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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Kraton Corporation | NYSE:KRA | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 46.49 | 0 | 01:00:00 |
¨
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Preliminary Proxy Statement.
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¨
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)).
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x
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Definitive Proxy Statement.
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¨
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Definitive Additional Materials.
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¨
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Soliciting Material Pursuant to §240.14a-12.
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x
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No fee required.
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¨
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Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
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(1)
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Title of each class of securities to which transaction applies:
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(2)
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Aggregate number of securities to which transaction applies:
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(3)
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
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(4)
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Proposed maximum aggregate value of transaction:
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(5)
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Total fee paid:
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¨
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Fee paid previously with preliminary materials.
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¨
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing.
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(1)
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Amount Previously Paid:
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(2)
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Form, Schedule or Registration Statement No.:
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(3)
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Filing Party:
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(4)
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Date Filed:
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Dear Fellow Stockholders,
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On behalf of the Board of Directors, I am pleased to invite you to attend the Annual General Meeting of Stockholders of Kraton Corporation on Wednesday, May 23, 2018 at 1:00 p.m., central time, at The Sheraton North Houston, 15700 John F. Kennedy Boulevard, Houston, Texas 77032. The meeting will focus on the items listed in the Notice of Annual General Meeting of Stockholders and Proxy Statement that follows. Your vote on these matters is very important regardless of whether you plan to attend the meeting, thus I encourage you to review the proxy material and vote by internet, phone or mail as soon as possible.
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As we prepare to host this year's Annual General Meeting, we do so as a company entering our third year as a transformed company. In 2017, we continued our roadmap in becoming
an admired Fortune 500 specialty chemical company
by, among other actions, committed execution on our corporate strategy, embracing the three fundamental pillars of sustainability, and enhancing the diversity of our Board.
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Continued Execution of our Corporate Strategy
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For Kraton, 2017 was a year of favorable execution and progress on multiple fronts. On our integration plan, we delivered the $65 million of operational cost-outs and synergies associated with the acquisition of our Chemical segment, one year ahead of our original 2018 target. Moreover, in executing our corporate strategy, the favorable business performance we delivered in 2017 translated into solid cash generation, allowing us to exceed our debt reduction targets for the year. Additionally, regarding the ongoing cost reset initiatives in our Polymer segment, as of year-end 2017, we realized approximately $45 million of our $70 million goal. We remain focused on building upon these successes into 2018.
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Embracing the Three Fundamental Pillars of Sustainability
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In 2017, Kraton published its first Corporate Sustainability Report reflecting the combined sustainability programs of our Polymer and Chemical segments. We identified our key sustainability priority areas and progressed in setting our long-term sustainability targets. This year, we continue to strive to deliver on our promise of “Sustainable Solutions and Endless Innovation”; whereby we believe we can create long-term stakeholder value in an otherwise resource-constrained world. Specifically, we seek to be sustainable across all three fundamental pillars: environmentally; socially; and in our governance. To accomplish these goals, we continue to focus on key areas, such as raw material use, operational efficiency, ecosystem impact, health and safety, human rights and corporate culture transparency. We look forward to the publication of our 2017 Corporate Sustainability Report, which will be available on
www.kraton.com
later this spring.
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Enhancing Board Diversity
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As part of our ongoing commitment to creating a balanced Board with diverse viewpoints and broad ranging experiences, we welcomed two new directors in August 2017 to infuse unique ideas and fresh perspectives into the boardroom. Ms. Bausch is the President of the Fluid Technologies division at Carlisle Companies Inc., and Mr. Blinn was, most recently, the President and Chief Executive Officer of Flowserve Corporation. Each are accomplished business leaders with significant experience directly relevant to our strategic vision and business. In our commitment to board refreshment, we focus on how the background, experience and skill set of each member complements those of their fellow directors to create a balanced board. One that embodies our principles of diversity and that will lead our business into the future.
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Sincerely,
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Kevin M. Fogarty
Director and President and Chief Executive Officer
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1.
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To elect three Class III directors, each to serve for a three-year term and until a successor is duly elected and qualified;
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2.
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To conduct an advisory vote on the compensation of our named executive officers;
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3.
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To ratify the appointment of KPMG LLP as our independent registered public accounting firm for the
2018
fiscal year;
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4.
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To approve and adopt an amendment to the Kraton Corporation 2016 Equity and Cash Incentive Plan to increase the number of shares available for issuance thereunder; and
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5.
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To transact other business that may properly come before the meeting and any postponement or adjournment of the meeting.
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H
OUSTON
, T
EXAS
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By Order of the Board of Directors of Kraton Corporation,
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James L. Simmons,
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Senior Vice President, General Counsel and Secretary
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April 13, 2018
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Annual Meeting Information
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1
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Proposals and Voting Recommendations
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1
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Director Nominees
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1
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Corporate Governance Highlights
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2
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Performance Highlights
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2
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Adherence to Executive Compensation Best Practices
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2
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Principles and Philosophy of the Compensation Program
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3
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2017 Named Executive Officer Compensation
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4
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Continuing Stockholder Outreach in 2017
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5
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Our Compensation Consultants
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5
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Overview
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9
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Nominees for Election as Class III Directors: Term Expiring 2021
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10
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Incumbent Class I Directors: Term Expiring 2019
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11
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Incumbent Class II Directors: Term Expiring 2020
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12
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Executive Officers Who are Not Directors
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13
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Our Board of Directors
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15
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Independence of the Board
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16
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Committees of the Board of Directors
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17
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Board Leadership Strategy and Role in Risk Oversight
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18
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Involvement in Certain Legal Proceedings
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18
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Board and Committee Effectiveness
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19
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Board Selection and Refreshment
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20
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Director Resignation Policy
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21
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Certain Relationships and Related Party Transactions
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21
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Corporate Governance Guidelines
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22
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Code of Ethics and Business Conduct
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22
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Holdings of Major Stockholders
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23
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Holdings of Officers and Directors
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24
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Section 16(a) Beneficial Ownership Reporting Compliance
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24
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Executive Summary
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25
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Roles in Determining Executive Compensation
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28
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Determining Executive Compensation
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29
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Principles and Philosophy of the Compensation Program
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33
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Compensation Decisions and Results
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36
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Other Compensation for our NEOs
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43
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Components of Post-Employment Compensation
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44
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Other Compensation Policies
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44
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Compensation Risk Assessment
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46
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Summary Compensation Table
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48
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Pay Ratio
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49
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Equity Compensation Plan Information
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50
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Grants of Plan-Based Awards
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50
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Outstanding Equity Awards at 2017 Fiscal Year-End
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51
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Option Exercises and Stock Vested
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52
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Pension Benefits
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52
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Nonqualified Deferred Compensation
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53
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Termination and Change in Control Payments
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54
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Components of Non-Management Director Compensation
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57
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Director Compensation for Fiscal 2017
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57
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Primary Responsibilities
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59
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Oversight of Independent Registered Public Accounting Firm
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59
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2017 Audited Financial Statements
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60
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Fees Paid to Independent Registered Public Accounting Firm
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61
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Audit Committee Pre-Approval Policies and Procedures
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62
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Proposal 4 - Vote to Approve and Adopt the Amendment to the Kraton Corporation 2016 Equity and Cash Incentive Plan
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Background and Purpose of the Proposal
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63
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Consequences of Failing to Approve the Proposal
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63
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Selected Data on Current Outstanding and Unissued Awards
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64
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Highlights of the Amended Plan
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64
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Summary of Material Terms of the Amended Plan
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65
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New Plan Benefits
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68
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Federal Income Tax Consequences of Awards
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68
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Inclusion of Proposal in Our Proxy Statement and Proxy Card under the SEC's Rules
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71
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Bylaw Requirements for Stockholder Submission of Nominations and Proposals
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71
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Incorporation by Reference
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72
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Annual Report on Form 10-K
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72
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Delivery of Documents to Stockholders Sharing an Address
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72
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•
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Time and Date:
Wednesday,
May 23, 2018
, at 1:00 p.m., central time
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•
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Location:
The Sheraton North Houston, 15700 John F. Kennedy Boulevard, Houston, Texas 77032
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•
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Record Date:
March 26, 2018
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•
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Availability of Materials:
Our
2017
Annual Report, Notice of Internet Availability of Proxy Materials and proxy card are first being made available online on or about
April 13, 2018
.
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Proposal
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Board of Directors'
Recommendation |
Page
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Election of Class III Directors
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FOR ALL
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Advisory vote on the compensation of our named executive officers
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FOR
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Ratification of the appointment of our Independent Registered Public Accounting Firm
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FOR
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Vote to approve and adopt an amendment to the Kraton Corporation 2016 Equity and Cash Incentive Plan to increase the number of shares available for issuance thereunder
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FOR
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Name
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Age
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Director
Since |
Other Current
Public Boards |
Committee Membership
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Current Position
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||||
Shelley J. Bausch
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52
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2017
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—
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NCG
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President of Carlisle Fluid Technologies
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Kevin M. Fogarty
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52
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2009
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1
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Executive
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CEO of Kraton Corporation
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Karen A. Twitchell
†
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62
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2009
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2
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Audit
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Retired EVP and CFO of Landmark Aviation
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Compensation
+
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Corporate Governance Highlights
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•
Resignation Policy for Uncontested Director Elections
|
•
Code of Ethics and Business Conduct for all Directors and Employees
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•
Fully Independent Board Committees
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•
Board Orientation and Continuing Education
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•
Board Risk Oversight
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•
Independent Board (Excluding our CEO)
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•
Diverse Board
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•
Independent Directors Meet without Management
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•
Stockholder Outreach Program
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•
Annual Board and Committee Self-evaluations
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Reduction of Debt to
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3-Year Relative Total Shareholder Return in the
|
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Net Income of
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$1,525 million
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$97.5 million
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and
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96
th
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and
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Net Debt to
|
|
Percentile
(2)
|
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Adjusted EBITDA
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$1,450 m
illion
(1)
|
|
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$374.2 m
illion
(1)
|
(1)
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For a reconciliation of U.S. generally accepted accounting principles ("GAAP") to non-GAAP financial measures, refer to
“Annex A — Non-GAAP Reconciliations.”
|
(2)
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Based on relative TSR from December 31, 2014 to December 31, 2017 using the 2017 TSR Peer Group.
|
What We Do
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What We Don't Do
|
ü
Emphasis on Pay-for-Performance
|
û
No Single-Trigger Change in Control Plans
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ü
Stock Ownership and Retention Guidelines
|
û
No Individual Employment Agreements
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ü
Clawback Policy
|
û
No Excise Tax Gross-Ups
|
ü
Minimum Vesting Periods for Awards
|
û
No Liberal Share Recycling
|
ü
Fungible Share Design
|
û
No Equity Plan Evergreen Provision
|
ü
Perform Annual Compensation Risk Assessment
|
û
No Tax Gross-Ups for Non-Relocation Based Personal Benefits
|
ü
Use of Independent Compensation Consultant
|
û
No Hedging or Pledging
|
CEO Total Direct Targeted Compensation
|
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Other NEOs Total Direct Targeted Compensation
|
Analysis of Total Direct Targeted Compensation
|
CEO
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Other NEOs
|
|||
Proportion of pay subject to specific quantitative performance criteria
|
60%
|
51%
|
|||
Proportion of pay at-risk (variable compensation)
|
80%
|
66%
|
|||
Proportion of pay delivered in the form of long-term equity
|
60%
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46%
|
•
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Grants of restricted stock performance units ("PRSUs") represent two-thirds of the variable equity compensation mix and have a three-year performance period;
|
•
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Grants of restricted stock awards ("RSAs") have a three-year cliff vest;
|
•
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Total variable compensation paid to our CEO in 2017 accounted for approximately 60% of his total reported compensation;
|
•
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Payout under the 2015 grants of PRSUs was 93.1%, with the 3-year relative total shareholder return (25% of the metric weighting) in the 95.6 percentile; and
|
•
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Actual payouts under our annual cash incentive compensation program in 2017 were reflective of our financial performance, being 107.6% of target for our NEOs.
