¨ | Preliminary Proxy Statement | |||
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þ | Definitive Proxy Statement | |||
¨ | Definitive Additional Materials | |||
¨ | Soliciting Material Pursuant to §240.14a-12 | |||
FEDERAL SIGNAL CORPORATION | ||||
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• | To elect nine directors; |
• | To approve, on an advisory basis, the compensation of our named executive officers (“NEOs”); |
• | To vote, on an advisory basis, on the frequency of future advisory votes on our NEO compensation; |
• | To ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for fiscal year 2017; and |
• | To transact such other business that may properly come before the meeting or any adjournment(s) or postponement(s) thereof. |
By order of the Board of Directors, |
DANIEL A. DUPRÉ, Corporate Secretary |
Item | Board Recommendations | Page | ||||
Proposal 1 | Election of Nine Directors | For all nominees | ||||
Proposal 2 | Advisory Vote to Approve the Compensation of our NEOs | For | ||||
Proposal 3 | Advisory Vote on the Frequency of Future Advisory Votes on our NEO Compensation | 1 Year | ||||
Proposal 4 | Ratification of the Appointment of Deloitte & Touche LLP as our Independent Registered Public Accounting Firm for Fiscal Year 2017 | For |
Name | Age | Director Since | Occupation and Experience | Independent | Audit Committee | Compensation and Benefits Committee | Nominating and Governance Committee | |||||||
James E. Goodwin (1) | 72 | 2005 | Lead Independent Director, Federal Signal Corporation | Yes | ü | ü | ||||||||
Paul W. Jones | 68 | 1998 | Former Executive Chairman and Chief Executive Officer (“CEO”), A. O. Smith Corporation | Yes | ü | Chair | ||||||||
Bonnie C. Lind | 58 | 2014 | Sr. Vice President, Chief Financial Officer (“CFO”) and Treasurer, Neenah Paper, Inc. | Yes | ü | |||||||||
Dennis J. Martin (1) | 66 | 2008 | Chairman and former CEO, Federal Signal Corporation | No |
Name | Age | Director Since | Occupation and Experience | Independent | Audit Committee | Compensation and Benefits Committee | Nominating and Governance Committee | |||||||
Richard R. Mudge | 71 | 2010 | President, Compass Transportation and Technology, Inc. | Yes | ü | |||||||||
William F. Owens | 66 | 2011 | Former Governor of Colorado | Yes | ü | ü | ||||||||
Brenda L. Reichelderfer | 58 | 2006 | Sr. Vice President and Managing Director, TriVista Business Group | Yes | Chair | ü | ||||||||
Jennifer L. Sherman | 52 | 2016 | President and CEO, Federal Signal Corporation | No | ||||||||||
John L. Workman | 65 | 2014 | Former CEO, Omnicare, Inc. | Yes | Chair |
(1) | Effective December 31, 2016, Mr. Martin retired from employment and transitioned from Executive Chairman of the Company to Chairman of the Board. Mr. Goodwin remains Lead Independent Director. |
• | Creating disciplined growth; |
• | Improving manufacturing efficiencies and costs; |
• | Leveraging invested capital; and |
• | Diversifying our customer base. |
• | In January 2016, we completed the sale of our Bronto Skylift business, receiving proceeds of approximately $88 million. The sale of our Bronto Skylift business removed a low-margin operation that required a disproportionate amount of invested capital and facilitates our focus on more profitable growth opportunities. |
• | In addition, in January 2016, we executed a new five-year $325 million revolving credit facility to replace our previous $225 million credit facility. |
• | We continued to apply a disciplined approach in considering potential acquisitions. In January 2016, we completed the acquisition of Westech Vac Systems, Ltd., a Canadian manufacturer of high-quality, rugged vacuum trucks. Although not significant in size, the acquisition provides access to new product offerings and new markets. |
• | In June 2016, the Company completed the acquisition of substantially all the assets and operations of Joe Johnson Equipment, Inc. and Joe Johnson Equipment (USA), Inc. (collectively, “JJE”). The Company expects that JJE will facilitate sales of its existing products into new markets, expand the Company’s product and service offerings and increase the Company’s footprint across North America. With the acquisition of JJE, the Company’s product offerings have expanded to include other products, including those not manufactured by the Company, such as refuse and recycling collection vehicles, camera systems, ice-resurfacing equipment and snow-removal equipment. |
• | We demonstrated our commitment to returning value to stockholders by paying increased cash dividends of $16.9 million in 2016, up from $15.6 million in 2015. |
• | We also significantly increased the amount of opportunistic share repurchases under our authorized share repurchase programs, repurchasing approximately 3.0 million shares at an average purchase price of $12.75 per share. Total repurchases in 2016 totaled $37.8 million, compared to $10.6 million in 2015. The remaining aggregate authorization under these programs of $31.4 million at December 31, 2016 represents approximately 4% of our market capitalization. |
• | Cash flow during 2016 remained healthy, with $26.7 million of cash being generated from continuing operations, facilitating the increased cash returns to shareholders, as well as investments in long-term growth initiatives, including new product development. |
• | We have also continued to focus on new product development in 2016 and believe that these efforts will provide additional opportunities to diversify further our customer base. Specific examples for industrial markets include investments in new excavator designs to better target utility markets and in internationally certified safety products to expand our global reach. |
• | We continue to focus on reducing product costs and improving manufacturing efficiencies across all of our businesses. We started our “80/20” efficiency initiatives in 2010, and they have remained a critical part of our culture. |
• | At December 31, 2016, total debt exceeded total cash and cash equivalents by $13.3 million, and we had $244 million of availability under our credit facility. With our current capital structure, strong balance sheet, availability under our credit facility and positive operating cash flow, we are well positioned to navigate short-term market headwinds and invest in internal growth initiatives, pursue strategic acquisitions and consider ways to return value to stockholders. |
• | Our debt leverage remained low, at 0.8 times adjusted EBITDA ** as of December 31, 2016. |
** | As this is a non-GAAP measure, we have included a reconciliation to the most directly comparable GAAP measure in Appendix A. |
Compensation Elements | Performance Based | Primary Financial Metric(s) | Terms |
Base Salary | N/A | Assessed annually based on individual performance and market data to ensure we attract and retain highly qualified executives. | |
Short-Term Incentive Bonus (Cash) | ü | Earnings | Annual cash awards designed to incentivize executives to achieve Company and individual objectives. |
Achievement of financial targets weighted 70%. | |||
Achievement of individual objectives weighted 30%. | |||
Designed to pay out between 0% and 200% of bonus opportunity based on financial and individual performance. | |||
Capped at a maximum of 200% of bonus opportunity. | |||
Long-Term Incentive Bonus (Equity) (1) | Annual equity awards link long-term financial interests of executives to those of our stockholders. | ||
• Performance Share Units | ü | Earnings Per Share from Continuing Operations and Return on Invested Capital | Performance share units are earned only if the threshold is met during a three-year performance period. Any earned shares vest at the end of the performance period. |
• Stock Options (2) | Stock Price | Stock options only have value if share price increases over grant date value. Stock options vest ratably over three years. | |
Indirect Compensation | N/A | Includes access to the same health and welfare and retirement plans available to other eligible employees. |
(1) | For 2016, long-term equity incentive awards were split 50/50 between performance share units (“PSUs”) and non-qualified stock options. Time-based restricted stock may also be awarded in recognition of performance and is subject to three-year cliff vesting. |
(2) | In our view, stock options are inherently at-risk because they only have value if share price increases over grant date value. |
1. | To elect nine directors; |
2. | To approve, on an advisory basis, the compensation of our NEOs; |
3. | To vote, on an advisory basis, on the frequency of future advisory votes on our NEO compensation; |
4. | To ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for fiscal year 2017; and |
