UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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Definitive Proxy Statement
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Soliciting Material Pursuant to §240.14a-12
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INTERNATIONAL SEAWAYS, INC.
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(Name of Registrant as Specified in Its Charter)
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INTERNATIONAL SEAWAYS, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JUNE 5, 2019
To the Stockholders of International Seaways, Inc.:
You are cordially invited to attend the Annual Meeting of Stockholders (the “Annual Meeting”) of International Seaways, Inc. (the “Company” or “INSW”), to be held at Club 101, Kenilworth Room, 101 Park Avenue, New York, New York, on Wednesday, June 5, 2019, at 2:00 P.M.
The meeting will be held for the following purposes:
| (1) | To elect nine directors, the names of whom are set forth in the accompanying Proxy Statement, to serve until the Company’s Annual Meeting in 2020; |
| (2) | To ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for 2019; |
| (3) | To approve, by advisory vote, the compensation of the Named Executive Officers for 2018 (as described in the accompanying Proxy Statement); and |
| (4) | To transact such other business as may properly be brought before the meeting. |
Stockholders of record at the close of business on April 10, 2019 are the only stockholders entitled to notice of, and to vote at, the Annual Meeting. The stockholders list will be open to the examination of stockholders for any purpose germane to the Annual Meeting, during ordinary business hours for ten days prior to the Annual Meeting, at the Company’s offices, 600 Third Avenue, 39th Floor, New York, New York.
We are utilizing the Securities and Exchange Commission rules that allow issuers to furnish certain proxy materials to their stockholders over the Internet. We believe these rules allow us to provide stockholders with the information they need, while lowering the costs of delivery and reducing the environmental impact of our Annual Meeting. If you received a printed copy of the materials, we have enclosed a copy of the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 with this notice and the accompanying Proxy Statement.
Your vote and that your shares be represented at the meeting are both very important. We urge you to vote as soon as possible by telephone, over the Internet or by marking, signing and returning your proxy or voting instruction card, even if you plan to attend the Annual Meeting in person. If you attend the meeting and wish to vote in person, you may withdraw your proxy and vote in person. Your prompt consideration is greatly appreciated.
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By order of the Board of Directors,
JAMES D. SMALL III |
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Chief Administrative Officer, Senior Vice President,
General Counsel and Secretary |
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New York, New York
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April 25, 2019
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IMPORTANT NOTICE REGARDING THE AVAILABILITY OF
PROXY MATERIALS FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 5, 2019
The Notice of Annual Meeting of Stockholders of the Company to be held on June 5, 2019, the Company’s Proxy Statement for the 2019 Annual Meeting of Stockholders and the Annual Report on Form 10-K for the fiscal year ended December 31, 2018 are available at http://www.intlseas.com/Docs.
INTERNATIONAL SEAWAYS, INC.
600 Third Avenue, 39th Floor
New York, New York 10016
PROXY STATEMENT
INFORMATION CONCERNING SOLICITATION AND VOTING
The accompanying proxy is solicited on behalf of the Board of Directors (the “Board”) of International Seaways, Inc. (the “Company” or “INSW”) for use at the Annual Meeting of Stockholders (the “Annual Meeting”) to be held on June 5, 2019 at 2:00 p.m. local time, or any adjournment or postponement thereof, for the purposes set forth herein and in the accompanying Notice of Annual Meeting of Stockholders. The Annual Meeting will be held at Club 101, Kenilworth Room, 101 Park Avenue, New York, New York.
Any stockholder giving a proxy may revoke it at any time before it is exercised at the meeting. This Proxy Statement and the accompanying proxy will first be sent to stockholders on or about April 25, 2019.
Record Date, Shares Outstanding and Voting
Only stockholders of record at the close of business on April 10, 2019 (the “record date”) will be entitled to vote at the Annual Meeting. As of the record date, the Company had one class of voting securities, its Common Stock, of which 29,222,068 shares were outstanding on the record date and entitled to one vote each (the “Common Stock”).
All shares represented by the accompanying proxy, if it is duly executed and received by the Company at or prior to the meeting, will be voted at the meeting in accordance with the instructions provided therein. If no instructions are provided, the proxy will be voted (1) FOR the election of directors, (2) FOR ratification of the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for 2019, and (3) FOR approval, in an advisory vote, of the compensation for 2018 of the executive officers named in the Summary Compensation Table in this Proxy Statement (each, a “Named Executive Officer” and collectively, the “NEOs”), as described in “Compensation Discussion and Analysis” section and in the accompanying compensation tables and narrative in this Proxy Statement.
Each of the election of directors and the ratification of the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for 2019 requires the affirmative vote (in person or by proxy) of a majority of the votes cast by the holders of the shares of Common Stock present in person or represented by proxy at the meeting and entitled to vote on the election of directors. The advisory vote on approval of the compensation to the NEOs for 2018 is non-binding, but the Board and the Human Resources and Compensation Committee (the “Compensation Committee”) will review the voting results in connection with their ongoing evaluation of the Company’s compensation program.
Your vote and that your shares be represented at the meeting are both very important. We urge you to vote as soon as possible by telephone, over the Internet or by marking, signing and returning your proxy or voting instruction card, even if you plan to attend the Annual Meeting in person.
Abstentions and broker non-votes will be counted for purposes of determining the presence or absence of a quorum. Abstentions will be counted in tabulations of the votes cast on each of the proposals presented at the Annual Meeting (and will have the same effect as “AGAINST” votes, except with respect to the election of directors where abstentions will not be counted), whereas broker “non-votes” will not be counted for purposes of determining the number of votes cast.
New York Stock Exchange (the “NYSE”) rules permit brokers to vote for routine matters such as the ratification of the appointment of Ernst & Young LLP without receiving instructions from the beneficial owner of
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the shares. NYSE rules prohibit brokers from voting on the election of directors, executive compensation, and other non-routine matters without receiving instructions from the beneficial owner of the shares. In the absence of instructions, the shares are viewed as being subject to “broker non-votes.” “Broker non-votes” will be counted for quorum purposes (as they are present and entitled to vote on the ratification of the appointment of Ernst & Young LLP) but will not affect the outcome of any other matter being voted upon at the Annual Meeting. Under current applicable rules, unless provided with voting instructions, a broker cannot vote shares of Common Stock for the election of directors, or on the advisory vote concerning the approval of the compensation of the NEOs for 2018.
As all of these matters are very important to the Company, we urge you to vote your shares by telephone, over the Internet or by marking, signing and returning your proxy or voting instruction card.
The cost of soliciting proxies for the meeting will be borne by the Company. The Company has retained Innisfree M&A Incorporated to assist with the solicitation of votes for a fee of $10,000 plus reimbursement of expenses, which will be paid by the Company. The Company will also reimburse brokers and others who are only record or nominee holders of the Company’s shares for their reasonable expenses incurred in obtaining voting instructions from beneficial owners. Directors and officers of the Company may solicit proxies personally or by telephone or facsimile, but will not receive additional compensation for doing so.
Proposals for 2020 Annual Meeting of Stockholders
Pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as amended (the “1934 Act”), any proposals of stockholders that are intended to be presented at the Company’s 2020 Annual Meeting of Stockholders must be received at the Company’s principal executive offices no later than December 31, 2019, and must comply with all other applicable legal requirements, in order to be included in the Company’s proxy statement and form of proxy for that meeting.
Stockholders who wish to propose a matter for action at the Company’s 2020 Annual Meeting of Stockholders (the “2020 Annual Meeting”), including the nomination of directors, but who do not wish to have a proposal or nomination included in the proxy statement for that meeting, must notify the Company in writing of the information required by the provisions of the Company’s Amended and Restated By-laws (the “By-laws”) dealing with stockholder proposals. The notice must be delivered to the Company’s Corporate Secretary between March 7, 2020 and April 6, 2020. Stockholders can obtain a copy of the By-laws on the Company’s website or by writing the Corporate Secretary at: Corporate Secretary, International Seaways, Inc., 600 Third Avenue, 39th Floor, New York, New York 10016.
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CORPORATE GOVERNANCE AND THE BOARD
Corporate Governance Principles. The Board believes that ethics and integrity cannot be legislated or mandated by directive or policy and that the ethics, character, integrity and values of the Company’s directors and senior management remain the most important safeguards in quality corporate governance. The business and affairs of the Company are managed under the direction of the Board in accordance with Marshall Islands law. The Board’s principal responsibilities are to provide direction, oversight and counsel to the Company’s management and to generally maximize the value of the Company for its stockholders.
Corporate Governance Guidelines. The Board has adopted Corporate Governance Guidelines to promote the effective functioning of the Board and its committees, to promote the interests of all stockholders, and to ensure a common set of expectations as to how the Board, its various committees, individual directors and management should perform their functions. The Corporate Governance Guidelines are posted on the Company’s website, which is www.intlseas.com, and are available in print upon request. That website and the information contained on that site, or connected to that site, are not incorporated by reference in this proxy statement.
Board Leadership Structure. The Corporate Governance Guidelines provide that the Board selects the CEO of the Company and may select a Chairman of the Board (the “Chairman”) in the manner it considers in the best interests of the Company. The Guidelines provide that if the Board determines that there should be a Chairman, he or she may be a non-management director or the CEO. The Company currently separates the role of CEO and Chairman.
The CEO and the Chairman are in frequent contact with one another and with senior management of the Company. They provide advice and recommendations to the full Board for the full Board’s consideration. They each review in advance the schedule of Board and committee meetings and establish the agenda for each Board meeting in order to ensure that the interests and requirements of the stockholders, the directors and other stakeholders are appropriately addressed. The Board believes that the existing leadership structure, with the current individuals in their positions, is in the best interests of stockholders.
The Board, primarily through its Governance Committee, periodically reviews the Company’s leadership structure to determine if it remains appropriate in light of the Company’s specific circumstances and needs, current corporate governance standards, market practices and other factors the Board considers relevant. The Board retains the right to combine the CEO and Chairman roles in the future if it determines that such a combination would be in the best interests of the Company and its stockholders.
Board Oversight of Risk Management. While the responsibility for management of the Company’s material risks lies with management of the Company, the Board provides oversight of risk management, directly and indirectly, through its committee structure. The Board performs this oversight role by using several different levels of review. The Board and the Governance Committee receive regular reports from key members of management responsible for specified areas of material non-financial risk to the Company. In addition, the Board reviews the risks associated with the Company’s strategic plan at an annual strategic planning session and periodically throughout the year as part of its consideration of the strategic direction of the Company.
At the committee level, the Audit Committee regularly reviews the financial statements and financial and other internal controls. Further, the Audit Committee meets in private sessions individually with certain members of management and with representatives of the internal auditors and the independent registered public accounting firm at the conclusion of every regularly scheduled meeting, where aspects of financial risk management are discussed as necessary. The Governance Committee manages risk associated with Board independence, corporate governance and potential conflicts of interest as well as oversight over non-financial risk assessments associated with the Company’s operations. The Compensation Committee annually reviews executive compensation policies and practices and employee benefits, and associated risks. Both the Audit Committee and the Compensation Committee also rely on the advice and counsel of the Company’s independent registered public accountants and independent compensation consultants, respectively, to raise awareness of any risk issues that may arise during their regular review of the Company’s financial statements, audit work and executive compensation policies and practices, as applicable.
Managing risk is an ongoing process inherent in all decisions made by management. The Company has an enterprise risk management program that is designed to ensure that risks are taken knowingly and purposefully.
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Management is responsible for assessing all the risks and related mitigation strategies for all material projects and initiatives of the Company prior to being submitted for consideration by the Board.
Environmental, Social and Governance Initiatives. The Board engages in regular discussions relating to environmental matters and INSW’s response to climate change-related risks and opportunities. The Company’s management team, led by the Chief Executive Officer, has the day-to-day responsibility to execute the action plans as approved by the Board of Directors. The Company is committed to environmental, social and governance (“ESG”) practices as a part of its core culture. Accordingly, INSW strives to meet, and when possible and appropriate, exceed minimum compliance levels for all applicable rules and regulations governing the maritime industry, as described in greater detail in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 (the “2018 Annual Report”). The Company’s governance, strategy, risk management and performance monitoring efforts in this area are evolving and will continue to do so over time.
INSW recognizes that greenhouse gas (“GHG”) emissions, which are largely caused by burning fossil fuels, contribute to the warming of the global climate system. The tanker industry, which is heavily dependent on the burning of fossil fuels, faces the dual challenge of reducing its carbon footprint by transitioning to the use of low-carbon fuels while extending the economic and social benefits of delivering energy to consumers across the globe. The Company welcomes and supports efforts, such as those led by the Task Force on Climate-related Financial Disclosures (“TCFD”), to increase transparency and to promote investors’ understanding of how INSW and its industry peers are addressing the climate change-related risks and opportunities particular to the industry in which the Company operates.
Independence. Under the Corporate Governance Guidelines, which incorporate standards established by the NYSE, the Board must consist of a majority of independent directors. As determined by the Board, as of the date of this Proxy Statement, all of the nominees other than Mr. Ian T. Blackley and Ms. Lois K. Zabrocky have been determined to be independent under the Corporate Governance Guidelines for purposes of service on the Board, because no relationship was identified that would automatically bar any of them from being characterized as independent, and any relationships identified were not so material as to impair their independence. In addition, the Board has determined that all of the nominees other than Messrs. Blackley and Kronsberg and Ms. Zabrocky are independent for purposes of serving on the Audit Committee.
The Board annually reviews relationships that directors may have with the Company to make a determination of whether there are any material relationships that would preclude a director from being independent. See “— Related Party Transactions” below.
Executive Sessions of the Board. To ensure free and open discussion and communication among the non-management directors, the Corporate Governance Guidelines provide that non-management directors meet in executive session at the time of each regular meeting of the Board; at least one of such executive sessions shall exclude non-management directors who do not qualify as independent. In accordance with the Guidelines, the nonexecutive Chairman of the Board chairs the executive sessions. Any non-management director can request that an additional executive session be scheduled.
Meetings of the Board. The Board held 14 meetings during 2018. Each director attended at least 75% of the total number of meetings of the Board and Board committees of which the director was a member. Under the Corporate Governance Guidelines, each director is expected to attend all Board meetings and all meetings of committees of which the director is a member. Meeting materials are provided to Board and Committee members prior to meetings, and members are expected to review such materials prior to each meeting.
Annual Meetings of Stockholders. Directors are not required, but are strongly encouraged, to attend the Annual Meeting of Stockholders in person or telephonically. All of the current directors attended the Annual Meeting of Stockholders in 2018.
Communications with Board Members. Interested parties, including stockholders, may communicate with any director, with the nonexecutive Chairman of the Board or with the non-management directors as a group by sending a letter to the attention of such director, the nonexecutive Chairman of the Board or such non-management directors as a group, as the case may be, in care of the Company’s Corporate Secretary, 600 Third Avenue, 39th Floor, New York, New York 10016. The Corporate Secretary opens and forwards all such correspondence (other than advertisements and other solicitations) to directors unless the director to whom the
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correspondence is addressed has requested that the Corporate Secretary forward correspondence unopened. Unless the context otherwise requires, the Corporate Secretary will provide any communication addressed to the Board to the director most closely associated with the nature of the request based on Committee membership and other factors.
Code of Business Conduct and Ethics. The Company has adopted a Code of Business Conduct and Ethics which is an integral part of the Company’s business conduct compliance program and embodies the commitment of the Company and its subsidiaries to conduct operations in accordance with the highest legal and ethical standards. The Code of Business Conduct and Ethics applies to all of the Company’s officers, directors and employees. Each is responsible for understanding and complying with the Code of Business Conduct and Ethics. The Company also has an Insider Trading Policy which prohibits the Company’s directors and employees from purchasing or selling securities of the Company while in possession of material nonpublic information or otherwise using such information for their personal benefit. The Insider Trading Policy also prohibits the Company’s directors and employees from hedging or pledging their ownership of securities of the Company. In addition, the Company has an Anti-Bribery and Corruption Policy which memorializes the Company’s commitment to adhere faithfully to both the letter and spirit of all applicable anti-bribery legislation in the conduct of the Company’s business activities worldwide. The Code of Business Conduct and Ethics, the Insider Trading Policy and the Anti-Bribery and Corruption Policy are posted on the Company’s website and are available in print upon request.
Other Directorships and Significant Activities. The Company values the experience directors bring from other boards of directors on which they serve, but recognizes that those boards also present significant demands on a director’s time and availability and may present conflicts and legal issues. The Corporate Governance Guidelines provide that non-management directors refrain from serving on the boards of directors of more than four publicly-traded companies (other than the Company or a company in which the Company has a significant equity interest) absent special circumstances. A member of the Audit Committee may not serve on more than two other audit committees of publicly-traded companies.
The Corporate Governance Guidelines require the CEO and other members of senior management, whether or not they are members of the Board of the Company, to receive the approval of the Governance Committee before accepting outside board membership. The Corporate Governance Guidelines prohibit the CEO from serving on the board of directors of more than one publicly-traded company (other than the Company or a company in which the Company has a significant equity interest).