|
Named Executive Officer
|
2017 Base Salary ($)
|
Change From 2016
|
2018 Base Salary ($)
|
Change From 2017
|
Kevin M. Fogarty
|
925,000
|
5.7%
|
1,000,000
|
8.1%
|
Stephen E. Tremblay
|
475,000
|
–
|
500,000
|
5.3%
|
Holger R. Jung
|
400,000
|
–
|
400,000
|
–
|
Marcello C. Boldrini
|
380,000
|
n/a
|
400,000
|
4.8%
|
Vijay Mhetar
|
310,000
|
n/a
|
325,000
|
5.3%
|
Named Executive Officer
|
Target Bonus
|
Payout Range for 2017 ($)
|
Actual Payout ($)
|
Kevin M. Fogarty
|
1.0 x Base Salary
|
0 - 1,850,000
|
995,300
|
Stephen E. Tremblay
|
.70 x Base Salary
|
0 - 665,000
|
357,770
|
Holger R. Jung
|
.60 x Base Salary
|
0 - 480,000
|
258,240
|
Marcello C. Boldrini
|
.60 x Base Salary
|
0 - 456,000
|
183,996
(1)
|
Vijay Mhetar
|
.50 x Base Salary
|
0 - 310,000
|
166,780
|
(1)
|
Amount prorated to Mr. Boldrini's April 1, 2017 start date.
|
(1)
|
The PRSUs are disclosed at target. The PRSUs will vest three-years from the date of grant in an amount, if at least the threshold level of performance is achieved, ranging from 0.5x target to 2.0x target level depending on performance against the Compensation Committee's established metrics.
|
(2)
|
These amounts do not reflect the RSAs granted to Mr. Boldrini and Dr. Mhetar as part of their respective sign-on compensation. For information on such grants, please refer to "
Named Executive Officer Compensation—Grants of Plan Based Awards
."
|
•
|
In Person
- we will provide a ballot to our stockholders who attend the Annual Meeting and wish to vote in person;
|
•
|
In Writing
- if you request a paper proxy card, simply complete, sign and date the proxy card, then follow the instructions on the proxy card; or
|
•
|
By Telephone or Internet
- follow the instructions on the Notice of Internet Availability or proxy card and have the Notice of Internet Availability or proxy card available when you access the Internet website or place your telephone call.
|
Proposal
|
Recommended Vote
|
Voting Approval Standard
(1)
|
Effect of Abstention
|
Effect of Broker Non-Vote
(3)
|
|
1
|
Election of Class III directors
|
FOR ALL
|
More votes “FOR” than “WITHHELD”
(2)
|
No effect
|
No effect
|
2
|
Advisory Approval on the Compensation of our Named Executive Officers
|
FOR
|
Majority of the votes cast
|
No effect
|
No effect
|
3
|
Ratification of the Appointment of our Independent Registered Public Accounting Firm
|
FOR
|
Majority of the votes cast
|
No effect
|
Not applicable
|
4
|
Vote to approve and adopt an amendment to the Kraton Corporation 2016 Equity and Cash Incentive Plan to increase the number of shares available for issuance thereunder
|
FOR
|
Majority of the votes cast
|
Vote against
|
No effect
|
(1)
|
Shares present in person or by proxy must be at least a majority of the shares entitled to vote to constitute a quorum. “Shares present” includes shares represented in person or by proxy at the Annual Meeting.
|
(2)
|
Any director nominee in an uncontested election who receives a greater number of votes “withheld” than votes “for” in such election shall, promptly following the certification of the voting results for such election, tender an offer of resignation for consideration by our NCG Committee. See “
Corporate Governance—Director Resignation Policy
”.
|
(3)
|
A broker non-vote occurs when a broker holding shares for a beneficial owner votes on some matters on the proxy card, but not on others, because the broker does not have instructions from the beneficial owner or discretionary authority (or declines to exercise discretionary authority) with respect to those other matters.
|
•
|
writing to our Secretary at our principal executive office;
|
•
|
delivering a properly executed proxy card dated after the date of the proxy card you want to revoke;
|
•
|
voting at a later time, but prior to 11:59 p.m. eastern time on May 22,
2018
, by telephone or the Internet; or
|
•
|
attending the Annual Meeting and casting your vote in person.
|
Shelley J. Bausch
|
|
|
Independent
Age:
52
Director since:
2017
Board Committee:
NCG
Current Public Directorships:
None
|
|
Ms. Bausch is the President of Carlisle Fluid Technologies at Carlisle Companies, Inc. From 2014 to October 2017, Ms. Bausch served as the Global Vice President, Global Industrial Coatings at PPG Industries, Inc. Ms. Bausch began her career at Dow Corning Corporation in 1988, and most recently served as its Business Vice President, Finished Products from 2011 to 2014.
|
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||
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||
|
Skills and Qualifications:
|
|
|
•
Significant experience in the chemicals industry, including internationally
|
|
|
•
Senior leadership experience
|
|
|
•
Broad experience in manufacturing, marketing, commercial operations, strategic planning, and organizational management
|
Kevin M. Fogarty
|
|
Our President and CEO
|
Age
:
52
Director since
:
2009
Board Committee:
Executive
Current Public Directorships:
•
P.H. Glatfelter Company
|
|
Mr. Fogarty was appointed our President and CEO in January 2008. Prior to being appointed President and CEO, Mr. Fogarty served as our Executive Vice President of Global Sales and Marketing from June 2005. Mr. Fogarty joined us from Invista, where he had served as President for Polymer and Resins since May 2004. For the 13 years prior to his most recent position with Invista, Mr. Fogarty held a variety of roles within the Koch Industries, Inc. family of companies, including KoSa.
|
|
||
|
||
|
Skills and Qualifications:
|
|
|
•
As the CEO of our Company, Mr. Fogarty sets the strategic direction of the Company under the guidance of the Board and provides valuable insight to the Board into the day to day business issues facing our Company
|
|
|
•
Extensive sales, marketing and high-level leadership experience in the chemical industry, including experience in the specialty chemicals business, with broad international business experience
|
Karen A. Twitchell
|
|
|
Independent
Age
:
62
Director since:
2009
Board Committees:
Compensation and Audit
Current Public Directorships:
•
KMG Chemical, Inc.
•
Trecora Resources (Audit Chair)
|
|
From 2010 to 2013, Ms. Twitchell served as the Executive Vice President and Chief Financial Officer of Landmark Aviation. From 2001 to 2009, Ms. Twitchell was a Vice President and Treasurer of LyondellBasell Industries and Lyondell Chemical Company. Prior to that, she served as a Vice President and Treasurer of Kaiser Aluminum Corporation and Southdown, Inc. Before joining Southdown, Ms. Twitchell was an investment banker with Credit Suisse First Boston in its corporate finance department.
|
|
||
|
||
|
Skills and Qualifications:
|
|
|
•
Broad experience in financial management and corporate finance, including investment banking, treasury and investor relations
|
|
|
•
Extensive chemical industry experience
|
|
|
•
Longstanding experience in senior corporate positions with knowledge of financial management oversight and enterprise risk management
|
Mark A. Blinn
|
|
|
|
Independent
Age:
56
Director since:
2017
Board Committee:
Audit
Current Public Directorships:
•
Texas Instruments, Inc. (Audit Chair)
|
|
Mr. Blinn served in various positions at Flowserve Corporation, including, most recently as the Chief Executive Officer and President from 2009 to March 2017 and Chief Financial Officer from 2004 to 2009. Prior to Flowserve, Mr. Blinn held senior finance, treasury and planning positions at FedEx Kinko’s Office and Print Services, Inc., Centex Corp., FirstPlus Financial Inc., Electronic Data Systems Corp. and Commercial Capital Funding Inc. Mr. Blinn also was formerly an attorney with Smith, Barshop, Stoffer and Millsap, where he represented large financial institutions, foreign corporations and insurance companies in litigation issues.
|
|
|
Skills and Qualifications:
|
||
|
•
Strong corporate finance, public company accounting and financial reporting experience, having served as a Chief Financial Officer
|
||
|
•
Longstanding experience in senior corporate positions , including as Chief Executive Officer, with knowledge of financial management oversight
|
||
|
•
Public company board experience, with knowledge on corporate governance and board function
|
Anna C. Catalano
|
|
|
|
Independent
Age:
58
Director since:
2011
Board Committee:
Compensation
Current Public Directorships:
•
Willis Towers Watson
•
HollyFrontier Corporation
|
|
Ms. Catalano served in various capacities for BP plc, and its predecessor Amoco Corporation, from 1979 until her retirement in 2003, including from 2000 to 2003, as Group Vice President, Global Marketing, for BP plc.
|
|
|
Skills and Qualifications:
|
||
|
•
International experience, having served as President of Amoco Orient Oil Company, lived in Beijing for two years, and is fluent in Mandarin
|
||
|
•
Senior leadership experience, possessing extensive knowledge of marketing and communications
|
||
|
•
Broad public company experience, with a wealth of knowledge on corporate governance, executive compensation and board function
|
||
|
Prior Public Directorships (Last Five Years):
|
||
|
Mead Johnson Nutrition Company, Chemtura Corporation, Hercules Incorporated, SSL International plc, and U.S. Dataworks, Inc.
|
||
|
Barry J. Goldstein
|
|
|
|
Independent
Age
:
75
Director since:
2009
Board Committees:
Audit and NCG
Current Public Directorships:
•
BMC Stock Holdings, Inc.
|
|
Mr. Goldstein retired as Executive Vice President and Chief Financial Officer of Office Depot, Inc. in October 2000, which he first joined as Chief Financial Officer in May 1987. Mr. Goldstein was previously with Grant Thornton from 1969 through May 1987, where he was named a Partner in 1976.
|
|
|
|||
|
|||
|
Skills and Qualifications:
|
||
|
•
Accounting experience, having served as the Chief Financial Officer of Office Depot for 13 years, as a partner in a major public accounting firm for over a decade, and as the chairman of six audit committees, four of them public
|
||
|
•
Senior leadership, possessing extensive knowledge of corporate finance
|
||
|
•
Broad public company experience and knowledge of corporate governance having served on the board of seven companies, four of them public
|
||
|
Prior Public Directorships (Last Five Years):
|
||
|
Interline Brands, Inc. and Generac Holdings Inc.
|
||
|
Dan F. Smith
|
|
Chairman of the Board
|
|
Independent
Age:
71
Director since:
2009
Board Committees:
Compensation and Executive (chair)
Current Public Directorships:
•
Orion Engineered Carbons, S.A.
•
Nexeo Solutions, Inc.
•
TPG Pace Energy Holdings Corp.
|
|
Mr. Smith began his career as an engineer with Atlantic Richfield Company in 1968. He was elected President of Lyondell Chemical Company in August 1994 and Chief Executive Officer in December 1996. He was also elected Chief Executive Officer of Equistar Chemicals, LP in December 1997 and Millennium Chemicals Inc. in November 2004, each a wholly-owned subsidiary of Lyondell. Mr. Smith retired from each of these Chief Executive Officer positions in December 2007.
|
|
|
|||
|
|||
|
Skills and Qualifications:
|
||
|
•
Industry knowledge with a long and distinguished career in the chemical industry and a degree in chemical engineering
|
||
|
•
Senior leadership with several years of service as the Chief Executive Officer of a major chemical company
|
||
|
•
Sophisticated public company experience having served as Chairman of the board of directors of Lyondell Chemical Company
|
||
|
Prior Public Directorships (Last Five Years):
|
||
|
Northern Tier Energy LLC
|
||
|
Dominique Fournier
|
|
|
Independent
Age:
67
Director since:
2012
Board Committees:
Executive and NCG (Chair)
Current Public Directorships:
None
|
|
Mr. Fournier was the Chief Executive Officer of Infineum International Limited, a joint venture specialty chemical company between Shell and ExxonMobil, from January 2005 until December 2011. From 1976 to 2004, he held various manufacturing and marketing positions in ExxonMobil’s (and its predecessor Exxon) chemical businesses as well as senior leadership positions, including AIB Vice President, from 1998 to 2004, and Managing Director – Exxon Chemical France, from 1996 to 1997.
|
|
||
|
||
|
Skills and Qualifications:
|
|
|
•
Knowledge of the industry, including manufacturing, marketing and executive management, and executive level knowledge of the Company and the specialty chemicals business by virtue of commercial relationships
|
|
|
•
International business experience in Asia and with joint ventures
|
|
|
•
Brings geographical diversity to the Board, as a French national
|
John J. Gallagher, III
|
|
|
Independent
Age
:
54
Director since:
2011
Board Committees:
Audit (Chair) and NCG
Current Public Directorships:
None
|
|
Mr. Gallagher is the Chief Executive Officer of Stellar CJS Holdings, LLC, a privately held investment company formed in 2009. Previously, Mr. Gallagher was the Chief Operating Officer - Melt Delivery & Control Systems / Fluid Technologies / Finance and Shared Services of Milacron LLC, a supplier of plastics processing equipment, technologies and services. From 2005 to 2007, Mr. Gallagher was Executive Vice President and Chief Financial Officer of Celanese Corporation and, from 2007 to 2009, he was Executive Vice President and President, Acetyls and Celanese Asia. From 1995 to 2005, Mr. Gallagher served in executive positions with Great Lakes Chemical Corp., UOP, LLC, and AlliedSignal, Inc. From 1986 to 1994, Mr. Gallagher worked for Price Waterhouse, LLP and is a certified public accountant.
|
|
||
|
||
|
Skills and Qualifications:
|
|
|
•
Significant expertise in corporate finance, public company accounting and financial reporting, including as a chief financial officer
|
|
|
•
Senior leadership, possessing international business experience in Asia
|
|
|
•
Over twenty years of industry knowledge of the chemical business
|
(1)
|
Our Board has determined that (1) all the committee members of each of the Audit Committee, NCG Committee and Compensation Committee are independent for purposes of applicable NYSE listing standards and SEC rules, and (2) each of Messrs. Blinn, Gallagher and Goldstein, and Ms. Twitchell qualifies as an “audit committee financial expert.”
|
(2)
|
Our Compensation Committee may (1) delegate responsibilities to subcommittees comprised of one or more members of our Compensation Committee, and (2) establish committees comprised of our officers, directors or employees to administer defined benefit and other pension plans as provided in plan documentation or otherwise.
|
Our Board and its Committees evaluate, among others, the following topics:
|
•
Effectiveness at discharging their respective allocated duties and responsibilities
|
•
Organization of the Board and respective Committees, including composition, diversity, structure and refreshment
|
•
Board and Committee meetings, information needs and quality of materials presented
|
•
Satisfaction with individual director performance, including Committee and Board chairs
|
•
Access to management, internal and external resources, and continuing education possibilities
|
•
Areas where the Board and Committees should increase their focus
|
Director Recruitment Process
|
|
Assess.
