<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
(Mark One)
[xx] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
--------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________ to _______________
Commission File Number 1-5846
THE LIBERTY CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
South Carolina 57-0507055
(State or other jurisdiction of (IRS Employer
incorporation or organization) identification No.)
Post Office Box 789, Wade Hampton Boulevard, Greenville, SC 29602
- --------------------------------------------------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code: 864/609-8256
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the Registrant's classes of
common stock as of the latest practicable date.
Number of shares Outstanding
Title of each class as of March 31, 2000
------------------- ----------------------------
Common Stock 19,365,836
Page 1 of 23 sequentially numbered pages.
The Exhibit Index is on Page 12.
<PAGE> 2
PART I, ITEM 1
THE LIBERTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED AND CONDENSED BALANCE SHEETS
(In 000's)
<TABLE>
<CAPTION>
MARCH 31, December 31,
2000 1999
----------- -----------
<S> <C> <C>
ASSETS (Unaudited)
Investments:
Fixed Maturity Securities available for sale, at market, cost of $928,822
at 3/31/00 and $890,900 at 12/31/99 $ 914,498 $ 859,296
Equity Securities, at market, cost of $21,703 at 3/31/00 and $61,732 at 26,419 81,290
12/31/99
Mortgage Loans 231,481 230,497
Investment Real Estate 23,451 25,692
Loans to Policyholders 92,715 91,964
Other Long-Term Investments 20,509 20,680
Short-Term Investments 308 1,930
----------- -----------
Total Investments 1,309,381 1,311,349
Cash 16,138 13,065
Accrued Investment Income 15,090 13,592
Receivables 62,634 70,167
Receivable from Reinsurers 261,708 266,141
Deferred Acquisition Costs and Cost of Business Acquired 300,384 304,419
Buildings and Equipment 99,377 90,675
Intangibles Related to Television Operations 266,025 218,166
Goodwill Related to Insurance Acquisitions 21,662 21,904
Other Assets 42,687 43,446
----------- -----------
Total Assets $ 2,395,086 $ 2,352,924
=========== ===========
LIABILITIES, REDEEMABLE PREFERRED STOCK AND SHAREHOLDERS' EQUITY
Liabilities
Policy Liabilities $ 1,335,336 $ 1,337,008
Notes, Mortgages and Other Debt 285,800 235,300
Accrued Income Taxes 17,682 15,409
Deferred Income Taxes 106,582 107,304
Accounts Payable and Accrued Expenses 87,307 98,990
Other Liabilities 7,666 4,689
----------- -----------
Total Liabilities 1,840,373 1,798,700
----------- -----------
Shareholders' Equity
Common Stock 94,397 100,112
Series 1995-A Convertible Preferred Stock, $35.00 redemption value, shares
issued and outstanding - 421,735 shares at 3/31/00 and 429,485 at
12/31/99 14,761 15,031
Unearned Stock Compensation (8,865) (5,057)
Retained Earnings 456,278 445,329
Accumulated Other Comprehensive Income:
Unrealized Investment Losses (1,858) (1,191)
----------- -----------
Total Shareholders' Equity 554,713 554,224
----------- -----------
Total Liabilities, Redeemable Preferred Stock and Shareholders' Equity $ 2,395,086 $ 2,352,924
=========== ===========
</TABLE>
See Notes to Consolidated and Condensed Financial Statements.
2
<PAGE> 3
THE LIBERTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED AND CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months ended
March 31,
---------------------------------
(In 000's, except per share data) 2000 1999
--------------- -------------
<S> <C> <C>
(Unaudited)
REVENUES
Insurance Premiums & Policy Charges $ 63,885 $ 64,053
Broadcasting Revenues 42,733 39,866
Net Investment Income 25,002 23,875
Service Contract Revenue 5,306 4,668
Other Income 2,403 484
Realized Investment Gains (Losses) 6,128 (8,344)
--------------- -------------
Total Revenues 145,457 124,602
--------------- -------------
EXPENSES
Policyholder Benefits 34,353 35,488
Insurance Commissions 19,383 18,559
General Insurance Expenses 16,617 18,010
Amortization of Deferred Acquisition Costs 8,777 10,377
Broadcasting Expenses 35,031 31,157
Interest Expense 3,958 3,927
Other Expenses 3,952 3,622
--------------- -------------
Total Expenses 122,071 121,140
--------------- -------------
Income Before Income Taxes 23,386 3,462
Income Tax Provision 7,989 942
--------------- -------------
NET INCOME $ 15,397 $ 2,520
=============== =============
EARNINGS PER SHARE:
Basic earnings per common share $ 0.79 $ 0.11
Diluted earnings per common share $ 0.78 $ 0.11
Dividends Per Common Share $ 0.22 $ 0.22
</TABLE>
See Notes to Consolidated and Condensed Financial Statements.
3
<PAGE> 4
THE LIBERTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED AND CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
(In 000's) 2000 1999
----------------------------
<S> <C> <C>
(Unaudited)
OPERATING ACTIVITIES
Net Income $ 15,397 $ 2,520
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Decrease in policy liabilities (7,508) (4,937)
Decrease in accounts payable and accrued liabilities (8,272) (8,288)
Decrease increase in receivables 9,133 (1,478)
Amortization of policy acquisition costs 8,777 10,376
Policy acquisition costs deferred (8,560) (10,572)
Realized investment (gains) losses (6,128) 8,344
Gain on sale of operating assets (439) (109)
Depreciation and amortization 6,210 5,420
Amortization of bond premium and discount (942) (1,000)
Provision for deferred income taxes 311 (1,166)
All other operating activities, net 1,143 7,620
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 9,122 6,730
INVESTMENT ACTIVITIES
Investment securities sold 254,209 17,622
Investment securities matured or redeemed by issuer 22,290 32,347
Cost of investment securities acquired - available for sale (266,489) (53,396)
Mortgage loans made (5,350) (4,399)
Mortgage loan repayments 4,930 6,802
Purchase of investment real estate, buildings and equipment (2,708) (3,353)
Sale of investment real estate, buildings and equipment 1,966 2,346
Purchase of television station (59,782) --
Purchases of short term investments (13,645) --
Sales of short-term investments 15,267 --
All other investment activities, net (522) (869)
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES (49,834) (2,900)
FINANCING ACTIVITIES
Proceeds from borrowings 809,500 663,000
Principal payments on debt (759,000) (670,000)
Dividends paid (4,448) (4,626)
Stock issued for employee benefit and compensation programs 145 821
Repurchase of common stock (10,428) --
Return of policyholders' account balances (6,808) (7,793)
Receipts credited to policyholders' account balances 14,824 15,015
--------- ---------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 43,785 (3,583)
INCREASE IN CASH 3,073 247
Cash at beginning of year 13,065 16,633
--------- ---------
CASH AT END OF PERIOD $ 16,138 $ 16,880
========= =========
</TABLE>
See Notes to Consolidated and Condensed Financial Statements.
4
<PAGE> 5
THE LIBERTY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS
March 31, 2000
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated and condensed financial
statements of The Liberty Corporation and Subsidiaries have been
prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form
10-Q and Article 10 of Regulation S-X. Accordingly, they do not include
all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. The
information included is not necessarily indicative of the annual
results that may be expected for the year ended December 31, 2000, but
it does reflect all adjustments (which are of a normal and recurring
nature) considered, in the opinion of management, necessary for a fair
presentation of the results for the interim periods presented. For
further information, refer to the consolidated financial statements and
footnotes thereto included in The Liberty Corporation Annual Report on
Form 10-K for the year ended December 31, 1999.
2. TELEVISION STATION ACQUISITION
On February 29, 2000 the Company completed the acquisition of KCBD, the
NBC affiliate in Lubbock, TX in a cash transaction for $59.8 million.
The transaction was accounted for as a purchase, and accordingly, its
results of operations are included in the accompanying consolidated
financial statements since the date of acquisition. This purchase was
funded using proceeds from the Company's credit facility.
3. REDEMPTION OF 1994-A and 1994-B SERIES PREFERRED STOCK
On May 25, 1999 ("the redemption date") the Company completed the
redemption of all of the outstanding shares of its 1994-A Series voting
cumulative preferred stock, and its 1994-B Series voting cumulative
preferred stock. Shares were called for redemption at $35.00 per share
and $37.50 per share for the 1994-A and 1994-B preferred stock,
respectively, plus accrued interest from April 1, 1999 through the
redemption date. Prior to the redemption date, all shares of the 1994-A
Series were converted into common stock, and all but 8,170 shares of
the 1994-B Series were converted into common stock.
