Proxy Statement (Form DEF 14A)
SECURITIES AND EXCHANGE COMMISSION
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
| ☑ | Filed by the Registrant | ☐ | Filed by a party other than the Registrant |
| CHECK THE APPROPRIATE BOX: | ||
| ☐ | Preliminary Proxy Statement | |
| ☐ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |
| ☑ | Definitive Proxy Statement | |
| ☐ | Definitive Additional Materials | |
| ☐ | Soliciting Material under §240.14a-12 | |
(
(
| PAYMENT OF FILING FEE (CHECK ALL BOXES THAT APPLY): | ||
| ☑ | No fee required | |
| ☐ | Fee paid previously with preliminary materials | |
| ☐ | Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11 | |
|
Dear fellow stockholder, Together with the Board of Directors and the management team of |
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2024 in Review
The
We delivered nearly 14,200 homes in 2024, generating total revenues of roughly
Looking Ahead
Our Company culture is oriented around consistently striving for improvement, with a focus on doing the right things for our buyers. Through this lens, sustainability remains a priority for us, as it affects the long-term affordability of owning a home. In 2024, we reached two important milestones in energy efficiency: building our 200,000th ENERGY STAR® certified home - more than any other national homebuilder - and achieving an average national Home Energy Rating System (HERS®) Index score of 45, a goal we established in 2020 and realized one year earlier than projected. To provide context on our HERS score, the average KB home is now 55% more energy efficient than a typical resale home, helping to lower the long-term cost of homeownership for our buyers. Our Company has also taken a leadership position in water conservation and building homes that are water efficient, preparing for a future that may experience both a diminished supply of water and higher costs. Our 18th Annual Sustainability Report, the longest-running publication of its kind for a national homebuilder, is slated for publication in April, and I encourage you to read it to leamore about what we are doing to drive a more sustainable future.
Another way we are laying the groundwork for the future is by continually building our brand, ensuring it effectively communicates who we are and what we stand for in a way that is relevant to homebuyers. Our vision is to be the most customer-obsessed homebuilder in the world. It guides our decisions and shapes how we operate. It extends far beyond customer service to define an organization that places the customer at the center of everything we do. To bring this vision to life, we maintain a daily focus on our relationships - with our employees, in how they work together as a team; with our customers and how we support them through every step in the homebuying process; and with our industry and trade partners - to operate our business in a manner that will deliver long-term value to our stockholders. Every relationship matters to us, and it is truly what our Company is built on.
Well Positioned
We believe the long-term outlook for the housing market remains favorable, driven by demographics, solid employment and wage growth. Millennial and Gen Z buyers, the largest generational cohorts, continue to demonstrate a strong desire for homeownership and are contributing to an increase in household formations. Our Company is well positioned to participate in the future growth of the housing market. We intend to continue meaningfully investing in land acquisition and development, which will fuel new community openings, and executing on our Built to Order approach, which offers a differentiated product, based on choice and personalization to meet demand. We have an experienced and long-tenured management team and seasoned operators in our divisions who are highly skilled in executing our business model and navigating fluctuating market conditions. Our Company has grown into a larger and more profitable business, with strong liquidity and a healthy balance sheet that provides financial flexibility. We remain focused on expanding both our scale and returns, while we continue to retucapital to stockholders, through share repurchases and our quarterly cash dividend.
Looking ahead, I am excited about the Company's future, and the
Sincerely,
Chairman and Chief Executive Officer
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Table of Contents
| 2 |
NOTICE OF
2025 Annual Meeting of Stockholders
|
Date and Time |
Webcast Meeting Location meetnow.global/MRP2C6W |
Record Date You are entitled to vote at the meeting and any adjournment or postponement of the meeting if you were a stockholder as of the close of business on |
Items of Business
| Proposals | Board vote recommendation |
Further details |
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| 1 | Elect ten directors, each for a one-year term. |
FOR
each director nominee
|
Page 14 |
| 2 | Advisory vote to approve named executive officer compensation. |
FOR
|
Page 53 |
| 3 |
FOR
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Page 56 |
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HOW TO VOTE
| By web www.investorvote.com/KBH |
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| By phone 1-800-652-VOTE (8683) |
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| By mail Mark, sign, date and mail your proxy card or voting instruction form in the postage-paid envelope. |
The accompanying Proxy Statement describes these items in more detail. We have not received notice of any other matters that may be properly presented at the meeting.
Voting
Please vote as soon as possible to ensure your shares will be represented. Holders of record may vote via the Internet, telephone or mail. Stockholders whose shares are held by an intermediate broker or financial institution, also called beneficial holders, must vote in the way their intermediary provides. Holders with a control number from our transfer agent can vote at the meeting.
Virtual Meeting Format
The meeting will be conducted online through an audio-only webcast. The accompanying Proxy Statement contains information about participating in the meeting. The meeting will have no physical location.
Annual Report
Our Annual Report on Form 10-K for the fiscal year ended
Vice President, Corporate Secretary and
Associate General Counsel
Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to be Held on
| 3 |
2025 Annual Meeting Summary
Your Board is furnishing this Proxy Statement and a proxy/voting instruction form or Notice of Internet Availability to solicit your proxy for
Annual Meeting Information
| Date & Time | Location: |
| Audio-only Virtual Meeting at meetnow.global/MRP2C6W |
|
Meeting Agenda
| Items of Business | Board Recommendation | Voting Standard | |||
| Election of Directors | FOReach of the ten nominees | Majority of Votes Cast | |||
| Advisory vote to approve named executive officer ("NEO") compensation, also known as "Say-on-Pay" | FOR | Majority of Shares Present/Represented by Proxy and Entitled to Vote | |||
| FOR | Majority of Shares Present/Represented by Proxy and Entitled to Vote | ||||
Participating in the Virtual Annual Meeting
The Annual Meeting will be webcast at meetnow.global/MRP2C6W, opening at approximately
Questions may be submitted before or during the Annual Meeting. To submit a question in advance, visit meetnow.global/MRP2C6W before
If you are a beneficial holder, meaning an intermediate broker or financial institution holds your shares, you must register with
Beneficial holders who cannot obtain a legal proxy can still attend the Annual Meeting as a guest at the above-noted Internet address. However, guests cannot vote or ask questions.
| 4 |
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2025 Annual Meeting Summary
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A clear vision for the future and the values to reach it
Our vision, mission and values are key guideposts we use in operating our business every day. They give purpose to our efforts to deliver an exceptional, personalized experience to our buyers who are making one of their most meaningful purchases - their own home, an important landmark in their life's journey.
| Our Vision | To be the most customer-obsessed homebuilder in the world. | |||
| Our Mission | Give our customers the ability to purchase a new home that reflects what they value and how they want to live, at a price they can afford. | |||
| Our Values |
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We make relationships the foundation for all we do. |
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We build homes that make lives better. |
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We believe that everyone deserves a home that's as unique as they are. |
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We deliver more for less. |
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We strive for a better shared future. |
| 5 |
Corporate Governance and Board Matters
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Independence n
All directors, except for our Chief Executive Officer ("CEO"), are independent. n
The Lead Independent Director position has significant responsibilities and authority, as described below. n
Only independent directors serve on Board committees. n
During 2024, there were no related party transactions involving outside directors. |
2024 Meetings and Attendance n
The Board held four meetings and also acted by unanimous written consent. n
n
Each incumbent director standing for election attended at least 75% of his or her total Board and committee meetings. n
We expect directors to attend our annual stockholder meetings. All directors elected to the Board at our 2024 annual meeting attended the meeting. |
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Accountability n
All directors are elected on an annual basis under a majority voting standard. n
We have one class of voting securities allowing each holder one vote for each share held, and no supermajority voting requirements (except per n
We proactively engage with our stockholders year-round on our business strategy, performance and outlook. n
Directors and senior executives are subject to significant stock ownership requirements, and they and all employees may not pledge or hedge holdings of our securities. n
Executive officers are subject to an incentive-based compensation recovery policy, and all unvested employee equity awards require double-trigger vesting in a change in control. |
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Effectiveness Standards n
Directors must retire as of the first Annual Meeting following their 75th birthday. Our directors' average age is currently 62. n
Non-employee directors hold an executive session without management at each regularly scheduled Board meeting. n
Directors may not serve on more than four other public company boards or, if they are a public company chief executive officer, on more than two other public company boards. No directors are over-boarded. n
The Board and each of its standing committees conduct an annual self-evaluation of their performance. |
Additional information about our corporate governance policies, processes and procedures, and regarding related party transactions, is provided in Annex 1.
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Corporate Governance and Board Matters
Board and Committee Governance Structure
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Board and Committee Governance Structure
Board Leadership
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Chairman of the Board and CEO |
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Lead Independent Director |
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| Board governance is balanced with a strong Lead Independent Director position, which is designed to maintain the Board's independent oversight. |
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Key Duties: ■
Presides at all Board meetings where the Chairman is not present and at all executive sessions and meetings of the non-employee directors, which may be called at any time and for any purpose.
■
Consults with the Chairman and the non-employee directors regarding meeting agendas and schedules, as well as the content and flow of information to the Board.
■
Provides Board leadership if there is (or there is perceived to be) a conflict of interest with respect to the role of the Chairman who is also the CEO.
■
If requested by major stockholders, being available to them for consultation and communication as appropriate.
■
Any additional duties set forth in our Corporate Governance Principles or By-Laws, or as the Board may determine from time to time.
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| 7 |
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Corporate Governance and Board Matters
Our Board's Risk Oversight Role
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| Our Board's Risk Oversight Role |
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| Our Board is elected by our stockholders to oversee the management of our business and affairs and assure stockholders' long-term interests are being served. |
| Board Oversight Activities |
Among other specified activities, the Board as a whole, or through its standing committees, reviews assessments of and senior management's plans with respect to significant risks we face. As described under "Commitment to Sustainability," the Board oversees our sustainability program as part of our overall business strategy. ■
The Board has delegated oversight of certain risks to its standing committees, as described below. The committee chairs report to the Board about such delegated risks and other matters at each Board meeting.
■
The Board itself monitors significant enterprise-wide operational and financial risks to our business, and management's strategies to address or mitigate them, through briefings our CEO, Chief Financial Officer ("CFO") and President and Chief Operating Officer ("COO") provide at each Board meeting and between meetings, as appropriate. The Board also receives regulatory and legal briefings from our general counsel.
■
The Board also approves land acquisitions if the purchase price or the purchase price plus expected land development exceed certain thresholds. In such cases, the proposed project, as with all our communities, will have previously been assessed through our standard local, regional and corporate review processes. There were two such land acquisition approvals in our 2024 fiscal year.
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| Cybersecurity and Insider Trading Risk Management |
■
As discussed in the Annual Report and below, the Board through its
■
Our chief information officer periodically conducts a review of cybersecurity risks, including those associated with our cloud computing resources, with the
■
Our chief information officer is supported by a chief information security officer and other employees and dedicated contract personnel experienced with information technology and cybersecurity matters who are responsible for evaluating and deploying the cybersecurity measures we employ, as described in the Annual Report.
■
We have adopted an insider trading policyand procedures applicable to our and our directors', officers' and employees' purchase, sale or other disposition of our securities that we believe are reasonably designed to promote compliance with insider trading laws, rules and regulations and
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| 8 |
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Corporate Governance and Board Matters
Our Board's Risk Oversight Role
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Standing Board Committee Profiles
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Audit and Compliance ("Audit Committee") |
Members:
■
Dr.
■
■
|
■
■
Dr.
|
Principal Responsibilities:
Oversees our corporate accounting and reporting practices and audit process, including our Independent Auditor's qualifications, independence, retention, compensation and performance, and our compliance with legal and regulatory requirements; and may approve our incurring, guaranteeing or redeeming debt. Four Audit Committee members, including the chair, are "audit committee financial experts" under
Delegated Risk Oversight:
| ■ | Oversees management's performance of an annual enterprise risk management assessment, which our internal audit department coordinates. This assessment identifies significant short-term (such as orders and cancellation rates), and long-term (such as land and community count growth and management, and land development activities) risks based on probability, impact and mitigating factors, which the Audit Committee reports on to the Board. | |
| - | The assessment follows the COSO Enterprise Risk Management Integrated Framework and is a component of how our executive team sets business strategies and objectives and manages operations. This assessment's outcome drives our internal audit department's activities for the subsequent 12 months, which are based on an Audit Committee-approved annual audit plan. | |
| ■ | Reviews and discusses the internal audit department's performance against the approved audit plan, along with the department's audit findings, at quarterly meetings and on request. |
| ■ | Monitors cybersecurity risks and our evolving physical, electronic and other protection strategies and initiatives. This includes engaging in periodic reviews with management covering our cybersecurity practices and risks, with the most recent review conducted in |
| ■ | Discusses with management our policies and processes with respect to risk assessment and risk management, and the steps management has taken to monitor, identify and address significant financial risk exposures, including, among others, any related to information technology and cybersecurity. |
| ■ | Evaluates our management of matters in which we have or may have material liability exposure, including those pertaining to environmental sustainability. |
| ■ | Receives and discusses reports from our senior finance, accounting, legal and compliance, and internal audit executives at each regular meeting on risks within their respective area of responsibility. It also conducts separate executive sessions at those meetings with each such executive and with our Independent Auditor to discuss such risks. |
| 9 |
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Corporate Governance and Board Matters
Our Board's Risk Oversight Role
|
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("Compensation Committee") |
Members:
■
■
■
|
■
|
Principal Responsibilities:
Evaluates and recommends our CEO's compensation; determines compensation for the CEO's direct reports; evaluates and recommends non-employee director compensation; and oversees our policies and programs relating to significant human resource matters, including leadership succession and continuity, non-discrimination and equal employment opportunity policies, and initiatives designed to foster the engagement and development, and to support the health and safety, of our workforce.
Delegated Risk Oversight:
| ■ | Oversees an annual employee compensation risk assessment FWC performs together with our management that largely focuses on potential policy and program design and implementation risks. |
| ■ | Annually reviews our compliance with our equity-based award grant policy, and our human capital management and leadership succession planning (both short- and long-term) for all levels of our organization, which, among other things, assesses executive bench readiness and talent development within our workforce. |
| ■ | Reviews and, as appropriate, approves the compensation arrangements our senior human resources personnel develop. |
| ■ | Reviews and approves, and monitors compliance with, our employee compensation recovery policy. |
| ■ | Based on this oversight approach, including the results of our most recent annual employee compensation risk assessment, we do not believe that risks arising from our present employee compensation policies and programs, including those applicable to senior executives, are reasonably likely to have a material adverse effect on us. |
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Nominating and Corporate ("Nominating Committee") |
Members:
■
■
■
|
■
Dr.
■
|
Principal Responsibilities:
Oversees our corporate governance policies and practices; and as further discussed in Annex 1, reviews "related party transactions", identifies, evaluates and recommends qualified director candidates to the Board; and administers the annual Board evaluation process.
Delegated Risk Oversight:
| ■ | Oversees corporate governance-related risks, including assessing potential related party transactions, and evaluating the mix of director skills and experience with that of potential director candidates and the Board's needs. |
| ■ | Reviews proposed updates to our core governance-related policies and documents based on input from management and recommends changes to the Board. |
| ■ | Monitors on an annual basis our political contributions and participation in industry trade associations. |
| ■ | Reviews and makes recommendations to the Board on the independence and the financial literacy and expertise of each director and director candidate relative to our Corporate Governance Principles and applicable laws/regulations/listing standards. |
Board Committee Membership Changes
Board Committee memberships changed on
| ■ | |
| ■ | |
| ■ | |
| ■ | Ms. Dominguez rotated off the Nominating Committee. |
On
There were no other changes to the Board Committees' composition in 2024.
| 10 |
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Corporate Governance and Board Matters
Board Experience and Skills
|
|
Board Experience and Skills We have a balanced and diverse Board whose members bring key skills and expertise, including those identified nearby, that enable them to oversee management's development and execution of our strategic and operational objectives. Our financially literate and highly engaged directors have strong leadership and governance backgrounds that in combination with their academic, professional and personal experiences make them well qualified to serve. |
100% | Corporate Governance | ||
| Experience with public or large private company governance. | ||||
| 100% | ||||
| Experience identifying, assessing and managing critical risks to enterprise-wide or business unit strategic plans and achieving strategic objectives. | ||||
| 90% | Enterprise Leadership | |||
| Experience as a chief executive or top manager for a commercial or academic organization, including responsibility for implementing business plans and managing results. | ||||
| 90% | Real Estate | |||
| Professional experience in acquiring, managing or selling real estate assets. | ||||
| 80% | Finance/Investing | |||
| Professional or academic expertise or experience in preparing, auditing or evaluating financial statements, or in managing commercial investments. | ||||
| 70% | Government | |||
| Experience serving as a public official or in another public position, or working with or advising on regulatory, legislative or policy matters. | ||||
| 60% | ||||
| Experience in talent management, professional development and/or succession planning. | ||||
| 50% | Homebuilding | |||
| Experience or expertise in residential land development or home construction activities. | ||||
| 40% | Retailing | |||
| Experience operating or managing retail businesses or operations similar to our design studios. | ||||
| 40% | Technological Innovation | |||
| Experience with or management of technology applications, advanced products or organizations that develop them. Several directors have experience with overseeing cybersecurity practices and incident management. | ||||
| 30% | Environmental | |||
| Experience or expertise with managing or advising on operational environmental matters, or possesses a relevant academic/research background. | ||||
| Board Diversity Considerations | ||
| The Board considers diversity for directors and director candidates as encompassing expertise or knowledge base, educational and career history, race, ethnicity, national origin, gender, geographic residency, community or public service and/or other tangible and intangible aspects of an individual. Beyond their distinct perspectives, skills and backgrounds, 50% of our directors are women or ethnic minorities. Our Board members are situated in regional locations generally in proportion to our business. | ||
| 11 |
Director Compensation
The Compensation Committee periodically evaluates, with FWC's assistance, and makes recommendations to the Board regarding compensation and benefits for non-employee directors, with attention to maintaining competitive positioning relative to peer public homebuilders and similarly situated companies. Non-employee director compensation was last adjusted in
Non-Employee Director Compensation
| ■ | Lead Independent Director Retainer - |
| ■ | Committee Retainers: |
| Chair | Member | ||||||||
| Audit | $ | 27,500 | $ | 12,500 | |||||
| Compensation | $ | 21,000 | $ | 10,000 | |||||
| Nominating | $ | 20,000 | $ | 10,000 | |||||
| ■ | Meeting Fees - |
Retainers
Each director may elect to receive retainers in equal quarterly cash installments, in unrestricted shares of our common stock or in deferred common stock awards ("stock units"). Equity-based grants are made as described below.
Equity Grants
Except as noted below, each director may elect to receive their equity grant in common stock or stock units. Grants are made on election to the Board, with the rounded number of shares/units based on our common stock's grant date closing price. Directors receive a share of our common stock for each stock unit they hold on the earlier of a change in control or leaving the Board. Directors receive cash dividends on their common stock holdings and cash dividend equivalent payments on their stock units. Stock units have no voting rights. If a director has not satisfied their stock ownership requirement (see under "Stock Ownership Requirements"), they can receive only stock units for their equity grant and must hold all shares of common stock until they satisfy the requirement or leave the Board.
Meeting Fees
Directors receive fees for each non-regularly scheduled Board or committee meeting they attend if they have also attended all the same body's prior meetings during the applicable Director Year, which is the period between our annual meetings.
Indemnification Agreements
We have agreements with our directors, which were updated in
| 12 |
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Director Compensation
Director Compensation During Fiscal Year 2024
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Director Compensation During Fiscal Year 2024
| Fees Earned or Paid in Cash ($)(a) |
Stock Awards ($)(b) |
All Other Compensation ($)(c) |
Total ($) |
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| $ | 100,000 | $ | 185,000 | $ | 1,500 | $ | 286,500 | |||||||||
| 100,000 | 182,500 | - | 282,500 | |||||||||||||
| Ms. Dominguez | 100,000 | 175,000 | 3,000 | 278,000 | ||||||||||||
| 122,500 | 162,500 | 3,000 | 288,000 | |||||||||||||
| 112,500 | 162,500 | 1,500 | 276,500 | |||||||||||||
| 137,500 | 162,500 | 3,000 | 303,000 | |||||||||||||
| 27,500 | 81,250 | - | 108,750 | |||||||||||||
| 121,000 | 202,500 | 1,500 | 325,000 | |||||||||||||
| - | - | 3,000 | 3,000 | |||||||||||||
| - | - | 3,000 | 3,000 | |||||||||||||
| 130,000 | 162,500 | - | 292,500 | |||||||||||||
| (a) | Fees Earned or Paid in Cash. These amounts generally represent cash retainers paid to directors per their individual elections. The amount for |
| (b) | Stock Awards. These amounts represent the aggregate grant date fair value of the shares of our common stock or stock units granted to our directors in 2024 based on their individual elections with regard to their retainers and type of equity grant (i.e., shares or stock units). The grant date fair value of each such award is equal to the closing price of our common stock on the date of grant. All grants were made on |
| 2024 Common Stock Grants (#) |
2024 Stock Unit Grants (#) |
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| 3,061 | - | ||||
| 3,020 | - | ||||
| Ms. Dominguez | 2,895 | - | |||
| 2,689 | - | ||||
| 2,689 | - | ||||
| - | 2,689 | ||||
| 1,018 | - | ||||
| - | 3,351 | ||||
| - | 2,689 |
| The aggregate number of outstanding equity awards held by our non-employee directors at the end of our 2024 fiscal year are shown under "Ownership of |
|
| (c) | All Other Compensation. These amounts are additional meetings fees paid in 2024 for |
| 13 |
| Election of Directors |
The Board will present as nominees at the Annual Meeting, and recommends our stockholders elect to the Board, each of the individuals named below for a one-year term ending at the election of directors at our 2026 annual meeting. Other than
Should any of the nominees become unable to serve as a director prior to the Annual Meeting, the named proxies, unless otherwise directed, may vote for the election of another person as the Board may recommend. If the Board's nominees below are elected at the Annual Meeting, the Board will have ten directors.
Voting Standard
To be elected, each nominee must receive a majority of votes cast (i.e., the votes cast for a nominee's election must exceed the votes cast against their election).
|
FOR
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Board recommendation: FOR approval of each director nominee |
Majority Voting Standard
Our Corporate Governance Principles provide that a director nominee who fails to win election to the Board in an uncontested election is expected to tender his or her resignation from the Board (or to have previously submitted a conditional tender). An "uncontested election" is one in which there is no director nominee that has been nominated by a stockholder in accordance with our By-Laws. This election is an uncontested election. If an incumbent director fails to receive the required vote for election in an uncontested election, the Nominating Committee will act promptly to determine whether to accept the director's resignation and will submit its recommendation for the Board's consideration. The Board expects the director whose resignation is under consideration to abstain from participating in any decision on that resignation. The Nominating Committee and the Board may consider any relevant factors in deciding whether to accept a director's resignation.
| 14 |
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Election of Directors
Voting Standard
|
|
Age: 55
Director Service Since:
2023 |
Before joining
In addition to his proven leadership skills,
n
Other Professional Experience:
n
Board Member,
n
Senior Vice President, Merchandising Décor,
n
Senior Vice President, Merchandising Services,
n
Executive Vice President and Chief Executive Officer Consumer Solutions Group, Optum,
n
Executive Vice President, Merchandising,
|
| 15 |
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Election of Directors
Voting Standard
|
|
Founder and Chairman, theGROUP
Age: 64
Director Service Since:
2020 |
n
n
n
Other Professional Experience:
n
Member,
n
Member,
n
Chairman,
n
Vice Chair, Brookings Institution
n
Member, Meridian International Center
n
Chairman, Florida A&M University
|
|
Chairwoman and
Chief Executive Officer, Age: 62
Director Service Since:
2017 |
n
n
n
Other Professional Experience:
n
n
Hesburgh Trustee,
n
n
Board Member,
n
Board Member,
n
Member,
|
| 16 |
|
Election of Directors
Voting Standard
|
|
Founder and Owner,
Age: 65
Director Service Since:
2020 |
n
Other Professional Experience:
n
Chairman,
n
Director,
n
Texas State Senator (2004-2016; President pro tempore, 2015 - 2016)
n
Mayor,
|
|
Dr.
Director,
at Distinguished Professor of Finance and Arden Realty Chair, UCLA Anderson
Age: 71
Director Service Since:
2016 |
Company Directorships:
n
n
n
n
Other Professional Experience:
n
Director and Lusk Chair,
n
Associate Professor/Professor, Finance and Business Economics,
n
Economics Staff Member,
|
| 17 |
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Election of Directors
Voting Standard
|
|
Dr.
Emeritus Director and
Senior Fellow at the Hoover Institution on War, Revolution, and Peace Age: 70
Director Service Since:
2012 |
n
n
Other Professional Experience:
n
Dean,
n
Interim Dean,
n
Assistant Professor,
n
Staff Economist,
|
|
Former President,
Chief Executive Officer, and Chairwoman, Age: 51
Director Service Since:
2024 |
n
Other Professional Experience:
n
President, Chief Executive Officer, and Chairwoman,
n
President, Chief Executive Officer, and Director,
|
| 18 |
|
Election of Directors
Voting Standard
|
|
Founder and CEO,
Age: 61
Director Service Since:
2021 |
n
n
n
n
Other Professional Experience:
n
Global Senior Vice President of Human Resources of
n
Executive Vice President and Chief Human Resources Officer of
|
|
Chairman and
Chief Executive Officer, Age: 69
Director Service Since:
2006 |
n
Other Professional Experience:
n
n
n
Founding Chairman,
n
Executive Board Member,
|
| 19 |
|
Election of Directors
Voting Standard
|
|
Chief Executive Officer
and Chairman, Age: 49
Director Service Since:
2017 |
n
Other Professional Experience:
n
Board Member,
n
Vice Chairman,
n
Member,
n
n
|
| 20 |
Ownership of
The table below shows the amount and nature of our non-employee directors' and NEOs' respective beneficial ownership of our common stock as of
| Non-Employee Directors | Total Ownership(a) | Stock Options(b) | |
| 6,987 | - | ||
| 12,118 | - | ||
| 24,162 | - | ||
| 17,287 | - | ||
| Dr. |
37,981 | - | |
| Dr. |
48,217 | - | |
| 1,018 | - | ||
| 23,004 | - | ||
| 41,974 | - | ||
| Named Executive Officers | |||
| 2,042,726 | 274,952 | ||
| 93,511 | 27,486 | ||
| 112,966 | 34,621 | ||
| 124,346 | - | ||
| 195,098 | - | ||
| All Directors and Executive Officers as a Group (14 people) | 2,781,395 | 337,059 |
| (a) | The total ownership amount includes the stock option holdings shown on the table. No non-employee director or NEO owns more than 1% of our outstanding common stock, except for |
| (b) | The reported stock option amounts are the shares of our common stock that can be acquired within 60 days of |
| 21 |
| Ownership of |
The following table shows the ownership of each stockholder known to us to beneficially own more than five percent of our common stock. The below share ownership information (including footnotes) is based solely on the stockholders' respective most recent filings with the
| Stockholder(a) | Total Ownership | Percent of Class | |
50 Hudson Yards, |
10,694,328 | 15.0% | |
| 7,784,840 | 11.0% | ||
| 5,007,432 | 7.0% |
| (a) | The stockholders' respective voting and dispositive power with respect to their reported ownership is presented below. |
| Sole voting power | 10,459,742 | - | 5,001,948 | |||
| Shared voting power | - | 62,247 | - | |||
| Sole dispositive power | 10,694,328 | 7,638,638 | 5,007,432 | |||
| Shared dispositive power | - | 146,202 | - |
| (1) | ||
| (2) | ||
| (3) |
Stock Ownership Requirements
Our non-employee directors and senior executives are subject to stock ownership requirements to better align their interests with those of our stockholders. Our Corporate Governance Principles require each of our non-employee directors to own at least five times the Board retainer (which currently equates to
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Compensation Discussion and Analysis
This compensation discussion and analysis describes our executive compensation programs and compensation decisions in 2024 for our NEOs, who are listed below. While
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Financial Performance and Compensation Highlights
In 2024, we generated healthy financial and operational results amid ongoing mortgage interest rate headwinds, as discussed in the Annual Report and summarized below, while also positioning our business for future growth. We expanded our scale, with our ending community count up 7% year over year, driven by both our investing more than
Annual Achievements
We produced a one-year total stockholder retuof approximately 61%, at the 75th percentile of our peer group, and strong results across several key measures during 2024.
| n | Revenues totaled |
| n | Pretax income increased to |
| n | Net income rose to |
| n | Diluted earnings per share increased 20% to |
| n | Retuon equity increased 90 basis points to 16.6%. |
| n | Debt to capital ratio improved by 130 basis points to 29.4%. |
| n | In |
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Compensation Discussion and Analysis
Financial Performance and Compensation Highlights
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Long-Term Growth
Over the five-year period from 2019 to 2024, we generated significant improvements in the financial metrics identified below.
| n | Total revenues rose from |
| n | Pretax income grew from |
| n | Net income increased from |
| n | Diluted earnings per share rose from |
| n | Book value per share improved 112%, from |
| n | Debt to capital ratio improved significantly from 42.3% to 29.4%. |
In particular, we achieved strong total revenues, net income, and diluted earnings per share results, as well as improvement in book value per share, over the period illustrated in the charts below.
