UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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x | Definitive Proxy Statement |
o | Definitive Additional Materials |
o | Soliciting Material under §240.14a-12 |
Gaming and Leisure Properties, Inc. | ||
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Notice of Annual Meeting of Shareholders of Gaming and Leisure Properties, Inc. |
The 2017 Annual Meeting of Shareholders of Gaming and Leisure Properties, Inc. (the "Company" or "GLPI") will be held:
June 15, 2017
10:00 a.m. Eastern Time
At the offices of Ballard Spahr LLP
1735 Market Street, 48th Floor
Philadelphia, Pennsylvania 19103
The items of business are:
1. | To elect Joseph W. Marshall, III, E. Scott Urdang, Earl C. Shanks and James B. Perry as directors to hold office until the 2018 Annual Meeting of Shareholders and until their respective successors have been duly elected and qualified. |
2. | To ratify the appointment of Deloitte & Touche LLP as the Company's independent registered public accounting firm for the current fiscal year. |
3. | To approve, on a non-binding advisory basis, the Company's executive compensation. |
4. | To approve, on a non-binding advisory basis, the frequency of future advisory votes to approve executive compensation. |
5. | To consider a shareholder proposal regarding majority voting in uncontested director elections, if properly presented at the meeting. |
6. | To transact such other business as may properly come before the Annual Meeting or any adjournments or postponements thereof. |
Shareholders of record of the Company's common stock (NASDAQ: GLPI) as of the close of business on April 13, 2017 are entitled to vote at the meeting and any postponements or adjournments of the meeting.
By order of the Board of Directors,
Peter M. Carlino
Chairman of the Board of Directors
Wyomissing, Pennsylvania
April 27, 2017
Your Vote is Important
Please vote as promptly as possible by using the Internet or telephone or by signing, dating and returning the Proxy Card mailed to those who receive paper copies of this Proxy Statement.
Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to be Held on June 15, 2017: The Notice of Annual Meeting, Proxy Statement, and Annual Report to Shareholders for the year ended December 31, 2016 are available at www.proxydocs.com/glpi. |
1 | Notice of Annual Meeting of Shareholders and Proxy Statement
TABLE OF CONTENTS
2 | Notice of Annual Meeting of Shareholders and Proxy Statement
PROXY SUMMARY
This summary highlights information contained elsewhere in this Proxy Statement. This summary does not contain all of the information that you should consider and you should read the entire Proxy Statement before voting. For more complete information regarding the Company's 2016 performance, please review the Company's Annual Report to Shareholders for the year ended December 31, 2016.
ANNUAL MEETING OF SHAREHOLDERS
Time and Date | Record Date |
10:00 a.m. Eastern Time | April 13, 2017 |
June 15, 2017 | Number of Common Shares Eligible to Vote at the Meeting as of the Record Date: |
Place Ballard Spahr LLP 1735 Market Street, 48th Floor Philadelphia, PA 19103 | 208,536,963 |
VOTING MATTERS
Matter | Board Recommendation | Page Reference (for more detail) |
FOR each director nominee | ||
FOR | ||
FOR | ||
ONE YEAR | ||
AGAINST | ||
BOARD NOMINEES
The following table provides summary information about the director nominees. Directors are elected by a plurality of votes cast.
Director Since | ||
Name, Age | Principal Occupation | |
Joseph W. Marshall, III, 64 | 2013 | Vice Chairman of Stevens & Lee, PC, and Vice Chairman of Griffin Holdings, LLC |
E. Scott Urdang, 67 | 2013 | Retired. Former Founder, Chairman, and Chief Executive Officer of Center Square Capital Management, Inc. |
Earl C. Shanks, 60 | 2017 | Chief Financial Officer of Essendant, Inc. |
James B. Perry, 67 | 2017 | Retired. Former Chairman and Chief Executive Officer of Isle of Capri Casinos, Inc. |
3 | Notice of Annual Meeting of Shareholders and Proxy Statement
2016 PERFORMANCE HIGHLIGHTS
Consistent Results - Stable Dividends
The Company has produced consistent increases in dividends and adjusted funds from operations ("AFFO") since the spin-off from Penn National Gaming, Inc. in 2013.
(1) | December 31, 2014 excludes one-time dividends paid to shareholders of $11.84 and $0.40 per share paid on February 18, 2014 and December 19, 2014, respectively. |
AFFO and AFFO per share are non-GAAP financial measures. AFFO per share is calculated using the Company's outstanding number of shares on a fully diluted basis. AFFO is FFO as defined by the National Association of Real Estate Investment Trusts (net income, excluding gains or losses from sales of property and real estate depreciation) excluding stock based compensation expense, debt issuance costs amortization, other depreciation, amortization of land rights, straight-line rent adjustments and direct financing lease adjustments, reduced by maintenance capital expenditures. For a complete discussion of our financial performance in 2016 and additional information on non-GAAP financial measures presented in this Proxy Statement, please see our Annual Report on Form 10-K for the year ended December 31, 2016, a copy of which is included in the Annual Report to Shareholders made available to shareholders in connection with this Proxy Statement.
4 | Notice of Annual Meeting of Shareholders and Proxy Statement
EXECUTIVE COMPENSATION
Thoughtful Approach
The Company's compensation program has been carefully designed to attract and retain the talent necessary to drive growth and increase shareholder value in a unique space in the REIT industry. The Company is currently one of only two triple-net landlords focusing on the ownership and lease of gaming facilities. The Compensation and Governance Committee designed the executive compensation program to attract and retain executive talent with the necessary experience in, and understanding of, gaming assets while recognizing that performance metrics should reflect the Company's operation as a triple-net REIT. This resulted in a two-pronged approach:
(1) offer base salaries competitive with the Company's gaming peers to attract and retain the unique skill sets necessary to appropriately value properties with revenues primarily derived from gaming operations; and
(2) offer performance-based compensation designed to drive shareholder value in the competitive REIT market.
By focusing on the Company's gaming peers in establishing base salary and the Company's REIT peers in structuring performance incentives, we believe the compensation program is successful in attracting and retaining talent and driving shareholder value. Further, in 2016, the total potential compensation opportunity of the Company's named executive officers consisted of approximately 76% performance-based and/or "at risk" compensation and approximately 24% fixed compensation (of which approximately 13% was base salary and 11% was time-based restricted stock awards).
2016 Chief Executive Officer Compensation
The base salary of the Company's Chief Executive Officer is competitive with the Company's gaming peers and has not been increased since 2012. Mr. Carlino received the same base salary when he became our Chief Executive Officer that he previously received at Penn National Gaming, Inc. in the same role prior to the spin-off.
(1) | Base salary for the Company's Gaming Peers is for 2015 based on public disclosures in 2016 and the Company's CEO base salary is for 2016. |
5 | Notice of Annual Meeting of Shareholders and Proxy Statement
In 2016, the performance metrics utilized in the Company's compensation program resulted in cash bonus payments for significant increases in dividend distributions and AFFO but no payments for components tied to acquisitions and total shareholder return. At the conclusion of 2016, the performance-based awards granted in 2014 matured and compensation actually received for 2014 was finally determined. When taking into consideration this information, the Company's CEO earned approximately 34% of the maximum potential compensation for 2014.
6 | Notice of Annual Meeting of Shareholders and Proxy Statement
PROXY STATEMENT
FOR 2017 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 15, 2017
This Proxy Statement is furnished to you in connection with the solicitation of proxies for the Annual Meeting of Shareholders of Gaming and Leisure Properties, Inc. to be held on June 15, 2017 (the "Annual Meeting"), and any postponements or adjournments of the meeting.
The Annual Meeting will be held at the offices of Ballard Spahr LLP, 1735 Market Street, 48th Floor, Philadelphia, Pennsylvania 19103 at 10:00 a.m. Eastern Time.
On or about April 27, 2017, we will mail to each of our shareholders (other than those who previously requested electronic delivery or to whom we are mailing a paper copy) a Notice of Internet Availability of Proxy Materials containing instructions on how to access and review the proxy materials via the Internet and how to submit a proxy electronically using the Internet.
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FREQUENTLY ASKED QUESTIONS
When and where will the meeting take place?
The Annual Meeting will be held on June 15, 2017, at 10:00 a.m. Eastern Time, at the offices of Ballard Spahr LLP, 1735 Market Street, 48th Floor, Philadelphia, Pennsylvania 19103.
Why did I receive only a Notice of Internet Availability of Proxy Materials?
As permitted by the Securities and Exchange Commission (the "SEC"), the Company is furnishing to shareholders its notice of the Annual Meeting (the "Notice"), this Proxy Statement and the 2016 Annual Report primarily over the Internet. On or about April 27, 2017, we will mail to each of our shareholders (other than those who previously requested electronic delivery or to whom we are mailing a paper copy) a Notice of Internet Availability of Proxy Materials (the "Notice of Internet Availability") containing instructions on how to access and review the proxy materials via the Internet and how to submit a proxy electronically using the Internet. The Notice of Internet Availability also contains instructions on how to receive, free of charge, paper copies of the proxy materials. If you received the Notice of Internet Availability, you will not receive a paper copy of the proxy materials unless you request one.
We believe the delivery options that we have chosen will allow us to provide our shareholders with the proxy materials they need, while minimizing the cost of the delivery of the materials and the environmental impact of printing and mailing printed copies.
What is the purpose of this meeting and these materials?
We are providing these proxy materials in connection with the solicitation by our Board of Directors of proxies to be voted at the Annual Meeting and any adjournments or postponements of the meeting.
At the Annual Meeting, you will be asked to vote on the following matters:
• | a proposal to elect four (4) directors to hold office until the 2018 Annual Meeting of Shareholders and until their respective successor has been duly elected and qualified (Proposal No. 1); |
• | a proposal to ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the current fiscal year (Proposal No. 2); |
• | a proposal to approve, on a non-binding advisory basis, the Company's executive compensation (Proposal No. 3); |
• | a proposal to approve, on a non-binding advisory basis, the frequency of future advisory votes to approve executive compensation (Proposal No. 4); |
• | a proposal to consider a shareholder proposal regarding majority voting in uncontested director elections, if properly presented at the meeting (Proposal No. 5); and |
• | any other business that may properly come before the Annual Meeting or any adjournments or postponements thereof. |
What are the voting recommendations of the Board of Directors on these matters?
The Board of Directors recommends that you vote your shares as follows:
• | FOR the nominees as directors for the Board of Directors (Proposal No. 1). |
• | FOR the ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the current fiscal year (Proposal No. 2). |
• | FOR the approval, on a non-binding advisory basis, of our executive compensation (Proposal No. 3). |
• | A frequency of ONE YEAR for future non-binding advisory votes to approve executive compensation (Proposal No. 4). |
• | AGAINST a shareholder proposal regarding majority voting in uncontested director elections, if properly presented at the meeting (Proposal No. 5). |
Who is entitled to vote at the Annual Meeting?
The record date for the Annual Meeting is April 13, 2017. You have one vote for each share of our common stock that you owned at the close of business on the record date, provided that on the record date those shares were either held directly in your name as the shareholder of record or were held for you as the beneficial owner through a
8 | Notice of Annual Meeting of Shareholders and Proxy Statement
bank, broker, or other intermediary. As of that date, there were 208,536,963 shares of common stock outstanding entitled to vote. There is no other class of voting securities outstanding.
What is the difference between holding shares as a shareholder of record and as a beneficial owner?
Most of our shareholders hold their shares through a bank, broker, or other intermediary (that is, in "street name") rather than directly in their own name. As summarized below, there are some distinctions between shares held of record and those owned beneficially.
Shareholder of Record. If your shares are registered directly in your name with our transfer agent, Continental Stock Transfer & Trust Company, you are considered to be the shareholder of record with respect to those shares, and we have sent the Notice of Internet Availability directly to you. As a shareholder of record, you have the right to grant your voting proxy directly to us or to vote in person at the Annual Meeting.
Beneficial Owner. If your shares are held in a stock brokerage account or by a bank or other nominee, you are considered to be the beneficial owner of shares held in "street name," and the Notice of Internet Availability has been forwarded to you by your bank, broker, or intermediary (which is considered to be the shareholder of record with respect to those shares). As a beneficial owner, you have the right to direct your bank, broker, or intermediary on how to vote and are also invited to attend the Annual Meeting. Your bank, broker, or intermediary has sent you a voting instruction card for you to use in directing the bank, broker, or intermediary regarding how to vote your shares. However, since you are not the shareholder of record, you may not vote these shares in person at the Annual Meeting unless you obtain a legal proxy, executed in your favor, from the bank, broker, or intermediary that holds your shares.
What options are available to me to vote my shares?
Whether you hold shares directly as the shareholder of record or through a bank, broker, or other intermediary, your shares may be voted at the Annual Meeting by following any of the voting options available to you below:
You may vote via the Internet.
• | If you received a Notice of Internet Availability by mail, you can submit your proxy or voting instructions over the Internet by following the instructions provided in the Notice of Internet Availability. |
• | If you received a Notice of Internet Availability or proxy materials by email, you may submit your proxy or voting instructions over the Internet by following the instructions included in the email. |
• | If you received a printed set of the proxy materials by mail, including a paper copy of the proxy card or voting instruction form, you may submit your proxy or voting instructions over the Internet by following the instructions on the proxy card or voting instruction form. |
You may vote via the telephone.
• | If you are a shareholder of record, you can submit your proxy by calling the telephone number specified on the paper copy of the proxy card you received if you received a printed set of the proxy materials. You must have the control number that appears on your proxy card available when submitting your proxy over the telephone. |
• | Most shareholders who hold their shares in street name may submit voting instructions by calling the number specified on the paper copy of the voting instruction form provided by their bank, broker, or other intermediary. Those shareholders should check the voting instruction form for telephone voting availability. |
You may vote by mail. If you received a printed set of the proxy materials, you can submit your proxy or voting instructions by completing and signing the separate proxy card or voting instruction form you received and mailing it in the accompanying prepaid and addressed envelope.
You may vote in person at the meeting. All shareholders of record may vote in person at the Annual Meeting. Written ballots will be passed out to anyone who wants to vote at the meeting. However, if you are the beneficial owner of shares held in street name through a bank, broker, or other intermediary, you may not vote your shares at the Annual Meeting unless you obtain a legal proxy from the bank, broker, or intermediary that holds your shares, giving you the right to vote the shares at the Annual Meeting.
Even if you plan to attend the Annual Meeting, we recommend that you submit your proxy or voting instructions in advance to authorize the voting of your shares at the Annual Meeting to ensure that your vote will be counted if you later are unable to attend.
9 | Notice of Annual Meeting of Shareholders and Proxy Statement
What if I don't vote for some of the items listed on my proxy card or voting instruction card?
If you properly return your proxy card in the enclosed envelope but do not mark selections, your shares will be voted in accordance with the recommendations of our Board of Directors. If you indicate a choice with respect to any matter to be acted upon on your proxy card, your shares will be voted in accordance with your instructions.
If you are a beneficial owner and hold your shares in street name through a bank, broker, or other intermediary and do not give voting instructions to the bank, broker, or intermediary, the bank, broker, or other intermediary, as applicable, will determine if it has the discretionary authority to vote on the particular matter. Under applicable rules, brokers have the discretion to vote on routine matters, such as the ratification of the selection of accounting firms, but do not have discretion to vote on non-routine matters, including the uncontested election of directors. As a result, if you are a beneficial owner and hold your shares in street name, but do not give your bank, broker, or other intermediary instructions on how to vote your shares with respect to the following matters, no votes will be cast on your behalf: the election of directors (Proposal No. 1); the advisory vote on executive compensation (Proposal No. 3); the advisory vote on the frequency of future advisory votes on executive compensation (Proposal No. 4); and the shareholder proposal regarding majority voting (Proposal No. 5).
If you do not provide voting instructions to your broker, and your broker indicates on its proxy card that it does not have discretionary authority to vote on a particular proposal, your shares will be considered to be "broker non-votes" with regard to that matter. Proxy cards that reflect a broker non-vote with respect to at least one proposal to be considered at the Annual Meeting (so long as they do not apply to all proposals to be considered) will be considered to be represented for purposes of determining a quorum but generally will not be considered to be entitled to vote with respect to that proposal. Broker non-votes are not counted in the tabulation of the voting results with respect to proposals that require a plurality of the votes cast or proposals that require a majority of the votes cast.
How is a quorum determined?
The presence, in person, by proxy or by means of electronic technology, of shareholders entitled to cast at least a majority of the votes that all shareholders are entitled to cast at the Annual Meeting constitutes a quorum at the Annual Meeting. Abstentions, broker votes and broker non-votes (only when accompanied by broker votes with respect to at least one matter at the meeting) are considered present and entitled to vote for purposes of establishing a quorum for the transaction of business at the Annual Meeting. If a quorum is not present by attendance at the Annual Meeting or represented by proxy, the shareholders present by attendance at the meeting or by proxy may adjourn the Annual Meeting, until a quorum is present. If a new record date is fixed for the adjourned meeting, we will provide notice of the adjourned meeting to each shareholder of record entitled to vote at the meeting.
What vote is required to approve each proposal at the Annual Meeting?
Proposal | Vote Required | Broker Discretionary Voting Allowed | |
Proposal No. 1 | Election of Directors | Plurality of Votes Cast | No |
Proposal No. 2 | Ratification of Appointment of Independent Registered Public Accounting Firm | Majority of Votes Cast | Yes |
Proposal No. 3 | Non-Binding Advisory Vote to Approve Executive Compensation | Majority of Votes Cast | No |
Proposal No. 4 | Non-Binding Advisory Vote on the Frequency of Future Advisory Votes to Approve Executive Compensation | Majority of Votes Cast | No |
Proposal No. 5 | Shareholder Proposal Regarding Majority Voting in Uncontested Director Elections, if properly presented at the meeting | Majority of Votes Cast | No |
With respect to Proposal No. 1, you may vote FOR or WITHHOLD your vote on each nominee. The nominee receiving the most FOR votes will be elected. A properly executed proxy marked WITHHOLD with respect to the election of the directors will not be voted with respect to the directors. Proxies may not be voted for more than one director.
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With respect to Proposal Nos. 2, 3 and 5, you may vote FOR, AGAINST or ABSTAIN. With respect to Proposal No. 4, you may vote for the frequency of every ONE YEAR, TWO YEARS, THREE YEARS or ABSTAIN.
If you abstain from voting on Proposal 2, 3, 4 or 5, your shares will be counted as present and entitled to vote on that matter for purposes of establishing a quorum, but will not be counted for purposes of determining the number of votes cast.
Can I change my vote or revoke my proxy?
Yes. Any shareholder of record has the power to change or revoke a previously submitted proxy at any time before it is voted at the Annual Meeting by:
• | submitting to our Corporate Secretary, before the voting at the Annual Meeting, a written notice of revocation bearing a later date than the proxy; |
• | timely delivery of a valid, later-dated proxy (only the last proxy submitted by a shareholder by Internet, telephone or mail will be counted); or |
• | attending the Annual Meeting and voting in person; however, attendance at the Annual Meeting will not by itself constitute a revocation of a proxy. |
For shares held in street name, you may revoke any previous voting instructions by submitting new voting instructions to the bank, broker, or intermediary holding your shares by the deadline for voting specified in the voting instructions provided by your bank, broker, or intermediary. Alternatively, if your shares are held in street name and you have obtained a legal proxy from the bank, broker, or intermediary, giving you the right to vote the shares at the Annual Meeting, you may revoke any previous voting instructions by attending the Annual Meeting and voting in person.
Are there other matters to be voted on at the Annual Meeting?
We do not know of any other matters that may come before the Annual Meeting other than Proposals 1 through 5 included herein. If any other matters are properly presented at the Annual Meeting, the persons named as proxies on the enclosed proxy card intend to vote or otherwise act in accordance with their judgment on the matter.
Is a list of shareholders available?
The names of shareholders of record entitled to vote at the Annual Meeting will be available for review by shareholders at the Annual Meeting.
Where can I find the voting results?
Preliminary voting results will be announced at the Annual Meeting, and final voting results will be reported in a Current Report on Form 8-K, which we will file with the SEC within four (4) business days following the Annual Meeting.
Who is soliciting proxies, how are they being solicited, and who pays the cost?
The solicitation of proxies is being made on behalf of our Board of Directors and we will bear the costs of the solicitation. This solicitation is being made by mail and through the Internet, but also may be made by telephone or in person. We have engaged Okapi Partners, LLC to aid in the solicitation of proxies and to verify records relating to the solicitation for an estimated fee of $9,000. All costs of such solicitation of proxies will be borne by us. We will reimburse brokerage firms and other custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses for sending proxy materials to shareholders and obtaining their votes.
What do I need to do if I intend to attend the Annual Meeting?
Attendance at the Annual Meeting will be limited to shareholders as of the record date or their duly-appointed proxies. Please note that if you attend the Annual Meeting, you may be asked to present valid picture identification, such as a driver's license or passport. If you are a shareholder holding stock in brokerage accounts or by a bank or other intermediary, you may be required to show a brokerage statement or account statement reflecting your stock ownership as of the record date, but in order to vote your shares at the Annual Meeting, you must obtain a "legal proxy" from the bank or brokerage firm that holds your shares. Cameras, recording devices and other electronic devices will not be permitted at the Annual Meeting.
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PROPOSAL 1
ELECTION OF DIRECTORS
At our Annual Meeting, shareholders will elect four (4) directors to hold office until our 2018 Annual Meeting of Shareholders. The nominees were recommended and approved for nomination by our Compensation and Governance Committee. The directors shall serve until their successors have been duly elected and qualified or until such director's earlier resignation or removal. Proxies cannot be voted for a greater number of persons than the number of nominees named. If you sign and return the accompanying proxy, your shares will be voted for the election of the nominees recommended by our Board of Directors, unless you mark the proxy in such a manner as to withhold authority to vote. If any of the nominees for any reason are unable to serve or will not serve, the proxies may be voted for such substitute nominees as the proxy holder may determine. We are not aware of any reason that the nominees will be unable to serve as a director.
Joseph W. Marshall, III, E. Scott Urdang, Earl C. Shanks, and James B. Perry are being nominated for election to our Board of Directors to serve for a term through the 2018 Annual Meeting of Shareholders. We did not pay a fee to any third party to identify or evaluate any potential nominees.
Required Vote
Our bylaws provide for a plurality voting standard for the election of directors. Under this voting standard, once a quorum has been established, each of the nominees receiving the highest number of affirmative votes of the shares entitled to be voted for him or her will be elected as a director to serve until the 2018 Annual Meeting of Shareholders and until his or her successor is duly elected and qualified. Votes withheld shall have no legal effect. At the Annual Meeting, proxies cannot be voted for more than the four (4) nominees named in this Proxy Statement.
As previously mentioned, brokers are not permitted to vote your shares for the election of directors absent instruction from you. Therefore, we urge you to give voting instructions to your broker on the proxy so that your votes may be counted on this important matter.
The Board of Directors recommends a vote FOR the election of the nominated directors.
The following biographical information is furnished as to the nominees for election as a director and each of the continuing directors.
Nominees for Election to the Board of Directors for a One-Year Term Expiring at the 2018 Annual Meeting
Joseph W. Marshall, III, age 64, has served as a member of our Board of Directors since October 2013. Mr. Marshall has also served as the Vice Chairman of the law firm Stevens & Lee, PC and Vice Chairman of Griffin Holdings, LLC since February 2010. In addition to a number of other boards, including the Cancer Treatment Centers of American-Eastern Regional Medical Center and First Bank of Delaware, Mr. Marshall has served on the Board of Directors of SIGA Technologies, Inc. (NASDAQ) since 2009. From 2001 to 2008, Mr. Marshall served as the Chairman and CEO of Temple University Health System, one of the largest health care organizations in Pennsylvania. Mr. Marshall served as director of Health Partners, a provider-owned Medicaid/Medicare Health Maintenance Organization operating in Greater Philadelphia, from 2003 to 2008. Mr. Marshall also previously served on the Pennsylvania Gaming Control Board, Pennsylvania Ethics Commission and the Medicaid Commission created by Congress and established by the Honorable Michael O. Leavitt, Secretary of the U.S. Department of Health & Human Services. In addition, Mr. Marshall is a member of the Board of Trustees of Temple University and Salus University. The Board of Directors supports and approves Mr. Marshall's nomination and continued service on our Board of Directors because of his extensive experience and knowledge of gaming regulation and his significant experience as a director and an executive in both the private and public sectors.
James B. Perry, age 67, was appointed to our Board of Directors on March 30, 2017. Mr. Perry served on the Board of Directors of Isle of Capri Casinos, Inc. ("Isle") from 2007 to 2014 and was named Chairman of the Board of Directors and Executive Chairman of the Board of Directors in 2009 and 2011, respectively. From March 2008 to April 2011, he served as Isle’s Chief Executive Officer. Prior to being named Chairman, Mr. Perry was Executive Vice Chairman from March 2008 to August 2009 and Vice Chairman from July 2007 to March 2008. Mr. Perry served as a Class III Director on the board of Trump Entertainment Resorts, Inc. from May 2005 until July 2007. From July 2005 to July 2007, Mr. Perry served as Chief Executive Officer and President of Trump Entertainment Resorts, Inc., which filed for Chapter 11 bankruptcy in February 2009. Mr. Perry was President of Argosy Gaming Company from April 1997 through July 2002 and Chief Executive Officer of Argosy Gaming Company from April 1997 through May 2003. Mr. Perry also served as a member of the Board of Directors of Argosy Gaming Company from 2000 to July 2005. The Board of Directors supports and approves Mr. Perry’s nomination because he brings
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more than 30 years of gaming industry experience to the Board of Directors. He also has extensive experience in executive management, corporate governance and strategic planning.
Earl C. Shanks, age 60, was appointed to our Board of Directors on March 7, 2017. Mr. Shanks has served as Chief Financial Officer of Essendant Inc., a leading supplier of workplace essentials, since November 2015. Previously, Mr. Shanks served as the Chief Financial Officer at Convergys Corporation from 2003 until 2012. Prior to that, Mr. Shanks held various financial leadership roles with NCR Corporation, ultimately serving as the Chief Financial Officer, where he oversaw treasury, finance, real estate, tax, and six business unit finance teams. Additionally, Mr. Shanks has served as a director of Verint Systems Inc. since July 2012. The Board of Directors supports and approves Mr. Shanks' nomination because of his financial expertise and significant public company experience.
E. Scott Urdang, age 67, has served as a member of our Board of Directors since October 2013. Mr. Urdang, who retired in 2012, was the founder, Chief Executive Officer and Chairman of Urdang Capital Management (now Center Square Capital Management, Inc.), a wholly-owned subsidiary of BNY Mellon. Center Square Capital Management is an investment management company that manages and participates in public, private, global, and US-only real estate investment strategies. Mr. Urdang founded the company in 1987 and at the time of his retirement it had in excess of $5 billion under management. From 1984-1987, Mr. Urdang was a Partner at Laventhol and Horwath, a national consulting and accounting firm, where he served as regional partner in charge of real estate consulting with national responsibility for its pension consulting practice. Mr. Urdang also has experience as a Vice-President of Finance of a large regional development company that was involved in residential subdivisions, office buildings, apartments and shopping centers. Mr. Urdang has 20 years of experience teaching both undergraduate and graduate courses in economics, corporate finance, and real estate finance and investment analysis at the Wharton School of the University of Pennsylvania. The Board of Directors supports and approves Mr. Urdang's nomination and continued service on our Board of Directors because of his extensive experience, comprehensive knowledge and strong record of success in the real estate industry as an investor, developer, entrepreneur, and professor.
