Message to Our Stockholders:
We are extremely pleased with the D.R. Horton team’s performance in fiscal 2023. We completed our 22nd consecutive year as the largest homebuilder in the United States by closing 89,092 homes in our homebuilding and single-family rental operations during fiscal 2023. Our consolidated revenues of $35.5 billion were 6% higher than fiscal 2022, and our consolidated pre-tax income was $6.3 billion in fiscal 2023. Over the last five years, we have grown our revenues by 121% and our earnings per share by 263%. In fiscal 2023, we generated $4.3 billion of cash from operations. We achieved a homebuilding return on inventory of 30% and return on equity of 23% while reducing our consolidated leverage to 18%. Our strong balance sheet, ample liquidity and low leverage provide us with significant financial flexibility. We are committed to maintaining our disciplined approach to investing capital to enhance the long-term value of our Company, including consistently returning capital to our stockholders through both dividends and share repurchases.
Our purpose as a Company is to enable our customers to achieve the American Dream of homeownership. We achieve this by ensuring that our homes remain affordable for entry-level and first-time homebuyers, and the average selling price of our homes is one of the lowest in the homebuilding industry. We are honored to provide new homes to more individuals and families than any other builder in the country, and in fiscal 2023 we celebrated the delivery of our one millionth home in the history of the Company. We strive to offer compelling value across our broad product offerings to serve a diverse customer base and provide homes for every stage in life.
As a Board, we remain committed to providing consistent and effective oversight of management as the Company implements its vision and strategic plans to create sustainable stockholder value. The Board remains committed to stockholder engagement, and the feedback gained in conversations with stockholders continues to serve as a key input to Board and Committee discussions and decisions. The following proxy statement outlines the significant actions taken by the Board and Compensation Committee to address and align with stockholder feedback. We are also proud to have been named the Best Investor Relations Program in the Homebuilders and Building Products sector by Institutional Investor multiple times in its annual survey, including in three of the four most recent years.
In September 2023, we announced several changes to our executive and board leadership as part of our ongoing succession plans. Effective October 1, 2023, David Auld, who served for the past nine years as President and CEO of the Company, was appointed Executive Vice Chair. Paul Romanowski was promoted to President and CEO and appointed to our Board of Directors. Our founder, Donald R. Horton, will no longer serve as an executive officer of the Company but will continue to provide the Board and Company with valuable insight and leadership as Chairman of the Board. Dr. Benjamin Carson continues to serve as Presiding Director. These moves will help facilitate a smooth transition and succession of management and board leadership, and demonstrate the depth of the Company’s leadership.
The Company continues to provide transparency regarding our Environmental, Social and Governance (“ESG”) efforts, and we plan to publish our second ESG report in early fiscal 2024. This ESG report will include discussion and metrics around the energy efficiency and environmental impacts of our homes, the importance of the people who work for D.R. Horton, our impacts on the communities in which we work, overall business ethics and other important topics.
Our employees continue to be the primary strength of our Company, ensuring the resilience of our business going forward. We remain committed to hiring, developing and supporting a positive, productive, diverse and inclusive workplace by attracting and retaining talented and experienced individuals to manage and support our operations. Our Company’s culture is centered on accountability, integrity and providing growth opportunities for our employees based on competence, effort and character.
Our employees strive to have a positive influence on their local communities by providing new homes to their neighbors and also by supporting local organizations that enhance the well-being of the community and help those in need. We support our employees and their communities through numerous efforts including team volunteering projects, support of individual employee volunteer efforts, natural disaster recovery assistance to municipalities, various types of donations, contributions and cooperation with our trade partners in supporting various charitable causes. Homebuilding is a local business, and we are proud to support the local communities where our employees and customers live and work.
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Board of Directors: Donald R. Horton, Chairman David V. Auld, Executive Vice Chair Paul J. Romanowski, Chief Executive Officer Barbara K. Allen Brad S. Anderson Michael R. Buchanan Benjamin S. Carson, Sr. Maribess L. Miller |
CORPORATE GOVERNANCE AND BOARD MATTERS
Majority Vote Standard and Resignation Policy
The D.R. Horton Bylaws require that to be elected, a director nominee must receive a majority of the votes cast with respect to such nominee in uncontested elections (the number of shares voted “for” a director nominee must exceed the number of votes cast “against” that nominee). In a contested election, where the number of nominees exceeds the number of directors to be elected (which is not the case for the 2024 Annual Meeting), the directors will be elected by a plurality of the shares present in person or by proxy and entitled to vote on the election of directors. Under the Corporate Governance Principles of the Company, any director who is not elected is required to tender his or her resignation to the Chairman of the Board within a reasonable time following certification of the vote. The Nominating and Governance Committee, which is composed of only independent directors, will consider the resignation offer and make a recommendation to the Board as to whether to accept or reject the resignation offer or whether other action should be taken. The Board will act on the Nominating and Governance Committee’s recommendation within 90 days following certification of the election results. Thereafter, the Board will promptly publicly disclose in a report filed with the SEC its decision regarding the director’s resignation offer (including the reason(s) for rejecting the resignation offer, if applicable).
Procedures for Nominating or Recommending for Nomination Candidates for Director
Our Bylaws provide, outside of the proxy access process, that any stockholder may make nominations for the election of directors if notice of such nominations is delivered to the principal executive offices of D.R. Horton not later than the close of business on the 90th calendar day or earlier than the close of business on the 120th calendar day prior to the first anniversary of the preceding year’s annual meeting. However, in the event that the date of the annual meeting is changed by more than 30 calendar days from the anniversary date of the preceding year’s meeting, for notice by the stockholder to be timely, it must be so delivered not earlier than the close of business on the 120th calendar day prior to such meeting and not later than the close of business on the later of the 90th calendar day prior to such meeting or the 10th calendar day following the day on which public disclosure of the date of such meeting is made. Such public disclosure is defined to mean a press release reported by the Dow Jones News Service, Associated Press or a comparable national news service or a document publicly filed by the Company with the SEC pursuant to Sections 13, 14 or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In addition, the notice must include information specified in our Bylaws, including information concerning the nominee, the stockholder and the beneficial owner, as the case may be. Because no such nominations have been made in accordance with our Bylaws, only the nominations of the Board of Directors may be voted for at the 2024 Annual Meeting.
The Board of Directors has adopted proxy access, which allows a stockholder or group of up to 20 stockholders owning in the aggregate 3% or more of D.R. Horton’s outstanding shares continuously for at least three years to nominate and include in the proxy materials director nominees constituting up to 20% of the number of directors in office, provided the stockholder(s) and nominee(s) satisfy the requirements in our Bylaws. In order for a stockholder or group of stockholders to nominate a director candidate to be included in D.R. Horton’s proxy materials, notice of such nomination must be delivered to the principal executive offices of D.R. Horton not later than the close of business on the 120th calendar day or earlier than the close of business on the 150th calendar day prior to the first anniversary of the date that the definitive proxy statement was first released to stockholders in connection with the preceding year’s annual meeting, and the nomination must otherwise comply with our Bylaws. However, in the event that the date of the annual meeting is changed by more than 30 calendar days from the anniversary date of the preceding year’s annual meeting, for notice by the stockholder to be timely, it must be so delivered not earlier than the close of business on the 150th calendar day prior to such meeting and not later than the close of business on the later of the 120th calendar day prior to such meeting or the 10th calendar day following the day on which public disclosure of the date of such meeting is made.
In addition, the Nominating and Governance Committee has adopted a policy permitting stockholders to recommend candidates for director for consideration by the committee. The Nominating and Governance Committee will consider candidates recommended by stockholders on the same basis as candidates identified through other means. Stockholders wishing to recommend candidates for election must give notice to the Nominating and Governance Committee by following the same deadlines for notice to submit a nomination outlined in our Bylaws and described above. Each notice must set forth the same information required by our Bylaws to submit a nomination. All recommended candidates shall, at a minimum, possess the characteristics for directors discussed above. The Nominating and Governance Committee may request additional information to assist in the evaluation of the candidacy of such person.
Director Independence
Our Board of Directors is composed of a majority of independent directors in accordance with the NYSE Rules. Our Board made the independence determination of its members based on the “Independence Standards” discussed below.
Our Board has adopted a set of “Independence Standards,” consistent with the NYSE Rules, to aid it in determining whether a member of the Board is independent under the NYSE Rules. In accordance with these Independence Standards, a director must not have a direct or indirect material relationship with the Company or its management, other than as a director. The Independence Standards specify the criteria by which the independence of our directors will be determined, including strict guidelines for directors and their immediate family members with respect to past employment or affiliation with the Company, its management or its independent auditor.
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The Independence Standards include the following:
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A director who is an employee or whose immediate family member is an executive officer of D.R. Horton is not independent until three years after the end of such employment relationship. |
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A director who receives, or whose immediate family member receives, more than $120,000 per year in direct compensation from D.R. Horton, other than director and committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service), is not independent until three years after he or she ceases to receive more than $120,000 per year in compensation. Compensation received by an immediate family member for service as a non-executive employee or non-member of senior management of D.R. Horton will not be considered in determining independence under this test. |
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A director is not independent if (i) the director or an immediate family member is a current partner of D.R. Horton’s external audit firm, (ii) the director is a current employee of such firm, (iii) the director’s immediate family member is a current employee of such firm and personally works on D.R. Horton’s audit, or (iv) the director or an immediate family member was within the last three years (but is no longer) a partner or employee of such firm and personally worked on D.R. Horton’s audit within that time. |
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A director who is employed, or whose immediate family member is employed, as an executive officer of another company where any of D.R. Horton’s present executives serve on that company’s compensation committee is not independent until three years after the end of such service or employment relationship. |
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A director who is an executive officer or an employee or whose immediate family member is an executive officer of a company that makes payments to or receives payments from D.R. Horton for property or services in an amount that in any single fiscal year exceeds the greater of $1 million or 2% of such other company’s consolidated gross revenues, is not independent until three years after falling below such threshold. |
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If a director serves as an executive officer, director or trustee of a charitable or educational organization and D.R. Horton’s contributions to the organization are less than $500,000, then the relationship will not be considered to be a material relationship that would impair a director’s independence. |
For purposes of these Independence Standards, an “immediate family member” includes a director’s spouse, parents, children, siblings, mother and father-in-law, sons and daughters-in-law, brothers and sisters-in-law, and anyone (other than domestic employees) who shares the director’s home.
Audit Committee Independence, Financial Literacy and Audit Committee Financial Expert
In addition to being independent based on the Independence Standards, the NYSE Rules require that each member of an audit committee satisfy additional independence and financial literacy requirements and at least one of these members must satisfy the additional requirement of having accounting or related financial management expertise. This additional requirement can be satisfied by the Board determining that at least one Audit Committee member is an “audit committee financial expert” within the meaning of the SEC Rules. Accordingly, the Corporate Governance Principles contain a set of standards that relate to audit committee independence, financial literacy and audit committee accounting and financial management expertise. Generally, the additional independence standard provides that (i) a member of the Audit Committee is prohibited from receiving any direct or indirect compensation or fee from the Company, its subsidiaries or its affiliates, other than in his or her capacity as a member of the Audit Committee, the Board or any other committee of the Board, and (ii) he or she may not be an affiliated person of the Company or any of its subsidiaries. Generally, the financial literacy standard provides that the Board, in its business judgment, shall determine if each member is financially literate, taking into account factors such as the member’s education, experience and ability to read and understand financial statements of public companies.
Audit Committee Financial Expert Attributes: Audit committee financial experts must have five additional attributes, which are (i) an understanding of generally accepted accounting principles and financial statements, (ii) the ability to assess the general application of such principles in connection with the accounting for estimates, accruals and reserves, (iii) experience preparing, auditing, analyzing or evaluating financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of issues that can reasonably be expected to be raised by the Company’s financial statements, or experience actively supervising one or more persons engaged in such activities, (iv) an understanding of internal control over financial reporting and (v) an understanding of audit committee functions. Altogether, attributes (i) through (v) are referred to as the “Financial Expert Attributes.” The audit committee Financial Expert Attributes are set forth in the Corporate Governance Principles.
Compensation Committee Independence
In addition to being independent based on the Independence Standards, the NYSE Rules require that each member of a compensation committee satisfy additional independence requirements. The NYSE Rules require that the Board consider all factors specifically relevant to determining whether a director has a relationship to the Company that is material to that director’s ability to be independent from
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management in connection with the duties of a compensation committee member, including, but not limited to (i) the source of compensation of such director, including any consulting, advisory or other compensatory fee paid by the Company to such director and (ii) whether such director is affiliated with the Company, a subsidiary of the Company or an affiliate of a subsidiary of the Company.
Board Determinations
Independence and Financial Literacy. Based on the independence and financial literacy standards discussed above, the Board has determined that Barbara K. Allen, Brad S. Anderson, Michael R. Buchanan, Benjamin S. Carson, Sr. and Maribess L. Miller are (i) independent for purposes of serving as independent members of the Board of Directors and the Nominating and Governance Committees, (ii) independent for purposes of serving as independent members on the Audit Committee and the Compensation Committee and (iii) financially literate for purposes of serving on the Audit Committee.
The Board also determined that Mr. Horton, Mr. Auld and Mr. Romanowski, each a director nominee, are not independent because they are current or former executive officers.
Audit Committee Financial Expert. Based on the Audit Committee Financial Expert Attributes discussed above, the Board has determined that Ms. Miller has the Financial Expert Attributes to qualify as the Audit Committee Financial Expert.
Retirement Age Policy
In 2007, our Board adopted a retirement policy for directors. Under the policy, directors may not stand for re-election after they have reached the age of 75. Directors serving on the Board on January 25, 2007, which include Mr. Anderson, Mr. Buchanan and Mr. Horton, are exempt from this policy. In fiscal years 2021, 2022 and 2023, the Board determined to waive this retirement age policy for Ms. Allen in the interest of promoting and maintaining gender and tenure diversity and leadership on our Board of Directors and its Committees.
Code of Ethical Conduct for the CEO, CFO and Senior Financial Officers
In accordance with SEC Rules, the Audit Committee and the Board have adopted the Code of Ethical Conduct for the CEO, CFO and Senior Financial Officers. The Board believes that these individuals must set an exemplary standard of conduct for D.R. Horton, particularly in the areas of accounting, internal accounting control, auditing and finance. The ethics code sets forth ethical standards the designated officers must adhere to and other aspects of accounting, auditing and financial compliance. Information relating to any amendment to or waiver of a provision of the Code of Ethical Conduct for the CEO, CFO and Senior Financial Officers will be, if required, disclosed on our website within four business days of such amendment or waiver. This Code of Ethical Conduct for the CEO, CFO and Senior Financial Officers has been posted to our website at investor.drhorton.com under the Policy & ESG Documents link within the ESG section.
Corporate Code of Business Conduct and Ethics
The Board of Directors has adopted a Corporate Code of Business Conduct and Ethics (Corporate Code of Conduct) for employees and directors of D.R. Horton in accordance with the NYSE Rules. The Board adopted the Corporate Code of Conduct to provide guidance to the Board and management in areas of ethical business conduct and risk and to provide guidance to employees and directors by helping them recognize and deal with ethical issues including, but not limited to, (i) conflicts of interest, (ii) corporate opportunities, (iii) confidentiality, (iv) fair dealing, (v) protection of corporate assets, (vi) compliance with rules and regulations, including insider trading of securities, and (vii) confidential reporting of unethical behavior and hotline telephone numbers. The Corporate Code of Conduct is reviewed at least annually to determine the need for any updates or revisions. The Corporate Code of Business Conduct and Ethics has been posted to our website at investor.drhorton.com under the Policy & ESG Documents link within the ESG section.
Complaint Procedures for Accounting, Internal Control, Auditing and Financial Matters
In accordance with SEC Rules, the Audit Committee has established procedures for (i) the receipt, retention and treatment of complaints regarding accounting, internal control, auditing or financial matters (collectively, “Accounting Matters”) and (ii) the confidential, anonymous submission by employees of concerns regarding questionable Accounting Matters. The Audit Committee oversees treatment of complaints and concerns in this area. The Complaint Procedures for Accounting, Internal Control, Auditing and Financial Matters have been posted to our website at investor.drhorton.com under the Policy & ESG Documents link within the ESG section.
Executive Sessions of the Board of Directors
Our non-employee members of the Board of Directors hold regularly scheduled executive sessions of these independent directors. Dr. Carson, Chair of the Nominating and Governance Committee, serves as Presiding Director of these executive sessions, at which the Chairman of the Board, the Executive Vice Chair and the CEO are not present. During fiscal 2023, the non-employee directors met four times in executive session, without members of management present.
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Active Stockholder Engagement and Feedback from Investors
During fiscal 2023, the Company’s management and investor relations professionals attended investment conferences and participated in investor meetings and conference calls with hundreds of institutional investors. The Company’s investor relations team strives to be very responsive to investor requests for information and discussions. The Company has been named the Best Investor Relations Program in the Homebuilders and Building Products sector by Institutional Investor multiple times in its annual survey, including in three of the four most recent years.
Also during fiscal 2023, the Company was in contact with stockholders representing approximately 58% of the Company’s outstanding shares and had substantive conversations with interested stockholders regarding the Company’s executive compensation, corporate governance and other ESG matters. The Compensation Committee Chair participated in outreach to the Company’s largest stockholders and in discussions with those who wished to engage.
The Company values feedback from its stockholders, and the input received regarding the Company’s performance, ESG reporting, executive compensation and other matters is regularly evaluated by management, the Board and Committees. For a more fulsome discussion of actions taken in response to stockholder feedback over recent years, please see the section titled “Track Record of Board Responsiveness and Commitment to Stockholder Engagement” on page 2 above.
Communications with the Board of Directors and the Company
Stockholders and others who wish to contact any member of our Board may send their correspondence to the Chair of the Nominating and Governance Committee, who also serves as the Presiding Director. Send communications to: Presiding Director, c/o Thomas B. Montaño, Senior Vice President and Corporate Secretary, D.R. Horton, Inc., 1341 Horton Circle, Arlington, Texas 76011 or email at tbmontano@drhorton.com. Communications will be promptly forwarded to such Board member(s) or the Presiding Director, as applicable. Stockholders and others who wish to contact our Investor Relations team may send communications to Jessica Hansen, Senior Vice President and Head of Investor Relations, D.R. Horton, Inc., 1341 Horton Circle, Arlington, Texas 76011 or email at InvestorRelations@drhorton.com. Further information may be obtained through our website at investor.drhorton.com under the Policy & ESG Documents link within the ESG section.
Board Leadership Structure, Board’s Role in Risk Oversight and Board and Committee Meetings
Board Leadership Transition and Structure
Our Board of Directors and the Nominating and Governance Committee regularly review and evaluate the Board’s leadership structure, including maintaining a succession plan for Board leadership. On September 20, 2023, our Board of Directors announced several changes to our executive and board leadership as part of its leadership succession and transition plans. To ensure a smooth transition of executive and board leadership, effective October 1, 2023, the Board and Nominating and Governance Committee appointed David Auld, who previously served as President and CEO of the Company, as Executive Vice Chair, and appointed Paul Romanowski as President and CEO and to serve as Director of the Company. Donald R. Horton continues to serve as Chairman of the Board, and no longer serves as an executive officer of the Company effective October 1, 2023. Dr. Benjamin Carson continues to serve as Presiding Director.
The Nominating and Governance Committee believes that this leadership structure, supported by independent and diverse key Board committee chairs, delivers independent Board leadership and engagement while offering the benefit of the extensive experience of our Chairman and Executive Vice Chair to provide valuable insight and leadership to both the Board and the Company.
The Board does not have a policy that requires a specific board leadership structure, nor does it require the roles of the Chairman and CEO to be separated. The Board believes the current separation of the Chairman and CEO roles provides an effective leadership structure that facilitates robust and effective communication between the Chairman, the Board’s independent directors and management, which has supported the Company’s enhancement of stockholder value.