| Total Revenues ($ in millions) |
Net Income ($ in millions) |
|
| Diluted Earnings Per Share | Book Value Per Share | |
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Compensation Discussion and Analysis
Pay For Performance - 2024 Fiscal Year CEO Compensation
|
Recent Recognition
We have been recognized by the following prominent organizations, among others, for our sustainability and human capital initiatives and practices:
| n | Forbes' 2024 list of America's Best Midsize Employers, including being among the top 20% of recognized companies in 2024. |
| n | Newsweek's 2024 list of America's Most Trustworthy Companies, which is a recognition based on three main public pillars: customer trust, investor trust and employee trust. |
| n | |
| n | Newsweek's 2025 list of America's Most Responsible Companies, the only homebuilder to make this distinguished list five years in a row, recognizing us for demonstrating leading sustainability and governance practices. |
| n |
Pay For Performance - 2024 Fiscal Year CEO Compensation
| n | Approximately 93% of our CEO's 2024 total direct compensation (i.e., value of base salary and annual incentive award, and target value of long-term incentive award), was performance-based. His base salary has remained the same since 2017. |
| n | While we achieved strong financial and operational performance in 2024, to better balance his cash and equity incentives, and enhance both retention and stockholder value creation, our CEO's total annual incentive payout was approximately |
| n | Our CEO's long-term incentive award granted in |
| n | Our CEO earned his long-term incentive award at 180% of target (as discussed under "2021 PSU Awards"), reflecting our strong performance on the three applicable measures over the performance period that ran from |
| n | Taken together, overall CEO total direct compensation was up a modest 3.4% over the prior year. |
The table below compares our CEO's total direct compensation for 2024 and 2023.
| Total Direct Compensation* | 2024 | 2023 | Change | |||||||||
| Base Salary | $ | 1,150,000 | $ | 1,150,000 | $ | - | ||||||
| Annual Incentive Plan Compensation(a) | 7,795,702 | 8,958,644 | (1,162,942 | ) | ||||||||
| Long-Term Incentive Awards(b) | 7,199,979 | 5,500,020 | 1,699,959 | |||||||||
| TOTAL | $ | 16,145,681 | $ | 15,608,664 | $ | 537,017 | ||||||
| * | This table does not include certain amounts that are reported in the Summary Compensation Table. It excludes the change in our CEO's pension value, a required reporting item that represents only the actuarial change in our CEO's pension benefits based on interest rate fluctuations. It does not reflect any new benefits, cash or other compensation granted to or received by our CEO. This benefit has been frozen with no additional benefit accruals since 2004 (other than the same cost-of-living adjustments applied to federal social security benefits). Additionally, this table excludes amounts in the "All Other Compensation" category, which represents less than one-half of 1% of our CEO's total annual compensation as reported in the Summary Compensation Table. |
| (a) | Reflects our CEO's entire annual incentive for each year, including both the portion paid out in cash and the portion paid out in time-vesting restricted stock in lieu of cash. |
| (b) | Reflects the target value of our CEO's long-term incentive award grants for each year, consisting solely of PSUs. |
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Compensation Discussion and Analysis
Engaging With Our Stockholders
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| Engaging With Our Stockholders | ||
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Direct engagement with our stockholders is an integral part of managing our business to drive long-term value and aligns with our core value of building strong and collaborative relationships. |
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Why We Engage
| To Interact: | To Inform: | To Improve: | |||
| We seek to understand the issues that are important to our stockholders through an ongoing, two-way dialogue in which we can respectfully discuss their priorities. | We are committed to providing transparency into our strategy, performance, outlook and sustainability-related practices. | We use feedback from stockholders to enhance our public disclosures and consider it in our decision-making. | |||
How We Engage
We conduct extensive stockholder outreach throughout the year, typically engaging with the investment management teams of our largest stockholders, as well as their governance representatives. Our stockholder conversations involve our senior management, investor relations, human resources and legal executives. Matters raised in these engagements are actively discussed with directors as relevant.
In 2024, we continued our longstanding practice of reaching out to our stockholders, including each of our 25 largest stockholders, in advance of our annual meeting and engaged with holders representing over 50% of our outstanding shares through written communications, phone calls and virtual meetings. We conducted additional proactive outreach with some of our largest stockholders throughout the balance of the year. During the course of these meetings, we discussed and received constructive feedback on a broad range of topics, including our company strategy and performance, executive compensation, board tenure and composition, environmental and social sustainability initiatives and governance matters.
We also provide stockholders with opportunities throughout the year to engage with us. We participate in formal events, including sell-side analyst hosted conferences, non-deal roadshows, and investor visits to our communities. In addition, we speak with stockholders more informally during the year, particularly following the announcement of our quarterly earnings results.
Actions Taken Following Stockholder Engagements
We value our stockholders' opinions and are responsive to them. At our 2024 annual meeting, stockholder support for our proposal on NEO compensation was 81%, an improvement from the prior year. The feedback we have received in the past few years through our stockholder engagement efforts shaped the following changes in our executive compensation programs, which we believe have helped strengthen the connection between our performance and executive compensation, as shown in the prior section:
| n | Developed with the Compensation Committee and FWC a structured scorecard methodology to guide annual incentive payout determinations. |
| n | Implemented a limit on the cash payouts for annual incentives to our NEOs. |
| n | Further reduced the cash payout of the CEO's annual incentive by allocating a higher portion of his total annual incentive to time-vesting equity in lieu of cash to balance his cash and equity compensation and enhance alignment with stockholder value creation. |
| n | The CEO's non-equity incentive payout has been reduced each year since 2021 despite strong company and individual performance, with more emphasis placed on time- and performance-vesting equity awards that align the CEO's interests with those of our stockholders. |
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Compensation Discussion and Analysis
Engaging With Our Stockholders
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The adjustments to our executive compensation programs complemented the following elements, which we have maintained for several years:
| Compensation Governance | ||||
| What We Do | What We Don't Do | |||
| Engage with and consider stockholder input in designing our executive pay programs. | No re-pricing or cash-out of underwater stock options without stockholder approval. | |||
| Link one- and three-year NEO incentive pay to objective, pre-set, financial performance goals. | We prohibit our employees and non-employee directors from hedging or pledging their holdings of our securities. | |||
| Solely utilize PSUs for our NEOs' regular long-term incentive grants, and subject NEOs to robust stock ownership requirements. | No new executive officer severance arrangements above a certain amount without stockholder approval (see under "Severance Arrangements"). | |||
| Employee equity awards are subject to double-trigger vesting in a change in control. | No new excise tax "gross-ups" for any officer or employee. | |||
| Maintain an incentive-based compensation recovery (a/k/a "clawback") policy that is consistent with NYSE rules. | No payments of dividends or dividend equivalents on performance-based equity awards before they vest. | |||
| Perform, under Compensation Committee oversight, annual risk assessments to determine that our employee compensation policies and programs are not likely to have a material adverse effect on us. | Avoid excessive perquisites. Perquisites are generally limited to market-competitive medical benefits and the opportunity to participate in a deferred compensation plan. | |||
| Engage, at the sole direction of the Compensation Committee, an independent compensation consultant. | ||||
| Consider our sustainability-related programs' progress in annual incentive plan performance assessments. | ||||
| Maintain a relevant industry peer group. | ||||
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Compensation Discussion and Analysis
Pay Program Overview
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Pay Program Overview
The table below sets forth the components of, and rationale for, each element of our executive compensation program.
| Compensation Type | Description | Rationale |
| Base Salary |
n
Fixed compensation delivered in cash on a semi-monthly basis. |
n
A market-aligned component of the overall pay package to provide a baseline level of pay; key to attracting and retaining highly qualified executives. |
| Annual IncentiveProgram |
n
Our NEOs' 2024 annual incentives were performance-based and formula-driven, focused on pretax income and asset efficiency measures, with final determinations based on a structured incentive compensation scorecard. n
The 2024 annual incentives had cash payout limits, with the balance of any earned award paid out in time-vesting restricted stock. |
n
Motivates achievement of core strategic short-term financial results with additional emphasis on attaining specified key leadership, strategic planning and execution objectives. |
| Long-Term IncentiveProgram |
n
PSUs constituted all awards for our NEOs' regular long-term incentive grants, similar to our 2018-2023 grants. n
2024 grants have three separate three-year performance measures: cumulative adjusted earnings per share, average adjusted retuon invested capital, and revenue growth versus our peer group. |
n
Focuses executives on achievement of long-term results and encourages retention. n
Establishes strong alignment with long-term stockholder interests through performance-based payouts in shares of our common stock. |
| Retirement Programsand Perquisites |
n
A 401(k) plan in which all eligible employees may participate; market-competitive medical, dental and vision benefits; and opportunity to participate in a deferred compensation plan. n
Legacy executive retirement and death benefit plans have been closed to new participants for over 19 years. |
n
Programs are aligned with market practices. n
Focuses executives on earning rewards through performance pay elements, not as entitlements. |
As outlined above, we place a significant emphasis on at-risk, performance-based pay. As shown below, in 2024, approximately 93% of our CEO's total direct compensation consisted of performance-based and/or at-risk vehicles. For our other NEOs, such vehicles, on average, approximated 80% of their total direct compensation. The long-term incentives identified below consist of PSUs and any time-vesting restricted stock paid in conjunction with annual incentives.
| 2024 CEO Compensation Mix | 2024 Other NEO Compensation Mix | |
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Compensation Discussion and Analysis
NEO Compensation Components
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NEO Compensation Components
Base Salaries
The Compensation Committee annually reviews and approves our CEO's and our other NEOs' base salaries. The Compensation Committee approves NEO base salaries after considering several factors, including an NEO's experience, specific responsibilities, capabilities, individual performance and expected future contributions; our current and expected financial and operational results; and market pay levels and trends to ensure competitiveness.
In
2024 Annual Incentives
| Our CEO's performance-driven annual incentive award payout of |
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Our annual incentive program is designed to drive performance within a single fiscal year period, with pay outcomes tied to our performance on total adjusted pretax income ("API"). The program is based on two components. First, threshold and target API goals are set based on our internal operational objectives established near the beginning of each year, which take into account expected business conditions for the year. API is our total pretax income excluding certain compensation expense and certain inventory-related charges. Payouts under this first component are capped at 100% of the participants' respective target level. Second, for the participants to eaany above-target payouts, API must exceed a hurdle based on a pre-set minimum asset efficiency objective. If the hurdle is met, an asset efficiency performance pool is funded for every dollar of API over the hurdle. The funded pool is then allocated based on the participants' individual performance and contributions as measured under a structured scorecard methodology, which is outlined below, and such allocations are further limited by the individual maximum payout amounts approved under the plan.
We view API as a comprehensive short-term measure of our senior officers' performance, as it reflects their ability to produce profits by generating revenues, managing expenses and controlling fixed costs. In addition, with the homebuilding industry's significant cyclicality and its volatility in recent years, using API as a primary measure intrinsically scales senior officer pay outcomes (down or up) to a degree relative to the API generated in a one-year period. Combining the API and asset efficiency measures is intended to motivate our senior officers to generate profitable growth aligned with our strategic goals.
In 2022, based on stockholder feedback and FWC's recommendations, the Compensation Committee refined the annual incentive program to further align it with our strategic focus on expanding our scale and to incorporate features to enhance its rigor, including the following, which were maintained in the 2024 program:
| n | limiting each participating officer's cash payouts to no more than 80% of their respective maximum opportunity, with the balance of any earned award above that level paid out in time-vesting restricted stock in lieu of cash. As discussed below, the Compensation Committee limited the CEO's cash payout under the 2024 program beyond the program's threshold. |
| n | applying a detailed, structured scorecard methodology to determine the annual incentive awards' asset efficiency component. |
The 2024 target payout opportunities remained the same as for 2023 and were set at 225% of base salary for our CEO, 175% for our COO and 140% for our other NEOs. As shown in the Grants of Plan-Based Awards During Fiscal Year 2024 table, maximum payout opportunities were limited to a multiple of target. The target and maximum opportunities were designed to generate payout levels that, if achieved, would appropriately reward strong performance for 2024, and together with base salary and long-term incentives, provide competitive total direct compensation.
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Compensation Discussion and Analysis
NEO Compensation Components
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2024 Annual Incentive Program Component Determinations
Our NEOs received annual incentive payouts under the 2024 program as described below.
API Performance Relative to Goals Component
The Compensation Committee set an API performance target of
2024 API PERFORMANCE LEVELS AND PAYOUT SUMMARY
| Threshold | Target | Actual Result | |
| API Performance Levels | |||
| API Performance Levels Relative to Target | 75% | 100% | 134% |
| Payout Level Ratios | 50% | 100% | 100% |
API Performance Relative to Asset Efficiency Component
Under this component, (a) two and one quarter percent of each dollar of API over our minimum asset efficiency objective of up to 110% of the API target, and (b) three and one quarter percent of each dollar of API above the level of 110% of our 2024 API target, funded an additional annual incentive pool to be allocated among the participating officers. The Compensation Committee set the minimum asset efficiency objective at a three percent retuon inventory for 2024, consistent with the prior year. Therefore, the 2024 minimum asset efficiency objective was
Annual Incentive Compensation Scorecard and Individual Performance Factor (or "IPF")
The Compensation Committee determined the asset efficiency performance pool's allocation to the participating officers (which included the NEOs and several other of our senior officers), guided by a detailed scorecard methodology through which their individual 2024 performance and contributions were assessed across four key dimensions: financial results, execution, strategic planning and leadership. Within the scorecard structure, each participating officer received points in each dimension based on our CEO's assessment of their performance, and on the Compensation Committee's assessment, with FWC's assistance, of our CEO's performance. The respective cumulative points a participating officer achieved corresponded to an IPF range with upper and lower limits of potential payouts to the officer of the total available asset efficiency performance pool. These pre-established IPF-based payout ranges, outlined below, took into consideration each participating officer's 2024 annual incentive payout opportunities at threshold, target and maximum levels; historical relative annual incentive payouts by functional role; additional individual accomplishments and competitive market pay information.
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Compensation Discussion and Analysis
NEO Compensation Components
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2024 Annual Incentive Compensation Scorecard
| Dimension | Financial Results (0-8 pts.) | Execution (0-4 pts.) | ||
| Goals andObjectives |
Meet or exceed FY24 goals for:
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Homebuilding revenues
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Homebuilding operating income as a percentage of total revenues
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Selling, general and administrative expenses as a percentage of homebuilding revenues
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Cash flow
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Retuon equity
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Diluted earnings per share
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Optimize performance of each community by balancing pricing, sales pace and retuon investment
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Generate year-over-year community count growth, targeting 250+ communities open at
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Achieve a minimum 90% customer satisfaction rating in the majority of served markets, per an outside firm
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Enhance supply chain to ensure ability to support the business with qualified partners that have committed to our Supplier Code of Conduct
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Analyze workplace practices, including as to pay, to ensure equitable outcomes
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| Strategic Planning (0-4 pts.) | Leadership (0-4 pts.) | |||
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Build forecasts and business plans to reflect current and expected future market conditions
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Establish future community count pipeline through 2026 in response to current market conditions and community needs
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Develop long-term objectives supported by concrete action plans for sustainability-related goals, such as average RESNET Home Energy Rating System (HERS®) Index score and workforce inclusion, wellness and safety
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Attract, retain and develop critical talent, especially in land disciplines, to drive growth and future results
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Enhance culture of customer obsession, driving best in class results in homebuyer satisfaction
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Strive to achieve top homebuilder rankings and external recognition for our sustainability-related accomplishments
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Maximum Potential IPF Per Cumulative Scorecard Points
| Cumulative Scorecard Points | ||||||||||
| 18-20 | 29.00% | 8.00% | 13.00% | 5.00% | 4.25% | |||||
| 15-18 | 25.00% | 6.00% | 11.00% | 4.00% | 3.25% | |||||
| 11-15 | 21.00% | 4.00% | 9.00% | 3.00% | 2.25% | |||||
| 0-11 | 17.00% | 2.00% | 7.00% | 1.50% | 1.25% |
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Compensation Discussion and Analysis
NEO Compensation Components
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Based on their respective cumulative scorecard assessment points, the Compensation Committee determined each NEO's IPF, as shown in the table below, within the corresponding lower and upper IPF limits indicated on the above table.
| Named Executive Officer | 2024 Cumulative Scorecard Points |
2024 IPF | ||
| 19.0 | 27.2% | |||
| 17.5 | 5.5% | |||
| 18.5 | 11.5% | |||
| 18.0 | 4.2% | |||
| 18.0 | 3.5% |
The table below summarizes our NEOs' individual performance contributions that informed their IPF assessments under the scorecard.
| NEO | 2024 NEO Individual Performance Contributions | |
|
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Drove our strong financial results in 2024, including exceeding our initial plan goals for the year across homebuilding revenues; homebuilding operating income; operating cash flow; retuon equity; and diluted earnings per share, as well as increasing our book value per share to over
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Directed a balanced capital allocation strategy, resulting in our investing significantly in our business' future growth and returning more than
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Continued to promote our culture of customer obsession, and in 2024 we achieved our highest-ever customer satisfaction levels based on buyer surveys, and maintained our position as a leader in customer satisfaction among national homebuilders based on third-party surveys
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Advanced our sustainability leadership, which is broadly recognized by third parties, including Forbes, Newsweek,
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Led, in conjunction with our human resources team, the process to hire, develop and promote several senior corporate, regional and division leaders in alignment with our talent and leadership strategies, to enhance succession planning and expand our leadership bench
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Developed and guided strategies that enabled us to navigate challenging market conditions and achieve land investment goals while optimizing current assets and generating strong cash flows from operations
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Drove solid performance on key financial metrics, including homes delivered, gross margins, selling, general and administrative expenses and inventory efficiency
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Built a three-year strategic plan, reflecting anticipated financial results and a capital structure strategy that considers expected market challenges
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Effectively managed our capital structure and strengthened our financial position, including ending 2024 with roughly
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Supported workforce development by mentoring key staff members for their future growth and succession
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Compensation Discussion and Analysis
NEO Compensation Components
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Led our field teams to deliver homes and, in turn, generate revenues and profitability performance that exceeded our expectations relative to our corresponding initial plan goals for 2024
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Drove additional significant improvement in our average build times, which we reduced 28% year over year
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Worked with our mortgage banking joint-venture partner to develop and deploy programs designed to support net orders and secure our backlog amid ongoing mortgage interest rate headwinds
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Co-led our investment of more than
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Headed our internal Sustainability Leadership Team and led our
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Restructured and mentored regional and division leadership while expanding our leadership bench, including the promotion of several leaders into regional and national roles, to advance growth and business model execution
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Strategically managed the company-wide land pipeline to promote an accelerated growth profile while maintaining our focus on cash flow and returns on capital
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Set growth targets for each submarket and aligned land acquisition resources to support these goals, resulting in our acquiring approximately 12,400 lots during 2024, as well as a 37% year-over-year increase in the number of lots owned and controlled to approximately 77,000 at
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Continued to calibrate community growth targets for 2024 and 2025, which contributed to our opening 106 new communities in 2024 and increasing our ending community count by 7% compared to the prior year
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Established new and fostered existing relationships with land sellers, developers and potential capital resources to maximize both growth opportunities and retuon investment
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Mentored division land team members through interacting in regular strategic land meetings, and directly participated in structuring and negotiating certain transactions with complex deal terms
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Successfully led litigation management, insurance recoveries and litigation avoidance strategies, including several favorable outcomes, resulting in better than expected financial and cash flow outcomes for us
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Provided responsive and skillful support of land transactions and transactional attorney team, including career development and mentorship of high-potential team members while optimizing efficient external legal spending
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Directed our risk management and compliance efforts including workforce safety and employment practices, consumer regulatory compliance, and insurance programs
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The Total Payout in the table below represents a cash payment to each officer other than Messrs. Mezger and Woram. Under the 2024 program terms, cash payouts were limited to 80% of a participating officer's respective maximum payout opportunity, with any earned award balance above the cash maximum paid in time-vesting restricted stock in lieu of cash. As an annual incentive payout, this stock grant is not part of our separate long-term incentive program described below.
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Compensation Discussion and Analysis
NEO Compensation Components
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2024 ANNUAL INCENTIVE PROGRAM COMPONENT AND TOTAL PAYOUT LEVELS(a)
| NEO | API Performance Component Payout |
Asset Efficiency Component Payout |
Total Payout(b) | |||||||||
| $ | 2,587,500 | $ | 5,208,202 | $ | 7,795,702 | |||||||
| 1,197,000 | 1,052,419 | 2,249,419 | ||||||||||
| 1,575,000 | 2,193,968 | 3,768,968 | ||||||||||
| 1,001,000 | 802,306 | 1,803,306 | ||||||||||
| 1,001,000 | 670,502 | 1,671,502 | ||||||||||
| (a) | Annex 2 to this Proxy Statement contains a reconciliation of our pretax income calculated in accordance with |
| (b) | As discussed above, and as reflected in the Summary Compensation Table, Messrs. Mezger's and Woram's respective total payouts are comprised of cash and time-vesting restricted stock. The total payouts for Messrs. Kaminski, McGibney and Praw comprised only cash. |
2025 Annual Incentive Program
The 2025 annual incentive program will be similar to our 2024 program, including a primarily formula-driven funding structure established by API and asset efficiency performance measures with payout levels determined by our outcomes on these measures and individual performance against key scorecard objectives. The pre-established 2025 annual incentive program's API target performance goal will reflect, among other things, the Compensation Committee's consideration of expected business conditions for the current year.
Long-Term Incentives
In
| PSUs # | PSUs $ | |||||||
| 90,214 | $ | 7,199,979 | ||||||
| 37,589 | 2,999,978 | |||||||
| 11,903 | 949,978 | |||||||
| 11,903 | 949,978 | |||||||
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Compensation Discussion and Analysis
NEO Compensation Components
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Performance-Based Restricted Stock Units
We have granted PSUs to our executive officers each year since 2012. As with prior PSU grants, the PSUs granted in 2024 are designed to focus our executive officers on achieving important long-term financial objectives over a three-year period. The 2024 PSU measures described below are a combination of absolute and relative metrics that should generate positive outcomes for our business, and, if achieved, are expected to be strong drivers of stockholder value creation.
| PSU Measures | Weight | Purpose | |||
| ■ | Cumulative Adjusted Earnings Per Share ("AEPS") | 40% | Measures profitability trajectory over the period | ||
| ■ | 35% | Measures profitability relative to capital deployed | |||
| ■ | Revenue Growth Rank Versus Peers | 25% | Measures top-line growth relative to peers | ||
The 2024 PSU amounts shown in the table above reflect a target award of shares of our common stock and their grant date fair value. Each 2024 PSU entitles a recipient to a grant of 0% to 200% of his target award depending on our performance relative to the above-noted performance measures over the three-year period of
The following tables present our goals with respect to the 2021 - 2024 absolute PSU performance measures. As shown below, the goals for both the AEPS and AROIC measures generally increased year over year at threshold, target and maximum performance levels, reflecting the consistent improvement in our performance in the prior-year periods and stockholder feedback. As it relates to fiscal 2022, when the Compensation Committee established the PSU measures and goals in the fourth quarter of that year, homebuyer demand had turned sharply lower, stemming from higher mortgage interest rates, persistent inflationary pressures and an uncertain economic outlook. Given this environment, the Compensation Committee established 2022 PSU goals for both AEPS and AROIC that were lower than the goals for the same measures under the 2021 PSUs. Considering then-current market conditions, the Compensation Committee established AEPS goals for the 2023 and 2024 PSUs and AROIC goals for the 2023 PSUs at levels higher than those for all prior years. For the 2024 PSUs, the AROIC goals were increased modestly at threshold and target compared to the prior year. In all cases, the goals have reflected our expectations regarding future performance against the measures at the times that the goals were set.
| Performance Measure | PSU Grant Year | Performance Period | Threshold Goal | Target Goal | Maximum Goal | |||||
| AEPS | 2021 | 2022-2024 | ||||||||
| 2022 | 2023-2025 | |||||||||
| 2023 | 2024-2026 | |||||||||
| 2024 | 2025-2027 | |||||||||
| AROIC | 2021 | 2022-2024 | 6.2% | 8.9% | 11.6% | |||||
| 2022 | 2023-2025 | 4.3% | 6.1% | 7.9% | ||||||
| 2023 | 2024-2026 | 6.3% | 9.0% | 11.7% | ||||||
| 2024 | 2025-2027 | 7.5% | 9.4% | 11.3% |
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Compensation Discussion and Analysis
NEO Compensation Components
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We utilize a percentile rank approach to determine the target award multiplier for the relative revenue growth measure as outlined in the table below. The applicable peer group is established at the respective grant date and adjustments are made if a peer group member ceases to be a peer during the relevant performance period. Payouts for performance between the levels shown below are determined by straight-line interpolation.
| Relative Revenue Growth | Performance (Rank) | Target Award Multiplier | ||
| 75th Percentile or above | 200% | |||
| 50th Percentile (Median) | 100% | |||
| 25th Percentile | 25% | |||
| Below 25th Percentile | 0% | |||
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As with our annual incentive program, the Compensation Committee intends the threshold performance levels outlined above to be reasonably achievable, yet uncertain to be met under expected market and business conditions at the time of grant. Target performance levels are designed to require significant management effort to achieve, and maximum performance levels are designed to be measurably more difficult to achieve than target performance levels. Each of these performance levels directly scale to threshold, target and maximum payout opportunities. As vesting for the PSUs granted in 2022 - 2024 will not be determined until after their respective performance periods end, we cannot predict the extent to which any shares under these awards will ultimately vest. 2021 PSU Awards The PSUs granted to our executive officers in 2021 entitled recipients to a grant of 0% to 200% of a target award of shares of our common stock based on our AEPS performance, AROIC performance, and relative revenue growth performance (with the respective rankings and multipliers as shown in the above table) over the three-year period from |
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| 2021 PSU Performance Measure | 2021 PSU Performance Goals | 2021 PSU Target Award Multiplier | ||
| AEPS | 200% | |||
| 100% | ||||
| 25% | ||||
| Below |
0% | |||
| AROIC | 11.6% and above | 200% | ||
| 8.9% | 100% | |||
| 6.2% | 25% | |||
| Below 6.2% | 0% | |||
2021 PSU AWARD DETERMINATIONS
| Performance Measure | Average Annual Performance | Aggregate Total Performance | Target Award Multiplier | |||
| AEPS (40% weight) | N/A | 200% | ||||
| AROIC (35% weight) | 13.0%* | N/A | 200% | |||
| Relative Revenue Growth (25% weight) | N/A | 55th percentile (6th) | 118% |
| * | Annex 2 to this Proxy Statement contains a reconciliation of our net income and diluted earnings per share calculated in accordance with GAAP to the non-GAAP financial measures of adjusted net income and adjusted earnings per share used in computing AEPS and AROIC. |
| 36 |
|
Compensation Discussion and Analysis
Executive Compensation Decision-Making Process and Policies
|
The AEPS performance result for the 2021 PSUs exceeded the challenging
On
2021 PSU AWARDS
| NEO | Target Award(#) | Actual Award(#) | ||
| 127,194 | 228,949 | |||
| 35,614 | 64,105 | |||
| 50,878 | 91,580 | |||
| 22,895 | 41,211 | |||
| 21,623 | 38,921 |
Executive Compensation Decision-Making Process and Policies
Pursuant to its charter, the Compensation Committee oversees the decision-making process for our executive compensation and benefits policies and programs. In making executive compensation decisions, the Compensation Committee considers a variety of factors and data, most importantly our performance and individual executives' performance, and the totality of compensation that may be paid. Among the data the Compensation Committee considers is our financial and operational performance, including comparisons to prior years' performance, our current business plans and our peer group; surveys and forecasts of comparative general industry and peer group compensation and benefits practices; and, at least annually, management-prepared tally sheets for senior executives with up to six years of compensation data.
Role of Our Management and
Our CEO, senior human resources and legal department executives, and FWC provide information and recommendations to assist the Compensation Committee's decision-making and advise on compliance and disclosure requirements. The Compensation Committee does not delegate its decision-making authority to management, except for establishing certain performance goals under our performance cash program for participating division-level personnel and certain administrative actions under our current equity compensation plan, but only to the extent consistent with our equity-based award grant policy and applicable law. FWC, which the Compensation Committee directly retains, attends Compensation Committee meetings as needed, communicates between meetings with the Compensation Committee chair and other committee members, advises the Compensation Committee as to the CEO's and other executive officers' compensation, and assists the Compensation Committee with the annual employee compensation risk assessment, as discussed under "
| 37 |
|
Compensation Discussion and Analysis
Executive Compensation Decision-Making Process and Policies
|
Our peer group is composed solely of
OUR
| ■ | ■ | ■ | |||||
| ■ | ■ | ■ | |||||
| ■ | ■ | ■ | |||||
| ■ | ■ | ■ |
As of
Equity Stock Ownership Policy
Our longstanding executive stock ownership policy is intended to encourage, and has encouraged, our executives to increase their ownership of our common stock over time and to align their interests with our stockholders' interests. Under the policy, designated senior executives are expected to achieve specific levels of common stock ownership within five years of joining us or being promoted to a position with a higher ownership guideline and, once achieved, maintain such ownership throughout their employment with us. The targeted common stock ownership levels for our NEOs are as follows:
| Executive | Ownership Guideline | |
| CEO | 6.0 times base salary | |
| COO | 3.0 times base salary | |
| Other NEOs | 2.0 times base salary |
Common stock ownership includes shares directly owned by the NEO, and shares are valued at the greater of the most recent closing price on a valuation date and the closing price on the date shares are acquired. Shares subject to unearned PSUs or unexercised stock options do not count toward common stock ownership. Designated executives are required to hold all vested net (after-tax) shares of time-vesting and performance-vesting restricted stock and up to 100% of net shares acquired through stock option exercises until their applicable stock ownership guideline is met, absent a hardship or other qualified exception. Each NEO is in compliance with the requirements of the policy.
Prohibition on Hedging/Pledging of Our Securities
To further align their interests with those of our stockholders, our employees and non-employee directors cannot engage in short sales of our securities and cannot buy or sell puts, calls or purchase any other financial instruments that are designed to hedge or offset decreases in the value of our securities. They also cannot hold our securities in a margin account or otherwise pledge our securities as collateral for any loan.
| 38 |
|
Compensation Discussion and Analysis
Executive Compensation Decision-Making Process and Policies
|
Equity-Based Award
Our equity-based award grant policy governs the timing and establishes certain internal controls over the grant of equity-based awards, including stock options (which we have not granted since 2016), restricted stock and PSUs. The policy establishes, among other things, that the Compensation Committee (or the Board) must approve all grants of equity-based awards and their terms, and the delegation of this authority to our management is not permitted. The policy also specifies that the exercise or grant price of any relevant equity-based award cannot be less than the closing price of our common stock on the grant date; annual long-term incentive equity-based awards to existing employees are to be granted only at a regularly scheduled meeting of the Compensation Committee or Board (either, a "granting body"), typically held in October; new hire or promotion awards are to be granted at a regularly scheduled meeting of the granting body that is on (or that is the earliest following) the date of an applicable circumstance; and the granting body generally avoid approving equity-based awards and setting grant dates during the trading blackout periods established under our Trading Policy to align with that policy's prohibition on our and covered persons' trading in our securities when aware of material, non-public information about the company. While the quarterly trading blackouts under the Trading Policy begin 15 days before each fiscal quarter-end and end after we have filed with the
Compensation Recovery Policy
The Board adopted an updated incentive-based compensation recovery policy in 2023 per the applicable NYSE listing standard. Under the policy, if we are required to prepare an accounting restatement due to material noncompliance with any financial reporting requirement under the securities laws, we will be entitled to recover in accordance with the listing standard the amount of erroneously awarded incentive-based compensation an executive officer received. In addition, under our CEO's employment agreement, we may require him to repay certain bonus and incentive- or equity-based compensation he receives as well as any profits realized from the sale of certain securities if we are required to restate our financial statements as a result of his misconduct, consistent with Section 304 of the Sarbanes-Oxley Act of 2002.
Executive Compensation Program Tax Implications
Due to changes to the Internal Revenue Code ("Code") enacted in 2017, specifically repealing an exemption for performance-based compensation, we are generally not able to deduct compensation over
Indemnification Agreements
We have entered into agreements with each NEO and certain other senior executives, which were updated in
Severance, Change in Control, Post-Termination Arrangements and Other Benefits
Severance Arrangements
| 39 |
|
Compensation Discussion and Analysis
|
Change in Control Arrangements
Since 2001, we have maintained without modification the terms of a Change in Control Severance Plan ("CIC Plan") that provides participants with certain benefits, as discussed under "Potential Payments Upon Termination of Employment or Change in Control." The CIC Plan is intended to enable and encourage our management to focus its attention on obtaining the best possible result for our stockholders in a change in control, to promote management continuity, and to provide income protection if there is an involuntary loss of employment. All unvested employee equity awards require double-trigger vesting in a change in control.
Death Benefits
Our Death Benefit Only Plan ("DBO Plan"), in which Messrs. Mezger and Praw participate, provides a
Other Benefits
Most of our health and welfare benefits are made available to all full-time employees, including our NEOs. During 2024, as in prior years, our NEOs were eligible to participate in a supplemental plan that reimburses them for qualified out-of-pocket expenses that exceed amounts payable under our standard medical, dental and vision plans. Our NEOs, and certain other employees, also participate in our unfunded nonqualified Deferred Compensation Plan ("DCP"), which is described below. These market-competitive benefits are offered to attract and retain key executive talent.
Retirement Programs
The
The DCP allows participants to make pretax contributions of up to 75% of their base salary and 75% of their annual incentive compensation, and to select from one or more investment options in which their deferred compensation is deemed to be invested. As we do not provide a guaranteed rate of retuunder the DCP, a participant's credited earnings depend on their investment elections. Deferred amounts together with any credited investment returns under the DCP are paid out to participants in a lump sum or in installments, commencing either at a participant-specified date during employment or upon termination of employment, subject to certain limitations. NEO deferrals under the DCP are shown in the Non-Qualified Deferred Compensation During Fiscal Year 2024 table.
We also maintain a supplemental non-qualified, unfunded retirement plan ("Retirement Plan") for certain executives, including
| 40 |
Executive Compensation
Summary Compensation Table
| Fiscal Year |
Salary ($)(a) |
Bonus ($) |
Stock Awards ($)(b) |
Non-Equity Incentive Plan Compensation ($)(c) |
Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(d) |
All Other Compensation ($)(e) |
Total ($) |
|||||||||||||||||||||||
| 2024 | $ | 1,150,000 | $ | - | $ | 8,699,979 | $ | 6,295,702 | $ | 482,359 | $ | 81,291 | $ | 16,709,331 | ||||||||||||||||
| 2023 | 1,150,000 | - | 7,178,664 | 7,280,000 | - | 80,391 | 15,689,055 | |||||||||||||||||||||||
| 2022 | 1,150,000 | - | 7,105,882 | 7,480,000 | - | 78,909 | 15,814,791 | |||||||||||||||||||||||
| 2024 | 840,417 | - | - | 2,249,419 | - | 63,516 | 3,153,352 | |||||||||||||||||||||||
| 2023 | 812,500 | - | 1,500,017 | 2,122,653 | - | 61,841 | 4,497,011 | |||||||||||||||||||||||
| 2022 | 785,417 | - | 1,400,008 | 2,272,201 | - | 60,234 | 4,517,860 | |||||||||||||||||||||||
| 2024 | 891,667 | - | 2,999,978 | 3,768,968 | - | 66,531 | 7,727,144 | |||||||||||||||||||||||
| 2023 | 820,833 | - | 2,249,982 | 3,723,971 | - | 62,281 | 6,857,067 | |||||||||||||||||||||||
| 2022 | 770,833 | - | 1,999,998 | 3,656,299 | - | 59,308 | 6,486,438 | |||||||||||||||||||||||
| 2024 | 700,417 | - | 949,978 | 1,803,306 | - | 54,648 | 3,508,349 | |||||||||||||||||||||||
| 2023 | 675,417 | - | 950,002 | 1,701,060 | - | 53,148 | 3,379,627 | |||||||||||||||||||||||
| 2022 | 650,417 | - | 899,986 | 1,821,451 | - | 51,666 | 3,423,520 | |||||||||||||||||||||||
| 2024 | 700,417 | - | 1,019,880 | 1,601,600 | - | 48,008 | 3,369,905 | |||||||||||||||||||||||
| 2023 | 675,417 | - | 931,376 | 1,545,600 | - | 47,866 | 3,200,259 | |||||||||||||||||||||||
| 2022 | 650,417 | - | 1,045,327 | 1,489,600 | - | 52,134 | 3,237,478 | |||||||||||||||||||||||
| (a) | Salary. As discussed under "Base Salaries," except for Messrs. Mezger and McGibney, NEO annual base salary levels were increased in |
| (b) | Stock Awards. These amounts include the aggregate grant date fair value of stock awards (consisting of PSUs granted in |
| (c) | Non-Equity Incentive Plan Compensation. For |
| (d) | Change in Pension Value and Nonqualified Deferred Compensation Earnings. These amounts (as applicable) reflect the increase in the actuarial present value of accumulated benefits under our Retirement Plan. These changes do not reflect any cash or other compensation received. |
| 41 |
|
Executive Compensation
Grants of Plan-Based Awards During Fiscal Year 2024
|
| (e) | All Other Compensation. The amounts shown consist of the following items: |
| ■ | 401(k) Plan and DCP Matching Contributions. The respective aggregate 2024, 2023 and 2022 401(k) Plan and DCP matching contributions we made to our NEOs were as follows: |
|
| ■ | Premium Payments. The respective aggregate premiums we paid for our NEOs in 2024, 2023 and 2022 for a supplemental medical expense reimbursement plan and life insurance policies, as described under "Other Benefits," were as follows: |
Grants of Plan-Based Awards During Fiscal Year 2024
| Estimated Future Payouts Under Non-Equity Incentive Plan Awards(b) |
Estimated Future Payouts Under Equity Incentive Plan Awards(c) |
Grant Date Fair Value of Stock and Option Awards ($)(d) |
||||||||||||||||||||||||||||||
| Grant Date(a) |
Type of Award |
Threshold ($) |
Target ($) |
Maximum ($) |
Threshold (#) |
Target (#) |
Maximum (#) |
|||||||||||||||||||||||||
| Annual Incentive | $ | 1,293,750 | $ | 2,587,500 | $ | 8,280,000 | ||||||||||||||||||||||||||
| PSUs | 22,554 | 90,214 | 180,428 | |||||||||||||||||||||||||||||
| Restricted Stock | 22,150 | 1,500,000 | ||||||||||||||||||||||||||||||
| Annual Incentive | 598,500 | 1,197,000 | 2,872,800 | |||||||||||||||||||||||||||||
| Annual Incentive | 787,500 | 1,575,000 | 3,780,000 | |||||||||||||||||||||||||||||
| PSUs | 9,397 | 37,589 | 75,718 | 2.999,978 | ||||||||||||||||||||||||||||
| Annual Incentive | 500,500 | 1,001,000 | 2,402,400 | |||||||||||||||||||||||||||||
| PSUs | 2,976 | 11,903 | 23,806 | 949,978 | ||||||||||||||||||||||||||||
| Annual Incentive | 500,500 | 1,001,000 | 1,601,600 | |||||||||||||||||||||||||||||
| PSUs | 2,976 | 11,903 | 23,806 | 949,978 | ||||||||||||||||||||||||||||
| Restricted Stock | 1,032 | 69,902 | ||||||||||||||||||||||||||||||
| (a) | Grant Date. The date the Compensation Committee approved each award. The |
| (b) | Estimated Future Payouts Under Non-Equity Incentive Plan Awards. The 2024 target payouts were set at 225% of base salary for our CEO and at 140% - 175% of base salary for each of our other NEOs with the maximum incentive set at a multiple of four times target for our CEO, three times target for Messrs. Kaminski, McGibney, and Praw, and two times target for |
| (c) | Estimated Future Payouts Under Equity Incentive Plan Awards. If there is a payout of the PSUs, "Threshold" represents the lowest possible payout (25% of the target award of shares granted) if threshold performance is achieved for each performance measure, and "Maximum" reflects the highest possible payout (200% of the target award of shares granted). The performance measures are described under "Performance-Based Restricted Stock Units." If threshold performance is not achieved on all three measures, the NEOs will not receive any payout of the PSUs. |
| (d) | Grant Date Fair Value of Stock and Option Awards. The grant date fair value for each award is computed as described in footnote (b) to the Summary Compensation Table. The 2024 PSUs represent the grant date fair value of the probable award of shares of our common stock underlying the PSUs granted as of the grant date. The restricted stock amounts for Messrs. Mezger and Woram are the value of the respective grant each received on |
| 42 |
|
Executive Compensation
Outstanding Equity Awards at Fiscal Year-End 2024
|
Outstanding Equity Awards at Fiscal Year-End 2024
| Option Awards | Stock Awards | |||||||||||||||||||||||||||
| Grant Date | Number of Securities Underlying Unexercised Options Exercisable (#)(a) |
Option Exercise Price ($) |
Option Expiration Date |
Number of Shares or Units of Stock That Have Not Vested (#)(b) |
Market Value of Shares or Units of Stock That Have Not Vested ($)(c) |
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(d) |
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(d) |
|||||||||||||||||||||
| 274,952 | ||||||||||||||||||||||||||||
| 228,949 | $ | 18,943,240 | ||||||||||||||||||||||||||
| 166,003 | $ | 13,735,088 | ||||||||||||||||||||||||||
| 40,342 | 3,337,897 | |||||||||||||||||||||||||||
| 124,717 | 10,319,085 | |||||||||||||||||||||||||||
| 27,465 | 2,272,454 | |||||||||||||||||||||||||||
| 90,214 | 7,464,306 | |||||||||||||||||||||||||||
| 54,986 | 16.21 | |||||||||||||||||||||||||||
| 64,105 | 5,304,048 | |||||||||||||||||||||||||||
| 46,481 | 3,845,838 | |||||||||||||||||||||||||||
| 34,014 | 2,814,318 | |||||||||||||||||||||||||||
| 14,000 | 14.92 | |||||||||||||||||||||||||||
| 20,621 | 16.21 | |||||||||||||||||||||||||||
| 91,580 | 7,577,329 | |||||||||||||||||||||||||||
| 66,401 | 5,494,019 | |||||||||||||||||||||||||||
| 51,020 | 4,221,395 | |||||||||||||||||||||||||||
| 37,589 | 3,110,114 | |||||||||||||||||||||||||||
| 41,211 | 3,409,798 | |||||||||||||||||||||||||||
| 29,880 | 2,472,271 | |||||||||||||||||||||||||||
| 21,542 | 1,782,385 | |||||||||||||||||||||||||||
| 11,903 | 984,854 | |||||||||||||||||||||||||||
| 38,921 | 3,220,324 | |||||||||||||||||||||||||||
| 28,220 | 2,334,923 | |||||||||||||||||||||||||||
| 3,742 | 309,613 | |||||||||||||||||||||||||||
| 20,408 | 1,688,558 | |||||||||||||||||||||||||||
| 513 | 42,446 | |||||||||||||||||||||||||||
| 11,903 | 984,854 | |||||||||||||||||||||||||||
| (a) | Number of Securities Underlying Unexercised Options Exercisable. Subsequent to our 2024 fiscal year end, |
| (b) | Number of Shares or Units of Stock That Have Not Vested. The |
