Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant x
Filed by a Party Other than the Registrant ¨
Check the appropriate box:
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Notice of Annual Shareholders Meeting
To be held March 8, 20125, 2014
To The Shareholders of Panhandle Oil and Gas Inc.:
Notice is hereby given that the annual meeting of the shareholders of Panhandle Oil and Gas Inc. (the “Company”) will be held at the WaterfordTower Hotel, formerly the Oklahoma City Marriott, 6300 Waterford Boulevard (63rd and North Pennsylvania),3233 Northwest Expressway, Oklahoma City, Oklahoma on Thursday,Wednesday, March 8, 2012,5, 2014, at 9:00 a.m.,1:30 p.m. local time, for the following purposes:
1.To elect the two nominees named in the accompanying proxy statement to serve as directors on the Company’s Board of Directors for terms of three years;
2.To elect the nominee named in the accompanying proxy statement to serve as a director on the Company’s Board of Directors for a term of one year;
3.To approve an amendment to the Panhandle Oil and Gas Inc. 2010 Restricted Stock Plan;
4.To ratify the appointment of Ernst & Young, LLP as our independent registered public accounting firm for the fiscal year ending September 30, 2014;
5.To hold an advisory vote on executive compensation;
6.To hold an advisory vote to determine the frequency of future advisory votes on executive compensation; and
7.To consider and act upon any other matter as may properly come before the meeting or any adjournment or postponement thereof.
Only holders of record of the Common Stock at the close of business on January 23, 201221, 2014 will be entitled to vote at the meeting and any adjournments or postponements.
By Order of the Board of Directors
Lonnie J. Lowry, Secretary |
Oklahoma City, Oklahoma
January 27, 201228, 2014
Your Vote Is Important.Important.
Whether Or Not You Expect To Attend The Meeting, Please Mark, Sign And Date The Enclosed Proxy And Mail It Promptly In The Postage-Paid Envelope Provided.
Please Vote!
Table OfContents
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Notice of Annual Meeting | 1 | |||
2 | ||||
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3 | ||||
PROPOSAL NO. 2 – ELECTION OF ONE DIRECTOR FOR A ONE YEAR TERM | ||||
ENDING IN 2015 | 3 | |||
Nominees for Election to the Board of Directors for Three Year Terms | ||||
Ending in 2017 | 4 | |||
Nominee for Election to the Board of Directors for a One Year Term | ||||
Ending in 2015 | 5 | |||
Directors Whose Terms Continue Beyond the | ||||
and Who | 6 | |||
7 | ||||
8 | ||||
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9 | ||||
10 | ||||
12 | ||||
12 | ||||
12 | ||||
13 | ||||
AND GAS INC. 2010 RESTRICTED STOCK PLAN | 13 | |||
Description of the Amended Restricted Stock Plan | 14 | |||
PROPOSAL NO. 4 – RATIFICATION OF SELECTION OF INDEPENDENT | ||||
REGISTERED PUBLIC ACCOUNTING FIRM | 18 | |||
Report of the Audit Committee | 18 | |||
Independent Accountants’ Fees and Services | 20 |
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PROPOSAL NO. 5 – ADVISORY VOTE ON EXECUTIVE COMPENSATION | 21 | |||
Executive Compensation Overview | 22 | |||
Summary of Current Compensation Program | 22 | |||
Financial and Operating Performance – Fiscal 2013 | 22 | |||
Information About our Executive Officers | 23 | |||
Compensation Discussion and Analysis | 23 | |||
Report of the Compensation Committee | 32 | |||
Executive Compensation | 32 | |||
ESOP Plan | 34 | |||
PROPOSAL NO. 6 – ADVISORY VOTE TO DETERMINE FREQUENCY OF | ||||
FUTURE ADVISORY VOTES ON EXECUTIVE COMPENSATION | 34 | |||
Stock Ownership of Certain Beneficial Owners | 35 | |||
Section 16(a) Beneficial Ownership Reporting Compliance | 35 | |||
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36 | ||||
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38 | ||||
APPENDIX A – Panhandle Oil and Gas Inc. Amended 2010 Restricted Stock Plan |
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Panhandle Oil and Gas Inc.
5400 N. Grand Boulevard, Suite 300
Oklahoma City, OK 73112-5688
Annual Shareholders Meeting
March 8, 20125, 2014
The accompanying proxy is solicited by the Board of Directors (the “Board”) of Panhandle Oil and Gas Inc., an Oklahoma corporation (the “Company”, “Panhandle”, “we”, “us” and “our”), for use at the Company’s annual shareholders meeting (the “meeting”) to be held at the WaterfordTower Hotel, formerly the Oklahoma City Marriott, 6300 Waterford Boulevard,3233 Northwest Expressway, Oklahoma City, Oklahoma, on Thursday,Wednesday, March 8, 2012,5, 2014, at 9:00 a.m.1:30 p.m. local time, and at any adjournment or postponement thereof, for the purposes set forth in the accompanying Notice of Annual Shareholders Meeting.
When the proxy is properly executed and returned, the shares it represents will be voted at the meeting in accordance with the directions noted thereon. If no direction is indicated, the persons named on the enclosed proxy will vote the proxy FOR the nominees for director in ProposalProposals No. 1 and No. 2 and FOR ratification of the appointment of our independent registered public accounting firm in ProposalProposals No. 2.3 through No. 6. Signed proxy cards without specified choices will be voted in the discretion of the proxies. Should other matters properly come before the meeting, the proxy will be voted as the Board may recommend, except proxies which are marked to deny discretionary authority.
If the enclosed form of proxy is executed and returned, it still may be revoked at any time before it is exercised by signing and sending to the Company a later dated proxy or a written revocation, or by attending the meeting and voting in person.
If your shares are held in “street name” (that is, through a bank, broker or other nominee), follow the voting instructions on the form you receive from such firm. IfIf you hold shares in “street name” and would like to attend the meeting and vote in person, you will need to bring a proxy to the meeting signed by the nominee in whose name your shares are registered.
The mailing address of the Company is 5400 N. Grand Boulevard, Suite 300, Oklahoma City, OK 73112-5688. The Company anticipates that the proxies and proxy statements will be mailed to shareholders beginning on or about January 27, 2012.28, 2014. A copy of the Company’sCompany’s Annual Report to Shareholders for the fiscal year ended September 30, 20112013 accompanies this proxy statement.
The cost of soliciting proxies for the meeting will be paid by the Company. In addition to solicitation by mail, arrangements may be made with brokerage firms, banks and other custodians, nominees and fiduciaries to send proxy material to their principals. The Company will reimburse these institutions for their reasonable costs.costs. No solicitation is to be made by specially engaged employees or other paid solicitors.
Important Notice Regarding the Availability of Proxy Materials for the Shareholders Meeting to be held on March 8, 2012:5, 2014: this proxy statement, form of proxy and the Company’s 20112013 Annual Report to Shareholders are available at the following website:www.proxydocs.com/phx.
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All holders of Common Stock of record at the close of business on January 23, 201221, 2014 will be entitled to vote at the meeting or any adjournments or postponements. As of January 23, 2012,21, 2014, there were 8,304,5528,319,961 shares of Class A Common Stock, par value $0.01666 (“Common Stock”), outstanding, entitled to vote, owned by approximately 4,0003,700 shareholders. A list of record shareholders entitled to vote at the meeting will be available for examination at least 10 days prior to the meeting at the Company’s offices during ordinary business hours and at the meeting.
The Amended Certificate of Incorporation of the Company provides for one vote for each share of Common Stock outstanding. At the meeting, each record holder of Common Stock will be entitled to cast one vote per share of Common Stock held of record on the record date. Votes may be cast by shareholders either present in person or by proxy.
The presence, in person or by proxy, of a majority of the outstanding shares of Common Stock entitled to vote is necessary to constitute a quorum for the transaction of business at the meeting. Abstentions and broker “non-votes” are counted as present and entitled to vote for the purpose of determining a quorum. Broker “non-votes” are shares held by brokers or nominees over which the broker or nominee lacks discretionary power to vote (such as for the election of directors) and for which the broker or nominee has not received specific voting instructions from the beneficial owner. For purposes of determining the outcome of any matter as to which the broker or nominee has indicated on the proxy that it does not have discretionary authority to vote, those shares will be treated as not present and not entitled to vote with respect to that particular matter, even though those shares will be considered present and entitled to vote for purposes of determining a quorum and may be entitled to vote on other matters.
Under the rules of the New York Stock Exchange, brokers or their nominees do not have the discretionary power to vote shares in uncontested director elections.on most matters. At the meeting, they may only vote shares for the election of directors if they receive specific voting instructions from the beneficial owner. In very limited circumstances, brokers generally do have discretion to vote on matters deemed to be routine. If your shares are held by a broker or other nominee and if you do not provide such specific voting instructions, your shares can notcannot be voted for the election of directors.directors or any Proposal other than ratification of the appointment of our independent registered public accounting firm.
The Board has adopted a majority vote standard for the election of directors in uncontested director elections. Accordingly, at the meeting, each nominee will be elected if the holders of a majority of shares of Common Stock present at the meeting and entitled to vote for the election of directors cast their votes “FOR” the nominee.
The twothree nominees for director at the meeting are currently directors of the Company. If any incumbent nominee for director fails to receive the required affirmative vote of the holders of a majority of the votes cast for that director, under Oklahoma law and the Company’s Bylaws, the incumbent will remain in office until his successor is elected and qualified or until his earlier death, resignation, retirement or removal. If any incumbent for director receives a greater number of votes “WITHHELD” from his election than votes “FOR”, he must promptly submit his offer of resignation from the Board for consideration by the Corporate Governance and Nominating Committee of the Board. The Corporate Governance and Nominating Committee will consider all relevant facts and circumstances and recommend to the Board the action to be taken with respect to such offer of resignation. The Board will act on the offered resignation, taking into account such
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recommendation, and publicly disclose its decision regarding the offered resignation within 90 days from the date of the annual meeting. The director who offered his resignation will not participate in any proceedings with respect to his offered resignation. If the Board accepts a director’s offered resignation, the Corporate Governance and Nominating Committee will recommend to the Board whether to fill such vacancy or reduce the size of the Board. The Company’s Corporate Governance Guidelines and Bylaws can be viewed at the Company’s website:www.panhandleoilandgas.com. www.panhandleoilandgas.com.