Member of the Board of Directors Continuing in Office for a Term Expiring at the 2018 Annual Meeting
David A. Handler, age 52, has served as a member of our Board of Directors since October 2013. Mr. Handler has also served as a director of Penn since 1994. In August 2008, Mr. Handler joined Centerview Partners, an independent financial advisory and private equity firm, as a Partner. From April 2006 to August 2008, he was a Managing Director at UBS Investment Bank. Prior to becoming a Managing Director at UBS Investment Bank, he was a Senior Managing Director at Bear Stearns & Co., Inc. Mr. Handler brings to our Board of Directors experience in investment banking and capital markets that has included a focus on mergers and acquisitions and other significant transactions. Mr. Handler's background is an invaluable asset to us, particularly in connection with evaluating potential acquisition and financing opportunities.
Member of the Board of Directors Continuing in Office for a Term Expiring at the 2019 Annual Meeting
Peter M. Carlino, age 70, has been the Chairman of our Board of Directors and our Chief Executive Officer since the Company's inception in February 2013. Mr. Carlino has served as the Chairman of the Board of Directors of Penn since April 1994 and served as Chief Executive Officer of Penn from 1994 until October 2013. Since 1976, Mr. Carlino has served in an executive capacity for Carlino Capital Management Corp. and is currently the Chairman of the Board and Chief Executive Officer. Carlino Capital Management Corp. is a holding company that owns and operates various Carlino family businesses and Mr. Carlino has been continuously active in strategic planning and monitoring the operations. Having served as the Chairman of Penn's Board of Directors since 1994 and as Chief Executive Officer for Penn, and now the Company, collectively, for over 20 years, Mr. Carlino brings to our Board of Directors extensive management experience, critical knowledge of our properties and knowledge and understanding of the gaming industry in general. Moreover, as one of the largest beneficial owners of our common stock, his interests are significantly aligned with our efforts to enhance long-term shareholder value.
Our directors serve subject to the requirements of our charter and bylaws, including the requirement that directors not be "unsuitable persons." Gaming laws require our directors to obtain licenses from gaming authorities. Licenses typically require a determination that the applicant qualifies or is suitable to hold the license. If one of our directors were to be determined to be an "unsuitable person" within the meaning of our charter, he or she would be subject to removal for cause by the remaining members of the Board of Directors or by shareholders with a vote of 75% of the votes cast at a shareholders meeting.
There are no family relationships among any of our directors or executive officers.
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Board Composition
Our business and affairs are managed under the direction of our Board of Directors, which currently consists of six (6) members. Our bylaws provide that our Board of Directors will consist of a number of directors to be fixed exclusively by resolution of the Board of Directors. The size of our board is currently set at seven directors. At the time of the filing and mailing of this Proxy Statement, the Compensation and Governance Committee is in the process of evaluating a potential seventh board member. The individual under consideration is in the process of completing certain mandatory gaming licensing applications and the Committee expects to make a final recommendation to the Board prior to the Annual Meeting. Consistent with our charter and bylaws, any nominee appointed by the Board will have a term expiring at the next annual meeting of shareholders.
In 2016, shareholders approved a declassification of the Company's Board of Directors. As a result, beginning with the Annual Meeting, all directors will be elected for one-year terms. Each director's term continues until the election and qualification of his successor, or his earlier death, resignation, retirement, disqualification or removal. Newly created directorships resulting from any increase in the number of directors and any vacancies in the Board of Directors resulting from death, resignation, retirement, disqualification, removal from office or other cause will be filled generally by the majority vote of the remaining directors in office, even if less than a quorum is present. A director may be removed by the Board of Directors only with cause or by the shareholders only with cause and only by the vote of 75% of the shares entitled to vote.
Director Independence
Our Board of Directors observes all applicable criteria for independence established by The NASDAQ Stock Market LLC ("NASDAQ") and other governing laws and applicable regulations. No director will be deemed to be independent unless our Board of Directors determines that the director has no relationship which would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. Our Board of Directors has determined that each of our directors, other than Mr. Carlino, is independent as defined under the corporate governance rules of NASDAQ. Of these independent directors, our Board has determined that each of (i) Messrs. Marshall, Handler and Urdang, who comprise our Audit and Compliance Committee, and (ii) Messrs. Handler and Urdang, who comprise our Compensation and Governance Committee, satisfy the independence standards for those committees established by the applicable rules and regulations of the SEC and NASDAQ.
Board Leadership Structure and Board's Role in Risk Oversight
Our Board of Directors has no policy with respect to the separation of the offices of Chief Executive Officer and Chairman of the Board of Directors. It is the Board of Directors' view that rather than having a rigid policy, the Board of Directors, with the advice and assistance of the Compensation and Governance Committee, and upon consideration of all relevant factors and circumstances, will determine, as and when appropriate, whether the two offices should be separate. Currently, our Chief Executive Officer also serves as the Chairman of the Board. The Board believes this is appropriate because of the Chairman's role in leading the Company and his proven track record of generating significant shareholder value for Penn over the years prior to the spin-off transaction, which led to the creation of the Company. Moreover, the Board believes that the Chairman's substantial beneficial ownership of the Company's equity has strongly aligned his interests with the interests of shareholders. Because we have selected to have Mr. Carlino serve in both the roles of Chairman and Chief Executive Officer, we have appointed Mr. Marshall to be our Lead Independent Director. As Lead Independent Director, Mr. Marshall is responsible for, among other tasks, the resolution of conflicts of interest that relate to our directors who also serve on the Board of Directors of Penn.
Our Board of Directors plays an active role in the oversight of risks impacting our Company and the management team is charged with managing such risks. Our Board of Directors works closely with management to ensure that integrity and accountability are integrated into our operations. Our Compensation and Governance Committee is responsible for overseeing the management of risks relating to our executive compensation plans and arrangements as well as risks associated with the independence of the Board of Directors. Our Audit and Compliance Committee oversees management of financial risks. While each committee is responsible for evaluating certain risks and overseeing the management of such risks, our full Board of Directors is regularly informed regarding such risks through committee reports and otherwise.
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Meetings and Attendance
During 2016, the Board of Directors met eight (8) times, the Audit and Compliance Committee met eleven (11) times and the Compensation and Governance Committee met two (2) times. Each director attended 75% or more of the aggregate of all meetings of the Board and the Committee on which he served in 2016.
Four out of five of our directors attended last year's annual meeting. Our Board of Directors generally expects its members to attend the Annual Meeting of Shareholders and we believe that all of our directors will attend this year's Annual Meeting.
Committees of the Board of Directors
Our Board of Directors has established the following committees: the Audit and Compliance Committee and the Compensation and Governance Committee. The composition of each such committee satisfies the independence requirements and current standards of the SEC and the rules of NASDAQ (as applicable). Current copies of the charters for each of these committees are available on our website, www.glpropinc.com, under the "About" section.
Audit and Compliance Committee
The duties and responsibilities of the Audit and Compliance Committee are set forth in its charter, which is available on our website, and include the following:
• | to oversee the quality and integrity of our financial statements and our accounting and financial reporting processes; |
• | to prepare the Audit and Compliance Committee report required by the SEC in our annual proxy statements; |
• | to review and discuss with management and the independent registered public accounting firm our annual and quarterly financial statements; |
• | to review and discuss with management and the independent registered public accounting firm our earnings press releases; |
• | to appoint, compensate and oversee our independent registered public accounting firm, and pre-approve all auditing services and non-audit services to be provided to us by our independent registered public accounting firm; |
• | to review the qualifications, performance and independence of our independent registered public accounting firm; |
• | to establish procedures for the receipt, retention and treatment of complaints received by us regarding accounting, internal accounting controls or auditing matters and the confidential, anonymous submission by our employees of concerns regarding questionable accounting or auditing matters; |
• | to review and approve related person transactions that would be required to be disclosed in our SEC reports; and |
• | to oversee the Company's compliance program. |
Our Audit and Compliance Committee is comprised of Joseph W. Marshall, III (chair), David A. Handler and E. Scott Urdang. Our Board of Directors has determined that all members of our Audit and Compliance Committee are independent under the director independence standards set forth in the rules and regulations of the SEC and the applicable listing standards of NASDAQ, that each member meets the heightened independence standards for service on the Audit and Compliance Committee and satisfies the financial literacy and other requirements for "audit committee" members under applicable NASDAQ rules and that Mr. Marshall is an "audit committee financial expert" as that term is defined in Item 407(d)(5) of Regulation S-K of the Securities Exchange Act of 1934, as amended (the "Exchange Act").
Compensation and Governance Committee
The duties and responsibilities of the Compensation and Governance Committee are set forth in its charter, which is available on our website, and include the following:
• | to determine, or recommend for determination by our Board of Directors, the compensation of our Chief Executive Officer and other executive officers; |
• | to establish, review and consider employee compensation policies and procedures; |
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• | to review and approve, or recommend to our Board of Directors for approval, any employment contracts or similar arrangement between the Company and any executive officer of the Company; |
• | to review and discuss with management the Company's compensation policies and practices and management's assessment of whether any risks arising from such policies and practices are reasonably likely to have a material adverse effect on the Company; |
• | to review, monitor, and make recommendations concerning incentive compensation plans, including the use of stock options and other equity-based plans; |
• | to recommend to our Board of Directors proposed nominees for election to the Board of Directors by the shareholders at annual meetings, including an annual review as to the renominations of incumbents and proposed nominees for election by the Board of Directors to fill vacancies that occur between shareholder meetings; |
• | to make recommendations to the Board of Directors regarding corporate governance matters and practices; |
• | to recommend members for each committee of the Board of Directors; and |
• | to recommend the compensation of directors. |
Our Compensation and Governance Committee is comprised of David A. Handler (chair) and E. Scott Urdang. Our Board of Directors has determined that all members of our Compensation and Governance Committee are independent under the director independence standards set forth in the rules and regulations of the SEC and the applicable listing standards of NASDAQ. The Compensation and Governance Committee has the authority to delegate any of its responsibilities, along with the authority to take action in relation to such responsibilities, to one or more subcommittees as the Compensation and Governance Committee may deem appropriate in its sole discretion.
Compensation and Governance Committee Interlocks and Insider Participation
None of our executive officers currently serves, or in 2016 served, as a member of the Board of Directors or compensation committee of any entity that has one or more executive officers serving on our Board of Directors or our Compensation and Governance Committee. Additional information concerning transactions between us and entities affiliated with members of the Compensation and Governance Committee is included in this Proxy Statement under the heading "Certain Relationships and Related Person Transactions."
Director Compensation
The Company paid director fees in 2016 to each director who is not an employee of the Company as shown in the table below. For 2017, each committee chair and member retainer was increased by $5,000 and the stock award value for each independent director was increased by $25,000.
Schedule of Director Fees for 2016 | ||
Annual Cash Retainer | $100,000 | |
Annual Restricted Stock Award | Restricted Stock valued at $150,000 | |
Committee Chair Retainer | $25,000 for the Audit and Compliance Committee | |
$20,000 for the Compensation and Governance Committee | ||
Committee Member Retainer | $10,000 for the Audit and Compliance Committee | |
$7,500 for the Compensation and Governance Committee | ||
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The following table sets forth information on the compensation of all our non-employee directors for 2016:
2016 Compensation | ||||||||||||
Name | Fees Earned or Paid in Cash ($) (1) | Stock Awards ($) (2) | Total ($) | Stock Awards (#) (3) | ||||||||
Wesley R. Edens (4) | 80,625 | 150,009 | 230,634 | — | ||||||||
David A. Handler | 130,000 | 150,009 | 280,009 | 11,779 | ||||||||
Joseph W. Marshall, III | 125,000 | 150,009 | 275,009 | 10,179 | ||||||||
E. Scott Urdang | 117,500 | 150,009 | 267,509 | 10,179 | ||||||||
(1) | Cash fees include annual director's retainer and, where applicable, committee fees. |
(2) | The amounts listed above are calculated based on the closing price on the day prior to grant date. In 2016, each non-employee director was granted an award of 5,396 shares of restricted stock, which for financial reporting purposes are deemed to have a grant date fair value of $150,009. |
(3) | Equity outstanding includes restricted stock awards and phantom stock units outstanding as of December 31, 2016. |
(4) | Mr. Edens resigned effective October 15, 2016, at which time all outstanding awards were forfeited. |
Communications with the Board of Directors
The Board believes it is important for shareholders and others to have a process to send communications to the Board. Shareholders who wish to communicate with directors should do so by writing to Gaming and Leisure Properties, Inc., 845 Berkshire Boulevard, Suite 200, Wyomissing, PA 19610, Attention: Secretary. The Secretary of the Company reviews all such correspondence and forwards to the Board of Directors a summary of all such correspondence and copies of all correspondence that, in the opinion of the Secretary, deals with the functions of the Board of Directors or Board committees or that he otherwise determines requires their attention. Directors may at any time review a log of all correspondence received by the Company that is addressed to members of the Board of Directors and request copies of any such correspondence. Concerns relating to accounting, internal controls or auditing matters will be brought to the attention of the Company's Audit and Compliance Committee.
Director Nomination Process
Minimum Qualifications of Directors
The Compensation and Governance Committee of the Board of Directors is responsible for evaluating and recommending candidates for membership on our Board, including director nominees suggested by, among others, other Board members, management and shareholders. Our Compensation and Governance Committee may also retain professional search firms to identify candidates.
The Compensation and Governance Committee seeks to identify, as candidates for director, persons with gaming and/or real estate industry knowledge, senior management experience, diversity of viewpoints, business acumen, strength of character, integrity and mature judgment. The Compensation and Governance Committee will also consider a candidate's background and skills, including financial literacy, independence, and the contribution he or she would make in light of the Company's business strategy; a candidate's ability to meet the suitability requirements of all relevant regulatory authorities; a candidate's ability to represent the interests of the shareholders; a candidate's ability to work constructively with the Company's management and other directors; and a candidate's availability, including the number of other boards on which the candidate serves, and his or her ability to dedicate sufficient time and energy to his or her board duties among other considerations set forth in the Company's Corporate Governance Guidelines, available on our website, www.glpropinc.com, under the "About" section.