If a director’s principal occupation or business association changes substantially during the director’s tenure as a member of the Board, that director is required by the Corporate Governance Guidelines to inform the Chairman of the Governance Committee of the change and offer to resign from the Board. In such case, such Committee must recommend to the Board the action, if any, to be taken with respect to the offer of resignation, taking into account the appropriateness of continued Board membership.
Related party transactions may present potential or actual conflicts of interest and create the appearance that Company decisions are based on considerations other than the best interests of the Company and its stockholders. The Company’s Code of Business Conduct and Ethics requires all directors, officers and employees who may have a potential or apparent conflict of interest to disclose fully all the relevant facts to the Company’s legal department. In addition to this reporting requirement, in order to identify related party transactions, each year the Company requires its directors and executive officers to complete Director and Officer questionnaires identifying any transactions with the Company in which the director or officer has an interest. Management and the legal department review the terms of all related party transactions, and management reports to the Board on all proposed related party transactions with directors and executive officers. Upon the presentation of a proposed related party transaction to the Board, the related party (if such related party is a director) is excused from participation and voting on the matter. In deciding whether to approve the related party transaction, the Board determines whether the transaction is on terms that could be obtained in an arm’s length transaction with an unrelated third party. If the related party transaction is not on such terms, it will not be approved.
The Company entered into several related party transactions in 2016 with OSG, the former parent corporation of the Company. These transactions are described in Note 12, “Related Parties,” to the audited financial statements of the Company for 2018 included in the 2018 Annual Report.
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The Company has three standing committees of its Board: the Audit Committee, the Governance Committee and the Compensation Committee. Each of the Board committee has a charter that is posted on the Company’s website and is available in print upon request.
Audit Committee. The Audit Committee is required to have no fewer than three members all of whom must be and are independent directors under the standards set forth in the Company’s Corporate Governance Guidelines. During 2018, the Audit Committee consisted of Messrs. Gregory A. Wright (Chairman) and David I. Greenberg and Ms. Randee E. Day. The Board has previously determined that Mr. Wright and Ms. Day are audit committee financial experts, as defined by rules of the Securities and Exchange Commission (the “SEC”) and NYSE. The Audit Committee met five times in 2018.
The Audit Committee oversees the Company’s accounting, financial reporting process, internal controls and audits and consults with management, internal auditors and the Company’s independent registered public accounting firm on, among other things, matters related to the annual audit, and published financial statements and the accounting principles applied, and the oversight of financial risk assessments associated with the Company’s operations. As part of its duties, the Audit Committee appoints and retains the Company’s independent registered public accounting firm, subject to stockholder ratification (though the stockholder vote is not binding on the Audit Committee, and the Audit Committee may in its sole discretion terminate the engagement of the firm and direct the appointment of another independent auditor at any time during the year if it determines that such an appointment would be in the best interests of the Company and its stockholders).
The Audit Committee maintains direct responsibility for the compensation and oversight of the Company’s independent registered public accounting firm and evaluates the independent registered public accounting firm’s qualifications, performance and independence. The Audit Committee has established policies and procedures for the pre-approval of all services provided by the Company’s independent registered public accounting firm.
Governance Committee. The Governance Committee is required to have no fewer than three members, all of whom must be and are independent directors under the standards set forth in the Company’s Corporate Governance Guidelines. During 2018, the Governance Committee consisted of David I. Greenberg (Chairman), Timothy J. Bernlohr, and Gregory A. Wright. The Governance Committee met five times in 2018.
The Governance Committee assists the Board by identifying and recommending individuals qualified to become Board members to the Board for nomination at the next annual stockholder meeting. It develops and recommends to the Board the establishment of the Company’s corporate governance guidelines, and it provides oversight over non-financial risk assessments associated with the Company’s operations. The Governance Committee’s risk assessment responsibilities include oversight of the Company’s quality of services, the Company’s vessels’ adherence to environmental and regulatory requirements, and an assessment of the scope and amount of the Company’s insurance coverage. The Governance Committee also meets with the General Counsel (in his capacity as compliance officer) in executive session from time to time as needed. As part of its duties, the Governance Committee also aids the Board by providing a review of the Board performance on an annual basis.
The Governance Committee evaluates prospective nominees identified on its own initiative or referred to it by other Board members, management, stockholders or external sources and all self-nominated candidates. The Governance Committee uses the same criteria for evaluating candidates nominated by stockholders and self-nominated candidates as it does for those proposed by other Board members, management and search consultants.
The Governance Committee considers the following criteria for identifying and recommending qualified candidates for membership on the Board, seeking to maintain within these criteria appropriate diversity of individuals on the basis of gender, ethnic heritage, international background and life experiences:
| • | judgment, character, age, integrity, expertise, tenure on the Board, skills and knowledge useful to the oversight of the Company’s business; |
| • | status as “independent” or an “audit committee financial expert” or “financially literate” as defined by the NYSE or the SEC; |
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| • | high level managerial, business or other relevant experience, including, but not limited to, experience in the industries in which the Company operates, and, if the candidate is an existing member of the Board, any change in the member’s principal occupation or business associations; |
| • | absence of conflicts of interest with the Company; and |
| • | ability and willingness of the candidate to spend a sufficient amount of time and energy in furtherance of Board matters. |
As part of its annual assessment of Board size, structure and composition, the Governance Committee evaluates the extent to which the Board as a whole satisfies the foregoing criteria. The Governance Committee believes that the current directors have the requisite character, integrity, expertise, skills, and knowledge to oversee the Company’s business in the best interests of the Company’s stockholders and does not believe at this time that the long-term goal of greater Board diversity is sufficient to merit replacing existing directors.
All the director nominees named in this Proxy Statement have been evaluated under the criteria set forth above and recommended by the Governance Committee to the full Board for election by stockholders at the Annual Meeting. The entire Board recommends that stockholders elect all nominees. All director nominees for election at the Annual Meeting were previously elected to the Board by the stockholders at the Annual Meeting of Stockholders in 2018.
A stockholder may recommend a person as a nominee for director by writing to the Corporate Secretary of the Company.
Recommendations must be received by December 31, 2019 in order for a candidate to be considered for election at the 2020 Annual Meeting. Each recommendation for nomination should contain the following information: (a) the name and address of the stockholder who intends to make the nomination and of the person or persons to be nominated; (b) a representation that the stockholder is a holder of record of stock of the Company entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; (c) a description of all arrangements or understandings between the stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the stockholder; (d) such other information regarding each nominee proposed by such stockholder as would have been required to be included in a proxy statement filed pursuant to the proxy rules of the SEC had such nominee been nominated, or intended to be nominated, by the Board; and (e) the consent of each nominee to serve as a director of the Company if so elected.
Compensation Committee. The Compensation Committee is required to have no fewer than three members, all of whom must be and are independent directors under the standards set forth in the Company’s Corporate Governance Guidelines. During 2018, the Compensation Committee consisted of Timothy J. Bernlohr (Chairman), Randee E. Day and Ty E. Wallach. The Compensation Committee met six times in 2018.
The Compensation Committee establishes, oversees, and carries out the Company’s compensation philosophy and strategy. It implements the Board responsibilities relating to compensation of the Company’s executive officers, and ensures that the Company’s officers and senior executives are compensated in a manner consistent with the Company’s philosophy and competitive with its peers. As part of its duties, it monitors and oversees the preparation of the Company’s annual Compensation Discussion and Analysis for inclusion in the annual proxy statement, prepares an annual report on executive compensation, and provides guidance with respect to other compensation matters including recommendations for the CEO and the other NEOs.
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OWNERSHIP OF COMMON STOCK BY DIRECTORS, EXECUTIVE OFFICERS
AND CERTAIN OTHER BENEFICIAL OWNERS
The tables below set forth certain beneficial ownership information with respect to certain individuals and stockholders. Except as disclosed in the notes to these tables and subject to applicable community property laws, the Company believes that each beneficial owner identified in the table possesses sole voting and investment power over all Common Stock shown as beneficially owned by the beneficial owner.
Beneficial ownership for the purposes of the following tables is determined in accordance with the rules and regulations of the SEC. Those rules generally provide that a person is the beneficial owner of shares if such person has or shares the power to vote or direct the voting of shares, or to dispose or direct the disposition of shares or has the right to acquire such powers within 60 days. For purposes of calculating each person’s percentage ownership, shares of Common Stock issuable pursuant to options exercisable within 60 days (including out of the money options) are included as outstanding and beneficially owned for that person, but are not deemed outstanding for the purposes of computing the percentage ownership of any other person. The percentage of beneficial ownership is based on 29,222,068 shares of the Company’s Common Stock outstanding as of the record date (April 10, 2019), and excludes any treasury stock.
Directors and Executive Officers
The table below sets forth information as to each director, director nominee and Named Executive Officer listed in the Summary Compensation Table in this Proxy Statement, and includes the amount and percentage of the Company’s Common Stock of which each director, director nominee, each Named Executive Officer, and all directors, directors nominees and executive officers as a group, was the “beneficial owner” (as defined in regulations of the SEC) on the record date, all as reported to the Company. The address of each person identified below as of the date of this Proxy Statement is c/o International Seaways, Inc., 600 Third Avenue, 39th Floor, New York, New York 10016.
Shares of Common Stock Beneficially Owned(1) |
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Name |
Number |
Percentage |
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Directors/Nominees |
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Doug Wheat |
37,577 | (2) |
0.1 | % |
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Timothy J. Bernlohr |
20,635 | (3) |
* |
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Randee E. Day |
8,006 | (3) |
* |
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David I. Greenberg |
10,362 | (3) |
* |
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Ian T. Blackley |
18,679 | (3) |
* |
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Joseph I. Kronsberg(4) |
— | * |
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Ty E. Wallach |
4,544 | (5) |
* |
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Gregory A. Wright |
20,635 | (3) |
* |
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Lois K. Zabrocky |
94,235 | (6) |
0.3 | % |
||
Named Executive Officers (other than Ms. Zabrocky who is listed above with the other Directors/Nominees) |
||||||
Jeffrey D. Pribor |
94,279 | (7) |
0.3 | % |
||
James D. Small III |
139,727 | (8) |
0.5 | % |
||
Derek G. Solon |
11,848 | (9) |
* |
|||
William F. Nugent |
11,414 | (10) |
* |
|||
All Directors, Director Nominees and Executive Officers as a Group (14 Persons) |
477,171 | (11) |
1.6 | % |
||
| * | Less than 0.1% |
| (1) | Includes shares of Common Stock issuable within 60 days of the record date upon the exercise of options owned by the indicated stockholders on that date. |
| (2) | Includes 10,737 shares of Common Stock that vest on May 24, 2019, the anniversary of the 2018 Annual Meeting of Stockholders. |
| (3) | Includes 5,370 shares of Common Stock that vest on May 24, 2019, the anniversary of the 2018 Annual Meeting of Stockholders. |
| (4) | Mr. Kronsberg is an employee of Cyrus Capital Partners, L.P. (“CCP”) which beneficially owns 4,017,582 shares of Common Stock, including 14,006 shares which were granted by the Company to CCP under the Company’s non-Employee Director Incentive Compensation Plan (of which 5,370 shares vest on May 24, 2019, the anniversary of the 2018 Annual Meeting of Stockholders). The |
8
grant was made to CCP pursuant to agreements between CCP and Mr. Kronsberg under which CCP is required to receive all compensation in connection with Mr. Kronsberg’s directorship. Mr. Kronsberg disclaims beneficial ownership of all Company securities held by CCP except to the extent of his pecuniary interest therein, if any.
| (5) | These 4,544 shares of Common Stock all vest on May 24, 2019, the anniversary of the 2018 Annual Meeting of Stockholders. |
| (6) | Includes 70,163 shares issuable upon the exercise of options. |
| (7) | Includes 74,287 shares issuable upon the exercise of options. |
| (8) | Includes 103,483 shares issuable upon the exercise of options. |
| (9) | Includes 6,249 shares issuable upon the exercise of options. |
| (10) | Includes 5,947 shares issuable upon the exercise of options. |
| (11) | Includes 263,864 shares issuable upon the exercise of options. |
Set forth below is information regarding stockholders of the Company’s Common Stock that are known by the Company to have been “beneficial owners” (as defined in regulations of the SEC) of 5% or more of the outstanding shares of the Common Stock as of the record date. The information with respect to beneficial ownership by the identified stockholders was prepared based on information supplied by such stockholders in their filings with the SEC.
Shares of Common Stock Beneficially Owned* |
||||||
Name |
Number |
Percentage |
||||
BlackRock, Inc.(1) |
1,616,320 | 5.5 | % |
|||
Cobas Asset Management, SGIIC, SA(2) |
4,288,360 | 14.7 | % |
|||
Cyrus Funds(3) |
4,017,582 | 13.7 | % |
|||
Dimensional Fund Advisors LP(4) |
1,539,150 | 5.3 | % |
|||
Donald Smith & Co., Inc.(5) |
2,545,533 | 8.7 | % |
|||
Paulson Funds(6) |
2,019,327 | 6.9 | % |
|||
The Vanguard Group(7) |
1,589,274 | 5.4 | % |
|||
| * | Unless otherwise stated in the notes to this table, the share and percentage ownership information presented is as of the record date. |
| (1) | Based on a Schedule 13G filed on February 4, 2019 with the SEC by BlackRock, Inc. (“BlackRock”) with respect to the beneficial ownership of 1,616,320 shares of Common Stock as of December 31, 2018 by BlackRock and certain of its subsidiaries. The address of BlackRock is 55 East 52nd Street, New York, New York 10055. |
| (2) | Based on a Schedule 13G filed on February 13, 2019 with the SEC by Cobas Asset Management, SGIIC, SA (“Cobas”) with respect to the beneficial ownership of 4,288,360 shares of Common Stock as of December 31, 2018 by Cobas. The address of Cobas is Jose Abascal, 45 St. 28003 Madrid, Spain. |
| (3) | Based on a Schedule 13D filed on December 9, 2016 and a Form 4 filed on May 30, 2018 with the SEC by Cyrus Capital Partners, L.P. (“CCP”) with respect to beneficial ownership of 4,017,582 shares by each of CCP and Cyrus Capital Partners GP, L.L.C. (“CCPGP”) as of May 25, 2018 of which 14,006 were granted to CCP pursuant to agreements between CCP and Mr. Joseph Kronsberg relating to the Company’s non-Employee Director Incentive Compensation Plan (of which 5,370 shares vest on May 24, 2019, the anniversary of the 2018 Annual Meeting of Stockholders). As the (i) principal of CCP and (ii) principal of Cyrus Capital Partners GP, L.L.C., the general partner of CCP, Stephen C. Freidheim (“Freidheim”) may be deemed the beneficial owner of 4,017,582 shares of Common Stock. The address of each of CCP, CCPGP and Freidheim is 65 East 55th Street, 39 Floor, New York, NY 10022. |
| (4) | Based on a Schedule 13G filed on February 8, 2019 with the SEC by Dimensional Fund Advisors LP (“Dimensional”) with respect to the beneficial ownership of 1,539,150 shares of Common Stock as of December 31, 2018 by Dimensional. Dimensional is an investment advisor registered under section 203 of the Investment Advisors Act of 1940 and furnishes investment advice to four investment companies registered under the Investment Company Act of 1940 and serves as investment manager or sub-advisor to certain other commingled funds, group trusts and separate accounts (such investment companies, trusts and accounts are referred to as the “Funds”). The Funds own all the shares of the Common Stock that are reported to be beneficially owned by Dimensional. The business address of Dimensional is Building One, 6300 Bee Cave Road, Austin, Texas 78746. |
| (5) | Based on a Schedule 13G filed on February 8, 2019 with the SEC by Donald Smith & Co., Inc. (“DS”) with respect to the beneficial ownership of 2,545,533 shares of Common Stock as of December 31,2018 by DS and one of its subsidiaries and Jon Hartsel, an individual. The address of DS, its subsidiary and Jon Hartsel is 152 West 57th Street, New York, New York 10019. |
| (6) | Based on a Schedule 13D filed on March 22, 2019 with the SEC by Paulson & Co. Inc. (“Paulson”) with respect to beneficial ownership of 2,019,327 shares by Paulson as of March 20, 2019. Paulson is an investment advisor that is registered under the Investment Advisors Act of 1940 and furnishes investment advice to, and manages, funds which in the aggregate held or owned 2,019,327 shares of Common Stock as of the filing date. The address of Paulson is 1133 Avenue of the Americas, 33rd Floor, New York, NY 10036. |
| (7) | Based on a Schedule 13G filed on February 13, 2019 with the SEC by The Vanguard Group (“Vanguard”) with respect to the beneficial ownership of 1,589,274 shares of Common Stock as of December 31, 2018 by Vanguard and two of its subsidiaries. The address of Vanguard and its subsidiaries is 100 Vanguard Blvd., Malvern, Pennsylvania 19355. |
9
Section 16(a) Beneficial Ownership Reporting Compliance
Under the securities laws of the United States, the Company’s directors, executive officers and any persons holding more than 10 percent of the Company’s common stock are required to report their ownership of common stock and any changes in that ownership, on a timely basis, to the SEC. Directors, executive officers and beneficial owners of more than 10% of the common stock are also required to furnish the Company with copies of all Section 16(a) reports that they file with the SEC. Based on material provided to the Company, all such reports were filed on a timely basis in 2018, except (1) Paulson & Co. Inc. filed late reports disclosing the sale of shares with respect to six dates and (2) various corrective amendments were filed during the year.
