UNITED STATES
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant x | |
Filed by a Party other than the Registrant o | |
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x | Definitive Proxy Statement |
o | Definitive Additional Materials |
o | Soliciting Material |
U.S. Xpress Enterprises, Inc. | |||
(Name of Registrant as Specified In Its Charter) | |||
N/A | |||
(Name of Person(s) Filing Proxy Statement, if other than the Registrant) | |||
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4080 Jenkins Road
Chattanooga, Tennessee 37421
NOTICE AND PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 2, 200611, 2007
To Our Stockholders:
You are cordially invited to attend the 20062007 annual meeting of stockholders of U.S. Xpress Enterprises, Inc., a Nevada corporation, to be held at our principal executive offices, 4080 Jenkins Road, Chattanooga, Tennessee 37421, at 10:30 a.m. local time, on Tuesday,Friday, May 2, 2006,11, 2007, for the following purposes:
1. To consider and act upon a proposal to elect five (5) directors;
2. To consider and act upon such other matters as may properly come before the meeting and any adjournment thereof.
The foregoing matters are more fully described in the accompanying proxy statement.
The Board of Directors has fixed the close of business on March 6, 2006,29, 2007, as the record date for the determination of stockholders entitled to receive notice of, and to vote at, the annual meeting or any adjournment thereof. Shares of Class A and Class B common stock may be voted at the annual meeting only if the holder is present at the annual meeting in person or by valid proxy. YOUR VOTE IS IMPORTANT. TO ENSURE YOUR REPRESENTATION AT THE ANNUAL MEETING, YOU ARE REQUESTED TO PROMPTLY DATE, SIGN, AND RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED ENVELOPE. Returning your proxy now will not interfere with your right to attend the annual meeting or to vote your shares personally at the annual meeting, if you wish to do so. The prompt return of your proxy may save us additional expenses of solicitation.
By Order of the Board of Directors, | ||||
U.S. Xpress Enterprises, Inc. |
 | ||||
Patrick E. Quinn | ||||
Co-Chairman, President, and Treasurer | ||||
 | ||||
Max L. Fuller | ||||
Co-Chairman, Chief Executive Officer, and Secretary |
Chattanooga, Tennessee
April 3, 2006
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4080 Jenkins Road
Chattanooga, Tennessee 37421
NOTICE AND PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 2, 200611, 2007
GENERAL INFORMATION
This proxy statement is furnished in connection with the solicitation of proxies from the stockholders of U.S. Xpress Enterprises, Inc., to be voted at the annual meeting of stockholders, which will be held at our principal executive offices, 4080 Jenkins Road, Chattanooga, Tennessee 37421, at 10:30 a.m. local time, on Tuesday,Friday, May 2, 2006,11, 2007, and any adjournments thereof. THE ENCLOSED PROXY IS SOLICITED BY OUR BOARD OF DIRECTORS. If not otherwise specified, all proxies received pursuant to this solicitation will be voted (1) FOR the director nominees named below, (2) FOR the approval of the 2006 Omnibus Incentive Plan, and (3)(2) with respect to any other matters properly brought before the annual meeting, in accordance with the judgment of the proxy holders.
The proxy statement, proxy card, and our annual report on Form 10-K for the fiscal year ended December 31, 2005,2006, were first mailed on or about April 3, 2006,11, 2007, to stockholders of record at the close of business on our record date of March 6, 2006. 29, 2007. Except to the extent it is incorporated by specific reference, the enclosed copy of our 20052006 annual report is not incorporated into this proxy statement and is not to be deemed a part of the proxy solicitation material.
The terms "“we," "” “our," "” “us," ” or the "“Company" ” refer to U.S. Xpress Enterprises, Inc. and its consolidated subsidiaries.
Voting Rights
Only stockholders of record at the close of business on the record date are entitled to vote at the annual meeting, either in person or by valid proxy. Holders of Class A common stock are entitled to one (1) vote for each share held. Holders of Class B common stock are entitled to two (2) votes for each share held so long as such shares are owned by Patrick E. Quinn, Max L. Fuller, or certain members of their immediate families. In the event that any shares of our Class B common stock cease to be owned by Messrs. Quinn or Fuller or certain of their family members, such shares will be automatically converted into shares of our Class A common stock. All of the issued and outstanding shares of our Class B common stock are currently owned by Messrs. Quinn and Fuller. Unless otherwise required by Nevada law, the Class A common stock and Class B common stock vote together as a single class. On March 6, 2006,29, 2007, the record date, there were issued and outstanding approximately 12,257,36712,278,808 shares of Class A common stock, par value $0.01 per share (including 197,218 shares of restricted Class A common stock subject to certain holding provisions), entitled to cast an aggregate 12,257,36712,278,808 votes on all matters subject to a vote at the annual meeting, and 3,040,262 shares of Class B common stock, par value $0.01 per share, entitled to cast an aggregate 6,080,524 votes on all matters subject to a vote at the annual meeting. The total number of shares of our common stock issued and outstanding on the record date was approximately 15,297,629,15,319,070, which is entitled to cast an aggregate of 18,337,89118,359,332 votes on all matters subject to a vote at the annual meeting. The total number of issued and outstanding shares excludes approximately 601,486554,485 shares of Class A common stock subject to issuance upon the exercise of outstanding stock options and 50,000 shares of restricted stock granted under our incentive stock plans and other arrangements.options. Holders of unexercised options are not entitled to vote at the annual meeting. We have no other class of stock outstanding. Stockholders are not entitled to cumulative voting in the election of directors. Votes cast at the annual meeting will be tabulated by the Inspector of Elections and the results of all items voted upon will be announced at the annual meeting.
In order to transact business at the annual meeting, a quorum must be present. A quorum is present if the holders of a majority of the total number of shares of Class A and Class B common stock issued and outstanding as of the record date are represented at the annual meeting in person or by proxy. Shares that are entitled to vote but that are not voted at the direction of the holder (called "abstentions"“abstentions”) and shares that are not voted by a broker or other record holder due to the absence of instructions from the beneficial owner (called "broker non-votes"“broker non-votes”) will be counted for the purpose of determining whether a quorum is present.
Required Vote
Directors are elected by an affirmative vote of a plurality of the total votes cast by stockholders entitled to vote and represented in person or by proxy at the annual meeting, which means that the five (5) director nominees receiving the highest number of votes for their election will be elected. Approval of the 2006 Omnibus Incentive Plan and anyAny other matter submitted to stockholders requires the affirmative vote of a majority of the votes of the stockholders entitled to vote and represented in person or by proxy at the annual meeting. Abstentions and broker non-votes are not considered affirmative votes and thus will have no effect on the election of directors by a plurality vote, but will have the same effect as negative votes with respect to the approval of the 2006 Omnibus Incentive Plan and any other matter submitted to stockholders.
Right to Attend Annual Meeting; Revocation of Proxy
Returning a proxy card now will not interfere with your right to attend the annual meeting or to vote your shares personally at the annual meeting, if you wish to do so. Stockholders who execute and return proxies may revoke them at any time before they are exercised by giving written notice to our Secretary at our address, by executing a subsequent proxy and delivering it to our Secretary, or by attending the annual meeting and voting in person.
Costs of Solicitation
We will bear the cost of solicitation of proxies, which we expect to be nominal and will include reimbursements for the charges and expenses of brokerage firms and others for forwarding solicitation materials to beneficial owners of our outstanding Class A common stock. Proxies will be solicited by mail, and may be solicited personally by directors, officers, or our regular employees, who will not receive any additional compensation for such services.
Annual Report
The information included in this proxy statement should be reviewed in conjunction with the Consolidated Financial Statements, Notes to Consolidated Financial Statements, Report of Independent Registered Public Accounting Firm, and other information included in our 20052006 annual report that was mailed on or about April 3, 2006,11, 2007, together with this notice and proxy statement, to all stockholders of record as of the record date.
How to Read This Proxy Statement
Set forth below are the proposals of our Board of Directors to be considered by stockholders at the annual meeting, as well as important information concerning, among other things, our management and our Board of Directors; executive compensation; transactions between us and our officers, directors, and affiliates; the stock ownership of certain beneficial owners and management; the services provided to us by, and the fees of, Ernst & Young LLP ("(“Ernst & Young"Young”), our independent registered public accounting firm; and how stockholders may make proposals at our next annual meeting. EACH STOCKHOLDER SHOULD READ THIS INFORMATION BEFORE COMPLETING AND RETURNING THE ENCLOSED PROXY CARD.
At the annual meeting, stockholders will elect five (5) directors to serve as the Board of Directors until our 20072008 annual meeting of stockholders or until their successors are elected and qualified. Upon the recommendation of our independent directors, our Board of Directors has nominated for election as directors Patrick E. Quinn, Max L. Fuller, James E. Hall, John W. Murrey, III, and Robert J. Sudderth, Jr., each of whom is presently serving as a director. In the absence of contrary instructions, each proxy will be voted for the election of all the proposed directors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR"“FOR” EACH OF THE DIRECTOR NOMINEES.
NOMINEES FOR DIRECTORSHIPS
Information concerning the names, ages, positions with us, tenure as a director, and business experience of the nominees standing for election as directors at the annual meeting is set forth below. All references to experience with us include positions with our operating subsidiaries, U.S. Xpress, Inc., a Nevada corporation, and Xpress Global Systems, Inc., a Georgia corporation.
| Patrick E. Quinn, |
 | ||
| Max L. Fuller, |
 | ||
| James E. Hall, |
| John W. Murrey, III, |
 | ||
| Robert J. Sudderth, Jr., |
Meetings. Our Board of Directors held three regularly scheduled meetings and two special meeting during the fiscal year ended December 31, 2005.2006. Each director attended at least 75% of the meetings of the Board of Directors or any committee on which he served. We encourage the members of our Board of Directors to attend our annual meetings of stockholders. ThreeTwo of our five directors attended the 20052006 annual meeting of stockholders.
Director Independence. Our Class A common stock is listed on the NASDAQ National Market ("Nasdaq"(“Nasdaq”). Therefore, it is subject to the listing standards, including standards relating to corporate governance, embodied in applicable rules promulgated by the National Association of Securities Dealers, Inc. (the "NASD"“NASD”). Pursuant to NASD Rule 4350(c)(1), the Board of Directors has determined that the following directors and nominees are "independent"“independent” under NASD Rule 4200(a)(15): James E. Hall, John W. Murrey, III, and Robert J. Sudderth, Jr. In accordance with NASD Rule 4350(c)(2), our independent directors held twothree meetings in 2005,2006, referred to as "executive“executive sessions,"” at which only the independent directors were present.
Communication with the Board of Directors. Stockholders who wish to communicate with members of the Board, including the independent directors individually or as a group, may send correspondence to them in care of the Secretary at our principal executive offices at 4080 Jenkins Road, Chattanooga, Tennessee 37421.