Shareholder Nominations of Directors and Other Business
Shareholders who (a) are not "Unsuitable Persons," as that term is defined in our charter, (b) have beneficially owned at least 1% of the Company's common stock for a continuous period of not less than 12 months before making such recommendation and (c) are entitled to vote at the Annual Meeting, may submit director nominations
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and proposals for other business for consideration by the Board of Directors and the Compensation and Governance Committee, as applicable, to be raised from the floor at our Annual Meeting, provided that such recommendations are in proper written form and timely received by the Secretary of the Company. To be timely, a shareholder's notice to the Secretary must be delivered to or mailed and received at the principal executive offices of the Company not less than 120 nor more than 150 days prior to the anniversary date of the immediately preceding annual meeting of shareholders. The requirements set forth in this section do not relate to shareholder proposals intended to be included in our Proxy Statement and submitted pursuant to Rule 14a-8 promulgated under the Exchange Act.
With respect to the shareholder giving the notice and the beneficial owner, if any, on whose behalf the recommendation for nomination or proposal is made, all notices must include the following information as further outlined in our Amended and Restated Bylaws:
• | the name and address of such shareholder, as they appear on the Company's books, the telephone number of such shareholder, and the name, address and telephone number of such beneficial owner, if any; |
• | a statement or SEC filing from the record holder of the shares, derivative instruments or other interests verifying the holdings of the beneficial owner and indicating the length of time the shares, derivative instruments or other interests have been held by such beneficial owner and any other information relating to such shareholder and beneficial owner, if any, that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for, as applicable, the proposal and/or the election of directors in a contested election pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder, including, but not limited to, voting arrangements, rights to dividends or performance related fees associated with any securities held, material legal proceedings involving the Company, its directors, officers or affiliates, and any material interest in any material contract or agreement with the Company, its affiliates or any principal competitors; |
• | a representation that such shareholder and beneficial owner, if any, intend to be present in person at the meeting; |
• | a representation that such shareholder and such beneficial owner, if any, intend to continue to hold the reported shares, derivative instruments or other interests through the date of the Company's next annual meeting of shareholders; and |
• | a completed and signed questionnaire, multi-jurisdictional personal disclosure form, representations, agreement and consent to provide additional information and to submit to a background check prepared with respect to and signed by such shareholder and beneficial owner, and such additional information, documents, instruments, agreements and consents as may be deemed useful to the Board of Directors to evaluate whether such shareholder or beneficial owner is an unsuitable person. |
Any notice pertaining to a shareholder recommendation for nomination for election or re-election as a director, must also include the following information:
• | all information relating to the recommended nominee that is required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors in an election contest, or is otherwise required, in each case pursuant to Section 14 of the Exchange Act, and the rules and regulations promulgated thereunder (including such person's written consent to being named in the proxy statement as a nominee and to serving as a director, if elected); |
• | a description of all direct and indirect compensation, economic interests and other material monetary agreements, arrangements and understandings during the past three years, and any other material relationships, between or among such shareholder and beneficial owner, if any, and their respective affiliates and associates, or others acting in concert therewith, on the one hand, and each recommended nominee, and his or her respective affiliates and associates, or others acting in concert therewith, on the other hand, including, without limitation, all information that would be required to be disclosed pursuant to Rule 404 promulgated under Regulation S-K if the shareholder making the nomination and any beneficial owner on whose behalf the nomination is made, if any, or any affiliate or associate thereof or person acting in concert therewith, were the "registrant" for purposes of such rule and the recommended nominee were a director or executive officer of such registrant; |
• | a description of all relationships between the proposed nominee and the recommending shareholder and the beneficial owner, if any, and of any agreements, arrangements and understandings between the |
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recommending shareholder and the beneficial owner, if any, and the recommended nominee regarding the nomination;
• | a description of all relationships between the recommended nominee and any of the Company's competitors, customers, suppliers, labor unions (if any) and any other persons with special interests regarding the Company; |
• | a completed and signed questionnaire, multi-jurisdictional personal disclosure form, representations, agreement and consent to provide additional information and to submit to a background check prepared with respect to and signed by the recommended nominee, and such additional information, documents, instruments, agreements and consents as may be deemed useful to the Board of Directors to evaluate whether such nominee is an Unsuitable Person; and |
• | the written representation and agreement (in the form provided by the Secretary upon written request) of the recommended nominee that he or she (1) is not and will not become a party to voting commitment that has not been disclosed to the Company or that could limit or interfere with such person's ability to comply, if elected as a director of the Company, with such person's fiduciary duties under applicable law, (2) is not and will not become a party to any compensation arrangement with any person or entity in connection with service or action as a director that has not been disclosed, and (3) in such person's individual capacity, and on behalf of any person or entity on whose behalf the nomination is being made, would be in compliance, if elected as a director of the Company, and will comply with all applicable publicly disclosed corporate governance and other policies and guidelines of the Company. |
Any notice as to any business other than a recommendation for nomination of a director or directors that the shareholder proposes to bring before the meeting, must also set forth (1) a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest of such shareholder and beneficial owner, if any, in such business, (2) a description of all contracts, arrangements, understandings and relationships between such shareholder and beneficial owner, if any, on the one hand, and any other person or persons (including their names), on the other hand, in connection with the proposal of such business by such shareholder and (3) the text of the proposal or business (including the text of any resolutions proposed for consideration).
Code of Business Conduct and Ethics
Our code of business conduct and ethics applies to all of our employees, officers and directors, including those officers responsible for financial reporting. Disclosure regarding any amendments to the code, or any waivers of its requirements, will be included in a current report on Form 8-K within four business days following the date of the amendment or waiver, unless posting such information on our website will then satisfy the rules of the SEC and NASDAQ. A copy of our code of business conduct and ethics is available on our website, www.glpropinc.com, under the "About" section.
Corporate Governance Guidelines
Our Board of Directors has adopted corporate governance guidelines that serve as a flexible framework within which our Board of Directors and its committees operate. These guidelines cover a number of areas including the size and composition of our Board of Directors, board membership criteria and director qualifications, director responsibilities, roles of the Chairman of the Board of Directors and Chief Executive Officer, meetings and roles of independent directors, committee responsibilities and assignments, stock ownership guidelines, board member access to management and independent advisors and direct communications with third parties. A copy of our Corporate Governance Guidelines, is available on our website, www.glpropinc.com, under the "About" section.
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EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
The Compensation and Governance Committee is responsible for the Company's executive compensation program. For purposes of the following Compensation Discussion and Analysis, the terms "Committee" or "we" or "our" refer to the Compensation and Governance Committee of the Board.
The following Compensation Discussion and Analysis describes our compensation philosophy, objectives and policies and how these are reflected in the compensation program for our named executive officers. Our named executive officers for 2016 were:
Name | Title |
Peter M. Carlino | Chairman, Chief Executive Officer and President |
William J. Clifford | Senior Vice President, Chief Financial Officer and Treasurer |
Steven T. Snyder | Senior Vice President, Corporate Development |
Desiree A. Burke | Senior Vice President and Chief Accounting Officer |
Brandon J. Moore | Senior Vice President, General Counsel and Secretary |
CD&A Quick Reference Guide
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Executive Summary
Transforming the Gaming Industry
On November 1, 2013, Penn National Gaming, Inc. ("Penn") led the gaming industry as the first gaming company to successfully spin-off its real property assets associated with casino gaming and racing facilities into a structure qualifying as a real estate investment trust (the "Spin-Off"). This innovative achievement changed the way gaming industry assets are valued, force gaming company boards and management teams to consider the separation of real property and operating assets to enhance shareholder value and introduce an attractive new form of financing. In the three years following the Spin-Off, several large gaming companies have explored, and in many cases utilized, a REIT structure to maximize value for their shareholders and other constituents, including: MGM Resorts International ("MGM") with the creation of MGM Growth Properties, LLC; Caesars Entertainment Corporation with the proposed formation of a REIT to resolve a contentious bankruptcy; and Pinnacle Entertainment, Inc. ("Pinnacle") in a transaction that would ultimately add 14 Pinnacle properties and a significant new tenant to the Company's portfolio. The Company's innovative thinking and achievements clearly had a profound impact on the gaming industry and the valuation of gaming assets.
Capitalizing on Opportunities and New Relationships in 2016
As the REIT alternative has become more mainstream in the gaming industry, the management team has been focused on expanding the Company's portfolio and diversifying its tenant base. In 2016, this focus resulted in the acquisition of the real property assets associated with 14 of Pinnacle's casino properties upon the consummation of a transaction that began in 2014.
In November 2014, when Pinnacle announced its intention to pursue a REIT spin-off transaction pursuant to a structure very similar to that successfully executed by Penn, the Company quickly evaluated the proposed structure to determine what role, if any, the Company could play in the execution of Pinnacle's proposed strategy. With an in-depth understanding of the complexity of the transaction Pinnacle was pursuing and a recognition of the efficiencies that could be achieved for the shareholders of both companies, the Company subsequently engaged in discussions with Pinnacle to structure a transaction between the companies that would achieve Pinnacle's stated goals. On July 15, 2015, the Company and Pinnacle announced the execution of a merger agreement providing for the acquisition by the Company of substantially all of the real estate assets of Pinnacle following Pinnacle's spin-off of its operating assets into a separate publicly traded company. On April 28, 2016, the Company closed on the acquisition of the Pinnacle assets and expanded its portfolio from 21 to 35 properties and increased its annual rent by approximately $377 million. Perhaps more importantly, the transaction added a significant new regional gaming operator as our tenant, representing both diversification of tenants and a new potential partner for future transactions.
The Company and Pinnacle immediately began to find ways to expand their new relationship and in March 2016 - a month before the merger closed - the Company entered into a purchase agreement and lease with Pinnacle to purchase the operating assets of the Meadows Racetrack & Casino and operate the property pursuant to a separate triple-net lease. The transaction closed on September 9, 2016, bringing the Company's portfolio to 36 properties and increasing rent by approximately $25 million annually.
As a result of the Company's focus on expansion and the management team's ability to solve complex, accounting, tax and legal issues necessary to structure accretive transactions, the Company saw significant advances in 2016:
• | Increasing its portfolio from 21 properties to 36 properties. |
• | Increasing its annual rental revenue and income from direct financing lease, as reported, from $427.1 million in 2015 to $684.2 million in 2016. As previously reported by the Company, annual rental revenue is expected to be approximately $829.9 million in 2017 with the full impact of the acquisitions. |
• | Increasing its quarterly dividend distributions from $0.545 per share in the fourth quarter of 2015 to $0.60 per share in the fourth quarter of 2016. |
• | Increasing its AFFO from $321.8 million in 2015 to $542.1 in 2016. As previously reported by the Company, AFFO is expected to be approximately $668.0 million in 2017 with the full impact of the acquisitions. (Additional information on AFFO, a non-GAAP financial measure, is disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2016, a copy of which is included in the Annual Report to Shareholders made available to shareholders in connection with this Proxy Statement.) |
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We believe the Company is well-positioned to take advantage of opportunities as gaming industry participants continue to explore the value embedded in real property assets and, more importantly, capable of executing complicated transactions quickly and efficiently when such opportunities arise.
Consistent Results - Stable Dividends
In addition to key acquisitions and development efforts, the Company has produced consistent increases in dividends and AFFO since the Spin-Off, all while keeping our debt levels stable.
(1) | December 31, 2014 excludes one-time dividends paid to shareholders of $11.84 and $0.40 per share paid on February 18, 2014 and December 19, 2014, respectively. |
AFFO and AFFO per share are non-GAAP financial measures. AFFO per share is calculated using the Company's outstanding number of shares on a fully diluted basis. AFFO is FFO as defined by the National Association of Real Estate Investment Trusts (net income, excluding gains or losses from sales of property and real estate depreciation) excluding stock based compensation expense, debt issuance costs amortization, other depreciation, amortization of land rights, straight-line rent adjustments and direct financing lease adjustments, reduced by maintenance capital expenditures. For a complete discussion of our financial performance in 2016 and additional information on non-GAAP financial measures presented in this Proxy Statement, please see our Annual Report on Form 10-K for the year ended December 31, 2016, a copy of which is included in the Annual Report to Shareholders made available to shareholders in connection with this Proxy Statement.
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Competitive Compensation Aligned with Shareholders
The Company's compensation program has been carefully designed to attract and retain the talent necessary to drive growth and increase shareholder value. The Company's focus on growth has been, and continues to be, concentrated in the gaming industry. As a result, the Company is in a unique position in the REIT industry with only one direct competitor - MGM Growth Properties, LLC ("MGP"). Further, MGP is unique itself because it is majority owned and controlled by MGM. This results in a distinct disconnect between the companies with whom the Company's stock trades - other REITs - and the companies with whom the Company competes for talent and assets - gaming companies. In an attempt to resolve this disconnect, we created a compensation program designed to address both of these realities.
First, in order to retain and attract talent with the necessary experience in, and understanding of, gaming assets, we have aligned the named executive officers' base pay with their peers in the gaming industry. The base compensation of our Chief Executive Officer is competitive among our gaming peers:
(1) | Base salary for the Company's Gaming Peers is for 2015 based on public disclosures in 2016 and the Company's CEO base salary is for 2016. |
Second, recognizing that the Company's stock performance is strongly correlated with REITs, we established performance goals for our cash bonus program and performance-based restricted stock awards designed to drive shareholder value, including:
• | Performance-based restricted stock awards tied to the Company's performance measured against the broad US MSCI REIT index generally and, beginning with awards granted in 2017, triple-net REITs specifically; and |
• | A cash bonus program primarily tied to the stability and growth of AFFO, dividends and acquisition goals. |
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These two components of "at risk" compensation represent a significant portion of management's total compensation opportunity:
By focusing on the Company's gaming peers in establishing base salary and the Company's REIT peers in establishing performance goals, we believe the compensation program is successful in attracting and retaining talent and driving shareholder value.
