DEF 14A 1 a14-2470_1def14a.htm DEFINITIVE PROXY STATEMENT

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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.     )

 

Filed by the Registrant  x

 

Filed by a Party other than the Registrant  o

 

Check the appropriate box:

o

Preliminary Proxy Statement

o

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

x

Definitive Proxy Statement

o

Definitive Additional Materials

o

Soliciting Material Pursuant to §240.14a-12

 

ARKANSAS BEST CORPORATION

(Name of Registrant as Specified In Its Charter)

 

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 

Payment of Filing Fee (Check the appropriate box):

x

No fee required.

o

Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

(1)

Title of each class of securities to which transaction applies:

 

 

 

 

(2)

Aggregate number of securities to which transaction applies:

 

 

 

 

(3)

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

 

 

 

(4)

Proposed maximum aggregate value of transaction:

 

 

 

 

(5)

Total fee paid:

 

 

 

o

Fee paid previously with preliminary materials.

o

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

(1)

Amount Previously Paid:

 

 

 

 

(2)

Form, Schedule or Registration Statement No.:

 

 

 

 

(3)

Filing Party:

 

 

 

 

(4)

Date Filed:

 

 

 

 



Table of Contents

 

GRAPHIC

 

ARKANSAS BEST

CORPORATION

 

 

 

 


 

 

 

Notice of

Annual Meeting

&

Proxy Statement

 

 

 


 

 

 

 

 

2014

 



Table of Contents

 

Contents

 

 

 

Page

 

 

Notice of Annual Meeting of Stockholders

1

Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting

2

Proxy Statement

 

Record Date

3

Proxies

3

Voting Shares

4

Proposal I. Election of Directors

5

Directors of the Company

6

Governance of the Company

10

Director Compensation

16

2013 Director Compensation Table

17

Principal Stockholders and Management Ownership

19

Executive Officers of the Company

21

Compensation Discussion & Analysis

24

Compensation Committee Report

37

Compensation Committee Interlocks and Insider Participation

37

Summary Compensation Table

38

2013 Grants of Plan-Based Awards

40

Outstanding Equity Awards at 2013 Fiscal Year-End

42

2013 Option Exercises and Stock Vested

43

2013 Equity Compensation Plan Information

44

2013 Pension Benefits

45

2013 Non-Qualified Deferred Compensation

47

Potential Payments upon Termination or Change in Control

49

Certain Transactions and Relationships

55

Section 16(a) Beneficial Ownership Reporting Compliance

55

Report of the Audit Committee

56

Proposal II. Ratification of Appointment of Independent Registered Public Accounting Firm

57

Principal Accountant Fees and Services

57

Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Registered Public Accounting Firm

58

Proposal III. Advisory Vote on Executive Compensation

58

Proposal IV. Approval of the Second Amendment to the 2005 Ownership Incentive Plan

59

Proposal V. Approval of Material Plan Terms of the 2005 Ownership Incentive Plan, as Amended, for Purposes of Complying with the Requirements of Section 162(m) of the Internal Revenue Code

67

Other Matters

68

Cost of Solicitation

68

Stockholder Communication with the Board

68

Procedure for Submitting Stockholder Proposals for 2015 Annual Meeting

69

General Matters

70

Appendix A

71

 



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GRAPHIC

 

ARKANSAS BEST

CORPORATION

 


Notice of

Annual Meeting of Stockholders

Arkansas Best Corporation


To Be Held on April 23, 2014

 

To the Stockholders of Arkansas Best Corporation:

 

You are cordially invited to attend the Annual Meeting of Stockholders of Arkansas Best Corporation (the “Company”) on Wednesday, April 23, 2014 at 8:00 a.m. (CDT) at the principal offices of the Company located at 3801 Old Greenwood Road, Fort Smith, Arkansas 72903. In addition to this notice, enclosed are a proxy card and a proxy statement containing information about the following matters to be acted upon at the meeting:

 

I.

 

To elect nine directors for a one-year term to expire at the 2015 Annual Meeting of Stockholders;

II.

 

To ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for fiscal year 2014;

III.

 

To conduct an advisory vote on executive compensation;

IV.

 

To approve the Second Amendment to the 2005 Ownership Incentive Plan;

V.

 

To approve the material plan terms of the 2005 Ownership Incentive Plan, as amended, for purposes of complying with the requirements of Section 162(m) of the Internal Revenue Code; and

VI.

 

To act upon such other matters as may properly be brought before the meeting affecting the business and affairs of the Company.

 

Only stockholders of record at the close of business on February 24, 2014 are entitled to notice of and to vote at the meeting or any adjournment(s) or postponement(s) thereof. Whether or not you plan to attend the meeting, please complete, sign, date and return the enclosed proxy card or follow the instructions on the proxy card and vote by Internet or by telephone as promptly as possible. It is important that your shares be represented at the meeting.

 

 

 

The Board of Directors urges you to sign and date your enclosed proxy card and promptly return it in the enclosed pre-addressed, postage-paid envelope or follow the instructions on the proxy card and vote by Internet or by telephone, even if you are planning to attend the meeting. Many of the Company’s stockholders hold their shares in “street-name” in the name of a brokerage firm or bank. If you hold your shares in “street-name,” please note that only your brokerage firm or bank can sign a proxy on your behalf. Accordingly, you must provide voting instructions to your brokerage firm or bank in order for your shares to be voted. The Board of Directors urges you to contact the person responsible for your account today and instruct them to execute a proxy considering the recommendations of the Board, which are described in this Proxy Statement.

 

Please note that if your shares are held of record by a broker, bank or other nominee and you wish to vote at the meeting, you will not be permitted to vote in person at the meeting unless you first obtain a legal proxy issued in your name from the record holder.

 

 

 

By Order of the Board of Directors, February 28, 2014.

 

GRAPHIC

 

GRAPHIC

Robert A. Young III

 

Judy R. McReynolds

Chairman of the Board

 

President–Chief Executive Officer

 

3801 OLD GREENWOOD ROAD / P.O. BOX 10048 / FORT SMITH, ARKANSAS 72917-0048 / 479-785-6000

 



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GRAPHIC

 

ARKANSAS BEST

CORPORATION

 


Important Notice Regarding the Availability of Proxy
Materials for the Stockholder Meeting


 

To Be Held on April 23, 2014

 

The Proxy Statement, proxy card and 2013 Annual Report on Form 10-K
to stockholders are available at www.arkbest.com.

 

The 2014 Annual Meeting of Stockholders of Arkansas Best Corporation (the “Company”) will be held on Wednesday, April 23, 2014 at 8:00 a.m. (CDT) at the principal offices of the Company located at 3801 Old Greenwood Road, Fort Smith, Arkansas 72903. To obtain directions to attend the Annual Meeting and to vote in person, contact the Company’s Investor Relations Department at toll-free telephone number 800-961-9744, email address invrel@arkbest.com or through the Company website www.arkbest.com.

 

The matters intended to be acted upon at the Annual Meeting are:

 

I.

 

Election of nine directors for a one-year term to expire at the 2015 Annual Meeting of Stockholders;

 

John W. Alden

Fred A. Allardyce

William M. Legg

Judy R. McReynolds

John H. Morris

Craig E. Philip

Steven L. Spinner

Janice E. Stipp

Robert A. Young III

 

II.

 

Ratification of appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for fiscal year 2014;

 

 

 

III.

 

Advisory vote on executive compensation;

 

 

 

IV.

 

Approval of the Second Amendment to the 2005 Ownership Incentive Plan;

 

 

 

V.

 

Approval of Material Plan Terms of the 2005 Ownership Incentive Plan, as amended, for purposes of complying with the requirements of Section 162(m) of the Internal Revenue Code; and

 

 

 

VI.

 

Consideration of such other matters as may properly be brought before the meeting affecting the business and affairs of the Company.

 

The Board of Directors recommends a vote “FOR” each of the nominees for election to the Board, “FOR” ratification of the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for fiscal year 2014, “FOR” the approval of the compensation of the Company’s Named Executive Officers, “FOR” approval of a Second Amendment to the 2005 Ownership Incentive Plan and “FOR” the approval of the material terms of the 2005 Ownership Incentive Plan, as amended, for purposes of complying with the requirements of Section 162(m) of the Internal Revenue Code.

 

The following proxy materials are being made available at the website location specified above:

 

·                  The Proxy Statement for the 2014 Annual Meeting of Stockholders

·                  The 2013 Annual Report on Form 10-K

·                  The form of proxy card being distributed to stockholders in connection with the 2014 Annual Meeting of Stockholders

 

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GRAPHIC

 

ARKANSAS BEST

CORPORATION

 


 

Proxy Statement

 


 

This Proxy Statement is furnished to the stockholders of Arkansas Best Corporation (“ABC” or the “Company”) in connection with the solicitation of proxies on behalf of the ABC Board of Directors (the “Board”) to be voted at the Company’s Annual Meeting of Stockholders (the “2014 Annual Meeting”) to be held on April 23, 2014 at 8:00 a.m. (CDT) at the principal offices of the Company for the purposes set forth in this Proxy Statement. This Proxy Statement, the Notice of Annual Meeting, the related proxy card, and the 2013 Annual Report on Form 10-K to Stockholders are being mailed to stockholders beginning on or about March 19, 2014. ABC’s principal place of business is at 3801 Old Greenwood Road, Fort Smith, Arkansas 72903, and its telephone number is 479-785-6000.

 

 

Record Date

 

The Board has fixed the close of business on February 24, 2014 as the record date for the 2014 Annual Meeting. Only stockholders of record on that date are entitled to vote at the meeting in person or by proxy.

 

 

Proxies

 

Registered stockholders may vote their shares of the Company’s common stock by proxy or in person at the meeting. To vote by proxy, registered stockholders must either: (i) visit the website designated on the proxy card to submit their proxy on the Internet; (ii) call the toll-free number set forth on the proxy card to submit their proxy telephonically; or (iii) mail their signed and dated proxy card in the envelope provided. Beneficial stockholders should follow the instructions that they receive from their bank, broker or other nominee to have their shares voted.

 

The proxies named on the enclosed proxy card were appointed by the Board to vote the shares represented by the proxy card. Upon receipt by the Company of either a submitted Internet or telephone vote or a properly signed and dated proxy card, the shares represented thereby will be voted in accordance with the stockholder’s instructions. If a stockholder does not vote either by Internet, telephone or returning a signed proxy card, his or her shares cannot be voted by proxy. Stockholders voting by returning a paper proxy card are urged to mark the ovals on the proxy card to show how their shares are to be voted. If a stockholder returns a signed proxy card without marking the ovals, the shares represented by the proxy card will be voted as recommended by the Board herein and in the proxy card. The proxy also confers discretionary authority to the proxy holders to vote on any other matter not presently known to the Company that may properly come before the meeting.

 

Registered stockholders may revoke their proxy at any time before the shares are voted at the 2014 Annual Meeting by: (i) timely submitting a proxy with new voting instructions, using the Internet or telephone voting system; (ii) voting in person at the 2014 Annual Meeting by completing a ballot; however, attending the meeting without completing a ballot will not revoke any previously submitted proxy; (iii) timely delivery of a valid, duly executed proxy card bearing a later date; or (iv) delivery of written notice of revocation to the Corporate Secretary of the Company at 3801 Old Greenwood Road, Fort Smith, Arkansas 72903, by 5:00 p.m. (CDT), on or before April 22, 2014. Beneficial stockholders may change their votes by submitting new voting instructions to their bank, broker or other nominee in accordance with that entity’s procedures.

 

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Voting Shares

 

On the record date, there were 25,868,155 shares of the Company’s common stock outstanding and entitled to vote (“Common Stock”). Each share of Common Stock is entitled to one vote. Cumulative voting is not allowed. The holders in person or by proxy of a majority of the total number of shares of Common Stock shall constitute a quorum for purposes of the 2014 Annual Meeting. If stockholders holding the number of shares of Common Stock necessary for a quorum shall fail to be present in person or by proxy at the time and place fixed for any meeting, the holders of a majority of the shares entitled to vote who are represented in person or by proxy may adjourn the meeting from time to time, until a quorum is present, and at any such adjourned meeting at which a quorum is present, any business may be transacted which might have been transacted at the original meeting. Votes are tabulated by the inspector of elections, Wells Fargo Bank, N.A.

 

If you hold your shares in “street name,” you will receive instructions from your broker or other nominees describing how to vote your shares. If you do not instruct your brokers or nominees how to vote your shares, they may vote your shares as they decide as to each matter for which they have discretionary authority under the rules of the New York Stock Exchange. For Proposal II (Ratification of Appointment of Independent Registered Public Accounting Firm) to be voted on at the annual meeting, brokers and other nominees will have discretionary authority in the absence of timely instructions from you.

 

For Proposal I (Election of Directors), Proposal III (Advisory Vote on Executive Compensation), Proposal IV (Approval of the Second Amendment to the 2005 Ownership Incentive Plan) and Proposal V (Approval of the Material Plan Terms of the 2005 Ownership Incentive Plan, as Amended, for Purposes of Complying with the Requirements of Section 162(m) of the Internal Revenue Code) to be voted on at the 2014 Annual Meeting, you must provide timely instructions on how the broker or other nominee should vote your shares. If you do not give timely instructions to the broker or other nominee on how that broker or nominee should vote your shares, a “broker non-vote” results. Although any broker non-vote would be counted as present at the meeting for purposes of determining a quorum, it would be treated as not entitled to vote with respect to Proposal I, Proposal III, Proposal IV and Proposal V.

 

Abstentions occur when stockholders are present at the annual meeting but fail to vote or voluntarily withhold their vote for any of the matters upon which the stockholders are voting.

 

Election of Directors. The Company’s bylaws provide that directors are elected by a plurality of the votes cast by stockholders, in person or by proxy, at a meeting at which a quorum is present. The Company’s bylaws, while not changing the requirement for a plurality vote in the election of directors, require additionally that any director in an uncontested election who does not receive the affirmative vote of a majority of the votes cast must promptly tender his or her resignation to the Board following certification of the stockholder vote. For this purpose, “majority of the votes cast” means the number of FOR votes equals or exceeds the number of WITHHOLD votes, and “votes cast” include only FOR and WITHHOLD votes. Abstentions and broker non-votes will not be taken into account in determining the outcome of the election. The requirement that a director tender his or her resignation if he or she does not receive a majority of the votes cast does not apply in the case of a contested election where the number of nominees exceeds the number of directors to be elected.

 

Other MattersThe required vote to approve any matter other than the election of directors is the affirmative vote by the holders of a majority of the total number of shares of Common Stock present in person or by proxy and entitled to vote on the matter.

 

Proposal II.  With respect to Proposal II, the ratification of the appointment of the Company’s independent registered public accounting firm, an abstention is treated as entitled to vote and, therefore, has the same effect as voting “against” the proposal.

 

Proposal III.  With respect to Proposal III, an abstention is treated as entitled to vote and, therefore, has the same effect as voting “against” such proposal. For purposes of Proposal III, broker non-votes are not treated as entitled to vote and, therefore, are not counted for purposes of determining whether a majority has been achieved. Proposal III is a non-binding advisory vote. However, the Board and the Compensation Committee will consider the outcome of the vote on Proposal III when considering future executive compensation decisions.

 

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Proposal IV.  With respect to Proposal IV, an abstention is treated as entitled to vote and, therefore, has the same effect as voting “against” such proposal. For purposes of Proposal IV, broker non-votes are not treated as entitled to vote and, therefore, are not counted for purposes of determining whether a majority has been achieved.

 

Proposal V. With respect to Proposal V, an abstention is treated as entitled to vote and, therefore, has the same effect as voting “against” such proposal. For purposes of Proposal V, broker non-votes are not treated as entitled to vote and, therefore, are not counted for purposes of determining whether a majority has been achieved.

 

Unless otherwise instructed or unless authority to vote is withheld, the enclosed proxy card will be voted for the election of each of the director nominees; for the ratification of Ernst & Young LLP as the Company’s independent registered public accounting firm for fiscal year 2014; for the approval, on an advisory basis, of the compensation of the Company’s Named Officers (as defined in the “Compensation Discussion and Analysis”); for the approval of the Second Amendment to 2005 Ownership Incentive Plan; and for the approval of the material plan terms of the 2005 Ownership Incentive Plan.

 

 

Proposal I. Election of Directors

 

The Board of Directors recommends a vote “FOR” Proposal I.

