UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities

Exchange Act of 1934 (Amendment No.    )

 

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CONSOL ENERGY INC.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 

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ANNUAL MEETING OF STOCKHOLDERS — MAY 8, 2019

 

 

 

1000 CONSOL Energy Drive, Suite 100

Canonsburg, Pennsylvania 15317

Telephone (724) 416-8300

 

 

Dear Fellow Stockholder:

 

 

Sincerely,

 

		William P. Powell Chair of the Board				James A. Brock President & CEO

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

 

 

 

DATE:				May 8, 2019
TIME:				8:00 a.m. Eastern Time
PLACE:				Hyatt Regency Pittsburgh International Airport Earhart Room (CD) 1111 Airport Boulevard Pittsburgh, Pennsylvania 15231
AGENDA:				1.		To elect two Class II directors for a three-year term;
				2.		To ratify the appointment of Ernst & Young LLP as CEIX’s independent registered public accounting firm for the fiscal year ending December 31, 2019;
				3.		To approve, on an advisory basis, the compensation paid to our named executive officers in 2018, as reported in this Proxy Statement; and
				4.		To transact such other business as may properly come before the meeting and at any adjournments or postponements of the meeting.
RECORD DATE:				By resolution of the Board of Directors, we have fixed the close of business on March 11, 2019 as the record date for determining the stockholders of CEIX entitled to notice of, and to vote at, the Annual Meeting and any adjournment or postponement thereof.

INFORMATION ABOUT THE MEETING: We are delivering our proxy materials to stockholders via the Internet. On March 27, 2019, we mailed a Notice of Internet Availability of Proxy Materials (the “Internet Notice”) to holders of record as of the record date, and posted our proxy materials on the website referenced in the Internet Notice. The Internet Notice explains how to access the proxy materials and our 2018 Annual Report, free of charge, through the website described in the Internet Notice. The Internet Notice and website also provide information regarding how you may request to receive proxy materials in printed form by mail or electronically by e-mail for this meeting and on an ongoing basis. You may vote in person or through any of the acceptable means described in the Proxy Statement. Instructions on how to vote begin on page 7.

 

				March 27, 2019   Martha A. Wiegand General Counsel and Secretary

 

TABLE OF CONTENTS

 

 

 

 

		– 2019 Proxy Statement

PROXY SUMMARY

 

 

		– 2019 Proxy Statement		1

 

2		– 2019 Proxy Statement

Proxy Summary

 

		– 2019 Proxy Statement		3

Proxy Summary

Proxy Summary

 

 

4		– 2019 Proxy Statement

INFORMATION ABOUT THE ANNUAL MEETING

 

 

 

CONSOL Energy Inc.

1000 CONSOL Energy Drive, Suite 100

Canonsburg, Pennsylvania 15317

Telephone (724) 416-8300

GENERAL: Proxies are being solicited by the Board to be voted at the Annual Meeting of Stockholders (the “Annual Meeting”) to be held on May 8, 2019, at 8:00 a.m., Eastern Time, at the Hyatt Regency Pittsburgh International Airport, Earhart Room (CD), 1111 Airport Boulevard, Pittsburgh, Pennsylvania 15231.

The specific proposals to be considered and voted upon at the Annual Meeting are summarized in the Notice of Annual Meeting of Stockholders. Each proposal is described in more detail in this Proxy Statement.

PROPOSALS, BOARD RECOMMENDATION AND VOTE REQUIRED: Stockholders are being asked to vote on the following proposals at the Annual Meeting. The table below also outlines the Board’s recommendation on how to vote for each proposal and the vote required with respect to each proposal.

 

Item		Proposal		Board Recommendation					Vote Required
1		Election of Class II Directors Election of two Class II director nominees, each for a three-year term ending in 2022.		FOR EACH NOMINEE					Plurality of the votes cast. Under this plurality vote standard, the director nominees who receive the highest number of “for” votes cast are elected as directors. Under our bylaws, if a director nominee does not receive a majority of the votes casts in favor of his or her election, then the director must tender his or her resignation to the Board.
2		Ratification of Appointment of Ernst & Young LLP The Audit Committee appointed Ernst & Young LLP as CEIX’s independent registered public accounting firm for fiscal year 2019. As a matter of good corporate governance, stockholders are being asked to ratify the Audit Committee’s appointment of the independent registered public accounting firm.		FOR					Affirmative vote of a majority of the shares of our common stock present in person or represented by proxy at the meeting and entitled to vote on the matter.
3		Advisory Approval of 2018 Named Executive Officers’ Compensation Stockholders are being asked to approve, on an advisory basis, the compensation paid to CEIX’s named executive officers in 2018. CEIX’s executive compensation programs are designed to create a direct linkage between stockholder interests and management with incentives specifically tailored to the achievement of financial, operational and stock performance goals.		FOR					Affirmative vote of a majority of the shares of our common stock present in person or represented by proxy at the meeting and entitled to vote on the matter.

In tabulating the voting result for any particular proposal, votes that are withheld or shares that constitute broker non-votes (described below) are not considered entitled to vote on that proposal and have no effect on the outcome. Abstentions have the same effect as votes against the matter, except in the case of Proposal No. 1, where abstentions would not have an effect on the outcome.

 

		– 2019 Proxy Statement		5

INFORMATION ABOUT THE ANNUAL MEETING

 

PROXY MATERIALS AND INFORMATION ABOUT THE MEETING: We mailed to all stockholders of record entitled to vote at the Annual Meeting the Internet Notice on or about March 27, 2019.

We are utilizing a Securities and Exchange Commission (“SEC”) rule that allows companies to furnish their proxy materials via the Internet rather than in paper form. This rule allows a company to send some or all of its stockholders the Internet Notice regarding Internet availability of proxy materials. The Internet Notice contains instructions on how to access the proxy materials over the Internet or how to request a paper copy of proxy materials.

An electronic copy of this Proxy Statement, the 2018 Annual Report and the Notice of Annual Meeting of Stockholders are available at www.edocumentview.com/CEIX.

Copies of our 2018 Annual Report furnished to our stockholders do not contain copies of exhibits to our Annual Report on Form 10-K for the year ended December 31, 2018. You can obtain copies of these exhibits electronically at the website of the SEC at www.sec.gov or by mail from the Public Reference Section of the SEC at 100 F Street, N.E., Washington, D.C. 20549 at prescribed rates. The exhibits are also available as part of the Form 10-K for the year ended December 31, 2018 which is available on CEIX’s corporate website at www.consolenergy.com. Stockholders may also obtain copies of our Annual Report on Form 10-K for the year ended December 31, 2018, or the exhibits thereto, without charge by contacting our Investor Relations department at CONSOL Energy Inc., Investor Relations department, 1000 CONSOL Energy Drive, Suite 100, Canonsburg, Pennsylvania 15317, Telephone (724) 416-8300.

RECORD DATE AND QUORUM: The record date with respect to this solicitation is March 11, 2019. All holders of record of CEIX common stock as of the close of business on the record date are entitled to vote at the Annual Meeting and any adjournment or postponement thereof. As of the record date, CEIX had 27,607,517 shares of common stock outstanding. Each share of common stock is entitled to one vote for each matter to be voted on at the Annual Meeting. Stockholders do not have cumulative voting rights. In order to hold the Annual Meeting, a quorum representing the holders of a majority of the outstanding shares of our common stock entitled to vote at the Annual Meeting must be present in person or represented by proxy.

PROXIES AND VOTING: A proxy is your legal designation of another person to vote the CEIX common shares that you owned as of the record date. The person that you designate to vote your shares is called a “proxy” and when you designate someone to vote your shares in a written document, that document is also called a “proxy” or “proxy card”. The Board has appointed several officers of the company to serve as proxies on the proxy card.

If a proxy is properly executed and is not revoked by the stockholder, the shares it represents will be voted at the Annual Meeting in accordance with the instructions provided by the stockholder. If a proxy card is signed and returned without specifying choices, the shares will be voted in accordance with the recommendations of the Board. Accordingly, if no contrary instructions are given, the proxies named by the Board intend to vote the shares represented by such proxies as follows:

 

•

in favor of the election of those persons nominated as set forth in this Proxy Statement to serve as Class II directors of CEIX (Proposal No. 1);

 

•

in favor of the ratification of the appointment of Ernst & Young LLP as the independent registered public accounting firm of CEIX for the fiscal year ending December 31, 2019 (Proposal No. 2);

 

•

in favor of approval, on an advisory basis, of the compensation paid to our named executive officers in 2018 (Proposal No. 3); and

 

•

in accordance with their judgment on any other matters which may properly come before the Annual Meeting.

The Board does not know of any other business to be brought before the Annual Meeting other than as indicated in the Notice of Annual Meeting of Stockholders.