4. COMPREHENSIVE INCOME
The components of comprehensive income, net of related income taxes,
for the three-month periods ended March 31, 2000 and 1999,
respectively, are as follows:
Three Months Ended
March 31,
---------------------------
2000 1999
------------- -------------
(In 000's)
Net Income $ 15,397 $2,520
Unrealized losses on
securities (667) (7,562)
------------- -------------
Comprehensive income (loss) $ 14,730 $ (5,042)
============= =============
5
<PAGE> 6
5. EARNINGS PER SHARE
The calculation of basic and diluted earnings per share is as follows:
(In 000's except per share data) Three Months Ended
March 31,
----------------------------------
2000 1999
------------------ ---------------
(Unaudited)
NUMERATOR - EARNINGS:
Net Income $ 15,397 $ 2,520
Preferred Dividends (185) (534)
------------------ ---------------
Numerator for basic earnings
per share 15,212 1,986
Effect of Dilutive Securities:
Redeemable Preferred Stock -- --
Convertible Preferred Stock 185 --
------------------ ---------------
Numerator for diluted earnings
per share $ 15,397 $ 1,986
================== ===============
DENOMINATOR - AVERAGE SHARES
OUTSTANDING:
Denominator for basic earnings
per share - weighted average
shares 19,199 18,563
Effect of Dilutive Securities:
Restricted Stock 11 --
Stock Options 138 --
Redeemable Preferred Stock -- --
Convertible Preferred Stock 423 --
------------------ ---------------
Denominator for diluted
earnings per share 19,771 18,563
================== ===============
Basic Earnings Per Share $0.79 $0.11
Diluted Earnings Per Share $0.78 $0.11
The effects of the Company's outstanding restricted stock, stock options,
redeemable preferred stock, and convertible preferred stock were antidilutive
for the quarter ended March 31, 1999.
6
<PAGE> 7
6. SEGMENT REPORTING
The Company operates primarily in the television broadcasting and life
insurance industries. The Company currently has five reportable
segments. All segments except television broadcasting are included in
Insurance Operations. The Company evaluates segment performance based
on several factors. For segments that are comprised of a separate
company (LIS and Cosmos) the primary factor is net income excluding
unusual, non-operating items. For those segments that are not separate
companies performance is evaluated based on income before income taxes
excluding realized gains and losses and unusual, non-operating items.
See the Company's 1999 Annual Report on Form 10K for additional
information on the types of operations for each of the Company's
segments.
During the first quarter of 2000 the Company amended the inter-company
service contract between Liberty Life and Liberty Insurance Services.
The previous contract had generally been based on the actual cost of
the services to LIS. Beginning in 2000 the contract was amended to be
more representative of a market rate contract. For segment reporting
purposes the 1999 information has been restated to reflect the new
terms of the contract. There was no change in the overall insurance
operating, nor the consolidated, results.
The following tables summarize financial information by segment for the
three-month periods ended March 31, 2000 and 1999. The adjustments
column reflects unallocated realized investment gain and losses,
unallocated income taxes, and any unusual non-operating items:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
For the quarter Liberty LIS Cosmos -
ended March 31, Liberty Life Insurance Total Television
2000 Life Liberty Admin- Corporate Adjust- Insurance Broad- Elimin- Total
(in thousands) Agency Direct istration & Other ments Operations casting ations Consolidated
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Outside revenues $50,582 $31,079 $ 5,306 $ 9,629 $ 6,128 $102,724 $42,733 $ - $ 145,457
Intersegment
revenues - - 9,063 5,239 - 14,302 - (14,302) -
Segment profit
(loss) before
income taxes 3,806 2,433 1,614 6,962 6,128 20,943 2,443 23,386
Income tax
expense (benefit) 622 6,266 6,888 1,101 7,989
--------- -------------------- -----------
Segment net income
$ 992 $ 14,055 $ 1,342 $ 15,397
========= ==================== ===========
</TABLE>
During the first quarter of 2000, total assets for the television broadcasting
operations increased approximately $54.2 million to $377.5 million due mainly to
the acquisition of KCBD during the first quarter of 2000. Total assets of the
other segments did not change materially since December 31, 1999.
7
<PAGE> 8
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
For the quarter Liberty LIS Cosmos -
ended March 31, Liberty Life Insurance Total Television
2000 Life Liberty Admin- Corporate Adjust- Insurance Broad- Elimin- Total
(in thousands) Agency Direct istration & Other ments Operations casting ations Consolidated
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Outside revenues $51,702 $29,711 $ 4,668 $ 6,999 $(8,344) $ 84,736 $ 39,866 $ - $ 124,602
Intersegment
revenues - - 10,244 5,300 - 15,524 - (15,524) -
Segment profit
(loss) before
income taxes 2,197 1,655 580 3,674 (8,344) (238) 3,700 3,462
Income tax
expense (benefit) (385) 142 (243) 1,185 942
--------- -------------------- -----------
Segment net income
$ 372 $ 5 $ 2,515 $ 2,520
========= ==================== ===========
</TABLE>
7. COMMITMENTS AND CONTINGENCIES
At March 31, 2000, the Company had made commitments as shown below:
(In 000's)
Investment real estate $ 547
Mortgage loans and fixed maturity securities 5,260
Other 3,785
------
$9,592
======
8. RECLASSIFICATIONS
Certain reclassifications have been made in the previously reported
financial statements to make the prior year amounts comparable to those
of the current year. Such reclassifications had no effect on previously
reported net income, total assets, or shareholders' equity.
8
<PAGE> 9
PART I, ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
(Unaudited)
The Liberty Corporation is a holding company with operations in insurance and
broadcasting. Liberty ("the Company") markets its insurance products through
Liberty Life Insurance Company. Additionally, Liberty is one of the nation's
largest life insurance third-party administrators through Liberty Insurance
Services Corporation. The Company's broadcasting subsidiary, Cosmos
Broadcasting, consists of twelve network-affiliated stations in the Southeast
and Midwest. Seven stations are affiliated with NBC, three with ABC, and two
with CBS.
SIGNIFICANT TRANSACTIONS AFFECTING COMPARABILITY BETWEEN PERIODS
TELEVISION STATION ACQUISITIONS
As noted above, on February 29, 2000 the Company acquired KCBD-TV, the NBC
affiliate in Lubbock, Texas in a cash transaction for approximately $59.8
million. The purchase was funded with borrowings from the Company's credit
facility. This acquisition was accounted for as a purchase with the results of
operations included in the accompanying consolidated financial statements from
the date of acquisition.
REDEMPTION OF 1994-A AND 1994-B SERIES PREFERRED STOCK
On May 25, 1999 ("the redemption date") the Company completed the redemption of
all of the outstanding shares of its 1994-A Series voting cumulative preferred
stock, and its 1994-B Series voting cumulative preferred stock. Shares were to
be redeemed at $35.00 per share and $37.50 per share for the 1994-A and 1994-B
preferred stock, respectively, plus accrued interest from April 1, 1999 through
the redemption date. Prior to the redemption date, all shares of the 1994-A
Series were converted into common stock, and all but 8,170 shares of the 1994-B
Series were converted into common stock.
RESULTS OF OPERATIONS
Liberty reported consolidated first quarter 2000 net income of $15.4 million
compared with net income of $2.5 million for the first quarter of 1999 (see
table below). Operating earnings (which exclude net realized investment gains
and losses) were $10.8 million, an increase of approximately 36% over the $7.9
million reported in the comparable prior-year quarter. Contributing to the
increase in operating earnings were increases in each of the insurance segments,
partially offset by a slight decrease in the broadcasting segment.