10
ELECTION OF DIRECTORS (PROPOSAL NO. 1)
The nine nominees for election at the forthcoming meeting, all of whom are current directors of the Company, are listed below. These nominees were selected by the Board upon the recommendation of the Corporate Governance and Risk Assessment Committee (the “Governance Committee”). Unless otherwise directed, the proxy will be voted for the election of these nominees, to serve until the 2020 Annual Meeting and until their successors are elected and qualify.
|
Name (age)
|
Business Experience during the Past Five Years and Other
Information |
Director
Since |
|
Doug Wheat (68)
|
Mr. Wheat has served as Chairman of the Board of the Company since November 30, 2016. He is currently the Managing Partner of Wheat Investments, a private investment firm. From 2007 to 2016, he was the founding and Managing Partner of the private equity company Southlake Equity Group. From 1992 until 2006, Mr. Wheat was President of Haas Wheat & Partners (“Haas Wheat”). Prior to the formation of Haas Wheat, Mr. Wheat was a founding member of the merchant banking group at Donaldson, Lufkin & Jenrette where he specialized in leveraged buyout financing. From 1974 to 1984, Mr. Wheat practiced corporate and securities law in Dallas, Texas. Mr. Wheat is currently the Chairman of the Board of Directors of Overseas Shipholding Group, Inc. (“OSG”) (the former parent corporation of the Company – ticker: “OSG”) and is also the Chairman of the board of directors of AMN Healthcare Services, Inc. (“AMN”) (ticker: “AMN”). He has been a director of AMN since 1999, becoming Chairman in 2007. He previously served as Vice Chairman of Dex Media, Inc. and served as Chairman of SuperMedia prior to its merger with Dex One. Mr. Wheat has also previously served as a member of the board of directors of several other companies including among others: Playtex Products (of which he also served as Chairman); Dr. Pepper/Seven-Up Companies, Inc.; Dr. Pepper Bottling of the Southwest, Inc.; Walls Industries, Inc.; Alliance Imaging, Inc.; Thermadyne Industries, Inc.; Sybron International Corporation; Nebraska Book Corporation; ALC Communications Corporation; Mother’s Cookies, Inc.; and Stella Cheese Company. Mr. Wheat received both his Juris Doctor and Bachelor of Science degrees from the University of Kansas. Mr. Wheat’s finance and legal expertise and experience serving on numerous boards of directors make him a valuable asset to the Board.
|
2016
|
|
|
|
|
|
Timothy J. Bernlohr (60)
|
Mr. Bernlohr is the Founder and Managing Member of TJB Management Consulting, LLC since 2005, which company specializes in providing project specific consulting services to businesses in transformation, including restructurings, interim executive management and strategic planning services. He is also the former President and Chief Executive Officer of RBX Industries, Inc. (“RBX”), which was a nationally recognized leader in the design, manufacture and marketing of rubber and plastic materials to the automotive, construction and industrial markets. Prior to joining RBX in 1997, Mr. Bernlohr spent 16 years in the International and Industry Products division of Armstrong World Industries, where he served in a variety of management positions. Mr. Bernlohr currently serves as a director and the Chairman of the Audit Committee of Atlas Air Worldwide Holdings, Inc. (ticker: “AAWW”); Chairman of the Board of Directors of Skyline Champion Corporation (ticker: “SKY”); and a director and the Chairman of the Compensation Committee of WestRock Company (“WRK”) (ticker: “WRK”). Within the past five years, Mr. Bernlohr
|
2016
|
11
|
Name (age)
|
Business Experience during the Past Five Years and Other
Information |
Director
Since |
|
|
served as an independent director of the following publicly-held companies: Chemtura Corporation; Rock-Tenn Company (a predecessor of WRK); Cash Store Financial Services, Inc.; and OSG (the former parent corporation of the Company – ticker: “OSG”). Mr. Bernlohr is a graduate of Pennsylvania State University. Mr. Bernlohr’s experience serving as a chief executive of an international manufacturing company and his varied directorship positions make him a valuable asset to the Board.
|
|
|
|
|
|
|
Ian T. Blackley (64)
|
Mr. Blackley was the President and Chief Executive Officer of OSG (the former parent corporation of the Company – ticker: “OSG”) from January 2015 until his retirement in December 2016. From September 2014 until November 2016, he was the Senior Vice President and Chief Financial Officer of the Company. After joining OSG in 1991, Mr. Blackley held numerous operating and financial positions. Prior to his election as President and Chief Executive Officer of OSG, Mr. Blackley served as Executive Vice President and Chief Operating Officer of OSG from December 19, 2014. Mr. Blackley served as Senior Vice President from May 2009 through December 2014, as Chief Financial Officer from April 2013 through December 2014, and Head of International Shipping from January 2009 through April 2013. Mr. Blackley also served as Managing Director and Chief Operating Officer of OSG Ship Management (UK) Ltd. from September 2005 through April 2013. Mr. Blackley began his seagoing career in 1971, serving as a captain from 1987 to 1991. He holds a diploma in Nautical Science from Glasgow College of Nautical Studies and a Master Mariner Class I license. He served as a Director of the Company from July 2013 through November 30, 2016, during which time the Company was a wholly-owned subsidiary of OSG, and is also a former director of OSG. Mr. Blackley also serves on the board of Gard P. & I. (Bermuda) Ltd. Mr. Blackley’s extensive experience both with the shipping industry generally and the Company in particular make him a valuable asset to the Board.
|
2013
|
|
|
|
|
|
Randee E. Day (71)
|
Ms. Day is President and Chief Executive Officer of Day & Partners, LLC, a maritime consulting and advisory company and a senior advisor to a full-service restructuring firm, Goldin Associates LLC. Prior to founding Day & Partners, LLC in 2011, Ms. Day served as interim Chief Executive Officer of DHT Maritime, Inc. Previously, Ms. Day was Managing Director at the Seabury Group, a transportation advisory firm, and the Division Head of JP Morgan’s shipping group in New York. Ms. Day is a director of Eagle Bulk Shipping Inc. (ticker: “EGLE”), an owner and operator of dry bulk vessels, and is Chairman of its Corporate Governance Committee and a member of its Audit Committee, and is a director of Tidewater, Inc. (ticker: “TDW”), an owner and operator of offshore support vessels. She is a former director of DHT Maritime, Inc., TBS International, Inc., Ocean Rig ASA and Excel Maritime Carriers Inc. Ms. Day is a graduate of the School of International Relations at the University of Southern California and did graduate studies at George Washington University. Ms. Day also is a graduate of the Senior Executives in National and International Security Program at the Kennedy School at Harvard University. Ms. Day’s
|
2016
|
12
|
Name (age)
|
Business Experience during the Past Five Years and Other
Information |
Director
Since |
|
|
extensive experience in the shipping industry make her a valuable asset to the Board.
|
|
|
|
|
|
|
David I. Greenberg (65)
|
Mr. Greenberg is Special Advisor (and from 2008 through 2016 was a member of the Executive Committee) for LRN Corporation, which advises global companies on governance, ethics, compliance, culture and strategy issues. For 20 years prior to 2008, Mr. Greenberg served in various senior positions at Altria Group, Inc. then the parent company of Phillip Morris USA, Phillip Morris International, Kraft Foods and Miller Brewing — culminating in his role as Senior Vice President, Chief Compliance Officer and a member of the Corporate Management Committee. Mr. Greenberg is a managing director of Cortina Partners LLC, a private equity firm that invests in and manages companies in the textile, health care, communications, and medical transportation and bedding industries, and is the Chief Executive Officer of Acqua Recovery, a residential drug and alcohol treatment center outside of Park City Utah. Earlier in his career, Mr. Greenberg was a partner in the Washington, D.C. law firm of Arnold & Porter. He attended Williams College and has Juris Doctor and Master of Business Administration degrees from the University of Chicago. Mr. Greenberg’s investment and legal experience, particularly with respect to governance-related matters, make him a valuable asset to the Board.
|
2017
|
|
|
|
|
|
Joseph I. Kronsberg (36)
|
Mr. Kronsberg has served in various roles at Cyrus Capital Partners, L.P. since 2006, and he is currently a Partner responsible for certain investments in the financial, shipping and energy sectors. Previously, Mr. Kronsberg worked at Greenhill & Co. as a generalist in its Mergers & Acquisitions and Restructuring departments. He currently serves as a director of OSG (the former parent corporation of the Company – ticker: “OSG”). Mr. Kronsberg has a Bachelor of Science degree in Economics from the Wharton School of the University of Pennsylvania where he graduated summa cum laude. Mr. Kronsberg’s substantial financial expertise and experience in investment management make him a valuable asset to the Board.
|
2016
|
|
|
|
|
|
Ty E. Wallach (47)
|
Until July 2018, Mr. Wallach was a Partner at Paulson & Co. Inc. (“Paulson”) and a Co-Portfolio Manager at Paulson’s credit funds. While at Paulson, he led numerous investments in the debt and equity of distressed and leveraged companies. Prior to joining Paulson, Mr. Wallach was a Partner and Managing Director at Oak Hill Advisors, serving most recently as Co-Head of European Investments. He currently serves on the board of directors of OSG (the former parent corporation of the Company – ticker: “OSG”), as well as on the boards of two non-profit organizations, Focus for a Future Inc. and New Heights Youth, Inc. Mr. Wallach is a graduate of Princeton University. Mr. Wallach’s substantial financial and investment experience make him a valuable asset to the Board.
|
2016
|
|
|
|
|
|
Gregory A. Wright (69)
|
Mr. Wright co-founded One Cypress Energy LLC in 2011 and has served as its Chief Financial Officer since inception. Mr. Wright is the former Chief Financial Officer and Chief Administrative Officer of Tesoro Corporation. Mr. Wright worked for Tesoro from 1995 until his
|
2016
|
13
|
Name (age)
|
Business Experience during the Past Five Years and Other
Information |
Director
Since |
|
|
retirement in 2010, leading the company from a small exploration and production company into the third largest independent refining and marketing company in the United States. Prior to joining Tesoro, Mr. Wright worked for Valero Energy Corporation for 14 years in various positions, including Vice President of Finance, Vice President of Business Development, Vice President of Planning and Vice President of Investor Relations. Prior to joining Valero, he worked for nine years for Columbia Gas Systems Inc. in various positions in accounting, budgeting and corporate planning. Mr. Wright is a former director of OSG (the former parent corporation of the Company – ticker: “OSG”). He graduated from The Ohio State University with a Bachelor of Business Administration in accounting and received his Masters of Business Administration with a concentration in finance from the University of Delaware. Mr. Wright’s extensive financial leadership experience and accounting expertise make him a valuable asset to the Board.
|
|
|
|
|
|
|
Lois K. Zabrocky (49)
|
Ms. Zabrocky has been the President and Chief Executive Officer (“CEO”) of the Company since the spin-off of the Company from OSG (the former parent corporation of the Company – ticker “OSG”) on November 30, 2016 and was President of the Company from August 2014. Prior to the spin-off, Ms. Zabrocky served as Senior Vice President and Head of the International Flag Strategic Business Unit of OSG with responsibility for the strategic plan and profit and loss performance of OSG’s international tanker fleet comprised of 50 vessels and approximately 300 shoreside staff. Ms. Zabrocky served in various roles during her more than 25 years at OSG. She served as Senior Vice President of OSG from June 2008 through August 2014, when she was appointed as Co-President of OSG and Head of the International Flag Strategic Business Unit of OSG. Ms. Zabrocky served as Chief Commercial Officer, International Flag Strategic Business Unit of OSG from May 2011 until her appointment as Head of International Flag Strategic Business Unit and as the Head of International Product Carrier and Gas Strategic Business Unit for at least four years prior to May 2011. She served as a director of the Company from November 2011 through November 2016 during which time the Company was a wholly-owned subsidiary of OSG. Ms. Zabrocky holds a Bachelor of Science degree from the United States Merchant Marine Academy and holds a Third Mate’s License. She has also completed the Harvard Business School Strategic Negotiations and Finance for Senior Executives courses. Ms. Zabrocky’s long experience with the Company and the shipping industry make her a valuable asset to the Board.
|
2018
|
The Board recommends a vote “FOR” the election of each of the nominees for director named in this Proxy Statement.
The Board has determined that each of the director nominees other than Mr. Blackley and Ms. Zabrocky is independent within the meaning of the applicable rules of the SEC and the listing standards of the NYSE, and that each of the director nominees other than Messrs. Blackley and Kronsberg and Ms. Zabrocky is independent under the rules of the SEC and the NYSE relating to audit committees. See “Information About the Board and Corporate Governance — Independence” below.
14
During 2018, the Company’s non-executive Chairman of the Board received an annual cash retainer of $172,000 and each of the Company’s other non-employee directors received an annual cash retainer of $80,000, except as described below. The Chairman of each of the Audit Committee, the Compensation Committee and the Governance Committee received an additional cash retainer of $20,000, $20,000 and $13,000 respectively. Each member of the three committees (other than the committee Chairman) received an additional cash retainer of $10,000, except that members of the Governance Committee received an additional cash retainer of $6,500. No director earned any fee for attending any Board meeting or Board committee meeting. The Company reimburses directors for their reasonable travel and lodging expenses in attending in-person Board and Board committee meetings.
Mr. Kronsberg has instructed the Company to pay all cash compensation (cash and equity) for his service as a director to his employer, CCP, at this time. Until July 20, 2018, Mr. Wallach was an employee of Paulson & Co. Inc. and he had previously agreed to waive all compensation (cash and equity) for his service as a director for such period. From July 21, 2018, Mr. Wallach and the Company agreed that Mr. Wallach would receive the same compensation (cash and equity) as any other non-employee director.
Under the International Seaways, Inc. Non-Employee Director Incentive Compensation Plan (the “Director Plan”), the Board has discretion to grant various types of equity-based awards to directors. On May 25, 2018, the Board granted the non-Executive Chairman of the Board 9,667 shares of Common Stock having a fair market value of $180,000 and granted each other non-employee director, except as described above, and Mr. Kronsberg’s employer, CCP (and not Mr. Kronsberg), 5,370 shares of Common Stock having a fair market value of $100,000, in each case vesting on the earlier of (a) May 24, 2019 and (b) the date of the Annual Meeting of Stockholders of the Company in 2019, subject to the director continuing to provide services to the Company as of such date.
On August 20, 2018, the Board granted Mr. Wallach 4,544 shares of Common Stock having a fair market value of $90,289, representing his pro rata share of the annual equity award for the 2018-2019 period, vesting on the earlier of (a) May 24, 2019 and (b) the date of the Annual Meeting of Stockholders of the Company in 2019, subject to Mr. Wallach continuing as a director as of such date.
On October 31, 2018, the Board determined that beginning on such date the Compensation Committee would administer the Director Plan. On November 6, 2018, the Compensation Committee, based upon consideration of information provided by the Compensation Committee’s independent advisors, decided to increase the annual equity compensation of the non-Executive Chairman of the Board from $180,000 to $220,000 effective as of such date and granted him 1,070 additional shares of Common Stock, representing his pro rata share of the equity compensation increase for the 2018-2019 period, vesting on the earlier of (i) May 24, 2019 and (ii) the date of the Annual Meeting of Stockholders of the Company in 2019, subject to the Chairman continuing as a director as of such date.
The following table shows the total compensation paid to the Company’s non-employee directors during 2018:
Fees earned or Paid in Cash ($)(1) |
Stock Awards ($) |
Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) |
All Other Compensation ($) |
Total ($) |
|||||||||||
Timothy J. Bernlohr |
106,500 | 100,000 | — | — | 206,500 | ||||||||||
Ian T. Blackley |
80,000 | 100,000 | — | — | 180,000 | ||||||||||
Randee E. Day |
100,000 | 100,000 | — | — | 200,000 | ||||||||||
David I. Greenberg |
103,000 | 100,000 | — | — | 203,000 | ||||||||||
Joseph I. Kronsberg(2) |
80,000 | 100,000 | — | — | 180,000 | ||||||||||
Ty E. Wallach(3) |
40,108 | 90,289 | — | — | 130,397 | ||||||||||
Douglas D. Wheat(4) |
172,000 | 203,828 | — | — | 375,828 | ||||||||||
Gregory A. Wright |
106,500 | 100,000 | — | — | 206,500 | ||||||||||
| (1) | Consists of annual Board fees, annual Board Chairman and annual Chairman of the Audit, Compensation and Governance Committees fees, and annual committee member fees. |
| (2) | In accordance with Mr. Kronsberg’s instruction, all compensation for his service as a director was paid to his employer, CCP, for 2018. |
| (3) | Mr. Wallach and the Company agreed that his compensation (cash and equity) would begin on July 21, 2018. |
| (4) | Mr. Wheat’s equity compensation was increased on November 6, 2018. |
All directors’ cash compensation is payable quarterly in advance.
