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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of report (Date of earliest event reported):
December 10, 2008
December 10, 2008
INTEGRATED ELECTRICAL SERVICES, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 001-13783 | 76-0542208 | ||
| (State or other jurisdiction of | (Commission | (IRS Employer | ||
| incorporation) | File Number) | Identification No.) |
| 1800 West Loop South, Suite 500 | ||
| Houston, Texas | 77027 | |
| (Address of principal | (Zip Code) | |
| executive offices) |
Registrant’s telephone number, including area code: (713) 860-1500
(Former name or former address, if changed since last report): Not applicable
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the
filing obligation of the registrant under any of the following provisions (see General Instruction
A.2. below):
| o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
| o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
| o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
| o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
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Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain
Officers; Compensatory Arrangements of Certain Officers.
(e) On December 10, 2008, the Human Resources and Compensation Committee (the “Committee”) of
the Board of Directors of Integrated Electrical Services, Inc. (the “Company”) took the following
actions relating to compensatory arrangements for the Named Executive Officers and certain
additional officers.
It is the Committee’s current intention that it will only grant up to 1.25 percent of the
Company’s outstanding common stock in any one year for retention and incentive awards and may
utilize cash or other compensatory arrangements for these purposes. The Committee granted a
combination of shares of restricted common stock (the “Restricted Stock”) under the Company’s 2006
Amended and Restated Equity Incentive Plan and a potential cash bonus dependent upon the Company’s
performance over the Fiscal 2009-2010 time period (the “Long Term Incentive Program”).
Messrs. Michael J. Caliel, Raymond K. Guba, and Robert B. Callahan received 40,800, 22,500,
and 11,300 shares of Restricted Stock, respectively, which vests on September 30, 2011 and
additional officers received an aggregate 91,400 shares of Restricted Stock which vest on the same
date. In addition, the Committee authorized a cash bonus equal to 87.5 percent of Mr. Caliel’s
annual base salary and cash bonuses of 75 percent and 62.5 percent of the annual base salaries of
Messrs. Guba and Callahan or $495,714, $273,675, and $137,479 respectively. The Committee
authorized an aggregate amount of $1,113,037 for additional officers. The payment of these cash
bonuses is contingent upon the Company’s attainment of target earnings per share (“EPS”) over the
time period from October 1, 2008 through September 30, 2010 and would be payable, to the extent
earned, on September 30, 2011. It is anticipated that the EPS targets, which are derived from the
Company’s operating plan, a proprietary document which outlines the Company’s operational
strategies for competing in the highly competitive electrical contracting industry, will be a
challenge to achieve in light of the anticipated difficult 2009-2010 economic climate. The
disclosure of the actual targets would provide earnings guidance, which the Company does not do.
Failure to meet a minimum threshold of 75 percent of the target EPS would result in no payment and
exceeding the target EPS would result in up to 200 percent payment. In December 2007, Mr. Curt L.
Warnock informed the Company of his intent to resign his position following the Company’s
successful search and selection of a new General Counsel. Mr. Warnock’s resignation will not be
effective until such time as his successor is appointed. In light of this decision, Mr. Warnock
did not receive a grant under the program.
The Committee also approved the Fiscal Year 2009 Annual Management Incentive Plan (the
“Management Incentive Plan”). The Management Incentive Plan provides an incentive compensation
pool for certain key employees and officers of the Company and is based upon the Company’s
achievement of its annual operating income and cash flow targets. These targets are developed as
an integral part of the Company’s operating plan discussed above.
Pursuant to the Management Incentive Plan, Messrs. Caliel, Guba, Warnock and Callahan are
eligible to receive a target payout of 100 percent, 75 percent, 50 percent and 50 percent
respectively, of the amount of their annual base salary in cash. Failure to reach 90 percent of
the target amount will result in no payout while achieving 120 percent of the target
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amount will result in a doubling of the payout. At the Committee’s discretion, the final awards
are subject to adjustment downward or upward in amounts not to exceed 25 percent of the award based
upon the individual’s performance considerations. The performance review of Mr. Caliel is based on
the attainment of individual goals and objectives established for Mr. Caliel as discussed below.
The other Named Executive Officers will be reviewed based upon their performance in assisting Mr.
Caliel in his efforts. The Committee has the sole discretion to increase or decrease the annual
incentive award made to the Chief Executive Officer. The Committee has the right, in its absolute
discretion, to reduce or eliminate the amount otherwise payable based upon individual performance
or any other factors the Committee deems appropriate.
Pursuant to the Management Incentive Plan and the Fiscal Year 2008 Annual Management Incentive
Plan, a minimum threshold performance of 90 percent against the performance targets must be
attained before any incentive award is payable. During Fiscal Year 2008, the Company realized
annual operating income which was 65.6 percent below the threshold requirement to earn an incentive
payment for this component. In addition, the Company realized operating cash flow which was 22.9
percent below the threshold requirement to earn an incentive payment for this component. As a
result, no incentive payments were made in 2008 pursuant to the Fiscal Year 2008 Annual Management
Incentive Plan.
Although the minimum goals of the Fiscal Year 2008 Annual Management Incentive Plan were not
met, in consideration of the Company’s significant year-to-year ongoing improvement in achievement
of strategic and financial objectives and Mr. Caliel’s leadership role in the elimination of
approximately $18 million of SG&A expense, restructuring of the business and enhancing the
leadership team by hiring and retaining key personnel, the Committee authorized a discretionary
incentive payment to Mr. Caliel equal to 50 percent of his annual target which resulted in the
payment of $283,500. Mr. Guba received a discretionary payment equal to 50 percent of his annual
target for his significant contribution to restructuring and cost reduction, measurable progress in
enhancing systems and controls, upgrading financial leadership and overall financial position of
the business resulting in a payment of $136,875. Mr. Warnock received a discretionary payment
equal to 25 percent of his annual target for measurable progress in enhancing the contract
management process resulting in a payment of $29,000. Finally, Mr. Callahan received a
discretionary payment equal to 40 percent of his annual target for measurable progress in
implementing leadership development, outsourcing payroll, recruiting key talent and driving
enhancements to the Company’s benefit plans while achieving significant cost reductions resulting
in a payment of $44,000.
The Committee approved a 7.6 percent base salary increase for Mr. Caliel to maintain his base
salary at the approximate median of the survey group and for his efforts on eliminating
approximately $18 million of SG&A expense as well as restructuring of the business. Effective
January 1, 2009 Mr. Caliel’s base salary will increase to $610,000. At the recommendation of Mr.
Caliel, the Committee also approved a 8.2 percent increase in Mr. Guba’s base salary. The role and
responsibilities of Mr. Guba have been expanded in FY 2009 to include responsibility for the
Company’s supply chain and he was appointed Executive Vice President, Chief Financial and
Administrative Officer effective January 1, 2009. Based upon this additional responsibility and
Mr. Guba’s strong performance in fiscal year 2008 leading the corporate SG&A
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consolidation and restructuring of the Company’s business, the Committee approved a salary
increase to $395,000. Messrs. Warnock and Callahan each received increases in base salary of
approximately 4.4 percent reflecting market inflation rates for their executive positions.
Messrs. Warnock and Callahan’s base salaries will be $242,000 and $230,000 respectively. All base
salary increases are effective January 1, 2009.
Finally, the Committee established the goals and objectives upon which Mr. Caliel will be
evaluated in fiscal year 2009. These goals include a reduction in the Company’s safety total
recordable incident rate and continuing efforts to strengthen the safety culture, the achievement
of EPS goals, the achievement of revenue growth targets and an overall recruiting and retention of
high potential employees and key talent while setting the tone at the top of the Company. These
goals are based upon the Company’s 2009 operating plan discussed above. The other Named Executive
Officers will be evaluated on their contribution towards achievement of the above goals plus
achievement of 2 to 3 individual goals set during the annual performance review process.
The foregoing descriptions of the Long-Term Incentive Program performance payout schedule and
the Management Incentive Plan performance criteria are qualified in the their entirety by reference
to the descriptions of the payout schedule and performance criteria which are appended to the
Program and Plan and which are hereby incorporated by reference and attached hereto as Exhibits
10.1 and 10.2.
Item 8.01 Other Events
Director Joseph V. Lash, who previously had waived receipt of fees and retainers, has now
agreed to receive such payments beginning with the start of Fiscal Year 2009 on October 1, 2008.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits.
| Exhibit | ||
| Number | Description | |
10.1
|
Long Term Incentive Program Performance Payout Schedule for FY 2009-2010 | |
10.2
|
Management Incentive Plan 2009 Performance Criteria |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| INTEGRATED ELECTRICAL SERVICES, INC. |
||||
| By: | /s/ Curt L. Warnock | |||
| Curt L. Warnock | ||||
| Senior Vice President and General Counsel | ||||
Date: December 12, 2008
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EXHIBIT INDEX
| Exhibit | ||
| Number | Description | |
10.1
|
Long Term Incentive Program Performance Payout Schedule for FY 2009-2010 | |
10.2
|
Management Incentive Plan 2009 Performance Criteria |
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Exhibit 10.1
EXHIBIT #1
LONG TERM INCENTIVE PROGRAM
PAYOUT SCHEDULE 1
LONG TERM INCENTIVE PROGRAM
PAYOUT SCHEDULE 1
| Corporate | ||||
| Performance | ||||
| Against EPS Target | ||||
| For the | LTIP Incentive | |||
| Performance Period | Plan Multiplier | |||
<75% |
0.00 | % | ||
75% |
50.00 | % | ||
80% |
60.00 | % | ||
85% |
70.00 | % | ||
90% |
80.00 | % | ||
95% |
90.00 | % | ||
100% |
100.00 | % | ||
105% |
112.50 | % | ||
110% |
125.00 | % | ||
115% |
137.50 | % | ||
120% |
150.00 | % | ||
125% |
162.50 | % | ||
130% |
175.00 | % | ||
135% |
187.50 | % | ||
140% > |
200.00 | % | ||
| 1 | Percent of participant’s targeted annual LTIP awarded will be interpolated on a straight line basis for EPS performance between threshold and maximum. |
Exhibit 10.2
APPENDIX A
ANNUAL INCENTIVE PLAN
FISCAL 2009 PERFORMANCE CRITERIA
FISCAL 2009 PERFORMANCE CRITERIA
This document sets forth the Performance Criteria established by the Board of Directors for
Integrated Electrical Services’ Annual Management Incentive Plan (hereinafter “Plan”) for Fiscal
2009.
I. PERFORMANCE CRITERIA
The Board has established the following Performance Criteria for Fiscal 2009 from which Awards
under this Plan shall be made pursuant to the Annual Management Incentive Plan Document:
| • | Annual Operating Income |
Under the Plan, Participants are assigned an incentive award target expressed as a percent of their
annual base salary. Based upon performance against pre-determined Performance Criteria,
participants may earn a range of incentive award payouts relative to their target. A minimum
threshold performance of 90% against the pre-determined Performance Criteria target must be
achieved before any incentive is payable under the Plan.
II. INCENTIVE AWARD CALUCLATIONS
| A. | Corporate Support Services. Awards under the Plan for Corporate Support Services will be weighted 100% on Corporate performance and calculated based upon three factors: |
| 1. | Corporate Performance. Achievement of the Company’s annual operating plan target for each Performance Criteria. There will be a Threshold Performance level for each Performance Criteria below which no award will be earned, and Maximum Performance level in all categories beyond which no additional award will be earned. A participant’s annual incentive award will be increased or decreased based on corporate performance against predetermined performance criteria (refer to Exhibit A). |
| a) | Threshold Award: The lowest award level paid, 50% of a Participant’s annual incentive target, is paid for the lowest performance level (90%) eligible for an award under the Plan. | ||
| b) | Target Award: The award to be paid for 100% attainment of the Performance Goal. |
| c) | Maximum Award: The Maximum award under the plan is 200% of a Participant’s annual incentive target. |
| 2. | Individual Performance. Attainment of individual goals and objectives established for the Participant during the plan year. Two to three individual goals will be set and weighted for each Participant during the plan year. The CEO will establish individual goals and weightings for Section 16 Participants subject to review and ratification by the Committee. | ||
| The Committee may in its sole discretion make downward or upwards adjustments to Awards based on “Individual Performance” considerations. The amount of the adjustment may not be increased or decreased by an amount exceeding 50% of the proposed incentive award. Discretionary adjustments may also be made for leadership behaviors that significantly impact strategic and operational initiatives of the Company; people development, and other factors as determined by the Company. Discretionary adjustments made to Plan participants, excluding the CEO, may not result in a net increase in Plan funding. The Committee shall have sole discretion to increase or decrease the annual incentive award made to the CEO. | |||
| 3. | Plan Modifiers. The final component in determining individual incentive awards under the Plan is the achievement of the Company’s annual operating cash flow target and safety performance. One-half of a Participant’s Annual incentive award will be modified based on the Company’s achievement of the annual operating cash flow target (see Exhibit B) and the remaining one-half of the Participants Annual Incentive Award will be modified based on the Company’s Safety Performance Index (“SPI”) score (refer to Exhibit C). |
| B. | Group Support Services. Awards under the Plan for Group Support Services will be calculated based upon the same three factors above. However, incentive awards for Group Vice Presidents and other Group Support Services shall be weighted 50% on achievement of Corporate performance and 50% on Group performance. A Group participant may earn an incentive award based on achievement of Group performance targets, Corporate performance targets, or both. |
III. PAYMENT OF AWARDS
Participants will receive an annual cash incentive award paid as soon as administratively possible
after the Committee determines the amount of any such bonus to be awarded under the Plan.
EXHIBIT A
THRESHOLD, TARGET & MAXIMUM AWARD LEVELS
THRESHOLD, TARGET & MAXIMUM AWARD LEVELS
| Percent of | Percent of | |
| Performance Goal | Target Award | |
| Achieved | Received | |
90% |
50.00% | |
91% |
55.00% | |
92% |
60.00% | |
93% |
65.00% | |
94% |
70.00% | |
95% |
75.00% | |
96% |
80.00% | |
97% |
85.00% | |
98% |
90.00% | |
99% |
95.00% | |
100% |
100.00% | |
101% |
105.00% | |
102% |
110.00% | |
103% |
115.00% | |
104% |
120.00% | |
105% |
125.00% | |
106% |
130.00% | |
107% |
135.00% | |
108% |
140.00% | |
109% |
145.00% | |
110% |
150.00% | |
111% |
155.00% | |
112% |
160.00% | |
113% |
165.00% | |
114% |
170.00% | |
115% |
175.00% | |
116% |
180.00% | |
117% |
185.00% | |
118% |
190.00% | |
119% |
195.00% | |
120% |
200.00% |
EXHIBIT B
OPERATING CASH FLOW MODIFIER
OPERATING CASH FLOW MODIFIER
| Percent of Group | ||
| Cash Flow Target | Cash Flow | |
| Achieved | Modifier | |
120.0% and Above |
120.00% | |
115.0 — 119.99% |
115.00% | |
110.0 — 114.99% |
110.00% | |
105.0 — 109.99% |
105.00% | |
100.0 — 104.99% |
100.00% | |
95.0 — 99.99% |
95.00% | |
90.0 — 94.99% |
90.00% | |
85.0 — 85.99% |
80.00% | |
80.0 — 84.99% |
70.00% | |
75.0 — 79.99% |
60.00% | |
Below 70% |
0% |
EXHIBIT C
SAFETY MODIFIER
SAFETY MODIFIER
| Safety Performance | Safety | |
| Index (SPI Score) | Modifier | |
9.00 — 10 |
110% | |
8.50 — 9.99 |
105% | |
8.00 — 8.49 |
100% | |
7.50 — 7.99 |
90% | |
7.00 — 7.49 |
80% | |
6.50 — 6.99 |
70% | |
6.00 — 6.49 |
60% | |
5.00 — 5.99 |
50% | |
4.9 and Below |
0.0% |