Allegheny Technologies Incorporated DEF 14A
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant To Section 14(a)
of the Securities Exchange Act of 1934
Filed by the
Registrant þ
Filed by a Party other
than the Registrant o
Check the appropriate box:
o Preliminary Proxy Statement
o Confidential, for Use of
the Commission Only (as permitted by Rule 14a-6(e)(2))
þ
Definitive Proxy Statement
o Definitive Additional Materials
o Soliciting Material Pursuant to §240.14a-12
Allegheny Technologies Incorporated
(Name of Registrant
as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing
Fee (Check the appropriate box):
þ No fee required.
o Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each
class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
o Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing
by registration statement number, or the Form or Schedule and the
date of its filing. |
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
1000 Six PPG Place
Pittsburgh, PA
15222-5479
March 25, 2008
To our Stockholders:
We are pleased to invite you to attend the 2008 Annual Meeting
of Stockholders. The meeting will be held at 11:00 a.m.,
Eastern Time, on Friday, May 9, 2008, in the Grand
Ballroom, 17th Floor, Omni William Penn Hotel, 530 William
Penn Place, Pittsburgh, Pennsylvania 15219. The location is
accessible to disabled persons.
This booklet includes the notice of meeting as well as the
Companys Proxy Statement. Enclosed with this booklet are
the following:
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Proxy or voting instruction card (including instructions for
telephone and Internet voting), and
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Proxy or voting instruction card return envelope (postage paid
if mailed in the U.S.)
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A copy of the Companys Annual Report for the year 2007 is
also enclosed.
Your Board of Directors recommends that you vote:
(1) FOR the election of the three nominees named in this
Proxy Statement (Item A);
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(2)
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FOR the ratification of the appointment of Ernst &
Young LLP to serve as the Companys independent auditors
for 2008 (Item B); and
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(3) AGAINST a stockholder proposal regarding majority
voting in director elections (Item C).
This Proxy Statement also outlines many of the corporate
governance practices at ATI, discusses our compensation
practices and philosophy, and describes the Audit
Committees recommendation to the Board regarding our 2007
financial statements. We encourage you to read these materials
carefully.
We urge you to vote promptly, whether or not you expect to
attend the meeting.
If you are a stockholder of record and plan to attend the
meeting, please mark the appropriate box on the proxy card, or
enter the appropriate information by telephone or Internet, so
that we can send your admission ticket to you before the meeting.
We look forward to seeing as many of you as possible at the 2008
Annual Meeting.
Sincerely,
L. Patrick Hassey
Chairman, President and Chief Executive Officer
ALLEGHENY
TECHNOLOGIES INCORPORATED
Notice
of Annual Meeting of Stockholders
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Meeting Date: |
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Friday, May 9, 2008 |
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Time: |
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11:00 a.m., Eastern Time |
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Place: |
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Grand Ballroom
17th Floor
Omni William Penn Hotel
530 William Penn Place
Pittsburgh, Pennsylvania 15219 |
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Record Date: |
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March 12, 2008 |
Agenda:
1) Election of three directors;
2) Ratification of the appointment of Ernst &
Young LLP as independent auditors for 2008;
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3) |
If properly presented at the meeting, a stockholder proposal
regarding majority voting in director elections; and
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4) Transaction of any other business properly brought
before the meeting.
Stockholder
List
A list of stockholders entitled to vote will be available during
business hours for 10 days prior to the meeting at the
Companys executive offices, 1000 Six PPG Place,
Pittsburgh, Pennsylvania
15222-5479,
for examination by any stockholder for any legally valid
purpose. The list of stockholders also will be available for
examination at the meeting.
Admission
to the Meeting
Holders of Allegheny Technologies common stock or their
authorized representatives by proxy may attend the meeting. If
you are a stockholder of record and you plan to attend the
meeting, you may obtain an admission ticket from us by mail by
checking the box on the proxy card indicating your planned
attendance and returning the completed proxy card promptly, or
by entering the appropriate information by telephone or the
Internet. If your shares are held through an intermediary such
as a broker or a bank, you should present proof of your
ownership at the meeting. Proof of ownership could include a
proxy card from your bank or broker or a copy of your account
statement. The approximate date of the mailing of this Proxy
Statement and proxy card, as well as a copy of ATIs 2007
Annual Report, is March 25, 2008. For further information
about Allegheny Technologies, please visit our web site at
www.alleghenytechnologies.com.
On behalf of the Board of Directors:
Jon D. Walton
Corporate Secretary
Dated: March 25, 2008
Table
of Contents
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A-1
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YOUR
VOTE IS IMPORTANT
Please vote as soon as possible. You can help the Company
reduce expenses by voting your shares by telephone or Internet;
your proxy card or voting instruction card contains the
instructions. Or, complete, sign and date your proxy card or
voting instruction card and return it as soon as possible in the
enclosed postage-paid envelope.
IMPORTANT
NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE
STOCKHOLDER MEETING TO BE HELD ON MAY 9, 2008.
The proxy statement and 2007 annual report of Allegheny
Technologies Incorporated are available to review at:
http://bnymellon.mobular.net/bnymellon/ati
PROXY
STATEMENT FOR
2008 ANNUAL MEETING OF STOCKHOLDERS
QUESTIONS
AND ANSWERS
You can help the Company save money by electing to receive
future proxy statements and annual reports over the Internet
instead of by mail. See question 11 below.
1. Who
is entitled to vote at the Annual Meeting?
If you held shares of Allegheny Technologies Incorporated
(ATI or the Company) common stock, par
value $0.10 per share (Common Stock), at the close
of business on March 12, 2008, you may vote at the annual
meeting. On that day, 101,098,773 shares of our Common
Stock were outstanding. Each share is entitled to one vote.
Stockholders do not have cumulative voting rights.
In order to vote, you must either designate a proxy to vote on
your behalf or attend the meeting and vote your shares in
person. The Board of Directors (Board) requests your
proxy so that your shares will count toward a quorum and be
voted at the meeting.
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2.
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How
do I cast my vote?
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There are four different ways you may cast your vote. You may
vote by:
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telephone, using the toll-free number listed on each proxy or
voting instruction card;
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the Internet, at the address provided on each proxy or voting
instruction card;
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marking, signing, dating and mailing each proxy or voting
instruction card and returning it in the envelope provided (If
you return your signed proxy card but do not mark the boxes
showing how you wish to vote, your shares will be voted FOR the
election of the three nominees for director named in this Proxy
Statement, FOR the ratification of the appointment of the
independent auditors, and AGAINST the stockholder proposal
regarding majority voting in director elections); or
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attending the meeting and voting your shares in person, if you
are a stockholder of record (that is, your shares
are registered directly in your name on the Companys books
and not held in street name through a broker, bank
or other nominee).
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If you are a stockholder of record and wish to vote by telephone
or electronically through the Internet, follow the instructions
provided on the proxy card. You will need to use the individual
control number that is printed on your proxy card in order to
authenticate your ownership.
The deadline for voting by telephone or the Internet is
11:59 p.m., Eastern Time, on May 8, 2008.
If your shares are held in street name (that is,
they are held in the name of broker, bank or other nominee), or
if your shares are held in one of the Companys savings or
retirement plans, you will receive instructions with your
materials that you must follow in order to have your shares
voted. For voting procedures for shares held in the
Companys savings or retirement plans, see question 6 below.
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3.
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How
do I revoke or change my vote?
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You may revoke your proxy or change your vote at any time before
it is voted at the meeting by:
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notifying the Corporate Secretary at the Companys
executive office;
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transmitting a proxy dated later than your prior proxy either by
mail, telephone or Internet; or
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attending the annual meeting and voting in person or by proxy
(except for shares held in street name through a
broker, bank or other nominee, or in the Companys savings
or retirement plans).
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The latest-dated, timely, properly completed proxy that you
submit, whether by mail, telephone or the Internet, will count
as your vote. If a vote has been recorded for your shares and
you submit a proxy card that is not properly signed and dated,
the previously recorded vote will stand.
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4.
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What
shares are included on the proxy or voting instruction
card?
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The shares on your proxy or voting instruction card represent
those shares registered directly in your name, those held on
account in the Companys dividend reinvestment plan and
shares held in the Companys savings or retirement plans.
If you do not cast your vote, your shares (except those held in
the Companys savings or retirement plans) will not be
voted. See question 6 for an explanation of the voting
procedures for shares in the Companys savings or
retirement plans.
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5.
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What
does it mean if I get more than one proxy or voting instruction
card?
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If your shares are registered differently and are in more than
one account, you will receive more than one card. Please
complete and return all of the proxy or voting instruction cards
you receive (or vote by telephone or the Internet all of the
shares on each of the proxy or voting instruction cards you
receive) in order to ensure that all of your shares are voted.
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6.
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How
are shares that I hold in a Company savings or retirement plan
voted?
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If you hold ATI Common Stock in one of the Companys
savings or retirement plans, you may tell the plan trustee how
to vote the shares of Common Stock allocated to your account.
You may either sign and return the voting instruction card
provided by the plan trustee or transmit your instructions by
telephone or the Internet. If you do not transmit instructions,
your plan shares will be voted as the plan administrator directs
or as otherwise provided in the plan.
The deadline for voting by telephone or the Internet is
11:59 p.m., Eastern Time, on May 5, 2008.
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7.
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How
are shares held by a broker, bank or other nominee
voted?
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If you hold your shares of ATI Common Stock in street
name through a broker, bank or other nominee account, you
are a beneficial owner of the shares. In order to
vote your shares, you must give voting instructions to your
broker, bank or other intermediary who is the nominee
holder of your shares. The Company asks brokers, banks and
other nominee holders to obtain voting instructions from the
beneficial owners of shares that are registered in the
nominees name. Proxies that are transmitted by nominee
holders on behalf of beneficial owners will count toward a
quorum and will be voted as instructed by the nominee holder.
A majority of the outstanding shares, present or represented by
a proxy, constitutes a quorum. There must be a quorum for
business to be conducted at the Annual Meeting. You are part of
the quorum if you have voted by proxy or voting instruction
card. Abstentions, broker non-votes and votes withheld from
director nominees count as shares present at the
meeting for purposes of determining a quorum.
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9.
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What
is the required vote for a proposal to pass?
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The director nominees receiving the highest number of votes will
be elected to fill the seats on the Board. Only votes
for or withheld affect the outcome.
Checking the box on the proxy card that withholds authority to
vote for a nominee is the equivalent of abstaining. Abstentions
are not counted for the purpose of election of directors.
With respect to each of the proposals other than the election of
directors (Items B and C), stockholders may vote in favor
of the proposal or against the proposal, or abstain from voting.
The affirmative vote of
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the majority of shares present in person or by proxy and
entitled to vote at the Annual Meeting is required for approval
of those proposals. A stockholder who signs and submits a ballot
or proxy is present, so an abstention will have the
same effect as a vote against those proposals.
Under New York Stock Exchange rules, if your broker holds your
shares in its name as a nominee, the broker is permitted to vote
your shares on the election of directors (Item A) and
on the ratification of the appointment of the independent
auditors (Item B) even if it does not receive voting
instructions from you. Item C of this Proxy Statement is
non-discretionary, meaning that brokers who hold
shares for the accounts of their clients and who have not
received instructions from their clients do not have discretion
to vote on that item. When a broker votes a clients shares
on some but not all of the proposals at the Annual Meeting, the
missing votes are referred to as broker non-votes.
Those shares will be included in determining the presence of a
quorum at the Annual Meeting but are not considered
present for purposes of voting on the
non-discretionary item. Accordingly, broker non-votes will have
no effect on the results of any of the proposals.
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10.
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Is
my vote confidential?
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The Company maintains a policy of keeping stockholder votes
confidential.
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11.
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Can I,
in the future, receive my proxy statement and annual report over
the Internet?
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Stockholders can elect to view future Company proxy statements
and annual reports over the Internet instead of receiving paper
copies in the mail and thus can save the Company the cost of
producing and mailing these documents. Costs normally associated
with electronic access, such as usage and telephonic charges,
will be borne by you.
If you are a stockholder of record and you choose to
vote over the Internet, you can choose to receive future annual
reports and proxy statements electronically by following the
prompt on the voting page. If you hold your Company stock in
street name (such as through a broker, bank or other
nominee account), check the information provided by your nominee
for instructions on how to elect to view future proxy statements
and annual reports over the Internet.
Stockholders who choose to view future proxy statements and
annual reports over the Internet will receive instructions
containing the Internet address for those materials, as well as
voting instructions, approximately six weeks before future
meetings.
If you enroll to view the Companys future annual reports
and proxy statements electronically and vote over the Internet,
your enrollment will remain in effect for all future
stockholders meetings unless you cancel it. To cancel,
stockholders of record should access
www.bnymellon.com/shareowner/isd and follow the
instructions to cancel your enrollment. You should retain your
control number appearing on your enclosed proxy or voting
instruction card. If you hold your Company stock in street
name, check the information provided by your nominee
holder for instructions on how to cancel your enrollment.
If at any time you would like to receive a paper copy of the
annual report or proxy statement, please write to the Corporate
Secretary, Allegheny Technologies Incorporated, 1000 Six PPG
Place, Pittsburgh, Pennsylvania
15222-5479.
3
ATI
CORPORATE GOVERNANCE AT A GLANCE
This list provides some highlights from the Allegheny
Technologies corporate governance program. You can find
details about these and other corporate governance policies and
practices in the following pages of the Proxy Statement and in
the Our Corporate Governance section of the
About Us page of our web site at
www.alleghenytechnologies.com.
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Over 75% of our directors are independent. Mr. Hassey is
the only ATI officer on the Board and Mr. Bozzone, our
former Chairman, President and Chief Executive Officer, is the
only other non-independent director. Mr. Bozzone is
retiring from the Board at the 2008 Annual Meeting of
Stockholders.
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Non-management directors meet in regularly scheduled executive
sessions without management; independent directors also meet in
regularly scheduled executive sessions.
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Stockholders can communicate with the non-management directors.
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The Audit Committee, Nominating and Governance Committee, and
Personnel and Compensation Committee are composed entirely of
independent directors.
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All standing committees have a written charter that is reviewed
and reassessed annually and is posted on our web site.
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The Chair of the Audit Committee has been designated as an
audit committee financial expert.
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Stockholders annually ratify the Audit Committees
selection of independent auditors.
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Our internal audit function reports directly to the Audit
Committee.
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Our Corporate Governance Guidelines have been adopted and are
disclosed on our web site.
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We have an annual self-evaluation process for the Board and each
standing committee.
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Our Board evaluates individual directors whose terms are nearing
expiration but who may be proposed for re-election.
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Our Corporate Guidelines for Business Conduct and Ethics
for directors, officers, and employees are disclosed on our
web site.
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Our Nominating and Governance Committee will consider director
candidates recommended by stockholders.
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We have stock ownership guidelines for officers.
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We have stock ownership guidelines for non-management directors.
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We provide confidential stockholder voting.
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Corporate governance and corporate responsibility are part of
our sustainability policies and practices, which can be found
under the Sustainability Report tab of our website.
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OUR
CORPORATE GOVERNANCE
Corporate
Governance Guidelines
ATIs Board of Directors has adopted Corporate Governance
Guidelines, which are designed to assist the Board in the
exercise of its duties and responsibilities to the Company. They
reflect the Boards commitment to monitor the effectiveness
of decision making at the Board and management level, with a
view to achieving ATIs strategic objectives. They are
subject to modification by the Board from time to time.
You can find the Companys Corporate Governance Guidelines
on our web site at www.alleghenytechnologies.com, by first
clicking About Us and then Our Corporate
Governance. Copies will also be mailed to stockholders on
written request directed to the Corporate Secretary, Allegheny
Technologies Incorporated, 1000 Six PPG Place, Pittsburgh, PA
15222-5479.
Number
and Independence of Directors
The Board of Directors determines the number of directors. The
Board currently consists of eleven members: L. Patrick Hassey
(Chairman), H. Kent Bowen, Robert P. Bozzone, Diane C. Creel,
James C. Diggs, J. Brett Harvey, Michael J. Joyce, W. Craig
McClelland, James E. Rohr, Louis J. Thomas and John D. Turner.
Messrs. Bozzone and McClelland are retiring from the Board
at the 2008 Annual Meeting of Stockholders. The Company wishes
to thank Messrs. Bozzone and McClelland for the
contributions they have made to the Board of Directors.
In accordance with the Corporate Governance Guidelines, at least
75% of the Companys directors are, and at least a
substantial majority of its directors will be,
independent under the guidelines set forth in the
listing standards of the New York Stock Exchange
(NYSE) and the Companys categorical Board
independence standards, which are set forth in the Corporate
Governance Guidelines and attached to this Proxy Statement as
Appendix A. A director is independent
only if the director is a non-management director and, in the
Boards judgment, does not have a material relationship
with the Company or its management.
In addition to L. Patrick Hassey, the current Chairman,
President and Chief Executive Officer of the Company, the Board
considers Robert P. Bozzone, whose
son-in-law
is the ATI Allegheny Ludlum Business Unit President, to not be
an independent director. Mr. Bozzone is retiring from the
Board at the 2008 Annual Meeting of Stockholders.
The Board, at its February 22, 2008 meeting, affirmatively
determined that the remaining nine of the Companys current
directors, H. Kent Bowen, Diane C. Creel, James C. Diggs, J.
Brett Harvey, Michael J. Joyce, W. Craig McClelland, James E.
Rohr, Louis J. Thomas and John D. Turner, are independent in
accordance with the foregoing standards. Eight of the
Companys directors have no relationships with the Company
other than as directors and stockholders of the Company. One of
the Companys directors, James E. Rohr, is Chairman and
Chief Executive Officer of The PNC Financial Services Group,
Inc. (PNC). The Company has a $400 million
unsecured revolving credit facility with a syndicate of 13
financial institutions, including PNC Bank, National
Association, a subsidiary of PNC, as lender and administrative
agent. PNC Capital Markets LLC, an affiliate of PNC, served as
lead arranger with respect to this facility. The Company pays
fees to PNC Bank under the terms of this facility. The Company
also invests in three money market funds managed by BlackRock,
Inc. (BlackRock). PNC currently holds approximately
33.5% of the outstanding common stock of BlackRock. During 2007,
the Company paid fees to PNC and its affiliates representing a
de minimis portion of both the Companys revenues
and PNCs revenues, and therefore, all amounts were
substantially less than the thresholds set forth in the
NYSEs listing standards which disqualify a director from
being independent. Mr. Rohrs compensation is not
affected by the fees that the Company pays to PNC. The Board has
determined that (A) the transactions between the Company
and PNC (i) are commercial transactions carried out at
arms length in the ordinary course of business,
(ii) are not material to PNC or to Mr. Rohr,
(iii) do not and would not potentially influence
Mr. Rohrs objectivity as a member of the
Companys Board of Directors in a manner
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that would have a meaningful impact on his ability to satisfy
requisite fiduciary standards on behalf of the Company and its
stockholders, and (iv) do not preclude a determination that
Mr. Rohrs relationship with the Company in his
capacity as Chairman and Chief Executive Officer of PNC is
immaterial, and (B) Mr. Rohr is an independent
director under NYSE existing guidelines and the Companys
categorical Board independence standards.
The Board has also determined that each member of the Audit
Committee satisfies the enhanced standards of independence
applicable to Audit Committee members under NYSE listing
standards and the rules of the Securities and Exchange
Commission (SEC).
Director
Terms
The directors are divided into three classes and the directors
in each class generally serve for a three-year term unless the
director is unable to serve due to death, retirement or
disability. The term of one class of directors expires each year
at the annual meeting of stockholders. The Board may fill a
vacancy by electing a new director to the same class as the
director being replaced. The Board may also create a new
director position in any class and elect a director to hold the
newly created position. It is expected that new directors
appointed to the Board to fill vacancies will stand for election
by the stockholders at the next annual meeting.
Committees
of the Board of Directors Standing Committees
The Board of Directors has the following five standing
committees: Audit Committee, Finance Committee, Nominating and
Governance Committee, Personnel and Compensation Committee, and
Technology Committee.
Only independent directors, as independence is determined by
NYSE rules, are permitted to serve on the Audit Committee, the
Nominating and Governance Committee, and the Personnel and
Compensation Committee. Audit Committee members must meet
additional independence standards under NYSE listing standards
and SEC rules; specifically, Audit Committee members may not
receive any compensation from the Company other than their
directors compensation.
Each committee has a written charter that describes its
responsibilities. Each of the Audit Committee, the Nominating
and Governance Committee and the Personnel and Compensation
Committee has the authority, as it deems appropriate, to
independently engage outside legal, accounting or other advisors
or consultants. In addition, each committee annually conducts a
review and evaluation of its performance and reviews and
reassesses its charter. You can find the current charters of
each committee on our web site at www.alleghenytechnologies.com
by first clicking About Us, then clicking Our
Corporate Governance and then clicking Committee
Charters. The current charters will also be mailed to
stockholders upon written request.
