Use these links to rapidly review the document
TABLE OF CONTENTS
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy
Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
|
|
|
Filed by the Registrant ý |
Filed by a Party other than the Registrant o |
Check the appropriate box: |
o |
|
Preliminary Proxy Statement |
o |
|
Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
ý |
|
Definitive Proxy Statement |
o |
|
Definitive Additional Materials |
o |
|
Soliciting Material under §240.14a-12
|
|
|
|
|
|
The Empire District Electric Company |
(Name of Registrant as Specified In Its Charter) |
|
(Name of Person(s) Filing Proxy Statement, if other than the Registrant) |
Payment of Filing Fee (Check the appropriate box): |
ý |
|
No fee required. |
o |
|
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
|
|
(1) |
|
Title of each class of securities to which transaction applies:
|
|
|
(2) |
|
Aggregate number of securities to which transaction applies:
|
|
|
(3) |
|
Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
|
|
|
(4) |
|
Proposed maximum aggregate value of transaction:
|
|
|
(5) |
|
Total fee paid:
|
o |
|
Fee paid previously with preliminary materials. |
o |
|
Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing. |
|
|
(1) |
|
Amount Previously Paid:
|
|
|
(2) |
|
Form, Schedule or Registration Statement No.:
|
|
|
(3) |
|
Filing Party:
|
|
|
(4) |
|
Date Filed:
|
Table of Contents
THE EMPIRE DISTRICT ELECTRIC COMPANY
602 S. Joplin Avenue
Joplin, Missouri 64801
March 18, 2015
Dear
Stockholder:
You
are cordially invited to attend our Annual Meeting of Stockholders to be held at 10:30 a.m., CDT, on Thursday, April 30, 2015, at the Joplin Convention Center, 3535
Hammons Blvd., Joplin, Missouri.
At
the meeting, stockholders will be asked to:
-
- Elect four persons to our Board of Directors for three-year terms,
-
- Ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm, and
-
- Vote upon a non-binding advisory proposal to approve the compensation of our named executive officers.
Your
participation in this meeting, either in person or by proxy, is important. Even if you plan to attend the meeting, please promptly vote the enclosed proxy through the Internet, by
telephone or by mail. Please note that brokers may not vote your shares on the election of directors in the absence of your specific instructions as to how to vote. Please return your proxy card so
your vote can be counted.
At
the meeting, if you desire to vote in person, you may withdraw the proxy.
|
|
|
|
|
Sincerely, |
|
|
Bradley P. Beecher President and Chief Executive Officer |
Table of Contents
THE EMPIRE DISTRICT ELECTRIC COMPANY
602 S. Joplin Avenue
Joplin, Missouri 64801
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To the Holders of Common Stock:
Notice
is hereby given that the Annual Meeting of Stockholders of The Empire District Electric Company will be held on Thursday, the 30th of April, 2015, at 10:30 a.m.,
CDT, at the Joplin Convention Center, 3535 Hammons Blvd., Joplin, Missouri, for the following purposes:
- 1.
- To
elect four persons named in the accompanying proxy statement as Directors for terms of three years.
- 2.
- To
ratify the appointment of PricewaterhouseCoopers LLP as Empire's independent registered public accounting firm for the fiscal year ending
December 31, 2015.
- 3.
- To
vote upon a non-binding advisory proposal to approve the compensation of our named executive officers as disclosed in this proxy statement.
- 4.
- To
transact such other business as may properly come before the meeting or at any adjournment or adjournments thereof.
Any
of the foregoing may be considered or acted upon at the first session of the meeting or at any adjournment or adjournments thereof.
This
year, we are once again pleased to be using the U.S. Securities and Exchange Commission rule that allows companies to furnish their proxy materials over the Internet. As a result,
we are mailing to many of our stockholders a notice instead of a paper copy of this proxy statement and our 2014 Annual Report. The notice contains instructions on how to access those documents over
the Internet. The notice also contains instructions on how each of those stockholders can receive a paper copy of our proxy materials, including this proxy statement, our 2014 Annual Report and a form
of proxy card or voting instruction card. All stockholders who do not receive a notice will receive a paper copy of the proxy materials by mail. We believe that this process will conserve natural
resources and reduce the costs of printing and distributing our proxy materials.
Holders
of Common Stock of record on the books of Empire at the close of business on March 2, 2015 will be entitled to vote on all matters which may come before the meeting or any
adjournment or adjournments thereof. A complete list of the stockholders entitled to vote at the meeting will be open at our office located at 602 S.
Joplin Avenue, Joplin, Missouri, to examination by any stockholder for any purpose germane to the meeting, for a period of ten days prior to the meeting, and also at the meeting.
Stockholders are requested, regardless of the number of shares of stock owned, to either vote the proxy through the Internet or by telephone or sign and date the
proxy and mail it promptly in the envelope provided, to which no postage need be affixed if mailed in the United States. A stockholder who plans to attend the meeting in person may withdraw the proxy
and vote at the meeting.
Please
note that brokers may not vote your shares on the election of directors in the absence of your specific instructions as to how to vote. Please return your proxy card so your vote
can be counted.
Joplin,
Missouri
Dated: March 18, 2015
|
|
|
|
|
Janet S. Watson Secretary |
Table of Contents
PROXY STATEMENT
Table of Contents
THE EMPIRE DISTRICT ELECTRIC COMPANY
602 S. Joplin Avenue
Joplin, Missouri 64801
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
April 30, 2015
1. GENERAL INFORMATION
This proxy statement is furnished in connection with the solicitation on behalf of the Board of Directors of The Empire District
Electric Company, hereinafter referred to as Empire (Empire), a Kansas corporation, of proxies to be voted at our Annual Meeting of Stockholders to be held on Thursday, April 30, 2015, and at
any and all adjournments of the meeting.
A
form of proxy is available for execution by stockholders. The proxy reflects the number of shares registered in a stockholder's name. Any stockholder giving a proxy has the right to
revoke it at any time before the proxy is exercised by written notice to the Secretary of Empire, by duly executing a proxy bearing a later date or by voting in person at the meeting.
A
copy of our Annual Report for the year ended December 31, 2014 has been mailed or made available electronically to each stockholder of record for the meeting. You are urged to
read the entire Annual Report.
The
entire cost of the solicitation of proxies will be borne by us. Solicitation, commencing on or about March 18, 2015, will be made by use of the mails, telephone, Internet and
fax and by our regular employees without additional compensation. We will request brokers or other persons holding stock in their names, or in the names of their nominees, to forward proxy material to
the beneficial owners of stock or request authority for the execution of the proxies and will reimburse those brokers or other persons for their expense in so doing.
March 2,
2015 has been fixed as the record date for the determination of stockholders entitled to vote at the meeting and at any adjournment or adjournments thereof. The stock
transfer books will not be closed. As of the record date, there were 43,372,815 shares of common stock outstanding. Holders of common stock will be entitled to one vote per share on all matters
presented to the meeting.
The
holders of a majority of the shares entitled to vote at the Annual Meeting, represented in person or by proxy, shall constitute a quorum for the purpose of transacting business at
the Annual Meeting. Each outstanding share shall be entitled to one vote on each matter submitted to a vote at the Annual Meeting. Directors will be elected by a plurality of the votes of the
stockholders present in person or represented by proxy at the meeting. For the
ratification of the appointment of Empire's independent registered public accounting firm, the vote of a majority of the shares voted on such matter, assuming a quorum is present, shall be the act of
the stockholders on such matter.
With
respect to the non-binding advisory proposal to approve the compensation of our named executive officers, the votes that stockholders cast "for" must exceed the votes that
stockholders cast "against" to approve this advisory vote. However, because your votes are advisory on this proposal, they will not be binding.
A
stockholder voting for the election of directors may withhold authority to vote for all or certain director nominees. A stockholder may also abstain from voting on any of the other
proposals. Votes withheld from the election of any nominee for director, abstentions from any other proposal and broker non-votes will be treated as shares that are present and entitled to vote for
purposes of determining the presence of a quorum, but will not be counted in the number of votes cast on a matter. With respect to shares allocated to a participant's account under our 401(k) Plan and
ESOP, such participant may direct the trustee of the plan, as indicated on the proxy card, on how to vote the shares allocated to such participant's account. If no direction is given with respect to
the shares allocated to a participant's account under the plan, the trustee will vote such shares in the same proportion as the shares for which directions were received from other participants in the
plan.
A
"broker non-vote" occurs if a broker or other nominee who is entitled to vote shares on behalf of a record owner has not received instructions with respect to a particular item to be
voted on, and the broker or nominee
1
Table of Contents
does
not otherwise have discretionary authority to vote on that matter. Under the rules of the New York Stock Exchange ("NYSE"), brokers may vote a client's proxy in their own discretion on certain
items even without instructions from the beneficial owner, but may not vote a client's proxy without voting instructions on "non-discretionary" items. The ratification of Empire's independent
registered public accounting firm is considered a "discretionary" item. However, the election of directors is a "non-discretionary" item and brokers may not vote your shares on the election of
directors in the absence of your specific instructions as to how to vote. The non-binding advisory proposal with respect to executive compensation is also a "non-discretionary" item and brokers may
not vote your shares without your instructions on this item. Please return your proxy card so your vote can be counted.
2. MATTERS TO BE CONSIDERED AT THE ANNUAL MEETING
A. ELECTION OF DIRECTORS
(Item 1 on Proxy Card)
The Board of Directors currently consists of eleven members and is divided into three classes with the Directors in each class serving
for a term of three years. The term of office of one class of Directors expires each year in rotation so that one class is elected at each Annual Meeting for a full three-year term. Directors are
required to retire when they reach the retirement age of 73 and, except as otherwise determined by the Board of Directors, no Director shall be nominated as a candidate for election to the Board of
Directors if such Director was an officer of the Company who has been retired from the Company three or more years prior to the date of the next Annual Meeting of Stockholders.
During
2014, the Board of Directors held four regular meetings. At these meetings, the Board, directly and as delegated to various committees, considered a wide variety of matters
involving, among other things:
|
|
|
Strategic planning New generation projects
The Company's financial
condition and results of operations Financings
Capital and operating
budgets Regulatory
proceedings Environmental stewardship Safety and health |
|
Personnel matters Succession planning
Risk management, including
cyber security Industry issues
Accounting practices
and disclosure Corporate governance practices Director and officer compensation
|
All
of the members of the Board of Directors attended more than 75% of the aggregate of the Board meetings and meetings held by all committees of the Board on which the Director served
during the periods that the Director served. The members of the Board of Directors conduct an annual self-evaluation to determine whether the Board and its committees are functioning effectively.
Unless
otherwise specified, the persons named in the accompanying proxy intend to vote the shares represented by proxies for the election of Mr. D. Randy Laney, Ms. Bonnie
C. Lind, Mr. B. Thomas Mueller and Dr. Paul R. Portney, all who are current members of the Board of Directors, as Class I Directors. While it is not expected that any of the
nominees will be unable to qualify for or accept office, if for any reason one or more shall be unable to do so, proxies will be voted for nominees selected by the Board of Directors.
Information about Nominees and Directors
The Nominating/Corporate Governance Committee selects as candidates those nominees it believes would best represent the interests of
the stockholders. This assessment includes such issues as experience, integrity, competence, diversity, skills and dedication in the context of the needs of the Board. The Committee does not have a
formal diversity policy; however, the Committee endeavors to select candidates with a broad mix of professional and personal backgrounds in order to best meet the needs of the Board, Empire and our
stockholders. The Nominating/Corporate Governance Committee begins the director search process by identifying specific experience, qualifications, attributes or skills they believe to be the most
beneficial in enabling the Board of Directors to satisfy its responsibilities effectively in light of our business and structure. These have included
2
Table of Contents
financial
expertise, capital markets experience, environmental and regulatory experience, utility leadership experience and service-area business experience. A third-party search firm is sometimes
paid a fee to assist in the process of identifying and evaluating candidates that have the experience, qualifications, attributes and skills to match the search criteria. The Director nominees must
also have a reputation for integrity, honesty and adherence to high ethical standards and have demonstrated superior business acumen and an ability to exercise sound judgment.
The
name, age, principal occupation for the last five years, period of service as a Director of Empire, other directorships of each Director and the qualifications of each Director are
set forth below. In addition, included in the information below, is a discussion of the specific experience, qualifications, attributes or skills that led to the conclusion that the person should
serve as a Director of Empire in light of our business and structure. See "Director Nomination Process" below for more information on the selection of director nominees.
Nominees for Director
CLASS I DIRECTORS
Nominated Term Expiring at the 2018 Annual Meeting
D. Randy Laney, age 60, joined our Board of Directors in 2003 and has served as the
Non-Executive Vice Chairman of the Board from 2008 to 2009 and Non-Executive Chairman of the Board since April 23, 2009. Mr. Laney, semi-retired since 2008, has held numerous senior
level positions with both public and private companies during his career, including 23 years with Wal-Mart Stores, Inc. in various executive positions including Vice President of
Finance, Benefits and Risk Management and Vice President of Finance and Treasurer. In addition, Mr. Laney has provided strategic advisory services to both private and public companies and
served on numerous profit and non-profit boards. Mr. Laney brings significant management and capital markets experience, and strategic and operational understanding to his position as Chairman
of the Board.
Bonnie C. Lind, age 56, joined our Board of Directors in 2009. Ms. Lind has served as Senior Vice President, Chief Financial
Officer and Treasurer, of Neenah Paper Inc. (global manufacturer of premium performance based papers) since 2004. Prior to the spin-off of Neenah Paper from Kimberly-Clark Corporation in 2004,
she held various financial and strategic management positions at Kimberly-Clark from 1982 to 2003, most recently as the Assistant Treasurer from 1999 to 2003. Ms. Lind also became a Director of
Federal Signal Corporation effective February 20, 2014. Ms. Lind has significant financial, capital markets and banking experience in a cyclical industry which consumes large quantities
of energy and is affected by energy prices. Her financial, capital markets and banking experience in a small-cap, NYSE listed company brings to the Board and the Audit Committee a wealth of knowledge
in dealing with financial and accounting matters in a comparable public company. Ms. Lind has been designated an Audit Committee Financial Expert.
B. Thomas Mueller, age 67, joined our Board of Directors in 2003. Mr. Mueller is the Founder and has served as the President and
Chief Executive Officer since 1987 of SALOV North America Corporation, a U.S. subsidiary of an Italian multi-national group that imports and markets Filippo Berio olive oil throughout the U.S. As a
Certified Public Accountant and an attorney, Mr. Mueller was formerly an international tax partner with KPMG Peat Marwick. His leadership skills and accounting and finance experience, as well
as his experience with complex global financial issues, make him a skilled advisor with the knowledge necessary to lead our Audit Committee. Mr. Mueller has been designated an Audit Committee
Financial Expert.
Paul R. Portney, age 69, joined our Board of Directors in 2009. Dr. Portney served as Dean of the Eller College of Management at
the University of Arizona from 2005 to 2010, where he continued as a professor, teaching such courses as "Energy, Environment and Business Strategy" until his retirement in May 2014.
Dr. Portney has been at the center of public environmental policy for three decades. At Resources for the Future, where he worked from 1972-2005 and was President and Chief Executive Officer
from 1995 to 2005, he conducted research on environmental protection and regulation, natural resources policy, federal energy policy, air pollution, health and safety regulation, and provision of
public goods. Dr. Portney is author and co-author of ten books, including Public Policies for Environmental Protection. The Board of Directors
values his deep knowledge of environmental policy and the environmental challenges and regulation facing our industry.
The Board of Directors unanimously recommends that you vote FOR each nominee.
3
Table of Contents
Members of the Board of Directors Continuing in Office
CLASS II DIRECTORS
Term Expiring at the 2016 Annual Meeting
Ross C. Hartley, age 67, joined our Board of Directors in 1988. Mr. Hartley is a
private investor. He is also the Co-Founder and has been a Director of NIC Inc., an investor-owned company that is a leader in providing e-government solutions for federal, state and local
governments since 1991. Mr. Hartley was a long-time leader in the independent insurance business in our tri-state area and has varied experience on both public and private boards including
significant experience serving on Finance and Audit Committees. Mr. Hartley is a successful entrepreneur and is valued by the Board of Directors for his business acumen and experience gained
from 26 years of service as a Director.
Herbert J. Schmidt, age 59, joined our Board of Directors in 2010. Mr. Schmidt served as the Executive Vice President of
Con-way Inc. and President of Con-way Truckload (trucking services) from 2007 to 2012. Prior to the merger of Contract Freighters, Inc. ("CFI") with Con-way Inc. in 2007,
Mr. Schmidt held positions at CFI of President and Chief Executive Officer from 2005 to 2007 and President from 2000 to 2005. Prior to his becoming President and CEO in 2005, he was employed in
a series of progressively more responsible positions at CFI where he gained extensive knowledge in risk management, safety, insurance, benefits, security, and compliance. Mr. Schmidt also
serves as a Director of Covenant Transportation Group. Mr. Schmidt, a long-time, service-area resident and businessman, has demonstrated exceptional management ability, community involvement
and
leadership, and his knowledge of Empire's service area, customers and stockholders brings valuable insight to the Board of Directors.
C. James Sullivan, age 68, joined our Board of Directors in 2010. Mr. Sullivan has served as Principal of Sullivan Group LLC
(utility and energy consulting) since 2008. He served as President of the Alabama Public Service Commission (the public utility regulator in Alabama) from 1983 to 2008 and has been active in the
National Association of Regulatory Utility Commissioners ("NARUC") serving in various capacities including President from 1998-1999. He served as a member of the University of Chicago Board of
Governors which administers the Argonne National Laboratory for the Department of Energy. He is also a member of the Alabama State Bar. Mr. Sullivan's diverse experience and vast knowledge of
utility issues brings to the Board of Directors critical insight into utility regulation, the regulatory process and the challenges facing the utility industry.
CLASS III DIRECTORS
Term Expiring at the 2017Annual Meeting
Kenneth R. Allen, age 57, joined our Board of Directors in 2005. Mr. Allen
served as Vice President, Finance and Chief Financial Officer of Texas Industries, Inc. (cement, aggregate and concrete products firm) from 2008 to 2014 and was the Vice President, Treasurer
and Director of Investor Relations from 1996 to 2008. Mr. Allen also worked as an economist and an analyst for an electric industry consultant early in his career which gives him additional
insight into some of the challenges facing the industry. Mr. Allen has significant financial, capital markets, and investor relations experience with a small-cap, NYSE listed company in a
highly capital and energy intensive industry. He also has considerable experience developing incentive compensation plans which serves him well as a member of the Compensation Committee.
Mr. Allen has been designated an Audit Committee Financial Expert.
Bradley P. Beecher, age 49, joined our Board of Directors in 2011. Mr. Beecher, a professional engineer, has served as President
and Chief Executive Officer of Empire since June 1, 2011. Mr. Beecher has also held the offices at Empire of Executive Vice President, Executive Vice President and Chief Operating
OfficerElectric, Vice PresidentEnergy Supply, Director of Strategic Planning as well as other operational and management positions during his career. His engineering
background combined with 26 years of broad-based electric industry experience and proven leadership skills position him well to serve as a Director and leader of the Company.
William L. Gipson, age 58, joined our Board of Directors in 2002 and served as President and Chief Executive Officer of Empire from 2002
to 2011. Mr. Gipson held various operational and management positions during his thirty year career with Empire. His extensive knowledge of all aspects of our business, combined with his
exceptional business acumen and drive for innovation and excellence are invaluable to the Board of Directors.
Thomas M. Ohlmacher, age 63, joined our Board of Directors in 2011. Mr. Ohlmacher served as President and Chief Operating Officer,
Non-regulated Energy of Black Hills Corporation from 2002 to 2011. He began his utility career with Black Hills Corporation (diversified energy company) in 1974 as a Performance Engineer and
4
Table of Contents
held
various operational, strategic planning, and managerial positions. Mr. Ohlmacher's experience includes the construction and operation of conventional coal and natural gas-fired generation
and the integration of renewable wind, solar and hydro generation. He brings to the Board of Directors a wealth of industry and technical knowledge, as well as considerable insight into the leadership
and business strategy of a public utility company.
