Operating income for the 2013 fiscal year was also subject to the following adjustments:
for any business classified as a discontinued operation during the 2013 fiscal year, our reported operating income was increased for any actual operating income, or decreased for any actual operating loss, from the start of the 2013 fiscal year through the date of disposal, and the budgeted operating income included in the annual budget for the 2013 fiscal year presented to our Board of Directors on October 4, 2012 (the “2013 Budget”) for the period from the date of disposal to the end of such fiscal year was added to such reported operating income, and any budgeted operating loss for that period was deducted from such reported operating income; and
for other business or asset disposals effected after the start of the 2013 fiscal year that were not otherwise reported as discontinued operations, the budgeted operating income included in the 2013 Budget for the period from the date of disposal to the end of the fiscal year was added to our reported operating income, and budgeted operating loss for such period was deducted from reported operating income.
(2) Net Revenue. The second financial performance goal was tied to our net revenue for the 2013 fiscal year, as measured on a consolidated basis with our subsidiaries and in accordance with GAAP. The target, threshold and maximum, and actual levels that the Compensation Committee set for this particular metric, subject to the adjustments noted below, were as follows:
Our net revenue (as adjusted below) for the 2013 fiscal year was $3.681 billion and accordingly between the $3.645 Billion threshold level and the $3.715 Billion target level, with the actual level of attainment at 76% of target.
In calculating net revenue for purposes of the 2013 cash incentive plan, the following adjustments were to be made:
There was excluded all revenue attributable to companies acquired during the 2013 fiscal year.
For any business classified as a discontinued operation during such fiscal year, there was included any actual revenue from the start of the 2013 fiscal year through the date of disposal plus the budgeted revenue for that business that was included in the 2013 Budget for the period from the date of disposal to the end of the 2013 fiscal year.
For other business or asset disposals effected after the start of the 2013 fiscal year that were not reported as discontinued operations, there was included the budgeted revenue that was included in the 2013 Budget for the period from the date of disposal to the end of the 2013 fiscal year.
(3) Employee Productivity. The remaining performance target, weighted at 20%, was tied to an annual employee productivity factor. This metric was measured in terms of the relationship between employee headcount and the number of students enrolled in degree programs at the University of Phoenix determined as follows:
Quarterly Degreed Enrollment* = Quarterly Employee Productivity Factor
Quarterly Average Employee Headcount**
Quarterly Employee Productivity Factor X 4 = Annual Employee Productivity Factor
Degreed Enrollment numbers equal the Degreed Enrollment numbers as reported in Item 1 of the Company’s Annual Report on Form 10-K for the year ended August 31, 2013 under the Heading: “Business-Students-University of Phoenix Degreed Enrollment” for each respective quarter.
Quarterly Average Employee Headcount for each quarter was calculated as the 4 point average for that quarter (with the first point measured as of the last day of the month preceding the start of the applicable quarter and the remaining three points measured as of the last day of each month within that quarter) of our total full-time employee and part-time employee headcount (excluding all faculty members and non-US employees) as tracked pursuant to our Hyperion Planning system.
Annual Employee Productivity Factor
The Annual Employee Productivity Factor achieved for the 2013 fiscal year was 20.5. Accordingly, we attained this particular performance goal at 157% of target level.
The Compensation Committee reserved discretion to reduce by up to 30% the cash bonus amount otherwise payable to the named executive officers based on the levels at which the performance goals for the 2013 fiscal year were attained. The Committee chose to exercise this discretion to reduce the actual amounts payable under the plan for the 2013 fiscal year by 30 percentage points in the case of Mr. Cappelli, as Chief Executive Officer, and by 20 percentage points in the case of all other named executive officers. As noted in the Executive Summary, the Committee believed these reductions were appropriate