 

6		– 2019 Proxy Statement

INFORMATION ABOUT THE ANNUAL MEETING

 

HOW TO VOTE: There are four ways for stockholders of record to vote:

 

•

VIA THE INTERNET BY PROXY: Stockholders who have received the Internet Notice by mail may submit proxies over the Internet by following the instructions on the Internet Notice. Stockholders who received a voting instruction form by mail or e-mail from their bank, broker or other nominee may submit proxies over the Internet by following the instructions on the voting instruction form provided by their bank, broker or other nominee.

 

•

VIA TELEPHONE BY PROXY: Registered stockholders of record may submit proxies by telephone by calling 1-800-652-8683 and following the instructions. Stockholders must have the 15-digit control number that appears on their Internet Notice when voting. Stockholders who have received a voting instruction form by mail or e-mail from their bank, broker or other nominee should check the voting instruction form for telephone voting availability. If available, those stockholders may vote by phone by calling the number specified on the voting instruction form provided by the bank, broker or other nominee.

 

•

VIA MAIL BY PROXY: Stockholders who have received a paper copy of a proxy card or voting instruction form by mail may submit proxies by completing, signing and dating their proxy card or voting instruction form and mailing it in the accompanying pre-addressed envelope.

 

•

IN PERSON AT ANNUAL MEETING: Stockholders of record may vote in person at the Annual Meeting.

BENEFICIAL OWNERSHIP AND BROKER NON-VOTES: If you hold shares beneficially in street name, then you must provide your voting instructions to your bank, broker or other nominee. If you do not provide your bank, broker or other nominee with voting instructions, your shares may be treated as “broker non-votes.”

Generally, broker non-votes occur on a matter when a bank, broker or other nominee is not permitted to vote on that matter without instructions from the beneficial owner and such instructions are not given. Banks, brokers or other nominees that have not received voting instructions from their clients cannot vote on their clients’ behalf on “non-routine” proposals, such as Proposal Nos. 1 and 3, although they may vote their clients’ shares on “routine matters,” such as Proposal No. 2.

REVOCATION OF PROXY: If you are the stockholder of record of shares of our common stock as of the close of business on the record date, you can revoke your proxy at any time before its exercise by:

 

•

sending a written notice to CEIX at 1000 CONSOL Energy Drive, Suite 100, Canonsburg, Pennsylvania 15317, attention: Secretary, bearing a date later than the date of the proxy, that is received prior to the Annual Meeting, stating that you revoke your proxy;

 

•

submitting your voting instructions again by telephone or over the Internet;

 

•

signing another valid proxy card bearing a later date than the proxy initially received and mailing it so that it is received by CEIX prior to the Annual Meeting; or

 

•

attending the Annual Meeting and voting in person.

If you hold your shares through a bank, broker or other nominee, you must follow the instructions found on your voting instruction form, or contact your bank, broker or other nominee, in order to revoke your previously delivered proxy. Attendance at the Annual Meeting without a request to revoke a proxy will not by itself revoke a previously executed and delivered proxy.

ATTENDING THE MEETING IN PERSON: Subject to space availability, all stockholders as of the record date, or their duly appointed proxies, may attend the Annual Meeting in person. Because seating is limited, admission to the meeting will be on a first come, first served basis.

Registration will begin at 7:30 a.m. Eastern Time. Stockholders who attend may be asked to present valid government-issued photo identification, such as a driver’s license or passport. Cameras, recording devices and other electronic devices will not be permitted at the Annual Meeting. Please also note that if you hold your shares in “street name” (that is, through a bank, broker or other nominee), a copy of a brokerage statement reflecting your stock ownership as of the record date must be provided during check-in at the registration desk at the Annual Meeting.

If you require directions to the Annual Meeting, please contact CEIX’s Investor Relations department at (724) 416-8300.

 

		– 2019 Proxy Statement		7

INFORMATION ABOUT THE ANNUAL MEETING

 

PROXY SOLICITATION: All costs relating to the solicitation of proxies will be borne by CEIX. Georgeson LLC has been retained by CEIX to aid in the solicitation of proxies at an estimated cost of $9,000, plus reimbursement of out-of-pocket expenses. Proxies may also be solicited by officers, directors and employees personally, by mail, or by telephone, facsimile transmission or other electronic means. None of these directors, officers or employees will receive any additional or special compensation for soliciting proxies. Upon request, CEIX will reimburse banks, brokers and other nominees for their reasonable expenses in sending proxy materials to their customers who are beneficial owners of CEIX’s common stock.

SECRECY IN VOTING: As a matter of policy, proxies, ballots and voting tabulations that identify individual stockholders are held confidentially by CEIX. Such documents are available for examination only by the inspectors of election and certain employees who assist in the tabulation of votes. The vote of any individual stockholder will not be disclosed except as may be necessary to meet applicable legal requirements.

 

8		– 2019 Proxy Statement

PROPOSAL NO. 1 — ELECTION OF CLASS II DIRECTORS

 

 

The Nominating and Corporate Governance Committee has recommended, and the Board has nominated, our current Class II directors, Joseph P. Platt and Edwin S. Roberson, whose terms expire at the Annual Meeting, for re-election by the stockholders as Class II directors at the Annual Meeting. Upon election, each such director will serve until the 2022 annual meeting of stockholders or until his successor is elected and qualified, or his earlier death, resignation or removal.

To be elected, each nominee must receive a plurality of the votes cast (i.e., the director nominees who receive the highest number of “for” votes cast, up to the maximum number of directors to be elected, are elected as directors). If any nominee should for any reason become unable to serve, all shares represented by valid proxies will be voted for the election of such other person as the Board may designate, as recommended by the Nominating and Corporate Governance Committee. Alternatively, the Board may reduce the number of directors to eliminate the vacancy.

Our bylaws provide that if an incumbent director receives a greater number of votes “withheld” from his or her election than votes “for” such director nominee’s election, the director must tender his or her resignation promptly to the Board. The Nominating and Corporate Governance Committee will make a recommendation to the Board as to whether to accept or reject the tendered resignation, or whether other action should be taken. The Board will act on the tendered resignation, taking into account the Nominating and Corporate Governance Committee’s recommendation, and publicly disclose its decision and the underlying rationale in a press release, a filing with the SEC or other broadly disseminated means of communication within 90 days from the date of the certification of the election results.

The biographies included in this Proxy Statement below include information concerning the nominees for director and the continuing directors, including their recent employment, positions with CEIX, other directorships, board committee memberships and ages as of March 11, 2019.

 

		– 2019 Proxy Statement		9

PROPOSAL NO. 1—ELECTION OF CLASS II DIRECTORS | Biographies of Class II Director Nominees

 

Biographies of Class II Director Nominees

 

JOSEPH P. PLATT
		GENERAL PARTNER – THORN PARTNERS, LP   Director Since: 2017 Age: 71		Class II Director Term expires 2019   CEIX Committees: •  Compensation (Chair) •  Nominating and Corporate Governance •  Health, Safety and Environmental

BACKGROUND:

Joseph P. Platt joined the Board on November 28, 2017. He currently serves as a member of our Board’s Compensation Committee, which he chairs, Nominating and Corporate Governance Committee and Health, Safety and Environmental Committee. Mr. Platt previously served as a member of the board of directors of CNX Resources Corporation (“CNX”), CEIX’s former parent, from May 2016 until November 28, 2017, when CEIX separated from CNX. He is the general partner at Thorn Partners, LP, a family limited partnership, a position he has held since 1998. Mr. Platt’s career at Johnson and Higgins, a global insurance broker and employee benefits consultant (J&H), spanned 27 years until 1997, when J&H was sold to Marsh & McLennan Companies. At the time of the sale, Mr. Platt was an owner, director and executive vice president of J&H. Mr. Platt has served on the board of directors of Greenlight Capital Re, Ltd., a property and casualty reinsurer, since 2004 and has been its lead independent director since 2007, and also serves as an independent director of BlackRock’s Open End & Liquidity Funds and on the boards of various other nonpublic companies and not-for-profit institutions.

 

QUALIFICATIONS:   Mr. Platt brings significant financial, compensation and risk management expertise to our Board.

 

EDWIN S. ROBERSON
		FORMER CHIEF EXECUTIVE OFFICER – CHRIST COMMUNITY HEALTH SERVICES   Director Since: 2017 Age: 73		Class II Director Term expires 2019   CEIX Committees: •  Audit •  Nominating and Corporate Governance (Chair) •  Health, Safety and Environmental

BACKGROUND:

Edwin S. Roberson joined the Board on November 28, 2017. He currently serves as a member of our Board’s Audit Committee, Nominating and Corporate Governance Committee, which he chairs, and Health, Safety and Environmental Committee. Mr. Roberson previously served as a member of the board of directors of CNX from May 2016 until November 28, 2017, when CEIX separated from CNX. From 2014 until his retirement on December 31, 2017, Mr. Roberson served as Chief Executive Officer of Christ Community Health Services, a health system of eight clinics providing high quality healthcare to the underserved in the Memphis, Tennessee community. Prior to that, Mr. Roberson served as Chief Executive Officer of various cancer research and biotech firms, and as President of Beacon Consulting, LLC, a business consulting firm, from 2006 to 2011. From 1991 to 2006, he worked at Conwood LLC, the nation’s second-largest manufacturer of smokeless tobacco products and a major seller and distributor of tobacco products manufactured by third parties, where he served in several roles, including Chief Financial Officer and, ultimately, President. After serving in the Army from 1969 to 1971, where he was awarded two Bronze Stars in Vietnam, Mr. Roberson, a certified public accountant, began his professional career at KPMG, an international accounting and consulting firm, where he was a tax partner until 1991. Mr. Roberson also served on the board of directors of Paragon National Bank, where he was chairman of the audit committee. Mr. Roberson currently serves on the board of directors of Infocare, Inc. (US), and on the boards of directors of several private companies.

 

QUALIFICATIONS:   Mr. Roberson brings to the Board significant leadership skills and financial, accounting and strategy expertise. Further, Mr. Roberson is a certified public accountant.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” EACH OF THE

ABOVE-NAMED CLASS II DIRECTOR NOMINEES FOR THE BOARD OF DIRECTORS.

 

10		– 2019 Proxy Statement

PROPOSAL NO. 1—ELECTION OF CLASS II DIRECTORS | Biographies of Continuing Class III Directors

 

Biographies of Continuing Class III Directors with Terms Expiring at the 2020 Annual Meeting of Stockholders

 

JOHN T. MILLS
		FORMER CHIEF FINANCIAL OFFICER – MARATHON OIL CORPORATION   Director Since: 2017 Age: 71		Class III Director Term expires 2020   CEIX Committees: •  Audit (Chair) •  Compensation •  Health, Safety and Environmental

BACKGROUND:

John T. Mills joined the Board on November 14, 2017. He currently serves as a member of our Board’s Audit Committee, which he chairs, Compensation Committee and Health, Safety and Environmental Committee. Mr. Mills previously served as a member of the board of directors of CNX from March 2006 until November 28, 2017, when CEIX separated from CNX. From December 2007 until August 2015, he served on the board of directors of Cal Dive International Inc., a marine contractor providing manned diving, derrick, pipelay and pipe burial services to the offshore oil and natural gas industry, where he served as lead independent director, and as a member of the audit, compensation, and corporate governance and nominating committees. From January 2008 through June 2010, Mr. Mills was a member of the board of directors and audit, conflicts and risk management committees of Regency GP, LLC, the general partner of Regency GP, LP, the general partner of Regency Energy Partners LP, a natural gas gathering, processing and transportation master limited partnership. Mr. Mills joined the board of directors of Horizon Offshore, Inc., a marine construction company, in June 2002 and served as the chairman of the board of directors from September 2004 until December 2007, when Horizon Offshore, Inc. was acquired by Cal Dive International, Inc. Mr. Mills was the Chief Financial Officer of Marathon Oil Corporation, an integrated energy company, from January 2002 until his retirement in December 2003. In 2011, Mr. Mills attended the Harvard Business School program “Making Corporate Boards More Effective.”

 

QUALIFICATIONS:   As a licensed attorney with over 40 years of business experience, including 16 years as an officer of Marathon Oil Corporation and U.S. Steel Corporation, Mr. Mills brings significant knowledge and experience to our Board. In particular, Mr. Mills brings an in-depth understanding of the evaluation of organic growth capital projects and acquisition and disposition opportunities, and the importance of maintaining a competitive capital structure and liquidity. In addition, having previously served as Senior Vice President, Finance and Administration, and later Chief Financial Officer of Marathon Oil Corporation, Mr. Mills has developed a wealth of financial knowledge with respect to the oversight of (i) the preparation of consolidated financial statements, (ii) internal audit functions, and (iii) public accountants, skills which are critical to our company and particularly our Audit Committee.

 

WILLIAM P. POWELL
		MANAGING PARTNER – 535 PARTNERS LLC   Director Since: 2017 Age: 63		Class III Director Term expires 2020   CEIX Committees: •  Audit •  Compensation •  Health, Safety and Environmental

BACKGROUND:

William P. Powell joined the Board on November 28, 2017 and has served as Chair of our Board since that time. He currently serves as a member of our Board’s Audit Committee, Compensation Committee and Health, Safety and Environmental Committee. Mr. Powell previously served as a member of the board of directors of CNX from January 2004 until November 28, 2017, when CEIX separated from CNX. Mr. Powell also previously was a director of Cytec Industries, a global specialty chemicals and materials company, from 1993 until its merger with Solvay SA in December 2015, where he served as lead independent director, as chair of the governance committee and as a member of the audit committee. From May 2001 until May 2007, Mr. Powell was a Managing Director of William Street Advisors, a New York City-based merchant banking boutique. Mr. Powell resigned from William Street Advisors to establish a family office, 535 Partners LLC, where he has served as Managing Partner since May 2007. Prior to his time at William Street Advisors, he served as a Managing Director of UBS Warburg LLC and its predecessor Dillon, Read & Co. Inc. since 1991.

 

QUALIFICATIONS:   With an MBA degree and over 30 years of financial, management and investment experience, Mr. Powell brings a wealth of knowledge to our Board. Having served on multiple public company boards for over 20 years, Mr. Powell also has significant expertise in corporate governance matters.

 

		– 2019 Proxy Statement		11

PROPOSAL NO. 1—ELECTION OF CLASS II DIRECTORS | Biographies of Continuing Class I Directors

 

Biographies of Continuing Class I Directors with Terms Expiring at the 2021 Annual Meeting of Stockholders

 

SOPHIE BERGERON
		MINE GENERAL MANAGER, ÉLÉONORE MINE OF GOLDCORP INC.     Director Since: 2019 Age: 41		Class I Director Term expires 2021   CEIX Committees: •  Nominating and Corporate Governance •  Health, Safety and Environmental (Chair)

BACKGROUND:

Sophie Bergeron joined the Board on March 1, 2019. She currently serves as a member of our Board’s Health, Safety and Environmental Committee, which she chairs, and Nominating and Corporate Governance Committee. Ms. Bergeron joined Goldcorp Inc., a gold production company headquartered in Vancouver British Columbia, Canada, in 2010 and has worked across the company’s project portfolio and mining operations in the Americas. She currently serves as the Mine General Manager for Goldcorp’s Éléonore Mine (James Bay, Québec), a position she has held since November 2017, and as the Project Manager for the Century Project (Timmins, Ontario), a position she has held since December 2016. Prior to that, Ms. Bergeron was the Operations Manager for Goldcorp’s Hoyle Pond Mine (Timmins, Ontario) from February 2015 to February 2016 and the Operations Manager for the Mine Ramp-Up (Cerro Negro, Argentina) from July 2014 to February 2015. Her other positions at Goldcorp included Director, Health and Safety from November 2012 to June 2014 and Senior Mining Manager from September 2010 to November 2012. Prior to joining Goldcorp in 2010, Ms. Bergeron held various positions with Xstrata Nickel (Xstrata), a nickel producer headquartered in Toronto, Canada. During her time at Xstrata, Ms. Bergeron rose to the position of Continuous Improvement Superintendent, completed her Six Sigma certification and earned a certificate in business optimization from Melbourne University in Australia. Ms. Bergeron is an active member of the Québec Mining Association and sits on its board of directors.

 

QUALIFICATIONS:   Through Ms. Bergeron’s education and experience, she has gained expertise in the mining sector, which provides significant value and insight to the Board, particularly with respect to operating and strategic issues. Ms. Bergeron has expertise in health and safety, mine operations management and continuous improvement.

