purchase Plan for Directors and (2) RSUs that each Director received in 2018 as part of their compensation. The Directors do not have voting or investment power for their respective common stock units and RSUs. The number of common stock units credited to each of the Directors pursuant to the Common Stock Purchase Plan as of March 8, 2019 is as follows: Ms. Ables, 0; Ms. Cole, 15,860; Mr. Davis, 623; Mr. Koraleski, 791; Ms. Perez, 5,258; Mr. Quillen, 7,218; Mr. Rediker, 10,001; Mr. Slager, 0; and Mr. Zelnak, 6,620. |
| 3 | The number of shares owned for each of Mr. Nye, Ms. Bar, Mr. McCunniff, Mr. Grant, Mr. Nickolas and all Directors and executive officers as a group assumes that options held by each of them covering shares of common stock in the amounts indicated, which are currently exercisable within 60 days of March 8, 2019, have been exercised: Mr. Nye, 56,533; Ms. Bar, 11,221; Mr. McCunniff, 8,251; Mr. Grant, 1,534; Mr. Nickolas, 0 and all Directors and executive officers as a group, 77,539. |
| 4 | Includes an approximation of the number of shares in IRA account. |
| 5 | The amounts reported include common stock units credited to each of the NEOs in connection with (i) their deferral of a portion of their cash bonus under the Martin Marietta Materials, Inc. Incentive Stock Plan, and (ii) RSUs (not including any performance-based share units (PSUs) granted under the Stock Plan that are subject to forfeiture in accordance with the terms of the plan and are scheduled to vest within 60 days of March 8, 2019), each in the following amounts: Mr. Nye, 18,711 and 45,582, respectively; Ms. Bar, 3,441 and 15,464, respectively; Mr. Nickolas, 735 and 8,511, respectively; Mr. McCunniff, 1,561 and 11,949, respectively; Mr. Grant, 1,573 and 10,818, respectively; and all Directors and executive officers as a group, 26,488 and 100,484 respectively. There are no voting rights associated with the stock units. |
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Section 16(a) Beneficial Ownership Reporting Compliance ◆ Security Ownership of Certain Beneficial Owners and Management
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires Directors and officers of Martin Marietta and persons who own more than 10% of the common stock to file with the Securities and Exchange Commission initial reports of ownership and reports in changes in ownership of the common stock. Directors, officers and more than 10% shareholders are required by Securities and Exchange Commission regulations to furnish to Martin Marietta copies of all Section 16(a) reports filed. Based solely on its review of copies of reports furnished to Martin Marietta and written representations of Directors and officers, the Company believes that during fiscal year 2018, such filing requirements were timely satisfied.
Who are the largest owners of Martin Marietta’s stock?
The following table sets forth information with respect to the shares of common stock which are held by persons known to Martin Marietta to be the beneficial owners of more than 5% of such stock as of March 8, 2019. To the best of Martin Marietta’s knowledge, based on filings with the Securities and Exchange Commission as noted below, no person beneficially owned more than 5% of any class of Martin Marietta’s outstanding voting securities at the close of business on March 8, 2019, except for those shown below.
| Name and Address of Beneficial Owner |
Amount and Nature of Beneficial Ownership |
Percent of Class | ||||||||
| The Vanguard Group1 100 Vanguard Boulevard V26 Malvern, PA 19355 |
6,841,180 | 10.95% | ||||||||
| BlackRock, Inc.2 55 East 52nd Street New York, NY 10055
|
3,945,492
|
6.31%
| ||||||||
| 1 | As reported in Schedule 13G/A reporting beneficial ownership as of December 31, 2018 filed with the Securities and Exchange Commission on February 11, 2019, indicating sole power to vote 77,275 shares, shared power to vote 13,245 shares, sole power to dispose of 6,751,400 shares, and shared power to dispose of 89,780 shares. |
| 2 | As reported in Schedule 13G/A reporting beneficial ownership as of December 31, 2018 filed with the Securities and Exchange Commission on February 6, 2019, indicating sole power to vote 3,470,515 shares and sole power to dispose of 3,945,492 shares. |
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Table of Contents
Corporate Governance Philosophy ◆ Corporate Governance Matters
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2019 PROXY STATEMENT
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25
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Table of Contents
Corporate Governance Matters ◆ Corporate Governance Philosophy
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26
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2019 PROXY STATEMENT
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Table of Contents
Corporate Governance Philosophy ◆ Corporate Governance Matters
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2019 PROXY STATEMENT
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Table of Contents
Corporate Governance Matters ◆ Corporate Governance Philosophy
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Table of Contents
Independent Auditors
(Item 2 on Proxy Card)
The Audit Committee has appointed PricewaterhouseCoopers LLP (PwC), an independent registered public accounting firm, to audit the consolidated financial statements of Martin Marietta and the effectiveness of Martin Marietta’s internal control over financial reporting for the 2019 fiscal year and the Board of Directors recommends that the shareholders ratify this appointment. The ratification of the appointment of PwC is being submitted to the shareholders because the Board of Directors believes this to be good corporate practice. Should the shareholders fail to ratify this appointment, the Audit Committee will review the matter and determine, in its sole discretion, whether PwC or another independent registered public accounting firm should be retained.
PwC served as Martin Marietta’s independent auditors for 2018 and audited the consolidated financial statements of Martin Marietta for the year ended December 31, 2018 and the effectiveness of Martin Marietta’s internal control over financial reporting as of December 31, 2018. In connection with the audit of Martin Marietta’s 2018 consolidated financial statements, Martin Marietta entered into an engagement letter with PwC that sets forth the terms by which PwC would perform audit services for Martin Marietta.
The Audit Committee is solely responsible for retaining or terminating Martin Marietta’s independent auditors. Representatives of PwC are expected to attend the Annual Meeting, will have the opportunity to make a statement if they so desire, and will be available to respond to questions from shareholders.
|
The Board Unanimously Recommends a Vote “FOR” on this Proposal 2 |
The following table summarizes the aggregate fees billed for professional services rendered to Martin Marietta by PwC in 2018 and 2017.
| 2018 |
2017 |
|||||||
| $ |
2,883,000 |
|
$ |
2,872,000 |
| |||
|
|
100,000 |
|
|
103,000 |
| |||
|
|
22,000 |
|
|
20,000 |
| |||
|
|
3,000 |
|
|
0 |
| |||
| TOTAL |
$ |
3,008,000 |
|
$ |
2,995,000 |
| ||
| Percentage of Audit & Audit-Related Fees to Total Fees |
|
99.2 |
% |
|
99.3 |
% | ||
| 1 | Services in connection with the annual consolidated financial statement audit, the annual internal controls audit, and reviews of the consolidated financial statements included in the quarterly reports. |
| 2 | Services in connection with audit-related services, including agreed-upon procedures reports and subsidiary audits. |
| 3 | Services in connection with tax advice related to transfer pricing matters. |
| 4 | Other fees include license fees for technical accounting software. |
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The Audit Committee operates under a written charter adopted by the Board of Directors, which is reassessed at least annually for adequacy by the Audit Committee. The Directors who serve on the Audit Committee have no financial or personal ties to Martin Marietta (other than Director compensation and equity ownership as described in this proxy statement) and are all “independent” for purposes of the Securities and Exchange Commission’s regulations, the New York Stock Exchange listing standards, and the Guidelines for Director’s Independence adopted by the Board of Directors. The Board of Directors has determined that none of the Audit Committee members has a relationship with Martin Marietta that may interfere with the Director’s independence from Martin Marietta and its management. Copies of the Audit Committee’s charter and Martin Marietta’s Guidelines for Director’s Independence can be viewed on Martin Marietta’s website at ir.martinmarietta.com/investor-relations/corporate-governance.
The Board of Directors has charged the Audit Committee with a number of responsibilities, including review of the adequacy of Martin Marietta’s financial reporting, accounting systems, and internal controls. Martin Marietta’s independent auditors and the vice president of the internal audit function report directly and are ultimately accountable to the Audit Committee.
In the discharge of its responsibilities, the Audit Committee has reviewed and discussed with management and the independent auditors Martin Marietta’s audited consolidated financial statements for fiscal year 2018. In addition, the Committee has discussed with the independent auditors matters such as the quality (in addition to acceptability), clarity, consistency, and completeness of Martin Marietta’s financial reporting, as required by Auditing Standard No. 1301, Communications with Audit Committees, as adopted by the Public Company Accounting Oversight Board.
The Audit Committee has received from the independent auditors written disclosures and a letter concerning the independent auditors’ independence from Martin Marietta, as required by the Public Company Accounting Oversight Board in Rule 3526, Communication with Audit Committees Concerning Independence, and has discussed with the independent auditors the independent auditors’ independence. These disclosures have been reviewed by the Committee and discussed with the independent auditors.
Based on these reviews and discussions, the Audit Committee has recommended to the Board of Directors that the audited financial statements be included in Martin Marietta’s 2018 Annual Report on Form 10-K for filing with the Securities and Exchange Commission.
February 21, 2019
AUDIT COMMITTEE
Laree E. Perez, Chair
Dorothy M. Ables
John J. Koraleski
Dennis L. Rediker
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Table of Contents
Compensation Committee Report
The Management Development and Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis beginning on page 32 of this Proxy Statement. Based on this review and discussion, the Management Development and Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in Martin Marietta’s 2018 Annual Report on Form 10-K and this Proxy Statement.
February 20, 2019
MANAGEMENT DEVELOPMENT AND
COMPENSATION COMMITTEE
Michael J. Quillen, Chair
Sue W. Cole
John J. Koraleski
Compensation Committee Interlocks and Insider
Participation in Compensation Decisions
The members of Martin Marietta’s Management Development and Compensation Committee are Directors Cole, Koraleski, and Quillen, none of whom has ever been an officer or employee of Martin Marietta or any of its subsidiaries, or had any relationship requiring disclosure by Martin Marietta under Item 404 of Regulation S-K of the SEC. There are no executive officer-Director interlocks where an executive of Martin Marietta serves on the compensation committee of another corporation that has an executive officer serving on Martin Marietta’s Board of Directors.