Director Independence
The Board of Directors has adopted the following standards to assist it in making determinations of independence in accordance with the
New York Stock Exchange (the "NYSE") Listed Company Manual:
- 1.
- A
Director shall not fail to meet any of the independence tests set forth in Section 303A.02 of the NYSE Listed Company Manual or any successor
provisions thereto.
- 2.
- The
Board of Directors shall affirmatively determine that, after taking into account all relevant facts and circumstances, the Director has no material
relationships with Empire (either directly or as a partner, stockholder or officer of an organization that has a relationship with Empire). For purposes of this determination, the following
relationships are not material (unless otherwise prohibited by clause 1 above):
- a.
- If
a Director (or any family member of a Director) is a current or former customer, or a current or former employee or Director of a customer (or an
affiliate of a customer), of Empire.
- b.
- If
a Director is a former employee of an organization which provides investment banking services to Empire or which publishes research opinions with respect
to any securities of Empire.
- c.
- If
a family member of a Director is an employee of, or otherwise affiliated with, a charitable organization to which Empire contributes less than $25,000 in
any fiscal year.
- d.
- If
a Director (or any family member of a Director) receives benefits payments under Empire's Retirement Plan or Empire's Supplemental Executive Retirement
Plan.
- e.
- If
a Director is an executive officer of an organization which is affiliated with an organization where an executive officer of Empire serves on the board.
The
Board of Directors has determined that each of the following meet the independence standards adopted above: Kenneth R. Allen, William L. Gipson, Ross C. Hartley, D. Randy Laney,
Bonnie C. Lind, B. Thomas Mueller, Thomas M. Ohlmacher, Paul R. Portney, Herbert J. Schmidt, and C. James Sullivan. The Board of Directors has determined that Bradley P. Beecher does not meet the
independence standards adopted above.
Executive Sessions
The terms of our Corporate Governance Guidelines provide that Directors will meet in two separate executive sessions chaired by the
Chairman of the Board, as follows: (1) all of the Directors will meet in executive session and (2) all of the independent Directors will meet in executive session. Such is the practice
at each Board meeting. With the exception of Mr. Beecher, all of the Directors of Empire are independent Directors.
Board Leadership Structure
The positions of Chairman of the Board and Chief Executive Officer have been held by separate individuals since 2002 in recognition of
the differences between the two roles. The Chairman of the Board provides leadership to the Board and works with the Board to define its structure and activities in the fulfillment of its
responsibilities. The Chairman works with the Chief Executive Officer and other Board members to provide strong, independent oversight of our management and affairs. The Chairman approves Board
meeting agendas and presides over meetings of the full Board.
Risk Oversight
Our Board of Directors is responsible for the oversight of management's responsibility to assess and manage our major financial and
other risk exposures, including, but not limited to, operational, legal, regulatory, business, financial, commodity, strategic, environmental, credit, liquidity, and reputational risks. The Board
reviews with management the categories of risk we face, including any risk concentrations and risk interrelationships, as well as the likelihood of occurrence, the potential impact of those risks and
mitigating measures. In addition, the Board reviews management's implementation of its risk practices, policies and procedures to assess whether they are
5
Table of Contents
being
followed and are effective. As part of this oversight role, the Board participates in a bi-annual enterprise risk management assessment.
While
the Board of Directors has the ultimate oversight responsibility for risk management activities, various committees of the Board also have responsibility for the oversight of risk
management. In particular, the Audit Committee focuses on financial risk, including counterparty credit risk, internal controls, and receives risk assessment reports from our internal auditors. In
addition, in setting compensation, the Compensation Committee strives to create incentives that encourage a level of risk-taking behavior consistent with our business strategy. The Strategic Projects
Committee works with management to oversee utility capital projects and operational issues of strategic importance.
The
Risk Oversight Committee assists the Board in fulfilling its responsibility to oversee our risk management activities. The members of the Risk Oversight Committee consist of the
Chairman of the Board as well as the Chairperson of each of the Audit, Compensation, Nominating/Corporate Governance and Strategic Projects Committees.
Director Compensation Governance
The Board of Directors has adopted a minimum stock ownership guidelines policy effective January 1, 2015. The policy requires
that each non-employee Director attain ownership in shares of our common stock in an amount equal to three (3) times their current annual cash retainer. This amount may be satisfied by the
total amount of shares owned directly or indirectly (e.g., spouse or trust accounts), or by
time-vested restricted stock, stock units or phantom stock. During the attainment period, each non-employee Director must retain 100% of his or her annual stock retainer (after tax) granted on or
after January 1, 2015, until such time that he or she is in compliance with his or her ownership requirement. Each of our Directors satisfies our stock ownership requirements as of
March 2, 2015. A similar policy is also applicable to the President and CEO (see "Compensation Discussion and AnalysisExecutive Officer Compensation Governance" below).
In
addition to the stock ownership guidelines policy described above, an anti-hedging policy has been adopted by the Board of Directors. This policy, also effective January 1,
2015, prohibits Directors from directly or indirectly engaging in hedging against future declines in market value of our securities through the purchase of financial instruments designed to offset
such risk. This anti-hedging policy is also applicable to our executive officers.
Committees of the Board of Directors
Audit Committee
We have an Audit Committee of the Board of Directors. The Board has adopted and approved a written charter for the Audit Committee. The
charter is available on our website at www.empiredistrict.com. The Audit Committee meets the definition of an audit committee as set forth in
Section 3(a)(58)(A) of the Securities Exchange Act of 1934 (the "Exchange Act").
In
accordance with its written charter, the Audit Committee assists the Board in its oversight of:
-
- The integrity of our financial statements,
-
- Our compliance with legal and regulatory requirements,
-
- The Independent Registered Public Accounting Firm's qualification and independence, and
-
- The performance of our internal audit function and independent auditors.
In
addition, the Audit Committee is directly responsible for the appointment, compensation, retention, termination and oversight of the work of our independent auditors. The Audit
Committee held eight meetings during 2014. The members of the Audit Committee are Ms. Lind and Messrs. Allen, Hartley and Mueller, each of whom is independent (as independence is defined
in the NYSE Listing Standards and the rules of the Securities and Exchange Commission (the "SEC") applicable to audit committee members) and is financially literate (as determined by the Board in its
business judgment in accordance with NYSE Listing Standards). The Board has also determined that Ms. Lind and Messrs. Allen and Mueller are "audit committee financial experts" (as
defined in the instructions to Item 407(d)(5)(i) of Regulation S-K). Ms. Lind began serving on the Audit Committee of Federal Signal Corporation on February 20, 2014. None
of the other members of the Audit Committee serve on
6
Table of Contents
the
Audit Committee of another public company. The report of the Audit Committee can be found below under the heading "Other MattersAudit Committee Report."
Compensation Committee
We have a Compensation Committee of the Board of Directors. The Compensation Committee assists the Board in establishing and overseeing
Director and executive officer compensation policies and practices of Empire on behalf of the Board. The Compensation Committee determines the compensation of each of our executive officers as more
fully described under "Executive CompensationCompensation Discussion and Analysis." Also, as more fully described under "Executive CompensationCompensation Discussion and
Analysis," our Chief Executive Officer makes recommendations to the Compensation Committee with respect to certain aspects of executive compensation. The charter for the Compensation Committee is
available on our website at www.empiredistrict.com. The Compensation Committee held six meetings during 2014. The members of our Compensation Committee
are Messrs. Allen, Laney, Ohlmacher, Portney and Schmidt. Mr. Schmidt has served as a Director of Covenant Transportation Group since October 2013, serving on the Compensation and
Corporate Governance Committees. The Board has determined that each member of the Compensation Committee is "independent" as defined by the
NYSE Listing Standards. The report of the Compensation Committee can be found below under the heading "Executive CompensationCompensation Committee Report."
Compensation Committee Interlocks and Insider Participation
None of the members of our Compensation Committee has ever been an officer or employee of Empire or any of its subsidiaries. None of
the members of our Compensation Committee had any relationship requiring disclosure under "Transactions with Related Persons" below. None of our current executive officers has ever served as a
Director or member of the Compensation Committee (or other Board committee performing equivalent functions) of another for-profit corporation.
Nominating/Corporate Governance Committee
We have a Nominating/Corporate Governance Committee of the Board of Directors. The Nominating/Corporate Governance Committee is
primarily responsible for:
-
- Identifying individuals qualified to become Board members, consistent with criteria approved by the Board, and recommending that the
Board select (or re-nominate) the Director nominees for the next annual meeting of stockholders,
-
- Developing and recommending to the Board a set of corporate governance guidelines applicable to Empire,
-
- Developing, approving and administering policies and procedures with respect to related person transactions,
-
- Overseeing the evaluation of the Board and its committees,
-
- Annually reviewing and recommending Board committee membership, and
-
- Working with the Board to evaluate and/or nominate potential successors to the CEO.
The
charter for the Nominating/Corporate Governance Committee is available on our website at www.empiredistrict.com. The Committee held
four meetings in 2014. The members of the Committee are Ms. Lind and Messrs. Allen, Hartley, Laney, and Sullivan. The Board has determined that each member of the Nominating/Corporate
Governance Committee is "independent" as defined by the NYSE Listing Standards. The report of the Nominating/Corporate Governance Committee can be found below under the heading
"Nominating/Corporate Governance Committee Report."
7
Table of Contents
Director Nomination Process
The Nominating/Corporate Governance Committee selects as candidates those nominees it believes would best represent the interests of
the stockholders. This assessment includes such issues as experience, integrity, competence, diversity, skills and dedication in the context of the needs of the Board. The Committee does not have a
formal diversity policy; however, the Committee endeavors to select candidates with a broad mix of professional and personal backgrounds in order to best meet the needs of the Board, Empire and our
stockholders. In addition, the Committee takes into account the nature of and time involved in the Director's other employment and service on other boards. The Committee reviews with the Board, as
required, the requisite skills and characteristics of individual Board members, as well as the composition of the Board as a whole, in the context of the needs of Empire. The Director nominees must
also have a reputation for integrity, honesty and adherence to high ethical standards and have demonstrated superior business acumen and an ability to exercise sound judgment. When seeking new
candidates, the Committee has sometimes paid a fee to a third party to assist in the process of identifying and evaluating candidates.
The
Nominating/Corporate Governance Committee will consider nominees recommended by stockholders for election to the Board of Directors. In order to be considered, proposals for nominees
for director by stockholders
must be submitted in writing to Corporate Secretary: The Empire District Electric Company, 602 S. Joplin Avenue, Joplin, Missouri 64801.
In
order to nominate a director at the Annual Meeting, Empire's By-Laws require that a stockholder follow the procedures set forth in Article VI, Section 5 of Empire's
Restated Articles of Incorporation. In order to recommend a nominee for a director position, a stockholder must be a stockholder of record at the time it gives notice of recommendation and must be
entitled to vote for the election of directors at the meeting at which such nominee will be considered. Stockholder recommendations must be made pursuant to written notice delivered (i) in the
case of a nomination for election at an annual meeting, not less than 35 days nor more than 50 days prior to the annual meeting; and (ii) in the event that less than
45 days notice or prior public disclosure of the date of the meeting is given or made to stockholders, notice by the stockholder to be timely must be received not later than the close of
business on the tenth day following the day on which notice of the date of the meeting was mailed or the public disclosure was made.
The
stockholder notice must set forth the following:
-
- As to each person the stockholder proposes to nominate for election or re-election as a director, all information relating to such
person that is required to be disclosed in solicitations of proxies for the election of directors, or is otherwise required by applicable law (including the person's written consent to being named as
a nominee and to serving as a director if elected), and
-
- As to the nominating stockholder on whose behalf the nomination is made, (a) the name and address, as they appear on Empire's
books, (b) a representation that the stockholder is a holder of record of the common stock entitled to vote at the meeting on the date of the notice and intends to appear in person or by proxy
at the meeting to nominate the person or persons specified in the notice, and (c) a description of all arrangements or understandings between the stockholder and each nominee and any other
person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the stockholder.
In
addition to complying with the foregoing procedures, any stockholder nominating a director must also comply with all applicable requirements of the Exchange Act and the rules and
regulations thereunder. We did not receive any recommendations for director nominees for the current Annual Meeting of Stockholders by any of our stockholders.
Nominating/Corporate Governance Committee Report
The Nominating/Corporate Governance Committee recommended that the Board of Directors nominate Mr. D. Randy Laney,
Ms. Bonnie C. Lind, Mr. B. Thomas Mueller and Dr. Paul R. Portney as Class I Directors. Mr. Laney, Ms. Lind, Mr. Mueller and Dr. Portney have
been nominated by the Board as Class I Directors subject to stockholder approval, for three-year terms ending at the Annual Meeting of Stockholders in 2018.
Empire's
Board of Directors operates pursuant to a set of written Corporate Governance Guidelines that set forth Empire's corporate governance philosophy and the governance policies and
practices that the Board has
8
Table of Contents
established
to assist in governing Empire and its affiliates. The Guidelines describe the Board membership criteria and the internal policies and practices by which Empire is operated and controlled
on behalf of its stockholders.
In
2014, the Board and its committees continued to examine their processes and strengthen them as appropriate, and the Board's evaluation of Empire's corporate governance processes is
ongoing. This assures that the Board and its committees have the necessary authority and practices in place to review and evaluate Empire's business operations as needed, and to make decisions that
are independent of Empire's management. As examples, the Board and its committees undertake an annual self-evaluation process, meet regularly without members of management present, have full access to
officers and employees of Empire, and retain their own advisors as they deem appropriate.
The
Code of Business Conduct and Ethics, which is applicable to all of our Directors, officers and employees, and the Corporate Governance Guidelines comply with the Sarbanes-Oxley Act
of 2002 and the listing standards of the New York Stock Exchange. We also have a separate code of ethics that applies to our chief executive officer and our senior financial officers, including our
chief financial officer and our principal accounting officer. These corporate governance materials, as well as our Policy and Procedures with Respect to Related Person Transactions and other corporate
governance materials are available for public viewing on our website at www.empiredistrict.com under the heading Investors, Corporate Governance. Copies
of these corporate governance materials are also available without charge to interested parties who request them in writing from: Corporate Secretary, The Empire District Electric Company, 602 S.
Joplin Avenue, Joplin, Missouri 64801.
Ross
C. Hartley, Chairman
Kenneth R. Allen
D. Randy Laney
Bonnie C. Lind
C. James Sullivan
Attendance at Annual Meetings
Empire's Corporate Governance Guidelines provide that Directors are expected to attend the annual meeting of stockholders. All members
of Empire's Board of Directors attended the Annual Meeting of Stockholders in 2014 except for Mr. Gipson and Mr. Schmidt.
B. RATIFICATION OF APPOINTMENT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
(Item 2 on Proxy Card)
Empire is asking the stockholders to ratify the appointment of PricewaterhouseCoopers LLP ("PwC") as our independent registered
public accounting firm for the fiscal year ending December 31, 2015. PwC was appointed by the Audit Committee of the Board of Directors on February 4, 2015, and has acted in this
capacity since 1992.
Although
ratification by the stockholders is not required by law, the Board of Directors has determined that it is desirable to request approval of this selection by the stockholders. In
the event the stockholders fail to ratify the appointment, the Audit Committee will consider this factor when making any future determination regarding PwC. Even if the selection is ratified, the
Audit Committee, in its discretion, may direct the appointment of a different independent accounting firm at any time during the year if it determines that such a change would be in the best interests
of Empire and its stockholders.
Passage
of the proposal requires the affirmative vote of a majority of the votes cast.
The Board of Directors unanimously recommends that you vote FOR the ratification of the appointment of PwC as the independent registered public accounting firm for fiscal year
ending December 31, 2015.
C. NON-BINDING ADVISORY VOTE OF THE STOCKHOLDERS
ON THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS
(Item 3 on Proxy Card)
We are providing our stockholders with the opportunity to cast an advisory vote on executive compensation (a "say-on-pay advisory
proposal") as described below. We believe that it is appropriate to seek the views of stockholders on the design and effectiveness of our executive compensation program.
9
Table of Contents
At
our annual meetings of stockholders held in May 2014, April 2013, April 2012 and April 2011, a substantial majority of the votes cast on the say-on-pay advisory proposal were voted in
favor of the proposal. The Compensation Committee believes this affirms the stockholders' support of our approach to executive compensation.
As
described in detail under the heading "Executive CompensationCompensation Discussion and Analysis," our executive compensation program is designed to provide a
competitive compensation package that will enable us to attract and retain highly talented individuals for key positions and promote the accomplishment of our performance objectives. The overarching
objective is to provide a conservative, yet secure, base salary, with the opportunity to earn a higher total level of compensation under programs that link executive compensation to Company and
individual performance factors. With the addition of stock ownership guidelines applicable to the President and CEO and anti-hedging and incentive compensation clawback policies applicable to all
executives, we have strengthened the alignment of the interests of our executives with the interests of our shareholders.
We
are asking our stockholders to indicate their support for our named executive officer compensation as described in this proxy statement. This say-on-pay advisory proposal gives our
stockholders the opportunity to express their views on our named executive officers' compensation. This vote is not intended to address any specific item of compensation, but rather the overall
compensation of our named executive officers and the philosophy, policies and practices described in this proxy statement pursuant to Item 402 of Regulation S-K, the compensation
disclosure rule of the SEC. Accordingly, we will ask our stockholders to vote "FOR" the following resolution at the Annual Meeting of Stockholders:
"RESOLVED,
that the Company's stockholders approve, on a non-binding advisory basis, the compensation of the named executive officers, as disclosed in the Company's Proxy Statement for
the 2015 Annual Meeting of Stockholders pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, the compensation tables and narrative discussion."
The
say-on-pay vote is advisory, and therefore not binding on the Company, the Compensation Committee or our Board of Directors. Our Board of Directors and our Compensation Committee
value the opinions of our stockholders, including those expressed by their vote on this proposal, and will consider the outcome of this vote when making future decisions with respect to our executive
compensation program.
The Board of Directors unanimously recommends a vote "FOR" the approval of the compensation of our named executive officers, as disclosed in this proxy statement pursuant to
Item 402 of Regulation S-K.
10
Table of Contents
3. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Stock Ownership of Directors and Officers
The following table shows information with respect to the number of shares of our common stock beneficially owned as of March 2,
2015 by each of our executive officers named in the Summary Compensation Table, each Director, each Director nominee and our Directors and executive officers as a group.
|
|
|
|
|
|
|
Name
|
|
Position |
|
Shares of
Common Stock
Beneficially
Owned(1) |
|
D. Randy Laney |
|
Director, Chairman of the Board |
|
|
23,784 |
|
Kenneth R. Allen |
|
Director |
|
|
18,520 |
|
William L. Gipson |
|
Director |
|
|
27,621 |
|
Ross C. Hartley |
|
Director |
|
|
53,930 |
|
Bonnie C. Lind |
|
Director |
|
|
2,500 |
|
B. Thomas Mueller |
|
Director |
|
|
10,450 |
|
Thomas M. Ohlmacher |
|
Director |
|
|
6,871 |
|
Paul R. Portney |
|
Director |
|
|
10,363 |
|
Herbert J. Schmidt |
|
Director |
|
|
9,236 |
|
C. James Sullivan |
|
Director |
|
|
21,236 |
|
Bradley P. Beecher |
|
President and Chief Executive Officer and Director |
|
|
25,298 |
|
Laurie A. Delano |
|
Vice PresidentFinance and Chief Financial Officer |
|
|
8,768 |
|
Kelly S. Walters |
|
Vice President and Chief Operating Officer-Electric |
|
|
10,935 |
|
Ronald F. Gatz |
|
Vice President and Chief Operating Officer-Gas |
|
|
23,012 |
|
Martin O. Penning |
|
Vice PresidentCommercial Operations |
|
|
2,656 |
|
Directors and named executive officers, as a group |
|
|
|
|
255,180 |
|
- (1)
- Reflects
shares in which the named Director or Officer of the Company has direct or indirect voting power and transactional influence over the shares,
although such individual may not hold actual title to the shares. Does not include deferred stock units granted under our Stock Unit Plan for Directors or restricted stock granted under our Stock
Incentive Plan. No Director or executive officer owns more than 0.5% of the outstanding shares of our common stock and all Directors and executive officers as a group own less than 1% of the
outstanding shares of our common stock.
As
described above under "Director Compensation Governance", the Board of Directors has adopted a Stock Ownership Guidelines Policy effective January 1, 2015. Under
the terms of this policy, non-employee Directors may satisfy the ownership guidelines by means of common stock that is directly or indirectly owned and deferred stock units granted under our Stock
Unit Plan for Directors. For non-employee Directors, the guideline multiple is equal to three (3) times their current annual cash retainer. The shares listed for each non-employee Director in
the table above are directly or indirectly owned by the Director and do not include deferred stock unit grants. At March 2, 2015, the number of deferred stock units granted to each non-employee
Director under our Stock Unit Plan for Directors is as follows: Mr. Laney, 12,980; Mr. Allen, 18,767; Mr. Gipson, 7,847; Mr. Hartley, 33,617; Ms. Lind, 18,336;
Mr. Mueller, 31,233; Mr. Ohlmacher, 12,123; Mr. Portney, 7,847; Mr. Schmidt, 7,847; and Mr. Sullivan, 7,847. When deferred stock unit grants are considered in
addition to the beneficially owned shares listed above, each of our Directors satisfies our stock ownership requirements as of March 2, 2015.
Under
the terms of the Stock Ownership Guidelines Policy, the guideline multiple for the President and Chief Executive Officer is equal to three (3) times his current base salary
(see "Compensation Discussion and AnalysisExecutive Officer Compensation Governance" below). Mr. Beecher's total shares satisfying
ownership guidelines includes shares beneficially owned as listed in the table above, plus non-vested shares of time-vested restricted stock (which at March 2, 2015, totaled 25,700 shares)
granted under our Stock Incentive Plan. When non-vested shares of time-vested restricted stock are considered in addition to the beneficially owned shares listed above, Mr. Beecher had met 80%
of his share ownership requirement as of March 2, 2015.
11
Table of Contents
Other Stock Ownership
The following table reflects the holdings of those known to us to own beneficially more than 5% of our common stock as of
March 2, 2015.
|
|
|
|
|
|
|
|
Name and Address of Beneficial Owner
|
|
Amount and Nature of
Beneficial Ownership
|
|
Percent of Class
|
|
|
|
The Charger Corporation |
|
|
4,112,496 |
(1) |
|
9.47 |
% |
First Trust Portfolios L.P. |
|
|
|
|
|
|
|
First Trust Advisors L.P.
120 East Liberty Drive, Suite 400
Wheaton, IL 60187 |
|
|
|
|
|
|
|
|
|
The Vanguard Group
100 Vanguard Boulevard
Malvern, PA 19355 |
|
|
3,192,771 |
(2) |
|
7.35 |
% |
|
|
BlackRock, Inc.
40 East 52nd Street
New York, NY 10022 |
|
|
2,575,713 |
(3) |
|
5.90 |
% |
|
|
- (1)
- As
reported on Schedule 13G filed with the Securities and Exchange Commission by The Charger Corporation, First Trust Portfolios L.P., and
First Trust Advisors L.P. on January 29, 2015. The Charger Corporation is the General Partner of both First Trust Portfolios L.P. and First Trust Advisors L.P. The Charger
Corporation and First Trust Advisors L.P. both have shared voting power with respect to 207,378 shares and shared dispositive power with respect to 4,112,496 shares. First Trust
Portfolios L.P. has shared dispositive power with respect to 3,905,118 shares.
- (2)
- As
reported on Schedule 13G/A filed with the Securities and Exchange Commission by The Vanguard Group on February 11, 2015. The Vanguard Group
has sole voting power with respect to 65,490 shares, sole dispositive power with respect to 3,133,981 shares and shared dispositive power with respect to 58,790 shares. Vanguard Fiduciary Trust
Company, a wholly-owned subsidiary of The Vanguard Group, Inc., is the beneficial owner of 58,790 shares or 0.13% of the Common Stock outstanding of the Company as a result of its serving as
investment manager of collective trust accounts. Vanguard Investments Australia, Ltd., a wholly-owned subsidiary of The Vanguard Group, Inc., is the beneficial owner of 6,700 shares or
0.01% of the Common Stock outstanding of the Company as a result of its serving as investment manager of Australian investment offerings.
- (3)
- As
reported on Schedule 13G/A filed with the Securities and Exchange Commission by BlackRock, Inc. on January 30, 2015.
BlackRock, Inc. has sole voting power with respect to 2,466,111 shares and dispositive power with respect to 2,575,713 shares.
12
Table of Contents
4. EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
Executive Summary
The compensation program for executive officers is designed to provide a conservative yet competitive compensation package that will
enable us to attract and retain highly talented individuals for key positions, promote the accomplishment of our performance objectives, and achieve Company results beneficial to our stockholders,
customers and other stakeholders. The program is administered by our Compensation Committee ("Committee") which is composed entirely of non-employee, independent directors who are appointed by and
serve at the sole discretion of the Board of Directors. The overarching objective of the Committee is to provide a conservative, yet secure, base salary, with the opportunity to earn a higher level of
total compensation under cash and equity incentive opportunities that link executive compensation to Company and individual performance factors.
In
order to align the Company's executive compensation program with the interests of our stockholders, a substantial portion of each executive's total compensation opportunity is
presented in the form of equity compensation. In addition, equity and other at-risk elements of compensation are tied to both short-term and long-term performance measures. In essence, at-risk
compensation must be "re-earned" annually.
The
Committee is assisted in accomplishing its responsibilities by an independent compensation consultant ("Consultant"). The Committee is directly responsible for the appointment,
compensation and oversight of the work of the Consultant. The Consultant does not perform other services for us outside of its engagement with the Committee, but may interact directly with the
President and CEO, our legal counsel and/or other Company personnel for the purpose of obtaining executive officer compensation and performance data to be used in its review and analysis. The
Committee retains all decision-making and approval authority with regard to determining executive compensation levels.
The
Committee structures the executive compensation program to motivate executives to achieve specified business goals and to reward the achievement of those goals. Compensation
decisions made by the Committee are based on market and peer group analysis, Company performance, achievement of individual performance objectives, the level and nature of the executive's
responsibilities and the level of experience in his or her position.
Our
compensation program includes three basic compensation elements:
|
|
|
|
|
Base Salary |
|
Annual Cash Incentives |
|
Long-Term Stock Incentives |
Base
Salary combined with Annual Cash Incentives make up Total Cash Compensation. Total Cash Compensation combined with Long-Term Stock Incentives make up Total Direct Compensation. Each
of these compensation elements is discussed more fully below.
The
Committee's compensation philosophy targets the 25th percentile level of our industry-specific peer group of companies (as provided to the Committee by the
Consultant from their most recent executive compensation review performed in 2014) for Base Salary, Total Cash Compensation, and Total Direct Compensation (see "Benchmarking" and
"Base Salary" below). Annual Cash Incentive and Long-Term Stock Incentive targets are set at fixed percentages of Base Salary. These incentive compensation elements provide each executive
the potential to earn higher levels of Total Direct Compensation depending on Company and individual performance.
The
Committee believes the compensation approach discussed above appropriately balances stockholder, customer and other stakeholder interests and is a responsible approach to executive
compensation. It includes the following features:
-
- Short-term incentive compensation focused on tactical near-term objectives that support the Company's longer-term goals,
-
- Long-term performance-based stock awards linked to stockholder returns over a three-year period,
-
- Limitations on potential incentive compensation awards equal to 200% of target opportunity. Beginning in 2015, Annual Cash Incentives
will be limited to 150% of target opportunity,
-
- Time-vested stock awards designed to promote an appropriate focus on the creation of stockholder value,
-
- Participation in the same health and welfare benefits and qualified pension plan offered to all our full-time employees. The pension
plan was modified in 2014 to allow current employees the option of electing a
13
Table of Contents
Executive Officer Compensation Governance
In addition to the features mentioned above, the executive compensation approach includes the following governance
provisions:
-
- A stock ownership guidelines policy applicable to the President and CEO requiring the attained ownership of our common stock with a
value of at least three (3) times current annual base salary, satisfied by shares owned directly or indirectly (e.g., spouse or trust accounts), amounts invested in a 401(k) plan or held
in a deferred compensation plan, or time-vested restricted stock, stock units or phantom stock. During the attainment period, the President and CEO must retain 100% of his vested long-term incentive
plan shares (after-tax) granted on or after January 1, 2015, with limited exceptions, until such time that he is in compliance with his ownership requirement (as discussed above, at
March 2, 2015, Mr. Beecher had met 80% of his share ownership requirement),
-
- An executive compensation recovery, or "clawback," policy that would seek to recover overpayments of incentive-based compensation, if
any, in the event of a restatement of our financial statements due to material noncompliance with any financial reporting requirement under securities laws,
-
- An anti-hedging policy designed to prohibit our officers from directly or indirectly engaging in hedging against future declines in
market value of our securities through the purchase of financial instruments designed to offset such risk,
-
- A Change In Control Severance Pay Plan ("Severance") that includes a "double-trigger" (requiring a change in control and termination
of employment) (see discussion under "Potential Payments upon Termination and Change in Control"),
-
- A provision preventing non-vested equity awards from accelerating after a change in control unless the executive is terminated, and
-
- The absence of employment agreements or guaranteed compensation arrangements between us and our executive officers other than the
Change In Control severance agreement.
Analysis of Executive Officer Compensation
The Committee believes the 2014 mix of compensation elements (based on target-level incentive opportunities) available to our President
and Chief Executive Officer ("CEO") and all other Named Executive Officers ("NEOs") as illustrated below reflects our commitment to an executive compensation program that rewards individuals for
performance.
14
Table of Contents
2014 Target Compensation Mix
|
|
|
President and CEO |
|
Average of Other NEOs |
|
|
|
With
respect to the 2014 compensation of Mr. Bradley P. Beecher, our President and CEO, approximately 57% of his total target direct compensation opportunity consisted of at-risk
compensation in the form of short-term cash and long-term stock incentives. The average at-risk compensation for the other NEOs was approximately 45% of their total target direct compensation in 2014.
Beginning
in 2015, the Committee has elected to make modifications to the mix of compensation elements available to our President and Chief Executive Officer to more closely align the
total target direct compensation associated with the position to the 25th percentile level of an industry-specific peer group (see "Benchmarking" below). This
modification increased Mr. Beecher's 2015 level of at-risk compensation opportunity to 61% of his total target direct compensation while reducing his base salary element to 39% of total target
direct compensation, as illustrated below.
2015 Target Compensation Mix
President and CEO
The
average mix of 2015 compensation elements for all NEOs other than the President and Chief Executive Officer remained unchanged from 2014.
When
establishing Mr. Beecher's compensation, the Committee does not consider the actuarially-estimated change in pension value reported under the "Change in Pension
Value and Nonqualified Deferred Compensation Earnings" column in the Summary Compensation Table of our Proxy Statements. Mr. Beecher participates in the traditional defined benefit pension
formula option and related DB-SERP. The Committee believes that the estimated change in pension value does not represent current compensation paid to Mr. Beecher for his service as President
and CEO, as Mr. Beecher's pension benefits are not realizable until the time of his retirement. In calculating Mr. Beecher's future pension benefits, his total years of service with our
Company are included in our benefit formula, rather than only those years he has served as our President and CEO.
Additionally, the estimated change in Mr. Beecher's pension value is based on a life expectancy of 87 years. The table below shows Mr. Beecher's total compensation as reported in
our Summary Compensation Table, the annual
15
Table of Contents
amounts
of estimated change in pension value included in his total compensation, and the amount of his compensation that excludes the change in his estimated pension value.
|
|
|
|
|
|
|
|
|
|
|
Year
|
|
Total Compensation
Reported on Summary
Compensation Table |
|
Change in Pension Value
Reported on Summary
Compensation Table |
|
Total Compensation
Excluding Change in
Pension Value |
|
2014 |
|
$ |
2,089,074 |
|
$ |
724,106 |
|
$ |
1,364,968 |
|
2013 |
|
$ |
1,333,504 |
|
$ |
62,628 |
|
$ |
1,270,876 |
|
2012 |
|
$ |
929,198 |
|
$ |
252,290 |
|
$ |
676,908 |
|
The
Committee believes the Total Compensation Excluding Change in Pension Value is more representative of the actual compensation value Mr. Beecher received for his service as
President and CEO during each year of service. This same type of assessment regarding actuarially-estimated change in pension value and the realization of pension benefits is applicable to each NEO.
The Role of the Compensation Committee
The Compensation Committee, on behalf of the Board of Directors, administers our director and executive compensation programs. The
Committee meets at scheduled times during the year and on an as-needed basis. The duties and responsibilities of the Committee are described in its charter (which has been approved by the full Board
of Directors) and include:
-
- Assisting the Board of Directors in establishing and overseeing director and executive officer compensation policies and practices,
-
- Hiring, terminating and directing the activities of the independent compensation consultant,
-
- Reviewing and analyzing general industry and peer group compensation data,
-
- Reviewing and approving executive officer goals, objectives and compensation levels,
-
- Evaluating executive officer performance,
-
- Monitoring the application of the Executive Compensation Clawback Policy,
-
- Making recommendations to the Board of Directors as to the form and amount of director compensation levels, and
-
- Considering the outcome of the stockholder advisory votes on executive compensation when evaluating executive compensation policies
and practices and when making future executive compensation decisions.
The Role of the President and CEO
The President and CEO attends Committee meetings, including the meeting where the Committee deliberates base salary changes and annual
incentive metrics and performance measures for executive officers. His role with regard to each executive officer at these meetings includes:
-
- Reviewing the performance of each executive officer against position accountabilities and Annual Incentive Plan ("AIP") metrics and
performance measures, and recommending AIP awards for the just-ended performance year (generally, the calendar year to which a particular set of AIP metrics and performance measures are related),
-
- Making base salary adjustment recommendations for the ensuing performance year for each executive officer,
-
- Reviewing and recommending AIP metrics and performance measures for the ensuing performance year, and
-
- Responding to questions Committee members may have regarding base salary levels and AIP metrics, performance measures and awards.
The
President and CEO does not directly participate in the deliberations of the Committee and he is not present during, nor does he take part in any way in, the Committee's deliberations
with respect to establishing his compensation.
16
Table of Contents
The Role of the Consultant
As previously discussed, the Committee periodically directly engages a compensation consultant to assist it in accomplishing its
responsibilities. During 2014, the Committee engaged Hay Group (the "Consultant"), an independent compensation consulting firm, to perform a review of executive compensation practices, which
included:
-
- Analysis of leading practices and trends in the utility industry,
-
- Review and evaluation of our compensation program and compensation levels as compared to compensation practices of other companies
with similar characteristics, including size and type of business (see discussion of industry-specific peer group under "Benchmarking"),
-
- Recommendation of an appropriate industry-specific peer group of companies,
-
- Recommendation of the relative positioning of each of our executive officer positions to similar positions within an industry-specific
peer group of companies,
-
- Performing calculations necessary to determine recommendations for performance-based equity awards, and
-
- Recommending the structure of the executive compensation program relative to the results of its analysis of industry-specific peer
group companies.
The
Consultant's 2014 review serves as the basis for compensation decisions beginning with the 2015 performance year and will continue to be the basis for compensation decisions until
such time that the Committee engages an independent consultant to perform a subsequent review. The most recent executive compensation review prior to the 2014 review was performed by the same
Consultant in 2012. The work performed by the Consultant during their 2012 review served as the basis for the compensation decisions during 2014.
The Role of Stockholder Say-on-Pay Advisory Votes
We provide our stockholders with the opportunity to cast an annual advisory vote on executive compensation (a "say-on-pay advisory
proposal" as described under Section 2, "MATTERS TO BE CONSIDERED AT THE ANNUAL MEETING"). At our annual meeting of stockholders held on May 1, 2014, a substantial majority
of the votes cast on the say-on-pay advisory proposal at that meeting were voted in favor of the proposal. The Committee believes this affirms stockholders' support of our approach to executive
compensation.
Compensation Philosophy
The Committee sets target compensation levels in a manner designed to:
-
- Be competitive and enable the Company to attract and retain executive talent,
-
- Be conservative with respect to our peer group, and
-
- Provide incentive for executives to achieve individual and company performance goals.
As
discussed earlier, the Committee's compensation philosophy targets the 25th percentile level of an industry-specific peer group of companies (see
"Benchmarking" below) for Base Salary, Total Cash Compensation and Total Direct Compensation, while continuing to maintain a range concept to recognize differing levels of experience. The
Committee believes the comparison to compensation levels of similar peer group positions is reflective of our executive officer's roles and responsibilities and is therefore appropriate for
comparison.
17
Table of Contents
Benchmarking
As noted above, during 2014 the Committee set the compensation benchmark (i.e., the 25th percentile) based on a 2012
executive compensation review performed by the Consultant. This review incorporated the results of a survey of executive compensation practices utilized by an industry-specific peer group of
companies.
The
industry-specific peer group of companies that was recommended by the Consultant and adopted by the Committee for 2014 represented publicly traded electric, gas, combined electric
and gas, and water utilities comparable to Empire in terms of sales, market value, growth characteristics, and assets. The 2014 peer group of companies, set forth in the table below, was also adopted
by the Committee for 2015.
|
|
|
|
|
ALLETE, Inc. |
|
Cleco Corporation |
|
NorthWestern Corporation |
American States Water Company |
|
El Paso Electric Company |
|
Otter Tail Corporation |
Aqua America, Inc. |
|
IDACORP, Inc. |
|
South Jersey Industries, Inc. |
Black Hills Corporation |
|
MGE Energy, Inc. |
|
Unitil Corporation |
California Water Services Group |
|
Northwest Natural Gas Company |
|
UNS Energy Corporation(1) |
Chesapeake Utilities |
|
|
|
|
- (1)
- UNS
Energy Corporation was acquired by Fortis Inc. on August 15, 2014
Base Salary
During their most recent review, the Consultant made base salary target recommendations to the Committee for each position with
consideration given to our compensation philosophy. Base salary targets are reviewed periodically as described above to ensure our executive positions are comparable with positions of similar levels
of responsibility in the peer group of companies.
At
the beginning of the performance year, the President and CEO reviewed executive officer performance with, and made Base Salary recommendations to the Committee for all executive
officers other than himself. Based upon his review and recommendations, and with consideration given to peer group information provided by the Consultant, the Committee set the Base Salary of each
such executive officer for the ensuing performance year. The Committee independently appraised the performance of the President and CEO, and set his Base Salary accordingly. The Committee will
determine any Base Salary adjustments necessary throughout the year should material changes in office or responsibilities occur.
Annual Cash Incentives
The Annual Cash Incentive portion of Total Cash Compensation is designed to reward executive officers for performance that benefits our
shareholders, customers, and other stakeholders. Performance incentive opportunities are derived from individual AIPs, whereby executive officers can earn additional cash compensation based on
performance measured against short-term tactical goals that focus on operating conditions and circumstances of a particular performance year. These tactical goals are developed from and lend support
to our long-term vision and goals.
During 2014, the Annual Cash Incentive opportunity at target levels of performance for each NEO was as follows:
|
|
|
|
|
Position
|
|
Annual Cash
Incentive as a
Percentage of
Base Salary |
|
President and Chief Executive Officer |
|
|
55 |
% |
Vice President and Chief Financial Officer |
|
|
40 |
% |
Vice President and Chief Operating OfficerElectric |
|
|
40 |
% |
Vice President and Chief Operating OfficerGas |
|
|
40 |
% |
All Other NEOs |
|
|
35 |
% |
The
2014 AIPs included common corporate performance metrics, specific operational metrics related to each NEO's area of responsibility, and subjective performance metrics whereby each
NEO was evaluated in areas of leadership, engagement of workforce, accountability, and overall job performance. As illustrated below, the corporate performance metrics comprised the most significant
portion of the 2014 AIPs. These metrics are
18
Table of Contents
composed
of performance measures related to Earnings Per Share ("EPS") of our common stock, control of capital expenditures and operating and maintenance expenses, overall corporate safety, and
electric system operating performance. The Annual Cash Incentive opportunity blend by category of performance metric for each NEO is illustrated below:
|
|
|
|
|
|
|
|
|
|
|
Position
|
|
Corporate
Performance
Metrics |
|
Operational
Performance
Metrics |
|
Subjective
Performance
Metrics |
|
President and Chief Executive Officer |
|
|
70 |
% |
|
0 |
% |
|
30 |
% |
Vice-PresidentFinance and CFO |
|
|
55 |
% |
|
35 |
% |
|
10 |
% |
Vice-President and COOElectric |
|
|
55 |
% |
|
35 |
% |
|
10 |
% |
All Other NEOs |
|
|
50 |
% |
|
40 |
% |
|
10 |
% |
Each
executive officer provided the President and CEO input on a set of proposed operational performance metrics and measures related to their areas of responsibility for the 2014
performance year. One or more performance measures were developed for each metric. The President and CEO evaluated the proposed metrics and performance measures, made any necessary modifications, and
presented the recommended suite of performance metrics and measures for himself and all other executive officers to the Committee. The Committee reviewed his recommendations for consistency,
measurability, and equity relative to individual responsibilities and, together with their assessment of our near-term objectives, made any necessary adjustments to individual AIPs before approving.
Once
metrics, performance measures and weightings were determined, total target Annual Cash Incentive amounts were calculated for each executive officer with consideration given to the
Total Cash Compensation philosophy discussed above. Threshold and maximum performance levels are also developed for each performance measure. Threshold and maximum amounts for 2014 were equal to 50%
and 200%, respectively, of the target level amount. Beginning in 2015, the Committee has elected to reduce the maximum amount to 150% of the target level amount. If an executive does not perform at
least at a threshold level of expected performance with regard to any particular individual performance measure, no incentive compensation is awarded with respect to that performance measure.
Likewise, no award greater than the maximum award is paid when performance exceeds the maximum level of expected performance required to earn such award.
Performance
measure ranges are generally linked to the threshold, target and maximum performance award levels. For instance, to qualify for the threshold performance award under a
performance measure of operating and maintenance expense control, an executive must operate their responsibility area at no greater than +10% of budgeted expenses. To qualify for the maximum
performance award under the same performance measure, an executive must operate their responsibility area at 10% of budgeted expenses. The qualification criteria for other performance
measures may be whether the executive accomplished or did not accomplish the measure. Under this criterion, the executive must fully accomplish the measure to qualify for any
award. AIP measurements may be either quantitative or qualitative. Measurements considered qualitative, if any, are identified as such below.
Each
executive officer's AIP performance and indicated payout were reviewed by the President and CEO with the Committee following the conclusion of the performance year. The Committee
considered his review and recommendations, made any appropriate adjustments and determined the amount of Annual Cash Incentive earned by each executive. The Committee independently appraised the
performance of the President and CEO, and determined his incentive award accordingly.
The
Committee established the corporate performance EPS metric as the most significant single metric of the 2014 AIP. At target performance levels, this metric encompassed 40% of the
CEO's Annual Cash Incentive opportunity, 25% of the CFO's Annual Cash Incentive Opportunity, and 20% of each other NEO's Annual Cash Incentive opportunity. The Committee set EPS target performance at
$1.44, the midpoint of our 2014 full-year earnings guidance range of $1.38 to $1.50 published in February 2014. Threshold and maximum performance levels were set at $0.05 below and $0.05 above our
published guidance range, respectively. Actual EPS results for 2014 were $1.55, or the maximum level (200% of target) of performance.
Corporate
performance metrics related to control of capital expenditures and operating and maintenance expenses comprised 15% of each NEO's Annual Cash Incentive opportunity. The
Committee established the targets at total-company budgeted capital expenditures (excluding major generation and environmental projects as such projects are considered in the operational performance
metrics of the responsible executive) and total-Company budgeted operating and maintenance expenses. For corporate performance purposes, the
19
Table of Contents
Committee
set the threshold level of opportunity for capital expenditures at 10% above budgeted expenditures, while the maximum level of opportunity was set at 10% below budgeted expenditures.
Similarly, the Committee established threshold and maximum levels of opportunity for corporate performance purposes at 5% above and 5% below the budgeted level of operating and maintenance expenses,
respectively. Actual capital expenditures, exclusive of generation and environmental projects, were 4.9% below budget, or between target and maximum (149% of target) performance. Actual operating and
maintenance expense was 1.7% below budget, or between target and maximum (134% of target) performance.
The
corporate safety performance metric DART (Days Away from work, Restricted work activity, or job Transfer) rate comprised 10% of each NEO's Annual Cash Incentive
opportunity. For 2014, the Committee set the DART rate target at 1.20. The corporate operations performance metric SAIDI (System Average Interruption Duration Index, (which is a measure of the length
of time (in minutes) of service interruptions our customers experience ) rate made up 10% of Ms. Walters' Annual Cash Incentive opportunity, and 5% of each of the other NEOs' Annual Cash
Incentive opportunity. For 2014, the SAIDI rate target was set at 145 minutes. The 2014 target level performance value for both of these metrics represented an improvement over 2013 actual
performance levels. The actual 2014 DART rate was 1.33, or between threshold and target (94% of target) performance. The actual 2014 SAIDI rate was 133, or between target and maximum (155% of target)
performance.
Operating
and maintenance expense control was also established as a specific operational-area metric for Ms. Delano, Ms. Walters, Mr. Gatz and Mr. Penning.
The Committee also established control of capital expenditures as a specific operational-area metric for Ms. Walters and Mr. Gatz. Ms. Walters' capital expenditure metric was
comprised of major generation and environmental projects (which were excluded from the corporate performance capital expenditure metric applicable to all NEOs), while Mr. Gatz's capital
expenditure metric included all capital expenditures related to his area of responsibility. The Committee set the measurement range for operational-area operating and maintenance expense control at
10% above and 10% below the operating area budgets, while maintaining the capital expenditure measurement range for operational areas similar to the corporate performance range of 10% above and 10%
below the operating area budget.
Ms. Delano's
investor relations and rating agency interactions metric involved activities designed to promote and maintain constructive relationships with credit rating agencies
and the investor community, including research coverage. Her internal control environment metric focused on ensuring the Company does not experience financial restatements or material control
weaknesses, and maintaining an internal control environment that reflects the most recent Commission of Sponsoring Organizations ("COSO") framework.
Mr. Penning's
Kodiak Service Center transition metric involved the effective transition from our outdated service center to our new state-of-the-art service center, insuring that
no customers were impacted by the transition and recognition of efficiencies and cost savings.
20
Table of Contents
The results of corporate performance metrics and related performance measures, expressed as a percentage of the total target Annual
Cash Incentive opportunity available to each NEO relative to the level of performance attained, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Metric
Performance Measures
|
|
Weighting
|
|
Threshold
50% of Target
|
|
Target
100%
|
|
Maximum
200% of Target
|
|
Actual
Performance
|
|
Earnings Per Share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CEO |
|
|
40 |
% |
|
20 |
% |
|
40 |
% |
|
80 |
% |
80% |
CFO |
|
|
25 |
% |
|
12.5 |
% |
|
25 |
% |
|
50 |
% |
50% |
All other NEOs |
|
|
20 |
% |
|
10 |
% |
|
20 |
% |
|
40 |
% |
40% |
|
Corporate Level Expense Control |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Expenditures |
|
|
5 |
% |
|
2.5 |
% |
|
5 |
% |
|
10 |
% |
7.45% |
Operating and Maintenance Expense |
|
|
10 |
% |
|
5 |
% |
|
10 |
% |
|
20 |
% |
13.4% |
|
Safety Performance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DART Rate |
|
|
10 |
% |
|
5 |
% |
|
10 |
% |
|
20 |
% |
9.4% |
|
Operations Performance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SAIDI RateVP and COOElectric |
|
|
10 |
% |
|
5 |
% |
|
10 |
% |
|
20 |
% |
15.5% |
SAIDI RateAll other NEOs |
|
|
5 |
% |
|
2.5 |
% |
|
5 |
% |
|
10 |
% |
7.75% |
|
Based
upon the actual performance results relative to target for the corporate performance metrics, each NEO was awarded the following Annual Cash Incentive:
|
|
|
|
|
|
|
|
|
|
Corporate Performance
Metrics |
|
|
|
Target Award
Opportunity |
|
Actual
Award |
|
Mr. Beecher |
|
$ |
196,350 |
|
$ |
330,990 |
|
Ms. Delano |
|
$ |
63,800 |
|
$ |
102,080 |
|
Ms. Walters |
|
$ |
64,900 |
|
$ |
101,185 |
|
Mr. Gatz |
|
$ |
50,000 |
|
$ |
78,000 |
|
Mr. Penning |
|
$ |
39,375 |
|
$ |
61,425 |
|
The results of the operational metrics and performance measures for each NEO other than the President and CEO are illustrated below.
Ms. Delano
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Metric
Performance Measures
|
|
Weighting
|
|
Threshold
50% of Target
|
|
Target
100%
|
|
Maximum
200% of Target
|
|
Actual
Performance
|
|
Operational Area Expense Control |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating and Maintenance Expenses |
|
|
10 |
% |
|
5 |
% |
|
10 |
% |
|
20 |
% |
14.1% |
Interest costs (excl. long term debt and AFUDC(1)) |
|
|
5 |
% |
|
2.5 |
% |
|
5 |
% |
|
10 |
% |
Below Threshold |
|
Capital Markets/Governance
Investor Relations and Rating Agency Interactions |
|
|
10 |
% |
|
5 |
% |
|
10 |
% |
|
20 |
% |
20% |
Internal Control Environment |
|
|
10 |
% |
|
5 |
% |
|
10 |
% |
|
20 |
% |
20% |
|
- (1)
- Allowance
for Funds Used During Construction
21
Table of Contents
Ms. Walters
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Metric
Performance Measures
|
|
Weighting
|
|
Threshold
50% of Target
|
|
Target
100%
|
|
Maximum
200% of Target
|
|
Actual
Performance
|
|
Operational Area Expense Control |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating and Maintenance Expense |
|
|
10 |
% |
|
5 |
% |
|
10 |
% |
|
20 |
% |
12% |
Fuel and Purchased Power Expenses |
|
|
5 |
% |
|
2.5 |
% |
|
5 |
% |
|
10 |
% |
4.31% |
|
Operations Performance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SAIFI Rate(1) (target=1.37) |
|
|
5 |
% |
|
2.5 |
% |
|
5 |
% |
|
10 |
% |
3.88% |
|
Customer Service Performance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer Contactsresponse and resolution time |
|
|
5 |
% |
|
2.5 |
% |
|
5 |
% |
|
10 |
% |
8.25% |
|
Capital Projecttimeline and cost management |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asbury Air Quality Control System (AQCS) Project |
|
|
5 |
% |
|
2.5 |
% |
|
5 |
% |
|
10 |
% |
5% |
Riverton Unit 12 Combined Cycle (CC) Project |
|
|
5 |
% |
|
2.5 |
% |
|
5 |
% |
|
10 |
% |
9.2% |
|
- (1)
- System
Average Interruption Frequency Index
Mr. Gatz
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Metric
Performance Measures
|
|
Weighting
|
|
Threshold
50% of Target
|
|
Target
100%
|
|
Maximum
200% of Target
|
|
Actual
Performance
|
|
Operational Area Expense Control |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Expenditures |
|
|
10 |
% |
|
5 |
% |
|
10 |
% |
|
20 |
% |
20% |
Operating and Maintenance Expenses |
|
|
10 |
% |
|
5 |
% |
|
10 |
% |
|
20 |
% |
10.2% |
|
OperationsGas |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Missouri Public Service Commission (MPSC) Safety Auditsmaterial violations, areas of concern |
|
|
5 |
% |
|
2.5 |
% |
|
5 |
% |
|
10 |
% |
7.2% |
|
Customer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential Customer Growth (target=0.25%) |
|
|
10 |
% |
|
5 |
% |
|
10 |
% |
|
20 |
% |
Below Threshold |
MPSC Non-Payment Related Commission Complaints (CC) (target=15) |
|
|
5 |
% |
|
2.5 |
% |
|
5 |
% |
|
10 |
% |
10% |
|
Mr. Penning
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Metric
Performance Measures
|
|
Weighting
|
|
Threshold
50% of Target
|
|
Target
100%
|
|
Maximum
200% of Target
|
|
Actual
Performance
|
|
Operational Area Expense Control |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating and Maintenance Expense |
|
|
10 |
% |
|
5 |
% |
|
10 |
% |
|
20 |
% |
10.3% |
|
Operations Performance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SAIFI Rate (target=1.37) |
|
|
5 |
% |
|
2.5 |
% |
|
5 |
% |
|
10 |
% |
3.88% |
Kodiak Service Centertransition and efficiencies |
|
|
10 |
% |
|
5 |
% |
|
10 |
% |
|
20 |
% |
20% |
|
Customer Service Performance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer Contactsresponse and resolution time |
|
|
15 |
% |
|
7.5 |
% |
|
15 |
% |
|
30 |
% |
24.75% |
|
Based
upon actual performance results relative to target for the operational performance metrics described above, the Annual Cash Incentive award for each NEO was as follows:
|
|
|
|
|
|
|
|
|
|
Operational Performance
Metrics |
|
|
|
Target Award
Opportunity |
|
Actual
Award |
|
Ms. Delano |
|
$ |
40,600 |
|
$ |
62,756 |
|
Ms. Walters |
|
$ |
41,300 |
|
$ |
50,313 |
|
Mr. Gatz |
|
$ |
40,000 |
|
$ |
47,400 |
|
Mr. Penning |
|
$ |
31,500 |
|
$ |
46,403 |
|
22
Table of Contents
It was the Committee's evaluation that the executive management team provided effective leadership, employee engagement, and noteworthy
performance as a team and on an individual level that resulted in increased customer and shareholder value, a safe and productive work environment, and fulfillment of short- and long-term performance
goals. Based upon the Committee's evaluation of individual performance, the Annual Cash Incentive award related to the subjective performance metrics (a qualitative measure), which represents 30% of
the total target Annual Cash Incentive opportunity for the President and CEO and 10% of the total target Annual Cash Incentive opportunity for each other NEO, was as follows:
|
|
|
|
|
|
|
|
|
|
Subjective Performance
Metrics |
|
|
|
Target Award
Opportunity |
|
Actual
Award |
|
Mr. Beecher |
|
$ |
84,150 |
|
$ |
84,150 |
|
Ms. Delano |
|
$ |
11,600 |
|
$ |
11,600 |
|
Ms. Walters |
|
$ |
11,800 |
|
$ |
11,800 |
|
Mr. Gatz |
|
$ |
10,000 |
|
$ |
10,000 |
|
Mr. Penning |
|
$ |
7,875 |
|
$ |
7,875 |
|
Total
AIP target award opportunities and actual AIP award results for each of the Company's NEOs during fiscal 2014 were as follows:
The
average Annual Cash Incentive award for all executive officers over the previous five performance years, including the President and CEO, but excluding the 2011 award that was earned
but not paid and partial year results for new or retiring executive officers, was approximately 132% of the target opportunity amounts.
On
February 4, 2015, Mr. Penning was awarded a cash incentive amount of $13,125, representing a pro-rata portion of his 2015 target Annual Cash Incentive opportunity of
$78,750 due to his retirement from the Company on February 28, 2015.
The Committee has structured the 2015 AIP so that the Annual Cash Incentive award opportunity as a percentage of Base Salary is as
follows.
|
|
|
|
|
Position
|
|
Annual Cash
Incentive as a
Percentage of
Base Salary |
|
President and Chief Executive Officer |
|
|
65 |
% |
Vice President and Chief Financial Officer |
|
|
40 |
% |
Vice President and Chief Operating OfficerElectric |
|
|
40 |
% |
Vice President and Chief Operating OfficerGas |
|
|
40 |
% |
All Other NEOs |
|
|
35 |
% |
23
Table of Contents
The
2015 blend of award opportunity by category of performance metric for each NEO is described below:
|
|
|
|
|
|
|
|
|
|
|
Position
|
|
Corporate
Performance
Metrics |
|
Operational
Performance
Metrics |
|
Subjective
Performance
Metrics |
|
President and Chief Executive Officer |
|
|
70 |
% |
|
0 |
% |
|
30 |
% |
Vice-PresidentFinance and CFO |
|
|
50 |
% |
|
40 |
% |
|
10 |
% |
Vice-President and COOElectric |
|
|
55 |
% |
|
35 |
% |
|
10 |
% |
All Other NEOs |
|
|
50 |
% |
|
40 |
% |
|
10 |
% |
As
mentioned above, in order to deliver incentive compensation consistent with the compensation philosophy, the Committee has set the 2015 threshold and maximum opportunities at 50% and
150%, respectively, of the target level opportunity. This represents a reduction in the maximum opportunity from the 2014 level of 200%. Similar to 2014, the Committee established the corporate
performance EPS metric as the most significant single metric of the 2015 AIP. At target performance levels, this metric encompasses 45% of the CEO's Annual Cash Incentive opportunity and 25% of each
of the other NEO's Annual Cash Incentive opportunity. The Committee set EPS target performance at $1.38, the midpoint of our 2015 full-year earnings guidance range of $1.30 to $1.45 published in
February 2015. Threshold was set at $1.25, $0.05 below our published guidance range, and maximum was set at $1.55, the level of our 2014 full-year EPS results.
Control
of capital expenditures comprises 5% of each NEO's Annual Cash Incentive opportunity. The Committee established the target at total-company budgeted capital expenditures
(excluding major generation and environmental projects). For corporate performance purposes, the Committee set the threshold level of opportunity for capital expenditures at 10% above budgeted
expenditures, while the maximum level of opportunity was set at 10% below budgeted expenditures.
Due
to the magnitude of its impact on customer costs, a fuel and purchased power cost metric has been added to the suite of corporate performance metrics for the 2015 performance year.
This new metric replaces the operating and maintenance expense metric that was utilized in 2014. The fuel and purchased power cost corporate performance metric represents 10% of Ms. Walters'
Annual Cash Incentive opportunity, and 5% of each other NEO's Annual Cash Incentive opportunity. This expense component has little impact on net income due to our fuel adjustment mechanisms. However,
fuel cost is a significant portion of our customers' rates. Thus the
Committee believes management of such cost is essential to providing least cost service to our customers. The Committee established threshold and maximum levels of opportunity at 10% above and 5%
below the budgeted per Megawatt hour cost of fuel and purchased power, respectively.
The
corporate safety performance metric DART rate comprises 10% of each NEO's corporate performance metric. For 2015, the Committee set the DART rate target at 1.30 (with threshold and
maximum set at 2.2 and 0.9, respectively). The 2015 target level performance value for the DART rate metric represents an improvement over 2014 actual performance of 1.33. The corporate operations
performance metric SAIDI rate makes up 5% of each NEO's corporate performance metric. For 2015, the SAIDI rate target was set at 136 minutes (with threshold and maximum set at
157 minutes and 119 minutes, respectively).
Ms. Delano's
investor relations and rating agency interactions metric involves activities designed to promote and maintain constructive relationships with credit rating agencies
and the investor community, including research coverage. Her internal control environment and process improvement metrics focus on ensuring we do not experience financial restatements or material
control weaknesses, maintaining an internal control environment that ensures the minimization of accounting errors, and leading initiatives to improve processes within the finance and accounting area.
Ms. Walter's
capital projects metric is comprised of major generation projects, which were excluded from the corporate performance capital expenditure metric applicable to all
NEOs. The Committee set the measurement range for her capital projects metric similar to the corporate performance range of 10% above and 10% below the operating area budget. Ms. Walters'
process improvement metric focuses on initiatives to improve processes in the operational areas of the Company.
Mr. Gatz's
cyber security metric involves the adoption by the Company of a cyber security policy and review of the Company's mitigating activities.