Audit
Committee
The current members of the Audit Committee are Michael J. Joyce
(Chairman), Diane C. Creel, James C. Diggs, Louis J. Thomas and
John D. Turner. The Board of Directors has determined that these
committee members have no financial or personal ties to the
Company (other than director compensation and equity ownership
as described in this Proxy Statement) and that they meet the
NYSE and SEC standards for independence. The Board of Directors
has also determined that Michael J. Joyce meets the SEC criteria
of an audit committee financial expert and meets the
NYSE standard of having accounting or related financial
management expertise. Mr. Joyce has over 35 years of
accounting, auditing and consulting experience, having most
recently served as New England Managing Partner of
Deloitte & Touche USA LLP prior to his retirement in
May 2004.
The Audit Committee assists the Board in its oversight of the
integrity of the Companys financial statements, compliance
with legal and regulatory requirements, the qualifications and
independence of the Companys independent auditors, and the
performance of the Companys internal audit function and
independent auditors. The Committee has the authority and
responsibility for the appointment, retention,
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compensation and oversight of ATIs independent auditors,
including pre-approval of all audit and non-audit services to be
performed by the independent auditors. The independent auditors
and the internal auditors have full access to the Committee and
meet with the Committee with, and on a routine basis without,
management being present, to discuss all appropriate matters.
The Audit Committee is also responsible for reviewing, approving
and ratifying related party transactions. For more information,
see the Certain Transactions section of this Proxy
Statement.
The Audit Committee Report appears on page 22 of this Proxy
Statement.
Finance
Committee
The Finance Committee makes recommendations and provides
guidance to the Board regarding major financial policies of the
Company. It also serves as named fiduciary of the employee
benefit plans maintained by the Company.
Nominating and
Governance Committee
The Nominating and Governance Committee is responsible for
overseeing corporate governance matters. It oversees the annual
evaluation of the Companys Board and its committees. It
also recommends to the Board individuals to be nominated as
directors, which process includes evaluation of new candidates
as well as an individual evaluation of current directors who are
being considered for re-election. In addition, this Committee is
responsible for administering ATIs director compensation
program. The Committee also performs other duties as are
described in the Corporate Governance Guidelines.
Personnel and
Compensation Committee
The Personnel and Compensation Committee, on behalf of the Board
of Directors, establishes and annually reassesses the executive
compensation program and the Companys philosophy on
executive compensation, which is more fully discussed in the
Executive Compensation Compensation Discussion
and Analysis section of this Proxy Statement.
One of the duties of the Committee is to oversee Chief Executive
Officer (CEO) and executive officer compensation.
The Personnel and Compensation Committee reviews and approves
corporate goals and objectives relevant to CEO and executive
officer compensation, evaluates the CEOs performance in
light of those goals and objectives, and determines and approves
the CEOs compensation level (either as a Committee or
together with the other independent directors, as directed by
the Board) based on this evaluation. The Committee also reviews
and approves non-CEO executive officer compensation, and makes
recommendations to the Board with respect to incentive
compensation plans and equity-based plans that require Board
approval. In addition, the Personnel and Compensation Committee
administers ATIs incentive compensation plans. The
Committee may delegate authority to subcommittees, when
appropriate. For other executives, the Committee reviews and
approves recommendations from management within plan parameters.
However, the Committee may not delegate any authority under
those plans for matters affecting the compensation and benefits
of the executive officers.
The Personnel and Compensation Committee, under the terms of its
charter, has the sole authority to retain, approve fees and
other terms for, and terminate any compensation consultant used
to assist the committee in the evaluation of the Chief Executive
Officer or other executive compensation. The Committee may also
obtain advice and assistance from internal or external legal,
accounting or other advisors. Each year, the Committee retains a
compensation consultant; for years 2005, 2006 and 2007, the
Committee retained Mercer Human Resources Consulting
(Mercer), an outside compensation and executive
benefits consulting firm. Mercer was retained to assist the
Committee to review market conditions and peer company practices
and to benchmark the Companys executive compensation
programs against those parameters. Mercer performed market
analyses of peer group companies and the general market for
executive talent, and made recommendations to the Committee as
to the form of and incentive opportunities for executive
compensation. The Committee has also retained external legal
7
advisors. Please see the Executive
Compensation Compensation Discussion and
Analysis section of this Proxy Statement for more
discussion about the role of the compensation consultant.
Mercer and the Companys legal advisors periodically attend
meetings of the Committee. For portions of those meetings, the
Chief Executive Officer and the Executive Vice President of
Human Resources, Chief Legal and Compliance Officer, General
Counsel and Corporate Secretary also attend. The Chief Executive
Officer and the Executive Vice President of Human Resources
express their views on executive compensation to the Committee.
Please see the Executive Compensation
Compensation Discussion and Analysis section of this Proxy
Statement for more discussion about executive officer
compensation.
Each member of the Personnel and Compensation Committee is a
non-employee director of the Company as defined
under
Rule 16b-3
of the Securities Exchange Act of 1934, and each member is also
an outside director for the purposes of the
corporate compensation provisions contained in
Section 162(m) of the Internal Revenue Code.
The Compensation Committee Report appears on page 26 of
this Proxy Statement.
Technology
Committee
The Technology Committee reviews changing technologies and
evaluates how they affect the Company and its technical
capabilities.
Board
and Committee Membership Director Attendance at
Meetings
During 2007, the Board of Directors held six meetings. The
Boards committees consisted of the five standing
committees already described. In 2007, all directors attended at
least 75% of the total Board meetings and meetings of Board
committees of which they were members, and average attendance at
Board and committee meetings was approximately 97%.
The non-management directors meet separately from the other
directors in regularly scheduled executive sessions without
members of management (except to the extent that the
non-management directors request the attendance of a member of
management). When, as is currently the case, the Chairman of the
Board is a management director, or if the Chairman would
otherwise so choose, the position of Chair of the meetings of
the non-management directors rotates on a per meeting basis in
the order specified in the Corporate Governance Guidelines among
the non-management Chairs of the Boards committees. If not
a member of management, the Chairman of the Board would serve as
Chair of these meetings.
We typically schedule a Board meeting in conjunction with our
annual meeting of stockholders and expect that our directors
will attend absent good reason, such as a scheduling conflict.
In 2007, all directors then on the Board attended our annual
meeting of stockholders. J. Brett Harvey joined the Board on
December 6, 2007.
8
The table below identifies the directors that the Board has
determined to be independent and provides information with
respect to Board committee memberships. The table also sets
forth the number of meetings held by each Board committee in
2007.
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Nominating
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Personnel
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and
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and
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Director
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Independent
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Audit
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Finance
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Governance
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Compensation
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Technology
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H. K. Bowen
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X
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X
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X
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*
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R. P. Bozzone**
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X
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X
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D. C. Creel
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X
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X
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X
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*
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X
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X
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J. C. Diggs
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X
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X
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X
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X
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J. B. Harvey
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X
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X
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L. P. Hassey
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M. J. Joyce
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X
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X
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*
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W. C. McClelland**
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X
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X
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*
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X
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X
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J. E. Rohr
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X
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X
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*
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L. T. Thomas
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X
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X
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X
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J. D. Turner
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X
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X
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X
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X
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Number of Meetings in 2007
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10
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6
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5
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5
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1
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*
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Denotes Committee Chair.
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**
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Retiring from the Board at the 2008
Annual Meeting of Stockholders.
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Director
Compensation
On December 15, 2006, the Board of Directors approved
changes to the non-employee director compensation program.
Effective January 1, 2007, the annual retainer fee consists
of a cash payment of $60,000 and restricted stock valued at
$75,000. Committee chairpersons receive a $10,000 cash retainer
fee, and directors are paid $1,500 per day for Board meetings
and $1,000 for each committee meeting attended. The Company also
pays for ATI orientation or training of Board members outside of
Board and committee meetings.
We also pay our directors travel, lodging, meal and other
expenses connected with their Board service. In addition,
certain benefits were made available to Mr. Bozzone, the
retired Chairman, President and Chief Executive Officer,
including office space, secretarial services, newspaper
subscriptions and parking space at ATIs headquarters
building. Mr. Bozzone is retiring from the Board at the
2008 Annual Meeting of Stockholders.
9
The non-employee directors of the Board earned the following in
2007:
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Change in
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Pension Value
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and Non-
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Fees
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Qualified
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Earned Or
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Non-Equity
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Deferred
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Paid
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Stock
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Option
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Incentive Plan
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Compensation
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All Other
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In Cash
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Awards
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Awards
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Compensation
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Earnings
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Compensation
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Total
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Name
(1)
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($)(3)
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($)(4)
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($)(5)
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($)
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($)
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($)
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($)
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H. K. Bowen
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94,500
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16,675
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10,320
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121,495
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R. P. Bozzone
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86,000
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16,675
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10,320
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21,389
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(6)
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134,384
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D. C. Creel
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116,000
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16,675
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10,320
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142,995
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J. C. Diggs
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101,000
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16,675
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10,320
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127,995
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J. B.
Harvey(2)
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5,772
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174
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5,946
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M. J. Joyce
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101,000
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16,675
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10,320
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127,995
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W. C. McClelland
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98,000
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16,675
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10,320
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124,995
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J. E. Rohr
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89,500
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16,675
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10,320
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116,495
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L. T. Thomas
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91,000
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16,675
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10,320
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117,995
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J. D. Turner
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96,000
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16,675
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10,320
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122,995
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(1) |
|
L. Patrick Hassey, President and Chief Executive Officer of the
Company, is Chairman of the Board of Directors and does not
receive any compensation for his service on the Board of
Directors. All compensation paid to Mr. Hassey by the
Company for his service as an executive officer is reflected
under Summary Compensation Table for 2007. |
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(2) |
|
Mr. Harvey joined the Board on December 6, 2007 and
amounts paid to Mr. Harvey were pro-rated for his 2007
service. |
|
(3) |
|
This column reflects the annual retainer fee, committee chair
fees, and meeting fees paid to each director. |
|
(4) |
|
This column sets forth the grant date fair value of restricted
stock awards made as part of the annual retainer fee and
computed in accordance with Statement of Financial Accounting
Standards (FAS) No. 123(R) Share-Based Payments
(FAS 123(R)). A discussion of the relevant
assumptions made in the valuations may be found in Notes 1
and 6 to the financial statements in the Companys Annual
Report on
Form 10-K
for the fiscal year ended December 31, 2007. |
|
(5) |
|
The values set forth in this column are based on the aggregate
grant date fair value of stock options computed in accordance
with FAS 123(R), and represent the expense recorded by the
Company in 2007. A discussion of the relevant assumptions made
in the valuations may be found in Notes 1 and 6 to the
financial statements in the Companys Annual Report on
Form 10-K
for the fiscal year ended December 31, 2007. |
|
(6) |
|
Represents the aggregate incremental cost to the Company of
office space, secretarial services, newspaper subscriptions and
parking space at ATIs headquarters building. |
The Board encourages directors to obtain a meaningful stock
ownership interest in the Company. Non-employee directors are
expected to own shares of Company Common Stock having a market
value of at least two times the annual retainer amount by
December 31, 2009 or within five years of first becoming a
director, whichever occurs later, and at least three times the
annual retainer amount within a reasonable time thereafter.
In December 2004, the Board froze and discontinued the
Companys Fee Continuation Plan for Non-Employee Directors.
Under the frozen plan, an amount equal to the annual retainer
fee in effect for 2004, which was $28,000, will be paid annually
to the members of the Board as of January 1, 2005 following
the termination of the directors service as a Board member
for each year of the directors credited service as a
director (as defined in the Plan) up to a maximum of ten years.
10
Corporate
Guidelines for Business Conduct and Ethics
ATI has a code of ethics, which we refer to as the Corporate
Guidelines for Business Conduct and Ethics, that applies to
all directors, officers and employees, including our principal
executive officer, our principal financial officer, and our
controller and chief accounting officer. ATI has had a code of
conduct for many years. We require all directors, officers and
employees to adhere to these Guidelines in addressing legal and
ethical issues encountered in their work. These Guidelines
require that our directors, officers and employees avoid
conflicts of interest, comply with all laws, conduct business in
an honest and ethical manner and otherwise act with integrity
and honesty in all of their actions by or on behalf of the
Company. These Guidelines include a financial code of ethics
specifically for our Chief Executive Officer, our Chief
Financial Officer, and all other financial officers and
executives, which supplements the general principles set forth
in the Guidelines and is intended to promote honest and ethical
conduct, full and accurate reporting, and compliance with laws
as well as other matters.
During 2007, our employees were required to certify that they
reviewed and understood the Guidelines. In addition, all
officers and managers are required to certify as to their
compliance with the standards set forth in the Guidelines. Also,
beginning in 2006, the Company implemented an online ethics
training program, administered by a third party, requiring all
directors, officers and employees to take an interactive online
ethics course at least annually. In 2007, the courses addressed
internet security and the Companys Corporate Guidelines
for Business Conduct and Ethics.
The Company encourages employees to communicate concerns before
they become problems. We believe that building and maintaining
trust, respect and communications between employees and
management and between fellow employees is critical to the
overriding goal of efficiently producing high quality products,
providing the maximum level of customer satisfaction, and
ultimately fueling profitability and growth. Only the Audit
Committee of the Board can amend or grant waivers from the
provisions of the Guidelines relating to the Companys
executive officers and directors, and any such amendments or
waivers will be promptly posted on our web site at
www.alleghenytechnologies.com. To date, no such amendments have
been made or waivers granted.
A copy of the Corporate Guidelines for Business Conduct and
Ethics, which includes the financial code of ethics, is
available on our web site at www.alleghenytechnologies.com by
first clicking About Us and then Our
Ethics and will be mailed to stockholders and other
interested parties on written request directed to the Corporate
Secretary, Allegheny Technologies Incorporated, 1000 Six PPG
Place, Pittsburgh, PA
15222-5479.
Identification
and Evaluation of Candidates for Director
The Board is responsible for recommending director nominees to
the stockholders and for selecting directors to fill vacancies
between stockholder meetings. The Nominating and Governance
Committee recommends candidates to the Board. The Nominating and
Governance Committee is comprised entirely of independent
directors under the applicable rules and regulations of the NYSE
and SEC. The Committee operates under a written charter adopted
by the Board of Directors. A copy of the Committees
charter is available at the Companys web site at
www.alleghenytechnologies.com by first clicking About
Us and then Our Corporate Governance. Paper
copies can be obtained by writing to the Corporate Secretary,
Allegheny Technologies Incorporated, 1000 Six PPG Place,
Pittsburgh, PA
15222-5479.
The Committee considers director candidates suggested by members
of the Committee, other directors, senior management and
stockholders. For information on how to submit a candidate for
consideration, please see the caption 2009 Annual Meeting
and Stockholder Proposals below.
Preliminary interviews of director candidates may be conducted
by the Chair of the Nominating and Governance Committee or, at
his request, any other member of the Committee or the Chairman
of the Board. Background material pertaining to director
candidates is distributed to the members of the Committee for
their review. Director candidates who the Committee determines
merit further consideration are interviewed by the Chair of the
Committee and other Committee members, directors
11
and key senior management. The results of these interviews are
considered by the Nominating and Governance Committee in its
deliberations.
Director candidates are generally selected on the basis of the
following criteria: their business or professional experience,
recognized achievement in their respective fields, integrity and
judgment, ability to devote sufficient time to the affairs of
the Company, the diversity of their backgrounds and the skills
and experience that their membership adds to the overall
competencies of the Board, and the needs of the Company from
time to time. Nominees must also represent the interests of all
stockholders. In accordance with the retirement policy for
directors set forth in the Corporate Governance Guidelines, a
person who is 72 years of age or older cannot be nominated
to serve on the Board.
In evaluating the needs of the Board, the Nominating and
Governance Committee considers the qualifications of sitting
directors and consults with other members of the Board
(including as part of the Boards annual self-evaluation),
the Chairman, President and Chief Executive Officer and other
members of executive management. At a minimum, all recommended
candidates must exemplify the highest standards of personal and
professional integrity, meet any required independence
standards, and be willing and able to constructively participate
in and contribute to Board and committee meetings. Additionally,
the Committee conducts individual reviews of current directors
whose terms are nearing expiration, but who may be proposed for
re-election, in light of the considerations described above and
their past contributions to the Board.
Mr. Harvey, who joined the Board of Directors in December
2007, was initially selected as a director nominee upon the
recommendation of an existing non-management director.
12
Process
for Communications with Directors
We maintain a process for stockholders and interested parties to
communicate with the Board of Directors or any individual
director. ATI stockholders or interested parties who want to
communicate with the Board or any individual director can write
to:
Allegheny Technologies Incorporated
Corporate Secretary
Board Administration
1000 Six PPG Place
Pittsburgh, PA
15222-5479
or call 1-877-787-9761 (toll free). Your letter or message
should indicate whether you are an ATI stockholder. Depending on
the subject matter, the Corporate Secretary will:
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forward the communication to the director or directors to whom
it is addressed;
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attempt to handle the inquiry directly when, for example, it is
a request for information about the Company or it is a
stock-related matter; or
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not forward the communication if it is primarily commercial in
nature or it relates to an improper or irrelevant topic.
|
At each Board meeting, the Corporate Secretary presents a
summary of all communications received since the last meeting
that were not forwarded and makes those communications available
to the directors on request.
2009
Annual Meeting and Stockholder Proposals
Under
Rule 14a-8
of the Securities and Exchange Commission, proposals of
stockholders intended to be presented at the 2009 Annual Meeting
of Stockholders must be received no later than November 25,
2008 for inclusion in the proxy statement and proxy card for
that meeting. In addition, the Companys certificate of
incorporation provides that in order for director nominations or
other business to be properly brought before an annual meeting
by a stockholder, the stockholder must give timely notice
thereof in writing to the Corporate Secretary. The notice must
contain certain information, including information about the
proposal and the interest, if any, of the stockholder who is
making the proposal, as well as the name, address and share
ownership of the stockholder giving notice.
Stockholders may nominate candidates for election to the Board
by following the procedures described in ATIs certificate
of incorporation. Stockholder-recommended candidates will be
evaluated on the same basis as other candidates. The provisions
of ATIs certificate of incorporation generally require
that written notice of a nomination be received by the Corporate
Secretary, who will forward the information to the Nominating
and Governance Committee of the Board of Directors for the
Committees consideration. The notice must contain certain
information about the nominee, including his or her age,
address, occupation and share ownership, as well as the name,
address and share ownership of the stockholder giving notice.
For all such notices to be timely, the provisions of the
Companys certificate of incorporation generally require
that notice be received by the Corporate Secretary not less than
75 days and not more than 90 days before the first
anniversary of the date of the preceding years annual
meeting. For our annual meeting in the year 2009, we must
receive this notice on or after February 8, 2009 and on or
before February 23, 2009.
13
Stockholders may obtain a copy of the full text of the
provisions of our certificate of incorporation by writing to the
Corporate Secretary, Allegheny Technologies Incorporated, 1000
Six PPG Place, Pittsburgh, PA
15222-5479.
A copy of our certificate of incorporation has been filed with
the Securities and Exchange Commission and can be viewed on our
web site at www.alleghenytechnologies.com by first clicking
About Us and then Our Corporate
Governance.
Householding of Proxy
Materials. The SEC has adopted rules that permit
companies and intermediaries such as brokers to satisfy delivery
requirements for proxy statements with respect to two or more
stockholders sharing the same address and the same last name by
delivering a single proxy statement addressed to those
stockholders. This process, which is commonly referred to as
householding, potentially provides extra convenience
for shareholders and cost savings for the Company. The Company
and some brokers household proxy materials, delivering a single
proxy statement to multiple stockholders sharing an address,
unless contrary instructions have been received from the
affected stockholders. Once stockholders have received notice
from their broker or the Company that materials will be sent in
the householding manner to the stockholders address,
householding will continue until otherwise notified or until the
stockholder revokes such consent. If, at any time, stockholders
no longer wish to participate in householding and would prefer
to receive a separate proxy statement, they should notify their
broker, if shares are held in a brokerage account, or the
Company, if holding registered shares. The Company will deliver
promptly, upon written or oral request, a separate copy of the
annual report or proxy statement, as applicable, to a
stockholder at a shared address to which a single copy of the
documents was delivered. Any such notice should be addressed to
the Corporate Secretary of the Company at 1000 Six PPG Place,
Pittsburgh, PA
15222-5479,
or notice may be given by calling the Company at
(412) 394-2800
(i) to receive a separate copy of an annual report or proxy
statement for this meeting, (ii) to receive separate copies
of those materials for future meetings, or (iii) if the
stockholder shares an address and wishes to request delivery of
a single copy of annual reports or proxy statements, if now
receiving multiple copies of annual reports or proxy statements.
14
STOCK
OWNERSHIP INFORMATION
Section 16(a)
Beneficial Ownership Reporting Compliance
The rules of the Securities and Exchange Commission (SEC)
require the Company to disclose late filings of reports of stock
ownership (and changes in stock ownership) by its directors and
statutory insiders. Based upon a review of filings with the SEC
and written representations, the Company believes that, in 2007,
the Companys directors and statutory insiders complied
with the reporting requirements of Section 16(a) of the
Securities Exchange Act of 1934 and all filings by these
individuals with respect to Company Common Stock were made on a
timely basis.
