DEF 14A 1 a15-1573_1def14a.htm DEFINITIVE PROXY STATEMENT

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

 

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.     )

 

Filed by the Registrant  x

 

Filed by a Party other than the Registrant  o

 

Check the appropriate box:

o

Preliminary Proxy Statement

o

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

x

Definitive Proxy Statement

o

Definitive Additional Materials

o

Soliciting Material Pursuant to §240.14a-12

 

ArcBest Corporation

(Name of Registrant as Specified In Its Charter)

 

 

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

 

Payment of Filing Fee (Check the appropriate box):

x

No fee required.

o

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

 

(1)

Title of each class of securities to which transaction applies:

 

 

 

 

(2)

Aggregate number of securities to which transaction applies:

 

 

 

 

(3)

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

 

 

 

 

(4)

Proposed maximum aggregate value of transaction:

 

 

 

 

(5)

Total fee paid:

 

 

 

o

Fee paid previously with preliminary materials.

o

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

 

(1)

Amount Previously Paid:

 

 

 

 

(2)

Form, Schedule or Registration Statement No.:

 

 

 

 

(3)

Filing Party:

 

 

 

 

(4)

Date Filed:

 

 

 

 



Table of Contents

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Notice of

 

 

 

Annual Meeting &

 

 

 

Proxy Statement

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2015

 

 

 

 

 

 

 

 



Table of Contents

 

Table of

Contents

 

 

Page

 

 

Notice of Annual Meeting of Stockholders

1

 

 

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

2

 

 

Proxy Statement

 

 

 

 

Record Date

3

 

Proxies

3

 

Voting Shares

4

 

Proposal I. Election of Directors

5

 

Directors of the Company

6

 

Governance of the Company

10

 

Director Compensation

15

 

2014 Director Compensation Table

17

 

Principal Stockholders and Management Ownership

19

 

Executive Officers of the Company

21

 

Compensation Discussion & Analysis

25

 

Compensation Committee Report

38

 

Compensation Committee Interlocks and Insider Participation

39

 

Summary Compensation Table

39

 

2014 Grants of Plan-Based Awards

41

 

Outstanding Equity Awards at 2014 Fiscal Year-End

43

 

2014 Option Exercises and Stock Vested

44

 

2014 Equity Compensation Plan Information

45

 

2014 Pension Benefits

46

 

2014 Non-Qualified Deferred Compensation

48

 

Potential Payments upon Termination or Change in Control

51

 

Certain Transactions and Relationships

57

 

Section 16(a) Beneficial Ownership Reporting Compliance

57

 

Report of the Audit Committee

58

 

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

59

 

Principal Accountant Fees and Services

59

 

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

60

 

Proposal III. Advisory Vote on Executive Compensation

60

 

Proposal IV. Approval of Material Plan Terms of the Executive Officer Annual Incentive Compensation Plan, as Amended, for Purposes of Complying with the Requirements of Section 162(m) of the Internal Revenue Code of 1986 as Amended

61

 

Other Matters

65

 

Cost of Solicitation

65

 

Stockholder Communication with the Board

65

 

Procedure for Submitting Stockholder Proposals for 2016 Annual Meeting

66

 

General Matters

67

 

Appendix A

68

 

Appendix B

76

 



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Notice of

Annual Meeting of Stockholders

ArcBest Corporation

To Be Held on May 1, 2015

 

To the Stockholders of ArcBest Corporation:

 

You are cordially invited to attend the Annual Meeting of Stockholders of ArcBest Corporation (the “Company”) on Friday, May 1, 2015 at 8:00 a.m. (CDT) at the principal offices of the Company located at 3801 Old Greenwood Road, Fort Smith, Arkansas 72903. In addition to this notice, enclosed are a proxy card and a proxy statement containing information about the following matters to be acted upon at the meeting:

 

I.

 

To elect nine directors for a one-year term to expire at the 2016 Annual Meeting of Stockholders;

 

 

 

II.

 

To ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for fiscal year 2015;

 

 

 

III.

 

To conduct an advisory vote on executive compensation;

 

 

 

IV.

 

To approve the material plan terms of the Executive Officer Annual Incentive Compensation Plan, as amended, for purposes of complying with the requirements of Section 162(m) of the Internal Revenue Code of 1986, as amended; and

 

 

 

V.

 

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

 

Only stockholders of record at the close of business on March 2, 2015 are entitled to notice of and to vote at the meeting or any adjournment(s) or postponement(s) thereof. Whether or not you plan to attend the meeting, please complete, sign, date and return the enclosed proxy card or follow the instructions on the proxy card and vote by Internet or by telephone as promptly as possible. It is important that your shares be represented at the meeting.

 

 

 

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

 

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

 

 

 

By Order of the Board of Directors, March 12, 2015.

 

GRAPHIC

GRAPHIC

Robert A. Young III

Judy R. McReynolds

Chairman of the Board

President and Chief Executive Officer

 

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

 

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

To Be Held on May 1, 2015

 

The Proxy Statement, proxy card and 2014 Annual Report on Form 10-K to stockholders are available at www.arcb.com.

 

The 2015 Annual Meeting of Stockholders of ArcBest Corporation (the “Company”) will be held on Friday, May 1, 2015 at 8:00 a.m. (CDT) at the principal offices of the Company located at 3801 Old Greenwood Road, Fort Smith, Arkansas 72903. To obtain directions to attend the Annual Meeting and to vote in person, contact the Company’s Investor Relations Department at toll-free telephone number 800-961-9744, email address invrel@arcb.com or through the Company website www.arcb.com.

 

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

 

I.

 

Election of nine directors for a one-year term to expire at the 2016 Annual Meeting of Stockholders;

 

John W. Alden

Fred A. Allardyce

William M. Legg

Judy R. McReynolds

John H. Morris

Craig E. Philip

Steven L. Spinner

Janice E. Stipp

Robert A. Young III

 

II.

 

Ratification of appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for fiscal year 2015;

 

 

 

III.

 

Advisory vote on executive compensation;

 

 

 

IV.

 

Approval of material plan terms of the Executive Officer Annual Incentive Compensation Plan, as amended, for purposes of complying with the requirements of Section 162(m) of the Internal Revenue Code, as amended (the “IRC”); and

 

 

 

V.

 

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

 

The Board of Directors recommends a vote “FOR” each of the nominees for election to the Board, “FOR” ratification of the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for fiscal year 2015, “FOR” the approval of the compensation of the Company’s Named Executive Officers, and “FOR” the approval of the material plan terms of the Executive Officer Annual Incentive Compensation Plan, as amended, for purposes of complying with the requirements of Section 162(m) of the IRC.

 

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

 

·                  The Proxy Statement for the 2015 Annual Meeting of Stockholders

·                  The 2014 Annual Report on Form 10-K

·                  The form of proxy card being distributed to stockholders in connection with the 2015 Annual Meeting of Stockholders

 

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Proxy Statement

 

This Proxy Statement is furnished to the stockholders of ArcBest Corporation (“ArcBest” or the “Company”), formerly known as Arkansas Best Corporation, in connection with the solicitation of proxies on behalf of the ArcBest Board of Directors (the “Board”) to be voted at the Company’s Annual Meeting of Stockholders (the “2015 Annual Meeting”) to be held on May 1, 2015 at 8:00 a.m. (CDT) at the principal offices of the Company for the purposes set forth in this Proxy Statement. This Proxy Statement, the Notice of Annual Meeting, the related proxy card, and the 2014 Annual Report on Form 10-K to Stockholders are being mailed to stockholders beginning on or about March 27, 2015. ArcBest’s principal place of business is at 3801 Old Greenwood Road, Fort Smith, Arkansas 72903, and its telephone number is 479-785-6000.

 

 

Record Date

 

The Board has fixed the close of business on March 2, 2015 as the record date for the 2015 Annual Meeting. Only stockholders of record on that date are entitled to vote at the meeting in person or by proxy.

 

 

Proxies

 

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

 

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

 

Registered stockholders may revoke their proxy at any time before the shares are voted at the 2015 Annual Meeting by: (i) timely submitting a proxy with new voting instructions, using the Internet or telephone voting system; (ii) voting in person at the 2015 Annual Meeting by completing a ballot; however, attending the meeting without completing a ballot will not revoke any previously submitted proxy; (iii) timely delivery of a valid, duly executed proxy card bearing a later date; or (iv) delivery of written notice of revocation to the Corporate Secretary of the Company at 3801 Old Greenwood Road, Fort Smith, Arkansas 72903, by 5:00 p.m. (CDT), on or before April 30, 2015. Beneficial stockholders may change their votes by submitting new voting instructions to their bank, broker or other nominee in accordance with that entity’s procedures.

 

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Voting Shares

 

On the record date, there were 25,986,079 shares of Common Stock outstanding and entitled to vote. Each share of Common Stock is entitled to one vote. Cumulative voting is not allowed. The holders in person or by proxy of a majority of the total number of shares of Common Stock shall constitute a quorum for purposes of the 2015 Annual Meeting. If stockholders holding the number of shares of Common Stock necessary for a quorum shall fail to be present in person or by proxy at the time and place fixed for any meeting, the holders of a majority of the shares entitled to vote who are represented in person or by proxy may adjourn the meeting from time to time, until a quorum is present, and at any such adjourned meeting at which a quorum is present, any business may be transacted which might have been transacted at the original meeting. Votes are tabulated by the inspector of elections, Wells Fargo Bank, N.A.

 

If you hold your shares in “street name,” you will receive instructions from your broker or other nominees describing how to vote your shares. If you do not timely instruct your broker or nominee how to vote your shares, he or she may use discretionary authority to vote your shares on Proposal II (Ratification of Appointment of Independent Registered Public Accounting Firm).

 

For Proposal I (Election of Directors), Proposal III (Advisory Vote on Executive Compensation) and Proposal IV (Approval of Material Plan Terms of the Executive Officer Annual Incentive Compensation Plan, As Amended, for Purposes of Complying with the Requirements of Section 162(m) of the Internal Revenue Code of 1986, as Amended), you must provide timely instructions on how the broker or other nominee should vote your shares. If you do not give timely instructions to the broker or other nominee on how that broker or nominee should vote your shares, a “broker non-vote” results. Although any broker non-vote would be counted as present at the meeting for purposes of determining a quorum, it would be treated as not entitled to vote with respect to Proposal I, Proposal III and Proposal IV.

 

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

 

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

 

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

 

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

 

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

 

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

 

Unless otherwise instructed or unless authority to vote is withheld, the enclosed proxy card will be voted for the election of each of the director nominees; for the ratification of Ernst & Young LLP as the Company’s independent registered public accounting firm for fiscal year 2015; for the approval, on an advisory basis, of the compensation of the Company’s Named Executive Officers (listed in the “Compensation Discussion and Analysis”); and for the approval of the material plan terms of the Executive Officer Annual Incentive Compensation Plan, as amended, for purposes of complying with the requirements of Section 162(m) of the Internal Revenue Code of 1986, as amended (the “IRC”).

 

 

Proposal I. Election of Directors

 

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

 

The Board has designated John W. Alden, Fred A. Allardyce, William M. Legg, Judy R. McReynolds, John H. Morris, Craig E. Philip, Steven L. Spinner, Janice E. Stipp and Robert A. Young III as nominees for election as Directors of the Company at the 2015 Annual Meeting (each a “Nominee” and “Director”). Each Nominee is currently a Director of the Company. If elected, each Nominee will serve until the expiration of his/her term at the Company’s Annual Meeting of Stockholders in 2016 or until his/her earlier death, resignation or removal from office.

 

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

 

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

 

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

 

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Directors of the Company

 

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

 

Nominees for Election at the 2015 Annual Meeting, Term Will Expire at the 2016 Annual Meeting

 

 

 

JOHN W. ALDEN, age 73, has been a Director of the Company since May 2005. Mr. Alden retired as Vice Chairman of United Parcel Service of America, Inc. (“UPS”) in 2000. From 1988 until his retirement from UPS, he served as a Director of UPS. Mr. Alden worked for UPS for 35 years in various capacities. Currently, Mr. Alden is also a Director of Silgan Holdings, Inc. and HD Supply.

 

Key Attributes, Experience and Skills

As Vice Chairman and Senior Vice President–Business Development of UPS, Mr. Alden led a global public transportation company and public company board. Through his 35 years at UPS, he gained expertise in the areas of sales and marketing, operations, customer service, management, senior management, business development and public company board strategic planning and oversight. Mr. Alden, Chairman of the Board’s Nominating/Corporate Governance Committee and member of the Board’s Compensation Committee, has served on seven boards over the past 21 years.

