The Nominating and Corporate Governance Committee interviews, evaluates, nominates and recommends individuals for membership on the Company’sCompany's Board and committees thereof and is responsible for establishing and periodically reviewing and revising the Company’sCompany's corporate governance policies and principles. Messrs. Frierson (Chairman), Sansom, Tellock and Dorey were members of the Nominating and Corporate Governance Committee during all of 2012.2014. The Nominating and Corporate Governance Committee held one meeting in 20122014 and has approved the Director nominations submitted in this Proxy Statement. The current members of the Nominating and Corporate Governance Committee are Messrs. Frierson (Chairman), Sansom, Tellock and Dorey. All members of the Nominating and Corporate Governance Committee are independent (as independence is defined in the Nasdaq Rules).
The Nominating and Corporate Governance Committee acts under a written charter adopted by the Board of Directors. A copy of the current Nominating and Corporate Governance Committee’sCommittee's charter adopted as of July 29, 2010 is available on the Company’sCompany's website at www.astecindustries.com.
The Nominating and Corporate Governance Committee will consider written recommendations from shareholders for Company nominees to the Board. A shareholder who wishes to recommend a person to the Committee for nomination by the Company must submit a written notice by mail to the Nominating and Corporate Governance Committee c/o the Corporate Secretary, Astec Industries, Inc. at 1725 Shepherd Road, Chattanooga, Tennessee 37421. Such a written recommendation must be received no later than 120 days in advance of the annual meeting of shareholders and should include (i) the candidate’scandidate's name, business address and other contact information, (ii) a complete description of the candidate’scandidate's qualifications, experience and background, as would be required to be disclosed in the proxy statement pursuant to Regulation 14A of the Securities Exchange Act of 1934, as amended, (iii) a signed statement by the candidate in which he or she consents to being named in the proxy statement as a nominee and to serve as a director if elected, (iv) a signed statement authorizing the Company to perform a background search on the candidate and (v) the name and address of the shareholder(s) of record making such a recommendation.
The Nominating and Corporate Governance Committee recommends nominees for election to the Board based on a number of qualifications, including but not limited to, independence, character and integrity, diversity, financial literacy, level of education and business experience, sufficient time to devote to the Board, and a commitment to represent the long-term interests of the Company’sCompany's shareholders. There are no differences in the manner in which the Nominating and Corporate Governance Committee evaluates a candidate that is recommended for nomination for membership on the Company’sCompany's Board by a shareholder. The Nominating and Corporate Governance Committee has not received any recommended nominations from any of the Company’sCompany's shareholders in connection with the Annual Meeting.
The Nominating and Corporate Governance Committee identifies potential Company nominees for director through a variety of business contacts, including current executive officers, directors, community leaders and shareholders. The Committee may, to the extent it deems appropriate, retain a professional search firm and other advisors to identify potential nominees for director.
The Nominating and Corporate Governance Committee evaluates candidates to the Board by reviewing their biographical information and qualifications. If the Nominating and Corporate Governance Committee determines that a candidate is qualified to serve on the Board, such candidate is interviewed by at least one member of the Nominating and Corporate Governance Committee and the Chief Executive Officer. Members of the Board also have an opportunity to interview qualified candidates. As described above, the Committee will also consider candidates recommended by shareholders. The Nominating and Corporate Governance Committee then determines, based on the background information and the information obtained in the interviews, whether to recommend to the Board that the Company nominate a candidate for approval by the shareholders to fill a directorship. With respect to an incumbent director whom the Nominating and Corporate Governance Committee is considering as a potential nominee for re-election, the Committee reviews and considers the incumbent director’sdirector's service to the Company during his or her term, including the number of meetings attended, level of participation, and overall contribution to the Company in addition to such person’sperson's biographical information and qualifications. The Nominating and Corporate Governance Committee gives strong consideration to a wide range of diversity factors as a matter of practice when evaluating candidates to the Board and incumbent directors, but the Committee does not have a formal policy regarding Board diversity.
In evaluating candidates to the Board, the Nominating and Corporate Governance Committee also takes into account the skill sets that are needed to balance and complement the skill sets of other candidates and members of the Board, and the skills and expertise of a candidate that facilitate the Company’sCompany's compliance with the rules of the Securities and Exchange Commission and the Financial Industry Regulatory Authority (FINRA).
The Board is nominating fourthree individuals for election as Directors. Of the four nominees, three are current Directors. Benjamin BrockDirectors, each of whom is standing for election by the shareholders for the first time.currently a Director. The Nominating and Corporate Governance Committee recommended each of the fourthree nominees to the Board.
Shareholder Communications
The Board of Directors has unanimously adopted a process to facilitate written communications by shareholders to the Board. Shareholders wishing to write to the Board of Directors of the Company or a specified director or committee of the Board should send correspondence to the Secretary of the Company, Astec Industries, Inc. at 1725 Shepherd Road, Chattanooga, Tennessee 37421. All written communications received in such manner from shareholders of the Company shall be forwarded to the members of the Board of Directors to whom the communication is directed or, if the communication is not directed to any particular member(s) or committee of the Board of Directors, the communication shall be forwarded to all members of the Board of Directors.
COMPENSATION DISCUSSION AND ANALYSIS
Overview
In the paragraphs that follow, we will give an overview and analysis of our compensation programs and policies, the material compensation decisions we have made under those programs and policies, and the material factors that we considered in making those decisions. This section includes, among other things, an explanation of the overall objectives of our compensation program, what it is designed to reward, and each element of the compensation that we pay. Later in this proxy statement under the heading “Executive Compensation”"Executive Compensation" you will find a series of tables containing specific information about the compensation earned or paid in 20122014 to the following individuals, who we refer to as our named executive officers:
· | J. DonBenjamin G. Brock, ("Mr. Brock") our chief executive officer and principal executive officer;Chief Executive Officer (since January 1, 2014); |
· | David C. Silvious, our vice presidentVice President, Chief Financial Officer and principal financial officer;Treasurer; |
· | J. Don Brock, ("Dr. Brock") our Company Chairman and Chairman of the Board (formerly our Chief Executive Officer through December 31, 2013); |
· | W. Norman Smith, our Company Vice Chairman and Vice Chairman of the Board (formerly our President and Chief Operating Officer;Officer through December 31, 2013); |
· | Richard A. Patek,Jeffery J. Elliott, our Group VP-AggregateVice President of our Aggregate and Mining Group (since July 1, 2014) and former President of Telsmith,Johnson Crushers, Inc.; and |
· | Joseph P. Vig, our Group VP-AggRecon Group and President of Kolberg-Pioneer, Inc. |
The discussion below is intended to help you understand the detailed information provided in those tables and put that information into context within our overall compensation program.
Objectives of Our Compensation Program
Our objectives with respect to the Company’sCompany's executive compensation program are to:
· | attract and retain qualified personnel who are critical to the Company’sCompany's long-term success and the creation of shareholder value; |
· | create a strong link between executive officer compensation and the Company���sCompany's annual and long-term financial performance; and |
· | encourage the achievement of Company performance by utilizing a performance-based incentive structure. |
In order to be effective, we believe our executive compensation program should meet the needs of the Company, our employees and our shareholders. We seek to provide direct compensation that is competitive within the marketplace, and believe that a portion of total compensation should be performance-based and in the form of equity awards.
How We Determine and Assess Executive Compensation
Our Compensation Committee of the Board of Directors, composed entirely of independent directors, reviews, determines and approves the base salaries and other compensation of our executive officers, including our named executive officers. Our Compensation Committee is also responsible for making recommendations to the Board with respect to the Company’sCompany's executive compensation policies and the adoption of stock and benefit plans. As a starting point, base salary increases for named executive officers, when given, historically have reflected a cost of living adjustment, with further increases approved by the Compensation Committee based on a subjective assessment of a number of factors. As more fully described below, the factors on which this subjective assessment is based fall into three general categories: company performance factors, individual performance factors and competitive salary practices.
It is important to emphasize that the subjective assessment of these factors is qualitative, rather than quantitative, and there are no specific weightings or objective criteria associated with any of the factors. In determining base salaries, annual cash incentives and long term stock incentives (if performance goals are met) for the named executive officers each year, the Compensation Committee relieshas relied upon Dr. Brock, the Company’sCompany's Chief Executive Officer ("CEO") to provide evaluations of the other named executive officers (each of whom report directly or indirectly to Dr. Brock)the CEO) and to provide recommendations regarding whether adjustments to base salariescompensation opportunities are warranted. In determining Dr. Brock’sthe CEO's base salary, annual cash incentives and long term stock incentives (if performance goals are met) each year, the Compensation Committee relies on its own observations and assessments with respect to Dr. Brock’shis individual performance and the overall results of his leadership of the Company.
Our Compensation Committee’sCommittee's policy is to set senior executive pay at sufficiently competitive levels to attract, retain, and motivate highly talented individuals to contribute to our goals, objectives, and overall financial success. We believe that the Company’sCompany's executive compensation program provides an overall level of compensation opportunity that is competitive within the construction equipment manufacturing industry, as well as with a broader group of companies of comparable size and complexity. Actual compensation levels may be greater or less than average competitive levels in similar companies based upon annual and long-term Company performance, as well as individual performance.
While market competitiveness is important, it is not the only factor we consider when establishing compensation opportunities of our named executive officers. Actual pay decisions are made following a review and discussion of the financial and operational performance of our businesses, individual performance, and competitive salary practices which address retention concerns and internal pay equity.
Company Performance Factors.
Compensation decisions for a particular year are made following a review of the financial and operational performance of the Company and its business groups for the prior year. In recommending and approving base salaries,compensation levels for executive officers, the Chief Executive Officer and the Compensation Committee review and assess the Company’sCompany's performance, with an emphasis on earnings, return on capital employed and cash flow on capital employed. These performance criteria are direct reflections of the Company’sCompany's profitability and operating efficiency, which the Company believes are key drivers for creating shareholder value.
Company performance factors typically weigh more heavily in the determination of annual cash and long-term incentive compensation than in the determination of base salary adjustments for named executive officers. As more fully described below, base pay rates for the named executive officers were increased in 20122014 over 20112013 levels after consideration of promotions received by certain of the improvement inexecutives, the Company’sCompany's performance in 2011 as compared the 20102013 and consideration of the current economic environment in which the Company operates.
Individual Performance Factors.
The subjective factors considered by the Compensation Committee in relation to a named executive officer’sofficer's individual performance for the previous year include management, leadership, staff development, contribution to the Company’sCompany's growth, scope of responsibilities and experience and an assessment of the named executive officer’sofficer's future performance potential.
Competitive Compensation Practices.
As discussed above, the Compensation Committee’sCommittee's policy is to set named executive officer compensation at sufficiently competitive levels within the construction equipment manufacturing industry, as well as within a broader group of companies of comparable size and complexity, in order to attract, retain and motivate named executive officers. In the past, the Company has engaged the services of a compensation consultant,consultants and instructed them to conduct a market analysis and to assist the Company in developing a long-term incentive plan and its overall executive compensation program. The most recent study was performed by Towers and Watson during 2012 for the Committee's use in evaluating 2013 salary adjustments and overall compensation opportunities for the Company's executives. For wages paid during 2012,2014 and to be paid during 2015, the Compensation Committee continued its past compensation program without significant deviation; however, the committee diddeviation. The Compensation Committee plans to again engage a compensation consultant during 20122015 to perform a market analysisfurther review the Company's executive compensation and specific peer group reviewbenefits for use in evaluating 20132016 salary adjustments and overall compensation opportunities in order to ensure that our compensation remains at sufficiently competitive levels within our industry.