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Table of Contents
Table of Contents
Compensation Discussion and Analysis ◆ Our 2018 Performance
By almost any meaningful measure, 2018 was a remarkable year for Martin Marietta. We achieved full-year record financial results for the seventh year in a row. We continue to focus not only on the operations of the Company, but also on the best practices needed to make Martin Marietta not just the best aggregates company, but rather one of the world’s best companies. Our Company performance, coupled with the achievement of key strategic goals, delivered excellent results in 2018, and established an enhanced solid foundation for continued performance and delivery of shareholder value.
|
|
Adjusted EBITDA* of $1.1 BILLION, an all-time high
|
|
Revenue and profitability growth driven largely by BLUEGRASS MATERIALS ACQUISITION | |||
|
|
SOLID PRICING GAINS AND MODEST IMPROVEMENT IN SHIPMENTS across heritage Building Materials business
|
|
Meaningful INCREASE IN DIVIDEND and resumed SHARE REPURCHASE program
| |||
|
|
Disciplined execution of our LONG-TERM STRATEGIC PLAN |
|
BEST HERITAGE SAFETY PERFORMANCE in Company’s history |
| * | Adjusted for certain non-reconciliation. See Appendix B for reconciliation to reported net earnings. Adjusted EBITDA is a metric used for executive performances targets |
We continue to focus on our capital allocation and shareholder returns to create shareholder value. Martin Marietta has returned more capital to its shareholders over the last five years than any of our peers in heavy construction materials.
Cumulative Capital Return as % of Operating Cash Flow (2014 – 2018)
Source: company filings, FactSet as of 3/15/2019
In 2018, we continued to focus on strategically positioning ourselves in high-growth areas. Consistent with our strategic plan and our assessment of the attractiveness of markets, we completed the acquisition of Bluegrass Materials, the largest privately-held, pure-play aggregates business in the United States with locations in Maryland, Georgia, Kentucky, Tennessee and South Carolina.
MARKET ATTRACTIVENESS DRIVER Population growth Market economic diversity Superior state financial position Population density High barriers to entry ADVANTAGE Increased per capita Aggregates consumption Market stability supports infrastructure growth Large infrastructure network leads to increased repair & maintenance expenditures Protects location advantage
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Table of Contents
Our 2018 Performance ◆ Compensation Discussion and Analysis
The successful, continued implementation of our strategic plan has helped us achieve a leading position in 90% of the markets in which we operate. Our strategic plan focuses on our trajectory in those regions with attractive population dynamics and long term expected growth. The following chart shows the 30-year forecasted population and gross state product growth for the highest growth states in which we generated sales in 2018, with the size of the circle for each state indicating the relative amount of our revenues attributable to sales in that state.
Martin Marietta Sales-Generating States1
Source: Company filings and IHS Markit
| 1 | Based on 2018 products and services revenue by state of destination; assumes equal sales-weighted exposure to all states with <1% |
| 2. | Long-term Gross State Product growth calculated as forecasted 30-year CAGR (2018-2048) |
| 3. | Long-term state population growth calculated as forecasted 30-year CAGR (2018-2048) |
Despite significant precipitation in many of our key markets, we achieved record financial performance in 2018. Effective management provided us the ability to prudently reinvest in our business, pursue strategic opportunities, and return cash to our shareholders.
In summary, Martin Marietta continued to execute its strategic plan while delivering strong performance in 2018 as compared to 2017:
| * | 2018 adjusted gross profit excludes the $18.7 million impact of selling acquired inventory after its markup to fair value as part of acquisition accounting. See Appendix B for reconciliation to reported gross profit. |
| ** | 2017 adjusted earnings per diluted share excludes the $4.07 per share one-time tax benefit from the 2017 Tax Act. See Appendix B for reconciliation to reported earnings per diluted share. |
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Table of Contents
Compensation Discussion and Analysis ◆ Our 2018 Performance
Sustainability Reporting
Martin Marietta continues to be recognized as the best of the best in our industry. Sustainability is a key component of our strategy and business plan at Martin Marietta. Sustainability excellence is not only the right thing to do and a key driver of shareholder value, it is a vital component of both our strategic planning process, or Strategic Operating Analysis and Review (SOAR), and our annual planning process. SOAR, supplemented by our annual plan, has guided us since 2010 as we have grown the business, driven our safety incidents to record low levels, achieved record financial performance and created positive impacts on our communities and the environment. Key managers from across our business and our senior leadership team engage throughout the year on material topics, including safety, employee wellbeing, community well-being and the environment.
Both SOAR and our annual plan are reviewed and endorsed by our Board of Directors. Martin Marietta’s Ethics, Environment, Safety and Health Committee (EESHC) of the Board of Directors, an experienced and knowledgeable group, has, for decades, overseen our ongoing efforts to hone truly sustainable business practices. Our full Board visits our operations frequently, to hear firsthand from our team and see the positive impact we have on our communities.
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Table of Contents
Safety and Sustainability ◆ Compensation Discussion and Analysis
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Table of Contents
Compensation Discussion and Analysis ◆ Safety and Sustainability
NSSGA also recognizes company performance in safety with their Sterling Safety Award. Martin Marietta was awarded a bronze-level Sterling Safety Award in 2018 in the large company category.
Environmental Stewardship
Stewardship is another of our core values and our operations were well-represented among the NSSGA Environmental Excellence Award winners. These awards provide national recognition for operations actively contributing to the maintenance of the environment in and around their operations as evidenced by a commitment to the exemplary use of environmental controls and systems. This award is based, in part, on the extent to which an operation meets and exceeds technical environmental and regulatory requirements. In addition, in order to be eligible for the award, the operation must certify its compliance with all applicable governmental environmental regulatory requirements and does not have a pattern of violations during the time period of two full years prior to the date of application. Churchville Quarry (Maryland) was recognized with a gold-level award. Nine of our operations were recognized as silver-level award winners and ten of our operations were recognized as bronze-level award winners.
Ethical Business Conduct
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Table of Contents
Components of Executive Compensation – Performance-Related Compensation ◆ Compensation Discussion and Analysis
Components of Executive Compensation – Performance-Related Compensation
Each NEO receives a mix of fixed and variable components of compensation. A substantial portion of our CEO’s and other executive officers’ compensation is at risk and will vary depending upon our performance. All of the opportunities to achieve long-term equity incentives (LTI) granted to our CEO and other executive officers in 2018 were performance-related consisting of performance share unit awards (PSUs) that comprised 55% of the long-term equity awards and performance-related restricted stock unit awards (RSUs) that comprised 45% of the awards. The following charts summarize the various forms of compensation and demonstrate that in 2018 87 percent of the CEO’s compensation and approximately 80 percent of other NEO compensation is variable and tied to company performance.
|
|
Pay Decisions and Compensation Governance Practices
|
WHAT WE DO | ||
|
|
Pay for performance. Tie pay to performance by ensuring that a significant portion of NEO compensation is performance-based and at-risk.
| |
|
|
Median compensation targets. We generally aim to align all compensation elements for our executives with the median of our peer group companies.
| |
|
|
PSUs are a substantial portion of LTI. PSU grants, tied to our achievement of specified performance measures, comprised approximately 55% of the total value of annual long-term incentive grants made to our NEOs in 2018. Performance-based RSUs comprised the remaining 45%.
| |
|
|
Independent compensation consultant. The Committee retains an independent compensation consultant. | |
|
|
Robust share ownership requirements. We have robust stock ownership guidelines of 7 times base salary for the CEO, 5 times base salary for our other NEOs, and 5 times annual retainer for Directors. We also have an equity retention requirement of 50% of net shares paid as incentive compensation until ownership guidelines are met.
| |
|
|
Clawback policy. We have a compensation recovery (clawback) policy that requires officers to forfeit certain cash-based incentive compensation and/or equity-based incentive compensation if the company restates its financial statements due to the officer’s misconduct.
| |
|
|
Regular engagement with shareholders. We engage with shareholders to hear their views on compensation and other issues. | |
|
|
Annual elections. We no longer have a classified Board of Directors and all of our Directors stand for election each year. | |
|
WHAT WE DON’T DO | ||
|
|
No employment contracts. None of our NEOs or other executive officers have employment contracts that guarantee continued employment.
| |
|
|
No dividends on unvested awards. Our 2018 RSU and PSU awards require three years to fully vest and dividends paid on shares of common stock of Martin Marietta during the vesting period are only paid to award holders if and when an award vests.
| |
|
|
No pledging of shares. Our directors and executive officers are not permitted to pledge Martin Marietta shares as collateral for loans or any other purpose.
| |
|
|
No hedging. We prohibit directors and executive officers from engaging in short sales of Martin Marietta stock or similar transactions intended to hedge or offset the market value of Martin Marietta stock owned by them.
| |
|
|
Minimal executive perquisites. We do not provide NEOs country club reimbursements, personal use of the Company aircraft unrelated to business travel, or other excessive perks.
| |
|
|
No 280G gross-ups. We eliminated the excise tax gross-ups. | |
|
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Table of Contents
Compensation Discussion and Analysis ◆ Pay Decisions and Compensation Governance Practices
A number of key 2018 compensation-related decisions resulted from our achievements, which are discussed more fully below. The Committee believes that our executive compensation program continues to reflect a strong pay-for-performance philosophy and is well aligned with the interests of shareholders
2018 Chairman, President and CEO Compensation
Elements of Compensation Base Salary 14% Annual incentive 16% Long-Term Incentive 70% Fixed vs. Variable Fixed 14% Variable 86%Short-Term Variable vs. Long -Term Variable Short-Term 20% Long Term 80%
| * | We consider base salary and annual incentives as short-term pay and PSUs and RSUs as long-term pay. We do not include retirement or other compensation components in the chart. |
Determination of CEO Compensation
At each February Committee meeting, without the CEO present, the Committee reviews and evaluates CEO performance, and determines achievement levels for the prior year. The Committee also reviews competitive compensation data. At this meeting, the Committee discusses salary and annual incentive pay recommendations for the CEO, as well as an evaluation of the CEO’s performance, with the independent members of the Board. The Committee also reviews and discusses an award of RSUs and the target PSU grant size for the CEO at that meeting, which is also discussed with the independent members of the Board.
