| | | | |
| | OMB APPROVAL |
| |
|
| | OMB Number: | | 3235-0059 |
| | Expires: | | January 31, 2008 |
| | Estimated average burden
hours per response | 14.75 |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
(Rule 14a-101)
Proxy Statement Pursuant Toto Section 14(A)
Of The14(a) of the Securities
Exchange Act Ofof 1934 (Amendment No. )
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ X ] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
TRINITY INDUSTRIES, INC.
(Name
| |
| Filed by the Registrant þ |
| Filed by a Party other than the Registrant o |
|
| Check the appropriate box: |
| |
| þ Preliminary Proxy Statement |
| oConfidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
| o Definitive Proxy Statement |
| o Definitive Additional Materials |
| o Soliciting Material Pursuant to §240.14a-12 |
Trinity Industries, Inc.
(Name of Registrant as Specified In Its Charter)
J. J. FRENCH, JR., SECRETARY
(Name
(Name of Person(s) Filing Proxy Statement)Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ X ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange
Act Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11: (Note 1)
4) Proposed maximum aggregate value of transaction:
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the form or
schedule and the date of its filing.
1) Amount previously paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
_____________________
Note 1: Set forth the amount on which the filing is calculated
and state how it was determined.
| |
| þ No fee required. |
| o Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
| |
| 1) Title of each class of securities to which transaction applies: |
| |
| 2) Aggregate number of securities to which transaction applies: |
| |
| 3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): |
| |
| 4) Proposed maximum aggregate value of transaction: |
| |
| o Fee paid previously with preliminary materials. |
| |
| o Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. |
| |
| 1) Amount Previously Paid: |
| |
| 2) Form, Schedule or Registration Statement No.: |
| |
| SEC 1913 (11-01) | Persons who are to respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OMB control number. |
Trinity Industries, Inc.
2525 Stemmons Freeway
Dallas, Texas 75207-2401
P. O. Box 568887
Dallas, Texas 75356-8887
(mailing address)
www.trin.net
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on July 16, 1997
Notice is hereby given thatMay 7, 2007
TO: Trinity Industries, Inc. Stockholders:
Please join us for the 2007 Annual Meeting of Stockholders of Trinity Industries, Inc. (the "Company"), a Delaware corporation,The meeting will be held at the offices of the Company, 2525 Stemmons Freeway, Dallas, Texas 75207, on
Wednesday, July 16, 1997, Monday, May 7, 2007,at 9:3000 a.m., Central Daylight Saving Time, forTime.
At the meeting, the stockholders will act on the following purposes:
(1) to elect ten (10) directors to hold office until the next Annual
Meeting of Stockholders or until their successors are elected and qualified;
(2) to approve an amendment to the Company's 1993 Stock Option and
Incentive Plan; and
(3) to transact such other business as may properly come before the
meeting or any adjournment thereof.
Onlymatters:
| |
| (1) Election of nine directors; |
|
| (2) Vote on an amendment to our Certificate of Incorporation, as amended, to increase the authorized shares of our Common Stock from 100,000,000 shares to 200,000,000 shares; |
|
| (3) Ratification of the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2007; and |
|
| (4) Any other matters that may properly come before the meeting. |
All stockholders of record at the close of business on May 30, 1997 will
beMarch 23, 2007 are entitled to notice of and to vote at the 1997 Annual Meetingmeeting or any postponement or adjournment thereof, notwithstanding the transfer of any stock on the books of the Company after such record date.meeting. A list of the stockholders will be openis available at the Company’s offices in Dallas, Texas.
| |
| By Order of the Board of Directors |
|
| MICHAEL G. FORTADO |
| Vice President and Corporate Secretary |
April 5, 2007
YOUR VOTE IS IMPORTANT!
Please vote as promptly as possible by using the internet or telephone or by signing, dating and returning the enclosed proxy card to the examination of any stockholder, for any purpose germane toaddress listed on the 1997
Annual Meeting, for a period of ten (10) days prior to the meeting at the
Company's offices, card.
TABLE OF CONTENTS
| | | | | | |
| | Page | |
| | | |
| | | 1 | |
| | | 2 | |
| | | | 2 | |
| | | | 3 | |
| | | | 6 | |
| | | | 6 | |
| | | | 7 | |
| | | 7 | |
| | | | 7 | |
| | | 9 | |
| | | 10 | |
| | | | 10 | |
| | | | 11 | |
| | | 12 | |
| | | | 12 | |
| | | | 19 | |
| | | | 20 | |
| | | | | 20 | |
| | | | | 22 | |
| | | | | 22 | |
| | | | | 24 | |
| | | | | 26 | |
| | | | | 26 | |
| | | | | 27 | |
| | | | | 27 | |
| | | | | 28 | |
| | | | 30 | |
| | | | | 31 | |
| | | | 32 | |
| | | 33 | |
| | | 34 | |
| | | | 34 | |
| | | | 35 | |
| | | | 35 | |
| | | | 35 | |
| | | 36 | |
Trinity Industries, Inc.
2525 Stemmons Freeway Dallas, Texas 75207.
You are requested to forward your proxy in order that you will be
represented at the 1997 Annual Meeting, whether or not you expect to attend in
person. Stockholders who attend the 1997 Annual Meeting may revoke their
proxies and vote in person, if they so desire.
A Proxy Statement, proxy card and a copy of the Annual Report on the
Company's operations during the fiscal year ended March 31, 1997, accompany
this Notice of Annual Meeting of Stockholders.
By Order of the Board of Directors
J. J. FRENCH, JR.
Secretary
June 11, 1997
Trinity Industries, Inc.
2525 Stemmons Freeway
Dallas, Texas 75207-2401
P. O. Box 568887
Dallas, Texas 75356-8887
(mailing address)
www.trin.net
PROXY STATEMENT
For
ANNUAL MEETING OF STOCKHOLDERS
To Be Held on July 16, 1997May 7, 2007
This Proxy Statement is furnishedbeing mailed on or about April 5, 2007 to the stockholders of Trinity Industries, Inc. (the "Company"(“Trinity” or the “Company”) in connection with the solicitation of proxies by the Board of Directors of the Company to be voted at the Annual Meeting of Stockholders of the Company to be held at the offices of the Company, 2525 Stemmons Freeway, Dallas, Texas, 75207, on Wednesday, July 16,
1997,Monday, May 7, 2007, at 9:3000 a.m., Central Daylight Saving Time (the "1997 Annual Meeting"“Annual Meeting”), or at any postponement or adjournment thereof, for the purposes set forth in the accompanying Notice of Annual Meeting of Stockholders. This Proxy Statement andThe Company’s mailing address is 2525 Stemmons Freeway, Dallas, Texas, 75207.
Shares represented by the enclosed form of proxy, are being mailedif properly executed and returned to stockholders onthe Company prior to the meeting, will be voted at the Annual Meeting and at any adjournment thereof in the manner specified, or about June 11, 1997.
RIGHT TO REVOKE PROXY
Any stockholder givingif not specified, the proxy enclosed with this Proxy Statement haswill be voted FOR the powerelection of the nine nominees for Directors as listed below, FOR the approval of the amendment to revoke suchthe Company’s Certificate of Incorporation, as amended, to increase the authorized shares of Common Stock from 100,000,000 shares to 200,000,000 shares, and FOR the ratification of Ernst & Young LLP as independent registered public accounting firm of the Company for the fiscal year ending December 31, 2007. The proxy may be revoked at any time prior to the exercise thereofbefore it is exercised by filing with the Company a written revocation, at or prior to the 1997 Annual
Meeting, by executing a proxy bearing a later date or by attending the 1997
Annual Meeting and voting in person the shares of stock that such stockholder
is entitled to vote. Unless the persons named in the proxy are prevented from
acting by circumstances beyond their control, the proxy will be voted at the
1997 Annual Meeting and at any adjournment thereof in the manner specified
therein, or if not specified, the proxy will be voted:
(1) FOR the election of the ten (10) nominees listed under "Election of
Directors" as nominees of the Company for election as directors to hold office
until the next Annual Meeting of Stockholders or until their successors are
elected and qualified;
(2) FOR the approval of the amendment to the Company's 1993 Stock Option
and Incentive Plan; and
(3) At the discretion of the persons named in the enclosed form of
proxy, on any other matter that may properly come before the 1997 Annual
Meeting or any adjournment thereof.
BY WHOM AND THE MANNER IN WHICH PROXY IS BEING SOLICITED
The enclosed proxy is solicited by and on behalf of the Board of
Directors of the Company. The expense of the solicitation of proxies for the
1997 Annual Meeting, including the cost of mailing, will be borne by the
Company. To the extent necessary to assure sufficient representation at the
1997 Annual Meeting, officers and regular employees of the Company, at no
additional compensation, may request the return of proxies personally, by
telephone or telegram. The extent to which this will be necessary depends
entirely upon how promptly proxies are received. Stockholders are urged to
send in their proxies without delay. The Company will supply brokers,
nominees, fiduciaries and other custodians with proxy materials to forward to
beneficial owners of shares in connection with the request from the beneficial
owners of authority to execute such proxies, and the Company will reimburse
such brokers, nominees, fiduciaries and other custodians for their expenses in
making such distribution. Management has no knowledge or information that any
other person will specially engage any persons to solicit proxies.
-1-
VOTING SECURITIES AND STOCKHOLDERSperson.
The outstanding voting securities of the Company consist entirely of shares of Common Stock, $1.00 par value per share, each share of which
entitles the holder thereof to one vote.share. The record date for the determination of the stockholders entitled to notice of and to vote at the
1997 Annual Meeting, or any adjournment thereof, has been established by the Board of Directors as of the close of business on May 30, 1997.March 23, 2007. At that date, there were outstanding and entitled to vote [ ] shares of Common Stock.
The presence, in person or by proxy, of the holders of record 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 1997 Annual Meeting, but if a quorum should not be present, the meeting may be adjourned from time to time until a quorum is obtained. All matters to be
voted on will be decided by a majority of the shares represented and voting at
the meeting. A holder of Common Stock will be entitled to one vote per share on each matter properly brought before the meeting. Cumulative voting is not permitted in the election of directors.
As
The proxy card provides space for a stockholder to withhold voting for any or all nominees for the Board of May 30, 1997, no person was known byDirectors. The election of directors requires a plurality of the Companyvotes cast at the meeting. The approval to own
beneficially more than five percent (5%)increase the number of authorized shares of Common Stock requires the affirmative vote of the majority of the outstanding shares of Common StockStock. The ratification of the independent auditors requires the affirmative vote of a majority of the shares present in person or represented by proxy and entitled to vote at the meeting. Shares of a stockholder who abstains from voting on any or all proposals will be included for the purpose of determining the presence of a quorum. However, votes withheld with respect to the election of the Company’s directors will not be counted either in favor of or against the election of the nominees. In the case of the other proposals which are being submitted for stockholder approval, an abstention will effectively count as a vote cast against such proposal. Broker non-votes on any matter, as to which the broker has indicated on the proxy that it does not have discretionary authority to vote, will be treated as shares not entitled to vote with respect to that matter. However, such shares will be considered present and entitled to vote for quorum purposes so long as they are entitled to vote on other matters.
CORPORATE GOVERNANCE
The business affairs of Trinity are managed under the direction of the Board of Directors (also sometimes referred to in this proxy statement as the “Board”) in accordance with the General Corporation Law of the State of Delaware and the Company’s Certificate of Incorporation and Bylaws. The role of the Board of Directors is to oversee the management of the Company although Cede and Company, a central clearinghouse and
nominee in New York, New York, wasfor the record holder of [ ] sharesbenefit of the Company's Common Stock asstockholders. This responsibility includes monitoring the senior management’s conduct of May 30, 1997.the Company’s business operations and affairs; reviewing and approving the Company’s financial objectives, strategies and plans; evaluating the performance of the chief executive officer and other executive officers; and overseeing the Company’s policies and procedures regarding corporate governance, legal compliance, ethical conduct and maintenance of financial and accounting controls. The following table shows the numberBoard of shares of Common Stock
beneficially owned by each director or nominee,Directors first adopted Corporate Governance Principles in 1998, which are reviewed annually by the executive officers
named belowCorporate Governance and Directors Nominating Committee and were last amended in the Summary Compensation TableDecember 2006. The Company has a long-standing Code of Business Conduct and byEthics, which is applicable to all such directors,
nominees and executive officers as a group, based upon information supplied by
them:
Number of Shares
Beneficially Owned Percent of
Name at April 30, 1997(1) Class
John L. Adams 1,000 *
Ralph A. Banks, Jr. 6,150 *
David W. Biegler 5,364 *
John Dane III 217,413 *
Barry J. Galt 10,160 *
Clifford J. Grum 3,000(2) *
Dean P. Guerin 57,410 *
Jess T. Hay 11,384(3) *
Edmund M. Hoffman 41,681(4) *
Diana S. Natalicio 1,000 *
John T. Sanford 129,875 *
Mark W. Stiles 21,607 *
Timothy R. Wallace 216,915 *
W. Ray Wallace 1,505,151 3.4%
Directors and Executive
Officers as a Group 2,329,553 5.3%
_________
* Less than one percent (1%).
-2-
(1) Unless otherwise noted, all shares are owned directly and the owner has
the right to vote the shares, except for shares that officers and
directors have the right to acquire under the Company's stock option plans
asemployees of the record date or within sixty (60) days thereafter, which for
Messrs. Galt, Guerin, HayCompany, including the chief executive officer, the chief financial officer, the chief accounting officer and Hoffman are 9,410 shares each, for Mr.
Biegler is 3,764 shares and for Messrs. Dane, Sanford, Stiles, Timothy
R. Wallace and W. Ray Wallace are 39,875, 82,191, 17,987, 203,671 and
621,080 shares, respectively. Such numbers for shares that the officers
and directors have right to acquire under the Company's stock option plans
reflect the adjustment resulting from the Company's distribution of its
stock in Halter Marine Group, Inc. Mr. Dane's association with the Company
ceased on March 31, 1997 upon the Company's distribution of its stock of
Halter Marine Group, Inc.; therefore, his options will expire on June 29,
1997, if not exercised.
(2) Shares are owned by Deerfield Corporation of which Mr. Grum is an owner.
(3) Includes 384 shares owned of record by Mr. Hay's wife as custodian for
their daughter in which Mr. Hay disclaims beneficial ownership.
(4) Includes 1,500 shares held by Mr. Hoffman as trustee of a trust in which
Mr. Hoffman disclaims beneficial ownership.
_____________
ITEM 1 - ELECTION OF DIRECTORS
At the 1997 Annual Meeting, ten (10) directors are to be elected who
shall hold office until the next Annual Meeting of Stockholders or until their
respective successors are duly elected and qualified. It is the intention of
the persons named in the Company's proxy to vote for the election of each of
the ten (10) nominees listed below, unless authority is withheld. All
nominees have indicated a willingness to serve as directors, but if any of
them should decline or be unable to serve as a director, the persons named in
the proxy will vote for the election of another person recommended by the Board of Directors. The BoardCompany intends to post any amendments to or waivers from its Code of Directors recommends you vote FORBusiness Conduct and Ethics on the election of each of
the ten (10) nomineesCompany’s website to the Boardextent applicable to the Company’s chief executive officer, chief financial officer, chief accounting officer or a director. The Corporate Governance Principles and the Code of Directors set forth below.
Nominees
W. Ray Wallace, 74. Director since 1956. ChairmanBusiness Conduct and Chief Executive
Officer ofEthics are available on the Company. He isCompany’s web site atwww.trin.netunder the father of Timothy R. Wallace, a director
and President of the
Company.
John L. Adams, 52. Director since 1996. Member of the Audit Committee and ofheading “Investor Relations/ Governance” or in print upon written request to the Corporate Development and Finance Committee. Mr. Adams is Chairman and
Chief Executive Officer of Texas Commerce Bank -- Dallas, Texas. He is also
Vice Chairman of the Board of Texas Commerce Bank National Association, a
national bank providing banking services in various Texas cities. He serves
as a director of Phillips Gas Company, a leading purchaser, producer, gatherer
and seller of natural gas, Texas Utilities Company (Advisory Director), a
public utility holding company, and Zale Lipshy University Medical Center, in
addition to service on the Board of Directors of several public and private
charitable organizations.
David W. Biegler, 50. Director since 1992. Chairman of the Corporate
Governance and Nominating Committee. Mr. Biegler is the Chairman, President
and Chief Executive Officer and a director of ENSERCH Corporation, an
integrated natural gas company engaged principally in natural gas transmission
and distribution, electric power development and other energy related
activities. He is also Chairman and Chief Executive Officer and a director of
Enserch Exploration, Inc., a company engaged in oil and gas exploration and
production, and a director of Texas Commerce Bank, National Association, a
national
bank.
-3-
Barry J. Galt, 63. Director since 1988. Member of the Audit Committee and of
the Corporate Development and Finance Committee. Mr. Galt is the Chairman,
President, and Chief Executive Officer and a director of Seagull Energy
Corporation, a diversified energy company engaged in oil and gas exploration
and development, as well as natural gas transportation, processing, marketing
and distribution. He is also a director of Standard Insurance Company, a
mutual life insurance company, and a director of Texas Commerce Bank, National
Association, a national
bank.
Clifford J. Grum, 62. Director since 1995. Member of the Audit Committee and
of the Human Resources Committee. Mr. Grum is Chairman and Chief Executive
Officer and a director of Temple-Inland, Inc., a holding company with
interests in corrugated containers, bleached paperboard, building products,
timber and timberlands, and financial services. He is also a director of
Cooper Industries, Inc., a company engaged in the businesses of electrical
products, tools and hardware, and automotive products and a director of
Tupperware Corporation, a multinational consumer products
company.
Dean P. Guerin, 75. Director since 1965. Chairman of the Corporate
Development and Finance Committee. Mr. Guerin's principal occupation is
investments. Mr. Guerin is a director of Lone Star Technologies, Inc.,
engaged in oil country tubular goods and banking, and a director of Seagull
Energy Corporation, a diversified energy
company.
Jess T. Hay, 66. Director since 1965. Chairman of the Human Resources
Committee and member of the Corporate Governance and Nominating Committee.
Mr. Hay is Chairman of Texas Foundation for Higher Education and of HCB
Enterprises, Inc., a private investment firm. Prior to retirement on December
31, 1994, Mr. Hay was Chairman and Chief Executive Officer of Lomas Financial
Corporation, a diversified financial services company engaged principally in
mortgage banking and real estate lending, and of Lomas Mortgage USA, a
mortgage banking institution. Mr. Hay is a director of The Dial Corp., which
is primarily involved in consumer products, services, transportation,
manufacturing and financial services, a director of Exxon Corporation, a
diversified energy company engaged principally in the exploration, production
and marketing of petroleum products, and a director of SBC Communications,
Inc., a telephone and wireless communications
company.
Edmund M. Hoffman, 75. Director since 1957. Chairman of the Audit Committee
and member of the Corporate Development and Finance Committee. Mr. Hoffman's
principal occupation is investments, primarily in the soft drink bottling and
full line vending business. Mr. Hoffman is a director of Coca-Cola Bottling
Group (Southwest) Inc., a distributor for Coca-Cola
products.
Diana S. Natalicio, 57. Director since 1996. Member of the Human Resources
Committee and of the Corporate Governance and Nominating Committee. President
of the University of Texas at El Paso. Dr. Natalicio is a director of ENSERCH
Corporation, an integrated natural gas company engaged principally in natural
gas transmission and distribution, electric power development and other energy
related activities. She was appointed by President Bush to the Commission on
Educational Excellence for Hispanic Americans and by President Clinton to the
National Science Board, currently serving as its
Vice-Chair.
-4-
Timothy R. Wallace, 43. Director since 1992. Mr. Wallace is President of the
Company. He is the son of Mr. W. Ray Wallace, a director and the Chairman,
and Chief Executive Officer of the
Company.
BOARD MEETINGS AND COMMITTEESSecretary.
The directors hold regular quarterly meetings, in addition to the
meeting immediately following the Annual Meeting of Stockholders, attendand special meetings, as required, and spend such time on the affairs of the Company as their duties require. During the fiscal year ended March 31, 1997,2006, the Board of Directors held five (5) meetings. AllThe Board also meets regularly in non-management executive sessions and selects the Presiding Director for the non-management executive sessions. Mr. Jess Hay currently serves in that capacity. In 2006, all directors of the Company attended at least seventy-five percent (75%)75% of the meetings of the Board of Directors and the committees on which they served duringserved. It is Company policy that each of our directors is expected to attend the fiscal year ended
March 31, 1997.
DuringAnnual Meeting. All of our directors were in attendance at the 2006 Annual Meeting.
Independence of Directors
Pursuant to the New York Stock Exchange (the “NYSE”) listing standards, the Board of Directors has adopted a formal set of Categorical Standards of Director Independence to assist in making its determination with respect to director independence under the NYSE listing standards. The Categorical Standards are available on our website atwww.trin.netunder the headings “Investor Relations/Governance” or in print upon written request to the Corporate Secretary. The Categorical Standards set forth commercial and charitable relationships that will not be considered to be material relationships that would impair a director’s independence. The Board undertook its annual review of director independence and considered transactions and relationships between each director or any member of his or her immediate family and the Company and its subsidiaries and affiliates. In making its determination the Board applied the Categorical Standards. In addition to applying the Categorical Standards, the Board considered transactions between our subsidiaries and subsidiaries of Austin Industries, Inc. for which Mr. Gafford serves as President and Chief Executive Officer. These transactions were made in the ordinary course of business in arms-length transactions and most were determined by competitive bids. The transactions involved the purchase from our subsidiaries of concrete, highway products and steel highway bridge girders. Mr. Gafford did not have a direct pecuniary interest in any of the fiscal year ended March 31, 1997, there were only twotransactions. The Board also considered that theson-in-law of Mr. Hay is employed by the Company in a non-executive officer capacity. As a result of its review, the Board affirmatively determined that the following directors are independent of the Company and its management under the standards set forth in the Categorical Standards: Rhys J. Best, David W. Biegler, Ronald J. Gafford, Clifford J. Grum, Ronald W. Haddock, Jess T. Hay, Adrian Lajous, and Diana S. Natalicio; and that Timothy R. Wallace is not independent because of his employment as Chairman, President and Chief Executive Officer of the Company and that John L. Adams is not independent because of his previous employment with the Company.
2
Board Committees
The standing committees those being an Audit Committee and a Compensation Committee. The
members of the Board of Directors are the Audit Committee, were Messrs. Barry J. Galt, Chairman, Clifford
J. GrumHuman Resources Committee, Corporate Governance and Edmund M. Hoffman. The membersDirectors Nominating Committee, and Finance and Risk Management Committee. Each of the Compensation Committee were
Messrs. Jess T. Hay,committees is governed by a charter, a current copy of which is available on our website atwww.trin.netunder the headings “Investor Relations/ Governance.” A copy of each charter is also available in print to stockholders upon written request addressed to the Corporate Secretary. Mr. Wallace, Chairman, David W. BieglerPresident and Dean P. Guerin. TheChief Executive Officer of the Company, does not serve on any Board Committee. Director membership of Directors on March 13, 1997 reorganized itsthe committees into four (4)
committees. The committees described below and their functions are those
resulting from the March 13, 1997 meeting, unless the context clearly
indicates otherwise.is identified below:
| | | | | | | | | | | | | | | | |
| | | | | | Corporate | | | |
| | | | | | Governance & | | | Finance & | |
| | | | | | Directors | | | Risk | |
| | Audit | | | Human Resources | | | Nominating | | | Management | |
| Director | | Committee | | | Committee | | | Committee | | | Committee | |
| | | | | | | | | | | | |
| John L. Adams | | | | | | | | | | | | | | | * | |
| Rhys J. Best | | | | | | | | | | | | | | | * | |
| David W. Biegler | | | * | | | | | | | | ** | | | | * | |
| Ronald J. Gafford | | | | | | | ** | | | | * | | | | | |
| Clifford J. Grum | | | ** | | | | | | | | * | | | | * | |
| Ronald W. Haddock | | | * | | | | * | | | | | | | | | |
| Jess T. Hay | | | | | | | * | | | | * | | | | ** | |
| Adrian Lajous | | | * | | | | | | | | | | | | * | |
| Diana S. Natalicio | | | | | | | * | | | | | | | | | |
The Audit Committee consistsCommittee’s function is to oversee the preparation of Messrs. Adams, Galt, Grumthe Company’s financial statements and Hoffman.
