DEF 14A of Kura Sushi Usa, Inc., Dec 12, 2023

DEF 14A of Kura Sushi Usa, Inc.

Filed Dec 12, 2023 · FY20230000950170-23-069706

Open on EDGAR

  1. PROPOSAL NO. 1—ELECTION OF DIRECTORS

    PROPOSAL NO. 1—ELECTION OF DIRECTORS The Company’s Board of Directors is presently comprised of five members. These directors are elected by the stockholders at each annual meeting to serve until the next annual meeting following their election. The Company’s current Board of Directors consists of Shintaro Asako, Kim Ellis, Seitaro Ishii, Carin L. Stutz and Hajime Uba, each of whom will stand for re-election at the Annual Meeting. Each of the nominees for election is currently a director of the Company. If elected at the Annual Meeting, each of the nominees would serve until the next annual meeting and until his or her successor shall have been duly chosen and qualified, or until his or her earlier death, resignation, retirement, disqualification or removal. If any of the nominees are unable or unwilling to be a candidate for election by the time of the Annual Meeting (a contingency which the Board does not expect to occur), the stockholders may vote for a substitute nominee chosen by the present Board to fill the vacancy. In the alternative, the stockholders may vote for just the remaining nominees, leaving a vacancy that may be filled at a later date by the Board. Alternatively, the Board may reduce the size of the Board. The names of the nominees for election as directors at the Annual Meeting, and certain information about them, including their ages as of December 12, 2023, are included below.

  2. PROPOSAL NO. 1—ELECTION OF DIRECTORS

    | Nominees | Age | Position | Term Expiration | Expiration of Term for which Nominated | | Shintaro Asako(1)(2)(3) | 49 | Director | 2024 | 2025 | | Kim Ellis(1)(4) | 57 | Director | 2024 | 2025 | | Seitaro Ishii(1)(2) | 77 | Director | 2024 | 2025 | | Carin L. Stutz(2)(4) | 67 | Director | 2024 | 2025 | | Hajime Uba | 46 | President, Chief Executive Officer, Director and Chairman of the Board | 2024 | 2025 |

  3. PROPOSAL NO. 1—ELECTION OF DIRECTORS

    (1) Member of the Audit Committee. (2) Member of Compensation Committee. (3) Lead Independent Director. (4) Effective immediately following the completion of the Annual Meeting and contingent upon re-election as directors at the Annual Meeting, the following committee changes will occur: (i) Kim Ellis will be removed from the Audit Committee and be appointed as a member of the Compensation Committee; (ii) Carin L. Stutz will be removed from the Compensation Committee and appointed as a member of the Audit Committee.

