UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
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OLD DOMINION FREIGHT LINE, INC.
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OLD DOMINION FREIGHT LINE, INC.
500 Old Dominion Way
Thomasville, North Carolina 27360
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
The Annual Meeting of Shareholders of Old Dominion Freight Line, Inc. will be held Thursday, May 19, 2016, at 10:00 a.m. Eastern Daylight Time, at our principal executive offices, 500 Old Dominion Way, Thomasville, North Carolina 27360, for the following purposes:
1. | To elect nine directors to our Board of Directors for one-year terms and until their respective successors have been elected and qualified or until their death, resignation, removal or disqualification or until there is a decrease in the number of directors, as set forth in the accompanying proxy statement. |
2. | To approve, on an advisory basis, the compensation of our named executive officers. |
3. | To approve the Old Dominion Freight Line, Inc. 2016 Stock Incentive Plan. |
4. | To ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the year ending December 31, 2016. |
5. | To transact such other business, if any, as may be properly brought before the meeting or any adjournment thereof. |
Shareholders of record at the close of business on March 11, 2016, are entitled to notice of and to vote at the meeting.
By Order of the Board of Directors
Ross H. Parr
Senior Vice President – Legal Affairs,
General Counsel and Secretary
Thomasville, North Carolina
April 19, 2016
If you do not intend to be present at the meeting, we ask that you vote your shares using a toll-free telephone number, the Internet or by signing, dating and returning the accompanying proxy card promptly so that your shares of common stock may be represented and voted at the Annual Meeting. Instructions regarding the different voting options that we provide are contained in the accompanying proxy statement.
TABLE OF CONTENTS TO THE PROXY STATEMENT
OLD DOMINION FREIGHT LINE, INC.
Principal Executive Offices: 500 Old Dominion Way
Thomasville, North Carolina 27360
___________________
PROXY STATEMENT
___________________
Important Notice Regarding the Availability of Proxy Materials
for the Shareholder Meeting to be held on May 19, 2016:
The Notice of Annual Meeting of Shareholders, Proxy Statement, Form of Proxy and 2015 Annual Report to Shareholders are available on our corporate website at www.odfl.com/company/proxy.shtml.
This proxy statement is first being sent to shareholders on or about April 19, 2016, in connection with the solicitation of proxies by and on behalf of the Board of Directors of Old Dominion Freight Line, Inc. for use at the Annual Meeting of Shareholders to be held at our principal executive offices, 500 Old Dominion Way, Thomasville, North Carolina 27360 on Thursday, May 19, 2016, at 10:00 a.m. Eastern Daylight Time, and at any adjournment thereof. If you need directions so you can attend the Annual Meeting and vote in person, please contact our Corporate Secretary at (336) 889-5000.
2016 PROXY STATEMENT SUMMARY | ||||||||||||||||||||||||
This summary highlights information contained elsewhere in this proxy statement. This summary does not contain all of the information that you should consider, and you should read the entire proxy statement carefully before voting. | ||||||||||||||||||||||||
Annual Meeting of Shareholders | ||||||||||||||||||||||||
• | Time and Date | 10:00 a.m., Thursday, May 19, 2016 | ||||||||||||||||||||||
• | Place | Old Dominion’s principal executive offices | ||||||||||||||||||||||
500 Old Dominion Way | ||||||||||||||||||||||||
Thomasville, North Carolina 27360 | ||||||||||||||||||||||||
• | Record Date | March 11, 2016 | ||||||||||||||||||||||
• | Voting | Shareholders as of the record date are entitled to vote. Each share of common stock is entitled to one vote for each director nominee and one vote for each of the proposals to be voted on at the meeting. | ||||||||||||||||||||||
• | Admission | If you decide to attend the meeting in person, upon your arrival you will need to register with our receptionist in the main lobby of our principal executive offices. See page 5 for further instructions. | ||||||||||||||||||||||
Meeting Agenda/Proposals | ||||||||||||||||||||||||
Board Vote | Page Reference | |||||||||||||||||||||||
Recommendation | (for more detail) | |||||||||||||||||||||||
• | Election of nine directors | FOR ALL | ||||||||||||||||||||||
• | Approval, on an advisory basis, of the compensation of our named executive officers | FOR | ||||||||||||||||||||||
• | Approval of the Old Dominion Freight Line, Inc. 2016 Stock Incentive Plan | FOR | ||||||||||||||||||||||
• | Ratification of Ernst & Young LLP as our independent registered public accounting firm for the year ending December 31, 2016 | FOR | ||||||||||||||||||||||
Transact other business that properly comes before the meeting | ||||||||||||||||||||||||
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Election of Directors | ||||||||||||||||||||||||
Our directors are elected annually for one-year terms. The following table provides summary information about each director nominee. On December 9, 2015, J. Paul Breitbach notified us of his decision to retire at the end of his current term. Accordingly, Mr. Breitbach is not standing for re-election to the Board at the Annual Meeting. Upon recommendation of its Governance and Nomination Committee, the Board has determined to increase its size from eight directors to nine directors. The nine nominees below are comprised of seven current directors and two nominees of the Board’s Governance and Nomination Committee - Bradley R. Gabosch and Patrick D. Hanley. The nominees receiving a plurality of the votes cast at the meeting will be elected as directors. | ||||||||||||||||||||||||
Committees | ||||||||||||||||||||||||
Name | Age | Director | Occupation | Experience/ | Independent | AC | CC | GNC | ||||||||||||||||
Since | Qualification | |||||||||||||||||||||||
Earl E. Congdon | 85 | 1952 | Executive Chairman of the Board of Directors, Old Dominion | Leadership, Industry, Operations, Strategy | ||||||||||||||||||||
David S. Congdon | 59 | 1998 | Vice Chairman of the Board of Directors and CEO, Old Dominion | Leadership, Industry, Operations, Strategy | ||||||||||||||||||||
John R. Congdon, Jr. | 59 | 1998 | Chairman of the Board of Directors, Old Dominion Truck Leasing, Inc. | Leadership, Fleet Management, Logistics | ||||||||||||||||||||
Robert G. Culp, III | 69 | 2003 | Chairman of the Board of Directors, Culp, Inc. | Leadership, Global | X | X | C | |||||||||||||||||
Bradley R. Gabosch | 64 | — | Managing Director, Grant Thornton LLP | Leadership, Accounting, Management | X | |||||||||||||||||||
Patrick D. Hanley | 71 | — | Private investor | Leadership, Accounting, Logistics | X | |||||||||||||||||||
John D. Kasarda, Ph.D. | 70 | 2008 | Professor Emeritus and Director of Center for Air Commerce at the University of North Carolina at Chapel Hill's Kenan-Flagler Business School | Leadership, Economic Development, Logistics | X | C | ||||||||||||||||||
Leo H. Suggs | 76 | 2009 | Private investor | Leadership, Logistics, Operations | X | X | X | |||||||||||||||||
D. Michael Wray | 55 | 2008 | President, Riverside Brick & Supply Company, Inc. | Leadership, Accounting, Management | X | C | X | |||||||||||||||||
AC | Audit Committee | GNC | Governance and Nomination Committee | |||||||||||||||||||||
CC | Compensation Committee | C | Committee Chair | |||||||||||||||||||||
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Approval, on an Advisory Basis, of the Compensation of our Named Executive Officers | ||||||||||||||||||||||||
We are asking our shareholders to approve, on a non-binding, advisory basis, the compensation of our named executive officers. The Board believes that our executive compensation policies are designed appropriately and are functioning as intended to produce long-term value for our shareholders. | ||||||||||||||||||||||||
Fiscal 2015 Executive Compensation Elements | ||||||||||||||||||||||||
Type | Form | General Purpose and Terms | ||||||||||||||||||||||
Cash | Base Salary | Retention component that is reviewed annually and adjusted as needed, and executives are generally eligible for an annual increase. | ||||||||||||||||||||||
Non-Equity Performance Incentive Plan | Motivates and rewards performance by linking a significant portion of compensation to profitability. Earned monthly based upon a fixed percentage, or participation factor, of our pre-tax income. No payment unless pre-tax income exceeds a required minimum performance threshold. | |||||||||||||||||||||||
Equity-based | Phantom Stock | Aligns executive compensation with shareholder value and provides a long-term benefit that supplements our 401(k) plan. Generally vests in increments of 20% per year, subject to continued service requirements, and can be settled only in cash. | ||||||||||||||||||||||
Other Employee Benefits | 401(k) Plan | Retirement plan with company match; receive the same benefit as all employees. | ||||||||||||||||||||||
Nonqualified Deferred Compensation Plan | Supplemental retirement benefit; can defer significant percentages of annual base salary and monthly non-equity performance-based incentive compensation. | |||||||||||||||||||||||
Fiscal 2015 Compensation Decisions | ||||||||||||||||||||||||
The principal factors in the Compensation Committee’s executive compensation decisions for 2015 were our financial performance, the relationship of executive compensation to our income before taxes, the amount of compensation that is performance-based, our organizational and leadership changes and the review and analysis conducted by its independent compensation consultant, Pearl Meyer. Based on the improvement in our financial results during 2014 and the outlook for 2015, the Compensation Committee approved a 3.3% increase in the base salaries for our named executive officers effective in January 2015. For 2015, our year-over-year revenue increased 6.6% to $3.0 billion, our net income increased 13.9% to $304.7 million and our earnings per diluted share grew 15.2% to $3.57. In keeping with our philosophy of pay-for-performance, the improvement in our financial performance during 2015 also resulted in increases in our Performance Incentive Plan (the "PIP") payouts to our officers, including our named executive officers, as compared to 2014, and these PIP payouts were directly aligned with our performance. As a result, total cash compensation for our named executive officers as a group increased 14.7% in 2015 from 2014. | ||||||||||||||||||||||||
We believe our compensation program aligns executive compensation with both our business objectives and the interests of our shareholders. | ||||||||||||||||||||||||
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Fiscal 2015 Compensation Summary | ||||||||||||||||||||||||
The following table summarizes the compensation of our Chief Executive Officer, our Chief Financial Officer during the fiscal year, and our next three most highly compensated executive officers, to whom we refer to collectively as our named executive officers, for the fiscal year ended December 31, 2015. J. Wes Frye, our former Senior Vice President – Finance, Chief Financial Officer and Assistant Secretary, retired from each of these positions effective December 31, 2015. | ||||||||||||||||||||||||
Non-Equity | ||||||||||||||||||||||||
Stock | Incentive Plan | All Other | Total | |||||||||||||||||||||
Salary | Awards | Compensation | Compensation | Compensation | ||||||||||||||||||||
Name | ($) | ($) | ($) | ($) | ($) | |||||||||||||||||||
Earl E. Congdon | 575,328 | 283,476 | 5,096,179 | 74,016 | 6,028,999 | |||||||||||||||||||
Executive Chairman of the Board | ||||||||||||||||||||||||
David S. Congdon | 575,328 | 283,476 | 5,096,179 | 126,479 | 6,081,462 | |||||||||||||||||||
Vice Chairman of the Board and Chief Executive Officer | ||||||||||||||||||||||||
Greg C. Gantt | 483,667 | 208,414 | 1,869,115 | 18,945 | 2,580,141 | |||||||||||||||||||
President and Chief Operating Officer | ||||||||||||||||||||||||
J. Wes Frye | 336,156 | 318,915 | 1,372,048 | 319,214 | 2,346,333 | |||||||||||||||||||
Former Senior Vice President – Finance, Chief Financial Officer and Assistant Secretary | ||||||||||||||||||||||||
Cecil E. Overbey, Jr. | 253,821 | 125,078 | 980,034 | 24,220 | 1,383,153 | |||||||||||||||||||
Senior Vice President – Strategic Development | ||||||||||||||||||||||||
Approval of the Old Dominion Freight Line, Inc. 2016 Stock Incentive Plan | ||||||||||||||||||||||||
We are asking our shareholders to approve the Old Dominion Freight Line, Inc. 2016 Stock Incentive Plan (the “2016 Plan”) in order to (i) comply with The NASDAQ Stock Market LLC rules requiring shareholder approval of equity compensation plans; and (ii) allow the Compensation Committee to grant awards that may be intended to qualify as “performance-based compensation,” thereby potentially preserving our tax deduction under Section 162(m) of the Internal Revenue Code of 1986, as amended. | ||||||||||||||||||||||||
Ratification of Independent Registered Public Accounting Firm | ||||||||||||||||||||||||
As a matter of good corporate governance, we are asking our shareholders to ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the year ending December 31, 2016. | ||||||||||||||||||||||||
2017 Annual Meeting | ||||||||||||||||||||||||
• | Shareholder proposals submitted pursuant to Securities and Exchange Commission ("SEC") Rule 14a-8 must be received by us by December 20, 2016. | |||||||||||||||||||||||
• | Notice of shareholder proposals outside of SEC Rule 14a-8 must be received by us no earlier than November 20, 2016 and no later than December 20, 2016. | |||||||||||||||||||||||
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GENERAL INFORMATION
The accompanying proxy is solicited by and on behalf of our Board of Directors, and the entire cost of such solicitation will be borne by us. This solicitation is being made by mail and may also be made in person or by fax, telephone, or Internet by our officers or employees. In addition, arrangements will be made with brokerage houses and other custodians, nominees and fiduciaries to send proxy materials to their principals, and we will reimburse them for their reasonable expenses in connection therewith.
The accompanying proxy is for use at the Annual Meeting if a shareholder either will be unable to attend in person or will attend but wishes to vote by proxy. “Registered holders” who have shares registered in the owner's name through our transfer agent may vote by either (i) completing the enclosed proxy card and mailing it in the postage-paid envelope provided; (ii) voting over the Internet by accessing the website identified on the proxy card and following the on-line instructions; or (iii) calling the toll-free telephone number identified on the proxy card. Proxies submitted via the Internet or by telephone must be received by 11:59 p.m. Eastern Daylight Time on Wednesday, May 18, 2016.
For shares held in “street name,” that is, shares held in the name of a brokerage firm, bank or other nominee, you should receive a voting instruction form from that institution in lieu of a proxy card. The voting instruction form should indicate whether the institution has a process for beneficial holders to vote over the Internet or by telephone. Many banks and brokerage firms participate in Broadridge Financial Solutions, Inc.'s online program. This program provides eligible shareholders who receive a paper copy of the proxy statement the opportunity to vote over the Internet or by telephone. The Broadridge Internet and telephone voting facilities will close at 11:59 p.m. Eastern Daylight Time on Wednesday, May 18, 2016. The Broadridge Internet and telephone voting procedures are designed to authenticate the shareholder's identity and to allow shareholders to vote their shares and confirm that their instructions have been properly recorded. If the voting instruction form does not reference Internet or telephone information, or if the shareholder prefers to vote by mail, please complete and return the paper voting instruction form in accordance with the instructions provided to you.