Therelated disclosures; the qualifications, independence and performance of the Company’s independent auditing firm; the performance of the Company’s internal audit function; the Company’s internal accounting and disclosure control systems; and the Company’s procedures for monitoring compliance with its Code of Business Conduct and Ethics. In carrying out its function, the Audit Committee reviews with the management, the director of internal
auditingchief audit executive, and the independent accountantsauditors the Company'sCompany’s financial statements, the accounting principles applied in their preparation, the scope of the audit, any comments made by the independent accountantsauditors upon the financial condition of the Company and its accounting controls and procedures, and such
other matters as the Audit Committee deems appropriate, and the Audit
Committee reviews with management such matters relating to compliance with corporate policies, andcompliance programs, internal controls, corporate aircraft usage, summaries of officer travel and entertainment reports, and performs such other matters as the Audit Committee deems appropriate. The Audit Committee also pre-approves all auditing and all allowable non-audit services provided to the Company by the independent auditors. The Audit Committee selects and retains the independent auditors for the Company and approves audit fees. The Audit Committee met two (2)seven times during 2006. The Board of Directors has determined that all members of the fiscal year
ended March 31, 1997.Audit Committee are “independent” as defined by the rules of the SEC and the listing standards of the NYSE. The Board has determined that Mr. Clifford J. Grum, Chair of the Committee, Mr. David W. Biegler and Mr. Ronald W. Haddock are each qualified as an audit committee financial expert within the meaning of SEC regulations.
| |
| Finance and Risk Management Committee |
The duties of the Finance and Risk Management Committee generally are to periodically review the financial status of the Company; review the Company’s compliance with certain debt instruments that may exist; make recommendations to the Board regarding financings and authorize financings within limits prescribed by the Board; review and assess risk exposure related to the Company’s operations; monitor the
3
funds for the Company’s benefit plans; and review significant acquisitions and dispositions of businesses or assets and authorize such transactions within limits prescribed by the Board. Each of the members of the Finance and Risk Management Committee, except John L. Adams, is an independent director under the NYSE listing standards. The Committee met four times during 2006.
| |
| Corporate Governance and Directors Nominating Committee |
The functions of the Corporate Governance and Directors Nominating Committee are to identify and recommend to the Board individuals qualified to be nominated for election to the Board; recommend to the Board the members and Chairperson for each Board committee; periodically review and assess the Company’s Corporate Governance Principles and the Company’s Code of Business Conduct and Ethics and make recommendations for changes thereto to the Board; periodically review the Company’s orientation program for new directors and the Company’s practices for continuing education of existing directors; annually review director compensation and benefits and make recommendations to the Board regarding director compensation and benefits; review, approve and ratify all transactions with related persons that are required to be disclosed under the rules of the SEC; annually conduct an individual director performance review of each incumbent director; and oversee the annual self-evaluation of the performance of the Board. Each of the members of the Corporate Governance and Directors Nominating Committee is an independent director under the NYSE listing standards. The Corporate Governance and Directors Nominating Committee met three times during 2006.
In performing its annual review of director compensation, the Corporate Governance and Directors Nominating Committee utilizes independent compensation consultants from time to time to assist in making its recommendations to the Board. In 2005, the Corporate Governance and Directors Nominating Committee retained the services of Pearl Meyer & Partners to provide a comparator group study of Board compensation. After a review of the consultant’s report, the Corporate Governance and Directors Nominating Committee recommended, and the Board approved a change in director compensation effective October 1, 2005. In 2006, the Company’s Vice President, Human Resources and Shared Services (the “VP of Human Resources”), in consultation with the Chairman of the Corporate Governance and Directors Nominating Committee, prepared a director compensation review of several relevant director compensation studies and a peer group of comparable sized companies. After a review of the report, the Corporate Governance and Directors Nominating Committee recommended, and the Board approved the current director compensation effective October 1, 2006.
The Corporate Governance and Directors Nominating Committee will consider director candidates recommended by stockholders. In considering candidates submitted by stockholders, the Corporate Governance and Directors Nominating Committee will take into consideration the needs of the Board and the qualifications of the candidate. To have a candidate considered by the Corporate Governance and Directors Nominating Committee, a stockholder must submit the recommendation in writing and must include the following information:
| | |
| • | The name of the stockholder, evidence of the person’s ownership of Company stock, including the number of shares owned and the length of time of ownership, and a description of all arrangements or understandings regarding the submittal between the stockholder and the recommended candidate; and |
|
| • | The name, age, business and residence addresses of the candidate, the candidate’s resume or a listing of his or her qualifications to be a director of the Company, and the person’s consent to be a director if selected by the Corporate Governance and Directors Nominating Committee, nominated by the Board and elected by the stockholders. |
The stockholder recommendation and information described above must be sent to the Corporate Secretary at 2525 Stemmons Freeway, Dallas, Texas 75207 and must be received by the Corporate Secretary not less than 120 days prior to the anniversary date of the date the Company’s proxy statement was released in connection with the previous year’s Annual Meeting of Stockholders.
4
The Corporate Governance and Directors Nominating Committee believes that the minimum qualifications for serving as a director of the Company are that a nominee demonstrate depth of experience at the policy making level in business, government or education, possess the ability to make a meaningful contribution to the Board’s oversight of the business and affairs of the Company and a willingness to exercise independent judgment, and have an impeccable reputation for honest and ethical conduct in both his or her professional and personal activities. In addition, the Corporate Governance and Directors Nominating Committee examines a candidate’s time availability, the candidate’s ability to make analytical and probing inquiries, and financial independence to ensure he or she will not be financially dependent on director compensation.
The Corporate Governance and Directors Nominating Committee identifies potential nominees by asking, from time to time, current directors and executive officers for their recommendation of persons meeting the criteria described above who might be available to serve on the Board. The Corporate Governance and Directors Nominating Committee also may engage firms that specialize in identifying director candidates. As described above, the Committee will also consider candidates recommended by stockholders.
Once a person has been identified by the Corporate Governance and Directors Nominating Committee as a potential candidate, the Committee makes an initial determination regarding the need for additional Board members to fill vacancies or expand the size of the Board. If the Committee determines that additional consideration is warranted, the Committee will review such information and conduct interviews as it deems necessary in order to fully evaluate each director candidate. In addition to the qualifications of a candidate, the Committee will consider such relevant factors as it deems appropriate, including the current composition of the Board, the evaluations of other prospective nominees, and the need for any required expertise on the Board or one of its committees. The Corporate Governance and Directors Nominating Committee also seeks for the Board to be balanced as to its diversity, experience, skills and expertise. The Committee’s evaluation process will not vary based on whether or not a candidate is recommended by a stockholder.
| |
| Human Resources Committee |
The Human Resources Committee (the “HR Committee”) assists the Board in the discharge of its fiduciary responsibilities relating to the fair and competitive compensation of the Company’s Chief Executive Officer and other senior executives; administers and makes or recommends awards under the Company’s incentive compensation and equity based plans; and reviews plans for management succession. The HR Committee annually evaluates the Chief Executive Officer’s leadership and performance. Each of the members of the HR Committee is an independent director under the NYSE listing standards. The HR Committee met five times during 2006.
The HR Committee recommends the total compensation package for Mr. Timothy R. Wallace, who holds the positions of the Chairman, President and Chief Executive Officer (collectively referred to as the “CEO”) to Trinity’s independent directors for approval. The HR Committee reviews and approves compensation for the Chief Financial Officer (the “CFO”) and the other executive officers named in the Summary Compensation Table (collectively, along with the CEO, are referred to in this proxy statement as the “named executive officers”). The HR Committee hires from time to time nationally recognized compensation consultants to assist in the development of the executive compensation program, including Hewitt Associates; Pearl Meyer & Partners; and Longnecker & Associates (collectively, referred to as the “compensation consultants”). At least one of the compensation consultants participates in HR Committee meetings when executive compensation is reviewed and discussed. The services of the compensation consultants are used only in conjunction with executive and director compensation matters and the consultants are not retained by the Company for any other purposes.
The CEO, the CFO, and the VP of Human Resources work with the HR Committee and the compensation consultants to develop the framework and design the plans for each of the components of compensation. The CEO and CFO recommend the financial performance measurements subject to HR Committee approval. The CFO certifies achievement of financial performance measures. The VP of Human Resources implements compensation-related policies and procedures and oversees the execution of each plan.
5
The CEO makes recommendations to the HR Committee on compensation for each of the other named executive officers.
The HR Committee bases its consideration of each executive’s compensation on past and expected future performance in respect to specific financial, strategic, and operating objectives, the scope of each executive’s responsibilities within the Company, the executive’s value to the Company and competitive market survey data. The HR Committee also periodically considers the benefits of a supplemental retirement plan as a part of the total compensation of the CEO.
The HR Committee annually reviews management’s assessment of the performance of the 25 highest paid executives of the Company and its subsidiaries. The review is conducted prior to the year in which any adjustment to the base salary becomes effective. Prior to the year in which an executive would earn an annual bonus, the HR Committee establishes an executive’s annual incentive compensation target as a percentage of base salary. Prior to the measurement period in which an executive would receive a long-term incentive award, the HR Committee establishes an executive’s target for long-term incentive compensation as a percent of base salary based on comparable Company market survey data, scope of an executive’s responsibilities, the executive’s tenure, their skill sets and their overall value to the Company.
Compensation Committee Interlocks and Insider Participation
Craig J. Duchossois, Ronald J. Gafford, Ronald W. Haddock, Jess T. Hay and Diana S. Natalicio served on the HR Committee during the last completed fiscal year. Mr. Duchossois resigned as a director on March 7, 2006. None of the members of the HR Committee has ever served as an executive officer or employee of the Company or any of its subsidiaries. There were no compensation committee interlocks during 2006.
In 2001, a subsidiary of Trinity merged with Thrall Car Manufacturing Company (“Thrall”) pursuant to a Merger Agreement with the sole stockholder of Thrall, Thrall Car Management Company (“TCMC”). During the time Mr. Duchossois was a director of the Company he was a director, executive officer and had a pecuniary interest in TCMC by virtue of his direct or indirect equity ownership of TCMC. During 2006, TCMC paid Trinity $3,779,733 for warranty claims made pursuant to the Merger Agreement. Trinity has submitted additional warranty claims to TCMC pursuant to the Merger Agreement that are under review by TCMC. Pursuant to the terms of a registration rights agreement that was entered into as part of the Merger Agreement, during 2006 Trinity registered for sale 3,150,000 shares of common stock that were issued in connection with the Merger Agreement. Under terms of the Merger Agreement, TCMC was entitled to receive a performance payment from the Company of up to $45,000,000 if certain industry related delivery targets were met. A payment was made in February 2006 of $15,322,000, and a payment of $29,678,000 was made in February 2007.
Stockholder Communications with Directors
The Board has established a process to receive communications from stockholders and other interested parties by mail. Stockholders and other interested parties may contact any member of the Board, including the Presiding Director, Mr. Jess T. Hay, or the non-management directors as a group, any Board committee or any chair of any such committee. To communicate with the Board of Directors, any individual director or any group or committee of directors, correspondence should be addressed to the Board of Directors or any such individual director or group or committee of directors by either name or title. All such correspondence should be sent “c/o Corporate Secretary” at 2525 Stemmons Freeway, Dallas, Texas 75207.
All communications received as set forth in the preceding paragraph will be opened by the office of our Corporate Secretary for the sole purpose of determining whether the contents represent a message to our directors. Any contents that are not in the nature of advertising, promotions of a product or service, or patently offensive material will be forwarded promptly to the addressee. In the case of communications to the Board or any group or committee of directors, the Corporate Secretary will make sufficient copies of the contents to send to each director who is a member of the group or committee to which the envelope is addressed.
6
Independence of Former Directors
Two former directors that served during a portion of 2006, Mr. Barry J. Galt and Mr. Craig J. Duchossois, had each been determined by the Board to be independent directors during the time of their service on the Board. In the case of Mr. Duchossois, the Board had considered the potential payments described under Compensation Committee Interlocks and Insider Participation to not be a bar to a determination of independence based on the advice of counsel and interpretations from the NYSE. The payment that occurred in February 2006 likely would have precluded him from being independent but he resigned as a director before the Board meeting that was scheduled to consider his independence.
PROPOSAL 1 — ELECTION OF DIRECTORS
Our Board of Directors currently consists of Messrs.ten members. Mr. Clifford J. Grum will be retiring from the Board at the Annual Meeting after 11 years of service on the Board. The Board has amended the Company’s Bylaws to reduce the size of the Board to nine directors effective upon Mr. Grum’s retirement at the Annual Meeting.
Following a recommendation from the Corporate Governance and Directors Nominating Committee, each of the members of the Board of Directors (other than Mr. Clifford J. Grum, who is retiring) has been nominated by the Board for election at the Annual Meeting to hold office until the later of the next Annual Meeting or the election of their respective successors. The director nominees are John L. Adams, Rhys J. Best, David W. Biegler, Grum,Ronald J. Gafford, Ronald W. Haddock, Jess T. Hay, Adrian Lajous, Diana S. Natalicio and Dr. Natalicio.Timothy R. Wallace. Mr. Lajous was recommended to the Corporate Governance and Directors Nominating Committee by a non-management director and Mr. Adams by a non-management director and the CEO. The dutiesBoard of Directors has determined that all of the director nominees other than Mr. Timothy R. Wallace and Mr. John L. Adams are “independent directors.” Mr. Wallace is our Chairman, President and Chief Executive Officer, and Mr. Adams served as a non-executive Vice Chairman within the last three years. Therefore, the Board of Directors has concluded that neither person is currently an independent director.
Mr. Adams served as our Executive Vice President from January 1999 through June 2005, having previously served as one of our directors from December 1996 until joining us as Executive Vice President. Mr. Adams served us on a part-time basis pursuant to a retirement and transition agreement in the non-executive officer capacity as Vice Chairman from July 2005 until March 5, 2007 when we mutually agreed to terminate the agreement and he was appointed as a non-employee director on our board. Mr. Adams was treated as retiring early for the purpose of accelerating vesting of 33,750 shares of restricted stock and 40,800 stock options as of December 31, 2006 which would have otherwise vested on or before his normal retirement from the Company in August 2009. Before joining us, Mr. Adams spent 25 years in various positions with Texas Commerce Bank N.A. and its successor, Chase Bank of Texas, National Association. From 1997 to 1998, Mr. Adams was Chairman, President and Chief Executive Officer of Chase Bank of Texas.
The information provided below is biographical information about each of the nominees.
Nominees
Timothy R. Wallace, 53. Director since 1992. Mr. Wallace is Chairman, President and Chief Executive Officer of the Company. Mr. Wallace is a director of MoneyGram International, Inc. which is a payment services and money transfer business.
John L. Adams, 62. Director since 2007. Member of the Finance and Risk Management Committee. Mr. Adams served as Executive Vice President of the Company from January 1999 to June 2005, serving thereafter on a part time basis as Vice Chairman until leaving the employ of the Company to join the Board in March of 2007. Mr. Adams is a director of Group 1 Automotive, Inc., a public company engaged in the ownership and operation of automotive dealerships and collision centers, and American Express Bank, Ltd., a wholly-owned subsidiary of American Express Company.
7
Rhys J. Best, 60. Director since 2005. Member of the Finance and Risk Management Committee. Mr. Best began serving during 1999 as Chairman, President and CEO and is a director of Lone Star Technologies, Inc., a company engaged in oil field products, tubing products for heat-recovery applications, thermal heating services and couplings supplier. He is also a director of Crosstex Energy, L.P.
David W. Biegler, 60. Director since 1992. Chairman of the Corporate Governance and Directors Nominating Committee and a member of the Audit Committee and Finance and Risk Management Committee. Mr. Biegler began serving during 2003 as Chairman of Estrella Energy L.P., a company engaged in natural gas transportation and processing. He retired as Vice Chairman of TXU Corporation at the end of 2001, having served TXU Corporation as President and Chief Operating Officer from 1997 until 2001. Mr. Biegler is also a director of Dynegy Inc., a company engaged in power generation; Southwest Airlines, Inc., a major domestic airline; Animal Health International, a company engaged in selling and distributing animal health products; and Austin Industries, Inc., a civil, commercial and industrial construction company.
Ronald J. Gafford, 57. Director since 1999. Chairman of the Human Resources Committee generally are to
(a) determine and/or recommendand a member of the compensation structureCorporate Governance and Directors Nominating Committee. Mr. Gafford is President and Chief Executive Officer of Austin Industries, Inc., a civil, commercial and industrial construction company. He is a director of Chaparral Steel Company.
Ronald W. Haddock, 66. Director since 2005. Member of the Audit Committee and the Human Resources Committee. Mr. Haddock has been Executive Chairman, CEO and director of Prisma Energy International, a power generation, distribution and a natural gas distribution company since August 2003. He was President and CEO of FINA, Inc. from January, 1989 until his retirement in July 2000. He is a director of Alon Energy USA, Safety-Kleen, Inc. and Adea Solutions, Inc.
Jess T. Hay, 76. Director since 1965. Chairman of the Finance and Risk Management Committee and a member of the Human Resources Committee and the Corporate Governance and Directors Nominating Committee. Mr. Hay is Chairman of HCB Enterprises, Inc., a private investment firm. He is also Chairman of the Texas Foundation for Higher Education. Mr. Hay is the retired Chairman and Chief Executive Officer of Lomas Financial Corporation, a diversified financial services company formerly engaged principally in mortgage banking, retail banking, commercial leasing, and real estate lending, and of Lomas Mortgage USA, a mortgage banking institution. Mr. Hay is a director of Viad Corp. which is a convention and event services, exhibit design and construction, and travel and recreational services company, and a director of MoneyGram International, Inc. which is a payment services and money transfer business.
Adrian Lajous, 63. Director since December 2006. Member of the Audit Committee and Finance and Risk Management Committee. Mr. Lajous is Senior Energy Advisor, McKinsey & Company and its subsidiaries, (b) make recommendationsPresident of Petrométrica, SC., an energy consulting company, since 2001. Mr. Lajous served Pemex in several capacities between 1982 and 1999, having served as Director General and CEO from 1994-1999. Mr. Lajous is Chairman of the Oxford Institute for Energy Studies and is a director of Schlumberger, Ltd. and Ternium, S.A.
Diana S. Natalicio, 67. Director since 1996. Member of the Human Resources Committee. Dr. Natalicio is President of the University of Texas at El Paso. Dr. Natalicio was appointed by President George H.W. Bush to the Commission on Educational Excellence for Hispanic Americans and by President William J. Clinton to the National Science Board and to the President’s Committee on the Arts and Humanities.
| |
| The Board of Directors recommends that you voteFOR all of the Nominees. |
8
PROPOSAL 2 — AMENDMENT OF CERTIFICATE OF
INCORPORATION TO INCREASE AUTHORIZED CAPITAL STOCK
At the Annual Meeting, stockholders will be asked to approve an amendment to the Company’s Certificate of Incorporation, as amended (the “Certificate of Incorporation”) to increase the authorized number of shares of common stock from 100 million shares to 200 million shares (the “Increase in Authorized Capital Amendment”). On March 5, 2007, the Board of Directors asadopted resolutions setting forth the Increase in Authorized Capital Amendment in the form of an amendment to the
salaryArticle IV of the Chief Executive Officer,Company’s Certificate of Incorporation, and sethas determined the salariesIncrease in Authorized Capital Amendment to be advisable and in the Company’s best interest.
The following is the relevant text of other senior
executivesArticle IV of the Company, (c) grant options,Company’s Certificate of Incorporation, as proposed to be amended, with additions indicated with italicized text and deletions indicated by strike-through text:
| |
| “The total number of shares of stock which the corporation shall have authority to issue isOne Hundred and One Million Five Hundred Thousand (101,500,000)Two Hundred and One Million and Five Hundred Thousand (201,500,000)shares, of which One Million Five Hundred Thousand (1,500,000) shares shall be voting Preferred Stock without par value andOne Hundred Million (100,000,000)Two Hundred Million (200,000,000)shares shall be Common Stock with a par value of One Dollar ($1.00) per share.” |
The purpose of the Increase in Authorized Capital Amendment is to increase the total authorized number of shares of common stock stock units and
such other benefits asfrom 100 million shares to 200 million shares. The additional authorized shares may be permitted under the Company's stock related
benefit plan or plans to such officers and employees as the Committee may
designate, and report all such grants to the Board of Directors, (d) review
with the Chief Executive Officer, no less frequently than once a year, the
depth and quality of the Company's management and succession plans related to
each critical operating position ofused by the Company (e) design, recommend to the
Board for approvalbusiness and administer long, intermediate and short-term incentive
compensation plans of the Company, (f) review and recommend to the Board the
adoption and, where applicable, amendment of employee benefit plans, (g)
administer, interpret, amend (where applicable), and carry out such other
duties with respect to the Company's employee benefit plans,financial purposes as may be
authorized or called fordetermined by such plans or the Board of Directors, (h) be kept
informed as to administration and management matters in respect of the
Company's qualified pension plans, and (i) make such other reports and
recommendations to the Board of Directors from time to time asto be necessary or desirable. We split our common stock three-for-two pursuant to a stock dividend in 2006. Although there is no current plan to declare any type of stock split or stock dividend, the Committee
may deem appropriate. The Human Resources Committee succeeded toadditional authorized shares could be used in connection with such a transaction. Other possible business and financial uses for the principal dutiesadditional shares of common stock include, without limitation, raising capital through the Compensation Committee. The Compensation Committee
met one (1) time duringsale of common stock; acquiring other companies, businesses, products or services in exchange for shares of common stock; attracting and retaining employees by the fiscal year ended March 31, 1997.
The Corporate Governanceissuance of additional securities under the Company’s various equity compensation plans; and Nominating Committee consists of Messrs.
Biegler, Guerinother transactions and Hay and Dr. Natalicio. The duties of the Corporate
Governance and Nominating Committee generally are to (a) recommend tocorporate purposes that the Board of Directors the director nominees proposed each yeardeems to be in the Company's
proxy statement for election byCompany’s best interest. The additional authorized shares would enable the Company stockholders, (b) reviewto act quickly in response to opportunities that may arise for these types of transactions.
As of March 23, 2007, there were approximately shares of common stock issued and outstanding. In addition, as of such date, approximately shares were subject to outstanding equity compensation awards such as stock options (restricted stock awards are treated as outstanding shares) and an additional shares were reserved for issuance in connection with future awards available for grant under the qualificationsCompany’s various, stockholder-approved, equity compensation plans. In June 2006, the Company issued $450 million of Convertible Subordinated Notes due 2036. Full conversion of the Notes would require 8,615,738 shares of common stock. However, upon conversion, we will pay only cash in settlement of the principal amount or conversion value thereof, and recommendwe will settle any amounts in excess of principal in cash or shares of our common stock at our option. Thus, the Company would anticipate issuing substantially fewer shares, if any, than those required for full conversion.
Other than shares that may be issued under the equity compensation plans described above or pursuant to the Board, candidatesConvertible Subordinated Notes, the Company has no immediate plans, understandings, agreements or commitments to fill Board
vacancies as they may occur, (c) consider suggestions from stockholders and
other sources regarding possible candidatesissue additional shares of common stock for director, (d) define and
recommendany purposes.
