DEF 14A 1 a17-2111_1def14a.htm DEF 14A

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

 

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

 

Filed by the Registrant  x

 

Filed by a Party other than the Registrant  o

 

Check the appropriate box:

o

Preliminary Proxy Statement

o

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

x

Definitive Proxy Statement

o

Definitive Additional Materials

o

Soliciting Material under §240.14a-12

 

Cloud Peak Energy Inc.

(Name of Registrant as Specified In Its Charter)

 

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 

Payment of Filing Fee (Check the appropriate box):

x

No fee required.

o

Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

(1)

Title of each class of securities to which transaction applies:

 

 

 

 

(2)

Aggregate number of securities to which transaction applies:

 

 

 

 

(3)

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):

 

 

 

 

(4)

Proposed maximum aggregate value of transaction:

 

 

 

 

(5)

Total fee paid:

 

 

 

o

Fee paid previously with preliminary materials.

o

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.

 

(1)

Amount Previously Paid:

 

 

 

 

(2)

Form, Schedule or Registration Statement No.:

 

 

 

 

(3)

Filing Party:

 

 

 

 

(4)

Date Filed:

 

 

 

 



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GRAPHIC

 

CLOUD PEAK ENERGY INC.
505 South Gillette Avenue
Gillette, Wyoming 82716

 

March 27, 2017

 

Dear Fellow Stockholder:

 

It is our pleasure to invite you to attend Cloud Peak Energy Inc.’s 2017 Annual Meeting of Stockholders (the “2017 Annual Meeting”). The 2017 Annual Meeting will be held on Wednesday, May 10, 2017 at 9:00 a.m. Mountain Time, at the Gillette College Technical Center, 3251 South 4-J Road, Gillette, Wyoming 82718.

 

In connection with the 2017 Annual Meeting, the attached Notice of Annual Meeting and Proxy Statement describe the business items we plan to address at the meeting. We also will present a brief report on our business and respond to your questions at the meeting.

 

In accordance with the Securities and Exchange Commission’s “notice and access” model, we are providing our Notice of Annual Meeting, Proxy Statement and annual report on Form 10-K for the year ended December 31, 2016 to you online with paper copies available, free of charge, upon request. On or about March 27, 2017, we began mailing a Notice of Internet Availability of Proxy Materials detailing how to access the proxy materials electronically and how to submit your proxy via the Internet. The Notice of Internet Availability of Proxy Materials also provides instructions on how to request and obtain paper copies of the proxy materials and proxy card or voting instruction form, as applicable. We believe this process provides our stockholders with a convenient way to access the proxy materials and submit their proxies online, while allowing us to reduce our environmental impact as well as the costs of printing and distribution.

 

Your vote is very important so we encourage you to review the information contained in the proxy materials and submit your proxy, regardless of the number of shares you own. It is important that beneficial owners instruct their brokers on how they want to vote their shares. Please note that you will need the control number provided on your Notice of Internet Availability of Proxy Materials in order to submit your proxy online.

 

We look forward to seeing you on May 10th.

 

Sincerely,

 

 

/s/ William T. Fox III

 

/s/ Colin Marshall

William T. Fox III

 

Colin Marshall

Chairman of the Board

 

President, Chief Executive Officer and Director

 



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GRAPHIC

 

CLOUD PEAK ENERGY INC.
505 South Gillette Avenue, Gillette, Wyoming 82716

 

March 27, 2017

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MAY 10, 2017

 

As a stockholder of Cloud Peak Energy Inc., a Delaware corporation, you are hereby given notice of, and invited to attend in person or by proxy, Cloud Peak Energy Inc.’s 2017 Annual Meeting of Stockholders (the “2017 Annual Meeting”). The 2017 Annual Meeting will be held at the Gillette College Technical Center, 3251 South 4-J Road, Gillette, Wyoming 82718, on Wednesday, May 10, 2017, at 9:00 a.m. Mountain Time, for the following purposes:

 

1.              To elect two Class II members of the Board of Directors of Cloud Peak Energy Inc. (the “Board”) named in the Proxy Statement, each for a term of three years;

 

2.              To ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the 2017 fiscal year;

 

3.              To approve, on an advisory basis, the compensation of the company’s named executive officers, as disclosed in the Proxy Statement pursuant to Item 402 of Regulation S-K promulgated by the Securities and Exchange Commission (the “SEC”);

 

4.              To approve, on an advisory basis, the frequency of future advisory votes on the compensation of the company’s named executive officers to occur every year, every two years or every three years;

 

5.              To approve the First Amendment to the Cloud Peak Energy Inc. 2009 Long Term Incentive Plan (as amended and restated effective March 3, 2017) (the “Amended LTIP”) to increase the number of shares authorized for issuance thereunder and to extend the term thereof;

 

6.              To re-approve the material terms of the Amended LTIP, as amended by the First Amendment, in accordance with the stockholder approval requirements of Section 162(m) of the Internal Revenue Code;

 

7.              To ratify the non-employee director maximum award limitations set forth in the Amended LTIP; and

 

8.              To transact other such business as may properly come before the meeting and any adjournment or postponement thereof.

 

The Board has fixed the close of business on March 17, 2017 as the record date for the determination of stockholders entitled to notice of and to vote at the 2017 Annual Meeting and any adjournment or postponement thereof.

 

Pursuant to rules adopted by the SEC, we are providing access to our proxy materials primarily via the Internet, rather than mailing paper copies of these materials to each stockholder. On or about March 27, 2017, we began mailing a Notice of Internet Availability of Proxy Materials, which contains instructions on how to access the proxy materials, submit your proxy, and request paper copies of the proxy materials. We believe this process expedites stockholders’ receipt of the proxy materials, lowers the cost of our 2017 Annual Meeting through lower printing and distribution costs, and reduces the environmental impact associated with printing a large volume of proxy materials. Your vote is important. We urge you to review the Proxy Statement carefully and to submit your proxy or voting instructions as soon as possible so that your shares will be represented at the meeting.

 

Thank you for your continued interest and support.

 

 

By Order of the Board of Directors,

 

 

 

 

 

/s/ Bryan Pechersky

 

 

 

Bryan Pechersky

 

Executive Vice President, General Counsel, and Corporate Secretary

 



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IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS
FOR THE 2017 ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 10, 2017

 

This Notice of Annual Meeting, the Proxy Statement and our annual report on Form 10-K for the year ended December 31, 2016 (the “Form 10-K”) (which we are distributing in lieu of a separate annual report to stockholders), are available on our website at www.cloudpeakenergy.com, in the “SEC Filings” subsection of the “Investor Relations” section. Additionally, you may access the Notice of Annual Meeting, the Proxy Statement and the Form 10-K at www.proxyvote.com.

 



Table of Contents

 

PROXY STATEMENT TABLE OF CONTENTS

 

GENERAL INFORMATION

1

2017 Annual Meeting Date and Location

1

Delivery of Proxy Materials

1

Mailing Date and Delivery of Proxy Materials

1

Stockholders Sharing an Address

1

Voting

2

Stockholders Entitled to Vote

2

Voting of Proxies by Management Proxy Holders

2

Quorum; Required Votes; Majority Voting Standard for Directors

3

Voting Procedures

5

Revoking Your Proxy

6

Annual Meeting Admission

6

Solicitation Expenses

6

Copies of the Annual Report

7

Section 16(a) Beneficial Ownership Reporting Compliance

7

PROPOSAL I

 

ELECTION OF DIRECTORS

7

Election of Class II Directors

7

Board Recommendation on Proposal

10

EXECUTIVE OFFICERS

10

CORPORATE GOVERNANCE

13

Board Leadership Structure; Separate Chairman and CEO Positions

13

Board’s Role in Risk Oversight

13

Diversity of Board Members

14

Board of Directors and Board Committees

14

Audit Committee

15

Compensation Committee

16

Nominating and Corporate Governance Committee

17

Health, Safety, Environment and Communities Committee

17

Director Nomination Process; Proxy Access

18

Director Retirement Policy; 2016 Chairman Transition

19

Independence of Directors

19

Executive Sessions of Independent Directors

20

Board and Committee Evaluations

20

Audit Committee Financial Experts and Financial Literacy

20

Communications with Non-Employee Directors and Other Board Communications

20

Director Attendance at Annual Meetings

21

Certain Relationships and Related Party Transactions

21

Policies on Business Conduct and Ethics

21

Indemnification of Officers and Directors

21

Management Certifications

21

SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDERS

22

EXECUTIVE COMPENSATION

24

Compensation Committee Report

24

Compensation Discussion and Analysis

24

Executive Summary

24

Executive Compensation Philosophy and Objectives

36

Stockholder Outreach and Response to 2016 Say on Pay Vote

37

Setting Executive Compensation for 2016; Compensation Peer Group

40

Key Elements of Our 2016 Executive Compensation Program

41

Changes in Executive Compensation Program for 2017

50

Tax Deductibility of Certain Executive Compensation

50

Compensation Risk Assessment

51

Important Note Regarding Compensation Tables

51

 

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Executive Compensation Tables

51

2016 Summary Compensation Table

51

2016 All Other Compensation

52

2016 Grants of Plan Based Awards

53

2016 Outstanding Equity Awards at Year End

54

2016 Option Exercises and Stock Vested

56

No Pension Benefits

56

Nonqualified Deferred Compensation

56

Potential Payments Upon Termination or Change in Control; Double-Trigger Change in Control Requirements

57

Compensation Committee Interlocks and Insider Participation

62

DIRECTOR COMPENSATION

63

2016 Director Compensation Program

63

Director Stock Ownership Guidelines; No Shares Delivered Until Separation of Service

64

Equity Awards Outstanding at Year End

64

Changes to the Directors’ Compensation Program for 2017

65

AUDIT COMMITTEE AND INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

66

Report of the Audit Committee

66

Independent Auditor Fees and Services

67

Pre-Approval for Audit and Non-Audit Services

67

PROPOSAL II

 

RATIFICATION OF THE APPOINTMENT OF INDEPENDENT AUDITORS

68

Description of Proposal

68

Board Recommendation on Proposal

68

PROPOSAL III

 

ADVISORY VOTE TO APPROVE THE COMPENSATION OF NAMED EXECUTIVE OFFICERS

69

Description of Proposal

69

Board Recommendation on Proposal

69

PROPOSAL IV

 

APPROVAL OF FREQUENCY OF FUTURE ADVISORY VOTES TO APPROVE THE COMPENSATION OF NAMED EXECUTIVE OFFICERS

70

Description of Proposal

70

Board Recommendation on Proposal

70

PROPOSAL V

 

APPROVAL OF THE FIRST AMENDMENT TO THE AMENDED LTIP TO INCREASE THE NUMBER OF AUTHORIZED SHARES AND EXTEND THE TERM

71

Description of Proposal

71

Description of the Amended LTIP

72

Purpose

73

Eligibility

73

Administration

73

Number of Shares; Award Limitations

74

Types of Awards

74

Minimum Vesting Provisions

78

No Repricing of Options or Stock Appreciation Rights

78

Limitations on Single Trigger Change in Control Vesting

78

Qualified Performance-Based Compensation

78

Amendment and Termination of the Amended LTIP

78

Certain United States Federal Income Tax Aspects

79

Tax Consequences to Participants under the Amended LTIP

79

Tax Consequences to the Company

81

Grants to Certain Persons

82

Board Recommendation on Proposal

82

PROPOSAL VI

 

RE-APPROVAL OF THE SECTION 162(M) MATERIAL TERMS OF THE AMENDED LTIP, AS AMENDED BY THE FIRST AMENDMENT

83

Description of Proposal

83

 

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Description of the Section 162(m) Material Terms

83

Eligibility to Participate

84

Maximum Amount of Compensation

84

Business Criteria

84

Other Material LTIP Provisions

85

Grants to Certain Persons

85

Board Recommendation on Proposal

85

PROPOSAL VII

 

RATIFICATION OF NON-EMPLOYEE DIRECTOR MAXIMUM AWARD LIMITATIONS

86

Description of Proposal

86

Description of Non-Employee Director Maximum Award Limitations

86

Maximum Annual Award Limitations

86

Other Material LTIP Provisions

86

Grants to Certain Persons

86

Board Recommendation on Proposal

86

EQUITY COMPENSATION PLAN INFORMATION

87

OTHER BUSINESS

88

PROPOSALS FOR 2018 ANNUAL MEETING OF STOCKHOLDERS

89

Proposals for Inclusion in Our Proxy Statement

89

Director Nominees for Inclusion in Next Year’s Proxy Statement (Proxy Access)

89

Proposals Not for Inclusion in Our Proxy Statement

89

DIRECTIONS TO ANNUAL MEETING LOCATION

90

APPENDIX A — CLOUD PEAK ENERGY INC. AMENDED AND RESTATED 2009 LONG TERM INCENTIVE PLAN (AS AMENDED AND RESTATED MARCH 3, 2017)

A-1

APPENDIX B — FIRST AMENDMENT TO THE CLOUD PEAK ENERGY INC. AMENDED AND RESTATED 2009 LONG TERM INCENTIVE PLAN (AS AMENDED AND RESTATED MARCH 3, 2017)

B-1

 

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GRAPHIC

 

CLOUD PEAK ENERGY INC.

 

505 South Gillette Avenue
Gillette, Wyoming 82716

 

PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 10, 2017

 

This Proxy Statement is being furnished to you in connection with the solicitation of proxies by the Board of Directors of Cloud Peak Energy Inc. (the “Board”) for use at Cloud Peak Energy Inc.’s 2017 Annual Meeting of Stockholders (the “2017 Annual Meeting”). In this Proxy Statement, references to “Cloud Peak Energy,” the “company,” “we,” “us,” “our” and similar expressions refer to Cloud Peak Energy Inc., unless the context of a particular reference provides otherwise. Although we refer to our website and other websites in this Proxy Statement, the information contained on our website or other websites is not a part of this Proxy Statement.

 

GENERAL INFORMATION

 

2017 Annual Meeting Date and Location

 

Our 2017 Annual Meeting will be held on Wednesday, May 10, 2017, at 9:00 a.m. Mountain Time, at the Gillette College Technical Center, 3251 South 4-J Road, Gillette, Wyoming 82718, or at such other time and place to which the meeting may be adjourned or postponed. References in this Proxy Statement to the 2017 Annual Meeting also refer to any adjournments, postponements or changes in time or location of the meeting, to the extent applicable.

 

Delivery of Proxy Materials

 

Mailing Date and Delivery of Proxy Materials

 

On or about March 27, 2017, we mailed a Notice of Internet Availability of Proxy Materials (the “Notice of Availability”) to our stockholders containing instructions on how to access the proxy materials and submit your proxy online. We have made these proxy materials available to you over the Internet or, upon your request, have delivered paper copies of these materials to you by mail, in connection with the solicitation of proxies by the Board for the 2017 Annual Meeting.

 

Stockholders Sharing an Address

 

Registered Stockholders—Each registered stockholder (meaning you own shares in your own name on the books of our transfer agent, Computershare Trust Company, N.A.) will receive one Notice of Availability, regardless of whether you have the same address as another registered stockholder.

 

Street Name Stockholders—If your shares are held in “street name” (that is, in the name of a bank, broker or other holder of record), applicable rules permit brokerage firms and our company, under certain circumstances, to send one Notice of Availability to multiple stockholders who share the same address. This practice is known as “householding.” Householding saves printing and postage costs by reducing duplicate mailings. If you hold your shares through a broker, you may have consented to reducing the number of copies of materials delivered to your address. In the event that you wish to revoke a “householding” consent you previously provided to a broker, you must contact that broker to revoke your consent. If your household is receiving multiple copies of the Notice of Availability and you wish to request delivery of a single copy, you should contact your broker directly.

 

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Voting

 

Stockholders Entitled to Vote

 

The record date for determining the common stockholders entitled to notice of and to vote at the 2017 Annual Meeting was the close of business on March 17, 2017, at which time we had issued and outstanding 75,056,435 shares of common stock, which were held by 76 holders of record. Please refer to “Security Ownership of Management and Principal Stockholders” for information about common stock beneficially owned by our directors, executive officers and principal stockholders as of the date indicated in such section. Stockholders of record are entitled to one vote for each share of common stock owned as of the record date. The officer of the company who is in charge of the stock ledger of Cloud Peak Energy will prepare, at least ten days prior to the 2017 Annual Meeting, a complete list of the stockholders entitled to vote at the meeting. Such list will be open to the examination of any stockholder, for any purpose germane to the meeting, for a period of at least ten days prior to the meeting during ordinary business hours at our principal executive offices located at 505 South Gillette Avenue, Gillette, Wyoming 82716. The list will also be available at the 2017 Annual Meeting for inspection by any stockholder who is present.

 

Voting of Proxies by Management Proxy Holders

 

The Board has appointed Mr. Bryan Pechersky, our Executive Vice President, General Counsel and Corporate Secretary, and Mr. Heath Hill, our Executive Vice President and Chief Financial Officer, as the management proxy holders for the 2017 Annual Meeting. If you submit a proxy for your shares, your shares will be voted by the management proxy holders in accordance with your properly submitted instructions. For stockholders who submit a proxy without indicating how to vote their shares, the proxy will be voted as the Board recommends, which is:

 

Proposal

 

Board Recommendation

Proposal I
(Election of Directors)

 

FOR the election of each of the persons named under “Proposal I—Election of Directors” as nominees for election as Class II directors

 

 

 

Proposal II
(Ratification of the Appointment of Independent Auditors)

 

FOR the ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm (independent auditors) for fiscal year 2017

 

 

 

Proposal III
(Advisory Vote to Approve the Compensation of Named Executive Officers)

 

FOR the approval, on an advisory basis, of the compensation of the company’s named executive officers, as disclosed in this Proxy Statement pursuant to Item 402 of Regulation S-K promulgated by the SEC

 

 

 

Proposal IV
(Frequency of Future Advisory Votes to Approve the Compensation of Named Executive Officers)

 

FOR the approval, on an advisory basis, of the frequency of future advisory votes on the compensation of the company’s named executive officers to occur EVERY YEAR

 

 

 

Proposal V
(Approval of First Amendment to Amended LTIP)

 

FOR the approval of the First Amendment to the Cloud Peak Energy Inc. 2009 Long Term Incentive Plan (as amended and restated effective March 3, 2017) (the “Amended LTIP”) to increase the number of shares authorized for issuance thereunder and to extend the term thereof

 

 

 

Proposal VI
(Re-Approval of Section 162(m) Material Terms of Amended LTIP, as amended by the First Amendment)

 

FOR the re-approval of the material terms of the Amended LTIP, as amended by the First Amendment, in accordance with the stockholder approval requirements of Section 162(m) of the Internal Revenue Code

 

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Proposal

 

Board Recommendation

Proposal VII
(Ratification of Non-Employee Director Maximum Award Limitations)

 

FOR the ratification of the non-employee director maximum award limitations set forth in the Amended LTIP

 

As of the date of this Proxy Statement, the Board is not aware of any other business or nominee to be presented or voted upon at the 2017 Annual Meeting. Should any other matter requiring a vote of stockholders properly arise, the proxies confer upon the management proxy holders discretionary authority to vote the proxies in accordance with their best judgment in the interest of the company.

 

Quorum; Required Votes; Majority Voting Standard for Directors

 

Quorum — The holders of a majority of the voting power of the issued and outstanding stock of the company entitled to vote, present in person or represented by proxy, shall constitute a quorum for the transaction of business at the 2017 Annual Meeting. Each vote represented at the meeting in person or by proxy will be counted toward a quorum. Abstentions and “broker non-votes” are counted as present at the 2017 Annual Meeting for purposes of determining whether a quorum is present. If a quorum is not present, the meeting may be adjourned or postponed from time to time until a quorum is obtained.

 

Broker Non-Votes — Under the rules of the New York Stock Exchange (“NYSE”), brokers holding shares of record for a customer have the discretionary authority to vote on certain proposals if the brokers do not receive timely instructions from the customer regarding how the customer wants the shares to be voted. However, there are also certain proposals for which brokers do not have discretionary authority to vote if they do not receive timely instructions from the customer. When a broker does not have discretion to vote on a particular matter and the customer has not given timely instructions on how the broker should vote, a “broker non-vote” results. The impact of broker non-votes on the proposals to be voted on at the 2017 Annual Meeting is set forth in the table below. It is important that beneficial owners instruct their brokers on how they want to vote their shares.

 

Majority Voting Standard for Directors — We have adopted a majority voting standard with respect to the election of directors to the Board. In accordance with our Bylaws, in order for a nominee to be elected as a director, a director nominee must receive more votes cast for than against his or her election. This policy does not apply, and directors must be elected by a plurality of the votes cast, if we have received a stockholder nominee for director or notice of an intention to nominate a competing candidate, including through the proxy access process provided by our Bylaws, and such stockholder nomination has not been withdrawn by the tenth day before we mail our Notice of Availability to stockholders. The Board shall nominate for election as director only a candidate who agrees to tender, promptly following the annual meeting at which he or she is to be elected, an irrevocable resignation that will become effective upon (i) the failure to receive the required vote at the annual meeting at which the director faces election, and (ii) Board acceptance of such resignation based on any factors deemed relevant by the Board. Our nominees for director at the 2017 Annual Meeting have each signed such a resignation letter. The foregoing summary is qualified by the terms of our majority voting standard, which are included in our Bylaws.

 

Vote Required — The table below sets forth the required vote for approval of each proposal to be voted on at the 2017 Annual Meeting.

 

Proposal

 

Required Vote for Approval

 

Broker Discretionary Voting
and Impact of Broker Non-
Votes

 

Impact of Abstentions

Proposal I
(Election of Directors)

 

See “Majority Voting Standard for Directors” above.

