UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
Proxy
Statement Pursuant to Section 14(a) of
the
Securities Exchange Act of 1934 (Amendment
No. )
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Filed
by the Registrant x
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Filed
by a Party other than the Registrant o
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Check
the appropriate box:
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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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x
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Definitive
Proxy Statement
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Definitive
Additional Materials
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Soliciting
Material Pursuant to §240.14a-12
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Carter’s,
Inc.
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(Name
of Registrant as Specified in its Charter)
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(Name
of Person(s) Filing Proxy Statement, if other than the
Registrant)
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Payment
of Filing Fee (Check the appropriate box):
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x
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No
fee required.
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Fee
computed on table below per Exchange Act
Rules 14a-6(i)(1) and 0-11.
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(1)
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Title
of each class of securities to which transaction
applies:
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(2)
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Aggregate
number of securities to which transaction applies:
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(3)
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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):
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(4)
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Proposed
maximum aggregate value of transaction:
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(5)
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Total
fee paid:
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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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(1)
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Amount
Previously Paid:
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(2)
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Form,
Schedule or Registration Statement No.:
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(3)
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Filing
Party:
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(4)
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Date
Filed:
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April 11,
2008
Dear
Stockholder:
It is my
pleasure to invite you to attend our 2008 Annual Meeting of Stockholders on May
9, 2008. The meeting will be held at our corporate offices at, The Proscenium,
1170 Peachtree Street NE, Atlanta, Georgia 30309, and will begin at
8:00 a.m.
The
attached Notice of 2008 Annual Meeting of Stockholders and Proxy Statement
describe the formal business to be transacted at the meeting. Whether or not you
plan to attend the Annual Meeting, your shares can be represented if you
promptly submit your voting instructions by telephone, by internet, or by
completing, signing, dating, and returning your proxy card in the enclosed
envelope.
On behalf
of the Board of Directors and management of Carter’s, Inc., thank you for
your continued support.
Sincerely,
Frederick
J. Rowan, II
Chairman
of the Board of Directors
and Chief
Executive Officer
The
Proscenium
1170
Peachtree Street NE, Suite 900
Atlanta,
Georgia 30309
Tel: (404)
745-2700
Fax: (404)
892-3079
NOTICE
OF 2008 ANNUAL MEETING OF STOCKHOLDERS
Notice is
hereby given that the 2008 Annual Meeting of Stockholders of Carter’s, Inc.
(the “Annual Meeting”) will be held at 8:00 a.m. on May 9, 2008 at our
corporate offices at, The Proscenium, 1170 Peachtree Street NE, Atlanta,
Georgia 30309. At the Annual Meeting, we will address all business that may
properly come before the meeting and vote on the following matters:
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1.
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The
election of three Class II Directors;
and
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2.
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The
ratification of the appointment of PricewaterhouseCoopers LLP as the
Company’s independent registered public accounting firm for fiscal
2008.
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Stockholders
of record at the close of business on March 29, 2008 are entitled to receive
notice of, attend, and vote at the Annual Meeting. Your vote is very important.
Whether or not you plan to attend the Annual Meeting, please complete, sign,
date, and return the proxy card in the envelope provided or submit your voting
instructions by telephone or through the internet so that your shares will be
represented at the Annual Meeting.
If you
plan to attend the Annual Meeting and are a registered stockholder, please bring
the invitation attached to your proxy card. If your shares are registered in the
name of a bank or your broker, please bring your bank or brokerage statement
showing your beneficial ownership to the Annual Meeting or request an invitation
by writing to our Vice President of Investor Relations at the address set forth
above.
Important
Notice Regarding the Availability of Proxy Materials for the Annual Meeting of
Stockholders to be held on May 9, 2008
The
proxy materials and the Annual Report to Stockholders are available at
www.carters.com.
By order
of the Board of Directors,
Brendan
M. Gibbons
Secretary
of Carter’s, Inc.
Atlanta,
Georgia
April 11,
2008
PROXY
STATEMENT
TABLE
OF CONTENTS
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Page
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9
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10
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27
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27
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GENERAL INFORMATION ABOUT THE PROXY MATERIALS AND THE ANNUAL
MEETING
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Why
am I receiving this proxy
statement?
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The Board
of Directors of Carter’s, Inc. (“we,” “us,” “our,” “Carter’s,” or the
“Company”) is soliciting proxies for our May 9, 2008 Annual Meeting of
Stockholders. This proxy statement and accompanying proxy card are being mailed
to stockholders of record on or about April 11, 2008. You are receiving this
proxy statement because you owned shares of Carter’s common stock on the record
date and are therefore entitled to vote at the Annual Meeting. By use of a
proxy, you can vote regardless of whether or not you attend the Annual Meeting.
This proxy statement provides information on the matter on which the Company’s
Board of Directors (the “Board”) would like you to vote so that you can make an
informed decision.
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What
is the purpose of the Annual
Meeting?
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The
purpose of the Annual Meeting is for our stockholders to address all business
that may properly come before the meeting and to vote on the following
matters:
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1.
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The
election of three Class II Directors (see page 9);
and
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2.
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The
ratification of the appointment of PricewaterhouseCoopers LLP (“PwC”) as
the Company’s independent registered public accounting firm for fiscal
2008 (see page 27).
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Who
is asking for my vote?
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The
Company is soliciting your proxy on behalf of the Board. The Company is paying
for the costs of this solicitation and proxy statement.
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Who
can attend the Annual Meeting?
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All
stockholders of record, or their duly appointed proxies, at the close of
business on March 29, 2008, the record date, may attend the Annual Meeting. As
of the record date, there were 57,008,933 shares of common stock issued and
outstanding.
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What
are my voting rights?
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Each
share of common stock is entitled to one vote on each matter submitted to
stockholders at the Annual Meeting.
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What
is the difference between holding shares as a stockholder of record and as
a beneficial owner?
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If your
shares are registered directly in your name with the Company’s transfer agent,
American Stock Transfer and Trust Company, you are considered the stockholder of
record for these shares. As the stockholder of record, you have the right to
grant your voting proxy directly to persons listed on your proxy card or vote in
person at the Annual Meeting.
If your
shares are held in a brokerage account or by another nominee, you are considered
the beneficial owner of shares held “in street name.” These proxy materials are
being forwarded to you together with a voting instruction card. As a beneficial
owner, you have the right to direct your broker, trustee, or nominee how to
vote, and you are also invited to attend the Annual Meeting. Because you are a
beneficial owner and not the stockholder of record, you may not vote your shares
in person at the Annual Meeting unless you obtain a “legal proxy” from the
broker, trustee, or nominee that holds your shares. Your broker, trustee, or
nominee should have enclosed or provided directions for you to use to instruct
the broker, trustee, or nominee how to vote your shares.
If the
brokers do not receive timely instructions from the beneficial owner regarding
how the beneficial owner wants the shares voted, brokers holding shares of
record for a beneficial owner have discretionary authority to vote on Proposal
Number One and Proposal Number Two.
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What
are my choices when voting on the election of Class II Directors, and what
vote is needed to elect the Director
nominees?
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In voting
on the election of Class II Directors (Proposal Number One), stockholders
may:
1. vote
for all nominees,
2. vote
to withhold authority for all nominees, or
3. vote
for all nominees, except specific nominees.
The three
nominees for election as Class II Directors who receive the greatest number of
votes will be elected as Class II Directors. Votes that are withheld will be
counted toward a quorum, but will be excluded entirely from the tabulation of
votes for each nominee, and, therefore, will not affect the outcome of the vote
on this Proposal.
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What
are my choices when voting on the ratification of the appointment of PwC
as the Company’s independent registered public accounting firm for fiscal
2008?
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In voting
on the ratification of PwC (Proposal Number Two), stockholders may:
1. vote
for ratifying PwC’s appointment,
2. vote
against ratifying PwC’s appointment, or
3.
abstain from voting on ratifying PwC’s appointment.
The
approval of Proposal Number Two requires the affirmative vote of the holders of
a majority of the shares of common stock present or represented at the meeting
and voted on the Proposal at the Annual Meeting. Votes to abstain will be
counted toward a quorum, but will be excluded entirely from the tabulation of
votes, and, therefore, will not affect the outcome of the vote on this
Proposal.
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What
constitutes a quorum?
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A quorum
is the minimum number of shares required to be present to transact business at
the Annual Meeting. Pursuant to the Company’s by-laws, the presence at the
Annual Meeting, in person, by proxy, or by remote communication, of the holders
of at least a majority of the shares entitled to be voted will constitute a
quorum. Broker non-votes will be counted as shares that are present at the
meeting for purposes of determining a quorum. If a quorum is not present, the
meeting may be adjourned until a quorum is obtained.
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How
does the Board recommend that I
vote?
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Unless
you give instructions on your proxy card, the persons named as proxy holders on
the proxy card will vote in accordance with the recommendations of the Board.
The Board recommends a vote:
FOR the election of the
nominees for Class II Directors (Proposal Number One); and
FOR the ratification of the
appointment of PwC (Proposal Number Two).
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How
do I vote?
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If you
are a stockholder of record, you may vote in one of four ways. First, you may
vote by mail by signing, dating, and mailing your proxy card in the enclosed
envelope. Second, you may vote in person at the Annual Meeting. Third, you may
vote through the internet by completing the voting instruction form found at
www.proxyvote.com. You will need your proxy card when voting through the
internet. Fourth, you may vote by telephone by using a touch-tone telephone and
calling 1-800-690-6903.
If your
shares are held in a brokerage account or by another nominee, these proxy
materials are being forwarded to you together with a voting instruction card.
Follow the instructions on the voting instruction card in order to vote your
shares by proxy or in person.
2
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Can
I change my vote after I return my proxy
card?
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Yes. Even
after you have submitted your proxy card, you may change your vote at any time
before your proxy votes your shares by submitting written notice of revocation
to Brendan M. Gibbons, Vice President, General Counsel, and Secretary of
Carter’s, Inc., at the Company’s address set forth in the Notice of the
Annual Meeting, or by submitting another proxy card bearing a later date.
Alternatively, if you have voted by telephone or through the internet, you may
change your vote by calling 1-800-690-6903 and following the instructions. The
powers of the proxy holders will be suspended if you attend the Annual Meeting
in person and so request, although attendance at the Annual Meeting will not by
itself revoke a previously granted proxy. If you hold your shares through a
broker or other custodian and would like to change your voting instructions,
please review the directions provided to you by that broker or
custodian.
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May I
vote confidentially?
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Yes. Our
policy is to keep your individual votes confidential, except as appropriate to
meet legal requirements, to allow for the tabulation and certification of votes,
and to facilitate proxy solicitation.
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Who
will count the votes?
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A
representative of Broadridge Financial Solutions, Inc. will count the votes and
act as the inspector of election for the Annual Meeting.
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What
happens if additional matters are presented at the Annual
Meeting?
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As of the
date of this proxy statement, the Board knows of no matters other than those set
forth herein that will be presented for determination at the Annual Meeting. If,
however, any other matters properly come before the Annual Meeting and call for
a vote of stockholders, the Board intends proxies to be voted in accordance with
the judgment of the proxy holders.
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Where
can I find the voting results of the Annual
Meeting?
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We intend
to announce preliminary voting results at the Annual Meeting and publish final
results in the Company’s quarterly report on Form 10-Q for the second
quarter of fiscal 2008.
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How
may I obtain information about the
Company?
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A copy of
our fiscal 2007 Annual Report accompanies this proxy statement and is available
on our website at www.carters.com. Stockholders may also obtain a free copy of
our Annual Report on Form 10-K by visiting our website or by sending a
request in writing to Eric Martin, Vice President of Investor Relations, at the
Company’s address set forth in the Notice of the Annual Meeting.
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When
are stockholder proposals due for consideration at next year’s annual
meeting?
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Any
proposals to be considered for inclusion in next year’s proxy statement must be
submitted in writing to Brendan M. Gibbons, Vice President, General Counsel,
and Secretary of Carter’s, Inc., at the Company’s address set forth in
the Notice of the Annual Meeting, prior to the close of business on December 12,
2008. There are additional requirements under our by-laws and the proxy
rules to present a proposal, including continuing to own a minimum number
of shares of our stock until next year’s annual meeting and appearing in person
at the annual meeting to explain your proposal. Stockholders who wish to make a
proposal to be considered at next year’s annual meeting, other than proposals to
be considered for inclusion in next year’s proxy statement, must notify the
Company in the same manner specified above no earlier than January 9, 2009 and
no later than February 8, 2009.
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Who
can help answer my questions?
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If you
have any questions about the Annual Meeting or how to submit or revoke your
proxy, or to request an invitation, contact Eric Martin, Vice President of
Investor Relations, at the Company’s address set forth in the Notice of the
Annual Meeting.
3
BOARD OF DIRECTORS AND CORPORATE GOVERNANCE
INFORMATION
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Board
of Directors
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Frederick J.
Rowan, II joined us in 1992 as President and Chief Executive Officer and
became Chairman of the Board of Directors in October 1996. Prior to joining us,
Mr. Rowan was Group Vice President of VF Corporation, a multi-division apparel
company and, among other positions, served as President and Chief Executive
Officer of both The HD Lee Company, Inc. and Bassett-Walker, Inc., divisions of
VF Corporation. Mr. Rowan, who has been involved in the textile and apparel
industries for over 40 years, has been in senior executive positions for nearly
30 of those years. Mr. Rowan began his career at the DuPont Corporation and
later joined Aileen, Inc., a manufacturer of women’s apparel, where he
subsequently became President and Chief Operating Officer. On June 1, 2004, the
Company named Joseph Pacifico, President of Carter’s, Inc. Mr. Rowan continues
to serve as our Chairman of the Board of Directors and Chief Executive
Officer.
Bradley M. Bloom
became a Director in August 2001. Mr. Bloom is a Managing
Director of Berkshire Partners LLC, (“Berkshire Partners”) which he co-founded
in 1986. He is or has been a director of several of Berkshire Partners’ consumer
and retailing companies. Mr. Bloom is a current director of Bare
Escentuals, Inc., Citizens of Humanity, LLC, and Gordon Brothers Group, and a
former director of Acosta, Inc., Sterling, Inc., America’s Best Contacts
and Eyeglasses, L.P., and Miami Cruiseline Services Holdings I.B.V.
A. Bruce Cleverly
became a Director in March 2008. Mr. Cleverly retired as President of
Global Oral Care from Procter & Gamble Company/The Gillette Company in
September 2007, a position he held since 2005. Mr. Cleverly joined The Gillette
Company in 1975 as a Marketing Assistant and held positions of increasing
responsibility in product management until 1985. From 1985 to 2001, Mr. Cleverly
held various management positions before he became President of Gillette’s
worldwide Oral Care business. In October 2005, Mr. Cleverly was elected
President of The Procter & Gamble Company’s Global Oral Care division. Mr.
Cleverly is a director of Rain Bird Corporation and a member of the Board of
Fellows of the Harvard School of Dental Medicine.
Paul
Fulton became a Director in
May 2002. Mr. Fulton retired as President of Sara Lee Corporation in
1993 after spending 34 years with the company. He is currently
non-Executive Chairman of the Board of Bassett Furniture Industries, Inc.,
where he has served since August 1993. Mr. Fulton was previously a
director at Bank of America Corporation, where he served from 1993 to 2007;
Lowe’s Companies, Inc., where he served from 1996 to 2007; and Sonoco
Products Company, Inc., where he served from 1989 to 2005.
William J.
Montgoris became a Director in August 2007. Mr. Montgoris retired as
Chief Operating Officer of The Bear Stearns Companies, Inc. in 1999, a position
he held since August 1993. While at Bear Stearns, Mr. Montgoris also served as
the company’s Chief Financial Officer from April 1987 until October 1996. Mr.
Montgoris is currently a director of Stage Stores, Inc. and Office Max
Incorporated.
David Pulver
became a Director in January 2002. Mr. Pulver has been a
private investor for approximately 25 years and is the President of
Cornerstone Capital, Inc. Mr. Pulver is a current director of
Hearst-Argyle Television, Inc., where he has served since August of
1997. Mr. Pulver was a founder of The Children’s Place, Inc., and
served as its Chairman and Co-Chief Executive Officer until 1982.
Elizabeth A.
Smith became a Director in November 2004. Ms. Smith is
currently President of Avon Products, Inc. Prior to her promotion to
President, Ms. Smith was Executive Vice President, President North American and
Global Marketing. Ms. Smith was formerly the Group Vice President for Kraft
Foods North America and President of Beverage and Grocery Sectors. From 1990 to
2004, she held various management positions at Kraft Foods, Inc. including
President, Beverages, Desserts and Cereals where she had responsibility for
managing many well-known brands.
John R. Welch
became a Director in February 2003. Mr. Welch retired as
President of Mast Industries (Far East) Ltd. in April 2002 after
spending 18 years with the company. Mr. Welch also served as Executive
Vice President of Operations at Warnaco Knitwear, a division of
Warnaco, Inc. from August 1978 to December 1983. Mr. Welch
is currently a director of Brandot International Ltd.
Thomas E. Whiddon
became a Director in August 2003. Mr. Whiddon retired as
Executive Vice President-Logistics and Technology of Lowe’s Companies, Inc.
in March 2003, a position he held since 2000. From 1996 to 2000,
Mr. Whiddon served as Lowe’s Chief Financial Officer. Since his retirement,
Mr. Whiddon has worked as a consultant, serving various companies in
executive capacities on an interim basis. Mr. Whiddon has over
30 years of accounting and financial experience. Mr. Whiddon is
currently a director of Sonoco Products Company, Inc. and of Dollar Tree
Stores, Inc. Mr. Whiddon has been an Advisory Director of Berkshire
Partners since October 2005 and previously served as a director of Bare
Escentuals, Inc.
4
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Board
Meetings
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Our
Corporate Governance Principles require Carter’s to have at least four regularly
scheduled Board meetings each year, and each Director is expected to attend each
meeting. The Board met four times during fiscal 2007. In fiscal 2007, no
Director (except Mr. Montgoris, who joined the Board in August 2007, and Mr.
Cleverly, who joined the Board in March 2008) participated in less than 75% of
the aggregate number of all of the Board and applicable committee meetings. The
Company does not have a policy with regard to Director attendance at the Annual
Meeting. Each Director (except for Mr. Montgoris and Mr. Cleverly) attended the
Company’s annual meetings in fiscal 2005 and 2007, and all but one of our
Directors attended the 2006 annual meeting.
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Executive
Sessions
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Executive
sessions of non-management Directors are held at least four times a year, and
executive sessions of independent, non-management Directors are held at least
once a year. Any non-management Director can request that an additional
executive session be scheduled. The Chairman of the Nominating and Corporate
Governance Committee, currently Mr. Welch, has been chosen to be the presiding
Director at the executive sessions of non-management Directors (the “Presiding
Director”).
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Board
Committees
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Our Board
has a standing Audit Committee, a Compensation Committee, and a Nominating and
Corporate Governance Committee. The Board may also establish other committees to
assist in the discharge of its responsibilities.
The
current members of each Board committee and the number of committee meetings
held during fiscal 2007 are listed below.
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Name of Director
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Audit
Committee
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Compensation
Committee
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Nominating and
Corporate
Governance
Committee
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A.
Bruce Cleverly
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x
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Paul
Fulton
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x
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*
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William
J. Montgoris
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x
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David
Pulver
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x
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*
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Elizabeth
A. Smith
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x
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x
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John
R. Welch
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x
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x
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*
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Thomas
E. Whiddon
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x
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x
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Number
of Meetings in Fiscal 2007
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8
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4
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4
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*Chairman
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Audit
Committee
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The
primary responsibilities of the Audit Committee include:
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·
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oversight
of the quality and integrity of the consolidated financial statements,
including the accounting, auditing, and reporting practices of the
Company;
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·
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oversight
of the effectiveness of the Company’s internal control over financial
reporting;
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·
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appointment
of the independent registered public accounting firm and oversight of its
performance, including its qualifications and
independence;
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·
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oversight
of the Company’s compliance with legal and regulatory requirements;
and
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·
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oversight
of the performance of the Company’s internal audit
function.
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The Audit
Committee operates pursuant to a written charter that addresses the requirements
of the New York Stock Exchange’s (“NYSE”) listing standards. The charter is
available on our website at www.carters.com or in print by
contacting Eric Martin, Vice President of Investor Relations of Carter’s, Inc.,
at the Company’s address set forth in the Notice of the Annual Meeting. The
Board has determined that each member of the Audit Committee is independent and
meets the financial literacy requirements set forth in the NYSE’s listing
standards. The Board has also determined that each member of the Audit Committee
is an “audit committee financial expert” as defined by the Securities and
Exchange Commission (“SEC”).
The Audit
Committee Report is included in this proxy statement on
page 26.
5
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Compensation
Committee
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The
primary responsibilities of the Compensation Committee include:
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·
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establishing
the Company’s philosophy, policies, and strategy relative to executive
compensation, including the mix of base salary and short-term and
long-term incentive compensation within the context of stated guidelines
for compensation relative to peer
companies;
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·
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evaluating
the performance of the Chief Executive Officer and other executive
officers relative to approved performance goals and
objectives;
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·
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setting
the compensation of the Chief Executive Officer and other executive
officers based upon an evaluation of their
performance;
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·
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assisting
the Board in developing and evaluating candidates for key executive
positions and ensuring a succession plan is in place for the Chief
Executive Officer and other executive
officers;
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·
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evaluating
compensation plans, policies, and programs with respect to the Chief
Executive Officer, other executive officers, and non-management
Directors;
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·
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monitoring
and evaluating benefit programs for the Company’s Chief Executive Officer
and other executive officers; and
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·
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producing
an annual report on executive compensation for inclusion in the Company’s
annual proxy statement. This years Compensation Committee Report is
included in this proxy statement on
page 18.
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The
Compensation Committee operates pursuant to a written charter that addresses the
requirements of the NYSE’s listing standards. The charter is available on our
website at www.carters.com or in print by contacting Eric Martin, Vice President
of Investor Relations of Carter’s, Inc., at the Company’s address set forth in
the Notice of the Annual Meeting. The Board has determined that each member of
the Compensation Committee is independent.
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Compensation
Committee Interlocks and Insider
Participation
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None of
the members of our Compensation Committee serving during fiscal 2007 has been an
officer or other employee of the Company. None of our executive officers has
served as a member of the board of directors or compensation committee of any
entity that has one or more executive officers serving on our Board or the
Compensation Committee.
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Nominating
and Corporate Governance Committee
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The
primary responsibilities of the Nominating and Corporate Governance Committee
include:
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·
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identifying
and recommending candidates qualified to become Board
members;
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·
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recommending
Directors for appointment to Board Committees;
and
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·
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developing
and recommending to the Board a set of corporate governance principles and
monitoring the Company’s compliance with and effectiveness of such
principles.
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The
Nominating and Corporate Governance Committee operates pursuant to a written
charter that addresses the requirements of the NYSE’s listing standards. The
charter is available on our website at www.carters.com or in print by
contacting Eric Martin, Vice President of Investor Relations of Carter’s, Inc.,
at the Company’s address set forth in the Notice of the Annual Meeting. The
Board has determined that each member of the Nominating and Corporate Governance
Committee is independent.
|
|
Consideration
of Director Nominees
|
The
Nominating and Corporate Governance Committee regularly assesses the
appropriateness of the size of the Board of Directors. In the event that
vacancies occur or are anticipated, the Committee will identify prospective
nominees that come to its attention through current Board members, professional
search firms, or stockholders who hold more than 1% of our common stock. The
Board believes that it is appropriate to limit the group of stockholders who can
propose nominees due to time constraints on the Nominating and Corporate
Governance Committee. The Committee will consider persons recommended by
stockholders who hold more than 1% of our common stock for inclusion as nominees
for election to the Board if the names of such persons are submitted to Brendan
M. Gibbons, Vice President, General Counsel, and Secretary of
Carter’s, Inc., at the Company’s address set forth in the Notice of the
Annual Meeting.
This submission must be made in writing and in accordance with our by-laws,
including mailing the submission in a timely manner and including the nominee’s
name, address, and qualifications for Board membership.
6
When
evaluating a potential candidate for membership on the Board, the Committee
considers each candidate’s skills and experience and assesses the needs of the
Board and its committees at that point in time. In connection with this
assessment, the Committee will determine whether to interview prospective
nominees, and if warranted, one or more members of the Committee, and others as
appropriate, will interview prospective nominees in person or by telephone. Once
this evaluation is completed, if warranted, the Committee recommends candidates
to the Board for nomination, and the Board determines whether or not to select
the nominees after considering the recommendation of the Committee.
|
|
Interested
Party Communications
|
A
stockholder or other interested party may submit a written communication to the
Board, non-management Directors, or Presiding Director. The submission must be
delivered to Brendan M. Gibbons, Vice President, General Counsel,
and Secretary of Carter’s, Inc., at the Company’s address set forth in
the Notice of the Annual Meeting.
The
Board, non-management Directors, or Presiding Director may require the
submitting stockholder to furnish such information as may be reasonably required
or deemed necessary to sufficiently review and consider the submission of such
stockholder.
Each
submission will be forwarded, without editing or alteration, to the Board,
non-management Directors, or Presiding Director, as appropriate, on or prior to
the next scheduled meeting of the Board. The Board, non-management Directors, or
Presiding Director, as appropriate, will determine, in their sole discretion,
the method by which such submission will be reviewed and
considered.
|
|
Corporate
Governance Principles and Code of
Ethics
|
Carter’s
is committed to conducting its business with the highest level of integrity and
maintaining the highest standards of corporate governance. Our Corporate
Governance Principles and our Code of Business Ethics and Professional Conduct
provide the structure within which our Board and management operate the Company.
The Company’s Code of Business Ethics and Professional Conduct applies to all
Directors and Company employees, including the Company’s executive officers. Our
Corporate Governance Principles and Code of Business Ethics and Professional
Conduct are available on the Company’s website at www.carters.com or in print by
contacting Eric Martin, Vice President of Investor Relations, at the Company’s
address set forth in the Notice of the Annual Meeting.
|
|
Director
Independence
|
The
Company’s Corporate Governance Principles require a majority of the Company’s
Directors to be independent. For a Director to be considered independent, the
Board must determine that the Director has no direct or indirect material
relationship with Carter’s. The Board considers all relevant information
provided by each Director regarding any relationships each Director may have
with Carter’s or management. To assist it in making such independence
determinations, the Board has established the following independence tests,
which address all the specific independence tests of the NYSE’s listing
standards. A Director will not be considered independent if:
|
|
·
|
the
Director is, or within the last three years has been, employed by the
Company; or an immediate family member of the Director is, or within the
last three years has been, employed as an executive officer of the
Company;
|
|
|
·
|
the
Director, or an immediate family member of the Director, has received,
during any twelve-month period within the last three years, direct
compensation from the Company exceeding $100,000, other than Director or
committee fees and pension or other forms of deferred compensation for
prior service (provided such compensation is not contingent in any way on
continued service);
|
|
|
·
|
(a) the
Director, or an immediate family member of the Director, is a current
partner of a firm that is the Company’s internal auditor or independent
registered public accounting firm; (b) the Director is a current
employee of such a firm; (c) the Director has an immediate family
member who is a current employee of such a firm and who participates in
the firm’s audit, assurance, or tax compliance (but not tax planning)
practice; or (d) the Director, or an immediate family member of the
Director, was within the last three years (but is no longer) a partner or
employee of such a firm and personally worked on the Company’s audit
within that time;
|
7
|
|
·
|
the
Director, or an immediate family member of the Director, is, or within the
last three years has been, employed as an executive officer of another
company where any of the Company’s present executive officers serve or
served on that company’s compensation
committee;
|
|
|
·
|
the
Director is a current employee, or has an immediate family member who is
an executive officer, of another company that has made payments to, or
receives payments from, the Company for property or services in an amount
which, in any of the last three fiscal years, exceeds the greater of $1.0
million, or 2%, of such other company’s consolidated gross
revenues;
|
|
|
·
|
the
Director, or an immediate family member of the Director, is, or within the
last three years has been, employed by a company that has a director who
is an officer of the Company;
|
|
|
·
|
the
Director serves as an officer, director, or trustee, or as a member of a
fund raising organization or committee of a not-for-profit entity to which
the Company made contributions in excess of $50,000;
or
|
|
|
·
|
the
Director is, or within the last three years has been, an executive officer
of another company that is indebted to the Company, or to which the
Company is indebted, and the total amount of either company’s indebtedness
to the other exceeds 1% of the total consolidated assets of such
company.