Upon issuance, the additional shares of authorized common stock would have rights identical to the Board appropriate guidelines and criteria regarding the
qualificationsshares of candidates for directorcommon stock currently outstanding. Approval of the Company, (e) review and from
time to time propose changes (as and if appropriate)Increase in Authorized Capital Amendment would not have any immediate dilutive effect on the compensation and
benefitsproportionate voting power or other rights of non-employee directorsexisting stockholders. Because the Company’s Certificate of the Company, (f) review and from time to
time propose changes (as andIncorporation does not confer to the extent deemed appropriate by the
Committee) in the Company's system of corporate governance, and (g) make such
other reports and recommendationsCompany’s stockholders preemptive rights with respect to common stock, should the Board of Directors from timeelect to time
asissue
9
additional shares of common stock, existing stockholders would not have any preferential rights to purchase these shares.
The Increase in Authorized Capital Amendment could, under certain circumstances, have an anti-takeover effect, although it is not the Committee may deem appropriate. The Corporate Governance and
Nominating Committee is new, being established asCompany’s intention with this proposal. For example, in the event of a parthostile attempt to take control of the reorganizationCompany, it may be possible for the Company to impede the attempt by issuing shares of common stock, which would dilute the voting power of the committee structureother outstanding shares and increase the potential cost to acquire control of the Company. The Increase in Authorized Capital Amendment therefore may have the effect of discouraging unsolicited takeover attempts, potentially limiting the opportunity for the Company’s stockholders to dispose of their shares at a premium, which is often offered in takeover attempts, or that may be available under a merger proposal. The Increase in Authorized Capital Amendment may have the effect of permitting the Company’s current management, including the current Board of Directors, to retain its position, and place it in a better position to resist changes that stockholders may wish to make if they are dissatisfied with the conduct of the Company’s business. However, the Board of Directors at its meeting on May 13,
1997. The Corporate Governance and Nominating Committee didis not meet during
the fiscal year ended March 31, 1997.
-5-
The Corporate Development and Finance Committee consistsaware of Messrs.
Adams, Galt, Guerin and Hoffman. The duties of the Corporate Development and
Finance Committee generally areany attempt to (a) provide direction for the assessment of
future acquisition opportunities, (b) review specific plans regarding
significant acquisitions or dispositions of business or assets, (c) authorize,
subject to limits imposed by the Board of Directors, an investment in (or sale
of) or acquisition of (or disposition of) another company, or the entry into
(or termination of) a partnership, joint venture, or similar investments, or a
financial guarantee or appropriations to subsidiaries of the Company for any
of the foregoing purposes, and (d) make such reports and recommendations to
the Board of Directors from time to time as the Committee may deem
appropriate. In addition, the Corporate Development and Finance Committee
shall (1) periodically review the financial status of the Company, (2) consult
with the officerstake control of the Company, and the Board of Directors has not presented this proposal with the intent that it be utilized as a type of anti-takeover device.
If the Increase in regardAuthorized Capital Amendment is approved by the stockholders, it will become effective upon filing of a Certificate of Amendment to significant matters involving the financesCompany’s Certificate of Incorporation with the Secretary of State of the State of Delaware, which filing is expected to occur soon after the Annual Meeting.
| |
| The Board of Directors recommends that you voteFOR the Increase in Authorized Capital Amendment to the Company’s Certificate of Incorporation. |
PROPOSAL 3 — RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP
The Audit Committee has appointed Ernst & Young LLP (“Ernst & Young”) as independent registered public accounting firm of the Company (3) review
financial policy and procedures and make such recommendations in regard
thereto as the Committee may deem appropriate, (4) approve guidelines for the
investment of the Company's cash reserves, and (5) recommend for approval by
the Board of Directors (i) the amount and record date of dividends, (ii) the
Company's annual budget (including, but not limited to, revenue, net income,
and capital expenditure objectives) and an acceptable range for the debt to
equity ratio of the Company, and (iii) Registration Statements to be filed
with the SEC in connection with the Company's securities issuances. The
Corporate Development and Finance Committee is new, being established as a
part of the reorganization of the Committee structure of the Board of
Directors at its meeting on March 13,1997. The Corporate Development and
Finance Committee did not meet during the fiscal year ended Marchending December 31, 1997.
COMPENSATION OF DIRECTORS
During2007, subject to ratification of stockholders.
The Company has been advised by Ernst & Young that the fiscal year ended March 31, 1997, each director received
$1,250 for each director's meeting attended and reimbursement for reasonable
out-of-pocket expenses. In addition, each director who is not a compensated
officer or employee offirm has no relationship with the Company or its subsidiaries receivedother than that arising from the firm’s engagement as auditors, tax advisors and consultants.
Ernst & Young, or a feepredecessor of $30,000 perthat firm, has been the auditors of the accounts of the Company each year since 1958. The Company has also been advised that representatives of Ernst & Young will be present at the Annual Meeting where they will have an opportunity to make a statement if they desire to do so and will be available to respond to appropriate questions.
Fees of Independent Registered Public Accounting Firm for servingFiscal Years 2006 and 2005
The following table presents fees for professional audit services rendered by Ernst & Young for the audits of the Company’s annual financial statements for the years ended December 31, 2006 and December 31, 2005, and fees for other services rendered by Ernst & Young during those periods:
| | | | | | | | | |
| | | 2006 | | | 2005 | |
| | | | | | | |
| Audit fees | | $ | 2,643,200 | | | $ | 2,413,500 | |
| Audit-related fees | | | 109,249 | | | | 34,500 | |
| Tax fees | | | 529,714 | | | | — | |
| All other fees | | | — | | | | — | |
Services rendered by Ernst & Young in connection with fees presented above were as follows:
In fiscal years 2006 and 2005, audit fees includes fees associated with the annual audit of the Company’s financial statements, the assessment of the Company’s internal control over financial reporting as integrated
10
with the annual audit of the Company’s financial statements, the quarterly reviews of the financial statements included in the Company’s Form 10-Q filings, and consents included in other SEC filings.
Audit-related fees include fees for accounting consultations, employee benefit plan audits and Sarbanes-Oxley consultations.
Tax fees in fiscal years 2006 and 2005 include fees for tax compliance, tax advice, tax planning and tax preparation of expatriate returns.
There were no fees for other services not included above.
The Audit Committee pre-approves all audit and permissible non-audit services provided by Ernst & Young. These services may include audit services, audit-related services, tax services and other services. The Audit Committee has adopted a director (andpolicy for the Chairmanpre-approval of services provided by Ernst & Young. In addition, the Audit Committee also may pre-approve particular services on a case-by-case basis. The Audit Committee has delegated pre-approval authority to the Chair of the Audit Committee. Pursuant to this delegation, the Chair must report any pre-approval decision by him to the Committee at its first meeting after the pre-approval was obtained. Under this policy, pre-approval is generally provided for up to one year and any pre-approval is detailed as to the particular services or category of services and includes an anticipated budget.
Report of the Audit Committee
We are a standing committee comprised of independent directors as “independence” is currently defined by SEC regulations and the applicable listing standards of the NYSE. Our Board of Directors has determined that three of the members of the Audit Committee are “audit committee financial experts” as defined by applicable SEC rules. We operate under a written charter adopted by our Board of Directors. A copy of the Charter is available free of charge on our website atwww.trin.net under the heading “Investor Relations/ Governance” or by writing to Trinity Industries, Inc. 2525 Stemmons Freeway, Dallas, Texas 75207 c/o Vice President and Corporate Secretary.
We annually select the Company’s independent auditors. That recommendation is subject to ratification by the Company’s stockholders.
Management is responsible for the Company’s internal controls and the Chairmanfinancial reporting process. The independent auditors are responsible for performing an independent audit of the CompensationCompany’s consolidated financial statements in accordance with auditing standards generally accepted in the United States of America and issuing a report thereon. As provided in our Charter, our responsibilities include the monitoring and oversight of these processes.
Consistent with our Charter responsibilities, we have met and held discussions with management and the independent auditors. In this context, management and the independent auditors represented to us that the Company’s consolidated financial statements for the fiscal year ended December 31, 2006 were prepared in accordance with U.S. generally accepted accounting principles. We reviewed and discussed the consolidated financial statements with management and the independent auditors and discussed with the independent auditors matters required to be discussed by Statement on Auditing Standards No. 61, as amended.
The Company’s independent auditors have also provided to us the written disclosures required by Independence Standards Board Standard No. 1Independence Discussions with Audit Committees, and we discussed with the independent auditors that firm’s independence. We also considered whether the provision of non-audit services is compatible with maintaining the independent auditors’ independence and concluded that such services have not impaired the auditors’ independence.
11
Based upon our reviews and discussions with management and the independent auditors and our review of the representation of management and the report of the independent auditors to the Committee, received an
additional $2,000 per year in those capacities) and $1,250 for each Audit
Committee or Compensation Committee meeting attended. Under the Deferred Plan
for Director Fees adopted bywe recommended that the Board of Directors include the audited consolidated financial statements in the Company’s Annual Report on June 13, 1996, each
director is permittedForm 10-K for the year ended December 31, 2006 filed with the Securities and Exchange Commission.
| |
| Audit Committee |
|
| Clifford J. Grum,Chairman |
| David W. Biegler |
| Ronald W. Haddock |
Mr. Adrian Lajous was appointed to elect,the Audit committee on or before eachMarch 5, 2007 and did not participate in the Audit Committee’s recommendation to the Board that the audited consolidated financial statements be included in the Company’s Annual MeetingReport on Form 10-K.
The Board of Directors to deferrecommends that you voteFOR the receipt of all or a specified portionratification of the fees to be paid to
him or her. If deferral is elected,selection of Ernst & Young LLP as the amounts that would otherwise be paid
to him or her in cash duringCompany’s independent registered public accounting firm for the ensuing fiscal year is creditedending December 31, 2007.
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
The Board of Directors has delegated to an accountthe HR Committee oversight of our executive compensation program. The HR Committee reviews and recommends to the Board the compensation for the CEO. The HR Committee reviews and approves the compensation of the CFO and the other named executive officers. For more information on the booksHR Committee, its members and its processes see “Corporate Governance — Human Resources Committee.” The HR Committee bases its consideration of each executive’s compensation on past and expected future performance in respect to specific financial, strategic, and operating objectives, the scope of each executive’s responsibilities within the Company, the executive’s value to the Company and treated as if invested either atcompetitive market survey data. The HR Committee generally strives for compensation for the prime
ratenamed executive officers to be between the 50th and 75th percentile of interest as announced from timecompensation paid to time by Texas Commerce Bankexecutives in Dallas, Texas or, atsimilar positions with companies comprising a compensation peer group.
The CEO, the director's prior election, in unitsCFO and the VP of Human Resources work with the HR Committee and the compensation consultants of the Company's
Common Stock atHR Committee to develop the closing price onframework and design the New York Stock Exchange onplans for each of the date
that a payment is creditedcomponents of compensation. The CEO and CFO recommend the financial performance measurements subject to HR Committee approval. The CFO certifies achievement of financial performance measures. The VP of Human Resources implements compensation-related policies and procedures and oversees the execution of each plan. The CEO makes recommendations to the director's account. If deemed invested in
unitsHR Committee on compensation for each of the Company's Common Stock,other named executive officers.
The following discussion and analysis contains statements regarding future company performance targets and goals. These targets and goals are disclosed in the stock unitslimited context of our compensation programs and should not be considered as statements of our expectations or estimates of results or other guidance. The following discussion should be read in conjunction with the Summary Compensation Table and related tables and narrative disclosure that follow the tables which set forth the compensation of our CEO and the other named executive officers.
12
| |
| Objectives of our Compensation Program |
The HR Committee’s primary objectives for the Company’s executive compensation program are creditedto:
| | |
| • | attract, motivate, and retain the key executives needed to enhance the profitability of the Company; |
|
| • | encourage the highest level of performance and accountability for the overall success of the Company; |
|
| • | provide an incentive for long-term value creation for our stockholders; |
|
| • | align compensation with short-term and long-term business objectives and strategies, financial targets and the core values of the Company; and |
|
| • | align compensation as appropriate with the cyclical nature of the Company’s businesses. |
| |
| Design of our Compensation Program |
Our compensation program is intended to reinforce the importance of performance and accountability at both the individual and corporate levels. Our compensation program is designed to:
| | |
| • | provide a reasonable balance between short-term and long-term compensation; |
|
| • | provide a reasonable mix of fixed and incentive-based compensation; |
|
| • | retain key executives through the cycles of our businesses; |
|
| • | be competitive with our compensation peer group; and |
|
| • | use equity-based awards, stock ownership guidelines and annual incentives that are linked to stockholder value. |
The HR Committee hires nationally recognized compensation consultants to assist in the development of our executive compensation program.
In connection with amounts
equivalentestablishing compensation for 2005, the HR Committee hired a nationally recognized compensation consultant to dividends paidconduct a total compensation study that compared the Company’s executive compensation to a compensation peer group. The compensation peer group was comprised of 25 manufacturing and service companies of comparable size based on revenue, with executives in positions comparable in breadth, complexity, scope of responsibility and who potentially compete with the Company's Common Stock. Upon ceasingCompany for executive talent. The compensation peer group consisted of the following 25 companies with median revenue of $2.4 billion: American Standard Companies, Inc., Avery Dennison Corporation, Ball Corporation, BJ Services Company, Briggs & Stratton Corporation, Burlington Northern Santa Fe Corporation, Chicago Bridge and Iron Company, Cooper Cameron Corporation, Cooper Industries, Inc., Dover Corporation, FlowServe Corporation, FMC Corporation, GATX Corporation, Hillenbrand Industries, Inc., Illinois Tool Works, Inc., ITT Industries, Inc., Kennametal Inc., Martin Marietta Materials, Inc., Milacron Inc., Parker Hannifin Corporation, Stewart & Stevenson Service, Inc., The Stanley Works, Temple-Inland, Inc., Texas Industries, Inc. and Vulcan Materials Company.
In preparation for the 2006 executive compensation review, the HR Committee adjusted the 2005 compensation study results by 4% to servereflect market changes after its compensation consultant advised there had been no significant changes in executive compensation trends and survey sources indicated that the total salary adjustments for manufacturing companies increased by 3.8%. This data was used as a director,reference point in establishing executive compensation for 2006.
In establishing the valuecompensation program for 2006, the HR Committee used tally sheets that set forth total compensation and benefits paid and potentially payable to each executive, including estimated pension benefits, equity holdings, and a range of the account will be paid to the director in
annual installments not exceeding ten (10) years, according to the director's
prior election.
-6-
Each outside director has been granted an option to purchase 7,500 shares
of the Company's Common Stock. The option exercise price at March 31, 1997 of
the options granted to Messrs. Galt, Guerin, Hay and Hoffman was $22.50 per
share. The option exercise prices at March 31, 1997 of the options granted to
Mr. Biegler, Mr. Grum, Mr. Adams, and Dr. Natalicio was $33.50, $35.00,
$32.125, and $32.125, respectively. The option exercise price of each option
granted to the outside directors is the market value of the Company's Common
Stock at the time of the grant, as adjusted for stock splits and other
extraordinary property distributions.
The Company has a Directors' Retirement Plan that was adopted on December
11, 1986. The plan is an unfunded arrangement through which monthlypossible payments
will be paid to members of the Board of Directors who are not employees of the
Company upon retirement, disability or death while serving as a director on or
after December 11, 1986. The payments will be made to the director and/or his
designated beneficiary for a ten (10) year period. The amount of each monthly
payment will be equal to one-twelfth (1/12) of a percentage of the annual
retainer paid to such director in the year of his retirement, disability or
death while serving as a director. The applicable percentage is dependent
upon the number of years of service as a member of the Board of Directors. If
the director has less than five (5) years of service, the applicable
percentage is zero. If the director has five (5) years of service, the
applicable percentage is fifty percent (50%). The applicable percentage
increases at the rate of ten percent (10%) for each year of service thereafter
and reaches one hundred percent (100%) after ten (10) years of service as a
director. However, notwithstanding the number of years of service, a
director's applicable percentage will be one hundred percent (100%) in the event of a Changechange in Controlcontrol. The impact on future retirement benefits and amounts subject to accrual under the deferred compensation plan are not specifically considered by the HR Committee when making changes in base salary or determining the potential amounts payable from annual incentive compensation.
13
While there is no pre-established policy or target for the allocation between cash and non-cash, short-term and long-term, or fixed and incentive-based compensation, the Company’s compensation and benefits program generally reflects the following although the HR Committee may make variations to meets its objectives:
Short-term versus Long-term Compensation. The HR Committee has established through practice that an executive’s maximum total potential short-term compensation should fall within a range of 45% to 65% of his or her total potential compensation. Short-term compensation consists of two primary components and is normally paid in cash:
| | |
| • | base salaries and executive perquisites typically comprise 15% to 25% of total compensation; and |
|
| • | annual incentive compensation that ranges from 30% to 40% of total compensation. |
Long-term compensation is typically 35% to 55% of total compensation and is composed of three primary components:
| | |
| • | retirement benefits; |
|
| • | deferred compensation; and |
|
| • | long-term incentive compensation that is typically paid with equity awards. |
Fixed versus incentive-based compensation. Incentive-based compensation is compensation that is based on achievement of measurable goals or has vesting requirements that may not be achieved. The named executive officers’ incentive-based compensation includes the following components:
| | |
| • | annual incentives typically paid in cash; and |
|
| • | long-term incentives typically paid through equity awards. |
For the named executive officers, incentive-based compensation typically ranges from 60% to 70% of total compensation. The percent of compensation that is incentive-based increases as an executive’s scope of responsibilities increases or expands. The CEO has the highest percentage of incentive-based compensation.
In setting base salaries, the HR Committee considers a variety of factors including when available a market range — 25th through 75th percentile — of salaries of senior executives with similar positions and similar responsibilities at comparable companies as reflected in a survey provided by an independent consultant. The HR Committee establishes executive base salary based on the market survey data, past and expected future performance, and a review of operating results, organizational improvements, and scope of an executive’s responsibilities, including projected revenue and business operation complexity under an executive’s control. The base salaries for the last fiscal year for the named executive officers can be found in the “Summary Compensation Table.” The base salary of each of the Company. For purposes of this Proxy
Statement, a "Change in Control"named executive officers is deemedwithin the compensation range established for each position, except for Mr. Stiles due to have occurred if (i) any person
becomes the beneficial owner, directly or indirectly, of securitiesdifficulty associated with obtaining survey data that fully reflected the complexity of the Company (other than directly frombusinesses that he oversees. The base salary of Mr. Menzies was increased as of May 15, 2006 to compensate Mr. Menzies for his promotion to Group President of Trinity’s rail businesses.
The base salary for Mr. Wallace was not changed for 2007. The HR Committee approved base salaries for the Companyother named executive officers for 2007. The base salaries of its affiliates) representing
thirty percent (30%) or moreMr. Stiles and Mr. Menzies for 2007 were set at $520,000. Mr. McWhirter’s base salary was set at $425,000 and Mr. Graham’s salary was set at $437,000. The base salary of each of the combined voting powernamed executive officers is within the compensation range established for each position, except for Mr. Graham due to the significant growth we have experienced in the business that he leads.
14
| |
| Annual Incentive Compensation |
Annual incentive targets are established after considering comparable company market survey data, the scope of an executive’s responsibilities, and an executive’s tenure, skill set and value to us. The HR Committee also establishes a maximum incentive compensation payout stated as a percentage of each executive’s base salary. Annual incentive compensation is normally paid out in cash because it is an award that recognizes current performance.
Due to the highly cyclical nature of our businesses, the HR Committee may adjust, from year to year, the performance criteria or other elements of an executive’s annual incentive. During cyclical growth years in which we have the potential to substantially improve the Company’s financial performance, the HR Committee may elect to provide the named executive officers and other select key executives with the opportunity to earn additional incentive income for achievement of measurable financial results beyond the normal cap placed on the basic annual incentive payout. This additional component of the Company's
then outstanding securities, (ii) a majorityannual incentive is referred to as the Exceptional Performance Incentive Program (“EPIP”). The HR Committee initiated the EPIP in 2005 and extended its use in 2006 and 2007. Trinity’s revenues grew by 32% in 2005 and 19% in 2006 while improving the operating results from $83.1 million in net income during 2005 to $230.1 million net income for 2006. During cyclical down years, the Company’s annual incentive plan may contain elements designed to focus management on other performance criteria.
For 2006, the maximum annual incentive compensation payout including EPIP was 246% of the number of directors
serving on the Board of Directors no longer consists of the existing directors
and any new director (other than a director whose initial assumption of office
is in connection with an actual or threatened election contest) whose
appointment or electionCEO’s base salary as established by the Board and 166% of Directors or nominationbase salary for electioneach of the other named executive officers as established by the stockholdersHR Committee. The Company made $1.13 diluted earnings per share in 2005 and in January of 2006 the annual incentive EPIP payout ranges were established based on the performance goal of $2.19 diluted earnings per share, a 94% increase. No discretion was exercised in determining the amounts payable.
The annual incentives for 2006 for the named executive officers were tied to financial performance goals set by the HR Committee at the beginning of the Company was approved or recommended by a vote of at
least two-thirdsyear. The table below shows the percent allocated to each of the directors then still in office whofinancial measurements for the CEO and named executive officers. The allocations are more heavily weighted towards current year profitability to better reflect the existing
directors or whose appointment, election or nominationgrowing earnings for election was
previously so approved or recommended, (iii)the Company during this cyclical upswing. The HR Committee allocates a merger or consolidationlesser portion of the Company with any other company unlessincentive to return metrics to ensure that management focuses on the Company's stockholders immediately
after the merger or consolidation represent at least sixty percent (60%)proper allocation of the combined voting power of the Company or such surviving entity or any
parent thereof or (iv) the stockholders approve a plan of complete liquidation
or dissolution of the Company or there is consummated an agreement for the
sale by the Company of all or substantially all of its assets other than a
sale or disposition to an entity, at least sixty percent (60%) of the combined
voting power of which is owned by stockholders of the Company in substantially
the same proportions as their ownership of the Company immediately prior to
the sale.
EXECUTIVE COMPENSATION AND OTHER MATTERS
The following table sets forth information for the Company's fiscal years
ended March 31, 1997, 1996 and 1995, with regard to the compensation for their
services tocapital within the Company and its subsidiariesvarious businesses.
Percentage Allocated to Company Financial Goals for 2006 Annual Incentive
| | | | | | | | | | | | | | | | | | | | | |
| | | Mr. | | | Mr. | | | Mr. | | | Mr. | | | Mr. | |
| | | Wallace | | | McWhirter | | | Stiles | | | Menzies | | | Graham | |
| | | | | | | | | | | | | | | | |
| Corporate Earnings Per Share | | | 70 | % | | | 70 | % | | | 25 | % | | | 25 | % | | | 25 | % |
| Return on Capital Employed — manufacturing businesses | | | 30 | % | | | 30 | % | | | | | | | | | | | | |
| Business Unit Specific Financial Metrics | | | | | | | | | | | 75 | % | | | 75 | % | | | 75 | % |
After the Company’s annual financial results have been audited, the HR Committee reviews and approves annual incentive awards. The Company retains the exclusive right to modify the level of participation under the Program for significant changes in all capacitiesjob responsibilities and reduce an executive’s incentive compensation on a discretionary basis for failure to meet performance expectations.
The HR Committee established the annual incentive performance goals for 2007 based on specific, measurable improvement from the Company’s 2006 diluted earnings per share from continuing operations. The goals range from threshold at 5% to maximum at 25% improvement from 2006 diluted earnings per share. To achieve target, diluted earnings per share must improve by 15% from 2006 diluted earnings per share.
15
| |
| Long-Term Incentive Compensation |
Long-term incentives are a key part of our executive compensation package and are provided through the stockholder-approved stock option and incentive plan. Long-term incentive compensation is designed to attract, develop and retain strong management through stock ownership, and to encourage key employees to look beyond the annual planning horizon for ways to improve the Company, strategically position the businesses and profitably grow the earnings; thereby aligning the Company’s employees’ interests with the interests of its stockholders. To meet these objectives we use three types of long-term incentives: (1) stock options; (2) time-based restricted stock; and (3) performance-based restricted stock.