 

JAMES A. BROCK
		PRESIDENT & CHIEF EXECUTIVE OFFICER OF CEIX   Director Since: 2017 Age: 62		Class I Director Term expires 2021   CEIX Committees: •  Health, Safety and Environmental

BACKGROUND:

James A. Brock has served as our Chief Executive Officer since June 21, 2017, and as our President since December 4, 2017, and he has been a member of our Board since November 28, 2017. He currently serves as a member of our Board’s Health, Safety and Environmental Committee. Mr. Brock previously served as the Chief Operating Officer-Coal of CNX from December 10, 2010 until November 28, 2017, when CEIX separated from CNX. Mr. Brock also currently serves as Chief Executive Officer and Chairman of the board of directors of the general partner of CONSOL Coal Resources LP, a position he has held since March 16, 2015. Previously, he served as Senior Vice President-Northern Appalachia-West Virginia Operations of CNX from 2007 to 2010, and as Vice President-Operations of CNX from 2006 to 2007. Mr. Brock began his career with CNX in 1979 at the Matthews Mine and since then has served at various locations in many positions including Section Foreman, Mine Longwall Coordinator, General Mine Foreman and Superintendent. Mr. Brock’s achievements in mining were recognized with his being named 2010 Coal Safety Leader of the Year in West Virginia and his induction into the West Virginia Coal Hall of Fame in 2016. Mr. Brock also currently serves as the Chairman of the Pennsylvania Coal Alliance board of directors, and as a member of the boards of directors of the National Coal Council, the American Coalition for Clean Coal Electricity (ACCCE) and the National Mining Association.

 

QUALIFICATIONS:   With a career in coal spanning five decades, we believe Mr. Brock’s extensive knowledge of our industry and our operations gained during his years of service with CNX, and now CEIX, provides our Board with valuable experience.

 

12		– 2019 Proxy Statement

PROPOSAL NO. 2 — RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

 

 

The Audit Committee is directly responsible for the appointment, compensation, retention and oversight of the work of CEIX’s independent registered public accounting firm. The Audit Committee has appointed Ernst & Young LLP as the independent registered public accounting firm for CEIX for the fiscal year ended December 31, 2019. The Board now recommends that CEIX’s stockholders ratify this appointment.

Neither CEIX’s governing documents nor the law require stockholder ratification of the appointment of Ernst & Young LLP as the company’s independent registered public accounting firm. However, the Board is submitting the appointment of Ernst & Young LLP to the stockholders for ratification as a matter of good corporate practice. If the stockholders fail to ratify the appointment, the Audit Committee will reconsider whether or not to retain that firm. Even if the appointment is ratified, the Audit Committee, in its discretion, may direct the appointment of a different independent registered public accounting firm at any time during the year if it determines that such a change would be in the best interests of CEIX and its stockholders.

Representatives of Ernst & Young LLP are expected to be present at the Annual Meeting and will have an opportunity to address the meeting and respond to appropriate questions.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2019.

 

		– 2019 Proxy Statement		13

AUDIT COMMITTEE AND AUDIT FEES

 

 

Audit Committee Report

The Audit Committee has reviewed and discussed with management and Ernst & Young LLP (“E&Y”), CEIX’s independent registered public accounting firm, the audited financial statements of CEIX for the fiscal year ended December 31, 2018 (the “Audited Financial Statements”). In addition, the Audit Committee has discussed with E&Y the matters required to be discussed under the auditing standards of the Public Company Accounting Oversight Board (“PCAOB”) (Auditing Standard No. 1301 –Communications with Audit Committees) relating to the conduct of the audit, including any difficulties encountered in the course of the audit work, any restrictions on the scope of the registered public accounting firm’s activities or access to requested information and any significant disagreements with management.

The Audit Committee also has received the written disclosures and letter from E&Y regarding E&Y’s independence required by PCAOB Ethics and Independence Rule 3526, Communication with Audit Committees Concerning Independence, and has discussed with the independent registered public accounting firm that firm’s independence from CEIX and its subsidiaries.

Based on the review and discussions referred to above, the Audit Committee recommended to the Board that the Audited Financial Statements be included in CEIX’s Annual Report on Form 10-K for the year ended December 31, 2018 for filing with the SEC.

Members of the Audit Committee:

John T. Mills, Chair

William P. Powell

Edwin S. Roberson

The foregoing Audit Committee Report does not constitute soliciting material and should not be deemed filed or incorporated by reference into any other filing of CEIX under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that CEIX specifically incorporates the Report by reference therein.

 

14		– 2019 Proxy Statement

AUDIT COMMITTEE AND AUDIT FEES | Independent Registered Public Accounting Firm

 

Independent Registered Public Accounting Firm

The following table presents fees billed for professional audit services rendered by E&Y in connection with its audits of CEIX’s annual financial statements for the years ended December 31, 2018 and 2017 and fees for other services rendered by E&Y during those periods, excluding the fees billed to CONSOL Coal Resources LP (“CCR”).

 

		2018 (E&Y Fees)					2017* (E&Y Fees)
Audit Fees			$	1,333,600				$	420,600
Audit-Related Fees			$	540,000				$	—
Tax Fees			$	—				$	—
All Other Fees			$	7,200				$	1,995
Total			$	1,880,800				$	422,595

 

*

Represents fees billed to CEIX following the separation of CEIX from CNX.

As used in the table above, the following terms have the meanings set forth below.

Audit Fees

The fees for professional services rendered in connection with the audit of CEIX’s annual financial statements, for the review of the financial statements included in CEIX’s Quarterly Reports on Form 10-Q, for the audit of certain financial statements included in CEIX’s Form 10 (for 2017 only) and for services that are normally provided by the accounting firm in connection with statutory and regulatory filings or engagements.

Audit-Related Fees

The professional services for audit-related fees in 2018 were for the pre-implementation assessment of our Oracle enterprise resource planning software that became our system of record on January 1, 2019. There were no professional services for audit-related fees in 2017.    

Tax Fees

There were no professional services for tax-related work in 2018 or 2017.

All Other Fees

The fees for products and services provided, other than for the services reported under the headings “Audit Fees,” “Audit-Related Fees” and “Tax Fees.” These fees were for publications and online subscriptions.

Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services

The Audit Committee, or the Chair of the Audit Committee, must preapprove all audit and non-audit services provided to CEIX by its independent registered public accounting firm. The Audit Committee must consider whether such services are consistent with SEC rules on auditor independence. All of the services performed by E&Y in 2018 were pre-approved by the Audit Committee.

 

		– 2019 Proxy Statement		15

PROPOSAL NO. 3 — ADVISORY APPROVAL OF EXECUTIVE COMPENSATION

 

 

Pursuant to Section 14A of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), CEIX is required to provide its stockholders with the opportunity to cast a non-binding advisory vote on compensation paid to our named executive officers. Accordingly, we ask our stockholders to vote, on an advisory basis, “FOR” the compensation paid to our named executive officers in 2018, as disclosed in this Proxy Statement pursuant to the compensation disclosure rules of the SEC, and to adopt the following resolution at the Annual Meeting:

“RESOLVED, that the compensation paid to CEIX’s named executive officers, as disclosed in this Proxy Statement, including the “Compensation Discussion and Analysis,” compensation tables and narrative discussion, is hereby APPROVED on an advisory basis.”

As described in detail in the “Compensation Discussion and Analysis,” our executive compensation program is designed to attract, motivate and retain key executives who drive our success and industry leadership. We achieve these objectives through compensation that:

 

•

links a significant portion of total compensation to performance, which we believe will create long-term stockholder value;

 

•

includes stock-based compensation, which encourages our named executive officers to act as owners of CEIX;

 

•

is tied to overall corporate performance, and financial and operational goals (annual and long-term);

 

•

enhances retention in a highly competitive market by subjecting a significant portion of total compensation to multi-year vesting or performance conditions;

 

•

discourages unnecessary and excessive risk-taking; and

 

•

provides a competitive total pay opportunity.

The Compensation Committee reviews the compensation programs for our executive officers to ensure they achieve the desired goal of aligning our executive compensation structure with our stockholders’ interests and current market practices. Please read “Compensation Discussion and Analysis” beginning on page 20, and the tabular compensation disclosures and accompanying narrative discussion beginning on page 34. The Compensation Discussion and Analysis discusses our executive compensation philosophy, programs and objectives, while the tabular compensation disclosures and accompanying narrative discussion provide detailed information on the compensation of our named executive officers.

We are asking our stockholders to indicate their support for the compensation paid to our named executive officers in 2018 as described in this Proxy Statement (including the Compensation Discussion and Analysis, the compensation tables and other related compensation disclosures required by Regulation S-K Item 402 and contained herein). This proposal is intended to give our stockholders the opportunity to express their views on the compensation paid to our named executive officers in 2018. This vote is not intended to address any specific item of compensation, but rather the overall compensation paid to our named executive officers, and the philosophy, policies and practices described in this Proxy Statement.

As an advisory vote, your vote will not be binding on CEIX, the Board or the Compensation Committee. However, our Board and our Compensation Committee, which are responsible for designing and administering CEIX’s executive compensation program, value the opinions of our stockholders and to the extent there is any significant vote against the compensation paid to our named executive officers in 2018, we will consider our stockholders’ concerns, if any, and the Compensation Committee will evaluate whether any actions are necessary to address those concerns.