If you decide to attend the meeting in person, upon your arrival you will need to register with our receptionist in the main lobby of our principal executive offices at 500 Old Dominion Way, Thomasville, North Carolina 27360. Please be sure to have your state or government issued photo identification with you at the time of registration. After a determination that you are a registered holder of Old Dominion common stock as of the record date, you will be allowed to access the meeting room and attend our Annual Meeting. If you are not a registered shareholder but beneficially own shares of our common stock as of the record date, please be sure that you bring your state or government issued photo identification as well as either (i) a proxy issued to you in your name by your brokerage firm, bank or other nominee, or (ii) a brokerage statement showing your beneficial ownership of our common stock as of the record date (and a legal proxy from your brokerage firm, bank or other nominee if you wish to vote your shares at the meeting) to present to us at the time of registration.
The Board of Directors has fixed March 11, 2016 as the record date for the determination of shareholders entitled to notice of and to vote at the Annual Meeting. On March 11, 2016, there were 83,760,230 outstanding shares of our common stock, each entitled to one vote. The presence in person or by proxy of a majority of the shares of common stock outstanding on the record date constitutes a quorum for purposes of conducting business at the Annual Meeting. Shareholders do not have cumulative voting rights in the election of directors.
Brokers that are members of certain securities exchanges and that hold shares of our common stock in street name on behalf of beneficial owners have authority to vote on certain items when they have not received instructions from beneficial owners. Under the applicable rules governing such brokers, the proposal to ratify the appointment of our independent registered public accounting firm is considered a “discretionary” item. This means that brokers may vote using their discretion on this proposal on behalf of beneficial owners who have not furnished voting instructions. In contrast, certain items are considered “non-discretionary,” and a “broker non-vote” occurs when brokers do not receive voting instructions from beneficial owners with respect to such items because the brokers are not entitled to vote such uninstructed shares. The proposals to elect our directors, approve the compensation of our named executive officers and approve the 2016 Plan are considered “non-discretionary,” which means that brokers cannot vote your uninstructed shares when they do not receive voting instructions from you.
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The voting options for each proposal presented in this proxy statement, as well as the vote required to approve each proposal at the Annual Meeting, are as follows:
Proposal 1 - Election of Directors: With respect to this proposal, you may cast your vote “for all,” “withhold all” or “for all except” with respect to the director nominees. Assuming the existence of a quorum, the nominees receiving a plurality of the votes cast by the shares entitled to vote will be elected as directors.
Proposal 2 - Approval, on an Advisory Basis, of the Compensation of Our Named Executive Officers: With respect to this proposal (the results of which will not be binding upon Old Dominion or the Board), you may vote “for,” “against,” or “abstain” from voting. For this non-binding vote to be approved by the shareholders, the votes cast “for” this proposal must exceed the votes cast “against” this proposal.
Proposal 3 - Approval of the 2016 Plan: With respect to this proposal, you may vote “for,” “against,” or “abstain” from voting. For this proposal to be approved by the shareholders, the votes cast “for” this proposal must exceed the votes cast “against” this proposal.
Proposal 4 - Ratification of the Appointment of Our Independent Registered Public Accounting Firm: With respect to this proposal, you may vote “for,” “against,” or “abstain” from voting. For this proposal to be approved by the shareholders, the votes cast “for” this proposal must exceed the votes cast “against” this proposal.
Abstentions, shares that are withheld as to voting and broker non-votes (if any) will be counted for determining the existence of a quorum, but will not be counted as a vote cast with respect to any of these proposals and, therefore, will have no effect on the outcome of the vote for any of these proposals.
Where a choice is specified on any proxy as to the vote on any matter to come before the Annual Meeting, the proxy will be voted in accordance with such specification. If no specification is made but the proxy is otherwise properly completed, the shares represented thereby will be voted “for” the election of the director nominees named in this proxy statement, “for” the approval, on an advisory basis, of the compensation of our named executive officers, "for" the approval of the 2016 Plan and “for” the ratification of the appointment of our independent registered public accounting firm. Any shareholder submitting the accompanying proxy has the right to revoke it by notifying our Corporate Secretary in writing at any time prior to the voting of the proxy. A proxy is suspended if the person giving the proxy attends the Annual Meeting and elects to vote in person.
Management is not aware of any matters, other than those specified above, that will be presented for action at the Annual Meeting. If any other matters do properly come before the Annual Meeting, the persons named as agents in the proxy will vote upon such matters in accordance with their best judgment.
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SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth information with respect to the beneficial ownership of our common stock, $0.10 par value, our only class of voting security, as of March 11, 2016, or such other date as indicated in the footnotes to the table, for (i) each person known by us to own beneficially more than five percent of our common stock; (ii) each director and director nominee; (iii) each executive officer; and (iv) all current directors, nominees and executive officers as a group. Beneficial ownership is determined in accordance with the rules of the SEC. Unless otherwise indicated, the address of all listed shareholders is c/o Old Dominion Freight Line, Inc., 500 Old Dominion Way, Thomasville, NC 27360. As of March 11, 2016, and in compliance with our securities trading policy, none of our directors or executive officers have pledged our common stock.
Name and Address of Beneficial Owner | Shares Beneficially Owned (1) | Percent |
Capital Research Global Investors (2) 333 South Hope Street Los Angeles, CA 90071 | 6,592,754 | 7.9% |
Jeffrey W. Congdon (3) 300 Arboretum Place, Suite 600 North Chesterfield, VA 23236 | 5,816,275 | 6.9% |
John R. Congdon, Jr. (4) 300 Arboretum Place, Suite 600 North Chesterfield, VA 23236 | 5,751,348 | 6.9% |
William Blair Investment Management, LLC (5) 231 W. Adams St. Chicago, IL 60606 | 5,187,814 | 6.2% |
David S. Congdon (6) | 4,870,890 | 5.8% |
BlackRock, Inc. (7) 55 East 52nd Street New York, NY 10055 | 4,624,652 | 5.5% |
The Vanguard Group (8) 100 Vanguard Boulevard Malvern, PA 19355 | 4,381,250 | 5.2% |
Earl E. Congdon (9) | 2,257,159 | 2.7% |
Susan C. Terry (10) 300 Arboretum Place, Suite 600 North Chesterfield, VA 23236 | 1,891,723 | 2.3% |
J. Wes Frye (11) | 42,864 | * |
Kevin M. Freeman (12) | 18,455 | * |
Adam N. Satterfield (13) | 6,758 | * |
J. Paul Breitbach (14) | 4,631 | * |
Greg C. Gantt (12) | 4,581 | * |
John D. Kasarda | 3,832 | * |
Robert G. Culp, III (15) | 3,768 | * |
Leo H. Suggs | 2,400 | * |
D. Michael Wray | 2,250 | * |
Cecil E. Overbey, Jr. (12) | 1,125 | * |
David J. Bates (12) | 330 | * |
Ross H. Parr (12) | 162 | * |
Bradley R. Gabosch | — | — |
Patrick D. Hanley | — | — |
All Directors, Nominees and Executive Officers as a Group (16 persons) (16) | 12,266,885 | 14.6% |
________________
* Less than 1%
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(1) | Except as indicated in the footnotes to this table and under applicable community property laws, each shareholder named has sole voting and dispositive power with respect to the shares set forth opposite the shareholder’s name. Beneficial ownership was determined from public filings, representations by the named shareholders and the Old Dominion Freight Line, Inc. 401(k) Plan. |
(2) | Information was obtained from a Schedule 13G filed on February 16, 2016 with the SEC by Capital Research Global Investors (“Capital Research”). Capital Research reports sole power to vote, or direct the vote of, and dispose of, or direct the disposition of, 6,592,754 shares. All shares are owned by various investment advisory clients of Capital Research, which is deemed to be the beneficial owner of those shares pursuant to Rule 13d-4 under the Exchange Act, due to its discretionary power to make investment decisions over such shares for its clients and/or its ability to vote such shares. In all cases, persons other than Capital Research have the right to receive, or the power to direct the receipt of, dividends from, or the proceeds from the sale of the shares. No individual client holds more than five percent of the total outstanding common shares. |
(3) | Includes (i) 829,179 shares held as trustee of the Jeffrey W. Congdon Revocable Trust; (ii) 83,610 shares held as trustee of the Jeffrey W. Congdon 2012 GRAT #2; (iii) 39,344 shares held as trustee of the Jeffrey W. Congdon 2013 GRAT #2; (iv) 52,667 shares held as trustee of the Jeffrey W. Congdon 2014 GRAT; (v) 439,383 shares held through shared voting and investment rights as co-trustee of the John R. Congdon Trust for Nathaniel Everett Terry; (vi) 1,264 shares held through shared voting and investment rights as co-trustee of the Susan C. Terry Irrevocable Trust Agreement fbo Natalie Grace Bagwell; (vii) 1,264 shares held through shared voting and investment rights as co-trustee of the Susan C. Terry Irrevocable Trust Agreement fbo Leyton Andrew Bagwell; (viii) 1,264 shares held through shared voting and investment rights as co-trustee of the Susan C. Terry Irrevocable Trust Agreement fbo Harley Virginia Terry; (ix) 1,264 shares held through shared voting and investment rights as co-trustee of the Susan C. Terry Irrevocable Trust Agreement fbo Brinkley Louise Terry; (x) 1,264 shares held through shared voting and investment rights as co-trustee of the Susan C. Terry Irrevocable Trust Agreement fbo Lillian Everett Terry; (xi) 1,264 shares held through shared voting and investment rights as co-trustee of the Susan C. Terry Irrevocable Trust Agreement fbo Jack Daniel Terry; (xii) 1,264 shares held through shared voting and investment rights as co-trustee of the Susan C. Terry Irrevocable Trust Agreement fbo Bailey Hunter Terry; (xiii) 1,264 shares held through shared voting and investment rights as co-trustee of the Susan C. Terry Irrevocable Trust Agreement fbo Henry Lawson Bagwell; (xiv) 400,716 shares held as trustee of the John R. Congdon Trust for Mary Evelyn Congdon; (xv) 277,492 shares held as trustee of the John R. Congdon Trust for Peter Whitefield Congdon; (xvi) 400,720 shares held as trustee of the John R. Congdon Trust for Michael Davis Congdon; (xvii) 252,883 shares held as trustee of the John R. Congdon, Jr. GRAT Remainder Trust; (xviii) 215 shares held as trustee of the Peter W. Congdon 2016 Irrevocable Trust Agreement dtd February 10, 2016 fbo Ella Kate Congdon; (xix) 215 shares held as trustee of the Peter W. Congdon 2016 Irrevocable Trust Agreement dtd February 10, 2016 fbo Kinsley Ann Congdon; (xx) 430 shares held through shared voting and investment rights as co-trustee of the Trust fbo Natalie Grace Bagwell under the Kathryn Lawson Bagwell 2016 Irrevocable Trust Agreement dtd February 10, 2016; (xxi) 430 shares held through shared voting and investment rights as co-trustee of the Trust fbo Leyton Andrew Bagwell under the Kathryn Lawson Bagwell 2016 Irrevocable Trust Agreement dtd February 10, 2016; (xxii) 430 shares held through shared voting and investment rights as co-trustee of the Trust fbo Henry Lawson Bagwell under the Kathryn Lawson Bagwell 2016 Irrevocable Trust Agreement dtd February 10, 2016; (xxiii) 100,000 shares held as trustee of the Jeffrey W. Congdon 2015 GRAT; and (xxiv) 2,675,566 shares held through shared voting and investment rights as co-manager of Congdon Family, LLC. This amount also includes 252,883 shares held by the Jeffrey W. Congdon GRAT Remainder Trust, with respect to which Jeffrey W. Congdon disclaims beneficial ownership. Jeffrey W. Congdon may be deemed a member of a group under Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). |
(4) | Includes (i) 947,556 shares held as trustee of the John R. Congdon, Jr. Revocable Trust; (ii) 83,610 shares held as trustee of the John R. Congdon, Jr. 2012 GRAT #2; (iii) 39,344 shares held as trustee of the John R. Congdon, Jr. 2013 GRAT #2; (iv) 52,667 shares held as trustee of the John R. Congdon, Jr. 2014 GRAT; (v) 100,000 shares held as trustee of the John R. Congdon, Jr. 2015 GRAT; (vi) 439,383 shares held through shared voting and investment rights as co-trustee of the John R. Congdon Trust for Nathaniel Everett Terry; (vii) 1,264 shares held through shared voting and investment rights as co-trustee of the Susan C. Terry Irrevocable Trust Agreement fbo Natalie Grace Bagwell; (viii) 1,264 shares held through shared voting and investment rights as co-trustee of the Susan C. Terry Irrevocable Trust Agreement fbo |
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Leyton Andrew Bagwell; (ix) 1,264 shares held through shared voting and investment rights as co-trustee of the Susan C. Terry Irrevocable Trust Agreement fbo Harley Virginia Terry; (x) 1,264 shares held through shared voting and investment rights as co-trustee of the Susan C. Terry Irrevocable Trust Agreement fbo Brinkley Louise Terry; (xi) 1,264 shares held through shared voting and investment rights as co-trustee of the Susan C. Terry Irrevocable Trust Agreement fbo Lillian Everett Terry; (xii) 1,264 shares held through shared voting and investment rights as co-trustee of the Susan C. Terry Irrevocable Trust Agreement fbo Jack Daniel Terry; (xiii) 1,264 shares held through shared voting and investment rights as co-trustee of the Susan C. Terry Irrevocable Trust Agreement fbo Bailey Hunter Terry; (xiv) 1,264 shares held through shared voting and investment rights as co-trustee of the Susan C. Terry Irrevocable Trust Agreement fbo Henry Lawson Bagwell; (xv) 438,467 shares held as trustee of the John R. Congdon Trust for Mark Ross Congdon; (xvi) 438,089 shares held as trustee of the John R. Congdon Trust for Jeffrey Whitefield Congdon, Jr.; (xvii) 5,963 shares held as trustee of the Page Elizabeth Conway Irrevocable Trust; (xviii) 5,963 shares held as trustee of the Katherine Sirles Conway Irrevocable Trust; (xix) 252,883 shares held as trustee of the Jeffrey W. Congdon GRAT Remainder Trust; (xx) 430 shares held through shared voting and investment rights as co-trustee of the Trust fbo Natalie Grace Bagwell under the Kathryn Lawson Bagwell 2016 Irrevocable Trust Agreement dtd February 10, 2016; (xxi) 430 shares held through shared voting and investment rights as co-trustee of the Trust fbo Leyton Andrew Bagwell under the Kathryn Lawson Bagwell 2016 Irrevocable Trust Agreement dtd February 10, 2016; (xxii) 430 shares held through shared voting and investment rights as co-trustee of the Trust fbo Henry Lawson Bagwell under the Kathryn Lawson Bagwell 2016 Irrevocable Trust Agreement dtd February 10, 2016; (xxiii) 430 shares held as trustee of the Jeffrey W. Congdon 2016 Irrevocable Trust Agreement fbo Lillian Grace Congdon; (xxiv) 3,571 shares held by the shareholder’s spouse as trustee of the John R. Congdon, Jr. 2015 Irrevocable Trust for Benefit of Michael M. Demo; (xxv) 3,571 shares held by the shareholder’s spouse as trustee of the John R. Congdon, Jr. 2015 Irrevocable Trust for Benefit of Brian H. Demo; and (xxvi) 2,675,566 shares held through shared voting and investment rights as co-manager of Congdon Family, LLC. This amount also includes 252,883 shares held by the John R. Congdon, Jr. GRAT Remainder Trust, with respect to which John R. Congdon, Jr. disclaims beneficial ownership. John R. Congdon, Jr. may be deemed a member of a group under Section 13(d) of the Exchange Act.