5. | To transact such other business that may properly come before the meeting or any adjournment(s) or postponement(s) thereof. |
• | By Telephone or Internet: You may vote by telephone or Internet by following the instructions included in the Notice of Internet Availability and in these proxy materials; |
• | By Written Proxy: If you received a printed copy of the proxy materials, you may vote by written proxy by signing, dating and returning the proxy card in the postage-paid envelope provided; or |
• | In Person: If you are a stockholder of record, you may vote in person at the Annual Meeting. You are a stockholder of record if your shares are registered in your name. If your shares are in the name of your broker or bank, your shares are held in “street name” and you are not a stockholder of record. If your shares are held in street name and you wish to vote in person at the Annual Meeting, you will need to contact your broker or bank to obtain a legal proxy allowing attendance at the Annual Meeting. If you plan to attend the Annual Meeting in person, please bring proper identification and proof of ownership of your shares. |
• | The approval, on an advisory basis, of the compensation of our NEOs (Proposal 2); |
• | The approval, on an advisory basis, of the frequency of an advisory vote on our NEO compensation (Proposal 3); and |
• | The ratification of Deloitte & Touche LLP as our independent registered public accounting firm (Proposal 4). |
• | Voting by telephone or Internet on a later date, or delivering a later-dated proxy card if you requested printed proxy materials, prior to or at the Annual Meeting; |
• | Filing a written notice of revocation with our Corporate Secretary; or |
• | Attending the Annual Meeting and voting your shares in person (Note: Attendance alone at the Annual Meeting will not revoke a proxy). |
Name | Amount and Nature of Beneficial Ownership | Percent of Outstanding Common Stock (1) | ||
BlackRock, Inc. | 7,043,176 (2) | 11.8% | ||
55 East 52nd Street | ||||
New York, NY 10055 | ||||
Dimensional Fund Advisors LP | 5,019,298 (3) | 8.4% | ||
Building One | ||||
6300 Bee Cave Road | ||||
Austin, TX 78746 | ||||
Franklin Mutual Advisers, LLC | 4,240,401 (4) | 7.1% | ||
101 John F. Kennedy Parkway | ||||
Short Hills, NJ 07078 |
(1) | Based on 59,721,376 shares of common stock issued and outstanding as of February 28, 2017. |
(2) | Based solely on a Schedule 13G (Amendment No. 9) filed with the Securities and Exchange Commission (“SEC”) on January 12, 2017, in which BlackRock, Inc. reported that, as of December 31, 2016, it had sole voting power over 6,905,440 shares and sole dispositive power over 7,043,176 shares. |
(3) | Based solely on a Schedule 13G (Amendment No. 3) filed with the SEC on February 9, 2017, in which Dimensional Fund Advisors LP reported that, as of December 31, 2016, it had sole voting power over 4,836,826 shares and sole dispositive power with respect to 5,019,298 shares in its capacity as an investment adviser registered under the Investment Advisors Act of 1940 to four investment companies and as investment manager to certain other commingled group trusts and separate accounts. Dimensional Fund Advisors LP disclaims beneficial ownership of these shares. |
(4) | Based solely on a Schedule 13G (Amendment No. 11) filed with the SEC on February 3, 2017, in which Franklin Mutual Advisers, LLC reported that, as of December 31, 2016, it had sole voting and dispositive power with respect to all shares. |
Name (1) | Amount and Nature of Beneficial Ownership (2)(3) | Percent of Outstanding Common Stock (4) | |
Brian S. Cooper | 94,626 | * | |
James E. Goodwin (5) | 143,196 | * | |
Ian A. Hudson | 34,136 | * | |
Paul W. Jones (5) | 120,670 | * | |
Bonnie C. Lind (5) | 18,660 | * | |
Dennis J. Martin (5) | 1,085,819 | 1.8% | |
Samuel E. Miceli | 50,908 | * | |
Richard R. Mudge (5) | 60,635 | * | |
William F. Owens (5) | 71,691 | * | |
Brenda L. Reichelderfer (5) | 121,157 | * | |
Jennifer L. Sherman | 473,719 | * | |
John L. Workman (5) | 35,156 | * | |
All Directors and Executive Officers as a Group (16 persons) (6) | 2,511,099 | 4.2% |
(1) | All of our directors and officers use our Company address: 1415 West 22nd Street, Suite 1100, Oak Brook, IL 60523. |
(2) | Totals include shares subject to stock options exercisable within 60 days of February 28, 2017 as follows: Mr. Cooper, 58,742; Mr. Goodwin, 53,317; Mr. Hudson, 8,968; Mr. Jones, 3,317; Ms. Lind, 5,000; Mr. Martin, 712,166; Mr. Miceli, 14,731; Dr. Mudge, 5,000; Ms. Reichelderfer, 3,317; Ms. Sherman, 268,393; and Mr. Workman, 5,000. All directors and executive officers as a group hold stock options exercisable within 60 days of February 28, 2017 with respect to 1,137,951 shares. Totals also include shares held in our 401(k) Plan as follows: Mr. Miceli, 8,001; and Ms. Sherman, 49,850. |
(3) | Totals do not include restricted stock units that are vested but for which delivery has been deferred at the election of the director, as follows: Mr. Goodwin, 25,161; Ms. Lind, 6,026; Dr. Mudge, 23,361; and Mr. Owens, 9,870. |
(4) | Based upon 59,721,376 shares of common stock issued and outstanding as of February 28, 2017 and, for each director or executive officer or the group, the number of shares subject to stock options exercisable by such director or executive officer or the group within 60 days of February 28, 2017. The use of “*” denotes percentages of less than 1%. |
(5) | Denotes non-employee director. Mr. Martin transitioned from Executive Chairman of the Company to Chairman of the Board effective December 31, 2016. |
(6) | The information contained in this row of the table is based upon information furnished to us by the named individuals above, our other Section 16 Officers and from our records. Each director and officer claims sole voting and investment power with respect to the shares listed above. |
Mr. Goodwin was elected Lead Independent Director of the Board effective January 1, 2016 and had previously served as Chairman of our Board since April 2009. He served as interim President and CEO of our Company from December 2007 until September 2008. From October 2001 to December 2007, Mr. Goodwin operated his own independent consulting business. He resumed this business in September 2008 and continues to operate it to date. Mr. Goodwin also serves as a member of the Advisory Board of Wynnchurch Capital, a private equity company, a position he has held since January 2013. From July 1999 to October 2001, Mr. Goodwin served as Chairman and CEO of United Airlines, a worldwide airline operator (NYSE: UAL). Mr. Goodwin also serves as a member of the Board of Directors of AAR Corp., a manufacturer of products for the aviation/aerospace industry (NYSE: AIR), and John Bean Technologies Corporation, a manufacturer of industrial equipment for the food processing and air transportation industries (NYSE: JBT), serving in such positions since April 2002 and July 2008, respectively. | ||
James E. Goodwin | Key Qualifications: | |
Director since October 2005 | • Extensive background in global operations, broad management experience and strategic leadership skills | |
Committees: | • In-depth understanding of our Company and its industry | |
• Nominating and Governance | • Significant experience as a Chairman, CEO and director of publicly traded companies | |
• Compensation and Benefits | ||
Age: 72 |
Effective April 2014, Mr. Jones retired as Executive Chairman of A. O. Smith Corporation, a manufacturer of water heating and water treatment systems (NYSE: AOS), a position he held since January 2013. From December 2005 to January 2013, he was Chairman and CEO of A. O. Smith Corporation, and from January 2004 until December 2005, he was President and Chief Operating Officer (“COO”). Mr. Jones has served on the Board of Directors of A. O. Smith Corporation since December 2004. In December 2014, Mr. Jones joined the Board of Directors of Rexnord Corporation, a manufacturer of water management systems (NYSE: RXN). In July 2015, he was elected Non-Executive Chairman of Rexnord Corporation. Mr. Jones also has served on the Board of Directors of Integrys Energy Group, Inc., a utility holding company (formerly NYSE: TEG), from December 2011 to June 2015 when it was acquired by WEC Energy Group, Inc., a distributor of electric energy (NYSE: WEC). On the date of the acquisition, Mr. Jones was elected to the Board of WEC Energy Group, Inc. From July 2006 to July 2011, Mr. Jones served as a member of the Board of Directors of Bucyrus International, Inc., a manufacturer of mining and construction machinery (formerly NASDAQ: BUCY), until its acquisition by Caterpillar Inc. Mr. Jones also serves as a member of the Board of Directors of the United States Chamber of Commerce since March 2008. | ||
