Page 53 - Proxy Statement - 2020

PSU Awards (55% of LTI Award) / Compensation Discussion and Analysis

Performance for each metric is measured independently, so PSUs our TSR against the S&P 500 index is appropriate because (1) it
can be earned as long as the threshold is satisfied for at least measures the interest of investors for whom we compete,
one metric. The “Target” level is generally viewed as achievable (2) there is no consensus of a significantly better peer group
although it has not been achieved every year. The “Maximum” with readily available comparable financial information; and
level is a stretch that is attainable if we outperform in the area (3) by using rTSR as a modifier rather than a primary
measured. PSU payments are capped at the target level if three- measurement, we give our other performance measures more
year TSR is negative. weight and their focus on profitability and growth both provide
long-term value creation.

The performance will be measured in February 2022 for the We believe that EBITDA, Sales Growth and rTSR metrics drive the
three-year period beginning January 2019 through December behaviors of our management team in ways that are intended to
2021 to determine (1) the three-year cumulative EBITDA for create the most value for our shareholders.
Martin Marietta against the target identified in the PSU Award
Agreement, and (2) the three-year cumulative Sales Growth Performance-Based RSU Awards
against the target identified in the PSU Award Agreement. The
payment amount will be further modified by the rTSR for the (45% of LTI Award)
three-year period as against the S&P 500, as set forth in the PSU
RSUs vest in three equal portions, each on the anniversary of the
Award Agreement. The Committee in its discretion may adjust
grant date (February 20, 2019) over a period of three years,
the final award values only as set forth in the Agreement, either
subject to satisfaction of the performance measure and generally
collectively or on an individual basis, in recognition of factors to continued employment through each one of those
that are unusual or nonrecurring. anniversaries. Once the restricted period ends (each anniversary
for one third of the total RSU award), the recipient will be issued
Over the three-year performance period, up to one-third of the unrestricted shares of common stock (minus applicable taxes).
target PSUs may be earned each year based on one-third of the The 2019 RSUs awarded to executive officers are also subject to
three-year cumulative EBITDA and Sales Growth goals. Each a performance measure that a stated level of EBITDA be
year, any earned PSUs are not distributed until the end of the achieved during the first year. If the performance measure is
three-year measurement period when the cumulative three-year satisfied, then the RSUs will continue to vest. If the performance
performance is determined. The actual PSUs will equal the measure is not satisfied, then the RSUs will be forfeited. For the
greater of the total PSUs earned for each of the annual periods 2019 grants, the performance measure was satisfied.
(capped at 100% of the annual target, that is, one-third of the
cumulative target) or the amount earned for cumulative three-
year performance (capped at 200% of target). The final amount 2019-2021 Performance Goals
of earned PSUs to be distributed are then subject to the three-
In setting minimum and maximum levels of payment, we
year rTSR modifier.
reviewed historical levels of performance against our long-range
plan commitments and conducted sensitivity analyses on
The PSUs will convert to unrestricted common stock and be alternative outcomes focused on identifying likely minimum and
distributed conditioned upon and to the extent that the maximum boundary performance levels. Levels between 100%
performance goals have been met, which will be determined in and the minimum and maximum levels were derived using linear
February 2022. These awards are also generally subject to interpolation between the performance hurdles.
continued employment through the date the PSUs vest. The
actual financial performance targets and achievement against The specific EBITDA and Sales Growth target values for the
those targets will be disclosed at the end of the three-year 2019-2021 PSUs are not publicly disclosed at the time of grant
performance period. due to the proprietary nature and competitive sensitivity of the
information. However, the method used to calculate the awards
will be based on actual performance compared to our 2019-
Selection of Relative TSR 2021 targets, with straight-line interpolation between points.
The individual award agreements require the adjustment of
We selected rTSR for the PSUs to measure our performance
goals to ensure that the ultimate payouts are not impacted to
against the companies in the S&P 500 index. We recognize that
the benefit or detriment of management by specified events,
every industry faces different challenges and opportunities, and
such as unplanned pension contributions, changes in accounting
that the S&P 500 index does not perfectly correlate to the
(GAAP) standards or impact of an acquisition or divestiture. The
environment in which Martin Marietta operates. However, we
Committee may exercise its discretion to reduce the final vesting
believe that the majority of our closest competitors are not
percentage to no more than target if the Company’s three-year
publicly-held companies or are not U.S. companies, and
TSR is less than zero.
therefore accurate information to potentially use as comparisons
is not readily available. As a result, we believe that comparing
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