SEC Filings

DEFR14A
MEDTRONIC PLC filed this Form DEFR14A on 10/11/2017
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Fiscal Year 2017 Annual Incentive Plan Calculation Methodology

 

In calculating the annual incentive plan results, if the minimum performance for a measure is met, then a performance multiplier for each performance measure is determined and the overall performance score is calculated. For each performance measure, the performance multiplier would be 0 if performance is below the minimum, 0.5x if performance is at threshold, 1x if performance is at target and 2x if performance is at or above the maximum performance level. The performance multiplier for each performance measure is multiplied by the weighted percentage to obtain a performance score for that measure. The performance scores for each measure are added together for an overall performance score, taking into account the Quality Compliance Modifier. That overall performance score is then multiplied by the applicable NEO’s individual target award and eligible earnings to arrive at the actual payment amount, as illustrated below:

 

MEDTRONIC INCENTIVE PLAN PERFORMANCE EQUALS:

 

 

Fiscal Year 2017 Annual Incentive Plan Performance Measures

 

At the Compensation Committee’s June 2016 meeting, the Committee approved the target performance goal and performance range for each of the three equally weighted performance measures. The targets come directly from the Company’s Board-approved annual operating plan and the performance range is derived from the median performance range structure used by our compensation Comparison Group. The Committee also strives to ensure the three measures are aligned with each other.

 

The following provides details about the performance measures, targets, and performance range.

 

Measure Rationale Performance Targets Weight
Revenue Growth Over Prior Year (Constant Currency, Constant Week) Top line growth continues to be a key Company strategy, reflecting market development, market penetration, and market share performance

Minimum

(95% of Plan)

Target

(100% of Plan)

Maximum

(105% of Plan)

1/3 of Payout
(0.2%) 5.0% 10.3%
Diluted Earnings Per Share Growth (Non-GAAP) Earnings both from operating efficiency and financial management is a key driver of returns to shareholders

Minimum

(92% of Plan)

Target

(100% of Plan)

Maximum

(110% of Plan)

1/3 of Payout
$4.27 $4.62 $5.08
Cash-Flow Indicator Cash flow generated from operations plus management of short-term receivables, inventory, and payables is a key driver of the Company’s ability to re-invest and provide returns to shareholders (in millions)

Minimum

(90% of Plan)

Target

(100% of Plan)

Maximum

(110% of Plan)

1/3 of Payout
$5,701 $6,334 $6,968
Quality Compliance Modifier Performance Threshold We endeavor to maintain high quality system compliance measured through FDA inspection results A score of 30 points or less A score of more than 30 points reduces payout by five (5) percentage points

 

For purposes of the annual incentive calculation, “diluted earnings per share” refers to non-GAAP diluted earnings per share as reported to shareholders. A reconciliation of the GAAP to non-GAAP diluted earnings per share is included in Appendix A to this proxy statement. Revenue growth is defined as the annual growth rate in revenue excluding the effects of foreign exchange rates, and is expressed as a percentage. Cash Flow Indicator is defined as profit after tax exclusive of special charges, plus or minus changes in accounts receivable, inventories, and accounts payable. The Cash Flow Indicator only includes changes in assets and liabilities that best reflect annual operations. This calculation excludes the effects of foreign exchange rates. Quality Compliance Modifier Performance Threshold uses a score calculated as follows:

 

FDA Inspections = Average Number of Findings per Inspection X 10 points

 

Non-Material FDA Warning Letter = 1 point per finding

 

Material FDA Warning Letter = 20 points

 

MEDTRONIC PLC   2017 Proxy Statement    42

 
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