| (c) | Market Value of Shares or Units of Stock That Have Not Vested. The market value shown is based on the closing price of our common stock on |
| (d) | Equity Incentive Plan Awards: Number and Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested. The awards shown are the PSUs granted to our NEOs in 2022, 2023 and 2024, reflecting target award amounts as of |
| 43 |
|
Executive Compensation
Option Exercises and Stock Vested During Fiscal Year 2024
|
Option Exercises and Stock Vested During Fiscal Year 2024
| Option Awards | Stock Awards | |||||||||||||||
| Number of Shares Acquired on Exercise (#) |
Value Realized on Exercise ($) |
Number of Shares Acquired on Vesting (#)(a) |
Value Realized on Vesting ($)(b) |
|||||||||||||
| 333,000 | $ | 14,877,632 | 249,121 | $ | 15,262,565 | |||||||||||
| 142,500 | 6,912,898 | 64,105 | 3,927,072 | |||||||||||||
| 14,781 | 683,487 | 91,580 | 5,610,191 | |||||||||||||
| - | - | 41,211 | 2,524,586 | |||||||||||||
| 93,272 | 4,175,473 | 40,792 | 2,499,048 | |||||||||||||
| (a) | The shares reported are the total each NEO acquired from the vesting of their 2021 PSU awards, as discussed under "Long-Term Incentives." In addition, Messrs. Mezger and Woram acquired 20,172 and 1,871 shares respectively through the vesting of restricted stock awards granted in |
| (b) | The amount shown is the total gross dollar value realized upon the vesting of the PSUs and the restricted stock, based on the closing price of our common stock on the vesting dates, and the applicable Dividend Equivalents paid on the earned PSUs. The restricted stock vested on |
Pension Benefits During Fiscal Year 2024
| Plan |
Number of Years Credited Service (#)(a) |
Present Value of Accumulated Benefit ($)(b) |
Payments During Last Fiscal Year ($) |
|||||||||||
| Retirement Plan | 31 | $ | - | |||||||||||
| * | Messrs. Kaminski, McGibney, Praw and Woram are not participants in the Retirement Plan, as the plan was open for a limited period and closed to new participants in 2004. |
| (a) | Number of Years of Credited Service. This is as of the valuation date. As of |
| (b) | Present Value of Accumulated Benefit. This amount represents the actuarial present value of the total retirement benefit that would be payable to |
| 44 |
|
Executive Compensation
Non-Qualified Deferred Compensation During Fiscal Year 2024
|
Non-Qualified Deferred Compensation During Fiscal Year 2024
| Executive Contributions in Last Fiscal Year ($)(a) |
Registrant Contributions in Last Fiscal Year ($)(b) |
Aggregate Earnings in Last Fiscal Year ($)(c) |
Aggregate Withdrawals/ Distributions ($) |
Aggregate Balance at Last Fiscal Year End ($)(d) |
||||||||||||||||
| $ | 46,000 | $ | 46,000 | $ | 1,270,276 | $ | - | $ | 5,603,745 | |||||||||||
| 50,425 | 29,725 | 389,459 | - | 1,738,194 | ||||||||||||||||
| 53,500 | 32,800 | 173,551 | - | 939,785 | ||||||||||||||||
| 42,025 | 21,325 | 221,709 | - | 935,222 | ||||||||||||||||
| 28,017 | 14,217 | 177,903 | - | 1,070,587 | ||||||||||||||||
| (a) | Executive Contributions in Last Fiscal Year. These amounts reflect compensation the NEOs earned in 2024 that they have voluntarily deferred. The amounts are included in the Summary Compensation Table. |
| (b) | Registrant Contributions in Last Fiscal Year. These amounts are matching contributions we made to the NEOs' voluntary contributions to our DCP and are included in the Summary Compensation Table. The DCP is discussed under "Retirement Programs." |
| (c) | Aggregate Earnings in Last Fiscal Year. These amounts do not include any above-market or preferential earnings. Accordingly, these amounts are not reported in the Summary Compensation Table. |
| (d) | Aggregate Balance at Last Fiscal Year End. These amounts reflect compensation the NEOs earned in 2024 or in prior years, but which they voluntarily elected to defer receipt, adjusted for changes in the value of their investments and distributions, if any. All the NEOs are fully vested in their respective balances. A portion of these amounts was previously reported as deferred compensation in the Summary Compensation Tables in our proxy statements for our 2023 and 2024 annual meetings. |
Pay Versus Performance
The following table presents information as required under Item 402(v) of SEC Regulation S-K regarding the relationship for the four most recently completed fiscal years between the compensation of our NEOs - as reported in the Summary Compensation Table and adjusted to reflect "compensation actually paid" ("CAP") as defined under
| 45 |
|
Executive Compensation
Pay Versus Performance
|
| Value of Initial Fixed Investment Based on: |
||||||||||||||||||||||||||||||||||
| Fiscal Year |
Summary Compensation Table Total for PEO ($) |
Compensation Actually Paid to PEO ($)(a) |
Average Summary Compensation Table Total for Other NEOs ($)(b) |
Average Compensation Actually Paid to Other NEOs ($)(a)(b) |
Total Stockholder Return ($)(c) |
Total Stockholder Return ($)(d) |
Net Income ($000s)(e) |
AEPS ($)(f) |
||||||||||||||||||||||||||
| 2024 | $ | 16,709,331 | $ | 51,037,727 | $ | 4,439,688 | $ | 11,843,645 | $ | 249.67 | $ | 255.39 | $ | 655,018 | $ | 8.45 | ||||||||||||||||||
| 2023 | 15,689,055 | 43,713,700 | 4,483,491 | 10,469,248 | 155.12 | 176.92 | 590,177 | 7.18 | ||||||||||||||||||||||||||
| 2022 | 15,814,791 | 12,168,706 | 4,416,324 | 4,273,279 | 92.08 | 112.90 | 816,666 | 9.36 | ||||||||||||||||||||||||||
| 2021 | 14,366,518 | 25,125,414 | 4,556,264 | 7,144,468 | 115.18 | 133.37 | 564,746 | 6.14 | ||||||||||||||||||||||||||
| (a) | To calculate CAP per |
| 2024 | |||||||||
| PEO | Average Other NEOs |
||||||||
| Summary Compensation Table Total | $ | 16,709,331 | $ | 4,439,688 | |||||
| Adjustments: | |||||||||
| Grant date fair value of stock awards from Summary Compensation Table | (8,699,979 | ) | (1,242,459 | ) | |||||
| Fair value at fiscal year end of outstanding and unvested equity awards granted in the fiscal year(1) | 15,708,206 | 2,296,531 | |||||||
| Change in fair value of outstanding and unvested equity awards granted in prior fiscal years(2) | 23,688,459 | 5,789,808 | |||||||
| Change in fair value as of the vesting date of equity awards granted in prior fiscal years that vested in the fiscal year(3) | 3,146,752 | 470,605 | |||||||
| Dividends paid on awards during the year before vesting | 626,075 | 89,472 | |||||||
| "Change in pension value and nonqualified deferred compensation earnings" from Summary Compensation Table | (482,359 | ) | - | ||||||
| Service cost for pension plans | 341,242 | - | |||||||
| Compensation Actually Paid (as calculated per |
$ | 51,037,727 | $ | 11,843,645 | |||||
| (1) | Represents the aggregate fair value as of the indicated fiscal year-end of outstanding and unvested stock awards granted during such fiscal year, calculated using the same methodology used for financial statement reporting purposes. | |
| (2) | Represents the aggregate change in fair value during the indicated fiscal year of the outstanding and unvested stock awards and option awards held, as of the last day of the indicated fiscal year, calculated using the same methodology used for financial statement reporting purposes. For awards subject to performance-based vesting conditions, the fair value is based on the probable outcome of such performance-based vesting conditions as of the last day of the fiscal year. | |
| (3) | Represents the aggregate change in fair value, measured from the prior fiscal year-end to the vesting date, of each stock award and option award, that was granted in a prior fiscal year and which vested during the indicated fiscal year, calculated using the same methodology used for financial statement reporting purposes. |
| (b) |
| (c) | The amounts reported reflect the cumulative total stockholder retu("TSR") on our common stock for each of the last four fiscal years ended |
| (d) | The peer group used in this disclosure is the Dow Jones US Home Construction Index, which is the same index we used in the Stock Performance Graph in our Annual Report. The amounts reported reflect the cumulative TSR of the Dow Jones US Home Construction Index for each of the last four fiscal years ended |
| (e) | Represents net income reported in our audited consolidated financial statements for each of the applicable fiscal years. |
| (f) | Annex 2 to this Proxy Statement contains a reconciliation of our diluted earnings per share calculated in accordance with GAAP to the non-GAAP financial measure of AEPS. We included AEPS as our company-selected financial measure as this metric has the largest weighting in determining our NEO's long-term incentive compensation, a significant component of their overall compensation. |
| 46 |
|
Executive Compensation
Pay Versus Performance
|
Relationship between CAP and Financial Performance Measures
The graphs below illustrate the relationships between CAP for the PEO and the average CAP for our other NEOs, with (i) the cumulative TSR of our common stock, (ii) our AEPS, and (iii) our net income, each as set forth in the Pay Versus Performance table above, as well as the relationship between the cumulative TSR of our common stock and of the Dow Jones US Home Construction Index.
| CAP vs. Cumulative TSR | CAP vs. AEPS | |
| CAP vs. Net Income | ||
| 47 |
|
Executive Compensation
CEO Pay Ratio
|
Pay Versus Performance Tabular List
Below is a list of the most important financial performance measures we used to link CAP for our NEOs to our performance for the fiscal year ended
| ■ | AEPS (the company-selected measure); |
| ■ | AROIC; |
| ■ | Adjusted pretax income; |
| ■ | Revenue growth, relative to our peer group; |
| ■ | Strategic measures, to the extent they incorporate or reflect financial performance metrics. |
CEO Pay Ratio
For our last completed fiscal year ended
| ■ | The annual total compensation of our median employee (excluding |
| ■ | |
| ■ | Based on this information, the ratio of |
As of
Because companies are allowed to identify the median employee and determine a CEO pay ratio using various methodologies, estimates and assumptions applicable to their own employee populations, compensation practices and other circumstances, the pay ratio other companies report - including those in our peer group - may not be comparable to the foregoing pay ratio.
Potential Payments Upon Termination of Employment or Change in Control
Based on the terms of certain of our employee benefit plans - primarily our Executive Severance Plan and our CIC Plan - our NEOs are entitled to certain payments and other benefits if their employment is terminated under certain circumstances and/or if we experience a change in control.
Termination of Employment
If we terminate
For equity awards granted to
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|
Executive Compensation
Potential Payments Upon Termination of Employment or Change in Control
|
Change in Control
If
If a change of control occurs, each of our other NEOs is entitled to receive, upon executing a release and if in the following 18-month period his employment is terminated other than for cause or disability, or he terminates employment for good cause (in each case, as defined in the CIC Plan), a severance benefit of 2.0 times the sum of his average base salary and average actual annual cash bonus for the three fiscal years prior to the year in which the change in control occurs. While
Per the terms of each recipient's award agreement, the vesting of our NEOs' outstanding equity awards will not accelerate upon a change in control unless the recipient is terminated without cause or resigns for good reason within 18 months. Generally, if such a termination occurs (a) within the first year of the award's performance period, the recipient will receive a target payout; (b) after the first year of the award's performance period, the recipient will receive a payout determined using prorated calculations of the applicable performance measures; and (c) before the award's performance period begins, the recipient will receive no payout of the award. In addition, under the CIC Plan, only
Other Change in Control and Employment Termination Provisions
Our restricted stock award agreements provide for accelerated vesting upon the recipient's death or disability. Our PSU award agreements provide for pro rata vesting if the recipient retires under certain circumstances, and for accelerated vesting upon death or disability; provided that any payout is delayed until the performance period is completed. The time a recipient can exercise a common stock option after termination of employment depends on the reason for termination. For example, they may have only five days if termination is for cause; while for retirement, death or disability, they may have the original term.
Our DCP provides for full vesting of benefits if there is a change in control or disability, as defined under the plan, or death. Under our Retirement Plan, a participant will immediately receive a lump sum payment of the actuarial value (as specified under the plan) of the participant's plan benefits if there is a change in control or death. Our DBO Plan provides for (a) distribution of an insurance contract to a participant sufficient to pay the death benefit (if death occurs before age 100); and (b) an additional tax restoration amount sufficient to pay specified taxes caused thereby, if there is a change in control as defined in the plan. We also maintain term life insurance policies that pay benefits upon certain NEOs' deaths, as described under "Death Benefits."
