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APOLLO EDUCATION GROUP INC filed this Form DEF 14C on 12/27/2013
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The Compensation Committee regularly reviews the Comparator Group with the intent of making changes to reflect the appropriate market positioning as compared to relevant peers. By April 2013, our relative positioning with the Comparator Group in terms of the financial criteria used to establish the Comparator Group had changed significantly since that Comparator Group was established in March 2011. In light of this change in positioning, the Compensation Committee with the assistance of the independent committee consultant revised the Comparator Group. Pearl Meyer & Partners recommended that the Comparator Group be revised for benchmarking pay levels going forward on the basis of the following financial criteria: (i) market capitalization in the range of $1 billion to $6 billion, (ii) price-to-sales ratio in the range of 0.25 to 1.0, (iii) annual revenue at the same $2 billion to $10 billion range, as used in the past, and (iv) meeting at least one of the following criteria: (a) an average return on equity for the past five years greater than 19%, (b) an average return on invested capital for the past five years greater than 10% or (c) average free cash flow over the past five years in the range of $350 million to $2 billion. This Revised Comparator Group includes the following companies:
Advanced Auto Parts, Inc.
Gannett Co., Inc.
Alliance Data Systems
International Game Technology
Interpublic Group of Cos. Inc.
Avery Dennison Corp.
Big Lots, Inc.
Laboratory Corp. of America Holdings
CA Inc.
Lender Processing Services, Inc.
Cablevision Systems Corp.
McGraw-Hill Companies
DeVry Inc.
Pitney Bowes Inc.
Quest Diagnostics
GameStop Corp.
Washington Post
In addition to our Comparator Group, the Compensation Committee also monitors compensation programs for an Education Peer Group. The Compensation Committee generally does not compare our named executive officers’ compensation levels to the Education Peer Group. However, the Compensation Committee believes that monitoring the compensation levels, overall compensation structure and program design, as well as the financial performance, of this group provides useful information that assists the Compensation Committee in designing our executive compensation programs. Our Education Peer Group is comprised of the following companies:
Bridgepoint Education, Inc.
Education Management Corp.
Capella Education Co.
Grand Canyon Education, Inc.
Career Education Corp.
ITT Education Services, Inc.
Corinthian Colleges, Inc.
Strayer Education, Inc.
DeVry, Inc.
The Washington Post Co.
Risk Assessment
The compensation programs and practices for our named executive officers are structured in a manner that does not encourage unnecessary or excessive risk-taking and that is not reasonably likely to create a material risk for us. Such conclusion is based on the following considerations:
The predominant component of the compensation structure for our named executive officers is in the form of long-term equity awards tied to the price of our Class A Common Stock, and increasing levels of compensation are derived from those awards as the stock price appreciates and shareholder value is thereby created. Accordingly, the overall compensation program is structured so as to encourage long-term growth and appreciation in the value of our business and stock price.
The performance share units we awarded as part of executive officer compensation for the 2013 fiscal year were tied to strategic financial objectives measured in terms of adjusted free cash flow and net revenue over the applicable multi-year performance period and are capped at three times the target number of performance share units awarded. The more leveraged performance share unit awards we made to Mr. Cappelli were tied to the growth in adjusted operating free cash flow of Apollo Global and were designed to be more entrepreneurial in nature by linking the payout to our success in diversifying our revenue sources. For that reason the payout level was capped at a higher maximum multiple of six times the target number of performance share units awarded. In addition, the portion of Mr. Cappelli’s total direct compensation allocated to his two more leveraged Apollo Global awards (the March 2012 award and his earlier June 2011 award) is limited to 8% (or approximately $1.5 million) of his multi-year targeted