Compensation Committee Interlocks and Insider Participation
Craig J. Duchossois, Ronald J.
Messrs. Echols, Gafford, Ronald W. Haddock, Jess T.and Hay and Diana S.Dr. 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 2006.2008.
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 through May 3, 2009 or Mr. Best commencing May 4, 2009, or the non-management directors as a group, any Board committee or any chair of any such committee. To communicate with the Board of Directors, any individual director or any group or committee of directors, correspondence should be addressed to the Board of Directors or any such individual director or group or committee of directors by either name or title. All such correspondence should be sent “c/“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.
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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 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, Leldon E. Echols, Ronald J. Gafford, Ronald W. Haddock, Jess T. Hay, Adrian Lajous, Diana S. Natalicio, and 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 Board 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 President, and Mr. Adams served as a non-executive Vice Chairman within the last three years.years preceding this proxy statement. Therefore, the Board of Directors has concluded that neither personMr. Wallace nor Mr. Adams 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.
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Nominees
Timothy R. Wallace, 53.55. Director since 1992. Mr. Wallace ishas been Chairman, President and Chief Executive Officer, and President of the Company. Mr. Wallace is a director of MoneyGram International, Inc. which is a payment services and money transfer business.Company since 1999.
John L. Adams, 62.64. 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. Since 2007, he has served on several corporate and not-for- profit boards. Mr. Adams is the non-executive Chairman of the Board and a director of Group 1 Automotive, Inc., a public company engaged in the ownership and operation of automotive dealerships and collision centers,centers. He also serves on the Audit Committee and American Express Bank, Ltd.is a director of Dr Pepper Snapple Group, Inc., a wholly-owned subsidiarycompany that is a leading brand owner, bottler, and distributor of American Express Company.non-alcoholic beverages in the U.S., Canada, and Mexico.
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Rhys J. Best, 60.62. Director since 2005. MemberChairman of the Finance and Risk Management Committee and member of the Corporate Governance and Directors Nominating Committee and the Audit Committee. Mr. Best began serving duringserved, beginning in 1999, as Chairman, President, and CEO and is a director of Lone Star Technologies, Inc., a company engaged in oil field products,producing and marketing casing, tubing, products for heat-recovery applications, thermal heating servicesline pipe, and couplings supplier.for the oil and gas, industrial, automotive, and power generation industries. He iswas also a director of, and remained in these positions with, Lone Star Technologies, Inc., until its acquisition by United States Steel Corporation in June 2007. Mr. Best has been engaged in private investments since 2007. He is also Chairman of Crosstex Energy, L.P., an energy company engaged in the gathering, transmission, treating, processing, and marketing of natural gas and natural gas liquids. He is a member of the board of directors of Cabot Oil & Gas Corporation, a leading North American oil and gas exploration and production company; Austin Industries, Inc., a civil, commercial, and industrial construction company; and McJunkin Red Man Corporation, a company engaged in the distribution of industrial PVF products, serving the refining, chemical, petrochemical, gas distribution and transmission, oil and gas exploration and production, pharmaceutical, and power generation industries.
David W. Biegler, 60.62. Director since 1992. Chairman of the Audit Committee and member 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 the natural gas transportation and processing.processing industry. 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.company; and Guaranty Financial Group Inc., a company conducting consumer and business banking activities.
Leldon E. Echols, 53. Director since 2007. Member of the Audit Committee and the Human Resources Committee. He served as Executive Vice President and Chief Financial Officer of Centex Corporation (“Centex”) from 2000 — 2006 when he retired. Prior to joining Centex, he spent 22 years with Arthur Andersen LLP and served as Managing Partner, Audit Practice for the North Texas, Colorado, and Oklahoma Region from 1997 — 2000. Mr. Echols is a certified public accountant and a member of the American Institute of Certified Public Accountants and the Texas Society of CPAs. Mr. Echols has been engaged in private investments since 2006. He is a member of the Board of Directors and Chairman of the Audit Committee of Crosstex Energy, L.P., an energy company engaged in the gathering, transmission, treating, processing and marketing of natural gas and natural gas liquids and Crosstex Energy, Inc., a company holding partnership interests of Crosstex Energy, L.P. He is also a member of the Board of Directors of Holly Corporation, an independent petroleum refiner; Roofing Supply Group Holdings, Inc., a company engaged in the distribution of roofing and related construction materials; and Colemont Corporation, a company engaged in insurance and reinsurance brokerage and related services.
Ronald J. Gafford, 57.59. Director since 1999. ChairmanMember of the Human Resources Committee and a member of the Corporate Governance and Directors Nominating Committee. Mr. Gafford ishas been President and Chief Executive Officer of Austin Industries, Inc., a civil, commercial, and industrial construction company. He is a director of Chaparral Steel Company.company, since 2001 and Chairman since 2008.
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Ronald W. Haddock, 66.68. Director since 2005. MemberChairman of the Human Resources Committee and member of the Audit Committee and the Human Resources Committee. Mr. Haddock has beenwas Chief Executive Officer of FINA, Inc. from December 1989 until his retirement in July 2000. He was also the Executive Chairman, CEO, and director of Prisma Energy International, a power generation, distribution, and a natural gas distribution company sincefrom August 2003.2003 until its acquisition by Ashmore Energy International Limited. He was Presidentcurrently serves as Chairman of the Board of AEI Services, LLC, an international power generator and CEO of FINA,distributor and natural gas distribution company; Rubicon Offshore International, an offshore oil storage and production well services company; and Safety-Kleen Systems, Inc. from January, 1989 until his retirement in July 2000. He, an environmental services, oil recycling, and refining company; and is a director of Alon USA Energy, USA, Safety-Kleen, Inc., a petroleum refining and marketing company, and Adea Solutions, Inc., a high-tech personnel and consulting firm.
Jess T. Hay, 76.78. Director since 1965. Chairman of the FinanceCorporate Governance and Risk ManagementDirectors Nominating Committee and a member of the Human Resources Committee and the Corporate GovernanceFinance and Directors NominatingRisk Management 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. He is also Chairman of the Texas Foundation for Higher Education. Mr. Hay is a director of Viad Corp. which is a convention and event services, exhibit design and construction, and travel and recreational services company, and a director of MoneyGram International, Inc. which is a payment services and money transfer business.
Adrian Lajous, 63.65. Director since December 2006. Member of the Audit Committee and the Finance and Risk Management Committee. Mr. Lajous ishas been Senior Energy Advisor, McKinsey & Company, a management consulting firm, and President 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 from1994-1999. Mr. Lajous is Chairman of the Oxford Institute for Energy Studies and is a director of Schlumberger, Ltd., an oilfield services company supplying technology, project management, and information solutions to the oil and gas industry; Ternium, S.A., a company engaged in the production and distribution of semi-finished and finished steel products; and Grupo Petroquímico Beta, a private Mexican chemical company.
Diana S. Natalicio, 67.68. Director since 1996. Member of the Human Resources Committee. Dr. Natalicio ishas been President of the University of Texas at El Paso.Paso since 1988. Dr. Natalicio was appointed by President George H.W. Bush to the Commission on Educational Excellence for Hispanic Americans and by President William J. Clinton to the National Science Board and to the President’s Committee on the Arts and Humanities.
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| The Board of Directors recommends that you voteFOR all of the Nominees. |
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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, theThe Board of Directors adopted resolutions setting forth the Increase in Authorized Capital Amendment in the form of an amendment to Article IVrecommends that you vote FOR all of the Company’s Certificate of Incorporation, and has determined the Increase in Authorized Capital Amendment to be advisable and in the Company’s best interest.Nominees.
The following is the relevant text of Article IV of the Company’s Certificate of Incorporation, as proposed to be amended, with additions indicated with italicized text and deletions indicated by strike-through text:
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| “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 from 100 million shares to 200 million shares. The additional authorized shares may be used by the Company for business and financial purposes as determined by the Board of Directors from time to time to 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 additional authorized shares could be used in connection with such a transaction. Other possible business and financial uses for the additional shares of common stock include, without limitation, raising capital through the sale of common stock; acquiring other companies, businesses, products or services in exchange for shares of common stock; attracting and retaining employees by the issuance of additional securities under the Company’s various equity compensation plans; and other transactions and corporate purposes that the Board of Directors deems to be in the Company’s best interest. The additional authorized shares would enable the Company to 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 Company’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 we 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 Convertible Subordinated Notes, the Company has no immediate plans, understandings, agreements or commitments to issue additional shares of common stock for any purposes.
Upon issuance, the additional shares of authorized common stock would have rights identical to the shares of common stock currently outstanding. Approval of the Increase in Authorized Capital Amendment would not have any immediate dilutive effect on the proportionate voting power or other rights of existing stockholders. Because the Company’s Certificate of Incorporation does not confer to the Company’s stockholders preemptive rights with respect to common stock, should the Board of Directors elect to issue
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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 Company’s intention with this proposal. For example, in the event of a hostile attempt to take control of the Company, 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 other 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 is not aware of any attempt to take 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 Authorized Capital Amendment is approved by the stockholders, it will become effective upon filing of a Certificate of Amendment to the Company’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.
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| The Board of Directors recommends that you voteFOR the Increase in Authorized Capital Amendment to the Company’s Certificate of Incorporation. |
PROPOSAL 32 — RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP
The Audit Committee has appointed Ernst & Young LLP (“Ernst & Young”) as independent registered public accounting firm of the Company for the fiscal year ending December 31, 2007,2009, subject to ratification of stockholders.
The Company has been advised by Ernst & Young that the firm has no relationship with the Company or its subsidiaries other than that arising from the firm’s engagement as auditors, tax advisors, and consultants.
Ernst & Young, or a predecessor of that firm, has been the auditors of the accounts of the Company each year since 1958. The Company has also been advised that representatives of Ernst & Young will be present at the Annual Meeting where they will have an opportunity to make a statement if they desire to do so and will be available to respond to appropriate questions.
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Fees of Independent Registered Public Accounting Firm for Fiscal Years 20062008 and 20052007
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, 20062008 and December 31, 2005,2007, 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 | | | — | | | | — | |
| | | | | | | | | |
| | | 2008 | | | 2007 | |
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| Audit fees | | $ | 2,613,400 | | | $ | 2,850,750 | |
| Audit-related fees | | | 50,760 | | | | 53,800 | |
| Tax fees | | | 355,544 | | | | 119,286 | |
| All other fees | | | — | | | | — | |
Services rendered by Ernst & Young in connection with fees presented above were as follows:
Audit Fees
In fiscal years 20062008 and 2005,2007, 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
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with the annual audit of the Company’s financial statements, the quarterly reviews of the financial statements included in the Company’sForm 10-Q filings, statutory audits in Mexico and Europe, and consents included in other SEC filings.
Audit-Related Fees
Audit-related fees include fees for accounting consultations, employee benefit plan audits, use of online research tools, and Sarbanes-Oxley consultations.certain compliance audits.
Tax Fees
Tax fees in fiscal years 20062008 and 20052007 include fees for tax compliance, tax advice, tax planning, and tax preparation of expatriate returns.return review.
All Other Fees
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 policy for the pre-approval of services provided by Ernst & Young. In addition, the Audit Committee also may pre-approve particular services on acase-by-case basis. The Audit Committee has delegated pre-approval authority to the Chair of the Audit Committee. Pursuant to this delegation, the Chair must report any pre-approval decision by him to the Audit Committee at its first meeting after the pre-approval was obtained. Under 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 threefour 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 Chartercharter is available free of charge on our website atwww.trin.netunder the heading “Investor Relations/Governance” or by writing to Trinity Industries, Inc., 2525 Stemmons Freeway, Dallas, Texas 75207c/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 financial reporting process. The independent auditors are responsible for performing an independent audit of the Company’s consolidated financial
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statements in accordance with auditing standards generally accepted in the United States of America and issuing a report thereon. As provided in our Charter,charter, our responsibilities include the monitoring and oversight of these processes.
Consistent with our Chartercharter 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, 20062008 were prepared in accordance with U.S. generally accepted accounting principles. We reviewed and discussed the consolidated financial statements with management and the independent auditors and discussed with the independent auditors matters required to be discussed by Statement on Auditing Standards No. 61, as amended.
The Company’s independent auditors have also provided to us the written disclosures and the letter required by Independence Standardsapplicable requirements of The Public Company Accounting Oversight Board Standard No. 1Independence Discussionsregarding the independent auditor’s communications with the Audit Committees,Committee, and we discussed with the independent auditors that firm’s independence. We also considered whether the provision of non-audit services is compatible with maintaining the independent auditors’ independence and concluded that such services have not impaired the auditors’ independence.
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Based upon our reviews and discussions with management and the independent auditors and our review of the representation of management and the report of the independent auditors to the Audit Committee, we recommended that the Board of Directors include the audited consolidated financial statements in the Company’s Annual Report onForm 10-K for the year ended December 31, 20062008 filed with the Securities and Exchange Commission.
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| Audit Committee |
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| Clifford J. Grum,Chairman |
| David W. Biegler |
| Ronald W. Haddock |
Audit Committee
Mr.
David W. Biegler,Chairman
Rhys J. Best
Leldon E. Echols
Ronald W. Haddock
Adrian Lajous was appointed to the Audit committee on March 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 Report on Form 10-K.
The Board of Directors recommends that you voteFOR the ratification of the selectionappointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2007.2009.
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
The Board of Directors has delegated to the 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 HR 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 competitive market survey data. The HR Committee generally strives for compensation for the named executive officers to be between the 50th and 75th percentile of compensation paid to executives in similar positions with companies comprising a compensation peer group.
The CEO, the CFO and the VP of Human Resources work with the HR Committee and the compensation consultants of the HR Committee 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. The CEO makes recommendations to the HR Committee on compensation for each of the 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 limited 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.
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| Objectives of our Compensation Program |
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
Overview
The Company’s long term strategic corporate vision is to become a premier multi-industry growth company that provides superior value to our stockholders. The Company’s executive compensation program is designed to facilitate and motivate its executives to conduct an orderly transition from a highly successful diversified industrial cyclical company into a premier multi-industry growth company.
Objectives of our Compensation Program
The HR Committee’s primary objectives for the Company’s executive compensation program are to:
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| | • | attract, motivate, and retain the key executives needed to enhance the profitability of the Company; |
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| | • | encourage the highest level of performance and accountability for the overall success of the Company; |
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| | • | provide an incentive for long-termlong term value creation for our stockholders; |
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| | • | align compensation with short-termshort term and long-termlong term business objectives and strategies, financial targets, and the core values of the Company; and |
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| | • | align compensation as appropriate with the cyclical nature of the Company’s businesses. |
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| Design of our Compensation Program |
Design of our Compensation Program
Our compensation program is intended to reinforce the importance of performance and accountability at both the individual and corporate achievement levels. Our compensation program is designed to:
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| | • | provide a reasonable balance between short-termshort term and long-termlong term compensation; |
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| | • | provide a reasonable mix of fixed and incentive-based compensation; |
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| | • | retain key executives through the cycles of our businesses; |
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| | • | be competitive with our compensation peercomparator company group; and |
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| | • | use equity-based awards, stock ownership guidelines, and annual incentives that are linked to stockholder value.value; and |
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| • | be transparent and easy to understand. |
Components of Compensation
The executive compensation program has four key components:
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| • | base salary; |
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| • | an executive perquisites payment; |
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| • | annual incentive plans designed to focus on short term performance; and |
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| • | long term incentive plans designed to encourage executives to promote the Company’s position as a premier multi-industry growth company. |
Business Plan and Operational Performance Linkage
Each year management prepares a strategic review of the Company’s businesses as well as the Company as a whole. The Company’s strategies are linked to the corporate vision and provide a multi-year projection of financial results, including fully diluted earnings per share (referred to as “EPS”) and return on equity (referred to as “ROE”). This business plan is reviewed and discussed annually with the Board of Directors. Following its discussions with
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the Board on the business plan, management prepares operational plans and budgets that provide specific performance measurements and goals required to achieve the strategies for the next year. The Company’s budgets are reviewed and approved annually by the Board of Directors.
Executive incentive target goals are linked to the Company’s business plans and budget. Threshold, target, and maximum level performance goals are established for the performance-based long term incentive compensation plan. These performance-based long term incentive compensation financial goals are a means of encouraging management to focus on initiatives that maximize stockholder return over the long term. The HR Committee hires nationally recognizeduses the Board-approved annual budget as a guideline when establishing the financial performance goals for the annual incentive compensation consultantsplan. These annual incentive compensation financial goals are used to assist inencourage management to focus resources on key short term earnings objectives.
The Company notes that the developmentperformance goals are part of the Company’s incentive program and do not correspond to any financial guidance that the Company has provided to the investment community for 2009 or that the Company will provide for future years and should not be considered as statements of the Company’s expectations or estimates.
The Named Executive Officers
The Board of Directors has delegated to the HR Committee oversight of our executive compensation program.
In connection with establishing The HR Committee reviews and recommends to the independent directors the compensation for 2005,the CEO. The independent directors approve the CEO’s compensation. The HR Committee reviews and approves the compensation of the CFO and the other named executive officers. The five named executive officers for 2008 were:
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| • | Timothy R. Wallace, Chairman, Chief Executive Officer, and President |
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| • | William A. McWhirter, Senior Vice President and Chief Financial Officer |
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| • | Mark W. Stiles, Senior Vice President and Group President |
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| • | D. Stephen Menzies, Senior Vice President and Group President |
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| • | S. Theis Rice, Vice President and Chief Legal Officer |
Competitive Analysis through Benchmarking
One of the HR Committee’s primary objectives related to the executive compensation program is to “attract, motivate, and retain” the key executives needed to enhance the profitability of the Company. To this end, the HR Committee hired a nationally recognizeddirects its compensation consultant to conductperform a total compensation study that comparedand include benchmarking information on each of the Company’snamed executive officers. During 2007, the HR Committee retained Longnecker & Associates (referred to as “L&A”) as its compensation consultant to provide guidance for setting 2008 base salaries, annual incentive compensation, and long term incentive compensation for executives.
The benchmarks for the 50th percentile (market median) and 75th percentile were a compensation peer group.combination of comparator company proxy statement data (referred to as “comparator companies”) and market survey data. The compensation peer group was comprised of 25 manufacturing and serviceHR Committee selected comparator companies of comparable sizeto benchmark based on revenue, with executives in positions comparable in breadth, complexity, scope of responsibility and whocriteria that included:
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| • | industry (manufacturing and industrial); |
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| • | size (based on revenues, assets, market capitalization, and total number of employees); |
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| • | competitiveness (companies that potentially compete with the Company for executive talent); and |
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| • | comparable executive positions (companies with executive positions with similar breadth, complexity, and scope of responsibility). |
The comparator companies for executive talent. The compensation peer group consistedeach of the following 25named executive officers for their 2008 compensation is shown in Table 1 and represent companies with medianwhose revenues are within a range of +50% and -50% of Trinity’s 2007 revenue of $2.4 billion: American$3.8 billion or assets with values of +50% and -50% of the asset valuation of Trinity. Additionally, for its proxy analysis, L&A included only comparator companies that filed in the new proxy format to keep the analysis as consistent as possible.
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Table 1 — Comparator Companies Used for Proxy Statement Data by Named Executive Officer
| | | | | | | | | | | | | | | | |
| Position Benchmarked | | | CEO | | | CFO/SVP | | | EVP/SVP | | | EVP/SVP | | | VP/CLO |
| Comparator Companies | | | Timothy R. Wallace | | | William A. McWhirter | | | Mark W. Stiles | | | D. Stephen Menzies | | | S. Theis Rice |
| AMETEK, Inc. | | | X | | | X | | | X | | | X | | | |
| Briggs & Stratton Corporation | | | X | | | X | | | | | | | | | |
| Carlisle Companies Incorporated | | | X | | | X | | | X | | | X | | | |
| Carpenter Technology Corporation | | | X | | | X | | | X | | | X | | | X |
| Chicago Bridge & Iron Company N.V. | | | X | | | X | | | X | | | X | | | |
| Crane Co. | | | X | | | X | | | X | | | X | | | X |
| Flowserve Corporation | | | X | | | X | | | X | | | X | | | X |
| Harsco Corporation | | | X | | | X | | | X | | | X | | | X |
| Kennametal Inc. | | | X | | | X | | | X | | | X | | | |
| Leggett & Platt, Incorporated | | | X | | | X | | | X | | | X | | | |
| Lennox International Inc. | | | X | | | X | | | X | | | X | | | |
| Roper Industries, Inc. | | | X | | | X | | | X | | | X | | | |
| Teleflex Incorporated | | | X | | | X | | | X | | | X | | | |
| Terex Corporation | | | X | | | X | | | X | | | X | | | X |
| The Manitowoc Company | | | X | | | X | | | X | | | X | | | |
| The Stanley Works | | | X | | | X | | | X | | | X | | | |
| The Timken Company | | | X | | | X | | | X | | | X | | | |
| Worthington Industries, Inc. | | | X | | | X | | | | | | | | | |
Total Comparator Companies | | | 18 | | | 18 | | | 16 | | | 16 | | | 5 |
| | | | | | | | | | | | | | | | |
As noted in Table 1, Mr. Wallace and Mr. McWhirter were benchmarked against all 18 comparator companies. Mr. Stiles and Mr. Menzies were benchmarked against 16 of the 18 comparator companies and were not benchmarked against Briggs & Stratton Corporation or Worthington Industries, Inc. because they did not report comparable operations positions. Mr. Stiles and Mr. Menzies were benchmarked against 23 companies, seven of which were not included in our primary comparator group (American Standard Companies, 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, FlowServeEaton Corporation, FMC Corporation, GATX Corporation, Hillenbrand Industries, Inc., Illinois Tool Works, Inc.,Ingersoll-Rand Company Limited and 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.Corporation) to capture and Vulcan Materials Company.include directly applicable industry specific companies for their lines of business. Mr. Rice’s position was benchmarked against five comparator companies because the position of Chief Legal Officer was not included in the named executive officer disclosure of the other comparator companies.
In preparationaddition to the comparator company proxy statement data, comparator company comparison data for base salary, cash annual incentives and long term incentives was obtained from a combination of the 2006 executive compensation review, the HR Committee adjusted the 2005 compensation study results by 4% to reflect market changes after its compensation consultant advised there had been no significant changes in executive compensation trends andfollowing published survey sources indicated that— Economic Research Institute, 2007 ERI Executive Compensation Assessor (“ERI”); Watson Wyatt, 2007/2008 Top Management Compensation — Industry Report (“Watson Wyatt”); William Mercer, 2007 Executive Compensation Survey (“Mercer”) and Hewitt, TCM Online Executive, United States 2007 Survey (“Hewitt TCM”). All the totalnamed executive officers were compared to the four surveys. Base salary adjustmentsdata from the ERI survey reflected the Industrial Machinery and Equipment industry using revenue ranges based on the specific named executive officer’s responsibility and corporate or business unit revenue. Data for manufacturingall components of pay from the Watson Wyatt Survey reflected the Durable Goods Manufacturing industry for companies increased by 3.8%. Thiswith revenues similar to the Company. The Mercer survey cash compensation data was used as a reference point in establishing executive compensationrepresented the Manufacturing industry with companies with revenues ranging from $2 billion to $5 billion. Finally, the Hewitt TCM survey data for 2006.all
In establishing the compensation 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 possible payments in the event of a change in control. 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.
14
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components of pay reflected revenue ranges based on corporate revenue ($1.9 billion to $5.7 billion) or business unit revenue as applicable.
Based on the 2007/2008 WorldatWork Total Salary Increase Budget Survey, all published survey and proxy data was time-adjusted to January 1, 2008 using the survey recommended annual adjustment factor of 4.0%.
After determining the most appropriate job match for each published survey and identifying the appropriate proxy company comparator group for each named executive officer position, L&A conducted its analysis for each component of pay. L&A benchmarked the market using a combination of comparator company proxy data and published industry survey data. L&A then met with management, including the CEO, to obtain its views on the similarities and differences in responsibilities between the Trinity positions and those in the comparator group that may affect the level of compensation. After this discussion with management and reviewing the data from the comparator groups, L&A provided a competitive market value range recommendation for each executive position. L&A’s recommendations on market value ranges, along with the CEO’s compensation recommendations for each named executive officer other than himself, were presented to the HR Committee.
The following discussion should be read in conjunction with the “Summary Compensation Table” and related tables and narrative disclosure that follows the tables which set forth the compensation of our CEO and the other named executive officers.
Total Target Compensation Overview
The HR Committee bases its consideration of each named executive officer’s compensation on:
| | |
| • | past and expected future performance in respect to specific financial, strategic, and operating objectives; |
|
| • | the scope of each executive’s responsibilities within the Company; |
|
| • | the executive’s value to the Company; and |
|
| • | a combination of competitive market survey data and comparator company proxy data that establishes the market ranges against which compensation is benchmarked. |
The HR Committee realizes that comparator benchmarking requires certain levels of interpretation due to the potential differences in position scope, the complexities associated with executive compensation plans, and the evolution of public company compensation disclosures. The HR Committee used the benchmarking information provided by L&A as a general guideline and retains the right to make adjustments to compensation levels based on what the HR Committee believes is in the best interests of the Company’s stockholders.
The HR Committee generally targets total compensation for the named executive officers to be between the 50th and 75th percentile of compensation paid to executives in similar positions at companies comprised of both the comparator company proxy group and survey data. The HR Committee develops the total compensation amounts using the criteria above and the percentile targets as general guidelines. Total compensation targets may be set closer to the market 50th percentile if named executive officers are in the early stages of their careers or relatively new to their current positions. Total compensation targets may be set closer to the market 75th percentile if named executive officers are seasoned executives with seniority in their roles at the Company or have extensive work experience in similar positions at other companies which the Company has determined provides additional value to the Company.
Based on its review of benchmark and tally sheet information and data, together with input from management, the HR Committee determined that no adjustments were needed for 2008 other than a base pay increase for Mr. Rice who was not a named executive officer in 2007.
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While there is no pre-established policy or target for the allocation between cashshort term and non-cash, short-term and long-term,long term, or fixed and incentive-based compensation, the aggregate results of the Company’s compensation and benefits program for named executive officers have generally reflectsreflected the following although the HR Committee may make variations to meets its objectives:following:
Short-termShort term compensation versus Long-term Compensation.long term compensation The HR Committee has established through practice that an executive’s maximum total potential short-term
A named executive officer’s 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:cash and consists of three primary components:
| | |
| | • | base salaries and executive perquisites typically comprise 15% to 25% of totalsalary; |
|
| • | annual incentive compensation; and |
| |
| | • | annual incentive compensation that ranges from 30% to 40% of total compensation.an executive perquisite payment. |
Long-term
A named executive officer’s short term compensation is typically 35%(the sum of the short term components listed above) generally falls within a range of 40% to 55%60% of totalthe aggregate of short term compensation and is composedlong term compensation described below.
A named executive officer’s long term compensation consists of three primary components:
| | |
| | • | retirement benefits; |
| |
| | • | deferred compensation; and |
| |
| | • | long-termannual long term incentive compensation that is typically paid with equity awards. |
A named executive officer’s long term compensation (the sum of the long term components listed above) generally falls within a range of 40% to 60% of the aggregate of long term compensation and short term compensation described above.
Fixed versus incentive-based compensation.compensation Incentive-based
The Company’s objectives include encouraging the highest level of performance and accountability for the overall success of the Company and providing an incentive for long term value creation for our stockholders. The incentive-based compensation is compensation thatcomponent is based on achievement of measurable goals or has vesting requirements that may or may not be achieved. The named executive officers’officer’s incentive-based compensation includes the following components:
| | |
| | • | annual incentives typically paid in cash; and |
| |
| | • | long-termlong term incentives typically paid through equity awards. |
For the
Incentive-based target compensation is within a range of 60% to 80% of a named executive officers, incentive-based compensation typically ranges from 60% to 70% ofofficer’s total target compensation. The percentpercentage of compensation that is incentive-based increases as an executive’sa named executive officer’s scope of responsibilities increases or expands. The CEOincreases. As Chairman, Chief Executive Officer, and President of the Company, Mr. Wallace has a unique and greater set of responsibilities as compared to the other named executive officers, including having ultimate responsibility for the overall success of the Company. As a result, he has the highest percentage of incentive-based compensation.
Elements of Compensation
Set forth below are the elements of compensation, how these elements were applied to each named executive officer, and the analysis of why such amounts were paid or set.
Base Salary
Base salary is intended to provide a consistent level of pay that appropriately and fairly compensates the executive for the scope of responsibility for the position and enables the Company to achieve its objectives of attracting, motivating, and retaining key executives. The HR Committee targets the 50th percentile of the market (the market median) as a starting point for discussions pertaining to an executive’s base salary. After evaluating the
16
benchmark data, the CEO discusses with the HR Committee his evaluation of each named executive officer’s performance for the past year; specific achievements he believes should be highlighted; changes in scope or complexity of responsibility that have occurred or will occur in the next year; operating results; organizational improvements; expected future performance; and relative pay equity among the named executive officers.
Benchmarking Analysis
For each named executive officer, L&A determined an overall 50th percentile (market median) and 75th percentile by equally weighting the data from the relevant data sources and proxy statement data from the comparator companies. The data from published surveys and proxy statements were averaged to arrive at an overall benchmark for base pay. The base salary of each named executive officer for 2008 as compared to the percentage above or below the 50th and 75th percentiles is set forth in Table 2.
Table 2 — Base Salary Benchmarking
| | | | | | | | | | | | | |
| Named Executive Officer | | Base Salary | | | 50th Percentile(1) | | | 75th Percentile(1) | |
| Timothy R. Wallace | | $ | 950,000 | | | | 3% above | | | | 8% below | |
| | | | | | | | | | | | | |
| William A. McWhirter | | $ | 425,000 | | | | 2% above | | | | 12% below | |
| | | | | | | | | | | | | |
| Mark W. Stiles | | $ | 520,000 | | | | 20% above | | | | 1% below | |
| | | | | | | | | | | | | |
| D. Stephen Menzies | | $ | 520,000 | | | | 18% above | | | | 2% below | |
| | | | | | | | | | | | | |
| S. Theis Rice | | $ | 365,000 | | | | 9% above | | | | 7% below | |
| | | | | | | | | | | | | |
| |
| (1) | ElementsIndicates the position of Compensation |
| |
| Base Salarythe Company’s 2008 base salary as compared to the market 50th and 75th percentiles using the following formulas: The Company 2008 base salary dollar amount divided by 2008 market 50th percentile dollar amount and the Company 2008 base salary dollar amount divided by 2008 market 75th percentile dollar amount. |
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.
Base Salary Results
The base salaries for the last fiscal year2008 for the named executive officers can be found in the “Summary Compensation Table.” The base salary of eachall of the named executive officers iswas within the compensation range established for each position, exceptposition. The 2008 base salaries for Messrs. Wallace, McWhirter, Stiles and Menzies (named executive officers in 2007 and 2008) were not increased from their applicable base salaries at their request. Mr. Stiles dueWallace’s base salary has remained the same since 2006 at his request which was approved by the independent directors. Mr. Rice’s base salary was increased by 4.3% effective January 2008 to recognize his performance. Mr. Rice was not a named executive officer in 2007.
Executive Perquisite Allowance
The Executive Perquisite Allowance replaces traditional benefits for executives such as country, health, dinner, luncheon or airport club dues, and fees and expenses incurred in financial planning and income tax preparation. Currently the Executive Perquisite Allowance is 10% of base salary for the named executive officers. The level of perquisites is tied to the difficulty associated with obtaining survey data that fully reflectedCompany’s earnings for the complexityprevious year. The HR Committee can modify the percentage based on the Company’s performance for the previous year or any other circumstance. Each named executive officer is required to use $6,000 of the businesses that he oversees. The base salaryamount received under the Executive Perquisite Allowance to maintain a four-door sedan, including insurance and other maintenance, and to forego reimbursement for the first 10,000 business miles annually. In 2008, the Executive Perquisite Allowance did not reimburse any named executive officer for mileage in excess of 10,000 miles.
Additional information on the value of perquisites offered to each named executive officer in 2008 can be found in the footnotes and narrative disclosure pertaining to the “Summary Compensation Table.”
Other Compensation
Mr. Menzies was increased as of May 15, 2006Menzies’s commuting expenses in 2008 and 2009 are subject to compensatereimbursement by the Company up to $50,000 per year and a gross up for applicable federal taxes. After 2009, the Company will not provide any
17
reimbursement to Mr. Menzies for his promotioncommuting expenses. Mr. Menzies’s 2007 commuting expenses of $41,276 were grossed up by $23,674 for applicable taxes. Mr. Menzies’s 2008 commuting expenses of $42,579 were grossed up by $24,422 for applicable taxes.
Annual Incentive Compensation
Our Annual Incentive Program (referred to Group Presidentas “AIP”) is an integral component of Trinity’s rail businesses.
The base salary for Mr. Wallace was not changed for 2007. The HR Committee approved base salariesour compensation program. It is designed to link and reinforce our executive decision-making and performance with the annual goals of the Company as well as ensure the highest level of accountability for the otheroverall success of the Company. Since annual incentive compensation (referred to as “AIC”) comprised between 35% and 40% of a named executive officersofficer’s total target compensation package for 2007. The base salaries2008, this portion of Mr. Stiles and Mr. Menziesour compensation program provides significant motivation 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 named executive officers is withinto achieve the compensation range established for each position, except for Mr. Graham due toperformance goals pre-established by the significant growth we have experienced in the business that he leads.HR Committee.
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| |
| Annual Incentive Compensation |
Annual incentive targets
AIC levels 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 statedexpressed as a percentage of each executive’s base salary. Annual incentive compensationThe Company establishes AIC threshold, target, and maximum levels for each named executive officer. AIC is normally paid out in cash because it is an award that recognizes current performance.
Due
Benchmarking Annual Incentive Compensation
AIC payouts are tied to the highly cyclical natureperformance of our businesses, the Company as well as an individual’s performance. To determine competitive market benchmarks for AIC targets, L&A used published survey data from the Wyatt, Mercer, and Hewitt TCM surveys. Based on the benchmark data, the AIC target levels for Messrs. Wallace, McWhirter, Stiles and Menzies fell below the 50th percentile. The AIC target level for Mr. Rice fell between the 50th and 75th percentile. The AIC target levels for each named executive officer for 2008 as compared to the percentage above or below the 50th and 75th percentiles is set forth in Table 3.
Table 3 — Annual Incentive Compensation Targets for Named Executive Officers
| | | | | | | | | | | | | | | |
| | | AIC Target
| | | | | | | | | |
| Named Executive Officer | | | (% of Base Salary) | | | | 50th Percentile(1) | | | | 75th Percentile(1) | |
| Timothy R. Wallace | | | | 90 | % | | | | 17% below | | | | | 50% below | |
| | | | | | | | | | | | | | | |
| William A. McWhirter | | | | 60 | % | | | | 16% below | | | | | 45% below | |
| | | | | | | | | | | | | | | |
| Mark W. Stiles | | | | 60 | % | | | | 8% below | | | | | 43% below | |
| | | | | | | | | | | | | | | |
| D. Stephen Menzies | | | | 60 | % | | | | 10% below | | | | | 43% below | |
| | | | | | | | | | | | | | | |
| S. Theis Rice | | | | 50 | % | | | | 11% above | | | | | 29% below | |
| | | | | | | | | | | | | | | |
| |
| (1) | Indicates the position of the Company’s 2008 AIC target dollar value as compared to the market 50th and 75th percentiles using the following formulas: The Company’s 2008 AIC target dollar value divided by 2008 market 50th percentile AIC target dollar value and the Company’s 2008 AIC target dollar value divided by 2008 market 75th percentile AIC target dollar value. |
Establishing Annual Incentive Payout Levels
The HR Committee establishes performance payout levels for the components of the AIC consisting of threshold, target, maximum, and Exceptional Performance Incentive Program (“EPIP”). EPIP is an amount that could be earned by the named executive officers above their normal maximum. EPIP is used to focus management on maximizing improvement of EPS. A named executive officer will not receive any AIC until the threshold performance goal is met or surpassed. The actual amount of AIC awarded is commensurate with the financial performance achievements and is prorated between the threshold level and EPIP level.
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, theAIP. The HR Committee may elect to provide the named executive officers and other select key executives with the opportunity to earn additional incentive incomeAIC for achievement of measurable Company-based financial results beyond the normal cap placed on the basic annual incentiveAIC payout. This additional component of the annual 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 planAIP may contain elements designed to focus management on other performance criteria.
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For 2006, the maximum annual incentive compensation payout including EPIP was 246% of the CEO’s base salary as established by the Board and 166% of base salary for each of the other named executive officers as established by the HR 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 year. The table below shows the percent allocated to each of the financial measurements for the CEO and named executive officers. The allocations are more heavily weighted towards current year profitability to better reflect the growing earnings for the Company during this cyclical upswing. The HR Committee allocates a lesser portion ofestablished the incentive to return metrics to ensure that management focuses onAIC target levels and AIC maximum levels after considering the proper allocation of capital within the Company and its various 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, thebenchmark data provided by L&A. The HR Committee reviews and approves annual incentive awards. The Company retains the exclusive right to modify the level of participation underfor the Program for significant changes in job responsibilities and reduceAIP if an executive’s incentive compensationresponsibilities change significantly and to reduce a named executive officer’s AIC on a discretionary basis for failurefailing to meet normal job performance expectations.
Setting 2008 Annual Incentive Compensation Performance Goals
The HR Committee determined that the best short term performance metric for the Company’s AIP was EPS. The EPS goals were set above the goals established for 2007 by 5.3% at threshold, 8.0% at target, and 5.9% at maximum based on expected improvements from 2007. The range between threshold and maximum performance was recommended by management to the annual incentiveHR Committee and approved by the HR Committee. At the time the performance goals for 2007 based on specific, measurable improvement fromwere implemented, this performance goal range reflected the appropriate potential challenges and opportunities associated with the Company’s 2006 diluted2008 budget. In addition, to encourage management to stretch for significant earnings per share from continuing operations. improvement, the EPIP level was established at 5.4% above the 2007 EPIP level. Based on the recommendations of the HR Committee, the goals for Mr. Wallace were approved by the independent directors.
The 2008 threshold, target, maximum, and EPIP levels for percentage of salary and performance goals 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.are set forth in Table 4.
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Table 4 — 2008 Annual Incentive Compensation Performance Goals
| | | | | | | | | | | |
| | | Base Salary | | Threshold(1) | | Target(2) | | Maximum(2) | | EPIP |
Financial Measurement:
Company EPS | | | | $3.00 | | $3.38 | | $3.60 | | $3.93 |
| | | | | | | | | | | |
| Timothy R. Wallace | | $950,000 | | $427,500 | | $855,000 | | $1,710,000 | | $2,280,000 |
| | | | | | | | | | | |
| % of base salary earned at each level | | | | 45% | | 90% | | 180% | | 240% |
| | | | | | | | | | | |
| William A. McWhirter | | $425,000 | | $127,500 | | $255,000 | | $510,000 | | $765,000 |
| | | | | | | | | | | |
| % of base salary earned at each level | | | | 30% | | 60% | | 120% | | 180% |
| | | | | | | | | | | |
| Mark W. Stiles | | $520,000 | | $156,000 | | $312,000 | | $624,000 | | $936,000 |
| | | | | | | | | | | |
| % of base salary earned at each level | | | | 30% | | 60% | | 120% | | 180% |
| | | | | | | | | | | |
| D. Stephen Menzies | | $520,000 | | $156,000 | | $312,000 | | $624,000 | | $936,000 |
| | | | | | | | | | | |
| % of base salary earned at each level | | | | 30% | | 60% | | 120% | | 180% |
| | | | | | | | | | | |
| S. Theis Rice | | $365,000 | | $91,250 | | $182,500 | | $319,375 | | $538,375 |
| | | | | | | | | | | |
| % of base salary earned at each level | | | | 25% | | 50% | | 87.5% | | 147.5% |
| | | | | | | | | | | |
| |
| (1) | Long-Term Incentive CompensationThreshold is set at 50% of a named executive officer’s AIC target as a reasonable amount of compensation for achieving the financial goals for threshold. |
|
| (2) | The AIC target and maximum levels are based on benchmark data, as previously discussed. |
Long-term
2008 Financial Results and Payout
The HR Committee reviews and approves AIP awards after the Company’s annual financial results have been audited. For 2008, the AIP target was equal to Company EPS of $3.38 and the AIP maximum was equal to Company EPS of $3.60. The 2008 AIP payout was based on Company EPS of $3.59. Although the Company’s financial performance for 2008 was comparable to the Company’s financial performance in 2007, the AIP awards for 2008 were less than the payouts for the 2007 AIP awards because the 2008 target and maximum goals for the AIP awards were higher than the 2007 target and maximum goals for the AIP awards by 8% and 6%, respectively. Since the calculation of AIC exceeded the target level but was slightly less than the maximum level, the amount of 2008 AIP awards paid to the named executive officers for the Company’s EPS results was prorated accordingly. The HR
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Committee did not exercise any negative discretion in the 2008 incentive payouts. See the “Summary Compensation Table” for the actual payments for 2008.
The Board, upon the recommendation of the HR Committee, determined that commencing with the 2009 AIP, the EPIP performance goal and payout level will be eliminated.
Long Term Incentive Compensation
Long term incentives (referred to as “LTI”) are a key part of our executive compensation package and are provided through the stockholder-approved stock option and incentive plan. Long-term incentiveTheir overarching purpose is to:
| | |
| • | attract, develop, and retain strong management through stock ownership; |
|
| • | align employee interests with those of the Company’s stockholders; |
|
| • | encourage key employees to look beyond the annual planning horizon for ways to improve the Company, strategically position its businesses, and profitably grow earnings; and |
|
| • | assist the Company’s successful transition to a multi-industry growth company from a cyclical industrial company. |
The HR Committee annually establishes a LTI compensation is designedtarget as a percentage of base salary and uses that target to attract, develop and retain strong management through stock ownership, andcompute the total target value of equity that can be granted to encourage key employeesan executive. Due to look beyond the annual planning horizon for ways to improve the Company, strategically position the businesses and profitably grow the earnings; thereby aligningcyclical nature of the Company’s employees’ interests withbusinesses, the interestsHR Committee directed management to calculate the value of its stockholders. To meet these objectives we usean executive’s equity grant based on the one-year average stock price.
The Company has a multi-year performance-based LTI program. An executive’s target grant can be composed of three types of long-termlong term incentives: (1) stock options;performance-based restricted stock; (2) time-based restricted stock; and (3) performance-based restricted stock.stock options.
As part
Ratio of the compensation program, the Board establishes a long-term incentive compensation target for the CEO and theRestricted Stock Grant Awards
The HR Committee establishes a long-term incentive compensation targetguidelines for the otherratio that it expects to award through restricted stock grants. The Company’s named executive officers as a percentagecan earn 60% of base salary. For 2006their LTI target compensation in the form of performance-based restricted stock and 2007,40% in the long-termform of time-based restricted stock for 2008 and 2009. During 2010 and 2011, the named executive officers can earn up to 75% of their LTI target compensation in the form of performance-based restricted stock and 25% in the form of time-based restricted stock. Due to the uncertain global economic conditions, the 2012 long term incentive compensation target waslevels for performance-based restricted stock were not set and when established, will be 275%based on a performance period that would qualify for tax deductibility under Internal Revenue Code of the CEO’s base salary and 150% for each of the other named executive officers.1986, as amended (the “Code”) Section 162(m). The performance period will be considered at a future HR Committee meeting.
| | | | | | | | | | | | | | | | |
| | | | Performance-Based
| | | | Time-Based
| | | | | |
| | | | Restricted Stock
| | | | Restricted Stock
| | | | | |
| | | | % of LTI Compensation
| | | | % of LTI Compensation
| | | | | |
| Grant Year | | | Target Level | | | | Target Level | | | | Measurement Period | |
| 2008 | | | | 60 | % | | | | 40 | % | | | | 2006 and 2007 | |
| | | | | | | | | | | | | | | | |
| 2009 | | | | 60 | % | | | | 40 | % | | | | 2006 – 08 | |
| | | | | | | | | | | | | | | | |
| 2010 | | | | 75 | % | | | | 25 | % | | | | 2007 – 09 | |
| | | | | | | | | | | | | | | | |
| 2011 | | | | 75 | % | | | | 25 | % | | | | 2008 – 10 | |
| | | | | | | | | | | | | | | | |
The HR Committee’s practice is to make the awards on the date of the Company’s annual meeting andAnnual Meeting of Stockholders, which is 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.
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Performance-Based LTI Program
During 2006, the Company began to phase in a three-year performance-based restricted stock program to align compensation with our long term business vision, objectives, and strategies. The performance-based program is contingent on the achievement of a three-year performance measurement that is based on cumulative EPS and average ROE.
Each year management prepares amulti-year business plan which provides a projection of financial results, including EPS and ROE. The plan is reviewed annually with the Board of Directors, which in turn influences the establishment of the long term goals and objectives for each of the business units within the Company and for the Company itself.
The HR Committee relies heavily on the Board of Directors approvedmulti-year business plan when establishing the target level performance goals for the performance-based LTI compensation plan. The LTI program is linked to the strategic objectives of the Company. These financial goals are a means of recognizing and compensating management for the ability to identify a sound business plan for the business units and the Company that maximizes stockholder return over the long term. The performance-based LTI compensation threshold level and target level performance goals for all named executive officers and the cumulative Company EPS and average ROE for the specified measurement periods are shown in Table 5.
The Company notes that the performance goals are part of the Company’s incentive program and do not correspond to any financial guidance that the Company has provided to the investment community for 2009 or that the Company will provide for future years and should not be considered as statements of the Company’s expectations or estimates.
Table 5 — Performance-Based LTI Compensation Threshold and Target Levels
Earnings Per Share Portion
| | | | | | | | | | | | | | | | | |
Date Target
| | | Performance-Based
| | | Cumulative
| | | EPS LTI
| | | | EPS LTI
| |
| Established | | | LTI Compensation | | | Measurement Period | | | Threshold | | | | Target | |
| January 2006 | | | Grant Awarded in May 2008 | | | Total of 2006 and 2007 | | | $ | 2.67 | | | | $ | 3.82 | |
| |
| January 2006 | | | Grant To Be Awarded in May 2009 | | | Total of 2006, 2007 and 2008 | | | $ | 4.63 | | | | $ | 6.61 | |
| |
| January 2007 | | | Grant To Be Awarded in May 2010 | | | Total of 2007, 2008 and 2009 | | | $ | 7.18 | | | | $ | 10.25 | |
| |
| January 2008 | | | Grant To Be Awarded in May 2011 | | | Total of 2008, 2009 and 2010 | | | $ | 8.66 | | | | $ | 12.37 | |
| |
For 2006,
Return on Equity Portion
| | | | | | | | | | | | | | | |
Date Target
| | | Performance-Based
| | | Cumulative
| | | ROE LTI
| | | ROE LTI
| |
| Established | | | LTI Compensation | | | Measurement Period | | | Threshold | | | Target | |
| January 2006 | | | Grant Awarded in May 2008 | | | Average of 2006 and 2007 | | | 9.04% | | | | 11.30 | % |
| |
| January 2006 | | | Grant To Be Awarded in May 2009 | | | Average of 2006, 2007 and 2008 | | | 9.89% | | | | 12.37 | % |
| |
| January 2007 | | | Grant To Be Awarded in May 2010 | | | Average of 2007, 2008 and 2009 | | | 12.43% | | | | 15.53 | % |
| |
| January 2008 | | | Grant To Be Awarded in May 2011 | | | Average of 2008, 2009 and 2010 | | | 12.96% | | | | 16.20 | % |
| |
If the specified performance goals are achieved, the HR Committee initially allocated 20% of an executive’s long term incentive compensationanticipates paying to be awarded as stock options. As a resulteach of the accounting rule change associated with expensing stock options (SFAS 123R),named executive officers the corresponding amount of performance-based restricted stock. However, for grants made through 2009, the HR Committee reevaluatedmay reduce the issuanceamount of options.the award even if the performance goals are achieved, by exercising its own discretion, and has not limited the circumstances in which it may exercise such negative discretion. Beginning with grants made in 2010, the HR Committee has determined that it will not retain discretion to reduce performance-based awards earned up to the target level.
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Time-Based Restricted Stock Grants
Time-based restricted stock is also an important form of compensation. 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 not 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 considersawards time-based restricted stock to executives as a means for retaining, motivating, and rewarding 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. executive.
For 2006,2008, after a review of the named executive officers’ contributions to the long-termlong term value of the Company and the financial performance of the Company for the prior year and based on Mr. Wallace’s recommendation, the HR Committee awarded within a rangeMessrs. McWhirter, Stiles, and Menzies 13%, 6%, and 19%, respectively, of 14% to 39% of each of the named executive officers’ long-term incentivetheir LTI compensation target as time-based restricted stock. These time-based restricted stock that vests one third each year aftergrants vest in five equal annual installments beginning on May 15th following the first third and fifth years followinganniversary of 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
In January 2008, upon the successful completion of Mr. McWhirter’s firstthird year as the Company’s CFO, the HR Committee made a special award of 22,50015,000 restricted shares. TheThese shares vest on retirement, orthe earlier onof (i) age 65, (ii) when Mr. McWhirter’s age plus years of vested service equal 80, (iii) death, disability or change in control, or (iv) consent of the HR Committee after three years from the date of grant. The HR Committee granted the shares to increase Mr. McWhirter’s equity ownership and to recognize his contributions to the Company during his firstthird year as CFO of the Company.CFO. Additionally, the extended time-vesting represents an economical method for the Company to provide an incentive for retention andMr. McWhirter to remain with the Company as well as to supplement his retirement as Mr. McWhirter is not a participant in the Company’s Supplemental Retirement Plan. Mr. McWhirter is entitled to receive dividends on the restricted stock and to vote the shares during the restricted period.
| |
| • Performance-Based Restricted Stock |
Stock Options
After
On December 10, 2008, the Board of Directors granted stock options to the named executive officers and the other key employees who were previously eligible for the EPIP program which was eliminated for 2009. As a reviewresult of eliminating the future opportunity for the named executive officers and the other key employees to earn short-term cash compensation above the maximum payout level pursuant to the EPIP, the Board of Directors granted stock options that vest on May 15, 2012 or earlier in the event of death, disability, retirement, or change in control and were granted with an exercise price equal to 110% of the Company’s closing stock price on the date of grant, or $16.24 per share. See “Grants of Plan-Based Awards Table” for information on the grants to the named executive officers. Stock options awarded to the named executive officers are also included in the “Summary Compensation Table” under the column headed “Option Awards.” The cost of stock options is amortized in accordance with “Statement of Financial Accounting Standard No. 123RShare-Based Payments” (“SFAS 123R”).
Benchmarking LTI Compensation Targets
For each named executive officer, L&A determined a competitive market LTI value. This value was based on the average of the relevant survey data and proxy statement 50th percentile data. The HR Committee approved the LTI compensation target levels for all of the named executive officers’ contributionsofficers for 2008, except for Mr. Wallace, whose target levels were approved by the independent directors. The LTI compensation target levels were set at 275% of the CEO’s base salary and 150% of base salary for Messrs. McWhirter, Stiles, and Menzies. Mr. Rice’s LTI target level was set at 100% of base salary. All named executive officer LTI compensation target levels were below the 50th percentile. Mr. Wallace’s LTI compensation target was 18% below the 50th percentile. Mr. McWhirter’s LTI compensation target was 33% below the 50th percentile. Messrs. Stiles and Menzies’ LTI compensation targets were 17% and 18%, respectively, below the 50th percentile. Mr. Rice’s LTI compensation target was 45% below the 50th percentile.
The LTI compensation target levels are below the 50th percentile due to the long-term valuefact that the Company’s LTI plan is based on multiple years. The HR Committee is closely monitoring the benchmarking process during the interim transition period but does not plan to make any adjustments until the grants are based on the three year performance windows. The HR Committee believes these targets are currently sufficient in size to motivate the executives and are in the best interest of the Companystockholders and that the financial performancesize of the Company for the prior year, the HR Committee awarded 60% of each ofgrant provides 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 onofficers sufficient compensation.
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16
Company financial performance for 2005 of $1.13 diluted earnings per share which mirrored the financial performance goals for the annual incentive.Performance-Based Restricted Stock Award Calculation Method
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
For 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. Theto be made through 2010, the HR Committee has established that an amount equal to 75%will consider awarding the performance-based grants if the Company achieves its pre-established performance goals set forth in Table 5. The calculation of this performance-based LTI compensation is determined by the 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 result of weighting the Company’s financial performance goals have been pre-determinedEPS at 70% and the Company’s ROE at 30%. The payout of performance-based LTI compensation by the HR Committee. The program will be phased in with measurement periodslevel is as follows:
| | |
| | • | forIfthresholdlevel is achieved, a named executive officer can receive 40% of the award that may betarget level. No awards are made in 2007, the performance measurement period will be fiscal year 2006;if threshold is not met. |
| |
| | • | for the award that may be made in 2008, the performance measurement period will be the cumulativeIftargetlevel is achieved, a named executive officer can receive 100% of 2006 and 2007;his LTI compensation target. |
| |
| | • | Ifmaximumlevel is achieved, a named executive officer can receive up to 200% of his LTI compensation target. |
The actual amount of performance-based LTI compensation awarded is commensurate with the EPS and ROE achievements and proportionate to the performance achieved between threshold level and maximum level.
For awards of performance-based restricted stock to be made in 2011, the HR Committee approved setting the financial goals at 70% of the weighting relating to the Company’s EPS and 30% of the weighting relating to the Company’s ROE based on a combination of the most recent 2008 budget andmulti-year business plan. The equity grants to be made in 2011 will still be based on a three-year period. However, the calculation of the payouts has been simplified by establishing stand-alone formulas for EPS and ROE. The EPS and ROE financial goals will be considered individually. The amount a named executive officer receives is contingent upon achievement of levels, as follows:
| | |
| • | Ifthresholdlevel of EPS performance is achieved, a named executive officer can receive 40% of the award that may be made in 2009, the performance measurement period will be the cumulative70% portion of 2006, 2007 and 2008; andLTI compensation target. |
| |
| | • | forIfthresholdlevel of ROE performance is achieved, a named executive officer can receive 40% of the award that may be made in 2010,30% portion of LTI compensation target. |
|
| • | Iftargetlevel of EPS performance is achieved, a named executive officer can receive 100% of the 70% portion of LTI compensation target. |
|
| • | Iftargetlevel of ROE performance measurement period will beis achieved, a named executive officer can receive 100% of the cumulative30% portion of 2007, 2008 and 2009.LTI compensation target. |
|
| • | Ifmaximumlevel is achieved, a named executive officer can receive up to 200% of his LTI compensation target. |
The actual amount of performance-based LTI compensation awarded is commensurate with the EPS and ROE achievements and proportionate to the performance achieved between threshold level and maximum level. Due to the uncertain global economic conditions, the 2012 long term incentive target levels for performance-based restricted stock were not set and when established, will be based on a performance period that would qualify for tax deductibility under Code Section 162(m). The performance period will be considered at a future HR Committee meeting.
2008 Performance-Based Restricted Stock Grants
On May 5, 2008, the HR Committee met to consider and approve the long term performance-based grants. For performance above or below the performance target range the number of shares is increased or reduced respectively. Since the Company achieved the maximum level, management recommended to the HR Committee and the HR Committee approved granting awards that were two-times (200%) the performance-based LTI target. The HR Committee noted that because the maximum goals were achieved, the awards represented fair long term incentive
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compensation for the named executive officers. See the “Grants of Plan-Based Awards” table for awards granted in 2008. The calculation of the 2008 long term performance-based grant is set forth below:
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | Over
| | | %Target
| | | % Earned
| | | Payout%
|
| | | | Actual | | | Target | | | Target | | | Earned | | | Over Target | | | per Metric |
| Earnings Per Share | | | $6.55 | | | $3.82 | | | $2.73 | | | 100% | | | 95.29% | | | 195.29% |
| | | | | | | | | | | | | | | | | | | |
| Return on Equity | | | 18.31% | | | 11.30% | | | 7.01% | | | 100% | | | 123.98% | | | 223.98% |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | Payout = 200% |
In 2005, the HR Committee adopted a formula to determine the number of shares to be granted for the performance-based grants and time-based grants since the threshold, target, and maximum amounts are set as a percentage of base salary. The formula uses the one-year average stock price for the one-year period ended March 31 of the year of the grant to determine the number of shares of restricted stock to be awarded. For the performance-based grants and time-based grants made on May 5, 2008, the one-year average stock price of $35.44 per share was used for our named executive officers.
Total Compensation Target Levels
Total compensation target level is the sum of base salary, AIC target level, and LTI compensation target level. The results of the benchmarking study showed that the 2007 total compensation target levels were below the 50th percentile for each of the named executive officers. The HR Committee approved changes to compensation as previously disclosed in this proxy statement for 2008. The result was that the total compensation target level for each of the named executive officers remained below the 50th percentile.
2009 Compensation
In March 2008, the HR Committee retained the services of Hewitt as its compensation consultant for the remainder of 2008.
The Board of Directors, upon the recommendation of the executives and the HR Committee, did not increase the base salaries for the named executive officers. This is the third year in a row that Mr. Wallace has recommended his base salary remain fixed. The HR Committee and the Board of Directors believe this action was appropriate in light of the uncertainty of the global economy.
The Board of Directors, upon the recommendation of the HR Committee, determined that commencing with the 2009 Annual Incentive Program, the EPIP performance goal and payout level will consider awardingbe eliminated.
Additionally, the Board of Directors, upon the recommendation of the HR Committee, did not increase the AIC levels for the named executive officers, other than Mr. McWhirter. The Board of Directors increased Mr. McWhirter’s AIC target to 75% (from 60%) and his AIC maximum to 150% (from 120%) in order to adjust his total target cash compensation closer to the 50th percentile. This adjustment resulted in his incentive target cash moving from 19% below the 50th percentile to 2% above the 50th percentile based on 2009 compensation market data. Additionally, the AIC target increase for Mr. McWhirter aligned his total target cash competitive position to 5% below the 50th percentile from 13% below based on 2009 compensation market data.
The HR Committee established the 2009 AIC measurement as Company EPS, setting threshold at $1.00 EPS and target at $1.80 EPS. This performance goal range reflects the appropriate potential challenges and opportunities associated with the Company’s 2009 budget. In addition, to encourage management to stretch for significant cash flow improvement versus the 2009 Free Cash Flow benchmark, an additional component, Free Cash Flow, will be included as an enhancement to the short term incentive plan to create a special emphasis on generating cash flow. For purposes of the performance goal, Free Cash Flow is defined as the net cash provided by operating activities, less the net cash required by investing activities, as reflected in the Company’s audited financial statements to be reported in the Company’s 2009Form 10-K. One-half of any amount above the 2009 Free Cash Flow benchmark of $281 million will be converted to fully diluted earnings per share amount and will result in an adjustment to incentive payout amounts contingent on the attainment of threshold EPS goal. The Company notes that the
24
performance goals are part of the Company’s incentive program and do not correspond to any financial guidance that the Company has provided to the investment community for 2009 or that the Company will provide for future years and should not be considered as statements of the Company’s expectations or estimates. See the “Grants of Plan-Based Awards Table” for information on future possible payments to the named executive officers.
With respect to LTI, Hewitt’s study concluded that, while total target compensation for the named executive officers is generally within a competitive range, overall LTI targets for the named executive officers are below the market median. Hewitt recommended that the mix of pay between target cash compensation and long term compensation should be rebalanced. To rebalance the mix in pay, the Board of Directors increased the LTI target percentage for Mr. Wallace from 275% to 300%, from 150% to 175% for Messrs. McWhirter, Stiles, and Menzies and from 100% to 125% for Mr. Rice. The LTI target adjustments will not take effect until 2012 due to the Company’s method of calculating performance-based long term incentives ifto comply with the provisions of Section 162(m) of the Code.
Internal Equity Regarding CEO Compensation
The HR Committee follows the same processes and methods disclosed herein in establishing the compensation for all other named executive officers as it does in recommending to the independent directors the compensation package for Mr. Wallace. As noted previously, his position as Chairman of the Board, Chief Executive Officer, and President is compared to other executives in comparable positions in the comparator group and surveys previously disclosed in this proxy statement. Since as the Chairman, Chief Executive Officer, and President of the Company, achieves its pre-established performance goals that are based on growth in earnings per sharehe has a unique and return on equity. The earnings per share goal,greater set of responsibilities 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 overother named executive officers, including having the measurement period. The goals range from a threshold of 70% to 200%ultimate responsibility for the overall success of the target grant. The earnings per share threshold represents 70%Company, the Board of Directors does not consider his compensation to be comparable to the compensation of the target grant. The returnother named executive officers.
Recoupment 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.Restatement
| |
| Recoupment on Restatement |
The Board of Directors has adopted a Company policy that allows payouts to be ratably recouped under annual- annualand/or long-term 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 Perquisite Allowance |
Post-employment Benefits
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.”
OurCompany’s retirement, savings, and deferred compensation plans are designed to provide some assurance that executives are financially prepared to transition from active employment. The HR Committee believes that these plans assist in recruiting and retaining senior executives. Each of the plans is discussed in the Compensation“Compensation of Executives section.Executives” section of this proxy statement. The Company’s retirement, savings, and deferred compensation plans consist of the following:
| | |
| | • | Trinity Industries, Inc. Standard Pension Plan (the “Standard Pension Plan”) — a funded, tax qualified, non-contributory defined benefit pension plan that covers certain of our employees, including the named executive officers. Mr. Graham elected to freeze his benefits under the Standard Pension Plan effective January 1, 2005 and participate in the enhanced feature of our 401(k) plan. Earnings are capped by the Internal Revenue Code (the “Code”) for those defined as “highly compensated employees”.employees.” |
On February 13, 2009, the Board amended the Standard Pension Plan. This amendment is designed to reduce future pension costs and provides that, effective March 31, 2009, all future benefit accruals under the Standard Pension Plan automatically ceased for all participants, and the accrued benefits under the Standard Pension Plan were determined and frozen as of that date. The amendment to the Standard Pension Plan does not affect other benefits earned by participants prior to March 31, 2009.
| | |
| | • | Trinity Industries, Inc. Supplemental Retirement Plan (the “Supplemental Retirement Plan”) — an unfunded pensiona non-qualified plan that provides annual retirement benefits that are deniednot provided under the Standard Pension Plan because of compliance withCode limitations. Several years ago the Code.Board of Directors made the decision to discontinue adding executives to this plan. Mr. Wallace was a participant at the time and was grandfathered. As a result, Mr. Wallace is the only named executive officer that participates in the Supplemental Retirement Plan. |
25
On February 13, 2009, the Board amended the Supplemental Retirement Plan designed to reduce future retirement plan costs. This amendment provides that all future benefit accruals under the Supplemental Retirement Plan automatically ceased effective March 31, 2009 and the accrued benefits under the Supplemental Retirement Plan were determined and frozen as of that date including Mr. Wallace’s benefits.
| | |
| | • | Trinity Industries, Inc. Profit Sharing 401(k) Plan (the “401(k) plan”Plan”) — a voluntary, tax qualified, defined contribution plan that covers most of our employees, including the named executive officers, that includes a Company match for 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. |
On February 13, 2009, the Board, in connection with its decision to freeze the Standard Pension Plan, amended the 401(k) Plan effective commencing with the 2009 Plan year to (i) allow the participants in the Standard Pension Plan to participate in the enhanced portion of the 401(k) Plan which provides for potential annual contributions by the Company to the participating employee’s account of up to an additional 3% of an employee’s base pay (subject to the Code limit for 401(k) plans ($245,000 in 2009)) depending upon years of service (the “Annual Retirement Contribution”) and (ii) require Board approval for the Company to make the 401(k) Company match and the Annual Retirement Contribution.
| | |
| | • | Trinity Industries, Inc. Supplemental Profit Sharing Plan (the “Supplemental Plan”) — a supplemental deferred profit sharing plan for highly compensated employees that allows them to defer a portion of their base pay and annual incentive and includes a Company match for a portion of their contribution. |
| |
| | • | 2005 Deferred Compensation Plan and Agreement (the “Deferred Compensation Plan”) — a plan to encourage the retention of strategically important executives focused on continuous improvement and growth of the Company and in recognition of their contribution to the Company and in the case of Messrs. McWhirter, Stiles, Menzies, and GrahamRice to provide benefits on retirement in lieu of participation in the Supplemental Retirement Plan. |
| |
| Change Mr. Rice was added to the plan in Control Agreements2008. |
Change in Control Agreements
The Board of Directors has determined that it is appropriate to reinforce and encourage the continued attention and dedication of members of the Company’s management to their assigned duties without distraction in potential circumstances arising from the possibility of a change in control of the Company. Accordingly, the Company has entered into a change in control agreement with each of the named executive officers that provides for certain vesting upon a change in control and the payment of certain compensation if the named executive officer’s employment with the Company is terminated under one of the circumstances described in the agreement in connection with a change in control of the Company (as defined in the agreement). We consider the compensation that would be payable under the agreement upon termination following a change in control to be appropriate in light of the unique mix of the industries we are engaged in, the limited number of companies in many of those industries, and the uncertain length of time necessary to find new employment. The level of payments and benefits provided under the change in control agreements were considered appropriate. These benefits are recognized as part of the overall compensation package and are reviewed periodically, but are not specifically considered by the HR Committee when making changes in base salary, AIC, or LTI compensation. During 2008, the HR Committee reviewed the change in control severance benefits of the named executive officers in connection with a more comprehensive review of the overall change in control severance policy in general and made modifications to comply with Section 409A of the Code. The change in control severance benefits are discussed in the Executive Compensation section under “Potential Payments Upon Termination or Change in Control.” The Company does not have severance agreements with named executive officers other than in connection with the change in control agreements.
18
Welfare Benefits
The Company-supported medical plan, life insurance and long-termlong term disability plan, and employee-paid dental, cancer-specific insurance, and optional life insurance are substantially similar for the named executive officers as for all full-time employees.
26
Limitation on Deductibility of Executive Compensation
| |
| Limitation on Deductibility of Executive Compensation |
For a publicly held corporation, Section 162(m) of the Code denies a publicly held corporation alimits the federal income tax deduction for the compensation of certain executive officers that exceeds $1 million per year. “Performance based”“Performance-based” compensation is not subject to the limitations on deductibility and the HR Committee strives to structure compensation so as to qualify for deductibility. The HR Committee will continue to monitor future deductibility options. However, the HR Committee may authorize compensation that may not be deductible when it deems doing so to be in the best interest of the Company and its stockholders.
| |
| Stock Ownership Guidelines |
Stock Ownership Guidelines
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 of Directors at three times annual retainer. Stock ownership is defined as stock owned without restrictions; restricted shares that vest at retirement; shares or share equivalents held in a qualified or non-qualified profit sharing plan; shares or units granted on which restrictions remain; and equivalent shares determined from vested,in-the-money in-the-money stock options. The named executive officers and the directors are all in compliance with the guidelines.
Conclusion
The HR Committee believes the executive officer compensation program provides appropriate incentives to executive 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 Company’s future growth and success.
CompensationHuman Resources Committee Report
We have reviewed and discussed with management the Compensation Discussion and Analysis required by Item 402(b) ofRegulation S-K and based on such review and discussions, we recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.
| |
| Human Resources Committee |
|
| Ronald J. Gafford,Chairman |
| Ronald W. Haddock |
| Jess T. Hay |
| Diana S. Natalicio |
Human Resources Committee
Ronald W. Haddock,Chairman
Leldon E. Echols
Ronald J. Gafford
Jess T. Hay
Diana S. Natalicio
27
19
Compensation of Executives
Summary Compensation Table
| |
| Summary Compensation Table |
The following table and accompanying narrative disclosure should be read in conjunction with the Compensation Discussion and Analysis, which sets forth the objectives of the Company’s executive compensation program.
The Summary“Summary Compensation TableTable” below summarizes the total compensation paid or earned by each of the named executive officers for the fiscal yearyears ended December 31, 2008, 2007, and 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 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | Change in
| | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | Pension
| | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | Value and
| | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | Nonqualified
| | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | Non-Equity
| | | | Deferred
| | | | | | | | | |
| | | | | | | | | | | | Stock
| | | | Option
| | | | Incentive Plan
| | | | Compensation
| | | | All Other
| | | | | |
Name and
| | | | | | | Salary
| | | | Awards
| | | | Awards
| | | | Compensation
| | | | Earnings
| | | | Compensation
| | | | Total
| |
| Principal Position | | | Year | | | | ($)(1) | | | | ($)(2) | | | | ($)(2) | | | | ($)(3) | | | | ($)(4) | | | | ($)(5) | | | | ($) | |
| Timothy R. Wallace | | | | 2008 | | | | $ | 950,000 | | | | $ | 4,096,782 | | | | $ | 290,105 | | | | $ | 1,671,136 | | | | $ | 1,077,123 | | | | $ | 452,718 | | | | $ | 8,537,864 | |
| Chairman, Chief Executive | | | | 2007 | | | | | 950,000 | | | | | 3,800,846 | | | | | 399,457 | | | | | 2,141,818 | | | | | 732,431 | | | | | 520,537 | | | | | 8,545,089 | |
| Officer, and President | | | | 2006 | | | | | 950,000 | | | | | 2,378,140 | | | | | 399,457 | | | | | 2,343,365 | | | | | 840,175 | | | | | 521,742 | | | | | 7,432,879 | |
| |
| William A. McWhirter | | | | 2008 | | | | | 425,000 | | | | | 858,340 | | | | | 57,097 | | | | | 498,409 | | | | | 33,512 | | | | | 149,637 | | | | | 2,021,995 | |
| Senior Vice President and | | | | 2007 | | | | | 425,000 | | | | | 840,133 | | | | | 74,344 | | | | | 703,182 | | | | | 3,914 | | | | | 169,056 | | | | | 2,215,629 | |
| Chief Financial Officer | | | | 2006 | | | | | 370,000 | | | | | 528,583 | | | | | 74,344 | | | | | 616,679 | | | | | 8,606 | | | | | 143,707 | | | | | 1,741,919 | |
| |
| Mark W. Stiles | | | | 2008 | | | | | 520,000 | | | | | 984,504 | | | | | 96,126 | | | | | 609,818 | | | | | 66,181 | | | | | 176,148 | | | | | 2,452,777 | |
| Senior Vice President | | | | 2007 | | | | | 520,000 | | | | | 1,022,833 | | | | | 113,951 | | | | | 860,364 | | | | | 24,339 | | | | | 200,144 | | | | | 2,741,631 | |
| and Group President | | | | 2006 | | | | | 490,000 | | | | | 678,950 | | | | | 113,951 | | | | | 816,683 | | | | | 26,655 | | | | | 189,027 | | | | | 2,315,266 | |
| |
| D. Stephen Menzies | | | | 2008 | | | | | 520,000 | | | | | 878,980 | | | | | 61,909 | | | | | 609,818 | | | | | 29,562 | | | | | 250,177 | | | | | 2,350,446 | |
| Senior Vice President | | | | 2007 | | | | | 520,000 | | | | | 900,756 | | | | | 89,095 | | | | | 860,364 | | | | | 13,895 | | | | | 273,572 | | | | | 2,657,682 | |
| and Group President | | | | 2006 | | | | | 482,500 | | | | | 530,055 | | | | | 89,095 | | | | | 804,183 | | | | | 12,109 | | | | | 218,548 | | | | | 2,136,490 | |
| |
| S. Theis Rice | | | | 2008 | | | | | 365,000 | | | | | 375,006 | | | | | 27,182 | | | | | 313,154 | | | | | 45,000 | | | | | 108,467 | | | | | 1,233,809 | |
| Vice President and | | | | 2007 | | | | | 350,000 | | | | | 413,540 | | | | | 30,414 | | | | | 465,341 | | | | | 14,000 | | | | | 38,950 | | | | | 1,312,245 | |
| Chief Legal Officer | | | | 2006 | | | | | 300,000 | | | | | 239,911 | | | | | 30,414 | | | | | 440,010 | | | | | 19,000 | | | | | 33,435 | | | | | 1,062,770 | |
| |
| | |
| (1) | | For Messrs. Wallace, McWhirter, and Stiles, $41,800; $18,700; and Graham, $41,800; $8,140; $10,780 and $115,500,$11,440, respectively, of the above amount was deferred pursuant to the Supplemental Plan and also is reported in the Nonqualified“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”)SFAS 123RShare-Based Payment, and includesinclude 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 16Note 17 of Item 8 of the Annual Report onForm 10-K.10-K for the year-ended December 31, 2008. |
| |
| (3) | | Non-equity incentive plan compensation represents cash awards earned during 20062008 under the Company’s Calendar Year 20062008 Annual Incentive Compensation Program based on goal achievements. For Mr. Wallace $117,168,$83,557 and for Mr. Menzies $80,418, and Graham $630,013Stiles $12,196 of the above amount was deferred pursuant to the Supplemental Plan and is also reported in the Nonqualified“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$1,050,000 of this column represents the aggregate change in pension values during 20062008 fiscal year under the Standard Pension Plan and the Supplemental Retirement Plan, and $9,175$27,123 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,Rice, the change in pension values were $6,000; $23,000; $9,000$25,000; $55,000; $19,000; and $1,000, |
20
| |
| $45,000, respectively, and the above market earnings on nonqualified deferred compensation under the Deferred Compensation Plan were $2,606; $3,655; $3,109$8,512; $11,181; $10,562; and $2,871,$0, respectively. Mr. Wallace’s change in pension plan reflects a correction of the calculation of the 2006 and 2007 change in pension plan data due to a miscalculation of pensionable wages under the Supplemental Retirement Plan in 2006. |
| |
| (5) | | The following table is a breakdown of all other compensation included in the Summary“Summary Compensation tableTable” for the named executive officers: |
28
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 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | 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 | | | | 2008 | | | | $ | 95,000 | | | | $ | — | | | | $ | 95,604 | | | | $ | 262,114 | | | | $ | 452,718 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | 2007 | | | | | 95,000 | | | | | 32,483 | | | | | 83,872 | | | | | 309,182 | | | | | 520,537 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | 2006 | | | | | 95,000 | | | | | 19,301 | | | | | 78,104 | | | | | 329,337 | | | | | 521,742 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| William A. McWhirter | | | | 2008 | | | | | 42,500 | | | | | — | | | | | 14,796 | | | | | 92,341 | | | | | 149,637 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | 2007 | | | | | 42,500 | | | | | — | | | | | 13,738 | | | | | 112,818 | | | | | 169,056 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | 2006 | | | | | 37,000 | | | | | — | | | | | 8,039 | | | | | 98,668 | | | | | 143,707 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Mark W. Stiles | | | | 2008 | | | | | 52,000 | | | | | — | | | | | 11,166 | | | | | 112,982 | | | | | 176,148 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | 2007 | | | | | 52,000 | | | | | — | | | | | 10,108 | | | | | 138,036 | | | | | 200,144 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | 2006 | | | | | 49,000 | | | | | — | | | | | 9,359 | | | | | 130,668 | | | | | 189,027 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| D. Stephen Menzies | | | | 2008 | | | | | 52,000 | | | | | 78,295 | | | | | 6,900 | | | | | 112,982 | | | | | 250,177 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | 2007 | | | | | 52,000 | | | | | 42,251 | | | | | 41,285 | | | | | 138,036 | | | | | 273,572 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | 2006 | | | | | 48,250 | | | | | 37,661 | | | | | 3,969 | | | | | 128,668 | | | | | 218,548 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| S. Theis Rice | | | | 2008 | | | | | 36,500 | | | | | — | | | | | 4,152 | | | | | 67,815 | | | | | 108,467 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | 2007 | | | | | 35,000 | | | | | — | | | | | 3,950 | | | | | — | | | | | 38,950 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | 2006 | | | | | 30,000 | | | | | — | | | | | 3,435 | | | | | — | | | | | 33,435 | |
| |
| | |
| (1) | | Represents the amounts payable pursuant to the Executive Perquisites Plan for the annual perquisite allowance. |
| |
| (2) | | For 2008 for Mr. WallaceMenzies includes $67,001 for reimbursement of commuting expenses including the gross up for federal taxes of $24,422, $10,354 for personal use of the Company’s aircraft, 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 his 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.service and incidental items received in connection with attendance at a Board of Directors meeting. Mr. Menzies’s commuting expenses in 2008 and 2009 are subject to reimbursement by the Company up to $50,000 per year and a gross up for federal taxes. After 2009, the Company will not provide any reimbursement to Mr. Menzies for commuting expenses. The amounts reported for personal use of Company aircraft represent the incremental cost of providing the benefit and include the cost of fuel, catering, landing fees, flight crew expenses, “dead head” costs of flying aircraft to and from locations for personal use, and the dollar value of the lost tax deductions for expenses that exceed the amounts reported as income for the named executive officers. |
| |
| (3) | | Represents for each of the named executive officers the Company matchCompany’s matching amounts under the Company’s 401(k) plan. Includes matching amountsPlan for 2008 for Messrs. Wallace $5,446; McWhirter $5,446; Stiles $5,446; Menzies $6,900; and Rice $4,152 and under the Company’s Supplemental Plan for 2008 for Messrs. Wallace $74,135,$90,158; McWhirter $4,070,$9,350; and Stiles $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.$5,720. |
| |
| (4) | | Represents an amount equal to ten percent10% of the salaries and annual incentive compensation set aside pursuant to the Deferred Compensation Plan. These amounts also are also included in the “Nonqualified Deferred Compensation Table.” The Deferred Compensation Plan is discussed following that table. |
29
21
Grants of Plan-Based Awards
| |
| Grants of Plan-Based Awards |
The following table summarizes the 20062008 grants of equity and non-equity plan-based awards.awards for the named executive officers and the 2009 grants of non-equity plan-based awards for the named executive officers.
Grants of Plan-Based Awards Table
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | All Other | | | |
| | | | | Estimated Possible Payouts and | | | Estimated Future Payouts | | | Stock Awards | | | |
| | | | | Future Payouts Under Non-Equity | | | Under Equity Incentive Plan | | | Number of | | | Grant Date | |
| | | | | Incentive Plan Awards(2) | | | Awards(3) | | | Shares of | | | Fair Value | |
| | | | | | | | | | | Stock or | | | of Stock | |
| | | Grant | | | Threshold | | | Target | | | Maximum | | | Threshold | | | Target | | | Maximum | | | Units | | | Awards | |
| Name | | Date(1) | | | ($) | | | ($) | | | ($) | | | (#) | | | (#) | | | (#) | | | (#)(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 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | All Other
| | | All Other
| | | | | | |
| | | | | | | Estimated Possible Payouts and
| | | Estimated Future Payouts
| | | Stock Awards
| | | Option Awards
| | | | | | Grant Date
|
| | | | | | | Future Payouts Under
| | | Under Equity Incentive
| | | Number of
| | | Number of
| | | Exercise or
| | | Fair Value
|
| | | | | | | Non-Equity Incentive Plan Awards(2) | | | Plan Awards(3) | | | Shares of
| | | Securities
| | | Base Price
| | | of Stock
|
| | | | | | | | | | | | | Stock or
| | | Underlying
| | | of Option
| | | and Option
|
| | | | Grant
| | | Threshold
| | | Target
| | | Maximum
| | | Threshold
| | | Target
| | | Maximum
| | | Awards
| | | Options
| | | Awards
| | | Awards
|
| Name | | | Date(1) | | | ($) | | | ($) | | | ($) | | | ($) | | | ($) | | | ($) | | | ($)(4) | | | ($) | | | ($) | | | ($)(5) |
| Timothy R. Wallace | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2008 Annual Incentive Plan | | | | | | | | $ | 427,500 | | | | $ | 855,000 | | | | $ | 2,280,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2008 Equity Awards | | | | 05/05/08 | | | | | | | | | | | | | | | | | | | | | | | | | 88,500 | | | | | | | | | | — | | | | | | | | | | | | | | $ | 2,918,730 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2008 Equity Awards | | | | 12/10/08 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 85,000 | | | | $ | 16.24 | | | | | 395,055 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2009 Annual Incentive Plan | | | | | | | | | 513,000 | | | | | 855,000 | | | | | 1,710,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2011 Equity Awards | | | | | | | | | | | | | | | | | | | | | | | $ | 783,750 | | | | $ | 1,959,375 | | | | $ | 3,918,750 | | | | | | | | | | | | | | | | | | | $ | 3,918,750 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| William A. McWhirter | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2008 Annual Incentive Plan | | | | | | | | | 127,500 | | | | | 255,000 | | | | | 765,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2008 Equity Awards | | | | 01/14/08 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 15,000 | | | | | | | | | | | | | | | 371,250 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2008 Equity Awards | | | | 05/05/08 | | | | | | | | | | | | | | | | | | | | | | | | | 18,800 | | | | | | | | | | 2,800 | | | | | | | | | | | | | | | 712,368 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2008 Equity Awards | | | | 12/10/08 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 40,000 | | | | | 16.24 | | | | | 185,908 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2009 Annual Incentive Plan | | | | | | | | | 191,250 | | | | | 318,750 | | | | | 637,500 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2011 Equity Awards | | | | | | | | | | | | | | | | | | | | | | | $ | 191,250 | | | | $ | 478,125 | | | | $ | 956,250 | | | | | | | | | | | | | | | | | | | $ | 956,250 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Mark W. Stiles | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2008 Annual Incentive Plan | | | | | | | | | 156,000 | | | | | 312,000 | | | | | 936,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2008 Equity Awards | | | | 05/05/08 | | | | | | | | | | | | | | | | | | | | | | | | | 24,900 | | | | | | | | | | 1,500 | | | | | | | | | | | | | | | 870,672 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2008 Equity Awards | | | | 12/10/08 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 45,000 | | | | | 16.24 | | | | | 209,147 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2009 Annual Incentive Plan | | | | | | | | | 187,200 | | | | | 312,000 | | | | | 624,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2011 Equity Awards | | | | | | | | | | | | | | | | | | | | | | | $ | 234,000 | | | | $ | 585,000 | | | | $ | 1,170,000 | | | | | | | | | | | | | | | | | | | $ | 1,170,000 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| D. Stephen Menzies | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2008 Annual Incentive Plan | | | | | | | | | 156,000 | | | | | 312,000 | | | | | 936,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2008 Equity Awards | | | | 05/05/08 | | | | | | | | | | | | | | | | | | | | | | | | | 21,300 | | | | | | | | | | 5,100 | | | | | | | | | | | | | | | 870,672 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2008 Equity Awards | | | | 12/10/08 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 45,000 | | | | | 16.24 | | | | | 209,147 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2009 Annual Incentive Plan | | | | | | | | | 187,200 | | | | | 312,000 | | | | | 624,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2011 Equity Awards | | | | | | | | | | | | | | | | | | | | | | | $ | 234,000 | | | | $ | 585,000 | | | | $ | 1,170,000 | | | | | | | | | | | | | | | | | | | $ | 1,170,000 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| S. Theis Rice | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2008 Annual Incentive Plan | | | | | | | | | 91,250 | | | | | 182,500 | | | | | 538,375 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2008 Equity Awards | | | | 05/05/08 | | | | | | | | | | | | | | | | | | | | | | | | | 10,200 | | | | | | | | | | | | | | | | | | | | | | | | | 336,396 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2008 Equity Awards | | | | 12/10/08 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 25,000 | | | | | 16.24 | | | | | 116,193 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2009 Annual Incentive Plan | | | | | | | | | 95,813 | | | | | 182,500 | | | | | 319,375 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2011 Equity Awards | | | | | | | | | | | | | | | | | | | | | | | $ | 109,500 | | | | $ | 273,750 | | | | $ | 547,500 | | | | | | | | | | | | | | | | | | | $ | 547,500 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
| (1) | | The grant date of all stock and option awards is the date of the HR Committee meeting or Board meeting at which such award was approved. |
| |
| (2) | | Represents the potential amounts payable in 20072009 under the Company’s Calendar Year 20062008 Annual Incentive Compensation Program for attainment of performance goals and potential amounts payable in 20082010 under the 20072009 Annual Incentive Compensation Program for attainment of performance goals. For 2008, maximum represents the EPIP level as described under “Compensation Discussion and Analysis — Establishing Annual Incentive Payout Levels.” There is no EPIP level for 2009. |
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| | |
|
| (3) | Represents | For 2008 equity awards, represents the number of performance-based restricted shares that were awarded in May 20062008 to each of the named executive officers as performance-based awards based on targetachieving financial performance in 2005. There was no threshold orfor 2006 and 2007 above the maximum payout applicable to these awards. Thelevel. These shares vest as discussed below. For 2011, represents the threshold, target, and maximum value of performance-based shares that could be awarded in 2011 if threshold, target, or maximum financial performance goals are achieved for the cumulative performance period2008-2010. The actual number of shares to be issued in 2011 will be based on the value of the award to be granted in 2011 divided by the one-year average stock price for the period ended March 31, 2011. |
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| (4) | Represents | In January 2008, upon the numbersuccessful completion of Mr. McWhirter’s third year as the Company’s CFO, the HR Committee made a special award of 15,000 restricted shares. These shares vest on the earlier of (i) age 65, (ii) when Mr. McWhirter’s age plus years of service equal 80, (iii) death, disability, or change in control or (iv) consent of the HR Committee after three years from the date of the grant. The HR Committee granted the shares to increase Mr. McWhirter’s equity ownership and to recognize his contributions to the Company during his third year as CFO. The restricted stock awardedgranted in May 20062008 to eachMessrs. McWhirter, Stiles, and Menzies in the amounts of the named executive officers2,800, 1,500, and 5,100 shares, respectively were granted as time-based restricted stock based on the HR Committee’s evaluation of performance in 2005. The sharesawards and vest as discusseddescribed below. |
| |
| (5) | | The grant date fair value of the stock and option awards is calculated in accordance with SFAS 123R.123R, except as it relates to the 2011 equity awards which have been included at the maximum potential value. |
Discussion Regarding Summary Compensation Table and Grants of Plan-Based Awards Table
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| Discussion Regarding Summary Compensation Table and Grants of Plan-Based Awards Table |
The stock awards and the option awards described in the Summary“Summary Compensation TableTable” are the dollar amounts reflected in our financial statements for 2006, 2007, and 2008 and include awards made in prior periods. No options were awarded to the named executive officers in 2006.
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The stock awards in May 20062008 to the named executive officers were grants of restricted stock pursuant to our Stock Option and Incentive Plan that vest one third afterin five equal annual installments beginning on May 15th following the first third and fifth yearsanniversary of the grant or earlier upon death, disability, or a change in control or consent of the HR Committee after three years from the date of grant. The awards are forfeited if termination of employment occurs prior to vesting. The performance-based restricted stock awards were made as long term compensation based on 2005aggregate achievement of the Company’s 2006 and 2007 financial performance of $1.13 diluted earnings per share of $2.90 and $3.65 respectively and return on equity of 17.84% and 18.77% respectively as well as the HR Committee’s evaluation of each executive’s overall performance during 2005. The holder of the shares 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.2007.
The award of restricted stock to Mr. McWhirter in January 2006 was for retention purposes and in recognition of his development during the first 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 the 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 20062008 to the named executive officers were pursuant to our Calendar Year 20062008 Annual Incentive Compensation Program and representrepresented performance goal achievement based on the Company’s 2006 diluted earnings per share2008 EPS 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.$3.59.
The estimates for future payouts under the 20072009 Annual Incentive PlanProgram represent potential payments of annual incentive compensation for 2007.2009. The HR Committee established the annual incentive performance goals for 20072009 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 sharethe Company must improve by 15% from 2006 diluted earnings per share.earn EPS of $1.80 for 2009.
We have
The Company has an Executive Perquisite Plan that in 20062008 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. TheOther than being required to use $6,000 of the perquisite allowance to maintain a four-door sedan, including insurance and other maintenance, and to forego reimbursement for the first 10,000 business miles annually, the perquisite allowance is to be used at the discretion of the executive for perquisite type expenses. It is intended that the perquisite allowance will eliminate charges to the Company for personal benefits for the executives that are not provided to Company employees generally other than occasionalde minimisitems such as the use of Company tickets to entertainment events or expenses related to spousal travel. The perquisite allowance is not intended to cover personal use of the Company’s aircraft or commuting or relocation expenses. For security purposes, the Board requires the CEO to use the Company aircraft for personal travel, and the value attributed to such personal use is calculated using the aggregate incremental cost method. Wemethod set forth in Note (2) to “All Other Compensation.” During 2008, Mr. Wallace did not have personal travel which required the use of the Company-owned aircraft. The Company has been paying commuting expenses for Mr. Menzies between Chicago, Illinois and Dallas, Texas. Mr. Menzies’s commuting expenses in 2008 and 2009 are subject to reimbursement by the Company
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up to $50,000 per year and a gross up for federal taxes. After 2009, the Company will not provide any reimbursement to Mr. Menzies for commuting expenses.
We have
The Company has a 401(k) plan that permits employees to elect to set aside up to 14 percent14% of their compensation (subject to the maximum limit on the amount of compensation permitted by the Code to be deferred for this purpose) in a trust to pay future retirement benefits. Depending upon years of service, the Company may match up to 50 percent50% of no more than six percent6% of the employee’s compensation set aside for this purpose. For employees who participate in the enhancement to the 401(k) plan, the Company contributes up to an additional three percent3% of the employee’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 enhanced portion of the 401(k) plan as an Annual Retirement Contribution. Mr. Graham is the onlyNo named executive officer participatingofficers participated in the enhanced portion of the 401(k) plan during 2008. As a result of the amendment to the Standard Pension Plan adopted on February 13, 2009, the named executive officers’ accrued benefits were frozen and no future benefits will accrue under the Standard Pension Plan. Therefore, commencing with the 401(k) plan’s 2009 plan year, all of the named executive officers will be eligible to participate in the enhanced portion of the 401(k) plan. Matching contributions under the Supplemental Plan are discussed under “Nonqualified Deferred Compensation.”
The change in pension value for Mr. Wallace is primarily a result of an 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 20062008 represented from 45%35% to 65% of the named executive officers’ total compensation as reflected in the Summary“Summary Compensation Table.”
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23
Outstanding Equity Awards at Year-End
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| Outstanding Equity Awards at Year-End |
The following tables summarize the total outstanding equity awardstable summarizes as of December 31, 2006,2008, for each named executive officer, as well as the number of option awards exercisedunexercised options and the number of shares of unvested restricted stock awards and restricted stock unit awards vested during 2006.stock. The market value of the stock awards was based on the closing price of the common stock as of December 29, 2006,31, 2008, which was $35.20. The unvested stock awards includes the grants of equity awards made in 2006 which are also disclosed in the Grants of Plan-Based Awards Table, all of which were unvested at the end of the fiscal year.$15.76.
Outstanding Equity Awards at Fiscal Year-End Table
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Option Awards | | | Stock Awards | |
| | | | | | | |
| | | Number of | | | Number of | | | | | | | Market | |
| | | Securities | | | Securities | | | | | Number of | | | Value of | |
| | | Underlying | | | Underlying | | | | | Shares or | | | Shares or | |
| | | Unexercised | | | Unexercised | | | | | Units of | | | Units of | |
| | | Options | | | Options | | | Option | | | | | Stock That | | | Stock That | |
| | | (#) | | | (#) | | | Exercise | | | Option | | | Have Not | | | Have Not | |
| | | | | | | | | Price | | | Expiration | | | Vested | | | Vested | |
| Name | | Exercisable | | | Unexercisable(3) | | | ($) | | | 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 | | | | | | | | | |
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| 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 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | Option Awards | | | | | | | | | Stock Awards |
| | | | | | | | | | | | | | | | | | | | | | | | | Equity
|
| | | | | | | | | | | | | | | | | | | | | | | | | Incentive
|
| | | | | | | | | | | | | | | | | | | | | | Equity
| | | Plan Awards:
|
| | | | | | | | | | | | | | | | | | | | | | Incentive
| | | Market or
|
| | | | | | | | | | | | | | | | | | | | | | Plan Awards:
| | | Payout
|
| | | | Number of
| | | Number of
| | | | | | | | | | | | Market
| | | Number of
| | | Value of
|
| | | | Securities
| | | Securities
| | | | | | | | | Number of
| | | Value of
| | | Unearned
| | | Unearned
|
| | | | Underlying
| | | Underlying
| | | | | | | | | Shares or
| | | Shares or
| | | Shares, Units
| | | Shares, Units
|
| | | | Unexercised
| | | Unexercised
| | | | | | | | | Units of
| | | Units of
| | | or Other
| | | or Other
|
| | | | Options
| | | Options
| | | Option
| | | | | | Stock That
| | | Stock That
| | | Rights That
| | | Rights That
|
| | | | (#) | | | (#) | | | Exercise
| | | Option
| | | Have Not
| | | Have Not
| | | Have Not
| | | Have Not
|
| | | | | | | | | | Price
| | | Expiration
| | | Vested
| | | Vested
| | | Vested
| | | Vested
|
| Name | | | Exercisable | | | Unexercisable(1) | | | ($) | | | Date | | | (#)(2) | | | ($) | | | ($) | | | ($) |
| Timothy R. Wallace | | | | — | | | | | 20,550 | | | | | 18.94 | | | | | 05/10/14 | | | | | 475,282 | | | | $ | 7,490,444 | | | | $ | 783,750 | (3) | | | $ | 783,750 | (3) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | — | | | | | 17,700 | | | | | 17.94 | | | | | 05/09/15 | | | | | | | | | | | | | | | 783,750 | (4) | | | | 783,750 | (4) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | — | | | | | 85,000 | | | | | 16.24 | | | | | 12/10/18 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| William A. McWhirter | | | | — | | | | | 4,500 | | | | | 18.94 | | | | | 05/10/14 | | | | | 161,658 | | | | | 2,547,730 | | | | | 191,250 | (3) | | | | 191,250 | (3) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | — | | | | | 7,200 | | | | | 17.94 | | | | | 05/09/15 | | | | | | | | | | | | | | | 191,250 | (4) | | | | 191,250 | (4) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | — | | | | | 40,000 | | | | | 16.24 | | | | | 12/10/18 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Mark W. Stiles | | | | 1,377 | | | | | — | | | | | 11.33 | | | | | 05/29/13 | | | | | 168,650 | | | | | 2,657,924 | | | | | 234,000 | (3) | | | | 234,000 | (3) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | 5,610 | | | | | 5,610 | | | | | 18.94 | | | | | 05/10/14 | | | | | | | | | | | | | | | 234,000 | (4) | | | | 234,000 | (4) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | 5,055 | | | | | 10,110 | | | | | 17.94 | | | | | 05/09/15 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | — | | | | | 45,000 | | | | | 16.24 | | | | | 12/10/18 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| D. Stephen Menzies | | | | — | | | | | 4,680 | | | | | 18.94 | | | | | 05/10/14 | | | | | 132,900 | | | | | 2,094,504 | | | | | 234,000 | (3) | | | | 234,000 | (3) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | — | | | | | 8,610 | | | | | 17.94 | | | | | 05/09/15 | | | | | | | | | | | | | | | 234,000 | (4) | | | | 234,000 | (4) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | — | | | | | 45,000 | | | | | 16.24 | | | | | 12/10/18 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| S. Theis Rice | | | | 6,000 | | | | | — | | | | | 11.33 | | | | | 05/29/13 | | | | | 64,491 | | | | | 1,016,378 | | | | | 105,000 | (3) | | | | 105,000 | (3) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | 3,300 | | | | | 1,650 | | | | | 18.94 | | | | | 05/10/14 | | | | | | | | | | | | | | | 109,500 | (4) | | | | 109,500 | (4) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | 4,080 | | | | | 4,080 | | | | | 17.94 | | | | | 05/09/15 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | — | | | | | 25,000 | | | | | 16.24 | | | | | 12/10/18 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| |
(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) (1) | | 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 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Timothy R.
| | | | William A.
| | | | Mark W.
| | | | D. Stephen
| | | | S. Theis
| |
| Vesting Date | | | Wallace | | | | McWhirter | | | | Stiles | | | | Menzies | | | | Rice | |
| 05/09/09 | | | | 8,850 | | | | | 3,600 | | | | | 5,055 | | | | | 4,305 | | | | | 2,040 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| 05/10/09 | | | | 20,550 | | | | | 4,500 | | | | | 5,610 | | | | | 4,680 | | | | | 1,650 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| 05/09/10 | | | | 8,850 | | | | | 3,600 | | | | | 5,055 | | | | | 4,305 | | | | | 2,040 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| 05/15/12 | | | | 85,000 | | | | | 40,000 | | | | | 45,000 | | | | | 45,000 | | | | | 25,000 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
33
| | |
(4) (2) | | 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 | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Timothy R.
| | | | William A.
| | | | Mark W.
| | | | D. Stephen
| | | | S. Theis
| |
| Vesting Date | | | Wallace(a) | | | | McWhirter | | | | Stiles | | | | Menzies | | | | Rice | |
| 05/09/09 | | | | 15,094 | | | | | 9,625 | | | | | 13,500 | | | | | 11,500 | | | | | 5,475 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| 05/15/09 | | | | 38,700 | | | | | 9,820 | | | | | 10,780 | | | | | 10,780 | | | | | 4,440 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| 05/29/09 | | | | 27,804 | | | | | 4,500 | | | | | 8,000 | | | | | 6,500 | | | | | 2,300 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| 05/11/10 | | | | 33,046 | | | | | 9,000 | | | | | 14,250 | | | | | 12,350 | | | | | 4,250 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| 05/15/10 | | | | 41,500 | | | | | 10,987 | | | | | 13,180 | | | | | 13,180 | | | | | 5,273 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| 05/09/11 | | | | 15,094 | | | | | 9,625 | | | | | 13,500 | | | | | 11,500 | | | | | 5,475 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| 05/15/11 | | | | 38,700 | | | | | 9,820 | | | | | 10,780 | | | | | 10,780 | | | | | 4,440 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| 05/29/11 | | | | 27,804 | | | | | 4,500 | | | | | 8,000 | | | | | 6,500 | | | | | 2,300 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| 05/11/12 | | | | 33,046 | | | | | 9,000 | | | | | 14,250 | | | | | 12,350 | | | | | 4,250 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| 05/15/12 | | | | 41,500 | | | | | 10,986 | | | | | 13,180 | | | | | 13,180 | | | | | 5,273 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| 05/09/13 | | | | 15,094 | | | | | 9,625 | | | | | 13,500 | | | | | 11,500 | | | | | 5,475 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| 05/15/13 | | | | 17,700 | | | | | 4,320 | | | | | 5,280 | | | | | 5,280 | | | | | 2,040 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Restricted Shares(b) | | | | 130,200 | | | | | 59,850 | | | | | 30,450 | | | | | 7,500 | | | | | 13,500 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
(A)(a) | | On December 30, 2008, Mr. Wallace turned 55 years old and, as a result, met the definition of “early retirement” on December 31, 2008 with respect to 262,750 shares and on January 1 and January 2, 2009, with respect to 88,200 shares. In accordance with the Code, personal income tax associated with the lapse of substantial risk of forfeiture of those shares must be satisfied currently even though the shares have not vested. The terms of the Company’s 2004 Stock Option and Incentive Plan, as amended (the “Plan”), provide that any participant under the Plan who is subject to Section 16 of the Securities Exchange Act of 1934 is required to satisfy his or her tax withholding obligation pursuant to the share retention method. As a result, Mr. Wallace has satisfied his tax withholding obligation by surrendering shares to the Company based on the appropriate federal income tax and payroll tax rates currently applicable. The unvested shares in the table above have been adjusted for the 95,768 shares surrendered December 31, 2008. Additionally, Mr. Wallace surrendered 8,672 shares on January 1, 2009 and 17,801 shares on January 2, 2009. The shares in the table above have not been adjusted for the shares surrendered in 2009. |
|
| (b) | | Grants of Restricted Stockrestricted stock which will vest upon retirement unless accelerated as provided(i) retirement; (ii) when the executive officer’s age plus years of vested service equal 80; (iii) the earlier of death, disability or change in the termscontrol; or (iv) consent of the award.HR Committee after three years from the date of grant. |
|
| (3) | | Represents the threshold value of performance-based shares that could be awarded in 2010 if threshold financial performance goals are achieved for the cumulative performance period 2007 — 2009. The actual number of shares to be issued in 2010 will be based on the value of the award to be granted in 2010 divided by the one-year average stock price for the period ended March 31, 2010. Vesting of any performance-based shares issued in 2010 will be determined on or prior to the date of issue. |
|
| (4) | | Represents the threshold value of performance-based shares that could be awarded in 2011 if threshold financial performance goals are achieved for the cumulative performance in 2008 — 2010. The actual number of shares to be issued in 2011 will be based on the value of the award to be granted in 2011 divided by the one-year average stock price for the period ended March 31, 2011. Vesting of any performance-based shares issued in 2011 will be determined on or prior to the date of issue. |
34
25
Option Exercises and Stock Vested in 2008
| |
| Option Exercises and Stock Vested in 2006 |
The following table summarizes for the named executive officers in 20062008 (i) the number of shares acquired upon exercise of stock options and the value realized and (ii) the number of shares acquired upon the vesting of restricted stock and restricted stock units and the value realized, each before payout of any applicable withholding tax.
Option Exercises and Stock Vested Table
| | | | | | | | | | | | | | | | | |
| | | Option Awards | | | Stock Awards | |
| | | | | | | |
| | | 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 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | 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 | | | | 139,740 | | | | $ | 3,332,750 | | | | | 75,800 | | | | $ | 2,632,940 | |
| | | | | | | | | | | | | | | | | | | | | |
| William A. McWhirter | | | | 13,499 | | | | | 312,173 | | | | | 15,667 | | | | | 551,243 | |
| | | | | | | | | | | | | | | | | | | | | |
| Mark W. Stiles | | | | 8,823 | | | | | 164,696 | | | | | 22,150 | | | | | 773,198 | |
| | | | | | | | | | | | | | | | | | | | | |
| D. Stephen Menzies | | | | 25,485 | | | | | 662,015 | | | | | 20,250 | | | | | 709,605 | |
| | | | | | | | | | | | | | | | | | | | | |
| S. Theis Rice | | | | — | | | | | — | | | | | 7,484 | | | | | 263,523 | |
| | | | | | | | | | | | | | | | | | | | | |
Pension Benefits
The following table summarizes the present value of the accumulated pension benefits of the named executive officers under the Standard Pension Plan and for Mr. Wallace the Supplemental Retirement Plan: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 | | | | — | |
| | | | | | | | | | | | | | |
| | | | | | | Number
| | | | Present
| |
| | | | | | | of Years
| | | | Value of
| |
| | | | | | | Credited
| | | | Accumulated
| |
| | | | | | | Service
| | | | Benefit
| |
| Name | | | Plan Name | | | (#) | | | | ($)(1) | |
| Timothy R. Wallace | | | Trinity Industries, Inc. Standard Pension Plan | | | | 34 | | | | $ | 373,000 | |
| | | | | | | | | | | | | | |
| | | | Trinity Industries, Inc. Supplemental Retirement Plan | | | | 34 | | | | | 4,690,000 | |
| | | | | | | | | | | | | | |
| William A. McWhirter | | | Trinity Industries, Inc. Standard Pension Plan | | | | 23 | | | | | 140,000 | |
| | | | | | | | | | | | | | |
| Mark W. Stiles | | | Trinity Industries, Inc. Standard Pension Plan | | | | 17 | | | | | 286,000 | |
| | | | | | | | | | | | | | |
| D. Stephen Menzies | | | Trinity Industries, Inc. Standard Pension Plan | | | | 7 | | | | | 72,000 | |
| | | | | | | | | | | | | | |
| S. Theis Rice | | | Trinity Industries, Inc. Standard Pension Plan | | | | 18 | | | | | 254,000 | |
| | | | | | | | | | | | | | |
| | |
| (1) | | The present value of the accumulated benefit is calculated in accordance with SFAS 87. Refer to footnote 12Note 13 of Item 8 of the Company’s Annual Report onForm 10-K for the year-ended December 31, 2008 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 contributed periodically to a trust that invests the Company’s contributions and earnings thereon in order to pay the benefits to the participating employees. The plan provides for the payment of monthly retirement benefits determined under a calculation based on credited years of service and a participant’s highest compensation over five consecutive years in the last ten years of employment. Retirement benefits are paid to participants upon normal retirement at the age of 65 or later, or upon early retirement. Mr. Wallace turned 55 on December 30, 2008, and, as a result, met the definition of “early retirement” on December 31, 2008. Mr. Wallace has not provided notice of intention to take early retirement. Covered compensation includes salary and non-equity incentive plan compensation as shown in the Summary“Summary Compensation Table.” Other elements of compensation in the Summary “Summary
35
Compensation TableTable” 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 lump sum value of the accrued benefit under the pension plan or one times base pay with less than 10 years of service and 2 and 1/1/2 times base pay with more than 10 years of service. All of the 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.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 planStandard Pension Plan that is limited by reason of compliance with the Code is paid as a supplemental pension benefit. The benefit payment terms are the same as the terms of the Standard Pension Plan. The benefits are payable from the general assets of the Company. On February 13, 2009, the Board amended the Standard Pension Plan and the Supplemental Retirement Plan. These amendments do not affect the Standard Pension Plan or the Supplemental Retirement Plan for 2008. These amendments are discussed in the Compensation Discussion and Analysis section under “Post-employment Benefits.”
Nonqualified Deferred Compensation
| |
| Nonqualified Deferred Compensation |
The table below shows the contributions by the executives and the Company, the aggregate earnings on nonqualified deferred compensation in 20062008 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 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | Executive
| | | | Registrant
| | | | Aggregate
| | | | Aggregate
| |
| | | | Contributions
| | | | Contributions
| | | | Earnings
| | | | Balance
| |
| | | | in Last Fiscal
| | | | in Last Fiscal
| | | | in Last Fiscal
| | | | at Last Fiscal
| |
| Name | | | Year(1) | | | | Year(2) | | | | Year(3) | | | | Year End(1)(2)(3)(4) | |
| Timothy R. Wallace | | | $ | 125,357 | | | | $ | 352,272 | | | | $ | (274,246 | ) | | | $ | 2,088,060 | |
| | | | | | | | | | | | | | | | | | | | | |
| William A. McWhirter | | | | 18,700 | | | | | 101,691 | | | | | (5,431 | ) | | | | 519,306 | |
| | | | | | | | | | | | | | | | | | | | | |
| Mark W. Stiles | | | | 23,636 | | | | | 118,702 | | | | | 4,655 | | | | | 624,980 | |
| | | | | | | | | | | | | | | | | | | | | |
| D. Stephen Menzies | | | | — | | | | | 112,982 | | | | | (28,136 | ) | | | | 624,696 | |
| | | | | | | | | | | | | | | | | | | | | |
| S. Theis Rice | | | | — | | | | | 67,815 | | | | | — | | | | | 67,815 | |
| | | | | | | | | | | | | | | | | | | | | |
| | |
| (1) | | Salary and incentive compensation deferrals to the Company’s Supplemental Plan. The amounts are also included in the Summary“Summary Compensation Table.Table” for 2008. |
| |
| (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,$262,114; McWhirter $98,668,$92,341; Stiles $130,668,$112,982; Menzies $128,668$112,982; and Graham $112,001Rice $67,815 and matching amounts under the Company’s Supplemental Plan for Messrs. Wallace $74,135,$90,158; McWhirter $4,070,$9,350; and Stiles $5,390 and Graham $24,591.$5,720. These amounts are also included in the Summary“Summary Compensation Table.Table” for 2008. |
| |
| (3) | | This column represents earningslosses in the Supplemental Plan and earnings in the Deferred Compensation Plan. For Messrs. Wallace, McWhirter, Stiles, and Graham, earningsMenzies, losses in the Supplemental Plan were $18,894; $5,158; $3,520$(356,331); $(31,193); $(29,188); and $15,733,$(60,105), respectively. For Messrs. Wallace, McWhirter, Stiles, Menzies and Graham,Menzies, earnings in the Deferred Compensation Plan were $27,599; $7,835; $10,991; $9,352$82,085; $25,762; $33,843; and $8,634,$31,969, respectively. The amounts reported in this table for the Deferred Compensation Plan are inclusive of above market earnings included in the Summary“Summary Compensation TableTable” above. See noteNote (4) to the Summary“Summary Compensation Table.” |
|
| (4) | | This column includes amounts in the “Summary Compensation Table” for (i) an amount equal to ten percent of the salaries and incentive compensation set aside pursuant to the Deferred Compensation Plan in 2006 for Messrs. Wallace $329,337; McWhirter $98,668; Stiles $130,668; and Menzies $128,668 and in 2007 for Messrs. Wallace $309,182; McWhirter $112,818; Stiles $138,036; and Menzies $138,036; (ii) matching amounts under the Company’s Supplemental Profit Sharing Plan in 2006 for Messrs. Wallace $74,135; |
36
| | |
| Deferred Compensation Discussion | McWhirter $4,070; and Stiles $5,390 and in 2007 for Messrs. Wallace $79,484; McWhirter $9,350; Stiles $5,720; and Menzies $36,897; and (iii) salary and incentive deferrals to the Company’s Supplemental Profit Sharing Plan in 2006 for Messrs. Wallace $158,968; McWhirter $8,140; Stiles $10,780; and Menzies $80,418 and in 2007 for Messrs. Wallace $213,145; McWhirter $18,700; and Stiles $11,440. |
Deferred Compensation Discussion
The Supplemental Plan was established for highly compensated employees who are limited as to the amount of deferrals allowed under the Company’s 401(k) plan. There is no limit on the percentage of salary or incentive pay that an executive may elect to defer into the Supplemental Plan. Participants must elect to defer salary prior to the beginning of the fiscal year and annual incentive pay prior to the beginning of the year to which the incentive payments relate. The first 6% of a Participant’sparticipant’s base salary and bonus contributed to the Supplemental Plan, less any compensation matched under the 401(k) plan, may be matched from 25% to 50%
27
by the Company based on years of service. The Company’s match vests 20% for each year of service up to 100% after five years. Participants may choose from several mutual fund like deemed investments.
If elected at the time of enrollment, Participantsparticipants 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-termlong term plan whereby an amount equal to 10% of salary and annual incentive bonuscompensation 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)2007 and 2008). The account is payable to the participant in a lump sum or annual installments from one to 20 years. Payments commence one year after termination and are subject to compliance with non-compete provisions for one year after termination and the participant must be available for consultation for one year after termination.
On February 13, 2009, the Board amended the 401(k) Plan. This amendment is discussed in the Compensation Discussion and Analysis section under “Post-employment Benefits.”
Potential Payments Upon Termination or Change in Control
Named executive officers that terminate voluntarily, involuntarily, by death or by disability have the same death and disability benefits that are available to the majority of salaried employees. While employed by us, salaried employees have a death benefit equal to the greater of their accrued benefit under the pension plan or one year of base salary for less than 10 years of service and 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. StockPursuant to the terms of the Executive Severance Agreement described below, stock options, and restricted stock, alsoand benefits under the Supplemental Plan, Deferred Compensation Plan, and 401(k) Plan vest onupon 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 had been terminated by death, disability or retirement on December 29, 2006 or a change in control 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 that in the event of a change in control, the named executive officers will be paid a proration of the target bonus for the year in which the change in
28
control occurs as of the date of the change in control. Assuming
37
The following table provides the dollar value of (i) accelerated vesting of stock options and restricted stock and (ii) the payment of annual incentive compensation assuming each of the named executive officers had been terminated by death, disability or retirement on December 31, 2008, or 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.31, 2008.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Timothy R.
| | | | William A.
| | | | Mark W.
| | | | D. Stephen
| | | | S. Theis
| |
| | | | Wallace | | | | McWhirter | | | | Stiles | | | | Menzies | | | | Rice | |
| Death | | | | | | | | | | | | | | | | | | | | | | | | | |
| Stock Options | | | $ | — | | | | $ | — | | | | $ | 6,096 | | | | $ | — | | | | $ | 26,560 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Restricted Stock | | | | 7,490,444 | | | | | 2,547,730 | | | | | 2,657,924 | | | | | 2,094,504 | | | | | 1,016,378 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total | | | | 7,490,444 | | | | | 2,547,730 | | | | | 2,664,020 | | | | | 2,094,504 | | | | | 1,042,938 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Disability | | | | | | | | | | | | | | | | | | | | | | | | | |
| Stock Options | | | | — | | | | | — | | | | | 6,096 | | | | | — | | | | | 26,560 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Restricted Stock | | | | 7,490,444 | | | | | 2,547,730 | | | | | 2,657,924 | | | | | 2,094,504 | | | | | 1,016,378 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total | | | | 7,490,444 | | | | | 2,547,730 | | | | | 2,664,020 | | | | | 2,094,504 | | | | | 1,042,938 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Retirement | | | | | | | | | | | | | | | | | | | | | | | | | |
| Stock Options | | | | — | | | | | — | | | | | 6,096 | | | | | — | | | | | 26,560 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Restricted Stock | | | | 4,683,588 | | | | | 1,232,826 | | | | | 1,819,492 | | | | | 1,256,072 | | | | | 678,074 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total | | | | 4,683,588 | | | | | 1,232,826 | | | | | 1,825,588 | | | | | 1,256,072 | | | | | 704,634 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Change in Control | | | | | | | | | | | | | | | | | | | | | | | | | |
| Stock Options | | | | — | | | | | — | | | | | 6,096 | | | | | — | | | | | 26,560 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Restricted Stock | | | | 7,490,444 | | | | | 2,547,730 | | | | | 2,657,924 | | | | | 2,094,504 | | | | | 1,016,378 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Annual Incentive Compensation | | | |
855,000 | | | | |
255,000 | | | | |
312,000 | | | | |
312,000 | | | | |
182,500 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total | | | | 8,345,444 | | | | | 2,802,730 | | | | | 2,976,020 | | | | | 2,406,504 | | | | | 1,225,438 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Each of the named executive officers has entered into an Executive Severance Agreement (the “Agreement”) with the Company thatCompany. In addition to the acceleration of vesting upon a change in control as described above, the Agreement provides for compensation if the named executive officer’s employment is terminated under one of the circumstances described in the Agreement in connection with a “change in control” of the Company. A “change in control” is generally defined as (i) any other person or entity acquires beneficial ownership of 30% or more of our outstanding common stock or the combined voting power over our outstanding voting securities unless the transaction resulting in the person becoming the beneficial owner of 30% or more of the combined voting power is approved in advance by the Company’s Board; (ii) the incumbent directors cease for any reason to constitute at least a majority of the Board; (iii) the completion of certain corporate transactions including a reorganization, merger, statutory share exchange, consolidation or similar transaction, a sale or other disposition of all or substantially all of our assets, or the acquisition of assets or stock of another entity, subject to certain exceptions; or (iv) our shareowners approve a complete liquidation or dissolution of the Company. See “Change in Control” of the Company (as defined in the Agreement).Control Agreements” under Compensation Discussion and Analysis section.
The Agreements are for continuous two-year terms until terminated by the Company upon specified notice and continue for two years following a Changechange in Control.control. The Agreements provide that if there is a Changechange in Controlcontrol of the Company and if the Company terminates the executive’s employment other than as a result of the executive’s death, disability or retirement, or for cause (as defined in the Agreement),“cause,” or if the executive terminates his or her employment for good“good reason, (as defined in the Agreement),” then the Company will pay to such executive a lump sum equal to three times (i) the amount of the executive’s base salary, (ii) the annual perquisite allowance, and (iii) the higher of the average bonus earned over the previous three years or the target bonus for the fiscal year in which the Changechange in Controlcontrol occurs.
“Cause” is generally defined as a participant’s (i) willful and continued failure to substantially perform his employment duties with the Company; (ii) misappropriation or embezzlement from the Company or any other act or acts of dishonesty by the participant constituting a felony that results in gain to the participant at the Company’s
38
expense; (iii) conviction of the participant of a felony involving moral turpitude; or (iv) the refusal of the participant to accept offered employment after a change in control.
“Good reason” is generally defined as, following a change in control, (i) a material adverse change in a participant’s working conditions or responsibilities; (ii) assignment to the participant of duties inconsistent with the participant’s position, duties, and reporting responsibilities; (iii) a change in the participant’s titles or offices; (iv) a reduction in the participant’s annual base salary; (v) a material reduction in the participant’s benefits, in the aggregate, under the benefits plans, incentive plans, and securities plans; (vi) failure to provide a participant with the number of paid vacation days entitled at the time of a change in control; (vii) any material breach by the Company of the Agreement; (viii) any successor or assign of the Company fails to assume the Agreement; (ix) the relocation of the participant’s principal place of employment outside of Dallas County, Texas; (x) voluntary resignation by the participant, or termination of employment by reason of the participant’s death or disability, at any time during either a90-day period beginning after a change in control or the30-day period beginning on the 365th day after a change in control; or (xi) any purported termination not conducted pursuant to a notice of termination by the Company.
The severance benefits provided by the Agreements also include continuation of all medical, dental, vision, health, and life insurance benefits to which each executive would have been entitled if the executive had continued in the employment of the Company for 36 months after the executive’s termination, a lump sum equivalent to the amount of income tax payable due to the continuation of insurance benefits, and a lump sum equivalent to the value of an annuity payable at age 65 with 36 months of additional service without regard to limitations imposed by the Code, less the benefit actually accrued under the pension plan,plan. Effective April 1, 2009, all future benefits under the Standard Pension Plan and the rightSupplemental Retirement Plan automatically ceased for all participants. Accordingly, the lump sum equivalent to surrender unexercised stock options and receive cash for the net realizable value of the options based on the highest price of the Common Stock within 180 days prior to the date of termination (the “Put Option”).an annuity payable at age 65 is no longer applicable.
The Agreements further provide that if any payment to which the executive is entitled would be subject to the excise tax imposed by Section 4999 of the Code, then the Company will pay to the executive an additional amount so that the net amount retained by the executive is equal to the amount that otherwise would be payable to the executive if no such excise tax has been imposed. The Agreements were amended in September 2008 in order to comply with Section 409A of the Code and such amendments did not materially affect the scope or amount of benefits provided.
If each named executive officer’s employment had been terminated on December 29, 200631, 2008 under one of the circumstances described in the Agreement in connection with a Changechange in Controlcontrol 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 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | Increase in
| | | | | | | | | |
| | | | | | | | | | | | Present
| | | | | | | | | |
| | | | | | | | | | | | Value of
| | | | | | | | | |
| | | | Cash
| | | | Continuation
| | | | Pension
| | | | Estimated
| | | | | |
| Name | | | Compensation(1) | | | | of Benefits(2) | | | | Benefits(3) | | | | Gross-up(4) | | | | Total | |
| Timothy R. Wallace | | | $ | 9,749,583 | | | | $ | 450,526 | | | | $ | 1,123,000 | | | | $ | — | | | | $ | 11,323,109 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| William A. McWhirter | | | | 3,247,206 | | | | | 450,526 | | | | | 936,000 | | | | | 2,249,826 | | | | | 6,883,558 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Mark W. Stiles | | | | 4,129,396 | | | | | 450,526 | | | | | 2,114,000 | | | | | 2,440,481 | | | | | 9,134,403 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| D. Stephen Menzies | | | | 4,007,227 | | | | | 450,526 | | | | | 717,000 | | | | | 2,057,504 | | | | | 7,232,257 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| S. Theis Rice | | | | 2,496,890 | | | | | 450,526 | | | | | 1,051,000 | | | | | 1,670,299 | | | | | 5,668,715 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
| (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 accruesEffective April 1, 2009, all future benefits under the Standard Pension Plan.Plan and the Supplemental Retirement Plan automatically ceased for all participants. Accordingly, the lump sum equivalent to the value of an annuity payable at age 65 is no longer applicable. |
| |
| (4) | 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,income, employment, 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 basedexcise taxes. The calculations for Mr. Wallace did not result in excise taxes under Code Section 280G; therefore, nogross-up payments would have been paid if his employment had been terminated on estimated cash payouts and accelerated equity values.December 31, 2008. |
39
Director Compensation
The following table summarizes the compensation paid by the Company to non-employee directors for the fiscal year ended December 31, 2006.2008.
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 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | 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 | | | $ | 74,500 | | | | $ | 103,367 | | | | $ | 2,113 | | | | $ | — | | | | $ | 179,980 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Rhys J. Best | | | | 93,000 | | | | | 103,367 | | | | | — | | | | | — | | | | | 196,367 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| David W. Biegler | | | | 109,000 | | | | | 103,367 | | | | | 5,681 | | | | | 696 | | | | | 218,744 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Leldon E. Echols | | | | 87,000 | | | | | 120,454 | | | | | — | | | | | 603 | | | | | 208,057 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Ronald J. Gafford | | | | 80,000 | | | | | 103,367 | | | | | 18,000 | | | | | 2,442 | | | | | 203,809 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Ronald W. Haddock | | | | 90,000 | | | | | 103,367 | | | | | — | | | | | — | | | | | 193,367 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Jess T. Hay | | | | 98,500 | | | | | 103,367 | | | | | — | | | | | 2,500 | | | | | 204,367 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Adrian Lajous | | | | 87,000 | | | | | 103,367 | | | | | — | | | | | — | | | | | 190,376 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Diana S. Natalicio | | | | 73,000 | | | | | 103,367 | | | | | — | | | | | 9,268 | | | | | 185,635 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
| (1) | | Includes amounts deferred under the 2005 Deferred Plan for Director Fees. |
| |
| (2) | | Stock awards are for restricted stock units awarded in 20062008 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 16Note 17 of Item 8 of the Company’s Annual Report on Form 10-K.10-K for the year-ended December 31, 2008. The SFAS 123R grant date fair value of the awards granted in 2008 was $93,070 for each director. The amount reported represents five months of amortization of the grant date fair value of the awards granted during 2007 and seven months of amortization of the grant date fair value of the awards granted during 20062008 for Messrs. Adams, Best, Biegler, Gafford, Grum, Haddock, Hay, and Lajous and Dr. NatalicioNatalicio. For Mr. Echols, the amount reported represents nine months of $103,725 each. Mr. Lajous was granted an award dated December 14, 2006 with aamortization of the grant date fair value of $106,204the awards granted during 2007 and no dollar amount was recognized for financial reporting purposes in 2006.seven months of amortization of the grant date fair value of the awards granted during 2008. |
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| (3) | | Messrs. Adams, Best, Biegler, Echols, Gafford, Grum, Haddock, Hay, and Lajous and Dr. Natalicio had restricted stock units totaling 3,750; 5,250; 5,250; 5,250; 3,750; 5,250; 2,8005,505; 9,255; 10,755; 5,349; 10,755; 9,255; 10,755; 8,305; and 5,250,10,755, respectively, as of December 31, 2006.2008. Messrs. Adams, Best, Biegler, Gafford, Grum, Haddock, and Hay and Dr. Natalicio had stock options totaling 175,500;81,528; 3,750; 60,000;37,500; 26,250; 60,000; 3,750; 60,00045,000; and 45,000, respectively, as of December 31, 2006.2008. |
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| (4) | | In 2005, the Board of Directors made amendments to the Directors Retirement Plan (the “DRP”) that waswere 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 |
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| 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 |
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| | |
| | value factor will be the date benefits are payable and not December 15, 2005. Includes for Mr.Messrs. Adams and Biegler the above market earnings from the interest rate equivalent under the 2005 Deferred Plan for Director Fees. |
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| (5) | | Includes dividend equivalents on stock units in director fee deferral plans andplans. For Mr. Hay, includes a $2,500 matching contribution by the Company in thehis 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. |
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(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.$5,000 per individual. |
Director Compensation Discussion
| |
| Director Compensation Discussion |
Effective October 1, 2006 each
Each director of the Company who is not a compensated officer or employee of the Company receives cash compensation as follows:
| | |
| | • | Board member annual retainer of $50,000 |
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| | • | Presiding Director — annual retainer of $5,000 |
| |
| | • | Board meeting fee of $1,500$2,000 for each meeting attended |
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| | • | Audit Committee Chairman — annual retainer of $15,000 |
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| | • | Member of the Audit Committee — $2,000 for each meeting attended |
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| | • | Human Resources Committee Chairman — annual retainer of $7,500 |
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| | • | Chairman of other Board Committees — annual retainer of $5,000 |
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| | • | Member of other Board Committees — $1,500 for each meeting attended |
In addition, the Company shall pay a director a fee equal to $2,000 per day for ad hoc or special assignment work performed for or at the request of the Chairman, Chief Executive Officer, and President.
The Board has also established a cash equivalent value as a guide for annual equity compensation for directors of $100,000 and will use a 12 month average share price as the basis for future awards. In May 20062008, each director who was not also an executive officer of the Company was granted 2,2502,822 restricted stock units, with dividend equivalents, that are convertible into 2,2502,822 shares of common stock upon terminationdeparture from the Board. Upon joining the Board in December 2006, Mr. Lajous was granted 2,800 restricted stock units.
Directors
Non-employee directors may elect, pursuant to a 2005 Deferred Plan for Director Fees, to defer the receipt of all or a specified portion of the fees to be paid to him or her. Deferred amounts are credited to an account on the books of the Company and treated as if invested either at an interest rate equivalent (8(73/4% in 20062008 and 73/4%5% in 2007)2009) or, at the director’s prior election, in units of the Company’s Common Stockcommon stock at the closing price on the New York Stock Exchange on the first 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.common stock. Upon ceasing to serve as a director or a change in control, the value of the account will be paid to the director in annual installments not exceeding ten years according to the director’s prior election.
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TRANSACTIONS WITH RELATED PERSONS
| |
| Transactions with Related Persons |
The Corporate Governance and Directors Nominating Committee has adopted a Policy and Procedures for the Review, Approval, and Ratification of Related Person Transactions. In accordance with the written policy, the Corporate Governance and Directors Nominating Committee, or the chair of such committee, as applicable, is responsible for the review, approval, and ratification of all transactions with related persons that are required to be disclosed under the rules of the SEC. Under the policy, a related person includes any of our directors, executive officers, certain stockholders, and any of their respective immediate family members. The policy applies to Related Person Transactions which are transactions in which the Company participates, a related person has a direct or indirect material interest, and the amount exceeds $120,000. Under the policy, the Chief Legal Officer (the “CLO”) will review potential transactions and in consultation with the CEO and CFO will assess whether the proposed transaction would be a Related Person Transaction. If the CLO determines the proposed transaction would be a Related Person Transaction, the proposed transaction is submitted to the Corporate Governance and Directors Nominating Committee, or the chair of such committee, as applicable, for review and consideration. In reviewing
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Related Person Transactions, the Corporate Governance and Directors Nominating Committee, or the chair of such committee, as applicable, shall consider all relevant facts and circumstances available, including, but not limited to the following:
| | |
| • | the benefits to the Company of the Related Person Transaction; |
|
| • | the impact of a director’s independence if the related person is a director, an immediate family member of a director or an entity in which a director is a partner, stockholder or executive officer; |
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| • | the availability of other sources for comparable products and services; |
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| • | the terms of the transaction; and |
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| • | the terms available to unrelated third parties or employees generally. |
After reviewing such information, the Corporate Governance and Directors Nominating Committee, or the chair of such committee, as applicable, may approve the Related Person Transaction if the committee, or the chair of the committee, as applicable, concludes in good faith that the Related Person Transaction is in, or is not inconsistent with, the best interests of the Company and its stockholders.
Under the policy, the HR Committee must approve hiring of immediate family members of executive officers or directors and any subsequent material changes in employment or compensation.
Employed family members of directors and executive officers with total compensation for 20062008 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$943,652 for 2006,2008, 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. |
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| | • | Mr. W. Ray Wallace, father of Timothy R. Wallace, is the Former Chairman and CEO of Trinity Industries, Inc. and is currently employed by the Company to provide consultation to the CEO and the Board and also serves as an Advisory Director of the Company. His total compensation was $191,962$216,558 for 2006,2008, which includes base salary; personal use of company aircraft; the dollar value of the lost tax deduction for expenses that exceeded the amount reported as income related to the personal use of the Company’s aircraft; director meeting fees associated with attendance as an Advisory Director; and other compensation.out-of-pocket medical reimbursement. In connection with Mr. Wallace’s consulting role, the Company provides office space to Mr. Wallace. |
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| | • | Mr. Webb Spradley,son-inson-in-law-law of Jess T.Mr. Hay, is employed by the Company in a non-executive officer capacity. His total compensation was $314,344$309,241 for 2006,2008, which includes base salary; bonus; matching contributions to a defined contribution plans;plan; and the dollar amount recognized for financial statement reporting purposes with respect to the fiscal year in accordance with SFAS 123R. |
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32
SECURITY OWNERSHIP
SECURITY OWNERSHIP
Security Ownership withof Certain Beneficial Owners and Management
The following table presents the beneficial ownership of our common stock as of March 15, 2007,20, 2009, except as noted for (i) each person beneficially owning more than 5% of the outstanding shares of our common stock, (ii) each director and nominee for director of the Company, (iii) each executive officer of the Company listed in the Summary Compensation Table, and (iv) all of our directors and executive officerofficers 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. The business address of each of our directors and executive officers isc/o Trinity Industries, Inc., 2525 Stemmons Freeway, Dallas, Texas75207-2401.
| | | | | | | | | | | |
| | | 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 | | | | | | | | |
| | | | | | | | | |
| | | Amount and Nature of
| | | | |
| | | Ownership of
| | | Percent of
| |
| Name and Address | | Common Stock(1) | | | Class | |
| Directors: | | | | | | | | |
| John L. Adams | | | 152,847 | | | | * | |
| | | | | | | | | |
| Rhys Best | | | 25,505 | | | | * | |
| | | | | | | | | |
| David W. Biegler | | | 50,655 | | | | * | |
| | | | | | | | | |
| Leldon E. Echols | | | 5,349 | | | | * | |
| | | | | | | | | |
| Ronald J. Gafford | | | 37,005 | | | | * | |
| | | | | | | | | |
| Ronald Haddock | | | 25,222 | | | | * | |
| | | | | | | | | |
| Jess T. Hay | | | 60,675 | | | | * | |
| | | | | | | | | |
| Adrian Lajous | | | 8,305 | | | | * | |
| | | | | | | | | |
| Diana S. Natalicio | | | 63,255 | | | | * | |
| | | | | | | | | |
| Named Executive Officers: | | | | | | | | |
| Timothy R. Wallace | | | 1,100,911 | (2) | | | 1.4 | % |
| | | | | | | | | |
| William A. McWhirter | | | 202,050 | | | | * | |
| | | | | | | | | |
| Mark W. Stiles | | | 240,671 | | | | * | |
| | | | | | | | | |
| D. Stephen Menzies | | | 198,834 | | | | * | |
| | | | | | | | | |
| S. Theis Rice | | | 111,977 | | | | * | |
| | | | | | | | | |
| All Directors and Executive Officers as a Group (21 persons): | | | 2,512,771 | | | | 3.2 | % |
| | | | | | | | | |
| Other 5% Owners: | | | | | | | | |
| First Pacific Advisors, LLC | | | 5,551,900 | (3) | | | 7.1 | % |
| | | | | | | | | |
| Franklin Resources, Inc. | | | 4,156,122 | (4) | | | 5.3 | % |
| | | | | | | | | |
| The Vanguard Group, Inc. | | | 4,227,586 | (5) | | | 5.4 | % |
| | | | | | | | | |
| | |
| * | * | 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, 2007,20, 2009, or within 60 days thereafter, as follows: Adams (150,500);65,505; Best (7,500);13,005; Biegler (57,750);48,255; Echols 5,349; Gafford (31,500); Graham (6,390); Grum |
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| |
| (65,250);37,005; Haddock (7,500);13,005; Hay (65,250);55,755; Lajous (2,800);8,305; McWhirter (9,600);8,100; Menzies (28,020);8,985; Natalicio (50,250);55,755; Rice 17,070; Stiles (58,708);22,707; Wallace (182,886)29,400; and all directors and executive officers as a group (798,893).426,701. Includes shares indirectly held through the Company’s 401(k) Plan as follows: Wallace 2,539; McWhirter (648), Wallace (1,762)1,204; Rice 2,307; and all executive officers as a group (3,714)6,182 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 |
43
| | |
| | any, in the accounts. At March 15, 2007,20, 2009, one executive officer had 11,56028,109 shares in a margin account with outstanding credit lines or loans and one director had 3,0753,000 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) (2) | | Includes 246,78257,688 shares held indirectly by limited partnerships which Mr. Wallace controls. |
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(4) (3) | | First Pacific Advisors, LLC and its affiliates, 11400 West Olympic Boulevard, Suite 1200, Los Angeles, California 90064, reported to the SEC on an Amendment to Schedule 13G datedfiled February 14, 2007,11, 2009, that First Pacific Advisors, LLC, in its capacity as investment adviser to its various clients, may be deemed to be the beneficial owner of 5,551,900 shares owned by such clients, as in its capacity as investment adviser it has the power to dispose, direct the disposition of, and vote the shares of the Company owned by its clients. First Pacific Advisors, LLC also stated that Robert L. Rodriguez and J. Richard Atwood are part-owners and managing members of First Pacific Advisors, LLC, and as controlling persons, they may be deemed to beneficially own 5,551,900 shares owned by First Pacific Advisors, LLC, and that First Pacific Advisors, LLC and its affiliates had shared voting power over 1,860,3502,171,050 shares and shared dispositive power over all 5,317,550 shares at December 31, 2006.5,551,900 shares. |
| |
(5) (4) | | Franklin Resources, Inc., and its affiliates, One Franklin Parkway, San Mateo, CACalifornia94403-1906, reported to the SEC on an Amendment to Schedule 13G datedfiled February 1, 2007,9, 2009, that certain affiliates of Franklin Resources, Inc. and certain affiliates hadhave sole voting power over 5,345,7254,050,300 shares and sole dispositive power over 5,345,7254,103,000 shares. These shares as of December 31, 2006. |
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(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”), theare beneficially owned by one or more open- or closed-end 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 separatelycompanies or other managed accounts directly own 140,650that are investment management clients of investment managers that are direct and indirect subsidiaries of Franklin Resources, Inc. Related investment management contracts give these subsidiaries of Franklin Resources, Inc. all investment and/or voting power over these shares, so subsidiaries of Common Stock. All of the foregoing shares of Common StockFranklin Resources, Inc. may be deemed to be beneficially owned by Mr. Gendell; however, Mr. Gendell disclaimsthe beneficial ownershipowners of the Issuer’s securities reported hereinshares. Charles B. Johnson and Rupert H. Johnson, Jr. each own in excess of ten percent of the outstanding common stock of Franklin Resources, Inc., and thus may be deemed to be beneficial owners of shares held by persons and entities for purposeswhom or for which subsidiaries 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.Franklin Resources, Inc. provide investment management services. |
| |
(7) (5) | Lord, Abbett & Co. LLC, 90 Hudson Street, Jersey City, NJ 07302, | The Vanguard Group, Inc., 100 Vanguard Blvd., Malvern, Pennsylvania 19355, reported to the SEC on an Amendment to Schedule 13G datedfiled on February 12, 2007,13, 2009, that The Vanguard Group, Inc. has sole voting power over 4,470,40838,019 shares and sole dispositive power over 4,697,3884,227,586 shares. Vanguard Fiduciary Trust Company, a wholly-owned subsidiary of The Vanguard Group, Inc., is the beneficial owner and directs the voting of 38,019 shares as a result of December 31, 2006.its serving as investment manager of collective trust accounts. |
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ADDITIONAL INFORMATION
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Company’s executive officers, directors, and persons who own more than ten percent of the Company’s Common Stock to file initial reports of ownership and changes in ownership with the Securities and Exchange Commission (“SEC”). These reports are also filed with the New York Stock Exchange, and a copy of each report is furnished to the Company.
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’s knowledge, based on a review of reports furnished to it and written representations from reporting persons, each individual who was required to file such reports complied with the applicable filing requirements 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 result of the three-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, 2006,2008.
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May 15, 2006, and September 13, 2006. Mr. Graham filed an amended Form 3 on October 30, 2006 correcting the omission.
Stockholder Proposals for the 20082010 Proxy Statement
Stockholders’ proposals to be presented at the 20082010 Annual Meeting of Stockholders, for inclusion in the Company’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, no later than December 6, 2007.2, 2009. 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 20082010 Annual Meeting
Under the Bylaws of the Company, certain procedures are provided which a stockholder must follow in order to place in nomination persons for election as directors at an annual meeting of stockholders 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 timely received (on or before March 9, 2008,5, 2010, but no earlier than February 7, 2008,3, 2010, for the 20082010 Annual Meeting) to the Corporate Secretary of the Company containing the name and address of the stockholder, the number of shares of the Company beneficially owned by the stockholder, and a representation 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 the stockholder and each nominee and any other person or person(s) (including their names) pursuant to which the nomination(s) are to be made, such other information regarding each nominee as would have been required to be included in a proxy statement filed pursuant to the proxy rules of the SEC had each nominee been nominated by the Board, and the 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. Notice 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 not 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 the process for stockholders to follow to suggest a director candidate to the Corporate Governance and Directors Nominating Committee for nomination by the Board.
Report onForm 10-K
The Company’s Annual Report onForm 10-K for the fiscal year ended December 31, 2006,2008, as filed with the Securities and Exchange Commission, including financial statements, was included with the Annual Report mailed to each stockholder. Stockholders may obtain without charge another copy of theForm 10-K, excluding certain
45
exhibits, by writing to Michael G. Fortado, Vice PresidentPaul M. Jolas, Deputy General Counsel and Corporate Secretary, Trinity Industries, Inc., 2525 Stemmons Freeway, Dallas, Texas 75207.
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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
By Order of the numberBoard of shares owned, to date, sign Directors
PAUL M. JOLAS
Deputy General Counsel
and return the enclosed proxy in the enclosed business reply envelope.Corporate Secretary
| |
| By Order of the Board of Directors |
|
|
| MICHAEL G. FORTADO |
| Vice President and Corporate Secretary |
April 5, 20071, 2009
46
36
TRINITY INDUSTRIES, INC.
This Proxy is Solicited by the Board of Directors
Annual Meeting of Stockholders — May 7, 2007
The undersigned hereby appoints Timothy R. Wallace, Jess T. Hay and Michael 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 Monday, May 7, 2007 at 9:00 a.m. Central Daylight 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.
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” EACH OF THE NAMED NOMINEES FOR DIRECTOR AND “FOR” PROPOSALS 2 and 3.
(Continued and to be marked, dated and signed on reverse side)
| |
| ANNUAL MEETING OF STOCKHOLDERS OF TRINITY INDUSTRIES, INC. |
| May 4, 2009 PROXY VOTING INSTRUCTIONS INTERNET — Access “www.voteproxy.com” and follow the on-screen instructions. Have your proxy card available when you access the web page, and use the Company Number and Account Number shown on your proxy card. TELEPHONE — Call toll-free 1-800-PROXIES (1-800-776-9437) in the United States or 1-718-921-8500 from foreign countries from any COMPANY NUMBER touch-tone telephone and follow the instructions. Have your proxy card available when you call and use the Company Number and Account Number shown on your proxy card. ACCOUNT NUMBER Vote online/phone until 11:59 Maiden Lane |
| New York, NY 10038 |
THE DIRECTORS RECOMMEND VOTING “FOR” EACH OF THE NOMINEES FOR DIRECTOR AND “FOR” PROPOSALS 2 and 3.
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(1) | PM EDT the day before the meeting. MAIL — Sign, date and mail your proxy card in the envelope provided as soon as possible. IN PERSON — You may vote your shares in person by attending the Annual Meeting. NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIAL: The Notice of Meeting, proxy statement and proxy card are available at www.proxydocs.com/trn Please detach along perforated line and mail in the envelope provided IF you are not voting via telephone or the Internet. —— —— 21030000000000000000 0 050409 THE DIRECTORS RECOMMEND VOTING “FOR” EACH OF THE NOMINEES FOR DIRECTOR AND “FOR” PROPOSAL 2. PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE x FOR AGAINST ABSTAIN 1. Election of nine (9)ten (10) 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.)
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(2) | 2. To approve an amendment toratification of the Certificateappointment 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 Independent Registered Public Accounting Firm for fiscal year ending December 31, 2007.
oFORoAGAINSToABSTAIN
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(4) | Ernst & Young LLP as Independent Registered Public Accounting Firm for fis-NOMINEES: cal year ending December 31, 2009. FOR ALL NOMINEES O John L. Adams O Rhys J. Best 3. In their discretion on such other matters as may properly come before the Meeting. |
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| | Changemeeting. WITHHOLD AUTHORITY O David W. Biegler FOR ALL NOMINEES O Leldon E. Echols O Ronald J. Gafford FOR ALL EXCEPT O Ronald W. Haddock (See instructions below) O Jess T. Hay O Adrian Lajous O Diana S. Natalicio O Timothy R. Wallace INSTRUCTIONS: To withhold authority to vote for any individual nominee(s), mark “FOR ALL EXCEPT” and fill in the circle next to each nominee you wish to withhold, as shown here: JOHN SMITH 1234 MAIN STREET APT. 203 NEW YORK, NY 10038 To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note that changes to the registered name(s) on the account may not be submitted via this method. Signature of Address Mark Here o |
| | Stockholder Date: Signature of Stockholder Date: Note: Please sign exactly as your name appearsor names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person. |
—. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —— 0 TRINITY INDUSTRIES, INC. THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS ANNUAL MEETING OF STOCKHOLDERS — May 4, 2009 As an alternative to completing this form, you may enter your vote instruction by telephone at 1-800-PROXIES, or via the Internet at WWW.VOTEPROXY.COM and follow the simple instructions. Use the Company Number and Account Number shown on your proxy card. The undersigned hereby appoints Timothy R. Wallace, Jess T. Hay and Paul M. Jolas and each of them with full power of substitution, attorneys, agents and proxies (“agents”) of the undersigned to vote as directed on the proxy.reverse side 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 Monday, May 4, 2009 at 8:30 a.m. Central Daylight Time, and at any adjournment or adjournments thereof. 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, aof the above agents shall be present in person or by substitution at such meeting or at any adjournment thereof, the majority of said agents 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 agents, their substitutes, or any of them, may lawfully do by virtue hereof. 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” EACH OF THE NAMED NOMINEES FOR DIRECTOR AND “FOR” PROPOSAL 2. (Continued and to be signed on the reverse side) 14475 |
ANNUAL MEETING OF STOCKHOLDERS OF TRINITY INDUSTRIES, INC. May 4, 2009 NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIAL: The Notice of Meeting, proxy statement and proxy card are available at www.proxydocs.com/trn Please sign, date and mail your proxy card in the envelope provided as soon as possible. Please detach along perforated line and mail in the envelope provided. — —— 21030000000000000000 0 050409 THE DIRECTORS RECOMMEND VOTING “FOR” EACH OF THE NOMINEES FOR DIRECTOR AND “FOR” PROPOSAL 2. PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE x FOR AGAINST ABSTAIN 1. Election of ten (10) Directors: 2. To approve ratification of the appointment of Ernst & Young LLP as Independent Registered Public Accounting Firm for NOMINEES: fiscal year ending December 31, 2009. FOR ALL NOMINEES O John L. Adams O Rhys J. Best 3. In their discretion on such other matters as may properly come before the meeting. WITHHOLD AUTHORITY O David W. Biegler FOR ALL NOMINEES O Leldon E. Echols O Ronald J. Gafford FOR ALL EXCEPT O Ronald W. Haddock (See instructions below) O Jess T. Hay O Adrian Lajous O Diana S. Natalicio O Timothy R. Wallace INSTRUCTIONS: To withhold authority to vote for any individual nominee(s), mark “FOR ALL EXCEPT” and fill in the circle next to each nominee you wish to withhold, as shown here: To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note that changes to the registered name(s) on the account may not be submitted via this method. Signature of Stockholder Date: Signature of Stockholder Date: Note: Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If signed bythe signer is a corporation, its seal should be affixed. |
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(x)please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in Black or Blue inkpartnership name by authorized person. |
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED.