 

Brokers do not have discretionary authority to vote on this proposal.

Broker non-votes are not considered votes cast and do not affect the outcome.

 

Abstentions are not considered votes cast and do not affect the outcome.

 

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Proposal

 

Required Vote for Approval

 

Broker Discretionary Voting
and Impact of Broker Non-
Votes

 

Impact of Abstentions

Proposal II
(Ratification of the Appointment of Independent Auditors)

 

The holders of a majority of the voting power of the issued and outstanding stock of Cloud Peak Energy present in person or represented by proxy and entitled to vote must vote for the ratification.

 

Brokers have discretionary authority in the absence of timely instructions from their customers to vote on this proposal. As a result, there will be no broker non-votes with respect to this proposal.

 

Abstentions are treated as present or represented and entitled to vote and will have the same effect as a vote against this proposal.

 

 

 

 

 

 

 

Proposal III
(Advisory Vote to Approve the Compensation of Named Executive Officers)


This advisory vote is not binding on the company, the Compensation Committee or the Board. However, the Compensation Committee and the Board will take into account the result of the vote when determining future executive compensation programs.

 

The holders of a majority of the voting power of the issued and outstanding stock of Cloud Peak Energy present in person or represented by proxy and entitled to vote must vote for approval.

 

Brokers do not have discretionary authority to vote on this proposal.

Broker non-votes are not considered to be entitled to vote and do not affect the outcome.

 

Abstentions are treated as present or represented and entitled to vote and will have the same effect as a vote against this proposal.

 

 

 

 

 

 

 

Proposal IV
(Frequency of Future Advisory Votes to Approve the Compensation of Named Executive Officers)


This advisory vote is not binding on the company, the Compensation Committee or the Board. However, the Compensation Committee and the Board will take into account the result of the vote when determining the frequency of future advisory votes to approve the compensation of the named executive officers.

 

The holders of a majority of the voting power of the issued and outstanding stock of Cloud Peak Energy present in person or represented by proxy and entitled to vote must vote for approval.


Because this proposal has three possible substantive responses (every year, every two years or every three years), if none of the frequency alternatives receives the vote of the holders of a majority of the voting power of the issued and outstanding stock of Cloud Peak Energy present in person or represented by proxy and entitled to vote, then we will consider stockholders to have approved the frequency selected by holders of a plurality of the voting power of the issued and outstanding stock of Cloud Peak Energy present in person or represented by proxy and entitled to vote at the meeting.

 

Brokers do not have discretionary authority to vote on this proposal.

Broker non-votes are not considered to be entitled to vote and do not affect the outcome.

 

Abstentions are treated as present or represented and entitled to vote and will have the same effect as a vote against each of the three possible responses to this proposal.

 

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Proposal

 

Required Vote for Approval

 

Broker Discretionary Voting
and Impact of Broker Non-
Votes

 

Impact of Abstentions

Proposal V
(Approval of First Amendment to Amended LTIP)

 

The holders of a majority of the votes cast must vote for approval.

If this proposal is approved by stockholders, the proposed share increase and term extension will go into effect. The share increase and term extension will not go into effect if this proposal is not approved by stockholders.

 

Brokers do not have discretionary authority to vote on this proposal.

Broker non-votes are not considered votes cast and do not affect the outcome.

 

Abstentions are treated as votes cast and will have the same effect as a vote against this proposal (in accordance with applicable NYSE standards).

 

 

 

 

 

 

 

Proposal VI
(Re-Approval of Section 162(m) Material Terms of Amended LTIP, as amended by the First Amendment)

 

The holders of a majority of the votes cast must vote for approval.

 

Brokers do not have discretionary authority to vote on this proposal.

Broker non-votes are not considered votes cast and do not affect the outcome.

 

Abstentions are not considered votes cast and do not affect the outcome of this proposal (in accordance with regulations under Section 162(m) of the Internal Revenue Code, which applies Delaware law).

 

 

 

 

 

 

 

Proposal VII
(Ratification of Non-Employee Director Maximum Award Limitations)

 

The holders of a majority of the voting power of the issued and outstanding stock of Cloud Peak Energy present in person or represented by proxy and entitled to vote must vote for approval.

 

Brokers do not have discretionary authority to vote on this proposal.

Broker non-votes are not considered to be entitled to vote and do not affect the outcome.

 

Abstentions are treated as present or represented and entitled to vote and will have the same effect as a vote against this proposal.

 

A representative of Broadridge Financial Services, Inc. will tabulate the votes and act as inspector of elections.

 

Voting Procedures

 

Registered Stockholders—If you are a registered stockholder, you may vote your shares or submit a proxy to have your shares voted by one of the following methods:

 

Voting Method

 

Description of Process

By Internet

 

You may submit a proxy electronically via the Internet at www.proxyvote.com. Please have your Notice of Availability, which includes your personal control number, in hand when you log onto the website. Internet voting facilities will close and no longer be available on the date and time specified on the proxy card or Notice of Availability.

 

 

 

By Telephone

 

If you request paper copies of the proxy materials by mail, you may submit a proxy by telephone using the toll-free number listed on the proxy card. Please have your proxy card in hand when you call. Telephone voting facilities will close and no longer be available on the date and time specified on the proxy card.

 

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By Mail

 

If you request paper copies of the proxy materials by mail, you may submit a proxy by signing, dating and returning your proxy card in the pre-addressed envelope provided.

 

 

 

In Person

 

You may vote in person at the 2017 Annual Meeting by completing a ballot; however, attending the meeting without completing a ballot will not count as a vote. Directions to the meeting are provided at the back of this Proxy Statement.

 

Street Name Stockholders—If your shares are held in street name, you will receive instructions from your bank, broker or other holder of record that you must follow in order for your shares to be voted. Internet and/or telephone voting will be offered to street name stockholders. You may also vote in person at the 2017 Annual Meeting if you obtain a legal proxy from your bank, broker or other holder of record. Please consult the voting instruction form or other information sent to you by your bank, broker or other holder of record to determine how to obtain a legal proxy in order to vote in person at the 2017 Annual Meeting.

 

Revoking Your Proxy

 

If you are a registered stockholder, you may revoke your proxy or change your vote at any time before the shares are voted at the 2017 Annual Meeting by:

 

Revocation Method

 

Description of Process

New Proxy Card

 

Timely delivering a valid, later-dated executed proxy card.

 

 

 

New Internet/Telephone Proxy

 

Timely submitting a proxy with new voting instructions using the Internet or telephone voting system.

 

 

 

Completing a Ballot at the Meeting

 

Voting in person at the meeting by completing a ballot (attending the meeting without completing a ballot will not revoke any previously submitted proxy).

 

 

 

Written Notice to the Company

 

Filing a written notice of revocation received by the General Counsel of Cloud Peak Energy Inc. at 505 South Gillette Avenue, Gillette, Wyoming 82716, by 5:00 p.m. Mountain Time, on Tuesday, May 9, 2017.

 

If you are a street name stockholder and you submit a voting instruction form, you may change your vote by submitting new voting instructions to your bank, broker or other holder of record in accordance with the procedures of such bank, broker or other holder of record.

 

Annual Meeting Admission

 

If you wish to attend the 2017 Annual Meeting in person, you must present a form of personal identification. If you are a beneficial owner of Cloud Peak Energy common stock that is held of record by a bank, broker or other holder of record, you will also need to provide proof of ownership as of the record date to be admitted to the meeting. A recent brokerage statement or a letter from your bank or broker are examples of proof of ownership. No cameras, recording equipment, electronic devices, large bags, briefcases or packages will be permitted in the meeting.

 

Solicitation Expenses

 

We will bear all costs incurred in the solicitation of proxies, including the preparation, printing and mailing of the Notice of Availability and related proxy materials. In addition to solicitation by mail, our directors, officers and employees may solicit proxies personally or by telephone, e-mail, facsimile or other means, without additional compensation. We have also retained MacKenzie Partners Inc. for proxy solicitation and related services in connection with our 2017 Annual Meeting. Under our agreement with MacKenzie Partners, MacKenzie Partners will receive a fee of $12,500 and we will also reimburse MacKenzie Partners for reasonable and customary out-of-

 

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pocket expenses incurred in performing such services. We may also make arrangements with brokerage houses and other custodians, nominees and fiduciaries for the forwarding of solicitation materials to the beneficial owners of shares of common stock held by such persons, and we may reimburse these brokerage houses and other custodians, nominees and fiduciaries for reasonable expenses incurred in connection therewith.

 

Copies of the Annual Report

 

Upon written request, we will provide any stockholder, without charge, a copy of our annual report on Form 10-K for the year ended December 31, 2016 (the “Form 10-K”), but without exhibits. Stockholders should direct requests to Cloud Peak Energy Inc., Attn: General Counsel, 505 South Gillette Avenue, Gillette, Wyoming 82716. The Form 10-K and the exhibits filed with it are available on our website, www.cloudpeakenergy.com in the “SEC Filings” subsection of the “Investor Relations” section. The Form 10-K does not constitute a part of the proxy solicitation materials.

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

Section 16(a) of the Securities Exchange Act of 1934 (“Exchange Act”) and related rules of the Securities and Exchange Commission (the “SEC”) require our directors and Section 16 officers, and persons who own more than 10% of a registered class of our equity securities, to file initial reports of ownership and reports of changes in ownership with the SEC. These persons are required by SEC regulations to furnish us with copies of all Section 16(a) reports that they file. We assist our directors and Section 16 officers in making their Section 16(a) filings pursuant to powers of attorney granted by our directors and Section 16 officers on the basis of information obtained from them and our records.

 

No director, Section 16 officer, beneficial owner of more than 10% of the outstanding common stock of the company, or any other person subject to Section 16 of the Exchange Act, failed to file on a timely basis during 2016. This is based solely upon a review of Forms 3, 4 and 5 and amendments thereto furnished to Cloud Peak Energy during and with respect to 2016, including those reports that we have filed on behalf of our directors and Section 16 officers pursuant to powers of attorney.

 

PROPOSAL I

ELECTION OF DIRECTORS

 

Election of Class II Directors

 

As of the date of mailing of the Notice of Availability, we have seven members on our Board. Pursuant to our Certificate of Incorporation and our Bylaws, as currently in effect, our Board is divided into three classes, each of which serves for a three-year term. One class of directors is elected each year at the annual meeting of stockholders. The current terms of our three classes of directors are:

 

Class

 

Expiration of Current Three-Year Term

I

 

2019 Annual Meeting of Stockholders

II

 

2017 Annual Meeting of Stockholders

III

 

2018 Annual Meeting of Stockholders

 

The Class II directors elected at the 2017 Annual Meeting will serve for a term of three years, which expires at the annual meeting of stockholders in 2020 or when their successors are duly elected and qualified. The nominees for Class II directors are (1) William T. Fox III and (2) Robert Skaggs, each of whom is a current member of our Board and was recommended for election by our Nominating and Corporate Governance Committee (“Governance Committee”). Each of the nominees has indicated his willingness to serve as a member of the Board if elected. If, however, a nominee is unable to serve, the shares represented by all valid proxies will be voted for the election of such substitute as the Board may recommend, or the Board may reduce the number of directors to eliminate the vacancy, and if any director is unable to serve his or her full term, the Board may by resolution reduce the number of directors or by a majority vote of the directors then in office may designate a substitute to serve until the annual meeting of stockholders in 2020.

 

The following table sets forth, as of the 2017 Annual Meeting date, certain information about our current directors and nominees.  Mr. Keith Bailey, who served as Chairman of the Board through the date of the 2016

 

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annual meeting, retired from our Board immediately following the 2016 annual meeting and is therefore not included in the table below.  Please see “Director Retirement Policy; 2016 Chairman Transition” below for additional information.

 

Name

 

Age*

 

Position

 

Class

Patrick Condon

 

68

 

Director

 

I

Jeane Hull

 

62

 

Director

 

I

William Owens

 

66

 

Director

 

I

William T. Fox III

 

71

 

Chairman of the Board and Director Nominee

 

II

Robert Skaggs

 

63

 

Director Nominee

 

II

Colin Marshall

 

53

 

President, Chief Executive Officer and Director

 

III

Steven Nance

 

60

 

Director

 

III

 


*                 As of the 2017 Annual Meeting date.

 

Below are summaries of the background, business experience, attributes, qualifications and skills of the current directors of the company and director nominees.

 

Patrick Condon has served as a director since March 2012. He also serves on the board of directors of Entergy Corporation (“Entergy”), an energy company based in Louisiana, and on the board of Urban Gateways, a Chicago-based 501(c)(3) organization whose mission is to educate and inspire young people by delivering high-quality, accessible arts experiences that advance their personal and academic growth. From May 2012 until its December 2015 sale to The Kroger Co., Mr. Condon also served as an independent director and chair of the audit committee of Roundy’s, Inc., a leading Midwest grocery company located in Milwaukee, Wisconsin. Mr. Condon joined Deloitte & Touche LLP as a partner in 2002, where he provided various consulting and attest services to clients and held a number of regional and national leadership positions until his retirement in 2011. Prior to joining Deloitte & Touche LLP, Mr. Condon was a partner at Arthur Andersen LLP where he provided similar services to clients and held similar leadership positions. Mr. Condon earned a Bachelor of Science in business administration degree in accounting from John Carroll University and is a certified public accountant.

 

Qualifications of Mr. Condon: Mr. Condon has over forty years’ experience in accounting and finance focused on auditing, leadership and strategy. His qualifications as a financial expert provide an essential skill set to the Board and the Audit Committee.

 

Jeane Hull has served as a director since July 2016.  Ms. Hull retired from Peabody Energy Corporation (“Peabody”) in August 2015, where she served as Peabody’s Executive Vice President and Chief Technical Officer with responsibility for global strategy and governance for health, safety and environment, supply chain, engineering, applied technologies and asset management functions. Ms. Hull joined Peabody in 2007 as the Senior Vice President of Engineering and Technical Services and managed the global delivery of engineering, environmental, geology and design and construction services. She also served as Peabody’s Group Executive, Powder River Basin from 2008 to 2011 and assumed additional responsibility for Southwest Operations in 2010.  Ms. Hull also serves on the board of directors of Interfor Corporation, a Toronto Stock Exchange listed lumber company with operations in Canada and the United States, since May 2014, and as a member of its audit committee and chair of its environmental and safety committee. A registered professional engineer, Ms. Hull holds a Bachelor of Science degree in civil engineering from South Dakota School of Mines and Technology and an M.B.A. from Nova University in Florida.

 

Qualifications of Ms. Hull: Ms. Hull has over thirty years’ experience in leadership and operations roles in the mining industry. Her experience brings important expertise to the Board and its committees.

 

William Owens has served as a director since January 2010. Mr. Owens served as Governor of Colorado from 1999 to 2007 and as Colorado State Treasurer from 1995 to 1999. Since January 2016, Mr. Owens has served as a Senior Director with the law firm Greenberg Traurig. Mr. Owens has served on the board of directors, compensation and corporate governance committees of Bill Barrett Corporation since 2010; and on the board of directors, compensation and corporate governance committees of Federal Signal Corporation, an industrial products company, since 2011. In addition, Mr. Owens has served as a member of the supervisory board of Credit Bank of Moscow, a medium-sized privately owned bank operating in Moscow, Russia and the Moscow region, since 2012, as chairman of its supervisory board since 2013, and as a member of its compensation, corporate governance and nominations committee and of its strategy and capital markets committee since 2013. Mr. Owens also served on the board of

 

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directors and audit committee of Key Energy Services, an oilfield services company, from 2007 to 2016; and on the board of directors and audit committee of Vision Logistics, a private transportation company, from 2008 to 2013. Mr. Owens earned a Bachelor of Science degree from Stephen F. Austin State University and a Master’s degree in public affairs from the University of Texas.

 

Qualifications of Mr. Owens: Mr. Owens’ experience in managing in both the public and private sectors makes him well suited to provide advice to the Board, including regarding the political environment that has increasingly impacted our industry in recent years. He also has extensive experience in both the energy and natural resources sectors. Mr. Owens’ breadth of public and private experience, including service on other public and private boards, brings valuable expertise to the Board and its committees.

 

William T. Fox III has served as Chairman of our Board since May 2016 and has been a director since October 2009. Mr. Fox was with Citigroup Inc., a global financial services company, and its predecessors for 36 years engaged in corporate lending, and served as a senior credit officer from 1978 until his retirement in 2003. From 1989 until his retirement in 2003, Mr. Fox served as Managing Director, Global Industry Head, Global Energy and Mining of Citigroup. Prior to that, Mr. Fox was Citigroup’s Managing Director, North American Energy and Vice President, Petroleum Department. Mr. Fox served on the board of directors of Rowan Companies, Inc., a provider of international and domestic contract drilling services, from 2001 to 2016, where he served as the chairman of its audit committee, a member of its nominating and corporate governance committee and a member of its executive committee. Mr. Fox holds a Bachelor of Arts degree in economics from Trinity College.

 

Qualifications of Mr. Fox: Mr. Fox has over thirty years’ experience in commercial banking with a focus in lending to energy companies. In addition, his financial qualifications and experience provide essential skill sets to the Board and its committees.

 

Robert Skaggs has served as a director since July 2015. Mr. Skaggs previously served as chairman of the board and chief executive officer of Columbia Pipeline Group, Inc. (“CPG”), a natural gas pipeline and underground storage system company, until it was acquired by TransCanada Corporation in July 2016.  Prior to CPG’s separation in July 2015 from NiSource Inc. (“NiSource”), a Fortune 500 energy holding company engaged in natural gas and electric generation, transmission, storage and distribution, Mr. Skaggs served as chief executive officer of NiSource since 2005 and as its president since 2004. Mr. Skaggs earned a Bachelor of Arts degree in economics from Davidson College, a Juris Doctorate from West Virginia University and a Master’s degree in business administration from Tulane University.

 

Qualifications of Mr. Skaggs: Through his background as a senior executive of large energy industry companies, Mr. Skaggs has extensive experience in developing regulatory strategies, as well as leading regulated commercial activities, and in federal governmental relations in the natural gas, electric and coal-fired generation industries, which brings important expertise and skill to the Board and its committees.

 

Colin Marshall has served as our President and Chief Executive Officer and a director since July 2008. Previously, he served as the president and chief executive officer of Rio Tinto Energy America Inc. (“RTEA”), an indirect subsidiary of Rio Tinto plc and the former parent company of Cloud Peak Energy Resources LLC (“CPE Resources”), the company’s wholly-owned subsidiary, from June 2006 until November 2009. In this Proxy Statement, references to “Rio Tinto” refer to Rio Tinto plc and Rio Tinto Limited and their subsidiaries, collectively. Rio Tinto plc is the ultimate parent company of RTEA. From March 2004 to May 2006, Mr. Marshall served as General Manager of Rio Tinto’s Pilbara Iron’s west Pilbara iron ore operations in Tom Price, West Australia, from June 2001 to March 2004, he served as General Manager of RTEA’s Cordero Rojo mine in Wyoming, and from August 2000 to June 2001, he served as Operations Manager of RTEA’s Cordero Rojo mine. Mr. Marshall worked for Rio Tinto plc in London as an analyst in the Business Evaluation Department from 1992 to 1996. From 1996 to 2000, he was Finance Director of the Rio Tinto Pacific Coal business unit based in Brisbane, Australia. Mr. Marshall holds a Bachelor of Engineering degree and a Master’s degree in mechanical engineering from Brunel University and a Master of Business Administration from the London Business School.

 

Qualifications of Mr. Marshall: In his position as President and Chief Executive Officer, making him the senior most executive of the company, Mr. Marshall provides the Board with a key perspective into the operations of the business, including the operations and marketing challenges it faces. Mr. Marshall has over twenty years’ financial and operational experience in the mining industry.

 

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Steven Nance has served as a director since January 2010. Mr. Nance has been the president and managing member of Steele Creek Energy, LLC, a company dealing primarily in oil and gas investments, since 2010. Mr. Nance was appointed to the board of directors of Newfield Exploration Company, an exploration and production company, in June 2013 and currently serves as lead director in addition to serving on its operations and reserves committee and chairing its nominating and governance committee. Mr. Nance served on the board of directors of The Williams Companies, Inc. from 2012 to 2016, where he served on its compensation committee and chaired its special safety committee. Mr. Nance served as president and sole director of Steele Creek Investment Company, the predecessor entity which held Mr. Nance’s oil and gas ownership, from 1997 to November 2013 providing, from time to time, consulting services on matters such as oil and gas investments, succession planning, coaching and leadership development. From 2000 until 2007, Mr. Nance served as the president of Peoples Energy Production Company, an oil and gas exploration and production company. Mr. Nance holds a Bachelor of Science degree in petroleum engineering from Texas Tech University and is a registered professional engineer (inactive status).

 

Qualifications of Mr. Nance: Mr. Nance has over thirty years’ experience in the oil and gas industry and has significant experience in senior executive positions, as well as merger and acquisition activities in these industries. Mr. Nance has experience in risk management and, along with his perspective as a former executive, brings a wealth of broad corporate knowledge to the Board and its committees.

 

Board Recommendation on Proposal

 

The Board unanimously recommends a vote FOR the election of each of the Class II director nominees named above. The management proxy holders will vote all properly submitted proxies FOR election unless properly instructed otherwise.

 

EXECUTIVE OFFICERS

 

This section provides information regarding the background, business experience, attributes, qualifications and skills of our current executive officers, other than Mr. Marshall, our President and Chief Executive Officer, who also serves as a director of the company. Refer to the table and disclosure above under “Proposal I—Election of Directors” for biographical and related information regarding Mr. Marshall.