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| Chairman — Mr. Horton |
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Executive Vice Chair — Mr. Auld |
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Presiding Director — Dr. Carson |
| Primary responsibilities include: • advising overall Company vision, direction and strategy; • leading the Board in overseeing key risk areas related to the Company; and • providing perspective and advice to the executive officers and overseeing the accountability of management to implement Board-approved strategies and oversight functions. |
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Primary responsibilities include: • working with the new CEO and executive officers to ensure smooth transition of responsibilities; • mentoring the new CEO and executive officers by conveying institutional knowledge; • working with the Chairman and the Board on implementation of succession planning for the Board and management team; and • working with the Chairman and full Board on developing overall Company visions, direction and strategy and oversight of key risk areas. |
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Primary responsibilities include: • presiding at meetings of independent directors; • calling meetings of independent directors as needed; • serving as a liaison between independent directors and Company management including the Chairman and Executive Vice Chair; and • working with key Board committee chairs to provide independent oversight of management. |
Board’s Role in Risk Oversight
Our Board and Board Committees have oversight responsibility of the Company’s risk management. The risk management process implemented by our executive officers and key managers addresses risks related to the Company’s operations, financing and liquidity needs, ESG matters, cybersecurity, financial reporting, internal control and regulatory compliance. Risk oversight is reviewed in the risk areas of the Company listed below.
Land and Lots. Our ability to build and sell homes that meet buyer demand is heavily impacted by our ability to control, buy and develop land and lots in a cost-effective manner. As a result, we use substantial financial resources to control, buy and develop land and lots. We control the amount of financial resources used in the acquisition of land and lots through a process which requires divisional, regional and corporate approval before financial resources are authorized for this purpose. Corporate approval includes review by corporate legal and accounting personnel and approval by our executive officers. Our executive team reports to the Board regarding our process of reviewing, approving and funding land and lot acquisitions. We believe this process adequately manages the risk related to our land and lot acquisitions.
Financing and Liquidity. Our financing and liquidity position may fluctuate due to changes in the homebuilding industry and home sales demand. Our Board oversees financing and liquidity risk to ensure we maintain the financial resources needed to fund our homebuilding operations. At each quarterly meeting, management reviews the Company’s financial and liquidity position with the Board, which includes projected short- and long-term financing and liquidity needs. To further manage risk in this area, the Board approves a limit on the amount of debt and equity that may be repurchased. Additionally, public debt or equity issuances are approved by the Board. We believe these measures provide adequate oversight of the Company’s financing and liquidity risk.
ESG Matters. Key ESG matters, including environmental and climate-related risks and human capital risks such as diversity, equity and inclusion and employee health and safety, could have an adverse impact on our company. Our Board oversees these risks through the Nominating and Governance Committee, which has regular discussions on these matters with both internal and external personnel with relevant ESG responsibilities and expertise. The Board also supports and receives regular updates on progress in the Company’s reporting of ESG policies, metrics and related disclosures.
In recent years, the Board has approved policies that enhance the Company’s commitments to respect human rights and to transparency of political contributions. The Board also reviewed an enterprise-level ESG risk assessment and the Company’s inaugural ESG report.
We also publish our human capital data and our EEO-1 report to highlight the demographic composition of our workforce and our homebuyers. Our ESG progress will be updated in our second ESG report, which we plan to publish in early fiscal 2024.
Cybersecurity. Our company is largely reliant on information technology (“IT”), and potential IT failures and data security breaches could harm our business. IT and cybersecurity risk is managed by the IT Cyber Security Risk Officer and Chief Information Officer (“CIO”), and our Board oversees this risk via regular discussions with and presentations to the Audit Committee as part of Internal Audit and the CFO’s materials, paired with periodic presentations by the CIO and IT Cyber Security Risk Officer. The most recent formal presentation included highlights around the Company’s process to maintain IT security and discussed the mix of preventative and defensive approaches for IT Security and the formal incident response procedures in place. The Board also regularly inquires about changes, updates and potential issues in our strategy and execution of IT security risk management and has had other informal reviews with the CIO. Internal Audit also conducts cybersecurity reviews as part of its audit procedures and presents any findings to the Board on a quarterly basis. Additionally, we conduct
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cybersecurity training for all employees at least annually. The Company has not had a material cybersecurity breach within the last three years. We believe these measures provide adequate risk oversight of information technology and cybersecurity matters that could affect the Company.
Financial Reporting, Internal Control and Regulatory Compliance. The Audit Committee of the Board provides risk oversight with respect to financial reporting, internal control over financial reporting, internal audit and related regulatory compliance matters. Each quarter, our Audit Committee discusses with our independent auditor its review of our interim financial information and, after our fiscal year-end, discusses its audit of our annual consolidated financial statements, including our procedures on internal control over financial reporting. Also, during the fiscal year, our Audit Committee meets in private session (without the presence of management) with our independent auditor to discuss any matters related to the audit of our annual consolidated financial statements and review of our internal control over financial reporting.
Each quarter, our Audit Committee meets with our director of internal audit and reviews the results of the internal audits of the Company’s operating divisions and other matters that may affect the Company’s key controls. Each year, the Audit Committee reviews and approves the internal audit plan for the forthcoming fiscal year. The internal audit plan is designed using a risk-based approach focusing on key risk areas in the Company’s homebuilding, financial services, IT and other operations. During the fiscal year, the Audit Committee meets in private session (without the presence of management) with our internal audit director.
Our Audit Committee periodically receives presentations on topics related to recent or anticipated changes to accounting rules and regulations, tax laws and regulations, corporate governance and financial reform rules and regulations. The Audit Committee oversees the Company’s compliance with regulatory issues in these areas and discusses with management any actions necessary to maintain or become compliant with such regulatory matters.
People. Through its oversight of and discussions with the Company’s executive management team, the Board maintains awareness of the significant decisions with regard to the appointment, promotion and retention of the Company’s management and employees. The Nominating and Corporate Governance Committee also oversees management and director succession planning.
The Compensation Committee provides risk oversight with respect to compensation of the Company’s employees, including the named executive officers and other key officers, with the assistance of the Board. The Compensation Committee also reviews and approves all equity plan awards to all Company employees. We regularly review the Company’s compensation policies and practices and believe that our compensation policies and practices do not create risks that are reasonably likely to have a material adverse effect on the Company. For a comprehensive compensation risk analysis, see page 42.
Board Meetings
During our fiscal year ended September 30, 2023, our Board of Directors held seven meetings and acted one time by written consent. Each director attended all of the Board and committee meetings for the committees on which he or she served during fiscal 2023. Executive sessions of our non-employee directors, all of whom are independent, are held regularly. The sessions are scheduled and chaired by the Chair of the Nominating and Governance Committee, who also acts as our Presiding Director. Although we do not have a policy with respect to director attendance at our annual meeting of stockholders, the 2023 Annual Meeting was attended in person by each of our directors serving at that time.
Committees of the Board
Our Board is composed of five independent directors and three management directors. Our independent directors meet regularly throughout the year in executive session to encourage open communication and discussion among the independent directors without the presence of management. The Presiding Director chairs these meetings, serves as liaison between the Chairman and the independent directors and has the authority to call meetings of the independent directors.
The Board has designated four primary committees that are responsible for various duties of the Board or its Committees, as applicable. The four committees of the Board are the Nominating and Governance Committee, Audit Committee, Compensation Committee and Executive Committee. The Board of Directors has adopted governing Charters for each of the Nominating and Governance Committee, the Compensation Committee and the Audit Committee. Each of the committee chairs, the Presiding Director and Chairman and Executive Vice Chair discuss agendas for the Board and Committees.
Executive Committee
The Executive Committee, while the Board is not in session, possesses all of the powers and may carry out all of the duties of the Board of Directors in the management of the business of the Company that by state or federal law or the NYSE Rules may be delegated to it by the Board of Directors. During fiscal 2023, the Executive Committee was composed of Donald R. Horton.
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Compensation of Directors
Our Board of Directors approves the annual compensation and fees paid to our non-employee directors, each of whom is listed in the “Director Compensation for Fiscal 2023” table. The Board’s goal is to set non-employee director compensation at a reasonable level of cash and equity compensation. The total annual compensation of directors has varied primarily due to our practice of awarding retainer restricted stock unit awards every three years. For fiscal 2023, Mr. Horton and Mr. Auld, as members of executive management, did not receive any additional compensation for serving on the Board of Directors. The details of compensation for these individuals are discussed in the Compensation Discussion and Analysis (“CD&A”) section beginning on page 27. In addition, for fiscal 2024, the Compensation Committee approved an annual strategic advisor fee and other benefits for Donald R. Horton, Chairman of the Board, which is described under the heading “Strategic Advisor“ on page 71.
Director Fees Paid in Cash. Non-employee directors are paid cash compensation based on the number of meetings attended in person, by telephone conference or virtually, the number of committees on which they serve and the number of committees for which they serve as Chair. In fiscal 2023, compensation for attending the meetings was $17,500 for each of the four quarterly meetings, not to exceed $70,000 for the calendar year. Additional compensation of $5,000 annually was paid for each committee on which a director serves, and $2,500 annually was paid to each committee chair. All compensation is paid quarterly and on a pro-rata basis if the composition of the committees changes during the year. In fiscal 2024, the Board approved compensation for attending the meetings from $17,500 to $20,000 for each of the four quarterly meetings, not to exceed $80,000 for the calendar year.
Restricted Stock Units. We grant our non-employee directors retainer restricted stock unit awards every three years that vest in annual installments over three years. These awards were last approved in January 2022 and no such retainer grants were made in fiscal 2023. In addition, our non-employee directors are also granted a separate award of restricted stock units on an annual basis at the time the Board and the Committee grant restricted stock units to a broad group of Company employees. Each of Ms. Allen, Mr. Anderson, Mr. Buchanan, Dr. Carson and Ms. Miller received a grant of 695 restricted stock units in April 2023 as reflected in the Director Compensation table that follows. These restricted stock units vest ratably over five years. In addition, when a new non-employee director joins our Board, the Board of Directors may award restricted stock units to the new non-employee director at that time.
Expenses and Health Care Plan. Each non-employee director is entitled to reimbursement for reasonable expenses relating to his or her service on the Board and any committee, including travel, meals and other related expenses. Each non-employee director is also eligible to participate in the Company’s broad-based health care plan, and Ms. Allen, Mr. Anderson and Mr. Buchanan each elected to participate in the plan in fiscal 2023.
Director Compensation for Fiscal 2023
|
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|
| Name(1) |
|
Fees Earned or Paid in Cash(2) |
|
Stock Awards(3) |
|
Total |
|
|
|
|
| Barbara K. Allen |
|
|
$ |
82,500 |
|
|
|
$ |
71,648 |
|
|
|
$ |
154,148 |
|
|
|
|
|
| Brad S. Anderson |
|
|
$ |
80,000 |
|
|
|
$ |
71,648 |
|
|
|
$ |
151,648 |
|
|
|
|
|
| Michael R. Buchanan |
|
|
$ |
75,000 |
|
|
|
$ |
71,648 |
|
|
|
$ |
146,648 |
|
|
|
|
|
| Benjamin S. Carson, Sr. |
|
|
$ |
82,500 |
|
|
|
$ |
71,648 |
|
|
|
$ |
154,148 |
|
|
|
|
|
| Maribess L. Miller |
|
|
$ |
82,500 |
|
|
|
$ |
71,648 |
|
|
|
$ |
154,148 |
|
| (1) |
The Company pays director fees to only non-employee directors. |
| (2) |
Amounts represent fees paid in cash during fiscal 2023. |
| (3) |
The amounts represent the grant date fair value of $103.09 per unit for the 695 restricted stock units granted to each non-employee director on April 20, 2023, which restricted stock units vest ratably over five years. |
| |
The grant date fair value of the restricted stock units was determined in accordance with the accounting guidance for share-based payments. The Company recognizes expense for these awards over the respective vesting period. |
|
As of September 30, 2023, each non-employee director held the following number of unvested restricted stock units:
|
|
|
|
|
|
| Name |
|
Unvested Restricted
Stock Units |
|
|
| Barbara K. Allen |
|
|
|
7,064 |
|
|
|
| Brad S. Anderson |
|
|
|
7,064 |
|
|
|
| Michael R. Buchanan |
|
|
|
7,064 |
|
|
|
| Benjamin S. Carson, Sr. |
|
|
|
6,719 |
|
|
|
| Maribess L. Miller |
|
|
|
8,594 |
|
D.R. HORTON, INC. 2024 PROXY STATEMENT 22
EXECUTIVE COMPENSATION
Final Results
The final payout was based on the three-year performance period ended September 30, 2023.
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| |
|
Donald R. Horton |
|
|
|
David V. Auld |
|
|
|
Michael J. Murray
and Bill W. Wheat |
| Final Company Performance Rankings |
|
Target Number
of RSUs Awarded |
|
Number of RSUs Earned |
|
|
|
Target Number
of RSUs Awarded |
|
Number of RSUs Earned |
|
|
|
Target Number
of RSUs Awarded |
|
Number of RSUs Earned |
|
|
|
|
|
|
|
|
|
| TSR = 10+ Points Above |
|
|
|
50,000 Units |
|
|
|
|
100,000 Units |
|
|
|
|
|
|
25,000 Units |
|
|
|
|
50,000 Units |
|
|
|
|
|
|
7,500 Units |
|
|
|
|
15,000 Units |
|
|
|
|
|
|
|
|
|
|
| ROI = 2nd Place |
|
|
|
50,000 Units |
|
|
|
|
87,500 Units |
|
|
|
|
|
|
25,000 Units |
|
|
|
|
43,750 Units |
|
|
|
|
|
|
7,500 Units |
|
|
|
|
13,125 Units |
|
|
|
|
|
|
|
|
|
|
| SG&A = 2nd Place |
|
|
|
50,000 Units |
|
|
|
|
87,500 Units |
|
|
|
|
|
|
25,000 Units |
|
|
|
|
43,750 Units |
|
|
|
|
|
|
7,500 Units |
|
|
|
|
13,125 Units |
|
|
|
|
|
|
|
|
|
|
| GP = 4th Place |
|
|
|
50,000 Units |
|
|
|
|
62,500 Units |
|
|
|
|
|
|
25,000 Units |
|
|
|
|
31,250 Units |
|
|
|
|
|
|
7,500 Units |
|
|
|
|
9,375 Units |
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
200,000 Units |
|
|
|
|
337,500 Units |
|
|
|
|
|
|
100,000 Units |
|
|
|
|
168,750 Units |
|
|
|
|
|
|
30,000 Units |
|
|
|
|
50,625 Units |
|
After reviewing rankings for the 2023 Performance RSUs, on October 31, 2023, the Compensation Committee approved the issuance of 337,500, 168,750, 50,625 and 50,625 shares of common stock to Mr. Horton, Mr. Auld, Mr. Murray and Mr. Wheat, respectively, which reflected a final payout of 168.8% of target for these awards.
Retirement Benefits
Our executive officers do not participate in any qualified defined benefit plans, but they do participate in the retirement plans described below. We believe that it is important to offer these retirement plans to our executive officers as part of a competitive long-term compensation program that encourages saving for retirement and that promotes long-term retention.
Profit Sharing Plus Plan (401(k) plan). Our executive officers participate in our Company-wide 401(k) plan. Executive officers, like all other eligible employees, may contribute 1% to 75% of their earnings, on a pre-tax basis, into the 401(k) plan. For 2023, the maximum amount that could be contributed was $22,500 ($30,000 for participants 50 years or older). The Company makes a matching contribution to the participant’s account in an amount of $0.50 for each $1.00 contributed by the participant up to 6% of his or her salary. The matching contributions made by the Company on behalf of the executive officers for each applicable year are included in the “All Other Compensation” column in the “Summary Compensation Table” on page 44.
Deferred Compensation Plan. The Company also maintains the Deferred Compensation Plan (the “Deferred Compensation Plan”). The Deferred Compensation Plan is a nonqualified deferred compensation plan maintained primarily to provide deferred compensation benefits in excess of IRS contribution limits for a select group of “management or highly compensated employees”. The Deferred Compensation Plan was adopted and approved by the Compensation Committee and ratified by the Board of Directors.
SERP 2. The Company also maintains the Amended and Restated Supplemental Executive Retirement Plan 2 (“SERP 2”), a nonqualified plan, to permit eligible participants, which include our executive officers, region presidents, division presidents and other key employees, to accrue supplemental Company benefits payable upon retirement, separation of service, death or disability. The SERP 2 provides that if the executive is employed by the Company on the last day of the fiscal year, the Company will establish a liability to such executive equal to 10% of his or her annual base salary as of the first day of such fiscal year. This liability will accrue earnings in future years at a rate established by the administrative committee for the SERP 2.
In fiscal 2023, the Compensation Committee reviewed the amounts listed in the column titled “Change in Pension Value and Nonqualified Deferred Compensation Earnings” in the “Summary Compensation Table” on page 44. These amounts represent the above-market portion of earnings on outstanding SERP 2 balances for the named executive officers. As part of this analysis, we reviewed the data related to the dollar amounts disclosed in the same column titled “Change in Pension Value and Nonqualified Deferred Compensation Earnings” in the Summary Compensation Tables for each of the CEOs or principal executive officers of each company in our peer group from their most recently filed proxy statements. For fiscal 2023, the amount for Mr. Horton was $409,168 and the amount for Mr. Auld was $196,287. We believe the amounts accrued for above-market earnings on SERP 2 balances are reasonable when compared to our peer group and reasonable relative to the total compensation packages offered to our named executive officers. Also, we considered other factors, including that the Company does not provide our named executive officers with employment agreements or severance agreements or other forms of guaranteed retirement benefits other than the 401(k) matching contribution discussed above. As a result, our SERP 2 program serves as a useful and reasonable fixed compensation component of our overall compensation package.
D.R. HORTON, INC. 2024 PROXY STATEMENT 39
EXECUTIVE COMPENSATION
Other Compensation and Stock Matters
Stock Ownership Guidelines. Historically, our executive officers have maintained significant ownership of our common stock. See “Beneficial Ownership of Common Stock” on pages 67 through 68. Our Board has adopted Stock Ownership Guidelines for directors and executive officers, which are available on our website at investor.drhorton.com under the Policy & ESG Documents link within the ESG section. Our stock ownership guidelines provide that no later than 5 years after the later of adoption of the guidelines or the date of election as a new director or appointment as an executive officer, such person shall maintain ownership of our common stock with a value equal to a multiple of (i) for non-employee directors, the annual cash board fee, and (ii) for executive officers, their annual base salary.
The multiples are as follows:
| • |
|
Chairman of the Board, 5x |
| • |
|
Executive Vice Chair, 4x |
| • |
|
Chief Executive Officer, 4x |
| • |
|
Chief Operating Officer and Chief Financial Officer, 3x |
| • |
|
Other Executive Officers, 2x |
| • |
|
Non-Employee Directors, 3x |
If after 4 years, the Nominating and Governance Committee determines a participant is not likely to satisfy the ownership requirements within the 5-year time frame, the Nominating and Governance Committee may require the participant to retain and hold 25% of the net shares received by the participant after taxes as compensation or fees from the Company until the ownership guidelines are satisfied.
As of November 30, 2023, each of our executive officers and non-employee directors satisfied the stock ownership requirements, or was within the applicable five-year compliance window, as set forth in the Company’s Stock Ownership Guidelines.
Double Trigger Acceleration of Vesting upon a Change in Control. The Compensation Committee provided that all grants of time-based equity awards to our executive officers beginning in fiscal 2020 must provide for the acceleration of vesting in the event of a change in control only if there occurs, both (i) a “change in control” and (ii) any deferred termination event (a “double trigger” vesting event). The double trigger vesting under outstanding time-based awards granted since fiscal 2022 provide that unvested time-based equity awards will vest if there is: (1) a change in control and (2) within 24 months after the change in control either (a) the Company or the acquirer terminates the executive officer without cause or (b) the executive officer terminates his or her employment with the Company or the acquirer for good reason.