ProposalProposals No. 23 through No. 6 will be approved if the holders of a majority of shares of Common Stock present at the meeting and entitled to vote on each such Proposal No. 2 vote “FOR”“FOR” the proposal.Proposal.
The Company knows of no arrangements which would result in a change in control of the Company at any future date.
The Company knows of no other matters to come before the meeting. The Company did not receive any shareholder proposals. If any other matters properly come before the meeting, the proxies solicited hereby will be voted on such matters as the Board may recommend, except proxies which are marked to deny discretionary authority.
A proxy is enclosed for your signature. Please return it immediately, marked, dated and signed. If your shares are held in “street name”, please provide voting instructions on the form you receive from your broker or other nominee.
The present directors of the Company and their current Board Committee memberships are as follows:
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Name |
Age | Positions/Offices Presently Held with the Company | Served As Director Since | Present Term Ends |
Michael C. Coffman | 60 | Director, President and Chief Executive Officer | 2006 | 2014 |
Duke R. Ligon (1)(3) | 72 | Director | 2007 | 2014 |
Robert O. Lorenz (1)(2) | 67 | Lead Independent Director | 2003 | 2016 |
Robert A. Reece (1)(3) | 69 | Director | 1986 | 2014 |
Robert E. Robotti (2)(3) | 60 | Director | 2004 | 2016 |
Darryl G. Smette (1)(2) | 66 | Director | 2010 | 2015 |
H. Grant Swartzwelder (2)(3) | 50 | Director | 2002 | 2015 |
(1)Member of the Audit Committee. (2)Member of the Compensation Committee. (3)Member of the Corporate Governance and Nominating Committee. |
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Name | Age | Positions/Offices Presently Held with the Company | Served As Director Since | Present Term Ends | ||||
Bruce M. Bell (2)(3) | 70 | Director | 2004 | 2013 | ||||
Michael C. Coffman | 58 | Director, President and Chief Executive Officer | 2006 | 2014 | ||||
E. Chris Kauffman (2)(4) | 71 | Director | 1991 | 2012 | ||||
Duke R. Ligon (1)(3) | 70 | Director | 2007 | 2014 | ||||
Robert O. Lorenz (1)(2) | 65 | Lead Independent Director | 2003 | 2013 | ||||
Robert A. Reece (1)(4) | 67 | Director | 1986 | 2014 | ||||
Robert E. Robotti (1)(2) | 58 | Director | 2004 | 2013 | ||||
Darryl G. Smette (1)(2) | 64 | Director | 2010 | 2012 | ||||
H. Grant Swartzwelder (3)(4) | 48 | Director | 2002 | 2012 |
Under Oklahoma law,The Board believes it is in the Company is requiredCompany's best interest to continue to have a classified board structure with three year terms for its directors due to the uniqueness of Company assets, strategies and the minimal amount of shares outstanding. Panhandle's ownership of perpetual fee mineral acres leads the Company to employ business strategies that are more long-term results oriented as compared to more traditional oil and gas companies. This requires the Company's directors to have a long-term outlook and understanding rather than being focused on short term results. This long-term results oriented focus has served the Company well, with demonstrated operating and financial results that continue to create value for our shareholders. Maintaining a consistent focus by a long-term oriented board is imperative and maintaining longer service for our board of directors that is divided into two orimportant in order to execute the overall strategy of Panhandle.
Nominees for the vacancies for the three classes.
The nominee to fill the third vacancy for a one year term ending in 2015 is Duke R. Ligon, who is a current director.
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The Board is divided into three classes, with the terms of office of each class ending in successive years. Each director is elected for a three year term. There are three directors whose terms expire in 2014 so normally three nominees would be proposed to fill the three vacancies with three year terms ending 2017. Duke R. Ligon is one of the directors whose term expires in 2014. When Mr. Ligon was re-elected to a three year term in 2011, he was 69 years of age. The Company’s Bylaws provide that, at the time of re-election, a director must be less than 70 years of age, unless, in the sole discretion of the Board, a director who is over 70 may be re-elected for one additional term of one year. The Board has determined to nominate Mr. Ligon for an additional term of one year ending in 2015. At the 2015 Annual Shareholders Meeting, a person will be nominated to serve the remaining two vacanciesyears of what would have been a three year term for Mr. Ligon. This will allow the three-year terms endingCompany to have its three classes of directors as nearly equal in 2012. Nominees fornumber as possible with the vacancies are Darryl G. Smette and H. Grant Swartzwelder, bothterm of whom are currently directors. office of one class expiring each year.
These twothree nominees were recommended by the Corporate Governance and Nominating Committee and approved by the Board. The Board has no reason to believe that either of the nomineesany nominee will be unable to serve as director. However, if eitherany nominee should be unable for any reason to accept nomination or election, it is the intention of the persons named in the enclosed proxy to vote those proxies for the election of such other person or persons as the Board may recommend.
The other director whose term expires in 2012 is E. Chris Kauffman. Mr. Kauffman is not eligible for re-election because he has reached age 70. Pursuant to the Company’s Bylaws, a person may not stand for election or re-election as a director after attaining the age of 70.
The Board currently intends to reduce the size of the Board from nine to eight members rather than elect a replacement for Mr. Kauffman.
Nominees for Election to the Board of Directors For Terms Ending in 2015
Darryl G. Smette joined Devon Energy Corporation (oil and gas exploration, production and transportation) in 1986 and currently serves as Executive Vice President of Marketing, Midstream and Supply Chain. Mr. Smette is a member of Devon’s Capital Budget Committee and the senior management Executive Committee and as such is charged with developing and executing Devon’s corporate strategy. Mr. Smette is also responsible for marketing, midstream operations and procurement and logistics of goods and services. Prior to joining Devon, Mr. Smette worked in the oil and gas industry for 15 years. Mr. Smette holds an MBA degree. He was elected to the Board in August 2010.
Mr. Smette’s qualifications to serve on the Board are his extensive operational experience in the oil and gas industry, including, exploration, production, distribution and marketing, and in developing and executing the corporate business strategies for a major independent oil and gas company.
H. Grant Swartzwelder is president of PetroGrowth Advisors and Pg Energy Holdings, LP, both in Irving, Texas (investment banking and venture capital) and both of which he founded in 1998. Since 1998, he has founded and managed several private companies engaged in various aspects of the oil and gas service business. Prior to 1998, he was vice president of Principal Financial Securities, Inc., Dallas, Texas (an investment-banking firm). He holds a Bachelor of Science degree in Petroleum Engineering and an MBA degree.
Mr. Swartzwelder’s qualifications to serve on the Board include his investment banking and venture capital experience, his founding and management of several oil and gas service businesses and his background in petroleum engineering.
The Board of Directors Recommends That The Shareholders
Vote “FOR” The Election of
Darryl G. Smette And H. Grant Swartzwelder
As Directors
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Directors Whose Terms Continue Beyond the 2012 Annual Meeting and Who Are Not Subject to Election this Year
Directors Whose Terms End in 2013
Dr. Bruce M. Bell has been CEO of Post Oak Oil Company (oil and gas exploration and production) since 1983 and president and CEO of Edrio Oil Co. Inc. (oil and gas exploration and production) since 1982, both of Oklahoma City. He served as chairman of the Mid-Continent Oil & Gas Association (oil and gas trade association) from 1997 to 2006. Dr. Bell holds a Ph.D. degree in paleontology.
Dr. Bell’s qualifications to serve on the Board include operating oil and gas exploration and production companies for over 30 years and his chairmanship for 10 years of a major oil and gas trade association.
Robert O. Lorenz is a former audit partner of Arthur Andersen LLP. He served as the managing partner of the Oklahoma City office beginning in 1994 and as the managing partner of the Oklahoma practice beginning in 2000. He retired from Arthur Andersen in 2002. Since 2005, Mr. Lorenz has been a director of OGE Energy Corp. (regulated electric utility and natural gas transportation), and was a director of Infinity Inc. (oil and gas exploration and development) from 2004 to 2009. He also served as a director of Kerr-McGee Corporation (oil and gas exploration and production) from 2005 to 2006 when it was acquired by Anadarko Petroleum Corp.
Mr. Lorenz’s qualifications to serve on the Board include over 30 years in public accounting, his expertise in the areas of finance and accounting, and his broad experience as a director of large public companies.
Robert E. Robotti, since 1983, has been the president of Robotti & Company, LLC (a registered broker-dealer), president of Robotti & Company Advisors, LLC (a registered investment advisor), or their predecessors, and, since 1980, has been the managing member of Ravenswood Investment Company, LLC, which serves as the general partner of three investment partnerships, all located in New York City. Since 2007, Mr. Robotti has served as a portfolio manager and managing member of Robotti Global Fund, LLC, a global equity fund. Mr. Robotti has been a director of Pulse Seismic, Inc. (oil and gas seismic) since 2007 and, from November 2006 to January 2007, he was a director of Advanced Marketing Services (book distribution) which filed for bankruptcy in December 2007. Mr. Robotti holds an MBA degree. He is a member of the New York Society of Security Analysts.
Mr. Robotti’s qualifications to serve on the Board include his vast experience in the investment business as the owner of a registered broker-dealer and registered investment advisor, as the manager of several investment partnerships and as a portfolio manager of a global equity fund. He has served as a director of several public companies.
