Summary
Applied Materials, Inc. (AMAT) filed an 8-K on December 7, 2020, to report on the approval of non-recurring, long-term value creation awards for its top executives. Specifically, CEO Gary E. Dickerson, CFO Daniel J. Durn, and SVP Prabu G. Raja were granted Performance Share Units (PSUs) tied to the company's Total Shareholder Return (TSR) over a five-year performance period (fiscal years 2021-2025). These awards are designed to align executive interests with those of shareholders, as the number of shares earned will range from 0% to 200% of the target amount, contingent upon achieving specific TSR hurdles relative to the stock price on December 3, 2020.
Key Highlights
- 1Top executives Gary E. Dickerson, Daniel J. Durn, and Prabu G. Raja received performance share unit (PSU) awards.
- 2The PSU awards are non-recurring, long-term value creation incentives.
- 3The number of PSUs earned is contingent on achieving specific Total Shareholder Return (TSR) hurdles over a five-year performance period (FY2021-FY2025).
- 4The award payout can range from 0% to 200% of the target number of PSUs.
- 5Vesting requires continued employment through the performance period, with provisions for involuntary termination without cause and death.
- 6The Committee intends to align executive compensation with long-term shareholder value creation.
- 7These awards supplement the executives' annual fiscal 2021 equity grants.
Frequently Asked Questions
The primary purpose is to align the long-term interests of key executives, including the CEO, CFO, and SVP of Semiconductor Products Group, with those of Applied Materials' shareholders. The awards are designed to reward executives only if shareholders realize significant value over the next five years, as the payout is directly tied to the company's Total Shareholder Return (TSR).
The actual number of PSUs earned will range from 0% to 200% of the target number, based on Applied Materials' TSR performance over a five-year period (fiscal years 2021-2025). Specific TSR hurdles are set, with a minimum TSR required for any shares to vest. Payouts will be determined by straight-line interpolation if the TSR falls between these predefined levels.
If a participant is involuntarily terminated without cause before the end of the performance period, their award will vest based on the TSR achievement up to their last day of employment. In the event of a participant's death during the performance period, the target number of PSUs will vest.
No, these PSU awards are described as 'non-recurring long-term value creation awards' and they 'supplement' the fiscal 2021 equity awards also granted to these executives as part of the company's annual grant process.