|
Applying
these standards, the Board has determined that seven of our eight non-management
Directors are independent: Ms. Smith and Messrs. Cleverly,
Fulton, Montgoris, Pulver, Welch, and Whiddon. In the course of making these
determinations, the Board considered the following:
|
|
·
|
Mr. Bloom’s
status as a managing director and an employee of Berkshire Partners. In
July 2005, the Company paid Berkshire Partners a transaction fee of
$1.5 million for its services as our financial advisor in connection with
our acquisition of OshKosh B’Gosh, Inc. Because of these payments to
Berkshire Partners, Mr. Bloom failed to meet the independence tests
listed above.
|
|
|
·
|
Mr. Whiddon’s
status as an Advisory Director at Berkshire Partners in light of the
payments made to Berkshire Partners described above. Mr. Whiddon is
not an employee of Berkshire Partners, and, therefore, the Board
determined that he does not fail to meet the independence tests listed
above, and does not otherwise have a material relationship with the
Company.
|
|
|
·
|
Mr. Fulton’s
status as a former director at Bank of America Corporation. Bank of
America is the administrative agent and a party to our senior credit
facility. Mr. Fulton was not an employee of Bank of America, and,
therefore, the Board determined that he does not fail to meet the
independence tests listed above, and does not otherwise have a material
relationship with the Company.
|
8
PROPOSAL NUMBER ONE
ELECTION
OF CLASS II DIRECTORS
The Board
proposes that the three Class II Director nominees be re-elected to the
Board to serve until 2011. The Company’s Board is divided into three classes
with each Director serving a three-year term or until his or her earlier
resignation, death, or removal. In addition to the three Class II nominees,
the Company’s current Class I and Class III Directors are listed
below. Each nominee currently serves as a Class II Director.
|
|
Class II
Nominees — Terms Expiring at the Annual
Meeting
|
|
Name
|
Age
|
|
|
Bradley
M.
Bloom
|
55
|
|
|
A.
Bruce
Cleverly
|
62
|
|
|
Frederick
J. Rowan,
II
|
68
|
The
individuals who will continue to serve as Class I and Class III
Directors after the Annual Meeting are:
|
|
Class I
Directors — Terms Expiring in 2010
|
|
Name
|
Age
|
|
|
William
J.
Montgoris
|
61
|
|
|
David
Pulver
|
66
|
|
|
Elizabeth
A.
Smith
|
44
|
|
|
Class III
Directors — Terms Expiring in 2009
|
|
Name
|
Age
|
|
|
Paul
Fulton
|
73
|
|
|
John
R.
Welch
|
76
|
|
|
Thomas
E.
Whiddon
|
55
|
The
Board recommends a vote FOR the election of Bradley M. Bloom, A. Bruce Cleverly,
and Frederick J. Rowan, II as Class II Directors.
|
|
Vote
Required
|
The three
nominees for election as Class II Directors who receive the greatest number
of votes will be elected as Class II Directors. Votes may be cast in favor
of all nominees, withheld for all nominees, or for all nominees, except specific
nominees. Votes that are withheld will be counted toward a quorum, but will be
excluded entirely from the tabulation of votes for each nominee, and, therefore,
will not affect the outcome of the vote on this Proposal. Proxies that are
granted without providing voting instructions will be voted FOR the election of the three
Class II Director nominees.
9
COMPENSATION OF DIRECTORS
Each of
our non-management Directors receives an annual retainer and meeting fees, and
each committee Chairman receives a separate retainer. In fiscal 2007, each
Director’s annual retainer was comprised of a $20,000 cash payment and a grant
of our common stock valued at approximately $90,000. Each Director also received
meeting fees of $2,500 for each regularly scheduled Board meeting, $1,000 for
each special Board meeting, and $1,000 for each regularly scheduled and special
committee meeting. The Chairman of our Audit Committee received a $20,000
retainer, and the Chairmen of our Compensation and Nominating and Corporate
Governance Committees each received $10,000 retainers. In addition, our new
non-management Directors were granted a one-time grant of restricted common
stock valued at approximately $100,000. This restricted stock “cliff vests”
after three years following the date of grant.
We
reimburse Directors for travel expenses incurred in connection with attending
Board and committee meetings and the Annual Meeting and for other expenses
incurred while conducting Company business. We pay no additional remuneration to
Mr. Rowan for serving as a Director. There are no family relationships
among any of the Directors or our executive officers.
The
following table provides information concerning the compensation of our
non-management Directors for fiscal 2007.
FISCAL
2007 DIRECTOR COMPENSATION TABLE
|
Name
|
Fees
Earned
or
Paid in Cash
(b)
|
Stock
Awards
($)
(c)
|
Option
Awards
($)
|
Total
($)
|
||||||||||||
|
Bradley
M. Bloom (a)
|
$ | 30,000 | $ | 90,000 | $ | -- | $ | 120,000 | ||||||||
|
Paul
Fulton
|
$ | 50,000 | $ | 90,000 | $ | 1,348 | (f) | $ | 141,348 | |||||||
|
William
J. Montgoris (d)
|
$ | 18,000 | $ | 57,858 | $ | -- | $ | 75,858 | ||||||||
|
David
Pulver.
|
$ | 58,000 | $ | 90,000 | $ | 50 | (g) | $ | 148,050 | |||||||
|
Elizabeth
A. Smith
|
$ | 38,000 | $ | 118,220 | (e) | $ | -- | $ | 156,220 | |||||||
|
John
R. Welch
|
$ | 48,000 | $ | 90,000 | $ | 4,915 | (h) | $ | 142,915 | |||||||
|
Thomas
E. Whiddon
|
$ | 42,000 | $ | 90,000 | $ | 15,549 | (i) | $ | 147,549 | |||||||
|
|
(a)
All compensation earned by Mr. Bloom was paid to Berkshire
Partners.
|
|
|
(b)
This column reports the amount of cash compensation earned in fiscal 2007
through annual cash retainers and meeting
fees.
|
|
|
(c)
On May 11, 2007, we issued each of our non-management Directors
(except Mr. Montgoris) 3,570 shares of common stock. The fair market value
of the common stock issuances was $25.21 per share, the closing market
price on the date of issuance.
|
|
|
(d)
Upon joining the Board in August 2007, the Company made a cash payment to
Mr. Montgoris representing a pro-rated share of his annual cash retainer.
In addition, the Company issued Mr. Montgoris 2,062 shares of common stock
representing a pro-rated share of his annual grant of our common stock.
The fair market value of the common stock was $21.82 per share, the
closing market price on the date of issuance. Mr. Montgoris was also
issued 4,583 shares of restricted stock which vest in August 2010. These
shares had a grant date fair value of $21.82 per share. In accordance with
Statement of Financial Accounting Standards (“SFAS”) No. 123 (revised
2004), “Share-Based Payment” (“SFAS 123R”), we assume these shares will
vest in August 2010 and record the related expense ratably over the
vesting period.
|
|
|
(e)
Upon joining the Board in November 2004, the Company issued
Ms. Smith 6,070 shares of restricted stock, which cliff vested in
November 2007. These shares had a grant date fair value of $16.48 per
share. In accordance with SFAS 123R, we recorded the related expense
ratably over the vesting period.
|
|
|
(f)
On May 15, 2002, Mr. Fulton was granted 16,000 stock options
with an exercise price of $3.08, which was $0.85 lower than the fair
market value of the stock on the date of grant. The amount disclosed in
this column equals the Company’s expense for such stock options, which
equals the difference between the exercise price and fair market value of
the stock on the date of grant recorded ratably over the vesting period
through May 2007.
|
|
|
(g)
On January 9, 2002, Mr. Pulver was granted 16,000 stock options
with an exercise price of $3.08, which was $0.36 lower than the fair
market value of the stock on the date of grant. The amount disclosed in
this column equals the Company’s expense for such stock options, which
equals the difference between the exercise price and fair market value of
the stock on the date of grant recorded ratably over the vesting period
through January 2007.
|
|
|
(h)
On April 5, 2003, Mr. Welch was granted 16,000 stock options
with an exercise price of $4.94 and a Black-Scholes fair value of $1.54.
The amount disclosed in this column equals the Company’s expense for such
stock options in accordance with SFAS 123R recorded ratably over the
vesting period through April 2008.
|
10
|
|
(i)
On September 17, 2003, Mr. Whiddon was granted 16,000 stock
options with an exercise price of $6.98 and a Black-Scholes fair value of
$4.88. The amount disclosed in this column equals the Company’s expense
for such stock options in accordance with SFAS 123R recorded ratably over
the vesting period through September
2008.
|
For stock
options, the SFAS 123R fair value is calculated based on assumptions summarized
in Note 6 to our audited consolidated financial statements which are included in
our Annual Report on Form 10-K. For complete beneficial ownership
information of our common stock for each of our Directors, see heading
“Securities Ownership of Beneficial Owners, Directors, and Executive Officers”
on page 24.
EXECUTIVE OFFICERS’ BIOGRAPHICAL INFORMATION AND
EXPERIENCE
The
following table sets forth the name, age, and position of each of our executive
officers as of the date of this proxy statement.
|
Name
|
Age
|
Position
|
||||||||
|
Frederick
J. Rowan, II
|
68
|
Chairman
of the Board of Directors and Chief Executive Officer
|
||||||||
|
Joseph
Pacifico
|
58
|
President
|
||||||||
|
David
A. Brown
|
50
|
Executive
Vice President and Chief Operations Officer
|
||||||||
|
Michael
D. Casey
|
47
|
Executive
Vice President and Chief Financial Officer
|
||||||||
|
James
C. Petty
|
49
|
President
of Retail Stores
|
||||||||
|
Charles
E. Whetzel, Jr.
|
57
|
Executive
Vice President and Chief Sourcing
Officer
|
||||||||
Frederick J.
Rowan, II joined us in 1992 as President and Chief Executive Officer and
became Chairman of the Board of Directors in October 1996. Prior to joining
us, Mr. Rowan was Group Vice President of VF Corporation, a multi-division
apparel company and, among other positions, served as President and Chief
Executive Officer of both The HD Lee Company, Inc. and
Bassett-Walker, Inc., divisions of VF Corporation. Mr. Rowan, who has
been involved in the textile and apparel industries for over 40 years, has been
in senior executive positions for nearly 30 of those years. Mr. Rowan began
his career at the DuPont Corporation and later joined Aileen, Inc., a
manufacturer of women’s apparel, where he subsequently became President and
Chief Operating Officer. On June 1, 2004, the Company named Joseph
Pacifico, President of Carter’s, Inc. Mr. Rowan continues to serve as
our Chairman of the Board of Directors and Chief Executive Officer.
Joseph Pacifico
joined us in 1992 as Executive Vice President-Sales and Marketing and was
named President of Marketing in 1997. On June 1, 2004, Mr. Pacifico
was named President of Carter’s, Inc. Mr. Pacifico began his career
with VF Corporation in 1981 as a sales representative for The HD Lee
Company, Inc. and was promoted to the position of Vice President of
Marketing in 1989, a position he held until 1992.
David A. Brown
joined us in 1992 as Senior Vice President-Business Planning and
Administration. In 1997, Mr. Brown was named Executive Vice
President-Operations, and in 2005 was named Executive Vice President and Chief
Operations Officer. Prior to 1992, Mr. Brown held various positions at VF
Corporation including Vice President-Human Resources for both The HD Lee
Company, Inc. and Bassett-Walker, Inc. Mr. Brown also held human
resource positions with Blue Bell, Inc. and Milliken & Company
earlier in his career.
Michael D. Casey
joined us in 1993 as Vice President-Finance and was named Senior Vice
President-Finance in 1997. In 1998, Mr. Casey was named Senior Vice
President and Chief Financial Officer. In March 2003, Mr. Casey was
named Executive Vice President and Chief Financial Officer. Prior to joining us,
Mr. Casey was a Senior Manager with Price Waterhouse LLP, predecessor to
PricewaterhouseCoopers LLP.
James C. Petty
joined us in 2007 as President of Retail Stores. Prior to joining us, Mr.
Petty served as President and Chief Executive Officer of PureBeauty, Inc. from
2005 to 2006. From 1997 to 2004, Mr. Petty held various positions at Tween
Brands, Inc., formerly Too, Inc., including President, General Manager – Limited
Too Division, Executive Vice President, Stores and Real Estate; Senior Vice
President, Stores; and Vice President, Stores, Limited Too Division. Prior to
1997, Mr. Petty held various positions at Gap, Inc.
Charles E.
Whetzel, Jr. joined us in 1992 as Executive Vice President-Operations and
was named Executive Vice President-Manufacturing in 1997. In 2000,
Mr. Whetzel was named Executive Vice President-Global Sourcing, and in 2005
he was named Executive Vice President and Chief Sourcing Officer.
Mr. Whetzel began his career at Aileen, Inc. in 1971 in the Quality
function and was later promoted to Vice President of Apparel. Following
Aileen, Inc., Mr. Whetzel held positions of increased responsibility
with Health-Tex, Inc., Mast Industries, Inc., and Wellmade
Industries, Inc. In 1988, Mr. Whetzel joined Bassett-Walker, Inc.
and was later promoted to Vice President of Manufacturing for The HD Lee
Company, Inc.
