UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
Proxy
Statement Pursuant to Section 14(a) of
the
Securities Exchange Act of 1934 (Amendment
No. )
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Filed
by the Registrant x
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Filed
by a Party other than the Registrant o
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Check
the appropriate box:
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Preliminary
Proxy Statement
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Confidential,
for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
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x
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Definitive
Proxy Statement
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Definitive
Additional Materials
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Soliciting
Material Pursuant to §240.14a-12
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Carter’s,
Inc.
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(Name
of Registrant as Specified in its Charter)
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(Name
of Person(s) Filing Proxy Statement, if other than the
Registrant)
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Payment
of Filing Fee (Check the appropriate box):
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x
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No
fee required.
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Fee
computed on table below per Exchange Act
Rules 14a-6(i)(1) and 0-11.
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(1)
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Title
of each class of securities to which transaction
applies:
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(2)
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Aggregate
number of securities to which transaction applies:
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(3)
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Per
unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
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(4)
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Proposed
maximum aggregate value of transaction:
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(5)
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Total
fee paid:
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Fee
paid previously with preliminary materials.
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Check
box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date
of its filing.
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(1)
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Amount
Previously Paid:
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(2)
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Form,
Schedule or Registration Statement No.:
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(3)
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Filing
Party:
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(4)
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Date
Filed:
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April 3,
2009
Dear
Shareholder,
It is my
pleasure to invite you to attend our 2009 Annual Meeting of Shareholders on May
14, 2009. The meeting will be held at 8:00 a.m. at our offices
located at 1170 Peachtree Street NE, 6th Floor,
Atlanta, Georgia 30309.
The
attached Notice of 2009 Annual Meeting of Shareholders and Proxy Statement
describe the formal business to be conducted at the meeting. Whether
or not you plan to attend the Annual Meeting, your shares can be represented if
you promptly submit your voting instructions by telephone, over the internet, or
by completing, signing, dating, and returning your proxy card in the enclosed
envelope.
On behalf
of the Board of Directors and management of Carter’s, Inc., thank you for
your continued support and investment in Carter's.
Sincerely,
Michael
D. Casey
Chief
Executive Officer
1170
Peachtree Street NE, Suite 900
Atlanta,
Georgia 30309
Tel: (404)
745-2700
Fax: (404)
892-3079
NOTICE
OF 2009 ANNUAL MEETING OF SHAREHOLDERS
Notice is
hereby given that the 2009 Annual Meeting of Shareholders of Carter’s, Inc.
(the “Annual Meeting”) will be held at 8:00 a.m. on May 14, 2009 at our
offices located at 1170 Peachtree Street NE, 6th Floor, Atlanta, Georgia
30309. At the Annual Meeting, we will address all business that may
properly come before the meeting and vote on the following matters:
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1.
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The
election of three Class III
Directors;
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2.
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The
approval of the Company’s Amended and Restated 2003 Equity Incentive Plan;
and
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3.
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The
ratification of the appointment of PricewaterhouseCoopers LLP as the
Company’s independent registered public accounting firm for fiscal
2009.
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Shareholders
of record at the close of business on March 27, 2009 are entitled to receive
notice of, attend, and vote at the Annual Meeting. Your vote is very
important. Whether or not you plan to attend the Annual Meeting, to
ensure that your shares are represented at the Annual Meeting, please complete,
sign, date, and return the proxy card in the envelope provided or submit your
voting instructions by telephone or over the internet.
If you
plan to attend the Annual Meeting and are a registered shareholder, please bring
the invitation attached to your proxy card. If your shares are
registered in the name of a bank or your broker, please bring your bank or
brokerage statement showing your beneficial ownership with you to the Annual
Meeting or request an invitation by writing to me at the address set forth
above.
Important
Notice Regarding the Availability of Proxy Materials for the
2009
Annual Meeting of Shareholders of Carter’s, Inc. to be held on May 14,
2009:
The
proxy materials and the Annual Report to Shareholders are available at
www.carters.com.
By order
of the Board of Directors,
Brendan
M. Gibbons
Vice
President, General Counsel, and Secretary
Atlanta,
Georgia
April 3,
2009
PROXY
STATEMENT
TABLE
OF CONTENTS
Why
am I receiving this proxy statement?
The Board
of Directors of Carter’s, Inc. (“we,” “us,” “our,” “Carter’s,” or the
“Company”) is soliciting proxies for our 2009 Annual Meeting of Shareholders on
May 14, 2009 (the “Annual Meeting”). This proxy statement and
accompanying proxy card are being mailed on or about April 3, 2009 to
shareholders of record as of March 27, 2009 (“record date”).
You are
receiving this proxy statement because you owned shares of Carter’s common stock
on the record date and are therefore entitled to vote at the Annual
Meeting. By use of a proxy, you can vote regardless of whether or not
you attend the Annual Meeting. This proxy statement provides
information on the matters on which the Company’s Board of Directors (the
“Board”) would like you to vote so that you can make an informed
decision.
What
is the purpose of the Annual Meeting?
The
purpose of the Annual Meeting is for our shareholders to address all business
that may properly come before the meeting and to vote on the following
matters:
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1.
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The
election of three Class III Directors (see page
9);
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2.
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The
approval of the Company’s Amended and Restated 2003 Equity Incentive Plan
(the “Plan”) (see page 32); and
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3.
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The
ratification of the appointment of PricewaterhouseCoopers LLP (“PwC”) as
the Company’s independent registered public accounting firm for fiscal
2009 (see page 38).
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Who
is asking for my vote?
The
Company is soliciting your proxy on behalf of the Board. The Company
is paying for the costs of this solicitation and proxy statement.
Who
can attend the Annual Meeting?
All
shareholders of record, or their duly appointed proxies, may attend the Annual
Meeting. As of the record date, there were 56,667,490 shares of
common stock issued and outstanding.
What
are my voting rights?
Each
share of common stock is entitled to one vote on each matter submitted to
shareholders at the Annual Meeting.
What
is the difference between holding shares as a shareholder of record and as a
beneficial owner?
If your
shares are registered directly in your name with the Company’s transfer agent,
American Stock Transfer and Trust Company, you are considered the shareholder of
record for these shares. As the shareholder of record, you have the
right to grant your voting proxy directly to persons listed on your proxy card
or vote in person at the Annual Meeting.
If your
shares are held in a brokerage account or by another nominee, you are considered
the beneficial owner of shares held “in street name.” These proxy materials are
being forwarded to you together with a voting instruction card. As a
beneficial owner, you have the right to direct your broker, trustee, or nominee
how to vote, and you are also invited to attend the Annual
Meeting. Because you are a beneficial owner and not the shareholder
of record, you may not vote your shares in person at the Annual Meeting unless
you obtain a “legal proxy” from the broker, trustee, or nominee that holds your
shares. Your broker, trustee, or nominee should have enclosed or
provided directions for you to use to instruct the broker, trustee, or nominee
how to vote your shares.
If the
brokers do not receive timely instructions from the beneficial owner regarding
how the beneficial owner wants the shares voted, brokers holding shares of
record for a beneficial owner have discretionary authority to vote on Proposal
Number One, Proposal Number Two, and Proposal Number Three.
1
What
are my choices when voting on the election of Class III Directors, and what vote
is needed to elect the Director nominees?
In voting
on the election of Class III Directors (Proposal Number One), shareholders
may:
1.
vote for all nominees,
2.
vote to withhold authority for all nominees, or
3.
vote for all nominees, except specific nominees.
The three
nominees for election as Class III Directors who receive the greatest number of
votes will be elected as Class III Directors. Votes that are withheld
will be counted toward a quorum, but will be excluded entirely from the
tabulation of votes for each nominee, and, therefore, will not affect the
outcome of the vote on this Proposal.
What
are my choices when voting on whether to approve the Plan, and what vote is
required to approve the Plan?
In voting
on the Plan (Proposal Number Two), shareholders may:
1.
vote for the Plan,
2.
vote against the Plan, or
3.
abstain from voting on the Plan.
The
approval of Proposal Number Two requires the affirmative vote of the holders of
a majority of the shares of common stock present or represented at the meeting
and voted on the Proposal at the Annual Meeting. Votes to abstain
will be counted toward a quorum, but will be excluded entirely from the
tabulation of votes for this Proposal, and, therefore, will not affect the
outcome of the vote on this Proposal.
What
are my choices when voting on the ratification of the appointment of PwC as the
Company’s independent registered public accounting firm for fiscal
2009?
In voting
on the ratification of PwC (Proposal Number Three), shareholders
may:
1.
vote for ratifying PwC’s appointment,
2.
vote against ratifying PwC’s appointment, or
3.
abstain from voting on ratifying PwC’s appointment.
The
approval of Proposal Number Three requires the affirmative vote of the holders
of a majority of the shares of common stock present or represented at the
meeting and voted on the Proposal at the Annual Meeting. Votes to
abstain will be counted toward a quorum, but will be excluded entirely from the
tabulation of votes for this Proposal, and, therefore, will not affect the
outcome of the vote on this Proposal.
What
constitutes a quorum?
A quorum
is the minimum number of shares required to be present to transact business at
the Annual Meeting. Pursuant to the Company’s by-laws, the presence
at the Annual Meeting, in person, by proxy, or by remote communication, of the
holders of at least a majority of the shares entitled to be voted will
constitute a quorum. Broker non-votes will be counted as shares that
are present at the meeting for purposes of determining a quorum. If a
quorum is not present, the meeting will be adjourned until a quorum is
obtained.
How
does the Board recommend that I vote?
Unless
you give instructions on your proxy card, the persons named as proxy holders on
the proxy card will vote in accordance with the recommendations of the
Board. The Board recommends a vote:
FOR the election of the
nominees for Class III Directors (Proposal Number One);
FOR the approval of the Plan
(Proposal Number Two); and
FOR the ratification of the
appointment of PwC (Proposal Number Three).
2
How
do I vote?
If you
are a shareholder of record, you may vote in one of four ways. First,
you may vote by mail by signing, dating, and mailing your proxy card in the
enclosed envelope. Second, you may vote in person at the Annual
Meeting. Third, you may vote over the internet by completing the
voting instruction form found at www.proxyvote.com. You will need
your proxy card when voting over the internet. Fourth, you may vote
by telephone by using a touch-tone telephone and calling 1-800-690-6903 and
following the instructions.
If your
shares are held in a brokerage account or by another nominee, these proxy
materials are being forwarded to you together with a voting instruction
card. Follow the instructions on the voting instruction card in order
to vote your shares by proxy or in person.
Can
I change my vote after I return my proxy card?
Yes. Even
after you have submitted your proxy card, you may change your vote at any time
before your proxy votes your shares by submitting written notice of revocation
to Brendan M. Gibbons, Vice President, General Counsel, and Secretary of
Carter’s, Inc., at the Company’s address set forth in the Notice of the
Annual Meeting, or by submitting another proxy card bearing a later
date. Alternatively, if you have voted by telephone or over the
internet, you may change your vote by calling 1-800-690-6903 and following the
instructions. The powers of the proxy holders will be suspended if
you attend the Annual Meeting in person, although attendance at the Annual
Meeting will not by itself revoke a previously granted proxy. If you
hold your shares through a broker or other custodian and would like to change
your voting instructions, please review the directions provided to you by that
broker or custodian.
May I
vote confidentially?
Yes. Our
policy is to keep your individual votes confidential, except as appropriate to
meet legal requirements, to allow for the tabulation and certification of votes,
or to facilitate proxy solicitation.
Who
will count the votes?
A
representative of Broadridge Financial Solutions, Inc. will count the votes and
act as the inspector of election for the Annual Meeting.
What
happens if additional matters are presented at the Annual
Meeting?
As of the
date of this proxy statement, the Board knows of no matters other than those set
forth herein that will be presented for determination at the Annual
Meeting. If, however, any other matters properly come before the
Annual Meeting and call for a vote of shareholders, the Board intends proxies to
be voted in accordance with the judgment of the proxy holders.
Where
can I find the voting results of the Annual Meeting?
We intend
to announce preliminary voting results at the Annual Meeting and publish final
results in our quarterly report on Form 10-Q for the second quarter of
fiscal 2009.
How
may I obtain information about the Company?
A copy of
our fiscal 2008 Annual Report accompanies this proxy statement and is available
on our website at www.carters.com. Shareholders may also obtain a
free copy of our Annual Report on Form 10-K by visiting our website or by
sending a request in writing to Mr. Gibbons at the Company’s address set forth
in the Notice of the Annual Meeting.
When
are shareholder proposals due for consideration in next year's proxy statement
or at next year’s annual meeting?
Any
proposals to be considered for inclusion in next year’s proxy statement must be
submitted in writing to Mr. Gibbons at the Company’s address set forth in
the Notice of the Annual Meeting, prior to the close of business on December 4,
2009. There are additional requirements under our by-laws and the
proxy rules to present a proposal, including continuing to own a minimum
number of shares of our stock until next year’s annual meeting and appearing in
person at the annual meeting to explain your proposal. Shareholders
who wish to make a proposal to be considered at next year’s annual meeting,
other than proposals to be considered for inclusion in next year’s proxy
statement, must notify the Company in the same manner specified above no earlier
than January 14, 2010 and no later than February 13, 2010.
3
Who
can help answer my questions?
If you
have any questions about the Annual Meeting or how to submit or revoke your
proxy, or to request an invitation, contact Mr. Gibbons at the Company’s address
set forth in the Notice of the Annual Meeting.
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Board
of Directors
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Bradley M. Bloom
became a Director in August 2001. Mr. Bloom is a
Managing Director of Berkshire Partners LLC, (“Berkshire Partners”) which he
co-founded in 1986. He is or has been a director of several of
Berkshire Partners’ consumer and retailing companies. Mr. Bloom
is a current director of Bare Escentuals, Inc., Citizens of Humanity Holding
Company LLC, and Gordon Brothers Group, and a former director of Acosta, Inc.,
Sterling, Inc., America’s Best Contacts and Eyeglasses, L.P., and Miami
Cruiseline Services Holdings I.B.V.