Michael C. Coffman has worked in public accounting and as a financial officer with companies involved in the oil and gas industry since 1975. He joined the Company in 1990 as its treasurer. From 1995 to 2006, he served as vice-president and chief financial officer. From 2006 to August 2007, he served as co-president and chief financial officer. Since August 2007, he has served as president and chief executive officer. He was elected to the Board in 2006. Since January 1, 2013, Mr. Coffman has been a director of the Oklahoma City branch of the Federal Reserve Bank of Kansas City and he has been a director of Equal Energy Ltd. (oil and gas production) since May 2013. (4) Mr. Coffman’s qualifications to serve on the Board include his Robert A. Reece is an attorney and since 1980 has been of counsel with the law firm of Crowe & Dunlevy, Oklahoma City, and active in the management of his family’s investments, including significant oil and gas holdings. He has been a director of NBC Bank (a state chartered bank) of Oklahoma City since 1982. He holds an MBA degree. Mr. Reece was elected to the Board in 1986. Mr. Reece’s qualifications to serve on the Board include extensive experience in the legal, oil and gas and private equity investment fields. Mr. Reece has managed significant investments for his family for over 35 years. The Board of Directors Recommends That The Shareholders Vote “FOR” The Election of Michael C. Coffman And Robert A. Reece As Directors Duke R. Ligon is an attorney and currently is the owner and manager of Mekusukey Oil Company LLC (oil and gas royalty company). He served as senior vice president and general counsel of Devon Energy Corporation (oil and gas exploration, production and transportation) from 1997 until he retired in 2007. Prior to 1997, Mr. Ligon was a partner in the law firm of Mayer Brown LLP, New York City. From 2007 to 2010, he served as strategic advisor to Love’s Travel Stops and Country Stores (convenience stores and midstream energy transportation). He has been a director of PostRock Energy Corporation (oil and natural gas transportation) since 2006, Mr. Ligon brings expertise to the Board in legal, investment banking and financial matters having practiced law in a large New York law firm, worked in the investment banking business and served as general counsel of a (5) The Board of Directors Recommends That The Shareholders Vote “FOR” The Election of Duke R. Ligon As A Director Directors Whose Terms Continue Beyond the 2014 Annual Meeting and Who are Not Subject to Election this Year Directors Whose Terms End in 2015 Darryl G. Smette joined Devon Energy Corporation (oil and gas exploration, production and transportation) in 1986 and currently serves as Executive Vice President of Marketing, Midstream and Supply Chain. Mr. Smette is Mr. H. Grant Swartzwelder is president of PetroGrowth Advisors and PG Energy Holdings, LP, Irving, Texas (investment banking and venture capital), both of which he founded in 1998. Since 1998, he has founded and managed several private companies engaged in various aspects of the oil and gas service business. Prior to 1998, he was vice president of Principal Financial Securities, Inc., Dallas, Texas (an investment-banking firm). He holds a Bachelor of Science degree in Petroleum Engineering and an MBA degree. He was elected to the Board in 2002. Mr. Swartzwelder’s qualifications to serve on the Board include his investment banking and venture capital experience, his founding and management of several oil and gas service businesses and his background in petroleum engineering. Directors Whose Terms End in 2016 Robert O. Lorenz is a former audit partner of Arthur Andersen LLP. He served as the managing partner of the Oklahoma City office beginning in 1994 and as the managing partner of the Oklahoma practice beginning in 2000. He retired from Arthur Andersen in 2002. Since 2005, Mr. Lorenz has been a director of OGE Energy Corp. (regulated electric utility and natural gas transportation), and was a director of Infinity Inc. (oil and gas exploration and development) from 2004 to 2009. He was elected to the Board in 2003. Mr. Lorenz’s qualifications to serve on the Board include over 30 years in public accounting, his expertise in the areas of finance and accounting, and his broad experience as a director of public companies engaged in the energy business. Robert E. Robotti, since 1983, has been the president of Robotti & Company, LLC (a registered broker-dealer), president of Robotti & Company Advisors, LLC (a registered investment (6) advisor), or their predecessors, and, since 1980, has been the managing member of Ravenswood Investment Company, LLC, which serves as the general partner of three investment partnerships, all located in New York City. Since 2007, Mr. Robotti has served as a portfolio manager and managing member of Robotti Global Fund, LLC, a global equity fund. Mr. Robotti holds an MBA degree and is a member of the New York Society of Security Analysts. He was elected to the Board in 2004. Mr. Robotti’s qualifications to serve on the Board include his extensive experience in the None of the organizations described in the business experiences of the Company’s directors and officers are parents, subsidiaries or affiliates of the Company, or None of the non-management directors have ever been employees of the Company.Directors Whose Terms End in 2014(5)3537 years in the oil and gas exploration and production industry his experience in public accounting and his skills and experience in financial, accounting and acquisition matters.Blue KnightBlueknight Energy Partners, L.P. (formerly SemGroup Energy Partners, L.P.) (crude oil terminaling, storage, gathering and transportation) since 2009, SteelPath MLP Funds Trust (investment company) since 2010, SteelPath Energy Infrastructure InvestmentVantage Drilling Company (investment company)(offshore drilling) since 2010, and Vantage Energy Services,Emerald Oil, Inc. (offshore drilling)(oil and gas production) since 2010.2011. He was a director of Pre-Paid Legal Services, Inc. (sale of legal expense plans) from 2007 tountil its sale in 2011, TransMontaigne Partners, L.P. (distribution and marketing of petroleum products) from 2008 to 2009, and Teppco Partners LP (crude oil transportation) in 2009.2009, and SteelPath MLP Funds Trust (investment company) from 2010 until November 2012 when the company was sold, but remains on the Advisory Board through 2014. Mr. Ligon was elected to the Company’s Board in August 2007.majorlarge independent oil and gas company. Mr. Ligon has served as a director of several large public companies and has extensive contacts in the oil and gas and financial industries.Robert A. Reecean attorneya member of Devon’s Capital Budget Committee and since 1980 has beenthe senior management Executive Committee and as such is charged with developing and executing Devon’s corporate strategy. Mr. Smette is also responsible for marketing, midstream operations and procurement and logistics of counsel with the law firm of Crowe & Dunlevy, Oklahoma City,goods and activeservices. Prior to joining Devon, Mr. Smette worked in the management of his family’s investments, including significant oil and gas holdings. He has been a director of NBC Bank (a state chartered bank) of Oklahoma City since 1982. Heindustry for 16 years. Mr. Smette holds an MBA degree. He was elected to the Board in August 2010.Reece’sSmette’s qualifications to serve on the Board are his extensive operational experience in the oil and gas industry, including, exploration, production, distribution and marketing, and in developing and executing corporate business strategies for a large independent oil and gas company.legal, oilinvestment business as the owner of a registered broker-dealer and gasa registered investment advisor, as the manager of several investment partnerships and privateas a portfolio manager of a global equity investment fields. Mr. Reece has managed significant investments for his family for over 35 years.fund. except for Mr. Kauffman’s insurance agency, do business with the Company. The Company for many years, in the ordinary course of its business, has participated on industry terms through its mineral acreage ownership in the drilling and completion of oil and gas wells infor which Devon Energy Corporation hasserves as the operator. Darryl G. Smette is an interest.Executive Vice President of Devon. See “Transactions with Directors” below.
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Stock Ownership of Certain Beneficial Owners
Based on filings with the Securities and Exchange Commission (“SEC”), we know that the following shareholders are beneficial owners of more than 5% of our outstanding shares of Common Stock as of December 31, 2011. Robert E. Robotti, a director of the Company, also owns beneficially more than 5% of our Common Stock which is set forth below in “Stock Ownership of Directors and Executive Officers”.
Name and Address of Beneficial Owner | Amount of Shares Beneficially Owned | Percent of Common Stock | ||||||
BlackRock, Inc. 40 E. 52nd Street New York, NY 10022 | 509,406 | (1) | 6.1 | % | ||||
Amica Mutual Insurance Company 100 Amica Way Lincoln, RI 02965 | 529,433 | (2) | 6.4 | % |
The following table sets forth information with respect to the outstanding shares of Common Stock owned beneficially as of December 31, 20112013 by each director, nominee for director and executive officerofficers and by all directors and executive officers as a group.
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Name of Beneficial Owner | Amount of Shares Beneficially Owned(3)(4) | Percent of Common Stock | ||||
Paul F. Blanchard, Jr. (2)(5) |
| 67,659 |
|
| * | |
Michael C. Coffman (1)(2)(5) |
| 168,981 |
|
| 2.1% | |
Duke R. Ligon (1) |
| 211,217 |
|
| 2.6% | |
Robert O. Lorenz (1) |
| 4,200 |
|
| * | |
Lonnie J. Lowry (2)(5) |
| 17,709 |
|
| * | |
Robert A. Reece (1) |
| 30,162 |
|
| * | |
Robert E. Robotti (1) |
| 714,680 |
|
| 8.7% | |
Darryl G. Smette (1) |
| 1,842 |
|
| * | |
Ben Spriestersbach (2)(5) |
| 20,277 |
|
| * | |
H. Grant Swartzwelder (1) |
| 8,272 |
|
| * | |
Robb P. Winfield (2)(5) |
| 7,525 |
|
| * | |
|
| ----------- |
|
| --------- | |
All directors and executive officers as a group (11 persons) |
| 1,252,524 |
|
| 15.1% |
Name of Beneficial Owner | Amount of Shares Beneficially Owned (3) (4) | Percent of Common Stock | ||||||
Bruce M. Bell (1) | 1,100 | * | ||||||
Paul F. Blanchard, Jr. (2)(5) | 35,436 | * | ||||||
Michael C. Coffman (1)(2)(5) | 144,570 | 1.7 | % | |||||
E. Chris Kauffman (1) | 32,400 | * | ||||||
Duke R. Ligon (1) | 207,633 | 2.5 | % | |||||
Robert O. Lorenz (1) | 4,200 | * | ||||||
Lonnie J. Lowry (2)(5) | 13,252 | * | ||||||
Robert A. Reece (1) | 36,625 | * | ||||||
Robert E. Robotti (1) |
| 768,982
|
|
| 9.3
| %
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Darryl G. Smette (1) | 1,815 | * | ||||||
Ben Spriestersbach (2)(5) | 10,431 | * | ||||||
H. Grant Swartzwelder (1) | 8,272 | * | ||||||
Robb P. Winfield (2)(5) | 3,617 | * | ||||||
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All directors and executive officers as a group (13 persons) | 1,268,363 | 15.3 | % | |||||
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(2)Executive Officer
(3)The number of shares shown includes shares that are individually or jointly owned, as well as shares over which the individual has either sole or shared investment or voting authority.