Our NCG Committee commences its director recruitment and Board refreshment process by using its business judgment to deliberatively evaluate the needs of the Board going forward against the composition of the current Board, considering those directors who wish to continue to serve on the Board. The ongoing assessment includes a review of the corporate strategy, input from management on the evolving business needs, the annually updated director skills matrix and the results of the annual Board and Committee self-evaluations.
|
Assess
|
|
|
Assess the current Board composition and recent Board evaluation results to develop a list of sought after backgrounds, skills and qualifications
|
|
|
â
|
|
|
Identify
|
|
Identify
. Our NCG Committee identifies director candidates through the recommendations of directors, management and stockholders, and the engagement of third-party consulting firms. The NCG Committee provides guidance to retained consulting firms about the preferred qualifications and backgrounds of a candidate, and uses such firms to perform reviews and evaluations. Our NCG Committee will consider director candidates recommended by our stockholders. Please refer to the text of our Bylaws (including Section 1.12 “Notice of Stockholder Business and Nominations”), which are on file with the SEC, and “Stockholder Proposals and Nominations for our 2019 Annual Meeting” in this proxy statement for additional information.
|
Identify candidates from third-party search firms, stockholders, management and directors
|
|
|
â
|
|
|
Evaluate
|
|
|
Review the universe of information on, and interview, prospective nominees
|
|
|
â
|
|
|
Appoint and Recommend
|
|
|
Appoint director and recommend approval of director at the next stockholder meeting covering the applicable class of directors
|
|
Ms. Bausch and Mr. Blinn were elected to the Board by our other directors effective August 11, 2017. Each of Ms. Bausch and Mr. Blinn were identified to the Board as a director candidate from a search conducted by SpencerStuart, a third-party consulting firm retained by our NCG Committee and paid a fee for its services. These services consisted of researching and recommending potential candidates, and performance background evaluations.
|
â
|
|
|
Two directors were added to our Board in 2017
|
|
Guidelines for Nominees Selected to Serve on Our Board
|
||
•
ability to meet any requirements of applicable law
|
||
•
ability to meet any requirements of NYSE listing standards
|
||
•
integrity and strength of character
|
||
•
high ethical standards and history in matters of compliance
|
||
•
ability to represent the interests of all stockholders
|
||
•
business experience
|
||
•
specific areas of expertise
|
||
•
ability to devote sufficient time for attendance at and preparation for Board meetings
|
•
|
the benefits of the transaction to our Company;
|
•
|
the terms of the transaction and whether they are arm’s-length and in the ordinary course of our Company’s business;
|
•
|
the direct or indirect nature of the related party’s interest in the transaction;
|
•
|
the size and expected term of the transaction; and
|
•
|
other facts and circumstances that bear on the materiality of the related party transaction under applicable law and listing standards.
|
Name and Address of Beneficial Owner
|
Amount and Nature
of Beneficial Ownership |
Percent of Class
|
BlackRock, Inc.
55 East 52nd St., New York, NY 10055
|
3,921,367
(1)
|
12.3%
|
The Vanguard Group
100 Vanguard Blvd., Malvern, PA 19355
|
2,936,149
(2)
|
9.2%
|
Frontier Capital Management Co., LLC
99 Summer St., Boston, MA 02110
|
2,810,445
(3)
|
8.8%
|
Dimensional Fund Advisors LP
Building One, 6300 Bee Cave Rd., Austin, TX 78746
|
2,625,070
(4)
|
8.2%
|
(1)
|
Information is based on a Schedule 13G/A filed with the SEC on January 19, 2018 and represents the number of shares beneficially owned as of December 31, 2017. BlackRock, Inc. holds sole power to vote 3,847,425 shares and sole power to dispose of 3,921,367 shares held by the following subsidiaries: BlackRock (Netherlands) B.V., BlackRock Advisors, LLC, BlackRock Asset Management Canada Limited, BlackRock Asset Management Ireland Limited, BlackRock Asset Management Schweiz AG, BlackRock Financial Management, Inc., BlackRock Fund Advisors, BlackRock Institutional Trust Company, N.A., BlackRock Investment Management (Australia) Limited, BlackRock Japan Co., Ltd., BlackRock Investment Management (UK) Ltd, and BlackRock Investment Management, LLC., with BlackRock Fund Advisors beneficially owning 5% or more of the outstanding shares of common stock.
|
(2)
|
Information is based on a Schedule 13G/A filed with the SEC on February 9, 2018. As of December 31, 2017, The Vanguard Group, an investment adviser, held sole power to vote 39,228 shares and sole power to dispose of 2,936,149 shares. Vanguard Fiduciary Trust Company, a wholly-owned subsidiary of The Vanguard Group, Inc., is the beneficial owner of 36,541 shares as a result of its serving as investment manager of collective trust accounts. Vanguard Investments Australia, Ltd., a wholly-owned subsidiary of The Vanguard Group, Inc., is the beneficial owner of 9,230 shares as a result of its serving as investment manager of Australian investment offerings.
|
(3)
|
Information is based on a Schedule 13G/A filed with the SEC on February 7, 2018. As of December 31, 2017, Frontier Capital Management Co. LLC, an investment adviser, held sole power to vote 1,300,325 shares and sole power to dispose of 2,810,445 shares.
|
(4)
|
Information is based on a Schedule 13G filed with the SEC on February 9, 2018. Dimensional Fund Advisors LP (“Dimensional”), reports the sole power to vote 2,513,932 shares and the sole power to dispose of 2,625,070 shares, as of December 31, 2017. Dimensional, an investment adviser registered under Section 203 of the Investment Advisors Act of 1940, furnishes investment advice to four investment companies registered under the Investment Company Act of 1940, and serves as investment manager or sub-adviser to certain other commingled funds, group trusts and separate accounts (such investment companies, trusts and accounts, collectively referred to as the “Funds”). All securities reported on the Schedule 13G are owned by the Funds. Dimensional disclaims beneficial ownership of such securities. The Funds have the right to receive or the power to direct the receipt of dividends from, or the proceeds from, the sale of such securities held in their respective accounts. To the knowledge of Dimensional, the interest of any one such Fund does not exceed 5% of the class of securities.
|
Name and Address of Beneficial Owner
(1)
|
Amount and Nature of Beneficial Ownership
(2)
|
Percent of Class
|
Shelley J. Bausch
|
3,051
|
*
|
Mark A. Blinn
|
3,051
|
*
|
Marcello C. Boldrini
|
14,150
|
*
|
Anna C. Catalano
|
23,066
|
*
|
Kevin M. Fogarty
|
641,962
|
2.0%
|
Dominique Fournier
|
21,823
|
*
|
John J. Gallagher, III
|
32,883
|
*
|
Barry J. Goldstein
|
27,668
|
*
|
Holger R. Jung
|
57,582
|
*
|
Vijay Mhetar
|
15,196
|
*
|
Dan F. Smith
|
56,674
|
*
|
Stephen E. Tremblay
|
168,641
|
*
|
Karen A. Twitchell
|
23,668
|
*
|
All Directors and Executive Officers as a Group (19 persons)
|
1,185,429
|
3.7%
|
*
|
Represents beneficial ownership of less than 1%.
|
(1)
|
The address for the beneficial owners is 15710 John F. Kennedy Boulevard, Suite 300 Houston, Texas 77032.
|
(2)
|
Shares shown in the table above include shares held in the beneficial owner’s name or jointly with others, or in the name of a bank, nominee or trustee for the beneficial owner’s account. The totals in this column include the following shares, beneficial ownership of which the officer or director has the right to acquire within 60 days of the Record Date: Mr. Fogarty—387,537; and Mr. Tremblay—79,317.
|
Named Executive Officer
|
Current Position Held
|
Kevin M. Fogarty
|
President and Chief Executive Officer
|
Stephen E. Tremblay
|
Executive Vice President and Chief Financial Officer
|
Holger R. Jung
|
Senior Vice President and Polymer Segment President
|
Marcello C. Boldrini
(1)
|
Senior Vice President and Chemical Segment President
|
Vijay Mhetar
(1)
|
Senior Vice President, Chief Technology Officer
|
|
|
Element
(1)
|
|
Description & Metrics
|
|
Purpose
|
||
|
|
|
|
|
|
|
|
|
F I X E D
|
|
Base Salary
|
|
Delivered in cash and evaluated each year, effective April 1, based primarily on surveys and market data
|
|
Provide competitive pay to attract and retain our executive officers.
|
||
|
|
|
|
|
|
|
|
|
V A R I A B L E
|
|
Annual Cash Incentive Compensation
|
|
Delivered in cash and based on: (1) Adjusted EBITDA; and (2) attainment of Net Debt reduction
|
|
Motivate and reward our executives to achieve key annual business objectives.
|
||
|
|
|
|
|
|
|
|
|
|
Long-Term Equity Incentive Compensation
|
|
Restricted Stock Awards ("RSAs")
|
|
Three-year cliff vest; Based on stock price appreciation/depreciation
|
|
Align interests of executives with long-term stockholder value to support our growth strategy and drive long-term performance, particularly in a volatile industry.
|
|
|
|
|
|
|
|
|||
|
|
Restricted Stock Performance Units ("PRSUs")
|
|
Three-year cliff vest payout based on: (1) cumulative Return on Capital Employed ("ROCE"), and (2) relative Total Shareholder Return ("rTSR")
|
|
(1)
|
Excludes discussion of our benefits which principally include, for our NEOs, contributions to the Kraton Savings Plan, contributions to the Benefits Restoration Plan, premiums for Supplemental Disability Insurance and certain perquisites. All elements of compensation are reviewed against a combination of the compensation elements of our stated peer group, and the market review of total direct compensation and of each discrete element of total direct compensation (base salary, annual cash incentive compensation, and long-term equity incentive compensation).
|
Reduction of Debt to
|
|
3-Year Relative TSR in the
|
|
Net Income of
|
$1,525 million
|
|
|
$97.5 million
|
|
and
|
|
96
th
|
|
and
|
Net Debt to
|
|
Percentile
(2)
|
|
Adjusted EBITDA of
|
$1,450 m
illion
(1)
|
|
|
$374.2
million
(1)
|
(1)
|
For a reconciliation of GAAP to non-GAAP financial measures, please refer to
“Annex A
—
Non-GAAP Reconciliations.”
|
(2)
|
Based on relative TSR from December 31, 2014 to December 31, 2017 using the 2017 TSR Peer Group.
|
Our two-year TSR, from December 31, 2015 to December 31, 2017 represents continued stock price appreciation following the acquisition of Arizona Chemical and during the continued execution of our corporate strategy.
|
||
——●——
Kraton Corp.
|
——■——
2017 TSR Peer Group
|
Additional Company Financial Highlights for 2017
|
||||
ü
|
As of year-end 2017, we had realized approximately $45 million of the target $70 million savings which are a part of the ongoing cost reset initiatives in our Polymer segment that began in 2015.
|
|||
ü
|
Delivered the $65 million of operational cost improvements and general & administrative synergies associated with the acquisition of our Chemical segment, one year ahead of our original 2018 target.
