Cincinnati Bell 2012 Annual Report Download - page 48

discussed below) and the recommendations of the Chief Executive Officer regarding each executive’s
performance and specific individual accomplishments. For each type of award (options, SARs, or performance
units), a market competitive grant is determined by dividing the peer group benchmark value for equity awards
by the binomial value of one option/SAR for the half of the award being made in options and SARs and the value
of one performance unit for the other half being awarded in performance units. The Compensation Committee’s
policy is not to grant more than 2,000,000 shares per year in connection with long-term incentive awards under
the 2007 Long Term Incentive Plan. To the extent that the settlement of the long-term incentive awards in any
year exceeds 2,000,000 shares, the incentives are settled in cash. The Company may also grant SARs and
performance cycle awards indexed to changes in the Company’s stock price to the NEOs that are payable in cash
instead of shares.
In addition, certain NEOs were granted additional performance unit awards pursuant to the Data Center
Performance Plan in 2012. See further discussion of the Data Center Performance Plan on page 37.
Stock Options and SARs
Stock options and SARs are used to align the interests of management with those of the Company’s
shareholders because they are designed to provide long-term equity-based compensation tied to future
appreciation of the Company’s common share price.
Target stock options and SARs grants for the NEOs for the fiscal year 2012-2014 performance cycle are
detailed in the Summary Compensation and Grants of Plan-Based Awards tables on pages 44 and 46 herein.
Performance Plan
Performance share or unit awards, which may be paid in common shares, cash, or a combination thereof, are
based on the achievement of specific Company quantitative goals over a three-year performance period. Such
awards are granted during the first quarter of each calendar year following finalization and approval by the full
Board of the one-year, two-year cumulative and three-year cumulative financial goal(s) for the next three-year
performance period.
The actual number of performance shares or units granted is based on the long-term incentive dollar value
approved by the Compensation Committee and the value of one share of stock on the date of grant. The threshold
and target performance levels are the same for each of the NEOs. For each performance cycle, actual adjusted
free cash flow and, commencing in 2012 and beyond, actual UCR achieved must be at least 90% of the target
goal in order to generate a threshold level payout equal to 75% of the target award for each executive.
For the adjusted free cash flow one-year, two-year cumulative and three-year cumulative financial target
goals and actual results for the performance periods beginning in 2010 and 2011, see the chart immediately
below.
Performance Cycle
Threshold
Performance
Level
Cumulative
Target
Amount
Superior
Performance
Level
Actual
Results*
Percentage of
Target (a)
(dollars in millions)
2010-2012
2010 .................................... 90% $130.0 110% $174.4 134.2%
2011 .................................... 90% $161.0 110% $316.6 196.6%
2012 .................................... 90% $197.0 110% $392.8 199.4%
2011-2013
2011 .................................... 90% $ 7.0 110% $ 36.9 527.1%
2012 .................................... 90% $ 32.0 110% $ 50.6 158.2%
(a) The maximum payout on a performance cycle is 150%
* Actual free cash flow was adjusted for special items not contemplated when the cumulative three-year target
was approved by the Compensation Committee.
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