UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): March 23, 2018
LIBERTY LATIN AMERICA LTD.
(Exact Name of Registrant as Specified in Charter)
Bermuda | 001-38335 | 98-1386359 | ||
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification #) | ||
Clarendon House,
2 Church Street,
Hamilton HM 11, Bermuda
(Address of Principal Executive Office)
303-925-6000
(Registrant’s telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Item 5.02 Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers; Compensatory Arrangements of Certain Officers.
(e) Compensatory Arrangements of Certain Officers
2018 Equity Awards.
For the equity incentive award component of our executive officers’ compensation packages, the Compensation Committee (the “Committee”) of Liberty Latin America Ltd.’s Board of Directors sets a target annual equity value for each executive, of which approximately two-thirds is delivered in the form of an annual award of performance-based restricted share units (“PSUs”) and approximately one-third in the form of an annual award of share appreciation rights (“SARs”). A similar approach is applied to the equity incentive compensation for other key employees. In the following text, the terms "we", "our", "our company" and "us" refers to Liberty Latin America Ltd.
Each year’s award of PSUs has a two-year performance period. The percentage of the PSU award earned during the relevant performance period is subject to vesting in two equal installments on April 1 and October 1 of the year following the end of the performance period. Each year’s award of SARs is made at the same time as awards are made under our annual equity grant program for employees and on terms consistent with our standard form of SARs award agreement.
Pursuant to the Liberty Latin America 2018 Incentive Plan (the “Incentive Plan”), on March 23, 2018, the Committee approved the target annual equity values for 2018 and granted an aggregate of 463,848 PSUs (the “2018 PSUs”) for our executive officers, including our Chief Executive Officer and the other named executive officers of our company (other than our Executive Chairman, Michael T. Fries), who we currently anticipate will be among our five most highly compensated executive officers for fiscal 2018 (the “2018 NEOs”). The 2018 PSUs will be divided with one-third as Class A PSUs and two-thirds as Class C PSUs. Each 2018 PSU represents the right to receive one Class A common share or Class C common share, as applicable, subject to performance and vesting.
The target annual equity values and grants for the 2018 PSUs for our 2018 NEOs are set forth in the table below:
Two-thirds of Target Annual Equity Value in the Form of: | ||||||||
Name and Position | Target Annual Equity Value | Class A 2018 PSU Grant | Class C 2018 PSU Grant | |||||
Balan Nair, Chief Executive Officer & President | $6,000,000 | 62,894 | 125,788 | |||||
Chris Noyes, Senior Vice President & Chief Financial Officer (Principal Financial Officer) | $1,500,000 | 15,724 | 31,448 | |||||
Betzalel Kenigsztein, Senior Vice President & Chief Operating Officer | $1,500,000 | 15,724 | 31,448 | |||||
John M. Winter, Senior Vice President, Chief Legal Officer & Secretary | $1,250,000 | 13,102 | 26,204 | |||||
The performance period for the 2018 PSUs ends on December 31, 2019. As the performance measure, the Committee selected growth in consolidated operating cash flow (operating income before depreciation and amortization, share-based compensation, provisions and provision releases related to significant litigation for litigation, and impairment, restructuring and other operating items), as adjusted for events such as acquisitions, dispositions and changes in foreign currency exchange rates and accounting principles or policies that affect comparability. In choosing operating cash flow as the performance measure for the 2018 PSUs, the Committee’s goal was to ensure that the management team is focused on maximizing performance against a key financial metric used by our Board and management in evaluating our operating performance. The Committee expects to set the compound annual growth rate in consolidated operating cash flow (“OCF CAGR”) for the 2018 PSUs during the second quarter based upon a comparison of our 2017 actual results to those reflected in our long-range plan for 2019. The target OCF CAGR will be subject
1
to upward or downward adjustment for certain events in accordance with the terms of the grant agreement. A performance range of 50% to 125% of the target OCF CAGR would generally result in award recipients earning 50% to 150% of their target 2018 PSUs, subject to reduction or forfeiture based on individual performance. One-half of the earned 2018 PSUs will vest on April 1, 2020 and the balance on October 1, 2020. The Committee also established a minimum OCF CAGR base performance objective, subject to certain limited adjustments, which must be satisfied in order for our chief executive officer to be eligible to earn any of his 2018 PSUs. The base performance objective was designed so that the awards for our chief executive officer would qualify as performance-based compensation under Section 162(m) of the Internal Revenue Code of 1986, as amended. If the base performance objective is achieved, our chief executive officer will be eligible to earn 150% of his 2018 PSUs, subject to the committee’s discretion to reduce the size of the award earned, including to zero, to align with our company’s and the individual’s performance.
The 2018 PSUs are subject to forfeiture or acceleration in connection with certain termination of employment or change-in-control events consistent with the terms of the PSUs granted in 2016. The 2018 PSUs will convert to time-vested restricted share units following certain change-in-control events.
Deferred Compensation Plan
On March 23, 2018, the Committee adopted the Liberty Latin America Deferred Compensation Plan (the “Deferred Compensation Plan”) with an effective date of May 1, 2018. Officers of our company, which include the 2018 NEOs, who are also U.S. taxpayers, may participate in the Deferred Compensation Plan. Each designated participant may elect to defer all or any portion of his or her (1) annual cash performance award, (2) annual salary up to limits specified by the Committee (currently 90%) and (3) award, if any, under a current or future multiyear performance award arrangement. Cash compensation deferred under the Deferred Compensation Plan will be credited with interest initially at the rate of 8.5% per year, compounded daily (the credited interest fund). The Committee reserved the right to change the interest rate in the future, provided that any decreases in the rate will apply only to deferred elections that become irrevocable after the new rate is set. Deferred equity awards will not be credited with interest, but will be adjusted for splits, combinations, dividends or distributions. If the Committee approves the establishment of one or more phantom investment funds for purposes of the Deferred Compensation Plan, a participant may, but will not be obligated to, elect one or more of such phantom investment funds as the measurement fund for the purpose of calculating notional earnings, losses and other relevant amounts to be credited to or deducted from all or a portion of his or her deferred compensation instead of the credited interest fund.
The Deferred Compensation Plan provides the Committee with the discretion to terminate the Deferred Compensation Plan within 12 months of certain change-in-control events and distribute each participant’s account balance. Otherwise, the amount of compensation deferred will be distributed in a lump sum or in up to three installments upon the date or dates selected by the participant, or in up to five equal annual installments, or in a lump sum when the participant ceases to be an employee of our company. At the participant’s request, if the Committee determines that such participant has suffered a financial hardship, it may authorize immediate distribution of all or a portion of his or her account balance. The Committee has reserved the right to terminate the Deferred Compensation Plan at any time. Such an optional termination will not result in accelerated distributions.
2
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
LIBERTY LATIN AMERICA LTD. | ||
By: | /s/ JOHN M. WINTER | |
John M. Winter | ||
Senior Vice President | ||
Date: March 29, 2018
3