Delinquent Section 16(a) Reports
Section 16 of the Securities Exchange Act of 1934, as amended, requires our directors, executive officers and persons holding more than 10% of our common stock to report to the SEC initial ownership of our common stock and any subsequent changes. The SEC has set filing dates for reporting these changes and we are required to disclosure any filings that are not timely. Based on our review of forms filed with the SEC we believe that all required Section 16(a) reports were filed timely during fiscal 2023, except that Michael J. Murray had one Section 16(a) report related to a gift of securities in June 2023 that was not filed timely.
Process for Determining Compensation
Authority and Role of Compensation Committee
Our Compensation Committee evaluates performance, approves compensation for our Chairman, our CEO and our other named executive officers. The Compensation Committee also administers our equity compensation programs and our executive officer bonus plans. Our Compensation Committee has the authority to delegate any or all of its responsibilities to a subcommittee of the Compensation Committee comprised of at least two members and, in certain other circumstances, to any other committee of directors of the Company. The duties of the Compensation Committee are summarized under the heading “Compensation Committee” on page 21 and are more fully set forth in the Compensation Committee Charter.
Roles of Chairman, Executive Vice Chair and Chief Executive Officer
Our Chairman, Executive Vice Chair and our CEO review and discuss salary and bonus compensation of our other named executive officers, and our Chairman makes recommendations to the Compensation Committee regarding the salaries and incentive bonus compensation of our Executive Vice Chair and CEO.
D.R. HORTON, INC. 2024 PROXY STATEMENT 40
EXECUTIVE COMPENSATION
The following table shows, for each named executive officer, aggregate contributions, earnings and withdrawals/distributions during fiscal 2023 and outstanding balances as of September 30, 2023 under both of our nonqualified deferred compensation plans.
Nonqualified Deferred Compensation
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|
|
|
|
|
|
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|
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|
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|
|
|
|
| |
|
Contributions
in Fiscal 2023 |
|
|
|
Aggregate Earnings
in Fiscal 2023 |
|
|
|
Aggregate Balance at
September 30, 2023 |
| Name |
|
Executive
Contributions
to Deferred
Compensation
Plan |
|
Company
Contributions
to SERP 2(1) |
|
|
|
Deferred
Compensation
Plan(2) |
|
SERP 2(3) |
|
Aggregate
Withdrawals/ Distributions in Fiscal 2023 |
|
Deferred
Compensation
Plan |
|
SERP 2 |
| Donald R. Horton |
|
|
|
— |
|
|
|
$ |
100,000 |
|
|
|
|
|
$ |
1,030,659 |
|
|
|
$ |
678,647 |
|
|
|
|
— |
|
|
|
$ |
11,736,671 |
|
|
|
$ |
7,315,864 |
|
| David V. Auld |
|
|
|
— |
|
|
|
$ |
70,000 |
|
|
|
|
|
$ |
— |
|
|
|
$ |
325,562 |
|
|
|
|
— |
|
|
|
$ |
— |
|
|
|
$ |
3,531,606 |
|
| Paul J. Romanowski |
|
|
|
— |
|
|
|
$ |
50,000 |
|
|
|
|
|
$ |
5,547,679 |
|
|
|
$ |
158,224 |
|
|
|
|
— |
|
|
|
$ |
24,718,230 |
|
|
|
$ |
1,732,346 |
|
| Michael J. Murray |
|
|
|
— |
|
|
|
$ |
50,000 |
|
|
|
|
|
$ |
11,028 |
|
|
|
$ |
132,789 |
|
|
|
|
— |
|
|
|
$ |
85,956 |
|
|
|
$ |
1,461,905 |
|
| Bill W. Wheat |
|
|
|
— |
|
|
|
$ |
50,000 |
|
|
|
|
|
$ |
— |
|
|
|
$ |
190,261 |
|
|
|
|
— |
|
|
|
$ |
— |
|
|
|
$ |
2,072,986 |
|
| (1) |
Represents the amount of unfunded, unsecured liabilities credited by the Company on behalf of each participant in fiscal 2023 under the SERP 2. Such amount is also included in the “All Other Compensation” column of the “Summary Compensation Table” on page 44. |
| (2) |
Represents the net amount of earnings resulting from the performance of a variety of independently managed funds available to and selected by each participant under the Deferred Compensation Plan. |
| (3) |
Represents the amount of earnings related to the SERP 2. The rate is determined by the SERP 2 plan administrative committee and is typically 10% per annum. The portion of earnings considered above-market are included in the “Change in Pension Value and Nonqualified Deferred Compensation Earnings” column of the “Summary Compensation Table” on page 44. The above-market portion of earnings for each of the above individuals for fiscal 2023 was: Mr. Horton: $409,168; Mr. Auld: $196,287; Mr. Romanowski: $95,396; Mr. Murray: $80,061; and Mr. Wheat: $114,707. |
Potential Payments Upon Termination or Change in Control
None of our named executive officers has employment or change in control agreements with us specifically providing for payments upon involuntary termination of their employment. However, certain of our benefit and incentive plans contain various provisions regarding termination of employment or a change in control. Any additional severance payments would be at the discretion of the Compensation Committee and determined at the time of termination. The following is a summary of the treatment of benefits under our benefit plans for various types of terminations, including upon a change in control.
Generally, our benefit plans define “cause” as a violation of the standards of employee conduct set forth in our employee manual and “change in control” as the occurrence of any of the following events:
(i) Our merger, consolidation or reorganization into another entity if our stockholders immediately before such transaction do not, immediately after such transaction, own more than 50% of the combined voting power of the outstanding voting securities resulting from such transaction and in substantially the same proportion as their stock ownership prior to the transaction;
(ii) We sell all or substantially all of our assets to another entity or we completely liquidate or dissolve;
(iii) A person (as defined by Section 13(d)(3) or Section 14(d)(2) of the Exchange Act) becomes the beneficial owner (as the term “beneficial owner” is defined under Rule 13d-3 or any successor rule or regulation promulgated under the Exchange Act) of securities representing 20% or more of the combined voting power of the then outstanding voting securities (except that the threshold for amounts deposited under our SERP 2 plan on or after January 1, 2005 is 50% or 35% acquired in a single transaction or series of transactions in any 12-month period); or
(iv) During any two-year period, a majority of the members of the Board is replaced by members of the Board who are not nominated and approved by the Board.
2018 Incentive Bonus Plan
Our D.R. Horton, Inc. 2018 Incentive Bonus Plan, under which our PTI Bonus program is administered, provides that the Compensation Committee, in its sole discretion may determine the effect of a participant’s termination of employment, death or disability prior to the payment of an award. In the event of a change in control of the Company, plan participants will become entitled to an amount equal to (i) the award the participant would have earned for the relevant performance period, assuming continued achievement of the relevant performance goals at the rate achieved as of the end of the calendar month immediately prior to the calendar month in which the change in control occurs, multiplied by (ii) a fraction, the numerator of which is the number of days in the applicable performance period which have elapsed as of the change in control, and the denominator of which is the number of days in the performance period. Such earned bonuses are payable within 15 days following such change in control and may not be subject to any downward discretion.
D.R. HORTON, INC. 2024 PROXY STATEMENT 48
EXECUTIVE COMPENSATION
2006 Stock Incentive Plan
Our D.R. Horton 2006 Stock Incentive Plan, which has been our primary equity compensation plan through fiscal 2023, allows or provides for accelerated vesting of all outstanding unvested restricted stock units and options granted under the plan in the event of a change in control of the Company or in the event of a participant’s death, disability or retirement at the retirement age specified in the plan. The participant or his or her beneficiary, as applicable, will be entitled to exercise such options for a period of one year in the event of retirement or two years in the event of death or disability. In the event the participant’s employment is terminated by the Company without cause or by the participant voluntarily, the participant will be entitled to exercise any options vested as of the date of termination for a period of three months following such termination. If the participant is terminated by the Company for cause, all options will immediately terminate and the participant will forfeit all vested options. As noted above, our Compensation Committee has adopted double trigger equity acceleration for time-vesting RSUs granted to our executive officers commencing with grants made in fiscal 2020.
Amended and Restated Supplemental Executive Retirement Plan No. 2 (“SERP 2”)
Under the SERP 2, all amounts deferred will be paid (either in a lump sum or in quarterly installments as elected by the participant) within 60 days following the date of the participant’s retirement or termination of employment without cause, disability, death or change in control of the Company; provided, however, “specified employees,” as such term is defined in Section 409A of the Internal Revenue Code, must generally wait six months following termination of employment before payments accrued on or after January 1, 2005 can be made. In the event the Company terminates a participant for cause, all benefits under the SERP 2 will be forfeited and no payments will be made to the participant. In the event of a change in control, all amounts deferred will be paid (in accordance with the participant’s election) within 60 days following the date of the change in control.
Notwithstanding the foregoing, a participant’s election as to form of payment (lump sum or installment) must have been made at least 12 months prior to distribution. If a termination event occurs and no election has been made, the distributions of pre-2005 accruals will be made on the first day of the 13th month following the date of election, and the distribution of post-2004 accruals will be made in a lump sum upon termination of employment (or six months later for specified employees).
Table – Potential Payments Upon Termination or Change in Control
The following table reflects amounts of compensation to be paid to each of the named executive officers in the event of termination of employment or change in control. Because neither the Company nor any of its plans currently provides for additional benefits related to a change in control termination, if such a termination is triggered, the payments would be as set forth under the applicable column under Termination of Employment, except with respect to the acceleration of time-vesting RSUs granted prior to fiscal 2020 or unless the Compensation Committee determined to award additional severance amounts.
The amounts in the table assume a termination date of September 30, 2023, the last day of our fiscal year, and, if applicable, are based on the closing price of our common stock of $107.47 on September 29, 2023, the last trading day of fiscal 2023. Because Mr. Horton and Mr. Auld had reached the normal retirement age (65 years old) before September 30, 2023, we included amounts payable upon retirement only for them. These amounts are estimates of payments to executives upon termination of employment or a change in control. Actual amounts can only be determined at the time of such executive’s actual separation from the Company or change in control. Factors that could affect these amounts include the timing during the year of any such event, the company’s stock price and the executive’s age. Amounts to be provided to an executive under arrangements that do not discriminate in scope, terms or operation in favor of our executive officers and are available to all salaried employees are not included in the following table in accordance with SEC regulations.
In addition to the amounts set forth below, each of the named executive officers would be entitled to receive, upon certain termination events or a change in control, a distribution of his or her outstanding balance of compensation earned and reported in prior years and deferred, at the executive officer’s option, under our Deferred Compensation Plan. The balances of such accounts as of September 30, 2023 are set forth and explained in the “Nonqualified Deferred Compensation” table on page 48.
D.R. HORTON, INC. 2024 PROXY STATEMENT 49
PROPOSAL FOUR – APPROVAL OF THE D.R. HORTON, INC. 2024 STOCK INCENTIVE PLAN
Proposal Four – Approval of the D.R. Horton, Inc.
2024 Stock Incentive Plan
Overview
At the 2024 Annual Meeting, stockholders will be presented with a proposal to approve the D.R. Horton, Inc. 2024 Stock Incentive Plan (the “2024 Plan”). Our Board approved the 2024 Plan on December 12, 2023, subject to stockholder approval. If approved, the 2024 Plan will replace the current D.R. Horton, Inc. 2006 Stock Incentive Plan, as amended (the “2006 Plan”) effective as of the date of such approval (such date, the “Effective Date”), and no further awards will be made under the 2006 Plan after the Effective Date. If the 2024 Plan is not approved by the Company’s stockholders, the 2006 Plan will continue to operate according to its terms.
The following table sets forth certain information about the 2006 Plan and the 2024 Plan. The Company also maintains an Employee Stock Purchase Plan, under which 2,406,583 shares were available for issuance as of November 30, 2023.
|
|
|
|
|
|
| Number of new shares being authorized under the 2024 Plan |
|
|
|
18,900,000 |
|
|
|
| Number of shares available for future awards as of November 30, 2023 under the 2006 Plan(1) |
|
|
|
226,454 |
|
|
|
| Number of shares underlying outstanding awards of restricted stock and restricted stock units as of November 30, 2023 under the 2006 Plan(2) |
|
|
|
5,449,575 |
|
|
|
| Number of shares underlying outstanding stock options as of November 30, 2023 under the 2006 Plan |
|
|
|
196,418 |
|
|
|
| Weighted average remaining term of outstanding options |
|
|
|
0.2 years |
|
|
|
| Weighted average exercise price of outstanding options |
|
|
|
$23.86 |
|
| (1) |
The 2006 Plan includes a 1:1.50 fungible share counting provision, meaning that awards of options and SARs count against the 2006 Plan reserve on a 1 for 1 basis and full value awards count against the 2006 Plan reserve on a 1 for 1.50 basis. Assuming all future grants were in the form of full value awards, only 150,969 shares would be available for grant under the 2006 Plan. Upon stockholder approval of the 2024 Plan, no future awards will be made under the 2006 Plan and the 2024 Plan will become the Company’s active stock incentive plan. |
| (2) |
Assumes maximum payout of outstanding performance-based awards. |
On November 30, 2023, the closing price of a share of the Company’s common stock as reported on the New York Stock Exchange was $127.67.
Historical Burn Rate and Dilution
The Company oversees its long-term dilution goals by managing the number of shares subject to equity awards that it grants annually, commonly referred to as the burn rate (calculated by dividing all shares subject to equity awards granted during the fiscal year by the weighted-average number of outstanding shares at the end of the fiscal year). The burn rate shows how rapidly a company is depleting its shares reserved for future issuance under its equity compensation plans. We have calculated our burn rate under the 2006 Plan for the past three years, as set forth in the following table:
|
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|
|
|
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|
|
|
|
|
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|
|
|
|
| Year |
|
Weighted Common
Shares Outstanding |
|
Restricted Stock
Units Granted |
|
Performance-Based
Restricted Stock Units
Granted (at Target) |
|
Performance-Based
Restricted Stock Units
Earned |
|
Annualized Burn Rate |
|
|
|
|
|
|
| 2023 |
|
|
|
334,848,565 |
|
|
|
|
877,131 |
|
|
|
|
600,000 |
|
|
|
|
607,500 |
|
|
|
|
0.44 |
% |
|
|
|
|
|
|
| 2022 |
|
|
|
343,953,023 |
|
|
|
|
1,153,124 |
|
|
|
|
430,000 |
|
|
|
|
585,000 |
|
|
|
|
0.51 |
% |
|
|
|
|
|
|
| 2021 |
|
|
|
356,015,843 |
|
|
|
|
856,615 |
|
|
|
|
360,000 |
|
|
|
|
630,000 |
|
|
|
|
0.42 |
% |
|
|
| 3-Year Average Burn Rate |
|
|
|
|
0.46 |
% |
As set forth in the table above, over the past three fiscal years, the Company’s burn rate has averaged 0.46%, while the industry group burn rate over the last three years averaged 0.49%. Our burn rate was 0.44% in fiscal 2023 and our industry group burn rate was 0.43% in 2022, the most recent completed year for our industry average. We believe our lower burn rate compared to our industry group’s burn rate over the last three years show we have effectively managed our dilution in terms of burn rate compared to our industry.
An additional metric we use to measure dilution is overhang (the number of shares subject to equity awards outstanding but not exercised or settled, plus the number of shares available to be granted, divided by the total number of shares of Company common stock outstanding at the end of the year). If the 2024 Plan is approved, the Company’s overhang will increase from approximately 1.75% as of November 30, 2023 to approximately 7.4%. The Compensation Committee is committed to effectively managing the number of shares reserved for issuance under the 2024 Plan while minimizing stockholder dilution.
D.R. HORTON, INC. 2024 PROXY STATEMENT 56
PROPOSAL FOUR – APPROVAL OF THE D.R. HORTON, INC. 2024 STOCK INCENTIVE PLAN
Eligibility
Awards may be granted under the 2024 Plan to any current or prospective officer or employee (including to any director who is also an employee) or certain current or prospective consultants or advisors of the Company or any of its subsidiaries, as well as to non-employee directors of the Company or any of its subsidiaries. As of November 30, 2023, there were approximately 13,765 individuals eligible to participate in the 2024 Plan, including our five NEOs and five non-employee directors. The number of eligible participants may increase over time if the Company experiences growth.
Shares Subject to the Plan
Subject to adjustment for certain changes in the Company’s capitalization, the aggregate number of shares of common stock issuable under the 2024 Plan will be equal to (i) 18,900,000 less (ii) the number of shares of common stock subject to Awards granted under the 2006 Plan between November 30, 2023 and the Effective Date plus (iii) any shares of common stock that remain available for issuance under the 2006 Plan as of the Effective Date (not including shares of common stock that were subject to outstanding awards under the 2006 Plan as of the Effective Date) and (iv) any shares of common stock subject to outstanding awards under the 2006 Plan as of the Effective Date that on or after the Effective Date cease for any reason to be subject to such awards (other than by reason of exercise or settlement of the awards to the extent they are exercised for or settled in nonforfeitable shares of common stock).
The aggregate number of shares of common stock issued under the 2024 Plan at any time will equal only the number of shares of common stock actually issued upon exercise of settlement of an Award. Shares of common stock subject to an Award that have been cancelled, expired, forfeited or otherwise not issued under the Award and shares subject to an Award settled in cash instead of shares will again become available for grants of Awards under the 2024 Plan. However, shares of common stock that (i) are used to pay the exercise price of a stock option or SAR, (ii) are delivered or withheld to pay withholding taxes related to a stock option or SAR, (iii) were subject to a stock-settled SAR but not issued in such settlement or (iv) repurchased on the open market with the proceeds of an option exercise will be counted against the total number of shares of common stock issuable under the 2024 Plan.
The shares to be delivered under the 2024 Plan may consist of, in whole or in part, shares of common stock that are authorized but unissued or shares that were reacquired by the Company, including, without limitation, shares purchased in the open market.
Types of Awards
The 2024 Plan provides for grants of stock options, SARs, restricted stock, restricted stock units, and incentive bonuses, any of which may be performance-based.
Options & Stock Appreciation Rights. An option is the right to purchase shares of common stock at a future date at a specified exercise price. The Administrator may grant both nonqualified stock options and incentive stock options under the 2024 Plan, although incentive stock options may only be granted to employees of the Company or any of its subsidiaries. The per share exercise price will be determined by the Administrator, but must be at least equal to the fair market value of the underlying shares of common stock on the date of grant, provided that the exercise price may be less than the fair market value of the underlying shares for certain options granted as Substitute Awards (as defined and described below). Subject to the minimum vesting period described below, the Administrator determines the date after which options may become vested and exercisable in whole or in part (which may be based on, without limitation, continued employment or performance conditions) and the expiration date of each option, which cannot be more than ten years from the date of grant; provided that the term of an option (other than an incentive stock option) will be automatically extended if, at the time of its scheduled expiration, the participant holding such option is prohibited by law or the Company’s insider trading policy from exercising the option, which extension will expire on the 30th day following the date such prohibition no longer applies. In the case of an incentive stock option granted to a participant who holds more than 10% of the voting power of the Company, the exercise price must be at least 110% of the fair market value of the underlying shares of common stock on the date of grant and the expiration date cannot be more than five years from the date of grant. Reload options are prohibited under the 2024 Plan.