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Table of Contents
2018 Named Executive Officers’ Compensation – Our Compensation Strategy ◆ Compensation Discussion and Analysis
2018 Named Executive Officers’ Compensation – Our Compensation Strategy
Our executive compensation program is specifically designed to:
| • | Attract and retain top-caliber, knowledgeable and experienced senior executives. |
| • | Motivate our executives to achieve superior results and build long-term value for shareholders. |
| • | Reward performance that meets or exceeds established goals consistent with our strategic aims and upholding integrity. |
| • | Align individual objectives with the Company’s objectives without fostering excessive or inappropriate risk-taking. |
| • | Encourage an ownership mentality and align the long-term financial interests of our executives with those of our shareholders. |
| • | Be market competitive with our peers. |
| • | Provide reward systems that are measurable and easily understood by our managers and shareholders. |
| • | Reinforce the succession planning process undertaken on a company-wide basis by building bench strength and by identifying and retaining senior leadership, both capable of achieving the Company’s growth, profitability and other objectives. |
In 2018, our executive compensation structure consisted of three primary components: base salary, annual incentives, and long-term incentives. Within the long-term incentive component, we utilized a balanced portfolio of PSUs and performance-based RSUs.
Total Compensation Opportunity Base Salary Long-Term Incentives Annual Incentives PSUs - 55% of Award Vesting and size based on Marietta performance level RSUs - 45% of Award Vesting is conditioned on performance measured after year 1 and then continued employment over the three-year that the awards vest
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Table of Contents
Compensation Discussion and Analysis ◆ 2018 Named Executive Officers’ Compensation – Our Compensation Strategy
The following table summarizes the key elements of our 2018 executive compensation program:
|
Element
|
Primary Purpose
|
Key Characteristics
| ||
|
Base Salary
|
To compensate the executive fairly and competitively for the responsibility level of the position.
|
Fixed compensation that is reviewed annually.
| ||
|
Annual Performance- Based Incentive Awards
|
To motivate and reward organizational and individual achievement of annual strategic, financial and individual objectives.
|
Variable compensation component; based on pre-established Company and individual performance goals.
| ||
|
Incentive Stock Plan
|
To ensure executives invest certain levels of their annual incentive compensation into Martin Marietta stock units.
|
To promote sustainable performance results, a portion of each NEO’s annual cash incentive compensation (35% for the CEO and 20% for the other NEOs) is automatically converted into common stock units. NEOs may elect to convert up to 50% of their annual cash incentive compensation into common stock units.
| ||
|
Long-Term Incentive Awards
|
To align executives with shareholder interests, to reinforce long-term value creation, and to provide a balanced portfolio of long-term incentive opportunities.
|
Variable compensation component. Reviewed and granted annually. Program splits long-term incentives for NEOs at 55% PSUs and 45% RSUs.
| ||
|
Performance Share Units (PSUs)
|
To motivate executives by tying incentives to our multi-year financial goals and relative TSR reinforcing the link between our executive officers and our shareholders.
|
Grants based on three-year adjusted EBITDA and Sales Growth goals, with a modifier based on TSR performance relative to peers.
| ||
|
Restricted Stock Units
|
To motivate the appropriate behaviors delivering superior long-term total shareholder return. Also promotes a base-level of executive retention.
|
Stock price growth. Awards are subject to achievement of one-year adjusted EBITDA goals.
| ||
|
Health/Welfare Plan and Retirement Benefits
|
To provide competitive benefits promoting employee health and productivity and support financial security.
|
Fixed compensation component.
| ||
|
Perquisites and Other Benefits
|
To provide limited business-related benefits, where appropriate, and to assist in attracting and retaining executive officers.
|
Fixed compensation component.
| ||
|
Change-in-Control Protection
|
To provide continuity of management and bridge future employment if terminated following a change-in-control.
|
Fixed compensation component; only paid in the event the executive’s employment is terminated other than “for cause” or for “good reason”, in either case, in connection with a change in control.
| ||
|
42
|
2019 PROXY STATEMENT
|
|
Table of Contents
Considerations Regarding 2018 Compensation ◆ Compensation Discussion and Analysis
Considerations Regarding 2018 Compensation
The following chart summarizes the target compensation in our 2018 executive compensation program:
|
Pay Component
|
Summary
|
|||
| Base Salary |
• At the February 2018 meeting, the Committee reviewed competitive market data and individual performance evaluations. Increases were effective March 1, 2018 for all NEOs.
|
|||
|
Target Annual Cash Incentives |
• NEO target bonuses (as a percentage of base earnings) did not change in 2018. Our CEO’s target incentive for 2018 was 110% of base earnings. Other NEOs, target incentives for 2018 were 70% to 80% of base earnings. • Our shareholders in 2016 approved a new Executive Cash Incentive Plan that fixed the bonus amounts based on certain objective criteria and allowed the Committee to reduce the award based on enumerated factors in the plan. • Our CEO is required to invest a minimum of 35% of his annual cash bonus into stock units, which are held generally for a period of three years. • Other NEOs are required to invest a minimum of 20% of their annual cash bonus into stock units, which are held generally for a period of three years.
|
|||
|
Long-Term Incentives |
• Our LTI structure consists of PSUs and performance-based RSUs. • The LTI awards for NEOs in 2018 were weighted 55% PSUs and 45% RSUs. The LTI grant size is based on competitive market data. • PSU awards in 2018 are earned based on achievement of performance levels, with 33% based on three-year cumulative Sales Growth and 67% based on three-year cumulative adjusted EBITDA performance. The Company’s relative TSR ranking compared to the S&P 500 provides a modifier to the award up to 20%. • RSU awards to NEOs in 2018 are subject to the achievement of one-year adjusted EBITDA performance.
|
|||
|
Total Compensation |
The Committee uses the size-adjusted 50th percentile of our Compensation Peer Group as a guide in setting the target for the total compensation opportunity, but considers a variety of factors in setting compensation. Overall, the Committee believes targeted compensation should be more heavily weighted on variable “at-risk” compensation and longer-term components. |
The Committee approved the following actual compensation items in February 2018.
The Committee determines base salaries for the NEOs and other executives based on a number of factors, including but not limited to, market data, individual performance, the Company’s performance, internal pay equity, the advice of the Committee’s independent compensation consultant, management recommendations (except for the CEO), and, for the CEO, the Committee’s assessment of Mr. Nye’s performance. Based on these factors, the Committee approved the following increases in base salary.
| • | Mr. Nye: 5.3% increase, based on his excellent achievements as CEO since 2010 in an economic environment that resulted in muted shipment volume recovery, and specifically his performance in 2018. |
| • | Other NEOs: approximately 4.0% to 9.0% increases, based on a review of competitive market data and individual performance evaluations. |
| NEO
|
2018 Base Salary*
|
2017 Base Salary
| ||||||||
|
C. Howard Nye
|
$1,100,000
|
$1,045,000
| ||||||||
|
James A. J. Nickolas
|
$ 488,800
|
$ 470,000
| ||||||||
|
Roselyn R. Bar
|
$ 542,500
|
$ 514,200
| ||||||||
|
Donald A. McCunniff
|
$ 418,900
|
$ 384,300
| ||||||||
|
Daniel L. Grant
|
$ 384,000
|
$ 362,300
| ||||||||
| * | NEO base salaries were increased effective March 1, 2018. |
|
|
2019 PROXY STATEMENT
|
43
|
Table of Contents
Table of Contents
2018 Annual Cash Incentive Goals and Results ◆ Compensation Discussion and Analysis
2018 Actual Incentive Cash Earned
In 2018, the Committee determined that Company and individual performance warranted the annual incentive payments in the chart below based on a review of financial metrics and other important achievements. The Committee reviews the NEOs’ performance based on continuous improvement from the preceding year. The Committee considered the following financial metrics in making this determination:
| • | Pre-Tax Earnings (profitability) as against prior year |
| • | EBITDA (profitability) as against prior year |
| • | Days Sales Outstanding, or DSO (cash flow) as against prior year |
The table below summarizes the targets for 2018 and annual incentive award earned by each NEO:
| NEO
|
2018 Performance Metrics
|
Target Annual Incentive Bonus (% of Salary)
|
2018 Target Annual Incentive*
|
2018 Actual Annual Incentive
| |||||||||||||||
|
C. Howard Nye |
• Continuous improvement on safety performance from prior year
• Successful organic and inorganic growth, including acquisition and integration of Bluegrass Materials
• Ongoing delivery of management succession and development plan and emergency CEO plan
|
|
110% |
$ |
1,199,917 |
|
$ |
2,100,000 |
| ||||||||||
|
James A. J. Nickolas |
• Continue to develop and build finance team
• Develop new financial planning and internal reporting processes
• Establish finance team succession planning framework
|
75% |
$ |
364,250 |
|
$ |
564,588 |
| |||||||||||
|
Roselyn R. Bar |
• Effective management of legal function at high level, including resolution of disputes
• Legal support of acquisitions, including successful regulatory resolution of Bluegrass Materials
• Provide oversight of ethics program as Chief Ethics Officer
• Continued improvement of processes and management of Corporate Secretary function
|
80% |
$ |
430,227 |
|
$ |
709,874 |
| |||||||||||
|
Donald A. McCunniff |
• Continue to drive safety performance
• Transition health and welfare plans to more effective third party administrators
• Continue to mature learning and development programs
|
70% |
$ |
289,193 |
|
$ |
462,709 |
| |||||||||||
|
Daniel L. Grant |
• Continue to pursue projects that align with our strategic objectives, including Bluegrass Materials acquisition
• Development of Strategy and Development personnel
• Continue progress on world-class organization initiative
|
70% |
$ |
266,268 |
|
$ |
386,089 |
| |||||||||||
| * | Based on actual base earnings in 2018. |
|
|
2019 PROXY STATEMENT
|
45
|
Table of Contents
Compensation Discussion and Analysis ◆ 2018 Annual Cash Incentive Goals and Results
|
46
|
2019 PROXY STATEMENT
|
|
Table of Contents
Selection of Relative TSR ◆ Compensation Discussion and Analysis
The following table provides a summary of the long-term incentives that each of the NEOs received in 2018.
