Business Context and Reporting Period
This Form 8-K is a current report filed by Brown Shoe Company, Inc. on March 18, 2013, regarding events occurring on March 14, 2013. The filing details the approval of long-term incentive awards and discretionary bonuses for executive officers by the Compensation Committee.
Key Financial Metrics and Compensation Details
The filing does not report consolidated revenue, profit, cash flow, or debt metrics for the company. Instead, it discloses specific compensation targets for Named Executive Officers (NEOs) under the 2011 Incentive Stock and Compensation Plan.
| Executive Officer | Title | Target Performance Units | Target Cash Award |
|---|---|---|---|
| Diane M. Sullivan | President and CEO | 26,775 | $964,800 |
| Russell C. Hammer | SVP and CFO | 6,575 | $233,350 |
| Richard M. Ausick | Division President, Retail | 12,000 | $426,000 |
| Douglas W. Koch | SVP, Chief Talent and Strategy Officer | 4,700 | $167,000 |
| John W. Schmidt | Division President, Contemporary Fashion Brands | 4,000 | $141,500 |
Additionally, a discretionary bonus of $100,000 was awarded to John W. Schmidt under the Annual Incentive Plan (AIP).
Material Changes and Plan Structure
A material change in the compensation structure involves the division of long-term awards into four distinct performance periods: fiscal 2013, fiscal 2014, fiscal 2015, and a cumulative three-year period (2013-2015). One-fourth of the target award is allocated to each period. Payouts are contingent on two metrics:
- Primary Metric: Adjusted EPS (consolidated diluted earnings per share, adjusted for non-recurring losses/recoveries).
- Secondary Metric: Consolidated net sales.
The maximum payout opportunity is 200% of the target, while failure to meet minimum levels results in forfeiture. Payouts are deferred until after the three-year period, provided the executive remains employed.
Outlook, Risks, and Management Commentary
The Compensation Committee retains discretion to reduce payout percentages based on the quality of earnings. A specific contingency exists regarding financial restatements: if financial statements are restated due to an executive's malfeasance, the Committee may require the return of proceeds earned from these awards. While several business units did not earn payouts under the standard AIP, the Committee exercised discretion to award bonuses to individuals deemed to have made significant contributions.
Investor Verification Checklist
- Verify the specific Adjusted EPS and net sales thresholds required to achieve the 200% maximum payout.
- Confirm the definition of "non-recurring losses and recoveries" used to calculate Adjusted EPS.
- Review the full terms of the 2011 Incentive Stock and Compensation Plan (Exhibit 10.1) for vesting and forfeiture details.
- Assess the impact of the deferred payout structure on executive retention and cash flow obligations.