UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
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Swift Energy Company
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be held May 11, 2004
Notice is hereby given that the annual meeting of shareholders of SWIFT
ENERGY COMPANY (the "Company") will be held at the Wyndham Greenspoint Hotel,
12400 Greenspoint Drive, Houston, Texas, on Tuesday, May 11, 2004 at 4:00 p.m.,
Houston time, for shareholders to consider and vote upon the following matters:
(1) A proposal to elect three members of Class II of the board of
directors, positions for which A. Earl Swift, Greg Matiuk and Henry C.
Montgomery have been nominated, and one member of Class III of the
board of directors, a position for which Deanna L. Cannon has been
nominated, and upon election all four nominees to serve for the terms
specified in the attached proxy statement or until their successors
are elected and qualified; and
(2) Such other business as may properly be presented at the meeting, or
any adjournment thereof.
A record of shareholders has been taken as of the close of business on
March 30, 2004, and only shareholders of record on that date will be entitled to
notice of and to vote at the meeting, or any adjournment thereof. A complete
list of shareholders will be available commencing April 30, 2004, and may be
inspected during normal business hours prior to the meeting at the offices of
the Company, 16825 Northchase Drive, Suite 400, Houston, Texas. This list will
also be available at the meeting.
Whether or not you plan to attend the meeting in person, please sign, date
and return the enclosed proxy card right away. A stamped envelope is enclosed
for this purpose. Your prompt return of the proxy card will ensure a quorum and
save the Company the expense of further solicitation.
By Order of the Board of Directors,
/s/ Bruce H. Vincent
BRUCE H. VINCENT
Secretary
April 5, 2004
SWIFT ENERGY COMPANY
16825 Northchase Drive, Suite 400
Houston, Texas 77060
(281) 874-2700
PROXY STATEMENT
This proxy statement is mailed to shareholders commencing on or about April
6, 2004, in connection with the solicitation by the board of directors (the
"Board") of SWIFT ENERGY COMPANY (the "Company") of proxies to be voted at the
annual meeting of shareholders to be held at the Wyndham Greenspoint Hotel,
12400 Greenspoint Drive, Houston, Texas, on Tuesday, May 11, 2004 at 4:00 p.m.,
Houston time, and any adjournment thereof (the "Meeting"), for the purposes set
forth in the accompanying Notice of Annual Meeting of Shareholders. Management
does not know of any matters other than those listed on the notice that will be
presented for action at the Meeting.
The Annual Report to Shareholders covering the fiscal year ended December
31, 2003 will be mailed to each shareholder entitled to vote at the Meeting on
or before the date of mailing this proxy statement or may accompany this proxy
statement.
The cost of soliciting proxies will be borne by the Company. In addition to
solicitations by mail, a number of regular employees of the Company may solicit
proxies in person or by telephone.
QUORUM AND VOTING
The record date for the determination of shareholders entitled to notice of
and to vote at the Meeting was the close of business on March 30, 2004. On the
record date, there were 27,621,356 shares of common stock of the Company, par
value $.01 per share, issued and outstanding and entitled to vote.
Each share of common stock entitles the holder to one vote on each matter
presented at the Meeting. Proxies will be voted in accordance with the
directions specified thereon. Any proxy on which no direction is specified will
be voted for the election of all nominees named therein to the Board for the
terms indicated, and otherwise at the discretion of the persons designated as
proxies. A shareholder may revoke his proxy at any time prior to the voting
thereof by attending and voting at the Meeting or by filing with the Secretary
of the Company a written revocation or a duly executed proxy bearing a later
date.
The presence, in person or by proxy, of the holders of a majority of the
issued and outstanding shares entitled to be voted at the Meeting is necessary
to constitute a quorum to transact business. If a quorum is not present or
represented at the Meeting, a majority of the votes represented at the Meeting
may adjourn the Meeting from time to time without notice, other than an
announcement at the Meeting, until a quorum is present or represented.
An automated system administered by the Company's transfer agent tabulates
the votes. Abstentions are included in the determination of the number of shares
present and voting and are counted as abstentions in tabulating the votes cast
on nominations or proposals presented to shareholders. Broker nonvotes are not
included in the determination of the number of shares present and voting or as a
vote with respect to such nominations.
PROPOSAL 1
ELECTION OF DIRECTORS
At the Meeting, three Class II directors are to be elected for terms to
expire at the 2007 Annual Meeting and one Class III director is to be elected
for a term to expire at the 2005 Annual Meeting. The Company has three classes
of directors and each year the directors in one of these classes are nominated
to serve three year terms, or until their successors have been duly elected and
qualified. Because Mr. Withrow is retiring from the Board at the expiration of
his term in May 2004, a vacancy will be open in Class II. Mr. Matiuk was
appointed to the Board as a Class III director last September 2003 in accordance
with the Bylaws of the Company so that there would be an even number of
directors in each class. With Mr. Withrow's retirement at the expiration of his
term, Mr. Matiuk was nominated to stand for election as a Class II director and
Ms. Cannon, who is not currently a director, has been nominated to stand for
election as a Class III director for the remaining year left in the Class III
term. Both Mr. Matiuk and Ms. Cannon were recommended to stand for election by
non-management directors. In order to be elected, each nominee for director must
receive at least the number of votes equal to a majority of the shares having
voting power that are present in person or represented by proxy at the Meeting.
The persons named as proxies on the accompanying proxy card, unless
authority is withheld by a shareholder on a proxy card, intend to vote for the
election of all of the nominees named below to the Board. If any nominee should
become unavailable or unable to serve as a director, the persons named as
proxies may vote for a substitute selected by them, or the Board may be reduced
accordingly; however, the Board is not aware of any circumstances likely to
render any nominee unavailable. Any director elected by the Board to fill a
vacancy will be elected for the unexpired term of such director's predecessor in
office.
Class II
A. Earl Swift
Greg Matiuk
Henry C. Montgomery
(Term to expire at the 2007 Annual Meeting)
Class III
Deanna L. Cannon
(Term to expire at the 2005 Annual Meeting)
Set forth below, for information purposes only, are the names and remaining
terms of the other five directors:
Class I
Raymond E. Galvin
Clyde W. Smith, Jr.
Terry E. Swift
(Terms to expire at the 2006 Annual Meeting)
Class III
G. Robert Evans
Virgil N. Swift
(Terms to expire at the 2005 Annual Meeting)
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Nominees
Set forth below is certain information, as of the date of this proxy
statement, concerning the nominees for election to the Board of the Company.
Class II Directors
A. Earl Swift, 70, is Chairman of the Board of Swift Energy and has served
in such capacity since the Company's founding in 1979. He previously served as
President from 1979 to November 1997 and as Chief Executive Officer from 1979
until May 2001. For the 17 years prior to 1979, he was employed by affiliates of
American Natural Resources Company. He currently serves on the board of
directors of Excalibur Industries, a public company primarily involved in the
uranium mining industry. Mr. Swift is a registered professional engineer and
holds a degree in Petroleum Engineering, a Juris Doctorate degree and a Master's
degree in Business Administration. He is the brother of Virgil N. Swift and the
father of Terry E. Swift.
Greg Matiuk, 58, was appointed to serve as a member of Swift Energy's Board
of Directors on September 17, 2003. After 36 years of service, Mr. Matiuk
retired from ChevronTexaco Corp. in May 2003 as Executive Vice President,
Administrative and Corporate Services, a position he had held since 2001. From
1998 until 2001, he was Vice President, Human Resources and Quality, and from
1996 to 1998 he served as Vice President of Strategic Planning and Quality. Mr.
Matiuk began his career at ChevronTexaco in 1967 as a production and reservoir
engineer. Among a variety of positions, Mr. Matiuk also served as Manager of
Drilling and Production in Australia, General Manager for Chevron U.K. Ltd. in
Aberdeen, Scotland, and Vice President and General Manger of the Western
Business Unit for Chevron U.S.A. Production Co., in Bakersfield, California. He
holds a Bachelor of Science degree in Geological Engineering and a Master's
degree in Business Administration. Mr. Matiuk has also served as a board member
for various other organizations including the National Council for Minorities in
Engineering, United Way, the Bakersfield Symphony, Boy Scouts of America and
INROADS.
Henry C. Montgomery, 68, has served as a director of the Company since
1987. Since 1980, Mr. Montgomery has been and continues to serve as the Chairman
of the Board of Montgomery Professional Services Corporation, a management
consulting and financial services firm. Mr. Montgomery currently also serves as
Chairman of the Board of Catalyst Semiconductor, Inc., a public company that
designs, develops and markets programmable integrated circuit products and,
since May 2003, he has also served as a director of QuickLogic Corporation, a
public company that designs and markets field programmable gate arrays, embedded
standard products, associated software and programming hardware. From January
2000 to March 2001, Mr. Montgomery served as Executive Vice President, Finance
and Administration, and Chief Financial Officer of Indus International, Inc., a
public company engaged in enterprise asset management systems. For eight months
in 1999, he served as interim Executive Vice President of Finance and
Administration of Spectrian Corporation, a publicly held wireless telecom
infrastructure company. Mr. Montgomery holds a Bachelor of Arts degree in
Economics.
Class III Director
Deanna L. Cannon, 43, was nominated by the Company's Board on March 30,
2004, to stand for election as a director on the Company's Board at the 2004
Annual Meeting. Ms. Cannon currently serves as President of Cannon & Company
CPA's PLC, a privately held, newly formed consulting firm. Through December
2003, she served as Chief Financial Officer of Miller Exploration Company from
November 2001 and Vice President-Finance and Corporate Secretary of Miller
Exploration from June 1999. From May 1998 to June 1999, she served as Assistant
Vice President--Finance of Miller Exploration. Miller Exploration Company was a
publicly held independent oil and gas exploration and
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production company that was acquired by Edge Petroleum Corporation in December
2003. She also served as director of Miller Oil Corporation, a wholly owned
subsidiary of Miller Exploration, from May 2001 to December 2003. Previously,
Ms. Cannon was employed in public accounting for 16 years, initially for Arthur
Andersen & Co. in Jacksonville, Florida and later for Plante & Moran, LLP in
Traverse City, Michigan. Ms. Cannon holds a Bachelor of Science degree in
Accounting and is a Certified Public Accountant. She is a member of the
Michigan Oil and Gas Association, American Institute of Certified Public
Accountants and Michigan Association of Certified Public Accountants.
The Board recommends that shareholders vote "FOR" all of the nominees for
directors.
BOARD OF DIRECTORS
Set forth below, for information purposes only, is information regarding
the Class I and the two incumbent Class III directors whose terms will expire at
the annual meetings in 2006 and 2005, respectively:
Class I Directors
Raymond E. Galvin, 72, has served as a director of Swift Energy since
August 5, 2003. From 1992 until he retired in February 1997, he was the
President of Chevron USA Production Company. He also served as a director of
Chevron Corp. from 1995 to 1997 and as a Vice President of Chevron Corp. from
1988 to 1997. Mr. Galvin has also served as chairman of the Natural Gas Council
and the Natural Gas Supply Association. He holds a Bachelor of Science degree in
Petroleum Engineering.
Clyde W. Smith, Jr., 55, has served as a director of Swift Energy since
1984. Since January 2002, Mr. Smith has served as President of Ascentron, Inc.,
an electronics manufacturing services company that acquired the assets of D.W.
Manufacturing, Inc. in January 2002. From May 1998 until January 2002, Mr. Smith
served as General Manager of D.W. Manufacturing, Inc. d/b/a Millennium
Technology Services, an electronics manufacturer. Mr. Smith is a Certified
Public Accountant and holds a Bachelor of Business Administration degree.
Terry E. Swift, 48, has served as the Chief Executive Officer of Swift
Energy since May 2001, as a director of the Company since May 2000, and as
President of the Company since November 1997. He served as Chief Operating
Officer from 1991 to February 2000 and was Executive Vice President from 1991 to
1997. He served as Senior Vice President--Exploration and Joint Ventures from
1990 to 1991 and as Vice President--Exploration and Joint Ventures from 1988 to
1990. Mr. Swift has a Bachelor's degree in Chemical Engineering and a Master's
degree in Business Administration. He is the son of A. Earl Swift and the nephew
of Virgil N. Swift.
Class III Directors
G. Robert Evans, 72, has been a director of Swift Energy since 1994.
Effective January 1, 1998, Mr. Evans retired as Chairman of Material Sciences
Corporation, having held that position since 1991. Material Sciences Corporation
is a public company that develops and commercializes continuously processed,
coated materials technologies. He remains a director of Material Sciences
Corporation. He also currently serves as a director of Consolidated Freightways
Corporation, a public trucking company, since 1996. Mr. Evans was also Chief
Executive Officer and Vice Chairman of Consolidated Freightways from January 24,
2000 through May 8, 2000. Mr. Evans has a Bachelor of Science degree in
Economics.
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Virgil N. Swift, 75, has been a director of Swift Energy since 1981 and has
acted as Vice Chairman of the Board since 1991. He acted as Executive Vice
President--Business Development between November 1991 and June 2000. He
previously served as Executive Vice President and Chief Operating Officer from
1982 to 1991. Mr. Swift joined the Company in 1981 as Vice President--Drilling
and Production. For the preceding 28 years he held various production, drilling
and engineering positions with Gulf Oil Corporation and its subsidiaries, last
serving as General Manager--Drilling for Gulf Canada Resources, Inc. Mr. Swift
is a registered professional engineer and holds a Bachelor's degree in Petroleum
Engineering. He is the brother of A. Earl Swift and the uncle of Terry E. Swift.
Compensation of Directors
During 2003, each non-employee member of the Board who served a full year
earned an aggregate amount of $39,750 for serving on the Board and one or more
committees of the Board. One Board member who served a partial year earned
$12,667. Aggregate compensation paid to the non-employee directors for their
services during 2003 as directors totaled $251,167. All Board members are
reimbursed for travel expenses they incur in attending Board meetings. Employees
of the Company are not compensated for serving as directors.
Under the Company's 1990 Nonqualified Stock Option Plan, as amended (the
"1990 Nonqualified Plan"), each non-employee director is granted options to
purchase 10,000 shares of the Company's common stock on the date he first
becomes a non-employee director. Additionally, on the day after each annual
meeting of the shareholders (occurring more than eleven months after each
non-employee director first becomes a director), each individual who is a
non-employee director on that date is granted options to purchase 5,000 shares
of the Company's common stock. The 1990 Nonqualified Plan permits each
non-employee director to hold a maximum of 66,000 options to purchase shares of
common stock under the Plan, subject to adjustments for changes in
capitalization affecting the stock of the Company.
In addition to his fees as a non-employee director, Mr. Virgil Swift
receives compensation pursuant to a consulting agreement. Under his consulting
agreement, which has been in effect since July 2000, Mr. Swift is paid $5,000
per month for providing advisory services to key employees, officers and
directors, especially in the area of the Company's New Zealand oil and gas
exploration and production operations and as otherwise requested by the Chairman
of the Board and the President. The consulting agreement is terminable by either
party without cause upon two weeks written notice. During the term of the
consulting agreement, upon a change of control, all outstanding stock options
held by Mr. Swift will become 100% vested. Additionally during 2003, Mr. Swift
received a reload grant of 3,509 options under the Company's 1990 Stock
Compensation Plan in connection with the exercise during 2003 of options that
were granted while he was an employee of the Company.
The Company also has a consulting agreement with Raymond O. Loen, director
emeritus, effective July 1, 2003 for a two-year period. Pursuant to the
agreement, Mr. Loen receives $2,000 per month for consulting services. The
agreement is terminable by either party without cause upon thirty days written
notice. From January 2003 through June 2003, Mr. Loen received $1,000 per month
for consulting services.
Meetings of the Board
During 2003, the Board met on 10 occasions either in person or
telephonically and acted by unanimous written consent three times. In addition,
management confers frequently with its directors on an informal basis to discuss
Company affairs. During 2003, each director attended at least 75% of the
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aggregate of (i) the total number of meetings of the Board and (ii) the total
number of meetings of all committees of the Board on which he served.
Committees of the Board
The Board of the Company has established the following standing committees:
Audit, Corporate Governance, Compensation and Executive Committees. Descriptions
of the functions of the Audit, Corporate Governance and Compensation Committees
are set forth below:
Audit Committee. The Audit Committee assists the Board in fulfilling its
responsibilities with respect to oversight in monitoring (i) the integrity of
the financial statements of the Company; (ii) Swift Energy's compliance with
legal and regulatory requirements; (iii) the independent auditors' selection,
qualifications and independence; and (iv) the performance of Swift Energy's
internal audit function and independent auditors. The committee is required to
be comprised of three or more non-employee directors, each of whom is determined
by the Board to be "independent" under the rules promulgated by the SEC under
the Securities Exchange Act of 1934, and meets the financial literacy and
experience requirements under the rules or listing standards established by the
NYSE, all as may be amended from time to time. In addition, at least one member
of the Committee must satisfy the definition of audit committee financial expert
as such term may be defined from time to time under the rules promulgated by the
SEC. The Board has determined that both Messrs. Montgomery and Smith qualify as
audit committee financial experts and that each member of the Audit Committee is
independent as defined in the SEC's rules and NYSE's listing standards. A report
of the Audit Committee appears below and a copy of the Audit Committee's charter
is attached as Appendix A to this proxy statement. Messrs. Montgomery
(Chairman), Smith and Evans are members of the Audit Committee, which held four
meetings in 2003.