  4. Nominees for Election as Directors

    Nominees for Election as Directors Shintaro Asako has served as a member of our Board of Directors since the completion of our initial public offering on August 5, 2019. He is a general partner of Delight Ventures, a Japanese Venture Capital Firm specializing in making investments to early-stage startups, where he has served in such capacity since May 2022. He is also the founder and Chief Executive Officer of Bulldog Advisory Inc., a California professional firm specializing in board and executive consultation services since August 2019. From 2011 to July 2019, he served in various management capacities with DeNa Co., Ltd., a developer of mobile game and online services, including as Chief Financial Officer and regional Chief Executive Officer & Chief Financial Officer of its western operations. From 2006 through 2011, Mr. Asako served as the Chief Financial Officer at MediciNova, Inc. Prior to his services with MediciNova, Inc., Mr. Asako held various positions at KPMG LLP and Arthur Andersen LLP, providing a variety of audit, tax, and business consulting services to multinational clients. Mr. Asako currently serves on various public and private company boards of directors, including 7-Eleven, Inc., Kubota Pharmaceutical Holdings Co., Ltd., Uzabase, Inc., and Inglewood Co., Ltd. Mr. Asako holds a Bachelor of Science from the University of Southern California Leventhal School of Accounting and is a certified public accountant from the state of California. Mr. Asako possesses strong knowledge and experience in financial management, strategic planning as well as background in regulations for publicly listed companies both in the United States and Japan, making him qualified to serve as a member of our Board of Directors. Kim Ellis has served as a member of our Board of Directors since December 1, 2019. She currently serves as Chief Development Officer for Scooter’s Coffee since February 2023. She served as Senior Vice President Real Estate Development for Black Rifle Coffee Company LLC from August 2021 to June 2022, Senior Vice President Development for GameStop Corp. from February 2020 to August 2021, Chief Development Officer for iFLY Indoor Skydiving from September 2018 to August 2019, as Chief Development Officer for Piada Italian Street Food from August 2015 to January 2018, and as Senior Vice President of Development for Regis Corporation from 2011 to 2014. From 2006 to 2011, Ms. Ellis served as Executive Vice President of Development for Panda Restaurant Group, where she led the company’s growth and development endeavors and was instrumental in expanding the Panda Express brand by over 600 locations. Ms. Ellis holds a Bachelor of Business Administration from George Mason University and is an active Member of the Board of Trustees of the International Council of Shopping Centers. Ms. Ellis’ over 30 years of development experience leading the growth of various retail and restaurant companies provide her with the qualifications and skills to serve as a member of our Board of Directors. Seitaro Ishii has served as a member of our Board of Directors since October 1, 2018. He is the founder and Chief Executive Officer of IIOSS K.K., a Japanese professional consulting services firm specializing in organizational development and financial management (“IIOSS”), where he has served in such capacity since 2008. From 1980 to 2005, he served in various management capacities with Applied Materials, Inc., a semiconductor equipment company, including as Regional Chief Financial Officer in Japan as well as positions within global human resources and global operations. Prior to his service with Applied Materials, Inc., Mr. Ishii served as an internal audit manager for Gulf & Western, Inc. and prior to that as a staff accountant with Peat Marwick & Mitchell, predecessor to KPMG LLP. Mr. Ishii holds a Bachelor of Business Administration from Pace University. Mr. Ishii possesses extensive expertise in organizational development and financial management, making him qualified to serve as a member of our Board of Directors. Carin L. Stutz has served as a member of our Board of Directors since December 1, 2021. Ms. Stutz was the President and Chief Executive Officer of Native Foods, a 100% plant-based fast casual eatery from October 2019 to March 2023. Previously, she served as Executive Vice President and Chief Operating Officer for Red Robin Gourmet Burgers, Inc. where she led operations for the casual dining chain. During her tenure, she realigned the operations team for improved efficiency, resulting in the Company’s improved P&L. Before joining Red Robin, Ms. Stutz served at FOCUS Brands LLC as President of the McAlister’s Deli brand and positioned the brand for rapid growth, moving from nine openings to more than 44 openings per year, including franchise development. Prior to FOCUS Brands LLC, Ms. Stutz served in various leadership capacities, including President and Chief Executive Officer at Cosi bakery-café, President of Global Business Development at Brinker International, Inc., Executive Vice President of Operations at Applebee’s International, Inc. and Division Vice President at Wendy’s International, Inc. Ms. Stutz currently serves on the board of directors of Hawaiian Bros and is an active member of the Fast Casual Industry Council, the Illinois Restaurant Association Board, and most recently, a founding member of the GLEAM Network Board of Directors. Hajime “Jimmy” Uba has served as President and Chief Executive Officer of the Company since 2008 and also served as interim Chief Operating Officer from August 2020 through July 2021. Mr. Uba became a member of our Board of Directors in October 2017. Mr. Uba joined the Company’s parent, Kura Sushi, Inc. (“Kura Japan”), in 2000 and in 2008 was selected to establish and grow the Company. From 2004 to 2008, Mr. Uba headed operations for Kura Japan, where he oversaw operations for Eastern and Western Japan. During this time, Mr. Uba was responsible for the expansion of the Kura brand into Eastern Japan and managed over 100 restaurants. From 2000 to 2004, Mr. Uba spent three years as a restaurant manager and one year as a regional manager. During his tenure, Kura Japan grew from approximately 30 to 180 restaurant locations. He holds a Bachelor of Arts from Kansai University in Japan. Mr. Uba possesses extensive knowledge of all facets of our business and operations, as well as a deep understanding of our history and culture, making him qualified to serve as a member of our Board of Directors.

  5. Director Compensation

    Director Compensation In fiscal year 2023, we revised the structure of our Board compensation. The following is a summary of the structure of our Board compensation program design. Each non-employee director receives an annual cash retainer and an annual grant of restricted stock units (“RSUs”) for board service, and if such non-employee director serves as a committee chair or a lead independent director, an additional annual cash retainer for such committee chair or lead independent director service. The Board has currently fixed the cash retainer for board service at $50,000 per year, the cash retainer for service as a committee chair at $20,000 to $25,000 per year and the cash retainer for service as a lead independent director at $20,000 per year. Each non-employee director has received annual RSUs issued under the 2018 Incentive Compensation Plan with the value of approximately $50,000 on the grant date. Such grants have the other terms provided for in the 2018 Incentive Compensation Plan and the award agreement providing for such grant. A director who is also an employee, such as Mr. Uba, has not and will not receive any compensation for service as a director. Directors have been and will continue to be reimbursed for travel, food, lodging and other expenses directly related to their activities as directors, including expenses incurred in attending board meetings. Directors are also entitled to the protection provided by their indemnification agreements and the indemnification provisions in our amended and restated certificate of incorporation and amended and restated bylaws, as well as the protection provided by director and officer liability insurance provided by us. The following table sets forth information concerning the compensation of our non-employee directors for the fiscal year ended August 31, 2023.

  6. Director Compensation

    | Name | Fees Earned or Paid in Cash ($) | Stock Awards ($) (1) | Total ($) | | Shintaro Asako | $90,833 | $50,000 | $140,833 | | Kim Ellis | $45,833 | $50,000 | $95,833 | | Seitaro Ishii | $65,833 | $50,000 | $115,833 | | Carin Stutz | $45,833 | $50,000 | $95,833 |

  7. Director Compensation

    (1) Each non-employee director was granted RSUs on February 1, 2023. The amounts reported in the “Stock Awards” column represent the grant date fair value of 804 RSUs computed in accordance with FASB ASC Topic 718.

  8. What We Do

    | What We Do | What We Don’t Do | | • Align Pay with Performance: A significant portion of executive compensation is performance-based, tied to performance goals that align with our short- and long-term objectives and stockholder value creation | • No Single Triggers: Any payments or benefits in the event of a change in control require a qualifying termination of employment (“double trigger”) | | • Engage Independent Compensation Consultant: Our Compensation Committee engages an independent consultant for objective advice regarding executive pay | • No Hedging and Pledging: We prohibit all employees and directors from engaging in hedging, pledging and speculative transactions in derivatives of Company securities | | • Focus on Retention and Long-Term Value Creation: Our Executive compensation package is heavily weighted towards equity awards that have long-term vesting | • No Perquisites: Do not provide perquisites to any Named Executive Officers | | • Recoupment Policy: We maintain a Recoupment Policy that aligns with SEC regulations and applies to incentive-based compensation granted, earned, or vested to our executives | • No Dividends paid on Unvested Awards: Any dividends or dividend equivalents related to equity awards are subject to the same vesting restrictions as the underlying awards | | • Assess and Manage Risk: We conduct an annual risk assessment to identify any significant risks in our incentive compensation programs | • No Uncapped Incentives: We cap on short-term cash incentive to curtail behavior focused on short-term gain |

  9. Role of the Consultants

    Role of the Consultants The Compensation Committee has engaged Pearl Meyer as its independent executive compensation consultant. Pearl Meyer provides analysis and recommendations regarding market pay data and competitive-position benchmarking, peer group development, performance measures and goals program structure, incentive and equity plan design, and the regulatory environment and Company policies as they relate to executive compensation. Pearl Meyer also reviews compensation goals and priorities with our CEO as part of providing advice and recommendations for the Compensation Committee.

  10. Peer Group

    Peer Group The Committee, with the advice of Pearl Meyer, considers several criteria to determine an appropriate peer group, such as whether companies (1) are in the same or similar lines of business, (2) compete for the same customers with similar products and services, and (3) have comparable financial characteristics. The Compensation Committee selected the following 10 companies, consisting of publicly traded companies in the restaurant and hotel/hospitality industries, for fiscal year 2023: • Ark Restaurants Corp. • Chuy’s Holdings, Inc. • El Pollo Loco Holdings, Inc. • Fiesta Restaurant Group. Inc. • Nathan’s Famous, Inc. • Potbelly Corporation • Portillo’s Inc. • Ruth's Hospitality Group, Inc. • Shake Shack Inc. • The ONE Group Hospitality, Inc. We use the Peer Group for executive compensation comparisons and compensation program design comparisons, as we believe this group reflects companies most similar to Kura in terms of size and complexity of operations.