(5) | Information was obtained from a Schedule 13G filed on February 9, 2016 with the SEC by William Blair Investment Management, LLC (“William Blair”). William Blair reports sole power to vote, or direct the vote of, 3,630,310 shares, and sole power to dispose, or direct the disposition of, 5,187,814 shares. All shares are owned by various investment advisory clients of William Blair, which is deemed to be the beneficial owner of those shares pursuant to Rule 13d-4 under the Exchange Act, due to its discretionary power to make investment decisions over such shares for its clients and/or its ability to vote such shares. In all cases, persons other than William Blair have the right to receive, or the power to direct the receipt of, dividends from, or the proceeds from the sale of the shares. No individual client holds more than five percent of the total outstanding common shares. |
(6) | Includes (i) 55,093 shares owned in the named shareholder’s 401(k) retirement plan; (ii) 685,469 shares held as trustee of the David S. Congdon Revocable Trust, dated December 3, 1991; (iii) 92,409 shares held as trustee of an Irrevocable Trust, dated December 18, 1998, fbo Marilyn Congdon; (iv) 92,410 shares held as trustee of an Irrevocable Trust, dated December 18, 1998, fbo Kathryn Congdon; (v) 92,410 shares held as trustee of an Irrevocable Trust, dated December 18, 1998, fbo Ashlyn Congdon; (vi) 188,318 shares held as trustee of the David S. Congdon Grantor Retained Annuity Trust 2014; (vii) 385,781 shares held as trustee of the Audrey L. Congdon Irrevocable Trust #1, dated December 1, 1992; (viii) 296,473 shares held as trustee of the Audrey L. Congdon Irrevocable Trust #2, dated May 28, 2004; (ix) 629,776 shares held through shared voting and investment rights with the shareholder’s spouse as trustee of the David S. Congdon Irrevocable Trust #1, dated December 1, 1992; (x) 19,582 shares owned by the shareholder’s daughter as trustee of the Kathryn Leigh Congdon Revocable Declaration of Trust, dated May 23, 2006; (xi) 19,582 shares owned by the shareholder’s daughter as trustee of the Marilyn Marie Congdon Revocable Declaration of Trust, dated May 23, 2006; (xii) 160,993 shares owned by the shareholder’s daughter as trustee of the Ashlyn Lane Congdon Revocable Intervivos Trust, dated December 7, 2010; (xiii) 316,405 shares held through shared voting and investment rights as co-trustee of the 1998 Earl E. Congdon Family Trust; (xiv) 318,357 shares held through shared voting and investment rights as co-trustee of the Earl and Kathryn Congdon Family Irrevocable Trust - 2011; (xv) 89,384 shares held through shared voting and investment rights with the shareholder’s spouse as trustee of the Helen S. Congdon Revocable Inter Vivos Trust, dated April 24, 2012; (xvi) 38,015 shares held through shared voting and investment rights with the shareholder’s spouse as trustee of the Seay Family Trust, dated November 21, 2012; (xvii) 299,251 shares |
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held through shared voting and investment rights with the shareholder’s spouse as trustee of the David S. Congdon Irrevocable Trust #2, dated November 18, 1999; (xviii) 645,976 shares held through shared voting and investment rights as co-trustee of the Earl E. Congdon GRAT Remainder Trust; (xix) 41,411 shares beneficially owned by the shareholder’s daughter through the Marilyn Congdon Nowell Grantor Retained Annuity Trust 2015; (xx) 41,411 shares beneficially owned by the shareholder’s daughter through the Kathryn Congdon Harrell Grantor Retained Annuity Trust 2015; (xxi) 158,490 shares held as trustee of the David S. Congdon Grantor Retained Annuity Trust 2015; (xxii) 864 shares beneficially owned by the shareholder’s daughter as trustee of the Irrevocable Inter Vivos Trust fbo Alice Rose Harrell dtd 8/12/15; (xxiii) 864 shares beneficially owned by the shareholder’s daughter as trustee of the Irrevocable Inter Vivos Trust fbo Ava Louise Harrell dtd 8/12/15; (xxiv) 864 shares beneficially owned by the shareholder’s daughter as trustee of the Irrevocable Inter Vivos Trust fbo David Congdon Nowell dtd 8/12/15; (xxv) 864 shares beneficially owned by the shareholder’s daughter as trustee of the Irrevocable Inter Vivos Trust fbo Matt Hooper Nowell, III dtd 8/12/15; (xxvi) 438 shares beneficially owned by the shareholder’s daughter as trustee of the Irrevocable Inter Vivos Trust fbo Lillian Ramsey Nowell dtd 2/1516; (xxvii) 100,000 shares beneficially owned by the shareholder’s daughter through the Marilyn C. Nowell Grantor Retained Annuity Trust - 2016; and (xxviii) 100,000 shares beneficially owned by the shareholder’s daughter through the Kathryn C. Harrell Grantor Retained Annuity Trust - 2016.
(7) | Information was obtained from a Schedule 13G filed on January 28, 2016 with the SEC by BlackRock, Inc. (“BlackRock”). BlackRock reports sole power to vote, or direct the vote of, 4,391,435 shares, and sole power to dispose of, or direct the disposition of, 4,624,652 shares. All shares are owned by various investment advisory clients of BlackRock, which is deemed to be a beneficial owner of those shares pursuant to Rule 13d-3 under the Exchange Act, due to its discretionary power to make investment decisions over such shares for its clients and/or its ability to vote such shares. In all cases, persons other than BlackRock have the right to receive, or the power to direct the receipt of, dividends from, or the proceeds from the sale of the shares. No individual client holds more than five percent of the total outstanding common shares. |
(8) | Information was obtained from a Schedule 13G filed on February 11, 2016 with the SEC by The Vanguard Group (“Vanguard”). Vanguard reports: (i) sole power to vote, or direct the vote of, 50,773 shares; (ii) sole power to dispose of, or direct the disposition of, 4,331,477 shares; (iii) shared power to vote, or direct the vote of, 2,900 shares; and (iv) shared power to dispose of, or direct the disposition of, 49,773 shares. All shares are owned by various investment advisory clients of Vanguard, which is deemed to be a beneficial owner of those shares pursuant to Rule 13d-3 under the Exchange Act, due to its discretionary power to make investment decisions over such shares for its clients and/or its ability to vote such shares. In all cases, persons other than Vanguard have the right to receive, or the power to direct the receipt of, dividends from, or the proceeds from the sale of the shares. No individual client holds more than five percent of the total outstanding common shares. |
(9) | Includes (i) 734,540 shares held as trustee of the Earl E. Congdon Trust - 1990; (ii) 392,330 shares held as trustee of the Earl E. Congdon Grantor Retained Annuity Trust 2014; and (iii) 39,794 shares owned in the named shareholder’s 401(k) retirement plan. Also includes (i) 209,121 shares owned beneficially by Kathryn W. Congdon, Earl E. Congdon’s spouse, as trustee of the Kathryn W. Congdon Trust - 1990; (ii) 235,398 shares owned beneficially by Kathryn W. Congdon as trustee of the Kathryn W. Congdon Grantor Retained Annuity Trust 2014; and (iii) 645,976 shares owned beneficially by the Earl E. Congdon 2003 GRAT Remainder Trust, with respect to all of which Earl E. Congdon disclaims beneficial ownership. |
(10) | Includes (i) 914,380 shares held as trustee of the Susan C. Terry Revocable Trust; (ii) 539,209 shares held through shared voting and investment as co-manager of Terry Family Associates, LLC; and (iii) 438,134 shares beneficially owned by Ms. Terry’s daughter as trustee of the Kathryn Lawson Bagwell Special Revocable Trust dated March 6, 2015. This amount does not include shares held by Congdon Family, LLC. The Susan C. Terry Revocable Trust is a member of Congdon Family, LLC. However, Susan C. Terry does not serve as a manager of Congdon Family, LLC and therefore does not have voting or dispositive power over such shares. Susan C. Terry may be deemed a member of a group under Section 13(d) of the Exchange Act. |
(11) | Includes (i) 22,259 shares owned of record by Mr. Frye; (ii) 17,750 shares owned in Mr. Frye’s 401(k) retirement plan; and (iii) 2,855 shares owned by Mr. Frye’s spouse. Mr. Frye retired from the positions of |
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Senior Vice President - Finance, Chief Financial Officer and Assistant Secretary effective December 31, 2015.
(12) | All shares are owned in the named shareholder’s 401(k) retirement plan. |
(13) | Includes (i) 430 shares owned of record by Mr. Satterfield and (ii) 6,328 shares owned in Mr. Satterfield’s 401(k) retirement plan. |
(14) | Mr. Breitbach is retiring at the end of his current term and is not standing for re-election at the Annual Meeting. |
(15) | All shares are owned by Mr. Culp’s spouse. |
(16) | The group of all current directors, nominees and executive officers includes 703,668 shares that have shared voting power between individuals within the group. These shares are counted only once in the total for the group. |
PROPOSAL 1 - ELECTION OF DIRECTORS
Our Bylaws currently provide that the number of directors shall be not less than five nor more than twelve. On December 9, 2015, J. Paul Breitbach notified us of his decision to retire at the end of his current term. Accordingly, Mr. Breitbach is not standing for re-election to the Board at the Annual Meeting. Upon recommendation of its Governance and Nomination Committee, the Board has determined to increase its size from eight directors to nine directors. The Board, upon the recommendation of its Governance and Nomination Committee, has nominated seven current directors and two new nominees - Bradley R. Gabosch and Patrick D. Hanley - for election to the Board at the Annual Meeting. The Governance and Nomination Committee discussed multiple candidates as potential director nominees following an extensive interview and selection process, including due consideration of diversity and other criteria as set forth in our Corporate Governance Guidelines relating to the recommendation of director nominees, and also obtained input from our CEO and other members of management as appropriate. Mr. Gabosch and Mr. Hanley were each identified and recommended to the Board for consideration by one of our independent directors during this process. Following completion of the candidate identification process, Mr. Gabosch and Mr. Hanley were each formally nominated for election to the Board at the Annual Meeting. If elected, the nine nominees identified herein will serve until our 2017 Annual Meeting and until their respective successors have been elected and qualified or until their death, resignation, removal or disqualification or until there is a decrease in the number of directors. Unless authority is withheld, it is intended that proxies received in response to this solicitation will be voted in favor of the nominees.
The age and a brief biographical description of each director nominee, their position with us, certain board memberships, and the nominee’s specific experience, qualifications, attributes and skills that led our Board to conclude that the candidate is well-qualified to serve as a member of our Board are set forth below. This information and certain information regarding beneficial ownership of securities by such nominees contained in this proxy statement has been furnished to us by the nominees or obtained from filings with the SEC. All of the nominees have consented to serve as directors, if elected.
Earl E. Congdon (85) joined us in 1949 and has served as a director since 1952. Mr. Congdon was our President and Chief Executive Officer from 1962 until 1985 and served as Chairman of our Board of Directors and Chief Executive Officer from 1985 through 2007. In October 2007, the Board of Directors appointed Mr. Congdon to his current position as Executive Chairman of the Board of Directors, effective January 1, 2008. He is the son of E. E. Congdon, one of our founders, the father of David S. Congdon and the uncle of John R. Congdon, Jr. Through his 67 years of experience with us, including 45 years as our Chief Executive Officer, Mr. Congdon helped transform Old Dominion from a small regional company to an international, publicly-traded company through geographic expansion and acquisitions. As a result, he brings to our Board first-hand knowledge of the opportunities and challenges in our less-than-truckload (“LTL”) industry. Mr. Congdon has valuable insight into the execution of our strategic, long-term objectives and is keenly aware of the operating complexities of the transportation industry.
David S. Congdon (59) was appointed Vice Chairman of the Board and Chief Executive Officer on May 21, 2015. Immediately prior to that date, and since January 1, 2008, Mr. Congdon served as our President and Chief Executive Officer. He was our President and Chief Operating Officer from May 1997 to December 2007 and served in various positions in operations, maintenance and engineering between 1978 and 1997. He was first elected a
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director in 1998 and is the son of Earl E. Congdon. Mr. Congdon, through his 38 years of service to us, including 19 years of service as an executive officer of Old Dominion, has played a critical role in helping us develop our strategic plan and grow our operations through geographic expansion and acquisitions. He has experience leading us through difficult operating conditions and has guided Old Dominion to sustained profitability. The Board benefits from Mr. Congdon’s critical knowledge of the LTL industry, as well as his deep understanding of the operational and regulatory complexities that we must address as a publicly-traded transportation company.
John R. Congdon, Jr. (59) was first elected a director in 1998. He currently serves as the Chairman of the Board of Directors and Chief Executive Officer of Old Dominion Truck Leasing, Inc. ("Leasing"), where he has been employed since May 1979. Mr. Congdon has 37 years of experience in the trucking industry and brings to the Board extensive knowledge of dedicated logistics, fleet management services and the purchase and sale of equipment. As Chairman of the Board of Leasing, Mr. Congdon also brings experience in board management.
Robert G. Culp, III (69) was first elected a director in 2003 and has served as our Lead Independent Director since 2010. Mr. Culp is the Chairman of the Board of Directors of Culp, Inc., a publicly-traded producer of upholstery and mattress fabrics, which he co-founded in 1972. Mr. Culp, who served as the CEO of Culp, Inc. for several decades, has significant knowledge regarding business leadership and the complex financial and regulatory requirements facing public companies. Mr. Culp has also gained experience regarding the challenges and opportunities associated with developing global operations, as Culp, Inc. expanded its operations into Canada and China under his leadership. Mr. Culp serves on the Board of Directors of Leggett & Platt, Incorporated, an S&P 500 diversified, multi-national manufacturer of home, office and automobile products. Mr. Culp also formerly served on the Board of Directors of Stanley Furniture Company, Inc. until he resigned from that position effective in December 2011. His guidance in international business matters relating to our global service offerings is valuable to our Board.
Bradley R. Gabosch (64) was nominated by our Board’s Governance and Nomination Committee as further described under "Proposal 1 - Election of Directors." Mr. Gabosch has served as Managing Director for the public accounting firm Grant Thornton LLP since August 2014. Mr. Gabosch also served as Managing Partner at Grant Thornton LLP from October 2009 until his retirement in July 2013. Mr. Gabosch brings over 42 years of experience in the public accounting profession, of which 29 years were spent as an audit partner. We believe that Mr. Gabosch will bring to the Board extensive knowledge of accounting and management and a strong understanding of financial statement oversight and disclosure matters.
Patrick D. Hanley (71) was nominated by our Board’s Governance and Nomination Committee as further described under "Proposal 1 - Election of Directors." Mr. Hanley was Chairman of the Board of Directors of Gallium Technologies, LLC, a technology company specializing in accounts receivable software, from January 2011 to January 2016, having previously served as its President and Chief Executive Officer from July 2009 to January 2011. Mr. Hanley has an extensive history in the trucking industry where he previously served as Senior Vice President - Finance and Accounting of UPS Ground Freight, Inc. (formerly Overnite Corporation) from August 2005 to October 2007 and Director, Senior Vice President and Chief Financial Officer of Overnite Corporation from June 1996 to August 2005. Prior to UPS Ground Freight, Inc. and Overnite Corporation, Mr. Hanley served in various senior financial positions at Union Pacific Resources Group and Union Pacific Corporation. Mr. Hanley has served on the Board of Directors of NewMarket Corporation since 2004, and Xenith Bankshares, Inc. since 2010. We believe that Mr. Hanley will bring to our Board significant knowledge in the management of public companies and significant leadership experience in accounting and finance within the trucking industry.
John D. Kasarda, Ph.D. (70) has served as a director since January 2008. Dr. Kasarda is Professor Emeritus and Director of the Center for Air Commerce at the University of North Carolina at Chapel Hill's Kenan-Flagler Business School. He has been employed by this university since 1977. Dr. Kasarda also serves as the President and Chief Executive Officer of Aerotropolis Business Concepts LLC. He is considered the leading developer of the aerotropolis concept which brings together air logistics and surface transportation to foster airport-linked business development. Dr. Kasarda previously served on the Board of Directors of Prologis Institutional Alliance REIT II from 2004 to 2014. He brings a unique perspective and creative insights to our Board from his breadth of knowledge in business strategy, transportation, logistics and global supply chain management, combined with his thought-leadership and worldwide experiences in the transportation industry.
Leo H. Suggs (76) was first elected as a director in 2009. Mr. Suggs has a long and distinguished career in the trucking industry that began in 1958, holding a wide range of positions that included Chairman, President and
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Chief Executive Officer of Overnite Transportation Company from 1996 to 2005 and President and Chief Executive Officer of UPS Freight from 2005 to 2006. As President and Chief Executive Officer of Overnite Transportation, and as a member of its Board of Directors from November 2003 to May 2005, Mr. Suggs gained extensive knowledge about managing a union-free motor carrier in the LTL industry. He understands the opportunities and challenges associated with the LTL industry, and has first-hand knowledge of merger and acquisition considerations and strategies. Mr. Suggs previously served on the Board of Directors of privately-held Greatwide Logistics Services, a provider of transportation and logistics management services, from July 2011 to December 2014, and The Kenan Advantage Group, Inc., a privately-held tank truck hauler and logistics provider, from July 2010 to July 2015. We believe that Mr. Suggs is invaluable to our Board as an advisor on logistics services and LTL operations.
D. Michael Wray (55) was first elected as a director in 2008 and is the President of Riverside Brick & Supply Company, Inc., a distributor of masonry materials in central Virginia. Mr. Wray has served in that position since 1998 and was formerly its Vice President and General Manager from 1996 to 1998. From 1992 to 1995, Mr. Wray was employed by Ruff Hewn, Inc., an apparel designer and manufacturer, where he held positions including Chief Financial Officer and Treasurer. Mr. Wray also served in various audit and management positions with Price Waterhouse from 1982 to 1992. The Board benefits from his experience in public accounting, which includes experience with the transportation industry. In addition, he has extensive knowledge of accounting and a valuable understanding of financial statement oversight and disclosure considerations gained from his experience as a chief financial officer. Mr. Wray also brings company leadership and business management expertise to his service on our Board as a result of his ongoing responsibilities as President of Riverside Brick & Supply Company, Inc.
Assuming the existence of a quorum, the nominees receiving a plurality of the votes cast by the shares entitled to vote will be elected as directors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE
ELECTION OF EACH OF THE NOMINEES IDENTIFIED ABOVE.
EXECUTIVE OFFICERS
The following provides certain information about our executive officers who are not directors:
Greg C. Gantt (60) was appointed President and Chief Operating Officer in May 2015 after serving as our Executive Vice President and Chief Operating Officer since June 2011. He also served as our Senior Vice President - Operations from January 2002 until June 2011. Mr. Gantt joined us in November 1994 and served as one of our regional Vice Presidents from November 1994 to January 2002. Prior to his employment with us, Mr. Gantt served in many operational capacities with Carolina Freight Carriers Corporation, including Vice President of its Southern Region.
David J. Bates (51) was appointed Senior Vice President - Operations in October 2011 after serving as our Vice President - Central States Region since July 2007. From March 2002 to July 2007, Mr. Bates served as our service center manager in Harrisburg, Pennsylvania. Mr. Bates has also served in various other positions in operations since joining us in December 1995.
Kevin M. Freeman (57) was appointed Senior Vice President - Sales in January 2011 after serving as our Vice President of Field Sales since May 1997. Mr. Freeman has 37 years of experience in the transportation industry, and has held various positions in sales with Old Dominion since joining us in February 1992.
Cecil E. Overbey, Jr. (54) was appointed Senior Vice President - Strategic Development in January 2011 after serving as our Vice President of National Accounts and Marketing since July 2000. Mr. Overbey has 32 years of experience in the transportation and distribution industries, and since joining us in June 1995 as a National Account Executive, has held various other management positions in sales and marketing.
Ross H. Parr (44) was appointed Senior Vice President - Legal Affairs, General Counsel and Secretary, effective January 1, 2016, after serving as our Vice President - Legal Affairs, General Counsel and Secretary since May 2012. Mr. Parr joined us in August 2011 and served as our Vice President, Deputy General Counsel and Assistant Secretary until May 2012. From August 2003 to December 2007 Mr. Parr was an associate, and from January 2008 to August 2011 he was a member, at the law firm Womble Carlyle Sandridge & Rice.
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Adam N. Satterfield (41) was appointed Senior Vice President - Finance, Chief Financial Officer and Assistant Secretary effective January 1, 2016 after serving as our Vice President - Treasurer since June 2011. Mr. Satterfield served as our Director - Finance and Accounting from August 2007 to June 2011 and as our Manager - SEC Reporting from October 2004 to August 2007. Prior to joining us in October 2004, he was an Audit Manager with KPMG LLP, a global accounting firm. Mr. Satterfield is a Certified Public Accountant.
CORPORATE GOVERNANCE
Board Leadership Structure
Historically, our Chairman of the Board has also served as our Chief Executive Officer, and these dual roles were held for many years by our current Executive Chairman of the Board, Earl E. Congdon. In 2007, however, following Earl E. Congdon's decision to resign from the Chief Executive Officer position effective on January 1, 2008, the Board determined that it was in the best interests of our shareholders to appoint David S. Congdon, who had been serving as our President and Chief Operating Officer, as our Chief Executive Officer and to redesignate Earl E. Congdon as Executive Chairman of the Board. The Board took these actions because it wanted to preserve the ability of Earl E. Congdon to continue to have a significant executive role on our management team. The Board also believes that strong, independent Board leadership is an important aspect of effective corporate governance and, as a result, appointed Robert G. Culp, III in January 2010 to serve as our Lead Independent Director. Our Lead Independent Director's responsibilities and authority include presiding at meetings of our independent directors, coordinating with our Executive Chairman and Chief Executive Officer on Board meeting agendas, schedules and materials and otherwise acting as a liaison between the independent directors, our Executive Chairman and our Chief Executive Officer. For these reasons, the Board believes that our current leadership structure is appropriate for us at this time. The Board believes that there is no specific generally accepted leadership structure that applies to all companies, nor is there one specific leadership structure that permanently suits us. As a result, our decision as to whether to combine or separate the positions of Chairman and Chief Executive Officer and whether to have a Lead Independent Director may vary from time to time, as industry or our own conditions and circumstances warrant. The independent directors of the Board consider the Board's leadership structure on an annual basis to determine the structure that is most appropriate for the governance of Old Dominion.
Independent Directors
In accordance with the listing standards of The NASDAQ Stock Market, LLC (“NASDAQ”), our Board of Directors must consist of a majority of independent directors. The Board has determined that current directors Messrs. Breitbach, Culp, Kasarda, Suggs and Wray and director nominees Messrs. Gabosch and Hanley are each independent in accordance with NASDAQ listing standards. The Board performed a review to determine the independence of its members and director nominees and made a subjective determination as to each that no transactions, relationships or arrangements exist that, in the opinion of the Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director of Old Dominion. In making these determinations, the Board considered information provided by the directors and director nominees, as well as information obtained by us, with regard to each individual's business and personal activities as they may relate to us and our management. Our Corporate Governance Guidelines direct the independent directors of the Board to meet in executive session at least twice each year, and they met four times in 2015. Shareholders may communicate with the independent directors by following the procedures set forth in “Shareholder Communications with the Board” in this proxy statement.
Attendance and Committees of the Board
Pursuant to our Corporate Governance Guidelines, directors are expected to attend the Annual Meeting and all meetings of the Board, including all meetings of Board committees of which they are members. All directors then in office were present at the 2015 Annual Meeting that was held on May 21, 2015. Our Board of Directors held four meetings during 2015. The Board of Directors has three standing committees: the Audit Committee, the Compensation Committee and the Governance and Nomination Committee. Each member of the Audit Committee, the Compensation Committee and the Governance and Nomination Committee is an “independent director” as such term is defined under applicable SEC rules and regulations and NASDAQ listing standards. All incumbent directors attended at least 75% of the aggregate meetings held by the Board and their assigned committees in 2015.
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Audit Committee
The Audit Committee, which is a separately-designated standing Audit Committee established in accordance with section 3(a)(58)(A) of the Exchange Act, currently consists of D. Michael Wray (Chairman), J. Paul Breitbach and Robert G. Culp, III, each of whom the Board of Directors has determined is independent pursuant to applicable SEC rules and regulations and NASDAQ listing standards. The Board of Directors has determined that all Audit Committee members are financially literate and that Mr. Breitbach and Mr. Wray each qualify as an “audit committee financial expert” as defined by applicable SEC rules. The Board has also determined that new director nominees Mr. Gabosch and Mr. Hanley each qualify as an audit committee financial expert. Please refer to the experience described for each of these members under “Proposal 1 - Election of Directors” in this proxy statement.
The Audit Committee is governed by a written charter approved by the Board of Directors, which is available on our website at http://www.odfl.com/Content/corpGovernance.faces. The Committee annually reviews this charter to reassess its adequacy and recommends any proposed changes to the Board of Directors for approval. Committee members are nominated annually by the Governance and Nomination Committee and approved by our Board of Directors to serve for one-year terms. Information regarding the functions performed by this committee is set forth in the “Report of Audit Committee,” which is included in this proxy statement. The Audit Committee met four times and held eight telephonic meetings in 2015. The Audit Committee holds telephonic meetings after each quarterly period to discuss with both management and our independent registered public accounting firm, Ernst & Young LLP (“EY”), the financial results to be included in our periodic filings with the SEC prior to their release.
Compensation Committee
Our Compensation Committee currently consists of Robert G. Culp, III (Chairman), Leo H. Suggs and D. Michael Wray, each of whom the Board of Directors has determined to be independent pursuant to applicable SEC rules and regulations and NASDAQ listing standards. Committee members are nominated annually by the Governance and Nomination Committee and approved by our Board of Directors to serve for one-year terms.
The Compensation Committee is responsible for reviewing the components of our compensation plans for our officers, including an evaluation of the components of compensation, the standards of performance measurements and the relationship between performance and compensation. The Compensation Committee is also responsible for reviewing the results of our most recent “say-on-pay” vote and considering whether any adjustments to our compensation policies and practices are necessary or appropriate in light of such “say-on-pay” vote. Please refer to our compensation philosophy described in the “Compensation Discussion and Analysis” section of this proxy statement for further discussion, including the role of executive officers in determining or recommending the amount or form of executive and director compensation. The Compensation Committee also reviews and evaluates the fees paid to members of our Board of Directors, and recommends changes in our fees paid to our Board of Directors as deemed necessary to maintain alignment with our compensation philosophy.
The Compensation Committee is governed by a written charter approved by the Board of Directors, which is available on our website at http://www.odfl.com/Content/corpGovernance.faces. The Committee annually reviews this charter to reassess its adequacy and recommends any proposed changes to the Board of Directors for approval. The Committee meets periodically and is authorized to obtain opinions or reports from external or internal sources as it may deem appropriate or necessary to assist and advise it in connection with its responsibilities. The Compensation Committee met four times in 2015. In accordance with its charter, the Committee may delegate authority to one or more members of the Committee as deemed necessary to fulfill its responsibilities. No such authority was delegated in 2015.
To assist the Compensation Committee with its review and analysis of executive, non-employee director and employee compensation matters, the Compensation Committee has engaged the services of an independent compensation consulting firm, Pearl Meyer, periodically since 2013. In December 2014, Pearl Meyer was instructed to review the competitiveness of and provide recommendations for our executive compensation program, analyze our business performance and executive compensation relative to our peer group, and provide input on our short- and long-term incentive programs. In July 2015, Pearl Meyer was again instructed to conduct a review and analysis of our executive compensation program as well as our non-employee director compensation program. For a more detailed discussion of the nature and scope of the role of Pearl Meyer with respect to our compensation programs,
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please see “Compensation Discussion and Analysis - Role of the Compensation Consultant” and “Director Compensation - Components of Compensation” below.
Governance and Nomination Committee
The Governance and Nomination Committee currently consists of John D. Kasarda (Chairman), J. Paul Breitbach and Leo H. Suggs, each of whom the Board of Directors has determined is independent pursuant to applicable NASDAQ listing standards. This Committee makes recommendations concerning the size and composition of the Board of Directors, evaluates and recommends candidates for election as directors (including nominees recommended by shareholders), coordinates the orientation (in conjunction with our Chief Executive Officer) and educational requirements of new and existing directors, develops and implements our corporate governance policies and assesses the effectiveness of the Board of Directors and its committees. We also maintain a corporate membership in the National Association of Corporate Directors (“NACD”), which provides our Board members with opportunities and resources to continue to enhance their knowledge of current governance best practices and emerging issues faced by public company directors.
The Governance and Nomination Committee is governed by a written charter approved by the Board of Directors, which is available on our website at http://www.odfl.com/Content/corpGovernance.faces. The Committee annually reviews this charter to reassess its adequacy and recommends any proposed changes to the Board of Directors for approval. Committee members are appointed annually by a majority of the Board of Directors to serve for one-year terms. The Governance and Nomination Committee met four times in 2015.
Corporate Governance Guidelines
The Board has adopted written Corporate Governance Guidelines, which provide the framework for fulfillment of the Board's duties and responsibilities in light of various best practices in corporate governance and applicable laws and regulations. The Corporate Governance Guidelines address a number of matters applicable to directors, including director qualification standards, our withhold vote policy, meeting requirements and responsibilities of the Board and its committees. The Corporate Governance Guidelines are available on our website at http://www.odfl.com/Content/corpGovernance.faces.
Code of Business Conduct
We have adopted a Code of Business Conduct that applies to all of our directors, officers (including our Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer and any person performing similar functions) and employees. Our Code of Business Conduct is available on our website at http://www.odfl.com/Content/corpGovernance.faces. To the extent permissible under applicable law, the rules of the SEC and NASDAQ listing standards, we intend to disclose on our website any amendment to our Code of Business Conduct, or any grant of a waiver from a provision of our Code of Business Conduct, that requires disclosure under applicable law, the rules of the SEC or NASDAQ listing standards.
Shareholder Communications with the Board
Any shareholder desiring to contact the Board or any individual director serving on the Board may do so by written communication mailed to: Board of Directors (Attention: (name of director(s), as applicable)), care of the Corporate Secretary, Old Dominion Freight Line, Inc., 500 Old Dominion Way, Thomasville, North Carolina 27360. Any communication so received will be processed by our Corporate Secretary and be promptly delivered to each member of the Board or, as appropriate, to the member(s) of the Board named in the communication.
Director Nominations
The Governance and Nomination Committee will consider qualified director nominees recommended by shareholders when such recommendations are submitted in accordance with our bylaws and policies regarding director nominations. Shareholders may submit in writing the names and qualifications of potential director nominees to our Corporate Secretary (500 Old Dominion Way, Thomasville, North Carolina 27360) for delivery to the Chairman of the Governance and Nomination Committee for consideration. When submitting a nomination to the Governance and Nomination Committee for consideration, a shareholder must provide the following minimum information for each director nominee: (i) full name, age, business address and, if known, residence address; (ii)
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principal occupation or employment; (iii) number of our shares of common stock beneficially owned; (iv) all information relating to such person that would be required to be disclosed in a proxy statement for the election of directors (including such person's written consent to being named in the proxy statement as a nominee and serving as a director if elected); and (v) a description of all direct and indirect compensation or other material monetary agreements during the past three years, and any other material relationships between or among the nominating shareholder (and his respective affiliates and associates) and the director nominee (and his respective affiliates and associates). The shareholder's nomination must also include, among other things, information regarding that shareholder's economic, voting and other interests that may be material to our and our shareholders' evaluation of the director nominee.
Shareholder nominations for director must also be made in a timely manner and otherwise in accordance with our bylaws, as described in more detail in Article 3, Section 6 of our bylaws. If the Governance and Nomination Committee receives a director nomination from a shareholder or group of shareholders who (individually or in the aggregate) have beneficially owned greater than 5% of our outstanding stock for at least one year prior to the date of nomination, we, to the extent required by applicable securities law, will identify the candidate and shareholder or group of shareholders recommending the candidate and will disclose in our proxy statement whether the Governance and Nomination Committee chose to nominate the candidate, as well as certain other information required by SEC rules and regulations.
In addition to any director nominees submitted by shareholders, the Governance and Nomination Committee considers candidates submitted by directors, as well as self-nominations by directors, and, from time to time, it may consider candidates submitted by a third-party search firm hired for the purpose of identifying director candidates. The Governance and Nomination Committee investigates potential director candidates and their individual qualifications, and all such candidates, including those submitted by shareholders, are similarly evaluated by the Governance and Nomination Committee.
In evaluating prospective nominees, the Governance and Nomination Committee considers the criteria outlined in our Corporate Governance Guidelines, which include personal and professional ethics, integrity and values; director independence; relevant educational and business experience; willingness to devote the time required to fulfill the duties of a director and to develop additional insight into our operations; and a willingness to represent the best interests of us and our shareholders and be objective in evaluating management's effectiveness.
In seeking and evaluating prospective director nominees, diversity in gender, race, ethnicity, culture, tenure of Board service, viewpoint, geography, and other qualities and attributes are important factors to consider in connection with the criteria outlined above and equal opportunity principles. Although we do not have a formal policy for the consideration of diversity in identifying director nominees, we and the Governance and Nomination Committee are committed to the consideration of diversity in connection with the criteria outlined above and as set forth in our Corporate Governance Guidelines when recommending director nominees so that the Board, as a whole, will possess the appropriate background, skills, experience and expertise to oversee our business. Although we and the Governance and Nomination Committee believe that the current composition of the Board of Directors and our slate of director nominees reflects a highly talented group of individuals best suited to perform oversight responsibilities for us and our shareholders at this time, we will continue to consider diversity factors as we evaluate the current and future composition of our Board. The Governance and Nomination Committee regularly monitors the effectiveness of its prospective director evaluation process, including its consideration of diversity, through our internal self-evaluation process in which directors discuss and evaluate the composition and functioning of the Board and its committees.
After the prospective director evaluation process is concluded, the Governance and Nomination Committee selects and submits nominees to the Board for further consideration and approval.
Effect of Withheld Votes on an Uncontested Election
In an uncontested election of directors, any director nominee who receives a greater number of votes "withheld" from his or her election than votes "for" such election shall immediately offer his or her resignation for consideration by the Governance and Nomination Committee. This resignation is conditioned upon the Board's acceptance and thus shall not be effective unless and until the Board of Directors, after considering the recommendation of the Governance and Nomination Committee, accepts the director nominee's offer to resign.
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Nevertheless, if the director nominee does not wish to remain a director, he or she shall so state and shall tender a non-conditional resignation, which shall be effective as of the date thereof.
The Governance and Nomination Committee will promptly consider the director nominee's offer to resign and will recommend to the Board of Directors whether to accept or reject it. In making this recommendation, the Governance and Nomination Committee will consider all factors deemed relevant by its members, including, without limitation, the stated reasons, if any, why shareholders "withheld" votes for election from such director nominee, the length of service and qualifications of the director nominee, the director nominee's contributions to us, our Corporate Governance Guidelines, whether accepting the offered resignation would cause us to fail to meet any applicable SEC or NASDAQ requirements and whether the director's resignation from the Board of Directors would be in the best interests of us and our shareholders.
The Board of Directors will act on the Governance and Nomination Committee's recommendation no later than 90 days following the date of the shareholders' meeting at which the election occurred. In considering the Governance and Nomination Committee's recommendation, the Board of Directors will consider the information and factors considered by the Governance and Nomination Committee and such additional information and factors as the Board of Directors deems relevant.
Any director nominee who offers his or her resignation for consideration pursuant to our Corporate Governance Guidelines will not participate in the Governance and Nomination Committee or Board of Directors deliberations regarding whether to accept the director nominee's offer to resign.
Risk Management
The Board of Directors is responsible for the oversight of our policies, procedures and systems in place to manage our risk exposure. Our Chief Executive Officer and Chief Financial Officer are responsible for the assessment and management of our risks and regularly report their findings to our Board directly or through their communications with our Audit Committee. Our Corporate Risk Manager is responsible for identifying, assessing and monitoring risks inherent to our business and providing guidance to senior management and the Audit Committee regarding our enterprise risk management, insurance portfolio, business continuity program, crisis management, claims management and governance, record retention, risk and compliance initiatives. Our Director of Internal Audit also reports risks that are identified during the internal audit process separately to our Chief Executive Officer, Chief Financial Officer, Corporate Risk Manager and our Audit Committee. After gathering and assessing risk information from each of these sources, our Audit Committee reports the results of its review to the Board on a regular basis.
Other committees of the Board have risk oversight responsibility as well. The Governance and Nomination Committee is responsible for the oversight of risks associated with succession planning and corporate governance matters, and the Compensation Committee is primarily responsible for the oversight of risks associated with employment agreements, compensation arrangements and the attraction and retention of qualified employees. The Chairmen of both the Governance and Nomination Committee and the Compensation Committee report the results of their meetings and reviews to the Board on a regular basis.
Our Lead Independent Director promotes effective communication and consideration of matters presenting significant risks to the Company through his role in coordinating with our Executive Chairman and Chief Executive Officer on meeting agendas, advising committee chairmen, chairing meetings of the independent directors and communicating between the independent directors, our Executive Chairman and our Chief Executive Officer.
Audit Committee Pre-Approval Policies and Procedures
The Audit Committee has adopted a written policy that requires advance approval of all audit services, audit-related services, tax services and other services performed by our independent registered public accounting firm. The policy provides for pre-approval by the Audit Committee of specifically defined audit and permissible non-audit services. Unless the specific service has been pre-approved with respect to that year, the Audit Committee must approve the permitted service before the independent registered public accounting firm is engaged to perform it. The Audit Committee has delegated to the Chairman of the Audit Committee authority to pre-approve permitted services under $20,000 provided that the Chairman reports any decisions to all members of the Audit Committee at the earliest convenience. In the event the Chairman is unavailable, the remaining members must unanimously
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approve any request for permitted services, not to exceed $20,000, and notify the Chairman at the earliest convenience.
Policy for Accounting Complaints
The Audit Committee has established procedures for (i) the receipt, retention and processing of complaints related to accounting, internal accounting controls and auditing matters and (ii) the confidential, anonymous submission by our employees of concerns regarding questionable accounting or auditing matters, in compliance with Section 301 of the Sarbanes-Oxley Act of 2002 and related SEC rules and regulations. The Audit Committee has contracted with a third party to provide a toll-free telephone number and internet service that is staffed 24 hours a day, seven days a week. This service documents the complaint, assigns a reference number to the complaint for tracking purposes and forwards that information, through email, to the Audit Committee Chairman and the Director of Internal Audit. In the event the complaint concerns an internal audit matter, only the Audit Committee Chairman is notified. Either the Audit Committee Chairman or Director of Internal Audit, using whatever resources are required, investigates the complaint. Corrective action, if deemed necessary, is decided upon by the Audit Committee Chairman and then implemented as needed. The identity of the individual submitting the complaint and the details of the complaint remain anonymous throughout this process. We periodically test this process to ensure that complaints are handled in accordance with these procedures.
Compensation Committee Interlocks and Insider Participation
The current members of the Compensation Committee are Messrs. Culp (Chairman), Suggs and Wray. None of the current members of the Compensation Committee has ever served as an officer or employee of our Company or had any relationship during the year ended December 31, 2015 that would be required to be disclosed pursuant to the SEC's Item 404 of Regulation S-K. No interlocking relationships exist between our current Board of Directors, executive officers or Compensation Committee and the board of directors or compensation committee of any other company.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires certain of our officers, 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. Such officers, directors and shareholders are required by SEC regulations to furnish us with copies of all such reports that they file. Based solely on a review of copies of the reports filed with the SEC since January 1, 2015 and on representations by certain officers and directors, all persons subject to the reporting requirements of Section 16(a) filed the reports required to be filed on a timely basis.
REPORT OF AUDIT COMMITTEE
The Audit Committee oversees our financial reporting, internal controls and audit functions on behalf of the Board of Directors and operates under a written charter, which is reviewed on an annual basis and was most recently revised on May 31, 2013. The Audit Committee is comprised solely of independent directors as defined by SEC rules and regulations and NASDAQ listing standards. Two of the three members of the Audit Committee, including the Chairman, have been designated as “audit committee financial experts” as that term is defined by SEC rules and regulations. The Chairman reports the Audit Committee's actions and deliberations to the Board at quarterly scheduled Board meetings.
During the fiscal year ended December 31, 2015, the Audit Committee fulfilled its duties and responsibilities as outlined in the charter. Among its actions, the Audit Committee:
• | reviewed and discussed our quarterly earnings releases and the quarterly financial statements filed on Forms 10-Q with the SEC, with management and our independent registered public accounting firm, EY; |
• | reviewed with management, the internal auditor and EY the audit scope and plan for the audit of the fiscal year ended December 31, 2015; and |
• | met with the internal auditor and EY individually, outside the presence of management, to discuss, among other things, our financial disclosures, accounting policies and principles and internal controls. |
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In fulfilling its oversight responsibilities, the Audit Committee also reviewed and discussed the audited financial statements in the Annual Report on Form 10-K with management. The Audit Committee also has reviewed and discussed with management and EY management’s assessment of the effectiveness of our internal control over financial reporting and EY’s evaluation of our internal control over financial reporting.
The Audit Committee has discussed with EY the matters required to be discussed by Auditing Standard No. 16, Communications with Audit Committees, issued by the Public Company Accounting Oversight Board (the “PCAOB”). In addition, the Audit Committee has received the written disclosures and the letter from EY required by applicable requirements of the PCAOB regarding EY's communications with the Audit Committee concerning independence, and has discussed with EY that firm's independence.
Based on the review and discussions referred to above, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in our Annual Report on Form 10-K for the year ended December 31, 2015 for filing with the SEC.
The Audit Committee, | |
D. Michael Wray, Chairman | |
J. Paul Breitbach | |
Robert G. Culp, III | |
COMPENSATION DISCUSSION AND ANALYSIS
Overview
Our guiding principles in the development of our executive compensation philosophy have been to align executive compensation with both our business objectives and the interests of our shareholders. We have attempted to balance the principal elements of our compensation program (base salary, short-term performance-based pay and longer-term incentives) to motivate our executives to achieve our short-term financial objectives as well as our long-term goal of increasing shareholder value, which is substantially dependent on our achievement of our short-term objectives. We believe a significant portion of executive compensation should be based upon performance and we have designed our elements of compensation accordingly. We do not believe the elements of our executive compensation program encourage excessive risk-taking, and we and our Board review our program periodically to ensure it is operating in accordance with our objectives.
Our executive compensation program ties a significant portion of current cash compensation directly to corporate performance primarily through the Performance Incentive Plan (the “PIP”). As described below, the PIP provides for monthly payouts of a specified percentage of our monthly pre-tax income to the plan participants, subject to a minimum level of profitability. We believe this plan has been instrumental in motivating our named executive officers and other participating officers to achieve and sustain superior profitability in our industry.
We believe long-term incentives are also necessary to reward loyalty, enhance retention and create shareholder value. Accordingly, our compensation program provides for phantom stock awards linked to the value of our common stock. Awards of phantom stock were granted under the Old Dominion Freight Line, Inc. Phantom Stock Plan (the “2005 Phantom Stock Plan”) prior to 2013 and are currently granted under its successor plan, the Old Dominion Freight Line, Inc. 2012 Phantom Stock Plan (the “2012 Phantom Stock Plan”), described below, which have vesting and continued service requirements and are linked to the value of our common stock. Other elements of our executive compensation program include employee deferrals of short-term cash compensation into our Nonqualified Deferred Compensation Plan and contributions to our 401(k) retirement plan, which are also described in more detail below.
The principal factors in the Compensation Committee's executive compensation decisions for 2015 were our financial performance, organizational and leadership changes, the relationship of executive compensation to the Company's income before taxes, the amount of compensation that is performance-based, and the review and analysis conducted by its independent compensation consultant during fiscal 2015. For 2015, our year-over-year revenue increased 6.6% to $3.0 billion, our net income increased 13.9% to $304.7 million and our earnings per diluted share grew 15.2% to $3.57. We also produced the best annual operating ratio (83.2%) in our history, and our financial position at the end of 2015 was stronger than at any time in our history as a public company.
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With the improvement in our financial results during 2015 and the outlook for 2016, the Compensation Committee approved an increase of 3.3% in the base salaries for Earl E. Congdon, our Executive Chairman of the Board, and David S. Congdon, our Vice Chairman of the Board and Chief Executive Officer, effective in January 2016. Also effective on that same date, the Compensation Committee approved increases in base salaries ranging from 3.3% to 7.2% for our other named executive officers. These increases followed an earlier increase of approximately 3.3% provided to non-officer employees effective in September 2015. In keeping with our philosophy of pay-for-performance, the improvement in our financial performance during 2015 also resulted in increases in PIP payouts to our officers, including our named executive officers, as compared to 2014, and these PIP payouts were directly aligned with our performance. As a result, total cash compensation as a group for our named executive officers increased 14.7% in 2015 from 2014, which was less than the 15.2% increase in the Company's basic and diluted earnings per share for the same period.
Objectives of Our Executive Compensation Program
Our executive compensation program is designed to achieve the following objectives, consistent with the principles and philosophy outlined above:
• | motivate and reward our executives to increase Company earnings; |
• | provide the opportunity for a high level of compensation for superior corporate performance as a means to increase long-term shareholder value; and |
• | promote and foster an environment of cooperation and “team spirit.” |
We also believe it is critical that our executive compensation program is structured to:
• | attract talented, knowledgeable and experienced executives, who are critical to our success in the highly competitive transportation industry; |
• | retain our executives so they can add further value in current and future roles by providing long-term incentives that reward loyalty and retention; and |
• | provide a reasonable level of compensation protection to our executive officers to offset some of the risks of a change in ownership. |
We believe our record-setting performance in 2015 was attributable to the execution of our strategic plan, which included key decisions made by our named executive officers. Our strong, industry-leading financial performance in 2015, coupled with the results of our most recent advisory vote to approve the compensation of our named executive officers at our 2015 Annual Meeting, reinforce the views of our Compensation Committee and Board of Directors that our executive compensation program is achieving its objectives.
Role of Compensation Committee and Independent Directors
The Compensation Committee is comprised entirely of independent directors, and this committee is charged with recommending to our Board the compensation of our Chief Executive Officer and determining the compensation paid to our other named executive officers. Additionally, the Compensation Committee makes recommendations to the Board regarding the adoption of, and changes to, our executive compensation plans.
David S. Congdon, our Vice Chairman of the Board and Chief Executive Officer, has a significant role in the compensation-setting process, including:
• | providing recommendations to the Compensation Committee on business performance targets and objectives; |
• | evaluating individual performance; and |
• | providing recommendations to the Compensation Committee for salary and equity or non-equity based awards. |
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Neither Earl E. Congdon, our Executive Chairman, nor David S. Congdon participates in the Compensation Committee's deliberations regarding his individual performance, salary level, non-equity incentive plan compensation or other compensation that may be granted to him.
The Compensation Committee has the authority to hire outside advisers, such as compensation consultants, to render guidance and assistance when the Committee deems it appropriate and advisable. The Compensation Committee, at its discretion, determines both the frequency that outside consultants are engaged and the scope of work these consultants perform. Prior to selecting or receiving advice from a compensation consultant or other adviser, the Compensation Committee assesses the independence of such adviser and thereafter conducts an annual assessment of any potential conflicts of interest raised by the work of such adviser.
Role of the Compensation Consultant
Since 2013, the Compensation Committee has periodically engaged Pearl Meyer, an independent compensation consulting firm, to assist it with its review and analysis of executive and non-employee director compensation matters. The Compensation Committee initially selected and continues to engage Pearl Meyer based primarily on its skill sets, strengths, professionals, industry knowledge and resources.
In December 2014, the Compensation Committee engaged Pearl Meyer to review the competitiveness of and provide recommendations for our executive compensation program, to analyze our business performance and executive compensation relative to our peer group, and to provide input on our short- and long-term incentive programs. Pearl Meyer conducted a competitive market review, business performance analysis and incentive plan review. In conducting its analysis, Pearl Meyer determined that the same nine publicly-traded transportation companies included in Pearl Meyer’s analysis conducted during 2013 continued to be appropriate:
Con-way Inc. | Swift Transportation Company | Werner Enterprises, Inc. |
J.B. Hunt Transport Services, Inc. | Landstar System, Inc. | Saia, Inc. |
YRC Worldwide Inc. | ArcBest Corporation | Roadrunner Transportation Systems, Inc. |
In January 2015, Pearl Meyer determined, among other things, that: (i) our executive compensation and business performance were directionally aligned relative to peer companies, and (ii) based on then-anticipated financial results, our pay program was aligned with our pay philosophy and continued to reward executives for superior performance. Based on these and other findings, Pearl Meyer did not recommend any changes to our executive compensation program at such time.
In July 2015, Pearl Meyer was engaged to conduct a review and analysis of both our executive and non-employee director compensation programs, which would be considered by the Compensation Committee and the Board when making 2016 compensation decisions. With respect to our executive compensation program, Pearl Meyer was requested to review the competitiveness of the program and analyze recent business results in order to evaluate the strength of the relationship between pay for performance for the Company relative to its peers. Pearl Meyer’s analysis of our executive compensation program: (i) included each of our eight executive officer positions; (ii) focused on position level pay data (with respect to base salary, short-term incentives, total cash compensation, long-term incentives and total direct compensation) and comparisons to market (based on proxy statement and survey data); (iii) included a review of the group of nine publicly-traded transportation companies included in Pearl Meyer’s prior analyses to assess whether any changes were appropriate; and (iv) included a review of our proxy statement disclosures.
Based on its review and analysis, Pearl Meyer determined, among other things, that: (i) our total direct compensation (sum of base salary, short-term incentives and long-term incentives) levels were above the 75th percentile of the market, (ii) our performance exceeded the results of the same nine publicly-traded transportation companies identified above for a variety of financial and stockholder metrics over multiple time periods; (iii) our executive compensation was well-aligned with our performance relative to our peers; and (iv) our pay structure yields a much higher variable compensation mix as compared to the market, with more emphasis on short-term performance and cash bonuses. Based on these and other findings, Pearl Meyer concluded that our program continued to align pay and performance, and therefore did not recommend any changes to our executive compensation program at such time.
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In 2015, Pearl Meyer was also engaged to advise on the change in our equity compensation policy to allow for stock-settled awards and implementation of the 2016 Plan. See “Proposal 3 - Approval of the Old Dominion Freight Line, Inc. 2016 Stock Incentive Plan.”
The Compensation Committee has reviewed and considered the results of Pearl Meyer’s analysis and will continue to consider these results in making future compensation decisions. Although peer data is utilized in Pearl Meyer’s analysis, and the Compensation Committee reviews and considers such analysis in making compensation decisions, we do not benchmark compensation to any particular peer group percentile for any of our named executive officers.
In connection with its engagement of Pearl Meyer, the Compensation Committee conducted a conflict of interest assessment and determined that Pearl Meyer was independent and that its engagement did not present any conflicts of interest. During fiscal 2015, Pearl Meyer only worked for the Compensation Committee and performed no additional services for the Company or any of the named executive officers. The Compensation Committee pre-approved all work performed by Pearl Meyer.
During fiscal 2015, neither the Compensation Committee nor our management used the services of any other compensation consultant other than Pearl Meyer.
Elements of Compensation
The following discusses each of the components of our executive compensation program and the decisions the Compensation Committee made in connection with 2015, and where appropriate, 2016 compensation.
Annual Base Salary
Base salaries for our executives are designed to reflect job responsibilities and to provide competitive, fixed pay to balance performance-based risks. We have historically increased the base salaries of our named executive officers annually for an inflationary factor and, in some instances, an incremental adjustment attributable to our overall growth and financial performance. The Compensation Committee also has approved additional salary increases for certain officers, including certain named executive officers, when job performance, increased job responsibilities and/or other factors warrant.
The Compensation Committee determined that our named executive officers, should receive an increase in base salary ranging from 3.3% to 7.2%, to be effective in January 2016. This followed an increase of approximately 3.3% for our non-officer employees that was effective in September 2015. The table below reflects the annual base salaries for our named executive officers that have been approved by the Compensation Committee for 2016, and the actual base salaries that were approved and paid in 2015 and 2014:
Named Executive Officer | 2016 Base Salary ($) | 2015 Base Salary (1) ($) | 2014 Base Salary (1) ($) |
Earl E. Congdon | 594,679 | 575,682 | 557,291 |
David S. Congdon | 594,679 | 575,682 | 557,291 |
Greg C. Gantt | 542,325 | 525,000 (2) | 409,772 |
J. Wes Frye (3) | — | 330,012 | 332,730(4) |
Cecil E. Overbey, Jr. | 272,358 | 253,977 | 245,864 |
(1) | The base salaries reported in this table and corresponding amounts reflected in the Summary Compensation Table may differ due to the timing of effective dates for base salary changes. |
(2) | In connection with Mr. Gantt’s promotion to President and Chief Operating Officer on May 21, 2015, his base salary was increased to $525,000 effective immediately. Prior his promotion, his 2015 base salary was $423,295. |
(3) | Mr. Frye retired as our Senior Vice President - Finance, Chief Financial Officer and Assistant Secretary effective December 31, 2015. |
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(4) | Reflects Mr. Frye's base salary on January 3, 2014; however, Mr. Frye's annual base salary was reduced to $319,470 on July 18, 2014 upon his election to utilize a Company-provided automobile. |
In approving the increases in base salary for our named executive officers that became effective in January 2016, the Compensation Committee considered the salaries of executive officers at peer companies, the 3.3% increase provided to non-officer employees in September 2015, the continued improvement in the Company's financial results and the Company's superior performance as compared to the overall LTL industry. Based on the data and analysis provided by Pearl Meyer, we believe that the base salary for each of our named executive officers is at or below the market median. The Committee also considered, however, that our named executive officers would likely experience increases in their total cash compensation due to anticipated increases in payouts under the PIP, which historically have been a significant component of the short-term cash compensation paid to our named executive officers. The increases in base salaries were designed to maintain the current balance of base salary and performance-based and at-risk compensation for our executive officers while also maintaining the desired level of competitiveness in compensation. As a result, the Committee determined that the base salary adjustments for 2016 were appropriate for our named executive officers.
Non-equity Incentive Plan
The Compensation Committee has determined that the majority of compensation provided to our named executive officers should be performance-based. Accordingly, during 2015, our named executive officers participated with certain other employees in our PIP, which is an incentive cash bonus plan designed to incentivize participants to achieve the Company’s strategic and financial goals for the fiscal year, using a formulaic calculation. The PIP is administered by the Compensation Committee. Participants were selected by the Compensation Committee, with input by senior management, to receive a monthly cash incentive payment based upon a fixed percentage, or participation factor, of our pre-tax income if our pre-tax income exceeds 2% of revenue for that month. The Compensation Committee approved the participation factors for our named executive officers and other key participants and monitored the compensation derived from the PIP.
The material terms of the PIP were reapproved by our shareholders at our 2013 Annual Meeting. Shareholder approval enabled us to maximize our income tax deductions for compensation paid to certain employees under our cash incentive program pursuant to Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”).
The formula applied for each participant in the PIP is shown below:
Monthly Income Before Income Taxes x Participation Factor = Monthly Payout
As a guideline for managing executive compensation, the Committee has determined that the majority of each named executive officer's cash compensation should be performance-based, with base salary comprising the remaining portion of cash compensation. The Committee understands that because compensation earned under the PIP is "at risk" and performance-based, there will be periods where the compensation could be lower or higher than this average. As our profitability improved to record levels in 2015, the “at risk” cash compensation paid to the named executive officers ranged between 69.9% and 89.9% of total cash compensation.
The Compensation Committee initially established the 2015 participation factor for each of our named executive officers at the same level as it was at year-end 2014. The following table shows the 2015 participation factor and the payout (the percentage of our income before income taxes) received by each of our named executive officers for each of 2015 and 2014:
Named Executive Officer | 2015 PIP Participation Factor (%) | 2015 PIP Payout ($) | 2014 PIP Payout ($) |
Earl E. Congdon | 1.04 | 5,096,179 | 4,498,150 |
David S. Congdon | 1.04 | 5,096,179 | 4,498,150 |
Greg C. Gantt | 0.40 (1) | 1,869,115 | 1,513,800 |
J. Wes Frye | 0.28 | 1,372,048 | 1,211,040 |
Cecil E. Overbey, Jr. | 0.20 | 980,034 | 865,029 |
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(1) | In connection with Mr. Gantt’s promotion to President and Chief Operating Officer on May 21, 2015, his PIP participation factor was increased to 0.40 effective immediately. Prior his promotion, his PIP participation factor was 0.35. |
The cash incentive provided by the PIP is determined on a monthly basis and paid to participants only if our pre-tax income exceeds 2% of revenue for that month. We met this minimum threshold of profitability for each month in 2015 and, as a result, our named executive officers received cash compensation from the PIP each month based upon their respective participation factor and our pre-tax income. Reflecting our philosophy of pay-for-performance, and allowing for organizational changes in 2015, the percentage increase in PIP payouts in 2015 over 2014 was consistent with the percentage increase in our pre-tax income.
The Compensation Committee recognizes that the PIP can produce higher-than-market cash compensation during periods of high profitability, including periods when our period-over-period performance may have declined. However, the PIP can also produce lower-than-market cash compensation during periods of low profitability, including periods when our period-over-period performance has improved.
The Compensation Committee has considered whether our employee compensation policies and practices, including our PIP, create inadvertent incentives for executive management and other participants to make decisions that are reasonably likely to have a material adverse effect on us, and believes they do not. The Committee believes the overarching characteristic of the PIP is its ability to create a highly motivated management team that is focused on improving our performance and creating long-term value for our shareholders.
Employee Phantom Stock Plans
Phantom stock awards have been used to reward our named executive officers for creating shareholder value and to provide a long-term retirement incentive for our named executive officers. We do not provide a supplemental retirement plan for our named executive officers, although we do offer a voluntary, self-funded and unsecured deferred compensation program. See "Nonqualified Deferred Compensation Plan" below. These phantom stock awards have been granted under the 2005 Phantom Stock Plan and the 2012 Phantom Stock Plan (together with the 2005 Phantom Stock Plan, the "Employee Phantom Stock Plans"). Each share of phantom stock awarded to eligible employees under the Employee Phantom Stock Plans represents a contractual right to receive an amount in cash equal to the fair market value of a share of our common stock on the settlement date, provided that vesting provisions have been satisfied.
All phantom stock awards not vested upon termination of employment are forfeited, although the Board of Directors has discretionary authority to modify or accelerate the vesting of awards. No shares of common stock will be issued upon settlement as these awards are settled in cash upon termination of employment. Because of the required vesting period and settlement provisions, this component of compensation generally facilitates the retention of key employees, rewards longevity and provides a retirement benefit to our named executive officers that is directly tied to shareholder value. Vesting and settlement provisions for each plan are discussed below.
Our Board of Directors approved, and we adopted, the 2005 Phantom Stock Plan in May 2005. The 2005 Phantom Stock Plan expired in May 2012; however, grants under this plan remain outstanding. Awards under the 2005 Phantom Stock Plan vest upon the earlier to occur of the following, provided the recipient is employed by us on such date: (i) the date of a change of control in our ownership; (ii) the fifth anniversary of the grant date; (iii) the date of the recipient's death; (iv) the date of the recipient's total disability; or (v) the date the recipient attains the age of 65. If termination of employment occurs for cause or prior to attaining the age of 55, all vested and unvested awards are generally forfeited unless the termination results from death or total disability or the Compensation Committee determines otherwise. Vested phantom stock awards are settled in cash upon the earlier of the recipient's: (i) termination of employment on or after reaching 55 years of age for any reason other than death, total disability, or for cause; (ii) death while employed by us; or (iii) termination of employment as a result of total disability. Subject to restrictions under Section 409A of the Code, settlements are paid in 24 equal monthly installments.
Following expiration of the 2005 Phantom Stock Plan, our Board of Directors approved, and we adopted, the 2012 Phantom Stock Plan in October 2012. Under this plan, a maximum of one million shares of phantom stock may be awarded to eligible employees, subject to adjustment to prevent dilution or enlargement caused by changes in our outstanding shares of common stock. Each award vests in 20% increments on the anniversary of the grant
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date and is fully vested on the fifth anniversary of the grant date provided that the recipient: (i) has been continuously employed by us from the grant date until each respective vesting date; (ii) has been continuously employed by us for at least 10 years on the respective vesting date; and (iii) has reached the age of 65 on the respective vesting date. Vesting also occurs on the earliest of: (i) the date of a change in control of our ownership; (ii) the date of the recipient’s death; or (iii) the date of the recipient’s total disability, in each case provided that the recipient has been continuously employed by us from the grant date until the date of the respective event. Vested phantom stock awards are settled in cash on the settlement date, which is the earliest of the date of the recipient's: (i) termination of employment for any reason other than death, total disability or for cause; (ii) death while employed by us; or (iii) termination of employment as a result of total disability. Settlements are generally paid in 24 equal monthly installments, although recipients may, with respect to each grant, provide for payment in any other manner for up to five years following settlement subject to the limitations set forth in each individual award agreement. Each recipient also has the ability to defer the annual installments payable under an award agreement for a period of five years by filing a written election with the administrator at least one year in advance of the date as of which payment of the annual installments would otherwise commence. Any payment may be delayed, if necessary, to comply with Section 409A of the Code.
While awards under the Employee Phantom Stock Plans are discretionary, it has been the Compensation Committee's practice to award phantom stock annually calculated as a percentage of base salary and based upon the prior year's financial performance. Our operating ratio was an industry-leading 84.2%, 85.5% and 86.6% for the years 2014, 2013 and 2012, respectively. To reward this performance, the Compensation Committee granted annual awards in 2015, 2014 and 2013 equal to 50% of each named executive officer's base salary. In addition to the 2015 annual award, the Compensation Committee granted an additional phantom stock award to J. Wes Frye on December 31, 2015, the effective date of his retirement, calculated at 50% of his base salary and based on our 2015 projected financial performance. Although the Committee has historically awarded annual grants ranging from 20%-50% of base salary based on our prior year's financial performance, in future periods the Committee expects to consider grants ranging from 0%-100% of base salary to further encourage continued improvement in our financial performance.
The following table reflects phantom stock awarded to each of our named executive officers in the year of the award and valued at the grant date fair value. For 2015 and 2014, the number of shares awarded was calculated by dividing the value of each award by the 50-day moving average of a share of our common stock, with such averaging period ending on the trading day immediately preceding the grant date. For 2013 awards, the number of shares awarded was calculated by dividing the value of each award by the average closing price of our common stock for the fourth, fifth and sixth trading days following the public release of our fourth quarter earnings. Phantom Stock Plan awards are considered compensation in the year of the award.
Named Executive Officer | Value of Phantom Stock Award(s) ($) | ||
2015 | 2014 | 2013 | |
Earl E. Congdon | 283,476 | 280,847 | 278,695 |
David S. Congdon | 283,476 | 280,847 | 278,695 |
Greg C. Gantt | 208,414 | 206,484 | 204,924 |
J. Wes Frye | 318,915 | 167,691 | 166,392 |
Cecil E. Overbey, Jr. | 125,078 | 123,901 | 122,940 |
As part of our ongoing commitment to reviewing and assessing the appropriateness and competitiveness of our executive compensation program, we have determined to shift our equity compensation policy to allow for stock-settled awards. We believe stock-settled awards will serve as an even stronger incentive and retention tool and more closely align participant and shareholder interests. As a result, the Compensation Committee and the Board have adopted the 2016 Plan, subject to shareholder approval. See “Proposal 3 - Approval of the Old Dominion Freight Line, Inc. 2016 Stock Incentive Plan” for additional details. Given that shareholders are being requested to approve the 2016 Plan at the Annual Meeting, no phantom stock grants have been made in 2016.
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401(k) Retirement Plan
Our named executive officers may participate in our 401(k) retirement plan, which includes a matching provision that is based upon the participant's contributions and, at our option, a discretionary contribution that is allocated to all 401(k) participants. Although we consider this match in our evaluation of overall compensation, we believe the maximum employee contribution and matching limits in our plan are, alone, insufficient to enable our named executive officers to save an amount that is adequate for their retirement or be competitive with similarly-situated executives at other companies in our industry. As a result, we offer certain employees, including our named executive officers, the opportunity to participate in a non-qualified deferred compensation plan.
Nonqualified Deferred Compensation Plan
Because we do not provide a significant retirement plan for our named executive officers, we offer them an alternative vehicle for funding their retirement through our 2006 Nonqualified Deferred Compensation Plan. This plan allows eligible participants, including our named executive officers, to defer significant percentages of both their annual base salary and their monthly non-equity incentive compensation. The retirement benefits for our named executive officers are largely self-funded and unsecured, and the availability of these retirement benefits will depend on our ability to fund future payments. The plan is described in further detail under the caption "Executive Compensation - 2015 Nonqualified Deferred Compensation" in this proxy statement.
Section 162(m) of the Code
Section 162(m) of the Code limits the deduction of certain compensation paid to our named executive officers, other than our Chief Financial Officer, to $1.0 million, unless certain requirements are satisfied. On May 31, 2013, our shareholders reapproved the material terms of the PIP at the 2013 Annual Meeting. This approval enabled us, pursuant to Section 162(m) of the Code, to maximize our income tax deductions for compensation paid to certain participants in the PIP. Although the Compensation Committee considers the deductibility of compensation paid to our named executive officers, it believes that tax deductibility is only one of several factors to consider in determining executive compensation. Accordingly, where it is deemed necessary and in our best interests to attract and retain executive talent, to compete successfully in the industry and to motivate our executives to achieve our strategic goals, the Committee may approve compensation to our named executive officers that exceeds the limits of deductibility under Section 162(m).
Employment Agreements
We currently maintain employment agreements with Earl E. Congdon, our Executive Chairman of the Board, and David S. Congdon, our Vice Chairman of the Board and Chief Executive Officer. These employment agreements are designed to:
• | establish non-competition and non-solicitation agreements, in order to limit our exposure to competition by any of these executives in the event of termination of his employment; |
• | provide long-term incentives to retain David S. Congdon and to ensure the continuity of leadership upon the retirement of Earl E. Congdon; |
• | provide protection to these executives in the event we experience a change in control; and |
• | limit our exposure to a sudden and significant drop in the market value of our common stock that could result from a liquidation of shares by the estate of these executives in the event of death. |
Each agreement was tailored to address the competitive and financial exposures to both us and the employee referred to above. In 2015, we amended Earl E. Congdon’s employment agreement, which was scheduled to expire on November 1, 2015, to extend the term through November 1, 2018. The terms and provisions of these agreements are described in more detail under the caption "Executive Compensation - Employment Agreements" in this proxy statement.
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Change of Control and Post-Employment Benefit Considerations
The employment agreements for each of Earl E. Congdon and David S. Congdon provide for post-employment benefits that result from a change in control. In addition, David S. Congdon is entitled to receive post-employment benefits upon termination for any reason, except for termination by us for cause or termination by the executive for a reason not constituting “good reason.” A “change of control” does not constitute “good reason,” but a fundamental disagreement with the Board following a change of control does constitute “good reason.” The employment agreements, including post-employment benefits, are described in more detail under the caption "Executive Compensation – Employment Agreements" in this proxy statement.
The Old Dominion Freight Line, Inc. Change of Control Severance Plan for Key Executives, as amended, provides for post-employment benefits that result from a change in control to eligible key executives, including three named executive officers: Greg C. Gantt, J. Wes Frye and Cecil E. Overbey, Jr. The benefits provided by this plan are described in more detail under the caption "Executive Compensation – Old Dominion Freight Line, Inc. Change of Control Severance Plan for Key Executives" in this proxy statement.
We believe that the employment agreements and the Change of Control Severance Plan for Key Executives provide a reasonable level of protection to our named executive officers in the event we experience a change of control. We also believe the post-employment benefits provided in the employment agreement for David S. Congdon are an effective incentive for retaining this key executive officer, who we believe is critical to our continued success.
Other Benefits and Perquisites
Our named executive officers participate equitably, except as noted below, with all employees in our employee benefits, which include medical, dental, vision, short-term disability and group life insurance. Each named executive officer receives term-life insurance benefits insuring his life for $300,000, if under the age of 70, or $150,000, if over the age of 70. In addition, the employment agreement with David S. Congdon provides for the reimbursement of premiums for term-life insurance coverage up to $10,000,000, subject to certain limitations. This perquisite was granted to Mr. Congdon to protect us from a sudden and significant drop in the market value of our common stock that could result from a liquidation of shares by his estate in the event of his death. Earl E. Congdon has obtained, at his own expense, additional life insurance benefits that we deem adequate in mitigating this risk; therefore, no additional life insurance benefits were provided to him.
We provide basic employee group health and dental coverage for all employees but charge a premium for dependent and family coverage. We have waived the premiums for basic coverage for our named executive officers' families, which are included in the “All Other Compensation” column of the Summary Compensation Table under the caption "Executive Compensation – Summary Compensation Table" in this proxy statement.
In 2015, we once again offered our officers, including our named executive officers, the opportunity to participate, on a voluntary basis, in an executive health program. For participants in this program, we paid the costs for a comprehensive health assessment to address their overall medical needs and assess their health risks. Participants, at their own expense, had the opportunity to choose additional testing, if desired. Our cost to provide this benefit ranged from $1,590 to $2,000 per participant, which cost is included in the “All Other Compensation” column of the Summary Compensation Table under the caption "Executive Compensation - Summary Compensation Table" in this proxy statement. We plan to continue to provide this benefit for our officers, including our named executive officers, on an annual basis.
All named executive officers elected to use a Company-provided automobile throughout 2015. The taxable value of the personal use of these automobiles is included in the “All Other Compensation” column of the Summary Compensation Table under the caption "Executive Compensation - Summary Compensation Table" in this proxy statement.
The employment agreements for Earl E. Congdon and David S. Congdon allow for personal use of our corporate aircraft. In 2015, personal use of our corporate aircraft by our named executive officers represented approximately 8% of the total hours that our aircraft were utilized. The incremental cost for the personal use of our corporate aircraft is included in the “All Other Compensation” column of the Summary Compensation Table under the caption "Executive Compensation - Summary Compensation Table" in this proxy statement. We do not provide any tax gross-up payments on any perquisites or benefits.
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Advisory Vote on Executive Compensation
Since our 2011 Annual Meeting, we have conducted an advisory vote on the approval of compensation for our named executive officers each year at our annual meeting of shareholders. While this is a non-binding vote, we believe it is important for our shareholders to have an opportunity to vote on this proposal on an annual basis as a means to express their views regarding our executive compensation philosophy, our compensation policies and programs and our decisions regarding executive compensation, all of which are disclosed in our proxy statement. Our Board of Directors and Compensation Committee value the opinions of our shareholders and, to the extent there is any significant vote against the compensation of our named executive officers as disclosed in the proxy statement, we will consider our shareholders' concerns and the Compensation Committee will evaluate whether any actions are necessary to address those concerns. In addition to our annual advisory vote on executive compensation, we are committed to ongoing engagement with our shareholders on executive compensation and corporate governance issues. These engagement efforts take place throughout the year through meetings, telephone calls and correspondence involving our senior management, directors and representatives of our shareholders.
At the 2015 Annual Meeting, 95.1% of the votes cast on the advisory vote to approve the compensation of our named executive officers were in favor of the proposal. Our Compensation Committee and our Board of Directors have carefully considered the advisory vote results and, based in part on the high level of shareholder approval obtained at our 2015 Annual Meeting, continue to believe that our existing executive compensation program has been and remains tailored to our business strategies, is consistent with our pay-for-performance philosophy, reflects competitive pay practices and appropriately rewards or penalizes our management team based on the level of financial success of our Company each year. Our strong, industry-leading financial performance in 2015 reinforces the view of our Compensation Committee and Board of Directors that our executive compensation program is achieving its objectives.
Nevertheless, we remain committed to periodically evaluating our executive compensation program to ensure that it remains competitive while also providing appropriate incentives for our management to work to create shareholder value. In 2015, the Compensation Committee once again engaged Pearl Meyer to review the competitiveness of and to provide recommendations for our executive compensation program, to analyze our business performance and executive compensation relative to our peers and to provide input on our short- and long-term incentive programs. Based on its review, Pearl Meyer concluded that our executive compensation program continues to achieve desired objectives and to align pay with performance. Although Pearl Meyer did not recommend any changes to our executive compensation program, the Compensation Committee has reviewed and considered the results of Pearl Meyer’s analysis, and in 2016, approved a shift in our equity compensation policy to allow for stock-settled awards. See “Compensation Discussion and Analysis – Role of the Compensation Consultant” above and "Proposal 3 – Approval of the Old Dominion Freight Line, Inc. 2016 Stock Incentive Plan" for additional details.
The Compensation Committee and the Board of Directors will continue to consider shareholders' sentiments about our core principles and objectives and the analysis of Pearl Meyer when determining future executive compensation.
We have determined that our shareholders should vote on a say-on-pay proposal each year, consistent with the preference expressed by our shareholders at the 2011 Annual Meeting. Our shareholders will once again have the opportunity to express a preference on the frequency of say-on-pay votes at our 2017 Annual Meeting. Our Board of Directors unanimously recommends that you vote “FOR” Proposal 2 at the Annual Meeting. More information on Proposal 2 can be found under the caption “Proposal 2 - Approval, on an Advisory Basis, of the Compensation of our Named Executive Officers” in this proxy statement.
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Conclusions
Our Compensation Committee has considered all of the elements of compensation described above and their role in determining the total amount of current compensation for our named executive officers. The Compensation Committee also considered whether our compensation policies and practices promote or encourage unnecessary and excessive risks and concluded they do not. Our compensation practices, which provide a balanced mix of short- and long-term incentives and use multiple performance metrics, together with our insider trading policy’s prohibitions on hedging and pledging of our securities, mitigate excessive risk-taking by our named executive officers. In addition, the Compensation Committee considered the review and analysis of our executive compensation program conducted by Pearl Meyer, which helped the Compensation Committee to reaffirm the Company’s compensation strategy and approach. The Compensation Committee believes the amount of each element of pay and the total amount of compensation for each named executive officer are reasonable and appropriate in light of the officer's experience and individual performance, our operational and financial performance relative to our own expectations and the industry, and the officer's role in creating shareholder value.
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board of Directors has reviewed and discussed the above Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with our management. Based on such review and discussions, the Compensation Committee recommended to our Board of Directors that the Compensation Discussion and Analysis be included in our Annual Report on Form 10-K for the year ended December 31, 2015 through incorporation by reference to this proxy statement.
Except for the Annual Report on Form 10-K described above, this Compensation Committee Report is not incorporated by reference into any of our previous or future filings with the SEC, unless such filing explicitly incorporates this report.
The Compensation Committee, | |
Robert G. Culp, III, Chairman | |
Leo H. Suggs | |
D. Michael Wray | |
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EXECUTIVE COMPENSATION
Summary Compensation Table
The following table provides an overview of compensation earned by our Chief Executive Officer, our former Chief Financial Officer and our three other most highly compensated executive officers (together, our “named executive officers”) for the years ended December 31, 2015, 2014 and 2013:
Name and Principal Position | Year | Salary ($) | Stock Awards ($)(1) | Non-Equity Incentive Plan Compensation ($)(2) | All Other Compensation ($)(3) | Total ($) | ||||
Earl E. Congdon Executive Chairman of the Board | 2015 | 575,328 | 283,476 | 5,096,179 | 74,016 | 6,028,999 | ||||
2014 | 567,383 | 280,847 | 4,498,150 | 71,219 | 5,417,599 | |||||
2013 | 540,453 | 278,695 | 3,418,332 | 64,003 | 4,301,483 | |||||
David S. Congdon Vice Chairman of the Board and Chief Executive Officer | 2015 | 575,328 | 283,476 | 5,096,179 | 126,479 | 6,081,462 | ||||
2014 | 567,383 | 280,847 | 4,498,150 | 95,836 | 5,442,216 | |||||
2013 | 540,453 | 278,695 | 3,418,332 | 73,027 | 4,310,507 | |||||
Greg C. Gantt President and Chief Operating Officer | 2015 | 483,667 | 208,414 | 1,869,115 | 18,945 | 2,580,141 | ||||
2014 | 417,194 | 206,484 | 1,513,800 | 17,554 | 2,155,032 | |||||
2013 | 397,392 | 204,924 | 1,150,400 | 16,049 | 1,768,765 | |||||
J. Wes Frye (4) Former Senior Vice President - Finance, Chief Financial Officer and Assistant Secretary | 2015 | 336,156 | 318,915 | 1,372,048 | 319,214 | 2,346,333 | ||||
2014 | 332,892 | 167,691 | 1,211,040 | 21,587 | 1,733,210 | |||||
2013 | 322,677 | 166,392 | 920,320 | 19,068 | 1,428,457 | |||||
Cecil E. Overbey, Jr. Senior Vice President - Strategic Development | 2015 | 253,821 | 125,078 | 980,034 | 24,220 | 1,383,153 | ||||
2014 | 250,317 | 123,901 | 865,029 | 21,797 | 1,261,044 | |||||
2013 | 238,435 | 122,940 | 657,371 | 21,842 | 1,040,588 | |||||
(1) | Reflects the aggregate grant date fair value of awards granted during the respective year under the Employee Phantom Stock Plans computed in accordance with Financial Accounting Standards Board Accounting Standards Codification 718, Compensation - Stock Compensation (“ASC 718”), disregarding the estimate of forfeitures related to applicable service-based vesting conditions. All awards were granted pursuant to the provisions of the Employee Phantom Stock Plans. Each of our named executive officers received an award granted in 2015 that was based on fiscal 2014 financial results. Mr. Frye received an additional award on the date of his retirement that was based on projected fiscal 2015 financial results. All awards granted in 2015 are included below in the Grants of Plan-Based Awards table. No shares of our common stock will be issued pursuant to the Employee Phantom Stock Plans, as the awards are required to be settled in cash. While 2014 financial results were used in the determination of awards granted in 2015, and 2015 projected financial results were used for Mr. Frye's additional award on his retirement date, awards under the Employee Phantom Stock Plans are discretionary. Our Compensation Committee considers the value of the grant as part of the compensation in the year of grant when evaluating annual compensation for our named executive officers. |
(2) | Pursuant to our PIP, we pay monthly cash incentives to our named executive officers based upon our pre-tax income during the fiscal year subject to certain restrictions. Cash incentives are generally paid in the month following the actual month in which the cash incentive is earned; therefore, the table reflects the cash incentives earned for each of the 12 months of the respective year, regardless of when the incentive payment was actually made. |
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(3) | See “All Other Compensation” below for the amounts and descriptions of these components of compensation in 2015. |
(4) | Mr. Frye retired from the positions of Senior Vice President - Finance, Chief Financial Officer and Assistant Secretary effective December 31, 2015. |
All Other Compensation
The allocation of 2015 “All Other Compensation” from the Summary Compensation Table is presented below:
Name | Personal Use of Corporate Aircraft ($)(1) | Life Insurance Premiums ($)(2) | Health Benefits ($)(3) | Personal Use of Corporate Automobile ($)(4) | Company Contributions to the 401(k) Plan ($)(5) | Other ($)(6) | Total ($) |
Earl E. Congdon | 50,618 | 2,431 | 4,372 | 4,723 | 11,872 | — | 74,016 |
David S. Congdon | 78,421 | 20,954 | 4,949 | 10,283 | 11,872 | — | 126,479 |
Greg C. Gantt | — | 1,947 | 2,782 | 2,211 | 12,005 | — | 18,945 |
J. Wes Frye | — | 3,810 | 4,782 | 9,877 | 11,874 | 288,871 | 319,214 |
Cecil E. Overbey, Jr. | — | 679 | 5,394 | 6,346 | 11,801 | — | 24,220 |
(1) | For the purpose of this table, compensation for the personal use of the corporate aircraft is calculated using incremental variable cost per flight hour. |
(2) | Includes the following: (i) the taxable excess group term-life insurance premiums under our group term-life insurance policy for all employees and (ii) reimbursement of term-life premiums for a $10,000,000 policy provided to David S. Congdon under his employment agreement that is further described under the caption “Executive Compensation – Employment Agreements – Employment Agreement with David S. Congdon” in this proxy statement. |
(3) | We offered our employees a choice in group health and dental plans that vary by the level of benefits available and premiums paid by the employee. Employee premiums for our basic group plans are waived for our named executive officers. If our named executive officers elect to enroll in plans with higher benefits and premiums, they are required to pay the difference in premiums between the basic plan and the more robust plan selected. The amount in the table reflects (i) the value of the basic group health and dental premiums that we waived for our named executive officers in 2015 ($2,782 for Earl E. Congdon, $3,281 for David S. Congdon, $2,782 for Mr. Gantt, $2,782 for Mr. Frye and $3,406 for Mr. Overbey); and (ii) our cost to provide to our named executive officers the opportunity to participate, on a voluntary basis, in an executive health program ($1,590 for Earl E. Congdon, $1,668 for David S. Congdon, $2,000 for Mr. Frye and $1,988 for Mr. Overbey). |
(4) | The amount reflected in the table for personal use of a Company-provided automobile is calculated by allocating the fixed and variable costs of the vehicle over the percentage of personal versus total mileage driven. |
(5) | Each of our named executive officers is eligible to participate in the Old Dominion 401(k) Employee Retirement Plan on the same basis as other employees. Employee contributions are limited to a percentage of their compensation, as defined in the plan. We guarantee a match of 30% of the first 6% of all employee contributions. Additional employer contributions may be awarded on a non-discriminatory basis to all participants at the discretion of our Board of Directors, and such discretionary employer contributions were awarded in 2015. |
(6) | Effective upon his retirement on December 31, 2015, Mr. Frye received a special cash retirement award of $250,000 and other consideration valued at $38,871. |
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2015 Grants of Plan-Based Awards
The following table provides information regarding plan-based awards made to our named executive officers during fiscal 2015:
Name | Grant Date | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | All Other Stock Awards: Number of Shares of Stock or Units (#)(2) | Grant Date Fair Value of Stock and Option Awards ($)(3) | ||
Threshold | Target | Maximum | ||||
Earl E. Congdon | 2/11/2015 | — | — | — | 3,803 | 283,476 |
David S. Congdon | 2/11/2015 | — | — | — | 3,803 | 283,476 |
Greg C. Gantt | 2/11/2015 | — | — | — | 2,796 | 208,414 |
J. Wes Frye | 2/11/2015 | — | — | — | 2,180 | 162,497 |
12/31/2015 | — | — | — | 2,648 | 156,418 | |
Cecil E. Overbey, Jr. | 2/11/2015 | — | — | — | 1,678 | 125,078 |
(1) | All payments made pursuant to the PIP and relating to the 2015 fiscal year have been made and are reflected in the ”Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table. |
(2) | Shares of phantom stock granted on February 11, 2015 under the 2012 Phantom Stock Plan were based upon our financial performance in fiscal year 2014. Shares of phantom stock granted on December 31, 2015 under the 2012 Phantom Stock Plan were determined based upon our financial performance in fiscal year 2015. For phantom stock granted on February 11, 2015, each named executive officer was awarded shares of phantom stock equal to 50% of his base salary on the grant date divided by the average closing price of our common stock for the 50-day period commencing November 28, 2014 and ending February 10, 2015. For phantom stock granted on December 31, 2015, Mr. Frye was awarded shares of phantom stock equal to 50% of his base salary on the grant date divided by the average closing price of our common stock for the 50-day period commencing October 20, 2015 and ending December 30, 2015. While 2014 and 2015 financial results were used in the determination of the awards granted in 2015, awards under our Employee Phantom Stock Plans are discretionary. Additionally, our Compensation Committee considers the value of the grant as part of the compensation in the year of grant when evaluating compensation to our named executive officers. No shares of our common stock will be issued pursuant to the Employee Phantom Stock Plans, as the awards are required to be settled in cash. |
(3) | The grant date fair value of phantom stock awards, computed in accordance with ASC 718, is determined by the number of shares set forth above multiplied by the grant date closing share price of $74.54 for the February 11, 2015 grants and $59.07 for the December 31, 2015 grants as reported on the NASDAQ Global Select Market. |
Our Employee Phantom Stock Plans are discussed in more detail under the caption "Compensation Discussion and Analysis – Elements of Compensation – Employee Phantom Stock Plans" in this proxy statement.
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Outstanding Awards at 2015 Fiscal Year-End
The following table reflects awards under our Employee Phantom Stock Plans to our named executive officers that have not vested at year-end 2015: