management’s travel and entertainment reports; and (iii) performs such other matters as the Audit Committee deems appropriate. The Audit Committee also pre-approves all auditing and all allowable non-audit services provided to the Company by the independent auditors. The Audit Committee selects and retains the independent auditors for the Company, subject to stockholder ratification, and approves audit fees. The Audit Committee met seveneight times during 2008.2010. The Board of Directors has determined that all members of the Audit Committee are “independent” as defined by the rules of the SEC and the listing standards of the NYSE. The Board has determined that Mr. Biegler,Echols, Chair of the Audit Committee, Mr. Best, Mr. Echols,Biegler, Mr. Haddock, and Mr. HaddockRock are each qualified as an audit committee financial expert within the meaning of SEC regulations.
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Finance and Risk Management Committee
The oversight duties of the Finance and Risk Management Committee (the “Finance Committee”) generally are to periodically review the financial status of the Company; review the Company’s compliance with certain debt instruments that may exist; make recommendations to the Board regarding financings and authorize financings within limits prescribed by the Board; review and assess risk exposure related to the Company’s operations; monitor the funds for the Company’s benefit plans; review the Company’s insurance coverages; and review significant acquisitions and dispositions of businesses or assets and authorize such transactions within limits prescribed by the Board. EachThe Finance Committee met seven times in 2010. The Company periodically identifies, assesses, and risk rates the business, commercial, operational, financial, and personal risks associated with its products and services. A cross-section of corporate and business segment executives meets quarterly to review the members ofidentified risks and assessed exposures and suggest changes to the Finance Committee as warranted. This management group reports to the Finance Committee at each regularly scheduled meeting and Risk Managementfollows through on any action items requested by the Finance Committee except Mr. Adams, is an independent director underto further define risk, assess or improve a mitigation initiative, or otherwise improve the NYSE listing standards. The Committee met five times during 2008.overall enterprise risk management process.
Corporate Governance and Directors Nominating Committee
The functions of the Corporate Governance and Directors Nominating Committee (“Nominating Committee”) are to identify and recommend to the Board individuals qualified to be nominated for election to the Board; review the qualifications of the members of each committee (including the independence of directors) to ensure that each committee’s membership meets applicable criteria established by the SEC and NYSE; recommend to the Board the members and Chairperson for each Board committee; periodically review and assess the Company’s Corporate Governance Principles and the Company’s Code of Business Conduct and Ethics and make recommendations for changes thereto to the Board; periodically review the Company’s orientation program for new directors and the Company’s practices for continuing education of existing directors; annually review director compensation and benefits and make recommendations to the Board regarding director compensation and benefits; review, approve, and ratify all transactions with related persons that are required to be disclosed under the rules of the SEC; annually conduct an individual director performance review of each incumbent director; and oversee the annual self-evaluation of the performance of the Board. Each of the members of the Corporate Governance and Directors Nominating Committee is an independent director under the NYSE listing standards. The Corporate Governance and Directors Nominating Committee met three times during 2008.2010.
In performing its annual review of director compensation, the Corporate Governance and Directors Nominating Committee utilizes independent compensation consultants from time to time to assist in making its recommendations to the Board. In 2007, the Company’s Vice President, Human Resources and Shared Services (the “VP of Human Resources”), in consultation with the Chairman of the Corporate Governance and DirectorsThe Nominating Committee prepared a director compensation review of several relevant director compensation studies and a peer group of comparably sized companies. After a review of this report, the Corporate Governance and Directors Nominating Committee recommended, and the Board approved, maintaining the 2007 compensation in 2008. In mid-2008, the Corporate Governance and Directors Nominating Committee retained the services of Hewitt Consulting, a nationally-recognized compensation consulting firm, to provide a comparator group study of Board compensation. After a review of this consultant’s report, the Corporate Governance and Directors Nominating Committee recommended, and the Board approved, revisingreviewed the director compensation effective September 7, 2008 to increase the Board meeting fee to $2,000 per meetingfor 2010 and to pay each director a fee equal to $2,000 per day for ad hoc or special assignment work performed fordetermined it was appropriate and at the requestnot in need of the Chairman, Chief Executive Officer, and President.modification.
The Corporate Governance and Directors Nominating Committee will consider director candidates recommended to it by stockholders. In considering candidates submitted by stockholders, the Corporate Governance and Directors Nominating Committee will take into consideration the needs of the Board and the qualifications of the candidate. To have a candidate considered by the Corporate Governance and Directors Nominating Committee, a stockholder must submit the recommendation in writing and must include the following information:
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| | • | The name of the stockholder, evidence of the person’s ownership of Company stock, including the number of shares owned and the length of time of ownership, and a description of all arrangements or understandings regarding the submittal between the stockholder and the recommended candidate; and |
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| | • | The name, age, business, and residence addresses of the candidate, the candidate’s resumerésumé or a listing of his or her qualifications to be a director of the Company, and the person’s consent to be a director if selected by |
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| | the Corporate Governance and Directors Nominating Committee, nominated by the Board, and elected by the stockholders. |
The stockholder recommendation and information described above must be sent to the Corporate Secretary at 2525 Stemmons Freeway, Dallas, Texas 75207 and must be received by the Corporate Secretary not less than 120 days prior to the anniversary date of the date the Company’s proxy statement was released in connection with the previous year’s Annual Meeting of Stockholders.
The Corporate Governance and Directors Nominating Committee believes that the minimum qualifications for serving as a director of the Company are that a nominee demonstrate depth of experience at the policy makingpolicy-making level in business, government or education, possess the ability to make a meaningful contribution to the Board’s oversight of the business and affairs of the Company and a willingness to exercise independent judgment, and have an impeccable reputation for honest and ethical conduct in both his or her professional and personal activities. In addition, the Corporate Governance and Directors Nominating Committee examines a candidate’s time availability, the candidate’s ability to make analytical and probing inquiries, and financial independence to ensure he or she will not be financially dependent on director compensation.
The Corporate Governance and Directors Nominating Committee identifies potential nominees by asking, from time to time, current directors and executive officers for their recommendation of persons meeting the criteria described above who might be available to serve on the Board. The Corporate Governance and Directors Nominating Committee also may engage firms that specialize in identifying director candidates. As described above, the Corporate Governance and Directors Nominating Committee will also consider candidates recommended by stockholders.
Once a person has been identified by the Corporate Governance and Directors Nominating Committee as a potential candidate, the Corporate Governance and Directors Nominating Committee makes an initial determination regarding the need for additional Board members to fill vacancies or expand the size of the Board. If the Corporate Governance and Directors Nominating Committee determines that additional consideration is warranted, the Corporate Governance and Directors Nominating Committee will review such information and conduct interviews as it deems necessary in order to fully evaluate each director candidate. In addition to the qualifications of a candidate, the Corporate Governance and Directors Nominating Committee will consider such relevant factors as it deems appropriate, including the current composition of the Board, the evaluations of other prospective nominees, and the need for any required expertise on the Board or one of its committees. The Corporate Governance and Directors Nominating Committee also seeks forcontemplates multiple dynamics that promote and advance diversity amongst its members. Although the Board to be balanced as to itsNominating Committee does not have a formal diversity experience,policy, the Nominating Committee considers a number of factors regarding diversity of personal and professional backgrounds (both domestic and international), national origins, specialized skills and expertise.acumen, and breadth of experience in industry, manufacturing, financing transactions, and business combinations. The Corporate Governance and Directors Nominating Committee’s evaluation process will not vary based on whether or not a candidate is recommended by a stockholder.
Human Resources Committee
The Human Resources Committee (the “HR Committee”) assistsmakes recommendations to the Board of Directors in their fiduciaryits responsibilities relating to the fair and competitive compensation of the Company’s Chief Executive Officer and other senior executives.Officer. The HR Committee also discusseshas been delegated authority by the Board of Directors to make compensation decisions with respect to the other named executive officers. Each of the members of the HR Committee is an independent director under the NYSE listing standards. The HR Committee met five times during 2010.
The HR Committee reviews management succession and administers and makes or recommendsapproves awards under the Company’s incentive compensation and equity based plans. The HR Committee annually evaluates the leadership and performance of Mr. Wallace, ourthe Company’s Chairman, Chief Executive Officer, and President (collectively referred to as the “CEO”). The CEO also provides to the HR Committee his assessment of the performance of his direct reports. The HR Committee also has access to the Company’s key leaders. For 2008, the members of the HR Committee were Messrs. Haddock, Echols, Gafford and Hay and Dr. Natalicio. Each of these members of the HR Committee is an independent director under the NYSE listing standards. The HR Committee met five times during 2008.
The HR Committee annually recommends to the Company’s independent directors the total compensation for the CEO. The independent directors are responsible for approving the CEO’s compensation. The CEO provides to the HR Committee his assessment of the performance of his direct reports. The HR Committee also has access to the Company’s key leaders. The HR Committee reviews and approves compensation for the Chief Financial Officer (the “CFO”) and the other executive officers named in the “Summary Compensation Table.” The CEO, the CFO, and the other executive officers named in the “Summary Compensation Table” are referred to in this proxy statement as the “named executive officers.”
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The Role of the Compensation Consultant
The HR Committee hires independent executive compensation consultants to provide an assessment of the Company’s executive compensation program and to perform fourfive key tasks. The consultants (i) review and assist management in the design of the Company’s compensation program. Theyprograms, (ii) provide insight into compensation best practices used by other companies. Theycompanies, (iii) benchmark the Company’s compensation pay levels with relevant industry surveys, (iv) provide proxy disclosure information for comparator companies, and relevant industry surveys. And, they(v) provide input to the HR Committee on the structure and overall competitiveness of the Company’s compensation programs. The HR Committee has found significant benefit from using independent consultants, and as a result, the Company has been able to use best practices and maintain competitive compensation programs.
The HR Committee retained the services of LongneckerHewitt Consulting and, Associates (referredupon its spin-off from Hewitt Consulting, Meridian Compensation Partners, LLC (both Hewitt Consulting and Meridian Compensation Partners, LLC are collectively referred to in this proxy statement as “L&A”the “Compensation Consultant”), a regionally-recognizedan internationally-recognized compensation consultantconsulting firm, as its compensation consultant to assist in providing an independent assessment of the executive compensation program. L&ASince its spin-off from Hewitt Consulting, Meridian Compensation Partners, LLC has been the HR Committee’s sole compensation consultant. The Compensation Consultant reported directly to the HR Committee for the purposes of advising it on matters relating to 2007 and 20082010 compensation. The services of L&Athe Compensation Consultant were used only in conjunction with executive compensation matters. L&AThe Compensation Consultant was not retained by the Company for any other purpose.
The HR Committee instructed L&Athe Compensation Consultant to provide analyses, insight, and benchmarking information for 20082010 on the 25 highest compensated executives to determine whether the compensation packages for these executives were competitive with the market and met the objective of the Company to attract, hire, and retain the best talent. L&AThe Compensation Consultant was instructed to:
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| | • | review the total direct compensation (base salary, annual incentive, and long term incentive); |
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| | • | confirm that the comparator companies selected by the HR Committee were appropriate for competitive benchmarking;appropriate; and |
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| | • | gather publicly traded comparator company proxy statementsproxies and market surveys to ascertain market competitive rates specifically for the named executive officers. |
L&A was instructed to benchmarkThe Compensation Consultant benchmarked all components of compensation for 2008 as well as to calculate a market median2010, excluding the Executive Perquisite Allowance, and determined the 50th percentile (market median) and the 75th percentile for each position, develop a compensation range using the market median and 75th percentile, and present their findings to the HR Committee.position.
The HR Committee retained the services of Hewitt Consulting (referred to in this proxy statement as “Hewitt”), a nationally-recognized compensation consulting firm, replacing L&A, as its compensation consultant with respect to the executive compensation program beginning in March 2008. Hewitt provided consulting services on programs such as change in control and was instructed to benchmark all components of executive compensation for 2009 as well as to calculate a market median for each position, develop a compensation range using the market median and 75th percentile, and present their findings to the HR Committee.
The Role of Management
The CEO, the CFO, and the VPVice President of Human Resources work with the HR Committee and the compensation consultantCompensation Consultant to develop the framework and design the plans for each of the components of compensation.all compensation components. The CEO and CFO recommend the financial performance measurements for the annual incentive awards and the long term performance-based restricted stock awards, subject to HR Committee approval for all named executive officers, except Mr. Wallace.approval. The HR Committee recommends to the independent directors Mr. Wallace’s compensation for their approval. The CFO certifies as to the achievement of these financial performance measures. The VPVice President of Human Resources implements compensation-related policies and procedures and oversees the execution of each plan. The CEO makes recommendations to the HR Committee on compensation for each of the other named executive officers.
The Role of the HR Committee
The HR Committee annually reviews management’s assessment of the performance of the 25 highest paid executives of the Company and its subsidiaries. The review is conducted prior to the year in which any adjustment to
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base salary, annual incentive or long term incentive becomes effective. Both annual incentives and long term incentives are established as a percent of base salary with threshold, target, and maximum payout levels.
The HR Committee realizes that comparator benchmarking requiresand comparing peer group proxy disclosures require certain levels of interpretation due to the complexities associated with executive compensation plans and the evolution of public company compensation disclosures.plans. The HR Committee uses the benchmarking information and the peer group proxy disclosures provided by the compensation consultantCompensation Consultant as a general guidelineguidelines and retains the right to make adjustments to compensation levels based on what the HR Committee believes is in the best interests of the Company’s stockholders. The HR Committee uses its judgment
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and bases its consideration of each executive’s compensation on past and expected future performance in respect to specific financial, strategic, and operating objectives; the scope of each executive’s responsibilities within the Company; the executive’s value to the Company; and a combination of competitive market survey data and proxy statement peer company data that establishes the market ranges against which compensation is benchmarked.
Board’s Role in Risk Oversight
The HRAudit Committee also periodicallyhas the responsibility to oversee the Company’s policies and procedures relating to risk assessment, management, and mitigation. The Finance Committee has the responsibility to review and assess risk exposure related to the Company’s operations, including safety, environmental, financial, contingent liabilities, and other risks which may be material to the Company, as well as the activities of management in identifying, assessing, and mitigating against business, commercial, operational, financial, and personal risks associated with the Company’s products and services. The Finance Committee accomplishes this responsibility as described in “Corporate Governance — Board Committees — Finance and Risk Committee.” In addition, the Audit Committee, in its discretion, reviews the Company’s major risks and exposures, including (i) any special-purpose entities, complex financing transactions and related off-balance sheet accounting matters; and (ii) legal matters that may significantly impact the Company’s financial statements or risk management.
Risk Assessment of Compensation Policies and Practices
The Company conducts a detailed risk assessment of its compensation policies and practices for its employees, including its executive officers. The Company’s Internal Audit group reviews the Company’s compensation policies and practices (the “Compensation Policies”), and meets with the Company’s management to discuss risks presented by the Compensation Policies. Based on these discussions, and a review of the Compensation Policies, the Internal Audit group assesses the likelihood and potential impact of the risk presented by the Compensation Policies.
The Internal Audit group presents its findings to an internal committee consisting of a cross-section of corporate and business segment executives that meets quarterly to review identified risks and assess exposures. This committee considers the benefits ofInternal Audit group’s findings and assessments. This committee has concluded that the Compensation Policies are not reasonably likely to have a supplemental retirement plan as a part ofmaterial adverse effect on the total compensation of the CEO.Company.
Compensation Committee Interlocks and Insider Participation
Messrs. Echols, Gafford, Haddock, and Hay, Rock, and Dr. Natalicio served on the HR Committee during the last completed fiscal year. None of the members of the HR Committee has ever served as an executive officer or employee of the Company or any of its subsidiaries. There were no compensation committee interlocks during 2008.2010.
Stockholder Communications with Directors
The Board has established a process to receive communications from stockholders and other interested parties by mail. Stockholders and other interested parties may contact any member of the Board, including the Presiding Director, Mr. Hay through May 3, 2009 or Mr. Best, commencing May 4, 2009, or the non-management directors as a group, any Board committee or any chair of any such committee. To communicate with the Board of Directors, any individual director or any group or committee of directors, correspondence should be addressed to the Board of Directors or any such individual director or group or committee of directors by either name or title. All such correspondence should be sent“c/o Corporate Secretary” at 2525 Stemmons Freeway, Dallas, Texas 75207.
All communications received as set forth in the preceding paragraph will be opened by the office of ourthe Corporate Secretary for the sole purpose of determining whether the contents represent a message to our directors. Any contents that are not in the nature of advertising, promotions of a product or service, or patently offensive material will be forwarded promptly to the addressee. In the case of communications to the Board or any group or committee of directors, the Corporate Secretary will make sufficient copies of the contents to send to each director who is a member of the group or committee to which the envelope is addressed.
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PROPOSAL 1 — ELECTION OF DIRECTORS
OurThe Board of Directors currently consists of ten members.twelve members, but will decrease to eleven effective with Mr. Hay’s retirement at the time of the Annual Meeting of Stockholders.
Following a recommendation from the Corporate Governance and Directors Nominating Committee, each of the members of the Board of Directors other than Mr. Hay has been nominated by the Board for election at the Annual Meeting to hold office until the later of the next Annual Meeting or the election of their respective successors. The director nominees are John L. Adams, Rhys J. Best, David W. Biegler, Leldon E. Echols, Ronald J. Gafford, Ronald W. Haddock, Jess T. Hay, Adrian Lajous, Charles W. Matthews, Diana S. Natalicio, Douglas L. Rock, and Timothy R. Wallace. The Board of Directors has determined that all of the director nominees other than Mr. Wallace and Mr. Adams are “independent directors.” Mr. Wallace is our Chairman, Chief Executive Officer, and President, and Mr. Adams served as a non-executive Vice Chairman within the three years preceding this proxy statement.President. Therefore, the Board of Directors has concluded that neither Mr. Wallace nor Mr. Adams is currentlynot an independent director.
The Board of Directors believes that each of the director nominees possesses the qualifications described above in “Corporate Governance — Board Committees — Corporate Governance and Directors Nominating Committee.” That is, the Board believes that each nominee possesses: (i) deep experience at the policy making level in business, government or education, (ii) the ability to make a meaningful contribution to the Board’s oversight of the business and affairs of the Company, (iii) a willingness to exercise independent judgment, and (iv) an impeccable reputation for honest and ethical conduct in both his or her professional and personal activities.
The information provided below is biographical information about each of the nominees.nominees, as well as a description of the experience, qualifications, attributes or skills that led the Board to conclude that the individual should be nominated for election as a director of the Company.
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Nominees
Timothy R. Wallace, 55.57. Director since 1992. Mr. Wallace has been Chairman, Chief Executive Officer, and President of the Company since 1999. From June 2004 until March 2008, Mr. Wallace was a director of MoneyGram International, Inc., a payment service and money transfer business.
Mr. Wallace joined the Company in 1975. During his long tenure with the Company, Mr. Wallace has consistently shown strong performance in a variety of roles, requiring a wide range of business and interpersonal skills. He has provided excellent leadership to the Company in his current positions, exhibiting sound judgment and business acumen.
John L. Adams, 64.66. Director since 2007. MemberMr. Adams is Chairman of the Finance and Risk Management Committee. Mr. Adams served as Executive Vice President of the Company from January 1999 — June 2005, serving thereafter on a part time basis as Vice Chairman until leaving the employ of the Company to join the Board of Directors in March 2007. Since 2007, he has served on several corporate and not-for- profitnot-for-profit boards. Mr. Adams is the non-executive Chairman of the Boardboard and a director of Group 1 Automotive, Inc., a company engaged in the ownership and operation of automotive dealerships and collision centers. He also serves on the Audit Committeeaudit committee and is a director of Dr Pepper Snapple Group, Inc., a company that is a leading brand owner, bottler, and distributor of non-alcoholic beverages in the U.S., Canada, and Mexico.
As a result of his past employment by the Company, Mr. Adams brings significant knowledge and understanding of the Company’s operations and business environment. In addition, he has experience as a senior executive in the banking industry, which provides the Board with experience in managing financing transactions. His service on the boards of other significant companies provides the Board with additional perspective on the Company’s operations.
Rhys J. Best, 62.64. Director since 2005. Mr. Best is Chairman of the Finance and Risk Management Committee and member of the Corporate Governance and Directors Nominating Committee, and a member of the Finance and Risk Committee and the Audit Committee. Mr. Best served, beginning in 1999, as Chairman, President, and CEO of Lone Star Technologies, Inc., a company engaged in producingthe production and marketing of casing, tubing, line pipe, and couplings for the oil and gas, industrial, automotive, and power generation industries. He was also a director of, and remained in these positions with, Lone Star Technologies, Inc., until its acquisition by United States Steel Corporation in June 2007. Mr. Best has been engaged
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in private investments since 2007. He is also Chairman of Crosstex Energy, L.P., an energy company engaged in the gathering, transmission, treating, processing, and marketing of natural gas and natural gas liquids. He is a member of the board of directors of Cabot Oil & Gas Corporation, a leading North American oil and gas exploration and production company; Austin Industries, Inc., a civil, commercial, and industrial construction company; and McJunkin Red Man Corporation, a company engaged in the distribution of industrial PVF products, serving the refining, chemical, petrochemical, gas distribution and transmission, oil and gas exploration and production, pharmaceutical, and power generation industries.industries; and Commercial Metals Corporation, which recycles, manufactures, and markets steel and metal products and related materials.
Mr. Best has broad experience in managing and leading significant industrial enterprises. His service on the boards of other significant companies provides the Board with additional perspective on the Company’s operations, including its international operations and future international opportunities.
David W. Biegler, 62.64. Director since 1992. ChairmanMr. Biegler is a member of the Audit Committee, and member of the Corporate Governance and Directors Nominating Committee, and the Finance and Risk Management Committee. Mr. Biegler began serving during 2003serves as the Chairman and CEO of EstrellaSouthcross Energy, L.P.,LLC, a company engaged in the natural gas transportation and processing industry.processing. He retired as Vice Chairman of TXU CorporationCorp. at the end of 2001, having served TXU CorporationCorp. as President and Chief Operating Officer from 1997 — 2001. Mr. Biegler is also a director of Dynegy Inc., a company engaged in power generation; Southwest Airlines, Inc., a major domestic airline; Animal Health International, a company engaged in selling and distributing animal health products; and Austin Industries, Inc., a civil, commercial, and industrial construction company; andcompany. In addition, Mr. Biegler served as a director of Guaranty Financial Group Inc., a company conducting consumer and business banking activities.activities, from February 2008 until August 2009.
Mr. Biegler has broad experience in managing and leading significant industrial enterprises. His service on the boards of other significant companies provides the Board with additional perspective on the Company’s operations.
Leldon E. Echols, 53.55. Director since 2007. MemberMr. Echols is Chairman of the Audit Committee and a member of the Human Resources Committee. He served as Executive Vice President and Chief Financial Officer of Centex Corporation (“Centex”) from 2000 — 2006 when he retired. Prior to joining Centex, he spent 22 years with Arthur Andersen LLP and served as Managing Partner, Audit Practice for the North Texas, Colorado, and Oklahoma Region from 1997 — 2000. Mr. Echols is a certified public accountant and a member of the American Institute of Certified Public Accountants and the Texas Society of CPAs. Mr. Echols has been engaged in private investments since 2006. He is a member of the Boardboard of Directorsdirectors and Chairman of the Audit Committeeaudit committee of Crosstex Energy, L.P., an energy company engaged in the gathering, transmission, treating, processing, and marketing of natural gas and natural gas liquids and Crosstex Energy, Inc., a company holding partnership interests of Crosstex Energy, L.P. He is also a member of the Boardboard of Directorsdirectors and Chairman of the audit committees of Holly Corporation, an independent petroleum refiner;refiner, and Roofing Supply Group Holdings, Inc., a privately-held company engaged in the distribution of roofing and related construction materials;materials. In addition, Mr. Echols served as a director of TXU Corp. from August 2005 until October 2007.
In addition to having gained substantial managerial experience as an executive officer of Centex, Mr. Echols possesses important skills and Colemont Corporation,experience gained through his service as a company engaged in insurance and reinsurance brokerage and related services.certified public accountant. His service on the boards of other significant companies provides the Board with additional perspective on the Company’s operations.
Ronald J. Gafford, 59.61. Director since 1999. MemberMr. Gafford is a member of the Human Resources Committee and the Corporate Governance and Directors Nominating Committee. Mr. Gafford has been President and Chief Executive Officer of Austin Industries, Inc., a civil, commercial, and industrial construction company, since 2001 and Chairman since 2008. From July 2005 until September 2007, Mr. Gafford served as a member of the board of directors of Chaparral Steel Company, a leading supplier of structural steel and steel bar products.
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Mr. Gafford has broad experience in managing and leading a significant industrial enterprise. His service as the Chief Executive Officer of Austin Industries, Inc. provides the Board with additional perspective on the Company’s operations.
Ronald W. Haddock, 68.70. Director since 2005. ChairmanMr. Haddock is a member of the Human Resources Committee and member of the Audit Committee. Mr. Haddock was Chief Executive Officer of FINA, Inc. from December 1989 until his
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retirement in July 2000. He was also the Executive Chairman, CEO, and director of Prisma Energy International, a power generation, power distribution, and natural gas distribution company from August 2003 until its acquisition by Ashmore Energy International Limited. He currently serves as Chairman of the Boardboard of AEI Services, LLC, an international power generator and distributor and natural gas distribution company; Rubicon Offshore International, an offshore oil storage and production well services company;company based in Singapore; and Safety-Kleen Systems, Inc., an environmental services, oil recycling, and refining company; and is a director of Alon USA Energy, Inc., a petroleum refining and marketing company; and Petron, a refining and marketing company and Adea Solutions, Inc., a high-tech personnel and consulting firm.based in the Philippines.
Jess T. Hay, 78. Director since 1965. ChairmanMr. Haddock has broad experience in managing and leading significant enterprises. His service on the boards of other significant companies provides the Corporate Governance and Directors Nominating Committee and member ofBoard with additional perspective on the Human Resources Committee and the Finance and Risk Management Committee. Mr. Hay is the retired Chairman and Chief Executive Officer of Lomas Financial Corporation, a diversified financial services company formerly engaged principally in mortgage banking, retail banking, commercial leasing, and real estate lending, and of Lomas Mortgage USA, a mortgage banking institution. He is also Chairman of the Texas Foundation for Higher Education. Mr. Hay is a director of Viad Corp. which is a convention and event services, exhibit design and construction, and travel and recreational services company, and a director of MoneyGram International, Inc. which is a payment services and money transfer business.Company’s operations, including its international opportunities.
Adrian Lajous, 65.67. Director since December 2006. MemberMr. Lajous is a member of the Audit Committee and the Finance and Risk Management Committee. Mr. Lajous has been Senior Energy Advisor for McKinsey & Company, a management consulting firm, and President of Petrométrica, SC.S.C., an energy consulting company, since 2001. Mr. Lajous served Pemex in several capacities between 1982 and 1999, having served as Director General and CEO from1994-1999. Mr. Lajous is Chairman of the Oxford Institute for Energy Studies and is a director of Schlumberger, Ltd., an oilfield services company supplying technology, project management, and information solutions to the oil and gas industry; and Ternium, S.A., a company engaged in the production and distribution of semi-finished and finished steel products;products.
Mr. Lajous has broad experience in managing and Grupo Petroquímico Beta,leading significant industrial enterprises in Mexico, where the Company has a private Mexican chemicalnumber of operations. His service on the boards of other significant companies provides the Board with additional perspective on the Company’s operations.
Charles W. Matthews, 66. Director since 2010. Mr. Matthews is a member of the Corporate Governance and Directors Nominating Committee. Mr. Matthews served Exxon Mobil Corporation, one of the leading global energy companies in the world, and its predecessor, Exxon Corporation, in several capacities in its legal department since 1971 before being appointed Vice President and General Counsel in 1995 until his retirement in 2010. He is a member of the board of directors of Cullen/Frost Bankers, Inc., a financial holding company and bank holding company.
During his long employment at Exxon Mobil Corporation, Mr. Matthews accumulated broad experience in legal, managerial, and other matters in the energy industry around the world.
Diana S. Natalicio, 68.71. Director since 1996. MemberDr. Natalicio is a member of the Human Resources Committee. Dr. Natalicio has been President of the University of Texas at El Paso since 1988. Dr. Natalicio was appointed by President George H.W. Bush to the Commission on Educational Excellence for Hispanic Americans and by President William J. Clinton to the National Science Board and to the President’s Committee on the Arts and Humanities. Under the Board’s retirement policy applicable to Dr. Natalicio, this will be the last year that she will be nominated for election to the Board.
During her long tenure at the University of Texas at El Paso, Dr. Natalicio has gained deep experience in dealing with a broad range of constituencies and competing interests. In addition, her service as a Presidential appointee has given her experience in working with significant governmental and civic officials across the political spectrum.
Douglas L. Rock, 64. Director since 2010. Mr. Rock is a member of the Audit Committee and the Human Resources Committee. From 1990 to August 2010, Mr. Rock served as the Chairman of the board of directors of Smith International, Inc., an oilfield services company. Mr. Rock joined Smith International, Inc. in 1974 and served as Chief Executive Officer, President and Chief Operating Officer from March 1989 until December 2008. From 2004 until 2009, he served as a director of MoneyGram International, Inc., a payment service and money transfer business, and from 1999 until 2008 he served as a director of CE Franklin Ltd., a distributor of pipe, valves, flanges, fittings, production and process control equipment, tubular products and other general oilfield supplies to the oil and gas industry in Canada.
Mr. Rock has broad experience in managing and leading a significant industrial enterprise. His recent service on the boards of other significant companies provides the Board with additional perspective on the Company’s
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operations. Mr. Rock was recommended to the Nominating Committee for service as a director by Mr. Best and Mr. Hay.
The Board of Directors recommends that you vote FOR all of the Nominees.
PROPOSAL 2 — ADVISORY VOTE ON EXECUTIVE COMPENSATION
The Company seeks a non-binding advisory vote from its stockholders regarding the compensation of its executive officers as described in this proxy statement.
As discussed in the Compensation Discussion and Analysis section of this proxy statement, the Company’s long term strategic corporate vision is to be a premier multi-industry growth company that provides superior value to stockholders. The Board of Directors believes that realization of this vision depends in large measure on the talents of the Company’s employees. The Company’s compensation system plays a significant role in its ability to attract, motivate, and retain a high quality workforce. As described in the Compensation Discussion and Analysis, the Company’s executive compensation program (i) encourages high levels of performance and accountability, (ii) aligns the interests of executives with those of stockholders, (iii) links compensation to business objectives and strategies, and (iv) takes into account, as appropriate, the cyclical nature of the Company’s businesses.
This proposal provides stockholders the opportunity to endorse or not endorse the Company’s executive compensation program through the following resolution:
“Resolved, that the compensation paid to the Company’s named executive officers, as disclosed pursuant to Item 402 ofRegulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion is hereby approved.”
Because this is an advisory vote, it will not be binding upon the Board of Directors. However, the HR Committee will take into account the outcome of the vote when considering future executive compensation arrangements.
The Board of Directors recommends that you vote FOR approval of this resolution.
PROPOSAL 3 — ADVISORY VOTE ON THE FREQUENCY OF ADVISORY VOTES ON
EXECUTIVE COMPENSATION
The Company seeks a non-binding advisory vote from its stockholders regarding the desired frequency for holding an advisory vote to approve the compensation of our executive officers as described in our annual proxy statements.
This proposal gives stockholders the opportunity to express their views as to whether the advisory vote on the Company’s executive compensation program should occur every one, two, or three years. Because this vote is advisory, it will not be binding upon the Board of Directors. However, the Board of Directors will take into account the outcome of the vote when deciding the frequency of the non-binding advisory vote on the Company’s executive compensation program.
The Board of Directors recommends that a non-binding advisory vote to approve the compensation of our executive officers as disclosed in the Company’s proxy statements occur annually.
While the Board believes this recommendation is appropriate at this time, stockholders are not voting to approve or disapprove this recommendation, but are instead asked to provide an advisory vote on whether the non-binding advisory vote on the approval of the Company’s executive officer compensation should be held every one, two or three years.
The Board of Directors recommends that you vote for “ONE YEAR” on this proposal.
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PROPOSAL 4 — RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP
The Audit Committee has appointed Ernst & Young LLP (“Ernst & Young”) as independent registered public accounting firm of the Company for the fiscal year ending December 31, 2009,2011, subject to ratification of stockholders.
The Company has been advised by Ernst & Young that the firm has no relationship with the Company or its subsidiaries other than that arising from the firm’s engagement as auditors, tax advisors, and consultants.
Ernst & Young, or a predecessor of that firm, has been the auditors of the accounts of the Company each year since 1958. The Company has also been advised that representatives of Ernst & Young will be present at the Annual Meeting where they will have an opportunity to make a statement if they desire to do so and will be available to respond to appropriate questions.
9
Fees of Independent Registered Public Accounting Firm for Fiscal Years 20082010 and 20072009
The following table presents fees for professional audit services rendered by Ernst & Young for the audits of the Company’s annual financial statements for the years ended December 31, 20082010 and 2007,2009, and fees for other services rendered by Ernst & Young during those periods:
| | | | | | | | | | | | | | | | | |
| | | 2008 | | 2007 | | | 2010 | | 2009 | |
| |
| Audit fees | | $ | 2,613,400 | | | $ | 2,850,750 | | | $ | 2,527,600 | | | $ | 2,404,500 | |
| Audit-related fees | | | 50,760 | | | | 53,800 | | | | 139,911 | | | | 51,200 | |
| Tax fees | | | 355,544 | | | | 119,286 | | | | 208,248 | | | | 288,957 | |
| All other fees | | | — | | | | — | | | | 193,295 | | | | — | |
Services rendered by Ernst & Young in connection with fees presented above were as follows:
Audit Fees
In fiscal years 20082010 and 2007,2009, audit fees includesinclude fees associated with the annual audit of the Company’s financial statements, the assessment of the Company’s internal control over financial reporting as integrated with the annual audit of the Company’s financial statements, the quarterly reviews of the financial statements included in the Company’sForm 10-Q filings, statutory audits in Mexico and Europe, and consents included in other SEC filings.
Audit-Related Fees
Audit-related fees include fees for employee benefit plan audits, use of online research tools, and certain compliance audits.
Tax Fees
Tax fees in fiscal years 20082010 and 20072009 include fees for tax advice, tax planning, and tax return review.
All Other Fees
There were noAll other fees consist of insurance claims services related to the flooding of the Company’s facility in Ashland City, Tennessee. These services include advising the Company on the appropriate methodologies for other services not included above.preparation of insurance claims and assisting in the assembling, analyzing and organizing of accounting documentation with respect to recovery expenditures and business losses.
The Audit Committee pre-approves all audit and permissible non-audit services provided by Ernst & Young. These services may include audit services, audit-related services, tax services, and other services. The Audit Committee has adopted a policy for the pre-approval of services provided by Ernst & Young. In addition, the Audit Committee also may pre-approve particular services on acase-by-case basis. The Audit Committee has delegated pre-approval authority to the Chair of the Audit Committee. Pursuant to this delegation, the Chair must report any pre-approval decision by him to the Audit Committee at its first meeting after the pre-approval was obtained. Under
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this policy, pre-approval is generally provided for up to one year, and any pre-approval is detailed as to the particular services or category of services and includes an anticipated budget.
Report of the Audit Committee
We are a standing committee comprised of independent directors as “independence” is currently defined by SEC regulations and the applicable listing standards of the NYSE. OurThe Board of Directors has determined that fourfive of the members of the Audit Committee are “audit committee financial experts” as defined by applicable SEC rules. We operate under a written charter adopted by ourthe Board of Directors. A copy of the charter is available free of charge on ourthe Company’s website atwww.trin.netunder the heading “Investor Relations/Governance” or by writing to Trinity Industries, Inc., 2525 Stemmons Freeway, Dallas, Texas 75207c/o Corporate Secretary.Relations — Governance.”
We annually select the Company’s independent auditors. That recommendation is subject to ratification by the Company’s stockholders.
Management is responsible for the Company’s internal controls and the financial reporting process. The independent auditors are responsible for performing an independent audit of the Company’s consolidated financial
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statements in accordance with auditing standards generally accepted in the United States of America and issuing a report thereon. As provided in our charter, our responsibilities include the monitoring and oversight of these processes.
Consistent with our charter responsibilities, we have met and held discussions with management and the independent auditors. In this context, management and the independent auditors represented to us that the Company’s consolidated financial statements for the fiscal year ended December 31, 20082010 were prepared in accordance with U.S. generally accepted accounting principles. We reviewed and discussed the consolidated financial statements with management and the independent auditors and discussed with the independent auditors matters required to be discussed by Statement on Auditing Standards No. 61, as amended.
The Company’s independent auditors have also provided to us the written disclosures and the letter required by applicable requirements of The Public Company Accounting Oversight Board regarding the independent auditor’s communications with the Audit Committee, and we discussed with the independent auditors that firm’s independence. We also considered whether the provision of non-audit services is compatible with maintaining the independent auditors’ independence and concluded that such services have not impaired the auditors’ independence.
Based upon our reviews and discussions with management and the independent auditors and our review of the representation of management and the report of the independent auditors to the Audit Committee, we recommended that the Board of Directors include the audited consolidated financial statements in the Company’s Annual Report onForm 10-K for the year ended December 31, 20082010 filed with the Securities and Exchange Commission.
Audit Committee
David W. Biegler,Leldon E. Echols, Chairman
Rhys J. Best
Leldon E. EcholsDavid W. Biegler
Ronald W. Haddock
Adrian Lajous
Douglas L. Rock
The Board of Directors recommends that you vote FOR the ratification of the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2009.2011.
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EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
The following Compensation Discussion and Analysis describes how the Human Resources Committee designed the executive compensation program and set individual pay for the executive officers named in the Summary Compensation Table.
OverviewExecutive Summary
The Company’s long term strategic corporate vision is to become a premier multi-industry growth company that provides superior value to our stockholders. Theprimary focus of the Company’s executive compensation program is to encourage and reward behavior that promotes attainment of the Company’s annual and long-term business goals. Those goals are set by management, under the oversight of the Board of Directors, and are designed to facilitatepromote sustainable growth in stockholder value. As stockholders themselves, the Company’s leaders are keenly focused on achieving these goals. The executive compensation programs for 2010, and motivate its executives to conduct an orderly transition from a highly successful diversified industrial cyclical company into a premier multi-industry growth company.the three-year performance period beginning with 2011, align with this approach.
Objectives of ourthe Executive Compensation Program
The HR Committee’s primary objectives for the Company’s executive compensation program are to:
| | |
| | • | attract, motivate, and retain the key executives needed to enhance the profitability of the Company; |
| |
| | • | encourage the highest level of performance and accountability for the overall success of the Company; |
| |
| | • | provide an incentive for long term value creation for our stockholders; |
| |
| | • | align compensation with short term and long term business objectives and strategies, financial targets, and the core values of the Company; and |
| |
| | • | align compensationtake into account as appropriate with the cyclical nature of the Company’s businesses. |
Design of ourthe Executive Compensation Program
OurThe Company’s executive compensation program is intended to reinforcereinforces the importance of performance and accountability at both the individual and corporate achievement levels. OurThe Company’s executive compensation program is designed to:
| | |
| | • | provide a reasonable balance between short term and long term compensation; |
| |
| | • | provide a reasonable mix of fixed and incentive-based compensation; |
| |
| | • | retain key executives through the cycles of our businesses; |
| |
| | • | be competitive with ourthe compensation comparator company group; |
| |
| | • | use equity-based awards, stock ownership guidelines, and annual incentives that are linked to the approved budget and stockholder value;interests; and |
| |
| | • | be transparent and easy to understand. |
Components of Compensation
The executive compensation program has four key components:
| | |
| | • | base salary; |
| |
| | • | an executive perquisitesperquisite payment; |
| |
| | • | annual incentive plans designed to focus on short term performance; and |
| |
| | • | long term incentive plans designed to encourage executives to promote the Company’s position as a premier, multi-industry growth company. |
Business Plan and Operational Performance Linkage
Each year management prepares a strategic review of the Company’s businesses as well as the Company as a whole. The Company’s strategies are linked to the corporate vision and provide a multi-year projection of financial results, including fully diluted earnings per share (referred to as “EPS”) and return on equity (referred to as “ROE”). This business plan is reviewed and discussed annually with the Board of Directors. Following its discussions with
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the Board on the business plan, management prepares operational plans and budgets that provide specific performance measurements and goals required to achieve the strategies for the next year. The Company’s budgets are reviewed and approved annually by the Board of Directors.
Executive incentive target goals are linked to the Company’s business plans and budget. Threshold, target, and maximum level performance goals are established for the performance-based long term incentive compensation plan. These performance-based long term incentive compensation financial goals are a means of encouraging management to focus on initiatives that maximize stockholder return over the long term. The HR Committee uses the Board-approved annual budget as a guideline when establishing the financial performance goals for the annual incentive compensation plan. These annual incentive compensation financial goals are used to encourage management to focus resources on key short term earnings objectives.
The Company notes that the performance goals are part of the Company’s incentive program and do not correspond to any financial guidance that the Company has provided to the investment community for 2009 or that the Company will provide for future years and should not be considered as statements of the Company’s expectations or estimates.
The Named Executive Officers
The Board of Directors has delegated to the HR Committee oversight of ourthe Company’s executive compensation program. The HR Committee reviews and recommends to the independent directors the compensation for the CEO. TheCEO, and the independent directors approve the CEO’s compensation. The HR Committee reviews and approves the compensation of the CFO and the other named executive officers. The fivesix named executive officers for 20082010 were:
| | |
| | • | Timothy R. Wallace, Chairman, Chief Executive Officer, and President |
| |
| | • | William A. McWhirter, SeniorJames E. Perry, Vice President and Chief Financial Officer |
|
| • | Mark W. Stiles, Senior (formerly Vice President, Finance and Group PresidentTreasurer until May 3, 2010) |
| |
| | • | D. Stephen Menzies, Senior Vice President and Group President |
| |
| | • | William A. McWhirter, Senior Vice President and Group President (formerly Chief Financial Officer until May 3, 2010) |
|
| • | Antonio Carrillo, Vice President and Group President |
|
| • | S. Theis Rice, Vice President, Human Resources and Chief Legal Officer |
Competitive Analysis through Benchmarking
One of the HR Committee’s primary objectives related to the executive compensation program is to “attract, motivate, and retain” the key executives needed to enhance the profitability of the Company. To this end, theThe HR Committee directs its compensation consultantretains the Compensation Consultant to perform a total compensation study and include benchmarking information on each of the named executive officers. During 2007,2009 and 2010, the HR Committee retained Longnecker & Associates (referred to as “L&A”) as its compensation consultant to provideCompensation Consultant provided guidance for setting 20082010 and 2011 base salaries, annual incentive compensation, and long term incentive compensation for executives.
The compensation study drew from published market surveys and peer group proxy disclosure data. The benchmarks for the 50th50th percentile (market median) and 75th75th percentile were a combination of comparator company proxy statement data (referred to as “comparator companies”) andderived from market survey data. The HR Committee selected comparator companies from which to benchmarkcompare proxy disclosure data based on criteria that included:
| | |
| | • | industry (manufacturing and industrial); |
| |
| | • | size (based on revenues, assets, market capitalization, and total number of employees); |
| |
| | • | competitiveness (companies that potentially compete with the Company for executive talent); and |
| |
| | • | comparable executive positions (companies with executive positions with similar breadth, complexity, and scope of responsibility). |
The comparator companiesA review of peer group proxy disclosures was conducted for each of the named executive officers for their 2008 compensation isas shown in Table 1 and represent1. This table depicts companies whosewith revenues are within a range ofranging between +50% and -50% of Trinity’s 20072008 revenue of $3.8$3.9 billion or assets withasset values ofranging between +50% and -50% of theTrinity’s asset valuationvalue of Trinity. Additionally, for its proxy analysis, L&A included only comparator companies that filed in the new proxy format to keep the analysis as consistent as possible.$4.9 billion.
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Table 1 — Comparator Companies Used for Proxy Statement Data by Named Executive Officer
| | | | | | | | | | | | | | | | | | | | | | | |
| Position Benchmarked | | | CEO | | | CFO/SVP | | | EVP/SVP | | | EVP/SVP | | | VP/CLO | |
| Position Compared | | | | CEO | | | VP/CFO | | | EVP/SVP | | | EVP/SVP | | | EVP/SVP | | | VP/CLO |
| Comparator Companies | | | Timothy R. Wallace | | | William A. McWhirter | | | Mark W. Stiles | | | D. Stephen Menzies | | | S. Theis Rice | | | Timothy R. Wallace | | | James E. Perry(1) | | | D. Stephen Menzies | | | William A. McWhirter(1) | | | Antonio Carrillo | | | S. Theis Rice |
| AMETEK, Inc. | | | X | | | X | | | X | | | X | | | | | | X | | | X | | | X | | | X | | | X | | | |
| Avery Dennison Corporation | | | | X | | | X | | | X | | | X | | | X | | | |
| BJ Services Company | | | | X | | | | | | | | | | | | | | | X |
| Briggs & Stratton Corporation | | | X | | | X | | | | | | | | | | | | X | | | X | | | | | | | | | | | | |
| Carlisle Companies Incorporated | | | X | | | X | | | X | | | X | | | | |
| Carpenter Technology Corporation | | | X | | | X | | | X | | | X | | | X | |
| Chicago Bridge & Iron Company N.V. | | | X | | | X | | | X | | | X | | | | | | X | | | X | | | X | | | | | | X | | | |
| Cooper Industries, PLC | | | | X | | | X | | | X | | | X | | | X | | | |
| Crane Co. | | | X | | | X | | | X | | | X | | | X | | | X | | | | | | X | | | X | | | X | | | X |
| Flowserve Corporation | | | X | | | X | | | X | | | X | | | X | | | X | | | X | | | X | | | X | | | X | | | |
| Harsco Corporation | | | X | | | X | | | X | | | X | | | X | | | X | | | X | | | X | | | X | | | X | | | X |
| Kennametal Inc. | | | X | | | X | | | X | | | X | | | | |
| Leggett & Platt, Incorporated | | | X | | | X | | | X | | | X | | | | | | X | | | X | | | X | | | X | | | X | | | |
| Lennox International Inc. | | | X | | | X | | | X | | | X | | | | |
| Martin Marietta Materials, Inc. | | | | X | | | X | | | X | | | X | | | X | | | |
| Roper Industries, Inc. | | | X | | | X | | | X | | | X | | | | | | X | | | X | | | | | | | | | | | | X |
| Teleflex Incorporated | | | X | | | X | | | X | | | X | | | | | | X | | | X | | | | | | | | | | | | X |
| Terex Corporation | | | X | | | X | | | X | | | X | | | X | |
| The Manitowoc Company | | | X | | | X | | | X | | | X | | | | |
| The Stanley Works | | | X | | | X | | | X | | | X | | | | | | X | | | | | | X | | | X | | | X | | | |
| The Timken Company | | | X | | | X | | | X | | | X | | | | | | X | | | X | | | X | | | X | | | X | | | |
| Vulcan Materials Company | | | | X | | | X | | | X | | | X | | | X | | | |
| Worthington Industries, Inc. | | | X | | | X | | | | | | | | | | | | X | | | | | | X | | | X | | | X | | | |
Total Comparator Companies | | | 18 | | | 18 | | | 16 | | | 16 | | | 5 | | | 17 | | | 13 | | | 13 | | | 12 | | | 13 | | | 5 |
| | | | | | | | | | | | | | | | | | | | | | | |
| |
| (1) | Benchmark study was conducted by the Compensation Consultant in May 2010 for Messrs. Perry and McWhirter. |
As noted in Table 1, Mr. Wallace and Mr. McWhirterthere were benchmarked against all 1817 comparator companies. Mr. Stiles and Mr. Menzies were benchmarkedPerry’s position was compared against 1613 of the 18 comparator17 companies and was not compared against BJ Services Company, Crane Co., The Stanley Works, and Worthington Industries, Inc. because these entities had no CFO position with comparable responsibilities during 2009. Mr. McWhirter’s position was compared to 14 companies and the positions of Messrs. Menzies and Carrillo were compared against 13 of the 17 comparator companies. The positions of Messrs. McWhirter, Menzies, and Carrillo were not benchmarkedcompared against BJ Services Company, Briggs & Stratton Corporation, or WorthingtonRoper Industries, Inc. or Teleflex Incorporated and for Mr. McWhirter, Chicago Bridge & Iron Company N.V. because theythese entities did not report comparable operations positions. Mr. Stiles and Mr. Menzies were benchmarked against 23 companies, seven of which were not included in our primary comparator group (American Standard Companies, Ball Corporation, Burlington Northern Santa Fe Corporation, Dover Corporation, Eaton Corporation, Ingersoll-Rand Company Limited and ITT Corporation) toTo capture and include directly applicable industry specific companies for their lines of business.business, the positions of Messrs. McWhirter, Menzies, and Carrillo were compared against two companies which were not included in our primary comparator group due to not meeting the revenue or asset ranges described above. These additional companies were Dover Corporation and Terex Corporation. Mr. Rice’s position was benchmarkedcompared against five comparator companies because thehis position of Chief Legal Officer was not included in the named executive officer disclosure of the other comparator companies.
In addition to the comparator company proxy statement data, comparator company comparison data for base salary, annual cash annual incentives, and long term incentives was obtained from a combination of the following published survey sources — Economic Research Institute, 2007 ERI Executive Compensation Assessor (“ERI”); Watson Wyatt, 2007/2008 Top Management Compensation — Industry Report (“Watson Wyatt”); Williamsources: Mercer, 20072009 Executive Compensation Survey (“Mercer”) and Hewitt, TCM Online Executive, United States 20072009 Survey (“Hewitt TCM”). All the named executive officers were compared to the fourtwo surveys. Base salary data from the ERI survey reflected the Industrial Machinery and Equipment industry using revenue ranges based on the specific named executive officer’s responsibility and corporate or business unit revenue. Data for all compensation components of pay from the Watson Wyatt Surveytwo surveys reflected the Durable Goods Manufacturing industry for companies with revenues similar to the Company. The Mercer survey cash compensation data represented the Manufacturing industry with companies with revenuescorporate revenue ranging from $2between $2.5 billion to $5and $5.0 billion or business unit revenue ranging between $0.6 billion and $2.6 billion. Finally, the Hewitt TCM survey data for all
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components of pay reflected revenue ranges based on corporate revenue ($1.9 billion to $5.7 billion) or business unit revenue as applicable.
Based on the 2007/2008 WorldatWork TotalHewitt U.S. Salary Increase Budget Survey 2009/2010, all published survey and proxy data was time-adjusted to January 1, 20082010 using the survey recommendedsurvey-based annual adjustment factor of 4.0%3%.
After determiningestablishing the most appropriate job match for each published survey, and identifying the appropriate proxy company comparator group forCompensation Consultant conducted an analysis of each named executive officer position, L&A conducted its analysis for eachcompensation component of pay. L&A benchmarked the market using a combination of comparator company proxy data and published industry survey data. L&AIn addition to the market survey study, a review of peer group proxy disclosures was conducted. The Compensation Consultant then met with Company management, including the CEO, to obtain its views on thediscuss similarities and differences in responsibilities between the Trinity positions and those in the comparatorpeer group that maycould affect the levellevels of compensation.all compensation components. After this discussion with managementthese discussions and reviewinga review of the data from the comparator groups, L&Apeer group, the Compensation Consultant provided a competitive market value range recommendationinformation for each executive position. L&A’s recommendations on market value ranges,The Compensation Consultant’s analyses, along with the CEO’s compensation recommendations for each named executive officer other than himself, were presented to the HR Committee.
The following discussion should be read in conjunction with the “Summary Compensation Table” and related tables and narrative disclosure that follows the tables which set forth the compensation of our CEO and the otherFor each named executive officers.officer, the Compensation Consultant determined an overall 50th percentile (market median) and 75th percentile derived from the relevant published survey sources. The Compensation Consultant has advised the HR Committee that compensation is generally competitive if it falls within a range of 15% above or below the 50th percentile market data. The base salary, annual incentive target and long term incentive compensation target of each named executive officer for 2010 were compared to the 50th and 75th percentiles. For all elements of target compensation for 2010, the named executive officers were within +/-20% of the market median, except for Mr. Perry who is new to his position, as shown in Table 2. The HR Committee believes that the 2010 compensation target levels for the named executive officers were appropriate.
Table 2 — 2010 Base Salary, Annual Incentive Target, and Long Term Incentive Target Benchmark Data
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Base Salary Benchmark Data(1) | | | AIC Target Benchmark Data(1) | | | LTI Target Benchmark Data(1) |
| | | | | | | | | | | | | | AIC Target
| | | | | | | | | LTI Target
| | | | | | |
| | | | | | | | | | | | | | (% of Base
| | | | | | | | | (% of Base
| | | | | | |
| Named Executive Officer | | | Base Salary | | | | 50th %ile | | | 75th %ile | | | Salary) | | | 50th %ile | | | 75th %ile | | | Salary) | | | 50th %ile | | | 75th %ile |
| Timothy R. Wallace | | | $ | 950,000 | | | | −2% | | | −15% | | | 90% | | | −20% | | | −37% | | | 275% | | | −8% | | | −38% |
| |
James E. Perry(2) | | | $ | 325,000 | | | | −29% | | | −40% | | | 60% | | | −38% | | | −51% | | | 110% | | | −45% | | | −65% |
| |
| D. Stephen Menzies | | | $ | 520,000 | | | | +15% | | | −3% | | | 60% | | | −4% | | | −27% | | | 150% | | | +5% | | | −33% |
| |
William A. McWhirter(3) | | | $ | 425,000 | | | | at median | | | −15% | | | 75% | | | +10% | | | −17% | | | 150% | | | +4% | | | −35% |
| |
| Antonio Carrillo | | | $ | 375,000 | | | | +3% | | | −14% | | | 60% | | | at median | | | −26% | | | 100% | | | −8% | | | −44% |
| |
| S. Theis Rice | | | $ | 365,000 | | | | −3% | | | −15% | | | 50% | | | −18% | | | −36% | | | 100% | | | −12% | | | −46% |
| |
| |
| (1) | Indicates the position of the Company’s 2010 base salary, AIC target or LTI target, respectively, as compared to the market 50th and 75th percentiles using the following formulas: The Company’s 2010 component of pay dollar amount divided by 2010 market 50th percentile dollar amount and the Company’s 2010 component of pay dollar amount divided by 2010 market 75th percentile dollar amount. |
|
| (2) | Mr. Perry was named Chief Financial Officer effective May 3, 2010. The compensation market data provided by the Compensation Consultant compared his 2010 compensation against survey data for a Chief Financial Officer position. |
|
| (3) | Mr. McWhirter transitioned from Chief Financial Officer to Group President, effective May 3, 2010. The compensation market data provided by the Compensation Consultant compared his 2010 compensation against survey data for a Group President position. |
Total Target Compensation Overview
This discussion should be read in conjunction with the Summary Compensation Table and related tables and narrative disclosures that follow the tables which set forth the compensation of the CEO and the other named executive officers.
The HR Committee bases its consideration ofconsiders each named executive officer’s compensation on:based on the overall objectives of the Company’s compensation program and the following:
| | |
| | • | past and expected future performance inwith respect to specific financial, strategic, and operating objectives; |
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| | |
| | • | the scope of each executive’s responsibilities within the Company; |
| |
| | • | the executive’s value to the Company; |
|
| • | a review of comparator company proxy data; and |
| |
| | • | a combination of competitive market survey data and comparator company proxy data that establishes the market ranges against which compensation is benchmarked. |
The HR Committee realizes that comparator benchmarking requires certain levelsand the comparison of peer group proxy disclosures require a degree of interpretation due to the potential differences in position scope, the complexities associated with executive compensation plans, and the evolution of public company compensation disclosures. The HR Committee useduses the benchmarking information and the peer group proxy disclosures provided by L&Athe Compensation Consultant as a general guidelineguidance and retains the right to makemakes adjustments to compensation levels based on what the HR Committee believes isto be consistent with the overall compensation objectives of the Company and in the best long term interests of the Company’s stockholders.
The HR Committee generally targets total compensation for the named executive officers to be between the 50th50th and 75th75th percentile of total target compensation paid to executives in similar positions at companies comprisedas derived from market survey data. The HR Committee believes that this range is appropriate and sufficient to attract, motivate, and retain the key executives needed to enhance the profitability of both the comparator company proxy group and survey data.Company. The HR Committee develops the total compensation amounts using the criteria above and the percentile targets as general guidelines. Total compensation targets may be set closer to the market 50th50th percentile if named executive officers are in the early stages of their careers or relatively new to their current positions. Total compensation targets may be set closer to the market 75th75th percentile if named executive officers are seasoned executives with seniority in their roles at the Company or have extensive work experience in similar positions at other companies which the Company has determined provides additional value to the Company.
Based on its review of benchmark and tally sheet information and data, together with input from management, thevalue. The HR Committee determined that no adjustments were needed for 2008 other than a base pay increase for Mr. Rice who was not abalances these general targets with an assessment of each named executive officer under the criteria mentioned above. The HR Committee also considers (i) the relatively large percentage of performance-based compensation, which may result in 2007.total compensation levels that vary from the target percentiles described above, (ii) the periodic impact on earnings of external business conditions outside the control of our executives, and (iii) the cyclical nature of the Company’s businesses.
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WhileAlthough there is no pre-established policy or target for the allocation between short term and long term, or fixed and incentive-based compensation, the aggregate results of the Company’s compensation and benefits program for named executive officers have generally reflected the following:
Short term compensation versus long term compensation
A named executive officer’s short term compensation is normally paid in cash and consists of three primary components:
| | |
| | • | base salary; |
| |
| | • | annual incentive compensation;an executive perquisite payment; and |
| |
| | • | an executive perquisite payment.annual incentive compensation. |
A named executive officer’s short term compensation (the sum of the short term components listed above) generally falls within a range of 40%35% to 60% of the aggregate of short term compensation and long term compensation described below.total compensation.
A named executive officer’s long term compensation consists of three primary components:
| | |
| | • | retirement benefits; |
| |
| | • | deferred compensation; and |
| |
| | • | annual long term incentive compensation that is typically paidconsists of annual equity awards with equity awards.long term vestingand/or multi-year performance periods. |
A named executive officer’s long term compensation (the sum of the long term components listed above) generally falls within a range of 40% to 60%65% of total compensation. The HR Committee believes that this
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percentage range appropriately rewards the aggregate of longnamed executive officers for shorter term compensation and short term compensation described above.accomplishments, while also maintaining their focus on longer-term Company performance.
Fixed versus incentive-based compensation
The Company’s objectives includeCompany combines both fixed and incentive-based compensation to attract, motivate, and retain top quality executive management, while encouraging the highest level of performance and accountability for the overall success of the Company as a whole and providing an incentive for long term value creation for our stockholders. A named executive officer’s fixed compensation is established to appropriately and fairly compensate the executive given the scope of the responsibilities required by the position. The incentive-based compensation component is based on the achievement of measurable goals or has vesting requirements that may or may not be achieved. The named executive officer’s incentive-based compensation includes the following components:
| | |
| | • | annual incentives typically paid in cash; and |
| |
| | • | long term incentives typically paidmade through equity awards. |
Incentive-based target compensation (including both short term and long term compensation) is generally within a range of 60% to 80% of a named executive officer’s total target compensation. The HR Committee believes that this range is appropriate and sufficient to attract, motivate, and retain the key executives needed to enhance the profitability of the Company. The percentage of compensation that is incentive-based increases as a named executive officer’s scope of responsibilities increases. As Chairman, Chief Executive Officer, and President of the Company, Mr. Wallace has a unique and greater setbroader range of responsibilities as compared tothan the other named executive officers, including having ultimate responsibility for the overall success of the Company. As a result,The HR Committee has therefore determined it is appropriate that he hasshould have the highest percentage of incentive-based target compensation.
Elements of Compensation
Set forth below are the elements of total target compensation, how these elements were applied to each named executive officer, and the analysis of why such amounts were paidset or set.paid.
Base Salary
Base salary is intended to provideattract, motivate, and retain key executives by providing a consistent level of pay that appropriately and fairly compensates the executive for the scope of responsibility forinherent in the position and enables the Company to achieve its objectives of attracting, motivating, and retaining key executives.position. The HR Committee targets the 50th50th percentile of the market (the market median) as a starting point for discussions pertaining to an executive’s base salary. After evaluating the
16
benchmark data and the peer group proxy disclosures, the CEO discusses with the HR Committee his evaluation of each named executive officer’sofficer, excluding himself. The discussion includes performance for the past year; specific achievements he believes should be highlighted; changes in scope or complexity of responsibilityresponsibilities that have occurred or will occur in the next year; operating results; organizational improvements; expected future performance; and relative pay equity among the named executive officers.
Benchmarking Analysis
For each named executive officer, L&A determined an overall 50th percentile (market median) and 75th percentile by equally weighting the data from the relevant data sources and proxy statement data from the comparator companies. The data from published surveys and proxy statements were averaged to arrive at an overall benchmark for base pay. The base salary of each named executive officer for 2008 as compared to the percentage above or below the 50th and 75th percentiles is set forth in Table 2.
Table 2 —2010 Base Salary Benchmarking
| | | | | | | | | | | | | |
| Named Executive Officer | | Base Salary | | | 50th Percentile(1) | | | 75th Percentile(1) | |
| Timothy R. Wallace | | $ | 950,000 | | | | 3% above | | | | 8% below | |
| | | | | | | | | | | | | |
| William A. McWhirter | | $ | 425,000 | | | | 2% above | | | | 12% below | |
| | | | | | | | | | | | | |
| Mark W. Stiles | | $ | 520,000 | | | | 20% above | | | | 1% below | |
| | | | | | | | | | | | | |
| D. Stephen Menzies | | $ | 520,000 | | | | 18% above | | | | 2% below | |
| | | | | | | | | | | | | |
| S. Theis Rice | | $ | 365,000 | | | | 9% above | | | | 7% below | |
| | | | | | | | | | | | | |
| |
(1) | Indicates the position of the Company’s 2008 base salary as compared to the market 50th and 75th percentiles using the following formulas: The Company 2008 base salary dollar amount divided by 2008 market 50th percentile dollar amount and the Company 2008 base salary dollar amount divided by 2008 market 75th percentile dollar amount. |
Base Salary Results
The 2010 base salaries for 2008 for the named executive officers can be found in the “Summary Compensation Table.”Table 2. The base salary offor all of the named executive officers was within the compensation range established for each position. The 2008position, except for Mr. Perry who was appointed CFO in May 2010. His base pay was set by the HR Committee as an appropriate salary for Mr. Perry since he is new to his CFO role. Due to economic conditions and based on Mr. Wallace’s recommendation, the 2010 base salaries for Messrs. Wallace, McWhirter, Stiles and Menzies (namedthe named executive officers, in 2007 and 2008)other than Mr. Perry, were not increased in 2010 from their applicable2009 base salaries at their request.salaries. At Mr. Wallace’s request, his base salary has remained the same since 2006 at2006.
2011 Base Salary
Mr. Wallace evaluated each of the named executive officers with respect to the benchmark data and changes in scope or complexity of responsibilities that occurred during the year; operating results; organizational improvements; and relative pay equity among the named executive officers. Based on the HR Committee’s review of
20
compensation factors and Mr. Wallace’s recommendations, the following 2011 base salaries were established. At Mr. Wallace’s request, his request which was approved by the independent directors. Mr. Rice’s base salary was increased by 4.3% effective January 2008 to recognize his performance. Mr. Rice was not a named executive officer in 2007.unchanged.
| | | | | | |
| Named Executive Officer | | | Base Salary |
| Timothy R. Wallace | | | $ | 950,000 | |
| | | | | | |
| James E. Perry | | | $ | 350,000 | |
| | | | | | |
| D. Stephen Menzies | | | $ | 540,000 | |
| | | | | | |
| William A. McWhirter | | | $ | 450,000 | |
| | | | | | |
| Antonio Carrillo | | | $ | 400,000 | |
| | | | | | |
| S. Theis Rice | | | $ | 400,000 | |
| | | | | | |
Executive Perquisite Allowance
The Executive Perquisite Allowance replaces traditional benefits for executives such as country, health, dinner, luncheon, or airport club dues, and fees and expenses incurred in financial planning and income tax preparation. Currently the Executive Perquisite Allowance is 10%The Company believes that payment of base salary forthis allowance serves as part of a competitive total compensation program and enhances the named executive officers. The level of perquisites is tiedofficers’ ability to conduct the Company’s earnings for the previous year. The HR Committee can modify the percentage based on the Company’s performance for the previous year or any other circumstance.business. Each named executive officer is required to use $6,000 of the amount received under the Executive Perquisite Allowance to maintain a four-door sedan, including Company-approved levels of automobile insurance and other maintenance, and to forego reimbursement for the first 10,000 business miles annually.
The HR Committee can modify the percentage based on the Company’s performance for the previous year or any other circumstance. For 2010, given the decline in Company earnings from 2008 to 2009, the HR Committee approved a reduction to 7.5% of base salary from the 10% paid the prior year. In 2008,2010, the Executive Perquisite Allowance did not reimburse any named executive officer for mileage in excess of 10,000 miles.
Additional information on the value of perquisites offered to each named executive officer in 20082010 can be found in the footnotes and narrative disclosure pertaining to the “Summary Compensation Table.”
Other CompensationBased on the Company’s 2010 earnings, the HR Committee approved maintaining the 2011 Executive Perquisite Allowance at 7.5% of base salary.
Mr. Menzies’s commuting expenses in 2008 and 2009 are subject to reimbursement by the Company up to $50,000 per year and a gross up for applicable federal taxes. After 2009, the Company will not provide any
17
reimbursement to Mr. Menzies for commuting expenses. Mr. Menzies’s 2007 commuting expenses of $41,276 were grossed up by $23,674 for applicable taxes. Mr. Menzies’s 2008 commuting expenses of $42,579 were grossed up by $24,422 for applicable taxes.
Annual Incentive Compensation
Our Annual Incentive Program (referred to as “AIP”) is an integral component of our total target compensation program. ItThe AIP is designed to link and reinforce our executive decision-making and performance with the annual goals of the Company, as well asreinforce these goals, and ensure the highest level of accountability for the overall success of the Company.Company as a whole. Since annual incentive compensation (referred to as “AIC”) comprised between 35% and 40%about 30% of a named executive officer’s total target compensation package for 2008, this2010, the AIC portion of our compensation program provides significant motivation for the named executive officers to achieve the performance goals pre-established by the HR Committee.
AIC levels are expressed as a percentage of base salary. The Company establishes AIC threshold, target, and maximum levels for each named executive officer. AIC is normally paid out in cash because it is an award that recognizes current performance.
Benchmarking Annual Incentive Compensation
AIC payouts are tied to the performance of the Company as well as an individual’s performance. To determine competitive market benchmarks for AIC targets, L&A used published survey data from the Wyatt, Mercer, and Hewitt TCM surveys. Based on the benchmark data, the AIC target levels for Messrs. Wallace, McWhirter, Stiles and Menzies fell below the 50th percentile. The AIC target level for Mr. Rice fell between the 50th and 75th percentile. The AIC target levels for each named executive officer for 2008 as compared to the percentage above or below the 50th and 75th percentiles is set forth in Table 3.
Table 3 — Annual Incentive Compensation Targets for Named Executive Officers
| | | | | | | | | | | | | | | |
| | | AIC Target
| | | | | | | | | |
Named Executive Officer | | | (% of Base Salary) | | | | 50th Percentile(1) | | | | 75th Percentile(1) | |
Timothy R. Wallace | | | | 90 | % | | | | 17% below | | | | | 50% below | |
| | | | | | | | | | | | | | | |
William A. McWhirter | | | | 60 | % | | | | 16% below | | | | | 45% below | |
| | | | | | | | | | | | | | | |
Mark W. Stiles | | | | 60 | % | | | | 8% below | | | | | 43% below | |
| | | | | | | | | | | | | | | |
D. Stephen Menzies | | | | 60 | % | | | | 10% below | | | | | 43% below | |
| | | | | | | | | | | | | | | |
S. Theis Rice | | | | 50 | % | | | | 11% above | | | | | 29% below | |
| | | | | | | | | | | | | | | |
| |
(1) | Indicates the position of the Company’s 2008 AIC target dollar value as compared to the market 50th and 75th percentiles using the following formulas: The Company’s 2008 AIC target dollar value divided by 2008 market 50th percentile AIC target dollar value and the Company’s 2008 AIC target dollar value divided by 2008 market 75th percentile AIC target dollar value. |
Establishing Annual Incentive Payout Levels
The HR Committee establishes performance payout levels for the components of the AIC consisting of threshold, target, maximum, and Exceptional Performance Incentive Program (“EPIP”). EPIP is an amount that could be earned by the named executive officers above their normal maximum. EPIP is used to focus management on maximizing improvement of EPS. A named executive officer will not receive any AIC untilunless the threshold performance goal is met or surpassed. The actual amount of AIC awarded is commensurate with the financial performance achievementsof the Company and is prorated between the threshold level and EPIPmaximum level.
The HR Committee may adjust, from year to year, the performance criteria or other elements of an executive’s AIP.AIP with the objective of assuring managements’ focus on annually appropriate performance metrics. The HR Committee also may electchoose to: (i) modify or discontinue the AIP at any time, overall or as to provide theany one or more named executive officers, and other select key executivesincluding non-payment or partial payment of incentive compensation or granting equity in lieu of cash compensation, with the opportunity to earn additional AIC for achievement of measurable Company-based financial results beyond the normal cap placed on the AIC payout. The Company’s AIP may contain elements designed to focus management on other performance criteria.
18
The HR Committee established the AIC target levels and AIC maximum levels after considering the benchmark data provided by L&A. The HR Committee retains the exclusive right toor without notice; (ii) modify the level of participation for thean executive’s AIP if an executive’s responsibilities change significantly and tosignificantly; (iii) reduce a named executive officer’s AIC on a discretionary basis for failing to meet normal job performance expectations.expectations; (iv) recoup all or any portion of an AIC under circumstances where the Company restates its financial statements; or (v) remove individuals from the AIP at any time. The HR Committee may remove any extraordinary, unusual, or non-recurring items of income or expense from the calculation of financial goal attainment and incentive compensation.
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2010 Annual Incentive Compensation
In 2010, the Company’s AIP was designed to focus participants on a common financial goal, earnings per share (“EPS”). The HR Committee established the 2010 AIP threshold at $0.47 of EPS (the Company’s 2010 budgeted EPS), and an AIP maximum of $2.75 of EPS, which represented a normalized, strong market earnings level. The AIP would pay 20% of maximum incentive pay at threshold, 50% of maximum incentive pay at $1.37 of EPS, and a full payout at $2.75 of EPS. In 2010 the Company was also highly focused on cash flow during the economic downturn. To encourage management to focus on an additional incentive component, after-tax free cash flow (“Free Cash Flow”) was included as an AIP enhancement. One-half of any amount above the 2010 Free Cash Flow benchmark of $100 million (the Company’s 2010 budgeted amount, after appropriate tax adjustments) would be converted to a fully diluted earnings per share amount and result in an adjustment to incentive payout amounts, subject to the attainment of the threshold EPS goal.
The 2010 maximum annual incentive compensation amounts for each named executive officer are set forth in Table 3.
Table 3 — 2010 Maximum Annual Incentive Compensation
| | | | | | | | | | | |
| | | | Maximum AIC
| | | Maximum AIC
|
| Named Executive Officer | | | (% of Base Salary) | | | (Dollar Value) |
| Timothy R. Wallace | | | | 180% | | | | $ | 1,710,000 | |
| | | | | | | | | | | |
| James E. Perry | | | | 105% | | | | | 311,500 | |
| | | | | | | | | | | |
| D. Stephen Menzies | | | | 120% | | | | | 624,000 | |
| | | | | | | | | | | |
| William A. McWhirter | | | | 150% | | | | | 637,500 | |
| | | | | | | | | | | |
| Antonio Carrillo | | | | 105% | | | | | 393,750 | |
| | | | | | | | | | | |
| S. Theis Rice | | | | 87.5% | | | | | 319,375 | |
| | | | | | | | | | | |
The amounts of the 2010 AIP awards paid to the named executive officers were paid at 32.7% of their maximum payout potential. The 2010 AIP payout was based on Company EPS of $0.85 which exceeded threshold level but was below target level. No additional incentive was earned from the Free Cash Flow component primarily due to the Company’s investment in working capital in response to growth opportunities in certain of its businesses. The HR Committee did not exercise any negative discretion in the 2010 incentive payouts as it believed the payouts appropriately reflected the Company’s performance. See the “Summary Compensation Table” for the actual payments for 2010 AIC.
Setting 20082011 Annual Incentive Compensation Performance Goals
The HR Committee determined that the best short term performance metric for the Company’s2010 AIP was highly effective in focusing executive attention on EPS. The EPS goals were set aboveFree Cash Flow component was less effective because the goals establishedCompany began investing more in working capital, organic growth, and growth through acquisitions. The Company’s business forecast for 2007 by 5.3% at threshold, 8.0% at target,2011 showed a moderate improvement in revenues and 5.9% at maximum based on expected improvements from 2007. The range between threshold and maximum performance was recommended by management toearnings. Accordingly, the HR Committee and approved byusing EPS as the HR Committee. Atexclusive AIP goal for the time the performance goals were implemented, this performance goal range reflected the appropriate potential challenges and opportunities associated with the Company’s 2008 budget. In addition, to encourage management to stretch for significant earnings improvement, the EPIP level was established at 5.4% above the 2007 EPIP level. Based on the recommendations of the HR Committee, the goals for Mr. Wallace were approved by the independent directors.
The 2008 threshold, target, maximum, and EPIP levels for percentage of salary and performance goals are set forthnamed executive officers in Table 4.
Table 4 — 2008 Annual Incentive Compensation Performance Goals
| | | | | | | | | | | |
| | | Base Salary | | Threshold(1) | | Target(2) | | Maximum(2) | | EPIP |
Financial Measurement:
Company EPS | | | | $3.00 | | $3.38 | | $3.60 | | $3.93 |
| | | | | | | | | | | |
| Timothy R. Wallace | | $950,000 | | $427,500 | | $855,000 | | $1,710,000 | | $2,280,000 |
| | | | | | | | | | | |
| % of base salary earned at each level | | | | 45% | | 90% | | 180% | | 240% |
| | | | | | | | | | | |
| William A. McWhirter | | $425,000 | | $127,500 | | $255,000 | | $510,000 | | $765,000 |
| | | | | | | | | | | |
| % of base salary earned at each level | | | | 30% | | 60% | | 120% | | 180% |
| | | | | | | | | | | |
| Mark W. Stiles | | $520,000 | | $156,000 | | $312,000 | | $624,000 | | $936,000 |
| | | | | | | | | | | |
| % of base salary earned at each level | | | | 30% | | 60% | | 120% | | 180% |
| | | | | | | | | | | |
| D. Stephen Menzies | | $520,000 | | $156,000 | | $312,000 | | $624,000 | | $936,000 |
| | | | | | | | | | | |
| % of base salary earned at each level | | | | 30% | | 60% | | 120% | | 180% |
| | | | | | | | | | | |
| S. Theis Rice | | $365,000 | | $91,250 | | $182,500 | | $319,375 | | $538,375 |
| | | | | | | | | | | |
| % of base salary earned at each level | | | | 25% | | 50% | | 87.5% | | 147.5% |
| | | | | | | | | | | |
| |
(1) | Threshold is set at 50% of a named executive officer’s AIC target as a reasonable amount of compensation for achieving the financial goals for threshold. |
|
(2) | The AIC target and maximum levels are based on benchmark data, as previously discussed. |
2008 Financial Results and Payout
2011. The HR Committee reviews and approvesestablished the 2011 AIP awards after the Company’s annual financial results have been audited. For 2008, the AIPmaximum at $1.50 of EPS, which represents a significant improvement in earnings over 2010. The threshold was set at $0.90 EPS, which represents a growth in earnings of 6% over 2010. The target was equal to Companyset at $1.20 EPS. The percentage payout for threshold performance was set at 20% of maximum incentive pay. The AIP would make a full payout at the maximum EPS goal and would pay 50% of $3.38 andmaximum at the AIP maximum was equal to Companytarget EPS goal. The HR Committee noted the high degree of $3.60. The 2008 AIP payout was based on Company EPS of $3.59. Although the Company’s financial performance for 2008 was comparable to the Company’s financial performancedifficulty in 2007, the AIP awards for 2008 were less than theachieving payouts for the 2007 AIP awards because the 2008 target and maximum goals for the AIP awards were higher than the 2007 target and maximum goals for the AIP awards by 8% and 6%, respectively. Since the calculation of AIC exceededat the target level but was slightly lesssince it represents a growth in earnings of more than 40% over 2010’s EPS and growth of more than 75% over 2010 at the maximum. For 2011, Mr. Wallace’s maximum level,AIC is 200% of his base salary. The 2011 maximum AIC for each of the amountother named executive officers is 150% of 2008 AIP awards paidtheir respective base salaries. See the “Grants of Plan-Based Awards Table” for more information on future possible payments to the named executive officers for the Company’s EPS results was prorated accordingly. The HRofficers.
