Courier DEF 14A 2008
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
January 14, 2009
To the Stockholders of
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the Annual Meeting) of COURIER CORPORATION (the Corporation) will be held at the Radisson Hotel Nashua, 11 Tara Boulevard, Nashua, New Hampshire, at 11:00 A.M. on Wednesday, January 14, 2009 for the following purposes:
1. To elect three Class B Directors to hold office for a term of three years and until their respective successors shall be elected and shall have been duly qualified;
2. To ratify and approve the selection by the Audit and Finance Committee of the Corporations Board of Directors of Deloitte & Touche LLP as independent auditors for the Corporation for the current fiscal year ending September 26, 2009; and
3. To transact such other business as may properly come before the Annual Meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on November 17, 2008 as the record date for the determination of the stockholders entitled to notice of and to vote at the Annual Meeting and at any adjournments or postponements thereof.
15 Wellman Avenue
North Chelmsford, Massachusetts 01863
December 5, 2008
IF YOU DO NOT EXPECT TO ATTEND IN PERSON, IT WOULD BE APPRECIATED IF YOU WOULD FILL IN AND SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. YOU MAY ALSO VOTE YOUR SHARES THROUGH THE INTERNET OR BY TELEPHONE.
15 Wellman Avenue
North Chelmsford, Massachusetts 01863
ANNUAL MEETING OF STOCKHOLDERS
January 14, 2009
NATURE OF SOLICITATION
This Proxy Statement is furnished in connection with and accompanies a Proxy Card (the Proxy) for and Notice of Annual Meeting of Stockholders (the Notice) of Courier Corporation (the Corporation or Courier), to be held Wednesday, January 14, 2009 at 11:00 A.M. at the Radisson Hotel Nashua, 11 Tara Boulevard, Nashua, New Hampshire, for the purposes set forth in the Notice. The solicitation is made on behalf of the Board of Directors of the Corporation (the Board of Directors).
This Proxy Statement and the accompanying Notice and Proxy are first being sent to stockholders on or about December 5, 2008. The Board of Directors has fixed the close of business on November 17, 2008 as the record date for the determination of stockholders entitled to notice of and to vote at the Annual Meeting (the Record Date).
The cost of preparing, assembling and mailing the Proxy and Notice and this Proxy Statement and of soliciting Proxies is to be borne by the Corporation. In addition to the use of the mails, solicitation may be made by telephone and personally by employees and Directors of the Corporation. Georgeson Shareholder Communications, Inc. has been hired by the Corporation to act as a distribution agent and solicitor only with respect to record holders who are brokers, dealers, banks or other entities that exercise fiduciary powers in nominee name or otherwise, at a fee of approximately $6,000. The Corporation will also bear the expense of record holders who are banks, brokers and other fiduciaries or nominees who may forward Proxies and proxy material to beneficial owners of such shares.
Any Proxy given pursuant to this solicitation may be revoked by the person giving it prior to the exercise of the powers conveyed by it by filing with the Secretary/Clerk of the Corporation a written revocation or duly executed Proxy bearing a later date, properly casting a new vote through the Internet or by telephone at any time before the closure of the Internet or telephone voting facilities, or by attending the Annual Meeting and voting in person. Unless a Proxy is revoked, the shares represented thereby will be voted at the Annual Meeting or at any adjournment thereof in the manner hereinafter described.
The Annual Report of the Corporation for the fiscal year ended September 27, 2008, including the Form 10-K for the fiscal year ended September 27, 2008, is being mailed to stockholders concurrently with this Proxy Statement.
As of the Record Date, the securities outstanding and entitled to vote at the Annual Meeting consist of 11,878,461 shares of Common Stock, par value $1 per share, of the Corporation (the Common Stock). Only holders of record on the Record Date will be
entitled to vote at the Annual Meeting. Each stockholder is entitled to one vote, in person or by proxy, for each share held. A majority in interest of all shares of Common Stock issued, outstanding and entitled to vote at the Annual Meeting constitutes a quorum for the meeting (5,939,231 shares). Abstentions and broker non-votes shall be counted in determining the number of shares present at the Annual Meeting.
A plurality of votes properly cast for the election of Directors by stockholders attending the Annual Meeting in person or by proxy will elect Directors to office. A majority of votes properly cast at the Annual Meeting is required for approval of the ratification of the auditors. Abstentions and broker non-votes will not be counted as votes cast at the Annual Meeting for such other matters. Under the Corporations Corporate Governance Guidelines, Directors who do not receive a majority of the shares outstanding are required to submit their resignation to the Board of Directors. The Board of Directors then determines whether to accept such resignation as set forth in the Corporate Governance Guidelines.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth, as of the Record Date, the ownership of Common Stock by each Director, by each executive officer named in the Summary Compensation Table below (each a Named Executive Officer), by all Directors and executive officers of the Corporation as a group, and by any person or group known to the Corporation to be the beneficial owner of more than 5% of the outstanding shares of Common Stock. The number of shares beneficially owned by each person and entity is determined according to the rules of the Securities and Exchange Commission (the Commission), and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rules, beneficial ownership includes any shares as to which the individual or entity has sole or shared voting power or investment power and also any shares which the individual or entity has the right to acquire within sixty days of the Record Date through the exercise of an option or similar right. Except as noted below, each holder has sole voting and investment power with respect to all shares of Common Stock listed as owned by such person or entity.
(1) The information concerning the amount of Common Stock beneficially owned by each of the Directors and executive officers was furnished to the Corporation by each such Director or executive officer. The address for the Directors and executive officers is c/o Courier Corporation, 15 Wellman Avenue, North Chelmsford, MA 01863.
(2) Includes shares subject to options exercisable within sixty days of the Record Date as follows: Mr. Conway, 55,058 shares; Prof. Curley, 20,727 shares; Mr. Hoff, 22,977 shares; Mr. Lerner, 22,227 shares; Mr. Markell, 20,727 shares; Mr. Skates, 22,977 shares; Mr. Story, 56,115 shares; Mr. Thorndike, 10,758 shares; Ms. Wagner, 20,727 shares; Mr. Folger, 15,114 shares; Mr. Balakrishna, 1,869 shares; Mr. Zimmerman, 4,217 shares; and all Directors and executive officers as a group, 273,493 shares. For purposes of calculating the percentage of shares outstanding with respect to each individual and the group, the shares subject to such options have been treated as if they were issued and outstanding only as to such individual or group.
(3) Includes shares allocated to individual accounts in the Courier Employee Stock Ownership Plan (the ESOP) as follows: Mr. Conway, 9,449 shares; Mr. Story, 6,723 shares; Mr. Folger, 4,352 shares; and Mr. Zimmerman, 187 shares.
(4) Includes 328,161 shares owned by the James F. Conway, Jr. Trusts of which Mr. Conway III is a trustee with shared voting and investment power as to these shares. Mr. Conways address is c/o the Corporation, 15 Wellman Avenue, North Chelmsford, MA 01863.
(5) Includes 100,000 shares pledged by Mr. Hoff against a line of credit with UBS Financial Services, Inc.