After our stockholders voted in 2018, on an advisory basis, on the frequency of this advisory vote on compensation, the Company elected to hold future advisory votes on compensation on an annual basis until the next stockholder advisory vote on frequency, which we expect will be conducted at our annual meeting of stockholders in 2024.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE COMPENSATION PAID TO OUR NAMED EXECUTIVE OFFICERS IN 2018, AS DISCLOSED IN THIS PROXY STATEMENT, PURSUANT TO THE COMPENSATION DISCLOSURE RULES OF THE SEC.

 

16		– 2019 Proxy Statement

EXECUTIVE OFFICERS

 

CEIX’s executive officers are listed below. Each officer is appointed by the Board and holds office for the term set forth in the officer’s written employment agreement or until the officer’s successor has been elected and qualified, or until such officer’s earlier death, resignation or removal.

 

Name		Age					Executive   Since					Position
James A. Brock		62					2017					President and Chief Executive Officer
David M. Khani		55					2017					Executive Vice President, Chief Financial Officer and Treasurer
James J. McCaffrey		62					2017					Senior Vice President – Coal Marketing
John M. Rothka		41					2017					Chief Accounting Officer
Kurt R. Salvatori		49					2017					Chief Administrative Officer
Martha A. Wiegand		48					2017					General Counsel and Secretary

The biographical information for Mr. Brock is provided under the caption “Proposal No. 1 – Election of Class II Directors – Continuing Class I Directors with Terms Expiring at the 2021 Annual Meeting of Stockholders” on page 12.

 

		David M. Khani   Mr. Khani has served as our Executive Vice President and Chief Financial Officer since August 2, 2017, and has served as our Treasurer since December 11, 2017. Mr. Khani previously served as the Executive Vice President and Chief Financial Officer at CNX from March 1, 2013 to August 2, 2017. Mr. Khani joined CNX in 2011 as Vice President of Finance, where he played a key role in the growth of CNX’s exploration and production business, and was integrally involved in the separation of CEIX from CNX. Prior to joining CNX, Mr. Khani was with FBR Capital Markets & Co., an investment banking and advisory firm, holding the positions of Director of Research (February 2007 to October 2010) and Co-Director of Research (November 2010 to August 2011). Mr. Khani also serves as Chief Financial Officer and as a director of the general partner of CONSOL Coal Resources LP and served in those same capacities with CONE Midstream Partners LP until January 3, 2018. He is a chartered financial analyst and a member of the CFA Society Pittsburgh.
		James J. McCaffrey   Mr. McCaffrey has served as our Senior Vice President—Coal Marketing since July 10, 2017 and acts as our functioning chief commercial officer. Mr. McCaffrey also has served as Senior Vice President—Sales of CONSOL Pennsylvania Coal Company, a wholly-owned subsidiary of CEIX, since June 2016. From January 2013 to June 2016, Mr. McCaffrey served as Senior Vice President—Energy Marketing for CONSOL Pennsylvania Coal Company, and from April 2003 to January 2013, he served as Senior Vice President of Coal Sales, Vice President of Materials & Supply Chain Management, Senior Vice President—CNX Land Resources, Vice President of Supply Chain and Vice President of Marketing Services in the coal operations group of CNX. Mr. McCaffrey, a certified mine foreman in Pennsylvania, started his career as a coal miner with CNX in 1976, and joined CNX’s management team as Vice President and General Manager of Consolidation Coal Mining Operations in March 2002.

 

		– 2019 Proxy Statement		17

EXECUTIVE OFFICERS

 

		John M. Rothka   Mr. Rothka has served as our Chief Accounting Officer since November 22, 2017. Mr. Rothka also serves as the Chief Accounting Officer of the general partner of CONSOL Coal Resources LP, a position he has held since August 2, 2017. Prior to his appointment as the Chief Accounting Officer of the general partner of CONSOL Coal Resources LP and beginning in July 2015, Mr. Rothka served as the Controller of the general partner. Mr. Rothka joined the Accounting Department of CNX in September 2005, where he served in positions of increasing responsibility, and was promoted to Senior Manager in February 2012, a position he served in until July 2015. Prior to joining CNX, Mr. Rothka began his professional career at the accounting firm of Aronson LLC, where he served from September 1999 to November 2002, before joining Deloitte from November 2002 to September 2005, where he held several positions of increasing responsibility in the audit and assurance groups. Mr. Rothka is a certified public accountant.
		Kurt R. Salvatori   Mr. Salvatori has served as our Chief Administrative Officer since July 10, 2017. Mr. Salvatori has also served as Vice President- Administration of CONSOL Pennsylvania Coal Company since January 1, 2017. Previously, Mr. Salvatori served as Vice President Shared Services for CNX from July 2016 to December 2017, and prior to that as Vice President Human Resources for CNX from September 2011 to June 2016. Mr. Salvatori joined CNX in April 1992 and held numerous positions at CNX and CNX Gas Corporation, including Director of Human Resources from April 2006 to September 2011, Manager of Human Resources from January 2005 to April 2006, and Supervisor of Retirement and Investment Plans from April 2002 to January 2005. Active in non-profit organizations, Mr. Salvatori has served as a trustee of the Washington County Community Foundation since 2010 and as a trustee of the Monongahela Health System since 2014. Mr. Salvatori has also served as chairman of the CONSOL Energy Political Action Committee (PAC) since 2017.
		Martha A. Wiegand   Ms. Wiegand has served as our General Counsel and Secretary since July 10, 2017. Ms. Wiegand has also served as General Counsel and Secretary of the general partner of CONSOL Coal Resources LP since March 16, 2015. Ms. Wiegand joined the legal department of CNX in December 2008 as Senior Counsel and was promoted to Associate General Counsel of CNX effective in 2012, where she was responsible for a variety of legal matters, including coal and natural gas marketing and transportation, labor and employment, financing arrangements and certain corporate transactions. Prior to joining CNX, Ms. Wiegand worked for approximately 10 years for several large Pittsburgh-based law firms, where she handled financing and corporate transactions for clients in the banking and energy industries, among others. She is licensed to practice law in Pennsylvania and New Jersey and is a member of the American Bar Association, the Pennsylvania Bar Association and the Energy & Mineral Law Foundation. Ms. Wiegand has also served on the American Coalition for Clean Coal Electricity (ACCCE) Strategy & Policy Committee since 2018.

 

18		– 2019 Proxy Statement

EXECUTIVE COMPENSATION INFORMATION

 

 

 

		– 2019 Proxy Statement		19

EXECUTIVE COMPENSATION INFORMATION | Compensation Discussion and Analysis

 

Compensation Discussion and Analysis

As one of the major producers of high-Btu bituminous thermal and crossover metallurgical coal in the United States, we operate with a pay for performance philosophy in a challenging, highly competitive and rapidly evolving environment. This Compensation Discussion and Analysis (“CD&A”) discusses the compensation decisions made for the fiscal year 2018 with respect to our named executive officers (“NEOs”), who are listed below.

Our Named Executive Officers (NEOs)

 

Name		Title
James A. Brock		President and Chief Executive Officer
David M. Khani		Executive Vice President, Chief Financial Officer and Treasurer
James J. McCaffrey		Senior Vice President—Coal Marketing
Martha A. Wiegand		General Counsel and Secretary
Kurt R. Salvatori		Chief Administrative Officer

Executive Summary

 

HOW DID WE PERFORM?		✓		—   Produced a record level of coal at 27.6 million tons, the highest level in the Pennsylvania Mining Complex history
		✓		—   Increased our coal average revenue per ton sold by 8% to $49.28 per ton
		✓		—   Increased our coal average cash margins per ton sold by 21% to $19.99 per ton*
		✓		—   Exceeded the pre-established performance metrics related to our 2018 annual incentive plan, as well as the pre-established performance metrics associated with the 2018 tranches under our 2016, 2017 and 2018 performance-based long-term incentive programs
		✓		—   Generated $413.5 million in net cash provided by operations, $248 million of free cash flow net to CEIX stockholders* and repaid $56 million of debt in 2018
q
WHAT DID WE CHANGE FOR 2018?		✓		—   Adopted and implemented a new compensation philosophy to recognize the highly competitive and regulated environment in which we operate to ensure that we continue to attract and retain key talent necessary to compete, incentivize our NEOs, and align risk-taking with the sustainability and the long-term financial health of our company
		✓		—   Adjusted base salaries for three of our NEOs and also adjusted annual and long-term incentive targets for certain NEOs to reflect results of competitive compensation peer group data, general industry and internal pay equity of our NEOs

 

 

*

This CD&A, which relates to 2018 compensation determinations, contains references to one or more financial measures (indicated by *) that have not been calculated in accordance with GAAP. See reconciliation of these disclosed non-GAAP financial measures including average cash margins per ton sold, average operating margin per ton sold, free cash flow and free cash flow net to CEIX stockholders to the most directly comparable GAAP financial measures in Appendix A to this Proxy Statement.