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Committee did not exercise any negative discretion in the 2008 incentive payouts. See the “Summary Compensation Table” for the actual payments for 2008.
The Board, upon the recommendation of the HR Committee, determined that commencing with the 2009 AIP, the EPIP performance goal and payout level will be eliminated.
Long Term Incentive Compensation
Long term incentives (referred to as “LTI”) are a key part of our executivetotal target compensation packagefor executives and are provided through the stockholder-approved stock option and incentive plan. TheirThe overarching purpose of LTI is to:to align employee interests with those of the Company’s stockholders and encourage key employees to look beyond the annual planning horizon for ways to improve the Company’s earnings and returns through a variety of strategic and operational initiatives.
| | |
| • | attract, develop, and retain strong management through stock ownership; |
|
| • | align employee interests with those of the Company’s stockholders; |
|
| • | encourage key employees to look beyond the annual planning horizon for ways to improve the Company, strategically position its businesses, and profitably grow earnings; and |
|
| • | assist the Company’s successful transition to a multi-industry growth company from a cyclical industrial company. |
The LTI program accomplishes this by linking incentives to the strategic objectives of the Company. Each year, management reviews the Company’s strategic objectives with the Board of Directors and prepares a multi-year business plan. The HR Committee annually establishesuses the approved multi-year business plan as a guide when establishing the target level performance goals and performance periods for the performance-based LTI compensation program.
An executive’s target as a percentage of base salary and uses that target to compute the total target value of equity thatLTI grant can be grantedcomposed of three types of long term incentives: (1) performance-based restricted stock or units; (2) retention-based restricted stock; and (3) stock options. The HR Committee establishes guidelines for the ratio that it expects to an executive.award through restricted stock or unit grants. The Company’s named executive officers could earn up to 75% of their LTI target compensation in the form of performance-based restricted stock or units and 25% in the form of retention-based restricted stock or units. Due to the cyclical nature of the Company’s businesses, the HR Committee directed management to calculate the value of an executive’s equity grant based on the one-year average stockCommon Stock price.
The Company has a multi-year performance-based LTI program. An executive’s target grant can be composed of three types of long term incentives: (1) performance-based restricted stock; (2) time-based restricted stock; and (3) stock options.
Ratio of Restricted Stock Grant Awards
The HR Committee establishes guidelines fordoes not retain discretion to reduce performance-based awards earned up to the ratio that it expects to award through restricted stock grants.target level. The Company’s named executive officers can earn 60% ofHR Committee believes this decision provides executives greater clarity regarding their LTI target compensationcompensation.
Starting in 2006, the formHR Committee began issuing a type of performance-based restricted stock (referred to as “PBRS”). PBRS has been issued with performance periods of two and 40% inthree years. The Company’s performance during the formperformance periods is used to determine the size of time-based restricted stockthe PBRS grant for 2008an executive. The performance period occurs prior to the granting of equity. After the performance period ends and 2009. During 2010 and 2011,if the performance goals are achieved, the HR Committee grants to each of the named executive officers can earn upthe corresponding amount of PBRS that then vests over a specified period of time. The design of these plans has resulted in restricted stock programs that extend between seven and eight years.
In 2010, the Compensation Consultant recommended that management consider, and the HR Committee approved, transitioning to 75% of their LTI target compensation in the forma new type of performance-based restricted stock and 25%unit program (referred to as “PBRSU”). The newer program is more widely used by the Company’s peer companies. This program will begin in 2011. The 2011 PBRSU program is designed to increase the formvisibility of time-based restricted stock. Due to the uncertain global economic conditions, the 2012 long term incentive performance goals for the executives who participate in the program; align their efforts toward achieving these goals; and reinforcepay-for-performance linkage through quicker settlement of awards.
This 2011 PBRSU program is designed to accomplish these goals by granting to the executives restricted stock units at pre-established target levels at the beginning of a three-year performance period. The Company’s attainment of certain performance goals during the performance period determines the quantity of shares that ultimately vest at the end of the performance period. The HR Committee designed the PBRSU program to more closely align the period in which the program’s expenses are recognized with the Company’s financial performance.
As a result of transitioning to this new approach, there is a small overlap between the programs. The HR Committee determined it would be better to phase in the new PBRSU program over the next three years rather than cancelling the original 2006 PBRS program.
For 2011, Mr. Wallace’s LTI target is 325% of base salary. The 2011 LTI target for performance-based restricted stockeach of the other named executive officers is 175% of their respective base salaries.
PBRS Grants Made During 2010
For 2010, PBRS grants were not set and when established, will becontingent upon the achievement of certain performance levels during a three-year performance period from2007-2009. The levels were based on a performance period that would qualify for tax deductibility under Internal Revenue Code of 1986, as amended (the “Code”cumulative EPS (weighted 70%) Section 162(m)and average return on equity (“ROE”) (weighted 30%). The performance period will be considered at a future HR Committee meeting.
| | | | | | | | | | | | | | | | |
| | | | Performance-Based
| | | | Time-Based
| | | | | |
| | | | Restricted Stock
| | | | Restricted Stock
| | | | | |
| | | | % of LTI Compensation
| | | | % of LTI Compensation
| | | | | |
| Grant Year | | | Target Level | | | | Target Level | | | | Measurement Period | |
| 2008 | | | | 60 | % | | | | 40 | % | | | | 2006 and 2007 | |
| | | | | | | | | | | | | | | | |
| 2009 | | | | 60 | % | | | | 40 | % | | | | 2006 – 08 | |
| | | | | | | | | | | | | | | | |
| 2010 | | | | 75 | % | | | | 25 | % | | | | 2007 – 09 | |
| | | | | | | | | | | | | | | | |
| 2011 | | | | 75 | % | | | | 25 | % | | | | 2008 – 10 | |
| | | | | | | | | | | | | | | | |
The HR Committee’s practice is to makelevels for all named executive officers for PBRS awards granted in 2010 are shown in Table 4. Since the awards onCompany earned cumulative diluted EPS of $8.57, excluding the dategoodwill impairment charge, and average ROE of 13.4% during the Company’s Annual Meeting of Stockholders, which is after the first quarter financial results have been disclosed. Prior to making the awards,performance period, the HR Committee confirms there is no pending undisclosed material information.
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Performance-Based LTI Program
During 2006, the Company began to phase in a three-year performance-based restricted stock program to align compensation with our long term business vision, objectives, and strategies. The performance-based program is contingent on the achievementCommittee approved granting awards that were 64.7% of a three-year performance measurement that is based on cumulative EPS and average ROE.
Each year management prepares amulti-year business plan which provides a projection of financial results, including EPS and ROE. The plan is reviewed annually with the Board of Directors, which in turn influences the establishment of the long term goals and objectives for each of the business units within the Company and for the Company itself.
The HR Committee relies heavily on the Board of Directors approvedmulti-year business plan when establishing the target level performance goals for the performance-based LTI compensation plan.target for each named executive officer. See the “Grants of Plan-Based Awards” table for awards granted in 2010.
Table 4 — Performance Levels for the 2010 PBRS Grant Program
| | | | | | | | | | | | | |
EPS
| | EPS
| | ROE
| | ROE
|
| Threshold | | Target | | Threshold | | Target |
| $7.18 | | $ | 10.25 | | | | 12.43 | % | | | 15.53 | % |
| | | | | | | | | | | | | |
PBRS Grants for 2011
For the three year performance period beginning in 2008 and ending in 2010, the Company did not achieve the LTI threshold levels of cumulative EPS of $8.66 and average ROE of 12.96%. As a result, the HR Committee does not plan to make any performance-based grants for the2008-2010 performance period.
Performance Levels for 2012 and 2013 PBRS Grants
At the end of 2011, the Company will have two additional performance periods remaining on the PBRS grant program.
In March 2010, the HR Committee approved the establishment of four key metrics in determining equity grants for the performance periods2010-2011 and2010-2012. The LTI program ismetrics are (i) cumulative Company ROE, (ii) cumulative net income, (iii) cumulative revenue from acquisitions or organic growth, and (iv) the Company’s credit rating. Each of these metrics cultivates management concentration on performance improvements linked to the strategic objectives of the Company. These financial goals are a means of recognizinglong-term stockholder value. Taken together, these metrics compel management to address growth and compensating management for the abilityinvestment relative to identify a sound business plan for the business unitsrisk and the Company that maximizes stockholder return over the long term.liquidity. The performance-based LTI compensation threshold level and target level performance goals for all named executive officers andwith respect to the cumulative Company EPS and average ROE for the specified measurement periodsfour metrics are shown in Table 5.
The Company notesIt is important to note that the performance goals are part of the Company’s incentive program and do not correspond to any financial guidance that the Company has provided to the investment community for 2009 or that the Company will provide for future years and should, therefore, not be considered as statements of the Company’s expectations or estimates.
Table 5 — Performance-Based LTI Compensation ThresholdPerformance Levels for the 2012 and Target Levels2013 PBRS Grants
Earnings Per Share Portion
| | | | | | | | | | | | | | | | | |
Date Target
| | | Performance-Based
| | | Cumulative
| | | EPS LTI
| | | | EPS LTI
| |
| Established | | | LTI Compensation | | | Measurement Period | | | Threshold | | | | Target | |
| January 2006 | | | Grant Awarded in May 2008 | | | Total of 2006 and 2007 | | | $ | 2.67 | | | | $ | 3.82 | |
| |
| January 2006 | | | Grant To Be Awarded in May 2009 | | | Total of 2006, 2007 and 2008 | | | $ | 4.63 | | | | $ | 6.61 | |
| |
| January 2007 | | | Grant To Be Awarded in May 2010 | | | Total of 2007, 2008 and 2009 | | | $ | 7.18 | | | | $ | 10.25 | |
| |
| January 2008 | | | Grant To Be Awarded in May 2011 | | | Total of 2008, 2009 and 2010 | | | $ | 8.66 | | | | $ | 12.37 | |
| |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | Revenue from
| | | |
| | | | | | | | | | Acquisition or
| | | |
| | | | Return on Equity
| | | Net Income
| | | Organic Growth
| | | Credit Rating(1)
|
| | | | (30% Weight) | | | (30% Weight) | | | (25% Weight) | | | (15% Weight) |
| Grant Periods | | | Threshold | | | Target | | | Threshold | | | Target | | | Threshold | | | Target | | | Threshold | | | Target |
| 2012 | | | 5.0% | | | 8.0% | | | $75 M | | | $125 M | | | $150 M | | | $250 M | | | BB | | | BB+ |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| 2013 | | | 8.0% | | | 12.0% | | | $150 M | | | $200 M | | | $250 M | | | $375 M | | | BB | | | BB+ |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| |
| (1) | Higher of Standard & Poor’s or Moody’s rating on the measurement date. |
Return on Equity Portion
The amount of shares a named executive officer is granted is contingent upon achievement of levels, as follows:
| | | | | | | | | | | | | | | |
Date Target
| | | Performance-Based
| | | Cumulative
| | | ROE LTI
| | | ROE LTI
| |
| Established | | | LTI Compensation | | | Measurement Period | | | Threshold | | | Target | |
| January 2006 | | | Grant Awarded in May 2008 | | | Average of 2006 and 2007 | | | 9.04% | | | | 11.30 | % |
| |
| January 2006 | | | Grant To Be Awarded in May 2009 | | | Average of 2006, 2007 and 2008 | | | 9.89% | | | | 12.37 | % |
| |
| January 2007 | | | Grant To Be Awarded in May 2010 | | | Average of 2007, 2008 and 2009 | | | 12.43% | | | | 15.53 | % |
| |
| January 2008 | | | Grant To Be Awarded in May 2011 | | | Average of 2008, 2009 and 2010 | | | 12.96% | | | | 16.20 | % |
| |
If the specified performance goals are achieved, the HR Committee anticipates paying to each of the named executive officers the corresponding amount of performance-based restricted stock. However, for grants made through 2009, the HR Committee may reduce the amount of the award even if the performance goals are achieved, by exercising its own discretion, and has not limited the circumstances in which it may exercise such negative discretion. Beginning with grants made in 2010, the HR Committee has determined that it will not retain discretion to reduce performance-based awards earned up to the target level.
| | |
| • | By achieving the threshold performance level for a performance goal, a named executive officer can earn 35% of the executive’s LTI compensation target for the performance-based component of the LTI grant based on the weighting for the performance goal. |
|
| • | By achieving the target performance level for a performance goal, a named executive officer can earn 70% of the executive’s LTI compensation target for the performance-based component of the LTI grant based on the weighting for the performance goal. |
|
| • | By exceeding the target performance level for a performance goal for awards in 2012 and 2013, a named executive officer can earn up to 150% and 200%, respectively, of the executive’s LTI compensation target for the performance-based component of the LTI grant. |
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A named executive officer will not receive LTI unless the threshold performance goal is met or surpassed. The actual amount of performance-based LTI compensation awarded is proportionate to the performance achieved between threshold level and maximum level.
Time-BasedPerformance Levels for the new 2011 PBRSU
In January 2011, the HR Committee approved establishing cumulative EPS as the primary goal for the PBRSU grant program for the performance period2011-2013. The EPS goal was established in light of improving, but still uncertain, economic conditions; the general expectation for a slow to moderate economic recovery over the next three years and the impact of this recovery on the Company’s businesses over such time frame; and the desire of the Company to focus its executives on improving earnings. The threshold level represents an 8% annual increase in growth in earnings over 2010 and the target level represents a 25% annual increase in earnings over 2010. The HR Committee also took into consideration that existing and continuing PBRS programs focused on growth, maintaining or improving our equity position, improving return on equity, and maintaining or improving our credit rating could also pay out during 2012 and 2013.
It is important to note that performance goals are part of the Company’s incentive program and do not correspond to any financial guidance that the Company has provided to the investment community or that the Company will provide for future years and, therefore, should not be considered as statements of the Company’s expectations or estimates.
Table 6 — Performance Levels for the 2011 PBRSU Grants
| | | | | | | | | | | |
Cumulative
| | | EPS
| | | EPS
|
| Measurement Period | | | Threshold | | | Target |
| 2011- 2013 | | | $ | 3.00 | | | | $ | 4.00 | |
| | | | | | | | | | | |
In 2011, the named executive officers will be granted 75% of their respective LTI compensation targets as PBRSUs. These PBRSUs are non-voting and will not pay dividends. At the end of the applicable performance period, the named executive officers can earn from 30% at threshold up to 200% of the target grant, or maximum level. If the Company achieves target level EPS, the named executive officers will retain 100% of their PBRSU grants. The actual amount of performance-based LTI compensation awarded will be proportionate to the performance achieved between threshold level and maximum level.
Retention-Based Restricted Stock Grants
Time-basedRetention-based restricted stock is also an important formpart of LTI compensation. The HR Committee awards time-basedexecutive retention-based restricted stock to facilitate retention, motivation, and reward. Such awards also help maintain appropriate compensation balance among executives, as a means for retaining, motivating,given their respective roles and rewarding an executive.responsibilities.
For 2008,2010, after a review of the named executive officers’ contributions to the long term value of the Company and the financial performance of the Company for the prior year, and based on Mr. Wallace’s recommendation, the HR Committee awarded Messrs. Perry, McWhirter, Stiles,Menzies, Carrillo and MenziesRice 71%, 31%, 16%, 24% and 13%, 6%, and 19%, respectively, of their LTI compensation as time-basedretention-based restricted stock. These time-basedretention-based restricted stock grants vest in five equal annual installments beginning on May 15th following the first anniversary of the grant.
In January 2008, upon the successful completion Recipients of Mr. McWhirter’s third year as the Company’s CFO, the HR Committee made a special award of 15,000retention-based restricted shares. These shares vest on the earlier of (i) age 65, (ii) when Mr. McWhirter’s age plus years of vested service equal 80, (iii) death, disability or change in control, or (iv) consent of the HR Committee after three years from the date of grant. The HR Committee granted the shares to increase Mr. McWhirter’s equity ownership and to recognize his contributions to the Company during his third year as CFO. Additionally, the extended time-vesting represents an economical method for the Company to provide an incentive for Mr. McWhirter to remain with the Company as well as to supplement his retirement as Mr. McWhirter is not a participant in the Company’s Supplemental Retirement Plan. Mr. McWhirter isstock are entitled to receive dividends on the restricted stock and to vote the shares during the restricted period.
Stock Options
On December 10, 2008, the Board of Directors In addition, Mr. Carrillo was granted stock options to the named executive officers and the other key employees who were previously eligible for the EPIP program which was eliminated for 2009. As a result of eliminating the future opportunity for the named executive officers and the other key employees to earn short-term cash compensation above the maximum payout level pursuant to the EPIP, the Board of Directors granted stock options that vest on May 15, 2012 or earlier in the event of death, disability, retirement, or change in control and were granted with an exercise price equal to 110% of the Company’s closing stock price on the date of grant, or $16.24 per share. See “Grants of Plan-Based Awards Table” for information on the grants to the named executive officers. Stock options awarded to the named executive officers are also included in the “Summary Compensation Table” under the column headed “Option Awards.” The cost of stock options is amortized in accordance with “Statement of Financial Accounting Standard No. 123RShare-Based Payments” (“SFAS 123R”).
Benchmarking LTI Compensation Targets
For each named executive officer, L&A determined a competitive market LTI value. This value was based on the average of the relevant survey data and proxy statement 50th percentile data. The HR Committee approved the LTI compensation target levels for all of the named executive officers for 2008, except for Mr. Wallace, whose target levels were approved by the independent directors. The LTI compensation target levels were set at 275% of the CEO’s base salary and 150% of base salary for Messrs. McWhirter, Stiles, and Menzies. Mr. Rice’s LTI target level was set at 100% of base salary. All named executive officer LTI compensation target levels were below the 50th percentile. Mr. Wallace’s LTI compensation target was 18% below the 50th percentile. Mr. McWhirter’s LTI compensation target was 33% below the 50th percentile. Messrs. Stiles and Menzies’ LTI compensation targets were 17% and 18%, respectively, below the 50th percentile. Mr. Rice’s LTI compensation target was 45% below the 50th percentile.
The LTI compensation target levels are below the 50th percentile due to the fact that the Company’s LTI plan is based on multiple years. The HR Committee is closely monitoring the benchmarking process during the interim transition period but does not plan to make any adjustments until the grants are based on the three year performance windows. The HR Committee believes these targets are currently sufficient in size to motivate the executives and are in the best interest of the stockholders and that the size of the grant provides the named executive officers sufficient compensation.
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Performance-Based Restricted Stock Award Calculation Method
For awards of performance-based restricted stock to be made through 2010, the HR Committee will consider awarding the performance-based grants if the Company achieves its pre-established performance goals set forth in Table 5. The calculation of this performance-based LTI compensation is determined by the cumulative result of weighting the Company’s EPS at 70% and the Company’s ROE at 30%. The payout of performance-based LTI compensation by level is as follows:
| | |
| • | Ifthresholdlevel is achieved, a named executive officer can receive 40% of the target level. No awards are made if threshold is not met. |
|
| • | Iftargetlevel is achieved, a named executive officer can receive 100% of his LTI compensation target. |
|
| • | Ifmaximumlevel is achieved, a named executive officer can receive up to 200% of his LTI compensation target. |
The actual amount of performance-based LTI compensation awarded is commensurate with the EPS and ROE achievements and proportionate to the performance achieved between threshold level and maximum level.
For awards of performance-based restricted stock to be made in 2011, the HR Committee approved setting the financial goals at 70% of the weighting relating to the Company’s EPS and 30% of the weighting relating to the Company’s ROE based on a combination of the most recent 2008 budget andmulti-year business plan. The equity grants to be made in 2011 will still be based on a three-year period. However, the calculation of the payouts has been simplified by establishing stand-alone formulas for EPS and ROE. The EPS and ROE financial goals will be considered individually. The amount a named executive officer receives is contingent upon achievement of levels, as follows:
| | |
| • | Ifthresholdlevel of EPS performance is achieved, a named executive officer can receive 40% of the 70% portion of LTI compensation target. |
|
| • | Ifthresholdlevel of ROE performance is achieved, a named executive officer can receive 40% of the 30% portion of LTI compensation target. |
|
| • | Iftargetlevel of EPS performance is achieved, a named executive officer can receive 100% of the 70% portion of LTI compensation target. |
|
| • | Iftargetlevel of ROE performance is achieved, a named executive officer can receive 100% of the 30% portion of LTI compensation target. |
|
| • | Ifmaximumlevel is achieved, a named executive officer can receive up to 200% of his LTI compensation target. |
The actual amount of performance-based LTI compensation awarded is commensurate with the EPS and ROE achievements and proportionate to the performance achieved between threshold level and maximum level. Due to the uncertain global economic conditions, the 2012 long term incentive target levels for performance-based restricted stock were not set and when established, will be based on a performance period that would qualify for tax deductibility under Code Section 162(m). The performance period will be considered at a future HR Committee meeting.
2008 Performance-Based Restricted Stock Grants
On May 5, 2008, the HR Committee met to consider and approve the long term performance-based grants. For performance above or below the performance target range the number of shares is increased or reduced respectively. Since the Company achieved the maximum level, management recommended to the HR Committee and the HR Committee approved granting awards that were two-times (200%) the performance-based LTI target. The HR Committee noted that because the maximum goals were achieved, the awards represented fair long term incentive
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compensation for the named executive officers. See the “Grants of Plan-Based Awards” table for awards granted in 2008. The calculation of the 2008 long term performance-based grant is set forth below:
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | Over
| | | %Target
| | | % Earned
| | | Payout%
|
| | | | Actual | | | Target | | | Target | | | Earned | | | Over Target | | | per Metric |
| Earnings Per Share | | | $6.55 | | | $3.82 | | | $2.73 | | | 100% | | | 95.29% | | | 195.29% |
| | | | | | | | | | | | | | | | | | | |
| Return on Equity | | | 18.31% | | | 11.30% | | | 7.01% | | | 100% | | | 123.98% | | | 223.98% |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | Payout = 200% |
In 2005, the HR Committee adopted a formula to determine the number of shares to be granted for the performance-based grants and time-based grants since the threshold, target, and maximum amounts are set as a percentage of base salary. The formula uses the one-year average stock price for the one-year period ended March 31 of the year of the grant to determine the number of5,800 shares of restricted stock to be awarded. Forfor retention purposes that will vest1/3 each in 5, 10 and 15 years after the performance-based grants and time-based grants made on May 5, 2008, the one-year average stock price of $35.44 per sharegrant date. At his request, Mr. Wallace was used for our named executive officers.not issued any retention-based restricted stock.
Total Compensation Target Levels
Total compensation target level is the sum of base salary, AIC target level, and LTI compensation target level. The results of the benchmarking study showed that the 2007 total compensation target levels were below the 50th percentile for each of the named executive officers. The HR Committee approved changes to compensation as previously disclosed in this proxy statement for 2008. The result was that the total compensation target level for each of the named executive officers remained below the 50th percentile.
2009 Compensation
In March 2008, the HR Committee retained the services of Hewitt as its compensation consultant for the remainder of 2008.
The Board of Directors, upon the recommendation of the executives and the HR Committee, did not increase the base salaries for the named executive officers. This is the third year in a row that Mr. Wallace has recommended his base salary remain fixed. The HR Committee and the Board of Directors believe this action was appropriate in light of the uncertainty of the global economy.
The Board of Directors, upon the recommendation of the HR Committee, determined that commencing with the 2009 Annual Incentive Program, the EPIP performance goal and payout level will be eliminated.
Additionally, the Board of Directors, upon the recommendation of the HR Committee, did not increase the AIC levels for the named executive officers, other than Mr. McWhirter. The Board of Directors increased Mr. McWhirter’s AIC target to 75% (from 60%) and his AIC maximum to 150% (from 120%) in order to adjust his total target cash compensation closer to the 50th percentile. This adjustment resulted in his incentive target cash moving from 19% below the 50th percentile to 2% above the 50th percentile based on 2009 compensation market data. Additionally, the AIC target increase for Mr. McWhirter aligned his total target cash competitive position to 5% below the 50th percentile from 13% below based on 2009 compensation market data.
The HR Committee established the 2009 AIC measurement as Company EPS, setting threshold at $1.00 EPS and target at $1.80 EPS. This performance goal range reflects the appropriate potential challenges and opportunities associated with the Company’s 2009 budget. In addition, to encourage management to stretch for significant cash flow improvement versus the 2009 Free Cash Flow benchmark, an additional component, Free Cash Flow, will be included as an enhancement to the short term incentive plan to create a special emphasis on generating cash flow. For purposes of the performance goal, Free Cash Flow is defined as the net cash provided by operating activities, less the net cash required by investing activities, as reflected in the Company’s audited financial statements to be reported in the Company’s 2009Form 10-K. One-half of any amount above the 2009 Free Cash Flow benchmark of $281 million will be converted to fully diluted earnings per share amount and will result in an adjustment to incentive payout amounts contingent on the attainment of threshold EPS goal. The Company notes that the
24
performance goals are part of the Company’s incentive program and do not correspond to any financial guidance that the Company has provided to the investment community for 2009 or that the Company will provide for future years and should not be considered as statements of the Company’s expectations or estimates. See the “Grants of Plan-Based Awards Table” for information on future possible payments to the named executive officers.