15
Director Stock Ownership Guidelines
The Company encourages stock ownership by directors in order to align interests of directors with the long-term interests of the Company’s stockholders. To further stock ownership by directors, the Board believes that regular grants of equity compensation should be a significant component of director compensation.
The Board has adopted stock ownership guidelines for non-employee directors. Under the stock ownership guidelines, each non-employee director is expected within five years after becoming a director to own shares of the Company’s common stock (including restricted stock units convertible into shares of stock and stock owned by his spouse and minor children), whose market value would equal at least three times his annual cash base retainer.
16
Management has primary responsibility for preparing the consolidated financial statements of the Company, for maintaining effective internal control over financial reporting and for assessing the effectiveness of internal control over financial reporting. The Company’s independent registered public accounting firm is responsible for performing independent audits of the Company’s consolidated financial statements in accordance with auditing standards generally accepted in the United States (“U.S. GAAS”) and the effectiveness of the Company’s internal control over financial reporting based on criteria established by the Public Company Accounting Oversight Board (the “PCAOB”). The Audit Committee’s responsibility is to monitor and oversee these processes on behalf of the Board. The Board has adopted a written Audit Committee Charter describing the Audit Committee’s role and responsibilities, which is posted on the Company’s website at www.intlseas.com/Docs.
In fulfilling its oversight responsibilities, the Audit Committee met and held discussions with management and the Company’s independent registered public accounting firm concerning the acceptability and quality of the accounting principles, the reasonableness of significant judgments, and the adequacy and clarity of disclosures in the consolidated financial statements to be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 (the “2018 Annual Report”). Management represented to the Audit Committee that such consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States. The Audit Committee reviewed and discussed such consolidated financial statements with management and the Company’s independent registered public accounting firm. The Audit Committee further discussed with the Company’s independent registered public accounting firm the matters required to be discussed by U.S. GAAS, including those described in the PCAOB Auditing Standard No. 1301 (Communications with Audit Committees).
The Committee also held discussions with the Company’s internal auditors and reviewed management’s report on the assessment of the effectiveness of the Company’s internal control over financial reporting and the Company’s independent registered public accounting firm’s report on the effectiveness of the Company’s internal control over financing reporting.
The Company’s independent registered public accounting firm also provided to the Audit Committee the written disclosures and letter required by PCAOB Rule 3526 (Communication with Audit Committees Concerning Independence), and the Audit Committee discussed with the independent registered public accounting firm their independence from the Company and management, and considered the compatibility of non-audit services with the registered public accounting firm’s independence.
Based upon the Audit Committee’s discussions with management and the Company’s internal auditors and independent registered public accounting firm, the Audit Committee’s review of the representations of management, the certifications of the Company’s chief executive officer and chief financial officer which are required by the Securities and Exchange Commission (“SEC”) and the Sarbanes-Oxley Act of 2002, and the reports, letters and other communications of the independent registered public accounting firm, the Audit Committee recommended to the Board (and the Board approved) that the audited consolidated financial statements and management’s assessment of the Company’s internal control over financial reporting referred to above be included in the 2018 Annual Report for filing with the SEC.
|
|
International Seaways, Inc. Audit Committee:
|
|
|
|
|
|
Gregory A. Wright, Chairman
|
|
|
Randee E. Day
|
|
|
David I. Greenberg
|
|
|
|
|
|
April 25, 2019
|
In accordance with the rules of the SEC, this Audit Committee report does not constitute “soliciting material” and shall not be incorporated by reference in any filings with the SEC made pursuant to the 1933 Act or the 1934 Act and shall not otherwise be deemed filed under such Acts.
17
RATIFICATION OF APPOINTMENT OF THE COMPANY’S INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM (PROPOSAL NO. 2)
The Audit Committee has reappointed Ernst & Young LLP as the independent registered public accounting firm for the Company and its subsidiaries for the year ending December 31, 2019, subject to ratification of the stockholders at the Annual Meeting. Ernst & Young LLP served as the independent registered public accounting firm of the Company for 2018 and 2017. The lead audit partner was appointed in 2017. As in prior years, management and the Audit Committee engaged in a review of Ernst & Young LLP in connection with the Audit Committee’s review of whether to recommend that stockholders ratify the selection of Ernst & Young LLP as the Company’s independent registered public accounting firm for 2019. In that review, the Audit Committee considered, among other factors, (i) the continued independence of Ernst & Young LLP, (ii) whether retaining Ernst & Young LLP is in the best interest of the Company and its stockholders, (iii) Ernst & Young LLP’s known legal risks and significant proceedings that may affect its ability to perform the Company’s annual audit, (iv) Ernst & Young LLP’s fees and services provided to the Company and (v) the impact of changing independent registered public accounting firms. The Audit Committee considers the appointment of Ernst & Young LLP to be in the best interest of the Company and its stockholders.
In deciding to engage Ernst & Young LLP, the Audit Committee reviewed auditor independence and existing commercial relationships with Ernst & Young LLP, and concluded that Ernst & Young LLP had no commercial relationship with the Company that would impair its independence.
Representatives of Ernst & Young will attend the Annual Meeting and be afforded an opportunity to make a statement, as well as be available to respond to appropriate questions submitted by stockholders. If the appointment is not ratified by stockholders, the selection of the Company’s independent registered public accounting firm will be reconsidered by the Audit Committee.
| • | Audit Fees. Audit fees incurred by the Company to Ernst & Young LLP were $1,242,000 in 2018 and $900,000 in 2017. Audit fees incurred by the Company to Ernst & Young LLP for 2018 and 2017 include fees for professional services rendered for the audit of the Company’s annual financial statements for the years ended December 31, 2018 and 2017; the review of the financial statements included in the Company’s Forms 10-Q for the respective quarters in the years ended December 31, 2018 and 2017; financial audits and reviews for certain of the Company’s subsidiaries; services associated with documents filed with the SEC; and expenses incurred related to the performance of the services noted above. |
| • | Audit-Related Fees. There were no audit-related fees incurred by the Company to Ernst & Young LLP in 2018 and 2017. |
| • | Tax Fees. Tax fees incurred by the Company to Ernst & Young LLP were $38,000 in 2018 and none in 2017. Tax fees relate to the preparation of certain foreign tax returns. |
| • | All Other Fees. Total other fees incurred by the Company to Ernst & Young LLP were none in 2018 and $3,500 in 2017. |
The Audit Committee considered whether the provision of services described above under “Tax Fees” are compatible with maintaining Ernst & Young’s independence. The Company does not believe that any reasonable concerns about the objectivity of Ernst & Young LLP in conducting the audit of the Company’s financial statements are raised as a result of the fees paid for non-audit-related services in 2018.
The Audit Committee has established policies and procedures for pre-approving audit and permissible non-audit work performed by its independent registered public accounting firm. As set forth in the pre-approval policies and procedures, unless a type of service has received general pre-approval, it will require specific pre-approval by the Audit Committee if it is to be provided by the independent auditor. Any proposed services exceeding pre-approved cost levels require specific pre-approval by the Audit Committee.
The Audit Committee and the Board recommends a vote “FOR” such ratification.
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ADVISORY VOTE ON APPROVAL OF THE COMPENSATION OF THE NAMED
EXECUTIVE OFFICERS (PROPOSAL NO. 3)
As required by the Dodd-Frank Act, stockholders are being provided with the opportunity to cast an advisory vote on the compensation of the Named Executive Officers for 2018 as described beginning on page 20 of this Proxy Statement in the section titled “Compensation Discussion and Analysis”.
As more fully described in the CD&A, the Company’s executive compensation program is designed to promote the following objectives:
| • | Attract, motivate, retain and reward highly-talented executives and managers, whose leadership and expertise are critical to the Company’s overall growth and success; |
| • | Compensate each executive based upon the scope and impact of his or her position as it relates to achieving the Company’s corporate goals and objectives, as well as on the potential of each executive to assume increasing responsibility within the Company; |
| • | Align the interests of the Company’s executives with those of its stockholders by linking incentive compensation rewards to the achievement of performance goals that maximize stockholder value; and |
| • | Reward the achievement of both the short-term and long-term strategic objectives necessary for sustained optimal business performance. |
The Compensation Committee and the Board believe that the design of the executive compensation program, and hence the compensation awarded to the Named Executive Officers, fulfills these objectives.
Stockholders are urged to read the “Compensation Discussion and Analysis” section of this Proxy Statement and the accompanying compensation tables and narrative which describe in detail how the Company’s compensation policies and procedures implement the Company’s compensation philosophy and disclose the compensation paid to the Named Executive Officers for 2018.
Accordingly, at the Annual Meeting, stockholders will be asked to vote on the following resolution:
RESOLVED, that the stockholders of the Company hereby approve, in an advisory vote, the compensation of the Named Executive Officers for 2018 as described in the “Compensation Discussion and Analysis” section and in the accompanying compensation tables and narrative in the Company’s Proxy Statement for the 2019 Annual Meeting of Stockholders.
As an advisory vote, the results of the vote will not be binding on the Board or the Company. However, the Board and the Compensation Committee value the opinion of the Company’s stockholders and will consider the outcome of the vote when making future decisions on the compensation of the Named Executive Officers and the Company’s executive compensation principles, policies and procedures. The affirmative vote of the holders of a majority of the outstanding shares of Common Stock present in person or represented by proxy and entitled to vote is required to approve the resolution.
The Board recommends a vote “FOR” advisory approval of the resolution set forth above and approval of the compensation of the Named Executive Officers for 2018 as disclosed in this Proxy Statement.
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COMPENSATION DISCUSSION AND ANALYSIS
This Compensation Discussion and Analysis (“CD&A”) provides information regarding the compensation program for our executive officers in 2018. It describes our compensation philosophy; the objectives of the executive compensation program and policies in 2018; the elements of the compensation program; and how each element fits into our overall compensation philosophy. The Compensation Committee oversees the compensation paid to all of our executive officers, including pursuant to the agreements described below under “Employment Agreements with the NEOs.”
Until November 30, 2016, INSW was a wholly-owned subsidiary of OSG. On November 30, 2016, OSG completed the spin-off of INSW (the “Spin-Off”) as a newly independent public company. Although INSW’s compensation policies prior to the Spin-Off were substantially the same as those of OSG, in 2017 the Compensation Committee had developed an independent set of policies and practices to support the Company’s compensation philosophy and strategy.
The compensation of the executives who constitute INSW’s named executive officers (the “Named Executive Officers” or “NEOs”) is included in the Summary Compensation Table in this CD&A. Our NEOs for 2018 were:
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Incumbent
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NEOs Position
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Lois K. Zabrocky
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President and Chief Executive Officer (“CEO”)
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Jeffrey D. Pribor
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Chief Financial Officer (“CFO”) Senior Vice President and Treasurer
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James D. Small III
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Chief Administrative Officer, Senior Vice President, General Counsel & Secretary
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Derek G. Solon
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Vice President (Chief Commercial Officer)
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William F. Nugent
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Vice President (Head of Ship Operations)
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All of the NEOs were employees of INSW throughout 2018.
2018 Performance Highlights
We have a strong and measurable pay for performance philosophy. Accordingly, our operational and financial performance in fiscal year 2017 and 2018 were important factors in understanding our 2018 executive compensation. As described in greater detail in our 2018 Annual Report, a copy of which can be obtained as described in “Other Matters” below, we faced a challenging market last year. Performance highlights included:
Fleet Renewal
| • | Successfully acquired six 300,000 deadweight ton VLCCs for $434 million from Euronav NV, inclusive of assumed debt, in June 2018. By growing and modernizing our fleet during the tanker market downturn, we positioned ourselves for a strengthening of the market while maintaining a strong balance sheet. |
| • | Sold and delivered 11 older vessels during 2018 for aggregate proceeds of $136.7 million. |
| • | The Company’s fleet renewal program reduced the average age of the Company’s owned and operated fleet by approximately three years from 11.5 years at the end of 2016 to 8.7 years at the end of 2018, while increasing the deadweight tonnage of the Company’s fleet by approximately 11.5%. |
Financial Results
| • | Time charter equivalent (“TCE”) revenues for INSW decreased in 2018 by $31.9 million to $243.1 million from $275.0 million in 2017. |
| • | Earnings from shipping operations (“ESO”) (as hereafter defined) for INSW was a loss of $14.1 million in 2018. ESO is a non-GAAP measure defined as income from vessel operations before depreciation and amortization and gains and losses from vessel sales (including impairments) reduced by payments for drydockings and vessel expenditures, which we use for compensation purposes. |
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| • | INSW’s loss for 2018 was $88.9 million, reflecting impairment charges on vessels aggregating $19.0 million, or a per-share loss of $3.05, compared with net loss for 2017 of $106.1 million, reflecting impairment charges of $88.4 million and the Company’s debt refinancing costs of $9.2 million, or a per-share loss of $3.64. See Note 5, “Vessels, Deferred Drydock and Other Property,” to INSW’s consolidated financial statements included in INSW’s 2018 Annual Report for more information about the impairment charges. |
| • | INSW’s 2018 Adjusted EBITDA was $68.3 million, a $49.5 million decrease from $117.8 million in 2017. Adjusted EBITDA consists of EBITDA (which represents net loss before interest expense, income taxes and depreciation and amortization expense) adjusted for the impact of certain items that INSW does not consider indicative of our ongoing operating performance, as disclosed in Item 6, “Selected Financial Data” in our 2018 Annual Report. |
| • | INSW’s total cash (including restricted cash) as of December 31, 2018 was $117.6 million compared to $70.6 million as of December 31, 2017. |
Say-on-Pay Results
At INSW’s 2018 Annual Meeting, approximately 99.7% of the stockholders who voted on the say-on-pay proposal (i.e. excluding broker non-votes) voted in favor of INSW’s executive compensation program. In consideration of these results, INSW’s Compensation Committee acknowledged the support received from its stockholders and viewed the results as a confirmation of the Company’s existing executive compensation policies and decisions.
The Company holds an annual say-on-pay vote by its stockholders, which vote frequency was approved by stockholders in 2017. The Company anticipates that its next “say-when-on-pay” vote will be conducted at the 2023 Annual Meeting of Stockholders. The Compensation Committee will continue to engage with its stockholders and consider the results from this year’s and future advisory votes on executive compensation, as well as feedback from stockholders.
Compensation Philosophy and Objectives
INSW believes that a well-designed compensation program is a powerful tool to attract, motivate, retain and reward top executive and managerial talent. INSW further believes that the compensation program should align the interests of executives with those of stockholders in achieving and sustaining increases in stockholder value over the short and long-term. We structure our compensation program to drive and support these goals. The compensation program is designed with the following objectives in mind:
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COMPENSATION PROGRAM OBJECTIVES
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Overall Objectives:
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Attract, motivate, retain and reward highly-talented executives and managers, whose leadership and expertise are critical to our overall growth and success.
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Align the interests of our executives with those of our stockholders.
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Support the long-term retention of the Company’s executives to maximize opportunities for teamwork, continuity of management and overall effectiveness.
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Compensate each executive competitively (1) within the marketplace for talent in which we operate; (2) based upon the scope and impact of his or her position as it relates to achieving our corporate goals and objectives; and (3) based on the potential of each executive to assume increasing responsibility within the Company.
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Discourage excessive and imprudent risk-taking.
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COMPENSATION PROGRAM OBJECTIVES
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Structure the total compensation program to reward the achievement of both the short-term and long-term strategic objectives necessary for sustained optimal business performance.
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Pay Mix Objectives
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•
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Provide a mix of both fixed and variable (“at-risk”) compensation, each of which has a different time horizon and payout form (cash and equity), to reward the achievement of annual and sustained, long-term performance.
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Pay-For-Performance Objectives
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Use our incentive compensation program and plans to align the interests of our executives with those of our stockholders by linking incentive compensation rewards to the achievement of performance goals that maximize stockholder value by:
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–
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Ensuring our compensation programs are consistent with, and supportive of, our short-term and long-term strategic, operating and financial objectives.
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Placing a significant portion of our executives’ compensation at risk, with payouts dependent on the achievement of both corporate and individual performance goals, which are set annually by the Compensation Committee.
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Encouraging balanced performance by employing a variety of performance measures to avoid over-emphasis on the short-term or any one metric.
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Applying judgment and reasonable discretion in making compensation decisions to avoid relying solely on formulaic program design, taking into account both what has been accomplished and how it has been accomplished in light of the existing commercial environment.