<TABLE>
<CAPTION>
Three Months Ended March
31,
---------------------------
2000 1999
------------ ------------
<S> <C> <C>
Insurance revenues $ 96,596 $ 93,080
Broadcasting revenues 42,733 39,866
------------ ------------
Total revenues (excluding realized gains and losses) 139,329 132,946
============ ============
Insurance operating earnings $ 9,434 $ 5,386
Broadcasting operating earnings 1,342 2,515
------------ ------------
Total operating earnings 10,776 7,901
Net realized investment gains (losses) 4,621 (5,381)
------------ ------------
Net income $ 15,397 $ 2,520
============ ============
</TABLE>
Consolidated revenues (excluding realized gains and losses) increased $6.4
million (5%) compared with the first quarter of 1999. Insurance revenues
increased $3.5 million (4%) while broadcasting revenues increased $2.9 million
(7%).
9
<PAGE> 10
Insurance operating earnings increased $4.0 million from the prior year first
quarter. Contributing to the increase was a $1.8 million improvement from
Liberty Life, a $0.6 million increase in Liberty Insurance Services, and a $1.6
million increase from the corporate operations.
Liberty Life reported operating earnings of $6.9 million for the first quarter
of 2000 compared with $5.1 million for the first quarter of 1999. Contributing
to the earnings increase were higher premiums in Liberty Direct, lower lapses in
both Agency and Liberty Direct which led to lower deferred acquisition cost
amortization, lower overall expenses, and higher investment income. Partially
offsetting the increased revenue, was an increase in benefit costs.
Liberty Insurance Services contribution to first quarter 2000 results were $0.6
million higher than the first quarter 1999 as a result of improved margins on
client accounts. The margin increases resulted from improved efficiencies and
expense control throughout the organization.
The broadcasting operations reported operating earnings of $1.3 million, down
$1.2 million from the $2.5 million reported in the prior-year first quarter. A
marginal amount of the decline was from the KCBD acquisition with the remainder
coming from higher expenses. Total revenues increased 7% with same station
revenue from television operations increasing 1%. The remainder of the revenue
increase came from the contribution of KCBD and from growth in cable advertising
sales revenues. Total expenses increased 12% with the majority of the expense
increase coming from the impact of KCBD. There were also higher expenses related
to the growth in the cable sales operation and start-up expenses connected with
SuperCoups, a direct-mail coupon business Cosmos is building.
Broadcast advertising revenues are generally highest in the second and fourth
quarters each year, due in part to increases in consumer advertising in the
spring and retail advertising in the period leading up to and including the
holiday season. In addition, broadcast advertising revenues are generally higher
during even numbered election years due to spending by political candidates and
other political advocacy groups, which spending typically is heaviest during the
fourth quarter.
INVESTMENTS
As of March 31, 2000, Liberty's consolidated investment portfolio was carried at
$1.3 billion. Approximately 70% of consolidated invested assets were in fixed
maturity securities (bonds and redeemable preferred stocks), 18% were in
mortgage loans, 7% in policy loans, with the balance consisting of equity
securities (2%), real estate (2%), and other long term investments (1%).
During the first quarter of 2000 the Company reallocated a significant portion
of its equity portfolio into fixed income securities. During January and
February approximately $50 million (70%) of its equity portfolio was liquidated,
with the proceeds used to purchase fixed income securities.
The overall average investment rating of fixed maturity securities as of March
31, 2000 was A+. Less than investment grade securities comprised 4.7% of the
fixed maturity portfolio at March 31, 2000, compared with 4.5% at December 31,
1999.
In accordance with the provisions of SFAS No. 115, "Accounting for Certain
Investments in Debt and Equity Securities", the Company reported in its balance
sheet an unrealized loss of $1.9 million on fixed maturity securities available
for sale and equity securities at March 31, 2000. This compares with an
unrealized loss of $1.2 million at December 31, 1999. Due to the requirements of
SFAS No. 115, shareholders' equity will be subject to future volatility from the
effects of interest rate fluctuations on the fair value of fixed maturity
securities.
CAPITAL, FINANCING AND LIQUIDITY
At March 31, 2000 the Company's borrowings and notes payable amounted to $285.8
million, an increase of $50.5 million from the $235.3 million outstanding at
December 31, 1999. The increase is due to the timing of the purchase of the KCBD
television station in February of 2000 for approximately $59.8 million.
Other Company commitments are shown in Note 7 contained in the accompanying
financial statements. Additional detail as to commitments and financing is
contained in the Notes to the Consolidated Financial Statements in the Company's
annual report on Form 10K for the year ended December 31, 1999.
Further discussion of investments and valuation is contained in Notes 1 and 2 to
the Consolidated Financial Statements in the Company's Annual Report on Form 10K
for the year ended December 31, 1999.
10
<PAGE> 11
CASH FLOWS
The Company's net cash flow from operating activities was $9.1 million for the
first quarter of 2000 compared to $6.7 million for the same period of 1999. The
Company's net cash used in investing activities was $49.8 million for the
quarter ended March 31, 2000, compared $2.9 million for the same period of 1999.
Of the $49.8 million of net cash used in investing activities in 2000, $59.8
million represents the cash used to purchase KCBD in February of 2000. Net cash
provided by financing activities for the quarter ended March 31, 2000 was $43.8
million, compared to net cash used in financing activities of $3.8 million for
the first quarter of 1999.
IMPACT OF YEAR 2000
The Year 2000 issue is the result of computer programs written to use two digits
rather than four to define the applicable year. Any computer programs or
hardware that have date sensitive software or embedded chips may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result in
a system failure or miscalculations causing disruptions of operations including
among other things, a temporary inability to process transactions, send premium
billings, pay personnel properly, or engage in normal business activities.
To date, the Company has not experienced any disruptions in its operations as a
result of Year 2000 issues. The Company will continue to monitor its systems and
operations for the remainder of the year for problems or issues related to the
Year 2000.
ACCOUNTING DEVELOPMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, " Accounting for Derivative Instruments
and Hedging Activities". This standard was originally required to be adopted in
years beginning after June 15, 1999. The Financial Accounting Standards Board
has delayed the required adoption date effectively to January 1, 2001. The
Company has not determined when it will adopt this standard. The Statement will
require the Company to recognize all derivatives on the balance sheet at fair
value. Derivatives that are not hedges must be adjusted to fair value through
income. If the derivative is a hedge, depending on the nature of the hedge,
changes in the fair value of derivatives will be either offset against the
change in fair value of the hedged assets, liabilities or firm commitments
through earnings or recognized in other comprehensive income until the hedged
item is recognized in earnings. The ineffective portion of a derivative's change
in fair value will be immediately recognized in earnings. The Company's use of
derivatives is limited to fixing the cost of borrowings on a portion of the
outstanding debt. The Company has not yet determined what the effect of
Statement 133 will be on the earnings and financial position of the Company, but
it is not expected to be material.
FORWARD LOOKING INFORMATION
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
for forward-looking statements. Certain information contained herein or in any
other written or oral statements made by, or on behalf of the Company, is or may
be viewed as forward looking. The words "expect", "believe", "anticipate" or
similar expressions identify forward-looking statements. Although the Company
has used appropriate care in developing any such forward looking information,
forward looking information involves risks and uncertainties that could
significantly impact actual results. These risks and uncertainties include, but
are not limited to, the following: changes in national and local markets for
television advertising, changes in general economic conditions, including the
performance of financial markets and interest rates; competitive, regulatory, or
tax changes that affect the cost of or demand for the Company's products; and
adverse litigation results. The Company undertakes no obligation to publicly
update or revise any forward looking statements, whether as a result of new
information, future developments, or otherwise.
11
<PAGE> 12
PART II, ITEM 6. EXHIBIT AND REPORTS ON FORM 8-K
(a) A list of the exhibits filed with this report is included in the
Index to Exhibits filed herewith.
(b) The filing of Form 8-K was not required during the first quarter of
2000.