(4)The number of shares shown does not include future share amounts recorded to each outside director’s account under the Directors’ Deferred Compensation Plan. These share amounts represent shares to be issued in the future and have no investment or voting authority. See “Compensation of Directors” - footnote (2) of table entitled “Directors Compensation For Fiscal 2013”, on page 10.
(5)The number of shares shown for Messrs. Coffman, Blanchard, Lowry, Spriestersbach and Winfield include unvested shares of restricted stock awarded under the Company’s 2010 Restricted Stock Plan and their shares in the Company’s ESOP Plan over which they exercise voting authority.
Lead Independent Director |
Effective November 1, 2008, the Board named Robert O. Lorenz as Lead Independent Director and eliminated the position of Chairman of the Board. The Lead Independent Director presides at all Board meetings and all executive sessions of outside directors. The Board adopted a “Charter of Lead Independent Director” which can be viewed at the Company’s website: www.panhandleoilandgas.com.www.panhandleoilandgas.com.
During the fiscal year ended September 30, During fiscal The Board has determined that, under the rules of the Securities and Exchange Commission and the New York Stock Exchange, all directors are currently independent, except for Michael C. Coffman, Chief Executive Officer, who does not serve on any Board committee. The members of the Board are elected to various committees. The Board presently has The Audit Committee is comprised of Robert O. Lorenz, chair, Duke R. Ligon, Robert A. Reece The Compensation Committee is comprised of Darryl G. Smette, chair, (8) for executive officers and directors. See “Compensation Discussion and Analysis” below. The Compensation Committee also oversees the administration of the Panhandle Oil and Gas Inc. Employee Stock Ownership and 401(k) Plan and Trust Agreement (the “ESOP Plan”). The Compensation Committee Charter can be viewed at the Company’s website:20112013 (“fiscal 2011”2013”), the Board held sevensix meetings. At each meeting, a quorum of directors was present. The outside directors hold executive sessions at each Board meeting without management present. The Company expects all of its directors to attend each annual shareholders meeting. All directors except Mr. Robotti, attended the 20112013 annual shareholders meeting.2011,2013, each director attended at least 75% of the meetings of the Board and each of the Board committees on which he served.fourthree standing committees: Audit, Compensation, and Corporate Governance and Nominating, and Retirement.Nominating. Robert E. Robotti and Darryl G. Smette. For information regarding the functions performed by the Audit Committee, its membership and the number of meetings held during fiscal 2011,2013, see “Report of the Audit Committee” below. EachThe Board has determined that each member of the Audit Committee meets all applicable independence and financial literacy requirements of the Securities and Exchange Commission and of the New York Stock Exchange. Robert O. Lorenz has been determined by the Board to meet the “audit committee financial expert” requirements of the Securities and Exchange Commission and the New York Stock Exchange. A copy of theThe Audit Committee Charter can be viewed at the Company’s website:www.panhandleoilandgas.com. www.panhandleoilandgas.com. Bruce M. Bell, E. Chris Kauffman, Robert O. Lorenz, and Robert E. Robotti.Robotti and H. Grant Swartzwelder. The Committee met threefour times during fiscal 2011.2013. The Committee reviews officer performance and recommends to the Board compensation amountswww.panhandleoilandgas.com.
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The Corporate Governance and Nominating Committee is comprised of Duke R. Ligon, chair, Bruce M. BellRobert A. Reece, Robert E. Robotti and H. Grant Swartzwelder. ThisThe Committee met twice during fiscal 2011.2013. The Committee’s charter can be viewed at the Company’s website:www.panhandleoilandgas.com. www.panhandleoilandgas.com. Functions of the Corporate Governance and Nominating Committee include: search for, identify and screen individuals qualified to become members of the Board; recommend to the Board when new members should be added to the Board; recommend to the Board individuals to fill vacant Board positions; and recommend to the Board nominees for election as directors at the annual shareholders meeting. If a vacancy on the Board exists that will not be filled by an incumbent director, the Committee identifies prospective nominees primarily through business and industry contacts. At a minimum, in its assessment of potential Board candidates, the Corporate Governance and Nominating Committee will review each candidate’s character, wisdom, acumen, business skills and experience, understanding of and involvement in the oil and gas industry, and ability to devote the time and effort necessary to fulfill his or her responsibilities. It is the policy of the Company to seek the most qualified candidates for Board membership without regard to race, gender, national origin, religion, disability, age or sexual orientation. The Corporate Governance and Nominating Committee will consider nominees proposed by shareholders of the Company if the requirements set forth in the Company’s Bylaws are satisfied. For more information, see “Shareholder Proposals” below. Those nominations must include sufficient biographical information so that the Committee can appropriately assess the proposed nominee’s background and qualifications. To propose a prospective nominee for the Committee’s consideration, shareholders must submit the proposal in writing to Panhandle Oil and Gas Inc., Attention: Secretary, 5400 N. Grand Boulevard, Suite 300, Oklahoma City, OK 73112-5688. Any such submission must be accompanied by the written consent of the proposed nominee to being named as a nominee and to serve as a director, if elected. The Committee is responsible for overall corporate governance issues and compliance. The Committee reviews periodically the corporate governance policies and principles of the Company and oversees and evaluates compliance with the Company’s Code of Ethics and Business Practices.
The RetirementCorporate Governance and Nominating Committee is comprised of Robert A. Reece, chair, E. Chris Kauffman and H. Grant Swartzwelder, and overseesCharter can be viewed at the administration of the Panhandle Oil and Gas Inc. Employee Stock Ownership and 401(k) Plan and Trust Agreement (the “ESOP Plan”). This Committee met twice during fiscal 2011.Company’s website: www.panhandleoilandgas.com.
Management is responsible for day-to-day risk assessment and mitigation activities. The Board is responsible for risk oversight, focusing on the Company’s overall risk management strategy, its degree of tolerance for risk and the steps management is taking to manage the Company’s risk. This process is designed to provide to the Board timely visibility about the identification, assessment and management of critical risks. The Audit Committee assists the Board by annually reviewing and discussing with management this process and its functionality. The areas of critical risk include information technology, strategic, operational, compliance, environmental and financial risks. The full Board, or the Audit Committee, receives this information through updates from the appropriate members of management to enable it to understand and monitor the Company’sCompany’s risk management
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process. Information brought to the attention of the Audit Committee can then be shared with the full Board, as appropriate.
The following outlines the compensation plan for the Company’s outside directors for their services in all capacities.
The following table contains information with respect to fiscal 20112013 compensation of directors who served in such capacity at any time during fiscal 2011,2013, except for the fiscal 20112013 compensation of Michael C. Coffman, Chief Executive Officer, whose compensation is disclosed below in the caption “Executive Compensation—Compensation – Summary Compensation Table”. OtherCurrently, other than the Company’s Deferred Compensation Plan for Non-Employee Directors (the “Directors’ Deferred Compensation Plan”), the Company has no stock award, stock option or other equity incentive plans for its directors.
Directors Compensation For Fiscal 2011
Name | Fees Paid in Cash or Deferred(1)(2) | All Other Compensation(3) | Total | |||||||||
Bruce M. Bell | $ | 52,000 | $ | 2,635 | $ | 54,635 | ||||||
E. Chris Kauffman | $ | 50,750 | $ | 6,024 | $ | 56,774 | ||||||
Duke R. Ligon | $ | 53,500 | $ | 1,596 | $ | 55,096 | ||||||
Robert O. Lorenz | $ | 76,000 | $ | 4,926 | $ | 80,926 | ||||||
Robert A. Reece | $ | 49,500 | $ | 10,415 | $ | 59,915 | ||||||
Robert E. Robotti | $ | 54,250 | $ | 3,184 | $ | 57,434 | ||||||
Darryl G. Smette | $ | 55,250 | $ | 438 | $ | 55,688 | ||||||
H. Grant Swartzwelder | $ | 53,250 | $ | 4,739 | $ | 57,989 |
Effective December 21, 2010, outside directors received for fiscal 2011 annual retainers of $35,000, $1,500 for attending each Board meeting, $1,000 for attending each committee meeting and out-of-pocket travel expenses for attending all meetings. Any director who travels over 50 miles to attend a Board or committee meeting receives an additional $500 for each meeting. In addition, during fiscal 2011, the Lead Independent Director and the chairs of the Audit, Compensation and Corporate Governance and Nominating Committees received additional annual retainers of $12,500, $10,000, $5,000 and $2,500, respectively. The annual retainers were paid in equal installments on December 31, 2010, and March 31, June 30 and September 30, 2011. This retainer and fee structure was guided by a study conducted by Longnecker & Associates, Houston, Texas (an independent compensation consultant) retained by the Compensation Committee to review the Company’s Board compensation levels.
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Effective July 27, 2011, any director who participates2010 Restricted Stock Plan is approved by shareholders at the 2014 Annual Meeting as set forth in a board meeting or committee meeting by conference telephone or other communications equipmentProposal No. 3, the directors will receive only one-half ofbe entitled to participate in the fee paid for attendance in person at these meetings.Plan.
Annually, outside directors may elect to be included in the Directors’ Deferred Compensation Plan. The Directors’ Deferred Compensation Plan provides that each outside director may individually elect to be credited with future unissued shares of Company stock rather than cash for all or a portion of the annual retainer,retainers, Board meeting fees and committee meeting fees, and also may elect to receive shares, if and when issued, over a period ofannual time periods up to ten years. These unissued shares are recorded to each director’s deferred compensation account at the closing market price of the shares (i) on the dates of the Board and committee meetings, and (ii) on the payment dates of the annual retainers. Only on a director’s retirement, termination, death, or a change-in-control of the Company will the shares recorded for such director under the Directors’ Deferred Compensation Plan be issued to the director. The promise to issue such shares in the future is an unsecured obligation of the Company. All directors participateparticipated in the Directors’ Deferred Compensation Plan.Plan in fiscal 2013.