  11. Competitive Pay Positioning

    Competitive Pay Positioning The Compensation Committee, in collaboration with our Chief Executive Officer and Chief People Officer, reviews market data related to pay practices among comparable companies but does not target specific market positioning when determining compensation for Named Executive Officers. Rather, the Compensation Committee uses comparative market data as one of several factors when making individual compensation decisions. As part of its compensation review process for fiscal 2023, the Compensation Committee reviewed an analysis prepared by its independent compensation consultant of market pay practices for positions similar to our Named Executive Officers, adjusted to take into account differences if any, between the scope of our Named Executives Officers’ responsibilities compared to their counterparts in positions with similar titles in comparable companies. This analysis used pay comparisons from comparable companies in the restaurant and hospitality industry as compiled from proxy disclosures and other SEC filings as well as proprietary survey data.

  12. Elements of Compensation

    | Element | Form | Time Horizon | Objectives | | Base Salary | Cash | Annual | Attract and retain our named executive officers with fixed cash compensation to provide stability that allows our named executive officers to focus their attention on business objectives and ensures reasonable base pay if targets are not met, so as to discourage excessive risk-taking | | Annual Cash Incentive | Cash | Annual | Focus and motivate our named executive officers to achieve annual corporate financial and operating goals with opportunity for upside based on exceptional performance, but with payout capped to curtail behavior focused on short-term gain | | Performance-Based Long-Term Incentives | Stock Options | Ratable four-year vesting | Focus and motivate our named executive officers to achieve long-term corporate financial and operating goals and superior stockholder returns. | | Time-Based Long-Term Incentives | RSUs | Ratable four-year vesting | Encourage retention of our named executive officers and promote stability among senior management. |

  13. Annual Cash Incentive

    Annual Cash Incentive Named Executive Officers are eligible to receive an annual cash performance incentive bonus (“Bonus”) based on our performance against specific financial and strategic objectives. At the beginning of each fiscal year, the Compensation. Committee establishes both the performance objectives and the formula for determining potential Bonus payments. Bonuses are payable, if at all, in the first quarter of the fiscal year following the year in which such Bonuses were earned, after the Compensation Committee certifies performance relative to the pre-established objectives. The Compensation Committee approved our fiscal 2023 cash bonus plan pursuant to our 2018 Incentive Compensation Plan. Under the 2023 cash bonus plan, the performance metrics consisted of adjusted EBITDA and Revenue. The Compensation Committee selected adjusted EBITDA and Revenue as they incentivize the Named Executive Officers to drive for top-line growth while also ensuring a focus on cost control and operational efficiency. Earned bonuses could range from 50% to 150% of target bonus opportunity. Any performance falling below the designated threshold results in no payout to participants. Adjusted EBITDA performance (threshold, target, maximum and actual) excludes Bonuses. The threshold, target, and maximum adjusted EBITDA along with our actual performance in 2023 are outlined in the following table:

  14. Annual Cash Incentive

    | Measure | Threshold ($ millions) | Target ($ millions) | Maximum ($ millions) | Actual ($ millions) | | Adjusted EBITDA (75%) (excludes Bonuses) | $16.6 | $18.5 | $20.3 | $17.6 | | Revenue (25%) | $181.5 | $191.1 | $200.6 | $187.4 | | Payout as a % of Target | 50% | 100% | 150% | 77% |