 

 

 

 

FRED A. ALLARDYCE, age 73, has been a Director of the Company and a Board-designated Audit Committee Financial Expert since February 2004. Mr. Allardyce has been Chairman and Chief Executive Officer of Advanced Breath Diagnostics since March 2000 and Chairman of Monitor Instruments since September 2000. Advanced Breath Diagnostics is a development-stage medical diagnostic company and Monitor Instruments is a development-stage scientific instrument company. From 1977 through 1999, he was employed by American Standard Inc., a publicly traded company, where he served in the following positions: Senior Vice President–Medical Products from January 1998 until November 1999; Chief Financial Officer from 1992 to 1997; Controller from 1983 to 1991; and Assistant Controller from 1977 to 1982. He also served in various financial-related capacities for Joseph E. Seagram & Sons from 1972 to 1977 and at Continental Oil Company from 1965 to 1972. Mr. Allardyce earned a B.A. in Economics from Yale University and an M.B.A. from the University of Chicago Graduate School of Business, where he was the recipient of the Institute of Professional Accountants Fellowship. Mr. Allardyce was Chairman in fiscal 1999–2000 of Financial Executives International, a 15,000-member organization of financial leaders.

 

Key Attributes, Experience and Skills

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

 

 

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WILLIAM M. LEGG, age 70, has been a Director of the Company since April 2002. He retired from Deutsche Banc Alex.Brown, an investment banking firm (“Alex.Brown”), as Managing Director, in 2002. During his 31 years at Alex.Brown, he served as Head of Alex.Brown’s Transportation Group and Co-Head of Alex.Brown & Sons, Inc.’s Corporate Finance Department. Mr. Legg and his group executed initial public offerings for many logistics companies including: Viking Freight, MS Carriers, Werner Enterprises, J.B. Hunt, Swift, Old Dominion, CH Robinson and Hub Group. Mr. Legg worked on transportation-related transactions for Deutsche Post, PepsiCo, ARA Services, Transport Development Group and the Company. Mr. Legg earned a B.A. from Trinity College and an M.B.A from Loyola College. Prior to joining Alex.Brown in 1971, he served as an officer in the United States Navy.

 

Key Attributes, Experience and Skills

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

 

 

 

 

JUDY R. MCREYNOLDS, age 52, has been a Director of the Company and President and Chief Executive Officer since January 2010. She served as Senior Vice President–Chief Financial Officer and Treasurer from February 2006 through December 2009. She was Vice President–Controller of ArcBest from January 2000 until January 2006. She previously served as the Controller of the Company from July 1998 until December 1999. Ms. McReynolds joined the Company as Director of Corporate Accounting in June 1997. Ms. McReynolds has been a member of the Board of Directors of OGE Energy Corp. since July 2011 and serves on its Compensation Committee and Nominating and Governance Committee. She has served on the Transportation Industry Council of the Federal Reserve Bank of St. Louis since June 2012.

 

Key Attributes, Experience and Skills

As the only member of the Company’s senior management who serves on the Board, Ms. McReynolds provides significant industry-specific experience and unique expertise with respect to both ArcBest and its transportation and logistics subsidiaries, resulting from a 17-year tenure with the Company and 25 years of financial experience in the less-than-truckload (“LTL”) and truckload trucking industry. Her experience as Chief Financial Officer, Certified Public Accountant, Controller, and currently as Chief Executive Officer, have contributed to the Board’s insights in LTL and truckload transportation knowledge, labor and pension matters, investment and corporate banking, financial analysis, strategic planning, appropriate capital structures and shareholder value.

 

 

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JOHN H. MORRIS, age 71, has been a Director of the Company since July 1988 and was a Director of Treadco, Inc. from June 1991 to June 1999. Mr. Morris was affiliated with StoneCreek Capital, a private equity firm, from 1992 to 2008. Mr. Morris served as a Managing Director of Kelso & Company, Inc. (“Kelso”), a private equity firm, from March 1989 to March 1992, was a General Partner from 1987 to March 1989 and prior to 1987, was a Vice President. Prior to 1985, Mr. Morris was President of LBO Capital Corp. Previous work experience includes Booz, Allen and Hamilton; three years with the First National Bank of Atlanta and nine years with Touche Ross & Co., a predecessor of Deloitte and Touche, as a management consultant. After leaving Touche Ross & Co., he joined Kelso, a boutique private equity firm in 1982. While with Kelso, he was responsible for several large buyouts, including Spectramed, IHOP, ArcBest, and Landstar Systems, and served on the committee that approved all Kelso acquisitions. Mr. Morris’s public board experience includes, in addition to ArcBest and Treadco, Inc., Spectramed, Inc. and Landstar Systems. Mr. Morris received a Bachelor of Industrial Engineering degree from Georgia Tech and an M.B.A. in Finance from Georgia State University. He received a CPA Certificate from the State of Georgia in 1974.

 

Key Attributes, Experience and Skills

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

 

 

 

DR. CRAIG E. PHILIP, age 61, has been a Director of the Company since August 2011. Dr. Philip joined the faculty of Vanderbilt University, in January 2015, as Research Professor in Civil and Environmental Engineering and Director of Vanderbilt’s Transportation Center, VECTOR. Dr. Philip retired as Chief Executive Officer of Ingram Barge Company in 2014. He was President of Ingram Barge from 1994 until 1999 when he was named Chief Executive Officer. Dr. Philip began his transportation career with Conrail in 1980, working for Ingram Barge from 1982 until 1987 and serving as Vice President of the Intermodal Division of Southern Pacific Railroad before returning to Ingram Barge in 1991. He has held adjunct faculty positions at Princeton University and at Vanderbilt University. Dr. Philip holds Master’s and Doctorate degrees in Engineering from the Massachusetts Institute of Technology and an undergraduate degree in Civil Engineering from Princeton University. In 2014, Dr. Philip was elected to membership in the National Academy of Engineering.

 

Key Attributes, Experience and Skills

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

 

 

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STEVEN L. SPINNER, age 55, has been a Director of the Company since July 2011. Mr. Spinner has been President and Chief Executive Officer and a member of the Board of Directors of United Natural Foods, Inc. (“UNFI”) since September 2008. Prior to joining UNFI in 2008, he was a Director and Chief Executive Officer of Performance Food Group Company (“PFG”) from October 2006 to May 2008 and PFG’s President and Chief Executive Officer from May 2005 to May 2008. He was the Senior Vice President and Chief Executive Officer of PFG’s Broadline Division (“Broadline”) from February 2002 to May 2005 and Division President of Broadline from August 2001 to February 2002.

 

Key Attributes, Experience and Skills

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

 

 

 

JANICE E. STIPP, age 55, has been a Director of the Company since October 2012 and a Board-designated Audit Committee Financial Expert since February 2015. Ms. Stipp is Executive Vice President, Chief Financial Officer and Treasurer of Tecumseh Products, a global manufacturer of compressors and condensing units for the commercial refrigeration market. She was named to this position in October 2011. Prior to that, she was Chief Financial Officer at Revestone Industries; Acument Global Technologies, a Platinum Equity portfolio company; and GDX Automotive, a Cerberus Equity portfolio company. She began her career in 1981 with Lear Siegler, working in corporate audit. From 1984 to 1999, she worked for General Motors in a variety of financial roles. She graduated from Michigan State University in 1981 with a B.A. in Accounting and received her CPA certification in 1983 and M.B.A from Wayne State University in 1987. Ms. Stipp also serves on the Board of Directors of Ply Gem Holdings, Inc., a building products manufacturer.

 

Key Attributes, Experience and Skills

Ms. Stipp has over 33 years of financial and accounting experience with a variety of industrial companies. For the past eight years, she has served as CFO of both public and private companies. She has a strong background in financial controls, auditing, financial management and accounting, acquisitions and treasury. She is experienced in corporate restructuring, having led turnaround efforts at several of the private equity-sponsored companies where she worked. In addition to her CFO experience, she has also held the Corporate Controller position and has held several treasury-related positions. Given her years of senior-level executive management, she has extensive experience working with boards of directors at several companies. Ms. Stipp’s financial experience brings valuable knowledge to the Audit Committee.

 

 

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ROBERT A. YOUNG III, age 74, has been a Director of the Company since 1970 and Chairman of the Board since July 2004. He was Chief Executive Officer of the Company from August 1988 until his retirement in January 2006. He was President of the Company from 1973 to 2004 and was Chief Operating Officer of the Company from 1973 to 1988. Mr. Young served as President of ABF Freight System, Inc., the Company’s largest subsidiary (“ABF Freight”), from 1979 to 1994. Between 1964 and 1973, he worked as Supervisor of Terminal Operations for ABF Freight; Vice President–General Manager of ArcBest Technologies, Inc., a Company subsidiary; Senior Vice President–National Bank of Commerce of Dallas; and as Vice President, Finance and Executive Vice President of the Company. Mr. Young was a Director of Treadco, Inc. from June 1991 to June 1999. Treadco, Inc. was a publicly held company from 1991 to 1999. The Company owned more than 40% of the outstanding stock of Treadco, Inc. from 1991 to 1999, when the Company purchased all remaining outstanding stock via a tender offer. Substantially all operations of Treadco were disposed of in 2000.

 

Key Attributes, Experience and Skills

Serving the Company and ABF Freight in executive and Board positions over the past four decades, Mr. Young has become an acknowledged leader in transportation and finance. He was a member of the Board of the Federal Reserve Bank (“Reserve Board”) of St. Louis, Little Rock Branch, from July 2004 until his retirement from the Reserve Board on December 31, 2011. After 51 years in the trucking industry and 44 years on the Company’s Board, he provides strong leadership through his background in LTL transportation, mergers and acquisitions, investment banking, private equity, labor and personnel selection and evaluation.

 

 

 

Governance of the Company

 

Board Leadership Structure

 

The Company has a separate Chairman of the Board and Chief Executive Officer. The Company believes this separation allows the individuals serving in these positions to effectively utilize their skills and time on behalf of the Company. Robert A. Young III, a past Chief Executive Officer, who brings more than 44 years of LTL transportation, finance and board experience to the Board, serves as non-employee Chairman of the Board and leads the Board in its governance role. Judy R. McReynolds brings significant LTL and truckload experience to her day-to-day leadership role as Chief Executive Officer. For complete business biographical information on Mr. Young and Ms. McReynolds, see “Directors of the Company.” Because Mr. Young, as Chairman, qualifies as an independent Director under NASDAQ requirements, the Company does not have a Lead Independent Director.

 

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

 

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

 

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

 

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The Board meets on a regularly scheduled basis six times a year to review significant developments affecting the Company and to act on matters requiring Board approval. It also holds special meetings when Board action is required between scheduled meetings. The Board met six times during 2014. During 2014, each member of the Board participated in at least 75% of all Board and applicable committee meetings held during the period for which he/she was a Director. The Nominating/Corporate Governance Committee has determined that a majority of the members of the Board are independent pursuant to applicable NASDAQ independence standards. Independent Directors are Messrs. Alden, Allardyce, Legg, Morris, Spinner and Young, Dr. Philip and Ms. Stipp. Independent Directors met in executive session four times in 2014.

 

It is the Company’s policy that all members of its Board attend each annual meeting of its stockholders, except when illness or other personal matters prevent such attendance. Eight of the nine members of the Board at the time of the Company’s 2014 Annual Meeting of Stockholders attended such meeting.

 

Board’s Role in Risk Oversight

 

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

 

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

 

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

 

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

 

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

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

·                  multiple performance metrics;

·                  relative performance metric;

 

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·                  robust financial control policies and audit practices;

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

·                  clawback policy;

·                  a prohibition against hedging transactions or pledging of shares;

·                  five-year cliff vesting periods for equity awards;

·                  stock ownership requirements for senior officers;

·                  utilizing an independent compensation consultant to review executive incentive plans;

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

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

 

The most recent risk management evaluation was provided to the Compensation Committee in January 2015. Based on the information provided and the Compensation Committee’s knowledge of the compensation policies and practices of the Company, the Compensation Committee concluded that the risks arising from the Company’s compensation plans and practices are not reasonably likely to have a material adverse effect on the Company.

 

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

 

Committees of the Board

 

The Board has established Audit, Compensation and Nominating/Corporate Governance committees to devote attention to specific subjects and to assist it in the discharge of its responsibilities. The functions of those committees, their current members, and the number of meetings held during 2014 are described below.

 

Audit Committee. Among the responsibilities of the Audit Committee contained in its charter are: (i) assisting the Board in overseeing matters involving the accounting, auditing, financial reporting and internal control functions of the Company; (ii) being directly responsible for the appointment, termination and oversight of the independent registered public accounting firm for the Company; (iii) establishing procedures for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters and the confidential anonymous submission by employees of concerns regarding questionable accounting or auditing matters; and (iv) implementing the Company’s policy regarding the review and approval of any “related person transaction” as required pursuant to Item 404 of  Regulation S-K of the Securities Act of 1933, as amended. Pursuant to the Audit Committee Charter, the Audit Committee reviews, approves or ratifies all related person transaction issues brought to its attention. Annually, as part of the Company’s proxy preparation, all Directors and executive officers who are subject to related person transaction disclosure are instructed to report in writing any such transactions to the Company; and further, they are reminded of their obligation to report to the Company any such transactions that may be planned or subsequently occur. In determining whether or not to approve or ratify a related person transaction, the Audit Committee considers all of the relevant facts and circumstances available, including (if applicable) (i) whether there is an appropriate business justification for the transaction; (ii) the benefits that accrue to the Company as a result of the transaction; (iii) the terms available to unrelated third parties entering into similar transactions; (iv) the impact of the transaction on a director’s independence (in the event the related person is a director, an immediate family member of a director or an entity in which a director is a partner, shareholder or executive officer); (v) the availability of other sources for comparable products or services; (vi) whether it is a single transaction or a series of ongoing, related transactions; and (vii) whether entering into the transaction would be consistent with the Company’s Code of Conduct.

