UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 14, 2005
ITT INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Indiana 1-5672 13-5158950
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
4 West Red Oak Lane
White Plains, New York 10604
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code: (914) 641-2000
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (See General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Not Applicable
(Former name or former address, if changed since last report)
Item 1.01 - Entry into a Material Definitive Agreement
On March 8, 2005, the Compensation and Personnel Committee of the Board of
Directors of ITT Industries, Inc. (the "Committee") approved annual and
long-term incentive awards, 2005 annual and long-term incentive opportunities
and 2005 base salaries for the individuals expected to be named executive
officers in our Proxy Statement for our 2005 Annual Meeting of Shareholders (the
"2005 Annual Meeting"). Additional information with respect to the compensation
arrangements for the named executive officers will be set forth in the Proxy
Statement for the 2005 Annual Meeting.
Annual Incentive Awards and Opportunities
For 2004, the named executive officers participated in the ITT Industries 1997
Annual Incentive Plan for Executive Officers (the "AIP") approved by ITT
Industries' shareholders in 1997. Bonus amounts to be paid under the plan are
based on the financial performance of ITT Industries during the performance year
as compared with the annual performance goals established and approved by the
Committee at the beginning of the performance year. Under the AIP, the Committee
has the authority to modify the award to reflect individual performance in
accordance with the terms of the AIP. The Committee also may award supplemental
bonus payments separate from the AIP in its discretion in recognition of
additional performance factors.
For performance year 2004 the approved annual performance goals were based 60%
on Economic Valued Added ("EVA"), 20% on Revenues, and 20% on Quarterly Cash
Targets. Additionally, the Committee established individual award targets which
varied by position as a percentage of base salary, with the award targets for
the Chief Executive Officer and the other named executive officers ranging from
a minimum of 55% to a maximum of 100%. Actual payment under the AIP can range
from 0-200% of the target. On March 8, 2005, the Committee approved the
following 2004 bonuses under the AIP for the named executive officers: Mr.
Driesse, $500,000; Mr. Ayers, $270,000; Mr. Maffeo, $300,000; and Mr. Giuliano,
$750,000. The bonus awards include additional payments made outside of the plan
to Mr. Maffeo in the amount of $4,966 and to Mr. Giuliano in the amount of
$19,680 to reflect individual performance. A bonus payment in the amount of
$1,000,000 was made to Mr. Loranger in consideration of his employment agreement
and individual performance factors. These amounts reflect ITT Industries' strong
overall operational and financial performance in 2004, as well as the
Committee's exercise of its discretion in accordance with the terms of the AIP.
The Committee approved a 2004 payment for Mr. Williams under the AIP of
$360,000, subject to review of additional information currently being assembled.
The Committee also determined that bonus opportunities for 2005 under the AIP
will be dependent on the following corporate performance goals: 60% on Return on
Invested Capital ("ROIC"), 20% on Revenues and 20% on Quarterly Cash Targets,
and that the award targets for the Chief Executive Officer and the other named
executive officers for 2005 will range from a minimum of 60% to a maximum of
100% of base salary. The formula change from EVA to ROIC for performance year
2005 is based on the Company's determination that ROIC is a more easily
understood measurement of capital allocation in the Company's business. The same
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discretionary factors as described above may be considered by the Committee when
determining the amounts paid for 2005.
Long Term Incentive Awards and Opportunities
For the named executive officers, the ITT Industries' Long-Term Incentive Award
Program total award value is determined individually based on the competitive
market, individual performance and business performance and is split equally
between non-qualified stock options and target cash awards.
o Stock-Based Awards
Effective March 8, 2005, the Committee approved the following stock option
grants to the named executive officers under the ITT Industries Inc. 2003 Equity
Incentive Plan (the "2003 Plan"): Mr. Loranger, 99,560 shares; Mr. Driesse,
23,780 shares; Mr. Ayers, 16,920 shares; and Mr. Maffeo, 16,590 shares.