Corporate Governance Committee. The Corporate Governance Committee
identifies individuals qualified to become directors and nominates candidates
for directorships, and recommends to the Board the membership for each of the
Board's committees. This committee may consider nominees recommended by
shareholders, upon written request by a shareholder in accordance with the
procedures for submitting shareholder proposals. See "Shareholder Proposals"
below. The Corporate Governance Committee also develops, monitors and recommends
to the Board corporate governance principles and practices applicable to Swift
Energy. The committee also assists management of the Company in identifying,
screening and recommending to the Board individuals qualified to become senior
executive officers of the Company. In addition, this committee administers the
Company's conflicts of interest policy. The Corporate Governance Committee is
required to be comprised of at least three directors who are "non-employee
directors" and determined by the Board to be "independent" under the listing
standards or rules of the NYSE and the SEC. Messrs. Evans (Chairman), Galvin,
Matiuk, Smith and Withrow are members of the Corporate Governance Committee and
all are independent as defined in the SEC's rules and NYSE's listing standards.
The Corporate Governance Committee held five meetings in 2003.
Compensation Committee. The Compensation Committee discharges the
responsibilities of the Board relating to compensation of the Company's
executive officers. This includes evaluating the compensation of the executive
officers of the Company and its affiliates and their performance relative to
their compensation to assure that such executive officers are compensated
effectively in a manner consistent with the strategy of Swift Energy,
competitive practices, and the requirements of the appropriate regulatory
bodies. In addition, this committee evaluates and makes recommendations to the
Board regarding the compensation of the directors. The Compensation Committee
also evaluates and approves any amendment, subject to shareholder approval, to
the Company's existing equity-related plans, and approves the adoption of any
new equity-related plans, subject to shareholder and Board approval. The
Compensation Committee is required to be comprised of at least three directors
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who are "non-employee directors" and determined by the Board to be "independent"
under the SEC rules and NYSE's listing standards. The report of the Compensation
Committee is included below. Messrs. Smith (Chairman), Galvin, Matiuk,
Montgomery and Withrow are members of the Compensation Committee, which held
three meetings and acted by unanimous written consent once during 2003. All
members are independent as defined by the SEC's rules and NYSE's listing
standards.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than 10% of the
Company's common stock, to file reports with the SEC regarding their ownership
of, and transactions in, the Company's common stock. SEC regulations require
Swift Energy to identify anyone who filed a required report late during the most
recent fiscal year. Based on a review of the Forms 3 and 4 filed during the 2003
fiscal year and written certifications provided to the Company, the Company
believes that all of these reporting persons timely complied with their filing
requirements, except as follows: Mr. Raymond O. Loen, director emeritus,
inadvertently filed a Form 4 on December 11, 2003 for a transaction that took
place on December 3, 2003.
Corporate Governance
During 2003, the Board adopted new charters for each of its committees in
connection with the adoption of the Company's Principles of Corporate
Governance, as well as a new Code of Ethics and Business Conduct applicable to
all employees, directors and consultants. All of these documents are posted on
the Company's website at www.swiftenergy.com.
In addition, the Company has adopted a Code of Ethics for Senior Financial
Officers and Principal Executive Officer. The Company has also posted this Code
of Ethics on its website, where it also intends to post any waivers from or
amendments to this Code of Ethics.
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PRINCIPAL SHAREHOLDERS
The following table sets forth information concerning the shareholdings, as
of March 15, 2004 (unless otherwise indicated), of the nine current members of
the Board, the Company's Chief Executive Officer and each of the Company's four
most highly compensated executive officers other than the CEO, all executive
officers and directors as a group, and to the Company's knowledge, each person
who beneficially owned more than five percent of the Company's outstanding
common stock.
Shares of Common Stock
Beneficially Owned at
March 15, 2004(1)
-------------------------------------
Percent of Class
Name of Person or Group Position Number Outstanding
A. Earl Swift.............. Chairman of the Board 324,151 1.2%
Virgil N. Swift............ Vice Chairman of the Board 360,730(2) 1.3%
G. Robert Evans............ Director 51,800 (3)
Raymond E. Galvin.......... Director 26,000 (3)
Greg Matiuk ............... Director -0- (3)
Henry C. Montgomery........ Director 31,215 (3)
Clyde W. Smith, Jr. ....... Director 47,500(4) (3)
Harold J. Withrow.......... Director 76,790(5) (3)
Terry E. Swift ............ President, Chief Executive Officer and Director 233,143 (3)
Joseph A. D'Amico ......... Executive Vice President and Chief Operating 129,721 (3)
Officer
Bruce H. Vincent........... Executive Vice President--Corporate Development 190,006 (3)
and Secretary
Alton D. Heckaman, Jr. .... Senior Vice President--Finance and Chief 118,850 (3)
Financial Officer
James M. Kitterman ........ Senior Vice President--Operations 168,804 (3)
All executive officers and directors as a group (16 persons) .............. 1,918,678 6.7%
Dimensional Fund Advisors Inc. ............................................ 1,943,195(6) 7.1%
1299 Ocean Avenue
Santa Monica, California 90401
FMR Corp. ................................................................. 2,728,400(7) 9.9%
Fidelity Low Priced Stock Fund
Fidelity Management and Research Company
Edward C. Johnson 3d
Abigail P. Johnson
82 Devonshire Street
Boston, Massachusetts 02109
8
Neuberger Berman, Inc. .................................................... 1,398,036(8) 5.1%
Neuberger Berman, LLC
Neuberger Berman Management, Inc.
605 Third Avenue
New York, New York 10158-3698
Wellington Management Company, LLP ........................................ 1,435,700(9) 5.2%
Wellington Trust Company, NA
75 State Street
Boston, Massachusetts 02109
---------------------------
(1) Unless otherwise indicated below, the persons named have sole voting and
investment power, or joint voting and investment power with their
respective spouses, over the number of shares of the Company's common stock
shown as being beneficially owned by them, less the shares set forth in
this footnote. The table includes the following shares that were acquirable
within 60 days following March 15, 2004 by exercise of options granted
under the Company's stock option plans: Mr. A. E. Swift - 164,416; Mr. V.
N. Swift - 70,524; Mr. Evans - 37,000; Mr. Galvin - 2,000; Mr. Montgomery -
28,300; Mr. Smith- 46,500; Mr. Withrow - 46,500; Mr. T. E. Swift - 178,830;
Mr. D'Amico - 114,910; Mr. Vincent - 143,906; Mr. Heckaman - 89,511; Mr.
Kitterman - 130,726; and all executive officers and directors as a group -
1,226,434.
(2) Includes 119,400 shares held of record by a Texas family limited
partnership in which Mr. Virgil Swift and his wife hold a 2% general
partner interest. Mr. Virgil Swift and his wife are both general partners
of the family limited partnership and, as such, they share voting and
dispositive power as to the 119,400 shares held by the family limited
partnership. Mr. Virgil Swift is deemed to beneficially own the 119,400
shares held by the partnership. Mr. Virgil Swift expressly disclaims
beneficial ownership as to 7.5%, or 8,995, of the shares held by the
partnership.
(3) Less than one percent.
(4) Mr. Smith disclaims beneficial ownership as to 1,000 shares held in a Roth
IRA for the benefit of Mr. Smith's son.
(5) Mr. Withrow disclaims beneficial ownership as to 11,479 shares held by his
wife, his daughter and jointly by his wife and daughter.
(6) Based on a Schedule 13G dated February 6, 2004, filed with the SEC to
reflect shares held at December 31, 2003, Dimensional Fund Advisors Inc.
("Dimensional"), an investment advisor registered under Section 203 of the
Investment Advisers Act of 1940, furnishes investment advice to four
investment companies registered under the Investment Company Act of 1940,
and serves as investment manager to certain other commingled group trusts
and separate accounts. These investment companies, trusts and accounts are
the "Funds." In its role as investment advisor or manager, Dimensional
possesses voting and/or investment power over the shares of the Company
described in this schedule that are owned by the Funds, and may be deemed
to be the beneficial owner of the shares of the Company held by the Funds.
However, all securities reported in this schedule are owned by the Funds.
Dimensional disclaims beneficial ownership of such securities.