Five
Percent Owners of Common Stock
The individuals and entities listed in the following table are
beneficial owners of five percent or more of Company Common
Stock as of December 31, 2007, based on information filed
with the SEC. In general, beneficial ownership
includes those shares a person has the power to vote or
transfer, and options to acquire Common Stock that are
exercisable currently or within 60 days.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount and Nature of
|
|
Percent of
|
|
|
Name and Address of Beneficial
Owner
|
|
|
Beneficial Ownership
|
|
Class(3)
|
|
|
|
The TCW Group, Inc. on behalf of the TCW Business Unit
865 South Figueroa Street
Los Angeles, CA 90017
|
|
|
|
7,130,867
|
(1)
|
|
|
7.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Singleton Group LLC
11661 San Vicente Blvd, Ste 915
Los Angeles, CA 90049
|
|
|
|
5,775,000
|
(2)
|
|
|
5.7
|
%
|
|
|
|
|
|
|
(1) |
|
Based on a Schedule 13G filing under the Securities
Exchange Act of 1934 on February 11, 2008 made by The TCW
Group, Inc. on behalf of the TCW Business Unit, consisting of
Trust Company of the West, TCW Asset Management Company,
TCW Investment Management Company and TCW Capital Investment
Corporation, The TCW Group, Inc. had shared voting power with
respect to an aggregate of 5,632,137 shares and shared
dispositive power with respect to an aggregate of
7,130,867 shares at December 31, 2007. |
|
(2) |
|
Based on a Schedule 13G/A filing under the Securities Act
of 1934 on August 17, 2007 by the Singleton Group LLC,
Christina Singleton Mednick, William W. Singleton and Donald E.
Rugg have shared voting and dispositive power with respect to
5,775,000 shares. As indicated in the Schedule 13G/A,
Donald E. Rugg also holds sole voting and dispositive power with
respect to 158 shares. |
|
(3) |
|
As of December 31, 2007, there were 101,616,534 outstanding
shares of Company Common Stock. |
15
Stock
Ownership of Management
The following table sets forth the shares of Common Stock
reported to the Company as beneficially owned as of
March 1, 2008 by the nominees for director, the continuing
directors, each officer named in the Summary Compensation Table
and all directors, nominees, named executive officers and other
statutory insiders as a group.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount and Nature of
|
|
Percent of
|
|
|
Beneficial Owner
|
|
Beneficial
Ownership(1)
|
|
Class(2)
|
|
|
|
H. Kent Bowen
|
|
|
8,538
|
|
|
|
*
|
|
|
|
|
|
Robert P. Bozzone
|
|
|
1,617,981
|
|
|
|
1.6
|
|
|
|
|
|
Diane C. Creel
|
|
|
14,255
|
|
|
|
*
|
|
|
|
|
|
James C. Diggs
|
|
|
3,095
|
|
|
|
*
|
|
|
|
|
|
Terry L. Dunlap
|
|
|
45,289
|
|
|
|
*
|
|
|
|
|
|
Richard J. Harshman
|
|
|
113,479
|
|
|
|
*
|
|
|
|
|
|
J. Brett Harvey
|
|
|
1,167
|
|
|
|
*
|
|
|
|
|
|
L. Patrick Hassey
|
|
|
365,724
|
|
|
|
*
|
|
|
|
|
|
Michael J. Joyce
|
|
|
5,024
|
|
|
|
*
|
|
|
|
|
|
Douglas A. Kittenbrink
|
|
|
62,488
|
|
|
|
*
|
|
|
|
|
|
W. Craig McClelland
|
|
|
8,464
|
|
|
|
*
|
|
|
|
|
|
James E. Rohr
|
|
|
18,448
|
|
|
|
*
|
|
|
|
|
|
Louis J. Thomas
|
|
|
4,831
|
|
|
|
*
|
|
|
|
|
|
John D. Turner
|
|
|
10,992
|
|
|
|
*
|
|
|
|
|
|
Jon D. Walton
|
|
|
129,551
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All directors, nominees, named officers and other statutory
insiders as a group (16)
|
|
|
2,438,031
|
|
|
|
2.4
|
|
|
|
|
|
|
|
|
*
|
Indicates beneficial ownership of less than one percent (1%) of
the outstanding shares of Company Common Stock.
|
|
(1)
|
The table includes shares of performance/restricted stock plus
accumulated dividends in the following amounts: L. Patrick
Hassey, 51,820; Richard J. Harshman, 15,246; Douglas A.
Kittenbrink, 15,246; Jon D. Walton, 15,246; and Terry L. Dunlap,
10,806; and all directors, nominees, named executive officers
and other statutory insiders as a group, 105,970. The table
includes shares held in the Companys
401(k) plans for the
accounts of Messrs. Bozzone, Kittenbrink, and Walton and
shares held jointly with the named individuals spouses.
|
The table also includes the following shares where beneficial
ownership is disclaimed: 31,700 shares owned by
Mr. Waltons spouse; 21,691 shares owned by
Mr. Harshmans spouse; and 265 shares held by the
spouses of other statutory insiders.
The table includes shares issuable pursuant to options that are
currently exercisable or may become exercisable on or before
April 30, 2008 in the following amounts: Mr. Bowen,
4,886; Mr. Bozzone, 33,000; Mr. Harshman, 15,000;
Mr. Joyce, 1,000; Mr. McClelland, 2,000;
Mr. Rohr, 7,567; Mr. Thomas, 2,000; Mr. Turner,
3,000; Mr. Walton, 15,000; and for all directors, nominees,
named executive officers and other statutory insiders as a
group, 88,453.
|
|
(2) |
The percentages in the column were calculated based on
101,616,534 outstanding shares of Company Common Stock at
December 31, 2007. As of March 1, 2008, there were
101,098,773 shares of Company Common Stock outstanding.
|
16
PROPOSALS REQUIRING
YOUR VOTE
Election
of Directors Item A on Proxy Card
The Board of Directors has nominated three directors, James C.
Diggs, J. Brett Harvey and Michael J. Joyce, to stand
for re-election to the Board for a three-year term expiring in
2011. The Board of Directors determined that each of the
nominees qualifies for re-election under the criteria for
evaluation of directors described under Identification and
Evaluation of Candidates for Director on page 11 of
this Proxy Statement. The Board of Directors determined that
Messrs. Diggs, Harvey and Joyce qualify as independent
directors under applicable rules and regulations and the
Companys categorical Board independence standards. See
Identification and Evaluation of Candidates for
Director at page 11 of this Proxy Statement and
Number and Independence of Directors at page 5
of this Proxy Statement.
The three nominees who receive the highest number of votes cast
will be elected. If you sign and return your proxy card, the
individuals named as proxies on the card will vote your shares
FOR the election of the three nominees named below unless you
provide other instructions. You may withhold authority for the
proxies to vote your shares on any or all of the nominees by
following the instructions on your proxy card. If a nominee
becomes unable to serve, the proxies will vote for a
Board-designated substitute or the Board may reduce the number
of directors. Management has no reason to believe that any of
the three nominees for election named below will be unable to
serve.
Background information about the nominees and the continuing
directors, including their business experience during the past
five years, follows. Messrs. Bozzone and McClelland are
retiring from the Board at the 2008 Annual Meeting of
Stockholders.
THE BOARD OF
DIRECTORS RECOMMENDS THAT YOU VOTE FOR
THE ELECTION OF ALL THREE NOMINEES LISTED BELOW.
Nominees
Term to Expire at the 2011 Annual Meeting
(Class III)
|
|
|
|
|
|
James C. Diggs
|
|
|
|
|
|
Age:
|
|
59
|
|
|
|
Director Since:
|
|
2001
|
|
|
|
Principal Occupation:
|
|
Senior Vice President, General Counsel and Secretary of PPG
Industries, Inc., a producer of coatings, glass and chemicals.
|
|
|
|
Recent Business Experience:
|
|
Mr. Diggs has been Senior Vice President, General Counsel of PPG
Industries, Inc. since 1997. He assumed the position of
Secretary in September 2004.
|
|
|
|
J. Brett Harvey
|
|
|
|
|
|
Age:
|
|
57
|
|
|
|
Director Since:
|
|
2007
|
|
|
|
Principal Occupation:
|
|
President and Chief Executive Officer of CONSOL Energy, Inc., a
high Btu bituminous coal and coal bed methane company, since
1998.
|
|
|
|
Recent Business Experience:
|
|
Prior to 1998, he was President and Chief Executive Officer of
PacifiCorp Energy Inc., and served in several other management
positions at PacifiCorp.
|
|
|
|
Other Directorships:
|
|
CONSOL Energy, Inc., Barrick Gold Corporation, and CNX Gas
Corporation (a subsidiary of CONSOL Energy, Inc.)
|
17
|
|
|
Michael J. Joyce
|
|
|
|
|
|
Age:
|
|
66
|
|
|
|
Director Since:
|
|
2004
|
|
|
|
Recent Business Experience:
|
|
Mr. Joyce served as New England Managing Partner of Deloitte
& Touche USA LLP, a public accounting firm, prior to his
retirement in May 2004.
|
|
|
|
Other Directorships:
|
|
A. C. Moore Arts & Crafts, Inc. and Brandywine Realty
Trust.
|
Continuing
Directors Term to Expire at the 2009 Annual Meeting
(Class I)
|
|
|
|
|
|
Diane C. Creel
|
|
|
|
|
|
Age:
|
|
59
|
|
|
|
Director Since:
|
|
1996
|
|
|
|
Principal Occupation:
|
|
Chairman, Chief Executive Officer and President of Ecovation,
Inc., a subsidiary of Ecolab Inc. and a waste stream technology
company using patented technologies, since May 2003.
|
|
|
|
Recent Business Experience:
|
|
Chief Executive Officer and President of Earth Tech, an
international consulting engineering firm, from 1992 to May 2003.
|
|
|
|
Other Directorships:
|
|
Foster Wheeler Ltd. and Goodrich Corporation.
|
|
|
|
James E. Rohr
|
|
|
|
|
|
Age:
|
|
59
|
|
|
|
Director Since:
|
|
1996
|
|
|
|
Principal Occupation:
|
|
Chairman and Chief Executive Officer, The PNC Financial Services
Group, Inc., a diversified financial services organization.
|
|
|
|
Recent Business Experience:
|
|
Mr. Rohr had served as President of The PNC Financial Services
Group from 1992-2002 and assumed the position of Chief Executive
Officer in 2000. He was named Chairman in 2001.
|
|
|
|
Other Directorships:
|
|
Equitable Resources, Inc., The PNC Financial Services Group,
Inc., and BlackRock, Inc. The PNC Financial Services Group, Inc.
holds approximately 33.5% of the outstanding common stock of
BlackRock, Inc.
|
|
|
|
Louis J. Thomas
|
|
|
|
|
|
Age:
|
|
65
|
|
|
|
Director Since:
|
|
2004
|
|
|
|
Recent Business Experience:
|
|
Mr. Thomas served as Director, District 4, United Steelworkers
for the Northeastern United States and Puerto Rico prior to his
retirement in May 2004.
|
18
Continuing
Directors Term to Expire at the 2010 Annual Meeting
(Class II)
|
|
|
|
|
|
H. Kent Bowen
|
|
|
|
|
|
Age:
|
|
66
|
|
|
|
Director Since:
|
|
2004
|
|
|
|
Principal Occupation:
|
|
Baker Foundation Professor, Harvard Business School, where his
research and teaching is in the field of operations and
technology management.
|
|
|
|
Recent Business Experience:
|
|
Prior to being Baker Foundation Professor, he was the
Bruce V. Rauner Professor of Business Administration
at Harvard Business School. Prior to 1992, he was the Ford
Professor of Engineering and co-founder of the Leaders for
Manufacturing Program at the Massachusetts Institute of
Technology.
|
|
|
|
Other Directorships:
|
|
Align Technology, Inc. and Ceramics Process Systems Corporation.
|
|
|
|
L. Patrick Hassey
|
|
|
|
|
|
Age:
|
|
62
|
|
|
|
Director Since:
|
|
2003
|
|
|
|
Principal Occupation:
|
|
Chairman, President and Chief Executive Officer of Allegheny
Technologies Incorporated.
|
|
|
|
Recent Business Experience:
|
|
Mr. Hassey has been President and Chief Executive Officer of the
Company since October 2003. He was elected to the Companys
Board of Directors in July 2003 and assumed the position of
Chairman in May 2004. Prior to this position, he worked as an
outside management consultant to Allegheny Technologies
executive management. Mr. Hassey was Executive Vice President
and a member of the corporate executive committee at Alcoa Inc.
at the time of his early retirement in February 2003. He had
served as Executive Vice President of Alcoa and Group President
of Alcoa Industrial Components from 2000 to 2002. Prior to 2000,
he served as Executive Vice President of Alcoa and President of
Alcoa Europe Inc.
|
|
|
|
Other Directorship:
|
|
Ryder System, Inc.
|
|
|
|
John D. Turner
|
|
|
|
|
|
Age:
|
|
62
|
|
|
|
Director Since:
|
|
2004
|
|
|
|
Recent Business Experience:
|
|
Mr. Turner served as Chairman and Chief Executive Officer of
Copperweld Corporation, a manufacturer of tubular and bimetallic
wire products and a wholly owned subsidiary of The LTV
Corporation, an integrated steel producer, from 2001 until his
retirement in March 2003. He served as President of LTV
Copperweld from 1999 to 2001 and Executive Vice President and
Chief Operating Officer of The LTV Corporation from February to
December 2001.
|
|
|
|
Other Directorship:
|
|
Matthews International Corporation
|
19
Ratification
of Selection of Independent Auditors Item B on
Proxy Card
Ernst & Young LLP (Ernst &
Young) has served as independent auditors for the Company
since August 15, 1996 and served as independent auditors
for Allegheny Ludlum Corporation since 1980. They have
unrestricted access to the Audit Committee to discuss audit
findings and other financial matters. The Audit Committee of the
Board of Directors believes that Ernst & Young is
knowledgeable about the Companys operations and accounting
practices and is well qualified to act in the capacity of
independent auditors.
In appointing Ernst & Young as the Companys
independent auditors for the fiscal year ending
December 31, 2008, and making its recommendation that
stockholders ratify the appointment, the Audit Committee
considered whether the audit and non-audit services
Ernst & Young provides are compatible with maintaining
the independence of our outside auditors.
If the stockholders do not ratify the selection of
Ernst & Young, the Audit Committee will reconsider the
appointment of Ernst & Young as the Companys
independent auditors.
Representatives of Ernst & Young will be present at
the Annual Meeting. They will be given the opportunity to make a
statement if they desire to do so, and they will be available to
respond to appropriate questions following the Annual Meeting.
THE BOARD OF
DIRECTORS RECOMMENDS THAT YOU VOTE FOR
RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG
LLP AS
INDEPENDENT AUDITORS FOR FISCAL YEAR 2008.
20
Audit
Committee Pre-Approval Policy
The Audit Committee has adopted a policy that sets forth the
manner in which the Audit Committee will review and approve all
services to be provided by Ernst & Young before the
firm is retained to perform the service. Under this policy, the
engagement terms and fees of all audit services and all
audit-related services are subject to the specific pre-approval
of the Audit Committee. In addition, while the Committee
believes that the independent auditor may be able to provide tax
services to the Company without impairing the auditors
independence, absent unusual circumstances, the Audit Committee
does not expect to retain the independent auditor to provide tax
services. Under the policy, the Committee has delegated limited
pre-approval authority to the Chair of the Committee with
respect to permitted, non-tax related services; the Chair is
required to report any pre-approval decisions to the Audit
Committee at its next scheduled meeting. The Audit Committee
pre-approved all audit and non-audit services provided by
Ernst & Young in 2007 and 2006.
Independent
Auditor: Services and Fees
The fees and expenses billed by Ernst & Young for the
indicated services performed during 2007 and 2006 were as
follows:
|
|
|
|
|
|
|
|
|
|
|
Service
|
|
2007
|
|
|
2006
|
|
Audit fees
|
|
|
$3,018,000
|
|
|
|
$2,828,000
|
|
Audit-related fees
|
|
|
348,000
|
|
|
|
259,000
|
|
Tax fees
|
|
|
|
|
|
|
5,000
|
|
All other fees
|
|
|
4,000
|
|
|
|
6,000
|
|
|
|
|
Total
|
|
|
$3,370,000
|
|
|
|
$3,098,000
|
|
|
|
|
Audit fees consisted of fees related to the annual
audit of the Companys consolidated financial statements
and review of the financial statements in our Quarterly Reports
on
Form 10-Q,
Sarbanes-Oxley Section 404 attestation services, audit and
attestation services related to statutory or regulatory filings,
the issuance of consents, and captive insurance company audits
(which fees for 2006 had previously been included as
audit-related fees).
Audit-related fees consisted of fees related to the
audits of employee benefit and pension plans.
Tax fees consisted of fees related to IRS transcript
reviews.
All other fees consisted of subscriptions to
Ernst & Youngs web-based EYOnline accounting
reference library.
21
Audit
Committee Report
The following is the report of the Audit Committee with respect
to the Companys audited financial statements for the year
ended December 31, 2007, which include the consolidated
balance sheets of the Company as of December 31, 2007 and
2006, and the related consolidated statements of operations,
stockholders equity and cash flows for each of the three
years in the period ended December 31, 2007, and the notes
thereto (collectively, the Financial Statements).
Management is responsible for the Companys internal
controls and financial reporting process. Ernst &
Young LLP (Ernst & Young), the
Companys independent auditors, are responsible for
performing an independent audit of the Companys Financial
Statements in accordance with generally accepted auditing
standards and expressing an opinion as to their conformity with
generally accepted accounting principles and for attesting to
managements report on the Companys internal control
over financial reporting. One of the Audit Committees
responsibilities is to monitor and oversee the financial
reporting process and to review and discuss managements
report on the Companys internal control over financial
reporting.
The Audit Committee has reviewed, met and held discussions with
the Companys management, internal auditors, and the
independent auditors regarding the Financial Statements,
including a discussion of quality, not just acceptability, of
the Companys accounting principles, and Ernst &
Youngs judgment regarding these matters.
The Audit Committee discussed with the Companys internal
auditors and independent auditors matters required to be
discussed by SAS 61 (Codification of Statements on Auditing
Standards, AU§ 380). The Audit Committee met with the
internal auditors and independent auditors, with and without
management present, to discuss the results of their
examinations, their evaluations of the Companys internal
controls, and the overall quality of the Companys
financial reporting. The Audit Committee has also discussed with
Ernst & Young matters required to be discussed by
applicable auditing standards.
The Audit Committee has received the written disclosures and the
letter from Ernst & Young required by the Independence
Standards Board Standard No. 1 (Independence Standards
Board Standard No. 1, Independence Discussions with Audit
Committees) and has also considered the compatibility of
non-audit services with Ernst & Youngs
independence. This information was also discussed with
Ernst & Young.
Based on the review and discussions referred to above, the Audit
Committee recommended to the Board of Directors at the
February 22, 2008 meeting of the Board that the Financial
Statements be included in the Companys Annual Report on
Form 10-K
for the year ended December 31, 2007 as filed with the
Securities and Exchange Commission. The Board has approved this
inclusion.
Submitted by:
AUDIT COMMITTEE, whose members are:
Michael J. Joyce, Chairman
Diane C. Creel
James C. Diggs
Louis J. Thomas
John D. Turner
22
Stockholder
Proposal Regarding Majority Voting in Director
Elections Item C on Proxy Card
The Company has been notified by The United Brotherhood of
Carpenters Pension Fund (the Fund) that it intends
to introduce the following resolution at the Annual Meeting. The
Fund, whose address is 101 Constitution Avenue, NW,
Washington, D.C. 20001, beneficially owns 1,624 shares
of Company Common Stock.
Stockholder
Proposal and Supporting Statement
RESOLVED:
That the shareholders of Allegheny Technologies Incorporated
(Company) hereby request that the Board of Directors
initiate the appropriate process to amend the Companys
governance documents (certificate of incorporation or bylaws) to
provide that director nominees shall be elected by the
affirmative vote of the majority of votes cast at an annual
meeting of shareholders, with a plurality vote standard retained
for contested director elections, that is, when the number of
director nominees exceeds the number of board seats.
Supporting
Statement
In order to provide shareholders a meaningful role in director
elections, our Companys director election vote standard
should be changed to a majority vote standard. A majority vote
standard would require that a nominee receive a majority of the
votes cast in order to be elected. The standard is particularly
well-suited for the vast majority of director elections in which
only board nominated candidates are on the ballot. We believe
that a majority vote standard in board elections would establish
a challenging vote standard for board nominees and improve the
performance of individual directors and entire boards. Our
Company presently uses a plurality vote standard in all director
elections. Under the plurality vote standard, a nominee for the
board can be elected with as little as a single affirmative
vote, even if a substantial majority of the votes cast are
withheld from the nominee.