INDEX TO EXHIBITS
EXHIBIT 10.2 The Liberty Corporation Performance Incentive Compensation
Program, as amended and restated on February 1, 2000
EXHIBIT 11 Consolidated Earnings Per Share Computation (included in Note
5 of Notes to Consolidated and Condensed Financial Statements)
EXHIBIT 27 Financial Data Schedule (Electronic Filing Only)
12
<PAGE> 13
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
THE LIBERTY CORPORATION Date: May 12, 2000
- -----------------------
(Registrant)
/s/ Kenneth W. Jones
- --------------------
Kenneth W. Jones
Corporate Controller
/s/ Martha G. Williams
- ----------------------
Martha G. Williams
Vice President, General Counsel and Secretary
13
<PAGE> 1
Exhibit 10.2
THE PERFORMANCE
INCENTIVE COMPENSATION PROGRAM
(AMENDED AND RESTATED - 2000)
The following is the text of the Performance Incentive Compensation
Program (the "Program"):
SECTION 1. PURPOSE. The purpose of this Program is to provide The
Liberty Corporation (the "Company") and its subsidiaries with an effective means
of attracting, retaining and motivating officers, other key employees and
directors (whether or not they are employees) and to encourage and enable them
to acquire common stock of the Company ("Common Stock"), thereby increasing
their proprietary interest in the Company's success. Subject to the limitations
set forth below, the Program provides for the granting of incentive stock
options within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code"), nonstatutory stock options, performance units,
restricted share awards, unrestricted share awards, phantom stock units, and all
or any combination of the foregoing ("Awards"), to eligible employees.
SECTION 2. ADMINISTRATION. The Compensation Committee of the Board of
Directors or such other committee of the Board as the Board may subsequently
designate (hereinafter referred to as the "Committee") shall have full power and
authority, subject to such orders or resolutions not inconsistent with the
provisions of the Program as may from time to time be issued or adopted by the
Board, to interpret the provisions and supervise the administration of the
Program. All determinations by the Committee shall be made by the affirmative
vote of a majority of its members, but any determination reduced to writing and
signed by all of the members shall be fully as effective as if it has been made
by a majority vote at a meeting duly called and held. All decisions made by the
Committee pursuant to the provisions of the Program or resolutions of the Board
shall be conclusive and binding on all persons, including the Company, its
shareholders and employees, and participants in the Program.
SECTION 3. SHARES SUBJECT TO THE PROGRAM.
(A) Shares of Common Stock are the only shares that may be
delivered under the Program. The shares of Common Stock to be delivered
under the Program shall be made available from the authorized but
unissued shares or from shares reacquired by the Company, including
shares purchased in the open market.
(B) Subject, in each case, to adjustments made pursuant to the
provisions of Sections 3(C) and 3(D):
(i) The aggregate number of shares that may be
subject to Awards under the Program from its initial inception
in 1983 shall not exceed 5,000,000 shares.
(ii) Effective May 6, 1997, with respect to stock
options granted on or after that date (and any stock options
granted prior to such date if their grant was conditioned upon
approval of amendments to the Program by the shareholders at
their annual meeting on May 6, 1997), the number of shares of
Common Stock with respect to which such stock options may be
granted to any one participant within any calendar year shall
not exceed 400,000 shares.
(iii) Effective May 6, 1997, with respect to Awards
granted on or after that date (and any Awards granted prior to
such date if their grant was conditioned upon approval of
amendments to the Program by the shareholders at their annual
meeting on May 6, 1997), the number of shares of Common Stock
with respect to which any such Awards that are measured based
on a number of actual or phantom shares (except for stock
options governed by paragraph (ii) above) may be granted to
any one participant within any calendar year shall not exceed
100,000 shares.
(iv) Effective May 6, 1997, with respect to Awards
granted on or after that date (and any Awards granted prior to
such date if their grant was conditioned upon approval of
amendments to the Program by the shareholders at their annual
meeting on May 6, 1997), the maximum amount of compensation
that can be paid to any one participant during any calendar
year on account of any such Awards that are not measured based
on a number of actual or phantom shares of Common Stock shall
not exceed $2,000,000.
(v) Effective May 6, 1997, with respect to Awards
granted on and after that date (and any Awards granted prior
to such date if their grant was conditioned upon approval of
amendments to the Program by the shareholders at their annual
meeting on May 6, 1997), under all such Awards (other than
stock options) granted under the Program, in any one calendar
year: (x) no one participant may be paid cash in excess of
$5,000,000 and (y) no one participant may receive more than
1,000,000 shares of Common Stock. For purposes of this
paragraph, the amount paid or received in any calendar year
under an Award described in this paragraph shall be deemed to
be the value or number of shares earned under such Award based
on the attainment of performance objectives, if any, and based
on any downward adjustments, as determined by the Committee,
as of the date of the determination. Except in the case of any
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<PAGE> 2
prior Awards granted subject to approval by the shareholders
of amendments to the Program at their May 6, 1997 annual
meeting, amounts paid pursuant to Awards granted under the
Program prior to May 6, 1997, shall not be counted toward and
shall not be subject to the limits contained in this paragraph
(v).
(C) The following rules shall apply in determining the amount
of shares or cash that has been used for purposes of the limits in
Section 3(B)(i), (ii), (iii), (iv) and (v):
(i) Any shares affected by the expiration or
termination (without exercise) of any option (or portion
thereof) prior to May 6, 1997 or by the forfeiture of all or
any portion of an Award of restricted shares or phantom stock
units prior to May 6, 1997, shall be restored to the total
shares available for use under the Program for Awards to the
same participant or other participants.
(ii) Effective May 6, 1997, if: (a) any shares of
Common Stock subject to an Award are forfeited or cancelled;
or (b) if any Award otherwise relating to shares of Common
Stock terminates by expiration, forfeiture, cancellation or
otherwise without the issuance of such shares or is settled in
cash in lieu of Common Stock; or (c) if any shares of Common
Stock subject to an Award, or any Awards otherwise relating to
shares of Common Stock, are, with the Committee's permission,
exchanged for or otherwise surrendered and cancelled in
connection with the grant of other Awards, the shares of
Common Stock so affected (directly or as a measurement of the
Award, to the extent so affected) shall be restored to the
total shares available for use under the Program for Awards
generally, but shall be counted against the limitations
contained in Section 3(B)(ii), (iii) and (v) with respect to
the participant involved. Although shares subject to or
relating to an Award exchanged for or otherwise surrendered
and cancelled in connection with the grant of a new Award
shall be restored to the total shares available for use under
the Program, the shares subject to or relating to the
resulting new Award shall be counted for all purposes under
the Program. The maximum number of shares available for
issuance under the Program shall not be reduced to reflect any
distributions that may be reinvested in additional shares of
Common Stock.
(D) In the event of a merger, reorganization, consolidation,
recapitalization, stock dividend, spin-off, stock split or any other
change in corporate structure or other distribution of stock or
property (except for ordinary cash dividends) affecting the Company's
Common Stock, such adjustments shall be made in the aggregate number of
shares subject to the Program, the maximum number of shares which may
be acquired by, or subject to an Award granted or paid to, any
participant under the Program, the number and option price of shares
subject to then outstanding options granted under the Program, the
number of restricted shares then subject to restrictions under the
Program and the number of shares used to determine the value of then
outstanding phantom stock units as may be determined to be appropriate
by the Committee. In no event shall any "Qualifying Award" (as
described in Section 10) that is then held by a "Covered Employee" as
defined in Section 162(m) of the Code be adjusted pursuant to Section
3(D) to the extent it would cause such Award to fail to qualify as
"Performance-Based Compensation" under Section 162(m) of the Code.
SECTION 4. ELIGIBILITY FOR PARTICIPATION. The individuals eligible to
participate in the Program shall consist of officers, other key employees and
directors of the Company and its subsidiaries, whether or not such directors are
also employees of the Company or its subsidiaries, as determined by the
Committee. Subject to the limitations of the Program, the Committee shall, after
consultation with and consideration of the recommendations of management, select
the officers, employees and directors to so participate and determine whether an
officer, employee or director is to receive Awards hereunder; provided, however,
that no incentive stock option may be granted to any director who is not an
employee of the Company (or any of its subsidiaries). The Committee, in its
discretion, may impose any conditions that it deems desirable on the grant of
any new Award, including without limitation a condition requiring the applicable
participant to surrender for cancellation an outstanding Award in order to
obtain a new Award that the Committee desires to grant in substitution of any
such outstanding Award.
SECTION 5. STOCK OPTIONS.
(A) Stock options shall be granted to participants by the
Committee from time to time at its discretion. Each option shall be
evidenced by an option agreement which shall contain such terms and
conditions as may be approved by the Committee and shall be signed by
an officer of the Company and the participant. Incentive stock options
and nonstatutory stock options shall be evidenced by separate and
distinct option agreements.