Paul W. Jones | ||
Director since December 1998 | ||
Key Qualifications: | ||
Committees: | ||
• Nominating and Governance (Chair) | • Extensive management and manufacturing experience with multinational companies | |
• Compensation and Benefits | • Significant experience as a Chairman, CEO and director of publicly traded companies | |
• Experienced strategist focused on enterprise growth | ||
Age: 68 |
Ms. Lind is Senior Vice President, CFO and Treasurer of Neenah Paper, Inc., a technical specialties and fine paper company (NYSE: NP). Ms. Lind joined Neenah Paper, Inc. in June 2004 as CFO to execute the spin-off from Kimberly-Clark Corporation, a manufacturer of personal care, consumer tissue and health care products (NYSE: KMB). Ms. Lind was an employee of Kimberly-Clark Corporation from 1982 until 2004, holding a variety of increasingly senior financial and operations positions and served as their Assistant Treasurer from 1999 until June 2004. From April 2009 to January 2017, Ms. Lind served on the Board of Directors of Empire District Electric Company (“Empire”), a utility generating, transmitting and distributing power to southwestern Missouri and adjacent areas (formerly NYSE: EDE). Ms. Lind was a member of Empire’s Audit Committee and Chairman of its Nominating and Corporate Governance Committee until the company was acquired in January 2017. | ||
Bonnie C. Lind | Key Qualifications: | |
Director since February 2014 | • Vast experience in manufacturing, financing and mergers and acquisitions | |
• Deep finance and treasury experience | ||
• Extensive leadership and managerial experience | ||
Committees: | ||
• Audit | ||
Age: 58 |
Mr. Martin was named Chairman of the Board on January 1, 2017. He previously served as our Executive Chairman beginning in January 2016, and as our President and CEO from October 2010 through December 2015. Mr. Martin has been a member of our Board since March 2008. Prior to becoming our President and CEO, Mr. Martin served as an independent business consultant to manufacturing companies. Mr. Martin has served as a director of Essendant Inc. (NASDAQ: ESND), a leading supplier of workplace essentials, since July 2016. From May 2001 to August 2005, Mr. Martin was the Chairman, President and CEO of General Binding Corporation, a manufacturer and marketer of binding and laminating office equipment (formerly NASDAQ: GBND), until its acquisition by Acco World Brands. Mr. Martin served as a director of HNI Corporation, a provider of office furniture and hearths (NYSE: HNI), from July 2000 to May 2016. Mr. Martin served on the Board of Directors of Coleman Cable, Inc. (“Coleman”), a manufacturer and innovator of electrical and electronic wire and cable products (formerly NASDAQ: CCIX), from February 2008 until February 2014 when Coleman was purchased by Southwire Company. Mr. Martin also served on the Board of Directors of A. O. Smith Corporation, a manufacturer of water heating systems and electric motors (NYSE: AOS), from January 2004 until December 2005. | ||
Dennis J. Martin | ||
Director since March 2008 | ||
Key Qualifications: | ||
Committees: None | • Expertise in manufacturing and business process engineering | |
• Accomplished sales strategist | ||
Age: 66 | • In-depth knowledge of our Company and its operations as our former President and CEO | |
Dr. Mudge is President of Compass Transportation and Technology Inc., a private economic and financial consulting firm, a position he has held since December 2013. Dr. Mudge previously served as the Vice President of the U.S. Infrastructure Division of Delcan Corporation from 2002 until December 2013 and he had served on the Board of Directors of Delcan’s U.S. subsidiary from 2005 until December 2013. Dr. Mudge previously served as President of the transportation subsidiary of U.S. Wireless Corporation, from April 2000 to December 2001, and as Managing Director of Transportation for Hagler Bailly, Inc., a worldwide provider of management consulting services to the energy and network industries (formerly NASDAQ: HBIX), from 1998 to 2000. In 1986, Dr. Mudge co-founded Apogee Research Inc. (“Apogee”), an infrastructure consulting firm, and served as its President until 1995 and then as its Chairman of the Board from 1995 until 1997, when Apogee merged with Hagler Bailly. Dr. Mudge also worked for the Congressional Budget Office from 1975 to 1986 where he became Chief of the Public Investment Unit and for the Rand Corporation where he served as Director of Economic Development Studies from 1972 to 1975. | ||
Richard R. Mudge | ||
Key Qualifications: | ||
Director since April 2010 | ||
• Expertise across multiple facets of the transportation industry | ||
Committees: | • Leadership in technology, finance, business, government policy and research | |
• Audit | • Experience growing businesses | |
Age: 71 |
Mr. Owens serves on the Board of Directors of Bill Barrett Corporation, an independent oil and gas company (NYSE: BBG); Cloud Peak Energy, Inc., a sub-bituminous steam coal producer (NYSE: CLD); positions he has held since May 2010 and January 2010, respectively. Mr. Owens served on the Board of Directors of Key Energy Services, Inc. an oil well services company (NYSE: KEG) from January 2007 to December 2016 and on the Board of Directors of Far Eastern Shipping Company Plc., a shipping and railroad company listed on the Moscow exchange (MOEX: FESH), from June 2007 to June 2012. Since April 2013, Mr. Owens has served as the Chairman of the Supervisory Board of the Credit Bank of Moscow, a private bank headquartered in Moscow. Mr. Owens serves as a Senior Director of government law and policy at Greenberg Traurig, LLP, an international law firm. Mr. Owens served as Governor of Colorado from 1999 to 2007. Prior to that, he served as Treasurer of Colorado (1995-1999) and as a member of the Colorado Senate (1989-1995) and the Colorado House of Representatives (1983-1989). | ||
William F. Owens | Key Qualifications: | |
Director since April 2011 | • Extensive experience in international business | |
• Management expertise across a broad range of industries | ||
Committees: | • Distinguished government background | |
• Compensation and Benefits | ||
• Nominating and Governance | ||
Age: 66 |
Ms. Reichelderfer is Senior Vice President and Managing Director of TriVista Business Group, a management consulting and advisory firm, a position she has held since July 2008. Since June 2011, Ms. Reichelderfer has served on the Board of Directors of Meggitt PLC, a global defense and aerospace firm, the shares of which are listed on the London Stock Exchange (MGGT: LSE). Since January 2016, she has served on the Board of Directors of Moog Inc., a designer and manufacturer of precision motion and fluid control systems for aerospace, defense and industrial markets worldwide (NYSE: MOG-A). From April 2010 to June 2014, she served on the Board of Directors of Wencor Group LLC, an aerospace distribution business owned by a private equity firm. From 2008 to 2014, Ms. Reichelderfer served as a member of the Technology Transfer Advisory Board of The Missile Defense Agency, a division of the United States Department of Defense. Until May 2008, Ms. Reichelderfer was Group President (from December 1998), Senior Vice President (from December 2002) and Corporate Director of Engineering and Chief Technology Officer (from October 2005) of ITT Corporation, a global engineering and manufacturing company (NYSE: ITT). | ||
Brenda L. Reichelderfer | ||
Director since October 2006 | Key Qualifications: | |
• Expertise in growing industrial and aerospace businesses | ||
Committees: | • Extensive experience in operations, innovation and new product development | |
• Compensation and Benefits (Chair) | • Significant international business experience | |
• Nominating and Governance | ||
Age: 58 |
Ms. Sherman was appointed President and CEO of our Company on January 1, 2016, and joined our Board on the same date. Prior to that, she served as our COO from April 2014 through December 2015, Chief Administrative Officer from October 2010 to April 2014 and General Counsel from March 2004 to November 2015. Ms. Sherman has been an employee of our Company since 1994. She also serves on the Board of Directors of Franklin Electric Co., Inc., a global water and fueling system manufacturer (NASDAQ: FELE), a position she has held since January 2015. | ||
Jennifer L. Sherman | Key Qualifications: | |
Director since January 2016 | • In-depth understanding of our Company and its industry | |
• Extensive experience across a broad range of areas, including finance, legal, compliance, governance and business operations | ||
Committees: None | ||