A stock appreciation right (“SAR”) is a contractual right granted to the participant to receive, in cash, shares of common stock or a combination thereof, an amount equal to the appreciation of one share of common stock from the date of grant. SARs may be granted as freestanding Awards, or in tandem with other types of Awards. Unless otherwise determined by the Administrator, if a stock appreciation right is granted in tandem with another Award, the exercise price, vesting, exercisability, forfeiture and termination provisions applicable to the stock appreciation right will be identical to the exercise price, vesting, exercisability, forfeiture and termination provisions applicable to the other Award. All freestanding SARs will be granted subject to the same terms and conditions applicable to options, as described above.
Without stockholder approval, the terms of outstanding options and SARs may not be amended to reduce the exercise price or to take any other action that is treated as re-pricing under generally accepted accounting principles, or to, at any time when the exercise price is above the market value of a share of Company common stock, cancel, exchange, buyout or surrender outstanding options or SARs in exchange for
D.R. HORTON, INC. 2024 PROXY STATEMENT 58
PROPOSAL FOUR – APPROVAL OF THE D.R. HORTON, INC. 2024 STOCK INCENTIVE PLAN
cash, other awards or options or SARs with an exercise price that is less than the exercise price of the original Awards, in each case other than in connection with a change in the Company’s capitalization or other event or transaction as described below in “Change in Capitalization.” Participants will not have any rights as a stockholder, including voting rights and will not have rights to receive dividends or dividend equivalents in respect of a SAR, an option or any shares subject to a SAR or an option until the participant becomes the holder of record of such shares.
Restricted Stock & Restricted Stock Units. A restricted stock award involves an immediate transfer of a fixed number of shares of common stock to the participant, although the shares are subject to a risk of forfeiture or to other conditions or restrictions during specified periods of time (including, without limitation, continued employment or performance conditions). The participant may be entitled to voting, dividend, distribution and other ownership rights in such shares at the discretion of the Administrator although dividends, distributions or dividend equivalents, if any, will be subject to the same vesting conditions as the underlying shares.
A restricted stock unit is an award denominated in units of shares of common stock that is subject to such terms and conditions (including, without limitation, continued employment, service or performance conditions) as the Administrator deems appropriate. For each restricted stock unit, a participant will be entitled to receive (assuming all terms and conditions are met) either shares of common stock or a cash amount calculated with reference to the value of a share of common stock. Shares underlying restricted stock units will be entitled to dividend or dividend equivalents only to the extent provided by the Administrator, and such dividends, distributions or dividend equivalents, if any, will be subject to the same vesting conditions as the underlying Award. Participants will not have any voting rights in respect of shares underlying restricted share units until the participant becomes the holder of record of such shares.
Incentive Bonuses. An incentive bonus is a bonus opportunity to earn a right to a future payment, which may be made in cash or in shares of common stock, based on the satisfaction of performance criteria during a designated performance period, in each case established by the Administrator and included in an Award agreement along with any other terms and conditions determined by the Administrator with respect to the incentive bonus. The amount paid under an incentive bonus on account of the satisfaction of performance criteria may, to the extent specified in the Award Agreement, be reduced, but not increased, by the Administrator on the basis of such further considerations as the Administrator shall determine.
Substitute Awards
If the Company or any of its subsidiaries acquires or merges or combines with another entity, the Company may grant Awards in assumption of, or in substitution or exchange for, awards previously granted or promised (“Substitute Awards”). Substitute Awards will not reduce the number of shares of common stock authorized for issuance under the 2024 Plan. The exercise price of a Substitute Award may be less than the fair market value of the underlying shares of common stock on the date of grant if the exercise price is based on a formula contained in the original option agreement or the purchase or merger agreement. In addition, if the entity acquired by the Company or any of its subsidiaries or with which the Company or any of its subsidiaries merges or combines has shares available under a pre-existing plan approved by its stockholders, the Company may grant awards to individuals who were employees, directors, consultants or advisors of the other entity under such other entity’s pre-existing plan and such grants of awards will not reduce the amount of shares of common stock available for issuance under the 2024 Plan.
Award Limitations
| • |
|
Minimum Vesting Requirement. Awards granted under the 2024 Plan will be subject to a minimum vesting period of one year from the date of grant. Notwithstanding the foregoing, (i) such minimum vesting provision will shall not apply to the accelerated vesting of an Award in the event of a participant’s death, disability, retirement or the occurrence of a change in control of the Company, and (ii) the Administrator may grant Awards covering 5% or fewer of the total number of shares of common stock authorized for issuance under the 2024 Plan without regard to the above-described minimum vesting requirements. In addition, with respect to Awards made to non-employee directors, the vesting of such Awards will be deemed to satisfy the one-year minimum vesting requirement to the extent that the Awards vest no sooner than the earlier of the one-year anniversary of the date of grant and the next regular annual meeting of the Company’s stockholders that is at least 50 weeks after the immediately preceding year’s annual meeting. |
| • |
|
Limit on Non-Employee Director Compensation: The aggregate dollar value of equity-based (based on the grant date fair value of equity-based Awards) and cash compensation granted under the 2024 Plan or otherwise during any fiscal to any one non-employee director of the Company or its subsidiaries will not exceed $1,000,000, with up to $1,500,000 to be permitted for a non-employee director in the fiscal year he or she first joins the Board or the board of directors of a subsidiary or is designated as chairman or lead director of the Board or of the board of directors of a subsidiary; |
| • |
|
Limit on Incentive Stock Options: The aggregate number of shares of common stock that may be issued pursuant to the exercise of incentive stock options granted under the 2024 Plan may not exceed 18,900,000; and |
| • |
|
Term Limit: Awards may not be granted under the 2024 Plan after December 12, 2033. |
D.R. HORTON, INC. 2024 PROXY STATEMENT 59
PROPOSAL FOUR – APPROVAL OF THE D.R. HORTON, INC. 2024 STOCK INCENTIVE PLAN
Transferability Restrictions
Except as otherwise permitted by the Administrator, participants generally may not sell, transfer, pledge, assign or otherwise alienate or hypothecate Awards granted under the 2024 Plan other than by will or the laws of descent and distribution, and each option and SAR is generally exercisable only by a participant during his or her lifetime, and thereafter by the legal representative of the Participant’s estate or the individual to whom such Award was transferred by the participant’s will or the laws of descent and distribution.
Change in Capitalization
The Administrator has discretion to adjust the number and kind of shares available for issuance under the 2024 Plan in the event of a reorganization, reclassification, combination or exchange of shares, repurchase of shares, stock split, reverse stock split, spin-off, dividend or other distribution of securities, property or cash (other than regular, quarterly cash dividends), or any other event or transaction that affects the number or kind of shares of the Company outstanding. The Administrator may also adjust the exercise price, number or kind of shares subject to individual Awards and other terms to reflect the foregoing events.
In the event of a change in capitalization caused by a change of control, merger, consolidation or otherwise, the Administrator has discretion to determine the appropriate adjustment, if any, to be effected with respect to any outstanding Awards. For example, the Administrator has discretion to (i) provide for the assumption or substitution of such Awards by the successor or surviving company, or a parent or subsidiary thereof, (ii) provide for the adjustment to the number and type of shares (or other security or property) subject to such Award and the terms and conditions thereof (including any exercise price); (iii) accelerate the vesting of, or termination of any restrictions on, outstanding Awards, (iv) provide for cancellation of accelerated Awards that are not exercised within a time period prescribed by the Administrator or (v) provide for the cancellation of any such Awards in exchange for an amount of cash and/or other property with a value equal to the amount that would have been attained upon the exercise of such Award or realization of the participant’s rights (and, for the avoidance of doubt, if as of the date of the occurrence of such transaction or event, the Administrator determines in good faith that no amount would have been attained upon the exercise of such Award or realization of the participant’s rights, then such Award may be terminated by the Company without payment).
No fractional shares will be issued in connection with a change in capitalization. Instead, the number of shares of common stock subject to an Award will be rounded down to the next lowest whole share.
Clawback and Recoupment
Awards granted under the 2024 Plan will be subject to recoupment in accordance with the Company’s clawback policy. In addition, the Administrator may impose such other clawback, recovery or recoupment provisions in an Award agreement as the Administrator determines necessary or appropriate, including a reacquisition right in respect of previously issued shares, the proceeds received from any sale of such shares, or any other cash or property upon the occurrence of misconduct.
Amendment or Termination of the 2024 Plan
The Board or Compensation Committee may amend, alter or discontinue the 2024 Plan, and the Administrator may amend or alter any Award agreement. However, other than in connection with a change in the Company’s capitalization, no amendment may be made without stockholder approval if such amendment would:
| • |
|
increase the maximum number of shares of common stock for which Awards may be granted under the 2024 Plan; |
| • |
|
reduce the exercise price of outstanding options or take any other action that is treated as re-pricing under generally accepted accounting principles or, at any time when the exercise price of an option is above the market value of a share of Company common stock, cancel, exchange, buyout or surrender outstanding options in exchange for cash, other awards or options or stock appreciation rights with an exercise price that is less than the exercise price of the original options; |
| • |
|
extend the term of the 2024 Plan; |
| • |
|
change the class of persons eligible to be participants in the 2024 Plan; |
| • |
|
otherwise amend the 2024 Plan in any way that would require stockholder approval by law or under the New York Stock Exchange listing requirements; or |
| • |
|
increase the compensation limitations for non-employee directors described in “Award Limitations”. |
U.S. Federal Income Tax Consequences
The following is a summary of the material U.S. federal income tax consequences to the Company and to recipients of Awards under the 2024 Plan. The summary is based on the United States Internal Revenue Code of 1986, as amended (the “Code”) and the U.S. Department of
D.R. HORTON, INC. 2024 PROXY STATEMENT 60
PROPOSAL FOUR – APPROVAL OF THE D.R. HORTON, INC. 2024 STOCK INCENTIVE PLAN
Treasury regulations promulgated under the Code in effect as of the date of this proxy statement, all of which are subject to change with retroactive effect. The summary is not intended to be a complete analysis or discussion of all potential tax consequences that may be important to recipients of Awards under the 2024 Plan. The laws governing the tax aspects of these awards are highly technical, and such laws are subject to change. Different tax rules may apply to specific participants and transactions under the 2024 Plan, particularly in jurisdictions outside the United States. As such, we recommend that all participants consult their own tax advisor concerning the tax implications of Awards granted under the 2024 Plan.
Nonqualified Stock Options and Stock Appreciation Rights
The recipient will not recognize any taxable income at the time a nonqualified stock option or an SAR is granted nor will the Company be entitled to a deduction at that time. When a nonqualified option is exercised, the optionee generally will recognize ordinary income (whether the option price is paid in cash or by delivery or surrender of shares of common stock), in an amount equal to the excess of the fair market value of the shares to which the option exercise pertains over the option exercise price. When an SAR is exercised, the holder will recognize ordinary income equal to (i) the excess of the sum of (a) the gross cash proceeds payable and (b) the fair market value on the exercise date of any shares received over (ii) the SAR exercise price. The Company will be entitled to a corresponding deduction with respect to a nonqualified stock option or SAR equal to the ordinary income recognized by the optionee or holder of the SAR, provided that the deduction is not disallowed by Section 162(m) or otherwise limited by the Code.
Incentive Stock Options (“ISOs”)
A recipient will not recognize any taxable income at the time an ISO is granted or recognize ordinary taxable income at the time the ISO is exercised. However, the excess of the fair market value of the shares at the time of exercise over the option exercise price will be a preference item that could create an alternative minimum tax liability for the optionee. Such alternative minimum tax may be payable even though the optionee receives no cash upon the exercise of the ISO with which to pay such tax. If the optionee disposes of the shares acquired on exercise of an ISO after the later of two years after the grant of the ISO and one year after exercise of the ISO, the gain recognized by the optionee (i.e., the excess of the proceeds received over the option exercise price), if any, will be long-term capital gain eligible for favorable tax rates under the Code. Conversely, if the optionee disposes of the shares within two years of the grant of the ISO or within one year of exercise of the ISO, the disposition will generally be a “disqualifying disposition,” and the optionee will recognize ordinary income in the year of the disqualifying disposition equal to the lesser of (i) the excess of the fair market value of the stock on the date of exercise over the option exercise price and (ii) the excess of the amount received upon such disposition of the shares over the option exercise price. The balance of the gain or loss, if any, will be long-term or short-term capital gain, depending on how long the shares were held. The Company is not entitled to a deduction as the result of the grant or exercise of an ISO. However, if the optionee recognizes ordinary income as a result of a disqualifying disposition, the Company will be entitled to a corresponding deduction equal to the amount of ordinary income recognized by the optionee, provided that the deduction is not disallowed by Section 162(m) or otherwise limited by the Code.
Restricted Stock
A participant will not recognize taxable income upon the grant of restricted stock. If the participant makes an election under Section 83(b) of the Code within 30 days after receiving the shares of restricted stock, however, he or she will recognize ordinary income in the year of receipt in an amount equal to the excess of the fair market value of such shares (determined without regard to the restrictions imposed by the 2024 Plan) at the time of transfer over any amount paid by the participant therefor. Then, upon the sale of such stock, the difference between the fair market value at the time of transfer and the net proceeds of sale will generally be taxed as capital gain or loss (long-term or short-term, depending on the holding period). If a participant makes a Section 83(b) election with respect to shares of common stock that are subsequently forfeited, he or she will not be entitled to deduct any amount previously included in taxable income by reason of such election. If a participant does not make a Section 83(b) election, the participant will recognize ordinary income in the year or years in which the Award of restricted stock vests and the restrictions imposed by the 2024 Plan on the Award terminate, in an amount equal to the excess, if any, of the fair market value of such shares on the date the restrictions expire or are removed over any amount paid by the participant. If a Section 83(b) election has not been made, any dividends accrued with respect to shares of common stock subject to restrictions will be treated as additional compensation income and not as dividend income.
Restricted Stock Units
A participant generally will not recognize taxable income upon the grant of an Award of restricted stock units. Unless the participant has made a deferral election that satisfies the requirements of Section 409A (as defined and described below), the participant will recognize ordinary income in the year or years in which the restricted stock units vest and settle in an amount equal to (i) the fair market value of the shares of common stock on the date of issuance or (ii) the cash received in settlement of the Award. If a valid deferral election has been made, the participant will recognize ordinary income in the subsequent year the restricted stock unit is paid to him, in an amount equal to (a) the fair market value of the shares of common stock on the date of issuance or (ii) the cash received in settlement of the Award.
D.R. HORTON, INC. 2024 PROXY STATEMENT 61
PROPOSAL FOUR – APPROVAL OF THE D.R. HORTON, INC. 2024 STOCK INCENTIVE PLAN
Incentive Bonuses
A participant generally will not recognize taxable income upon the grant of an Award of an incentive bonus. The participant will recognize ordinary income in the year of settlement in an amount equal to the cash received and the fair market value of any shares of common stock received.
Withholding Taxes
Generally, the Company will be required to withhold applicable taxes with respect to any ordinary income recognized by a participant in connection with Awards granted under the 2024 Plan. The Administrator may permit a participant to pay withholding taxes through the mandatory or elective sale of shares of common stock, by electing to have the Company withhold a portion of the shares or cash that would otherwise be issued upon exercise of an option or SAR or the settlement of an Award, by tendering shares already owned by the participant or by such other means as the Administrator deems appropriate.
Section 409A
Certain types of Awards under the 2024 Plan may constitute, or provide for, a deferral of compensation subject to Section 409A of the Code (“Section 409A”). Unless certain requirements set forth in Section 409A are complied with, holders of such Awards could be taxed earlier than would otherwise be the case (e.g., at the time of vesting instead of the time of payment) and be subject to an additional 20% penalty tax (and, potentially, certain interest penalties). The Company will have no liability to a participant, or any other party, if an Award that is intended to be exempt from, or compliant with, Section 409A is not so exempt or compliant.
Deductibility of Executive Compensation and Impact of Section 280G
The Company will generally be entitled to a tax deduction corresponding in amount and time to the participant’s recognition of ordinary income in the circumstances described above, provided, among other things, that such deduction meets the test of reasonableness and is an ordinary and necessary business expense. However, Section 162(m) of the Code limits the deductibility for federal income tax purposes of certain compensation paid to any “covered employee” in excess of $1 million. For purposes of Section 162(m) of the Code, the term “covered employee” includes any individual who serves as chief executive officer, chief financial officer or one of the other three most highly compensated executive officers for 2017 or any subsequent calendar year. It is expected that compensation deductions for any covered employee with respect to awards under the 2024 Plan will be subject to the $1 million annual deduction limitation.
Additionally, in connection with a change in control of the Company, and depending upon the terms and conditions of Awards granted under the 2024 Plan and upon the individual circumstances of the participants, certain amounts with respect to Awards granted under the 2024 Plan may constitute “excess parachute payments” under the “golden parachute” provisions of Section 280G of the Code. Under these provisions, a participant will be subject to a 20% excise tax on any “excess parachute payment” and the Company will be denied any deduction with respect to such payment.
New Plan Benefits
The benefits or amounts that will be awarded or paid in the future under the 2024 Plan are not currently determinable, as such Awards are within the discretion of the Compensation Committee, and the Compensation Committee has not determined future Awards or who might receive them.
D.R. HORTON, INC. 2024 PROXY STATEMENT 62
INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS
Independent Registered Public Accountants
Ernst & Young LLP has been engaged by the Audit Committee to serve through our fiscal year ending September 30, 2024. A representative of Ernst & Young LLP will be present in person or by conference call at the 2024 Annual Meeting and will have an opportunity to make a statement and to respond to appropriate questions from stockholders.
Audit Fees and All Other Fees
The following table shows the fees paid or accrued by the Company for the audit and other services provided by Ernst & Young LLP for the last two fiscal years.
|
|
|
|
|
|
|
|
|
|
|
| |
|
Fiscal Year Ended
September 30, |
| Fees |
|
2023 |
|
2022(4) |
|
|
|
| Audit fees(1) |
|
|
$ |
2,987,363 |
|
|
|
$ |
3,081,088 |
|
|
|
|
| Audit-related fees |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
| Tax fees(2) |
|
|
|
6,440 |
|
|
|
|
6,440 |
|
|
|
|
| All other fees |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
| Total(3) |
|
|
$ |
2,993,803 |
|
|
|
$ |
3,087,528 |
|
| (1) |
Includes audit fees of $815,111 and $817,966 incurred by Forestar Group Inc. in fiscal 2023 and 2022, respectively, for which Ernst & Young LLP also serves as the independent registered public accounting firm. |
| (2) |
Tax fees are related to tax compliance services for the preparation of partnership tax returns. |
| (3) |
The amounts listed above were approved by the Audit Committee, and therefore, none were approved based on waiver of pre-approval under Rule 2-01(c)(7)(i)(C) of Regulation S-X. |
| (4) |
The amounts shown for fiscal 2022 have been revised to reflect additional fees paid for audit services. |
Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services
The Audit Committee has responsibility for appointing, approving fees and overseeing the work of the independent auditor. In recognition of this responsibility, the Audit Committee has established a policy to pre-approve audit and permissible non-audit services provided by the independent auditor.
In connection with the engagement of the independent auditor for fiscal 2024, the Audit Committee pre-approved the services listed below by category of service, including the pre-approval of fee limits. The Audit Committee’s pre-approval process by category of service also includes a review of specific services to be performed and fees expected to be incurred within each category of service. The term of any pre-approval is 12 months from the date of the pre-approval, unless the Audit Committee specifically provides for a different period. During fiscal 2024, circumstances may arise when it may become necessary to engage the independent auditor for additional services not contemplated in the original pre-approval. In those instances, the Audit Committee requires separate pre-approval before engaging the independent auditor.
The services pre-approved by the Audit Committee, which may be performed by the independent auditor during fiscal 2024, include the following:
Audit Services include audit work performed related to the Company’s financial statements (including quarterly reviews), as well as work that generally only the independent auditor can reasonably be expected to provide, including comfort letters, statutory audits, and attest services and consultation regarding financial accounting and/or reporting standards.
