Pultegroup pays a visit to the Friday night dump…

May 31, 2011

We always watch the filings that trickle in just before the SEC closes its doors for a long holiday weekend, and that’s how we found this 8-K by home building company Pultegroup, Inc. (PHM), filed at 4:41 p.m on Friday afternoon

In that filing, PulteGroup disclosed the retirement terms for Roger A. Cregg, its Executive Vice President and Chief Financial Officer, who announced back in February that he planned to retire sometime this year. The filing was submitted on the same day that Cregg’s retirement took effect, May 27. Two days prior to that, though, the company and Cregg entered into a Separation Agreement that was attached to the 8-K.

The Agreement discloses that PulteGroup will pay Cregg $1.35 million, which gives him an extra 24 months of his base salary. It’s also giving him $22,769.84 as a “COBRA allowance” to help buy health insurance. As long as Cregg returns any company property that he has and doesn’t breach the terms of the Separation Agreement, he will get a check for $1.37 million (minus taxes and any other required withholding) within 30 days.

But wait. There’s more. If the company performs well, Cregg is also eligible for a pro-rated share of his 2011 bonus. And there’s at least another $547,500, to be paid “not later than March 15, 2012,” which represents his Long Term Incentive Award for the 2009 – 2011 cycle. That number may increase, since the filing notes that any payment for 2011 will be “based on the actual performance of the Company” and – like his bonus – will be prorated for the time that he worked this year.

Finally, there’s the matter of Cregg’s outstanding equity awards. The Separation Agreement specifies that while Cregg’s outstanding stock options and restricted stock awards will vest in accordance with the terms of their respective grants, there is an exception:

“On the effective date of this Agreement, Your outstanding stock option agreements are hereby amended to provide that after Your Retirement Date the Company shall treat You as continuing employment with the Company on a full-time basis for purposes of determining the vesting and exercisability of Your stock options, and Your stock options shall continue to vest and shall be exercisable by You with respect to all of the shares of common stock subject to the options as set forth in Your grant documents governing such options until and including the expiration date of such options.”

An exhibit to the filing helps to distill exactly what this means for Cregg: Out of the 2,651,668 outstanding options, 1,864,168 of them are deemed “Exercisable” and have vesting dates that range between the signing of the Separation Agreement and February, 2015. Some of the options are currently underwater (given the current stock price of $8.29 per share), but that may change before Cregg needs to do anything with them.

This isn’t the first expensive retirement for PulteGroup in the past year. We wrote about founder William Pulte’s retirement in February, 2010; but also, former Executive Vice President and Chief Operating Officer Steven C. Petruska retired on August 14 of last year, which brought him nearly $1.625 million in separation-related payments.

We found it interesting, though, that Cregg is turning in his keys at the ripe old age of 54. Although we know from PulteGroup’s proxy (filed April 5) that the company doesn’t have a defined benefit pension plan or any supplemental executive retirement arrangements, Cregg is still leaving with more than $1.92 million in cash and continued vesting of his equity interests. We suspect that’s at least enough money to help soften the transition from high-powered executive to the golf course.

Image source: bradipo via flickr

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