As part of the Chief
Executive Officercompensation program, the Board establishes a long-term incentive compensation target for the CEO and the HR Committee establishes a long-term incentive compensation target for the other named executive officers as a percentage of base salary. For 2006 and 2007, the long-term incentive compensation target was and will be 275% of the CEO’s base salary and 150% for each of the other four (4) most highly compensatednamed executive officers servingofficers.
The HR Committee’s practice is to make the Company atawards on the closedate of the Company's most
recently completed fiscal yearCompany’s annual meeting and after the first quarter financial results have been disclosed. Prior to making the awards, the HR Committee confirms there is no pending undisclosed material information.
For 2006, the HR Committee initially allocated 20% of Mr. John Dane III, Chairman, President
and Chief Executive Officeran executive’s long term incentive compensation to be awarded as stock options. As a result of Halter Marine Group, Inc.the accounting rule change associated with expensing stock options (SFAS 123R), the HR Committee reevaluated the issuance of which all stock
ownedoptions. The HR Committee considered the cost of the options relative to the perceived value by the Company executives and chose not to issue options for 2006. The 20% allocation was distributednot reallocated to another method of compensation as the HR Committee and Management determined the amount awarded as long term compensation was adequate to meet the HR Committee’s compensation objectives and philosophy for the year.
| |
| • Time-Based Restricted Stock |
The HR Committee considers time-based restricted stock as an important means to retain executives while also providing an incentive to grow the value of the Company and further align the interest of the executives with the stockholders. For 2006, after a review of the named executive officers’ contributions to the Company's stockholderslong-term value of the Company and the financial performance of the Company for the prior year, the HR Committee awarded within a range of 14% to 39% of each of the named executive officers’ long-term incentive compensation target as time-based restricted stock that vests one third each year after the first, third and fifth years following the grant. For 2007, the HR Committee will consider awarding up to 40% of the named executive officers’ long-term incentive compensation target as time-based restricted stock.
Upon the successful completion of Mr. McWhirter’s first year as the Company’s CFO, the HR Committee made a special award of 22,500 restricted shares. The shares vest on March
31, 1997.
-7-
retirement, or earlier on death, disability or change in control or consent of the HR Committee after three years from the date of grant. The HR Committee granted the shares to increase Mr. McWhirter’s equity ownership and to recognize his contributions to the Company during his first year as CFO of the Company. Additionally, the extended time-vesting represents an economical method for the Company to provide an incentive for retention and supplement retirement as Mr. McWhirter is not a participant in the Company’s Supplemental Retirement Plan.
SUMMARY COMPENSATION TABLE
Annual
Compensation Long Term
Compensation
--------------------
Name | |
| • Performance-Based Restricted Stock |
After a review of the named executive officers’ contributions to the long-term value of the Company and the financial performance of the Company for the prior year, the HR Committee awarded 60% of each of the named executive officers’ long-term incentive compensation target as performance-based restricted stock that vests one third each year after the first, third and fifth years following the grant. The grants were based on
16
Company financial performance for 2005 of $1.13 diluted earnings per share which mirrored the financial performance goals for the annual incentive.
During 2006, we began to phase in a three year performance-based restricted stock program. The HR Committee has determined that a portion of the long term incentive compensation in future years may be awarded as restricted stock if certain performance goals are met. If the performance goals are not met, then the shares will not be awarded. If the shares are awarded they will be subject to a vesting period and the awards in 2007 will be disclosed in our proxy statement next year.
The HR Committee has determined that an amount equal to 60% of the long term compensation target in effect for 2006 for each named executive officer is the target for the award of performance-based restricted stock in 2007, 2008, and 2009. The HR Committee has established that an amount equal to 75% of the long term compensation target will be in effect for 2010 for each named executive officer. This movement from 60% to 75% reflects the HR Committee’s desire to place more compensation at risk and appropriately reward improved performance.
The program includes a cumulative3-year measurement window in which the Company’s financial performance goals have been pre-determined by the HR Committee. The program will be phased in with measurement periods as follows:
| | |
| • | for the award that may be made in 2007, the performance measurement period will be fiscal year 2006; |
|
| • | for the award that may be made in 2008, the performance measurement period will be the cumulative of 2006 and Other Restricted Stock All
Principal Position Annual Stock Option Other
Year Salary Bonus Compen- Awards Awards Compen-
sation (Shares) (Shares) sation
W. Ray Wallace - Chairman & 1997 $1,000,000 $2,495,430 $524,315 - 75,000 $28,164
Chief 2007; |
|
| • | for the award that may be made in 2009, the performance measurement period will be the cumulative of 2006, 2007 and 2008; and |
|
| • | for the award that may be made in 2010, the performance measurement period will be the cumulative of 2007, 2008 and 2009. |
The HR Committee will consider awarding the performance-based long term incentives if the Company achieves its pre-established performance goals that are based on growth in earnings per share and return on equity. The earnings per share goal, as compared to prior year target, ranges from 13% to 55% improvement on average over the measurement period. The return on equity goal, as compared to prior year target, ranges from 9% to 26% improvement on average over the measurement period. The goals range from a threshold of 70% to 200% of the target grant. The earnings per share threshold represents 70% of the target grant. The return on equity threshold represents 80% of the target grant. The potential award in 2007 will be made based on the formula that calculates to 200% of target. The HR Committee retains the right to not make or reduce the award in 2007 even if the pre-established goals are achieved. The HR Committee also maintains the right to issue the awards in cash or other forms of compensation with a subsequent vesting period.
| |
| Recoupment on Restatement |
The Board of Directors has adopted a Company policy that allows payouts to be ratably recouped under annual- and/or long-term incentive plans if the financial statements on which they are based are subsequently required to be restated as a result of errors, omissions, fraud or other misconduct. The policy provides discretion to the HR Committee to make such determinations while providing a framework to guide their decisions.
| |
| Executive Officer 1996 $1,000,000 $2,033,372 $441,730 - - $25,414
1995 $1,000,000 $2,000,000 $289,227 - - $25,414
Timothy R. Wallace 1997 $475,000 $593,750 $106,875 3,000 50,000 $25,022
President 1996 $475,000 $373,540 $84,854 - - $25,084
1995 $295,000 $348,041 $64,304 - - $23,464
John T. Sanford 1997 $380,000 $452,314 $83,231 2,500 35,000 $17,484
Executive Vice President 1996 $380,000 $329,498 $70,950 - 13,202 $18,309
1995 $270,000 $105,111 $37,511 - 14,085 $17,559
Ralph A. Banks, Jr. 1997 $280,000 $40,000 - - - $4,500
Senior Vice President 1996 $280,000 $35,000 - - - $4,500
1995 $280,000 $25,000 - - - $4,500
Mark W. Stiles 1997 $275,000 $69,222 $34,422 2,000 15,000 $8,641
Group Vice President 1996 $275,000 $295,130 $57,013 - - $5,599
1995 $165,000 $90,503 $25,550 - 1,500 $6,166
John Dane III 1997 $491,667 $415,800 $134,947 - 27,682 $18,312
Chairman, PresidentPerquisite Allowance |
The objective of our Executive Perquisite Plan is to provide additional elements of compensation that help retain key executives and provide certain benefits that help our executives to be more secure and safe, healthier, more visible in the community, and free of personal distractions that may affect the time they can devote to our business. The perquisite allowance will fluctuate from year to year depending upon our earnings but it is not expected to exceed the current level of 10% of base salary.
17
Additional information on the value of perquisites offered to each named executive officer in 2006 can be found in the footnotes and narrative disclosure pertaining to the “Summary Compensation Table.”
Our retirement, savings and deferred compensation plans are designed to provide some assurance that executives are financially prepared to transition from active employment. The HR Committee believes that these plans assist in recruiting and retaining senior executives. Each of the plans is discussed in the Compensation of Executives section. The Company’s retirement, savings and deferred compensation plans consist of the following:
| | |
| • | Trinity Industries, Inc. Standard Pension Plan (the “Standard Pension Plan”) — a funded, tax qualified, non-contributory defined benefit pension plan that covers certain of our employees, including the named executive officers. Mr. Graham elected to freeze his benefits under the Standard Pension Plan effective January 1, 2005 and Chief 1996 $450,000 $36,810 $48,681 - - $19,699
Executive Officerparticipate in the enhanced feature of Halter 1995 $265,000 $116,017 $38,102 - 13,030 $18,425
Marine Group, Inc.
An incentive bonus is paid only upon the achievement of a predetermined financial goal set for each
executiveour 401(k) plan. Earnings are capped by the Human Resources Committee (formerly,Internal Revenue Code (the “Code”) for those defined as “highly compensated employees”. |
|
| • | Trinity Industries, Inc. Supplemental Retirement Plan (the “Supplemental Retirement Plan”) — an unfunded pension plan that provides annual retirement benefits that are denied under the Compensation Committee) atStandard Pension Plan because of compliance with the beginning
ofCode. Mr. Wallace is the fiscal year. The Committee also predetermines at the beginning of each fiscal year whether the
amount of any incentive bonus earned in excess of a certain percentage of base salary (ranging from
twenty-five percent (25%)only named executive officer that participates in the caseSupplemental Retirement Plan. |
|
| • | Trinity Industries, Inc. Profit Sharing 401(k) Plan (the “401(k) plan”) — a voluntary, tax qualified, defined contribution plan that covers most of some executives to fifty percent (50%) inour employees, including the case of other
executives), will be paid within ninety (90) days after the close of the fiscal year or, in the discretion of
the Committee, deferred and paid in equal annual installments up to three (3) years after the close of the
fiscal year. The Committee elected not to defer any of the incentive bonus earnednamed executive officers, that includes a Company match for fiscal 1997;
however, the Committee elected to defer and pay the incentive bonus earned for fiscal 1996 in excess of
the applicable percentage in two (2) subsequent annual installments, and for fiscal 1995, in three (3)
subsequent annual installments. If the Committee elects to defer the payment of a portion of the employee’s contribution. An enhanced feature to the plan provides for a Company contribution for employees that do not participate in the pension plan up to 3% of an employee’s base salary, depending upon years of service, as an annual retirement contribution. Mr. Graham is the only named executive officer that participates in the enhanced feature of the 401(k) plan. |
|
| • | Trinity Industries, Inc. Supplemental Profit Sharing Plan (the “Supplemental Plan”) — a supplemental deferred profit sharing plan for highly compensated employees that allows them to defer a portion of their base pay and annual incentive bonus,and includes a Company match for a portion of their contribution. |
|
| • | 2005 Deferred Compensation Plan and Agreement (the “Deferred Compensation Plan”) — a plan to encourage the executive will forfeit the deferred portion if the executive's employment withretention of strategically important executives focused on continuous improvement and growth of the Company is
terminated prior to payment for any reason other than death, disability, retirement or a changeand in recognition of control
of the Company. The amounts shown for incentive bonuses in the foregoing table include the amounts
deferred and payabletheir contribution to the executive in succeeding years. The amounts deferred for fiscal 1997, 1996
and 1995, respectively, were $-0-, $1,016,686 and $1,500,000 for Mr. W. Ray Wallace, $-0-, $186,770
and $259,541 for Mr. Timothy R. Wallace, $-0-, $164,749 and $24,111 for Mr. Sanford, $-0-, $-0- and
$-0- for Mr. Banks, $-0-, $147,565 and $41,003 for Mr. Stiles and $207,900, $18,405 and $58,008 for
Mr. Dane.
-8-
An amount equal to fifteen percent (15%) of the salary and incentive bonus of Mr. W. Ray Wallace, and
amounts equal to ten percent (10%) of the salaries and incentive bonuses of Messrs. Timothy R. Wallace,
Sanford, Stiles and Dane, are set aside annually pursuant to the long term deferred compensation plans for
them.
All Other Compensation consists principally of the matching amounts under the Company's Supplemental
Retirement Plan and Section 401(k) Plan (described below under "Retirement Plans"), automobile
allowances, reimbursements for medical insurance premiumsCompany and in the case of Messrs. W. Ray WallaceMcWhirter, Stiles, Menzies and Timothy R. Wallace, directors' fees.
Does not include a special bonusGraham to provide benefits on retirement in lieu of $442,000 awarded to Mr. Dane byparticipation in the Board of Directors of Halter
Marine Group, Inc. on April 2, 1997, after Trinity had distributed to its stockholders all of its stock of
Halter Marine Group, Inc. and after the officers of Trinity had ceased to serve as directors.
Supplemental Retirement Plan. |
Stock Option Plans | |
| Change in Control Agreements |
The Company's 1993 Stock OptionBoard of Directors has determined that it is appropriate to reinforce and Incentive Plan (the "1993 Plan")
that was approved byencourage the stockholders at the Annual Meeting held on July 21,
1993 permits the grantcontinued attention and dedication of stock options, stock appreciation rights, restricted
stock, performance and other stock related awards. The 1993 Plan terminated
the Company's earlier 1989 stock option plan which in turn had terminated the
Company's 1983 stock option plan, except in each case for options granted and
outstanding under the prior plans. Stock options that expire, terminate or
are surrendered unexercised under the prior plans are available for further
award under the 1993 Plan. At April 30, 1997, options were granted and
outstanding under the 1993 Plan on 1,634,781 sharesmembers of the Company's Common
Stock, underCompany’s management to their assigned duties without distraction in potential circumstances arising from the 1989 plan on 681,536 shares, and under the 1983 plan on
107,369 shares.
Onepossibility of a change in control of the goalsCompany. Accordingly, the Company has entered into a change in control agreement with each of the 1993 Plannamed executive officers that provides for compensation if the named executive officer’s employment with the Company is to maketerminated under one of the key executives to whom
options are granted long term stockholderscircumstances described in the agreement in connection with a change in control of the Company (as defined in orderthe agreement). We consider the compensation that their
long range economic interests willwould be more directly aligned withpayable under the long term
economic interestsagreement upon termination following a change in control to be appropriate in light of the Company's stockholders. Further,unique mix of the awardsindustries we are designedengaged in, the limited number of companies in many of those industries, and the uncertain length of time necessary to retainfind new employment. The change in control severance benefits are discussed in the Executive Compensation section under “Potential Payments Upon Termination or Change in Control.”
18
The Company-supported medical plan, life insurance and developlong-term disability plan, and employee-paid dental, cancer-specific insurance, and optional life insurance are substantially similar for all full-time employees.
| |
| Limitation on Deductibility of Executive Compensation |
Section 162(m) of the Code denies a strong management team who will be dependent
upon value createdpublicly held corporation a federal income tax deduction for the Company's stockholders for an accumulationcompensation of significant personal wealth. The provisions of the 1993 Plan may be modified
or amended at any time or from time to time by the Board of Directors;
provided, however, no option at any time outstanding may be impaired or
canceled without the consent of the holder thereof, and no amendment can
increase the maximum number of sharescertain executive officers that exceeds $1 million per year. “Performance based” compensation is not subject to the plan, reducelimitations on deductibility and the option
exercise price of shares contraryHR Committee strives to structure compensation so as to qualify for deductibility. The HR Committee will continue to monitor future deductibility options. However, the provisionsHR Committee may authorize compensation that may not be deductible when it deems doing so to be in the best interest of the planCompany and its stockholders.
| |
| Stock Ownership Guidelines |
Stock ownership guidelines have been adopted that require the CEO to maintain ownership of Company stock valued at five times base salary, the other named executive officers at three times base salary and the Board at three times annual retainer. Stock ownership is defined as stock owned without restrictions; restricted shares that vest at retirement; shares or materially
modifyshare equivalents held in a qualified or non-qualified profit sharing plan; shares or units granted on which restrictions remain; and equivalent shares determined from vested,in-the-money stock options. The named executive officers are all in compliance with the requirements asguidelines.
The HR Committee believes the executive officer compensation program provides appropriate incentives to eligibility for participationexecutive officers to achieve strong financial performance and aligns with stockholder interests. The compensation philosophy and programs outlined above continue to direct the efforts of our executive officers in driving the plan,
without stockholder approval.
The Human ResourcesCompany’s future growth and success.
Compensation Committee Report
We have reviewed and discussed with management the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K and based on such review and discussions, we recommended to the Board of Directors determines the
officers and key employees to whom options are granted, the type of options,
the number of shares covered by such options, the option vesting schedule and,
if other than an incentive stock option for purposes of the Internal Revenue
Code, the option exercise price. In the case of incentive stock options, the
Internal Revenue Code requires that the option exercise price must notCompensation Discussion and Analysis be less
than the fair market value of the stock at the time that the option is granted
and,included in the case of any employee owning directly or indirectly more than ten
percent (10%) of the total outstanding Common Stock, the option exercise price
for an incentive stock option must be at least one hundred ten percent (110%)
of the fair market value. Options become exercisable as set forth in the
option agreements pursuant to which they are issued, but in no event are
incentive stock options exercisable after the expiration of ten (10) years
from the date of grant (or, in the case of an employee owning directly or
indirectly more than ten percent (10%) of the total outstanding Common Stock,
five (5) years from the date of grant). Regardless of any vesting schedule
contained in an option agreement, the plan provides for the acceleration of
vesting in certain events, including the optionee's death, disability or
retirement, or a Change in Control of the Company. For the definition of
Change in Control, see this proxy statement.
| |
| Human Resources Committee |
|
| Ronald J. Gafford,Chairman |
| Ronald W. Haddock |
| Jess T. Hay |
| Diana S. Natalicio |
19
Compensation of Directors" above. All rights to
exercise an option terminate immediately upon an employee's discharge for
cause, ten (10) days after an employee's resignation, three (3) months after
an employee's disability, twelve (12) months after an employee's death and
three (3) years after the employee's retirement. All stock appreciation
rights and limited stock appreciation rights, if any, terminate immediately
upon cessation of employment, regardless of the reason for such cessation.
-9-
Recipients of options may pay the option exercise price in cash or by
delivering to the Company shares of the Company's Common Stock already owned
by the optionee having a fair market value equal to the option exercise
price. In certain instances, when the optionee surrenders stock already owned
by him in payment of the exercise price, the optionee will be granted a new
option on shares equal in number to those surrendered at an option exercise
price that is the fair market value of the Company's Common Stock on the date
of the new grant and exercisable no earlier than six (6) months after the date
of such new grant. An optionee also may elect to satisfy the income tax
withholding requirement upon the exercise of a nonincentive stock option
either by payment of the amount of such withholding obligation in cash or
through the retention by the Company of a number of shares of Common Stock out
of the shares being purchased with a fair market value equal to the amount of
the withholding obligation, but no new option is awarded for the shares
retained to satisfy the employee's income tax withholding requirement.
Further, the awards are designed to retain and develop a strong
management team who will be dependent upon value created for the Company's
stockholders for an accumulation of significant personal wealth.Executives
| |
| Summary Compensation Table |
The following table contains information concerningand accompanying narrative disclosure should be read in conjunction with the grant of stock
options with respect to fiscal 1997 to eachCompensation Discussion and Analysis, which sets forth the objectives of the executives named in theCompany’s executive compensation program.
The Summary Compensation
Table.
Option Grants In Last Fiscal Year
Individual Grants
--------------------------------------------------------
Percent
of
Total Potential Realizable Value
Options at Assumed Annual
Granted Market Rates of Stock Price
to Exercise Price Appreciation For Option Term
Employ- or on ---------------------------------
ees in Base Date At 5% At 10%
Options Fiscal Price of Expiration Annual Annual
Name Granted Year ($/Sh) Grant Date Growth Growth
All Stockholders'
Stock appreciation N/A N/A N/A N/A N/A $821,368,000 $2,081,519,000
W. Ray Wallace 75,000 15.6% $31.50 $31.50 03/21/07 $1,486,000 $3,765,000
Timothy R. Wallace 50,000 10.4% $31.50 $31.50 03/21/07 $991,000 $2,510,000
John T. Sanford 14,925 3.1% $33.50 $33.50 04/13/03 $314,000 $797,000
35,000 7.3% $31.50 $31.50 03/21/07 $693,000 $1,757,000
Ralph A. Banks, Jr. - - - - - - -
Mark W. Stiles 500 0.1% $36.00 $36.00 04/13/03 $11,000 $29,000
1,108 0.2% $37.50 $37.50 04/13/03 $26,000 $66,000
15,000 3.1% $31.50 $31.50 03/21/07 $297,000 $753,000
John Dane III 27,682 5.8% $36.125 $36.125 06/29/97 $629,000 $1,594,000
The Company has not granted any stock appreciation rights.
These stock options were original grants pursuant to the 1993 Plan.
-10-
These stock options were granted pursuant to the reload provisions of the 1993 Plan.
These options would have expired on April 13, 2003, but Mr. Dane's association with the Company
terminated upon the Company's distribution to its stockholders of all stock of Halter Marine Group, Inc.
Therefore, these options, as well as all other employee stock options granted to Mr. Dane, will expire on
June 29, 1997.
The tableTable below
sets forth information concerning each exercise of stock
optionssummarizes the total compensation paid or earned by each of the named executive officers
duringfor the
most recently
completed fiscal year
and the number of exercisable and unexercisable
stock options held by them and the fiscal year-end value of the exercisable
and unexercisable options.
ended December 31, 2006. Summary Compensation Table
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | Change in | | | | | |
| | | | | | | | | | | | | Pension | | | | | |
| | | | | | | | | | | | | Value and | | | | | |
| | | | | | | | | | | | | Nonqualified | | | | | |
| | | | | | | | | | | Non-Equity | | | Deferred | | | | | |
| | | | | | | Stock | | | Option | | | Incentive Plan | | | Compensation | | | All Other | | | |
| Name and | | | | Salary | | | Awards | | | Awards | | | Compensation | | | Earnings | | | Compensation | | | |
| Principal Position | | Year | | | ($)(1) | | | ($)(2) | | | ($)(2) | | | ($)(3) | | | ($)(4) | | | ($)(5) | | | Total ($) | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Timothy R. Wallace | | | 2006 | | | $ | 950,000 | | | $ | 2,378,140 | | | $ | 399,457 | | | $ | 2,343,365 | | | $ | 476,175 | | | $ | 524,373 | | | $ | 7,071,510 | |
| | Chairman, President &
Chief Executive Officer | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| William A. McWhirter | | | 2006 | | | | 370,000 | | | | 528,583 | | | | 74,344 | | | | 616,679 | | | | 8,606 | | | | 146,338 | | | | 1,744,550 | |
| | Senior Vice President and Chief Financial Officer | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Mark W. Stiles | | | 2006 | | | | 490,000 | | | | 678,950 | | | | 113,951 | | | | 816,683 | | | | 26,655 | | | | 191,658 | | | | 2,317,897 | |
| | Senior Vice President and Group President | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| D. Stephen Menzies | | | 2006 | | | | 482,500 | | | | 530,055 | | | | 89,095 | | | | 804,183 | | | | 12,109 | | | | 221,179 | | | | 2,139,121 | |
| | Senior Vice President and Group President | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Martin Graham | | | 2006 | | | | 420,000 | | | | 404,694 | | | | 60,568 | | | | 700,014 | | | | 3,871 | | | | 191,792 | | | | 1,780,939 | |
| | President Trinity Freightcar | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Aggregated Option Exercises In Last Fiscal | |
| (1) | For Messrs. Wallace, McWhirter, Stiles and Graham, $41,800; $8,140; $10,780 and $115,500, respectively, of the above amount was deferred pursuant to the Supplemental Plan and is reported in the Nonqualified Deferred Compensation Table. |
|
| (2) | Stock and option awards are the dollar amounts recognized for financial statement reporting purposes with respect to the fiscal year in accordance with Statement of Financial Accounting Standard (“SFAS”) 123R,Share-Based Payment, and includes awards granted in prior periods. No options were awarded to the named executive officers in 2006. Our policy and assumptions made in the valuation of share-based payments are contained in notes 1 and 16 of Item 8 of the Annual Report on Form 10-K. |
|
| (3) | Non-equity incentive plan compensation represents cash awards earned during 2006 under the Company’s Calendar Year And FY-End Option Values
Value2006 Incentive Compensation Program based on goal achievements. For Mr. Wallace $117,168, Mr. Menzies $80,418, and Graham $630,013 of Numberthe above amount was deferred pursuant to the Supplemental Plan and is reported in the Nonqualified Deferred Compensation Table. |
|
| (4) | This column represents both changes in pension value for the named executive officers, as well as above market earnings on deferred compensation. For Mr. Wallace, $467,000 of Unexercised
Unexercised in-the-Money
Shares Optionsthis column represents the aggregate change in pension values during 2006 fiscal year under the Standard Pension Plan and the Supplemental Retirement Plan and $9,175 represents Mr. Wallace’s above market earnings on nonqualified deferred compensation under the Company’s Deferred Compensation Plan. For Messrs. McWhirter, Stiles, Menzies and Graham, the change in pension values were $6,000; $23,000; $9,000 and $1,000, |
20
| |
| respectively and the above market earnings on nonqualified deferred compensation under the Deferred Compensation Plan were $2,606; $3,655; $3,109 and $2,871, respectively. |
|
| (5) | The following table is a breakdown of all other compensation included in the Summary Compensation table for the named executive officers: |
All Other Compensation
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | Company | | | | | |
| | | | | | | Perquisites | | | Contributions | | | | | |
| | | | | Executive | | | and Other | | | to Defined | | | Deferred | | | Total All | |
| | | | | Perquisite | | | Personal | | | Contribution | | | Compensation | | | Other | |
| Name | | Year | | | Plan(1) | | | Benefits(2) | | | Plans(3) | | | Plan(4) | | | Compensation | |
| | | | | | | | | | | | | | | | | | | |
| Timothy R. Wallace | | | 2006 | | | $ | 95,000 | | | $ | 19,301 | | | $ | 80,735 | | | $ | 329,337 | | | $ | 524,373 | |
| William A. McWhirter | | | 2006 | | | | 37,000 | | | | — | | | | 10,670 | | | | 98,668 | | | | 146,338 | |
| Mark W. Stiles | | | 2006 | | | | 49,000 | | | | — | | | | 11,990 | | | | 130,668 | | | | 191,658 | |
| D. Stephen Menzies | | | 2006 | | | | 48,250 | | | | 37,661 | | | | 6,600 | | | | 128,668 | | | | 221,179 | |
| Martin Graham | | | 2006 | | | | 42,000 | | | | — | | | | 37,791 | | | | 112,001 | | | | 191,792 | |
| |
| (1) | Represents the amounts payable pursuant to the Executive Perquisites Plan for the annual perquisite allowance. |
|
| (2) | For Mr. Wallace includes personal use of the Company’s aircraft, automobile maintenance service, personal use of administrative staff, personal use of our courier and assistance from our information technologies personnel with his personal computer at Fiscal Options at Fiscal
Acquired Value Year-End Year-End
Name on Realized
Exercise Exercisable/ Exercisable/
Unexercisable Unexercisable
W. Rayhis residence. For Mr. Menzies includes $34,757 for reimbursement of commuting expenses and the remainder is for spousal travel and related expenses, and automobile maintenance service. |
|
| (3) | Represents for each of the named executive officers the Company match under the Company’s 401(k) plan. Includes matching amounts under the Company’s Supplemental Plan for Messrs. Wallace - - 450,000 $4,156,252
150,000 $178,125
Timothy R. Wallace 6,249 $101,546 143,574 $1,187,311
143,750 $347,653
John T. Sanford 22,368 $196,565 65,506 $263,180
128,750 $347,653
Ralph A. Banks, Jr. 4,500 $62,750 - $-
- $-
Mark W.$74,135, McWhirter $4,070, Stiles 3,733 $45,928 10,584 $41,832
34,858 $69,531
John Dane III 84,500 $1,009,387 13,030 $-
121,432 $347,653
$5,390 and Graham $24,591. For Mr. Graham also includes the Company’s match under an enhancement to the 401(k) plan for employees who elect to participate in the enhanced feature of the 401(k) plan rather than the Standard Pension Plan. |
|
| (4) | Represents an amount equal to ten percent of the salaries and incentive compensation set aside pursuant to the Deferred Compensation Plan. These amounts are also included in the “Nonqualified Deferred Compensation Table.” The Deferred Compensation Plan is discussed following that table. |
Career Stock Awards
In fiscal 1997, the Company granted under the 1993 Plan career stock
awards to certain executive officers and key employees. The recipients of the
awards were given shares of Common Stock of the Company that were issued in
their respective names. Each recipient receives dividends and other
distributions on his shares when and if paid by the Company and is entitled to
vote his shares on any matter submitted to a vote of the holders of the Common
Stock of the Company. However, the shares so awarded to a recipient may not
be sold, transferred, pledged or in any manner alienated except upon the
recipient's retirement at age 65 (or earlier retirement, with the approval of
the Human Resources Committee), death or disability or except upon a Change in
Control of the Company. For the definition of Change in Control, see
"Compensation of Directors" above. If the employment of the recipient is
terminated for any reason other than death or disability prior to the
recipient's retirement, then absent a merger, consolidation or change of
control of the Company, the shares of stock so awarded to the recipient are
forfeited to the Company as of the date of the recipient's termination of
employment.
-11-21
| |
| Grants of Plan-Based Awards |
The following table sets forth each long-term incentive plan award (the
careersummarizes the 2006 grants of equity and non-equity plan-based awards.
Grants of Plan-Based Awards Table
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | All Other | | | |
| | | | | Estimated Possible Payouts and | | | Estimated Future Payouts | | | Stock Awards | | | |
| | | | | Future Payouts Under Non-Equity | | | Under Equity Incentive Plan | | | Number of | | | Grant Date | |
| | | | | Incentive Plan Awards(2) | | | Awards(3) | | | Shares of | | | Fair Value | |
| | | | | | | | | | | Stock or | | | of Stock | |
| | | Grant | | | Threshold | | | Target | | | Maximum | | | Threshold | | | Target | | | Maximum | | | Units | | | Awards | |
| Name | | Date(1) | | | ($) | | | ($) | | | ($) | | | (#) | | | (#) | | | (#) | | | (#)(4) | | | ($)(5) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Timothy R. Wallace | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2006 Annual Incentive Plan | | | | | | $ | 53,200 | | | $ | 1,330,000 | | | $ | 2,343,365 | | | | | | | | | | | | | | | | | | | | | |
| | 2007 Annual Incentive Plan | | | | | | | 427,500 | | | | 855,000 | | | | 2,280,000 | | | | | | | | | | | | | | | | | | | | | |
| | 2006 Equity Awards | | | 05/15/06 | | | | | | | | | | | | | | | | | | | | 44,550 | | | | | | | | 18,450 | | | $ | 2,904,300 | |
| William A. McWhirter | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2006 Annual Incentive Plan | | | | | | | 11,840 | | | | 296,000 | | | | 616,679 | | | | | | | | | | | | | | | | | | | | | |
| | 2007 Annual Incentive Plan | | | | | | | 127,500 | | | | 255,000 | | | | 765,000 | | | | | | | | | | | | | | | | | | | | | |
| | 2006 Equity Awards | | | 01/18/06 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 22,500 | | | | 668,401 | |
| | 2006 Equity Awards | | | 05/15/06 | | | | | | | | | | | | | | | | | | | | 9,050 | | | | | | | | 7,450 | | | | 760,650 | |
| Mark W. Stiles | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2006 Annual Incentive Plan | | | | | | | 13,068 | | | | 392,000 | | | | 816,683 | | | | | | | | | | | | | | | | | | | | | |
| | 2007 Annual Incentive Plan | | | | | | | 156,000 | | | | 312,000 | | | | 936,000 | | | | | | | | | | | | | | | | | | | | | |
| | 2006 Equity Awards | | | 05/15/06 | | | | | | | | | | | | | | | | | | | | 12,690 | | | | | | | | 3,810 | | | | 760,650 | |
| D. Stephen Menzies | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2006 Annual Incentive Plan | | | | | | | 7,720 | | | | 386,000 | | | | 804,183 | | | | | | | | | | | | | | | | | | | | | |
| | 2007 Annual Incentive Plan | | | | | | | 156,000 | | | | 312,000 | | | | 936,000 | | | | | | | | | | | | | | | | | | | | | |
| | 2006 Equity Awards | | | 05/15/06 | | | | | | | | | | | | | | | | | | | | 10,800 | | | | | | | | 5,700 | | | | 760,650 | |
| Martin Graham | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2006 Annual Incentive Plan | | | | | | | 11,201 | | | | 336,000 | | | | 700,014 | | | | | | | | | | | | | | | | | | | | | |
| | 2007 Annual Incentive Plan | | | | | | | 131,100 | | | | 262,200 | | | | 721,050 | | | | | | | | | | | | | | | | | | | | | |
| | 2006 Equity Awards | | | 05/15/06 | | | | | | | | | | | | | | | | | | | | 9,990 | | | | | | | | 6,510 | | | | 760,650 | |
| |
| (1) | The grant date of all stock awards is the date of the HR Committee meeting or Board meeting at which such award was approved. |
|
| (2) | Represents the potential amounts payable in 2007 under the Company’s Calendar Year 2006 Incentive Compensation Program for attainment of performance goals and potential amounts payable in 2008 under the 2007 Incentive Compensation Program for attainment of performance goals. |
|
| (3) | Represents the number of performance-based restricted shares that were awarded in May 2006 to each of the named executive officers as performance-based awards based on target financial performance in 2005. There was no threshold or maximum payout applicable to these awards. The shares vest as discussed below. |
|
| (4) | Represents the number of shares of restricted stock awarded in May 2006 to each of the named executive officers as time-based restricted stock based on the HR Committee’s evaluation of performance in 2005. The shares vest as discussed below. |
|
| (5) | The grant date fair value of the stock awards is calculated in accordance with SFAS 123R. |
| |
| Discussion Regarding Summary Compensation Table and Grants of Plan-Based Awards Table |
The stock awards) made during fiscal 1997 to each ofawards and the executives namedoption awards described in the Summary Compensation Table .
Long-Termare the dollar amounts reflected in our financial statements for 2006 and include awards made in prior periods. No options were awarded to the named executive officers in 2006.
22
The stock awards in May 2006 to the named executive officers were grants of restricted stock pursuant to our Stock Option and Incentive Plans -- AwardsPlan that vest one third after the first, third and fifth years or earlier upon death, disability, or a change in Last Fiscal year
Performance
Numbercontrol or consent of Or Other
Shares, Period Until
Units Or Maturation
Name Year Other Rights Or Payout (1)
W. Ray Wallace 1997 - -
1996 - -
1995 - -
Timothy R. Wallace 1997 3,000 12/30/2018
1996 - -
1995 - -
John T. Sanford 1997 2,500 05/18/2017
1996 - -
1995 - -
Ralph A. Banks, Jr. 1997 - -
1996 - -
1995 - -
Mark W. Stiles 1997 2,000 11/03/2013
1996 - -
1995 - -
John Dane III 1997 - -
1996 - -
1995 - -
(1) Thethe HR Committee after three years from the date of maturation shown ingrant. The awards are forfeited if termination of employment occurs prior to vesting. The awards were made as long term compensation based on 2005 financial performance of $1.13 diluted earnings per share and the above table is the date when the
person will attain age 65.HR Committee’s evaluation of each executive’s overall performance during 2005. The shares may not be sold, transferred,
pledged or in any manner alienated except upon the recipient's retirement
at age 65 (or earlier with the approvalholder of the Human Resources Committee),
death or disability or except upon a merger, consolidation or changeshares is entitled to vote the shares and dividend equivalents are paid on the restricted stock at the same rate as dividends are paid on the Common Stock.
The award of controlrestricted stock to Mr. McWhirter in January 2006 was for retention purposes and in recognition of his development during the Company. If the employment of the recipient is terminated
for any reason other than death or disability prior to the recipient's
retirement, then absent a merger, consolidation or change of controlfirst year as CFO of the Company and the shares do not vest until retirement, or earlier on death, disability, or change in control or consent of stock are forfeitedthe HR Committee after three years from the date of grant. Termination of employment before vesting will cause forfeiture of the shares.
The non-equity incentive plan awards for 2006 to the named executive officers were pursuant to our Calendar Year 2006 Incentive Compensation Program and represent performance goal achievement based on the Company’s 2006 diluted earnings per share of $2.90 and return on capital employed of 31% for our manufacturing business as well as certain business unit financial metrics for the operating units.
The estimates for future payouts under the 2007 Annual Incentive Plan represent potential payments of annual incentive compensation for 2007. The HR Committee established the annual incentive performance goals for 2007 based on specific, measurable improvement from the Company’s 2006 diluted earnings per share from continuing operations. The goals range from threshold at 5% to maximum at 25% improvement from 2006 diluted earnings per share. To achieve target, diluted earnings per share must improve by 15% from 2006 diluted earnings per share.
We have an Executive Perquisite Plan that in 2006 provided to the named executive officers an allowance of 10% of base pay in lieu of providing company furnished vehicles, club memberships and similar perquisites. The perquisite allowance is to be used at the discretion of the executive for perquisite type expenses. It is intended that the perquisite allowance will eliminate charges to the Company for personal benefits for the executives that are not provided to Company employees generally other than occasionalde minimisitems such as the use of Company tickets to entertainment events or expenses related to spousal travel. The perquisite allowance is not intended to cover personal use of the date of termination of employment.
Retirement Plans
TheCompany’s aircraft or commuting or relocation expenses. For security purposes, the Board requires the CEO to use the Company has noncontributory, defined benefit retirement and death
benefit plans which are available to all eligible employees who have completed
specified periods of employment. The benefits of the plans are funded by
periodic contributions to retirement trusts that invest the Company's
contributions and earnings thereon in order to pay the benefits to the
employees. The plans provideaircraft for the payment of monthly retirement benefits
determined under a calculation based on credited years of service and/or a
participant's compensation. Retirement benefits are paid to participants upon
normal retirement at the age of 65 or later, or upon early retirement. The
plans also provide for the payment of certain disability and death benefits.
-12-
The Company has also adopted a Supplemental Pension Plan that permits the
payment of supplemental benefits to certain employees whose annual benefits
under the foregoing retirement plan would exceed those permitted by the
Internal Revenue Code of 1986, as amended (the "Code"). The Supplemental
Pension Plan provides that if at any time the amount of the annual retirement
benefit which would otherwise be payable under the Company's pension plan is
or becomes limited by reason of compliance with the Code, such person shall be
entitled to receive a supplemental pension benefit equal to the difference
between the benefit that such person receives under the Company's pension planpersonal travel and the benefit thatvalue attributed to such person wouldpersonal use is calculated using the aggregate incremental cost method. We have received if such limitation had
not been in effect. The benefits are payable from the general assets of the
Company.
The following table reflects the estimated aggregate annual benefits,
computed on the basis ofpaying commuting expenses for Mr. Menzies between Chicago, Illinois and Dallas, Texas.
We have a monthly benefit payable for ten (10) years certain
and life thereafter, payable under such plans to a fully vested participant of
the Company upon retirement at age 65 after 10, 20, 30 and 40 credited years
of service at the annual remuneration levels set forth in the table.
Pension Plan Table
Remuneration Years of Service
10 20 30 40
$250,000 $24,760 $49,520 $74,280 $99,040
$300,000 $29,760 $59,520 $89,280 $119,040
$350,000 $34,760 $69,520 $104,280 $139,040
$400,000 $39,760 $79,520 $119,280 $159,040
$450,000 $44,760 $89,520 $134,280 $179,040
$500,000 $49,760 $99,520 $149,280 $199,040
$550,000 $54,760 $109,520 $164,280 $219,040
$600,000 $59,760 $119,520 $179,280 $239,040
$650,000 $64,760 $129,520 $194,280 $259,040
$700,000 $69,760 $139,520 $209,280 $279,040
$750,000 $74,760 $149,520 $224,280 $299,040
$800,000 $79,760 $159,520 $239,280 $319,040
$850,000 $84,760 $169,520 $254,280 $339,040
$900,000 $89,760 $179,520 $269,280 $359,040
$950,000 $94,760 $189,520 $284,280 $379,040
$1,000,000 $99,760 $199,520 $299,280 $399,040
$1,050,000 $104,760 $209,520 $314,280 $419,040
$1,100,000 $109,760 $219,250 $329,280 $439,040
The compensation covered under those plans is the same as the salary and
bonus reported earlier in the Summary Compensation Table. The annual benefits
shown are not subject to any deduction for Social Security benefits or other
offset amounts. Mr. Timothy R. Wallace has 22 credited years of service under
the plans under which he is covered; Mr. Sanford has 13 years and Mr. Stiles
has 5 years. Messrs. W. Ray Wallace and Ralph A. Banks, Jr. began receiving
pension payments at age 65 of $126,933 and $76,848, respectively, per year
from the Company's regular retirement plan.
-13-
The Company also is obligated to pay supplemental retirement benefits to
Mr. W. Ray Wallace, Chairman, President and Chief Executive Officer of the
Company, under an agreement made by the Company in 1990 which provides that
the Company will supplement, commencing at his actual retirement, his other
retirement benefits from the Company so that his aggregate retirement benefits
from the Company will equal eighty percent (80%) of the average of his annual
cash compensation earned during his most highly compensated five (5)
consecutive years of employment. At March 31, 1997, the estimated annual
benefit payable to him upon his retirement under this unfunded supplemental
retirement program was $2,293,000.
The Company maintains a Section 401(k) plan that permits employees to elect to set aside up to ten14 percent (10%) of their compensation (subject to the maximum limit on the amount of compensation permitted by the Code to be deferred for this purpose) in a trust to pay future retirement benefits. TheDepending upon years of service, the Company matches fiftymay match up to 50 percent (50%)of no more than six percent of the lesser of (i) the amount that the
employee elects toemployee’s compensation set aside for this purpose or (ii) sixpurpose. For employees who participate in the enhancement to the 401(k) plan, the Company contributes up to an additional three percent (6%) of the employee's compensation. The Company also maintains a similar plan for its
"highly compensated employees", as definedemployee’s base pay (subject to the maximum limit permitted by the Code) depending upon years of service to the account of employees participating in the Code.enhanced portion of the 401(k) plan as an Annual Retirement Contribution. Mr. Graham is the only named executive officer participating in the enhanced portion of the 401(k) plan. Matching contributions under the Supplemental Plan are discussed under Deferred Compensation.
The highly
compensated employeeschange in pension value for Mr. Wallace is primarily a result of an increase in the five year average compensation under the Supplemental Retirement Plan created by elimination of a year of low annual incentive compensation during a down cycle period.
Base salary, the executive perquisite allowance and annual incentive compensation in 2006 represented from 45% to 65% of the named executive officers’ total compensation as reflected in the Summary Compensation Table.
23
| |
| Outstanding Equity Awards at Year-End |
The following tables summarize the total outstanding equity awards as of December 31, 2006, for each named executive officer, as well as the number of option awards exercised and restricted stock awards and restricted stock unit awards vested during 2006. The market value of the stock awards was based on the closing price of the common stock as of December 29, 2006, which was $35.20. The unvested stock awards includes the grants of equity awards made in 2006 which are not limited as toalso disclosed in the percentageGrants of their
compensationPlan-Based Awards Table, all of which may be contributed towere unvested at the plan; however,end of the Company only
matchesfiscal year.
Outstanding Equity Awards at Fiscal Year-End Table
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Option Awards | | | Stock Awards | |
| | | | | | | |
| | | Number of | | | Number of | | | | | | | Market | |
| | | Securities | | | Securities | | | | | Number of | | | Value of | |
| | | Underlying | | | Underlying | | | | | Shares or | | | Shares or | |
| | | Unexercised | | | Unexercised | | | | | Units of | | | Units of | |
| | | Options | | | Options | | | Option | | | | | Stock That | | | Stock That | |
| | | (#) | | | (#) | | | Exercise | | | Option | | | Have Not | | | Have Not | |
| | | | | | | | | Price | | | Expiration | | | Vested | | | Vested | |
| Name | | Exercisable | | | Unexercisable(3) | | | ($) | | | Date | | | (#)(4) | | | ($) | |
| | | | | | | | | | | | | | | | | | | |
| Timothy R. Wallace | | | 60,000 | (1) | | | — | | | $ | 35.33 | | | | 03/12/08 | | | | 564,936 | | | $ | 19,885,747 | |
| | | | 80,250 | (2) | | | — | | | | 26.21 | | | | 12/07/08 | | | | | | | | | |
| | | | — | | | | 110,340 | | | | 11.33 | | | | 05/29/13 | | | | | | | | | |
| | | | — | | | | 61,650 | | | | 18.94 | | | | 05/10/14 | | | | | | | | | |
| | | | — | | | | 35,400 | | | | 17.94 | | | | 05/09/15 | | | | | | | | | |
| William A. McWhirter | | | 1,500 | | | | — | | | | 35.33 | | | | 03/12/08 | | | | 132,225 | | | | 4,654,320 | |
| | | | — | | | | 10,800 | | | | 11.33 | | | | 05/29/13 | | | | | | | | | |
| | | | — | | | | 13,499 | | | | 18.94 | | | | 05/10/14 | | | | | | | | | |
| | | | — | | | | 14,400 | | | | 17.94 | | | | 05/09/15 | | | | | | | | | |
| Mark W. Stiles | | | 15,001 | | | | — | | | | 35.33 | | | | 03/12/08 | | | | 157,200 | | | | 5,533,440 | |
| | | | 18,000 | | | | — | | | | 26.21 | | | | 12/07/08 | | | | | | | | | |
| | | | 1,376 | | | | 20,400 | | | | 11.33 | | | | 05/29/13 | | | | | | | | | |
| | | | 5,611 | | | | 16,830 | | | | 18.94 | | | | 05/10/14 | | | | | | | | | |
| | | | 5,055 | | | | 20,220 | | | | 17.94 | | | | 05/09/15 | | | | | | | | | |
| |
| D. Stephen Menzies | | | 8,250 | | | | 16,500 | | | | 11.33 | | | | 05/29/13 | | | | 116,850 | | | | 4,113,120 | |
| | | | 4,680 | | | | 14,040 | | | | 18.94 | | | | 05/10/14 | | | | | | | | | |
| | | | 4,305 | | | | 17,220 | | | | 17.94 | | | | 05/09/15 | | | | | | | | | |
| Martin Graham | | | — | | | | 14,040 | | | | 11.33 | | | | 05/29/13 | | | | 75,600 | | | | 2,661,120 | |
| | | | — | | | | 8,999 | | | | 18.94 | | | | 05/10/14 | | | | | | | | | |
| | | | — | | | | 9,360 | | | | 17.94 | | | | 05/09/15 | | | | | | | | | |
| |
| (1) | Includes 30,000 options held by a family partnership Mr. Wallace controls. |
|
| (2) | Includes 22,500 options held by a family partnership Mr. Wallace controls. |
24
| |
| (3) | The following table provides the vesting date of the unvested stock options. |
| | | | | | | | | | | | | | | | | | | | | |
| | | Timothy R. | | | William A. | | | Mark W. | | | D. Stephen | | | Martin | |
| Vesting Date | | Wallace | | | McWhirter | | | Stiles | | | Menzies | | | Graham | |
| | | | | | | | | | | | | | | | |
| 05/09/07 | | | 8,850 | | | | 3,600 | | | | 5,055 | | | | 4,305 | | | | 2,340 | |
| 05/10/07 | | | 20,550 | | | | 4,500 | | | | 5,610 | | | | 4,680 | | | | 3,000 | |
| 05/29/07 | | | 55,170 | | | | 5,400 | | | | 10,200 | | | | 8,250 | | | | 7,020 | |
| 05/09/08 | | | 8,850 | | | | 3,600 | | | | 5,055 | | | | 4,305 | | | | 2,340 | |
| 05/10/08 | | | 20,550 | | | | 4,499 | | | | 5,610 | | | | 4,680 | | | | 2,999 | |
| 05/29/08 | | | 55,170 | | | | 5,400 | | | | 10,200 | | | | 8,250 | | | | 7,020 | |
| 05/09/09 | | | 8,850 | | | | 3,600 | | | | 5,055 | | | | 4,305 | | | | 2,340 | |
| 05/10/09 | | | 20,550 | | | | 4,500 | | | | 5,610 | | | | 4,680 | | | | 3,000 | |
| 05/09/10 | | | 8,850 | | | | 3,600 | | | | 5,055 | | | | 4,305 | | | | 2,340 | |
| |
| (4) | The following table provides the vesting date of unvested stock awards. |
| | | | | | | | | | | | | | | | | | | | | |
| | | Timothy R. | | | William A. | | | Mark W. | | | D. Stephen | | | Martin | |
| Vesting Date | | Wallace | | | McWhirter | | | Stiles | | | Menzies | | | Graham | |
| | | | | | | | | | | | | | | | |
| 05/09/07 | | | 13,236 | | | | 1,500 | | | | 3,000 | | | | 1,800 | | | | 1,050 | |
| 05/15/07 | | | 21,000 | | | | 5,500 | | | | 5,500 | | | | 5,500 | | | | 5,500 | |
| 05/29/07 | | | 43,750 | | | | 4,500 | | | | 8,000 | | | | 6,500 | | | | 5,600 | |
| 05/11/08 | | | 52,000 | | | | 9,000 | | | | 14,250 | | | | 12,350 | | | | 7,500 | |
| 05/09/09 | | | 23,750 | | | | 9,625 | | | | 13,500 | | | | 11,500 | | | | 6,250 | |
| 05/15/09 | | | 21,000 | | | | 5,500 | | | | 5,500 | | | | 5,500 | | | | 5,500 | |
| 05/29/09 | | | 43,750 | | | | 4,500 | | | | 8,000 | | | | 6,500 | | | | 5,600 | |
| 05/11/10 | | | 52,000 | | | | 9,000 | | | | 14,250 | | | | 12,350 | | | | 7,500 | |
| 05/09/11 | | | 23,750 | | | | 9,625 | | | | 13,500 | | | | 11,500 | | | | 6,250 | |
| 05/15/11 | | | 21,000 | | | | 5,500 | | | | 5,500 | | | | 5,500 | | | | 5,500 | |
| 05/29/11 | | | 43,750 | | | | 4,500 | | | | 8,000 | | | | 6,500 | | | | 5,600 | |
| 05/11/12 | | | 52,000 | | | | 9,000 | | | | 14,250 | | | | 12,350 | | | | 7,500 | |
| 05/09/13 | | | 23,750 | | | | 9,625 | | | | 13,500 | | | | 11,500 | | | | 6,250 | |
| Career Shares(A) | | | 130,200 | | | | 44,850 | | | | 30,450 | | | | 7,500 | | | | — | |
| | |
| (A) | | Grants of Restricted Stock which will vest upon retirement unless accelerated as provided in the terms of the award. |
25
| |
| Option Exercises and Stock Vested in 2006 |
The following table summarizes for the lesser ofnamed executive officers in 2006 (i) the amount thatnumber of shares acquired upon exercise of stock options and the employee elects to set aside for
this purpose orvalue realized and (ii) six percent (6%)the number of shares acquired upon the vesting of restricted stock and restricted stock units and the value realized, each before payout of any applicable withholding tax.
Option Exercises and Stock Vested Table
| | | | | | | | | | | | | | | | | |
| | | Option Awards | | | Stock Awards | |
| | | | | | | |
| | | Number of | | | | | Number of | | | |
| | | Shares | | | Value | | | Shares | | | Value | |
| | | Acquired on | | | Realized on | | | Acquired on | | | Realized | |
| | | Exercise | | | Exercise | | | Vesting | | | on Vesting | |
| Name | | (#) | | | ($) | | | (#) | | | ($) | |
| | | | | | | | | | | | | |
| Timothy R. Wallace | | | 651,887 | | | $ | 12,343,958 | | | | 22,866 | | | $ | 961,746 | |
| William A. McWhirter | | | 18,002 | | | | 316,996 | | | | 2,850 | | | | 118,371 | |
| Mark W. Stiles | | | 8,823 | | | | 177,137 | | | | 6,000 | | | | 247,620 | |
| D. Stephen Menzies | | | — | | | | — | | | | 1,800 | | | | 83,304 | |
| Martin Graham | | | 12,362 | | | | 254,759 | | | | 1,050 | | | | 48,594 | |
The following table summarizes the present value of the employee's compensation (butaccumulated pension benefits of the Company never contributes more than it would have contributed if the "highly
compensated employees" had participated in the Section 401(k) plan).
Participation in the Section 401(k) plan by all such "highly compensated
employees" would have an adverse effect on the Section 401(k) plan.
Contributionsnamed executive officers under the latterStandard Pension Plan and for Mr. Wallace the Supplemental Retirement Plan:
Pension Benefits Table
| | | | | | | | | | | | | | | |
| | | | | Number | | | Present | | | |
| | | | | of Years | | | Value of | | | Payments | |
| | | | | Credited | | | Accumulated | | | During | |
| | | | | Service | | | Benefit | | | Last Fiscal | |
| Name | | Plan Name | | (#) | | | ($)(1) | | | Year ($) | |
| | | | | | | | | | | | |
| Timothy R. Wallace | | Standard Pension Plan | | | 32 | | | $ | 318,000 | | | | — | |
| | | Supplemental Retirement Plan | | | 32 | | | | 2,269,000 | | | | — | |
| William A. McWhirter | | Standard Pension Plan | | | 21 | | | | 115,000 | | | | — | |
| Mark W. Stiles | | Standard Pension Plan | | | 15 | | | | 212,000 | | | | — | |
| D. Stephen Menzies | | Standard Pension Plan | | | 5 | | | | 44,000 | | | | — | |
| Martin Graham(2) | | Standard Pension Plan | | | 3 | | | | 34,000 | | | | — | |
| |
| (1) | The present value of the accumulated benefit is calculated in accordance with SFAS 87. Refer to footnote 12 of Item 8 of the Company’s Annual Report on Form 10-K for our policy and assumptions made in the valuation of this accumulated benefit. |
|
| (2) | Mr. Graham elected in 2005 to participate in the Company’s enhanced 401(k) plan and no longer accrues benefits under the Standard Pension Plan. |
The Standard Pension Plan is a noncontributory defined benefit retirement and death benefit plan. Funds are also madecontributed periodically to a trust but unlikethat invests the Company’s contributions byand earnings thereon in order to pay the Companybenefits to the trust created pursuant toparticipating employees. The plan provides for the Section
401(k) plan (whichpayment of monthly retirement benefits determined under a calculation based on credited years of service and a participant’s highest compensation over five consecutive years in the last ten years of employment. Retirement benefits are deductible by the Company when paid to participants upon normal retirement at the trust),age of 65 or later, or upon early retirement. Covered compensation includes salary and non-equity incentive plan compensation as shown in the contributionsSummary Compensation Table. Other elements of compensation in the Summary Compensation Table are not included in covered compensation. The normal monthly retirement benefit payable at age 65 is a life annuity with ten years guaranteed equal to3/4 of 1% of average monthly compensation up to $800 plus 1% of average monthly
26
compensation over $800 times the years of credited service. The plan also provides for the payment of a death benefit before retirement that is the greater of the Company to the trust for the "highly compensated
employees" are not deductible by the Company for federal income tax purposes
until such amounts are paid out by the trust. Further, the assetslump sum value of the trust createdaccrued benefit under the pension plan foror one times base pay with less than 10 years of service and 2 and 1/2 times base pay with more than 10 years of service. All of the "highly compensated employees"named executive officers participate in the Standard Pension Plan; however, Mr. Graham elected to have his plan benefits frozen on January 1, 2005 in order to participate in the enhanced feature of the 401(k) plan.
We have a Supplemental Retirement Plan that applies to Mr. Wallace. The Supplemental Retirement Plan provides that the amount of the annual retirement benefit under our standard pension plan that is limited by reason of compliance with the Code is paid as a supplemental pension benefit. The benefits are considered part ofpayable from the general assets of the Company.
| |
| Nonqualified Deferred Compensation |
The table below shows the contributions by the executives and the Company, the aggregate earnings on nonqualified deferred compensation in 2006 and the aggregate balance at year end under nonqualified deferred compensation plans of the Company.
Nonqualified Deferred Compensation Table
| | | | | | | | | | | | | | | | | |
| | | Executive | | | Registrant | | | Aggregate | | | Aggregate | |
| | | Contributions | | | Contributions | | | Earnings in | | | Balance at | |
| | | in Last Fiscal | | | in Last Fiscal | | | Last Fiscal | | | Last Fiscal | |
| Name | | Year(1) | | | Year(2) | | | Year(3) | | | Year End | |
| | | | | | | | | | | | | |
| Timothy R. Wallace | | $ | 158,968 | | | $ | 403,472 | | | $ | 46,493 | | | $ | 1,161,383 | |
| William A. McWhirter | | | 8,140 | | | | 102,738 | | | | 12,993 | | | | 247,228 | |
| Mark W. Stiles | | | 10,780 | | | | 136,058 | | | | 14,511 | | | | 300,226 | |
| D. Stephen Menzies | | | 80,418 | | | | 128,668 | | | | 9,352 | | | | 321,106 | |
| Martin Graham | | | 745,513 | | | | 136,592 | | | | 24,367 | | | | 1,063,094 | |
| |
| (1) | Salary and incentive compensation deferrals to the Company’s Supplemental Plan. The amounts are also included in the Summary Compensation Table. |
|
| (2) | Includes an amount equal to ten percent of the salaries and incentive compensation set aside pursuant to the Deferred Compensation Plan for Messrs. Wallace $329,337, McWhirter $98,668, Stiles $130,668, Menzies $128,668 and Graham $112,001 and matching amounts under the Company’s Supplemental Plan for Messrs. Wallace $74,135, McWhirter $4,070, Stiles $5,390 and Graham $24,591. These amounts are also included the Summary Compensation Table. |
|
| (3) | This column represents earnings in the Supplemental Plan and earnings in the Deferred Compensation Plan. For Messrs. Wallace, McWhirter, Stiles, and Graham, earnings in the Supplemental Plan were $18,894; $5,158; $3,520 and $15,733, respectively. For Messrs. Wallace, McWhirter, Stiles, Menzies and Graham, earnings in the Deferred Compensation Plan were $27,599; $7,835; $10,991; $9,352 and $8,634, respectively. The amounts reported in this table for the Deferred Compensation Plan are inclusive of above market earnings included in the Summary Compensation Table above. See note (4) to the Summary Compensation Table. |
| |
| Deferred Compensation Discussion |
The Supplemental Plan was established for highly compensated employees who are limited as to the amount of deferrals allowed under the Company’s 401(k) plan. There is no limit on the percentage of salary or incentive pay that canan executive may elect to defer into the Supplemental Plan. Participants must elect to defer salary prior to the beginning of the fiscal year and annual incentive pay prior to the beginning of the year to which the incentive payments relate. The first 6% of a Participant’s base salary and bonus contributed to the Supplemental Plan, less any compensation matched under the 401(k) plan, may be attached matched from 25% to 50%
27
by its creditors.the Company based on years of service. The Company’s match vests 20% for each year of service up to 100% after five years. Participants may choose from several mutual fund like deemed investments.
If elected at the time of enrollment, Participants may take an in-service distribution of deferrals three years after the end of the plan year in which the deferral was made. Amounts are paid out immediately on death or disability. Upon termination of employment, amounts in the Supplemental Plan are paid out beginning 6 months after termination of employment in lump sum or annual installments from one to 20 years according to election of the Participant.
Each named executive officer participates in the Deferred Compensation Plan which is an unfunded long-term plan whereby an amount equal to 10% of salary and incentive bonus is set aside in an account on the books of the Company. The account is credited monthly with an interest rate equivalent as determined annually by the HR Committee (83/4% for 2006 and 73/4 % for 2007). The account is payable to the participant in a lump sum or annual installments from one to 20 years. Payments commence one year after termination and are subject to compliance with non-compete provisions for one year after termination and the participant must be available for consultation for one year after termination.
Potential Payments Upon Termination or Change in Control
Named executive officers that terminate voluntarily, involuntarily, by death or by disability have the same death and disability benefits that are available to the majority of Control Agreements
On June 8, 1989,salaried employees. While employed by us, salaried employees have a death benefit equal to the Boardgreater of Directors authorized agreementstheir accrued benefit under the pension plan or one year of base salary for less than 10 years of service and 2 and1/2 times base salary for over 10 years of service. Our long term disability plan provides salaried employees with a disability benefit after six months of disability of 60% of base salary up to a maximum of $12,000 a month while disabled and until normal retirement at age 65. Pension benefits payable at retirement are described under “Pension Benefits” and deferred compensation benefits that are payable on termination are described under “Deferred Compensation Discussion.”
Stock options and restricted stock held by the named executive officers have no acceleration of vesting upon voluntary or involuntary termination but vesting is accelerated on death, disability and in some cases retirement. Stock options and restricted stock also vest on a change in control.
The following table provides the dollar value of accelerated vesting of stock options and restricted stock assuming each of the named executive officers namedhad been terminated by death, disability or retirement on December 29, 2006 or a change in the Summary Compensation Table above and
others tocontrol occurred on December 29, 2006.
| | | | | | | | | | | | | | | | | | | | | | |
| | | Timothy R. | | | William A. | | | Mark W. | | | D. Stephen | | | Martin | |
| | | Wallace | | | McWhirter | | | Stiles | | | Menzies | | | Graham | |
| | | | | | | | | | | | | | | | |
| Death | | | | | | | | | | | | | | | | | | | | |
| | Stock Options | | $ | 4,968,469 | | | $ | 725,798 | | | $ | 1,482,709 | | | $ | 1,266,610 | | | $ | 642,966 | |
| | Restricted Stock | | | 19,885,747 | | | | 4,654,320 | | | | 5,533,440 | | | | 4,113,120 | | | | 2,661,120 | |
| Disability | | | | | | | | | | | | | | | | | | | | |
| | Stock Options | | | 4,968,469 | | | | 725,798 | | | | 1,482,709 | | | | 1,266,610 | | | | 642,966 | |
| | Restricted Stock | | | 19,885,747 | | | | 4,654,320 | | | | 5,533,440 | | | | 4,113,120 | | | | 2,661,120 | |
| Retirement | | | | | | | | | | | | | | | | | | | | |
| | Stock Options | | | 4,968,469 | | | | 725,798 | | | | 1,482,709 | | | | 1,266,610 | | | | 642,966 | |
| | Restricted Stock | | | 16,981,447 | | | | 3,893,670 | | | | 4,772,790 | | | | 3,352,470 | | | | 1,900,470 | |
| Change in Control | | | | | | | | | | | | | | | | | | | | |
| | Stock Options | | | 4,968,469 | | | | 725,798 | | | | 1,482,709 | | | | 1,266,610 | | | | 642,966 | |
| | Restricted Stock | | | 19,885,747 | | | | 4,654,320 | | | | 5,533,440 | | | | 4,113,120 | | | | 2,661,120 | |
The annual incentive compensation agreements also provide certain severance benefits to themthat in the event of a terminationchange in control, the named executive officers will be paid a proration of employment followingthe target bonus for the year in which the change in
28
control occurs as of the date of the change in control. Assuming a change in control occurred on December 29, 2006, Messrs. Wallace, McWhirter, Stiles, Menzies and Graham would have received $1,330,000, $296,000, $392,000, $386,000, and $336,000, respectively, for their 2006 annual incentive compensation.
Each of controlthe named executive officers has entered into an Executive Severance Agreement (the “Agreement”) with the Company that provides for compensation if the named executive officer’s employment is terminated under one of the circumstances described in the Agreement in connection with a “Change in Control” of the Company (as defined in the agreements) ofAgreement).
The Agreements are for continuous two-year terms until terminated by the Company. Each agreement providesCompany upon specified notice and continue for two years following a Change in Control. The Agreements provide that if there is a change
of controlChange in Control of the Company and if the Company terminates the executive'sexecutive’s employment other than as a result of the executive'sexecutive’s death, disability or retirement, or for cause (as defined in the agreements)Agreement), or if the executive terminates his or her employment for good reason (as defined in the agreements)Agreement), then the Company will pay to such executive a lump sum equal to three (3) times (i) the amount of the executive'sexecutive’s base salary, (ii) the annual perquisite allowance, and bonus paid by(iii) the Company and its
subsidiaries to the executive during the twelve (12) months prior to
termination or, if higher the twelve (12) months prior to the change of
control of the Company.average bonus earned over the previous three years or the target bonus for the fiscal year in which the Change in Control occurs.
The severance benefits provided by the agreementsAgreements also include certain
fringecontinuation of all medical, dental, vision, health and life insurance benefits to which each executive would have been entitled if the executive had continued in the employment of the Company for thirty-six (36)36 months after the executive'sexecutive’s termination, a lump sum equivalent to the value of an annuity payable at age 65 with 36 months of additional service without regard to limitations imposed by the Code, less the benefit actually accrued under the pension plan, and a supplemental benefitthe right to surrender unexercised stock options and receive cash for the net realizable value of the options based on the Company's retirement plan, which benefit is payable in a serieshighest price of cash
payments.the Common Stock within 180 days prior to the date of termination (the “Put Option”).
The agreementsAgreements further provide that if any payment to which the executive is entitled would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code, of 1986, as amended, then the Company will pay to the executive an additional amount so that the net amount retained by the executive is equal to the amount that otherwise would be payable to the executive if no such excise tax has been imposed.
If each named executive officer’s employment had been imposed.
-14-
Reportterminated on December 29, 2006 under one of the Human Resources Committee on Executive Compensation
The following report is submitted by the Human Resources Committee for
inclusion in this Proxy Statement pursuant to the rules of the Securities and
Exchange Commission with respect to Executive Compensation:
The Company's executive compensation program is administered by the Human
Resources Committee ("the Committee") of the Board of Directors. The
Committee, which is composed entirely of independent outside directors, is
responsible for setting and overseeing the administration of policies that
govern the compensation of the Company's executives. It establishes the base
salary, the incentive compensation, the deferred compensation, the stock
options and other stock based awards for each Corporate officer and certain
key operating officers of the Company.
It is the Committee's policy to provide a competitive and comprehensive
compensation program to attract, motivate, reward and retain the key
executives needed to enhance the profitability of the Company and to create
value for its stockholders. The Committee believes that the Company's
executive compensation should consist of competitive base salaries and
incentive compensation plans that reward both short and long term
performance. The key components of the Company's executive compensation
programcircumstances described in the last fiscal year were a base salary, incentive compensation,
andAgreement in some cases, deferred compensation, stock options and restricted stock
awards. The Committee periodically reviews each component of the Company's
executive compensation program to ensure that pay levels and incentive
opportunities are competitive, directly linked to performance and aligned with
the interest of stockholders. The Committee determines each executive's
compensation based upon past and expected future performance, the executive's
responsibilities within the Company, and the executive's value to the Company
as determined by the Committee.
Base Salary
The Committee each year reviews each executive's performance and
establishes each executive's base salary based upon past and expected future
performance, and the executive's responsibilities within the Company. In
fixing base salaries, the Committee also considers salaries of senior
executives of other comparable companies as reflected in a survey provided by
an independent outside consultant.
Incentive Compensation
Incentive bonuses awarded annually to the Company's executive officers
and key operating officers are tied to the Company's success in achieving
significant performance goals. An incentive bonus is determined for each
executive upon the basis of the achievement of certain financial goals set
each year by the Committee at the beginning of the year. The Company's
corporate executives' performance targets are directly related to the
Company's consolidated income before federal income tax; and targets of
division executives responsible for the operation of a division or segment of
the Company are directly related to the operating profits achieved by that
division or segment. The performance goals are predetermined by the Human
Resource Committee on the basis of the Company's past performance and
anticipated future performance. In the case of both corporate and division
executives, the total amount of incentive compensation that may be earned by
any executive in any year is limited to a predetermined maximum percentage of
his or her base salary.
Stock Options, Restricted Stock Grants and Deferred Compensation
Long-term incentive awards provided by the stockholder-approved 1993
Stock Option and Incentive Plan are designed to develop and retain strong
management through stock ownership, deferred compensation, stock options and
other stock based incentive awards.
Stock options historically have been and in fiscal 1997 were the primary
long-term incentive granted to 12 executive officers, 12 key operating
officers and approximately 60 key employees in fiscal 1997. Options to
purchase a total of 480,456 shares were granted in fiscal 1997. The Committee
believes that a significant portion of senior executives' compensation should
be dependent on value created for the shareholders. Options are an excellent
vehicle to accomplish this by tying the executives' interest directly to the
shareholders' interests. Options are granted at the fair market value of the
Company's Common Stock on the date of grant and vest in annual increments over
five to eight years after such date if the optionee is still employed or vest
fully at the date of normal retirement.
-15-
The number of options that the Committee grants to executive officers is
based on individual performance and level of responsibility. The award level
must be sufficient in size to provide a strong incentive for executives to
work for long-term business interests and become meaningful owners of the
business. The number of options currently held by an executive is not a
factor in determining individual grants since such a factor would create an
incentive to exercise options and sell the shares.
A limited number of senior executives also received grants of Career
Shares in 1997. Career Shares are shares of the Company's Common Stock
grantedconnection with a restriction designed to promote long-term retention, as well as
superior long-term performance, of key strategic and operating management.
These restrictions generally expire after the executive reaches normal
retirement age. The number of Career Shares granted to senior executives also
recognizes the increased responsibility and complexity of senior positions.
Individual grants are based on personal contribution and level of
responsibility within the organization. The number of shares currently held
by an executive is not a factorChange in determining individual grants since Career
Shares are primarily designed to promote long-term retention and steadily
increasing stock ownership by the Company's key executives. A total of 20,000
Career Shares were granted to 14 key executives in 1997.
To encourage the retention of certain key and strategically important
executives focused on continuous improvement and growthControl of the Company, the named executive officers would have received the following:
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | Increase in | | | | | |
| | | | | | | Present | | | | | |
| | | | | | | Value of | | | | | |
| | | Cash | | | Continuation | | | Pension | | | Value of Put | | | Estimated | |
| Name | | Compensation(1) | | | of Benefits(2) | | | Benefits(3) | | | Option(4) | | | Gross-up(5) | |
| | | | | | | | | | | | | | | | |
| Timothy R. Wallace | | $ | 7,172,259 | | | $ | 160,100 | | | $ | 2,942,000 | | | $ | 1,563,334 | | | $ | 6,589,720 | |
| William A. McWhirter | | | 2,265,267 | | | | 160,100 | | | | 649,000 | | | | 181,500 | | | | 2,687,576 | |
| Mark W. Stiles | | | 3,103,644 | | | | 160,100 | | | | 1,536,000 | | | | 461,269 | | | | 3,037,869 | |
| D. Stephen Menzies | | | 3,049,902 | | | | 160,100 | | | | 422,000 | | | | 293,777 | | | | 2,437,847 | |
| Martin Graham | | | 2,428,443 | | | | 160,100 | | | | — | | | | 146,443 | | | | 1,464,249 | |
| |
| (1) | Cash lump sum equal to three times base salary, perquisite allowance and applicable bonus. |
|
| (2) | Estimated cost of continuation for 36 months of medical and life insurance benefits. |
|
| (3) | Cash lump sum payment for the increase in present value of pension benefits. Not applicable to Mr. Graham because he no longer accrues benefits under the Standard Pension Plan. |
|
| (4) | Value of Put Option is a calculation of any excess in the amount that would have been realizable from the exercise and sale of options using the highest closing price of the Company’s common stock during the 180 days preceding December 29, 2006 over the amount that would have been realizable from the exercise and sale of stock options on December 29, 2006. |
29
| |
| (5) | Estimated gross up of federal, FICA, and excise taxes estimated pursuant to Internal Revenue Code Section 280 (G) using each named executive officer’s W-2 compensation from the Company over the last five years and estimated change in control compensation based on estimated cash payouts and accelerated equity values. |
The following table summarizes the compensation paid by the Company has established a deferred compensation planto non-employee directors for certain key officersthe fiscal year ended December 31, 2006.