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Executive Compensation Practices
Our goal is to maintain an executive compensation program that is competitive, rooted in the principles of pay-for-performance and in conformance with best practices in executive compensation and corporate governance. To this end, the Compensation Committee routinely evaluates its practices and programs with respect to executive compensation to identify opportunities for improvement. The following table summarizes key features of our executive compensation program.
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WHAT WE DO:
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Stock Ownership Guidelines
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We maintain, and track progress against, stock ownership guidelines for our executives and directors.
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Anti-Hedging and Anti-Pledging Policies
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We maintain policies and procedures for transactions in the Company’s securities that are designed to ensure compliance with all insider trading rules and that prohibit all hedging, pledging and short-selling of our stock by all officers and employees.
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Compensation Recoupment (“Clawback”) Policy
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All of our incentive compensation plans and the terms of our equity agreements provide that the Compensation Committee may seek reimbursement of incentives paid or equity-related proceeds provided to an executive officer if it is later determined that the executive officer engaged in misconduct, acted in a manner contrary to the Company’s interest or breached a non-competition agreement.
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WHAT WE DO NOT DO:
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Excise Tax Gross-Ups
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We do not provide for excise tax gross-ups.
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Supplemental Executive Retirement Plans (“SERPs”)
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We do not provide any SERPs, and our legacy SERP was frozen to new participants in November 2012.
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Roles in Setting Executive Compensation
Role of the Compensation Committee
Structure of the Compensation Committee: In 2018, the Compensation Committee consisted of three members of the Board, each of whom qualified as “independent” under the NYSE listing standards and applicable independence standards under the 1934 Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), and the Internal Revenue Code of 1986, as amended (the “Code”). Recognizing the importance of independent perspectives, the Compensation Committee regularly meets in executive session, without any members of management present.
Objectives of The Compensation Committee and the Decision-Making Process: The primary goals of the Compensation Committee are to establish the Company’s compensation philosophy and strategy and to ensure that the Company’s executives are compensated in a manner consistent with the articulated philosophy and strategy. The Compensation Committee takes many factors into account when making compensation decisions with respect to the NEOs and other senior executives, including the individual’s performance, tenure and experience; the ability of the individual to affect long-term growth and success; INSW’s overall performance; internal equity among the NEOs; and external, publicly available market data on competitive compensation practices and levels.
Role of Outside Advisors: The Compensation Committee has the authority to engage independent advisors to assist in carrying out its duties. The Compensation Committee has engaged Lyons, Benenson & Company Inc. (“LB&Co.”) as its independent compensation consultant to advise on executive and director compensation arrangements and related governance matters. LB&Co. assisted management in the preparation of this Proxy Statement.
Compensation Consultant Conflict of Interest Assessment: As required by rules adopted by the SEC under the Dodd-Frank Act, the Compensation Committee assessed all relevant factors and determined that the work of LB&Co. did not raise any conflict of interest in 2018. In making this determination, the Compensation Committee considered all relevant factors, including those set forth in Rule 10C-1(bX4)(i) through (vi) under the 1934 Act.
Role of the CEO in Setting CEO and Other Executives’ Compensation
All decisions relating to the compensation of Ms. Zabrocky, INSW’s CEO, are made by the Compensation Committee without her or other members of management present. In making determinations regarding compensation for INSW’s other NEOs and other selected senior executives, the Compensation Committee generally considers the recommendations of the CEO (for all executives other than herself), and advice received from LB&Co. The CEO recommends the compensation levels for the other NEOs and for all others whose compensation is determined by the Compensation Committee. In making her recommendations, the CEO evaluates the performance of each executive, considers each executive’s compensation in relation to the other officers and executives (“internal equity”) and assesses retention risks. The CEO’s recommendations are subject to review by and, in some cases modification, and ultimately approval of the Compensation Committee or, when sufficiently material, the full Board.
All 2018 compensation decisions (including base salaries, annual and long-term incentive target percentages and annual and long-term incentive performance measures and goals) were made under the auspices of the Compensation Committee. Additionally, the Compensation Committee was responsible for the review and certification of the 2018 performance results that determined the annual and long-term incentive payouts for the NEOs.
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2018 Peer Group
The Compensation Committee examines the executive compensation of a group of peer companies to stay current with market pay practices and trends, and to understand the competitiveness of our total compensation and its various elements. In general, we strive for total compensation to be competitive with a select group of companies that the Compensation Committee believes to be an appropriate compensation reference group (the “Peer Group”). The Compensation Committee reviews the Peer Group at least annually to affirm that it is comprised of companies that are similar to us in terms of industry focus and scope of operations, size (based on revenues and market capitalization), and the competitive marketplace for talent.
The Peer Group for 2018 consisted of 13 publicly traded oil, shipping and transportation companies, with a significant international focus, total revenues between $100 million and $2.3 billion, and median revenues of approximately $830 million. The 2018 Peer Group remained the same as the 2017 Peer Group except that Gener8 Maritime, Inc. was removed from the group during the course of 2018 after it was acquired by Euronav NV in June 2018. The following 13 companies comprised the 2018 Peer Group:
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DHT Holdings, Inc.
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Genesis Energy, L.P.
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Dorian LPG Ltd.
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Kirby Corporation
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Eagle Bulk Shipping Inc.
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Martin Midstream Partners, L.P.
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Euronav NV
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Matson, Inc.
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GATX Corporation
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SEACOR Holdings Inc.
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Genco Shipping & Trading Limited
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SemGroup Corporation.
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Andeavor Logistics, L.P. (formerly known as Tesoro)
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At the end of 2018, a decision was made to reassess the Peer Group for 2019.
2019 Peer Group
For 2019, the INSW Compensation Committee approved a revised Peer Group consisting of 12 publicly traded oil, shipping and maritime offshore companies, again, with a significant international focus, with total revenues for 2017 between $166.5 million and $2.2 billion, and median revenues of approximately $476.8 million. The following 12 companies comprise the 2019 Peer Group:
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DHT Holdings, Inc.
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Kirby Corporation
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Dorian LPG Ltd.
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Martin Midstream Partners, L.P.
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Eagle Bulk Shipping Inc.
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Matson, Inc.
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Euronav NV
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SEACOR Holdings Inc.
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Genco Shipping & Trading Limited
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SEACOR Marine Holdings Inc.
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Genesis Energy, L.P.
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Tidewater Inc.
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While the Compensation Committee believes the data derived from any peer group is helpful, it also recognizes that benchmarking is not necessarily definitive in every case. Furthermore, the Peer Group is limited to those companies for which executive compensation data is publicly available, which necessarily eliminates some of INSW’s closest competitors that are privately held and/or incorporated in jurisdictions that do not require public disclosure of executive compensation. The Compensation Committee, therefore, uses the information from the Peer Group for informational and analytical purposes, but does not make compensation decisions based solely on this market data. With this in mind, INSW augments the Peer Group data with publicly-available survey data, and uses all compensation data in conjunction with annual assessments of corporate and individual performance to make recommendations and decisions on the compensation arrangements applicable to the Company’s NEOs.
24
Elements of the 2018 Executive Officer Compensation Program
The Compensation Committee reviews each element of compensation annually to ensure alignment with its compensation philosophy and objectives, as well as to assess its executive compensation program and levels relative to the competitive landscape. The executive compensation program consists of the following:
| • | Base salary |
| • | Annual cash incentive awards |
| • | Long-term incentive compensation |
| • | Severance arrangements through employment agreements |
| • | Retirement benefits generally available to all employees under the Savings Plan |
| • | Welfare and similar benefits (e.g., medical, dental, disability and life insurance) |
INSW seeks to provide competitive “fixed” compensation in the form of base salary while emphasizing a pay for performance culture in which we place a larger portion of total compensation “at-risk” in the form of annual performance-based cash incentives (which will only be paid if INSW achieves specified performance goals) and long-term equity incentives (which vest over a multi-year period and, in certain cases, also depend on the achievement of specific performance goals).
Base Salary
We strive to pay base salaries that are market competitive to attract talented executives and to provide a secure fixed level of compensation to our executives and managers. The Compensation Committee reviews the base salaries of the executive officers and compares them to the salaries of senior management among the Peer Group companies, bearing in mind that total estimated direct compensation opportunity is the principal comparative measure of the competitiveness of our program. Based on its own experience and that comparison, the Compensation Committee determines whether the salaries, in concert with other elements of compensation, of the NEOs are at levels sufficient to attract, motivate and retain the executives who are essential to leading the Company and driving stockholder value.
Annual adjustments in base salary, if any, consider individual performance, prior experience, position duties and responsibilities, internal equity and external market practices. The Compensation Committee generally relies on the CEO’s evaluation of each NEO’s performance (other than her own) in deciding whether to recommend and/or approve merit increases for any NEOs in a given year. In those instances, where the duties and responsibilities of a NEO change, the CEO may recommend any adjustments believed to be warranted, and the Compensation Committee will consider all the factors enumerated above in determining whether to approve any such changes.
With respect to those employees who were NEOs in 2018, increases in base salary from 2017 to 2018 for Ms. Zabrocky and Messrs. Solon and Nugent were 14.3%, 3.0% and 5.1%, respectively.
The following table summarizes 2018 base salaries for our NEOs.
Name |
Position |
2018 Salary |
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Lois K. Zabrocky |
President and Chief Executive Officer |
$ | 600,000 | |
Jeffrey D. Pribor |
Senior Vice President, CFO and Treasurer |
$ | 450,000 | |
James D. Small III |
Chief Administrative Officer, Senior Vice President, General Counsel & Secretary |
$ | 475,000 | |
Derek G. Solon |
Vice President (Chief Commercial Officer) |
$ | 285,475 | |
William F. Nugent |
Vice President (Head of Ship Operations) |
$ | 273,500 | |
2018 Annual (Cash) Incentive Plan
Pursuant to the Company’s Management Incentive Compensation Plan (the “MICP”), NEOs are eligible to receive annual cash incentives based upon the achievement of specified annual performance goals, which are established and approved by the Compensation Committee during the first quarter of the performance year. Our annual cash incentive plan which for NEOs generally reflects the terms of the annual cash incentive plan
25
available to all employees is intended to focus our NEOs on our critical, short-term financial and operational goals. As in past years, the financial performance measure for 2018 was ESO. The NEO awards were also based on quantifiable measures of our performance in corporate metrics, business/operational metrics (including safety) and individual factors.
For 2018, the annual incentive targets for Ms. Zabrocky and Messrs. Pribor and Small were 100% of their respective base salaries and the annual incentive targets for Messrs. Solon and Nugent were 70% of their respective base salaries. The potential actual incentive payout range for each NEO was 0% to 150% of target with respect to the ESO component and 0% to 150% for the other components.
NEOs have different weights ascribed to their Company ESO, business/operational and individual goals, each of which is a component of the payout calculation. The specific weights were established based on the scope of each NEO’s role and their respective abilities to affect the results, and were ultimately recommended by the CEO and approved by the Compensation Committee. The following table sets forth the weights by component and NEO.
Individual |
Company ESO |
Business/Operational Metrics |
Individual Performance Goals |
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Ms. Zabrocky |
60 | % |
15 | % |
25 | % |
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Messrs. Pribor and Small |
60 | % |
10 | % |
30 | % |
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Messrs. Solon and Nugent |
33.3 | % |
33.3 | % |
33.4 | % |
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For 2018, ESO goals were assessed on achievement scale of 0% to 130%, and business/operational metrics and individual performance goals were also assessed on achievement rating scale of 0% to 130%, with 100% as the performance factor (the payout) for achieving target performance and a maximum of 150% as the performance factor for 130% ESO achievement (as described below). If a rating for a measure was below 70%, the performance factor (payout) for that measure is zero, resulting in no bonuses being payable under that measure. If a rating for the individual performance measure was below 70%, the performance factor (payout) for that measure is zero, resulting in no bonus being payable under any measure.
The formulas to determine each NEO’s actual annual cash incentive award for 2018 are as follows:
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Chief Executive Officer (Zabrocky)
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the sum of
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Base Salary × Target Incentive % ×
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(60% × Performance Factor for Company ESO 0-150%) +
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=
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Annual Cash
Incentive Payout |
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(15% × Performance Factor for Business/Operational Metrics 0-150%) + (25% × Performance Factor for Individual 0-150%)
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Chief Financial Officer and Chief Administrative Officer/General Counsel (Pribor and Small)
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the sum of
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Base Salary × Target Incentive % ×
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(60% × Performance Factor for Company ESO 0-150%) +
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=
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Annual Cash
Incentive Payout |
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(10% × Performance Factor for Business/Operational Metrics 0-150%) + (30% × Performance Factor for Individual 0-150%)
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Other Participants: Vice Presidents (Solon and Nugent)
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the sum of
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Base Salary × Target Incentive % ×
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(33.3% × Performance Factor for Company ESO 0-150%) +
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=
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Annual Cash
Incentive Payout |
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(33.3% × Performance Factor for Business/Operational Metrics 0-150%) + (33.4% × Performance Factor for Individual 0-150%)
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2018 Company ESO Goal
For 2018, the table below sets forth the ESO performance thresholds at INSW and the corresponding amounts that would be earned (expressed as percentages of target) by the NEOs at each level of achievement. In 2018, the ESO result was $14.1 million, which corresponded to a performance factor of 83.3%.
($ Thousands) |
ESO Threshold |
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Performance Factor (Payout As a % of Target |
% Achievement |
2018 |
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50.0% |
70 | % |
(40,678 | ) |
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58.4% |
75 | % |
(29,116 | ) |
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66.7% |
80 | % |
(17,554 | ) |
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75.0% |
85 | % |
(5,992 | ) |
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83.3% |
90 | % |
5,570 | |||
91.7% |
95 | % |
17,132 | |||
100.0% |
100 | % |
28,694 | |||
108.4% |
105 | % |
40,256 | |||
116.7% |
110 | % |
51,818 | |||
125.0% |
115 | % |
63,380 | |||
133.3% |
120 | % |
74,942 | |||
141.7% |
125 | % |
86,504 | |||
150.0% |
130 | % |
98,066 | |||
INSW Business/Operational Metrics
For 2018, the INSW business and operational metrics were weighted equally. The business metrics related to the time charter equivalent (“TCE”) performance of INSW’s VLCCs, Aframaxes, Panamaxes and MRs TCE compared with spot TCE rates of competitors, and minimizing the discount received on the Company’s older VLCCs and Aframaxes compared with the TCE achieved on its more modern units. The operational measures were:
| (i) | Achieving or doing better than INSW vessel operating budget; |
| (ii) | Time not earning (technical) — a metric that tracks unplanned off hire; |
| (iii) | Total recordable case frequency (“TRCF”) — a metric that tracks injuries; |
| (iv) | Vetting observations — Total operational and safety observations on the vessels; and |
| (v) | Vessel visits — number of visits to a vessel by shoreside staff. |
The overall INSW performance score for 2018 was 115%.
Individual Performance Goals
Each of our NEOs also had individual performance goals established by the Compensation Committee. The individual goals for 2018 covered a broad range of performance indicators that included, among others, the following (although not all goals listed below applied to all NEOs):
| • | Completing the acquisition of the six 300,000 deadweight ton VLCCs; |
| • | Developing and executing business strategy; |
| • | Achieving revenue, operating expenses and General & Administrative Expense targets; |
| • | Meeting key customers and investors; |
| • | Evaluating strategic alternatives; |
| • | Restructuring the legal department and accomplishing goals within the Company’s Information Technology and Human Resources infrastructures; |
| • | Reviewing and identifying operational risks and performing risk assessments; and |
| • | Engaging in other projects, including additional fleet renewal initiatives, business development, scrubber technology assessment, capital management, management development and financial reporting. |
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After the 2018 performance year, the Compensation Committee assessed the level of achievement of our NEOs relative to their respective individual performance goals. Following this assessment, it was determined that Ms. Zabrocky and Messrs. Pribor, Small, Solon and Nugent achieved their individual goals above target levels.
2018 Actual Annual Incentive Paid
Based on the foregoing, the NEOs received the following annual cash incentive awards for 2018: Ms. Zabrocky – $567,720; Mr. Pribor – $426,645; Mr. Small – $448,153; Mr. Solon – $206,257; and Mr. Nugent – $196,569.
Equity-Based Compensation
INSW’s equity-based compensation program is intended to align the interests of its executives with those of its stockholders, and to focus executives on the achievement of long-term performance objectives that are aligned with its business strategy, thereby establishing a direct relationship between compensation, long-term operating performance and sustained increases in stockholder value. The MICP and a similar plan applicable to the incentive compensation for non-employee directors (the “Director Plan”) became effective in 2016. The MICP provides for grants of nonqualified stock options, incentive stock options, stock appreciation rights, performance units, performance shares and other performance awards, restricted stock units and restricted stock, and other awards valued in whole or in part by reference to, or otherwise based on, INSW stock. The purpose of the MICP and the Director Plan is to facilitate the grant of equity and cash incentives to employees (including our NEOs) and Directors of the Company, and to enable the Company to obtain and retain the services of these individuals, which is essential to our long-term success.
INSW initially reserved 2,000,000 shares for issuance under the MICP and 400,000 shares for issuance under the Director Plan. The MICP contains an anti-dilution provision whereby in the event of certain corporate changes in the Company, outstanding awards may be adjusted, as appropriate, to prevent dilution or enlargement of rights.
Consistent with our practices and in each case pursuant to the terms of the MICP, equity awards may be granted from time to time to motivate and retain executives and align their interests with stockholders.
In April 2018, the Compensation Committee approved the following long-term incentive award date values for Ms. Zabrocky and Messrs. Pribor, Small, Solon and Nugent:
Incumbent |
Total Grant Date Value |
Stock Options |
Time-Based RSUs |
Performance- Based RSUs |
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Lois K. Zabrocky |
$ | 1,200,000 | $ | 400,000 | $ | 400,000 | $ | 400,000 | ||||
Jeffrey D. Pribor |
$ | 675,000 | $ | 225,000 | $ | 225,000 | $ | 225,000 | ||||
James D. Small III |
$ | 475,000 | $ | 158,333 | $ | 158,333 | $ | 158,333 | ||||
Derek G. Solon |
$ | 285,475 | $ | 95,158 | $ | 95,158 | $ | 95,158 | ||||
William F. Nugent |
$ | 273,500 | $ | 91,167 | $ | 91,167 | $ | 91,167 | ||||
The time-based restricted stock units (“RSUs”) and stock options vest and become exercisable in equal amounts on the first, second and third anniversaries of the grant date of April 4, 2018. The 2018 performance-based restricted stock units (“PRSUs”) awards vest as follows: (i) one-half of the target PRSUs vest on December 31, 2020, subject to INSW’s three-year Return on Invested Capital (“ROIC”) performance; and (ii) one-half of the target PRSUs vest on December 31, 2020, subject to INSW’s three-year total shareholder return (“TSR”) performance relative to that of a performance peer group. Vesting is subject in each case to the Compensation Committee’s certification of achievement of the performance targets no later than March 15, 2021. The funding formulas applicable to the PRSUs are as follows:
The cumulative target ROIC for the three-year period is 3.17% (with a minimum threshold for 50% of 0.17% and a maximum threshold for 150% achievement of 6.17%).
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TSR
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Threshold
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Target
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Maximum
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Performance Achievement
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25th Percentile
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50th Percentile
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90th Percentile
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Payout
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50%
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100%
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150%
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If the absolute value of three-year TSR is negative, then the payout for the TSR component of the PRSUs is capped at 100%.
Upon termination of employment for any reason, all unvested PRSUs will be forfeited unless the NEO’s respective employment agreement provides otherwise.
For the initial award of performance-based RSUs granted on March 29, 2017 to Mr. Pribor, the Compensation Committee reserved the right to choose different performance measures and targets applicable to the performance-based RSUs before March 31 of each year (2017, 2018 and 2019) and for 2018 determined that the performance measure would be ROIC with a target ROIC of 1.35% for the year ending December 31, 2018 (with a minimum threshold for 50% achievement of -1.65% and a maximum threshold for 150% achievement of 4.35%). For 2018, the actual ROIC result was -.35% resulting in achievement of 72% for Mr. Pribor. Therefore, for Mr. Pribor the performance-based RSUs awarded vested at the appropriate percentage upon certification of this result which occurred in 2019. The grant date value of the 2018 tranche of the 2017 performance-based RSU grant value for Mr. Pribor was $207,460.
2019 Compensation Decisions
Base Salary Decision:
On April 5, 2019, the base salary for Ms. Zabrocky increased from $600,000 to $615,000, for Mr. Pribor from $450,000 to $500,000, for Mr. Solon from $285,475 to $300,000, and for Mr. Nugent from $273,500 to $300,000 from their 2018 levels, in each case retroactive to January 1, 2019. The base salary for Mr. Small remained at his 2018 level as the Compensation Committee determined that his current base salary was competitive and that no changes were required. The INSW NEOs earn annualized base salaries that are commensurate with their positions as named executive officers of a public company and which will provide a steady source of income sufficient to permit these officers to focus their time and attention on their work duties and responsibilities.
Annual Incentive Decisions
The design of INSW’s 2019 annual cash incentive plan is generally consistent with INSW’s 2018 annual cash incentive plan. In 2019, pursuant to the terms of their employment agreements with the Company, Ms. Zabrocky will have a target annual incentive equal to 115% of base salary (an increase from 100% of her base salary in 2018) and Messrs. Pribor and Small will each have a target annual incentive bonus equal to 100% of their base salaries, and Messrs. Solon and Nugent will each have a target annual incentive bonus of 70% in 2019, as was the case for each individual in 2018.
Long-Term Equity Awards Decisions:
In April 2019, the Compensation Committee awarded each of the NEOs equity grants with a fair value as of the grant date of approximately (1) for Ms. Zabrocky, 200% of her base salary; (2) for Mr. Pribor, 150% of his base salary; (3) for Mr. Small, 125% of his base salary; and (4) Messrs. Solon and Nugent, 100% of their respective base salaries. These equity grants were divided equally among time-based RSUs, stock options and PRSUs.
Ms. Zabrocky, President and CEO, does not receive additional compensation for services as a director of the Company.
Employment Agreements with the NEOs
Employees of INSW Classified as NEOs of INSW for 2018
INSW has employment agreements with Ms. Zabrocky and Messrs. Pribor and Small. Under the terms of those agreements, Ms. Zabrocky and Messrs. Pribor and Small are entitled to certain compensation arrangements and severance benefits as detailed in the paragraphs below. Although Messrs. Solon and Nugent do not have formal contractual employment agreements with INSW, they are also entitled to certain compensation arrangements and severance benefits. In addition, each NEO (whether or not his or her employment relationship with INSW is governed by a formal contractual employment agreement) is entitled to vacation in accordance with INSW policy, and each of them participates in medical, dental, and life insurance, as well as retirement and other benefit plans as may be in effect from time to time.
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Under the terms of the employment agreements for Ms. Zabrocky and Messrs. Pribor and Small, if an executive’s employment is terminated by INSW for any reason or terminated voluntarily by the executive, he or she is entitled to the following payments (“Accrued Payments”): (i) any earned, unpaid base salary through the date of termination, (ii) any earned, unpaid annual bonus applicable to the performance year prior to the termination, (iii) payment for any accrued, but unused vacation through the date of termination and (iv) reimbursement of any business expenses not reimbursed as of the date of termination. If any such executive’s employment is terminated by reason of death or permanent disability, INSW will pay the Accrued Payments to the executive or the executive’s estate, and INSW will vest any non-performance-based equity previously granted to the executive that has not yet vested.
On September 29, 2014, OSG entered into an employment agreement with Ms. Zabrocky to serve as the Co-President and Head of the International Flag Strategic Business Unit, which was assumed by INSW. Under this agreement, Ms. Zabrocky’s annual salary was $525,000 and her Target Bonus was set at 150% of annual salary. The agreement also provides for the possibility of annual equity grants at the discretion of the Board upon recommendation from the compensation committee. Ms. Zabrocky’s agreement further provides for severance benefits in the event of termination without cause or resignation with good reason as follows: (i) salary continuation for a period of 24 months and (ii) a lump sum payment in the amount equal to her Target Bonus in effect for the year of termination. On March 30, 2016, OSG and Ms. Zabrocky executed an amendment to her employment agreement. This amendment changed Ms. Zabrocky’s title to Senior Vice President and President of International Flag SBU. The amendment also reduced the Target Annual Bonus from 150% to 125% of annual salary in 2016 and from 125% to at least 100% in 2017 and thereafter. The amendment also provided an equity grant to Ms. Zabrocky in the amount of $525,000 for 2016 and an amount equal to her base salary for 2017 and thereafter. The structure of the 2018 award is discussed above. The amendment also adjusted the severance benefits provided under the employment agreement in the event of termination without cause or resignation with good reason as follows: (i) a lump sum payment in the amount equal to 150% of her base salary in effect for the year of termination if separation occurs prior to January 1, 2018 and (ii) accelerated vesting of all unvested equity (performance-based grants shall vest at target levels). On August 3, 2016, Ms. Zabrocky and OSG entered into a subsequent amendment to her employment agreement. This amendment adjusted the severance benefits provided in the event of termination without cause or resignation with good reason: Ms. Zabrocky will receive salary continuation for 24 months and also a lump sum payment in an amount depending on which year the termination occurs (if in 2017, $1,204,166, in 2018 and beyond, $1,049,999). In addition, all outstanding and unvested options, RSUs and other equity-based grants or cash in lieu of grants that in all cases are not performance-based will vest upon a termination without cause, for good reason, by death or disability. INSW assumed this agreement in its current form effective as of the Spin-Off. On November 7, 2016, OSG and Ms. Zabrocky entered into a further amendment to her employment agreement, providing that she would become President and CEO of INSW as of the closing of the Spin-Off. As of the date of the Spin-Off, Ms. Zabrocky became President and CEO of the Company under the terms above. The Compensation Committee increased her equity grant target from 100% of base salary to 200% for 2018 and future periods (subject to further changes in the future). On April 4, 2018 INSW and Ms. Zabrocky executed a subsequent amendment to her employment agreement. This amendment increased her base salary from $525,000 to $600,000. On April 5, 2019, INSW and Ms. Zabrocky executed a subsequent amendment to her employment agreement. This amendment increased her base salary from $600,000 to $615,000 and her target bonus from 100% to 115% of base salary.
On November 9, 2016, INSW entered into an employment agreement with Mr. Pribor to serve as CFO of the Company. Under his employment agreement, Mr. Pribor’s annual salary is $450,000, his annual Target Bonus is set at 100% of his base salary, and he would be granted a long-term, equity incentive award with a grant-date value of $1,500,000 consisting in equal amounts of stock options, time-based restricted stock units and performance-based restricted stock units, vesting over ratably, annually over a three-year period. Mr. Pribor also received a one-time payment of $150,000 in lieu of his annual bonus and equity grants for his service in fiscal year 2016, and management recommended to the Board that Mr. Pribor be granted equity incentive awards starting in 2017 with a grant-date value equal to 100% of his base salary. The Company also agreed to reimburse Mr. Pribor for reasonable and customary attorney’s fees in connection with the negotiation of his agreement. Mr. Pribor’s agreement provides for severance benefits in the event of termination without cause or resignation with good reason as follows: (i) 12 months’ continuation of annual base salary plus Target Bonus (18 months’ in the event of a change in control); (ii) to the extent not already paid, the $150,000 that Mr. Pribor is entitled to receive in lieu of his annual bonus and equity grants for fiscal year 2016; (iii) a lump sum payment of a pro rata
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portion of his annual bonus based on actual achievement, calculated by multiplying such bonus by a fraction, the numerator of which is the number of full weeks of employment in the year of termination and the denominator of which is fifty-two; (iv) accelerated vesting of all outstanding awards from his initial grant (with performance-based awards vesting at target); (v) accelerated vesting of all outstanding awards other than his initial grant of unvested options, RSUs and other equity-based grants or cash in lieu of grants (that are not performance-based) that would have vested on the next regularly scheduled vesting date following the termination date; and (vi) a pro-rated portion of all RSUs and other equity-based grants or cash in lieu of grants that are performance-based remain outstanding and eligible to vest, to the extent the applicable performance goals are achieved based on the portion of the performance period in which Mr. Pribor was employed with the Company. All outstanding and unvested options, RSUs, and other equity-based grants or cash in lieu of grants vest upon termination without cause or for good reason within a one-year period following such change in control. INSW assumed this agreement in its current form effective as of the Spin-Off. As of the Spin-Off, Mr. Pribor is Senior Vice President, CFO and Treasurer of the Company. The Compensation Committee increased his equity grant target from 100% of base salary to 150% for 2018 and future periods (subject to further changes in the future). On April 5, 2019, INSW and Mr. Pribor executed as amendment to his employment agreement that increased his base salary to $500,000.
As of the Spin-Off, Mr. Small became Chief Administrative Officer, Senior Vice President, Secretary and General Counsel of INSW. On February 13, 2015, OSG entered into an employment agreement with Mr. Small to serve as Senior Vice President, Secretary and General Counsel effective March 2, 2015, his hire date with OSG. INSW assumed the agreement between Mr. Small and OSG in its current form effective as of the Spin-Off. In connection with his employment, Mr. Small’s annual salary was $475,000, his annual Target Bonus was set at 150% of his base salary, and he was granted a long-term, equity incentive award with a grant-date value of $1,500,000 consisting in equal amounts of stock options, time-based restricted stock units and performance based restricted stock units, vesting over a three-year period in equal one-third portions. In addition, Mr. Small was paid a sign-on bonus of $150,000. The agreement also states that Mr. Small be granted equity incentive awards with a grant-date value of $600,000 for 2016. His agreement provides for severance benefits in the event of termination without cause or resignation with good reason as follows: (i) salary continuation for a period of 24 months, (ii) a lump sum payment in the amount equal to his Target Bonus in effect for the year of termination, and (iii) accelerated vesting of all unvested equity. On March 30, 2016, OSG and Mr. Small executed an amendment to his employment agreement. This amendment reduced the Target Annual Bonus from 150% to 125% of annual salary in 2016 and from 125% to 100% in 2017 and thereafter. The amendment also provided an equity grant to Mr. Small in the total amount of $900,000 for 2016 and an amount equal to his base salary for 2017 and thereafter. The amendment also adjusted the severance benefits provided under the employment agreement in the event of termination without cause or resignation with good reason as follows: (i) a lump sum payment in the amount equal to 150% of his base salary in effect for the year of termination if separation occurs prior to January 1, 2018 and (ii) accelerated vesting of all unvested equity (performance-based grants shall vest at target levels). On August 3, 2016, Mr. Small and OSG entered into a subsequent amendment to his employment agreement. This amendment adjusted the severance benefits provided in the event of termination without cause or resignation with good reason: Mr. Small will receive salary continuation for 24 months and also a lump sum payment in an amount depending on which year the termination occurs (if in 2017, $1,337,499, in 2018, $1,091,666, in 2019 and beyond, $950,000). In addition, all outstanding and unvested options, RSUs and other equity-based grants or cash in lieu of grants that in all cases are not performance-based will vest upon a termination without cause, for good reason, by death or disability. On November 7, 2016, OSG and Mr. Small entered into a further amendment to his employment agreement, providing that he would become Chief Administrative Officer, Senior Vice President, Secretary and General Counsel of the Company as of the closing of the Spin-Off. As of the date of the Spin-Off, Mr. Small became Chief Administrative Officer, Senior Vice President, Secretary and General Counsel of the Company under the terms above. The Compensation Committee decided to increase his equity grants from 100% of base salary to 125% for 2019 and future periods (subject to further changes in the future).
The Company’s agreements with Messrs. Solon and Nugent are in the form of the company standard offer letter to all employees other than the employment contracts of Ms. Zabrocky and Messrs. Pribor and Small. Messrs. Solon and Nugent have an additional letter providing for their years of service to be treated as 26 years of service solely with regard to the terms of the INSW severance plan and the specific terms as described in their equity grant letters. On April 5, 2019, each of their annual base salaries was increased to $300,000.
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Benefits
In general, INSW provides benefits to its employees that we believe are important to maintaining a competitive total compensation program. Benefits are designed to provide a reasonable level of retirement income and to provide a safety net for protection against the financial concerns and catastrophes that can result from illness, disability or death.
INSW provides a tax-qualified defined contribution employee benefit plan to employees, which for 2019 is the EngagePEO Retirement Savings Plan (the “Savings Plan”). Under the Savings Plan eligible employees may contribute, on a pre-tax basis, an amount up to the limit imposed by the Code. Under the Savings Plan, INSW will match 100% of the first 6% of a participant’s pre-tax contribution (up to the Code limit) which for 2018 was $16,500.
INSW does not currently have any plans that provide for payments or other benefits at, following or in connection with the retirement of our employees, other than the Savings Plan and the INSW SERP (as described in the following paragraph). INSW also assumed OSG’s obligations under the retiree medical plan with respect to those OSG employees who continued to work for the Company after the Spin-Off.
In December 2017, INSW formally adopted the INSW Supplemental Executive Retirement Plan (“INSW SERP”), pursuant to which INSW assumed existing obligations under OSG’s Supplemental Executive Retirement Plan (the “OSG SERP”), which had been assumed in connection with the Spin-Off. Prior to OSG’s Chapter 11 filing, OSG sponsored the OSG SERP. Upon the Chapter 11 filing, account balances under the OSG SERP, including accruals and earnings thereon, were frozen, and OSG discontinued future contributions. In October 2014, OSG decided to pay interest on balances from the time of the Chapter 11 filing until the termination of the participant’s employment at the annual rate of 2.98%. INSW employees who participated in the OSG SERP prior to the Spin-Off (including Ms. Zabrocky) are now participants in the INSW SERP, which remains frozen to new contributions and continues to pay interest on obligations assumed at an annual rate of 2.98%.
Risk Mitigation
As previously discussed, the Compensation Committee believes a significant portion of the NEOs’ total compensation should be variable and “at risk,” based upon Company performance, business/operational metrics and individual performance. Performance measures include both financial and operational metrics. To accomplish this, the Compensation Committee uses a balanced weighting of performance measures and metrics in its incentive compensation programs (i) to promote the achievement of its annual operating plan and long-term business strategy, (ii) to build long-term stockholder value and (iii) to discourage excessive risk taking by eliminating any inducement to over-emphasize one goal to the detriment of others.
To further ensure the Company mitigates excessive risk taking:
| • | INSW maintains policies prohibiting insider trading, hedging and pledging of its securities by directors and executives; |
| • | INSW maintains an Incentive Compensation Recoupment Policy for executive officers; and |
| • | INSW maintains stock ownership guidelines applicable to directors and executive officers of the Company. |
Stock Ownership Guidelines
INSW encourages stock ownership by its executives and non-employee directors in order to align their interests with the long-term interests of its stockholders. INSW has adopted stock ownership guidelines for directors and executive officers of the Company. As measured on January 1 of each fiscal year, each director and officer of the Company (including the NEOs) is expected to own a number of shares of INSW common stock priced at the closing price on the last trading day of the prior fiscal year equal to a specified multiple of his or her salary or, in the case of the independent, non-employee members of the Board, a multiple of his or her annual cash retainer, as follows:
| • | President and CEO — 5 × base salary |
| • | Senior Vice Presidents — 2 × base salary |
| • | Vice Presidents — 1 × base salary |
| • | Independent Non-Employee Directors — 3 × annual board service cash retainer |
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NEOs and independent, non-employee directors are afforded five years from the later of (1) the adoption of the ownership guidelines following the Spin-Off and (2) the time they first received an equity grant from INSW to achieve these ownership guidelines. For purposes of satisfying the guidelines, shares of common stock include stock owned outright by the incumbent, his or her spouse and minor children; time-based restricted stock or RSUs awarded (whether or not vested); vested in-the-money stock options; and shares of stock held for the incumbents’ benefit in any pension or 401(k) plan. Unvested PRSUs do not count towards satisfying the guidelines. INSW has only recently become a public company, and its directors and executive officers have made progress towards meeting these goals since the Spin-Off.
Incentive Compensation Recoupment Policy for Executive Officers
INSW’s Incentive Compensation Recoupment Policy generally provides that if an executive officer, including any NEO, receives cash or equity-based incentive compensation based on the achievement of a performance metric and the Board commenced action to restate the calculation of such performance metric within five fiscal years due to a material misstatement or inaccuracy, INSW may require such executive officer to repay all or a portion of the amounts of such incentive compensation that the Board in good faith determines would not have been payable if not for the material misstatement or inaccuracy. The five-year look back limitation does not apply where the Board determines that the executive officer’s fraud, misconduct, negligence or other knowing actual involvement was a contributing factor to the need for the restatement. The Compensation Committee is monitoring the proposed regulations under the Dodd-Frank Act relating to incentive compensation recoupment and will amend the policy to the extent necessary to comply with the Dodd-Frank Act.
Hedging, Pledging and Insider Trading
INSW’s insider trading policy prohibits its directors and employees from hedging their ownership of its securities, including investing in options, puts, calls, short sales, futures contracts or other derivative instruments relating to its securities or pledging securities directly owned by them, regardless of whether such directors and employees have material nonpublic information about INSW. In addition, the insider trading policy prohibits INSW directors and employees from purchasing or selling its securities while in possession of material nonpublic information or otherwise using such information for their personal benefit. Directors and employees are permitted to enter into trading plans under Rule 10b5-1 under the 1934 Act. With the approval of INSW’s General Counsel, a 10b5-1 Plan may be entered into during a time when the equity participant is not in possession of material, non-public information. These plans are intended to aid the equity participants in diversifying their portfolios without violating federal securities laws.
Report of the Compensation Committee
The Compensation Committee, comprised entirely of independent directors (as defined under U.S. securities laws, NYSE listing standards and applicable guidelines under the Code), has reviewed the CD&A included in this Proxy Statement and discussed that CD&A with management. Based on its review and discussion with management, the Compensation Committee approved the CD&A and recommended to the INSW Board of Directors that the CD&A be included in this Proxy Statement.
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Compensation Committee:
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Timothy J. Bernlohr, Chairman
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Randee E. Day
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Ty E. Wallach
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In accordance with the rules of the SEC, the report of the Compensation Committee does not constitute “soliciting material” and is not incorporated by reference in any filings with the SEC made pursuant to the Securities Act of 1933, as amended (the “1933 Act”), or the 1934 Act.
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The following Summary Compensation Table includes individual compensation information for services in all capacities for the Company and prior to Spin-Off, OSG, received by the individuals identified as NEOs of the Company.
Name and Principal Position |
Year |
Salary(1) |
Bonus |
Stock Awards(2)(3) |
Option Awards(2) |
Non-Equity Incentive Plan Compensation(4) |
Change in Pension Value and Nonqualified Deferred Compensation Earnings |
All Other Compensation(5) |
Total |
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Lois Zabrocky President and Chief Executive Officer |
2018 | $ | 600,000 | $ | — | $ | 800,000 | $ | 399,997 | $ | 567,720 | $ | — | $ | 36,899 | $ | 2,404,616 | ||||||||||
2017 | $ | 525,000 | $ | — | $ | 394,669 | $ | 174,993 | $ | 554,439 | $ | — | $ | 36,465 | $ | 1,685,566 | |||||||||||
2016 | $ | 525,000 | $ | 525,000 | $ | 390,411 | $ | 186,824 | $ | 629,713 | $ | — | $ | 41,248 | $ | 2,298,196 | |||||||||||
Jeffrey D. Pribor Senior Vice President, Chief Financial Officer and Treasurer |
2018 | $ | 450,000 | $ | — | $ | 657,460 | $ | 225,000 | $ | 426,645 | $ | — | $ | 24,666 | $ | 1,783,771 | ||||||||||
2017 | $ | 450,000 | $ | — | $ | 1,300,000 | $ | 798,648 | $ | 476,321 | $ | — | $ | 24,532 | $ | 3,049,501 | |||||||||||
2016 | $ | 58,846 | $ | 150,000 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 208,846 | |||||||||||
James D. Small III Senior Vice President, Chief Administrative Officer, Secretary and General Counsel |
2018 | $ | 475,000 | $ | — | $ | 316,665 | $ | 158,335 | $ | 448,153 | $ | — | $ | 26,000 | $ | 1,424,153 | ||||||||||
2017 | $ | 475,000 | $ | — | $ | 428,348 | $ | 158,335 | $ | 490,556 | $ | — | $ | 25,556 | $ | 1,577,795 | |||||||||||
2016 | $ | 475,000 | $ | — | $ | 701,026 | $ | 320,270 | $ | 558,363 | $ | — | $ | 38,737 | $ | 2,093,396 | |||||||||||
Derek G. Solon Vice President and Chief Commercial Officer |
2018 | $ | 285,475 | $ | — | $ | 190,317 | $ | 95,153 | $ | 206,257 | $ | — | $ | 36,899 | $ | 814,101 | ||||||||||
2017 | $ | 277,160 | $ | — | $ | 129,341 | $ | 64,665 | $ | 208,279 | $ | — | $ | 36,465 | $ | 715,910 | |||||||||||
William F. Nugent VP & Head of International Fleet Operations |
2018 | $ | 273,500 | $ | — | $ | 182,333 | $ | 91,164 | $ | 196,569 | $ | — | $ | 36,899 | $ | 780,465 | ||||||||||
2017 | $ | 260,337 | $ | — | $ | 121,491 | $ | 60,747 | $ | 194,785 | $ | — | $ | 35,932 | $ | 673,292 | |||||||||||
| (1) | The salary amounts reflect the actual salary received during the year. |
| (2) | These amounts represent the aggregate grant date fair value of equity awards granted in the specified fiscal year as calculated pursuant to FASB ASC Topic 718. In 2018, Ms. Zabrocky, Messrs. Pribor, Small, Solon and Nugent received time based equity awards. One third of these awards vests on each of the first, second and third anniversaries of April 4, 2018. Ms. Zabrocky and Messrs. Pribor, Small, Solon and Nugent received stock option awards on April 4, 2018. One third of each stock option award vests and becomes exercisable on each of the first, second and third anniversaries of April 4, 2018. |
| (3) | In 2018, Ms. Zabrocky and Messrs. Pribor, Small, Solon and Nugent received PRSU grants on April 4, 2018. The performance awards vest in full on December 31, 2020, subject to the Compensation Committee’s certification of achievement of the performance measures and targets. Settlement of the PRSUs may be either in shares of common stock or cash, as determined by the Compensation Committee in its discretion, and shall occur as soon as practicable following the Compensation Committee’s certification of the achievement of the applicable performance measures and targets for 2020 and in any event no later than March 15, 2021. The number of PRSUs shall be subject to an increase or decrease depending on performance against the applicable performance measures and targets with the maximum number of PRSUs vesting equivalent to 150% of the PRSUs awarded. The 2018 amounts in this column represent the aggregate grant date fair value of the PRSU award at target, calculated in accordance with accounting guidance, as follows: Ms. Zabrocky — $400,000, Mr. Pribor — $225,000, Mr. Small — $158,333, Mr. Solon — $95,158 and Mr. Nugent — $91,167. Additionally, as part of his initial grant, Mr. Pribor also received a PRSU grant on March 29, 2017 with one-third of the performance award vesting on each anniversary of December 31, 2016 subject in each case to the Compensation Committee’s certification of the performance measures and targets no later than each March 31st following the respective date of vesting. Settlement of the vested PRSUs may be in either shares of common stock or cash, as determined by the Compensation Committee in its discretion, and shall occur as soon as practicable following the Committee’s certification of the achievement of the applicable performance measures and targets for 2018 and in any event no later than March 31, 2020. The number of PRSUs, shall be subject to an increase or decrease depending on performance against the applicable performance measures and goals with the maximum number of PRSUs vesting |
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equivalent to 150% of the PRSUs awarded. Since performance targets are set annually each tranche of the award is considered to be a separate grant. Of the amounts in this column, $207,460 represents the aggregate grant date fair value of the 2018 tranche of such PRSU award at target, calculated in accordance with accounting guidance.
| (4) | The amounts in this column for 2018, 2017 and 2016 reflect the amounts paid in 2019, 2018 and 2017 under the Company’s Cash Incentive Compensation Plan for performance in 2017, 2016, and 2015, respectively. |
| (5) | See the “All Other Compensation Table” below for additional information. |
The following table describes each component of the All Other Compensation column for 2018 in the Summary Compensation Table.
Name |
Savings Plan Matching Contribution(1) |
Qualified Defined Contribution Plan |
Life Insurance Premiums(2) |
Other(3) |
Total |
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Lois K. Zabrocky |
$ | 16,500 | $ | — | $ | 936 | $ | 19,463 | $ | 36,899 | |||||
Jeffrey D. Pribor |
$ | 9,450 | $ | — | $ | 936 | $ | 14,280 | $ | 24,666 | |||||
James D. Small III |
$ | 16,500 | $ | — | $ | 936 | $ | 8,564 | $ | 26,000 | |||||
Derek G. Solon |
$ | 16,500 | $ | — | $ | 936 | $ | 19,463 | $ | 36,899 | |||||
William F. Nugent |
$ | 16,500 | $ | — | $ | 936 | $ | 19,463 | $ | 36,899 | |||||
| (1) | Constitutes INSW’s matching contributions under the INSW Savings Plan. |
| (2) | Life insurance premiums represent the cost of term life insurance paid on behalf of the NEO. |
| (3) | Includes the following amounts for each NEO under plans and arrangements generally maintained by us for all employees (other than “umbrella” liability insurance coverage): (a) medical and dental coverage premiums of $16,615 for Ms. Zabrocky, Messrs. Pribor, $11,432, Small, $5,716, Solon, $16,615, Nugent, $16,615, (b) long-term and short-term disability plan premiums for each NEO of $1,326; and (c) a premium for excess liability insurance coverage for each NEO of $1,522. |
This following table lists the INSW equity and non-equity awards made in fiscal year 2018 to the NEOs granted under the MICP.
Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) |
Estimated Future Payouts Under Equity Incentive Plan Awards(2) |
All Other Stock Awards: Number of Shares of Stock or Stock Units(3) |
All Other Option Awards: Number of Securities Underlying Options (#) |
Exercise or Base Price of Option Awards ($/Sh) |
Grant Date Fair Value of Stock and Option Awards(4) |
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Name |
Grant Date |
Threshold |
Target |
Maximum |
Threshold (#) |
Target (#) |
Maximum (#) |
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Lois K. Zabrocky |
4/4/2018 |
$ | 300,000 | $ | 600,000 | $ | 900,000 | 11,454 | 22,908 | 34,362 | 22,910 | 51,546 | $ | 17.46 | $ | 1,216,129 | |||||||||||||||
Jeffrey D. Pribor |
4/4/2018 |
$ | 225,000 | $ | 450,000 | $ | 675,000 | 6,443 | 12,886 | 19,329 | 12,887 | 28,995 | $ | 17.46 | $ | 684,082 | |||||||||||||||
James D. Small III |
4/4/2018 |
$ | 237,500 | $ | 475,000 | $ | 712,500 | 4,5344 | 9,068 | 13,602 | 9,068 | 20,404 | $ | 17.46 | $ | 481,383 | |||||||||||||||
Derek G. Solon |
4/4/2018 |
$ | 99,916 | $ | 199,833 | $ | 299,749 | 2,725 | 5,450 | 8,175 | 5,450 | 12,262 | $ | 17.46 | $ | 289,309 | |||||||||||||||
William F. Nugent |
4/4/2018 |
$ | 95,725 | $ | 191,450 | $ | 287,175 | 2,611 | 5,222 | 7,833 | 5,221 | 11,748 | $ | 17.46 | $ | 277,181 | |||||||||||||||
| (1) | Amounts actually paid under these awards for 2018 are set forth above under “ – Elements of the 2018 Executive Officer Compensation Program – 2018 Actual Annual Incentive Paid.” |
| (2) | In 2018, Ms. Zabrocky and Messrs. Pribor, Small, Solon and Nugent received PRSU grants on April 4, 2018. These performance awards vest in full on December 31, 2020, subject to the Compensation Committee’s certification of achievement of the performance measures. Settlement of the PRSUs may be either in shares of common stock or cash, as determined by the Compensation Committee in its discretion, and shall occur as soon as practicable following the Compensation Committee’s certification of the achievement of the applicable performance measures and targets for 2020 and in any event no later than March 15, 2021. The number of PRSUs shall be subject to an increase or decrease depending on performance against the applicable performance measures and targets with the maximum number of PRSUs vesting equivalent to 150% of the PRSUs awarded. |
In 2018, Mr. Pribor received a PRSU grant on April 4, 2018 as part of his initial grant. One third of the initial PRSU grant award will vest on each of December 31, 2017, 2018 and 2019, subject in each case to the Compensation Committee’s certification of achievement of the performance measures and targets no later than each March 31 following the respective date of vesting. Settlement of the vested PRSUs may be in either shares of common stock or cash, as determined by the Compensation Committee in its discretion, and shall occur as soon as practicable following the Compensation Committee’s certification of the achievement of the applicable performance measures and targets for 2019 and in any event no later than March 31, 2020. The number of target PRSUs shall be subject to an increase or decrease depending on performance against the applicable performance measures and targets with the
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maximum number of PRSUs vesting equivalent to 150% of the PRSUs awarded. Since performance targets are set annually each tranche of the award is considered to be a separate grant for accounting treatment and, therefore, $207,460 is excluded from the grant date fair value amounts in the above table. For 2018, the actual achievement level was 72% for Mr. Pribor. Therefore, for Mr. Pribor the PRSUs awarded vested at the appropriate percentage upon certification of this result which occurred in 2019. These awards were made pursuant to the terms of Mr. Pribor’s employment agreement.
| (3) | Reflects grants of time-based RSUs. |
| (4) | For information with respect to grant date fair values, see Note 13, “Capital Stock and Stock Compensation, “to INSW’s consolidated financial statements included in INSW’s 2018 Annual Report. |
Outstanding Equity Awards at Fiscal Year-End
The following table lists outstanding INSW equity awards at December 31, 2018 for NEOs under the MICP.
Name |
Option Awards |
Stock/RSU Awards |
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Number of Securities Underlying Unexercised Options (#) Exercisable |
Number of Securities Underlying Unexercised Options (#) Unexercisable |
Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) Unexercisable |
Options Exercise Price |
Option Expiration Date |
Number of Shares or Units of Stock That Have Not Vested (#) |
Market Value of Shares or Units of Stock That Have Not Vested (#)(1) |
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) |
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested(1) |
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Lois K. Zabrocky |
14,942 | — | — | $ | 30.93 | 9/29/2024 | — | $ | — | — | $ | — | |||||||||||||||
16,316 | 8,158 | (3) |
— | $ | 19.04 | 3/30/2026 | 3,065 | (4) |
$ | 51,615 | — | (2) |
$ | — | |||||||||||||
6,782 | 13,566 | (5) |
— | $ | 19.13 | 3/29/2027 | 6,098 | (6) |
$ | 102,690 | 9,147 | (7) |
$ | 154,035 | |||||||||||||
— | 51,546 | (8) |
— | $ | 17.46 | 4/4/2028 | 22,910 | (9) |
$ | 385,804 | 22,908 | (10) |
$ | 385,771 | |||||||||||||
Jeffrey D. Pribor |
52,994 | 26,497 | (11) |
— | $ | 18.21 | 2/14/2027 | 11,882 | (12) |
$ | 200,093 | 11,882 | (13) |
$ | 200,093 | ||||||||||||
5,814 | 11,628 | (5) |
— | $ | 19.13 | 3/29/2027 | 5,228 | (6) |
$ | 88,040 | 7,841 | (7) |
$ | 132,042 | |||||||||||||
— | 28,995 | (8) |
— | $ | 17.46 | 4/4/2028 | 12,887 | (9) |
$ | 217,017 | 12,887 | (10) |
$ | 217,017 | |||||||||||||
James D. Small III |
42,452 | — | — | $ | 27.54 | 3/11/2025 | — | $ | — | — | $ | — | |||||||||||||||
27,971 | 13,985 | (3) |
— | $ | 19.04 | 3/30/2026 | 5,254 | (4) |
$ | 88,477 | — | (2) |
$ | — | |||||||||||||
6,137 | 12,274 | (5) |
— | $ | 19.13 | 3/29/2027 | 5,518 | (6) |
$ | 92,923 | 8,276 | (7) |
$ | 139,334 | |||||||||||||
— | 20,404 | (8) |
— | $ | 17.46 | 4/4/2028 | 9,068 | (9) |
$ | 152,705 | 9,068 | (10) |
$ | 152,705 | |||||||||||||
Derek G. Solon |
2,162 | 4,324 | (14) |
— | $ | 22.42 | 8/03/2027 | 1,923 | (15) |
$ | 32,383 | 2,884 | (7) |
$ | 48,567 | ||||||||||||
— | 12,262 | (8) |
— | $ | 17.46 | 4/4/2028 | 5,450 | (9) |
$ | 91,778 | 5,450 | (10) |
$ | 91,778 | |||||||||||||
William F. Nugent |
2,031 | 4,062 | (14) |
— | $ | 22.42 | 8/03/2027 | 1,806 | (15) |
$ | 30,413 | 2,709 | (7) |
$ | 45,620 | ||||||||||||
— | 11,748 | (8) |
— | $ | 17.46 | 4/4/2028 | 5,221 | (9) |
$ | 87,922 | 5,222 | (10) |
$ | 87,938 | |||||||||||||
| (1) | Based on the closing price of INSW common stock of $16.84 on December 31, 2018. |
| (2) | One third of these PRSUs vested on December 31, 2018 with a payout of at 137.5% subject to the Compensation Committee’s certification of achievement of the performance measure, which occurred in 2019. Two-thirds of the PRSUs did not meet the payout threshold. Refer to footnote (1) to the “Option Exercises and Stock Vested Table,” which follows for additional information. |
| (3) | The option to purchase these shares of common stock was granted pursuant to the 2014 OSG Management Incentive Compensation Plan and assumed by INSW in connection with the Spin-Off. The unvested options vested and became exercisable on March 30, 2019. |
| (4) | These RSUs vested on March 30, 2019. |
| (5) | The unvested options vested and became exercisable as to one half of such shares on March 29, 2019. One-half of such unvested options vest and become exercisable on March 29, 2020. |
| (6) | Of these RSUs, one-half vested on March 29, 2019 and one-half will vest on March 29, 2020 subject to accelerated vesting on the event of termination of employment. |
| (7) | These PRSUs will vest on December 31, 2019, subject to performance achievement. The PRSUs have a maximum result of 150% of target. |
| (8) | One third of the unvested options vested and became exercisable on April 4, 2019. The remaining two thirds of such shares vest ratably on each of the second and third anniversaries of April 4, 2018. |
| (9) | Of these RSUs, one-third vested on April 4, 2019. The remaining two thirds of such RSUs vest ratably on each of the second and third anniversaries of April 4, 2018, subject to accelerated vesting on the event of termination of employment. |
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| (10) | These performance PRSUs will vest on December 31, 2020, subject to performance achievement. The PRSUs have a maximum result of 150% of target. |
| (11) | The unvested options vest and become exercisable on December 31, 2019. |
| (12) | These RSUs vest on December 31, 2019. |
| (13) | These PRSUs vest on December 31, 2019, subject to achievement of the performance measures. The PRSUs have a maximum result of 150% of target based on performance measures determined by the Compensation Committee in March 2019. These shares, which represent one-third of Mr. Pribor’s initial grant, are not considered granted for accounting purposes as of December 31, 2018. |
| (14) | The unvested options vest and become exercisable as to one-half of such shares on August 3, 2019 and one-half on August 3, 2020. |
| (15) | Of these RSUs one-half vest on August 3, 2019, and one-half vest on August 3, 2020, subject to accelerated vesting in the event of involuntary termination of employment, including a termination without cause or a resignation with good reason within the twelve months following a change in control. |
Option Exercises and Stock Vested
The following table provides information for the year ending December 31, 2018 concerning the exercises of INSW stock options and the vesting of stock awards by the NEOs in INSW common stock. This table includes exercised and vested INSW stock option and stock awards. The market value of the stock awards is based on the closing market price of the Company’s common stock as of December 31, 2018, which was $16.84 per share.
Option Awards |
Stock Awards |
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Name |
Number of Shares Acquired on Exercise (#) |
Value Realized on Exercise |
Number of Shares Acquired on Vesting (#)(1) |
Value Realized on Vesting |
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Lois K. Zabrocky |
— | — | 10,326 | $ | 173,890 | |||||||
Jeffrey D. Pribor |
— | — | 23,018 | $ | 387,623 | |||||||
James D. Small III |
— | — | 21,073 | $ | 354,874 | |||||||
Derek G. Solon |
— | — | 961 | $ | 16,183 | |||||||
William F. Nugent |
— | — | 903 | $ | 15,207 | |||||||
| (1) | For Ms. Zabrocky and Mr. Small, each NEO’s respective PRSU tranche vested on December 31, 2018. The formal certification of the achievement of the performance measure by the Compensation Committee occurred in 2019. One-third of Ms. Zabrocky and Mr. Small’s 2016 PRSUs vested at 137.5% for a total of 4,213 and 7,224 respectively. The remaining two-thirds of their performance based 2016 grant did not meet the minimum threshold for a payout. Mr. Pribor’s (2018 tranche of the 2017 grant) PRSUs vested at 72% for a total of 8,436. Additionally, Ms. Zabrocky had RSUs of 3,049 and 3,064 vest on March 29, 2018 and March 30, 2018, respectively. Additionally, Mr. Small had RSUs of 5,838, 2,758 and 5,253 vest on March 2, 2018, March 29, 2018 and March 30, 2018, respectively. Messrs. Solon and Nugent had RSUs vest on August 3, 2018. Additionally, Mr. Pribor had 2,613 and 11,882 RSUs vest March 29, 2018 and December 31, 2018, respectively. |
Nonqualified Deferred Compensation
The following table provides information with respect to the deferral of compensation on a non-tax qualified basis to the INSW Supplemental Plan for each NEO. The Supplemental Plan provides for interest at an annual rate of 2.98% through the termination date of the participant. The plan is frozen to new participants.
Name |
Executive Contributions in 2018 |
Company Contributions on 2018 |
Aggregate Earnings/ Losses in 2018(1) |
Aggregate Withdrawals/ Spin-Offs in 2018 |
Aggregate Balance at December 31, 2018 |
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Lois K. Zabrocky |
$ | — | $ | — | $ | 4,937 | $ | — | $ | 195,948 | |||||
Jeffrey D. Pribor |
$ | — | $ | — | $ | — | $ | — | $ | — | |||||
James D. Small III |
$ | — | $ | — | $ | — | $ | — | $ | — | |||||
Derek G. Solon |
$ | — | $ | — | $ | — | $ | — | $ | — | |||||
William F. Nugent |
$ | — | $ | — | $ | — | $ | — | $ | — | |||||
| (1) | The aggregate earnings constitute accrued interest for the calendar year ended December 31, 2018. There were no executive or INSW contributions in 2018. |
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Potential Payments Upon Termination or Change in Control
The following table discloses the amounts that would have been payable to each NEO upon termination of their employment, assuming for this purpose that such termination had occurred on December 31, 2018. At December 31, 2018, no NEO was eligible for normal retirement at age 65. The table excludes amounts payable pursuant to the INSW Supplemental Plan and pursuant to plans that do not discriminate in favor of executive officers and that are generally available to all salaried employees, such as the Savings Plan.
Event(1) |
Lois K. Zabrocky |
Jeffrey D. Pribor |
James D. Small III |
Derek G. Solon |
William F. Nugent |
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Involuntary Termination Without Cause or Voluntary Resignation for Good Reason, Including in Connection with a Change in Control |
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Cash Severance Payment(2) |
$ | 1,200,000 | $ | 450,000 | $ | 950,000 | $ | 285,475 | $ | 273,500 | |||||
Pro Rata Bonus Payment(3) |
$ | 600,000 | $ | 450,000 | $ | 475,000 | $ | 0 | $ | 0 | |||||
Bonus Payment(4) |
$ | 0 | $ | 0 | $ | 0 | $ | 199,833 | $ | 191,450 | |||||
Equity Awards(5) |
$ | 540,109 | $ | 591,995 | $ | 334,106 | $ | 0 | $ | 0 | |||||
Lump Sum Payment |
$ | 1,049,999 | $ | 0 | $ | 1,091,666 | $ | 0 | $ | 0 | |||||
Total |
$ | 3,390,108 | $ | 1,491,995 | $ | 2,850,772 | $ | 485,308 | $ | 464,950 | |||||
Death/Disability |
|||||||||||||||
Pro Rata Bonus Payment |
$ | 0 | $ | 450,000 | (6) |
$ | 0 | $ | 0 | $ | 0 | ||||
Equity Awards |
$ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | |||||
Total |
$ | 0 | $ | 450,000 | $ | 0 | $ | 0 | $ | 0 | |||||
| (1) | The values in this table reflect estimated payments associated with various termination scenarios. |
| (2) | This reflects a cash severance payment equal to 24 months of base salary for Ms. Zabrocky and Mr. Small. Mr. Pribor is entitled to receive 18 months of base salary if the separation is for good reason and due to a change in control or (as shown) 12 months if the separation is for good reason and not due to a change in control. Messrs. Solon and Nugent are entitled to 12 months of base salary if the separation is for “good reason”. |
| (3) | For Ms. Zabrocky and Messrs. Pribor and Small a pro-rata target bonus is provided for in their respective employment agreements. The amounts listed are if termination of employment occurs on the last business day of the year. For Mr. Pribor if no bonus payment is made to other executive officers of the Company in respect of the year in which the separation from service occurs due to business unit and company performance objectives not being met, then no amount shall be payable to him. |
| (4) | Messrs. Solon and Nugent are to receive a 12 month bonus at target for the year if terminated. |
| (5) | For Ms. Zabrocky and Mr. Small all option shares and time based RSUs (and any other equity based grant or cash in lieu of grants that is not performance based) granted to Ms. Zabrocky and Mr. Small, to the extent not otherwise vested, shall vest as of the separation date, as applicable. The unvested PRSUs will be forfeited in the event of termination. As of December 31, 2018, all options for Ms. Zabrocky and Messrs. Small, Solon and Nugent were considered underwater and were therefore not included in the calculation. Mr. Pribor would be entitled to the vesting of the remaining portions of his initial grant which includes 11,882 shares for his PRSUs, 11,882 for his performance RSUs and 26,497 for his stock options (also underwater). Given a strike price for the options of $16.84 and a vesting price of $16.84 on December 31, 2018, the total for the initial grant of all three equity awards is $400,186. For Mr. Pribor (per his agreement) the March 29, 2017 grant for RSUs one-third, 2,613, were considered to vest totaling $44,014. For PRSUs the number of unvested units, 2,613 at a rate of $16.84 are multiplied by the number of weeks worked, divided by the term of the grant 143 weeks for a total value of $56,018. The total for the 2017 grant for RSUs and PRSUs is $100,032. His stock options for this grant were considered underwater. For Mr. Pribor (per his agreement) the April 4, 2018 grant for RSUs one third, 4,295, were considered to vest totaling $72,339. For PRSUs, the number of unvested units, 4,205 at a rate of $16.84 are multiplied by the number of weeks worked, 38 divided by the term of the grant 143 weeks for a total value of $19,358. The total for the 2018 grant for PRSUs is $91,697. His stock options were considered underwater. Messrs. Solon and Nugent would be entitled to vesting of the unvested time based RSUs and unvested stock options if the separation is for “good reason” and within 12 months of a “change in control”, otherwise the unvested RSUs and unvested stock options shall immediately be forfeited (as reflected above). For Messrs. Solon and Nugent all PRSUs shall immediately be forfeited on the separation date. |
| (6) | Upon Mr. Pribor’s disability, Mr. Pribor, or in the case of his death, his estate, is entitled to receive the pro-rata portion of his annual bonus at target for the year of termination. The amount listed in table is if his disability or death occurs on December 31, 2018, the last business day of the year. |
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The compensation of the Company’s median employee (“Median Employee”) was determined by reviewing the amount of compensation paid to each of the Company’s employees, of which 41 (not including the CEO) were located in its New York, Houston and European offices and 1,600 seafarers were employed on its vessels during the year ended December 31, 2018. The Company’s seafarers are hired by its technical managers acting as agent for the individual ship owning companies, each of which is a subsidiary of the Company, and include employees from various non-U.S. jurisdictions, including in particular the Philippines, India and Eastern Europe. In determining the compensation paid to the CEO and the Median Employee, the Company used the data as shown in its payroll records including base salary, bonuses (including equity awards), seniority payments, performance bonuses, welfare costs, healthcare payments and other benefits paid by or on behalf of the Company. While the number of days worked by the Company’s seafarers ranged from approximately 2 to 362 days in 2018, the Median Employee worked approximately 228 days. Our CEO had annual total compensation of $2,404,616 and our Median Employee had annual total compensation of $22,972. Therefore, our CEO’s annual total compensation is 105 times that of the median of the annual total compensation of all our employees.
Compensation Committee Interlocks and Insider Participation
No member of the Compensation Committee was, during fiscal year 2018, an officer or employee of INSW or was formerly an officer of INSW. None of INSW’s executive officers served on any board of directors or compensation committee of any other company for which any of INSW’s directors served as an executive officer at any time during fiscal 2018. Please see “Information About the Board and Corporate Governance — Related Party Transactions” above for the Company’s policy on related person transactions.
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The Board is not aware of any matters to be presented at the meeting other than those specified above. If any other matter should be presented, the holders of the accompanying proxy will vote the shares represented by the proxy on such matter in accordance with their best judgment.
The SEC has adopted rules that permit companies and intermediaries such as brokers to satisfy delivery requirements for proxy statements with respect to two or more stockholders sharing the same address by delivering a single proxy statement addressed to those stockholders. This process, which is commonly referred to as “householding,” potentially provides extra convenience for stockholders and cost savings for companies. Some brokers use this process for proxy materials, delivering a single proxy statement to multiple stockholders sharing an address unless contrary instructions have been received from the affected stockholders. Once you have received notice that any person will be householding materials to your address, householding will continue until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in householding and would prefer to receive a separate proxy statement, or if you are receiving multiple copies of the proxy statement and wish to receive only one, please notify your broker if your shares are held in a brokerage account or the Company if you hold shares registered in your name, and the Company will promptly undertake to carry out your request. You can notify the Company by sending a written request to the Company at its address set forth above.
The Company’s 2018 Annual Report is available at http://www.intlseas.com/Docs. That 2018 Annual Report does not form part of this Proxy Statement. The Company will provide to any stockholder of the Company, without charge, a copy of the Company’s 2018 Annual Report upon written request addressed to the Corporate Secretary of the Company at 600 Third Avenue, New York, New York 10016.
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By order of the Board of Directors,
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JAMES D. SMALL III
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Chief Administrative Officer, Senior Vice President,
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General Counsel and Secretary
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New York, New York
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April 25, 2019
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40