(7) Based on a Schedule 13G dated February 17, 2004 filed with the SEC to
reflect shares held at December 31, 2003, Fidelity Management & Research
Company ("Fidelity), a wholly owned subsidiary of FMR Corp. and an
investment adviser registered under Section 203 of the Investment Advisers
Act of 1940, is the beneficial owner of 2,728,400 shares or 9.9% of the
common stock outstanding of the Company as a result of acting as investment
adviser to various investment companies registered under Section 8 of the
Investment Company Act of 1940. The ownership of one investment company,
Fidelity Low Priced Stock Fund, amounted to 2,728,400 shares or 9.9% of the
common stock outstanding. Edward C. Johnson 3d, FMR Corp., through its
control of Fidelity, and the investment funds (the "Fidelity Funds") each
has sole power to dispose of the 2,728,400 shares owned by the Fidelity
Funds.
Neither FMR Corp. nor Edward C. Johnson 3d, Chairman of FMR Corp., has the
sole power to vote or direct the voting of the shares owned directly by the
Fidelity Funds, which power resides with the Fidelity Funds' Boards of
Trustees. Fidelity carries out the voting of the shares under written
guidelines established by the Fidelity Funds' Boards of Trustees.
Members of the Edward C. Johnson 3d family are the predominant owners of
Class B shares of common stock of FMR Corp., representing approximately 49%
of the voting power of FMR Corp. Mr. Johnson 3d owns 12.0% and Abigail
Johnson owns 24.5% of the aggregate outstanding voting stock of FMR Corp.
Mr. Johnson 3d is Chairman of FMR Corp. and Abigail P. Johnson is a
Director of FMR Corp. The Johnson family group and all other Class B
shareholders have entered into a shareholders' voting agreement under which
all Class B shares will be voted in accordance with the majority vote of
Class B shares. Accordingly, through their ownership of voting common stock
and the execution of the shareholders' voting agreement, members of the
9
Johnson family may be deemed, under the Investment Company Act of 1940, to
form a controlling group with respect to FMR Corp.
(8) Based on a Schedule 13G dated February 9, 2004 filed with the SEC to
reflect shares held at December 31, 2003, Neuberger Berman, LLC
("Neuberger") and Neuberger Berman Management Inc. ("Management") serve as
sub-adviser and investment manager, respectively, of various mutual funds
and are thus deemed beneficial owners of 1,398,036 shares of the Company's
common stock, which shares they hold for their clients and in which shares
they have no economic interest. Of the shares beneficially owned, both
Neuberger and Management share dispositive power as to all 1,398,036 shares
and share voting power as to 1,149,690 shares of the Company's common
stock. Neuberger has sole voting power as to 21,900 shares. The remaining
shares are for individual accounts over which Neuberger has shared power to
dispose but not vote shares. As the parent holding company of Neuberger and
Management, Neuberger Berman Inc. is also deemed beneficial owner of these
shares.
(9) Based on a Schedule 13G dated February 12, 2004 filed with the SEC to
reflect shares held at December 31, 2003, the shares of common stock shown
in the table are owned of record by clients of Wellington Management
Company, LLP, an investment advisor. Those clients have the right to
receive, or the power to direct the receipt of dividends from, or the
proceeds from the sale of such securities. WMC has shared power to vote
910,000 of the shares and shared power to dispose of 1,435,700 shares of
common stock.
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
The following table provides information as of December 31, 2003 regarding
compensation plans (including individual compensation arrangements) under which
equity securities of the Company are authorized for issuance, which plans are
the 2001 Omnibus Stock Compensation Plan for employees, the 1990 Nonqualified
Stock Option Plan for non-employee directors (as amended and restated as of May
13, 1997), the 1990 Stock Compensation Plan for employees (as amended and
restated as of May 13, 1997) and the Employee Stock Purchase Plan available to
all employees after a year of service (as amended and restated as of January 1,
2003).
EQUITY COMPENSATION PLAN INFORMATION
(c)
Number of securities
(a) (b) remaining available for
Number of securities to Weighted average future issuance under
Plan Category be issued upon exercise exercise price of equity compensation plans
of outstanding options, outstanding options, (excluding securities
Plan Category warrants and rights warrants and rights reflected in column (a))
--------------------------------------- ----------------------- ---------------------- -------------------------
Equity compensation plans approved
by security holders 3,238,611 $ 16.37 494,925
Equity compensation plans not
approved by security holders -0- -0- -0-
----------------------- ---------------------- -------------------------
----------------------- ---------------------- -------------------------
TOTAL 3,238,611 $ 16.37 494,925
======================= =========== ========== =========================
======================= ====================== =========================
10
EXECUTIVE OFFICERS
The executive officers of the Company are appointed annually by the Board.
Information regarding Terry E. Swift, President and Chief Executive Officer, is
set forth above under "Election of Directors" above. Set forth below is certain
information, as of the date hereof, concerning the other executive officers of
the Company.
Joseph A. D'Amico, 55, was appointed Executive Vice President in August
2000 and was appointed Chief Operating Officer of the Company in February 2000.
He was Senior Vice President of Exploration and Development of the Company from
February 1998 to February 2000. He served as the Company's Vice President of
Exploration and Development from 1993 to 1998, Director of Exploration and
Development from 1992 to 1993 and Funds Manager from 1988, when he joined the
Company, until 1992. Mr. D'Amico holds Bachelor of Science and Master of Science
degrees in Petroleum Engineering and a Master's degree in Business
Administration.
Bruce H. Vincent, 56, was appointed Executive Vice President--Corporate
Development and Secretary of the Company in August 2000. On January 23, 2004,
Mr. Vincent was also appointed President of Swift Energy International, Inc., a
wholly owned subsidiary of the Company. Previously he served as Senior Vice
President--Funds Management for Swift Energy since joining the Company in 1990.
Mr. Vincent holds a Bachelor of Arts degree in Business Administration and a
Master's degree in Finance.
Alton D. Heckaman, Jr., 47, was appointed Senior Vice President--Finance
and Chief Financial Officer in August 2000. He had previously served as Vice
President and Controller from May 1993 to August 2000 and Assistant Vice
President--Finance from March 1986 to May 1993. Mr. Heckaman joined the Company
in 1982. He is a Certified Public Accountant and holds a Bachelor's degree in
Accounting.
James M. Kitterman, 59, was appointed Senior Vice President--Operations in
May 1993. He had previously served as Vice President--Operations since joining
the Company in 1983. Mr. Kitterman holds a Bachelor's degree in Petroleum
Engineering and a Master's degree in Business Administration.
James P. Mitchell, 50, was appointed Senior Vice President-Commercial
Transactions and Land in February 2003. He previously served as Vice
President-Land and Property Transactions from December 2001 to February 2003,
Vice President-Land from 1996 to 2001 and Manager of Land from 1992 to 1996.
Previously he had served as Director of Land Acquisitions and Joint Venture
Negotiations and Coordinator of Land Acquisitions, having joined the Company in
1987. Mr. Mitchell holds a Bachelor's degree in History and Business Law.
Victor R. Moran, 48, was appointed Senior Vice President--Energy Marketing
and Business Development in August 2000. From 1995 he served as Vice
President--Natural Gas Marketing/Business Development. He had previously served
as Director of Business Development since January 1992, when he joined the
Company. Mr. Moran holds a Bachelor's degree in Government, a Master's degree in
Business Administration and a Juris Doctorate degree.
David W. Wesson, 45, was appointed Controller in January 2001. He
previously served as Assistant Controller--Reporting from April 1999 to January
2001, Manager, Reporting/Budget from October 1995 to April 1999 and Manager,
Corporate Accounting/Budget from February 1990 to October 1995. He joined the
Company as Senior Accountant in 1988. Mr. Wesson is a Certified Public
Accountant and holds a Bachelor's degree in Accounting.
11
EXECUTIVE COMPENSATION
Summary of Cash and Certain Other Compensation
The following table sets forth certain summary information regarding
compensation paid or accrued by the Company to or on behalf of the Company's
Chief Executive Officer and each of the other four most highly compensated
executive officers of the Company (determined as of the end of 2003) for the
fiscal years ended December 31, 2003, 2002 and 2001.
SUMMARY COMPENSATION TABLE
Long Term
Compensation
Annual Compensation -------------------
------------------- Stock All Other
Name and Bonus(1) Common Annual Compensation ($)
Name and -------------------- Stock -----------------------------
Principal Underlying Life
Position(2) Year Salary ($) Cash ($) Stock ($) Options/SARs(#) Insurance($)(3) 401(k)($)(4)
-------------------------- ---- ----------- --------- ---------- ----------------- ------------------ ----------
Terry E. Swift 2003 $450,000 $180,000 $0 40,000 $26,207 $10,000
President and Chief 2002 400,000 120,000 $0 20,000 24,870 8,500
Executive Officer(5) 2001 392,068 96,600 $0 67,500 21,989 8,500
Bruce H. Vincent 2003 $316,268 $92,248 $0 36,171 $24,918 $10,000
Executive Vice President- 2002 277,424 57,700 $0 34,000 33,099 8,500
Corporate Development and 2001 277,424 56,200 $0 42,500 18,825 8,500
Secretary
Joseph A. D'Amico 2003 $314,608 $55,051 $0 20,000 $19,260 $10,000
Executive Vice President 2002 302,504 45,800 $0 28,560 23,036 8,500
and Chief Operating 2001 302,504 35,300 $0 47,094 13,658 8,500
Officer
James M. Kitterman 2003 $259,852 $62,857 $0 20,000 $28,880 $10,000
Senior Vice President- 2002 245,165 46,900 $0 23,000 27,459 8,500
Operations 2001 245,165 24,500 $0 20,000 22,753 8,500
Alton D. Heckaman, Jr. 2003 $244,776 $71,378 $0 27,370 $13,050 $10,000
Senior Vice President- 2002 214,711 44,700 $0 26,000 21,832 8,500
Finance and Chief 2001 214,711 42,200 $0 40,491 10,080 8,500
Financial
Officer
-----------------------------------
(1) Bonus amounts reported for 2003, 2002 and 2001 include bonuses earned
during those years, but actually paid in the following year.
(2) In accordance with the terms of A. Earl Swift's employment agreement, he is
entitled to a non-competition payment each year for five years following
his retirement as Chief Executive Officer of the Company in May 2001. Upon
his retirement from his position as Chief Executive Officer, he began
working half-time for the Company. His salary in 2003 was $324,480 and he
also received the third installment of his non-competition payments in the
amount of $406,842. Additionally, he received a cash bonus of $90,000 and
25,000 stock options. The Company also paid $126,772 in insurance premiums
for his benefit and contributed $10,000 to his 401(k) in 2003.
(3) Represents insurance premiums paid by the Company during the covered fiscal
year with respect to life insurance for the benefit of the named executive
officer.
(4) Contributions by the Company to the Swift Energy Company Employee Savings
Plan (100% in Company common stock) for 2003, 2002 and 2001 for the account
of the named executive officer.
(5) Terry E. Swift was appointed Chief Executive Officer, effective May 8,
2001.
12
Employment Contracts
A. Earl Swift's employment agreement was amended and restated in November
2000. Effective May 8, 2001, Mr. Swift stepped down as Chief Executive Officer
and effective June 30, 2001 began working on a half-time basis. He may continue
on a half-time basis for five years (up to 46 weeks per year as the Board may
specify) on specific matters designated by the Board. During this five-year
period, Mr. Swift's compensation is one-half (i.e. $300,000) his annual base
compensation at the time of transition from a full-time to half-time schedule,
with a 4% per annum inflation adjustment, plus any bonus provided by the Board.
These amounts are also payable in one lump sum, discounted to present value,
upon Mr. Swift's death or disability, which also triggers 100% vesting of all
unexercised options, plus continuation of insurance for his spouse and minor
children for a year. In the event of a change of control, Mr. Swift is to be
paid a lump sum equal to the discounted present value of amounts payable during
the remainder of the contract, plus a one-year continuation of medical and
dental coverage, and a tax gross-up if such payments are deemed to be subject to
"parachute payment" excise taxes. Mr. Swift's contract also provides for a
payment of approximately $407,000 per year to Mr. Swift or his estate during
each of the last five years of the agreement in consideration of Mr. Swift's
agreement not to compete with the Company while he is receiving payments from
the Company. These payments have been made for each of the years 2003, 2002 and
2001. Upon termination of Mr. Swift's employment during its term, other than for
cause, Mr. Swift is entitled to receive continuation of his salary for a period
of one year plus 4 weeks' salary for every year of service to the Company if he
is then being employed and paid on a half-time basis, provided that salary
payments are not to be made for more than five years after he begins his
part-time status. Insurance coverage is to be continued while he is being paid,
and all unexercised stock options held at such date are to become vested.
Effective May 9, 2001, the Company entered into amended and restated
employment agreements with Terry E. Swift, President and Chief Executive
Officer, Bruce H. Vincent, Executive Vice President, Alton D. Heckaman, Senior
Vice President and Chief Financial Officer, James M. Kitterman, Senior Vice
President, and Joseph A. D'Amico, Executive Vice President and on the same date
entered into a new employment agreement with Victor Moran, Senior Vice
President. Effective November 1, 2003, the Company also entered into an
employment agreement with James P. Mitchell, Senior Vice President. All of the
agreements provide for an initial three-year term, which is automatically
extended for one year on May 9 of each year (such period, as so extended at any
time, the "Contract Term"). These agreements provide for payment of certain
amounts and continuation of medical benefits for one-half of the remainder of
the Contract Term upon termination of employment other than for cause. The
payment shall be equal to the executive's base salary in effect immediately
prior to the termination date, plus one week's salary for every year of service
to the Company, plus in the case of Messrs. Swift, Kitterman and Heckaman,
certain amounts compounded at a rate of 8% per annum, representing amounts in
lieu of Company contributions to a 401(k) plan for those periods of employment
prior to adoption of such a plan by the Company. The agreements also provide for
the continuation of medical benefits for one-half of the remainder of the
Contract Term upon termination of employment other than for cause. The
agreements can be terminated by the Company other than for cause only by a
majority of the continuing directors who have been directors for two years or
nominated for election by a majority of continuing directors. Upon employment
termination in connection with or following a change of control, the executives
are entitled to receive their salary that would have been paid for the remainder
of the Contract Term, plus two weeks' salary for every year of service to the
Company, plus in the case of Messrs. Swift, Kitterman and Heckaman, certain
amounts compounded at a rate of 8% per annum, representing amounts in lieu of
Company contributions to a 401(k) plan for those periods of employment prior to
adoption of such a plan by the Company, and continuation of medical and dental
insurance and universal life coverages for certain periods. Immediately prior to
termination of employment, outstanding unexercised stock options vest or are
deemed to have vested, and the executives retain such options with no change to
13
their terms, except as to Messrs. Moran and Mitchell, for whom the only
outstanding options that vest are those granted after the date of their
respective employment agreement.
Stock Option Grants
During 2003, the following stock options were granted to the named
executive officers under the Company's stock compensation plans.
Option Grants in 2003
Individual Grants Grant Date
Value
-------------------------------------------------------------------------------------------------------- ----------------
Name Number of % of Total Options
Granted to Exercise or Grant Date
Options Employees in Base Price Present Value
Granted(1) Fiscal Year ($/Sh) Expiration Date ($)(2)
--------------------------- -------------- -------------------- ---------------- ------------------- ----------------
Terry E. Swift 40,000 8.44% $13.84 11/04/13 $299,600
Bruce H. Vincent 30,000 6.33% $13.84 11/04/13 $224,700
6,171 1.30% $13.52 09/12/05 $17,279
Joseph A. D'Amico 20,000 4.22% $13.84 11/04/13 $149,800
Alton D. Heckaman, Jr. 25,000 5.27% $13.84 11/04/13 $187,250
2,370 0.50% $17.14 12/07/08 $14,552
James M. Kitterman 20,000 4.22% $13.84 11/04/13 $149,800
----------------------------
(1) A. Earl Swift, Chairman of the Board, received 25,000 options, representing
5.27% of total options granted to employees in 2003, with an exercise price
of $13.84, an expiration date of November 4, 2013, and a grant date present
value of $187,250.
(2) Estimated present values are based on the Black-Scholes Model, a
mathematical formula used to value exchange-traded options. The stock
options granted by the Company are long term, non-transferable and subject
to vesting restrictions, while exchange-traded options are short term and
can be exercised or sold immediately in a liquid market. The Black-Scholes
Model considers a number of factors, including the expected volatility of
the stock, interest rates, and the estimated time period until exercise of
the option. In calculating the grant date present values set forth in the
table, the following ranges of assumptions were used: daily volatility for
common stock of 34.71% risk-free rate of return of 1.64% to 4.31% and
actual number of years from grant date to expiration date. In each case,
the risk-free rate was based on a 10-year government bond as of the grant
date and no dividend yield. No adjustments were made for
non-transferability or risk of forfeiture. The ultimate value of the option
will depend on the future market price of the Company's common stock, which
cannot be forecast with reasonable accuracy.
Option Values
The following table contains information concerning the number of shares
acquired and value realized from the exercise of options during 2003 and the
number of unexercised options held by the named executive officers at December
31, 2003.