| NEO |
RSUs (3 year annual (# of shares) |
PSUs – Target (3 year cliff vesting subject to achievement of performance measures) (# of shares) | ||||||||
|
C. Howard Nye
|
|
8,539
|
|
|
9,940
|
| ||||
|
James A. J. Nickolas
|
|
1,681
|
|
|
1,956
|
| ||||
|
Roselyn R. Bar
|
|
1,839
|
|
|
2,140
|
| ||||
|
Donald A. McCunniff
|
|
1,178
|
|
|
1,371
|
| ||||
|
Daniel L. Grant
|
|
963
|
|
|
1,120
|
| ||||
|
|
2019 PROXY STATEMENT
|
47
|
Table of Contents
Compensation Discussion and Analysis ◆ 2018-2020 Performance Goals
In setting performance goals for the three-year PSUs awarded in 2018, the Committee considered various factors in choosing the metrics and establishing the goals, including:
| • | The metrics reflect drivers of our performance and we believe are important to our investors. |
| • | The goals are consistent with our business plan and positive over prior year. |
| • | We have a history of setting challenging target and maximum goals. |
| • | Our prior payouts on our PSUs, despite record financial performance, were on average below target: |
| — | 2014 to 2016: 108% |
| — | 2015 to 2017: 95% |
| — | 2016 to 2018: 75% |
In addition, we have looked at the alignment of our payouts with TSR and found that pay and performance are aligned.
2018 Performance Goals and Metrics
| Relative TSR (Modifier +/- 20%)* | EBITDA (67%) | Sales Growth (33%) | ||||||||||||||||
| TSR Percentile |
Payout Factor |
EBITDA Achievement |
Payout Factor** |
Sales Growth Achievement |
Payout Factor** | |||||||||||||
|
³75th |
+20% (Maximum) |
Plan + ³ $.24B |
200% (Maximum) |
Plan + ³ 4.5% |
200% (Maximum) | |||||||||||||
|
50th |
0% adjustment (Target) |
Plan EBITDA |
100% (Target) |
Plan Growth |
100% (Target) | |||||||||||||
|
£ 25th |
-20% (Threshold) |
Plan - $.24B |
50% (Threshold) |
Plan - 1.5% |
50% (Threshold) | |||||||||||||
| Plan - < $.24B |
0% |
Plan - < 1.5% |
0% | |||||||||||||||
| * TSR is calculated as (i) the average of our closing stock price over the final 20 trading days of the measurement period, minus the average of our closing stock price over the first 20 trading days of the measurement period, plus the value of reinvested dividends divided by (ii) the average of our closing stock price over the first 20 trading days of the measurement period, and is measured against each of the companies in the S&P 500 index (excluding any Companies acquired during the measurement period. ** Threshold and maximum are a percentage of the target. | ||||||||||||||||||
| Measure
|
Performance Target
|
Performance Result
|
Weighting
|
Weighted Payout Factor
| ||||
| EBITDA
|
$ 3.535 B
|
$ 3.145 B
|
37.5%
|
27%
| ||||
| Return on Sales
|
23.5%
|
19.4%
|
37.5%
|
21%
| ||||
| Relative TSR
|
50th
Percentile
|
52nd Percentile
|
25.0%
|
27%
| ||||
|
48
|
2019 PROXY STATEMENT
|
|
Table of Contents
2016-2018 PSU Award Payouts ◆ Compensation Discussion and Analysis
Based on a weighted payout factor of 75%, the following table shows the payouts under the 2016-2018 PSU made in February 2019.
| Payment Calculation for PSUs Granted in 2016 Certified on February 20, 2019 | ||||||||||
| NEO
|
Target Units Granted
|
Payout (shares)
| ||||||||
| C. Howard Nye |
|
21,339 |
16,101 | |||||||
| James A. J. Nickolas* |
||||||||||
| Roselyn R. Bar |
4,697 | 3,545 | ||||||||
| Donald A. McCunniff |
2,942 | 2,220 | ||||||||
| Daniel L. Grant |
2,407 | 1,817 | ||||||||
| * | Mr. Nickolas commenced employment with the Company in August 2017. |
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|
2019 PROXY STATEMENT
|
49
|
Table of Contents
Compensation Discussion and Analysis ◆ Compensation Decision Process
The following companies comprised our Compensation Peer Group for 2018 base salary and long-term incentive pay decisions:
|
Albermarle Corporation |
Louisiana-Pacific Corporation |
Owens Corning |
Vulcan Materials Company | |||
| Eagle Materials, Inc. |
Masco Corporation |
USG Corp. |
Westlake Chemical Corporation | |||
| FMC Corporation |
Mosaic Co. |
Stanley Black & Decker, Inc. |
Weyerhaeuser Company | |||
| Fortune Brands Home & Security |
Nucor Corporation |
Summit Materials, Inc. |
||||
|
50
|
2019 PROXY STATEMENT
|
|
Table of Contents
Compensation Program Risk Assessment ◆ Compensation Discussion and Analysis
|
|
2019 PROXY STATEMENT
|
51
|
Table of Contents
Compensation Discussion and Analysis ◆ Our Use of Independent Compensation Consultants
|
52
|
2019 PROXY STATEMENT
|
|
Table of Contents
Perquisites ◆ Compensation Discussion and Analysis
|
|
2019 PROXY STATEMENT
|
53
|
Table of Contents
Executive Officer Compensation
The following tables show annual and long-term compensation, for services in all capacities to Martin Marietta, earned by the Chief Executive Officer, the Chief Financial Officer, and the three other most highly compensated executive officers in 2018, which we refer to collectively in this section of this proxy statement as the “named executive officers” or “NEOs.” These tables and the accompanying narratives should be read in conjunction with the Compensation Discussion and Analysis section of this proxy statement, which provides a detailed overview of the methods used by Martin Marietta to compensate its officers, including the named executive officers.
The table below summarizes the total compensation paid to or earned by each of the named executive officers for the fiscal years set forth below. Martin Marietta has not entered into any employment agreements with any of the named executive officers.
SUMMARY COMPENSATION TABLE
| Name and Principal Position (a) |
Year (b) |
Salary ($)1 (c) |
Bonus ($)2 (d) |
Stock Awards ($)3 |
Option Awards ($)4 (f) |
Non-Equity Compensation (g) |
Change in Pension Value and Non- Qualified Deferred Compensation Earnings ($)6 (h) |
All Other Compensation ($)7 (i) |
Total ($) (j) |
|||||||||||||||||||||||||||
|
C. Howard Nye Chairman, President and CEO |
|
2018
|
|
|
1,090,833
|
|
|
5,046,900
|
|
|
1,050,000
|
|
|
1,235,634
|
|
|
110,091
|
|
|
8,533,458
|
| |||||||||||||||
|
|
2017
|
|
|
1,039,167
|
|
|
5,431,412
|
|
|
1,000,000
|
|
|
1,414,782
|
|
|
103,804
|
|
|
8,989,165
|
| ||||||||||||||||
|
|
2016
|
|
|
1,005,000
|
|
|
1,300,000
|
|
|
4,682,240
|
|
|
687,864
|
|
|
364,227
|
|
|
8,039,331
|
| ||||||||||||||||
|
James A. J. Nickolas Senior Vice President and CFO |
|
2018
|
|
|
485,667
|
|
|
899,577
|
|
|
451,670
|
|
|
91,960
|
|
|
84,393
|
|
|
2,013,267
|
| |||||||||||||||
|
|
2017
|
|
|
172,936
|
|
|
1,320,232
|
|
|
162,127
|
|
|
25,995
|
|
|
8,534
|
|
|
1,689,824
|
| ||||||||||||||||
|
Roselyn R. Bar Executive Vice President, General Counsel and Corporate Secretary |
|
2018
|
|
|
537,783
|
|
|
1,073,594
|
|
|
496,912
|
|
|
940,466
|
|
|
52,958
|
|
|
3,101,713
|
| |||||||||||||||
|
|
2017
|
|
|
511,383
|
|
|
1,433,583
|
|
|
475,586
|
|
|
1,039,249
|
|
|
52,062
|
|
|
3,511,863
|
| ||||||||||||||||
|
|
2016
|
|
|
496,583
|
|
|
498,967
|
|
|
1,001,335
|
|
|
528,522
|
|
|
100,915
|
|
|
2,626,322
|
| ||||||||||||||||
|
Donald A. McCunniff Senior Vice President, Human Resources |
|
2018
|
|
|
413,133
|
|
|
643,874
|
|
|
370,167
|
|
|
271,632
|
|
|
52,144
|
|
|
1,750,950
|
| |||||||||||||||
|
|
2017
|
|
|
382,250
|
|
|
1,044,225
|
|
|
321,090
|
|
|
292,574
|
|
|
51,251
|
|
|
2,091,390
|
| ||||||||||||||||
|
|
2016
|
|
|
370,050
|
|
|
323,276
|
|
|
629,840
|
|
|
160,803
|
|
|
71,038
|
|
|
1,555,007
|
| ||||||||||||||||
|
Daniel L. Grant Senior Vice President, Strategy & Development |
|
2018
|
|
|
380,383
|
|
|
527,756
|
|
|
308,871
|
|
|
163,952
|
|
|
41,967
|
|
|
1,422,929
|
| |||||||||||||||
|
|
2017
|
|
|
360,433
|
|
|
947,503
|
|
|
255,457
|
|
|
193,221
|
|
|
38,825
|
|
|
1,795,439
|
| ||||||||||||||||
|
|
2016
|
|
|
349,250
|
|
|
303,149
|
|
|
525,032
|
|
|
98,052
|
|
|
63,434
|
|
|
1,338,917
|
| ||||||||||||||||
| 1 | The amounts in column (c) reflect the base salary actually paid. Mr. Nickolas’ employment with the Company began in August 2017. |
| 2 | The amounts in column (d) for 2016 reflects the cash bonuses to the named individuals earned under annual incentive arrangements. The amounts in this column include the amounts of bonus irrevocably deferred in common stock units at the election of each named executive officer pursuant to Martin Marietta’s Incentive Stock Plan, which is discussed in further detail on page 45 under the heading “Annual Incentive Feature: Performance-Based Stock Purchase Plan.” Column (e) includes the amounts mandatorily deferred in 2016 under the Incentive Stock Plan. |