 

20		– 2019 Proxy Statement

EXECUTIVE COMPENSATION INFORMATION | Compensation Discussion and Analysis

 

WHAT DID WE CHANGE FOR 2018?		✓		—   Implemented performance-based annual and long-term variable incentive compensation with goals tied to the achievement of operating margin and free cash flow net to CEIX stockholders annual targets, as well as relative total stockholder return and free cash flow long-term targets for our NEOs
		✓		—   Approved our peer group, adopted double trigger change in control (“CIC”) and non-CIC severance agreements for our NEOs (also including an employment agreement for our CEO)

q
HOW DO WE DETERMINE PAY?		✓		—   Design competitive pay programs to reward executives for positive company pre-established financial and operational goals, mitigate material risks and align with stockholder interests’ equity-based long-term incentive awards
		✓		—   Establish pay levels commensurate with performance and the need to retain high-quality talent, as well as to preserve internal equity among new NEOs
		✓		—   Consider many factors, including the advice of our Compensation Committee’s independent compensation consultant, internal pay equity among executives and the alignment of total pay opportunity and pay outcomes with performance and external competitive market data relating to our peer group and general industry
q
HOW DID WE PAY OUR NEOS?		✓		—   Base salaries reflected each NEO’s role, responsibility, experience and market conditions
		✓		—   Payouts under our annual program aligned with our fiscal 2018 performance
		✓     ✓		—   Annual cash incentive payouts up to 200% based on achievement of operating margin and free cash flow net to CEIX stockholders performance goals   —   Vesting under our long-term programs aligned with performance of our stock as compared to our peers
		✓		—   Long-term equity incentives granted at target levels delivered through a mix of performance-based restricted stock units (“PSUs”) (60%) and time-based restricted stock units (“RSUs”) (40%)
		✓		—   No off-cycle equity awards or material perquisites for any of our NEOs
q
HOW DO WE ADDRESS RISK AND GOVERNANCE?		✓		—   Provide an appropriate balance of short- and long-term compensation with payouts based on the company’s achievement of pre-established financial and operational goals, including a focus on sustainability, environmental compliance and safety
		✓		—   Follow practices that promote good governance and serve the interests of our stockholders, with threshold and maximum payout caps for annual cash incentives and long-term performance awards, and policies on clawbacks, anti-pledging, anti-hedging, insider trading, stock ownership and equity grant practices
		✓		—   Solicit “say-on-pay” stockholder vote annually at stockholder meeting
		✓		—   Conducts an annual risk assessment of our compensation policies and practices through our Compensation Committee, with the assistance of an independent compensation consultant
		✓		—   Review our compensation program and practices with an independent compensation consultant that reports directly to our Compensation Committee

 

		– 2019 Proxy Statement		21

EXECUTIVE COMPENSATION INFORMATION | Compensation Discussion and Analysis

 

q
WHY YOU SHOULD APPROVE THE SAY-ON-PAY PROPOSAL		✓		—   Fiscal 2018 performance continued to support long-term stockholder value
		✓		—   Fiscal 2018 annual and long-term incentive payouts for our NEOs aligned with company performance
		✓		—   Our pay program is aligned with stockholder interests, emphasizing achievement of strategic objectives both annually and over the long term
		✓		—   Our pay practices are tied to robust risk management and corporate governance principles

Say-on-Pay Vote

We took into consideration the results of the say-on-pay voting by our stockholders last year when reviewing our current policies and practices related to compensation of our NEOs. Of the 23,189,928 million votes cast by our stockholders, over 95% were in favor of our 2017 executive compensation program. While we believe we have a fair and effective compensation program, we are gratified to receive the vote of confidence from our stockholders. We therefore determined not to make any significant changes to our current compensation program. We commit to staying up-to-date on recommended best practices where practicable. Finally, our Compensation Committee and senior management will also continue to consider stockholder input, including the advisory say-on-pay vote, as we evaluate the future design of our executive compensation programs and the specific compensation decisions for each of our NEOs.

CEIX Executive Compensation Policies and Practices

Our commitment to strong corporate governance practices extends to the compensation plans, principles, programs and policies established by our Compensation Committee and our Board, which include the following governance practices and policies:

 

WHAT WE DO		WHAT WE DON’T DO
✓  Pay for Performance      ✓  Meaningful Stock Ownership/Holding Requirements     ✓  Anti-Hedging Policy      ✓  Assess Compensation Risk		No Excessive Perquisites     No Income Tax Gross Ups     No Backdating of Stock Options     No Repricing of Stock Options        (without stockholder approval)
✓  Equity Grant Practices Policy		No Discounting of Stock Options
✓  Clawback Provisions in All Incentive Awards
✓  Double Trigger Cash Change in Control Provisions
✓  Independent Compensation Consultant

CEIX Executive Compensation Philosophy

Our compensation philosophy is designed to attract and retain key talent necessary for us to compete, promote a pay-for-performance culture, incentivize our NEOs to achieve desired financial and operating results, and create a balanced compensation program that aligns risk-taking with the sustainability and long-term financial health of our company.

 

 

22		– 2019 Proxy Statement

EXECUTIVE COMPENSATION INFORMATION | Compensation Discussion and Analysis

 

Our philosophy is founded on the following six guiding principles:

 

•

Compensation targets and the mix of pay based on market practices.

 

•

Actual compensation should align with results against performance objectives.

 

•

Incentives should promote above-median pay when performance exceeds company and peer expectations and below-median pay when performance lags behind these indicators.

 

•

Compensation should be aligned with the long-term interest of our stockholders.

 

•

Compensation practices and policies should not encourage unreasonable risk-taking.

 

•

Compensation programs should align with our corporate values.

Our compensation philosophy also reflects our commitment to enhancing management retention and leadership stability in a highly competitive market by subjecting a significant portion of total compensation to multi-year vesting or performance conditions described on pages 27-31, relating to our long-term compensation programs.

2018 Compensation Overview

Elements of Total 2018 Compensation Program. In 2018, our NEOs were compensated through the following elements of compensation.

 

Compensation Element		Form of Compensation		Purpose
Base Salary		Cash		Provides fixed compensation element necessary to attract and retain key executives
2018 Short-Term Incentive Compensation (“STIC”)		Cash		Motivates NEOs to work towards achievement of key operational and financial goals, including a focus on sustainability, environmental compliance, safety, profitability and balance sheet strength
2018 Long-Term Incentive Compensation (“LTIC”)		Equity: Performance-based restricted stock units that vest ratably over 3 years based on pre-established performance goals   Equity: Service-based restricted stock units that vest ratably over 3-year period		Performance goals tied to relative total stockholder return and free cash flow net to CEIX stockholders promote investor alignment through ownership consistent with peer group practices
Change in Control and Non CIC Severance Agreements		Cash severance including post-termination benefits		Attracts and retains NEOs, provides competitive benefits and ensures NEOs remain focused to act in best interest of company when faced with significant strategic event
Retirement Benefits		Active qualified 401(k) savings plan with company matching and discretionary contributions		Broad-based plan that provides income security through employee and company contributions for all participants including NEOs

 

 

		– 2019 Proxy Statement		23

EXECUTIVE COMPENSATION INFORMATION | Compensation Discussion and Analysis

 

Pay Mix. The charts below illustrate the target total direct compensation opportunity for 2018 for Mr. Brock and the average of our other NEOs; 62.5% of CEO’s total direct compensation is equity based and 82.1% is performance-based.

 

CEO   17.9% Base; 19.6% STIC; 62.5% LTIC		Other NEOs 26.2% Base; 15.0% STIC; 58.8% LTIC

Our Compensation Committee and Management Roles. Our Compensation Committee requests that the CEO be present at committee meetings, where compensation and corporate performance are discussed and evaluated. The CEO is encouraged to provide insight, suggestions or recommendations regarding executive compensation if present during these meetings or at other times. However, only independent committee members are allowed to vote on decisions made regarding executive compensation. In making its determinations with respect to executive compensation, the committee is supported by CEIX’s Chief Administrative Officer, its General Counsel and Mercer, the committee’s independent compensation consultant. While the committee meets with the CEO to discuss his own compensation package, ultimately, decisions regarding the CEO’s compensation are made by the committee in executive session without the CEO or any other executive officer present, solely based upon the committee’s deliberations. Decisions regarding other NEOs who report directly to the CEO are also made by the committee (or Board, in the case of equity grants, absent a delegation to the committee or CEO) after considering recommendations from the CEO, Mercer and the Chief Administrative Officer.