With respect to LTI, Hewitt’s study concluded that, while total target compensation for the named executive officers is generally within a competitive range, overall LTI targets for the named executive officers are below the market median. Hewitt recommended that the mix of pay between target cash compensation and long term compensation should be rebalanced. To rebalance the mix in pay, the Board of Directors increased the LTI target percentage for Mr. Wallace from 275% to 300%, from 150% to 175% for Messrs. McWhirter, Stiles, and Menzies and from 100% to 125% for Mr. Rice. The LTI target adjustments will not take effect until 2012 due to the Company’s method of calculating performance-based long term incentives to comply with the provisions of Section 162(m) of the Code.
Internal Equity Regarding CEO Compensation
The HR Committee follows the same processes and methods disclosed herein in establishing the compensation for all other named executive officers as it does in recommending to the independent directors the compensation package for Mr. Wallace. As noted previously, his position as Chairman of the Board, Chief Executive Officer, and President is compared to other executives in comparable positions in the comparatorpeer group and surveys previously disclosed in this proxy statement. Since as the Chairman, Chief Executive Officer, and President of the Company, he
25
has a unique and greater set of responsibilities as compared to the other named executive officers, including having the ultimate responsibility for the overall success of the Company, the Board of Directors does not consider his compensation to be comparable to the compensation of the other named executive officers. It is important to note that for several years, Mr. Wallace has told the HR Committee and the Board of Directors he believes he is adequately compensated and does not expect any increase in his compensation package. In deference to his request, the Board has kept his base salary fixed for the last five years at the current level.
Recoupment on Restatement
The Board of Directors has adopted a Company policy that allows payouts to be ratably recouped under annualand/or long term incentive plans if the financial statements on which they are based are subsequently required to be restated as a result of errors, omissions, fraud, or other misconduct. The policy provides discretion to the HR Committee to make such determinations while providing a framework to guide their decisions.
Post-employment Benefits
The Company’s retirement, savings, and deferred compensation plans are designed to provide some assurance that executives are financially prepared to transition from active employment. The HR Committee believes that these plans assist in recruiting and retaining senior executives. Each of the plans is discussed in the “Compensation of Executives” section of this proxy statement. The Company’s retirement, savings, and deferred compensation plans consist of the following:
| | |
| | • | Trinity Industries, Inc. Standard Pension Plan (the “Standard Pension Plan”) — a funded, tax qualified, non-contributory defined benefit pension plan that covers certain of our employees, including the named executive officers. Earnings are capped by the Internal Revenue Code (the “Code”) for those defined as “highly compensated employees.” |
On February 13, 2009, the Board amended the Standard Pension Plan. This amendment is designed to reduce future pension costs and provides that, effective March 31, 2009, all future benefit accruals under the Standard Pension Plan automatically ceased for all participants, and the accrued benefits under the Standard Pension Plan were determined and frozen as of that date. The amendment to the Standard Pension Plan does not affect other benefits earned by participants prior to March 31, 2009.
| | |
| | • | Trinity Industries, Inc. Supplemental Retirement Plan (the “Supplemental Retirement Plan”) — a non-qualified plan that provides annual retirement benefits that are not provided under the Standard Pension Plan because of Code limitations. Several years ago the Board of Directors made the decision to discontinue adding executives to this plan. Mr. Wallace was a participant at the time and was grandfathered. As a result, Mr. Wallace is the only named executive officer that participates in the Supplemental Retirement Plan. |
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On February 13, 2009, the Board amended the Supplemental Retirement Plan designed to reduce future retirement plan costs. This amendment provides that all future benefit accruals under the Supplemental Retirement Plan automatically ceased effective March 31, 2009 and the accrued benefits under the Supplemental Retirement Plan were determined and frozen as of that date, including Mr. Wallace’s benefits.
| | |
| | • | Trinity Industries, Inc. Profit Sharing 401(k) Plan (the “401(k) Plan”) — a voluntary, tax qualified, defined contribution plan that covers most of our employees, including the named executive officers, thatand includes a potential, annual Company match for a portion of theeach employee’s contribution. |
On February 13, 2009, the Board, in connection with its decision to freeze the Standard Pension Plan, amended the 401(k) Plan effective commencing with the 2009 Plan year to (i) allow the participants in the Standard Pension Plan to participate in the enhanced portion of the 401(k) Plan whichthat provides for potential annual contributions by the Company to the participating employee’s account of up to an additional 3% of an employee’s base pay, (subjectsubject to the Code limit for 401(k) plans, ($245,000 in 2009)) depending upon years of service (the “Annual Retirement Contribution”) and (ii) require Board approval for the Company to make the 401(k) Company match and the Annual Retirement Contribution.
26
| | |
| | • | Trinity Industries, Inc. Supplemental Profit Sharing Plan (the “Supplemental Plan”) — a supplemental deferred profit sharing plan for highly compensated employees that allows them to defer a portion of their base pay and annual incentive and includes a Company match for a portion of their contribution. |
| |
| | • | 20052008 Deferred Compensation Plan and Agreement (the “Deferred Compensation Plan”) — a plan to encourage the retention of strategically important executives focused on continuous improvement and growth of the Company and in recognition of their contribution to the Company and in the case of Messrs. Perry, McWhirter, Stiles, Menzies, Carrillo and Rice, to provide benefits on retirement in lieu of participation in the Supplemental Retirement Plan. Mr. Rice was added to the plan in 2008. |
Change in Control Agreements
The Board of Directors has determined that it is appropriate to reinforce and encourage the continued attention and dedication of members of the Company’s management to their assigned duties without distraction in potential circumstances arising from the possibility of a change in control of the Company. Accordingly, the Company has entered into a change in control agreement with each of the named executive officers that provides for certain vesting upon a change in control and the payment of certain compensation if the named executive officer’s employment with the Company is terminated under one of the circumstances described in the agreement in connection with a change in control of the Company (as defined in the agreement). We consider the compensation that would be payable under the agreement upon termination following a change in control to be appropriate in light of the unique mix of the industries in which we are engaged, in, the limited number of companies in many of those industries, and the uncertain length of time necessary to find new employment. The level of payments and benefits provided under the change in control agreements were considered appropriate. These benefits are recognized as part of the overalltotal compensation package and are reviewed periodically, but are not specifically considered by the HR Committee when making changes in base salary, AIC, or LTI compensation. During 2008, the HR Committee reviewed the change in control severance benefits of the named executive officers in connection with a more comprehensive review of the overall change in control severance policy in general and made modifications to comply with Section 409A of the Code. The change in control severance benefits are discussed in the Executive Compensation section under “Potential Payments Upon Termination or Change in Control.” The Company does not have severance agreements with named executive officers other than in connection with the change in control agreements.
Welfare Benefits
The Company-supported medical plan, life insurance, and long term disability plan, and employee-paid dental, vision, cancer-specific insurance, and optional life insurance are substantially similar for the named executive officers as for all full-time employees.
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Limitation on Deductibility of Executive Compensation
For a publicly held corporation, Section 162(m) of the Code limits the federal income tax deduction for the compensation of certain executive officers that exceeds $1 million per year. “Performance-based” compensation is not subject to the limitations on deductibility and the HR Committee strives to structure compensation so as to qualify for deductibility. The HR Committee will continue to monitor future deductibility options. However, the HR Committee may authorize compensation that may not be deductible when it deems doing so to be in the best interest of the Company and its stockholders.
Stock Ownership Guidelines
Stock ownership guidelines have been adopted that require the CEO to maintain ownership of Company stockCommon Stock valued at five times base salary, the other named executive officers at three times base salary, and the Board of Directors at three times annual retainer. Stock ownership is defined as stock owned without restrictions; restricted shares that vest at retirement; shares or share equivalents held in a qualified or non-qualified profit sharing plan; shares or units granted on which restrictions remain; and equivalent shares determined from vested,in-the-money stock options. The named executive officers and the directors are all in compliance with the guidelines.Company’s stock ownership requirements.
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Conclusion
The HR Committee believes the executive officer compensation program provides appropriate incentives to each executive officersofficer to achieve strongstrive for the Company’s achievement of outstanding operating results and concurrent preservation of, and improvements to, the Company’s financial performance and alignscondition, thereby clearly aligning each executive’s compensation prospects with stockholder interests. Thethe long-term interests of our stockholders. In summary, the Company’s compensation philosophypolicies and programs outlined above continueare designed to direct theencourage sustained efforts of our executive officers in driving the Company’sto produce future growth and success.continuous enhancements to the Company’s operations and related levels of profitability.
Human Resources Committee Report
We have reviewed and discussed with management the Compensation Discussion and Analysis required by Item 402(b) ofRegulation S-K and based on such review and discussions, we recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.
Human Resources Committee
Ronald W. Haddock,Jess T. Hay,Chairman
Leldon E. Echols
Ronald J. Gafford
Jess T. HayRonald W. Haddock
Diana S. Natalicio
Douglas L. Rock
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Compensation of Executives
Summary Compensation Table
The following table and accompanying narrative disclosure should be read in conjunction with the Compensation Discussion and Analysis, which sets forth the objectives of the Company’s executive compensation program.
The “Summary Compensation Table” below summarizes the total compensation paid or earned by each of the named executive officers for the fiscal years ended December 31, 2010, 2009, and 2008. The compensation for Messrs. Perry and Carrillo for 2008 2007, and 2006.2009 is not shown because they were not named executive officers for those years.
Summary Compensation Table
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | Change in
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Change in
| | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | Pension
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Pension
| | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | Value and
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Value and
| | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | Nonqualified
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Nonqualified
| | | | | | |
| | | | | | | | | | | | | | | | | | | | Non-Equity
| | | | Deferred
| | | | | | | | | | | | | | | | | | | | | | | | | | | Non-Equity
| | | Deferred
| | | | | | |
| | | | | | | | | | | | Stock
| | | | Option
| | | | Incentive Plan
| | | | Compensation
| | | | All Other
| | | | | | | | | | | | | | | | | Stock
| | | Option
| | | Incentive Plan
| | | Compensation
| | | All Other
| | | |
Name and
| | | | | | | Salary
| | | | Awards
| | | | Awards
| | | | Compensation
| | | | Earnings
| | | | Compensation
| | | | Total
| | | | | | | Salary
| | | Bonus
| | | Awards
| | | Awards
| | | Compensation
| | | Earnings
| | | Compensation
| | | Total
|
| Principal Position | | | Year | | | | ($)(1) | | | | ($)(2) | | | | ($)(2) | | | | ($)(3) | | | | ($)(4) | | | | ($)(5) | | | | ($) | | | | Year | | | ($)(1) | | | ($)(2) | | | ($)(3) | | | ($)(3) | | | ($)(4) | | | ($)(5) | | | ($)(6) | | | ($) |
| Timothy R. Wallace | | | | 2008 | | | | $ | 950,000 | | | | $ | 4,096,782 | | | | $ | 290,105 | | | | $ | 1,671,136 | | | | $ | 1,077,123 | | | | $ | 452,718 | | | | $ | 8,537,864 | | | | | 2010 | | | | $ | 950,000 | | | | $ | — | | | | $ | 1,973,580 | | | | $ | — | | | | $ | 559,170 | | | | $ | 736,571 | | | | $ | 280,804 | | | | $ | 4,500,125 | |
| Chairman, Chief Executive | | | | 2007 | | | | | 950,000 | | | | | 3,800,846 | | | | | 399,457 | | | | | 2,141,818 | | | | | 732,431 | | | | | 520,537 | | | | | 8,545,089 | | | | | 2009 | | | | | 950,000 | | | | | — | | | | | 1,254,400 | | | | | — | | | | | 940,500 | | | | | 735,432 | | | | | 361,428 | | | | | 4,241,760 | |
| Officer, and President | | | | 2006 | | | | | 950,000 | | | | | 2,378,140 | | | | | 399,457 | | | | | 2,343,365 | | | | | 840,175 | | | | | 521,742 | | | | | 7,432,879 | | | | | 2008 | | | | | 950,000 | | | | | — | | | | | 2,918,730 | | | | | 395,055 | | | | | 1,671,136 | | | | | 1,077,123 | | | | | 452,718 | | | | | 7,464,762 | |
| | William A. McWhirter | | | | 2008 | | | | | 425,000 | | | | | 858,340 | | | | | 57,097 | | | | | 498,409 | | | | | 33,512 | | | | | 149,637 | | | | | 2,021,995 | | |
| Senior Vice President and | | | | 2007 | | | | | 425,000 | | | | | 840,133 | | | | | 74,344 | | | | | 703,182 | | | | | 3,914 | | | | | 169,056 | | | | | 2,215,629 | | |
| Chief Financial Officer | | | | 2006 | | | | | 370,000 | | | | | 528,583 | | | | | 74,344 | | | | | 616,679 | | | | | 8,606 | | | | | 143,707 | | | | | 1,741,919 | | |
| | |
| Mark W. Stiles | | | | 2008 | | | | | 520,000 | | | | | 984,504 | | | | | 96,126 | | | | | 609,818 | | | | | 66,181 | | | | | 176,148 | | | | | 2,452,777 | | |
| Senior Vice President | | | | 2007 | | | | | 520,000 | | | | | 1,022,833 | | | | | 113,951 | | | | | 860,364 | | | | | 24,339 | | | | | 200,144 | | | | | 2,741,631 | | |
| and Group President | | | | 2006 | | | | | 490,000 | | | | | 678,950 | | | | | 113,951 | | | | | 816,683 | | | | | 26,655 | | | | | 189,027 | | | | | 2,315,266 | | |
| James E. Perry | | | | | 2010 | | | | | 296,667 | | | | | 20,000 | | | | | 444,500 | | | | | — | | | | | 101,861 | | | | | — | | | | | 65,728 | | | | | 928,756 | |
| Vice President and Chief Financial Officer | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | D. Stephen Menzies | | | | 2008 | | | | | 520,000 | | | | | 878,980 | | | | | 61,909 | | | | | 609,818 | | | | | 29,562 | | | | | 250,177 | | | | | 2,350,446 | | | | | 2010 | | | | | 520,000 | | | | | — | | | | | 698,500 | | | | | — | | | | | 204,048 | | | | | 16,253 | | | | | 126,105 | | | | | 1,564,906 | |
| Senior Vice President | | | | 2007 | | | | | 520,000 | | | | | 900,756 | | | | | 89,095 | | | | | 860,364 | | | | | 13,895 | | | | | 273,572 | | | | | 2,657,682 | | | | | 2009 | | | | | 520,000 | | | | | — | | | | | 504,896 | | | | | — | | | | | 343,200 | | | | | 38,557 | | | | | 188,948 | | | | | 1,595,601 | |
| and Group President | | | | 2006 | | | | | 482,500 | | | | | 530,055 | | | | | 89,095 | | | | | 804,183 | | | | | 12,109 | | | | | 218,548 | | | | | 2,136,490 | | | | | 2008 | | | | | 520,000 | | | | | — | | | | | 870,672 | | | | | 209,147 | | | | | 609,818 | | | | | 29,562 | | | | | 250,177 | | | | | 2,489,376 | |
| | William A. McWhirter | | | | | 2010 | | | | | 425,000 | | | | | — | | | | | 698,500 | | | | | — | | | | | 208,463 | | | | | 26,845 | | | | | 119,058 | | | | | 1,477,866 | |
| Senior Vice President and | | | | | 2009 | | | | | 425,000 | | | | | — | | | | | 470,400 | | | | | — | | | | | 350,625 | | | | | 30,066 | | | | | 144,113 | | | | | 1,420,204 | |
| Group President | | | | | 2008 | | | | | 425,000 | | | | | — | | | | | 1,083,618 | | | | | 185,908 | | | | | 498,409 | | | | | 33,512 | | | | | 149,637 | | | | | 2,376,084 | |
| | | |
| Antonio Carrillo | | | | | 2010 | | | | | 375,000 | | | | | — | | | | | 508,000 | | | | | — | | | | | 128,756 | | | | | — | | | | | 101,091 | | | | | 1,112,847 | |
| Vice President | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| and Group President | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | |
| S. Theis Rice | | | | 2008 | | | | | 365,000 | | | | | 375,006 | | | | | 27,182 | | | | | 313,154 | | | | | 45,000 | | | | | 108,467 | | | | | 1,233,809 | | | | | 2010 | | | | | 365,000 | | | | | — | | | | | 304,800 | | | | | — | | | | | 104,436 | | | | | 35,429 | | | | | 83,494 | | | | | 893,159 | |
| Vice President and | | | | 2007 | | | | | 350,000 | | | | | 413,540 | | | | | 30,414 | | | | | 465,341 | | | | | 14,000 | | | | | 38,950 | | | | | 1,312,245 | | |
| Chief Legal Officer | | | | 2006 | | | | | 300,000 | | | | | 239,911 | | | | | 30,414 | | | | | 440,010 | | | | | 19,000 | | | | | 33,435 | | | | | 1,062,770 | | |
| Vice President, Human | | | | | 2009 | | | | | 365,000 | | | | | — | | | | | 285,376 | | | | | — | | | | | 175,656 | | | | | 37,320 | | | | | 99,741 | | | | | 963,093 | |
| Resources and Chief Legal Officer | | | | | 2008 | | | | | 365,000 | | | | | — | | | | | 336,396 | | | | | 116,193 | | | | | 313,154 | | | | | 45,000 | | | | | 108,467 | | | | | 1,284,210 | |
|
| | |
| (1) | | For Messrs. Wallace, Perry, McWhirter, and Stiles, $41,800; $18,700;Carrillo, $40,850; $9,568; $18,275; and $11,440,$16,125, respectively, of the above amount was deferred pursuant to the Supplemental Plan and also is reported in the “Nonqualified Deferred Compensation Table.” |
| |
| (2) | | Mr. Perry received a bonus of $20,000 for his efforts in activities associated with the Company’s lease fleet financing. |
|
| (3) | | Stock and option awards are the grant date fair value dollar amounts recognized for financial statement reporting purposes with respect to the fiscal yearcomputed in accordance with SFAS 123R and include awards granted in prior periods.ASC Topic 718. Our policy and assumptions made in the valuation of share-based payments are contained in Note 1716 of Item 8 of the Annual Report onForm 10-K for the year-ended December 31, 2008.2010. |
| |
(3)(4) | | Non-equity incentive plan compensation represents cash awards earned (i) during 2010 under the 2010 Annual Incentive Program based on goal achievements, (ii) during 2009 under the 2009 Annual Incentive Program based on goal achievements and (iii) during 2008 under the 2008 Annual Incentive Program based on goal achievements. For 2010, for Mr. Wallace $83,557$16,775 and for Mr. Stiles $12,196Perry $3,056 of the above amount was deferred pursuant to the Supplemental Plan and is also reported in the “Nonqualified Deferred Compensation Table.” |
| |
(4)(5) | | This column represents both changes in pension value for the named executive officers, as well as above market earnings on deferred compensation. For Mr. Wallace for 2010, $731,000 of this column represents the aggregate change in pension values during the 2010 fiscal year under the Standard Pension Plan and the Supplemental Retirement Plan, and $5,571 represents Mr. Wallace’s above market earnings on nonqualified deferred compensation under the Company’s Deferred Compensation Plan. For 2010 for Messrs. McWhirter, Menzies, and Rice, the change in pension values was $25,000; $14,000; and $35,000, respectively, under the Standard Pension Plan and the above market earnings on nonqualified deferred compensation under the Deferred Compensation Plan were $1,845; $2,253; and $429, respectively. For 2009 for Mr. Wallace, $729,000 of this |
29
| | |
| | column represents the aggregate change in pension values during 2009 fiscal year under the Standard Pension Plan and the Supplemental Retirement Plan, and $6,432 represents Mr. Wallace’s above market earnings on nonqualified deferred compensation under the Company’s Deferred Compensation Plan. For 2009 for Messrs. McWhirter, Menzies, and Rice, the change in pension values was $28,000; $36,000; and $37,000, respectively, under the Standard Pension Plan and the above market earnings on nonqualified deferred compensation under the Deferred Compensation Plan were $2,066; $2,557; and $320, respectively. For Mr. Wallace for 2008, $1,050,000 of this column represents the aggregate change in pension values during 2008 fiscal year under the Standard Pension Plan and the Supplemental Retirement Plan, and $27,123 represents Mr. Wallace’s above market earnings on nonqualified deferred compensation under the Company’s Deferred Compensation Plan. For 2008 for Messrs. McWhirter, Stiles, Menzies, and Rice, the change in pension values werewas $25,000; $55,000; $19,000; and $45,000, respectively, under the Standard Pension Plan and the above market earnings on nonqualified deferred compensation under the Deferred Compensation Plan were $8,512; $11,181; $10,562; and $0, respectively. Mr. Wallace’s change in pension plan reflects a correction of the calculation of the 2006 and 2007 change in pension plan data due to a miscalculation of pensionable wages under the Supplemental Retirement Plan in 2006. |
| |
(5)(6) | | The following table is a breakdown of all other compensation included in the “Summary Compensation Table” for the named executive officers: |
28
All Other Compensation
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | Company
| | | | | | | | | | | | | | | | | | | | | Company
| | | | | | |
| | | | | | | | | | | | Perquisites
| | | | Contributions
| | | | | | | | | | | | | | | | | | Perquisites
| | | Contributions
| | | | | | |
| | | | | | | | Executive
| | | | and Other
| | | | to Defined
| | | | Deferred
| | | | Total All
| | | | | | | Executive
| | | and Other
| | | to Defined
| | | Deferred
| | | Total All
|
| | | | | | | | Perquisite
| | | | Personal
| | | | Contribution
| | | | Compensation
| | | | Other
| | | | | | | Perquisite
| | | Personal
| | | Contribution
| | | Compensation
| | | Other
|
| Name | | | Year | | | | Plan(1) | | | | Benefits(2) | | | | Plans(3) | | | | Plan(4) | | | | Compensation | | | | Year | | | Allowance(1) | | | Benefits | | | Plans(2) | | | Plan(3) | | | Compensation |
| Timothy R. Wallace | | | | 2008 | | | | $ | 95,000 | | | | $ | — | | | | $ | 95,604 | | | | $ | 262,114 | | | | $ | 452,718 | | | | | 2010 | | | | $ | 71,250 | | | | $ | — | | | | $ | 58,637 | | | | $ | 150,917 | | | | $ | 280,804 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | 2007 | | | | | 95,000 | | | | | 32,483 | | | | | 83,872 | | | | | 309,182 | | | | | 520,537 | | | | | 2009 | | | | | 95,000 | | | | | — | | | | | 77,378 | | | | | 189,050 | | | | | 361,428 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | 2006 | | | | | 95,000 | | | | | 19,301 | | | | | 78,104 | | | | | 329,337 | | | | | 521,742 | | | | | 2008 | | | | | 95,000 | | | | | — | | | | | 95,604 | | | | | 262,114 | | | | | 452,718 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| William A. McWhirter | | | | 2008 | | | | | 42,500 | | | | | — | | | | | 14,796 | | | | | 92,341 | | | | | 149,637 | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | 2007 | | | | | 42,500 | | | | | — | | | | | 13,738 | | | | | 112,818 | | | | | 169,056 | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | 2006 | | | | | 37,000 | | | | | — | | | | | 8,039 | | | | | 98,668 | | | | | 143,707 | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Mark W. Stiles | | | | 2008 | | | | | 52,000 | | | | | — | | | | | 11,166 | | | | | 112,982 | | | | | 176,148 | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | 2007 | | | | | 52,000 | | | | | — | | | | | 10,108 | | | | | 138,036 | | | | | 200,144 | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | 2006 | | | | | 49,000 | | | | | — | | | | | 9,359 | | | | | 130,668 | | | | | 189,027 | | |
| James E. Perry | | | | | 2010 | | | | | 22,250 | | | | | — | | | | | 15,916 | | | | | 27,562 | | | | | 65,728 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| D. Stephen Menzies | | | | 2008 | | | | | 52,000 | | | | | 78,295 | | | | | 6,900 | | | | | 112,982 | | | | | 250,177 | | | | | 2010 | | | | | 39,000 | | | | | — | | | | | 14,700 | | | | | 72,405 | | | | | 126,105 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | 2007 | | | | | 52,000 | | | | | 42,251 | | | | | 41,285 | | | | | 138,036 | | | | | 273,572 | | | | | 2009 | | | | | 52,000 | | | | | 36,418 | (4) | | | | 14,210 | | | | | 86,320 | | | | | 188,948 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | 2006 | | | | | 48,250 | | | | | 37,661 | | | | | 3,969 | | | | | 128,668 | | | | | 218,548 | | | | | 2008 | | | | | 52,000 | | | | | 78,295 | (4) | | | | 6,900 | | | | | 112,982 | | | | | 250,177 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| William A. McWhirter | | | | | 2010 | | | | | 31,875 | | | | | — | | | | | 23,837 | | | | | 63,346 | | | | | 119,058 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | 2009 | | | | | 42,500 | | | | | — | | | | | 24,050 | | | | | 77,563 | | | | | 144,113 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | 2008 | | | | | 42,500 | | | | | — | | | | | 14,796 | | | | | 92,341 | | | | | 149,637 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Antonio Carrillo | | | | | 2010 | | | | | 28,125 | | | | | — | | | | | 22,590 | | | | | 50,376 | | | | | 101,091 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| S. Theis Rice | | | | 2008 | | | | | 36,500 | | | | | — | | | | | 4,152 | | | | | 67,815 | | | | | 108,467 | | | | | 2010 | | | | | 27,375 | | | | | — | | | | | 9,175 | | | | | 46,944 | | | | | 83,494 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | 2007 | | | | | 35,000 | | | | | — | | | | | 3,950 | | | | | — | | | | | 38,950 | | | | | 2009 | | | | | 36,500 | | | | | — | | | | | 9,175 | | | | | 54,066 | | | | | 99,741 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | 2006 | | | | | 30,000 | | | | | — | | | | | 3,435 | | | | | — | | | | | 33,435 | | | | | 2008 | | | | | 36,500 | | | | | — | | | | | 4,152 | | | | | 67,815 | | | | | 108,467 | |
| | | | | | | | | | | | | | | | | | | | |
| | |
| (1) | | Represents the amounts payable pursuant to the Executive Perquisites Plan for the annual perquisite allowance.Allowance. |
| |
| (2) | | For 2008 for Mr. Menzies includes $67,001 for reimbursement of commuting expenses including the gross up for federal taxes of $24,422, $10,354 for personal use of the Company’s aircraft, and the remainder is for automobile maintenance service and incidental items received in connection with attendance at a Board of Directors meeting. Mr. Menzies’s commuting expenses in 2008 and 2009 are subject to reimbursement by the Company up to $50,000 per year and a gross up for federal taxes. After 2009, the Company will not provide any reimbursement to Mr. Menzies for commuting expenses. The amounts reported for personal use of Company aircraft represent the incremental cost of providing the benefit and include the cost of fuel, catering, landing fees, flight crew expenses, “dead head” costs of flying aircraft to and from locations for personal use, and the dollar value of the lost tax deductions for expenses that exceed the amounts reported as income for the named executive officers. |
|
(3) | | Represents the Company’s matching amounts under the Company’s 401(k) Plan for 20082010 for Messrs. Wallace $5,446;$14,700; McWhirter $5,446; Stiles $5,446;$14,700; Menzies $6,900;$14,700; Perry $11,132; Carrillo $14,527 and Rice $4,152$9,175 and under the Company’s Supplemental Plan for 20082010 for Messrs. Wallace $90,158;$43,937; McWhirter $9,350;$9,137; Perry $4,784; and Stiles $5,720.Carrillo $8,063. |
| |
(4)(3) | | Represents an amount equal to 10% of the salaries and annual incentive compensation set aside pursuant to the Deferred Compensation Plan. These amounts also are included in the “Nonqualified Deferred Compensation Table.” The Deferred Compensation Plan is discussed following that table. |
|
| (4) | | Amounts for Mr. Menzies in 2008 and 2009 are for reimbursement of commuting expenses including a gross up for federal taxes, personal use of the Company’s aircraft, automobile maintenance services, and incidental items received in connection with attendance at a Board of Directors meeting. |
2930
Grants of Plan-Based Awards
The following table summarizes the 20082010 grants of equity and non-equity plan-based awards for the named executive officers and the 20092011 grants of non-equity plan-based awards for the named executive officers.