| 3 | The amounts in column (e) reflect the aggregate grant date fair value of awards made in the year reported, determined in accordance with FASB ASC Topic 718 (without any assumption for early forfeiture), of awards of RSUs; and awards of PSUs, which are described in more detail on pages 46 to 48 under the heading “2018 Long-Term Incentive Compensation.” The amounts included in the table reflects the value of the units granted, which are subject to forfeiture if the executive does not remain in the employment of Martin Marietta for the requisite time period (generally three years) and if Martin Marietta does not achieve the performance criteria, where applicable. The amounts reported for 2016 include awards related to the amount of cash bonus irrevocably and mandatorily deferred in common stock units by each named executive officer pursuant to Martin Marietta’s Incentive Stock Plan, which is discussed in further detail on page 45 under the heading “Annual Incentive Feature: Performance-Based Stock Purchase Plan”. The amounts in column (e) for 2016 do not include the 20% discount on the Incentive Stock Plan units, which is reported in column (i). The amount in column (e) includes PSUs based on the target level of performance. Assuming the maximum payout under the PSUs granted in 2018, whose payout will be determined in February 2021 based on the Company’s performance in 2018-2020, the amounts reported above for 2018 would be as follows: |
|
54
|
2019 PROXY STATEMENT
|
|
Table of Contents
Summary Compensation Table ◆ Executive Compensation
| Mr. Nye, $5,245,457; Mr. Nickolas, $1,032,205; Ms. Bar, $1,129,304; Mr. McCunniff, $723,493; and Mr. Grant, $591,037. Assumptions used in the calculation of these amounts are included in Note A to Martin Marietta’s audited financial statements for the fiscal year ended December 31, 2018, included in Martin Marietta’s Annual Report on Form 10-K filed with the SEC on February 25, 2019. The amounts of cash bonus deferred in 2018 for each named executive officer are included in column (e) as follows: Mr. Nye, $1,050,000; Mr. Nickolas, $112,918; Ms. Bar, $212,962; Mr. McCunniff, $92,542; and Mr. Grant, $77,218. |
| 4 | The Company does not issue SARs and has not granted any options since 2015. The Stock-Based Award Plan prohibits share recycling for options or SARs. |
| 5 | The amounts in column (g) for 2018 reflect the cash paid to the named individuals earned in 2018 and paid in 2019 under annual incentive arrangements discussed in further detail on pages 44 to 46 under the heading “2018 Annual Cash Incentive Goals and Results” and not deferred pursuant to Martin Marietta’s Incentive Stock Plan, which is discussed in further detail on page 45 under the heading “Annual Incentive Feature: Performance-Based Stock Purchase Plan.” |
| 6 | The amounts in column (h) reflect the aggregate increase in the actuarial present value of the named executive officer’s accumulated benefits during 2018, 2017 and 2016, respectively, under all defined benefit retirement plans established by Martin Marietta determined using interest rate and mortality rate assumptions consistent with those used in Martin Marietta’s financial statements and include amounts which the named executive officer may not currently be entitled to receive because such amounts are not vested. |
| 7 | The amount shown in column (i) for 2018 reflects for each named executive officer: matching contributions allocated by Martin Marietta to each of the named executive officers pursuant to the Savings and Investment Plan, which is more fully described on page 59 under the heading “Retirement and Other Benefits” in the following amounts: Mr. Nye, $9,625; Mr. Nickolas, $8,638; Ms. Bar, $9,555; Mr. McCunniff, $9,625; and Mr. Grant, $8,228; the value attributable to life insurance benefits provided to the named executive officers, which is more fully described on page 59 under the heading “Retirement and Other Benefits” in the following amounts: Mr. Nye, $10,062; Mr. Nickolas, $1,659; Ms. Bar, $5,995; Mr. McCunniff, $9,422; and Mr. Grant, $5,630; the value attributable to personal use of leased automobiles provided by Martin Marietta in the following amounts: Mr. Nye, $10,794; Mr. Nickolas, $13,608; Ms. Bar, $11,873; Mr. McCunniff, $13,409, and Mr. Grant, $8,847; dividend equivalents on RSUs in the following amounts: Mr. Nye, $79,610; Mr. Nickolas, $0; Ms. Bar, $25,535; Mr. McCunniff, $19,687; and Mr. Grant, $19,262; and for Mr. Nickolas, a moving bonus of $60,489 in connection with his employment that began in August 2017. These values are included as compensation on the W-2 of named executive officers who receive such benefits. Each such named executive officer is responsible for paying income tax on such amount. The amounts in column (i) also reflect the 20% discount from the market price of Martin Marietta’s common stock pursuant to the elective deferrals under the Incentive Stock Plan in 2016, and the dollar value of dividend equivalents on units credited under the equity awards as computed for financial statement reporting purposes for each fiscal year ended December 31, 2018, 2017 and 2016 in accordance with FASB ASC Topic 718. |
|
|
2019 PROXY STATEMENT
|
55
|
Table of Contents
Executive Compensation ◆ Grants of Plan-Based Awards
The table below shows each grant of an award made to a named executive officer in the fiscal year ended December 31, 2018. This includes equity awards made to the named executive officers under the Stock Plan and the Incentive Stock Plan.
GRANTS OF PLAN-BASED AWARDS TABLE
|
Estimated Future Payouts Under Non-Equity Incentive |
Estimated Future Payouts Under Equity Incentive Plan Awards |
All Other Stock Awards: Number of Shares of Stock or Units (#) |
Grant Date Fair Value of Stock and Option Awards4 |
|||||||||||||||||||||||||||||||||
| Name | Grant Date |
Threshold ($) |
Target ($) |
Maximum ($) |
Threshold (#) |
Target (#) |
Maximum (#) |
|||||||||||||||||||||||||||||
| (a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | (l) | |||||||||||||||||||||||||||
|
C. Howard Nye |
|
2/20/19 |
1 |
|
599,958 |
|
|
3,750,000 |
|
|
3,901 |
|
|
24,380 |
|
|
750,045 |
| ||||||||||||||||||
|
|
|
2/22/18 |
3 |
|
3,976 |
|
|
9,940 |
|
|
23,856 |
|
|
2,185,607 |
| |||||||||||||||||||||
|
|
|
2/22/18 |
2 |
|
8,539 |
|
|
1,811,293 |
| |||||||||||||||||||||||||||
|
James A. J. Nickolas |
|
2/20/19 |
1 |
|
291,400 |
|
|
6,000,000 |
|
|
474 |
|
|
9,752 |
|
|
91,136 |
| ||||||||||||||||||
|
|
|
2/22/18 |
3 |
|
783 |
|
|
1,956 |
|
|
4,695 |
|
|
430,085 |
| |||||||||||||||||||||
|
|
|
2/22/18 |
2 |
|
1,681 |
|
|
356,574 |
| |||||||||||||||||||||||||||
|
Roselyn R. Bar |
|
2/20/19 |
1 |
|
301,158 |
|
|
5,250,000 |
|
|
840 |
|
|
14,628 |
|
|
161,507 |
| ||||||||||||||||||
|
|
|
2/22/18 |
3 |
|
856 |
|
|
2,140 |
|
|
5,136 |
|
|
470,543 |
| |||||||||||||||||||||
|
|
|
2/22/18 |
2 |
|
1,839 |
|
|
390,089 |
| |||||||||||||||||||||||||||
|
Donald A. McCunniff |
|
2/20/19 |
1 |
|
231,354 |
|
|
6,000,000 |
|
|
377 |
|
|
9,752 |
|
|
72,486 |
| ||||||||||||||||||
|
|
|
2/22/18 |
3 |
|
549 |
|
|
1,371 |
|
|
3,291 |
|
|
301,455 |
| |||||||||||||||||||||
|
|
|
2/22/18 |
2 |
|
1,178 |
|
|
249,877 |
| |||||||||||||||||||||||||||
|
Daniel L. Grant |
|
2/20/19 |
1 |
|
213,014 |
|
|
6,000,000 |
|
|
347 |
|
|
9,752 |
|
|
66,718 |
| ||||||||||||||||||
|
|
|
2/22/18 |
3 |
|
448 |
|
|
1,120 |
|
|
2,688 |
|
|
246,266 |
| |||||||||||||||||||||
|
|
|
2/22/18 |
2 |
|
963 |
|
|
204,272 |
| |||||||||||||||||||||||||||
| 1 | The amounts shown in this row reflect the annual bonus that could have been earned in 2018, payable in 2019, pursuant to the Executive Cash Incentive Plan. For each named executive officer, the amounts shown in columns (d) and (e) reflect the portion of the annual bonus that would have been paid in cash if, respectively, target and maximum performance was achieved for the year (i.e., after reduction for the total portion that would be deferred pursuant to the Incentive Stock Plan pursuant to both mandatory and voluntary deferrals). The amounts shown in columns (g) and (h) reflect the portion of the annual bonus that would have been deferred pursuant to the Incentive Stock Plan if, respectively, target and maximum performance was achieved for the year, inclusive of the 20% discount. Participants in the Incentive Stock Plan for 2018 were approved on May 17, 2018. These awards are discussed under the heading “Annual Incentive Feature: Performance-Based Stock Purchase Plan” on page 45. The actual amounts paid are reflected in the Summary Compensation Table on page 54. |