24
Table of Contents
The
2015 corporate and operational performance metrics and measures, expressed as a percentage of the total target Annual Cash Incentive opportunity available to each NEO (other than
Mr. Penning) relative to the level of performance attained, are presented in the following tables.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Metric
Performance Measures
|
|
Weighting
|
|
Threshold
Opportunity
50% of Target
|
|
Target
Opportunity
|
|
Maximum
Opportunity
150% of Target
|
|
|
|
Earnings Per Share |
|
|
|
|
|
|
|
|
|
|
|
|
|
CEO |
|
|
45 |
% |
|
22.5 |
% |
|
45 |
% |
|
67.5 |
% |
All other NEOs |
|
|
25 |
% |
|
17.5 |
% |
|
35 |
% |
|
52.5 |
% |
|
|
Corporate Level Expense Control |
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Expenditures |
|
|
5 |
% |
|
2.5 |
% |
|
5 |
% |
|
7.5 |
% |
Fuel and Purchased Power CostsVP and COOElectric |
|
|
10 |
% |
|
5 |
% |
|
10 |
% |
|
15 |
% |
Fuel and Purchased Power CostsAll other NEOs |
|
|
5 |
% |
|
2.5 |
% |
|
5 |
% |
|
7.5 |
% |
|
|
Safety Performance |
|
|
|
|
|
|
|
|
|
|
|
|
|
DART Rate |
|
|
10 |
% |
|
5 |
% |
|
10 |
% |
|
15 |
% |
|
|
Operations Performance |
|
|
|
|
|
|
|
|
|
|
|
|
|
SAIDI Rate |
|
|
5 |
% |
|
2.5 |
% |
|
5 |
% |
|
7.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Metric
Performance Measures
|
|
Weighting
|
|
Threshold
Opportunity
50% of Target
|
|
Target
Opportunity
|
|
Maximum
Opportunity
150% of Target
|
|
|
|
Capital Markets/Governance |
|
|
|
|
|
|
|
|
|
|
|
|
|
Investor Relations and Rating Agency Interactions |
|
|
10 |
% |
|
5 |
% |
|
10 |
% |
|
15 |
% |
Internal Control Environment |
|
|
10 |
% |
|
5 |
% |
|
10 |
% |
|
15 |
% |
|
|
Process Improvementsplan and implementation |
|
|
10 |
% |
|
5 |
% |
|
10 |
% |
|
15 |
% |
|
|
Financial Performancefinancial results modeling |
|
|
10 |
% |
|
5 |
% |
|
10 |
% |
|
15 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Metric
Performance Measures
|
|
Weighting
|
|
Threshold
Opportunity
50% of Target
|
|
Target
Opportunity
|
|
Maximum
Opportunity
150% of Target
|
|
|
|
Operations Performance |
|
|
|
|
|
|
|
|
|
|
|
|
|
Project Toughen Upplan and budget, SAIFI rate |
|
|
10 |
% |
|
5 |
% |
|
10 |
% |
|
15 |
% |
|
|
Customer Service Performance |
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer Contactsresponse and resolution times |
|
|
5 |
% |
|
2.5 |
% |
|
5 |
% |
|
7.5 |
% |
|
|
Capital Projectstimeline and cost management |
|
|
|
|
|
|
|
|
|
|
|
|
|
Riverton Unit 12 Combined Cycle (CC) Project |
|
|
10 |
% |
|
5 |
% |
|
10 |
% |
|
15 |
% |
|
|
Process Improvementsplan and implementation |
|
|
10 |
% |
|
5 |
% |
|
10 |
% |
|
15 |
% |
|
|
25
Table of Contents
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Metric
Performance Measures
|
|
Weighting
|
|
Threshold
Opportunity
50% of Target
|
|
Target
Opportunity
|
|
Maximum
Opportunity
150% of Target
|
|
|
|
Operational Area Expense Control |
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Expenditures |
|
|
10 |
% |
|
5 |
% |
|
10 |
% |
|
15 |
% |
|
|
OperationsGas |
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Missouri Public Service Commission (MPSC) Safety Auditsmaterial violations and areas of concern |
|
|
5 |
% |
|
2.5 |
% |
|
5 |
% |
|
7.5 |
% |
|
|
Residential Customer Growth (target = 0.25%) |
|
|
5 |
% |
|
2.5 |
% |
|
5 |
% |
|
7.5 |
% |
MPSC Non-Credit Related Commission Complaints (CC)(target = 10) |
|
|
5 |
% |
|
2.5 |
% |
|
5 |
% |
|
7.5 |
% |
|
|
Information Technology/Cyber Security |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cyber Policyadoption and audit |
|
|
10 |
% |
|
5 |
% |
|
10 |
% |
|
15 |
% |
Energy Management System Design Projecttimeline and cost management |
|
|
5 |
% |
|
2.5 |
% |
|
5 |
% |
|
7.5 |
% |
|
|
The subjective performance metric (a qualitative measure) is weighted at 30% of the total target Annual Cash Incentive opportunity for
the President and CEO and 10% of the total target Annual Cash Incentive opportunity for each other NEO. Similar to 2014, the Committee will evaluate each NEO's performance in areas of leadership,
engagement of workforce, accountability, and overall job performance.
Total
AIP target award opportunities attainable by each of our NEOs (other than Mr. Penning) during the 2015 performance year are:
The
2015 AIP metrics and measures are not presented for Mr. Penning due to his retirement from the Company on February 28, 2015.
Long-Term Incentives
Long-Term Incentives consist of time-vested restricted stock awards and performance-based restricted stock awards. Both forms of award
are discussed in more detail below. Equity awards were granted under our 2006 Stock Incentive Plan (SIP). The 2006 SIP, which was set to expire on December 31, 2015, was replaced by the 2015
Stock Incentive Plan, which was approved by stockholders in 2014. This plan became effective for equity awards granted after January 1, 2015. Prior to 2015, where fair market value was used to
establish the grant date value of stock awards, fair market value was determined by calculating the average value between the high and low stock trading prices reported on the New York Stock Exchange
on the day of the grant. Beginning in 2015, fair market value means the closing price of our stock as reported on the New York Stock Exchange on the day of the grant.
The
Long-Term Incentive element is designed to motivate executive officers over the long-term to put forth maximum effort in contributing to the continued success and growth of Empire,
and to ensure the interests of the executive officers are aligned with those of stockholders. In addition, Long-Term Incentives provide a measure of retention incentive for executive officers, leading
to enhanced stability of our senior management team.
26
Table of Contents
During
2014, the target Long-Term Incentive opportunity for the President and CEO was equal to 80% of his annual base salary. The target Long-Term Incentive opportunity for the
Vice-President and Chief Financial Officer, Vice-President and Chief Operating OfficerElectric, and the Vice- President and Chief Operating OfficerGas was equal to 45% of
their annual base salary. The Long-Term Incentive opportunity for all other executive officers was equal to 30% of their annual base salary. As with Total Cash Compensation, Total Direct Compensation
at target-level performance will approximate the 25th percentile of the Total Direct Compensation of the industry-specific peer group of companies for all executive officers.
Beginning
in 2015, in order to continue to provide the opportunity to achieve the 25th percentile level of peer group Total Direct Compensation, the Committee has
modified the Long-Term Incentive opportunity for the President and CEO to represent 90% of his annual base salary. The Committee maintained the 2014 level of Long-Term Incentive opportunity for the
Vice-President and Chief Financial Officer, Vice-President and Chief Operating OfficerElectric, and the Vice-President and Chief Operating OfficerGas at 45% of their annual
base salary. The Long-Term Incentive opportunity for all other executive officers was modified to represent 35% of their annual base salary.
At
target levels of performance, the time-vested restricted stock award is intended to represent approximately one-half the total value of each executive officer's Long-Term Incentive
opportunity, with the performance-based restricted stock award representing the remaining half.
Time-vested restricted stock awards granted to executive officers provide the opportunity to receive a number of shares of common stock
at the end of a three-year vesting period. No dividend rights accumulate during the vesting period.
If
employment terminates during the vesting period because of death, retirement, or disability, the executive is entitled to a pro-rata portion of the time-vested restricted stock awards
such executive would otherwise have earned. If employment is terminated during the vesting period for reasons other than those listed above, the
time-vested restricted stock awards will be forfeited on the date of the termination unless the Committee determines, in its sole discretion, that the executive is entitled to a pro-rata portion of
such award.
Performance-based restricted stock awards granted to executive officers provide the opportunity to receive a number of shares of common
stock at the end of a three-year performance period if performance goals set forth in the award are satisfied. The performance goals are tied to the percentile ranking of Empire's total stockholder
return (share price appreciation or decline over the performance period plus cumulative value of dividends paid over the performance period, assuming reinvestment, divided by the stock price at the
beginning of the performance period) for the three-year performance period as measured over the same period against all publicly traded, investor-owned electric utility companies (the "comparator
group"). The target level of performance under the 2014 grants was set at the 50th percentile ranking when compared to this group. The threshold level was set at the
20th percentile, while the maximum level was set at the 80th percentile.
At
the end of the performance period (December 31, 2016 for awards granted in 2014), the executive would earn 100% of the target number of shares if the target
(50th percentile) level of performance is reached. If the threshold level of performance is reached, the executive would earn 50% of the target number of shares. If performance
reaches or exceeds the maximum level, the executive would earn 200% of the target number of shares. When performance levels are between the threshold and maximum performance levels, the amount of
shares the executive earns is interpolated. No shares are earned if the threshold level of performance is not reached. The Consultant prepares an analysis of our total stockholder return percentile
ranking for the just-ended three-year performance period relative to the comparator group described above. Based upon this analysis, the Consultant calculates the appropriate number of
performance-based restricted stock shares to be awarded each executive. Performance-based restricted stock awards are approved by the Committee at the first meeting of the year. The total stockholder
return for the three year performance period ended December 31, 2014, was 17.3%, or approximately the 62nd percentile of the comparator group. No performance-based
restricted stock awards were made in 2012 (the grant year of the three year performance period ended December 31, 2014) in accordance with the normal application of the executive compensation
program due to the triggering of a limitation on incentive compensation brought about by the Board's decision to temporarily suspend the common stock dividend following the EF-5 tornado that struck
the Joplin, Missouri area in May, 2011. However, in order to recognize outstanding
27
Table of Contents
efforts
by management subsequent to the event described above, the Committee granted discretionary performance-based restricted stock awards in 2012. Over the previous five 3-year performance cycles,
we have averaged a total stockholder return ranking slightly above the 40th percentile.
If
employment terminates during the performance period because of death, retirement, or disability, the executive is entitled to a pro-rata portion of the performance-based restricted
stock awards such executive would otherwise have earned. If employment is terminated during the performance period for reasons other than those listed
above, the performance-based restricted stock awards will be forfeited on the date of the termination unless the Committee determines, in its sole discretion, that the executive is entitled to a pro-
rata portion of such award.
Change in Control
We maintain a Change In Control Severance Pay Plan that covers executive officers as well as our other key employees who are not
executive officers. The purpose of the plan is to assure continuity in leadership, continued focus, and dedication to customer and stockholder interests during and immediately after a change in
control by mitigating the personal concerns that may confront a participant as a result of such an event. The plan provides severance pay benefits upon termination of employment after a change in
control. This requirement of a "double-trigger" (i.e., the requirement that there be a change in control and a termination of employment) was instituted to balance the interests of the
executive, Empire and our stockholders. There are several conditions that could constitute a change in control, but primarily, a change in control occurs if a merger or consolidation with, or sale to,
another corporation or entity is consummated. The Change In Control Severance Pay Plan is discussed more fully under the section entitled "Potential Payments upon Termination and Change
in Control."
We
have not entered into any form of employment agreements with any executive officer other than agreements under the Change In Control Severance Pay Plan.
Other Benefits
Executive officers participate in the same 401(k) and Retirement Plans that cover substantially all our other employees (see
"Pension Benefits" below). With the exception of certain plans specifically referenced in this discussion, the executive officers participate in the same health and welfare plans and
under the same plan provisions available to all our other employees.
Our
Articles of Incorporation and bylaws contain provisions permitted by the Kansas General Corporation Code which, in general terms, provide that officers and directors will be
indemnified by us for all losses that may be incurred by them in connection with any claim or legal action in which they may become involved by reason of their service as our officers or directors, if
they meet certain specified conditions, and provide for the advancement by us to the officers and directors of expenses incurred by them in defending suits arising out of their service as an officer
or director. The Board has authorized us to enter into indemnity agreements with officers and directors that provide for similar indemnification and advancement of expenses. The officers and directors
are also covered by insurance indemnifying them against certain liabilities which might be incurred by them in their capacities as officers and directors. The premium for this insurance is paid by us.
Compensation Committee Report
The Committee has reviewed and discussed the Compensation Discussion and Analysis (which is set forth above) with management. Based on
this review and discussions, the Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.
Thomas
M. Ohlmacher, Chairman
D. Randy Laney
Kenneth R. Allen
Paul R. Portney
Herbert J. Schmidt
28
Table of Contents
Summary Compensation Table
Set forth below is summary compensation information for each person who was (1) at any time during 2014 our Chief Executive
Officer or Chief Financial Officer and (2) at December 31, 2014, one of our three most highly compensated executive officers, other than the Chief Executive Officer and the Chief
Financial Officer (collectively, the "Named Executive Officers").
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name and Principal
Position
(a)
|
|
Year
(b) |
|
Salary
($)
(c) |
|
Bonus(1)
($)
(d) |
|
Stock
Awards(2)(3)
($)
(e) |
|
Stock
Options
($)
(f) |
|
Non-Equity
Incentive Plan
Compensation(4)
($)
(g) |
|
Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings(5)
($)
(h) |
|
All Other
Compensation(6)(7)
($)
(i) |
|
Total
($)
(j) |
|
Bradley P. Beecher, |
|
|
2014 |
|
|
510,000 |
|
|
0 |
|
|
429,510 |
|
|
0 |
|
|
415,140 |
|
|
724,106 |
|
|
10,318 |
|
|
2,089,074 |
|
President and Chief |
|
|
2013 |
|
|
459,000 |
|
|
0 |
|
|
397,286 |
|
|
0 |
|
|
402,405 |
|
|
62,628 |
|
|
12,185 |
|
|
1,333,504 |
|
Executive Officer |
|
|
2012 |
|
|
323,825 |
|
|
0 |
|
|
123,114 |
|
|
0 |
|
|
220,759 |
|
|
252,290 |
|
|
9,210 |
|
|
929,198 |
|
Laurie A. Delano, |
|
|
2014 |
|
|
290,000 |
|
|
0 |
|
|
140,353 |
|
|
0 |
|
|
176,436 |
|
|
406,617 |
|
|
9,336 |
|
|
1,022,742 |
|
Vice President |
|
|
2013 |
|
|
261,000 |
|
|
0 |
|
|
128,929 |
|
|
0 |
|
|
181,604 |
|
|
132,580 |
|
|
8,855 |
|
|
712,968 |
|
Finance and Chief |
|
|
2012 |
|
|
177,677 |
|
|
0 |
|
|
19,312 |
|
|
0 |
|
|
86,995 |
|
|
114,080 |
|
|
5,865 |
|
|
403,929 |
|
Financial Officer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kelly S. Walters, |
|
|
2014 |
|
|
295,000 |
|
|
0 |
|
|
140,353 |
|
|
0 |
|
|
163,298 |
|
|
338,883 |
|
|
10,922 |
|
|
948,456 |
|
Vice President and |
|
|
2013 |
|
|
266,000 |
|
|
0 |
|
|
133,051 |
|
|
0 |
|
|
170,092 |
|
|
24,124 |
|
|
8,834 |
|
|
602,101 |
|
Chief Operating |
|
|
2012 |
|
|
242,667 |
|
|
2,000 |
|
|
24,140 |
|
|
0 |
|
|
112,877 |
|
|
186,552 |
|
|
7,936 |
|
|
576,851 |
|
Officer-Electric |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ronald F. Gatz, |
|
|
2014 |
|
|
250,000 |
|
|
0 |
|
|
121,186 |
|
|
0 |
|
|
135,400 |
|
|
259,111 |
|
|
10,375 |
|
|
776,072 |
|
Vice President and |
|
|
2013 |
|
|
250,000 |
|
|
0 |
|
|
124,808 |
|
|
0 |
|
|
142,750 |
|
|
90,571 |
|
|
10,535 |
|
|
618,664 |
|
Chief Operating |
|
|
2012 |
|
|
195,700 |
|
|
0 |
|
|
19,312 |
|
|
0 |
|
|
83,050 |
|
|
114,587 |
|
|
9,767 |
|
|
422,416 |
|
Officer-Gas |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Martin O. Penning, |
|
|
2014 |
|
|
225,000 |
|
|
0 |
|
|
74,401 |
|
|
0 |
|
|
115,703 |
|
|
482,649 |
|
|
7,213 |
|
|
905,416 |
|
Vice President |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- (1)
- Ms. Walters'
2012 award is related to efforts put forth during the implementation of our enterprise application software upgrade.
- (2)
- Amounts
shown for stock awards represent the grant date fair value determined in accordance with Financial Accounting Standards Board Accounting Standard
Codification Topic 718 ("FASB ASC Topic 718") for the applicable year relating to such awards. A discussion of the assumptions used to value these awards can be found under Note 8 to our
Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2014 (the "2014 10-K").
- (3)
- Represents
the grant date fair value (determined in accordance with FASB ASC Topic 718) for the applicable year relating to awards of time- vested
restricted stock and performance-based restricted stock. No time-vested restricted stock awards were made by the Compensation Committee in 2012 due to the triggering of a limitation on incentive
compensation as a result of a temporary dividend suspension. The 2012 performance-based restricted stock awards were also subject to this same limitation on incentive compensation. However, in order
to recognize outstanding efforts by management subsequent to the triggering event, the Compensation Committee granted discretionary performance-based restricted stock awards in 2012.
Includes amounts relating to grants of time-vested restricted stock as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
February |
|
|
|
2012 |
|
2013 |
|
2014 |
|
B.P. Beecher |
|
$ |
0 |
|
$ |
160,511 |
|
$ |
180,030 |
|
L.A. Delano |
|
$ |
0 |
|
$ |
52,259 |
|
$ |
58,705 |
|
K.S. Walters |
|
$ |
0 |
|
$ |
54,126 |
|
$ |
58,705 |
|
R.F. Gatz |
|
$ |
0 |
|
$ |
50,393 |
|
$ |
50,878 |
|
M.O. Penning |
|
|
N/A |
|
|
N/A |
|
$ |
31,309 |
|
Includes amounts relating to grants of performance-based restricted stock as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
February |
|
|
|
2012 |
|
2013 |
|
2014 |
|
B.P. Beecher |
|
$ |
123,114 |
|
$ |
236,775 |
|
$ |
249,480 |
|
L.A. Delano |
|
$ |
19,312 |
|
$ |
76,670 |
|
$ |
81,648 |
|
K.S. Walters |
|
$ |
24,140 |
|
$ |
78,925 |
|
$ |
81,648 |
|
R.F. Gatz |
|
$ |
19,312 |
|
$ |
74,415 |
|
$ |
70,308 |
|
M.O. Penning |
|
|
N/A |
|
|
N/A |
|
$ |
43,092 |
|
The amounts set forth in the table relating to performance-based restricted stock represent the grant date fair value of such awards assuming the target level of
performance is attained. Assuming the maximum level of performance is attained, the grant date fair value of such awards would be as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
February |
|
|
|
2012 |
|
2013 |
|
2014 |
|
B.P. Beecher |
|
$ |
246,228 |
|
$ |
473,550 |
|
$ |
498,900 |
|
L.A. Delano |
|
$ |
38,624 |
|
$ |
153,340 |
|
$ |
163,296 |
|
K.S. Walters |
|
$ |
48,280 |
|
$ |
157,850 |
|
$ |
163,296 |
|
R.F. Gatz |
|
$ |
38,624 |
|
$ |
148,830 |
|
$ |
140,616 |
|
M.O. Penning |
|
|
N/A |
|
|
N/A |
|
$ |
86,184 |
|
29
Table of Contents
- (4)
- Represents
cash awards under our Executive Officer Annual Incentive Plan (AIP). Ms. Delano requested her 2012 awards, which were paid in 2013, be
paid in the form of Empire common stock rather than cash.
- (5)
- Represents
the difference between the actuarial present value of each Named Executive Officer's accumulated benefit under all defined benefit plans at
December 31 of the applicable year and the actuarial present value of each Named Executive Officer's accumulated benefit under all defined benefit plans at December 31 of the preceding
year. During 2014, Mr. Beecher, Ms. Delano, Ms. Walters, Mr. Gatz, and Mr. Penning participated in the traditional benefit formula option of The Empire District
Electric Company Employees' Retirement Plan ("Retirement Plan") and The Empire District Electric Company Supplemental Executive Retirement Plan (DB-SERP). During 2014 Mr. Gatz elected to
participate in the cash balance formula option (accompanied by an enhanced 401(k) matching formula) of the Retirement Plan beginning January 1, 2015 and, as a result, will also participate in
our DC-SERP, our new non-qualified deferred compensation plan. Because of this election during 2014, Mr. Gatz's qualified plan benefit and underlying present value factor is determined
differently than those participants who chose the traditional benefit formula option. This factor implicitly calculates an opening cash balance account and projects forward with the cash balance
formula option's interest crediting rate. The actuarial present value of each Named Executive Officer's accumulated benefit is affected in part by the discount rate assumption. The discount rate
assumption used to determine the actuarial present value of each Named Executive Officer's accumulated benefit was 4.00%, 4.90%, and 4.06% during the 2012, 2013 and 2014 measurement periods,
respectively. The decrease in the discount rate assumption from the 2013 measurement period to the 2014 measurement period was the driving factor in the increase in actuarial present value of the
Retirement Plan benefit between the 2013 and the 2014 periods. Other factors that affected the accumulated benefit for each Named Executive Officer during the 2014 measurement period included an
additional year of credited service, increased average annual earnings as a result of an additional year of compensated service, and decreased pension-eligible incentive compensation as a result of
the triggering during 2011 of the limitation on incentive compensation described in Note 3 above. These factors are described more fully in the narrative discussion to the Pension Benefits
table below. The amount of change in the pension value attributable to the Retirement Plan and the DB-SERP is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
2012 |
|
2013 |
|
2014 |
|
B.P. Beecher |
|
|
|
|
|
|
|
|
|
|
Retirement Plan |
|
$ |
134,915 |
|
$ |
(51,892 |
) |
$ |
180,038 |
|
DB-SERP |
|
$ |
117,375 |
|
$ |
114,520 |
|
$ |
544,068 |
|
L.A. Delano |
|
|
|
|
|
|
|
|
|
|
Retirement Plan |
|
$ |
114,080 |
|
$ |
73,500 |
|
$ |
202,970 |
|
DB-SERP |
|
$ |
0 |
|
$ |
59,080 |
|
$ |
203,647 |
|
K.S. Walters |
|
|
|
|
|
|
|
|
|
|
Retirement Plan |
|
$ |
153,527 |
|
$ |
(30,623 |
) |
$ |
144,594 |
|
DB-SERP |
|
$ |
33,025 |
|
$ |
54,747 |
|
$ |
194,238 |
|
R.F. Gatz |
|
|
|
|
|
|
|
|
|
|
Retirement Plan |
|
$ |
95,610 |
|
$ |
42,168 |
|
$ |
145,392 |
|
DB-SERP |
|
$ |
18,977 |
|
$ |
48,403 |
|
$ |
113,719 |
|
M.O. Penning |
|
|
|
|
|
|
|
|
|
|
Retirement Plan |
|
|
N/A |
|
|
N/A |
|
$ |
371,464 |
|
DB-SERP |
|
|
N/A |
|
|
N/A |
|
$ |
111,184 |
|
Prior to 2015, none of the Named Executive Officers participated in a non-qualified deferred compensation arrangement.
- (6)
- Includes
matching contributions under our 401(k) Retirement Plan and payment of term life insurance premiums as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
2012 |
|
2013 |
|
2014 |
|
B.P. Beecher |
|
|
|
|
|
|
|
|
|
|
401(k) Matching Contribution |
|
$ |
7,500 |
|
$ |
7,650 |
|
$ |
8,750 |
|
Term Life premium |
|
$ |
1,710 |
|
$ |
1,710 |
|
$ |
1,568 |
|
L.A. Delano |
|
|
|
|
|
|
|
|
|
|
401(k) Matching Contribution |
|
$ |
5,091 |
|
$ |
6,420 |
|
$ |
8,627 |
|
Term Life premium |
|
$ |
774 |
|
$ |
774 |
|
$ |
710 |
|
K.S. Walters |
|
|
|
|
|
|
|
|
|
|
401(k) Matching Contribution |
|
$ |
7,232 |
|
$ |
7,650 |
|
$ |
8,750 |
|
Term Life premium |
|
$ |
705 |
|
$ |
1,184 |
|
$ |
1,214 |
|
R.F. Gatz |
|
|
|
|
|
|
|
|
|
|
401(k) Matching Contribution |
|
$ |
5,843 |
|
$ |
7,403 |
|
$ |
7,471 |
|
Term Life premium |
|
$ |
2,736 |
|
$ |
3,132 |
|
$ |
2,904 |
|
M.O. Penning |
|
|
|
|
|
|
|
|
|
|
401(k) Matching Contribution |
|
|
N/A |
|
|
N/A |
|
$ |
5,461 |
|
Term Life premium |
|
|
N/A |
|
|
N/A |
|
$ |
1,752 |
|
- (7)
- Includes
perquisites and personal benefits if the aggregate value of such perquisites and personal benefits for each Named Executive Officer exceeds
$10,000. Perquisites and other personal benefits for 2012, 2013 and 2014 for Named Executive Officers were not included in the Summary Compensation Table because the aggregate value, based upon the
actual cost to Empire of the perquisites, did not exceed $10,000. Other compensation for 2013 for Mr. Beecher and Ms. Delano includes a tax "gross-up" of $2,825 and $1,661, respectively,
related to the provision of medical examinations. Other compensation for 2014 for Ms. Walters includes a tax "gross-up" of $958 related to the provision of a medical examination.
30
Table of Contents
Grants of Plan-Based Awards
The following table shows information about plan-based awards granted during fiscal 2014 to the Named Executive Officers.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All other
Stock
Awards:
Number of
Shares of
Stock or
Units(3)
(#)
(i) |
|
|
|
|
|
|
|
Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards(1) |
|
Estimated Future Payouts
Under Equity Incentive Plan
Awards(2) |
|
Grant Date
Fair Value
of Stock
Awards(4)
($)
(j) |
|
Name
(a)
|
|
Grant
Date
(b) |
|
Threshold
($)
(c) |
|
Target
($)
(d) |
|
Maximum
($)
(e) |
|
Threshold
(#)
(f) |
|
Target
(#)
(g) |
|
Maximum
(#)
(h) |
|
B.P. Beecher |
|
|
02/05/2014 |
|
|
140,250 |
|
|
280,500 |
|
|
561,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N/A |
|
|
|
|
02/05/2014 |
|
|
|
|
|
|
|
|
|
|
|
5,500 |
|
|
11,000 |
|
|
22,000 |
|
|
|
|
|
249,480 |
|
|
|
|
02/05/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,200 |
|
|
180,030 |
|
L.A. Delano |
|
|
02/05/2014 |
|
|
58,000 |
|
|
116,000 |
|
|
232,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N/A |
|
|
|
|
02/05/2014 |
|
|
|
|
|
|
|
|
|
|
|
1,800 |
|
|
3,600 |
|
|
7,200 |
|
|
|
|
|
81,648 |
|
|
|
|
02/05/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,000 |
|
|
58,705 |
|
K.S. Walters |
|
|
02/05/2014 |
|
|
59,000 |
|
|
118,000 |
|
|
236,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N/A |
|
|
|
|
02/05/2014 |
|
|
|
|
|
|
|
|
|
|
|
1,800 |
|
|
3,600 |
|
|
7,200 |
|
|
|
|
|
81,648 |
|
|
|
|
02/05/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,000 |
|
|
58,705 |
|
R.F. Gatz |
|
|
02/05/2014 |
|
|
50,000 |
|
|
100,000 |
|
|
200,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N/A |
|
|
|
|
02/05/2014 |
|
|
|
|
|
|
|
|
|
|
|
1,550 |
|
|
3,100 |
|
|
6,200 |
|
|
|
|
|
70,308 |
|
|
|
|
02/05/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,600 |
|
|
50,878 |
|
M.O. Penning(5) |
|
|
02/05/2014 |
|
|
39,375 |
|
|
78,750 |
|
|
157,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N/A |
|
|
|
|
02/05/2014 |
|
|
|
|
|
|
|
|
|
|
|
950 |
|
|
1,900 |
|
|
3,800 |
|
|
|
|
|
43,092 |
|
|
|
|
02/05/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,600 |
|
|
31,309 |
|
- (1)
- Represents
cash award opportunities under our Executive Officer AIP. Actual AIP cash award payouts are presented in the Summary Compensation Table, column
g.
- (2)
- Represents
grants of performance-based restricted stock.
- (3)
- Represents
grants of time-vested restricted stock.
- (4)
- In
the case of performance-based restricted stock, represents the value of such awards at the grant date based upon the target level of performance, which
is consistent with the estimate of the aggregate compensation cost to be recognized over the service period determined as of the grant date under FASB ASC Topic 718, excluding the effect of estimated
forfeitures.
- (5)
- Mr. Penning
will be entitled to the distribution of a pro-rata portion of the non-equity and equity incentive awards (based on target grant) due to
his retirement from the Company on February 28, 2015.
Narrative Disclosure to Summary Compensation Table and Grants of Plan- Based Awards Table
Grants of awards under our Executive Officer Annual Incentive Plan are disclosed in the Grants of Plan-Based Awards Table in the year
they are granted. The value of the award is disclosed in the Summary Compensation Table in the year when the performance criteria under the plan are satisfied and the compensation earned. For example,
the amount set forth in the Summary Compensation Table for 2014 represents the award made in the beginning of 2014 to be paid in early 2015 based on the performance during 2014. No awards were paid in
early 2012 as a result of a limitation on incentive compensation in place in 2011. This limitation provided that, regardless of the extent to which any performance goals were met in any calendar year,
no incentive compensation was to be provided to any executive for any year in which we did not pay dividends per share of common stock at least equal to the dividends per share paid in the preceding
year. Ms. Delano requested that her 2012 award be paid in the form of Empire common stock rather than cash.
Grants of awards of performance-based restricted stock and the grant date fair value (determined in accordance with FASB ASC Topic 718)
of such awards are disclosed in the Grants of Plan-Based Awards Table in the year they are granted. The grant date fair value of such awards is also disclosed under Stock Awards in the Summary
Compensation Table in the year when the awards are made. The performance-based restricted share
31
Table of Contents
awards
underlying the Stock Awards in the Summary Compensation Table for each Named Executive Officer are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
Award |
|
2013
Award |
|
2014
Award |
|
B.P. Beecher |
|
|
5,100 |
|
|
10,500 |
|
|
11,000 |
|
L.A. Delano |
|
|
800 |
|
|
3,400 |
|
|
3,600 |
|
K.S. Walters |
|
|
1,000 |
|
|
3,500 |
|
|
3,600 |
|
R. F. Gatz |
|
|
800 |
|
|
3,300 |
|
|
3,100 |
|
M.O Penning |
|
|
N/A |
|
|
N/A |
|
|
1,900 |
|
Grants of awards of time-vested restricted stock and the full grant date fair value (determined in accordance with FASB ASC Topic 718)
of such awards are disclosed in the Grants of Plan-Based Awards Table in the year they are granted. The grant date fair value of such awards is also disclosed under Stock Awards in the Summary
Compensation Table in the year when the awards are made. No time-vested restricted shares were granted in 2012 due to the triggering during 2011 of the limitation on incentive compensation described
above. The time-vested restricted stock awards underlying the Stock Awards in the Summary Compensation Table for each Named Executive Officer are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
Award |
|
2013
Award |
|
2014
Award |
|
B.P. Beecher |
|
|
0 |
|
|
8,600 |
|
|
9,200 |
|
L.A. Delano |
|
|
0 |
|
|
2,800 |
|
|
3,000 |
|
K.S. Walters |
|
|
0 |
|
|
2,900 |
|
|
3,000 |
|
R. F. Gatz |
|
|
0 |
|
|
2,700 |
|
|
2,600 |
|
M.O. Penning |
|
|
N/A |
|
|
N/A |
|
|
1,600 |
|
Outstanding Equity Awards at Fiscal Year-End
The following table provides information with respect to the common stock that may be issued upon the exercise of options and other
awards under our existing equity compensation plans as of December 31, 2014.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards |
|
Stock Awards |
|
Name
(a)
|
|
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable(1)
(b) |
|
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
(c) |
|
Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#)
(d) |
|
Option
Exercise
Price
($)
(e) |
|
Option
Expiration
Date
(f) |
|
Number
of
Shares
or Units
of Stock
That
Have Not
Vested
(#)
(g)(2) |
|
Market
Value of
Shares
or Units
of Stock
That
Have Not
Vested
($)
(h)(3) |
|
Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights That
Have Not
Vested(4)
(#)
(i) |
|
Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units
or Other
Rights That
Have Not
Vested(5)
($)
(j) |
|
B.P. Beecher |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
N/A |
|
|
N/A |
|
|
17,800 |
|
|
536,403 |
|
|
26,600 |
|
|
801,591 |
|
L.A. Delano |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
N/A |
|
|
N/A |
|
|
5,800 |
|
|
174,783 |
|
|
7,800 |
|
|
235,053 |
|
K.S. Walters |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
N/A |
|
|
N/A |
|
|
5,900 |
|
|
177,797 |
|
|
8,100 |
|
|
244,094 |
|
R. F. Gatz |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
N/A |
|
|
N/A |
|
|
5,300 |
|
|
159,716 |
|
|
7,200 |
|
|
216,972 |
|
M.O. Penning |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
N/A |
|
|
N/A |
|
|
3,100 |
|
|
93,419 |
|
|
4,400 |
|
|
132,594 |
|
- (1)
- All
remaining options were exercised during 2014 (see "Option Exercises and Stock Vested" below).
- (2)
- Represents
the number of shares attainable at fiscal year-end 2014 underlying the time-vested restricted stock granted in 2013 and 2014.
- (3)
- Represents
the value, based on the stock price at December 31, 2014, of the time-vested restricted stock listed in column (g).
- (4)
- Represents
the total number of shares attainable at the target level of performance for the 2012, 2013 and 2014 grants of performance-based restricted
stock.
- (5)
- Represents
the value, based on the stock price at December 31, 2014, of the performance-based restricted stock listed in column (i).
32
Table of Contents
Option Exercises and Stock Vested
The following table provides information with respect to the number and value of shares acquired during 2014 from the exercise of
vested stock options, dividend equivalents and the vesting of performance-based stock awards.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards |
|
Stock Awards |
|
Name
(a)
|
|
Number of
Shares Acquired
on Exercise
(#)
(b) |
|
Value Realized
on Exercise
($)
(c) |
|
Number of
Shares Acquired
on Vesting(1)
(#)
(d) |
|
Value Realized
on Vesting
($)
(e) |
|
B.P. Beecher |
|
|
762 |
|
|
18,611 |
|
|
1,100 |
|
|
25,278 |
|
L.A. Delano(2) |
|
|
N/A |
|
|
N/A |
|
|
N/A |
|
|
N/A |
|
K.S. Walters |
|
|
325 |
|
|
8,214 |
|
|
800 |
|
|
18,384 |
|
R. F. Gatz |
|
|
1,201 |
|
|
29,332 |
|
|
700 |
|
|
16,086 |
|
M.O. Penning(3) |
|
|
N/A |
|
|
N/A |
|
|
N/A |
|
|
N/A |
|
- (1)
- Represents
the vesting of time-vested restricted stock awards granted in 2011.
- (2)
- Ms. Delano
did not receive equity awards prior to becoming an executive officer on August 1, 2011.
- (3)
- Mr. Penning
did not receive equity awards prior to becoming an executive officer on February 4, 2011.
Pension Benefits
We maintain The Empire District Electric Company Employees' Retirement Plan ("Retirement Plan") covering substantially all of our
employees.
The
Retirement Plan is a noncontributory, trusteed pension plan designed to meet the requirements of Section 401(a) of the Internal Revenue Code. The Retirement Plan was modified
in 2014 to include a cash balance formula option coupled with an enhanced 401(k) matching formula. Normal retirement under the Retirement Plan's traditional benefit formula option is at age 65, with
early retirement at a reduced benefit level permitted under certain conditions. We maintain a Supplemental Executive Retirement Plan (DB-SERP) which covers the executive officers who participate in
the traditional benefit formula option of the Pension Plan. As explained below, this supplemental plan is intended to provide benefits which, except for the applicable limits of Section 415 and
Section 401(a)(17) of the Internal Revenue Code, would have been payable under the Pension Plan. The supplemental plan is not qualified under the Internal Revenue Code and benefits payable
under the plan are paid out of our general funds.
In
2014, the Pension Plan was modified to allow current employees the option of electing a defined benefit cash formula coupled with an enhanced 401(K) matching formula. In addition,
beginning in 2015, we have established a supplemental Deferred Compensation Plan (DC-SERP) for the purpose of allowing executive officers who elect to participate in the qualifying cash balance option
of the Retirement Plan to obtain retirement savings that are not available to them under the 401(k) plan due to the exclusion of incentive compensation from the 401(k) plan's definition of
compensation, and the compensation limits imposed on the 401(k) plan by the aforementioned Section 401(a)(17). The Deferred Compensation Plan is intended to constitute a non-qualified deferred
compensation plan within the meaning of Section 409A(d)(1) of the Internal Revenue Code, and to qualify for
various exemptions from the requirements of the Employee Retirement Income Security Act of 1974 ("ERISA") as an unfunded arrangement for the benefit of a select group of management or highly
compensated employees.
33
Table of Contents
The
following table sets forth, with respect to each Named Executive Officer, the actuarial present value at December 31, 2014 of accumulated benefits under the Retirement Plan
and the DB-SERP, the number of years of credited service and the payments made under such plans during 2014.
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
(a)
|
|
Plan Name
(b) |
|
Number
of Years
Credited
Service
(#)
(c) |
|
Present
Value of
Accumulated
Benefit(1)
($)
(d) |
|
Payments
During
Last
Fiscal
Year
($)
(e) |
|
B.P. Beecher |
|
The Empire District Electric Company Employee's Retirement Plan |
|
|
25.1 |
|
$ |
656,049 |
|
|
0 |
|
|
|
The Empire District Electric Company Supplemental Executive Retirement Plan |
|
|
25.1 |
|
$ |
1,073,349 |
|
|
0 |
|
L.A. Delano |
|
The Empire District Electric Company Employee's Retirement Plan |
|
|
22.8 |
|
$ |
709,397 |
|
|
0 |
|
|
|
The Empire District Electric Company Supplemental Executive Retirement Plan |
|
|
22.8 |
|
$ |
262,726 |
|
|
0 |
|
K.S. Walters |
|
The Empire District Electric Company Employee's Retirement Plan |
|
|
22.5 |
|
$ |
618,171 |
|
|
0 |
|
|
|
The Empire District Electric Company Supplemental Executive Retirement Plan |
|
|
22.5 |
|
$ |
369,455 |
|
|
0 |
|
R.F. Gatz(2) |
|
The Empire District Electric Company Employee's Retirement Plan |
|
|
13.8 |
|
$ |
662,567 |
|
|
0 |
|
|
|
The Empire District Electric Company Supplemental Executive Retirement Plan |
|
|
13.8 |
|
$ |
259,039 |
|
|
0 |
|
M.O. Penning(3) |
|
The Empire District Electric Company Employee's Retirement Plan |
|
|
34.6 |
|
$ |
1,118,836 |
|
|
0 |
|
|
|
The Empire District Electric Company Supplemental Executive Retirement Plan |
|
|
34.6 |
|
$ |
138,667 |
|
|
0 |
|
- (1)
- Value
represents Actuarial Present Value of age 65 monthly benefit. Assumed discount rate of 4.06%, no pre-retirement mortality or decrements, no
collar adjustment and post-retirement mortality tables for males and females (projected on a static basis) required by the Pension Protection Act of 2006 and published by the Internal Revenue Service
for funding valuations in 2014. The Retirement Plan was amended in 2014 to allow participants the option of choosing a lump sum benefit or the traditional annuity benefit. Accordingly the Actuarial
Present Value factors applied to each NEOs' age 65 monthly benefit under the qualified pension plan reflects a blending assuming 85% of participants elect a lump sum benefit and 15% elect an
annuity benefit. The Actuarial Present Value factors applicable to the DB-SERP are not blended as DB-SERP benefits are only available as an annuity.
- (2)
- During
2014, Mr. Gatz elected to participate in the cash balance formula option of the Retirement Plan. As such, the Actuarial Present Value factor
used to determine his accumulated benefit at present value implicitly calculates an opening cash balance account and projects forward with the cash balance formula option's interest crediting rate.
- (3)
- Mr. Penning
retired on February 28, 2015.
Normal
retirement under the Retirement Plan's traditional benefit formula option is age 65, or, for individuals hired after December 31, 1996 and within 5 years of their
65th birthday, normal retirement will be the 5th anniversary of their hire date. Retirement benefits under the traditional benefit formula are calculated based on credited
service, average annual earnings, and Social Security covered compensation. The formula used to determine normal retirement benefits is as follows:
-
- 1.2625% of average annual earnings up to Social Security covered compensation times years of credited service up to 35 years,
plus
-
- 1.64125% of average annual earnings in excess of Social Security covered compensation times years of credited service up to
35 years, plus
-
- 1.64125% of average annual earnings times years of credited service in excess of 35 years up to a maximum of 5 additional years
of covered service.
Earnings
include base salary, cash incentive amounts, the value of performance-based restricted stock and time-vested restricted stock on the award date, and dividend equivalents. The
2014 calculation of pension benefits was impacted by the triggering of the limitation on incentive compensation described above which reduced the level of pension-eligible incentive compensation that
was considered in the benefit calculation. Average annual
34
Table of Contents
earnings
is the average of annual earnings over the five consecutive years within the ten-year period prior to termination of employment which produces the highest average. Early retirement is
available at age 55 with 5 years of eligibility service. The benefit is calculated in the same manner as the normal retirement benefit before applying early retirement reduction factors which
reduce the normal retirement benefit by a certain percentage. For instance, the normal retirement benefit is reduced by 25% if an employee elects to retire at age 55. If an employee terminates
employment after completing five years of vesting service (a plan year after age 18 in which the employee completes 1,000 hours of service), such employee is entitled to a benefit beginning at
age 65. The benefit is calculated in the same manner as the normal retirement benefit. Forms of benefits include lump sum, life only annuity, and 25%, 331/3%, 50%,
662/3%, or 75% joint and survivor ("J&S") benefits. Election of the J&S benefit (only available to married participants) has the effect of reducing the employee's benefit. The reduction
is dependent on the employee's age, the spouse's age, and the J&S benefit percentage elected.
Normal
retirement under the Retirement Plan's cash balance formula option is identical to the Plan's traditional benefit option. Retirement benefits under the cash balance formula are
based on pay credits equal to a percentage of earnings and interest credits at a current effective rate of 5%. Pay credits increase over time (based on participant age plus years of credited service)
from 3% for participants under the age of 40 to 7% for participants age 70 or greater. The opening account balance for participants who elected during 2014 to move from the traditional benefit formula
to the cash balance benefit formula was established as the actuarially equivalent lump-sum value of their traditional formula benefit. Pay and interest credits are applied to participant account
balances at the end of each calendar year. Under the cash balance formula, participants who have 3 or more years of vesting service at the time their employment with the Company ends are entitled to
receive the benefits they have accrued through their termination date. Forms of benefit include lump sum, life only annuity, and 25%, 50% or 75% J&S benefits. As with the traditional benefit formula,
election of the J&S benefit has the effect of reducing the employee's benefit.
Executive
officers whose accrued benefit under the Retirement Plan is reduced by the limits set forth in Section 401 or Section 415 of the Internal Revenue Code, or whose
anticipated earnings for any year exceed $120,000, become a participant in the DB-SERP (or, after January 1, 2015, the DC-SERP, based upon their election to participate in the traditional
benefit formula or cash balance formula option). Generally, benefits payable under the DB-SERP equal the difference between the benefit calculated under the Retirement Plan without regard to Internal
Revenue Code limitations, and the benefit calculated under the Retirement Plan as limited by the Internal Revenue Code. Actuarial equivalencies are determined in accordance with the actuarial
assumptions set forth in the Retirement Plan.
Ms. Delano
and Mr. Gatz are eligible for early retirement under the terms of the Retirement Plan and the DB-SERP. The present value of Ms. Delano's and
Mr. Gatz's approximate early retirement benefit under the Retirement Plan, assuming retirement at December 31, 2014, is $897,528 and $649,315, respectively. The present value of
Ms. Delano's and Mr. Gatz's approximate early retirement benefit under the DB-SERP, payable as a single life annuity and assuming retirement at December 31, 2013, is $328,442 and
$253,859, respectively.
Potential Payments upon Termination and Change in Control
The Board of Directors adopted a Change In Control Severance Pay Plan ("Severance Plan") in 1991, amended most recently in 2008, that
covers our executive officers as well as our other key employees who are not executive officers. The Severance Plan provides severance payments and other benefits upon involuntary or voluntary
termination of employment after a Change In Control.
Change In Control
A Change In Control will be deemed to have occurred if:
- 1.
- A
merger or consolidation of Empire with any other corporation is consummated, other than a merger or consolidation which would result in our voting
securities held by such stockholders outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by converting into voting securities of the surviving entity)
more than 75% of the voting securities of Empire or such surviving entity outstanding immediately after such merger or consolidation;
- 2.
- A
sale, exchange or other disposition of all or substantially all the assets of Empire for the securities of another entity, cash or other property is
consummated;
- 3.
- Empire
stockholders approve a plan of liquidation or dissolution of Empire;
35
Table of Contents
- 4.
- Any
person, other than a trustee or other fiduciary holding securities under an employee benefit plan of Empire or other than a corporation owned directly or
indirectly by the stockholders of Empire in substantially the same proportions as their ownership of voting securities of Empire, is or becomes the beneficial owner, directly or indirectly, of voting
securities of Empire representing at least 25% of the total voting power represented by such securities then outstanding; or
- 5.
- Individuals
who on January 1, 2001 constituted the Empire Board of Directors and any new director whose election by the Empire Board of Directors or
nomination for election by Empire's stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors on January 1, 2001 or whose
election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof.
Involuntary Termination
An involuntary termination is deemed to occur if (1) we terminate the employment of the executive officer or key employee within
two years after a Change In Control other than for certain reasons (such as specified acts of willful misconduct, felony convictions or failure to perform duties) or (2) the executive officer
or key employee terminates the employment within two years after a Change In Control and within 180 days after a material reduction or material change in responsibilities or authority,
reassignment to another geographic location, or a reduction in base salary or incentive compensation or other benefits. Should an involuntary termination occur, an executive officer would be eligible
under the Severance Plan for a payment equal to 36 months of compensation. This compensation is based on the executive officer's annual base salary in effect immediately prior to the date of
termination plus the average of annual awards of incentive compensation made to the executive in the form of cash or restricted stock in the three calendar years immediately preceding the calendar
year of the involuntary termination. Payments pursuant to an involuntary termination of employment are made in the form of a lump sum within 30 days following termination.
Voluntary Termination
A voluntary termination is deemed to occur if the executive officer or key employee elects to terminate his or her employment between
the first anniversary date of a Change In Control and the date that is 18 months after the Change In Control. In the case of a voluntary termination, the executive officer or key employee would
be eligible for the same compensation as if it were an involuntary termination, with payment made in the form of a lump sum within 30 days following termination. In the event such executive
officer becomes re-employed, including certain forms of self-employment, within the 36 month period following a voluntary termination, the executive officer is required to repay a pro-rata
portion of the lump sum received under the Severance Plan to the Company.
Estimated
lump-sum severance payments and other benefits payable to named executive officers in the event of a Change In Control based on involuntary termination are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Cash
Severance
Benefit
($) |
|
Retirement
and SERP
Enhancement
($) |
|
Accelerated
Vesting of
Outstanding
Equity
Grants
($) |
|
Benefits
Continuation
($) |
|
Tax
Gross-Up
($) |
|
Total
Change in
Control
Benefit
($) |
|
B.P. Beecher |
|
|
2,506,056 |
|
|
1,413,583 |
|
|
682,583 |
|
|
60,089 |
|
|
2,600,668 |
|
|
7,262,979 |
|
L.A. Delano |
|
|
1,144,122 |
|
|
1,470,881 |
|
|
222,247 |
|
|
16,079 |
|
|
1,673,461 |
|
|
4,526,790 |
|
K.S. Walters |
|
|
1,322,249 |
|
|
544,381 |
|
|
225,475 |
|
|
30,281 |
|
|
1,122,011 |
|
|
3,244,397 |
|
R.F. Gatz |
|
|
1,129,307 |
|
|
693,012 |
|
|
203,221 |
|
|
16,079 |
|
|
1,086,996 |
|
|
3,128,615 |
|
M.O. Penning |
|
|
918,930 |
|
|
1,163,530 |
|
|
117,557 |
|
|
30,281 |
|
|
1,282,352 |
|
|
3,512,650 |
|
The
amounts in the above table assume that the Change In Control and the involuntary termination occurred on December 31, 2014, and the price of our common stock was the closing
market price on December 31, 2014. In order to receive Change in Control benefit payments outlined above, an executive officer is not required to satisfy any additional condition or obligation.
Executive
officers or key employees are eligible for continuation (under similar cost sharing arrangements as immediately prior to a Change In Control) of benefits and service credit for
benefits they would have received had they remained an employee of Empire (in the case of involuntary termination of an executive officer, a period of 36 months or, in the case of a voluntary
termination, for the period during which the executive officer is entitled
36
Table of Contents
to
receive the other severance benefits). Benefits include medical, life and accidental death and dismemberment insurance. Executive officers or key employees accumulate additional age and service
credits as a result of a Change In Control equal to the period corresponding to the multiple used to calculate the severance benefit (e.g., 36 months in the case of an executive officer). Such
executive officers or key employees are eligible to receive an enhanced retirement benefit equal to the difference between the retirement benefit they would receive (including Retirement Plan and SERP
benefits) had they not received additional age and service credits and the retirement benefit they would receive when such additional age and service credits are included.
Executive
officers are also entitled to a pro-rata portion of restricted shares of Company common stock granted under the Stock Incentive Plan. The total of such shares is based on the
assumption of achievement of target performance goals, if applicable, and is prorated based upon the portion of the performance or restriction period completed at the time of a Change In Control. If
any payments to qualifying individuals are subject to the excise tax on "excess parachute payments" under Section 4999 of the Internal Revenue Code, such qualifying individual(s) will receive
an additional gross-up amount designed to place them in the same after-tax position as if the excise tax had not been imposed.
Director Compensation
Our non-employee Directors received the following aggregate amounts of compensation during the year ended December 31, 2014.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
(a)
|
|
Fees
Earned or
Paid in
Cash
($)
(b) |
|
Stock
Awards
($)(1)
(c) |
|
Option
Awards
($)
(d) |
|
Non-Equity
Incentive
Plan
Compensation
($)
(e) |
|
Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
(f) |
|
All Other
Compensation
($)(2)
(g) |
|
Total
($)
(h) |
|
K.R. Allen |
|
|
68,000 |
|
|
55,000 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
20,814 |
|
|
143,814 |
|
W.L. Gipson |
|
|
65,000 |
|
|
55,000 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
8,586 |
|
|
128,586 |
|
R.C. Hartley |
|
|
72,500 |
|
|
55,000 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
36,133 |
|
|
163,633 |
|
D.R. Laney |
|
|
172,500 |
|
|
55,000 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
13,772 |
|
|
241,272 |
|
B.C. Lind |
|
|
72,500 |
|
|
55,000 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
15,983 |
|
|
143,483 |
|
B.T. Mueller |
|
|
75,000 |
|
|
55,000 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
28,880 |
|
|
158,880 |
|
T.M. Ohlmacher(3) |
|
|
72,500 |
|
|
55,000 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
10,117 |
|
|
137,617 |
|
P.R. Portney |
|
|
72,500 |
|
|
55,000 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
8,193 |
|
|
135,693 |
|
H.J. Schmidt |
|
|
65,000 |
|
|
55,000 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
8,193 |
|
|
128,193 |
|
C.J. Sullivan(4) |
|
|
65,000 |
|
|
55,000 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
8,550 |
|
|
128,550 |
|
- (1)
- Represents
the annual award accrued to each Director under the Stock Unit Plan for Directors.
- (2)
- Represents
dividends paid on accrued stock units earned under the Stock Unit Plan for Directors and interest on fees accumulated quarterly for
Mr. Ohlmacher and Mr. Sullivan.
- (3)
- Mr. Ohlmacher
had elected to receive 100% of his Director compensation in Empire common stock. The entire amount of $72,500 listed in
column (b) was paid in the form of common stock. He received prime rate interest on his earned fees until the shares of common stock were issued quarterly. He earned $346.88 in interest in 2014
which is included in column (g). Beginning in 2015, Mr. Ohlmacher has elected to receive 100% of his Director compensation in the form of cash payments.
- (4)
- Mr. Sullivan
has elected to receive 100% of his Director compensation in Empire common stock. The entire amount of $65,000 listed in
column (b) was paid in the form of common stock. He receives prime rate interest on his earned fees until the shares of common stock are issued quarterly. He earned $356.75 in interest in 2014
which is included in column (g).
37
Table of Contents
An
analysis of the fees and retainers earned by the non-employee Directors in 2014 is provided in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
(a)
|
|
Annual
Retainer
($)(b) |
|
Chairman
and Committee
Chair Fees
($)
(c) |
|
Director
Training
Fees
($)
(d) |
|
Annual Award
of Stock Units
($)
(e) |
|
All Other
Compensation
($)
(f) |
|
Total
($)
(g) |
|
K.R. Allen |
|
|
65,000 |
|
|
0 |
|
|
3,000 |
|
|
55,000 |
|
|
20,814 |
|
|
143,814 |
|
W.L. Gipson |
|
|
65,000 |
|
|
0 |
|
|
0 |
|
|
55,000 |
|
|
8,586 |
|
|
128,586 |
|
R.C. Hartley |
|
|
65,000 |
|
|
7,500 |
|
|
0 |
|
|
55,000 |
|
|
36,133 |
|
|
163,633 |
|
D.R. Laney |
|
|
65,000 |
|
|
107,500 |
|
|
0 |
|
|
55,000 |
|
|
13,772 |
|
|
241,272 |
|
B.C. Lind |
|
|
65,000 |
|
|
7,500 |
|
|
0 |
|
|
55,000 |
|
|
15,983 |
|
|
143,483 |
|
B.T. Mueller |
|
|
65,000 |
|
|
10,000 |
|
|
0 |
|
|
55,000 |
|
|
28,880 |
|
|
158,880 |
|
T.M. Ohlmacher |
|
|
65,000 |
|
|
7,500 |
|
|
0 |
|
|
55,000 |
|
|
10,117 |
|
|
137,617 |
|
P.R. Portney |
|
|
65,000 |
|
|
7,500 |
|
|
0 |
|
|
55,000 |
|
|
8,193 |
|
|
135,693 |
|
H.J. Schmidt |
|
|
65,000 |
|
|
0 |
|
|
0 |
|
|
55,000 |
|
|
8,193 |
|
|
128,193 |
|
C.J. Sullivan |
|
|
65,000 |
|
|
0 |
|
|
0 |
|
|
55,000 |
|
|
8,550 |
|
|
128,550 |
|
Narrative to Director Compensation Table
For 2014, each Director who was not an officer or full-time employee of Empire was paid a monthly retainer for his or her services as a
Director at a rate of $65,000 per annum. The Chairman of each Committee received an additional annual retainer of $7,500 ($10,000 for the Chairman of the Audit Committee). The Chairman of the Board
received an additional annual retainer of $100,000. One-twelfth of the annual retainers for the Directors, the Committee Chairman, and the Chairman of the Board are paid each month that the Director
serves in that position. In addition, each non-employee Director is paid a $1,000 per day fee in the event an individual Committee or the Board meets more than 10 times per year and a $1,000 per day
stipend for outside training.
Our
2006 Stock Incentive Plan (and our 2015 Stock Incentive Plan, which was approved by stockholders in 2014 and replaced the 2006 Stock Incentive Plan effective January 1, 2015,
will permit) permits our Directors to receive shares of common stock in lieu of all or a portion of any cash payment for services rendered as a Director. In addition, a Director may defer all or part
of any compensation payable for his or her services under the terms of our Deferred Compensation Plan for Directors. Amounts so deferred are credited to an account for the benefit of the Director and
accrue an interest equivalent at a rate equal to the prime rate. A Director is entitled to receive all amounts deferred in a number of annual installments following retirement, as elected by him or
her.
In
addition to the cash retainer and fees for non-employee Directors, we maintain a Stock Unit Plan for non-employee Directors, which we refer to as the Stock Unit Plan, to provide
Directors the opportunity to accumulate compensation in the form of common stock units. When implemented in 1998, the Stock Unit Plan provided Directors the opportunity to convert cash retirement
benefits earned under our prior cash retirement plan for Directors into common stock units. All eligible Directors who had benefits under the prior cash retirement plan converted their cash retirement
benefits to common stock units. Each common stock unit earns dividends in the form of common stock units and can be redeemed for one share of common stock upon retirement or death of the Director, or
on a date elected in advance by the Director with respect to awards made on or after January 1, 2006. The number of units granted annually is calculated by dividing the annual contribution
rate, which is either the annual retainer fee or such other amount as is established by the Compensation Committee of the Board of Directors, by the fair-market value of our common stock on
January 1 of the year the units are granted. The annual contribution rate for 2014 was $55,000. Beginning in 2015, the Compensation Committee elected to increase the annual contribution rate to
$70,000.
Common
stock unit dividends are computed based on the fair market value of our common stock on the dividend's record date. During 2014, 21,083 units were converted to common stock
by retired and current Directors, 24,202 units were granted for services provided in 2014 (based on an annual contribution rate of $55,000), and 6,563 units were granted pursuant to the
provisions of the plan providing for the reinvestment of dividends on stock units in additional stock units.
38
Table of Contents
In accordance with Empire's Corporate Governance Guidelines, Empire encourages Directors to attend education programs relating to the responsibilities of
directors of public companies. The expenses for the Directors to attend these courses are paid by Empire. Empire reimburses Directors for expenses incurred in connection with their position as a
Director including the reimbursement of expenses for transportation. Empire maintains $250,000 of business travel accident insurance for non-employee Directors while traveling on Empire business.
5. TRANSACTIONS WITH RELATED PERSONS
Transactions with Related Persons
There were no reportable transactions pursuant to Item 404(a) of Regulation S-K with related persons during 2014.
Review, Approval or Ratification of Transactions with Related Persons
Our Nominating/Corporate Governance Committee has adopted a written Policy and Procedures with Respect to Related Person Transactions
(the "Policy"). The Policy is available on our website at www.empiredistrict.com. The Policy provides that any proposed Related Person Transaction be
submitted to the Nominating/Corporate Governance Committee for consideration. In determining whether or not to approve the transaction, the Policy provides that the Committee shall consider all of the
relevant facts and circumstances available to the Committee, including (if applicable) but not limited to: the benefits to us; the impact on a Director's independence; the availability of other
sources for comparable products or services; the terms of the transaction; and the terms available to unrelated third parties or to employees generally. The Policy provides that the Committee will
approve only those Related Person Transactions that are in, or are not inconsistent with, the best interests of Empire and its stockholders, as the Committee determines in good faith.
For
purposes of the Policy, a "Related Person Transaction" is a transaction, arrangement or relationship (or any series of similar transactions, arrangements or relationships) in which
Empire (including any of its subsidiaries) was, is or will be a participant and the amount involved exceeds $25,000, and in which any Related Person had, has or will have a direct or indirect material
interest.
For
purposes of the Policy, a "Related Person" means:
- 1.
- any
person who is, or at any time since the beginning of our last fiscal year was, a Director or executive officer or a nominee to become a Director of
Empire;
- 2.
- any
person who is known to be the beneficial owner of more than 5% of any class of our voting securities; and
- 3.
- any
immediate family member of any of the foregoing persons, which means any child, stepchild, parent, stepparent, spouse, sibling, mother- in-law,
father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law of the Director, executive officer, nominee or more than 5% beneficial owner, and any person (other than a tenant or
employee) sharing the household of such Director, executive officer, nominee or more than 5% beneficial owner.
The
policy specifically provides that transactions involving the rendering of services by us (in our capacity as a public utility) to a Related Person at rates or charges fixed in
conformity with law or governmental authority will not be considered Related Person Transactions.
6. OTHER MATTERS
Audit Committee Report
The Audit Committee reviews Empire's financial reporting process on behalf of the Board of Directors. In fulfilling its
responsibilities, the Committee has reviewed and discussed the audited financial statements to be included in the 2014 Annual Report on Form 10-K with Empire's management and the Independent
Registered Public Accounting Firm ("Independent Auditors"). Management is responsible for the financial statements and the reporting process, as well as maintaining effective internal control over
financial reporting and assessing such effectiveness. The Independent Auditors are responsible for expressing an opinion on the conformity of those audited financial statements with accounting
principles generally accepted in the United States, as well as expressing an opinion on whether Empire maintained effective internal control over financial reporting.
39
Table of Contents
The
Audit Committee has discussed with the Independent Auditors the matters required to be discussed by the statement on Auditing Standards No. 16, as amended (AICPA, Professional
Standards, Vol. 1. AU section 380), as adopted by the Public Company Accounting Oversight Board in Rule 3200T. In addition, the Audit Committee has received the written
disclosures and the letter from the Independent Auditors required by applicable requirements of the Public Company Accounting Oversight Board regarding the Independent Auditors' communications with
the Audit Committee concerning independence, and has discussed with the Independent Auditors, the auditor's independence. The Audit Committee has considered whether the services provided by the
Independent Auditors
in 2014, described in this proxy statement, are compatible with maintaining the auditor's independence and has concluded that the auditor's independence has not been impaired by its engagement to
perform these services.
In
reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in Empire's
Annual Report on Form 10-K for the year ended December 31, 2014, for filing with the Securities and Exchange Commission.
B.
Thomas Mueller, Chairman
Kenneth R. Allen
Ross C. Hartley
Bonnie C. Lind
Fees Billed by Our Independent Registered Public Accounting Firm During Each of the Fiscal Years Ended December 31, 2014 and December 31, 2013
Representatives of PricewaterhouseCoopers LLP are expected to be present at the meeting for the purpose of answering questions
which any stockholder may wish to ask, and such representatives will have an opportunity to make a statement at the meeting.
Audit Fees
The aggregate fees billed by our Independent Auditors for professional services rendered in connection with the audit of our financial
statements included in our Annual Report on Form 10-K, the audit of our internal control over financial reporting, the review of our interim financial statements included in our Quarterly
Reports on Form 10-Q, as well as services provided in connection with certain of our equity and debt offerings, totaled $791,000 for the year ended December 31, 2014, as compared to
$753,000 for the year ended December 31, 2013.
Audit-Related Fees
The aggregate fees billed by our Independent Auditors for audit-related services during the years ended December 31, 2014 and
2013 totaled $17,000 and $23,500, respectively, related to services provided by PwC in connection with accounting consultations in 2014 and 2013.
Tax Fees
There were no fees billed by our Independent Auditors for tax services during each of the years ended December 31, 2014 and
2013.
All Other Fees
No other fees were billed by our Independent Auditors during the years ended December 31, 2014 and 2013.
Audit Committee Pre-Approval Policies and Procedures
All auditing services and non-audit services provided to us by our Independent Auditors must be pre-approved by the Audit Committee
(other than the de minimis exceptions provided by the Exchange Act). All of the Audit, Audit-Related, Tax Fees and All Other Fees shown above for 2014 and 2013 satisfied these Audit Committee
procedures.
40
Table of Contents
Communications with the Board of Directors
The Board of Directors provides a process for interested parties (including security holders) to send communications to the Board,
including those communications intended for non-management or independent Directors. These procedures may be found on our website at www.empiredistrict.com.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our Directors and executive officers to file reports of changes in ownership of our
equity securities with the SEC and the NYSE. SEC regulations require that Directors and executive officers furnish to us copies of all Section 16(a) forms they file. To our knowledge, based
solely on review of the copies of such reports furnished to us and written representations that no other reports were required, during the fiscal year ended December 31, 2014, all our executive
officers and Directors complied with applicable Section 16(a) filing requirements.
Other Business
At the date of this proxy statement, the Board of Directors has no knowledge of any business other than that described herein which
will be presented for consideration at the meeting. In the event any other business is presented at the meeting, the persons named in the enclosed proxy will vote such proxy thereon in accordance with
their judgment in the best interests of Empire and its stockholders.
7. STOCKHOLDER PROPOSALS FOR 2016 ANNUAL MEETING
The 2016 Annual Meeting is tentatively scheduled to be held on April 28, 2016. Specific proposals of stockholders intended to be
presented at that meeting (1) must comply with the requirements of the Exchange Act and the rules and regulations promulgated thereunder and our Articles of Incorporation, and (2) if
intended to be included in our proxy materials for the 2016 Annual Meeting, must be received at Empire's principal office not later than November 19, 2015. If the date of the 2016 Annual
Meeting is changed by more than 30 days from April 28, 2016, stockholders will be advised of such change and of the new date for submission of
proposals. If a stockholder intends to submit a proposal that is not to be included in our proxy materials for the 2016 Annual Meeting, the stockholder must give us notice of not less than
35 days and no more than 50 days before the date of the 2016 Annual Meeting in accordance with the requirements set forth in our Articles of Incorporation.
8. HOUSEHOLDING
Pursuant to the SEC rules regarding delivery of proxy statements, annual reports or Notice of Internet availability of proxy materials
to stockholders sharing the same address, we may deliver a single proxy statement, annual report or Notice of Internet availability of proxy materials to an address shared by two or more of our
stockholders. This delivery method is referred to as "householding" and can result in significant cost savings for us. In order to take advantage of this opportunity, we may have delivered only one
proxy statement, annual report or Notice of Internet availability of proxy materials to multiple stockholders who share an address, unless we received contrary instructions from the impacted
stockholders prior to the mailing date. We undertake to deliver promptly, upon written or oral request, a separate copy of the proxy statement, annual report or Notice of Internet availability of
proxy materials, as requested, to any stockholder at the shared address to which a single copy of those documents was delivered. If you prefer to receive separate copies of a proxy statement, annual
report or Notice of Internet availability of proxy materials, either now or in the future, send your request in writing to us at the following address: Investor Relations Department, The Empire
District Electric Company, 602 S. Joplin Avenue, Joplin, Missouri 64801.
If
you are currently a stockholder sharing an address with another stockholder and wish to have your future proxy statements and annual reports householded (i.e., receive only one
copy of each document for your household), please contact us at the above address.
9. ELECTRONIC PROXY VOTING
Registered stockholders can vote their shares via (1) a toll-free telephone call from the U.S. or Canada; (2) the
Internet; or (3) by mailing their signed proxy card. The telephone and Internet voting procedures are designed to authenticate stockholders' identities, to allow stockholders to vote their
shares and to confirm that
41
Table of Contents
their
instructions have been properly recorded. Specific instructions to be followed by any registered stockholder interested in voting via telephone or the Internet are set forth on the enclosed
proxy card.
10. INTERNET AVAILABILITY OF PROXY MATERIALS
This year, we are once again pleased to be using the new U.S. Securities and Exchange Commission rule that allows companies to furnish
their proxy materials over the Internet. As a result, we are mailing to many of our stockholders a notice about the Internet availability of the proxy materials instead of a paper copy of the proxy
materials. All stockholders receiving the notice will have the ability to access the proxy materials over the Internet. They may also request to receive a paper copy of the proxy materials by mail.
Instructions on how to access the proxy materials over the Internet or to request a paper copy may be found on the notice.
The proxy statement and 2014 Annual Report are available online at www.ematerials.com/ede. Please
have the 11-digit control
number and the last 4 digits of your Social Security Number or Tax Identification Number available in order to vote your proxy. The 11-digit control number is located in the box in the upper right
hand corner on the front of the proxy card and the Important Notice Regarding the Availability of Proxy Materials.
11. DIRECTIONS TO THE ANNUAL MEETING
Directions to the Annual Meeting being held at the Joplin Convention Center, 3535 Hammons Blvd., Joplin, Missouri, are as follows:
To
Joplin from the West: Take I-44 East to Exit 8. Turn left onto I-49 BUS N/S Range Line Road for about 0.4 miles. Turn right onto Hammons Boulevard. The Joplin Convention Center will be on the
right.
To
Joplin from the North: From MO-171, turn South onto S. Madison Street. Travel 1.2 miles. Continue on Range Line Road for 5 miles. Turn left onto Hammons Boulevard, just before the I-44
intersection. The Joplin Convention Center will be on the right.
To
Joplin from the East: Take I-44 West to Exit 8. Turn right onto I-49 BUS N/S Range Line Road and turn right onto Hammons Boulevard. The Joplin Convention Center will be on the right.
Dated:
March 18, 2015
It is important that proxies be returned promptly. Therefore, stockholders are urged to either vote the proxy through the Internet or by telephone or sign, date
and return the proxy in the envelope provided, to which no postage need be affixed if mailed in the united states. A stockholder who plans to attend the meeting in person may withdraw the proxy and
vote at the meeting.
42
|
Shareowner
Services P.O. Box 64945 St. Paul, MN 55164-0945 THE EMPIRE DISTRICT ELECTRIC
COMPANY ANNUAL MEETING OF STOCKHOLDERS April 30, 2015 10:30 a.m. CDT Joplin
Convention Center 3535 Hammons Blvd. Joplin, Missouri 64804 Important Notice
Regarding the Availability of Proxy Materials for the Stockholder Meeting to
be Held on April 30, 2015. Notice is hereby given that the Annual Meeting of
Stockholders of The Empire District Electric Company will be held at the
Joplin Convention Center, 3535 Hammons Blvd., Joplin, Missouri on April 30,
2015 at 10:30 a.m. CDT. Under Securities and Exchange Commission rules, you
are receiving this notice that the proxy materials for the Annual Meeting are
available on the Internet. Directions to The Empire District Electric Company
2015 Annual Meeting are available in the Proxy Statement which can be viewed
at www.proxydocs.com/ede and on the reverse side of this notice. This
communication presents only an overview of the more complete proxy materials
that are available to you on the Internet. We encourage you to access and
review all of the important information contained in the proxy materials
before voting. The Proxy Statement and 2014 Annual Report are available at
www.proxydocs.com/ede. If you want to receive a paper copy of these documents
or an email with a link to the electronic copies, you must request one. There
is no charge to you for requesting a copy. Although proxy materials will
continue to be available after the meeting, please make your request for a
copy as instructed on the reverse side of this notice on or before April 16,
2015 to facilitate timely delivery in advance of the Annual Meeting. Matters
intended to be acted upon at the meeting are listed below. The Board of
Directors recommends a vote FOR Items 1, 2 and 3. 1. To elect four Directors
for terms of three years: 01 D. Randy Laney 02 Bonnie C. Lind 03 B. Thomas
Mueller 04 Paul R. Portney 2. To ratify the appointment of
PricewaterhouseCoopers LLP as Empires independent registered public
accounting firm for the fiscal year ending December 31, 2015. 3. To vote upon
a non-binding advisory proposal to approve the compensation of our named
executive officers as disclosed in the proxy statement. 4. To transact such
other business as may properly come before the meeting or at any adjournment
or adjournments thereof. THIS IS NOT A FORM FOR VOTING You may immediately
vote your proxy on the Internet at: www.proxypush.com/ede Use the Internet
to vote your proxy 24 hours a day, 7 days a week, until 11:59 p.m. (CDT) on
April 29, 2015. Please have this Notice and the last four digits of your
Social Security Number or Tax Identification Number available. Follow the
instructions to vote your proxy. Your Internet vote authorizes the Named
Proxies to vote your shares in the same manner as if you marked, signed and
returned your proxy card.
|
|
To request
paper copies of the proxy materials, which include the proxy card, proxy
statement and annual report, please contact us via: Internet Access the
Internet and go to www.investorelections.com/ede. Follow the instructions to
log in, and order copies. Telephone Call us free of charge at 866-870-3684
in the U.S. or Canada, using a touch-tone phone, and follow the instructions
to log in and order copies. Email Send us an email at
paper@investorelections.com with EDE Materials Request in the subject line.
The email must include: The 11-digit control # located in the box in the
upper right hand corner on the front of this notice. Your preference to
receive printed materials via mail -or- to receive an email with links to the
electronic materials. If you choose email delivery, you must include the
email address. If you would like this election to apply to delivery of
material for all future meetings, write the word Permanent and include the
last 4 digits of your Social Security Number or Tax ID Number in the email.
Directions to the Annual Meeting being held at the Joplin Convention Center,
3535 Hammons Blvd., Joplin, Missouri: To Joplin from the West: Take I-44 East
to Exit 8. Turn left onto I-49 BUS N/S Range Line Road for about 0.4 miles.
Turn right onto Hammons Boulevard. The Joplin Convention Center will be on
the right. To Joplin from the North: From MO-171, turn South onto S. Madison
Street. Travel 1.2 miles. Continue on Range Line Road for 5 miles. Turn left
onto Hammons Boulevard, just before the I-44 intersection. The Joplin
Convention Center will be on the right. To Joplin from the East: Take I-44
West to Exit 8. Turn right onto I-49 BUS N/S Range Line Road and turn right
onto Hammons Boulevard. The Joplin Convention Center will be on the right.
|
|
Shareowner
Services P.O. Box 64945 St. Paul, MN 55164-0945 Vote by Internet, Telephone
or Mail 24 Hours a Day, 7 Days a Week Your phone or Internet vote authorizes
the named proxies to vote your shares in the same manner as if you marked,
signed and returned your proxy card. INTERNET www.proxypush.com/ede Use the
Internet to vote your proxy until 11:59 p.m. (CDT) on April 29, 2015. Please
have your Social Security Number or Tax ID Number available. PHONE
1-866-883-3382 Use a touch-tone telephone to vote your proxy until 11:59 p.m.
(CDT) on April 29, 2015. Please have your Social Security Number or Tax ID
Number available. MAIL Mark, sign and date your proxy card and return it in
the postage-paid envelope weve provided or return it to THE EMPIRE DISTRICT
ELECTRIC COMPANY, c/o Shareowner Services, P.O. Box 64873, St. Paul, MN
55164- 0873. If you vote your proxy by Internet or by Telephone, you do NOT
need to mail back your Proxy Card. TO VOTE BY MAIL AS THE BOARD OF DIRECTORS
RECOMMENDS ON ALL ITEMS BELOW, SIMPLY SIGN, DATE, AND RETURN THIS PROXY CARD.
The Board of Directors Recommends a Vote FOR Items 1, 2 and 3. 1. Election of
four Directors 01 D. Randy Laney 03 B. Thomas Mueller Vote FOR all nominees
Vote WITHHELD for terms of three years: 02 Bonnie C. Lind 04 Paul R. Portney
-(except as marked) from all nominees (Instructions: To withhold authority to
vote for any indicated nominee, write the number(s) of the nominee(s) in the
box provided to the right.) 2. To ratify the appointment of PricewaterhouseCoopers
LLP as Empires independent registered public accounting firm for the fiscal
year ending December 31, 2015. For Against Abstain 3. To vote upon a
non-binding advisory proposal to approve the compensation of our named
executive officers as disclosed in the proxy statement. For Against Abstain
4. Upon any other matter which may come before the meeting in their
discretion. THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR,
IF NO DIRECTION IS GIVEN, WILL BE VOTED FOR PROPOSALS 1, 2 and 3. Address
Change? Mark Box Indicate changes below: Date Signature(s) in Box Please sign exactly as
your name(s) appears on the Proxy. If held in joint tenancy, all persons
should sign. Trustees, adminis-trators, etc., should include title and
authority. Corporations should provide full name of corporation and title of
authorized officer signing the Proxy.
|
|
TWO ADDITIONAL
WAYS TO VOTE Vote by Internet Its fast, convenient, and your vote is
immediately confirmed and registered. Go to Website: www.proxypush.com/ede
Follow these three easy steps: Read the accompanying Proxy Statement and
Proxy Card. Go to Website www.proxypush.com/ede. Follow the simple
instructions. Vote by Telephone Its fast, convenient, and your vote is
immediately confirmed and registered. Call toll-free on a touch-tone phone in
the U.S. or Canada: 1-866-883-3382 Follow these three easy steps: Read the
accompanying Proxy Statement and Proxy Card. Call the toll-free phone
number above. Follow the simple instructions. VOTE 24 HOURS A DAY DO NOT
RETURN PROXY CARD IF YOU ARE VOTING BY INTERNET OR TELEPHONE You are
cordially invited to attend the 2015 Annual Meeting of Stockholders on
Thursday, April 30, 2015, at 10:30 A.M. (Central Daylight Time), at the
Joplin Convention Center, 3535 Hammons Blvd., Joplin, Missouri. It is
important that these shares are represented at this meeting. Whether or not
you plan to attend the meeting, please review the enclosed proxy materials.
You may vote by telephone or Internet or you may sign, date and return this
proxy card. The Empire District Electric Company 602 S. Joplin Avenue Joplin,
MO 64801 proxy This proxy is solicited by the Board of Directors for use at
the Annual Meeting on April 30, 2015. If no choice is specified, the proxy
will be voted FOR Items 1, 2 and 3. KNOW ALL MEN BY THESE PRESENTS, that the
undersigned hereby constitutes and appoints B. P. Beecher, L. A. Delano and
D. W. Harrington, and each of them, as proxies with power of substitution,
and hereby authorizes them to represent and to vote, in accordance with the
instructions on the reverse side, all shares of Common Stock of The Empire
District Electric Company that the undersigned may be entitled to vote at the
Annual Meeting of Stockholders to be held at the Joplin Convention Center,
3535 Hammons Blvd., Joplin, Missouri, on April 30, 2015, at 10:30 A.M. (CDT),
or any adjournment thereof. This proxy also provides voting instructions for
shares held by FIDELITY MANAGEMENT TRUST COMPANY, TRUSTEE FOR THE EMPIRE
DISTRICT ELECTRIC COMPANY 401(K) PLAN AND ESOP, and directs such Trustee to
vote, as indicated on the reverse side of this card, any shares allocated to
the account in the Plan. The Trustee will vote these shares as you direct. If
no direction is given to the Trustee, the Plans Trustee will vote your
shares held in the Plan in the same proportion as votes received from other
participants in the Plan. This proxy/voting instruction card is solicited
pursuant to a separate Notice of Annual Meeting and Proxy Statement, receipt of
which is hereby acknowledged. For registered shares, this card should be
voted, by Internet, telephone or mail, in time to reach the Companys proxy
tabulator, Wells Fargo Shareowner Services, by 11:59 P.M. (CDT) on Wednesday,
April 29, 2015. For shares allocable to the 401(k) Plan and ESOP, this card
should be voted by 11:59 P.M. (CDT) on Monday, April 27, 2015. Individual
proxy voting and voting instructions will be kept confidential. See reverse
for voting instructions.
|
Empire Electric (NYSE:EDE)
Historical Stock Chart
From Apr 2024 to May 2024
Empire Electric (NYSE:EDE)
Historical Stock Chart
From May 2023 to May 2024