Finding a newsworthy needle in Kraft’s 10-Q…
Hundreds of filings are pouring in daily as the deadline nears for the largest companies to file their next round of quarterly reports, and that poses an interesting dilemma for the folks here at footnoted: There is plenty to write about, but the challenge of getting through so much more makes it harder to find the proverbial needle in the haystack.
But we spotted something interesting in the 10-Q that Kraft Foods, Inc. (KFT) filed last Friday. It came in the form of Exhibit 10.1, a June 20, 2011 Offer Letter that the company sent to Daniel Myers, whom Kraft hired as its “Executive Vice President, Supply Chain.” Myers jumped to Kraft after spending more than three decades at The Procter & Gamble Co. (PG), where he served “in roles across all areas of engineering, plant management and supply chain functions” (according to his bio posted on Kraft’s website).
Kraft offered Myers millions of reasons to make the switch. To be precise, it offered him a total compensation package that estimated Myers’ “Range of Opportunity” as being somewhere between almost $1.76 million and $2.94 million. That is a big range, of course, but it depends on how much the Compensation Committee decides to pay him for variable types of compensation such as his cash bonus and award him in the form of performance shares and restricted stock.
Besides a base salary of $575,000 and the assurance that Myers will participate in the Annual Incentive Plan and the Long-Term Incentive Plan, Kraft also promised Myers:
“As part of your employment offer, to offset loss of compensation at your current employer and to ensure that you begin participating in our long-term compensation programs immediately, you will receive a one-time restricted stock award equal in value to $1,400,000.”
The sign-on stock award, as well as the long-term equity compensation that Myers is eligible to receive (starting in 2012) will fully vest if Myers stays with Kraft for a minimum of five years. That shouldn’t be much of a challenge, since he was only 56 when his move was announced, and he has proven his ability to stay with an employer for far longer than that. Finally, Myers got a couple of additional annual perks, including a $15,000 car allowance and $7,500 for financial counseling at the firm of his choice.
It’s impossible to say how this compensation package stacks up to what Myers earned at Procter & Gamble since he wasn’t a Named Executive Officer there (so his compensation wasn’t disclosed in P&G’s Aug. 26, 2011 proxy), nor does it appear that he had an employment agreement with the company that was ever filed with the SEC. However, presumably Myers wouldn’t jump ship at P&G unless he thought it would be financially worthwhile to do so.
But why Kraft hadn’t filed Myers’ Offer Letter closer to the time it was sent? After all, the company filed an earlier 10-Q on Aug. 5, which was less than 7 weeks after the correspondence was sent to Myers (whereas now it’s 20 weeks later). We’re speculating a bit, but it seems plausible that the answer may simply be that Kraft was waiting for Myers to actually show up and start work. The Offer Letter stated, “…it is our interest that you join Kraft as soon as possible which we understand will be in early September.”
Kraft is riding high at the moment, having just announced last week that it raised its guidance for FY 2011 based on increased revenues. Now it’s up to Myers and the rest of the executive team to keep the company going in the right direction.
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