Audit-Related Services are for assurance and related services that are traditionally performed by the independent auditor, including due diligence related to mergers and acquisitions, employee benefit plan audits, and special procedures required to meet certain regulatory requirements.
Tax Services include all services performed by the independent auditor’s tax personnel except those services specifically related to the audit of the financial statements, and include fees in the areas of tax compliance, tax planning, and tax advice.
All Other Fees are those associated with permitted services not included in the other categories.
The Audit Committee may delegate pre-approval authority to one or more of its members. The member or members to whom such authority is delegated shall report any pre-approval decisions to the Audit Committee at its next scheduled meeting. The Audit Committee may not otherwise delegate its responsibilities to pre-approve services performed by the independent auditor to management.
D.R. HORTON, INC. 2024 PROXY STATEMENT 64
CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS
Certain Relationships and Related Person Transactions
We have a Related Party Transaction Policy to govern the Company’s practices related to reviewing and approving Related Party Transactions. Our Related Party Transaction Policy is available on our website at investor.drhorton.com under the Policy & ESG Documents link within the ESG section. The SEC requires the Company to disclose Related Party Transactions in its proxy statement.
Related Party Transactions and Related Parties. Our Related Party Transaction Policy provides that Related Party Transactions will be reviewed for consideration of approval or ratification by our Nominating and Governance Committee of the Board (“Governance Committee”), which is composed of independent directors of the Board. If a member of the Nominating and Governance Committee has an interest in a Related Party Transaction, he or she will abstain in voting on such transaction. Related Party Transactions occur when any Related Party has a direct or indirect material interest in a transaction with the Company exceeding $120,000. A Related Party includes:
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any of our Directors or executive officers; |
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any 5% or more beneficial stockholder of the Company; |
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any immediate family member of such persons; and |
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any entity controlled by such persons. |
“Immediate family member” means a child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law of such director, executive officer, nominee for director or beneficial owner, and any person (other than a tenant or employee) sharing the household of such director, executive officer, nominee for director or beneficial owner. A Related Party also includes anyone who was a director (or director nominee), executive officer, or immediate family member of the forgoing at any time since the beginning of the Company’s last fiscal year.
Procedures for Review of Related Party Transactions. All Related Party Transactions subject to the Related Party Transaction Policy will be reviewed in accordance with the Related Party Transaction Policy to determine if approval or ratification is appropriate.
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Notification to the Company. A Related Party shall inform a designated compliance person of any potential Related Party Transaction. |
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Information Regarding the Related Party Transaction. A designated compliance person shall be provided the following information: |
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the Related Party’s relationship to the Company and such person’s interest in the Related Party Transaction; |
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approximate dollar value of the Related Party Transaction; |
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material terms of the Related Party Transaction; and |
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benefits to the Company of the Related Party Transaction. |
Determination of Related Party Transaction and Submission to the Governance Committee. A designated compliance person shall determine if the proposed transaction is a Related Party Transaction under the Related Party Transaction Policy. If it is, the Related Party Transaction shall be submitted to the Governance Committee for review and consideration of approval or ratification as set forth in the Related Party Transaction Policy.
Governance Committee Considerations. The applicable compliance person will submit potential Related Party Transactions to the Governance Committee for approval or ratification. Our Governance Committee shall take into consideration the following items:
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whether the Company and the Governance Committee reasonably believe the Related Party Transaction is in the best interest of the Company and its stockholders at the time of review, taking into account the facts and circumstances of the Related Party Transaction; |
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whether the Company has business reasons to enter into the Related Party Transaction; and |
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applicable requirements under the rules, regulations, listing standards or statues of the SEC, NYSE and Delaware General Corporation Law Section 144. |
Approval or Disapproval of Related Party Transactions. A Related Party Transaction requires an approval or ratification by a majority vote of disinterested members of the Governance Committee (or Board, if applicable) where a quorum is present or by unanimous written consent of the Governance Committee, if applicable. If the Related Party Transaction is approved or ratified by the Governance Committee, the Company may proceed in accordance with the Related Party Transaction’s terms, conditions, schedule and practices. If the approved or ratified Related Party Transaction involves one or more phases or installments, a series of transactional steps or if it is of an ongoing nature, no further approval is required for each subsequent phase or installment, series of transactional steps or ongoing dealings, provided that the terms or conditions have not materially changed from those previously approved by the Governance Committee. If the terms or conditions impacting a Related Party Transaction have materially changed, the Governance Committee shall review the new material changes to the terms or conditions for approval or ratification.
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CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS
If a Related Party Transaction is entered into by the Company without any prior review or approval required by the Related Party Transaction Policy, the transaction shall not be deemed to violate the Related Party Transaction Policy or be deemed to be void, invalid or unenforceable, provided that such Related Party Transaction is submitted to the Governance Committee for review as promptly as reasonably practicable after it is entered into or after it becomes reasonably apparent that such transaction is covered by the Policy. The Governance Committee may consider all alternatives including approving, ratifying, terminating or amending such Related Party Transaction.
Other Related Party Transactions – Delegation to Executive Officers. Authority to approve or ratify the following transactions has been delegated to any Executive Officer of the Company who is disinterested in the transaction. If any of the following transactions approved or ratified by an Executive Officer exceeds $120,000 and involves a Related Party, the Company will comply with Item 404 of Regulation S-K and disclose such transaction in the Company’s proxy statement.
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Home Purchase. Home purchases or construction services with the Company under the Company’s home purchase program, which is available to all employees of the Company. Actual pricing is determined in each local market where the home is located and is determined based on the market conditions and other facts and circumstances related to the transaction by the Company’s manager overseeing the project. |
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Employment. Employment by the Company of an Executive Officer or any “immediate family member” who is a Related Party. |
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Other Transactions. Transactions or services involving the Company and a Related Party that are valued at $120,000 or less, provided that if the Related Party is an independent director such transaction or services would not impair the independence of the director. |
Related Party Transactions – Land Transactions
The Company’s homebuilding operations require significant investment in land and lots each year. During fiscal 2023, the Company purchased $5.4 billion of land and finished lots. At September 30, 2023, the remaining purchase price of lots controlled through land and lot purchase contracts was $21.1 billion. The Company routinely enters into contracts to purchase land or developed residential lots at predetermined prices on a defined schedule commensurate with planned development or anticipated housing demand. During the due diligence period prior to purchasing undeveloped land, the Company determines if the land has received, or will likely soon receive, all significant entitlements or approvals for the land to be used as residential lots for home construction. The Company does not generally purchase undeveloped land without these entitlements or approvals in place or soon to be in place.
The Company also evaluates the expected financial performance of a planned development project during the due diligence period prior to the purchase of the land to determine whether it meets the Company’s investment criteria. The projected financial performance of the development project must meet minimum thresholds for profitability, return on investment and recovery of the Company’s initial cash investment in land and development costs.
The Company routinely utilizes third-party lot developers and land bankers as part of its land purchasing strategies to allow the Company to retain control of land parcels that have not received all significant entitlements or are too large to meet the Company’s investment criteria if purchased in whole. The Company typically assigns, in part or whole, its land purchase contracts to its third-party developers and land bankers, who then purchase the land from the original land seller. The Company enters into a purchase contract with the developer or land banker to purchase the land or lots after the necessary entitlements have been obtained, or are likely soon to be obtained, at predetermined pricing and timing that allow the development project to meet the Company’s investment criteria. Generally, terms of a land purchase contract involving a land seller or land banker depend on the location of the land, size of the parcel, status of entitlements, duration of the due diligence period, term of the contract, willingness of a land banker to commit investment capital to buy and hold large parcels of unentitled land, and the availability of a land banker with capital capacity.
The Company has a strategic relationship with Ryan Horton and Reagan Horton and entities controlled by them (collectively, referred to herein as “R&R”) where R&R has served as a land seller and a land banker to the Company. Ryan and Reagan Horton are the adult sons of Donald R. Horton, the Company’s Chairman, and Martha Elizabeth Horton. Donald R. Horton and Martha Elizabeth Horton are referred to herein as the “Hortons.” The relationship between the Company and R&R provides an advantage to the Company compared to other relationships with third-party land sellers, lot developers and land bankers. R&R has the capital capacity and has demonstrated the willingness and ability to purchase and hold large tracts of unentitled land or land that does not currently meet the Company’s investment criteria, to a greater extent than many of the Company’s other relationships with third-party land sellers, land developers and land bankers. The Company typically enters into a contract with R&R to purchase the land in phases on a defined future schedule after the land has been entitled and on terms that meet the Company’s investment criteria.
The following Related Party Transactions between the Company and R&R involve land purchase contracts for the purchase of land by the Company to be used primarily in the Company’s homebuilding business. Each of these Related Party Transactions was approved by the Governance Committee, composed of disinterested and independent directors of the Board, in accordance with our Related Party Transaction Policy.
D.R. HORTON, INC. 2024 PROXY STATEMENT 70
GENERAL INFORMATION
General Information
Time, Place and Purposes of Meeting
Our 2024 Annual Meeting of Stockholders will be held on Wednesday, January 17, 2024, at 10:00 a.m. Central Time, at our corporate offices located at 1341 Horton Circle, Arlington, Texas. Each stockholder may appoint only one proxy holder or representative to attend the meeting on his or her behalf. If you require directions to our meeting, please call (817) 390-8200 and ask for our Investor Relations department. The purposes of the 2024 Annual Meeting are set forth in the Notice of Annual Meeting of Stockholders to which this Proxy Statement is attached.
Solicitation of Proxies
This Proxy Statement is furnished in connection with the solicitation of proxies by the Board of Directors of D.R. Horton. D.R. Horton expects that this Proxy Statement and the accompanying form of proxy will first be released to our stockholders of record on or about December 15, 2023. The cost of this solicitation will be paid by D.R. Horton. The solicitation of proxies will be made primarily by use of the mail. In addition, directors, officers and regular employees of D.R. Horton may make solicitations without special compensation by telephone, facsimile, e-mail or personal interview. They may request banks, brokers, fiduciaries and other persons holding stock in their names, or in the names of their nominees, to forward proxies and proxy materials to their principals and obtain authorization for the execution and return of such proxies to management. D.R. Horton will reimburse such banks, brokers and fiduciaries for their reasonable out-of-pocket expenses for this service. D.R. Horton has engaged Innisfree to act as D.R. Horton’s proxy solicitor in connection with the proposals to be acted upon at the 2024 Annual Meeting. Pursuant to D.R. Horton’s agreement with Innisfree, it will, among other things, provide advice regarding proxy solicitation issues and solicit proxies from D.R. Horton’s stockholders on D.R. Horton’s behalf in connection with the 2024 Annual Meeting. For these services, D.R. Horton will pay a fee estimated to be $30,000, plus expenses.
Revocation and Voting of Proxies
Stockholders may vote by marking, signing and dating each proxy card received and returning it in the prepaid envelope, by telephone or electronically through the Internet by following the instructions included on the enclosed proxy card or by casting votes in person at the meeting. The telephone and Internet voting procedures are designed to authenticate votes cast by use of a personal identification number. The procedures, which are designed to comply with Delaware law, allow stockholders to appoint a proxy to vote their shares and to confirm that their instructions have been properly recorded. Stockholders who hold shares in “street name” through a broker or other nominee may be able to vote by telephone or electronically through the Internet in accordance with the voting instructions provided by that institution.
Any proxy given may be revoked by a stockholder at any time before it is exercised by filing with D.R. Horton a notice in writing revoking it, by duly executing and returning a proxy bearing a later date or by voting by telephone or Internet. Proxies also may be revoked by any stockholder present at the 2024 Annual Meeting who expresses a desire to vote his or her shares in person. Subject to such revocation and except as otherwise stated herein or in the form of proxy, all proxies duly executed and received prior to or at the time of the 2024 Annual Meeting will be voted in accordance with the specifications of the proxies. If no specification is made, proxies will be voted as follows: (i) FOR each of the nominees for election of directors (see Proposal One on page 6), (ii) FOR the adoption of the advisory resolution on executive compensation (see Proposal Two on page 23), (iii) FOR an annual basis as the recommended frequency of future advisory votes on executive compensation (see Proposal Three on page 24), (iv) FOR the approval of the D.R. Horton, Inc. 2024 Stock Incentive Plan (see Proposal Four on page 56) and (v) FOR ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm (see Proposal Five on page 66), and at the discretion of the proxy holders on all other matters properly brought before the 2024 Annual Meeting or any adjournment or postponement thereof.
Outstanding Shares and Voting Rights
November 30, 2023 has been set as the record date for the purpose of determining stockholders entitled to notice of and to vote at the 2024 Annual Meeting. There were 332,999,691 shares of D.R. Horton’s common stock, $.01 par value, issued and outstanding on the record date. On any matter submitted to a stockholder vote, each holder of common stock will be entitled to one vote, in person or by proxy, for each issued and outstanding share of common stock registered in his or her name on the books of D.R. Horton as of the record date. A list of such stockholders will be available for examination by any stockholder at the offices of D.R. Horton set forth above for at least ten days before the 2024 Annual Meeting. If you would like to view the stockholder list, please email Thomas B. Montaño, our Corporate Secretary, at tbmontano@drhorton.com.
D.R. HORTON, INC. 2024 PROXY STATEMENT 73
REQUESTING DOCUMENTS FROM THE COMPANY
Requesting Documents from the Company
On our website at investor.drhorton.com under the Policy & ESG Documents link within the ESG section, you will find the following: (i) Corporate Governance Principles, (ii) Audit Committee Charter, (iii) Compensation Committee Charter, (iv) Nominating and Governance Committee Charter, (v) Code of Ethical Conduct for the CEO, CFO, and Senior Financial Officers, (vi) Complaint Procedures for Accounting, Internal Control, Auditing and Financial Matters and Complaint Procedures for Employee Matters, (vii) Corporate Code of Business Conduct and Ethics for Employees and Directors, (viii) Human Rights Policy, (ix) Related Party Transaction Policy, (x) Stock Ownership Guidelines, (xi) Political Contributions Policy Statement and (xii) Clawback Policy. You may obtain a copy of any of these documents at no charge through our website or by contacting us for a printed set. In addition, a copy of our Annual Report on Form 10-K for the fiscal year ended September 30, 2023, including the financial statements and the financial statement schedules included therein, is available without charge. The exhibits of the Annual Report on Form 10-K are available upon payment of charges that approximate our cost of reproduction. You may contact us for these purposes at: Attention: Thomas B. Montaño, Senior Vice President and Corporate Secretary, D.R. Horton, Inc., 1341 Horton Circle, Arlington, Texas 76011, (817) 390-8200 or e-mail: tbmontano@drhorton.com.
Other Matters
Management knows of no other matters to be voted upon at the 2024 Annual Meeting. If any other matter is properly brought before the 2024 Annual Meeting, it is the intention of the persons named as proxies in the form of proxy to vote in their discretion upon such matters in accordance with their judgment. The persons named as proxies are Donald R. Horton, Chairman, and Paul J. Romanowski, President and Chief Executive Officer.
You are urged to sign, date and return the enclosed proxy in the envelope provided. No postage is required if the envelope is mailed from within the United States. If you subsequently decide to attend the 2024 Annual Meeting and wish to vote your shares in person, you may do so. Your cooperation in giving this matter your prompt attention is appreciated.
By Order of the Board of Directors,
THOMAS B. MONTAÑO
Senior Vice President and Corporate Secretary
Arlington, Texas
December 15, 2023
D.R. HORTON, INC. 2024 PROXY STATEMENT 77
APPENDIX A
D.R. HORTON, INC.
2024 STOCK INCENTIVE PLAN
1. Purpose
The purpose of the D.R. Horton, Inc. 2024 Stock Incentive Plan (the “Plan”) is to advance the interests of D.R. Horton, Inc. (the “Company”) and its Subsidiaries by stimulating the efforts of employees, officers, Nonemployee Directors and certain other Service Providers, in each case who are selected to be Participants, by heightening the desire of such persons to continue in working toward and contributing to the success and progress of the Company. The Plan supersedes the Company’s 2006 Stock Incentive Plan with respect to future awards, and provides for the grant of Incentive and Nonqualified Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units and Incentive Bonuses, any of which may be performance-based.
2. Definitions
As used in the Plan, the following terms shall have the meanings set forth below:
(a) “Administrator” means the Administrator of the Plan in accordance with Section 16.
(b) “Award” means an Incentive Stock Option, Nonqualified Stock Option, Stock Appreciation Right, Restricted Stock grant, Restricted Stock Unit or Incentive Bonus granted to a Participant pursuant to the provisions of the Plan.
(c) “Award Agreement” means a written agreement or other instrument, which may be transmitted electronically, as may be approved from time to time by the Administrator implementing the grant of each Award. An Award Agreement may be in the form of an agreement to be executed by both the Participant and the Company (or an authorized representative of the Company) or certificates, notices or similar instruments as approved by the Administrator.
(d) “Board” means the Board of Directors of the Company.
(e) “Change in Control” means the occurrence of any of the following events:
(i) The consummation of a merger, consolidation or reorganization of the Company into or with another corporation or other legal person if the stockholders of the Company, immediately before such merger, consolidation or reorganization, do not, immediately following such merger, consolidation or reorganization, then own directly or indirectly, more than 50% of the combined voting power of the then-outstanding voting securities of the corporation or other legal person resulting from such merger, consolidation or reorganization in substantially the same proportion as their ownership of Voting Securities (as hereinafter defined) immediately prior to such merger, consolidation or reorganization;
(ii) The Company sells all or substantially all of its assets to another corporation or other legal person, or there is a complete liquidation or dissolution of the Company;
(iii) Any person (as the term “person” is used in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act) has become the beneficial owner (as the term “beneficial owner” is defined under Rule 13d-3 or any successor rule or regulation promulgated under the Exchange Act) of securities representing 20% or more of the combined voting power of the then-outstanding voting securities of the Company (“Voting Securities”) (computed in accordance with the standards for the computation of total percentage ownership for the purposes of Schedule 13D or Schedule 14D-l or any successor schedule, form or report)); excluding, however, the following: any acquisition by the Company, any Subsidiary or an employee benefit plan or related trust of the Company or any Subsidiary; or
(iv) During any two year period, a majority of the members of the Board serving as of the Effective Date is replaced by members of the Board who are not nominated and approved by the Board.
(f) “Code” means the Internal Revenue Code of 1986, as amended, and the rulings and regulations issued thereunder.
(g) “Company” means D.R. Horton, Inc., a Delaware corporation.
(h) “Disability” means, except as otherwise provided in an Award Agreement, the Participant is either: (i) unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months; or (ii) by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than three months under an accident and health plan maintained or offered by the Company or a Subsidiary.
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APPENDIX A
(i) “Exchange Act” means the Securities Exchange Act of 1934, as amended.
(j) “Incentive Bonus” means a bonus opportunity awarded under Section 9 pursuant to which a Participant may become entitled to receive an amount based on satisfaction of such performance or other criteria as are specified in the Award Agreement.
(k) “Incentive Stock Option” means a stock option that is intended to qualify as an “incentive stock option” within the meaning of Section 422 of the Code.
(l) “Nonemployee Director” means each person who is, or is elected to be, a member of the Board or of the board of directors of a Subsidiary and who is not an employee of the Company or any Subsidiary.
(m) “Nonqualified Stock Option” means a stock option that is not intended to qualify as an “incentive stock option” within the meaning of Section 422 of the Code.
(n) “Option” means an Incentive Stock Option and/or a Nonqualified Stock Option granted pursuant to Section 6.
(o) “Participant” means any individual described in Section 3 to whom Awards have been granted from time to time by the Administrator and any authorized transferee of such individual.
(p) “Plan” means the D.R. Horton, Inc. 2024 Stock Incentive Plan, as set forth herein and as amended from time to time.
(q) “Prior Plan” means the D.R. Horton, Inc. 2006 Stock Incentive Plan, as amended and restated on December 11, 2014.