 

Messrs. Allardyce (Chair), Legg and Spinner and Ms. Stipp are currently members of the Audit Committee. The Nominating/Corporate Governance Committee has determined that each member of the Audit Committee meets all applicable Securities and Exchange Commission (“SEC”) and NASDAQ independence standards. Mr. Allardyce and Ms. Stipp are Board-designated Audit Committee Financial Experts. The Audit Committee met six times during 2014. The Audit Committee Charter is posted in the Corporate Governance section of the Company website, www.arcb.com.

 

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Compensation Committee. The Compensation Committee is responsible for reviewing and approving executive management compensation. The Compensation Committee’s current members are Messrs. Morris (Chair) and Alden and Dr. Philip. The Nominating/Corporate Governance Committee has determined that each member of the Compensation Committee meets applicable NASDAQ independence standards, IRC Section 162(m) outside director requirements and Exchange Act Section 16 non-employee director requirements. The Compensation Committee met seven times in 2014. The Compensation Committee Charter is posted in the Corporate Governance section of the Company website, www.arcb.com.

 

The Compensation Committee has authority to make and administer awards under the 2005 Ownership Incentive Plan.

 

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

 

The Compensation Committee directly engaged Meridian Compensation Partners, LLC (“Meridian”) as its independent executive compensation consulting firm in 2014. Meridian reviewed executive compensation practices, including executive compensation design issues, market trends, and technical considerations and provided ongoing consulting assistance to the Compensation Committee throughout the year. Other than executive and director compensation consulting to the Board, Compensation Committee or Nominating/Corporate Governance Committee, Meridian does not provide any other services to the Company. The Compensation Committee has assessed the independence of Meridian under the SEC rules and concluded that Meridian’s work for the Compensation Committee does not raise any conflict of interest.

 

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

 

The Compensation Committee may not and does not delegate its authority to review and determine the forms and values of the various elements of compensation for Named Executive Officers. The Compensation Committee does delegate to Company management the implementation and record-keeping functions related to the various elements of compensation it has approved. The Company has retained Mercer to provide additional consulting services at the direction of management and to assist with management’s recommendations for our peer group and executive compensation. Mercer assists management with market analysis, plan design, proxy disclosure review and review of corporate governance practices. The Company has assessed the independence of Mercer under the SEC rules and concluded that Mercer’s work for management does not raise any conflict of interest.

 

Nominating/Corporate Governance Committee. The current members of the Nominating/Corporate Governance Committee are Messrs. Alden (Chair) and Morris and Dr. Philip. The Nominating/Corporate Governance Committee has determined that each member of the committee is independent, as defined in applicable NASDAQ independence standards. The Nominating/Corporate Governance Committee’s responsibilities include: (i) identifying individuals believed to be qualified to become Directors and to select and recommend to the Board for its approval the nominees to stand for election as Directors by the stockholders or, if applicable, to be appointed to fill vacancies on the Board; (ii) determining appropriate compensation for Directors; (iii) recommending any changes regarding size, structure, composition, processes and practices of the Board; (iv) reviewing the independence of Directors and assessing whether members are meeting the applicable independence standards required to serve on the various Board committees; (v) reviewing the Company’s corporate governance standards; and (vi) making recommendations regarding succession planning for the Chief Executive Officer of the Company. Meridian consults with the Nominating/Corporate Governance Committee regarding the value and forms of compensation for non-employee Directors. The Nominating/Corporate Governance Committee held five meetings in 2014 The Nominating/Corporate Governance Charter is posted on the Corporate Governance section of the Company website, www.arcb.com.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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whom any of the persons described in the foregoing clauses (i) and (ii) either is acting in concert with respect to the corporation or has any agreement, arrangement or understanding (whether written or oral) for the purpose of acquiring, holding, voting (except pursuant to a revocable proxy given to such person in response to a public proxy solicitation made generally by such person to all stockholders entitled to vote at any meeting) or disposing of any capital stock of the corporation or to cooperate in obtaining, changing or influencing the control of the corporation (except independent financial, legal and other advisors acting in the ordinary course of their respective businesses).

 

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

 

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

 

Code of Conduct and Corporate Governance Guidelines

 

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

 

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

 

Director Compensation

 

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

 

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Cash Compensation

 

For the fiscal year ended December 31, 2014, the standard cash compensation arrangement for non-employee Directors was as follows:

 

Annual Retainers

 

Board Chair

$  100,000

Members

$    50,000

Audit Committee Chair

$    15,000

Compensation Committee Chair

$    12,000

Nominating/Corporate Governance Committee Chair

$      8,000

 

 

Daily Meeting Fees

 

Board Meeting

$1,500 per day

Committee Meeting

$1,500 per day

 

Based on a review of peer practices conducted by Meridian, daily meeting fees have been eliminated and the annual retainer was adjusted. Effective January 1, 2015, the standard cash compensation arrangement for non-employee Directors is as follows.

 

Annual Retainers

 

Board Chair

$  122,000

Members

$    72,000

Audit Committee Chair

$    15,000

Compensation Committee Chair

$    12,000

Nominating/Corporate Governance Committee Chair

$      8,000

 

 

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

 

Equity-Based Awards

 

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

 

The restricted stock unit (“RSU”) awards to non-employee Directors provide for three-year cliff vesting. All of the RSU awards are subject to accelerated vesting due to death, disability or change in control of the Company. Accelerated vesting for RSUs also occurs upon attainment of normal retirement age (age 65 with five years of service with the Company). Messrs. Alden, Allardyce, Legg, Morris and Young are currently eligible for normal retirement. Upon early retirement (three years of service as a Director), a Director is eligible for accelerated vesting of a pro rata number of shares based on the number of whole months since the award date. Dr. Philip and Mr. Spinner are currently eligible for early retirement. Ms. Stipp is not currently eligible for early retirement. Vested RSU awards are paid in shares, unless deferred under the provisions of the plan, on the earlier to occur of (i) the normal vesting date applicable to the award or (ii) the Director’s termination of service with the Company.

 

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

 

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vested either due to the Director’s eligibility for normal retirement or early retirement pursuant to the award agreement under which the RSU was granted.

 

The Nominating/Corporate Governance Committee monitors ownership levels annually. As of the review completed in 2014, all of the Directors have met their ownership requirements.

 

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

 

 

2014 Director Compensation Table

 

The table below summarizes the compensation paid by the Company to non-employee Directors for the fiscal year ended December 31, 2014.

 

 

 

Fees Earned or

 

Stock

 

All Other

 

 

 

Name

 

Paid in Cash

 

Awards

 

Compensation

 

Total

 

(1)

 

 

 

(2, 3)

 

 

 

 

 

John W. Alden(4)

 

$     71,917

 

$ 100,400

 

$              –    

 

$    172,317

 

Fred A. Allardyce(4)

 

78,542

 

100,400

 

–    

 

178,942

 

William M. Legg(4)

 

69,083

 

100,400

 

–    

 

169,483

 

John H. Morris

 

73,667

 

100,400

 

–    

 

174,067

 

Craig E. Philip

 

62,667

 

100,400

 

–    

 

163,067

 

Steven L. Spinner

 

64,167

 

100,400

 

–    

 

164,567

 

Janice E. Stipp

 

64,167

 

100,400

 

–    

 

164,567

 

Robert A. Young III

 

109,000

 

100,400

 

64,931(5) 

 

274,331

 

 

(1)

Judy R. McReynolds, the President and Chief Executive Officer of the Company, is not included in this table since she is an employee of the Company and thus received no compensation for her service as a Director. The compensation received by Ms. McReynolds as an officer of the Company is shown in the Summary Compensation Table on page 39.

 

 

(2)

Reflects the aggregate grant date fair value of awards made during 2014 computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 (formerly Statement of Financial Accounting Standards No. 123R) (“FASB ASC Topic 718”), determined without regard to estimated forfeitures. Messrs. Alden, Allardyce, Legg, Morris, Spinner and Young, Dr. Philip and Ms. Stipp received an award of 2,500 RSUs under the 2005 Ownership Incentive Plan on May 8, 2014 (computed using the closing price of $40.16 per share on such date). See Note L to the consolidated financial statements in the Company’s 2014 Annual Report on Form 10-K for additional detail on share-based compensation. Dividends are paid on RSUs at the same rate and at the same time as the dividends paid to stockholders.

 

 

(3)

As of December 31, 2014, each non-employee Director had the following aggregate number of RSUs outstanding, although only the value of the 2014 RSU award is provided in the Stock Awards column.

 

 

 

Alden

 

Allardyce*

 

Legg

 

Morris*

 

Philip

 

Spinner

 

Stipp

 

Young

Vested but subject to transfer restrictions

 

11,200 

 

20,000  

 

11,200 

 

20,000 

 

4,444  

 

4,444 

 

 

11,200

Unvested

 

– 

 

–  

 

– 

 

– 

 

5,317  

 

5,317 

 

11,200

 

Total RSUs Outstanding

 

11,200 

 

20,000  

 

11,200 

 

20,000 

 

9,761  

 

9,761 

 

11,200

 

11,200

 

*Mr. Allardyce elected to defer his 2009 RSU award of 4,400 RSUs and his 2010 award of 4,400 RSUs until his termination from Board service. Mr. Morris elected to defer his 2009 RSU award of 4,400 RSUs and his 2011 RSU award of 4,400 RSUs until termination from Board Service. All deferral elections must be made in the year prior to the year the award is granted.

 

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(4)

Committee Chairpersons: Mr. Allardyce, Audit Committee and Qualified Legal Compliance Committee; Mr. Morris, Compensation Committee and Mr. Alden, Nominating/Corporate Governance Committee.

 

 

(5)

For purposes of the column titled “All Other Compensation,” for 2014 Mr. Young’s amount consists of the following:

 

 

 

Young

 

Perquisites(i) 

 

  $

52,850

 

Gross-ups(i) 

 

3,024

 

Executive medical premiums(ii) 

 

9,057

 

Total

 

  $

64,931

 

 

(i)

Mr. Young’s perquisites include: (a) spousal travel to Company or industry events and any related Company lost tax deduction resulting from the spouse accompanying him on the Company’s corporate aircraft, (b) personal use of an administrative assistant, (c) infrequent personal use of a lodging facility and related hunting property owned by the Company for business entertainment purposes and (d) a Christmas gift from the Company (the Company also provides a Christmas gift to each of the other Board members). It is estimated that 40% of Mr. Young’s administrative assistant’s time is spent on his personal business, and the incremental cost associated with that personal use is estimated to be $37,913. This value is calculated by adding together 40% of the administrative assistant’s salary, 401(k) match, DC contribution, pension accrual and health and welfare cost for 2014. Mr. Young retains an office at the Company’s corporate office.

 

 

(ii)

Because Mr. Young is a former officer of the Company, he and his spouse participate in the Company’s fully insured third-party executive medical plan that is provided for life upon retirement. The Company pays the majority of the premium amount for this coverage. The amount shown is total premiums paid by the Company for coverage during 2014.

 

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Principal Stockholders and Management Ownership

 

The following table sets forth certain information concerning beneficial ownership of the Common Stock as of March 2, 2015 by (i) each person who is known by the Company to own beneficially more than five percent (5%) of the outstanding shares of Common Stock; (ii) each Director and officer who is listed in the Summary Compensation Table (collectively “Named Executive Officers”), and Director nominees; and (iii) all Directors and executive officers as a group.

 

Unless otherwise indicated, to the Company’s knowledge, the persons included in the tables below have sole voting and investment power with respect to all the shares of Common Stock beneficially owned by them, subject to applicable community property laws. The number of shares beneficially owned by a person includes RSUs that are (i) scheduled to vest within 60 days after March 2, 2015, (ii) vested but deferred (and payable on a separation from service with the Company), or (iii) vested but unsettled either due to the Director’s or officer’s eligibility for normal retirement or early retirement pursuant to the award agreement under which the award was granted. These shares are also deemed outstanding for the purpose of computing the percentage of outstanding shares owned by the person. These shares are not deemed outstanding for the purpose of computing the percentage ownership of any other person. On March 2, 2015, there were 25,986,079 shares of Common Stock outstanding.