Committees of the Board of Directors
Functions, Composition, and Meetings of the Audit Committee. Our Audit Committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), operates pursuant to a written Audit Committee Charter adopted by our Board of Directors, a copyDirectors. In March 2007, the charter of whichthe Audit Committee was included as an annexamended and restated to our proxy statement relating to our 2004 annual meeting of stockholders filedcomply with the Securities and Exchange Commission (the "SEC"“SEC”) Release Nos. 33-8732 and 34-54302. A copy of the Audit Committee Charter is available to stockholders on April 19, 2004.our website, located at http://www.usxpress.com. As more fully outlined in the Audit Committee Charter, the primary functions of the Audit Committee are to select our independent registered public accounting firm and ensure its independence; to approve the services to be provided to us by our independent registered public accounting firm and the fees for such services; and to meet with our independent registered public accounting firm, internal accounting personnel, and management and to review with them matters relating to our financial statements, accounting practices and policies, and financial reporting processes. During 2005,2006, Messrs. Hall, Murrey, and Sudderth served as the members of the Audit Committee, with Mr. Murrey serving as Chairman. The Committee held nineseven meetings in 2005, four of which were regular and five telephonic. Each member of the Audit Committee attended at least 75% of the Audit Committee meetings during 2005.
Each member of the Audit Committee satisfies the independence and audit committee membership criteria set forth in NASD Rule 4350(d)(2). Specifically, each member of the Audit Committee:
· meets the criteria for independence set forth in Rule 10A-3(b)(1) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”);
· did not participate in the preparation of our financial statements or the financial statements of any of our current subsidiaries at any time during the past three (3) years; and
· is able to read and understand fundamental financial statements, including our balance sheet, statement of operations, and statement of cash flows.
Audit Committee Financial Expert. The Board of Directors has determined that at least one "audit“audit committee financial expert"expert” (as defined in Item 401(h) of Regulation S-K)S-K and NASD Rule 435o(d)(2)(A)) who has the necessary financial sophistication (as defined in NASD Rule 4350(d)(2)(A)) currently serves on the Audit Committee. The Board of Directors has identified Mr. Murrey as an audit committee financial expert who possesses the requisite financial sophistication. Mr. Murrey is independent, as independence for audit committee members is defined underin applicable NASD rules.
Audit Committee Report. In performing its duties, the Audit Committee, as required by applicable rules of the SEC, issues a report recommending to the Board of Directors that our audited financial statements be included in our annual report on Form 10-K, and determines certain other matters, including the independence of our independent registered public accounting firm. The Audit Committee Report for 20052006 is set forth below.
The Audit Committee Report shall not be deemed to be "filed"“filed” with the SEC or to be incorporated by reference into any filing made by us under the Securities Act of 1933, as amended (the "Securities Act"“Securities Act”), or the Exchange Act, notwithstanding any general statement contained in any such filings incorporating this proxy statement by reference, except to the extent we incorporate thissuch report by specific reference.
Audit Committee Report for 20052006
The primary purpose of the Audit Committee is to assist the Board of Directors in fulfilling its oversight responsibilities relating to the quality and integrity of the Company'sCompany’s financial reports and financial reporting processes and systems of internal controls. The Company'sCompany’s management has primary responsibility for the Company'sCompany’s financial statements and the overall reporting process, including maintenance of the Company'sCompany’s system of internal controls. The Company retains an independent registered public accounting firm, which is responsible for conducting independent audits of the Company'sCompany’s financial statements, the effectiveness of management'smanagement’s assessment of internal controlcontrols over financial reporting, and the effectiveness of internal controlcontrols over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States) and issuing reports thereon.
In performing its duties, the Audit Committee has discussed the Company'sCompany’s financial statements, management'smanagement’s assessment of internal controlcontrols over financial reporting, and the effectiveness of internal controlcontrols over financial reporting with management and the Company'sCompany’s independent registered public accounting firm and, in issuing this report, has relied upon the responses and information provided to the Audit Committee by management and such accounting firm. For the fiscal year ended December 31, 2005,2006, the Audit Committee (i) reviewed and discussed the audited financial statements, management'smanagement’s assessment of internal controlcontrols over financial reporting, and the effectiveness of internal controlcontrols over financial reporting with management and Ernst & Young LLP, the Company'sCompany’s independent registered public accounting firm; (ii) discussed with the independent registered public accounting firm the matters required to be disclosed by Statement on Auditing Standards No. 61, Communication with Audit Committees, as amended; (iii) received and discussed with the independent registered public accounting firm the written disclosures and the letter from such accounting firm required by Independence Standards Board Statement No. 1, Independence Discussions with Audit Committees, as amended; and (iv) has discussed with the independent registered public accounting firm its independence. The Audit Committee met with representatives of the independent registered public accounting firm without management or other persons present on twothree occasions during 20052006 and also prior to completion of the 20052006 audit during 2006.2007.
Based on the foregoing reviews and meetings, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in the annual report on Form 10-K for the fiscal year ended December 31, 2005,2006, for filing with the SEC.
Audit Committee: | ||
John W. Murrey, III, Chairman | ||
James E. Hall, Member | ||
Robert J. Sudderth, Jr., Member |
The functions of the Compensation Committee of the Board of Directors include establishing policies and plans concerning the salaries, bonuses, and other compensation of our executive officers. The Compensation Committee reviews all aspects of compensation of our executive officers; approves salaries, bonuses, stock options, and other forms of compensation for such officers; establishes and reviews policies regarding executive officer perquisites; and performs such other duties as shall be delegated to it by the Board of Directors. During 2005,2006, Messrs. Hall, Murrey, and Sudderth served as the members of the Compensation Committee, with Mr. Sudderth serving as Chairman. The Committee met on fourtwo occasions in 2005, and each member of the Compensation Committee attended at least 75% of all meetings.2006. The 2005 Report of the Compensation Committee is set forth below under the section titled "Executive“Executive Compensation -— Compensation Committee Report on Executive Compensation."”
Compensation Committee Charter. In March 2007, the charter of the Compensation Committee was amended and restated to comply with SEC Release Nos. 33-8732 and 34-54302. A copy of the Compensation Committee Charter is available to stockholders on our website, located at http://www.usxpress.com.
Compensation Committee Interlocks and Insider Participation
No member of the Compensation Committee is or has been an officer or employee of ours or any of our subsidiaries, or has or had any relationship with us requiring disclosure pursuant to Item 404 of Regulation S-K.
During 2006, none of our executive officers served as a member of the board of directors or compensation committee (or other committee performing equivalent functions) of any entity that had one or more executive officers serving as a member of our Board of Directors.
See “Certain Relationships and Related Transactions” below for a description of certain transactions between us and other members of the Board of Directors, our executive officers, and their affiliates.
In performing its duties, the Compensation Committee, as required by applicable rules and regulations promulgated by the SEC, issues a report recommending to the Board of Directors that our Compensation Discussion and Analysis be included in this Proxy Statement and in our Annual Report on Form 10-K. The Report of the Compensation Committee follows.
The Report of the Compensation Committee shall not be deemed to be incorporated by reference into any filing made by us under the Securities Act of 1933 or the Exchange Act, notwithstanding any general statement contained in any such filings incorporating this Proxy Statement by reference, except to the extent we incorporate such report by specific reference.
Report of the Compensation Committee
We have reviewed and discussed the Compensation Discussion and Analysis contained in this Proxy Statement with management. Based on that review and discussion, we have recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement and in U.S. Xpress Enterprises, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2006.
Compensation Committee: | ||
Robert J. Sudderth, Jr., Chairman | ||
John W. Murrey, III | ||
James E. Hall |
7
Director Nomination Process
The Board of Directors has no standing nominating committee or any committee performing the functions of a nominating committee. The Board believes that, based on the role of the independent directors, as described below, it is not necessary to have a standing nominating committee at this time. On April 29, 2004, the Board approved a director nomination process, pursuant to which the independent directors of the Board recommend director nominees to the full Board for approval. In selecting director nominees, the independent directors take into account all factors they consider appropriate, which may include experience, accomplishments, education, understanding of our business and the industry in which we operate, specific skills, general business acumen, and personal and professional integrity. The directors believe continuity in leadership and board tenure will maximize the Board'sBoard’s ability to exercise meaningful board oversight. The independent directors will generally consider as potential candidates those incumbent directors interested in standing for reelection whowhom the directors believe have satisfied director performance expectations, including regular attendance at, preparation for, and meaningful participation in board and committee meetings.
Under their policies, the independent directors also consider the following specific requirements:
· at all times, at least a majority of directors must be “independent” in the opinion of the Board as determined in accordance with NASD Rule 4200(a)(15);
· at all times, at least three (3) members of the Board must satisfy the heightened standards of independence for Audit Committee members; and
· at all times, the Board should have at least one member who satisfies the criteria to be designated by the Board as an “audit committee financial expert” and possesses the requisite “financial sophistication.”
Only nominees approved by a majority of the independent directors are recommended to the full Board for approval. The entire Board selects nominees for election as director from persons recommended by a majority of the independent directors and considers the performance of directors in determining whether to nominate them for reelection.
It is generally the policy of the Board to consider stockholder recommendations of proposed director nominees if such recommendations are serious and timely received. To be timely, recommendations must be received in writing at our principal executive offices, 4080 Jenkins Road, Chattanooga, Tennessee 37421, at least 120 days prior to the anniversary date of mailing of our proxy statement for the prior year'syear’s annual meeting. For the 20072008 annual meeting, the deadline for receiving stockholder recommendations of proposed director nominees will be December 4, 2006.13, 2007. In addition, any stockholder director nominee recommendation must include the following information:
· the proposed nominee’s name and qualifications and the reason for such recommendation;
· the name and record address of the stockholder(s) proposing such nominee;
· the number of shares of our Class A and/or Class B common stock that are beneficially owned by such stockholder(s); and
· a description of any financial or other relationship between the stockholder(s) and such nominee or between the nominee and us or any of our subsidiaries.
In order to be considered by the Board, any candidate proposed by one or more stockholders will be required to submit appropriate biographical and other information equivalent to that required of all other director candidates.
Effective May 5, 2005, we increased the annual retainer for our non-employee directors to $17,500 from $12,500. This increase had been approved on March 3, 2005. In addition, on March 10,2, 2006, we increased the annual retainer for our non-employee directors to $20,000 from $17,500. This increase will become effective on May 2, 2006. In addition to the annual retainer, non-employee directors receive $1,500 per Board of Directors'Directors’ meeting attended in person (or separate committee meeting attended in person), and $500 per Board of Directors'Directors’ meeting attended by telephone (or separate telephonic committee meeting). We also reimburse our non-employee directors for travel and other related expenses incurred in attending meetings. Non-employee directors have the option to accept shares of our Class A common stock in lieu of the annual retainer and meeting fees. If a non-employee director elects this option, the number of shares issued to such director in lieu of cash is determined based on (i) the amount of the annual retainer divided by the fair market value of our Class A common stock on the annual meeting date, and (ii) the amount of meeting fees divided by the fair market value of our Class A common stock on the date compensation is earned. Currently, Mr. Sudderth has opted to receive his board-related compensation in the form of stock.
