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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to Sec. 240.14a-12
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
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In 2011, based upon financial results that did not achieve our targets for 2011, our CEO’s total compensation was down substantially – $1,098,580, or 38.8%, less than 2010. Our CEO received no annual bonus in 2011 and he forfeited the restricted stock award that he received in January 2011. In 2010, based upon financial results that did achieve our targets for 2010, our CEO received an annual bonus and the restricted shares awarded in 2010 were deemed earned (but remain subject to three-year vesting) based upon the achievement of the financial target established for the restricted stock award.
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2011
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2010
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% Change
2010 to 2011
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Base salary
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$ | 587,600 | $ | 565,000 | +3.9 | % | |||||
Annual Bonus
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0 | $ | 500,000 | -100.0 | % | ||||||
Restricted stock
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0 | $ | 525,000 | -100.0 | % | ||||||
Option grant *
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$ | 750,000 | $ | 855,600 | -12.3 | % | |||||
Long-term non-equity incentives
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$ | 361,205 | $ | 360,681 | -0.1 | % | |||||
All other compensation
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$ | 30,983 | $ | 22,087 | +40.3 | % | |||||
Total
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$ | 1,729,788 | $ | 2,828,368 | -38.9 | % |
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Highlights of Compensation Committee decisions with respect to CEO total compensation in 2011:
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CEO received no annual cash bonus for 2011.
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2011 restricted stock grant (constituting 35% of long-term compensation with value of $525,000) forfeited in 2011 based on failure of the Company to achieve its financial target (net income of $75.6 million) for 2011.
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2011 stock option grant (constituting 50% of total long-term compensation), has exercise price that is approximately $8.00 per share more than the Company’s current stock price of $18.25 (as of close of business on April 30, 2012).
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No increase to base salary for 2012 (2011 raise awarded in January 2011 based upon 2010 financial results and other achievements during 2010).
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CEO’s realizable pay important indicator of pay-for-performance program.
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We believe the most appropriate metric for assessing pay-for-performance is “realizable pay.” The compensation amounts listed in our Summary Compensation Table, as required under the securities rules, do not reflect the clear realities of our compensation practices and processes.
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The realizable pay of our executive officers in 2011 is meaningfully less than the “pay opportunity” values in our Summary Compensation Table or the amounts initially targeted by the Compensation Committee, demonstrating that pay-for-performance is achieved in our compensation programs.
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The following chart demonstrates the relationship between grant date value, as reported in our Summary Compensation Table, and pay earned and realized for fiscal years 2011, 2010 and 2009.
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Target compensation includes target base salary and non-equity incentive values, and the reported grant date fair value for equity as reported in our 2012 Summary Compensation Table.
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Actual compensation includes actual base pay and non-equity incentive values as reported in our 2012 Summary Compensation Table, and the reported grant date fair value for non-forfeited equity as reported in our 2012 Summary Compensation Table.
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Value at December 31, 2011 is the “realizable” compensation and includes actual base pay and non-equity incentive values as reported in our 2012 Summary Compensation Table and the intrinsic value of stock options granted based on a closing price of our Company’s common stock on December 31, 2011 of $15.34 and non-forfeited restricted stock granted based on the $15.34 closing price.
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The objective financial performance targets that we set for our CEO’s and other NEO’s annual incentive compensation and long-term compensation are aggressive and consistent with our internal budgets. They are not easy hurdles designed to assure the payment of these awards. For 2011, the financial performance target for our annual incentive plan and for our performance-based restricted stock was net income of $75.6 million, or $1.90 per share.
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If a threshold percentage (historically, 75% to 90%) of the objective financial performance target has not been attained, no annual incentive payments or long-term cash-based incentive payments will be made. While our CEO and the other NEOs are given other non-quantitative standards that will be considered in determining the amount of the annual incentive payments, no payments can be made on the basis of these non-quantitative standards alone without meeting at least the threshold level under the objective performance targets.
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In 2012, we revised our long-term incentive program as described under the heading “2012 Compensation Program Changes” in our CD&A. The revised program requires first meeting an annual and/or cumulative three-year return on invested capital, with the actual amount of restricted stock units vesting under the grant to be determined on the basis of achievement of annual or cumulative three-year earnings per share levels as compared with the pre-determined targets. The return on invested capital gate must first be achieved before considering whether the earnings per share targets have been satisfied. This revised program replaced both the one-year performance-based restricted stock awards and the long-term cash payments made under the prior program, and was utilized for 2012 awards in February 2012. We believe that with the ability to earn over the three-year performance period, those performance units that are not otherwise earned on an annual basis, maintains the intended incentives of the long-term performance plan for the entire three-year performance period.
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