11
COMPENSATION DISCUSSION AND ANALYSIS
Overview
This
Compensation Discussion and Analysis, or CD&A, is intended to provide
information regarding the Company’s executive compensation program and
practices. This CD&A covers a variety of topics, including: the Company’s
compensation philosophy regarding executive compensation, the role of our
Compensation Committee in setting the compensation of our named executive
officers, and our executive compensation decisions for fiscal 2007.
Compensation
Philosophy
The
Company is committed to achieving long-term, sustainable growth and increasing
stockholder value. The Company’s compensation program for our named executive
officers is designed to support these objectives and encourage strong financial
performance on an annual and long-term basis by linking a significant portion of
our named executive officers’ total compensation to Company performance in the
form of incentive compensation. The principal elements of our executive
compensation structure are base salary, annual performance bonus, and long-term
equity incentives. Together, we refer to these three elements as total direct
compensation. In addition, the Company offers perquisites and other personal
benefits to our named executive officers. Our named executive officers may also
receive special bonuses, in recognition of special circumstances or superior
performance.
The
Company’s compensation philosophy is to set our named executive officers’
compensation at levels that will attract, motivate, and retain superior
executive talent in a highly competitive environment. To be consistent with this
philosophy, our Compensation Committee aims to set our named executive officers’
total direct compensation between the fiftieth and seventy-fifth percentile of
compensation paid to similar executive positions at companies in our peer group,
with maximum total direct compensation targeted in the top quartile if superior
performance is achieved.
Our peer
group is comprised of 14 companies in the retail or wholesale industries that
primarily conduct business in apparel or related accessories, have revenues
between $800 million and $3.3 billion, and whom we consider to be
high-performing companies, generally with three years of growth in revenue and
net income. In fiscal 2007, our peer group was comprised of Abercrombie &
Fitch, Aeropostale, American Eagle Outfitters, Chico’s, The Children’s Place,
Coach, Coldwater Creek, Gymboree, J. Crew, Oxford Industries, Pacific Sunwear,
Quicksilver, Timberland, and Tween Brands.
Role
of the Compensation Committee
Our
Compensation Committee sets the total direct compensation of our named executive
officers. Our Compensation Committee also sets the financial performance targets
for our named executive officers’ annual performance bonuses and the performance
vesting terms for applicable equity awards. Our Compensation Committee has
engaged a compensation consultant, the Hay Group, to advise it on executive
compensation matters and provide the Committee with data to benchmark the base
salary, annual performance bonus, and long-term equity incentive compensation of
our named executive officers. The Hay Group serves at the direction of the
Compensation Committee, and meets privately with the Compensation Committee and
with its Chairman.
To
maintain the effectiveness of our executive compensation program, and to keep it
consistent with our compensation philosophy, our Compensation Committee
regularly reviews the reasonableness of our named executive officers’
compensation. In addition to using proxy data of companies in our
peer group, our Compensation Committee references the compensation data provided
by the Hay Group’s Retail Industry Total Remuneration Survey (the “Retail
Survey”), which is comprised of approximately 100 companies in the retail
and wholesale industry and provides comparable compensation information by
controlling for differences in companies’ revenue size and the differences in
the scopes of responsibility of different executives.
In making
compensation determinations for our named executive officers, our Compensation
Committee principally takes into account the nature and scope of each officer’s
responsibilities, the Company’s performance, and the comparative compensation
data of companies in our peer group and the Hay Group’s Retail Survey. Our
Compensation Committee also considers the recommendations of our Chief Executive
Officer regarding the base salary, annual performance bonus, and long-term
equity incentives of our named executive officers, other than himself. In
addition, our Chief Executive Officer and Chief Financial Officer make
recommendations to the Compensation Committee regarding the structure of our
executive compensation program generally.
12
Total
Direct Compensation
In
setting a total direct compensation target for each named executive officer, our
Compensation Committee considers both objective and subjective factors, such as
the scope of each officer’s responsibilities, Company performance, prior equity
awards, potential future earnings from equity awards, retention needs, and
comparative compensation data of companies in our peer group and the Hay Group’s
Retail Survey. The Company’s general goal is to set total direct compensation
for each of our named executive officers between the fiftieth and seventy-fifth
percentile of similar executive positions at companies in our peer group, and to
award our named executive officers total direct compensation in the top quartile
if superior performance is achieved.
In fiscal
2007, as set forth in more detail in the Fiscal 2007 Summary Compensation Table,
the total direct compensation of each of our named executive officers was as
follows: Chief Executive Officer $1,138,666; Chief Financial Officer $869,503;
President $861,446; Chief Sourcing Officer $724,492; and Chief Operations
Officer $724,492.
Base
Salary
The
Company’s goal is to set our named executive officers’ base salaries at
approximately the fiftieth percentile of the base salaries paid to similar
executive positions in our peer group, while making adjustments in light of the
objective and subjective factors discussed above.
In fiscal
2007, we provided our Chief Executive Officer, President, and remaining named
executive officers with base salaries of $812,000, $600,000, and $375,000,
respectively. In fiscal 2008, the base salary of our Chief Executive Officer is
$850,000; the base salary of our President is $650,000; the base salary of our
Chief Financial Officer is $450,000; and the base salaries of our Chief
Operations Officer and Chief Sourcing Officer are $425,000. Our named executive
officers have employment agreements that provide them with minimum base salary
levels that can be increased to account for cost of living adjustments and other
adjustments our Compensation Committee deems appropriate. Except for our Chief
Executive Officer, each of our named executive officers had base salaries in
fiscal 2007 in excess of the minimum base salary levels set forth in their
employment agreements. These employment agreements were entered into in August
2001, prior to the promotions of each of Messrs. Pacifico, Brown, Casey, and
Whetzel, and prior to the significant increase in the scope of each of their
responsibilities.
Annual
Performance Bonus
The
Company makes annual cash performance bonuses a significant component of our
named executive officers’ total compensation, while maintaining the Company’s
compensation philosophy and its general goal to target total direct compensation
between the fiftieth and seventy-fifth percentile of similar executive positions
in our peer group, and in the top quartile when superior performance is
achieved. We believe this design aligns the interests of our named executive
officers with the interests of our stockholders.
Our
Compensation Committee approves a target bonus for each named executive officer
that is based on a percentage of their base salaries. In establishing these
bonus targets, the Compensation Committee considers our named executive
officers’ potential total direct compensation in light of the Company’s
compensation philosophy and comparative compensation data. The named executive
officers can earn their target bonuses based upon the Company’s achievement of
pre-determined financial performance targets. Our Compensation Committee has the
discretion not to award performance bonuses, even if the Company achieves its
financial performance targets.
In
accordance with our Amended and Restated Annual Incentive Compensation Plan (the
“Incentive Compensation Plan”), for fiscal 2007, the Compensation Committee
selected earnings per share, as adjusted for unusual or non-recurring items, as
the financial performance metric used to determine the amount, if any, of annual
performance bonuses to be paid to our named executive officers. Our Compensation
Committee selected earnings per share because it believes it is closely aligned
with the interests of our stockholders.
For
fiscal 2008, our Compensation Committee has chosen to use three financial
performance metrics - earnings per share (weighted at 50%), net sales (weighted
at 25%), and earnings before interest and taxes (“EBIT”) (weighted at 25%) - to
determine the amount of annual performance bonuses to be paid under our
Incentive Compensation Plan. The Compensation Committee determined to add net
sales and EBIT as performance metrics as they are key financial measures that
are aligned with the interests of our stockholders and help to measure the
quality of our earnings.
13
Our named
executive officers can earn from 0% to 200% of their target performance bonus
based upon the Company’s achievement of pre-determined financial targets
established by the Compensation Committee. In fiscal 2007, the Company’s
adjusted earnings per share had to be at least $1.48 per share, representing
approximately 4% growth in earnings per share, before any annual performance
bonus could be earned. At an adjusted earnings per share of $1.48, our named
executive officers' annual performance bonus would have been 10% of their target
bonuses. To earn 100% of their target bonus, the Company’s adjusted earnings per
share had to be at least $1.65 per share, representing approximately 16% growth
in earnings per share; and for our named executive officers to earn a maximum
bonus, the Company’s adjusted earnings per share had to be at least $1.72 per
share, representing approximately 21% growth in earnings per share. Based on the
Company’s adjusted earnings per share in fiscal 2007 of $1.37, performance bonus
targets were not achieved. Accordingly, no annual performance bonuses were paid
to our named executive officers for fiscal 2007.
In
accordance with the terms of our Chief Executive Officer’s employment agreement,
his annual performance bonus target must be at least 150% of his base salary. In
fiscal 2007, we set our Chief Executive Officer’s performance bonus target at
150% of his base salary. In accordance with the terms of our President’s
employment agreement, his annual performance bonus target must be no less than
65% of his base salary. Mr. Pacifico entered into this employment agreement in
August 2001, prior to being promoted to President in June 2004. In recognition
of an increase in the scope of his responsibilities resulting from his promotion
to President, and taking into consideration comparative compensation data, the
Compensation Committee set Mr. Pacifico’s fiscal 2007 performance bonus target
at 100% of his base salary. In accordance with the terms of our remaining named
executive officers’ employment agreements, their annual performance bonus target
must be no less than 65% of their base salaries. Our remaining named executive
officers entered into their employment agreements in August 2001, prior to each
officer’s promotion and an increase in the scope of the responsibilities of
their respective positions. In recognition of this, and taking into
consideration comparative compensation data, the Compensation Committee sets
each of our remaining named executive officer’s performance bonus targets at
87.5% of their base salaries.
Internal
Revenue Code Section 162(m)
Section
162(m) of the Internal Revenue Code of 1986, as amended, imposes a $1 million
limit on the amount that a public company may deduct for compensation paid to a
company’s principal executive officer and the company’s three most highly
compensated executive officers other than its principal financial officer. This
limitation generally does not apply to performance-based compensation that is
awarded under a plan that is approved by the stockholders of a company and that
also meets certain other technical requirements. Our compensation program for
our named executive officers generally operates within the deductibility
requirements under Section 162(m). However, the Compensation Committee
realizes that exceptions may occur.
Equity
Incentives
Our
Amended and Restated 2003 Equity Incentive Plan (“Equity Incentive Plan”) allows
for various types of equity awards, including stock options, restricted stock,
stock appreciation rights, and deferred stock. Awards under our Equity Incentive
Plan are granted to recruit, motivate, and retain employees and are granted in
connection with promotions or increases in responsibility. These awards have
been limited to time and performance-based stock options and time and
performance-based restricted stock, although our Compensation Committee could
use other forms of equity awards in the future.
All
awards under our Equity Incentive Plan must be approved by our Compensation
Committee. Our Compensation Committee determines the type, timing, and amount of
equity awards granted to each of our named executive officers after considering
their previous equity awards, base salary, and target annual performance bonus
in light of the Company’s compensation philosophy. Our Compensation Committee
also considers the comparative compensation data of our peer group and the Hay
Group’s Retail Survey, and our desire to retain and motivate our named executive
officers and to align their goals with the long-term goals of our
stockholders.
Our
Compensation Committee’s practice is to approve grants of stock options and
restricted stock at regularly scheduled meetings. Our Compensation Committee may
also make equity grants at special meetings or by unanimous written consent. Our
Compensation Committee sets the exercise prices of equity awards at the closing
price of our common stock on the NYSE on the date of grant.
14
In
considering the value of equity awards, we calculate the value of equity awards
by using the Black-Scholes valuation method. In addition, our Compensation
Committee regularly reviews the equity ownership of our executives compared to
the Company’s minimum ownership guidelines. These minimum ownership guidelines
require our Chief Executive Officer and President to own at least ten times
their base salary in Company stock (or the intrinsic value of options to
purchase Company stock that were granted prior to the Company’s 2001
acquisition). The minimum ownership guidelines require our remaining named
executive officers to each own five times their base salary in Company stock.
Each of our named executive officers is in compliance with their ownership
guidelines.
In May
2005, our Compensation Committee granted our Chief Executive Officer 400,000
performance-based stock options. These options vest in varying percentages in
February 2009 based upon Mr. Rowan’s continued employment with the Company, the
Company’s achievement of specified levels of fiscal 2008 adjusted net income
ranging from $75 million to $100 million, and an individual performance
criterion. In fiscal 2007, we made assumptions that these performance
criteria will be partially met and that 40% of these shares will vest. Mr. Rowan
has not received any additional equity awards since 2005, as that grant was a
multi-year grant.
In March
2004, our Compensation Committee granted our President 200,000 time-based stock
options that vest in five equal, annual installments based on Mr. Pacifico’s
continued employment with the Company. In November 2005, we granted our
President 200,000 performance-based stock options. These options vest in
February 2010 based upon Mr. Pacifico’s continued employment with the Company,
the Company’s achievement of fiscal 2009 adjusted net income of at least $116
million, and an individual performance criterion. In fiscal 2007,
we made assumptions that these performance criteria will not be met
and that these shares will not vest. Mr. Pacifico has not received any
additional equity awards since 2005, as that grant was a multi-year
grant.
In March
2004, our Compensation Committee granted our Chief Financial Officer 200,000
time-based stock options that vest in five equal, annual installments based on
Mr. Casey’s continued employment with the Company. In each of February 2006 and
February 2007, our Compensation Committee granted our Chief Financial Officer
12,000 stock options and 12,000 shares of restricted stock, each of which vest
in four equal, annual installments based on Mr. Casey’s continued employment
with the Company.
In May
2005, our Compensation Committee granted our Chief Operations Officer and Chief
Sourcing Officer each 60,000 stock options that vest in four equal, annual
installments based on each’s continued employment with the Company. In May 2005,
our Compensation Committee also granted our Chief Operations Officer and Chief
Sourcing Officer each 40,000 shares of restricted stock that cliff vest in May
2009 based on each’s continued employment with the Company. Neither Mr. Brown
nor Mr. Whetzel has received any equity awards since 2005, as these grants were
multi-year grants.
Perquisites
and Other Benefits
The
Company provides perquisites and other benefits to our named executive officers.
In fiscal 2007, the Compensation Committee established a perquisite allowance
from which each named executive officer was reimbursed for certain perquisites,
including automobile allowances, financial and tax planning, health club dues,
and related tax gross-up payments. Amounts from the perquisite allowance that
remain unused at the end of the fiscal year are forfeited.
