Annual Incentive Plan Guidelines for 2017
EX-10.5 2 ex10_5.htm EXHIBIT 10.5
EXHIBIT 10.5
ANNUAL INCENTIVE PLAN
2017 Plan Year
Guidelines
KIRBY CORPORATION
January 2017
TABLE OF CONTENTS
| Introduction | 2 |
| The 2017 Annual Incentive Plan | 3 |
| Plan Objectives | 3 |
| Business Groups | 3 |
| Performance Period | 4 |
| Eligibility | 4 |
| Individual Bonus Targets | 4 |
| Aggregate Payment Amount | 5 |
| Section 162(m) Performance Goal and Maximum Payments | 5 |
| Performance Measures | 5 |
| Business Group Weighting | 6 |
| Performance Standards for Interim Incentive Payment Calculations | 7 |
| Administration | 9 |
1
Introduction
Kirby Corporation (together with its subsidiaries, “Kirby” or the “Company”) established the 2017 Annual Incentive Plan (the “Plan”) to focus employees of the Company on identifying and achieving business strategies that lead to increased stockholder value. The Plan is also intended to reward superior performance by employees and their contribution to achieving Kirby’s objectives.
Certain aspects of this Plan are complex. Although these Guidelines establish rules for Plan operation, those rules may not work in all circumstances. Therefore, the Compensation Committee of the Kirby Board of Directors has discretion to interpret these Guidelines to assure the awards are consistent with the Plan’s purposes and the Company’s interests. All decisions by the Compensation Committee shall be final and binding.
Unless resolutions of the Compensation Committee expressly provide otherwise, awards granted under the Plan shall constitute performance awards granted under Article IV of the Kirby Corporation 2005 Stock and Incentive Plan and are subject to the terms and provisions of such Plan that apply to performance awards.
The Plan may be amended, modified or terminated at any time without prior notice by written authorization of the Compensation Committee or the Board of Directors of Kirby Corporation; provided that the Plan may not be amended or modified in a manner that would cause an award that is intended to satisfy the performance-based compensation exception under Section 162(m) of the Internal Revenue Code of 1986, as amended (“Section 162(m)”), to fail to satisfy the exception.
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The Annual Incentive Plan
Each award granted under the Plan is an award for Company performance or a combination of Company and Business Group performance. Awards are generally based on achieving the Company Performance Goal as well as additional Company, Business Group and individual performance measures and objectives. Once the Company Performance Goal is reached, participants in the Plan become eligible for an incentive bonus payment.
All amounts paid to participants pursuant to the Plan shall be subject to any policy relating to the recovery of erroneously awarded incentive compensation that may hereafter be adopted by the Company in order to comply with Securities and Exchange Commission rules or New York Stock Exchange listing standards.
Plan Objectives
The key objectives of the Plan are:
| · | Provide an annual incentive plan that drives performance toward objectives critical to creating stockholder value. |
| · | Offer competitive cash compensation opportunities to key Kirby employees. |
| · | Reward outstanding achievement by employees who directly affect Kirby’s results. |
| · | Assist Kirby in attracting and retaining high quality employees. |
| · | Reflect both quantitative and qualitative performance factors in actual bonus payouts. |
| · | Ensure that incentive payments made by the Company are fully deductible by the Company. |
Business Groups
The following Business Groups are designated for purposes of the Plan:
Kirby Inland Marine, LP (“KIM”)
Kirby Offshore Marine, LLC (“KOM”)
United Holdings LLC, excluding Thermo King (“United”)
Kirby Engine Systems, Inc., excluding United and Thermo King (“KES”)
Kirby Ocean Transport Company and Osprey Line, L.L.C. are considered part of the KIM Business Group for purposes of the Plan.
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Performance Period
Performance is measured on a calendar year basis for the Plan. The Performance Period begins on January 1, 2017 and ends on December 31, 2017. Except as expressly provided in these Guidelines in the case of new employees or termination of employment, incentive compensation payments under the Plan are for the full year 2017 and shall not be reduced for the period between the commencement of the Performance Period and the date on which the Compensation Committee approves these Guidelines and the individual bonus targets for participants in the Plan are approved.
Eligibility
| · | Generally, managerial employees and KIM wheelhouse employees classified as Captain, Relief Captain or Pilot, are eligible for participation. Selection for participation in the Plan is based upon each position’s ability to impact long-term financial results of the Company and designation by management. Some employees in managerial positions might not be included in the Plan. |
| · | In order to be eligible to receive an incentive payment under the Plan, participants must be employed on the last day of the Performance Period and on the date bonuses are actually paid for the Performance Period, unless their earlier termination is due to death, retirement or disability. If a participant’s employment is terminated prior to the last day of the Performance Period, or prior to the date of payment, for any reason other than death, retirement or disability, any bonus the participant may otherwise have received will be forfeited and the participant will have no right to any incentive payment under the Plan. As used in the Plan, the terms “retirement” and “disability” have the same meanings as in the Kirby Profit Sharing Plan in the case of shore-based employees and in the Kirby Pension Plan in the case of vessel employees. |
| · | Participation in the Plan in 2017 does not guarantee participation in similar plans in future years. Participants in the Plan or in similar plans in future years will be notified annually of their selection for participation. |
Individual Bonus Targets
On or before March 31, 2017, each participant will be assigned a target bonus level defined as a percentage of base salary earned during the Performance Period. This bonus target is based on competitive market practices, as well as the employee’s ability to impact long-term Company performance. Market practices will be determined using data from either general industry, the marine transportation industry or the diesel engine services industry, depending upon the individual position being considered.
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Aggregate Payment Amount
At the end of the year, an interim incentive payment amount will first be calculated for each participant in the Plan in order to determine the Aggregate Payment Amount for all participants for the year. The interim incentive payment amount for each participant will be calculated as of December 31, 2017 based on the target incentive level for such participant and the calculation formulas described in these Guidelines. The Aggregate Payment Amount under the Plan shall equal the sum of all of such interim incentive payment amounts.
The Company will be obligated to pay out the full Aggregate Payment Amount to eligible participants, subject to the discretion of the Compensation Committee with respect to the allocation of the Aggregate Payment Amount among individual participants. Therefore, the Company’s obligation to pay out the Aggregate Payment Amount becomes fixed on the last day of the Performance Period.
The Compensation Committee may determine the amount of the bonus paid to any participant based on the performance measures described in the Plan or any other criteria deemed appropriate in its discretion, provided that in no event will the aggregate incentive payments made pursuant to the Plan exceed the Aggregate Payment Amount.
Section 162(m) Performance Goal and Maximum Payments
The Performance Goal that must be attained in order for any Plan participant to receive a bonus under the Plan is the achievement by the Company of net earnings attributable to Kirby for 2017 (as shown in Kirby’s audited Consolidated Statements of Earnings for 2017) greater than $1,000,000. If the Company achieves the Performance Goal, the maximum bonus that any participant may receive under the Plan will be equal to 200% of the individual bonus target established for such participant (for each participant, the “Maximum Payment”). The Compensation Committee in its discretion may reduce the bonus paid to any participant to an amount less than the Maximum Payment.
Performance Measures
If the Company Performance Goal is attained, the following additional performance measures will be used to calculate an interim incentive payment amount for each participant and the Aggregate Payment Amount for the year:
| · | EBITDA |
| · | Return on total capital |
| · | Earnings per share |
Annual performance targets will be established for each measure based on Kirby’s budget for the year and each of the performance measures will have equal weight in calculating the interim incentive payment amount for each participant, except that only EBITDA will be used to measure United’s performance.
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| Measure | Weight |
| EBITDA | |
| (Earnings before interest, taxes, depreciation and amortization) | *33.33% |
| Return on Total Capital | |
| (Earnings before interest and taxes divided by average beginning and ending stockholders' equity plus long-term debt) | **33.33% |
| Earnings per share | **33.33% |
| 100% | |
| * 100% for United ** Not applicable to United |
Business Group Weighting
Calculation of the interim incentive payment amount for Business Group employees will be based primarily on Business Group performance with a defined portion based on Company performance. Calculation of the interim incentive payment amount for employees of Kirby Corporation will be based on Company performance. Specific weightings are set forth in the following table:
| Calculation of Interim Incentive Payment Amounts | |||||
| Kirby Corporation | Business Group(s) | ||||
| Eligible Corporate Employees 1 | 100% | 0% | |||
| Business Group Presidents 2 | 50% | 50% | |||
| Other officers of KIM with primary responsibilities for KIM and additional responsibilities for KOM | 30% | 50% KIM 20% KOM | |||
| Other officers of KOM with primary responsibilities for KOM and additional responsibilities for KIM | 30% | 50% KOM 20% KIM | |||
| Other Business Group Employees | 30% | 70% | |||
1 Calculation for the President-Marine Transportation Group will be based 50% on Kirby Corporation, 35% on KIM and 15% on KOM
2 Excluding the President – Marine Transportation Group of Kirby Corporation
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Performance Standards for Incentive Payment Calculations
Kirby Corporation, KIM, KOM and KES
| Performance Level | Definition | Relationship to Budget | % of Target Used for Calculation |
| Below Threshold | Performance did not meet minimum metric | less than 80% of budget | 0% |
| Threshold | Minimum acceptable performance for payout | 80% of budget | 50% |
| Target | Expected performance at stretch level | 100% of budget | 100% |
| Maximum | Outstanding performance | 120% of budget | 200% |
| · | Between 80% and 120% of budget achieved for each performance measure, there is a linear relationship between the percentage of budget achieved and the resulting percentage of the target payout percentage used in calculating payout amounts. For example, 90% of budget would result in 75% of target used in the calculation of an interim payment amount and 105% of budget would result in 125% of target used for the calculation of an interim payment amount. |
| · | The target amount determined for each performance measure is then multiplied by the weight for the performance measure (33.33%, except in the case of United) and the results are added together to produce a total Company or Business Group payout percentage of the target incentive that is applied to each individual participant (except United employees) in calculating the Aggregate Payout Amount under the Plan. |
United
The Kirby Corporation component of incentive payment calculations for United employees shall follow the same approach described above. The United component of incentive payment calculations for United employees shall be determined as follows:
| Performance Level | Definition | Relationship to Budget | % of Target Used for Calculation |
| Below Threshold | Performance did not meet minimum metric | less than 60% of budget | 0% |
| Threshold | Minimum acceptable performance for payout | 60% of budget | 50% |
| Target | Expected performance at stretch level | 100% of budget | 100% |
| Maximum | Outstanding performance | 140% of budget | 200% |
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| · | Between 60% and 140% of budget achieved for the United performance measure, there is a linear relationship between the percentage of budget achieved and the resulting percentage of the target payout percentage used in calculating payout amounts. For example, 80% of budget would result in 75% of target used in the calculation of an interim payment amount and 110% of budget would result in 125% of target used for the calculation of an interim payment amount. |
| · | The target amount determined for the United performance measure is the Business Group payout percentage of the target incentive that is applied to each United employee who is a participant in calculating the Aggregate Payout Amount under the Plan. |
General
| · | The Compensation Committee and the Chief Executive Officer shall in their discretion allocate the Aggregate Payment Amount among eligible participants; provided that only the Compensation Committee shall have the authority to allocate payment amounts to eligible participants (i) who are Covered Employees (as defined below), (ii) who are “officers” for purposes of Section 16 of the Securities and Exchange Act of 1934, (iii) whose bonus target is 50% or more of base salary or (iv) whose base salary is $250,000 or more (collectively “Specified Participants”). In allocating the Aggregate Payment Amount, the Compensation Committee and the Chief Executive Officer may consider, but shall not be bound by, the interim incentive payment amount calculated for each participant. |
| · | The Compensation Committee has discretion to modify the performance measures or adjust the calculation of the interim incentive payment amounts to adjust for acquisitions, divestures and other material business events. |
| · | The aggregate amount of incentive payments made to participants in the Plan must equal the Aggregate Payment Amount. |
| · | Notwithstanding the foregoing or any provision of the Plan to the contrary, no participant who is a covered employee as defined in the Section 162(m) (a "Covered Employee”) may receive an amount in excess of the participant’s Maximum Payment. |
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Administration
Incentive Payments
A participant’s final incentive bonus payment is paid out in cash within 90 days following the end of the Company’s fiscal year, based on audited financial statements of the Company. No payment shall be made to a participant who is a Covered Employee until the Compensation Committee certifies that the Performance Goal and other material terms of the Plan resulting in such payment have been achieved.
Eligibility Limitation
Participants must be employed by the Company on the last day of the Performance Period and on the date bonuses are actually paid in order to receive a bonus, unless otherwise provided for in the Plan.
Special Circumstances
The Compensation Committee will have the sole authority to resolve disputes related to Plan administration. Decisions made by the Compensation Committee will be final and binding on all participants. The Chief Executive Officer shall determine the bonus targets for newly hired, terminated, transferred and promoted employees, except that the Compensation Committee shall have the sole authority to determine the bonus targets for any such employees who are Specified Participants. Bonus targets for such employees will generally be based on the following provisions.
New Employees
New employees hired after the beginning of a Performance Period who are selected for participation in the Plan, will receive prorated bonuses for the current Performance Period, subject to the Termination of Employment restrictions.
Termination of Employment
If employment terminates prior to the last day of the Performance Period or prior to the date bonuses are actually paid for the Performance Period, for any reason other than death, retirement or disability, the participant will be ineligible to receive a bonus.
If employment terminates before the end of the full Performance Period or before the date bonuses are actually paid for the Performance Period as a result of death, retirement or disability, the participant (or the participant’s heirs) will be entitled to receive a prorated bonus at the end of the Performance Period based upon actual performance and base wages earned while employed during the Performance Period.
Transfer
A participant who is transferred between Business Groups during the year will be eligible to receive a weighted bonus based upon the time spent at each of the Business Groups. In calculating a weighted bonus, relevant Company and Business Group performance measures will be calculated for the full Performance Period and then a blended bonus will be calculated based on the time spent at each Business Group.
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Promotions
A participant who is promoted or reassigned during any Performance Period and whose bonus target is subsequently increased or decreased will be eligible to receive a weighted bonus, based on the service before and after the promotion or reassignment.
Compensation Committee
The Plan shall be administered by the Compensation Committee. The Compensation Committee shall have the authority to interpret the provisions of the Plan and these Guidelines, to adopt such rules for carrying out the Plan as it may deem advisable, to decide conclusively all questions arising with respect to the Plan and to make all other determinations and take all other actions necessary or desirable for the administration of the Plan. All decisions and acts of the Compensation Committee shall be final and binding upon all affected parties.
In administering the Plan the Compensation Committee will:
| · | Approve the designation of Business Groups within the Company |
| · | Approve the Company Performance Goal |
| · | Approve other performance measures used and the Threshold, Target and Maximum budget performance levels for purposes of calculating interim incentive payment amounts and the Aggregate Payment Amount |
| · | Approve linkage for participants to Company and Business Group performance |
| · | Approve the individual bonus targets for all Specified Participants |
| · | Approve the Aggregate Payment Amount to be paid to participants in the Plan |
| · | Certify whether the Company Performance Goal and other material terms that result in payments under the Plan have been satisfied prior to any incentive payment to a Covered Employee |
| · | Determine in its discretion the final incentive payments for Specified Participants |
The Compensation Committee may deviate from the Guidelines for the Plan, but in no event will a bonus paid pursuant to the Plan exceed the Maximum Payment for any Covered Employee. The Compensation Committee may decrease the bonus to be paid to any participant below the Maximum Payment based on such objective or subjective criteria as the Compensation Committee deems appropriate.
The total amount of the incentive payments made to participants pursuant to the Plan must equal, and may not exceed, the Aggregate Payment Amount.
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The performance objectives of Covered Employees may only be adjusted as permitted under Section 162(m) or the regulations thereunder.
Chief Executive Officer (CEO)
The CEO has primary responsibility for recommending Plan Guidelines to the Committee, for approving individual bonus targets and final incentive payments for participants other than Specified Participants and for delegating administrative duties associated with the Plan. The Compensation Committee may delegate additional administrative duties to the CEO or any Company officer. The CEO may make recommendations, subject to Compensation Committee approval, with respect to the incentive payment to any participant.
Chief Financial Officer (CFO)
The CFO is responsible for calculating performance under the Plan. The CFO will:
| · | Provide annual reports to the Compensation Committee and the CEO on each Business Group’s performance at the end of the fiscal year |
| · | Maintain a financial information system that reports results on an estimated quarterly and annual basis |
| · | Coordinate with the Company’s auditors to properly recognize any accounting expense associated with incentive payments under the Plan |
| · | Provide the VP – HR with the performance results of each Business Group as well as overall Company performance |
Vice President – Human Resources (VP-HR)
The VP-HR has responsibility for administration of the Plan and will:
| · | Develop and recommend eligible participants and target bonus guidelines |
| · | Coordinate communications with participants, including materials to facilitate understanding the Plan’s objectives and goals |
| · | Calculate participants’ interim incentive payment amounts, using the performance factors provided by the CFO |
| · | Process paperwork approving individual incentive payments |
Business Group Presidents and Vice Presidents will:
| · | Recommend participants in the Plan |
| · | Coordinate with the CFO to determine any significant changes in business conditions for purposes of reviewing the Threshold, Target and Maximum performance objectives |
| · | Assure that participants are informed of the actual incentive payment to be made for the Performance Period |
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