 

Name

 

Age*

 

Position(s)

Heath Hill

 

46

 

Executive Vice President and Chief Financial Officer

Gary Rivenes

 

47

 

Executive Vice President and Chief Operating Officer

Bryan Pechersky

 

46

 

Executive Vice President, General Counsel and Corporate Secretary

Bruce Jones

 

59

 

Senior Vice President, Technical Services

Cary Martin

 

65

 

Senior Vice President, Human Resources

Todd Myers

 

53

 

Senior Vice President, Marketing and Business Development

Kendall Carbone

 

51

 

Vice President and Chief Accounting Officer

 


*                 As of the 2017 Annual Meeting date.

 

Heath Hill has served as our Executive Vice President and Chief Financial Officer since March 2015 and prior to that he served as our Vice President and Chief Accounting Officer since September 2010. Previously, Mr. Hill served in various capacities with PricewaterhouseCoopers LLP, our independent auditors, from September 1998 to September 2010, including Senior Manager from September 2006 to September 2010, and Manager from September 2003 to September 2006. While with PricewaterhouseCoopers LLP, Mr. Hill’s responsibilities included assurance services primarily related to SEC registrants, including annual audits of financial statements and internal controls, public debt offerings and IPO transactions. From June 2003 to June 2005 he held a position with PricewaterhouseCoopers in Germany serving U.S. registrants throughout Europe. Mr. Hill never worked on any engagements or projects for Cloud Peak Energy Inc. or its predecessor, Rio Tinto, while he was with PricewaterhouseCoopers LLP. Mr. Hill earned his Bachelor’s degree in accounting from the University of Northern Colorado and is an active certified public accountant.

 

Gary Rivenes has served as our Executive Vice President and Chief Operating Officer since October 2009. Previously, he served as Vice President, Operations, of RTEA from December 2008 until November 2009, and as Acting Vice President, Operations, of RTEA from January 2008 to November 2008. From September 2007 to December 2007, Mr. Rivenes served as General Manager for RTEA’s Jacobs Ranch mine, from October 2006 to

 

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September 2007, he served as General Manager for RTEA’s Antelope mine and from November 2003 to September 2006, he served as Manager, Mine Operations for RTEA’s Antelope mine. Prior to that, he worked for RTEA in a variety of operational and technical positions for RTEA’s Antelope, Colowyo and Jacobs Ranch mines since 1992. Mr. Rivenes holds a Bachelor of Science in mining engineering from Montana College of Mineral Science & Technology.

 

Bryan Pechersky has served as our Executive Vice President since January 2015, our General Counsel since January 2010 and our Corporate Secretary since March 2013. Prior to his promotion to Executive Vice President, he served as Senior Vice President beginning in 2010. Mr. Pechersky oversees our legal department and, since June 2016, our government affairs department. Previously, Mr. Pechersky was Senior Vice President, General Counsel and Secretary for Harte-Hanks, Inc., a worldwide, direct and targeted marketing company from March 2007 to January 2010. Prior to that, he also served as Senior Vice President, Secretary and Senior Corporate Counsel for Blockbuster Inc., a global movie and game entertainment retailer from October 2005 to March 2007, and was Deputy General Counsel and Secretary for Unocal Corporation, an international energy company acquired by Chevron Corporation in 2005, from March 2004 until October 2005. While in these capacities, Mr. Pechersky’s responsibilities included advising on various legal, regulatory and compliance matters, transactions and other responsibilities that are common for a general counsel and corporate secretary. Mr. Pechersky was in private practice for approximately seven years with the international law firm Vinson & Elkins L.L.P. before joining Unocal Corporation. Mr. Pechersky also served as a Law Clerk to the Hon. Loretta A. Preska of the U.S. District Court for the Southern District of New York in 1995 and 1996. Mr. Pechersky earned his Bachelor’s degree and Juris Doctorate from the University of Texas at Austin.

 

Bruce Jones has served as our Senior Vice President, Technical Services since July 2013, with responsibilities in strategic and long-term mine planning, geological services, land management and environmental affairs. Prior to his appointment as Senior Vice President, Mr. Jones was General Manager of our Spring Creek Mine from March 2007 to July 2013. Before joining the Spring Creek Mine, Mr. Jones was the Operations Manager for Kennecott Utah Copper at the Bingham Canyon Mine in Bingham Canyon, Utah. Mr. Jones began his career as a mining engineer for Inspiration Coal, Inc. in 1982 and has worked in several sectors of the mining industry. During his career, Mr. Jones has held engineering and operations management positions at gold, copper and coal mining operations. Mr. Jones holds a Bachelor of Science degree in mining engineering from the University of Wisconsin-Platteville and a Master of Business Administration from the University of Utah. Mr. Jones is a registered professional engineer in Kentucky and Utah.

 

Cary Martin has served as our Senior Vice President, Human Resources since October 2009. Previously, he served as Vice President / Corporate Officer of Human Resources for OGE Energy Corp., an electric utility and natural gas processing holding company from September 2006 until March 2008, and as a Segment Vice President for several different divisions of SPX Corporation, an international multi-industry manufacturing and services company from December 1999 until May 2006. In these capacities, Mr. Martin’s responsibilities included oversight of employee and labor relations, workforce planning, employee development, compensation administration, policies and procedures and other responsibilities that are common for a human resources executive. From 1982 until 1999, Mr. Martin served in various management and officer positions for industries ranging from medical facilities to cable manufacturers. Mr. Martin received his Bachelor’s degree in business administration from the University of Missouri and his Master’s degree in management science from St. Louis University.

 

Todd Myers has served as our Senior Vice President, Marketing and Business Development since June 2016.   Prior to that appointment, he served as our Senior Vice President, Business Development beginning in July 2010.  Previously, he served as President of Westmoreland Coal Sales Company and in other senior leadership positions with Westmoreland Coal in marketing and business development during two periods dating to 1989. In his various capacities with Westmoreland Coal, Mr. Myers’s responsibilities included developing and implementing corporate merger and acquisition strategies, divesting coal related assets, negotiating complex transactions and other responsibilities generally attributable to the management of coal businesses. Mr. Myers also spent five years with RDI Consulting, a leading consulting firm in the coal and energy industries, where he led the environmental consulting practice. In 1987, Mr. Myers served as a staff assistant in the U.S. House of Representatives. Mr. Myers earned his Bachelor of Arts in political science from Pennsylvania State University in University Park, Pennsylvania, and his Masters in International Management from the Thunderbird Graduate School of Global Management in Glendale, Arizona.

 

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Kendall Carbone has served as our Vice President and Chief Accounting Officer since March 2015 and previously as our Assistant Chief Accounting Officer since January 2015. Prior to joining Cloud Peak Energy, Ms. Carbone served as Vice President, Controller and Chief Accounting Officer for both Cool Planet Energy Systems, Inc. from 2013 to 2014 and QEP Resources, Inc. from 2010 to 2013. Ms. Carbone has extensive experience in the energy industry including bio-fuel, natural gas and oil refining as well as previous experience in mining. Ms. Carbone is a certified public accountant and holds a Master’s degree in accounting from New York University and a Bachelor’s degree in economics from Dartmouth College.

 

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CORPORATE GOVERNANCE

 

We believe strong corporate governance helps to ensure our company is managed for the long-term benefit of our stockholders. We believe effective corporate governance should include constructive conversations with our stockholders, and we maintain a robust investor relations program. In 2016, we engaged in extensive investor outreach efforts specifically focused on executive compensation matters, as described in greater detail below under “Executive Compensation—Compensation Discussion and Analysis — Stockholder Outreach and Response to 2016 Say on Pay Vote.”

 

As part of our commitment to corporate governance leadership and our compliance with the listing standards of the NYSE and SEC regulations, we have adopted various charters, policies and procedures. You can access and print, free of charge, the charters of our Audit Committee, Compensation Committee, Governance Committee, and Health, Safety, Environment and Communities Committee (“HSEC Committee”), as well as our Corporate Governance Guidelines, Code of Conduct, Code of Ethics for Principal Executive and Senior Financial Officers, Clawback Policy, Insider Trading Policy and certain other policies and procedures from our website at www.cloudpeakenergy.com in the “Corporate Governance” subsection of the “Investor Relations” section. Additionally, stockholders can request copies of any of these documents, free of charge, by submitting a written request to Cloud Peak Energy Inc., Attn: General Counsel, 505 South Gillette Avenue, Gillette, Wyoming 82716.

 

The Board reviews these materials annually and updates them based on changes in Delaware corporate law, the rules and listing standards of the NYSE and SEC regulations, as well as best practices suggested by recognized governance authorities. The Board also takes into account feedback received from our investor outreach efforts. From time to time, we expect these materials will be modified in response to changing regulatory requirements, evolving practices, feedback from our stockholders and other stakeholders and otherwise as circumstances warrant. We encourage you to check our website periodically for the most recent versions of our governance materials.

 

Board Leadership Structure; Separate Chairman and CEO Positions

 

Cloud Peak Energy’s Chairman of the Board and Chief Executive Officer (“CEO”) positions are separate. Our Board is composed of a majority of independent directors, and the Chairman of the Board is an independent director. The only member of our Board who is not considered independent is Mr. Marshall, our President and CEO. In addition, our Audit Committee, Compensation Committee and Governance Committee, each as described below, are composed of entirely independent directors, including the chairman of each committee. The Board believes that the HSEC Committee is best served by including Mr. Marshall as a member and has appointed an independent director as the chairman of that committee.

 

The Board recognizes that one of its key responsibilities is to evaluate and determine its optimal leadership structure to provide independent oversight of management. The Board understands that there is no single, generally accepted approach to providing Board leadership and that given the dynamic and competitive environment in which we operate, the right Board leadership structure may vary as circumstances warrant. We believe the number of independent directors that make up our Board, along with the oversight provided by our independent Chairman of the Board, benefits both the company and our stockholders. The Board and independent directors consider the Board’s leadership structure on a regular basis.

 

Board’s Role in Risk Oversight

 

Generally speaking, the Board executes oversight responsibility for risk management directly and through its committees, as follows:

 

·                  The Audit Committee has primary responsibility for overseeing and discussing with management the process for identifying and classifying the company’s principal risks and identifying appropriate steps to monitor and manage such exposures. The company’s internal auditor, who reports directly to the Audit Committee and administratively to our Executive Vice President and Chief Financial Officer, performs risk assessments and conducts audits of high risk areas accordingly. The Audit Committee’s meeting agendas are planned to include discussions of significant individual risk areas throughout the year. In addition, the Audit Committee has certain oversight responsibilities with respect to our overall legal compliance program.  Our internal compliance committee is a cross-functional employee committee that oversees our

 

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corporate ethics and compliance programs and is appointed by, and reports directly to, our Audit Committee. The compliance committee consists of our CEO, Chief Operating Officer, General Counsel, Senior Vice President, Human Resources and Director of Internal Audit.

 

·                  The Board’s other committees (Compensation Committee, Governance Committee, and HSEC Committee) oversee risks associated with their respective areas of responsibility. For example, the Compensation Committee considers the risks associated with our compensation policies and practices, with respect to both executive compensation and compensation generally.

 

·                  The Board is kept abreast of its committees’ risk oversight and other activities via reports of the committee chairmen to the full Board. These reports are presented at regular Board meetings and include discussions of committee agenda topics, including matters involving risk oversight. In addition, Board members frequently attend all committee meetings regardless of membership on that committee, and the full Board is provided with all Board and standing committee meeting materials. For additional information about the activities and responsibilities of the Board’s committees and the scope of the Board’s delegation to its committees, refer to the respective committees’ charters, which are available on our website at www.cloudpeakenergy.com in the “Corporate Governance” subsection of the “Investor Relations” section.

 

·                  The Board’s meetings are also planned to consider specific risk topics, including risks associated with our strategic plan, our capital structure and our significant business activities, and an overall risk review presented by management. In addition, the Board receives detailed regular reports from members of our executive management team, which include discussions of the risks and exposures involved in their respective areas of responsibility. These reports are provided in connection with regular Board meetings and are discussed, as necessary, at Board meetings. Further, the Board’s fulfillment of its oversight responsibility for risk management includes being informed between regular meetings of significant developments, including those that could affect our risk profile or other aspects of our business.

 

Diversity of Board Members

 

We do not maintain a separate policy regarding the diversity of our Board members. However, the charter of the Governance Committee provides that in recommending potential nominees to the Board, the Committee will take diversity into account with the intent of creating a Board that consists of members with a broad spectrum of experience and expertise and with a reputation for integrity. Consistent with its charter, the Governance Committee and ultimately the Board seek nominees with distinct professional backgrounds, experience and perspectives so that the Board as a whole has the appropriate mix of skills, perspectives, personal and professional experiences and backgrounds necessary to fulfill the needs of the company with respect to the current issues it faces. When evaluating recommendations for potential nominees, the Governance Committee considers the contribution of existing directors, as well as the qualifications of new nominees.

 

Board of Directors and Board Committees

 

Our business is managed under the direction of our Board. The Board appoints the CEO, approves and monitors the fundamental financial and business strategies of our company, and provides a source of advice and counsel to management. The Board also oversees CEO succession planning and is responsible for ensuring that succession planning for other members of senior management is ongoing. In addition, the Board’s responsibilities include reviewing and approving major corporate actions, working with management to identify the principal risks of the company’s businesses and overseeing the implementation of appropriate risk management systems, as well as evaluating, through the Compensation Committee and the independent directors, the compensation of the CEO and other executive officers.

 

The Board meets on a regularly scheduled basis to review significant developments affecting our company, to act on matters requiring approval by the Board and to otherwise fulfill its responsibilities. It also holds special meetings when an important matter requires action or review by the Board between regularly scheduled meetings. The Board has the following separately designated standing committees:

 

·                  Audit Committee,

 

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·                  Compensation Committee,

 

·                  Governance Committee, and

 

·                  HSEC Committee.

 

The following table provides membership and meeting information for the Board and each of the Board’s standing committees during 2016 and also describes changes to the Board and its committees as of the date of this Proxy Statement:

 

Director

 

Independent
(1)

 

Audit Committee
(2)

 

Compensation
Committee

 

Governance
Committee

 

HSEC
Committee

Keith Bailey (3)

 

Yes

 

 

 

 

Former Member

Patrick Condon

 

Yes

 

Chair

 

 

Member

 

William T. Fox III (3)

 

Yes

 

Former Member

 

Former Chair

 

Member

 

Member

Jeane Hull (4)

 

Yes

 

Member

 

Member

 

 

Member

Colin Marshall

 

No

 

 

 

 

Member

Steven Nance

 

Yes

 

 

Member

 

 

Chair

William Owens

 

Yes

 

 

Member

 

Chair

 

Robert Skaggs

 

Yes

 

Member

 

Chair

 

Former Member

 

Number of In-Person and Telephonic Committee Meetings in 2016 (5)

 

 

8

 

7

 

5

 

5

Number of In-Person and Telephonic Board Meetings in 2016 (5)

 

9

 

 

 

 

 


(1)         The Board has determined whether the director is independent as described below under “Independence of Directors.”

 

(2)         The Board has determined that each of Messrs. Condon and Skaggs is an audit committee financial expert as described below under “Audit Committee Financial Experts and Financial Literacy.”

 

(3)         Mr. Bailey served as Chairman of the Board through the date of the 2016 annual meeting and, immediately following the 2016 annual meeting, he retired from the Board pursuant to our director retirement policy.  Mr. Fox became Chairman of the Board immediately following the 2016 annual meeting upon Mr. Bailey’s retirement from the Board.

 

(4)         Ms. Hull was elected to the Board effective July 6, 2016, and was appointed as a member of the Audit Committee, Compensation Committee and HSEC Committee.

 

(5)         During 2016, each director participated in (a) all of the Board meetings that were held and (b) at least 75 percent of the total number of all meetings of each committee of which the director was a member that were held, in each case, during the period that the director served on the Board or the applicable committee.

 

A brief description of the principal functions of each of the Board’s four standing committees follows. Each committee also has certain oversight responsibilities for risk management as described above. The Board retains the right to exercise the powers of any committee to the extent consistent with applicable rules and regulations, and may do so from time to time. For additional information, please refer to the Audit Committee Charter, the Compensation Committee Charter, the Governance Committee Charter, and the HSEC Committee Charter, which are available on our website at www.cloudpeakenergy.com in the “Corporate Governance” subsection of the “Investor Relations” section.

 

Audit Committee

 

The primary function of the Audit Committee is to assist the Board in fulfilling its responsibility to our stockholders, the investment community and governmental agencies that regulate our activities in its oversight of:

 

·                  The integrity of our financial statements, financial reports and other financial information filed with the SEC;

 

·                  The integrity and adequacy of our auditing, accounting and financial reporting processes and systems of internal control over financial reporting;

 

·                  Our compliance with legal and regulatory requirements, including internal controls designed for that purpose;

 

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·                  The independence, qualifications and performance of our independent registered public accounting firm; and

 

·                  The performance of our internal audit function.

 

The Audit Committee provides an avenue of free, open and clear communication among the auditors, the internal audit function, management, the Audit Committee and the Board. The Audit Committee is also responsible for preparing the Audit Committee Report that SEC rules require be included in our annual proxy statement. The Audit Committee meets regularly in executive session with the Chief Financial Officer (“CFO”), internal auditor, General Counsel and external auditors, and as a committee. These executive sessions may include other non-employee directors.

 

Compensation Committee

 

General

 

The Compensation Committee determines and oversees the execution of the company’s compensation philosophy and oversees the administration of the company’s executive compensation program. The primary functions of the Compensation Committee are to:

 

·                  Review, evaluate and approve, or recommend to the Board or other independent directors of the Board, our agreements, plans, policies and programs to compensate our executive officers and directors;

 

·                  Oversee our plans, policies and programs to compensate our non-executive employees;

 

·                  Review and discuss with our management the Compensation Discussion and Analysis included in our annual proxy statement, and determine whether to recommend to the Board that the Compensation Discussion and Analysis be included in our annual proxy statement, in accordance with applicable rules and regulations;

 

·                  Produce the Compensation Committee Report as required by Item 407(e)(5) of Regulation S-K for inclusion in our annual proxy statement; and

 

·                  Otherwise discharge the Board’s responsibilities relating to compensation of our executive officers and directors.

 

The Compensation Committee may, in its discretion and as appropriate, delegate duties and responsibilities to a member or to a subcommittee of the Compensation Committee. However, no subcommittee may be delegated any power or authority required by any law, regulation or listing standard to be exercised by the Compensation Committee as a whole. No subcommittees were formed or met in 2016.

 

The Compensation Committee meets in executive session as it deems appropriate to review and consider executive compensation matters without the presence of our executive officers. These executive sessions may include other independent directors and the Compensation Committee’s independent compensation consultant.

 

Other Participants in the Executive Compensation Process

 

In addition to the members of the Compensation Committee and members of the Board who may also be in attendance at the Compensation Committee’s meetings, our CEO, Senior Vice President, Human Resources and the Compensation Committee’s independent compensation consultant, Aon Hewitt, also participated in and contributed to our executive compensation process during 2016. Ultimately, the Compensation Committee exercises its independent business judgment with respect to recommendations and opinions of these other participants and the Compensation Committee (or our independent directors as a group) makes final determinations about our executive officer compensation.

 

CEO—During its meetings throughout 2016, the Compensation Committee invited input from our CEO on executive compensation for 2016. In particular, Mr. Marshall provided the perspective of management to the

 

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Compensation Committee regarding executive compensation matters generally and the performance of the executive officers reporting to him. Mr. Marshall provided input on the company targets, and, for the executive officers reporting to him, the personal performance measurements related to our Annual Incentive Plan for 2016, base salary levels and other compensation matters. Mr. Marshall did not provide recommendations with respect to his own compensation amounts.

 

Compensation Consultants—As in prior years, the Compensation Committee retained Aon Hewitt to assist with the evaluation of and determinations for our executive compensation program and other executive and director compensation matters for 2016. Under the terms of the engagement, Aon Hewitt reports directly to the Compensation Committee. Although Aon Hewitt also works in cooperation with management as required to gather information necessary to carry out its obligations to the Compensation Committee, Aon Hewitt does not have a separate engagement with our management; however, management has periodically engaged Radford, an Aon Hewitt affiliate, to provide equity valuation and other similar services from time to time for an immaterial service fee.

 

In connection with its engagement of Aon Hewitt and based on the information presented to it, the Compensation Committee assessed the independence of Aon Hewitt pursuant to applicable SEC and NYSE rules and concluded that Aon Hewitt’s work for the Compensation Committee, and the immaterial services provided by Radford as described above, did not raise any conflict of interest for 2016. Please see “Executive Compensation—Compensation Discussion and Analysis” for additional information regarding the scope of Aon Hewitt’s engagement for 2016 and other matters related to our executive compensation program for 2016.

 

Nominating and Corporate Governance Committee

 

The primary functions of the Governance Committee are to:

 

·                  Advise the Board and make recommendations regarding appropriate corporate governance practices and assist the Board in implementing those practices;

 

·                  Assist the Board by identifying individuals qualified to become members of the Board, consistent with the criteria approved by the Board, and recommending director nominees to the Board for election at the annual meetings of stockholders or for appointment to fill vacancies on the Board;

 

·                  Advise the Board about the appropriate composition of the Board and its committees;

 

·                  Lead the Board in the annual performance evaluation of the Board, its committees and of management; and

 

·                  Direct all matters relating to the succession of our CEO.