(B) A participant shall not be granted any incentive stock
option if the receipt of that option would result in the participant
owning incentive stock options (under the Program and any other plan
maintained by the Company or any subsidiary) that become exercisable
for the first time in any one calendar year into stock of the Company
or any of its subsidiaries with a fair market value in excess of
$100,000. For purposes of the preceding sentence, the fair market value
of the stock of the Company or any of its subsidiaries will be
determined by the Committee as of the grant of the incentive stock
options without regard to any restriction other than a restriction
which by its terms will never lapse.
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<PAGE> 3
(C) The price at which shares may be purchased upon exercise
of a particular option shall be not less than 100% of the fair market
value of such shares on the date such option is granted, as determined
by the Committee without regard to any restriction other than a
restriction which by its terms will never lapse. In the case of an
individual who, at the time an option is granted, owns stock possessing
more than 10% of the total combined voting power of all classes of
stock of the Company (or any of its subsidiaries) (a "10%
Shareholder"), the exercise price of any incentive stock option shall
be not less than 110% of the fair market value of the shares subject to
the option on the date such option is granted, as determined by the
Committee without regard to any restriction other than a restriction
which by its terms will never lapse.
(D) Options may be granted for any period of time as
established by the Committee, except that:
(i) The term of any incentive stock option shall not
be longer than ten years (or five years if granted to a 10%
Shareholder) from the date the option is granted.
(ii) No option granted prior to 1997 may be exercised
before the expiration of a one year period of continued
employment by the optionee with the Company or a subsidiary
thereof commencing on the date the option is granted, except
as provided in Section 5(E)(iv) below or except as provided in
any amendment to the applicable option agreement approved and
authorized through specific action by the Committee in a
manner consistent with terms permitted hereunder for options
granted after 1996.
(E) Subject to the limitations in this Section 5 and the terms
and conditions of the option agreement, each option shall be
exercisable at such time or times and in such amount or amounts as the
Committee may prescribe and specify in the applicable option agreement.
(i) No incentive stock option granted after 1996
under this Program may be exercised more than three months (or
one year in the case of a disabled employee or a deceased
employee who died within three months of terminating
employment or during a disability that terminated employment)
after the participant holding such option ceased being an
employee of the Company or a subsidiary thereof, unless: (x) a
longer period applies under Section 5(E)(iv) below for the
beneficiary or legal representative of a deceased employee
whose death terminated employment, or (y) the Company and such
participant (or a deceased participant's beneficiary or legal
representative) mutually agree in writing that such option
will be amended to treat it as a nonstatutory stock option.
(ii) Unless the option agreement specifies a longer
or shorter time for exercise, a nonstatutory stock option
granted after 1996 must be exercised no later than one year
after the participant holding such option ceases to be an
employee (or ceases to be a non-employee director) of the
Company or a subsidiary thereof, unless a longer period
applies under Section 5(E)(iv) below.
(iii) In the case of options granted prior to 1997
(both incentive stock options and nonstatutory stock options),
unless the option agreement is amended by specific action by
the Committee (with the consent of the holder if required) in
a manner consistent with terms permitted hereunder for options
granted after 1996, each such option may be exercised only
during the continuance of the optionee's employment with the
Company or one of its subsidiaries, except as provided in
Section 5(E)(iv) below.
(iv) Except as otherwise provided in Section 5(E)(i)
with respect to the disability or retirement of the holder of
incentive stock options granted after 1996, in the event of
termination of employment (or service as a non-employee
director) by an optionee by reason of death, disability or
retirement at normal retirement age under the Company's
Retirement Plan or any applicable Retirement Plan of any of
the Company's subsidiaries (or any applicable retirement
policy for non-employee directors), any options then
exercisable by such optionee shall remain exercisable by the
optionee or, if applicable, a beneficiary or legal
representative, for three years from the date of such
termination of employment (or service as a non-employee
director) or until the expiration of the option, whichever
occurs first.
(F) No shares shall be delivered pursuant to the exercise of
any option, in whole or in part, until qualified for delivery under
such laws and regulations as may be deemed by the Committee to be
applicable thereto and until payment in full of the option price
therefor is received by the Company. Payment of the purchase price
shall be made in cash, cash equivalent or, at the discretion of the
Committee, in Common Stock of the Company valued at its fair market
value on the date of exercise or, at the discretion of the Committee,
in a combination of the foregoing.
(G) An option granted under the Program may not be transferred
except by will or the laws of descent and distribution and, during the
lifetime of the participant to whom granted, may be exercised only by
such participant or his or her personal representative.
SECTION 6. PERFORMANCE UNITS.
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(A) Performance units may be awarded by the Committee to
participants from time to time at its discretion. Such units shall have
defined terms and conditions as to their value and the basis on which
such values will be determined.
(B) Performance units may be awarded in lieu of, or in
combination with, any other Awards, as the Committee may determine.
Performance standards shall be established by the Committee each time
performance units are granted and, except as provided in Section 6(D)
below, these standards must be met during the continuance of the
participant's employment with (or service as a non-employee director
of) the Company or one of its subsidiaries and prior to the making of
any payment with respect to such units.
(C) Performance units shall be assigned a value by the
Committee upon the award of such units.
(D) The value of performance units as established pursuant to
Section 6(C) above shall be paid in cash promptly after the performance
standards established pursuant to Section 6(B) above shall have been
met and, for Qualifying Awards, the Committee certification required
under Section 10 shall have occurred. In the event of termination of
employment (or service as a non-employee director) by reason of death,
disability or retirement at normal retirement age under the Company's
Retirement Plan or any applicable Retirement Plan of any of the
Company's subsidiaries (or any applicable retirement policy for
non-employee directors), the Committee shall have complete discretion
to waive all or a part of the continued employment or service
requirements and performance standard requirements for payment in
respect of one or more performance units that are not Qualifying Awards
(as defined below).
(E) Performance units awarded under the Program may not be
transferred except by will or the laws of descent and distribution and,
during the lifetime of the participant to whom awarded, payment may be
made with respect to such performance units only to the participant or
such participant's personal representative.
SECTION 7. RESTRICTED SHARES.
(A) Awards of restricted shares of Common Stock of the Company
shall be granted to participants by the Committee from time to time in
its discretion. Upon the grant of such an Award to a participant, the
Committee shall notify the participant in writing of the terms of such
Award, as described below. Each Award of restricted shares shall be
evidenced by an agreement which shall contain such terms and conditions
as may be approved by the Committee and which are consistent with the
applicable provisions of the Program and shall be signed by an officer
of the Company and the participant.
(B) No consideration will be paid by a participant pursuant to
an Award of restricted shares under the Program.
(C) Except as provided for in Section 7(D) and Section 7(F)
below, restricted shares awarded to a participant under the Program
shall vest in the participant during a period commencing on the date
such shares are awarded to a participant and ending on a date to be
specified by the Committee, in accordance with a vesting schedule to be
determined by the Committee in its discretion and specified in the
Award. Subject to the immediately preceding sentence, the Committee may
condition the vesting of any restricted shares awarded after November
7, 1995 on any additional terms and conditions (including performance
achievement goals applicable to all or any portion of the overall
vesting period) for such period or periods as shall be determined by
the Committee. If the Award document relating to any Award of
restricted shares granted prior to November 7, 1995 fails to contain
any vesting schedule, then such shares shall vest in equal annual
installments (of 20% on each anniversary of the Award date) over the
five year period commencing on the date such shares are awarded.
(i) To the extent that the shares remain non-vested
under the vesting schedule and any additional vesting terms
and conditions set by the Committee, such shares shall be
deemed to be subject to a Restriction Period. The Restriction
Period for restricted shares shall terminate when and to the
extent that such shares vest in the participant in accordance
with their stated vesting terms or in accordance with the
accelerated vesting provided in Section 7(D), Section 7(F) or
the terms of any Award implementing the provisions of Section
12 below, subject, in each case, to the need for Qualifying
Awards to comply with Section 10, and except to the extent
such shares have been forfeited as provided in Section 7(E) or
7(G) below.
(ii) Restricted shares under the Program which are
subject to a Restriction Period may not be assigned,
transferred, pledged or otherwise encumbered or disposed of,
except by forfeiture to the Company as provided in Section
7(E) or 7(G) below.