(r) “Restricted Stock” means Shares granted pursuant to Section 8.
(s) “Restricted Stock Unit” means an Award granted pursuant to Section 8 pursuant to which Shares or cash in lieu thereof may be issued in the future.
(t) “Retirement” means, except as otherwise provided in an Award Agreement, a voluntary Termination of Employment on or after the date on which the Participant has attained age 65.
(u) “Securities Act” means the Securities Act of 1933, as amended.
(v) “Service Provider” means a consultant or advisor to the Company or any Subsidiary who (i) is a natural person, (ii) provides bona fide services to the Company or any Subsidiary, (iii) provides services other than in connection with the offer or sale of securities in a capital-raising transaction, and (iv) does not directly or indirectly promote or maintain a market for the Company’s securities, in each case, within the meaning of the General Instructions to Form S-8 under the Securities Act.
(w) “Share” means a share of the Company’s common stock, par value $0.01, subject to adjustment as provided in Section 12.
(x) “Stock Appreciation Right” means a right granted pursuant to Section 7 that entitles the Participant to receive, in cash or Shares or a combination thereof, as determined by the Administrator, value equal to or otherwise based on the excess of (i) the market price of a specified number of Shares at the time of exercise over (ii) the exercise price of the right, as established by the Administrator on the date of grant.
(y) “Subsidiary” means (i) any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company where each of the corporations in the unbroken chain other than the last corporation owns stock possessing at least 50% or more of the total combined voting power of all classes of stock in one of the other corporations in the chain, (ii) other than with respect to Incentive Stock Options, any limited liability company, limited partnership, general partnership or other entity, the majority of the equity or ownership interests in which are owned, directly or indirectly, by the Company, and (iii) if specifically determined by the Administrator in the context other than with respect to Incentive Stock Options, any entity in which the Company has a significant ownership interest or that is directly or indirectly controlled by the Company.
(z) “Substitute Awards” means Awards granted or Shares issued by the Company in assumption of, or in substitution or exchange for, awards previously granted, or the right or obligation to make future awards, by a person or entity acquired by the Company or any Subsidiary or with which the Company or any Subsidiary merges or combines.
(aa) “Termination of Employment” means ceasing to serve as a full-time employee of the Company and its Subsidiaries or, with respect to a Nonemployee Director or other Service Provider, ceasing to serve as such for the Company and its Subsidiaries, except that with respect to all or any Awards held by a Participant (i) the Administrator may determine, subject to Section 6(e), that an approved leave of absence or approved employment on a less than full-time basis is not considered a “Termination of Employment,” (ii) the Administrator may determine that a transition of employment to service with a partnership, joint venture or corporation not meeting the requirements of a Subsidiary in which the Company or a Subsidiary is a party is not considered a “Termination of Employment,” (iii) service as a member of the Board shall
D.R. HORTON, INC. 2024 PROXY STATEMENT A-2
APPENDIX A
constitute continued employment with respect to Awards granted to a Participant while he or she served as an employee, (iv) service as an employee of the Company or a Subsidiary shall constitute continued employment with respect to Awards granted to a Participant while he or she served as a member of the Board, and (v) the Administrator may determine that a transition from employee to Service Provider or from Service Provider to employee is not considered a “Termination of Employment”. The Administrator shall determine whether any corporate transaction, such as a sale or spin-off of a division or subsidiary that employs a Participant, shall be deemed to result in a Termination of Employment with the Company and its Subsidiaries for purposes of any affected Participant’s Awards, and the Administrator’s decision shall be final and binding. Unless determined otherwise by the Administrator, a “Termination of Employment” will be interpreted consistent with the definition of a “separation from service” under the Code Section 409A Regulations.
3. Eligibility
Any person who is a current or prospective officer or employee (including, without limitation, any director who is also an employee, in his or her capacity as such) or a current or prospective Service Provider of the Company or of any Subsidiary shall be eligible for selection by the Administrator for the grant of Awards hereunder. To the extent provided by Section 5(d), any Nonemployee Director shall be eligible for the grant of Awards hereunder as determined by the Administrator. Options intending to qualify as Incentive Stock Options may only be granted to employees of the Company or any Subsidiary within the meaning of Section 424(f) the Code, as selected by the Administrator.
4. Effective Date and Termination of Plan
This Plan was adopted by the Board on December 12, 2023 and shall become effective upon approval by the Company’s stockholders (the “Effective Date”). The Plan shall remain available for the grant of Awards until December 12, 2033. Notwithstanding the foregoing, the Plan may be terminated at such earlier time as the Board or the Compensation Committee of the Board may determine. Termination or expiration of the Plan will not affect the rights and obligations of the Participants and the Company arising under Awards previously granted and then in effect.
5. Shares Subject to the Plan; Award Limitations
(a) Aggregate Limits. The aggregate number of Shares issuable under the Plan shall be equal to (i) 18,900,000 less (ii) the number of Shares subject to awards granted under the Prior Plan between November 30, 2023 and the Effective Date plus (iii) any Shares that remain available for issuance under the Prior Plan as of the Effective Date (not including any Shares subject to outstanding awards under the Prior Plan as of the Effective Date) and plus (iv) any Shares subject to outstanding awards under the Prior Plan as of the Effective Date that on or after the Effective Date cease for any reason to be subject to such Awards (other than by reason of exercise or settlement of the awards to the extent they are exercised for or settled in nonforfeitable Shares). The aggregate number of Shares available for grant under this Plan and the number of Shares subject to outstanding Awards shall be subject to adjustment as provided in Section 12. The aggregate number of Shares that may be issued pursuant to the exercise of Incentive Stock Options granted under this Plan shall not exceed 18,900,000, which number shall be calculated and adjusted pursuant to Section 12 only to the extent that such calculation or adjustment will not affect the status of any option intended to qualify as an Incentive Stock Option under Section 422 of the Code. The Shares issued pursuant to Awards granted under this Plan may be shares that are authorized and unissued or shares that were reacquired by the Company, including, without limitation, shares purchased in the open market.
(b) Issuance of Shares. For purposes of Section 5(a), the aggregate number of Shares issued under this Plan at any time shall equal only the number of Shares actually issued upon exercise or settlement of an Award. Notwithstanding the foregoing, Shares subject to an Award under the Plan may not again be made available for issuance under the Plan if such Shares are: (i) Shares that were subject to a stock-settled Stock Appreciation Right (or stock appreciation right under the Prior Plan) and were not issued upon the net settlement or net exercise of such Stock Appreciation Right (or stock appreciation right under the Prior Plan), (ii) Shares delivered to or withheld by the Company to pay the exercise price of a Stock Option (or stock option under the Prior Plan), (iii) Shares delivered to or withheld by the Company to pay the withholding taxes related to a Stock Option or a Stock Appreciation Right (or stock option or stock appreciation right under the Prior Plan), or (iv) Shares repurchased on the open market with the proceeds of a Stock Option (or option under the Prior Plan) exercise. Shares subject to Awards that have been canceled, expired, forfeited or otherwise not issued under an Award and Shares subject to Awards settled in cash shall not count as Shares issued under this Plan.
(c) Substitute Awards. Substitute Awards shall not reduce the Shares authorized for issuance under the Plan. In addition, in the event that a person or entity acquired by the Company or any Subsidiary, or with which the Company or any Subsidiary merges or combines, has shares available under a pre-existing plan approved by its stockholders and not adopted in contemplation of such acquisition, merger or combination, the shares available for grant pursuant to the terms of such pre-existing plan (as adjusted, to the extent appropriate, using the exchange ratio or other adjustment or valuation ratio or formula used in such acquisition, merger or combination to determine the
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APPENDIX A
consideration payable to the holders of common stock of the entities party to such transaction) may be used for Awards under the Plan and, notwithstanding any other provision hereof, shall not reduce the Shares authorized for issuance under the Plan; provided that Awards using such available shares shall not be made after the date awards or grants could have been made under the terms of the pre-existing plan, absent the acquisition, merger or combination, and shall only be made to individuals who were employees, directors or Service Providers of such acquired, merged or combined company before such acquisition, merger or combination.
(d) Nonemployee Director Compensation Limit. The aggregate dollar value of equity-based (based on the grant date fair market value of equity-based Awards) and cash compensation granted under this Plan or otherwise during any fiscal year to any Nonemployee Director in respect of such individual’s service as a Nonemployee Director shall not exceed $1,000,000; provided, however, that in the calendar year in which a Nonemployee Director first joins the Board or the board of directors of a Subsidiary or during any fiscal in which a Nonemployee Director is designated as chairman or lead director of the Board or of the board of directors of a Subsidiary, such limit shall be increased to $1,500,000.
(e) Minimum Vesting. Except as otherwise provided in this Section 5(e), Awards granted under the Plan shall be subject to a minimum vesting period of one year from the date of grant of such Award. Notwithstanding the foregoing, (i) such minimum vesting provision shall not apply to the accelerated vesting of an Award in the event of a Participant’s death, Disability, Retirement or the occurrence of a Change in Control, and (ii) the Administrator may grant Awards covering 5% or fewer of the total number of Shares authorized for issuance under the Plan as set forth in Section 5(a) without regard to the above-described minimum vesting requirements. In addition, with respect to Awards made to Nonemployee Directors, the vesting of such Awards will be deemed to satisfy the one-year minimum vesting requirement to the extent that the Awards vest no sooner than the earlier of the one-year anniversary of the date of grant and the next regular annual meeting of the Company’s stockholders that is at least 50 weeks after the immediately preceding year’s annual meeting.
(f) Effect on Prior Plan. From and after the Effective Date, no further grants or awards are permitted to be made under the Prior Plan. Grants and awards made, or Substitute Awards assumed, under the Prior Plan before the Effective Date, however, shall continue in effect in accordance with their terms.
6. Options
(a) Option Awards. Options may be granted to Participants from time to time as determined by the Administrator. Each Option shall be evidenced by an Award Agreement. Options granted pursuant to the Plan need not be identical but each Option must contain and be subject to the terms and conditions set forth below.
(b) Price. The Administrator will establish the exercise price per Share under each Option, which, in no event will be less than the fair market value of the Shares on the date of grant; provided, however, that the exercise price per Share with respect to an Option that is granted as a Substitute Award may be less than 100% of the market price of the Shares on the date such Option is granted if such exercise price is based on a formula set forth in the terms of the options held by such optionees or in the terms of the agreement providing for such merger or other acquisition. The exercise price of any Option may be paid in Shares, cash or a combination thereof, as determined by the Administrator, including, without limitation, an irrevocable commitment by a broker to pay over such amount from a sale of the Shares issuable under an Option, the delivery of previously owned Shares and withholding of Shares deliverable upon exercise.
(c) No Repricing. Other than in connection with a change in the Company’s capitalization or other event or transaction described in Section 12, the terms of outstanding Awards may not be amended to (i) reduce the exercise price of outstanding Options or take any other action that is treated as a re-pricing under generally accepted accounting principles (“GAAP”), or (ii) at any time when the exercise price of an Option is above the market value of a Share, cancel, exchange, buyout or surrender outstanding Options in exchange for cash, other awards or Options or Stock Appreciation Rights with an exercise price that is less than the exercise price of the original Options, in each case without stockholder approval.
(d) No Reload Grants. Options shall not be granted under the Plan in consideration for, and shall not be conditioned upon the delivery of, Shares to the Company in payment of the exercise price and/or tax withholding obligation under any other employee stock option.
(e) Provisions Applicable to Options. Subject to Section 5(e) above, the date on which Options become vested and exercisable (which may be based on, without limitation, continued employment or performance conditions) shall be determined at the sole discretion of the Administrator and set forth in an Award Agreement. Unless provided otherwise in the applicable Award Agreement, to the extent that the Administrator determines that an approved leave of absence or employment on a less than full-time basis is not a Termination of Employment, the vesting period and/or exercisability of an Option shall be adjusted by the Administrator during or to reflect the effects of any period during which the Participant is on an approved leave of absence or is employed on a less than full-time basis.
(f) Term of Options and Termination of Employment. The Administrator shall establish the term of each Option, which in no case shall exceed a period of 10 years from the date of grant; provided, however, the term of an Option (other than an Incentive Stock Option) shall be
D.R. HORTON, INC. 2024 PROXY STATEMENT A-4
APPENDIX A
automatically extended if, at the time of its scheduled expiration, the Participant holding such Option is prohibited by law or the Company’s insider trading policy from exercising the Option, which extension shall expire on the 30th day following the date such prohibition no longer applies. In addition, the Award Agreement evidencing the grant of each Option shall set forth the terms and conditions applicable to such Option upon a Participant’s Termination of Employment.
(g) Incentive Stock Options. Notwithstanding anything to the contrary in this Section 6, in the case of the grant of an Incentive Stock Option: (i) if the Participant owns stock possessing more than 10% of the combined voting power of all classes of stock of the Company (a “10% Shareholder”), the exercise price of such Option must be at least 110% of the fair market value of the Shares on the date of grant and the Option must expire within a period of not more than five years from the date of grant, and (ii) Termination of Employment will occur when the person to whom an Award was granted ceases to be an employee (as determined in accordance with Section 3401(c) of the Code and the regulations promulgated thereunder) of the Company and its Subsidiaries. Notwithstanding anything in this Section 6 to the contrary, options designated as Incentive Stock Options shall not be eligible for treatment under the Code as Incentive Stock Options (and will be deemed to be Nonqualified Stock Options) to the extent that either (A) the aggregate fair market value of Shares (determined as of the time of grant) with respect to which such Options are exercisable for the first time by the Participant during any calendar year (under all plans of the Company and any Subsidiary) exceeds $100,000, taking Options into account in the order in which they were granted, or (B) such Options otherwise remain exercisable but are not exercised within three months of Termination of Employment (or such other period of time provided in Section 422 of the Code).
(h) No Stockholder Rights. Participants shall have no rights as a stockholder, including voting rights and will have no rights to receive dividends or dividend equivalents in respect of an Option or any Shares subject to an Option until the Participant has become the holder of record of such Shares.
(i) Adjustments. Notwithstanding the satisfaction of any performance goals, the number of Options granted, retainable, and/or vested and exercisable under an Award of Options on account of the attainment of performance objectives may, to the extent specified in the Award Agreement, be reduced, but not increased, by the Administrator on the basis of such further considerations as the Administrator shall determine.
7. Stock Appreciation Rights
Stock Appreciation Rights may be granted to Participants from time to time either in tandem with or as a component of other Awards granted under the Plan (“tandem SARs”) or not in conjunction with other Awards (“freestanding SARs”) and may, but need not, relate to a specific Option granted under Section 6. The provisions of Stock Appreciation Rights need not be the same with respect to each grant or each recipient. Any Stock Appreciation Right granted in tandem with an Award may be granted at the same time such Award is granted or at any time thereafter before exercise or expiration of such Award. All freestanding SARs shall be granted subject to the same terms and conditions applicable to Options as set forth in Section 6 (including, without limitation, the maximum term thereof) and all tandem SARs shall have the same exercise price, vesting, exercisability, forfeiture and termination provisions as the Award to which they relate. Subject to the provisions of Section 6 and the immediately preceding sentence, the Administrator may impose such other conditions or restrictions on any Stock Appreciation Right as it shall deem appropriate. Stock Appreciation Rights may be settled in Shares, cash or a combination thereof, as determined by the Administrator and set forth in the applicable Award Agreement. Other than in connection with a change in the Company’s capitalization or other event or transaction described in Section 12, the terms of outstanding Awards may not be amended to (a) reduce the exercise price of outstanding Stock Appreciation Rights or take any other action that is treated as a re-pricing under GAAP, or (b) at any time when the exercise price of an SAR is above the market value of a Share, cancel, exchange, buyout or surrender outstanding Stock Appreciation Rights in exchange for cash, other awards or Options or Stock Appreciation Rights with an exercise price that is less than the exercise price of the original Stock Appreciation Rights, in each case without stockholder approval. Participants shall have no voting rights and will have no rights to receive dividends or dividend equivalents in respect of an Award of Stock Appreciation Rights or any Shares subject to an Award of Stock Appreciation Rights until the Participant has become the holder of record of such Shares. The Award Agreement evidencing the grant of an Award of Stock Appreciation Rights shall set forth the terms and conditions applicable to such Award upon a Participant’s Termination of Employment.
8. Restricted Stock and Restricted Stock Units
(a) Restricted Stock and Restricted Stock Unit Awards. Restricted Stock and Restricted Stock Units may be granted to Participants from time to time as determined by the Administrator. Restricted Stock is an award or issuance of Shares the grant, issuance, retention, vesting and/or transferability of which is subject during specified periods of time to such conditions (including, without limitation, continued employment or performance conditions) and terms as the Administrator deems appropriate. Restricted Stock Units are Awards denominated in units of Shares under which the issuance of Shares (or a corresponding cash amount) is subject to such conditions (including, without limitation, continued employment or performance conditions) and terms as the Administrator deems appropriate. Each grant of Restricted Stock and
D.R. HORTON, INC. 2024 PROXY STATEMENT A-5
APPENDIX A
Restricted Stock Units shall be evidenced by an Award Agreement. Unless determined otherwise by the Administrator, each Restricted Stock Unit will be equal to one Share and will entitle a Participant to either the issuance of Shares or payment of an amount of cash determined with reference to the value of Shares. To the extent determined by the Administrator, Restricted Stock and Restricted Stock Units may be satisfied or settled in Shares, cash or a combination thereof. Restricted Stock and Restricted Stock Units granted pursuant to the Plan need not be identical but each grant of Restricted Stock and Restricted Stock Units must contain and be subject to the terms and conditions set forth below.
(b) Contents of Agreement. Each Award Agreement shall contain provisions regarding (i) the number of Shares or Restricted Stock Units subject to such Award or a formula for determining such number, (ii) the purchase price of the Shares, if any, and the means of payment, (iii) the performance criteria, if any, and level of achievement versus these criteria that shall determine the number of Shares or Restricted Stock Units granted, issued, retainable and/or vested, (iv) such terms and conditions on the grant, issuance, vesting and/or forfeiture of the Shares or Restricted Stock Units as may be determined from time to time by the Administrator, (v) the term of the performance period, if any, as to which performance will be measured for determining the number of such Shares or Restricted Stock Units, and (vi) restrictions on the transferability of the Shares or Restricted Stock Units. Shares issued under a Restricted Stock Award may be issued in the name of the Participant and held by the Participant or held by the Company, in each case as the Administrator may provide.
(c) Vesting Criteria; Termination of Employment. Subject to Section 5(e) above, the grant, issuance, retention, vesting and/or, subject to Section 10, settlement of shares of Restricted Stock and Restricted Stock Units will occur when and in such installments as the Administrator determines or under criteria the Administrator establishes, which may include performance conditions. The Award Agreement evidencing the grant of an Award of Restricted Stock or Restricted Stock Units shall set forth the terms and conditions applicable to such Award upon a Participant’s Termination of Employment.
(e) Voting Rights. Unless otherwise determined by the Administrator, Participants holding shares of Restricted Stock granted hereunder may exercise full voting rights with respect to those shares during the period of restriction. Participants shall have no voting rights with respect to Shares underlying Restricted Stock Units unless and until the Participant has become the holder of record of such Shares.
(f) Dividends and Distributions. Participants in whose name Restricted Stock is granted shall be entitled to accrue all dividends and other distributions paid with respect to those Shares, unless determined otherwise by the Administrator. The Administrator will determine whether any such dividends or distributions will be automatically reinvested in additional shares of Restricted Stock or whether such dividends or distributions will accrue in cash. Such dividends or distributions will be subject to the same restrictions on transferability as the Restricted Stock with respect to which they were distributed. Shares underlying Restricted Stock Units shall be entitled to dividends or dividend equivalents only to the extent provided by the Administrator. Notwithstanding the foregoing, any dividends, distributions or dividend equivalents on Awards granted under the Plan shall be subject to the same vesting criteria and other restrictions on transferability as the underlying Award with respect to which they were paid or distributed.
(g) Adjustments. Notwithstanding the satisfaction of any performance goals, the number of Shares granted, issued, retainable and/or vested under an Award of Restricted Stock or Restricted Stock Units on account of the attainment of performance objectives may, to the extent specified in the Award Agreement, be reduced, but not increased, by the Administrator on the basis of such further considerations as the Administrator shall determine.
9. Incentive Bonuses
(a) General. Each Incentive Bonus Award will confer upon the Participant the opportunity to earn a future payment tied to the level of achievement of one or more performance criteria established for a performance period designated by the Administrator.
(b) Incentive Bonus Document. The terms of any Incentive Bonus will be set forth in an Award Agreement. Each Award Agreement evidencing an Incentive Bonus shall contain provisions regarding (i) the target (and any threshold or maximum) amount payable to the Participant as an Incentive Bonus, (ii) the performance criteria and level of achievement versus these criteria that shall determine the amount of such payment, (iii) the term of the performance period as to which performance shall be measured for determining the amount of any payment, (iv) the timing of any payment earned by virtue of performance, (v) restrictions on the alienation or transfer of the Incentive Bonus prior to actual payment, (vi) forfeiture provisions and (vii) such further terms and conditions, in each case not inconsistent with this Plan as may be determined from time to time by the Administrator.
(c) Performance Criteria. The Administrator shall establish the performance criteria and level of achievement versus these criteria that shall determine the target and maximum amount payable under an Incentive Bonus, which criteria may be based on financial performance, strategic or operational objectives, and/or personal performance evaluations.
(d) Timing and Form of Payment. The Administrator shall determine the timing of payment of any Incentive Bonus. Payment of the amount due under an Incentive Bonus may be made in cash or in Shares, as determined by the Administrator.
D.R. HORTON, INC. 2024 PROXY STATEMENT A-6
APPENDIX A
(e) Adjustments. Notwithstanding satisfaction of any performance goals, the amount paid under an Incentive Bonus on account of the attainment of performance objectives may, to the extent specified in the Award Agreement, be reduced, but not increased, by the Administrator on the basis of such further considerations as the Administrator shall determine.
10. Deferral of Awards
The Administrator may, in an Award Agreement or otherwise, provide for the deferred delivery of Shares or cash upon settlement, vesting or other events with respect to Restricted Stock or Restricted Stock Units, or in payment or satisfaction of an Incentive Bonus. Notwithstanding anything herein to the contrary, in no event will any deferral of the delivery of Shares or any other payment with respect to any Award be allowed if the Administrator determines that the deferral would result in the imposition of the additional tax under Section 409A(a)(1)(B) of the Code. The Company shall have no liability to a Participant, or any other party, if an Award that is intended to be exempt from, or compliant with, Section 409A of the Code is not so exempt or compliant or for any action taken by the Board.
To the extent any payment under this Plan is considered deferred compensation subject to the restrictions contained in Section 409A of the Code, such payment may not be made to a specified employee (as determined in accordance with a uniform policy adopted by the Company with respect to all arrangements subject to Section 409A of the Code) upon a separation from service (as defined for purposes of Section 409A of the Code) before the date that is six months after the specified employee’s separation form service (or, if earlier, the specified employee’s death). Any payment that would otherwise be made during this period of delay shall be accumulated and paid on the sixth month plus one day following the specified employee’s separation from service (or, if earlier, as soon as administratively practicable after the specified employee’s death).
11. Conditions and Restrictions Upon Securities Subject to Awards
The Administrator may provide that the Shares issued upon exercise of an Option or Stock Appreciation Right or otherwise subject to or issued under an Award shall be subject to such further agreements, restrictions, conditions or limitations as the Administrator in its discretion may specify prior to the exercise of such Option or Stock Appreciation Right or the grant, vesting or settlement of such Award, including, without limitation, conditions on vesting or transferability, forfeiture or repurchase provisions and method of payment for the Shares issued upon exercise, vesting or settlement of such Award (including, without limitation, the actual or constructive surrender of Shares already owned by the Participant) or payment of taxes arising in connection with an Award. Without limiting the foregoing, such restrictions may address the timing and manner of any resales by the Participant or other subsequent transfers by the Participant of any Shares issued under an Award, including, without limitation (a) restrictions under an insider trading policy or pursuant to applicable law, (b) restrictions designed to delay and/or coordinate the timing and manner of sales by Participant and holders of other Company equity compensation arrangements, (c) restrictions as to the use of a specified brokerage firm for such resales or other transfers and (d) provisions requiring Shares to be sold on the open market or to the Company in order to satisfy tax withholding or other obligations.
12. Adjustment of and Changes in the Stock
The number and kind of Shares available for issuance under this Plan (including, without limitation, under any Awards then outstanding) shall be equitably adjusted by the Administrator as it determines appropriate to reflect any reorganization, reclassification, combination or exchange of shares, repurchase of shares, stock split, reverse stock split, spin-off, dividend or other distribution of securities, property or cash (other than regular, quarterly cash dividends), or any other event or transaction that affects the number or kind of Shares of the Company outstanding. Such adjustment may be designed to comply with Section 425 of the Code or may be designed to treat the Shares available under the Plan and subject to Awards as if they were all outstanding on the record date for such event or transaction or to increase the number of such Shares to reflect a deemed reinvestment in Shares of the amount distributed to the Company’s securityholders. The terms of any outstanding Award shall also be equitably adjusted by the Administrator as to price, number or kind of Shares subject to such Award, vesting, and other terms to reflect the foregoing events, which adjustments need not be uniform as between different Awards or different types of Awards.
In the event there shall be any other change in the number or kind of outstanding Shares, or any stock or other securities into which such Shares shall have been changed, or for which it shall have been exchanged, by reason of a Change in Control, other merger, consolidation or otherwise, then the Administrator shall, in its sole discretion, determine the appropriate and equitable adjustment, if any, to be effected with respect to outstanding Awards. Without limiting the generality of the foregoing, in the event of any such change described in this paragraph, the Administrator may, in its sole discretion, (i) provide for the assumption or substitution of such Awards by the successor or surviving company, or a parent or subsidiary thereof, (ii) provide for the adjustment to the number and type of Shares (or other security or property) subject to such Award and the terms and conditions thereof (including any exercise price); (iii) accelerate the vesting of and terminate any restrictions on outstanding Awards; (iv) provide for cancellation of accelerated Awards that are not exercised within a time
D.R. HORTON, INC. 2024 PROXY STATEMENT A-7
APPENDIX A
prescribed by the Administrator; or (v) provide for the cancellation of any such Award in exchange for an amount of cash and/or other property with a value equal to the amount that would have been attained upon the exercise of such Award or realization of the Participant’s rights (and, for the avoidance of doubt, if as of the date of the occurrence of the transaction or event described in this Section 12 the Administrator determines in good faith that no amount would have been attained upon the exercise of such Award or realization of the Participant’s rights, then such Award may be terminated by the Company without payment).
No right to purchase fractional shares shall result from any adjustment in Awards pursuant to this Section 12. In case of any such adjustment, the Shares subject to the Award shall be rounded down to the nearest whole share. The Company shall notify Participants holding Awards subject to any adjustments pursuant to this Section 12 of such adjustment, but (whether or not notice is given) such adjustment shall be effective and binding for all purposes of the Plan.
13. Transferability
Unless the Administrator specifies otherwise to the extent permitted under the General Instructions to Form S-8 under the Securities Act an Award may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated by a Participant other than by will or the laws of descent and distribution, and each Option or Stock Appreciation Right shall be exercisable only by the Participant during his or her lifetime, and thereafter by the legal representative of the Participant’s estate or the individual to whom such Award was transferred by the Participant’s will or the laws of descent and distribution.
14. Compliance with Laws and Regulations
This Plan, the grant, issuance, vesting, exercise and settlement of Awards thereunder, and the obligation of the Company to sell, issue or deliver Shares under such Awards, shall be subject to all applicable foreign, federal, state and local laws, rules and regulations, stock exchange rules and regulations, and to such approvals by any governmental or regulatory agency as may be required. The Company shall not be required to register in a Participant’s name or deliver any Shares prior to the completion of any registration or qualification of such shares under any foreign, federal, state or local law or any ruling or regulation of any government body which the Administrator shall determine to be necessary or advisable. To the extent the Company is unable to or the Administrator deems it infeasible to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder, the Company and its Subsidiaries shall be relieved of any liability with respect to the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained. No Option shall be exercisable and no Shares shall be issued and/or transferable under any other Award unless a registration statement with respect to the Shares underlying such Option is effective and current or the Company has determined that such registration is unnecessary.
In the event an Award is granted to or held by a Participant who resides, is employed or is providing services outside the United States, the Administrator may, in its sole discretion, modify the provisions of the Plan or of such Award as they pertain to such individual or adopt one or more sub-plans to comply with applicable foreign law or to recognize differences in local law, currency or tax policy. The Administrator may also impose conditions on the grant, issuance, exercise, vesting, settlement or retention of Awards in order to comply with such foreign law and/or to minimize the Company’s obligations with respect to tax equalization for Participants employed outside their home country.
15. Withholding
To the extent required by applicable federal, state, local or foreign law, a Participant shall be required to satisfy, in a manner satisfactory to the Company, any withholding tax obligations that arise by reason of an Option exercise, disposition of Shares issued under an Incentive Stock Option, the vesting of or settlement of an Award, an election pursuant to Section 83(b) of the Code or otherwise with respect to an Award. To the extent a Participant makes an election under Section 83(b) of the Code, within ten days of filing such election with the Internal Revenue Service, the Participant must notify the Company in writing of such election. The Company and its Subsidiaries shall not be required to issue Shares, make any payment or to recognize the transfer or disposition of Shares until such obligations are satisfied. The Administrator may provide for or permit these obligations to be satisfied through the mandatory or elective sale of Shares and/or by having the Company withhold a portion of the Shares or cash that otherwise would be issued to him or her upon exercise of the Option or the vesting or settlement of an Award, by tendering Shares previously acquired, or by such other means as the Administrator determines appropriate.
16. Administration of the Plan
(a) Administrator of the Plan. The Plan shall be administered by the Administrator who shall be the Compensation Committee of the Board or, in the absence of a Compensation Committee, the Board itself; provided, however, that with respect to Awards to Nonemployee Directors, the Administrator shall be the full Board. Any power of the Administrator may also be exercised by the Board, except to the extent
D.R. HORTON, INC. 2024 PROXY STATEMENT A-8
APPENDIX A
that the grant or exercise of such authority would cause any Award or transaction to become subject to (or lose an exemption under) the short-swing profit recovery provisions of Section 16 of the Exchange Act. To the extent that any permitted action taken by the Board conflicts with action taken by the Administrator, the Board action shall control. The Administrator may by resolution authorize one or more individuals to do or perform any or all things that the Administrator is authorized and empowered to do or perform under the Plan, and for all purposes under this Plan, such individuals shall be treated as the Administrator; provided, however, that such resolution shall specify the total number of Shares subject to any Awards such individual may award pursuant to such delegated authority. No such individual shall designate himself or herself or any executive officer or director of the Company as a recipient of any Awards granted under authority delegated to such individual. In addition, the Administrator may delegate any or all aspects of the day-to-day administration of the Plan to one or more officers or employees of the Company or any Subsidiary, and/or to one or more agents.
(b) Powers of Administrator. Subject to the express provisions of this Plan, the Administrator shall be authorized and empowered to do all things that it determines to be necessary or appropriate in connection with the administration of this Plan, including, without limitation: (i) to prescribe, amend and rescind rules and regulations relating to this Plan and to define terms not otherwise defined herein; (ii) to determine which persons are Participants, to which of such Participants, if any, Awards shall be granted hereunder and the timing of any such Awards; (iii) to grant Awards to Participants and determine the terms and conditions thereof, including, without limitation, the number of Shares subject to Awards and the exercise or purchase price of such Shares and the circumstances under which Awards become exercisable or vested or are forfeited or expire, which terms may but need not be conditioned upon the passage of time, continued employment, the satisfaction of performance criteria, the occurrence of certain events (including, without limitation, events which the Board or the Administrator determine constitute a Change in Control), or other factors; (iv) to establish and verify the extent of satisfaction of any performance goals or other conditions applicable to the grant, issuance, exercisability, vesting and/or ability to retain any Award; (v) to prescribe and amend the terms of the agreements or other documents evidencing Awards made under this Plan (which need not be identical) and the terms of or form of any document or notice required to be delivered to the Company by Participants under this Plan; (vi) to determine whether, and the extent to which, adjustments are required pursuant to Section 12; (vii) to interpret and construe this Plan, any rules and regulations under this Plan and the terms and conditions of any Award granted hereunder, and to make exceptions to any such provisions if the Administrator, in good faith, determines that it is necessary to do so in light of the circumstances and for the benefit of the Company; (viii) to approve corrections in the documentation or administration of any Award; (ix) subject to any limitations otherwise set forth in Section 17, waive, settle or adjust the terms of any Award so as to avoid unanticipated consequences, to implement the intent of the Award, or address unanticipated events (including, but not limited to, any temporary closure of an applicable stock exchange, disruption of communications or natural catastrophe); and (x) to make all other determinations deemed necessary or advisable for the administration of this Plan. Except as set forth in Section 6(c) or Section 7 above (with regard to adjustments to the exercise price or re-pricings of Options and SARs), the Administrator may, in its sole and absolute discretion, without amendment to the Plan, waive or amend the operation of Plan provisions respecting vesting of an Award or exercise after Termination of Employment and, except as otherwise provided herein, adjust any of the other terms of any Award.
(c) Determinations by the Administrator. All decisions, determinations and interpretations by the Administrator regarding the Plan, any rules and regulations under the Plan and the terms and conditions of or operation of any Award granted hereunder, shall be final and binding on all Participants, beneficiaries, heirs, assigns or other persons holding or claiming rights under the Plan or any Award. The Administrator shall consider such factors as it deems relevant, in its sole and absolute discretion, to making such decisions, determinations and interpretations including, without limitation, the recommendations or advice of any officer or other employee of the Company and such attorneys, consultants and accountants as it may select.
(d) Liability of Administrator. No member of the Board and no Administrator shall be personally liable by reason of any contract or other instrument executed by such member or on his or her behalf in his or her capacity as the Administrator nor for any mistake of judgment made in good faith, and the Company shall indemnify and hold harmless each member of Board and each other employee, officer or director of the Company to whom any duty or power relating to the administration or interpretation of the Plan may be allocated or delegated, against any cost or expense (including counsel fees) or liability (including any sum paid in settlement of a claim) arising out of any act or omission to act in connection with the Plan, unless arising out of such Person’s own fraud or willful bad faith; provided, however, that approval of the Board shall be required for the payment of any amount in settlement of a claim against any such person. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such Persons may be entitled under the Company’s Certificate of Incorporation and Bylaws (as each may be amended from time to time), as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless.
(e) Subsidiary Awards. In the case of a grant of an Award to any Participant employed or engaged by a Subsidiary, such grant may, if the Administrator so directs, be implemented by the Company issuing any subject Shares to the Subsidiary, for such lawful consideration as the Administrator may determine, upon the condition or understanding that the Subsidiary will transfer the Shares to the Participant in accordance with the terms of the Award specified by the Administrator pursuant to the provisions of the Plan. Notwithstanding any other provision hereof, such Award may be issued by and in the name of the Subsidiary and shall be deemed granted on such date as the Administrator shall determine.
D.R. HORTON, INC. 2024 PROXY STATEMENT A-9
APPENDIX A
17. Amendment of the Plan or Awards
The Board or the Compensation Committee of the Board may amend, alter or discontinue this Plan, and the Administrator may amend or alter any agreement or other document evidencing an Award made under this Plan but, except as provided pursuant to the provisions of Section 12, no such amendment shall, without the approval of the stockholders of the Company:
(a) increase the maximum number of Shares for which Awards may be granted under this Plan;
(b) other than in connection with a change in the Company’s capitalization or other event or transaction described in Section 12, amend the terms of outstanding Awards to (i) reduce the exercise price of outstanding Options or Stock Appreciation Rights or take any other action that is treated as a re-pricing under GAAP, or (ii) at any time when the exercise price of an Option or SAR is greater than the market value of a Share, cancel, exchange, buyout or surrender outstanding Options or Stock Appreciation Rights in exchange for cash, other awards or Options or Stock Appreciation Rights with an exercise price that is less than the exercise price of the original Options or Stock Appreciation Rights;
(c) extend the term of this Plan;
(d) change the class of persons eligible to be Participants;
(e) otherwise amend the Plan in any manner requiring stockholder approval by law or under the New York Stock Exchange listing requirements; or
(f) increase the Nonemployee Director compensation limits in Section 5(d).
No amendment or alteration to the Plan or an Award Agreement shall be made which would impair the rights of the holder of an Award, without such holder’s consent, provided that no such consent shall be required if (i) the Administrator determines in its sole discretion and prior to the date of any Change in Control that such amendment or alteration either is required or advisable in order for the Company, the Plan or the Award to satisfy any law or regulation or stock exchange listing requirement or to meet the requirements of or avoid adverse financial accounting consequences under any accounting standard, or (ii) the Administrator determines in its sole discretion that such amendment or alteration is not reasonably likely to significantly diminish the benefits provided under the Award, or that any such diminution has been adequately compensated.
18. No Liability of Company
The Company and any Subsidiary or affiliate which is in existence or hereafter comes into existence shall not be liable to a Participant or any other person as to: (a) the non-issuance or sale of Shares as to which the Company has been unable to obtain from any regulatory body having jurisdiction the authority deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder; and (b) any tax consequence expected, but not realized, by any Participant or other person due to the receipt, exercise or settlement of any Award granted hereunder.
19. Non-Exclusivity of Plan
Neither the adoption of this Plan by the Board nor the submission of this Plan to the stockholders of the Company for approval shall be construed as creating any limitations on the power of the Board or the Administrator to adopt such other incentive arrangements as either may deem desirable, including, without limitation, the granting of cash or equity-based compensation awards otherwise than under this Plan.
20. Governing Law
This Plan and any agreements or other documents hereunder shall be interpreted and construed in accordance with the laws of the Delaware and applicable federal law. Any reference in this Plan or in the agreement or other document evidencing any Awards to a provision of law or to a rule or regulation shall be deemed to include any successor law, rule or regulation of similar effect or applicability.
21. No Right to Employment, Reelection or Continued Service
Nothing in this Plan or an Award Agreement shall interfere with or limit in any way the right of the Company, its Subsidiaries and/or its affiliates to terminate any Participant’s employment, service on the Board or service for the Company at any time or for any reason not
D.R. HORTON, INC. 2024 PROXY STATEMENT A-10
Pay vs Performance Disclosure - USD ($)
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12 Months Ended |
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2021 |
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| Pay vs Performance Disclosure, Table |
As required by Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 402(v) of Regulation S-K, we are providing the following information about the relationship between executive “compensation actually paid” (as defined under SEC rules) and certain financial performance of the Company. For further information concerning the Company’s pay for performance philosophy and how the Company aligns executive compensation with the Company’s performance, refer to the Compensation Discussion and Analysis section beginning on page 27. The following table sets forth information regarding the compensation of our former President and Chief Executive Officer, David Auld, and the average compensation of our other named executive officers (NEOs) for the years listed, as well as certain financial performance measures of the Company for the three most recently completed fiscal years. Mr. Auld was our principal executive officer (“PEO”) in the years presented.
