[ ] Plan – ROCE Plan Component
ArcBest 16b Annual Incentive Compensation Plan
Pursuant to the Executive Officer Incentive Compensation Plan (the “Governing Plan”), the Compensation Committee of the ArcBest Corporation Board of Directors (“Compensation Committee”) has adopted this ROCE Component as a component of the [ ] Plan, including the following Individual Award Opportunities and Performance Measures for ArcBest Corporation and its subsidiaries.
I. Performance Measure
ROCE for ArcBest is calculated as the following ratio:
Net Income + After-tax Effect of Interest Expense
+ After-tax Effect of Imputed Interest Expense + After-tax Effect of Amortization of intangibles
– After-tax Effect of Income from
Cash and Short-term Investments Attributable to the reduction in Average Debt
Average Equity + Average Debt + Average Imputed Debt
“Net Income” for the ROCE calculation is consolidated net income determined in accordance with Generally Accepted Accounting Principles.
“Interest Expense” for the ROCE calculation is (i) interest on all long and short-term indebtedness, including capital leases, and other interest bearing obligations, and (ii) deferred financing cost amortization and other financing costs including letters of credit fees, reduced by the amount of interest expense on debt not included in Average Debt as defined below.
“Imputed Interest Expense” consists of the interest attributable to Average Imputed Debt assuming an interest rate of 7.5%.
“Average Debt” is the average of the beginning of the year and the end of the year current and long-term debt, with beginning of the year and end of the year current and long-term debt reduced by the respective amount of the beginning of the year and end of the year total of unrestricted cash, cash equivalents and short-term investments, and limited to a reduction of debt to zero.
“Average Equity” is the average of the beginning of the Measurement Period and the end of the Measurement Period stockholder’s equity.
“Average Imputed Debt” consists of the average of the beginning of the year and the end of the year present value of all payments determined using an interest rate of 7.5% on operating leases of revenue equipment with an initial term of more than two years.
“Amortization of intangibles” consists of amortization of intangibles and depreciation of software related to acquired businesses including any writedown or impairment charge related to those assets.
“Income from Cash and Short-term Investments Attributable to the reduction in Average Debt” consists of income earned on the amount by which Average Debt is reduced at the average interest rate earned in cash and short-term investments for the measurement period.