With Towers Watson's assistance in 2012, we reviewed and analyzed competitive market data as background information in connection with setting 2013 and 2014 compensation and to obtain a general understanding of current compensation practices. Data sources included industry-specific and size-adjusted published survey data. In addition, we compared compensation opportunities for our named executive officers with pay opportunities available to executive officers in comparable positions at similar companies (our "Peer Group"). Our Peer Group consists of the following eleven comparably-sized companies from the industrial manufacturing industry, each with significant international revenue:
Actuant Corporation | Federal Signal Corporation |
Alamo Group Inc. | Idex Corporation |
Altra Industrial Motion Corp. | Lindsay Corporation |
Cascade Corporation | Nordson Corporation |
Commercial Vehicle Group, Inc. | The Toro Company |
Enpro Industries, Inc. | |
In general, the review of competitive market data and compensation opportunities available to executive officers of companies within our Peer Group revealed that the base salaries and total compensation opportunities of our named executive officers are generally below market. This is one factor that was considered in raising the base salary of our Chief Executive Officer and our Group Vice President of Aggregate and Mining for 2014, and setting annual cash incentive compensation opportunities for our named executive officers, as discussed below.
Consideration of Last Year’sYear's Advisory Stockholder Vote on Executive Compensation
At the Annual Meeting of Shareholders on May 3, 2012,April 24, 2014, over 95%99% of the shares voted were cast to approve the compensation of the Company’sCompany's named executive officers, as discussed and disclosed in the 20122014 Proxy Statement. The Board and the Compensation Committee appreciate and value the views of our shareholders. Although theThe results of this advisory vote on executive compensation shows that the compensation paid to our executive officers and the Company's overall pay practices were supported by a vast majority of the shares voted, the Committee decided it should revisit its executive pay practices to determine if enhancements could be achieved.
voted. In light of the strong shareholder support of the compensation paid to our executive officers evidenced by the results of this decision, ouradvisory vote, the Compensation Committee engaged an independent compensation consultant to conduct a market analysis and peer group survey, anddoes not intend to make recommendations with respectany specific changes to our executive compensation practices. The Compensation Committee hadprogram for 2015 in response to the results of this study available for consideration prior to making base salary adjustments for executive officers for 2013. The Compensation Committee also approved a new bonus plan for corporate officers to provide incentives for 2013 performance. vote.
Going forward, future advisory votes on executive compensation will serve as an additional tool to guide the Board and the Compensation Committee in evaluating the alignment of the Company’sCompany's executive compensation program with the interests of the Company and its stockholders.
Also atAt the Annual Meeting of Shareholders on April 28, 2011, our shareholders expressed a preference that advisory votes on executive compensation every year. Consistent with this preference, the Board determined to implement an advisory vote on executive compensation every year until the next required vote on the frequency of stockholder votes on the compensation of executive officers, which is scheduled to occur at the 2017 Annual Meeting.
Elements of Our Compensation Program
The Company’sCompany's executive officer compensation program is comprised of base salary, annual cash incentive compensation, and long-term incentive compensation in the form of equity grants. We also provide our executive officers certain perquisites and executive benefits, including contributions to the Company’sCompany's Supplemental Executive Retirement Plan (SERP), as well as other benefits that are generally available to all employees of the Company, including medical and 401(k) plans.
Base Salary
Base salary is the fixed component of our named executive officers’officers' total direct compensation, as opposed to at-risk compensation based on performance. The Compensation Committee reviews base salaries on an annual basis and approves salary levels after a subjective assessment of a number of factors as discussed above. The Compensation Committee increased the salaries of our named executive officers as of January 1, 2012.2014. After reviewing the market analysis and peer group study performed during 2012, the Compensation Committee set the initial salary for our newly appointed CEO at $400,000 (a 94.2% increase over his previous year salary as President of one of our subsidiaries), and increased the base salary of our CFO by 10.5% effective January 1, 2014. Due to his transition from CEO to Chairman, the salary of our Chairman was not adjusted from the prior year level. Each of our other named executive officers received a cost of living adjustment to their base salary of between 3.03%from 3.0% to 3.57%3.2%, effective January 1, 2012. The most recent previous base2014. Additionally, the salary adjustment for these executivesof our Group Vice President was on January 1, 2011. Additionally, in August 2012, coincident withincreased an additional $28,500 upon his promotion to Company President and Chief Operating Officer, Mr. Smith received an additional pay rate adjustment of $35,000 per annum.his current position effective July 1, 2014.
Annual Cash Incentive Compensation
Annual cash incentive compensation rewards an executive officer’sofficer's individual performance as well as the overall performance of the Company for a given year. These profit sharing paymentsBeginning in 2013, the Company has two separate bonus plans for Messrs. Brock, Silviouskey management – one for the Company's corporate officers and Smith, each of whom is employed at the Astec Industries, Inc. level, are discretionary, but are historically consistent with the percent distributions earned byone for our subsidiary companies' Presidents.
The Company generally uses Both plans use two financial metrics—return on capital employed (weighted 60%) and cash flow on capital employed—employed (weighted 25%)—and other non-financial metrics related to employee safety (weighted 15%) in determining the named executive officers’ annual bonuses. bonus amounts. Prior to 2013, annual cash incentive compensation of our Company corporate officers was determined on a discretionary basis by the Board's Compensation Committee after consultation with the Chief Executive Officer.
These metrics are the key indicators of proper capital management and are critical to the Company’sCompany's success. Although annual bonuses for the named executive officers have historically been discretionary, the Company believes the annual bonus program created a performance driven environment with a focus on the Company’s overall financial performance as a whole, rather than on individual achievements. Beginning in 2013, however, the Compensation Committee has adopted a formula driven cash incentive plan for its corporate officers. The new plan calculates awards based on a mix of return on capital employed, cash flow on capital employed and employee safety. These elements are measured against pre-determined goals and achievement against those goals which drives a formula that calculates the amount of annual bonus paid.
Mr. Patek and Mr. Vig-
Mr. Patek and Mr. Vig, in addition to their roles asThe incentive plan for Company corporate officers calculates annual bonuses based upon Company's consolidated performance for all corporate officers except for Group Vice-Presidents also have direct responsibility for individual subsidiariesPresidents/Vice Presidents. Half of the Company. Mr. Patek serves as PresidentGroup Presidents/Vice President's bonuses are based upon the Company's consolidated performance and the other half is based upon the combined results of Telsmith, Inc.(“Telsmith”) and Mr. Vig serves as President of Kolberg-Pioneer, Inc. (“KPI”) As such, Mr. Patek and Mr. Vig’s 2012the companies in their group. Each corporate officer can earn an annual bonus opportunities were pursuantof up to the incentive program70% of their base salary. The plan for our subsidiary presidents and is based on their individual subsidiary’s achievementcompanies' Presidents allows each subsidiary President to earn an annual bonus of performance goals relating to return on capital employed (weighted 45%), cash flow on capital employed (weighted 45%), and safety record (weighted 10%). For 2012, if Telsmith and KPI, respectively, met their target goals of 14% for each financial metric and met the safety goal, Mr. Patek and Mr. Vig would receive a bonus equalup to 50% of their base salary which is consistent with past practice of granting maximum annual bonuses opportunities in an amount equal to 50% of an individual’s base salary for achievement of performance goals at the maximum performance level. For 2012, Telsmith’s weighted average achievement on the three performance goals was 95%, and therefore Mr. Patek received a bonus equal to 48% of his base salary, or $110,156. For 2012, KPI’s weighted average achievement on the three performance goals was 100%; therefore Mr. Vig received a bonus equal to 50% of his base salary, or $116,000. Additionally, as Mr. Patek and Mr. Vig each serve as Group Vice-Presidents in addition to their duties as individual subsidiary Presidents; they each were awarded an additional $10,000 discretionary bonus for their performance in fulfilling their additional Group Vice-President duties.
Mr. Smith-
Through August 2012, Mr. Smith was the Company’s Group Vice President-Asphalt and had direct responsibility for the Company’s subsidiaries in the Asphalt Group. In August, 2012 Mr. Smith was promoted to President and Chief Operating Officer of the Company. Coincident with this promotion, Mr. Smith received a $35,000 increase in his annual salary rate. The Compensation Committee typically intends to provide Mr. Smith with a discretionary bonus not normally exceeding the percentage of base salary bonus opportunities available to the presidents of the Company’s subsidiaries. The bonus programs applicable to these individual subsidiaries, includingbased upon the performance criteria, performance goals and maximum bonus opportunity, are generally consistent with the Telsmith and KPI bonus program described above; however, in determining the actual amount of bonus to be awarded, the Compensation Committee relies on the Company’s Chief Executive Officer to provide evaluations of Mr. Smith and to make specific recommendations regarding his bonus amount. The Committee retains discretion, however, to adjust the amount of bonus earned by Mr. Smith based on the recommendation of the Company’s Chief Executive Officer and a subjective assessment of the Company performance factors andtheir individual performance factors described above. After the completion of this process and considering the current business environment in which the Company operates and the additional duties assumed by Mr. Smith during 2012, Mr. Smith was awarded a discretionary bonus of $100,000, or 36% of his base salary for 2012, as compared to the average bonus as a percent of base salary earned by subsidiary Presidents under the subsidiary bonus plan in 2012 of 25%.
Dr. Brock and Mr. Silvious-subsidiary.
The Compensation Committee reviews the Company’sCompany's consolidated performance as a wholeresulted in determining the discretionary bonusno bonuses being earned for Dr. Brock and2014 for corporate officers who do not also have individual Group responsibilities. However, Mr. Silvious because they have responsibility for and oversee the entire Company’s operations. Mr. Silvious, the Company’sElliott, Group Vice President of Aggregate and Chief Financial Officer during 2012, does not have the same level of direct impact on the Company’s operating results as Dr. Brock and therefore his annual bonus as a percentage of base salary is generally lower than that of Dr. Brock’s. In determining the bonuses for Dr. Brock and Mr. Silvious, the Compensation Committee reviewed the Company’s return on capital employed and cash flow on capital employed (the same metrics utilizedMining for the subsidiary presidents). Additionally,second half of 2014 earned a bonus of $18,385 (7.4%) based upon his group's performance plus an additional bonus of $35,191 (15.9%) for his duties as President of Johnson Crushers, Inc. ("JCI") during the Compensation Committee made an overall subjective judgmentfirst half of the Company performance factors and the individual performance factors described above. After the completion of this process and considering the current business environment in which the Company operates, Dr. Brock and Mr. Silvious were awarded discretionary bonuses of $160,000 and $35,000, respectively for 2012. These represent 28% and 21% of 2012 base salaries of Dr. Brock and Mr. Silvious, respectively.2014.
Long-Term Incentive Compensation
The Company provides long-term incentives to its executive officers through its 2006 and 2011 Incentive Plans, which permit the grant of various equity based awards, including stock options, stock appreciation rights, restricted stock and performance awards that are payable in stock. Grants of equity based compensation are designed to create a strong and direct link between executive officer pay and shareholder return and to enable executive officers to develop and maintain a long-term position in the Company’sCompany's common stock. Awards are granted at our discretion based on Company performance, individual performance and the employee’semployee's position with the Company.