Directors Compensation For Fiscal 2013
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Name | Fees Paid in Cash or Deferred(1)(2) | All Other Compensation(3) | Total | |||||||||
Bruce M. Bell (4) | $ | 6,000 | $ | 854 | $ | 6,854 | ||||||
Duke R. Ligon | $ | 55,000 | $ | 2,673 | $ | 57,673 | ||||||
Robert O. Lorenz | $ | 74,500 | $ | 6,385 | $ | 80,885 | ||||||
Robert A. Reece | $ | 46,500 | $ | 11,529 | $ | 58,029 | ||||||
Robert E. Robotti | $ | 51,500 | $ | 4,215 | $ | 55,715 | ||||||
Darryl G. Smette | $ | 56,250 | $ | 1,517 | $ | 57,767 | ||||||
H. Grant Swartzwelder | $ | 54,750 | $ | 5,844 | $ | 60,594 |
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Share Ownership Guidelines(1)All directors deferred 100% of their retainers and fees under the Directors’ Deferred Compensation Plan.
(2)At the end of fiscal 2013, the following future share amounts had been recorded to each director’s account under the Directors’ Deferred Compensation Plan: Ligon– 10,708; Lorenz– 24,447; Reece– 42,351; Robotti– 16,113; Smette– 6,559; and Swartzwelder– 22,042.
(3)Under the Directors’ Deferred Compensation Plan, dividends paid on the Common Stock are recorded to each Director’s account on the record date of the dividend in the form of unissued shares. The amount recorded is based on the number of future unissued shares in each Director’s account and the closing market price of the Company Stock on each dividend record date. These future share amounts have no voting authority and the Directors have no investment authority with respect thereto.
(4)Retired from Board in December 2012.
For fiscal 2013, outside directors received annual retainers of $35,000, $1,500 for Directorsattending each Board meeting, $1,000 for attending each committee meeting and out-of-pocket travel expenses for attending all meetings. Any director who traveled over 50 miles to attend a Board or committee meeting received an additional $500 for each meeting. In addition, during fiscal 2013, the Lead Independent Director and the chairs of the Audit, Compensation and Corporate Governance and Nominating Committees received additional annual retainers of $12,500, $10,000, $5,000, and $5,000, respectively. The annual retainers were paid in equal installments on December 31, 2012, and March 31, June 30 and September 30, 2013. This retainer and fee structure was guided by a study conducted by Longnecker & Associates, Houston, Texas (an independent compensation consultant) retained by the Compensation Committee to review the Company’s Board compensation levels.
Any director who participates in a board meeting or committee meeting by conference telephone or other communications equipment receives only one-half of the fee paid for attendance in person at these meetings.
For fiscal 2014, outside directors will receive annual retainers of $37,500, $1,500 for attending each Board meeting, $1,000 for attending each committee meeting and out-of-pocket travel expenses for attending all meetings. Any director who travels over 50 miles to attend a Board or committee meeting receives an additional $500 for each meeting. In addition, the Lead Independent Director and the chairs of the Audit, Compensation and Corporate Governance and Nominating Committees will receive additional annual retainers of $15,000, $10,000, $6,000 and $5,000, respectively. The annual retainers are paid in equal installments on December 31,2013, March 31, June 30 and September 30, 2014. The changes in retainers and fees for fiscal 2014 were guided by a study conducted by Longnecker & Associates, an independent compensation consultant retained by the Compensation Committee.
Longnecker & Associates has for several years recommended that Panhandle directors add an equity-based component to their compensation. To address Longnecker's recommendation, if Proposal 3, Amendment to 2010 Restricted Stock Plan, is approved by vote of the shareholders, the directors will become eligible to participate in the Plan. The initial grant of restricted stock to each director is planned to be valued at $35,000, will vest one-fourth each quarter and will be effective mid-March 2014. According to Longnecker & Associates, with the adjustments to director compensation for fiscal 2014 and the $35,000 restricted equity award, Panhandle's directors will be compensated at about the 25th percentile range of peer company directors.
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The Bylaws of the Company require outside directors to own shares of the Company’s Common Stock in order to be a Board member. To further align the interests of the Directors with the Company’s shareholders, each Director is expected to own that number of shares at the end of their third year of Board service which equals, on a cost basis, the aggregate amount of the three prior years’ Directors annual retainerDirectors’ retainers and the meeting fees for the five regularly scheduled Board meetings held each year during such three year period. Future unissued shares that have been recorded to the directors’ accounts under the Director’s Deferred Compensation Plan may be used to satisfy this share ownership requirement.
The Company has entered into indemnification agreements with each of its directors and executive officers. We review any transactions and relationships in which the Company and any of our directors, nominees for director, executive officers or any of their immediate family members may be participants, so as to determine whether any of these individuals have a direct or indirect material interest in any such transaction. We have developed and implemented processes and controls to obtain information from the directors and executive officers about related person transactions, and for then determining, based on the facts and circumstances, whether a related person has a direct or indirect material interest in any such transaction. Transactions that are determined to be directly or indirectly material to a related person are disclosed in our proxy statement as required by SEC rules.During fiscal 2011,The Company for many years in the Company purchased directorsordinary course of its business has participated on industry terms through its mineral acreage ownership in the drilling and officers liabilitycompletion of oil and other miscellaneous insurance policies through The Insurance Center Agency, Inc. for premiums aggregating $175,893. E. Chris Kauffmangas wells in which Devon Energy Corporation serves as the operator. Darryl G. Smette is an owner and officerExecutive Vice President of the Agency. The Company believes that the premiums and the terms of the insurance policies were at market rates and on market terms.Devon.
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Pursuant to these processes, all directors and executive officers annually complete, sign and submit a directors’ and officers’ questionnaire that is designed to identify related person transactions and both actual and potential conflicts of interest. We also make appropriate inquiries as to the nature and extent of business that the Company may conduct with other companies for whom any of our directors or executive officers also serve as directors or executive officers. Under the Company’s Code of Ethics and Business Practices, if an actual or potential conflict of interest affects an executive officer or a director, he or she is to immediately disclose all the relevant facts and circumstances to the Company’s President or the Corporate Governance and Nominating Committee, as appropriate. If the Corporate Governance and Nominating Committee determines that there is a conflict, it will refer the matter to the Board, which will review the matter to make a final determination as to whether a conflict exists,exists; and, if so, how the conflict should be resolved. In addition, the Audit Committee reviews all reports and disclosures of actual and potential related person transactions.
The functions and members of the Compensation Committee are set forth above under “Proposal No. (12) Committee members are independent and none of the Committee members have served as an officer or employee of the The Board has adopted a Code of Ethics and Business Practices applicable to all directors, officers and employees of the Company. In addition, the Board has adopted a Code of Ethics for Senior Financial Officers. The Company’s Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer were required to sign this code and will be held to the standards outlined in the code. Copies of both codes are available at the Company’s website: The Company is asking its shareholders to approve an amendment to increase the number of shares of common stock reserved for issuance under the Panhandle Oil and Gas Inc. 2010 Restricted Stock Plan from 100,000 shares to 250,000 shares and to allow the grant of shares of restricted stock to our directors. The 2010 Restricted Stock Plan was initially approved by the shareholders at the Company’s 2010 Annual Shareholders meeting and covered 100,000 shares reserved for grant to officers of the Company. As of December 21, 2013, an aggregate of 100,851 shares of common stock had been awarded under the 2010 Restricted Stock Plan. December 21, 2013 is the last date restricted stock has been awarded. The Company had repurchased 8,422 shares of common stock previously awarded but which did not vest, leaving only 7,571 shares available for grants in the future. The Company believes that the grant of restricted shares that vest over several years is an essential long-term component to the Company’s total compensation package for its officers and also encourages officers to remain with the Company. Under the 2010 Restricted Stock Plan, directors were not eligible for stock awards. The Company recommends that Directors become eligible for stock awards under the Plan. We believe this will help retain and attract qualified directors and further align the directors’ interests with those of the Company’s shareholders. The Restricted Stock Plan was designed to provide as much flexibility as possible for future granting of restricted stock so that the Company can respond as necessary to provide competitive compensation in order to attract, retain and motivate officers and directors of the Company and to align their interests with those of the Company’s shareholders. Until the Restricted Stock Plan was approved in 2010, the Company had not provided any equity incentives to its officers other than contributions of Common Stock to the Company’s ESOP Plan. See “Executive Compensation”. (13) The Company intends to repurchase on the open market or in private transactions shares of Common Stock equal to the number of shares of restricted stock awarded on an annual basis under the Restricted Stock Plan in order to avoid dilution to existing shareholders. The full text of the Amended 2010 Restricted Stock Plan as proposed to be amended (the “Amended Restricted Stock Plan”) is included as Appendix A to this Proxy Statement and a brief description of its material terms is provided below. Brief Summary of Proposed Amendments. The number of shares covered by the Amended Restricted Stock Plan is increased from 100,000 shares to 250,000 shares and directors become eligible for awards of restricted stock. Further, the Compensation Committee is given the authority to determine the vesting period for all awards to directors and officers. Officers participate in this program based on their (i) ability to make a significant contribution to the Company’s financial and operating results, (ii) level of responsibility and (iii) performance. No officer is entitled to participate automatically based on title, position or salary level. This program is designed to help retain key officers of the Company and participation is highly selective. Longnecker & Associates has for several years recommended that Panhandle directors have an equity-based portion to their compensation. To address Longnecker's recommendation, the amendment to the 2010 Restricted Stock Plan, Proposal No. 3, will include the directors as participants in the Plan. If Proposal 3, Amendment to 2010 Restricted Stock Plan, is approved by vote of the shareholders, the directors will become eligible to participate in the Plan. The initial grant to directors is planned to be valued at $35,000, will vest one-fourth each quarter, and will be effective mid-March 2014. According to Longnecker & Associates, with the adjustments to director compensation for fiscal 2014 and the $35,000 restricted equity award, Panhandle's directors will be compensated at about the 25th percentile range of peer company directors. Each participant in the Restricted Stock Plan enters into a stock restriction agreement with the Company setting forth the terms, conditions and restrictions of the restricted stock award. The restricted stock is issued by the Company in the name of the participant and deposited with the (14) Company, or an escrow agent determined by the Compensation Committee, until the restrictions lapse or until vesting is no longer possible under the stock restriction agreement. Subject to the terms and conditions of the stock restriction agreement, a participant holding restricted stock has the right to receive dividends on the shares of restricted stock during the restriction period, vote the shares of restricted stock and enjoy other shareholder rights related to the restricted stock. On expiration of the restriction period, subject to the terms of the Plan, the stock restriction