Author: Kristen Scholer

Gas prices may be much lower than they were during the summer of 2008, when they were approaching $5 a gallon in many parts of the country. But we couldn’t help but think about gas prices as we dipped into the 10-K that Exxon Mobil (XOM) filed on Friday.

In the filing, which was significantly longer than the 2008 10-K, the company disclosed that total compensation for one of its directors was over $600,000 in 2009. Eight other directors collected more than $300,000 and two received a little less than $250K.  Kenneth Frazier, Merck’s Executive Vice President of Global Human Health and a new bee to Exxon’s Board of Directors last year, made the most: $614,283, though to be fair, the bulk of that was in stock awards as opposed to cash compensation. While the other 10 directors took home $201,263 in stock awards, Frazier’s award was valued at $554,280. The footnotes reveal Frazier received a one-time grant of 8,000 restricted shares upon being first elected to the Board in May 2009. The valuation of this award is based on a market price of $69.29 on the date of grant, which is actually higher than Exxon stock is currently trading at.

Our find on Exxon’s director pay was just one of a few gems buried in last weeks’ filings. Other companies that fueled up their director’s pay in 2009 were Baker Hughes (BHI), Brocade Communications (BRCD) and Arkansas Best (ABFS). Directors at Brocade and Baker Hughes received more than $200K, while Robert Young of Arkansas Best pocketed $280K. Young’s perquisite value included personal use of the company’s aircraft and a hunting lodge, an administrative assistant, a nominal gift related to business activities and a Christmas gift from the Company.

This post was written by footnoted intern Kristen Scholer, who is a junior at Northwestern University.

Thursdays are my current events days. For people in the working world, this might seem strange, but it’s common lingo used among us nerdy Northwestern journalism students. Without a doubt, every Thursday our professors begin class with an extensive current events quiz, and I must admit that while I usually do well on these, yesterday wasn’t my best performance.

So what’s the point of me sharing my current event shortcomings with all of you? Well, this week the one question I missed was on Chicago’s soaring home foreclosures in the fourth quarter – a point I’m still kicking myself for missing considering hot topics in this week’s batch of filings.

I opened my inbox Tuesday morning to find this proxy filed by Pulte Homes (PHM). Earlier this week, the company put out this press release to announce company founder William Pulte’s retirement. But the proxy included something more – what Pulte will collect as he bids farewell after spending 60 years in the building business. The first check he can cash is more than $3 million in severance payments. The second is compensation for his consulting agreement with the company beginning April 1, 2010 and extending to March 31, 2012. Over the course of this two-year agreement, Pulte will pocket $3 million in total, or $1.5 million per year. The company also promised Pulte an office, administrative assistance, and reimbursement for all expenses related to the job. Now, granted, this may not seem like a huge amount considering the company’s $4 billion market cap, but after taking a closer glance at the agreement, it seems like a lot of money for very little work. Here’s a key section:

Consultant shall not devote more than 75 hours during any calendar quarter during the Consulting Period to the performance of such consulting services, which the parties acknowledge and agree is less than 20% of the average level of services performed by the Consultant for the Company during the 36-month period prior to April 1, 2010.

Pulte’s send-off comes in the midst of one of the worst housing cycles the country has ever witnessed. Last week, the company issued this press release citing a net loss of $117 million in the fourth quarter of 2009, including significant charges totaling $925 million. And, due to high home foreclosures, like those happening in Chicago Pulte Homes’ net loss was $1.2 billion for the year ending Dec. 31, 2009.

This post was written by footnoted intern Kristen Scholer who is a junior at Northwestern University.

Monday marked the first snowfall in Chicago since I’ve returned from winter break. As I trudged across campus and watched the white flakes fall, I found myself wishing that I could escape to a hot, sunny climate over spring break.

Everyone needs an occasional vacation, and no one begrudges others for taking a little time off now and then. But sometimes heavy workloads make that impossible. If we’re lucky, we cancel our plans and our employer pays us for the vacation days we couldn’t use.  If we’re not so lucky, we scrap the vacation plans without compensation, get back to work, and start dreaming about next year’s getaway.

And then there’s Applied Signal Technology Inc.’s (APSG) curious vacation policy, which we came across in the preliminary proxy that it filed Monday.

In the footnotes to the Summary Compensation Table, we came across a category entitled “Payments for Unused Vacation.”  For two of the named executive officers, the amount was just under $12,000 for 2009.  But for the other three, it was substantially higher.  In 2009, James Doyle, VP-Finance/CFO, received $274,432; Dr. John Treichler, Chief Technology Officer, got $234,891; and Dr. Michael Ready, Chief Marketing Officer, received $106,788. Compare that to the base salaries of the three men and the two aren’t that far off: Doyle’s base salary last year was $316K and Treichler’s was $327K, so the vacation pay nearly doubled their salaries.

The footnote to the summary comp table simply says:  “Represents accrued, but unused, vacation that was paid as a result of a change to our vacation policy.”

So what was the change?  Well, it’s hard to say.  The preliminary proxy doesn’t explain that, so we wondered if a little scuba diving through past filings might tell us more.

According to last year’s proxy, which was filed in February, the company’s vacation policy at that time was that any employee could sell back unused vacation time. But  a month later, in the 10-Q the filing refers to:  “payments for accrued vacation of approximately $1,181,000 due to a change in our vacation policy….”