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|
|
|
|
|
|
|
|
|
|
Summary
Compensation
Table Total |
|
|
Compensation Actually Paid to Mr. Auld (2) |
|
|
Average Summary Compensation Table Total for Non-PEO NEOs (3) |
|
|
Average Compensation Actually Paid to Non-PEO NEOs (4) |
|
|
Value of Initial Fixed $100
Investment Based On: |
|
|
|
|
|
|
|
| |
Total Shareholder Return (5) |
|
|
Peer Group Total Shareholder Return (6) |
|
|
|
|
|
|
|
|
|
|
| 2023 |
|
$ |
32,082,857 |
|
|
$ |
47,028,337 |
|
|
$ |
17,370,023 |
|
|
$ |
26,652,166 |
|
|
$ |
146.46 |
|
|
$ |
145.19 |
|
|
$ |
4,795.2 |
|
|
$ |
6,314.7 |
|
|
|
|
|
|
|
|
|
|
| 2022 |
|
$ |
29,996,862 |
|
|
$ |
26,181,129 |
|
|
$ |
16,279,137 |
|
|
$ |
13,299,571 |
|
|
$ |
90.89 |
|
|
$ |
88.95 |
|
|
$ |
5,895.6 |
|
|
$ |
7,629.7 |
|
|
|
|
|
|
|
|
|
|
| 2021 |
|
$ |
30,571,596 |
|
|
$ |
51,287,681 |
|
|
$ |
23,003,394 |
|
|
$ |
35,128,198 |
|
|
$ |
112.08 |
|
|
$ |
112.30 |
|
|
$ |
4,191.2 |
|
|
$ |
5,356.3 |
|
| (1) |
David V. Auld was our President and Chief Executive Officer in each of the fiscal years presented and currently serves as Executive Vice Chair. The dollar amounts in this column are the amounts reported for Mr. Auld for each of the corresponding fiscal years in the “Total” column in the Summary Compensation Table on page 4 4 . |
| (2) |
The dollar amounts reported in this column represent the amount of “compensation actually paid” to Mr. Auld, as computed in accordance with Item 402(v) of Regulation S-K, and do not reflect the total compensation actually realized or received by Mr. Auld. In accordance with these rules, these amounts reflect the “Total” as set forth in the Summary Compensation Table for each fiscal year, adjusted as shown below. Equity values are calculated in accordance with FASB ASC Topic 718, and the valuation assumptions used to calculate fair values did not materially differ from those disclosed at the time of grant. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation Actually Paid to Mr. Auld |
|
|
|
|
|
|
|
|
|
|
Summary Compensation Table (SCT) total compensation |
|
|
$ |
32,082,857 |
|
|
|
$ |
29,996,862 |
|
|
|
$ |
30,571,596 |
|
|
|
|
|
Less: value of stock awards reported in SCT for the fiscal year |
|
|
|
(24,791,961 |
) |
|
|
|
(21,987,160 |
) |
|
|
|
(8,145,841 |
) |
|
|
|
|
Plus: year-end fair value of outstanding and unvested stock awards granted in the fiscal year |
|
|
|
17,771,741 |
|
|
|
|
15,200,693 |
|
|
|
|
13,673,255 |
|
|
|
|
|
Plus: fair value as of the vesting date of stock awards granted and vested in the fiscal year |
|
|
|
6,314,648 |
|
|
|
|
6,999,862 |
|
|
|
|
11,425,435 |
|
|
|
|
|
Plus (or less, if negative): change in fair value from prior fiscal year end to the applicable fiscal year end of outstanding and unvested stock awards granted in prior fiscal years |
|
|
|
8,639,441 |
|
|
|
|
(2,773,163 |
) |
|
|
|
1,555,460 |
|
|
|
|
|
Plus (or less, if negative): change in fair value from prior fiscal year end to vesting date of stock awards granted in prior fiscal years that vested in the fiscal year |
|
|
|
7,011,611 |
|
|
|
|
(1,255,965 |
) |
|
|
|
2,207,776 |
|
|
|
|
|
Less: prior year-end fair value of any stock awards forfeited during the fiscal year |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
Compensation actually paid to David V. Auld |
|
|
$ |
47,028,337 |
|
|
|
$ |
26,181,129 |
|
|
|
$ |
51,287,681 |
|
| (3) |
The dollar amounts reported in this column represent the average of the amounts reported for the Company’s NEOs as a group (excluding Mr. Auld) (Non-PEO NEOs) in the “Total” column of the Summary Compensation Table in each applicable fiscal year. The Non-PEO NEOs for the fiscal years presented were as follows: |
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
| Donald R. Horton |
|
Donald R. Horton |
|
Donald R. Horton |
|
|
|
|
|
|
| Michael J. Murray |
|
Michael J. Murray |
|
Michael J. Murray |
|
|
|
|
|
|
| Paul J. Romanowski |
|
Paul J. Romanowski |
|
Bill W. Wheat |
|
|
|
|
|
|
| Bill W. Wheat |
|
Bill W. Wheat |
|
|
|
|
| (4) |
The dollar amounts reported in this column represent the average amount of “compensation actually paid” to the Non-PEO NEOs as a group, as computed in accordance with Item 402(v) of Regulation S-K. In accordance with these rules, these amounts reflect the “Total” as set forth in the Summary Compensation Table for each fiscal year, adjusted as shown below. Equity values are calculated in accordance with FASB ASC Topic 718, and the valuation assumptions used to calculate fair values did not materially differ from those disclosed at the time of grant. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Compensation Actually Paid to Non-PEO NEOs |
|
|
|
|
|
|
|
|
|
|
Average Summary Compensation Table (SCT) total compensation |
|
|
$ |
17,370,023 |
|
|
|
$ |
16,279,137 |
|
|
|
$ |
23,003,394 |
|
|
|
|
|
Less: average value of stock awards reported in SCT for the fiscal year |
|
|
|
(11,010,902 |
) |
|
|
|
(9,061,487 |
) |
|
|
|
(7,641,207 |
) |
|
|
|
|
Plus: average year-end fair value of outstanding and unvested stock awards granted in the fiscal year |
|
|
|
9,098,177 |
|
|
|
|
7,392,807 |
|
|
|
|
12,438,896 |
|
|
|
|
|
Plus: average fair value as of the vesting date of stock awards granted and vested in the fiscal year |
|
|
|
1,578,662 |
|
|
|
|
1,749,966 |
|
|
|
|
3,808,478 |
|
|
|
|
|
Plus (or less, if negative): average change in fair value from prior fiscal year end to the applicable fiscal year end of outstanding and unvested stock awards granted in prior fiscal years |
|
|
|
4,876,345 |
|
|
|
|
(2,252,841 |
) |
|
|
|
1,616,589 |
|
|
|
|
|
Plus (or less, if negative): average change in fair value from prior fiscal year end to vesting date of stock awards granted in prior fiscal years that vested in the fiscal year |
|
|
|
4,739,861 |
|
|
|
|
(808,011 |
) |
|
|
|
1,902,048 |
|
|
|
|
|
Less: prior year-end fair value of any stock awards forfeited during the fiscal year |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
Average compensation actually paid to Non-PEO NEOs |
|
|
$ |
26,652,166 |
|
|
|
$ |
13,299,571 |
|
|
|
$ |
35,128,198 |
|
| (5) |
Total shareholder return (“TSR”) is calculated by assuming that a $100 investment was made on September 30, 2020 and all dividends were reinvested until the last day of each reported fiscal year. |
| (6) |
For purposes of this peer group TSR disclosure, we have used the S&P 1500 Homebuilding Index, which is the peer group used in the Company’s stock performance graph in our annual report on Form 10-K for the 2023 fiscal year. |
| (7) |
The dollar amounts reported in this column are the net income reflected in the Company’s audited financial statements for the applicable fiscal year. |
| (8) |
The dollar amounts reported in this column are the amount of pre-tax income reflected in the Company’s audited financial statements for the applicable fiscal year. We selected pre-tax income as our company-selected financial measure because this is the key annual performance metric employed under our executive compensation program. |
|
|
|
| Company Selected Measure Name |
Pre-Tax Income
|
|
|
| Named Executive Officers, Footnote |
| (3) |
The dollar amounts reported in this column represent the average of the amounts reported for the Company’s NEOs as a group (excluding Mr. Auld) (Non-PEO NEOs) in the “Total” column of the Summary Compensation Table in each applicable fiscal year. The Non-PEO NEOs for the fiscal years presented were as follows: |
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
| Donald R. Horton |
|
Donald R. Horton |
|
Donald R. Horton |
|
|
|
|
|
|
| Michael J. Murray |
|
Michael J. Murray |
|
Michael J. Murray |
|
|
|
|
|
|
| Paul J. Romanowski |
|
Paul J. Romanowski |
|
Bill W. Wheat |
|
|
|
|
|
|
| Bill W. Wheat |
|
Bill W. Wheat |
|
|
|
|
|
|
|
| Peer Group Issuers, Footnote |
| (6) |
For purposes of this peer group TSR disclosure, we have used the S&P 1500 Homebuilding Index, which is the peer group used in the Company’s stock performance graph in our annual report on Form 10-K for the 2023 fiscal year. |
|
|
|
| PEO Total Compensation Amount |
$ 32,082,857
|
$ 29,996,862
|
$ 30,571,596
|
| PEO Actually Paid Compensation Amount |
$ 47,028,337
|
26,181,129
|
51,287,681
|
| Adjustment To PEO Compensation, Footnote |
| (2) |
The dollar amounts reported in this column represent the amount of “compensation actually paid” to Mr. Auld, as computed in accordance with Item 402(v) of Regulation S-K, and do not reflect the total compensation actually realized or received by Mr. Auld. In accordance with these rules, these amounts reflect the “Total” as set forth in the Summary Compensation Table for each fiscal year, adjusted as shown below. Equity values are calculated in accordance with FASB ASC Topic 718, and the valuation assumptions used to calculate fair values did not materially differ from those disclosed at the time of grant. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation Actually Paid to Mr. Auld |
|
|
|
|
|
|
|
|
|
|
Summary Compensation Table (SCT) total compensation |
|
|
$ |
32,082,857 |
|
|
|
$ |
29,996,862 |
|
|
|
$ |
30,571,596 |
|
|
|
|
|
Less: value of stock awards reported in SCT for the fiscal year |
|
|
|
(24,791,961 |
) |
|
|
|
(21,987,160 |
) |
|
|
|
(8,145,841 |
) |
|
|
|
|
Plus: year-end fair value of outstanding and unvested stock awards granted in the fiscal year |
|
|
|
17,771,741 |
|
|
|
|
15,200,693 |
|
|
|
|
13,673,255 |
|
|
|
|
|
Plus: fair value as of the vesting date of stock awards granted and vested in the fiscal year |
|
|
|
6,314,648 |
|
|
|
|
6,999,862 |
|
|
|
|
11,425,435 |
|
|
|
|
|
Plus (or less, if negative): change in fair value from prior fiscal year end to the applicable fiscal year end of outstanding and unvested stock awards granted in prior fiscal years |
|
|
|
8,639,441 |
|
|
|
|
(2,773,163 |
) |
|
|
|
1,555,460 |
|
|
|
|
|
Plus (or less, if negative): change in fair value from prior fiscal year end to vesting date of stock awards granted in prior fiscal years that vested in the fiscal year |
|
|
|
7,011,611 |
|
|
|
|
(1,255,965 |
) |
|
|
|
2,207,776 |
|
|
|
|
|
Less: prior year-end fair value of any stock awards forfeited during the fiscal year |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
Compensation actually paid to David V. Auld |
|
|
$ |
47,028,337 |
|
|
|
$ |
26,181,129 |
|
|
|
$ |
51,287,681 |
|
|
|
|
| Non-PEO NEO Average Total Compensation Amount |
$ 17,370,023
|
16,279,137
|
23,003,394
|
| Non-PEO NEO Average Compensation Actually Paid Amount |
$ 26,652,166
|
13,299,571
|
35,128,198
|
| Adjustment to Non-PEO NEO Compensation Footnote |
| (4) |
The dollar amounts reported in this column represent the average amount of “compensation actually paid” to the Non-PEO NEOs as a group, as computed in accordance with Item 402(v) of Regulation S-K. In accordance with these rules, these amounts reflect the “Total” as set forth in the Summary Compensation Table for each fiscal year, adjusted as shown below. Equity values are calculated in accordance with FASB ASC Topic 718, and the valuation assumptions used to calculate fair values did not materially differ from those disclosed at the time of grant. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Compensation Actually Paid to Non-PEO NEOs |
|
|
|
|
|
|
|
|
|
|
Average Summary Compensation Table (SCT) total compensation |
|
|
$ |
17,370,023 |
|
|
|
$ |
16,279,137 |
|
|
|
$ |
23,003,394 |
|
|
|
|
|
Less: average value of stock awards reported in SCT for the fiscal year |
|
|
|
(11,010,902 |
) |
|
|
|
(9,061,487 |
) |
|
|
|
(7,641,207 |
) |
|
|
|
|
Plus: average year-end fair value of outstanding and unvested stock awards granted in the fiscal year |
|
|
|
9,098,177 |
|
|
|
|
7,392,807 |
|
|
|
|
12,438,896 |
|
|
|
|
|
Plus: average fair value as of the vesting date of stock awards granted and vested in the fiscal year |
|
|
|
1,578,662 |
|
|
|
|
1,749,966 |
|
|
|
|
3,808,478 |
|
|
|
|
|
Plus (or less, if negative): average change in fair value from prior fiscal year end to the applicable fiscal year end of outstanding and unvested stock awards granted in prior fiscal years |
|
|
|
4,876,345 |
|
|
|
|
(2,252,841 |
) |
|
|
|
1,616,589 |
|
|
|
|
|
Plus (or less, if negative): average change in fair value from prior fiscal year end to vesting date of stock awards granted in prior fiscal years that vested in the fiscal year |
|
|
|
4,739,861 |
|
|
|
|
(808,011 |
) |
|
|
|
1,902,048 |
|
|
|
|
|
Less: prior year-end fair value of any stock awards forfeited during the fiscal year |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
Average compensation actually paid to Non-PEO NEOs |
|
|
$ |
26,652,166 |
|
|
|
$ |
13,299,571 |
|
|
|
$ |
35,128,198 |
|
|
|
|
| Compensation Actually Paid vs. Total Shareholder Return |
|
|
|
| Compensation Actually Paid vs. Net Income |
|
|
|
| Compensation Actually Paid vs. Company Selected Measure |
|
|
|
| Total Shareholder Return Vs Peer Group |
|
|
|
| Tabular List, Table |
Financial Performance Measures The most important financial performance measures used by the Company to link NEO compensation actually paid for the most recently completed fiscal year to the Company’s performance are as follows:
• |
|
Total shareholder return relative to the S&P 500 Index |
• |
|
Return on investment relative to our performance peer group |
• |
|
SG&A expense as a percentage of consolidated revenues relative to our performance peer group |
• |
|
Gross profit relative to our performance peer group |
|
|
|
| Total Shareholder Return Amount |
$ 146.46
|
90.89
|
112.08
|
| Peer Group Total Shareholder Return Amount |
145.19
|
88.95
|
112.3
|
| Net Income (Loss) |
$ 4,795,200,000
|
$ 5,895,600,000
|
$ 4,191,200,000
|
| Company Selected Measure Amount |
6,314,700,000
|
7,629,700,000
|
5,356,300,000
|
| PEO Name |
Mr. Auld
|
|
|
| Measure:: 1 |
|
|
|
| Pay vs Performance Disclosure |
|
|
|
| Name |
Pre-tax income
|
|
|
| Measure:: 2 |
|
|
|
| Pay vs Performance Disclosure |
|
|
|
| Name |
Total shareholder return relative to the S&P 500 Index
|
|
|
| Measure:: 3 |
|
|
|
| Pay vs Performance Disclosure |
|
|
|
| Name |
Return on investment relative to our performance peer group
|
|
|
| Measure:: 4 |
|
|
|
| Pay vs Performance Disclosure |
|
|
|
| Name |
SG&A expense as a percentage of consolidated revenues relative to our performance peer group
|
|
|
| Measure:: 5 |
|
|
|
| Pay vs Performance Disclosure |
|
|
|
| Name |
Gross profit relative to our performance peer group
|
|
|
| Measure:: 6 |
|
|
|
| Pay vs Performance Disclosure |
|
|
|
| Name |
Company stock price
|
|
|
| PEO | Value of Stock Awards Reported In SCT For The Fiscal Year [Member] |
|
|
|
| Pay vs Performance Disclosure |
|
|
|
| Adjustment to Compensation, Amount |
$ (24,791,961)
|
$ (21,987,160)
|
$ (8,145,841)
|
| PEO | Fair Value Of Outstanding And Unvested Stock Awards Granted In The Fiscal Year [Member] |
|
|
|
| Pay vs Performance Disclosure |
|
|
|
| Adjustment to Compensation, Amount |
17,771,741
|
15,200,693
|
13,673,255
|
| PEO | Fair Value As of the Vesting Date of Stock Awards Granted and Vested in the Fiscal Year [Member] |
|
|
|
| Pay vs Performance Disclosure |
|
|
|
| Adjustment to Compensation, Amount |
6,314,648
|
6,999,862
|
11,425,435
|
| PEO | Fair Value From Prior Fiscal Year End To The Applicable Fiscal Year End Of Outstanding And Unvested Stock Awards Granted In Prior Fiscal Years [Member] |
|
|
|
| Pay vs Performance Disclosure |
|
|
|
| Adjustment to Compensation, Amount |
8,639,441
|
(2,773,163)
|
1,555,460
|
| PEO | Fair Value From Prior Fiscal Year End To Vesting Date Of Stock Awards Granted In Prior Fiscal Years That Vested In The Fiscal Year [Member] |
|
|
|
| Pay vs Performance Disclosure |
|
|
|
| Adjustment to Compensation, Amount |
7,011,611
|
(1,255,965)
|
2,207,776
|
| PEO | Fair Value Of Any Stock Awards Forfeited During The Fiscal Year [Member] |
|
|
|
| Pay vs Performance Disclosure |
|
|
|
| Adjustment to Compensation, Amount |
0
|
0
|
0
|
| Non-PEO NEO | Value of Stock Awards Reported In SCT For The Fiscal Year [Member] |
|
|
|
| Pay vs Performance Disclosure |
|
|
|
| Adjustment to Compensation, Amount |
(11,010,902)
|
(9,061,487)
|
(7,641,207)
|
| Non-PEO NEO | Fair Value Of Outstanding And Unvested Stock Awards Granted In The Fiscal Year [Member] |
|
|
|
| Pay vs Performance Disclosure |
|
|
|
| Adjustment to Compensation, Amount |
9,098,177
|
7,392,807
|
12,438,896
|
| Non-PEO NEO | Fair Value As of the Vesting Date of Stock Awards Granted and Vested in the Fiscal Year [Member] |
|
|
|
| Pay vs Performance Disclosure |
|
|
|
| Adjustment to Compensation, Amount |
1,578,662
|
1,749,966
|
3,808,478
|
| Non-PEO NEO | Fair Value From Prior Fiscal Year End To The Applicable Fiscal Year End Of Outstanding And Unvested Stock Awards Granted In Prior Fiscal Years [Member] |
|
|
|
| Pay vs Performance Disclosure |
|
|
|
| Adjustment to Compensation, Amount |
4,876,345
|
(2,252,841)
|
1,616,589
|
| Non-PEO NEO | Fair Value From Prior Fiscal Year End To Vesting Date Of Stock Awards Granted In Prior Fiscal Years That Vested In The Fiscal Year [Member] |
|
|
|
| Pay vs Performance Disclosure |
|
|
|
| Adjustment to Compensation, Amount |
4,739,861
|
(808,011)
|
1,902,048
|
| Non-PEO NEO | Fair Value Of Any Stock Awards Forfeited During The Fiscal Year [Member] |
|
|
|
| Pay vs Performance Disclosure |
|
|
|
| Adjustment to Compensation, Amount |
$ 0
|
$ 0
|
$ 0
|