Executive Pay vs. Company Performance
Following the Spin-Off, the Company's named executive officers transitioned to the Company at the same base pay in effect at the time of the Spin-Off. With the exception of the Company's Senior Vice President and Chief Accounting Officer and the Senior Vice President, General Counsel and Secretary, the named executive officers have not received an increase in base pay since the Company's inception. Further, the total realizable pay for the Company's Chief Executive Officer has decreased each year since the Spin-Off despite a significant increase in AFFO.
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Despite the Company's impressive achievements described above, the executives have not earned their maximum potential bonus in any year since the Spin-Off. Further, the first three-year performance-based restricted stock award matured at the end of 2016 with no value. The performance goals established by the Committee require extraordinary results to achieve maximum payout.
We believe the Company's compensation program appropriately recognizes the unique position the Company holds in the REIT community, while providing the necessary incentives to drive shareholder value as a REIT.
Executive Compensation Highlights
In structuring the Company's executive compensation program for 2016, the Committee's primary objective was to align pay with performance while taking into consideration the performance of the Company over the past two years, the complicated corporate structuring and tax issues encountered in acquiring gaming assets, shareholder feedback, industry and general market trends in compensation practices, as well as the advice and recommendations of our independent compensation advisor.
Highlights of our overall executive compensation program are outlined in the following table, with details of the program discussed more fully throughout this Compensation Discussion & Analysis:
Meaningful 2016 Shareholder Outreach | - Engaged in shareholder outreach in spring and fall 2016 to discuss and obtain feedback on executive compensation and corporate governance matters. - Based directly on this feedback, the Company (i) changed 2017 performance-based restricted share awards so that 50% of the shares will be measured against triple-net REIT companies and (ii) voluntarily included a shareholder proposal to go from a triennial say-on-pay vote to an annual vote. |
Pay for Performance Alignment | - 2016 annual performance cash awards paid out at approximately 70% of the maximum potential (Company achieved maximum AFFO and dividend targets but did not achieve new acquisition targets). - Executives have not earned their maximum potential bonus in any year since the spin-off. - Performance-based stock awards granted in 2014 matured at year-end 2016 with no payout as a result of the Company’s total shareholder return performance among the US MSCI REIT Index. - The multi-dimensional nature of the Company’s compensation program requires extraordinary results across a wide range of metrics to achieve target and maximum payouts, including increases in AFFO, dividend distributions, total shareholder return and successfully executing strategic acquisitions. |
Continued Use of Formulaic Incentive Compensation | - 90% of annual performance cash awards are tied to the achievement of pre-determined quantitative performance goals and 10% are based on qualitative performance. - 80% of stock awards granted for equity compensation continue to be at-risk and are contingent upon the Company achieving rigorous total shareholder return hurdles over the three-year performance period - Maximum payout for performance-based equity awards require that the Company’s three-year total shareholder return be in the top 20% of the performance peer group. Conversely, performance in the bottom quartile will result in no payout. |
25 | Notice of Annual Meeting of Shareholders and Proxy Statement
Shareholder Outreach
In 2014, shareholders approved a triennial say-on-pay vote. As a result, the Company did not present a
shareholder advisory vote on executive compensation at its 2016 Annual Meeting of Shareholders. However, in 2014 shareholders were supportive of the Company's compensation programs with 97% of the voted shares approving the Company's executive compensation.
It is important to note that while we did not present shareholders with a say-on-pay proposal in 2016, we maintained active and open communications with shareholders, including two separate shareholder outreach efforts in 2016.
Our shareholder outreach efforts are summarized below:
• | Spring 2016 - In connection with the distribution of the proxy materials, we reached out to our top 20 shareholders to discuss questions and concerns related to specific proposals presented in the Company's proxy materials. |
• | Fall 2016 - We broadened our outreach efforts to include not only the top 20 shareholders, but also significant shareholders that either withheld votes or voted against the recommendations of the Board. The Board felt strongly that it was important to understand the reasons why shareholders choose not to support certain of the Board's recommendations and to discuss the Company's governance structure and initiatives that shareholders would like the Board to consider in the upcoming year. |
Our Response to Shareholder Feedback
As a result of discussions with shareholders, we made the following changes to our executive compensation program:
• | Altered the measurement group for determination of performance-based restricted stock awards to include triple net lease REITs. |
• | Elected to present shareholders at this Annual Meeting a proposal on the frequency of our say-on-pay advisory vote to recommend a say-on-pay vote every year instead of the current frequency of every three years. We were not required to present a vote on the frequency of the say-on-pay vote until 2020 but understand that many shareholders view an annual say-on-pay advisory vote as an important opportunity to express concerns with our compensation program. See Proposal No. 4 in this Proxy Statement for further information. |
Compensation Philosophy and Objectives
Objectives of Compensation Program
The overall objective of the Company's executive compensation program is to compensate members of management in a manner that most effectively incentivizes them to maximize shareholder value without taking undue financial risks. At the same time, the executive compensation program is intended to enable the Company to attract and retain the executive talent needed to grow and further its strategic initiatives. This cannot be understated. The acquisition of real property assets by a REIT from a taxable corporation presents unique and complex tax, accounting, legal and structural issues. Unfortunately, gaming assets are generally owned by corporations and a failure of the Company's management team to identify latent tax, accounting and legal issues can result in a transaction that appears to be accretive on the surface, potentially reducing AFFO and dividend distributions. It is imperative that the Company's management team have the experience and skills necessary to recognize and solve these problems. With these goals in mind, the Company's compensation objectives are to:
• | offer a competitive and balanced compensation program to compensate executives for the unique experience required of our management team, taking into consideration the total compensation opportunity offered by other REITs and gaming companies; |
• | utilize a mix of fixed and performance-based compensation designed to closely align the interests of management with those of the Company's shareholders; and |
• | attract and retain the best possible management team for the Company to increase shareholder value and maintain the Company's credibility in, and access to, the capital markets. |
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Compensation Philosophy
To support the Company's compensation program objectives, we have adopted and annually review and confirm a compensation philosophy that serves as the guide for all executive compensation decisions. Our compensation philosophy is as follows:
The Company intends to maintain an executive compensation program that will help it attract and retain the executive talent needed to grow and further the strategic interests of the business. To this end, the Company provides a compensation and benefits program that will be sufficiently attractive to provide talented executives with good reason to remain with the Company and continue in their efforts to improve shareholder value. The Company's program is designed to motivate and reward executives to achieve and exceed targeted results. Pay received by the executives will be commensurate with the performance of the Company and their own individual contributions.
We believe that it is in the long-term best interests of the Company to provide a significant portion of each executive's compensation in the form of equity incentive awards. However, we also believe that it is important to provide base salaries that do not motivate or encourage executives to take excessive risks to ensure future financial security, particularly in light of the complex tax, accounting and legal issues inherent in the Company's transactions. To balance these goals, we believe that the appropriate compensation program includes (a) fixed and performance-based cash and (b) time and performance-based equity incentive awards. We focused on the appropriate balance of each of these components in developing our 2016 executive compensation program.
Key Compensation Practices
The Committee, in consultation with our independent compensation advisor and management team, continually evaluates and considers compensation practices identified as "best practices" by various market constituents. We incorporated into our compensation program the practices we believe will most effectively support the Company's continuing efforts to create shareholder value, including:
• | no agreements or arrangements containing tax gross-ups or other similar tax indemnification provisions; |
• | compensation largely based on multiple performance metrics, including dividend yield, adjusted funds from operations, relative total shareholder return and acquisition activity; |
• | compensation that includes a combination of variable and fixed incentive opportunities; and |
• | established maximum bonus opportunities. |
We will continue to evaluate and consider input from our shareholders and emerging "best practices" to ensure that our compensation program contains the features necessary to properly align the interests of our executives with the interests of our shareholders without encouraging undue risk.
We have also taken steps to protect shareholder interests and promote shareholder value in both the design and in the administration of the Company's equity compensation program. Under the terms of our 2013 Long-Term Incentive Compensation Plan (the "Plan"), awards to employees are administered by the Committee and will generally include vesting schedules designed to encourage employees to focus on the long-term success of the Company by requiring employees to remain with the Company for a number of years before all of their awards may be settled. Further, the Plan neither permits the exercise price of outstanding stock options or stock appreciation rights to be reduced nor permits the grant of discounted stock options or stock appreciation rights.
Annual Review and Approval Process
Role of the Committee
Our Committee meets each year to review and approve the executive compensation packages for the Chief Executive Officer and each of the other executive officers as well as to confirm and approve performance-based awards earned for the most recently completed year. In establishing compensation packages, we consider numerous factors and data, including:
• | the experience necessary to identify and solve the significant tax, accounting, legal and structural complexities inherent in the types of transactions conducted by the Company; |
• | compensation packages of gaming peers with whom the Company competes for talent and assets; |
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• | the dividend payout for the previous fiscal year and projected dividends for the current year; |
• | the ability to enter into definitive acquisition agreements for properties that will be accretive to the Company's AFFO and dividend; |
• | the Company's performance relative to its REIT peers; |
• | the performance of the Company's properties in Perryville and Baton Rouge; |
• | the individual performance of the executives and their total compensation relative to similarly situated gaming executives; |
• | a breakdown of the various components of each executive officer's compensation package; |
• | perquisites and other benefits, if any, offered to each executive; and |
• | the performance of previous compensation awards. |
The Committee reviews this information with its compensation consultant and certain members of the executive management team to revise or confirm the compensation packages for each executive officer. One of our goals is to ensure that base salaries and total compensation packages are appropriate to attract and retain executives with the gaming and real estate experience necessary to create long-term shareholder value. We will also alter performance measures and/or the mix of cash and long-term equity incentive awards as necessary to ensure that management incentives continue to be aligned with shareholders.
Role of Management
The Company's Chief Executive Officer and Chief Financial Officer work closely with the Committee to analyze relevant peer data and to determine the appropriate base salary, cash bonus and incentive award levels for each member of the executive management team. However, while the Committee values the judgment and input from the CEO and CFO, and considers their recommendations, the Committee ultimately retains sole discretion to approve the compensation packages for each named executive officer.
Role of Compensation Consultant
We retained FTI Consulting, Inc. ("FTI"), an independent compensation consultant, to advise the Committee on compensation related matters. The Committee selected FTI because of its experience in assisting other REITs in determining the optimal type and balance of cash and incentive award components in a manner intended to align the interests of management and shareholders while being competitive. In addition to other tasks, FTI worked with management and the Committee to develop a peer group for use in structuring the Company's executive compensation program. FTI and the Company review the peer group annually to ensure that it provides an accurate representation of the Company's peers. A description of the process and rationale utilized for selecting our peer group is described below.
The Committee has determined that no conflict of interest exists between FTI and the Company (including the Company's Board of Directors and the Company's management) pursuant to Item 407(e)(3)(iv) of SEC Regulation S-K. Neither FTI nor any affiliate provided additional services to the Company or its affiliates in excess of $120,000 during 2016.
FTI reviews the current compensation of each executive officer on several levels, including consideration of (a) cash versus equity-based incentive awards; (b) fixed versus variable, (c) time-based vesting versus performance-based vesting and (d) short-term awards versus long-term awards. In addition, FTI provides the Committee with information regarding the compensation levels of executive officers in our selected peer group, as well as, current compensation "best practices" and trends in the REIT and gaming industries. Based on all of the available information and discussions with the Chief Executive Officer and Chief Financial Officer, FTI provides its recommendation to the Committee as to the appropriate compensation of each executive officer or confirms for the Committee that the suggested compensation packages are reasonable.
Peer Group
In selecting and reviewing the Company's peer group, FTI and the Company utilize a set of criteria that they believe captures the key areas of the Company's business and the experience necessary for its executives. FTI and the Company revisited the peer group at the end of 2016 to ensure that it reflects the realities of the environment in which the Company generates its revenue and competes for talent and assets. As a result, the criteria used to select the peer group were refined and the peer group was revised for 2017. The criteria are as follows:
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• | gaming companies comparable to the Company in terms of its asset portfolio and the knowledge and skills necessary by the executive team to effectively evaluate opportunities and to manage the Company's operating properties; |
• | gaming companies with whom the Company competes for talent; and |
• | triple-net REITs with revenues primarily derived from triple-net leases. |
Applying these criteria, FTI recommended, and the Committee approved, the following peer group:
Gaming Companies | Triple-Net REITs |
Boyd Gaming Corporation | Alexandria Real Estate Equities, Inc. |
Caesars Entertainment Corporation | Communications Sales & Leasing, Inc. |
Las Vegas Sands Corp. | EPR Properties |
MGM Resorts International | Gramercy Property Trust, Inc. |
Penn National Gaming, Inc. | MGM Growth Properties LLC |
Pinnacle Entertainment, Inc. | National Retail Properties, Inc. |
Wynn Resorts, Limited | Omega Healthcare Investors, Inc. |
Realty Income Corporation | |
Spirit Realty Capital, Inc. | |
STORE Capital Corporation | |
VEREIT, Inc. | |
W. P. Carey, Inc. | |
Risk Assessment
In establishing and reviewing our executive compensation program, we consider, among other things, whether the program properly motivates executives to focus on the creation of shareholder value without encouraging unnecessary or excessive risk taking. To this end, the Committee carefully reviews the principal components of executive compensation. Base salaries are reviewed annually and are fixed in amount. Annual incentive pay is focused on achievement of certain specific overall financial goals and is determined using multiple performance criteria with established maximum payouts. The other major component of our executive officers' compensation is long-term incentives through restricted stock, which we believe is important to help further align executives' interests with those of our shareholders. We believe that these cash and incentive awards, especially when combined with the compensation clawback policy, described in this Proxy Statement under the heading Other Compensation Policies, appropriately balance risk, payment for performance and align executive compensation with shareholders without encouraging unnecessary or excessive risk taking.
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Overview of 2016 Compensation
Elements of Compensation
The compensation program is weighted towards performance-based compensation utilizing several different performance metrics. The mix of cash versus equity-based incentive awards, fixed versus variable compensation, and time-based vesting versus performance-based vesting of equity incentive awards is designed to ensure that management is, and remains, appropriately incentivized across a number of different business and economic environments. In addition, our program includes both internal performance measures as well as external performance metrics to ensure that our executives are focused both on the Company's goals as well as its position in the market. The following is a summary of the key elements (a more detailed description of each element is provided below):
Component | Description | Objective | Strategic Rationale |
Base Salary | Fixed cash compensation | Provide competitive fixed compensation considering the job responsibilities, individual performance, skills and experience | Designed to attract and retain executives with the experience to implement the Company's growth strategy |
Annual Performance Cash Awards | Cash compensation with 90% tied to achievement of pre-determined quantitative performance goals and 10% tied to qualitative performance | Provide incentives for executives to enter into accretive transactions that result in growing dividend distributions and AFFO | Aligns executive and shareholder interests |
Long-Term Fixed Equity Awards | Annual equity awards with time-based vesting equally over a three-year period | Supplement fixed compensation with long-term compensation to enhance retention and encourage long-term growth | Aligns executive and shareholder interests and rewards long-term stock performance |
Long-Term Performance-Based Equity Awards | Annual equity award with three-year cliff vesting based on total shareholder return measured against the US MSCI Index and, for 2017 awards, triple-net REIT peers | Provide a significant portion of total potential compensation tied to long-term stock performance | Aligns executive and shareholder interests and rewards long-term stock performance with no payout for under-performance |
In 2016, the total potential compensation opportunity of the Company's named executive officers consisted of approximately 76% of performance-based and/or "at risk" compensation and approximately 24% of fixed compensation (of which approximately 13% was base salary and 11% time-based restricted stock awards).
Base Salary
The base salaries of our executives are designed to compensate them for services rendered during the fiscal year and consistent with our pay for performance philosophy, executives receive a significant portion of their overall targeted compensation in a form other than a fixed base salary. Although the Company does not generally benchmark against any particular percentile of base salaries of comparable executives within the Company's peer group, we set salaries that are competitive in the gaming industry, recognizing that our Company seeks to attract and retain executives with experience in the gaming industry. In addition, we recognize that it is critical that executives have the experience necessary to identify and resolve the complex tax, accounting and legal issues inherent in the type of transactions engaged in by the Company. Base salaries are then further adjusted for certain qualitative factors, including: specific position duties and responsibilities; tenure with the Company; individual contributions; and value to the Company and the overall reasonableness of an executive's pay package.
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Set forth below are the 2016 base salary increases approved by the Committee for each of the named executive officers:
Executive | 2016 Salary | Percentage Increase over 2015 Base Salary | ||||
Chairman, Chief Executive Officer and President | $ | 1,808,468 | — | % | ||
Senior Vice President, Chief Financial Officer and Treasurer | $ | 1,166,990 | — | % | ||
Senior Vice President, Corporate Development | $ | 519,841 | — | % | ||
Senior Vice President and Chief Accounting Officer | $ | 400,000 | 8 | % | ||
Senior Vice President, General Counsel and Secretary | $ | 425,000 | 42 | % | ||
Base salaries of the Senior Vice President and Chief Accounting Officer and the Senior Vice President, General Counsel and Secretary were increased to better align their salaries with the median of our executive compensation gaming peers.
Annual Performance Cash Awards
For 2016, the Company's Compensation Committee continued the performance-based annual cash incentive bonus program designed to motivate the executive officers and other members of the management team to achieve certain Company growth objectives that we believe were most likely to increase shareholder value. The program was based on the achievement of a number of specific performance criteria focused on the Company's annual strategic goals and business plan. For 2016, the annual cash bonus for each named executive officer was comprised of four components:
• | 40% based on the Company's achievement of established AFFO per share targets; |
• | 20% based on the Company's achievement of established dividend targets; |
• | 30% based on the achievement of established additional AFFO targets resulting from acquisitions; and |
• | 10% discretionary based on the qualitative factors indicated above. |
With respect to the AFFO and dividend components, a cash bonus could have been earned at three different achievement levels: Threshold; Target; and Maximum. The acquisition goal was measured on a scale of 0-100% with annual target being the maximum and zero being the minimum. The achievement levels established by the Committee for 2016 are set forth below.
Component | Threshold | Target | Maximum |
AFFO Growth | Annual AFFO per share of $2.72 | Annual AFFO per share of $2.80 | Annual AFFO per share of $2.90 |
Dividend Growth | Fourth quarter dividend per share of $0.545 | Fourth quarter dividend per share of $0.56 | Fourth quarter dividend per share of $0.585 |
Acquisition Growth | Payout determined based on the percentage of maximum target achieved | Annual effect on AFFO per share $0.13 | |
We set the ranges of bonuses payable pursuant to the cash bonus measure for each executive as a percentage of annual base salary, as set forth below. In order to help manage total potential compensation payouts, annual cash bonus opportunities are capped at a maximum bonus level, regardless of the extent to which performance exceeds targeted levels.
Executive | Threshold | Target | Maximum | ||||||
Chairman, Chief Executive Officer and President | 50 | % | 100 | % | 200 | % | |||
Senior Vice President, Chief Financial Officer and Treasurer | 50 | % | 100 | % | 200 | % | |||
Senior Vice President, Corporate Development | 50 | % | 100 | % | 200 | % | |||
Senior Vice President and Chief Accounting Officer | 25 | % | 50 | % | 100 | % | |||
Senior Vice President, General Counsel and Secretary | 25 | % | 50 | % | 100 | % | |||
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In 2016, the Company achieved annual AFFO of $3.00 per share and paid $0.60 per share in fourth quarter dividends. The named executive officers were also awarded the maximum discretionary bonus as a result of successfully closing both the Pinnacle and Meadows transactions. However, no new acquisitions were entered into by the Company in 2016 and therefore no bonus payment was earned for the acquisition growth component. As a result, the cash bonus paid to the named executive officers for 2016 was 70% of the maximum.
The following table indicates the actual amount paid to each named executive officer as a percentage of annual base salary for 2016 for the annual performance cash awards described above:
Executive | Actual Bonus Percent of Base Salary | Actual Payment ($) | |||
Chairman, Chief Executive Officer and President | 140 | % | 2,531,854 | ||
Senior Vice President, Chief Financial Officer and Treasurer | 140 | % | 1,633,786 | ||
Senior Vice President, Corporate Development | 140 | % | 727,777 | ||
Senior Vice President and Chief Accounting Officer | 70 | % | 280,000 | ||
Senior Vice President, General Counsel and Secretary | 70 | % | 297,500 | ||
Long-Term Performance-Based Equity Awards
While the annual cash bonus program was designed to incentivize the Company's management team to achieve specific near-term internal Company growth goals, the long-term performance equity award program was designed to focus management on the Company's long-term performance in relation to the broader REIT indices. We believe that a high degree of equity compensation motivates executives to increase the long-term value of the Company by aligning a significant portion of their total compensation with the interests of the Company's shareholders. We also believe that equity compensation is a critical tool in attracting and retaining executives with the type of entrepreneurial spirit that we believe is integral to the Company's success.
The Committee determined that the long-term portion of the executive compensation program for 2016 would continue to be awarded and paid in the form of performance-based restricted shares. Awards have three-year cliff vesting with the amount of restricted shares vesting at the end of the three-year period determined based on the Company's performance measured against its peers. More specifically, the percentage of shares vesting at the end of the measurement period will be based on the Company's three-year total shareholder return ranking among the three-year return of the companies included in the MSCI US REIT index (see Overview of Compensation Program for 2017 of the Compensation Discussion and Analysis for a change in the measurement index for 2017). The 2014 awards matured on December 31, 2016 with no value. The number of shares vesting at each performance achievement level for each named executive officer are set forth below.
Executive | Below 25th Percentile | 25th to less than 40th Percentile | 40th to less than 60th Percentile | 60th to less than 80th Percentile | Above 80th Percentile | ||||
Chairman, Chief Executive Officer and President | 0 | 55,000 | 110,000 | 165,000 | 220,000 | ||||
Senior Vice President, Chief Financial Officer and Treasurer | 0 | 27,500 | 55,000 | 82,500 | 110,000 | ||||
Senior Vice President, Corporate Development | 0 | 17,500 | 35,000 | 52,500 | 70,000 | ||||
Senior Vice President and Chief Accounting Officer | 0 | 12,500 | 25,000 | 37,500 | 50,000 | ||||
Senior Vice President, General Counsel and Secretary | 0 | 12,500 | 25,000 | 37,500 | 50,000 | ||||
We believe that this long-term performance-based equity incentive program compliments the annual cash incentive program by providing the appropriate balance between performance-based cash and performance-based equity awards.
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Long-Term Fixed Equity Awards
In addition to the long-term performance-based equity awards, we established a time-based retention equity award for 2016. A significant amount of each named executive officer's compensation is tied to performance and we recognize that there are often macro-economic factors impacting the business that are outside of management's control. Therefore, we believe that the time-based awards serve as a critical retention tool, recognizing that while the vesting of such awards is unrelated to performance, the value is directly correlated with the Company's share price. Awards vest at a rate of 33.33% per year and are generally subject to continued employment.
The number of shares awarded to each named executive officer for 2016 was as follows:
Executive | Number of Shares | |
Chairman, Chief Executive Officer and President | 55,000 | |
Senior Vice President, Chief Financial Officer and Treasurer | 27,500 | |
Senior Vice President, Corporate Development | 17,500 | |
Senior Vice President and Chief Accounting Officer | 12,500 | |
Senior Vice President, General Counsel and Secretary | 12,500 | |
Other Compensation
The Committee had the discretion to pay dividend equivalent payments through the third quarter of 2016 to employees holding Company options and other cash-settled awards received as a result of the conversion of Penn options to Company options in connection with the Spin-Off, as described in the Company's Prospectus effective on October 9, 2013. The Company has not issued option awards since the Spin-Off.
In 2016, the Committee approved the payment of dividend equivalents to the named executive officers for each of the dividends declared during the first three quarters of 2016. The dividend equivalent payments for converted Penn options to each named executive officer for 2016 are set forth below:
Executive | Spin-Off Option Dividend Equivalents ($) | |
Chairman, Chief Executive Officer and President | 1,894,119 | |
Senior Vice President, Chief Financial Officer and Treasurer | 403,077 | |
Senior Vice President, Corporate Development | 543,831 | |
Senior Vice President and Chief Accounting Officer | 111,010 | |
Senior Vice President, General Counsel and Secretary | 7,302 | |
No dividend equivalent payments have been made since September 23, 2016.
Overview of Compensation Program for 2017
In establishing the compensation program for 2017, the Committee began with a review of compensation earned by executives in 2016 measured against the Company's achievements in 2016. We believe that the compensation program for the Company's named executive officers in 2016 continued to provide the right balance between performance-based and fixed compensation to properly align the interests of management with shareholders without encouraging undue financial risks. More specifically:
• | base salaries were competitive with gaming industry peers, the companies with whom the Company competes for talent and assets; |
• | under the performance-based cash bonus program, named executive officers were rewarded in 2016 for their ability to grow the Company's dividend and AFFO but did not receive maximum value due to the lack of new acquisitions under agreement; and |
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• | at the end of 2016, the first three-year performance-based restricted share award matured without value as a result of the Company's stock performance ranking among the US MSCI REIT Index. |
With the first performance-based restricted share awards maturing at the end of 2016, we re-examined the program to ensure that it is achieving our goals and providing the proper incentives. The Committee also considered feedback from certain of our institutional shareholders, including certain REIT investors, and advice from our compensation consultant. As a result of this review, the Committee decided to extend the program for 2017, but determined that a portion of the award should be measured against a peer group comprised solely of triple-net REITs. Consequently, performance-based restricted stock awards granted in 2017 will continue to have a three-year vesting period but 50% of the award will be measured by the Company's stock performance ranking among the US MSCI REIT Index and the remaining 50% will be measured by the Company's stock performance ranking among a group of triple-net REIT peer companies. The triple-net measurement group includes publicly traded REITs deriving at least 75% of revenues from triple-net leases:
Triple-Net REITs | |
Agree Realty Corporation | STORE Capital Corporation |
EPR Properties | VEREIT |
Four Corners Property Trust | W. P. Carey |
Getty Realty | Omega Healthcare Investors |
Global Net Lease | Communications Sales & Leasing |
Gramercy Property Trust | Alexandria Real Estate Equities |
Lexington Realty Trust | Gladstone Commercial Corporation |
MGM Growth Properties | LTC Properties |
National Retail Properties | One Liberty Properties |
Realty Income Corporation | Seritage Growth Properties |
Select Income REIT | STAG Industrial Group |
Spirit Realty Capital | Care Capital Properties |
We will continue to look closely at the efficacy of this program as additional awards mature and more information is available.
With respect to the other components of the compensation program, comparing management's achievements and the Company's share performance to the impact on compensation, the Committee decided to continue the overall compensation program for 2017.
Base Salary
Set forth below are the 2017 base salaries for each of the named executive officers. There were no increases for 2017.
Executive | 2017 Salary | Percentage Increase over 2016 Base Salary | ||||
Chairman, Chief Executive Officer and President | $ | 1,808,468 | — | % | ||
Senior Vice President, Chief Financial Officer and Treasurer | $ | 1,166,990 | — | % | ||
Senior Vice President, Corporate Development | $ | 519,841 | — | % | ||
Senior Vice President and Chief Accounting Officer | $ | 400,000 | — | % | ||
Senior Vice President, General Counsel and Secretary | $ | 425,000 | — | % | ||
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Annual Performance Cash Awards
The Company's annual cash incentive bonus program is a performance-based measure designed to motivate the executive officers and other members of the management team to achieve certain Company growth objectives that we believe are most likely to increase shareholder value. The program is based on the achievement of a number of specific Company performance criteria that we believe are critical for the achievement of the Company's annual strategic goals and business plan. For 2017, the annual cash bonus for each named executive officer will be comprised of four components:
• | 40% based on the Company's achievement of established AFFO per share targets; |
• | 20% based on the Company's achievement of established dividend targets; |
• | 30% based on the achievement of established additional AFFO targets resulting from acquisitions; and |
• | 10% discretionary based on the qualitative factors indicated above. |
With respect to the AFFO Growth and Dividend Growth components, a cash bonus can be earned at three different achievement levels: Threshold; Target; and Maximum. The achievement levels established by the Committee for 2017 are set forth below. With respect to the Acquisition Growth component, to determine the achievement level, if any, the Committee will evaluate the impact of acquisitions assuming each is financed at 5.5x leverage.
Component | Threshold | Target | Maximum |
AFFO Growth | Annual AFFO per share of $2.98 | Annual AFFO per share of $3.09 | Annual AFFO per share of $3.18 |
Dividend Growth | Fourth quarter dividend per share of $0.60 | Fourth quarter dividend per share of $0.62 | Fourth quarter dividend per share of $0.64 |
Acquisition Growth | Payout determined based on the percentage of maximum target achieved | Annual effect on AFFO per share $0.13 | |
We set the ranges of bonuses payable pursuant to the cash bonus measure for each executive as a percentage of annual base salary, as set forth below. In order to help manage total potential compensation payouts, annual cash bonus opportunities are capped at a maximum bonus level, regardless of the extent to which performance exceeds targeted levels.
Executive | Threshold | Target | Maximum | ||||||
Chairman, Chief Executive Officer and President | 50 | % | 100 | % | 200 | % | |||
Senior Vice President, Chief Financial Officer and Treasurer | 50 | % | 100 | % | 200 | % | |||
Senior Vice President, Corporate Development | 50 | % | 100 | % | 200 | % | |||
Senior Vice President and Chief Accounting Officer | 25 | % | 50 | % | 100 | % | |||
Senior Vice President, General Counsel and Secretary | 25 | % | 50 | % | 100 | % | |||
Long-Term Performance-Based Equity Awards
The Committee believes that the long-term performance-based equity award program designed for 2014, and continued in 2015 and 2016, was effective in focusing management on the Company's long-term performance in relation to its peer group and provided an effective balance against the short-term Company growth goals reflected in the cash bonus program. Awards have three-year cliff vesting with the amount of restricted shares vested at the end of the three-year period determined based on the Company's performance during such period measured against its peers. More specifically, for 2017, the percentage of shares vesting at the end of the measurement period will be based on the Company's three-year total shareholder return ranking among the three-year return of the companies included in the MSCI US REIT index and in the triple-net REIT group set forth above, in equal amounts.
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The number of shares vesting at each performance achievement level for each named executive officer are set forth below.
Executive | Below 25th Percentile | 25th to less than 40th Percentile | 40th to less than 60th Percentile | 60th to less than 80th Percentile | Above 80th Percentile | ||||
Chairman, Chief Executive Officer and President | 0 | 55,000 | 110,000 | 165,000 | 220,000 | ||||
Senior Vice President, Chief Financial Officer and Treasurer | 0 | 27,500 | 55,000 | 82,500 | 110,000 | ||||
Senior Vice President, Corporate Development | 0 | 17,500 | 35,000 | 52,500 | 70,000 | ||||
Senior Vice President and Chief Accounting Officer | 0 | 12,500 | 25,000 | 37,500 | 50,000 | ||||
Senior Vice President, General Counsel and Secretary | 0 | 12,500 | 25,000 | 37,500 | 50,000 | ||||
Annual Equity Awards
In addition to the long-term performance-based equity awards, we have established a time-based vesting award for 2017 in the same amounts granted in 2016. Awards will vest at a rate of 33.33% per year, generally subject to the executive's continued employment. The number of shares awarded to each named executive officer is set forth below.
Executive | Number of Shares | |
Chairman, Chief Executive Officer and President | 55,000 | |
Senior Vice President, Chief Financial Officer and Treasurer | 27,500 | |
Senior Vice President, Corporate Development | 17,500 | |
Senior Vice President and Chief Accounting Officer | 12,500 | |
Senior Vice President, General Counsel and Secretary | 12,500 | |
Deferred Compensation
The Company does not maintain any defined benefit pension programs for its executives. The Company maintains an elective non-qualified deferred compensation plan for executives. Pursuant to the plan, the Company's contributions under the plan are equal to 50% of the participant's deferral for the first 10% of the salary and/or bonus deferred, subject to a maximum annual Company contribution equal to 5% of the participant's salary and/or bonus. All amounts credited to an executive's account are notionally invested, as directed by the executive, in commonly available mutual funds, and the Company does not guarantee any minimum returns. The plan is unfunded and benefits are paid from the Company's general assets. However, the Company currently contributes funds into a grantor trust on a monthly basis in respect of these deferred compensation obligations. The Company generally sets aside separately the amounts deferred by the executives and the matching contributions thereon and, to protect against excess liabilities, invests such amounts in the mutual funds notionally selected by each executive. The deferred compensation program is described in more detail under the heading 2016 Nonqualified Deferred Compensation of this Proxy Statement.
Benefits and Perquisites
We believe that executives should be offered customary benefits and perquisites that are reasonable relative to the benefits provided to all employees, are consistent with competitive practices among the Company's peer group and, in certain circumstances, may address a particular reasonable issue or concern of an executive. The standard benefits offered to all of the Company's employees include medical, dental and vision insurance, group life insurance, short and long-term disability and a 401(k) with certain contributions matched by the Company (50% of employee contributions, subject to applicable contribution limits). Consistent with the objectives described above, the Company also provides certain executive officers with additional supplemental benefits and perquisites,
36 | Notice of Annual Meeting of Shareholders and Proxy Statement
including in limited instances, use of the Company's private aircraft where individual circumstances merit. The description and value of such supplemental benefits and perquisites in 2016 can be found on the All Other Compensation Table of this Proxy Statement.
Employment Agreements
None of the named executive officers has an employment agreement with the Company.
Other Compensation Policies
Hedging and Pledging Policy. We believe that equity ownership fosters an atmosphere where directors and officers "think like owners" and are motivated to increase the long-term value of the Company by aligning their interests with those of the Company's shareholders. Accordingly, we have adopted policies generally restricting each of the Company's directors and executive officers from engaging in hedging transactions or pledging Company shares.
Compensation Clawback Policy. The Company has a commitment to ensure that its executive officers adhere to the highest professional and personal standards. Accordingly, the Company's policy is that misconduct by any executive officer that leads to a restatement of the Company's financial results could subject executive officers to disgorge prior compensation to the extent such compensation would not have been earned based on the restated financial statements. In light of the highly regulated nature of the Company's business, the Committee would likely pursue such remedy, among others, where appropriate based on the facts and circumstances surrounding the restatement and existing laws.
Statutory and Regulatory Considerations. In designing the Company's compensatory programs, we consider the various tax, accounting and disclosure rules associated with various forms of compensation. We also review and consider the deductibility of executive compensation under Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"), which generally provides that the Company may not deduct certain compensation of more than $1 million that is paid to certain individuals. We seek to preserve the Company's tax deductions for executive compensation to the extent consistent with the Company's executive compensation objectives. However, we may also from time to time consider and grant compensation that may not be tax deductible if we believe such compensation is warranted to achieve the Company's objectives.
37 | Notice of Annual Meeting of Shareholders and Proxy Statement
Summary Compensation Table
The following table sets forth information concerning the compensation earned during the fiscal years ended December 31, 2016, 2015 and 2014 by the Company's Chief Executive Officer, Chief Financial Officer and the three other most highly compensated executive officers as of December 31, 2016 (collectively, the "Named Executive Officers"):
Name and Principal Position | Year | Salary ($) (1) | Stock Awards ($) (2) | Non-Equity Incentive Plan Compensation ($) (3) | All Other Compensation ($) (4) | Total ($) | |||||||||||
Peter M. Carlino Chairman, Chief Executive Officer and President | 2016 | 1,808,468 | 5,317,400 | 2,531,854 | 2,353,353 | 12,011,075 | |||||||||||
2015 | 1,878,024 | 5,417,500 | 3,279,763 | 6,189,919 | 16,765,206 | ||||||||||||
2014 | 1,808,468 | 7,087,300 | 1,910,683 | 9,745,696 | 20,552,147 | ||||||||||||
William J. Clifford Senior Vice President, Chief Financial Officer and Treasurer | 2016 | 1,166,990 | 2,658,700 | 1,633,786 | 594,436 | 6,053,912 | |||||||||||
2015 | 1,211,874 | 2,708,750 | 2,117,427 | 2,142,572 | 8,180,623 | ||||||||||||
2014 | 1,166,990 | 3,543,650 | 1,236,637 | 3,419,671 | 9,366,948 | ||||||||||||
Steven T. Snyder Senior Vice President, Corporate Development | 2016 | 519,841 | 1,691,900 | 727,777 | 628,628 | 3,568,146 | |||||||||||
2015 | 539,835 | 1,723,750 | 944,996 | 1,086,847 | 4,295,428 | ||||||||||||
2014 | 519,841 | 2,255,050 | 557,283 | 1,370,527 | 4,702,701 | ||||||||||||
Desiree A. Burke (5) Senior Vice President and Chief Accounting Officer | 2016 | 400,000 | 1,208,500 | 280,000 | 153,167 | 2,041,667 | |||||||||||
2015 | 385,817 | 1,231,250 | 337,149 | 263,864 | 2,218,080 | ||||||||||||
2014 | 232,919 | 1,610,750 | 197,186 | 378,457 | 2,419,312 | ||||||||||||
Brandon J. Moore Senior Vice President, General Counsel and Secretary | 2016 | 425,000 | 1,208,500 | 297,500 | 29,812 | 1,960,812 | |||||||||||
2015 | 311,538 | 985,000 | 272,240 | 31,272 | 1,600,050 | ||||||||||||
2014 | 285,000 | 1,288,600 | 159,224 | 36,849 | 1,769,673 | ||||||||||||
(1) | Amounts are based on W2 reported earnings, which reflects timing of wages paid. |
(2) | The amounts reflect the full grant date fair value calculated in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, "Compensation - Stock Compensation" ("ASC 718"). The assumptions used in calculating these amounts are described in footnote 3 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2016. Included in stock awards for the years 2016, 2015 and 2014 are restricted stock and performance-based restricted stock awards granted on January 4, 2016, January 2, 2015 and April 25, 2014, respectively, relating to the Company's long-term fixed equity award grant and long-term performance-based equity award grant, respectively. For more information on the Company’s long-term fixed equity awards and long-term performance-based equity awards, see the Overview of 2016 Compensation section of the Compensation Discussion and Analysis included in this Proxy Statement. |
(3) | The amounts in 2016, 2015 and 2014 reflect annual performance cash awards earned for each period. For more information on the Company's annual performance cash awards, see the Compensation Discussion and Analysis included in this Proxy Statement. |
(4) | See All Other Compensation Table included in this Proxy Statement for more information. |
(5) | Ms. Burke joined the Company on April 30, 2014. |
38 | Notice of Annual Meeting of Shareholders and Proxy Statement
All Other Compensation Table
The following table describes each component of the All Other Compensation column of the Summary Compensation Table:
Perquisites | ||||||||||||||||||||||||||
Name | Year | Company Contributions to Deferred Compensation Plan ($) (1) | Company Contributions to 401(k) ($) (2) | Company Dividend Equivalents Related to Spin-Off ($) (3) | Company Paid Insurance Premiums ($) (4) | Club Memberships ($) | Personal Use of Company Vehicle ($) (5) | Personal Use of Company Airplane ($) (6) | Total ($) | |||||||||||||||||
Peter M. Carlino | 2016 | 254,411 | 5,300 | 1,894,119 | — | 4,230 | 4,439 | 190,854 | 2,353,353 | |||||||||||||||||
2015 | 189,435 | 5,300 | 5,791,097 | — | 4,575 | 2,000 | 197,512 | 6,189,919 | ||||||||||||||||||
2014 | 147,842 | 5,200 | 9,391,106 | — | 4,560 | — | 196,988 | 9,745,696 | ||||||||||||||||||
William J. Clifford | 2016 | 164,221 | 5,300 | 403,077 | — | — | — | 21,838 | 594,436 | |||||||||||||||||
2015 | 122,426 | 5,300 | 2,006,215 | — | — | — | 8,631 | 2,142,572 | ||||||||||||||||||
2014 | 86,138 | 5,200 | 3,300,415 | — | — | — | 27,918 | 3,419,671 | ||||||||||||||||||
Steven T. Snyder | 2016 | 73,242 | 5,300 | 543,831 | 6,255 | — | — | — | 628,628 | |||||||||||||||||
2015 | 54,856 | 5,300 | 1,020,436 | 6,255 | — | — | — | 1,086,847 | ||||||||||||||||||
2014 | 34,244 | 8,750 | 1,321,278 | 6,255 | — | — | — | 1,370,527 | ||||||||||||||||||
Desiree A. Burke | 2016 | 36,857 | 5,300 | 111,010 | — | — | — | — | 153,167 | |||||||||||||||||
2015 | 29,150 | 5,300 | 229,414 | — | — | — | — | 263,864 | ||||||||||||||||||
2014 | 10,717 | 3,172 | 364,568 | — | — | — | — | 378,457 | ||||||||||||||||||
Brandon J. Moore | 2016 | 17,210 | 5,300 | 7,302 | — | — | — | — | 29,812 | |||||||||||||||||
2015 | 6,231 | 5,300 | 19,741 | — | — | — | — | 31,272 | ||||||||||||||||||
2014 | — | 5,192 | 31,657 | — | — | — | — | 36,849 | ||||||||||||||||||
(1) | This column reports the Company's matching contributions under the Company's Deferred Compensation Plan. |
(2) | This column reports the Company's contributions to the Named Executive Officers' 401(k) savings accounts. |
(3) | In connection with the Spin-Off transaction, this column reports dividends paid to the Named Executive Officers on vested stock options converted from PENN stock options as of the time of the Spin-Off and the incremental fair value charge taken in 2014 and 2015 by the Company relating to dividends accrued on unvested stock options as of the time of Spin-Off, which was not factored into the grant date value of the awards at the time they were granted. The final dividend payment was made on September 23, 2016. |
(4) | This column reports life insurance policy premiums paid by the Company on behalf of Mr. Snyder. |
(5) | The amount allocated for personal use of a company vehicle is calculated based upon the lease value of the vehicle and an estimate of personal usage provided by the executive. |
(6) | The amount allocated for personal aircraft usage is calculated based on the incremental cost to the Company for fuel, landing fees and other variable costs of operating the airplane. Since the Company's aircrafts are used for business travel, the Company does not include fixed costs that do not change based on usage, such as pilots' salaries, depreciation of the purchase cost of the aircraft and the cost of general maintenance. |
39 | Notice of Annual Meeting of Shareholders and Proxy Statement
2016 Grants of Plan-Based Awards
The following table sets forth certain information regarding grants of plan-based awards to the Named Executive Officers in 2016:
Estimated future payouts under equity incentive plan awards | All Other Stock Awards | |||||||||||||||||
Name | Grant Date | Grant Board Approval Date | Threshold (#) (1) | Target (#) (1) | Maximum (#) (1) | Number of Securities Underlying Stock Awards (#) (2) | Grant Date Fair Value of Stock Awards ($) (3) | |||||||||||
Peter M. Carlino | 1/4/2016 | 12/14/2015 | 55,000 | 1,529,000 | ||||||||||||||
1/4/2016 | 12/14/2015 | 0 | 110,000 | 220,000 | 3,788,400 | |||||||||||||
William J. Clifford | 1/4/2016 | 12/14/2015 | 27,500 | 764,500 | ||||||||||||||
1/4/2016 | 12/14/2015 | 0 | 55,000 | 110,000 | 1,894,200 | |||||||||||||
Steven T. Snyder | 1/4/2016 | 12/14/2015 | 17,500 | 486,500 | ||||||||||||||
1/4/2016 | 12/14/2015 | 0 | 35,000 | 70,000 | 1,205,400 | |||||||||||||
Desiree A. Burke | 1/4/2016 | 12/14/2015 | 12,500 | 347,500 | ||||||||||||||
1/4/2016 | 12/14/2015 | 0 | 25,000 | 50,000 | 861,000 | |||||||||||||
Brandon J. Moore | 1/4/2016 | 12/14/2015 | 12,500 | 347,500 | ||||||||||||||
1/4/2016 | 12/14/2015 | 0 | 25,000 | 50,000 | 861,000 | |||||||||||||
(1) | Awards represent performance-based restricted stock with cliff vesting at the end of the performance period beginning on January 4, 2016 and ending on December 31, 2018. The amount of restricted shares vested at the end of the performance period can range from zero to a maximum of 200% of target, depending on the level of achievement of the performance goals measured against the return of the companies included in the MSCI US REIT Index over the measurement period. In the event of a change in control, awards vest immediately at target level or, if greater, the actual level of achievement as of the date of the change of control, annualized for the entire performance period. For more information on the Company's performance-based equity awards, see the Overview of 2016 Compensation section of the Compensation Discussion and Analysis included in this Proxy Statement. |
(2) | Awards represent restricted stock awards granted to the Named Executive Officers as part of their annual compensation. All grants have vesting over three years, 33.33% on the first anniversary of the date of grant and 33.33% on each succeeding anniversary. In the event of a change in control, awards vest immediately. |
(3) | Represents the full grant date fair value of awards under ASC 718. Generally, the full grant date fair value is the amount the Company would expense in its financial statements over the award's vesting period. The Company utilized a third party valuation firm to measure the fair value of the performance-based restricted stock awards at grant date using the Monte Carlo model. Additional information regarding the calculation of the grant date fair value is included in footnote 3 to the Company's audited financial statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2016. |
40 | Notice of Annual Meeting of Shareholders and Proxy Statement
Outstanding 2016 Equity Awards at Fiscal Year-End
The following table sets forth information concerning equity awards outstanding as of December 31, 2016:
Option Awards | Stock Awards | Performance Awards | ||||||||||||||||||||||
Name | Stock Ticker | Number of Securities Underlying Unexercised Options (#) (1) | Option Exercise Price ($) | Option Expiration Date | Stock Ticker | Stock Award Grant Date | Number of Shares or Units Held that Have Not Vested (#) | Market Value of Shares or Units Held that Have Not Vested ($)(4) | Number of Unearned Shares or Units Held that Have Not Vested (#) (5) | Market Value of Unearned Shares or Units Held that Have Not Vested ($)(4) | ||||||||||||||
Peter M. Carlino | PENN | 84,123 | 6.96 | 7/8/2018 | GLPI | 1/29/2013 | (3) | 16,911 | 517,815 | |||||||||||||||
PENN | 84,123 | 8.19 | 1/3/2018 | GLPI | 6/12/2013 | (2) | 26,534 | 812,471 | ||||||||||||||||
PENN | 84,123 | 8.88 | 1/3/2019 | GLPI | 3/11/2014 | (2) | 10,012 | 306,567 | ||||||||||||||||
GLPI | 4/25/2014 | (2) | 18,333 | 561,356 | ||||||||||||||||||||
GLPI | 1/2/2015 | (2) | 36,666 | 1,122,713 | 110,000 | 3,368,200 | ||||||||||||||||||
GLPI | 1/4/2016 | (2) | 55,000 | 1,684,100 | 110,000 | 3,368,200 | ||||||||||||||||||
PENN | 1/29/2013 | (3) | 13,451 | 185,489 | ||||||||||||||||||||
William J. Clifford | PENN | 150,000 | 6.96 | 7/8/2018 | GLPI | 1/29/2013 | (3) | 8,184 | 250,594 | |||||||||||||||
PENN | 150,000 | 8.19 | 1/3/2018 | GLPI | 3/18/2013 | (2) | 9,430 | 288,747 | ||||||||||||||||
PENN | 150,000 | 8.88 | 1/3/2019 | GLPI | 3/11/2014 | (2) | 4,845 | 148,354 | ||||||||||||||||
GLPI | 4/25/2014 | (2) | 9,166 | 280,663 | ||||||||||||||||||||
GLPI | 1/2/2015 | (2) | 18,333 | 561,356 | 55,000 | 1,684,100 | ||||||||||||||||||
GLPI | 1/4/2016 | (2) | 27,500 | 842,050 | 55,000 | 1,684,100 | ||||||||||||||||||
PENN | 1/29/2013 | (3) | 6,510 | 89,773 | ||||||||||||||||||||
PENN | 3/18/2013 | (2) | 7,500 | 103,425 | ||||||||||||||||||||
Steven T. Snyder | GLPI | 92,509 | 20.40 | 1/3/2018 | GLPI | 1/29/2013 | (3) | 2,431 | 74,437 | |||||||||||||||
GLPI | 88,085 | 17.34 | 7/8/2018 | GLPI | 3/18/2013 | (2) | 4,401 | 134,759 | ||||||||||||||||
GLPI | 92,509 | 22.09 | 1/3/2019 | GLPI | 3/11/2014 | (2) | 1,439 | 44,062 | ||||||||||||||||
PENN | 15,000 | 6.96 | 7/8/2018 | GLPI | 4/25/2014 | (2) | 5,833 | 178,606 | ||||||||||||||||
PENN | 70,000 | 8.88 | 1/3/2019 | GLPI | 1/2/2015 | (2) | 11,666 | 357,213 | 35,000 | 1,071,700 | ||||||||||||||
GLPI | 1/4/2016 | (2) | 17,500 | 535,850 | 35,000 | 1,071,700 | ||||||||||||||||||
PENN | 1/29/2013 | (3) | 1,933 | 26,656 | ||||||||||||||||||||
PENN | 3/18/2013 | (2) | 3,500 | 48,265 | ||||||||||||||||||||
Desiree A. Burke | GLPI | 1/29/2013 | (3) | 842 | 25,782 | |||||||||||||||||||
GLPI | 3/18/2013 | (2) | 1,571 | 48,104 | ||||||||||||||||||||
GLPI | 3/11/2014 | (2) | 2,814 | 86,165 | ||||||||||||||||||||
GLPI | 4/25/2014 | (2) | 4,166 | 127,563 | ||||||||||||||||||||
GLPI | 1/2/2015 | (2) | 8,333 | 255,156 | 25,000 | 765,500 | ||||||||||||||||||
GLPI | 1/4/2016 | (2) | 12,500 | 382,750 | 25,000 | 765,500 | ||||||||||||||||||
PENN | 1/29/2013 | (3) | 670 | 9,239 | ||||||||||||||||||||
PENN | 3/18/2013 | (2) | 1,250 | 17,238 | ||||||||||||||||||||
Brandon J. Moore | GLPI | 3/18/2013 | (2) | 314 | 9,615 | |||||||||||||||||||
GLPI | 3/11/2014 | (2) | 2,314 | 70,855 | ||||||||||||||||||||
GLPI | 4/25/2014 | (2) | 3,333 | 102,056 | ||||||||||||||||||||
GLPI | 1/2/2015 | (2) | 6,666 | 204,113 | 20,000 | 612,400 | ||||||||||||||||||
GLPI | 1/4/2016 | (2) | 12,500 | 382,750 | 25,000 | 765,500 | ||||||||||||||||||
PENN | 3/18/2013 | (2) | 250 | 3,448 | ||||||||||||||||||||
(1) | All options are fully vested and exercisable. |
(2) | Represents restricted stock awards. The forfeiture provisions on the restricted stock awards granted on March 18, 2013 and June 12, 2013, lapse 25% on each of the first, second, third and fourth anniversary of the date of grant. The forfeiture provisions on the restricted stock awards granted March 11, 2014, April 25, 2014, January 2, 2015, and January 4, 2016 lapse 33.33% on each of the first, second, and third anniversary of the date of grant. In the event of a change in control, the forfeiture restrictions on restricted stock lapse immediately. |
(3) | Represents phantom stock unit awards. Awards granted January 29, 2013, are scheduled to vest over four years, 25% on the first anniversary of the date of grant and 25% on each succeeding anniversary. In the event of a change in control, the forfeiture restrictions on restricted stock lapse immediately. |
41 | Notice of Annual Meeting of Shareholders and Proxy Statement
(4) | Calculated based on the closing price of the Company's common stock on December 30, 2016 ($13.79 for PENN and $30.62 for GLPI), which was the last trading day of 2016. |
(5) | Represents target achievement of the performance-based restricted stock awards. The amount of restricted stock to actually vest at the end of the performance period can range from zero to the maximum as described in the long-term performance-based equity awards section of the Overview of 2016 Compensation section of the Compensation Discussion and Analysis included in this Proxy Statement. The forfeiture provisions on the performance-based restricted stock awards granted January 2, 2015 and January 4, 2016, lapse at the end of the measurement period, December 31, 2017 and 2018, respectively. In the event of a change in control, awards vest immediately at target level or, if greater, the actual level of achievement as of the date of the change of control, annualized for the entire performance period. |
42 | Notice of Annual Meeting of Shareholders and Proxy Statement
2016 Option Exercises and Stock Vested
The following table sets forth information concerning options exercised, restricted stock awards vested, and phantom stock unit awards vested during fiscal 2016:
Option Awards | Stock Awards | Phantom Stock Unit Awards | ||||||||||||||||||
Name | Stock Ticker | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) (1) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) (1) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) (1) | |||||||||||||
Peter M. Carlino (2) | GLPI | 2,899,164 | 39,112,833 | 73,215 | 2,164,389 | 34,697 | 905,087 | |||||||||||||
PENN | 168,246 | 881,340 | — | — | 27,597 | 376,278 | ||||||||||||||
William J. Clifford | GLPI | 957,241 | 11,855,940 | 32,609 | 963,852 | 16,791 | 438,001 | |||||||||||||
PENN | 250,000 | 2,230,298 | 7,500 | 111,300 | 13,355 | 182,092 | ||||||||||||||
Steven T. Snyder | GLPI | 270,362 | 2,607,875 | 17,506 | 519,310 | 4,987 | 130,088 | |||||||||||||
PENN | 131,653 | 887,701 | 3,500 | 51,940 | 3,967 | 54,089 | ||||||||||||||
Desiree A. Burke | GLPI | 148,675 | 2,222,459 | 12,720 | 374,975 | 1,730 | 45,127 | |||||||||||||
PENN | 18,750 | 119,391 | 1,250 | 18,550 | 1,376 | 18,762 | ||||||||||||||
Brandon J. Moore | GLPI | 26,432 | 377,200 | 9,296 | 273,802 | — | — | |||||||||||||
PENN | 5,000 | 40,600 | 250 | 3,710 | — | — | ||||||||||||||
(1) | Value realized reflects the difference between the per-share closing price of the Company's common stock on the date of exercise and the option's exercise price for options and the closing price of the Company's common stock on the day prior to vesting for awards, not the grant date fair value disclosed elsewhere in this Proxy Statement. |
(2) | As part of the Spin-Off, Mr. Carlino exchanged stock awards to acquire Penn common stock for awards to acquire GLPI common stock; therefore there are no Penn stock award vestings reported for Mr. Carlino. |
43 | Notice of Annual Meeting of Shareholders and Proxy Statement
Potential Payments Upon Termination or Change-in-Control
The Named Executive Officers are entitled to accelerated vesting of equity-based incentive awards under the 2013 Long Term Incentive Compensation Plan (the "Plan") upon a change in control and, under certain circumstances, in the event of termination. The information below describes and quantifies compensation that would become payable and that which is accelerated assuming that such termination was effective December 31, 2016.
Executive Payments | Termination without Cause by Company ($) | Termination Upon Death ($) | Termination upon Disability ($) | Change in Control ($) | Change in Control Termination without Cause ($) | |||||||||||||||