 

The Board has designated John W. Alden, Fred A. Allardyce, William M. Legg, Judy R. McReynolds, John H. Morris, Craig E. Philip, Steven L. Spinner, Janice E. Stipp and Robert A. Young III as nominees for election as Directors of the Company at the Annual Meeting (each a “Nominee”). Each Nominee is currently a Director of the Company. If elected, each Nominee will serve until the expiration of his/her term at the Annual Meeting in 2015 or until his/her earlier death, resignation or removal from office.

 

Each Nominee has indicated his/her willingness to serve as a member of the Board, if elected. If, for any reason not presently known, any of Messrs. Alden, Allardyce, Legg, Morris, Philip, Spinner or Young or Ms. McReynolds or Stipp are unable or unwilling to serve if elected, your proxy card may be voted for the election in his/her stead of a substitute nominee designated by the Board or a committee thereof, unless the proxy withholds authority to vote for the Nominee.

 

The Company’s bylaws provide that directors are elected by a plurality of the votes cast by stockholders, in person or by proxy, at a meeting at which a quorum is present. The Company’s bylaws, while not changing the requirement for a plurality vote in the election of directors, require additionally that any director in an uncontested election who does not receive the affirmative vote of a majority of the votes cast must promptly tender his or her resignation to the Board following certification of the stockholder vote. For this purpose, “majority of the votes cast” means the number of FOR votes equals or exceeds the number of WITHHOLD votes, and “votes cast” include only FOR and WITHHOLD votes. Abstentions and broker non-votes will not be taken into account in determining the outcome of the election. The Nominating/Corporate Governance Committee will consider any resignation tendered under this policy and recommend to the Board whether to accept or reject it, and the Board will act on such resignation, taking into account the Nominating/Corporate Governance Committee’s recommendation, within 90 days following the certification of the election results. The Nominating/Corporate Governance Committee in making its recommendation, and the Board in making its decision, may consider any information it deems appropriate, including, without limitation, any reasons given by stockholders for their WITHHOLD votes, the qualifications of the director and his or her contributions to the Board and the Company. The Board will promptly disclose its decision to accept or reject the resignation and, if rejected, the reasons for doing so. If a director’s resignation is not accepted by the Board, then such director will continue to serve until the next annual meeting for the year in which his or her term expires and until his or her successor is duly elected, or his or her earlier resignation or removal. If a director’s resignation is accepted by the Board, then the Board, in its sole discretion, may fill any remaining vacancy or decrease the size of the Board. The requirement that a director tender his or her resignation if he or she does not receive a majority of the votes cast does not apply in the case of a contested election where the number of nominees exceeds the number of directors to be elected.

 

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Unless otherwise instructed or unless authority to vote is withheld, the enclosed proxy card will be voted for the election of each of the Nominees.

 

 

Directors of the Company

 

The following information relates to the Nominees named in “Proposal I. Election of Directors.” The information includes the publicly traded company directorships and certain other directorships held by each Director for the past five years and the specific experience, qualifications, attributes and skills that each Director possesses that led to the conclusion that the person should serve as a Director of the Company. There are no family relationships among Directors and executive officers of the Company or its subsidiaries.

 

Nominees for Election at the 2014 Annual Meeting, Term Will Expire at the 2015 Annual Meeting

 

 

 

JOHN W. ALDEN, age 72, has been a Director of the Company since May 2005. Mr. Alden retired as Vice Chairman of United Parcel Service of America, Inc. (“UPS”) in 2000. From 1988 until his retirement from UPS, he served as a Director of UPS. Mr. Alden worked for UPS for 35 years in various capacities. Currently, Mr. Alden is also a Director of Barnes Group, Inc., Dun & Bradstreet Corporation and Silgan Holdings, Inc.

 

Key Attributes, Experience and Skills

As Vice Chairman and Senior Vice President–Business Development of UPS, Mr. Alden led a global public transportation company and public company board. Through his 35 years at UPS, he gained expertise in the areas of sales and marketing, operations, customer service, management, senior management, business development and public company board strategic planning and oversight. Mr. Alden, Chairman of the Board’s Nominating/Corporate Governance Committee and member of the Board’s Compensation Committee, has served on seven boards over the past 20 years.

 

 

 

 

FRED A. ALLARDYCE, age 72, has been a Director of the Company and the Board’s Audit Committee Financial Expert since February 2004. Mr. Allardyce has been Chairman and Chief Executive Officer of Advanced Breath Diagnostics since March 2000 and Chairman of Monitor Instruments since September 2000. Advanced Breath Diagnostics is a development-stage medical diagnostic company and Monitor Instruments is a development-stage scientific instrument company. From 1977 through 1999, he was employed by American Standard Inc., a publicly traded company, where he served in the following positions: Senior Vice President–Medical Products from January 1998 until November 1999; Chief Financial Officer from 1992 to 1997; Controller from 1983 to 1991; and Assistant Controller from 1977 to 1982. He also served in various financial-related capacities for Joseph E. Seagram & Sons from 1972 to 1977 and at Continental Oil Company from 1965 to 1972. Mr. Allardyce earned a B.A. in Economics from Yale University and an M.B.A. from the University of Chicago Graduate School of Business, where he was the recipient of the Institute of Professional Accountants Fellowship. Mr. Allardyce was Chairman in fiscal 1999–2000 of Financial Executives International, a 15,000-member organization of financial leaders.

 

Key Attributes, Experience and Skills

Mr. Allardyce has extensive accounting and auditing experience in public and private organizations and has a strong background in financial controls and reporting, financial management, financial analysis, acquisitions, entrepreneurship and investment banking, including finance and private equity. A former chief financial officer and controller of a public company, his skills also include preparing financial reports, maintaining internal controls and overseeing financial reporting. Mr. Allardyce is Chairman of the Board’s Audit Committee and is the Audit Committee’s Financial Expert.

 

 

 

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WILLIAM M. LEGG, age 69, has been a Director of the Company since April 2002. He retired from Deutsche Banc Alex.Brown, an investment banking firm (“Alex.Brown”), as Managing Director, in 2002. During his 31 years at Alex.Brown, he served as Head of Alex.Brown’s Transportation Group and Co-Head of Alex.Brown & Sons, Inc.’s Corporate Finance Department. Mr. Legg and his group executed initial public offerings for many logistics companies including: Viking Freight, MS Carriers, Werner Enterprises, J.B. Hunt, Swift, Old Dominion, CH Robinson and Hub Group. Mr. Legg worked on transportation-related transactions for Deutsche Post, PepsiCo, ARA Services, Transport Development Group and the Company. Mr. Legg earned a B.A. from Trinity College and an M.B.A from Loyola College. Prior to joining Alex.Brown in 1971, he served as an officer in the United States Navy.

 

Key Attributes, Experience and Skills

Mr. Legg brings to the Board significant investment banking experience, including finance, private equity, mergers and acquisitions, capital structures and strategic planning. His contributions to the Board include in-depth knowledge of other transportation companies and industry subsets. His years in transportation-related finance bring valuable analytical transportation knowledge to the Board. Mr. Legg has experience in executive compensation, governance and director nomination matters. He is the Board’s Compensation Committee Chairman and is a member of the Board’s Nominating/Corporate Governance Committee.

 

 

 

 

JUDY R. MCREYNOLDS, age 51, has been a Director of the Company and President & Chief Executive Officer since January 1, 2010. She served as Senior Vice President–Chief Financial Officer and Treasurer from February 2006 through December 2009. She was Vice President–Controller of ABC from January 2000 until January 31, 2006. She previously served as the Controller of the Company from July 1998 until December 1999. Ms. McReynolds joined the Company as Director of Corporate Accounting in June 1997. Ms. McReynolds has been a member of the Board of Directors of OGE Energy Corp. since July 2011 and serves on its Compensation Committee and Nominating and Governance Committee. She has served on the Transportation Industry Council of the Federal Reserve Bank of St. Louis since June 2012.

 

Key Attributes, Experience and Skills

As the only member of the Company’s senior management who serves on the Board, Ms. McReynolds provides significant industry-specific experience and unique expertise with respect to both Arkansas Best Corporation and its transportation and logistics subsidiaries, resulting from a 16-year tenure with the Company and 24 years of financial experience in the less-than-truckload (“LTL”) and truckload trucking industry. Her experience as Chief Financial Officer, Certified Public Accountant, Controller, and currently as Chief Executive Officer, have contributed to the Board’s insights in LTL and truckload transportation knowledge, labor and pension matters, investment and corporate banking, financial analysis, strategic planning, appropriate capital structures and shareholder value.

 

 

 

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JOHN H. MORRIS, age 70, has been a Director of the Company since July 1988 and was a Director of Treadco, Inc. from June 1991 to June 1999. Mr. Morris was affiliated with StoneCreek Capital, a private equity firm, from 1992 to 2008. Mr. Morris served as a Managing Director of Kelso & Company, Inc., a private equity firm, from March 1989 to March 1992, was a General Partner from 1987 to March 1989 and prior to 1987, was a Vice President. Prior to 1985, Mr. Morris was President of LBO Capital Corp. Previous work experience includes Booz, Allen and Hamilton; three years with the First National Bank of Atlanta and nine years with Touche Ross & Co., a predecessor of Deloitte and Touche, as a management consultant. After leaving Touche Ross, he joined Kelso & Company (“Kelso”), a boutique private equity firm in 1982. While with Kelso, he was responsible for several large buyouts, including Spectramed, IHOP, Arkansas Best Corporation, and Landstar Systems, and served on the committee that approved all Kelso acquisitions. Mr. Morris’s public board experience includes, in addition to Arkansas Best Corporation and Treadco, Inc., Spectramed, Inc. and Landstar Systems. Mr. Morris received a Bachelor of Industrial Engineering degree from Georgia Tech and an M.B.A. in Finance from Georgia State University. He received a CPA Certificate from the State of Georgia in 1974.

 

Key Attributes, Experience and Skills

Mr. Morris has extensive experience in mergers and acquisitions, including the analysis of acquisitions, private equity investing and business and financial structures. He has other public transportation company-related board service as described in the preceding paragraph. Knowledgeable in investment banking and LTL transportation, Mr. Morris has provided consulting services to companies for over 10 years and has been involved in more than 40 acquisitions through his roles at Kelso & Co. and StoneCreek Capital. Currently, a member of the ABC Board Nominating/Corporate Governance Committee and the Compensation Committee, Mr. Morris’s Board expertise also includes the area of executive and director compensation, corporate governance, director nominations and audit.

 

 

 

 

DR. CRAIG E. PHILIP, age 60, has been a Director of the Company since August 2011. Dr. Philip is Chief Executive Officer of Ingram Barge Company. He was President of Ingram Barge from 1994 until 1999 when he was named Chief Executive Officer. Dr. Philip began his transportation career with Conrail in 1980, working for Ingram Barge from 1982 until 1987 and serving as Vice President of the Intermodal Division of Southern Pacific Railroad before returning to Ingram Barge in 1991. He has held adjunct faculty positions at Princeton University and at Vanderbilt University. Dr. Philip holds Master’s and Doctorate degrees in Engineering from the Massachusetts Institute of Technology and an undergraduate degree in Civil Engineering from Princeton University.

 

Key Attributes, Experience and Skills

Dr. Philip’s career in the marine, rail and intermodal industries spans more than 30 years. He provides the Board with a unique blend of leadership experience in various modes of freight transportation, in combination with experience in industrial marketing and strategic planning. Dr. Philip currently serves on the Board’s Compensation Committee and Nominating/Corporate Governance Committee.

 

 

 

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STEVEN L. SPINNER, age 54, has been a Director of the Company since July 2011. Mr. Spinner has been President and Chief Executive Officer and a member of the Board of Directors of United Natural Foods, Inc. (“UNFI”) since September 2008. Prior to joining UNFI in 2008, he was a Director and Chief Executive Officer of Performance Food Group Company (“PFG”) from October 2006 to May 2008 and PFG’s President and Chief Executive Officer from May 2005 to May 2008. He was the Senior Vice President and Chief Executive Officer of PFG’s Broadline Division (“Broadline”) from February 2002 to May 2005 and Division President of Broadline from August 2001 to February 2002.

 

Key Attributes, Experience and Skills

Mr. Spinner provides the insight and knowledge that comes from years of senior-level executive management, logistical experience and knowledge of network businesses. His background has given him extensive experience in the wholesale food distribution business, which includes overseeing the organic and acquisition growth of a food distribution company and directing the successful integration of the operational, organizational and technological aspects of two companies. Mr. Spinner brings valuable knowledge to the Board as an active CEO of a public company. Mr. Spinner currently serves on the Board’s Audit Committee.

 

 

 

 

JANICE E. STIPP, age 54, has been a Director of the Company since October 2012. Ms. Stipp is Executive Vice President, Chief Financial Officer and Treasurer of Tecumseh Products, a global manufacturer of compressors and condensing units for the commercial refrigeration market. She was named to this position in October 2011. Prior to that, she was Chief Financial Officer at Revestone Industries; Acument Global Technologies, a Platinum Equity portfolio company; and GDX Automotive, a Cerberus Equity portfolio company. She began her career in 1981 with Lear Siegler, working in corporate audit. From 1984 to 1999, she worked for General Motors in a variety of financial roles. She graduated from Michigan State University in 1981 with a B.A. in Accounting and received her CPA certification in 1983 and M.B.A from Wayne State University in 1987.

 

Key Attributes, Experience and Skills

Ms. Stipp has over 32 years of financial and accounting experience with a variety of industrial companies. For the past seven years, she has served as CFO of both public and private firms. She has a strong background in financial controls, auditing, financial management and accounting, acquisitions and treasury. She is experienced in corporate restructuring, having lead turnaround efforts at several of the private equity-sponsored firms where she worked. In addition to her CFO experience, she has also held the Corporate Controller position and has held several treasury-related positions. Given her years of senior-level executive management, she has extensive experience working with boards of directors at several firms. Ms. Stipp’s financial experience brings valuable knowledge to the Audit Committee.

 

 

 

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ROBERT A. YOUNG III, age 73, has been a Director of the Company since 1970 and Chairman of the Board since July 2004. He was Chief Executive Officer of the Company from August 1988 until his retirement in January 2006. He was President of the Company from 1973 to 2004 and was Chief Operating Officer of the Company from 1973 to 1988. Mr. Young served as President of ABF Freight System, Inc., the Company’s largest subsidiary (“ABF Freight”), from 1979 to 1994. Between 1964 and 1973, he worked as Supervisor of Terminal Operations for ABF Freight; Vice President–General Manager of Data-Tronics Corp., a Company subsidiary; Senior Vice President–National Bank of Commerce of Dallas; and as Vice President, Finance and Executive Vice President of the Company. Mr. Young was a Director of Treadco, Inc. from June 1991 to June 1999. Treadco, Inc. was a publicly held company from 1991 to 1999. The Company owned more than 40% of the outstanding stock of Treadco, Inc. from 1991 to 1999, when the Company purchased all remaining outstanding stock via a tender offer. Substantially all operations of Treadco were disposed of in 2000.

 

Key Attributes, Experience and Skills

Serving the Company and ABF Freight in executive and Board positions over the past four decades, Mr. Young has become an acknowledged leader in transportation and finance. He was a member of the Board of the Federal Reserve Bank (“Reserve Board”) of St. Louis, Little Rock Branch, from July 2004 until his retirement from the Reserve Board on December 31, 2011. After 50 years in the trucking industry and 43 years on the Company’s Board, he provides strong leadership through his background in LTL transportation, mergers and acquisitions, investment banking, private equity, labor and personnel selection and evaluation.

 

 

 

 

Governance of the Company

 

Board Leadership Structure

 

The Company has separated the positions of Chairman of the Board and Chief Executive Officer. The Company believes this separation allows the individuals serving in these positions to effectively utilize their skills and time on behalf of the Company. Robert A. Young III, who brings more than 43 years of LTL transportation, finance and board experience to the Board, serves as nonemployee Chairman of the Board and leads the Board in its governance role. Judy R. McReynolds brings significant LTL and truckload experience to her day-to-day leadership role as Chief Executive Officer. For complete business biographical information on Mr. Young and Ms. McReynolds, see “Directors of the Company.” Because Mr. Young, as Chairman, qualifies as an independent director under NASDAQ requirements, the Company does not have a Lead Independent Director.

 

The business of the Company is managed under the direction of the Board. There are nine members of the Board. The three standing Board committees – the Audit Committee, the Compensation Committee, and the Nominating/Corporate Governance Committee – are an integral part of the Board leadership structure. These committees, of which all members are independent Directors, are discussed below in more detail under “Committees of the Board.” The Company’s leadership structure includes an experienced management team, upon whose advice, reports and opinions the Board relies. The Board also relies on the advice of counsel, accountants, executive compensation consultants, auditors, strategic planning consultants and other expert advisors.

 

The size of the Board and the different types of corporate and transportation backgrounds of the members of the Board allow for timely, effective action in the rapidly evolving trucking industry. See “Key Attributes, Experience and Skills” for each Director under “Directors of the Company.”

 

A robust committee framework sustains the lines of communication among Directors and with management. Regularly scheduled management reports and presentations, based on operational, financial, legal and risk management aspects of the Company’s operations, provide vital information to the Board. Directors have complete access to the Chief Executive Officer and other members of senior management.

 

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The Board meets on a regularly scheduled basis six times a year to review significant developments affecting the Company and to act on matters requiring Board approval. It also holds special meetings when Board action is required between scheduled meetings. The Board met six times during 2013. During 2013, each member of the Board participated in at least 75% of all Board and applicable committee meetings held during the period for which he/she was a Director. The Nominating/Corporate Governance Committee has determined that a majority of the members of the Board are independent pursuant to applicable NASDAQ independence standards. Independent Directors are Messrs. Alden, Allardyce, Legg, Morris, Philip, Spinner, and Young and Ms. Stipp. Independent Directors met in executive session four times in 2013.

 

It is the Company’s policy that all members of its Board attend each annual meeting of its stockholders, except when illness or other personal matters prevent such attendance. Seven of the nine members of the Board at the time of the 2013 Annual Meeting attended the 2013 Annual Meeting.

 

Board’s Role in Risk Oversight

 

The Board believes that the current management structure facilitates risk oversight by combining experienced leadership with independent review by the Board and its committees. Potential risk factors that are monitored through this structure include financial, operational, technological, disaster, environmental, cyberspace, legal and regulatory, fraud/corruption, employment practices, executive compensation, reputational and legislative areas. Risk factors may present themselves on any of the multiple levels of the Company. The Board is regularly informed through committee reports of each committee’s activities in overseeing risk management within their respective areas of oversight responsibility.

 

The Audit Committee directly oversees risk management relating to financial reporting and public disclosure and the steps management has taken to monitor and control those exposures. In addition, the Audit Committee is responsible for the oversight of general financial risk matters. The Audit Committee meets regularly with financial management, including the Chief Financial Officer and the Vice President–Controller, as well as our external auditors and our Chief Audit Executive. In addition, the Company’s Risk Management Committee, which consists of several members of senior management, provides periodic reports to the Audit Committee of its activities in various risk management areas, and the Chairman of the Company’s Risk Management Committee makes presentations to the Audit Committee from time to time regarding various risk or potential risk matters. The Audit Committee also requests and receives from time to time presentations regarding other potential risk areas, including those related to information technology.

 

The Compensation Committee is responsible for oversight of risk for the Company’s compensation policies and practices for all employees. Management has evaluated the Company’s compensation policies and practices for all employees, including the Named Executive Officers (listed in “Compensation, Discussion & Analysis”) and non-executive officers. The evaluation included consideration of whether any of the Company’s compensation policies and practices, including incentive plans, create risks that are reasonably likely to have a material adverse effect on the Company. The primary responsibility for the Company’s evaluation was assigned to the Company’s Risk Management Committee, which includes as its members the Vice President responsible for the Risk Management Department, the Vice President–General Counsel, the Senior Vice President–Chief Financial Officer & Chief Information Officer, the Senior Vice President–Tax and Chief Audit Executive, Senior Vice President–Enterprise Customer Solutions and the Vice President–Controller, as well as other officers. Based on management’s evaluation, including the specific process completed by the Company’s Risk Management Committee, management concluded that the Company’s compensation policies and practices are not reasonably likely to have a material adverse effect on the Company. Management’s evaluation, including the conclusions reached by the Company’s Risk Management Committee, was discussed with the Compensation Committee.

 

The information used by management and the Company’s Risk Management Committee and provided to the Compensation Committee included a framework of potential risk factors for certain compensation plans and identified how the Company’s existing processes and compensation programs mitigate those risks. Mitigating factors for potential risks identified included:

 

·                  a combination of short- and long-term compensation;

·                  a combination of equity- and cash-based compensation;

·                  multiple performance metrics;

 

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·                  relative performance metric;

·                  robust financial control policies and audit practices;

·                  caps for potential amounts earned under annual and long-term incentive plans;

·                  clawback policy;

·                  no hedging transactions or pledging of shares;

·                  five-year cliff vesting periods for equity awards;

·                  stock ownership requirements for senior officers;

·                  approval of performance criteria, as well as performance results by the Compensation Committee that consists of only independent Directors; and

·                  review of peer groups by an independent compensation consultant and the Compensation Committee.

 

The most recent management evaluation was provided to the Compensation Committee in January 2014. Based on the information provided and the Compensation Committee’s knowledge of the compensation policies and practices of the Company, the Compensation Committee concluded that the risks arising from the Company’s compensation plans and practices are not reasonably likely to have a material adverse effect on the Company.

 

The Nominating/Corporate Governance Committee is responsible for overseeing risks associated with corporate governance and reviews corporate governance matters at least once a year. In connection with this responsibility, the Nominating/Corporate Governance Committee annually reviews the Company’s Corporate Governance Guidelines and their implementation.

 

Committees of the Board

 

The Board has established Audit, Compensation, and Nominating/Corporate Governance committees to devote attention to specific subjects and to assist it in the discharge of its responsibilities. The functions of those committees, their current members, and the number of meetings held during 2013 are described below.

 

Audit Committee. Among the responsibilities of the Audit Committee contained in its charter are: (i) assisting the Board in overseeing matters involving the accounting, auditing, financial reporting and internal control functions of the Company; (ii) being directly responsible for the appointment, termination and oversight of the independent registered public accounting firm for the Company; (iii) responsibility for establishing procedures for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters and the confidential anonymous submission by employees of concerns regarding questionable accounting or auditing matters; and (iv) implementing the Company’s policy regarding the review and approval of any “related person transaction” as required pursuant to Securities and Exchange Commission (“SEC”) Regulation S-K, Item 404. Pursuant to the Audit Committee Charter, the Audit Committee reviews, approves or ratifies all related person transaction issues brought to its attention. Annually, as part of the Company’s proxy preparation, all Directors and executive officers who are subject to related person transaction disclosure are instructed to report in writing any such transactions to the Company; and further, they are reminded of their obligation to report to the Company any such transactions that may be planned or subsequently occur.

 

Messrs. Allardyce (Chair) and Spinner and Ms. Stipp are currently members of the Audit Committee. The Nominating/Corporate Governance Committee has determined that each member of the Audit Committee meets all applicable SEC and NASDAQ independence standards. Mr. Allardyce is the Board-designated “Audit Committee Financial Expert.” The Audit Committee met seven times during 2013. The Audit Committee Charter is posted in the Corporate Governance section of the Company website, www.arkbest.com.

 

Compensation Committee. The Compensation Committee is responsible for reviewing and approving executive management compensation. The Compensation Committee’s current members are Messrs. Legg (Chair), Alden, Morris and Philip. The Nominating/Corporate Governance Committee has determined that each member of the Compensation Committee meets applicable NASDAQ independence standards and Internal Revenue Code (“IRC”) Section 162(m) nonemployee director requirements. The Compensation Committee met six times in 2013. The Compensation Committee Charter is posted in the Corporate Governance section of the Company website, www.arkbest.com.

 

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The Board has designated the Compensation Committee to also serve as the Stock Compensation Committee for the Company’s stock compensation plans. The Compensation Committee also has authority to make and administer awards under the 2005 Ownership Incentive Plan.

 

The Compensation Committee has determined and reviewed the value and forms of compensation for Named Executive Officers and other officers based on the Compensation Committee members’ knowledge and experience; competitive proxy and market compensation information; periodic review and analysis from an independent compensation consultant retained by, and which reports directly to, the Compensation Committee; and management recommendations.

 

The Compensation Committee directly engaged Meridian Compensation Partners, LLC (“Meridian”) as its independent executive compensation consulting firm in 2013. Meridian reviewed executive compensation practices, including executive compensation design issues, market trends, and technical considerations and provided ongoing consulting assistance to the Compensation Committee throughout the year. Other than executive and director compensation consulting to the Board, Compensation Committee or Nominating/Corporate Governance Committee, Meridian does not provide any other services to the Company. The Compensation Committee has assessed the independence of Meridian under the SEC rules and concluded that Meridian’s work for the Compensation Committee does not raise any conflict of interest.

 

The Compensation Committee did not direct Meridian to perform the above services in any particular manner or under any particular method. The Compensation Committee has the final authority to hire and terminate the consultant and evaluates the consultant periodically. The Compensation Committee also approves the fees paid to its independent compensation consultant.

 

The Compensation Committee may not and does not delegate its authority to review and determine the forms and values of the various elements of compensation for Named Executive Officers. The Compensation Committee does delegate to Company management the implementation and record-keeping functions related to the various elements of compensation it has approved.

 

Nominating/Corporate Governance Committee. The current members of the Nominating/Corporate Governance Committee are Messrs. Alden (Chair), Legg, Morris and Philip. The Nominating/Corporate Governance Committee has determined that each member of the committee is independent, as defined in applicable NASDAQ independence standards. The Nominating/Corporate Governance Committee’s responsibilities include: (i) identifying individuals believed to be qualified to become Directors and to select and recommend to the Board for its approval the nominees to stand for election as Directors by the stockholders or, if applicable, to be appointed to fill vacancies on the Board; (ii) determining appropriate compensation for Directors; (iii) recommending any changes regarding size, structure, composition, processes and practices of the Board; (iv) reviewing the independence of Directors and assessing whether members are meeting the applicable independence standards required to serve on the various Board committees; (v) reviewing the Company’s corporate governance standards; and (vi) making recommendations regarding succession planning for the Chief Executive Officer of the Company. Meridian consults with the Nominating/Corporate Governance Committee regarding the value and forms of compensation for Directors. The Nominating/Corporate Governance Committee held four meetings in 2013. The Nominating/Corporate Governance Charter is posted on the Corporate Governance section of the Company website, www.arkbest.com.

 

In recommending nominees for the Board, the Nominating/Corporate Governance Committee considers any specific criteria the Board may request from time to time and such other factors as it deems appropriate. These factors may include any special training or skill, experience with businesses and other organizations of comparable size and type, experience or knowledge with businesses or organizations that are particularly relevant to the Company’s current or future business plans, financial expertise, the interplay of the candidate’s experience with the experience of the other Directors, sufficient time to devote to the responsibilities of a director, freedom from conflicts of interest or legal issues and the extent to which, in the Nominating/Corporate Governance Committee’s opinion, the candidate would be a desirable addition to the Board.

 

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Diversity is taken into account when determining how the candidates’ qualities and attributes would complement the other Directors’ backgrounds. Type of advanced studies and certification, type of industry or aspect of transportation experience, area of corporate experience and gender, among other factors, are taken into consideration. The Nominating/Corporate Governance Committee believes that the different business and educational backgrounds of the Directors of the Board contribute to the overall insight necessary to evaluate matters coming before the Board. The Nominating/Corporate Governance Committee implements its policy of considering a range of candidates by including diversity aspects in its analysis of candidates’ qualifications. A listing of current Directors’ and potential candidates’ qualifications and attributes is periodically discussed in Nominating/Corporate Governance Committee meetings. In these discussions, the effectiveness of this methodology is addressed.

 

There is currently no set of specific minimum qualifications that must be met by a nominee recommended by the Nominating/Corporate Governance Committee, as different factors may assume greater or lesser significance at particular times and the needs of the Board may vary in light of its composition and the Nominating/Corporate Governance Committee’s perceptions about future issues and needs.

 

The Nominating/Corporate Governance Committee may draw upon individuals known by members of the Board, and at the Nominating/Corporate Governance Committee’s discretion, candidates recommended by management or third parties engaged by the Nominating/Corporate Governance Committee to assist it in identifying appropriate candidates.

 

The Nominating/Corporate Governance Committee shall consider any candidate for director recommended by a stockholder if submitted in accordance with the Stockholder Director Nomination Procedure set forth below. The Nominating/Corporate Governance Committee shall consider the same factors when considering a stockholder-recommended candidate as it does when considering other candidates.

 

The Nominating/Corporate Governance Committee considers director candidates submitted by stockholders that follow the procedure set forth in the following Stockholder Director Nomination Procedure, in accordance with the Company’s bylaws:

 

Any stockholder entitled to vote at an annual meeting of stockholders and intending to recommend candidate(s) for nomination for director at that meeting must submit a written stockholder notice to the Company. The information required to be included in a stockholder notice nominating a candidate for the Board is set forth in detail in the Company’s bylaws and includes the following information: (1) as to the stockholder giving the notice and each Stockholder Associated Person (a) the name and address, including business address and telephone number, of such persons, (b) the class and number of shares of the Company which are owned beneficially and of record by such persons, (c) any option, warrant or other derivative security owned by such persons, (d) any agreement pursuant to which such persons have the right to vote any shares of the Company, and (e) any other information relating to such persons required to be disclosed in a proxy statement in connection with the solicitation of proxies relating to the election of directors in a contested election; and (2) as to each person whom the stockholder proposes to nominate for election or re-election as a director (a) all information relating to such person required to be disclosed in a proxy statement relating to the election of directors in a contested election, (b) such person’s written consent to being named in the proxy statement and to serving as a director if elected, and (c) a description of all direct and indirect compensation and other material monetary agreements during the past three years between the stockholder and Stockholder Associated Person and their affiliates and the proposed nominee and his or her other affiliates. “Stockholder Associated Person” of any stockholder means (i) any beneficial owner of shares of stock of the corporation on whose behalf any proposal or nomination is made by such stockholder; (ii) any affiliates or associates of such stockholder or any beneficial owner described in the foregoing clause (i); and (iii) each other person with whom any of the persons described in the foregoing clauses (i) and (ii) either is acting in concert with respect to the corporation or has any agreement, arrangement or understanding (whether written or oral) for the purpose of acquiring, holding, voting (except pursuant to a revocable proxy given to such person in response to a public proxy solicitation made generally by such person to all stockholders entitled to vote at any meeting) or disposing of any capital stock of the corporation or to cooperate in obtaining, changing or influencing the control of the corporation (except independent financial, legal and other advisors acting in the ordinary course of their respective businesses).

 

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Additionally, for a candidate to be eligible to be a nominee for election as director, the candidate must deliver to the Corporate Secretary a written response to a questionnaire with respect to candidate’s background and qualifications and a written representation and agreement. Such stockholder notice and candidate questionnaire and representation and agreement must be received by the Corporate Secretary at 3801 Old Greenwood Road, Fort Smith, Arkansas 72903 not earlier than 120 days and not later than 90 days prior to the first anniversary of the preceding year’s annual meeting of stockholders: provided, however, that in the event that the date of the annual meeting is more than 30 days before or more than 60 days after the anniversary date of the preceding year’s annual meeting, notice by the stockholder to be timely must be received no earlier than the close of business on the 120th day prior to the date of such annual meeting and not later than the close of business on the later of the 100th day prior to the date of such annual meeting or, if the first public announcement of the date of such annual meeting is less than 100 days prior to the date of such annual meeting, the 10th day following the day on which public announcement of the date of such meeting is first made. For information regarding the required information in the stockholder notice and the candidate’s questionnaire and representation and agreement, contact the Corporate Secretary’s office at info@arkbest.com or at 479-785-6000.

 

Qualified Legal Compliance Committee. The Qualified Legal Compliance Committee is responsible for confidentially receiving, retaining and considering any report pursuant to SEC Rule 205 by an attorney representing the Company. The Audit Committee serves as the Qualified Legal Compliance Committee. The Qualified Legal Compliance Committee Charter is posted in the Corporate Governance section of the Company website, www.arkbest.com.

 

Corporate Governance Guidelines and Code of Conduct

 

The Board has adopted Corporate Governance Guidelines and a Code of Conduct. The full text of both documents is posted in the Corporate Governance section of the Company website, www.arkbest.com.

 

The Company’s Code of Conduct applies to all of its Directors, officers (including the Chief Executive Officer, Chief Financial Officer, Principal Accounting Officer, Controller, and any person performing similar functions) and employees. The Company intends to post on its website any amendment to, or waiver from, a provision of the Code of Conduct that applies to its Chief Executive Officer, Chief Financial Officer, Principal Accounting Officer, Controller or persons performing similar functions and that relates to any of the following elements of the Code of Conduct: honest and ethical conduct; disclosure in reports or documents filed with the SEC and other public communications; compliance with applicable laws, rules and regulations; prompt internal reporting of code violations; and accountability for adherence to the Code of Conduct.