|
|||
ü
|
Optimized our capital structure by closing a Euro denominated tranche of our term loan facility and repricing the existing USD denominated tranche of our term loan facility.
|
1
|
Solicit candid feedback from stockholders and encourage discussion on compensation and governance practices
|
|
2
|
Report stockholder views directly to the Compensation Committee and the Board
|
|
3
|
Evaluate and design the executive compensation and corporate governance programs
|
What We Heard in 2017
|
How We Responded for 2018
|
Valued performance metrics based on our strategic focus to delever subsequent to the Arizona Chemical acquisition
|
Our ICP continues to include a metric based on the attainment of net debt reduction
|
Encouraged ongoing and enhanced focus on pay-for-performance
|
•
Continued employing cumulative ROCE and rTSR as the performance metrics for our LTIP
•
Continued the use of measures for our ICP that are determined entirely by Company performance
•
Maintained a
⅔
weighting of PRSUs against a
⅓
weighting of RSAs
|
Supported continued focus on both absolute and relative performance metrics
|
Absolute and relative performance metrics for our PRSUs remain equally balanced with ½ cumulative ROCE and ½ rTSR
|
Valued challenging and well aligned performance metrics
|
Reviewed an extensive universe of data, including peer group financial performance metrics, to gauge the Company's absolute and relative performance metrics. See "
—Selecting Performance Metrics and Setting Associated Goals
" below.
|
Positive response to our focus on variable compensation and vesting durations
|
•
RSAs and PRSUs continue having a three-year cliff vest
•
Stock options have not been issued for over four years
|
Encouraged clear and more detailed disclosure on performance metrics and Compensation Committee actions
|
Enhanced and clarified various sections of this CD&A to illustrate our performance metrics and calculations, and the timeline of Compensation Committee actions. See "
—Roles in Determining Executive Compensation
" and "
—Selecting Performance Metrics and Setting Associated Goals
" below.
|
|
|
2017 and 2018
|
|||
ICP
|
è
|
Adjusted EBITDA (¾)
|
Net Debt (¼)
|
||
|
|
|
|
|
|
LTIP
|
è
|
Cumulative ROCE (½)
|
Relative TSR (½)
|
Company
|
2017
|
2018
|
Company
|
2017
|
2018
|
A. Schulman, Inc.
|
ü
|
ü
|
Newmarket Corp.
|
ü
|
ü
|
Albemarle Corp.
|
ü
|
ü
|
Olin Corp.
(3)
|
ü
|
-
|
Chemtura Corp.
(1)
|
ü
|
ü
|
OMNOVA Solutions, Inc.
|
ü
|
ü
|
Ferro Corp.
|
ü
|
ü
|
Platform Specialty Products Corp.
|
ü
|
ü
|
GCP Applied Technologies
(2)
|
-
|
ü
|
PolyOne Corp.
|
ü
|
ü
|
H.B. Fuller Co.
|
ü
|
ü
|
Quaker Chemical Corp.
|
ü
|
ü
|
Ingevity Corporation
(2)
|
-
|
ü
|
Rayonier Advanced Materials Inc.
|
ü
|
ü
|
Innophos Holdings, Inc.
|
ü
|
ü
|
Sensient Technologies Corp.
|
ü
|
ü
|
Innospec, Inc.
|
ü
|
ü
|
Stepan Co.
|
ü
|
ü
|
Int'l Flavors & Fragrances, Inc.
|
ü
|
ü
|
W.R. Grace & Co.
|
ü
|
ü
|
Minerals Technologies, Inc.
|
ü
|
ü
|
|
|
|
(1)
|
Although this company was acquired in 2017, data was available for 2018 evaluation. This company will be removed from our 2019 Compensation Peer Group. This company was not included in our 2018 TSR Peer Group.
|
(2)
|
Added to our 2018 Compensation Peer Group due to alignment with our business, customer focus and global operations.
|
(3)
|
This company is no longer classified as a diversified chemical company and has exceeded the appropriate revenue range for a peer, and therefore was removed from our 2018 Compensation Peer Group.
|
Company
|
2017
|
2018
|
Company
|
2017
|
2018
|
2017 Compensation Peer Group
|
ü
|
-
|
FutureFuel Corp.
|
ü
|
ü
|
2018 Compensation Peer Group
|
-
|
ü
|
GCP Applied Technologies, Inc.
|
ü
|
ü
|
Advanced Emissions Solutions, Inc.
(1)
|
-
|
ü
|
Huntsman Corporation
|
ü
|
ü
|
Ashland Global Holdings Inc.
|
ü
|
ü
|
Ingevity Corporation
|
ü
|
ü
|
Axalta Coating Systems Ltd.
|
ü
|
ü
|
KMG Chemicals, Inc.
|
ü
|
ü
|
Balchem Corporation
|
ü
|
ü
|
LSB Industries, Inc.
|
ü
|
ü
|
Celanese Corporation
|
ü
|
ü
|
PPG Industries, Inc.
|
ü
|
ü
|
Chase Corporation
|
ü
|
ü
|
PQ Group Holdings Inc.
(1)
|
-
|
ü
|
Codexis, Inc.
|
ü
|
ü
|
RPM International Inc.
|
ü
|
ü
|
DowDuPont Inc.
(2)
|
ü
|
ü
|
TerraVia Holdings, Inc.
(3)
|
ü
|
-
|
Eastman Chemical Company
|
ü
|
ü
|
The Chemours Company
|
ü
|
ü
|
Ecolab Inc.
|
ü
|
ü
|
The Sherwin-Williams Company
|
ü
|
ü
|
Flotek Industries, Inc.
|
ü
|
ü
|
Valhi, Inc.
|
ü
|
ü
|
(2)
|
Dow Chemical Company and EI du Pont de Nemours and Co. merged in 2017; Each were on the 2017 TSR Peer Group.
|
Considerations in Setting Rigorous Performance Metrics and Goals
|
|
ü
|
The Company's short- and long-term strategy
|
ü
|
Publicly disclosed long-term financial targets
|
ü
|
The Company's historical performance
|
ü
|
Peer group data and market statistics regarding executive compensation performance metrics and historical performance
|
ü
|
Targets that are established to encourage a level of risk-taking that is appropriate, but not unreasonable in the context of the Company’s business strategy
|
ü
|
Targets that are structured to avoid excessive risk-taking by using a variety of performance goals that apply over performance periods of varying lengths
|
ü
|
For each of the performance metrics, our Compensation Committee may certify the payout anywhere from 0% to 200%
|
2017 ICP
|
|
2017 PRSUs
|
|||
Adjusted EBITDA
(¾)
|
Net Debt (¼)
|
|
Cumulative ROCE (
½)
|
Relative TSR (
½)
|
Selecting Absolute and Relative Performance Metrics
|
During our Compensation Committee's stockholder outreach efforts, our stockholders emphasized the value of relative metrics, alongside absolute metrics, in ensuring further alignment between long-term equity compensation and stockholder interests. Accordingly, in 2017, and continuing in 2018, our Compensation Committee increased the weighting of rTSR, as a relative metric for our grants of PRSUs, to 50% compared to 25% in 2016.
|
Our Compensation Committee believes that Adjusted EBITDA, as a performance metric, correlates with delivering strong sustainable performance that, in turn, drives long-term value creation.
|
Threshold 0.3x
|
Target
1.0x |
Stretch
2.0x |
|
For 2017, our Compensation Committee set Adjusted EBITDA targets by evaluating the Company's historical performance, the historical performance of peers, the approved business plan and stockholder expectations. The 2017 target represents a 6% growth from 2016 actual Adjusted EBITDA, in line with the median 3-year and 5-year average Adjusted EBITDA growth of peers.
|
($ in millions)
|
|||
$336
|
$375
|
$413
|
||
Following the close of the Arizona Chemical acquisition in early 2016, the Company had $1.73 billion of net debt and by year-end 2016 the Company had reduced net debt to $1.61 billion. Recognizing the Company’s strategic deleveraging plan, our Compensation Committee continued to set net debt targets in line with stockholder expectations, Company forecasts and Company goals to achieve a consolidated net debt leverage of below four turns by year-end 2018.
|
Threshold 0.3x
|
Target
1.0x |
Stretch
2.0x |
||
($ in millions)
|
|||||
$1,513
|
$1,470
|
$1,420
|
|||
Our Compensation Committee believes that cumulative ROCE, as a performance metric, demonstrates our efficiency at using both equity and debt to generate returns, therefore driving long-term value creation. Cumulative ROCE, rather than a point-to-point evaluation, is designed to promote continuous performance during the performance period.
|
2017 PRSUs
|
Threshold 0.5x
|
Target 1.0x
|
Stretch 2.0x
|
|
2017
|
6.2%
|
6.5%
|
7.0%
|
||
2018
|
6.4%
|
6.8%
|
7.4%
|
||
In setting the targets, our Compensation Committee evaluated historical performance and set realistic targets for the Company's current business. Additionally, the cumulative ROCE goals were designed to align with competitive ranges for the Company's peer group.
|
|||||
2019
|
6.9%
|
7.3%
|
8.2%
|
||
In response to stockholder feedback, our Compensation Committee uses rTSR as a metric to provide an external benchmark of our relative performance. The achievement levels determined by our Compensation Committee have remained the same since inception of the metric and are prevalent from a market perspective. These levels ensure that it is challenging for the Company to achieve the top quartile performance repeatedly over multiple performance cycles.
|
Threshold 0.5x
|
Target
1.0x |
Stretch
2.0x |
(Percentile Rank)
|
|||
30
th
|
50
th
|
75
th
|
CEO Total Direct Targeted Compensation (2017)
|
|
Other NEOs Total Direct Targeted Compensation (2017)
|
Analysis of Total Direct Targeted Compensation
|
CEO
|
Other NEOs
|
|||
Proportion of pay subject to specific quantitative performance criteria
|
60%
|
51%
|
|||
Proportion of pay at-risk (variable compensation)
|
80%
|
66%
|
|||
Proportion of pay delivered in the form of long-term equity
|
60%
|
46%
|
Factors Affecting Realized and Realizable Pay
|
Our CEO did not exercise any stock options in 2015 or 2016. Our CEO exercised 82,472 stock options in 2017.
|
In part due to a three-year rTSR in the 95.6 percentile, resulting in a 200% payout for the rTSR performance component, our Compensation Committee certified the payout at 93.1% of target for the 2015 grants of PRSUs.
|
The value of the Long-Term Equity Incentive Awards increased between Reported and Realizable pay for each of 2016 and 2017 due to stock price appreciation in those years. Our stock price increased $12 over 2016, and $19 over 2017.
|
$ in Thousands
|
||||||||
Base Salary
|
|
Long Term Equity Incentive Awards
|
|
Option Awards
|
|
Cash Incentive Compensation
|
|
Other Compensation
(3)
|
(1)
|
Reflects the value realized from the vesting of stock awards and the exercise of stock options, each as reported in the Option Exercises and Stock Vested table for the given year.
|
(2)
|
Reflects the value that could be realized from the vesting of stock awards granted in the given year, based on the closing price for our common stock on the NYSE on the last trading day of such year. This valuation: (i) assumes vesting at target levels for the 2016 and 2017 PRSUs, and (ii) uses a certified payout of 93.1% of target for the 2015 PRSUs.
|
(3)
|
Includes changes in pension value and non-qualified deferred compensation earnings.
|
|
Fixed
|
|
Variable
|
|
|
|
||||
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
Base Salary
|
|
Cash Incentive Compensation
|
+
|
Restricted Stock Awards
|
+
|
Restricted Stock Performance Units
|
=
|
Target Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
Annual Incentive
|
|
Long-Term Incentive Compensation (3-Year Cliff Vesting)
|
|
|
|
Named Executive Officer
|
2017 Base Salary($)
|
Change From 2016
|
2018 Base Salary($)
|
Change From 2017
|
Kevin M. Fogarty
|
925,000
|
5.7%
|
1,000,000
|
8.1%
|
Stephen E. Tremblay
|
475,000
|
-
|
500,000
|
5.3%
|
Holger R. Jung
|
400,000
|
-
|
400,000
|
-
|
Marcello C. Boldrini
|
380,000
|
n/a
|
400,000
|
5.3%
|
Vijay Mhetar
|
310,000
|
n/a
|
325,000
|
4.8%
|
2017 ICP
|
||
Adjusted EBITDA
(¾)
|
Net Debt (¼)
|
Named Executive Officer
|
Target Bonus
|
Change from 2016
|
Bonus Range ($)
(1)
|
Kevin M. Fogarty
|
1.0 x Base Salary
|
-
|
0 - 1,850,000
|
Stephen E. Tremblay
|
.70 x Base Salary
|
-
|
0 - 665,000
|
Holger R. Jung
|
.60 x Base Salary
|
-
|
0 - 480,000
|
Marcello C. Boldrini
|
.60 x Base Salary
|
n/a
|
0 - 456,000
|
Vijay Mhetar
|
.50 x Base Salary
|
n/a
|
0 - 310,000
|
(1)
|
Depending on actual performance, annual cash incentive compensation can range from zero to 2x times target.
|
1
|
ADJUSTED EBITDA (¾)
|
|
Weight
|
Threshold 0.3x
|
Target
1.0x |
Stretch
2.0x |
|
2017 Actual
|
2017 Factor
|
|||||||||
|
|
($ in millions)
|
|
($ in millions)
|
|
|||||||||||
Adjusted EBITDA
(1)
|
75
|
%
|
$
|
336
|
|
$
|
375
|
|
$
|
413
|
|
|
$
|
374.2
|
|
0.739
|
(1)
|
For discussion on
2017
goal setting, please refer to "
—Selecting Performance Metrics and Setting Associated Goals."
For a reconciliation of Net Income to Adjusted EBITDA, refer to
“Annex A—Non-GAAP Reconciliations.”
|
2
|
NET DEBT (¼)
|
|
Weight
|
Threshold 0.3x
|
Target
1.0x |
Stretch
2.0x |
|
2017 Actual
|
2017 Factor
|
|||||||||
|
|
($ in millions)
|
|
($ in millions)
|
|
|||||||||||
Net Debt
(1)
|
25
|
%
|
$
|
1,513
|
|
$
|
1,470
|
|
$
|
1,420
|
|
|
$
|
1,452.7
|
|
0.337
|
(1)
|
For discussion on
2017
goal setting, please refer to "
—Selecting Performance Metrics and Setting Associated Goals."
For a reconciliation of Debt to Net Debt, refer to
“Annex A — Non-GAAP Reconciliations.”
|
2017 and 2018 ICP
|
||
Adjusted EBITDA
(¾)
|
Net Debt (¼)
|
Target Long-Term Equity Incentives
|
||
PRSUs
(⅔)
|
RSAs (⅓)
|
|
|
2017 Grants
|
|
2018 Grants
|
||||||
Named Executive Officer
|
|
RSAs (#)
(1)
|
PRSUs (#)
(2)
|
|
RSAs (#)
(1)
|
PRSUs (#)
(2)
|
||||
Kevin M. Fogarty
|
|
34,050
|
|
68,100
|
|
|
24,023
|
|
48,047
|
|
Stephen E. Tremblay
|
|
9,557
|
|
19,115
|
|
|
5,913
|
|
11,827
|
|
Holger R. Jung
|
|
7,168
|
|
14,336
|
|
|
4,435
|
|
8,870
|
|
Marcello C. Boldrini
|
|
4,330
(3)
|
|
8,659
|
|
|
3,326
|
|
6,653
|
|
Vijay Mhetar
|
|
4,181
(3)
|
|
8,363
|
|
|
2,772
|
|
5,544
|
|
(1)
|
The RSAs are subject to three-year cliff vesting.
|
(2)
|
The PRSUs will vest three-years from the date of grant in an amount, if at least the threshold level of performance is achieved, ranging from 0.5x target to 2.0x target level depending on performance against the Compensation Committee's established metrics for the achievement of cumulative ROCE and rTSR.
|
(3)
|
Do not reflect RSAs granted to Mr. Boldrini and Dr. Mhetar as part of their respective sign-on compensation. For information on such grants, please refer to "
Named Executive Officer Compensation—Grants of Plan Based Awards
."
|
2015 and 2016
|
|
2017 and 2018
|
||
Cumulative ROCE (¾)
|
Relative TSR (¼)
|
|
Cumulative ROCE (½)
|
Relative TSR (½)
|
Selecting Performance Metrics
|
During our Compensation Committee's stockholder outreach efforts, our stockholders emphasized the value of relative metrics, alongside absolute metrics, in ensuring further alignment between long-term equity compensation and stockholder interests. Accordingly, in 2017, and continuing in 2018, our Compensation Committee increased the weighting of rTSR, as a relative metric, for the PRSU grants.
|
1
|
Calculate the Cumulative Net Operating Profit
(for the three-year period)
|
2
|
Calculate the Cumulative Return Percentage Levels
(for the three-year period)
|
|
Year One
|
|
Year Two
|
|
Year Three
|
|
Cumulative
|
Threshold (0.5x Target)
|
Avg. Capital Employed x Return Percentage
|
+
|
Avg. Capital Employed x Return Percentage
|
+
|
Avg. Capital Employed x Return Percentage
|
=
|
Threshold Return Percentage
|
Target (1.0x Target)
|
Avg. Capital Employed x Return Percentage
|
+
|
Avg. Capital Employed x Return Percentage
|
+
|
Avg. Capital Employed x Return Percentage
|
=
|
Target Return Percentage
|
Stretch (2.0x Target)
|
Avg. Capital Employed x Return Percentage
|
+
|
Avg. Capital Employed x Return Percentage
|
+
|
Avg. Capital Employed x Return Percentage
|
=
|
Stretch Return Percentage
|
3
|
Compare the Cumulative Net Operating Profit (Step 1) to the Cumulative Return Percentage Levels (green column from Step 2) to determine the payout factor for cumulative ROCE.
|
Named Executive Officer
(1)
|
# Shares at Target
|
Value of Grant
(2)
|
# Shares at Vest
|
Realized Value
(3)
|
Kevin M. Fogarty
|
91,650
|
$1,957,992
|
85,321
|
$3,794,225
|
Stephen E. Tremblay
|
27,155
|
$580,134
|
25,279
|
$1,124,157
|
Holger R. Jung
|
20,367
|
$435,117
|
18,960
|
$843,151
|
(1)
|
Dr. Mhetar and Mr. Boldrini were not granted any 2015 PRSUs.
|
(2)
|
The grant-date fair value for PRSUs is computed in accordance with FASB ASC Topic 718 (disregarding the estimate of forfeitures related to service-based vesting conditions). For a discussion of the assumptions used in calculating the fair value of our stock-based compensation, refer to Note 5,
Share-Based Compensation
, in the Notes to Consolidated Financial Statements contained in our 2017 Annual Report.
|
(3)
|
The realized value was calculated based on the closing price of our common stock on February 27, 2018, the date that the 2015 PRSUs fully vested, which was $44.47.
|
Payouts Resulting From Rigorous Metrics for our PRSUs
|
Our recent results against the compensation targets for our PRSUs demonstrate that our Compensation Committee sets challenging goals. There was no payout under the PRSUs granted in 2013 and a 52.5% payout for the PRSUs granted in 2014. For the PRSUs granted in 2015, our Compensation Committee certified a 93.1% payout which was largely a result of three-year rTSR in the 95.6 percentile resulting in a 200% payout for that component.
|
2017 - 2019 PRSUs
|
2017
|
|
2018
|
|
2019
|
|
FY 2017
|
|
Threshold
(0.5x Target)
|
$2,625,503 x
6.2%
$162,781
|
+
|
$TBD x
6.5%
|
+
|
$TBD x
7%
|
=
|
$162,781
|
|
Target
|
$2,625,503 x
6.4%
$168,032
|
+
|
$TBD x
6.8%
|
+
|
$TBD x
7.4%
|
=
|
$168,032
|
|
|
||||||||
Stretch
(2.0x Target)
|
$2,625,503 x
6.9%
$181,160
|
+
|
$TBD x
7.4%
|
+
|
$TBD x
8.2%
|
=
|
$181,160
|
|
|
|
|
|
|
|
|
|
|
Actual Net Operating Profit
(with taxes at 29%)
|
$161,670
|
+
|
$TBD
|
+
|
$TBD
|
=
|
$161,670
|
|
|
Setting Performance Goals
|
For the 2018 PRSUs, our Compensation Committee approved the three-year attainment level for cumulative ROCE and rTSR, based on our 2018 TSR Peer Group. The target levels for cumulative ROCE align with the Company’s 2018 Strategic Plan, as approved by the Board. Cumulative ROCE levels for prior PRSUs were overly aspirational in comparison to peers, particularly those with similar high asset intensity as us, and industry-wide performance. The cumulative ROCE levels for the 2018 PRSUs (using a 21% tax rate) more closely reflect the realistic performance trends of the Company and its peers.
|
Level
|
Actual ROCE
|
Cumulative ROCE
|
Relative TSR
(Percentile Rank)
|
||
|
2017
|
2018
|
2019
|
2020
|
|
Threshold (0.5x Target)
|
6.2%
|
6.2%
|
6.5%
|
6.9%
|
30
th
|
Target (1.0x Target)
|
6.2%
|
7.1%
|
7.5%
|
8.0%
|
50
th
|
Stretch (2.0x Target)
|
6.2%
|
7.7%
|
8.8%
|
9.8%
|
75
th
|
•
|
the payment was predicated upon achieving certain financial results that were subsequently the subject of a substantial restatement of our financial statements as filed with the SEC;
|
•
|
the Compensation Committee determines that the covered executive engaged in fraud or willful misconduct that caused or substantially caused the substantial restatement; and
|
•
|
a lower payment would have been made to the covered executive based upon the restated financial results.
|
Covered Executive
|
Ownership Target
|
Chief Executive Officer
|
5X
|
Chief Financial Officer
|
3X
|
Segment Presidents; Chief Technology Officer; SVP – Global Operations
|
1.5X
|
Other Executives
|
1X
|
Submitted by the Compensation Committee:
|
|
Anna C. Catalano
|
Dominique Fournier
|
Dan F. Smith
|
Karen A. Twitchell,
Chair
|
Name
Principal Position
|
Year
|
Salary ($)
|
Bonus
($) |
Stock Awards
($) (1) |
Non-equity
Incentive Plan Compensation ($) (2) |
Change in Pension Value and Non-qualified Deferred
Compensation Earnings ($) (3) |
All Other
Compensation ($) (4) |
Total ($)
|
|||||||
Kevin M. Fogarty
|
2017
|
912,500
|
|
—
|
|
3,086,292
|
|
995,300
|
|
1,845
|
|
145,635
|
|
5,141,572
|
|
President and Chief Executive Officer
|
2016
|
875,000
|
|
—
|
|
2,922,650
|
|
654,500
|
|
1,106
|
|
193,816
|
|
4,647,072
|
|
2015
|
875,000
|
|
—
|
|
2,885,261
|
|
1,420,794
|
|
—
|
|
145,041
|
|
5,326,096
|
|
|
Stephen E. Tremblay
|
2017
|
475,000
|
|
—
|
|
866,278
|
|
357,770
|
|
—
|
|
80,364
|
|
1,779,412
|
|
Executive Vice President and Chief Financial Officer
|
2016
|
468,750
|
|
—
|
|
865,974
|
|
248,710
|
|
—
|
|
88,622
|
|
1,672,056
|
|
2015
|
450,000
|
|
—
|
|
854,885
|
|
494,676
|
|
—
|
|
64,566
|
|
1,864,127
|
|
|
Holger R. Jung
|
2017
|
400,000
|
|
—
|
|
649,708
|
|
258,240
|
|
—
|
|
65,871
|
|
1,373,819
|
|
Senior Vice President and Polymer Segment President
|
2016
|
393,750
|
|
—
|
|
649,476
|
|
179,520
|
|
—
|
|
59,831
|
|
1,282,577
|
|
2015
|
375,000
|
|
—
|
|
641,170
|
|
358,515
|
|
—
|
|
33,463
|
|
1,408,148
|
|
|
Marcello C. Boldrini
(5)
|
|
|
|
|
|
|
|
|
|||||||
Senior Vice President and Chemical Segment President
|
2017
|
285,000
|
|
100,000
|
|
647,040
|
|
183,996
|
|
—
|
|
146,135
|
|
1,362,171
|
|
Vijay Mhetar
(5)
|
|
|
|
|
|
|
|
|
|||||||
Senior Vice President and Chief Technology Officer
|
2017
|
297,083
|
|
150,000
|
|
658,997
|
|
166,780
|
|
—
|
|
101,776
|
|
1,374,636
|
|
(1)
|
This column consists of RSAs and PRSUs granted pursuant to the 2009 Plan (for 2015 and 2016), and pursuant to the 2016 Plan (for 2017). Amounts set forth in the Stock Awards column represents the aggregate grant date fair value in accordance with the FASB ASC Topic 718. For the assumptions used in calculating the fair value, refer to Note 5,
Share-Based Compensation
, in the Notes to Consolidated Financial Statements contained in our
2017
Annual Report.
|
|
|
Grant Date Value
|
||
Name
|
|
Probable (Target) Outcome of Performance-Related Component
|
Maximum Outcome of Performance-Related Component
|
Market-Related Component
|
Kevin M. Fogarty
|
2017
|
$949,995
|
$1,899,990
|
$1,186,302
|
|
2016
|
$1,432,911
|
$2,865,822
|
$534,444
|
|
2015
|
$1,390,893
|
$2,781,786
|
$567,084
|
Stephen E. Tremblay
|
2017
|
$266,640
|
$533,280
|
$332,983
|
|
2016
|
$424,562
|
$849,124
|
$158,355
|
|
2015
|
$412,106
|
$824,212
|
$168,022
|
Holger R. Jung
|
2017
|
$199,987
|
$399,974
|
$249,733
|
|
2016
|
$318,417
|
$636,834
|
$118,764
|
|
2015
|
$309,090
|
$618,180
|
$126,021
|
Marcello C. Boldrini
|
2017
|
$133,333
|
$266,666
|
$150,840
|
Vijay Mhetar
|
2017
|
$116,650
|
$233,300
|
$145,683
|
(2)
|
Amounts listed in this column consist of cash incentive payments pursuant to the 2013 Cash Incentive Plan (for year 2015 and 2016) or the 2016 Plan (for year 2017). Please see the discussion of the specific components of the 2017 ICP under "
Compensation Discussion and Analysis
."
|
(3)
|
All amounts in this column reflect the aggregate change in the actuarial present value of the NEO’s accumulated benefit under our pension plan during the applicable periods. Our NEOs do not earn above-market or preferential earnings on compensation that is deferred on a basis that is not tax-qualified.
|
(4)
|
Amounts in this column for
2017
consist of amounts paid by the Company for:
|
|
Kevin M. Fogarty
|
Stephen E. Tremblay
|
Holger R. Jung
|
Marcello C. Boldrini
|
Vijay Mhetar
|
Explanation
|
($)
|
||||
Savings Plan Contributions
|
124,880
|
52,386
|
57,952
|
17,950
|
18,513
|
Supplemental Disability Premiums
|
19,555
|
10,865
|
6,719
|
1,304
|
267
|
HSA Contribution
|
1,200
|
600
|
1,200
|
900
|
1,100
|
Relocation Expenses
|
-
|
-
|
-
|
89,727
|
57,170
|
Tax Gross-Up Payments for Relocation Expenses
|
-
|
-
|
-
|
34,342
|
24,726
|
(5)
|
Compensation information is not provided for fiscal years in which the individual was not a named executive officer.
|
Plan Category
|
Number of securities to be issued upon exercise of outstanding options, warrants and rights
|
Weighted-average exercise price of outstanding options, warrants and rights ($)
|
Number of securities remaining available for future issuance under equity compensation plans (excludes securities reflected in column (a))
(1)
|
|||
Equity compensation plans approved by stockholders
|
675,516
(2)
|
|
25.59
|
|
2,091,548
|
|
Equity compensation plans not approved by stockholders
|
—
|
|
—
|
|
—
|
|
Total:
|
675,516
(2)
|
|
25.59
|
|
2,091,548
|
|
(1)
|
Represents equity securities remaining available for future issuance under the 2016 Plan.
|
(2)
|
217,815 of these options, warrants and rights were issued under the TJ Chemical Holdings LLC 2004 Option Plan (the "2004 Plan"). Stockholder approval of this plan occurred prior to our initial public offering.
|
Name
|
Grant
Date |
Estimated Future Payouts Under
Non-Equity Incentive Plan Award (1) |
Estimated Future Payouts Under
Equity Incentive Plan Awards (2) |
All Other Stock Awards: Number of Shares of Stock (#)
(3)
|
Grant Date Fair Value of Stock Awards
($) (4) |
||||||||||||
Threshold
($) |
Target
($) |
Maximum
($) |
Threshold
(#) |
Target
(#) |
Maximum
(#) |
||||||||||||
Kevin M. Fogarty
|
|
462,500
|
|
925,000
|
|
1,850,000
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
3/2/2017
|
—
|
|
—
|
|
—
|
|
34,050
|
|
68,100
|
|
136,200
|
|
—
|
|
2,136,297
|
|
|
3/2/2017
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
34,050
|
|
949,995
|
|
Stephen E. Tremblay
|
|
166,250
|
|
332,500
|
|
665,000
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
3/2/2017
|
—
|
|
—
|
|
—
|
|
9,558
|
|
19,115
|
|
38,230
|
|
—
|
|
599,638
|
|
|
3/2/2017
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
9,557
|
|
266,640
|
|
Holger R. Jung
|
|
120,000
|
|
240,000
|
|
480,000
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
3/2/2017
|
—
|
|
—
|
|
—
|
|
7,168
|
|
14,336
|
|
28,672
|
|
—
|
|
449,720
|
|
|
3/2/2017
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
7,168
|
|
199,987
|
|
Marcello C. Boldrini
|
|
85,500
|
|
171,000
|
|
342,000
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
4/1/2017
|
—
|
|
—
|
|
—
|
|
4,330
|
|
8,659
|
|
17,318
|
|
—
|
|
284,188
|
|
|
4/1/2017
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
10,824
|
|
333,379
|
|
Vijay Mhetar
|
|
77,500
|
|
155,000
|
|
310,000
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
3/2/2017
|
—
|
|
—
|
|
—
|
|
4,182
|
|
8,363
|
|
16,726
|
|
—
|
|
262,347
|
|
|
1/16/2017
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
9,901
|
|
280,000
|
|
|
3/2/2017
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
4,181
|
|
116,650
|
|
(1)
|
These columns provide information on potential payouts for our 2017 ICP under our 2016 Plan. For information on actual amounts earned, see “
—
S
ummary Compensation Table
" above. For a discussion of the applicable performance criteria, see “
Compensation Discussion and Analysis
” above.
|
(2)
|
These columns provide information on potential share issuances under PRSUs granted pursuant to the 2016 Plan. The amount issued will be determined based on cumulative ROCE (50%) and rTSR (50%) over a three-year performance period ending March 2,
2020
and assuming the executive remains continuously employed with our Company during such period. For a discussion of the applicable performance criteria, see “
Compensation Discussion and Analysis
” above.
|
(3)
|
This column reflects grants of RSAs to each of our NEOs under our 2016 Plan. Our annual grants of RSAs are subject to three-year cliff vesting. As part of Mr. Boldrini's sign-on compensation when he joined the Company in April 2017, he received 3,247 RSAs with a one-year cliff vesting and 3,247 RSAs with a two-year cliff vesting. As part of Dr. Mhetar's sign-on compensation when he joined the Company in January 2017, he received 6,365 RSAs with a one-year cliff vesting and 3,536 RSAs with a two-year cliff vesting.
|
(4)
|
The grant-date fair value for each award is computed in accordance with the FASC ASB Topic 718 (disregarding the estimate of forfeitures related to service-based vesting conditions). For a discussion of the assumptions used in calculating the fair value of our stock-based compensation, refer to Note 5,
Share-Based Compensation
, in the Notes to Consolidated Financial Statements contained in our
2017
Annual Report.
|
|
Option Awards
(1)
|
Stock Awards
|
||||||||||||||
Name
|
Number of
Securities Underlying Unexercised Options (#) Exercisable |
Number of
Securities Underlying Unexercised Options (#) Unexercisable |
Option
Exercise Price ($) |
Option
Expiration Date |
Number of Shares of Stock or Units of Stock That Have Not
Vested (#) (2) |
Market Value of Shares or Units of Stock That Have Not Vested ($)
(3)
|
Equity Incentive Plan Awards: number of unearned shares, units or other rights that have not vested (#)
(4)
|
Equity Incentive Plan Awards: market or payout value of unearned shares, units or other rights that have not vested ($)
(3)
|
||||||||
Kevin M. Fogarty
|
176,577
|
|
—
|
|
14.46
|
|
1/3/2020
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
83,098
|
|
—
|
|
37.11
|
|
3/7/2021
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
77,485
|
|
—
|
|
28.42
|
|
3/5/2022
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
65,093
|
|
—
|
|
23.84
|
|
3/4/2023
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
73,052
|
|
—
|
|
27.98
|
|
3/3/2024
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
135,431
|
|
6,523,711
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
45,825
|
|
2,207,390
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
55,556
|
|
2,676,133
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
34,050
|
|
1,640,189
|
|
Stephen E. Tremblay
|
22,259
|
|
—
|
|
37.11
|
|
3/7/2021
|
|
—
|
|
—
|
|
—
|
|
—
|
|
20,821
|
|
—
|
|
28.42
|
|
3/5/2022
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
|
14,646
|
|
—
|
|
23.84
|
|
3/4/2023
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
21,591
|
|
—
|
|
27.98
|
|
3/3/2024
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
39,596
|
|
1,907,339
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
13,577
|
|
654,004
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
16,461
|
|
792,926
|
|
|
|
|
|
|
|
|
9,557
|
|
460,361
|
|
||||||
Holger R.Jung
|
—
|
|
—
|
|
—
|
|
—
|
|
29,697
|
|
1,430,504
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
10,183
|
|
490,515
|
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
12,346
|
|
594,707
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
7,168
|
|
345,283
|
|
Marcello C. Boldrini
|
|
|
|
|
10,824
|
|
521,392
|
|
|
|
||||||
|
|
|
|
|
|
4,329
|
|
208,528
|
|
|||||||
Vijay Mhetar
|
|
|
|
|
14,082
|
|
678,330
|
|
|
|
||||||
|
|
|
|
|
|
4,181
|
|
201,399
|
|
(1)
|
Options granted from January 2010 forward were granted pursuant to the 2009 Plan.
|
(2)
|
Each of our NEOs has received RSAs with a three-year cliff vest, subject to the NEO remaining continuously employed by us through the vesting date. The vesting of the RSAs set forth in the table above is as follows:
|
|
|
Kevin M. Fogarty
|
Stephen E. Tremblay
|
Holger R. Jung
|
Marcello C. Boldrini
|
Vijay Mhetar
|
Grant Date
|
Vest Date
|
Shares Subject to the Grant
|
||||
2/27/2015
|
2/27/2018
|
45,825
|
13,578
|
10,183
|
-
|
-
|
2/26/2016
|
2/26/2019
|
55,556
|
16,461
|
12,346
|
-
|
-
|
1/16/2017
|
1/16/2018
|
-
|
-
|
-
|
-
|
6,365
|
1/16/2019
|
-
|
-
|
-
|
-
|
3,536
|
|
3/2/2017
|
3/2/2020
|
34,050
|
9,557
|
7,168
|
-
|
4,181
|
4/1/2017
|
4/1/2018
|
-
|
-
|
-
|
3,247
|
-
|
4/1/2019
|
-
|
-
|
-
|
3,247
|
-
|
|
4/1/2020
|
-
|
-
|
-
|
4,330
|
-
|
(3)
|
The market value of unvested RSAs and unearned PRSUs is calculated based on the closing price of our common stock on December 29,
2017
, the last trading day of the year, which was $48.17.
|
(4)
|
The number of shares reported in this column and the payout value calculated in the column to the right are based on the achievement of threshold performance levels.
|
|
Option Awards
|
Stock Awards
|
||||||
Name
|
Number of Shares Acquired on Exercise (#)
|
Value Realized on
Exercise ($) (1) |
Number of Shares Acquired on Vesting (#)
(2)
|
Value Realized on
Vesting ($) (3) |
||||
Kevin M. Fogarty
|
82,472
|
|
2,934,149
|
|
49,053
|
|
1,358,531
|
|
Stephen E. Tremblay
|
49,623
|
|
1,677,429
|
|
14,534
|
|
402,529
|
|
Holger R. Jung
|
63,960
|
|
970,012
|
|
10,901
|
|
301,905
|
|
Marcello C. Boldrini
|
—
|
|
—
|
|
—
|
|
—
|
|
Vijay Mhetar
|
—
|
|
—
|
|
—
|
|
—
|
|
(1)
|
The value realized on exercise is calculated by multiplying the number of options exercised by the difference between the market price of the underlying securities at exercise and the exercise price of the option.
|
(2)
|
Includes the vesting of (i) 52.5% of the total PRSUs granted to the NEO on March 3, 2014, and (ii) the RSAs granted to the NEO on March 2, 2014.
|
(3)
|
The value realized on vesting is calculated by multiplying the number of shares of stock by the fair market value of the underlying shares on the vesting date.
|
Name
(1)
|
Plan Name
|
Number of Years Credited
Services (#) |
Present Value of
Accumulated Benefit ($) |
Payments
During Last Fiscal Year ($) |
Kevin M. Fogarty
|
U.S. Pension Plan
|
0.6
|
15,116
|
0
|
(1)
|
Messrs. Tremblay, Jung, Boldrini and Mhetar are not eligible to participate in our U.S. Pension Plan.
|
Name
|
Executive Contributions in 2017 ($)
|
Company Contributions in 2017 ($)
(1)
|
Aggregate Earnings in 2017 ($)
(2)
|
Aggregate
Withdrawals/ Distributions ($) |
Aggregate
Balance at 12/31/2017 ($) |
Kevin M. Fogarty
|
77,820
|
97,880
|
52,177
|
-
|
1,807,827
|
Stephen E. Tremblay
|
27,223
|
41,898
|
26,288
|
-
|
588,010
|
Holger R. Jung
|
18,571
|
30,952
|
9,848
|
-
|
268,531
|
Marcello C. Boldrini
|
-
|
-
|
-
|
-
|
-
|
Vijay Mhetar
|
-
|
-
|
-
|
-
|
-
|
(1)
|
Amounts set forth in this column were reported in “All Other Compensation” for
2017
in our “
—Summary Compensation
Table
" above.
|
(2)
|
These amounts were not reported for
2017
in our “
Summary Compensation
Table
" because our NEOs do not earn above-market or preferential earnings on contributions under this plan. In
2017
, our NEOs invested in these funds with gross one-year average annual total returns reflected as of December 31,
2017
: Baron Small Cap Fund Retail Class (27.13%);
Deutsche CROCI
®
Equity Dividend A (19.25%); Fidelity
®
Blue Chip Growth (36.06%); Fidelity
®
Blue Chip Value (14.87%); Fidelity Freedom
®
2020 (15.64%); Fidelity Freedom
®
2025 (16.82%); Fidelity Freedom
®
Income (8.21%); Fidelity
®
Growth and Income Portfolio (16.88%); Fidelity
®
Large Cap Stock (18.15%); Fidelity
®
Real Estate Investment Portfolio (4.27%); Fidelity
®
Total Bond (4.18%); Fidelity
®
Small Cap Discovery (7.91%); Fidelity
®
Worldwide (29.54%); and AB Discovery Value Fund Class A (12.71%); Baron Growth Fund Retail Shares (27.04%).
|
Name and Triggering Event
|
Severance Payment($)
|
Accelerated Vesting of Equity Awards ($)
(4)
|
Continuation of Medical Benefits ($)
|
Total ($)
(4)
|
||||
Kevin M. Fogarty
(7)
|
|
|
|
|
||||
Termination of Employment:
|
|
|
|
|
||||
By us for cause or resignation by executive without good reason
|
—
|
|
—
|
|
—
|
|
—
|
|
By us without cause or by executive for good reason
(1)(4)
|
3,029,363
|
|
—
|
|
49,217
|
|
3,078,580
|
|
By us without cause or by executive for good reason within one/two years after a change in control
(2)(4)
|
5,550,000
|
|
19,571,086
|
|
73,825
|
|
25,194,911
|
|
Upon Disability or Death
(3)
|
589,681
|
|
15,600,095
|
|
—
|
|
16,189,776
|
|
Upon a Change in Control
|
—
|
|
—
|
|
—
|
|
—
|
|
|
|
|
|
|
||||
Stephen E. Tremblay
|
|
|
|
|
||||
Termination of Employment:
|
|
|
|
|
||||
By us for cause or resignation by executive without good reason
|
—
|
|
—
|
|
—
|
|
—
|
|
By us without cause or by executive for good reason
(4)(5)
|
678,697
|
|
—
|
|
7,392
|
|
686,089
|
|
By us without cause or by executive for good reason within one/two years after a change in control
(4)(6)
|
1,615,000
|
|
5,722,018
|
|
14,784
|
|
7,351,802
|
|
Upon Disability or Death
(3)
|
203,697
|
|
4,579,554
|
|
—
|
|
4,783,251
|
|
Upon a Change in Control
|
—
|
|
—
|
|
—
|
|
—
|
|
|
|
|
|
|
||||
Holger R. Jung
|
|
|
|
|
||||
Termination of Employment:
|
|
|
|
|
||||
By us for cause or resignation by executive without good reason
|
—
|
|
—
|
|
—
|
|
—
|
|
By us without cause or by executive for good reason
(4)(5)
|
549,355
|
|
—
|
|
24,608
|
|
573,963
|
|
By us without cause or by executive for good reason within one/two years after a change in control
(4)(6)
|
1,280,000
|
|
4,291,513
|
|
49,217
|
|
5,620,730
|
|
Upon Disability or Death
(3)
|
149,355
|
|
3,434,682
|
|
—
|
|
3,584,037
|
|
Upon a Change in Control
|
—
|
|
—
|
|
—
|
|
—
|
|
|
|
|
|
|
||||
Marcello C. Boldrini
|
|
|
|
|
||||
Termination of Employment:
|
|
|
|
|
||||
By us for cause or resignation by executive without good reason
|
—
|
|
—
|
|
—
|
|
—
|
|
By us without cause or by executive for good reason
(4)(5)
|
380,000
|
|
—
|
|
16,012
|
|
396,012
|
|
By us without cause or by executive for good reason within one/two years after a change in control
(4)(6)
|
1,216,000
|
|
938,496
|
|
32,024
|
|
2,186,520
|
|
Upon Disability or Death
(3)
|
—
|
|
660,427
|
|
—
|
|
660,427
|
|
Upon a Change in Control
|
—
|
|
—
|
|
—
|
|
—
|
|
|
|
|
|
|
Name and Triggering Event
|
Severance Payment($)
|
Accelerated Vesting of Equity Awards ($)
(4)
|
Continuation of Medical Benefits ($)
|
Total ($)
(4)
|
||||
Vijay Mhetar
|
|
|
|
|
||||
Termination of Employment:
|
|
|
|
|
||||
By us for cause or resignation by executive without good reason
|
—
|
|
—
|
|
—
|
|
—
|
|
By us without cause or by executive for good reason
(4)(5)
|
310,000
|
|
—
|
|
24,608
|
|
334,608
|
|
By us without cause or by executive for good reason within one/two years after a change in control
(4)(6)
|
930,000
|
|
604,244
|
|
49,217
|
|
1,583,461
|
|
Upon Disability or Death
(3)
|
—
|
|
335,681
|
|
—
|
|
335,681
|
|
Upon a Change in Control
|
—
|
|
—
|
|
—
|
|
—
|
|
(1)
|
Upon termination of Mr. Fogarty’s employment by us without cause or by Mr. Fogarty for “good reason,” Mr. Fogarty is entitled to (i) continuation of base salary for 24 months, (ii) a lump sum cash payment equal to two times Mr. Fogarty’s average annual bonus paid over the prior three years and (iii) continuation of medical benefits for up to 24 months (such benefits cease when Mr. Fogarty becomes entitled to benefits from a new employer, if any; however, for the purposes of this table, we have assumed such benefits shall continue for 24 months).
|
(2)
|
Upon termination of Mr. Fogarty’s employment by us without cause or by Mr. Fogarty for “good reason” within two years after a change in control, Mr. Fogarty is entitled to (i) continuation of base salary for 36 months, (ii) a lump sum cash payment equal to three times Mr. Fogarty’s target annual bonus and (iii) continuation of medical benefits for up to 36 months (such benefits cease when Mr. Fogarty becomes entitled to benefits from a new employer, if any; however, for the purposes of this table, we have assumed such benefits shall continue for 36 months).
|
(3)
|
Upon termination of the executive officer’s employment due to Disability or Death, such executive officer, or his or her estate, is entitled to a lump sum cash payment equal to the product of such executive officer’s average annual bonus paid over the prior three years, times a fraction, the numerator of which is the number of days such executive officer worked in the year in which the termination event occurred and the denominator of which is 365.
|
(4)
|
Equity awards vest in accordance with the terms of the individual grant agreements with respect to each award. Options, RSAs and PRSUs (which vest at the Target amount) held by the executive officer vest immediately in the event of termination of such executive officer’s employment by us without “cause” within one year following a change in control. Options and RSAs also vest in full upon the termination of the grantee’s employment due to Disability or death, and PRSUs will vest at one-third of Target (if termination occurs prior to the first anniversary of grant), two-thirds of Target (after the first anniversary, but prior to the second) or in full (after the second anniversary of grant). Additionally, for our grants of RSAs in 2017, the award will become vested on the date the NEO's employment is terminated without Cause (and other than as a result of the NEO's death or Disability) during the six (6) month period prior to third anniversary of the grant date. For our grants of PRSUs in 2017, the award will become vested on the third anniversary of the grant date if the NEO's employment is terminated without Cause (and other than as a result of the NEO's death or Disability) during the six (6) month period prior to third anniversary of the grant date. The value in this column represents an amount equal to the number of shares underlying the executive officer’s unvested RSAs, PRSUs and stock options as of December 31,
2017
multiplied by, in the case of RSAs and PRSUs, the closing market price of our common stock on December 29,
2017
($48.17), which was the last trading day of fiscal
2017
.
|
(5)
|
Upon termination of the executive officer’s employment by us without cause or by such executive officer for “good reason,” such executive officer is entitled to (i) continuation of base salary for 12 months, (ii) a lump sum cash payment equal to one times such executive officer’s average annual bonus paid over the prior three years and (iii) continuation of medical benefits for up to 12 months (such benefits cease when such executive officer becomes entitled to benefits from a new employer, if any; however, for the purposes of this table, we have assumed such benefits shall continue for 12 months).
|
(6)
|
Upon termination of the executive officer’s employment by us without cause or by such executive officer for “good reason” within two years after a change in control, such executive officer is entitled to (i) continuation of base salary for 24 months, (ii) a lump sum cash payment equal to two times such executive officer’s target annual bonus and (iii) continuation of medical benefits for up to 24 months (such benefits cease when such executive officer becomes entitled to benefits from a new employer, if any; however, for the purposes of this table, we have assumed such benefits shall continue for 24 months).
|
(7)
|
In addition to the amounts set forth in the table for Mr. Fogarty, on the first day of the seventh month from his date of separation, Mr. Fogarty would be entitled to the issuance of 5,607 shares of our common stock based on phantom shares of our common stock Mr. Fogarty holds as a result of deferrals of bonus compensation he had previously made under the terms of the Executive Deferred Compensation Plan and as a result of a grant of phantom stock prior to our initial public offering.
|
Component
|
Type
|
Annual Amount
|
||
Base Compensation
|
|
Equity Grant
|
$
|
90,000
|
for all non-management directors
|
Cash Retainer
|
$
|
90,000
|
|
Additional Cash Fees
|
|
Chairman of the Board
|
$
|
130,000
|
|
Audit Committee Chair
|
$
|
17,500
|
|
for Board and Committee Chairs
|
Compensation Committee Chair
|
$
|
12,500
|
|
NCG Committee Chair
|
$
|
10,000
|
Name
|
Fees Earned or
Paid in Cash ($) |
Stock Awards
($) (2) |
Total
($) |
|||
Shelley J. Bausch
|
34,973
|
|
35,248
|
|
70,221
|
|
Mark A. Blinn
|
34,973
|
|
35,248
|
|
70,221
|
|
Anna C. Catalano
|
90,000
|
|
89,978
|
|
179,978
|
|
Steven J. Demetriou
(1)
|
41,113
|
|
35,991
|
|
77,104
|
|
Dominique Fournier
|
100,000
|
|
89,978
|
|
189,978
|
|
John J. Gallagher, III
|
107,500
|
|
89,978
|
|
197,478
|
|
Barry J. Goldstein
|
90,000
|
|
89,978
|
|
179,978
|
|
Francis S. Kalman
(1)
|
90,000
|
|
89,978
|
|
179,978
|
|
Dan F. Smith
|
220,000
|
|
89,978
|
|
309,978
|
|
Karen A. Twitchell
|
97,486
|
|
89,978
|
|
187,464
|
|
(1)
|
Mr. Demetriou resigned from our Board effective May 25, 2017 and Mr. Kalman resigned from our Board effective February 28, 2018.
|
(2)
|
Amounts set forth in the Stock Awards column represent the aggregate grant date fair value with respect to grants of fully vested common stock in accordance with the FASB ASC Topic 718 (disregarding the estimate of forfeitures related to service-based vesting conditions). For a discussion of the assumptions used in calculating the fair value of our stock-based compensation, refer to
Note 5, Share-Based Compensation
, in the Notes to Consolidated Financial Statements contained in our
2017
Annual Report.
|
•
|
the integrity of the Company’s financial statements and financial reporting process and the Company’s systems of internal accounting and financial controls;
|
•
|
the annual independent audit of the Company’s financial statements;
|
•
|
the engagement of the independent auditors and the evaluation of the independent auditors’ qualifications, independence and performance;
|
•
|
the compliance by the Company with legal and regulatory requirements, including the Company’s disclosure controls and procedures;
|
Submitted by the Audit Committee:
|
|
Mark A. Blinn
|
John J. Gallagher, III,
Chairman
|
Barry J. Goldstein
|
Karen A. Twitchell
|
Description of Services
|
Amount Billed ($ thousands)
|
|||||
2017
|
2016
|
|||||
Audit Fees.
The audit of our consolidated financial statements, review of our interim financial statements, review of our systems of internal control over financial reporting, services in connection with statutory and regulatory filings and work in connection with certain financings.
|
$2,912
|
$3,124
|
||||
Audit-Related Fees.
Performance of the audit or review of local regulations requirements, that are not reportable as Audit Fees.
|
—
|
|
7
|
|
||
Tax Fees.
Tax compliance, tax advice and tax planning services, primarily related to consultations for certain tax matters with respect to our international operations.
|
773
|
|
858
|
|
||
All Other Fees.
|
—
|
|
—
|
|
||
Total
(may not foot due to rounding)
|
$
|
3,685
|
|
$
|
3,990
|
|
(1)
|
Includes 513,913 PRSUs, which assuming maximum vest, would vest as 1,027,826 shares.
|
(2)
|
Excludes 27,809 outstanding RSUs held by our Chief Executive Officer that are fully vested but not distributable as shares of our common stock until our Chief Executive Officer's termination from employment.
|
•
|
Options or SARs exercisable for more than (1) 1,000,000 shares of common stock to any employee or consultant, or (2) 100,000 shares of common stock to any non-employee director;
|
•
|
Stock Awards covering or relating to more than (1) 1,000,000 shares of common stock to any employee or consultant, or (2) 50,000 shares of common stock to any non-employee director; and
|
•
|
Cash Awards in excess of $5,000,000 based on the grant date value to any participant.
|
•
|
selecting eligible employees and consultants to receive awards (our Board retains discretion for selecting non-employee directors);
|
•
|
determining the limitations and other terms and conditions applicable to each award;
|
•
|
determining the type and size of award, and whether, to what extent, and under what circumstances, awards may be settled in cash, shares, or other property;
|
•
|
determining the treatment of an award upon termination of a participant’s employment for cause or for good reason, a change in control, or a participant’s death, disability or retirement; and
|
•
|
delegating its authority to grant awards to consultants and certain employees to a subcommittee or any other committee of our Board.
|
NEO/Group
|
Restricted Stock
(1)
|
Performance Units
(2)
|
Options
|
Cash Incentive
($)
|
Aggregate Grant Date Fair Value
(3)
|
||||
Kevin M. Fogarty
President and Chief Executive Officer
|
34,050
|
|
68,100
|
|
—
|
995,300
|
|
3,086,292
|
|
Stephen E. Tremblay
Executive Vice President and Chief Financial Officer
|
9,557
|
|
19,115
|
|
—
|
357,770
|
|
866,278
|
|
Holger R. Jung
Senior Vice President and Polymer Segment President
|
7,168
|
|
14,336
|
|
—
|
258,240
|
|
649,708
|
|
Marcello C. Boldrini
Senior Vice President and Chemical Segment President
|
10,824
|
|
8,659
|
|
—
|
183,996
|
|
647,040
|
|
Vijay Mhetar
Senior Vice President and Chief Technology Officer
|
14,082
|
|
8,363
|
|
—
|
166,780
|
|
658,997
|
|
All executive officers, as a group
|
93,778
|
|
154,770
|
|
—
|
2,975,275
|
|
7,519,195
|
|
All other employees, as a group
|
127,077
|
|
9,076
|
|
—
|
13,833,725
|
|
3,855,187
|
|
All non-employee directors,
as a group
|
25,975
|
|
—
|
|
—
|
—
|
|
736,329
|
|
TOTAL
|
246,830
|
|
163,846
|
—
|
16,809,000
|
|
12,110,711
|
|
(2)
|
Represents PRSUs granted at target.
|
(3)
|
These amounts represent the full fair value of restricted stock awards, restricted stock units and restricted stock performance units as calculated under ASC Topic 718. For a discussion of the assumptions used in calculating the fair value of our stock-based compensation, refer to Note 5,
Share-Based Compensation
, in the Notes to Consolidated Financial Statements contained in our Annual Report on Form 10-K for the year ended December 31, 2017.
|
H
OUSTON
, T
EXAS
|
By Order of the Board of Directors of Kraton Corporation,
|
|
|
JAMES L. SIMMONS,
|
|
Senior Vice President, General Counsel and Secretary
|
|
April 13, 2018
|
|
The Board of Directors recommends you vote FOR the following
|
|
For All
|
Withhold All
|
For all Except
|
|
To withhold authority to vote for any individual
|
|
|
|
|
|
|
nominee(s), mark "For All Except" and write the
|
1. Election of Class III Directors
|
|
o
|
o
|
o
|
|
number(s) of the nominee(s) on the line below.
|
Nominees
|
|
|
|
|
|
|
01) Shelley J. Bausch
|
|
|
|
|
|
|
02) Kevin M. Fogarty
|
|
|
|
|
|
|
03) Karen A. Twitchell
|
|
|
|
|
|
|
The Board of Directors recommends you vote FOR Proposal 2:
|
|
|
For
|
Against
|
Abstain
|
2. Advisory vote on the compensation of named executive officers.
|
|
|
o
|
o
|
o
|
|
|
|
|
|
|
The Board of Directors recommends you vote FOR Proposal 3:
|
|
|
For
|
Against
|
Abstain
|
3.
To ratify the appointment of KPMG LLP as independent registered public accounting firm for the 2018 fiscal year.
|
|
|
o
|
o
|
o
|
|
|
|
|
|
|
The Board of Directors recommends you vote FOR Proposal 4:
|
|
|
For
|
Against
|
Abstain
|
4.
To approve and adopt an amendment to the Kraton Corporation 2016 Equity and Cash Incentive Plan to increase the number of shares available for issuance thereunder.
|
|
|
o
|
o
|
o
|
NOTE:
In their discretion, the proxies are authorized to vote upon such business as may properly come before the Annual Meeting or any postponement or adjournment thereof.
|
|
|
|
|
|
|
|
|
|
Kraton Corporation
2018 Annual General Meeting of Stockholders
The Board of Directors Solicits this Proxy
PROXY
The undersigned hereby appoints Stephen E. Tremblay, Executive Vice President and Chief Financial Officer of Kraton Corporation, and James L. Simmons, Senior Vice President, General Counsel and Secretary of Kraton Corporation, and each of them, acting in the absence of others, as proxies of the undersigned, with full power of substitution in the premises and with discretionary authority to each of them, to appear and vote, as designated herein, all shares of the common stock of Kraton Corporation held of record by the undersigned on March 26, 2018 at the Annual General Meeting of Stockholders scheduled to be held at The Sheraton North Houston, 15700 John F. Kennedy Boulevard, Houston, Texas 77032 on May 23, 2018 at 1:00 p.m., central time, and at any and all postponements or adjournments thereof. The undersigned acknowledges receipt of the notice of and proxy statement for such annual meeting.
This proxy, when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy will be voted in accordance with the Board of Directors' recommendations.
|
|
Year ended December 31,
|
||
|
2017
|
||
|
(in thousands)
|
||
Net Debt
(1)
|
$
|
1,450,147
|
|
Adjusted EBITDA
(2)(3)
|
374,199
|
|
(1)
|
We define net debt as total debt (excluding debt of Kraton Formosa Polymers Corporation ("KFPC") a 50% joint venture which we consolidate) less cash and cash equivalents. Management uses net debt to determine our outstanding debt obligations that would not be readily satisfied by its cash and cash equivalents on hand. Management believes that using net debt is useful to investors in determining our leverage since we could choose to use cash and cash equivalents to retire debt. In addition, management believes that presenting net debt excluding KFPC is useful because KFPC has its own capital structure.
|
(2)
|
The majority of our consolidated inventory is measured using the FIFO basis of accounting. As part of our pricing strategy, we measure our business performance using the estimated current replacement cost (“ECRC”) of our inventory and cost of goods sold. Our ECRC is based on our current expectation of the current cost of our significant raw material inputs. ECRC is developed monthly based on actual market-based contracted rates and spot market purchase rates that are expected to occur in the period. We then adjust the value of the significant raw material inputs and their associated impact to finished goods to the current replacement cost to arrive at an ECRC value for inventory and cost of goods sold. The result of this revaluation from the U.S. GAAP carrying value creates the spread between U.S. GAAP and ECRC. We maintain our perpetual inventory in our global enterprise resource planning system, where the carrying value of our inventory is determined. With inventory valued under U.S. GAAP and ECRC, we then have the ability to report cost of goods sold and therefore Adjusted EBITDA under both our U.S. GAAP convention and ECRC.
|
(3)
|
Adjusted EBITDA is EBITDA net of the impact of the spread between the FIFO basis of accounting and ECRC and net of the impact of items we do not consider indicative of our ongoing operating performance. EBITDA represents net income before interest, taxes, depreciation and amortization. We explain how each adjustment is derived and why we believe it is helpful and appropriate in the reconciliation below. You are encouraged to evaluate each adjustment and the reasons we consider
|
•
|
Adjusted EBITDA does not reflect the significant interest expense on our debt;
|
•
|
Adjusted EBITDA does not reflect the significant depreciation and amortization expense associated with our long-lived assets;
|
•
|
other companies in our industry may calculate EBITDA differently than we do, limiting its usefulness as a comparative measure; and
|
•
|
due to volatility in raw material price, Adjusted EBITDA may, and often does, vary substantially from EBITDA, net income and other performance measures, including net income calculated in accordance with US GAAP.
|
|
As of December 31, 2017
|
|||
|
(In thousands)
|
|||
USD Tranche of Term Loan Facility
|
$
|
485,000
|
|
|
Euro Tranche of Term Loan Facility
|
|
198,265
|
|
|
10.5% Senior Notes due 2023
|
440,000
|
|
|
|
7.0% Senior Notes due 2025
|
400,000
|
|
|
|
ABL
|
-
|
|
|
|
Capital lease
|
2,086
|
|
|
|
Kraton debt
|
1,525,351
|
|
|
|
Kraton cash
|
75,204
|
|
|
|
Kraton net debt (non-GAAP)
|
1,450,147
|
|
|
|
Year Ended December 31, 2017
|
||||
|
|
$ in thousands
|
|||
Net income attributable to Kraton
|
|
$
|
97,549
|
|
|
Net loss attributable to noncontrolling interest
|
|
(4,903
|
|
)
|
|
Consolidated net income
|
|
92,646
|
|
|
|
Add (deduct):
|
|
|
|||
Income tax benefit
|
|
(57,884
|
|
)
|
|
Interest expense, net
|
|
132,459
|
|
|
|
Earnings of unconsolidated joint venture
|
|
(486
|
|
)
|
|
Loss on extinguishment of debt
|
|
35,389
|
|
|
|
Operating income
|
|
202,124
|
|
|
|
Add:
|
|
|
|||
Depreciation and amortization expenses
|
|
137,162
|
|
|
|
Loss on extinguishment of debt
|
|
(35,389
|
|
)
|
|
Earnings of unconsolidated joint venture
|
|
486
|
|
|
|
EBITDA
|
|
304,383
|
|
|
|
Add (deduct):
|
|
|
|||
Transaction, acquisition related costs, restructuring, and other costs (a)
|
|
12,835
|
|
|
|
Loss on extinguishment of debt
|
|
35,389
|
|
|
|
Weather related costs (b)
|
|
5,465
|
|
|
|
KFPC startup costs (c)
|
|
14,618
|
|
|
|
Non-cash compensation expense
|
|
7,627
|
|
|
|
Spread between FIFO and ECRC
|
|
(6,228
|
|
)
|
|
Adjusted EBITDA
|
|
$
|
374,199
|
|
|
(a)
|
Charges related to the evaluation of acquisition transactions, severance expenses, and other restructuring related charges, which are primarily recorded in selling, general, and administrative expenses.
|
(b)
|
Costs are related to Hurricane Harvey and Hurricane Irma, which are recorded in cost of goods sold.
|
(c)
|
Startup costs related to the joint venture company, KFPC, which are recorded in costs of goods sold.
|
1.
|
Section 5(a) of the Plan is amended by replacing the number “1,550,000” with the number “3,350,000.”
|
2.
|
The Plan shall remain in full force and effect and, as amended by this Amendment, is ratified and affirmed in all respects.
|
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