Form 8-K CASEYS GENERAL STORES For: Jun 06
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 2, 2016
CASEY'S GENERAL STORES, INC.
(Exact name of registrant as specified in its charter)
Iowa
(State or other jurisdiction of incorporation)
001-34700 | 42-0935283 | |
(Commission File Number) | (IRS Employer Identification No.) | |
One Convenience Blvd., Ankeny, Iowa | 50021 | |
(Address of principal executive Offices) | (Zip Code) | |
515/965-6100
(Registrant's telephone number, including area code)
NONE
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
• | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
• | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
• | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CF 240.14d-2(b)) |
• | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02. Results of Operations and Financial Condition.
On June 6, 2016, Casey's General Stores, Inc. (the "Company") issued a press release announcing its financial results for the fourth fiscal quarter and fiscal year ended April 30, 2016. A copy of the Company's press release is attached as Exhibit 99.1 and is incorporated herein by reference.
Item 5.02. | Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers. |
On June 2, 2016, the Compensation Committee of the Board of Directors authorized the award of restricted stock units to each of the Company's executive officers, Vice Presidents and other key employees under the terms of the 2009 Stock Incentive Plan. The awards will vest in full on June 2, 2019.
On that same date, the Compensation Committee also authorized the payment of awards to the executive officers and Vice Presidents under the fiscal 2016 annual incentive plan (described in the Form 8-K filed on June 8, 2015 and the proxy statement filed on August 7, 2015). The awards are equal to 100% of the officer's base salary, and each award is payable in cash (30%) and shares of restricted stock (70%). The shares so acquired are subject to a three-year holding period requirement.
In addition, the Compensation Committee also authorized an Amendment to the Restricted Stock Units Agreements (dated June 6, 2014 and June 5, 2015) (the "Amendment") with Sam J. Billmeyer, Senior Vice President, Logistics and Acquisitions. The Amendment modifies the vesting provision in those award agreements (each relating to an award of 3,250 restricted stock units that vest on June 6, 2017 and June 5, 2018, respectively), to allow full vesting of the awards on those dates, notwithstanding Mr. Billmeyer's retirement from employment on June 30, 2016. A copy of the Amendment is attached as Exhibit 99.2 and is incorporated herein by reference.
On June 3, 2016, the Board of Directors of the Company approved salaries and the annual incentive plan arrangements for the Company's executive officers and Vice Presidents for the fiscal year ending April 30, 2017. Further information concerning such arrangements is described in Exhibit 99.3 and is incorporated herein by reference.
As previously disclosed, Mr. Billmeyer will retire as Senior Vice President, Logistics and Acquisitions, on June 30, 2016. Mr. Billmeyer's responsibilities are being assumed by other officers, primarily by Jay Soupene, Senior Vice President, Store Operations, and as of July 1, 2016, by Brian J. Johnson, who will assume the position of Senior Vice President, Store Development on that date. Mr. Johnson currently serves as Vice-President, Finance and Corporate Secretary. Julia L. Jackowski, Senior Vice President, Corporate General Counsel, will assume Corporate Secretary functions as of July 1, 2016. In addition, Cindi Summers, currently Vice President, Human Resources, has been promoted to Senior Vice President, Human Resources.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
The exhibits accompanying this report are listed in the Exhibit Index
attached hereto.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.
CASEY'S GENERAL STORES, INC. | ||
Date: June 6, 2016 | By: | /s/ William J. Walljasper |
William J. Walljasper | ||
Senior Vice President and | ||
Chief Financial Officer | ||
EXHIBIT INDEX
The following exhibits are filed herewith:
Exhibit No. Description
99.1 | Press Release issued by Casey's General Stores, Inc., dated June 6, 2016. |
99.2 | Amendment to Restricted Stock Units Agreement with Sam J. Billmeyer, dated June 2, 2016 |
99.3 | Description of FY2017 Salary and Bonus Arrangements for Named Executive Officers |
Exhibit 99.1
NEWS RELEASE FOR IMMEDIATE RELEASE | ||
Casey’s General Stores, Inc. One Convenience Blvd. Ankeny, IA 50021 | Nasdaq Symbol CASY CONTACT Bill Walljasper (515) 965-6505 | |
Casey’s Finishes Year with Record Earnings
Ankeny, IA, June 6, 2016 - Casey’s General Stores, Inc. (Nasdaq symbol CASY) today reported diluted earnings per share of $1.19 for the fourth quarter of fiscal year ended April 30, 2016 compared to $1.05 for the same period a year ago. For the year, diluted earnings per share grew 24% to $5.73 versus $4.62 for the same period last year. “Fiscal 2016 was an exciting year for Casey’s. We successfully opened our second distribution center in Terre Haute, Indiana, and launched our mobile app in conjunction with rolling out on-line ordering across all our stores,” said Terry Handley, President and CEO. “Total gross profit was up over 12% for the year and the Company is positioned well for continued strong performance in fiscal 2017.”