  15. Long-Term Incentives

    Long-Term Incentives Equity-based compensation comprises the most significant component of total executive compensation to align executive compensation with our long-term performance and to encourage executives to make decisions for the benefit of our stockholders. Each of our Named Executive Officers is eligible to receive equity compensation, which may consist of a mix of stock options, restricted stock, and restricted stock units, to encourage a focus on long-term stockholder value and to foster long-term retention. We approach equity compensation grants by considering the overall value of the grant (as opposed to the number of shares granted). Equity grants to all staff members, including Named Executive Officers and other executives require approval from the Compensation Committee and, in considering whether to approve such equity grants, the Compensation Committee considers past grants, corporate and individual performance, the valuation of grants, and recommendations of our Chief Executive Officer and the Compensation Committee’s compensation consultant. The Compensation Committee has not established formal guidelines for the size of individual equity grants for our Named Executive Officers, but considers the factors listed above as well as market data in making such decisions. For fiscal year 2023, the Compensation Committee determined that our Named Executive Officers would receive the following type of equity awards: • Stock Options (70% of grant value): Provide strong incentives for our executive officers to increase the value of our common stock over the long term, and they tightly align the interests of our executives with those of our stockholders. The stock options we grant vest over four years, with 25% of the shares subject to the option vesting on each anniversary of the vesting commencement date, subject to the recipient’s continued employment or service with us on each vesting date. Options have a term of seven years from the date of grant. • Time-Based RSU Awards (30% of grant value): Granted because they are less dilutive to our stockholders, as fewer shares of our common stock are granted to achieve an equivalent value relative to stock options, and because RSU awards are an effective retention tool that maintain value even in cases where the share price is trading lower than the initial grant price. The RSUs we grant vest in equal annual increments over four years, subject to the recipient’s continued employment or service with us on each vesting date. In addition to the annual 2023 equity awards, the Compensation Committee provided our Named Executive Officers with a discretionary equity grant for their role in the completion of the Company’s follow-on offering. In determining appropriate award amounts, the Compensation Committee evaluated several metrics including issue price, discount rate, and commissions paid, among others. Based on this evaluation, the Compensation Committee determined the results of the follow-on offering were successful. As such, each Named Executive Officer received a discretionary RSU award that vests in two equal installments over a two-year period.

  16. Summary Compensation Table

    Summary Compensation Table The following table sets forth the total compensation that was paid or accrued for the NEOs for the 2022 and 2023 fiscal years.

  17. Summary Compensation Table

    | Name and Principal Position | Year | Salary | Bonus | Option Awards (1) | Stock Awards (2) | All Other Compensation | Total | | Hajime Uba | 2023 | $431,379 | $196,988 | $193,375 | $252,875 | — | $1,074,617 | | Chairman of the Board, President and Chief Executive Officer | 2022 | $369,167 | $93,750 | $187,500 | — | — | $650,417 | | Jeffrey Uttz | 2023 | $325,329 | 121,669 | $1,147,000 | $223,000 | 75,000(4) | $1,891,998 | | Chief Financial Officer (3) | | | | | | | | | Shahin Allameh | 2023 | $302,865 | $89,610 | $101,500 | $43,500 | — | $537,475 | | Chief Operating Officer(5) | 2022 | $270,000 | $40,500 | $81,000 | — | — | $391,500 |

  18. Summary Compensation Table

    (1) The amounts reported represent the aggregate grant date fair value of the stock options awarded to the NEOs during the 2023 and 2022 fiscal years, calculated in accordance with FASB ASC Topic 718. Such grant date fair values do not take into account any estimated forfeitures. The amounts reported in this column reflect the accounting cost for these stock options and do not correspond to the actual economic value that may be received by the NEOs upon the exercise of the stock options or any sale of the underlying shares of common stock. (2) The amounts reported represent the aggregate grant date fair value of the RSUs granted to the NEOs during the 2023 fiscal year. The amounts reported in this column reflect the accounting cost for these RSUs and do not correspond to the actual economic value that may be received by the NEOs upon any sale of the underlying shares of common stock. (3) Mr. Uttz has served as the Company’s Chief Financial Officer since October 3, 2022. (4) The amount reported represents a one-time signing bonus pursuant to Mr. Uttz’s employment agreement. (5) Mr. Allameh has served as the Company’s Chief Operating Officer since July 26, 2021.