| 2 | The amounts shown in column (i) reflect the number of RSUs granted in 2018 to each of the named executive officers pursuant to the Stock-Based Award Plan. These awards are discussed under the heading “2018 Long-Term Incentive Compensation” on pages 46 to 48. These awards are also included in column (e) of the Summary Compensation Table on page 54. |
| 3 | The amounts shown in columns (f), (g) and (h) reflect the threshold, target and maximum, respectively, levels of PSUs payable if the performance measurements are satisfied in the period 2018-2020. These awards are discussed under the heading “2018 Long-Term Incentive Compensation” on pages 46 to 48. |
| 4 | The amounts shown in column (l) reflect the grant date fair value of each equity award computed in accordance with FASB ASC Topic 718. No options to purchase shares of Martin Marietta’s common stock were granted in 2018. |
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Table of Contents
Grants of Plan-Based Awards ◆ Executive Compensation
Outstanding Equity Awards at Fiscal Year-End
The table below shows for each of the named executive officers information with respect to the unexercised stock options (columns (b), (c), (e), and (f)), stock unit awards (columns (g) and (h)) that have not vested, and equity incentive plan awards (columns (d), (i), and (j)) outstanding on December 31, 2018.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END TABLE
| OPTION AWARDS | STOCK AWARDS | |||||||||||||||||||||||||||
| Name | Number
of (#) |
Number
of (#) |
Option ($) |
Option Expiration Date |
Number (#) |
Market Value of Shares or Units of Stock That Have Not Vested1 ($) |
Equity Not Vested |
Equity Other ($) |
||||||||||||||||||||
| (a)
|
(b)
|
(c)
|
(e)
|
(f)
|
(g)
|
(h)
|
(i)
|
(j)
|
||||||||||||||||||||
|
C. Howard Nye |
12,609 16,317 14,475 6,792 6,340 |
0 0 0 0 3,1702 |
|
86.90 69.12 108.24 121.00 154.58 |
|
|
5/12/2019 5/24/2020 5/23/2023 5/22/2024 5/21/2025 |
|
|
22,070 3,556 6,502 8,539 5,991 5,893 |
3 4 5 6 7 8 |
|
3,793,171 611,170 1,117,499 1,467,598 1,029,673 1,012,830 |
|
|
21,339 11,355 9,940 |
9 10 11 |
|
3,667,534 1,951,584 1,708,388 |
| ||||||||
|
James A. J. Nickolas |
|
5,130 1,681 |
12 6 |
|
881,693 288,913 |
|
|
1,956 |
11 |
|
336,178 |
| ||||||||||||||||
|
Roselyn R. Bar |
4,513 4,004 1,877 827 |
0 0 0 8242 |
|
69.12 108.24 121.00 154.58 |
|
|
5/24/2020 5/23/2023 5/22/2024 5/21/2025 |
|
|
9,913 783 1,870 1,839 1,121 935 |
3 4 5 6 7 8 |
|
1,703,747 134,574 321,396 316,069 192,666 160,698 |
|
|
4,697 3,267 2,140 |
9 10 11 |
|
807,273 561,499 367,802 |
| ||||||||
|
Donald A. McCunniff |
3,226 3,027 1,998 |
0 0 6652 |
|
108.24 121.00 154.58 |
|
|
5/23/2023 5/22/2024 5/21/2025 |
|
|
8,127 490 1,414 1,178 485 474 |
3 4 5 6 7 8 |
|
1,396,787 84,216 243,024 202,463 83,357 81,466 |
|
|
2,942 2,470 1,371 |
9 10 11 |
|
505,642 424,519 235,634 |
| ||||||||
|
Daniel L. Grant |
816 718 |
0 3582 |
|
121.00 154.58 |
|
|
5/22/2024 5/21/2025 |
|
|
7,643 401 1,264 963 568 502 |
3 4 5 6 7 8 |
|
1,313,602 68,920 217,244 160,011 97,622 86,279 |
|
|
2,407 2,210 1,120 |
9 10 11 |
|
413,691 379,833 192,494 |
| ||||||||
|
|
2019 PROXY STATEMENT
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57
|
Table of Contents
Executive Compensation ◆ Outstanding Equity Awards at Fiscal Year-End
| 1 | Based on the closing price of our common stock as of December 31, 2018 ($171.87). |
| 2 | Options exercisable on May 21, 2019. |
| 3 | RSU restrictions lapse on August 21, 2019. |
| 4 | RSU restrictions lapsed on February 4, 2019. |
| 5 | RSU restrictions lapse ratably in installments on March 28, 2019 and March 28, 2020. |
| 6 | RSU restrictions lapse ratably in installments on February 22, 2019, February 22, 2020 and February 22, 2021. |
| 7 | Incentive Stock Plan units restrictions lapse on December 1, 2019. |
| 8 | Incentive Stock Plan units restrictions lapse on December 1, 2020. |
| 9 | The amount for these outstanding awards of PSUs are presented at the target performance levels. The awards generally vest at December 31, 2018. |
| 10 | The amount for these outstanding awards of PSUs are presented at the target performance levels. The awards generally vest at December 31, 2019. |
| 11 | The amount for these outstanding awards of PSUs are presented at the target performance levels. The awards generally vest at December 31, 2020. |
| 12 | RSU vests as follows subject to continued employment on the dates of vesting: 1,083 units vest on December 31, 2019, and 4,047 units vest on August 21, 2022. If Mr. Nickolas’ employment terminates prior to August 21, 2022 as a result of his voluntary termination or the Company’s termination of Mr. Nickolas for cause, all outstanding RSUs expire and he is required to return to the Company the value of any vested shares of common stock that vested in connection with this award. |
Option Exercises and Stock Vested
The table below shows on an aggregated basis for each of the named executive officers information on (1) the exercise of options for the purchase of Martin Marietta’s common stock and (2) the vesting of stock, including RSUs, PSUs and Incentive Stock Plan units, during the last completed fiscal year. There are no awards of stock appreciation rights for Martin Marietta’s common stock or other similar instruments.
OPTION EXERCISES AND STOCK VESTED TABLE
| OPTION AWARDS | STOCK AWARDS | |||||||||||||||
| Name (a) |
Number of Shares (#) (b) |
Value Realized ($) (c) |
Number
of (#) (d) |
Value Realized ($) (e) |
||||||||||||
| C. Howard Nye |
|
11,196 |
|
|
1,323,255 |
|
|
33,916 |
|
|
6,319,413 |
| ||||
| James A. J. Nickolas |
|
0 |
|
|
0 |
|
|
1,506 |
|
|
258,836 |
| ||||
| Roselyn R. Bar |
|
7,408 |
|
|
835,374 |
|
|
7,675 |
|
|
1,466,285 |
| ||||
| Donald A. McCunniff |
|
1,818 |
|
|
211,586 |
|
|
5,231 |
|
|
1,007,999 |
| ||||
| Daniel L. Grant |
|
0 |
|
|
0 |
|
|
4,217 |
|
|
775,176 |
| ||||
| 1 | The amounts in column (e) include the value of RSUs and PSUs at the time of vesting and the appreciation of both mandatory and voluntary contributions under the Incentive Stock Plan. |
|
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|
|
Table of Contents
Option Exercises and Stock Vested ◆ Executive Compensation
|
|
2019 PROXY STATEMENT
|
59
|
Table of Contents
Executive Compensation ◆ Pension Benefits
The table below shows the present value of accumulated benefits payable to each of the named executive officers, including the number of years of service credited to each such named executive officer, under our Pension Plan and SERP, determined using interest rate and mortality rate assumptions consistent with those used in Martin Marietta’s financial statements.
PENSION BENEFITS TABLE
| Name (a)
|
Plan Name (b)
|
Numbers of Years Credited Service (#) (c)
|
Present Value of Accumulated Benefit ($)1 (d)
|
Payments During Last Fiscal Year ($) (e)
| |||||||||||||
|
C. Howard Nye |
Pension Plan SERP
|
|
12.417 12.417
|
|
|
489,661 5,325,892
|
|
||||||||||
|
James A. J. Nickolas |
Pension Plan SERP
|
|
1.417 1.417
|
|
|
40,630 77,325
|
|
||||||||||
|
Roselyn R. Bar |
Pension Plan SERP
|
|
24.500 24.500
|
|
|
1,249,548 3,859,990
|
|
||||||||||
|
Donald A. McCunniff |
Pension Plan SERP
|
|
7.417 7.417
|
|
|
375,116 777,053
|
|
||||||||||
|
Daniel L. Grant |
Pension Plan SERP
|
|
5.333 5.333
|
|
|
262,859 430,878
|
|
||||||||||
| 1 | Amounts in column (d) reflect the valuation method and use the assumptions that are included in Notes A and J to Martin Marietta’s audited financial statements for the fiscal year ended December 31, 2018, included in Martin Marietta’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 25, 2019. |
|
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Table of Contents
Table of Contents
Executive Compensation ◆ Potential Payments Upon Termination or Change of Control
|
62
|
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|
|
Table of Contents
Potential Payments Upon Termination or Change of Control ◆ Executive Compensation
Value of Payments Upon Termination. The following table shows the potential incremental value of payments to each of our named executive officers upon termination, including in the event of a Change of Control of Martin Marietta, assuming a December 31, 2018 termination date and, where applicable, using the NYSE closing price of our common stock of $171.87 on December 31, 2018 (the last trading day of 2018).
POTENTIAL INCREMENTAL VALUE OF PAYMENTS UPON TERMINATION
OR CHANGE OF CONTROL AT DECEMBER 31, 2018
|
Name
|
Benefit or Payment1
|
Retirement ($)
|
Involuntary
|
Disability ($)
|
Death ($)
|
Change- of- Control ($)
| |||||||||||||||||||||
|
Cash Severance2 |
9,300,000 | ||||||||||||||||||||||||||
| Unvested RSUs3 | 3,196,266 | 3,793,171 | 6,989,437 | 6,989,437 | 6,989,437 | ||||||||||||||||||||||
| Unexercisable Options4 | 57,207 | 57,207 | 57,207 | 57,207 | |||||||||||||||||||||||
| Unvested Incentive Stock Plan Units5 | 42,503 | 22,974 | 42,503 | 42,503 | 42,503 | ||||||||||||||||||||||
| C. Howard Nye | PSUs6 | 3,659,972 | 3,659,972 | 3,659,972 | 3,659,972 | ||||||||||||||||||||||
| Retirement Plans7 | 1,437,564 | 13,615,299 | |||||||||||||||||||||||||
| Health and Welfare Benefits8
|
65,760 | ||||||||||||||||||||||||||
|
Cash Severance2 |
1,953,051 | ||||||||||||||||||||||||||
| Unvested RSUs3 | 1,170,607 | 1,170,607 | 1,170,607 | 1,170,607 | |||||||||||||||||||||||
| Unexercisable Options4 | |||||||||||||||||||||||||||
| Unvested Incentive Stock Plan Units5 | |||||||||||||||||||||||||||
| James A. J. Nickolas | PSUs6 | 336,178 | 336,178 | 336,178 | 336,178 | ||||||||||||||||||||||
| Retirement Plans7 | 799,962 | 1,052,447 | |||||||||||||||||||||||||
| Health and Welfare Benefits8
|
78,328 | ||||||||||||||||||||||||||
|
Cash Severance2 |
3,529,845 | ||||||||||||||||||||||||||
| Unvested RSUs3 | 772,040 | 1,703,747 | 2,475,787 | 2,475,787 | 2,475,787 | ||||||||||||||||||||||
| Unexercisable Options4 | 14,924 | 14,924 | 14,924 | 14,924 | |||||||||||||||||||||||
| Unvested Incentive Stock Plan Units5 | 7,723 | 4,231 | 7,723 | 7,723 | 7,723 | ||||||||||||||||||||||
| Roselyn R. Bar | PSUs6 | 929,301 | 929,301 | 929,301 | 929,301 | ||||||||||||||||||||||
| Retirement Plans7 | 5,644,123 | ||||||||||||||||||||||||||
| Health and Welfare Benefits8
|
34,483 | ||||||||||||||||||||||||||
|
Cash Severance2 |
2,468,985 | ||||||||||||||||||||||||||
| Unvested RSUs3 | 529,704 | 1,396,787 | 1,926,491 | 1,926,491 | 1,926,491 | ||||||||||||||||||||||
| Unexercisable Options4 | 12,001 | 12,001 | 12,001 | 12,001 | |||||||||||||||||||||||
| Unvested Incentive Stock Plan Units5 | 3,731 | 1,993 | 3,731 | 3,731 | 3,731 | ||||||||||||||||||||||
| Donald A. McCunniff | PSUs6 | 660,153 | 660,153 | 660,153 | 660,153 | ||||||||||||||||||||||
| Retirement Plans7 | 120,543 | 1,596,909 | |||||||||||||||||||||||||
| Health and Welfare Benefits8
|
34,977 | ||||||||||||||||||||||||||
|
Cash Severance2 |
2,288,809 | ||||||||||||||||||||||||||
| Unvested RSUs3 | 446,175 | 1,313,602 | 1,759,777 | 1,759,777 | 1,759,777 | ||||||||||||||||||||||
| Unexercisable Options4 | 6,461 | 6,461 | 6,461 | 6,461 | |||||||||||||||||||||||
| Unvested Incentive Stock Plan Units5 | 4,015 | 2,200 | 4,015 | 4,015 | 4,015 | ||||||||||||||||||||||
| Daniel L. Grant | PSUs6 | 572,327 | 572,327 | 572,327 | 572,327 | ||||||||||||||||||||||
| Retirement Plans7 | 11,954 | 1,153,066 | |||||||||||||||||||||||||
| Health and Welfare Benefits8
|
34,044 | ||||||||||||||||||||||||||
| 1 | The table does not include information with respect to plans or arrangements that are available generally to all salaried employees and that do not discriminate in favor of executive officers. The table reflects the incremental value over the amounts to which the named executive officer would have been entitled on a voluntary resignation on December 31, 2018. |
| 2 | Assumes all earned base salary has been paid. |
| 3 | Reflects the estimated lump-sum intrinsic value of all unvested RSUs. |
| 4 | Reflects the estimated lump-sum intrinsic value of all unvested stock options. |
| 5 | Reflects the difference between the value of the unvested Incentive Stock Plan share units at year-end and the amount of cash invested by the executive officer in the share units. |
| 6 | Reflects the estimated lump-sum intrinsic value of all unvested PSUs. |
| 7 | The table does not include information related to the form and amount of payments or benefits that are not enhanced or accelerated in connection with any termination that would be provided by Martin Marietta’s retirement plans, which is disclosed in the Pension Benefits Table and the accompanying narrative on page 60. Change of Control values include the incremental value of the benefit (including three times Martin Marietta’s match to the defined contribution plan) payable upon a qualifying termination of employment following a Change of Control. |
| 8 | Reflects the estimated incremental lump-sum present value of all future premiums that would be paid on behalf of the named executive officer under Martin Marietta’s health and welfare plans, including long-term disability and life insurance. |
|
|
2019 PROXY STATEMENT
|
63
|
Table of Contents
Table of Contents
Table of Contents
Securities Authorized for Issuance
Under Equity Compensation Plans
The following table shows information as of December 31, 2018 regarding Martin Marietta’s compensation plans that allow Martin Marietta to issue its equity securities. Martin Marietta’s equity compensation plans consist of the Amended and Restated Martin Marietta Materials, Inc. Common Stock Purchase Plan for Directors (the Directors’ Plan), the Martin Marietta Materials, Inc. Amended and Restated Stock-Based Award Plan (the Stock-Based Award Plan), under which the Martin Marietta Materials, Inc. Incentive Stock Plan (the Incentive Stock Plan) was adopted, the Martin Marietta Materials, Inc. Amended Omnibus Securities Award Plan (the Omnibus Securities Award Plan), and the Martin Marietta Materials, Inc. Shareholder Value Achievement Plan (the Achievement Plan). Martin Marietta’s shareholders have approved all of these plans. Martin Marietta has not entered into any individual compensation arrangements that would allow it to issue its equity securities to employees or non-employees in exchange for goods or services.
EQUITY COMPENSATION PLAN INFORMATION
| Plan Category
|
Number of securities options, warrants, (a)
|
Weighted-average (b)3
|
Number of securities for future issuance reflected in column (c)
| ||||||||||||
|
Equity compensation plans approved by shareholders |
602,968 | 1 | $ | 122.22 | 1,150,654 | 4 | |||||||||
| Equity compensation plans not approved by shareholders |
65,695 | 2 | $ | 51.82 | 0 | 5 | |||||||||
| TOTAL |
668,663 | $ | 105.63 | 1,150,654 | |||||||||||
| 1 | Includes 152,782 stock options that have a weighted-average exercise price of $112.56; 416,083 restricted stock units that have a $0 exercise price; and 34,103 stock units granted in accordance with the Incentive Stock Plan that are credited to participants at an average weighted cost of $165.47. The restricted stock units and stock units granted in accordance with the Incentive Stock Plan represent Martin Marietta’s obligation to issue shares in the future subject to certain conditions in accordance with the Stock-Based Award Plan. |
| 2 | Represents stock options and restricted stock units granted to legacy Texas Industries, Inc. (“TXI”) employees and employees hired after July 1, 2014. |
| 3 | The weighted-average exercise price does not take into account the restricted stock units and stock units for which there is no exercise price. |
| 4 | Includes shares of Martin Marietta’s common stock available for issuance (other than those reported in column (a)) under Martin Marietta’s equity compensation plans as of December 31, 2018 in the following amounts: Directors’ Plan (143,483 shares), Stock-Based Award Plan (799,196 shares), and Achievement Plan (207,975 shares). Also excludes Texas Industries Inc. stock-based award plans (1,878,850 shares). The Directors’ Plan provides that nonemployee directors may elect to receive all or a portion of their fees in the form of common stock. Under the Achievement Plan, awards can be granted to key senior employees based on certain common stock performance over a long-term period. No awards have been granted under this plan since 2000. |
| 5 | There are 1,878,850 shares of Martin Marietta’s common stock available for issuance to legacy TXI employees. These shares will be used to settle currently outstanding awards but no further awards will be granted for these shares, as indicated by management in connection with the approval by shareholders of the Stock-Based Award Plan on May 19, 2017. |
|
66
|
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|
|
Table of Contents
Description of the Deferred Compensation Plan ◆ Securities Authorized for Issuance Under Equity Compensation Plans
|
|
2019 PROXY STATEMENT
|
67
|
Table of Contents
Table of Contents
Annual Meeting and Voting Information ◆
|
|
2019 PROXY STATEMENT
|
69
|
Table of Contents
Table of Contents
Table of Contents
NON-GAAP MEASURES
Non-GAAP financial measures disclosed by management are provided as additional information to investors in order to provide them with an alternative method for assessing our financial condition and operating results. These measures are not in accordance with, or a substitute for, GAAP, and may be different from or inconsistent with non-GAAP financial measures used by other companies.
EBITDA is a widely accepted financial indicator of a company’s ability to service and/or incur indebtedness. EBITDA is not defined by GAAP and, as such, should not be construed as an alternative to net earnings or operating cash flow. Consolidated adjusted EBITDA excludes the impact of selling acquired inventory after its markup to fair value as part of acquisition accounting; acquisition-related expenses, net; and asset and portfolio rationalization charge.
The following presents a reconciliation of net earnings attributable to Martin Marietta to consolidated adjusted EBITDA for the year ended December 31, 2018
Consolidated adjusted EBITDA for year ended December 31:
|
2018
|
||||||||
|
Net earnings attributable to Martin Marietta |
$ | 469,998 | ||||||
|
Add back: |
||||||||
|
Interest expense |
137,069 | |||||||
|
Income tax (benefit) expense for controlling interests |
105,637 | |||||||
|
Depreciation, depletion and amortization expense |
340,006 | |||||||
|
|
|
|||||||
|
Consolidated EBITDA
|
1,052,710 | |||||||
|
Add back: |
||||||||
|
Impact of selling acquired inventory after its markup to fair value as part of acquisition accounting |
18,738 | |||||||
|
Acquisition-related expenses, net |
13,479 | |||||||
|
Asset and portfolio rationalization charge |
18,838 | |||||||
|
|
|
|||||||
|
Consolidated adjusted EBITDA |
$ | 1,103,765 | ||||||
|
|
|
|||||||
|
Total revenues |
$ | 4,244,265 | ||||||
|
EBITDA margin |
26 | % | ||||||
|
|
|
|||||||
|
|
|
|||||||
Adjusted gross profit excludes the impact of selling acquired inventory after its markup to fair value as part of acquisition accounting. The following reconciles reported consolidated gross profit to adjusted consolidated gross profit for the year ended December 31, 2018:
| (dollars in thousands) |
||||||||
|
Reported consolidated gross profit |
$ | 966,577 | ||||||
|
Impact of selling acquired inventory after its markup to fair value as part of acquisition accounting |
18,738 | |||||||
|
|
|
|||||||
|
Adjusted consolidated gross profit |
$ |
985,315 |
|
|||||
|
|
|
|||||||
|
|
2019 PROXY STATEMENT | B-1 |
Table of Contents
Appendix B ◆ Non-GAAP Measures
Adjusted earnings from operations for the years ended December 31, 2018 and 2017 exclude the impact of selling acquired inventory after its markup to fair value as part of acquisition accounting, acquisition-related expenses, net and asset and portfolio rationalization charge. The following reconciles reported earnings from operations for the years ended December 31, 2018 and 2017 to adjusted earnings from operations and the percentage increase in 2018 compared with 2017:
| (dollars in thousands) | Year Ended December 31 | |||||||
| 2018 | 2017 | |||||||
| Reported earnings from operations |
$690,737 | $700,381 | ||||||
| Impact of selling acquired inventory after its mark up to fair value as part of acquisition accounting |
18,738 | — | ||||||
| Acquisition-related expenses, net |
13,479 | 8,638 | ||||||
| Asset and portfolio rationalization charge |
18,838 | — | ||||||
|
|
|
|
|
|||||
| Adjusted earnings from operations |
$741,792 | $709,019 | ||||||
| Percentage increase in 2018 compared with 2017 |
5 | % | ||||||
Adjusted earnings per diluted share for the year ended December 31, 2017 excludes the one-time impact of the 2017 Tax Act. The following reconciles reported earnings per diluted share to adjusted earnings per diluted share for the year ended December 31, 2017:
|
Reported earnings per diluted share |
$ | 11.25 | ||||||
|
Less: impact of the 2017 Tax Act |
(4.07 | ) | ||||||
|
|
|
|||||||
| Adjusted earnings per diluted share |
$ | 7.18 | ||||||
|
|
|
|||||||
|
|
|
The increase in 2018 reported earnings per diluted share compared with 2017 adjusted earnings per diluted share is as follows:
| Reported earnings per diluted share for the year ended December 31, 2018 |
$ | 7.43 | ||||||
|
Adjusted earnings per diluted share for the year ended December 31, 2017 |
$ | 7.18 | ||||||
| Percentage increase for 2018 compared with 2017 |
3 | % | ||||||
|
B-2
|
2019 PROXY STATEMENT
|
|
Table of Contents
Table of Contents
ANNUAL MEETING OF SHAREHOLDERS OF
MARTIN MARIETTA MATERIALS, INC.
May 9, 2019
|
PROXY VOTING INSTRUCTIONS
|
|
NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIAL: The proxy statement, form of proxy card and 2018 Annual Report to Shareholders are available for review on the Internet at http://ir.martinmarietta.com/investor-relations/reports-filings
|
i Please detach along perforated line and mail in the envelope provided IF you are not voting via telephone or the Internet. i
| ⬛ 00033333333333000000 9 | 050919 |
| YOU DO NOT NEED TO MARK ANY BOXES IF YOU WISH TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS’ RECOMMENDATIONS. THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE “FOR” ITEMS 1, 2 AND 3. PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE ☒
|
|
This proxy is solicited by the Board of Directors of Martin Marietta Materials, Inc. and when properly executed will be voted as specified herein and, unless otherwise directed, will be voted FOR the election of all nominees as Directors, FOR the ratification of the selection of PricewaterhouseCoopers as independent auditors, and FOR the approval, by a non-binding advisory vote, of the compensation of our named executive officers. The Board of Directors recommends voting FOR each item.
Receipt of Notice of Annual Meeting of Shareholders and accompanying Proxy Statement is hereby acknowledged. |
1. |
Election of Directors: |
FOR |
AGAINST |
ABSTAIN | |||||||
|
Dorothy M. Ables |
☐ | ☐ | ☐ | |||||||||
|
Sue W. Cole |
☐ | ☐ | ☐ | |||||||||
|
Smith W. Davis |
☐ | ☐ | ☐ | |||||||||
|
John J. Koraleski |
☐ | ☐ | ☐ | |||||||||
|
C. Howard Nye |
☐ | ☐ | ☐ | |||||||||
|
Laree E. Perez |
☐ | ☐ | ☐ | |||||||||
|
Michael J. Quillen |
☐ | ☐ | ☐ | |||||||||
|
Donald W. Slager |
☐ | ☐ | ☐ | |||||||||
|
Stephen P. Zelnak, Jr. |
☐ | ☐ | ☐ | |||||||||
|
2. |
Ratification of selection of PricewaterhouseCoopers as independent auditors. |
☐ |
☐ |
☐ | ||||||||
|
3. |
Approval, by a non-binding advisory vote, of the compensation of Martin Marietta Materials, Inc.’s named executive officers. |
☐ |
☐ |
☐ | ||||||||
|
4. |
In their discretion, the proxies are authorized to vote upon such other business as may properly come before the meeting, or any adjournments thereof.
| |||||||||||
| To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note that changes to the registered name(s) on the account may not be submitted via this method.
|
☐ | |||||||||||
| Signature of Shareholder | Date: | Signature of Shareholder | Date: |
| ⬛ | Note: | Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person. | ⬛ |
Table of Contents
ANNUAL MEETING OF SHAREHOLDERS OF
MARTIN MARIETTA MATERIALS, INC.
May 9, 2019
GO GREEN
| e-Consent makes it easy to go paperless. With e-Consent, you can quickly access your proxy material, statements and other eligible documents online, while reducing costs, clutter and paper waste. Enroll today via www.astfinancial.com to enjoy online access. |
NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIAL:
The proxy statement, form of proxy card and 2018 Annual Report to Shareholders
are available for review on the Internet at http://ir.martinmarietta.com/investor-relations/reports-filings
Please sign, date and mail
your proxy card in the
envelope provided as soon
as possible.
i Please detach along perforated line and mail in the envelope provided. i
| ⬛ | 00033333333333000000 9 | 050919 |
YOU DO NOT NEED TO MARK ANY BOXES IF YOU WISH TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS’
RECOMMENDATIONS.
THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE “FOR” ITEMS 1, 2 AND 3.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE ☒
|
This proxy is solicited by the Board of Directors of Martin Marietta Materials, Inc. and when properly executed will be voted as specified herein and, unless otherwise directed, will be voted FOR the election of all nominees as Directors, FOR the ratification of the selection of PricewaterhouseCoopers as independent auditors, and FOR the approval, by a non-binding advisory vote, of the compensation of our named executive officers. The Board of Directors recommends voting FOR each item.
Receipt of Notice of Annual Meeting of Shareholders and accompanying Proxy Statement is hereby acknowledged. |
1. |
Election of Directors: |
FOR |
AGAINST |
ABSTAIN | |||||||
|
Dorothy M. Ables |
☐ | ☐ | ☐ | |||||||||
|
Sue W. Cole |
☐ | ☐ | ☐ | |||||||||
|
Smith W. Davis |
☐ | ☐ | ☐ | |||||||||
|
John J. Koraleski |
☐ | ☐ | ☐ | |||||||||
|
C. Howard Nye |
☐ | ☐ | ☐ | |||||||||
|
Laree E. Perez |
☐ | ☐ | ☐ | |||||||||
|
Michael J. Quillen |
☐ | ☐ | ☐ | |||||||||
|
Donald W. Slager |
☐ | ☐ | ☐ | |||||||||
|
Stephen P. Zelnak, Jr. |
☐ | ☐ | ☐ | |||||||||
|
2. |
Ratification of selection of PricewaterhouseCoopers as independent auditors. |
☐ |
☐ |
☐ | ||||||||
|
3. |
Approval, by a non-binding advisory vote, of the compensation of Martin Marietta Materials, Inc.’s named executive officers. |
☐ |
☐ |
☐ | ||||||||
|
4. |
In their discretion, the proxies are authorized to vote upon such other business as may properly come before the meeting, or any adjournments thereof.
| |||||||||||
| To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note that changes to the registered name(s) on the account may not be submitted via this method.
|
☐ | |||||||||||
| Signature of Shareholder | Date: | Signature of Shareholder | Date: |
| ⬛ | Note: | Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person. | ⬛ |
Table of Contents
| 0 | ⬛ | |||||
|
MARTIN MARIETTA MATERIALS, INC. |
||||||
|
Proxy solicited by the Board of Directors for the |
||||||
| Annual Meeting to be held May 9, 2019 | ||||||
|
The undersigned hereby appoints C. Howard Nye and James A. J. Nickolas, and each or either of them, proxies, with full power of substitution, with the powers the undersigned would possess if personally present, to vote, as designated below, all shares of the common stock of the undersigned in Martin Marietta Materials, Inc. at the Annual Meeting of Shareholders to be held on May 9, 2019, and at any adjournment thereof. |
||||||
|
(Continued and to be signed on the reverse side) |
||||||
|
⬛ |
1.1 |
14475 |
⬛ | |||