The following table illustrates the calculation of the Distribution segment portion of Mr. Smidler's 2016 annual cash incentive award payout. As shown in the table, Mr. Smidler earned 26.9 points based on actual 2016 business segment results as measured against the specified financial goals. Given the performance factor weightings and point conversion methodology described above, the 2016 financial performance by the Distribution segment resulted in a corresponding performance award factor of 0% out of a maximum of 200%.
2016 ANNUAL INCENTIVE AWARD CALCULATIONS FOR DISTRIBUTION 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 9.6%. The average investment was $437.0 million.
Segment operating income decreased from $49.4 million in 2015 to an adjusted $42.9 million in 2016, a decrease of 13.2%. Segment operating income was adjusted by $1.0 million relating to restructuring costs. Actual operating income was $41.9 million.
Segment sales decreased from $1.177 billion in 2015 to an adjusted $1.106 billion in 2016, a decrease of 6.0%.
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.
Determined utilizing Annual Incentive Award "Points" Conversion Chart.
Since 75% of Mr. Smidler's annual cash incentive award was based on Segment performance and 25% was based on corporate performance, Mr. Smidler's aggregate annual cash incentive award factor was 22.6% (.75 x 0% + .25 x 90.3%). The following table shows the calculation of the 2016 annual cash incentive award earned by Mr. Smidler, together with the resulting percentage of base salary such award represents:
Named Executive Officer
Target Award %
Annual Incentive Award Perf. Factor
Expressed as a
Steven J. Smidler
Long-Term Incentive Awards
The Committee uses cash- and equity-based awards under the long-term incentive features of the Company's stock incentive plans ("LTIP awards") in order to focus executive officers on long-term performance. LTIP awards generally are based on the Company’s actual performance during a three-year performance period, as compared to performance measures established at the beginning of the performance period. The award payout for a completed performance period is determined by comparing the Company’s actual financial performance for the three-year period with the performance of the Russell 2000 Index for the same period. Award payouts for completed performance periods generally are made in cash unless a participant has not yet achieved his or her required stock ownership level under the Company’s stock ownership guidelines, in which case the Committee may elect to pay up to one-third of the amount earned in shares of Company stock. In the discretion of the Committee, up to the entire amount of the amount earned may be paid in shares of Company stock to the extent requested by a participant. Assuming a participant has achieved his or her required stock ownership level under the Company's stock ownership guidelines, LTIP award payouts generally are made in cash in order to provide additional liquidity to participants without the need to sell Company securities. These awards are intended to qualify as performance-based compensation under Section 162(m) of the Internal Revenue Code. The Committee retains the ability to utilize negative discretion to eliminate or decrease the amount payable to a participant with respect to any award.