  19. Outstanding Equity Awards at 2023 Fiscal Year-End

    Outstanding Equity Awards at 2023 Fiscal Year-End The following table sets forth information regarding outstanding equity awards at the end of fiscal year 2023 for each of the NEOs:

  20. Outstanding Equity Awards at 2023 Fiscal Year-End

    | | Option Awards(1) | | | | Stock Awards(1) | | | Name | Number of Securities Underlying Unexercised Options Exercisable | Number of Securities Underlying Unexercised Options Unexercisable | Option Exercise Price | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (2) | Market Value of Shares or Units of Stock That Have Not Vested | | Hajime Uba | 77,571 | — | $4.26 | 6/15/2028 | 1,333(8) | $82,875 | | | 4,629 | — | $25.94 | 12/2/2029 | 1,708(9) | $170,000 | | | 8,931 | 1,789(3) | $22.65 | 2/1/2031 | — | — | | | 3,575 | 3,573(4) | $46.15 | 2/1/2032 | — | — | | | — | 5,163(7) | $62.14 | 2/1/2033 | — | — | | Jeffrey Uttz | — | 21,905(5) | $73.58 | 10/3/2032 | 1,359(10) | $100,000 | | | — | 3,925(7) | $62.14 | 2/1/2033 | 1,013(8) | $63,000 | | | | | | | 1,607(9) | $160,000 | | Shahin Allameh | 15,000 | 15,000(6) | $52.07 | 7/26/2031 | 700(8) | $43,500 | | | 1,546 | 1,542(4) | $46.15 | 2/1/2032 | — | — | | | — | 2,710(7) | $62.14 | 2/1/2033 | — | — |

  21. Outstanding Equity Awards at 2023 Fiscal Year-End

    (1) Each equity award is subject to the terms of our 2018 Incentive Compensation Plan. (2) Represents restricted stock units granted under our 2018 Incentive Compensation Plan that are subject to the NEO’s continuous service relationship with the Company through each applicable vesting date. (3) One-third of the shares subject to the equity award vest twelve (12) months after February 1, 2021, and the remaining shares vest in equal quarterly installments from the grant date over twenty-four (24) months after February 1, 2022, generally subject to the NEO’s continuous service relationship with the Company through each applicable vesting date. (4) One-third of the shares subject to the equity award vest twelve (12) months after February 1, 2022, and the remaining shares vest in equal quarterly installments from the grant date over twenty-four (24) months after February 1, 2023, generally subject to the NEO’s continuous service relationship with the Company through each applicable vesting date. (5) One-quarter of the shares subject to the equity award vest twelve (12) months after October 3, 2022, and the remaining shares vest in equal quarterly installments from the grant date over thirty-six (36) months after October 3, 2023, generally subject to the NEO’s continuous service relationship with the Company through each applicable vesting date. (6) One-quarter of the shares subject to the equity award vest twelve (12) months after July 26, 2021, and the remaining shares vest in equal quarterly installments from the grant date over thirty-six (36) months after July 26, 2022, generally subject to the NEO’s continuous service relationship with the Company through each applicable vesting date. (7) One-quarter of the shares subject to the equity award vest twelve (12) months after February 1, 2023, and the remaining shares vest in equal quarterly installments from the grant date over thirty-six (36) months after February 1, 2024, generally subject to the NEO’s continuous service relationship with the Company through each applicable vesting date. (8) One-quarter of the RSUs subject to the equity award vest twelve (12) months after February 1, 2023, and the remaining RSUs vest in equal quarterly installments from the grant date over thirty-six (36) months after February 1, 2024, generally subject to the NEO’s continuous service relationship with the Company through each applicable vesting date. (9) One-half of the RSUs subject to the equity award vest twelve (12) months after August 1, 2023, and the half remaining RSUs vest from the grant date over twelve (12) months after August 1, 2024, generally subject to the NEO’s continuous service relationship with the Company through each applicable vesting date. (10) RSUs subject to the equity award vest twelve (12) months after October 3, 2022, generally subject to the NEO’s continuous service relationship with the Company through each applicable vesting date.

  22. Payments Upon Termination or Change in Control

    Payments Upon Termination or Change in Control None of our NEOs are entitled to receive payments or other benefits upon termination of employment or a change in control, except as provided in the employment agreements described above and the equity acceleration pursuant to the 2018 Incentive Compensation Plan described below.

  23. Nonqualified Deferred Compensation

    Nonqualified Deferred Compensation Our NEOs did not earn any nonqualified deferred compensation benefits from us during fiscal year 2023.