 

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Director Compensation

 

The Nominating/Corporate Governance Committee is responsible for reviewing and awarding compensation to the Directors. The Nominating/Corporate Governance Committee sets the levels and forms of Director compensation based on its experience, review of the compensation paid to directors of comparable publicly traded companies and the advice of its independent compensation consultant. The Nominating/Corporate Governance Committee uses a combination of cash and stock-based compensation to attract and retain qualified candidates to serve on the Board.

 

Cash Compensation

 

For the fiscal year ended December 31, 2013, the standard cash compensation arrangement for Non-Employee Directors was as follows:

 

Annual Retainers

 

 

 

Board Chair

 

$

100,000

 

Members

 

$

40,000

 

Audit Committee Chair

 

$

7,500

 

Other Committee Chair

 

$

5,000

 

 

 

 

 

 

Daily Meeting Fees

 

 

 

Board Meeting

 

$1,500 per day

Committee Meeting

 

$1,500 per day

 

Effective February 1, 2014, the standard cash compensation arrangement for Non-Employee Directors is as follows. The previous retainer amounts had been in place since 2002.

 

Annual Retainers

 

 

 

Board Chair

 

$

100,000

 

Members

 

$

50,000

 

Audit Committee Chair

 

$

15,000

 

Compensation Committee Chair

 

$

12,000

 

Nominating/Corporate Governance Committee Chair

 

$

8,000

 

 

 

 

 

Daily Meeting Fees

 

 

 

Board Meeting

 

$1,500 per day

Committee Meeting

 

$1,500 per day

 

Retainers are cumulative, i.e., each Director who is (i) a Non-Employee and (ii) not the Board Chair, receives a “Member Retainer” plus the appropriate retainer fee for any other positions he holds.

 

Only one daily meeting fee is paid in the event of multiple meetings held on the same day.

 

Equity-Based Awards

 

The policy for granting equity awards states that the Nominating/Corporate Governance Committee is responsible for granting all equity compensation to Non-Employee Directors. Under the terms of this policy, the effective date of an equity award will be the date which is five business days following the Company’s applicable quarterly earnings release.

 

The restricted stock unit (“RSU”) awards to Non-Employee Directors provide for three-year cliff vesting. All of the RSU awards are subject to accelerated vesting due to death, disability or change in control of the Company. Accelerated vesting for RSUs also occurs upon attainment of normal retirement age (age 65 with five years of service with the Company). Messrs. Alden, Allardyce, Legg, Morris, and Young are currently eligible for normal retirement. Upon early retirement (three years of service as a Director), a Director is eligible for accelerated vesting of a pro rata number of shares based on the number of whole months since the award date. Vested RSU awards are paid in shares, unless deferred under the provisions of the plan, on the earlier to occur of (i) the normal vesting date applicable to the award or (ii) the Director’s termination of service with the Company.

 

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Stock Ownership Policy. The Nominating/Corporate Governance Committee believes that the Directors of the Company should maintain a level of equity holdings in the Company that will further align the interests of Directors with the Company’s stockholders. The Board adopted a Stock Ownership Policy for Directors, which was effective January 1, 2008. Under this policy, Directors must own shares equal to six times their annual retainer. No Director covered by the policy is permitted to sell any shares of Company stock until such time as the Director satisfies the stock ownership requirement. Restricted stock, RSUs and stock owned outright count toward the Company’s Stock Ownership Policy requirements. However, RSUs are not reflected as shares beneficially owned in the “Principal Stockholders and Management Ownership” table unless (i) the award is scheduled to vest within 60 days of the measurement date, (ii) the award is fully vested but deferred (and payable on a separation from service with the Company), or (iii) the award (or a portion of the award) is vested either due to the Director’s eligibility for retirement or early retirement pursuant to the award agreement under which the RSU was granted.

 

The Nominating/Corporate Governance Committee monitors ownership levels annually. As of the review completed in 2013, all of the Directors have met their ownership requirements except for Ms. Stipp who became a member of the Board in 2012.

 

Clawback Policy. The Committee has implemented a policy for the “clawback” of any equity awards granted to a Director whose misconduct contributed to the Company being required to restate its financial statements. Under the terms of the policy, the Board will, to the full extent permitted by governing law, in appropriate cases, effect the cancellation of unvested restricted or deferred stock awards previously granted to the Director if (a) the amount of the equity award was calculated based upon the achievement of certain financial results that were subsequently the subject of the restatement, (b) the Director engaged in intentional misconduct that caused or partially caused the need for the restatement and (c) the amount of the equity award that would have been awarded to the Director had the results been properly reported would have been lower than the amount actually awarded.

 

 

2013 Director Compensation Table

 

The table below summarizes the compensation paid by the Company to Non-Employee Directors for the fiscal year ended December 31, 2013.

 

 

Name
(1)

 

 

Fees Earned or
Paid in Cash

 

Stock
Awards
(2, 3)

 

All Other
Compensation

 

 

Total

 

John W. Alden(5)

 

$     61,500

 

$  101,232

 

$          –

 

$   162,732

 

Fred A. Allardyce(5)

 

64,000

 

101,232

 

 

165,232

 

William M. Legg(5)

 

61,500

 

101,232

 

 

162,732

 

John H. Morris

 

55,000

 

101,232

 

 

156,232

 

Craig E. Philip

 

56,500

 

101,232

 

 

157,732

 

Steven L. Spinner

 

58,000

 

101,232

 

 

159,232

 

Janice E. Stipp

 

58,000

 

101,232

 

 

159,232

 

Robert A. Young III

 

109,000

 

101,232

 

67,408(4)

 

277,640

 

 

(1)          Judy R. McReynolds, the President and Chief Executive Officer of the Company, is not included in this table since she is an employee of the Company and thus received no compensation for her service as a Director. The compensation received by Ms. McReynolds as an officer of the Company is shown in the Summary Compensation Table on page 40.

 

(2)          Reflects the aggregate grant date fair value made during 2013 computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 (formerly Statement of Financial Accounting Standards No. 123R) (“FASB ASC Topic 718”), determined without regard to estimated forfeitures. Messrs. Alden, Allardyce, Legg, Morris, Philip, Spinner, Stipp and Young received an award of 3,700 RSUs under the 2005 Ownership Incentive Plan on November 1, 2013 (computed using the closing price of $27.36 per share on such date). See Note L to the consolidated financial statements in the Company’s 2013 Annual Report on Form 10-K for additional detail on share-based compensation. Dividends are paid on RSUs at the same rate and at the same time as the dividends paid to stockholders.

 

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(3)          As of December 31, 2013, none of the Non-Employee Directors held any stock options and each Non-Employee Director had the following aggregate number of RSUs outstanding, although only the value of the 2013 RSU award is provided in the Stock Awards column.

 

 

 

Alden

 

Allardyce*

 

Legg

 

Morris*

 

Philip

 

Spinner

 

Stipp

 

Young

 

Vested but subject to transfer restrictions

 

13,100

 

21,900

 

13,100

 

17,500

 

 

 

 

13,100

 

Unvested

 

 

 

 

 

13,700

 

13,500

 

8,700

 

 

Total RSUs Outstanding

 

13,100

 

21,900

 

13,100

 

17,500

 

13,700

 

13,500

 

8,700

 

13,100

 

 

*Messrs. Allardyce and Morris elected to defer their 2009 RSU award of 4,400 RSUs until their termination from Board service. Mr. Allardyce elected to defer his 2010 RSU award of 4,400 RSUs until termination from Board service. All deferral elections must be made in the year prior to the year the award is granted.

 

(4)          For purposes of the column titled “All Other Compensation,” for 2013 Mr. Young’s amount consists of the following:

 

 

 

 

Young

 

Perquisites(i) 

 

 

$

51,515

 

Gross-ups(i) 

 

 

5,966

 

Executive medical premiums(ii) 

 

 

9,927

 

Total

 

 

$

67,408

 

 

(i)

Mr. Young’s perquisites include: (a) spousal travel to Company or industry events and any related Company lost tax deduction resulting from the spouse accompanying him on the Company’s corporate aircraft, (b) personal use of an administrative assistant, (c) infrequent personal use of a lodging facility and related hunting property owned by the Company for business entertainment purposes and (d) a Christmas gift from the Company (the Company also provides a Christmas gift to each of the other Board members). It is estimated that 40% of Mr. Young’s administrative assistant’s time is spent on his personal business, and the incremental cost associated with that personal use is estimated to be $35,592. This value is calculated by adding together 40% of the administrative assistant’s salary, 401(k) match, pension accrual and health and welfare cost for 2013. Mr. Young retains an office at the Company’s corporate office.

 

 

(ii)

Because Mr. Young is a former officer of the Company, he and his spouse participate in the Company’s fully insured third-party executive medical plan that is provided for life upon retirement. The Company pays the majority of the premium amount for this coverage. The amount shown is total premiums paid by the Company for coverage during 2013.

 

(5)          Committee Chairpersons: Mr. Allardyce, Audit Committee and Qualified Legal Compliance Committee; Mr. Legg, Compensation Committee; and Mr. Alden, Nominating/Corporate Governance Committee.

 

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Table of Contents

 

Principal Stockholders and Management Ownership

 

The following table sets forth certain information concerning beneficial ownership of the Common Stock as of February 24, 2014 by (i) each person who is known by the Company to own beneficially more than five percent (5%) of the outstanding shares of Common Stock; (ii) each Director and Named Executive Officer of the Company or ABF Freight, the Company’s largest subsidiary, who is listed in the Summary Compensation Table (collectively “Named Executive Officers”), and Director nominees; and (iii) all Directors and executive officers as a group.

 

Unless otherwise indicated, to the Company’s knowledge, the persons included in the tables below have sole voting and investment power with respect to all the shares of Common Stock beneficially owned by them, subject to applicable community property laws. The number of shares beneficially owned by a person includes RSUs that are (i) scheduled to vest within 60 days after February 24, 2014, (ii) vested but deferred (and payable on a separation from service with the Company), or (iii) the award (or a portion of the award) is vested but unsettled either due to the Director’s or Named Executive Officer’s eligibility for retirement or early retirement pursuant to the award agreement under which the award was granted. These shares are also deemed outstanding for the purpose of computing the percentage of outstanding shares owned by the person. These shares are not deemed outstanding for the purpose of computing the percentage ownership of any other person. On February 24, 2014, there were 25,868,155 shares of Common Stock outstanding.

 

 

 

Shares

 

Percentage

 

 

 

Beneficially

 

of Shares

 

 

 

Owned

 

Outstanding

 

(i) Name / Address

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BlackRock, Inc.(1)

 

2,294,541

 

 

 

8.87%

 

40 East 52nd Street, New York, NY 10022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dimensional Fund Advisors LP(2)

 

2,185,129

 

 

 

8.45%

 

Palisades West, Building One, 6300 Bee Cave Road, Austin, TX 78746

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Vanguard Group, Inc.(3)

 

1,526,515

 

 

 

5.90%

 

100 Vanguard Blvd., Malvern, PA 19355

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

State of Wisconsin Investment Board(4)

 

 

 

 

 

 

 

121 East Wilson Street, Madison, WI 53703

 

1,459,180

 

 

 

5.64%

 

 

 

 

 

 

 

 

 

(ii) Name

 

Position

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Robert A. Young III(5, 7)

 

Chairman of the Board (also a Director Nominee)

 

1,207,903

 

 

 

4. 67%

 

John W. Alden(5, 8)

 

Director (also a Director Nominee)

 

31,000

 

 

 

*

 

Fred A. Allardyce(5, 6)

 

Director (also a Director Nominee)

 

35,500

 

 

 

*

 

William M. Legg(5)

 

Director (also a Director Nominee)

 

35,500

 

 

 

*

 

Judy R. McReynolds(5, 9)

 

Director and President–CEO (also a Director Nominee)

 

25,117

 

 

 

*

 

John H. Morris(5, 6)

 

Director (also a Director Nominee)

 

17,500

 

 

 

*

 

Craig E. Phillip(5)

 

Director (also a Director Nominee)

 

 

 

 

*

 

Steven L. Spinner(5)

 

Director (also a Director Nominee)

 

 

 

 

*

 

Janice E. Stipp(5)

 

Director (also a Director Nominee)

 

 

 

 

*

 

Jim A. Ingram(5)

 

Sr. VP–Strategy and ABF Logistics President

 

 

 

 

*

 

James W. Keenan(5, 10)

 

Sr. VP–Enterprise Customer Solutions

 

39,059

 

 

 

*

 

Michael E. Newcity(5)

 

Sr. Vice President–CFO and CIO

 

1,642

 

 

 

*

 

Roy M. Slagle(5, 11)

 

ABF Freight President–CEO

 

35,796

 

 

 

*

 

 

 

 

 

 

 

 

 

 

 

(iii) All Current Directors and Executive Officers as a Group (19 total)(12)

 

1,555,680

 

 

 

5.97%

 

*Less than 1%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Based on information contained in Amendment No. 4 to Schedule 13G filed with the SEC by BlackRock, Inc. on January 28, 2014, BlackRock, Inc. has sole voting power with respect to 2,188,616 shares and sole dispositive power with respect to 2,294,541 shares.

 

 

(2)

Based on information contained in Amendment No. 5 to Schedule 13G filed with the SEC by Dimensional Fund Advisors LP on February 10, 2014, Dimensional Fund Advisors LP beneficially owns 2,185,129 shares of Common Stock and has sole voting power with respect to 2,118,765 shares and sole dispositive power with respect to 2,185,129 shares.

 

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(3)

Based on information contained in Amendment No. 2 to Schedule 13G filed with the SEC by The Vanguard Group, Inc. (“Vanguard”) on February 11, 2014, Vanguard has sole voting power with respect to 41,600 shares of Common Stock, shared voting power with respect to 0 shares of Common Stock, sole dispositive power with respect to 1,487,415 shares of Common Stock and shared dispositive power with respect to 39,100 shares of Common Stock.

 

 

(4)

Based on information contained in Schedule 13G filed with the SEC by the State of Wisconsin Investment Board on January 28, 2014, the State of Wisconsin Investment Board has sole voting and sole dispositive power with respect to 1,459,180 shares of Common Stock.

 

 

(5)

Includes RSUs, that are (i) scheduled to vest within 60 days after February 24, 2014, (ii) vested but deferred (and payable on a separation from service with the Company), or (iii) the award (or a portion of the award) is vested but unsettled either due to the Director’s or Named Executive Officer’s eligibility for retirement or early retirement pursuant to the award agreement under which the award was granted as follows:

 

 

 

As of February 24, 2014

Young

 

13,100

 

Alden

 

13,100

 

Allardyce

 

21,900

 

Legg

 

13,100

 

McReynolds

 

 

Morris

 

17,500

 

Philip

 

 

Spinner

 

 

Stipp

 

 

Ingram

 

 

Keenan

 

20,285

 

Newcity

 

 

Slagle

 

23,600

 

 

(6)

Includes RSUs which are vested and deferred. Messrs. Allardyce and Morris elected to defer their 2009 RSU award of 4,400 RSUs until their termination from Board service. Mr. Allardyce also elected to defer his 2010 RSU award of 4,400 RSUs. All deferral elections must be made in the year prior to the year the award is granted. RSUs were granted under the Company’s 2005 Ownership Incentive Plan.

 

 

(7)

Includes 941,785 shares of Common Stock held by the Robert A. Young III 2008 Trust and 14,556 shares of Common Stock held by Cross Creek Management Co. of which Mr. Young is director and President. Mr. Young has sole voting and investment power over these shares.

 

 

(8)

Includes 17,900 shares of Common Stock held by the John W. Alden Trust, of which Mr. Alden is trustee.

 

 

(9)

Includes 25,117 shares of Common Stock held by the McReynolds 2005 Joint Trust, of which Ms. McReynolds is co-trustee.

 

 

(10)

Includes 9,486 shares held by Mr. Keenan in the Arkansas Best 401(k) and DC Retirement Plan.

 

 

(11)

Includes 12,196 shares of Common Stock held by the Roy M. Slagle Living Trust, of which Mr. Slagle is trustee.

 

 

(12)

Includes 13,200 that are vested and deferred and 170,655 that will vest in 60 days or are vested either due to the Director’s or Named Executive Officer’s eligibility for retirement or early retirement pursuant to the terms of the Company’s 2005 Ownership Incentive Plan.