14
Aggregate Option Exercises in Last Fiscal Year
And
Fiscal Year End Option Values
Number of Shares of
Common Stock Underlying Value of Unexercised
Unexercised Options In-The-Money Options
at Year End 2003 at Year End 2003(1)
--------------------------------- -----------------------------------
Shares
Acquired
On Value(2)
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---------------------- ------------- --------------- --------------- ----------------- ---------------- ------------------
Terry E. Swift - $0 156,330 106,500 $880,327 $174,525
Bruce H. Vincent 9,075 $39,295 130,806 97,271 $822,808 $267,134
Joseph A. D'Amico 1,153 $ 4,992 97,610 82,900 $493,645 $182,725
Alton D. Heckaman, Jr. 5,000 $44,475 77,411 87,470 $301,200 $203,830
James M. Kitterman - $0 122,126 59,200 $841,251 $150,250
-----------------------------
(1) Options are "in-the-money" if the market price of a share of common stock
exceeds the exercise price of the option. The value of unexercised
in-the-money options equals the closing price of Swift common stock at
December 31, 2003 of $16.85 less the exercise price.
(2) Value Realized represents the difference between the exercise price of the
options and the NYSE closing price on the exercise date for Swift common
stock received upon exercise.
Compensation Committee Interlocks and Insider Participation
During 2003, the Compensation Committee of the Company consisted of Messrs.
Smith, Galvin, Montgomery, Withrow and, from September 2003, Mr. Matiuk, who are
all independent directors. To the Company's knowledge, there are no
inter-relationships involving members of the Compensation Committee or other
directors of the Company requiring disclosure in this section of the proxy
statement.
Related Party Transaction
During 2003, the Company received research, technical writing, publishing
and website-related services from Tec-Com Inc., a corporation located in
Knoxville, Tennessee and controlled by the sister of the Company's Chairman and
Vice Chairman of the Board. The sister and brother-in-law of Messrs. E. Swift
and V. Swift also own a substantial majority of Tec-Com. For the fiscal year
ended December 31, 2003, the Company paid an aggregate of $381,400 to Tec-Com
for such services pursuant to the terms of the contract between the parties. The
contract expires June 30, 2004 but is expected to be renewed or extended. The
Company believes that the terms of this contract are consistent with third
party arrangements that provide similar services.
15
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Compensation Philosophy
The Board first established its Compensation Committee in 1982. The
Compensation Committee has always been composed solely of non-employee
directors, and has set executive compensation since that time. Since 1987, when
the Compensation Committee undertook an evaluation of the Company's policies,
compensation has been based upon Company performance.
Philosophically, the Compensation Committee and the Company's founding
Chief Executive Officer believed it to be beneficial to the Company in its early
years to keep executive compensation in the low to middle ranges in comparison
to levels paid by comparable entities, particularly in comparison to many
companies in the oil and gas industry. Since 1987, the bonus compensation of the
Company's Chief Executive Officer has been based almost solely upon the
Company's performance, as described below.
Since late 1989, the bonus formula for the Chief Executive Officer has been
based upon earnings per share and growth in oil and gas reserves, as described
in detail below. Since 1995, the criteria also have reflected the importance of
cash flow to an oil and gas company and the Company's increased emphasis on
exploration and drilling activities to achieve growth in probable reserves, in
addition to acquisition of producing properties, given the Compensation
Committee's belief that successful drilling activities are based upon a high
level of drilling prospects. Accordingly, the bonus formula in the 2001 Omnibus
Stock Compensation Plan (the "2001 Plan"), which was adopted by the Shareholders
at the 2001 Annual Meeting and was in effect with respect to compensation in
2003, provides for bonuses based upon year-to-year increases in earnings per
share, cash flow per share, proved reserves and probable reserves and an
assessment of the individual's contribution over the course of the year.
During 2003, the Compensation Committee adopted a new charter, which
additionally provided for the Compensation Committee to evaluate and make
recommendations as to the compensation of the Company's directors.
Review and Evaluation of Compensation Practices
Upon recommendation by the Compensation Committee, during 2003 the Board
retained The Delves Group to work with senior management and the Compensation
Committee to examine the current compensation practices for its top executive
team and directors and to make recommendations with regard to alignment with
competitive and best practices. The Delves Group is a consulting firm with
expertise in measuring performance, setting goals, and designing effective pay
and incentive systems. The Delves Group reviewed Swift Energy's current
compensation practices, both with regard to the Company's officers and its
directors, and conducted a competitive analysis of those practices in relation
to various market benchmarks. The Delves Group also reviewed Swift Energy's
short- and long-term incentive programs and offered analysis and advice with
regard to those pay components for both 2003 and 2004 going forward. No changes
were made to the Company's compensation practices with respect to 2003
compensation in connection with The Delves Group's consultation services.
Additional review and studies are expected to be conducted during 2004 by the
Compensation Committee based in part on recommendations from The Delves Group,
as well as at the request of the Compensation Committee and the Chairman of the
Board.
16
Director Compensation
Because of the increased demands on the time required from its directors
due to the heightened corporate governance environment, the cash compensation
portion of director compensation was increased for 2003 from an aggregate amount
of $32,250 for a full year of service on the Board and one or more committees of
the Board to $39,750. After a presentation on director compensation by The
Delves Group, the Compensation Committee recommended that the increased cash
compensation of the directors for 2003 was adequate and not be increased further
and that alternative forms of stock compensation to the current option grants
under the 1990 Nonqualified Stock Option Plan be considered for the future.
Executive Compensation Criteria and Performance Measurement
The Company's executive compensation consists of three components: base
salary, annual incentive bonuses, and long-term stock-based incentives.
Base Salary for a particular year is based upon (i) the executive's scope
of responsibility, (ii) an evaluation of each executive's individual performance
during the year, (iii) an attempt to keep executive salaries within the range
paid by comparably sized oil and gas exploration and production companies, based
in part upon annual surveys provided by outside consultants on independent oil
and gas companies with similar market capitalizations (the "Compensation
Surveys"), and (iv) an evaluation of the Company's performance during the
preceding year, including the Company's earnings, reserve growth and cash flow.
Individual performance evaluation is based upon each executive's review of his
own performance throughout the year and upon a performance review and
compensation recommendation by the Company's Chief Executive Officer, which is
then reviewed and acted upon by the Compensation Committee.
The Compensation Surveys include companies in common with the Dow Jones
Oil, Secondary Index (the "Index") used in the "Five Year Shareholder Return
Comparison" set forth herein. The Compensation Surveys are used by the Company
for purposes of executive compensation comparison because they constitute a
broader group than the group of companies included in the Index, and because the
Compensation Surveys are comprised of companies somewhat closer in size and line
of business to the Company than some of the companies included in the Index. The
Index was selected in accordance with SEC rules solely for shareholder return
comparison purposes because it is a published industry index.
Annual Incentive Bonuses for a particular year are awarded after the end of
that year, based on both individual and Company performance during that year.
Under the 2001 Plan, bonuses are awarded in the form of Performance Bonus
Awards, which may be in cash, in shares of the Company's common stock or a
combination thereof, as determined by the Compensation Committee. The amount of
an executive officer's Performance Bonus Award for a particular year is
determined utilizing the following factors: (i) the increase in earnings per
share during that year and the increase in the cash flow per share during that
year (measures of short-term performance); (ii) the increase in the volume of
the Company's proved and probable oil and gas reserves during that year
(measures of long-term performance); (iii) individual performance of that
executive officer in contributing to either the Company's overall achievement of
its strategic objectives, or the achievement of the objectives of the
executive's department or group within the Company; and (iv) the Compensation
Committee's determination of the extent to which the executive officer's
individual performance merits a bonus.
In determining Performance Bonus Awards for 2003 (determined and paid in
February 2004), the Committee considered all of the above factors in determining
bonuses awarded. The Compensation Committee also took into account individual
17
performance ratings reflecting individual contribution and contribution to group
effectiveness.
Long-Term Stock-Based Incentives are provided through grants of incentive
stock options, usually on an annual basis, to executives and others under the
2001 Plan. This component is intended to retain and motivate executives to
improve long-term shareholder value. Stock options are granted at the prevailing
market price. Grants have always vested in equal amounts over five years.
The Compensation Committee determines a total number of options to be
granted in any year based on the total number of outstanding unexercised
options, so as to avoid excessive dilution of the shareholders' value in the
Company through option exercises. Out of the number so determined, options are
granted to executive officers in varying amounts, roughly related to their
levels of executive responsibility. Outstanding performance by an executive
officer may be recognized through a larger than normal option grant.
The Company believes that its compensation policy described above provides
an excellent link between the value created for shareholders and the
compensation paid to executive officers.
Compensation of Chief Executive Officer
Base Salary. The Chief Executive Officer's base salary in 2003 was
$450,000, compared to his base salary of $400,000 in 2002 for his service as
President and Chief Executive Officer of the Company. The Compensation
Committee's determination was based on the factors described above under
"Compensation Criteria and Performance Measurement--Base Salary."
Bonus. In determining the Chief Executive Officer's bonus, the Compensation
Committee has typically given more weight to factors based upon the Company's
performance than to its evaluation of his general contribution, since the
Compensation Committee does not observe and supervise such performance on a
day-to-day basis. Terry E. Swift received a bonus of $180,000 in cash for his
service as Chief Executive Officer and President of the Company, compared to his
cash bonus of $120,000 in 2002 for his service in the same positions.
Stock Options. In 2003, the Company granted the Chief Executive Officer
40,000 options to purchase shares of the Company's common stock, on the basis
explained above under "Compensation Criteria and Performance
Measurement--Long-Term Stock-Based Incentives."
Section 162(m) of the Internal Revenue Code
The Compensation Committee does not propose to adopt any particular policy
with respect to Section 162(m) of the Internal Revenue Code. Section 162(m)
generally limits deductions for compensation paid to any employee in excess of
$1 million per year. The Company believes that any loss of deduction for
compensation exceeding Section 162(m)'s limitations is outweighed by the
flexibility it gains in not meeting the requirements of this section.
COMPENSATION COMMITTEE
Clyde W. Smith, Jr., Chairman
Raymond E. Galvin
Greg Matiuk
Henry C. Montgomery
Harold J. Withrow
18
FIVE YEAR SHAREHOLDER RETURN COMPARISON
The graph below compares the cumulative total return on the Company's
common stock to that of (i) the Standard & Poor's 500 Stock Index and (ii) the
Dow Jones Oil, Secondary Index, with "Cumulative total return" equaling (i) the
change in share price during the measurement period plus cumulative dividends
(of which, in accordance with its dividend policy, the Company has paid none)
for the measurement period (assuming dividend reinvestment), divided by (ii) the
share price at the beginning of the measurement period.
[GRAPHIC OMITTED]
Cumulative Total Return
-------------------------------------------------------------
12/98 12/99 12/00 12/01 12/02 12/03
Swift Energy Company 100.00 155.93 510.17 273.90 131.12 228.47
S & P 500 100.00 121.04 110.02 96.95 75.52 97.18
Dow Jones Oil Companies, Sectiondary 100.00 115.40 184.31 169.22 172.88 226.59
19
AUDIT COMMITTEE REPORT
In fulfilling its oversight responsibilities, the Audit Committee reviewed
and discussed with management the Company's audited financial statements for the
year ended December 31, 2003, including a discussion of the quality and
acceptability of the Company's financial reporting and controls. The Audit
Committee also reviewed with the Company's independent auditors, Ernst & Young
LLP, who are responsible for expressing an opinion on the conformity of those
audited financial statements with generally accepted accounting principles,
Ernst & Young's judgments as to the quality and acceptability of the Company's
financial reporting and other matters, including those matters required to be
discussed by Statement on Auditing Standards No. 61, Communications With Audit
Committees.
The Audit Committee discussed with Ernst & Young the auditors' independence
from the Company and its management, including the matters in the written
disclosures and the letter from Ernst & Young required by Independence Standards
Board Standard No. 1, Independence Discussions With Audit Committees, and
carefully considered whether the provision by the auditors of non-audit
professional services is compatible with maintaining the auditors independence.
In connection with the standards for independence of the Company's independent
public accountants promulgated by the SEC, the Audit Committee has reviewed and
is satisfied that the additional services did not affect the independence of
Ernst & Young.
Based on the review and discussions referred to above, the Audit Committee
recommended to the Board that the audited financial statements be included in
the Company's Annual Report on Form 10-K for filing with the SEC for the year
ended December 31, 2003.
No portion of this Audit Committee Report shall be deemed to be
incorporated by reference into any filing under the Securities Act or the
Exchange Act, through any general statement incorporating by reference in its
entirety the Proxy Statement in which this report appears, except to the extent
that the Company specifically incorporates this report or a portion of it by
reference. In addition, this report shall not be deemed to be filed under either
the Securities Act or the Exchange Act.
AUDIT COMMITTEE
Henry C. Montgomery, Chairman
G. Robert Evans Clyde W.
Smith, Jr.
20
INDEPENDENT AUDITORS AND FEES
Auditors
Ernst & Young LLP, certified public accountants, began serving as the
Company's independent auditors in 2002. A representative from Ernst & Young will
be present at this year's Meeting. Such representative will have the opportunity
to make a statement if he desires to do so and is expected to be available to
respond to appropriate questions.
Change in Auditors
Swift Energy has not had any changes in or disagreements with its
independent accountants since the Board of Directors' June 12, 2002 appointment,
based upon the recommendation of the Audit Committee, of Ernst & Young LLP as
Swift Energy's independent auditors for the fiscal year ended December 31, 2002,
replacing Arthur Andersen LLP. There were no disagreements with the former
accountants. That change was reported by Swift Energy in a Current Report on
Form 8-K dated June 12, 2002, filed with the SEC on June 18, 2002.
Audit Fees
The aggregate amount of fees and expenses billed or expected to be billed
to the Company by Ernst & Young for its audit of the Company's consolidated
financial statements for the year ended December 31, 2003 and for its review of
the financial statements included in the Company's Quarterly Reports on Form
10-Q filed with the SEC was $471,118 for 2003 and $410,700 for 2002.
Audit Related Fees
The aggregate amount of fees and expenses billed or expected to be billed
to the Company by Ernst & Young for assistance and related services reasonably
related to the performance of the audit of the Company's consolidated financial
statements and for reviews of the Company's financial statements included in the
Company's Quarterly Reports on Form 10-Q that were not included in "Audit Fees"
above was $22,900 in 2003 and $18,500 in 2002. This assistance and related
services generally consisted of limited scope audits performed in connection
with the Company's Employee Savings Plan and Employee Stock Option Plan for both
years, but also including for 2002 consultation relating to assistance in
preparing for internal control reporting.
Tax Fees
The aggregate amount of fees and expenses billed or expected to be billed
to the Company by Ernst & Young for professional services rendered for tax
compliance, tax advice, and tax planning was $172,180 for 2003 and $169,800 for
2002. These tax compliance, tax advice, and tax planning services generally
consisted of U.S., federal, state, local, and international tax planning,
compliance and advice, and expatriate and executive tax services.
All Other Fees
There were no other fees and expenses billed to the Company by Ernst &
Young during the Company's 2003 and 2002 fiscal years not included above.
21
Pre-approval Policies and Procedures
The Charter of the Audit Committee provides that the Audit Committee shall
approve, in its sole discretion, any professional services to be provided by the
Company's independent auditors, including audit services and significant
non-audit services (significant being defined for these purposes as non-audit
services for which fees in the aggregate equal 5% or more of the base annual
audit fee paid by the Company to its independent auditors) before such services
are rendered, and consider the possible effect of the performance of such latter
services on the independence of the auditors. The Committee may delegate
pre-approval authority to a member of the Committee. The decisions of any
Committee member to whom pre-approval authority is delegated must be presented
to the full Committee at its next scheduled meeting.
All of the services described above for 2003 and 2002 were pre-approved by
the Audit Committee before Ernst & Young was engaged to render the services.
DIRECTOR NOMINEES
The Corporate Governance Committee will consider shareholder
recommendations for membership on the Board, upon written request by a
shareholder in accordance with the procedures for submitting shareholder
proposals. See "Shareholder Proposals" below. Such recommendations must also
meet the requirements of the Company's Bylaws, which in general requires that
the recommendation must be delivered to or received not less than 60 days nor
more than 90 days prior to the first anniversary of the preceding year's annual
meeting. The recommendation must state the name, age, business address and
residence address of the recommended nominee and any other information required
to be disclosed in the Company's proxy statement by rules promulgated by the
SEC. Additionally, the recommendation must include the name and address of the
shareholder and the number of shares of the Company's securities that the
shareholder beneficially owns and the period for which the shareholder has held
such shares.
The Board has ultimate responsibility for nominating individuals for
election to the Board by shareholders and for filling vacancies on the Board.
The Corporate Governance Committee, in consultation with the Chairman of the
Board, is responsible for identifying, screening, personally interviewing and
recommending candidates to the entire Board for nomination or appointment to the
Board. Nominees to serve as director of the Company are expected to understand
the Company's business and the marketplaces in which it operates. Director
nominees are expected to keep abreast of general economic, business and
management news and trends, as well as developments in Swift Energy's
competitive environment and Swift Energy's performance with respect to that
environment. Nominees for director will be selected taking all factors into
account, including reputation, mature judgment, career specialization, relevant
technical skills, diversity, the extent to which the candidate would fill a
present need on the Board, as well as their willingness to devote adequate time
to Board duties and the likelihood that he or she will be willing and able to
serve on the Board for a sustained period of time.
SHAREHOLDER PROPOSALS
Pursuant to various rules promulgated by the SEC, a shareholder that seeks
to include a proposal in the Company's proxy statement and form of proxy card
for the meeting of the shareholders of the Company to be held in 2005 must
timely submit such proposal in accordance with SEC Rule 14a-8 to the Company,
addressed to Bruce H. Vincent, Secretary, 16825 Northchase Drive, Houston, Texas
77060 no later than December 3, 2004. Further, a shareholder may not submit a
22
matter for consideration at the 2004 Meeting, regardless of whether presented
for inclusion in the Company's proxy statement and form of proxy card, unless
the shareholder shall have timely complied with the requirements in the
Company's Bylaws which set a notice deadline after which a shareholder will not
be permitted to present a proposal at the Company's shareholder meetings. The
Bylaws state that in order for business to be properly brought before an annual
meeting by a shareholder, the shareholder must have given timely notice thereof
in writing to the Secretary of the Company. To be timely, a shareholder's notice
must be delivered to or mailed and received at the principal executive offices
of the Company not less than 60 days nor more than 90 days prior to the first
anniversary of the preceding year's annual meeting. A notice given pursuant to
this advance notice Bylaw will not be timely with respect to the Company's 2005
meeting unless duly given by no later than March 11, 2005 and no earlier than
February 9, 2005.
With respect to business to be brought before the 2004 Meeting, the Company
has not received any notices from shareholders that the Company is required to
include in this proxy statement.
COMMUNICATIONS WITH THE BOARD OF DIRECTORS
Typically the Chairman of the Corporate Governance Committee presides at
executive sessions of the independent directors of the Board of Directors. Any
communications that shareholders may wish to send to the Board of Directors may
be directly sent to the Chairman of the Corporate Governance Committee at the
following address:
Chairman of the Corporate Governance Committee
Swift Energy Company
c/o CCI
P. O. Box 561915
Charlotte, NC 28256
Historically, the Company's annual meeting of its Board of Directors was
held to coincide with the annual meeting of its shareholders and a majority of
the directors would attend the annual meeting of shareholders. However, with the
increased responsibilities and time requirements in connection with the Board's
annual meeting, the Board's annual meeting is now held the week before the
shareholders' annual meeting. Therefore, the Company does not have a policy with
regard to Board members' attendance at its annual meetings of shareholders. At
the Company's 2003 Annual Meeting of Shareholders, a majority of the members of
the Board attended and it is expected that a majority of the members of the
Board will also attend the 2004 Annual Meeting of Shareholders.
"HOUSEHOLDING" OF PROXY MATERIALS
The SEC permits companies and intermediaries, such as brokers, to satisfy
the delivery requirements for proxy materials with respect to two or more
shareholders sharing the same address by delivering a single annual report and
one set of proxy materials addressed to those shareholders. This process, which
is commonly referred to as "householding," potentially means extra convenience
for shareholders and cost savings for companies.
Shareholders who currently receive multiple copies of the Company's
communications and would like to request householding or shareholders that are
receiving only a single copy of the Company's communications but would like to
received multiple copies in the future should contact their broker or, if a
shareholder is a direct holder of shares of Swift Energy's common stock, he or
23
she should submit a written request to the Company's transfer agent, American
Stock Transfer & Trust Company, 59 Maiden Lane, Plaza Level, New York, New York
10038, phone number (877) 777-0800 or contact the Company by mail to Swift
Energy Company, Attention: Scott Espenshade, Director of Investor Relations,
16825 Northchase Dr., Suite 400, Houston, Texas 77060; by telephone at (713)
874-2700 or (800) 777-2412; or by email to info@swiftenergy.com. Additionally,
the Company will promptly deliver a separate copy of the annual report or proxy
statement, as applicable, to a shareholder at a shared address to which a single
copy of the documents was delivered upon written or oral notice from the
affected shareholder to the Company.
ANNUAL REPORT ON FORM 10-K
Upon written request, the Company will provide any shareholder of the
Company at no charge a copy of the Company's Annual Report on Form 10-K for 2003
as filed with the SEC, including the financial statements and schedules, but
without exhibits. Direct requests should be made by mail to Swift Energy
Company, Attention: Scott Espenshade, Director of Investor Relations, 16825
Northchase Dr., Suite 400, Houston, Texas 77060; by telephone at (713) 874-2700
or (800) 777-2412; or by email to info@swiftenergy.com.
FORWARD LOOKING STATEMENTS
The statements contained in this proxy statement that are not historical
are "forward-looking statements," as that term is defined in Section 21E of the
Exchange Act that involve a number of risks and uncertainties. Forward-looking
statements use forward-looking terms such as "believe," "expect," "may,"
"intend," "will," "project," "budget," "should" or "anticipate" or other similar
words. These statements discuss "forward-looking" information such as future net
revenues from production and estimates of oil and gas reserves.
These forward-looking statements are based on assumptions that the Company
believes are reasonable, but they are open to a wide range of uncertainties and
business risks, including the following:
o fluctuations of the prices received or demand for crude oil and
natural gas over time;
o geopolitical conditions or hostilities;
o uncertainty of reserve estimates; o operating hazards;
o unexpected substantial variances in capital requirements;
o environmental matters; and o general economic conditions.
Other factors that could cause actual results to differ materially from
those anticipated are discussed in the Company's Annual Report to Shareholders
for the year ended December 31, 2003. The Company will not update these
forward-looking statements unless the securities laws require the Company to do
so.
24
GENERAL
The information contained in this proxy statement in the sections entitled
"Election of Directors," "Compensation Committee Report on Executive
Compensation," "Comparative Total Returns" and "Audit Committee Report" shall
not be deemed incorporated by reference by any general statement incorporating
by reference any information contained in this proxy statement into any filing
under the Securities Act, or the Exchange Act, except to the extent that the
Company specifically incorporates by reference the information contained in such
sections, and shall not otherwise be deemed filed under the Securities Act or
the Exchange Act.
By Order of the Board of Directors
/s/ Bruce H. Vincent
BRUCE H. VINCENT
Secretary
Houston, Texas
April 5, 2004
25
SWIFT ENERGY COMPANY
The Board of Directors Solicits This Proxy for the
Annual Meeting of Shareholders to be held on May 11, 2004
The undersigned hereby constitutes and appoints Terry E. Swift, Bruce H.
Vincent and Alton D. Heckaman, Jr., or any one of them, with full power of
substitution and revocation of each, the true and lawful attorneys and proxies
of the undersigned at the Annual Meeting of Shareholders (the "Meeting") of
SWIFT ENERGY COMPANY (the "Company") to be held on Tuesday, May 11, 2004 at 4:00
p.m. Houston time, in the Wyndham Greenspoint Hotel, 12400 Greenspoint Drive,
Houston, Texas, or any adjournments thereof, and to vote the shares of common
stock of the Company standing in the name of the undersigned on the books of the
Company (or which the undersigned may be entitled to vote) on the record date
for the Meeting with all powers the undersigned would possess if personally
present at the Meeting.
(Continued and to be SIGNED on the REVERSE side)
ANNUAL MEETING OF SHAREHOLDERS OF
SWIFT ENERGY COMPANY
MAY 11, 2004
Please date, sign and mail
your proxy card in the
envelope provided as soon
as possible.
Please detach and mail in the envelope provided.
----------------------------------------------------------------------------
/X/ Please mark your votes as in this example.
To withhold authority to vote for any individual nominee, strike his or her name
from the listing below.
PROPOSAL 1: FOR the election of all nominees for directors listed
(except as marked to the contrary); or to WITHHOLD AUTHORITY
to vote for all nominees.
NOMINEES: A. Earl Swift*
Greg Matiuk*
Henry C. Montgomery*
Deanna L. Cannon**
[ ] FOR [ ] WITHHOLD AS TO ALL NOMINEES
*Class II Nominee (Term Expires 2007)
**Class III Nominee (Term Expires 2005)
PROPOSAL 2: In their discretion, the Proxies are authorized to vote upon
such other matters as may properly come before the Meeting or
any adjournment thereof, hereby revoking any proxy or proxies
heretofore given by the undersigned.
The Board of Directors recommends a vote "FOR" all nominees named in
Proposal 1. This proxy will be voted in accordance with the
specifications made hereon. If NO specification is made, the shares
will be voted "FOR" all nominees.
The undersigned hereby acknowledges receipt of the Notice of 2004 Annual Meeting
of Shareholders and Proxy Statement and the 2003 Annual Report to Shareholders
furnished herewith.
PLEASE SIGN AND RETURN IN THE ENCLOSED STAMPED, PRE-ADDRESSED ENVELOPE.
Signature Date Signature Date
-------------- ---------- -------------- -------------
NOTE: Signature should agree with name as it appears hereon. If stock is held in
the name of more than one person, EACH joint owner should sign. Executors,
administrators, trustees, guardians and attorneys should indicate the capacity
in which they sign. Attorneys should submit power of attorney.