Age: 52 |
In June 2014, Mr. Workman retired as CEO of Omnicare, Inc., a healthcare services company specializing in the management of pharmaceutical care in 47 states, a position he had held since June 2012 (formerly NYSE: OCR). From February 2011 to June 2012, Mr. Workman was Omnicare's President and CFO and held the position of Executive Vice President and CFO from November 2009 until February 2011. Mr. Workman also served on the Board of Directors of Omnicare, Inc. from September 2012 to June 2014. From September 2004 to November 2009, Mr. Workman served as Executive Vice President and CFO of HealthSouth Corporation, a provider of inpatient rehabilitation services in the U.S. (NYSE: HLS). Mr. Workman held the positions of CEO (from February 2003 to April 2004), COO (from October 2002 to February 2003), and CFO (from August 1998 to October 2002) of U.S. Can Corporation (formerly NYSE: USC), a manufacturer of aerosol and general line cans sold in the U.S., Europe and South America. Mr. Workman has been a member of the Board of Directors of Universal Hospital Services, Inc., a private company that provides technology and medical equipment to the healthcare industry services, since November 2014. Effective April 2015, Mr. Workman was appointed the non-Executive Chairman of the Board of Directors of Universal Hospital Services, Inc. Since July 2015, Mr. Workman serves as a director of CONMED Corporation (NASDAQ: CNMD), an international manufacturer of equipment and disposables for orthopedic and other general lines of surgery. He has also served as a director of Care Capital Properties, Inc. (NYSE: CCP), a healthcare REIT, since August 2015. Mr. Workman served on the Boards of APAC Customer Services, Inc. (formerly NASDAQ: APAC), a provider of customer care out-sourcing solutions, from June 2008 to October 2011 and U.S. Can Corporation from 2000 to 2004. | ||
John L. Workman | ||
Director since February 2014 | ||
Committees: | ||
• Audit (Chair) | ||
Age: 65 | Key Qualifications: | |
• Broad-based executive and leadership experience in a variety of businesses and disciplines | ||
• Financial expertise | ||
• Executive experience with focus on optimizing capital structure |
Name | Audit | Compensation and Benefits | Nominating and Governance |
James E. Goodwin | — | ü | ü |
Paul W. Jones | — | ü | Chair |
Bonnie C. Lind (1) | ü | — | — |
Dennis J. Martin | — | — | — |
Richard R. Mudge | ü | — | — |
William F. Owens | — | ü | ü |
Brenda L. Reichelderfer | — | Chair | ü |
Jennifer L. Sherman | — | — | — |
John L. Workman (1) | Chair | — | — |
(1) | The Board has determined that Mr. Workman and Ms. Lind each qualify as an “audit committee financial expert” as defined by the SEC. |
• | The integrity of our financial statements; |
• | The qualifications and independence of our independent registered public accounting firm; |
• | The performance of our internal audit function and independent registered public accounting firm; and |
• | Our compliance with legal and regulatory requirements, including our Policy for Business Conduct for all employees and Code of Ethics for our CEO and senior officers. |
Name | Fees Earned or Paid in Cash (1) | Stock Awards (2) | Option Awards (3) | Other Compensation | Total | ||||||||||
James E. Goodwin (4) | $ | 108,500 | $ | 90,000 | $ | — | $ | — | $ | 198,500 | |||||
Paul W. Jones | $ | 72,000 | $ | 75,000 | $ | — | $ | — | $ | 147,000 | |||||
Bonnie C. Lind | $ | 67,520 | $ | 75,000 | $ | — | $ | — | $ | 142,520 | |||||
Richard R. Mudge | $ | 68,000 | $ | 75,000 | $ | — | $ | — | $ | 143,000 | |||||
William F. Owens | $ | 71,000 | $ | 75,000 | $ | — | $ | — | $ | 146,000 | |||||
Brenda L. Reichelderfer | $ | 76,000 | $ | 75,000 | $ | — | $ | — | $ | 151,000 | |||||
John L. Workman | $ | 74,008 | $ | 75,000 | $ | — | $ | — | $ | 149,008 |
(1) | Includes the following share amounts awarded in lieu of cash using the closing share price of our common stock on the grant date: Ms. Lind, 645 deferred stock units. |
(2) | Each non-employee director is issued a stock award annually. The annual award is determined by dividing $75,000 ($90,000 in the case of our Lead Independent Director) by the closing price of our common stock on the grant date. Amounts stated reflect the grant date fair value computed in accordance with Accounting Standards Codification 718 “Compensation — Stock Compensation” (“ASC 718”). The following awards were granted to the non-employee directors on April 26, 2016, at a closing share price of $13.94: 6,457 shares of common stock to Mr. Goodwin as Lead Independent Director and 5,381 shares of common stock to each of Messrs. Jones, Mudge and Workman, and Ms. Reichelderfer. Mr. Owens and Ms. Lind received 5,381 deferred shares in the form of restricted stock units. As of December 31, 2016, each non-employee director held the following aggregate number of shares: Mr. Goodwin, 115,040 shares, including 25,161 deferred shares held in the form of restricted stock units; Mr. Jones, 117,353 shares; Ms. Lind, 19,686 shares, including 6,026 deferred shares held in the form of restricted stock units; Dr. Mudge, 78,996 shares, including 23,361 deferred shares held in the form of restricted stock units; Mr. Owens, 81,561 shares, including 9,870 deferred shares held in the form of restricted stock units; Ms. Reichelderfer, 117,840 shares; and Mr. Workman, 30,156 shares. Excluding initial awards upon appointment to our Board, stock awards to non-employee directors are not subject to vesting requirements. |
(3) | No stock options were granted to any of the directors during the fiscal year ended December 31, 2016. As of December 31, 2016, each non-employee director had the following number of stock options outstanding: Mr. Goodwin, 53,317; Mr. Jones, 3,317; Ms. Lind, 5,000; Dr. Mudge, 5,000; Mr. Owens, 0; Ms. Reichelderfer, 3,317; and Mr. Workman, 5,000. For information on the assumptions used to calculate the value of the stock option awards, refer to Note 13 — Stock-Based Compensation to our consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016, as filed with the SEC on February 28, 2017. |
(4) | Mr. Goodwin served as Lead Independent Director. In that capacity, he received an annual retainer of $87,500, Committee membership fees of $6,000 per Committee and meeting fees of $1,500 for each board meeting attended in person and $500 for each board meeting attended by telephone. His fees in the first column are comprised of an annual retainer of $87,500, Committee membership fees of $12,000 and board meeting fees of $9,000. |
Annual Retainer | Per Diem Fee | Board Meeting Attended in Person (1) | Board Meeting Attended by Telephone | |||||||||
Executive Chairman (2) | $ | — | $ | — | $ | — | $ | — | ||||
Lead Independent Director | $ | 87,500 | $ | — | $ | 1,500 | $ | 500 | ||||
Director (excluding Lead Independent Director) | $ | 50,000 | $ | — | $ | 1,500 | $ | 500 | ||||
Audit Committee Chair | $ | 15,000 | $ | — | $ | — | $ | — | ||||
Audit Committee Member | $ | 9,000 | $ | — | $ | — | $ | — | ||||
Compensation & Benefits Committee Chair | $ | 12,000 | $ | — | $ | — | $ | — | ||||
Compensation & Benefits Committee Member | $ | 6,000 | $ | — | $ | — | $ | — | ||||
Nominating & Governance Committee Chair | $ | 10,000 | $ | — | $ | — | $ | — | ||||
Nominating & Governance Committee Member | $ | 6,000 | $ | — | $ | — | $ | — |
(1) | Directors are also reimbursed for their out-of-pocket expenses relating to attendance at Board and Committee meetings. |
(2) | Mr. Martin did not receive cash compensation for his service on the Board as Executive Chairman during fiscal year 2016. He retired from employment effective December 31, 2016 and transitioned to Chairman of the Board. In 2017, as Chairman of the Board, Mr. Martin will receive an annual retainer, currently valued at $90,000, as well as fees for attendance at in-person and telephonic Board meetings, which are currently valued at $3,000 and $500 per meeting, respectively. Mr. Martin will also be entitled to receive a per diem fee for other time spent on Company business, which is currently valued at $2,500 per day, up to a maximum of $150,000 per year. |
Common Stock Award | |||
Lead Independent Director | $ | 90,000 | |
Non-employee director (excluding the Lead Independent Director) | $ | 75,000 |
• | Jennifer L. Sherman, President and CEO; |
• | Dennis J. Martin, Chairman of the Board (retired as Executive Chairman of the Company on December 31, 2016); |
• | Brian S. Cooper, Senior Vice President and CFO; |
• | Ian A. Hudson, Vice President and Corporate Controller; and |
• | Samuel E. Miceli, Senior Vice President, Environmental Solutions Group. |
• | Creating disciplined growth; |
• | Improving manufacturing efficiencies and costs; |