 

Health, Safety, Environment and Communities Committee

 

The primary functions of the HSEC Committee are to oversee:

 

·                  Our compliance with safety, health, environmental and sustainability-related laws and other regulatory requirements applicable to our business;

 

·                  Our initiatives to enhance sustainable business practices and our reputation as a responsible corporate citizen, including the promulgation and enforcement of policies, procedures and practices that promote the protection of the safety and health of our employees, contractors, customers, the public and the environment;

 

·                  The plans, programs and processes established by us to evaluate and manage safety, health, environmental and sustainability risks to our business, operations, products and reputation generally; and

 

·                  Our response to significant safety, health, environmental and sustainability-related public policy, legislative, regulatory, political and social issues, trends or incidents that may affect our business operations, financial performance or public image or the industry in which we operate.

 

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Director Nomination Process; Proxy Access

 

The Governance Committee identifies and recommends to the Board the candidates for nomination as directors. Stockholders may propose nominees for consideration by our Governance Committee by submitting names and supporting information to Cloud Peak Energy Inc., Attn: Corporate Secretary, 505 South Gillette Avenue, Gillette, Wyoming, 82716 in accordance with our Bylaws and applicable law. The Board approves the final choice of candidates for nomination and recommendation for election to our stockholders. In addition, our Bylaws provide that eligible stockholders who comply with the requirements of the proxy access provision set forth in our Bylaws may include their own nominee or nominees for director in our proxy statement.  Specifically, the company’s proxy access provision provides that a stockholder, or an unlimited group of stockholders, who has, or have:

 

·                  maintained continuous qualifying ownership of at least 3% of Cloud Peak Energy’s outstanding common stock, for at least 3 years, and

 

·                  complied with the other requirements set forth in the Bylaws,

 

may submit, for inclusion in Cloud Peak Energy’s proxy materials for an annual meeting of stockholders, a number of director nominees that together with all eligible stockholder nominees shall not exceed 25% of the total number of directors in office (rounded down to the nearest whole number).

 

The Governance Committee selects nominees for the Board, including any nominees proposed for consideration by our stockholders, in accordance with the procedures and criteria set forth in the Corporate Governance Guidelines and the Governance Committee’s charter. The Board seeks a diverse group of candidates who possess the background, skills and expertise necessary to make a significant contribution to the Board and the company. In reviewing director candidates, the Governance Committee reviews each candidate’s qualifications for membership on the Board and takes into account the qualities required to add value to the company and to the functioning of the Board and its committees such as independence, financial expertise, diversity, experience with businesses and other organizations of comparable size, the interplay of the candidate’s experience with the experience of other Board members, the candidate’s personal and professional integrity and business judgment, the candidate’s willingness to commit the required time to serve as a Board member, the extent to which the candidate would be a desirable addition to the Board and its committees and any other factors it deems appropriate (including with respect to continuing directors, the director’s past Board and committee meeting attendance and performance and length of Board service), as well as the expected qualities of Board members set forth in our Corporate Governance Guidelines and any applicable legal, regulatory and listing requirements.

 

As provided by our Corporate Governance Guidelines, a Board member is expected to demonstrate high ethical standards and integrity in his or her personal and professional dealings, act honestly and in good faith with a view to the best interest of the company, devote sufficient time to the affairs of the company and exercise care, diligence and skill in fulfilling his or her responsibilities, both as a Board member and as a member of any of its standing committees. A Board member is also expected to provide independent judgment on a broad range of issues, understand and challenge the key business plans of the company, be willing to work in a team and be open to opinions of others, and raise the appropriate difficult questions and issues to facilitate active and effective participation in the deliberation of the Board and of each committee on which he or she serves. Further, each of the Board members should make all reasonable efforts to attend all Board and committee meetings, review the materials provided by management in advance of the Board and committee meetings, and inform the Chairman of the Board before accepting membership on any other board of directors or audit committees. A Board member should also inform the Chairman of the Board of any change in the director’s interests that could affect the director’s relationship to the company.

 

The Governance Committee and the Board may take into account the nature of and time involved in a director’s service on other boards in evaluating the suitability of individual directors and making its recommendations to the Board or the company’s stockholders, as applicable.

 

Ms. Hull, who was appointed to the Board in July 2016, was initially referred to the Governance Committee and the Board for consideration by our CEO.  Ms. Hull was considered along with another potential candidate.  In accordance with our director nomination process described above, Ms. Hull was ultimately recommended by our Governance Committee and nominated by the Board following a thorough review and evaluation by the Governance

 

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Committee and the Board of Ms. Hull’s executive and industry experience, skill set and independence and the determination that she would provide a valuable additional perspective to the Board and its committees.

 

Director Retirement Policy; 2016 Chairman Transition

 

Our Corporate Governance Guidelines state that a director who has attained the age of 72 prior to the annual meeting of stockholders in any year shall retire from office at such annual meeting unless the Board, in its discretion, approves an exception.

 

Mr. Keith Bailey, who turned 72 on April 5, 2014 and who served as Chairman of the Board during 2016 through the date of the 2016 annual meeting, retired from the Board immediately following the 2016 annual meeting. The Board previously approved an exception to our director retirement policy to provide for Mr. Bailey to continue serving the remainder of his then-current term as a Class I director, which expired at the 2016 annual meeting.  Mr. Bailey did not stand for reelection at the 2016 annual meeting. The Board reduced the size of the Board by one effective upon Mr. Bailey’s retirement and, as of that time, our Board was comprised of six members until the Board increased the size of the Board by one immediately prior to the appointment of Ms. Hull in July 2016.

 

The Board appointed independent director Mr. Fox, who is currently 71, to become Chairman of the Board effective upon Mr. Bailey’s retirement.  In connection with the nomination of Mr. Fox as a Class II director to serve a new term of three years commencing at the 2017 Annual Meeting, the Board considered the fact that Mr. Fox would turn 72 years old prior to the expiration of this new term at the annual meeting of stockholders in 2020.  Given Mr. Fox’s significant, continuing contributions to the Board and a desire to provide longer-term consistency in the role of Chairman of the Board, the Board approved an exception to our director retirement policy to provide for Mr. Fox to continue to serve on the Board for the full duration of the new term, assuming his re-election to the Board at the 2017 Annual Meeting.

 

Independence of Directors

 

Pursuant to our Corporate Governance Guidelines and the rules of the NYSE, our Board is comprised of a majority of directors who satisfy the criteria for “independent directors.”

 

Annual questionnaires are used to gather input to assist the Governance Committee and the Board in their determinations of the independence of the non-employee directors. Based on the foregoing and on such other due consideration and diligence as it deemed appropriate, the Governance Committee presented its findings to the Board on the independence of (1) former director Keith Bailey, (2) Patrick Condon, (3) William T. Fox III, (4) William Owens, (5) Steven Nance, (6) Robert Skaggs, and (7) in connection with her appointment to the Board in July 2016, Jeane Hull, in each case, in accordance with the applicable federal securities laws, the SEC rules promulgated thereunder, and the applicable rules of the NYSE and our Guidelines on the Independence of the Directors (which may be found in Annex A to our Corporate Governance Guidelines).

 

The Board concluded that, other than in their capacity as directors, none of the non-employee directors had a material relationship with Cloud Peak Energy, either directly or as a partner, stockholder or officer of an organization that has a relationship with Cloud Peak Energy. In making its determination in connection with the appointment of Ms. Hull, the Board considered that Ms. Hull retired from her position as an officer of Peabody in August 2015 and that Cloud Peak Energy has in the past sold coal to, or purchased coal from, Peabody in the ordinary course of business.  Due to the amounts involved in those ordinary course transactions, the fact that Ms. Hull’s employment with Peabody terminated prior to her appointment to the Board and the fact that Ms. Hull did not participate in those transactions, the Board determined that Ms. Hull did not have a material relationship with Cloud Peak Energy that would impair Ms. Hull’s independence to serve on our Board or the Board’s committees.  The Board undertook a similar analysis with respect to Mr. Condon, who also serves as a non-employee director of Entergy.  In the ordinary course of business, we sell our coal to numerous domestic utility customers, including Entergy or its affiliates.  Our Board considered that potential relationship and deemed it not to be material or to otherwise impair Mr. Condon’s independence to serve on our Board or the Board’s committees because Mr. Condon’s role for Entergy is solely as a non-employee member of its board of directors and he does not participate in those ordinary course transactions.

 

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The Board further determined that (1) each director serving on the Audit Committee, Compensation Committee and Governance Committee is otherwise independent under applicable NYSE listing standards and our Guidelines on the Independence of the Directors for purposes of serving on the Board, Audit Committee, Compensation Committee and Governance Committee, as applicable, (2) each such non-employee director satisfies the additional audit committee independence standards under Rule 10A-3 of the Exchange Act and the additional independence requirements applicable specifically to compensation committee members under the NYSE’s listing standards, and (3) each director serving on the Compensation Committee qualifies as an “outside director” under Section 162(m) of the Internal Revenue Code and a “non-employee director” under Rule 16b-3 of the Exchange Act.

 

Executive Sessions of Independent Directors

 

Our Corporate Governance Guidelines provide that every regular meeting of the Board will include one or more executive sessions at which no employee directors or other members of senior management are present in order to promote free and open discussion and communication among the non-employee directors. At least one executive session per year includes only independent directors. Currently, all of our non-employee directors are also considered to be independent directors. As a result, our independent directors hold an executive session at each quarterly Board meeting. The Chairman of the Board, who is an independent director, presides over all executive sessions of the Board. If, in the future, our Chairman of the Board were to be a person who is an executive of the company, in accordance with our Corporate Governance Guidelines, our Board would appoint a lead director from among the non-employee directors to preside over the executive sessions of the Board.

 

Board and Committee Evaluations

 

Each year, the Board and its committees perform a rigorous self-evaluation. The Governance Committee oversees this process. The evaluations solicit input from directors regarding the performance and effectiveness of the Board and its committees and provide an opportunity for directors to identify areas where improvements could be made. Individual director responses are submitted to our Corporate Secretary, who then compiles aggregated, anonymous results of the evaluations for review and discussion by the Board and its committees. The Board believes this process is effective to evaluate the Board and its committees and identify opportunities for continuous improvement.

 

Audit Committee Financial Experts and Financial Literacy

 

The Board has determined that Messrs. Condon and Skaggs and Ms. Hull, the current members of the Audit Committee, are each financially literate as interpreted by the Board in its business judgment based on applicable NYSE rules, and that Messrs. Condon and Skaggs each further qualify as an audit committee financial expert, as such term is defined in applicable SEC rules, and have accounting or related financial management experience, as defined by applicable NYSE rules and interpreted by the Board in its business judgment.

 

Communications with Non-Employee Directors and Other Board Communications

 

The Board provides a process, pursuant to its Policy Regarding Communications from Stockholders, to enhance the ability of stockholders and other interested parties to communicate directly with the non-employee directors as a group, the entire Board, Board committees or individual directors.

 

Stockholders and other interested parties may communicate by writing to: Cloud Peak Energy Inc., 505 South Gillette Avenue, Gillette, Wyoming 82716, Attn: Corporate Secretary; or via the Internet at www.cloudpeakenergy.com by clicking on “Contact the Board” in the “Corporate Governance” subsection of the “Investor Relations” section. Stockholders may submit their communications to the Board or individual directors on a confidential or anonymous basis by sending the communication in a sealed envelope marked “Confidential—To be opened only by the Corporate Secretary of the Company.” The Corporate Secretary will compile all communications submitted using the process described herein and forward such communications to such director or group of directors as he deems necessary or appropriate. The Corporate Secretary is not required to forward certain communications if it is determined that the communication is (1) unrelated to the duties and responsibilities of the Board, (2) unduly hostile, threatening or illegal, or (3) obscene or otherwise deemed to be inappropriate.

 

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Stockholder communications that relate to accounting, internal accounting controls or auditing matters will be processed in accordance with our Accounting Complaints Policy. Concerns about accounting or auditing matters may be forwarded on a confidential or anonymous basis to the Audit Committee by writing to: Cloud Peak Energy Inc., 505 South Gillette Avenue, Gillette, Wyoming 82716, Attn: General Counsel, as well as through the Ethics Hotline at (866) 528-0054.

 

Director Attendance at Annual Meetings

 

The Corporate Governance Guidelines provide that directors are expected to attend our annual meeting of stockholders. All of our directors at the time of the 2016 annual meeting of stockholders attended that meeting.

 

Certain Relationships and Related Party Transactions

 

Pursuant to our Related Party Transactions Policy, our Audit Committee reviews and approves or ratifies transactions in excess of $100,000 of value in which we participate and in which a director, nominee for director, executive officer of the company or any immediate family member thereof, or beneficial holder of more than 5% of any class of our voting securities has or will have a direct or indirect material interest. After appropriate review (which includes consideration of the financial terms of the transaction), the Audit Committee is to approve only those related party transactions that are consistent with our Related Party Transactions Policy and on terms, taken as a whole, which the Audit Committee believes are no less favorable to us than could be obtained in an arms-length transaction with an unrelated third party, unless the Audit Committee determines that the transactions are not inconsistent with the best interests of the company.

 

Policies on Business Conduct and Ethics

 

We have established a corporate compliance program as part of our commitment to responsible business practices in all of the communities in which we operate. The Board has adopted a Code of Conduct that applies to all of our directors, officers and employees, which, although not intended to cover every situation or circumstance that may arise, is designed to (1) provide basic principles and guidelines to assist directors, officers and employees in complying with the legal and ethical requirements governing the company’s business conduct and (2) cover a wide range of business practices and procedures. In addition, we have adopted a Code of Ethics for Principal Executive and Senior Financial Officers mandating a commitment to financial integrity and to full and accurate financial disclosure in compliance with applicable accounting policies, laws and regulations. These two policies form the foundation of a compliance program that includes policies and procedures covering a variety of specific areas of professional conduct, including compliance with laws, conflicts of interest, confidentiality, public corporate disclosures, insider trading, anti-bribery, trade practices, protection and proper use of company assets, intellectual property, financial accounting, employment practices, health, safety and environment, and political contributions and payments.

 

Both our Code of Conduct and our Code of Ethics for Principal Executive and Senior Financial Officers are available on our website at www.cloudpeakenergy.com in the “Corporate Governance” subsection of the “Investor Relations” section. In accordance with NYSE and SEC rules, we will disclose any future amendments to or waivers from our Code of Ethics for our Principal Executive and Senior Financial Officers as well as any waivers from our Code of Conduct for directors and executive officers by posting such information on our website within the time period required by applicable SEC and NYSE rules.

 

Indemnification of Officers and Directors

 

Our Bylaws require us to indemnify our officers and directors to the fullest extent permitted by the Delaware General Corporation Law. Our Bylaws also state that Cloud Peak Energy has the power to purchase and maintain insurance on behalf of any person who is or was or has agreed to become a director, officer, employee or agent of the company, or is or was serving at the request of the company as a director, officer, employee or agent of another corporation, partnership, limited liability company, joint venture, trust or other enterprise (including, without limitation, with respect to an employee benefit plan), against any liability asserted against the person and incurred by the person or on the person’s behalf in any such capacity, or arising out of the person’s status as such, whether or not the company would have the power to indemnify the person against such liability under our Bylaws or the Delaware General Corporation Law; provided, however, that such insurance is available on acceptable terms, as determined by a majority of the Board.

 

Management Certifications

 

In accordance with the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) and SEC rules thereunder, our CEO and CFO have signed certifications under Sarbanes-Oxley Act Section 302, which have been filed as exhibits to the Form 10-K. In addition, our CEO submitted our most recent certification to the NYSE under Section 303A.12(a) of the NYSE listing standards on May 19, 2016.

 

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SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDERS

 

The following table sets forth information with respect to the number of shares of common stock beneficially owned by each person known by Cloud Peak Energy to beneficially own more than 5% of the outstanding shares of our common stock. Except as otherwise noted, (A) the persons named in the table have sole voting and investment power with respect to all shares beneficially owned by them, and (B) ownership is as of the dates noted below. As of February 28, 2017, there were 74,964,793 shares of our common stock outstanding.

 

Name and Address of Beneficial Owner

 

Number of
Shares of
Common Stock

 

Percent of Class

 

BlackRock, Inc. (1)
55 East 52nd Street
New York, NY 10055

 

4,417,116

 

5.9

%

Dimensional Fund Advisors LP (2)
6300 Bee Cave Road
Austin, TX 78746

 

3,751,599

 

5.0

%

The Vanguard Group, Inc. (3)
100 Vanguard Blvd.
Malvern, PA 19355

 

2,799,354

 

3.7

%

Kopernik Global Investors, LLC (4)
Two Harbour Place
302 Knights Run Avenue, Suite 1225
Tampa, FL 33602

 

1,799,904

 

2.4

%

Franklin Resources, Inc. (5)
One Franklin Parkway
San Mateo, CA 94403

 

2,266,400

 

3.0

%

 


(1)         This information is based on a Schedule 13G/A filed with the SEC on January 23, 2017, by BlackRock, Inc., in which it reported sole voting power as to 4,395,594 shares and sole dispositive power as to all shares.

 

(2)         This information is based on a Schedule 13G filed with the SEC on February 9, 2017, by Dimensional Fund Advisors LP (“Dimensional”), in which it reported sole voting power as to 3,590,130 shares and sole dispositive power as to all shares. Dimensional 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”). In certain cases, subsidiaries of Dimensional may act as an adviser or sub-adviser to certain Funds. In its role as investment advisor, sub-adviser and/or manager, Dimensional or its subsidiaries may possess voting and/or investment power over the securities that are owned by the Funds, and may be deemed to be the beneficial owner of the shares held by the Funds. However, all securities are owned by the Funds. Dimensional disclaims beneficial ownership of such securities.

 

(3)         This information is based on a Schedule 13G/A filed with the SEC on February 10, 2017, by The Vanguard Group, Inc., in which it reported sole voting power as to 19,388 shares, sole dispositive power as to 2,779,966 shares and shared dispositive power as to 19,388 shares.   Vanguard Fiduciary Trust Company (“VFTC”), a wholly-owned subsidiary of The Vanguard Group, Inc., is the beneficial owner of 19,388 shares as a result of its serving as investment manager of collective trust accounts.

 

(4)         This information is based on a Schedule 13G filed with the SEC on February 3, 2017, by Kopernik Global Investors, LLC, in which it reported sole voting power as to 1,410,977 shares and sole dispositive power as to all shares.

 

(5)         This information is based on a Schedule 13G filed with the SEC on February 7, 2017, by Franklin Resources, Inc., in which it reported sole voting power and sole dispositive power held by Franklin Advisory Services, LLC, an indirect wholly-owned investment management subsidiary, as to all shares. The securities are beneficially owned by one or more open or closed-end investment companies or other managed accounts that are investment management clients of investment managers that are direct and indirect subsidiaries of Franklin Resources, Inc., including Charles B. Johnson, Rupert H. Johnson, Jr. and Franklin Advisory Services, LLC, each of which may be deemed to be the beneficial owners of the securities reported. The address of Franklin Advisory Services, LLC is 55 Challenger Road, Suite 501, Ridgefield Park, NJ 07660.

 

The following table sets forth information with respect to the number of shares of our common stock beneficially owned by (1) our “named executive officers,” which, for purposes of this Proxy Statement, refers to the five executive officers included in the Summary Compensation Table below in this Proxy Statement, (2) each current Cloud Peak Energy director and each nominee for director, and (3) all current Cloud Peak Energy directors and executive officers as a group. Except as otherwise noted, (a) the persons named in the table have sole voting and investment power with respect to all shares beneficially owned by them, and (b) ownership is as of February 28, 2017.

 

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Name and Address (1) of Beneficial Owner

 

Number of
Shares of
Common Stock
(3)

 

Percent Of Class

 

Colin Marshall

 

844,244

 

1.1

%

Gary Rivenes

 

225,108

 

*

 

Heath Hill

 

22,034

 

*

 

Bryan Pechersky

 

124,192

 

*

 

Todd Myers

 

48,269

 

*

 

Patrick Condon

 

72,448

 

*

 

William T. Fox III

 

79,298

 

*

 

Jeane Hull (2)

 

48,442

 

*

 

Steven Nance

 

77,985

 

*

 

William Owens

 

78,485

 

*

 

Robert Skaggs

 

72,326

 

*

 

All Current Executive Officers and Directors as a Group (14 persons)

 

1,857,732

 

2.5

%

 


*                 Less than 1%.

 

(1)         Address for beneficial owners shown in the table is: c/o Cloud Peak Energy Inc., 505 South Gillette Avenue, Gillette, Wyoming 82716.

 

(2)         Includes 800 shares held in a joint account with Ms. Hull’s spouse.

 

(3)         Includes the following: (a) common stock underlying restricted stock units (referred to herein as “RSUs” or “restricted stock units”), including RSUs that may vest within 60 days of February 28, 2017, (b) common stock underlying performance share units (referred to herein as “PSUs” or “performance share units”) that may vest within 60 days of February 28, 2017, reported at 51% of the target number of PSUs subject to each award, and (c) shares issuable upon the exercise of outstanding stock options that are exercisable within 60 days of February 28, 2017, as follows:

 

Name

 

Common Stock
Underlying
Restricted Stock
Units (RSUs)

 

Common Stock
Underlying
Performance
Share Units
(PSUs)

 

Shares Issuable
Upon Exercise
of Options **

 

Colin Marshall

 

28,682

 

29,256

 

594,091

 

Gary Rivenes

 

11,628

 

11,861

 

117,756

 

Heath Hill

 

1,733

 

1,768

 

13,534

 

Bryan Pechersky

 

4,521

 

4,612

 

88,282

 

Todd Myers

 

3,876

 

3,954

 

29,980

 

Patrick Condon (4)

 

71,643

 

 

 

William T. Fox III (4)

 

70,611

 

 

 

Jeane Hull (4)

 

47,642

 

 

 

Steven Nance (4)

 

70,611

 

 

 

William Owens (4)

 

70,611

 

 

 

Robert Skaggs (4)

 

72,326

 

 

 

 


**          As of February 28, 2017, all exercisable stock options had an exercise price greater than the market price of the underlying stock.

 

(4)         The number of RSUs reported above does not include the following restricted stock unit awards granted in January 2017 because non-employee directors are not expected to have a right to acquire the full number of underlying shares within 60 days: (a) 16,015 restricted stock units to Mr. Condon, (b) 20,463 restricted stock units to Mr. Fox, (c) 16,015 restricted stock units to Ms. Hull, (d) 16,015 restricted stock units to Mr. Nance, (e) 16,015 restricted stock units to Mr. Owens, and (f) 16,015 restricted stock units to Mr. Skaggs. Pursuant to the terms of those awards, the number of RSUs awarded will become payable on a pro rata basis if the non-employee director leaves the Board prior to the one-year anniversary of the grant date.

 

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EXECUTIVE COMPENSATION

 

Compensation Committee Report

 

The material in this Report is not “soliciting material,” is not deemed “filed” with the SEC, and is not to be incorporated by reference into any filing under the Securities Act of 1933 (the “Securities Act”) or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in such filing.

 

The Compensation Committee of the Board of Directors has reviewed and discussed with management the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K and contained in this Proxy Statement. Based on such review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement.

 

Compensation Committee

Robert Skaggs, Chair

Jeane Hull

Steven Nance

William Owens

 

Compensation Discussion and Analysis

 

This Compensation Discussion and Analysis (“CD&A”) provides a discussion of the compensation philosophy and objectives that underlie our executive compensation program and how we evaluated and set our executives’ compensation for 2016. This CD&A is intended to provide qualitative information concerning how 2016 compensation was earned and awarded to our named executive officers. Further, it identifies the most significant factors relevant to our 2016 executive compensation decisions and gives context to the data presented in the compensation tables included below in this Proxy Statement. Lastly, this CD&A describes any significant changes to our executive compensation program for 2017 that have been implemented prior to filing this Proxy Statement. The term “executive officers” means our senior executives who are all listed above under the heading “Executive Officers” and also includes Mr. Marshall (who is listed further above under the heading “Proposal I—Election of Directors” and is also an executive officer). The term “named executive officers” means the five executive officers identified in the table below, each of whom were considered “executive officers” as of December 31, 2016.

 

Named Executive Officer

 

Title

Colin Marshall

 

President, Chief Executive Officer and Director

Gary Rivenes

 

Executive Vice President and Chief Operating Officer

Heath Hill

 

Executive Vice President and Chief Financial Officer

Bryan Pechersky*

 

Executive Vice President, General Counsel and Corporate Secretary

Todd Myers*

 

Senior Vice President, Marketing and Business Development

 


*                 Mr. Orchard, our former Senior Vice President, Marketing and Government Affairs, retired from the company effective June 3, 2016.  In connection with his retirement, Mr. Orchard’s responsibilities were reallocated to other members of the management team.  Mr. Myers assumed responsibility for the company’s marketing functions, and Mr. Pechersky assumed responsibility for the company’s government affairs functions. Prior to assuming his new responsibilities, Mr. Myers’ title was Senior Vice President, Business Development.

 

Executive Summary

 

This CD&A executive summary describes key features of our executive compensation program, summarizes the 2016 cash and equity incentive compensation received by our named executive officers and highlights the strong alignment of our executives’ compensation with our financial, operating and stockholder returns. Please read the complete CD&A and remaining compensation sections in this Proxy Statement for further details regarding the matters summarized below.

 

24



 

Table of Contents

 

CD&A Executive Summary Organization

 

Proxy Statement
Page Number

Executive Compensation Program Overview

 

25

2016 Company Performance Highlights

 

25

2016 Executive Compensation Highlights

 

27

CEO Pay Alignment with Compensation Peer Group

 

29

Compensation Risk Mitigating Program Design and Governance Policies

 

29

Comparison of Historical Granted and Realized/Realizable Total Pay

 

30

Base Salaries and Periodic Historical Adjustments

 

31

Annual Cash Incentive Plan, Rigor of Target-Setting and Historical Payouts

 

32

Long-Term Equity Incentive Plan and Realized/Realizable Values

 

34

 

Executive Compensation Program Overview

 

Our executive compensation program is designed to attract and retain highly competent, motivated executives and reward them for superior performance, consistent with creating long-term stockholder value. It consists of a mix of three primary components, described below, which we believe appropriately rewards our executive officers for their overall contribution to company performance, recognizes the impact of ongoing depressed coal industry conditions on our performance and on our executive compensation program and aligns our executives’ interests with those of our stockholders with the ultimate objective of increasing long-term stockholder value.

 

Based on this philosophy we set targeted pay levels that approximate the median of our Compensation Peer Group (defined below). The pay ultimately realized is dependent primarily upon (1) our financial and safety performance, (2) individual executive performance and (3) our absolute and relative stock price performance.

 

The three primary components of our executive compensation program are:

 

Primary
Compensation Components

 

Overview

Base Salary

 

Competitive base salaries determined in large part through an in-depth comparative analysis of comparable positions at our Compensation Peer Group companies and targeted to be approximately at the 50th percentile of our Compensation Peer Group.

 

 

 

Annual Cash Incentive

 

Opportunity for an annual cash incentive award to align our executives with annual performance achievements with the ultimate payment amount based on (1) actual Adjusted EBITDA (defined below) versus a target Adjusted EBITDA approved by the Compensation Committee and which aligns with the Adjusted EBITDA included in our annual budget (60% weighting); (2) annual safety performance with target and maximum payout levels requiring a substantial improvement relative to a rolling three-year average (20% weighting); and (3) an assessment by the Compensation Committee and other independent directors of individual executive performance taking into account a number of factors, as discussed below (20% weighting).

 

 

 

Long-Term Equity Incentive

 

A long term incentive plan and stock ownership guidelines to align our executives with longer term performance achievement and stockholder returns over time, and which consist of (1) 40% of the targeted grant date value in restricted stock units that cliff-vest after three years and (2) 60% in performance share units that vest solely on the satisfaction of our performance based on our three-year total stockholder return (“TSR”) compared to our Performance Peer Group (defined below), with any vesting capped at target if our absolute TSR is negative over the three-year performance period.

 

2016 Company Performance Highlights

 

As described in our year-end 2016 earnings announcement, our company and industry again faced a challenging external environment and continued to be negatively impacted by reduced sales volumes and revenues, weak coal demand and pricing, competition with low priced natural gas and subsidized wind and solar energy in the U.S., and anti-coal regulatory and political initiatives. Despite the external environment, we performed well in managing

 

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through these challenging industry conditions and completed a number of important transactions that we believe significantly improved our financial flexibility and positioned our company for future growth opportunities.  Highlights of our 2016 results and significant transactions are described below:

 

·                  Strong Adjusted EBITDA Performance — In depressed industry conditions that reduced our shipments from 75.1 million tons in 2015 to 58.5 million tons in 2016, we earned Adjusted EBITDA of $98.6 million.  A portion of the 2016 Adjusted EBITDA reflected our ability to preserve economic value through contract buyouts from customers who cancelled previously committed tons.

 

·                  Positive Net Income in 2016 Compared to Net Loss in 2015 — In 2016, we earned net income of $21.8 million, compared to a net loss in 2015 of $(204.9) million.

 

·                  Improved Cost Per Ton and Effectively Managed Variable Shipment Rates — We improved our average cost per ton sold in 2016 compared to 2015, despite significantly reduced shipments and a lower realized price per ton in 2016. A primary driver behind our improved cost per ton was our implementation of greater flexibility into our workforce planning to better align labor costs to variable shipment rates in our industry.

 

·                  Strong Year-End Liquidity — We ended 2016 with total available liquidity of approximately $440 million, including cash and cash equivalents of approximately $84 million.

 

·                  296% Absolute TSR Performance — Our strong stock performance in 2016 led to an absolute TSR (calculated using the same methodology as for our performance share units) of 296%.

 

·                  Achieved 0.25 AIFR, Resulting in a Company Record and Industry Leading Safety Performance — During 2016, we had a Mine Safety and Health Administration (“MSHA”) All Injury Frequency Rate (“AIFR”) of 0.25, a decrease from the full-year 2015 AIFR rate of 0.91 and the lowest in our company’s history.

 

·                  Amended Bank Facility to Enhance Flexibility — We amended our Credit Agreement to modify the financial covenants and increase the second-lien issuance capacity to enhance our liquidity and enable the completed bond exchange offers in 2016.

 

·                  Completed Bond Exchange Offers, Reduced Leverage and Significantly Reduced Previous 2019 Bond Maturities — We exchanged over 75% of our 2019 and 2024 unsecured bonds into newly issued second lien 2021 notes, which reduced our outstanding bond liability by $91 million. The exchange offers also eliminated a significant portion of our previous 2019 bond maturities by taking advantage of then-prevailing discounted trading prices for our 2019 bonds and exchanging a substantial portion of our previous 2019 bonds into 2021 bonds. In early 2017, we completed an equity offering to raise proceeds to redeem the remaining 2019 bonds.

 

·                  Eliminated Self-Bonding for Reclamation — Total reclamation bonding exposure was reduced by $167 million or 28% during 2016, reflecting our successful reclamation and updated state requirements.  Approval from the Wyoming Department of Environmental Quality was received in January 2017 of our application to reduce our Antelope Mine’s required bond amount by an additional $25 million, which allows for the final $10 million of self-bonding to be removed.  Our reclamation bonding requirements are now all covered by third-party surety providers.

 

·                  Resumed Export Sales in Fourth Quarter — Taking advantage of higher international coal prices in late 2016, we resumed export sales and shipped 0.4 million tons during the fourth quarter of 2016.  As of February 15, 2017, we had committed export sales of 1.9 million tons for the first half of 2017.

 

·                  Significantly Reduced Take-or-Pay Exposure In Our Logistics Business — We replaced our throughput and transportation agreements with our port and rail logistics providers in late 2016 and early 2017 to enhance our flexibility and substantially reduce our potential future take-or-pay

 

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obligations that we would have owed if we failed to meet minimum shipment obligations under those agreements.  As of February 15, 2017, the outstanding undiscounted commitments under the amendments were reduced by $488 million that could have been owed through 2024, to approximately $51 million through the current two year term (2017 and 2018) of these agreements.

 

The following table highlights our 2016 financial performance and shipments:

 

 

 

Year Ended

 

 

 

12/31/2016

 

12/31/2015

 

 

 

(in millions, except per ton amounts)

 

Net income (loss) (1)

 

$

21.8

 

$

(204.9

)

Adjusted EBITDA (2)

 

$

98.6

 

$

123.8

 

Average cost per ton sold

 

$

9.75

 

$

9.81

 

Shipments — owned and operated mines (tons)

 

58.5

 

75.1

 

Asian exports (tons)

 

0.6

 

3.6

 

 


(1)         Net loss for 2015 was impacted by the $111.8 million non-cash valuation allowance adjustment on our deferred tax assets based upon then-forecasted taxable earnings and a $58.2 million non-cash asset impairment recorded due to lower forecasted earnings as a result of the weak international coal prices at that time.

 

(2)         Refer to Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures” in our Form 10-K filed on February 16, 2017 for additional information regarding and a reconciliation of Adjusted EBITDA.

 

2016 Executive Compensation Highlights

 

·                  Continued High Percentage of At-Risk, Performance Based Compensation — As shown in the chart below, targeted direct compensation for our CEO was 80% at-risk, performance-based, while targeted direct compensation for our other named executive officers was 70% at-risk, performance-based.

 

2016 Direct Compensation Components - CEO

 

2016 Direct Compensation Components - Average Other NEOs

 

 

 

GRAPHIC

 

GRAPHIC

 

·                  No 2016 Target Compensation Increases (Other Than Limited Salary Adjustment for New CFO) — Taking into account depressed industry conditions and outlook in early 2016, our historical executive compensation adjustments and the company’s compensation philosophy and goals, the Compensation Committee decided not to increase 2016 base salaries, target bonus opportunity, target LTIP opportunity or other compensation amounts for our executives, other than a market increase to Mr. Hill’s base salary from $350,000 to $375,000 to more appropriately reflect his earlier promotion to Chief Financial Officer. As a result, the Compensation Committee did not engage Aon Hewitt to update the Compensation Peer Group for 2016.

 

·                  Established Rigorous Adjusted EBITDA Bonus Target That Reflected Depressed Industry Conditions and Expectations of Reduced Sales Volumes and Revenues — In establishing Adjusted EBITDA targets for 2016, as in prior years, the Compensation Committee reviewed a sensitivity analysis to the key business drivers of Adjusted EBITDA. This sensitivity analysis sought to identify opportunities and risks for each of the key business drivers to establish rigorous threshold, target, and maximum Adjusted

 

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EBITDA levels. Key business drivers encompassed sales volumes, coal prices and operating costs, including diesel fuel, labor and explosives costs, logistics revenues and transportation costs. The Adjusted EBITDA goal for 2016 was lower than 2015 and reflected the expected continued challenging environment for coal demand and pricing for 2016 and corresponded to our budgeted Adjusted EBITDA in our 2016 annual operating plan, as well as our expectation that no export shipments would occur in 2016. The established 2016 Adjusted EBITDA target was rigorous taking into account these ongoing depressed industry conditions and expected reduced sales volumes and revenues.

 

·                  Strong Financial Performance in Depressed Industry Conditions Resulted in Slightly Above Target Achievement Against Adjusted EBITDA Component (60%) of Bonus Plan — Despite difficult industry conditions, we achieved a 2016 Adjusted EBITDA slightly above the target goal, resulting in a 104% payout on this bonus component.

 

·                  Record Safety Performance Resulted in Increased Year-Over-Year Bonuses Due to Maximum 200% Achievement Against Safety Component (20%) of Bonus Plan, Compared to 0% Safety Payout for 2015 — During 2016, our AIFR under our cash bonus plan was 0.25, resulting in a maximum payout to our executives for that component of our 2016 cash bonus plan. The AIFR component of the 2015 bonus awards resulted in 0% payouts for 2015. Consequently our record safety performance in 2016 significantly contributed to the 2016 bonus awards exceeding 2015 amounts.

 

·                  Compensation Committee Evaluated Individual Executives for Personal Performance Component (20%) of Bonus Plan — As in prior years, the Compensation Committee evaluated the performance of each individual executive officer for purposes of making executive compensation determinations, including the personal performance component of the annual cash bonus plan.  The personal performance component is evaluated against the responsibilities of each executive’s position, achievement of annual departmental goals, feedback from peers and other co-workers, assessments of our independent directors, annual performance ratings and the executive’s contributions, individually and as part of the executive team, to achieving the significant company accomplishments during the year, which are highlighted above. In 2016, the executive team was responsible for successfully achieving a significant restructuring of our balance sheet and future contractual commitments and adjusting our business and cost structure to depressed industry conditions, weak pricing and increased variability in shipment rates.

 

·                  Retained 60% Weighting of Performance Share Units in Long-Term Incentive Program — The Compensation Committee decided to retain the same long term incentive target award values for 2016 and the same percentage split between time-vested restricted stock units (40%) and performance-vested performance share units (60%) used in 2015.

 

·                  Equity Award Program Structured to Help Offset Dilution — The Compensation Committee decided to grant the 2016 restricted stock units and performance share units with the flexibility to settle those awards upon vesting in shares of common stock, cash or a combination of common stock and cash, similar to the 2015 awards.  The Compensation Committee granted the 2016 performance share units with the expectation that they would be settled in cash upon any vesting in 2019 and did not award any stock options in 2016 to help offset dilution to our stockholders.

 

·                  2014-2016 PSUs Vested At Only 51% of Target — With respect to the 2014-2016 performance share units that vested in March 2017, they vested at 51% of target, reflecting the impact of continued challenging conditions in the U.S. coal industry and our negative absolute TSR performance over that three-year performance period.

 

·                  Strong Relative and Absolute TSR Performance in 2016 — From the end of 2015 to the end of 2016, our TSR (calculated using the same methodology as for our performance share units) relative to our Performance Peer Group was number two of seventeen (or the 94th percentile). Our absolute TSR in 2016 (calculated on the same basis) was 296%. Our strong 2016 TSR performance impacts the three-year performance period for performance unit awards granted in 2016 and in certain prior years, in addition to the overall impact that our stock price has on the value associated with other historical equity awards.

 

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·                  Reduced Executive Team Size Following Retirement of Former Executive — Mr. Orchard, our former Senior Vice President, Marketing and Government Affairs, retired from the company effective June 3, 2016.  In connection with his retirement, Mr. Orchard’s responsibilities were reallocated to other members of the management team.  We did not replace his position. Mr. Myers assumed responsibility for the company’s marketing functions, and Mr. Pechersky assumed responsibility for the company’s government affairs functions.

 

·                  Compensation Committee Conducted Extensive Investor Outreach on Executive Compensation — As discussed below under “—Stockholder Outreach and Response to 2016 Say on Pay Vote,” in response to the low majority Say on Pay approval with respect to our 2015 compensation program, the Compensation Committee undertook a comprehensive investor outreach initiative in the summer and fall of 2016 led by the Chair of our Compensation Committee, reaching out to investors representing approximately 60% of our outstanding shares.  The purpose of the outreach was to better understand stockholder perspectives with respect to our executive pay practices and evaluate any concerns and feedback.

 

CEO Pay Alignment with Compensation Peer Group

 

We believe our CEO’s compensation is well-aligned with our Compensation Peer Group, as demonstrated by the following:

 

·                  Our CEO’s 2016 direct compensation (salary, plus realized 2016 bonus, plus targeted 2016 long-term incentive awards) was less than the median of the direct compensation for our Compensation Peer Group CEOs (based on available 2015 proxy data); and

 

·                  Although our 2014-2016 relative TSR compared to our Compensation Peer Group was at the 50th percentile, our CEO’s 2014-2016 direct compensation (as described above for each year) was at the 33rd percentile of the direct compensation for our Compensation Peer Group CEOs (based on available 2013-2015 proxy data).

 

GRAPHIC

 

Due to other Compensation Peer Group companies who filed for bankruptcy and/or did not file proxy statements for certain years as a result of bankruptcy filings, the Compensation Peer Group identified under the heading “2015/2016 Compensation Peer Group” below was modified as follows for purposes of these CEO pay alignment comparisons: (1) Alpha Natural Resources, Inc. and Walter Energy, Inc. were excluded due to bankruptcy in 2015; (2) Arch Coal Inc. and Peabody Energy Corporation were deemed to have TSR of negative 100%, as each company went into bankruptcy during the 2016 year; and (3) only companies that filed a definitive proxy statement in 2016 (with respect to 2015 year compensation) were included for comparison purposes.

 

Compensation Risk Mitigating Program Design and Governance Policies

 

In addition to our three primary components of executive compensation, our executive compensation program includes other features that we believe are consistent with strong governance practices, including:

 

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What We Do:

 

·                  Active investor outreach program, including on executive compensation and corporate governance matters

·                  A substantial percentage at-risk, performance-based equity and cash compensation

·                  Rigorous performance targets for Adjusted EBITDA, safety and TSR measures, which have frequently resulted in below target payouts and significant reductions compared to targeted pay amounts

·                  Three-year vesting for all executive equity awards

·                  Robust disclosures regarding our executive pay practices, decision-making process, the rigor of our performance target-setting and alignment with our stockholders

·                  Annual Say on Pay stockholder vote regarding our executive compensation program

·                  Annual compensation program risk assessment

·                  Engagement by the Compensation Committee of an independent compensation consultant

·                  Regular review of executive tally sheets by the Compensation Committee

·                  Executive stock ownership guidelines and holding requirements

·                  Clawback Policy (defined below) for incentive compensation

·                  Insider Trading Policy that prohibits, among other things, hedging and pledging transactions relating to our stock

·                  Low double-trigger change-in-control severance multiple of 2X target cash compensation for our CEO and 1X target cash compensation for other executives

·                  Double-trigger change in control vesting acceleration provisions for awards under our 2009 Long Term Incentive Plan (as amended and restated effective March 3, 2017) (the “Amended LTIP” or “LTIP”)

 

What We Do Not Do:

 

·                  No tax gross-ups upon a change in control

·                  No repricing of stock options without stockholder approval

·                  No prospective payment of dividends on unvested equity awards (i.e., time-based and performance-based)

·                  No perquisites

 

Comparison of Historical Granted and Realized/Realizable Total Pay

 

We believe our compensation program creates a strong direct link between our pay and our performance. The table below shows the significant impact of our rigorous performance target setting in our incentive programs and our stock price performance on the substantially reduced realized or estimated year-end 2016 realizable pay of our executives over time.  Even in years when target financial performance levels are set lower than prior year performance to reflect the challenging external environment for the coal industry, the table below demonstrates the rigor of our targets and alignment of our executive pay and our performance. Refer to the Cumulative LTIP Awards 2009-2016 table below for additional information regarding the longer-term significant reductions to the equity award values in our executive compensation program. 

 

In  2016,  we had a strong absolute and relative TSR performance as discussed above, resulting in an increase in the estimated year-end 2016 equity value under our 2016 executive compensation program.  In particular, the estimated value of 2016 PSUs assumes a 200% vesting based on our strong 296% absolute 2016 TSR performance. The actual value of any vested 2016 PSUs in 2019 will be based on our TSR performance for the full three-year performance period.

 

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GRAPHIC

 


*                 As a result of the transition between NEOs throughout the applicable years, the “Other NEOs” includes our former Chief Financial Officer, Michael Barrett, for years prior to and including 2014, and includes Heath Hill as Chief Financial Officer for 2015 and 2016.  The chart also includes our former Senior Vice President, Marketing and Government Affairs, Mr. James Orchard, for years prior to and including 2015, with Mr. Myers only being included with respect to the 2016 year.