The tables below show payments our NEOs may receive assuming various employment termination and change in control scenarios occurred on
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|
Executive Compensation
Potential Payments Upon Termination of Employment or Change in Control
|
Potential Payments Upon Termination Of Employment Or Change In Control
Post-Employment Payments -
| Executive Payments and Benefits upon Termination or Change in Control |
Voluntary Termination |
Involuntary Termination for Cause |
Involuntary Termination Without Cause/ Termination for Good Reason |
Change in Control Without Termination |
Change in Control With Termination for Good Reason or Without Cause |
Death | Disability | ||||||||||||||
| Severance | $ | - | $ | - | $ | 14,846,822 | $ | - | $ | 20,846,822 | $ | - | $ | - | |||||||
| Long-term Incentives(a) | |||||||||||||||||||||
| Restricted Stock | - | - | 4,852,866 | - | 5,610,351 | 5,610,351 | 5,610,351 | ||||||||||||||
| PSUs | 32,608,678 | - | 43,964,237 | - | 43,964,237 | 52,289,647 | 52,289,647 | ||||||||||||||
| DBO Plan(b) | - | - | - | 1,031,661 | 1,031,661 | 1,652,893 | - | ||||||||||||||
| Health Benefits(c) | - | - | 83,695 | - | 83,695 | - | - | ||||||||||||||
| Credited Vacation(d) | 88,462 | 88,462 | 88,462 | - | 88,462 | 88,462 | 88,462 | ||||||||||||||
| TOTAL | $ | 32,697,140 | $ | 88,462 | $ | 63,836,082 | $ | 1,031,661 | $ | 71,625,228 | $ | 59,641,353 | $ | 57,998,460 | |||||||
| (a) | Assumes |
| (b) | |
| (c) | Assumes we make 24 months of contributions for health benefits of approximately |
| (d) | Assumes payout of 160 hours of vacation benefits, which |
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|
Executive Compensation
Potential Payments Upon Termination of Employment or Change in Control
|
Post-Employment Payments -
| Executive Payments and Benefits upon Termination or Change in Control |
Voluntary Termination |
Involuntary Termination for Cause |
Involuntary Termination Without Cause/ Termination for Good Reason |
Change in Control Without Termination |
Change in Control With Termination for Good Reason or Without Cause |
Death | Disability | ||||||||||||||
| Severance | $ | - | $ | - | $ | 5,992,923 | $ | - | $ | 5,853,201 | $ | - | $ | - | |||||||
| Long-term Incentives(a) | |||||||||||||||||||||
| PSUs | 9,104,354 | - | 9,104,354 | - | 12,233,883 | 12,384,542 | 12,384,542 | ||||||||||||||
| Health Benefits(b) | - | - | 63,611 | - | - | - | - | ||||||||||||||
| TOTAL | $ | 9,104,354 | $ | - | $ | 15,160,888 | $ | - | $ | 18,087,084 | $ | 12,384,542 | $ | 12,384,542 | |||||||
| (a) | The values for |
| (b) | Assumes we make 24 months of contributions for health benefits of approximately |
Post-Employment Payments -
| Executive Payments and Benefits upon Termination or Change in Control |
Voluntary Termination |
Involuntary Termination for Cause |
Involuntary Termination Without Cause/ Termination for Good Reason |
Change in Control Without Termination |
Change in Control With Termination for Good Reason or Without Cause |
Death | Disability | ||||||||||||||
| Severance | $ | - | $ | - | $ | 7,200,000 | $ | - | $ | 7,337,080 | $ | - | $ | - | |||||||
| Long-term Incentives(a) | |||||||||||||||||||||
| PSUs | - | - | - | - | 17,680,803 | 21,143,170 | 21,143,170 | ||||||||||||||
| Health Benefits(b) | - | - | 78,216 | - | - | - | - | ||||||||||||||
| TOTAL | $ | - | $ | - | $ | 7,278,216 | $ | - | $ | 25,017,883 | $ | 21,143,170 | $ | 21,143,170 | |||||||
| (a) | The values for |
| (b) | Assumes we make 24 months of contributions for health benefits of approximately |
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|
Executive Compensation
Potential Payments Upon Termination of Employment or Change in Control
|
Post-Employment Payments -
| Executive Payments and Benefits upon Termination or Change in Control |
Voluntary Termination |
Involuntary Termination for Cause |
Involuntary Termination Without Cause/ Termination for Good Reason |
Change in Control Without Termination |
Change in Control With Termination for Good Reason or Without Cause |
Death | Disability | ||||||||||||||
| Severance | $ | - | $ | - | $ | 4,862,483 | $ | - | $ | 4,735,261 | $ | - | $ | - | |||||||
| Long-term Incentives(a) | |||||||||||||||||||||
| PSUs | 5,843,499 | - | 5,845,499 | - | 7,837,436 | 8,960,073 | 8,960,073 | ||||||||||||||
| DBO Plan(b) | - | - | - | 1,393,398 | 1,393,398 | 2,012,072 | - | ||||||||||||||
| Health Benefits(c) | - | - | 63,611 | - | - | - | - | ||||||||||||||
| TOTAL | $ | 5,843,499 | $ | - | $ | 10,769,593 | $ | 1,393,398 | $ | 13,966,095 | $ | 10,972,145 | $ | 8,960,073 | |||||||
| (a) | The values for |
| (b) | |
| (c) | Assumes we make 24 months of contributions for health benefits of approximately |
Post-Employment Payments -
| Executive Payments and Benefits upon Termination or Change in Control |
Voluntary Termination |
Involuntary Termination for Cause |
Involuntary Termination Without Cause/ Termination for Good Reason |
Change in Control Without Termination |
Change in Control With Termination for Good Reason or Without Cause |
Death | Disability | ||||||||||||||
| Severance | $ | - | $ | - | $ | 4,607,085 | $ | - | $ | 4,479,863 | $ | - | $ | - | |||||||
| Long-term Incentives(a) | |||||||||||||||||||||
| Restricted Stock | - | - | - | - | 352,059 | 352,059 | 352,059 | ||||||||||||||
| PSUs | 5,520,654 | - | 5,520,654 | - | 7,407,281 | 8,524,719 | 8,524,719 | ||||||||||||||
| Health Benefits(b) | - | - | 63,611 | - | - | - | - | ||||||||||||||
| TOTAL | $ | 5,520,654 | $ | - | $ | 10,191,350 | $ | - | $ | 12,239,203 | $ | 8,876,778 | $ | 8,876,778 | |||||||
| (a) | The values for |
| (b) | Assumes we make 24 months of contributions for health benefits of approximately |
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| Advisory Vote to Approve Named Executive Officer Compensation |
We believe that our CEO's and our other NEOs' 2024 fiscal year compensation was well aligned with our performance and stockholders' interests, as detailed under "Compensation Discussion and Analysis." We also believe that the design and implementation of our executive compensation programs reflect our longstanding significant outreach to our stockholders. In turn, our stockholders have generally expressed support through our annual NEO compensation advisory votes. At the 2024 annual meeting, the advisory vote received 81% support, an improvement from the prior year.
As a result, and in accordance with regulations under Section 14A of the Exchange Act, we are seeking an advisory vote from our stockholders to approve our NEOs' 2024 fiscal year compensation as follows:
RESOLVED, that
Responsiveness to Stockholders
The feedback we have received in recent years through our stockholder engagement efforts shaped the following changes in our executive compensation programs, which we believe have helped strengthen the connection between our performance and executive compensation, as described below:
| ■ | Developed with the Compensation Committee and FWC a structured scorecard methodology to guide annual incentive payout determinations. |
| ■ | Implemented a limit on the cash payouts for annual incentives to our NEOs. |
| ■ | Further reduced the cash payout of the CEO's annual incentive by allocating a higher portion of his total annual incentive to time-vesting equity in lieu of cash to balance his cash and equity compensation and enhance alignment with stockholder value creation. |
| ■ | The CEO's non-equity incentive payout has been reduced each year since 2021 despite strong company and individual performance, with more emphasis placed on time- and performance-vesting equity awards that align the CEO's interests with those of our stockholders. |
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|
Advisory Vote to Approve Named Executive Officer Compensation
Pay for Performance and 2024 Fiscal Year CEO Compensation
|
Pay for Performance and 2024 Fiscal Year CEO Compensation
We achieved strong total revenues, net income, and diluted earnings per share results, as well as improvement in book value per share, over the period illustrated in the charts below.
|
Total Revenues ($ in millions) |
Net Income ($ in millions) |
|
| Diluted Earnings Per Share | Book Value Per Share | |
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|
Advisory Vote to Approve Named Executive Officer Compensation
Pay for Performance and 2024 Fiscal Year CEO Compensation
|
| ■ | Approximately 93% of our CEO's 2024 total direct compensation (i.e., value of base salary and annual incentive award, and target value of long-term incentive award), was performance-based. His base salary has remained the same since 2017. |
| ■ | While we achieved strong financial and operational performance in 2024, to better balance his cash and equity incentives, and enhance both retention and stockholder value creation, our CEO's total annual incentive payout was approximately |
| ■ | Our CEO's long-term incentive award granted in |
| ■ | Our CEO earned his long-term incentive award at 180% of target (as discussed under "2021 PSU Awards"), reflecting our strong performance on the three applicable measures over the performance period that ran from |
| ■ | Taken together, overall CEO total direct compensation was up a modest 3.4% over the prior year. |
Reflecting the nearly 94% support stockholders expressed at our 2023 annual meeting for an annual frequency, we intend to offer this non-binding Say-on-Pay vote at each of our annual meetings. We and the Board welcome our stockholders' views on our NEOs' compensation and, as in past years, will carefully consider the outcome of this advisory vote consistent with the best interests of all stockholders. As an advisory vote, it is not intended to have any use or effect for or on behalf of
Voting Standard
This non-binding advisory resolution will be considered approved based on the affirmative vote of a majority of the shares of our common stock present or represented by proxy at the Annual Meeting and entitled to vote on this item.
| FOR | Board recommendation: FOR approval of NEO compensation |
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In
Voting Standard
The Audit Committee's appointment of
| FOR | Board recommendation: FOR ratifying |
Representatives of
Independent Auditor Services and Fees
Below are the services provided by
| Fiscal Year Ended ($000s) | ||||||
| 2024 | 2023 | |||||
| Audit Fees | $ | 1,451 | $ | 1,453 | ||
| Audit-Related Fees | 55 | 54 | ||||
| Tax Fees | - | - | ||||
| All Other Fees | - | - | ||||
| TOTAL FEES | $ | 1,506 | $ | 1,507 | ||
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|
Audit Committee Report
|
Audit Committee Report
The Audit Committee acts under a written charter to assist the Board in overseeing, among other things,
| ■ | conducts at most meetings separate executive sessions with |
| ■ | oversees management's performance of an annual enterprise risk management assessment and discusses with management identified significant business and operations risks, along with corresponding mitigating factors. |
| ■ | periodically reviews with management |
| ■ | annually reviews and approves the internal audit department's audit plan, which is based on the top risks identified in the annual enterprise risk management assessment, and receives at least quarterly plan status updates. |
| ■ | reviews and discusses with management quarterly and annual periodic reports before they are filed with the |
| ■ | receives and discusses quarterly management reports on the structure and testing of |
| ■ | receives and discusses reports from the chief legal officer and senior compliance executives on material legal, compliance and ethics matters, and the Independent Auditor on its audit and internal control evaluation activities. |
Management is responsible for
The Audit Committee is responsible for the appointment (with consideration given to stockholder ratification), compensation, engagement terms (including fees), retention (or termination) and oversight of the Independent Auditor's work. As to the Independent Auditor, the Audit Committee also:
| ■ | annually evaluates the Independent Auditor's qualifications, independence and effectiveness and conducts an in-depth review at least every five years, the most recent such review having been conducted in |
| - | in the |
| ■ | in |
| ■ | reviews and discusses with the Independent Auditor the scope and plan of its financial statement and internal control over financial reporting audits; the critical accounting policies and practices in the firm's audits; and any critical audit matter that is identified in |
In this context, the Audit Committee reviewed and discussed
In reliance on the reviews, reports, activities and discussions referred to above, the Audit Committee recommended to the Board, and the Board approved, the inclusion of
The Audit Committee respectfully submits this report.
Dr.
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Annual Meeting Voting Matters and Other Information
Holders of record of 71,447,228 shares of our common stock outstanding as of the close of business on the
For stockholders to take action at the Annual Meeting, the holders of a majority of the shares of our common stock outstanding on the record date must be present or represented at the meeting. Abstentions and "broker non-votes" are counted for this purpose. A "broker non-vote" occurs when a broker or financial institution does not receive instructions from a beneficial holder and does not have the discretionary authority to vote on an item of business, which will apply for all Annual Meeting matters other than ratifying our Independent Auditor's appointment. Therefore, if you are a beneficial owner, you must instruct your broker or financial institution on how you want your shares to be voted on the other items of business in order for your shares to be counted for those items.
Voting Your Shares
Stockholders can vote via the Internet, telephone or mail or in person at the Annual Meeting, as described under "Voting Procedures." There are no dissenters' rights or rights of appraisal as to any item to be acted upon at the Annual Meeting. There is no right to cumulative voting.
The Annual Meeting named proxies -
Voting Standards
You will find the voting standard for each item of business at the Annual Meeting on the first page on which it is discussed in this Proxy Statement. Approval of any other matter properly presented at the Annual Meeting requires the affirmative vote of a majority of the shares of our common stock present or represented and entitled to vote thereon. Shares that are not present or represented at the Annual Meeting and broker non-votes will not affect the outcome for any items of business at the Annual Meeting. Abstentions will not affect the outcome of the election of directors but will have the effect of an against vote for any other items of business.
Voting Procedures
| Holders of Record | Beneficial Holders | 401(k) Plan Participant Holders | ||||
| How to Vote | If your shares are registered directly with our transfer agent, |
If an intermediary broker or financial institution holds your shares, vote via the Internet, telephone or mail as instructed on your mailed or electronic voting instruction form. | If you can vote any shares under the 401(k) Plan, vote via the Internet, telephone or mail following the instructions on your mailed or electronic proxy form. | |||
| Voting Deadlines | Internet and telephone voting is available until 11:59 p.m. (EasteTime) on April 16, 2025. Mailed proxy forms must be received before the Annual Meeting polls close. | Your broker, financial institution or other holder of record sets the voting deadlines. | Internet and telephone voting is available until, and mailed proxy forms must be received by, 11:59 p.m. (EasteTime) on April 15, 2025. | |||
| Changing Your Vote | To revoke voting instructions, submit a later vote in person before polls close, or via the Internet, telephone or mail before the above-noted deadlines. | You must contact your broker/ other holder of record to revoke any prior voting instructions. | To revoke voting instructions, submit a later vote in person before polls close, or via the Internet, telephone or mail before the above-noted deadline. |
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Annual Meeting Voting Matters and Other Information
Proxy Solicitation Costs
|
Proxy Solicitation Costs
We will pay the cost to solicit proxies for the Annual Meeting. In addition to this Proxy Statement, our officers, directors and other employees may solicit proxies personally, in writing or by telephone, facsimile, email or other means for no additional compensation. We will, if requested, reimburse banks, brokers and other custodians, nominees and certain fiduciaries for their reasonable expenses in providing proxy materials to their principals. We have hired Georgeson LLC, a professional soliciting organization, to assist us in soliciting proxies and distributing proxy materials for a fee of $10,500, plus reimbursement of out-of-pocket expenses.
Internet Availability of Proxy Materials
The Annual Meeting proxy materials are being made available primarily via the Internet at www.kbhome.com/investor/proxyin order to speed their delivery to our stockholders, to contain costs and to reduce the impact on the environment. In addition, beginning March 7, 2025, we mailed the Notice of Internet Availability to stockholders, which provides instructions on how to access and view the proxy materials, and to vote via the Internet or telephone. To request a printed copy of our proxy materials, follow the instructions on the notice. Stockholders who previously elected to receive proxy materials electronically will continue to receive them and a notice by e-mail, unless we are told otherwise. Please note that you cannot vote your shares by marking and returning a notice.
Stockholder Proposals for Our 2026 Annual Meeting of Stockholders
To be included in the proxy statement and form of proxy for our 2026 annual meeting, we must receive any stockholder proposal intended to be presented at that meeting no later than November 7, 2025. Any such proposal must comply with the requirements of Rule 14a-8 under the Exchange Act. In addition, per our By-Laws, a stockholder who wishes to nominate a director candidate or bring any other business for consideration at the 2026 annual meeting must provide notice to us no earlier than December 18, 2025 and no later than January 17, 2026. In addition to complying with the terms of the By-Laws and applicable law, stockholders who intend to solicit proxies in support of director nominees other than the company's nominees must also comply with the additional requirements of Rule 14a-19(b) under the Exchange Act.
Governance Documents and Public Filings Availability
Our Certificate of Incorporation, By-Laws, Corporate Governance Principles, Board-approved charters for each standing committee and Ethics Policy serve as the foundation of our corporate governance. Each document may be viewed, printed or downloaded at https://investor.kbhome.com/environmental-social-and-governance-esg/governance/default.asp. These documents are also available in print at no charge upon request. The information on our website, including the investor relations section and our annual sustainability reports, is not incorporated by reference into and does not form a part of this Proxy Statement.
Our
Communicating with the Board
Any interested party may write to the Board, the Chairman of the Board, the Lead Independent Director or any other director in care of our Corporate Secretary at
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Commitment to Sustainability
Since 2007, we have been a sustainability leader in the homebuilding industry. As a natural extension of our highly customer-centric operating philosophy, our sustainability efforts are focused on benefiting our customers, primarily through helping them lower their long-term costs of homeownership. In doing so, we believe these efforts also distinguish us in important ways from other new home builders and from resale homes, and enable us to contribute positively to the environment and communities in our served markets.