The exercise price of the options is $90.94 per share. The options granted to
the named executive officers will vest upon a 25% appreciation in ITT
Industries' common stock price for ten (10) consecutive trading days. The
options may not be exercised, in any event, earlier than three years from the
date of grant. If the option threshold is not achieved, options will vest six
years from the date of grant and may be exercised for the remainder of their
term. The term for all options is seven years. Each of the options also provides
for accelerated vesting upon change in control events that are defined in the
2003 Plan and upon termination of employment in certain circumstances. The
amended form of option award agreement for the named executive officers, which
are applicable to the March 8, 2005 awards, was filed as Exhibit 10.3 to ITT
Industries' Annual Report on Form 10-K for the year ended December 31, 2004 and
is incorporated by reference herein.
o Long-Term Incentive Plan
The ITT Industries 1997 Long-Term Incentive Plan ("LTIP") approved by
shareholders in 1997 authorizes performance awards to be made to key employees
of ITT Industries at the discretion of the Committee. Awards made under this
plan are expressed as target cash awards and comprise one-half of the total
long-term incentive value for senior executives. The non-qualified stock options
described above comprise the other half.
The LTIP provides that the Committee shall determine the size and frequency of
awards, performance measures, performance goals and performance periods.
Payment, if any, of awards generally will be made at the end of the applicable
performance period and are based on ITT Industries' performance as compared with
the performance measures approved by the Committee prior to the performance
period. Payment, if any, of awards may be made in whole or in part, at the
discretion of the Committee, in the form of cash and/or common stock of ITT
Industries. The Committee determined that payment for the awards granted in
2002, and payable in 2005, be made wholly in cash. It is anticipated that future
payments under the plan will continue to be made entirely in cash.
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The LTIP enables the Committee to make adjustments to awards and increase or
decrease payment values based upon events or circumstances, including but not
limited to acquisitions or divestitures, having a material impact on the overall
performance of ITT Industries.
Messrs. Driesse, Williams, Maffeo and Giuliano received grants of awards in 2002
under the LTIP. These awards were subject to a three-year performance period
ending December 31, 2004 and were subject to achievement of pre-established
goals, as approved by the Committee in 2002, measuring ITT Industries'
performance with respect to total shareholder return against the performance of
the other S&P(R) Industrial companies. LTIP payments were made in strict
accordance with the plan as measured for the period January 1, 2002 through
December 31, 2004. Based on the Company's performance at the 83.0 percent rank
of the S&P(R) Industrial companies, payout was at 200% of target, which was in
accordance with the approved formula. Mr. Giuliano's payment was prorated, based
on his active service during the performance period, in accordance with the
terms of the LTIP.
On March 8, 2005, the Committee granted target awards under the LTIP for the
three-year period beginning January 1, 2005 to the named executive officers as
follows: Mr. Loranger, $1,800,000; Mr. Driesse, $537,400; Mr. Ayers, $382,400;
and Mr. Maffeo, $374,900. The Committee may grant additional LTIP awards
following evaluation of additional information currently being assembled. The
ultimate value, if any, of each of these awards will be determined in accordance
with the established performance measurement formula for the target awards
granted in 2005. The Committee designated a 35th percentile performance level at
which a 50% payout would be received and fixed a maximum performance payment of
200% for performance at or above the 80th percentile. The award amounts set
forth above would be the amounts payable if the formula results in payment at
the 100% level. Payment, if any, with respect to the 2005 target awards will be
based on the Company's total shareholder return performance compared with the
other S&P(R) Industrial companies. Mr. Loranger also received a target Phantom
LTIP award of $450,000, subject to the same performance thresholds and
conditions as awards under the LTIP.
Base Salary for 2005
The Committee approved new base compensation, effective March 1, 2005, for the
named executive officers as follows: Mr. Loranger, $900,000; Mr. Driesse,
$425,000; Mr. Williams, $480,000; Mr. Ayers, $460,000; and Mr. Maffeo, $422,000.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ITT INDUSTRIES, INC.
By: /s/ Kathleen S. Stolar
---------------------------
Kathleen S. Stolar
Its: Vice President, Secretary
and Associate General Counsel
Date: March 14, 2005
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