Fuel - The Company’s annual goal for fiscal 2016 was to increase same-store gallons sold 2% with an average margin of 16.7 cents per gallon. For the year, same-store gallons sold were up 3% with an average margin of 19.6 cents per gallon. For the quarter, same-store gallons rose 4.6% with an average margin of 17.8 cents per gallon. The Company sold 12.7 million renewable fuel credits for $9.1 million in the fourth quarter. “Same-store gallons sold benefited from lower retail fuel prices throughout the fiscal year," said Handley. “The fuel margin remained strong throughout the year, aided in part by favorable renewable fuel credit values.” For fiscal 2016, total gallons sold were up 7.4% to 2.0 billion, while gross profit rose 8.7% to $381.7 million.
Grocery and Other Merchandise - Casey’s goal was to increase same-store sales 6.2% with an average margin of 32.1%. For the year, same-store sales were up 7.1% with an average margin of 31.9%. For the fourth quarter, same-store sales were up 7.4% with an average margin of 32.1%. “For the year, cigarette sales continued to lead the category as customers traded up to premium brands in response to lower retail fuel prices,” said Handley. “The margin fell slightly below goal primarily due to the increased contribution of cigarettes to the category, however, gross profit dollars rose 9.3% to $629.2 million .” For the year, total sales were up 10% to $2.0 billion.
Prepared Food and Fountain - Casey’s annual goal was to increase same-store sales 10.4% with an average margin of 60.8%. For the year, same-store sales were up 8.4% with an average margin of 62.5%. For the fourth quarter, same-store sales were up 8.2% with an average margin of 61.9%. “Several of our ongoing growth programs were implemented toward the end of fiscal 2016, which contributed to same-store sales falling below our annual goal in the back half of the year. We also cycled against strong results from the same period a year ago,” said Handley. “The margin for the fiscal year was up 280 basis points from the prior fiscal year as we benefited from lower commodity costs. We are optimistic about this category going forward as we have implemented on-line ordering in all our stores, locked in favorable cheese costs through December 2016 and continue to roll out major remodels, 24 hour conversions, and pizza delivery.” For fiscal 2016, total sales were up 12.8% to $880.7 million, and gross profit dollars were up 18.1% at $550.3 million.
Operating Expenses - For the fiscal year, operating expenses increased 9.7% to $1.1 billion. For the fourth quarter, operating expenses were up 12.9%. “The primary reason for the increase for both year-to-date and fourth quarter was due to operating more stores compared to the same periods a year ago, along with the various growth programs impacting our existing stores,” said Handley.
Expansion - The Company’s annual goal was to build or acquire 75 to 113 stores, replace 10 existing locations, and complete 100 major remodels. For the fiscal year, the Company completed 51 new store constructions and acquired 5 stores. The Company also completed 11 replacement stores and 102 major remodels. “We have dedicated more resources to our store development area over the past year. As a result, we currently have a robust pipeline of projects with 21 stores under construction and an additional 75 sites under contract for future new store construction, including numerous sites in Ohio,” stated Handley. “With our new distribution center in Terre Haute, we can efficiently build or acquire in a considerably larger geographical footprint.”