In addition, each non-employee director is granted options to purchase 1,200 shares of our Class A common stock on the date he is elected or reelected. Such options are assigned at an exercise price equal to the fair market value of our Class A common stock as of the grant date and vest in equal increments of 400 shares on each of the first, second, and third anniversaries of the date of grant. Such options expire at the earlier of (i) ten (10) years from the date of grant; (ii) thirteen (13)13 months after the non-employee director ceases to serve as one of our directors due to death, incapacity, or retirement at or after the age of sixty-five (65); or (iii) at the time the non-employee director ceases to serve as one of our directors for any reason other than death, incapacity, or retirement at or after the age of sixty-five (65).
Directors who are our employees or employees of one of our subsidiaries do not receive compensation for board or committee service. We do, however, reimburse themthese directors for travel and other related expenses.
Set forth below is certain information regarding our current executive officers, and significant employees, with the exceptions of our Co-Chairmen, Messrs. Quinn and Fuller, who are discussed above under "Nominees“Nominees for Directorships."” All executive officers are elected annually by the Board of Directors.
Ray M. Harlin, 56,57, has served as our Executive Vice President of Finance and Chief Financial Officer since 1997. Mr. Harlin served as a director from 1997 until May 2004. Previously, Mr. Harlin served for 25 years in auditing and managerial positions and as a partner with Arthur Andersen LLP.
Jeffrey S. Wardeberg, 43,44, has served as our Executive Vice President of Operations since 2002 and Chief Operating Officer since March 2004. Previously, Mr. Wardeberg was Executive Vice President of Sales and Marketing from 2000 to 2002, Vice President of Sales and Marketing from 1998 to 2000, Director of Marketing from 1996 to 1998, and a Regional Sales Vice President from 1994 to 1996. Mr. Wardeberg served on the Board of Directors from 2003 to May 2004.
William K. Farris, 53, has served as Senior Vice President and General Manager of our Dedicated Services Business Unit since 2002. Previously, Mr. Farris served as our Executive Vice President of Operations, and president of our largest subsidiary, U.S. Xpress, Inc., from 1996 to 2002. Mr. Farris joined the Company as Vice President of Customer Service in 1988, was named Vice President of Operations for our former subsidiary, Southwest Motor Freight, in 1992, and was named Vice President of Operations of U.S. Xpress, Inc. in 1993.
Section 16(a) of the Exchange Act requires our officers and directors, and persons who own more than 10% of a registered class of our equity securities, to file reports of ownership and changes in ownership with the SEC. Officers, directors, and greater than 10% stockholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file. Based solely upon a review of the copies of such forms furnished to us, we believe that our officers, directors, and greater than 10% beneficial owners complied with all Section 16(a) filing requirements applicable to them during the fiscal year ended December 31, 2005,2006, except that aMr. Sudderth, Jr. inadvertently failed to timely report on Form 4 for Robert J. Sudderth, Jr. with respect to sharesthe April 25, 2006 and July 20, 2006 grants of our Class A common stock granted on April 25, 2005, was not filed until May 3, 2005.in lieu of meeting fees. These transactions have been reported in subsequent filings. This transaction has been reported in a subsequent filing. We make available copies of Section 16(a) forms that our directors and executive officers file with the SEC through our website at http://www.usxpress.com.
Our Board of Directors has adopted a Code of Ethics that applies to all directors, officers, and employees, whether with us or one of our subsidiaries. The Code of Ethics includes provisions applicable to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions that constitute a "code“code of ethics"ethics” within the meaning of Item 406(b) of Regulation S-K. A copy of the Code of Ethics has been posted on our website at http://www.usxpress.com.
Compensation Discussion and Analysis
Overview and Philosophy of Compensation
The following table sets forth information concerningCompensation Committee of our Board of Directors (“Compensation Committee”) has the annualresponsibility to review, analyze, recommend, and long-termapprove executive officer compensation paidarrangements. The Compensation Committee has the specific responsibility to (i) review and approve corporate goals and objectives relevant to the compensation of our President, Chief Executive Officer (“CEO”) and our President, (ii) evaluate the performance of our CEO and our President in light of those goals and objectives, and (iii) determine and approve the compensation level of our CEO and our President based upon that evaluation. The Compensation Committee also has the responsibility to annually review the compensation of our other executive officers and to determine whether such compensation is reasonable under existing facts and circumstances. In making such determinations, the Compensation Committee seeks to ensure that the compensation of our executive officers aligns the executives’ interests with the interests of our stockholders. The Compensation Committee must also review and approve all forms of deferred compensation and incentive compensation, including stock option grants, stock grants, and other forms of incentive compensation granted to our executive officers. The Compensation Committee takes into account the recommendations of our CEO and our President in reviewing and approving the overall compensation of the other executive officers.
We believe that the quality, skills, and dedication of our executive officers are critical factors affecting our long-term value and success. Thus, one of our primary executive compensation goals is to attract, motivate, and retain qualified executive officers. We seek to accomplish this goal by rewarding past performance, incentivizing future performance, and aligning our executive officers’ long-term interests with those of our stockholders. Our compensation program is specifically designed to reward our executive officers for individual performance, years of experience, contributions to our financial success, and creation of stockholder value. Our compensation philosophy is to provide overall compensation levels that (i) are sufficient to attract and retain talented executives and to motivate those executives to achieve superior results, (ii) align executives’ interests with our corporate strategies, our business objectives, and the long-term interests of our stockholders, (iii) enhance executives’ incentives to increase our stock price and maximize stockholder value, and (iv) are consistent with our constant focus on controlling costs. In many instances we build our compensation elements around long term retention and development together with annual rewards based on specific focus areas.
Our compensation program for senior executive officers has two major elements, fixed and incentive. Our compensation program also consists of providing our senior executive officers with specified perquisites and with employee benefits that are generally available to all of our employees.
The Compensation Committee has the responsibility to make and approve changes in the total compensation of our executive officers, including the mix of compensation elements. In making decisions regarding an executive’s total compensation, the Compensation Committee considers whether the total compensation is (i) fair and reasonable to us, (ii) internally appropriate based upon our culture and the compensation of our other employees, and (iii) within a reasonable range of the compensation afforded by other opportunities. The Compensation Committee also bases its decisions regarding compensation upon its assessment of the executive’s leadership, individual performance, years of experience, skill set, level of commitment and responsibility required in the position, contributions to our financial success, the creation of stockholder value, and current and past compensation. In determining the mix of compensation elements, the Compensation Committee considers the effect of each element in relation to total compensation. The Compensation Committee also considers the tax consequences associated with each element of compensation. In determining whether to increase or decrease an element of compensation, we rely upon the Compensation Committee’s judgment concerning the contributions of each executive and, with respect to executives other than our CEO and our President, we consider the recommendations of our CEO and our President. When setting compensation, we do not rely on rigid formulas or short-term changes in business performance.
Although we do not believe it is appropriate to establish compensation levels based solely on benchmarking because of geographic and incentive compensation differences, we consider compensation levels of executives having similar qualifications and holding comparable positions in companies similarly situated to ours. At the end of 2005, we engaged Towers Perrin to provide competitive market and peer group data for purposes of our review and evaluation of the overall
compensation of our then four most highly compensated executive officers. We set our 2006 compensation levels based, in part, on the Towers Perrin’s data. We recently engaged Towers Perrin to once again provide competitive market and peer group data for purposes of reviewing our compensation packages and anticipate Towers Perrin’s data will guide us in setting compensation levels for 2007.
The following is a discussion of each element of our compensation program, including (i) why we choose to pay each element, (ii) how we determine the specific amount to pay for each element, and (iii) how each element, and our decisions regarding each element, fit into our overall compensation objectives and affect decisions regarding other elements. We also discuss the specific decisions we made with respect to the compensation of our Chief Executive Officer, Chief Financial Officer, and our three other most highly compensated executive officers to whom we refer as the named executive officers, for services to us in all capacities for the fiscal years ended December 31, 2005, 2004, and 2003.
| Long-Term Compensation | ||||||||
| Annual Compensation | Awards | Payouts | ||||||
| Name and Principal Position | Year | Salary ($) | Bonus ($) | Other Annual Compen- sation (1) ($) | Restricted Stock Award(s) ($) | Securities Underlying Options/ SARs (#) | LTIP Payouts ($) | All Other Compen- sation (2) ($) |
Patrick E. Quinn Co-Chairman, President, and Treasurer | 2005 2004 2003 | $734,615 $669,231 $500,000 | - $150,000 - | - - - | - - - | - 50,000 - | - - - | $24,941 $20,036 $10,417 |
Max L. Fuller Co-Chairman, Chief Executive Officer, Secretary, and President - Xpress Global Systems, Inc. | 2005 2004 2003 | $734,615 $669,231 $500,000 | - $150,000 - | - - - | - - - | - 50,000 - | - - - | $18,773 $15,403 $17,776 |
Ray M. Harlin Executive Vice President - Finance and Chief Financial Officer | 2005 2004 2003 | $328,461 $325,000 $260,000 | $ 50,000 $ 26,000 - | - - - | - - - | - 15,000 - | - - - | $ 6,300 $ 6,150 $ 6,000 |
Jeffrey S. Wardeberg Executive Vice President - Operations | 2005 2004 2003 | $313,846 $288,654 $225,000 | - $ 22,500 - | - - - | - - - | - 20,000 - | - - - | $ 1,617 $ 1,605 $ 2,120 |
William K. Farris Senior Vice President and General Manager of Dedicated Strategic Business Unit | 2005 2004 2003 | $214,200 $218,077 $210,808 | - $ 3,000 - | - - - | - - - | - 3,000 - | - - - | $ 6,300 $ 6,150 $ 6,000 |
Base Salary
We pay base salaries at levels that reward executive officers exercised options during 2005.
Shares Acquired on Exercise | Value Realized | Number of Securities Underlying Unexercised Options/SARs at Fiscal Year-End (#) | Value of Unexercised In-the-Money Options/SARs at Fiscal Year End (1) ($) | |||
| Name | (#) | ($) | Exercisable | Unexercisable | Exercisable | Unexercisable |
| Patrick E. Quinn | - | - | 80,000 | - | 349,600 | - |
| Max L. Fuller | - | - | 80,000 | - | 349,600 | - |
| Ray M. Harlin | - | - | 166,000 | - | 935,795 | - |
| Jeffrey S. Wardeberg | - | - | 54,000 | - | 322,443 | - |
| William K. Farris | - | - | 30,000 | - | 149,200 | - |
Base Salaries of their deaths, to continue paying 50% of their current base compensation for a period of six (6) months, and, in the event of either of their disabilities, to continue paying their current base compensation in full for a period of twelve (12) months and 50% of their current base compensation for an additional twelve (12) months thereafter. The salary continuation agreements also provide that Messrs. Quinn and Fuller will receive payments on account of personal guarantees of our indebtedness if either of them or their estates personally guarantees any of our indebtedness.
Base Salary of Our Other Named Executive OfficerOfficers. In addition to the factors identified above in connection with compensation of the Company's executive officers, the Compensation Committee considered the following in establishing compensation of the Company's President and its Chief Executive OfficerJanuary 2006, after reviewing our financial performance for 2005:
Fiscal 2005 | Fiscal 2004 | ||||||
Audit Fees(1) | $668,150 | $880,700 | |||||
Audit-Related Fees(2) | 55,128 | 43,000 | |||||
Tax Fees(3) | 19,447 | 68,822 | |||||
All Other Fees(4) | 3,000 | 3,000 | |||||
Total | $745,725 | $995,522 | |||||
The following table reflects the adjustments we have maintained several equity-based incentive plans since becoming a public company in 1994. Our original 1993 Incentive Stock Plan (the "1993 Stock Plan") was supplemented in 1995 bymade from 2005 to 2006 to the adoptionbase salaries of our 1995 Non-Employee Directors Stock Award and Option Plan (the "1995 Non-Employee Directors Plan"). In 2002, the 1993 Stock Plan was replaced with our 2002 Stock Named Executive Officers:
Named Executive Officer and Principal Position |
|
|
| 2005 Base |
|
|
| 2006 Base |
|
Max L. Fuller, Co-Chairman and Chief Executive Officer |
|
|
| 750,000 |
|
|
| 775,000 |
|
Patrick E. Quinn, Co-Chairman and President |
|
|
| 750,000 |
|
|
| 775,000 |
|
Ray M. Harlin, Chief Financial Officer |
|
|
| 350,000 |
|
|
| 400,000 |
|
Jeffrey S. Wardeberg, Chief Operating Officer |
|
|
| 320,000 |
|
|
| 385,000 |
|
Michael S. Walters, President of Arnold |
|
|
| 295,000 |
|
|
| 295,000 |
|
TOTAL |
|
|
| 2,465,000 |
|
|
| 2,630,000 |
|
Incentive Plan (the "2002 Stock Plan"), and in 2003, the 1995 Non-Employee Directors Plan was replaced with our 2003 Non-Employee Directors Stock Award and Option Plan (the "2003 Non-Employee Directors Plan").
On May 2002, all equity-based incentive compensation awarded to our executive officers and employees has been granted under the 2002 Stock Plan. A total of 1,000,000 shares of Class A common stock are reserved for awards under the 2002 Stock Plan. Of these 1,000,000 shares, as of March 6,2, 2006, 424,277 shares are subject to issued and outstanding option grants. The 2002 Stock Plan is scheduled to expire on May 14, 2012. Since May 2003, all stock options and stock awards given to our non-employee directors have been granted under the 2003 Non-Employee Directors Plan. A total of 50,000 shares of Class A common stock are reserved for awards under the 2003 Non-Employee Directors Plan. Of these 50,000 shares, as of March 6, 2006, 10,800 shares remain available for future awards.
| Plan Category | Number of Securities to Be Issued upon Exercise of Outstanding Options, Warrants, and Rights | Weighted- Average Exercise Price of Outstanding Options, Warrants, and Rights | Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) |
| (a) | (b) | (c) | |
Equity Compensation Plans Approved by Security Holders (1) | 622,746 | $12.32 | 554,151 |
Equity Compensation Plans Not Approved by Security Holders | — | — | — |
| Total | 622,746 | $12.32 | 554,151 |
Omnibus Incentive Plan. The Omnibus Incentive Plan allows the Compensation Committee to link compensation to performance over a period of time by enabling us to offergranting awards that have multiple-year vesting schedules. Awards with multiple-year vesting schedules, such persons a variety of incentive awards, and (d) to ensure,as restricted stock grants, provide balance to the extent possible,other elements of our compensation program that otherwise link compensation to annual performance. Awards with multiple-year vesting schedules create incentive compensationfor executive officers to increase stockholder value over an extended period of time because the value received from such awards is based on the growth of the stock price. Such awards also incentivize executives to remain with us over an extended period of time. Thus, we believe our Omnibus Incentive Plan is an effective way of aligning the interests of our executive officers with those of our stockholders.
Awards under our Omnibus Incentive Plan may be paid by us is deductible for tax purposes.
Stock Options.The Compensation Committee may grant awards in the form of stock options to purchase shares of Class A common stock, which stock options may be non-qualified or incentive stock options for federal income tax purposes. Stock options granted under the 2006 Omnibus Incentive Plan will vest and become exercisable at such times and upon such terms and conditions as may be determined by the Compensation Committee. Any stock option granted in the form of an incentive stock option must satisfy the requirements of Section 422 of the Code.Internal Revenue Code (the “Code”). The exercise price per share of Class A common stock for any stock option willcan not be less than one hundred percent (100%)100% of the fair market value of a share of Class A common stock on the day that the stock option is granted. In addition, the term of the stock option may not exceed ten (10) years. In the case of an incentive stock option granted to an employee participantexecutive officer who owns, directly or indirectly (as determined by reference to Section 424(d) of the Code), at the time the option is granted, stock possessing more than ten10 percent (10%) of the total combined voting power of all classes of our stock, the exercise price per share of Class A common stock for any stock option willcan not be less than one hundred ten percent (110%)110% of the fair market value of a share of Class A common stock on the day that the stock option is granted, and the term of the stock option may not exceed five (5) years. The exercise price of any stock option granted pursuant to the 2006 Omnibus Incentive Plan may not be subsequently reduced by amendment or cancellation and substitution of such stock option or any other action of the Compensation Committee without stockholder approval, subject to the Committee'sCompensation Committee’s authority to adjust awards upon certain events (described under "Adjustments Upon Certain Events").as set forth in the Omnibus Incentive Plan. The type (incentive or non-qualified), vesting, exercise price, and other terms of each stock option will beis set forth in the award notice for such stock option.
A stock option may be exercised by paying the exercise price in cash or its equivalent and/or, to the extent permitted by the Compensation Committee and applicable law, shares of Class A common stock, a combination of cash and shares of Class A common stock, or through the delivery of irrevocable instruments to a broker to sell the shares obtained upon the exercise of the stock option and to deliver to us an amount equal to the exercise price.
Stock Appreciation Rights. The Compensation Committee may grant awards in the form of stock appreciation rights, either in tandem with a stock option ("(“Tandem SARs"SARs”) or independent of a stock option ("(“Freestanding SARs"SARs”). The exercise price of a stock appreciation right will beis an amount determined by the Compensation Committee, but in no event willis such amount be less than 100% of the fair market value of a share of Class A common stock on the date that the stock appreciation right iswas granted or, in the case of a Tandem SAR, the exercise price of the related stock option.
A Tandem SAR may be granted either at the time of grant of the related stock option or at any time thereafter during the term of the related stock option. A Tandem SAR will beis exercisable to the extent its related stock option is exercisable. Each Tandem SAR will entitleentitles the holder of such stock appreciation right to surrender the related stock option and to receive an amount equal to (i) the excess of (A) the fair market value on the exercise date of one (1) share of Class A common stock over (B) the stock option price per share of Class A common stock, times (ii) the number of shares of Class A common stock covered by the stock option which is surrendered. Upon the exercise of a stock option as to some or all of the shares of Class A common stock covered by such stock option, the related Tandem SAR willis automatically be canceled to the extent of the number of shares of Class A common stock covered by the exercise of the stock option.
Each Freestanding SAR will entitleentitles the holder of such stock appreciation right upon exercise to an amount equal to (i) the excess of (A) the fair market value on the exercise date of one (1) share of Class A common stock over (B) the exercise price, times (ii) the number of shares of Class A common stock covered by the Freestanding SAR and as to which the stock appreciation right iswas exercised.
Performance Units.The Compensation Committee may grant awards in the form of performance units, which are units valued by reference to designated criteria established by the Compensation Committee other than Class A common stock. Performance units will beare in such form, and dependent on such conditions, as the Compensation Committee determines, including, without limitation, the right to receive a designated payment upon the completion of a specified period of service, the occurrence of an event, and/or the attainment of performance objectives. The form, applicable conditions, and other terms of each performance unit will beare set forth in the award notice for such performance unit.
Performance Awards. Performance awards are designed to reward executive officers for their contributions to our financial and operating performance and are based primarily upon our financial results and certain operating statistics that the Compensation Committee identifies each year as being important to our success. Performance awards are awards structured to qualify as deductible "performance-based" compensation for purposes of Section 162(m) of the Code (see "Limitation on Income Tax Deduction"). The Committee may grant performance awards to employees who are "covered employees" (within the meaning of Section 162(m) of the Code) and to other participants in order to qualify such awards as "performance-based"“performance-based” compensation for purposes of Section 162(m) of the Code. Under Section 162(m) of the Code, "covered employees" generally means the CEO and the other four highest-paid executive officers. Performance awards may take the form of cash, stock awards, restricted stock unit awards, or performance units that are conditioned upon the satisfaction of enumerated performance criteria during a stated performance period, which awards, in addition to satisfying the requirements otherwise applicable to that type of award generally, also satisfy the requirements of performance awards under the 2006 Omnibus Incentive Plan.
Performance awards must be based upon one or more of the following performance criteria: (a) revenues (including without limitation, measures such as revenue per mile (loaded or total) or revenue per tractor), (b) net revenues, (c) fuel surcharges, (d) accounts receivable collection or days sales outstanding, (e) cost reductions and savings (or limits on cost increases), (f) safety and claims (including, without limitation, measures such as accidents per million miles and number of significant accidents), (g) operating income, (h) operating ratio, (i) income before taxes, (j) net income, (k) earnings before interest and taxes (EBIT), (l) earnings before interest, taxes, depreciation, and amortization (EBITDA), (m) adjusted net income, (n) earnings per share, (o) adjusted earnings per share, (p) stock price, (q) working capital measures, (r) return on assets, (s) return on revenues, (t) debt-to-equity or debt-to-capitalization (in each case with or without lease adjustment), (u) productivity and efficiency measures (including, without limitation measures such as driver turnover, trailer to tractor ratio, and tractor to non-driver ratio), (v) cash position, (w) return on stockholders'stockholders’ equity, (x) return on invested capital, (y) cash flow measures (including, without limitation, free cash flow), (z) market share, (aa) stockholder return, (bb) economic value added, or (cc) completion of acquisitions (either with or without specified size). In addition, the Compensation Committee may establish, as an additional performance measure, the attainment by a participant of one or more personal objectives and/or goals that the Compensation Committee deems appropriate, including but not limited to implementation of Company policies, negotiation of significant corporate transactions, development of long-term business goals or strategic plans, or the exercise of specific areas of managerial responsibility. The performance goals set by the Compensation Committee may be expressed on an absolute and/or relative basis, and may include comparisons with our past performance (including the performance of one or more of our divisions) and/or the current or past performance of other peer group companies or indices.