 

 

 

Shares

 

Percentage

 

 

 

Beneficially

 

of Shares

 

 

 

Owned

 

Outstanding

 

 

 

 

 

 

 

(i) Name / Address

 

 

 

 

 

 

BlackRock, Inc.(1)

 

2,273,417

 

 

8.75%

 

55 East 52nd Street, New York, NY 10022

 

 

 

 

 

 

Dimensional Fund Advisors LP(2)

 

2,172,147

 

 

8.36%

 

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

 

 

 

 

 

 

The Vanguard Group, Inc.(3)

 

1,732,963

 

 

6.67%

 

100 Vanguard Blvd., Malvern, PA 19355

 

 

 

 

 

 

CI Global Investments, Inc.(4)

 

 

 

 

 

 

2 Queen Street East, 20th Floor, Toronto, ON M5C 3G7 Canada

 

1,502,000

 

 

5.78%

 

 

 

 

 

 

 

 

 

(ii) Name

Position                     

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Robert A. Young III(5, 7)

Chairman of the Board (also a Director Nominee)

 

1,210,403

 

 

4.66%

 

John W. Alden(5, 8)

Director (also a Director Nominee)

 

33,500

 

 

*

 

Fred A. Allardyce(5, 6)

Director (also a Director Nominee)

 

38,000

 

 

*

 

William M. Legg(5)

Director (also a Director Nominee)

 

29,600

 

 

*

 

Judy R. McReynolds(5, 9)

Director and President and CEO (also a Director Nominee)

 

30,370

 

 

*

 

John H. Morris(5, 6)

Director (also a Director Nominee)

 

20,000

 

 

*

 

Craig E. Philip(5)

Director (also a Director Nominee)

 

11,506

 

 

*

 

Steven L. Spinner(5)

Director (also a Director Nominee)

 

11,306

 

 

*

 

Janice E. Stipp(5)

Director (also a Director Nominee)

 

 

 

*

 

Jim A. Ingram(5)

ABF Logistics President

 

 

 

*

 

Michael R. Johns(5)

Vice President–General Counsel and Corporate Secretary

 

203

 

 

*

 

J. Lavon Morton(5)(10)

Sr. Vice President–Risk and Chief Audit Executive

 

40,533

 

 

*

 

Michael E. Newcity(5)

Sr. Vice President–Chief Innovation Officer

 

2,365

 

 

*

 

Roy M. Slagle(5, 11)

Former ABF Freight President and CEO

 

26,036

 

 

*

 

 

 

 

 

 

 

 

(iii) All Current Directors and Executive Officers as a Group (20 total)(12)

 

1,515,522

 

 

5.80%

 

*Less than 1%

 

 

 

 

 

 

 

 

 

(1)

Based on information contained in Amendment No. 5 to Schedule 13G filed with the SEC by BlackRock, Inc. on January 22, 2015, BlackRock, Inc. has sole voting power with respect to 2,214,321 shares and sole dispositive power with respect to 2,273,417 shares.

 

 

(2)

Based on information contained in Amendment No. 6 to Schedule 13G filed with the SEC by Dimensional Fund Advisors LP on February 5, 2015, Dimensional Fund Advisors LP beneficially owns 2,172,147 shares of Common Stock and has sole voting power with respect to 2,079,965 shares and sole dispositive power with respect to 2,172,147 shares.

 

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(3)

Based on information contained in Amendment No. 3 to Schedule 13G filed with the SEC by The Vanguard Group, Inc. (“Vanguard”) on February 10, 2015, Vanguard has sole voting power with respect to 36,411 shares of Common Stock, shared voting power with respect to 0 shares of Common Stock, sole dispositive power with respect to 1,699,052 shares of Common Stock and shared dispositive power with respect to 33,911 shares of Common Stock.

 

 

(4)

Based on information contained in Schedule 13G filed with the SEC by CI Global Investments, Inc. on February 12, 2015, CI Global Investments, Inc. has sole voting and sole dispositive power with respect to 1,502,000 shares of Common Stock.

 

 

(5)

Includes RSUs, that are (i) scheduled to vest within 60 days after March 2, 2015, (ii) vested but deferred (and payable on a separation from service with the Company), or (iii) vested but unsettled either due to the Director’s or Named Executive Officer’s eligibility for normal retirement or early retirement pursuant to the award agreement under which the award was granted as follows:

 

As of March 2, 2015

Young

 

11,200

 

Alden

 

11,200

 

Allardyce

 

20,000

 

Legg

 

11,200

 

McReynolds

 

 

Morris

 

20,000

 

Philip

 

6,506

 

Spinner

 

6,506

 

Stipp

 

 

Ingram

 

 

Johns

 

 

Morton

 

21,380

 

Newcity

 

 

Slagle

 

18,400

 

 

(6)

Includes RSUs which are vested and deferred. Mr. Allardyce elected to defer his 2009 award of 4,400 RSUs and 2010 award of 4.400 RSUs until his termination from Board service. Mr. Morris elected to defer his 2009 award of 4,400 RSUs and 2011 award of 4,400 RSUs until his termination from Board service. All deferral elections must be made in the year prior to the year the award is granted. RSUs were granted under the Company’s 2005 Ownership Incentive Plan.

 

 

(7)

Includes 946,185 shares of Common Stock held by the Robert A. Young III 2008 Trust and 14,556 shares of Common Stock held by Cross Creek Management Co. of which Mr. Young is director and President. Mr. Young has sole voting and investment power over these shares.

 

 

(8)

Includes 22,300 shares of Common Stock held by the John W. Alden Trust, of which Mr. Alden is trustee.

 

 

(9)

Includes 30,370 shares of Common Stock held by the McReynolds 2005 Joint Trust, of which Ms. McReynolds is co-trustee.

 

 

(10)

Includes 21.535 shares held by Mr. Morton in the ArcBest 401(k) and DC Retirement Plan.

 

 

(11)

Includes 7,636 shares of Common Stock held by the Roy M. Slagle Living Trust, of which Mr. Slagle is trustee.

 

 

(12)

Includes 17,600 that are vested and deferred and 128,322 that will vest in 60 days or are vested either due to the Director’s or officer’s eligibility for normal retirement or early retirement pursuant to the terms of the Company’s 2005 Ownership Incentive Plan.

 

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Executive Officers of the Company

 

The following information sets forth the name, age, principal occupation and business experience during the last five years of each of the current executive officers of the Company, and subsidiaries of the company ABF Freight and ABF Logistics, Inc. (“ABF Logistics”). The executive officers, including the Named Executive Officers, serve at the pleasure of the Board. For information regarding ownership of the Common Stock by the executive officers of the Company, see “Principal Stockholders and Management Ownership” on page 19. There are no family relationships among Directors and executive officers of the Company or its subsidiaries.

 

 

 

JUDY R. MCREYNOLDS, age 52, is President and Chief Executive Officer and a Director of the Company. See previous description under “Directors of the Company.”

 

 

 

 

 

TIMOTHY D. THORNE, age 53, has been President of ABF Freight since October 2014. Mr. Thorne has served ABF Freight in many capacities, including Vice President–Linehaul Operations from April 2013 to October 2014 and Regional Vice President of Operations in the Midvale, Utah and Reno, Nevada regional offices from May 2006 through March 2013. Prior to March 2006, Mr. Thorne had worked as Branch Manager at four ABF Freight terminals from May 1993 through April 2006, including Florence and Decatur, Alabama; Nashville, Tennessee and Carlisle, Pennsylvania. He joined ABF Freight as a Supervisor Assistant at the Orlando, Florida terminal in 1990, working in that position until serving as Sales Representative at the same terminal from June 1992 to May 1993. Mr. Thorne holds a B.S.B.A. from the University of Oklahoma and an M.B.A. from the University of North Alabama. He served as a captain in the U.S. Army.

 

 

 

 

JIM A. INGRAM, age 47, has been President of ABF Logistics since August 2013. For ArcBest, he was Senior Vice President–Strategy from November 2011 through January 2014, Vice President–Strategic Development from April 2010 through October 2011, and Vice President–Market Development from January 2008 to April 2010. Prior to 2008, Mr. Ingram served as Vice President–Market Development for ABF Freight from February 2006 through December 2007, and from January 2000 through January 2006, he was ABF Freight’s Director–Quotation Services. Between January 1990 and December 1999, he held the positions of Analyst, Senior Analyst and Pricing Manager in ABF Freight’s Pricing Department.

 

 

 

 

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MICHAEL E. NEWCITY, age 45, has been Senior Vice President-Chief Innovation Officer for the Company and President of the Company’s subsidiary ArcBest Technologies, Inc. since January 2015. He previously served the Company as Chief Financial Officer and Chief Information Officer from August 2013 to December 2014, and prior to that had been Vice President–Chief Financial Officer from June 2010 until July 2013, and Director–Economic Analysis from November 2007 through May 2010. Prior to that he had served as Director–E-Systems and Emerging Technologies for ABF Freight from November 2005 through October 2007.  In these capacities, Mr. Newcity led the group that provides critical analysis on topics including costing and profitability methods, incentive plans, metrics and forecasting, as well as the development and implementation of internal management systems. From January 2000 through October 2005, Mr. Newcity held several managerial positions with ABF Freight that spanned marketing, information technology and business development. He began his career with the Company in 1993 at its subsidiary, ArcBest Technologies, Inc., leading the Company’s e-commerce development initiatives through December 1999. Mr. Newcity holds an M.B.A from the Walton College at the University of Arkansas.

 

 

 

J. LAVON MORTON, age 64, has been Senior Vice President–Risk and Chief Audit Executive since October 2014. He previously served as Senior Vice President-Tax and Chief Audit Executive from January 2010 through September 2014 and as the Company’s Vice PresidentTax and Chief Internal Auditor from January 2000 through December 2009. From May 1997 to December 1999, Mr. Morton was the Vice PresidentFinancial Reporting. Mr. Morton joined the Company as Assistant Treasurer in December 1996. From 1972 through November 1996, Mr. Morton was employed by Ernst & Young LLP. Mr. Morton was a Partner in Ernst & Young LLP from October 1984 through November 1996. From January 2003 to October 2005, Mr. Morton was a Director and a designated Audit Committee Financial Expert of BEI Technologies, Inc. which was purchased by Schneider Electric in October 2005. Mr. Morton is currently Chairman of the Tax Policy Committee of the American Trucking Associations (the “ATA”) and a member of the Board of Directors of the ATA. He previously served as Chairman of the ATA’s Tax Policy Committee and was a member of the ATA Board of Directors from October 2004 to October 2007. Mr. Morton is a Certified Public Accountant. Mr. Morton has an undergraduate degree in Accounting from the University of Central Arkansas and a Master of Taxation degree from the University of Tulsa.

 

 

 

DAVID R. COBB, age 49, has been Vice President-Chief Financial Officer since January 2015 and previously served as Vice President and Controller for the Company from May 2006 through December 2014 and Chief Accounting Officer for the Company from January 2010 through December 2014. Mr. Cobb was employed by Smith International, Inc., a publicly traded international oilfield service company acquired by Schlumberger Limited, as Vice President and Controller from 2002 to April 2006. He was employed by Kent Electronics Corporation, a publicly traded specialty electronics distributor and network integrator, from 1995 to 2001 and Price Waterhouse, a predecessor of PricewaterhouseCoopers LLP from 1988 to 1994. Mr. Cobb is a Certified Public Accountant and has served publicly traded companies since 1988.

 

 

 

 

 

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CHRISTOPHER L. BURTON, age 57, has been Vice President–Business Insight & Analytics for the Company since January 2015 and previously served as Vice President–Economic Analysis from January 2008 through December 2014. He served ABF Freight as Vice President–Economic Analysis from February 2006 through December 2007, Director–Economic Analysis from September 1995 through January 2006, and Manager–Pricing from February 1995 through August 1995. From January 1979 through January 1995, Mr. Burton served the Company’s subsidiary, ArcBest Technologies, Inc., as Manager of Services and Human Resources and Systems Analyst/Programmer and also worked for the Company as an Economic Analyst.

 

 

 

 

 

WALTER J. ECHOLS, age 61, has been Vice President–Real Estate for the Company since January 2012. Mr. Echols previously served as Vice President–Real Estate for ABF Freight from January 1994 until January 2012 and Director–Real Estate for ABF Freight from November 1987 until 1994. Mr. Echols joined ArcBest Technologies, Inc., a subsidiary of the Company, in June 1975 serving as Manager–Sales and Marketing until becoming Manager of the ArcBest Technologies, Inc. Information Center in 1983. Mr. Echols holds a B.S.B.A. in Finance from the University of Arkansas.

 

 

 

 

 

KATHLEEN A. FIEWEGER, age 50, has been Vice President–Marketing and Corporate Communications, Chief Marketing Officer since May 2013. Prior to joining the Company, she had worked for eight years as a nationally-recognized consultant and expert in media strategy, crisis and issues management. She was Executive Vice President, General Manager for MWW Group from 2011 to 2012 and Senior Vice President at Edelman from 2009 to 2011. She has worked as Vice President for US Bank from 2006 to 2008 and served as a Director in the Corporate and Government Affairs Group at United Airlines from 2004 to 2005. From 1990 to 2004, she worked for Reuters as a journalist. Ms. Fieweger holds a Bachelor’s degree from the University of Notre Dame, a Master’s degree in Journalism from Northwestern University and an M.B.A. from the University of Chicago.