 

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Table of Contents

 

Executive Officers of the Company

 

The following information sets forth the name, age, principal occupation and business experience during the last five years of each of the current executive officers of the Company and ABF Freight, the Company’s largest subsidiary. The executive officers, including the Named Executive Officers, serve at the pleasure of the Board. For information regarding ownership of the Common Stock by the executive officers of the Company, see “Principal Stockholders and Management Ownership” on page 21. There are no family relationships among Directors and executive officers of the Company or its subsidiaries.

 

 

 

JUDY R. MCREYNOLDS, age 51, is President & Chief Executive Officer and a Director of the Board. See previous description under “Directors of the Company.”

 

 

 

 

ROY M. SLAGLE, age 60, has been ABF Freight’s President & Chief Executive Officer since January 1, 2012. Mr. Slagle was Senior Vice President–Sales and Marketing of ABF Freight from February 2006 through December 2011, Vice President–Administration and Treasurer for ABF Freight from January 2000 through January 2006 and Vice President and Treasurer for ABF Freight from 1995 to 2000. He was a Regional Vice President of Sales for ABF Freight from 1989 to 1995. Between 1976 and 1989, Mr. Slagle served ABF Freight as Operations Supervisor at the Dayton, Ohio terminal; Operations Manager at the Dayton terminal; Branch Manager at the Cincinnati, Ohio terminal; Branch Manager at the Carlisle, Pennsylvania terminal; and Regional Training Specialist at the Dayton terminal.

 

 

 

 

MICHAEL E. NEWCITY, age 44, has been Senior Vice President, Chief Financial Officer & Chief Information Officer since August 2013 and prior to that had been Vice President–Chief Financial Officer for the Company from June 1, 2010 until July 2013. He previously served as Director–Economic Analysis for the Company from November 2007 through May 2010, and prior to that he had served as Director–E-Systems and Emerging Technologies for ABF Freight from November 2005 through October 2007.  In these capacities, Mr. Newcity led the group that provides critical analysis on topics including costing and profitability methods, incentive plans, metrics and forecasting, as well as the development and implementation of internal management systems. From January 2000 through October 2005, Mr. Newcity held several managerial positions with ABF Freight that spanned marketing, information technology and business development. He began his career with the Company in 1993 at its subsidiary, Data-Tronics Corp., leading the Company’s e-commerce development initiatives through December 1999. Mr. Newcity holds an M.B.A from the Walton College at the University of Arkansas.

 

 

 

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J. LAVON MORTON, age 63, has been Senior Vice President–Tax and Chief Audit Executive since January 1, 2010. He served as the Company’s Vice PresidentTax and Chief Internal Auditor from January 2000 through December 2009. From May 1997 to December 1999, Mr. Morton was the Company’s Vice PresidentFinancial Reporting. Mr. Morton joined the Company as Assistant Treasurer in December 1996. From 1972 through November 1996, Mr. Morton was employed by Ernst & Young LLP. Mr. Morton was a Partner in Ernst & Young LLP from October 1984 through November 1996. From January 2003 to October 2005, Mr. Morton was a Director and a designated Audit Committee Financial Expert of BEI Technologies, Inc. BEI was purchased by Schneider Electric in October 2005. Mr. Morton is currently Chairman of the Tax Policy Committee of the American Trucking Associations (ATA) and a member of the Board of Directors of the ATA. He previously served as Chairman of ATA’s Tax Policy Committee and was a member of the ATA Board of Directors from October 2004 to October 2007. Mr. Morton is a Certified Public Accountant. Mr. Morton has an undergraduate degree in Accounting from the University of Central Arkansas and a Master of Taxation degree from the University of Tulsa.

 

 

 

 

JIM A. INGRAM, age 46, has been President of ABF Logistics, Inc. (“ABF Logistics”), a subsidiary of the Company, since August 2013. For ABC, he was Senior Vice President–Strategy from November 2011 through January 2014, Vice President–Strategic Development from April 2010 through October 2011, and Vice President–Market Development from January 2008 to April 2010. Prior to 2008, Mr. Ingram served as Vice President–Market Development for ABF Freight from February 2006 through December 2007, and from January 2000 through January 2006, he was ABF Freight’s Director–Quotation Services. Between January 1990 and December 1999, he held the positions of Analyst, Senior Analyst and Pricing Manager in ABF Freight’s Pricing Department.

 

 

 

 

JAMES W. KEENAN, age 55, has been Senior Vice President–Enterprise Customer Solutions for the Company since November 2013 and prior to that had been Senior Vice President–Sales and Marketing for ABF Freight from January 2012 through October 2013. He served as ABF Freight’s Vice President–Sales from 2007 until January 2012. Mr. Keenan had previously served as Vice President–Sales and Marketing for Clipper, a former Company subsidiary, from May 1995 to December 1998 and as Vice President–Administration and Treasurer for ABF Freight from February 2006 to February 2007. Mr. Keenan joined ABF Freight in 1981, working as an ABF Freight Pricing Department analyst and later as Pricing Department Manager. From 1988 to 1995 and again from 1999 to 2006, Mr. Keenan served as ABF Freight Regional Vice President of Sales.

 

 

 

 

CHRISTOPHER L. BURTON, age 56, has been Vice President–Economic Analysis for the Company since January 1, 2008. Previously, he served ABF Freight as Vice President–Economic Analysis from February 1, 2006 through December 31, 2007, Director–Economic Analysis from September 1995 through January 2006, and Manager–Pricing from February 1995 through August 1995. From January 1979 through January 1995, Mr. Burton served the Company’s subsidiary, Data-Tronics Corp., as Manager of Services & Human Resources and Systems Analyst/Programmer and also worked for the Company as an Economic Analyst.

 

 

 

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Table of Contents

 

 

 

DAVID R. COBB, age 48, has been Vice President and Controller for the Company since May 1, 2006 and Chief Accounting Officer for the Company since January 1, 2010. Mr. Cobb was employed by Smith International, Inc., a publicly traded international oilfield service company acquired by Schlumberger Limited, as Vice President and Controller from 2002 to April 2006. He was employed by Kent Electronics Corporation, a publicly traded specialty electronics distributor and network integrator, from 1995 to 2001 and Price Waterhouse, a predecessor of PricewaterhouseCoopers LLP from 1988 to 1994. Mr. Cobb is a Certified Public Accountant and has served publicly traded companies since 1988.

 

 

 

 

WALTER J. ECHOLS, age 60, has been Vice President–Real Estate for the Company since January 1, 2012. Mr. Echols previously served as Vice President–Real Estate for ABF Freight from January 1994 until January 2012 and Director–Real Estate for ABF Freight from November 1987 until 1994. Mr. Echols joined Data-Tronics Corp., a subsidiary of the Company, in June 1975 serving as Manager–Sales & Marketing until becoming Manager of the Data-Tronics Corp. Information Center in 1983.

 

 

 

 

ERIN K. GATTIS, age 40, has been Vice President–Human Resources for the Company since October 1, 2011. She previously served as the Company’s Chief of Staff from January 2010 through September 2011. Prior to that departmental director position, Ms. Gattis served as Manager of Retirement Services and Executive Compensation from August 2006 to September 2009. She joined the Company in 1999 and between 1999 and 2006 worked for both the Company and ABF Freight as a Retirement Specialist, Benefits Analyst, Supervisor of Executive Compensation and Manager of Executive Compensation. Ms. Gattis holds a Senior Professional in Human Resources certification.

 

 

 

 

MICHAEL R. JOHNS, age 55, has been the Company’s Vice PresidentGeneral Counsel and Corporate Secretary since April 2, 2007. From 1991 to 2007, he was a partner in the law firm of Dover Dixon Horne PLCC in Little Rock, Arkansas. Mr. Johns was a practicing attorney in two other Little Rock law firms for seven years, including Rose Law Firm, prior to 1991. He is a Certified Public Accountant. Mr. Johns is a member of the American Bar Association, Sebastian County Bar Association and Arkansas Society of Certified Public Accountants.

 

 

 

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Table of Contents

 

Compensation Discussion & Analysis

 

The purpose of this Compensation Discussion & Analysis (“CD&A”) is to provide you with an overview and analysis of (i) our executive compensation programs; (ii) material compensation changes made during the year for Named Executive Officers; and (iii) the process for review and decision-making for the executive compensation programs. The Compensation Committee (the “Committee”) of the Board of Directors determines the compensation and reviews, approves and oversees the administration of plans and programs for our Named Executive Officers.

 

The Named Executive Officers for 2013 are listed below:

 

Named
Executive Officer

Title

 

 

Judy R. McReynolds

ABC President & Chief Executive Officer (“ABC CEO”)

Roy M. Slagle

ABF Freight President & Chief Executive Officer (“ABF CEO”)

James W. Keenan

ABC Senior Vice President–Enterprise Customer Solutions

Jim A. Ingram

ABC Senior Vice President–Strategy and ABF Logistics President

Michael E. Newcity

ABC Senior Vice President–Chief Financial Officer & Chief Information Officer (“CFO/CIO”)

 

Executive Summary

 

Our Company

 

From our roots 90 years ago as LTL carrier ABF Freight System, Inc., the Arkansas Best companies have significantly expanded and continue to expand our total product and service offering through an array of emerging, non-asset-based businesses that focus on skillful solutions, emerging technology and our employees’ will to get things done. We are a transportation and logistics partner that goes the extra mile, solving the most complex, daily changing problems, one customer at a time. Our problem-solving culture and personal touch set us apart, and our best-in-class ABF and Panther brands stand for quality in every business we operate.

 

Company Performance

 

In 2013, the Company experienced a return to profitability as the emerging non-asset businesses continued their operating income growth and ABF Freight produced positive earnings. ABF Freight’s union contract was finalized and implemented on November 3, 2013. Each of the Company’s operating segments experienced revenue growth for the year. A few financial highlights for 2013 include:

 

·                  revenue of $2.3 billion, up from to $2.1 billion in 2012

·                  net earnings of $15.8 million, or $0.59 per share, compared to a net loss of $7.7 million, or $0.31 per share loss, in 2012

·                  stock price increase of over 250%

 

Executive Compensation Relative to Company Performance

 

Overall compensation levels in 2013 for the Named Executive Officers increased compared to 2012, reflecting the improved performance of the Company.

 

Annual Incentive Compensation:  For 2013, the annual cash incentive continued to be based on Return on Capital Employed (“ROCE”) and operating income improvement as compared to the prior year. These metrics were weighted 50% each. Operating income improvement levels over 2012 resulted in a payout under the plan. However, because ROCE was less than the plan threshold, no incentive was earned under that component for 2013. Overall, the payout was below target, as outlined further on page 32.

 

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Table of Contents

 

Long-Term Incentive Compensation:  The 2011-2013 cash long-term incentive compensation plan is based on Total Shareholder Return (“TSR”) compared to our peer group and ROCE goals. Relative performance under the TSR component generated a payment under the 2011-2013 plan. However, because ROCE was less than the plan threshold, no incentive was earned under that component. Overall, the resulting payout was below target, as outlined further on page 34. A cash long-term incentive award for 2013-2015 was granted including metrics for ROCE and TSR consistent with the grant for 2011-2013 and 2012-2014.

 

Consistent with equity awards in 2011 and 2012, an RSU award was granted to Named Executive Officers in 2013 to further link Named Executive Officer compensation with stock price performance and stockholder interests.

 

Compensation Philosophy and Objectives

 

The primary objectives of the Company’s executive compensation program are to:

 

·                  attract and retain highly qualified executives;

·                  motivate the Company’s leaders to work together as a team to deliver superior business performance;

·                  encourage balance between short-term results and the long-term strategic decisions needed to ensure sustained business performance over time; and

·                  ensure that the interests and risk tolerance of the Company’s leaders are closely aligned with those of the Company’s stockholders.

 

As discussed in the sections that follow, the Company uses a variety of compensation vehicles to meet its compensation philosophy and objectives. The Company does not establish a targeted mix of weightings between the various components. Both internal and external influences on our compensation program fluctuate periodically, and the Company believes that it is in the best interest of the Company, the Company’s stockholders, as well as the Named Executive Officers, to provide the Committee with the flexibility to design a compensation program appropriate to the current market environment and the Company’s goals.

 

Position and level of responsibility are important factors in the compensation of the Company’s executives. There are internal salary levels, as well as annual and long-term target incentive opportunities for each executive level in the organization. The Company believes this strategy emphasizes the executive team concept.

 

Each Named Executive Officer is a long-term employee of the Company with tenure ranging from 16 to 37 years, resulting in a group that is very knowledgeable about our Company and the transportation industry. This knowledge is extremely valuable to both the Company and our stockholders and makes members of our management desired targets for recruitment by other transportation companies. Our compensation program is designed to prevent loss of our existing managerial talent as well as attract future leaders for the Company.

 

2013 Variable vs. Fixed Compensation

 

The charts below show the significant portion of the Named Executive Officers’ 2013 target compensation that was variable based either on reaching certain performance goals or the value of the Common Stock.

 

 

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Table of Contents

 

Pay for Performance

 

In addition to being designed to attract and retain effective management, our compensation program also has a strong relationship between pay and performance and our compensation programs evolve and are adjusted over time to support the Company’s goals and short- and long-term objectives. The following chart illustrates how incentive payments (both short- and long-term) track with the Company’s operating income performance.

 

 

Performance-based annual and long-term incentive compensation represents a significant portion of the Named Executive Officers’ compensation package.

 

Prior to 2010, the annual incentive plan was tied solely to the Company’s ROCE. Starting in 2010, the plan was based 50% on ROCE and 50% on cash flow improvement.  In 2012, the cash flow improvement metric was replaced with operating income improvement.

 

Prior to 2011, the long-term incentive compensation plans were based on EPS growth and ROCE.  Beginning in 2011, relative TSR replaced EPS.  These plans are described in more detail below.

 

Response to 2013 Say on Pay Vote

 

In 2013, the Company held its third annual stockholder advisory vote on the compensation paid to our Named Executive Officers, again resulting in over 90% of votes cast approving such compensation. The Committee considered these results and the overwhelming support expressed by stockholders as well as many other factors in evaluating the Company’s executive compensation programs as discussed in this CD&A. These factors include the Committee’s assessment of the interaction of our compensation programs with our corporate business objectives, evaluations of our programs by external consultants, and review of data of a selected group of peers. Each of these factors is evaluated in the context of the Committee’s duty to act as the Directors determine to be in the stockholders’ best interests. Based on this evaluation, the Committee did not make any changes to our executive compensation program, policies or pay levels as a result of the 2013 “say on pay” advisory vote.

 

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Table of Contents

 

Roles and Responsibilities in Determining Executive Compensation

 

The Compensation Committee is responsible for overseeing and approving compensation levels and incentive plans for the Named Executive Officers. The Committee approves salary levels, incentive plan performance metrics, performance goals, targets and maximum payouts, equity awards and the peer group used for benchmarking. The Committee also evaluates the need for, and the provisions of, severance arrangements for the Named Executive Officers. As a part of its responsibilities, the Committee also reviews risks associated with compensation plans.

 

The Committee retains an independent consultant, Meridian, to assist with the evaluation of compensation programs and award levels and to provide updates to the Committee on trends and issues related to executive compensation as well as to review executive compensation related proxy disclosures. See “Committees of the Board Compensation Committee” for more information regarding the Committee’s independent consultant.

 

The Company has retained Mercer to provide additional consulting services at the direction of management and to assist with management’s recommendations for our peer group and executive compensation. Mercer assists with market analysis, plan design, proxy disclosure review, review of corporate governance practices and periodically participates in Committee meetings and reviews Committee materials.

 

From time to time, at the Committee’s request, the Company’s Chairman of the Board, President & Chief Executive Officer, Senior Vice President–Tax & Chief Audit Executive, Vice President–General Counsel & Corporate Secretary, Senior Vice President–Chief Financial Officer & Chief Information Officer, Vice President–Human Resources and ABF Freight President & Chief Executive Officer provide analysis and recommendations to the Committee on compensation issues.

 

At certain meetings, the President & Chief Executive Officer presents pay recommendations to the Committee for her direct reports. The President & Chief Executive Officer does not make recommendations on her own compensation. Some or all of the above-listed individuals are routinely invited by the Committee to attend Committee meetings in order to provide information relating to matters the Committee is considering. None of the above-listed individuals participate in discussions concerning their own pay or attend Committee executive sessions, except to the extent requested by the Committee.