The same is true for the quarterly report filed in June, 2009, as well as the one filed in September, 2009.  They refer to the change without saying what it was. Likewise, in the annual report filed January 12, 2010, the company says:  “Accrued payroll liabilities declined by approximately $2,357,000 primarily due to payments for accrued vacation of approximately $2,365,000 due to a change in our vacation policy;….”

So at this point, we know that the vacation policy changed; we know that change resulted in $2.36 million going to employees (and $616,111 going to 3 executives) for their unused vacation time; and we know that a fair amount of digging didn’t reveal an explanation for the changes.

Anyone looking for a good little mystery for his or her next vacation?

Image Source:  Pasadena Now

This post was written by footnoted.org intern Kristen Scholer who is a junior at Northwestern University.

Is anyone up for a little guessing game?  It involves the proxy that Tyco International Ltd. (TYC) filed last Friday.

First, read a snippet from the Fiscal Summary on p. 37:

Overall, fiscal 2009 was a challenging year for the Company, as the global economic recession adversely affected the Company’s businesses across nearly all industries and regions…In response to the downturn, management implemented a number of measures to contain general and administrative costs, including compensation costs….

Based on that passage, is your guess that:

A)    The Compensation Committee took dramatic steps to reverse some of Tyco’s past excesses; or

B)    There’s no need to hold a bake sale for the benefit of Tyco’s executives.

Well, let’s take a closer look.  On p. 38, the filing lists several steps the company took, such as:

• “reaffirm[ing] its commitment to competitive pay levels and ‘pay for performance’”;
• “enhanc[ing] the alignment of incentive pay with shareholder value creation” (here they say they ceased the practice of granting time-based RSUs and started granting “only stock options and performance share awards, which tie 100% of long-term incentives to shareholder value creation”;
• and “eliminat[ing] the practice of paying gross-ups for taxes paid by Senior Officers in connection with supplemental benefits paid on or after January 1, 2010.”

And then there’s this:

“In addition, Mr. Breen, our CEO, agreed to waive the benefits available to him under his employment agreement for New York City/State tax gross-up payments for compensation that is awarded to him after January 1, 2009. The Compensation Committee also negotiated the phase-down of severance and change in control benefits payable to Mr. Breen under his employment contract executed in December 2008.” (Longtime footnoted readers will recall that this has been anissue for nearly a decade.)

Yet the money flowing to executives is still staggering.  The Summary Compensation Table shows that four of the top five executives actually received less total compensation in 2009 than they got in 2008.  But when the lowest paid NEO is getting cash, stock, options, non-equity incentive plan compensation, and perks worth $3.6 million, the Compensation Committee’s promised action seems like much ado about (practically) nothing.

And what about Edward Breen, Tyco’s Chairman/CEO?  Well, he may be waiving that gross-up on New York taxes, but he still got cash, stock, options, and perks (including $238,795 worth of personal use of the company’s aircraft) worth more than $19.4 million.

Our vote?  Call off the bake sale.

This post was written by footnoted.org intern Kristen Scholer, who is a junior at Northwestern University.

Today is a big day for Orexigen Therapeutics’ (OREX) CEO Mike Narachi. At 1:30 p.m. EST he is scheduled to present at JPMorgan’s big Healthcare Conference in San Francisco. Narachi will have only a brief half hour to explain, or perhaps gloss over the 30-page slideshow that the company filed as an 8K on Monday.

It’s no lie that obesity is increasing healthcare costs in America. As the slideshow notes, obesity rates in the United States will raise from 75 million obese people in 2009 to 103 million by 2018. The slides also reveal that the US healthcare system will spend $344 billion on treating obesity in 2018 – a $197 billion increase from the $147 billion spent as of 2008. For Orexigen, Contrave is the company’s lead investigational product addressing this spreading epidemic. It has completed Phase 3 clinical trials and is on track for a regulatory submission with the FDA in the beginning of 2010 and the company clearly has high hopes for the drug.

While browsing through Orexigen’s presentation, there was one slide that made us lean in to take a closer look. On page 17 the company claims there is a clear demand for a prescription-based solution and that consumers are more than willing to pay. But what’s really surprising is that Orexigen compares this pent-up demand to another weight-loss drug we haven’t heard a lot about lately — Fen-phen– a medication that was taken off the market for causing heart defects, which eventually led to legal damages in excess of $13 billion. Still, the slide notes that between 1995 and 1996, the demand for Fen-phen grew from 6.6 million to 20.6 million prescriptions.

The slideshow also states that, “treating obesity in patients with depressive symptoms may be an attractive future opportunity.” The company’s research indicates 92 percent of physicians would be willing to prescribe Contrave for obesity to patients who display depressive symptoms but are not on an antidepressant. However, only 72 percent of doctors say they would suggest Contrave for obese patients who display depressive symptoms and are on an antidepressant. And there was also a pitch to a potential outside suitor: with 150 sales reps, Orexigen is able to reach a much smaller number of doctors. But by teaming up with someone else — they never mention who — “as few as 500 reps can build a blockbuster.”

Orexigen wasn’t the only company to sneak a slideshow into its filings before the conference. Cell Therapeutics (CTIC), MediciNova (MNOV), and Molina Healthcare (MOH) are another three of the conference’s 300 companies that filed their presentations with the SEC this week.

This post was written by footnoted intern Kristen Scholer, who is a junior at Northwestern Unviersity.

Image source: Yvonne Hemsey/GETTY IMAGES

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