Michael D.
Casey became a director in August 2008. Mr. Casey joined the
Company in 1993 as Vice President-Finance. Mr. Casey was named Senior
Vice President-Finance in 1997, Senior Vice President and Chief Financial
Officer in 1998, Executive Vice President and Chief Financial Officer in 2003,
and Chief Executive Officer on August 1, 2008. Prior to joining the
Company, Mr. Casey was a Senior Manager with Price Waterhouse LLP,
predecessor to PricewaterhouseCoopers LLP.
A. Bruce Cleverly
became a Director in March 2008. Mr. Cleverly retired as
President of Global Oral Care from Procter & Gamble Company/The Gillette
Company in September 2007, a position he held since 2005. Mr.
Cleverly joined The Gillette Company in 1975 as a Marketing Assistant and held
positions of increasing responsibility in product management. In
2001, Mr. Cleverly became President of Gillette’s worldwide Oral Care
business. In October 2005, Mr. Cleverly was elected President of The
Procter & Gamble Company’s Global Oral Care division. Mr.
Cleverly is a director of Rain Bird Corporation and a member of the Board of
Fellows of the Harvard School of Dental Medicine.
Paul
Fulton became a Director in
May 2002. Mr. Fulton retired as President of Sara Lee
Corporation in 1993 after spending 34 years with the company. He
is currently non-Executive Chairman of the Board of Bassett Furniture
Industries, Inc. and Premier Commercial Bank. Mr. Fulton
was previously a director at Bank of America Corporation, where he served from
1993 to 2007; Lowe’s Companies, Inc., where he served from 1996 to 2007;
and Sonoco Products Company, Inc., where he served from 1989 to
2005.
William J.
Montgoris became a Director in August 2007. Mr. Montgoris
retired as Chief Operating Officer of The Bear Stearns Companies, Inc. in 1999,
a position he held since August 1993. While at Bear Stearns, Mr.
Montgoris also served as the company’s Chief Financial Officer from April 1987
until October 1996. Mr. Montgoris is currently a director of Stage
Stores, Inc. and Office Max Incorporated.
David Pulver
became a Director in January 2002. Mr. Pulver has
been a private investor for more than 25 years and is the President of
Cornerstone Capital, Inc. Mr. Pulver is a current director
of Hearst-Argyle Television, Inc., where he has served since August of
1997. Mr. Pulver was a founder of The Children’s
Place, Inc., and served as its Chairman and Co-Chief Executive Officer
until 1982.
John R. Welch
became a Director in February 2003. Mr. Welch
retired as President of Mast Industries (Far East) Ltd. in April 2002
after spending 18 years with the company. Mr. Welch also
served as Executive Vice President of Operations at Warnaco Knitwear, a division
of Warnaco, Inc. from August 1978 to
December 1983. Mr. Welch is currently a director of Brandot
International Ltd.
Thomas E. Whiddon
became a Director in August 2003. Mr. Whiddon
retired as Executive Vice President-Logistics and Technology of Lowe’s
Companies, Inc. in March 2003, a position he held since
2000. From 1996 to 2000, Mr. Whiddon served as Lowe’s Chief
Financial Officer. Since his retirement, Mr. Whiddon has worked
as a consultant, serving various companies in executive capacities on an interim
basis. Mr. Whiddon is currently a director of Sonoco Products
Company, Inc. and of Dollar Tree
Stores, Inc. Mr. Whiddon has been an Advisory Director of
Berkshire Partners since October 2005 and previously served as a director
of Bare Escentuals, Inc.
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Board
Meetings
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Our
Corporate Governance Principles require Carter’s to have at least four regularly
scheduled Board meetings each year, and each Director is expected to attend each
meeting. The Board met five times during fiscal 2008. In
fiscal 2008, no Director participated in less than 75% of the aggregate number
of all of the Board and applicable committee meetings. Although the
Company does not have a policy regarding Director attendance at annual
meetings, each Director attended the Company’s annual meeting in fiscal
2008.
4
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Executive
Sessions
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Executive
sessions of non-management Directors are held at least four times a year, and
executive sessions of independent, non-management Directors are held at least
once a year. Any non-management Director can request that an
additional executive session be scheduled. The Chairman of the
Nominating and Corporate Governance Committee, currently Mr. Welch, has been
chosen to be the presiding Director at the executive sessions of non-management
Directors (the “Presiding Director”).
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Board
Committees
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Our Board
has a standing Audit Committee, a Compensation Committee, and a Nominating and
Corporate Governance Committee. The Board may also establish other
committees to assist in the discharge of its responsibilities. For
example, in June 2008, the Board established a Transition Committee, chaired by
Mr. Cleverly, to assist our Chief Executive Officer in the transition into his
new role.
The
current members of each Board committee and the number of committee meetings
held during fiscal 2008 are listed below.
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Name of Director
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Audit
Committee
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Compensation
Committee
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Nominating and
Corporate
Governance
Committee
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Bradley
M. Bloom
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x
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A.
Bruce Cleverly
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x
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Paul
Fulton
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x
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*
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William
J. Montgoris
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x
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David
Pulver
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x
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*
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John
R. Welch
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x
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x
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*
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Thomas
E. Whiddon
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x
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x
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Number
of Meetings in Fiscal 2008
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8
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6
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4
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*
Chairman
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Audit
Committee
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The
primary responsibilities of the Audit Committee include:
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·
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oversight
of the quality and integrity of the consolidated financial statements,
including the accounting, auditing, and reporting practices of the
Company;
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·
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oversight
of the Company’s internal control over financial
reporting;
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·
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appointment
of the independent registered public accounting firm and oversight of its
performance, including its qualifications and
independence;
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·
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oversight
of the Company’s compliance with legal and regulatory requirements;
and
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·
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oversight
of the performance of the Company’s internal audit
function.
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The Audit
Committee operates pursuant to a written charter that addresses the requirements
of the New York Stock Exchange’s (“NYSE”) listing standards. The
charter is available on our website at www.carters.com or in print by
contacting Brendan M. Gibbons, Vice President, General Counsel, and Secretary of
Carter’s, Inc., at the Company’s address set forth in the Notice of the
Annual Meeting. The Board has determined that each member of the
Audit Committee is independent and meets the financial literacy requirements set
forth in the NYSE’s listing standards. The Board has also determined
that each member of the Audit Committee is an “audit committee financial expert”
as defined by the Securities and Exchange Commission (“SEC”).
The Audit
Committee Report is included in this proxy statement on
page 37.
5
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Compensation
Committee
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The
primary responsibilities of the Compensation Committee include:
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·
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establishing
the Company’s philosophy, policies, and strategy relative to executive
compensation, including the mix of base salary and short-term and
long-term incentive compensation within the context of stated guidelines
for compensation relative to peer
companies;
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·
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evaluating
the performance of the Chief Executive Officer and other executive
officers relative to approved performance goals and
objectives;
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·
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setting
the compensation of the Chief Executive Officer and other executive
officers based upon an evaluation of their
performance;
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·
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assisting
the Board in developing and evaluating candidates for key executive
positions and ensuring a succession plan is in place for the Chief
Executive Officer and other executive
officers;
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·
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evaluating
compensation plans, policies, and programs with respect to the Chief
Executive Officer, other executive officers, and non-management
Directors;
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·
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monitoring
and evaluating benefit programs for the Company’s Chief Executive Officer
and other executive officers; and
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·
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producing
an annual report on executive compensation for inclusion in the Company’s
annual proxy statement. This years Compensation Committee
Report is included in this proxy statement on
page 21.
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The
Compensation Committee operates pursuant to a written charter that addresses the
requirements of the NYSE’s listing standards. The charter is
available on our website at www.carters.com or in print by contacting Brendan M.
Gibbons, Vice President, General Counsel, and Secretary of Carter’s, Inc.,
at the Company’s address set forth in the Notice of the Annual
Meeting. The Board has determined that each member of the
Compensation Committee is independent.
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Compensation
Committee Interlocks and Insider
Participation
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None of
the members of our Compensation Committee serving during fiscal 2008 has been an
officer or other employee of the Company. None of our executive
officers has served as a member of the board of directors or compensation
committee of any entity that has one or more executive officers serving on our
Board or the Compensation Committee.
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Nominating
and Corporate Governance Committee
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The
primary responsibilities of the Nominating and Corporate Governance Committee
include:
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·
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identifying
and recommending candidates qualified to become Board
members;
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·
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recommending
Directors for appointment to Board Committees;
and
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·
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developing
and recommending to the Board a set of corporate governance principles and
monitoring the Company’s compliance with and effectiveness of such
principles.
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The
Nominating and Corporate Governance Committee operates pursuant to a written
charter that addresses the requirements of the NYSE’s listing
standards. The charter is available on our website at
www.carters.com or
in print by contacting Brendan M. Gibbons, Vice President, General Counsel, and
Secretary of Carter’s, Inc., at the Company’s address set forth in the
Notice of the Annual Meeting. The Board has determined that each
member of the Nominating and Corporate Governance Committee is
independent.
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Consideration
of Director Nominees
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The
Nominating and Corporate Governance Committee regularly assesses the
appropriateness of the size of the Board of Directors. In the event
that vacancies occur or are anticipated, the Committee will identify prospective
nominees that come to its attention through current Board members, professional
search firms, or shareholders who hold more than 1% of our common
stock. The Board believes that it is appropriate to limit the group
of shareholders who can propose nominees due to time constraints on the
Nominating and Corporate Governance Committee. The Committee will
consider persons recommended by shareholders who hold more than 1% of our common
stock for inclusion as nominees for election to the Board if the names of such
persons are submitted to Brendan M. Gibbons, Vice President, General Counsel,
and Secretary of Carter’s, Inc., at the Company’s address set forth in the
Notice of the Annual Meeting. This submission must be made in writing
and in accordance with our by-laws, including mailing the submission in a timely
manner and including the nominee’s name, address, and qualifications for Board
membership.
6
When
evaluating a potential candidate for membership on the Board, the Committee
considers each candidate’s skills and experience and assesses the needs of the
Board and its committees at that point in time. In connection with
this assessment, the Committee will determine whether to interview prospective
nominees, and if warranted, one or more members of the Committee, and others as
appropriate, will interview prospective nominees in person or by
telephone. Once this evaluation is completed, if warranted, the
Committee recommends candidates to the Board for nomination, and the Board
determines whether or not to select the nominees after considering the
recommendation of the Committee.
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Interested
Party Communications
|
A
shareholder or other interested party may submit a written communication to the
Board, non-management Directors, or Presiding Director. The
submission must be delivered to Brendan M. Gibbons, Vice President, General
Counsel, and Secretary of Carter’s, Inc., at the Company’s address set
forth in the Notice of the Annual Meeting.
The
Board, non-management Directors, or Presiding Director may require the
submitting shareholder to furnish such information as may be reasonably required
or deemed necessary to sufficiently review and consider the submission of such
shareholder.
Each
submission will be forwarded, without editing or alteration, to the Board,
non-management Directors, or Presiding Director, as appropriate, on or prior to
the next scheduled meeting of the Board. The Board, non-management
Directors, or Presiding Director, as appropriate, will determine, in their sole
discretion, the method by which such submission will be reviewed and
considered.
|
Corporate
Governance Principles and Code of
Ethics
|
Carter’s
is committed to conducting its business with the highest level of integrity and
maintaining the highest standards of corporate governance. Our
Corporate Governance Principles and our Code of Business Ethics and Professional
Conduct provide the structure within which our Board and management operate the
Company. The Company’s Code of Business Ethics and Professional
Conduct applies to all Directors and Company employees, including the Company’s
executive officers. Our Corporate Governance Principles and Code of
Business Ethics and Professional Conduct are available on the Company’s website
at www.carters.com or in print by
contacting Brendan M. Gibbons, Vice President, General Counsel, and Secretary of
Carter’s, Inc., at the Company’s address set forth in the Notice of the
Annual Meeting.
|
Director
Independence
|
The
Company’s Corporate Governance Principles require a majority of the Company’s
Directors to be independent. For a Director to be considered
independent, the Board must determine that the Director has no direct or
indirect material relationship with Carter’s. The Board considers all
relevant information provided by each Director regarding any relationships each
Director may have with Carter’s or management. To assist it in making
such independence determinations, the Board has established the following
independence tests, which address all the specific independence tests of the
NYSE’s listing standards. A Director will not be considered
independent if:
|
|
·
|
the
Director is, or within the last three years has been, employed by the
Company; or an immediate family member of the Director is, or within the
last three years has been, employed as an executive officer of the
Company;
|
|
|
·
|
the
Director, or an immediate family member of the Director, has received,
during any twelve-month period within the last three years, direct
compensation from the Company exceeding $120,000, other than Director or
committee fees and pension or other forms of deferred compensation for
prior service (provided such compensation is not contingent in any way on
continued service);
|
|
|
·
|
(a) the
Director, or an immediate family member of the Director, is a current
partner of a firm that is the Company’s internal auditor or independent
registered public accounting firm; (b) the Director is a current
employee of such a firm; (c) the Director has an immediate family
member who is a current employee of such a firm and who participates in
the firm’s audit, assurance, or tax compliance (but not tax planning)
practice; or (d) the Director, or an immediate family member of the
Director, was, within the last three years (but is no longer), a partner
or employee of such a firm and personally worked on the Company’s audit
within that time;
|
7
|
|
·
|
the
Director, or an immediate family member of the Director, is, or within the
last three years has been, employed as an executive officer of another
company where any of the Company’s present executive officers serve or
served on that company’s compensation
committee;
|
|
|
·
|
the
Director is a current employee, or has an immediate family member who is
an executive officer, of another company that has made payments to, or
receives payments from, the Company for property or services in an amount
which, in any of the last three fiscal years, exceeds the greater of $1.0
million, or 2%, of such other company’s consolidated gross
revenues;
|
|
|
·
|
the
Director, or an immediate family member of the Director, is, or within the
last three years has been, employed by a company that has a director who
is an officer of the Company;
|
|
|
·
|
the
Director serves as an officer, director, or trustee, or as a member of a
fund raising organization or committee of a not-for-profit entity to which
the Company made, in any of the last three fiscal years, contributions in
excess of the greater of (i) $50,000, or (ii) 2% of the gross annual
revenues or charitable receipts of such entity;
or
|
|
|
·
|
the
Director is, or within the last three years has been, an executive officer
of another company that is indebted to the Company, or to which the
Company is indebted, and the total amount of either company’s indebtedness
to the other exceeds 1% of the total consolidated assets of such
company.
|
Applying
these standards, the Board has determined that all of our non-management
Directors are independent. In the course of making these
determinations, the Board considered the following:
|
|
·
|
Mr.
Bloom’s status as a director of Gordon Brothers Group. From
June 2006 to May 2007, the Company made payments totaling $151,061 to
Gordon Brothers Group. Because Mr. Bloom is not an employee of
Gordon Brothers Group, the Board determined that he does not fail to meet
the independence tests listed above, and does not otherwise have a
material relationship with the
Company.
|
8
ELECTION
OF CLASS III DIRECTORS
The Board
proposes that the three Class III Director nominees be re-elected to the
Board to serve until 2012. The Company’s Board is divided into three
classes with each Director serving a three-year term or until his or her earlier
resignation, death, or removal. In addition to the three
Class III nominees, the Company’s current Class I and Class II
Directors are listed below. Each nominee currently serves as a
Class III Director.
|
Class III
Nominees—Terms Expiring at the Annual
Meeting
|
|
Name
|
Age
|
|||
|
Paul
Fulton
|
74 | |||
|
John
R.
Welch
|
77 | |||
|
Thomas
E.
Whiddon
|
56 | |||
The
individuals who will continue to serve as Class I and Class II
Directors after the Annual Meeting are:
|
Class I
Directors—Terms Expiring in 2010
|
|
Name
|
Age
|
|||
|
William
J.
Montgoris
|
62 | |||
|
David
Pulver
|
67 | |||
|
Class II
Directors—Terms Expiring in 2011
|
|
Name
|
Age
|
|||
|
Bradley
M.
Bloom
|
56 | |||
|
Michael
D.
Casey
|
48 | |||
|
A.
Bruce
Cleverly
|
63 | |||
The
Board recommends a vote FOR the election of Paul Fulton, John R. Welch, and
Thomas E. Whiddon as Class III Directors.
|
Vote
Required
|
The three
nominees for election as Class III Directors who receive the greatest
number of votes will be elected as Class III Directors. Votes
may be cast in favor of all nominees, withheld for all nominees, or for all
nominees, except specific nominees. Votes that are withheld will be
counted toward a quorum, but will be excluded entirely from the tabulation of
votes for each nominee, and, therefore, will not affect the outcome of the vote
on this Proposal. Proxies that are granted without providing voting
instructions will be voted FOR the election of the three
Class III Director nominees.
9
Each of
our non-management Directors receives an annual retainer and meeting fees, and
each committee Chairman receives a separate retainer. In fiscal 2008,
each Director’s annual retainer was comprised of a $20,000 cash payment, except
for Mr. Cleverly who received a pro-rated amount upon joining the Board in March
2008, and a grant of our common stock valued at approximately
$90,000. Effective at the Annual Meeting, the equity portion of our
Directors’ annual retainer will be increased to $100,000. Each
Director also received meeting fees of $2,500 for each regularly scheduled Board
meeting, $1,000 for each special Board meeting, and $1,000 for each regularly
scheduled or special meeting of our standing Board committees. In
addition, for meetings of our Transition Committee held in connection with our
Board or standing Board committee meetings, or Transition Committee meetings
held telephonically, each Director received meeting fees of
$1,000. For special, in-person meetings of our Transition Committee,
our Directors received meeting fees of $2,500.
In fiscal
2008, the Chairman of our Audit Committee received a $20,000 retainer, and the
Chairmen of our Compensation, Nominating and Corporate Governance, and
Transition Committees each received $10,000 retainers. In addition,
as a new non-management Director, Mr. Cleverly was granted a one-time grant of
restricted common stock valued at approximately $100,000. This
restricted stock “cliff vests” after three years following the date of
grant.
We
reimburse Directors for travel expenses incurred in connection with attending
Board and committee meetings and for other expenses incurred while conducting
Company business. We pay no additional compensation to Mr. Casey for
serving as a Director. There are no family relationships among any of
the Directors or our executive officers.
The
following table provides information concerning the compensation of our
non-management Directors for fiscal 2008.
FISCAL
2008 DIRECTOR COMPENSATION TABLE
|
Name
|
Fees
Earned
or
Paid in Cash
(b)
|
Stock
Awards
($)
(c)
|
Option
Awards
($)
|
Total
($)
|
||||||||||||
|
Bradley
M. Bloom (a)
|
$ | 31,000 | $ | 90,000 | $ | -- | $ | 121,000 | ||||||||
|
A.
Bruce Cleverly
|
$ | 49,500 | $ | 118,215 |
(d)
|
$ | -- | $ | 167,715 | |||||||
|
Paul
Fulton
|
$ | 53,000 | $ | 90,000 | $ | -- | $ | 143,000 | ||||||||
|
William
J. Montgoris
|
$ | 39,000 | $ | 123,846 |
(e)
|
$ | -- | $ | 162,846 | |||||||
|
David
Pulver
|
$ | 65,000 | $ | 90,000 | $ | -- | $ | 155,000 | ||||||||
|
Elizabeth
A. Smith (f)
|
$ | 35,000 | $ | -- | $ | -- | $ | 35,000 | ||||||||
|
John
R. Welch
|
$ | 50,000 | $ | 90,000 | $ | 716 | (g) | $ | 140,716 | |||||||
|
Thomas
E. Whiddon
|
$ | 43,000 | $ | 90,000 | $ | 11,234 |
(h)
|
$ | 144,234 | |||||||
|
(a)
|
All
compensation earned by Mr. Bloom was paid to Berkshire
Partners.
|
|
(b)
|
This
column reports the amount of cash compensation earned in fiscal 2008
through annual cash retainers and meeting
fees.
|
|
(c)
|
On
May 8, 2008, we issued each of our non-management Directors 6,198
shares of common stock with a grant date fair value of $14.52 per
share.
|
|
(d)
|
Upon
joining the Board in March 2008, the Company issued Mr. Cleverly
6,481 shares of restricted stock, which “cliff vest” in March
2011. These shares had a grant date fair value of $15.43 per
share. In accordance with Statement of Financial Accounting
Standards (“SFAS”) No. 123 (revised 2004), “Share-Based Payment” (“SFAS
123R”), we assume these shares will vest in March 2011 and record the
related expense ratably over the vesting
period.
|
|
(e)
|
Upon
joining the Board in August 2007, the Company issued Mr. Montgoris 4,583
shares of restricted stock, which “cliff vest” in August
2010. These shares had a grant date fair value of $21.82 per
share. In accordance with SFAS 123R, we assume these shares
will vest in August 2010 and record the related expense ratably over the
vesting period.
|
|
(f)
|
Ms.
Smith resigned from the Board effective December 31,
2008.
|
|
(g)
|
On
April 5, 2003, Mr. Welch was granted 16,000 stock options with
an exercise price of $4.94 and a Black-Scholes fair value of
$1.54. The amount disclosed in this column equals the Company’s
expense for such stock options in accordance with SFAS 123R recorded
ratably over the vesting period through April
2008.
|
|
(h)
|
On
September 17, 2003, Mr. Whiddon was granted 16,000 stock options
with an exercise price of $6.98 and a Black-Scholes fair value of
$4.88. The amount disclosed in this column equals the Company’s
expense for such stock options in accordance with SFAS 123R recorded
ratably over the vesting period through September
2008.
|
For stock
options, the SFAS 123R fair value is calculated based on assumptions summarized
in Note 6 to our audited consolidated financial statements which are included in
our Annual Report on Form 10-K. For complete beneficial
ownership information of our common stock for each of our Directors, see heading
“Securities Ownership of Beneficial Owners, Directors, and Executive Officers”
on page 30.
10
The
following table sets forth the name, age, and position of each of our executive
officers as of the date of this proxy statement.
|
Name
|
Age
|
Position
|
|||
|
Michael
D. Casey
|
48
|
Chief
Executive Officer
|
|||
|
Joseph
Pacifico
|
59
|
President
|
|||
|
David
A. Brown
|
51
|
Executive
Vice President and Chief Operations Officer
|
|||
|
James
C. Petty
|
50
|
President
of Retail Stores
|
|||
|
Richard
F. Westenberger
|
40
|
Executive
Vice President and Chief Financial Officer
|
|||
|
Charles
E. Whetzel, Jr.
|
58
|
Executive
Vice President and Chief Sourcing
Officer
|
|||
Michael D. Casey
joined the Company in 1993 as Vice President-Finance. Mr.
Casey was named Senior Vice President-Finance in 1997, Senior Vice President and
Chief Financial Officer in 1998, Executive Vice President and Chief Financial
Officer in 2003, and Chief Executive Officer on August 1, 2008. Mr.
Casey became a Director on August 7, 2008. Prior to joining the
Company, Mr. Casey was a Senior Manager with Price Waterhouse LLP,
predecessor to PricewaterhouseCoopers LLP.
Joseph Pacifico
joined the Company in 1992 as Executive Vice President-Sales and
Marketing. Mr. Pacifico was named President of Marketing in 1997 and
President of Carter’s, Inc. in 2004. Mr. Pacifico began his
career with VF Corporation in 1981 as a sales representative for The HD Lee
Company, Inc. and was promoted to the position of Vice President of
Marketing in 1989, a position he held until 1992.
David A. Brown
joined the Company in 1992 as Senior Vice President-Business Planning and
Administration. Mr. Brown was named Executive Vice
President-Operations in 1997, and Executive Vice President and Chief Operations
Officer in 2005. Prior to 1992, Mr. Brown held various positions
at VF Corporation including Vice President-Human Resources for both The HD Lee
Company, Inc. and Bassett-Walker, Inc. Mr. Brown also
held human resource positions with Blue Bell, Inc. and Milliken &
Company earlier in his career.
James C. Petty
joined the Company in 2007 as President of Retail
Stores. Prior to joining the Company, Mr. Petty served as President
and Chief Executive Officer of PureBeauty, Inc. from 2005 to
2006. From 1997 to 2004, Mr. Petty held various positions at Tween
Brands, Inc., formerly Too, Inc., including President, General Manager – Limited
Too Division, Executive Vice President, Stores and Real Estate; Senior Vice
President, Stores; and Vice President, Stores, Limited Too
Division. Prior to 1997, Mr. Petty held various positions at Gap,
Inc.
Richard F.
Westenberger joined the Company in 2009 as Executive Vice President and
Chief Financial Officer. Prior to joining the Company, Mr.
Westenberger served as Vice President of Corporate Finance and Treasurer of
Hewitt Associates, Inc. from 2006 to 2008. Prior to Hewitt, Mr.
Westenberger was Senior Vice President and Chief Financial Officer of Land’s
End, Inc., a specialty apparel division of Sears Holdings
Corporation. During his ten years at Sears, Mr. Westenberger held
various other senior financial management positions, including Vice President of
Corporate Planning and Analysis and Vice President of Investor
Relations. Prior to Sears, Mr. Westenberger was with Kraft Foods,
Inc. He began his career at Price Waterhouse LLP, predecessor to
PricewaterhouseCoopers LLP, and is a certified public accountant.
Charles E.
Whetzel, Jr. joined the Company in 1992 as Executive Vice
President-Operations. Mr. Whetzel was named Executive Vice
President-Manufacturing in 1997, Executive Vice President-Global Sourcing in
2000, and Executive Vice President and Chief Sourcing Officer in
2005. Mr. Whetzel began his career at Aileen, Inc. in 1971
in the Quality function and was later promoted to Vice President of
Apparel. Following Aileen, Inc., Mr. Whetzel held positions
of increased responsibility with Health-Tex, Inc., Mast
Industries, Inc., and Wellmade Industries, Inc. In 1988,
Mr. Whetzel joined Bassett-Walker, Inc. and was later promoted to Vice
President of Manufacturing for The HD Lee Company, Inc.
11
Overview
This
Compensation Discussion and Analysis, or CD&A, is intended to provide
information regarding the Company’s executive compensation program and
practices. This CD&A covers a variety of topics, including: the
Company’s compensation philosophy regarding executive compensation, the role of
our Compensation Committee in setting the compensation of our named executive
officers, and our executive compensation decisions for fiscal 2008.
During
fiscal 2008, the Company announced that Frederick J. Rowan, II was retiring as
Chief Executive Officer and resigning his position as Chairman of the Company’s
Board of Directors, effective August 1, 2008. The Company agreed to
treat Mr. Rowan's retirement as a termination for "good reason" under the terms
of his employment agreement. The Company also announced that Michael D.
Casey, the Company’s sitting Chief Financial Officer, was being promoted to
Chief Executive Officer effective August 1, 2008. In addition, the
Board of Directors appointed Andrew B. North, the sitting Vice President of
Finance, to serve as interim Chief Financial Officer effective August 1,
2008. On August 7, 2008, Mr. Casey was elected to the Company’s Board
of Directors. Richard F. Westenberger joined the Company as Executive
Vice President and Chief Financial Officer on January 19, 2009.
Compensation
Philosophy
The
Company is committed to achieving long-term, sustainable growth and increasing
shareholder value. The Company’s compensation program for our named
executive officers is designed to support these objectives and encourage strong
financial performance on an annual and long-term basis by linking a significant
portion of our named executive officers’ total compensation to Company
performance in the form of incentive compensation. The principal
elements of the compensation structure for our named executive officers, which
are discussed in more detail below, are base salary, annual performance bonus,
and equity incentives.
Together,
we refer to these three elements as total direct compensation. In
addition, the Company offers perquisites and other personal benefits to our
named executive officers. Our named executive officers may also
receive special bonuses, in recognition of special circumstances or for superior
performance.
The
Company’s compensation philosophy is to set our named executive officers’
compensation at levels that will attract, motivate, and retain superior
executive talent in a highly competitive environment. To be
consistent with this philosophy, our Compensation Committee aims to set our
named executive officers’ total direct compensation between the fiftieth and
seventy-fifth percentiles of compensation paid to similar executive positions at
companies in the Total Remuneration Survey (the “Retail Survey”) conducted by
the Hay Group, an independent compensation consultant engaged by our
Compensation Committee, with maximum total direct compensation targeted in the
top quartile if superior performance is achieved. We also reference
the proxy compensation data of companies in our peer group.
The
Retail Survey is comprised of approximately 100 companies in the retail and
wholesale industry and provides comparable compensation information by
controlling for differences in companies’ revenue size and the differences in
the scopes of responsibility of different executives. Our peer group
is comprised of 14 companies in the retail or wholesale industries that
primarily conduct business in apparel or related accessories, have revenues
between $900 million and $3.8
billion. In fiscal 2008, our peer group was comprised of the
following companies:
|
Abercrombie
& Fitch
|
Gymboree
|
|
|
Aeropostale
|
J.
Crew
|
|
|
American
Eagle Outfitters
|
Oxford
Industries
|
|
|
Chico’s
|
Pacific
Sunwear
|
|
|
The
Children’s Place
|
Quicksilver
|
|
|
Coach
|
Timberland
|
|
|
Coldwater
Creek
|
Tween
Brands
|
12
Role
of the Compensation Committee
Our
Compensation Committee sets the total direct compensation of our named executive
officers. Our Compensation Committee also sets the financial
performance targets for our named executive officers’ annual performance bonuses
and the performance vesting terms for their equity awards. Our
Compensation Committee has engaged the Hay Group to advise it on executive and
director compensation matters and provide the Committee with data to benchmark
the base salary, annual performance bonus, and long-term equity incentive
compensation of our named executive officers. The Hay Group serves at
the direction of the Compensation Committee, and meets privately with the
Compensation Committee and with its Chairman.
To
maintain the effectiveness of our executive compensation program, and to keep it
consistent with our compensation philosophy, our Compensation Committee
regularly reviews the reasonableness of our named executive officers’
compensation and compares it with compensation data from the Retail Survey and
our peer group.
In making
compensation determinations for our named executive officers, our Compensation
Committee principally takes into account:
|
(i)
|
the
nature and scope of each officer’s
responsibilities;
|
|
(ii)
|
the
Company’s performance; and
|
|
(iii)
|
the
comparative compensation data of companies in the Retail Survey and our
peer group.
|
Our
Compensation Committee also considers the recommendations of our Chief Executive
Officer regarding the base salary, annual performance bonus, and long-term
equity incentives of our named executive officers, other than
himself. In addition, our Chief Executive Officer makes
recommendations to the Compensation Committee regarding the structure of our
executive compensation program generally.
Total
Direct Compensation
In
setting a total direct compensation target for each named executive officer, our
Compensation Committee considers both objective and subjective factors,
including the scope of each officer’s responsibilities, Company performance,
prior equity awards, potential future earnings from equity awards, retention
needs, and comparative compensation data of companies in the Retail Survey and
our peer group. The Company’s compensation philosophy is to set total
direct compensation for each of our named executive officers between the
fiftieth and seventy-fifth percentile of similar executive positions at
companies in our peer group, and to set our named executive officers total
direct compensation in the top quartile if superior performance is
achieved.
In fiscal
2008, as set forth in more detail in the Fiscal 2008 Summary Compensation Table,
the total direct compensation of each of our named executive officers was as
follows:
|
Total
Direct
Compensation
|
||||
|
Chief
Executive Officer
|
$ | 2,058,187 | ||
|
Vice
President of Finance and Interim Chief Financial Officer
|
$ | 433,573 | ||
|
President
|
$ | 1,749,079 | ||
|
President
of Retail Stores
|
$ | 1,588,487 | ||
|
Chief
Sourcing Officer
|
$ | 1,215,830 | ||
|
Former
Chief Executive Officer
|
$ | 4,829,092 | ||
Although
no changes have been made to the Company’s overall compensation philosophy or
structure, the Company has taken measures in fiscal 2009 to control and reduce
costs in response to current global economic conditions that will impact
executive compensation in fiscal 2009. These measures include holding
our employees’ base salaries consistent with 2008 levels, exclusive of employee
promotions, including the salaries of our named executive officers, and
suspending the Company’s 401(k) matching program, effective April 17,
2009.
13
Base
Salary
The
Company’s compensation philosophy is to set our named executive officers’ base
salaries at approximately the fiftieth percentile of the base salaries paid to
similar executive positions in the Retail Survey and our peer group, while
making adjustments in light of the objective and subjective factors discussed
above.
The
following table details the base salaries we provided in fiscal 2008 to each of
our named executive officers and their corresponding base salaries for fiscal
2009:
|
Base
Salary
|
||||||||
|
Named
Executive Officer
|
Fiscal
2008
|
Fiscal
2009
|
||||||
|
Michael
D.
Casey
|
$ | 700,000 | (a) | $ | 700,000 | |||
|
Chief
Executive Officer
|
||||||||
|
Andrew
B.
North
|
$ | 250,000 | (b) | $ | 250,000 | |||
|
Vice
President of Finance and Interim Chief Financial Officer
|
||||||||
|
Richard
F.
Westenberger
|
$ | -- | $ | 400,000 | (c) | |||
|
Executive
Vice President and Chief Financial Officer
|
||||||||
|
Joseph
Pacifico
|
$ | 650,000 | $ | 650,000 | ||||
|
President
|
||||||||
|
James
C.
Petty
|
$ | 425,000 | $ | 425,000 | ||||
|
President
of Retail Stores
|
||||||||
|
Charles
E. Whetzel,
Jr.
|
$ | 425,000 | $ | 425,000 | ||||
|
Executive
Vice President and Chief Sourcing Officer
|
||||||||
|
Frederick
J. Rowan,
II
|
$ | 850,000 | (d) | $ | -- | |||
|
Former
Chairman of the Board and Chief Executive Officer
|
||||||||
|
(a)
|
Prior
to his promotion on August 1, 2008 to Chief Executive Officer, Mr. Casey’s
base salary was $450,000. The amount shown reflects his base
salary following his promotion.
|
|
(b)
|
Mr.
North served as Interim Chief Financial Officer from August 1, 2008 until
January 19, 2009. Mr. North continues to serve as Vice
President of Finance.
|
|
(c)
|
Mr.
Westenberger joined the Company as Executive Vice President and Chief
Financial Officer effective January 19,
2009.
|
|
(d)
|
Mr.
Rowan retired as Chief Executive Officer effective August 1,
2008.
|
Annual
Performance Bonus
The
Company makes annual cash performance bonuses a significant component of our
named executive officers’ targeted total direct compensation, while maintaining
the Company’s compensation philosophy to target total direct compensation
between the fiftieth and seventy-fifth percentiles of similar executive
positions in the Retail Survey and our peer group, and in the top quartile when
superior performance is achieved. We believe this design aligns the
interests of our named executive officers with the interests of our
shareholders.
Our
Compensation Committee approves a target bonus for each named executive officer
that is based on a percentage of their base salaries. In establishing
these bonus targets, the Compensation Committee considers our named executive
officers’ potential total direct compensation in light of the Company’s
compensation philosophy and comparative compensation data. The named
executive officers can earn their target bonuses based upon the Company’s
achievement of financial performance targets pre-determined by the Compensation
Committee.
14
In
accordance with our Amended and Restated Annual Incentive Compensation Plan (the
“Incentive Compensation Plan”), for fiscal 2008, the Compensation Committee used
three financial performance metrics to determine the amount, if any, of annual
performance bonuses to be paid under our Incentive Compensation Plan: net sales
(weighted at 25%), adjusted earnings before interest and taxes (“adjusted EBIT”)
(weighted at 25%), and adjusted earnings per share (“adjusted EPS”) (weighted at
50%). Our Compensation Committee selected net sales, adjusted EBIT,
and adjusted EPS as performance metrics because it believes they are key
financial measures that are aligned with the interests of our shareholders and
help to measure the quality of our earnings.
Our
Compensation Committee has the discretion not to award performance bonuses, even
if the Company achieves its financial performance targets, and to take into
account personal performance in determining the percentage of each named
executive officer’s annual performance bonus to be paid, if any.
Our named
executive officers could have earned from 0% to 200% of their target performance
bonus in fiscal 2008 based upon the Company’s achievement of the following
financial targets, weighted at the following percentages:
|
Net
Sales
($
in billions)
(25%)
|
Adjusted
EBIT
($
in millions)
(25%)
|
Adjusted
EPS
(50%)
|
||||||||||
|
25%
of Target Performance Bonus
|
$ | 1.447 | $ | 146.2 | $ | 1.32 | ||||||
|
100%
of Target Performance Bonus
|
$ | 1.490 | $ | 154.6 | $ | 1.40 | ||||||
|
200%
of Target Performance Bonus
|
$ | 1.560 | $ | 162.5 | $ | 1.48 | ||||||
Based on
the Company’s net sales of $1.5 billion, adjusted EBIT of $143.4 million, and
adjusted EPS of $1.37 in fiscal 2008, our named executive officers', other than
our former interim Chief Financial Officer, each earned approximately 62%
of their performance bonus target (representing 100% of the net sales target, 0%
of the adjusted EBIT target, and 75% of the adjusted EPS target). Our
former interim Chief Financial Officer earned 80% of his performance bonus
target.
Internal
Revenue Code Section 162(m)
Section
162(m) of the Internal Revenue Code of 1986, as amended, imposes a $1 million
limit on the amount that a public company may deduct for compensation paid to a
company’s principal executive officer and the company’s three most highly
compensated executive officers other than its principal financial
officer. This limitation generally does not apply to
performance-based compensation that is awarded under a plan that is approved by
the shareholders of a company and that also meets certain other technical
requirements. Our compensation program for our named executive
officers generally operates within the deductibility requirements under
Section 162(m). However, the Compensation Committee realizes
that exceptions may occur.
Equity
Incentives
Our
Amended and Restated 2003 Equity Incentive Plan (“Equity Incentive Plan”) allows
for various types of equity awards, including stock options, restricted stock,
stock appreciation rights, and deferred stock. Awards under our
Equity Incentive Plan are granted to recruit, motivate, and retain employees and
in connection with promotions or increased responsibility. Our
Compensation Committee has only awarded time and performance-based stock options
and time and performance-based restricted stock, although it could use other
forms of equity awards in the future.
All
awards under our Equity Incentive Plan must be approved by our Compensation
Committee. Our Compensation Committee determines the type, timing,
and amount of equity awards granted to each of our named executive officers
after considering their previous equity awards, base salary, and target annual
performance bonus in light of the Company’s compensation
philosophy. Our Compensation Committee also considers the comparative
compensation data in the Retail Survey and our peer group, and our desire to
retain and motivate our named executive officers and to align their goals with
the long-term goals of our shareholders.
Our
Compensation Committee’s practice is to approve grants of stock options and
restricted stock at regularly scheduled meetings. Our Compensation
Committee may also make equity grants at special meetings or by unanimous
written consent. In the future, our Compensation Committee may select
a date subsequent to a regularly scheduled meeting on which to grant equity
awards. Our Compensation Committee sets the exercise prices of equity
awards at the closing price of our common stock on the NYSE on the date of
grant.
15
In
considering the value of equity awards, we calculate the value of stock option
awards by using the Black-Scholes option pricing valuation method and the value
of restricted stock awards equal to the closing price of our common stock on the
date of grant. In addition, our Compensation Committee regularly
reviews the equity ownership of our named executive officers compared to the
Company’s minimum ownership guidelines. Under the Company’s minimum
ownership guidelines, no named executive officer can sell Company stock (other
than to cover the tax obligations resulting from the vesting of Company
restricted stock), unless he owns shares of Company stock with a total market
value in excess of a multiple of his base salary. The multiples for
our named executive officers are as follows: Chief Executive Officer and
President - seven times their base salary; Chief Sourcing Officer - five times
his base salary; our President of Retail Stores and Chief Financial Officer -
three times their base salaries. Each of our named executive officers
has complied with these ownership guidelines.
In March
2004, our Compensation Committee granted Mr. Casey, then our Chief Financial
Officer, 200,000 time-based stock options that vested in five equal, annual
installments based on his continued employment with the Company. In
each of February 2006 and February 2007, our Compensation Committee granted Mr.
Casey 12,000 stock options and 12,000 shares of restricted stock, each of which
vest in four equal, annual installments based on his continued employment with
the Company. In August 2008, following Mr. Casey’s promotion to Chief
Executive Officer, our Compensation Committee granted Mr. Casey 125,000
time-based stock options that vest in four equal, annual installments based upon
Mr. Casey’s continued employment with the Company. Mr. Casey was also
granted 75,000 performance-based shares of restricted stock. Fifty
percent of these shares will be eligible to vest upon the Company’s reporting of
adjusted EPS growth in fiscal 2009 (over fiscal 2008) and in fiscal 2010 (over
fiscal 2009) of at least 4%. If this threshold earnings per share
growth is achieved in fiscal 2009 and 2010, then these eligible shares will
vest, in varying percentages, from 33% to 100%, based on the Company’s compound
annual growth rate in earnings per share from fiscal 2009 to 2010 ranging
between 4% and 8%. The remaining 50% of these shares will then vest
in equal amounts on December 31, 2011 and December 31, 2012 based on his
continued employment with the Company. In March 2009, Mr. Casey was
granted 100,000 time-based stock options and 50,000 shares of restricted stock,
each of which vest in four equal, annual installments based on his continued
employment with the Company. Pursuant to a Company policy, while
employed by the Company, Mr. Casey shall not sell any of these vested restricted
shares, other than to cover any associated tax obligations, until the fourth
anniversary of the date of grant.
In
September 2003, our Compensation Committee granted our former
interim Chief Financial Officer and current Vice President of Finance, Mr.
North, 22,560 time-based and 37,440 performance-based stock options, each of
which vested in five equal, annual installments based on Mr. North’s continued
employment with the Company. In February 2006, our Compensation
Committee granted Mr. North 2,800 time-based stock options and 1,200 shares of
restricted stock, each of which vest in four equal, annual installments based on
his continued employment with the Company. In each of February 2007
and December 2007, our Compensation Committee granted Mr. North 6,000 time-based
stock options and 3,000 shares of restricted stock, each of which vest in four
equal, annual installments based on his continued employment with the
Company. In March 2009, our Compensation Committee granted Mr. North
10,000 time-based stock options and 5,000 shares of restricted stock, each of
which vest in four equal, annual installments based on his continued employment
with the Company.
In
February 2009, our Compensation Committee granted our current Chief Financial
Officer, Mr. Westenberger, 20,000 time-based stock options and 10,000 shares of
restricted stock, each of which vest in four equal, annual installments based
upon Mr. Westenberger’s continued employment with the
Company. Pursuant to a Company policy, while employed by the Company,
Mr. Westenberger shall not sell any of these vested restricted shares, other
than to cover any associated tax obligations, until the fourth anniversary of
the date of grant.
In March
2004, our Compensation Committee granted our President 200,000 time-based stock
options that vested in five equal, annual installments based on Mr. Pacifico’s
continued employment with the Company. In November 2005, we granted
our President 200,000 performance-based stock options. These options
vest in February 2010 based upon Mr. Pacifico’s continued employment with the
Company, the Company’s achievement of fiscal 2009 adjusted net income of at
least $116 million, and an individual performance criterion. In
fiscal 2007, we made assumptions that these performance criteria will not be met
and that these shares will not vest. In July 2008, our Compensation
Committee granted our President 200,000 time-based stock options that vest in
three equal, annual installments based on Mr. Pacifico’s continued employment
with the Company.
In June
2007, our Compensation Committee granted our President of Retail Stores 40,000
time-based stock options and 10,000 shares of restricted stock, each of which
vest in four equal, annual installments based upon Mr. Petty’s continued
employment with the Company. In July 2008, our Compensation Committee
granted our President of Retail Stores 75,000 time-based stock options and
25,000 shares of restricted stock, each of which vest in four equal, annual
installments based upon Mr. Petty’s continued employment with the
Company. In March 2009, Mr. Petty was granted 25,000 time-based stock
options and 7,000 shares of restricted stock, each of which vest in four equal,
annual installments based on his continued employment with the
Company. Pursuant to a Company policy, while employed by the Company,
Mr. Petty shall not sell any of these vested restricted shares, other than to
cover any associated tax obligations, until the fourth anniversary of the date
of grant.
16
In May
2005, our Compensation Committee granted our Chief Sourcing Officer 60,000 stock
options that vest in four equal, annual installments based on Mr. Whetzel’s
continued employment with the Company. In May 2005, our Compensation
Committee also granted our Chief Sourcing Officer 40,000 shares of restricted
stock that cliff vest in May 2009 based on Mr. Whetzel’s continued employment
with the Company. In July 2008, our Compensation Committee granted
our Chief Sourcing Officer 40,000 stock options and 10,000 shares of restricted
stock, each of which vest in four equal, annual installments based on Mr.
Whetzel’s continued employment with the Company. In March 2009, Mr.
Whetzel was granted 20,000 time-based stock options and 5,000 shares of
restricted stock, each of which vest in four equal, annual installments based on
his continued employment with the Company. Pursuant to a Company
policy, while employed by the Company, Mr. Whetzel shall not sell any of these
vested restricted shares, other than to cover any associated tax obligations,
until the fourth anniversary of the date of grant.
In May
2005, our Compensation Committee granted our former Chief Executive Officer
400,000 performance-based stock options. These options were scheduled
to vest in varying percentages in February 2009 based upon Mr. Rowan’s continued
employment with the Company, the Company’s achievement of specified levels of
fiscal 2008 adjusted net income ranging from $75 million to $100 million, and an
individual performance criterion. Due to Mr. Rowan’s retirement,
which was treated as a termination for "good reason," the vesting of these
options was accelerated.
Employment
Agreements
The
Company maintains employment agreements that provide our Chief Executive Officer
and certain named executive officers with, among other things, minimum base
salary levels, annual performance bonus targets, and severance
benefits. The material terms of these agreements are summarized
briefly below.
Michael
D. Casey
Mr. Casey served as Chief Financial
Officer in fiscal 2008 through July 31, 2008, and as Chief Executive Officer for
the remainder of fiscal 2008. In accordance with the terms
of Mr. Casey's employment agreement, which was entered into in August
2001, his base salary shall be no less than $250,000, and his annual performance
bonus target shall be no less than 65% of his base salary. Mr.
Casey entered into his employment agreement prior to his promotion to Chief
Executive Officer. In recognition of this, and taking into
consideration comparative compensation data, the Compensation Committee set Mr.
Casey’s fiscal 2008 base salary as Chief Financial Officer at $450,000 and his
performance bonus target at 87.5% of his base salary, and set his fiscal 2008
base salary as Chief Executive Officer at $700,000 and his performance bonus
target at 150% of his base salary. It is expected that the Company
and Mr. Casey will enter into a new employment agreement
that reflects Mr. Casey's promotion to Chief Executive
Officer. Based upon the achievement of the Company’s net sales of
$1.5 billion, adjusted EBIT of $143.4 million, and adjusted EPS of $1.37, Mr.
Casey received an annual performance bonus of $651,000, or 93% of his most
recent base salary and 62% of his target incentive.
Joseph
Pacifico
In accordance with the terms of our
President’s employment agreement entered into in August 2001, his base salary
shall be no less than $420,000 and his annual performance bonus
target shall be no less than 65% of his base salary. Mr.
Pacifico entered into this employment agreement prior to being promoted to
President in June 2004. In recognition of an increase in the scope of
his responsibilities resulting from his promotion to President, and taking into
consideration comparative compensation data, the Compensation Committee set our
President’s fiscal 2008 base salary at $650,000 and his performance bonus target
at 100% of his base salary. Based upon the achievement of the
Company’s net sales of $1.5
billion, adjusted EBIT of $143.4 million, and adjusted EPS of $1.37, Mr.
Pacifico received an annual performance bonus of $403,000, or 62% of his most
recent base salary and of his target incentive.
James
C. Petty
In accordance with the terms of our
President of Retail Stores’ employment agreement entered into in May 2008, his
base salary shall be no less than $400,000 and his annual performance bonus
target shall be no less than 75% of his base salary. In
fiscal 2008, we set our President of Retail Stores’ base salary at $425,000 and
his performance bonus target at 75% of his base salary. Based upon
the achievement of the Company’s net sales of $1.5 billion, adjusted EBIT of
$143.4 million, and adjusted EPS of $1.37, Mr. Petty received an annual
performance bonus of $200,000, or 47% of his most recent base salary and 62% of
his target incentive.
17
Charlie
E. Whetzel, Jr.
In accordance with the terms of our
Chief Sourcing Officer’s employment agreement entered into in August 2001, his
base salary shall be no less than $285,000 and his annual performance bonus
target shall be no less than 65% of his base salary. Mr. Whetzel
entered into his employment agreement prior to his promotion to Chief Sourcing
Officer and an increase in the scope of the responsibilities of his
position. In recognition of this, and taking into consideration
comparative compensation data, the Compensation Committee set our Chief Sourcing
Officer’s fiscal 2008 base salary at $425,000 and his performance bonus target
at 87.5% of his base salary. Based upon the achievement of the
Company’s net sales of $1.5
billion, adjusted EBIT of $143.4 million, and adjusted EPS of $1.37, Mr. Whetzel
received an annual performance bonus of $230,563, or 54% of his most recent base
salary and 62% of his target incentive.
Richard
F. Westenberger
In accordance with the terms of our
Chief Financial Officer’s employment arrangement entered into in January 2009,
his base salary shall be no less than $400,000 and his annual performance bonus
target shall be no less than 75% of his base salary.
Potential
Payments Upon a Termination or Change in Control
Termination
In the
event that our Chief Executive Officer, President, or Chief Sourcing Officer is
terminated by the Company for “cause,” retires, becomes disabled, or dies, the
executive or his estate will be provided his base salary and fringe, medical,
and other benefits through the termination of his employment. If any
of these named executive officers is terminated “without cause,” or if any of
these named executive officers terminates his employment for “good reason,” the
named executive officer shall receive his base salary and medical and dental
benefits for 24 months following the date of his termination, provided the named
executive officer complies with confidentiality, intellectual property
assignment, non-competition, and non-solicitation obligations, which generally
last for a period of one to two years.
Our Chief
Executive Officer, President, or Chief Sourcing Officer shall also receive the
annual performance bonus that he would have earned as if he had been employed at
the end of the year in which his employment was terminated. The
determination of whether an annual performance bonus is payable to the named
executive officer may take into account whether the Company achieved its
performance targets, but may not take into account whether personal performance
targets for the named executive officer were achieved. The vesting of
equity incentives for these named executive officers is not required to be
accelerated in the event of a termination of employment. The total
payments made to these named executive officers shall comply with the
requirements of Section 409A of the Internal Revenue Code of 1986, as
amended.
In the
event, our President of Retail Stores is terminated by the Company for “cause,”
resigns, or dies, the executive or his estate will be provided his base salary
through the termination of his employment. If our President of Retail
Stores becomes disabled, the executive shall continue to receive his base salary
and fringe benefits until the Company terminates his employment for
disability. If our President of Retail Stores is terminated “without
cause,” or if he terminates his employment for “good reason,” he shall receive
his base salary for 24 months following the date of his termination, provided
the executive officer complies with confidentiality, intellectual property
assignment, non-competition, and non-solicitation obligations, which generally
last for a period of two years.
In the
event our Chief Financial Officer is terminated by the Company for “cause,” he
shall receive his base salary then in effect, together with medical and dental
benefits, for 12 months following the date of his termination. In
addition, our Chief Financial Officer shall also receive the annual performance
bonus, if any, pro-rated for the amount of time he was employed by the Company
in the year in which his employment was terminated.
Our
former interim Chief Financial Officer and current Vice President of Finance is
eligible for severance compensation in accordance with the Company’s general
severance policy, which provides one week of severance for each year of service
in the case of termination.
In
determining whether a termination occurred with or without “cause,” “cause” is
generally deemed to exist when the named executive officer has: been convicted
of a felony (or the entering of a plea of guilty or no contest to a felony);
committed an act of fraud involving an act of dishonesty for personal gain which
is materially injurious to the Company; willfully breached his obligations of
confidentiality, intellectual property assignment, non-competition, or
non-solicitation against the Company; willfully engaged in gross misconduct
which is materially injurious to the Company; or, after a cure period, willfully
refused to perform his duties.
18
In
determining whether a named executive officer, with the exception of our
President of Retail Stores, has “good reason” to terminate his employment, “good
reason” is generally deemed to exist when the Company has: materially reduced a
named executive officer’s duties, responsibilities, or status; assigned to the
executive a material amount of additional duties that are significantly
inconsistent with his previous duties; required the executive to relocate; or
materially breached his employment agreement. In determining whether
our President of Retail Stores has “good reason” to terminate his employment,
“good reason” is generally deemed to exist when the Company has materially
reduced the President of Retail Stores’ duties, responsibilities, or status, or
materially breached his employment agreement.
Based
upon a hypothetical termination “without cause” or for “good reason” as of
January 3, 2009, the severance and other benefits certain of our named executive
officers would have been entitled to are as follows:
|
Chief
Executive
Officer
|
Interim
Chief
Financial
Officer
|
President
|
President
of
Retail
Stores
|
Chief
Sourcing
Officer
|
||||||||||||||||
|
Base
Salary
|
$ | 1,400,000 | $ | 28,846 | $ | 1,300,000 | $ | 850,000 | $ | 850,000 | ||||||||||
|
Performance
Bonus
|
651,000 | -- | 403,000 | -- | 230,563 | |||||||||||||||
|
Health
and Other Benefits
|
29,170 | -- | 29,170 | -- | 29,170 | |||||||||||||||
|
Total
|
$ | 2,080,170 | $ | 28,846 | $ | 1,732,170 | $ | 850,000 | $ | 1,109,733 | ||||||||||
In
addition, our named executive officers, with the exception of our former interim
Chief Financial Officer, are entitled to receive any benefits that they would
have been entitled to under our 401(k) plan and supplemental retirement plans,
if any. These severance benefits are provided under the terms of each
of our named executive officers’ employment agreements, if any.
Change
in Control
In the
event of a change in control of the Company, all unvested stock options shall
vest and the Compensation Committee has the ability to remove the vesting
restrictions on all unvested shares of restricted stock. The closing
price on the NYSE of the Company’s common stock on the last trading day of
fiscal 2008 was $19.24 per share. Based upon a hypothetical change in
control of the Company on January 3, 2009, the intrinsic value of accelerated
stock option vesting and the value of accelerated vesting of restricted shares
for our named executive officers would have been as follows:
|
Chief
Executive
Officer
|
Interim
Chief
Financial
Officer
|
President
|
President
of
Retail
Stores
|
Chief
Sourcing
Officer
|
||||||||||||||||
|
Option
Value
|
$ | 344,900 | $ | -- | $ | 1,189,400 | $ | 379,500 | $ | 202,400 | ||||||||||
|
Restricted
Stock
Value
|
1,731,600 | 98,124 | -- | 625,300 | 962,000 | |||||||||||||||
|
Total
Value
|
$ | 2,076,500 | $ | 98,124 | $ | 1,189,400 | $ | 1,004,800 | $ | 1,164,400 | ||||||||||
Retirement
Benefits of Former Chief Executive Officer
In connection
with Mr. Rowan's retirement, the Company paid Mr. Rowan severance benefits of
$346,538 in fiscal 2008 and $78,462 in fiscal 2009, and a lump sum payment of
$1,947,020 in fiscal 2009. In addition, Mr. Rowan was entitled to
receive the annual performance bonus that he would have earned had he been
employed at the end of fiscal 2008. Under the terms of his employment
agreement, Mr. Rowan’s annual performance bonus target shall be no less than
150% of his base salary. In fiscal 2008, the Compensation Committee
set our former Chief Executive Officer’s performance bonus target at 150% of his
base salary. Based upon the achievement of the Company’s net sales of
$1.5 billion, adjusted EBIT of $143.4 million, and adjusted EPS of $1.37,
our former Chief Executive Officer received an annual performance bonus of
$790,500, or 93% of his base salary and 62% of his target
incentive.
19
As part
of Mr. Rowan’s employment agreement, the Company provided him with a
supplemental executive retirement plan (“SERP”) which provides a defined benefit
according to a formula based on his final average annual salary during the
highest 36 consecutive months of his last 60 months of employment, offset by
other external retirement benefits and Social Security benefits to which he is
entitled. Based on the value of his other retirement and Social
Security benefits, Mr. Rowan began to receive his monthly benefit payment of
$18,990 starting in August 2008 and will continue to receive $227,878 annually
for his lifetime. The plan is fully funded through two insurance
policies, and the Company was not required to make any premium payments in
fiscal 2008. The Company included taxable income of $17,855 in Mr.
Rowan’s income, representing the taxes on the increase in the present value of
the accumulated benefit in fiscal 2008 up to the date of his retirement and
associated tax gross-up.
Pursuant
to his employment agreement, the Company had also provided Mr. Rowan with life
insurance equal to 250% of his annual base salary. This life
insurance benefit was provided through two split-dollar life insurance
policies. Upon Mr. Rowan’s retirement on August 1, 2008, the
split-dollar arrangement was terminated and $891,922 of the cash value of the
policies was used to reimburse the Company for premium payments made prior to
fiscal 2003. Upon termination of the split-dollar arrangement, Mr.
Rowan incurred $816,396 of taxable compensation which was included in his fiscal
2008 taxable income. This amount consisted of a cash surrender value
of $483,804 and associated tax gross-up of $332,592.
Perquisites
and Other Benefits
The
Company provides perquisites and other benefits to our Chief Executive Officer,
President, and Chief Sourcing Officer, and in fiscal 2008, to our former Chief
Executive Officer. In fiscal 2008, the Compensation Committee
established a perquisite allowance from which these named executive officers
were reimbursed for certain perquisites, including automobile allowances,
financial and tax planning, health club dues, and related tax gross-up
payments. Amounts from the perquisite allowance that remain unused at
the end of the fiscal year are forfeited.
The
fiscal 2008 perquisite allowances for certain of our named executive officers
were:
|
Chief
Executive
Officer
|
President
|
Chief
Sourcing
Officer
|
Former
Chief
Executive
Officer
|
|||||||||||||
|
Perquisite
Allowance
|
$ | 30,000 | $ | 45,000 | $ | 30,000 | $ | 35,000 | (a) | |||||||
|
(a)
|
Pro-rated
to reflect his retirement on August 1,
2008.
|
In
addition to the perquisite allowances, our President is provided a country club
membership. Our former Chief Executive Officer was provided a country
club membership in fiscal 2008 during his employment. Additional
information on named executive officer perquisites can be found in the footnotes
to the Fiscal 2008 Summary Compensation Table on page 22 of this proxy
statement.
Pursuant
to the Company’s 401(k) plan, in fiscal 2008, the Company provided its
executives the same level of matching contributions available to all eligible
employees, which is equal to 100% of each named executive officer’s first 3% of
pre-tax contributions and 50% of each executive officer’s next 2% of pre-tax
contributions each year, subject to Internal Revenue Service
limitations. In fiscal 2008, each of our named executive officers,
with the exception of our former interim Chief Financial Officer, received
$9,200 in matching contributions. Our former interim Chief Financial
Officer received $6,200 in matching contributions in fiscal
2008. Effective April 17, 2009, the Company has suspended this
matching contribution for all employees, including our named executive
officers.
The
Company also made premium payments on behalf of certain of our named executive
officers, on their personally owned insurance policies. In fiscal
2008, including the associated tax gross-ups, the Company made payments of
$69,505 on behalf of our Chief Executive Officer, $192,876 on behalf of our
President, and $99,043 on behalf of our Chief Sourcing Officer.
The
Company also provides our Chief Executive Officer, President, Chief Sourcing
Officer, and former Chief Executive Officer with an excess supplementary health
insurance policy that reimburses our executives for certain qualified health
expenses not covered under the Company’s ERISA medical plan.
20
The
Compensation Committee of the Board has reviewed and discussed with Company
management the Compensation Discussion and Analysis included in this proxy
statement. Based on such review and discussions, the Compensation
Committee has recommended to the Board that the Compensation Discussion and
Analysis be included in this proxy statement for filing with the
SEC.
Submitted
by the Compensation Committee
Mr. Paul
Fulton, Chairman
Mr. A.
Bruce Cleverly
Mr. John
R. Welch
21
The table
below provides information concerning the compensation of our named executive
officers.
In the
“Salary” column, we disclose the base salary paid to each of our named executive
officers during fiscal 2008, 2007, and 2006.
In the
“Bonus” column, we disclose the cash bonuses earned during fiscal 2008, 2007,
and 2006, other than amounts earned pursuant to the Company’s Incentive
Compensation Plan.
In the
“Stock Awards” and “Option Awards” columns, we disclose the fiscal 2008, 2007,
and 2006 compensation expense the Company recorded in accordance with SFAS 123R
relating to awards of stock or options, without a reduction for assumed
forfeitures. For restricted stock, the SFAS 123R fair value is
calculated using the closing price on the NYSE of our stock on the date of grant
and the related expense is recorded ratably over the vesting
period. For time-based and performance-based stock options, the
SFAS 123R fair value is calculated based on assumptions summarized in
Note 6 to our audited consolidated financial statements, which are included
in our fiscal 2008 Annual Report on Form 10-K. For time-based
stock options, we recognize the related expense ratably over the vesting
period. For performance-based stock options and restricted stock
awards that cliff vest, if we assume the performance criteria will be met and
restricted stock awards will cliff vest, we record the related expense ratably
over the vesting period.
In the
column “Non-Equity Incentive Plan Compensation,” we disclose the dollar value of
all compensation earned in fiscal 2008, 2007, and 2006 pursuant to the Company’s
Incentive Compensation Plan.
In the
column “Nonqualified Deferred Compensation Earnings,” we disclose the dollar
value of any earnings from an aggregate change in the actuarial present value of
the named executive officers accumulated benefit under all defined benefit and
pension plans.
In the
column “All Other Compensation,” we disclose the dollar value of all other
compensation that could not properly be reported in other columns of the Fiscal
2008 Summary Compensation Table, including perquisites, amounts reimbursed for
the payment of taxes, and insurance premiums paid by the Company for the benefit
of our named executive officers.
|
Name
and Principal Position
|
Fiscal
Year
|
Salary
($)
|
Bonus
($)
|
Stock
Awards
($)
(b)
|
Option
Awards
($)
(c)
|
Non-Equity
Incentive
Plan
Compensation
($)
|
Nonqualified
Deferred
Compensation
Earnings
($)
(d)
|
All
Other
Compensation
($)
(e)
|
Total
($)
|
|||||||||||||||||||||||||
|
Michael
D.
Casey
|
2008
|
$ | 540,385 | (a) | $ | -- | $ | 309,716 | $ | 435,586 | $ | 651,000 | $ | -- | $ | 121,500 | $ | 2,058,187 | ||||||||||||||||
|
Chief
Executive Officer
|
2007
|
$ | 375,000 | $ | -- | $ | 160,369 | $ | 334,134 | $ | -- | $ | -- | $ | 124,459 | $ | 993,962 | |||||||||||||||||
|
(previously
Chief Financial Officer)
|
2006
|
$ | 375,000 | $ | -- | $ | 89,689 | $ | 302,069 | $ | 328,125 | $ | -- | $ | 119,036 | $ | 1,213,919 | |||||||||||||||||
|
Andrew
B.
North
|
2008
|
$ | 232,115 | $ | -- | $ | 31,262 | $ | 63,996 | $ | 100,000 | $ | -- | $ | 6,200 | $ | 433,573 | |||||||||||||||||
|
Vice
President of Finance and
|
||||||||||||||||||||||||||||||||||
|
Interim
Chief Financial Officer
|
||||||||||||||||||||||||||||||||||
|
Joseph
Pacifico
|
2008
|
$ | 642,308 | $ | -- | $ | -- | $ | 432,210 | $ | 403,000 | $ | -- | $ | 271,561 | $ | 1,749,079 | |||||||||||||||||
|
President
|
2007
|
$ | 600,000 | $ | -- | $ | -- | $ | 261,446 | $ | -- | $ | -- | $ | 264,148 | $ | 1,125,594 | |||||||||||||||||
|
2006
|
$ | 600,000 | $ | -- | $ | -- | $ | 880,962 | $ | 600,000 | $ | -- | $ | 284,210 | $ | 2,365,172 | ||||||||||||||||||
|
James
C.
Petty
|
2008
|
$ | 412,500 | $ | 593,596 | (f) | $ | 113,334 | $ | 177,158 | $ | 200,000 | $ | -- | $ | 91,899 | $ | 1,588,487 | ||||||||||||||||
|
President
of Retail Stores
|
||||||||||||||||||||||||||||||||||
|
Charles
E. Whetzel,
Jr.
|
2008
|
$ | 417,308 | $ | -- | $ | 241,507 | $ | 162,232 | $ | 230,563 | $ | -- | $ | 164,220 | $ | 1,215,830 | |||||||||||||||||
|
Executive
Vice President and
|
2007
|
$ | 375,000 | $ | -- | $ | 219,297 | $ | 130,195 | $ | -- | $ | -- | $ | 159,390 | $ | 883,882 | |||||||||||||||||
|
Chief
Sourcing Officer
|
2006
|
$ | 375,000 | $ | -- | $ | 219,297 | $ | 130,193 | $ | 328,125 | $ | -- | $ | 153,105 | $ | 1,205,720 | |||||||||||||||||
|
Frederick
J. Rowan,
II
|
2008
|
$ | 497,615 | $ | -- | $ | -- | $ | 2,241,343 | $ | 790,500 | $ | 10,581 | $ | 1,289,053 | $ | 4,829,092 | |||||||||||||||||
|
Former
Chairman of the Board and
|
2007
|
$ | 812,000 | $ | -- | $ | -- | $ | 326,666 | $ | -- | $ | 0 | $ | 150,432 | $ | 1,289,098 | |||||||||||||||||
|
Chief
Executive Officer
|
2006
|
$ | 812,000 | $ | 1,000,000 | (g) | $ | -- | $ | 849,172 | $ | 1,218,000 | $ | 0 | $ | 143,603 | $ | 4,022,775 | ||||||||||||||||
22
| (a) |
Prior to Mr. Casey’s
promotion to Chief Executive Officer on August 1, 2008, his base salary
for the 2008 fiscal year was $450,000. After his promotion and for
the balance of the 2008 fiscal year, his base salary was
$700,000.
|
|
(b)
|
The
amounts disclosed in this column
for Messrs. Casey, North, Petty, and Whetzel reflect the expense we
recorded in accordance with SFAS 123R for the following
grants:
|
| (i) |
Mr. Casey
was granted 12,000 shares of restricted stock on each of February 16,
2006 and February 15, 2007 with a grant date fair value of $34.32 and
$22.19 per share, respectively. Both grants vest in four equal,
annual installments following the date of grant. Mr. Casey was
also granted 75,000 shares of performance-based restricted stock on August
7, 2008 with a grant date fair value of $17.92 per share. Fifty
percent of these shares will be eligible to vest upon the Company’s
reporting of adjusted EPS growth in fiscal 2009 (over fiscal 2008) and in
fiscal 2010 (over fiscal 2009) of at least 4%. If this
threshold earnings per share growth is achieved in fiscal 2009 and 2010,
then these eligible shares will vest, in varying percentages, from 33% to
100%, based on the Company’s compound annual growth rate in earnings per
share from fiscal 2009 to 2010 ranging between 4% and 8%. The
remaining 50% of these shares will then vest in equal amounts on December
31, 2011 and December 31, 2012 based on his continued employment with the
Company. In fiscal 2008, we have assumed that these performance
criteria will be met and that these shares will
vest.
|
|
(ii)
|
Mr.
North was granted 1,200 shares of restricted stock on February 16, 2006
with a grant date fair value of $34.32 per share, 3,000 shares of
restricted stock on February 15, 2007 with a grant date fair value of
$22.19 per share, and 3,000 shares of restricted stock on December 3, 2007
with a grant date fair value of $22.79 per share. These grants
vest in four equal, annual installments following the date of
grant.
|
|
(iii)
|
Mr.
Petty was granted 10,000 shares of restricted stock on June 5, 2007 with a
grant date fair value of $27.06 per share. Mr. Petty was also
granted 25,000 shares of restricted stock on July 1, 2008 with a grant
date fair value of $14.18 per share. Both grants vest in four
equal, annual installments following the date of
grant.
|
|
(iv)
|
Mr. Whetzel
was granted 40,000 shares of restricted stock on May 13, 2005 with a
grant date fair value of $22.01 per share. These shares cliff
vest on May 13, 2009. We have assumed these shares will
vest on May 13, 2009, and in accordance with SFAS 123R, we record
expense for these grants ratably over the four-year vesting
period. Mr. Whetzel was also granted 10,000 shares of
restricted stock on July 1, 2008 with a grant date fair value of $14.18
per share. These shares vest in four equal, annual installments
following the date of grant.
|
|
(c)
|
The
amounts disclosed in this column represent the expense we recorded in
accordance with SFAS 123R for the following
grants:
|
|
(i)
|
Mr. Casey
was granted 200,000 time-based stock options on March 22, 2004 with a
Black-Scholes fair value of $6.56 per share and an exercise price of
$14.81 per share. These shares vest in five equal, annual
installments following the date of grant. Mr. Casey was
also granted 12,000 time-based stock options on February 16, 2006
with a Black-Scholes fair value of $15.59 per share and an exercise price
of $34.32 per share, 12,000 time-based stock options on February 15, 2007
with a Black-Scholes fair value of $10.01 per share and an exercise price
of $22.19 per share, and 125,000 time-based stock options on August 6,
2008 with a Black-Scholes fair value of $7.13 per share and an exercise
price of $17.90 per share. The stock options granted to Mr.
Casey in fiscal 2006, 2007, and 2008 vest in four equal, annual
installments following the date of
grant.
|
|
(ii)
|
Mr.
North was granted 60,000 time-based stock options on September 17, 2003
with a Black-Scholes fair value of $4.88 per share and an exercise price
of $6.98 per share. These shares vest in five equal, annual
installments following the date of grant. Mr. North was also
granted 2,800 time-based stock options on February 16, 2006 with a
Black-Scholes fair value of $15.59 per share and an exercise price of
$34.32 per share, 6,000 time-based stock options on February 15, 2007 with
a Black-Scholes fair value of $10.01 per share and an exercise price of
$22.19 per share, and 6,000 time-based stock options on December 3, 2007
with a Black-Scholes fair value of $9.15 per share and an exercise price
of $22.79 per share. The stock options granted to Mr. North in
fiscal 2006 and 2007 vest in four equal, annual installments following the
date of grant.
|
|
(iii)
|
Mr. Pacifico
was granted 200,000 time-based stock options on March 22, 2004 with a
Black-Scholes fair value of $6.56 per share and an exercise price of
$14.81 per share. These shares vest in five equal, annual
installments following the date of grant. Mr. Pacifico was
also granted 200,000 performance-based stock options on November 10,
2005 with a Black-Scholes fair value of $12.68 and an exercise price of
$31.18 per share. Subject to the achievement of individual and
Company performance targets, these stock options vest in
February 2010. In fiscal 2007, we assumed these
performance criteria will not be met and that these shares will not
vest. Prior to fiscal 2007, we assumed that 100% of these
shares would vest. In accordance with SFAS 123R, we record
performance-based stock option expense based upon the probability of
performance target achievement, and we adjust any previously recorded
expense if assumptions regarding the achievement of performance targets
change. Mr. Pacifico was granted 200,000 time-based stock
options on July 1, 2008 with a Black-Scholes fair value of $4.89 per share
and an exercise price of $14.18 per share. These shares vest in
three equal, annual installments following the date of
grant.
|
|
(iv)
|
Mr.
Petty was granted 40,000 time-based stock options on June 5, 2007 with a
Black-Scholes fair value of $12.15 per share and an exercise price of
$27.06 per share. Mr. Petty was also granted 75,000 time-based
stock options on July 1, 2008 with a Black-Scholes fair value of $5.82 per
share and an exercise price of $14.18 per share. These shares
vest in four equal, annual installments following the date of
grant.
|
|
(v)
|
Mr. Whetzel
was granted 60,000 time-based stock options on May 13, 2005 with a
Black-Scholes fair value of $8.71 per share and an exercise price of
$22.01 per share. Mr. Whetzel was also granted 40,000
time-based stock options on July 1, 2008 with a Black-Scholes fair value
of $5.82 per share and an exercise price of $14.18 per
share. Both grants vest in four equal, annual installments
following the date of grant.
|
|
(vi)
|
Mr. Rowan
was granted 400,000 performance-based stock options on May 13, 2005
with a Black-Scholes fair value of $7.76 per share and an exercise price
of $22.01 per share. These stock options were scheduled to vest
in February 2009, subject to the achievement of individual and
Company performance criteria. Due to Mr. Rowan’s termination
for "good reason" on August 1, 2008, the vesting of these shares was
accelerated and the Company recognized approximately $2.2 million of
stock-based compensation expense during fiscal 2008, in accordance with
SFAS 123R.
|
| (d) |
Amount
represents the increase in the present value of Mr. Rowan’s SERP in
fiscal 2008.
|
| (e) |
The
amounts shown as “All Other Compensation” for fiscal 2008 consist of the
following:
|
|
Name
|
Insurance
Premium
Payments
(i)
|
Excess
Personal
Liability
Insurance
Premiums
|
Medical
Reimbursements
(ii)
|
401(k)
Company
Match
|
Perquisites
(iii)
|
Severance
Compensation
(iv)
|
Relocation
|
Tax
Gross-Ups
(v)
|
Total
|
|||||||||||||||||||||||||||
|
Michael
D. Casey
|
$ | 40,000 | $ | 3,400 | $ | 5,777 | $ | 9,200 | $ | 30,315 | $ | -- | $ | -- | $ | 32,808 | $ | 121,500 | ||||||||||||||||||
|
Andrew
B. North
|
$ | -- | $ | -- | $ | -- | $ | 6,200 | $ | -- | $ | -- | $ | -- | $ | -- | $ | 6,200 | ||||||||||||||||||
|
Joseph
Pacifico
|
$ | 111,000 | $ | 3,400 | $ | 9,603 | $ | 9,200 | $ | 41,502 | $ | -- | $ | -- | $ | 96,856 | $ | 271,561 | ||||||||||||||||||
|
James
C. Petty
|
$ | -- | $ | -- | $ | -- | $ | 9,200 | $ | -- | $ | -- | $ | 74,085 | $ | 8,614 | $ | 91,899 | ||||||||||||||||||
|
Charles
E. Whetzel, Jr.
|
$ | 57,000 | $ | 3,400 | $ | 20,069 | $ | 9,200 | $ | 24,194 | $ | -- | $ | -- | $ | 50,357 | $ | 164,220 | ||||||||||||||||||
|
Frederick
J. Rowan, II
|
$ | -- | $ | 3,400 | $ | 5,992 | $ | 9,200 | $ | 36,413 | $ | 878,239 | $ | -- | $ | 355,809 | $ | 1,289,053 | ||||||||||||||||||
|
(i)
|
Payments
to Messrs. Casey, Pacifico, and Whetzel relate to contributions made
to individual whole-life insurance policies paid by the
Company.
|
|
(ii)
|
Amounts
relate to medical reimbursements and related costs pursuant to a
supplemental executive medical reimbursement
plan.
|
23
|
(iii)
|
Mr. Casey’s
perquisites are comprised of $26,906 for automobile-related costs, $1,909
for a health club membership, $750 for financial planning, and $750 for a
service award; Mr. Pacifico’s perquisites are comprised of $26,728
for automobile-related costs, $6,376 for a health club membership, $4,298
for country club dues, and $4,100 for financial planning;
Mr. Whetzel’s perquisites are comprised of $18,360 for
automobile-related costs, $3,925 for financial planning, and $1,909 for a
health club membership; and Mr. Rowan’s perquisites are comprised of
$18,545 for financial planning, $9,823 for fundraising activities, $3,097
for automobile-related costs, $2,997 for country club dues, and $1,951 in
reimbursable medical expense pursuant to his separation
agreement.
|
|
(iv)
|
Mr.
Rowan’s severance compensation is comprised of $483,804 related to the
termination of his split-dollar arrangement, $346,538 of severance
benefits, and $47,897 for office furniture given to Mr.
Rowan.
|
|
(v)
|
Mr. Casey’s
gross-ups are comprised of $29,505 for insurance premium payments, $2,508
for excess personal liability insurance, $435 for automobile-related
costs, and $360 for a service award; Mr. Pacifico’s gross-ups are
comprised of $81,876 for insurance premium payments, $7,796 for
automobile-related costs, $4,676 for county club dues, and $2,508 for
excess personal liability insurance; Mr. Petty’s gross-up is comprised of
$8,614 for relocation reimbursements; Mr. Whetzel’s gross-ups are
comprised of $42,043 for insurance premium payments, $5,806 for
automobile-related costs, and $2,508 for excess personal liability
insurance; and Mr. Rowan’s gross-ups are comprised of $332,592 for
insurance premium payments, $9,785 for financial planning, $7,274 for the
increase in the present value of his SERP agreement, $2,508 for excess
personal liability insurance, $2,211 for country club dues, and $1,439 for
reimbursable medical expenses.
|
|
(f)
|
Special
one-time bonus related to the reimbursement for a loss on sale of Mr.
Petty’s former residence and associated tax
gross-ups.
|
|
(g)
|
Bonus
award earned in fiscal 2006 based on the Company’s achievement of
performance criteria related to the integration of
OshKosh. This award was paid in fiscal
2007.
|
24
The
following table provides information concerning each grant of plan-based awards
made to a named executive officer in fiscal 2008. This includes
incentive compensation awards granted under our Incentive Compensation Plan and
stock option and restricted stock awards granted under our Equity Incentive
Plan. The threshold, target, and maximum columns reflect the range of
estimated payouts under these plans for fiscal 2008. The exercise
price disclosed is equal to the closing market price of our common stock on the
date of grant. The last column reports the aggregate SFAS 123R value
of all awards made in fiscal 2008 as if they were fully vested on the grant
date.
|
Estimated
Future Payouts Under
Non-Equity
Incentive Plan Awards (a)
|
Estimated
Future Payouts Under
Equity
Incentive Plan Awards
|
||||||||||||||||||||||||||||||||||||
|
Name
|
Award
Type
|
Equity
Award
Grant
Date
|
Threshold
($)
|
Target
($)
|
Maximum
($)
|
Threshold
(#)
|
Target
(#)
|
Maximum
(#)
|
Exercise
or
Base
Price
of
Option
Awards
($/Sh)
|
Grant
Date
Fair
Value
of
Stock
and
Option
Awards
|
|||||||||||||||||||||||||||
|
Michael
D. Casey
|
Cash
Bonus
|
-- | $ | 262,500 | $ | 1,050,000 | $ | 2,100,000 | -- | -- | -- | $ | -- | $ | -- | ||||||||||||||||||||||
|
Shares
(b)
|
8/7/2008
|
$ | -- | $ | -- | $ | -- | -- | 75,000 | 75,000 | $ | -- | $ | 1,344,000 | |||||||||||||||||||||||
|
Options
(c)
|
8/6/2008
|
$ | -- | $ | -- | $ | -- | -- | 125,000 | 125,000 | $ | 17.90 | $ | 891,250 | |||||||||||||||||||||||
|
Andrew
B. North
|
Cash
Bonus
|
-- | $ | 31,250 | $ | 125,000 | $ | 250,000 | -- | -- | -- | $ | -- | $ | -- | ||||||||||||||||||||||
|
Shares
|
-- | $ | -- | $ | -- | $ | -- | -- | -- | -- | $ | -- | $ | -- | |||||||||||||||||||||||
|
Options
|
-- | $ | -- | $ | -- | $ | -- | -- | -- | -- | $ | -- | $ | -- | |||||||||||||||||||||||
|
Joseph
Pacifico
|
Cash
Bonus
|
-- | $ | 162,500 | $ | 650,000 | $ | 1,300,000 | -- | -- | -- | $ | -- | $ | -- | ||||||||||||||||||||||
|
Shares
|
-- | $ | -- | $ | -- | $ | -- | -- | -- | -- | $ | -- | $ | -- | |||||||||||||||||||||||
|
Options
(d)
|
7/1/2008
|
$ | -- | $ | -- | $ | -- | -- | 200,000 | 200,000 | $ | 14.18 | $ | 978,000 | |||||||||||||||||||||||
|
James
C. Petty
|
Cash
Bonus
|
-- | $ | 79,688 | $ | 318,750 | $ | 637,500 | -- | -- | -- | $ | -- | $ | -- | ||||||||||||||||||||||
|
Shares
(e)
|
7/1/2008
|
$ | -- | $ | -- | $ | -- | -- | 25,000 | 25,000 | $ | -- | $ | 354,500 | |||||||||||||||||||||||
|
Options
(f)
|
7/1/2008
|
$ | -- | $ | -- | $ | -- | -- | 75,000 | 75,000 | $ | 14.18 | $ | 436,500 | |||||||||||||||||||||||
|
Charles
E. Whetzel, Jr.
|
Cash
Bonus
|
-- | $ | 92,969 | $ | 371,875 | $ | 743,750 | -- | -- | -- | $ | -- | $ | -- | ||||||||||||||||||||||
|
Shares
(e)
|
7/1/2008
|
$ | -- | $ | -- | $ | -- | -- | 10,000 | 10,000 | $ | -- | $ | 141,800 | |||||||||||||||||||||||
|
Options
(f)
|
7/1/2008
|
$ | -- | $ | -- | $ | -- | -- | 40,000 | 40,000 | $ | 14.18 | $ | 232,800 | |||||||||||||||||||||||
|
Frederick
J. Rowan, II
|
Cash
Bonus
|
-- | $ | 318,750 | $ | 1,275,000 | $ | 2,550,000 | -- | -- | -- | $ | -- | $ | -- | ||||||||||||||||||||||
|
Shares
|
-- | $ | -- | $ | -- | $ | -- | -- | -- | -- | $ | -- | $ | -- | |||||||||||||||||||||||
|
Options
|
-- | $ | -- | $ | -- | $ | -- | -- | -- | -- | $ | -- | $ | -- | |||||||||||||||||||||||
|
(a)
|
The
amounts shown under “Threshold” represent 25% of the target performance
bonus, assuming threshold level performance is achieved for all
performance measures. The amounts shown under “Target”
represent 100% of the target performance bonus. The amounts
shown under “Maximum” represent 200% of the target performance
bonus.
|
|
(b)
|
Shares
of performance-based restricted stock granted to Mr. Casey on
August 7, 2008 pursuant to the Company’s Equity Incentive
Plan. Fifty percent of these shares will be eligible to vest
upon the Company’s reporting of adjusted EPS growth in fiscal 2009 (over
fiscal 2008) and in fiscal 2010 (over fiscal 2009) of at least
4%. If this threshold earnings per share growth is achieved in
fiscal 2009 and 2010, then these eligible shares will vest, in varying
percentages, from 33% to 100%, based on the Company’s compound annual
growth rate in earnings per share from fiscal 2009 to 2010 ranging between
4% and 8%. The remaining 50% of these shares will then vest in
equal amounts on December 31, 2011 and December 31, 2012 based on his
continued employment with the Company. In fiscal 2008, we have
assumed that these performance criteria will be met and that these shares
will vest.
|
|
(c)
|
Time-based
stock options granted to Mr. Casey on August 6, 2008 pursuant to
the Company’s Equity Incentive Plan. These stock options vest
ratably in four equal, annual installments following the date of
grant.
|
|
(d)
|
Time-based
stock options granted to Mr. Pacifico on July 1, 2008 pursuant
to the Company’s Equity Incentive Plan. These stock options
vest ratably in three equal, annual installments following the date of
grant.
|
|
(e)
|
Shares
of restricted stock granted to Mr. Petty and Mr. Whetzel on July 1,
2008 pursuant to the Company’s Equity Incentive Plan. These
restricted shares vest ratably in four equal, annual installments
following the date of grant.
|
|
(f)
|
Time-based
stock options granted to Mr. Petty and Mr. Whetzel on July 1, 2008
pursuant to the Company’s Equity Incentive Plan. These stock
options vest ratably in four equal, annual installments following the date
of grant.
|
25
The
following table provides information concerning our named executive officers’
exercises of stock options and vesting of restricted stock during fiscal
2008. The table reports, on an aggregate basis, the number of
securities acquired upon exercise of stock options, the dollar value realized
upon exercise of stock options, the number of shares of restricted stock that
have vested, and the dollar value realized upon the vesting of restricted
stock.
|
Option
Awards
|
Stock
Awards
|
|||||||||||||||
|
Name
|
Number
of
Shares
Acquired
on
Exercise
(#)
|
Value
Realized
on
Exercise
($)
(a)
|
Number
of
Shares
Acquired
on
Vesting
(#)
|
Value
Realized
on
Vesting
($)
(b)
|
||||||||||||
|
Michael
D. Casey
|
-- | $ | -- | 6,000 | $ | 125,520 | ||||||||||
|
Andrew
B. North
|
-- | $ | -- | 1,800 | $ | 36,329 | ||||||||||
|
James
C. Petty
|
-- | $ | -- | 2,500 | $ | 38,400 | ||||||||||
|
Frederick
J. Rowan, II
|
548,356 | $ | 9,353,608 | -- | $ | -- | ||||||||||
|
(a)
|
Aggregate
dollar amount was calculated by multiplying the number of shares acquired
by the difference between the market price of the underlying securities at
the time of exercise and the exercise price of the stock
options.
|
|
(b)
|
Aggregate
dollar amount was calculated by multiplying the number of shares acquired
on vesting by the market price of the Company’s stock on the date of
vesting.
|
26
The
following table provides information regarding unexercised stock options, stock
that has not yet vested, and equity incentive plan awards for each named
executive officer outstanding as of the end of fiscal 2008. Each
outstanding award is represented by a separate row that indicates the number of
securities underlying the award.
|
Option
Awards
|
Stock
Awards
|
|||||||||||||||||||||||||||
|
Name
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
(Exercisable)
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
(a)
(Unexercisable)
|
Equity
Incentive
Plan
Awards:
Number
of
Securities
Underlying
Unexercised
Unearned
Options
(#)
(b)
|
Option
Exercise
Price
($)
|
Option
Expiration
Date
|
Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units
or
Other
Rights
That
Have
Not
Vested
(#)
(c)
|
Equity
Incentive
Plan
Awards:
Market
or
Payout
Value of
Unearned
Shares,
Units
or Other
Rights
That Have
Not
Vested
($)
(d)
|
|||||||||||||||||||||
|
Michael
D. Casey
|
243,488 | -- | -- | $ | 3.08 |
8/15/2011
|
-- | $ | -- | |||||||||||||||||||
| 160,000 | 40,000 | -- | $ | 14.81 |
3/22/2014
|
-- | $ | -- | ||||||||||||||||||||
| 6,000 | 6,000 | -- | $ | 34.32 |
2/16/2016
|
-- | $ | -- | ||||||||||||||||||||
| 3,000 | 9,000 | -- | $ | 22.19 |
2/15/2017
|
-- | $ | -- | ||||||||||||||||||||
| -- | 125,000 | -- | $ | 17.90 |
8/6/2018
|
-- | $ | -- | ||||||||||||||||||||
| -- | -- | -- | $ | -- | -- | 90,000 | $ | 1,731,600 | ||||||||||||||||||||
|
Andrew
B. North
|
32,500 | -- | -- | $ | 6.98 |
9/17/2013
|
-- | $ | -- | |||||||||||||||||||
| 1,400 | 1,400 | -- | $ | 34.32 |
2/16/2016
|
-- | $ | -- | ||||||||||||||||||||
| 1,500 | 4,500 | -- | $ | 22.19 |
2/15/2017
|
-- | $ | -- | ||||||||||||||||||||
| 1,500 | 4,500 | -- | $ | 22.79 |
12/3/2017
|
-- | $ | -- | ||||||||||||||||||||
| -- | -- | -- | $ | -- | -- | 5,100 | $ | 98,124 | ||||||||||||||||||||
|
Joseph
Pacifico
|
389,688 | -- | -- | $ | 3.08 |
8/15/2011
|
-- | $ | -- | |||||||||||||||||||
| 160,000 | 40,000 | -- | $ | 14.81 |
3/22/2014
|
-- | $ | -- | ||||||||||||||||||||
| -- | -- | 200,000 | $ | 31.18 |
11/10/2015
|
-- | $ | -- | ||||||||||||||||||||
| -- | 200,000 | -- | $ | 14.18 |
7/1/2018
|
-- | $ | -- | ||||||||||||||||||||
|
James
C. Petty
|
10,000 | 30,000 | -- | $ | 27.06 |
6/5/2017
|
-- | $ | -- | |||||||||||||||||||
| -- | 75,000 | -- | $ | 14.18 |
7/1/2018
|
-- | $ | -- | ||||||||||||||||||||
| -- | -- | -- | $ | -- | -- | 32,500 | $ | 625,300 | ||||||||||||||||||||
|
Charles
E. Whetzel, Jr.
|
389,688 | -- | -- | $ | 3.08 |
8/15/2011
|
-- | $ | -- | |||||||||||||||||||
| 45,000 | 15,000 | -- | $ | 22.01 |
5/13/2015
|
-- | $ | -- | ||||||||||||||||||||
| -- | 40,000 | -- | $ | 14.18 |
7/1/2018
|
-- | $ | -- | ||||||||||||||||||||
| -- | -- | -- | $ | -- | -- | 50,000 | $ | 962,000 | ||||||||||||||||||||
|
Frederick
J. Rowan, II
|
1,060,710 | -- | -- | $ | 3.08 |
8/1/2011
|
-- | $ | -- | |||||||||||||||||||
|
(a)
|
Unexercised
options relate to the following
awards:
|
|
(i)
|
Mr. Casey
was granted 200,000 time-based stock options on March 22, 2004 with a
Black-Scholes fair value of $6.56 per share and an exercise price of
$14.81 per share. These stock options vest in five equal,
annual installments following the date of grant. Mr. Casey
was also granted 12,000 time-based stock options on both February 16,
2006 and February 15, 2007 with a Black-Scholes fair value of $15.59 per
share and $10.01 per share, and an exercise price of $34.32 per share and
$22.19 per share, respectively. In addition, Mr. Casey was
granted 125,000 time-based stock options on August 6, 2008 with a
Black-Scholes fair value of $7.13 per share and an exercise price of
$17.90 per share. The stock options granted to Mr. Casey in
fiscal 2006, 2007, and 2008 vest in four equal, annual installments
following the date of grant.
|
|
(ii)
|
Mr. North
was granted 2,800 time-based stock options on February 16, 2006 with a
Black-Scholes fair value of $15.59 per share and an exercise price of
$34.32 per share. Mr. North was also granted 6,000
time-based stock options on February 15, 2007 with a Black-Scholes
fair value of $10.01 per share and an exercise price of $22.19 per
share. In addition, Mr. North was granted 6,000 time-based
stock options on December 3, 2007 with a Black-Scholes fair value of $9.15
per share and an exercise price of $22.79 per share. The stock
options granted to Mr. North in fiscal 2006 and 2007 vest in four equal,
annual installments following the date of
grant.
|
|
(iii)
|
Mr. Pacifico
was granted 200,000 time-based stock options on March 22, 2004 with a
Black-Scholes fair value of $6.56 per share and an exercise price of
$14.81 per share. These stock options vest in five equal,
annual installments following the date of grant. Mr. Pacifico
was also granted 200,000 time-based stock options on July 1, 2008 with a
Black-Scholes fair value of $4.89 per share and an exercise price of
$14.18 per share. These stock options vest in three equal,
annual installments following the date of
grant.
|
27
|
(iv)
|
Mr.
Petty was granted 40,000 time-based stock options on June 5, 2007 with a
Black-Scholes fair value of $12.15 per share and an exercise price of
$27.06 per share. Mr. Petty was also granted 75,000 time-based
stock options on July 1, 2008 with a Black-Scholes fair value of $5.82 per
share and an exercise price of $14.18 per share. The stock
options granted to Mr. Petty in fiscal 2007 and 2008 vest in four equal,
annual installments following the date of
grant.
|
|
(v)
|
Mr. Whetzel
was granted 60,000 time-based stock options on May 13, 2005 with a
Black-Scholes fair value of $8.71 per share and an exercise price of
$22.01 per share. Mr. Whetzel was also granted 40,000
time-based stock options on July 1, 2008 with a Black-Scholes fair value
of $5.82 per share and an exercise price of $14.18 per
share,. The stock options granted to Mr. Whetzel in fiscal 2005
and 2008 vest in four equal, annual installments following the date of
grant.
|
|
(b)
|
Unexercised,
unearned stock options relate to the following
awards:
|
|
(i)
|
Mr. Pacifico
was granted 200,000 performance-based stock options on November 10,
2005 with a Black-Scholes fair value of $12.68 and an exercise price of
$31.18 per share. Subject to the achievement of individual and
Company performance targets, these stock options vest in
February 2010. We have assumed that these performance
criteria will not be met and that these shares will not
vest.
|
|
(c)
|
Equity
Incentive Plan awards relate to the following
grants:
|
|
(i)
|
Mr. Casey
was granted 12,000 shares of restricted stock on both February 16,
2006 and February 15, 2007 with a grant date fair value of $34.32 per
share and $22.19 per share. These grants vest in four equal,
annual installments following the date of grant. Mr. Casey was
also granted 75,000 shares of performance-based restricted stock on August
7, 2008 with a grant date fair value of $17.92 per share. Fifty
percent of these shares will be eligible to vest upon the Company’s
reporting of adjusted EPS growth in fiscal 2009 (over fiscal 2008) and in
fiscal 2010 (over fiscal 2009) of at least 4%. If this
threshold earnings per share growth is achieved in fiscal 2009 and 2010,
then these eligible shares will vest, in varying percentages, from 33% to
100%, based on the Company’s compound annual growth rate in earnings per
share from fiscal 2009 to 2010 ranging between 4% and 8%. The
remaining 50% of these shares will then vest in equal amounts on December
31, 2011 and December 31, 2012 based on his continued employment with the
Company. In fiscal 2008, we have assumed that these performance
criteria will be met and that these shares will
vest.
|
|
(ii)
|
Mr.
North was granted 1,200 shares of restricted stock on February 16,
2006 with a grant date fair value of $34.32 per share. Mr.
North was also granted 3,000 shares of restricted stock on both February
15, 2007 and December 3, 2007 with a grant date fair value of $22.19 and
$22.79 per share, respectively. All grants vest in four equal,
annual installments following the date of
grant.
|
|
(iii)
|
Mr.
Petty was granted 10,000 shares of restricted stock on June 5, 2007 with a
grant date fair value of $27.06 per share. Mr. Petty was also
granted 25,000 shares of restricted stock on July 1, 2008 with a grant
date fair value of $14.18 per share. Both grants vest in four
equal, annual installments following the date of
grant.
|
|
(iv)
|
Mr. Whetzel
was granted 40,000 shares of restricted stock on May 13, 2005 with a
grant date fair value of $22.01 per share. These shares cliff
vest on May 13, 2009. We have assumed these shares will
vest on May 13, 2009 and in accordance with SFAS 123R, we record the
related expense for these grants ratably over the four-year vesting
period. Mr. Whetzel was also granted 10,000 shares of
restricted stock on July 1, 2008 with a grant date fair value of $14.18
per share. This grant vests in four equal, annual installments
following the date of grant.
|