(iii) During the applicable Restriction Period: (x)
the Company shall retain possession of the certificates for
restricted shares awarded under the Program, (y) the
participant shall execute and deliver to the Company a stock
power in blank with respect to such shares and (z) the
participant shall be entitled to full dividend and voting
rights in respect of such shares. After the end of the
applicable Restriction Period, the restrictions imposed under
the Program
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<PAGE> 5
shall cease to apply to the shares previously subject to such
Restriction Period and the certificates for such shares shall
be delivered to the participant.
(D) In the event of termination of employment (or service as a
non-employee director) by reason of death, disability or retirement at
normal retirement age under the Company's Retirement Plan or any
applicable Retirement Plan of any of the Company's subsidiaries (or any
applicable retirement policy for non-employee directors), the
restrictions imposed under the Program in respect of any Awards then
subject to a Restriction Period, except Qualifying Awards, shall
terminate as of the date of such termination of employment (or service
as a non-employee director).
(E) In the event of termination of employment (or service as a
non-employee director) for any reason other than as provided in Section
7(D) above, a participant shall forfeit all rights in respect of any
shares then subject to a Restriction Period as of the date of such
termination of employment (or service as a non-employee director),
absent a contrary determination by the Committee pursuant to the terms
of any Award implementing the provisions of Section 12 in connection
with a Change in Control Event.
(F) With respect to restricted share Awards granted prior to
1997, in the event of a merger, consolidation, sale of all or
substantially all of the Company's assets, or other corporate
reorganization in which the Company is not the surviving corporation,
the restrictions imposed under the Program in respect of any shares
then subject to a Restriction Period shall terminate as of the date of
such event or as of such earlier date as determined by the Committee.
With respect to restricted share Awards granted after 1996, the terms
of the particular Awards will govern the extent (if any) to which the
restrictions on such restricted shares may terminate as a result of any
transaction described in the immediately preceding sentence, and in
such regard may refer to the provisions of Section 12.
(G) To the extent all or a portion of a restricted share Award
is subject to additional vesting terms and conditions (such as
performance goals) imposed by the Committee to supplement the vesting
schedule established for such Award, and such additional terms and
conditions are not satisfied during the applicable period established
for satisfying such terms and conditions, the restricted shares subject
to such additional vesting terms and conditions shall be forfeited as
of the end of the period during which such vesting terms and conditions
were to be satisfied. This special forfeiture provision applies only to
the number of restricted shares for which a special vesting term or
condition is not satisfied. To the extent a portion of the restricted
shares granted initially as part of the same Award are not subject to
any special vesting terms or conditions (other than the vesting
schedule based on continued employment (or service as a non-employee
director) over the vesting period) or are subject to special terms and
conditions that have been satisfied, or may be satisfied by a later
deadline, such restricted shares shall not be forfeited pursuant to
this Section 7(G) unless and until the later deadline for satisfying
any remaining special terms and conditions occurs without such terms
and conditions being satisfied.
SECTION 8. PHANTOM STOCK UNITS. Awards of phantom stock units ("phantom
units") shall be based on a number of phantom shares of Common Stock determined
by the Committee. The Company shall establish a book account ("Book Account") on
its records for each participant receiving an Award of phantom stock units and
shall credit to a participant's Book Account the number of phantom shares of
Common Stock granted to such participant pursuant to the Award. No actual shares
of Common Stock or other certificates shall be issued to a participant when a
phantom unit Award is granted. Phantom unit Awards shall be evidenced by written
agreements in such form as the Committee shall approve from time to time. A
participant shall earn the amount credited to his or her Book Account from time
to time in accordance with a schedule established by the Committee. The schedule
shall provide that a participant's interest will be earned in one or more
increments over a period of time determined by the Committee and may require
that certain performance goals be achieved. The Committee may establish a
different schedule for each phantom unit Award and each participant.
(A) From the time a phantom unit Award has been granted until
the time it is settled or forfeited, the participant to whom the
phantom units were awarded shall be entitled to receive, as additional
compensation, cash payments equivalent to the amount of dividends that
would be paid with respect to a number of shares of Common Stock
corresponding to the number of phantom units represented by such Award.
(B) No Award of phantom units shall confer on the participant
any voting rights unless and until such phantom unit Award is paid to
the participant in the form of actual shares of Common Stock.
(C) Except as otherwise provided in Section 10 with respect to
Qualifying Awards, if a participant ceases employment with (or service
as a non-employee director of) the Company and its subsidiaries as a
result of death, disability or retirement at normal retirement age
under the Company's Retirement Plan or any applicable Retirement Plan
of any of the Company's subsidiaries (or any applicable retirement
policy for non-employee directors), such participant (or his or her
beneficiary) shall be entitled to such participant's full interest in
any phantom unit Award (whether or not earned) on the date of such
termination (to the extent not previously paid). Upon termination of
employment with (or service as a non-employee director of) the Company
and its subsidiaries for any other reason, a participant's interest in
any unearned phantom unit Awards shall be forfeited, absent a contrary
determination by the Committee pursuant to the terms of any Award
implementing the provisions of
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Section 12 in connection with a Change in Control Event.
Notwithstanding the preceding sentence, whenever a phantom unit Award
is granted in substitution for restricted shares that were subject to
an Award granted prior to 1997 and that are surrendered and cancelled
in connection with the grant of such phantom unit Award, the Committee
may provide in such phantom unit Award that such phantom units will
become fully earned under the same circumstances as the restrictions
applicable to the cancelled restricted shares would have terminated
pursuant to Section 7(F).
(D) When the Committee determines that a phantom unit Award is
to be granted, the Committee shall give the participant an opportunity
to elect the time(s) at which the amount credited to his or her Book
Account, once earned, is to be paid in a form of payment determined
under Section 8(E) below. Thereafter, the participant may make one or
more superseding elections to modify an earlier election in order to
further defer (but not accelerate) the time(s) of payment, provided
that any superseding election must be made prior to the tax year in
which the payments affected by the further deferral would have
otherwise been made. All elections under this Section 8(D) shall be
made subject to the provisions of Section 8(E) below and to the
following:
(i) An election may specify that the amount credited
to a participant's Book Account will be paid to the
participant in increments as soon as each increment becomes
earned.
(ii) Alternatively, an election may specify that the
earned amounts credited to a participant's Book Account will
be paid to the participant in a lump sum or in increments at a
specified time or times after they become earned even though
the participant has not yet retired, or in substantially equal
annual installments commencing as soon as practicable
following the participant's retirement from employment with
(or service as a non-employee director of) the Company and its
subsidiaries. At the time the participant makes an election,
the participant shall designate the period over which the
installment payments will be made. The Committee will have
discretion to modify the form of installment payment
designated by the participant, if the Committee deems such a
modification to be appropriate and in the best interests of
the Company. If a participant elects the deferred payment form
of payment and dies after the installment payments begin, the
remaining installments will be paid to the participant's
beneficiary according to the schedule of installments
designated by the participant.
(iii) The Committee may specify in a phantom unit
Award or by rules adopted and amended from time to time
reasonable limits on the minimum amounts and the frequency of
payments that shall be required for a participant to elect
multiple installments and a maximum time period (no sooner
than five years following termination of a participant's
employment (or service as a non-employee director)) during
which all earned amounts shall be paid.
(E) Subject to any restrictions on the form of payment that
may be specified by the Committee in the terms of any phantom unit
Award, the Committee shall determine whether a payment shall be made:
(i) in whole shares of Common Stock equal to the number of whole
phantom shares of Common Stock credited to the participant's Book
Account, (ii) in cash, or (iii) in a combination of whole shares of
Common Stock and cash, in such proportions as the Committee deems
appropriate. When a payment is made in cash, the phantom shares of
Common Stock then credited to the participant's Book Account shall be
valued, for purposes of the payment, at the fair market value of a
share of Common Stock at the time the payment is made.
(F) The Committee shall have the right to defer payment of a
participant's phantom unit Awards, when earned, to the extent that the
sum of (i) the participant's phantom unit Awards that have been earned
and are scheduled to be settled plus (ii) all other "compensation" (as
defined for purposes of Section 162(m) of the Code) with respect to the
participant for the taxable year in which settlement of the earned
phantom unit Awards would otherwise be deductible, may not be
deductible by the Company by reason of Section 162(m) of the Code, as
determined by the Committee in its sole discretion. A phantom unit
Award deferred pursuant to this Section 8(F) shall be settled in
subsequent taxable years of the Company to the extent that the sum of
the participant's deferred, but earned, phantom unit Awards and all
other "compensation" with respect to the participant would be
deductible by the Company under Section 162(a) of the Code. This
Section 8(F) shall apply only to the extent that the Committee
determines in its sole discretion that the deferral could allow
settlement of the phantom unit Awards to be deductible in a future
year. The Committee's determination shall be final and binding.