In August 2006, the Company developed a long-term incentive program (the “2006 RSU Program”) for annual grants of restricted stock units (“RSUs”) to approximately 100 employees, including the named executive officers, based on the Company’s goal of increasing its earnings by 100% over a five-year performance period (fiscal year 2006 through fiscal year 2010). The final RSU’s available under this program were granted in February 2011. In October 2010, the Compensation Committee approved a successorlong-term incentive program (the “2011"2011 RSU Program”Program"), which reserved a maximum of 700,000 RSUs that may be earned each year by approximately 100 employees of the Company and its subsidiaries, including its named executive officers, based on achievement of earnings goals for the year at target levels for a five-year performance period (fiscal year 2011 through fiscal year 2015). If the goals discussed below are met, the Compensation Committee grants a certain number of RSUs determined in its discretion to each of the Company’sCompany's key employees that participate in the program, including the named executive officers. The individuals with greater influence over the Company’sCompany's performance generally receive more RSUs. For example, Dr. Brock, asthe Company's CEO earns more RSUs than other employees because of his level of influence on Company operations. The Compensation Committee, in its discretion and after consideration of the recommendation of the Company’s Chief Executive Officer,Company's CEO, determines the amount of RSUs granted to executive officers, including subsidiary presidents, and each subsidiary president then divides the remainder allocated to his or her subsidiary among the subsidiary’ssubsidiary's key employees. RSUs vest and convert into shares of the Company’sCompany's common stock five years from the grant date, subject to the individual’sindividual's continued employment (other than in certain cases, such as retirement after reaching age 65). In addition, management will receive an additional award if the cumulative performance over the five-year period exceeds the cumulative goals.
Dr. Brock and Messrs. Smith and Silvious’s
Mr. Brock's performance targets for 2010 (under2011 through 2013 were based upon a combination of the 2006 RSU Program)performance of Astec, Inc. (75%) and the Company as a whole (25%), while his performance targets for 2014 was based solely on the performance of the Company as a whole. Dr. Brock, Mr. Smith and Mr. Silvious' s performance targets for 2011 through 2014 and 2012 (underMr. Elliott's performance targets for the 2011 RSU Program)second half of 2014 (as he relinquished his position as President of JCI in July 2014), were based entirely on the performance of the Company as a whole, with performance targets based on return on capital employed and net income. The 2011 to mid-2014 performance targets for Mr. Elliott, who was President of JCI during those periods, were based upon the performance of JCI (75%) and the Company as a whole (25%). The performance targets must be met each year, after considering any allowed carryover of prior year’syear's profits in excess of plan goals or carryback of current year’syear's profits in excess of plan goals to recoup awards not granted in previous years, in order to earn the RSUs. The performance targets for both programs were established to provide incentive and rewards based on the Company achieving its goal of increasing its total net income by 100% over the 5-year period with 25% of the net income growth to come from acquisitions. The final number of shares awarded to the Company’sCompany's officers is approved each year by the Compensation Committee.
If the net income goal is not met in onea given year, no RSUs are granted.granted for that year. However, if the Company misses the goal in onea given year, the Company can “carry back”"carry back" net income earned in excess of the goal for any following year to meet the goal for such year. The Company can also “carry forward”"carry forward" net income earned in excess of the goal for onea given year into any of the following years in the five-year performance period. The numberAdditional RSUs can be earned in year five of RSUs granted to named executive officers for fiscal year 2011 included shares earned for 2010 performance as well asthe plan (2015) on a proportional basis if the five-year cumulative award equal to the average number of shares earned during the five-year period increased proportionally by the percentage the actual results exceeded the net income goal. The Company exceededperformance exceeds the cumulative five year net income goal under the 2006 plan provisions by 3.9%. A similar provision is in the 2011 RSU Program concerning awards earned for 2015.five-year goals.
In addition to achieving the net income goal, the Company (and Telsmith and KPI in the case ofJCI, as applicable to Mr. Patek and Mr. Vig)Elliot) must also attain a return on capital employed, as defined, of at least 14% for RSU grants to be earned by the named executive officers in each year.
Astec, Inc. and the Company as a whole did not meet its goals for 2011 through 2014, and thus no RSUs were granted to Mr. PatekBrock, Mr. Silvious, Dr. Brock and Mr. Vig’s RSU grants are based upon the Company’s performance as describedSmith for the other named executive officers with respect to 25%those years. JCI did meet its goals for each of his award. The remaining 75% is based upon the performance of Telsmiththose years and KPI, respectively, measured in the same manner as discussed above for the Company.
The Company and certain of its subsidiaries met the earnings goals discussed aboveMr. Elliott was granted RSUs in each of the five years ending 2010 as well as the cumulative five year goal under the 2006 plan, and therefore the Company’s key employees earned RSUs for those years (the grant is usually made in Februaryas shown below due to his performance as President of the following year). Telsmith and KP met their goals for 2006, 2007, 2008, 2009, 2011 and 2012 but did not meet their goal for 2010 or the cumulative five year goal under the 2006 plan. The Company did not meet the combined company overall goal for 2011 or 2012 and thus no RSU’s were granted to the named executive officers other than Mr. Patek and Mr. Vig for 2011 or 2012.JCI. Additionally, as stipulated in the plan’splan's provisions, the number of RSUs granted to Mr. Patek and Mr. Vig’s RSU’s granted for 2011 performance wereElliott was reduced by 25% due to the Company not meeting its overall goal. The RSUs granted to the named executive officers for performance in prior years,under the 2011 Incentive Plan, based on the allocation determined in the Compensation Committee’sCommittee's discretion, is as follows:
| | 2007 | | | 2008 | | | 2009 | | | 2010 | | | 2011 | | | 2012 | | | 2013 | | | 2012 | | | 2013 | | | 2014 | | | 2015 | |
Mr. Brock | | | | -- | | | | -- | | | | -- | | | | -- | |
Mr. Silvious | | | | -- | | | | -- | | | | -- | | | | -- | |
Dr. Brock | | | 9,000 | | | | 9,000 | | | | 9,000 | | | | 9,000 | | | | 18,351 | | | | -- | | | | -- | | | | -- | | | | -- | | | | -- | | | | -- | |
Mr. Silvious | | | 600 | | | | 800 | | | | 800 | | | | 800 | | | | 1,590 | | | | -- | | | | -- | | |
Mr. Smith | | | 3,100 | | | | 3,100 | | | | 3,100 | | | | 3,100 | | | | 6,321 | | | | -- | | | | -- | | | | -- | | | | -- | | | | -- | | | | -- | |
Mr. Patek | | | 1,500 | | | | 1,500 | | | | 1,500 | | | | 1,500 | | | | -- | | | | 1,125 | | | | 638 | | |
Mr. Vig | | | 2,000 | | | | 2,200 | | | | 2,150 | | | | 1,800 | | | | -- | | | | 1,425 | | | | 1,200 | | |
Mr. Elliott | | | | 1,125 | | | | 1,125 | | | | 1,125 | | | | 563 | |
Perquisites and other Executive Benefits
Executive officers are eligible for certain perquisites and additional benefits that are not available to all employees (but are available to many management level employees), including premiums for term life insurance for the Company’s CEO, Dr. Brock. In addition, our executive officers are eligible for benefits undersuch as our Supplemental Executive Retirement Plan (“SERP”("SERP"). The SERP provides additional benefits to individuals whose retirement benefits are affected by the limit on the maximum amount of compensation which may be taken into account under the qualified pension and 401(k) plans and provides additional benefits on annual profit sharing distributions not recognized under the qualified plans. Additional details regarding perquisites and other benefits provided to our named executive officers are disclosed in the Summary Compensation Table and described in the accompanying narrative.
We believe the perquisites and additional benefits provided to our named executive officers are reasonable in light of industry practices and competitive with the perquisites provided to executive officers within our peer group. We review the perquisites provided to our executive officers on an annual basis to ensure that we are providing benefits that align with our overall compensation goal of providing competitive compensation to our executive officers that maximizes the interests of our shareholders.
Other Factors Affecting Compensation
Tax Deductibility Under Section 162(m)
In establishing pay levels for our named executive officers, the Committee considers the impact of Section 162(m) of the Internal Revenue Code on the amount of compensation deductible by the Company. Under current tax law, Section 162(m) imposes a $1 million limit (per “covered employee”"covered employee") that a publicly traded company can deduct for compensation paid to the CEO and four other most highly compensated executive officers employed as of the end of any fiscal year. This limitation does not apply to pay that qualifies as “performance-based compensation”"performance-based compensation" (as defined under Section 162(m)). In order to qualify as “performance-based”"performance-based", compensation must, among other things, be based solely on the attainment of pre-established objective goals under a shareholder approved plan, with no positive discretion permitted when determining award payouts.
While our current annual incentive program is discretionary and therefore does not qualify as “performance-based compensation” under Section 162(m), theThe Committee generally seeks to structure long-term incentive arrangements for named executive officers to qualify for full tax deductibility under Section 162(m). Our current long-term equity incentive program is structured so that all awards to our Chief Executive Officer will be fully deductible under Section 162(m). Any options and stock appreciation rights granted under the 2011 Incentive Plan will be exempt from the deduction limit of 162(m). The Compensation Committee may designate any other award granted under the 2011 Incentive Plan as performance-based in order to make the award fully deductible. However, the Committee reserves the right to make awards outside of these plans or to provide compensation that does not qualify for full tax deductibility under Section 162(m) when deemed appropriate.
Accounting Considerations
The Company considers the accounting implications of all aspects of its executive compensation program. As a result of the provisions of FASB ASC Topic 718, we do not expect accounting treatment of differing forms of equity awards to vary significantly and, therefore, accounting treatment is not expected to have a material effect on our selection of forms of equity compensation. In addition, accounting treatment is just one of many factors impacting plan design and pay determinations. Our executive compensation program is designed to achieve the most favorable accounting and tax treatment possible as long as doing so does not conflict with intended plan design or program objectives.
Additional Executive Compensation Policies
Stock Ownership Guidelines
The Company encourages executive stock ownership but does not currently have formal guidelines in place. The Committee will periodically monitor executive officer stock ownership levels to determine whether ownership requirements are warranted.
EXECUTIVE COMPENSATION
Summary Compensation Table
This table provides information regarding compensation paid to or earned by our named executive officers for the fiscal years ended December 31, 2010,2012, December 31, 20112013 and December 31, 2012.2014.