(6) Includes 5,062 shares owned by Mr. Lerners wife, as to which shares Mr. Lerner disclaims beneficial ownership.
(7) Represents shares owned by Mr. Nichols at the time of his death on April 23, 2008.
(8) Includes 900 shares owned by family trusts of which Mr. Skates is a trustee with shared voting and investment power as to these shares, but to which he disclaims beneficial ownership.
(9) Includes 4,050 shares owned by Mr. Storys wife, as to which shares Mr. Story disclaims beneficial ownership.
(10) Includes 4,500 shares owned by a family trust of which Mr. Thorndike is a trustee with shared voting and investment power as to these shares, but to which he disclaims beneficial ownership.
(11) Based upon information provided by T. Rowe Price Associates, Inc. (Price Associates) as of the Record Date. The total shares held of 1,241,300 are owned by various individual and institutional investors, including T. Rowe Price Small-Cap Value Fund, Inc. (which owns 1,023,200 shares representing 8.6% of the shares outstanding), for which Price Associates serves as investment adviser with power to direct investments and/or power to vote the securities. Price Associates has sole dispositive power for the entire holding of 1,241,300 shares and has sole voting power for 215,700 shares. For purposes of the reporting requirements of the Securities Exchange Act of 1934, Price Associates is deemed to be a beneficial owner of such securities; however, Price Associates
expressly disclaims that it is, in fact, the beneficial owner of such securities. The address for Price Associates is 100 East Pratt Street, Baltimore, MD 21202.
(12) Based upon information provided by Royce & Associates as of September 30, 2008, Royce & Associates owned 952,386 shares with sole voting and dispositive power as to these shares. The address for Royce & Associates is 1414 Avenue of the Americas, New York, NY 10019.
ITEM 1: ELECTION OF DIRECTORS
Pursuant to the By-Laws, the Corporations directorships are divided into three classes, consisting of Class A, Class B and Class C Directors. The term of each directorship is three years and the terms of the three classes are staggered in such a manner that only one class is elected in any one year. Three Class B Directors are to be elected at the 2009 Annual Meeting. If elected, each of the three Class B Directors will serve until the 2012 Annual Meeting and until his/her successor shall have been elected and duly qualified or until his/her earlier death, incapacity, resignation or removal. Proxies not limited to the contrary will be voted to elect James F. Conway III, Kathleen Foley Curley and W. Nicholas Thorndike as Class B Directors. Messrs. Conway and Thorndike and Prof. Curley are presently Class B Directors having terms expiring at the 2009 Annual Meeting. The Board has no reason to believe that any of the Director nominees will be unavailable. In the event a nominee is not available, the Board of Directors may decrease the number of Directors or choose a different nominee. If a substitute nominee is chosen, the proxy will be voted for the substitute nominee unless other instructions are given. Pursuant to the Corporations Corporate Governance Guidelines regarding a Director standing for reelection after the age of 75, upon the recommendation of the Nominating and Corporate Governance Committee, the Board of Directors determined that the reelection of Mr. Thorndike would be in the best interests of the shareholders of the Corporation.
Messrs. Conway and Thorndike and Prof. Curley were previously elected by the stockholders.
The Board of Directors unanimously recommends a vote FOR the three Director Nominees listed below.
Nominees for Election as Class B Directors
James F. Conway III Mr. Conway, age 56, has been a Director of the Corporation since 1988. Mr. Conway was elected Chairman of the Corporation on September 22, 1994 and also serves as President and Chief Executive Officer. He had been Acting Chairman, President and Chief Executive Officer since December 1992, and President and Chief Operating Officer from 1988 to 1992. He is a Director of Enterprise Bancorp Inc. If elected, Mr. Conway will serve as a Class B Director until the 2012 Annual Meeting.
Kathleen Foley Curley Professor Curley, age 57, has been a Director of the Corporation since 1995, and she is currently Chairperson of the Nominating and Corporate Goveranance Committee. She joined Boston University School of Management as a Research Professor in 2002. She had been Senior Vice President and Chief Community Builder at Communispace Corporation from 2000 to 2002 and Executive Director of Lotus Institute since 1999. Prior to her industry positions, she was a tenured Professor at Northeastern University College of Business Administration in Management Information
Systems between 1982 and 1997. If elected, Professor Curley will serve as a Class B Director until the 2012 Annual Meeting.
W. Nicholas Thorndike Mr. Thorndike, age 75, has been a Director of the Corporation since 1989, and currently serves as Lead Director in meetings of the independent Directors. He is an independent trustee of the mutual funds of Grantham, Mayo, and Van Otterloo (GMO). He has also served as a Trustee of Massachusetts General Hospital from 1969 to 1999 and now serves as Honorary Trustee, and was the Chairman of the Board from 1987 to 1992 and President from 1992 to 1994. Until December 1988, he was Chairman and Managing Partner of Wellington Management Company. If elected, Mr. Thorndike will serve as a Class B Director until the 2012 Annual Meeting.
Directors Continuing in Office
The following persons are incumbent Directors and have unexpired terms as Class A and Class C Directors as indicated.
Edward J. Hoff Mr. Hoff, age 53, has been a Director of the Corporation since 1989, and he is currently Chairperson of the Compensation and Management Development Committee. He joined IBM as Vice President, Learning in 2001 and serves as a member of the IBM Senior Leadership Team. He was President of Leadership Development Inc., a management development firm, from 1998 to 2001. He had been a Partner at The Center for Executive Development from 1992 to 1998. Mr. Hoff was previously elected as a Class A Director to serve until the 2011 Annual Meeting.
Robert P. Story, Jr. Mr. Story, age 57, has been a Director of the Corporation since 1995. He was elected Executive Vice President and Chief Operating Officer of Courier in November 2006. Mr. Story has operational responsibility for the Corporations publishing and book manufacturing operations. He joined the Corporation in 1986 as Vice President and Treasurer and served as Senior Vice President and Chief Financial Officer from April 1989 through October 2006. Mr. Story was previously elected as a Class A Director to serve until the 2011 Annual Meeting.
Susan L. Wagner Ms. Wagner, age 59, has been a Director of the Corporation since November 2004. She is Vice President, Global Strategic Insights, Johnson and Johnson Group of Consumer Companies, a position she has held since September 2008. Prior to that time she was Vice President, Strategic Insights, Pepsi-Cola Company from 2006 to 2008, Vice President of Consumer and Market Knowledge, Procter and Gamble from 2005 to 2006, Vice President of Market Research, Personal Care Group for the Gillette Company from 2002 to 2005 and Vice President of Strategic Market Intelligence, Duracell, from 1998 to 2002. Ms. Wagner was previously elected as a Class A Director to serve until the 2011 Annual Meeting.
Arnold S. Lerner Mr. Lerner, age 78, has been a Director of the Corporation since 1989. He is a Director and Vice Chairman of Enterprise Bancorp Inc. Previously, he was a partner in twenty radio stations. Mr. Lerner was previously elected as a Class C Director to serve until the 2010 Annual Meeting.