SECTION 9. UNRESTRICTED SHARES. Awards of unrestricted shares of Common
Stock of the Company may be granted by the Committee from time to time in its
discretion to participants in consideration of services rendered to the Company
or its subsidiaries; provided that the Committee obtains adequate authorization
(whether in advance or as ratification) from the Board of Directors to the
extent required to comply with Sections 33-6-210(b) and 33-8-250(e)(8) of the
South Carolina Business Corporation Act of 1988, as it may be amended from time
to time (the "SCBCA"), or any successor provisions, all as in effect at the time
of any such grants. Without limiting the preceding sentence, but subject to the
proviso therein, Awards of unrestricted shares may be granted by the Committee
from time to time to directors of the Company or its subsidiaries in lieu of or
as a supplement to cash fees for services rendered as directors.
SECTION 10. QUALIFYING AWARDS. The Committee may, in its sole
discretion, grant an Award (other than unrestricted shares) to any participant
with the intent that such Award as "performance-based compensation" under
Section 162(m) of the Code (a
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<PAGE> 7
"Qualifying Award"). Qualifying Awards may be issued as stock options or, if the
settlement or vesting of the Award is conditioned upon achievement of
performance goals established pursuant to Section 10(A) below, as restricted
shares, phantom stock units or performance units. Unless otherwise specified in
writing by the Committee, either at the time an Award is granted or at any time
thereafter, all Awards issued under the Program that are either stock options or
Awards as to which the settlement or vesting of the Award is conditioned upon
achievement of performance goals established by the Committee in accordance with
Section 10(A) below, shall be treated as Qualifying Awards. The provisions of
this Section 10, as well as other applicable provisions of the Plan not
inconsistent with this Section 10, shall apply to all Qualifying Awards issued
under the Program.
(A) For Qualifying Awards, all amounts received upon the
settlement or vesting of restricted shares, phantom stock units and
performance units shall be based upon the attainment of performance
goals established by the Committee in accordance with Section 162(m) of
the Code. Such performance goals may vary by participant and by Award.
For Awards granted on or after May 6, 1997 (or granted prior to such
date if their grant was conditioned upon approval of amendments to the
Program by the shareholders at their annual meeting on May 6, 1997),
such performance goals shall be based on any one or more (or any
combination) of the following business criteria: revenues, net income
(before or after tax), earnings, earnings per share, shareholders'
equity, return on equity, assets, return on assets, capital, return on
capital, book value, economic value added, operating margins, profit
margins, cash flow, shareholder return, expenses, sales or market
share, expense management, return on investment, improvements in
capital structure, budget comparisons, profitability of an identifiable
business unit or product, or stock price, or shall be based on any one
or more (or any combination) of the foregoing business criteria: (1)
before the effect of acquisitions, divestitures, accounting changes,
restructuring or other special charges or other extraordinary items or
(2) after giving effect to an adjustment to reflect any such
transaction or extraordinary item, to the extent in each such case the
Committee specifies, when granting the Award, that the effect of any
such transactions or extraordinary items shall be disregarded or that a
particular formula or other objective method shall be used to make an
appropriate adjustment to reflect any such transaction or extraordinary
item.
(i) The foregoing business criteria and the
performance goals established by the Committee may be
applicable to the Company as a whole, one or more of its
subsidiaries, divisions, business units or business lines, or
any combination of the foregoing. The performance goals also
may be based on the attainment of specified levels of Company
performance under one or more of the business criteria
described above relative to the performance of other
corporations.
(ii) The Committee may condition the settlement or
vesting of any such Award on the attainment of other
conditions, such as completion of a period of service, that
must be satisfied in addition to the performance goal or goals
specified in the Award and that may apply during the same or a
different time period than the period used for the performance
goal or goals.
(B) The Committee shall have the discretion, by participant
and by Award, to reduce (but not to increase) some or all of the amount
that would otherwise be payable under the Award by reason of the
satisfaction of the performance goals set forth in the Award. In making
any such determination, the Committee is authorized to take into
account any such factor or factors it determines are appropriate,
including but not limited to Company, business unit and individual
performance.
(C) Prior to payment of any Qualifying Award, the Committee
shall certify in writing that the performance goals and any other
material terms of the Award were in fact satisfied, all in a manner
consistent with the applicable regulations under Section 162(m) of the
Code. Such certification shall not be required, however, for
compensation that is attributable solely to an increase in the value of
the Company's Common Stock.
(D) If a participant leaves employment with the Company and
its subsidiaries as a result of death or disability, any stock options
shall become fully exercisable and any restrictions with respect to any
other forms of Qualifying Awards shall terminate, in each case as of
the date of such termination, subject to the Committee's authority
under Section 10(E) as to the timing or receipt, payment or settlement
of such Qualifying Award. In the event of termination of employment for
any other reason, including retirement: (i) the extent to which and the
period of time during which stock options can be exercised shall be
governed by Section 5, and (ii) a participant shall forfeit all rights
that have not become vested or earned in respect of any other form of
Qualifying Awards as of the date of such termination, subject to the
Committee's authority under Section 10(E) as to the timing of receipt,
payment or settlement of such Qualifying Award.
(E) Except in the case of a stock option (as to which the
holder decides when to exercise consistent with applicable provisions
in the Program and option agreement), the Committee is authorized to
defer or accelerate the actual receipt, payment or settlement of any
Qualifying Award to the extent it is or becomes vested or owned, and
the applicable performance goals have been satisfied, at or prior to
the time of termination of the holder's employment for any reason
(including Awards that become vested or owned in accordance with this
Section 10 and Section 5 as a result of such termination) or to the
extent the Qualifying Award is or will be vested or owned, and the
applicable performance goals have been satisfied, at the time of
receipt, payment or settlement during employment; provided, however,
that if any "payment of compensation" (other than a "transfer of
property"), as
20
<PAGE> 8
such terms are used in the regulations adopted under Section 162(m), is
accelerated, the amount of compensation paid shall be discounted to
reasonably reflect the time value of money, except to the extent such
discounting is not necessary to comply with the regulations under
Section 162(m) of the Code when acceleration occurs as a result of
termination of employment due to the death or disability of a holder of
an Award.
SECTION 11. WITHHOLDING. Whenever the Company proposes or is
required to issue or transfer shares of Common Stock or issue a certificate free
of restrictions for vesting shares previously subject to forfeiture under the
Program, the Company shall have the right to require the participant to remit to
the Company an amount sufficient to satisfy any applicable federal, state and
local withholding tax requirements prior to the delivery of any certificate or
certificates for such shares. Whenever under the Program payments are to be made
in cash, such payments shall be net of an amount sufficient to satisfy any
applicable federal, state and local withholding tax requirements. A participant
may elect with respect to any stock option (other than an incentive stock
option), restricted share award, restricted stock unit or performance unit to
surrender or authorize the Company to withhold shares of Common Stock (valued at
current fair market value on the date of surrender or withholding of the shares)
in satisfaction of all such applicable withholding requirements (the "Stock
Surrender Withholding Election"); provided, however, that:
(A) Any Stock Surrender Withholding Election shall be made by
written notice to the Company and thereafter shall be irrevocable by
the participant;
(B) If a participant is an "officer" of the Company or other
person subject to Section 16 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), or any successor law, any Stock Surrender
Withholding Election shall be subject to any additional rules
established from time to time by the Committee;
(C) Any Stock Surrender Withholding Election must be made
prior to the date on which the participant recognizes taxable income
with respect to the receipt of such shares (the "Tax Date");
(D) When the Tax Date falls after the exercise of a stock
option and the participant makes a Stock Surrender Withholding
Election, the full number of shares of Common Stock subject to the
stock option being exercised will be issued, but the participant will
be unconditionally obligated to deliver to the Company on the Tax Date
a number of shares of Common Stock having a value on the Tax Date equal
to the participant's federal, state and local withholding tax
requirements; and
(E) For purposes of this Section, the Committee shall have the
discretion to provide (by general rule or a provision in a specific
Award document) that, at the election of the participant (and subject
to such conditions as the Committee may impose by general rule or in a
provision in a specific Award document), "federal, state and local
withholding tax requirements" shall be deemed to be any amount
designated by the participant which exceeds the amount required by
applicable law and governmental regulations to be withheld but which
does not exceed the participant's total estimated federal, state and
local tax obligations associated with the transaction, including FICA
taxes to the extent applicable.
Shares subject to an Award under the Program that are surrendered or
withheld under this Section 11 to satisfy a participant's federal, state and
local withholding tax obligations shall not thereby become available for use
again under the Program.
SECTION 12. COMMITTEE AUTHORITY TO ACCELERATE RIGHT OF EXERCISE AND
ACCELERATE VESTING IN CERTAIN CIRCUMSTANCES. The Committee may determine when
granting any Award (and may specify in the Award document) or may determine at
any time after granting an Award (in circumstances deemed appropriate by the
Committee) that notwithstanding the fact that an outstanding stock option has
not otherwise become exercisable in full in accordance with its terms and
notwithstanding any conditions to the vesting or earning of a participant's
rights with respect to any Award of restricted shares, phantom stock units or
performance units, such Award shall become fully exercisable (in the case of
stock options) or otherwise shall become fully exercisable and fully vested and
earned upon a "Change in Control Event" described in this Section 12 or upon any
termination of such participant's employment with (or service as a director of)
the Company or its subsidiary or significant reduction in such participant's
responsibilities or compensation following any such Change in Control Event.
Such determinations may be different as to different Awards.
(A) A "Change in Control Event" shall be deemed to have
occurred if:
(i) a tender offer or exchange offer has been made
(other than by the Company, any of its subsidiaries, any
employee benefit plan of the Company or of any of its
subsidiaries, or any person organized, appointed or
established by the Company or any of its subsidiaries for or
pursuant to the terms of any such plan) if, upon consummation
thereof, the corporation, person or other entity making such
offer would become an Acquiring Person (as defined below), and
provided that the corporation, person or other entity making
such offer purchases or otherwise acquires shares of the
Company's Common Stock pursuant to such offer; or
(ii) any person, entity or "group," within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")
(excluding, for this purpose, any employee benefit plan of the
21
<PAGE> 9
Company or of any of its subsidiaries, or any person
organized, appointed or established by the Company or any of
its subsidiaries for or pursuant to the terms of any such plan
which acquires beneficial ownership of voting securities of
the Company) becomes an Acquiring Person (other than through
acquisitions from the Company or in a transaction approved by
the "Incumbent Board" as defined below); or
(iii) the individuals who constitute the Incumbent
Board fail for any reason to continue to constitute at least a
majority of the Board of Directors. The "Incumbent Board" at
any time shall mean the persons who are then members of the
Board of Directors and who (a) are members of the Board of
Directors as of February 4, 1997 or (b) become members of the
Board of Directors thereafter upon election, or nomination for
election by the Company's shareholders, by a vote of at least
a majority of the Incumbent Board (other than an election or
nomination of an individual whose initial assumption of office
is in connection with an actual or threatened election contest
relating to the election of the directors of the Company, as
such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act.)
For purposes hereof, "Acquiring Person" means any person or group of
affiliated or associated persons that, after February 4, 1997, becomes
the beneficial owner (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of 20% or more of either the then outstanding
shares of the Company's Common Stock or the combined voting power of
the Company's then outstanding voting securities entitled to vote
generally in the election of directors; provided however, that such
term does not include any person who beneficially owns 20% or more of
either the Company's Common Stock or the combined voting power of the
Company's then outstanding voting securities entitled to vote generally
in the election of directors: (x) as a result of the reduction in the
number of shares of Common Stock outstanding due to the Company's
acquisition of its Common Stock; (y) as a result of (1) a will or the
laws of descent and distribution, (2) the transfer of shares to any
member of the transferor's immediate family or to a trust for the
benefit of a member of the transferor's immediate family (a "Transferee
Trust"), (3) a divorce decree or settlement or (4) the transfer of
shares held on February 4, 1997 by any trust or held at any time by a
Transferee Trust to any beneficiary of such trust; or (z) as a result
of any acquisition by such person of shares pursuant to any employee
benefit plan of the Company or of any of its subsidiaries.
(B) The relevant Change in Control Event shall be deemed to
occur:
(i) in the event of Section 12(A)(i) above, on or
after the date on which shares are purchased pursuant to such
tender or exchange offer; or
(ii) in the event of Section 12(A)(ii) above, at any
time after the date upon which the Company is provided a copy
of Schedule 13D (filed pursuant to Section 13(d) of the
Exchange Act and the rules and regulations promulgated
thereunder) or other notice indicating that any person, entity
or group has become an Acquiring Person or, if the Company is
not subject to Section 13(d) of the Exchange Act, at any time
after the date upon which the Company receives written notice
that any person, entity or group has become an Acquiring
Person; or
(iii) in the event of Section 12(A)(iii) above, on or
after the occurrence of such failure.
SECTION 13. REGULATORY AND OTHER LEGAL REQUIREMENTS. All aspects of
this Program shall be subject to applicable laws, rules, regulations and
approvals required by governmental entities and stock exchanges. Without
limiting the foregoing, the issuance of shares of the Company's Common Stock
under the Program is subject to applicable provisions of the SCBCA (or any
successor laws); without in any way abdicating its decision making authority in
connection with the grant of any Awards hereunder (including, but not limited
to, the Committee's authority to establish and administer performance goals and
certify as to the attainment of any such performance goals), the Committee may
obtain further parameters from the Board of Directors within which to exercise
the Committee's authority or may obtain ratification of the Committee's
decisions by the full Board of Directors or may do both to the extent deemed
appropriate to comply with the SCBCA (including Sections 33-6-210(b) and
33-8-250(e)(8)) or any successor laws.
SECTION 14. GRANTOR TRUSTS. The Committee may, in its discretion and in
a manner consistent with Section 13, establish one or more grantor trusts (with
such terms as the Committee may determine) and contribute shares of Common Stock
and such other assets as may be deemed desirable for use in satisfying the
Company's obligations to one or more participants under one or more Awards
granted hereunder. The creation and funding of any such trust with respect to
one or more Awards shall not create any obligation on the part of the Company or
any rights in participants receiving other Awards to have the same or any
similar trust created or funded with respect to other Awards. If any such trust
is used for purposes of satisfying the Company's obligations to any participant
under an Award, the Company shall be relieved of its obligation to satisfy any
claim for benefits under such Award to the extent such participant receives a
distribution from the trust of the shares of Common Stock or other assets due in
accordance with the Award, but the Company shall remain liable for any balance
due that is not received from such trust.
SECTION 15. TERM. This Program initially became effective May 3, 1983
for ten years and was amended, with shareholder approval, in 1990 to extend its
term to May 1, 2000. Subject to approval of certain amendments by the
shareholders of the Company at their
22
<PAGE> 10
annual meeting to be held on May 6, 1997 or at any adjournment thereof, this
Program has been further amended, effective on the date of such shareholder
approval, to extend its term to May 6, 2007 unless terminated at an earlier date
by the Board. No Awards shall be granted after termination of the Program, but
any then outstanding Awards shall continue in effect for the remainder of their
respective terms, subject to the conditions of such Awards. No incentive stock
options may be granted after February 4, 2007, which is ten years after the
Committee's adoption of the Program as most recently extended and restated.
SECTION 16. AMENDMENTS AND DISCONTINUANCE. The Committee may amend,
suspend, or discontinue the Program; provided, however, that the Committee may
condition the effectiveness of any amendment on shareholder approval to the
extent the Committee determines that shareholder approval is necessary or
desirable to qualify for: certain tax deductions or other desired treatment
under Section 162(m) or other Sections of the Code and related regulations of
the Internal Revenue Service, all as amended from time to time; certain
exemptions under Section 16 of the Securities Exchange Act of 1934 and related
rules adopted by the Securities and Exchange Commission, all as amended from
time to time; or any other desired exemption or treatment under any applicable
law or regulation. Notwithstanding the foregoing, no such amendment shall
materially and adversely affect the rights of any participant as to any Award
then outstanding without the consent of such participant.
23
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