Our Annual Report, and our annual sustainability reports and investor relations website, which are not incorporated in this Proxy Statement or any other
Sustainability Governance
Our Board oversees our sustainability efforts as part of our overall business strategy. The Board's Audit and Compliance Committee assesses environmental sustainability, and its Management Development and Compensation Committee evaluates workforce matters. Two directors,
Sustainability Focus Areas and Achievements
In our business, we acquire land, develop communities on the land and sell homes in the communities. We engage independent contractors to perform land development and home construction work. We do not operate manufacturing facilities or a vehicle fleet, or package our products. Various local utilities, and their power sources, supply the energy used in community development. Once all homes in a community are delivered, development work ceases and residents use their homes, typically over decades.
Within the foregoing operational context, and as a home's energy consumption mostly occurs after it is delivered to a customer, we have focused on maximizing our homes' energy efficiency to the extent possible using advanced, cost-effective products and technology. This direction aligns with our core first-time homebuyers' long-term affordability needs through potentially lower utility bills. It also helps to minimize our homes' impact on the environment.
Reflecting our long-standing focus on enhancing the energy efficiency of our homes, in 2008 we became the first national homebuilder to make a broad commitment to building ENERGY STAR® certified homes. ENERGY STAR is a voluntary
Beyond our construction of ENERGY STAR certified homes, we assess our progress in this area using the HERS Index, as each HERS Index score point reduction equates to a 1% improvement in energy efficiency relative to a standard new home and potentially produces an average of 0.1 metric tons less GHG emissions (as calculated based on the states in which we operate). In 2020, we set a goal to lower the estimated GHG emissions (metric tons per year) produced through the use of our average home built in 2025 by 0.5 metric tons per year, or 8%, from the estimated 6 metric tons per year average for a KB home built in 2020. Accordingly, our goal was to lower our national average HERS Index score by five points, from 50 for 2020 to 45 for 2025. We achieved a HERS Index score of 45 in 2024, a year earlier than we targeted. For comparison, a typical resale home today has a HERS Index score of 130.
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| Commitment to Sustainability |
As a homebuilder operating in some of the most water-challenged regions of the country, we also prioritize water conservation. We provide water-saving features in our homes that reduce our homeowners' bills and may help to mitigate strain on local communities' water resources. As water availability is an important consideration for local governments in approving new-home developments, we believe our leadership in this area has positioned us to effectively address water-related development concerns and help preserve this critical resource. We were the first national homebuilder to join the
To date, we have built over 26,000 WaterSense labeled and Water Smart homes, which we believe is more than any other homebuilder, and installed over 1.2 million WaterSense labeled fixtures, collectively helping to save an estimated 2.1 billion gallons of water per year based on calculations derived from WaterSense program and supplier data. This initiative helps homeowners use less water, as well as lower their utility bills, in some of the most drought-affected areas of the country.
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ANNEX 1
Corporate Governance Processes and Procedures
This Annex provides additional information about
Director Independence Determinations
We believe that a substantial majority of our directors should be independent. To be independent, the Board must affirmatively determine that a director does not have any direct or indirect material commercial or charitable relationship with us based on all relevant facts and circumstances. The Board makes independence determinations from information supplied by directors, director nominees and other sources, the Nominating Committee's prior review and recommendation, and certain categorical standards contained in our Corporate Governance Principles that are consistent with NYSE listing standards. The Board determined that all directors who served in 2024 and all director nominees are independent, other than
In making its independence determinations, the Board found that the following directors' independence was not impaired by, and each did not have a direct or indirect material interest in, the following:
The Board also determined that each Compensation Committee member is a "non-employee director" under
Related Party Transactions
The Nominating Committee reviews any transactions, arrangements or relationships in which we participate and in which a director, director nominee, executive officer or beneficial owner of five percent or more of our common stock (or, in each case, an immediate family member) had or will have a direct or indirect material interest (a "Related Party Transaction"). Covered individuals and stockholders are expected to inform our Corporate Secretary of any Related Party Transactions, and we collect information from our directors, director nominees and executive officers so that we can review our records for any such transactions.
Per the policies and procedures set forth in its Charter, the Nominating Committee will approve a Related Party Transaction if, based on a review of all material facts and feasible alternatives, it deems the transaction to be in our and our stockholders' best interests. In addition, specified categories of transactions set forth in the Nominating Committee's Charter are deemed pre-approved, including those in which the total amount involved is less than or equal to $120,000; and those that would not (a) need to be reported under federal securities laws, (b) be deemed to impair a director's independence or (c) be deemed to be a conflict of interest.
In 2000, the Compensation Committee approved an incentive program under which certain executives were granted minority interests in limited liability companies through which we made strategic e-commerce investments in technology businesses in the late-1990s. The program is described in the Proxy Statement for our 2001 Annual Meeting of Stockholders. The executives vested in their ownership interests three years later if they remained employed with us for that period and, as owners, are entitled to share in each limited liability company's net income and gains, if any. Only one of the investee companies, in which the relevant limited liability company had an approximately 13.0% ownership interest, developed a viable business. On March 1, 2024, shortly after the distribution of certain assets through a taxable dividend, this investee company was acquired by a privately held buyer for cash and equity consideration. As a result, according to their respective interests in the relevant limited liability company, the vested executives, many of whom are no longer employees, became entitled to receive an allocated cash distribution from the transaction proceeds, including any later distributions from the sale transaction-related escrows, and recognized taxable gains attributable to the sale transaction consideration and pre-sale asset dividend. This includes
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Annex 1 Corporate Governance Processes and Procedures
Director Qualifications and Nominations
|
Director Qualifications and Nominations
The Nominating Committee evaluates and recommends individuals for election to the Board at its meetings and at any point during the year. Current directors may nominate individuals, and the Nominating Committee has retained professional search firms from time to time to assist with director recruitment. Among other factors, the Nominating Committee takes into consideration the attributes listed in our Corporate Governance Principles and diversity as described under "Board Experience and Skills." There is no formal policy as to how diversity is applied, and an individual's background and experience, while important, do not necessarily outweigh any other factors.
Security holders may propose director nominees by following the procedures in our By-Laws, which require, among other things, timely advance written notice to our Corporate Secretary of any potential nominee that contains specified information about the nominee and the nominating security holder. Director nominees proposed by security holders in accordance with the procedures in our By-Laws are considered in the same manner as any other potential nominees.
Board Evaluation Process
In October 2024 and January 2025, the Board and each committee conducted an annual evaluation of their respective performance as part of their regular meetings. Their discussions were guided by a set of subjects the Nominating Committee approved in July 2024. The subjects included, among others: Board/committee structure, composition, diversity, skills, meeting processes, interaction with management, and the performance of the Board Chairman/committee chair and the Lead Independent Director. Each committee reported on the results of its own assessment to the Board.
Audit Fee Pre-Approval Policy; Audit Committee Designation
The Audit Committee has established a policy that requires it to pre-approve all services our Independent Auditor provides to us, including audit, audit-related, tax and other permitted non-audit services. In certain circumstances under the policy, our chief accounting officer (or a functional equivalent) can authorize the firm to perform services, and the Audit Committee Chair can pre-approve services up to a specific per-engagement fee limit. The Audit Committee Chair must report to the Audit Committee any such pre-approvals granted.
The Audit Committee approved all services
The Audit Committee is a separately designated standing audit committee as defined in Section 3(a)(58)(A) of the Exchange Act.
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ANNEX 2
Reconciliation of Non-GAAP Financial Measures
This Proxy Statement contains information regarding Adjusted Pretax Income, Adjusted Net Income and Adjusted Earnings Per Share, all of which are financial measures that are not calculated in accordance with GAAP. We believe these non-GAAP financial measures are relevant and useful for purposes of this Proxy Statement to understand our 2024 fiscal year performance generally and in relation to the annual incentive payouts the Compensation Committee approved for our NEOs, as described under "2024 Annual Incentives," and how the 2021 PSU performance measures of AEPS and AROIC were determined, as described under "Long-Term Incentives." However, because Adjusted Pretax Income, Adjusted Net Income and Adjusted Earnings Per Share are not calculated in accordance with GAAP, these financial measures may not be completely comparable to other companies in the homebuilding industry and, thus, should not be considered in isolation or as an alternative to measures prescribed by GAAP. Also, we do not necessarily use these specific financial measures to make business decisions or in other investor communications about our results of operations. Rather, these financial measures should be used to supplement the most directly comparable GAAP financial measures in order to provide a greater understanding of our performance solely with respect to the 2024 fiscal year annual incentives and 2021 PSU payouts to our NEOs.
The table below reconciles our total pretax income calculated in accordance with GAAP to the non-GAAP measure of Adjusted Pretax Income used in the computation of the 2024 fiscal year annual incentives (in thousands):
| For the Fiscal Year Ended November 30, 2024 |
||||
| Total pretax income | $ | 850,918 | ||
| Add: Incentive compensation expense | 86,075 | |||
| ADJUSTED PRETAX INCOME | $ | 936,993 | ||
Adjusted Pretax Income is a non-GAAP financial measure, which is calculated as our total pretax income excluding certain compensation expense and certain inventory-related charges. There were no inventory-related charges that impacted the calculation for 2024. For Adjusted Pretax Income, the most directly comparable GAAP financial measure is pretax income.
The tables below reconcile our net income and diluted earnings per share calculated in accordance with GAAP to the non-GAAP measures of Adjusted Net Income and Adjusted Earnings Per Share used in the computation of the AEPS and AROIC performance measures for the 2021 PSU payouts to our NEOs ($ in thousands, except per share amounts):
| For the Fiscal Years Ended November 30, | |||||||||
| 2024 | 2023 | 2022 | |||||||
| Total pretax income | $ | 850,918 | $ | 771,277 | $ | 1,072,066 | |||
| Income tax expense | (195,900) | (181,100) | (255,400) | ||||||
| NET INCOME | $ | 655,018 | $ | 590,177 | $ | 816,666 | |||
| DILUTED EARNINGS PER SHARE | $ | 8.45 | $ | 7.03 | $ | 9.09 | |||
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| Annex 2 Reconciliation of Non-GAAP Financial Measures |
| For the Fiscal Years Ended November 30, | |||||||||
| 2024 | 2023 | 2022 | |||||||
| Net income | $ | 655,018 | $ | 590,177 | $ | 816,666 | |||
| Adjustments (a): Certain inventory-related charges |
- | 11,424 | 25,542 | ||||||
| Income tax impact (b) | - | (2,700) | (6,100) | ||||||
| ADJUSTED NET INCOME | $ | 655,018 | $ | 598,901 | $ | 836,108 | |||
| ADJUSTED EARNINGS PER SHARE (AEPS) | $ | 8.45 | $ | 7.18 | $ | 9.36 | |||
| (a) | There were no pre-specified categories of compensation expense or other extraordinary items approved by the Compensation Committee in 2024, 2023 or 2022 that impacted the calculation for those years. |
| (b) | Represents the total adjustments to net income multiplied by our effective tax rate, which was 23.0% for 2024, 23.5% for 2023 and 23.8% for 2022. |
| For the Fiscal Years Ended November 30, | |||||||||
| 2024 | 2023 | 2022 | |||||||
| ADJUSTED NET INCOME | $ | 655,018 | $ | 598,901 | $ | 836,108 | |||
| Average notes payable | $ | 1,690,789 | $ | 1,764,205 | $ | 1,761,769 | |||
| Average stockholders' equity | 3,935,378 | 3,735,468 | 3,340,135 | ||||||
| AVERAGE INVESTED CAPITAL | $ | 5,626,167 | $ | 5,499,673 | $ | 5,101,904 | |||
| ADJUSTED RETURN ON INVESTED CAPITAL (AROIC) | 11.6% | 10.9% | 16.4% | ||||||
Adjusted Net Income is a non-GAAP financial measure, which is calculated as our net income excluding pre-specified categories of compensation expense; certain inventory-related charges; and other extraordinary items approved by the Compensation Committee, and the applicable income tax impact of these items for the period. AEPS is calculated based on Adjusted Net Income. AROIC is calculated as Adjusted Net Income divided by average invested capital (average notes payable and stockholders' equity for the beginning and end of the applicable year). For Adjusted Net Income and AEPS, the most directly comparable GAAP financial measures are net income and diluted earnings per share, respectively.
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FORWARD-LOOKING STATEMENTS
Certain statements contained in this Proxy Statement and accompanying materials, are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 ("Act"). Statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include words such as "expect," "anticipate," "intend," "plan," "believe," "estimate," "hope," and similar expressions constitute forward-looking statements. In addition, any statements concerning our anticipated or projected financial or operating performance (including without limitation as to revenues, community count, homes delivered, net orders, selling prices, sales pace per new community, expenses, expense ratios, housing gross profits, housing gross profit margins, earnings or earnings per share, book value per share, or growth or growth rates); market conditions; mortgage or other interest rates and other economic conditions; our ongoing business strategies or prospects, including those relating to land acquisition and development investments, expanding our scale and returns, building our brand, and our sustainability-related programs and goals or targets; customer satisfaction levels on an absolute or relative basis to other homebuilders; our executive compensation program; dividends and changes in dividend levels; our cash generation and liquidity; the value of our backlog (including amounts that we expect to realize upon delivery of homes included in our backlog and the timing of those deliveries); the value of our net orders; share or other security issuances or repurchases; whether and to what extent we retucapital to stockholders, if at all; debt issuances, repurchases or redemptions; and other possible actions in these or other areas of our business are also forward-looking statements under the Act. Forward-looking statements are based on our expectations and projections about future events at the time made and are subject to risks, uncertainties, and assumptions about our operations, economic and market factors, and the homebuilding industry, among other things, including events outside our control. These statements are not guarantees of future performance or outcomes, and we have no specific policy or intention to update these statements. If we update or revise any such statement(s), no assumption should be made that we will further update or review that statement(s) or update or revise any other such statement(s). In addition, forward-looking and other statements in this Proxy Statement and accompanying materials may be based in whole or in part on general observations of our management, limited or anecdotal evidence and/or business or industry experience without in-depth or any particular empirical investigation, inquiry or analysis. Actual events and results may differ materially from those expressed, forecasted or implied in forward-looking statements due to a number of factors, including, without limitation, economic and business conditions; our ability to successfully implement our current and planned strategies and initiatives related to our product, geographic and market positioning; and if we can successfully implement our business and capital allocation strategies and achieve any associated financial and operational objectives. Please see our periodic reports and other filings with the Securities and Exchange Commission, including, but not limited to, our Annual Report, for a further discussion of the risks, uncertainties and other factors applicable to our business.
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Attachments
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Proxy Statement (Form DEF 14A)
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