TEXAS INDUSTRIES, INC. ANNUAL INCENTIVE PLAN adopted pursuant to the Master Performance-Based Incentive Plan
Exhibit 10.10
TEXAS INDUSTRIES, INC.
ANNUAL INCENTIVE PLAN
adopted pursuant to the
Master Performance-Based Incentive Plan
This Annual Incentive Plan is adopted by the Compensation Committee of the Board of Directors pursuant to the Texas Industries, Inc. Master Performance-Based Incentive Plan (“Master Incentive Plan”). This Annual Incentive Plan is subject to all of the terms and conditions of the Master Incentive Plan. Terms not defined in this Annual Incentive Plan have the same meanings as in the Master Incentive Plan. Amendments and exceptions to this Annual Incentive Plan may be made only in the manner provided in the Master Incentive Plan.
A. Performance Period
Fiscal year 2013
B. Participants
The Annual Incentive Plan Participants are the President and CEO, Vice Presidents, other Officers, Employees in staff functions (Information Services, Legal, Environmental, Human Resources, Real Estate (i.e., Brookhollow entities), Controller, Financial Services, Treasury, etc.), Employees in operating functions that cover more than one region and managers of facilities or operations who are not in another incentive plan (such as an operations/production plan or a sales plan).
C. Objectives
This Annual Incentive Plan establishes minimum, target and maximum goals for the following three objectives:
| • | Gross Margin – Gross Profit as shown in the Company’s consolidated statement of operations for Fiscal Year 2013 divided by Net Sales (expressed as a percentage by multiplying the result by 100). |
| • | Selling, General & Administrative Expense (“SG&A”) as a Percent of Net Sales – All Fiscal Year 2013 SG&A expense (except stock based compensation that is determined based on a mark-to-market calculation) divided by Net Sales (expressed as a percentage by multiplying the result by 100). Net Sales is defined as the net sales amount shown in the Company’s consolidated statement of operations for Fiscal Year 2013. |
| • | Return on Assets (“ROA”) – Operating profits (earnings before corporate overhead, interest and taxes) divided by the average book value of the adjusted operating assets (which is then expressed as a percentage by multiplying the result by 100). Operating profit and assets are adjusted in order to treat assets on operating leases as owned assets. |
The average book value of the adjusted operating assets is determined by averaging the book values of the adjusted operating assets at the beginning of the Performance Period and the end of each fiscal quarter in the Performance Period. If significant assets are added or removed during a quarter, the book value at the end of such quarter will be adjusted by prorating the new or removed assets based on the time operated during such quarter.
The Administrative Committee, in its discretion, may exclude profits and losses considered to be extraordinary from the calculations.
All calculations include the cost of incentive Awards. All objectives are calculated on a consolidated basis for the Performance Period.
D. Participant Eligibility Levels
PARTICIPANT ELIGIBILITY LEVEL A
| • | Non-exempt employees |
PARTICIPANT ELIGIBILITY LEVEL B
| • | Exempt non-supervisory employees. |
PARTICIPANT ELIGIBILITY LEVEL C
| • | Supervisory positions in Salary Grades 11 or below. |
| • | Exempt Employees in Salary Grades 10 or above reporting directly to a Vice President. |
PARTICIPANT ELIGIBILITY LEVEL D
| • | Employees in Salary Grades 12 or above. |
PARTICIPANT ELIGIBILITY LEVEL E
| • | Officers of TXI excluding the President/CEO |
PARTICIPANT ELIGIBILITY LEVEL F
| • | President/CEO |
Page 2
E. Objective Target Percent Calculation
The objective target percent calculation is determined using the chart below which includes the weight given to each objective, the threshold, target and maximum goals for each objective and the pay out percents. The actual determination of payout percents for each objective met between the threshold and maximum will be prorated.
| Weight | Objective | Threshold | Target | Maximum | ||||||||||
| 60% | Gross Margin | 11 | % | 13 | % | 15 | % | |||||||
| 20% | SG&A as a % of Net Sales | 10 | % | 9 | % | 8 | % | |||||||
| 20% | ROA | 15 | % | 18 | % | 21 | % | |||||||
| Plan Pay Out Percent | 50 | % | 100 | % | 200 | % | ||||||||
Example—For the Performance Period, Gross Margin was 13%, SG&A as a % of Net Sales was 8.5%, and ROA was 16.5%. Numbers have been rounded for illustrative purposes.
| Objective | Weight | Pay Out Percent | Objective Target % | |||||||||||||||||
| Gross Margin | 60 | % | X | 100 | % | = | 60.00 | % | ||||||||||||
| SG&A as a % of Net Sales | 20 | % | X | 150 | % | = | 30.00 | % | ||||||||||||
| ROA | 20 | % | X | 75 | % | = | 15.00 | % | ||||||||||||
| Objective Target Percent | 105.00 | % | ||||||||||||||||||
In summary, 105% of the objective target was met.
F. Base Award Percentage
The “BASE AWARD PERCENTAGE” for this Annual Incentive Plan is the Objective Target Percent multiplied by 10%.
In the example above in Section E, the Objective Target Percent of 105% multiplied by 10% would create a BASE AWARD PERCENTAGE of 10.5%.
Page 3
G. Award Calculation
A Participant’s Award amount is determined as follows:
| • | A Participant’s eligibility level (defined in Section D) determines the AWARD MULTIPLIER shown below: |
| Participant Eligibility Level | AWARD MULTIPLIER | |
| A | 1.0 | |
| B | 1.5 | |
| C | 2.0 | |
| D | 2.5 | |
| E | 3.0 | |
| F | 4.0 |
| • | The TOTAL AWARD PERCENTAGE is calculated by multiplying the Participant’s BASE AWARD PERCENTAGE (defined in Section F) by his or her AWARD MULTIPLIER |
| • | The Award amount is the TOTAL AWARD PERCENTAGE multiplied by the Participant’s regular earnings (including overtime, but excluding earnings from incentive payments and Awards) for the Performance Period. |
H. Other Incentive Plans
Operations/Production Plans and Sales Plans are described in this document to provide the authority for management to develop individual incentive plans that will provide eligible employees an opportunity to participate in an incentive plan. There are approximately 25 such plans in any Fiscal Year. The specific terms of such plans are contained in separate documents, but generally have the following characteristics.
OPERATIONS/PRODUCTION PLANS
Operations or production plans cover individual plant and operating areas whose performance can be more directly influenced by employees. Participation in these plans can vary year-to-year and generally will include employees who are directly involved in the production process with the exception of Plant/Operation Managers.
Page 4
Production plan objectives are tailored to local needs and pay for improvement or above average performance. Plans may vary in goal achievement, timing of awards (weekly, monthly, quarterly, or annually), objectives and award amounts. Base award amounts can vary from 5% to 15% although they are expected to average 5% over time.
SALES PLANS
Sales plans cover business units where individual performance can be more directly influenced by employees. Participation in these plans can vary year-to-year and generally will include sales, marketing, customer relations, and/or administrative support employees directly involved in the sales process.
Sales plan objectives are tailored to business unit markets and pay for improvement or above average performance. Plans may vary in goal achievement, timing of awards (quarterly or annually), objectives and award amounts. Base award amounts can vary from 10% to 25% depending on the participant level similar to the TXI Annual Incentive Plan.
Page 5
