2016 ANNUAL INCENTIVE AWARD CALCULATIONS FOR AEROSPACE NEO
Calculation of Points Earned
Actual vs Target ROI
Free Cash Flow
2016 actual average ROI was calculated based on operating income and average investment, modified to exclude restructuring costs incurred in 2016. Actual unadjusted ROI for 2016 was 18.2%. The average investment was $632.0 million.
Segment operating income increased from $110.3 million in 2015 to an adjusted $117.5 million in 2016, an increase of 6.5%. Segment operating income was adjusted by $2.5 million relating to restructuring costs. Actual unadjusted operating income was $115.0 million.
Segment sales increased from $597.6 million in 2015 to an adjusted $706.2 million in 2016, an increase of 18.2%. Segment sales were adjusted by $3.9 million relating to foreign exchange rate effects.
Segment adjusted free cash flow is expressed in millions and represents the net cash provided by (used in) operating activities less expenditures for property, plant & equipment. Actual free cash flow was $45.1 million.
Determined utilizing Annual Incentive Award "Points" Conversion Chart.
Since 75% of Mr. Steiner's annual cash incentive award was based on Segment performance and 25% was based on corporate performance, Mr. Steiner's aggregate annual cash incentive award factor was 38.0% (.75 x 20.6% + .25 x 90.3%). The following table shows the calculation of the 2016 annual cash incentive award earned by Mr. Steiner, together with the resulting percentage of base salary such award represents:
Named Executive Officer
Target Award %
Annual Incentive Award Perf. Factor
Expressed as a
Gregory L. Steiner
Distribution Segment Named Executive Officer. The 2016 annual cash incentive award for Mr. Smidler, President of our Distribution segment, was calculated based 25% on corporate performance and 75% on predetermined financial goals for the Distribution segment that were recommended by our CEO and approved by the Committee. The financial performance goals and their weightings for the Distribution segment were as follows:
Financial Performance Goal
Actual average return on investment vs. target
Growth in segment operating profit from prior year
Growth in segment sales from prior year
Segment free cash flow vs. Plan
Target return on investment performance is the average return on investment for the three previous calendar years (i.e., the average of 2013, 2014, and 2015 for the 2016 performance year). Growth in segment sales and growth in operating profit both are measured against the prior year. Segment free cash flow represents the net cash provided by (used in) operating activities less expenditures for property, plant & equipment.
"Points" are earned based on the extent to which each performance goal is achieved, with a minimum level of achievement being required to earn any points. The points are then converted into an aggregate payout percentage using the points conversion chart set forth above, which is used to determine the amount of the actual cash incentive award payout. A minimum of 50 points must be accumulated in order to earn any cash incentive award payout and, the more points that are earned, the greater the cash incentive award payout, subject to a maximum cap of 200 points.