Peter K. Markell Mr. Markell, age 53, has been a Director of the Corporation since November 2004. He joined Partners HealthCare System, Inc. as Vice President for Finance in 1999. He had previously been a partner at Ernst & Young LLP from 1988 to 1998. He is
a director of Eastern Bank. Mr. Markell was previously elected as a Class C Director to serve until the 2010 Annual Meeting.
Ronald L. Skates Mr. Skates, age 67, has been a Director of the Corporation since 2003, and he is currently Chairperson of the Audit and Finance Committee. He is a private investor. From 1989 through 1999, he was president and chief executive officer of Data General Corporation, a computer and storage manufacturer. He retired in 1999 when EMC Corp. acquired the company. Prior to joining Data General in 1986, Mr. Skates was a certified public accountant and a partner with Price Waterhouse & Co. He is a director of Gilbane Corporation, Raytheon Company and State Street Corporation. Mr. Skates is a trustee of Massachusetts General Physicians Organization, Inc. Mr. Skates was previously elected as a Class C Director to serve until the 2010 Annual Meeting.
The Corporations Corporate Governance Guidelines, the charters of the Nominating and Corporate Governance Committee (attached as Attachment A), the Audit and Finance Committee, and the Compensation and Management Development Committee (attached as Attachment B), the Corporations Business Conduct Guidelines, and the Environmental, Health and Safety Policy are available on the Corporations website at www.courier.com. Printed copies are available free of charge by contacting General Counsel, Courier Corporation, 15 Wellman Avenue, North Chelmsford, MA 01863.
Code of Ethics
On November 4, 2003, the Board of Directors adopted, and subsequently amended on September 18, 2007, The Courier Corporation Business Conduct Guidelines for all its directors, officers and employees. The Courier Corporation Business Conduct Guidelines have been posted on the Corporations website at www.courier.com.
Board Meetings and Committees
The Board of Directors held a total of ten meetings during the fiscal year ended September 27, 2008. The Board of Directors has established the following separately designated standing committees: an Audit and Finance Committee, a Compensation and Management Development Committee and a Nominating and Corporate Governance Committee.
Audit and Finance Committee
The Audit and Finance Committee (the Audit Committee) consists of Messrs. Lerner, Markell, and Skates. Mr. Skates serves as Chairperson of the Audit Committee. The Board of Directors has determined that Mr. Skates and Mr. Markell each meet all of the qualifications of an Audit Committee Financial Expert, as defined in Item 407(d)(5) of Regulation S-K under the Securities Exchange Act of 1934. All the members of the Audit Committee are independent, under the rules of the NASDAQ Global Select Market (NASDAQ) and the Commission. The functions of the Audit Committee include appointment and oversight of independent auditors for the Corporation; determination of compensation payable to the independent auditors; consultation with the Corporations independent auditors regarding the plan of audit; review, in consultation with the independent auditors, of their audit report and management letter; and review of reports and recommendations of the Corporations internal audit department. The Audit Committee has
established procedures for the receipt, retention and treatment of complaints received regarding accounting, internal accounting controls or auditing matters. These procedures, along with the Audit Committee Charter are available to stockholders on the Corporations website at www.courier.com. The Audit Committee held four meetings during the last fiscal year. A part of each of the meetings was held with representatives of the Corporations independent auditors outside of the presence of management. The Audit Committee also met separately with the Corporations internal audit manager at three of these formal meetings.
Compensation and Management Development Committee
The Compensation and Management Development Committee (the Compensation Committee) consists of Messrs. Hoff, Lerner, Markell, Skates, and Thorndike, Ms. Wagner and Professor Curley. Mr. Hoff serves as Chairperson of the Committee. All the members of the Compensation Committee are independent under the rules of the NASDAQ and the Commission. The Compensation Committee administers the Corporations executive compensation programs and approves the compensation of executive officers. The Compensation Committee charter is available to stockholders on the Corporations website at www.courier.com and is attached hereto as Attachment B. The Committee meets each September and November to formally review executive compensation and may meet at other times during the year on compensation matters.
At its meeting in September of each year, the Compensation Committee reviews compensation data provided by the Vice President of Human Resources to establish compensation targets for the executives for the upcoming fiscal year. The Compensation Committee did not engage any compensation consultant to assist it in its compensation decisions during 2008. As part of the process of setting executive compensation targets, the Compensation Committee reviews the following:
· Compensation tally sheets for the Chief Executive Officer (CEO) and each executive as prepared by the Vice President of Human Resources. The overall purpose of these tally sheets is to bring together, in one place, all of the elements of actual and potential future compensation of our named executive officers. The tally sheets provide a four-year review of all compensation earned by the executives under our Executive Compensation Program, including salary, bonuses, perquisites, company contributions made on executives behalf to the Corporations retirement plan and deferred compensation plan, the value of stock options and restricted stock grants, and potential future payments under long-term plans and change in control arrangements.
· Compensation data of other companies of similar size or in similar industries as the Corporation. For fiscal year 2008, the Compensation Committee reviewed compensation data of executives from our peer group, which consisted of Borders Group; Bowne & Co.; Consolidated Graphics, Inc; Ennis, Inc.; The Standard Register Company; Scholastic Corporation; and John Wiley & Sons, Inc.; and survey data as provided through The Survey Group 2008 Management Compensation Survey, which is a survey of compensation from 298 Massachusetts-based companies, reported on an aggregate basis based on size, industry, and geographic location without reference to company names.
Each year at the September meeting, the Compensation Committee also grants stock options and restricted stock awards to the CEO and other executives as part of their compensation package for the next fiscal year.
At its November meeting each year, following its review of the prior fiscal years operating results, the Compensation Committee approves awards earned under our Executive Compensation Program for the fiscal year just ended. In addition, the Compensation Committee reviews the compensation targets it established for the CEO and other executives at the September meeting and formally approves the compensation of the CEO and the proposed compensation for the other executives for the new fiscal year. The Compensation Committee also sets the performance targets for the new fiscal years performance-based incentive plans.
Managements Role in the Compensation-Setting Process. The CEO provides his evaluation of the performance of the other executives to the Compensation Committee. Using tally sheets and peer group and company survey data as prepared by the Vice President of Human Resources described above, he recommends salary, non-equity incentive compensation, and equity compensation for the other executives, and recommends the business performance targets and objectives for approval by the Compensation Committee in connection with incentive compensation plans. The CEO does not participate in discussions of his compensation by the Compensation Committee.
Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee (the Nominating Committee) consists of Messrs. Hoff, Lerner, Markell, Skates, and Thorndike, Ms. Wagner and Professor Curley. Professor Curley serves as Chairperson of the Nominating Committee. All the members of the Nominating Committee are independent under the rules of NASDAQ and the Commission. The Nominating and Corporate Governance Committee Charter is available to stockholders on the Corporations website at www.courier.com and is attached hereto as Attachment A.
The Nominating Committee, on behalf of the Board of Directors (the Board), is responsible for identifying individuals qualified to become Board members and recommending to the Board Director nominees for election, including nominees to be elected or re-elected as Directors at each annual meeting of stockholders, as more fully detailed in the Nominating Committee charter. The Nominating Committee also periodically reviews and monitors the Corporations performance against the corporate governance guidelines established by the Committee. Each of the Directors is in compliance with the stock ownership requirements set forth in the corporate governance guidelines.
To fulfill its responsibility to recruit and recommend to the full Board nominees for election as Directors, the Nominating Committee reviews the composition of the full Board to determine the qualifications and areas of expertise needed to further enhance the composition of the Board and works with management in attracting candidates with those qualifications.
· The Nominating Committee looks for nominees to have the highest personal and professional integrity, demonstrated exceptional ability and judgment, and effectiveness in serving the long-term interests of the shareholders as a member of the Board.
· The Nominating Committee may consider whether the nominee has direct experience in the printing or publishing industry or in the markets in which the
Corporation operates and whether the nominee, if elected, assists in achieving a mix of Board members that represents a diversity of background and experience.
· The Nominating Committee must ensure that the Board has sufficient independent directors (as defined under NASDAQs rules) and sufficient audit committee financial experts on the Board to satisfy all applicable rules of NASDAQ and the Securities and Exchange Commission, including rules regarding the composition of certain committees of the Board.
· The Nominating Committee considers the number of other boards of public companies on which a candidate serves under our Corporate Governance Guidelines.
The Nominating Committee considers candidates for Director suggested by our shareholders, provided that the recommendations are made according to the procedures required under our By-laws and described in this Proxy Statement under the heading Miscellaneous Stockholder Proposals. Shareholder nominees whose nominations comply with these procedures and who meet the criteria outlined above, in the Nominating Committees Charter, and in our Corporate Governance Guidelines, will be evaluated by the Nominating Committee in the same manner as the Nominating Committees nominees.
The Nominating Committee recommended that Messrs. Conway and Thorndike, and Prof. Curley each be nominated for election to serve as Class B Directors until the 2012 Annual Meeting. The Nominating Committee held one meeting during the last fiscal year.
Participation at Meetings
Each Director attended at least 75% of the total number of meetings held by the Board of Directors and any committees on which he or she served during fiscal year 2008. According to a resolution passed by the Board of Directors, all Directors are expected to attend our annual meeting, and eight out of nine of the Directors attended the 2008 Annual Meeting.
Contacting Members of the Board of Directors
The policy of the Board of Directors is that stockholders of the Corporation may contact the Board of Directors, including the Chairman of the Board, the independent Directors as a group, or any individual Director, by writing to the Board of Directors c/o, Courier Corporation, Attention: Compliance Officer, 15 Wellman Avenue, North Chelmsford, MA 01863. Such writing must clearly specify the name of the individual Director or group of Directors to whom such writing is addressed.
If you wish to contact the Audit Committee to report complaints or concerns regarding accounting, internal accounting controls or auditing matters, you may do so by writing to the Compliance Officer, Courier Corporation, 15 Wellman Avenue, North Chelmsford, MA 01863. You are welcome to make such reports anonymously.
We recommend that all correspondence be sent via certified U.S. mail, return receipt requested. All such correspondence received in this manner will be forwarded to the relevant Director or group of Directors or other addressee.
The Board of Directors has determined that each of Messrs. Hoff, Lerner, Markell, Skates and Thorndike, Prof. Curley and Ms. Wagner is an independent director in accordance with corporate governance rules of NASDAQ. Therefore, the Corporation currently has a majority of independent directors.
Meetings of Independent Directors
Independent directors of the Corporation regularly meet in executive session outside the presence of management. The presiding director for these meetings is Mr. Thorndike. Any interested parties who wish to make their concerns known to the independent directors may avail themselves of the procedures listed above in the section of this Proxy Statement entitled Contacting Members of the Board of Directors.
Related Party Transactions
Under the terms of the Audit Committee charter and its Business Conduct Policy, information about transactions involving related persons are reviewed by the independent directors of the Corporation. Related persons include, among others, the Corporations directors and executive officers, as well as immediate family members of directors and officers. If the determination is made that a related person has a material interest in any transaction of the Corporation, then the Corporations independent directors would review, and if it were in the best interests of the Corporation, approve or ratify it. In addition, the transaction would be required to be disclosed in accordance with the Commissions rules. There were no related party transactions in fiscal 2008.
On January 16, 2008, the Corporation paid its non-employee Directors (Messrs. Hoff, Lerner, Markell, Skates and Thorndike, Prof. Curley and Ms. Wagner) an annual retainer of $25,000 for calendar year 2008. During fiscal year 2008, they also received meeting fees of $1,250 per meeting attended of the Board of Directors and any committee meetings of the Board of Directors or $625 for any such meeting held by phone and lasting less than one-half hour. The Corporation paid annual retainer fees to non-employee Directors who serve as Chairpersons of Committees of the Board of Directors as follows: Compensation Committee, $10,000; Audit Committee, $10,000; and Nominating Committee, $5,000. Non-employee directors may receive additional fees for service on executive, strategic initiative, shareholder value and other special committees that the Board of Directors may from time to time establish. Total compensation earned for fiscal 2008 for each of the non-employee Directors is detailed in the table below.
For fiscal 2008, the non-employee Directors were allowed, at their election, to receive all or one-half of their annual retainer fees for services as Directors and as Chairpersons of Committees (annual retainer fees) in the form of stock units or shares of Common Stock pursuant to the Corporations 2005 Stock Equity Plan (the Stock Equity Plan). On January 16, 2008, an aggregate of 5,399 shares were awarded to the following Directors who elected to participate in the Stock Equity Plan: Mr. Hoff, 1,303 shares; Mr. Markell, 931 shares; Mr. Skates, 1,303 shares; Mr. Thorndike, 931 shares; and Ms. Wagner, 931 shares. In addition, all non-employee Directors receive an annual stock option award granted at fair market value on the date of each annual meeting of stockholders. This option award is for a number of shares of common stock equal to the
lesser of 6,000 shares or $50,000 based on the Black-Scholes option pricing model. Options for 6,000 shares of Common Stock each, or an aggregate of 42,000 shares, were granted on January 16, 2008 at an exercise price of $26.86 per share to all non-employee Directors. All such options have a term of five years from the date of grant, are exercisable immediately and (except for transfers to or for the benefit of the Directors immediate family) are non-transferable otherwise than by will or the laws of descent and distribution. Both the stock grant and option awards were fully vested on the date of grant.
Directors Compensation Table - 2008
The non-employee Directors do not receive non-equity incentive plan compensation, pension, or non-qualified deferred compensation, nor did they receive any other form of compensation. Therefore, the columns titled Non-Equity Incentive Plan Compensation, Change in Pension Value and Non-qualified Deferred Compensation Earnings and All Other Compensation were intentionally omitted from the Directors Compensation table.
AUDIT COMMITTEE REPORT
The primary purpose of the Audit Committee is to assist the Board of Directors in its general oversight of the Corporations financial reporting process.
Management is responsible for the preparation, presentation, and integrity of the Corporations financial statements, accounting and financial reporting principles, internal controls, and procedures designed to ensure compliance with accounting standards, applicable laws, and regulations. The Corporations independent auditors, Deloitte & Touche LLP, are responsible for performing an independent audit of the consolidated financial statements and expressing an opinion on the conformity of those financial statements with generally accepted accounting principles.
The Audit Committee has reviewed and discussed the audited financial statements of the Corporation for the fiscal year ended September 27, 2008 with the Corporations management and has discussed with Deloitte & Touche LLP the matters required to be discussed by Statement on Auditing Standards No. 61 as amended, Communication with Audit Committees. In addition, Deloitte & Touche LLP has provided the Audit Committee with the written disclosures and the letter required by the applicable requirements of the Public Company Accounting Oversight Board regarding Deloitte & Touche LLPs communications with the Audit Committee concerning independence.
Based on these reviews and discussions, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in the Corporations Annual Report on Form 10-K for the fiscal year ended September 27, 2008, for filing with the Securities and Exchange Commission.
COMPENSATION DISCUSSION AND ANALYSIS
The goals of our Executive Compensation Program are to:
· attract and retain high quality management talent and to motivate them to build and sustain value for shareholders;
· provide aggregate compensation opportunities that, when performance goals are achieved, will be comparable to those provided by other companies with revenues and operating characteristics similar to us; and
· establish for employees in management positions a significant risk/reward compensation structure through incentive pay plans.
Our Executive Compensation Program is designed to accomplish these goals by providing an annual incentive to motivate executives to achieve our annual earnings goals and two long-term incentives tying executives compensation to the results of the business decisions they make and to the creation of shareholder value over the long term.
The cash- and stock-based and the short- and long-term components of our Executive Compensation Program begin with a total compensation amount established for each executive officer. In determining total compensation amounts, the Committee considers the following:
· compensation data of companies of a similar revenue size, in similar markets and in regional areas in which we compete for executive talent. Those companies are listed above on page 7. However, there is no attempt to benchmark total compensation of executive officers to particular levels (e.g., median, salary midpoint) within the survey group data. The Committee reviews the compensation data to make sure that the total compensation paid to our executives remain competitive.
· the total compensation earned by executives over the past four years as provided on tally sheets provided to the Committee. The tally sheet information provides confirmation to the Committee that our compensation program is indeed performance-based.
· the Corporations initiatives for the new fiscal year, and the challenges in achieving those initiatives.
· the performance of our executives and the company as a whole.
· individual job responsibilities of our executives.
Our Executive Compensation Program is designed such that three of the four compensation components are variable; therefore, total compensation can fluctuate significantly year-to-year if performance targets are exceeded, achieved, or not attained.
Total compensation, as defined in our plan, is comprised of a fixed pay component, which is base salary, and up to three variable pay components, which consist of an annual cash bonus, a long-term stock incentive, and a long-term performance incentive. The Committee uses as a guide a target pay mix for the four compensation components. For the CEO, the target pay mix is 45 percent in fixed pay, 20 percent in annual cash bonus, 20 percent in the long-term stock incentive, and 15 percent in a long-term performance incentive. For the other executive officers, the target pay mix is 50 percent in fixed pay, 20 percent in annual cash bonus, 15 percent in the long-term stock incentive, and 15 percent in the long-term performance incentive. The Committee believes it is reasonable and appropriate for executive officers to have at least half of their total compensation in the form of variable pay. The Committee further believes it is appropriate for the CEO to have a higher percentage of his total compensation in the form of variable pay because of the importance of his role to grow the Corporation and increase total shareholder returns. The actual pay mix among all of these components may fluctuate year to year among individual executives.
The total compensation for fiscal 2008 for all of the executives, with the exception of Messrs. Nichols and Zimmerman, consisted of the four compensation components described above. In light of Mr. Nichols retirement plans, the Committee did not believe it was appropriate to award him any long-term incentive awards. Mr. Zimmerman, in his role as Vice President of Publishing, has his entire long-term incentive delivered as a long-term stock incentive, rather than a performance incentive, to encourage greater stock ownership and because the publishing segment is expected to have less impact on our return on assets (ROA) and more impact on our long-term shareholder value.
There is some disparity between the total compensation paid to our top two named executive officers and the other named executive officers. This is primarily because Messrs. Conway and Story have a long tenure as executives while Messrs. Folger, Balakrishna, and Zimmerman have been promoted to their executive management roles only in recent years. Mr. Nichols died in April 2008 and thus earned only a partial year of his total compensation.
1. Base Salary. The base salary is designed to compensate executives for fulfilling their job responsibilities, their expected contribution to our performance, and to aid in their attraction and retention. The base salary for Mr. Conway and the other named executive officers was increased by 3 percent for fiscal 2008. In light of the significant adjustment in base salaries for most executives in fiscal 2007, the Committee did not believe there was any need to provide for any increases beyond a 3 percent increase to cover increases in cost of living.
At its meeting in November 2008, the Committee approved a 3 percent base salary increase for fiscal year 2009 for all executives, including the CEO, consistent with the Corporations overall compensation increases for its employees budgeted for fiscal 2009. In light of the Corporations fiscal 2008 performance and the salary adjustments made in fiscal 2007, the Committee does not believe there is any need to provide for any increases for fiscal 2009 beyond a 3 percent increase to cover increases in cost of living.
2. Annual Cash Bonus. The annual cash bonus is intended to promote the achievement of our business goals and annual earnings objectives, and is entirely based on quantitative objectives established by the Committee at its November meeting. An annual cash bonus target is set by the Committee for each executive for the fiscal year, which corresponds to an earnings target. If the earnings target is met for the fiscal year, the executive earns his or her annual cash bonus target for the year. The cash bonus plan provides for the actual amount of annual cash bonus awards to vary from 0 percent of target to 200 percent of target depending on the Corporations actual earnings for the fiscal year. No annual cash bonus is earned unless a minimum earnings threshold is achieved, at which an executive earns 25 percent of the annual cash bonus target. Earnings targets are set in 25 percent increments, from 25 percent to a maximum of 200 percent, at which an executive may earn that percentage of his annual cash bonus target based on the earnings target.
All executives had a portion of their annual cash bonus for fiscal 2008 based on an earnings per share target for the Corporation. Earnings growth is a key measure that we use to measure our performance year to year. Therefore, the Committee believes it is appropriate to use an earnings per share measure for the annual cash bonus. With the exception of Mr. Zimmerman, the CEO and other named executives had 100 percent of their annual bonus based on our achieving the earnings per share target. Mr. Zimmerman had one-third of his annual cash bonus based on our achieving the earnings per share target. The other two-thirds of his cash bonus was based on a pretax income target for our publishing segment, which the Committee believes is an appropriate measure since he manages just this segment of the Corporation and pretax income of the segment is a primary measurement of his performance for the year.
The earnings targets for fiscal 2008 are listed below. The earnings per share target at 100 percent is consistent with the guidance provided to shareholders for fiscal 2008.
Based on our performance in fiscal 2008, all of the executives earned zero percent of their annual cash bonus target that was based on the earnings per share measure
because the minimum earnings threshold target of $1.96 was not achieved. Mr. Zimmerman earned zero percent of his bonus award that was based on the publishing segment pretax income target for fiscal 2008 since the minimum threshold earnings target of $6.075 million was not achieved in 2008. Therefore, Messrs. Conway, Story, Folger, Balakrishna, and Zimmerman earned no bonus award for fiscal 2008.
While Messrs. Folger and Balakrishna were not entitled to receive a cash bonus under our annual cash bonus plan for fiscal 2008, the Committee nevertheless awarded them each with a special cash award of $40,000. In the case of Mr. Balakrishna who joined the Corporation in mid-2007, the Committee granted the special cash award in recognition of his personal achievements and contribution to the Corporation in his first full year in the newly created role of Vice President, General Counsel. In the case of Mr. Folger, the Committee granted the special cash award in recognition of his personal contribution to the Corporation during a challenging year of market and industry uncertainty and in consideration that the compensation paid to him continues to be significantly below what is paid to Chief Financial Officers of companies in our peer group.
Earnings targets for the fiscal 2009 annual cash bonus will continue to be based on earnings per share and, for Mr. Zimmerman, pretax income targets for our publishing segment established by the Committee.
Change in Control. In the event we undergo a change in control, executives are entitled to receive a pro rata portion of their annual cash bonus target. It is the Committees belief that making such awards pro rata based on the elapsed time period and target amount is a fair and reasonable manner in which to treat executives who, as a result of the change in control, may not have the opportunity to earn all of this incentive.
3. Long-Term Stock Incentive (LTSI). The LTSI is comprised of awards of stock options and restricted stock under the Courier Corporation Amended and Restated 1993 Stock Incentive Plan approved by shareholders in November 2004. The Committee believes that stock-based awards closely align the interests of the executive officers with those of our shareholders. The value of stock option awards cannot be realized unless an appreciation in the price of our Common Stock occurs over a number of years. Similarly, the value of restricted stock awards will fluctuate with the value of our Common Stock. We use a mix of options and restricted stock in order to control our annual run rate and minimize dilution.
Stock Option Awards. One-half of the compensation value under the LTSI is delivered as a stock option. The Committee uses the Black-Scholes option-pricing model to determine the number of shares that correspond to the compensation value to be delivered through a stock option. The Committee awards the stock option with an exercise price equal to the fair market value of the Corporations Common Stock on the date of the award. Beginning with awards for fiscal 2006, the Committee granted stock option awards with a five-year term. Stock option awards granted as part of the LTSI vest in equal amounts annually over a three-year period.
Restricted Stock Grants. The other half of the compensation value to be delivered under the LTSI is awarded as a restricted stock grant which vests in full three years following the date of the grant. Executives receive dividends on unvested shares during the restricted period in the same amount and manner as are paid to all shareholders. In addition, we provide tax assistance to the executive of up to 30 percent of the taxable value realized upon vesting of the restricted stock grant in order to encourage our
executives to retain their shares of our Common Stock and not to sell them to meet tax obligations that result from the vesting.
In addition to the LTSI awarded under the Executive Compensation Program, the Committee may also make discretionary stock awards for special purposes. In September 2008, the Committee awarded a restricted stock award to Mr. Balakrishna in recognition of his achievements in his first full year as the Corporations General Counsel as well as to provide a retention incentive through additional share ownership. The award has a long- term (five year) vesting schedule.
A description of the equity awards including the number of shares granted to the named executives is set forth in the Grant of Plan-based Awards table.
Change in Control. If we should undergo a change in control, all outstanding restricted stock grants for the executives will vest and all outstanding stock options will become fully exercisable. It is the Committees belief that accelerating such awards is a fair and reasonable manner in which to treat executives who, as a result of the change in control, could otherwise forfeit the value of these incentives.
4. Long-Term Performance Incentive (LTPI). The LTPI is a cash award earned by executive officers based upon our achieving an average return on asset (ROA) target over a three-year performance period as compared against our peer groups average ROA over a comparable three-year performance period. The Committee believes the three-year ROA measure is an effective way to encourage executives to manage our operations responsibly and to invest in our business wisely so that our ROA exceeds the performance of our industry peers over the long-term. ROA is a financial measure typically used in industries where investments in equipment are a critical component of performance.
The LTPI earned at the close of fiscal 2008 is the 2006 LTPI, which covers the three-year performance period of fiscal 2006, 2007, and 2008. The award is earned if our average ROA for this period exceeds by 5 percent or more our peer groups average ROA for a comparable period. Since our average ROA for this three-year period was 8.7 percent and our peer groups average ROA for the comparable period was 4.3 percent, the 2006 LTPI was earned. The peer group of companies for the 2006 LTPI are listed above on page 7.
The 2006 LTPI awards were approved at the Committees November 2008 meeting and paid out soon thereafter. The 2007 LTPI which covers the three-year period of fiscal 2007, 2008, and 2009, and the 2008 LTPI which covers the three-year period of fiscal 2008, 2009, and 2010 will be earned if our average ROA exceeds by 5 percent or more our peer groups average ROA for the comparable three-year periods. The peer group of companies for the fiscal 2007 and 2008 LTPI are listed above on page 7.
Change in Control. In the event we undergo a change in control, executives are entitled to receive a pro rata portion of their target LTPI awards. It is the Committees belief that making such awards pro rata based on the elapsed time period is a fair and reasonable manner in which to treat executives who, as a result of the change in control, may not have an opportunity to earn these incentives.
Other Benefits and Perquisites
Executives generally receive the same healthcare benefits, life and disability insurance, and vacation benefits as other employees. The executives participate in the same manner as all employees in the Courier Profit Sharing and Savings Plan, which is our retirement plan. The plan provides all non-union employees with a 401k savings feature, a company matching contribution, and an annual profit sharing contribution.
We provide executives with certain limited perquisites and other personal benefits that the Committee believes are reasonable and appropriate for attracting and retaining executives for key positions. Executives receive a monthly car allowance, with Mr. Conway receiving a car allowance of $1,466 per month and the other named executive officers receiving an allowance of $1,228 per month. This amount is normally adjusted annually in January by the same percentage as the percentage increase in the annual IRS mileage reimbursement rate. We pay the annual dues, plus tax assistance on the value of the dues, associated with a country club membership and other club membership dues for Mr. Conway. We paid the annual dues, plus tax assistance on the value of the dues, and the annual tax preparation and planning fees for Mr. Nichols during fiscal 2008. Messrs. Conway, Story, and Folger participate in the Courier Corporation Deferred Compensation Program, which is a non-qualified, unfunded plan that provides for an annual award. The annual award is the difference between what our annual profit sharing contribution would have been but for the IRS-mandated compensation maximum and the actual profit sharing contribution made to the participants account in the Courier Profit Sharing and Savings Plan for the plan year (which is a calendar year). Interest is credited annually based on the investment return of one of four mutual funds within the Courier Profit Sharing and Savings Plan that the participant elects prior to the beginning of the plan year. Messrs. Conway, Story, and Folger make no contributions to the plan. Mr. Nichols participated in the Courier Corporation Deferred Compensation Program during his employment with the Corporation in fiscal 2008; and his account balance was paid to his beneficiary, his spouse, in May 2008.
Senior Executive Severance Program
Our Board of Directors determined that it is appropriate to reinforce and encourage the continued attention and dedication of senior members of our management to their assigned duties without distraction in potentially disturbing circumstances arising from the possibility of a change in control. In December 2005, the Board of Directors approved the Amended and Restated Senior Executive Severance Program which sets forth the severance compensation which we will pay to certain executives in the event that the executives employment with us terminates under certain circumstances if we should undergo a change in control.
Messrs. Conway, Story, Folger, Balakrishna, and Zimmerman are participants in our Senior Executive Severance Program (the Severance Program). In accordance with the Severance Program, if we should undergo a change in control, as defined in the Severance Program, while one of these individuals is an employee, and his employment is subsequently terminated for reasons other than death, disability, or termination for cause, he shall be entitled to a severance payment and continuation of participation in our group health plan until the end of the second calendar year following the year of termination.
The occurrence or potential occurrence of a change in control transaction creates uncertainty regarding the continued employment of executive officers; and often times,
such transactions are immediately followed by significant organizational changes, especially at the senior officer level. In order to encourage executive officers to remain with us to create shareholder value and to obtain the highest value possible should we be acquired in the future, we have agreed to provide the severance benefits described above should their employment be terminated following the transaction. In order to give the executives comfort that the obligations under the Severance Program will be fulfilled by any acquirer, we have provided for payment of severance benefits on termination by the executive for good reason (e.g., as a result of changes in title, responsibilities or salary), and which includes termination by the individual for any reason during a 30-day window commencing on the first anniversary of the change in control. We provided this window period whereby the executive can resign and receive his severance to encourage the executive to remain employed for at least one year after the transaction to provide transition assistance to the acquirer. No tax gross-up payment is provided under the Severance Program. It is the Committees belief that the benefits provided under our Severance Plan are consistent with severance benefits provided by other companies of similar size and in similar industries as us.
Supplemental Retirement Benefit Agreement
In June 1992, our Board of Directors approved a Supplemental Retirement Benefit Agreement with Mr. Nichols providing for a supplemental retirement benefit upon his retirement to encourage Mr. Nichols to remain with us at least until age 70. His Supplemental Retirement Benefit Agreement provided that in the event that Mr. Nichols died before he retired and is survived by his spouse, a monthly benefit would be paid to his spouse for her life in an amount equal to the benefit she would have received upon Mr. Nichols death had he retired on the day preceding his death. Mr. Nichols remained employed by us until his death in April 2008. His benefit is paid monthly to his spouse.
Other than Mr. Nichols, we have not entered into a supplemental retirement benefit agreement with any executive.
We have not entered into an employment agreement with any executive.
Tax Deductibility of Compensation
In its deliberations, the Committee considers ways to maximize deductibility of executive compensation, but nonetheless retains the discretion to compensate executive officers at levels the Committee considers commensurate with their responsibilities and achievements. We have not adopted a policy that all executive compensation be fully deductible.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION.
We, the Compensation Committee of the Board of Directors of Courier Corporation, have reviewed and discussed the Compensation Discussion and Analysis contained in this proxy statement with management. Based on such review and discussion, we have recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement for the fiscal year ended September 27, 2008.
Compensation Committee of the Board of Directors
Summary Compensation Table
The following narrative, table, and footnotes describe the total compensation earned during fiscal 2008 by our Named Executive Officers (executives).
The table discloses compensation information for the Chief Executive Officer, the Chief Financial Officer, and the three highest paid other executives as follows: Chief Executive Officer, James F. Conway, III; the Chief Operating Officer, Robert P. Story, Jr.; the Chief Financial Officer, Peter M. Folger; Rajeev Balakrishna, Vice President and General Counsel; and Eric J. Zimmerman, Vice President, Publishing. In addition, under the Commissions rules, we have included George Q. Nichols, Chairman of National Publishing Company, who died in April 2008.
The table discloses the salary of each executive. Salary is base salary paid during the fiscal year before salary reduction contributions to health insurance plans and to the Courier Profit Sharing and Savings Plan.
The amounts reported under the heading, Bonus, reflect the discretionary, non-performance-based awards granted to Mr. Balakrishna and Mr. Folger, as described in the Compensation Discussion and Analysis section above.
The amounts reported under the heading, Stock Awards, reflect the dollar amount recognized for financial statement reporting purposes for the fiscal year ending September 27, 2008, in accordance with Statement of Financial Accounting Standards No. 123R (SFAS 123R), for awards of restricted stock grants subject to time-based vesting, which were granted in prior fiscal years and in fiscal 2008. The amounts reported under the heading, Option Awards, reflects the dollar amount recognized for financial statement reporting purposes for the fiscal year ending September 27, 2008, in accordance with SFAS 123R, for awards of stock options subject to time-based vesting, which were granted in prior fiscal years and in fiscal 2008. Grants of restricted stock and stock options are explained in detail in the Compensation Discussion and Analysis section above.
Amounts listed as Non Equity Incentive Plan Compensation were earned in fiscal 2008 under the 2006 LTPI for the three-year performance period ended September 27, 2008, as described more fully in the Compensation Discussion and Analysis section above. These amounts were approved for payment by the Compensation Committee on
November 5, 2008, and paid shortly thereafter. We have omitted the column with the heading, Change in Pension Value and Non Qualified Deferred Compensation Earnings, as we do not consider the interest credited under the Deferred Compensation Plan as above market.
Amounts listed under the heading, All Other Compensation, show the combined value of the executives perquisites, such as automobile allowance, payment of country club dues, club membership dues, and financial planning; tax assistance on amounts taxable as compensation as a result of vesting of restricted stock grant awards and payment of country club dues; company contributions to the Courier Profit Sharing and Savings Plan and the Deferred Compensation Plan; and group-term life insurance premiums.
SUMMARY COMPENSATION TABLE - 2008
(1) The amounts reflect the dollar amount recognized for financial statement reporting purposes for the fiscal year ended September 27, 2008, in accordance with SFAS 123R but disregarding the estimate of forfeitures related to service-based vesting conditions of awards of restricted stock which were granted in and prior to 2008. Refer to note F to our Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended September 27, 2008, for a discussion of the relevant assumptions used in calculating the compensation expense.
(2) The amounts reflect the dollar amount recognized for financial statement reporting purposes for the fiscal year ended September 27, 2008, in accordance with SFAS 123R but disregarding the estimate of forfeitures related to service-based vesting conditions of awards of stock options which were granted in and prior to 2008. Refer to note F to our Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended September 27, 2008, for a discussion of the relevant assumptions used in calculating the compensation expense.
(3) Awards of Non Equity Incentive Plan Compensation were earned under the fiscal 2006 LTPI.
(4) The table below presents an itemized account of All Other Compensation paid in 2008 to or on behalf of the executives in accordance with the Commissions rules and regulations.
All Other Compensation
(a) Amounts listed are the value of executives perquisites: automobile allowance, payment of country club dues and club memberships, and payment of financial planning services. Amount does not include any amounts for the following perquisite because no incremental costs were incurred in fiscal 2008: The Corporation purchases season tickets for sporting events for business outings with customers and vendors. If the tickets are not being used for business purposes, the named executives and other employees may have opportunities to use these tickets.
(b) Amounts listed represent the tax assistance paid upon the vesting of the restricted stock award, equal to 30 percent of the amount that is taxable as income to the executive for the fiscal year, and tax assistance paid on country club dues.
(c) Represents amount paid to the profit sharing and 401k matching contribution accounts in the Courier Profit Sharing and Savings Plan and contributions made to the Deferred Compensation Plan in fiscal 2008.
(d) Company cost of group-term life insurance premiums.
Grant of Plan-based Awards
During fiscal 2008, the Compensation Committee granted the following plan-based awards:
· An annual cash bonus, subject to minimum earnings performance thresholds for fiscal 2008.
· The 2008 LTPI, to be earned at the end of a three-year performance period (fiscal 2008, 2009, and 2010), subject to the Corporation exceeding its peer groups three-year average ROA. Since a three-year long-term performance incentive is normally granted each year, there are three overlapping long-term performance incentive awards outstanding at any time.
· A special award of restricted stock to Mr. Balakrishna.
· Restricted stock grant and stock option awards under the LTSI as part of executives fiscal 2009 compensation.
Information with respect to each of these awards on a grant-by-grant basis is set forth in the Grant of Plan-based Awards Table below and is explained more fully in the Compensation Discussion and Analysis section above.
The Compensation Committee granted restricted stock grants and stock option awards as part of the executives fiscal 2009 compensation at the Committees last meeting in fiscal 2008. The restricted stock grants awarded to executives in fiscal 2008 vest in full three years following the date of the grant. Stock option awards vest in equal amounts annually over a three-year period. The restricted stock grant of 3,000 shares awarded to Mr. Balakrishna in September 2008 was awarded in recognition of his achievements in his first full year as the Corporations General Counsel as well as to provide for a retention incentive through additional share ownership. Twenty percent of these shares vest annually on the anniversary date of the grant.
GRANTS OF PLAN-BASED AWARDS TABLE - 2008
(1) The amounts shown for the Annual Cash Bonus for fiscal 2008 are the range of payouts that may be earned. If the minimum earnings threshold is met, the payout amount is 25% of the target bonus, as shown in the Threshold column above. If the minimum earnings threshold is not met, the payout amount is $0. The amount in the Maximum column reflects the maximum payout under the annual cash bonus program, which is 200 percent of the amount shown in the Target column. The target amount for the LTPI may be earned at the end of the three-year performance
period of fiscal 2008, 2009, and 2010, as described in the Compensation Discussion and Analysis section above. These amounts were approved by the Committee on November 7, 2007.
(2) Amounts shown in All Other Stock Awards column reflect shares of restricted stock granted in fiscal 2008. Awards vest in full three years following the date of grant; Mr. Balakrishnas award of 3,000 shares vests 20 percent annually on the anniversary date of the grant. Dividends are paid on shares of restricted stock, when and if declared, at the same rate as paid to all shareholders.
(3) The amounts shown in the All Other Option Awards column reflect stock options granted in fiscal 2008, which are for a term of five years and vest in equal amounts annually over a three-year period.
(4) The stock option exercise price is the closing price of our Common Stock on the date of grant.
(5) The grant date fair value for awards is calculated as follows: (a) for restricted stock, by multiplying the number of shares granted by the closing price of our Common Stock on the date of the award; and (b) for option awards, by using the Black-Scholes option pricing model, as described in Note F of the Corporations audited financial statements for fiscal 2008 included in the Corporations Annual Report. This value does not reflect estimated forfeitures or awards actually forfeited during the year or tax assistance on grants when they vest. The actual value, if any, that will be realized upon the exercise of an option will depend upon the difference between the exercise price of the option and the market price of our Common Stock on the date the option is exercised. The actual value realized by the executive with respect to a grant of restricted stock depends on the market value of the shares when the executive sells the shares after the shares have vested.
Outstanding Equity Awards at Fiscal Year-End - 2008
The following table sets forth information concerning stock options and stock awards which were outstanding as of September 27, 2008:
(1) The market value is the closing price per share of our Common Stock of $20.60 per share on September 26, 2008, multiplied by the number of unvested shares of Common Stock.
(2) Stock option award has a five-year term and vests in equal installments on the anniversary date of grant over a three-year period.
(3) Award vests on 9/25/2009.
(4) Award vests on 11/7/2009.
(5) Award vests on 9/18/2010.
(6) Award vests on 9/23/2011.
(7) 1,000 shares vest on March 14 of 2009, 2010, 2011, and 2012.
(8) Award vests on 3/14/2010.
(9) 600 shares vest on September 23 of 2009, 2010, 2011, 2012, and 2013.
Option Exercises and Stock Vested - 2008
The following table sets forth information concerning stock option exercises and vesting of restricted stock during fiscal 2008:
(1) Represents the amounts realized based on the difference between the market price of our Common Stock on the date of exercise and the exercise price.
(2) Represents the amount realized based on the market price of our Common Stock on the vesting date. These restricted stock awards were granted in fiscal 2005 and vested in fiscal 2008.
Nonqualified Deferred Compensation
In November 1997, we established the Courier Corporation Deferred Compensation Program for certain key executives. The current eligible participants in the plan are Messrs. Conway, Story, and Folger. Mr. Nichols also participated in the plan in fiscal 2008. The plan is a non-qualified, unfunded plan that provides for an annual award. The annual award is the difference between what the company annual profit sharing contribution would have been if not limited to the IRS-mandated compensation maximum and the actual profit sharing contribution made to the participants account in the Courier Profit Sharing and Savings Plan for the plan year (which is a calendar year). The participants make no contributions to the plan.
Amounts are accrued and recorded in each participants Deferred Compensation Account. Interest is credited annually based on the investment return of one of four mutual funds within the Courier Profit Sharing and Savings Plan that the participant elects prior to the beginning of the plan year. We do not consider the interest credited to be above-market as the fund choices are available to all participants in the Savings Plan. All of the participants are fully vested in the amounts credited to their Deferred Compensation Account. Participants are eligible for a distribution of their accrued account upon retirement, termination of employment, disability, or to their beneficiary upon death.
The following table provides information with respect to the Deferred Compensation Accounts of the eligible executives:
Nonqualified Deferred Compensation - 2008
(1) Amounts in this column are included in the All Other Compensation column in the Summary Compensation Table.
(2) Mr. Nichols balance was paid to his beneficiary in May 2008.
(3) Represents the sum of all contributions and earnings, less any withdrawals, credited to the participants Deferred Compensation Account as of the end of fiscal 2008.