• | Leveraging invested capital; and |
• | Diversifying our customer base. |
• | In January 2016, we completed the sale of our Bronto Skylift business, receiving proceeds of approximately $88 million. The sale of our Bronto Skylift business removed a low-margin operation that required a disproportionate amount of invested capital and facilitates our focus on more profitable growth opportunities. |
• | In addition, in January 2016, we executed a new five-year $325 million revolving credit facility to replace our previous $225 million credit facility. |
• | We continued to apply a disciplined approach in considering potential acquisitions. In January 2016, we completed the acquisition of Westech Vac Systems, Ltd., a Canadian manufacturer of high-quality, rugged vacuum trucks. Although not significant in size, the acquisition provides access to new product offerings and new markets. |
• | In June 2016, the Company completed the acquisition of JJE. The Company expects that JJE will facilitate sales of its existing products into new markets, expand the Company’s product and service offerings and increase the Company’s footprint across North America. With the acquisition of JJE, the Company’s product offerings have expanded to include other products, including those not manufactured by the Company, such as refuse and recycling collection vehicles, camera systems, ice-resurfacing equipment and snow-removal equipment. |
• | We demonstrated our commitment to returning value to stockholders by paying increased cash dividends of $16.9 million in 2016, up from $15.6 million in 2015. |
• | We also significantly increased the amount of opportunistic share repurchases under our authorized share repurchase programs, repurchasing approximately 3.0 million shares at an average purchase price of $12.75 per share. Total repurchases during 2016 totaled $37.8 million, compared to $10.6 million in 2015. The remaining aggregate authorization under these programs of $31.4 million at December 31, 2016 represents approximately 4% of our market capitalization. |
• | Cash flow during 2016 remained healthy, with $26.7 million of cash being generated from continuing operations, facilitating the increased cash returns to shareholders, as well as investments in long-term growth initiatives, including new product development. |
• | We have also continued to focus on new product development in 2016 and believe that these efforts will provide additional opportunities to diversify further our customer base. Specific examples for industrial markets include investments in new excavator designs to better target utility markets and in internationally certified safety products to expand our global reach. |
• | We continue to focus on reducing product costs and improving manufacturing efficiencies across all of our businesses. We started our “80/20” efficiency initiatives in 2010, and they have remained a critical part of our culture. |
• | At December 31, 2016, total debt exceeded total cash and cash equivalents by $13.3 million, and we had $244 million of availability under our credit facility. With our current capital structure, strong balance sheet, availability under our credit facility and positive operating cash flow, we are well positioned to navigate short-term market headwinds and invest in internal growth initiatives, pursue strategic acquisitions and consider ways to return value to stockholders. |
• | Our debt leverage remained low, at 0.8 times adjusted EBITDA ** as of December 31, 2016. |
** | As this is a non-GAAP measure, we have included a reconciliation to the most directly comparable GAAP measure in Appendix A. |
• | The Committee adopted the Federal Signal Corporation Short Term Incentive Bonus Plan (the “STIP”) as a sub-plan under the Federal Signal Corporation (2015) Equity Incentive Compensation Plan (the “2015 Plan”). The STIP establishes the framework and terms applicable to annual cash incentive awards and replaced the Federal Signal Corporation Short Term Incentive Bonus Plan (as amended and restated, March 2013). |
• | The Committee modified the performance metrics used in STIP awards to be based on earnings (weighted at 70%) and individual objectives (weighted at 30%) in order to better align incentive pay with the Company’s short-term focus, goals and initiatives. |
• | For performance share units issued under the 2015 Plan, the Committee retained both the three-year performance period and the applicable performance metrics, i.e. earnings per share from continuing operations (weighted at 75%) and return on invested capital (weighted at 25%). |
• | The Committee modified the Company’s peer group to reflect market changes and position the Company closer to median with respect to peer revenue and market capitalization. |
• | Executive compensation must be linked to the achievement of strategic, financial and operational goals that successfully drive growth in stockholder value; |
• | Total targeted compensation must be competitive to attract, motivate and retain experienced executives during all business cycles with leadership abilities and talent necessary for the Company’s short-term and long-term success, profitability and growth, while taking into account Company performance and external market factors; |
• | The portion of compensation that is variable based on performance and therefore at-risk should increase with officer level and responsibility; |
• | Executive awards should differ based on actual performance to ensure alignment with stockholder value (actual pay can be above or below target pay); and |
• | Equity ownership and holding requirements align the interests of executives with the interests of stockholders and help build long-term value. |
• | Establishes our compensation philosophy, sets broad compensation objectives and evaluates compensation to ensure that it complies with and promotes our compensation philosophy and objectives; |
• | Determines the various elements of our executive compensation, including base salary, annual cash incentives, long-term equity incentives, retirement, health and welfare benefits and perquisites; |
• | Establishes performance goals for our President and CEO and oversees the establishment of performance goals for the other executive officers and for each business unit; |
• | Evaluates annually each executive officer’s performance in light of the goals established for the most recently completed year; |
• | Establishes each executive officer’s annual compensation level based upon the individual’s performance, our financial results, the amount of compensation paid to comparable executive officers at comparable companies, the awards given to the individual in past years and our capacity to fund the compensation; |
• | Reviews our President and CEO’s annual succession planning report and executive development recommendations for her direct reports; |
• | Reviews benefit and compensation programs and plans to ensure incentive pay does not encourage unnecessary risk taking; and |
• | Retains and oversees advisors it may engage periodically to assist in the performance of its role. |
• | Base salary; |
• | Annual cash incentives; |
• | Long-term equity incentives; |
• | Retirement, health and welfare benefits; and |
• | Perquisites. |
** | The 2% referenced above relates to a 2016 award of time-based restricted stock to Mr. Hudson in recognition of his contribution to the sale the Company’s Fire Rescue Group. |
Company Financial Performance | Group Financial Performance | Individual Performance | |
President and CEO (1) | 70% | N/A | 30% |
Executive Chairman (1) | 70% | N/A | 30% |
Senior Vice President and CFO | 70% | N/A | 30% |
Vice President and Corporate Controller | 70% | N/A | 30% |
Senior Vice President, Environmental Solutions Group | 21% | 49% | 30% |
(1) | Effective January 1, 2016, Ms. Sherman was promoted to President and CEO concurrent with Mr. Martin’s transition from President and CEO to Executive Chairman. Effective December 31, 2016, Mr. Martin retired from employment and transitioned to Chairman of the Board. |
Year | Component | Company Level | Group and Business Unit Level |
2016 | Earnings (70%) | Based on consolidated income before income taxes. As Company income taxes are impacted by external factors outside the control of the majority of STIP participants, the Committee decided that income taxes should not factor into the calculation. | Based on earnings before interest and taxes, thereby excluding income taxes and interest expense, neither of which are generally impacted by participants at this level. |
2017 | Based on operating income, thereby excluding income taxes, interest expense and other non-operating income/expense, none of which are generally impacted by participants at this level. |
Fiscal Year | Annual Equity Award Mix (1) | Performance Share Unit Metrics (2) | Performance Period (3) | Award Earned or Not Earned |
2014 | Performance Share Units (50%) Stock Options (50%) | EPS from Continuing Operations (75%) ROIC (25%) | 2 years | Earned (4) |
2015 | 3 years | To be determined at end of fiscal year 2017 | ||
2016 | 3 years | To be determined at end of fiscal year 2018 |
(1) | Stock options are inherently at-risk and have value only if our stock price increases. These awards are not tied to a performance metric and vest ratably over a three-year period measured from the grant date. |
(2) | If the Company does not achieve a threshold level of performance for each metric measured independently, no units are earned and no shares are issued with respect to the corresponding percentage of the award tied to that metric. |
(3) | Effective fiscal year 2014, we increased the performance period from one to two years followed by a one-year vesting period. Effective fiscal year 2015, we further increased the performance period from two to three years and, subject to performance, vesting occurs at the end of the performance period. These modifications advance our compensation philosophy by further strengthening the link between the long-term interests of our executives and stockholders. The Committee retained usage of a three-year performance period for the 2016 performance share unit awards, and anticipates doing so again in 2017. |
(4) | For fiscal year 2014, the performance period was two years followed by an additional one-year vesting period ending December 31, 2016. The Company exceeded maximum performance and the performance share units were earned at 200%. Earned shares were issued to recipients who were employed by the Company on December 31, 2016. |
Position/Title | Target Ownership Level |
President and CEO | 5 x Base Salary |
Executive Chairman (1) | 5 x Base Salary |
CFO | 3 x Base Salary |
All Other Section 16 Officers | 2 x Base Salary |
Selected Key Management Personnel and Other Corporate Officers | 1 x Base Salary |
(1) | Mr. Martin retired as Executive Chairman effective December 31, 2016 and became Chairman of the Board; there are no plans to fill the position of Executive Chairman at this time. |
Retirement and Health and Welfare Benefits |
Retirement Plans |
Executives participate in the same retirement savings plans available to other eligible employees. Our Retirement Savings Plan is a 401(k) defined contribution plan that includes both a matching component and an additional points-weighted Company contribution, providing an opportunity for enhanced benefits. Generally, all eligible employees receive a Company-matching contribution of up to 50% of the first 6% of the compensation the employee elects to defer into the plan. Eligible employees may receive an additional Company-paid retirement contribution between 1% and 4% of eligible compensation based on age and years of service. For those eligible employees who wish to defer additional income, but are subject to certain limits of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), our non-qualified Savings Restoration Plan restores Company contributions through a notional Company contribution and notional earnings from investments, and provides investment choices similar to those available under the 401(k) plan. Certain employees, including two of our NEOs, continue to participate in our defined benefit plan. We froze years of service under the plan at December 31, 2006 and wage increases froze on December 31, 2016. The plan is now considered fully frozen. |
Health and Welfare Plans |
NEOs may participate in the same broad-based, market-competitive health and welfare plans (medical, prescription, dental, vision, wellness, life and disability insurance) that are available to other eligible employees. |
• | airline club memberships; |
• | auto allowances; and |
• | life insurance. |
NEO | 2015 Annual Base Salary (1) | 2016 Annual Base Salary (2) | 2017 Annual Base Salary (3) | ||||||
Jennifer L. Sherman | $ | 435,000 | $ | 650,000 | $ | 669,500 | |||
Dennis J. Martin | $ | 805,000 | $ | 600,000 | $ | — | |||
Brian S. Cooper | $ | 349,400 | $ | 359,882 | $ | 367,080 | |||
Ian A. Hudson | $ | — | $ | 264,069 | $ | 279,913 | |||
Samuel E. Miceli | $ | — | $ | 283,250 | $ | 291,748 |
(1) | Messrs. Hudson and Miceli were not NEOs in fiscal year 2015. |
(2) | Salary adjustments for Mr. Martin and Ms. Sherman between 2015 and 2016 reflect their transition to the roles of Executive Chairman and President and CEO, respectively, effective January 1, 2016. |
(3) | Effective December 31, 2016, Mr. Martin retired from his position as Executive Chairman of the Company and therefore will not receive an annual salary in 2017. He continues to serve on the Board as Chairman. See below under the heading “Dennis Martin Separation Agreement” for additional information regarding Mr. Martin’s compensation. |
($ in millions) | Threshold | Target | Maximum | Actual | Payout Percentage | ||||||||
Federal Signal Corporation | $ | 72.0 | $ | 80.4 | $ | 97.7 | $ | 62.8 | — | ||||
Environmental Solutions Group | $ | 76.5 | $ | 84.5 | $ | 102.2 | $ | 58.6 | — |
Name | Target Bonus Opportunity as Percentage of Salary | Target Financial- Based Incentive | Target Individual Performance- Based Incentive | Total Target Incentive | ||||||
Jennifer L. Sherman | 100% | $ | 455,000 | $ | 195,000 | $ | 650,000 | |||
Dennis J. Martin | 100% | $ | 420,000 | $ | 180,000 | $ | 600,000 | |||
Brian S. Cooper | 60% | $ | 151,150 | $ | 64,779 | $ | 215,929 | |||
Ian A. Hudson | 40% | $ | 73,940 | $ | 31,688 | $ | 105,628 | |||
Samuel E. Miceli | 50% | $ | 99,137 | $ | 42,488 | $ | 141,625 |
Name | Payment Based on Company Performance | Payment Based on Group Performance | Payment Based on Individual Performance | Total STIP Payment | ||||||||
Jennifer L. Sherman | $ | — | N/A | $ | 214,500 | $ | 214,500 | |||||
Dennis J. Martin | $ | — | N/A | $ | 198,000 | $ | 198,000 | |||||
Brian S. Cooper | $ | — | N/A | $ | 64,779 | $ | 64,779 | |||||
Ian A. Hudson | $ | — | N/A | $ | 63,376 | $ | 63,376 | |||||
Samuel E. Miceli | $ | — | $ | — | $ | 53,110 | $ | 53,110 |
• | Ms. Sherman and Messrs. Martin, Cooper, Hudson and Miceli were granted options to purchase 177,727; 177,727; 47,395; 15,997; and 20,736 shares of our common stock, respectively, at an exercise price of $12.66 per share (the closing price of our stock on date of grant). The options vest in three equal annual installments on the first three anniversaries of the grant date. |
• | Ms. Sherman and Messrs. Martin, Cooper, Hudson and Miceli were granted performance share units of 59,241; 59,241; 15,797; 5,331; and 6,911, respectively. Each performance share unit represents a right to receive up to two shares of our common stock based upon achieving certain performance targets during a three-year performance period ending December 31, 2018. The award is subject to vesting requirements that require each recipient to remain employed with us through the end of the performance period. |
• | Mr. Hudson received a time-based restricted stock award of 7,109 shares in recognition of his outstanding contributions with respect to the sale of the Company’s former Fire Rescue Group. The restricted stock award cliff vests in full on its third anniversary, subject to continued employment. |
• | Subject to Mr. Martin’s compliance with certain post-employment conditions contained in the Separation Agreement, including three-year non-competition and non-solicitation provisions, the Company accelerated the vesting of 31,075 and 19,747 PSUs originally granted to Mr. Martin in 2015 and 2016, respectively. The number of PSUs subject to acceleration is based on Mr. Martin’s pro-rata employment during the performance period (i.e., the number of full months of Mr. Martin’s employment during the applicable performance period divided by 36, the number of months contained in the applicable performance period). Mr. Martin forfeited the remaining 15,537 PSUs originally granted in 2015, and 39,494 PSUs originally granted in 2016. The PSUs subject to accelerated vesting will be earned, if at all, based on actual |
• | Stock options originally granted in 2014, 2015 and 2016 that have not yet vested will continue to vest in accordance with the original terms of the awards, conditioned upon Mr. Martin’s continued service as a director of the Company. Any vested options will be exercisable for the shorter of their original expiration date or for a period of five years after the date that Mr. Martin ceases to serve as a director. |
• | Stock options originally granted in 2013, 2014 and 2015 that have previously vested will remain exercisable for the shorter of their original expiration date or for a period of five years after the date that Mr. Martin ceases to serve as a director. |
• | Stock options originally granted in 2010, 2011 and 2012 that have previously vested will remain exercisable for the shorter of their original expiration date or for a period of three years after the date that Mr. Martin ceases to serve as a director. |
• | For fiscal year 2016, Mr. Martin was also awarded an annual cash bonus of $198,000 through the STIP. |
• | The total fees paid to WTW of $243,995 represented approximately 0.003% of its revenue for its 2016 fiscal year-end ($7.9 billion); |
• | There is no overlap between the WTW team that provided services to the Committee and the WTW team that provided the additional services; |
• | No member of the WTW team receives additional compensation as a result of the provision of services to the Committee or with respect to the additional services; |
• | WTW prohibits compensation consultants from owning stock in any company it advises; |
• | There are no business ventures or personal relationships between WTW and any member of the Committee; and |
• | There is no affiliation between any member of WTW’s team and any member of our Board or any NEO. |
2016 Peer Group Companies | |
• Actuant Corporation | • Graco Inc. |
• Alamo Group Inc. | • The Greenbrier Companies, Inc. |
• Astec Industries, Inc. | • John Bean Technologies Corporation |
• Brady Corporation | • Nordson Corporation |
• Columbus McKinnon Corporation | • Powell Industries, Inc. |
• Commercial Vehicle Group, Inc. | • Standex International Corporation |
• EnPro Industries, Inc. | • Teleflex Incorporated |
• ESCO Technologies Inc. | • Tennant Company |
• L.B. Foster Company | • TriMas Corporation |
• Franklin Electric Co., Inc. |
2017 Peer Group Companies | |
• Actuant Corporation | • EnPro Industries, Inc. |
• Alamo Group Inc. | • ESCO Technologies Inc. |
• Altra Industrial Motion Corp. | • L.B. Foster Company |
• Astec Industries, Inc. | • Franklin Electric Co., Inc. |
• Barnes Group Inc. | • John Bean Technologies Corporation |
• Brady Corporation | • Manitex International, Inc. |
• CLARCOR Inc. (1) | • Powell Industries, Inc. |
• Columbus McKinnon Corporation | • Standex International Corporation |
• Commercial Vehicle Group, Inc. | • Tennant Company |
• Douglas Dynamics, Inc. | • TriMas Corporation |
(1) | CLARCOR, Inc. was acquired by Parker-Hannifin in February 2017 and will be removed from our peer group. |
• | Except as noted below, we will not enter into any employment agreement, severance agreement or change-in-control agreement that requires us to make or agree to make any tax gross-up payments to any NEO except for such payments provided pursuant to a relocation or expatriate tax equalization plan, policy or arrangement; and |
• | Unless approved by a vote of our stockholders entitled to vote in an election of directors, we will not enter into any compensation agreement with any NEO that provides for severance payments (excluding the value of any accelerated vesting of equity based awards) in an amount exceeding 2.99 times the sum of: (i) the NEO’s highest annual base salary for the year of termination (determined as an annualized amount) or either of the immediate two preceding years; plus (ii) either the NEO’s current target bonus or the highest annual bonus awarded to the NEO in any of the three years preceding the year in which the NEO’s termination of employment occurs (excluding the value of any accelerated vesting of equity based awards). |
Name and Principal Position | Year | Salary | Bonus | Stock Awards (1) | Option Awards (2) | Non-Equity Incentive Plan Compensation (3) | Change in Pension Value and Non- qualified Deferred Compensation Earnings (4) | All Other Compensation (5) | Total | ||||||||||||||||
Jennifer L. Sherman, President and CEO | 2016 | $ | 650,000 | $ | — | $ | 749,991 | $ | 750,008 | $ | 214,500 | $ | 43,643 | $ | 94,600 | $ | 2,502,742 | ||||||||
2015 | $ | 428,050 | $ | — | $ | 274,994 | $ | 275,002 | $ | 395,850 | $ | — | $ | 85,968 | $ | 1,459,864 | |||||||||
2014 | $ | 391,083 | $ | — | $ | 237,501 | $ | 237,493 | $ | 437,035 | $ | 75,369 | $ | 81,289 | $ | 1,459,770 | |||||||||
Dennis J. Martin, Executive Chairman | 2016 | $ | 600,000 | $ | — | $ | 749,991 | $ | 750,008 | $ | 198,000 | $ | — | $ | 141,186 | $ | 2,439,185 | ||||||||
2015 | $ | 800,833 | $ | — | $ | 749,987 | $ | 750,012 | $ | 1,046,500 | $ | — | $ | 176,927 | $ | 3,524,259 | |||||||||
2014 | $ | 775,833 | $ | — | $ | 749,992 | $ | 750,003 | $ | 1,444,560 | $ | — | $ | 170,074 | $ | 3,890,462 | |||||||||
Brian S. Cooper, Senior Vice President and CFO | 2016 | $ | 358,135 | $ | — | $ | 199,990 | $ | 200,007 | $ | 64,779 | $ | — | $ | 69,441 | $ | 892,352 | ||||||||
2015 | $ | 347,700 | $ | — | $ | 199,999 | $ | 199,995 | $ | 241,086 | $ | — | $ | 67,916 | $ | 1,056,696 | |||||||||
2014 | $ | 336,000 | $ | — | $ | 174,991 | $ | 175,005 | $ | 331,127 | $ | — | $ | 22,897 | $ | 1,040,020 | |||||||||
Ian A. Hudson, Vice President and Corporate Controller | 2016 | $ | 259,713 | $ | — | $ | 157,490 | $ | 67,507 | $ | 63,376 | $ | — | $ | 35,188 | $ | 583,274 | ||||||||
2015 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||
2014 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||
Samuel E. Miceli, Senior Vice President, Environmental Solutions Group | 2016 | $ | 287,163 | $ | — | $ | 87,493 | $ | 87,506 | $ | 53,110 | $ | 11,526 | $ | 44,477 | $ | 571,275 | ||||||||
2015 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||
2014 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — |
(1) | The stock award values represent the aggregate grant date fair values computed in accordance with ASC 718. These figures reflect long-term equity incentive restricted stock awards and performance share units, discussed in the section titled “Compensation Discussion and Analysis — Elements of Executive Compensation” under the heading “Long-Term Equity Incentives.” Restricted stock awards granted in fiscal year 2016 were valued at the closing price of our Company’s stock on the grant date, resulting in a value of $12.66 for grants issued in 2016. Of our NEOs, only Mr. Hudson received such an award in 2016, in recognition of his contribution to the sale of our Fire Rescue Group. Performance share units granted in fiscal years 2014, 2015 and 2016 were valued at the closing price of our Company’s stock on the grant dates, resulting in values of $14.48 for grants issued in 2014, $16.09 for grants issued in 2015, and $12.66 for grants issued in 2016. For fiscal year 2014, we adjusted the weighting of the EPS metric from 100% to 75%, added an ROIC performance metric weighted at 25% and expanded the performance period from one to two years. The Company achieved the maximum target levels under both metrics and 200% of the target units were earned on December 31, 2015. There was an additional one-year vesting period for these earned units and the shares underlying the earned units vested on December 31, 2016. For fiscal year 2015, we retained the EPS metric weighted at 75% and ROIC metric weighted at 25% and further expanded the performance period from two to three years. For fiscal year 2016, we retained the EPS metric weighted at 75%, the ROIC metric weighted at 25%, and the three-year performance period. |
(2) | The option award values represent the grant date fair values computed in accordance with ASC 718. These amounts reflect long-term equity incentive stock option grants, discussed in further detail in the sections titled “Compensation Discussion and Analysis — Elements of Executive Compensation” under the heading “Long-Term Equity Incentives” and “Compensation Discussion and Analysis — Setting Actual Compensation for Our NEOs” under the heading “Dennis Martin Separation Agreement.” The Black-Scholes model is used to estimate the fair value of stock options, resulting in an estimated value of $4.22 for options granted on May 5, 2016; $6.12 for options granted on April 10, 2015; and $7.19 for options granted on May 5, 2014. For information on the assumptions used to calculate the value of the stock option awards, refer to Note 13 — Stock-Based Compensation to our consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016, as filed with the SEC on February 28, 2017. |
(3) | Reflects annual cash incentive payments. For a description of these incentive awards, see the section titled “Compensation Discussion and Analysis — Elements of Executive Compensation” under the heading “Annual Cash Incentive Payments.” |