For each performance period, the Compensation Committee will,designates, in its sole discretion, designate within the initial period allowed under Section 162(m) of the Code which persons will beare eligible for performance awards for such period, the length of the performance period, the types of performance awards to be issued, the performance criteria that are to be used to establish performance goals, the kind or level of performance goals, and other relevant matters.
After the close of each performance period, the Compensation Committee will determinedetermines whether the performance goals for the cycle have been achieved. In determining the actual award to be paid to a participant, the Compensation Committee has the authority to reduce or eliminate any performance award earned by the participant, based upon any objective or subjective criteria it deems appropriate.
Arnold Bonus Program. The Arnold Bonus Program is an annual bonus program based upon the overall operating performance of Arnold. Employees who have been with Arnold for at least six months are eligible to participate in this program. The Arnold Bonus Program is designed to award Arnold employees for contributing to the overall performance of Arnold. Bonus awards are based upon a target goal and are expressed in dollar amounts or as a percentage of the employees’ base salary, depending on among other things, the employee’s level of responsibilities. Cash bonuses have historically been paid during the first quarter of each year, based upon the financial results for the prior year-ended December 31. The Arnold Bonus Program was in effect at the time we increased our ownership in Arnold, and the Board, by approving the terms of the acquisition, approved the terms of the bonus program.
Incentive Compensation of Our Named Executive Officers. As of April 2006, the Omnibus Incentive Plan had not yet been approved by our stockholders, but the Compensation Committee determined it was in our best interest to provide the Named Executive Officers, other than Mr. Walters, with some form of incentive compensation. Thus, on April 6, 2006, the Compensation Committee approved restricted stock awards pursuant to our 2002 Stock Incentive Plan, which plan was previously filed as Annex A to our Proxy Statement for our 2002 Annual Meeting of Stockholders, to our Named Executive Officers, other than Mr. Walters, in the following amounts:
Named Executive Officer | Restricted | ||||||
Max L. Fuller | 25,000 | ||||||
Patrick E. Quinn | 25,000 | ||||||
Ray M. Harlin | 10,000 | ||||||
Jeffrey S. Wardeberg | 10,000 | ||||||
15
Subject to the terms of the award notices, 25% of the restricted share awards will vest on each of the first through fourth anniversaries of the date of grant. The primary purpose of these time-vesting awards was retention. The secondary purpose was alignment with stockholder interests, as the recipients have the incentive to attempt to increase the share price and therefore stockholder value.
As part of the negotiated terms of increasing our ownership interest in Arnold, we granted restricted stock awards to Mr. Walters of 4,265 and 11,800 shares, respectively. Subject to the terms of the award notices, the grant of 4,265 shares will be fully vested no later than December 8, 2009, and the grant of 11,800 shares will be fully vested no later than December 8, 2008. The primary purpose of these time-vesting awards was retention. The secondary purpose was alignment with stockholder interests, as Mr. Walters has the incentive to attempt to increase the share price and therefore stockholder value.
After receiving stockholder approval of the Omnibus Incentive Plan and in addition to the foregoing awards, the Compensation Committee set performance-based bonus opportunities under which each of our Named Executive Officers, other than Mr. Walters, was eligible to receive 25% of their respective base salaries in the form of restricted stock and 75% of their respective base salaries in the form of a cash bonus. These awards were based upon us achieving a pre-tax earnings target, which we did not achieve in 2006. See the Grants of Plan-Based Awards may be paidtable for more information.
Despite not reaching the target in 2006, our company improved its performance over 2005 in a soft freight environment and was designated as a Forbes’ Platinum 400 company. In addition, Xpress Global Systems returned to profitability and generated $4.4 million of operating income, we increased our ownership in Arnold Transportation Services and Total Transportation to 80%, we acquired a 49% interest in Abilene Motor Express, and we achieved the second best performance year in our company’s history. Our Named Executive Officers played a key role in these improvements. Accordingly, the Compensation Committee approved a $75,000 cash bonus for each of Messrs. Fuller and Quinn and a $50,000 cash bonus for each of Messrs. Harlin and Wardeberg.
For 2006, the performance target for the Arnold Bonus program was based solely on EBITDA. Based upon Arnold achieving the EBITDA target, Mr. Walters was awarded a cash bonus of $75,000, which represented approximately 25% of his base salary.
In October 2006, the Compensation Committee recommended to the Board, and the Board approved, an extension to the expiration date of outstanding option grants to Messrs. Harlin and Wardeberg. The extension had the following effect: (i) Mr. Harlin’s option to purchase 50,000 shares of our Class A common stock a combinationat an exercise price of cash$18.75 per share, originally granted on July 3, 1997, and previously set to expire on July 3, 2007, was amended to expire on July 3, 2012; and (ii) Mr. Wardeberg’s option to purchase 5,000 shares of our Class A common stock or in anyat an exercise price of $19.125 per share, originally granted on September 18, 1997, and previously set to expire on September 18, 2007, was amended to expire on September 18, 2012. The Compensation Committee extended the expiration date of these stock options as a retention device for these senior executives.
On April 6, 2007, the Compensation Committee approved restricted stock awards to the Named Executive Officers, other permissible form,than Mr. Walters, under our 2006 Omnibus Incentive Plan. The Compensation Committee established each individual executive officer’s restricted stock award after considering a variety of factors, including the company’s and the executive officer’s recent performance. Messrs. Fuller and Quinn were each awarded 50,000 restricted shares and Messrs. Harlin and Wardeberg were each awarded 25,000 restricted shares. Subject to the terms of the award notices one-third of the restricted share awards will vest on each of the third through fifth anniversaries of the date of grant. Similar to the awards made on April 6, 2006, the primary purpose of these time-vesting awards was retention and the secondary purpose was alignment with stockholder interests, as the recipients have the incentive to attempt to increase the share price and therefore stockholder value.
Other Compensation
We provide our Named Executive Officers with certain other benefits that we believe are reasonable, competitive, and consistent with our overall executive compensation program. We believe that these benefits generally allow our executives to work more efficiently. The costs of these benefits constitute only a small percentage of each executive’s total compensation. In setting the amount of these benefits, the Compensation Committee determines. Paymentconsiders (i) each executive’s position
and scope of awards may includeresponsibilities, and (ii) all other elements comprising the executive’s compensation. In 2006, we provided the following additional compensation to our Named Executive Officers: (i) each Named Executive Officer was provided either a company-owned vehicle or a cash vehicle allowance, (ii) each Named Executive Officer, other than Mr. Walters, used our corporate airplane for personal travel, and (iii) each Named Executive Officer, other than Mr. Walters, was reimbursed for certain medical expenses. During 2006, we also (i) paid certain club initiation fees and dues for Messrs. Quinn, Fuller, and Harlin, and (ii) paid certain life insurance premiums for Messrs. Quinn, Fuller, and Walters. See “Executive Compensation—Summary Compensation Table” below for the aggregate dollar amount of all perquisites provided to each of our Named Executive Officers.
Employee Benefits
Our executive officers are eligible to participate in all of our employee benefit plans, such terms, conditions, restrictions, and/or limitations, if any, as our 401(k) Plan and medical, dental, and group life insurance plans, in each case on the Committee deems appropriate, including,same basis as our other employees.
Employee Benefits Paid to Our Named Executive Officers. In 2006, in addition to providing medical, dental, and group life insurance to our Named Executive Officers, we also contributed to the 401(k) Plan account of each of our Named Executive Officers, which amount is included in “All Other Compensation” in the caseSummary Compensation Table below.
Employment Agreements
We currently do not have employment contracts, severance agreements, or change-of-control agreements with any of our Named Executive Officers, other than with Mr. Walters. As part of the negotiated terms of increasing our ownership interest in Arnold, we negotiated an employment agreement with Mr. Walters. The employment agreement is a standard agreement that provides Mr. Walters with a specified salary and other benefits in exchange for him agreeing not to compete with us if he were to leave our company. Subject to the terms of the agreement, if we were to terminate Mr. Walters’ employment other than for “cause,” as set forth in the agreement, we would be obligated to pay Mr. Walters his salary through December 31, 2009.
The following table sets forth information concerning the total compensation for the fiscal year 2006 awarded to, earned by, or paid to those persons who were, at December 31, 2006, (i) our Chief Executive Officer, (ii) our Chief Financial Officer, and (iii) our three other most highly compensated executive officers with total compensation exceeding $100,000 for the fiscal year ended December 31, 2006 (collectively, the “Named Executive Officers”).
Name and Principal Position |
|
|
| Year |
|
|
| Salary |
|
|
| Bonus |
|
|
| Stock |
|
|
| Option |
|
|
| Non-Equity |
|
|
| All Other |
|
|
| Total |
|
Max L. Fuller, |
|
|
| 2006 |
|
|
| 768,269 |
|
|
| 75,000 |
|
|
| 95,016 |
|
|
| — |
|
|
| — |
|
|
| 279,443 |
|
|
| 1,217,728 |
|
Chief Executive Officer, Co-Chairman, Secretary, and President-Xpress Global Systems, Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patrick E. Quinn, |
|
|
| 2006 |
|
|
| 768,269 |
|
|
| 75,000 |
|
|
| 95,016 |
|
|
| — |
|
|
| — |
|
|
| 277,527 |
|
|
| 1,215,812 |
|
Co-Chairman, President, and Treasurer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ray M. Harlin, |
|
|
| 2006 |
|
|
| 386,539 |
|
|
| 50,000 |
|
|
| 38,006 |
|
|
| 238,955 |
|
|
| — |
|
|
| 54,183 |
|
|
| 767,683 |
|
Chief Financial Officer and Executive Vice President-Finance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael S. Walters, |
|
|
| 2006 |
|
|
| 294,430 |
|
|
|
|
|
|
| 96,965 |
|
|
| — |
|
|
| 75,000 |
|
|
| 16,322 |
|
|
| 482,717 |
|
President-Arnold Transportation Services, Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jeffrey S. Wardeberg, |
|
|
| 2006 |
|
|
| 367,500 |
|
|
| 50,000 |
|
|
| 38,006 |
|
|
| 22,743 |
|
|
| — |
|
|
| 35,875 |
|
|
| 514,124 |
|
Chief Operating Officer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)See the Compensation Discussion and Analysis for a description of these bonus amounts.
(2)This column represents the dollar amount recognized for financial statement reporting purposes with respect to the 2006 fiscal year for the fair value of stock awards granted to each Named Executive Officer, in 2006 as well as prior fiscal years, in accordance with SFAS 123R. Pursuant to SEC rules, the amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions. For additional information on the valuation assumptions with respect to the 2006 grants, refer to note 2 of our financial statements as provided in the Form 10-K for the year-ended December 31, 2006, as filed with the SEC. For information on the valuation assumptions with respect to grants made prior to 2006, refer to the notes of our financial statements as provided in the Form 10-K for the respective year-end. See the Grants of Plan-Based Awards Table for information on awards made in 2006. These amounts reflect our accounting expense for these awards, and do not correspond to the actual value that will be recognized by the Named Executive Officers.
(3)This column represents the dollar amount recognized for financial statement reporting purposes with respect to the 2006 fiscal year for the fair value of stock options granted to each Named Executive Officer, in 2006 as well as prior fiscal years, in accordance with SFAS 123R. Pursuant to SEC rules, the amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions. For additional information on the valuation assumptions with respect to the 2006 grants, refer to note 2 of our financial statements as provided in the Form 10-K for the year-ended December 31, 2006, as filed with the SEC. For information on the valuation assumptions with respect to grants made prior to 2006, refer to the notes of our financial statements as provided in the Form 10-K for the respective year-end. See the Compensation Discussion and Analysis for further discussion with respect the options underlying these amounts. These amounts reflect our accounting expense for these awards, and do not correspond to the actual value that will be recognized by the Named Executive Officers.
(4)See the Grants of Plan-Based Awards Table for additional information.
(5)See the All Other Compensation Table for additional information.
The following table describes each component of the “All Other Compensation” column in the Summary Compensation Table.
Name |
|
|
| Year |
|
|
| Perquisites and |
|
|
| Insurance |
|
|
| Contributions to |
|
|
| Total |
| ||||||
Max L. Fuller |
|
|
| 2006 |
|
|
|
| 110,651 | (1) |
|
|
|
| 162,192 |
|
|
|
|
| 6,600 |
|
|
|
| 279,443 |
|
Patrick E. Quinn |
|
|
| 2006 |
|
|
|
| 110,297 | (2) |
|
|
|
| 160,630 |
|
|
|
|
| 6,600 |
|
|
|
| 277,527 |
|
Ray M. Harlin |
|
|
| 2006 |
|
|
|
| 47,583 | (3) |
|
|
|
|
|
|
|
|
|
| 6,600 |
|
|
|
| 54,183 |
|
Michael S. Walters |
|
|
| 2006 |
|
|
|
| 10,708 | (4) |
|
|
|
|
|
|
|
|
|
| 5,614 |
|
|
|
| 16,322 |
|
Jeffrey S. Wardeberg |
|
|
| 2006 |
|
|
|
| 33,989 | (5) |
|
|
|
|
|
|
|
|
|
| 1,886 |
|
|
|
| 35,875 |
|
(1) During 2006, Mr. Fuller received certain other benefits in addition to his salary, including, use of a company-owned vehicle, limited use of the company-owned aircraft for personal travel, and reimbursement for certain medical expenses. Additionally, during 2006 we paid certain club initiation fees and dues for Mr. Fuller. With the exception of the use of a company-owned aircraft, none of the personal benefits provided to Mr. Fuller exceeded the greater of $25,000 or 10% of the total amount of the personal benefits he received during 2006. The incremental cost of Mr. Fuller’s use of the company-owned aircraft was $81,881 and includes the variable costs incurred as a result of personal flight activity, a portion of ongoing maintenance and repairs, aircraft fuel, and any travel expenses for the flight crew. The calculation of the incremental cost excludes non-variable costs, which would have been incurred regardless of whether there was any personal use of the aircraft.
(2) During 2006, Mr. Quinn received certain other benefits in addition to his salary, including, use of a company-owned vehicle, limited use of the company-owned aircraft for personal travel, and reimbursement for certain medical expenses. Additionally, during 2006 we paid certain club initiation fees and dues for Mr. Quinn. With the exception of the use of a company-owned vehicle and aircraft, none of the personal benefits provided to Mr. Quinn exceeded the greater of $25,000 or 10% of the personal benefits he received during 2006. The incremental cost of Mr. Quinn’s use of a company-owned vehicle was $27,865 and was calculated based on the depreciation expense we recognized with respect to that vehicle. The incremental cost of Mr. Quinn’s use of the company-owned aircraft was $75,422 and includes the variable costs incurred as a result of personal flight activity, a portion of ongoing maintenance and repairs, aircraft fuel, and any travel expenses for the flight crew. The calculation of the incremental cost excludes non-variable costs, which would have been incurred regardless of whether there was any personal use of the aircraft.
(3) During 2006, Mr. Harlin received certain other benefits in addition to his salary, including, a cash vehicle allowance, limited use of the company-owned aircraft for personal travel, and reimbursement for certain medical expenses. Additionally, during 2006 we paid certain club initiation fees and dues for Mr. Harlin. None of the personal benefits provided to Mr. Harlin exceeded the greater of $25,000 or 10% of the total amount of the personal benefits he received during 2006.
(4) During 2006, Mr. Walters received certain other benefits in addition to his salary, including, use of a company-owned vehicle. Additionally, during 2006 we paid certain term life insurance premiums on behalf of Mr. Walters. None of the personal benefits provided to Mr. Walters exceeded the greater of $25,000 or 10% of the total amount of the personal benefits he received during 2006.
(5) During 2006, Mr. Wardeberg received certain other benefits in addition to his salary, including, a cash vehicle allowance, limited use of the company-owned aircraft for personal travel, and reimbursement for certain medical expenses. None of the personal benefits provided to Mr. Wardeberg exceeded the greater of $25,000 or 10% of the total amount of the personal benefits he received during 2006.
(6) During 2006, we paid certain life insurance premiums on behalf of Messrs. Quinn and Fuller, as a result of arrangements entered into during a time when split-dollar insurance policies were common.
Narrative to the Summary Compensation Table
See “Executive Compensation — Compensation Discussion and Analysis” for a complete description of our compensation plans pursuant to which the amounts listed under the Summary Compensation Table were paid or awarded and the criteria for such award or payment.
The following table sets forth information concerning each grant of an award made to our Named Executive Officers during the fiscal year 2006.
|
|
|
|
| Estimated Future Payouts |
|
| Estimated Future Payouts |
|
| All Other |
|
| All Other |
|
| Exercise or |
|
| Grant Date |
| ||||||||||||||
|
|
|
|
|
| Under Non-Equity |
|
| Under Equity |
|
| Shares of |
|
| Securities |
|
| Base Price |
|
| of Stock |
| |||||||||||||
|
|
|
|
|
| Incentive Plan Awards(1) |
|
| Incentive Plan Awards(2) |
|
| Stock or |
|
| Underlying |
|
| of Option |
|
| and Option |
| |||||||||||||
Named Executive Officer |
|
| Grant |
|
| Threshold |
|
| Target |
|
| Maximum |
|
| Threshold |
|
| Target |
|
| Maximum |
|
| Units |
|
| Options |
|
| Awards(6) |
|
| Awards(7) |
| |
Max L. Fuller |
|
| 1/27/06 |
|
| 172,860 |
|
|
|
|
| 576,202 |
|
| 3,498 |
|
|
|
|
| 11,661 |
|
| — |
|
|
|
|
|
| — |
|
| — |
|
|
|
| 4/6/06 |
|
| — |
|
|
|
|
| — |
|
| — |
|
|
|
|
| — |
|
| 25,000 | (3) |
|
|
|
|
| 20.27 |
|
| 506,750 |
|
Patrick E. Quinn |
|
| 1/27/06 |
|
| 172,860 |
|
|
|
|
| 576,202 |
|
| 3,498 |
|
|
|
|
| 11,661 |
|
| — |
|
|
|
|
|
| — |
|
| — |
|
|
|
| 4/6/06 |
|
| — |
|
|
|
|
| — |
|
| — |
|
|
|
|
| — |
|
| 25,000 | (3) |
|
|
|
|
| 20.27 |
|
| 506,750 |
|
Ray M. Harlin |
|
| 1/27/06 |
|
| 86,971 |
|
|
|
|
| 289,905 |
|
| 1,760 |
|
|
|
|
| 9,867 |
|
| — |
|
|
|
|
|
| — |
|
| — |
|
|
|
| 4/6/06 |
|
| — |
|
|
|
|
| — |
|
| — |
|
|
|
|
| — |
|
| 10,000 | (3) |
|
|
|
|
| 20.27 |
|
| 202,700 |
|
Michael S. Walters |
|
| 2/28/06 |
|
| — |
|
|
|
|
| — |
|
| — |
|
|
|
|
| — |
|
| 4,265 | (4) |
|
|
|
|
| 17.06 |
|
| 72,761 |
|
|
|
| 2/28/06 |
|
| — |
|
|
|
|
| — |
|
| — |
|
|
|
|
| — |
|
| 11,800 | (5) |
|
|
|
|
| 17.06 |
|
| 201,308 |
|
|
|
| 1/1/06 |
|
| 37,500 |
|
|
|
|
| 75,000 |
|
| — |
|
|
|
|
| — |
|
| — |
|
|
|
|
|
|
|
|
|
|
|
Jeffrey S. Wardeberg |
|
| 1/27/06 |
|
| 82,688 |
|
|
|
|
| 275,625 |
|
| 1,674 |
|
|
|
|
| 5,578 |
|
| — |
|
|
|
|
|
| — |
|
| — |
|
|
|
| 4/6/06 |
|
| — |
|
|
|
|
| — |
|
| — |
|
|
|
|
| — |
|
| 10,000 | (3) |
|
|
|
|
| 20.27 |
|
| 202,700 |
|
(1)These columns represent the potential value of the payout for each Named Executive Officer based upon the attainment of specified performance targets, including the threshold and maximum targets, that were established by the Compensation Committee and as discussed in more detail in the Compensation Discussion and Analysis. The potential payouts are performance-driven and therefore completely at risk. As reflected in the Summary Compensation Table and as discussed in the Compensation Discussion and Analysis, Mr. Walters was the only Named Executive Officer that received non-equity incentive compensation for 2006.
(2)This column represents the potential number of shares of stock to be awarded to each Named Executive Officer based upon the attainment of specified performance targets, including the threshold and maximum targets, that were established by the Compensation Committee and as discussed in more detail in the Compensation Discussion and Analysis.
(3)This represents the number of restricted stock awards granted in 2006 to the Named Executive Officer. Subject to the terms of the award notices, 25% of the restricted stock awards will vest on each of the first through fourth anniversaries of the date of grant.
(4)This represents the number of restricted stock awards granted on February 28, 2006 to Mr. Walters. As more fully described in the Compensation Discussion and Analysis, this grant will vest in full no later than December 8, 2009.
(5)This represents the number of restricted stock awards granted on February 28, 2006 to Mr. Walters. As more fully described in the Compensation Discussion and Analysis, this grant will vest in full no later than December 8, 2008.
(6)This column represents the exercise price for the stock awards granted, which was the closing price of our stock on the grant date.
(7)This column represents the full grant date fair value of the stock awards under SFAS 123R granted to the Named Executive Officers in 2006. The fair value was calculated using the closing price of our common stock on the grant date. The fair value of the stock awards are accounted for in accordance with SFAS 123R. For additional information on the valuation assumptions, refer to note 2 of our financial statements in the Form 10-K for the year-ended December 31, 2006, as filed with the SEC. These amounts reflect our accounting expense, and do not correspond to the actual value that will be recognized by the Named Executive Officers.