Name and
Principal Position | | Year | | | Salary
($)
| | | Bonus
($) (1)
| | | Stock Awards
($) (2)
| | | Non-Equity Incentive Plan Compensation
($) (3)
| | | All Other Compensation ($) (4) | | | Total ($) | |
J. Don Brock,
Chairman of the
Board and Chief
Executive Officer
(PEO)
| | | 2012
2011
2010
| | | | 580,000
560,000
545,000
| | | | 160,000
175,000
100,000
| | | | --
629,990
218,610
| | | | | | | 151,722
134,356
123,005
| | | | 891,722
1,499,346
986,615
| |
David C. Silvious
VP, Chief
Financial Officer
and Treasurer
(PFO) (5)
| | | 2012
2011
| | | | 170,000
152,750
| | | | 35,000
40,000
| | | | --
54,585
| | | | | | | 33,539
22,869
| | | | 238,539
270,204
| |
W. Norman Smith,
President & Chief
Operating Officer
| | | 2012
2011
2010
| | | | 277,639
257,000
250,000
| | | | 100,000
75,000
50,000
| | | | --
217,000
75,299
| | | | | | | 48,503
43,377
39,898
| | | | 426,142
592,377
415,197
| |
Rick. A. Patek,
Group VP,
Aggregate and
Mining Group
and President,
Telsmith (6)
| | | 2012
2011
2010
| | | | 232,000
225,000
200,000
| | | | 10,000
--
10,000
| | | | 43,988
--
36,435
| | | | 110,156
112,087
67,467
| | | | 55,859
49,687
45,513
| | | | 452,003
386,774
359,415
| |
Joseph P. Vig,
Group VP,
AggRecon
Group and
President, KPI (7)
| | | 2012
2011
2010
| | | | 232,024
225,030
196,113
| | | | 10,000
--
10,000
| | | | 55,718
--
43,722
| | | | 116,000
107,325
71,650
| | | | 43,346
39,512
28,808
| | | | 457,088
371,867
350,293
| |
Name and Principal Position | | Year | | | Salary ($) | | | Bonus ($) (1) | | | Stock Awards ($) (2) | | | Non-Equity Incentive Plan Compensation ($) (3) | | | All Other Compensation ($) (4) | | | Total ($) | |
Benjamin G. Brock, Chief Executive Officer(5) | | 2014
| | | | 400,000
| | | | --
| | | | --
| | | | --
| | | | 64,258
| | | | 464,258
| |
David C. Silvious VP, Chief Financial Officer and Treasurer | | | 2014 2013 2012
| | | | 210,000 190,000 170,000
| | | | -- -- 35,000
| | | | -- -- --
| | | | -- 20,143 --
| | | | 36,581 69,891 33,539
| | | | 246,581 280,034 238,539
| |
J. Don Brock, Company Chairman and Chairman of the Board(6) | | | 2014 2013 2012
| | | | 600,000 600,000 580,000
| | | | -- -- 160,000
| | | | -- -- --
| | | | -- 63,610 --
| | | | 108,481 130,011 151,722
| | | | 708,481 793,621 891,722
| |
W. Norman Smith, Company Vice Chairman and Vice Chairman of the Board(7) | | | 2014 2013 2012
| | | | 320,000 310,000 277,639
| | | | -- -- 100,000
| | | | -- -- --
| | | | -- 32,865 --
| | | | 49,595 55,088 48,503
| | | | 369,595 397,953 426,142
| |
Jeffery J. Elliott, Group VP- Aggregate and Mining and former President, Johnson Crushers, Inc.(8) | | | 2014 2013 | | | | 234,915 214,663 | | | | -- -- | | | | 45,585 40,061 | | | | 53,576 107,500 | | | | 44,776 45,593 | | | | 378,852 407,817 | |
(1) | Reflects discretionary annual bonuses paid to our named executive officers based on the overall performance of the Company and individual performance factors, as more fully described in the Compensation Discussion and Analysis section of this proxy statement. |
(2) | Beginning in August 2006, we authorized and reserved an aggregate number of unallocated shares of common stock to be awarded to approximately 100 employees, including our named executive officers, as stock performance awards pursuant to a long-term incentive program under our 2006 Incentive Plan and our 2011 Incentive Plan. Each year that the Company and/or its subsidiaries meet established performance expectations, key members of management will be awarded restricted stock units. Restricted stock units were granted in March 2007, February 2008, February 2009, February 2010, February 2011 and February 2012 based on performance in the immediately preceding year. Additional RSUs based on five year cumulative performance were also granted in February 2011. Dollar amounts shown are equal to the grant date fair value of the RSU’sRSUs granted in the reported year, determined in accordance with Financial Accounting Standards Board ASC Topic 718 Stock Compensation (“("FASB ASC Topic 718”718"). The grant date fair value of the RSUs is equal to the Company’sCompany's per share stock value on each grant date times the number of RSU’sRSUs granted. For more information regarding annual RSU grants pursuant to our long-term incentive program, see the Compensation Discussion and Analysis section of this proxy statement. |
(3) | Reflects annual incentive bonus earned based on achievement of pre-established performance goals, as more fully described in the Compensation Discussion and Analysis section of this proxy statement. |
(4) | Amounts included in this column for 20122014 include the following: |
| | Brock | | | Silvious | | | Smith | | | Patek | | | Vig | | | Mr. Brock | | | Silvious | | | Dr. Brock | | | Smith | | | Elliott | |
Employer contribution to 401(k) plan | | $ | 7,500 | | | $ | 6,329 | | | $ | 7,500 | | | $ | 7,500 | | | $ | 7,500 | | | $ | 7,800 | | | $ | 7,800 | | | $ | 7,800 | | | $ | 7,800 | | | $ | 7,800 | |
Employer contribution to SERP | | | 75,000 | | | | 20,875 | | | | 34,189 | | | | 34,221 | | | | 33,747 | | | | 45,298
| | | | 22,514
| | | | 66,361
| | | | 35,037
| | | | 33,300
| |
Premiums for term life insurance | | | 23,570 | | | | -- | | | | -- | | | | -- | | | | -- | | |
Tax gross up on perks | | | 18,483 | | | | -- | | | | -- | | | | -- | | | | -- | | | | --
| | | | --
| | | | 12,872
| | | | --
| | | | --
| |
Personal Use of Company Plane | | | 7,234 | | | | -- | | | | -- | | | | -- | | | | -- | | |
Personal use of Company plane | | | | --
| | | | --
| | | | 15,171
| | | | --
| | | | --
| |
Personal use of automobile costs | | | 2,704 | | | | 5,383 | | | | 6,814 | | | | 5,214 | | | | 1,832 | | | | 3,237
| | | | 6,267
| | | | 6,277
| | | | 6,758
| | | | 3,521
| |
Compensation for unused vacation | | | 17,231 | | | | 952 | | | | -- | | | | 8,924 | | | | -- | | | | 7,923
| | | | --
| | | | --
| | | | --
| | | | --
| |
Other | | | -- | | | | -- | | | | -- | | | | -- | | | | 267 | | | | --
| | | | --
| | | | --
| | | | --
| | | | 155
| |
TOTAL | | $ | 151,722 | | | $ | 33,539 | | | $ | 48,503 | | | $ | 55,859 | | | $ | 43,346 | | | $ | 64,258 | | | $ | 36,581 | | | $ | 108,481 | | | $ | 49,595 | | | $ | 44,776 | |
(5) | Effective January 1, 2014, Mr. Silvious was not oneBrock transitioned from his role as President of our named executive officers in 2010. Astec, Inc. to Chief Executive Officer of the Company. |
(6) | Mr. Patek was not oneEffective January 1, 2014, Dr. Brock transitioned out of our named executive officers in 2011. the role of Chief Executive Officer while remaining the Company's Chairman of the Board and continuing his full-time employment with the Company as its Chairman. |
(7) | Effective January 1, 2014, Mr. Vig was not one Smith transitioned from the Company's President and Chief Operating Officer to the Vice-Chairman of our named executive officers in 2011 and 2010. the Board while continuing his full-time employment as the Company's Vice Chairman. |
(8) | Effective July 1, 2014, Mr. Elliott transitioned from his role as President of JCI to Group Vice President of the Company's Aggregate and Mining Group. |
Grants of Plan-Based Awards for Fiscal Year 20122014
The following table sets forth individual grants of awards made to each named executive officer during fiscal year 2012.2014.
Name | | Grant Date | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards (1) | | All Other Stock Awards: Number of Shares of Stock or Units | | Grant Date Fair Value of Stock and Option Awards |
| | | | Threshold ($) | | Target ($) | | Maximum ($) | | (#)(2) | | ($)(3) |
Dr. Brock | | | | | | | | | | | | |
Mr. Silvious | | | | | | | | | | | | |
Mr. Smith | | | | | | | | | | | | |
Mr. Patek Mr. Patek | | | | 1 | | 116,000 | | 116,000 | | | | |
| 2-28-12 | | | | | | | | 1,125 | | 43,988 |
Mr. Vig Mr. Vig | | | | 1 | | 116,000 | | 116,000 | | | | |
| 2-28-12 | | | | | | | | 1,425 | | 55,718 |
| | | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards (1) | | | | All Other Stock Awards: Number of Shares of Stock or Units (#) (2) | | Grant Date Fair Value of Stock and Option Awards ($) (3) |
Name | | Grant Date | | Threshold ($) | | | Target ($) | | | Maximum ($) | | |
Mr. Brock | | | | | 1 | | | | 280,000 | | | | 280,000 | | | | | | | | |
Mr. Silvious | | | | | 1 | | | | 147,000 | | | | 147,000 | | | | | | | | |
Dr. Brock | | | | | 1 | | | | 420,000 | | | | 420,000 | | | | | | | | |
Mr. Smith | | | | | 1 | | | | 224,000 | | | | 224,000 | | | | | | | | |
Mr. Elliott | | | | | 1 | | | | 145,000 | | | | 145,000 | | | | | | | | |
| 2-28-14 | | | | | | | | | | | | | | | | 1,125 | | | 45,585 |
(1) | Represents potential threshold, target and maximum payout opportunities for financial performance in 20122014 under the annual cash incentive planplans in place for Mr. Patek and Mr. Vig.place. |
(2) | Represents restricted stock units granted under our 2011 Incentive Plan based on 20112013 performance. Awards based on 20122014 performance under the 2011 Incentive Plan were granted in February 2013,2015, and will be reflected in the Grants of Plan Based Awards for Fiscal Year 20132015 table in next year’syear's proxy statement. The restricted stock units vest five years from the date they are granted or earlier upon the death, disability or retirement of the grantee after reaching age 65, or upon a change in control in which the successor company does not assume or otherwise equitably convert the awards. |
(3) | Represents the aggregate grant date fair value of each restricted stock unit award. The grant date fair value of the awards is determined pursuant to FASB ASC Topic 718 and is equal to the Company’sCompany's stock price on the date of grant times the number of RSU’sRSUs granted. |
Outstanding Equity Awards at 20122014 Fiscal Year-End
This table discloses outstanding stock option and stock awards for the named executive officers as of December 31, 2012.2014.