Grants of Plan-Based Awards Table
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | All Other
| | | All Other
| | | | | | |
| | | | | | | Estimated Possible Payouts and
| | | Estimated Future Payouts
| | | Stock Awards
| | | Option Awards
| | | | | | Grant Date
|
| | | | | | | Future Payouts Under
| | | Under Equity Incentive
| | | Number of
| | | Number of
| | | Exercise or
| | | Fair Value
|
| | | | | | | Non-Equity Incentive Plan Awards(2) | | | Plan Awards(3) | | | Shares of
| | | Securities
| | | Base Price
| | | of Stock
|
| | | | | | | | | | | | | Stock or
| | | Underlying
| | | of Option
| | | and Option
|
| | | | Grant
| | | Threshold
| | | Target
| | | Maximum
| | | Threshold
| | | Target
| | | Maximum
| | | Awards
| | | Options
| | | Awards
| | | Awards
|
| Name | | | Date(1) | | | ($) | | | ($) | | | ($) | | | ($) | | | ($) | | | ($) | | | ($)(4) | | | ($) | | | ($) | | | ($)(5) |
| Timothy R. Wallace | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2008 Annual Incentive Plan | | | | | | | | $ | 427,500 | | | | $ | 855,000 | | | | $ | 2,280,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2008 Equity Awards | | | | 05/05/08 | | | | | | | | | | | | | | | | | | | | | | | | | 88,500 | | | | | | | | | | — | | | | | | | | | | | | | | $ | 2,918,730 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2008 Equity Awards | | | | 12/10/08 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 85,000 | | | | $ | 16.24 | | | | | 395,055 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2009 Annual Incentive Plan | | | | | | | | | 513,000 | | | | | 855,000 | | | | | 1,710,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2011 Equity Awards | | | | | | | | | | | | | | | | | | | | | | | $ | 783,750 | | | | $ | 1,959,375 | | | | $ | 3,918,750 | | | | | | | | | | | | | | | | | | | $ | 3,918,750 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| William A. McWhirter | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2008 Annual Incentive Plan | | | | | | | | | 127,500 | | | | | 255,000 | | | | | 765,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2008 Equity Awards | | | | 01/14/08 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 15,000 | | | | | | | | | | | | | | | 371,250 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2008 Equity Awards | | | | 05/05/08 | | | | | | | | | | | | | | | | | | | | | | | | | 18,800 | | | | | | | | | | 2,800 | | | | | | | | | | | | | | | 712,368 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2008 Equity Awards | | | | 12/10/08 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 40,000 | | | | | 16.24 | | | | | 185,908 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2009 Annual Incentive Plan | | | | | | | | | 191,250 | | | | | 318,750 | | | | | 637,500 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2011 Equity Awards | | | | | | | | | | | | | | | | | | | | | | | $ | 191,250 | | | | $ | 478,125 | | | | $ | 956,250 | | | | | | | | | | | | | | | | | | | $ | 956,250 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Mark W. Stiles | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2008 Annual Incentive Plan | | | | | | | | | 156,000 | | | | | 312,000 | | | | | 936,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2008 Equity Awards | | | | 05/05/08 | | | | | | | | | | | | | | | | | | | | | | | | | 24,900 | | | | | | | | | | 1,500 | | | | | | | | | | | | | | | 870,672 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2008 Equity Awards | | | | 12/10/08 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 45,000 | | | | | 16.24 | | | | | 209,147 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2009 Annual Incentive Plan | | | | | | | | | 187,200 | | | | | 312,000 | | | | | 624,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2011 Equity Awards | | | | | | | | | | | | | | | | | | | | | | | $ | 234,000 | | | | $ | 585,000 | | | | $ | 1,170,000 | | | | | | | | | | | | | | | | | | | $ | 1,170,000 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| D. Stephen Menzies | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2008 Annual Incentive Plan | | | | | | | | | 156,000 | | | | | 312,000 | | | | | 936,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2008 Equity Awards | | | | 05/05/08 | | | | | | | | | | | | | | | | | | | | | | | | | 21,300 | | | | | | | | | | 5,100 | | | | | | | | | | | | | | | 870,672 | |
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| 2008 Equity Awards | | | | 12/10/08 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 45,000 | | | | | 16.24 | | | | | 209,147 | |
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| 2009 Annual Incentive Plan | | | | | | | | | 187,200 | | | | | 312,000 | | | | | 624,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2011 Equity Awards | | | | | | | | | | | | | | | | | | | | | | | $ | 234,000 | | | | $ | 585,000 | | | | $ | 1,170,000 | | | | | | | | | | | | | | | | | | | $ | 1,170,000 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| S. Theis Rice | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2008 Annual Incentive Plan | | | | | | | | | 91,250 | | | | | 182,500 | | | | | 538,375 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2008 Equity Awards | | | | 05/05/08 | | | | | | | | | | | | | | | | | | | | | | | | | 10,200 | | | | | | | | | | | | | | | | | | | | | | | | | 336,396 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2008 Equity Awards | | | | 12/10/08 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 25,000 | | | | | 16.24 | | | | | 116,193 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2009 Annual Incentive Plan | | | | | | | | | 95,813 | | | | | 182,500 | | | | | 319,375 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2011 Equity Awards | | | | | | | | | | | | | | | | | | | | | | | $ | 109,500 | | | | $ | 273,750 | | | | $ | 547,500 | | | | | | | | | | | | | | | | | | | $ | 547,500 | |
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| | | | | | | | | | | | | | | | Estimated
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| | | | | | | | | | | | | | | | Future
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| | | | | | | | | | | | | | | | Payouts
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| | | | | | | | | | | | | | | | Under
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| | | | | | | Estimated Possible Payouts and
| | | Equity
| | | All Other
| | | |
| | | | | | | Future Payouts Under Non-Equity
| | | Incentive
| | | Stock Awards
| | | Grant Date
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| | | | | | | Incentive Plan Awards(2) | | | Plan Awards(3) | | | Number of
| | | Fair Value
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| | | | | | | | | | | | | Shares of
| | | of Stock
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| | | | Grant
| | | Threshold
| | | Target
| | | Maximum
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| | | Awards
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| Name | | | Date(1) | | | ($) | | | ($) | | | ($) | | | Target(#) | | | (#)(4) | | | ($)(5) |
| Timothy R. Wallace | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2010 Annual Incentive Plan | | | | | | | | $ | 342,000 | | | | $ | 855,000 | | | | $ | 1,710,000 | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2010 Equity Awards | | | | 05/03/10 | | | | | | | | | | | | | | | | | | | | 77,700 | | | | | — | | | | $ | 1,973,580 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2011 Annual Incentive Plan | | | | | | | | | 380,000 | | | | | 950,000 | | | | | 1,900,000 | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| James E. Perry | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2010 Annual Incentive Plan | | | | | | | | | 62,300 | | | | | 178,000 | | | | | 311,500 | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2010 Equity Awards | | | | 05/03/10 | | | | | | | | | | | | | | | | | | | | 5,000 | | | | | 12,500 | | | | | 444,500 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2011 Annual Incentive Plan | | | | | | | | | 105,000 | | | | | 262,500 | | | | | 525,000 | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| D. Stephen Menzies | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2010 Annual Incentive Plan | | | | | | | | | 124,800 | | | | | 312,000 | | | | | 624,000 | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2010 Equity Awards | | | | 05/03/10 | | | | | | | | | | | | | | | | | | | | 23,200 | | | | | 4,300 | | | | | 698,500 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2011 Annual Incentive Plan | | | | | | | | | 162,000 | | | | | 405,000 | | | | | 810,000 | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| William A. McWhirter | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2010 Annual Incentive Plan | | | | | | | | | 127,500 | | | | | 318,750 | | | | | 637,500 | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2010 Equity Awards | | | | 05/03/10 | | | | | | | | | | | | | | | | | | | | 19,000 | | | | | 8,500 | | | | | 698,500 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2011 Annual Incentive Plan | | | | | | | | | 135,000 | | | | | 337,500 | | | | | 675,000 | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Antonio Carrillo | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2010 Annual Incentive Plan | | | | | | | | | 78,750 | | | | | 225,000 | | | | | 393,750 | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2010 Equity Awards | | | | 05/03/10 | | | | | | | | | | | | | | | | | | | | 9,400 | | | | | 10,600 | | | | | 508,000 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2011 Annual Incentive Plan | | | | | | | | | 120,000 | | | | | 300,000 | | | | | 600,000 | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| S. Theis Rice | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2010 Annual Incentive Plan | | | | | | | | | 63,875 | | | | | 182,500 | | | | | 319,375 | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2010 Equity Awards | | | | 05/03/10 | | | | | | | | | | | | | | | | | | | | 10,400 | | | | | 1,600 | | | | | 304,800 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2011 Annual Incentive Plan | | | | | | | | | 120,000 | | | | | 300,000 | | | | | 600,000 | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
| (1) | | The grant date of all stock and option awards is the date of the HR Committee meeting or Board meeting at which such award was approved. |
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| (2) | | Represents the potential amounts payable in 20092011 under the 20082010 Annual Incentive Program for attainment of performance goals and potential amounts payable in 20102012 under the 20092011 Annual Incentive Program for attainment of performance goals. For 2008, maximum represents the EPIP level as described under “Compensation Discussion and Analysis — Establishing Annual Incentive Payout Levels.” There is no EPIP level for 2009. |
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| (3) | | For 20082010 equity awards, represents the number of performance-based restricted shares that were awarded in May 20082010 to each of the named executive officers as performance-based awards based on achieving financial performance for 2006 and 2007 above the maximum level.through 2009. These shares vest as discussed below. For 2011, represents the threshold, target, and maximum value of performance-based shares that could be awarded in 2011 if threshold, target, or maximum financial performance goals are achieved for the cumulative performance period2008-2010. The actual number of shares to be issued in 2011 will be based on the value of the award to be granted in 2011 divided by the one-year average stock price for the period ended March 31, 2011. |
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| (4) | | In January 2008, upon the successful completion of Mr. McWhirter’s third year as the Company’s CFO, the HR Committee made a special award of 15,000 restricted shares. These shares vest on the earlier of (i) age 65, (ii) when Mr. McWhirter’s age plus years of service equal 80, (iii) death, disability, or change in control or (iv) consent of the HR Committee after three years from the date of the grant. The HR Committee granted the shares to increase Mr. McWhirter’s equity ownership and to recognize his contributions to the Company during his third year as CFO. The restricted stock granted in May 20082010 to Messrs. McWhirter, Stiles,Menzies, Perry, Carrillo and Menzies in the amounts of 2,800, 1,500, and 5,100 shares, respectivelyRice were granted as time-based awards and vest as described below. |
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| (5) | | The grant date fair value of the stock and option awards is calculated in accordance with SFAS 123R, except as it relates to the 2011 equity awards which have been included at the maximum potential value.ASC Topic 718. |
Discussion Regarding Summary Compensation Table and Grants of Plan-Based Awards Table
The stock awards and the option awards described in the “Summary Compensation Table” are the dollar amounts reflectedof the grant date fair value of the awards calculated in our financial statements for 2006, 2007, and 2008 and include awards made in prior periods.accordance with ASC Topic 718.
The stock awards in May 20082010 to the named executive officers were grants of restricted stock pursuant to our Amended and Restated 2004 Stock Option and Incentive Plan that vest in five equal annual installments beginning on May 15th following the first anniversary of the grant or earlier upon death, disability, or a change in control or consent of the HR Committee after three years from the date of grant. The awards are forfeited if termination of employment occurs prior to vesting. The performance-basedperformance based restricted stock awards were made as long termlong-term compensation based on the aggregate achievement of the Company’s 2006 and 2007 through 2009 financial performance of cumulative diluted earnings per shareEPS of $2.90$8.57, excluding the goodwill impairment charge and $3.65 respectivelyaverage ROE of 13.4%. The recipients of the restricted stock are entitled to dividends and return on equityto vote the shares of 17.84%Common Stock during the restricted period. See the description of such restricted stock grants for 2010 in “Long Term Incentive Compensation” under “Compensation Discussion and 18.77% respectively as well as the HR Committee’s evaluation of each executive’s overall performanceAnalysis” and “Long Term Incentive Compensation — PBRS Grants made during 2007.2010.”
The non-equity incentive plan awards for 20082010 to the named executive officers were pursuant to our 2008 Annual Incentive Program and represented performance goal achievement based on the Company’s 2008Company EPS of $3.59.$0.85. No additional incentive was earned on the Free Cash Flow goal.
The estimates for future payouts under the 20092011 Annual Incentive Program represent potential payments of annual incentive compensation for 2009.2011. The HR Committee established the annual incentive performance goals for 20092011 based on earnings per share. To achieve target, the Company must earn EPS of $1.80$1.20 for 2009.2011. See “Setting 2011 Annual Incentive Compensation Performance Goals” under “Compensation Discussion and Analysis” above for description of the goals.
The Company has an Executive Perquisite PlanAllowance that in 20082010 provided to the named executive officers an allowance of 10%7.5% of base pay in lieu of providing company furnished vehicles, club memberships, and similar perquisites. Other than being required to use $6,000 of the perquisite allowance to maintain a four-door sedan, including insurance and other maintenance, and to forego reimbursement for the first 10,000 business miles annually, the perquisite allowance is to be used at the discretion of the executive for perquisite type expenses. It is intended that the perquisite allowance will eliminate charges to the Company for personal benefits for the executives that are not provided to Company employees generally other than occasionalde minimisitems such as the use of Company tickets to entertainment events or expenses related to spousal travel. The perquisite allowance is not intended to cover personal use of the Company’s aircraft or commuting or relocation expenses. For security purposes, the Board requires the CEO to use the Company aircraft for personal travel to the extent possible, and the value attributed to such personal use is calculated using the aggregate incremental cost method set forth in Note (2)method. Incremental costs include the cost of fuel, catering, landing fees, flight crew expenses, “dead head” costs of flying aircraft to “All Other Compensation.”and from locations for personal use, and the dollar value of the lost tax deductions for expenses that exceed the amounts reported as income for the named executive officers. During 2008,2010, Mr. Wallace did not havehad personal travel which required the use of the Company-owned aircraft. The Company has been paying commuting expensesaircraft for Mr. Menzies between Chicago, Illinois and Dallas, Texas. Mr. Menzies’s commuting expenses in 2008 and 2009 are subject to reimbursement by the Company
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up to $50,000 per year and a gross up for federal taxes. After 2009, the Company will not provide any reimbursement to Mr. Menzies for commuting expenses.one trip.
The Company has a 401(k) planPlan that permits employees to elect to set aside up to 14% of their compensation (subject to the maximum limit on the amount of compensation permitted by the Code to be deferred for this purpose) in a trust to pay future retirement benefits. Depending upon years of service, the Company may match up to 50% of no more than 6% of the employee’s compensation set aside for this purpose. For employees who participate in the enhancement to the 401(k) plan,Plan, the Company contributes up to an additional 3% of the employee’s base pay (subject to the maximum limit permitted by the Code) depending upon years of service to the
32
account of employees participating in the enhanced portion of the 401(k) planPlan as an Annual Retirement Contribution. No named executive officers participated in the enhanced portion of the 401(k) plan during 2008. As a result of the amendment to the Standard Pension Plan adopted on February 13, 2009, the named executive officers’ accrued benefits were frozen and no future benefits will accrue under the Standard Pension Plan. Therefore, commencing with the 401(k) plan’s 2009 planPlan year, all of the named executive officers will bewere eligible to participate in the enhanced portion of the 401(k) plan.Plan. Matching contributions under the Supplemental Plan are discussed under “Nonqualified Deferred Compensation.”
The change in pension value for Mr. Wallace is primarily a result of an increasethe passage of time and changes in the five year average compensation under the Supplemental Retirement Plan created by elimination of a year of low annual incentive compensation during a down cycle period.actuarial assumptions.
Base salary, the executive perquisite allowance,Executive Perquisite Allowance, and annual incentive compensation in 20082010 represented from 35% to 65%56% of the named executive officers’ total compensation as reflected in the “Summary Compensation Table.”
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Outstanding Equity Awards at Year-End
The following table summarizes as of December 31, 2008,2010, for each named executive officer, the number of unexercised options and the number of shares of unvested restricted stock. The market value of the stock awards was based on the closing price of the common stockCommon Stock as of December 31, 2008,2010, which was $15.76.$26.61.
Outstanding Equity Awards at Fiscal Year-End Table
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| | | | | | Option Awards | | | | | | | Stock Awards | | | | | Option Awards | | | | | | | Stock Awards |
| | | | | | | | | | | | | | | | | | | | | | | | | Equity
| | | | | | | | | | | | | | | | | | | | | | | | Equity
|
| | | | | | | | | | | | | | | | | | | | | | | | | Incentive
| | | | | | | | | | | | | | | | | | | | | | | | Incentive
|
| | | | | | | | | | | | | | | | | | | | | | Equity
| | | Plan Awards:
| | | | | | | | | | | | | | | | | | | | | Equity
| | | Plan Awards:
|
| | | | | | | | | | | | | | | | | | | | | | Incentive
| | | Market or
| | | | | | | | | | | | | | | | | | | | | Incentive
| | | Market or
|
| | | | | | | | | | | | | | | | | | | | | | Plan Awards:
| | | Payout
| | | | | | | | | | | | | | | | | | | | | Plan Awards:
| | | Payout
|
| | | | Number of
| | | Number of
| | | | | | | | | | | | Market
| | | Number of
| | | Value of
| | | Number of
| | | Number of
| | | | | | | | | | | | Market
| | | Number of
| | | Value of
|
| | | | Securities
| | | Securities
| | | | | | | | | Number of
| | | Value of
| | | Unearned
| | | Unearned
| | | Securities
| | | Securities
| | | | | | | | | Number of
| | | Value of
| | | Unearned
| | | Unearned
|
| | | | Underlying
| | | Underlying
| | | | | | | | | Shares or
| | | Shares or
| | | Shares, Units
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| | | Underlying
| | | | | | | | | Shares or
| | | Shares or
| | | Shares, Units
| | | Shares, Units
|
| | | | Unexercised
| | | Unexercised
| | | | | | | | | Units of
| | | Units of
| | | or Other
| | | or Other
| | | Unexercised
| | | Unexercised
| | | | | | | | | Units of
| | | Units of
| | | or Other
| | | or Other
|
| | | | Options
| | | Options
| | | Option
| | | | | | Stock That
| | | Stock That
| | | Rights That
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| | | | | | Stock That
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| | | | (#) | | | (#) | | | Exercise
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|
| | | | | | | | | | Price
| | | Expiration
| | | Vested
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| | | | | | | | | Price
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| | | Vested
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| | | Vested
|
| Name | | | Exercisable | | | Unexercisable(1) | | | ($) | | | Date | | | (#)(2) | | | ($) | | | ($) | | | ($) | | | Exercisable | | | Unexercisable(1) | | | ($) | | | Date | | | (#)(2) | | | ($) | | | ($) | | | ($) |
| Timothy R. Wallace | | | | — | | | | | 20,550 | | | | | 18.94 | | | | | 05/10/14 | | | | | 475,282 | | | | $ | 7,490,444 | | | | $ | 783,750 | (3) | | | $ | 783,750 | (3) | | | | 20,550 | | | | | — | | | | | 18.94 | | | | | 05/10/14 | | | | | 434,365 | | | | $ | 11,558,453 | | | | $ | 2,137,500 | (3) | | | $ | 2,137,500 | (3) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | — | | | | | 17,700 | | | | | 17.94 | | | | | 05/09/15 | | | | | | | | | | | | | 783,750 | (4) | | | | 783,750 | (4) | | | | 17,700 | | | | | — | | | | | 17.94 | | | | | 05/09/15 | | | | | | | | | | | | | 2,137,500 | (4) | | | | 2,137,500 | (4) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | — | | | | | 85,000 | | | | | 16.24 | | | | | 12/10/18 | | | | | | | | | | | | | | | | | | | | | — | | | | | 85,000 | | | | | 16.24 | | | | | 12/10/18 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| James E. Perry | | | | | 1,500 | | | | | — | | | | | 20.24 | | | | | 09/20/14 | | | | | 49,780 | | | | | 1,324,646 | | | | | 268,125 | (3) | | | | 268,125 | (3) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | 1,200 | | | | | — | | | | | 17.94 | | | | | 05/09/15 | | | | | | | | | | | | | 268,125 | (4) | | | | 268,125 | (4) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | — | | | | | 12,500 | | | | | 16.24 | | | | | 12/10/18 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| D. Stephen Menzies | | | | | 4,680 | | | | | — | | | | | 18.94 | | | | | 05/10/14 | | | | | 131,850 | | | | | 3,508,529 | | | | | 682,500 | (3) | | | | 682,500 | (3) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | 8,610 | | | | | — | | | | | 17.94 | | | | | 05/09/15 | | | | | | | | | | | | | 682,500 | (4) | | | | 682,500 | (4) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | — | | | | | 45,000 | | | | | 16.24 | | | | | 12/10/18 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| William A. McWhirter | | | | — | | | | | 4,500 | | | | | 18.94 | | | | | 05/10/14 | | | | | 161,658 | | | | | 2,547,730 | | | | | 191,250 | (3) | | | | 191,250 | (3) | | | | 4,500 | | | | | — | | | | | 18.94 | | | | | 05/10/14 | | | | | 169,226 | | | | | 4,503,104 | | | | | 557,813 | (3) | | | | 557,813 | (3) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | — | | | | | 7,200 | | | | | 17.94 | | | | | 05/09/15 | | | | | | | | | | | | | 191,250 | (4) | | | | 191,250 | (4) | | | | 7,200 | | | | | — | | | | | 17.94 | | | | | 05/09/15 | | | | | | | | | | | | | 557,813 | (4) | | | | 557,813 | (4) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | — | | | | | 40,000 | | | | | 16.24 | | | | | 12/10/18 | | | | | | | | | | | | | | | | | | | | | — | | | | | 40,000 | | | | | 16.24 | | | | | 12/10/18 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Mark W. Stiles | | | | 1,377 | | | | | — | | | | | 11.33 | | | | | 05/29/13 | | | | | 168,650 | | | | | 2,657,924 | | | | | 234,000 | (3) | | | | 234,000 | (3) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | 5,610 | | | | | 5,610 | | | | | 18.94 | | | | | 05/10/14 | | | | | | | | | | | | | 234,000 | (4) | | | | 234,000 | (4) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | 5,055 | | | | | 10,110 | | | | | 17.94 | | | | | 05/09/15 | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | — | | | | | 45,000 | | | | | 16.24 | | | | | 12/10/18 | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| D. Stephen Menzies | | | | — | | | | | 4,680 | | | | | 18.94 | | | | | 05/10/14 | | | | | 132,900 | | | | | 2,094,504 | | | | | 234,000 | (3) | | | | 234,000 | (3) | |
| Antonio Carrillo | | | | | 1,500 | | | | | — | | | | | 18.94 | | | | | 05/10/14 | | | | | 113,623 | | | | | 3,023,508 | | | | | 492,188 | (3) | | | | 492,188 | (3) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | — | | | | | 8,610 | | | | | 17.94 | | | | | 05/09/15 | | | | | | | | | | | | | 234,000 | (4) | | | | 234,000 | (4) | | | | 3,030 | | | | | — | | | | | 17.94 | | | | | 05/09/15 | | | | | | | | | | | | | 492,188 | (4) | | | | 492,188 | (4) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | — | | | | | 45,000 | | | | | 16.24 | | | | | 12/10/18 | | | | | | | | | | | | | | | | | | | | | — | | | | | 30,000 | | | | | 16.24 | | | | | 12/10/18 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| S. Theis Rice | | | | 6,000 | | | | | — | | | | | 11.33 | | | | | 05/29/13 | | | | | 64,491 | | | | | 1,016,378 | | | | | 105,000 | (3) | | | | 105,000 | (3) | | | | 6,000 | | | | | — | | | | | 11.33 | | | | | 05/29/13 | | | | | 70,313 | | | | | 1,871,029 | | | | | 342,188 | (3) | | | | 342,188 | (3) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | 3,300 | | | | | 1,650 | | | | | 18.94 | | | | | 05/10/14 | | | | | | | | | | | | | 109,500 | (4) | | | | 109,500 | (4) | | | | 4,950 | | | | | — | | | | | 18.94 | | | | | 05/10/14 | | | | | | | | | | | | | 342,188 | (4) | | | | 342,188 | (4) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | 4,080 | | | | | 4,080 | | | | | 17.94 | | | | | 05/09/15 | | | | | | | | | | | | | | | | | | | | | 8,160 | | | | | — | | | | | 17.94 | | | | | 05/09/15 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | — | | | | | 25,000 | | | | | 16.24 | | | | | 12/10/18 | | | | | | | | | | | | | | | | | | | | | — | | | | | 25,000 | | | | | 16.24 | | | | | 12/10/18 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
| (1) | | The following table provides the vesting date of theAll unvested stock options.options vest on May 15, 2012. |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Timothy R.