Narrative to Grants of Plan-Based Awards
See “Executive Compensation — Compensation Discussion and Analysis” for a complete description of (i) the performance targets for payment of incentive awards, and (ii) the stock awards that we granted during the year.
Outstanding Equity Awards at Fiscal Year-End
The following table sets forth information concerning all stock option grants and stock awards held by our Named Executive Officers as of December 31, 2006. All outstanding equity awards are in shares of our Class A Common Stock.
|
| Option Awards |
|
| Stock Awards |
| ||||||||||||||||||||||
Name |
|
| Grant Date |
|
| Number of |
|
| Equity |
|
| Option |
|
| Option |
|
| Number of |
|
| Market |
|
| Equity |
|
| Equity |
|
Max L. Fuller |
|
| 5/15/02 |
|
| 30,000 |
|
|
|
|
| 11.50 |
|
| 5/15/12 |
|
| — |
|
| — |
|
|
|
|
|
|
|
|
|
| 2//5/04 |
|
| 50,000 |
|
|
|
|
| 13.90 |
|
| 2/05/14 |
|
| — |
|
| — |
|
|
|
|
|
|
|
|
|
| 4/6/06 |
|
| — |
|
|
|
|
| — |
|
| — |
|
| 25,000(1) |
|
| 411,750 |
|
|
|
|
|
|
|
Patrick E. Quinn |
|
| 5/15/02 |
|
| 30,000 |
|
|
|
|
| 11.50 |
|
| 5/15/12 |
|
| — |
|
| — |
|
|
|
|
|
|
|
|
|
| 2//5/04 |
|
| 50,000 |
|
|
|
|
| 13.90 |
|
| 2/05/14 |
|
| — |
|
| — |
|
|
|
|
|
|
|
|
|
| 4/6/06 |
|
| — |
|
|
|
|
| — |
|
| — |
|
| 25,000(1) |
|
| 411,750 |
|
|
|
|
|
|
|
Ray M. Harlin |
|
| 7/3/97 |
|
| 50,000 |
|
|
|
|
| 18.75 |
|
| 7/03/12 |
|
| — |
|
| — |
|
|
|
|
|
|
|
|
|
| 9/30/98 |
|
| 8,000 |
|
|
|
|
| 12.25 |
|
| 9/30/08 |
|
| — |
|
| — |
|
|
|
|
|
|
|
|
|
| 2/28/00 |
|
| 25,000 |
|
|
|
|
| 6.50 |
|
| 2/28/10 |
|
| — |
|
| — |
|
|
|
|
|
|
|
|
|
| 7/01/00 |
|
| 50,000 |
|
|
|
|
| 8.06 |
|
| 7/01/10 |
|
| — |
|
| — |
|
|
|
|
|
|
|
|
|
| 5/15/02 |
|
| 18,000 |
|
|
|
|
| 11.50 |
|
| 5/15/12 |
|
| — |
|
| — |
|
|
|
|
|
|
|
|
|
| 2/05/04 |
|
| 15,000 |
|
|
|
|
| 13.90 |
|
| 2/05/14 |
|
| — |
|
| — |
|
|
|
|
|
|
|
|
|
| 4/6/06 |
|
| — |
|
|
|
|
| — |
|
| — |
|
| 10,000(1) |
|
| 164,700 |
|
|
|
|
|
|
|
Michael S. Walters |
|
| 2/28/06 |
|
| — |
|
|
|
|
| — |
|
| — |
|
| 4,265(2) |
|
| 70,244 |
|
|
|
|
|
|
|
|
|
| 2/28/06 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 11,800(3) |
|
| 194,347 |
|
|
|
|
|
|
|
Jeffrey S. Wardeberg |
|
| 9/18/97 |
|
| 5,000 |
|
|
|
|
| 19.13 |
|
| 9/18/12 |
|
| — |
|
| — |
|
|
|
|
|
|
|
|
|
| 9/30/98 |
|
| 2,500 |
|
|
|
|
| 12.25 |
|
| 9/30/08 |
|
| — |
|
| — |
|
|
|
|
|
|
|
|
|
| 2/28/00 |
|
| 10,000 |
|
|
|
|
| 6.50 |
|
| 2/28/10 |
|
| — |
|
| — |
|
|
|
|
|
|
|
|
|
| 1/25/01 |
|
| 7,500 |
|
|
|
|
| 6.88 |
|
| 1/25/11 |
|
| — |
|
| — |
|
|
|
|
|
|
|
|
|
| 5/15/02 |
|
| 9,000 |
|
|
|
|
| 11.50 |
|
| 5/15/12 |
|
| — |
|
| — |
|
|
|
|
|
|
|
|
|
| 2/05/04 |
|
| 20,000 |
|
|
|
|
| 13.90 |
|
| 2/05/14 |
|
| — |
|
| — |
|
|
|
|
|
|
|
|
|
| 4/6/06 |
|
| — |
|
|
|
|
| — |
|
| — |
|
| 10,000(1) |
|
| 164,700 |
|
|
|
|
|
|
|
(1)Subject to the terms of the award notices, 25% of the restricted stock awards will vest on each of the first through fourth anniversaries of the date of grant.
(2)As more fully described in the Compensation Discussion and Analysis, and subject to the terms of the award notices, this grant will vest in full no later than December 8, 2009.
(3)As more fully described in the Compensation Discussion and Analysis, and subject to the terms of the award notices, this grant will vest in full no later than December 8, 2008.
(4)The market value was calculated by multiplying the closing market price of our stock on December 31, 2006, by the number of shares that have not vested.
The following table sets forth information concerning the compensation of our non-employee directors for the fiscal year 2006.
Name |
|
|
| Fees Earned |
|
|
| Stock |
|
|
| Option |
|
|
| Non-Equity |
|
|
| Change in Pension |
|
|
| All Other |
|
|
| Total |
|
James E. Hall |
|
|
| 29,500 |
|
|
|
|
|
|
| 8,514 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 38,014 |
|
John W. Murrey, III |
|
|
| 31,000 |
|
|
|
|
|
|
| 8,514 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 39,514 |
|
Robert J. Sudderth, Jr. |
|
|
| 29,500 | (2) |
|
|
|
|
|
| 8,514 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 38,014 |
|
(1) This column represents the amount of cash compensation earned in 2006 for Board and committee service.
(2) Mr. Sudderth opted to receive his board-related compensation in the form of stock.
(3) This column represents the dollar amount recognized for financial statement reporting purposes with respect to the 2006 fiscal year for the fair value of stock options granted to each director, in 2006 as well as prior fiscal years, in accordance with SFAS 123R. Pursuant to SEC rules, the amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions. For additional information on the valuation assumptions with respect to the 2006 grants, refer to note 2 of our financial statements in the Form 10-K for the year-ended December 31, 2006, as filed with the SEC. For information on the valuation assumptions with respect to grants made prior to 2006, refer to the notes of our financial statements in the Form 10-K for the respective year-end. These amounts reflect our accounting expense to be recognized over the full vesting period, and do not correspond to the actual value that will be recognized by the directors.
(4) As at December 31, 2006, (i) Mr. Hall had 7,200 outstanding option awards; (ii) Mr. Murrey had 4,800 outstanding option awards; and (iii) Mr. Sudderth had 10,800 outstanding option awards.
Narrative to the Director Compensation Table
Effective on March 2, 2006, we increased the annual retainer for our non-employee directors to $20,000 from $17,500. In addition to the annual retainer, non-employee directors receive $1,500 per Board of Directors’ meeting attended in person (or separate committee meeting attended in person), and $500 per Board of Directors’ meeting attended by telephone (or separate telephonic committee meeting). We also reimburse our non-employee directors for travel and other related expenses incurred in attending meetings. Non-employee directors have the option to accept shares of our Class A common stock restrictions on transfer of such shares and provisions regarding the forfeiture of such shares under certain circumstances.
In addition, each non-employee director is exercised by deliveringgranted options to purchase 1,200 shares of our Class A common stock to us,on the use of such shares of Class A common stock will not be considered a taxable disposition of such shares. Instead, (a) the number of shares of Class A common stock received from thedate he is elected or reelected. Such options are assigned at an exercise equal to the number of shares delivered will have the same basis and same holding period as the shares so delivered, (b) the participant will realize taxable ordinary income in an amountprice equal to the fair market value of our Class A common stock as of the additionalgrant date and vest in equal increments of 400 shares on each of the first, second, and third anniversaries of the date of grant. Such options expire at the earlier of (i) ten (10) years from the date of grant; (ii) 13 months after the non-employee director ceases to serve as one of our directors due to death, incapacity, or retirement at or after the age of sixty-five (65); or (iii) at the time the non-employee director ceases to serve as one of our directors for any reason other than death, incapacity, or retirement at or after the age of sixty-five (65).
Directors who are our employees or employees of one of our subsidiaries do not receive compensation for board or committee service. We do, however, reimburse these directors for travel and other related expenses.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth, as of March 29, 2007, the number and percentage of outstanding shares of our Class A and Class B common stock beneficially owned by each person known by us to beneficially own more than 5% of such stock, by each of our directors and named executive officers, and by all of our directors and executive officers as a group. We had issued and outstanding approximately 12,278,808 shares of Class A and 3,040,262 shares of Class B common stock received from the exerciseas of suchMarch 29, 2007 (including 197,218 shares of restricted Class A common stock option, (c) the participant will have a tax basis in the additional shares equal to their fair market value and the holding period of the additional shares will begin on the date that they are actually acquired, and (d) we will receive a deduction at such time in the same amount as the taxable income realized by the participant. In either case, our deduction will be subject to the limitations of Section 162(m) of the Code, if applicable (see "Limitation on Income Tax Deduction")certain holding provisions). The gain, if any, realized upon the subsequent disposition by the participant of the shares
Title of Class |
|
|
| Name and Address of Beneficial Owner (1) |
|
|
| Amount and |
|
|
| Percent of Class (3) |
| ||
Class A & Class B Common |
|
|
| Patrick E. Quinn |
|
|
|
| 2,993,665 | (4) |
|
|
| 11.9% of Class A |
|
Class A & Class B Common |
|
|
| Max L. Fuller |
|
|
|
| 2,819,753 | (6) |
|
|
| 10.5% of Class A |
|
Class A Common |
|
|
| Ray M. Harlin |
|
|
|
| 213,924 |
|
|
|
| 1.7% of Class A |
|
Class A Common |
|
|
| Jeffrey S. Wardeberg |
|
|
|
| 65,924 |
|
|
|
| * |
|
Class A Common |
|
|
| James E. Hall |
|
|
|
| 6,000 |
|
|
|
| * |
|
Class A Common |
|
|
| John W. Murrey, III |
|
|
|
| 3,600 |
|
|
|
| * |
|
Class A Common |
|
|
| Robert J. Sudderth, Jr. |
|
|
|
| 24,165 |
|
|
|
| * |
|
Class A Common |
|
|
| Galleon Captain’s Partners, L.P., |
|
|
|
| 1,231,473 |
|
|
|
| 10.2% of Class A |
|
Class A Common |
|
|
| Goldman Sachs Asset Management, L.P. (9) |
|
|
|
| 1,219,325 |
|
|
|
| 10.1% of Class A |
|
Class A & Class B Common |
|
|
| All directors and executive officers |
|
|
|
| 6,127,031 |
|
|
|
| 39.6% of Total |
|
* Less than 1% of Class A common stock will constitute short- or long-term capital gain, depending onstock.
(1) The business address of each director and named executive officer is 4080 Jenkins Road, Chattanooga, Tennessee 37421.
(2) Beneficial ownership includes sole voting power and sole investment power with respect to such shares unless otherwise noted and subject to community property laws where applicable. In accordance with Rule 13d-3(d)(1) under the participant's holding period.
(3) Shares of Class A common stock underlying stock options that are currently exercisable or will be exercisable within 60 days following March 29, 2007 are deemed to be outstanding for purposes of computing the percentage ownership of the person holding period"), then uponsuch options and the dispositionpercentage ownership of suchany group of which the holder is a member, but are not deemed outstanding for purposes of computing the percentage ownership of any other person.
(4) Comprised of 1,390,855 shares of Class A common stock the participant will realize a long-term capital gain or loss equal to the difference between the aggregate exercise price previously paid for theand 1,520,131 shares disposed and the proceeds received from such disposition; we willof Class B common stock. Does not be entitled to any deduction. If theinclude 300,000 shares of Class A common stock are disposedheld by the Quinn Family Partnership, as to which shares Mr. Quinn disclaims beneficial ownership. Mr. Quinn’s spouse is the general partner of in a sale, exchange, or other disqualifying disposition during the required holding period, then the participant will realize taxable gain in an amount equal toQuinn Family Partnership.
(5) Based on the aggregate exercise price previously paid for thenumber of shares disposedof Class A and the proceeds received from such disposition, and the portion of such taxable gain up to the excess of the fair market value of theClass B common stock held by Mr. Quinn. The Class A common stock disposed (at the time that the stock option from the exercise of which such shares were received) over the exercise price previously paid for such shares will be taxable ordinary income, and we will beis entitled to a corresponding deduction at such time, subjectone (1) vote per share, and the Class B common stock is entitled to the limitationstwo (2) votes per share. Mr. Quinn beneficially owns shares of Section 162(m)Class A and Class B common stock with 24.5% of the Code, if applicable (see "Limitation on Income Tax Deduction"). Any remaining portionvoting power of such taxable gain will constitute short- or long-term capital gain, depending on the participant's holding period.
Stock Appreciation Rights. (6)No income will be realized by a participant at the time a stock appreciation right is awarded, and no deduction will be available to us at such time. A participant will realize ordinary income upon the exercise Comprised of the stock appreciation right in an amount equal to the cash and fair market value of the1,208,834 shares of Class A common stock received by the participant from such exercise, and we will be entitled to a corresponding deduction at such time, subject to the limitations1,520,131 shares of Section 162(m) of the Code, if applicable (see "Limitation on Income Tax Deduction").
(7) Based on Income Tax Deduction").
(8) The principle business address of Galleon Captain’s Partners, L.P., Galleon Captain’s Offshore, LTD., Galleon Buccaneer’s Offshore, LTD., and we will be entitled to a corresponding deduction at such time. In each case, our deduction will be subject to the limitations of Section 162(m) of the Code, if applicable (see "Limitation on Income Tax Deduction").
(9) The principle business address of Goldman Sachs Asset Management, L.P. is 32 Old Slip, New York, New York 10005. Goldman Sachs Asset Management, L.P. reported that it has sole voting power over 1,219,325 shares, and we will be entitled to a corresponding tax deduction at that time, subject tosole dispositive power over 1,219,325 shares, of our Class A common stock. The reported information is based solely upon the limitations of Section 162(m) of the Code, if applicable (see "Limitation on Income Tax Deduction").
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
We have adopted a policy that transactions with affiliated persons or entities must be reviewed and pre-approved by our Audit Committee on an ongoing basis.
The information set forth herein briefly describes certain transactions between us and certain affiliated parties. We believe that the Committee, the participant will not realize taxable income until the date the participant becomes entitled to receive such payment pursuantterms of these transactions are comparable to the terms that could be obtained from unaffiliated parties.
Innovative Processing Solutions. Messrs. Quinn and Fuller own 100% of the deferral election,outstanding common stock of Innovative Processing Solutions (“IPS”), a company that purchased the assets of Transcommunications, Inc. We utilize IPS charge cards for over-the-road fuel purchases, driver advances, and driver payroll. We paid IPS an aggregate of approximately $333,000 in fees for these services in 2006. IPS also provides communications services to us and our drivers and we will not be entitled to a deduction until such time. Any interest or dividends paid on, or capital gains resulting from, our investmentapproximately $190,000 for these services in 2006. Finally, IPS owns 30% of the amount deferredoutstanding stock of a provider of onboard computers for the trucking industry. During 2006, the Company paid this provider $6.7 million primarily for communications hardware.
Leased Facilities. An office and a terminal in Tunnel Hill, Georgia, and a terminal in Oklahoma City, Oklahoma, used by us during 2005 are owned by Q&F Realty, LLC, of which Messrs. Quinn and Fuller own 100% of the deferral period will be taxablemembership interests. These facilities are leased to ustwo of our operating subsidiaries at, in management’s opinion, fair market rent. In the aggregate, rental payments to Q&F from such subsidiaries in the year recognized. Atended December 31, 2006, were approximately $976,000.
Substantially all of Messrs. Quinn and Fuller’s business time is spent on our business and affairs. In the time the participant becomes entitled to receive the deferred payment, the participant will recognize taxable income in an amount equal to the actual payment to be received, including any interest or earnings credited on the amount deferred during the deferral period, and we will be entitled to a corresponding deduction for such amount at that time.
Certain Family Relationships. Lisa M. Pate, the daughter of Mr. Quinn, is employed by us as Vice President and General Counsel. Patrick Brian Quinn, the son of Mr. Quinn, is employed by us as Vice President — Marketing Analysis and Sales Administration. William E. Fuller, the son of Mr. Fuller, is employed as Vice President and General Manager of Xpress Direct. Christopher Fuller, the son of Mr. Fuller, is employed as a customer service representative for Xpress Direct. During 2006, these four individuals received aggregate compensation from us in the prior sentence.
RELATIONSHIPS WITH INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The principal independent registered public accounting firm utilized by us during fiscal 2006 was Ernst & Young, which has served as our independent registered public accounting firm since May 2002. Representatives of Ernst & Young are expected to be present at the annual meeting, to be available to respond to appropriate questions raised by stockholders, and to make a statement if they desire. The Audit Committee has not yet selected a principal accountant for the current year.
Principal Accounting Fees and Services
Ernst & Young billed us the following amounts for services provided in the following categories during the fiscal years ended December 31, 2006 and 2005, all of which were approved by our Audit Committee pursuant to the procedures described below:
| Fiscal 2006 |
| Fiscal 2005 |
| |||
Audit Fees (1) |
| $ | 803,704 |
| $ | 668,150 |
|
Audit-Related Fees (2) |
| $ | 96,000 |
| $ | 55,128 |
|
Tax Fees (3) |
| $ | 35,400 |
| $ | 19,447 |
|
All Other Fees (4) |
| $ | 3,500 |
| $ | 3,000 |
|
Total |
| $ | 938,604 |
| $ | 745,725 |
|
(2) Represents the aggregate fees billed for assurance and related services by Ernst & Young for the audit of our Xpre$$avings 401(k) Plan, accounting consultation related to acquisitions, and services that are reasonably related to the performance of the audit or review of our financial statements and are not reported under “Audit Fees.”
(3) Represents the aggregate fees billed for professional services rendered by Ernst & Young for tax compliance, tax advice, and tax planning.
(4) Represents fees for a subscription to a technical service provided by Ernst & Young.
Our Audit Committee maintains a policy pursuant to which it pre-approves all audit services to be performed by our independent registered public accounting firm in order to assure that the provision of such services is compatible with maintaining the firm’s independence. In addition, our Audit Committee has pre-approved up to $50,000 of fees related to accounting consultation, and has pre-approved up to $50,000 of fees related to tax consulting. A summary report of such fees is reviewed by the Audit Committee on a quarterly basis. The Chairman of the Audit Committee also has the power to approve any auditor fees up to an aggregate of $50,000 in addition to the fees set forth above. Any auditor fees above the foregoing amounts must be approved by the Audit Committee. No audit-related, tax, or other non-audit services were approved by the Audit Committee pursuant to the de minimis exception to the pre-approval requirement under Rule 2-01(c)(7)(i)(C) of Regulation S-X during the fiscal year ended December 31, 2006.
To be eligible for inclusion in our proxy materials relating to our annual meeting of stockholders following completion of our fiscal year ended December 31, 2006,2007, stockholder proposals intended to be presented at that meeting must be received by us in writing on or before December 4, 2006.13, 2007. However, if the date of such annual meeting is more than thirty (30) days before or after May 2, 2007,11, 2008, then the deadline for submitting any such stockholder proposal for inclusion in the proxy materials relating to our annual meeting following completion of our fiscal year ended December 31, 2006,2007, will be a reasonable time before we begin to print or mail such proxy materials. The inclusion of any such stockholder proposals in our proxy materials will be subject to the requirements of the proxy rules adopted under the Exchange Act, including Rule 14a-8.
We must receive in writing any stockholder proposals to be considered at our annual meeting following completion of our fiscal year ended December 31, 2006,2007, but not included in our proxy materials relating to that meeting pursuant to Rule 14a-8 under the Exchange Act, by February 17, 2007.26, 2008. However, if the date of the 2007 annual meeting of stockholders is more than thirty (30) days before or after May 2, 2007,11, 2008, then the deadline for submitting any such stockholder proposal will be a reasonable time before we mail the proxy materials relating to such meeting. Pursuant to Rule 14(a)-4(c)(1) under the Exchange Act, the proxy holders designated by an executed proxy in the form accompanying our 20072008 proxy statement will have discretionary authority to vote on any stockholder proposal that is not received on or prior to the deadline described above.
Written copies of all stockholder proposals should be sent to us at our principal executive offices, 4080 Jenkins Road, Chattanooga, Tennessee 37421, to the attention of Max L. Fuller, Secretary. Stockholder proposals must comply with the rules and regulations of the SEC.
OTHER MATTERS
The Board of Directors does not intend to present at the annual meeting any matters other than those described herein and does not presently know of any matters that will be presented by other parties.
U.S. Xpress Enterprises, Inc. |
| ||||
Patrick E. Quinn | ||||
Co-Chairman, President, and Treasurer | ||||
| ||||
Max L. Fuller | ||||
Co-Chairman, Chief Executive Officer, and Secretary |
April 3, 2006
27