 

 

 

 

 

ERIN K. GATTIS, age 41, has been Vice President–Human Resources for the Company since October 2011. She previously served as the Company’s Chief of Staff from January 2010 through September 2011. Prior to that departmental director position, Ms. Gattis served as Manager of Retirement Services and Executive Compensation from August 2006 to September 2009. She joined the Company in 1999 and between 1999 and 2006 worked for both the Company and ABF Freight as a Retirement Specialist, Benefits Analyst, Supervisor of Executive Compensation and Manager of Executive Compensation. She holds a Bachelor’s degree from Arkansas Tech University in Economics and Finance. Ms. Gattis has a Senior Professional in Human Resources certification.

 

 

 

 

 

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Table of Contents

 

 

 

MICHAEL R. JOHNS, age 56, has been the Company’s Vice PresidentGeneral Counsel and Corporate Secretary since April 2007. From 1991 to 2007, he was a partner in the law firm of Dover Dixon Horne PLLC in Little Rock, Arkansas. Mr. Johns was a practicing attorney in two other Little Rock law firms for seven years, including Rose Law Firm, prior to 1991. He is a Certified Public Accountant. Mr. Johns is a member of the American Bar Association, Sebastian County Bar Association and Arkansas Society of Certified Public Accountants.

 

 

 

 

 

 

 

 

 

DANIEL E. LOE, age 40, has been Vice President–Enterprise Customer Solutions for ArcBest since May 2014. Prior to his current position, Mr. Loe had served as Vice President–Yield Management for ABF Freight since 2010. In previous positions with ABF Freight, he had worked as Director of Marketing & Public Relations from 2004 to 2010, and Senior Pricing Analyst from 2000 to 2004. Mr. Loe joined the Company in 1997, working as an Associate Analyst, Analyst, and Lead Analyst in the Pricing Department prior to his promotion to Senior Pricing Analyst in 2000. He holds a Bachelor’s degree in Industrial Engineering from the University of Arkansas.

 

 

 

 

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Table of Contents

 

Compensation Discussion & Analysis

 

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

 

The Named Executive Officers for 2014 are listed below:

 

Named
Executive Officer

 

Title

 

 

 

 

Judy R. McReynolds

 

ArcBest President and Chief Executive Officer (“ArcBest CEO”)

Jim A. Ingram

 

ABF Logistics President

J. Lavon Morton

 

ArcBest Senior Vice President–Risk and Chief Audit Executive

Michael E. Newcity

 

ArcBest Senior Vice President–Chief Financial Officer and Chief Information Officer (“CFO/CIO”)1

Michael R. Johns

 

ArcBest Vice President–General Counsel and Corporate Secretary

Roy M. Slagle

 

Former ABF Freight President and Chief Executive Officer (“ABF CEO”) (Retired October 15, 2014)

 

 

 

(1)          On January 1, 2015, Mr. Newcity was named ArcBest Chief Innovation Officer and ArcBest Technologies, Inc. President.

 

 

Executive Summary

 

Our Company

 

At ArcBest Corporation, we solve complex transportation and logistics challenges. We began over 90 years ago as an LTL carrier, ABF Freight System, Inc., and we have grown significantly over the past several years, continuing to diversify and expand our total product and service offerings to meet our customers’ needs. Our companies and brands – ABF Freight, ABF Logistics, Panther Premium Logistics, FleetNet America®, U-Pack® and ArcBest Technologies – apply The Skill and The Will with every shipment and supply chain solution, household move or vehicle repair.

 

Company Performance

 

In 2014, as expected, ABF Freight’s profitability improved following its new November 2013 collective bargaining agreement with the International Brotherhood of Teamsters, which reduced expenses and allowed ABF Freight to be more cost competitive with its LTL industry peers. As more customers recognized the ArcBest Companies’ ability to provide holistic transportation and logistics solutions, each of the Company’s operating segments experienced revenue growth again this year. A few financial highlights for 2014 include:

 

·     Revenue increased 14% to $2.6 billion, up from to $2.3 billion in 2013, with 27% of total revenue generated from emerging businesses.

·     Net income of $46.2 million, or $1.69 per share, nearly three times full year 2013 net income of $15.8 million or $0.59 per share.

·      Combined EBITDA and operating income for the emerging businesses increased 45% to $40.5 million and 71% to $25.8 million, respectively, in 2014. For a definition of EBITDA, a reconciliation to operating income and other information regarding EBITDA, see the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section in the Company’s 2014 Annual Report on Form 10-K.

·     Stock price appreciation of 37%.

 

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Table of Contents

 

Executive Compensation Relative to Company Performance

 

Overall compensation levels in 2014 for the Named Executive Officers increased compared to 2013, reflecting the improved performance of the Company.

 

Annual Incentive Compensation:  For 2014, the annual cash incentive continued to be based on Return on Capital Employed (“ROCE”) and operating income improvement as compared to the prior year. These metrics were weighted 50% each.

 

Based on an assessment of the plan goals, a payout of approximately 152% of the target incentive opportunity under the 2014 annual plan was achieved as outlined further on page 32.

 

Long-Term Incentive Compensation:  The 2012-2014 cash long-term incentive compensation plan was based on Total Shareholder Return (“TSR”) compared to our peer group and ROCE goals.

 

Relative performance under the TSR component and ROCE levels generated a below target payment under the 2012-2014 plan, as outlined further on page 33. A cash long-term incentive award opportunity for 2014-2016 was granted including metrics for ROCE and TSR consistent with the grant for 2012-2014 and 2013-2015.

 

Consistent with equity awards in 2012 and 2013, an RSU award was granted to Named Executive Officers in 2014 to further link Named Executive Officer compensation with stock price performance and stockholder interests.

 

Key Compensation and Governance Policies

 

The Committee continually reviews the Company’s executive compensation program to maintain compensation practices that are in the best interests of our shareholders. Some of our key policies are summarized below:

 

What We Do:

 

·

We tie pay to performance. The majority of executive pay is variable.

·

Long-term compensation is subject to extended vesting requirements (five years for RSUs and three years for the cash long-term incentive compensation plan).

·

We maintain significant stock ownership guidelines for our Named Executive Officers.

·

We have a clawback policy.

·

We conduct annual risk assessments.

 

What We Don’t Do:

 

·

We do not provide tax gross up payments for any amounts considered excess parachute payments.

·

We do not permit the repricing of stock options without prior shareholder approval, except in connection with a transaction.

·

We do not provide excessive perquisites to our Named Executive Officers.

·

We do not permit hedging or pledging of Company stock.

·

We do not have single trigger payments upon a change in control.

 

Compensation Philosophy and Objectives

 

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

 

·

attract and retain highly qualified executives;

·

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

·

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

·

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

 

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

 

Experience, scope and complexity of the position, current objectives and responsibilities, internal equity, retention needs and relative compensation of the peer group are all important factors used to determine the compensation of the Company’s executives.

 

Each Named Executive Officer is a long-term employee of the Company with tenure ranging from 8 to 38 years, resulting in a group that is very knowledgeable about our Company and the transportation industry. This knowledge is extremely valuable to both the Company and our stockholders and makes members of our management desired targets for recruitment by other transportation companies. Our compensation program is designed to prevent loss of our existing managerial talent as well as attract future leaders for the Company.

 

2014 Variable vs. Fixed Compensation

 

One of the primary considerations in trying to implement our compensation philosophy and objectives is striking the proper balance between fixed and variable compensation.  Fixed compensation ensures that the executive receives a minimum level of compensation irrespective of company performance, which is important for retention and risk reduction. Variable compensation ties the executive’s compensation to Company performance, aligning the executive’s interests with those of the Company’s stockholders.  The charts below show the significant portion of the Named Executive Officers’ 2014 target compensation that was variable and based either on reaching certain performance goals or the value of the Common Stock.

 

 

 

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Table of Contents

 

Pay for Performance

 

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

 

 

Response to 2014 Say on Pay Vote

 

In 2014, the Company held its fourth annual stockholder advisory vote on the compensation paid to our Named Executive Officers, resulting in almost 98% of votes cast approving such compensation. The Committee considered these results and the overwhelming support expressed by stockholders as well as many other factors in evaluating the Company’s executive compensation programs as discussed in this CD&A. These factors include the Committee’s assessment of the interaction of our compensation programs with our corporate business objectives, evaluations of our programs by external consultants, and review of data of a selected group of peers. Each of these factors is evaluated in the context of the Committee’s duty to act as the Directors determine to be in the stockholders’ best interests. Based on this evaluation, the Committee did not make any changes to our executive compensation program, policies or pay levels as a result of the 2014 “say on pay” advisory vote.

 

Roles and Responsibilities in Determining Executive Compensation

 

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

 

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

 

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

 

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

 

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

 

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

 

Determining Appropriate Pay Levels and Linkage to Objectives

 

The Committee compares its compensation program with the compensation levels of executives at similar peer entities in our industry to determine whether the Company is providing a competitive compensation program within the market in which we compete for qualified executives. For base salary, the Company targets the 50th percentile of the market (i.e., the peer group described on page 30) for Named Executive Officers. Annual cash incentives are designed to deliver total cash compensation (salary and annual incentives) to exceed the 50th percentile of the market when the Company performs above target performance levels. Total direct compensation, including base salary, annual cash incentives, long-term cash incentives and equity awards, is also targeted to exceed the 50th percentile of the market when the Company exceeds target performance levels. Compensation for each executive may vary from these targets based on the executive’s experience, the scope and complexity of the position, current objectives and responsibilities, internal equity and retention needs.

 

Peer Group. In conjunction with input from Meridian and Mercer, in January 2014 the Committee reviewed and revised the peer group that the Committee uses to analyze market compensation rates for its Named Executive Officers and the performance peer group for the TSR component of the cash long-term incentive plan to more accurately represent the Company’s current competitors. After taking into account our aggressive corporate goals to continue to expand into other areas of transportation and logistics in addition to LTL, the Committee determined that certain changes needed to be made to the peer group to better reflect the companies with which we compete in our industry and for executive talent. Our new market compensation competitor group incorporates a more appropriate mix of our transportation- and logistics-related competitors and was used for the relative performance measurement in long-term incentive awards granted in 2014 as well as for the market analysis mentioned below.

 

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Company Name

Revenue in 2014

($ thousands)

ArcBest Corporation

$ 2,600,000

Con-Way, Inc.

5,810,000

Echo Global Logistics, Inc.*

1,170,000

Forward Air Corporation*

781,000

Hub Group, Inc.*

3,600,000

JB Hunt Transport Services, Inc.*

6,200,000

Landstar System, Inc.*

3,200,000

Old Dominion Freight Line, Inc.

2,790,000

Roadrunner Transportation Systems, Inc.*

1,870,000

Saia, Inc.

1,300,000

Swift Transportation Company

4,300,000

Werner Enterprises, Inc.

2,100,000

XPO Logistics, Inc.*

2,400,000

YRC Worldwide Inc.

5,069,000

*New to the peer group in 2014.

 

The following companies were removed from the 2013 peer group: Celadon Group, Covenant Transport, Heartland Express, Knight Transportation, Marten Transport, USA Truck and Vitran Corporation.

 

Mercer conducted an in depth market analysis in 2014 for the Company’s executive compensation program. As part of the analysis, the Committee examined peer group salaries, incentive plan designs and equity award practices. This analysis indicated that total direct compensation for some of the Named Executive Officers was below the desired range. Certain compensation adjustments were made as a result of the analysis as further discussed below. Before the market analysis review in 2014, the most recent analysis was conducted in 2011.

 

Due to the strong performance orientation of the annual cash incentive, as discussed on page 32, and the long-term cash incentives, as described on page 33, the Committee is satisfied that above-median total cash and total direct compensation will only be awarded when the Company performs above market levels.  In setting performance goals, the Committee references the historical ROCE of the S&P 500 companies. The S&P 500 is an appropriate performance benchmark because it is a broad-based group of companies in leading industries in the United States. The S&P 500 reflects the risk and return characteristics of the broader market on an on-going basis. While the S&P 500 includes companies that are larger than the Company, the performance of these companies reflects stable, well-managed organizations. Performance at or above the level of the S&P 500 companies is considered acceptable performance by management and worthy of performance-based incentive payments. In addition, for long-term incentives, the Company uses TSR relative to the above listed peer group to more directly align the cash long-term incentive plan with above-market shareholder value creation.

 

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

 

Short-Term Cash Compensation

 

Long-Term Incentive Compensation

Base
Salary

+

Annual Cash
Incentive

(1-Yr.
Financial
Goals)

=

Total Short-
Term Cash
Compensation

+

Long-Term
Cash Incentive

(3-Yr. Financial
& Market
Goals)

+

Equity
Awards

(5-Yr.
vesting)

=

Total Direct
Compensation

 

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

 

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Retirement of Mr. Slagle

 

Mr. Slagle retired from the Company on October 15, 2014. Because Mr. Slagle’s termination constituted an early retirement under the Company’s plans and programs, he received prorated payments under the Company’s annual incentive plan and cash long-term incentive compensation plan for the 2012-2014 performance period and certain payments in connection with Company retirement plans. Following the required six-month waiting period under Section 409A of the IRC, Mr. Slagle will receive shares as a result of settlement of vested and outstanding RSUs. In addition, Mr. Slagle and his spouse participate in the Company’s fully insured third-party executive medical plan that is provided upon retirement. Mr. Slagle is responsible for paying a reduced monthly premium for this coverage. Additional information about these payments and benefits is included in the Summary Compensation Table (and narrative to the table) as well as the section below entitled “Potential Payments upon Termination or Change in Control.”

 

Because of Mr. Slagle’s strong connections in the industry and his decades of experience, we have asked him to make himself available to us to help ensure a smooth transition. In addition, we wanted to make sure that Mr. Slagle does not compete or solicit employees or customers away from us. Therefore, on October 24, 2014, the Company and Mr. Slagle entered into a consulting agreement under which Mr. Slagle will provide consulting services to the Company for a term of three years (the “Consulting Agreement”).

 

Components of Compensation

 

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

 

·

the Company’s compensation philosophy and objectives as described above including consideration of the executive’s experience, the scope and complexity of the executive’s position, current objectives and responsibilities, internal equity and retention needs;

·

market analysis;

·

input from the Committee’s independent consultant, Meridian;

·

economic and inflationary factors;

·

the Company’s recent and historical financial performance;

·

the Company’s strategic plans;

·

the resources of the Company; and

·

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

 

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

 

Market adjustments may be made when an individual is performing successfully and a gap is identified between the market data and the officer’s base salary. Based on market compensation analysis completed by Mercer in 2014, the Committee approved salary increases effective July 1, 2014 for the officer group to recognize identified gaps. The following chart shows the annualized base salary rates in effect as of December 31 for each Named Executive Officer for 2012, 2013 and 2014:

 

 

2012 Salary

2013 Salary

2014 Salary

Judy R. McReynolds

$575,000

$575,000

$625,000

Jim A. Ingram

$294,000

$325,000

$335,000

J. Lavon Morton

$294,000

$294,000

$320,000

Michael E. Newcity

$266,000

$294,000

$320,000

Michael R. Johns

$266,000

$266,000

$300,000

Roy M. Slagle

$375,000

$375,000

$390,000

 

Annual Cash Incentive Compensation.  The annual cash incentive for 2014 was based on the Company’s ROCE and operating income improvement, as it was in 2012 and 2013. The performance metrics were equally weighted. Operating income is generally determined as operating income as shown by the consolidated financial statements and consistent with the historical determination of operating income in ArcBest’s financial statements (adjusted for nonrecurring or unusual items). The use of improvement in operating income as a performance metric

 

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reinforces the Company’s emphasis on profitable growth. ROCE is generally calculated by dividing net income (adjusted for nonrecurring or unusual items) by average adjusted debt plus average equity for the applicable period. The Committee and management believe that ROCE keeps participants focused on the profitable use of Company resources, which increases the value of the Company to its stockholders. Additionally, ROCE is a valuable motivational tool since it can be calculated throughout the year by participants.

 

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

 

Under the annual cash incentive program, Named Executive Officers had a target incentive opportunity expressed as a percentage of their base salary paid during the year that is multiplied by a performance factor determined by the actual levels of operating income improvement and ROCE achieved by the Company.

 

The following table shows the incentive targets for the 2014 fiscal year for the annual incentive plan:

 

 

Target Incentive
(% of Base Salary
Paid During 2014)

Judy R. McReynolds

100%

 

Jim A. Ingram

60%

 

J. Lavon Morton

50%

 

Michael E. Newcity

50%

 

Michael R. Johns

45%

 

Roy M. Slagle

70%

 

 

The following tables show the performance factor applied to varying levels of performance for each of the two performance metrics utilized for fiscal year 2014. The performance factor earned for performance at levels between those indicated below is calculated using straight-line interpolation. The operating income component was capped at a 200% performance factor and the ROCE component was capped at a 300% performance factor.

 

Operating

Income

Improvement

Performance
Factor Earned

<$20 million

0%  

+$20 million

25%  

+$50 million

100%  

+$80 million

200%  

 

ROCE %
Achieved

Performance
Factor Earned

<5%

0%  

  5%

50%  

10%

100%  

15%

300%  

 

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Actual operating income improvement achieved for the 2014 fiscal year as measured under the annual plan was $59.7 million and the ROCE was 11.81%. Combining the two resulting performance factors (weighted 50% each) produced a payout of approximately 152% of the target incentive opportunity. Actual payouts are shown below:

 

 

2014 Target
Annual Incentive
Opportunity

 

Actual 2014 Annual
Incentive Plan
Payout

 

 Judy R. McReynolds

$582,772

 

$887,729

 

 Jim A. Ingram

$192,137

 

$292,680

 

 J. Lavon Morton

$149,090

 

$227,106

 

 Michael E. Newcity

$149,090

 

$227,106

 

 Michael R. Johns

$123,629

 

$188,322

 

 Roy M. Slagle (retired 10/15/2014)1

$267,750

 

$320,664

 

 

1.          Actual incentive payment provided above for Mr. Slagle is prorated based on his early retirement date of October 15, 2014.

 

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

 

In February 2014, the Committee granted a three-year cash long-term incentive plan award for January 1, 2014 through December 31, 2016 using the same components as the 2012-2014 and 2013-2015 plans. The 2014-2016 cash long-term incentive plan components are:

 

Cash Long-Term Incentive
Plan Components

Weighting

Relative TSR Component

50%

ROCE Component

50%

 

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

 

The performance peer group for the TSR component of the 2014-2016 cash long-term incentive plan is listed in the “Determining Appropriate Pay Levels and Linkage to Objectives” section of the CD&A.

 

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

 

For the 2014-2016 cash long-term incentive plan, the Named Executive Officers have a target incentive opportunity expressed as a percentage of their average base salary paid during the performance period. The following table shows the 2014 target incentive for the Named Executive Officers for the 2014-2016 cash long-term incentive plan.

 

 

Cash Long-Term Incentive Plan
Target Incentive Opportunity
(% of Average Base Salary Paid
During Performance Period )

 Judy R. McReynolds

85%

 Jim A. Ingram

75%

 J. Lavon Morton

70%

 Michael E. Newcity

70%

 Michael R. Johns

60%

 Roy M. Slagle

75%

 

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The following tables show the performance factor that will be applied to varying levels of possible performance for each of the two performance metrics utilized for the 2014-2016 cash long-term incentive plan. The performance factor earned for performance at levels between those indicated below is calculated using straight-line interpolation. The Relative TSR component was capped at a 200% performance factor and the ROCE component was capped at a 300% performance factor. Payments for the 2014-2016 cash long-term incentive plan, if any, will be made in early 2017.

 

Relative TSR

Performance Factor
Earned for Relative TSR

< 25th percentile

0%

25th percentile

25%

50th percentile

100%

75th percentile

200%

 

 

ROCE % Achieved

Performance
Factor Earned on ROCE

<3%

0%

3%

30%

10%

100%

15%

300%

 

The performance period for the 2012-2014 cash long-term incentive compensation plan ended on December 31, 2014. The actual TSR percentile rank was 58.4 and ROCE was 3.83% as calculated under the terms of the 2012-2014 cash long-term incentive compensation plan. Combining the resulting two performance factors (weighted 50% each) produced a payout of approximately 86% of the target incentive opportunity as reflected in the table below.

 

 

2012-2014 Target Cash
Long-Term Incentive
Opportunity

Actual 2012-2014
Long-Term Incentive
Plan Payout

 Judy R. McReynolds

$490,952

$421,944

 Jim A. Ingram

$222,184

$190,953

 J. Lavon Morton

$206,775

$177,711

 Michael E. Newcity

$181,621

$156,092

 Michael R. Johns

$161,346

$138,667

 Roy M. Slagle (retired 10/15/14)1

$283,125

$225,759

 

1.  Incentive payment for Mr. Slagle is prorated based on his early retirement date of October 15, 2014.

 

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

 

To help align executive interests with those of shareholders, the Company grants RSU awards. In 2014, Named Executive Officers were granted time-vested RSUs under the Company’s 2005 Ownership Incentive Plan as follows:

 

Named Executive Officer

Targeted Grant Date
Award Value

RSUs
Granted in 2014

 Judy R. McReynolds

$330,000

8,200

 Jim A. Ingram

$200,000

5,000

 J. Lavon Morton

$180,000

4,500

 Michael E. Newcity

$180,000

4,500

 Michael R. Johns

$170,000

4,200

 Roy M. Slagle (retired 10/15/2014)1

$240,000

6,000

 

1.  Award was forfeited at retirement because the early retirement date was less than one year from the award date.

 

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The number of RSUs awarded to each Named Executive Officer was based, in large part, on the Named Executive Officer’s position within the Company. Other considerations included the total number of shares available to be granted, the number of previously granted RSUs currently outstanding, burn rate and potential shareholder dilution. See “Outstanding Equity Awards at 2014 Fiscal Year-End” for additional information regarding these awards.

 

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

 

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

 

Position Title

Stock Ownership Multiple

 

 

ArcBest President and CEO

3 x base salary

 

 

Other Named Executive Officers

2 x base salary

 

 

 

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

 

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

 

·

the Committee is responsible for granting equity-based compensation for all employees;

·

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

·

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

·

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

·

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

 

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

 

Prior to 2009, the Company provided Named Executive Officers with the predominant portion of their long-term compensation through post-employment payments under the Supplemental Benefit Plan (the “SBP”) and Deferred Salary Agreements (“DSA”) retirement programs described on page 36 and 37. All benefits under these plans have been frozen, and officers now receive a significant portion of their long-term compensation through the performance plans previously described. As officers promoted or hired after the SBP and DSA freeze, Messrs. Ingram, Newcity, and Johns are not participants in the SBP or DSA.

 

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

 

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

 

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

 

Voluntary Savings Plan (“VSP”) – The ArcBest VSP is a nonqualified plan which was created to offset the IRC limitations on contributions to the Company’s 401(k) plan for certain eligible officers, including the Named Executive Officers. Prior to 2010, the Company matched 15% of each participant’s contributions up to a maximum annual match amount of $15,000. The match was suspended for the VSP effective January 1, 2010 and has not been reinstated. See the “2014 Non-Qualified Deferred Compensation” section for a more detailed description of the VSP. Mr. Morton is the only Named Executive Officer that currently has a balance in the VSP.

 

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

 

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

 

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

 

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

 

Supplemental Benefit Plan – Prior to 2010, the Company maintained a noncontributory, unfunded supplemental pension benefit plan that supplements benefits under the Pension Plan. Under the SBP, the Company will pay sums in addition to amounts payable under the Pension Plan to eligible officers, including the Named Executive Officers. The SBP has been frozen since December 31, 2009. See “2014 Pension Benefits” for more information.

 

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Deferred Salary Agreements – The Company and ABF Freight also have unfunded, noncontributory DSAs with certain of their officers. No Named Executive Officers are active participants in the DSA; however, Ms. McReynolds and Messrs. Morton and Slagle have frozen benefits under the DSAs. See the “2014 Pension Benefits” section for more information.

 

Pension Plan – As part of their postemployment compensation, the Named Executive Officers participated in the Company’s non-union defined benefit Pension Plan on the same basis as other eligible noncontractual employees. Participation in the Pension Plan was frozen to new entrants effective December 31, 2005. Because the Named Executive Officers, excluding Mr. Johns who was hired after the freeze date, were already active Pension Plan participants as of the participation freeze date, they remained active participants in the Plan with other eligible noncontractual employees until the Pension Plan was amended to freeze the participant’s final average compensation and years of credited service as of July 1, 2013. See the “2014 Pension Benefits” section for more information on the benefit and terms and conditions of the Pension Plan.

 

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

 

Employment Agreements and Change in Control Provisions

 

None of our Named Executive Officers is party to an employment agreement with the Company. However, the Named Executive Officers do participate in the 2012 Change in Control Plan for certain senior officers of the Company. The Committee believes this plan serves the best interests of the stockholders since it helps retain executives during uncertain times leading up to and immediately following a change in control. By providing fair compensation in the event of termination following a change in control, the plan allows the executives to reasonably evaluate potential actions without concern over how it may impact them financially.

 

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

 

(i)

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

(ii)

a prorated annual incentive payment for the year of termination;

(iii)

prorated cash long-term incentive payments;

(iv)

full vesting of all equity awards; and

(v)

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

 

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

 

The benefits are intended to provide the officer participants with a reasonable severance package that is based on the value the officers have created and is realized by the Company’s stockholders in the event of a change in control. None of the change in control provisions requires the Company to gross-up a Named Executive Officer for taxes they may owe on change in control benefits including any excise taxes under IRC Section 4999. Under the terms of the Change in Control Plan, a best-of-net calculation will be performed to determine whether change in control benefits due to the Named Executive Officers should be reduced (so no excise tax will be imposed under IRC Section 280G) or should be paid in full (with any excise taxes resulting to be paid in full by the Named Executive Officer). See “Potential Payments upon Termination or Change in Control” for additional information regarding the provisions of the 2012 Change in Control Plan.

 

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Clawbacks

 

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

 

·

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

·

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

·

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

 

Anti-hedging and Pledging Policies

 

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

 

Tax Implications

 

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

 

IRC Section 280G applies to payments made to executives of a company in connection with a change in control and prohibits the deduction of any “excess parachute payment.” Benefits payable under the 2012 Change in Control Plan as well as accelerated vesting of equity awards and annual and long-term cash incentives could result in “excess parachute payments” that are not deductible by us. For more information regarding amounts payable and benefits available upon the occurrence of certain changes in control, see “Executive Compensation – Potential Payments upon Termination or Change in Control.”

 

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

 

 

 

Compensation Committee Report

 

The Compensation Committee has reviewed and discussed the Compensation Discussion & Analysis with management, and based on the review and discussions, the Compensation Committee recommended to the Board that it be included in the Company’s 2014 Annual Report on Form 10-K and, as applicable, the Company’s 2015 Proxy Statement.

 

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Committee Members

 

 

 

 

 

 

 

 

John H. Morris, Chair

 

 

John W. Alden

 

 

Craig E. Philip

 

 

 

 

Compensation Committee Interlocks and Insider Participation

 

None of the Compensation Committee members are officers or employees or former officers or employees of the Company. No executive officer of the Company serves as a member of the Board of any other entity or the Compensation Committee of any other entity that has one or more executive officers serving as a member of the Board or Compensation Committee. Messrs. Morris and Alden and Dr. Philip served on the Compensation Committee in 2014. In 2014, Mr. Legg served on the Compensation Committee from January 1 through April 23.

 

 

 

Summary Compensation Table

 

The following table sets forth compensation paid for the fiscal years indicated for our 2014 Named Executive Officers.

 

Name and
Principal Position

 

 

Year

 

 

Salary
($)

 

Stock
Awards
($)
(1)

 

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

 

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

 

All Other
Compensation
($)
(4)

 

Total
($)

 

Judy R. McReynolds

ArcBest President and CEO

 

2014

2013

2012

 

$  600,000

575,000

575,000

 

$  329,312

331,056

242,055

 

$  1,309,673

599,104

 

$        45,704

97,574

 

$     37,443

38,382

30,757

 

 

$  2,322,132

1,543,542

945,386

 

Jim A. Ingram

ABF Logistics President

 

2014

2013

2012

330,000

306,917

294,000

 

200,800

199,728

132,030

 

483,633

195,047

 

 

39,641

63,566

 

19,321

15,081

8,534

 

 

1,073,395

716,773

498,130

 

J Lavon Morton

ArcBest Senior Vice President–

Risk and Chief Audit Executive

 

2014

2013

2012

307,000

294,000

294,000

 

 

180,720

180,576

132,030

 

 

404,817

188,665

 

 

12,448

32,658

41,739

 

 

19,740

15,013

8,983

 

 

 

924,725

710,912

476,752

 

 

Michael E. Newcity

ArcBest Senior Vice President–

Chief Financial Officer and

Chief Information Officer

 

2014

2013

2012

307,000

277,667

266,000

 

 

180,720

180,576

124,695

 

 

383,198

160,645

 

 

28,574

55,248

 

 

11,459

14,422

8,485

 

 

 

910,951

633,310

454,428

 

 

Michael R. Johns(5)

ArcBest Vice President–General

Counsel and Corporate Secretary

 

 

2014

283,000

 

168,672

 

326,989

 

 

18,868

 

 

797,529

 

Roy M. Slagle(6)

Former ABF Freight President

and CEO

 

2014

2013

2012

300,726

375,000

375,000

 

 

240,960

240,768

176,040

 

 

546,423

289,168

 

 

133,623

132,125

220,608

 

 

159,183

58,923

44,046

 

 

 

1,380,915

1,095,984

815,694

 

 

 

(1)

The amounts reflect the aggregate grant date fair value of RSU awards to the Named Executive Officers during 2014 under the 2005 Ownership Incentive Plan, computed in accordance with FASB ASC Topic 718, determined without regard to estimated forfeitures. The fair value of RSU awards is equal to the fair market value of the Common Stock on the date of grant multiplied by the number of RSUs awarded. The Named Executive Officers each received an award of RSUs under the 2005 Ownership Incentive Plan on May 8, 2014. The actual amount realized by the officer will vary based on a number of factors, including the Company’s performance, stock price fluctuations and applicable vesting. Dividends are paid on RSUs at the same rate and at the same time as the dividends paid to Company stockholders. See Note L to the consolidated financial statements in the Company’s 2014 Annual Report on Form 10-K for additional detail regarding share-based compensation.

 

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(2)

Reflects cash compensation earned during 2014 and paid in January 2015 from the annual incentive plan and cash compensation paid in January 2015 earned from the 2012-2014 cash long-term incentive plan. See the “2014 Grants of Plan-Based Awards” table for additional information on the 2014 annual incentive plan award and the CD&A for additional information on the cash long-term incentive plan.

 

 

 

McReynolds

 

Ingram

 

Morton

 

Newcity

 

Johns

 

Slagle

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Annual Incentive Plan

 

$

887,729

 

$

292,680

 

$

227,106

 

$

227,106

 

$

188,322

 

$

320,664

 

C-LTIP

 

421,944

 

190,953

 

177,711

 

156,092

 

138,667

 

225,759

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

$

1,309,673

 

$

483,633

 

$

404,817

 

$

383,198

 

$

326,989

 

$

546,423

 

 

(3)

Reflects the increase in actuarial present value during 2014 of each Named Executive Officer’s accumulated benefit under the Company’s legacy Pension Plan, SBP and DSAs. The values reported are determined using the same assumptions as used by the Company for financial reporting purposes for the Company’s Pension Plan, SBP and DSAs. See “2014 Pension Benefits” for additional information on these plans. Interest rate indexes used in determining present values increased in some periods resulting in some negative year over year changes in the Pension Plan and SBP. Negative values are not reported in the table above.

 

 

 

The 2014 change in actuarial present value by plan is as follows:

 

 

 

McReynolds

 

Ingram

 

Morton

 

Newcity

 

Johns

 

Slagle

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pension Plan

 

$

24,738

 

$

39,641

 

$

 

$

28,574

 

$

 

$

 

Supplemental Benefit Plan

 

15,364

 

 

 

 

 

 

Deferred Salary Agreement

 

5,602

 

 

12,448

 

 

 

133,623

 

Total Increase

 

$

45,704

 

$

39,641

 

$

12,448

 

$

28,574

 

$

 

$

133,623

 

 

 

Earnings with respect to outstanding vested RSUs are not above market and are not included in this column. See “2014 Non-Qualified Deferred Compensation” for additional information on RSUs.

 

 

(4)

All Other Compensation for 2014 consists of the following:

 

 

 

McReynolds

 

Ingram

 

Morton

 

Newcity

 

Johns

 

Slagle

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

401(k) Company Match

 

$

7,800

 

$

7,800

 

$

7,800

 

$

 

$

7,240

 

$

7,800

 

DC Contribution

 

10,400

 

10,400

 

10,400

 

10,400

 

10,400

 

10,400

 

Long-Term Disability Premiums

 

1,931

 

941

 

1,360

 

879

 

1,048

 

1,608

 

24-Hour Accidental Death Premiums

 

180

 

180

 

180

 

180

 

180

 

180

 

Vacation Pay(i) 

 

 

 

 

 

 

37,500

 

Consulting Payment(ii) 

 

 

 

 

 

 

67,500

 

Perquisites(iii) 

 

13,826

 

 

 

 

 

23,600

 

Gross-Ups(iv) 

 

3,306

 

 

 

 

 

10,595

 

Total Other Compensation

 

$

37,443

 

$

19,321

 

$

19,740

 

$

11,459

 

$

18,868

 

$

159,183

 

 

 

 (i)

Mr. Slagle received a payment of his accumulated vacation pay as a result of his early retirement on October 15, 2014.

 

 

 

 

(ii)

The Company and Mr. Slagle entered into a Consulting Agreement following his early retirement on October 15, 2014. The Consulting Agreement is described under “Compensation Discussion & Analysis – Retirement of Mr. Slagle”.

 

 

 

 

(iii)

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

 

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

 

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

 

(5)   Mr. Johns was not a Named Executive Officer for 2012 and 2013. Accordingly, the table includes Mr. Johns’ compensation for 2014 only.

 

(6)   Mr. Slagle retired as ABF Freight President and Chief Executive Officer effective October 15, 2014.

 

2014 Grants of Plan-Based Awards

 

The following table provides information related to non-equity and equity-based awards made to the Named Executive Officers for the 2014 fiscal year:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

All Other
Stock Awards

 

Name

 

Award
Type
(1)

 

 

Grant
Date

 

 

Approval
Date
(2)

 

 

Threshold

 

 

Target
($)

 

Maximum

 

 

Number
of
Shares
of
Stock or
Units
(#)

 

Grant
Date Fair
Value of
Stock
Awards
(4)

 

 

 

AIP

 

02/24/2014

 

02/24/2014

 

$    –

 

$ 582,772

 

$1,456,931

 

 

 

 

 

Judy R. McReynolds

 

RSU

 

05/08/2014

 

04/22/2014

 

 

 

 

 

 

 

8,200

 

$    329,312

 

 

 

C-LTIP

 

02/24/2014

 

02/24/2014

 

 

519,286

 

1,298,214

 

 

 

 

 

 

 

AIP

 

02/24/2014

 

02/24/2014

 

 

192,137

 

480,341

 

 

 

 

 

Jim A. Ingram

 

RSU

 

05/08/2014

 

04/22/2014

 

 

 

 

 

 

 

5,000

 

200,800

 

 

 

C-LTIP

 

02/24/2014

 

02/24/2014

 

 

247,557

 

618,893

 

 

 

 

 

 

 

AIP

 

02/24/2014

 

02/24/2014

 

 

149,090

 

372,724

 

 

 

 

 

J. Lavon Morton

 

RSU

 

05/08/2014

 

04/22/2014

 

 

 

 

 

 

 

4,500

 

180,720

 

 

 

C-LTIP

 

02/24/2014

 

02/24/2014

 

 

218,909

 

547,271

 

 

 

 

 

 

 

AIP

 

02/24/2014

 

02/24/2014

 

 

149,090

 

372,724

 

 

 

 

 

Michael E. Newcity

 

RSU

 

05/08/2014

 

04/22/2014

 

 

 

 

 

 

 

4,500

 

180,720

 

 

 

C-LTIP

 

02/24/2014

 

02/24/2014

 

 

218,909

 

547,271

 

 

 

 

 

 

 

AIP

 

02/24/2014

 

02/24/2014

 

 

123,629

 

309,072

 

 

 

 

 

Michael R. Johns

 

RSU

 

05/08/2014

 

04/22/2014

 

 

 

 

 

 

 

4,200

 

168,672

 

 

 

C-LTIP

 

02/24/2014

 

02/24/2014

 

 

174,946

 

437,365

 

 

 

 

 

 

 

AIP

 

02/24/2014

 

02/24/2014

 

 

267,750

 

669,375

 

 

 

 

 

Roy M. Slagle

 

RSU

 

05/08/2014

 

04/22/2014

 

 

 

 

 

 

 

6,000

 

240,960

 

 

 

C-LTIP

 

02/24/2014

 

02/24/2014

 

 

290,625

 

726,563

 

 

 

 

 

 

(1)   Award Types:

AIP = annual incentive compensation plan

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

C-LTIP = three-year cash long-term incentive compensation plan (2014-2016 plan period)

 

(2)   The performance criteria for the 2014 annual incentive plan award were approved by the Committee on February 24, 2014. Amounts shown in the “Estimated Future Payouts under Non-Equity Incentive Plan Awards” column with respect to the 2014 annual incentive plan award represent the target and maximum payment levels of the 2014 annual incentive plan. The incentive amounts are based on actual base salary amounts paid to each Named Executive Officer during 2014. Amounts for Mr. Slagle were estimated based on the base salary amounts that would have been paid to him had he continued to serve as

 

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an employee through the end of 2014. Awards under the annual incentive plan are described in greater detail in the narrative following this table and in “Compensation Discussion & Analysis – Components of Compensation – Annual Cash Incentive Compensation.” The actual amount of the 2014 annual incentive plan award paid for 2014 performance with respect to each Named Executive Officer is set forth in the “Non-Equity Incentive Plan Compensation” column of the “Summary Compensation Table.”

 

(3)    The performance criteria for the 2014-2016 cash long-term incentive compensation plan award were approved by the Committee on February 24, 2014. Amounts shown in the “Estimated Future Payouts under Non-Equity Incentive Plan Awards” column represent the threshold, target and maximum payment levels with respect to cash long-term incentive compensation plan awards granted in 2014. The incentive amounts are based on the average of (i) actual base salary amounts paid to each Named Executive Officer during 2014, (ii) a projected level of base salary for 2015, based on each Named Executive Officer’s base salary as of December 31, 2014, and (iii) a projected level of base salary for 2016, based on each Named Executive Officer’s base salary as of December 31, 2014. Amounts for Mr. Slagle were calculated using the same methodology except that his amounts also assume he continued to serve as an employee through the end of the 2014-2016 performance period. Awards under the cash long-term incentive compensation plan are described in greater detail in the narrative following this table and in “Compensation Discussion & Analysis – Components of Compensation – Long-Term Cash Incentive Compensation.”

 

(4)    Reflects the full grant date fair value ($40.16 per share), computed in accordance with FASB ASC Topic 718, determined without regard to forfeitures, of RSU awards made under the 2005 Ownership Incentive Plan on May 8, 2014.

 

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

 

Non-Equity Incentive Compensation

 

Annual Incentive Compensation Plan: Annual incentive compensation plan awards earned are generally paid as soon as administratively practicable following the date the awards are calculated and approved, but no later than March 15 of the year following the year to which the performance goals relate. Participants generally must be employed on the payment date in order to receive payment of their earned annual incentive compensation plan awards. However, if participants terminate during the plan year due to early retirement (age 55 with 10 years of service), normal retirement (age 65), death or disability, such participants remain eligible to receive a prorated annual incentive compensation plan award, provided, in the case of early or normal retirement, the individual has been a participant for at least 90 days during the plan year. Payment of the prorated incentive, if any, is made at the end of the measurement period and based upon actual performance results. Consistent with this policy, Mr. Slagle received a pro-rated annual incentive payment based on the base salary he received while employed during 2014. Upon any other termination, a participant’s award will be forfeited, unless the Committee, in its discretion, decides that a prorated award should be paid. The 2012 Change in Control Plan provides for immediate payment of an earned award upon a qualified termination following a change in control, except where payment must be delayed six months for key employees as required by Section 409A of the IRC. Target incentive levels and information on performance goals are set forth in the “Compensation Discussion & Analysis – Components of Compensation – Annual Cash Incentive Compensation.” Additional information regarding the treatment of these awards upon termination or a change in control is provided in “Potential Payments upon Termination or Change in Control.”

 

Cash Long-Term Incentive Compensation Plan: Generally, participants in the cash long-term incentive compensation plan must remain employed through the end of the measurement period in order to receive payment of any earned award. However, if participants have at least 12 months of employment during a measurement period, such participants are eligible for a prorated benefit upon normal retirement (age 65) or early retirement (age 55 with 10 years of service), death or disability based on base salary received during the measurement period and payment, if any, is made at the end of the measurement period based upon actual performance results. Consistent with this policy, Mr. Slagle’s 2014-2016 cash long-term incentive compensation benefit was forfeited since less than 12 months of the measurement period had elapsed as of his October 15, 2014 early retirement date.

 

Additional detail regarding the 2014 awards granted under the cash long-term incentive compensation plan can be found in the “Compensation Discussion & Analysis – Components of Compensation – Long-Term Cash Incentive Compensation.”

 

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Table of Contents

 

Stock Awards under the 2005 Ownership Incentive Plan

 

RSUs were granted under the Company’s 2005 Ownership Incentive Plan on May 8, 2014. Vesting and settlement of RSUs generally occurs on the earlier of the fifth anniversary of the award date or the date the participant experiences a qualifying termination from employment with the Company. Upon a participant’s normal retirement (age 65) or termination due to death or disability, the RSUs will fully vest. If termination of the participant occurs within 24 months of a change in control of the Company for good reason or without cause (as defined in the RSU agreement for awards prior to January 1, 2012 and as defined in the 2012 Change in Control Plan for awards January 1, 2012 and later), the participant’s RSUs awarded become fully vested and will be distributed as soon as administratively possible, except where payment must be delayed for six months for key employees as required by Section 409A of the IRC. Upon early retirement eligibility (age 55 with 10 years of service), if a minimum of 12 months have elapsed since the award date, the participant becomes vested in a pro rata number of RSUs based on the number of whole months since the award date. The remaining shares subject to the RSUs will continue to vest with respect to 1/60 of the total number of shares subject to the award each month through the participant’s normal retirement date or, if sooner, the end of the vesting period. A participant does not have to terminate employment in order to vest upon normal or early retirement eligibility, but no RSUs will be distributed until actual termination or the fifth anniversary of the award date, if earlier. Consistent with the preceding description, following the six month waiting period required under Section 409A of the IRC, Mr. Slagle will receive shares as a result of settlement of his vested and outstanding RSUs in connection with his retirement and forfeit any unvested RSUs as of his early retirement date. No dividends will be paid to Named Executive Officers on RSUs after December 31, 2014. Prior to January 1, 2015, dividend equivalents were paid on RSUs to Named Executive Officers at the same rate and at the same time as the dividends paid to Company stockholders.

 

Outstanding Equity Awards at 2014 Fiscal Year-End

 

The following table provides information related to any equity-based awards outstanding as of December 31, 2014 for the Named Executive Officers:

 

 

 

Stock Awards

 

 

 

 

Number of Shares or Units of

 

Market Value of Shares or Units

 

 

Stock that Have Not Vested

 

of Stock that Have Not Vested

Name

 

(#)(1)

 

($)(2)

Judy R. McReynolds

 

14,600(3)

 

$      677,002

 

 

14,600(4)

 

677,002

 

 

16,500(5)

 

765,105

 

 

12,100(6)

 

561,077

 

 

8,200(7)

 

380,234

Jim A. Ingram

 

7,100(3)

 

329,227

 

 

7,100(4)

 

329,227

 

 

9,000(5)

 

417,330

 

 

7,300(6)

 

338,501

 

 

5,000(7)

 

231,850

J. Lavon Morton

 

933(3)

 

43,263

 

 

2,133(4)

 

98,907

 

 

4,200(5)

 

194,754

 

 

5,060(6)

 

234,632

 

 

4,500(7)

 

208,665

Michael E. Newcity

 

7,500(3)

 

347,775

 

 

7,500(4)

 

347,775

 

 

8,500(5)

 

394,145

 

 

6,600(6)

 

306,042

 

 

4,500(7)

 

208,665

Michael R. Johns

 

7,100(3)

 

329,227

 

 

7,500(4)

 

347,775

 

 

8,500(5)

 

394,145

 

 

6,200(6)

 

287,494

 

 

4,200(7)

 

194,754

Roy M. Slagle

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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(1)    Vesting of RSUs generally occurs on the fifth anniversary of the award date, and settlement of RSUs generally occurs at that time or, if earlier, upon the award holder’s qualifying termination of employment. Upon a participant’s eligibility for normal retirement (age 65) or termination due to death or disability, RSUs generally will become vested in full. If termination of the participant occurs within 24 months of a change in control of the Company for good reason or without cause (as defined in the RSU agreements for awards prior to January 1, 2012 and as defined in the 2012 Change in Control Plan for awards January 1, 2012 and later), the participant’s RSUs awarded become fully vested and will be distributed as soon as administratively possible, except for RSUs where payment must be delayed for six months for key employees as required by Section 409A of the IRC. Upon early retirement (age 55 with 10 years of service), the participant is entitled to the vesting of a pro rata number of RSUs based on the number of whole months elapsed since the award date, if there has elapsed a minimum of twelve months since the award date. From that 12-month anniversary forward, employees, including Named Executive Officers, who have attained the early retirement age and service requirements but have not terminated employment, continue to vest in 1/60th of their RSU awards each month. Mr. Morton has attained early retirement age in accordance with the terms of the RSU awards. Mr. Slagle’s unvested RSUs were forfeited upon his October 15, 2014 early retirement date.

       

(2)    Reflects the value of unvested RSUs as of December 31, 2014 awarded under the 2005 Ownership Incentive Plan. The value is based on the closing market price of the Common Stock of $46.37 on December 31, 2014.

       

(3)    These RSU awards fully vest on July 28, 2015, the fifth anniversary of their grant date.

       

(4)    These RSU awards fully vest on May 2, 2016, the fifth anniversary of their grant date.

       

(5)    These RSU awards fully vest on May 4, 2017, the fifth anniversary of their grant date.

       

(6)    These RSU awards fully vest on November 1, 2018, the fifth anniversary of their grant date.

       

(7)    These RSU awards fully vest on May 8, 2019, the fifth anniversary of their grant date.

 

2014 Option Exercises and Stock Vested

 

The following table provides information related to stock options exercised in 2014 by the Named Executive Officers and RSUs that became vested during the 2014 fiscal year for the Named Executive Officers.

 

 

 

Option Awards

 

Stock Awards

Name

 

 

Number of
Shares
Acquired on
Exercise
(#)

 

Value
Realized

on Exercise
($)
(1)

 

Number of Shares
Acquired on Vesting
(#)
(2, 3)

 

Value Realized
on Vesting
($)
(4)

Judy R. McReynolds

 

7,500

 

$   25,050

 

8,000

 

$ 304,000

Jim A. Ingram

 

 

 

7,100

 

269,800

J. Lavon Morton

 

7,500

 

38,325

 

7,013

 

265,263

Michael E. Newcity

 

 

 

1,100

 

41,800

Michael R. Johns

 

 

 

7,100

 

269,800

Roy M. Slagle

 

 

 

5,200

 

188,832

 

(1)   Value realized from the exercise of stock options is equal to the difference between the closing market price of the Company’s Common Stock on the date of exercise and the exercise price of the options, multiplied by the number of shares with respect to which the option is being exercised.

 

(2)   All the shares issued for the 2009 RSU award at final vesting are free of all restrictions. All shares owned by executive officers are subject to company imposed restrictions that limit trading during periods when officers have material nonpublic information as well as the Company’s policy related to minimum stock ownership for executive officers as discussed in the Compensation Discussion & Analysis.

 

(3)   Messrs. Slagle and Morton were subject to pro rata vesting in 2014 because each had attained early retirement age under the terms of the RSU awards. Awards that vest on a pro rata basis due to attainment of early retirement age are not settled until the earlier of the original vesting date (five years from the grant date) or a qualifying termination event. As such, while the value of all pro rata vesting in 2014 is reflected in the Options Exercised and Stock Vested table above, Mr. Morton has not yet received the shares that vested in 2014 due to qualification for early retirement vesting. Mr. Slagle retired on October 15,

 

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Table of Contents

 

2014 and will receive shares for all vested but not yet settled RSU awards at the end of the six-month delay required under Section 409A of the IRC.

 

The pro rata vesting of RSUs is outlined in the table below. Of Mr. Morton’s 7,013 vested shares in 2014, 473 shares related to final vesting of the 2009 RSU award, with the remainder attributable to pro rata vesting. Of Mr. Slagle’s 5,200 vested shares in 2014, 533 shares related to final vesting of the 2009 RSU award, with the remainder attributable to pro rata vesting. Vested but unissued RSUs will be settled at the earlier of five years from the award date or a qualifying termination event. The value of the vested but not issued RSUs is reported in the 2014 “Nonqualified Deferred Compensation Table.”

 

 

 

Morton

Vested in 2014

Slagle

Vested in 2014

2009 RSU Award

473

533

2010 RSU Award

1,600

1,333

2011 RSU Award

1,600

1,333

2012 RSU Award

1,800

2,000

2013 RSU Award

1,540

2014 RSU Award

Total pro rata vesting in 2014

7,013

5,200

 

(4)          Value realized from RSU vesting is equal to the closing market price of the Common Stock on the date of vesting multiplied by the number of vested shares.

 

2014 Equity Compensation Plan Information

 

The following table sets forth information as of December 31, 2014 with respect to the Company’s compensation plans under which equity securities of the Company are authorized for issuance:

 

 

 

 

 

 

 

Number of Securities

 

 

 

 

 

 

 

Remaining Available for

 

 

 

Number of Securities to be

 

Weighted-Average

 

Future Issuance Under

 

 

 

Issued Upon Exercise of

 

Exercise Price of

 

Equity Compensation Plans,

 

 

 

Outstanding Options,

 

Outstanding Options,

 

Excluding Securities

 

Plan Category

 

Warrants and Rights

 

Warrants and Rights

 

Reflected in Column (a)

 

 

 

(a)

 

(b)

 

(c)

 

Equity Compensation

 

 

 

 

 

 

 

Plans Approved by

 

 

 

 

 

 

 

Security Holders

 

1,368,880(1)

 

$           –

 

1,294,096

 

Equity Compensation

 

 

 

 

 

 

 

Plans Not Approved