In response to strong shareholder support for a majority vote
standard in director elections, an increasing number of the
nations leading companies, including Intel, General
Electric, Motorola, Hewlett-Packard, Morgan Stanley, Wal-Mart,
Home Depot, Gannett, Marathon Oil, and recently Pfizer have
adopted a majority vote standard in company bylaws or articles
of incorporation. Additionally, these companies have adopted
director resignation policies in their bylaws or corporate
governance policies to address post-election issues related to
the status of director nominees that fail to win election. Other
companies have responded only partially to the call for change
by simply adopting post-election director resignation policies
that set procedures for addressing the status of director
nominees that receive more withhold votes than
for votes. At the time this proposal submission, our
Company and its board had not taken either action.
We believe that a post-election director resignation policy
without a majority vote standard in company bylaws or articles
is an inadequate reform. The critical first step in establishing
a meaningful majority vote policy is the adoption of a majority
vote standard. With a majority vote standard in place, the board
can then consider action on developing post-election procedures
to address the status of directors that fail to win election. A
majority vote standard combined with a post-election director
resignation policy would establish a meaningful right for
shareholders to elect directors, and reserve for the board an
important post-election role in determining the continued status
of an unelected director. We feel that this combination of the
majority vote standard with a post-election policy represents a
true majority vote standard.
The Board of
Directors Statement Against this Stockholder
Proposal
The Board of
Directors has considered the above proposal and recommends that
you vote AGAINST the proposal for the following
reasons:
We are incorporated under Delaware law, and our stockholders
currently elect directors through plurality voting, whereby
nominees receiving the most affirmative votes are elected as
directors. Plurality voting is the standard method for the
election of directors under Delaware law, and this has been the
applicable
23
voting method since the Companys incorporation. Plurality
voting is also used by a substantial number of comparable large
public companies incorporated in the State of Delaware.
The Board of Directors has monitored, and will continue to
monitor, national trends in the implementation of voting in
director elections. The evaluation of the various effects of
voting as proposed by the stockholder is still in relatively
early stages at this time, however. Currently, there is
disagreement among corporate governance experts as to the exact
form that majority voting should take, if adopted, and best
practices are continuing to evolve. Thus, there remains at this
time a high degree of risk and uncertainty surrounding the
consequences of adopting the voting method proposed by the
stockholder.
One aspect of the director election process which would become
uncertain upon the implementation of such voting is the status
of hold-over directors. Under Delaware law, an incumbent
director who is not re-elected will continue to serve with the
same voting rights and powers until a successor is elected and
qualified. Accordingly, even if voting as proposed by the
stockholder were implemented, we could not force a director who
failed to receive a majority vote to leave the Board of
Directors until a successor is elected at a subsequent
stockholder meeting. Not only would the status of the hold-over
director be in question, but there would also be uncertainty
surrounding the enforceability of the forced resignation of such
a director.
Moreover, the proposal does not address the issue of vacancies
on the Board of Directors that are created in the event that a
nominee fails to receive a majority of the votes cast. Under
both Delaware law and the Companys Amended and Restated
Bylaws, the Board of Directors may elect a director to fill a
vacancy, opt to have the position remain vacant, or call a
special meeting of stockholders for the sole purpose of filling
the vacancy. If voting as proposed by the stockholder were
implemented, any vacancy could remain open for a prolonged
period of time, preventing the Board of Directors from fully
staffing important committees and otherwise meeting its
obligations to oversee the Companys business and affairs,
which could cause needless disruption and expense for the
Company.
We enjoy a long track record of strong corporate governance and
integrity, led by our Board of Directors. In particular, the
Board of Directors maintains a Nominating and Governance
Committee, which is responsible for recommending director
nominees to the Board of Directors, composed exclusively of
independent directors. The Nominating and Governance Committee
generally identifies appropriate nominees based on several
criteria described in our Corporate Governance Guidelines and
has established procedures to consider and evaluate persons
recommended by stockholders of the Company.
Stockholder-recommended candidates will be evaluated on the same
basis as other candidates. In recognition of these and other of
our corporate governance policies, as of February 2008, the
Company ranked ahead of nearly 85% of materials companies, as
measured by the ISS Corporate Governance Quotient.
Under our current voting method for electing directors, our
stockholders consistently have supported to a significant degree
our highly qualified nominees from diverse business backgrounds.
At our annual meeting of stockholders in 2007, for example, each
nominee received the affirmative vote of approximately 98% of
the shares voted and approximately 93% of the shares then
outstanding. Moreover, we have never had a director nominee who
has not received the affirmative vote of a majority of the votes
cast. Therefore, it is not likely that the implementation of
voting as proposed by the stockholder at this time would change
the results of an election of our directors or improve either
our overall corporate governance or the performance of our Board
of Directors as a whole.
In addition, as a company listed on the New York Stock Exchange,
we must comply with listing standards that include requirements
for maintaining independent directors and directors with
particular qualifications or expertise. These requirements are
considered by our Board of Directors when recommending nominees
to our stockholders. The failure to elect a particular nominee
by voting as proposed by the stockholder, especially in an
uncontested election, may impair our ability to continue to
comply with those listing standards, which would negatively
impact our stockholders.
The Board of Directors does not believe that we should rush to
adopt an untested voting system without the benefit of a
reasonable consensus on the topic and a greater understanding of
the full impact of
24
such a system. Adopting the voting method proposed by the
stockholder at this time would introduce unnecessary uncertainty
and complexity into the director election process. The Board of
Directors instead intends to evaluate the experiences of
companies which implement majority voting in various forms to
determine whether the adoption of such a standard in any form is
in the best interests of our stockholders in light of the
resulting impact on director recruitment, proxy solicitation
costs, and other relevant factors. In the event that a
reasonable consensus develops in this area, the Board of
Directors will revisit our director election process and pursue
any changes that it determines to be in the best interests of
our stockholders.
FOR THE FOREGOING
REASONS, THE BOARD OF DIRECTORS BELIEVES THAT MAJORITY VOTING IN
DIRECTOR ELECTIONS IS NOT IN THE BEST INTERESTS OF OUR
STOCKHOLDERS AT THIS TIME AND RECOMMENDS THAT YOU VOTE
AGAINST THIS PROPOSAL.
25
OTHER
BUSINESS
The Company knows of no business that may be presented for
consideration at the meeting other than the items indicated in
the Notice of Annual Meeting. If other matters are properly
presented at the meeting, the persons designated as proxies on
your proxy card may vote at their discretion.
Following adjournment of the formal business meeting, L. Patrick
Hassey, Chairman, President and Chief Executive Officer, will
address the meeting and will hold a general discussion period
during which the stockholders will have an opportunity to ask
questions about the Company and its business.
EXECUTIVE
COMPENSATION
Compensation
Committee Report
The Personnel and Compensation Committee (referred to in this
Report as the Committee) has reviewed and discussed
the following Compensation Discussion and Analysis with Company
management. Based on such review and discussion, the Committee
recommends to the Board of Directors that the Compensation
Discussion and Analysis be included in the Companys 2008
Proxy Statement. The Committee furnishes this Report for
inclusion in the 2008 Proxy Statement and recommends its
inclusion in the Companys annual report on
Form 10-K.
Submitted by:
PERSONNEL AND COMPENSATION
COMMITTEE, whose members are:
James E. Rohr, Chairman
Diane C. Creel
W. Craig McClelland
Compensation
Discussion and Analysis
Summary
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The Personnel and Compensation Committee of the Board of
Directors (the Committee) is responsible for the
Companys compensation programs. The Committee has a
two-fold task with respect to the Companys compensation
programs: (1) linking executives compensation to
performance objectives that mesh with the Companys
business plans and advance the interests of its stockholders,
and (2) supervising managements implementation of the
compensation programs for the Companys other key employees.
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The purposes of the Companys executive compensation
programs are: (1) to provide compensation levels
benchmarked to attract and retain exceptional managerial talent
for the present and future, and (2) to offer
incentive-based programs in order to challenge managers to
achieve business goals within their area of authority and in the
interests of Company stockholders.
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The Companys compensation programs consist of the
following plans:
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1. Key Executive Performance Plan (KEPP) (cash
incentive measured over a three-year period)
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2.
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Total Shareholder Return Incentive Compensation Program
(TSRP) (incentive measuring relative stock returns)
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3. Performance/Restricted Stock Program (PRSP)
(performance vesting with retention features)
4. Annual Incentive Plan (AIP) (annual cash
incentive)
5. Base Salary and Discretionary Bonus (based on broad
measures of reported profits)
26
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To determine individuals eligible to participate in the cash
incentive and equity programs, the Company uses a
pyramid approach based on levels of responsibility.
The performance pyramid on the following page summarizes the
principles of each of the foregoing plans. Each of the named
executive officers participates in each of the first four plans
named in the previous paragraph. Individuals who participate in
the Annual Incentive Plan, including the named executive
officers, are not eligible to participate in the Discretionary
Bonus plan.
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The Companys incentive and equity plans are designed to
reward performance. Excellent company performance in 2007
resulted in short-term and long-term compensation payouts at
maximum levels under all of the compensation plans.
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We do not grant stock options. We have not granted stock options
to executives and employees since 2003, and have not granted
stock options to directors since 2006.
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Two of the five named executive officers have employment
agreements. The named executive officers (other than
Mr. Hassey) and certain managers and key employees have
double-trigger change in control severance agreements.
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The Committee reviewed the compensation tables that follow this
discussion. The amounts and types of compensation set forth in
the tables are consistent with the philosophy and intentions of
the Committee when the programs and plans that produced those
compensation types and amounts were implemented. Equity awards
are denominated in shares of Common Stock when granted and,
because of the significant increase in the trading price of the
Companys Common Stock from the date of commencement of the
programs to the closing date of the performance measurement
period, the dollar value of the equity awards also significantly
increased.
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27
ATI
Compensation Pyramid
©
2008 ATI
Key Executive
Performance Plan
This is a cash-based incentive plan with a three-year
performance measurement period. Only the members of
managements executive committee (a group that includes the
named executive officers) are eligible to participate in this
plan. Performance is measured by the degree to which pre-set
Company income before tax levels and specific operational,
team-oriented goals are achieved over the three-year period. If
income before tax performance in one year merits, the plan
reserves an amount for assured payment after the performance
measurement period ends. The purpose of the program has been to
drive the Companys earnings and simultaneously target the
specific business objectives over the three-year period. The
specific objectives for current performance measurement periods
are proprietary. However in past periods, the objectives have
included achievement of specified increases in production
capacity and market share in higher margin materials,
development of specific high performance alloys, specific cost
control objectives, attainment of preset indicia of market
leadership in specific markets, and achievement of balance
sheet, credit rating and pension funding improvements. The
overall objective has been to reposition the Company to achieve
long-term, profitable growth.
Total Shareholder
Return Incentive Compensation Program
This is an equity-based incentive plan in which awards are
denominated in shares of Company Common Stock. Approximately 50
key executives (including the named executive officers)
participate in this plan. Awards denominated in shares of
Company Common Stock are earned to the extent that returns on
Company Common Stock (generally, trading price increase plus
dividends) exceed the returns on common stock of members of a
peer group over a three-year performance measurement period. The
number of shares actually earned will be the target number if
returns on Company Common Stock are at the
50th percentile,
and up to three times target for returns over
90th percentile performance, with interpolation between
these points. The threshold for an award, at one half the
target, is the
25th percentile.
No shares are awarded for returns below
25th percentile
performance. The purpose of this program is to focus management
directly on returns to stockholders.
Performance/Restricted
Stock Program
Shares of performance/restricted stock are awarded to
participants. Approximately 100 key managers participate in this
plan (including the named executive officers). The restrictions
provide that one-half of each award will vest, if at all, only
if pre-set earnings targets are achieved over a three-year
period. Vesting of the other half will accelerate if the
performance targets are reached after three years but otherwise
will vest only if the employee is employed by the Company on the
fifth anniversary of the grant. Shares may also vest upon death,
disability and retirement. This program is primarily designed to
drive Company earnings. However, because this broader group of
managers represents the pool of talent for future management,
the plan has the time-based vesting retention feature.
Annual Incentive
Plan
This is a cash-based, incentive bonus plan in which
approximately 350 key employees (including the named executive
officers) participate. Performance is measured based on a
weighted formula that takes into account operating earnings,
operating cash flow, manufacturing improvements, employee
safety, environmental compliance and responsiveness to
customers. This diverse matrix of measures allows the Committee,
for senior managers, and management, for other managers, to
direct attention to goals and achievements within each
participants direct control. In this regard, awards to
employees of specific operations are measured based on that
operations profit and goal achievement. Goals for more
senior participants concentrate on Company-wide results and
achievement.
Base Salary and
Discretionary Bonus
All salaried employees are paid a base salary that is
benchmarked against a group of public companies with which the
Company competes for salaried employees. For reasons driven by
the geography of the Companys operating locations and
based on skill-set requirements, the peer group for salary
benchmarking is somewhat different from the peer group used for
measuring relative stock price returns. The peer group for stock
price returns is focused more on the Companys industrial
and capital markets classifications. The discretionary bonus
program is available to certain salaried employees who do not
participate in the Annual Incentive Plan and is based on a broad
measure of Company profits and provides rewards to key employees
for their contributions to overall Company performance.
28
Compensation
Philosophy
For many years, and continuing in 2007, the Committees
approach to all manager compensation has been to offer a
compensation package consisting of base compensation competitive
with an identified peer group of companies and incentive
opportunities that are performance oriented and linked to the
interests of stockholders. For approximately 350 key employees,
managers and executives, the program consists of base salary and
potential annual cash-based incentives. For approximately 100 of
such key managers and executives, the program adds longer-term
(generally three year) cash
and/or
equity compensation plans.
The Committee has consistently determined that the compensation
program be:
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Attractive for long-term careers with the Company;
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Performance oriented with opportunities for superior
compensation for superior results;
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Linked to the interests of stockholders; and
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Competitive in the aggregate.
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Attractive for
Long Term Careers
The compensation program is designed to attract and retain a
deep pool of managerial talent that shares the Companys
commitment to enhancing stockholder value in the short and
longer terms. Base salaries are intended to be at the
approximate mid-point of the peer group. In addition, the
Company offers a qualified defined contribution pension plan to
all salaried employees and a non-qualified pension benefit
restoration plan to make up for amounts that cannot be
contributed because of limitations on the qualified plan. Some
salaried employees participate in a defined benefit plan.
However, for most management level employees, the defined
benefit plans have been frozen (Allegheny Ludlum froze its plan
in 1988) or have limited accruals (Teledyne accruals were
curtailed in 1996). Certain key executives participate in a
Supplemental Pension Plan which pays an annuity for
10 years after retirement under specified circumstances
with annual payments at one half of base pay at retirement.
Performance
Oriented
The Committee believes that management employees should have
significant portions of compensation at risk for attaining
performance goals. The more senior the manager, the larger
percentage of compensation should be at risk. The Committee
believes that, if performance exceeds goals, total compensation
should exceed the benchmarks for the peer group described below.
The Committee views the compensation program as a management
tool that, through goal and target setting, encourages the
management team to achieve or surpass the Companys
business objectives. The array of goals and targets used as
incentives across all management levels, which include both
financial performance measures as well as achievement of pre-set
goals within a particular participants area of
responsibility, are designed to encourage a team-oriented
approach to achieving Company profitability objectives and to
position it for the challenges of the future. The Committee
believes that the performance weight and opportunity will
challenge, attract and retain superior managers experienced in
the Companys businesses and direct their efforts toward
achieving specific tasks that the Board and senior executives
determine to be necessary for profitable growth.
Linking
Compensation to the Interests of Stockholders
Over the last several years, the Committee has implemented its
pay-for-performance philosophy by using earnings and stock price
performance as the principal goals for performance driven
programs, particularly for the individuals named in the
compensation tables. Since 2004, the Companys business
plans have progressively focused on profitable growth,
proceeding through stages of reversing losses incurred in years
prior to 2004, then diversifying the Companys mix of
products and then toward achieving market leadership in core
product lines with an emphasis on the most profitable product
lines. Throughout, the Companys business plans have
focused on internal generation of the funds necessary
29
for the sustainable profitable growth and product and end market
diversification. The Committee believes that focusing
compensation programs first on earnings and stock performance
directs managements energies toward achieving those longer
term goals. The Committee also sets team goals for executive
management in certain programs and has designed programs for
other management employees that base a portion of compensation
on predetermined individual achievements within particular
managers area of responsibility.
Competitive in
the Aggregate
The Committee reviews with outside advisors the compensation
practices at peer groups of companies, both those with which the
Company competes for talent in geographic areas and skill sets
and those in our industrial classification. The Committee uses
this information as benchmarks to set base compensation levels
throughout the management team at approximate mid-points of
these groups. As described above, the incentive portions of the
compensation programs provide opportunities to earn additional
amounts. If performance targets are not met, the Companys
compensation program is designed to pay less than the mid-point
for total compensation of the peer groups. If the performance
goals are met or exceeded, the compensation earned under the
Companys programs will be well above the mid-point.
No Stock
Options
The Committee ceased awarding stock options to employees as a
matter of policy after 2003 and to directors after 2006.
Subsequently, the Company became an early adopter of Statement
of Financial Accounting Standards (FAS) No. 123(R)
Share-Based Payments (FAS 123(R)).
Some stock options granted before that time remain outstanding
as reported elsewhere in this Proxy Statement. The Committee
retains discretion to award stock options to employees but there
is no present intent to do so, except possibly in recruitment or
retention situations. At the time that the Committee ceased
awarding stock options, it chose to implement the
Performance/Restricted Stock Program for a smaller, more senior
group of managers than the group previously considered for
option awards. The Committees view was that the
Performance/Restricted Stock Program, by putting half of each
award at risk for performance for the limited group
of employees, would more efficiently provide a strong incentive
to the management employees more able to influence corporate
earnings and goal achievement.
Employment
Contracts and Change in Control Agreements
For retention purposes, the Committee has authorized
participation in qualified and non-qualified retirement plans, a
limited number of employment contracts, and double trigger
change in control severance agreements, all of which reflect
competitive practices. The change in control agreements are
intended to better enable the Company to retain the employee
counterparties in the event that the Company is the subject of a
potential change in control transaction and are in the interests
of the Company and its stockholders. The Committee has been
advised that the potential payments under the change in control
agreements are, individually and in the aggregate, in line with
competitive practices. The Committee takes the value of these
contracts as well as qualified and non-qualified plans into
account when setting compensation. Please see the
Employment and Change in Control Section of this
Proxy Statement.
Adherence to
Ethical Standards; Clawbacks
The payment of awards under the Annual Incentive Plan is
conditioned on adherence to the Companys Corporate
Guidelines for Business Conduct and Ethics. Furthermore, the
Committee has included clawback provisions in each compensation
program that require participants in plans to return
compensation to the extent that earnings or other performance
measures are improperly reported.
30
Federal Income
Taxes
The Committee designs programs intended to be performance based
within the meaning of Section 162(m) of the Code. All
compensation earned under these programs is intended to be
deductible by the Company for federal income tax purposes. The
Committee retains discretion to adjust compensation paid under
these programs to recognize extraordinary performance. If that
discretion is exercised, upward adjustments may not be
deductible for federal income tax purposes.
Process
Role of the
Committee
The Personnel and Compensation Committee is composed of three
independent, non-employee directors and has a twofold task with
respect to the Companys compensation programs. With regard
to the named executive officers and other members of
managements executive committee, the Committee has the
sole responsibility to carry out the Companys overarching
policy of linking the compensation program to the interests of
stockholders. The Committee also has the responsibility to
outline the programs for management employees more generally and
to supervise managements implementation of those programs
to ensure a continuing source of leadership for the Company. The
Committee scales compensation challenges and opportunities by
level of responsibility and focuses performance on measures
particular managers can most directly influence.
The Committee intends that compensation for the named executive
officers should be approximately at the midpoint of the peer
group used for the Total Shareholder Return Incentive
Compensation Program if actual performance is at the midpoint of
the actual performance of that group. The degree to which
compensation is placed at risk is intended to cause named
executive officers to earn less than the midpoint of the peer
group if actual performance is not at target levels, and named
executive officers can earn substantially more than the midpoint
if actual performance exceeds the performance of the peer group.
Monitoring of
Performance and Progress Throughout the Year
The Committee meets periodically during the year to monitor
Company and individual performance and determine
managements progress toward achieving business objectives
and potential payouts under the plans. Portions of these
meetings are attended by members of executive management and,
from time to time, by the Committees outside compensation
and legal advisors. These meetings assist the Committee with its
evaluation of whether the compensation programs continue to
support and direct performance as required to achieve the
Companys business goals.
Compensation
Advisors
With respect to executive compensation, the Committee uses
advisors an independent compensation consultant and
external legal advisors to assist it in reviewing
the continued suitability of the peer groups used for setting
base pay amounts and shareholder return achievement, and to
report on comparable company executive compensation practices.
In particular, the Committee has had long-standing reliance on
its external legal advisors for objectivity with regard to
market practices and the Committees performance-oriented
approach to executive compensation. The compensation advisors
are retained solely by the Committee and are responsible only to
the Committee.
Peer
Group
The Committee has been advised by the advisors regarding the
relative compensation among named executive officers. For the
past several years, the Committees practices for setting
base compensation and incentive opportunities for named
executive officers have differed from practices used by peer
companies. Peer company practices generally focus on job
function. Instead, the Committee has elected for the last
several years to support a team-oriented and collective
responsibility approach by approving equal base salary and
incentive opportunities for the named executive officers that
report directly to the
31
CEO. Recognizing the ultimate management responsibility of the
CEO, base pay and compensation opportunities are significantly
greater for the CEO than for those who report to him. However,
the Committee has been advised that the degree of difference
between the CEO of the Company and the other named executive
officers is not as great as may be found in comparable
companies. The result is intended to benchmark the aggregate of
opportunities at the Company to compare to the aggregate of
opportunities at peer companies but to do so in a way that helps
support a collegial and team-oriented approach to management.
The Committee recognizes that there are no public companies that
engage in the full range of the Companys specialty metals
production, fabrication, marketing and distribution. Peer group
companies have been selected based on relative similarity to one
or more of the aspects of the Companys businesses and on
the risk profiles typically assigned by the capital markets. The
Committee recognizes that some companies in the peer group are
more heavily involved in one aspect of the Companys
business than in others. For example, two members of the peer
group used for benchmarking shareholder return are involved
almost exclusively in the titanium business (and one more in
fabrication than production) while others are primarily in less
specialized stainless steel production and distribution; some
are more heavily involved in sales than in production or
fabricating. However, on balance, the Committee believes the
peer group shown on page 38 under the caption
Three-Year Total Stockholder Return is
representative of companies in the Companys industry that
serve similar markets and the balance of companies allows for
effective benchmarks to inform Committee judgments.
Benchmarking
The Committee receives information from its outside advisors as
to compensation practices across a wider group of industrial
companies. The benchmarking process assists the Committee to
assess the relative competitiveness of the Companys
programs and earnings opportunities as well as to determine the
approaches to compensation used by peers and other industrial
enterprises. Inherent in this process is a review of the
financial performance of the peer companies to determine the
relative efficacy of the programs used at the peer companies and
others to the Companys goals and plans. In addition,
members of the Committee take into account financial and
performance information received as members of the Board as a
whole and through service on other Board committees. All of the
foregoing information enables the Committee to evaluate the
relative performance of the Companys senior management
team individually and in the aggregate and to make informed
judgments concerning compensation programs, methods and award
opportunities. The Committee believes that the benchmarking
process provides an important frame of reference for measurement
and a perspective of competitive practices but should not be the
sole determinant of compensation practices at the Company. The
Committee takes into account the specific business plans and
opportunities of the Company to fashion programs intended to
incent achieving the Company business plans.
Implementation of
Compensation Levels and Opportunities
Near the end of each year, the Board, including members of the
Committee, receives the Companys annual and longer term
business plans and has several opportunities to question
management on those plans. For the last several years, at the
Committees January meeting, substantial time is devoted to
discussing what compensation programs, levels and goals were
effective for the performance measurement periods then recently
ended in December and which programs, levels and goals would
optimize the achievement of the Companys business plans
for future periods. Generally, at the Committees February
or March meeting, the Committee authorizes compensation programs
for future periods and sets specific performance goals for
senior management in light of approved business plans. In
addition, at the February or March meeting, the Committee also
designs compensation programs for other members of the
management group and directs senior managers to make awards
under those programs consistent with guidelines given by the
Committee. Members of executive management, primarily the CEO,
have discretion in fashioning specific awards to key employees
who are not named executive officers. No compensation awards
have been made after March in any year except for internal
32
promotions and external hiring, in which cases, the
Companys general practice has been to slot the incoming
individual into the previously vacated compensation position
(prorated as necessary).
When setting compensation under the Annual Incentive Plan and
for the three-year performance measurement periods of the longer
term incentive plans, the Committee looks to the prospective
periods and does not take into account amounts earned in prior
periods. The peer review process indicates this to be the
industry practice. Moreover, the Committee does not believe that
it is in the best interests of the Company to reduce prospective
compensation opportunities because excellent performance in past
periods has produced maximum cash awards and caused the value of
equity awards to increase significantly from the value on date
of grant.
In setting compensation opportunities, the Committee maintains
an approximate ratio from year to year between the CEO
compensation opportunities and the compensation opportunities of
the corporate executives who report directly to the CEO. In
addition, the Committee treats the three corporate direct
reports to the CEO as co-equals in setting compensation to
reflect the interdisciplinary efforts necessary to achieve the
Companys business goals.
At its periodic monitoring meetings and at its target setting
meetings, the Committee provides the compensation consultant and
its other advisors with the opportunity to review questions and
discuss concepts without the presence of Company personnel.
Committees
Discretion
The Committee has always retained discretion for recruitment and
retention purposes as well as to reward extraordinary
performance. The key concept in the compensation program for
senior executives is and has been to provide comparatively
modest compensation for average performance but to recognize
superior performance with top quartile compensation. The
Committee can make awards above the amounts awarded under the
plan to recognize extraordinary performance. Because of the
superior earnings performance in 2007, the Committee increased
the annual bonus amounts payable to the following individuals
above the formula amount: Mr. Hassey, $323,886;
Messrs. Harshman, Kittenbrink and Walton, $12,582; and
Mr. Dunlap, $48,400. The compensation programs are designed
to comply with Section 162(m) of the Code and cause all
compensation amounts to be deductible. The above discretionary
payments are not performance based compensation and,
therefore, a portion of the discretionary increases may not be
deductible. However, the Committee believed the discretionary
increases to be appropriate and wholly consistent with the
pay-for-performance philosophy. In years past, the
Committee has exercised negative discretion when circumstances
indicated it to be appropriate.
Stock Ownership
Guidelines
The Company has stock ownership guidelines for its officers. The
guidelines call for a minimum level of stock ownership based on
the executives base salary, which is designed to further
link these executives interests to increased stockholder
value, as follows: Chief Executive Officer, three times base
salary; Executive Officers, two times base salary; and Vice
Presidents, one times base salary. The executives must reach the
target ownership levels before September 2008 or five years from
the date executives employment began, whichever is later.
These guidelines were met as of December 31, 2007. The
Company also has stock ownership guidelines for its non-employee
directors, which are discussed in the Director
Compensation section of this Proxy Statement.
Current
Compensation Structures
Base
Compensation: At Mid-Point
The Committee views the compensation program as integrated
through several levels of the Companys management
employees. For base salary, the Committee engaged an independent
compensation consultant to perform a salary survey of a group of
companies with which the Company competes for non-executive
management talent as a benchmark for determining the
reasonableness of base compensation for salaried employees
generally. Base salary for the named executive officers was
benchmarked using a more focused survey of a peer group. With
some exceptions recommended by senior management to meet
competitive and skill set needs, base compensation for the broad
manager group is set at or near the mid-point of the competitive
group.
33
Annual Incentive
Plan or AIP
For executive officers and certain other senior employees, the
performance criteria are determined solely on a corporate-wide
basis. For other participants, performance criteria are geared
to the respective company or division or area of responsibility
of a particular manager. The target incentive opportunities have
ranged from 15% of base compensation for key employees to 80%
for certain members of the managements executive
committee, to 100% of base compensation for executive vice
presidents and 175% of base compensation for the CEO. The AIP
allows the Committee to exercise negative discretion to reduce
payments if actual performance does not exceed targeted
performance. In the most recent three years, the Committee used
its discretion and awarded bonus payments in excess of the AIP
formula in some cases based on the Companys extraordinary
financial performance.
The opportunities for the named executive officers, as measured
in percentages of base pay under the AIP as well as under the
other programs described below, are set each year in connection
with the review of peer group practices and levels in light of
the philosophy to award equal opportunities to executive vice
presidents.
The
Performance/Restricted Stock Program or
PRSP
Earnings thresholds are set with respect to a three-year
business plan. Because of its retention element, the earnings
levels in this plan are not as challenging as the earnings
levels in other incentive programs. For the
2007-2009
performance measurement period, the earnings threshold was set
at $900 million. Awards are denominated in shares of common
stock, using the fair market value of the common stock on the
date of grant which is defined as the average of the high and
low trading prices on the date the award is made by the
Committee. Dollar levels of awards have ranged from 50% of base
compensation for key employees to 125% of base compensation for
executive vice presidents and 200% of base compensation for the
CEO. Because this program is denominated in shares of stock, the
dollar value of awards earned may exceed, or be less than, the
dollar value of the awards when granted.
The Total
Shareholder Return Incentive Compensation Program or
TSRP
Awards are denominated in shares of common stock, using a per
share value equal to the average of the closing price over the
30 trading days immediately preceding the first day of the
performance measurement period. The percentile rank of returns
on the Companys Common Stock compared with actual returns
on the Common Stock of the peer group determines whether
participants receive no shares (less than 25th percentile),
target (at 50th percentile) or up to three times the target
number of shares (90th percentile or higher). Interpolation
is made between these points. The dollar value of grant
opportunities at target on the date of grant in recent years
have ranged from 50% of base compensation for key employees to
125% for executive vice presidents and 200% of base compensation
for the CEO. Because this plan increases the number of shares
that may ultimately be awarded for performance above the target
level, and because performance above the target level may
contribute to a higher trading price, either or both of the
number of shares actually earned and their dollar value when
earned may exceed the target dollar value at grant. Similarly,
because this program is denominated in shares of stock, the
dollar value of awards if earned may be less than the dollar
value of the awards when granted, and the number of shares
ultimately received may be less than the target level, depending
on the Companys performance.
The Key Executive
Performance Plan or KEPP
Under KEPP, cash targets are based on two levels. Improvement in
income before tax over a three-year base period is the measure
for level one. Accomplishment of specific team tasks keyed to
positioning the Company for future challenges provides a
guideline for the negative discretion permitted under level two.
As background, for the
2004-2006
performance measurement period (KEPP I), the minimum level
of achievement required a turnaround in operations and a net
income improvement of $192 million over the prior
three-year period with seven gradients above the minimum target,
with the first gradient of $60 million and the remaining
six gradients at $50 million each. The initial period,
therefore, focused on reversing the losses the Company incurred.
For the
2005-2007
performance measurement period (KEPP II), the focus of
34
KEPP was repositioning the Company to maximize its presence in
higher margin product markets. For the
2006-2008
performance measurement period (KEPP III), the focus was to
internally generate capital to invest in the higher margin
businesses. The
2007-2009
performance measurement period (KEPP IV) focuses on
optimizing the capital assets in which the Company invested over
the recent past.
The Committee intends for the income before taxes (IBT) targets
for this plan to be particularly challenging, requiring
continued substantial earnings improvement over the rolling
three-year prior period which in and of itself may include
exceeding previous record earnings years for each KEPP program
up to the
2007-2009
performance measurement period. The minimum performance level
has exceeded the maximum level when compared to the prior KEPP
performance measurement period. The specific tasks for level two
are proprietary but have included specific strategic goals such
as investing in assets required to penetrate predetermined niche
markets, efficiently increasing the Companys titanium
production capacity, specific cost control measures, increasing
overseas presence and production, balance sheet credit rating
and pension funding improvements and other team-oriented tasks
key to the Companys long term business plan. These
strategic actions are intended to be formidable objectives to
achieve. Target awards are set at one times base salary and
achievement of each gradient above target increases potential
awards by approximately one times base salary. For the
2006-2008
and
2007-2009
performance measurement periods, the KEPP plan has a
banking feature whereby if the actual achievement
for any one or more years exceeds the average annual targets for
that year, a KEPP payment may be reserved to be paid after the
end of the measurement period.
The Committee believes it strikes an appropriate balance for
executive officers between cash and stock compensation
opportunities on one axis and between one year and longer term
measurements on another. At target levels of awards, based on
stock trading values when the award is made, approximately 45%
of compensation opportunities for executive officers are payable
in cash (base pay, AIP and KEPP) and 55% is payable in stock
(PRSP and TSRP). On the axis of short and longer term
performance measurement periods, the Committee believes this
balance achieves consistency in goal setting that considers both
the short term results and building a platform for future
profitable growth. On the axis of cash and equity opportunities,
the Committee believes the ratio focuses the executives
attention on the interest of stockholders and encourages
executives to retain shares of stock. It is expected that the
Committee will strive to retain these general ratios.
Defined
Contribution Plans
The Company also sponsors a number of defined contribution and,
for some executives that were employees of Teledyne, Inc. prior
to the 1996 merger, defined benefit retirement arrangements,
with non-qualified programs compliant with Section 409A of
the Code aimed at restoring the effects of limitations
35
imposed by the Code. The benefits payable under these programs
are more modest than the benefits payable under restoration
plans sponsored by other manufacturing companies, in large part
because accruals for former Teledyne, Inc. employees under the
applicable qualified defined benefit plan for those employees
have been curtailed and the fact that the defined benefit plan
for former Allegheny Ludlum Corporation employees were frozen in
1988. The Company does sponsor a Supplemental Pension
Plan covering certain corporate officers as a
non-qualified plan that pays one half of the individuals
salary at retirement to the executive (or spouse) for ten years
after retirement at or after age 58 with the consent of the
Company. The Company maintains these programs in order to offer
competitive compensation and as retention devices.
Employment
Agreements
The Company is a party to only two employment agreements, a
three-year evergreened agreement with Mr. Hassey that was
entered into when Mr. Hassey was recruited in 2003, and a
one-year evergreened agreement with Mr. Walton that was
entered into in 1996 when Allegheny Ludlum Corporation and
Teledyne, Inc. combined. For a discussion of these agreements,
see the Employment and Change in Control Agreements
section of this Proxy Statement. In the process of recruiting
Mr. Hassey in 2003, the Company agreed to accommodate his
request that he be able to avoid relocating his family from its
Salt Lake City residence. In order to do so, Mr. Hassey
periodically uses Company leased aircraft so that he can
maintain a full schedule with the Company.
Mr. Hasseys employment agreement was signed in August
of 2003 and Mr. Hassey served as a consultant to the
Company prior to October 1, 2003.
Perquisites
The Company provides a limited number of perquisites, having
eliminated the use of automobiles and reimbursement for country
club memberships several years ago.
For more information on each of the incentive compensation
plans, please see the narrative discussion following the Grants
of Plan-Based Awards Table.
CEO Compensation
and Compensation Decisions for Performance Measurement Periods
Ending
in 2007
After the Company incurred losses over the previous three years,
Mr. Hassey began his tenure as CEO on October 1, 2003.
Mr. Hassey and his management team announced the three-year
strategic goals for the Company for 2004 through 2006 as a
turnaround to profitability (KEPP I), as depicted in the
KEPP graph on page 35.
As a result of achieving those KEPP I strategic goals and
the KEPP II strategic goals established in 2005, the
Companys financial performance built to a one-year record
earnings amount of $7.26 per share in 2007. Total net income for
the KEPP II three-year performance measurement period ended
December 31, 2007 was approximately $1.7 billion. The
achievement to date of the strategic goals for KEPP III
(2006-2008) and KEPP IV (2007-2009) were on track for the
completed years of those performance measurement periods. As
reported elsewhere, the actual earnings, relative stock price
and other performance measures of the management performance
programs of the Company have been superior during this period.
The number of shares awarded as opportunities for the 2005
through 2007 performance measurement periods under the TSRP and
PRSP were determined by multiplying base pay by a percentage
(determined in consultation with outside advisors to reflect
competitive practices) divided by the then applicable trading
price. For the TSRP, the applicable stock price was the average
of the closing prices of the Common Stock over the thirty
trading days immediately preceding January 1, 2005, or
$21.615 per share. For the Performance/Restricted Stock, the
applicable stock price was the average of the high and low
trading prices of the stock on the day the award was made, or
$22.895 per share. The result of the process was a fixed number
of target shares.
36
During the
2005-2007
performance measurement period, the management team delivered on
the strategic goals. At the end of 2007, the Companys
revenues had grown to $5.45 billion from $4.94 billion
in 2006 and $3.54 billion in 2005. At the close of the
2005-2007
performance measurement period, the closing trading price was
$86.40 per share (on December 31, 2007). At the time the
achievement of all performance measures was determined on
January 25, 2008, the valuation date for the award
payments, which was two business days following the release of
the Companys fourth quarter 2007 earnings, the average of
the high and low trading prices of ATI Common Stock was $67.435
per share. This per share value is shown in the dollar values of
the compensation in the Option Exercises and Stock Vested Table.
Any increase in the trading price of Company Common Stock does
not increase the relative percentage of outstanding shares
awarded but does have a substantial effect on the dollar value
of the awards realized because the target values increase at the
same rates as the stock prices and rewards to stockholders
increase. In terms of dollars, for the various compensation
periods ending December 31, 2007, only the base pay and
benefit (including the non-qualified plans shown in the
All Other Compensation column of the Summary
Compensation Table) components represented guaranteed
compensation. All other amounts were at risk for
performance achievement. For Mr. Hassey and each of the
other named officers in the Summary Compensation Table, on
average, approximately 90% of their respective compensation
earned during the
2005-2007
performance measurement period was at risk.
In early 2008, the Committee reviewed the 2007 earnings results,
the relative rates of return on Company Common Stock and the
achievement of individual goals. The Committee applied those
results to the formulae under the respective long term plans and
awarded the shares and cash earnings shown in the tables. For
the AIP, based on the Companys extraordinary performance
in 2007, the Committee exercised its discretion and increased
the annual bonus amounts above the formula-derived amount for
Mr. Hassey by $323,886, and for Messrs. Harshman,
Kittenbrink, and Walton, by $12,582 each, and for
Mr. Dunlap, by $48,400, in recognition of the superior
performance for calendar year 2007.
37
Three-Year Total
Stockholder Return
The following graph, which is derived from the comparable
five-year graph appearing in Item 5 of the Companys
Annual Report on
Form 10-K
for the fiscal year ended December 31, 2007, shows the
cumulative total stockholder return (i.e., price change plus
reinvestment of dividends) (TSR) on our Common Stock
for three years, from December 31, 2004 through
December 31, 2007, as compared to the S&P 500 Index
and a peer group of companies. The total stockholder return for
the peer group is weighted according to the respective
issuers stock market capitalization at the beginning of
each period. The graph assumes that $100 was invested on
December 31, 2004. For a comparison of the Companys
TSR for the past five years, please see Item 5 of the
Companys Annual Report on
Form 10-K
for the fiscal year ended December 31, 2007, which contains
the five-year performance graph required by Item 201(e) of
Regulation S-K.
Peer group companies for the cumulative three-year total return
period ended December 31, 2007 were as follows:
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AK Steel Holding Corporation
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Quanex Corporation
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Alcan Inc. (included through 2006)
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Reliance Steel & Aluminum Co.
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Alcoa Inc.
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RTI International Metals, Inc.
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Carpenter Technology Corporation
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Steel Dynamics, Inc.
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IPSCO Inc. (included through 2006)
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Titanium Metals Corporation
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Kennametal Inc.
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United States Steel Corporation
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Nucor Corporation
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COMPARISON OF
CUMULATIVE THREE-YEAR TOTAL RETURN
The peer group depicted above is the peer group reviewed by the
Personnel and Compensation Committee in evaluating the
Companys compensation programs, and is the peer group used
in the
2005-2007
TSRP. Under the TSRP, the total shareholder return (TSR) of the
Company is compared to the TSR of the peer group on an absolute
basis, and is not weighted for market capitalization. The amount
of the award, if any, is determined by measuring the
Companys TSR performance against the relative performance
of all peer group companies without regard to their size. This
is unlike the above performance graph, in which the returns are
weighted for market capitalization, causing the TSR performance
of a large capitalization company to have greater weight than
the TSR performance of a small capitalization company. As a
result, in the performance graph, weak performance of a large
capitalization company will have a greater weight than the
strong performance of a small capitalization company.
38
Summary
Compensation Table for 2007
The following Summary Compensation Table sets forth information
about the compensation paid by the Company to the Chief
Executive Officer, the Chief Financial Officer and to each of
the other three most highly compensated executives required to
file reports under Section 16 of the Securities Exchange
Act of 1934, as of December 31, 2007 (the named
officers).
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Change in
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Pension
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Value and
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Non-Qualified
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Non-Equity
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Deferred
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Name and
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Stock
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Option
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Incentive Plan
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Compensation
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All Other
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Principal
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Salary
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Bonus
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Awards
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Awards
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Compensation
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Earnings
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Compensation
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Total
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Position
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Year
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($)
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($)(1)
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($)(2)
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($)(2)
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($)(3)
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($)(4)
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($)(5)
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($)
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L. Patrick Hassey
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2007
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880,042
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323,886
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3,120,420
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17,959,447
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639,524
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567,172
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23,490,491
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Chairman, President and
Chief Executive Officer
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2006
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850,000
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1,337,584
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1,800,408
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10,445,749
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330,000
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615,248
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15,378,989
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Richard J. Harshman
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2007
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413,733
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12,582
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917,316
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7,707,418
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669,873
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134,845
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9,855,767
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Executive Vice
President, Finance
and Chief Financial
Officer
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2006
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400,000
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130,912
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514,560
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1,788
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4,702,421
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310,000
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127,869
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6,187,550
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Douglas A. Kittenbrink
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2007
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413,733
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12,582
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917,316
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7,707,418
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119,030
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136,443
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9,306,522
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Executive Vice President,
Corporate Planning and
International Business
Development
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2006
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400,000
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130,912
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518,124
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1,788
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4,702,421
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140,000
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123,635
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6,016,880
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Jon D. Walton
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2007
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413,733
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12,582
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917,316
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7,707,418
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61,616
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145,086
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9,257,751
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Executive Vice President,
Human Resources,
Chief Legal and
Compliance Officer,
General Counsel and
Corporate Secretary
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2006
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400,000
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130,912
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514,560
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1,788
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4,702,421
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300,000
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131,808
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6,181,489
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Terry L. Dunlap
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2007
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366,500
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48,400
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610,344
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6,568,267
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(279
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)
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107,243
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7,700,475
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ATI Allegheny Ludlum Business Unit President
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(1) |
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Consists of discretionary cash
bonuses.
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(2) |
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The values set forth in this column
are based on the aggregate grant date fair value of
performance/restricted stock awards, awards under the
Companys TSRP and for 2006, stock options, computed in
accordance with FAS
123(R) and represent the expense
recorded under FAS 123(R), and include
performance/restricted stock and TSRP awards made in 2005, 2006
and 2007 (for 2007 values), and 2004, 2005, and 2006 (for 2006
values), each of which has a three-year performance measurement
period, and stock options granted in 2003 with a three-year
vesting period. A discussion of the relevant assumptions made in
the valuations may be found in Notes 1 and 6 to the
financial statements in the Companys Annual Report on
Form 10-K
for the fiscal year ended December 31, 2007. The right to
receive dividends on performance/restricted stock, which are
paid in the form of additional shares of performance/restricted
stock for grants made prior to 2007, is not reflected in the
grant date fair value computed under FAS 123(R). See
note 5 below for the amount of dividends paid thereon in
2007. Dividends on performance/restricted stock granted in 2007
are paid in cash.
|
|
(3) |
|
Consists of performance-based cash
awards earned for the years indicated under the AIP and KEPP for
the
2005-2007
and
2004-2006
performance measurement periods, respectively, as follows: for
2007, Mr. Hassey, $3,676,113 and $8,500,000, for each
Messrs. Harshman, Kittenbrink and Walton, $987,417 and
$4,000,000, and for Mr. Dunlap, $651,600 and $3,500,000;
and for 2006, Mr. Hassey, $1,612,416 and $6,000,000, for
each Messrs. Harshman, Kittenbrink, and Walton, $569,088
and $2,800,000. This column also includes amounts earned under
the
2006-2008
KEPP and
2007-2009
KEPP based on 2006 and 2007 performance, which amounts are not
payable until the completion of the
2006-2008
and
2007-2009
performance measurement periods, respectively, and are subject
to forfeiture prior to the end of the performance measurement
period if employment is terminated for reasons other than death,
disability or retirement.
|
|
(4) |
|
The amounts in this column reflect
the actuarial change in the present value of the named
officers benefits under all defined benefit pension plans
(both qualified and non-qualified) established by the Company
determined using interest rate and mortality rate assumptions
consistent with those used in the Companys financial
statements and include amounts which the named officer currently
may not be entitled to receive because such amounts are not
vested.
|
39
|
|
|
(5) |
|
The amounts do not include
perquisites and other personal benefits received individually by
Messrs. Harshman, Kittenbrink, Walton and Dunlap because
the aggregate value of such benefits for each individual did not
exceed $10,000. Mr. Hassey received perquisites and
personal benefits in 2007 of $147,935 for air travel. He also
received amounts for club membership and parking.
|
Other amounts included in the All Other Compensation
Column consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contributions
|
|
|
|
|
|
|
|
|
|
|
made by the
|
|
|
|
|
|
|
|
|
|
|
Company to
|
|
|
|
|
|
|
|
|
|
|
401(k) and
|
|
|
|
Dividends on
|
|
|
|
|
|
|
other
|
|
|
|
Nonvested
|
|
|
|
|
Benefit
|
|
Defined
|
|
|
|
Performance/
|
|
|
|
|
Restoration
|
|
Contribution
|
|
Insurance
|
|
Restricted
|
|
|
Tax Reimbursements
|
|
Plan
|
|
Plans
|
|
Premiums
|
|
Shares
|
Name
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
|
L. Patrick Hassey
|
|
31,231 (for air travel, city club membership and parking)
|
|
|
322,328
|
|
|
|
22,895
|
|
|
|
13,530
|
|
|
|
24,507
|
|
Richard J. Harshman
|
|
3,283 (for city club membership and parking)
|
|
|
94,567
|
|
|
|
22,895
|
|
|
|
*
|
|
|
|
*
|
|
Douglas A. Kittenbrink
|
|
3,255 (for city club membership and parking)
|
|
|
89,692
|
|
|
|
22,895
|
|
|
|
*
|
|
|
|
*
|
|
Jon D. Walton
|
|
3,873 (for city club membership and parking)
|
|
|
94,567
|
|
|
|
22,895
|
|
|
|
11,836
|
|
|
|
*
|
|
Terry L. Dunlap
|
|
|
|
|
79,108
|
|
|
|
22,895
|
|
|
|
*
|
|
|
|
*
|
|
|
|
|
|
*
|
|
Amount is included in the All
Other Compensation Column but did not exceed $10,000.
|
The value of any perquisites, including personal travel amounts,
are calculated based on the aggregate incremental cost to the
Company. Amounts for Mr. Hassey relating to air travel,
most of which are travel expenses to and from
Mr. Hasseys family home in Salt Lake City, Utah, are
calculated based on the variable costs of hourly and fuel
charges and excise taxes paid by the Company for the leased
aircraft used. Fixed costs are not included. In the process of
recruiting Mr. Hassey in 2003, the Company agreed to
accommodate his request that he be able to avoid relocating his
family from its Salt Lake City residence. In order to do so,
Mr. Hassey periodically uses Company leased aircraft so
that he can maintain a full schedule with the Company.
Mr. Hasseys use of Company leased aircraft for these
purposes is a provision of Mr. Hasseys employment
agreement with the Company. Also, the Personnel and Compensation
Committee has required Mr. Hassey to use Company leased
aircraft for the Companys benefit.
Under the non-qualified Defined Contribution Benefit Restoration
Plan, the Company supplements payments received by participants
under the Companys defined contribution plan (which is
known as the Retirement Savings Plan) by accruing
benefits on behalf of participants in amounts that are
equivalent to the portion of the formula contributions or
benefits that cannot be made under such plan due to limitations
imposed by the Internal Revenue Code. See also the narrative
discussion following the Non-Qualified Deferred Compensation
Table.
The quarterly dividends paid on shares of performance/restricted
stock, as described in note 2 above, are based on the
intra-day
price of the shares on the applicable dividend payment date. The
price used to reinvest shares, and the mechanism and manner in
which the dividends are reinvested, are consistent with the
Companys dividend reinvestment plan.
40
Grants
of Plan-Based Awards for 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option
|
|
|
|
|
|
|
|
|
|
|
Estimated
|
|
Estimated
|
|
All Other
|
|
Awards:
|
|
Exercise
|
|
|
|
|
|
|
|
|
Possible Payouts
|
|
Possible Payouts
|
|
Stock
|
|
Number of
|
|
Or Base
|
|
Grant Date
|
|
|
|
|
|
|
Under Non-Equity
|
|
Under Equity
|
|
Awards:
|
|
Securities
|
|
Price of
|
|
Fair Value of
|
|
|
|
|
|
|
Incentive Plan Awards
|
|
Incentive Plan Awards
|
|
Number
|
|
Underlying
|
|
Option
|
|
Plan-Based
|
|
|
|
|
Grant
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
of Shares
|
|
Options
|
|
Awards
|
|
Equity
|
Name
|
|
Description(1)
|
|
Date
|
|
($)
|
|
($)
|
|
($)
|
|
(#)(2)
|
|
(#)(2)
|
|
(#)(2)
|
|
of Stock (#)
|
|
(#)
|
|
($/sh)
|
|
Awards
($)(3)
|
|
|
L. Patrick Hassey
|
|
|
AIP
|
|
|
|
|
|
|
|
774,375
|
|
|
|
1,548,750
|
|
|
|
3,676,114
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PRSP
|
|
|
|
2/21/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,423
|
|
|
|
16,845
|
|
|
|
16,845
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,768,051
|
|
|
|
|
TSRP
|
|
|
|
2/21/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,019
|
|
|
|
20,037
|
|
|
|
60,111
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,720,270
|
|
|
|
|
KEPP
|
|
|
|
|
|
|
|
885,000
|
|
|
|
885,000
|
|
|
|
8,850,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
1,659,375
|
|
|
|
2,433,750
|
|
|
|
12,526,114
|
|
|
|
18,442
|
|
|
|
36,882
|
|
|
|
76,956
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,488,321
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard J. Harshman
|
|
|
AIP
|
|
|
|
|
|
|
|
208,000
|
|
|
|
416,000
|
|
|
|
987,418
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PRSP
|
|
|
|
2/21/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,477
|
|
|
|
4,954
|
|
|
|
4,954
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
519,972
|
|
|
|
|
TSRP
|
|
|
|
2/21/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,943
|
|
|
|
5,886
|
|
|
|
17,658
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,092,854
|
|
|
|
|
KEPP
|
|
|
|
|
|
|
|
416,000
|
|
|
|
416,000
|
|
|
|
4,160,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
624,000
|
|
|
|
832,000
|
|
|
|
5,147,418
|
|
|
|
5,420
|
|
|
|
10,840
|
|
|
|
22,612
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,612,826
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Douglas A. Kittenbrink
|
|
|
AIP
|
|
|
|
|
|
|
|
208,000
|
|
|
|
416,000
|
|
|
|
987,418
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PRSP
|
|
|
|
2/21/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,477
|
|
|
|
4,954
|
|
|
|
4,954
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
519,972
|
|
|
|
|
TSRP
|
|
|
|
2/21/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,943
|
|
|
|
5,886
|
|
|
|
17,658
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,092,854
|
|
|
|
|
KEPP
|
|
|
|
|
|
|
|
416,000
|
|
|
|
416,000
|
|
|
|
4,160,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
624,000
|
|
|
|
832,000
|
|
|
|
5,147,418
|
|
|
|
5,420
|
|
|
|
10,840
|
|
|
|
22,612
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,612,826
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jon D. Walton
|
|
|
AIP
|
|
|
|
|
|
|
|
208,000
|
|
|
|
416,000
|
|
|
|
987,418
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PRSP
|
|
|
|
2/21/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,477
|
|
|
|
4,954
|
|
|
|
4,954
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
519,972
|
|
|
|
|
TSRP
|
|
|
|
2/21/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,943
|
|
|
|
5,886
|
|
|
|
17,658
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,092,854
|
|
|
|
|
KEPP
|
|
|
|
|
|
|
|
416,000
|
|
|
|
416,000
|
|
|
|
4,160,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
624,000
|
|
|
|
832,000
|
|
|
|
5,147,418
|
|
|
|
5,420
|
|
|
|
10,840
|
|
|
|
22,612
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,612,826
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Terry L. Dunlap
|
|
|
AIP
|
|
|
|
|
|
|
|
150,000
|
|
|
|
300,000
|
|
|
|
651,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PRSP
|
|
|
|
2/21/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,787
|
|
|
|
3,573
|
|
|
|
3,573
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
375,022
|
|
|
|
|
TSRP
|
|
|
|
2/21/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,123
|
|
|
|
4,245
|
|
|
|
12,735
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
788,169
|
|
|
|
|
KEPP
|
|
|
|
|
|
|
|
375,000
|
|
|
|
375,000
|
|
|
|
3,750,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
525,000
|
|
|
|
675,000
|
|
|
|
4,401,600
|
|
|
|
3,910
|
|
|
|
7,818
|
|
|
|
16,308
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,163,191
|
|
|
|
|
|
(1) |
|
Represents the Companys
Annual Incentive Plan (AIP), Performance/Restricted Stock
Program (PRSP), Total Shareholder Return Incentive Compensation
Program (TSRP) and Key Executive Performance Plan (KEPP).
|
|
(2) |
|
Amounts do not include associated
dividends received on performance/restricted stock awarded in
the form of additional shares of performance/restricted stock.
Dividends on performance/restricted stock granted in 2007 are
paid in cash.
|
|
(3) |
|
The values set forth in this column
are based on the aggregate grant date fair value of awards
computed in accordance with FAS 123(R). A discussion of the
relevant assumptions made in the valuations may be found in
Notes 1 and 6 to the financial statements in the
Companys Annual Report on
Form 10-K
for the fiscal year ended December 31, 2007.
|
41
Annual Incentive
Plan
In considering performance targets for the 2007 AIP, the
Committee took into account the Companys business and
operations plans. The Committee recognized that opportunities
for 2007 should allow for reasonable rewards for meeting, and
larger amounts for exceeding, the performance goals that
represented substantial challenges to AIP participants. The
Company performance goals for 2007 consisted of the following
components:
|
|
|
|
|
Operating Earnings Achievements
|
|
|
40
|
%
|
Operating Cash Flow Achievements
|
|
|
30
|
%
|
Manufacturing Improvements
|
|
|
10
|
%
|
(Inventory Turns 5%)
|
|
|
|
|
(Yield Improvements 5%)
|
|
|
|
|
Safety and Environmental Improvements
|
|
|
10
|
%
|
(Lost Time Incidents 5%)
|
|
|
|
|
(Recordable Incidents 5%)
|
|
|
|
|
Customer Responsiveness Improvements
|
|
|
10
|
%
|
(Delivery Performance 5%)
|
|
|
|
|
(Quality/Complaints 5%)
|
|
|
|
|
Under the 2007 AIP, no payments were to be made if the operating
earnings achieved were less than the established minimums for
each item, notwithstanding the level of achievement of the other
performance goals for the year. In addition, a prerequisite to
any award is compliance with ATIs Corporate Guidelines
for Business Conduct and Ethics.
Individual AIP opportunities are granted at
Threshold, Target and
Maximum levels, which are predetermined levels of
achievement of the performance goals and are expressed as a
percentage of base salary. For Mr. Hassey, the respective
percentages of base pay that could be paid under AIP for 2007
based on the relative levels of achievement were 87.5% at
Threshold, 175% at Target and 350% at Maximum. For
Messrs. Harshman, Kittenbrink and Walton, the Committee
determined that the percentages of base salary to be paid under
AIP for 2007 at Threshold would each be 50%, at Target would
each be 100% and at Maximum would each be 200%. For
Mr. Dunlap, the Committee determined that the percentages
of base salary to be paid under AIP for 2007 at Threshold would
be 40%, at Target would be 80% and at Maximum would be 160%.
Under the AIP, the Committee retains negative discretion to
reduce actual amounts payable to each individual by up to 20% if
the individual does not achieve goals determined appropriate by
the Committee. The Committee also has the discretion to pay up
to 20% of an individuals calculated award as annual bonus
if, in its discretion, such additional amounts are warranted
under the circumstances, including achieving financial
performance in excess of the Maximum performance goals set for
the year. No discretionary additional amount would be
performance-based compensation for purposes of
Section
162(m) of the Internal Revenue Code of 1986, as
amended.
As previously disclosed, the Committee has chosen not to grant
stock options to employees as a matter of policy after 2003 and,
although permitted to grant stock options under the 2007
Incentive Plan, the Committee did not grant stock options in
2007.
The programs implemented for the
2007-2009
performance measurement period, and also reflected in preceding
tables, were:
Performance/Restricted Stock Program (PRSP)
For the
2007-2009
performance measurement period, one-half of the stock-based
awards granted will vest, if at all, only upon the
Companys achievement of at least an aggregate of
$900 million in net income (determined in accordance with
U.S. generally accepted accounting principles) for the
period of January 1,
42
2007 through and including December 31, 2009. If the net
income target is not reached or exceeded on or before
December 31, 2009, or if the individual leaves the employ
of the Company for a reason other than retirement, death or
disability, this one-half of the stock-based award will be
forfeited.
The other one-half of the stock-based awards is traditional
restricted stock but also has a performance element. This
one-half of each award will vest upon the earlier of
(i) February 22, 2012 (if, except in the case of
retirement, death or disability, the participant is still an
employee of the Company on that date) or (ii) attainment of
the performance criteria for the January 1, 2007 through
December 31, 2009 period. The share amount of the
performance/restricted stock award is calculated as a percent of
base salary, based on the average trading price of the stock on
the New York Stock Exchange on the date of the award. The
respective percentage of base salary used to determine the
number of shares of performance/restricted stock for the named
officers is as follows: Mr. Hassey, 200%,
Messrs. Harshman, Kittenbrink and Walton, 125% and
Mr. Dunlap, 100%.
Dividends on performance/restricted stock are paid in cash for
the
2007-2009
measurement period.
Total Shareholder
Return Incentive Compensation Program
(TSRP)
Under the TSRP, participants receive an opportunity to earn a
target number of shares based on a comparison of the
Companys total stockholder return (change in stock price
plus dividends paid, or TSR) for a three-year
performance measurement period, compared to the TSR for the same
performance measurement period of a peer group of companies
approved by the Committee. The peer group consists of publicly
held companies that engage in metals, metals-handling and
aerospace-related or metals-related businesses. The peer group
is more fully discussed in the Three-Year Total
Stockholder Return portion of the Executive
Compensation Compensation Discussion and
Analysis section of this Proxy Statement.
The Committee determined that there would be a new TSRP
performance measurement period starting on January 1, 2007,
and ending on December 31, 2009. Under the terms of the
TSRP, the Committee selected the eligible participants,
established a target number of performance shares for each
participant, and constructed the peer group of companies for
that performance measurement period. The target number of shares
was determined by dividing a predetermined percentage of an
individuals base salary by the average closing price of a
share of Company Common Stock for the thirty trading days
preceding January 1, 2007, $88.338. The percentage of base
salary used to determine the number of shares to be issued under
the program for the named officers at target is as follows:
Mr. Hassey, 200%, Messrs. Harshman, Kittenbrink and
Walton, 125%, and Mr. Dunlap 100%.
For the
2007-2009
performance measurement period, participants in the TSRP can
earn from 50% (at threshold, which is performance at the
25th percentile) to a maximum of 300% of the target number
of shares for performance at the 90th percentile or above,
depending on the percentile rank of the Companys TSR for
the performance measurement period as compared to the TSR of the
peer group of companies for the same period. Performance below
threshold earns 0%. The earned number of shares of Company
Common Stock, if any, are issued to the participants after the
end of the performance measurement period. The design of the
TSRP was largely unchanged from 2006.
Key Executive
Performance Plan (KEPP)
The Companys KEPP is a long-term cash bonus plan in which
managements executive committee, including the five named
officers, participate and will receive cash payments if, but
only if, a predetermined level of financial performance is
attained or exceeded for the applicable performance measurement
period. KEPP was established by the Committee initially in 2004
in order to keep the Companys long-term incentive programs
competitive with peer companies. The Committee has established
three performance measurement periods under the KEPP applicable
for purposes of the compensation tables:
2005-2007
(KEPP II),
2006-2008
(KEPP III) and
2007-2009
(KEPP IV). See the KEPP graph on page 35 of this Proxy
Statement.
43
The KEPP program is divided into two levels, one requiring
payment of cash bonuses if a designated threshold level of
income before taxes for the
2007-2009
performance measurement period is reached, and the second
permitting the Committee to exercise negative discretion on a
separate level bonus pool formed if the preset financial
performance goals are reached. The Committees negative
discretion concerning the second level is based on the
Committees evaluation of the extent to which designated
key operational objectives are achieved and the Committees
evaluation of the performance of the trading price of Company
Common Stock.
Opportunities under KEPP are scaled so that aggregate
compensation of participants will be at or below median of a
comparable group of companies (see peer group of companies
listed on page 38 of this Proxy Statement) if performance
is less than the threshold level of payment, but will result in
aggregate compensation to KEPP participants at approximately the
90th percentile of the comparator group if performance is
at the highest preset gradient. Threshold and gradients are
intended to be substantial challenges to participants and are
set with reference to improvements in income before taxes over
the preceding periods actual results.
For the
2005-2007
three-year performance measurement period of KEPP II, the
threshold level of performance required income before taxes of
$420 million at threshold and an additional
$40 million of income before taxes for each of the ten
gradients. No additional amount was paid for performance
achieving income before taxes above the highest gradient. Actual
income before taxes was approximately $1.7 billion;
therefore, the KEPP II paid out at maximum performance
levels for the
2005-2007
performance measurement period.
For the
2006-2008
performance measurement period of KEPP III, an aggregate of
$900 million in income before taxes is required at
threshold, and each of the successive nine gradients requires an
additional $100 million in aggregate income before taxes.
No additional amount will be paid for performance achieving
income before taxes above the highest gradient.
For the
2007-2009
performance measurement period of KEPP IV, an aggregate of
$2.5 billion in income before taxes is required at
threshold, and each of the successive nine gradients requires an
additional $100 million in aggregate income before taxes.
Additionally, at level two for KEPP, there are specific goal
tasks that are proprietary but have in the past included
acquiring assets required to penetrate predetermined niche
markets, efficiently increasing the Companys titanium
production capacity, specific cost control measures, increasing
overseas presence and production and other team-oriented tasks
key to the Companys long term business plan designed to
fundamentally reposition the Company to succeed in cyclical
markets. KEPP payments may be made if the actual achievement for
any one or more years exceeds the average annual targets. In
2007, the Committee was informed by its compensation consultant
that, in the sixteen year period then completed, only one
company in the comparator group has maintained the rate of
earnings and income before taxes improvements required to
qualify for threshold levels of payments for the three
performance measurement periods.
For the
2007-2009
performance measurement period, the payment to continuing KEPP
participants (which included Dr. Jack W. Shilling at
the time the measurement period began and who has since retired)
for threshold performance is approximately 0.14% of the amount
of income before taxes for each of level one and level two, and
the payment opportunities increase to approximately 1.03% of the
designated amount of income before taxes for level one and for
level two at the highest gradient. No compensation will be paid
for performance in excess of the highest gradient.
The percentage of the bonus pools that would or could be paid to
individual participants varies slightly at the various gradients
for the
2005-2007
and the
2006-2008
measurement periods. For those years, the CEOs percentage
of any pool is not greater than 24% at any gradient above
threshold and, at some gradients, is less. The other named
officers opportunities average approximately 11% each at
the various gradients for those performance measurement periods.
Beginning for the
2007-2009
performance measurement period,
44
the gradients are a direct function of base salary at each
gradient. The CEOs percentage of the potential pools for
2007-2009 is
approximately 26%.
For a discussion of employment agreements that the named
officers have entered into with the Company, please see the
Employment and Change in Control Agreements section
of this Proxy Statement.
Outstanding
Equity Awards at Fiscal Year-End for 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan
|
|
Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
Awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
|
|
Market
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
of
|
|
or Payout
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
Market
|
|
Unearned
|
|
Value of
|
|
|
|
|
|
|
|
|
Plan
|
|
|
|
|
|
Number of
|
|
Value of
|
|
Shares,
|
|
Unearned
|
|
|
|
|
Number of
|
|
Number of
|
|
Awards:
|
|
|
|
|
|
Shares or
|
|
Shares or
|
|
Units or
|
|
Shares,
|
|
|
|
|
Securities
|
|
Securities
|
|
Number of
|
|
|
|
|
|
Units of
|
|
Units of
|
|
Other
|
|
Units or
|
|
|
|
|
Underlying
|
|
Underlying
|
|
Securities
|
|
|
|
|
|
Stock
|
|
Stock
|
|
Rights
|
|
Other
|
|
|
|
|
Unexercised
|
|
Unexercised
|
|
Underlying
|
|
Option
|
|
|
|
that
|
|
that
|
|
that
|
|
Rights
|
|
|
|
|
Options
|
|
Options
|
|
Unexercised
|
|
Exercise
|
|
Option
|
|
Have
|
|
Have
|
|
Have Not
|
|
That have not
|
|
|
|
|
Exercisable
|
|
Unexercisable
|
|
Unearned
|
|
Price
|
|
Expiration
|
|
Not Vested
|
|
Not Vested
|
|
Vested
|
|
Vested
|
Name
|
|
Grant Date
|
|
(#)(1)(2)
|
|
(#)(1)
|
|
Options (#)
|
|
($)
|
|
Date
|
|
(#)(1)(3)
|
|
($)(4)
|
|
(#)(1)
|
|
($)(4)
|
|
|
L. Patrick Hassey
|
|
|
02/22/2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,647
|
|
|
|
574,301
|
|
|
|
6,646
|
(5)
|
|
|
574,214
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
02/22/2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
46,977
|
(6)
|
|
|
4,058,853
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
02/21/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,423
|
|
|
|
727,747
|
|
|
|
8,422
|
(5)
|
|
|
727,661
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
02/21/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,312
|
(6)
|
|
|
1,236,594
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,070
|
|
|
|
1,302,048
|
|
|
|
76,358
|
|
|
|
6,597,322
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard J. Harshman
|
|
|
01/24/2003
|
|
|
|
10,000
|
|
|
|
|
|
|
|
|
|
|
|
5.70
|
|
|
|
01/24/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
02/12/2003
|
|
|
|
5,000
|
|
|
|
|
|
|
|
|
|
|
|
3.63
|
|
|
|
02/12/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
02/22/2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,995
|
|
|
|
168,912
|
|
|
|
1,955
|
(5)
|
|
|
168,912
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
02/22/2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,817
|
(6)
|
|
|
1,193,780
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
02/21/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,477
|
|
|
|
214,013
|
|
|
|
2,477
|
(5)
|
|
|
214,013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
02/21/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,204
|
(6)
|
|
|
363,258
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,432
|
|
|
|
382,925
|
|
|
|
22,453
|
|
|
|
1,939,963
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Douglas A. Kittenbrink
|
|
|
02/22/2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,995
|
|
|
|
168,912
|
|
|
|
1,955
|
(5)
|
|
|
168,912
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
02/22/2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,817
|
(6)
|
|
|
1,193,780
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
02/21/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,477
|
|
|
|
214,013
|
|
|
|
2,477
|
(5)
|
|
|
214,013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
02/21/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,204
|
(6)
|
|
|
363,258
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,432
|
|
|
|
382,925
|
|
|
|
22,453
|
|
|
|
1,939,963
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jon D. Walton
|
|
|
01/24/2003
|
|
|
|
10,000
|
|
|
|
|
|
|
|
|
|
|
|
5.70
|
|
|
|
01/24/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
02/12/2003
|
|
|
|
5,000
|
|
|
|
|
|
|
|
|
|
|
|
3.63
|
|
|
|
02/12/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
02/22/2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,995
|
|
|
|
168,912
|
|
|
|
1,955
|
(5)
|
|
|
168,912
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
02/22/2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,817
|
(6)
|
|
|
1,193,780
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
02/21/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,477
|
|
|
|
214,013
|
|
|
|
2,477
|
(5)
|
|
|
214,013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
02/21/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,204
|
(6)
|
|
|
363,258
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,432
|
|
|
|
382,925
|
|
|
|
22,453
|
|
|
|
1,939,963
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Terry L. Dunlap
|
|
|
02/22/2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,332
|
|
|
|
114,221
|
|
|
|
1,321
|
(5)
|
|
|
114,134
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
02/22/2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,705
|
(6)
|
|
|
752,102
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
02/21/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,787
|
|
|
|
154,397
|
|
|
|
1,786
|
(5)
|
|
|
154,310
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
02/21/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,032
|
(6)
|
|
|
261,982
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,109
|
|
|
|
268,618
|
|
|
|
14,844
|
|
|
|
1,282,529
|
|
|
|
|
|
(1) |
|
This table relates to unexercised
options to purchase Company Common Stock as of December 31,
2007, and shares of performance/restricted stock and awards
under the TSRP that have not vested for performance measurement
periods ending in 2008 and 2009.
|
|
(2) |
|
Stock options awarded to named
officers vested in equal amounts annually over three years from
their respective dates of grant.
|
|
(3) |
|
Consists of shares of time-based
restricted stock. In conjunction with the shares set forth in
the Equity Incentive Plan Awards: Number of Unearned
Shares, Units or Other Rights that Have Not Vested column
of this table, the number of shares reported in this column
represent the number of shares that would be awarded if the
maximum performance measure under the Performance/Restricted
Stock Program for the
2006-2008
and
2007-2009
performance measurement periods are met at the end of the
applicable performance measurement period. This assumption was
made because 2007 performance exceeded maximum.
|
|
(4) |
|
Amounts were calculated using
$86.40 per share, the closing trading price of Company Common
Stock at December 31, 2007. When the performance/restricted
stock was granted in February 2006, the share price used to
determine the number of shares
|
45
|
|
|
|
|
awarded was the average of the high
and low trading prices on the date of grant, which was $51.155.
When the performance/restricted stock was granted in February
2007, the share price used to determine the number of shares
awarded was the average of the high and low trading prices on
the date of grant, which was $104.96. When the TSRP share awards
were granted, the stock price used to calculate the number of
shares was $33.7263 in 2006 and was $88.338 in 2007, which is
the average closing price of Company Common Stock for the thirty
trading days prior to the first day of the performance
measurement period.
|
|
(5) |
|
Consists of shares of
performance-based restricted stock. In conjunction with the
shares set forth in the Number of Shares or Units of Stock
that Have Not Vested column of this table, the number of
shares reported in this column represent the number of shares
that would be awarded if the maximum performance measure under
the Performance/Restricted Stock Program for the
2006-2008
and
2007-2009
performance measurement periods are met at the end of the
applicable performance measurement period. This assumption was
made because 2007 performance exceeded maximum.
|
|
(6) |
|
Represents the number of shares
that would be awarded if the maximum performance measure under
the TSRP for the
2006-2008
and
2007-2009
performance measurement periods are met at the end of the
performance measurement period. This assumption was made because
2007 performance exceeded maximum.
|
Option
Exercises and Stock Vested for 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
Number of
|
|
|
Value
|
|
|
Number of
|
|
|
|
|
|
|
Shares
|
|
|
Realized on
|
|
|
Shares
|
|
|
Value
|
|
|
|
Acquired on
|
|
|
Exercise
|
|
|
Acquired on
|
|
|
Realized on
|
|
Name
|
|
Exercise
(#)(1)
|
|
|
($)(3)
|
|
|
Vesting
(#)(4)
|
|
|
Vesting
($)(5)
|
|
|
|
|
L. Patrick Hassey
|
|
|
46,000
|
(2)
|
|
|
4,345,665
|
|
|
|
124,748
|
|
|
|
8,412,400
|
|
Richard J. Harshman
|
|
|
|
|
|
|
|
|
|
|
36,691
|
|
|
|
2,474,276
|
|
Douglas A. Kittenbrink
|
|
|
|
|
|
|
|
|
|
|
36,691
|
|
|
|
2,474,276
|
|
Jon D. Walton
|
|
|
|
|
|
|
|
|
|
|
36,691
|
|
|
|
2,474,276
|
|
Terry L. Dunlap
|
|
|
|
|
|
|
|
|
|
|
18,491
|
|
|
|
1,246,935
|
|
|
|
|
|
|
(1) |
|
Options to purchase Company Common
Stock were awarded pursuant to the Companys 2000 Incentive
Plan.
|
|
(2) |
|
Mr. Hassey exercised 46,000
stock options on January 30, 2007.
|
|
(3) |
|
Amounts were calculated by
multiplying the number of shares acquired upon exercise of the
stock options by the difference between the exercise price of
the stock options and the value received upon sale of Company
Common Stock on the applicable date of exercise.
|
|
(4) |
|
Consists of shares of
performance/restricted stock awarded on February 25, 2005
pursuant to the Performance/Restricted Stock Program plus
dividends paid on such shares during the
2005-2007
performance measurement period in the form of additional shares
of performance/restricted stock, and shares awarded at the
maximum amount (or three times target) based on performance
pursuant to the TSRP at the 90th percentile or above,
respectively, in the following amounts for the named officers
(excluding dividend amounts): Mr. Hassey, 29,701 and
94,380; Messrs. Harshman, Kittenbrink and Walton, 8,736 and
27,759; Mr. Dunlap, 4,403 and 13,989.
|
|
(5) |
|
Amounts were calculated using the
award price of $67.435 per share, which was the average of the
high and low trading prices of Company Common Stock for
January 25, 2008, the business day prior to the award
payment date. The closing price of Company Common Stock on the
date that the performance measurement period ended,
December 31, 2007, was $86.40 per share.
|
|
|
|
When the stock awards, as described
in note 4 to this table, were made in 2005, the price used
to determine the number of shares of performance/restricted
stock issued was $22.895, which was the average of the high and
low trading prices of Company Common Stock on the NYSE on
February 25, 2005. At the time the TSRP award opportunity
was set in 2005 for the
2005-2007
performance measurement period, the awards were denominated in
shares of Company Common Stock based on a percentage of the
participants base salary at the beginning of the
performance measurement period, with the number of shares
determined using the average closing price for a share of
Company Common Stock on the NYSE for the thirty trading days
immediately prior to the beginning of the performance
measurement period, which was $21.615.
|
46
Pension
Benefits for 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Present Value
|
|
|
|
|
|
|
Number of Years
|
|
of Accumulated
|
|
Payments During
|
|
|
|
|
Credited Service
|
|
Benefit
|
|
Last Fiscal Year
|
Name
|
|
Plan Name
|
|
(#)(1)
|
|
($)(2)
|
|
($)
|
|
|
L. Patrick Hassey
|
|
Supplemental Pension Plan
|
|
|
4
|
|
|
|
1,644,434
|
|
|
|
|
|
Richard J. Harshman
|
|
ATI Pension Plan
|
|
|
28
|
|
|
|
655,804
|
|
|
|
|
|
|
|
ATI Benefit Restoration Plan
|
|
|
21
|
|
|
|
803,801
|
|
|
|
|
|
|
|
Supplemental Pension Plan
|
|
|
7
|
|
|
|
805,789
|
|
|
|
|
|
Douglas A. Kittenbrink
|
|
ATI Pension Plan
|
|
|
14
|
|
|
|
468,108
|
|
|
|
|
|
|
|
Supplemental Pension Plan
|
|
|
16
|
|
|
|
873,871
|
|
|
|
|
|
Jon D. Walton
|
|
ATI Pension Plan
|
|
|
20
|
|
|
|
1,494,028
|
|
|
|
|
|
|
|
Supplemental Pension Plan
|
|
|
22
|
|
|
|
1,528,462
|
|
|
|
|
|
Terry L. Dunlap
|
|
ATI Pension Plan
|
|
|
5
|
|
|
|
19,823
|
|
|
|
|
|
|
|
|
|
(1) |
|
Years of credited service reflect
the number of years of service used for determining benefits for
each individual during their participation under the respective
plans.
|
|
(2) |
|
The present value of accumulated
benefit as of December 31, 2007 is computed using the
relevant actuarial assumptions consistent with those used to
value the Companys defined benefit pension plans in the
Companys 2007 audited financial statements.
|
The Company maintains a qualified defined benefit pension plan,
called the Allegheny Technologies Incorporated Pension Plan
(ATI Pension Plan), which has a number of benefit
formulas that apply separately to various groups of employees
and retirees. In general, the variances among formulas are
determined by work location and job classification. A principal
determinant is whether an employee was employed by Allegheny
Ludlum Corporation (Allegheny Ludlum), as in the
case of Messrs. Kittenbrink and Walton, or by Teledyne,
Inc. (TDY), as in the case of Mr. Harshman, in
1996 when those corporations engaged in a business combination
to form the Company. Mr. Hassey does not participate in the
ATI Pension Plan under any formula.
Allegheny Ludlum ceased pension accruals under its pension
formula in 1988, except for employees who then met certain age
and service criteria. Mr. Walton and Mr. Dunlap have
modest frozen benefits under the Allegheny Ludlum formula.
Mr. Kittenbrink accrued no benefit under the Allegheny
Ludlum benefit formula. Neither Mr. Walton nor
Mr. Kittenbrink participates in a restoration plan for
defined benefits.
Both the Allegheny Ludlum formula and the TDY formula multiply
years of service by compensation and then by a factor to produce
a benefit which, in turn, is reduced with respect to Social
Security amounts payable to determine a monthly amount payable
as a straight life annuity. Participants can choose alternate
benefit forms, including survivor benefits. The Allegheny Ludlum
and TDY definitions of service and compensation differ somewhat,
as do the factors used in the respective formulas. However, the
differences in the resulting benefits between the two formulas
are small for the named officers to which they apply.
Upon becoming a corporate employee, Mr. Harshman ceased
receiving credit for service under the TDY formula after having
been credited with approximately twenty years of service under
that formula. Mr. Harshman participates in a restoration
plan for defined benefits that would restore to him from
corporate assets the amount not payable under the TDY formula
due to limits under the Code.
As an alternative benefit, if greater than the benefit under the
applicable Allegheny Ludlum or TDY formula, the named
individuals, other than Mr. Hassey, participate in the ATI
Pension Plan at specified, actuarially determined accrual rates
per year that do not exceed annual accrual rates permitted under
the Code. The monthly straight life annuity value is determined
by multiplying (i) the highest rate of monthly compensation
in the five years prior to retirement after giving effect to
applicable limitations on compensation imposed by
Section 401(a)(17) of the Internal Revenue Code (which was
$225,000 for 2007) by (ii) the specified accrual rates
(ranging from 2.5% to 3.4%) and then by (iii) years of
service not in excess of thirty. Benefits are not subject to
offset for Social Security or other third party benefits. These
benefits are subject to further reduction to comply with any
applicable limitations under the Code.
Normal retirement age under the ATI Pension Plan is age 65.
Participants can retire with immediate commencement of an
undiscounted accrued benefit at the normal retirement age or
after thirty years of
47
service regardless of age. Participants can retire prior to
attaining age 65 or thirty years of service with benefit
payments discounted for early payment at age 62 with at
least ten years of service or, with a greater discount, at
age 55 with at least ten years of service.
In addition, the Company has established a Supplemental Pension
Plan that provides certain key employees of the Company and its
subsidiaries, including the named officers (or their
beneficiaries in the event of death), with monthly payments in
the event of retirement, disability or death, equal to 50% of
monthly base salary as of the date of retirement, disability or
death. Monthly retirement benefits start following the end of
the two-month period after the later of (i) age 62, if
actual retirement occurs prior to age 62 but after
age 58 with the approval of the Board of Directors, or
(ii) the date actual retirement occurs, and generally
continue for a
118-month
period. With respect to Mr. Hassey, one year of payment is
accrued for each year of service, to a maximum of ten years. The
plan describes the events that will terminate an employees
participation in the plan.
Nonqualified
Deferred Compensation for 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive
|
|
Registrant
|
|
|
|
Aggregate
|
|
|
|
|
Contributions
|
|
Contributions
|
|
Aggregate Earnings
|
|
Withdrawals/
|
|
Aggregate Balance
|
|
|
In Last FY
|
|
In Last FY
|
|
In Last FY
|
|
Distributions
|
|
at Last FYE
|
Name
|
|
($)(1)
|
|
($)(1)
|
|
($)(2)
|
|
($)
|
|
($)
|
|
|
L. Patrick Hassey
|
|
|
|
|
|
|
322,328
|
|
|
|
44,369
|
|
|
|
|
|
|
|
1,019,503
|
|
Richard J. Harshman
|
|
|
|
|
|
|
94,567
|
|
|
|
18,244
|
|
|
|
|
|
|
|
419,207
|
|
Douglas A. Kittenbrink
|
|
|
|
|
|
|
89,692
|
|
|
|
19,060
|
|
|
|
|
|
|
|
437,965
|
|
Jon D. Walton
|
|
|
|
|
|
|
94,567
|
|
|
|
26,311
|
|
|
|
|
|
|
|
604,567
|
|
Terry L. Dunlap
|
|
|
|
|
|
|
79,108
|
|
|
|
9,995
|
|
|
|
|
|
|
|
229,672
|
|
|
|
|
|
(1) |
|
Reflects contributions made
pursuant to the Benefit Restoration Plan. Under the terms of the
plan, the participants do not contribute; only the Company
contributes to the plan on the participants behalf. These
amounts are included in the All Other Compensation
column of the Summary Compensation Table for 2007.
|
|
(2) |
|
Aggregate earnings are calculated
using the fiscal year end balance, including current year
contributions, multiplied by the interest rate on the Fixed
Income Fund investment option in the Companys (qualified)
Defined Contribution Pension Plan. For 2007, this rate was 4.62%.
|
Under the non-qualified Defined Contribution Benefit Restoration
Plan, the Company supplements payments received by participants
under the Retirement Savings Plan by accruing benefits on behalf
of participants in amounts that are equivalent to the portion of
the formula contributions or benefits that cannot be made under
such plan due to limitations imposed by the Internal Revenue
Code. Distributions under the Defined Contribution Benefit
Restoration Plan are available only at the times and in the same
forms as under the Retirement Savings Plan, subject to payment
delays to comply with Section 409A of the Internal Revenue
Code.
48
Employment
and Change in Control Agreements
Employment
Agreements
In August 2003, the Company entered into an employment agreement
with L. Patrick Hassey in connection with his employment as
President and Chief Executive Officer, effective October 1,
2003. The agreement has an initial term of three years and
renews automatically each month thereafter for a successive
three-year term absent notice from one party to another of
termination. Under the terms of his employment agreement,
Mr. Hassey is paid an annual base salary of at least
$850,000. In the process of recruiting Mr. Hassey in 2003,
the Company agreed to accommodate his request that he be able to
avoid relocating his family from its Salt Lake City residence.
In order to do so, Mr. Hassey periodically uses Company
leased aircraft so that he can maintain a full schedule with the
Company. Mr. Hasseys use of Company leased aircraft
for these purposes is a provision of Mr. Hasseys
employment agreement with the Company. In addition, under the
terms of the employment agreement, Mr. Hassey is entitled
to participate in the Annual Incentive Plan and the
Companys other executive compensation programs, including
the TSRP, the KEPP and the Supplemental Pension Plan on the
terms outlined above. Mr. Hassey is bound by a
confidentiality provision, and he is subject to non-competition
and non-interference covenants during the term of his employment
and for one year thereafter. Also, a non-disparagement provision
survives for 24 months following the termination of his
employment.
The agreement also provides that if the Company terminates
Mr. Hasseys employment for reasons other than
cause (defined in the agreement to mean (i) a
willful failure to perform substantially his duties after a
written demand for substantial performance is given,
(ii) willful engagement in illegal conduct or gross
misconduct, or (iii) the breach of a fiduciary duty
involving personal profit), or if he resigns for good
reason (defined in the agreement to mean (i) the
assignment of duties inconsistent with position,
(ii) failure by the Company to pay compensation and
benefits when due other than a failure not occurring in bad
faith, (iii) relocation of Company headquarters outside of
Pittsburgh, Pennsylvania or requiring substantially more
business travel, (iv) purported termination other than as
expressly permitted in the agreement, or (v) failure by the
Company to cause a successor corporation to adopt and perform
under the agreement), Mr. Hassey will receive all payments
and obligations accrued through the date of his termination, as
well as a cash severance payment equal to:
|
|
|
three times the sum of his then-current annual base salary plus
the amount of Annual Incentive Plan bonus payable for the year
of termination at the greater of actual-to-date performance or
target;
|
|
|
all accrued benefits under all qualified and nonqualified
pension, retirement and other plans in which he participates;
|
|
|
accelerated vesting of stock options and stock-based rights
which shall remain exercisable until the earlier of their
expiration or three years from the date of termination;
|
|
|
earned but not yet paid TSRP or other equity-based
awards; and
|
|
|
continued health and life insurance benefits for 36 months
following the date of termination, unless such termination or
resignation occurs after a change in control.
|
A change in control is defined to include
(i) the acquisition by an individual or entity of 20% or
more of Company voting stock, (ii) incumbent directors
ceasing to constitute a majority of the Board,
(iii) approval by Company stockholders of a reorganization,
merger or consolidation, (iv) approval by the Company
stockholders of a liquidation or sale or disposition of 60% in
value of the Companys assets, or (v) the occurrence
of any of the preceding events within 90 days prior to the
date of termination. If such termination or resignation occurs
within one year after a change in control, Mr. Hassey will
receive all payments and obligations accrued through the date of
his termination, as well as a cash severance payment equal to:
|
|
|
three times the sum of his then-current annual base salary plus
the amount of AIP payable for the year at the greater of
actual-to-date performance or target;
|
|
|
all accrued benefits under all qualified and nonqualified
pension, retirement and other plans in which he participates;
|
49
|
|
|
accelerated vesting of stock options and stock-based rights
which shall remain exercisable until the earlier of their
expiration or three years from the date of termination;
|
|
|
payments with respect to the TSRP and KEPP for the completed and
uncompleted performance measurement periods;
|
|
|
vesting of equity-based awards at the target level of
performance;
|
|
|
continued health and life insurance benefits for 36 months
following the date of termination; and
|
|
|
reimbursement for taxes, including excise taxes, assessed.
|
The Company entered an employment agreement with Jon D. Walton
in connection with the combination of Allegheny Ludlum
Corporation and Teledyne, Inc. in 1996. The initial term under
the agreement was three years, but by its terms, the agreement
renews automatically each month absent notice from one party to
the other, so that the then remaining term is one year. The
agreement provides for the payment of base salary as well as for
eligibility to participate in incentive compensation, equity
compensation, employee and fringe benefit plans offered to
senior executives of the Company. The agreement generally
terminates prior to the expiration date without breach by any
party in the event of Mr. Waltons death, disability
or voluntary resignation. The Company may also terminate the
agreement for cause without breach by it. If Mr. Walton
resigns for good reason (which is defined to include demotion,
reduction in base pay or movement of corporate headquarters), or
if the Company terminates his employment for reasons other than
cause or disability, then Mr. Walton is entitled to receive
continued payment of his base salary through the date of
termination, as well as payments equal to:
|
|
|
his base pay for the remaining term of the agreement;
|
|
|
cash bonus, determined based on actual financial results;
|
|
|
service credit for the period of the remaining term of the
agreement under Company deferred compensation plans and the
Benefit Restoration Plan, and full vesting under such plans;
|
|
|
reimbursement of certain legal and tax audit fees; and
|
|
|
continued participation in certain compensation and employee
benefit plans for the remainder of the term, including certain
supplemental pension benefits.
|
Mr. Walton is subject to a confidentiality covenant and is
bound by a non-competition provision during the term of his
employment.
Change in Control
Severance Agreements
The Company has entered into change in control severance
agreements, as amended, with the named officers (other than
Mr. Hassey) and other key employees to assure the Company
that it will have the continued support of the executive and the
availability of the executives advice and counsel
notwithstanding the possibility, threat or occurrence of a
change in control.
A change in control is defined as (i) the
Companys actual knowledge that (x) an individual or
entity has acquired beneficial ownership of 20% or more of the
voting power of Company stock or (y) persons have agreed to
act together for the purpose of acquiring 20% or more of the
voting power of Company stock, (ii) the completion of a
tender offer entitling the holders to 20% or more of the voting
power of Company stock, (iii) the occurrence of a
successful solicitation electing or removing 50% of the Board or
the Board consisting less than 51% of continuing directors, or
(iv) the occurrence of a merger, consolidation, sale or
similar transaction.
In general, the agreements provide for the payment of severance
benefits if a change in control occurs and within 24 months
after the change in control either the Company terminates the
executives employment with the Company without
cause (defined to mean a felony conviction, breach
of fiduciary duty involving personal profit, or intentional
failure to perform stated duties after thirty days notice
to cure) or the executive terminates employment with the Company
for good reason (defined to mean (i) a material
diminution of duties, responsibilities or status or the
assignment of duties inconsistent with position,
(ii) relocation more than
50
35 miles from principal job location, (iii) reduction
in annual salary or material reduction in other compensation or
benefits, (iv) failure by the Company to cause a successor
corporation to adopt and perform under the agreement, or
(v) purported termination other than as expressly permitted
in the agreement).
In addition to amounts accrued through the date of termination,
an employee entitled to severance benefits under a change in
control agreement will be paid a lump sum cash payment within
30 days of the date of termination equal to the sum of:
|
|
|
base salary plus annual bonus at the greater of target or the
actual level of performance achieved through the date of
termination projected through the end of the year times a
multiple (which is 3 for Messrs. Harshman, Kittenbrink and
Walton and 2 for Mr. Dunlap);
|
|
|
prorated annual incentive for the then uncompleted year measured
at the greater of target or the level of performance achieved
through the date of termination projected through the end of the
year; and
|
|
|
the value of all long term incentive awards for then uncompleted
measurement periods determined at the greater of target or
actual performance levels achieved to the date of termination
projected through the remainder of the measurement period.
|
An employee eligible for severance will also be provided:
|
|
|
the continuation of perquisites and welfare benefits for a
period (36 months for Messrs. Harshman, Kittenbrink
and Walton and 24 for Mr. Dunlap);
|
|
|
reimbursement for outplacement services up to $25,000 for
Mr. Harshman, Kittenbrink and Walton and $15,000 for
Mr. Dunlap; and
|
|
|
the number of years corresponding to the applicable multiples
above of credited service and full vesting under the
Companys supplemental pension plans in which the executive
participates.
|
The agreements also provide for the lifting of restrictions on
stock awarded. Also, the Company will pay the employee a
gross-up
payment for excise taxes, if necessary.
The agreements have a term of three years, which three-year term
will continue to be extended until either party gives written
notice that it no longer wants to continue to extend the term.
If a change in control occurs during the term, the agreements
will remain in effect for the longer of three years or until all
obligations of the Company under the agreements have been
fulfilled.
In 2007, the Personnel and Compensation Committee reviewed and
amended the change in control severance agreements to eliminate
the presumption of performance at maximum levels under the
performance plans for purposes of the change in control
payments. The Committee also reviewed the then change in control
valuation, as well as the purposes and effects of the
agreements, and determined that it is in the Companys best
interests to retain the change in control agreements on their
terms and conditions as amended.
51
Potential
Payments Upon Termination or Change in Control
The tables below reflect estimates of the amount of compensation
in addition to the amounts shown in the compensation tables to
each of the named officers of the Company in the event of
termination of such executives employment. The amount of
enhanced compensation payable to each named officer upon
voluntary termination, retirement, involuntary not for cause
termination, for cause termination, involuntary or good reason
termination within 24 months following a change in control
and in the event of disability or death of the executive is
shown below. The amounts shown assume that such termination was
effective as of December 31, 2007, and are estimates of the
amounts which would be paid out to the executives upon their
termination. On December 31, 2007, the closing trading
price of Company Common Stock on the NYSE was $86.40. The actual
amounts to be paid out can only be determined at the time of
such executives separation from the Company.
For purposes of the tables, the actual performance to the
assumed date of termination has been at or near maximum
performance targets for the uncompleted performance measurement
periods and that maximum performance level is projected through
the remainder of the uncompleted performance measurement
periods. Further, the tables show annual bonus amounts at the
highest level of performance. The actual amounts to be paid out
can only be determined at the time of such executives
separation from the Company. However, the amounts shown are
approximately the greatest amount that can be paid under the
circumstances prevailing at the assumed termination date of
December 31, 2007.
Payments Made
Upon Termination
Regardless of the manner in which a named officers
employment terminates, he may be entitled to receive amounts
earned during his term of employment. Such amounts include:
|
|
|
non-equity incentive compensation earned during the fiscal year;
|
|
|
amounts contributed under the savings portion of the Retirement
Savings Plan and the Benefit Restoration Plan;
|
|
|
unused vacation pay; and
|
|
|
amounts accrued and vested through the ATI Pension Plan and
Supplemental Pension Plan.
|
Payments Made
Upon Retirement
In the event of the retirement of a named officer, in addition
to the items identified above, such officer will be entitled to:
|
|
|
retain any outstanding stock options for the remainder of the
outstanding ten-year term;
|
|
|
receive a prorated share of each outstanding TSRP award upon the
completion of such cycle when, if and to the extent such award
is earned during the applicable performance measurement period;
|
|
|
receive all outstanding shares of performance/restricted stock
when and to the extent that the restrictions on such shares
lapse upon the passage of time or the achievement of the
applicable performance criteria;
|
|
|
receive that portion of the outstanding KEPP awards that were
earned at the time of retirement and a prorated share of the
remaining portion of each outstanding KEPP award;
|
|
|
receive payments under the Supplemental Pension Plan, beginning
two months after retirement, subject to Section 409A of the
Internal Revenue Code;
|
|
|
receive health and welfare benefits until age 65 and
receive health and welfare benefits for dependants, as
applicable, subject to the limitations applicable to all
salaried employees; and
|
|
|
receive life insurance benefits until death.
|
Consent of the Company is required for payments of the TSRP,
performance/restricted stock and KEPP awards described above
upon retirement.
52
Payments Made
Upon Death or Disability
In the event of the death or disability of a named officer, in
addition to the benefits listed under the headings
Payments Made Upon Termination and Payments
Made Upon Retirement above, the named officer will receive
benefits under the Companys disability plan or payments
under the Companys life insurance plan, as appropriate,
each as generally available to all salaried employees. In
addition, all outstanding performance/restricted share awards
vest on the death of a named officer.
Payments Made
Upon a Change in Control
As described in the Employment and Change in Control
Agreements section, the Company is a party to an
employment agreement with Mr. Hassey and a change in
control severance agreement with each other named officer that
provides the named officer with payments in the event his
employment is terminated by the Company for reasons other than
cause or by the named officer for good reason (defined to
include diminishment of pay, benefits, title or job
responsibilities or transfer from the home office) within twenty
four months after a change in control. See the information under
the caption Employment and Change in Control
Agreements for definitions. The tables below illustrate
the amount of payments due in various circumstances.
As noted, the column Involuntary or Good Reason
Termination w/in 24 Months of a Change in Control assumes
that there was a change in control at the December 31, 2007
closing price of $86.40 per share and all of the named officers
had a triggering event on December 31, 2007 and all cash
amounts due, all deferred compensation enhancements and all
potential benefit payments were to be paid in a single lump sum.
The aggregate of the payment to the named officers would be
1.27% of the indicated transaction value of $8.84 billion,
which represents the Companys equity market capitalization
value at December 31, 2007.
L. Patrick Hassey
($ in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
or Good
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reason
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(w/in 24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary
|
|
|
|
|
|
months of
|
|
|
|
|
|
|
Executive Benefit and
|
|
|
Voluntary
|
|
|
|
|
|
Not for Cause
|
|
|
For Cause
|
|
|
Change in
|
|
|
|
|
|
|
Payments Upon Separation
|
|
|
Termination
|
|
|
Retirement
|
|
|
Termination
|
|
|
Termination
|
|
|
Control)
|
|
|
Disability
|
|
|
Death
|
Severance:
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
7,301
|
|
|
|
|
0
|
|
|
|
|
7,301
|
|
|
|
|
0
|
|
|
|
|
0
|
|
Compensation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AIP
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
0
|
|
Long-Term Incentive Compensation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance/Restricted Stock
|
|
|
|
0
|
|
|
|
|
2,604
|
|
|
|
|
2,604
|
|
|
|
|
0
|
|
|
|
|
2,604
|
|
|
|
|
2,604
|
|
|
|
|
2,604
|
|
TSRP
|
|
|
|
0
|
|
|
|
|
4,382
|
|
|
|
|
4,382
|
|
|
|
|
0
|
|
|
|
|
10,420
|
|
|
|
|
4,382
|
|
|
|
|
4,382
|
|
KEPP
|
|
|
|
0
|
|
|
|
|
14,206
|
|
|
|
|
14,206
|
|
|
|
|
0
|
|
|
|
|
17,350
|
|
|
|
|
14,206
|
|
|
|
|
14,206
|
|
Benefits & Perquisites:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-qualified Savings Plan
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
Non-qualified Retirement Plan
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
Health & Welfare Benefits
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
30
|
|
|
|
|
0
|
|
|
|
|
0
|
|
Life Insurance Proceeds
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
Excise Tax & Gross Up
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
Outplacement
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
Supplemental Pension Plan:
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
Total
|
|
|
|
0
|
|
|
|
|
21,192
|
|
|
|
|
28,493
|
|
|
|
|
0
|
|
|
|
|
37,705
|
|
|
|
|
21,192
|
|
|
|
|
21,192
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For 12 months after termination, Mr. Hassey is
obligated to refrain from competing with the Company and
soliciting employees or customers of the Company, and for
24 months after termination, Mr. Hassey is obligated
to refrain from disparaging the Company.
53
Richard J.
Harshman ($ in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
or Good
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reason
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(w/in 24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary
|
|
|
|
|
|
months of
|
|
|
|
|
|
|
Executive Benefit and
|
|
|
Voluntary
|
|
|
|
|
|
Not for Cause
|
|
|
For Cause
|
|
|
Change in
|
|
|
|
|
|
|
Payments Upon Separation
|
|
|
Termination
|
|
|
Retirement
|
|
|
Termination
|
|
|
Termination
|
|
|
Control)
|
|
|
Disability
|
|
|
Death
|
Severance:
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
3,328
|
|
|
|
|
0
|
|
|
|
|
0
|
|
Compensation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AIP
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
Long-Term Incentive Compensation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance/Restricted Stock
|
|
|
|
0
|
|
|
|
|
766
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
766
|
|
|
|
|
622
|
|
|
|
|
622
|
|
TSRP
|
|
|
|
0
|
|
|
|
|
1,288
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
3,063
|
|
|
|
|
1,288
|
|
|
|
|
1,288
|
|
KEPP
|
|
|
|
0
|
|
|
|
|
3,401
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
8,160
|
|
|
|
|
3,401
|
|
|
|
|
3,401
|
|
Benefits & Perquisites:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-qualified Savings Plan
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
131
|
|
|
|
|
0
|
|
|
|
|
0
|
|
Non-qualified Retirement Plan
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
692
|
|
|
|
|
0
|
|
|
|
|
0
|
|
Health & Welfare Benefits
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
30
|
|
|
|
|
0
|
|
|
|
|
0
|
|
Life Insurance Proceeds
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
Excise Tax & Gross Up
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
4,534
|
|
|
|
|
0
|
|
|
|
|
0
|
|
Outplacement
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
25
|
|
|
|
|
0
|
|
|
|
|
0
|
|
Supplemental Pension Plan:
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
2,080
|
|
|
|
|
0
|
|
|
|
|
0
|
|
Total
|
|
|
|
0
|
|
|
|
|
5,455
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
22,809
|
|
|
|
|
5,311
|
|
|
|
|
5,311
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Douglas A.
Kittenbrink ($ in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
or Good
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reason
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(w/in 24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary
|
|
|
|
|
|
months of
|
|
|
|
|
|
|
Executive Benefit and
|
|
|
Voluntary
|
|
|
|
|
|
Not for Cause
|
|
|
For Cause
|
|
|
Change in
|
|
|
|
|
|
|
Payments Upon Separation
|
|
|
Termination
|
|
|
Retirement
|
|
|
Termination
|
|
|
Termination
|
|
|
Control)
|
|
|
Disability
|
|
|
Death
|
Severance:
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
3,328
|
|
|
|
|
0
|
|
|
|
|
0
|
|
Compensation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AIP
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
Long-Term Incentive Compensation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance/Restricted Stock
|
|
|
|
0
|
|
|
|
|
766
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
766
|
|
|
|
|
622
|
|
|
|
|
622
|
|
TSRP
|
|
|
|
0
|
|
|
|
|
1,288
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
3,063
|
|
|
|
|
1,288
|
|
|
|
|
1,288
|
|
KEPP
|
|
|
|
0
|
|
|
|
|
3,401
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
8,160
|
|
|
|
|
3,401
|
|
|
|
|
3,401
|
|
Benefits & Perquisites:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-qualified Savings Plan
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
125
|
|
|
|
|
0
|
|
|
|
|
0
|
|
Non-qualified Retirement Plan
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
677
|
|
|
|
|
0
|
|
|
|
|
0
|
|
Health & Welfare Benefits
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
30
|
|
|
|
|
0
|
|
|
|
|
0
|
|
Life Insurance Proceeds
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
Excise Tax & Gross Up
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
4,387
|
|
|
|
|
0
|
|
|
|
|
0
|
|
Outplacement
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
25
|
|
|
|
|
0
|
|
|
|
|
0
|
|
Supplemental Pension Plan:
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
2,080
|
|
|
|
|
0
|
|
|
|
|
0
|
|
Total
|
|
|
|
0
|
|
|
|
|
5,455
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
22,641
|
|
|
|
|
5,311
|
|
|
|
|
5,311
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
54
Jon D. Walton ($
in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
or Good
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reason
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(w/in 24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary
|
|
|
|
|
|
months of
|
|
|
|
|
|
|
Executive Benefit and
|
|
|
Voluntary
|
|
|
|
|
|
Not for Cause
|
|
|
For Cause
|
|
|
Change in
|
|
|
|
|
|
|
Payments Upon Separation
|
|
|
Termination
|
|
|
Retirement
|
|
|
Termination
|
|
|
Termination
|
|
|
Control)
|
|
|
Disability
|
|
|
Death
|
Severance:
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
832
|
|
|
|
|
0
|
|
|
|
|
3,328
|
|
|
|
|
0
|
|
|
|
|
0
|
|
Compensation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AIP
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
Long-Term Incentive Compensation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance/Restricted Stock
|
|
|
|
0
|
|
|
|
|
766
|
|
|
|
|
623
|
|
|
|
|
0
|
|
|
|
|
766
|
|
|
|
|
622
|
|
|
|
|
622
|
|
TSRP
|
|
|
|
0
|
|
|
|
|
1,288
|
|
|
|
|
2,544
|
|
|
|
|
0
|
|
|
|
|
3,063
|
|
|
|
|
1,288
|
|
|
|
|
1,288
|
|
KEPP
|
|
|
|
0
|
|
|
|
|
3,401
|
|
|
|
|
6,773
|
|
|
|
|
0
|
|
|
|
|
8,160
|
|
|
|
|
3,401
|
|
|
|
|
3,401
|
|
Benefits & Perquisites:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-qualified Savings Plan
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
44
|
|
|
|
|
0
|
|
|
|
|
131
|
|
|
|
|
0
|
|
|
|
|
0
|
|
Non-qualified Retirement Plan
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
77
|
|
|
|
|
0
|
|
|
|
|
231
|
|
|
|
|
0
|
|
|
|
|
0
|
|
Health & Welfare Benefits
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
10
|
|
|
|
|
0
|
|
|
|
|
30
|
|
|
|
|
0
|
|
|
|
|
0
|
|
Life Insurance Proceeds
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
Excise Tax & Gross Up
|
|
|
|
0
|
|
|
|