ARO Liquidation, Inc. DEF 14A 2012
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
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Filed by a Party other than the Registrant ¨
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¨ Preliminary Proxy Statement
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þ Definitive Proxy Statement
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112 West 34th Street, 22nd Floor
New York, NY 10120
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held June 13, 2012
To the Stockholders of Aéropostale, Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Aéropostale, Inc., a Delaware corporation (the Company), will be held at the Companys office at 125 Chubb Avenue, 5th Floor, Lyndhurst, New Jersey, 07071, on June 13, 2012 at 2:00 p.m., local time, for the following purposes:
The Board of Directors has fixed the close of business on April 18, 2012 as the record date for determining stockholders entitled to notice of, and to vote at, the Annual Meeting and at any adjournment thereof.
Your vote is important. Stockholders of record can give proxies by calling a toll-free telephone number, by using the Internet or by mailing their signed proxy cards. Whether or not you plan to attend the meeting, please vote by telephone or via the Internet or sign, date and return the enclosed proxy card in the envelope provided. Instructions are included on your proxy card. You may change your vote by submitting a later dated proxy (including a proxy via telephone or the Internet) or by attending the meeting and voting in person.
Help us make a difference by eliminating paper proxy mailings to your home or business: with your consent, we will provide all future proxy voting materials and annual reports to you electronically. Instructions for consenting to electronic delivery can be found on your proxy card. Your consent to receive stockholder materials electronically will remain in effect until canceled.
May 4, 2012
TABLE OF CONTENTS
112 West 34th Street, 22nd Floor
New York, NY 10120
ANNUAL MEETING OF STOCKHOLDERS
June 13, 2012
Our Board of Directors (or the Board) is soliciting proxies for the 2012 Annual Meeting of Stockholders. This Proxy Statement contains important information for you to consider when deciding how to vote on the matters brought before the meeting. Please read it carefully.
In this Proxy Statement:
Our 2011 Annual Report to Stockholders, which includes our financial statements, is available to review with this Proxy Statement. We are mailing notices of our Annual Meeting (or, for those who request it, a hard copy of this proxy statement, the enclosed form of proxy and our 2011 Annual Report) to our stockholders beginning on or about May 4, 2012.
ABOUT THE MEETING
All shares represented by properly executed proxies received by the Company prior to the meeting will be voted in accordance with the stockholders directions. A proxy may be revoked by written notice mailed to the Company (Attention: Edward M. Slezak, General Counsel and Secretary) or delivered in person at the meeting, by filing a duly executed, later dated proxy or by attending the meeting and voting in person.
What is the purpose of the annual meeting?
At our Annual Meeting, stockholders will act upon the matters outlined in the notice of meeting on the cover page of this Proxy Statement, namely, electing eleven (11) directors, approving, on an advisory basis executive compensation, ratifying the appointment of our independent registered public accounting firm and acting upon any other matter to come properly before the Annual Meeting.
Who is entitled to vote at the meeting?
Only stockholders of record at the close of business on April 18, 2012, the record date for the meeting, are entitled to receive notice of and to participate in the Annual Meeting. If you were a stockholder of record on that date, you will be entitled to vote all of the shares that you held on that date at the Annual Meeting or any postponements or adjournments of the Annual Meeting.
What if my shares are held in Street Name by a broker?
If you are the beneficial owner of shares held in street name by a broker, then your broker, as the record holder of the shares, must vote those shares in accordance with your instructions. If you do not give instructions to your broker, then your broker can vote your shares with respect to discretionary items, but not with respect to non-discretionary items. On non-discretionary items, such as the election of directors and advisory approval
of executive compensation, for which you do not give instructions, the shares will be treated as broker non-votes. A discretionary item is a proposal that is considered routine under the rules of the New York Stock Exchange, such as the ratification of our auditors. Shares held in street name may be voted by your broker on discretionary items in the absence of voting instructions given by you.
What are the voting rights of the holders of Aéropostales common stock?
Holders of our common stock are entitled to one (1) vote, for each share held of record, on all matters submitted to a vote of the stockholders, including the election of directors. Stockholders do not have cumulative voting rights.
Who can attend the meeting?
Subject to space availability, all holders of our common stock as of the record date, or their duly appointed proxies, may attend the meeting. Admission to the meeting will be on a first-come, first-serve basis. Registration will begin at 1:30 p.m. If you attend, please note that you may be asked to present valid photo identification, such as a drivers license or passport. Cameras, recording devices and other electronic devices will not be permitted at the meeting. Please also note that if you hold your shares in street name (that is, through a broker or other nominee), you will need to bring a copy of a brokerage statement reflecting your stock ownership as of the record date and check in at the registration desk at the meeting.
What constitutes a quorum?
The presence at the meeting, in person or by proxy, of the holders of record of the issued and outstanding shares of capital stock representing a majority of the votes entitled to be cast at the meeting constitutes a quorum, thereby permitting the meeting to conduct its business. As of the record date, April 18, 2012, 81,256,182 shares of our common stock were issued and outstanding. Thus, the presence, in person or by proxy, of the holders of common stock representing at least 40,628,092 votes will be required to establish a quorum.
Proxies received but marked as abstentions and broker non-votes will be included in the calculation of the number of votes considered to be present at the meeting for quorum purposes.
What if a quorum is not present at the meeting?
If a quorum is not present at the scheduled time of the Annual Meeting, we may adjourn the Annual Meeting, either with or without a vote of the stockholders. If we propose to have the stockholders vote whether to adjourn the meeting, the people named in the enclosed proxy will vote all shares of our common stock for which they have voting authority in favor of the adjournment. An adjournment will have no effect on the business that may be conducted at the Annual Meeting.
How do I vote?
1. You may vote by mail. If you properly complete and sign the enclosed proxy card and return it in the enclosed envelope, it will be voted in accordance with your instructions. The enclosed envelope requires no additional postage if mailed either in the United States or Canada.
2. You may vote by telephone. If you are a registered stockholder (if you hold your common stock in your own name), you may submit your voting instructions by telephone by following the instructions printed on the proxy card. If you submit your voting instructions by telephone, you do not have to mail in your proxy card.
3. You may vote on the Internet. If you are a registered stockholder (if you hold your common stock in your own name), you may vote on the Internet by following the instructions printed on the proxy card. If you vote on the Internet, you do not have to mail in your proxy card.
If you are a registered stockholder and attend the Annual Meeting, you may deliver your completed proxy card in person or vote in person by ballot at the meeting. If your shares are held in street name and you wish to vote at the Annual Meeting, you will need to obtain a proxy form from the institution that holds your shares.
Can I change my vote after I submit my Proxy?
Yes, you may revoke your proxy at any time before it is voted at the Annual Meeting by:
Your attendance at the meeting will not have the effect of revoking your proxy unless you give written notice of revocation to the Corporate Secretary of the Company before the polls are closed on the date of the Annual Meeting. Any written notice revoking a proxy should be sent to our Corporate Secretary at 112 West 34th Street, 22nd Floor, New York, New York 10120 and must be received before the polls are closed.
How does the Board of Directors recommend I vote on the Proposals?
Unless you give other instructions on your proxy card, the persons named as proxy holders on the proxy card will vote in accordance with the recommendations of the Board of Directors. The Boards recommendation is set forth together with the description of each item in this proxy statement. In summary, your Board recommends that you vote:
With respect to any other matter that properly comes before the meeting, the proxy holders will vote as recommended by the Board of Directors or, if no recommendation is given, in their own discretion.
What are my voting options on each Proposal?
You have several choices on each of the matters to be voted upon at the Annual Meeting. On the election of directors, by checking the appropriate box on your proxy card, you may: (a) vote for all of the director nominees as a group; (b) withhold authority to vote for all director nominees as a group; or (c) vote for all director nominees as a group except those nominees you identify as directors for whom your vote is withheld. On Proposals 2 and 3, by checking the appropriate box, you may: (a) vote For the Proposal; (b) vote Against the Proposal; or (c) Abstain from voting on the Proposal by checking Abstain.
Why did I receive a notice regarding the internet availability of the proxy materials instead of a paper copy of the proxy materials?
In an effort to be environmentally responsible and to reduce the costs of printing and distributing its proxy materials, as it did last year, Aéropostale is taking advantage of the SEC rule that allows companies to furnish their proxy materials over the internet to some or all of their stockholders. As a result, we are sending to our stockholders a notice regarding the internet availability of the proxy materials instead of a paper copy of its proxy materials. This notice explains how you can access the proxy materials over the internet and also describes how to request to receive a paper copy of the proxy materials by mail or a printable copy electronically.
How many votes are required to approve the Proposals?
For Proposal 1, pursuant to our bylaws and Delaware law, directors receiving a plurality of the votes represented and entitled to vote at the meeting shall be required. For Proposals 2 and 3, pursuant to our bylaws and Delaware law, an affirmative vote of a majority of shares of common stock represented and entitled to vote
at the meeting is required to approve these Proposals. Abstentions will have no effect on the outcome of Proposal 1, but will have the same effect as a vote Against Proposals 2 and 3. Broker non-votes have the same effect as a vote Against for Proposal 2 and Proposal 3.
How will abstentions be treated?
If you abstain from voting on one or more proposals, we will still include your shares for purposes of determining whether a quorum is present.
What is the effect of a broker non-vote on the proposals to be voted on at the Annual Meeting?
A broker non-vote occurs if your shares are not registered in your name and you do not provide the record holder of your shares (usually a bank, broker, or other nominee) with voting instructions on a matter as to which, under NYSE rules, a broker may not vote without instructions from you, but the broker nevertheless provides a proxy. A broker non-vote is considered present for purposes of determining whether a quorum exists, but is not considered a vote cast or entitled to vote with respect to such matter.
Under NYSE rules, the election of directors, as well as Proposal 2 are not matters on which a broker may vote without your instructions. Therefore, if you do not provide instructions to the record holder of your shares with respect to Proposals 1 and 2, a broker non-vote as to your shares will result. The ratification of the appointment of independent accountants is a routine item under NYSE rules. As a result, brokers who do not receive instructions as to how to vote on that matter generally may vote on that matter in their discretion.
If your shares are held of record by a bank, broker, or other nominee, we urge you to give instructions to your bank, broker, or other nominee as to how you wish your shares to be voted so you may participate in the stockholder voting on these important matters.
What happens if a nominee for Director is unable to stand for election?
If a nominee is unable to stand for election, our Board of Directors may either reduce the number of directors to be elected or select a substitute nominee. If a substitute nominee is selected, the proxy holders will vote your shares for the substitute nominee, unless you have withheld authority.
Where can I find voting results of the meeting?
We will announce preliminary voting results at the meeting and publish final results in a Form 8-K filed with the Securities and Exchange Commission once the final voting results have been tabulated.
Is my vote confidential?
Proxy instructions, ballots and voting tabulations that identify individual stockholders are handled in a manner that protects your voting privacy. Your vote will not be disclosed either within Aéropostale or to third parties except as necessary to meet applicable legal requirements, or to allow for the tabulation of votes and certification of the vote, or to facilitate a successful proxy solicitation by our Board of Directors. Occasionally, stockholders provide written comments on their proxy card, which will be forwarded to Aéropostale management, as appropriate.
Who will bear the cost for soliciting votes for the meeting?
The expenses of soliciting proxies to be voted at the meeting will be paid by Aéropostale. Following the original mailing of soliciting materials, we may also solicit proxies by mail, telephone, fax or in person. Following the original mailing of soliciting materials, we will request that brokers, custodians, nominees and other record holders of common stock forward copies of the proxy statement and other soliciting materials to persons for whom they hold shares of common stock and request authority for the exercise of proxies.
Ownership of Common Stock
The following table shows, as of April 2, 2012, certain information with regard to the beneficial ownership of the Companys Common Stock by: (i) each person known by the Company to own beneficially more than 5% of the outstanding shares of Common Stock; (ii) each of the Companys directors and nominees; (iii) each executive officer named in the summary compensation table below; and (iv) all directors and executive officers as a group.
Recent Board Events
On November 14, 2011, Arthur Rubinfeld, President Global Development for Starbucks Coffee Company, was appointed to our Board of Directors. Mr. Rubinfeld helped build the foundation of Starbucks as Senior Vice President of Real Estate from 1992 to 2002 and returned to the company as President, Global Development in 2008, his current position. After leaving Starbucks in 2002, Mr. Rubinfeld founded Airvision, a strategic brand development and growth advisory firm. From 2006 to 2008 Mr. Rubinfeld served as Executive Vice President, Corporate Strategy and Development at Potbelly Sandwich Works.
On February 1, 2012, Julian R. Geiger resigned as Chairman and a member of our Board of Directors.
Also on February 1, 2012, Karin Hirtler-Garvey was appointed Non-Executive Chairman of our Board of Directors. Ms. Hirtler-Garvey has been a member of the Board of Directors since August 2005, serving as the Chairman of the Audit Committee, and a member of the Nominating and Corporate Governance Committee. In addition, Ms. Hirtler-Garvey also served as our Lead Independent Director until February 2012.
Also on February 1, 2012, Janet E. Grove was appointed as a member of our Board of Directors. Ms. Grove most recently served as Vice Chairman of Macys, Inc. Prior to becoming Vice Chairman of Macys, Inc., Ms. Grove held various senior management positions for Macys, Inc., including Division Vice Chairman, Merchandising Private Brand and Product Development, and Division Chairman, Macys Merchandising Group Inc. Ms. Grove is also a member of the board of directors of the publicly traded company Safeway, Inc.
At the meeting, the stockholders will be asked to elect eleven (11) directors. The Board has nominated, upon the recommendation of our Nominating and Corporate Governance committee, eleven (11) members to the Board, comprised of nine (9) Board members who were elected at our annual meeting of stockholders held in 2011 and two (2) Board members who were initially appointed to the Board subsequent to the 2011 annual meeting.
Proxies solicited by the Board of Directors will, unless otherwise directed, be voted to elect the eleven (11) nominees named below to constitute the entire Board. Each nominee shall be elected for a term of one year or until such nominees successor is elected and qualified. Pursuant to our bylaws, the Board of Directors has resolved that the size of our Board of Directors shall be fixed, from time to time, by a vote of a majority of the members of the Board of Directors. Information regarding the nominees is set forth below.
The Board seeks independent directors who represent a mix of backgrounds and experiences that will enhance the quality of the Boards deliberations and decisions. Candidates shall have substantial experience with one or more publicly traded national or multinational companies or shall have achieved a high level of distinction in their chosen fields. Board membership should reflect diversity in its broadest sense, including persons diverse in geography, gender, and experience. The Board evaluates each individual in the context of the Board as a whole, with the objective of recommending a group of members that can best support the success of our business and represent our stockholders interests through the exercise of sound judgment and utilization of their diverse backgrounds, skill sets and experiences.
Information Regarding Nominees
Ronald R. Beegle, 49, has served as director since August 2003 and is a founding partner of Goode Partners LLC, a private equity firm focused on investments in small to middle market consumer product, retail, and restaurant companies. Prior to forming Goode Partners, from 2004 through 2005, Mr. Beegle was the Chairman of Credit Suisse Groups Global Consumer/Retail Investors Unit. Previously, Mr. Beegle had been employed by Gap, Inc. from 1996 until 2003 and had most recently served as Chief Operating Officer of the companys flagship Gap division. While at Gap, Inc., he also served as Senior Vice President of Operations and Finance of Banana Republic and Executive Vice President and General Manager of Gap, Inc. Direct. He is a member of the Audit and Nominating and Corporate Governance Committees of the Board. Mr. Beegles qualifications to serve on the Board include his demonstrated leadership and knowledge of financial, operational and strategic issues facing retail companies gained through his experience as a Chief Operating Officer of a major retail company. Mr. Beegle also provides a finance and strategic investment perspective and expertise to the Board.
Robert B. Chavez, 57, has served as a director since April 2004 and currently is the President and Chief Executive Officer of Hermes of Paris, Inc., a luxury goods retailer, which he joined in August 2000. Between 1992 and August 2000 Mr. Chavez was the Chief Executive Officer at Etienne Aigner. Mr. Chavez was also President of Frederic Fekkai (Hair Services and Products), a division of Chanel, Inc. from May 2000 through July 2000. Mr. Chavez is a member of the Compensation and Nominating and Corporate Governance Committees of the Board. Mr. Chavezs qualifications to serve on the Board include his demonstrated business leadership expertise gained through his service as Chief Executive Officer of a major luxury brand retailer, as well as his brand management expertise, and his financial and operational expertise. In addition, through his years of service in the retail industry, Mr. Chavez is able to provide valuable operational and strategic expertise to the Board.
Michael J. Cunningham, 54, was appointed as President of the Company in December 2010 after serving as President and Chief Financial Officer from February 2010, Executive Vice President and Chief Financial Officer from March 2004 to February 2010 and as Senior Vice President and Chief Financial Officer from August 2000 to March 2004. Mr. Cunningham previously served as Chairman and Co-Founder of Compass International Services Corporation from 1997 to 1999. Prior to that, he held various senior executive positions for American Express Company from 1984 to 1997, including Vice President Operations and Vice President Finance. Mr. Cunninghams qualifications to serve on the Board include his years in leadership roles at Aéropostale, as well as his extensive knowledge of our Company, its history and culture. Mr. Cunningham, a Certified Public Accountant, also provides extensive business, financial, accounting and operational expertise. As our former Chief Financial Officer, Mr. Cunningham possesses extensive knowledge of financial reporting rules and regulations, evaluating financial results and generally overseeing the financial reporting process of a public company. Mr. Cunningham has served as a director since June 2010.
Evelyn Dilsaver, 57, has served as a director since October 2007. Ms. Dilsaver was appointed Chairman of the Audit Committee of the Board, effective February 1, 2012. Ms. Dilsaver was formerly a member of The Charles Schwab Corporation from December 1991 through September 2007, and held various senior management positions within the organization including Executive Vice President, The Charles Schwab Corporation and President and Chief Executive Officer of Charles Schwab Investment Management. Prior to becoming President and Chief Executive Officer of Charles Schwab Investment Management, from July 2003 to July 2004, Ms. Dilsaver held the position of Senior Vice President, Asset Management Products and Services. Ms. Dilsaver is a Certified Public Accountant. Ms. Dilsaver is also a member of the board of directors and audit committee of the publicly traded company Tempur-Pedic as well as the board of directors of a privately held corporation. In addition to serving as the Chairman of the Audit Committee of the Board, Ms. Dilsaver is also a member of the Nominating and Corporate Governance Committee of the Board. Ms. Dilsavers qualifications to serve on the Board include her finance and brokerage expertise at a major brokerage firm, as well as her financial and leadership experience gained in those positions. Through her service on the boards of other public and private companies, Ms. Dilsaver also brings valuable finance, accounting and operational expertise to the Board.
Janet E. Grove, 61, was appointed, on February 1, 2012 as a member of our Board of Directors. Ms. Grove most recently served as Vice Chairman of Macys, Inc. from February 2003 until her retirement in June 2011. Prior to becoming Vice Chairman of Macys, Inc., Ms. Grove held various senior management positions for Macys, Inc., including Division Vice Chairman, Merchandising Private Brand and Product Development, and Division Chairman, Macys Merchandising Group Inc. Ms. Grove is also a member of the board of directors of the publicly traded company Safeway, Inc. Ms. Groves qualifications to serve on the Board include her many years of leadership experience at Macys, as well as his in-depth knowledge of the retail industry, all gained through more than thirty years of service at major retail organizations. With her extensive knowledge of the retail industry, Ms. Grove also provides the Board with broad expertise in merchandising, strategic planning and operational execution.
John N. Haugh, 49, has served as a director since June 2007. Mr. Haugh is currently General Manager at Sunglass Hut, Luxottica Retail., a retailer of eyewear, having served in this position since July 2011. From March 2009 through July 2011, Mr. Haugh held various senior level executive positions at Build-A-Bear Workshop, Inc., the last position being President Bear. From January 2008 through December 2008, he served as President of ITSUGAR LLC. Mr. Haugh served as President of Mars Retail Group from January 2004 through December 2007, where he led all retail business operations for this subsidiary of Mars, Incorporated. Earlier in his career, Mr. Haugh held marketing, operations and sales roles with General Mills, Inc., Carlson Companies, Inc. and Universal Studios, Inc. He is also on the Advisory Board for Archway Marketing Holdings, Inc. Mr. Haugh is Chairman of the Compensation Committee and a member of the Nominating and Corporate Governance Committee of the Board. Mr. Haughs qualifications to serve on the Board include his broad executive experience and brand management expertise gained through the various executive positions he has held throughout his career. Mr. Haugh also provides the Board with expertise in brand building and corporate strategy initiatives.
Karin Hirtler-Garvey, 55, has served as a director since August 2005. Ms. Hirtler-Garvey was appointed Chairman of our Board of Directors effective February 1, 2012. From May 2009 through November 2011, Ms. Hirtler-Garvey was the Chief Risk Executive for Ally Financial Inc. Previously, Ms. Hirtler-Garvey was a principal in a start-up real estate development venture based in New Jersey. Prior to that, Ms. Hirtler-Garvey was Chief Operating Officer, Global Markets for Bank of America (formerly NationsBank). Ms. Hirtler-Garvey joined Bank of America in September 1995 and held various senior management positions within the organization until March 2005. Prior to becoming Chief Operating Officer, Global Markets, from April to October 2004, Ms. Hirtler-Garvey held the position of President of Trust and Credit Banking Products. From June 2001 to March 2004, Ms. Hirtler-Garvey held the position of Chief Financial Officer/Chief Operating Officer for the Wealth and Investment Management division. Ms. Hirtler-Garvey is a Certified Public Accountant. Ms. Hirtler-Garvey is also a member of the board of directors of the publicly traded company Medley Capital Corporation, as well as a director of two privately held corporations, USAA Federal Savings
Bank and Western World Insurance Company. As well as serving as our Chairman, Ms. Hirtler-Garvey is a member of the Nominating and Corporate Governance Committee of the Board. Ms. Hirtler-Garveys qualifications to serve on the Board include extensive financial accounting knowledge that is critical to our Board. As a former Chief Financial Officer and Chief Operating Officer at global banking organizations, Ms. Hirtler-Garvey has extensive knowledge of financial reporting rules and regulations, evaluating financial results and generally overseeing the financial reporting process of a public company. Ms. Hirtler-Garvey also provides the board with extensive experience in the area of risk awareness and risk mitigation.
John D. Howard, 59, has served as a director since August 1998. Mr. Howard is currently the Chief Executive Officer of Irving Place Capital, a middle-market private equity firm. Previously from 1997 through June of 2008, Mr. Howard served as a Senior Managing Director of Bear, Stearns & Co. Inc. and was the Chief Executive Officer of Bear Stearns Merchant Banking LLC, an affiliate of Bear, Stearns & Co. Inc. Mr. Howard had been the head of the merchant banking department of Bear, Stearns & Co. Inc. since its inception in 1997. Mr. Howard is also a member of the board of directors of the publicly traded companies New York & Company, Inc. and Vitamin Shoppe Industries, as well as a director of several privately held corporations. Mr. Howard is a member of the Nominating and Corporate Governance Committee of the Board. Mr. Howards qualifications to serve on the Board include his entrepreneurial and merchant banking experience as well as his expertise in financial and business related matters gained through his years in the merchant banking industry. In addition, through his years of service on the boards of public and private companies, including other apparel retailers, Mr. Howard is able to provide diverse and valuable financial, strategic and operational expertise to the Board.
Thomas P. Johnson, 54, was promoted to Chief Executive Officer in December 2010, after serving as our Co-Chief Executive Officer from February 2010 and as Executive Vice President and Chief Operating Officer from March 2004 to February 2010. Mr. Johnson rejoined us in January 2001 as Senior Vice President Director of Stores. Mr. Johnson had served as Senior Vice President, Vice President, Regional Manager and District Manager with Federated Specialty Stores from 1989 to 1996. In the interim, he served as Senior Vice President Director of Stores for Davids Bridal, Inc. in 2000 and as Senior Vice President Director of Stores for Brooks Brothers, Inc. from 1997 to 2000. Mr. Johnson also held various field positions at Gap, Inc. as Regional Manager for Banana Republic, District Manager and Store Manager for Gap, Inc. from 1981 to 1989. Mr. Johnsons qualifications to serve on the Board include his years in leadership roles at Aéropostale, as well as his extensive knowledge of our Company, its history and culture, as well as the retail industry generally. Mr. Johnson has served as a senior executive at several major retail organizations as well as ten years of service at Aéropostale in various leadership positions, including his current role as Chief Executive Officer and Board member. With his extensive knowledge of the retail industry, Mr. Johnson also provides the Board and our Company with broad expertise in store operations, strategic planning and organizational structure. Mr. Johnson has served as a director since August 2008.
Arthur Rubinfeld, 58, was appointed, on November 16, 2011 as a member of our Board of Directors. Mr. Rubinfeld helped build the foundation of Starbucks, the premier roaster, marketer and retailer of specialty coffee in the world, as Senior Vice President of Real Estate from 1992 to 2002 and returned to the company as President, Global Development in 2008, his current position. After leaving Starbucks in 2002, Mr. Rubinfeld founded Airvision, a strategic brand development and growth advisory firm. From 2006 to 2008 Mr. Rubinfeld served as Executive Vice President, Corporate Strategy and Development at Potbelly Sandwich Works. Mr. Rubinfelds qualifications to serve on the Board include his broad executive experience and brand management expertise gained through the various executive positions he has held throughout his career, and at Starbucks in particular. Mr. Rubinfeld also provides the Board with expertise in brand building and corporate strategy initiatives.
David B. Vermylen, 61, has served as a director since May 2003. Mr. Vermylen is Senior Advisor Member of the Board of Directors for TreeHouse Foods, a food manufacturer servicing primarily the retail grocery and foodservice distribution channels. From January 2005 through July 2011, he served as President and Chief Operating Officer of TreeHouse Foods, as well as a member of its Board of Directors. Previously,
Mr. Vermylen had been employed by Keebler Company from 1996 until 2002 and had served as its Chief Executive Officer and President from 2001. Mr. Vermylen is Chairman of the Nominating and Corporate Governance Committee, as well as a member of the Audit and Compensation Committees of the Board. Mr. Vermylens qualifications to serve on the Board include his demonstrated leadership qualities and knowledge of operational and strategic issues gained through his years of experience as a Chief Operating Officer of a public company. Mr. Vermylen provides the Board a diverse background of experiences as well as his corporate governance acumen.
Each of the directors listed above has agreed to serve, if elected, and management has no reason to believe that they will be unavailable to serve. In the event that any of the nominees is unable or declines to serve as a director at the time of the Annual Meeting, the proxies will be voted for any nominee who may be designated by the present Board of Directors to fill the vacancy. Unless otherwise instructed, the proxy holders will vote the proxies received by them FOR the election of each of the directors listed above. The proxies solicited by this Proxy Statement cannot be voted for a greater number of persons than the number of nominees named.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS YOU VOTE
FOR THE ELECTION OF EACH OF THE NOMINEES LISTED ABOVE.
During the fiscal year ended January 28, 2012 (fiscal 2011), our Board of Directors met formally six (6) times. The Board has a standing Audit Committee, Compensation Committee, and Nominating and Corporate Governance Committee. Our Board and Committees also met, as necessary, on an informal basis throughout the year. During fiscal 2011, each of the Companys current directors participated in at least 75% of the aggregate number of meetings of the Board of Directors and meetings of the Board Committee or Committees upon which such director is or was a member.
We currently separate the roles of our Chief Executive Officer and our Chairman. As specified in our Bylaws, our Chief Executive Officer is responsible for the general management, oversight, supervision and control of the business and affairs of our Company, and ensuring that all orders and resolutions of the Board are carried into effect. Our Chairman, on the other hand, is charged with presiding over all meetings of the Board and our stockholders, and providing advice and counsel to our Chief Executive Officer and our Companys other executive officers regarding our business and operations. In connection with the Boards annual self-evaluation process, as required by our Corporate Governance Guidelines, the Board evaluates its organization and processes to ensure that the Board is functioning effectively. Currently, we believe that separating the positions of Chief Executive Officer and Chairman is the most appropriate and effective leadership structure for our Company and our stockholders.
The Boards Role in Risk Oversight
The Audit Committee reviews and discusses with management the Companys processes and policies with respect to risk assessment and risk management, including the Companys enterprise-wide risk management program. In addition, the Companys risk oversight process involves the entire Board receiving information from executive management on a variety of matters, including operations, legal, regulatory, finance and strategy, as well as information regarding any material risks associated with each matter. The full Board (or the appropriate Board committee, if the Board has delegated to a committee responsibility for the oversight of the matter) receives this information through updates from the appropriate members of executive management to enable it to understand and monitor the Companys risk management practices. When a Board committee receives an update, the chairperson of the relevant Board committee reports on the discussion to the full Board during the Board committee reports portion of the next Board meeting. This enables the Board and the Board committees to coordinate the risk oversight role.
The Board has determined that each of Mr. Beegle, Mr. Chavez, Ms. Dilsaver, Ms. Grove, Ms. Hirtler-Garvey, Mr. Haugh, Mr. Howard, Mr. Rubinfeld and Mr. Vermylen have no material relationship with the Company other than in her or his capacity as a director of the Company and that each is independent in accordance with applicable NYSE standards. Following the Annual Meeting of stockholders, if all director nominees are elected to serve as our directors, independent directors will constitute more than two-thirds of our Board. Mr. Johnson and Mr. Cunningham are executive officers of the Company. Therefore, Mr. Johnson and Mr. Cunningham are not independent in accordance with applicable NYSE standards.
In making these determinations, the Board took into account all factors and circumstances that it considered relevant, including, where applicable, the existence of any employment relationship between the director (or nominee) or a member of the directors (or nominees) immediate family and the Company; whether within the past three years the director (or nominee) has served as an executive officer of the Company; whether the director (or nominee) or a member of the directors (or nominees) immediate family has received, during any twelve-month period within the last three years, direct compensation (other than director fees) from the Company in excess of $120,000; whether the director (or nominee) or a member of the directors (or nominees) immediate family has been, within the last three years, a partner or an employee of the Companys internal or external auditors; and whether the director (or nominee) or a member of the directors (or nominees) immediate family is employed by an entity that is engaged in business dealings with the Company. The Board has not adopted categorical standards with respect to director independence. The Board believes that it is more appropriate to make independence determinations on a case by case basis in light of all relevant factors.
For our 2011 fiscal year, our independent directors were paid a $50,000 annual retainer. Also in addition to the annual retainer, our Lead Independent Director received a $25,000 annual retainer, our Audit Committee chairperson received a $30,000 retainer, our Compensation Committee chairperson received a $15,000 retainer and our Nominating and Corporate Governance chairperson received a $10,000 retainer. Each Committee member was paid an annual retainer as follows; Audit Committee a $20,000 retainer, Compensation Committee a $10,000 retainer, Nominating and Corporate Governance a $7,500 retainer. Beginning in fiscal 2012, the Chairman of the Board will receive an annual retainer of $125,000 and no other retainers for participation on any of the other committees. All Board members receive an annual grant of restricted stock equal to the value of $105,000; whereas the Chairman of the Board receives an annual grant of restricted stock equal to $130,000. New Board members receive a one-time grant of 10,000 stock options and a restricted stock grant equal to $105,000. Restricted Stock grants vest 100% after one year. Stock Option grants vest ratably over a four year period. All Board members are reimbursed for travel expenses relating to attending Board, Committee or Company business meetings. Directors who are employees of the Company or are otherwise not considered independent do not receive separate compensation for serving as directors.
Fiscal 2011 Director Compensation. The following table sets forth compensation earned by the individuals who served as non-associated (independent) directors of the Company during fiscal 2011.
Outstanding Equity Awards at Fiscal Year-End. The following table provides information relating to outstanding awards held by independent directors of the Company as of the fiscal year ended January 28, 2012.
Does the Company have a Code of Ethics?
Our Code of Business Conduct and Ethics is applicable to all our officers, directors and employees, including the principal executive officer, the principal financial officer and the principal accounting officer. The Code is available on the Investor Relations portion of our website (www.aeropostale.com). We intend to post amendments to or waivers from the Code, if any, (to the extent applicable to our chief executive officer, principal financial officer or principal accounting officer or Directors) on our website.
How do stockholders communicate with the Board?
The Board provides a process for interested parties to send communications to the full Board, the independent members of the Board and the members of the Audit Committee. Any director may be contacted by writing to him or her, c/o General Counsel and Secretary, Aéropostale, Inc., 112 West 34th Street, New York, New York 10120 or e-mail at firstname.lastname@example.org to the attention of the General Counsel. Communications that are not related to a directors duties and responsibilities as a Board member, an independent director or an Audit Committee member may be excluded by the Office of the General Counsel, including, without limitation, solicitations and advertisements; junk mail; product-related communications; job referral materials such as resumes; surveys; and any other material that is determined to be illegal or otherwise inappropriate. The directors to whom such information is addressed are informed that the information has been removed and that it will be made available to such directors upon request. Directors may at any time review a log of all correspondence received by the Company that is addressed to members of the Board and request copies of
any such correspondence. Concerns, if any, relating to accounting, internal controls or auditing matters would be brought immediately to the attention of the Companys Chief Financial Officer and/or General Counsel and handled in accordance with procedures established by the Audit Committee with respect to such matters.
Copies of the Companys code of conduct, corporate governance materials, related person transaction policy and committee charters
The Companys code of conduct, corporate governance materials, related person transaction policy, as well as the charters of the Audit Committee, Compensation Committee and Nominating and Governance Committee of the Board of Directors, are all available on the Companys website at www.aeropostale.com. Stockholders may also request a printed copy of any of those materials, free of charge by writing to the following: General Counsel and Secretary, Aéropostale, Inc., 112 West 34th Street, New York, New York 10120.
Committees of the Board of Directors
Audit Committee. The Board of Directors maintains an Audit Committee, currently consisting of the following Board members, Ms. Dilsaver (Chairperson), Mr. Beegle and Mr. Vermylen. The Board has determined that Ms. Dilsaver, Mr. Beegle and Mr. Vermylen are all qualified as financial experts within the meaning of the SEC regulations. The Board has also determined that each member of the Audit Committee possesses the accounting and financial management expertise, within the meaning of the standards of the New York Stock Exchange, to be considered financially literate. All members of our Audit Committee have been determined to be independent by our Board of Directors, as that term is defined by SEC regulations relating to audit committee independence, the listing standards of New York Stock Exchange and the Companys Corporate Governance Guidelines.
The Audit Committee of the Board is instrumental in the Boards fulfillment of its oversight responsibilities relating to (i) the integrity of the Companys financial statements, (ii) the Companys compliance with regulatory requirements, (iii) the qualifications, independence and performance of the Companys independent auditors and (iv) the performance of the Companys internal audit function. The Audit Committee meets with management and the Companys independent registered public accounting firm. The Audit Committee met five (5) times during fiscal 2011 and also met informally, either in person or by phone, on a number of other occasions during fiscal 2011. The Committee schedules its meetings to ensure that it devotes appropriate attention to all of its tasks. The Committees meetings include, whenever appropriate, executive sessions with the Companys independent registered public accounting firm without the presence of the Companys management.
In connection with the New York Stock Exchanges adopting its revised Corporate Governance Standards, we amended the Companys Audit Committee Charter in November 2004. The full text of the Committees charter is available on the Investor Relations portion of our website at www.aeropostale.com.
In carrying out these responsibilities, the Audit Committee, among other things, appoints, and monitors the performance of, the independent registered public accounting firm; oversees and reviews accounting policies and practices and internal controls; oversees and monitors the Companys financial statements and audits; oversees matters relating to communications with the independent registered public accounting firm and management; reviews the annual report to be included with the Companys proxy statement; and oversees, to the extent it deems necessary, matters related to related party transactions, if any.
As part of its oversight of the Companys financial statements, the Committee reviews and discusses with both management and the Companys independent registered public accounting firm the Companys annual financial statements and quarterly operating results prior to their issuance. During fiscal 2011, management advised the Committee that each set of financial statements had been prepared in accordance with generally accepted accounting principles. Management also reviewed significant accounting and disclosure matters with the Committee. These reviews included discussions with the independent registered public accounting firm about
matters required to be discussed pursuant to PCAOB AU 380, Communication With Audit Committees, and SEC Rule 2-07, Communication With Audit Committees, of Regulation S-X. The Audit Committee discussed the adoption of, or changes to, the Companys significant accounting policies and procedures, if any, and significant internal audit procedures with the independent registered public accounting firm, internal audit and management. The Committee also discussed with our independent registered public accounting firm matters relating to its independence, including a review of audit and non-audit fees and the disclosures made to the Committee pursuant to PCAOB Ethics and Independence Rule 3526, Communication with Audit Committees Concerning Independence and the Audit Committee has received a written disclosure letter as required by that standard. The Audit Committee has also received, reviewed and discussed with the Companys independent registered public accounting firm the report required by section 10A(k) of the Securities Exchange Act of 1934. The Report of the Audit Committee can be found on page 40 of this Proxy Statement.
Compensation Committee. The Board of Directors also has a Compensation Committee, currently consisting of Mr. Haugh (Chairman), Mr. Chavez, and Mr. Vermylen. The Compensation Committee of the Board (i) oversees the Companys compensation and benefits philosophy and policies generally, (ii) evaluates the performance of our chief executive officer and oversees and sets compensation for our chief executive officer, (iii) oversees the evaluation process and compensation structure for other members of the Companys senior management and (iv) fulfills the other responsibilities set forth in its charter. The Compensation Committee met formally four (4) times during fiscal 2011 and also met informally, either in person or by phone, on a number of other occasions during fiscal 2011. The Board has determined that each of the Compensation Committee members is independent in accordance with applicable NYSE standards. The Compensation Discussion and Analysis can be found beginning on page 17 of this Proxy Statement and the Compensation Committees Report can be found on page 40 of this Proxy Statement.
Nominating and Corporate Governance Committee. The Board of Directors also has a Nominating and Corporate Governance Committee currently consisting of Mr. Vermylen (Chairman), Mr. Beegle, Mr. Chavez, Ms. Dilsaver, Mr. Haugh, and Mr. Howard. The Nominating and Corporate Governance Committee of the Board identifies and recommends to the Board candidates who are qualified to serve on the Board and its committees. The Nominating and Corporate Governance Committee considers and reviews the qualifications of any individual nominated for election to the Board by stockholders. It also proposes a slate of candidates for election as directors at each Annual Meeting of stockholders. The Nominating and Corporate Governance Committee also develops and recommends to the Board, and reviews from time to time, a director compensation program, as well as establish corporate governance principles for the Company, while also overseeing compliance with those governance principles. The Board has determined that each of the Nominating and Corporate Governance members is independent in accordance with applicable NYSE standards.
The Nominating and Corporate Governance Committee will consider candidates for Board membership suggested by its members, other Board members, by management and by stockholders, in all cases applying similar criteria. Stockholders who wish to submit candidates for Board membership must submit all required information, consistent with the below criteria, in writing to the Chairman of the Nominating and Corporate Governance Committee c/o the General Counsel of the Company at 112 West 34th Street, New York, New York 10120.
The Nominating and Corporate Governance Committee, at the direction of the Chairman, makes an initial determination as to whether to conduct a full evaluation of a prospective candidate. This initial determination is based on whatever information is provided to the Committee with the recommendation of the prospective candidate, as well as the Committees own knowledge of the prospective candidate, which may be supplemented by inquiries to the person making the recommendation or others. The preliminary determination is based primarily on the need for additional Board members to fill vacancies or expand the size of the Board and the likelihood that the prospective nominee can satisfy the evaluation factors described below. If the Committee determines, in consultation with the other Board members as appropriate, that additional consideration is warranted, it may request that additional information about the prospective nominees background and
experience be gathered and a report be prepared for the Committee. The Committee then would evaluate the prospective nominee against the standards and qualifications set out in the Companys Corporate Governance Guidelines, including, independence, integrity, experience, sound judgment in areas relevant to the Companys businesses and willingness to commit sufficient time to the Board, all in the context of an assessment of the perceived needs of the Board at that point in time. The Committee will also measure candidates against the criteria it sets, including skills and attributes that reflect the values of the Company. The Nominating and Corporate Governance Committee will also be responsible for reviewing with the Board, on an annual basis, the criteria it believes appropriate for Board membership.
The Committee will also consider such other relevant factors as it deems appropriate, including the current composition of the Board, the balance of management and independent directors, the need for Audit Committee expertise and the evaluations of other prospective nominees. Depending on the needs of the Company at the time, the prospective nominees and such other factors as the Committee deems in its business judgment to be relevant, the Committee will take such other steps as are necessary to evaluate the prospective nominee, including, if warranted, one or more of the members of the Committee interviewing the prospective nominee. After completing this evaluation and other steps of the process the Committee would make a recommendation to the full Board as to the persons who should be nominated by the Board, and the Board determines the nominees after considering the recommendation and report of the Committee.
The Nominating and Corporate Governance Committee recommended to the Board of Directors that the nominees listed in this Proxy Statement stand for election at our 2012 Annual Meeting. The Nominating and Corporate Governance Committee met formally two (2) times during fiscal 2011 and also met informally, either in person or by phone, on a number of other occasions during fiscal 2011.
Meetings of the Companys Non-Management Directors
The non-management directors meet at scheduled executive sessions of the Board of Directors and our Lead Independent Director presides over those meetings.
ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION
The Dodd-Frank Wall Street Reform and Consumer Protection Act, enacted in July 2010, requires that we provide our stockholders with the opportunity to vote to approve, on an advisory basis, the compensation of our named executive officers. As described in detail under the heading Compensation Discussion and Analysis, we believe that executive compensation should be closely linked with our Company financial performance and, to this end, our executive compensation programs are designed to, among other things, reward our named executive officers for their contribution to the achievement of short-term and long-term strategic and operational goals and to align executive compensation and stockholder interests through performance and equity-based plans. Stockholders are urged to read the Compensation Discussion and Analysis, which discusses in detail how our compensation policies and procedures implement our compensation philosophy.
This advisory vote is not intended to address any specific element of compensation; rather, the vote relates to the overall compensation of our Named Executive Officers. The vote is advisory, which means that the vote is not binding on the Company, our Board of Directors or the Compensation Committee. To the extent there is any significant vote against our executive compensation program as disclosed in this proxy statement, the Compensation Committee will evaluate whether any actions are necessary to address the concerns of our stockholders. Accordingly, we are asking our stockholders to approve, on an advisory basis, the overall compensation of the Companys Named Executive Officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, the compensation tables and the accompanying narrative disclosures set forth in the proxy statement for this Annual Meeting.
THE BOARD UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR
ADVISORY APPROVAL OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS
AS DISCLOSED IN THIS PROXY STATEMENT.
REGISTERED PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP has been the Companys independent registered public accounting firm since 1998, and has reported on the Companys consolidated financial statements included in our annual report. The Audit Committee appoints the Companys independent registered public accounting firm, and the Audit Committee has reappointed Deloitte & Touche LLP as the Companys independent registered public accounting firm for fiscal 2012. In the event that the stockholders do not ratify the reappointment of Deloitte & Touche LLP as the Companys independent registered public accounting firm, the Audit Committee will reconsider the selection of the independent registered public accounting firm. A representative of Deloitte & Touche LLP will be present at the Annual Meeting, will have an opportunity to make a statement and will be available to respond to appropriate questions.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
YOU VOTE FOR THE RATIFICATION OF THE APPOINTMENT OF
OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.
Fiscal 2011 was a year characterized by multiple challenges. We continued to evolve our merchandise assortment to better resonate with our customer while navigating through a highly promotional retail environment. In addition, we experienced significantly higher product costs compared to fiscal 2010. These macroeconomic, competitive and internal factors reduced our overall profitability for fiscal 2011. Specifically, during fiscal 2011 we reported:
As a result of disappointing results in fiscal 2011, the compensation levels of our Named Executive Officers were significantly unfavorably impacted as none of the Named Executive Officers received a bonus and performance share plan payouts were significantly negatively impacted.
On December 1, 2010, Mr. Johnson was promoted from Co-CEO to sole Chief Executive Officer. At the same time, Mr. Cunningham assumed a greater level of responsibility in his role as President. In conjunction with their new roles and responsibilities, the company entered into new employments agreements with Mr. Johnson and Mr. Cunningham at a level of compensation commensurate with their positions. Per their employment agreements, they were granted equity awards of restricted stock and performance shares in March of 2011. However, the financial results of 2011 will result in no performance shares paid out at the end of the three-year performance cycle. The following table illustrates the impact of the lower than expected operating income and earnings per share in fiscal 2011 on the compensation for Mr. Johnson and Mr. Cunningham.
Target vs. Actual Fiscal 2011 Compensation
However, despite our financial results, 2011 was an important inflection point for our organization with a focus on progressing key strategic initiatives that will position us well for the future. Some of our more noteworthy achievements for the year included:
The Link Between Pay and Performance
Many of the compensation actions in 2011 were directly related to the challenging environment and our desire to retain key talent. Considering our pay for performance philosophy, our negative financial performance for 2011 resulted in no bonuses paid to our Named Executive Officers. Our results for 2011 will also have a significant negative impact on our current performance share awards, including the 2010-2012 and 2011-2013 cycles. Given our historic success, our 2009-2011 performance share award vested above target.
The following chart illustrates the actual and estimated performance share achievement for the 2009, 2010, and 2011 three-year cycles:
As of the middle of 2011, management recognized that many of our motivation and retention tools did not provide a meaningful level of incentive to achieve our financial and strategic objectives. To further the retention and performance objectives of our programs, the Compensation Committee took the following actions, none which impacted the compensation of our Chief Executive Officer or President.
To further align the interests of our executives and stockholders and as a continued focus on good corporate governance, our Compensation Committee implemented stock ownership guidelines as follows:
Stock Ownership Guidelines
All Executives and Board members have three years to attain 50% of the guideline and five years to attain 100% of the guideline. The measurement date for determining whether or not our executives meet the guideline is April 1st of each year.
Key Fiscal 2012 Actions
Reflecting the desire to motivate and retain key executive talent through continued challenges, the Compensation Committee approved key actions for fiscal year 2012 with regard to our performance-based programs:
Advisory Vote to Approve Executive Compensation( the Say-on-Pay vote)
In making compensation determinations, the Committee considers feedback from stockholders in conjunction with our compensation philosophy and business needs. The Say-on-Pay vote provided for our fiscal year 2010 pay program resulted in a favorable vote from approximately 88% of stockholders. Consistent with the stockholder resolution on the frequency of the vote to approve executive compensation, the Compensation Committee has determined to submit an advisory vote to approve executive compensation on an annual basis.
Given the strong support for our executive compensation program in last years Say-on-Pay vote and our continued focus on pay and performance, we recommend stockholders vote favorably on this years resolution to approve fiscal year 2011 compensation (see Proposal No. 2 Advisory Vote to Approve Executive Compensation).
The Compensation Committee considered the shareholder vote regarding the non-binding resolution on executive compensation voted on at the 2011 Annual Meeting of Shareholders. Because a substantial majority (88%) of votes cast approved the compensation program described in the Companys proxy statement for the 2011 Annual Meeting of Shareholders, the Compensation Committee continued to apply the same general principles in determining the amounts and types of executive compensation.
Executive Compensation Philosophy and Practices
Although there is no formal policy for a specific allocation between compensation elements, the Committee has established a pay mix for executive officers that places emphasis on those elements that are performance-based. The programs seek to balance motivation and retention through an emphasis on short- and long-term performance incentives. By following this approach, we strive to effectively balance executive retention while motivating a focus on the business metrics that will produce a high level of Company performance. This relationship is illustrated in the charts below.
Chief Executive Officer Target Pay Mix
Average All Other Named Executive Officers Target Pay Mix
Guiding Principles of Our Executive Compensation Philosophy
Our philosophy is based on the following core principles:
Compensation Analysis Framework
The Committee annually reviews our executive compensation to ensure it best reflects our compensation philosophy. In determining our program design and compensation levels for our executives, the Company and the Committee review publicly available data for a peer group consisting of national and regional, specialty and department store retail organizations to benchmark the appropriateness and competitiveness of our compensation program.
Each year, this list of peer companies is reviewed and compiled by the Committees compensation consultant, Towers Watson, in conjunction with input from Company management, and is then approved by the Compensation Committee. Towers Watson reviewed and recommended companies based on the following criteria:
In February 2011, the Compensation Committee reviewed and approved the new peer group for fiscal 2011.
The peer set of 18 retailers and mall-based stores provides a well-rounded cross section of Aéropostales markets for executive talent. The complete peer group used in fiscal 2011 is as follows:
The following is a list of the Companys executive officers, followed by their biographical information (other than for Mr. Johnson and Mr. Cunningham whose biographical information appears in the section of this proxy statement entitled Election of Directors Nominees).
Mary Jo Pile was promoted to Executive Vice President Customer Engagement in December 2010. Prior to this appointment, Ms. Pile served as our Senior Vice President and Chief Stores Officer since May 2005. From 2001 to 2005, Ms. Pile held the position of Executive Vice President of Stores for Express/Express Mens. Prior to that, Ms. Pile held the position of Vice President of Stores for Express and The Limited from 1997-2001.
Marc D. Miller was promoted to Executive Vice President and Chief Financial Officer in March 2012. Prior to this appointment, Mr. Miller held the positions of Senior Vice President and Chief Financial Officer from December 2010 to March 2012, Senior Vice President of Strategic Planning, Business Development and E-Commerce from April 2007 to December 2010, Group Vice President of Strategic Planning, Business Development and E-Commerce from April 2006, and Vice President of Strategic Planning and Business Development from February 2005. Prior to joining Aéropostale, Mr. Miller held executive management positions at Footstar, Inc., and Tradeout, Inc.
Barbara A. Pindar has served as Senior Vice President of Planning and Allocation since December 2005. Previously, she held the position of Senior Vice President, Inventory Management for the Pottery Barn brand division of Williams-Sonoma. Prior to that, from 1986 to 2002, Ms. Pindar held various senior executive positions for Limited Brands, Inc., including Vice President, Merchandise Planning and Analysis for Victorias Secret Direct.
Edward M. Slezak was promoted to Senior Vice President, General Counsel and Secretary in April 2006. Prior to this appointment, Mr. Slezak held the positions of Group Vice President and General Counsel from March 2005 and Vice President and General Counsel from November 2004. From 2002 to 2004, Mr. Slezak held the position of Vice President and General Counsel of Acclaim Entertainment, Inc. Prior to that, Mr. Slezak was a senior associate in the corporate department at the law firm of Cadwalader, Wickersham & Taft, LLP.
Our executive compensation program is overseen by the Compensation Committee of our Board of Directors. Compensation Committee members are appointed by our Board and meet the independence and other requirements of the New York Stock Exchange and other applicable laws and regulations. Compensation Committee members are selected based on their knowledge and experience in compensation matters from their professional roles.
The role of the Compensation Committee and information about its meetings are set forth on page 14 of this Proxy Statement. The Compensation Committees charter was last amended in 2004 and is available on the Companys website at www.aeropostale.com.
As provided for in the Compensation Committee Charter, the Compensation Committee retained, for the fourth consecutive fiscal year, Towers Watson (the consultant or the compensation consultant) as its
independent compensation consultant to assist in the evaluation of Chief Executive Officer and other executive officer compensation levels and program design. The Committee, in conjunction with recommendations from management, determines the work to be performed by the consultant and has the ultimate authority to retain and terminate the compensation consultant. The consultant works with management to gather data required in preparing analyses for Committee review.
Towers Watson was directed to review the Companys compensation programs and practices and to provide recommendations and suggestions which are consistent with the Companys compensation philosophy. In fiscal 2011, Towers Watson was engaged by the Committee for the following executive compensation work:
Other than the aforementioned engagement, Towers Watson maintains no other direct or indirect business relationship with the Company. All executive compensation services provided by the consultant are conducted under the direction and authority of the Compensation Committee and all work performed by Towers Watson is approved by the Chairman of the Compensation Committee. Management has not engaged a separate compensation consultant. We continue to monitor the performance of our consultant on an annual basis through an internal evaluation process as well as through comparisons of services offered by other major consulting firms in the executive compensation arena.
Additionally, as stated in our Compensation Committee Charter, the Compensation Committee has the authority to engage additional consulting firms to assist them in performing their duties. There were no executive compensation services provided by any other consulting firms in fiscal 2011.
Company management, including our Senior Vice President of Human Resources, Vice President of Compensation and Benefits, and Senior Vice President General Counsel, prepared the compensation materials and attended our Compensation Committee meetings. The Companys management team, in conjunction with the Companys Chief Executive Officer, President, and Executive Vice President Chief Financial Officer, propose compensation program designs, levels and components and make recommendations on the compensation levels and stock awards for employees, other than for themselves. The Compensation Committee makes the final determination regarding certain proposals including the compensation of our Chief Executive Officer and those executive officers listed in this proxy statement. The Committee also meets in executive session with Towers Watson and without management present in order to review managements proposals.
The Compensation Committee considers, in establishing and reviewing the executive compensation program, whether the program encourages risks which are within reason, likely to have a material adverse effect on the Company. In light of the Companys broad-based plans, including those which the named executive officers participate in, the Committee determined that our compensation programs are not reasonably likely to have a material adverse effect on the Company. A review of these features and Aéropostales compensation programs is highlighted below:
The Compensation Committee noted that the Company does not engage in the practices that aggravate risk and further noted a number of design features of the Companys cash and equity incentive programs reduce the likelihood of excessive risk-taking. For example, the Compensation Committee believes that the bonus program appropriately balances risk and desire to focus executives on specific short-term goals important to the Companys success. Further, a significant portion of the compensation provided to the named executive officers is in the form of long-term equity awards that are important to help further align executives interests with those of the Companys stockholders. The Compensation Committee determined and the full Board of Directors concurred that, the Companys compensation programs do not encourage excessive risk and instead encourage behaviors that support sustainable value creation.
Summary Compensation Table. The following table sets forth information concerning total compensation earned by or paid to our Chief Executive Officer, our Chief Financial Officer and our next three other most highly compensated executive officers who served in such capacity as of January 28, 2012 (the Named Executive Officers) for services rendered to us during the three most recent fiscal years.
The Compensation Committee annually reviews and adjusts, where appropriate, the base salaries of the Companys executive officers listed in this Proxy Statement. In determining the appropriate level of base salary compensation, the Compensation Committee considers a number of factors including:
As illustrated above, Aéropostale has designed its compensation structure around a generally balanced allocation between fixed compensation, and performance based variable compensation, such as bonus and equity compensation.
Annual Incentive and Bonus Plan
Aéropostales culture is driven by our strong pay for performance orientation. Our compensation program awards annual bonuses based upon the Company obtaining certain annual financial targets in accordance with our financial plan. The Companys annual financial plan is established by management and ratified by our Board at the beginning of each fiscal year. The Annual Incentive Plan (AIP) is designed to motivate and reward employees by aligning a substantial portion of their total compensation directly with the Companys financial success, specifically operating income.
With regard to our Chief Executive Officer, our President, and Chief Financial Officer, their AIP bonus is determined based upon not only Company operating income growth (OI), but the Companys diluted earnings per share (EPS) growth as well. The two components, operating income and earnings per share, are weighted equally. Management determined, in conjunction with the Compensation Committee, that those three positions within the Company are able to make policies and decisions which can directly impact the Companys EPS, and as such, in order to further align those executives with the Companys stockholder value, half of their AIP bonus is determined based upon year over year EPS growth targets as set by our Compensation Committee. All other employees bonuses are determined solely based upon Company operating income growth.
The AIP contains a tiered payment structure based upon the Companys annual financial performance. Those tiers are Threshold (achieving 80% of the Companys annual financial plan), Target (achieving 100% of the Companys annual financial plan) and maximum (achieving 120% or greater of the Companys annual financial plan). This payment structure was elongated for fiscal year 2011 to reflect the economic and market uncertainties and volatility.
The Companys actual performance in 2011 was $113,515 in Operating Income and $0.85 in Earnings Per Share. As adjusted, Operating Income was $119,597(*) and Earnings Per Share was $0.90(*) which was below threshold levels and did not yield a payout for either component.
The table below reflects fiscal 2011 AIP payout:
As discussed above, the Committee approved the one-time financial performance-based bonus program by which all employees below the Senior Vice President level were provided the opportunity to earn 50% of their target payout based on revised and more attainable financial goals. Based on our results, the one-time financial performance-based bonus program was achieved and a small bonus pool was allocated for our core staff. This program did not impact our Named Executive Officers.
The AIP is a cash bonus plan and is determined formulaically, as described above. However, the Company does maintain some flexibility to award certain limited discretionary bonus amounts to employees in limited circumstances. Only those executives at the Senior Vice President level and below are eligible for a discretionary bonus. None of our Named Executive Officers received a discretionary bonus for 2011.
We believe that equity awards of our common stock under the Aéropostale Amended and Restated 2002 Long-Term Incentive Plan are an important factor in aligning the long-term financial interests of our equity-eligible employees with the interests of our stockholders. Additionally, long-term compensation increases the likelihood that we will be able to retain top performers. Management continually evaluates the use of equity-based awards and intends to continue to use such awards in the future as part of designing and administering our compensation program. The percentage mix of the components of our equity awards depends upon the employees level within the organization.
Generally, executives at the Senior Vice President level and above are granted a 50/50 mix of performance shares and restricted stock. The design of our performance-based equity awards help to align the interests of our executive officers with those of our stockholders. Because they are tied to key performance measures, including operating income and earnings per share over a three year period, they also support our key brand and human capital strategies. The combination of performance and time-based equity has been a successful component of our overall compensation program providing the right balance of performance and retention awards.
Given our financial performance, we recognized that our executives may not realize value from the performance share component of the 2011 award. In addition, our performance had a significant negative impact on the 2010-2012 cycle that is currently in progress. To that end, the Committee approved a program to pull forward the March 2012 equity grant for all executives, with the exception of our Chief Executive Officer and President. These awards were delivered in order to retain key leaders, and provide a motivational tool to focus executives on stock price performance and stockholder value creation. The award, detailed below, was provided in the form of restricted stock in November 2011.
2009-2011 Performance Share Cycle Results
The performance share grant awarded in 2009 and measured against the three-year performance in fiscal 2009, 2010, and 2011 achieved a performance level of 150.7% of target. Although this cycle was also impacted by our 2011 performance, our past success resulted in a payout above target levels.
The table below reflects the performance-based equity award Company financial measures and actual performance over the aforementioned three-year period:
Performance Share Plan Mechanics
Performance shares represent an unsecured promise by the Company to award common shares to certain executives, contingent upon the Companys achievement of pre-determined three year financial performance goals. The number of performance shares to be awarded to an employee is not finalized until the Company files the Annual Report on form 10-K. With regard to Performance Shares, there are two financial measures against which the Companys performance is measured: diluted earnings per share and operating income. Financial performance for each measure is based upon cumulative targets determined over the applicable three-year period. Each measure is separate and distinct and the actual number of shares awarded at the end of the three-year cycle is additive in determining the total number of performance shares issued.
The Compensation Committee may continue to grant equity incentives to the Companys equity eligible employees consistent with the Companys compensation philosophies. The Compensation Committee delegates administrative aspects of equity grants to management.
All equity grants are issued on the date they are approved by the Compensation Committee, except for new hires, whose grant date is the first day of their employment, with all such grants only being made when the Company is not in a trading blackout period. In addition, the Compensation Committees approval of grants of awards is not conditioned nor linked to the timing of the Companys release of financial information. Non-vested stock awarded to executive officers vests at the end of three years of continuous service with us, except for certain grants described in sections of this Proxy Statement entitled Employment Agreements. From time to time, for retention and other competitive reasons, the Company will award non-vested stock with vesting periods other than a three-year cliff vesting. Although no longer granted, the exercise price for stock options is the last sales price reported for the Common Stock as reported on the NYSE on the date upon which the Award is granted. Stock options generally vest over four years on a pro rata basis and expire after eight years.
Other Benefits and Perquisites
Our executive officer compensation program also includes other benefits and perquisites. These benefits include annual matching contributions to executive officers 401(k) plan accounts, MERP, Company partially-paid medical benefits, group term life insurance coverage and an auto allowance of $8,500 per year. These benefits also include benefit accruals under our supplemental executive retirement plan. We annually review these other benefits and perquisites with the Compensation Committee and the compensation consultant, and make adjustments as warranted based on competitive practices and our Companys financial performance.
Post-Termination Compensation and Benefits
Our executive officers are also entitled to post-termination benefits in the event that their employment with us is terminated. For those executive officers who have an employment agreement with us, a description of the termination events that trigger post termination pay and benefits can be found in the section of this Proxy Statement entitled Employment Agreements. In addition, pursuant to Company policy, all Senior Vice Presidents of the Company receive one (1) year of post termination pay upon involuntary termination without cause. Our Compensation Committee, in conjunction with the compensation consultant, has reviewed the severance costs to the Company associated with the Companys severance-eligible employees. Specific information regarding benefits individuals would be eligible to receive upon termination of their employment with the Company is illustrated in the table on page 35.
Impact of Accounting and Tax
The Compensation Committee takes into account the various tax and accounting implications of compensation vehicles employed by us.
When determining amounts of stock incentive plan grants awarded to our executives, employees and Board members, the Compensation Committee examines the accounting cost associated with the grants. Under ASC 718, grants of stock-based compensation result in an accounting charge for us, which is amortized over the requisite service period, or vesting period of the instruments.
Section 162(m) of the Internal Revenue Code of 1986 limits the deductibility of executive compensation paid by a publicly-held company to $1,000,000 per covered employee per year. This limitation generally does not
apply to performance-based compensation under a plan that is approved by the stockholders of a company that also meets certain other technical requirements. Our 2002 Amended and Restated Long-Term Incentive Plan was re-approved by stockholders on June 16, 2011 and therefore awards under the plan are eligible to be exempt from Section 162(m), assuming those awards meet the other criteria for Section 162(m) deductibility. The Compensation Committee intends to utilize performance-based compensation programs that meet the deductibility requirements under Section 162(m). However, the Compensation Committee may approve compensation that may not be deductible if the Committee determines that such compensation is in the best interests of the Company which may include for example, the payment of certain non-deductible compensation necessary in order to attract and retain individuals with superior talent.
Option Exercises and Stock Vested Information. The following table provides information relating to option awards exercised and restricted stock awards vested during the fiscal year ended January 28, 2012.
Pension Benefits. The following table reflects the present value for each of the named executive officers of their accumulated benefits under the Aéropostale Supplemental Executive Retirement Plan (SERP) and the Aéropostale Long-Term Deferred Incentive Compensation Plan (LTIP) as of January 28, 2012.
The change in pension value for the SERP is driven by several different factors including (i) the five years of highest compensation for the employee, (ii) the employees years of employment, and (iii) the actuarial determined discount rate. For calendar year 2011, the discount rate decreased from 5.5% to 3.95%. This change in the discount rate was the main factor of the increase in the overall change in pension value for Mr. Johnson and Mr. Cunningham.
The amounts shown in the Pension Benefits Table above are actuarial present values of the benefits accumulated through the date shown. An actuarial present value is calculated by estimating the expected future lump sum payment at retirement and discounting the payment to reflect the time value of money. The assumed retirement age for each executive is the plans normal retirement age, which is the earliest age at which the executive could retire without any reduction due to age. Actual benefit present values will vary from these estimates depending on many factors, including an executives actual retirement age and the lump sum interest rate in effect at that time. The assumptions used for determining the present values of the accumulated pension benefits are outlined below:
Interest will be credited to each Participants account on the last day of the plan year. The interest rate to be used to calculate the interest shall be the annual rate of 10-year Treasury Constant Maturities as of November 30th of the plan year.
The table below shows the amounts that the following individuals would be eligible to receive upon termination of their employment with the Company, assuming that termination occurred on January 28, 2012, the last day of our 2011 fiscal year:
Thomas P. Johnson
We have an employment agreement (the Employment Agreement) with Thomas P. Johnson, our Chief Executive Officer, effective December 1, 2010 (Effective Date) that is in effect for three (3) years from the Effective Date. During the employment period, Mr. Johnson receives an annual base salary of $950,000, an annual incentive bonus, and medical and other benefits, including an automobile allowance in the amount of $8,500 per year. The base salary may be increased at the discretion of the Company and the Board annually. Mr. Johnson has an opportunity to earn an annual bonus of up to 300% of Mr. Johnsons then applicable base salary, dependent upon the Companys and his individual performance. Mr. Johnsons annual bonus is capped at three times his base salary in respect of any fiscal year. The annual bonus is payable pursuant to the terms of the our Annual Incentive Bonus Plan.
Mr. Johnson also received a one-time sign-on grant of 42,544 shares of our restricted stock equating to, on the grant date, $1,000,000. This restricted stock vests 50% per year from the grant date. In addition, Mr. Johnson will also receive a grant of 63,830 shares of restricted stock equating to, on the grant date, $1,500,000. This restricted stock fully vests two years from the grant date. At the time of the Companys next annual equity grant period, Mr. Johnson will receive an award of Company restricted stock, in the form of performance shares, which will have a grant date value of $1,500,000. This award will vest three years from the date of that grant.
Mr. Johnson is entitled to participate in any benefit plan we maintain for our senior executive officers, including any life, medical, accident, or disability insurance plan, and any pension, profit sharing, retirement, deferred compensation or savings plan for our senior executive officers. We also will reimburse the reasonable expenses incurred by Mr. Johnson in the performance of his duties and indemnify Mr. Johnson against any loss or liability suffered in connection with such performance.
We are entitled to terminate the Employment Agreement with or without Cause (as defined in the Employment Agreement). Mr. Johnson is entitled to terminate his Employment Agreement for Good Reason (as defined in the Employment Agreement) which includes a reduction in base salary, a material alteration in duties and responsibilities, any material amendments to our long term incentive plan which adversely affects Mr. Johnson, or for certain other specified reasons, including relocating the Registrants corporate offices greater than a 50 mile radius from their current location. In the event of a Change of Control (as defined in the Employment Agreement) of the Company and the Employment Agreement being terminated within two (2) years of such Change of Control, without Cause by us or with Good Reason by Mr. Johnson, then Mr. Johnson will be entitled to a severance payment equal to three times the sum of (i) his annual base salary payable and (ii) the target bonus amount which would have been owed to Mr. Johnson for the applicable fiscal year in which the termination of the agreement occurred. In addition, at the time of a Change of Control all unvested restricted stock and unvested performance shares outstanding shall fully vest.
Other than after a Change of Control, if we terminate Mr. Johnsons employment without Cause or if Mr. Johnson resigns his position for Good Reason, he will be entitled to receive the greater of his base salary for the remainder of the term of the Employment Agreement or one and one quarter times his then applicable base salary. Mr. Johnson will also be entitled to receive a pro rata portion of the annual bonus that would have been payable for the fiscal year in which such termination occurs. In addition, all unvested options, unvested restricted stock, and unvested performance shares shall continue to vest for a period of one year from the termination of the Employment Agreement. Lastly, in the event the Employment Agreement ends on its term with no further action by either party, Mr. Johnson will receive severance equal to one and one quarter times his then applicable base salary and he will be subject to the Restricted Period referenced below.
If Mr. Johnsons employment terminates prior to the end of the contract term for any reason other than due to his death or disability, then he will be restricted from engaging in competitive activities during the Restricted Period (as defined in the Employment Agreement) and he will also be restricted from soliciting Company employees during the Restricted Period.
There are also additional customary provisions contained in the Employment Agreement.
Michael J. Cunningham
We have an employment agreement (the Employment Agreement) with Michael J. Cunningham, our President, effective December 1, 2010 (Effective Date) that is in effect for three (3) years from the Effective Date. During the employment period, Mr. Cunningham receives an annual base salary of $625,000, an annual incentive bonus, and medical and other benefits, including an automobile allowance in the amount of $8,500 per year. The base salary may be increased at the discretion of the Company and the Board annually. Mr. Cunningham has an opportunity to earn an annual bonus of up to 200% of Mr. Cunninghams then applicable base salary, dependent upon the Companys and his individual performance. Mr. Cunninghams annual bonus is capped at two times his base salary in respect of any fiscal year. The annual bonus is payable pursuant to the terms of our Annual Incentive Bonus Plan.
Mr. Cunningham also received a one-time sign-on grant of 21,277 shares of restricted stock equating to, on the grant date, $500,000. This restricted stock vests 50% per year from the grant date. In addition, Mr. Cunningham received a grant of 21,277 shares of restricted stock equating to, on the grant date, $500,000. This restricted stock fully vests two years from the grant date. At the time of the Companys next annual equity grant period, Mr. Cunningham will receive an award of Company restricted stock, in the form of performance shares, which will have a grant date value of $500,000. This award will vest three years from the date of that grant.
Mr. Cunningham is entitled to participate in any benefit plan we maintain for our senior executive officers, including any life, medical, accident, or disability insurance plan, and any pension, profit sharing, retirement, deferred compensation or savings plan for our senior executive officers. We also will reimburse the reasonable expenses incurred by Mr. Cunningham in the performance of his duties and indemnify Mr. Cunningham against any loss or liability suffered in connection with such performance.
We are entitled to terminate the Employment Agreement with or without Cause (as defined in the Employment Agreement). Mr. Cunningham is entitled to terminate his Employment Agreement for Good Reason (as defined in the Employment Agreement) which includes a reduction in base salary, a material alteration in duties and responsibilities, any material amendments to our long term incentive plan which adversely affects Mr. Cunningham, or for certain other specified reasons, including relocating the Registrants corporate offices greater than a 50 mile radius from their current location. In the event of a Change of Control (as defined in the Employment Agreement) of the Company and the Employment Agreement being terminated within two (2) years of such Change of Control, without Cause by us or with Good Reason by Mr. Cunningham, then Mr. Cunningham will be entitled to a severance payment equal to two times the sum of (i) his annual base salary payable and (ii) the target bonus amount which would have been owed to Mr. Cunningham for the applicable fiscal year in which the termination of the agreement occurred. In addition, at the time of a Change of Control all unvested restricted stock and unvested performance shares outstanding shall fully vest.
Other than after a change of control, if we terminate Mr. Cunninghams employment without Cause or if Mr. Cunningham resigns his position for Good Reason, he will be entitled to receive the greater of his base salary for the remainder of the term of the Employment Agreement or one and one quarter times his then applicable base salary. Mr. Cunningham will also be entitled to receive a pro rata portion of the annual bonus that would have been payable for the fiscal year in which such termination occurs. In addition, all unvested options,
unvested restricted stock, and unvested performance shares shall continue to vest for a period of one year from the termination of the Employment Agreement. Lastly, in the event the Employment Agreement ends on its term with no further action by either party, Mr. Cunningham will receive severance equal to one and one quarter times his then applicable base salary and he will be subject to the Restricted Period referenced below.
If Mr. Cunninghams employment terminates prior to the end of the contract term for any reason other than due to his death or disability, then he will be restricted from engaging in competitive activities during the Restricted Period (as defined in the Employment Agreement) and he will also be restricted from soliciting Company employees during the Restricted Period.
There are also additional customary provisions contained in the Employment Agreement.
We are providing our stockholders with an advisory vote to approve the compensation of our Named Executive Officers, as disclosed in this proxy statement, including this Compensation Discussion and Analysis and the supporting tables (see Proposal No. 2 Advisory Vote on Executive Compensation). The information set forth reflects both the Compensation Committee and managements commitment to implementing pay for performance programs that are aligned purposefully to balance risk and reward. We believe that our compensation programs have been successful in driving the performance of our executives to meet our short and long-term goals. We seek your support and think that it is appropriate because, as detailed in this Compensation Discussion and Analysis, we have a comprehensive executive compensation program that is designed to link our executives compensation as closely as possible with the Companys performance and to align the executives interests with yours as our stockholders.
Compensation Committee Interlocks and Insider Participation
No member of the Compensation Committee of our Board of Directors and none of our executive officers serve, and we anticipate that no member of our Compensation Committee nor any of our executive officers will serve, as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving as a member of our Board of Directors or Compensation Committee.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Companys officers, directors and persons who are beneficial owners of more than ten percent of the Companys Common Stock (reporting persons) to file reports of ownership and changes in ownership with the Securities and Exchange Commission. Reporting persons are required by Securities and Exchange Commission regulations to furnish the Company with copies of all Section 16(a) forms filed by them. Based on its review of the copies of Section 16(a) forms received by it, the Company believes that, during fiscal 2011, all reporting persons complied with applicable filing requirements.
REPORT OF THE COMPENSATION COMMITTEE
The following Report of the Compensation Committee does not constitute soliciting material and should not be deemed filed or incorporated by reference into any other Company filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent the Company specifically incorporates this Proxy Statement by reference therein.
To: The Board of Directors
As members of the Compensation Committee, we are responsible for administering the Companys incentive plans, including the 1998 Stock Option Plan, Amended and Restated 2002 Long-Term Incentive Plan and Annual Incentive Bonus Plan. In addition, we review compensation levels of members of senior management, evaluate the performance of senior management and consider management succession and related matters. The Compensation Committee reviews compensation for the executive officers of the Company with the Board.
The Compensation Committee reviewed and discussed the Compensation Discussion and Analysis with management. Based on this review and discussions, the Compensation Committee has recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.
REPORT OF THE AUDIT COMMITTEE
The following report of the Audit Committee shall not be deemed to be soliciting material or to be filed with the Securities and Exchange Commission under the Securities Act of 1933 or the Securities Exchange Act of 1934 or incorporated by reference in any document so filed.
To: The Board of Directors
As members of the Audit Committee, we are responsible for the oversight of all aspects of the Companys financial reporting, internal control and audit functions. We adopted a charter in May 2002 and revised this charter in November of 2004. Management has the primary responsibility for the financial statements and the reporting process, including the systems of internal controls. We have reviewed and discussed the Companys financial statements with management.
We selected Deloitte & Touche LLP (Deloitte) to be the Companys independent registered public accounting firm, and they were responsible for expressing an opinion on the consolidated financial statements in the Annual Report for fiscal 2011. We have received written confirmation from Deloitte & Touche LLP of their independence within the meaning of the Securities Act administered by the Securities and Exchange Commission and the requirements of PCAOB Ethics and Independence Rule 3526, Communication with Audit Committees Concerning Independence, and have discussed Deloitte & Touche LLPs independence. We have discussed with Deloitte those matters required by PCAOB AU 380, Communication With Audit Committees, and SEC Rule 2-07, Communication With Audit Committees, of Regulation S-X. In addition, a representative of Deloitte will be in attendance at the Annual Meeting.
In reliance on the reviews and discussions noted above, we recommended to the Board of Directors that the audited financial statements be included in the Companys annual report on Form 10-K for the year ended January 28, 2012 for filing with the Securities and Exchange Commission.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FEES AND SERVICES
The following table sets forth the fees billed by Deloitte & Touche LLP for each of the past two fiscal years for audit and fees billed in each of the past two fiscal years for other related services: