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Published on April 8, 2009
April 8, 2009
VIA EDGAR AND FEDERAL EXPRESS
Mr. John Reynolds
Assistant Director
U.S. Securities and Exchange Commission
Division of Corporation Finance
100 F Street, N.E.
Washington, DC 20549-7010
Assistant Director
U.S. Securities and Exchange Commission
Division of Corporation Finance
100 F Street, N.E.
Washington, DC 20549-7010
Re: | Graphic Packaging Holding Company Preliminary Proxy Statement filed on March 19, 2009 Commission File No. 001-33988 |
Dear Mr. Reynolds:
Graphic Packaging Holding Company (the Company) is hereby responding to the comments
contained in your letter dated April 2, 2009 relating to the Preliminary Proxy Statement for the
Annual Meeting of Stockholders to be held on May 13, 2009, filed on March 19, 2009. The comments
of the Staff are set forth in bold and italicized text below and the Companys responses are set
forth in plain text immediately beneath each comment. The references in the Companys responses
below to page numbers refer to the pages in the blacklined courtesy copies of the Companys
definitive Proxy Statement (the Proxy Statement), which we are providing to you for your
convenience.
Compensation Discussion and Analysis
1. | Please revise the Compensation Discussion and Analysis to clarify the material information about compensation objectives and policies for named executive officers, including how and why the compensation committee arrived at the specific executive compensation decisions and policies. For example, although you identify seven compensation components and provide information regarding the methodology used for setting the amounts of individual types of compensation, it is not clear how each compensation component and your decisions regarding these elements fit into the companys overall compensation objectives and their impact regarding other elements. Similarly, it is unclear if and how the committees decisions regarding these elements were affected by the vesting in March 2008 of all RSUs outstanding under the 2004 Plan as a result of the change of control that occurred upon the consummation of the Altivity Transaction, as disclosed in footnote 1 on page 21. See Item 402(b)(1)(vi). Please revise as appropriate. |
April 8, 2009
Page 2 of 7
To address the Staffs concerns expressed in Comment No. 1, the Company has added a number of new disclosures. First, the Company has added additional information regarding the purposes and objectives for the individual components of compensation by adding the following statements under the headings Base Salary, Welfare Benefit Plans, Perquisites, and Retirement Benefits, respectively, on pages 14-16 of the Proxy Statement: |
The purpose of base salaries is to attract and retain our
Executives. Increases in base salary also serve to reward
performance and recognize significant increases in the scope of an
Executives position and responsibilities.
The purposes of the Companys welfare benefit plans are to attract
and retain Executives and other employees.
The purpose of providing a fixed payment in lieu of perquisites is
to attract and retain Executives who would typically receive various
perquisites with at least a similar value if employed by other
companies comparable to the Company.
The Company provides retirement benefits to attract and retain
qualified employees and Executives, and to reward significant
service to the Company.
We have also expanded the explanation of the potential impact that each component of compensation may have on the other components by adding the following language prior to the last sentence in the paragraph under the heading Guiding Principles and Policies on page 12 of the Proxy Statement: |
The Committees goal is to set each Executives total compensation
at approximately the 50th percentile of the peer groups
total pay for executives with similar positions and
responsibilities. As data for the peer group fluctuates or the peer
group is updated to reflect changes in the market, the Committee may
make adjustments in one or more components of compensation to
achieve the
50th percentile of total compensation.
However, because of recent promotions, changes in the peer group to
reflect the Companys size after the Altivity Transaction and the
redesign of the long-term incentive program in 2008 (which resulted
in the Executives receiving no grants of Service-Based Restricted
Stock Units), total compensation for the Executives is below the
50th percentile of the peer group for 2008.
April 8, 2009
Page 3 of 7
To address the Staffs question about the effect of the vesting and payout of all RSUs under the Companys 2004 Stock and Incentive Compensation Plan, the following language has been added at the end of the third full paragraph under the heading Long-Term Incentives on page 15 of the Proxy Statement: |
The vesting and payout of all of the RSUs previously granted under
the 2004 Plan did not affect the Committees decisions with respect
to long-term incentives or other components of compensation in
2008.