agreement and the vesting requirements, the participant will be entitled to receive shares of Common Stock not subject to restriction. Effective Date and Term. The Stock Restriction Plan initially became effective in March, 2010 when approved by shareholders. The Amended Restricted Stock Plan proposed herein will become effective when and if approved by the Company’s shareholders. No restricted stock can be awarded after the day before the tenth anniversary of the date of shareholder approval, but the vesting periods for restricted stock previously sold may extend beyond that date. If the Amended Stock Restriction Plan is approved by shareholders, the tenth anniversary will be measured from such approval. Eligibility. Any current officer or director of the Company, or any future subsidiary entities in which the Company has a controlling interest, as determined by the Compensation Committee, are eligible to be granted an award of restricted stock. Administration. The Plan is administered by the Compensation Committee of the Board, which has authority to grant awards of restricted stock and determine the recipients and the terms of awards. The Compensation Committee has full authority to construe and interpret the terms of the Amended Restricted Stock Plan and to determine all facts necessary to administer the Plan. Stock Subject to the Restricted Stock Plan. Subject to adjustments allowed under the Amended Restricted Stock Plan, awards of restricted stock which may be made under the Plan will increase to 250,000 shares from 100,000 shares of Common Stock if the proposed amendment to the Plan is approved by shareholders. If any award of restricted stock expires or is terminated, surrendered or canceled without being fully vested, the unused shares covered by such award will again be available for awards under the Plan. Restricted Stock. Pursuant to the Amended Restricted Stock Plan, the Compensation Committee may grant awards of restricted stock on the terms and conditions set forth by the Compensation Committee in the applicable stock restriction agreement, including the conditions for vesting, the vesting periods, the issue price and the acceleration of vesting in certain events. The vesting periods for previous restricted stock awards to officers have been a minimum of two years. Adjustments Due to Changes in Capitalization or Control. In the event of any stock split, reverse stock split, stock dividend, recapitalization, combination of shares, reclassification of shares, spin-off or other similar change in capitalization or event, or any dividend or distribution to holders of shares of Common Stock other than an ordinary cash dividend, (i) the number of shares of Common Stock available under the Amended Restricted Stock Plan, (ii) the number of shares of Common Stock subject to and the repurchase price per share subject to each outstanding restricted stock award, and (iii) the terms of each other outstanding award shall be equitably adjusted by the Company in the manner determined by the Compensation Committee. (15) Change in Control. On the occurrence of a change in control of the Company as defined in the Amended Restricted Stock Plan, except to the extent provided to the contrary in the stock restriction agreement between a participant and the Company, all restrictions and conditions on all restricted stock awards then outstanding shall automatically lapse and be deemed terminated or satisfied, as applicable. Transferability of Awards. Unless otherwise provided by the Compensation Committee, restricted stock will be nontransferable, either voluntarily or by operation of law, except by will or the laws of descent and distribution or pursuant to a qualified domestic relations order. Voting and Dividends. Holders of shares of restricted stock may vote their shares. Dividends are paid on restricted stock. Termination of Employment. The Compensation Committee will determine the effect on restricted stock due to the disability, death, retirement, termination or other cessation or change in the employment, of a participant. Tax Withholding. A participant in the Amended Restricted Stock Plan must satisfy all applicable federal, state and local or other income and employment tax withholding obligations of the Company before it will authorize the restricted stock to be released by the Company or from escrow. The Compensation Committee may allow a participant to satisfy all or part of these withholding obligations by transferring shares of restricted stock to the Company. Amendment of Awards. The Compensation Committee may amend, suspend or terminate the Amended Restricted Stock Plan or any portion of the Plan at any time; provided that if at any time the approval of the Company’s shareholders is required as to any modification or amendment under applicable laws and rules, the Compensation Committee may not effect such modification or amendment without shareholder approval. Unless otherwise specified in the amendment, any amendment to the Amended Restricted Stock Plan shall apply to, and be binding on, the holders of restricted stock under the Plan at the time the amendment is adopted, provided, the Compensation Committee determines that such amendment does not materially and adversely affect the rights of participants under the Plan. Outstanding Equity Awards. The following table provides information on the holdings of restricted stock by our executive officers OUTSTANDING RESTRICTED STOCK AWARDS Name Award Date Approval Date Number of Shares of Restricted Stock That Have Not Vested Market Value of Shares of Restricted Stock That Have Not Vested Michael C. Coffman June 18, 2010 May 19, 2010 3,500(1)(2) $98,980(11) December 21, 2010 December 21, 2010 9,821(3)(4) $277,737(11) December 08, 2011 December 08, 2011 11,990(5)(6) $339,077(11) December 11, 2012 December 11, 2012 13,361(7)(8) $377,849(11) December 21, 2013 December 11, 2013 12,290(9)(10) $402,989(12) Paul F. Blanchard, Jr. June 18, 2010 May 19, 2010 5,000(1)(2) $141,400(11) December 21, 2010 December 21, 2010 7,741(3)(4) $218,915(11) December 08, 2011 December 08, 2011 9,414(5)(6) $266,228(11) (16) Name Award Date Approval Date Number of Shares of Restricted Stock That Have Not Vested Market Value of Shares of Restricted Stock That Have Not Vested December 11, 2012 December 11, 2012 10,476(7)(8) $296,261(11) December 21, 2013 December 11, 2013 9,611(9)(10) $315,145(12) Lonnie J. Lowry December 08, 2011 December 08, 2011 851(5)(6) $24,066(11) December 11, 2012 December 11, 2012 935(7)(8) $26,442(11) December 21, 2013 December 11, 2013 849(9)(10) $27,839(12) Ben Spriestersbach December 08, 2011 December 08, 2011 689(5)(6) $19,485(11) December 11, 2012 December 11, 2012 1,285(7)(8) $36,340(11) December 21, 2013 December 11, 2013 467(9)(10) $15,313(12) Robb P. Winfield December 08, 2011 December 08, 2011 668(5)(6) $18,891(11) December 11, 2012 December 11, 2012 748(7)(8) $21,153(11) December 21, 2013 December 11, 2013 1,155(9)(10) $37,875(12) (1) Mr. Coffman and Mr. Blanchard paid $0.01666 per share, or $58.31 and $83.30, respectively, to purchase their restricted stock. (2) Consists of the restricted stock awards granted on June 18, 2010 which vest on the completion of five years of service, commonly known as “cliff vesting”. (3) Mr. Coffman and Mr. Blanchard paid $0.01666 per share, or $163.62 and $128.97, respectively, to purchase their restricted stock. (4) Consists of the restricted stock awards granted on December 21, 2010 to Mr. Coffman and Mr. Blanchard, 50% of which vests on the completion of three years of service, and 50% of which vests based on the market price performance of the Company's Common Stock at the completion of three years of service (5) Messrs. Coffman, Blanchard, Lowry, Spriestersbach and Winfield paid $.01666 per share, or $199.75, $156.84, $14.18, $11.48 and $11.13, respectively. (6) Consists of the restricted stock awards granted on December 8, 2011, 25% of which vests on the completion of three years of service, and 75% of which vests based on the market price performance of the Company’s Common Stock at the completion of three years of service. (7) Messrs. Coffman, Blanchard, Lowry, Spriestersbach and Winfield paid $.01666 per share, or $222.59, $174.53, $15.58, $21.41 and $12.46, respectively. (8) Consists of the restricted stock awards granted on December 11, 2012, 25% of which vests on the completion of three years of service, and 75% of which vests based on the market price performance of the Company’s Common Stock at the completion of three years of service. (9) Messrs. Coffman, Blanchard, Lowry, Spriestersbach and Winfield paid $.01666 per share, or $204.75, $160.12, $14.14, $7.78 and $19.24, respectively. (10) Consists of the restricted stock awards granted on December 21, 2013, 25% of which vests on the completion of three years of service, and 75% of which vests based on the market price performance of the Company's Common Stock at the completion of three years of service. (11) Based on the closing market price of the Company's Common Stock of $28.28 on September 30, 2013. (12)Based on the closing market price of the Company's Common Stock of $32.79 on December 20, 2013, the last trading date before the award. Vesting of the performance shares of restricted stock awards is based on the market price performance of the Company’s Common Stock at the completion of the time vesting period. For performance shares to An aggregate of 9,140 shares of restricted stock granted to Messrs. Coffman and Blanchard on December 21, 2010, vested on December 21, 2013 and an aggregate of 8,422 shares did not vest (17) and were repurchased by the Company. Pursuant to Vesting of the time vested restricted stock awards occurs only if the officers remain employed by the Company After the awards of The Audit Committee has directed the Company to submit the selection of Ernst & Young LLP as the Company’s independent registered public accounting firm for fiscal 1—1 and Proposal No. 2 – Meetings and Committees of the Board of Directors”.Directors.” AllCompany or a subsidiary of the Company.www.panhandleoilandgas.com www.panhandleoilandgas.com.Section 16(a) Beneficial Ownership Reporting ComplianceAwards. Section 16(a)The Restricted Stock Plan permits awards of restricted stock to Company officers and directors and is used by the Compensation Committee for retention and long-term incentive compensation. The Company will sell shares of restricted stock to officers and directors at a significant discount to the fair market value of the Securitiesshares, generally at the par value of the shares. The restricted shares may vest after the passage of time (which for officers will typically be several years on the anniversary dates of the issuance of the restricted stock) and Exchange Actmay vest depending on the market price performance of 1934 requires the Company’s Common Stock. The vesting period under the Plan will be determined by the Compensation Committee when it awards shares of Restricted Stock. Under various vesting requirements, the restricted stock awards may wholly or partially vest or never vest. The Company will repurchase the restricted stock at the original purchase price if vesting does not occur.and persons who own more than ten percentat December 21, 2013 which is the last date restricted stock has been awarded. file withpartially vest, the Securities and Exchange Commission initial reportsCompany’s Common Stock must appreciate at a minimum rate of ownership and reports of changes in ownership of4% compounded annually. If not, no performance shares vest. To fully vest, the Common Stock must appreciate at a rate of 15% compounded annually.furnishthe Plan, these unvested shares are again available for awards under the Restricted Stock Plan.with copiesfor the required vesting period. If not, all such awards are forfeited.such reports. Based on a reviewrestricted stock in December 2013, and the vesting of restricted stock and the filings with the Securities and Exchange Commission and representations that no other reports were filed,repurchase of unvested shares of restricted stock by the Company believes that during fiscal 2011 all directorson December 21, 2013, there are 7,571shares of Common Stock available under the current Restricted Stock Plan for future awards of restricted stock. If the amendments to the Restricted Stock Plan proposed herein are approved by shareholders, subject to future forfeitures and executive officers complied withrepurchases of unvested shares by the reporting requirementsCompany, there will be 157,571 shares of Section 16(a).Proposal No. 2Common Stock available for future awards.20122014 for ratification by the shareholders at the meeting. Neither the Company’s Bylaws nor other governing documents or law require shareholder ratification of the selection of Ernst & Young LLP as the Company’s independent registered public accounting firm. However, the Audit Committee is submitting the
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selection of Ernst & Young LLP to the shareholders for ratification as a matter of good corporate practice. If the shareholders fail to ratify the selection, the Audit Committee will reconsider whether or not to retain that firm. Even if the selection is ratified, the Audit Committee may, in its discretion, direct the appointment of a different independent registered public accounting firm at any time during fiscal 20122014 if it determines that such a change would be in the best interests of the Company and its shareholders.