(4) | Reflects the actuarial increase in the present value of NEO benefits under all pension plans, including our supplemental pension plans, determined using interest rate and mortality rate assumptions consistent with those used in our financial statements, and includes amounts which the NEO may not currently be entitled to receive because such amounts are not vested. The present value of the benefits for Ms. Sherman and Mr. Miceli, the only NEOs that are participants in the Company’s pension plan, increased by $43,643 and $11,526, respectively, in 2016. Decreases are recorded as $0 in the Summary Compensation Table. Earnings on deferred compensation are not reflected in this column because the return on earnings is calculated in the same manner and at the same rate as earnings on externally managed investments of employees participating in the tax-qualified 401(k) savings plan, and dividends on our common stock are paid at the same rate as dividends paid to stockholders. |
(5) | All other compensation in fiscal year 2016 includes the following aggregate perquisites and other items. |
Name | Auto Allowance (a) | Contribution to Retirement Savings Plans | Savings Restoration Plan Contributions | Other Items (b) | Totals | ||||||||||
Jennifer L. Sherman | $ | 11,400 | $ | 14,663 | $ | 66,895 | $ | 1,642 | $ | 94,600 | |||||
Dennis J. Martin | $ | 13,800 | $ | 15,225 | $ | 110,603 | $ | 1,558 | $ | 141,186 | |||||
Brian S. Cooper | $ | 11,400 | $ | 18,550 | $ | 38,888 | $ | 603 | $ | 69,441 | |||||
Ian A. Hudson | $ | 9,000 | $ | 11,354 | $ | 14,397 | $ | 437 | $ | 35,188 | |||||
Samuel E. Miceli | $ | 9,000 | $ | 15,468 | $ | 19,525 | $ | 484 | $ | 44,477 |
(a) | Ms. Sherman’s auto allowance was increased to $13,800, effective January 1, 2016, upon her promotion to President and CEO. Ms. Sherman will be eligible to receive a retroactive adjustment in 2017 to account for the underpayment in 2016. |
(b) | For Ms. Sherman, includes $550 for membership in the United Airlines United Club and $1,092 for life insurance premium payments. For Mr. Martin, includes $550 for membership in the United Airlines United Club and $1,008 for life insurance premium payments. For Messrs. Cooper, Hudson and Miceli, the amounts stated are for life insurance premium payments. |
Name | Grant Date | Estimated Future Payouts under Non-Equity Incentive Plan Awards (1) | Estimated Future Payouts under Equity Incentive Plan Awards (2) | All Other Stock Awards: Number of Shares of Stock or Units (#) | All Other Option Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Option Awards (3) | |||||||||||||||||||
Threshold | Target | Maximum | Threshold (#) | Target (#) | Maximum (#) | |||||||||||||||||||||
Jennifer L. Sherman | $ | 325,000 | $ | 650,000 | $ | 1,300,000 | — | — | — | — | — | $ | — | $ | — | |||||||||||
5/5/16 | $ | — | $ | — | $ | — | 29,621 | 59,241 | 118,482 | — | — | $ | — | $ | 749,991 | |||||||||||
5/5/16 | $ | — | $ | — | $ | — | — | — | — | — | 177,727 | $ | 12.66 | $ | 750,008 | |||||||||||
Dennis J. Martin | $ | 300,000 | $ | 600,000 | $ | 1,200,000 | — | — | — | — | — | $ | — | $ | — | |||||||||||
5/5/16 | $ | — | $ | — | $ | — | 29,621 | 59,241 | 118,482 | — | — | $ | — | $ | 749,991 | |||||||||||
5/5/16 | $ | — | $ | — | $ | — | — | — | — | — | 177,727 | $ | 12.66 | $ | 750,008 | |||||||||||
Brian S. Cooper | $ | 107,965 | $ | 215,929 | $ | 431,858 | — | — | — | — | — | $ | — | $ | — | |||||||||||
5/5/16 | $ | — | $ | — | $ | — | 7,899 | 15,797 | 31,594 | — | — | $ | — | $ | 199,990 | |||||||||||
5/5/16 | $ | — | $ | — | $ | — | — | — | — | — | 47,395 | $ | 12.66 | $ | 200,007 | |||||||||||
Ian A. Hudson (4) | 3/10/16 | $ | — | $ | — | $ | — | — | — | — | 7,109 | — | $ | — | $ | 90,000 | ||||||||||
$ | 52,814 | $ | 105,628 | $ | 211,256 | — | — | — | — | — | $ | — | $ | — | ||||||||||||
5/5/16 | $ | — | $ | — | $ | — | 2,666 | 5,331 | 10,662 | — | — | $ | — | $ | 67,490 | |||||||||||
5/5/16 | $ | — | $ | — | $ | — | — | — | — | — | 15,997 | $ | 12.66 | $ | 67,507 | |||||||||||
Samuel E. Miceli | $ | 70,813 | $ | 141,625 | $ | 283,250 | — | — | — | — | — | $ | — | $ | — | |||||||||||
5/5/16 | $ | — | $ | — | $ | — | 3,456 | 6,911 | 13,822 | — | — | $ | — | $ | 87,493 | |||||||||||
5/5/16 | $ | — | $ | — | $ | — | — | — | — | — | 20,736 | $ | 12.66 | $ | 87,506 |
(1) | See the section titled “Compensation Discussion and Analysis — Elements of Executive Compensation” under the heading “Annual Cash Incentive Payments.” |
(2) | These columns include information regarding performance share units. The “Threshold” column represents the minimum amount payable when threshold performance is met (50% of performance share units granted would be earned). If performance is below the threshold performance, no units are earned. The “Target” column represents the amount payable if actual performance is equal to target (100% of performance share units granted would be earned). The “Maximum” column represents the full payout potential under the plan if actual performance is equal to or greater than maximum (200% of performance share units granted would be earned). Shares of Company stock are awarded, if any, as a percentage of the pre-determined target shares for that executive officer ranging from 0% to 200% as determined by the performance against the applicable metrics. For fiscal year 2016, the performance metrics were EPS from continuing operations weighted at 75% and ROIC weighted at 25%, measured over a three-year performance period. The performance period ends on December 31, 2018. |
(3) | The grant date fair values are determined in accordance with ASC 718. The fair value of restricted stock awards is based on the closing price of our Company’s common stock on the grant date, resulting in an estimated fair value of $12.66 for shares granted to Mr. Hudson on March 10, 2016. The fair value of performance share units is based on the closing price of our Company’s common stock on the grant date, resulting in an estimated fair value of $12.66 for units granted on May 5, 2016. The Black-Scholes model is used to estimate the fair value of stock options, resulting in an estimated value of $4.22 for stock options granted on May 5, 2016. |
(4) | On March 10, 2016, Mr. Hudson was awarded a grant of restricted stock, valued at $90,000, with respect to the sale of the Company’s Fire Rescue Group. The 7,109 shares of restricted stock will vest in full on March 10, 2019, subject to his continued employment. |
Name | Grant Date | Option Awards | Stock Awards | |||||||||||||||||||
Number of Securities Underlying Unexercised Options Exercisable | Number of Securities Underlying Unexercised Options Unexercisable (1) | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised, Unearned Options | Option Exercise Price (2) | Option Expiration Date | Number of Unvested Shares or Stock Units (3)(4)(5) | Market Value of Unvested Shares or Units of Stock (6) | Equity Incentive Plan Awards: Number of Unearned Shares, Units, or Other Unvested Rights | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units, or Other Unvested Rights | ||||||||||||||
Jennifer L. Sherman | 2/26/07 | 11,700 | — | — | $ | 16.10 | 2/26/17 | — | $ | — | — | $ | — | |||||||||
2/22/08 | 16,100 | — | — | $ | 10.59 | 2/22/18 | — | $ | — | — | $ | — | ||||||||||
2/20/09 | 16,100 | — | — | $ | 6.68 | 2/20/19 | — | $ | — | — | $ | — | ||||||||||
8/7/09 | 14,479 | — | — | $ | 8.53 | 8/7/19 | — | $ | — | — | $ | — | ||||||||||
4/26/10 | 20,200 | — | — | $ | 10.04 | 4/26/20 | — | $ | — | — | $ | — | ||||||||||
5/4/11 | 45,277 | — | — | $ | 6.52 | 5/4/21 | — | $ | — | — | $ | — | ||||||||||
5/9/12 | 68,681 | — | — | $ | 5.50 | 5/9/22 | — | $ | — | — | $ | — | ||||||||||
5/9/13 | 50,556 | — | — | $ | 8.40 | 5/9/23 | — | $ | — | — | $ | — | ||||||||||
5/5/14 | 22,021 | 11,010 | — | $ | 14.48 | 5/5/24 | — | $ | — | — | $ | — | ||||||||||
4/10/15 | 14,979 | 29,956 | — | $ | 16.09 | 4/10/25 | — | $ | — | — | $ | — | ||||||||||
4/10/15 | — | — | — | $ | — | — | 17,091 | $ | 266,790 | — | $ | — | ||||||||||
5/5/16 | — | 177,727 | — | $ | 12.66 | 5/5/26 | — | $ | — | — | $ | — | ||||||||||
5/5/16 | — | — | — | $ | — | — | 59,241 | $ | 924,752 | — | $ | — | ||||||||||
Dennis J. Martin (7) | 3/12/08 | 5,000 | — | — | $ | 12.39 | 3/12/18 | — | $ | — | — | $ | — | |||||||||
10/30/10 | 90,875 | — | — | $ | 5.39 | 10/30/20 | — | $ | — | — | $ | — | ||||||||||
5/4/11 | 159,990 | — | — | $ | 6.52 | 5/4/21 | — | $ | — | — | $ | — | ||||||||||
5/9/12 | 201,465 | — | — | $ | 5.50 | 5/9/22 | — | $ | — | — | $ | — | ||||||||||
5/9/13 | 144,444 | — | — | $ | 8.40 | 5/9/23 | — | $ | — | — | $ | — | ||||||||||
5/5/14 | 69,541 | 34,771 | — | $ | 14.48 | 5/5/24 | — | $ | — | — | $ | — | ||||||||||
4/10/15 | 40,851 | 81,700 | — | $ | 16.09 | 4/10/25 | — | $ | — | — | $ | — | ||||||||||
4/10/15 | — | — | — | $ | — | — | 46,612 | $ | 727,613 | — |