| | | | William A.
| | | | Mark W.
| | | | D. Stephen
| | | | S. Theis
| |
| Vesting Date | | | Wallace | | | | McWhirter | | | | Stiles | | | | Menzies | | | | Rice | |
| 05/09/09 | | | | 8,850 | | | | | 3,600 | | | | | 5,055 | | | | | 4,305 | | | | | 2,040 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| 05/10/09 | | | | 20,550 | | | | | 4,500 | | | | | 5,610 | | | | | 4,680 | | | | | 1,650 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| 05/09/10 | | | | 8,850 | | | | | 3,600 | | | | | 5,055 | | | | | 4,305 | | | | | 2,040 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| 05/15/12 | | | | 85,000 | | | | | 40,000 | | | | | 45,000 | | | | | 45,000 | | | | | 25,000 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
33
| | |
| (2) | | The following table provides the vesting date of unvested stock awards. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Timothy R.
| | | | William A.
| | | | Mark W.
| | | | D. Stephen
| | | | S. Theis
| | | | Timothy R.
| | | | James E.
| | | | D. Stephen
| | | | William A.
| | | | Antonio
| | | | S. Theis
| |
| Vesting Date | | | Wallace(a) | | | | McWhirter | | | | Stiles | | | | Menzies | | | | Rice | | | | Wallace | | | | Perry | | | | Menzies | | | | McWhirter | | | | Carrillo | | | | Rice | |
| 05/09/09 | | | | 15,094 | | | | | 9,625 | | | | | 13,500 | | | | | 11,500 | | | | | 5,475 | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 05/15/09 | | | | 38,700 | | | | | 9,820 | | | | | 10,780 | | | | | 10,780 | | | | | 4,440 | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 05/29/09 | | | | 27,804 | | | | | 4,500 | | | | | 8,000 | | | | | 6,500 | | | | | 2,300 | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 05/11/10 | | | | 33,046 | | | | | 9,000 | | | | | 14,250 | | | | | 12,350 | | | | | 4,250 | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 05/15/10 | | | | 41,500 | | | | | 10,987 | | | | | 13,180 | | | | | 13,180 | | | | | 5,273 | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 05/09/11 | | | | 15,094 | | | | | 9,625 | | | | | 13,500 | | | | | 11,500 | | | | | 5,475 | | | | | 15,094 | | | | | 1,250 | | | | | 11,500 | | | | | 9,625 | | | | | 4,075 | | | | | 5,475 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 05/15/11 | | | | 38,700 | | | | | 9,820 | | | | | 10,780 | | | | | 10,780 | | | | | 4,440 | | | | | 70,240 | | | | | 6,520 | | | | | 22,720 | | | | | 21,320 | | | | | 11,420 | | | | | 9,480 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 05/29/11 | | | | 27,804 | | | | | 4,500 | | | | | 8,000 | | | | | 6,500 | | | | | 2,300 | | | | | 27,804 | | | | | — | | | | | 6,500 | | | | | 4,500 | | | | | 2,160 | | | | | 2,300 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 06/11/11 | | | | | — | | | | | — | | | | | — | | | | | — | | | | | 4,000 | | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 05/11/12 | | | | 33,046 | | | | | 9,000 | | | | | 14,250 | | | | | 12,350 | | | | | 4,250 | | | | | 33,046 | | | | | — | | | | | 12,350 | | | | | 9,000 | | | | | 3,500 | | | | | 4,250 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 05/15/12 | | | | 41,500 | | | | | 10,986 | | | | | 13,180 | | | | | 13,180 | | | | | 5,273 | | | | | 73,040 | | | | | 7,420 | | | | | 25,120 | | | | | 22,486 | | | | | 12,253 | | | | | 10,313 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 06/11/12 | | | | | — | | | | | — | | | | | — | | | | | — | | | | | 4,000 | | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 05/09/13 | | | | 15,094 | | | | | 9,625 | | | | | 13,500 | | | | | 11,500 | | | | | 5,475 | | | | | 15,094 | | | | | 1,250 | | | | | 11,500 | | | | | 9,625 | | | | | 4,075 | | | | | 5,475 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 05/15/13 | | | | 17,700 | | | | | 4,320 | | | | | 5,280 | | | | | 5,280 | | | | | 2,040 | | | | | 49,240 | | | | | 5,920 | | | | | 17,220 | | | | | 15,820 | | | | | 9,020 | | | | | 7,080 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Restricted Shares(b) | | | | 130,200 | | | | | 59,850 | | | | | 30,450 | | | | | 7,500 | | | | | 13,500 | | |
| 05/15/14 | | | | | 31,540 | | | | | 7,920 | | | | | 11,940 | | | | | 11,500 | | | | | 10,480 | | | | | 5,040 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 05/15/15 | | | | | 15,540 | | | | | 3,500 | | | | | 5,500 | | | | | 5,500 | | | | | 4,774 | | | | | 2,400 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 05/15/19 | | | | | — | | | | | 3,000 | | | | | — | | | | | — | | | | | 4,000 | | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 05/15/20 | | | | | — | | | | | — | | | | | — | | | | | — | | | | | 1,933 | | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 05/15/24 | | | | | — | | | | | 3,000 | | | | | — | | | | | — | | | | | 4,000 | | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 05/15/25 | | | | | — | | | | | — | | | | | — | | | | | — | | | | | 1,933 | | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Retirement(a) | | | | | 103,727 | | | | | — | | | | | 7,500 | | | | | 44,850 | | | | | 7,500 | | | | | 13,500 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Age 65(b) | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | 5,000 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Earlier of age 65 or rule of 80(c) | | | | | — | | | | | 10,000 | | | | | — | | | | | 15,000 | | | | | 24,500 | | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
| (a) | | On December 30, 2008, Mr. Wallace turned 55 years old and, as a result, met the definition of “early retirement” on December 31, 2008 with respect to 262,750 shares and on January 1 and January 2, 2009, with respect to 88,200 shares. In accordance with the Code, personal income tax associated with the lapse of substantial risk of forfeiture of those shares must be satisfied currently even though the shares have not vested. The terms of the Company’s 2004 Stock Option and Incentive Plan, as amended (the “Plan”), provide that any participant under the Plan who is subject to Section 16 of the Securities Exchange Act of 1934 is required to satisfy his or her tax withholding obligation pursuant to the share retention method. As a result, Mr. Wallace has satisfied his tax withholding obligation by surrendering shares to the Company based on the appropriate federal income tax and payroll tax rates currently applicable. The unvested shares in the table above have been adjusted for the 95,768 shares surrendered December 31, 2008. Additionally, Mr. Wallace surrendered 8,672 shares on January 1, 2009 and 17,801 shares on January 2, 2009. The shares in the table above have not been adjusted for the shares surrendered in 2009. |
|
(b) | | Grants of restricted stock which will vest upon the earlier of: (i) retirement; (ii) death, disability or change in control; or (iii) consent of the HR Committee after three years from the date of grant. |
| | |
| (b) | Grant of restricted stock which will vest upon the earlier of: (i) when the executive officer reaches age 65; (ii) death, disability or change in control; or (iii) consent of the HR Committee after three years from the date of grant. |
| | |
| (c) | Grant of restricted stock which will vest upon the earlier of: (i) when the executive officer reaches age 65; (ii) the executive officer’s age plus years of vested service equal 80; (iii) the earlier of death, disability or change in control; or (iv) consent of the HR Committee after three years from the date of grant. |
| | |
| (3) | | Represents the thresholdtarget value of performance-based shares that couldto be awarded in 20102012 if thresholdtarget financial performance goals are achieved for the cumulative performance period 2007 — 2009.in2010-2011. The actual number of shares to be issued in 20102012 will be based on the value of the award to be granted in 20102012 divided by the one-year average stockCommon Stock price for the period ended March 31, 2010.2012. Vesting of any performance-based shares issued in 20102012 will be determined on or prior to the date of issue. |
| |
| (4) | | Represents the thresholdtarget value of performance-based shares that could be awarded in 20112013 if thresholdtarget financial performance goals are achieved for the cumulative performance in 20082010 — 2010.2012. The actual number of shares to be issued in 20112013 will be based on the value of the award to be granted in 20112013 divided by the one-year average stockCommon Stock price for the period ended March 31, 2011.2013. Vesting of any performance-based shares issued in 20112013 will be determined on or prior to the date of issue. |
34
Option Exercises and Stock Vested in 20082010
The following table summarizes for the named executive officers in 20082010 (i) the number of shares acquired upon exercise of stock options and the value realized and (ii) the number of shares acquired upon the vesting of restricted stock and restricted stock units and the value realized, each before payout of any applicable withholding tax.
Option Exercises and Stock Vested Table
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Option Awards | | | | Stock Awards | | | | Option Awards | | | Stock Awards |
| | | | Number of
| | | | | | | | Number of
| | | | | | | | Number of
| | | | | | Number of
| | | |
| | | | Shares
| | | | Value
| | | | Shares
| | | | Value
| | | | Shares
| | | Value
| | | Shares
| | | Value
|
| | | | Acquired on
| | | | Realized on
| | | | Acquired on
| | | | Realized
| | | | Acquired on
| | | Realized on
| | | Acquired on
| | | Realized
|
| | | | Exercise
| | | | Exercise
| | | | Vesting
| | | | on Vesting
| | | | Exercise
| | | Exercise
| | | Vesting
| | | on Vesting
|
| Name | | | (#) | | | | ($) | | | | (#) | | | | ($) | | | | (#) | | | ($) | | | (#) | | | ($) |
| Timothy R. Wallace | | | | 139,740 | | | | $ | 3,332,750 | | | | | 75,800 | | | | $ | 2,632,940 | | | | | — | | | | | — | | | | | 109,500 | | | | $ | 2,171,345 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| William A. McWhirter | | | | 13,499 | | | | | 312,173 | | | | | 15,667 | | | | | 551,243 | | |
| | | | | | | | | | | | | | | | | | | | | | |
| Mark W. Stiles | | | | 8,823 | | | | | 164,696 | | | | | 22,150 | | | | | 773,198 | | |
| James E. Perry | | | | | — | | | | | — | | | | | 3,920 | | | | | 92,159 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| D. Stephen Menzies | | | | 25,485 | | | | | 662,015 | | | | | 20,250 | | | | | 709,605 | | | | | — | | | | | — | | | | | 31,970 | | | | | 753,838 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| William A. McWhirter | | | | | — | | | | | — | | | | | 25,987 | | | | | 612,574 | |
| | | | | | | | | | | | | | | | | | |
| Antonio Carrillo | | | | | — | | | | | — | | | | | 16,913 | | | | | 387,975 | |
| | | | | | | | | | | | | | | | | | |
| S. Theis Rice | | | | — | | | | | — | | | | | 7,484 | | | | | 263,523 | | | | | — | | | | | — | | | | | 12,163 | | | | | 286,717 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Pension Benefits
The following table summarizes the present value of the accumulated pension benefits of the named executive officers under the Standard Pension Plan and for Mr. Wallace the Supplemental Retirement Plan.
Pension Benefits Table
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | Number
| | | | Present
| | | | | | | Number
| | | Present
| | | Payments
|
| | | | | | | of Years
| | | | Value of
| | | | | | | of Years
| | | Value of
| | | During
|
| | | | | | | Credited
| | | | Accumulated
| | | | | | | Credited
| | | Accumulated
| | | Last Fiscal
|
| | | | | | | Service
| | | | Benefit
| | | | | | | Service
| | | Benefit
| | | Year
|
Name | | | Plan Name | | | (#) | | | | ($)(1) | | | | Plan Name | | | (#) | | | ($)(2) | | | ($) |
| Timothy R. Wallace | | | Trinity Industries, Inc. Standard Pension Plan | | | | 34 | | | | $ | 373,000 | | | | Trinity Industries, Inc. Standard Pension Plan | | | | 34 | | | | $ | 484,000 | | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Trinity Industries, Inc. Supplemental Retirement Plan | | | | 34 | | | | | 4,690,000 | | | | Trinity Industries, Inc. Supplemental Retirement Plan | | | | 34 | | | | | 6,039,000 | | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| William A. McWhirter | | | Trinity Industries, Inc. Standard Pension Plan | | | | 23 | | | | | 140,000 | | |
| | | | | | | | | | | | | | | |
| Mark W. Stiles | | | Trinity Industries, Inc. Standard Pension Plan | | | | 17 | | | | | 286,000 | | |
| James E. Perry | | | | Trinity Industries, Inc. Standard Pension Plan | | | | — | | | | | 1,000 | | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| D. Stephen Menzies | | | Trinity Industries, Inc. Standard Pension Plan | | | | 7 | | | | | 72,000 | | | | Trinity Industries, Inc. Standard Pension Plan | | | | 9 | | | | | 122,000 | | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| William A. McWhirter | | | | Trinity Industries, Inc. Standard Pension Plan | | | | 23 | | | | | 193,000 | | | | | — | |
| | | | | | | | | | | | | | | | | |
| S. Theis Rice | | | Trinity Industries, Inc. Standard Pension Plan | | | | 18 | | | | | 254,000 | | | | Trinity Industries, Inc. Standard Pension Plan | | | | 18 | | | | | 326,000 | | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | |
| | |
| (1) | | Mr. Carrillo is not a pension plan participant. |
|
| (2) | | The present value of the accumulated benefit is calculated in accordance with SFAS 87.ASC Topic 718. Refer to Note 1314 of Item 8 of the Company’s Annual Report onForm 10-K for the year-ended December 31, 20082010 for our policy and assumptions made in the valuation of this accumulated benefit. |
The Standard Pension Plan is a noncontributory defined benefit retirement and death benefit plan. Funds are contributed periodically to a trust that invests the Company’s contributions and earnings thereon in order to pay the benefits to the participating employees. The plan provides for the payment of monthly retirement benefits determined under a calculation based on credited years of service and a participant’s highest compensation over five consecutive years in the last ten years of employment. Retirement benefits are paid to participants upon normal retirement at the age of 65 or later, or upon early retirement. Mr. Wallace turned 55 on December 30, 2008, and, as a result, met the definition of “early retirement” on December 31, 2008. Mr. Wallace has not provided notice of
35
intention to take early retirement. Covered compensation includes salary and non-equity incentive plan compensation as shown in the “Summary Compensation Table.” Other elements of compensation in the “Summary
35
Compensation Table” are not included in covered compensation. The normal monthly retirement benefit payable at age 65 is a life annuity with ten years guaranteed equal to3/4 of 1% of average monthly compensation up to $800 plus 1% of average monthly compensation over $800 times the years of credited service. The plan also provides for the payment of a death benefit before retirement that is the greater of the lump sum value of the accrued benefit under the pension plan or one times base pay with less than 10 years of service and 21/2 times base pay with more than 10 years of service. All of the named executive officers other than Mr. Carrillo participate in the Standard Pension Plan.
We have a Supplemental Retirement Plan that applies to Mr. Wallace. The Supplemental Retirement Plan provides that the amount of the annual retirement benefit under our Standard Pension Plan that is limited by reason of compliance with the Code is paid as a supplemental pension benefit. The benefit payment terms are the same as the terms of the Standard Pension Plan. The benefits are payable from the general assets of the Company. On February 13, 2009, the Board amended the Standard PensionSupplemental Retirement Plan and the Standard Pension Plan. As a result, all future benefit accruals under the Supplemental Retirement Plan. These amendments do not affectPlan and the Standard Pension Plan orautomatically ceased effective March 31, 2009 for all participants and the Supplemental Retirement Plan for 2008.accrued benefits under each plan were determined and frozen as of that date. These amendments are discussed in the Compensation Discussion and Analysis section under “Post-employment Benefits.”
Nonqualified Deferred Compensation
The table below shows the contributions by the executives and the Company, the aggregate earnings on nonqualified deferred compensation in 20082010 and the aggregate balance at year end under nonqualified deferred compensation plans of the Company.
Nonqualified Deferred Compensation Table
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Executive
| | | | Registrant
| | | | Aggregate
| | | | Aggregate
| | | | Executive
| | | Registrant
| | | Aggregate
| | | Aggregate
|
| | | | Contributions
| | | | Contributions
| | | | Earnings
| | | | Balance
| | | | Contributions
| | | Contributions
| | | Earnings
| | | Balance
|
| | | | in Last Fiscal
| | | | in Last Fiscal
| | | | in Last Fiscal
| | | | at Last Fiscal
| | | | in Last Fiscal
| | | in Last Fiscal
| | | in Last Fiscal
| | | at Last Fiscal
|
| Name | | | Year(1) | | | | Year(2) | | | | Year(3) | | | | Year End(1)(2)(3)(4) | | | | Year(1) | | | Year(2) | | | Year(3) | | | Year End(4) |
| Timothy R. Wallace | | | $ | 125,357 | | | | $ | 352,272 | | | | $ | (274,246 | ) | | | $ | 2,088,060 | | | | $ | 57,625 | | | | $ | 194,854 | | | | $ | 94,900 | | | | $ | 3,032,715 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| William A. McWhirter | | | | 18,700 | | | | | 101,691 | | | | | (5,431 | ) | | | | 519,306 | | |
| | | | | | | | | | | | | | | | | | | | | | |
| Mark W. Stiles | | | | 23,636 | | | | | 118,702 | | | | | 4,655 | | | | | 624,980 | | |
| James E. Perry | | | | | 12,624 | | | | | 32,346 | | | | | 9,930 | | | | | 127,989 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| D. Stephen Menzies | | | | — | | | | | 112,982 | | | | | (28,136 | ) | | | | 624,696 | | | | | — | | | | | 72,405 | | | | | 40,185 | | | | | 886,616 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| William A. McWhirter | | | | | 18,275 | | | | | 72,483 | | | | | 44,695 | | | | | 805,454 | |
| | | | | | | | | | | | | | | | | | |
| Antonio Carrillo | | | | | 16,125 | | | | | 58,439 | | | | | 9,558 | | | | | 149,014 | |
| | | | | | | | | | | | | | | | | | |
| S. Theis Rice | | | | — | | | | | 67,815 | | | | | — | | | | | 67,815 | | | | | — | | | | | 46,944 | | | | | 6,414 | | | | | 178,709 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
| (1) | | Salary and incentive compensation deferrals to the Company’s Supplemental Plan. The amounts are also included in the “Summary Compensation Table” for 2008.2010. |
| |
| (2) | | Includes an amount equal to ten percent10% of the salaries and incentive compensation set aside pursuant to the Deferred Compensation Plan for Messrs. Wallace $262,114;$150,917; Perry $27,562; Menzies $72,405; McWhirter $92,341; Stiles $112,982; Menzies $112,982;$63,346; Carrillo $50,376 and Rice $67,815$46,944 and matching amounts under the Company’s Supplemental Plan for Messrs. Wallace $90,158;$43,937; Perry $4,784; McWhirter $9,350;$9,137; and Stiles $5,720.Carrillo $8,063. These amounts are also included in the “Summary Compensation Table” for 2008.2010. |
| |
| (3) | | This column represents lossesearnings in the Supplemental Plan and earnings in the Deferred Compensation Plan. For Messrs. Wallace, McWhirter, Stiles, and Menzies, lossesEarnings in the Supplemental Plan were $(356,331); $(31,193); $(29,188); and $(60,105), respectively. Forwere: Messrs. Wallace $11,752; Perry $9,930; Menzies $6,566; McWhirter Stiles,$17,128; and Menzies, earningsCarrillo $9,558. Earnings in the Deferred Compensation Plan were $82,085; $25,762; $33,843;were: Messrs. Wallace $83,148; Menzies $33,619; McWhirter $27,567; and $31,969, respectively.Rice $6,414. The amounts reported in this table for the Deferred Compensation Plan are inclusive of above market earnings included in the “Summary Compensation Table” above. See Note (4)(5) to the “Summary Compensation Table.” |
36
| | |
| (4) | | This column includes amounts in the “Summary Compensation Table” for (i) an amount equal to ten percent of the salaries and incentive compensation set aside pursuant to the Deferred Compensation Plan in 20062009 for Messrs. Wallace $329,337;$189,050; Menzies $86,320; McWhirter $98,668; Stiles $130,668;$77,563; and Menzies $128,668Rice $54,066 and in 20072008 for Messrs. Wallace $309,182;$262,114; Menzies $112,982; McWhirter $112,818; Stiles $138,036;$92,341; and Menzies $138,036;Rice $67,815; (ii) matching amounts under the Company’s Supplemental Profit Sharing Plan in 20062009 for Messrs. Wallace $74,135; |
36
| | |
| | $62,678; and McWhirter $4,070; and Stiles $5,390$9,350; and in 20072008 for Messrs. Wallace $79,484;$90,158; and McWhirter $9,350; Stiles $5,720; and Menzies $36,897; and (iii) salary and incentive compensation deferrals to the Company’s Supplemental Profit Sharing Plan in 20062009 for Messrs. Wallace $158,968;$88,825; and McWhirter $8,140; Stiles $10,780; and Menzies $80,418$18,700; and in 20072008 for Messrs. Wallace $213,145;$125,357; and McWhirter $18,700; and Stiles $11,440.$18,700. |
Deferred Compensation Discussion
The Supplemental Plan was established for highly compensated employees who are limited as to the amount of deferrals allowed under the Company’s 401(k) plan. There is no limit on the percentage of salary or incentive pay that an executive may elect to defer into the Supplemental Plan. Participants must elect to defer salary prior to the beginning of the fiscal year and annual incentive pay prior to the beginning of the year to which the incentive payments relate. The first 6% of a participant’s base salary and bonus contributed to the Supplemental Plan, less any compensation matched under the 401(k) plan, may be matched from 25% to 50% by the Company based on years of service. The Company’s match vests 20% for each year of service up to 100% after five years. Participants may choose from several mutual fund likefund-like deemed investments.
If elected at the time of enrollment, participants may take an in-service distribution of deferrals three years after the end of the plan year in which the deferral was made. Amounts are paid out immediately on death or disability. Upon termination of employment, amounts in the Supplemental Plan are paid out beginning 6six months after termination of employment in lump sum or annual installments from one to 20 years according to election of the Participant.participant.
Each named executive officer participates in the Deferred Compensation Plan which is an unfunded long term plan whereby an amount equal to 10% of salary and annual incentive compensation is set aside in an account on the books of the Company. The account is credited monthly with an interest rate equivalent as determined annually by the HR Committee (83/4%(5% for 2006 and 73/4% for 2007 and 2008)2010). The account is payable to the participant in a lump sum or annual installments from one to 20 years. Payments commence one year after termination and are subject to compliance with non-compete provisions for one year after termination and the participant must be available for consultation for one year after termination.
On February 13, 2009, the Board amended the 401(k) Plan to allow the participants in the Standard Pension Plan to participate in the enhanced portion of the 401(k) Plan. This amendment is discussed in the Compensation Discussion and Analysis section under “Post-employment Benefits.”
Potential Payments Upon Termination or Change in Control
Named executive officers that terminate voluntarily, involuntarily, by death or by disability have the same death and disability benefits that are available to the majority of salaried employees. While employed by us, salaried employees have a death benefit equal to the greater of their accrued benefit under the pension plan or one year of base salary for less than 10 years of service and 21/2 times base salary for over 10 years of service. Our long term disability plan provides salaried employees with a disability benefit after six months of disability of 60% of base salary up to a maximum of $12,000 a month while disabled and until normal retirement at age 65. Pension benefits payable at retirement are described under “Pension Benefits” and deferred compensation benefits that are payable on termination are described under “Deferred Compensation Discussion.”
Stock options and restricted stock held by the named executive officers have no acceleration of vesting upon voluntary or involuntary termination but vesting is accelerated on death, disability, and in some cases retirement. Pursuant to the terms of the Executive Severance Agreement described below, stock options, restricted stock, and benefits under the Supplemental Plan, Deferred Compensation Plan, and 401(k) Plan vest upon a change in control. The annual incentive compensation agreements also provide that in the event of a change in control, the named executive officers will be paid a proration of the target bonus for the year in which the change in control occurs as of the date of the change in control.