Option Awards | | Stock Awards | |
Name | | Number of Securities Underlying Unexercised Options (#) Exercisable (1) | | Number of Securities Underlying Unexercised Options (#) Unexercisable | | Option Exercise Price ($) | | Option Expiration Date | | Number of Shares or Units of Stock That Have Not Vested (#) | | | Market Value of Shares or Units of Stock That Have Not Vested ($) (7) | |
Dr. Brock | | | | | | | | | | | 9,000 | 2 | | | 300,240 | |
| | | | | | | | | | | 9,000 | 3 | | | 300,240 | |
| | | | | | | | | | | 9,000 | 4 | | | 300,240 | |
| | | | | | | | | | | 18,351 | 5 | | | 612,189 | |
| | | | | | | | | | | | | | | | |
Mr. Silvious | | | | | | | | | | | 800 | 2 | | | 26,688 | |
| | | | | | | | | | | 800 | 3 | | | 26,688 | |
| | | | | | | | | | | 800 | 4 | | | 26,688 | |
| | | | | | | | | | | 1,590 | 5 | | | 53,042 | |
| | | | | | | | | | | | | | | | |
Mr. Smith | | | | | | | | | | | 3,100 | 2 | | | 103,416 | |
| | | | | | | | | | | 3,100 | 3 | | | 103,416 | |
| | | | | | | | | | | 3,100 | 4 | | | 103,416 | |
| | | | | | | | | | | 6,321 | 5 | | | 210,869 | |
| | | | | | | | | | | | | | | | |
Mr. Patek | | | 10,000 | | | | | 19.43 | | 3/6/2015 | | | 1,500 | 2 | | | 50,040 | |
| | | | | | | | | | | | | 1,500 | 3 | | | 50,040 | |
| | | | | | | | | | | | | 1,500 | 4 | | | 50,040 | |
| | | | | | | | | | | | | 1,125 | 6 | | | 37,530 | |
| | | | | | | | | | | | | | | | | | |
Mr. Vig | | | | | | | | | | | | | 2,200 | 2 | | | 73,392 | |
| | | | | | | | | | | | | 2,150 | 3 | | | 71,724 | |
| | | | | | | | | | | | | 1,800 | 4 | | | 60,048 | |
| | | | | | | | | | | | | 1,425 | 6 | | | 47,538 | |
Stock Awards | |
Name | | Number of Shares or Units of Stock That Have Not Vested (#) | | | Market Value of Shares or Units of Stock That Have Not Vested ($) (6) | |
Mr. Brock | | | 2,000 | 1 | | | 78,620 | |
| | | 4,657 | 2 | | | 183,067 | |
| | | | | | | | |
Mr. Silvious | | | 800 | 1 | | | 31,448 | |
| | | 1,590 | 2 | | | 62,503 | |
| | | | | | | | |
Dr. Brock | | | 9,000 | 1 | | | 353,790 | |
| | | 18,351 | 2 | | | 721,378 | |
| | | | | | | | |
Mr. Smith | | | 3,100 | 1 | | | 121,861 | |
| | | 6,321 | 2 | | | 248,479 | |
| | | | | | | | |
Mr. Elliott | | | 1,125 | 3 | | | 44,224 | |
| | | 1,125 | 4 | | | 44,224 | |
| | | 1,125 | 5 | | | 44,224 | |
| | | | | | | | |
(1) | All stock options were awarded under the 1998 Long-Term Incentive Plan. All options are fully vested. |
(2) | Reflects restricted stock units granted under our 2006 Incentive Plan. The restricted stock units vest as to 100% of the units on February 28, 2013, which is the fifth anniversary of the grant date, or earlier upon the death, disability or retirement of the executive after reaching age 65, or upon a change in control in which the successor company does not assume or otherwise equitably convert the awards. |
(3) | Reflects restricted stock units granted under our 2006 Incentive Plan. The restricted stock units vest as to 100% of the units on February 28, 2014, which is the fifth anniversary of the grant date, or earlier upon the death, disability or retirement of the executive after reaching age 65, or upon a change in control in which the successor company does not assume or otherwise equitably convert the awards. |
(4) | Reflects restricted stock units granted under our 2006 Incentive Plan. The restricted stock units vest as to 100% of the units on February 28, 2015, which is the fifth anniversary of the grant date, or earlier upon the death, disability or retirement of the executive after reaching age 65, or upon a change in control in which the successor company does not assume or otherwise equitably convert the awards. |
(5) (2) | Reflects restricted stock units granted under our 2006 Incentive Plan. The restricted stock units vest as to 100% of the units on February 28, 2016, which is the fifth anniversary of the grant date, or earlier upon the death, disability or retirement of the executive after reaching age 65, or upon a change in control in which the successor company does not assume or otherwise equitably convert the awards. |
(6) (3) | Reflects restricted stock units granted under our 2011 Incentive Plan. The restricted stock units vest as to 100% of the units on February 28, 2017, which is the fifth anniversary of the grant date, or earlier upon the death, disability or retirement of the executive after reaching age 65, or upon a change in control in which the successor company does not assume or otherwise equitably convert the awards. |
(7) (4) | Reflects restricted stock units granted under our 2011 Incentive Plan. The restricted stock units vest as to 100% of the units on February 28, 2018, which is the fifth anniversary of the grant date, or earlier upon the death, disability or retirement of the executive after reaching age 65, or upon a change in control in which the successor company does not assume or otherwise equitably convert the awards. |
(5) | Reflects restricted stock units granted under our 2011 Incentive Plan. The restricted stock units vest as to 100% of the units on February 28, 2019, which is the fifth anniversary of the grant date, or earlier upon the death, disability or retirement of the executive after reaching age 65, or upon a change in control in which the successor company does not assume or otherwise equitably convert the awards. |
(6) | Reflects the value calculated by multiplying the number of restricted stock units by $33.36,$39.31, which was the closing price of our common stock on December 31, 2012,2014, the last trading day in our 20122014 fiscal year. |
Nonqualified Deferred Compensation for Fiscal Year 20122014
Name | | Executive Contributions in Last FY ($) | | | Registrant Contributions in Last FY ($) (1) | | | Aggregate Earnings (Losses) in Last FY ($) (2) | | | Aggregate Withdrawals/ Distributions ($) | | | Aggregate Balance at Last FYE ($) (3) | | | Executive Contributions in Last FY ($) | | | Registrant Contributions in Last FY ($) (1) | | | Aggregate Earnings (Losses) in Last FY ($) (2) | | | Aggregate Withdrawals/ Distributions ($) | | | Aggregate Balance at Last FYE ($) (3) | |
Mr. Brock | | | | -- | | | | 45,298 | | | | 20,024 | | | | -- | | | | 324,596 | |
Mr. Silvious | | | | -- | | | | 22,514 | | | | 14,791 | | | | -- | | | | 219,394 | |
Dr. Brock | | | -- | | | | 75,000 | | | | 128,016 | | | | -- | | | | 1,706,220 | | | | -- | | | | 66,361 | | | | 96,425 | | | | -- | | | | 2,284,776 | |
Mr. Silvious | | | -- | | | | 20,875 | | | | 13,239 | | | | -- | | | | 101,808 | | |
Mr. Smith | | | -- | | | | 34,189 | | | | 66,665 | | | | -- | | | | 852,994 | | | | -- | | | | 35,037 | | | | 52,952 | | | | -- | | | | 1,157,371 | |
Mr. Patek | | | -- | | | | 34,221 | | | | 30,721 | | | | -- | | | | 500,084 | | |
Mr. Vig | | | -- | | | | 33,747 | | | | 28,787 | | | | -- | | | | 304,263 | | |
Mr. Elliott | | | | -- | | | | 33,300 | | | | 29,176 | | | | -- | | | | 574,991 | |
(1) | Reflects the annual Company contributions made to the Supplemental Executive Retirement Plan (SERP) accounts of the named executive officers in an amount equal to 10% of the executive’sexecutive's total compensation, as defined in the plan. These amounts are reflected in the Summary Compensation Table in the “All"All Other Compensation”Compensation" column. |
(2) | Reflects the aggregate earnings credited to the executive’sexecutive's account during 2012,2014, which include interest and other earnings based on the investment elections of the executive. All investment elections provide market returns and there were no preferential or above-market earnings that would be required to be included in the Summary Compensation Table in the "Change in Pension Value and Nonqualified Deferred Compensation Earnings" column. |
(3) | To the extent that a participant was a named executive officer in prior years, executive and Company contributions included in the “Aggregate"Aggregate Balance at Last FYE”FYE" column have been reported as compensation in the Summary Compensation Table for the applicable year. |
The Astec Industries, Inc. Supplemental Executive Retirement Plan (SERP) provides a fully vested retirement benefit to our named executive officers upon their termination of employment with the Company.
During a participant’sparticipant's employment, the Company contributes 10%, unless specified otherwise by the Board, of such participant’sparticipant's compensation (which includes base salary and annual profit sharing distribution but excludes certain amounts, such as an amount realized from the exercisegranting or vesting of arestricted stock option)units) to each named executive officer’sofficer's SERP account. This amount is credited with earnings or losses based on the rate of return on the Participant’sParticipant's investment elections, which include money market funds, mutual funds, and Company common stock, and are generally the same investment choices available under our 401(k) plan.
Upon separation from service, the Company will pay the participant a single lump sum in cash equal to the amount in his or her SERP account or a participant may elect to receive payment in annual installments, not to exceed 10 years. If a participant dies before receiving the lump sum payment, or, in the case of an annual installment election, before receiving all installments, the SERP account balance will be distributed to his or her survivor in a single lump sum as soon as practicable following the participant’sparticipant's death.
Accelerated withdrawal is not permitted except in certain limited circumstances specified in the plan. The Company may terminate the SERP at any time but must pay participants the account value as determined under the SERP.
Potential Payments Upon Termination or Change-in-Control
As a matter of business philosophy, the Company generally does not enter into employment agreements or severance agreements with the Company’sCompany's senior executive officers, including the named executive officers. In the event of a termination without cause or resignation without good reason, or a change in control of the Company, the Company would consider at that time based on the circumstances whether to enter into any arrangements providing for payments to our named executive officers.
Our 2006 and 2011 Incentive Plans provide that awards will vest and become fully-exercisable, either immediately or at the end of any applicable performance year, in the event of a termination due to the death, disability or retirement (after reaching age 65) of the individual. In addition, in the event (i) a change in control occurs where the surviving entity does not assume or otherwise equitably convert the awards, or (ii) the participant’sparticipant's employment is terminated without Cause or for Good Reason (as such terms are defined in the Plans) within two years after the effective date of a change in control, all outstanding awards vest and become fully exercisable. In addition, our Compensation Committee has the discretion to fully vest awards under the 2006 and 2011 Incentive Plans upon termination of employment or a change in control, even if such events do not automatically trigger vesting under the plan.
All outstanding options or stock awards under our 1998 Long-Term Incentive Plan are fully vested and currently exercisable. Thus, they would not be impacted in the event of death, disability or termination of employment or a change in control of the Company.
The following table sets forth the number and value (based upon the fair market value of Astec stock on December 31, 2012)2014) of restricted stock units held by the named executive officers as of December 31, 20122014 that would have vested and converted to shares of common stock upon a termination of employment or a change in control as of such date under the specified circumstances described above.
| | Restricted stock units vesting | |
Name | | | (# | ) | | ($) | |
Mr. Brock | | | 6,657 | | | | 261,687 | |
Mr. Silvious | | | 2,390 | | | | 93,951 | |
Dr. Brock | | | 27,351 | | | | 1,075,168 | |
Mr. Smith | | | 9,421 | | | | 370,340 | |
Mr. Elliott | | | 3,375 | | | | 132,671 | |
| | Restricted stock units vesting | |
Name | | | (# | ) | | ($) | |
Dr. Brock | | | 45,351 | | | | 1,512,909 | |
Mr. Silvious | | | 3,990 | | | | 133,106 | |
Mr. Smith | | | 15,621 | | | | 521,117 | |
Mr. Patek | | | 5,625 | | | | 187,650 | |
Mr. Vig | | | 7,575 | | | | 252,702 | |
The amounts shown in the table above do not include payments and benefits to the extent they are provided on a non-discriminatory basis to salaried employees generally upon termination of employment including accrued salary, vacation pay, regular pension benefits, welfare benefits and 401(k) and nonqualified deferred compensation distributions. Amounts that would be distributed pursuant to our SERP for retirement eligible executives are indicated in the Nonqualified Deferred Compensation Plan table above.
Name (1) | | Fees Earned or Paid in Cash ($)(2) | | | Stock Awards ($)(3) | | | Total ($) | | | Fees Earned or Paid in Cash ($)(2) | | | Stock Awards ($)(3) | | | Total ($) | |
James B. Baker | | | 25,000 | | | | 33,000 | | | | 58,000 | | | | 26,500 | | | | 33,000 | | | | 59,500 | |
Phillip E. Casey | | | 24,500 | | | | 33,000 | | | | 57,500 | | |
William G. Dorey | | | 16,500 | | | | 33,000 | | | | 49,500 | | | | 15,500 | | | | 33,000 | | | | 48,500 | |
Daniel K. Frierson | | | 12,000 | | | | 33,000 | | | | 45,000 | | | | 10,500 | | | | 33,000 | | | | 43,500 | |
William D. Gehl | | | 25,000 | | | | 33,000 | | | | 58,000 | | | | 26,500 | | | | 33,000 | | | | 59,500 | |
Charles F. Potts | | | | 14,000 | | | | 24,750 | | | | 38,750 | |
William B. Sansom | | | 23,000 | | | | 33,000 | | | | 56,000 | | | | 24,500 | | | | 33,000 | | | | 57,500 | |
Glen E. Tellock | | | 26,500 | | | | 33,000 | | | | 59,500 | | | | 31,000 | | | | 33,000 | | | | 64,000 | |
(1) | Mr. Brock, Dr. Brock and Mr. Smith, twothree of our named executive officers served as directors of the Company during 20122014, but are not included in this section because they received no compensation for serving as directors of the Company. |
(2) | Reflects attendance fees for the various Board and Committee meetings attended and annual retainers for committee membership.membership, as described below. |
(3) | Reflects the grant date fair value of common stock awards granted as payment of the director’sdirector's annual retainer, with respect to Messrs. Baker, Casey, Dorey, Frierson,Potts, Sansom and Tellock, and deferred stock awards granted as payment of the director’sdirector's annual retainer, with respect to Mr.Messrs. Frierson and Gehl. The fair value of awards of common stock and deferred stock was determined by reference to the market price of the underlying shares on the grant date and in accordance with FASB ASC Topic 718. The dollar values shown above equal the full grant date fair value of the awards. |
The following table shows the aggregate number of deferred stock awards held by each director who is not a named executive officer as of December 31, 2012:2014:
Director | | Deferred Stock Awards
| |
Mr. Baker | | | -- | |
Mr. Casey | | | -- | |
Mr. Dorey | | | -- | |
Mr. Frierson | | | 4,0464,961 | |
Mr. Gehl | | | 13,36615,425 | |
Mr. Potts | | | -- | |
Mr. Sansom | | | -- | |
Mr. Tellock | | | -- | |
(4)None of the directors were issued stock option awards during 2012.2014. The following table shows the aggregate number of stock options held by each director who is not a named executive officer as of December 31, 2012:2014:
Director | | Options | |
Mr. Baker | | | -- | |
Mr. Casey | | | -- | |
Mr. Dorey | | | -- | |
Mr. Frierson | | | 1,287-- | |
Mr. Gehl | | | -- | |
Mr. Potts | | | -- | |
Mr. Sansom | | | 9,5742,415 | |
Mr. Tellock | | | -- | |
Material Terms of Director Compensation Plan
Our director compensation program provides for both cash and equity compensation for our non-employee directors. The principal features of the director compensation program as in effect for 20122014 are described below. We review director compensation on an annual basis.
Annual Retainers. All non-employee directors received an annual board retainer fee of $33,000 which they can individually elect to receive in the form of cash, stock, deferred stock or stock options each year. In addition, the director compensation plan provides for the following supplemental annual retainers:
| | 2012(1) | | | 2014(1) | |
Audit Committee member | | $ | 4,000 | | | $ | 4,000 | |
Compensation Committee member | | | 2,000 | | | | 2,000 | |
Nominating and Corporate Governance Committee member | | | 2,000 | | | | 2,000 | |
(1) | These fees for 20122014 were paid to the appropriate directors in January 20132015. |
Meeting Fees. Our director compensation plan provides for meeting fees for non-employee directors as follows:
· | $1,500 for each board meeting; |
· | $1,000 for each committee meeting attended; and |
· | $500 additional fee to the audit committee Chairman for each audit committee meeting attended. |
Equity Awards. In accordance with the Company's Non-Employee Directors Stock Incentive Plan, the Company's non-employee directors may elect to receive their annual retainer in the form of cash, shares of common stock, deferred stock or stock options. If the director elects to receive common stock, whether on a current or deferred basis, the number of shares to be received is determined by dividing the dollar value of the annual retainer by the fair market value of the common stock on the date the retainer is payable.
Non-employee directors may elect to defer the receipt of common stock received as payment of the annual retainer until the earlier of (i) his or her termination of service as a director, or (ii) another designated date at least three years after the date of such deferral election. If any dividends or other rights or distributions of any kind are distributed to shareholders prior to the non-employee director's receipt of his or her deferred shares, an amount equal to the cash value of such distribution will be credited to a deferred dividend account for the non-employee director. The deferred dividend account will provide the non-employee director with the right to receive additional shares of common stock having a fair market value as of the date of the dividend distribution equal to the cash value of the distributions.
Non-employee directors may also elect to receive stock options in payment of the annual retainer. If the director elects to receive stock options, the number of options to be received is determined by dividing the dollar value of the annual retainer by the Black-Scholes value of an option on the date the retainer is payable. The options will be fully exercisable on the date of grant.
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Company has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in the Company’sCompany's Annual Report on Form 10-K for the year ended December 31, 20122014 and in this proxy statement.
COMPENSATION COMMITTEE
William D. Gehl (Chairman)
James B. Baker
Phillip E. Casey
William G. Dorey
Charles F. Potts
This Report of the Compensation Committee shall not be deemed to be incorporated by reference by any general statement incorporating by reference this proxy statement into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, and shall not otherwise be deemed filed under such acts.
REPORT OF THE AUDIT COMMITTEE
Decisions and recommendations regarding the financial reporting procedures of the Company are made by the Audit Committee of the Board of Directors, which was comprised of Messrs. Tellock, Casey, Gehl, Baker and Sansom during the entire 20122014 year. Mr. Potts joined the Committee in April 2014. The following report is not subject to incorporation by reference in any filings made by the Company with the Securities and Exchange Commission under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.
We, as a committee of the Board of Directors, oversee the Company’sCompany's financial reporting process on behalf of the Board of Directors. We operate under a written charter adopted by the Board of Directors on March 13, 2000, and amended and restated on each of October 24, 2002 and March 11, 2004.Directors. This report reviews the actions we have taken with regard to the Company’sCompany's financial reporting process during 20122014 and the Company’sCompany's audited consolidated financial statements as of December 31, 20122014 included in the Company’sCompany's Annual Report on Form 10-K for the year ended December 31, 2012.2014.
In March 2004, the Board also designated us to serve as the Company’sCompany's Qualified Legal Compliance Committee, or QLCC, in accordance with SEC rules and regulations. In our capacity as the QLCC, we are responsible for handling reports of a material violation of the securities laws or a breach of a fiduciary duty by the Company, its officers, directors, employees, or agents. In our capacity as the QLCC, we have the authority and responsibility to inform the Company’sCompany's Chief Executive Officer of any violations. We can determine whether an investigation is necessary and can take appropriate action to address these reports. If an investigation is deemed necessary or appropriate, we have the authority to notify the Board, initiate an investigation and retain outside experts.
We are composed solely of independent directors, as that term is defined in Rule 5605(a)(2) of the Nasdaq Rules, and as independence for audit committee members is defined in the Nasdaq Rules. None of the committee members is or has been an officer or employee of the Company or any of its subsidiaries or has engaged in any business transaction or has any business or family relationship with the Company or any of its subsidiaries or affiliates. Our Chairman, Mr. Tellock, has been designated by the Board as our financial expert.
The Company’sCompany's management has the primary responsibility for the Company’sCompany's financial statements and reporting process, including the systems of internal controls. The Company’sCompany's outside auditors are responsible for performing an independent audit of the Company’sCompany's consolidated financial statements in accordance with generally accepted auditing standards and issuing a report thereon. Our responsibility is to monitor and oversee these processes and to recommend annually to the Board of Directors the accountants to serve as the Company’sCompany's outside auditors for the coming year.
We have implemented procedures to ensure that during the course of each fiscal year we devote the attention that we deem necessary or appropriate to fulfill our oversight responsibilities under our charter. To carry out our responsibilities, we met seventen times during 2012.2014.
In fulfilling our oversight responsibilities, we reviewed and discussed with management the audited financial statements to be included in the Company’sCompany's Annual Report on Form 10-K for the year ended December 31, 20122014, including a discussion of the quality (rather than just the acceptability) of the accounting principles, the reasonableness of significant judgments and the clarity of disclosures in the financial statements.
We reviewed with the Company’sCompany's outside auditors during 2012,2014, Ernst & Young LLP, as to their judgments about the quality (rather than just the acceptability) of the Company’sCompany's accounting principles. We discussed with Ernst & Young LLP the matters required to be discussed pursuant to Public Company Accounting Oversight Board AU 380 (Communication With Audit Committees). In addition, we discussed with Ernst & Young LLP their independence from management and the Company, and we received and discussed with Ernst & Young LLP the written disclosures and the letter from Ernst & Young LLP required by the Public Company Accounting Oversight Board regarding their communications with us regarding their independence. We also considered whether the provision of services during 20122014 by Ernst & Young LLP that were unrelated to their audit of the financial statements referred to above and to their reviews of the Company’sCompany's interim financial statements during 20122014 was compatible with maintaining Ernst & Young LLP’sLLP's independence with respect to the time such auditor was performing services for the Company.
Additionally, we discussed with the Company’sCompany's internal and independent auditors the overall scope and plan for their respective audits. We met with the outside auditors, with and without management present, to discuss the results of their examinations, their evaluations of the Company’sCompany's internal controls and the overall quality of the Company’sCompany's financial reporting.
In reliance on the reviews and discussions referred to above, we recommended to the Board of Directors that the audited financial statements be included in the Company’sCompany's Annual Report on Form 10-K for the year ended December 31, 20122014 for filing with the Securities and Exchange Commission.
AUDIT COMMITTEE
Glen E. Tellock, Chairman
James B. Baker
Phillip E. Casey
William D. Gehl
Charles F. Potts
William B. Sansom
March 12, 201310, 2015
TRANSACTIONS WITH RELATED PERSONS
The Company recognizes that transactions between the Company and any of its related persons (as such term is defined in Item 404(a) of Regulation S-K) can present potential or actual conflicts of interest or create the appearance that Company decisions are based on considerations other than the best interests of the Company and its shareholders. Therefore, as a general matter, it is the Company’sCompany's preference to avoid such transactions. Nevertheless, the Company recognizes that there are situations where such transactions may be in, or may not be inconsistent with, the best interests of the Company. Therefore, the Company has adopted a written policy with respect to related person transactions which requires either the Company’sCompany's Audit Committee or the Company’sCompany's Compensation Committee to review and, if appropriate, to approve or ratify any such transactions. Pursuant to the Company’sCompany's written policy, any transaction in which the Company is or will be a participant and the amount involved exceeds $120,000, and in which any of the Company’sCompany's related persons had, has or will have a direct or indirect material interest, must be reviewed, and if appropriate, approved or ratified by either the Audit Committee or the Compensation Committee.
Benjamin G. Brock is the son of Dr. J. Don Brock and has served as the President of Astec, Inc. since 2006 and as Group Vice President–Asphalt since August 2012. Benjamin Brock is also a nominee for Director of the Company. He received compensation of approximately $252,000 in salary and annual profit sharing for 2012. Thomas R. Campbell is the first cousin of Dr. Brock and has served as Group Vice President of Mobile Asphalt Paving and Underground since 2001. He received compensation of approximately $330,000 in salary and annual profit sharing for 2012. The Audit Committee has reviewed and approved or ratified these transactions.25
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information known to us with respect to beneficial ownership of Company’sCompany's Common Stock as of February 15, 2013,17, 2015, by the following individuals or groups:
· | each of our current directors, nominees for director, and Named Executive Officers individually; |
· | all our directors and executive officers as a group; and |
· | each person (or group of affiliated persons) known by us to own beneficially more than 5% of our outstanding common stock. |
The percentage of beneficial ownership of common stock is based on 22,916,69322,999,614 shares deemed outstanding as of February 15, 2013.17, 2015. In preparing the following table, we relied upon statements filed with the SEC by beneficial owners of more than 5% of the outstanding shares of our common stock pursuant to Section 13(d) or 13(g) of the Exchange Act, unless we knew or had reason to believe that the information contained in such statements was not complete or accurate, in which case we relied upon information that we considered to be accurate and complete. We have determined beneficial ownership in accordance with the rules of the SEC. Except as otherwise indicated, we believe, based on information furnished to us, that the beneficial owners of the common stock listed below have sole voting power and investment power with respect to the shares beneficially owned by them, subject to applicable community property laws.
Name and Address1 | | Shares Beneficially Owned2 | | | Percent of Class | |
Directors, Nominees and Named Executive Officers: | | | | | | |
Benjamin G. Brock3 | | | 205,494 | | | | -- | % |
David C. Silvious4 | | | 1,617 | | | | -- | |
J. Don Brock5 | | | 2,072,416 | | | | 9.0 | |
W. Norman Smith6 | | | 120,152 | | | | -- | |
Jeffery J. Elliott7 | | | 4,218 | | | | -- | |
William B. Sansom8 | | | 21,732 | | | | -- | |
Daniel K. Frierson9 | | | 6,762 | | | | -- | |
Glen E. Tellock | | | 8,022 | | | | -- | |
William D. Gehl10 | | | 5,364 | | | | -- | |
James B. Baker | | | 4,392 | | | | -- | |
William G. Dorey | | | 8,498 | | | | -- | |
Charles F. Potts | | | 1,131 | | | | -- | |
All directors, nominees and executive officers as a group11 | | | 2,496,957 | | | | 10.9 | % |
5% Stockholders | | | | | | | | |
Lynne W. Brock12 | | | 1,589,976 | | | | 6.9 | % |
Black Rock, Inc.13 | | | 1,640,205 | | | | 7.1 | % |
Franklin Advisory Services14 | | | 2,495,798 | | | | 10.9 | % |
The Vanguard Group15 | | | 1,260,493 | | | | 5.4 | % |
Gabelli Funds, Inc.16 | | | 1,913,694 | | | | 8.3 | % |
| | | | | | | | |
Name and Address1 | | Shares Beneficially Owned2 | | | Percent of Class | |
Directors, Nominees and Named Executive Officers: | | | | | | |
J. Don Brock3 | | | 2,152,249 | | | | 9.4 | % |
David C. Silvious4 | | | 1,427 | | | | -- | |
W. Norman Smith5 | | | 131,702 | | | | -- | |
Richard A. Patek6 | | | 13,339 | | | | -- | |
Joseph P. Vig7 | | | 4,834 | | | | -- | |
William B. Sansom8 | | | 19,941 | | | | -- | |
Daniel K. Frierson9 | | | 7,057 | | | | -- | |
Glen E. Tellock | | | 6,231 | | | | -- | |
William D. Gehl10 | | | 3,588 | | | | -- | |
Phillip E. Casey | | | 7,029 | | | | -- | |
James B. Baker | | | 2,601 | | | | -- | |
William G. Dorey | | | 1,707 | | | | -- | |
Benjamin G. Brock11 | | | 202,195 | | | | -- | |
All directors, nominees and executive officers as a group12 | | | 2,580,252 | | | | 11.3 | % |
5% Stockholders | | | | | | | | |
Lynne W. Brock13 | | | 1,596,842 | | | | 7.0 | % |
Black Rock, Inc.14 | | | 1,583,249 | | | | 6.9 | % |
Franklin Advisory Services15 | | | 1,478,300 | | | | 6.5 | % |
The Vanguard Group16 | | | 1,180,424 | | | | 5.2 | % |
1 Except as otherwise noted, the address of each beneficial owner listed in the table is c/o Astec Industries, Inc. at 1725 Shepherd Road, Chattanooga, Tennessee 37421.
2 The amounts of the Company’sCompany's Common Stock beneficially owned are reported on the basis of regulations of the Securities and Exchange Commission governing the determination of beneficial ownership of securities. The beneficial owner has both voting and dispositive power over the shares of Common Stock, unless otherwise indicated. As indicated, certain of the shares included are beneficially owned by the holders by virtue of their ownership of rights to acquire such shares pursuant to options to purchase Common Stock, deferred stock rights and restricted stock units. Unless indicated in the table, the number of shares included in the table as beneficially owned by a director, nominee or officer does not exceed one percent of the Common Stock of the Company outstanding on February 15, 2013.17, 2015.
3 Dr.Mr. Brock is the Chief Executive Officer of the Company. Beneficially owned shares include 2,000 of restricted stock units that convert to shares of Common Stock on February 28, 2015.
4Mr. Silvious is the Vice President, Chief Financial Officer and Treasurer of the Company. The shares beneficially owned by Mr. Silvious include 800 restricted stock units that convert to shares of Common Stock on February 28, 2015.
5 Dr. Brock is Chairman of the Company, its Chairman of the Board of the Company.and its former Chief Executive Officer. The shares beneficially owned by Dr. Brock include 44,475 shares held in a residuary trust over which shares Dr. Brock has control as trustee. Beneficially owned shares also includes 45,35127,351 of restricted stock units that convert to shares of Common Stock on a future designated date, subject to earlier settlement upon retirement.
4 Mr. Silvious is the Vice President and Principal Financial Officer of the Company. The shares beneficially owned by Mr. Silvious include 800 restricted stock units that convert to shares of Common Stock on February 28, 2013.
56 Mr. Smith is President and Chief Operating OfficerVice Chairman of the Company and the former group vice presidentalso its Vice Chairman of the Company’s Asphalt segment.Board of Directors The shares beneficially owned by Mr. Smith include 15,6219,421 restricted stock units that convert to shares of Common Stock on a future designated date, subject to earlier settlement upon retirement. Beneficially owned shares also include 113,756108,406 shares held in a revocable living trust over which Mr. Smith is trustee.
6 7 Mr. PatekElliott is the Group Vice President of the Aggregate and Mining Groupsegment and past President of Telsmith,Johnson Crushers, Inc. The shares beneficially owned by Mr. PatekElliott include 10,000 stock options to purchase shares of Common Stock that are currently exercisable and 1,5001,125 restricted stock units that convert to shares of Common Stock on February 28, 2013.2015.
7 Mr. Vig is the Group Vice President of the AggRecon Group and President of Kolberg-Pioneer, Inc. The shares beneficially owned by Mr. Vig include 2,200 restricted stock units that convert to shares of Common Stock on February 28, 2013.
8 Includes 5,4432,415 stock options to purchase shares of Common Stock that are currently exercisable or will become exercisable within 60 days after February 15, 2013.17, 2015.
9 Includes 1,287 stock options to purchase shares of Common Stock that are currently exercisable or will become exercisable within 60 days after February 15, 2013. Also includes 789825 deferred stock rights, each of which represents the right to receive one share of Common Stock within 30 days of termination of service as a director.
10 Includes 3,3055,081 deferred stock rights, each of which represents the right to receive one share of Common Stock within 30 days of termination of service as a director.
11 Mr. Brock is Group Vice President–Asphalt President of Astec, Inc. as well as a nominee for Director. The shares beneficially owned by Mr. Brock include 2,587 restricted stock units that convert to shares of Common Stock on February 28, 2013.
12 Includes 21,5842,415 shares that the directors and executive officers havea director has the right to acquire pursuant to currently exercisable options or options exercisable within 60 days after February 15, 201317, 2015 under the Company’sCompany's stock option plans. Such shares are issuable upon exercise of such options and are assumed to be outstanding for purposes of determining the percent of shares owned by the group. Also includes 2,6543,300 shares of Common Stock held in the Company’sCompany's 401(k) Plan, 4,0945,906 deferred rights to shares of Common Stock and 80,48456,101 restricted stock units which convert to shares of Common Stock on a future designated date, subject to earlier settlement upon retirement.
13 12 The information shown is derived from account statements of Lynne W. Brock, which were provided as of February 15, 201317, 2015 by her investment broker at Stifel, Nicolaus & Company, Inc. The address for Ms. Brock is 6454 Solitude Drive, Chattanooga, Tennessee 37416.
13The number of shares reported and the information included in this footnote were derived from a Schedule 13G/A filed with the SEC on January 26, 2015 by BlackRock, Inc. According to the Schedule 13G/A, BlackRock, Inc. beneficially owns 1,640,205 shares, with sole dispositive power over all such shares and sole voting power over 1,588,969 shares. The address for BlackRock, Inc. is 40 East 52nd Street, New York, NY 10022.
14The number of shares reported and the information included in this footnote were derived from a Schedule 13G/A filed with the SEC on February 6, 2013 by BlackRock, Inc. According to the Schedule 13G/A, BlackRock, Inc. beneficially owns 1,583,249 shares with sole dispositive and voting powers over such shares. The address for BlackRock, Inc. is 40 East 52nd Street, New York, NY 10022.
15 The number of shares reported and the information included in this footnote were derived from a Schedule 13G/A filed with the SEC on February 1, 20132, 2015 jointly by Franklin Resources, Inc. (“("Franklin Resources”Resources"), Charles B. Johnson, Rupert H. Johnson and Franklin Advisory Services, LLC (“("Franklin Services”Services"). According to the Schedule 13G,13G/A, (i) Franklin Services beneficially owns 1,478,3002,495,798 shares, with sole dispositive power over all such shares and sole voting power over 1,400,4002,278,798 shares; and (ii) Franklin Resources, Charles B. Johnson and Rupert H. Johnson each beneficially owns 1,478,3002,495,798 shares, with dispositive and voting power over zero shares. According to the Schedule 13G,13G/A, the shares are held by one or more open- or closed-end investment companies or other managed accounts that are investment management clients of investment managers that are direct and indirect subsidiaries of Franklin Resources, including Franklin Services. Investment management contracts grant to such subsidiaries all investment and/or voting power over the securities owned by such investment management clients. Charles B. Johnson and Rupert H. Johnson each own in excess of 10% of the outstanding common stock of Franklin Resources and are the principal stockholders of Franklin Resources. The address of Franklin Resources, Charles B. Johnson and Rupert H. Johnson is One Franklin Parkway, San Mateo CA 94403. The address of Franklin Services is One Parker Plaza, Ninth Floor, Fort Lee, NJ 07024.
16 15The number of shares reported and the information included in this footnote were derived from a Schedule 13G13G/A filed with the SEC on February 13, 201310, 2015 by The Vanguard Group, Inc. According to the Schedule 13G,13G/A, The Vanguard Group, Inc. beneficially owns 1,180,4241,260,493 shares, with sole voting power over 32,81925,065 shares, sole dispositive power over 1,148,6051,238,028 shares, and shared dispositive power over 31, 81925,465 shares. The address for The Vanguard Group, Inc. is 100 Vanguard Blvd., Malvern, PA 19355.
16The number of shares reported and the information included in this footnote were derived from a Schedule 13D/A filed with the SEC on February 17, 2015 jointly by GGCP, Inc. ("GGCP"), Teton Advisors, Inc. ("Teton"), GAMCO Asset Management Inc. ("GAMCO"), GAMCO Investors, Inc. ("GBL"), Gabelli Funds, LLC ("Gabelli Funds") and Mario J. Gabelli. According to the Schedule 13D/A, Gabelli Funds beneficially owns 466,507 shares, with sole voting and dispositive power over all such shares; GAMCO beneficially owns 1,155,527 shares with sole voting power over 1,015,827 shares and sole dispositive power over 1,155,527 shares; Teton Advisors owns 291,660 shares with sole voting and dispositive power of all such shares; and Mario J. Gabelli is deemed to have beneficial ownership of the shares held by each of the foregoing persons. The address for each of GAMCO, GBL, Teton Advisors and Gabelli Funds is One Corporate Center, Rye, New York 10580. The address for GGCP is 140 Greenwich Avenue, Greenwich, CT 06830.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Company’sCompany's directors, executive officers and persons who own beneficially more than 10% of the Company’sCompany's Common Stock to file reports of ownership and changes in ownership of such stock with the Securities and Exchange Commission, and to furnish the Company with copies of all Section 16(a) forms they file. In addition, Item 405 of Regulation S-K requires the Company to identify in this Proxy Statement any person that may have failed to file a Section 16(a) form in a timely manner. Based solely upon information provided to the Company by each such person, the Company believes that its directors, executive officers and greater than 10% shareholders timely complied with all applicable Section 16(a) filing requirements during fiscal 2012,2014, except that on May 4, 2010, Richard Dorris’s stock broker sold four shares and again29, 2014, as approved by the Company's Board of Directors, the cash dividends on November 17, 2011 sold 2 shares of the Company’s Common Stock on behalfCompany's stock held by its Supplemental Executive Retirement Plan that were received in connection with the Company's declaration of Mr. Dorrisa dividend for the first quarter of 2014 were automatically reinvested in order to pay Mr. Dorris’s annual brokerageeach participant's account fees without Mr. Dorris’s knowledge or consent and Form 4s were not timely filed. Mr. Dorris reported this sale on a Form 5 filed on February 13, 2013. In addition, it was recently determined that forty certificatedin the plan by the acquisition of additional shares of the Company’s Common Stock had been issued to BenjaminCompany's stock on May 29, 2014; however, the related Form 4's for each participant were not filed until July 9, 2014. The number of shares that were acquired but reported late for each participant are as follows: Jeffrey Richmond, 8.88 shares; Norman Smith, 54.97 shares; Joseph Vig, 8.45 shares; Matthew Haven, 0.99 shares; Timothy Gonigam, 12.80 shares; Richard Patek, 27.64 shares; Michael Bremmer, 8.33 shares; J. Don Brock, on January 3, 1995 that had never been reported on a Form 3, Form 4 or Form 5 as the certificate had been lost. Mr. Brock reported these shares on a Form 5 filed on February 11, 2013.114.46 shares; Chris Colwell, 3.59 shares; Malcolm Swanson, 0.35 shares; Thomas Wilkey, 0.38 shares; and Lawrence Cummings, 7.35 shares.
AUDIT MATTERS
Ernst & Young LLP ("E&Y") has served as the Company’sCompany's independent registered public accounting firm fromsince June 15, 2006 until2006. On December 31, 2012. Ernst & Young LLP is serving as10, 2014, the Audit Committee of the Company dismissed E&Y from the role of independent registered public accounting firm for the Company, which became effective upon completion by E&Y of its audit of the Company's consolidated financial statements as of and for the current calendar year.year ending December 31, 2014 and the effectiveness of the Company's internal controls over financial reporting as of December 31, 2014 and all other procedures related to filing the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2014.
The reports of E&Y on the Company's consolidated financial statements for the fiscal years ended December 31, 2012 and 2013 did not contain an adverse opinion or a disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles.
During the fiscal years ended December 31, 2012 and 2013, and the subsequent interim period from January 1, 2014 through December 10, 2014, (i) the Company had no disagreements with E&Y on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of E&Y, would have caused E&Y to make reference to the subject matter of the disagreements in connection with its report on the consolidated financial statements for such periods, and (ii) there were no "reportable events" as defined in Item 304(a)(1)(v) of Regulation S-K.
On January 9, 2015, the Audit Committee engaged KPMG LLP ("KPMG") as the new independent registered public accounting firm for the Company. During the Company's fiscal years ending December 31, 2013 and 2014, and the subsequent interim period from January 1, 2015 through January 9, 2015, the Company did not consult KPMG regarding (i) the application of accounting principles to a specific transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company's consolidated financial statements, or (ii) any matter that was the subject of a disagreement (as defined in Item 304(a)(1)(iv) of Regulation S-K) or any reportable event (as described in Item 304(a)(1)(v) of Regulation S-K). KPMG will serve as the Company's independent registered public accounting firm beginning in the first quarter of 2015.
The Company provided E&Y and KPMG with a copy of the disclosures required by Item 304(a) of Regulation S-K prior to the time this proxy statement was filed with the SEC. In the event that E&Y or KPMG believed the disclosures were incorrect or incomplete, each was permitted to express its views in a brief statement to be included in this proxy statement. Neither submitted such a statement.
Representatives of Ernst & Young LLPKPMG are expected to be present at the Annual Meeting and will have an opportunity to make a statement if they so desire and will be available to respond to appropriate questions.
Fees Paid to the Independent Registered Public Accounting Firm
The following tables presenttable presents fees for professional audit services rendered by Ernst & Young LLP for the audit of the Company’sCompany's annual financial statements for the years ended December 31, 20122014 and 2011,2013, and fees billed for other services rendered by Ernst & Young LLP during those periods. No fees were paid to KPMG LLP during the periods.
| | 2012 | | | 2011 | | | 2014 | | | 2013 | |
Audit Fees(1) | | $ | 1,572,735 | | | $ | 1,452,563 | | | $ | 1,947,918 | | | $ | 1,570,971 | |
Audit-Related Fees(2) | | | 70,172 | | | | 338,701 | | | | 90,075 | | | | 213,197 | |
Tax Fees(3) | | | 130,967 | | | | 185,084 | | | | 32,621 | | | | 176,512 | |
All Other Fees(4) | | | 1,995 | | | | 1,995 | | | | 1,985 | | | | 1,995 | |
Total: | | $ | 1,775,869 | | | $ | 1,978,343 | | |
Total | | | $ | 2,072,599 | | | $ | 1,962,675 | |
(1) | Audit Fees consisted of professional services performed for the audit of the Company’sCompany's annual financial statements and the required review of financial statements included in the Company’sCompany's Form 10-Q filings, as well as fees for subsidiary audits. |
(2) | Audit-Related Fees consisted of audits of financial statements of employee benefit plans, due diligence on acquisitions and accounting consultations. |
(3) | Tax Fees consisted of fees for tax compliance and tax consulting services. |
(4) | Other fees are for a subscription to Ernst & Young Online, a website useful in researching accounting guidance. |
Audit Fee Approval
The Company’sCompany's Audit Committee preapproved all audit fees, audit-related fees, tax fees and all other fees that were paid to Ernst & Young LLP in fiscal 20122014 and fiscal 2011.2013.
Audit Committee Pre-Approval Policy
Since October 24, 2002, the Company’sCompany's Audit Committee has approved all fees for audit and non-audit services of the Company’sCompany's independent registered public accounting firm prior to engagement. It is the policy of the Audit Committee, as set forth in the Audit Committee Charter, to pre-approve, to the extent required by applicable law, all audit and non-audit services provided to the Company by its independent registered public accounting firm. In accordance with applicable law, the Audit Committee may delegate to one or more designated members of the Audit Committee the authority to grant the required pre-approvals, provided that the decisions of any member(s) to whom such authority is delegated to pre-approve an activity shall be presented to the full Audit Committee at its next regularly scheduled meeting. The Audit Committee has delegated to each of its members the authority to grant the required pre-approvals for any engagement that does not exceed twenty-five thousand dollars ($25,000).
Audit Committee Review
The Company’sCompany's Audit Committee has reviewed the services rendered and the fees billed by Ernst & Young LLP for the fiscal year ended December 31, 2012.2014. The Audit Committee has determined that the services rendered and the fees billed last year that were not related to the audit of the Company’sCompany's financial statements are compatible with the independence of Ernst & Young LLP as the Company’sCompany's independent registered public accounting firm.
SOLICITATION OF PROXIES
The costs of soliciting proxy appointments will be paid by the Company. The Company’sCompany's directors, officers and employees may solicit proxies in person or by telephone, mail, facsimile, internet or otherwise, but they will not receive additional compensation for their services. The Company may request brokers holding stock in their names, or the names of nominees, to forward proxy soliciting material to the beneficial owners of such stock and will reimburse such brokers for their reasonable expenses.
CERTAIN MATTERS RELATING TO PROXY MATERIALS AND ANNUAL REPORTS
The delivery rules regarding proxy statements and annual reports may be satisfied by delivering a single copy of a proxy statement and annual report or notice of availability of these materials to an address shared by two or more shareholders. This method of delivery is referred to as “householding.”"householding." Currently, the Company is not householding for registered shareholders, but brokers, dealers, banks or other entities which hold Common Stock in “street name”"street name" for beneficial owners of Common Stock and which distribute proxy statements and annual reports or notice of availability of these materials they receive to beneficial owners may be householding. Such brokers, dealers, banks or other entities may deliver only one proxy statement and annual report or notice of availability to certain multiple shareholders who share an address, unless the Company or such other distributor has received contrary instructions from one or more of those shareholders. The Company undertakes to deliver promptly upon request a separate copy of the proxy statement and/or annual report or notice of availability of these materials to a shareholder at a shared address to which a single copy of these documents was delivered. If you hold shares of Common Stock as a registered shareholder and prefer to receive separate copies of a proxy statement or annual report or notice of availability either now or in the future, please send a written request to the Corporate Secretary, Astec Industries, Inc. at 1725 Shepherd Road, Chattanooga, Tennessee 37421. Shareholders who hold Common Stock through a broker, dealer, bank or other entity, who share an address and are receiving multiple copies of annual reports or proxy statements or notices of availability and who prefer to receive a single copy of such material, either now or in the future, can request delivery of a single copy of a proxy statement, annual report and/or or notice of availability, as requested, by contacting such broker, dealer, bank or other entity.
Our Annual Report and Proxy Statement will also be available on the web prior to our annual meeting. Once posted, you will be able to access, view and download this year’syear's Annual Report and Proxy Statement on the web at www.proxyvote.com.
OTHER MATTERS
Management does not know of any other matters to be brought before the meeting other than those referred to above. If any matters which are not specifically set forth in the form of proxy appointment and this Proxy Statement properly come before the meeting, the persons appointed as proxies will vote thereon in accordance with their best judgment.
SHAREHOLDER PROPOSALS
Proposals of shareholders of the Company, made pursuant to Rule 14a-8 of the Securities Exchange Act of 1934, as amended, intended to be presented for consideration at the 20142016 Annual Meeting of Shareholders of the Company must be received by the Company at its principal executive offices on or before November 12, 20132015 in order to be included in the Company’sCompany's proxy statement and form of proxy relating to the 20142016 Annual Meeting of Shareholders.
Any other matter proposed by shareholders to be discussed at the 20142016 Annual Meeting of Shareholders may be so discussed if (i) the proposal is received by the Company on or before January 26, 20142016 and (ii) the Company in its sole discretion and in accordance with applicable law, approves discussion of the matter at the 20142016 Annual Meeting of Shareholders. Any shareholder proposal not received prior to January 26, 20142016 will be considered untimely and, if such proposal is nonetheless presented at the 20142016 Annual Meeting of Shareholders, then the proxy holders will be able to vote your shares on any such proposal to the extent authorized by Rule 14a-4(c) under the Securities Exchange Act of 1934, as amended.
INFORMATION INCORPORATED BY REFERENCE
The Company’sCompany's financial statements and other financial information for the fiscal year ended December 31, 20122014 may be found in the Company’s 2012Company's 2014 Annual Report, which has been made available to all shareholders. The 20122014 Annual Report does not form any part of the material for the solicitation of proxies.
ANY SHAREHOLDER WHO HAS NOT RECEIVED A COPY OF OUR MOST RECENT ANNUAL REPORT ON FORM 10-K, INCLUDING THE FINANCIAL STATEMENTS AND THE FINANCIAL STATEMENT SCHEDULES, AS FILED WITH THE SEC SHALL BE FURNISHED A COPY WITHOUT CHARGE UPON WRITTEN REQUEST. PLEASE DIRECT YOUR WRITTEN REQUEST TO THE CORPORATE SECRETARY, ASTEC INDUSTRIES, INC. AT 1725 SHEPHERD ROAD, CHATTANOOGA, TENNESSEE 37421.
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