Fiscal 2017 goals - The corporate performance goals for fiscal 2017 are as follows:
• | Increase same-store fuel gallons sold 2% with an average margin of 18.4 cents per gallon |
• | Increase same-store grocery and other merchandise sales 6.2% with an average margin of 32% |
• | Increase same-store prepared food and fountain sales 10.2% with an average margin of 62.5% |
• | Build or acquire 77 to 116 stores, replace 35 existing locations, and complete 100 major remodels |
Dividend - At its June meeting, the Board of Directors increased the quarterly dividend to $.24 per share. The dividend is payable August 15th to shareholders of record on August 1st, 2016.
****
Casey’s General Stores, Inc.
Condensed Consolidated
Statements of Income
(Dollars in thousands, except share and per share amounts)
(Unaudited)
Three Months Ended April 30, | Twelve Months Ended April 30, | ||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||
Total revenue | $ | 1,582,954 | 1,653,858 | $ | 7,122,086 | 7,767,216 | |||||||
Cost of goods sold (exclusive of depreciation and amortization, shown separately below) | 1,194,734 | 1,307,315 | 5,508,465 | 6,327,431 | |||||||||
Gross profit | 388,220 | 346,543 | 1,613,621 | 1,439,785 | |||||||||
Operating expenses | 262,620 | 232,543 | 1,053,805 | 960,424 | |||||||||
Depreciation and amortization | 45,909 | 42,156 | 170,937 | 156,111 | |||||||||
Interest, net | 9,948 | 10,168 | 40,173 | 41,225 | |||||||||
Income before income taxes | 69,743 | 61,676 | 348,706 | 282,025 | |||||||||
Federal and state income taxes | 22,699 | 20,333 | 122,724 | 101,397 | |||||||||
Net income | $ | 47,044 | 41,343 | $ | 225,982 | 180,628 | |||||||
Net income per common share | |||||||||||||
Basic | $ | 1.20 | 1.06 | $ | 5.79 | 4.66 | |||||||
Diluted | $ | 1.19 | 1.05 | $ | 5.73 | 4.62 | |||||||
Basic weighted average shares | 39,053,737 | 38,868,593 | 39,016,299 | 38,743,227 | |||||||||
Plus effect of stock compensation | 408,585 | 369,888 | 405,900 | 360,606 | |||||||||
Diluted weighted average shares | 39,462,322 | 39,238,481 | 39,422,199 | 39,103,833 | |||||||||
Casey’s General Stores, Inc.
Condensed Consolidated Balance Sheets
(Dollars in thousands)
(Unaudited)
April 30, 2016 | April 30, 2015 | ||||||
Assets | |||||||
Current assets | |||||||
Cash and cash equivalents | $ | 75,775 | $ | 48,541 | |||
Receivables | 27,701 | 22,609 | |||||
Inventories | 204,988 | 197,331 | |||||
Prepaid expenses | 3,008 | 2,025 | |||||
Deferred income taxes | — | 15,531 | |||||
Income tax receivable | 14,413 | 19,223 | |||||
Total current assets | 325,885 | 305,260 | |||||
Other assets, net of amortization | 19,222 | 18,295 | |||||
Goodwill | 128,566 | 127,046 | |||||
Property and equipment, net of accumulated depreciation of $1,340,249 at April 30, 2016 and $1,185,246 at April 30, 2015 | 2,252,475 | 2,019,364 | |||||
Total assets | $ | 2,726,148 | $ | 2,469,965 | |||
Liabilities and Shareholders’ Equity | |||||||
Current liabilities | |||||||
Current maturities of long-term debt | 15,375 | 15,398 | |||||
Accounts payable | 241,207 | 226,577 | |||||
Accrued expenses | 130,989 | 122,914 | |||||
Total current liabilities | 387,571 | 364,889 | |||||
Long-term debt, net of current maturities | 822,869 | 838,245 | |||||
Deferred income taxes | 394,934 | 354,973 | |||||
Deferred compensation | 17,813 | 17,645 | |||||
Other long-term liabilities | 19,498 | 18,984 | |||||
Total liabilities | 1,642,685 | 1,594,736 | |||||
Total shareholders’ equity | 1,083,463 | 875,229 | |||||
Total liabilities and shareholders’ equity | $ | 2,726,148 | $ | 2,469,965 | |||
Certain statements in this news release, including any discussion of management expectations for future periods, constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause actual results to differ materially from future results expressed or implied by those statements. Casey’s disclaims any intention or obligation to update or revise forward-looking statements, whether as a result of new information, future events, or otherwise.
In the quarter ended April 30, 2016, the Company adopted the provisions of ASU 2015-17 "Balance Sheet Classification of Deferred Taxes", on a prospective basis. The guidance requires that all deferred tax assets and deferred tax liabilities be classified as noncurrent on the balance sheet. Prior periods have not been impacted by this adoption.
Revenue and Gross Profit by Category (Amounts in thousands) | |||||||||||||||||||
Three months ended 4/30/2016 | Fuel | Grocery & Other Merchandise | Prepared Food & Fountain | Other | Total | ||||||||||||||
Revenue | $ | 873,081 | $ | 477,487 | $ | 218,349 | $ | 14,037 | $ | 1,582,954 | |||||||||
Gross profit | $ | 85,828 | $ | 153,299 | $ | 135,073 | $ | 14,020 | $ | 388,220 | |||||||||
Margin | 9.8 | % | 32.1 | % | 61.9 | % | 99.9 | % | 24.5 | % | |||||||||
Fuel gallons | 482,160 | ||||||||||||||||||
Three months ended 4/30/2015 | |||||||||||||||||||
Revenue | $ | 1,010,033 | $ | 436,591 | $ | 194,688 | $ | 12,546 | $ | 1,653,858 | |||||||||
Gross profit | $ | 75,228 | $ | 140,230 | $ | 118,551 | $ | 12,534 | $ | 346,543 | |||||||||
Margin | 7.4 | % | 32.1 | % | 60.9 | % | 99.9 | % | 21.0 | % | |||||||||
Fuel gallons | 444,800 | ||||||||||||||||||
Revenue and Gross Profit by Category (Amounts in thousands) | |||||||||||||||||||
Year ended 4/30/2016 | Fuel | Grocery & Other Merchandise | Prepared Food & Fountain | Other | Total | ||||||||||||||
Revenue | $ | 4,214,802 | $ | 1,974,073 | $ | 880,713 | $ | 52,498 | $ | 7,122,086 | |||||||||
Gross profit | $ | 381,659 | $ | 629,234 | $ | 550,292 | $ | 52,436 | $ | 1,613,621 | |||||||||
Margin | 9.1 | % | 31.9 | % | 62.5 | % | 99.9 | % | 22.7 | % | |||||||||
Fuel gallons | 1,951,814 | ||||||||||||||||||
Year ended 4/30/2015 | |||||||||||||||||||
Revenue | $ | 5,144,385 | $ | 1,794,822 | $ | 780,887 | $ | 47,122 | $ | 7,767,216 | |||||||||
Gross profit | $ | 351,155 | $ | 575,510 | $ | 466,056 | $ | 47,064 | $ | 1,439,785 | |||||||||
Margin | 6.8 | % | 32.1 | % | 59.7 | % | 99.9 | % | 18.5 | % | |||||||||
Fuel gallons | 1,816,596 | ||||||||||||||||||
Fuel Gallons | Fuel Margin | ||||||||||||||||||||||||||||||||||
Same-store Sales Growth | (Cents per gallon, excluding credit card fees) | ||||||||||||||||||||||||||||||||||
Q1 | Q2 | Q3 | Q4 | Fiscal Year | Q1 | Q2 | Q3 | Q4 | Fiscal Year | ||||||||||||||||||||||||||
F2016 | 3.4 | % | 3.3 | % | 1.6 | % | 4.6 | % | 3.0 | % | F2016 | 17.5 | ¢ | 24.7 | ¢ | 18.1 | ¢ | 17.8 | ¢ | 19.6 | ¢ | ||||||||||||||
F2015 | 3.0 | 2.3 | 2.2 | 3.5 | 2.6 | F2015 | 18.9 | 19.5 | 22.0 | 16.9 | 19.3 | ||||||||||||||||||||||||
F2014 | 3.2 | 4.2 | 3.8 | 1.8 | 3.1 | F2014 | 21.4 | 16.0 | 13.6 | 13.1 | 16.1 | ||||||||||||||||||||||||
Grocery & Other Merchandise | Grocery & Other Merchandise | |||||||||||||||||||||||||||||
Same-store Sales Growth | Margin | |||||||||||||||||||||||||||||
Q1 | Q2 | Q3 | Q4 | Fiscal Year | Q1 | Q2 | Q3 | Q4 | Fiscal Year | |||||||||||||||||||||
F2016 | 7.0 | % | 7.5 | % | 7.1 | % | 7.4 | % | 7.1 | % | F2016 | 32.6 | % | 31.5 | % | 31.2 | % | 32.1 | % | 31.9 | % | |||||||||
F2015 | 7.7 | 6.6 | 7.7 | 9.7 | 7.8 | F2015 | 32.5 | 32.3 | 31.2 | 32.1 | 32.1 | |||||||||||||||||||
F2014 | 6.1 | 10.2 | 6.5 | 7.2 | 7.4 | F2014 | 32.7 | 32.3 | 31.1 | 32.1 | 32.1 | |||||||||||||||||||
Prepared Food & Fountain | Prepared Food & Fountain | |||||||||||||||||||||||||||||
Same-store Sales Growth | Margin | |||||||||||||||||||||||||||||
Q1 | Q2 | Q3 | Q4 | Fiscal Year | Q1 | Q2 | Q3 | Q4 | Fiscal Year | |||||||||||||||||||||
F2016 | 10.3 | % | 9.4 | % | 6.0 | % | 8.2 | % | 8.4 | % | F2016 | 62.5 | % | 63.4 | % | 62.0 | % | 61.9 | % | 62.5 | % | |||||||||
F2015 | 11.1 | 11.1 | 14.1 | 13.5 | 12.4 | F2015 | 59.9 | 59.3 | 58.7 | 60.9 | 59.7 | |||||||||||||||||||
F2014 | 11.9 | 12.3 | 10.7 | 12.1 | 11.8 | F2014 | 61.8 | 61.8 | 60.8 | 60.1 | 61.1 | |||||||||||||||||||
Corporate information is available at this Web site: http://www.caseys.com. Earnings will be reported during a conference call on June 7, 2016. The call will be broadcast live over the Internet at 9:30 a.m. CDT via the Investor Relations section of our Web site and will be available in an archived format.
EXHIBIT 99.2
AMENDMENT TO
RESTRICTED STOCK UNITS AGREEMENTS
(June 6, 2014 and June 5, 2015)
This Amendment to Restricted Stock Units Agreement (the "Amendment") is made and entered into on the 2nd day of June, 2016 by and between Casey's General Stores, Inc. (the "Company") and Sam J. Billmeyer (the "Participant"), pursuant to the Casey's General Stores, Inc. 2009 Stock Incentive Plan (the "Plan").
WHEREAS, the Company and the Participant are parties to Restricted Stock Units Agreements made and entered into on June 6, 2014 and June 5, 2015 (together, the "Original Agreements"), pursuant to which, in each case, the Participant was awarded 3,250 restricted stock units under the Plan, subject to Participant's continued employment through June 6, 2017 and June 5, 2018, respectively;
WHEREAS, the Compensation Committee of the Board of Directors of the Company has authorized an amendment of the vesting provision applicable to the foregoing awards, as described herein.
NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto agree as follows:
Section 1. Amendment of Section 4. Section 4 of the Original Agreements, entitled "Vesting of Units", is hereby amended to delete the existing text of said Section 4 and to substitute therefore the following:
Agreement dated June 6, 2014:
4. Vesting of Units. The Units will vest and become "Vested Units" as of June 6, 2017 provided that the Participant remains in compliance with the terms of this Agreement.
Despite any other provisions of this Agreement, in the event of the Participant's death or permanent disability, the Units that otherwise would not be vested as of the date thereof shall vest and become Vested Units as of that date.
Following the Participant's retirement from employment with the Company and until the Vesting Date, the Participant shall (i) not knowingly use for his own benefit nor knowingly divulge any confidential information and trade secrets of the Company or its subsidiaries which are not otherwise in the public domain, nor intentionally disclose them to anyone outside of the Company and (ii) not accept employment or an engagement as a consultant with a competitor of the Company without the prior written consent of the Company. For this purpose, a "competitor" means any person or entity engaged in the business of operating, in two or more states, retail convenience stores; supermarkets or grocery stores; gasoline stations, travel plazas or other vehicle fuel outlets; "quick serve" restaurants or other prepared or "fast food" outlets; drug stores; or other discount stores, club stores or general merchandise stores. In the event of any breach of this covenant by the Participant, this Agreement may be terminated by the Company in writing, and the Participant's right to the Units shall be forfeited.
Agreement dated June 5, 2015:
4. Vesting of Units. The Units will vest and become "Vested Units" as of June 5, 2018 provided that the Participant remains in compliance with the terms of this Agreement.
Despite any other provisions of this Agreement, in the event of the Participant's death or permanent disability, the Units that otherwise would not be vested as of the date thereof shall vest and become Vested Units as of that date.
Following the Participant's retirement from employment with the Company and until the Vesting Date, the Participant shall (i) not knowingly use for his own benefit nor knowingly divulge any confidential information and trade secrets of the Company or its subsidiaries which are not otherwise in the public domain, nor intentionally disclose them to anyone outside of the Company and (ii) not accept employment or an engagement as a consultant with a competitor of the Company without the prior written consent of the Company. For this purpose, a "competitor" means any person or entity engaged in the business of operating, in two or more states, retail convenience stores; supermarkets or grocery stores; gasoline stations, travel plazas or other vehicle fuel outlets; "quick serve" restaurants or other prepared or "fast food" outlets; drug stores; or other discount stores, club stores or general merchandise stores. In the event of any breach of this covenant by the Participant, this Agreement may be terminated by the Company in writing, and the Participant's right to the Units shall be forfeited.
Section 2. Ratification. All other provisions of the Original Agreements are hereby ratified, confirmed and accepted, and shall continue in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date first above written.
CASEY'S GENERAL STORES, INC.
By: /s/ Terry W. Handley
Terry W. Handley, President & CEO
ATTEST:
By: /s/ Brian J. Johnson
Brian J. Johnson, Vice President – Finance
and Corporate Secretary
By: /s/ Sam J. Billmeyer
Sam J.Billmeyer
EXHIBIT 99.3
FY2017 SALARY AND BONUS ARRANGEMENTS
FOR NAMED EXECUTIVE OFFICERS
FY2017 Salary Structure | |||||||
Position | Name | FY2017 Base Salary | |||||
President & CEO | Terry W. Handley | $ | 900,000 | ||||
SVP/CFO | William J. Walljasper | $ | 580,000 | ||||
SVP/Logistics & | Sam J. Billmeyer | $ | 580,000 | * | |||
Acquisitions | |||||||
SVP/General Counsel | Julia L. Jackowski | $ | 580,000 | ||||
SVP/Store Operations | Jay Soupene | $ | 425,000 | ||||
* Through June 30, 2016, when Mr. Billmeyer will retire from his position. | |||||||
FY2017 Annual Incentive Plan
As in prior years, the target bonus available to the named executive officers (and Vice Presidents) will be an amount equal to 60% of base salary, with an opportunity for up to 100% of base salary if the Company exceeds certain earnings per share and return on invested capital goals for the year. Of that amount, 75% will be based on earnings per share, and 25% based on return on invested capital.
If and as earnings per share reach specified targets approved by the Board of Directors, bonus payments will be made in amounts beginning at 7.5% of salary and increasing at intervals of 7.5% up to a maximum of 75% of the base salary amount (45% at the target amount). The bonus payment will be made in the form of 75% cash and 25% equity (restricted stock) at the 7.5% level, with incremental adjustments to 30% cash and 70% equity at the 75% maximum bonus amount.
If and as return on invested capital reaches specified targets approved by the Board, bonus payments will be made in amounts beginning at 2.5% of salary and increasing at intervals of 2.5% up to a maximum of 25% of the base salary amount (15% at the target amount). The bonus payment will be made in the form of 75% cash and 25% equity (restricted stock) at the 2.5% level, with incremental adjustments to 30% cash and 70% equity at the 25% maximum bonus amount. For this purpose, return on invested capital is determined by dividing operating income after depreciation and tax before interest by average invested capital.