 

Management formulates its recommendations with assistance from Mercer. The Committee considers management recommendations and reviews recommendations from Meridian before making decisions on compensation to be provided to the executives. The Committee feels these recommendations provide valuable insight in making compensation decisions; however, the Committee alone approves all pay decisions for the Named Executive Officers.

 

Determining Appropriate Pay Levels and Linkage to Objectives

 

The Committee compares its compensation program with the compensation levels of executives at similar peer entities in our industry to determine whether the Company is providing a competitive compensation program within the market in which we compete for qualified executives. For base salary, the Company has historically targeted between the 25th and 50th percentiles of the market (i.e., the peer group described on page 30) for Named Executive Officers. Annual cash incentives are designed to deliver total cash compensation (salary and annual incentives) to meet or exceed the 50th percentile of the market when the Company performs above target performance. Total direct compensation, including base salary, annual cash incentives, long-term cash incentives and equity awards, is also targeted to meet or exceed the 50th percentile of the market when the Company exceeds target performance levels.

 

To assess the competitive range of pay for a particular position, the Committee periodically examines pay data for executives in positions of comparable size and complexity at other companies. The Company’s peer group is designated by the Committee.

 

The latest in depth market analysis was conducted for the Company’s executive compensation program in 2011 in conjunction with the Company’s retention assessment and incentive plan review. As part of the analysis, the Committee examined peer group incentive plan designs and practices and reviewed severance and change in control agreements provided by peers. This analysis indicated that total direct compensation for the Named Executive

 

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Table of Contents

 

Officers is within the desired range when the Company performs well. The next in-depth market analysis of executive compensation will be conducted during 2014.

 

A change to the peer group was made in 2012, moving to the Stephen’s Transportation Index with the addition of YRC Worldwide, Inc. The change was made to more accurately represent the Company’s direct competitors for business and executive talent at that time. This peer group is also used in the TSR component of the 2012-2014 and 2013-2015 cash long-term incentive plan, and includes the following companies:

 

Company Name

 

 

Revenue in 2013
($ thousands)

 

Arkansas Best Corporation

 

$2,300,000

 

Celadon Group Inc.

 

680,900

 

Con-Way, Inc.

 

5,470,000

 

Covenant Transport, Inc.

 

684,500

 

Heartland Express, Inc.

 

582,300

 

Knight Transportation, Inc.

 

969,200

 

Marten Transport, Ltd.

 

659,200

 

Old Dominion Freight Line, Inc.

 

2,340,000

 

SAIA, Inc.

 

1,140,000

 

Swift Transportation Corporation

 

4,120,000

 

USA Truck Inc.1

 

548,400

 

Vitran Corporation1

 

310,300

 

Werner Enterprises

 

2,030,000

 

YRC Worldwide, Inc.1

 

4,826,300

 

 

1.          12 months ended 9/30/2013

 

Due to the strong performance orientation of the annual cash incentive, as discussed on page 31, and the long-term cash incentives, as described on page 33, the Committee is satisfied that above-median total cash and total direct compensation will only be awarded when the Company performs well against the historical ROCE of the S&P 500 companies. The S&P 500 is an appropriate performance benchmark because it is a broad-based group of companies in leading industries in the United States. The S&P 500 reflects the risk and return characteristics of the broader market on an on-going basis. While the S&P 500 includes companies that are larger than the Company, the performance of these companies reflects stable, well-managed organizations. Performance at or above the level of the S&P 500 companies is considered acceptable performance by management and worthy of performance-based incentive payments. For long-term incentives, the Company also uses TSR relative to the above listed peer group to more directly align the cash long-term incentive plan with shareholder value creation.

 

The Committee evaluates Named Executive Officers’ compensation by analyzing two general categories: (i) short-term cash compensation and (ii) long-term incentive compensation.

 

Short-Term Cash Compensation

 

 

 

Long-Term Incentive Compensation

Base Salary

 

+

 

Annual Cash Incentive (1-Yr. Financial Goals)

 

=

 

Total Short-Term Cash Compensation

 

+

 

Long-Term Cash Incentive (3-Yr. Financial Goals)

 

+

 

Equity Awards (Annual Grant with 5-Yr. vesting)

 

=

 

Total Direct Compensation

 

Although the Committee also reviews retirement, perquisites and other benefits such as the 401(k) plan and health and welfare benefits, these benefits are not referenced against market data or used in determining direct compensation levels. These benefits are more fully described in the “Retirement and Other Benefits” and the “Perquisites” sections of this CD&A.

 

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Components of Compensation

 

Base Salary.  Base salaries for Named Executive Officers are reviewed by the Committee on an annual basis. In establishing base salaries, the Committee reviews the following:

 

·                  the Company’s compensation philosophy and objectives as described above;

·                  market analysis;

·                  input from the Compensation Committee’s independent consultant, Meridian;

·                  economic and inflationary factors;

·                  the Company’s recent and historical financial performance;

·                  the Company’s strategic plans;

·                  differences in the level of responsibility and authority between the Named Executive Officers;

·                  the resources of the Company; and

·                  the President–Chief Executive Officer’s recommendations (on positions other than her own).

 

The Committee does not assign a specific weighting to any of these factors.

 

For 2013, the only salary increases to Named Executive Officers related to promotions. Mr. Ingram’s salary was increased upon his promotion to ABF Logistics President effective August 1, 2013. Mr. Ingram also continued to serve as ABC Senior Vice President–Strategy through January 31, 2014. Mr. Newcity’s salary was increased upon his promotion to ABC Senior Vice President–Chief Financial Officer & Chief Information Officer effective August 1, 2013. The following chart shows the annualized base salary rates for each Named Executive Officer for 2012 and 2013:

 

 

2012 Salary

2013 Salary

Judy R. McReynolds

$575,000

$575,000

Roy M. Slagle

$375,000

$375,000

James W. Keenan

$294,000

$294,000

Jim A. Ingram

$294,000

$325,000

Michael E. Newcity

$266,000

$294,000

 

Annual Cash Incentive Compensation.  The annual cash incentive plan benefit for 2013 was based on the Company’s ROCE and operating income improvement, as it was in 2012. The performance metrics were equally weighted. Under the plan, participants receive a payout if certain goals for improvement in operating income as compared to the previous year are met and/or if certain ROCE levels are achieved. Operating income is generally determined as operating income as shown by the consolidated financial statements and consistent with the historical determination of operating income in Arkansas Best’s financial statements after taking into account the required adjustments specified in the annual incentive plan. ROCE is generally calculated by dividing net income (adjusted for nonrecurring or unusual items) by average debt plus average equity for the applicable period. The Committee and management believe that ROCE keeps participants focused on the profitable use of Company resources, which increases the value of the Company to its stockholders. Additionally, ROCE is a valuable motivational tool since it can be calculated throughout the year by participants. The use of improvement in operating income as a performance metric reinforces the Company’s emphasis on profitable growth.

 

The ROCE incentive award scale is based on studies conducted since the inception of the ROCE plan in 1998 regarding the historical average ROCE for the S&P 500 publicly traded companies over longer periods of time.

 

For 2013, Named Executive Officers had a target incentive opportunity expressed as a percentage of their base salary that is multiplied by a performance factor determined by the operating income improvement and ROCE achieved by the Company. The target incentive opportunity for Mr. Ingram was raised from 50% to 60% of base salary to reflect his promotion to ABF Logistics President in 2013. The target for Mr. Newcity was raised from 45% to 50% of base salary to reflect his promotion to ABC Senior Vice President–Chief Financial Officer & Chief Information Officer in 2014. Both adjustments were effective for the incentive paid with respect to performance in 2013.

 

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Table of Contents

 

The following table shows the incentive targets for the 2013 fiscal year for the annual incentive plan:

 

Job Title

Target
Incentive
(% of Salary)

ABC President & CEO

100%

ABF President & CEO

70%

ABC Senior Vice President–Enterprise Customer Solutions

50%

ABC Senior Vice President–Strategy and ABF Logistics President

60%

ABC Senior Vice President–CFO & CIO

50%

 

The following tables show how the Company determined the performance factor applied in each half of the incentive paid under the annual cash incentive compensation plan with respect to performance in fiscal year 2013.

 

Operating
Income
Improvement

Performance
Factor Earned

<+$10 million

0%

 

+$10 million

25%

 

+$25 million

100%

 

+$65 million

200%

 

 

The operating income component was capped at a 200% performance factor.

 

ROCE %
Achieved

Performance
Factor Earned

<5%

 

0%

 

5%

 

50%

 

10%

 

100%

 

15%

 

300%

 

 

The ROCE component was capped at a 300% performance factor.

 

Actual operating income improvement achieved for the 2013 fiscal year as measured under the annual plan was $39.9 million and the ROCE was 3.66%. Combining the two resulting performance factors (weighted 50% each), a payout of approximately 69% of the target incentive opportunity under the 2013 annual plan was achieved as reflected in the table below.

 

Job Title

2013 Target
Annual Incentive
Opportunity

Actual 2013 Annual
Incentive Plan
Payout

ABC President & CEO

$575,000

$394,559

ABF President & CEO

$262,500

$180,125

ABC Senior Vice President–Enterprise Customer Solutions

$147,000

$100,870

ABC Senior Vice President–Strategy and ABF Logistics President

$167,000

$114,594

ABC Senior Vice President–CFO & CIO

$131,075

$89,942

 

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Long-Term Cash Incentive Compensation.  The Committee has awarded three-year cash incentive opportunities annually since 2006.

 

In January 2013, the Committee granted a three-year cash long-term incentive plan award for January 1, 2013 through December 31, 2015 using the same components as the 2011-2013 and 2012-2014 plans. The 2013-2015 cash long-term incentive plan components are:

 

Cash Long-Term Incentive
Plan Components

Weighting

Relative TSR Component

50%

ROCE Component

50%

 

Management and the Committee believe that the combination of performance measures in the cash long-term incentive plan places an emphasis on the efficient use of corporate assets to create profitable growth during the measurement period and rewards participants when they outperform their peer group. The relative TSR component is intended to more directly align the plan with shareholder value creation relative to our peers while the ROCE component aligns management’s interest with our profitability and appropriate employment of capital.

 

The performance peer group for the TSR component of the 2013-2015 cash long-term incentive plan (which includes the same companies used for the 2012-2014 plan) is listed in the “Determining Appropriate Pay Levels and Linkage to Objectives” section of the CD&A.

 

For the “ROCE Component,” the Committee used the Company’s three-year average ROCE as its performance measure. The ROCE goal is based on studies conducted by the Company on historical averages of ROCE for S&P 500 publicly traded companies over longer periods of time. ROCE is generally calculated by dividing net income (adjusted for nonrecurring or unusual items) by average debt plus average equity for the applicable period.

 

For the 2013-2015 cash long-term incentive plan, the Named Executive Officers have a target incentive opportunity expressed as a percentage of their base salary earned during the performance period. The target incentive opportunity for Mr. Ingram was raised from 70% to 75% of base salary to reflect his promotion to ABF Logistics President. The target incentive opportunity for Mr. Newcity was raised from 60% to 70% of base salary due to his promotion to ABC Senior Vice President–Chief Financial Officer & Chief Information Officer. The following table shows the 2013 target incentive for the Named Executive Officers for the 2013-2015 cash long-term incentive plan.

 

Job Title

Cash Long-Term Incentive Plan
Incentive Award (% of Salary
Earned During Period )

ABC President & CEO

85%

ABF President & CEO

75%

ABC Senior Vice President–Enterprise Customer Solutions

70%

ABC Senior Vice President–Strategy and ABF Logistics President

75%

Senior Vice President–CFO & CIO

70%

 

The following tables show how payments are determined for each half of the cash long-term incentive plan for the 2013-2015 cash long-term incentive plan:

 

Relative TSR

Performance Factor
Earned for Relative
TSR

< 25th percentile

0%

 

25th percentile

25%

 

50th percentile

100%

 

75th percentile

200%

 

 

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The Relative TSR component was capped at a 200% performance factor.

 

ROCE %
Achieved

Performance
Factor Earned on
ROCE

<3%

 

0%

 

3%

 

30%

 

10%

 

100%

 

15%

 

300%

 

 

The ROCE component was capped at a 300% performance factor.

 

Payments for the 2013-2015 cash long-term incentive plan, if any, will be made in early 2016.

 

Payout of Past Award

 

The performance period for the 2011-2013 cash long-term incentive compensation plan ended on December 31, 2013.

 

The following tables show how payments were determined for each half of this cash long-term incentive award:

 

Actual TSR performance was at the 45th percentile and ROCE was 1.36% for the 2011-2013 cash long-term incentive compensation plan. Combining the resulting two performance factors (weighted 50% each), a payout of approximately 43% of the target incentive opportunity under the 2011-2013 cash long-term incentive plan was achieved as reflected in the table below.

 

Job Title

2011-2013 Target Cash
Long-Term Incentive
Opportunity

Actual 2011-2013
Long-Term Incentive
Plan Payout

ABC President & CEO

$474,583

$204,545

ABF President & CEO

$253,000

$109,043

ABC Senior Vice President–Enterprise Customer Solutions

$177,667

$76,574

ABC Senior Vice President and ABF Logistics President

$186,666

$80,453

ABC Senior Vice President–CFO & CIO

$159,591

$70,703

 

Equity Awards. The Company’s policies and practices for aligning the Named Executive Officers’ interests with stockholders’ interests and encouraging stock ownership by Named Executive Officers are described below:

 

To help align executive interests with those of shareholders, the Company awards RSUs. In 2013, Named Executive Officers were granted RSUs under the Company’s 2005 Ownership Incentive Plan as follows:

 

Named Executive Officer

Target Award
Value

RSUs

Granted in 2013

Judy R. McReynolds

$330,000

12,100

 

Roy M. Slagle

$240,000

8,800

 

James W. Keenan

$180,000

6,600

 

Jim A. Ingram

$200,000

7,300

 

Michael E. Newcity

$180,000

6,600

 

 

The number of RSUs awarded to each Named Executive Officer was based, in large part, on the Named Executive Officer’s position within the Company. Other considerations included the total number of shares available to be granted, the number of previously granted RSUs currently outstanding, burn rate and potential shareholder dilution.

 

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See “Outstanding Equity Awards at 2013 Fiscal Year-End” for additional information regarding these awards. Prior to 2005, the Named Executive Officers were awarded stock options.

 

The Committee has granted RSUs since 2007. The Committee believes the awarding of RSUs with five-year cliff vesting facilitates the Named Executive Officers’ accumulation of an equity interest in the Company and helps to retain key talent. This vesting schedule also assists the Named Executive Officers in complying with the Stock Ownership Policy. Stock will be issued in settlement of the RSUs on the regular five-year vesting date or, if earlier, at the time the Named Executive Officer’s employment terminates due to retirement, death or disability.

 

Ownership and Retention Policy – The Committee believes that the Named Executive Officers should maintain meaningful equity holdings in the Company in order to align their interests with those of the Company’s shareholders. The Board adopted a Stock Ownership Policy (the “Policy”) for Named Executive Officers that became effective January 1, 2008. Under this Policy, Named Executive Officers must own stock with a value equal to or greater than the following multiple of their base salary.

 

Position Title

Stock Ownership Multiple

ABC President & CEO

3 x base salary

Other Named Executive Officers

2 x base salary

 

Participants are prohibited from selling any company stock (except to pay the exercise price of stock options or taxes generated as a result of equity grants or vesting) until the ownership requirement is attained. Stock owned in a Company-sponsored retirement plan, restricted stock, RSUs and stock owned outright each count toward the ownership requirement. The Committee monitors ownership levels annually. As of the last review which took place in February, 2014, all Named Executive Officers have met or exceeded their ownership requirement. The Committee reserves the right to amend or terminate the Policy at any time or waive the restrictions for any individual at its sole discretion.

 

Equity Award Practices – The Committee’s policy for granting equity awards states:

 

·          the Committee shall be responsible for granting equity-based compensation for all employees;

·          the award dates for each grant shall be five business days following the Company’s applicable quarter’s earnings release;

·          the exercise price or value of the grant shall be determined by reference to the closing price of the Common Stock on the specified award date;

·          the number of shares/units awarded will be based on stated dollar amounts for each participant unless otherwise approved by the Board; and

·          any award which does not conform to these policy requirements must be approved by the Board

 

Retirement and Other Benefits. The Named Executive Officers are eligible to participate in retirement and benefit programs as described below. The Committee generally reviews the overall cost to the Company of the various programs on an annual basis or when changes are proposed. The Committee believes the benefits provided by these programs continue to be important factors in attracting and retaining the overall officer group, including the Named Executive Officers. However, in recent years, these benefits have become more limited as their cost rises and general compensation trends move away from the provision of additional benefits under defined benefit retirement plans.

 

In the past, the Company provided officers with the predominant portion of their long-term compensation through post-employment payments under the Supplemental Benefit Plan (the “SBP”) and Deferred Salary Agreements (“DSA”) retirement programs described on page 36. All benefits under these plans have been frozen, and officers now receive a significant portion of their long-term compensation through the performance plan described earlier. As officers promoted after the SBP and DSA freeze, Messrs. Newcity and Ingram are not participants in the SBP or DSA.

 

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Table of Contents

 

Following are the various benefit programs in which the Named Executive Officers have either active or frozen participation.

 

Supplemental Benefit Plan – Prior to 2010, the Company maintained a noncontributory, unfunded supplemental pension benefit plan that supplements benefits under the Arkansas Best Corporation Pension Plan (the “Pension Plan”). Under the SBP, the Company will pay sums in addition to amounts payable under the Pension Plan to eligible officers, including the Named Executive Officers. The SBP has been frozen since December 31, 2009. See “2013 Pension Benefits” for more information.

 

Deferred Salary Agreements – The Company and ABF also have unfunded, noncontributory DSAs with certain of their officers. No Named Executive Officers are active participants in the DSA. See the “2013 Pension Benefits” section for more information.

 

Pension Plan – As part of their postemployment compensation, the Named Executive Officers participated in the Company’s non-union defined benefit Pension Plan on the same basis as other eligible noncontractual employees. Participation in the Pension Plan was frozen to new entrants effective December 31, 2005. Because the Named Executive Officers were already active Pension Plan participants as of the participation freeze date, they remained in the Plan with other eligible noncontratual employees until the Pension Plan was amended to freeze the participant’s final average compensation and years of credited service as of July 1, 2013. See the “2013 Pension Benefits” section for more information on the benefit and terms and conditions of the Pension Plan.

 

401(k) and DC Retirement Plan – The Company maintains the Arkansas Best 401(k) and DC Retirement Plan for eligible noncontractual employees. The Named Executive Officers are eligible to participate in this plan on the same basis as all other eligible employees. The Company matches 50% of the employee’s contributions up to a maximum of 6% of the employee’s eligible earnings subject to the Internal Revenue Service (“IRS”) annual compensation limit.

 

After the freeze of the accrual of benefits for active participants of the Pension Plan effective on July 1, 2013, the former Pension Plan participants, including the Named Executive Officers, became eligible for Discretionary Defined Contributions. Discretionary Defined Contributions were originally established for those hired after the Pension Plan was frozen to new participants effective December 31, 2005. The Discretionary Defined Contributions are made by the Company and determined annually based on the operating results of the Company and made to the participant’s Arkansas Best 401(k) and DC Retirement Plan account. The amount of the Discretionary Defined Contribution is based on a percentage of annual eligible compensation (generally wages and incentive payments).

 

Voluntary Savings Plan (“VSP”) – The Arkansas Best VSP is a nonqualified plan which was created to offset the IRC limitations on contributions to the Company’s 401(k) plan for certain eligible officers, including the Named Executive Officers. Prior to 2010, the Company matched 15% of each participant’s contributions up to a maximum annual match amount of $15,000. The match was suspended for the VSP effective January 1, 2010. See the “2013 Non-Qualified Deferred Compensation” section for a more detailed description of the VSP. No Named Executive Officers currently have a balance in the VSP.

 

Health and Welfare Plans – The Company provides medical, dental, vision, life insurance and disability benefits to all eligible noncontractual employees. The Named Executive Officers are eligible to participate in these benefit plans on the same basis as all other eligible noncontractual employees. The Named Executive Officers also have individual long-term disability policies subsidized by the Company that supplement the group disability policy.

 

Officer Life Insurance – The Company, ABF Freight and ABF Logistics officers, including the Named Executive Officers, are provided with life insurance coverage of $1 million in the event they suffer accidental death while traveling on Company business.

 

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Table of Contents

 

Post-Employment Supplemental Medical Policy (“Executive Medical Policy”) – The Company provides the Named Executive Officers and their eligible dependents with lifetime health coverage under the Company’s Executive Medical Policy following their termination of employment after age 55 with 10 years of service. The health coverage is provided through a fully insured third-party provided health plan. Eligible officers from age 55 to 60 pay a premium to the Company, historically equivalent to the then current COBRA rate. From age 60 to 65, the terminated officer is required to reimburse the Company an amount equivalent to the premium paid for health coverage by active officers of the Company. For retired officers age 65 and over, nominal premiums are charged by the Company for continued retiree coverage.

 

The Executive Medical Policy provides that coverage will be forfeited if the officer becomes an employee, consultant or director of, or has an ownership interest in, any competitor of the Company.

 

Perquisites. Perquisites provided by the Company are generally limited to situations where there is some related business benefit to the Company, such as personal travel cost associated with spousal attendance at Company or industry events. See the “Summary Compensation Table” for a listing of the reportable perquisites for the Named Executive Officers.

 

Employment Agreements and Change in Control Provisions

 

None of our Named Executive Officers is party to an employment agreement with the Company.  However, the Named Executive Officers do participate in a Change in Control Plan for certain senior officers of the Company. The Committee believes this plan serves the best interests of the stockholders since it helps retain executives during uncertain times leading up to and immediately following a change in control. By providing fair compensation in the event of termination following a change in control, the plan allows the executives to reasonably evaluate potential actions without concern over how it may impact them financially.

 

The plan provides the following benefits if an eligible executive is involuntarily terminated following a change in control:

 

(i)

a cash payment (for Ms. McReynolds the payment is two times her base salary plus two times her average annual cash incentive, and for other Named Executive Officers the payment is one times the executive’s base salary plus one times his average annual cash incentive);

(ii)

a prorated annual incentive payment for the year of termination;

(iii)

prorated cash long-term incentive payments;

(iv)

full vesting of all equity awards; and

(v)

a lump sum payment adequate to cover medical and dental premiums for 24 months.

 

In addition, upon a change in control, benefits including the DSA and VSP will automatically vest.  Also, if the equity awards are not replaced with awards of equal value upon on a change in control, then they will also vest. If the awards are replaced by the successor company and the Named Executive Officer is terminated within 24 months of the change in control, he/she shall become vested as of the termination date in any unvested equity awards.

 

The benefits are intended to provide the officer participants with a reasonable severance package that is based on the value the officers have created and is realized by the Company’s stockholders in the event of a change in control. None of the change in control provisions requires the Company to gross-up a Named Executive Officer for taxes they may owe on change in control benefits including any excise taxes under IRC Section 4999. Under the terms of the Change in Control Plan, a best-of-net calculation will be performed to determine whether change in control benefits due to the Named Executive Officers should be reduced (so no excise tax will be imposed under IRC Section 280G) or should be paid in full (with any excise taxes resulting to be paid in full by the Named Executive Officer). See “Potential Payments upon Termination or Change in Control” for additional information regarding the provisions of the Change in Control Plan.

 

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Table of Contents

 

Clawbacks

 

The Committee has implemented a policy for the “clawback” of any bonus or incentive compensation awarded to any executive officer, including a Named Executive Officer, whose misconduct contributed to the Company being required to restate its financial statements. Under the terms of the policy, the Board may require reimbursement of any bonus or incentive compensation awarded or effect the cancellation of unvested RSUs or deferred stock awards previously granted to the executive officer under the scenarios described as follows:

 

·

the amount of the bonus or incentive compensation was calculated based upon the achievement of certain financial results that were subsequently the subject of the restatement;

·

the executive officer engaged in intentional misconduct that caused or partially caused the need for the restatement; and

·

the amount of the bonus or incentive compensation that would have been awarded to the executive officer had the results been properly reported would have been lower than the amount actually awarded.

 

Anti-hedging and Pledging Policies

 

The Insider Trading Agreement prohibits certain transactions in the Company’s securities, including the purchase or sale of puts, calls, options or other derivative securities based on the Company’s securities. The policy also prohibits monetization transactions, such as forward sale contracts, in which the stockholder continues to own the underlying security without all the risks or rewards of ownership, short-selling Company securities or “selling against the box” (failing to deliver sold securities), as well as any other hedging or pledging transaction involving the Company’s securities.

 

Tax Implications

 

Deductibility of Executive Compensation. Section 162(m) of the IRC generally precludes a public company from taking a federal income tax deduction for annual compensation in excess of $1 million per individual paid to its Chief Executive Officer or the other three most highly compensated officers of the Company (other than the Chief Executive Officer or Chief Financial Officer). Under Section 162(m), certain compensation, including “performance-based compensation,” is excluded from this deduction limitation. It is generally the Committee’s intent to structure compensation paid to the officers to be fully deductible. However, the Committee may award compensation that is not fully deductible if it determines that such awards are consistent with its compensation philosophy and in the best interests of the Company and its stockholders. The Committee intends for all compensation paid to Named Executive Officers in 2013 to be deductible.

 

IRC Section 280G applies to payments made to executives of a company in connection with a changed in control and prohibits the deduction of any “excess parachute payment.” Benefits payable under the Change in Control Plan as well as accelerated vesting of equity awards and annual and long-term cash incentives could result in “excess parachute payments” that are not deductible by us. For more information regarding amounts payable and benefits available upon the occurrence of certain changes in control, see “Executive Compensation – Potential Payments upon Termination or Change in Control.”

 

Non-Qualified Deferred Compensation. The Company designs and operates its nonqualified deferred compensation arrangements in a manner that is intended to be compliant with Section 409A of the IRC and the final regulations issued thereunder.

 

Key Compensation Actions, Including Changes for 2014

 

Base Salary:  At this time, no salary increases have been approved for Named Executive Officers in 2014.

 

Annual Incentive Goals and Metrics:  For the 2014 Annual Cash Incentive Compensation Plan, the performance metrics will continue to be ROCE and operating income improvement. The 2014 metrics are weighted 50% each.

 

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Long-Term Incentive Plan:  The 2014-2016 cash long-term incentive plan continues to be based on ROCE and relative TSR. Under the cash long-term incentive plan, the Company’s relative three-year TSR is compared to our performance peer group.

 

Risk Assessment: The most recent compensation plan risk assessment by the Committee was conducted in January 2014. For more information on the risk assessment process and results, see the section of this proxy titled “Governance of the Company – Board’s Role in Risk Oversight” in the Corporate Governance section of this proxy.

 

Peer Group Updates: In conjunction with input from Meridian and Mercer, in January 2014 the Committee reviewed and revised the peer group for market compensation and the performance peer group for the TSR component of the cash long-term incentive plan to more accurately represent the Company’s current competitors. With our aggressive corporate goals to continue to expand into other areas of transportation and logistics in addition to less than truckload, our competitor group has evolved since the peer group was last updated. The following group incorporates a more diverse mix of our transportation- and logistics-related competitors and will be utilized for awards granted in 2014.

 

·                  Con-Way, Inc.

·                  Echo Global Logistics, Inc.

·                  Forward Air Corp

·                  Hub Group, Inc.

·                  J.B. Hunt Transport Services, Inc.

·                  Landstar System, Inc.

·                  Old Dominion Freight Line, Inc.

·                  Roadrunner Transportation Systems, Inc.

·                  SAIA, Inc.

·                  Swift Transportation Corporation

·                  Werner Enterprises

·                  XPO Logistics, Inc.

·                  YRC Worldwide, Inc.

 

 

 

Compensation Committee Report

 

The Compensation Committee has reviewed and discussed the Compensation Discussion & Analysis with management, and based on the review and discussions, the Compensation Committee recommended to the Board that it be included in the Company’s 2013 Annual Report filed on Form 10-K and, as applicable, the Company’s 2014 Proxy Statement.

 

 

Committee Members

 

 

William M. Legg, Chairman

John W. Alden

John H. Morris

Craig E. Philip

 

 

Compensation Committee

Interlocks and Insider Participation

 

None of the Compensation Committee members are officers or employees or former officers or employees of the Company. No executive officer of the Company serves as a member of the Board of any other entity or the Compensation Committee of any other entity that has one or more executive officers serving as a member of the Board or Compensation Committee. Messrs. Legg, Alden, Morris and Philip served on the Compensation Committee in 2013.

 

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Table of Contents

 

Summary Compensation Table

 

The following table sets forth compensation paid for the fiscal years indicated for our 2013 Named Executive Officers.

 

Name and
Principal Position

 

Year

 

Salary
($)

 

Stock
Awards
($)
(1)

 

Non-Equity
Incentive Plan
Compensation
($)
(2)

 

Change in
Pension Value and
Non-Qualified
Deferred
Compensation
Earnings
($)
(3)

 

All Other
Compensation
($)
(4)

 

Total
($)

 

Judy R. McReynolds

 

2013

 

$

575,000

 

$

331,056

 

$

599,104

 

$

 

$

38,382

 

$1,543,542

 

ABC President & CEO

 

2012

 

575,000

 

242,055

 

 

97,574

 

30,757

 

945,386

 

 

 

2011

 

525,000

 

329,960

 

383,093

 

92,858

 

16,496

 

1,347,407

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Roy M. Slagle

 

2013

 

375,000

 

240,768

 

289,168

 

132,125

 

58,923

 

1,095,984

 

ABF Freight President & CEO

 

2012

 

375,000

 

176,040

 

 

220,608

 

44,046

 

815,694

 

 

 

2011

 

285,000

 

180,800

 

103,982

 

263,546

 

28,107

 

861,435

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

James W. Keenan(5)

 

2013

 

294,000

 

180,576

 

177,444

 

38,320

 

44,241

 

734,581

 

ABC Senior Vice President–

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Enterprise Customer Solutions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Jim A. Ingram(6)

 

2013

 

306,917

 

199,728

 

195,047

 

 

15,081

 

716,773

 

ABC Senior Vice President–Strategy

 

2012

 

294,000

 

132,030

 

 

63,566

 

8,534

 

498,130

 

ABF Logistics President

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Michael E. Newcity

 

2013

 

277,667

 

180,576

 

160,645

 

 

14,422

 

633,310

 

ABC Senior Vice President–

 

2012

 

266,000

 

124,695

 

 

55,248

 

8,485

 

454,428

 

Chief Financial Officer & Chief

 

2011

 

258,000

 

169,500

 

75,305

 

46,015

 

513

 

549,333

 

Information Officer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)          The amounts reflect the aggregate grant date fair value of RSU awards to the Named Executive Officers during 2013 under the 2005 Ownership Incentive Plan, computed in accordance with FASB ASC Topic 718, determined without regard to estimated forfeitures. The fair value of RSU awards is equal to the fair market value of the Common Stock on the date of grant multiplied by the number of RSUs awarded. The Named Executive Officers each received an award of RSUs under the 2005 Ownership Incentive Plan on November 1, 2013. The actual amount realized by the officer will vary based on a number of factors, including the Company’s performance, stock price fluctuations and applicable vesting. Dividends are paid on RSUs at the same rate and at the same time as the dividends paid to Company stockholders. See Note L to the consolidated financial statements in the Company’s 2013 Annual Report on Form 10-K for additional detail regarding share-based compensation.

 

(2)          Reflects cash compensation earned during 2013 and paid in January 2014 from the annual incentive plan and cash compensation earned from 2011-2013 and paid in January 2014 from the cash long-term incentive plan. See the “2013 Grants of Plan-Based Awards” table for additional information on the 2013 annual incentive plan Award and the CD&A for additional information on the cash long-term incentive plan.

 

 

 

McReynolds

 

Slagle

 

Keenan

 

Ingram

 

Newcity

 

 

 

 

 

 

 

 

 

 

 

 

 

Annual Incentive Plan

 

$

394,559

 

$

180,125

 

$

100,870

 

$

114,594

 

$

89,942

 

C-LTIP

 

204,545

 

109,043

 

76,574

 

80,453

 

70,703

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

$

599,104

 

$

289,168

 

$

177,444

 

$

195,047

 

$

160,645

 

 

(3)          Reflects the increase in actuarial present value during 2013 of each Named Executive Officer’s accumulated benefit under the Company’s Pension Plan and legacy SBP and DSAs. The values reported are determined using the same assumptions as used by the Company for financial reporting purposes for the Company’s Pension Plan, SBP and DSAs. See “2013 Pension Benefits” for additional information on these plans. Interest rate increases resulted in some negative year over year changes in the Pension Plan and SBP. Negative values are not reported in the table above.

 

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The 2013 change in value by plan is as follows:

 

 

 

McReynolds

 

Slagle

 

Keenan

 

Ingram

 

Newcity

 

 

 

 

 

 

 

 

 

 

 

 

 

Pension Plan

 

$

(201)

 

$

45,643

 

$

38,320

 

$

(15,660

)

$

(2,374

)

Supplemental Benefit Plan

 

(12,964)

 

61,589

 

 

 

 

Deferred Salary Agreement

 

5,711

 

24,893

 

 

 

 

Total Increase

 

$

(7,454)

 

$

132,125

 

$

38,320

 

$

(15,660

)

$

(2,374

)

 

Earnings with respect to outstanding vested RSUs are not above market and are not included in this column. See “2013 Non-Qualified Deferred Compensation” for additional information on RSUs.

 

(4)          All Other Compensation for 2013 consists of the following:

 

 

 

McReynolds

 

Slagle

 

Keenan

 

Ingram

 

Newcity

 

 

 

 

 

 

 

 

 

 

 

 

 

401(k) Company Match

 

$

7,650

 

$

7,650

 

$

7,650

 

$

7,650

 

$

7,650

 

DC Contribution

 

10,200

 

7,500

 

5,880

 

6,397

 

5,787

 

Long-Term Disability Premiums

 

1,931

 

1,931

 

1,139

 

854

 

805

 

24-Hour Accidental Death Premiums

 

180

 

180

 

180

 

180

 

180

 

Perquisites(i) 

 

13,298

 

33,144

 

20,187

 

 

 

Gross-Ups(ii) 

 

5,123

 

8,518

 

9,205

 

 

 

Total Other Compensation

 

$

38,382

 

$

58,923

 

$

44,241

 

$

15,081

 

$

14,422

 

 

(i)             Perquisite values for Ms. McReynolds and Messrs. Slagle and Keenan include expenses for spousal travel to Company or industry events and any related Company lost tax deduction resulting from the spouse accompanying the Named Executive Officer on a Company airplane. Ms. McReynolds’ perquisite value includes a Christmas gift from the Company (the Company also provides a Christmas gift to each of the other Board members). In general, the Company’s executive officers are not allowed to use corporate aircraft for personal trips. When appropriate for business purposes, executive officers’ spouses are permitted to accompany them on trips. Executive officers are also permitted to invite their spouse or other personal guests to occasionally accompany them on business trips when space is available. When the spouse’s or guest’s travel does not meet the IRS standard for “business use,” the cost of that travel, determined under the IRS Standard Industrial Fare Level, is imputed as income to the executive officer, and if the spouse’s travel was related to a business purpose, the Company will reimburse the executive officer for the associated income tax resulting from the imputed income.

 

The Company determines the cost of personal use of Company aircraft using all aircraft operating costs and total flight hours as prescribed by IRS Notice 2005-45 and related regulations. Under IRS rules, spousal travel on a business trip is generally considered nonbusiness travel. The incremental cost to the Company included in the perquisite values above is based on the Company’s normal effective income tax rate.

 

(ii)          Tax gross-ups for Ms. McReynolds and Messrs. Slagle and Keenan are for spousal travel to a Company or industry event.

 

(5)          Mr. Keenan was not a Named Executive Officer for 2011 and 2012. Accordingly, the table includes Mr. Keenan’s compensation for 2013 only.

 

(6)          Mr. Ingram was not a Named Executive Officer for 2011. Accordingly, the table includes Mr. Ingram’s compensation for 2012 and 2013 only.

 

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2013 Grants of Plan-Based Awards

 

The following table provides information related to non-equity and equity-based awards made to the Named Executive Officers for the 2013 fiscal year:

 

 

 

 

 

 

 

 

 

Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards
(2, 3)

 

All Other
Stock Awards

 

Name

 

Award
Type
(1)

 

Grant
Date

 

Approval
Date
(2)

 

Threshold

 

Target
($)

 

Maximum

 

Number
of
Shares of
Stock or
Units
(#)

 

Grant
Date Fair
Value of
Stock
Awards
(4)

 

 

 

AIP

 

02/20/2013

 

N/A

 

$

 

$ 575,000

 

$ 1,437,500

 

 

 

 

 

Judy R. McReynolds

 

RSU

 

11/01/2013

 

07/24/2013

 

 

 

 

 

 

 

12,100

 

$ 331,056

 

 

 

C-LTIP

 

02/20/2013

 

N/A

 

 

503,559

 

1,258,898

 

 

 

 

 

 

 

AIP

 

02/20/2013

 

N/A

 

 

262,500

 

656,250

 

 

 

 

 

Roy M. Slagle

 

RSU

 

11/01/2013

 

07/24/2013

 

 

 

 

 

 

 

8,800

 

240,768

 

 

 

C-LTIP

 

02/20/2013

 

N/A

 

 

289,772

 

724,430

 

 

 

 

 

 

 

AIP

 

02/20/2013

 

N/A

 

 

147,000

 

367,500

 

 

 

 

 

James W. Keenan

 

RSU

 

11/01/2013

 

07/24/2013

 

 

 

 

 

 

 

6,600

 

180,576

 

 

 

C-LTIP

 

02/20/2013

 

N/A

 

 

212,036

 

530,089

 

 

 

 

 

 

 

AIP

 

02/20/2013

 

N/A

 

 

167,000

 

417,500

 

 

 

 

 

Jim A. Ingram

 

RSU

 

11/01/2013

 

07/24/2013

 

 

 

 

 

 

 

7,300

 

199,728

 

 

 

C-LTIP

 

02/20/2013

 

N/A

 

 

243,418

 

608,545

 

 

 

 

 

 

 

AIP

 

02/20/2013

 

N/A

 

 

131,075

 

327,688

 

 

 

 

 

Michael E. Newcity

 

RSU

 

11/01/2013

 

07/24/2013

 

 

 

 

 

 

 

6,600

 

180,576

 

 

 

C-LTIP

 

02/20/2013

 

N/A

 

 

202,441

 

506,102

 

 

 

 

 

 

(1)          Award Types:

AIP = annual incentive compensation plan

RSU = restricted stock units granted under the 2005 Ownership Incentive Plan

C-LTIP = three-year cash long-term incentive compensation plan (2013-2015 plan period)

 

(2)          The performance criteria for the 2013 annual incentive plan award were approved by the Committee on February 20, 2013. Amounts shown in the “Estimated Future Payouts under Non-Equity Incentive Plan Awards” column with respect to the 2013 annual incentive plan award represent the threshold, target and maximum payment levels of the 2013 annual incentive plan. Awards under the annual incentive plan are described in greater detail in the narrative following this table and in “Compensation Discussion & Analysis – Components of Compensation – Annual Cash Incentive Compensation.” The actual amount of the 2013 annual incentive plan award paid for 2013 performance with respect to each Named Executive Officer is set forth in the “Non-Equity Incentive Plan Compensation” column of the “Summary Compensation Table.”

 

(3)          The performance criteria for the 2013-2015 cash long-term incentive compensation plan award were approved by the Committee on February 20, 2013. Amounts shown in the “Estimated Future Payouts under Non-Equity Incentive Plan Awards” column represent the threshold, target and maximum payment levels with respect to cash long-term incentive compensation plan awards granted in 2013. Awards under the cash long-term incentive compensation plan are described in greater detail in the narrative following this table and in “Compensation Discussion & Analysis – Components of Compensation – Long-Term Cash Incentive Compensation.”

 

(4)          Reflects the full grant date fair value ($27.36 per share), computed in accordance with FASB ASC Topic 718, determined without regard to forfeitures, of RSU awards made under the 2005 Ownership Incentive Plan on November 1, 2013.

 

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Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table

 

Non-Equity Incentive Compensation

 

Annual Incentive Compensation Plan: The 2013 awards granted under the Company’s annual incentive compensation plan were made on February 20, 2013. Awards under the annual incentive compensation plan become payable based on the Company’s actual performance for the year in relation to pre-established performance goals. Annual incentive compensation plan awards earned are generally paid as soon as administratively practicable following the date the awards are calculated and approved, but no later than March 15 of the year following the year to which the performance goals relate. Participants generally must be employed on the payment date in order to receive payment of their earned annual incentive compensation plan awards. However, if participants terminate during the plan year due to early retirement (age 55 with 10 years of service), normal retirement (age 65), death or disability, such participants remain eligible to receive a prorated annual incentive compensation plan award, provided, in the case of early or normal retirement, the individual has been a participant for at least 90 days during the plan year. Payment of the prorated incentive, if any, is made at the end of the measurement period and based upon actual performance results. Upon any other termination, a participant’s award will be forfeited, unless the Committee, in its discretion, decides that a prorated award should be paid. The 2012 Change in Control Plan provides for immediate payment of an earned award upon a qualified termination following a change in control, except where payment must be delayed six months for key employees as required by Section 409A of the IRC. For awards that have not reached the end of the measurement period, the benefit amount will be prorated based on the number of whole months completed during the measurement period as of the date of the qualified termination. Target incentive levels are set forth in the “Compensation Discussion & Analysis — Components of Compensation — Annual Cash Incentive Compensation.” Additional information regarding the treatment of these awards upon termination or a change in control is provided in “Potential Payments upon Termination or Change in Control.”

 

For 2013, the performance goals under the annual incentive compensation plan were based on the level of operating income improvement and the ROCE for the Company, and these performance goals were equally weighted. See “Compensation Discussion & Analysis — Components of Compensation — Annual Cash Incentive Compensation” for further detail regarding awards under the Company’s annual incentive compensation plan.

 

Cash Long-Term Incentive Compensation Plan: The 2013 awards granted under the cash long-term incentive compensation plan were granted on February 20, 2013 with respect to the 2013-2015 performance period. Awards under the cash long-term incentive compensation plan become payable based on the Company’s actual performance over a three-year measurement period in relation to pre-established performance goals. The performance goals for the 2013-2015 period are relative TSR and ROCE. Generally, participants in the cash long-term incentive compensation plan must remain employed through the end of the measurement period in order to receive payment of any earned award. However, if participants have at least 12 months of employment during a measurement period, such participants are eligible for a prorated benefit upon retirement (age 55 with 10 years of service), death or disability based on their base salary received and the period of time employed during the measurement period and payment, if any, is made at the end of the measurement period based upon actual performance results.

 

Additional detail regarding the 2013 awards granted under the cash long-term incentive compensation plan can be found in the “Compensation Discussion &Analysis — Components of Compensation — Long-Term Cash Incentive Compensation.”

 

Stock Awards under the 2005 Ownership Incentive Plan

 

RSUs were granted under the Company’s 2005 Ownership Incentive Plan on November 1, 2013. Vesting and settlement of RSUs generally occurs on the earlier of the fifth anniversary of the award date or the date the participant experiences a qualifying termination from employment with the Company. Upon a participant’s normal retirement (age 65) or termination due to death or disability, the RSUs will fully vest. If termination of the participant occurs within 24 months of a change in control of the Company for good reason or without cause (as defined in the RSU agreement for awards prior to January 1, 2012 and as defined in the 2012 Change in Control Plan for awards January 1, 2012 and later), the participant’s RSUs awarded become fully vested and will be

 

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distributed as soon as administratively possible, except where payment must be delayed for six months for key employees as required by Section 409A of the IRC. Upon early retirement eligibility (age 55 with 10 years of service), if a minimum of 12 months have elapsed since the award date, the participant becomes vested in a pro rata number of RSUs based on the number of whole months since the award date. The remaining shares subject to the RSUs will continue to vest with respect to 1/60 of the total number of shares subject to the award each month through the participant’s normal retirement date or, if sooner, the end of the vesting period. A participant does not have to terminate employment in order to vest upon normal or early retirement eligibility, but no RSUs will be distributed until actual termination or the fifth anniversary of the award date, if earlier. Dividend equivalents are paid on RSUs at the same rate and at the same time as the dividends paid to Company stockholders.

 

Outstanding Equity Awards at 2013 Fiscal Year-End

 

The following table provides information related to any equity-based awards outstanding as of December 31, 2013 for the Named Executive Officers:

 

Option Awards(1)

 

Stock Awards

 

 

 

Number of

 

Number of

 

 

 

 

 

 

 

 

 

 

 

Securities

 

Securities

 

 

 

 

 

 

 

 

 

 

 

Underlying

 

Underlying

 

 

 

 

 

Number of

 

Market Value of

 

 

 

Unexercised

 

Unexercised

 

Option

 

Option

 

Shares or Units

 

Shares or Units

 

 

 

Options

 

Options

 

Exercise

 

Expiration

 

of Stock that

 

of Stock that

 

Name

 

(#) Exercisable

 

(#) Unexercisable

 

Price

 

Date

 

Have Not Vested

 

Have Not Vested

 

 

 

 

 

 

 

($)

 

 

 

(#)(2)

 

($)(3)

 

Judy R. McReynolds

 

7,500

 

 

$ 29.1000

 

1/27/2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8,000(4)

 

$    269,440

 

 

 

 

 

 

 

 

 

 

 

14,600(5)

 

491,728

 

 

 

 

 

 

 

 

 

 

 

14,600(6)

 

491,728

 

 

 

 

 

 

 

 

 

 

 

16,500(7)

 

555,720

 

 

 

 

 

 

 

 

 

 

 

12,100(8)

 

407,528

 

Roy M. Slagle

 

 

 

 

 

 

 

 

 

533(4)

 

17,951

 

 

 

 

 

 

 

 

 

 

 

2,533(5)

 

85,311

 

 

 

 

 

 

 

 

 

 

 

3,733(6)

 

125,727

 

 

 

 

 

 

 

 

 

 

 

8,000(7)

 

269,440

 

 

 

 

 

 

 

 

 

 

 

8,800(8)

 

296,384

 

James W. Keenan

 

 

 

 

 

 

 

 

 

7,100(4)

 

239,128

 

 

 

 

 

 

 

 

 

 

 

7,100(5)

 

239,128

 

 

 

 

 

 

 

 

 

 

 

7,100(6)

 

239,128

 

 

 

 

 

 

 

 

 

 

 

9,000(7)

 

303,120

 

 

 

 

 

 

 

 

 

 

 

6,600(8)

 

222,288

 

Jim A. Ingram

 

 

 

 

 

 

 

 

 

7,100(4)

 

239,128

 

 

 

 

 

 

 

 

 

 

 

7,100(5)

 

239,128

 

 

 

 

 

 

 

 

 

 

 

7,100(6)

 

239,128

 

 

 

 

 

 

 

 

 

 

 

9,000(7)

 

303,120

 

 

 

 

 

 

 

 

 

 

 

7,300(8)

 

245,864

 

Michael E. Newcity

 

 

 

 

 

 

 

 

 

1,100(4)

 

37,048

 

 

 

 

 

 

 

 

 

 

 

7,500(5)

 

252,600

 

 

 

 

 

 

 

 

 

 

 

7,500(6)

 

252,600

 

 

 

 

 

 

 

 

 

 

 

8,500(7)

 

286,280

 

 

 

 

 

 

 

 

 

 

 

6,600(8)

 

222,288

 

 

(1)          All stock options previously granted are fully vested and (i) have an exercise price not less than the closing price of the Common Stock on the grant date, (ii) became exercisable with respect to 20% of total option shares each year, generally starting on the first anniversary of the grant date and (iii) are granted for a term of 10 years. Following a participant’s termination as a result of death, disability, normal retirement (age 65) or early retirement (age 55 with 10 years of service), a participant will have until the earlier of two years from the date of termination or the ten-year anniversary of the grant date to exercise stock options.

 

(2)          Vesting of RSUs generally occurs on the fifth anniversary of the award date, and settlement of RSUs generally occurs at that time or, if earlier, upon the award holder’s qualifying termination of employment. Upon a participant’s eligibility for normal retirement (age 65) or termination due to death or disability, RSUs generally will become vested in full. If termination of the participant occurs within 24 months of a change in control of the Company for good reason or without cause (as defined in the RSU agreements for awards prior to January 1, 2012 and as defined in the 2012 Change in Control Plan for awards January 1, 2012 and later), the participant’s RSUs awarded become fully vested and will be distributed as soon as administratively possible, except for RSUs where payment must be delayed for six months for key employees as required by

 

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Section 409A of the IRC. Upon early retirement (age 55 with 10 years of service), the participant is entitled to the vesting of a pro rata number of RSUs based on the number of whole months elapsed since the award date, if there has elapsed a minimum of twelve months since the award date. E