CEIX Compensation Consultant. Our Compensation Committee retained Mercer as an independent compensation consultant directly, although in carrying out its assignments, Mercer also interacts with CEIX management when necessary and appropriate. Specifically, the Chief Administrative Officer, responsible for Human Resources matters, including executive compensation, interacts with the consultant to provide compensation data, best practices data, and executive compensation trends. In addition, Mercer may, in its discretion, seek input and feedback from executives regarding its consulting work product prior to the presentation to the Compensation Committee to align with CEIX’s business strategy, to determine that additional data may need to be gathered, or to identify other issues, if any, prior to the presentation to the Compensation Committee. Annually, the Compensation Committee reviews with management the independence of any compensation consultant it retains. In February 2019, the Compensation Committee conducted an independence review of Mercer by analyzing the factors mandated by the listing standards of the New York Stock Exchange and concluded that there were no conflicts of interest arising from Mercer’s work.

 

 

24		– 2019 Proxy Statement

EXECUTIVE COMPENSATION INFORMATION | Compensation Discussion and Analysis

 

2018 Compensation Actions

Increase in 2018 Base Salaries, 2018 STIC and LTIC Targets. In early 2018, our Compensation Committee approved increases in the base salaries of Messrs. Brock and Salvatori and Ms. Wiegand to reflect their increased roles and responsibilities and to ensure that such executives are compensated competitively in line with CEIX’s Peer Group and general industry. The Compensation Committee also approved adjustments in the STIC and LTIC compensation targets for our NEOs to ensure that their short-term and long-term compensation opportunities are in line with the CEIX Peer Group and general industry. The base salaries and targets, expressed as a percentage of each NEO’s base salary, are included in the table below.

 

Name of Executive		Base Salary					2018 STIC					2018 LTIC
Mr. Brock				$650,000					110	%				350	%
Mr. Khani				$530,566					70	%				487	%
Mr. McCaffrey				$389,500					50	%				128	%
Ms. Wiegand				$300,000					50	%				42	%
Mr. Salvatori				$270,000					50	%				46	%

While the targets for all of our NEOs were reviewed, only the STIC targets (for Messrs. Brock and Salvatori and Ms. Wiegand) and LTIC targets (for Messrs. Brock, McCaffrey and Salvatori and Ms.  Wiegand) were adjusted during 2018.

2018 Peer Group. The Compensation Committee selected the following 11 companies (the “Peer Group”) based on the recommendation of Mercer, which includes companies in the coal and energy industry similar in revenue size to CEIX and with industry and business characteristics comparable to CEIX in terms of revenue and market cap and with whom we compete for talent. The Compensation Committee does not target a particular percentile within the Peer Group in setting an NEO’s compensation, but uses the Peer Group compensation data as one of several reference points in determining the form and amount of compensation. The Compensation Committee also uses general industry competitive market data to evaluate our NEO total compensation packages.

 

Alliance Resources Partners, LP		Hallador Energy Inc.
Arch Coal Inc.		Louisiana-Pacific Corporation
Cleveland-Cliffs Inc.		Natural Resources Partners LP
Cloud Peak Energy Inc		Peabody Energy Corporation
Compass Minerals Inc.		Westmoreland Coal Company
Foresight Energy LP

In early 2019, our Compensation Committee reviewed with Mercer the composition of our Peer Group and decided to eliminate two (2) members of the group, Westmoreland Coal Company and Cloud Peak Energy Inc. for equity valuation reasons in light of their respective financial challenges, the change to be effective for the 2019 year. At the same time the Compensation Committee decided to include newly publicly listed Warrior Met Coal Company Inc. as a new member of the Peer Group as it more accurately reflects our coal industry and more closely resembles our size in terms of revenue and market capitalization.

2018 Short-Term Incentive Compensation (STIC). In January 2018, the Compensation Committee approved 2018 annual incentive awards for the performance period beginning January 1, 2018 through December 31, 2018, the payment of which was contingent on the company’s successful achievement of performance goals related to operating margin and free cash flow net to CEIX stockholders, equally weighted, but subject to modification influenced by each NEO’s contribution towards achieving environmental and safety initiatives, as determined by our President and CEO, and approved by our Compensation Committee. The STIC awards included threshold, target and maximum performance levels. The 2018 STIC performance factors had a potential score ranging from 0% – 200%, with a target score of 100%. If the threshold, or minimum, score of 50% had not been achieved, a score of zero would be assigned, with no payout.

 

		– 2019 Proxy Statement		25

EXECUTIVE COMPENSATION INFORMATION | Compensation Discussion and Analysis

 

For purposes of calculating the payouts for the 2018 STIC, operating margin means per ton sales price less per ton direct operating cost, and free cash flow net to CEIX stockholders means operating cash flow, plus monetization of non-earnings before-interest, taxation, depreciation and amortization (“EBITDA”) producing assets, less organic capital expenditures and distributions to non-controlling interests. Our Compensation Committee believes these performance goals encourage our NEOs to stay focused on operational and balance sheet strength.

The 2018 STIC award payout formula appears below:

 

Annual Base Salary

X

Target Opportunity Percentage (% of Base Salary)

X

(+/- Up to 200% Modifiers)

=

2018 STIC Award Payout

The performance goals are equally weighed at 45% with 10% allocated to individual NEO performance.

 

Performance Goals		Operating Margin					Free Cash Flow
Threshold (50%)				$14.13 Per Ton					$  42 million
Target (100%)				$15.89 Per Ton					$  77 million
Maximum (200%)				$17.28 Per Ton					$111 million

In February 2019, the Compensation Committee evaluated and determined achievement with the performance goals and the resulting amounts of payments for our NEOs under the 2018 STIC. The percentage payout for the 2018 STIC, as well as the achievement of the performance goals against actual performance appear in the table below.

 

Performance Goal1		Actual Results					Weighted Score
Operating Margin Per Ton* (45%)				$        18.60					200	%
Free Cash Flow Net to CEIX Stockholders* (45%)				$248 million					200	%
Employee Performance Score (+/-10%)

Maximum Score Possible:         200%

The following table shows the details of the payments made to our NEOs under the 2018 STIC, based on their target payout (as a percentage of base salary) multiplied by the payout percentage of 200%, as influenced by each NEO’s individual performance.

 

NEO		Target Opportunity Percentages (% of Base Salary)					Target Payout Opportunity					STIC Payout Score (% of Opportunity)					Actual Payout
Mr. Brock				110	%				$715,000					200	%				$1,430,000
Mr. Khani				70	%				$371,396					199	%				$   739,078
Mr. McCaffrey				50	%				$194,750					200	%				$   389,500
Ms. Wiegand				50	%				$150,000					200	%				$   300,000
Mr. Salvatori				50	%				$135,000					197.5	%				$   266,625

 

26		– 2019 Proxy Statement

EXECUTIVE COMPENSATION INFORMATION | Compensation Discussion and Analysis

 

2018 Performance Highlights of Our NEOs.

 

•

James A. Brock. As our Chief Executive Officer, Mr. Brock successfully led CEIX in its first full year of existence, and continued his role as Chief Executive Officer of the general partner of CCR. For the third consecutive year, the Pennsylvania Mining Complex posted organic growth with a record coal production level of 27.6 million tons with associated realizations up 8%. Additionally, the CONSOL Marine Terminal achieved record revenue of $64.9 million.

 

•

David M. Khani. As our Chief Financial Officer, Mr. Khani has played and continues to play a critical role in supporting Mr. Brock’s leadership of our company’s business, and in light of his significant experience relating to the coal industry, he also serves as the Chief Financial Officer of the general partner of CCR. During 2018, Mr. Khani led efforts to lower our cost of capital and refined the company’s capital allocation process.

 

•

James J. McCaffrey. As our Senior Vice President – Coal Marketing, Mr. McCaffrey holds a critical role as the leader of the marketing team for our coal business, which recorded a 8% increase in realizations for 2018 versus 2017 results. Mr. McCaffrey’s team built CEIX’s coal sales portfolio for 2018 through 2020, resulting in our company being greater than 95% contracted for 2019, 53% contracted for 2020, and 28% contracted for 2021, assuming an annual coal production rate of approximately 27 million tons.

 

•

Martha A. Wiegand. As the General Counsel and Secretary of CEIX and the general partner of CCR, Ms. Wiegand has played a critical role in leading both internal and external teams of lawyers in her role of advising both boards on various corporate governance and other board-level issues, serves as the top legal advisor for the Pennsylvania Mining Complex and oversees the companies’ land, legal, health, safety and environmental, and internal audit functions. During the year Ms. Wiegand played a lead role in the company’s legal and permitting issues related to obtaining critical mining permits in order for the company to continue its mining efforts in the Pennsylvania Mining Complex.