2. | The compensation discussion and analysis should be sufficiently precise to identify material differences in compensation policies with respect to individual named executive officers. Please expand your disclosure to explain the differences in the types and amounts of compensation awarded to the named executive officers. For example, we note the different trends in Mr. Simkos salary and non-equity incentive plan compensation as compared to those of the other named executive officers. We refer you to Section 11.B.1. of Commission Release No. 33-8732A. To the extent policies or decisions are materially similar, you may discuss the compensation of these individuals on a group basis. | ||
The Company did not apply different compensation policies or practices to any one or more of the Named Executive Officers in 2008. Rather, as stated under the section of the Compensation Discussion and Analysis titled Guiding Principles and Policies, the Committee and the Company reviewed market data, individual performance, retention needs and internal equity among Executives compensation packages in determining whether to increase, maintain or decrease compensation. Accordingly, the Company discussed its policies and compensation decisions during 2008 on a group basis. | |||
With respect to Mr. Simko, the different trends in base salary and non-equity incentive plan compensation as compared to those of the other Named Executive Officers result from Mr. Simkos termination of employment on April 15, 2008. This resulted in actual base salary payments below his 2007 level, as well as the fact that he received no non-equity incentive plan compensation for 2008. We propose adding a footnote to the Summary Compensation Table on page 19 of the Proxy Statement with language as follows: |
(9) | The amount shown in the Salary column for Mr. Simko reflects salary paid to Mr. Simko through April 15, 2008, the date his employment with the Company terminated. Mr. Simko received no non-equity incentive plan compensation for 2008 because, pursuant to his employment agreement, he received an amount equal to a pro-rated award at target level under the MIP as part of his severance payments. |
April 8, 2009
Page 4 of 7
We believe this additional disclosure should clarify the application of the Companys compensation policies and practices caused by the disclosure of Mr. Simkos 2008 compensation in the Summary Compensation Table. | |||
3. | We note the statement on page 13 that the compensation committee engaged Hewitt Associates. Please revise to clarify the material elements of the instructions or directions given to the consultants with respect to the performance of their duties under the engagement. See Item 407(e)(3)(iii) of Regulation S-K. | ||
We have added the requested information by inserting the following language after the third sentence in the paragraph under the heading Role of Compensation Consultants on page 13 of the Proxy Statement: |
The Committee and the Company instructed Hewitt Associates to
compile and provide data on both total pay and individual elements
of compensation among companies in the peer group, as well as trends
in compensation practices that they observed within the peer group
and generally among public companies. Neither the Company nor the
Committee relies on Hewitt Associates to recommend specific levels
of total pay or any specific element of compensation to our
Executives; such recommendations are developed by management based
on information provided by Hewitt Associates and then presented to
the Committee for consideration.
4. | Please revise to disclose the certain performance metrics identified in the third paragraph on page 20. | ||
We have added the requested information by inserting the following language after the second sentence in the fifth paragraph on page 21 of the Proxy Statement: |
Specifically, the performance metrics (that would result in an
award at target level) were debt reduction of $61.0 million, cost
reduction of $25.8 million, sales related to innovation of $41.0
million, process improvement (measured by cost of variation) of no
more than 6.7% and asset utilization (measured by operating
equipment efficiency) of at least 57%. The Company achieved or
exceeded all of these metrics except debt reduction, resulting in
awards at 112% of the 2007 Service RSU award level.
April 8, 2009
Page 5 of 7
Certain Relationships and Related Transactions, page 25
5. | We note the statement on page 32 that you and GPC, Molson Coors Brewing Company and CoorsTek have certain business relationships and have engaged in certain transactions with one another, as described below. The disclosure in the subsequent paragraphs refers to a supply agreement with Coors Brewing Company, under which you received approximately $87 million in 2008, and a Golden Properties partnership, which owns, develops, operates and sells certain real estate and appears to have distributed approximately $4.3 million to you in 2008. Please revise to describe the material terms of the supply agreement and real estate operations. Similarly, please revise to describe the Supply Agreement with Fiskeby International Holding AB, and explain the basis on which it is affiliated with Jeffrey H. Coors. | ||
We propose to more fully describe the supply agreement with Coors Brewing Company by deleting the second full paragraph from the top of page 34 in the Proxy Statement, which describes the Companys relationship with Molson Coors Brewing Company, and replacing it with the following: |
GPIC originated as the packaging division of Adolph Coors Company.
At the time of the spin-off from Adolph Coors Company, GPIC entered
into an agreement with Coors Brewing Company to continue to supply
its packaging needs. GPC executed a supply agreement, effective
April 1, 2004 with Coors Brewing Company (now a subsidiary of Molson
Coors Brewing Company) that expires on December 31, 2009, unless
extended for one year at the option of Coors Brewing Company.
Pursuant to this supply agreement, GPII supplies an agreed-upon
percentage of Coors Brewing Companys beverage packaging needs in
North America. Pricing for such packaging is based on competitive
industry levels for similar products and adjusted annually based on
published indices for commodity input costs. Sales under this
agreement were approximately $87 million for the year ended December
31, 2008 (not including sales to MillerCoors, a joint venture formed
in June 2008).
We propose to more fully describe the real estate operations of Golden Properties, Ltd. by deleting the third full paragraph from the top of page 34 in the Proxy Statement and replacing it with the following: |
One of the Companys subsidiaries, Golden Equities, Inc. is the
general partner of Golden Properties, Ltd., a limited partnership in
April 8, 2009
Page 6 of 7
which Coors Brewing Company is the limited partner. Prior to August
2003, Golden Equities, Inc. was a subsidiary of GPIC. Following the
merger of GPIC into and with Riverwood Holding, Inc., Golden
Properties, Ltd. owned, developed, operated and sold 12 commercial
properties in the Coors Technology Center in Golden, Colorado and
several residential properties outside of Golden, Colorado. These
properties were previously owned directly by Coors Brewing Company
or Adolph Coors Company. Golden Properties, Ltd. sold its last
property in December 2007 and the Company has been in the process of
liquidating the partnership since that time. The Company received a
distribution of capital of $1.6 million in 2008, as well as
approximately $2.7 million as a distribution of earnings.
We propose to more fully describe the relationship between Fiskeby International Holding AB and Jeffrey H. Coors by deleting the last three sentences in the fourth full paragraph on page 34 of the Proxy Statement and replacing them with the following: |
Pursuant to the Purchase and Sale Agreement, the Purchaser acquired
all of the outstanding shares of Graphic Packaging International
Sweden AB (the Swedish Company). The Swedish Company and its
subsidiaries are in the business of developing, manufacturing and
selling paper and packaging boards made from recycled fiber. The
Purchaser is owned by Fiskeby US LLC, a domestic limited liability
company, which is in turn wholly owned by Fiskeby, Inc. Fiskeby,
Inc is primarily owned by the Grover C. Coors Trust (one of the
Coors family trusts), although Jeffrey H. Coors, a member of GPHCs
Board of Directors, and his son, Timothy I. Coors, currently own
approximately 5% of Fiskeby, Inc. and have certain rights to
increase their ownership. Mr. Jeffrey H. Coors also serves as the
non-executive Chairman of the Purchaser.
We propose to expand the description of the Supply Agreement with Fiskeby International Holding AB by deleting the last two sentences in the last paragraph on page 34 of the Proxy Statement and replacing them with the following: |
The Purchaser entered into a two year Supply Agreement with GPC
pursuant to which GPC will purchase its requirements for coated
recycled board in the European Union from the Purchaser at the
prevailing market price at the time of the order. In 2008, GPC and
GPHC purchased approximately $2.9 million of paperboard from the
Purchaser.
April 8, 2009
Page 7 of 7
6. | Also, please disclose any recent transactions with CoorsTek. We note the last full paragraph on page 32 refers to a 1999 transaction, but it is unclear if there are other or continuing relationships with CoorsTek. | ||
The Company and its subsidiaries have not had any recent transactions with CoorsTek. Upon further review of the Distribution Agreement and the Tax Sharing Agreement, we have determined that the federal and state statutes of limitations with respect to tax actions related to the spin-off of CoorsTek and the requirements for record retention for tax documents have lapsed. Accordingly, the Company has no further obligations under either of these documents. We propose to delete the entire paragraph. |
Closing Comments
As requested, the undersigned hereby acknowledges, on behalf of the Company, that
| the Company is responsible for the adequacy and accuracy of the disclosures in its filing; | ||
| Staff comments or changes to disclosures in response to Staff comments do not foreclose the Commission from taking any action with respect to the filing; and | ||
| the Company may not assert Staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States. |
If the Staff has additional comments or questions after reviewing this response, please
contact the undersigned at (770) 644-3232 or Mr. Stephen Hellrung at (770) 644-3231.
Very truly yours,
/s/ Laura Lynn Smith
Laura Lynn Smith
Counsel and Assistant Secretary
Counsel and Assistant Secretary
cc: | David W. Scheible, President and Chief Executive Officer Stephen A. Hellrung, Senior Vice President, General Counsel and Secretary Dana Brown, Securities and Exchange Commission, Division of Corporation Finance |