 

(1)         Realizable values include (a) base salary, (b) actual bonus payouts and (c) estimated long-term incentive value as of year-end 2016 as reported below under “—Long-Term Equity Incentive Plan and Realized/Realizable Values.” 2016 PSUs reflect an assumed 200% vesting based on our strong 296% absolute TSR performance for 2016.

 

(2)         Granted values include (a) base salary, (b) target bonus amount and (c) the grant date fair value of awards under FASB ASC Topic 718, which is how equity awards are reported in the Summary Compensation Table and the Grants of Plan-Based Awards Table.

 

Base Salaries and Periodic Historical Adjustments

 

Base salaries are generally reviewed annually based upon market data provided from time to time by Aon Hewitt, the Compensation Committee’s independent compensation consultant. In years where Aon Hewitt is engaged to perform detailed reviews of our compensation program, the Compensation Committee will also review compensation for comparable positions of our Compensation Peer Group. In addition, the Compensation Committee assesses individual performance, experience, responsibilities and time in position. The chart below shows the annual adjustments, if any, to base salaries from 2013 through 2016 for our CEO and other current named executive officers.

 

Reflecting the challenging environment and our focus on costs, the Committee made no merit increases for the named executive officers for 2016. With respect to Mr. Hill, the chart below reflects his promotion from Vice President and Chief Accounting Officer to Executive Vice President and Chief Financial Officer in March 2015, as well as his market increase for 2016  to adjust his below market salary in his first year as Chief Financial Officer in 2015. Other than Mr. Hill, no named executive officer received a salary increase for 2016.

 

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Annual Cash Incentive Plan, Rigor of Target-Setting and Historical Payouts

 

Our Annual Incentive Plan (“AIP”), approved at the 2013 annual meeting of stockholders, is an annual cash incentive plan designed to reward executives for the achievement of certain annual company performance targets that are approved by the Compensation Committee. Under the AIP, each executive has the potential to earn an annual cash incentive based upon a percentage of the executive’s base salary.  If performance targets are exceeded, maximum payouts of up to two times target are possible and if performance falls below threshold levels, no payouts are made.

 

As in prior years, the 2016 AIP performance targets consisted of three components. The Compensation Committee believes the established performance targets are rigorous and reflect the ongoing challenging external environment for the coal industry, weak demand and pricing and reduced sales volume and revenues.  See the section titled “Annual Incentive Compensation and Process for Setting Rigorous Performance Objectives” below for a full discussion of our AIP goal setting process.

 

AIP Metric

 

Weighting

 

Rigor of Target-Setting

Adjusted EBITDA

 

60%

 

Performance targets have resulted in below-target payouts on the Adjusted EBITDA goal in three of the last five years. In establishing Adjusted EBITDA targets for 2016, as in prior years, the Compensation Committee reviewed a sensitivity analysis to the key business drivers of Adjusted EBITDA. This sensitivity analysis sought to identify opportunities and risks for each of the key business drivers to establish rigorous threshold, target, and maximum Adjusted EBITDA levels. The Adjusted EBITDA goal for 2016 was lower than 2015 and reflected the expected continued challenging environment for coal demand and pricing for 2016 and corresponded to our budgeted Adjusted EBITDA in our 2016 annual operating plan, as well as our expectation that no export shipments would occur in 2016.

 

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Safety

 

20%

 

Our safety performance target and maximum payout levels require a substantial improvement over our three year rolling safety achievement average to earn a payout on this component. Our threshold payout level is set at the rolling three year average AIFR. Accordingly, despite our consistently strong safety performance, our executives may nevertheless receive below target bonus payouts or none at all for safety, such as the 0% safety payout in 2015.

 

 

 

 

 

Personal Performance

 

20%

 

The personal performance component is evaluated against the responsibilities of each executive’s position, achievement of annual departmental goals, feedback from peers and other co-workers, assessments of our independent directors, annual performance ratings and the executive’s contributions, individually and as part of the executive team, to achieving significant company accomplishments during the year, which are highlighted above. In 2016, the executive team was responsible for, among other things, successfully achieving a significant restructuring of our balance sheet and future contractual commitments, and adjusting our business and cost structure to depressed industry conditions, weak pricing and increased variability in shipment rates.

 

For 2016 the Adjusted EBITDA component was awarded at 104% of target and the safety performance component resulted in a maximum 200% payment.  The personal performance components of the AIP were made at levels ranging between 175% and 180% of target, depending on the assessment of each individual’s performance during the year. As a result, the aggregate AIP payouts for our named executive officers for 2016 ranged between 138% and 141% of target.

 

As shown in the charts below, our AIP payouts have reflected the different performance levels for Adjusted EBITDA, safety and personal performance over time. We believe our compensation program is appropriately aligned with our performance. Our achievement of the maximum 200% safety payout in 2016 reflects our strong safety performance last year and was a significant contributing factor to the total 2016 AIP payments exceeding 2015 AIP payments.

 

AIP Payout - CEO

 

Average AIP Payout - Other NEOs*

 

 

 

GRAPHIC

 

GRAPHIC

 

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*                 As a result of the transition between NEOs throughout the applicable years, the “Other NEOs” includes our former Chief Financial Officer, Michael Barrett, for years prior to and including 2014, and includes Heath Hill as Chief Financial Officer for 2015 and 2016.  The chart also includes our former Senior Vice President, Marketing and Government Affairs, Mr. James Orchard, for years prior to and including 2015, with Mr. Myers’ AIP bonus only being included with respect to the 2016 year.

 

(1) Reflects 0% payout on safety component.

 

(2) Reflects 200% payout on safety component.

 

AIP Payout Results For Each Component as % of Target

 

 

 

Adjusted EBITDA
(%)

 

Safety (%)

 

Personal
Performance Range
for CEO and Other
Then-Applicable
NEOs (%)

 

2013

 

84

 

167

 

100 – 160

 

2014

 

110

 

129

 

150 – 185

 

2015

 

87

 

0

 

125 – 180

 

2016

 

104

 

200

 

175 – 180

 

 

Long-Term Equity Incentive Plan and Realized/Realizable Values

 

The LTIP is an equity-based plan designed to align the long-term interests of our executive officers with those of our stockholders. Each executive is awarded an annual target award value under the LTIP based upon a multiple of the executive’s base salary. In 2015, the Compensation Committee eliminated the stock option component of the annual award (which comprised 25% of the total equity award value in prior years) in light of ongoing depressed equity values in our industry and the dilutive impact of options, and re-directed the targeted long-term equity value between the following two components, which was continued for 2016 grants:

 

Award Type

 

Weighting

 

Performance Share Units

 

60

%

Restricted Stock Units

 

40

%

 

The long term value of the awards is a function of our stock price performance over time: if our stock price increases, the value of awards made under the LTIP increases and our executives benefit; if our stock price decreases, the value of awards made under the LTIP decreases and our executives do not achieve some or any of the potential value of the awards.

 

The following tables provide a comparison of the 2013 through 2016, and cumulative 2009-2016, target equity award values at grant date versus actual values or estimated values at year-end 2016 for our CEO and other named executive officers. Grant date targeted value reflects the grant date fair value for the applicable year as determined under FASB ASC Topic 718, which is how equity awards are reported in the Summary Compensation Table and the Grants of Plan-Based Awards Table. The estimated year-end 2016 value is calculated as of December 30, 2016 (as December 31, 2016 was not a trading day) based on our closing stock price of $5.61.

 

We believe the tables below highlight the strong pay for performance alignment of our compensation program as shown by the substantially reduced realized or estimated year-end 2016 realizable value of historical equity awards compared to grant date target values, other than for 2016 when we had a strong TSR performance that positively impacted the potential realizable value of 2016 awards.

 

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LTIP Awards — Grant Date Targeted Value vs Realized (Realizable) Value

 

GRAPHIC

 

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GRAPHIC

 


*                 As a result of the transition between NEOs throughout the applicable years, the “Other NEOs” within the tables above includes our former Chief Financial Officer, Michael Barrett, for years prior to and including 2014, and includes Heath Hill as Chief Financial Officer for 2015 and 2016.  The chart also includes our former Senior Vice President, Marketing and Government Affairs, Mr. James Orchard, for years prior to and including 2015, with Mr. Myers only being included with respect to the 2016 year.

 

(1)         All 2013 LTIP awards were subject to a three-year vesting schedule, in addition to satisfaction of TSR performance criteria over the three-year period for our PSUs. 2013 award values at year-end 2016 were calculated as follows: (1) PSUs reflect the actual 43% vesting of those awards; (2) NQ were valued at $0 because the exercise price was in excess of the closing stock price at year-end 2016; and (3) RSUs were valued based on the number of vested RSUs multiplied by our closing stock price of $5.61 on December 30, 2016.

 

(2)         All 2014 LTIP awards are subject to a three-year vesting schedule, in addition to satisfaction of TSR performance criteria over the three-year period for our PSUs. 2014 award values at year-end 2016 were calculated as follows: (1) PSUs reflect the actual 51% vesting of those awards; (2) NQ were valued at $0 because the exercise price was in excess of the closing stock price at year-end 2016; and (3) RSUs were valued based on the number of RSUs that vested in March 2017 multiplied by our closing stock price of $5.61 on December 30, 2016.

 

(3)         All 2015 LTIP awards are subject to a three-year vesting schedule, in addition to satisfaction of TSR performance criteria over the three-year period for our PSUs. 2015 award values at year-end 2016 were calculated as follows: (1) PSUs reflect the estimated 100% vesting of those awards based on TSR performance through year-end 2016 with a cap at target vesting for a negative absolute TSR; and (2) RSUs were valued based on the number of unvested RSUs multiplied by our closing stock price of $5.61 on December 30, 2016.

 

(4)         All 2016 LTIP awards are subject to a three-year vesting schedule, in addition to satisfaction of TSR performance criteria over the three-year period for our PSUs. 2016 award values at year-end 2016 were calculated as follows: (1) PSUs reflect the assumed 200% vesting of those awards based on our strong 296% absolute TSR for 2016; and (2) RSUs were valued based on the number of unvested RSUs multiplied by our closing stock price of $5.61 on December 30, 2016.

 

(5)         The Cumulative LTIP Awards 2009-2016 table reflects all LTIP awards granted to our named executive officers since the adoption of our LTIP in 2009.  Grant date target values and year-end 2016 estimated values were calculated by using the same methodology as described within the footnotes above for target award values as of the grant dates of an award and 2016 estimated year-end values.

 

Executive Compensation Philosophy and Objectives

 

Our executive compensation program is designed to reward our executive officers for their overall contribution to company performance, including the achievement of specific annual, long-term and strategic goals. The executive

 

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compensation program also seeks to align executive officers’ interest with those of our stockholders by rewarding performance that meets or exceeds established goals, with the ultimate objective of increasing long-term stockholder value. Specifically, the program is designed to:

 

·                                          Retain and attract a highly competent, motivated team of employees appropriately aligned with the long-term interest of our stockholders;

 

·                                          Encompass safety and environmental stewardship as core elements of our compensation program;

 

·                                          Encourage behavior that will enhance both current year performance and long-term growth of stockholder value;

 

·                                          Target total compensation to be in a range around the 50th percentile of our peer group with the opportunity for enhanced compensation for superior company and individual performance;

 

·                                          Provide as part of our total compensation base salary, the opportunity for a cash incentive and the opportunity for equity, linked to the long-term growth in TSR;

 

·                                          Achieve minimum performance thresholds prior to any incentive compensation being earned;

 

·                                          Provide market competitive programs of health, welfare and retirement benefits to all employees on an equivalent basis; and

 

·                                          Make equity ownership and retention guidelines for executives and directors a key component to ensure alignment with long-term stockholder interests.

 

The Compensation Committee reviews the compensation philosophy annually to review whether the goals and objectives are being met, and what, if any, changes may be needed to the philosophy.  In recent years, the Compensation Committee’s review has taken into account the impact of ongoing depressed coal industry conditions on our company’s performance and on our executive compensation program.

 

Stockholder Outreach and Response to 2016 Say on Pay Vote

 

Annual Say on Pay Vote

 

As recommended by our Board in 2011, a majority of stockholders in 2011 expressed their preference for an advisory vote on executive compensation every year, and we have implemented that recommendation.  At our 2017 annual meeting, we are again asking our stockholders to communicate their preference on the frequency of these advisory votes on executive compensation and are recommending continued annual advisory votes (see Proposal IV   Frequency of Future Advisory Votes to Approve the Compensation of Named Executive Officers).

 

2011-2015 Votes — Strong Historical Stockholder Support for Executive Compensation

 

Historically, we have received strong stockholder support in favor of our executive compensation program. As shown in the table below, prior to 2016, we received over 90% approval each year going back to 2011:

 

Annual Stockholders Meeting

 

Say on Pay Vote
Approvals

 

Applicable Year of Executive
Compensation Disclosure

 

2016

 

53%

 

2015

 

2015

 

98%

 

2014

 

2014

 

91%

 

2013

 

2013

 

96%

 

2012

 

2012

 

98%

 

2011

 

2011

 

99%

 

2010

 

 

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2016 Vote — Low Majority Stockholder Say on Pay Approval for 2015 Compensation; Investor Outreach

 

In 2016, the advisory vote on compensation received a significantly lower approval of approximately 53% with respect to our 2015 executive compensation program as disclosed in our proxy statement for the 2016 annual meeting.  As a result of this decline in support for Say on Pay in 2016, the Compensation Committee undertook a comprehensive investor outreach initiative in the summer and fall of 2016 led by the Chair of our Compensation Committee, reaching out to investors representing approximately 60% of our outstanding shares.  The purpose of the outreach was to better understand stockholder perspectives with respect to our executive pay practices and evaluate any concerns and feedback.

 

This section provides an overview of (1) our outreach process and participants, (2) the significant stockholder base included in our outreach program, (3) feedback received from stockholders and (4) the response of our Compensation Committee and other independent directors to the feedback.

 

Although the topics and specifics of each investor conversation varied, we believe the table below summarizes the most relevant matters and our responses.  The responses described below reflect actions of the Compensation Committee and the company in early 2016 that addressed certain issues ultimately raised by some investors in our Say on Pay outreach, as well as other actions taken later in 2016 and early 2017 following the 2016 Say on Pay vote and investor outreach. In addition to the compensation determinations made to date, the Compensation Committee will continue to consider investor feedback and the outcome of future Say on Pay votes and future investor outreach when making compensation decisions for our executive officers.  The impact of these future determinations will be reflected in future proxy statements.

 

Overview of 2016 Say on Pay Investor Outreach

 

Outreach Process

 

·                  Outreach directed by the Compensation Committee and led by Compensation Committee Chair — The Compensation Committee discussed the 2016 Say on Pay voting outcome at its July 2016 meeting and directed that the company engage in a comprehensive investor outreach. The process was led by the Chair of our Compensation Committee, who participated in all investor discussions. Other participants included Aon Hewitt, the Compensation Committee’s independent compensation consulting firm; our Senior Vice President, Human Resources; our Executive Vice President, General Counsel and Corporate Secretary; and MacKenzie Partners, our proxy solicitation firm. The Compensation Committee and other independent directors received regular updates on the outreach and held numerous discussions.

Extent of Investors in Outreach Process

 

·                  Reached out to ~60% of shares — We reached out to investors that represented approximately our top 40 shareholders. These investors individually owned at least 0.4% of our outstanding shares. In the aggregate, this represented approximately 60% of our outstanding shares.

 

 

 

 

 

·                  Received feedback from ~20% of shares, outreach efforts were declined by ~15% of shares, and we received no response from ~25% of shares.

 

 

 

 

 

·                  Discussions also held with Institutional Shareholder Services (“ISS”) and Glass Lewis — In addition to investors, we also held calls with the research teams at proxy advisory firms ISS and Glass Lewis to discuss their 2016 voting recommendations and evaluation of our executive compensation program.

What We Heard

 

·                  We generally received supportive feedback on our executive compensation program. There was no broad consensus from investors regarding specific changes to our executive compensation program.

 

 

·                  Investors were generally comfortable with the current program structure, such as the mix and weighting of cash/non-cash, fixed/performance-based and other components, executive pay amounts, our heavy emphasis on incentive compensation, peer groups, benchmarking practices, compensation disclosures and other key executive pay practices.

 

 

·                  Investors recognized the impact of external industry conditions on our stock price and our financial performance, and the resulting direct negative impact on the potential realizable value of our historical executive officer equity awards.

 

 

·      Investors generally expressed a preference for avoiding significant changes in the program.

 

 

 

 

 

·                  For those investors who did raise specific areas to be considered by our Compensation Committee, below is an overview of that feedback:

 

 

·                  Balance future dilution resulting from using increased shares in the equity compensation program due to awards made at low stock prices.

 

 

·                  Consider a slight increase to the weighting of our PSUs and other performance equity (which, for some investors, would also include stock options) from 60% to 66%.

 

 

·                  Consider adding an additional performance metric for our PSUs, in addition to absolute and relative TSR.

 

 

·                  Consider increasing the TSR target payout for our PSUs to be above the 50% percentile as coal industry conditions hopefully improve going forward.

 

 

·                  Ensure sufficient disclosures of the rationale for any declining year-over-year Adjusted EBITDA targets in our cash bonus plan, base salary adjustments and above-target bonus payouts, particularly in declining industry conditions.

 

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What We Did and Why

 

·                  No target executive compensation increases in 2016 other than a limited increase for our new CFO —In 2016 the Compensation Committee discussed depressed industry conditions and outlook, historical executive compensation adjustments and the company’s compensation philosophy and goals, and decided not to increase current compensation for our executives, other than a market increase to Mr. Hill’s base salary from $350,000 to $375,000 to appropriately reflect his increased responsibility in his new role as our CFO.

 

 

 

 

 

·                  In 2016 and again in 2017, we addressed equity dilution by issuing some awards with the expectation of cash-settlement and using less dilutive forms of equity, not stock options — To balance the goals of our executive compensation program against the potential dilution of the long term incentive awards due to then-prevailing prices, the 2016 performance share units were awarded with the expectation that such units would be settled in cash upon any vesting in 2019. In addition, the Compensation Committee continued to issue less-dilutive forms of equity, specifically RSUs and PSUs, rather than stock options in 2016 and 2017. In 2017, the Compensation Committee also considered the substantial year-over-year increase in the company’s stock price compared to the price at the time of the 2016 annual employee awards, which resulted in substantially lower dilution in 2017.

 

 

 

 

 

·      Evaluated historical Adjusted EBITDA performance against the established bonus targets and approved rigorous 2017 Adjusted EBITDA target — The Compensation Committee evaluated the historical cash bonus payouts based on actual Adjusted EBITDA performance against the approved bonus targets, as described elsewhere in this Proxy Statement, to ensure the rigor of our performance targets. For the 2017 cash bonus plan, the Adjusted EBITDA performance goal to achieve a target payout represented an increase from the actual 2016 Adjusted EBITDA performance. In establishing Adjusted EBITDA performance levels for the 2017 cash bonus plan, as in prior years, the Compensation Committee reviewed a sensitivity analysis to the key business drivers of Adjusted EBITDA and sought to identify opportunities and risks for each of the key business drivers to establish rigorous threshold, target, and maximum Adjusted EBITDA levels. The target Adjusted EBITDA level corresponded to our budgeted Adjusted EBITDA in our 2017 annual operating plan and reflected the ongoing challenging external environment for the coal industry, weak demand and pricing.

 

 

 

 

 

·                  Retained current 60%/40% PSU/RSU weighting, absolute and relative TSR metrics and other equity program features — After careful evaluation, the Compensation Committee elected to retain the 60% / 40% weighting of PSUs to RSUs in the annual 2017 equity awards. The Compensation Committee believes that weighting properly aligns our long-term incentive program to our long-term stockholder returns, while also serving our retention goals through long-term, time-based vesting of RSUs. The Compensation Committee also elected to retain the relative and absolute TSR metrics in our PSUs for the 2017 equity awards. There was no consensus from investors suggesting a need to add a new metric. In addition, the Compensation Committee believes TSR remains the proper metric for this element of our executive pay program and is properly balanced by Adjusted EBITDA and safety in our cash bonus program, in addition to individual executive performance factors. The Compensation Committee considered the use of additional or alternative metrics for the PSU program, including EBITDA or ROIC, but ultimately chose to maintain the current TSR structure. Adding an EBITDA target to our PSUs would be duplicative of our short-term bonus program, and ROIC is not appropriate at this time because we are not making material capital investments. Finally, the Compensation Committee retained the TSR target payout for PSUs at the 50% percentile, rather than increasing the target payout requirement to be above the 50% percentile, given that coal industry conditions remain challenging.

 

 

 

 

 

·                  Continued evaluation of 2017 executive base salaries; only limited adjustments to 2017 LTIP and AIP target grant values for one executive officer for internal consistency — In January 2017, the Compensation Committee and independent directors determined not to increase the target LTIP or AIP grant values for any of our executives, other than for Mr. Pechersky to align his target values with those of our other executive vice presidents. The Compensation Committee plans to further evaluate any potential 2017 base salary adjustments at its April 2017 meeting, taking into account updated Aon Hewitt market survey data for our applicable Compensation Peer Group, the Say on Pay feedback, the additional responsibilities required of our smaller executive team in the 2017 year, and other factors.

 

 

 

 

 

·                  Enhanced executive compensation disclosures — We enhanced our proxy statement disclosures in a number of areas this year, including by highlighting the shareholder engagement process and the Compensation Committee’s responses.

 

 

 

 

 

·                  Terminated Profit Sharing Plan contributions to executives and other employees effective January 1, 2017 — As a result of challenging industry conditions, we made the decision in 2016 to terminate our Profit Sharing Plan, effective January 1, 2017.

 

 

 

 

 

·                  Additional Compensation Committee considerations — The Compensation Committee analyzed the rigor of appropriately challenging performance targets for our short-term and long-term incentive programs in a continued difficult industry environment, characterized by weak demand and pricing and increased volatility. The Compensation Committee also determined that consistency within the program from year to year was desirable, as significant changes to address volatile industry conditions could lead to significant misalignment of compensation with our performance.

 

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In addition to evaluating the feedback from our Say on Pay outreach process and the results of each year’s advisory vote on executive compensation, the Compensation Committee also considers many other factors in evaluating our executive compensation programs as discussed in this CD&A, including the Compensation Committee’s assessment of the interaction of our compensation programs with our corporate business objectives, evaluations of our programs by the Compensation Committee’s independent compensation consultant, and in years where we conduct extensive Compensation Peer Group reviews, data relating to pay practices of our Compensation Peer Group.

 

Setting Executive Compensation for 2016; Compensation Peer Group

 

The Compensation Committee historically has engaged Aon Hewitt, its independent compensation consultant, to conduct a review of the company’s executive officer compensation program in order to assist the Compensation Committee in determining whether any elements or amounts of the existing compensation program should be modified. With respect to 2016, however, the Compensation Committee ultimately determined that executive officer base salaries, target annual cash bonus opportunities (as a percentage of base salary) and target equity award values (as a percentage of base salary), as well as the overall structure and components of the executive compensation program, would remain the same in 2016 as in 2015, other than the limited market-based increase in our Chief Financial Officer’s base salary. Therefore Aon Hewitt’s engagement for 2016 included the following, at the Compensation Committee’s request:

 

·                                          Assist the Compensation Committee in staying abreast of industry, governance and regulatory developments impacting executive and director compensation;

 

·                                          Participate in Compensation Committee meetings as requested and provide the views of Aon Hewitt with regard to various agenda items considered by the Compensation Committee throughout 2016;

 

·                                          Assist the Compensation Committee in reviewing and updating the company’s Performance Peer Group, which is used for purposes of TSR comparisons and vesting requirements in the company’s performance share unit awards;

 

·                                          Assist with the Compensation Committee’s periodic compensation program risk assessment;

 

·                                          Assist with the company’s compensation disclosures in its annual proxy statement; and

 

·                                          Assist with the Compensation Committee’s Say on Pay investor outreach.

 

The Compensation Peer Group is used for the purpose of establishing the comparison targets for and review of the company’s executive compensation program. As discussed below, we have a separate Performance Peer Group for purposes of the TSR performance metrics used in our performance share units. Our Compensation Peer Group is designed to focus on coal industry peers and competitors for executive talent. Our Performance Peer Group is a broader group that reflects the equity performance of coal producers and also includes oil and gas companies because of the impact natural gas prices have on demand and pricing for domestic coal supplies.

 

Because the 2016 executive compensation program remained the same as in 2015, there were no formal updates to the Compensation Peer Group companies that the company previously utilized in 2015. For reference, below are the Compensation Peer Group companies identified in the 2015 year:

 

 

 

2015/2016 Compensation Peer Group

1)

 

Alpha Natural Resources, Inc*.

2)

 

Arch Coal Inc.*

3)

 

Consol Energy Inc.

4)

 

Westmoreland Resource Partners, LP (formerly Oxford Resource Partners, LP)

5)

 

Peabody Energy Corporation *

6)

 

Rhino Resource Partners LP

7)

 

Suncoke Energy Inc.

8)

 

Walter Energy, Inc.*

9)

 

Westmoreland Coal Co.

 


*                 Alpha Natural Resources, Inc. and Walter Energy, Inc. filed for bankruptcy in 2015.  Arch Coal Inc. and Peabody Energy Corporation filed for bankruptcy during 2016.

 

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Key Elements of Our 2016 Executive Compensation Program

 

The following table highlights the key elements of our 2016 executive compensation program and the primary purpose of each element. Each element set forth in the table below is discussed in further detail in this CD&A.

 

Element

 

Objectives and Basis

 

Key Features

Base Salary

 

·                  Provide base compensation that is competitive for each position to reward and motivate individual performance.

 

·                  Targeted to be in a range around the 50th percentile of our Compensation Peer Group, with the opportunity for enhanced compensation for superior individual performance.

·                  Varies by executive based upon individual skills, experience, responsibilities of the position, performance and other factors.

 

 

 

 

 

Annual Incentive Compensation (Cash)

 

·                  Provide short term rewards for achieving annual operating, financial and personal performance objectives.

·                  Align executive officers’ interests with those of our stockholders by promoting strong annual results through maximizing revenue and operating efficiency.

·                  Retain executive officers by providing market-competitive compensation.

 

·                  Targeted at a level that will provide total direct compensation opportunities (base + annual incentive + equity awards) in a range around the 50th percentile of our Compensation Peer Group’s total direct compensation.

·                  Cash incentive based on achievement of company financial and safety targets.

·                  A portion of the cash incentive is based on individual performance as determined by the Compensation Committee.

·                  Actual payout can vary from 0% to 200% of the target amount.

 

 

 

 

 

Long-Term Incentive Awards (Equity)

 

·                  Align executives’ interests with stockholders’ interests by linking a substantial part of each executive officer’s compensation to long-term corporate performance.

·                  Provide ownership opportunities which promote retention and enable us to attract and motivate our executive officers.

·                  Retain executive officers through multi-year vesting of equity grants.

 

·                  Targeted at a level that will provide total direct compensation opportunities (base + annual incentive + equity awards) in a range around the 50th percentile of our Compensation Peer Group’s total direct compensation.

·                  Utilizes different equity types (RSUs and PSUs) to balance multiple objectives. Stock options were eliminated from the equity award mix after 2014.

·                  Long-term equity awards generally vest 100% at the end of a three-year period. PSUs also incorporate relative and absolute TSR requirements for any vesting.

 

Base Salary

 

Base salaries are generally reviewed annually based upon a detailed review of the compensation for comparable positions of our Compensation Peer Group and other market data provided from time to time by the Compensation

 

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Committee’s independent compensation consultant. In addition, the Compensation Committee assesses individual performance, experience, responsibilities and time in position. For 2016, no changes were made to executive officer base salaries (other than with respect to Mr. Hill) and, therefore, the Compensation Committee did not conduct a market comparison for base salaries. Mr. Hill received a limited market increase to his base salary as a result of his earlier promotion to Chief Financial Officer. Below are the 2016 annual base salaries for our named executive officers:

 

Base Salary

 

Name

 

2016 Annual
Base Salary

 

2015 Annual
Base Salary

 

Colin Marshall

 

$

765,000

 

$

765,000

 

Gary Rivenes

 

$

470,000

 

$

470,000

 

Heath Hill

 

$

375,000

 

$

350,000

 

Bryan Pechersky

 

$

360,000

 

$

360,000

 

Todd Myers

 

$

310,000

 

$

310,000

 

 

Annual Incentive Compensation and Process for Setting Rigorous Performance Objectives

 

Our AIP is our cash incentive plan, which has a one-year performance period. Awards under the plan are paid based on actual performance against pre-established company targets that are approved in advance by the Compensation Committee and also include a personal performance component. In accordance with the plan, annual incentive compensation is determined after the completion of each fiscal year.

 

In setting the performance objectives for 2016, the Compensation Committee considered a variety of factors, including (i) the continued importance of safety in the company’s culture and the desire to continuously improve the company’s safety record, (ii) setting financial performance targets at a level that is rigorous and reflects the ongoing challenging external environment for the coal industry and weak demand and pricing, (iii) appropriately incentivizing and compensating executive officers, and (iv) the importance of holding each executive accountable for his individual contribution to our success and aligning our executive pay to performance.

 

As in prior years, the target bonus percentage amounts (“target”) under the AIP for 2016 awards were based on a multiple of each executive’s base salary for 2016. For 2016, no changes were made to executive officer target bonus percentage amounts, therefore the Compensation Committee did not conduct a market comparison for annual incentive bonuses.

 

The following table provides the 2016 target multiple, as well as potential payments which could have been made upon the achievement of a threshold, target or maximum level of performance for each of our named executive officers.

 

2016 Target AIP Opportunities

 

Name

 

2016 Target
Award (% of
Base Salary)

 

2016 Threshold:
50% of Target
Award ($)

 

2016 Target:
100% of Target
Award ($)

 

2016 Maximum:
200% of Target
Award ($)

 

Colin Marshall

 

100

 

382,500

 

765,000

 

1,530,000

 

Gary Rivenes

 

75

 

176,250

 

352,500

 

705,000

 

Heath Hill

 

75

 

140,625

 

281,250

 

562,500

 

Bryan Pechersky

 

60

 

108,000

 

216,000

 

432,000

 

Todd Myers

 

60

 

93,000

 

186,000

 

372,000

 

 

The measurement objectives for the plan were established at the beginning of 2016 by the Compensation Committee. There are three components that determined 2016 awards under the AIP: (1) Adjusted EBITDA (weighted 60%), (2) safety (weighted 20%) and (3) personal performance (weighted 20%).

 

The threshold, target and maximum for the Adjusted EBITDA and safety components, including actual results achieved for each component for 2016, are shown in the following table:

 

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2016 Adjusted EBITDA and Safety Performance Targets

 

Metric

 

Threshold

 

Target

 

Maximum

 

Actual 2016
Result

 

Adjusted EBITDA (in millions) (1)

 

$

50

 

$

97

 

$

133

 

$

99

 

Safety (AIFR) (2)

 

0.59

 

0.47

 

0.35

 

0.25

 

 


(1)         Refer to Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures” in our Form 10-K filed on February 16, 2017 for additional information regarding and a reconciliation of Adjusted EBITDA.

 

(2)         See below for a discussion of the differences between our AIFR calculation for the AIP compared to the MSHA methodology.

 

In establishing Adjusted EBITDA targets for 2016, as in prior years, the Compensation Committee reviewed a sensitivity analysis to the key business drivers of Adjusted EBITDA. This sensitivity analysis sought to identify opportunities and risks for each of the key business drivers to establish rigorous threshold, target, and maximum Adjusted EBITDA levels. Key business drivers included sales volumes, coal prices and operating costs, including diesel fuel, labor and explosives costs, logistics revenues and transportation costs. The Adjusted EBITDA goal for 2016 was lower than 2015 and reflected the expected continued challenging environment for coal demand and pricing for 2016 and corresponded to our budgeted Adjusted EBITDA in our 2016 annual operating plan, as well as our expectation that no export shipments would occur in 2016.

 

The table below reflects the Adjusted EBITDA goals we have set in recent years, along with the actual Adjusted EBITDA result for each applicable year. The Compensation Committee believes the target performance goal for each year was rigorous and reflected the ongoing challenging external environment for the coal industry. As shown in the table below, the goal setting process has produced performance targets that have resulted in below-target payouts on the Adjusted EBITDA goal in three of the last five years.

 

2012-2016 Adjusted EBITDA Achievement Against Targets

($ in millions)

 

Year

 

Threshold

 

Target

 

Maximum

 

Actual Result

 

Achievement
Above or

Below Target

 

2016

 

$

50

 

$

97

 

$

133

 

$

99

 

Above

 

2015

 

$

76

 

$

141

 

$

196

 

$

123

 

Below

 

2014

 

$

131

 

$

195

 

$

262

 

$

202

 

Above

 

2013

 

$

165

 

$

244

 

$

315

 

$

219

 

Below

 

2012

 

$

278

 

$

361

 

$

427

 

$

339

 

Below

 

 

Taking into account the recommendation of management, the Compensation Committee again used a rolling three-year average of our AIFR to establish the safety threshold. Target and maximum levels were established by reducing the threshold number by 20% and 40%, respectively. Accordingly, despite our consistently strong safety performance, our executives may nevertheless receive below target bonus payouts or none at all for safety, such as the 0% safety payout in 2015.

 

In general, we calculate our AIFR using the same methodology used to report monthly to MSHA, which is calculated by multiplying the number of reportable injuries times 200,000, divided by the total number of hours of employee exposure. The number we report to MSHA is required to include only the employees at our three mines and does not include contractors, visitors or employees at our non-mine sites. However, the safety number we use for our AIP is based on all our employees and includes contractors and all other visitors to all our sites to better reflect our core values and commitment to the safety of everyone involved in our business. As such, our number for purposes of our AIP target has often differed in past years from the MSHA number we reported publicly. With respect to the 2016 year, however, the AIFR calculation and the MSHA calculation were both 0.25, which was a record safety achievement for us. The maximum safety component achievement reflects our strong safety performance last year and was a significant contributing factor to the 2016 AIP payments exceeding 2015 AIP payments.

 

Personal performance is evaluated and determined by the Compensation Committee.  With respect to the senior executive officers other than himself, our CEO provided his recommendations for these amounts to the Compensation Committee for its consideration. The personal performance component is evaluated against:

 

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·                  the responsibilities of each executive’s position,

 

·                  achievement of annual departmental goals,

 

·                  feedback from peers and other co-workers,

 

·                  assessments of our independent directors,

 

·                  annual performance ratings, and

 

·                  the executive’s contributions, individually and as a member of the executive team, to achieving significant company accomplishments during the year, which are highlighted above.

 

These factors are not individually weighted.  Rather, the Compensation Committee makes its ultimate determination for each executive based on the totality of these factors, as determined in its judgment.  In 2016, the executive team was responsible for successfully achieving a significant restructuring of our balance sheet and future contractual commitments and adjusting our business and cost structure to depressed industry conditions, weak pricing and increased variability in shipment rates.  As a result of this evaluation by the Compensation Committee and other independent directors, and taking into account the recommendations of our CEO for the other executive officers, our named executive officers received amounts ranging from 175% to 180% of their targeted amounts for their personal performance components.

 

The following table provides a quantitative supplemental breakdown of the three components that make up the named executive officers’ actual 2016 award under our AIP. Both the dollar amount of the award and the award as a percentage of each named executive officer’s base salary are displayed for each component. Our record safety performance in 2016 resulted in a maximum 200% achievement on that component of the bonus, thereby leading to increased year-over-year bonuses in 2016 compared to 2015.

 

2016 AIP Performance Goal Achievement

 

 

 

ADJUSTED
EBITDA
Weighting:
60%

Result as %
of Target:
104%

 

SAFETY
Weighting:
20%

Result as %
of Target:
200%

 

PERSONAL
PERFORMANCE
Weighting: 20%

 

 

 

Total 2016 Award

 

 

 

Dollar
Amount of
Award($)

 

Dollar
Amount of
Award ($)

 

Result as
% of
Target

 

Dollar
Amount
of
Award
($)

 

Total
Performance
Score

 

($)

 

As a %
of Base
Salary

 

Colin Marshall

 

480,274

 

306,884

 

180

%

276,196

 

139

%

1,063,354

 

139

%

Gary Rivenes

 

221,301

 

141,407

 

180

%

134,336

 

141

%

497,044

 

106

%

Heath Hill

 

176,572

 

112,826

 

180

%

101,543

 

139

%

390,941

 

104

%

Bryan Pechersky

 

135,611

 

86,653

 

175

%

75,821

 

138

%

298,085

 

83

%

Todd Myers

 

116,776

 

74,617

 

175

%

65,290

 

138

%

256,683

 

83

%

 

Long-Term Equity-Based Awards

 

The LTIP provides for the grant of a variety of equity-based awards, including share based awards and options, and awards contingent on TSR performance. The LTIP is intended to promote our long-term success and increase long-term stockholder value by attracting, motivating and retaining our non-employee directors, officers and employees. Additionally, to better align our executive officers’ long-term interests with those of our stockholders, the LTIP does not allow for the repricing of stock options after they are awarded unless approved by our stockholders. For additional information regarding the terms of the Amended LTIP, as it is proposed to be amended by the First Amendment, please see “Proposal V—Approval of First Amendment to the Amended LTIP to Increase the Number of Authorized Shares and Extend the Term” and “Proposal VI—Re-approval of the Section 162(m) Material Terms of the Amended LTIP, as amended by the First Amendment.”

 

We intend for a significant portion of our total compensation provided to our executive officers to consist of equity-based compensation. In 2015, the Compensation Committee evaluated the intended motivational and alignment purposes of stock options in light of ongoing depressed equity values in our industry and the dilutive

 

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impact of options, and decided to eliminate stock options as a component of the equity program for 2015. Instead, the Compensation Committee re-directed the targeted long-term equity value towards a combination of restricted stock units (40%) and performance share units (60%), which award mix was continued for 2016, to accomplish several objectives, including:

 

·                  Providing an incentive for our executive officers to grow long-term stockholder value;

 

·                  Providing an incentive for our executive officers to preserve long-term stockholder value and avoid excessive risks; and

 

·                  Positively impacting executive officer retention.

 

Equity Award Material Terms—We grant equity awards to our executives and certain other employees annually, generally in March of each year following our year-end earnings announcement. All outstanding equity awards vest on an accelerated basis in connection with certain types of terminations of employment following a change in control. For information regarding the terms of this accelerated vesting, please see “Potential Payments Upon Termination or Change in Control; Double-Trigger Change in Control Requirements.”

 

In determining awards for 2016, the Compensation Committee considered the number of shares then remaining under the LTIP, the anticipated needs for future settlement of 2016 awards, the potential dilution that would result from granting historical long term incentive values at then-prevailing stock prices and alternatives to maintain current long term incentive award levels, including using cash-settled awards.  While maintaining the same long term incentive target award values for 2016 and the same percentage split between restricted stock units and performance share units, the Compensation Committee also decided to grant the 2016 restricted stock units and performance share units with the flexibility to settle those awards upon vesting in shares of common stock, cash or a combination of common stock and cash, similar to the 2015 awards.  However, to balance the goals of our executive compensation program against the potential dilution of the long term incentive awards due to our then-prevailing low stock price, the 2016 performance share units were awarded with the expectation that such units would be settled in cash upon any vesting in 2019.

 

Restricted Stock Units—RSUs vest on the basis of time as determined by the Compensation Committee, which is three years in the case of all awards granted to date. As discussed above, for 2015 and 2016, the Compensation Committee retains the discretion to pay any vested awards in shares of our common stock, cash or a combination of shares and cash. A recipient will not receive dividend equivalents, if any, on RSUs until the RSUs have fully vested and, upon the vesting date, the recipient will be paid any dividend equivalents that may have accrued on the RSUs. To date, our company has never paid dividends on our common stock.

 

Performance Share Units—The performance share units granted in 2016 are substantially similar to the 2015 performance share units, with the following updates: (1) the agreements were modified to provide for a rank order  (one to seventeen) rather than a percentile ranking, and (2) the Performance Peer Group was updated for 2016.  Our performance share units require a minimum relative stock performance compared to our Performance Peer Group (at least 25th percentile relative performance for our 2016 awards) below which no shares are earned. The awards also have a maximum opportunity above which no additional shares are earned (94th percentile and above relative performance for our 2016 awards). Payouts also depend on whether the company has a positive TSR for the performance period with the vesting level capped at target if there is a negative absolute TSR over the three-year performance period for the 2016 award. Performance share units are intended to provide market-competitive compensation to our executive officers and to align their incentives with our longer-term stock performance. The performance conditions are established by the Compensation Committee at the outset of the performance period, which is currently three years. The following table shows the performance levels and payout opportunities for the 2016-2018 performance cycle (without consideration to the cap explained above in the event of a negative TSR):

 

TSR Company Ranking

 

Percentile Ranking

 

Payout Percentage of Target Award

 

Company 1

 

100

%

200

%

Company 2

 

94

%

200

%

Company 3

 

88

%

186

%

Company 4

 

81

%

171

%

Company 5

 

75

%

157

%

 

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Company 6

 

69

%

143

%

Company 7

 

63

%

129

%

Company 8

 

56

%

114

%

Company 9

 

50

%

100

%

Company 10

 

44

%

88

%

Company 11

 

38

%

75

%

Company 12

 

31

%

63

%

Company 13

 

25

%

50

%

Company 14

 

19

%

0

%

Company 15

 

13

%

0

%

Company 16

 

6

%

0

%

Company 17

 

0

%

0

%

 

The recipient will earn dividend equivalents, if any, on the performance share units, which will be reinvested into additional performance share units and will be subject to the same vesting conditions as the underlying performance share units. To date, our company has never paid dividends on our common stock. As discussed above, for 2015 and 2016, the Compensation Committee retains the discretion to pay any vested awards in shares of our common stock, cash or a combination of shares and cash. For the 2016 performance share units, the Compensation Committee currently expects to settle any such vested awards in cash.

 

The performance condition that the Compensation Committee determined to use in order to more closely align this element of the named executive officers’ compensation with our stockholders’ interests is relative total stockholder return (“RTSR”), which is calculated by comparing our TSR to the TSR of our Performance Peer Group over the performance period. TSR is calculated as follows:

 

TSR (1) =

End of Period Share Price - Beginning of Period Share Price + Dividends (2)

 

Beginning of Period Share Price

 


(1)         Share prices are calculated based on a multi-day average, as provided by the relevant award agreement.

 

(2)         Assumes the reinvestment of dividends paid in the applicable shares during the performance period, as provided by the relevant award agreement.

 

Performance Peer Group—We maintain a separate Performance Peer Group for purposes of the TSR performance metrics used in our performance share units. Our Compensation Peer Group is designed to focus on coal industry peers and competitors for executive talent, while our Performance Peer Group is a broader group that reflects the equity performance of coal producers and also includes oil and gas companies because of the impact natural gas prices have on demand and pricing for domestic coal supplies.

 

In connection with the award of performance share units in 2016, the Compensation Committee asked Aon Hewitt to assist in reviewing the Performance Peer Group used to measure our RTSR, and six peers from the 2015 Performance Peer Group were removed due to the following reasons:  Alpha Natural Resources, Sabine Oil & Gas, and Walter Energy declared bankruptcy in 2015; Arch Coal declared bankruptcy in January 2016; and SandRidge Energy and Penn Virginia were delisted by the NYSE and moved to NASDAQ’s pink sheets in January 2016.  The following three companies were identified as new Performance Peer Group members:  Antero Resources Corporation, Hallador Energy Company, and Range Resources Corporation.   The Compensation Committee considered the relative size of the included companies, as well as the overall mix of coal and oil and gas companies.

 

In 2016, the Compensation Committee approved the following Performance Peer Group:

 

 

 

2016 PSU Performance Peer Group

1)

 

Alliance Resource Partners LP

2)

 

Antero Resources Corporation

3)

 

Cabot Oil & Gas Corporation

4)

 

Consol Energy

5)

 

EQT Corporation

6)

 

Foresight Energy LP

7)

 

Hallador Energy Company

8)

 

Newfield Exploration Co.

9)

 

Noble Energy, Inc.

 

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2016 PSU Performance Peer Group

10)

 

Peabody Energy Corporation

11)

 

Range Resources Corporation

12)

 

Rhino Resource Partners LP

13)

 

SM Energy Company

14)

 

Suncoke Energy Inc.

15)

 

Westmoreland Coal Co.

16)

 

Whiting Petroleum Corp.

 


*                 Italics denote companies that are common as between the Performance Peer Groups and the 2015/2016 Compensation Peer Group.

 

Results of Completed PSU Performance Cycles—The following table shows the actual vesting, if any, for our completed PSU award cycles. In addition to the below-target vesting each cycle, the value of any vested shares reflects the substantial reduction in our stock price since the grant date targeted values. Accordingly, the Compensation Committee believes there is a strong pay for performance alignment in our long-term incentive plan.

 

Completed PSU Award Cycles (Calendar Years)

 

Cloud Peak
Energy Relative
TSR

 

Cloud Peak
Energy Absolute
TSR

 

Vesting (% of
Target)

 

Payout Date (if
applicable)

 

2014-2016

 

51st percentile

 

-66

%

51

%

March 2017

 

2013-2015

 

43rd percentile

 

-88

%

43

%

March 2016

 

2012-2014

 

48th percentile

 

-50

%

48

%

March 2015

 

2011-2013

 

60th percentile

 

-23

%

0

%

 

 

Equity Awards for 2016—Our equity program is based on the award of equity targeted at the time of grant to be equal to a certain percentage of the executive’s base salary, or “target multiple.” In 2016, equity awards were in the form of (1) restricted stock units (40%), and (2) performance share units (60%). The Compensation Committee made no changes to the 2016 target multiples for any of the named executive officers.

 

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The following table provides the LTIP target multiples for 2016 for each of the current named executive officers:

 

Name

 

2016 Target as
% of Base
Salary

 

% of Target:
Restricted
Stock Units

 

% of Target:
Performance
Share Units
(at Threshold)

 

% of Target:
Performance
Share Units
(at Target)

 

% of Target:
Performance
Share Units
(at Maximum)

 

Colin Marshall

 

300

 

40

 

30

 

60

 

120

 

Gary Rivenes

 

200

 

40

 

30

 

60

 

120

 

Heath Hill

 

200

 

40

 

30

 

60

 

120

 

Bryan Pechersky

 

150

 

40

 

30

 

60

 

120

 

Todd Myers

 

100

 

40

 

30

 

60

 

120

 

 

Stock Ownership Guidelines and Holding Requirements—In January 2011, the Compensation Committee established stock ownership guidelines for our executive officers and certain other employees. These guidelines reinforce the importance of aligning the interests of our executive officers with the interests of our stockholders. The guidelines are expressed in terms of the value of their equity holdings as a multiple of each named executive officer’s base salary, as follows:

 

Name

 

Stock Ownership
Guideline

 

Dollar Value of
Holding
Requirement
(based on year-
end 2016 base
salary)

 

Colin Marshall

 

5X Base Salary

 

$

3,825,000

 

Gary Rivenes

 

3X Base Salary

 

$

1,410,000

 

Heath Hill

 

3X Base Salary

 

$

1,125,000

 

Bryan Pechersky

 

3X Base Salary

 

$

1,080,000

 

Todd Myers

 

2X Base Salary

 

$

620,000

 

 

Equity interests that count toward the satisfaction of the ownership guidelines include stock owned outright by the employee or jointly owned, unvested restricted stock or stock units, and, to the extent provided, stock owned in a company-sponsored retirement plan. Although the employees are not subject to a minimum number of years in which to achieve their ownership goals, they are generally prohibited from selling or transferring any stock granted by the company other than to pay the exercise price of stock options or to pay taxes owed as a result of vesting or settlement of an award prior to the time that they meet the ownership guidelines. Per our Stock Ownership Guidelines, ownership is calculated based on an individual’s annual base salary and the average share price of the seven trading days immediately prior to the date of the planned sale transaction. After they have met the ownership guidelines, they are also generally prohibited from selling or transferring stock granted by the company that would cause them to drop below their ownership guideline level unless the transaction was also related to the payment of exercise prices or taxes on equity awards.

 

Additionally, we have stock ownership guidelines for our non-employee directors. For information regarding these guidelines, please see “Director Compensation” below.

 

Clawback Policy

 

Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) requires the SEC to direct national securities exchanges to prohibit the listing of any security of an issuer that fails to develop and implement a clawback policy. Although these rules have not been finalized, in April 2013, the Board approved and adopted the Cloud Peak Energy Inc. Clawback Policy (the “Clawback Policy”). Under the Clawback Policy, if the Board determines, after conducting a reasonable investigation, any wrongful conduct such as fraud, gross negligence, or intentional misconduct was committed by, or attributable to, any current or former senior executive officer or employee who received an award or payout under the LTIP or the AIP was a significant contributing factor to the company having to restate all or a portion of its publicly reported financial statements due to material non-compliance with any financial reporting requirement under the U.S. federal securities laws (which shall exclude any restatement caused by a change in applicable accounting rules or interpretations), then the Board shall have the right to take, or cause to be taken, in its sole discretion, such action as it deems necessary to remedy the wrongful conduct and seek to prevent its recurrence. Remedies may result in the reduction, cancellation,

 

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forfeiture or recoupment of such grants if certain specified events occur, including, but not limited to, an accounting restatement due to the company’s material non-compliance with financial reporting regulations.

 

On July 1, 2015 the SEC issued proposed clawback rules under the Dodd-Frank Act. The proposed rules require the adoption and disclosure of a clawback policy that provides that in the event a company is required to prepare an accounting restatement due to material noncompliance with any financial reporting requirement under securities laws, that company will recover from any of its current or former executive officers who received incentive-based compensation during the preceding three-year period based on the erroneous data any such compensation in excess of what would have been paid under the accounting restatement. We will continue to monitor developments as these rules are finalized and implemented and we will evaluate any necessary changes to our current Clawback Policy.

 

Insider Trading Policy; Prohibitions Against Hedging and Pledging

 

In addition to addressing other customary topics, our Insider Trading Policy prohibits company employees, directors and officers from engaging in certain transactions, including transactions in company or subsidiary debt securities, short sales of company securities, publicly-traded options, any hedging transactions and margin accounts and pledged securities. This policy does not allow for any exception (e.g., waivers that provide for pre-clearance or pre-approval) to the above provisions.

 

Other Benefits

 

Retirement and Health and Welfare—We offer the same types of retirement, health and welfare benefits to all of our employees, including to our executive officers, as part of our total executive compensation package. Our programs are designed to be competitive and cost-effective. It is our objective to provide core benefits, including medical, retirement, life insurance, and paid time off to all our employees and executive officers. Benefits programs are reviewed on a periodic basis by comparing against companies with which we directly compete, reviewing published survey information, and obtaining advice from various third party benefits consultants.

 

In 2016 our executive officers and other employees participated in our tax-qualified defined contribution savings plan, which we referred to as the Profit Sharing Plan. We terminated the Profit Sharing Plan effective January 1, 2017, therefore no employees, including the named executive officers, will receive Profit Sharing Plan benefits during the 2017 year.  With respect to our 401 (k) plan, in 2016 we provided a company match of up to the first 6% of the individual’s contributions, and a profit sharing contribution of 4% of base salary and a portion of the annual cash incentive for each of our employees, including our named executive officers.  With respect to the 2017 year, we increased the 401(k) matching contribution from 6% to 8% of the individual’s contributions.   We also offer an optional retiree medical plan that is designed to provide retiree medical benefits for our executive officers and other employees once they reach age 55 and have 10 years of continuous service combined with our predecessor, Rio Tinto.  This plan ends at age 65 and is replaced with an optional health reimbursement arrangement for retirees age 65 and above.

 

We also offer a non-qualified deferred compensation program (“NQDC Plan”) to the executive officers and select other high-level employees. The NQDC Plan was put in place to continue our efforts to remain competitive with our benefit programs and is designed to allow the deferral of pre-tax compensation in excess of the limits imposed by the Internal Revenue Service under our 401(k) and terminated Profit Sharing Plan. Participants are eligible to defer up to 80% of their base salary and 100% of their AIP bonus award earned during the year. Similar to our 401(k) plan, participants were eligible to receive a dollar-for-dollar company match of up to 6% of their deferrals during the 2016 year, which was increased to 8% for the 2017 year.  The NQDC Plan also provided a company contribution that was consistent with the design of our Profit Sharing Plan during 2016. All profit sharing contributions were terminated effective January 1, 2017. Additional information regarding the material terms of the NQDC Plan is set forth under “Executive Compensation Tables—Nonqualified Deferred Compensation.”

 

Employment Agreements—We have entered into employment agreements with all our named executive officers and other executive officers who report directly to our CEO. These employment agreements provide assurances as to position, responsibility, location of employment and certain compensation terms, which, if breached, would constitute “good reason” to terminate employment with us. Each agreement has a one-year term that will extend automatically for one year unless advance written notice by either party is provided. In addition, the agreements provide for:

 

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·                  Specified minimum base salaries;

 

·                  Participation in all of our employee benefit plans on the same basis as our other senior management;

 

·                  Termination benefits, including, in specified circumstances, severance payments; and

 

·                  Annual bonuses pursuant to our AIP and grants pursuant to our LTIP.

 

We have not entered into separate severance agreements with our executive officers and instead rely on the terms of the executive’s employment agreement and LTIP award agreements to dictate the terms of any severance and change in control arrangements. Our employment agreements do not provide for accelerated or enhanced cash payments or health and welfare benefits upon a change in control, but do provide for such payments upon the termination of the executive’s position by the executive for “good reason” or by our company “without cause,” which are defined in the employment agreements. Each of the executive officer’s LTIP award agreements set forth acceleration terms in the event of a termination within two years of a change in control or termination of the executive’s position by the executive for good reason or by us without cause. Additional information is set forth below under “Potential Payments upon Termination or Change in Control; Double-Trigger Change in Control Requirements.”

 

Perquisites—It is our policy to not grant perquisites to our named executive officers as a matter of good practice, although the Compensation Committee reserves the right to grant perquisites in the future if it finds that doing so furthers its compensation goals and objectives.

 

Changes in Executive Compensation Program for 2017

 

In January 2017, the Compensation Committee met to discuss certain 2017 executive compensation matters.  The Compensation Committee discussed our 2016 operational and financial performance, the significant restructuring achieved by our management team of our balance sheet, contractual commitments and our cost structure in 2016 to align with depressed and volatile industry conditions, the proposed budget for 2017, industry conditions and outlook, our compensation philosophy, investor feedback from our Say on Pay outreach, historical compensation adjustments (or lack thereof), realizable pay amounts compared to target amounts, individual executive performance, the rigor of performance targets in our incentive plans, and other matters.

 

Following these discussions, the Compensation Committee approved the 2017 AIP target awards and the 2017 LTIP target awards for each named executive officer as a percentage of salary. The 2017 target AIP and LTIP awards as a percentage of base salary were maintained at the same percentages as noted above for 2016 other than with respect to Mr. Pechersky.  Mr. Pechersky’s 2017 AIP target was set at 75% of base salary and his 2017 LTIP target was set at 200% of base salary, consistent with the target percentages for our other executive vice presidents.  The Compensation Committee did not approve any changes to the named executive officers’ base salaries at the January 2017 meeting.

 

In January 2017, the Compensation Committee engaged Aon Hewitt to conduct a detailed updated market analysis with respect to executive compensation programs at our Compensation Peer Group.  At a subsequent Compensation Committee meeting, Aon Hewit recommended, and the Compensation Committee approved, an updated Compensation Peer Group for 2017 and a 2017 Performance Peer Group with respect to the 2017 PSUs. The Compensation Committee expects to review additional Aon Hewitt compensation survey data at a meeting in April 2017, and additional changes, if any, to the executive compensation program could occur at such time or later in 2017.

 

Tax Deductibility of Certain Executive Compensation

 

Pursuant to Section 162(m) of the Code (“Section 162(m)”), certain compensation paid to our CEO and our three most highly compensated executive officers (other than our CFO) in excess of $1 million is not tax deductible, except to the extent it constitutes performance-based compensation. We have designed certain elements of compensation for our executive officers to be performance-based compensation under Section 162(m) in order to maintain the deductibility of that compensation when we have determined that performance-based compensation was appropriate for those executive officers. To this end, we previously requested that our stockholders approve the material terms of our LTIP at the 2016 annual meeting of stockholders and the AIP at the 2013 annual meeting of stockholders for purposes of Section 162(m), as periodic stockholder approval of the material terms of these two

 

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plans is necessary for us to design awards as performance-based compensation for our covered executive officers, if our Compensation Committee determines in its discretion that particular awards under those plans should qualify for Section 162(m) tax deductibility. In addition and in accordance with the Section 162(m) requirements, we are asking our stockholders at the 2017 Annual Meeting to re-approve the material terms of the Amended LTIP, as amended by the First Amendment. Please see “Proposal VI—Re-approval of the Section 162(m) Material Terms of the Amended LTIP, as amended by the First Amendment.”

 

The Compensation Committee considers its primary goal to design compensation strategies that further the best interests of our stockholders. In certain cases, it may determine that the amount of tax deductions lost is not significant when compared to the potential opportunity a compensation program provides for creating long-term stockholder value. The Compensation Committee therefore retains the ability to evaluate the performance of our executive officers and to pay appropriate compensation, even if some or all of it may be non-deductible. For example, the Compensation Committee has retained the 20% personal performance component of the AIP awards even though that portion is not deductible as performance-based compensation under Section 162(m). The Compensation Committee may similarly decide to award compensation or make other compensation determinations, including making or modifying awards under our LTIP and AIP, that do not meet the deductibility requirements for performance-based compensation under Section 162(m).

 

Compensation Risk Assessment

 

In accordance with the requirements of Item 402(s) of Regulation S-K, to the extent that risks may arise from our compensation policies and practices for our employees that are reasonably likely to have a material adverse effect on us, we are required to discuss our policies and practices for compensating our employees (including our employees that are not named executive officers) as they relate to our risk management practices and risk-taking incentives. We have determined that our compensation policies and practices for our employees, including our named executive officers, are not reasonably likely to have a material adverse effect on us. Our Compensation Committee routinely assesses our compensation policies and practices and takes this consideration into account as part of its review.

 

Important Note Regarding Compensation Tables

 

The following compensation tables in this Proxy Statement have been prepared pursuant to SEC rules. Although some amounts (e.g., salary and non-equity incentive plan compensation) represent actual dollars paid to an executive, other amounts are estimates based on certain assumptions about future circumstances (e.g., payments upon termination of an executive’s employment) or they may represent dollar amounts recognized for financial statement reporting purposes in accordance with accounting rules, but do not represent actual dollars received by the executive (e.g., dollar values of stock awards and option awards). The footnotes and other explanations to the Summary Compensation table and the other tables herein contain important estimates, assumptions and other information regarding the amounts set forth in the tables and should be considered together with the quantitative information in the tables. In addition, please refer to the tables above under the heading “LTIP Awards — Grant Date Targeted Value vs Realized (Realizable) Value” for information regarding actual realized or estimated year-end 2016 LTIP values compared to the targeted grant date values.

 

Executive Compensation Tables

 

The following table sets forth information regarding compensation for each of our named executive officers for fiscal years 2014 through 2016, to the extent that the executive was a named executive officer for such year.

 

2016 Summary Compensation Table

 

Name and Principal Position

 

Year

 

Salary ($)

 

Stock Awards
($) (1)

 

Option
Awards ($) (2)

 

Non-Equity
Incentive Plan
Compensation
($) (3)

 

All Other
Compensation
($) (4)

 

Total ($)

 

Colin Marshall (5)

 

2016

 

765,003

 

2,295,008

 

 

1,063,354

 

131,324

 

4,254,689

 

President and Chief

 

2015

 

765,003

 

2,589,006

 

 

665,600

 

171,223

 

4,190,832

 

Executive Officer

 

2014

 

740,002

 

2,025,236

 

554,994

 

954,700

 

163,573

 

4,438,505

 

 

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Name and Principal Position

 

Year

 

Salary ($)

 

Stock Awards
($) (1)

 

Option
Awards ($) (2)

 

Non-Equity
Incentive Plan
Compensation
($) (3)

 

All Other
Compensation
($) (4)

 

Total ($)

 

Gary Rivenes

 

2016

 

470,018

 

940,033

 

 

497,044

 

73,114

 

1,980,209

 

Executive Vice

 

2015

 

470,018

 

1,060,475

 

 

306,700

 

92,738

 

1,929,931

 

President and Chief

 

2014

 

450,008

 

821,053

 

224,998

 

435,400

 

88,012

 

2,019,471

 

Operating Officer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Heath Hill (6)

 

2016

 

375,003

 

750,005

 

 

390,941

 

53,500

 

1,569,449

 

Executive Vice

 

2015

 

282,690

 

789,684

 

 

180,692

 

50,287

 

1,303,353

 

President and Chief

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial Officer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bryan Pechersky

 

2016

 

360,006

 

540,008

 

 

298,085

 

52,272

 

1,250,371

 

Executive Vice President,

 

2015

 

360,006

 

609,203

 

 

183,700

 

66,142

 

1,219,051

 

General Counsel and

 

2014

 

350,002

 

319,253

 

87,497

 

268,900

 

65,120

 

1,090,772

 

Corporate Secretary

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Todd Myers (6)

 

2016

 

310,003

 

310,001

 

 

256,683

 

44,723

 

921,410

 

Senior Vice President,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Marketing and Business Development

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


(1)         The amounts reported in the “Stock Awards” column for 2016 reflect the aggregate grant date fair value of the RSU and PSU awards granted under the LTIP during fiscal 2016, computed in accordance with FASB ASC Topic 718, excluding the effect of estimated forfeitures. The value of PSUs are based upon the estimated outcome of the market condition applicable to the awards as of the time of grant as required by FASB ASC Topic 718, which was the target level for 2016. If the grant date estimate was calculated using maximum levels, the PSUs granted in 2016 would have been included at the following grant date fair value amounts: $3,672,012 for Mr. Marshall; $1,504,053 for Mr. Rivenes; $1,200,009 for Mr. Hill; $864,012 for Mr. Pechersky; and $496,002 for Mr. Myers. Further details of the methods and assumptions used for purposes of valuing these awards are included in Note 20 of the Notes to Consolidated Financial Statements included in our Form 10-K for fiscal 2016. “Stock Award” amounts reflected for 2014 may differ from dollar values for that year included in our proxy statements prior to 2016 in order to conform our valuation methodologies to the FASB ASC Topic 718 values.

 

(2)         The Compensation Committee did not award stock options to any of the named executive officers for 2015 or 2016. The amounts reported in the “Option Awards” column for 2014 reflect the aggregate grant date fair value of the stock option awards granted under the LTIP during the 2014 year, computed in accordance with FASB ASC Topic 718.

 

(3)         For 2016, the amounts shown represent payments earned by each named executive officer under our AIP for performance during the year. Actual payments were made in March 2017.

 

(4)         The amounts shown in the “All Other Compensation” column with respect to 2016 are more fully described in the 2016 All Other Compensation table included below.

 

(5)         Mr. Marshall does not receive any additional compensation for his service on the Board.

 

(6)         Mr. Hill was not a named executive officer for 2014 and his compensation for 2014 is therefore not included in this table. Mr. Myers was not a named executive officer during the 2014 or 2015 year and his compensation for those years is therefore not included in this table.

 

2016 All Other Compensation

 

Name

 

Company
Contrib. to
401(k) Plan
($)

 

Company
Contrib. to
Profit
Sharing Plan
($)(a)

 

Company
Contrib. to
NQDC Plan
($)

 

Company

Profit
Sharing
Contrib.
Under
NQDC Plan
($)(a)

 

Other (b) ($)

 

Total ($)

 

Colin Marshall

 

15,900

 

10,600

 

69,936

 

33,312

 

1,576

 

131,324

 

Gary Rivenes

 

15,900

 

10,600

 

30,703

 

14,335

 

1,576

 

73,114

 

Heath Hill

 

15,487

 

10,600

 

17,860

 

8,018

 

1,535

 

53,500

 

Bryan Pechersky

 

15,492

 

10,600

 

17,130

 

7,474

 

1,576

 

52,272

 

Todd Myers

 

15,900

 

10,600

 

11,964

 

4,888

 

1,371<