The
fiscal 2007 perquisite allowances for our named executive officers were: $60,000
for our Chief Executive Officer, $45,000 for our President, and $30,000 for each
of our remaining named executive officers. In addition to the perquisite
allowances, our Chief Executive Officer, President, and Chief Operations Officer
are each provided a country club membership. Additional information on named
executive officer perquisites can be found in the footnotes to the Fiscal 2007
Summary Compensation Table in this proxy statement.
Pursuant
to the Company’s 401(k) plan, the Company provides its executives the same level
of matching contributions available to all eligible employees, which is equal to
100% of each named executive officer’s first 3% of pre-tax contributions and 50%
of each executive officer’s next 2% of pre-tax contributions each year, subject
to Internal Revenue Service limitations. In fiscal 2007, each of our named
executive officers received $9,000 in matching contributions.
The
Company also made premium payments on behalf of our named executive officers,
other than our Chief Executive Officer, on their personally owned insurance
policies. In fiscal 2007, including the associated tax gross-ups, the Company
made payments of $192,876 on behalf of our President, $59,079 on behalf of our
Chief Operations Officer, $69,505 on behalf of our Chief Financial Officer, and
$99,044 on behalf of our Chief Sourcing Officer.
The
Company also provides our named executive officers with an excess supplementary
health insurance policy that reimburses our executives for certain qualified
health expenses not covered under the Company’s ERISA medical plan.
15
Retirement
Benefits
As part
of Mr. Rowan’s employment agreement, the Company provides him with a
supplemental executive retirement defined benefit according to a formula based
on his final average annual salary during the highest 36 consecutive months of
his last 60 months of employment, offset by other external retirement benefits
and Social Security benefits to which he is entitled. This benefit is subject to
an overall annual maximum payment of $385,000. Based on the estimated value of
his other retirement and Social Security benefits, Mr. Rowan’s annual payment is
projected to be $330,520 upon retirement. The plan is fully funded through two
insurance policies, and the Company was not required to make any premium
payments in fiscal 2007. No additional premiums are expected to be required in
the future to provide Mr. Rowan with this benefit as this plan is fully
funded.
Pursuant
to his employment agreement, the Company also provides Mr. Rowan with life
insurance equal to 250% of his annual base salary. This life insurance benefit
is provided through two split-dollar life insurance policies. The premium and
gross-up payment for fiscal 2007 was $48,106, which was included in Mr. Rowan’s
compensation. Upon Mr. Rowan’s retirement, the split-dollar arrangement will be
terminated. A portion of the cash value of the policies will be used to
reimburse the Company for premium payments made prior to fiscal 2003. A portion
of this reimbursement will be used to provide Mr. Rowan with a gross-up payment
for taxes that Mr. Rowan will incur upon termination of the split-dollar
arrangement.
Potential
Payments Upon a Termination or Change in Control
Termination
In the
event that any of our named executive officers is terminated by the Company for
“cause,” retires, becomes disabled, or dies, the executive or his estate will be
provided his base salary and fringe, medical, and dental benefits through the
termination of his employment. If any of our named executive officers is
terminated “without cause,” or if any of our named executive officers terminates
his employment for “good reason,” the named executive officer shall receive his
base salary and medical and dental benefits for 24 months (36 months in the case
of our Chief Executive Officer) following the date of his termination, provided
the named executive officer complies with confidentiality, intellectual property
assignment, non-competition, and non-solicitation obligations, which generally
last for a period of one to two years. The named executive officers have the
option of receiving these payments in one lump sum equal to the net present
value of the total payments.
The named
executive officers shall also receive the annual performance bonus that he would
have earned as if he had been employed at the end of the year in which his
employment was terminated. The determination of whether an annual performance
bonus is payable to the named executive officer may take into account whether
the Company achieved its performance targets, but may not take into account
whether personal performance targets for the named executive officer were
achieved. The vesting of equity incentives for our named executive officers is
not required to be accelerated in the event of a termination of
employment.
In
determining whether a termination occurred with or without “cause,” “cause” is
deemed to exist when the named executive officer has: been convicted of a felony
(or the entering of a plea of guilty or no contest to a felony); committed an
act of fraud involving an act of dishonesty for personal gain which is
materially injurious to the Company; willfully breached his obligations of
confidentiality, intellectual property assignment, non-competition, or
non-solicitation against the Company; willfully engaged in gross misconduct
which is materially injurious to the Company; or, after a cure period, willfully
refused to perform his duties.
In
determining whether a named executive officer has “good reason” to terminate his
employment, “good reason” is generally deemed to exist when the Company has:
materially reduced a named executive officer’s duties, responsibilities, or
status; assigned to the executive a material amount of additional duties that
are significantly inconsistent with his previous duties; required the executive
to relocate or imposed a material amount of increased travel obligations; or
materially breached his employment agreement.
16
Based
upon a hypothetical termination “without cause” or for “good reason” as of
December 29, 2007, the severance and other benefits each named executive officer
would have been entitled to are as follows:
|
Chief
Executive
Officer
|
President
|
Executive
Vice
President
|
||||||||||
|
Base
Salary
|
$ | 2,436,000 | $ | 1,200,000 | $ | 750,000 | ||||||
|
Performance
Bonus
|
-- | -- | -- | |||||||||
|
Health
and Other
Benefits
|
47,895 | 31,930 | 31,930 | |||||||||
|
Total
|
$ | 2,483,895 | $ | 1,231,930 | $ | 781,930 | ||||||
In
addition, our named executive officers are entitled to receive any benefits that
they would have been entitled to under our 401(k) plan and supplemental
retirement plans. These severance benefits are provided under the terms of each
of our executive’s employment agreements.
Change
in Control
In the
event of a change in control of the Company, all unvested stock options shall
vest. The closing price on the NYSE of the Company’s common stock on the last
trading day of fiscal 2007 was $19.90 per share. Based upon a hypothetical
change in control of the Company on December 29, 2007, the intrinsic value of
accelerated option vesting for our named executive officers would have been as
follows:
|
Chief
Executive
Officer
|
Chief
Financial
Officer
|
President
|
Chief
Sourcing
Officer
|
Chief
Operations
Officer
|
||||||||||||||||
|
Option
Value
|
$ | -- | $ | 407,600 | $ | 407,600 | $ | -- | $ | -- | ||||||||||
In the
event of a change in control of the Company, the Compensation Committee also has
the ability to remove the vesting restrictions on all unvested shares of
restricted stock. Based upon a hypothetical change in control of the Company on
December 29, 2007, the intrinsic value of accelerated option vesting and the
value of accelerated vesting of restricted shares for our named executive
officers would have been as follows:
|
Chief
Executive
Officer
|
Chief
Financial
Officer
|
President
|
Chief
Sourcing
Officer
|
Chief
Operations
Officer
|
||||||||||||||||
|
Option
and Restricted Stock
Value
|
$ | -- | $ | 825,500 | $ | 407,600 | $ | 796,000 | $ | 796,000 | ||||||||||
17
The
Compensation Committee of the Board has reviewed and discussed with Company
management the Compensation Discussion and Analysis included in this proxy
statement. Based on such review and discussions, the Compensation Committee has
recommended to the Board that the Compensation Discussion and Analysis be
included in this proxy statement for filing with the SEC.
Submitted by the Compensation
Committee
Mr. Paul
Fulton, Chairman
Mr. A. Bruce
Cleverly
Ms. Elizabeth
A. Smith
Mr. John
R. Welch
18
FISCAL 2007 SUMMARY COMPENSATION TABLE
The table
below provides information concerning the compensation of our named executive
officers.
In the
“Salary” column, we disclose the base salary paid to each of our named executive
officers during fiscal 2007 and 2006.
In the
“Bonus” column, we disclose the cash bonuses earned during fiscal 2007 and 2006,
other than amounts earned pursuant to the Company’s Incentive Compensation
Plan.
In the
“Stock Awards” and “Option Awards” columns, we disclose the fiscal 2007 and 2006
compensation expense the Company recorded in accordance with SFAS 123R relating
to awards of stock or options, without a reduction for assumed forfeitures. For
restricted stock, the SFAS 123R fair value is calculated using the closing
price on the NYSE of our stock on the date of grant and the related expense is
recorded ratably over the vesting period. For time-based and performance-based
stock options, the SFAS 123R fair value is calculated based on assumptions
summarized in Note 6 to our audited consolidated financial statements,
which are included in our fiscal 2007 Annual Report on Form 10-K. For
time-based stock options, we recognize the related expense ratably over the
vesting period. For performance-based stock options and restricted stock awards
that cliff vest, we have assumed the performance criteria will be met and
restricted stock awards will cliff vest, and in accordance with SFAS 123R, we
record the related expense ratably over the vesting period.
In the
column “Non-Equity Incentive Plan Compensation,” we disclose the dollar value of
all compensation earned in fiscal 2007 and 2006 pursuant to the Company’s
Incentive Compensation Plan.
In the
column “Nonqualified Deferred Compensation Earnings,” we disclose the dollar
value of any earnings from an aggregate change in the actuarial present value of
the named executive officers accumulated benefit under all defined benefit and
pension plans.
In the
column “All Other Compensation,” we disclose the dollar value of all other
compensation that could not properly be reported in other columns of the Fiscal
2007 Summary Compensation Table, including perquisites, amounts reimbursed for
the payment of taxes, and insurance premiums paid by the Company for the benefit
of our named executive officers.
|
Name
and Principal Position
|
Fiscal
Year
|
Salary
($)
|
Bonus
($)
|
Stock
Awards
($)
(b)
|
Option
Awards
($)
(c)
|
Non-Equity
Incentive
Plan
Compensation
($)
|
Nonqualified
Deferred
Compensation
Earnings
($)
(d)
|
All
Other
Compensation
($)
(e)
|
Total
($)
|
||||||||||||||||||||||||
|
Frederick
J. Rowan,
II
|
2007
|
$ | 812,000 | $ | -- | $ | -- | $ | 326,666 | $ | -- | $ | 0 | $ | 150,432 | $ | 1,289,098 | ||||||||||||||||
|
Chairman
of the Board and
|
2006
|
$ | 812,000 | $ | 1,000,000 | (a) | $ | -- | $ | 849,172 | $ | 1,218,000 | $ | -- | $ | 143,603 | $ | 4,022,775 | |||||||||||||||
|
Chief
Executive Officer
|
|||||||||||||||||||||||||||||||||
|
Michael
D.
Casey
|
2007
|
$ | 375,000 | $ | -- | $ | 160,369 | $ | 334,134 | $ | -- | $ | -- | $ | 124,459 | $ | 993,962 | ||||||||||||||||
|
Executive
Vice President and
|
2006
|
$ | 375,000 | $ | -- | $ | 89,689 | $ | 302,069 | $ | 328,125 | $ | -- | $ | 119,036 | $ | 1,213,919 | ||||||||||||||||
|
Chief
Financial Officer
|
|||||||||||||||||||||||||||||||||
|
Joseph
Pacifico
|
2007
|
$ | 600,000 | $ | -- | $ | -- | $ | 261,446 | $ | -- | $ | -- | $ | 264,148 | $ | 1,125,594 | ||||||||||||||||
|
President
|
2006
|
$ | 600,000 | $ | -- | $ | -- | $ | 880,962 | $ | 600,000 | $ | -- | $ | 284,210 | $ | 2,365,172 | ||||||||||||||||
|
Charles
E. Whetzel,
Jr.
|
2007
|
$ | 375,000 | $ | -- | $ | 219,297 | $ | 130,195 | $ | -- | $ | -- | $ | 159,390 | $ | 883,882 | ||||||||||||||||
|
Executive
Vice President and
|
2006
|
$ | 375,000 | $ | -- | $ | 219,297 | $ | 130,193 | $ | 328,125 | $ | -- | $ | 153,105 | $ | 1,205,720 | ||||||||||||||||
|
Chief
Sourcing Officer
|
|||||||||||||||||||||||||||||||||
|
David
A.
Brown
|
2007
|
$ | 375,000 | $ | -- | $ | 219,297 | $ | 130,195 | $ | -- | $ | -- | $ | 120,766 | $ | 845,258 | ||||||||||||||||
|
Executive
Vice President and
|
2006
|
$ | 375,000 | $ | -- | $ | 219,297 | $ | 130,193 | $ | 328,125 | $ | -- | $ | 110,956 | $ | 1,163,571 | ||||||||||||||||
|
Chief
Operations Officer
|
|||||||||||||||||||||||||||||||||
19
|
|
(a)
Bonus award earned in fiscal 2006 based on the Company’s achievement of
performance criteria related to the integration of OshKosh. This award was
paid in fiscal 2007.
|
|
|
(b)
The amounts disclosed in this column for Mr. Casey, Mr. Whetzel,
and Mr. Brown reflect the expense we recorded in accordance with SFAS
123R for the following grants, without a reduction for assumed
forfeitures:
|
|
|
(i)
Mr. Casey was granted 12,000 shares of restricted stock on
February 16, 2006 with a grant date fair value of $34.32 per share,
the closing price of the Company’s common stock on the date of grant. Mr.
Casey was also granted 12,000 shares of restricted stock on February 15,
2007 with a grant date fair value of $22.19 per share, the closing price
of the Company’s common stock on the date of grant. Both grants vest
in four equal, annual installments following the date of grant. In
accordance with SFAS 123R, we record expense for these grants ratably
over the four-year vesting period.
|
|
|
(ii)
Mr. Whetzel and Mr. Brown were each granted 40,000 shares of
restricted stock on May 13, 2005 with a grant date fair value of
$22.01 per share, the closing price of the Company’s common stock on the
date of grant. These shares cliff vest on May 13, 2009. We have
assumed these shares will vest on May 13, 2009, and in accordance
with SFAS 123R, we record expense for these grants ratably over the
four-year vesting period.
|
|
|
(c)
The amounts disclosed in this column represent the expense we recorded in
accordance with SFAS 123R for the following grants, without a reduction
for assumed forfeitures.
|
|
|
(i)
Mr. Rowan was granted 400,000 performance-based stock options on
May 13, 2005 with a Black-Scholes fair value of $7.76 per share and
an exercise price of $22.01 per share, the closing price of the Company’s
common stock on the date of grant. Subject to the achievement of
individual and Company performance targets, these stock options vest in
February 2009. In fiscal 2007, we made assumptions that these
performance criteria will be partially met and that 40% of these shares
will vest. Prior to fiscal 2007, we assumed that 100% of these shares
would vest. In accordance with SFAS 123R, we record performance option
expense based upon the probability of performance target achievement, and
we adjust any previously recorded expense if assumptions regarding the
achievement of performance targets
change.
|
|
|
(ii)
Mr. Casey was granted 200,000 time-based stock options on
March 22, 2004 with a Black-Scholes fair value of $6.56 per share and
an exercise price of $14.81 per share, the closing price of the Company’s
common stock on the date of grant. These shares vest in five equal, annual
installments following the date of grant. In accordance with SFAS 123R, we
record expense for this grant ratably over the five-year vesting period.
Mr. Casey was also granted 12,000 time-based stock options on
February 16, 2006 with a Black-Scholes fair value of $15.59 per share
and an exercise price of $34.32 per share, the closing price of the
Company’s common stock on the date of grant, and was granted 12,000
time-based stock options on February 15, 2007 with a Black-Scholes fair
value of $10.01 per share and an exercise price of $22.19 per share, the
closing price of the Company’s common stock on the date of grant. The
stock options granted to Mr. Casey in fiscal 2006 and 2007 vest in four
equal, annual installments following the date of grant. In accordance with
SFAS 123R, we record expense for these grants ratably over the four-year
vesting period.
|
|
|
(iii)
Mr. Pacifico was granted 200,000 time-based stock options on
March 22, 2004 with a Black-Scholes fair value of $6.56 per share and
an exercise price of $14.81 per share, the closing price of the Company’s
common stock on the date of grant. These shares vest in five equal, annual
installments following the date of grant. In accordance with SFAS 123R, we
record expense for this grant ratably over the five-year vesting period.
Mr. Pacifico was also granted 200,000 performance-based stock options
on November 10, 2005 with a Black-Scholes fair value of $12.68 and an
exercise price of $31.18 per share, the closing price of the Company’s
common stock on the date of grant. Subject to the achievement of
individual and Company performance targets, these stock options vest in
February 2010. In fiscal 2007, we made assumptions
that these performance criteria will not be met and that these shares
will not vest. Prior to fiscal 2007, we assumed that 100% of these shares
would vest. In accordance with SFAS 123R, we record performance option
expense based upon the probability of performance target achievement, and
we adjust any previously recorded expense if assumptions regarding the
achievement of performance targets
change.
|
|
|
(iv)
Mr. Whetzel and Mr. Brown were each granted 60,000 stock options
on May 13, 2005 with a Black-Scholes fair value of $8.71 per share
and an exercise price of $22.01 per share, the closing price of the
Company’s common stock on the date of grant. These stock options vest in
four equal, annual installments following the date of grant. In accordance
with SFAS 123R, we record expense for these grants ratably over the
four-year vesting period.
|
|
|
(d)
There was no increase in the present value of Mr. Rowan’s
supplemental executive retirement plan benefit from the end of fiscal 2006
to the end of fiscal 2007.
|
|
|
(e)
The amounts shown as “All Other Compensation” consist of the
following:
|
|
Name
|
Insurance
Premium
Payments
(i)
|
Excess
Personal
Liability
Insurance
Premiums
|
Medical
Reimbursements
(ii)
|
401(k)
Company
Match
|
Perquisites
(iii)
|
Tax
Gross-Ups
(iv)
|
Total
|
|||||||||||||||||||||
|
Frederick
J. Rowan, II
|
$ | 27,685 | $ | 3,529 | $ | 7,269 | $ | 9,000 | $ | 61,202 | $ | 41,747 | $ | 150,432 | ||||||||||||||
|
Michael
D. Casey
|
$ | 40,000 | $ | 3,529 | $ | 9,081 | $ | 9,000 | $ | 29,107 | $ | 33,742 | $ | 124,459 | ||||||||||||||
|
Joseph
Pacifico
|
$ | 111,000 | $ | 3,529 | $ | 4,783 | $ | 9,000 | $ | 45,198 | $ | 90,638 | $ | 264,148 | ||||||||||||||
|
Charles
E. Whetzel, Jr.
|
$ | 57,000 | $ | 3,529 | $ | 13,170 | $ | 9,000 | $ | 29,012 | $ | 47,679 | $ | 159,390 | ||||||||||||||
|
David
A. Brown
|
$ | 34,000 | $ | 3,529 | $ | 12,438 | $ | 9,000 | $ | 28,559 | $ | 33,240 | $ | 120,766 | ||||||||||||||
|
|
(i)
Amount for Mr. Rowan relates to split-dollar life insurance premiums
paid by the Company, and payments to Messrs. Casey, Pacifico,
Whetzel, and Brown relate to contributions made to individual whole-life
insurance policies.
|
|
|
(ii)
Amounts relate to medical reimbursements and related costs pursuant to a
supplemental executive medical reimbursement
plan.
|
|
|
(iii)
Mr. Rowan’s perquisites are comprised of $39,053 for financial
planning, $7,643 for fundraising activities, $4,971 for country club dues,
$4,542 for automobile-related costs, $4,243 for family travel, and $750
for a service award; Mr. Casey’s perquisites are comprised of $27,507
for automobile-related costs and $1,600 for a health club membership;
Mr. Pacifico’s perquisites are comprised of $26,970 for
automobile-related costs, $4,971 for country club dues, $4,590 for a
health club membership, $3,998 for home office costs, $3,919 for financial
planning, and $750 for a service award; Mr. Whetzel’s perquisites are
comprised of $22,112 for automobile-related costs, $3,750 for financial
planning, $2,400 for a health club membership, and $750 for a service
award; and Mr. Brown’s perquisites are comprised of $23,786 for
automobile-related costs, $2,073 for country club dues, $1,950 for
financial planning, and $750 for a service
award.
|
|
|
(iv)
Mr. Rowan’s gross-ups are comprised of $20,421 for insurance premium
payments, $11,745 for financial planning, $3,667 for country club dues,
$3,344 for excess personal liability insurance, $1,950 for fundraising
activities, and $620 for automobile-related costs; Mr. Casey’s
gross-ups are comprised of $29,505 for insurance premium payments, $3,344
for excess personal liability insurance, $870 for automobile-related
costs, and $23 for a health club membership; Mr. Pacifico’s gross-ups
are comprised of $81,876 for insurance premium payments, $3,667 for county
club dues, $3,344 for excess personal liability insurance, and $1,751 for
automobile-related costs; Mr. Whetzel’s gross-ups are comprised of
$42,044 for insurance premium payments, $3,344 for excess personal
liability insurance, and $2,291 for automobile-related costs; and
Mr. Brown’s gross-ups are comprised of $25,079 for insurance premium
payments, $3,344 for excess personal liability insurance, $3,379 for
automobile-related costs, and $1,438 for financial
planning.
|
20
FISCAL 2007 GRANTS OF PLAN-BASED AWARDS
The
following table provides information concerning each grant of plan-based awards
made to a named executive officer in fiscal 2007. This includes incentive
compensation awards granted under our Incentive Compensation Plan and stock
option and restricted stock awards granted under our Equity Incentive Plan. The
threshold, target, and maximum columns reflect the range of estimated payouts
under these plans for fiscal 2007. The exercise price disclosed is equal to the
closing market price of our common stock on the date of grant. The last column
reports the aggregate SFAS 123R value of all awards made in fiscal 2007 as if
they were fully vested on the grant date.
|
Estimated
Future Payouts Under
Non-Equity
Incentive Plan Awards
|
Estimated
Future Payouts Under
Equity
Incentive Plan Awards
|
||||||||||||||||||||||||||||||||||||
|
Name
|
Award
Type
|
Equity
Award
Grant
Date
|
Threshold
($)
|
Target
($)
(a)
|
Maximum
($)
|
Threshold
(#)
|
Target
(#)
|
Maximum
(#)
|
Exercise
or
Base
Price
of
Option
Awards
($/Sh)
|
Grant
Date
Fair
Value
of
Stock
and
Option
Awards
|
|||||||||||||||||||||||||||
|
Frederick
J. Rowan, II
|
Cash
Bonus
|
-- | $ | -- | $ | 1,218,000 | $ | 2,436,000 | -- | -- | -- | $ | -- | $ | -- | ||||||||||||||||||||||
|
Shares
|
-- | $ | -- | $ | -- | $ | -- | -- | -- | -- | $ | -- | $ | -- | |||||||||||||||||||||||
|
Options
|
-- | $ | -- | $ | -- | $ | -- | -- | -- | -- | $ | -- | $ | -- | |||||||||||||||||||||||
|
Michael
D. Casey
|
Cash
Bonus
|
-- | $ | -- | $ | 328,125 | $ | 656,250 | -- | -- | -- | $ | -- | $ | -- | ||||||||||||||||||||||
|
Shares
(b)
|
2/15/2007
|
$ | -- | $ | -- | $ | -- | -- | 12,000 | 12,000 | $ | -- | $ | 266,280 | |||||||||||||||||||||||
|
Options
(c)
|
2/15/2007
|
$ | -- | $ | -- | $ | -- | -- | 12,000 | 12,000 | $ | 22.19 | $ | 120,138 | |||||||||||||||||||||||
|
Joseph
Pacifico
|
Cash
Bonus
|
-- | $ | -- | $ | 600,000 | $ | 1,200,000 | -- | -- | -- | $ | -- | $ | -- | ||||||||||||||||||||||
|
Shares
|
-- | $ | -- | $ | -- | $ | -- | -- | -- | -- | $ | -- | $ | -- | |||||||||||||||||||||||
|
Options
|
-- | $ | -- | $ | -- | $ | -- | -- | -- | -- | $ | -- | $ | -- | |||||||||||||||||||||||
|
Charles
E. Whetzel, Jr.
|
Cash
Bonus
|
-- | $ | -- | $ | 328,125 | $ | 656,250 | -- | -- | -- | $ | -- | $ | -- | ||||||||||||||||||||||
|
Shares
|
-- | $ | -- | $ | -- | $ | -- | -- | -- | -- | $ | -- | $ | -- | |||||||||||||||||||||||
|
Options
|
-- | $ | -- | $ | -- | $ | -- | -- | -- | -- | $ | -- | $ | -- | |||||||||||||||||||||||
|
David
A. Brown
|
Cash
Bonus
|
-- | $ | -- | $ | 328,125 | $ | 656,250 | -- | -- | -- | $ | -- | $ | -- | ||||||||||||||||||||||
|
Shares
|
-- | $ | -- | $ | -- | $ | -- | -- | -- | -- | $ | -- | $ | -- | |||||||||||||||||||||||
|
Options
|
-- | $ | -- | $ | -- | $ | -- | -- | -- | -- | $ | -- | $ | -- | |||||||||||||||||||||||
|
|
(a)
No executive officer was paid an annual performance bonus in fiscal
2007.
|
|
|
(b)
Shares of restricted stock granted to Mr. Casey on February 15,
2007 pursuant to the Company’s Equity Incentive Plan. These restricted
shares vest ratably in four equal, annual installments following the date
of grant. In accordance with SFAS 123R, we record expense related to this
grant ratably over the vesting
period.
|
|
|
(c)
Time-based stock options granted to Mr. Casey on February 15,
2007 pursuant to the Company’s Equity Incentive Plan. These stock options
vest ratably in four equal, annual installments following the date of
grant. In accordance with SFAS 123R, we record expense related to this
grant ratably over the vesting
period.
|
OPTION EXERCISES AND STOCK VESTED IN FISCAL 2007
The
following table provides information concerning our named executive officers’
exercises of stock options and vesting of restricted stock during fiscal 2007.
The table reports, on an aggregate basis, the number of securities acquired upon
exercise of stock options, the dollar value realized upon exercise of stock
options, the number of shares of restricted stock that have vested, and the
dollar value realized upon the vesting of restricted stock.
|
Option
Awards
|
Stock
Awards
|
|||||||||||||||
|
Name
|
Number
of
Shares
Acquired
on
Exercise
(#)
|
Value
Realized
on
Exercise
($)
(a)
|
Number
of
Shares
Acquired
on
Vesting
(#)
|
Value
Realized
on
Vesting
($)
|
||||||||||||
|
Frederick
J. Rowan, II
|
410,000 | $ | 10,568,667 | -- | $ | -- | ||||||||||
|
Michael
D. Casey
|
146,200 | $ | 3,449,791 | 3,000 | $ | 66,570 | (b) | |||||||||
|
(a)
|
Aggregate
dollar amount was calculated by multiplying the number of shares acquired
by the difference between the market price of the underlying securities at
the time of exercise and the exercise price of the stock
options.
|
|
(b)
|
Aggregate
dollar amount was calculated by multiplying the number of shares acquired
on vesting by the market price of the Company’s stock on the date of
vesting.
|
21
OUTSTANDING EQUITY AWARDS AT FISCAL 2007 YEAR-END
The
following table provides information regarding unexercised stock options, stock
that has not yet vested, and equity incentive plan awards for each named
executive officer outstanding as of the end of fiscal 2007. Each outstanding
award is represented by a separate row that indicates the number of securities
underlying the award.
|
Option
Awards
|
Stock
Awards
|
|||||||||||||||||||||||||||
|
Name
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
(Exercisable)
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
(a)
(Unexercisable)
|
Equity
Incentive
Plan
Awards:
Number
of
Securities
Underlying
Unexercised
Unearned
Options
(#)
(b)
|
Option
Exercise
Price
($)
|
Option
Expiration
Date
|
Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units
or
Other
Rights
That
Have
Not
Vested
(#)
(c)
|
Equity
Incentive
Plan
Awards:
Market
or
Payout
Value of
Unearned
Shares,
Units
or Other
Rights
That Have
Not
Vested
($)
(d)
|
|||||||||||||||||||||
|
Frederick
J. Rowan, II
|
548,356 | -- | -- | $ | 0.75 |
8/15/2011
|
-- | $ | -- | |||||||||||||||||||
| 1,060,710 | -- | -- | $ | 3.08 |
8/15/2011
|
-- | $ | -- | ||||||||||||||||||||
| -- | -- | 400,000 | $ | 22.01 |
5/13/2015
|
-- | $ | -- | ||||||||||||||||||||
|
Michael
D. Casey
|
243,488 | -- | -- | $ | 3.08 |
8/15/2011
|
-- | $ | -- | |||||||||||||||||||
| 120,000 | 80,000 | -- | $ | 14.81 |
3/22/2014
|
-- | $ | -- | ||||||||||||||||||||
| 3,000 | 9,000 | -- | $ | 34.32 |
2/16/2016
|
-- | $ | -- | ||||||||||||||||||||
| -- | 12,000 | -- | $ | 22.19 |
2/15/2017
|
-- | $ | -- | ||||||||||||||||||||
| -- | -- | -- | $ | -- |
--
|
21,000 | $ | 417,900 | ||||||||||||||||||||
|
Joseph
Pacifico
|
389,688 | -- | -- | $ | 3.08 |
8/15/2011
|
-- | $ | -- | |||||||||||||||||||
| 120,000 | 80,000 | -- | $ | 14.81 |
3/22/2014
|
-- | $ | -- | ||||||||||||||||||||
| -- | -- | 200,000 | $ | 31.18 |
11/10/2015
|
-- | $ | -- | ||||||||||||||||||||
|
Charles
E. Whetzel, Jr.
|
389,688 | -- | -- | $ | 3.08 |
8/15/2011
|
-- | $ | -- | |||||||||||||||||||
| 30,000 | 30,000 | -- | $ | 22.01 |
5/13/2015
|
-- | $ | -- | ||||||||||||||||||||
| -- | -- | -- | $ | -- | -- | 40,000 | $ | 796,000 | ||||||||||||||||||||
|
David
A. Brown
|
389,688 | -- | -- | $ | 3.08 |
8/15/2011
|
-- | $ | -- | |||||||||||||||||||
| 30,000 | 30,000 | -- | $ | 22.01 |
5/13/2015
|
-- | $ | -- | ||||||||||||||||||||
| -- | -- | -- | $ | -- | -- | 40,000 | $ | 796,000 | ||||||||||||||||||||
|
|
(a)
Unexercised options relate to the following
awards:
|
|
|
(i)
Mr. Casey was granted 200,000 time-based stock options on
March 22, 2004 with a Black-Scholes fair value of $6.56 per share and
an exercise price of $14.81 per share, the closing price of the Company’s
common stock on the date of grant. These stock options vest in five equal,
annual installments following the date of grant. Mr. Casey was also
granted 12,000 time-based stock options on February 16, 2006 with a
Black-Scholes fair value of $15.59 per share and an exercise price of
$34.32 per share, the closing price of the Company’s common stock on the
date of grant. In addition, Mr. Casey was granted 12,000 time-based stock
options on February 15, 2007 with a Black-Scholes fair value of $10.01 per
share and an exercise price of $22.19 per share, the closing price of the
Company’s common stock on the date of grant. The stock options granted to
Mr. Casey in fiscal 2006 and 2007 vest in four equal, annual installments
following the date of grant. In accordance with SFAS 123R, we record
option expense ratably over the applicable vesting
period.
|
|
|
(ii)
Mr. Pacifico was granted 200,000 time-based stock options on
March 22, 2004 with a Black-Scholes fair value of $6.56 per share and
an exercise price of $14.81 per share, the closing price of the Company’s
common stock on the date of grant. These stock options vest in five equal,
annual installments following the date of grant. In accordance with SFAS
123R, we record the related expense ratably over the five-year vesting
period.
|
|
|
(iii)
Mr. Whetzel and Mr. Brown were each granted 60,000 time-based
stock options on May 13, 2005 with a Black-Scholes fair value of
$8.71 per share and an exercise price of $22.01 per share, the closing
price of the Company’s common stock on the date of grant. These stock
options vest in four equal, annual installments following the date of
grant. In accordance with SFAS 123R, we record the related expense ratably
over the four-year vesting period.
|
22
|
|
(b)
Unexercised, unearned stock options relate to the following
awards:
|
|
|
(i)
Mr. Rowan was granted 400,000 performance-based stock options on
May 13, 2005 with a Black-Scholes fair value of $7.76 per share and
an exercise price of $22.01 per share, the closing price of the Company’s
common stock on the date of grant. Subject to the achievement of
individual and Company performance target, these stock options vest in
February 2009. In fiscal 2007, we made assumptions
that these performance criteria will be partially met and that 40% of
these shares will vest. Prior to fiscal 2007, we assumed that 100% of
these shares would vest. In accordance with SFAS 123R, we record
performance option expense based upon the probability of performance
target achievement, and we adjust any previously recorded expense if
assumptions regarding the achievement of performance targets
change.
|
|
|
(ii)
Mr. Pacifico was granted 200,000 performance-based stock options on
November 10, 2005 with a Black-Scholes fair value of $12.68 and an
exercise price of $31.18 per share, the closing price of the Company’s
common stock on the date of grant. Subject to the achievement of
individual and Company performance targets, these stock options vest in
February 2010. In fiscal 2007, we made assumptions that these
performance criteria will not be met and that these shares will not vest.
Prior to fiscal 2007, we assumed that 100% of these shares would vest. In
accordance with SFAS 123R, we record performance option expense based upon
the probability of performance target achievement, and we adjust any
previously recorded expense if assumptions regarding the achievement of
performance targets change.
|
|
|
(c)
Equity Incentive Plan awards relate to the following
grants:
|
|
|
(i)
Mr. Casey was granted 12,000 shares of restricted stock on
February 16, 2006 with a grant date fair value of $34.32 per share,
the closing price of the Company’s common stock on the date of grant. Mr.
Casey was also granted 12,000 shares of restricted stock on February 15,
2007 with a grant date fair value of $22.19, the closing price of the
Company’s common stock on the date of grant. Both grants vest in four
equal, annual installments following the date of grant. In accordance with
SFAS 123R, we record the related expense ratably over the four-year
vesting period.
|
|
|
(ii)
Mr. Whetzel and Mr. Brown were each granted 40,000 shares of
restricted stock on May 13, 2005 with a grant date fair value of
$22.01 per share, the closing price of the Company’s common stock on the
date of grant. These shares cliff vest on May 13, 2009. We have
assumed these shares will vest on May 13, 2009 and in accordance with
SFAS 123R, we record the related expense for these grants ratably over the
four-year vesting period.
|
|
|
(d)
Amount based on the closing market price per share of the Company’s common
stock on Friday, December 28, 2007 of
$19.90.
|
FISCAL 2007 PENSION BENEFITS TABLE
The
following table provides information with respect to Mr. Rowan’s SERP.
Mr. Rowan’s SERP provides him with a defined benefit according to a formula
based on his final average annual salary during the highest 36 consecutive
months of his last 60 months of employment, offset by other external retirement
benefits and Social Security benefits to which he is entitled. This benefit is
subject to an overall annual maximum payment of $385,000. Based on the estimated
value of his other retirement and Social Security benefits, Mr. Rowan’s
annual payment is projected to be $330,520 upon retirement. The plan is fully
funded through two insurance policies, and the Company was not required to make
any premium payments in fiscal 2007 to meet the plan’s benefit obligation. In
addition, no other premiums are expected to be required in the future to meet
the plan’s benefit obligation.
The
amounts below reflect the actuarial present value of Mr. Rowan’s
accumulated benefit under the plan, computed as of December 29,
2007.
|
Name
|
Plan
Name
|
Number
of Years
Credited
Service
(#)
|
Present
Value of
Accumulated
Benefit
($)
|
Payments
During
Last
Fiscal Year
($)
|
|||||||||
|
Frederick
J. Rowan, II
|
SERP
|
-- | $ | 3,131,033 | $ | -- | |||||||
23
SECURITIES OWNERSHIP OF BENEFICIAL OWNERS,
DIRECTORS,
AND EXECUTIVE OFFICERS
The
following table sets forth the number of shares of the Company’s common stock
owned by each of the following parties as of March 29, 2008, or as of such other
date as indicated: (a) each person known by the Company to own beneficially more
than five percent of the outstanding common stock; (b) the Company’s named
executive officers; (c) each Director; and (d) all Directors and named
executive officers as a group. Unless otherwise indicated below, the
holders address is The Proscenium, 1170 Peachtree Street NE, 9th Floor, Atlanta,
Georgia 30309.
|
Beneficial Ownership
|
|||||
|
Name of Beneficial Owner
|
Shares
|
Percent
|
|||
|
Wellington
Management Company, LLP (1)
|
6,158,057
|
10.8
|
%
|
||
|
The
Guardian Life Insurance Company of America (2)
|
6,061,758
|
10.6
|
%
|
||
|
Baron
Capital Group, Inc. (3)
|
5,095,311
|
8.9
|
%
|
||
|
Snow
Capital Management, L.P. (4)
|
4,795,519
|
8.4
|
%
|
||
|
Frederick
J. Rowan, II (5)
|
1,609,066
|
2.7
|
%
|
||
|
Joseph
Pacifico (6)
|
829,776
|
1.4
|
%
|
||
|
David
A. Brown (7)
|
816,272
|
1.4
|
%
|
||
|
Michael
D. Casey (8)
|
612,800
|
1.1
|
%
|
||
|
Charles
E. Whetzel, Jr. (7)
|
767,908
|
1.3
|
%
|
||
|
Bradley
M. Bloom (9)
|
205,680
|
*
|
|||
|
A.
Bruce Cleverly (10)
|
6,481
|
*
|
|||
|
Paul
Fulton (11)
|
191,524
|
*
|
|||
|
William
J. Montgoris (12)
|
6,645
|
*
|
|||
|
David
Pulver (13)
|
242,236
|
*
|
|||
|
Elizabeth
A. Smith (14)
|
15,124
|
*
|
|||
|
John
R. Welch (15)
|
45,296
|
*
|
|||
|
Thomas
E. Whiddon (16)
|
93,564
|
*
|
|||
|
All
directors and executive officers as a group (17)
|
5,442,372
|
9.0
|
%
|
||
|
|
*Indicates
less than 1% of our common stock.
|
|
|
(1)
This information is based on a Schedule 13G filed with the SEC on February
11, 2008. Wellington Management Company, LLP has shared voting power
covering 4,042,967 shares of our common stock and shared dispositive power
covering 6,158,057 shares of our common stock. The address for Wellington
Management Company, LLP is 75 State Street, Boston, Massachusetts
02109.
|
|
|
(2)
This information is based on information provided on a
Schedule 13G/A filed with the SEC on February 8, 2008. The Guardian Life
Insurance Company of America shares voting and dispositive power covering
6,061,758 shares of our common stock. The Guardian Life Insurance Company
of America is the parent company of Guardian Investor Services LLC and RS
Investment Management Co. LLC. The address for The Guardian Life
Insurance Company of America is 388 Market Street, Suite 1700, San
Francisco, California 94111. Guardian Investor Services LLC shares voting
and dispositive power covering 6,061,758 shares of our common stock. RS
Investment Management Co. LLC shares voting and dispositive power covering
6,061,758 shares of our common stock. RS Partners Fund shares voting and
dispositive power covering 3,903,440 shares of our common
stock.
|
|
|
(3)
This information is based on a Schedule 13G/A filed with the SEC on
February 14, 2008. Baron Capital Group, Inc. has shared voting
power covering 4,641,311 shares and shared dispositive power covering
5,095,311 shares of our common stock. Baron Capital Group, Inc. and
Ronald Baron are the parent of BAMCO, Baron Capital Management, and Baron
Growth Fund. The address for Baron Capital Group, Inc. is 767 Fifth
Avenue, New York, New York 10153. BAMCO, Inc. has shared voting power
covering 4,387,000 shares and shared dispositive power covering 4,829,000
shares of our common stock. Baron Capital Management, Inc. has shared
voting power covering 254,311 shares and shared dispositive power covering
266,311 shares of our common stock. Ronald Baron has shared voting power
covering 4,641,311 shares and shared dispositive power covering 5,095,311
shares of our common stock.
|
|
|
(4)
This information is based on information provided on a Schedule 13G filed
with the SEC on January 22, 2008. Snow Capital Management, L.P. is an
investment adviser and has sole voting power covering 4,757,449 shares of
our common stock and dispositive power covering 4,795,519 shares of our
common stock. The address for Snow Capital Management, L.P. is 2100
Georgetowne Drive, Suite 400, Sewickley, Pennsylvania
15143.
|
|
|
(5)
Represents 1,609,066 shares subject to exercisable stock
options.
|
|
|
(6)
Includes 549,688 shares subject to exercisable stock options, including
stock options that will become exercisable during the 60 days after
March 29, 2008.
|
24
|
|
(7)
Includes 434,688 shares subject to exercisable stock
options, including stock options that will become exercisable during the
60 days after March 29, 2008 and 40,000 restricted
shares.
|
|
|
(8) Includes
412,488 shares subject to exercisable stock options, including stock
options that will become exercisable during the 60 days after
March 29, 2008 and 15,000 restricted
shares.
|
|
|
(9)
Includes 11,676 shares held by Berkshire Partners, of which Mr. Bloom is a
member, and as to which Mr. Bloom disclaims beneficial ownership except to
the extent of his pecuniary interest therein. Also includes 44,000 shares
held by a charitable foundation as to which Mr. Bloom shares voting and
investment control with certain family members, but in which he has no
pecuniary interest. Mr. Bloom’s address is c/o Berkshire Partners,
One Boston Place, Suite 3300, Boston, Massachusetts
02108.
|
|
|
(10)
The total shown next to Mr. Cleverly’s name includes 6,481 shares of
restricted common stock.
|
|
|
(11)
Mr. Fulton’s address is c/o Bassett Furniture Industries, Inc.,
380 Knollwood Street, Suite 610, Winston-Salem, North Carolina
27103. The total shown next to Mr. Fulton’s name includes
16,000 shares subject to exercisable stock
options.
|
|
|
(12)
The total shown next to Mr. Montgoris’s name includes 4,583 shares of
restricted common stock.
|
|
|
(13)
Mr. Pulver is the sole stockholder of Cornerstone Capital, Inc.,
which is the record holder of 226,236 of the shares set forth next to
Mr. Pulver’s name above. The total shown next to Mr. Pulver’s
name includes 16,000 shares subject to exercisable stock
options.
|
|
|
(14)
Ms. Smith’s address is c/o Avon Products, Inc., 1345 Avenue of the
Americas, New York, New York 10105.
|
|
|
(15)
The total shown next to Mr. Welch’s name includes 16,000 shares
subject to exercisable stock
options.
|
|
|
(16)
The total shown next to Mr. Whiddon’s name includes 12,800 shares
subject to exercisable stock options, including stock options that will
become exercisable during the 60 days following March 29,
2008.
|
|
|
(17)
Includes 3,501,418 shares subject to exercisable
stock options, including stock options that will become exercisable during
the 60 days following March 29,
2008.
|
|
|
Section 16(a) Beneficial
Ownership Reporting Compliance
|
Section 16(a) of the Securities Exchange Act of 1934,
as amended, requires that the Company’s executive officers and directors, and
persons who beneficially own more than ten percent (10%) of the
Company’s common stock, file initial reports of ownership and changes in
ownership with the SEC and the NYSE. Based on a review of the copies of such
forms furnished to the Company, the Company believes that all forms were
filed in a timely manner during fiscal 2007.
EQUITY COMPENSATION PLAN INFORMATION
The
following table provides information about the Company’s equity compensation
plan as of the end of its last fiscal year:
|
Plan Category
|
Number of securities to be
issued upon exercise
of outstanding options,
warrants, and rights
|
Weighted-average
exercise price of
outstanding options,
warrants, and rights
|
Number of securities
remaining available for
future issuance under
the equity compensation
plans (excluding
securities reflected in
first column)
|
|||||||||
|
Equity
compensation plans approved by security holders (1)
|
5,597,559
|
$ |
9.46
|
1,725,019
|
||||||||
|
Equity
compensation plans not approved by security holders
|
—
|
—
|
—
|
|||||||||
|
Total
|
5,597,559
|
$ |
9.46
|
1,725,019
|
||||||||
|
|
(1)
Represents stock options that are outstanding or that are available
for future issuance pursuant to the Company’s Equity Incentive
Plan.
|
TRANSACTIONS WITH RELATED PERSONS, PROMOTERS, AND CERTAIN
CONTROL PERSONS
The
Company has a written policy that requires all transactions with related persons
be reviewed by our Chief Financial Officer, and all such transactions involving
more than $10,000 be reviewed with and approved by our Audit Committee. Our
Chief Financial Officer annually reviews all transactions with related persons
with our Audit Committee.
There
were no such transactions during the fiscal year ended December 29,
2007.
25
The Audit
Committee reviews the Company’s financial reporting process on behalf of the
Board. Management has the primary responsibility for establishing and
maintaining adequate internal financial controls, for preparing the financial
statements, and for the public reporting process. PwC, the Company’s independent
registered public accounting firm, is responsible for expressing opinions on the
conformity of the Company’s audited consolidated financial statements with
accounting principles generally accepted in the United States of America and on
the Company’s internal control over financial reporting.
In this
context, the Audit Committee has reviewed and discussed with management and PwC
the audited consolidated financial statements for the fiscal year ended
December 29, 2007 and PwC’s evaluation of the Company’s internal control
over financial reporting. The Audit Committee has discussed with PwC the matters
that are required to be discussed by Statement on Auditing Standards No. 61
(Communication with Audit Committees), as adopted by the Public Company
Accounting Oversight Board. PwC has provided to the Audit Committee the written
disclosures and the letter required by Independence Standards Board Standard
No. 1 (Independence Discussions with Audit Committees), as adopted by the
Public Company Accounting Oversight Board, and the Audit Committee has discussed
with PwC that firm’s independence. The Audit Committee has concluded that PwC’s
provision of audit and non-audit services to the Company and its affiliates are
compatible with PwC independence.
Based on
the considerations and discussions referred to above, the Audit Committee
recommended to our Board of Directors that the audited consolidated financial
statements for the fiscal year ended December 29, 2007 be included in our
Annual Report on Form 10-K for fiscal 2007 for filing with the SEC.
Submitted
by the Audit Committee
Mr. David
Pulver, Chairman
Mr. William
J. Montgoris
Mr. Thomas
E. Whiddon
26
RATIFICATION
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit
Committee of the Board of Directors has appointed PwC to serve as our
independent registered public accounting firm for fiscal 2008. The Board is
submitting the appointment of PwC as our independent registered public
accounting firm for stockholder ratification and recommends that stockholders
ratify this appointment at the Annual Meeting. A representative of PwC is
expected to attend the Annual Meeting and will be available to respond to
appropriate questions. For additional information regarding the Company’s
relationship with PwC, please refer to the Audit Committee Report
above.
The Audit
Committee has also adopted policies and procedures for pre-approving all
non-audit work performed by PwC. The Audit Committee has pre-approved the use of
PwC for specific types of services that fall within categories of non-audit
services, including various tax services. The Audit Committee receives regular
updates as to the fees associated with the services that are subject to
pre-approval. Services that do not fall within a pre-approved category require
specific consideration and pre-approval by the Audit Committee.
The
aggregate fees that the Company incurred for professional services rendered by
PwC for the fiscal years ended December 29, 2007 and December 30, 2006
were as follows:
|
2007
|
2006
|
|||||||
|
Audit
Fees
|
$ | 966,284 | $ | 970,876 | ||||
|
Audit-Related
Fees
|
73,649 | 69,995 | ||||||
|
Tax
Fees
|
147,000 | 44,525 | ||||||
|
Software
License Fees
|
6,250 | 15,990 | ||||||
|
Total
Fees
|
$ | 1,193,183 | $ | 1,101,386 | ||||
|
|
·
|
Audit Fees for the
fiscal years ended December 29, 2007 and December 30, 2006 were
for professional services rendered for the integrated audit of the
consolidated financial statements and internal control over financial
reporting of the Company, other auditing procedures related to the
adoption of new accounting pronouncements and review of other significant
transactions, and related out-of-pocket
expenses.
|
|
|
·
|
Audit-Related Fees for
the fiscal years ended December 29, 2007 and December 30, 2006
were for assurance services related to employee benefit plan audits and
related out-of-pocket expenses.
|
|
|
·
|
Tax Fees for the fiscal
years ended December 29, 2007 and December 30, 2006 were for
services related to tax consultation and compliance, special projects, and
related out-of-pocket expenses.
|
The
Board recommends a vote FOR the ratification of the appointment of
PricewaterhouseCoopers LLP as the Company's independent registered public
accounting firm.
|
|
Vote
Required
|
The
approval of Proposal Number Two requires the affirmative vote of the holders of
a majority of the shares of common stock present or represented at the meeting
and entitled to vote on such Proposal. Votes may be cast in favor of or against
Proposal Number Two. Stockholders may also abstain from voting on Proposal
Number Two. Votes to abstain will be counted toward a quorum, but will be
excluded entirely from the tabulation of votes, and, therefore, will have the
effect of votes “against” this Proposal. Proxies that are granted without
providing voting instructions will be voted FOR the approval of Proposal
Number Two.
As of the
date of this proxy statement, we know of no business that will be presented for
consideration at the Annual Meeting, other than the items referred to above. If
any other matter is properly brought before the Annual Meeting for action by
stockholders, proxies in the enclosed form returned to the Company will be voted
in accordance with the recommendation of the Board or, in the absence of such a
recommendation, in accordance with the judgment of the proxy
holder.
27
Invitation
to Carter's, Inc.
2008
Annual Meeting of Stockholders
Carter's,
Inc. will conduct its Annual Meeting of Stockholders on Friday, May 9, 2008, at
8:00 a.m. The meeting will be held at the Company's corporate offices at, The
Proscenium, 1170 Peachtree Street NE, Atlanta, Georgia 30309.
You are
cordially invited to join us for refreshments prior to the Annual Meeting,
beginning at 7:30 a.m. The meeting will convene promptly at 8:00
a.m.
In order
to expedite your entrance into the meeting, please present this invitation at
the registration desk. Invitations or proof of stock ownership as of the record
date of March 29, 2008 will be required to enter the meeting. Photo
identification is also required for admission.
We look
forward to your participation.
Important
Notice Regarding Internet Availability of Proxy Materials for the Annual
Meeting:
|
PROXY
|
||
|
CARTER’S,
INC.
|
||
|
THIS
PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF CARTER’S,
INC.
|
||
|
ANNUAL
MEETING OF STOCKHOLDERS - MAY 9, 2008
|
||
|
The
undersigned hereby appoints Frederick J. Rowan, II and Michael D.
Casey as proxies (each with the power to act alone and with full power of
substitution) to vote, as designated herein, all shares the undersigned is
entitled to vote at the Annual Meeting of Stockholders of
Carter’s, Inc. to be held on May 9, 2008, and at any and all
adjournments thereof. The proxies are authorized to vote in their
discretion upon such other business as may properly come before the
meeting and any and all adjournments thereof.
|
||
|
Your
vote on the election of Class II Directors and ratification of the
appointment of PricewaterhouseCoopers LLP as the Company’s independent
registered public accounting firm for fiscal 2008 may be specified on the
reverse side. The nominees for Class II Directors are: Bradley M.
Bloom, A. Bruce Cleverly, and Frederick J. Rowan, II.
|
||
|
IF
PROPERLY SIGNED, DATED, AND RETURNED, THIS PROXY WILL BE VOTED AS
SPECIFIED ON THE REVERSE SIDE, OR, IF NO CHOICE IS SPECIFIED, THIS PROXY
WILL BE VOTED “FOR” THE ELECTION OF ALL DIRECTOR NOMINEES IN PROPOSAL 1
AND “FOR” THE RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS
LLP AS INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR FISCAL 2008 IN
PROPOSAL 2.
|
||
|
(Continued
and to be signed on the reverse side)
|
|
VOTE
BY INTERNET - www.proxyvote.com
|
||
|
1170
PEACHTREE STREET NE
SUITE
900
ATLANTA,
GEORGIA 30309
|
Use
the Internet to transmit your voting instructions and for electronic
delivery of information up until 11:59 P.M. Eastern Time the day
before the cut-off date or meeting date. Have your proxy card in hand when
you access the website and then follow the instructions to obtain your
records and to create an electronic voting instruction
form.
|
|
|
ELECTRONIC
DELIVERY OF FUTURE STOCKHOLDER COMMUNICATIONS
|
||
|
If
you would like to reduce the costs incurred by Carter’s, Inc. in mailing
proxy materials you can consent to receive all future proxy statements,
proxy cards, and annual reports electronically via e-mail or the internet.
To sign up for electronic delivery, please follow the instructions above
to vote using the internet and, when prompted, indicate that you agree to
receive or access stockholder communications electronically in future
years.
|
||
|
VOTE
BY PHONE - 1-800-690-6903
|
||
|
Use
any touch-tone telephone to transmit your voting instructions up until
11:59 P.M. Eastern Time the day before the cut-off date or meeting
date. Have your proxy card in hand when you call and then follow the
instructions.
|
||
|
VOTE
BY MAIL
|
||
|
Mark,
sign, and date your proxy card and return it in the postage-paid envelope
we have provided or return it to Carter’s, Inc., c/o Broadridge
Financial Solutions, Inc., 51 Mercedes Way, Edgewood, NY
11717.
|
TO VOTE,
MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: x
|
CARTE1 KEEP
THIS PORTION FOR YOUR RECORDS
|
||
|
DETACH
AND RETURN THIS PORTION ONLY
|
THIS
PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
|
CARTER’S,
INC.
|
||||||||||||||||||||||||
|
Vote
On Directors
|
||||||||||||||||||||||||
|
1.
|
Election
of Class II Directors:
|
For
All
|
Withhold
For
All
|
For
All
Except
|
To
withhold authority to vote for any individual
nominee(s),
mark “FOR ALL EXCEPT” and write the number(s) of the nominee(s) on the
line below.
|
|||||||||||||||||||
|
Nominees:
|
o
|
o
|
o
|
|||||||||||||||||||||
|
01)
Bradley M. Bloom
|
||||||||||||||||||||||||
|
02)
A. Bruce Cleverly
|
||||||||||||||||||||||||
|
03)
Frederick J. Rowan, II
|
||||||||||||||||||||||||
|
The
Board of Directors recommends a vote FOR the election of the
Class II Nominees.
|
||||||||||||||||||||||||
|
Vote
On Ratification
|
||||||||||||||||||||||||
|
2.
|
Ratification
of the appointment of PricewaterhouseCoopers LLP as independent registered
public accounting firm for fiscal 2008
|
For
o
|
Against
o
|
Abstain
o
|
||||||||||||||||||||
|
The
Board of Directors recommends a vote FOR the ratification of
the appointment of PricewaterhouseCoopers LLP as independent registered
accounting firm.
|
||||||||||||||||||||||||
|
PLEASE
SIGN, DATE, AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
|
||||||||||||||||||||||||
|
Note:
Please sign exactly as your name or names appear(s) on this Proxy. When
shares are held jointly, each holder should sign. When signing as
executor, administrator, attorney, trustee, or guardian, please give full
title as such. If the signer is a corporation, please sign full corporate
name by duly authorized officer, giving full title as such. If signer is a
partnership, please sign in partnership name by authorized
person.
|
||||||||||||||||||||||||
|
Yes
|
No
|
|||||||||||||||||||||||
|
Please
indicate if you plan to attend this meeting.
|
o
|
o
|
||||||||||||||||||||||
|
Signature
[PLEASE SIGN WITHIN BOX]
|
Date
|
Signature
(Joint Owners)
|
Date
|
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