 

•

Kurt R. Salvatori. As our Chief Administrative Officer, Mr. Salvatori oversees the company’s Human Resource, Government Affairs, Information Technology and Public Relations functions. During 2018, these functions recorded material reductions in the company’s long-term liability portfolio and implemented a new Enterprise Resource Planning System for the company.

2018 Long-Term Incentive Compensation (LTIC). In January of 2018, our Compensation Committee designed the long-term program for our NEOs to include grants of PSUs and RSUs. The RSUs and PSUs both vest ratably over a three-year period, although vesting of the PSUs is subject to the company’s satisfactory achievement of pre-established performance goals as follows:

 

Form of 2018 LTIC		Weight		Performance Goal and Vesting Period
Performance-Based Restricted Stock Units (PSUs)		60%		Performance Goals - 50% Relative TSR of XME Metals & Mining Index - 50% Free Cash Flow Net to CEIX Stockholders Ratable vesting over three-year performance period
Service-Based Restricted Stock Units (RSUs)		40%		Ratable vesting over three-year service period

Our Compensation Committee believes the PSUs and RSUs align the interests of our executives with those of our stockholders because (1) the vesting of the RSUs increases executive stock ownership and supports executive retention, and (2) the vesting of the PSUs is tied to the achievement of pre-established goals related to our stock price and the sustained financial and operational stability of our company over the long-term. While most companies tie target relative TSR to peer group median performance, we have imposed a higher performance bar for target vesting. As described below, CEIX is required to perform above the median (60th percentile) to earn target award values.

 

 

		– 2019 Proxy Statement		27

EXECUTIVE COMPENSATION INFORMATION | Compensation Discussion and Analysis

 

The target accounting values for the 2018 PSU and RSU grants for our NEOs appear below. These values are computed in the same manner as the stock awards in the Summary Compensation Table that appears on page 34 as explained by footnote 3 to the table.

 

Named Executive Officer		PSU Target Grant ($)					RSU Target Grant ($)
Mr. Brock			$	1,528,938				$	909,977
Mr. Khani			$	1,736,596				$	1,033,592
Mr. McCaffrey			$	336,004				$	199,996
Ms. Wiegand			$	83,989				$	49,991
Mr. Salvatori			$	83,989				$	49,991

The vesting of the NEOs’ PSUs will be calculated annually based on the following pre-established equally weighted goals, with the aggregate payout capped at 200% of target performance.

 

(1)	The TSR relative to the XME Metals and Mining ETF (measured at the end of each year) during the 3-year performance period using the 10-day average closing price ending December 31 for the applicable tranche; and

 

(2)	Free cash flow net to CEIX stockholders means operating cash flow plus monetization of non-EBITDA producing assets less organic capital expenditure and distributions to non-controlling interests.

The PSU target performance goals for the 2018-2020 performance period appear below:

 

2018

Weight

50% Target

100% Target

200% Target

Relative TSR

50%

25th Percentile

60th Percentile

75th Percentile

Free Cash Flow Net to CEIX Stockholders

50%

$ 42 million

$ 77 million

$ 111 million

 

2019

Weight

50% Target

100% Target

200% Target

Relative TSR

50%

25th Percentile

60th Percentile

75th Percentile

Free Cash Flow Net to CEIX Stockholders

50%

$ 26 million

$ 67 million

$ 98 million

 

2020

Weight

50% Target

100% Target

200% Target

Relative TSR

50%

25th Percentile

60th Percentile

75th Percentile

Free Cash Flow Net to CEIX Stockholders

50%

$ 60 million

$ 132 million

$ 166 million

2018 to 2020 LTIC Payout for 2018 Tranche. The vesting of the 2018-2020 PSUs is calculated annually based on the following pre-established equally weighted performance goals, with the maximum payout capped at 200% of target performance:

 

Performance Metric		Performance Results		Target Units Earned (%)					Weighting (%)					Total Units Earned (%)
Relative TSR		75th Percentile				200	%				50	%				100	%
Free Cash Flow Net to CEIX Stockholders*		$       248 million				200	%				50	%				100	%

 

28		– 2019 Proxy Statement

EXECUTIVE COMPENSATION INFORMATION | Compensation Discussion and Analysis

 

In February 2019, the Compensation Committee evaluated the company’s achievement against the above-described performance goals, and determined that our NEOs earned the following payouts with respect to the 2018 PSU tranche:

 

Named Executive Officer		2018 PSU Tranche (at target)					Target Payout (%)					Payout Amounts (# of shares)
Mr. Brock				14,361					200	%				28,722
Mr. Khani				16,312					200	%				32,624
Mr. McCaffrey				3,155					200	%				6,310
Ms. Wiegand				788					200	%				1,576
Mr. Salvatori				788					200	%				1,576

Our Former Parent Long-Term Incentive Compensation Programs. The awards and payouts described below include awards granted under our former parent’s equity plan and assumed by CEIX under our Omnibus Performance Incentive Plan (the “Omnibus Plan”). These awards included PSUs that are eligible for vesting with respect to the company’s performance during the 2018 Year.

Former Parent 2016 to 2020 LTIC Payout. In January 2016, Messrs. Brock, Khani, McCaffrey and Salvatori were granted PSUs by our former parent that vest, if earned, ratably over a five-year period (January 1, 2016 through December 31, 2020) based on Absolute Stock Price and Relative TSR as compared to the S&P 500. The performance goals established for the 2016 through 2020 performance period for 2018 are as follows:

 

The vesting of these awards is calculated annually based on the pre-established equally weighted performance goals described above, with the aggregate payout capped at 200% of target performance. Our performance for the 2018 tranche is shown below:

 

Performance Metric		Performance Results					Target Units Earned (%)					Weighting (%)					Total Units Earned (%)
Relative TSR		99th Percentile							200	%				50	%				100	%
Absolute Stock Price Per Share		$31.37							200	%				50	%				100	%

Relative TSR for the 2018 tranche was measured by comparing CEIX’s common stock price 10-day average closing stock price per share ending on December 31, 2018, against the companies in the S&P 500 as of the same date using a 10-day average closing stock price per share ending on December 31, 2016. The Absolute Stock Price metric for the 2018 tranche was measured by comparing the 2018 target grant date stock price (“GDSP”) of $11.27 per share against CEIX’s 10-day average closing stock price per share ending December 31, 2018 of $31.37 per share.

 

 

		– 2019 Proxy Statement		29

EXECUTIVE COMPENSATION INFORMATION | Compensation Discussion and Analysis

 

In February 2019, the Compensation Committee evaluated the company’s achievement against the above-described performance goals, and determined that our NEOs (other than Ms. Wiegand who was not a participant in the 2016 LTIC) earned the following payouts with respect to the 2018 PSU tranche:

 

Named Executive Officer		2018 PSU Tranche (at target)					Target Payout (%)					Payout Amounts (# of shares)
Mr. Brock				9,960					200	%				19,920
Mr. Khani				19,920					200	%				39,840
Mr. McCaffrey				2,499					200	%				4,978
Mr. Salvatori				746					200	%				1,492

Former Parent 2017 to 2021 LTIC Payout. In January 2017, only Mr. Khani was granted PSUs by our former parent that vest, if earned, ratably over a five-year period (January 1, 2017 through December 31, 2021) based on Absolute Stock Price and Relative TSR as compared to the S&P 500. The performance goals established for the 2017 through 2021 Performance Period for 2018 and the 2017 “look-back” (described below) are as follows:

 

The vesting of the 2017-2021 PSU awards is calculated annually based on the pre-established, equally weighted performance goals described above, with the maximum payout capped at 200% of target performance. Our performance for the 2018 tranche is shown below:

 

Performance Metric		Performance Results					Target Units Earned (%)					Weighting (%)					Total Units Earned (%)
Relative TSR		70th Percentile							168	%				50	%				84	%
Absolute Stock Price Per Share		$31.37							100	%				50	%				50	%

Relative TSR for the 2018 tranche was measured by comparing our company’s common stock price 10-day average closing stock price per share ending on December 31, 2018, against the companies in the S&P 500 as of the same date using a 10-day average closing stock price per share ending on December 31, 2018. The Absolute Stock Price metric for the 2018 tranche was measured by comparing the target GDSP of $31.36 per share against CEIX’s 10-day average closing stock price per share ending December 31, 2018 of $31.37 per share. For the Absolute Stock Price metric, in the event that a tranche fails to pay out at target at the end of a year (a “Missed Year”), the unvested PSUs attributable to the Missed Year vest at target if the company achieves target performance (or greater) at the end of a future period. This is a feature of our former parent’s 2017-2021 LTIC program.

 

30		– 2019 Proxy Statement