A representative of Ernst & Young LLP is expected to attend the meeting and will have the opportunity to make a statement if he or she so desires, and will be available to respond to appropriate questions of shareholders.
For fiscal 2012, theThe Audit Committee has selected Ernst & Young LLP to conduct quarterly reviews for the first three fiscal quarters.
Reportquarters of fiscal 2014.
During fiscal 2011,2013, the Audit Committee was comprised of fivefour independent directors: Robert O. Lorenz, chair, Duke R. Ligon, Robert A. Reece, Robert E. Robotti and Darryl G. Smette. The Board has determined that all committee members are independent and that Mr. Lorenz is an “audit committee financial expert”, as (as defined by the Securities and Exchange Commission guidelines and the New York Stock Exchange), and that each member is financially literate as required by the rules of the New York Stock Exchange. For purposes of complying with New York Stock Exchange rules, the Board has determined that none of the Committee members currently serve on the audit committees of more than three public companies. Four meetings of the Committee were held during fiscal 2011.2013.
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The Audit Committee Charter was adopted in December 2004 with immaterial changes subsequently approved by the Board. A copy of the Charter can be viewed at the Company’s website:www.panhandleoilandgas.com. www.panhandleoilandgas.com.
The Audit Committee’s primary responsibility is to oversee the Company’s financial reporting process on behalf of the Board and report the results of its activities to the Board. Management has the primary responsibility for the financial statements and the reporting process, including internal control over financial reporting.
Controls and Procedures. Management has established and maintains a system of disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed by the Company in the reports filed or submitted under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and includes controls and procedures designed to provide reasonable assurance that information required to be disclosed by the Company in those reports is accumulated and communicated to management, including the Chief Executive Officer and the Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. As of September 30, 2011,2013, management conducted an evaluation of disclosure controls and procedures. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective to provide reasonable assurance that the information required to be disclosed in the reports filed or submitted under the Securities and Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. The Audit Committee discussed with management and Ernst & Young LLP, the Company’s independent registered public accounting firm (“independent accountants”), the quality and adequacy of the Company’s disclosure controls and procedures.
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Management has also established and maintains a system of internal controls over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) underof the Securities Exchange Act of 1934. These internal controls are designed to provide reasonable assurance that the reported financial information is presented fairly, that disclosures are adequate and that the judgments inherent in the preparation of financial statements are reasonable. Management conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting based on the framework set forth inInternal Control—Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on management’s evaluation under the framework inInternal Control—Control – Integrated Framework, management concluded that the Company’s internal control over financial reporting was effective as of September 30, 20112013 as discussed in more detail in Management’s Report on Internal Control Over Financial Reporting, which was included in our Annual Report on Form 10-K for the year ended September 30, 2011,2013, filed with the SEC on December 8, 2011.11, 2013. The effectiveness of the Company’s internal control over financial reporting as of September 30, 20112013 has been audited by Ernst & Young LLP, as stated in its attestation report, which was included in our Annual Report on Form 10-K for the year ended September 30, 2011.2013. The Audit Committee reviewed and discussed with management and Ernst & Young LLP the Company’s system of internal control over financial reporting in compliance with Section 404 of the Sarbanes-Oxley Act of 2002.
Discussions with Management and Independent Accountants. In fulfilling its responsibilities, the Committee reviewed with management the audited financial statements included in the Company’s Annual Report on Form 10-K for fiscal 2011,2013, including a discussion of the quality, not just the
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acceptability, of the accounting principles, the reasonableness of significant judgments and the clarity of disclosures in the financial statements. The Audit Committee reviewed with Ernst & Young LLP, which is responsible for expressing an opinion on the conformity of those audited financial statements with generally accepted accounting principles, their judgments as to the quality, not just the acceptability, of the Company’s accounting principles andprinciples. The Audit Committee discussed with the independent accountants such other matters as are required to be discussed with the Audit Committee byunder generally accepted auditing standards, including Statement on Auditing Standards No. 61 (Communications with Audit Committees), as amended by Statement on Auditing Standards No. 90 (Audit Committee Communications). and SEC Rule 2‑07. In addition, the Audit Committee discussed with the independent accountants its independence from management and the Company, including matters in the written disclosures and letter received from the independent accountants as required by the Independence StandardsPublic Company Accounting Oversight Board Standard No. 1 (Independence DiscussionsRule 3526 (Communications with Audit Committees)Committee Concerning Independence).
The Audit Committee met with the independent accountants, with and without management present, to discuss the overall scope and plans for their audit, the results of their examinations, their evaluations of the Company’s internal control over financial reporting and the overall quality of the Company’s financial reporting.
The Audit Committee also met with the independent accountants and management after the end of each of the first three fiscal quarters. At these meetings, the independent accountants’ review of quarterly results was presented and discussed and discussions were also held with management concerning these results.
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In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board (and the Board approved) that the audited financial statements be included in the Company’s Annual Report on Form 10-K for fiscal 20112013 for filing with the Securities and Exchange Commission.Commission (which was filed on December 11, 2013).
Audit Committee
Robert O. Lorenz—Chair
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The following sets forth fees billed for audit and other services provided by Ernst & Young LLP for the fiscal years ended September 30, 20112013 and September 30, 2010:2012:
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Fee Category | Fiscal 2013 Fees | Fiscal 2012 Fees | ||||
Audit Fees (1) | $ | 339,000 | $ | 328,000 | ||
Audit-Related Fees | $ | --- | $ | --- | ||
Tax Fees | $ | --- | $ | --- | ||
All Other Fees | $ | --- | $ | --- |
(1)Includes fees for audit of annual financial statements, reviews of the related quarterly financial statements and internal control audits required by Section 404 of the Sarbanes-Oxley Act.
Fee Category | Fiscal 2011 Fees | Fiscal 2010 Fees | ||||||
Audit Fees (1) | $ | 318,500 | $ | 312,500 | ||||
Audit-Related Fees | $ | — | $ | — | ||||
Tax Fees | $ | — | $ | — | ||||
All Other Fees | $ | — | $ | — |
All services rendered by Ernst & Young LLP were permissible under applicable laws and regulations and were pre-approved by the Audit Committee. The Audit Committee’s pre-approval
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policy is set forth in the Audit Committee Charter which can be viewed at the Company’s website:www.panhandleoilandgas.com. www.panhandleoilandgas.com.
To ratify the selection of Ernst & Young LLP, a majority of the votes entitled to be cast on Proposal No. 24 must vote “FOR” ratification. Abstentions will have the effect of a vote “AGAINST” ratification.
The Board of Directors Recommends That Shareholders
Vote “FOR”
Ratification of Selection of Independent
Registered Public Accounting Firm
The Securities Exchange Act of 1934 requires that we include in our proxy statements a non-binding vote on our executive compensation (commonly referred to as “Say-On-Pay”). At the 2011 Annual Shareholders meeting, the Board recommended, and the shareholders approved, that the Say-on-Pay vote should occur every three years. Accordingly, we include in this proxy statement a non-binding vote on our executive compensation as described in this proxy statement.
In Proposal No. 6, the Board now recommends that future Say-On-Pay votes by shareholders be held every year rather than every three years.
We encourage shareholders to review the discussion on executive compensation and Compensation Discussion and Analysis section below on pages 22 to 32 and the Executive Compensation section below on pages 32 to 34. The Company’s consistent value creation over time is attributable to a rigorously-applied management process implemented over the years by successive teams of talented and committed executives. The Company’s executive compensation underpins and reinforces this process and the performance it generates. We believe our compensation program strikes the appropriate balance between utilizing fair and responsible pay practices and effectively incentivizing our executives to dedicate themselves fully to value creation for our shareholders.
The Board strongly endorses the Company’s executive compensation program and recommends that the shareholders vote in favor of the following resolution:
RESOLVED, that the shareholders approve on an advisory basis the compensation of the Company’s named executive officers as described in the Company’s Proxy Statement for the 2014 Annual Meeting of Shareholders under “Compensation Discussion and Analysis” and “Executive Compensation” and the other related tabular and narrative disclosure contained in this Proxy Statement.
Because the vote is advisory, it will not be binding upon the Board or the Compensation Committee and neither the Board nor the Compensation Committee will be required to take any action as a result of the outcome of the vote on this Proposal. The Compensation Committee will carefully consider the outcome of the vote when considering future executive compensation arrangements.