Director Compensation Table
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | Change in | | | | | |
| | | | | | | Pension | | | | | |
| | | | | | | Value and | | | | | |
| | | Fees | | | | | Nonqualified | | | | | |
| | | Earned | | | | | Deferred | | | | | |
| | | or Paid | | | Stock | | | Compensation | | | All Other | | | |
| | | in Cash | | | Awards | | | Earnings | | | Compensation | | | Total | |
| Name | | ($)(1) | | | ($)(2)(3) | | | ($)(4) | | | ($)(5) | | | ($) | |
| | | | | | | | | | | | | | | | |
| John L. Adams(6) | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| Rhys J. Best | | | 56,000 | | | | 60,506 | | | | — | | | | — | | | | 116,506 | |
| David W. Biegler | | | 80,167 | | | | 60,506 | | | | 2,225 | | | | 369 | | | | 143,267 | |
| Craig J. Duchossois(6) | | | 10,000 | | | | — | | | | — | | | | — | | | | 10,000 | |
| Ronald J. Gafford | | | 69,125 | | | | 60,506 | | | | 10,000 | | | | 786 | | | | 140,417 | |
| Barry J. Galt(6) | | | 14,167 | | | | — | | | | — | | | | — | | | | 14,167 | |
| Clifford J. Grum | | | 85,083 | | | | 60,506 | | | | — | | | | 874 | | | | 146,463 | |
| Ronald W. Haddock | | | 69,000 | | | | 60,506 | | | | — | | | | — | | | | 129,506 | |
| Jess T. Hay | | | 73,000 | | | | 60,506 | | | | — | | | | 2,500 | | | | 136,006 | |
| Adrian Lajous(6) | | | 3,966 | | | | — | | | | — | | | | — | | | | 3,966 | |
| Diana S. Natalicio | | | 57,500 | | | | 60,506 | | | | 13,000 | | | | 5,705 | | | | 136,711 | |
| |
| (1) | Includes amounts deferred under the 2005 Deferred Plan for Director Fees. |
|
| (2) | Stock awards are for restricted stock units awarded in 2006 and the dollar amounts recognized for financial statement reporting purposes with respect to the fiscal year in accordance with SFAS 123R. Our policy and assumptions made in the valuation of share-based payments are contained in notes 1 and 16 of Item 8 of the Company’s Annual Report on Form 10-K. The amount reported represents seven months of amortization of the grant date fair value of the awards granted during 2006 for Messrs. Best, Biegler, Gafford, Grum, Haddock, Hay and Dr. Natalicio of $103,725 each. Mr. Lajous was granted an award dated December 14, 2006 with a grant date fair value of $106,204 and no dollar amount was recognized for financial reporting purposes in 2006. |
|
| (3) | Messrs. Best, Biegler, Gafford, Grum, Haddock, Hay, Lajous and Dr. Natalicio had restricted stock units totaling 3,750; 5,250; 5,250; 5,250; 3,750; 5,250; 2,800 and 5,250, respectively as of December 31, 2006. Messrs. Adams, Best, Biegler, Gafford, Grum, Haddock, Hay and Dr. Natalicio had stock options totaling 175,500; 3,750; 60,000; 26,250; 60,000; 3,750; 60,000 and 45,000, respectively as of December 31, 2006. |
|
| (4) | In 2005, the Board of Directors made amendments to the Directors Retirement Plan (the “DRP”) that was designed to discontinue the DRP. Before the addition of the two new directors in 2005, the DRP was amended to exclude new directors and in December 2005 it was amended to terminate the interest of each fully vested non-employee director as of December 15, 2005 and to make provision to terminate the interest of the remaining directors who were not fully vested. The basic benefit of the DRP before it was amended was a monthly payment for ten years upon retirement, disability or death equal to a percentage of the annual retainer in effect at termination of Board service. The percentage was based upon the |
30
| |
| number of years of service, starting with 50% after five years of service and increasing 10% for each year up to 100% after ten years. After completion of 10 years of service a lump-sum payment was made in 2006 to Dr. Natalicio of $306,216 calculated using the annual retainer of $40,000 per year in effect in December 2005 increased by 4% for each year remaining between December 15, 2005 and May 15 of the year following the director’s 72nd birthday and the ten years of payments as provided in the DRP were then discounted using a present value factor of five percent. Mr. Gafford is the remaining participating director who was not fully vested on December 15, 2005. He will receive a payout of benefits to the extent vested on the earlier of retirement, death, a change of control as defined by Section 409A of the Code or after ten years of service on the Board with payment calculated on the same basis as used for termination of the fully vested directors’ interest in the DRP, except that the date for calculation of the present value factor will be the date benefits are payable and not December 15, 2005. Includes for Mr. Biegler the above market earnings from the interest rate equivalent under the 2005 Deferred Plan for Director Fees. |
|
| (5) | Includes dividend equivalents on stock units in director fee deferral plans and a $2,500 matching contribution by the Company in the name of Mr. Hay pursuant to the Company’s Matching Gifts to Education Program. The maximum annual contribution that may be matched under that Program is $2,500. |
|
| (6) | Mr. Adams joined the Board on March 5, 2007 and therefore did not receive any director compensation in 2006. Mr. Lajous joined the Board on December 14, 2006. Mr. Duchossois resigned from the Company’s Board of Directors on March 7, 2006 and Mr. Galt retired from the Company’s Board of Directors on May 14, 2006. |
| |
| Director Compensation Discussion |
Effective October 1, 2006 each director of the Company including Messrs. Timothy R. Wallace, John T. Sanfordwho is not a compensated officer or employee of the Company receives cash compensation as follows:
| | |
| • | Board member annual retainer of $50,000 |
|
| • | Presiding Director — annual retainer of $5,000 |
|
| • | Board meeting fee of $1,500 for each meeting attended |
|
| • | Audit Committee Chairman — annual retainer of $15,000 |
|
| • | Member of the Audit Committee — $2,000 for each meeting attended |
|
| • | Human Resources Committee Chairman — annual retainer of $7,500 |
|
| • | Chairman of other Board Committees — annual retainer of $5,000 |
|
| • | Member of other Board Committees — $1,500 for each meeting attended |
The Board has also established a cash equivalent value as a guide for annual equity compensation for directors of $100,000 and Mark
W. Stiles. Underwill use a 12 month average share price as the deferred compensation plan,basis for future awards. In May 2006 each director who was not also an amount equalexecutive officer of the Company was granted 2,250 restricted stock units, with dividend equivalents, that are convertible into 2,250 shares of common stock upon termination from the Board. Upon joining the Board in December 2006, Mr. Lajous was granted 2,800 restricted stock units.
Directors may elect, pursuant to ten
percent (10%)a 2005 Deferred Plan for Director Fees, to defer the receipt of each participant's annual base salary and incentive
compensation is accruedall or a specified portion of the fees to his deferredbe paid to him or her. Deferred amounts are credited to an account on the books of the Company.
All such deferrals bearCompany and treated as if invested either at an interest rate equivalent (83/4% in 2006 and 73/4% in 2007) or, at the prime rate from time to time at Texas
Commerce Bank.
Chief Executive Officer Compensation
The base salary, incentive compensation and stock option grants to Mr. W.
Ray Wallace, the Company's Chief Executive Officer, are set within the
philosophy and policies enunciated above for all other executivesdirector’s prior election, in units of the Company.
His base salary in fiscal 1997 was fixed by the Committee after reviewing
the performance of the Company in fiscal 1996, after considering the
positioning of the Company for future years, and after assessing Mr. Wallace's
past and ongoing personal performance in the position of Chief Executive
Officer. There was no change in his base salary for fiscal 1997. The
Committee did not follow any set formula in making such determination, but
considered, among other things, the report of a nationally recognized
consulting firm employed to survey the compensation of chief executive
officers of other companies, with particular emphasis on companies with sales
volumes comparable to that of the Company.
Mr. Wallace's incentive compensation in fiscal 1997 was derived from a
formula directly related to the Company's pretax income from continuing and
discontinued operations, which in fiscal 1997 totaled $223 million, up from
$186 million in fiscal 1996. His incentive compensation for the year is
payable currently.
Mr. Wallace also has a long term deferred compensation plan under which
the Company awards annually an amount equal to fifteen percent (15%) of Mr.
Wallace's combined salary and incentive compensation in each fiscal year.
These deferrals bear interestCompany’s Common Stock at the prime rate from time to time at Texas
Commerce Bank.
-16-
Pursuant to an agreement between the Company and Mr. Wallace dated July
18, 1990, the Company is obligated to supplement his pension plan and other
retirement benefits from the Company so that the aggregate amount of all his
retirement benefits from the Company will equal eighty percent (80%) of his
average annual compensation for the five (5) consecutive years in which he was
most highly compensated by the Company.
Conclusion
The Committee believes that the Company's compensation policies and
practices are appropriately designed to attract, retain and motivate key
executives to guide the Company in the future and to produce results which
will enhance the Company's long-term prospects, thereby ultimately enriching
shareholder values.
Jess T. Hay, Chairman David W. Biegler, Member
Human Resource Committee Clifford J. Grum, Member
Diana Natalicio, Member
Compensation Committee Interlocks and Insider Participation
No member who served during the Company's fiscal year ended March 31,
1997 on either the current Human Resources Committee or the former
Compensation Committee is a current or former officer or employee of the
Company or any of its subsidiaries. During the Company's fiscal year ended
March 31, 1997, no executive officer of the Company served as a member of a
compensation committee (or other board committee performing equivalent
functions) or as a director of any other entity which has an executive officer
serving on either the current Human Resources Committee or former Compensation
Committee of the Company.
PERFORMANCE GRAPH
The following graph shows a comparison of the five (5) year cumulative
return (assuming reinvestment of any dividends) for the Company, the New York
Stock Exchange Index and the Dow Jones Transportation Equipment Index. The
sources for the information contained in this table in respect to the return
for the Company and for the Dow Jones Transportation Equipment Index are
Research Data Group and, in respect to the New York Stock Exchange Index, is
Media General Financial Services.
[Appearing at this point is a performance graph comparing the
five (5) year cumulative return (assuming reinvestment of any
dividends) for the Company, the New York Stock Exchange Index and
the Dow Jones Transportation Equipment Index, with the following
plot points expressed dollars:
1992 1993 1994 1995 1996 1997
Trinity 100 159 201 201 192 170
DJ Transport. 100 120 138 124 131 156
NYSE Index 100 115 119 133 173 202]
-17-
ITEM 2 - AMENDMENT OF 1993 STOCK OPTION AND INCENTIVE PLAN
The following proposal will be offered by the Board of Directors: The
Board of Directors recommends that you vote FOR this proposal.
RESOLVED, that the stockholders of the Company hereby approve an
amendment to the 1993 Stock Option and Incentive Plan to add the
following new Section 24:
24. Maximum Compensation of an Employee. Notwithstanding
the foregoing provisions of this Plan, on and after July 16, 1997 the
maximum number of Shares for which grants of stock options and Stock
Appreciation Rights may be made to an employee in any fiscal year of the
Company shall not exceed one-half of one percent (0.5%) of the total number of
Shares of the Company outstanding on March 31, 1997, and the exerciseclosing price of
any stock option or Stock Appreciation Right granted on and after July 16,
1997 shall in no event be less than the Fair Market Value of the Shares at the
time of the grant. The sole purpose of this proposed amendment to the 1993
Plan is to entitle the Company to continue to deduct the compensation expense
resulting from stock option exercises (and if and when granted, exercises of
stock appreciation rights) by certain executives for federal income tax
purposes. In order for the Company to continue to receive this tax deduction,
Treasury Regulations Section 1.162-27 issued on December 20, 1995 with respect
to Internal Revenue Code Section 162(m) requires that the 1993 Plan be
amended, and that the amendment be submitted to stockholders, to limit on the
maximum number of shares for which stock options or rights may be granted to
any employee during a specified period so as to enable stockholders to "...
calculate the maximum amount that would be attributable to the exercise of
options on the basis of their assumptions as to the future stock price." The
proposed amendment is intended to comply with this requirement by providing a
maximum number of shares of Common Stock of the Company for which stock
options and stock appreciation rights may be granted to any employee in any
fiscal year at an exercise price at not less than the fair market value of the
shares at the time of the grant.
-18-
The Human Resources Committee (formerly, the Compensation Committee and
hereinafter referred to as the "Committee") has historically granted
individual awards that have been significantly less than the maximum number of
shares which may be awarded under the proposed amendment to the 1993 Plan.
Further, the exercise price of the stock options awarded by the Committee
always have been at the fair market value of the shares at the time of the
grant. This amendment is not intended to result in compensation above the
level that would otherwise be provided. If this amendment is approved by
stockholders, it is expected that the Committee will continue to use its
discretion to make future awards that are significantly less than the maximum
number of shares that may be awarded under this amendment. If this amendment
is not approved, the 1993 Plan will continue in effect in its present form.
The Board of Directors has made no determination as to what action, if any,
will be taken with respect to this matter if the amendment is not approved by
the stockholders.
Copies of the 1993 Plan as currently in effect will be provided to
stockholders without charge upon written request to Mr. F. Dean Phelps, Jr.,
Vice President, Trinity Industries, Inc., P.O. Box 568887, Dallas, TX 75356-
8887 or upon telephone request to him at (214) 630-4420.
Summary of 1993 Plan
The 1993 Plan permits the grant of any or all of the following types of
awards: (1) stock options, including incentive stock options; (2) stock
appreciation rights, in tandem with stock options or freestanding; (3)
restricted stock; (4) performance awards; (5) dividend equivalent rights, in
tandem with other awards or freestanding; and (6) other awards based on,
payable in, or otherwise related to Common Stock of the Company. The 1993
Plan was originally approved by shareholders on July 21, 1993. It may be
terminated by the Board of Directors at any time.
The 1993 Plan provides that the maximum number of shares of Common Stock
with respect to which awards may be granted pursuant to the 1993 Plan is
[______________] shares (originally 1,000,000 shares, but adjusted as a result
of the stock split on August 31, 1993 and the distribution of shares of Halter
Marine Group, Inc. on March 31, 1997). As awards under the 1993 Plan or stock
options granted under prior plans expire, terminate or are surrendered
unexercised, the shares underlying such awards and options are available for
further awards under the 1993 Plan. Under the proposed amendment, the maximum
number of shares for which stock options and stock appreciation rights can be
awarded on and after July 15, 1997 would be limited to one-half of one percent
(0.5%) of the shares of Common Stock of the Company outstanding on March 31,
1997.
The 1993 Plan is administered by the Committee. The Committee currently
consists of four outside directors, none of whom receive remuneration from the
Company or its affiliates in any capacity other than as a director. The Plan
requires that the committee named by the Board of Directors to administer the
1993 Plan must consist of not less than three (3) members of the Board of
Directors.
The Committee determines the persons to whom awards are granted, the type
of award, and, if applicable, the number of shares to be covered by the
award. The persons eligible to receive awards is limited to employees who are
either directors or officers of the Company or one of its affiliates or who
are in managerial or other key positions in the Company or one of its
affiliates. In making the determination as to person to whom awards are
granted, the Committee considers the position and responsibilities of the
person, his or her importance to the Company and its affiliates, the duties of
such person, his or her past, present and potential contributions to the
growth and success of the Company and its affiliates, and such other factors
as the Committee deems relevant in connection with accomplishing the purposes
of the 1993 Plan.
Stock Options. The Committee may grant either an
incentive stock option (as that term is used in Section 422 of the Internal
Revenue Code of 1986) or any other stock option. In the case of an incentive
stock option, the option exercise price must be not less than one hundred
percent (100%) of the last reported sales price of the Company's Common Stock on the New York Stock Exchange on the first trading day of the quarter following the date that a payment is credited to the director’s account. Such stock units are credited with amounts equivalent to dividends paid on the Company’s Common Stock. Upon ceasing to serve as a director or a change in control, the value of grantthe account will be paid to the director in annual installments not exceeding ten years according to the director’s prior election.
31
| |
| Transactions with Related Persons |
The Corporate Governance and Directors Nominating Committee has adopted a Policy and Procedures for the Review, Approval and Ratification of Related Person Transactions. In accordance with the written policy, the Corporate Governance and Directors Nominating Committee is responsible for the review, approval and ratification of all transactions with related persons that are required to be disclosed under the rules of the SEC. Under the policy, a related person includes any of our directors, executive officers, certain stockholders and any of their respective immediate family members. The policy applies to Related Person Transactions which are transactions in which the Company participates, a related person has a direct or indirect material interest, and the amount exceeds $120,000. Under the policy, the Chief Legal Officer (the “CLO”) will review potential transactions and in caseconsultation with the CEO and CFO will assess whether the proposed transaction would be a Related Person Transaction. If the CLO determines the proposed transaction would be a Related Person Transaction, the proposed transaction is submitted to the Corporate Governance and Directors Nominating Committee for review and consideration. Under the policy, the HR Committee must approve hiring of immediate family members of executive officers or directors and any employeesubsequent material changes in employment or compensation.
Employed family members of directors and executive officers with total compensation for 2006 in excess of $120,000 are as follows:
| | |
| • | Mr. Patrick S. Wallace, brother of Timothy R. Wallace, is an officer of a subsidiary of the Company. His total compensation was $727,342 for 2006, which includes base salary; bonus; matching contributions to defined contribution plans; perquisite allowance; and the dollar amount recognized for financial statement reporting purposes with respect to the fiscal year in accordance with SFAS 123R. |
|
| • | Mr. W. Ray Wallace, father of Timothy R. Wallace, is employed by the Company to provide consultation to the CEO and the Board and also serves as an Advisory Director of the Company. His total compensation was $191,962 for 2006, which includes base salary; personal use of company aircraft; and other compensation. |
|
| • | Mr. Webb Spradley,son-in-law of Jess T. Hay, is employed by the Company in a non-executive officer capacity. His total compensation was $314,344 for 2006, which includes base salary; bonus; matching contributions to defined contribution plans; and the dollar amount recognized for financial statement reporting purposes with respect to the fiscal year in accordance with SFAS 123R. |
32
SECURITY OWNERSHIP
Security Ownership with Certain Beneficial Owners and Management
The following table presents the beneficial ownership of our common stock as of March 15, 2007, except as noted for (i) each person beneficially owning more than ten percent (10%)5% of the total outstanding Common
Stock, the option price of an incentive stock option must be at least one
hundred ten percent (110%) of the last reported sales price. If the proposed
amendment is approved by stockholders, no stock option granted on or after
July 15, 1997 will have an exercise price that is less than one hundred
percent (100%) of the last reported sale price of the Company's Common Stock
on the New York Stock Exchange on the date of grant. Recipients of stock
options may pay the option exercise price in cash or by delivering to the
Company shares of the Company's Common Stock already owned by the optionee
having a fair market value equal to the aggregate option exercise price.
-19-
If an optionee delivers shares of Common Stockour common stock, (ii) each director and nominee for director of the Company, already
owned by the optionee in full or partial payment of the exercise price for any
stock option granted under the 1993 Plan or any prior stock option plan(iii) each executive officer of the Company the Committee may authorize the automatic grant of a new option (a
"Reload Option") for the same number of shares as the number of shares of
Common Stock surrendered in full or partial payment of the option exercise
price of the underlying stock option being exercised. The option exercise
price of the Reload Option will be the last reported sale price of the
Company's Common Stock on the New York Stock Exchange on the date of the
exercise of the underlying stock option. A Reload Option cannot be exercised
earlier than six (6) months from the date of its grant nor later than the time
when the underlying option exercised by the surrender of the already owned
shares could have been last exercised. The Committee may impose additional
terms, conditions and restrictions on any Reload Option and the shares
acquired upon the exercise of the Reload Option. Stock options will be
exercisable as set forth in the option agreements pursuant to which they are
issued, but in no event are incentive stock options exercisable after the
expiration of ten (10) years from the date of grant (or, in the case of an
employee owning more than ten percent (10%) of the total outstanding Common
Stock, five (5) years from the date of grant). Regardless of any vesting
schedule contained in an option agreement, the 1993 Plan provides for the
acceleration of the vesting of stock options in certain events, including the
optionee's death, disability or retirement, or a Change in Control of the
Company. See "Compensation of Directors" above for the definition of "Change
in Control". All rights to exercise a stock option terminate immediately if
an optionee is discharged for cause, after ten (10) days in the event of an
optionee's resignation, after three (3) months in the case of an optionee's
disability, after twelve (12) months in the case of an optionee's death, and
after three (3) years in case of the optionee's retirement. Options are not
transferrable other than by will or the laws of descent and distribution,
except that with the approval of the Committee, an option that is not an
incentive stock option may be transferred to a trust for the benefit of one
(1) or more members of the immediate family of the optionee.
The Company is of the opinion that a person receiving a stock option will
not realize any compensation income under the Internal Revenue Code upon the
grant of the option. However, he or she will realize compensation income at
the time of exercise (except for options which are incentive stock options or
where restricted stock is acquired upon the exercise of the option) in the
amount of the difference between the option exercise price and the fair market
value on the date of exercise. The Company is also of the opinion that for
its federal income tax purposes, the Company will be entitled to a deduction
equal to the amount of compensation income realized by optionee at the time of
exercise. In the case of incentive stock options, although no compensation
income is realized upon exercise, the excess of the fair market value on the
date of exercise over the option price is included in alternative minimum
taxable income for alternative minimum tax purposes.
Stock Appreciation Rights. A stock appreciation right may be granted in
conjunction with or independent of a stock option. A stock appreciation
right is the right to receive an amount equal to the excess of the fair market
value of a share of the Company's Common Stock on the date of exercise over
the exercise price, i.e., the fair market value of a share of Common Stock on
the date of grant (or other value specified in the agreement granting the
stock appreciation right). A stock appreciation right granted in tandem with
a stock option will require the holder, upon exercise, to surrender the
related stock option, or a portion thereof, with respect to the number of
shares as to which such stock appreciation right is exercised. If the
proposed amendment is approved by stockholders, no stock appreciation right
granted on or after July 15, 1997 will have an exercise price that is less
than one hundred percent (100%) of the last reported sale price of the
Company's Common Stock on the New York Stock Exchange on the date of the grant.
A stock appreciation right granted independent of a stock option will be
exercisable as determined by the Committee. An independent stock appreciation
right will entitle the holder, upon exercise, to receive payment as described
above either in cash or in shares of Common Stock of the Company, or a
combination thereof, as specified in the grant of the stock appreciation
right. The Committee may limit the amount payable upon exercise of any Stock
Appreciation Right. Any such limitation will be specified in the grant.
-20-
In the case of a stock appreciation right granted either independent of
or in conjunction with a stock option, the Company is of the opinion that the
person to whom the stock appreciation right is granted will not realize any
compensation income at the time of the grant. However, the cash, or in case
of shares delivered pursuant to the exercise of any such stock appreciation
right, the fair market value of the shares, will be treated as compensation
income of the grantee at the time of exercise, and the Company will be
entitled to a federal income tax deduction in the amount of the compensation
income realized by the grantee of the stock appreciation right at the time of
exercise.
Restricted Stock. An award of restricted stock may be granted under the
1993 Plan, either at no cost to the recipient or for such cost as may be
required by law or otherwise as determined by the Committee. The terms and
conditions of the restricted stock will be specified at the time of the
grant. Restricted stock may not be disposed of by the recipient until the
restrictions specified in the award expire. The Committee will determine at
the time of the award what rights, if any, the person to whom an award of
restricted stock is made will have with respect to restricted stock during the
restriction period, including the right to vote the shares and the right to
receive any dividends or other distributions applicable to the shares.
In the case of restricted stock, the Company is of the opinion that the
recipient will realize compensation income in an amount equal to the fair
market value of such stock less any amount paid for such stock at a time when
the employee's rights with respect to such stock are no longer subject to a
substantial risk of forfeiture. However, the recipient may make a special
election provided in the Internal Revenue Code to be taxed at the time of the
receipt of the award (as if the restrictions did not exist) but he or she will
not be allowed any deduction if the restricted stock is later forfeited.
Dividends, if any, paid to the holder of the restricted stock award during the
restriction period will be taxable as compensation income (or as dividend
income if the election referred to in the preceding sentence has been made).
The Company is also of the opinion that, subject to the limitations of
Internal Revenue Code Section 162(m), it will be entitled to a federal income
deduction at the time and equal to the amount that compensation income is
realized by the recipient of the restricted stock.
Performance Awards. A performance award may be granted under the 1993
Plan, either at no cost to the recipient or for such cost as may be required
by law or as otherwise determined by the Committee. Performance awards may
take the form of performance shares, or of performance units or rights valued
by reference to the value of Common Stock of the Company or by reference to
some other formula or method. Any performance award may require attainment of
performance criteria within a specified period in order for the award to be
earned. Performance awards, when and if payable, may be paid in cash, stock,
other consideration, or a combination thereof. If the Committee determines,
in its sole discretion, that the established performance measures or
objectives are no longer suitable to Company objectives because of a change in
the Company's business, operations, corporate structure, or for other reasons
that the Committee deems satisfactory, the Committee may modify the
performance measures or objectives and/or the performance period.
The Company is of the opinion that the recipient of a performance award
will realize compensation income when the recipient's rights with respect to
such award are no longer subject to a substantial risk of forfeiture in an
amount equal to the excess of the fair market value of such award at that time
over the amount, if any, paid for such award, unless the recipient makes a
special election provided in the Internal Revenue Code. The Company is also
of the opinion that, subject to the limitations of Internal Revenue Code
Section 162(m), it will be entitled to a federal income tax deduction at the
time and equal to the amount that compensation income is realized by the
recipient of the performance award.
Dividend Equivalent Rights and Interest Equivalents. A dividend
equivalent right gives the recipient the right to receive credits for
dividends that would be paid if the recipient held a specified number of
shares of Common Stock of the Company. A dividend equivalent right may be
granted as a component of another award or as a freestanding award. Dividend
equivalents credited to the holder of a dividend equivalent right may be paid
currently or be deemed to be reinvested in additional shares (which may
thereafter accrue additional dividend equivalents) at fair market value at the
time of deemed reinvestment. Dividend equivalent rights may be settled in
cash, shares, or a combination thereof, in a single payment or in
installments, as specified in the award.
-21-
In the case of a dividend equivalent right, the Company is of the opinion
that the recipient of the dividend equivalent right will realize compensation
income in an amount equal to the cash or fair market value of the shares as
and when the same becomes payable to the recipient. The Company is also of
the opinion that, subject to the limitations of Internal Revenue Code Section
162(m), it will be entitled to a federal income tax deduction at the time and
equal to the amount that compensation income is realized by the recipient.
Other Awards. Other forms of award based upon, payable in, or otherwise
related in whole or in part to Common Stock of the Company may be granted
under the 1993 Plan if the Committee determines that such awards are
consistent with the purposes and restrictions of the 1993 Plan. The terms and
conditions of such awards shall be specified by the grant. Such awards shall
be granted for no cash consideration, for such minimum consideration as may be
required by applicable law, or for such other consideration as may be
specified by the Committee. The federal income tax consequences of such other
awards will depend upon the form that such awards may take.
Adjustments upon Changes in Capitalization. The number of shares subject
to an award will be adjusted for any subdivision or consolidation of shares of
Common Stock of the Company or upon stock dividends payable in stock of the
Company or in case of any change from par value stock to stock of a different
par value or without par value or, in the discretion of the Board of
Directors, any distribution by the Company of shares of stock of another
corporation. Amendments. All provisions of the 1993 Plan (including
any award under the plan) may at any time or from time to time be modified or
amended by the Board of Directors. However, no outstanding award may be
adversely modified, impaired or canceled without the consent of the holder
thereof, and the 1993 Plan cannot be amended, without stockholder approval, to
increase the maximum number of shares subject to the 1993 Plan, or to
materially modify the requirements as to eligibility for participation in the
1993 Plan or materially increase the benefits accruing to persons eligible to
participate in the 1993 Plan, or if stockholder approval is necessary in order
to comply with Rule 16b-3 under the Securities Exchange Act of 1934 or to
comply with any other applicable law, regulation, or listing requirement or to
qualify for an exemption or characterization deemed desirable by the Company's
Board of Directors.
Termination. The 1993 Plan will terminate only by resolution of the
Board of Directors. However, no incentive stock option may be granted under
the 1993 Plan after April 12, 2003.
The awards that the Committee will grant to persons eligible to receive
awards under the 1993 Plan is not currently determinable. Information
regarding stock options and restricted stock awarded to the executive officers
namedlisted in the Summary Compensation Table is set forth on pages 10, 11 and 12(iv) all of the proxy statement. At April 30, 1997, options were grantedour directors and outstanding
under the 1993 Plan on 1,634,781executive officer as a group. Except pursuant to applicable community property laws and except as otherwise indicated, each shareholder possesses sole voting and investment power with respect to its, his or her shares.
At March 31, 1997, [___________] shares of Common Stock of the Company
were outstanding. The closing price of a share of Common Stock of the Company
on the New York Stock Exchange consolidated tape on May 30, 1997 was
[________].
COMPLIANCE WITH SECTION
| | | | | | | | | | | |
| | | Amount and Nature of | | | |
| | | Ownership of | | | Percent of | |
| Name and Address | | Common Stock(1) | | | Class | |
| | | | | | | |
| Directors: | | | | | | | | |
| | John L. Adams | | | 254,556 | | | | * | |
| | Rhys J. Best | | | 11,250 | | | | * | |
| | David W. Biegler | | | 60,150 | | | | * | |
| | Ronald J. Gafford | | | 31,500 | | | | * | |
| | Clifford J. Grum | | | 83,865 | (2) | | | * | |
| | Ronald W. Haddock | | | 19,717 | | | | * | |
| | Jess T. Hay | | | 71,250 | | | | * | |
| | Adrian Lajous | | | 2,800 | | | | * | |
| | Diana S. Natalicio | | | 55,500 | | | | * | |
| Named Executive Officers: | | | | | | | | |
| | Timothy R. Wallace | | | 1,292,559 | (3) | | | 1.6 | % |
| | William A. McWhirter | | | 151,789 | | | | * | |
| | Mark W. Stiles | | | 249,393 | | | | * | |
| | D. Stephen Menzies | | | 175,340 | | | | * | |
| | Martin Graham | | | 92,472 | | | | * | |
| All Directors and Executive Officers as a Group (22 persons) | | | 2,886,891 | | | | 3.6 | % |
| Over 5% Owners: | | | | | | | | |
| | First Pacific Advisors, LLC | | | 5,317,550 | (4) | | | 6.6 | % |
| | | 11400 West Olympic Blvd.,
Suite 1200
Los Angeles, CA 90064 | | | | | | | | |
| | Franklin Resources, Inc. | | | 5,345,725 | (5) | | | 6.7 | % |
| | | One Franklin Parkway
San Mateo, CA 94403-1906 | | | | | | | | |
| | Jeffrey L. Gendell | | | 10,094,235 | (6) | | | 12.6 | % |
| | | 55 Railroad Avenue
Greenwich, CT 06830 | | | | | | | | |
| | Lord, Abbett & Co. LLC | | | 4,697,388 | (7) | | | 5.9 | % |
| | | 90 Hudson Street
Jersey City, NJ 07302 | | | | | | | | |
| | |
| * | Less than one percent (1%) |
| |
| (1) | Unless otherwise noted, all shares are owned directly and the owner has the right to vote the shares, except for (i) shares that officers and directors have the right to acquire through the exercise of stock options or through restricted stock units held as of March 15, 2007, or within 60 days thereafter as follows: Adams (150,500); Best (7,500); Biegler (57,750); Gafford (31,500); Graham (6,390); Grum |
33
| |
| (65,250); Haddock (7,500); Hay (65,250); Lajous (2,800); McWhirter (9,600); Menzies (28,020); Natalicio (50,250); Stiles (58,708); Wallace (182,886) and all directors and executive officers as a group (798,893). Includes shares indirectly held through the Company’s 401(k) Plan as follows: McWhirter (648), Wallace (1,762) and all executive officers as a group (3,714) shares. Certain executive officers and directors maintain margin securities accounts, and the positions held in such margin accounts, which may from time to time include shares of Common Stock, are pledged as collateral security for the repayment of debit balances, if any, in the accounts. At March 15, 2007, one executive officer had 11,560 shares in a margin account with outstanding credit lines or loans and one director had 3,075 shares pledged on a revolving line of credit. |
| |
| (2) | Includes 4,500 shares owned by Deerfield Corporation of which Mr. Grum is an owner. |
|
| (3) | Includes 246,782 shares held indirectly by limited partnerships which Mr. Wallace controls. |
|
| (4) | First Pacific Advisors, LLC, 11400 West Olympic Boulevard, Suite 1200, Los Angeles, California 90064, reported to the SEC on Schedule 13G dated February 14, 2007, shared voting power over 1,860,350 shares and shared dispositive power over all 5,317,550 shares at December 31, 2006. |
|
| (5) | Franklin Resources, Inc., One Franklin Parkway, San Mateo, CA94403-1906, reported to the SEC on Schedule 13G dated February 1, 2007, that Franklin Resources, Inc. and certain affiliates had sole voting power over 5,345,725 shares and sole dispositive power over 5,345,725 shares as of December 31, 2006. |
|
| (6) | Pursuant to a Form 4 filing on February 26, 2007, Jeffery L. Gendell is the managing member of Tontine Management, L.L.C. (“TM”), a Delaware limited liability company, the general partner of Tontine Partners, L.P. (“TP”), a Delaware limited partnership. Mr. Gendell is also the managing member of Tontine Overseas Associates, L.L.C., a Delaware limited liability company (“TOA”), the investment adviser to Tontine Overseas Fund Ltd., a Cayman Island Corporation (“TO”) and certain separately managed accounts. Mr. Gendell directly owns 0 shares of the Common Stock. TM and TOA directly own 0 shares of Common Stock. TP directly owns 6,365,900 shares of Common Stock. TO owns 3,587,685 shares of Common Stock. The separately managed accounts directly own 140,650 shares of Common Stock. All of the foregoing shares of Common Stock may be deemed to be beneficially owned by Mr. Gendell; however, Mr. Gendell disclaims beneficial ownership of the Issuer’s securities reported herein for purposes of Section 16(a) under the Securities Exchange Act of 1934, as amended, or otherwise, except as to securities directly owned by Mr. Gendell or representing Mr. Gendell’s pro rata interest in, and interest in the profits of, TM, TP, TOA, TO and the separately managed accounts. |
|
| (7) | Lord, Abbett & Co. LLC, 90 Hudson Street, Jersey City, NJ 07302, reported to the SEC on Schedule 13G dated February 12, 2007, sole voting power over 4,470,408 and sole dispositive power over 4,697,388 shares as of December 31, 2006. |
ADDITIONAL INFORMATION
Section 16(a) OF THE
SECURITIES EXCHANGE ACT OF 1934Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Company'sCompany’s executive officers, directors and persons who own more than ten percent (10%) of the Company'sCompany’s Common Stock to file initial reports of ownership and changes in ownership with the Securities and Exchange Commission ("SEC"(“SEC”). These reports are also filed with the New York Stock Exchange and a copy of each report is furnished to the Company.
-22-
Additionally, SEC regulations require that the Company identify any individuals for whom one of the referenced reports was not filed on a timely basis during the most recent fiscal year. To the Company'sCompany’s knowledge, based solely on a review of reports furnished to it and written representations that
no other reports were required during and with respect to the fiscal year
ended March 31, 1997,from reporting persons, each individual who was required to file such reports during the fiscal year complied with the applicable filing requirements.
RELATIONSHIP WITH INDEPENDENT AUDITORS
Ernst & Young LLP, independent auditors, orrequirements during 2006, with the exception of Martin Graham’s original Form 3 which, when first timely filed on November 28, 2005, inadvertently omitted 753 shares (1,104 shares as a predecessor of that firm,
have been the auditorsresult of the accounts ofthree-for-two stock split effective May 26, 2006) and was not reflected in Forms 4 filed by Mr. Graham on December 16, 2005, May 9, 2006,
34
May 15, 2006, and September 13, 2006. Mr. Graham filed an amended Form 3 on October 30, 2006 correcting the Company each year since 1958,
including the fiscal year ended March 31, 1997. It is anticipated that
representatives of Ernst & Young LLP will be present at the 1997 Annual
Meeting, will have the opportunity to make a statement if they so desire and
will be available to respond to appropriate questions raised at the 1997
Annual Meeting or submitted to them in writing before the 1997 Annual Meeting.
Ernst & Young LLP has informed the Company that it does not have any
direct financial interest in the Company and that it has not had any direct
connection with the Company in the capacity of promoter, underwriter,
director, officer or employee.
As is customary, auditorsomission.
Stockholder Proposals for the current fiscal year will be appointed
by the Board of Directors at their meeting immediately following the 1997
Annual Meeting upon recommendation of the Audit Committee.
OTHER MATTERS
Management of the Company is not aware of other matters to be presented
for action at the 1997 Annual Meeting; however, if other matters are presented
for action, it is the intention of the persons named in the accompanying form
of proxy to vote in accordance with their judgment on such matters.
STOCKHOLDER PROPOSALS
Stockholders'2008 Proxy Statement
Stockholders’ proposals to be presented at the 19982008 Annual Meeting of Stockholders, for inclusion in the Company'sCompany’s Proxy Statement and form of proxy relating to the meeting, must be received by the Company at its offices in Dallas, Texas, addressed to the Corporate Secretary of the Company, notno later than [120
days in advance of the date that is one year from this mailing], 1998.December 6, 2007. Upon timely receipt of any such proposal, the Company will determine whether or not to include such proposal in the proxy statement and proxy in accordance with applicable regulations and provisions governing the solicitation of proxies.
Director Nominations or Other Business for Presentation at the 2008 Annual Meeting
Under the Bylaws of the Company, stockholders entitledcertain procedures are provided which a stockholder must follow in order to voteplace in the
election of directors may nominate one or morenomination persons for election as directors only ifat an annual meeting or to introduce an item of business at an annual meeting of stockholders. These procedures provide, generally, that stockholders desiring to place in nomination persons for directors, and/or bring a proper subject of business before an annual meeting, must do so by a written notice in writingtimely received (on or before March 9, 2008, but no earlier than February 7, 2008, for the 2008 Annual Meeting) to the Corporate Secretary of the Company of such
stockholder's intent to make such nomination or nominations has been delivered
to, or mailed and received at, the principal executive of the Company not less
than sixty (60) days nor more than ninety (90) days prior to the anniversary
date of the immediately preceding annual meeting. Such notice must set forth
(a) as to each person whom the stockholder proposes to nominate for election
as a director, (i)containing the name age, business address and residence address of the person, (ii)stockholder, the principal occupation or employment of the person, (iii)
the class and number of shares of capital stock of the corporation which are
beneficially owned by the person, and (iv) any other information relating to
the person that is required to be disclosed in solicitations for proxies for
election of directors pursuant to Rule 14a under the Securities Exchange Act
of 1934, as amended; and (b) as to the stockholder giving the notice, (i) the
name and record address of the stockholder, (ii) the class and number of
shares of capital stock of the corporation which areCompany beneficially owned by the stockholder, (iii)and a descriptionrepresentation that the stockholder intends to appear in person or by proxy at the meeting. If the notice relates to a nomination for director, it must also set forth the name and address of any nominee(s), all arrangements or understandings between suchthe stockholder and each proposed nominee and any other person or personsperson(s) (including their names) pursuant to which the nomination(s) are to be made, by
such stockholder, (iv) a representation that such stockholder intends to
appear in person or by proxy at the meeting to nominate the persons named in
its notice and (v) any other information relating to such stockholder thatregarding each nominee as would behave been required to be disclosedincluded in a proxy statement or other filings
required to be made in connection with solicitations of proxies for election
of directorsfiled pursuant to Section 14the proxy rules of the Exchange ActSEC had each nominee been nominated by the Board, and the rules and
regulations promulgated thereunder.consent of each nominee to serve. The Company may require any proposed nominee to furnish such other information as may reasonably be required by the Company to determine the eligibility of such proposed nominee to serve as director. NoNotice of an item of business shall include a brief description of the proposed business and any material interest of the stockholder in such business.
The Chairman of the meeting may refuse to allow the transaction of any business not presented, or to acknowledge the nomination of any person is eligiblenot made, in compliance with the foregoing procedures. Copies of the Company’s Bylaws are available from the Secretary of the Company.
See “Corporate Governance and Directors Nominating Committee” for election asthe process for stockholders to follow to suggest a director ofcandidate to the Company
unless nominated in accordance withCorporate Governance and Directors Nominating Committee for nomination by the procedures set forth in the Bylaws.
-23-
REPORT ON FORM Board.
Report on Form 10-K
Upon written request from any stockholder of record at May 30, 1997 (or any
beneficial owner representing that he is or was entitled to vote at the 1997
Annual Meeting), the Company will furnish to such stockholder, without charge,
its
The Company’s Annual Report on Form 10-K for the fiscal year ended MarchDecember 31, 1997,2006, as filed with the Securities and Exchange Commission, including financial statements. The Companystatements, was included with the Annual Report mailed to each stockholder. Stockholders may impose a reasonable fee for its expenses in
connection with providingobtain without charge another copy of the Form 10-K, excluding certain exhibits, referredby writing to in such Form 10-K, if the full
text of such exhibits is specifically requested. Requests should be directed
to: Mr. F. Dean Phelps, Jr.,Michael G. Fortado, Vice President and Corporate Secretary, Trinity Industries, Inc., P. O.
Box 568887,2525 Stemmons Freeway, Dallas, Texas 75356-8887.
75207.
35
OTHER BUSINESS
Management of the Company is not aware of other business to be presented for action at the Annual Meeting; however, if other matters are presented for action, it is the intention of the persons named in the accompanying form of proxy to vote in accordance with their judgment on such matters.
It is important that proxies be returned promptly to avoid unnecessary expense. Therefore, stockholders are urged, regardless of the number of shares owned, to date, sign and return the enclosed proxy in the enclosed business reply envelope.
| |
| By Order of the Board of Directors |
|
|
| MICHAEL G. FORTADO |
| Vice President and Corporate Secretary |
April 5, 2007
36
TRINITY INDUSTRIES, INC.
This Proxy is Solicited by the Board of Directors
J. J. FRENCH, JR.
Secretary
June 11, 1997
-24-
[FRONT SIDE OF PROXY CARD]
TRINITY INDUSTRIES, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
ANNUAL MEETING OF STOCKHOLDERS - July 16, 1997
Annual Meeting of Stockholders — May 7, 2007
The undersigned hereby appoints J. J. French, Jr., W. RayTimothy R. Wallace, Jess T. Hay and Dean P. GuerinMichael G. Fortado and each of them with full power of substitution, attorneys, agents and proxies of the undersigned to vote as directed below the shares of stock which the undersigned would be entitled to vote, if personally present, at the Annual Meeting of Stockholders of Trinity Industries, Inc. to be held at its offices, 2525 Stemmons Freeway, Dallas, Texas 75207, on Wednesday, July 16, 1997Monday, May 7, 2007 at 9:3000 a.m. Central Daylight Saving Time, and at any adjournment or adjournments thereof. If more than one of the above attorneys shall be present in person or by substitution at such meeting or at any adjournment thereof, the majority of said attorneys so present and voting, either in person or by substitution, shall exercise all of the powers hereby given. The undersigned hereby revokes any proxy or proxies heretofore given to vote upon or act with respect to such shares of stock and hereby ratifies and confirms all that said attorneys, their substitutes, or any of them, may lawfully do by virtue hereof.
(1) Election of ten (10) Directors: John L. Adams, David W.
Biegler, Barry J. Galt, Clifford J. Grum, Dean P. Guerin, Jess
T. Hay, Edmund M. Hoffman, Diana S. Natalicio, Timothy R.
Wallace and W. Ray Wallace.
___
/___/ FOR all nominees listed above (except as marked to the contrary)
___
/___/ WITHHOLD AUTHORITY to vote for all nominees listed above
INSTRUCTION: To withhold authority to vote for one or more,
but not all, of the above named nominees, check the box before
"FOR" and indicate your desire to withhold such authority by
drawing a line through the name(s) of such nominee(s).
(2) Approval of the amendment to the the Company's 1993 Stock Option and
Incentive Plan.
___
/___/ FOR approval of the amendment.
___
/___/ AGAINST approval of the amendment.
___
/___/ ABSTAIN.
(3) In their discretion on such other matters as may
properly come before the meeting.
(Please sign on reverse side)
[BACK SIDE OF PROXY CARD]
(Continued from other side)
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR“FOR” EACH OF THE ABOVE NAMED NOMINEES FOR DIRECTOR.
Signature(s): ____________________
Date Signed: ____________________
Please sign exactlyDIRECTOR AND “FOR” PROPOSALS 2 and 3.
(Continued and to be marked, dated and signed on reverse side)
| |
| TRINITY INDUSTRIES, INC. |
| 59 Maiden Lane |
| New York, NY 10038 |
THE DIRECTORS RECOMMEND VOTING “FOR” EACH OF THE NOMINEES FOR DIRECTOR AND “FOR” PROPOSALS 2 and 3.
| |
| (1) | Election of nine (9) Directors: |
| | | | | | | | | | |
| o | | FOR all nomineeslisted below | | o | | WITHHOLD AUTHORITYto vote for all nominees listed below. | | o | | EXCEPTIONS |
Nominees: John L. Adams, Rhys J. Best, David W. Biegler, Ronald J. Gafford, Ronald W. Haddock, Jess T. Hay, Adrian Lajous, Diana S. Natalicio and Timothy R. Wallace.
(INSTRUCTION: To withhold authority to vote for any individual nominee, mark the “Exceptions” box and strike a line through that nominee’s name.)
| |
| (2) | To approve an amendment to the Certificate of Incorporation to increase the authorized shares of Common Stock from 100,000,000 to 200,000,000. |
oFORoAGAINSToABSTAIN
(3) To approve ratification of Ernst & Young LLP as your name appears on the
proxy. If your stock is jointly owned, both parties
must sign. Fiduciaries and representatives should so
indicate when signing, and when more than one is
named, a majority should sign. If signed by a
corporation, its seal should be affixed.
Independent Registered Public Accounting Firm for fiscal year ending December 31, 2007.
oFORoAGAINSToABSTAIN
| |
| (4) | In their discretion on such other matters as may properly come before the Meeting. |
| | | | |
| | Change of Address Mark Here o |
| | Please sign exactly as your name appears on the proxy. If your stock is jointly owned, both parties must sign. Fiduciaries and representatives should so indicate when signing, and when more than one is named, a majority should sign. If signed by a corporation, its seal should be affixed. |
|
| | DATED: | | |
| | | | |
|
| | |
| | Signature |
| | |
| | Signature |
| | VOTES MUST BE INDICATED o
(x) in Black or Blue ink |
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED.