37
The following table provides the dollar value of (i) accelerated vesting of stock options and restricted stock and (ii) the payment of annual incentive compensation assuming each of the named executive officers had been terminated by death, disability, or retirement on December 31, 2008,2010, or a change in control occurred on December 31, 2008.2010.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Timothy R.
| | | | William A.
| | | | Mark W.
| | | | D. Stephen
| | | | S. Theis
| | | | Timothy R.
| | | James E.
| | | D. Stephen
| | | William A.
| | | Antonio
| | | S. Theis
|
| | | | Wallace | | | | McWhirter | | | | Stiles | | | | Menzies | | | | Rice | | | | Wallace | | | Perry | | | Menzies | | | McWhirter | | | Carrillo | | | Rice |
| Death | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Stock Options | | | $ | — | | | | $ | — | | | | $ | 6,096 | | | | $ | — | | | | $ | 26,560 | | | | $ | 881,450 | | | | $ | 129,625 | | | | $ | 466,650 | | | | $ | 414,800 | | | | $ | 311,100 | | | | $ | 259,250 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Restricted Stock | | | | 7,490,444 | | | | | 2,547,730 | | | | | 2,657,924 | | | | | 2,094,504 | | | | | 1,016,378 | | | | | 11,558,453 | | | | | 1,324,646 | | | | | 3,508,529 | | | | | 4,503,104 | | | | | 3,023,508 | | | | | 1,871,029 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total | | | | 7,490,444 | | | | | 2,547,730 | | | | | 2,664,020 | | | | | 2,094,504 | | | | | 1,042,938 | | | | | 12,439,903 | | | | | 1,454,271 | | | | | 3,975,179 | | | | | 4,917,904 | | | | | 3,334,608 | | | | | 2,130,279 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Disability | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Stock Options | | | | — | | | | | — | | | | | 6,096 | | | | | — | | | | | 26,560 | | | | | 881,450 | | | | | 129,625 | | | | | 466,650 | | | | | 414,800 | | | | | 311,100 | | | | | 259,250 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Restricted Stock | | | | 7,490,444 | | | | | 2,547,730 | | | | | 2,657,924 | | | | | 2,094,504 | | | | | 1,016,378 | | | | | 11,558,453 | | | | | 1,324,646 | | | | | 3,508,529 | | | | | 4,503,104 | | | | | 3,023,508 | | | | | 1,871,029 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total | | | | 7,490,444 | | | | | 2,547,730 | | | | | 2,664,020 | | | | | 2,094,504 | | | | | 1,042,938 | | | | | 12,439,903 | | | | | 1,454,271 | | | | | 3,975,179 | | | | | 4,917,904 | | | | | 3,334,608 | | | | | 2,130,279 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Retirement | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Stock Options | | | | — | | | | | — | | | | | 6,096 | | | | | — | | | | | 26,560 | | | | | 881,450 | | | | | 129,625 | | | | | 466,650 | | | | | 414,800 | | | | | 311,100 | | | | | 259,250 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Restricted Stock | | | | 4,683,588 | | | | | 1,232,826 | | | | | 1,819,492 | | | | | 1,256,072 | | | | | 678,074 | | | | | 5,182,697 | | | | | 66,525 | | | | | 1,313,204 | | | | | 2,064,936 | | | | | 567,059 | | | | | 824,910 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total | | | | 4,683,588 | | | | | 1,232,826 | | | | | 1,825,588 | | | | | 1,256,072 | | | | | 704,634 | | | | | 6,064,147 | | | | | 196,150 | | | | | 1,779,854 | | | | | 2,479,736 | | | | | 878,159 | | | | | 1,084,160 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Change in Control | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Stock Options | | | | — | | | | | — | | | | | 6,096 | | | | | — | | | | | 26,560 | | | | | 881,450 | | | | | 129,625 | | | | | 466,650 | | | | | 414,800 | | | | | 311,100 | | | | | 259,250 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Restricted Stock | | | | 7,490,444 | | | | | 2,547,730 | | | | | 2,657,924 | | | | | 2,094,504 | | | | | 1,016,378 | | | | | 11,558,453 | | | | | 1,324,646 | | | | | 3,508,529 | | | | | 4,503,104 | | | | | 3,023,508 | | | | | 1,871,029 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Annual Incentive Compensation | | | |
855,000 | | | | |
255,000 | | | | |
312,000 | | | | |
312,000 | | | | |
182,500 | | |
| Annual Incentive | | | | | | | | | | | | | | | | | | | | | | | | | |
| Compensation | | | | | 855,000 | | | | | 178,000 | | | | | 312,000 | | | | | 318,750 | | | | | 225,000 | | | | | 182,500 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total | | | | 8,345,444 | | | | | 2,802,730 | | | | | 2,976,020 | | | | | 2,406,504 | | | | | 1,225,438 | | | | | 13,294,903 | | | | | 1,632,271 | | | | | 4,287,179 | | | | | 5,236,654 | | | | | 3,559,608 | | | | | 2,312,779 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Each of the named executive officers has entered into an Executive Severance Agreement (the “Agreement”) with the Company. In addition to the acceleration of vesting upon a change in control as described above, the Agreement provides for compensation if the named executive officer’s employment is terminated under one of the circumstances described in the Agreement in connection with a “change in control” of the Company. A “change in control” is generally defined as (i) any other person or entity acquires beneficial ownership of 30% or more of our outstanding common stockCommon Stock or the combined voting power over our outstanding voting securities unless the transaction resulting in the person becoming the beneficial owner of 30% or more of the combined voting power is approved in advance by the Company’s Board; (ii) the incumbent directors cease for any reason to constitute at least a majority of the Board; (iii) the completion of certain corporate transactions including a reorganization, merger, statutory share exchange, consolidation or similar transaction, a sale or other disposition of all or substantially all of our assets, or the acquisition of assets or stock of another entity, subject to certain exceptions; or (iv) our shareownersstockholders approve a complete liquidation or dissolution of the Company. See “Change in Control Agreements” under Compensation Discussion and Analysis section.
The Agreements are for continuous two-year terms until terminated by the Company upon specified notice and continue for two years following a change in control. The Agreements provide that if there is a change in control of the Company and if the Company terminates the executive’s employment other than as a result of the executive’s death, disability or retirement, or for “cause,” or if the executive terminates his or her employment for “good reason,” then the Company will pay to such executive a lump sum equal to three times (i) the amount of the executive’s base salary, (ii) the annual perquisite allowance, and (iii) the higher of the average bonus earned over the previous three years or the target bonus for the fiscal year in which the change in control occurs.
“Cause” is generally defined as a participant’s (i) willful and continued failure to substantially perform his employment duties with the Company; (ii) misappropriation or embezzlement from the Company or any other act or acts of dishonesty by the participant constituting a felony that results in gain to the participant at the Company’s
38
expense; (iii) conviction of the participant of a felony involving moral turpitude; or (iv) the refusal of the participant to accept offered employment after a change in control.
“Good reason” is generally defined as, following a change in control, (i) a material adverse change in a participant’s working conditions or responsibilities; (ii) assignment to the participant of duties inconsistent with the participant’s position, duties, and reporting responsibilities; (iii) a change in the participant’s titles or offices; (iv) a reduction in the participant’s annual base salary; (v) a material reduction in the participant’s benefits, in the aggregate, under the benefits plans, incentive plans, and securities plans; (vi) failure to provide a participant with the number of paid vacation days entitled at the time of a change in control; (vii) any material breach by the Company of the Agreement; (viii) any successor or assign of the Company fails to assume the Agreement; (ix) the relocation of the participant’s principal place of employment outside of Dallas County, Texas; (x) voluntary resignation by the participant, or termination of employment by reason of the participant’s death or disability, at any time during either a90-day period beginning after a change in control or the30-day period beginning on the 365th365th day after a change in control; or (xi) any purported termination not conducted pursuant to a notice of termination by the Company.
The severance benefits provided by the Agreements also include continuation of all medical, dental, vision, health, and life insurance benefits to which each executive would have been entitled if the executive had continued in the employment of the Company for 36 months after the executive’s termination and a lump sum equivalent to the amount of income tax payable due to the continuation of insurance benefits, and a lump sum equivalent to the value of an annuity payable at age 65 with 36 months of additional service without regard to limitations imposed by the Code, less the benefit actually accrued under the pension plan. Effective April 1, 2009, all future benefits under the Standard Pension Plan and the Supplemental Retirement Plan automatically ceased for all participants. Accordingly, the lump sum equivalent to the value of an annuity payable at age 65 is no longer applicable.benefits.
The Agreements further provide that if any payment to which the executive is entitled would be subject to the excise tax imposed by Section 4999 of the Code, then the Company will pay to the executive an additional amount so that the net amount retained by the executive is equal to the amount that otherwise would be payable to the executive if no such excise tax has been imposed. The Agreements were amended in September 2008 in order to comply with Section 409A of the Code and such amendments did not materially affect the scope or amount of benefits provided.
If each named executive officer’s employment had been terminated on December 31, 20082010 under one of the circumstances described in the Agreement in connection with a change in control of the Company, the named executive officers would have received the following:
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | Increase in
| | | | | | | | | | |
| | | | | | | | | | | | Present
| | | | | | | | | | |
| | | | | | | | | | | | Value of
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Cash
| | | | Continuation
| | | | Pension
| | | | Estimated
| | | | | | | | Cash
| | | Continuation
| | | Estimated
| | | |
| Name | | | Compensation(1) | | | | of Benefits(2) | | | | Benefits(3) | | | | Gross-up(4) | | | | Total | | | | Compensation(1) | | | of Benefits(2) | | | Gross-up(3) | | | Total |
| Timothy R. Wallace | | | $ | 9,749,583 | | | | $ | 450,526 | | | | $ | 1,123,000 | | | | $ | — | | | | $ | 11,323,109 | | | | $ | 7,817,204 | | | | $ | 36,561 | | | | $ | — | | | | $ | 7,853,765 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| William A. McWhirter | | | | 3,247,206 | | | | | 450,526 | | | | | 936,000 | | | | | 2,249,826 | | | | | 6,883,558 | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Mark W. Stiles | | | | 4,129,396 | | | | | 450,526 | | | | | 2,114,000 | | | | | 2,440,481 | | | | | 9,134,403 | | |
| James E. Perry | | | | | 791,063 | | | | | 28,032 | | | | | 546,880 | | | | | 1,365,975 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| D. Stephen Menzies | | | | 4,007,227 | | | | | 450,526 | | | | | 717,000 | | | | | 2,057,504 | | | | | 7,232,257 | | | | | 3,490,382 | | | | | 41,334 | | | | | — | | | | | 3,531,716 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| William A. McWhirter | | | | | 2,922,841 | | | | | 60,504 | | | | | 1,645,476 | | | | | 4,628,821 | |
| | | | | | | | | | | | | | | | | | |
| Antonio Carrillo | | | | | 2,231,506 | | | | | 50,886 | | | | | — | | | | | 2,282,392 | |
| | | | | | | | | | | | | | | | | | |
| S. Theis Rice | | | | 2,496,890 | | | | | 450,526 | | | | | 1,051,000 | | | | | 1,670,299 | | | | | 5,668,715 | | | | | 2,131,276 | | | | | 60,504 | | | | | — | | | | | 2,191,780 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
| (1) | | Cash lump sum equal to three times base salary, perquisite allowance, and applicable bonus, except for Mr. Perry, for whom it was equal to one and a half times his base salary, perquisite allowance, and applicable bonus. |
| |
| (2) | | Estimated cost of continuation for 36 months of medical and life insurance benefits. |
| |
| (3) | | Cash lump sum payment for the increase in present value of pension benefits. Effective April 1, 2009, all future benefits under the Standard Pension Plan and the Supplemental Retirement Plan automatically ceased for all participants. Accordingly, the lump sum equivalent to the value of an annuity payable at age 65 is no longer applicable. |
|
(4) | | Estimated gross up of income, employment, and change in control excise taxes. The calculations for Mr.Messrs. Wallace, Carrillo, and Rice did not result in excise taxes under Code Section 280G; therefore, nogross-up payments would have been paid if histheir employment had been terminated on December 31, 2008.2010. |
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Director CompensationDIRECTOR COMPENSATION
The following table summarizes the compensation paid by the Company to non-employee directors for the fiscal year ended December 31, 2008.2010.
Director Compensation Table
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | Change in
| | | | | | | | | | | | | | | Change in
| | | | | | |
| | | | | | | | | | Pension
| | | | | | | | | | | | | | | Pension
| | | | | | |
| | | | | | | | | | Value and
| | | | | | | | | | | | | | | Value and
| | | | | | |
| | | | Fees
| | | | | | Nonqualified
| | | | | | | | | Fees
| | | | | | Nonqualified
| | | | | | |
| | | | Earned
| | | | | | Deferred
| | | | | | | | | Earned
| | | | | | Deferred
| | | | | | |
| | | | or Paid
| | | Stock
| | | Compensation
| | | All Other
| | | | | | or Paid
| | | Stock
| | | Compensation
| | | All Other
| | | |
| | | | in Cash
| | | Awards
| | | Earnings
| | | Compensation
| | | Total
| | | in Cash
| | | Awards
| | | Earnings
| | | Compensation
| | | Total
|
| Name | | | ($)(1) | | | ($)(2)(3) | | | ($)(4) | | | ($)(5) | | | ($) | | | ($)(1) | | | ($)(2)(3) | | | ($)(4) | | | ($)(5) | | | ($) |
| John L. Adams | | | $ | 74,500 | | | | $ | 103,367 | | | | $ | 2,113 | | | | $ | — | | | | $ | 179,980 | | | | $ | 77,500 | | | | $ | 155,626 | | | | $ | 605 | | | | $ | 1,959 | | | | $ | 235,690 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Rhys J. Best | | | | 93,000 | | | | | 103,367 | | | | | — | | | | | — | | | | | 196,367 | | | | | 105,000 | | | | | 155,626 | | | | | — | | | | | 5,000 | | | | | 265,626 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| David W. Biegler | | | | 109,000 | | | | | 103,367 | | | | | 5,681 | | | | | 696 | | | | | 218,744 | | | | | 91,500 | | | | | 155,626 | | | | | 1,553 | | | | | 828 | | | | | 249,507 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Leldon E. Echols | | | | 87,000 | | | | | 120,454 | | | | | — | | | | | 603 | | | | | 208,057 | | | | | 95,000 | | | | | 155,626 | | | | | — | | | | | 4,335 | | | | | 254,961 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Ronald J. Gafford | | | | 80,000 | | | | | 103,367 | | | | | 18,000 | | | | | 2,442 | | | | | 203,809 | | | | | 74,000 | | | | | 155,626 | | | | | — | | | | | 5,706 | | | | | 235,332 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Ronald W. Haddock | | | | 90,000 | | | | | 103,367 | | | | | — | | | | | — | | | | | 193,367 | | | | | 81,500 | | | | | 155,626 | | | | | — | | | | | — | | | | | 237,126 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Jess T. Hay | | | | 98,500 | | | | | 103,367 | | | | | — | | | | | 2,500 | | | | | 204,367 | | | | | 92,000 | | | | | 155,626 | | | | | — | | | | | 5,000 | | | | | 252,626 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Adrian Lajous | | | | 87,000 | | | | | 103,367 | | | | | — | | | | | — | | | | | 190,376 | | | | | 85,000 | | | | | 155,626 | | | | | — | | | | | — | | | | | 240,626 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Charles W. Matthews | | | | | 56,667 | | | | | 209,845 | | | | | — | | | | | — | | | | | 266,512 | |
| | | | | | | | | | | | | | | | | | | | | | |
| Diana S. Natalicio | | | | 73,000 | | | | | 103,367 | | | | | — | | | | | 9,268 | | | | | 185,635 | | | | | 66,000 | | | | | 155,626 | | | | | — | | | | | 13,005 | | | | | 234,631 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Douglas L. Rock | | | | | 28,167 | | | | | 76,764 | | | | | — | | | | | 29 | | | | | 104,960 | |
| | | | | | | | | | | | | | | | | |
| | |
| (1) | | Includes amounts deferred under the 2005 Deferred Plan for Director Fees. |
| |
| (2) | | Stock awards are for restricted stock units awarded in 20082010 and the grant date fair value dollar amounts recognized for financial statement reporting purposes with respect to the fiscal year incomputed accordance with SFAS 123R.ASC Topic 718. Our policy and assumptions made in the valuation of share-based payments are contained in Note 1716 of Item 8 of the Company’sForm 10-K for the year-ended December 31, 2008. The SFAS 123R grant date fair value of the awards granted in 2008 was $93,070 for each director. The amount reported represents five months of amortization of the grant date fair value of the awards granted during 2007 and seven months of amortization of the grant date fair value of the awards granted during 2008 for Messrs. Adams, Best, Biegler, Gafford, Haddock, Hay, and Lajous and Dr. Natalicio. For Mr. Echols, the amount reported represents nine months of amortization of the grant date fair value of the awards granted during 2007 and seven months of amortization of the grant date fair value of the awards granted during 2008.2010. |
| |
| (3) | | Messrs. Adams, Best, Biegler, Echols, Gafford, Haddock, Hay, and Lajous and Dr. NatalicioAs of December 31, 2010, the directors had restricted stock units totaling 5,505; 9,255; 10,755; 5,349; 10,755; 9,255; 10,755; 8,305;as follows: Messrs. Adams 15,821; Best 19,571; Biegler 21,071; Echols 15,665; Gafford 21,071; Haddock 19,571; Hay 21,071; Lajous 18,621; Matthews 9,227; Rock 4,105; and 10,755, respectively,Dr. Natalicio 21,071. Includes the following amounts of stock options as of December 31, 2008.2010: Messrs. Adams, Best 3,750; Biegler 22,500; Gafford 7,500; Haddock and3,750; Hay 22,500; and Dr. Natalicio had stock options totaling 81,528; 3,750; 37,500; 26,250; 3,750; 45,000; and 45,000, respectively, as of December 31, 2008.22,500. |
| |
| (4) | | In 2005, the Board of Directors made amendments to the Directors Retirement Plan (the “DRP”) that were designed to discontinue the DRP. Before the addition of the two new directors in 2005, the DRP was amended to exclude new directors, and in December 2005 it was amended to terminate the interest of each fully vested non-employee director as of December 15, 2005, and to make provision to terminate the interest of the remaining directors who were not fully vested. The basic benefit of the DRP before it was amended was a monthly payment for ten years upon retirement, disability or death equal to a percentage of the annual retainer in effect at termination of Board service. The percentage was based upon the number of years of service, starting with 50% after five years of service and increasing 10% for each year up to 100% after ten years. Mr. Gafford is the remaining participating director who was not fully vested on December 15, 2005. He will receive a payout of benefits to the extent vested on the earlier of retirement, death, a change of control as defined by Section 409A of the Code, or after ten years of service on the Board with payment calculated on the same basis as used for termination of the fully vested directors’ interest in the DRP, except that the date for calculation of the present |
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| | |
| | value factor will be the date benefits are payable and not December 15, 2005. Includes for Messrs. Adams and Biegler the above market earnings from the interest rate equivalent under the 2005 Deferred Plan for Director Fees. |
| |
| (5) | | Includes dividend equivalents on stock units in director fee deferral plans. For Mr.Messrs. Best and Hay, includes a $2,500$5,000 matching contribution by the Company in histheir name pursuant to the Company’s Matching Gifts to Education Program.program of matching charitable contributions. The maximum annual contribution that may be matched under that Programprogram is $5,000 per individual. |
Director Compensation Discussion
Each director of the Company who is not a compensated officer or employee of the Company receives cash compensation as follows:
| | |
| | • | Board member — annual retainer of $50,000 |
| |
| | • | Presiding Director — annual retainer of $5,000 |
| |
| | • | Board meeting fee of $2,000 for each meeting attended |
| |
| | • | Audit Committee Chairman — annual retainer of $15,000 |
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| | |
| | • | Member of the Audit Committee — $2,000 for each meeting attended |
| |
| | • | Human Resources Committee Chairman — annual retainer of $7,500 |
| |
| | • | Chairman of other Board Committees — annual retainer of $5,000 |
| |
| | • | Member of other Board Committees — $1,500 for each meeting attended |
In addition, the Company shall pay a director a fee equal to $2,000 per day for ad hoc or special assignment work performed for or at the request of the Chairman, Chief Executive Officer, and President.
The Board has also established a cash equivalent value as a guide for annual equity compensation for directors of $100,000 and will use a 12 month average share price as the basis for future awards. In May 2008,2010, each director who was not also an executive officer of the Company was granted 2,8226,127 restricted stock units, with dividend equivalents, that are convertible into 2,8226,127 shares of common stockCommon Stock upon departure from the Board.
Non-employee directors may elect, pursuant to a 2005 Deferred Plan for Director Fees, to defer the receipt of all or a specified portion of the fees to be paid to him or her. Deferred amounts are credited to an account on the books of the Company and treated as if invested either at an interest rate equivalent (73/4%(5% in 2008 and 5% in 2009)2010) or, at the director’s prior election, in units of the Company’s common stockCommon Stock at the closing price on the New York Stock Exchange on the first tradinglast day of the quarter following the date that a payment is credited to the director’s account.account, or if the last day of the quarter is not a trading day, on the next succeeding trading day. Such stock units are credited with amounts equivalent to dividends paid on the Company’s common stock.Common Stock. Upon ceasing to serve as a director or a change in control, the value of the account will be paid to the director in annual installments not exceeding ten years according to the director’s prior election.
TRANSACTIONS WITH RELATED PERSONS
The Corporate Governance and Directors Nominating Committee has adopted a Policy and Procedures for the Review, Approval, and Ratification of Related Person Transactions. In accordance with the written policy, the Corporate Governance and Directors Nominating Committee, or the chair of such committee, as applicable, is responsible for the review, approval, and ratification of all transactions with related persons that are required to be disclosed under the rules of the SEC. Under the policy, a related person includes any of our directors, executive officers, certain stockholders, and any of their respective immediate family members. The policy applies to Related Person Transactions which are transactions in which the Company participates, a related person has a direct or indirect material interest, and the amount exceeds $120,000. Under the policy, the Chief Legal Officer (the “CLO”) will review potential transactions and in consultation with the CEO and CFO will assess whether the proposed transaction would be a Related Person Transaction. If the CLO determines the proposed transaction would be a Related Person Transaction, the proposed transaction is submitted to the Corporate Governance and Directors Nominating Committee, or the chair of such committee, as applicable, for review and consideration. In reviewing
41
Related Person Transactions, the Corporate Governance and Directors Nominating Committee, or the chair of such committee, as applicable, shall consider all relevant facts and circumstances available, including, but not limited to the following:
| | |
| | • | the benefits to the Company of the Related Person Transaction; |
| |
| | • | the impact of a director’s independence if the related person is a director, an immediate family member of a director or an entity in which a director is a partner, stockholder or executive officer; |
| |
| | • | the availability of other sources for comparable products and services; |
| |
| | • | the terms of the transaction; and |
| |
| | • | the terms available to unrelated third parties or employees generally. |
After reviewing such information, the Corporate Governance and Directors Nominating Committee, or the chair of such committee, as applicable, may approve the Related Person Transaction if the committee, or the chair of the committee, as applicable, concludes in good faith that the Related Person Transaction is in, or is not inconsistent with, the best interests of the Company and its stockholders.
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Under the policy, the HR Committee must approve hiring of immediate family members of executive officers or directors and any subsequent material changes in employment or compensation.
Employed family members of directors and executive officers with total compensation for 20082010 in excess of $120,000 are as follows:
| | |
| | • | Mr. Patrick S. Wallace, brother of Timothy R. Wallace, is an officer of a subsidiary of the Company. His total compensation was $943,652$702,440 for 2008,2010, which includes base salary; bonus; matching contributions to defined contribution plans; perquisite allowance; and the dollar amount recognized for financial statement reporting purposes with respectaggregate grant date fair value of all equity awards pursuant to the fiscal year in accordance with SFAS 123R.ASC 718. |
| |
| | • | Mr. W. Ray Wallace, father of Timothy R. Wallace, is the Formerformer Chairman and CEO of Trinity Industries, Inc. and is currently employed by the Company to provide consultation to the CEO and the Board and also serves asin an Advisory Director of the Company.capacity. His total compensation was $216,558$215,471 for 2008,2010, which includes base salary; personal use of company aircraft; the dollar value of the lost tax deduction for expenses that exceeded the amount reported as income related to the personal use of the Company’s aircraft; director meeting fees associated with attendance as an Advisory Director; andout-of-pocket medical reimbursement. In connection with Mr. Ray Wallace’s consulting role, the Company providesprovided an office space to Mr. Wallace.Wallace at a cost of $115,244 during 2010. For 2011, the arrangement with Mr. Ray Wallace provides that he will receive an annual salary of $5,000, reimbursement forout-of-pocket medical expenses, and use of the Company’s aircraft for up to 30 flight hours for the year. Mr. Ray Wallace’s agreement with the Company will be re-evaluated annually. |
| |
| | • | Mr. Webb Spradley,son-in-law of Mr. Hay, is employed byserves as a part-time employee of the Company in a non-executive officer capacity.providing international and other legal services. His total compensation was $309,241$99,847 for 2008,2010, which includes base salary; bonus;and matching contributions to a defined contribution plan;plan. The Company entered into an agreement with Mr. Spradley commencing August 1, 2009 for international and other legal services through December 31, 2011 on a transitional basis under which his total projected aggregate compensation for 2011 would be $99,847 which, provided he performs the transition services as required under the agreement, includes wages and matching contributions to a defined benefit contribution plan. |
Mr. Spradley is also Of Counsel to an outside law firm which provides the Company with certain legal services. Mr. Spradley is paid a percentage of his personal collections by such law firm. During 2010, Mr. Spradley received $23,000 pursuant to this arrangement related to legal services for the Company which were not covered by his part-time employment relationship described above.
| | |
| • | Mr. Luis Pardo,brother-in-law of Mr. Carrillo, is an officer of a subsidiary of the Company. His total compensation was $437,963 for 2010, which includes base salary; bonus; a contribution to a Mexican statutory pension; perquisite allowance; and the dollar amount recognized for financial statement reporting purposes with respectaggregate grant date fair value of all equity awards pursuant to the fiscal year in accordance with SFAS 123R.ASC 718. |
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