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(15)The Board of Directors Recommends a Vote
Approval of The Company’s Executive OfficersCompensation
For fiscal 2013, Panhandle's executive compensation program was generally unchanged from fiscal 2012. The program is designed to reward the Company's leadership team for operating and financial results for the year and for adding to and building per share value for our shareholders, measured on both a yearly and long-term horizon. We believe our current program's Company performance metrics are the correct measures that align shareholder interests and executive interests to Company performance over the short-, medium- and long-term horizons. Because of the unique assets and operating strategies of the Company, we believe it is imperative that its management team be engaged in and manage the Company for a longer horizon than the typical oil and gas company. Accordingly, our compensation programs and performance metric measurements are structured for that purpose.
· | Yearly salaries of our executives are based on Company and individual results, overall responsibilities of each officer, expertise required in execution of the position and comparable Company ranges, |
· | Yearly cash bonus payments are based on achievement of Company operational performance metrics and subjective job responsibility performance goals, |
· | Yearly Long-Term Incentive (LTI) restricted equity based compensation is used to motivate achievement of long-range goals of the Company and to reward individual achievement performance over longer-term horizons, |
· | Yearly LTI ultimate realization is based on employment longevity (25%) and growth in the per share market price (75%) of the Company's common shares over the vesting period of the restricted stock grants. |
The following is a listfinancial and operating results outlined below provide additional perspective on Panhandle's fiscal 2013 performance:
· | Net income of $13,960,049, $1.67 per share, increased 89% over 2012. |
· | Production of oil, natural gas and natural gas liquids (NGL) increased 22% to 13.0 billion cubic feet equivalent (Bcfe), the largest in Company history. |
· | Generated cash from operating activities of $37.4 million in fiscal 2013, well in excess of capital expenditures. |
· | Exceeded target amounts on all objective performance metrics for fiscal 2013, except for total general and administrative expenses. |
· | Continued to maintain a strong balance sheet with debt to equity at 8.6% on September 30, 2013. |
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The current executive officers of the Company.Company are listed below. All officers hold office at the discretion of the Board and may be removed from office, with or without cause, at any time by the Board.
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Name | Age | Positions and Offices | Officer Since |
Michael C. Coffman(1) | 60 | President and Chief Executive Officer | 1990 |
Paul F. Blanchard, Jr. | 53 | Senior Vice President and Chief Operating Officer | 2009 |
Lonnie J. Lowry | 61 | Vice President, Chief Financial Officer and Secretary | 2006 |
Ben Spriestersbach | 62 | Vice President of Land | 2005 |
Robb P. Winfield | 39 | Controller and Chief Accounting Officer | 2009 |
Name | Age | Positions and Offices Presently Held With the Company | Officer Since | |||
Michael C. Coffman(1) | 58 | President and Chief Executive Officer | 1990 | |||
Paul F. Blanchard, Jr. | 51 | Senior Vice President and Chief Operating Officer | 2009 | |||
Lonnie J. Lowry | 59 | Vice President, Chief Financial Officer and Secretary | 2006 | |||
Ben Spriestersbach | 60 | Vice President of Land | 2005 | |||
Robb P. Winfield | 37 | Controller and Chief Accounting Officer | 2009 |
(1)Biographical information for Mr. Coffman is set forth |
All officers named above heldin “Election of Directors – Nominees for Election to the same officeBoard of Directors for Three Year Terms Ending in the Company’s wholly-owned subsidiary, Wood Oil Company, until July 1, 2011 when Wood Oil Company was merged into the Company.2017.”
Paul F. Blanchard, Jr. was sole proprietor of a consulting petroleum engineering firm from 2007 to 2008, and served from 1997 to 2007 as Vice President, Mid-Continent Business Unit of Range Resources Corporation (oil and gas exploration and production). He joined the Company as Vice President and Chief Operating Officer in January 2009. In March, 2010, he was elected Senior Vice President and Chief Operating Officer. Mr. Blanchard holds a Bachelors of Science Degree in Petroleum Engineering.
Lonnie J. Lowry served as Vice President, Controller and Secretary from March 2006 until August 2007 when he was elected Vice President, Chief Financial Officer and Secretary. From 2001 to 2006, he served as Controller of the Company. He had been Controller of Wood Oil Company, Tulsa, Oklahoma (oil and gas exploration and production) for 15 years when it was acquired by Panhandle in 2001.
Ben Spriestersbach was elected Vice President of Land in 2005. From 2002 through 2004, he served as Land Manager of the Company. From 1989 to 2001, he worked for Farmers Union Cooperative Royalty Company (oil and gas royalty company), last serving as assistant secretary-treasurer. Mr. Spriestersbach is a certified professional land man.
Robb P. Winfield served as Controller from February 2008 to March 2009 when he was elected Controller and Chief Accounting Officer. Mr. Winfield was employed by Chesapeake Energy Corporation (independent oil and gas company) from 2004 to 2008 as Revenue Coordinator and Supervisor and was employed as an auditor from 1999 to 2004 by Ernst & Young LLP.
Compensation Committee and Role of the Board of Directors in Fiscal 2013 |
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Compensation Discussion and Analysis
Compensation Committee and Role of the Board of Directors in Fiscal 2011
The Compensation Committee is composed entirely of independent directors and has the responsibility for establishing, implementing and monitoring all facets of the compensation of the Company’s executive officers. In particular, the Committee’s role is to oversee and recommend to the Board for final approval, the compensation, benefit plans and policies, and, in addition, review, approve and recommend to the Board annually all compensation decisions relating to the Chief Executive Officer and the other executive officers of the Company. The Committee reviews the executive
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compensation programs, approvesprogram, recommends compensation levels, and performance metrics, reviews management performance and finalrecommends executive bonus distributions.distributions and restricted stock awards. The Committee met threefour times during fiscal 2011.2013. The Committee operates in accordance with its charter which sets forth its powers and responsibilities. A copy of the charter of the Compensation Committee can be viewed at the Company’s website:www.panhandleoilandgas.com. www.panhandleoilandgas.com.
Under the Committee’s Charter, the Committee reviews and approves corporate goals and objectives relevant to the executive officers’ compensation, evaluates the executive officers’ performance in light of those goals and objectives and, based on the Committee’s evaluation, recommends to the Board compensation levels for the Chief Executive Officer and all other executive officers with the final decision made by the Board.
Compensation Philosophy and Objectives |
The objectives of the Company’s compensation program are to:
· | Attract,
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· | Motivate and reward individual and Company performance and contributions. |
· | Align the interests of the executives with those of our shareholders. |
The principal elements of the executive compensation program are yearly salary, annual cash bonus, restricted stock awards and contributions to the ESOP Plan. The Company has no employment contracts. Awards of restricted stock pursuant to the Company’s 2010 Restricted Stock Plan are an integral part of the Company’s compensation program. Awardsprogram as a retention and long-term incentive form of restricted stock, salary, cash bonus and ESOP Plan contributions will becompensation. The executive compensation program is used to meet the Company’s compensation objectives as follows:
· | Attract and retain key executives, reward the officers who contribute to the Company’s success, and motivate the officers to develop and execute short-term, medium-term and long-term business strategies as well as meet annual goals approved by the Board. |
· | Align the interests of the executives with those of the Company’s shareholders. In fiscal 2013, the Company used allocations of Company stock to the ESOP Plan and awards of restricted stock to align the financial interests of the executives with those of our shareholders and to provide a longer-term incentive form of compensation. |
· | Motivate and reward individual performance and contributions. The Company’s evaluation of the individual performance of each executive officer affects most aspects of the executive’s compensation. Market data, individual performance and level of responsibility are considered in determining an executive’s annual salary and are important factors in deciding discretionary cash bonuses. |
· | Financial and operating performances of the Company and the market price performance of the Company’s Common Stockare also key factors in determining compensation. |
· | Awards of shares under the Restricted Stock Plan made in December of 2012 and 2013 contain vesting provisions that require both continuing length of service to the Company and market price performance of the Company’s Common Stock. These provisions further align the structure of management compensation to Company performance and shareholder interests. |
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Attract and retain key executives, reward the officers who contribute to the Company’s success, and motivate the officers to develop and execute short-term, medium-term and long-term business strategies and goals.
Role of Executive Officers |
In fiscal 2011,2013, the Compensation Committee and the Board, after receiving input from Longnecker & Associates, the Committee’s independent compensation consultant, made all compensation decisions for the Chief Executive Officer and, after receiving input from the Chief Executive Officer, all other executive officers. The Compensation Committee and the Board reviewed the performance of the Chief Executive Officer, and afterwards, set his compensation. Mr. Coffman was not present during these discussions. The Compensation Committee and the Board, together with the Chief Executive Officer, reviewed the performance of the other executive officers. The Chief Executive Officer made compensation recommendations to the Compensation Committee and the Board with respect to the other executive officers. Messrs. Blanchard, Lowry, Spriestersbach and Winfield were not present during these discussions.
Role of the Compensation Consultant |
In an effort to align our executives’ compensation competitively with the market, the Compensation Committee engaged an outside, independent compensation consultant, Longnecker & Associates, Houston, Texas (“L&A”Longnecker”), to review levels and incentive components of the executives’ compensation for fiscal 2011.2013. The primary role of L&ALongnecker was to help identify peer companies and to provide the Compensation Committee with market data and information regarding compensation trends in our industry and to make recommendations regarding base salaries, the design of our incentive programs and executive and director compensation levels. Our managementManagement does not direct or oversee the retention or activities of L&ALongnecker with respect to ourthe Company’s executive compensation program. The Compensation Committee has sole authority to retain and terminate independent compensation consultants and to determine the terms of their retention.
Base Salaries and Annual Cash Bonuses |
In December of each year, base salaries of the executive officers are set for the next calendar year and bonuses are determined based on the preceding fiscal year’s (year-end September 30) operational and financial performance. Base salaries and annual cash bonuses for executive officers are based on the individual’s responsibilities and experience, taking into account, among other factors, the individual’s initiative, contribution to the Company’s overall performance, handling of special projects or events during the year and yearly financial and operating results.results of the Company. Base salaries for executive officers are reviewed and compared to similar positions in the Company’s industry. L&A andThe Compensation Committee, with the Boardassistance of Longnecker, selected the following group of “peer companies” for 2011 comparison purposes.purposes in determining compensation during fiscal 2013: