DEF 14A of Hurco Companies Inc
Filed Jan 29, 2025 · FY20240001104659-25-007132
Director Nominees
Director Nominees
Director Nominees
| | | | | # of | Committee Memberships | | | | Name | Age | Director Since | Independent | Other Public Company Boards | Audit | Compensation | Nominating and Governance | | Michael Doar, Executive Chairman | 69 | 2000 | | 1 | | | | | Cynthia Dubin | 63 | 2019 | ✓ | 0 | ✓ | | | | Timothy J. Gardner | 69 | 2017 | ✓ | 0 | | Chair | ✓ | | Jay C. Longbottom | 71 | 2015 | ✓ | 0 | | ✓ | ✓ | | Richard Porter | 69 | 2012 | ✓ | 0 | | ✓ | Chair | | Benjamin Rashleger | 49 | New Nominee | ✓ | 0 | | | | | Janaki Sivanesan | 53 | 2008 | ✓ | 1 | Chair | | | | Gregory S. Volovic, President & CEO | 61 | 2019 | | 0 | | | |
PROPOSAL 1. ELECTION OF DIRECTORS
PROPOSAL 1. ELECTION OF DIRECTORS The Board currently consists of eight members. The Board, acting on the recommendation of our Nominating and Governance Committee, has nominated each of the current directors for reelection at the 2025 Annual Meeting, other than Thomas A. Aaro. Following discussions with Mr. Aaro, the Board did not nominate Mr. Aaro to stand for re-election at the 2025 Annual Meeting. The Board thanks Mr. Aaro for his years of service, dedication to the Board, and his many contributions to the Company. The Board, acting on the recommendation of our Nominating and Governance Committee, has nominated a new nominee for election at the annual meeting, Benjamin Rashleger. Mr. Rashleger was recommended to the Board for nomination as a director by the Nominating and Governance Committee. The Nominating and Governance Committee considered and reviewed Mr. Rashleger as a candidate for director after receiving a recommendation from the Executive Chairman and Chief Executive Officer. No fees were paid to any third parties to identify or evaluate potential nominees. Unless authority is specifically withheld, the shares being voted by proxy will be voted in favor of each of these nominees. Each nominee who is elected will serve for a term of one year, which expires at our next Annual Meeting of Shareholders or such later date as his or her successor has been elected and qualified. Proxies cannot be voted for a greater number of persons than eight, which is the number of nominees named in this proxy statement. If any of these nominees becomes unable to serve, we expect that the persons named in the proxy will exercise their voting power in favor of such other person or persons as the Board may recommend. Each of the nominees has consented to being named in this proxy statement and to serve if elected. The Board knows of no reason why any of the nominees would be unable to serve.
Director Nominees
Director Nominees The names of the persons who are nominees for election and their current positions and offices with Hurco, if any, are set forth below. There are no family relationships among any of our directors or officers.
Director Nominees
| Nominees | Positions and Offices Held with Hurco | | Michael Doar | Executive Chairman and Director | | Cynthia Dubin | Director | | Timothy J. Gardner | Director | | Jay C. Longbottom | Director | | Richard Porter | Director | | Benjamin Rashleger | Director Nominee | | Janaki Sivanesan | Director | | Gregory S. Volovic | President, Chief Executive Officer, and Director |
Director Nominees
Michael Doar, age 69, has been a member of the Board since 2000. Mr. Doar was elected Chairman of the Board and appointed our Chief Executive Officer (“CEO”) in fiscal year 2001, a position he held until March 2021, when he transitioned to the role of Executive Chairman. Mr. Doar also served as our President from November 2009 to March 2013. Prior to joining Hurco, Mr. Doar served as Vice President of Sales and Marketing of Ingersoll Contract Manufacturing Company, a subsidiary of Ingersoll International, an international engineering and machine tool systems business, having previously held various management positions with Ingersoll International from 1989. Mr. Doar also serves as a director of Twin Disc, Incorporated (“Twin Disc”), a manufacturer of marine and heavy duty off-highway power transmission equipment, and currently serves on Twin Disc’s Nominating & Governance and Compensation & Executive Development Committees. Mr. Doar led Hurco for more than 20 years. As our current Executive Chairman and former CEO, Mr. Doar brings to our Board his in-depth knowledge of our business, strategy, people, operations, competition, and financial position. Cynthia Dubin, age 63, has been a member of the Board since 2019. Ms. Dubin is an experienced chief financial officer and board director. In February 2019, Ms. Dubin was appointed to the board of the U.K. Competition and Markets Authority (“CMA”) and is currently the Chair of its Nominations Committee and Audit and Risk Assurance Committee. The CMA is a non-ministerial government department in the United Kingdom, responsible for strengthening business competition and preventing and reducing anti-competitive activities. Since December 2020, Ms. Dubin has also served as a director for ICE Futures Europe, an exchange for futures and options contracts for crude oil, interest rates, equity derivatives, natural gas, power, coal, emissions, and soft commodities, and is currently also the chair of its Risk and Audit Committee. From May 2021 to August 2023, Ms. Dubin served as a director, Chair of the Audit Committee, and member of the Compensation Committee for Franchise Group, Inc. (the “Franchise Group”). Franchise Group is a holding company for a franchising platform for an increasingly diverse collection of market-leading and emerging brands. From September 2020 through November 2022, Ms. Dubin served as a director, Chair of the Audit Committee, and a member of the Remuneration and Nomination Committees of Synthomer plc, a U.K. publicly-traded chemicals manufacturer specializing in aqueous polymers. From 2015 to September 2020, she served on the Board of Directors of Babcock & Wilcox Enterprises, Inc. (“B&W”), a NYSE-listed global provider of advanced energy and environmental technologies for the power and industrial markets with operations, subsidiaries, and joint ventures worldwide. During that time, she also served as Chair of B&W’s Audit Committee and a member of its Governance Committee. Ms. Dubin also served as the CFO of Pivot Power LLP, an emerging leader in power storage and electric vehicle infrastructure in the U.K., from August 2018 to March 2019; as CFO of JKX Oil & Gas Ltd. (“JKX”) from 2011 to 2016; and CFO for Canamens Ltd. (“Canamens”) from 2006 to 2011. JKX and Canamens are London Stock Exchange listed and private equity-backed oil and gas exploration and production companies, respectively. Additionally, Ms. Dubin was European CFO for Edison Mission Energy, a builder, owner, and operator of large-scale power generation projects, and started her career as a project finance banker with Irving Trust Company. Ms. Dubin brings to our Board thorough knowledge and understanding of complex international corporate finance, mergers and acquisitions, capital markets, and risk management and oversight. Timothy J. Gardner, age 69, has been a member of the Board since 2017. A seasoned leader in industrial and international manufacturing operations, from 2016 to March 2021, Mr. Gardner served as the Managing Director of Akoya Capital (“Akoya”), responsible for leading Akoya’s industrial product sector. From 2015 to December 2020, Mr. Gardner also served as a Senior Advisor for Pritzker Private Capital (“Pritzker”) and a board member of LBP Manufacturing, a packaging company acquired by Pritzker. From 2009 to 2014, Mr. Gardner served as the Executive Vice President of Illinois Tool Works (“ITW”) and led ITW’s consumer products segment, a $1.6 billion business focused on packaging and specialty decorating. Between 1997 and 2009, Mr. Gardner held various leadership positions within ITW. Mr. Gardner brings to our Board extensive leadership experience in industrial and international manufacturing operations, as well as extensive knowledge and experience in finance and acquisitions and divestitures. During his tenure at ITW, Mr. Gardner led ten acquisitions and four divestitures and managed multiple division and group financial controllers. Jay C. Longbottom, age 71, has been a member of the Board since 2015. Mr. Longbottom is currently an Operating Partner of the BERKS Group, a privately held investment initiative, a position he has held since 2018. Previously, from 2013 to 2017, Mr. Longbottom was CEO of Robert Family Holdings (“RFH”), a privately-held company that manages a portfolio of specialty manufacturers, was a board member of RFH from 2008 to 2017, and served as RFH’s Audit Committee Chair from 2008 to 2013. For one year prior to his RFH tenure, Mr. Longbottom served as CEO of Trostel, LLC, a rubber products company. Additionally, from 2002 to 2012, Mr. Longbottom was an executive of Haldex AB, a Swedish, publicly-traded company that provides proprietary and innovative solutions to improve safety, vehicle dynamics, and environmental sustainability in the global commercial vehicle industry. Mr. Longbottom served as the CEO and President of Haldex AB from 2011 to 2012. Prior to 2011, he was the Executive Vice President and Head of the Commercial Vehicle Systems Division and the President of the Hydraulics Division of Haldex Group. Mr. Longbottom brings to our Board significant knowledge in finance, mergers and acquisitions, and international manufacturing operations. His experience as a CEO of a Swedish, publicly-traded company is also relevant to understanding regulations and capital market requirements. Mr. Longbottom currently serves as a director of two privately-held companies, was a director of RFH for nine years, and has served as a director for a number of international companies. Richard Porter, age 69, has been a member of the Board since 2012. Mr. Porter has managed a private equity portfolio of manufacturing companies since 2007. Previously, he was President of CB Manufacturing, a cutting tool company, and President of Ingersoll Contract Manufacturing Company, a subsidiary of Ingersoll International. Mr. Porter brings to our Board extensive experience in the machine tool industry, particularly in product and contract manufacturing. Mr. Porter also has experience serving on the boards of a number of private companies with annual revenues ranging from approximately $40 million to $480 million.
Director Nominees
Benjamin Rashleger, age 49, is a director nominee and a machine tool industry executive, having held leadership positions with multiple organizations in each of the industry’s market segments, including a manufacturer of CNC equipment, an end-user manufacturing company specializing in CNC machining, and a multi-state distributor of CNC equipment. Mr. Rashleger is currently the President of Machine Tools for Concept Advanced Manufacturing Solutions, a large multi-state distributor of CNC and metrology equipment, where he is responsible for the machine tool division, a position he has held since 2019. Previously, from 2009 to 2017, Mr. Rashleger was the Chief Executive Officer and director of WSI Industries, a publicly-traded contract manufacturer that specialized in CNC machining and assembly, serving primarily the recreational products, aerospace, defense and energy markets. From 1991 to 2008, Mr. Rashleger held multiple roles with Milltronics Manufacturing Company, ultimately the President and CFO prior to the sale of that business, and thereafter he served as the Director of Operations of that business. Mr. Rashleger would bring to the Board a broad knowledge of the CNC machining space, specifically in manufacturing, distribution, product development, sales and marketing, finance, mergers and acquisitions, and international operations. Mr. Rashleger also has served, and currently sits, on multiple boards including private equity owned, public, ESOP and non-profit organizations. He currently is a director for a private waterjet CNC equipment manufacturer and a private contract manufacturer in CNC machining. Janaki Sivanesan, age 53, has been a member of the Board since 2008. Ms. Sivanesan is a practicing attorney and founding principal of a private equity firm focused on middle-market investments. She previously served as a partner at a large, New York law firm. She was admitted to the bars of the States of New York and Georgia in 2007 and 1996, respectively. Since 2020, Ms. Sivanesan has also served as a director of Essential Properties Realty Trust, Inc., a publicly-traded real estate investment trust that acquires, owns, and manages primarily single-tenant properties that are net leased on a long-term basis to companies operating service-oriented or experience-based businesses. Ms. Sivanesan has experience in a wide range of corporate transactions, from mergers and acquisitions to corporate finance, including private debt, equity investments, and venture capital transactions. Ms. Sivanesan also has experience in cross-border transactions related to manufacturing and outsourcing and is particularly knowledgeable with respect to business operations in India. Ms. Sivanesan served as the General Counsel and Chief Compliance Officer of Hayfin Capital Management, LLC (formerly known as Kingsland Capital Management, LLC), from 2011 to 2018, and has been self-employed as an attorney in private practice since 2009. Ms. Sivanesan provides to the Board and Audit Committee thorough knowledge and understanding of complex legal and capital markets transactions, as well as corporate mergers and acquisitions. Gregory S. Volovic, age 61, has been a member of the Board since 2019. He has been employed by us since 2005, was appointed as our President in 2013, and served as our Chief Operating Officer from 2019 until he was appointed as our CEO in March 2021. Mr. Volovic oversees all of Hurco’s operations, including worldwide sales, service, end-to-end management of research and development, new product development activities, and operational initiatives. He has held various positions within Hurco, most recently Executive Vice President, Software and Engineering, before becoming President in 2013. Prior to joining Hurco, Mr. Volovic led the advanced manufacturing equipment development program for the CRT division of RCA/Thomson and the worldwide development of Information Technology (IT) and E-business/Knowledge Management technologies. He also held various positions within Thomson, including Director of E-Business, Engineering, and Information Technology. Mr. Volovic started his career as a software developer for Unisys Corporation, where he was a Linux programmer. Mr. Volovic also serves on the boards of two private industrial and manufacturing companies and is a board member of the Association of Manufacturing Technology (AMT). Mr. Volovic brings to our Board his significant knowledge of the machine tool industry, as well as his experience and understanding of our technologies, product development, business strategies, people, and operations. Mr. Volovic also provides leadership and vision for the development and execution of our strategic plans and the achievement of our business goals and objectives.
Board Diversity, Director Nominee Experience and Qualifications, and Board Composition
Board Diversity, Director Nominee Experience and Qualifications, and Board Composition While neither the Board nor the Nominating and Governance Committee has a separate formal written policy regarding director diversity, each body considers the diversity of backgrounds and experience when selecting nominees for director election and in evaluating Board composition and performance. Not only has this informal approach to the promotion of diversity resulted in a group of director nominees that we believe to be individuals of substantial accomplishment with demonstrated leadership capabilities, but, as indicated in the following charts, it has also resulted in a group of director nominees that possess diversity of thought, perspective, experience, and backgrounds.
Board Diversity, Director Nominee Experience and Qualifications, and Board Composition
| Director Nominee Experience & Qualifications | | | | | | | | | | | Michael Doar | Cynthia Dubin | Timothy J. Gardner | Jay C. Longbottom | Richard Porter | Benjamin Rashleger | Janaki Sivanesan | Gregory S. Volovic | | Public Company Board | ● | ● | | | | ● | ● | | | Public Company Executive | ● | ● | ● | ● | | ● | | ● | | Manufacturing Industry | ● | ● | ● | ● | ● | ● | | ● | | International Business / Global Operations | ● | ● | ● | ● | ● | ● | ● | ● | | Risk Management | ● | ● | | | | ● | ● | | | Financial Analysis / Accounting | ● | ● | ● | ● | ● | ● | ● | | | Information Technology / Cyber Security | | | | | | ● | | ● | | Project Management | ● | ● | ● | ● | ● | ● | | ● | | Environmental Sustainability | ● | ● | ● | ● | | | | | | Sales & Marketing | ● | ● | ● | ● | ● | | ● | ● | | Supply Chain / Logistics | | | ● | ● | ● | ● | | ● | | Strategic Planning | ● | ● | ● | ● | ● | ● | ● | ● | | Government Relations, Public Policy or Regulatory | | ● | ● | | | | | | | Mergers & Acquisitions / Business Development | ● | ● | ● | ● | ● | ● | ● | ● | | Human Capital Management | ● | | ● | ● | ● | ● | | ● |
Board Diversity, Director Nominee Experience and Qualifications, and Board Composition
| Board Diversity Matrix (As of January 29, 2025) | | | | | | Total Number of Directors: 8 | Female | Male | Non-Binary | Did Not Disclose Gender | | Part I: Gender Identity | | | | | | Directors | 2 | 6 | | | | Part II: Demographic Background | | | | | | Asian | 1 | | | | | White | | 7 | | |
Board Diversity, Director Nominee Experience and Qualifications, and Board Composition
In further demonstration of the value the Board places on diversity, it also considers the diversity of background and experience when appointing our executive officers. To that end, and as indicated in the chart below, our executive officer team is a diverse group of individuals representative of both Hurco’s global footprint and the communities in which we operate.
Board Diversity, Director Nominee Experience and Qualifications, and Board Composition
| Officer Diversity Matrix (As of January 29, 2025) | | | | | | Total Number of Executive Officers: 5 | Female | Male | Non-Binary | Did Not Disclose Gender | | Part I: Gender Identity | | | | | | Executive Officers | 2 | 3 | | | | Part II: Demographic Background | | | | | | Asian | 1 | | | | | White | | 3 | | | | Two or More Races or Ethnicities | 1 | | | |
Board Diversity, Director Nominee Experience and Qualifications, and Board Composition
The Board of Directors recommends a vote “FOR” each of the nominees for director.
COMPENSATION OF DIRECTORS
COMPENSATION OF DIRECTORS
Director Compensation Table
Director Compensation Table
Director Compensation Table
| | Fees Earned or | Stock | | | | Paid in Cash | Awards | Total | | | ($) | ($)(1) | ($) | | Thomas A. Aaro | 52,500(2) | 79,997 | 132,497 | | Cynthia Dubin | 50,000 | 79,997 | 129,997 | | Timothy J. Gardner | 52,500 | 79,997 | 132,497 | | Jay C. Longbottom | 45,000 | 79,997 | 124,997 | | Richard Porter | 61,250(2) | 79,997 | 141,247 | | Janaki Sivanesan | 55,000 | 79,997 | 134,997 |
Director Compensation Table
| (1) Amounts reflect the grant date fair value of restricted shares issued to each non-employee director during the year ended October 31, 2024, calculated in accordance with Accounting Standards Codification Topic 718 (“ASC 718”). Each non-employee director received 3,813 restricted shares on March 14, 2024, the date of our 2024 Annual Meeting of Shareholders, pursuant to our non-employee director compensation program. The grant date fair value is calculated by multiplying the closing price of our common stock on Nasdaq on the date of grant, which was $20.98, by the number of restricted shares awarded. The restricted shares vest one year from the date of grant or upon the Company’s next Annual Meeting of Shareholders, whichever is earlier. | | (2) Fees paid to Mr. Aaro and Mr. Porter during fiscal year 2024 include an additional $2,500 for Mr. Aaro and an additional $1,250 for Mr. Porter paid to them as corrections to committee compensation resulting from changes in the composition of our Audit Committee during fiscal year 2023. |
Director Compensation Table
Mr. Doar’s compensation and Mr. Volovic’s compensation for fiscal year 2024 are set forth in the Summary Compensation Table and the following tables and narrative. Neither are included in the table above, because they did not receive any additional compensation for their services as directors.
Director Compensation Program
Director Compensation Program In fiscal year 2024, the fees earned by, or paid in cash to, our non-employee directors were as follows:
Director Compensation Program
| | 1st Quarter ($) | 2nd Quarter ($) | 3rd Quarter ($) | 4th Quarter ($) | Total ($) | | Non-employee directors retainer | 11,250 | 11,250 | 11,250 | 11,250 | 45,000 | | Presiding Independent Director retainer | 3,750 | 3,750 | 3,750 | 3,750 | 15,000 | | Audit Committee chair retainer | 2,500 | 2,500 | 2,500 | 2,500 | 10,000 | | Compensation Committee chair retainer | 1,875 | 1,875 | 1,875 | 1,875 | 7,500 | | Audit Committee member retainer | 1,250 | 1,250 | 1,250 | 1,250 | 5,000 |
Director Compensation Program
We also paid our directors’ travel expenses incurred to attend Board meetings, which are not included in the Director Compensation Table above.
Short-Term Incentive Compensation
Short-Term Incentive Compensation As in recent years, for the fiscal 2024 short-term incentive compensation program, the Committee utilized objective performance measures based on our operating income margin and certain strategic objectives for each NEO. Due to the amount of our net loss for fiscal year 2024, there were no payout amounts under the 2024 short-term incentive compensation program, under either of the operating income margin metric or the strategic objectives.
Long-Term Incentive Compensation
Long-Term Incentive Compensation In fiscal 2024, the Committee decided to both (1) maintain the overall general allocation of award value between restricted shares (targeted at approximately 25% of long-term incentive compensation award value) and performance stock units (“PSUs”) (targeted at approximately 75% of long-term incentive compensation award value) and (2) similar to the 2023 arrangement, tie the vesting and earning of the PSUs to the performance measures of net income (loss) and free cash flow. The Committee granted the awards of restricted shares and target number of PSUs to the NEOs effective as of January 4, 2024, as follows:
Long-Term Incentive Compensation
| | Grant Date Value of Restricted Shares | Grant Date Value of Target PSUs – NI | Grant Date Value of Target PSUs – FCF | | Gregory S. Volovic | $312,500 | $500,000 | $437,500 | | Michael Doar | $225,000 | $360,000 | $315,000 | | Sonja K. McClelland | $187,500 | $300,000 | $262,500 | | HaiQuynh Jamison | $25,000 | $40,000 | $35,000 | | Jonathon D. Wright | $37,500 | $60,000 | $52,500 |
Long-Term Incentive Compensation
The amounts shown in the table above as the grant date value represent the amounts that the Committee approved for each award. The actual grant date value of each award differed slightly due to rounding, as shown in the “Grants of Plan-Based Awards in 2024” table.
ALIGNMENT OF EXECUTIVE PAY-FOR-PERFORMANCE
| ● | cash award opportunities under the short-term incentive compensation plan based on the Company’s operating income margin and certain strategic objectives set for fiscal year 2024; | | ● | restricted shares that vest in equal installments over three years granted to promote executive retention; |
ALIGNMENT OF EXECUTIVE PAY-FOR-PERFORMANCE
| ● | PSUs that will be earned based on the Company’s average net income (“PSUs – NI”) for fiscal years 2024-2026; and | | ● | PSUs that will be earned based on the Company’s average free cash flow from operations (“PSUs – FCF ”) for fiscal years 2024-2026. |
ALIGNMENT OF EXECUTIVE PAY-FOR-PERFORMANCE
| ● | the vesting in 2024 of a portion of the restricted shares granted in fiscal years 2021, 2022, and 2023; and | | ● | PSUs granted in fiscal year 2022 that were earned based on the Company’s total shareholder return performance, or TSR, relative to companies in an established peer group, for fiscal years 2022 through 2024. |
ALIGNMENT OF EXECUTIVE PAY-FOR-PERFORMANCE
| Base salary over the period | Actual bonus earned and paid during the period | | The aggregate current value of restricted stock or restricted stock unit grants made during the period | The aggregate in-the-money value of stock option grants made during the period | | The actual payouts of performance-based equity awards with performance periods beginning and ending during the period | The estimated payout for performance-based equity awards that were granted during the period but remaining unvested at its conclusion |
ALIGNMENT OF EXECUTIVE PAY-FOR-PERFORMANCE
| ● | Operating income margin – a measure of profitability used in the Company’s annual incentive plan; |
ALIGNMENT OF EXECUTIVE PAY-FOR-PERFORMANCE
| ● | ROIC – a measure of capital efficiency historically used in the Company’s long-term incentive plan prior to the fiscal year 2023 grants; and |
ALIGNMENT OF EXECUTIVE PAY-FOR-PERFORMANCE
| ● | TSR – a measure of shareholder value creation historically used in the Company’s long-term incentive plan prior to the fiscal year 2023 grants. |
ALIGNMENT OF EXECUTIVE PAY-FOR-PERFORMANCE
| ● | Our CEO’s three-year (fiscal years 2021-2023) total realizable compensation was positioned at the 23rd percentile of the peer group and was generally aligned with composite Company performance ranked at the 41st percentile; and |
ALIGNMENT OF EXECUTIVE PAY-FOR-PERFORMANCE
| ● | Our CEO’s five-year (fiscal years 2019-2023) total realizable compensation was positioned at the 10th percentile of the peer group and was generally aligned with composite Company performance ranked at the 32nd percentile. |
Role of Compensation Consultant
Role of Compensation Consultant In 2023 and 2024, the Committee engaged Pay Governance to advise and assist the Committee related to executive compensation matters. Pay Governance is retained directly by the Committee, reports directly to the Committee, and participates in certain Committee meetings. In this regard, from time to time, Pay Governance advises and assists the Compensation Committee in:
Role of Compensation Consultant
| ● | determining the appropriate objectives and goals of our executive compensation program; |
Role of Compensation Consultant
| ● | designing compensation programs that fulfill those objectives and goals; |
Role of Compensation Consultant
| ● | reviewing the primary components of that compensation; |
Role of Compensation Consultant
| ● | evaluating the effectiveness of our compensation programs, including pay-for-performance alignment, and assisting in compiling data, calculations, and disclosures required under corresponding pay versus performance rules; |
Role of Compensation Consultant
| ● | identifying appropriate pay positioning strategies and pay levels in our executive compensation program; |
Role of Compensation Consultant
| ● | evaluating the historical performance of our equity incentive plan, estimating the share reserve necessary to fund anticipated awards for NEOs and other personnel to accomplish the Company’s compensation program goals, and recommending retention or modification of other terms and conditions set forth in such plan; and |
Role of Compensation Consultant
| ● | identifying comparable companies and compensation surveys for the Committee to use to benchmark the appropriateness and competitiveness of our executive compensation program. |
Role of Compensation Consultant
Pay Governance may, from time to time, contact our executive officers for information necessary to fulfill its assignment and may make reports and presentations to and on behalf of the Committee that our executive officers also receive. Pay Governance and its affiliates did not provide any other services to us or our affiliates during 2023 or 2024. In addition, the Committee has determined that the work of Pay Governance and its employees has not raised any conflict of interest.
Use of Peer Group Data
Use of Peer Group Data As part of the Committee’s continuous effort to strengthen the executive compensation program, the Committee annually engages its independent compensation consultant, Pay Governance, to conduct a competitive market assessment for each executive position using publicly-available data from the Company’s applicable peer group and executive compensation surveys. In addition, the Committee’s compensation consultant also provides reports and assessments on changes in executive compensation programs, generally, and executive compensation within comparable industries, specifically, to evaluate trends and recommend changes to better align our executive compensation programs with similarly situated companies in comparable industries. The assessment focuses on the competitiveness of compensation provided to each executive by compensation element (base salary, target annual incentive, target total cash compensation, expected value of long-term incentives, and target total direct compensation). The objectives of the assessment are to understand changes in market compensation from year to year, to analyze the competitiveness of current pay levels relative to the market, and to serve as an input for making compensation adjustments if necessary. The following companies made up the peer group utilized for fiscal year 2024 executive compensation determinations and were selected on the basis of industry, revenue, global operations, assets, employee size, and market capitalization ($ in millions):
Use of Peer Group Data
| Company Name | 2023 Revenue (fiscal year) | Market Capitalization (at April 30, 2024) | Employees (at 2023 fiscal year-end) | | Ampco-Pittsburgh Corporation | $422 | $41 | 1,697 | | Broadwind, Inc. | $203 | $46 | 444 | | Core Molding Technologies, Inc. | $358 | $158 | 1,857 | | Douglas Dynamics, Inc. | $568 | $520 | 1,885 | | DMC Global Inc. | $719 | $317 | 1,800 | | The Eastern Company | $273 | $197 | 1,199 | | Energy Recovery, Inc. | $128 | $854 | 269 | | FARO Technologies, Inc. | $359 | $356 | 1,243 | | Graham Corporation | $157 | $301 | 538 | | Key Tronic Corporation. | $588 | $46 | 5,447 | | The L.S. Starrett Company | $256 | $118 | 1,529 | | Manitex International, Inc. | $291 | $106 | 705 | | nLIGHT, Inc. | $210 | $542 | 930 | | Omega Flex, Inc. | $111 | $669 | 168 | | Perma-Pipe Int’l Holdings, Inc. | $143 | $69 | 819 | | Proto Labs, Inc. | $504 | $779 | 2,415 | | Transcat, Inc. | $231 | $980 | 1,030 | | Twin Disc, Incorporated | $277 | $225 | 739 | | UFP Technologies, Inc. | $400 | $1,574 | 3,093 | | Vishay Precision Group, Inc. | $355 | $442 | 2,300 | | Hurco Companies, Inc. | $228 | $118 | 716 | | Median | $284 | $309 | 1,221 |
Use of Peer Group Data
After review of the peer group data for fiscal year 2024, and based upon the recommendation of Pay Governance, the Committee decided to modify the Company’s executive compensation peer group for fiscal year 2025 as follows: (1) removing DMC Global, Inc., the 2024 peer company with the highest 2023 annual revenue; (2) removing UFP Technologies, Inc., the 2024 peer company with the highest market capitalization as of the reference date; and (3) adding the two peer companies reflected in the table below:
Use of Peer Group Data
| Company Name | 2023 Revenue (fiscal year) | Market Capitalization (at April 30, 2024) | Employees (at 2023 fiscal year-end) | | Markforged Holding Corporation | $94 | $122 | 351 | | Velo3D, Inc. | $77 | $78 | 237 |
Use of Peer Group Data
After giving effect to the changes in the 2025 peer group referenced above, the adjusted 2025 peer group medians for fiscal 2023 revenue, market capitalization as of the reference date, and employees as of the reference date decreased to $265 million, $211 million, and 980, respectively. The Committee uses the peer group data as one of several inputs when making compensation determinations. Periodically, the Committee also reviews trends data for the manufacturing industry from various third-party service providers to obtain a general understanding of current compensation practices in that industry as part of its analysis of executive compensation. In addition to the market data, the Committee may consider other factors such as an executive’s individual performance, experience in his or her position, and responsibilities that may not necessarily be benchmarked in market data.
Policies and Procedures Related to the Grant of Certain Equity Awards
Policies and Procedures Related to the Grant of Certain Equity Awards We have established processes to ensure that the timing of any stock option grants to executives is not influenced by material nonpublic information (“MNPI”), and that all grant decisions are made based on a predetermined schedule, taking into account factors like employee performance and market conditions, regardless of any upcoming announcements or events that could impact our stock price. The Committee carefully reviews any potential MNPI before granting options and will delay a grant if necessary to avoid any appearance of impropriety related to the timing of the award.
Short-Term Incentive Compensation
Short-Term Incentive Compensation On January 4, 2024, pursuant to the Hurco Companies, Inc. Cash Incentive Plan (the “Cash Incentive Plan”), which was approved by our shareholders on March 10, 2016, the Committee approved the short-term incentive compensation arrangement for fiscal year 2024 for all NEOs, with payout to occur thereunder in January 2025, if and to the extent the performance goals were attained during fiscal year 2024. Similar to fiscal year 2023, the Committee selected operating income margin and certain strategic objectives for the NEOs as the performance measures, with potential payouts weighted 70% on operating income margin and 30% on strategic objectives for each NEO. Operating income margin was chosen as the primary performance metric because the Committee believes it continues to most directly correlate to our executives’ performance. An executive could earn a short-term incentive award due to success in achieving individual strategic objectives, even if performance fell below threshold on the operating income margin; however, the weighting of the two performance metrics encourages decisions that should benefit our overall profitability. Further, the Committee provided that if the fiscal year 2024 operating income margin was zero or negative, then no amounts would be paid under the 2024 short-term incentive arrangement, even if all or a portion of the performance goals under the strategic objectives component were attained. Participants had the ability to earn between 50% of target for achieving threshold performance and 200% of target for achieving maximum performance for each metric. The Committee established the target percentage by which the base salary of each NEO paid during fiscal year 2024 would be multiplied in order to determine the dollar amount payable to the NEO pursuant to the 2024 short-term incentive compensation arrangement. The target amount for each NEO is set forth below:
Short-Term Incentive Compensation
| | Target Amount of Fiscal Year 2024 Base Salary | | Gregory S. Volovic | 100% | | Michael Doar | 85% | | Sonja K. McClelland | 75% | | HaiQuynh Jamison | 35% | | Jonathon D. Wright | 40% |
Operating Income Margin
| Operating Income Margin | Threshold | Target | Exceeds | Maximum | | Actual Results | 3% | 6% | 8% | 10% | | Percentage Payout Level | 50% | 100% | 150% | 200% |
Sonja K. McClelland
| ● | Evaluate and assess the needs of the Internal Audit Department and identify global resources required for long-term sustainability. Assist the Audit Committee in the evaluation and assessment of the external audit services, including quality of services, sufficiency of resources, communication, interaction, objectivity, and independence. |
Determinations
Determinations On January 7, 2025, the Committee determined the degree to which the operating income margin metric and the strategic objectives for fiscal year 2024 were attained, and the resulting payout level relative to the target amount for each metric. For fiscal year 2024, the Company’s operating income margin was below the threshold amount and, therefore, the Committee determined that the resulting percentage payout level relative to the target amount for that metric was 0%. Further, because fiscal year 2024 operating income margin was negative, no amounts were payable under the 2024 short-term incentive arrangement, even though the Committee determined that a portion of the performance goals under the strategic objectives component were attained.
Restricted Share and PSU Awards for Fiscal Years 2024-2026
Restricted Share and PSU Awards for Fiscal Years 2024-2026 On January 4, 2024, the Committee approved a long-term incentive compensation arrangement for the NEOs in the form of restricted shares and PSUs awarded under the Amended and Restated Hurco Companies, Inc. 2016 Equity Incentive Plan (the “2016 Plan). The awards were weighted as approximately 25% time-based vesting (in equal installments over three years) and approximately 75% performance-based vesting (at the end of a three-year period, to the extent certain performance metrics or criteria are satisfied). The three-year performance period for those awards is fiscal years 2024-2026. The Committee considered a variety of factors in determining the amount of the target long-term incentive compensation award to each NEO, including the results of the most recent competitive market assessment from Pay Governance for the executive role in question, the individual’s performance, his or her roles and responsibilities, related experience in those roles, and long-term executive succession planning strategies. After considering these factors, the Committee granted the awards of restricted shares and target number of PSUs to the NEOs effective as of January 4, 2024, as follows:
Restricted Share and PSU Awards for Fiscal Years 2024-2026
| | Restricted Shares | PSUs – NI | PSUs – FCF | | Gregory S. Volovic | 14,514 | 23,223 | 20,320 | | Michael Doar | 10,450 | 16,720 | 14,630 | | Sonja K. McClelland | 8,708 | 13,934 | 12,192 | | HaiQuynh Jamison | 1,161 | 1,857 | 1,625 | | Jonathon D. Wright | 1,741 | 2,786 | 2,438 |
Restricted Share and PSU Awards for Fiscal Years 2024-2026
The following sets forth additional information about the PSUs – NI and the PSUs – FCF with performance periods of fiscal years 2024-2026, as well as the potential payout levels under both types of awards.
Restricted Share and PSU Awards for Fiscal Years 2024-2026
| PSUs – NI | PSUs – FCF | | Approximately 55% of PSU grant | Approximately 45% of PSU grant | | Based on our average net income for the performance period, relative to pre-established goals. | Based on the achievement of pre-established goals related to our average free cash flow over the three-year period. Free cash flow for any fiscal year in the performance period is defined as cash flow from operating activities (as reported in our audited financial statements for the period in question), minus capital expenditures (including software capitalization, since it represents a normal, recurring feature of our business). |
Restricted Share and PSU Awards for Fiscal Years 2024-2026
Participants will have the ability to earn: 50% of the target number of shares for achieving threshold performance 100% of the target number of shares for achieving target performance 200% of the target number of shares for achieving maximum performance Awards will be interpolated for results between threshold and target, and target and maximum. In reaching its decision to select net income and free cash flow as the performance measures, the Committee considered a number of factors, including, among others, that:
Restricted Share and PSU Awards for Fiscal Years 2024-2026
| ● | net income remains a powerful, yet simple, metric of company profitability by concentrating crucial information into a single number; |
Restricted Share and PSU Awards for Fiscal Years 2024-2026
| ● | net income for public companies is readily available through many third-party intermediary sources, which facilitates accountability by allowing investors to compare investments across sectors and industries and against alternative investments among peers; |
Restricted Share and PSU Awards for Fiscal Years 2024-2026
| ● | as a measure of profitability, assuming appropriate thresholds are set, net income performance measures would generally avoid vesting and payment of awards in periods of sustained company unprofitability; |
Restricted Share and PSU Awards for Fiscal Years 2024-2026
| ● | free cash flow may provide insight into how financially capable a company is at having quick access to cash in case of unexpected debts or obligations, which is particularly important to companies operating in cyclical industries like ours; |
Restricted Share and PSU Awards for Fiscal Years 2024-2026
| ● | net income and free cash flow both align with our balanced approach to capital allocation strategy of prioritizing a strong balance sheet and liquidity position while recognizing the importance of accretive growth and returning value to shareholders through dividends and stock repurchases when appropriate; and |
Restricted Share and PSU Awards for Fiscal Years 2024-2026
| ● | net income and free cash flow remain among some of the most popular performance measures for public company executive compensation arrangements and, therefore, are likely in line with market and shareholder expectations. |
Restricted Share and PSU Awards for Fiscal Years 2024-2026
For all these reasons, the Committee believes that net income and free cash flow appropriately align executive compensation with Company and individual performance.
Earned PSU Awards for Fiscal Years 2022-2024
Earned PSU Awards for Fiscal Years 2022-2024 On January 7, 2025, the Committee determined the degree to which the long-term incentive compensation arrangement approved for the fiscal years 2022-2024 performance period was attained, and the resulting payout level relative to the target amount for each metric. The performance and payout standards for the PSUs – TSR for the fiscal years 2022-2024 performance period that were established by the Committee in 2022 are set forth immediately below:
Earned PSU Awards for Fiscal Years 2022-2024
| PSUs – TSR | Threshold | Target | Maximum | | Performance Range | 30th Percentile | 55th Percentile | 90th Percentile | | Payout Range | 50% of Target Shares | 100% of Target Shares | 200% of Target Shares |
Earned PSU Awards for Fiscal Years 2022-2024
Awards will be interpolated for results between the 30th and 55th percentiles and the 55th and 90th percentiles. The PSUs designated as “PSUs – TSR” were based on our total shareholder return over the three-year period, relative to the TSR over that period of the companies in our peer group for the reference period. For fiscal years 2022 through 2024, the Company’s TSR performance over the three-year period of (32.5)% was positioned between the 30th percentile TSR of (47.4)% and the 55th percentile TSR of (13.3)%, relative to the TSR of the companies in our 2022 peer group. As such and based on the applicable performance and payout standards noted above, the Committee determined that the resulting interpolated percentage payout level relative to the target amount for the fiscal years 2022-2024 PSUs – TSR was 71.79%. The performance and payout standards for the PSUs – ROIC for the fiscal years 2022-2024 performance period that were established by the Committee in 2022 are set forth immediately below.
Earned PSU Awards for Fiscal Years 2022-2024
| PSUs – ROIC | Threshold | Target | Maximum | | Average ROIC | 4% | 6% | 12% | | Payout Range | 50% of Target Shares | 100% of Target Shares | 200% of Target Shares |
Earned PSU Awards for Fiscal Years 2022-2024
Awards will be interpolated for results between 4% and 6% and 6% and 12%. The PSUs designated as “PSUs – ROIC” were based on the achievement of pre- established goals related to our average ROIC over the three-year period. As calculated under our 2022 long-term incentive compensation arrangement, the Company’s average ROIC for fiscal years 2022 through 2024 was (0.3)%. As such and based on the applicable performance and payout standards previously noted, the Committee determined that the resulting percentage payout level relative to the target amount for the fiscal years 2022-2024 PSUs – ROIC was 0%. Based on these determinations, the Committee approved the following number of PSUs earned and vested pursuant to the long-term incentive compensation plan for each NEO:
Earned PSU Awards for Fiscal Years 2022-2024
| | Target PSUs | | Grant Date Fair Value | Actual PSUs | | Vest Date Fair Value | | | TSR | ROIC | $(1) | TSR | ROIC | $(2) | | Gregory S. Volovic | 12,001 | 11,517 | $749,995 | 8,615 | 0 | $170,663 | | Michael Doar | 10,801 | 10,365 | $674,989 | 7,754 | 0 | $153,607 | | Sonja K. McClelland | 9,001 | 8,637 | $562,482 | 6,461 | 0 | $127,992 | | HaiQuynh Jamison | 1,200 | 1,151 | $74,975 | 861 | 0 | $17,056 | | Jonathon D. Wright | 1,200 | 1,151 | $74,975 | 861 | 0 | $17,056 |
Earned PSU Awards for Fiscal Years 2022-2024
| (1) Amounts related to target PSU awards represent the value at the grant date based upon the probable outcome of the performance conditions. Amounts related to the PSUs designated as “PSUs – TSR” were calculated using the Monte Carlo approach. Amounts related to the PSUs designated as “PSUs – ROIC” were calculated using the closing sales price of our common stock on the grant date. |
Earned PSU Awards for Fiscal Years 2022-2024
| (2) Amounts related to PSU awards that were earned and vested represent the value at the vest date based upon the actual outcome of the performance conditions. Amounts were calculated using the closing sales price of our common stock on the vest date of January 7, 2025. |
Employment Agreements
Employment Agreements We have employment agreements with the following NEOs: Mr. Volovic, Mr. Doar, and Ms. McClelland. Information regarding these employment agreements is found in this section under the heading “Employment Agreements” on page 40. Under the heading “Potential Payments upon Termination” on page 42, we also estimate the benefits that we would have paid to any of our NEOs if their employment had terminated on October 31, 2024, under various scenarios. The Committee believes that these agreements are an important part of the overall compensation arrangements for the applicable executives by helping to secure for us the continued employment and dedication of the executives (as well as certain noncompetition and other restrictive covenants), while simultaneously providing a reasonable amount of assurance of continued employment to them.
Recoupment Policy
Recoupment Policy The Company also has in place the Hurco Companies, Inc. Compensation Recovery Policy (the “Recoupment Policy”). The Recoupment Policy applies to all incentive-based compensation, which is any compensation that is granted, earned, or vested based wholly or in part upon the attainment of a financial reporting measure, received by our executive officers, including our NEOs. The Recoupment Policy applies in the case of an accounting restatement due to the material noncompliance of the Company with any financial reporting requirement under the securities laws, including any required accounting restatement to correct an error in previously issued financial statements that is material to the previously issued financial statements, or that would result in a material misstatement if the error were corrected in the current period or left uncorrected in the current period. The Recoupment Policy provides that promptly following such an accounting restatement, the Committee will determine the amount of the erroneously awarded compensation, which is the excess of the amount of incentive-based compensation received by current and former executive officers during the three completed fiscal years immediately preceding the required restatement date over the amount of incentive-based compensation that otherwise would have been received had it been determined based on the restated amounts. The Company will provide each such executive officer with a written notice of such amount and a demand for repayment or return. If such repayment or return is not made within a reasonable time, the Recoupment Policy provides that the Company will recover the erroneously awarded compensation in a reasonable and prompt manner using any lawful method, subject to limited exceptions as permitted by Nasdaq listing standards. Notably, (1) under the Recoupment Policy, covered executives are required to reimburse the Company for all expenses reasonably incurred by the Company in recovering erroneously awarded compensation (including legal fees); and (2) under applicable equity award documents, covered executives explicitly consent, acknowledge, and agree that all equity awards received from the Company are subject to compensation recoupment policies of the Company in place from time to time, including the Recoupment Policy. A full copy of the Recoupment Policy is publicly available as Exhibit 97.1 to the Company’s Annual Report on Form 10-K for the fiscal year ended October 31, 2023.
Long-Term Incentive Compensation
Long-Term Incentive Compensation In considering the structure of the long-term incentive compensation program for fiscal year 2025, the Committee focused on the mix of equity awards between time-based restricted shares and performance-based RSUs. Over the past few years, the long-term incentives have been allocated 25% to restricted shares and 75% to PSUs. The Committee considered that performance-based metrics can often result in lower or no payouts, particularly in a cyclical industry like ours. In particular, the Committee noted that the PSUs awarded to NEOs have not been earned above the target level in any of the last seven completed three-year performance periods, and that no PSUs were earned for two of the four most recently completed three-year performance periods (fiscal years 2018-2020 and fiscal years 2019-2021). Pay Governance also analyzed the mix of long-term equity awards of companies in the manufacturing industry, as well as companies in our peer group. They found that manufacturing companies average approximately 40% in time-based awards and our peer companies average approximately 45% in time-based awards. After taking these considerations into account, the Committee determined to increase the time-based restricted stock portion of the long-term incentive awards to approximately 45%, with the remainder in PSUs, both to enhance the retention value of this compensation element and to more closely align with current market practice. The Committee determined to retain the performance measures of net income and free cash flow for the PSUs. As in prior years, participants will have the ability to earn 50% of the target number of shares for achieving threshold performance, 100% of the target number of shares for achieving target performance and 200% of the target number of shares for achieving maximum performance. Effective January 7, 2025, the Committee granted the awards below of restricted shares and target number of PSUs to each of the NEOs. The restricted shares will vest in equal installments over three years and the three-year performance period for the PSUs will be fiscal years 2025 through 2027.
Long-Term Incentive Compensation
| | Restricted Shares | PSUs – NI | PSUs - FCF | | Gregory S. Volovic | 28,394 | 18,930 | 15,775 | | Michael Doar | 20,444 | 13,629 | 11,358 | | Sonja K. McClelland | 17,036 | 11,357 | 9,465 | | HaiQuynh Jamison | 4,543 | 3,028 | 2,524 | | Jonathon D. Wright | 4,702 | 3,134 | 2,613 |
SUMMARY COMPENSATION TABLE
SUMMARY COMPENSATION TABLE
SUMMARY COMPENSATION TABLE
| Name and Principal Position | Fiscal Year | Salary $ | Bonus $(1) | Stock Awards $(2) | Non-Equity Incentive Plan Compensation $(3) | All Other Compensation $(4) | Total $ | | Gregory S. Volovic | 2024 | 613,735 | - | 1,249,967 | - | 95,305 | 1,959,007 | | President and Chief | 2023 | 587,383 | 88,764 | 1,249,963 | 295,880 | 96,429 | 2,318,419 | | Executive Officer | 2022 | 547,820 | - | 999,953 | 509,255 | 82,987 | 2,140,015 | | Michael Doar | 2024 | 400,437 | - | 899,954 | - | 72,611 | 1,373,002 | | Executive Chairman | 2023 | 453,848 | 57,406 | 899,954 | 191,353 | 86,803 | 1,689,364 | | | 2022 | 476,856 | - | 899,998 | 356,792 | 92,620 | 1,826,266 | | Sonja K. McClelland | 2024 | 393,790 | - | 749,976 | - | 28,556 | 1,172,322 | | Executive Vice President, Treasurer | 2023 | 399,450 | 45,192 | 749,957 | 150,639 | 23,074 | 1,368,312 | | and Chief Financial Officer | 2022 | 387,793 | - | 749,958 | 261,788 | 23,447 | 1,422,986 | | HaiQuynh Jamison | 2024 | 220,529 | - | 99,964 | - | 12,134 | 332,627 | | Corporate Controller | 2023 | 208,077 | 11,025 | 99,954 | 36,750 | 16,584 | 372,390 | | and Principal Accounting Officer | 2022 | 192,835 | - | 99,955 | 62,650 | 13,963 | 369,403 | | | | | - | | | | | | Jonathon D. Wright | 2024 | 286,428 | - | 149,956 | - | 16,020 | 452,405 | | General Counsel and | 2023 | 256,008 | 15,732 | 99,954 | 52,440 | 20,867 | 445,001 | | Corporate Secretary | 2022 | 219,182 | - | 99,955 | 96,198 | 15,889 | 431,224 |
SUMMARY COMPENSATION TABLE
| (1) For fiscal year 2023, represents discretionary cash bonuses awarded to each named executive officer. | | (2) Represents the grant date fair value of stock awards determined in accordance with ASC 718. The stock awards consist of restricted share awards and PSU awards. Amounts related to restricted share awards are calculated using the closing sales price of our common stock on the grant date. Amounts related to PSU awards represent the value at the grant date based upon the probable outcome of the performance conditions. Amounts related to the PSUs designated as “PSUs – TSR” are calculated using the Monte Carlo approach. Amounts related to the PSUs designated as “PSUs – ROIC,” “PSUs – NI,” and “PSUs – FCF” are calculated using the closing sales price of our common stock on the grant date. |
SUMMARY COMPENSATION TABLE
The following table presents the grant date fair value of the PSU awards included in the “Stock Awards” column and the grant date fair value of these awards assuming that the highest level of performance conditions would be achieved:
SUMMARY COMPENSATION TABLE
| | | | PSU Awards | | | | Fiscal Year of Grant | Performance Period | Grant Date Fair Value (Based on Probable Outcome) | Grant Date Fair Value (Based on Maximum Performance) | | Gregory S. Volovic | 2024 | 2024-2026 | 937,481 | 1,874,962 | | | 2023 | 2023-2025 | 937,466 | 1,874,932 | | | 2022 | 2022-2024 | 749,995 | 1,499,990 | | Michael Doar | 2024 | 2024-2026 | 674,966 | 1,349,932 | | | 2023 | 2023-2025 | 674,959 | 1,349,918 | | | 2022 | 2022-2024 | 674,990 | 1,349,980 | | Sonja K. McClelland | 2024 | 2024-2026 | 562,493 | 1,124,986 | | | 2023 | 2023-2025 | 562,474 | 1,124,948 | | | 2022 | 2022-2024 | 562,482 | 1,124,964 | | HaiQuynh Jamison | 2024 | 2024-2026 | 74,967 | 149,934 | | | 2023 | 2023-2025 | 74,972 | 149,944 | | | 2022 | 2022-2024 | 74,975 | 149,950 | | Jonathon D. Wright | 2024 | 2024-2026 | 112,473 | 224,946 | | | 2023 | 2023-2025 | 74,972 | 149,944 | | | 2022 | 2022-2024 | 74,975 | 149,950 |
SUMMARY COMPENSATION TABLE
| (3) Represents amounts earned in the specified fiscal year and paid in the following fiscal year under the specified fiscal year’s short-term incentive compensation arrangement. See “Compensation Discussion and Analysis—Compensation Decisions for Fiscal Year 2024—Short-Term Incentive Compensation” for additional information regarding the 2024 short-term incentive compensation arrangement. |
SUMMARY COMPENSATION TABLE
The following table summarizes the information included in the All Other Compensation column in the Summary Compensation Table:
SUMMARY COMPENSATION TABLE
| | Fiscal Year | Leased Auto ($) | Supplemental Disability Insurance ($) | Matching 401(k) Plan Contributions ($) | Life Insurance ($) | Total ($) | | Gregory S. Volovic | 2024 | - | 16,275 | 20,700 | 58,330 | 95,305 | | | 2023 | - | 18,299 | 19,800 | 58,330 | 96,429 | | | 2022 | - | 18,054 | 18,300 | 46,633 | 82,987 | | Michael Doar | 2024 | 25,133 | 8,845 | 20,700 | 17,933 | 72,611 | | | 2023 | 31,001 | 9,839 | 19,800 | 26,163 | 86,803 | | | 2022 | 31,560 | 13,171 | 18,300 | 29,589 | 92,620 | | Sonja K. McClelland | 2024 | - | 7,856 | 20,700 | - | 28,556 | | | 2023 | - | 3,274 | 19,800 | - | 23,074 | | | 2022 | - | 5,147 | 18,300 | - | 23,447 | | HaiQuynh Jamison | 2024 | - | 340 | 11,794 | - | 12,134 | | | 2023 | - | 340 | 16,244 | - | 16,584 | | | 2022 | - | 323 | 13,640 | - | 13,963 | | Jonathon D. Wright | 2024 | - | 340 | 15,680 | - | 16,020 | | | 2023 | - | 340 | 20,527 | - | 20,867 | | | 2022 | - | 323 | 15,566 | - | 15,889 |
SUMMARY COMPENSATION TABLE
The amounts shown in the Leased Auto column represent either the portion of the lease cost for automobiles leased by us allocable to an executive’s personal use of the automobile or the sum of a monthly car allowance that is added to an executive’s salary. For automobiles leased by us where the automobile is used for both business and personal purposes, the percentage of personal use is calculated and applied to the lease and operating expenses. The Split-Dollar Life Insurance amounts represent a portion of the premium paid on insurance policies we own on the life of the employee. All cash contributions are returned to us upon employee separation or death of the insured. We pay the full amount of the premiums and are the beneficiary for a portion of the policies’ death benefit. By policy endorsement, the employee has the right to designate the beneficiary for the death benefit.
GRANTS OF PLAN-BASED AWARDS IN 2024
GRANTS OF PLAN-BASED AWARDS IN 2024 The following table provides information regarding awards related to the 2024 short-term incentive compensation arrangement (referred to as “2024 S-T Compensation” in the table), PSU awards, and restricted share awards granted during fiscal year 2024 to the named executive officers.
GRANTS OF PLAN-BASED AWARDS IN 2024
| Name & Awards | Grant Date | Estimated Possible Payouts Under Non- Equity Incentive Plan Awards | | | Estimated Possible Payouts Under Equity Incentive Plan Awards | | | All Other Stock Awards: Number of Shares of Stock or Units (#) | Grant Date Fair Value of Stock and Option Awards ($)(1) | | | | Threshold | Target | Maximum | Threshold | Target | Maximum | | | | | | ($) | ($) | ($) | (#) | (#) | (#) | | | | Gregory S. Volovic | | | | | | | | | | | 2024 S-T Compensation | 1/4/24 | 329,906 | 659,812 | 1,319,624 | | | | | | | 2024-2026 PSU-NI | 1/4/24 | | | | 11,612 | 23,223 | 46,446 | | 499,991 | | 2024-2026 PSU-FCF | 1/4/24 | | | | 10,160 | 20,320 | 40,640 | | 437,490 | | 2024-2026 Restricted Shares | 1/4/24 | | | | | | | 14,514 | 312,486 | | Michael Doar | | | | | | | | | | | 2024 S-T Compensation | 1/4/24 | 176,044 | 352,087 | 704,174 | | | | | | | 2024-2026 PSU-NI | 1/4/24 | | | | 8,360 | 16,720 | 33,440 | | 359,982 | | 2024-2026 PSU-FCF | 1/4/24 | | | | 7,315 | 14,630 | 29,260 | | 314,984 | | 2024-2026 Restricted Shares | 1/4/24 | | | | | | | 10,450 | 224,989 | | Sonja K. McClelland | | | | | | | | | | | 2024 S-T Compensation | 1/4/24 | 156,663 | 313,326 | 626,652 | | | | | | | 2024-2026 PSU-NI | 1/4/24 | | | | 6,967 | 13,934 | 27,868 | | 299,999 | | 2024-2026 PSU-FCF | 1/4/24 | | | | 6,096 | 12,192 | 24,384 | | 262,494 | | 2024-2026 Restricted Shares | 1/4/24 | | | | | | | 8,708 | 187,483 | | HaiQuynh Jamison | | | | | | | | | | | 2024 S-T Compensation | 1/4/24 | 40,278 | 80,556 | 161,112 | | | | | | | 2024-2026 PSU-NI | 1/4/24 | | | | 929 | 1,857 | 3,714 | | 39,981 | | 2024-2026 PSU-FCF | 1/4/24 | | | | 813 | 1,625 | 3,250 | | 34,986 | | 2024-2026 Restricted Shares | 1/4/24 | | | | | | | 1,161 | 24,996 | | Jonathon D. Wright | | | | | | | | | | | 2024 S-T Compensation | 1/4/24 | 60,306 | 120,612 | 241,224 | | | | | | | 2024-2026 PSU-NI | 1/4/24 | | | | 1,393 | 2,786 | 5,572 | | 59,983 | | 2024-2026 PSU-FCF | 1/4/24 | | | | 1,219 | 2,438 | 4,876 | | 52,490 | | 2024-2026 Restricted Shares | 1/4/24 | | | | | | | 1,741 | 37,484 |
GRANTS OF PLAN-BASED AWARDS IN 2024
| (1) Amounts represent the grant date fair value of the awards determined in accordance with ASC 718, calculated using $21.53, the closing price of our common stock as reported by Nasdaq on January 4, 2024, for the restricted shares and the PSUs. Amounts related to PSU awards represent the value at the grant date based upon the probable outcome of the performance conditions. |
GRANTS OF PLAN-BASED AWARDS IN 2024
Our named executive officers are eligible to participate in the 2016 Plan, which provides for equity-based incentive awards in the form of stock options, stock appreciation rights, restricted stock, stock units, and other stock-based awards. Under the 2016 Plan, the Compensation Committee has the authority to determine the persons to whom awards will be granted, the timing, type and number of shares covered by each award, and the terms and conditions of the awards. Prior to shareholder approval of the 2016 Plan, the named executive officers were eligible to participate in the Hurco Companies, Inc. 2008 Equity Incentive Plan (the “Prior Plan”). Upon shareholder approval of the 2016 Plan, no further awards have been or will be made under the Prior Plan.
OUTSTANDING EQUITY AWARDS AT 2024 FISCAL YEAR END
OUTSTANDING EQUITY AWARDS AT 2024 FISCAL YEAR END The following table summarizes the outstanding equity awards held by the named executive officers as of October 31, 2024.
OUTSTANDING EQUITY AWARDS AT 2024 FISCAL YEAR END
| | Stock Awards | | | | | | Time-Based Awards | | Performance-Based Awards | | | Name and Grant Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(1) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights that Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights that Have Not Vested ($)(1) | | Gregory S. Volovic | | | | | | 01/04/22 | 2,748(2) | 57,735 | | | | 01/03/23 | 7,902(3) | 166,021 | 17,768(5) | 373,306 | | 01/04/24 | 14,514(4) | 304,939 | 43,543(6) | 914,838 | | Michael Doar | | | | | | 01/04/22 | 2,474(2) | 51,979 | | | | 01/03/23 | 5,688(3) | 119,505 | 12,793(5) | 268,781 | | 01/04/24 | 10,449(4) | 219,533 | 31,350(6) | 658,664 | | Sonja K. McClelland | | | | | | 01/04/22 | 2,062(2) | 43,323 | | | | 01/03/23 | 4,740(3) | 99,587 | 10,661(5) | 223,988 | | 01/04/24 | 8,706(4) | 182,913 | 26,126(6) | 548,907 | | HaiQuynh Jamison | | | | | | 01/04/22 | 276(2) | 5,799 | | | | 01/03/23 | 632(3) | 13,278 | 1,421(5) | 29,855 | | 01/04/24 | 1,161(4) | 24,393 | 3,482(6) | 73,157 | | Jonathon D. Wright | | | | | | 01/04/22 | 276(2) | 5,799 | | | | 01/03/23 | 632(3) | 13,278 | 1,421(5) | 29,855 | | 01/04/24 | 1,740(4) | 36,557 | 5,224(6) | 109,756 |
OUTSTANDING EQUITY AWARDS AT 2024 FISCAL YEAR END
| (1) Market value is calculated by multiplying the number of shares by $21.01, the closing price of our common stock as reported by Nasdaq on October 31, 2024, the last trading day of our 2024 fiscal year. | | (2) These restricted shares vested on January 4, 2025. | | (3) One-half of these restricted shares vested on January 3, 2025, and one-half will vest on January 3, 2026. | | (4) These restricted shares vest in thirds on each of the first, second, and third anniversary of the grant date, provided the recipient remains employed by the Company through that date. | | (5) Represents PSUs designated as “PSUs – NI” and “PSUs – FCF” that were granted in 2023 with a performance period of fiscal years 2023-2025. The PSUs shown represent the threshold number of PSUs that have not yet been earned. The actual number of PSUs that will be earned and will vest after the 2023-2025 three-year performance period will depend on the extent to which performance conditions related to the Company’s net income and free cash flow for the reference period are satisfied. | | (6) Represents PSUs designated as “PSUs – NI” and “PSUs – FCF” that were granted in 2024 with a performance period of fiscal years 2024-2026. The PSUs shown represent the target number of PSUs that have not yet been earned. The actual number of PSUs that will be earned and will vest after the 2024-2026 three-year performance period will depend on the extent to which the performance conditions outlined under “Compensation Discussion and Analysis—Compensation Decisions for Fiscal Year 2024—Long-Term Incentive Compensation” are satisfied. |
OPTION EXERCISES AND STOCK VESTED IN 2024
OPTION EXERCISES AND STOCK VESTED IN 2024 The following table provides information regarding stock awards held by the named executive officers that vested during fiscal year 2024. There were no stock options exercised by any of the named executive officers during fiscal year 2024.
OPTION EXERCISES AND STOCK VESTED IN 2024
| | Stock Awards | | | | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($)(1) | | Gregory S. Volovic | 17,923(2) | 375,097 | | Michael Doar | 15,975(3) | 334,759 | | Sonja K. McClelland | 13,070(4) | 273,452 | | HaiQuynh Jamison | 1,678(5) | 34,267 | | Jonathon D. Wright | 1,678(6) | 34,267 |
OPTION EXERCISES AND STOCK VESTED IN 2024
| (1) Value realized is calculated (a) for the restricted shares that vested, by multiplying the closing price of our common stock, as reported on the Nasdaq Global Select Market, on the date of vesting by the number of restricted shares that vested; and (b) for the PSUs that were earned and vested, by multiplying the closing price of our common stock, as reported on the Nasdaq Global Select Market, on January 7, 2025, the date that the Compensation Committee certified the number of PSUs earned and vested, by the number of PSUs that were earned and vested. |
OPTION EXERCISES AND STOCK VESTED IN 2024
| (2) Reflects (a) the vesting of 9,308 restricted shares, from which 2,651 shares were withheld for tax purposes; and (b) 8,615 PSUs that were earned and vested for the fiscal years 2022-2024 performance period that ended on October 31, 2024, based on the attainment of the applicable performance measures, of which 2,373 shares were withheld for tax purposes. |
OPTION EXERCISES AND STOCK VESTED IN 2024
| (3) Reflects (a) the vesting of 8,221 restricted shares, from which 2,431 shares were withheld for tax purposes; and (b) 7,754 PSUs that were earned and vested for the fiscal years 2022-2024 performance period that ended on October 31, 2024, based on the attainment of the applicable performance measures, of which 2,136shares were withheld for tax purposes. |
OPTION EXERCISES AND STOCK VESTED IN 2024
| (4) Reflects (a) the vesting of 6,609 restricted shares, from which 1,881 shares were withheld for tax purposes; and (b) 6,461 PSUs that were earned and vested for the fiscal years 2022-2024 performance period that ended on October 31, 2024, based on the attainment of the applicable performance measures, of which 1,833shares were withheld for tax purposes. |
OPTION EXERCISES AND STOCK VESTED IN 2024
| (5) Reflects (a) the vesting of 817 restricted shares, from which 239 shares were withheld for tax purposes; and (b) 861 PSUs that were earned and vested for the fiscal years 2022-2024 performance period that ended on October 31, 2024, based on the attainment of the applicable performance measures, of which 295 shares were withheld for tax purposes. |
OPTION EXERCISES AND STOCK VESTED IN 2024
| (6) Reflects (a) the vesting of 817 restricted shares, from which 242 shares were withheld for tax purposes; and (b) 861 PSUs that were earned and vested for the fiscal years 2022-2024 performance period that ended on October 31, 2024, based on the attainment of the applicable performance measures, of which 298 shares were withheld for tax purposes. |
NONQUALIFIED DEFERRED COMPENSATION IN 2024
NONQUALIFIED DEFERRED COMPENSATION IN 2024 For Mr. Volovic and Mr. Doar, the only two named executive officers participating in the nonqualified deferred compensation plan, the following table provides information regarding fiscal year 2024 executive contributions, fiscal year 2024 earnings, and aggregate balances as of October 31, 2024. There were no Company contributions or aggregate withdrawals or distributions in fiscal year 2024.
NONQUALIFIED DEFERRED COMPENSATION IN 2024
| Name | Executive Contributions in Last Fiscal Year ($) | Aggregate Earnings in Last Fiscal Year ($) | Aggregate Balance at Last Fiscal Year End ($) | | Michael Doar | 24,026 | 435,240 | 1,901,323 | | Gregory S. Volovic | 99,838 | 116,994 | 760,619 |
NONQUALIFIED DEFERRED COMPENSATION IN 2024
The amounts shown in the first column of this table are also included in the amounts shown in the “Salary” column of the Summary Compensation Table. All of the contributions by Mr. Doar and Mr. Volovic in fiscal year 2024 and prior fiscal years were reported in the Summary Compensation Table in fiscal year 2024 or prior fiscal years, as applicable. The aggregate balance shown includes earnings on such contributions. The Hurco Companies, Inc. Deferred Compensation Plan II (the “DCPII”) is a nonqualified deferred compensation plan in which senior managers and other highly compensated employees are eligible to participate. A committee consisting of our CEO, CFO, and Director of Human Resources administers the DCPII. This committee is authorized to interpret the DCPII, establish, amend, and rescind any rules and regulations relating to the DCPII, determine the terms and provisions of any agreements made pursuant to the DCPII, and make all other determinations that may be necessary or advisable for the administration of the DCPII. Eligible participants are able to defer between 2% and 50% percent of their base salary and up to 100% of their annual bonus less required and voluntary payroll deductions in a given plan year. Deferral elections are made by eligible executives in January of each year for amounts to be earned in the following year. The Board may declare a discretionary amount of matching credits for participants deferring compensation, up to a maximum of 6% of compensation. The Board has not awarded any such matching credits to Mr. Doar or Mr. Volovic. Participants are 100% vested in all deferral and matching accounts under the DCPII at all times. Amounts deferred under the DCPII are credited with earnings at the rate of return generated by the Vanguard mutual fund investment options elected by the participants that are offered in our 401(k) plan. The earnings do not reflect any above-market or preferential rates of return. Participants may change their investment options under the DCPII at any time by contacting Vanguard. Account balances in the DCPII are payable at the election of the participant either in a single lump sum or in monthly, quarterly, or annual installments with a term of between two and ten years. Distributions under the DCPII will not commence prior to the expiration of a six-month period from the date of separation of service or the participant’s death, if earlier.
CEO Pay Ratio Disclosure
CEO Pay Ratio Disclosure As required by the Dodd-Frank Wall Street Reform and Consumer Protection Act and applicable SEC rules, the following is a reasonable estimate of the ratio of the annual total compensation of our CEO to the annual total compensation of the median of the Company’s other employees, together with an explanation of the Company’s methodology in calculating the same. For fiscal year 2024:
CEO Pay Ratio Disclosure
| ● | The annual total compensation of the Median Employee (as defined below) was $58,347 using the average of the applicable month-end exchange rates during our fiscal year, as published by The Wall Street Journal. | | ● | The annual total compensation of the Company’s CEO, as reported in the above Summary Compensation Table, was $1,959,007. | | ● | The ratio of the annual total compensation of the Company’s CEO to the annual total compensation of the Company’s Median Employee, was reasonably estimated to be 34 to 1. |
CEO Pay Ratio Disclosure
Because this pay ratio is a reasonable estimate, and because SEC rules allow companies to adopt a variety of methodologies and assumptions and to apply certain exclusions, the pay ratio reported by other companies may not be comparable to the pay ratio reported by the Company. To identify the Company’s median employee for fiscal year 2024, the Company determined that the Company and its subsidiaries employed approximately 633 employees (excluding the CEO) as of an August 1, 2024, determination date (the “Non-CEO Employee Population”). The Company identified “annual cash compensation” as its consistently applied compensation measure. The Company defined the term “annual cash compensation” as gross amounts of cash compensation paid for the period beginning on January 1, 2023, and ending on December 31, 2023 (the “Measurement Period”), which included salary or hourly wages (including overtime pay), as applicable, plus sales commissions and cash bonuses. For permanent employees within the Non-CEO Employee Population employed by the Company or its subsidiaries for part but not all of the Measurement Period, the Company annualized their cash compensation paid. For permanent employees within the Non-CEO Employee Population employed by the Company or its subsidiaries as of the August 1, 2024, determination date but not employed during the Measurement Period, the Company applied an annual cash compensation equal to $0. For non-U.S. employees, the annual cash compensation was converted into U.S. currency using the applicable exchange rates as of October 31, 2024, as reported by The Wall Street Journal. The Company did not apply any cost-of-living adjustments to non-U.S. employees. The Company then sorted the listing of the annual cash compensation of each employee in the Non-CEO Employee Population from lowest to highest and selected the employee at the median (the “Median Employee”). The Company calculated the Median Employee’s total annual compensation for fiscal year 2024 using the same rules that apply to reporting the compensation of our named executive officers in the “Total” column of the Summary Compensation Table listed previously.
Potential Payments upon Termination
Potential Payments upon Termination
Potential Payments upon Termination
| | Resignation ($) | Death ($) | Disability ($)(1) | Retirement ($) | Termination Without Cause or by Executive for Good Reason Prior to a Change in Control ($)(2) | Termination For Cause ($)(2) | Certain Terminations Within Specified Period After Change in Control or Equity Awards Not Assumed ($)(2) | | | Gregory S. Volovic | | | | | | | | | | Severance Pay(3) | - | - | - | - | 944,691 | - | 1,889,382 | | | Deferred Compensation(4) | 760,619 | 760,619 | 760,619 | 760,619 | 760,619 | 760,619 | 760,619 | | | Restricted Shares(5) | - | - | - | - | - | - | 528,695 | | | PSUs(6) | - | 181,001 | 181,001 | 181,001 | 181,001 | - | 983,142 | | | Health Care Coverage(7) | - | - | 625,556 | - | 48,592 | - | 97,184 | | | Life Insurance(8) | - | 1,836,677 | - | - | - | - | - | | | Total | 760,619 | 2,778,297 | 1,567,176 | 941,620 | 1,934,903 | 760,619 | 4,259,022 | | | Michael Doar | | | | | | | | | | Severance Pay(10) | - | - | - | - | 467,249 | - | 934,498 | | | Deferred Compensation(4) | 1,901,323 | 1,901,323 | 1,901,323 | 1,901,323 | 1,901,323 | 1,901,323 | 1,901,323 | | | Restricted Shares(5) | - | - | - | - | - | - | 391,059 | | | PSUs(6) | - | 162,912 | 162,912 | 162,912 | 162,912 | - | 740,437 | | | Health Care Coverage(7) | - | - | 447,111 | - | 36,397 | - | 54,596 | | | Life Insurance(9) | - | 2,556,920 | - | - | - | - | - | | | Total | 1,901,323 | 4,621,155 | 2,511,346 | 2,064,235 | 2,567,881 | 1,901,323 | 4,021,913 | | | Sonja K. McClelland | | | | | | | | | | Severance Pay(10) | - | - | - | - | 425,413 | - | 850,826 | | | Restricted Shares(5) | - | - | - | - | - | - | 325,887 | | | PSUs(6) | - | 135,746 | 135,746 | 135,746 | 135,746 | - | 617,028 | | | Health Care Coverage(7) | - | - | 385,854 | - | 50,679 | - | 76,018 | | | Life Insurance(11) | - | 400,000 | - | - | - | - | - | | | Total | - | 535,746 | 521,600 | 135,746 | 611,838 | - | 1,869,759 | | | HaiQuynh Jamison | | | | | | | | | | Severance Pay(10) | - | - | - | - | 52,219 | - | 52,219 | | | Restricted Shares(5) | - | - | - | - | - | - | 43,470 | | | PSUs(6) | - | 18,090 | 18,090 | 18,090 | 18,090 | - | 82,237 | - | | Health Care Coverage(7) | - | - | 175,080 | - | - | - | - | | | Life Insurance(11) | - | 226,000 | - | - | - | - | | | | Total | - | 244,090 | 193,170 | 18,090 | 70,309 | - | 177,926 | | | Jonathon D. Wright | | | | | | | | | | Severance Pay(10) | - | - | - | - | 33,919 | - | 33,919 | | | Restricted Shares(5) | - | - | - | - | - | - | 55,656 | | | PSUs(6) | - | 18,090 | 18,090 | 18,090 | 18,090 | - | 94,315 | | | Health Care Coverage(7) | - | - | 210,765 | - | - | - | - | | | Life Insurance(11) | - | 294,000 | - | - | - | - | - | | | Total | - | 312,090 | 228,855 | 18,090 | 52,009 | - | 183,890 | |
Potential Payments upon Termination
| (1) “Disability” giving rise to the Company’s right to terminate the employment agreements in question would exist (a) when the executive is deemed disabled and entitled to benefits in accordance with any Company-provided long-term disability insurance policy or plan, if any is applicable, covering the executive; (b) upon the inability of the executive, because of injury, illness, disease or bodily or mental infirmity, to perform, with or without reasonable accommodation, the essential functions of the executive’s job for more than 90 days during any period of 12 consecutive months; or (c) upon the written determination by a physician selected by the Company that, because of an injury, illness, disease, or bodily or mental infirmity, the executive is unable to perform, with or without reasonable accommodation, the essential functions of the executive’s job, and, as of the date of determination, such condition is reasonably expected to last for a period of 90 days or longer after the date of determination, based on the medical information reasonably available to such physician at the time of determination. |
Potential Payments upon Termination
| (2) “Cause” for the Company’s termination of the employment agreement would exist if the executive (a) is convicted of, or pleads no contest to, a felony, (b) engages in fraudulent or dishonest conduct, (c) fails to follow the lawful instructions of a superior or the Company’s Board of Directors, (d) breaches the terms of the employment agreement, (e) violates written policies or procedures, (f) engages in willful misconduct, or (g) misuses alcohol or drugs. “Good Reason” for the executive’s termination of the employment agreement would exist if the Company (a) fails to automatically extend the term of the employment agreement, (b) decreases the executive’s base salary by more than 5% a year unless the decrease is part of a broader cost reduction (and in the case of Mr. Doar, unless such reduction exceeding 5% is in connection with his transition to the Executive Chairman or a different role with the Company), (c) demotes the executive or assigns duties that are inconsistent with the executive’s position, (d) eliminates or materially reduces employee benefits other than as part of a broader cost reduction, (e) requires the executive to relocate more than 30 miles from the Company office at which the executive was based immediately prior to such relocation, (f) materially breaches any material term of the employment agreement, or (g) fails to have the employment agreement assumed as part of a merger or sale of the Company. There are notice and cure provisions with respect to certain grounds for termination for Cause or Good Reason. “Change in Control” means (a) the acquisition of 25% or more of the voting securities of the Company, (b) a majority of the directors of the Company being elected who were not approved by a majority of the persons who were previously serving as directors, or (c) a merger, other reorganization or liquidation involving the Company or a sale of substantially all of the assets of the Company, unless (i) the Company’s shareholders would own 55% or more of the voting power of the successor entity, (ii) no individual person would own 25% or more of the successor entity and (iii) a majority of the directors of the successor entity were directors of the Company. Although Ms. Jamison and Mr. Wright are currently not parties to a written employment agreement with the Company, they would potentially remain eligible for severance pay under the Company’s severance pay policy eligible to all employees, which is based on the length of continuous service and annual wage at the time of termination. | | (3) If the Company terminates Mr. Volovic’s employment without Cause or he resigns for Good Reason prior to a Change in Control, then he will be entitled to severance payments in the form of a salary continuation benefit at base salary then in effect for a period of 12 months; an additional monthly amount during the severance period equal to 1/12 of the average of his annual cash bonuses for the preceding three years; and an additional monthly payment during the severance period equal to 140% of the Company’s monthly cost at the time of termination for continuation of health insurance. If Mr. Volovic’s employment is terminated by the Company without Cause or by him for Good Reason within 12 months following a Change in Control, then he will be entitled to the severance amounts disclosed in the preceding sentence for a period of 24 months. | | (4) Amounts can be paid in lump sum distribution or installments depending on the participant’s election. | | (5) Reflects the value of unvested restricted shares that would vest as a result of the specified termination event occurring as of October 31, 2024, using the closing price of $21.01 per share on that date. A participant’s rights with respect to the unvested portion of the restricted shares will terminate if a participant ceases continuous service for any reason, except in the event of an involuntary termination without cause within 18 months after a change in control that involves a Corporate Transaction. Generally, if a participant is involuntarily terminated without cause within 18 months after such a change in control, unvested restricted shares will vest in full. Further, if a participant’s unvested restricted shares are not continued, assumed, or replaced in connection with a change in control that involves a Corporate Transaction, such unvested restricted shares will vest in full. | | (6) Reflects the value of unvested PSUs that would vest as a result of the specified termination event occurring as of October 31, 2024, using the closing price of $21.01 per share on that date. A participant’s rights with respect to unvested PSUs will terminate if a participant ceases continuous service for any reason, except in the event of an involuntarily termination without cause within 18 months after a change in control that involves a Corporate Transaction. Generally, if a participant is involuntarily terminated without cause within 18 months after such a change in control, unvested PSUs will vest assuming the target level of performance for all performance metrics and the vested portion of the award at that level of performance will be proportionate to the portion of the performance period that has elapsed as of the effective time of the Corporate Transaction. Further, if a participant’s unvested PSUs are not continued, assumed, or replaced in connection with a change in control that involves a Corporate Transaction, such PSUs will vest assuming the target level of performance for all performance metrics and the vested portion of the award at that level of performance will be proportionate to the portion of the performance period that has elapsed as of the effective time of the Corporate Transaction. | | (7) “Health Care Coverage” includes the following: (a) in the event of a termination due to Disability, payments and the market value of any supplemental disability insurance or plans for which the executive would have been entitled, if such termination occurred on October 31, 2024, and that either discriminate in scope, terms or operation, in favor of the executive, or that are not generally otherwise available to all salaried employees; and (b) in the event of a termination by the Company without Cause or by the executive for Good Reason, an amount equal to 140% of the “COBRA Premium Rate” during the applicable “Severance Period.” For purposes of the foregoing, (y) the term “COBRA Premium Rate” means the monthly amount charged, as of the termination date, for COBRA continuation coverage options and coverage levels applicable to the executive and the executive’s covered dependents immediately prior to the termination date; and (z) the term “Severance Period” means (i) with respect to a termination without Cause by the Company or by the executive for Good Reason, a period of nine months after employment termination for Mr. Doar and Ms. McClelland and a period of 12 months for Mr. Volovic; and (ii) with respect to a termination without Cause by the Company or by the executive for Good Reason within 12 months after a Change in Control, a period of 18 months for Mr. Doar and Ms. McClelland and a period of 24 months for Mr. Volovic. | | (8) Amount includes $2,000,000 maximum benefit for term life and accidental death insurance policies, less cumulative premiums paid by the Company. | | (9) Amount includes split-dollar life insurance payment of two times annual salary plus one times bonus, less cumulative premiums paid by the Company, and $870,000 maximum benefit for term life and accidental death insurance policies. | | (10) If the Company terminates the executive’s employment without Cause or he or she resigns for Good Reason prior to a Change in Control, then he or she will be entitled to severance payments in the form of a salary continuation benefit at base salary then in effect for a period of nine months; an additional monthly amount during the severance period equal to 1/12 of the average of the executive’s annual cash bonuses for the preceding three years; and an additional monthly payment during the severance period equal to 140% of the Company’s monthly cost at the time of termination for continuation of health insurance. If the executive’s employment is terminated by the Company without Cause or by the executive for Good Reason within 12 months following a Change in Control, then he or she will be entitled to the severance amounts disclosed in the preceding sentence for a period of 18 months. Although Ms. Jamison and Mr. Wright are currently not parties to a written employment agreement with the Company, they would potentially remain eligible for severance pay under the Company’s severance pay policy eligible to all employees, which is based on the length of continuous service and annual wage at the time of termination. | | (11) Amounts include life insurance of one-time annual salary, rounded to the nearest thousand, up to a maximum annual salary of $400,000 under accidental death insurance policy. |
Pay Versus Performance
Pay Versus Performance As required by Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(v) of Regulation S-K (collectively, the “PvP Rule”), we are providing certain information about the relationship between compensation paid to our NEOs and certain financial performance metrics of the Company using a methodology that has been prescribed by the SEC. For information concerning the Compensation Committee’s pay-for-performance philosophy and how it aligns executive compensation with the Company’s performance, refer to the “Compensation Discussion and Analysis” section of this proxy statement. As a qualified “smaller reporting company” under the SEC’s rules, we have elected to provide the level of disclosure permitted under Item 402(v) of Regulation S-K applicable to “smaller reporting companies” with respect to this Pay Versus Performance section. Parenthetical letter references in the table below correlate to column letters or names referenced directly in the PvP Rule.
Pay Versus Performance
| | Summary | | Average Summary Compensation | Average Compensation | Value of Initial Fixed $100 Investment Based on: | | | Fiscal Year | Compensation Table Total for PEO(1) | Compensation Actually Paid to PEO(1)(2) | Table Total for Non-PEO NEOs(1) | Actually Paid to Non-PEO NEOs(1) (2) | Total Shareholder Return | Net Income (Loss) ($ millions) | | (a) | (b) | (c) | (d) | (e) | (f) | (h) | | 2024 | $1,959,007 | $813,504 | $832,589 | $406,920 | $69.05 | $(16.6) | | 2023 | $2,318,419 | $1,625,725 | $968,767 | $680,771 | $64.71 | $4.4 | | 2022 | $2,140,015 | $1,292,435 | $1,012,470 | $596,870 | $72.92 | $8.2 |
Pay Versus Performance
(1) Mr. Volovic served as our principal executive officer (“PEO”) for the full fiscal year in each of 2024, 2023 and 2022. Our other NEOs (the “Non-PEO NEOs”) for fiscal years 2024, 2023 and 2022 were Messrs. Doar and Wright and Mses. McClelland and Jamison. (2) The following amounts were deducted from / added to the Summary Compensation Table (“SCT”) total compensation in accordance with the SEC-mandated adjustments to calculate Compensation Actually Paid (“CAP”) to our PEO and the average CAP to our Non-PEO NEOs. The fair value of equity awards was determined using methodologies and assumptions developed in a manner substantively consistent with those used to determine the grant date fair value of such awards. None of our NEOs participate in a pension plan; therefore, no adjustment from the SCT total related to pension value was made. PEO SCT Total to CAP Reconciliation
Pay Versus Performance
| Fiscal Year | 2022 | 2023 | 2024 | | SCT Total | $2,140,015 | $2,318,419 | $1,959,007 | | - Grant Date Fair Value of Stock Awards Granted in Covered Fiscal Year | $(999,953) | $(1,249,963) | $(1,249,967) | | + Fair Value at Covered Fiscal Year-End of Outstanding and Unvested Stock Awards Granted in Covered Fiscal Year | $686,632 | $912,834 | $731,862 | | ± Change in Fair Value from End of Prior Fiscal Year to End of Covered Fiscal Year of Outstanding and Unvested Stock Awards Granted in Prior Fiscal Years | $(527,457) | $(405,237) | $(660,504) | | ± Fair Value at Vesting Date of Stock Awards Granted in Covered Fiscal Year That Vested During Covered Fiscal Year | $0 | $0 | $0 | | ± Change in Fair Value from End of Prior Fiscal Year to Vesting Date of Stock Awards Granted in Prior Fiscal Years For Which Applicable Vesting Conditions Were Satisfied During Covered Fiscal Year | $(16,287) | $36,298 | $29,918 | | - Fair Value as of Prior Fiscal Year-End of Stock Awards Granted in Prior Fiscal Years That Failed to Meet Applicable Vesting Conditions During Covered Fiscal Year | $0 | $0 | $0 | | + Dividends or Other Earnings Paid on Stock Awards in the Covered Fiscal Year Prior to the Vesting Date that are not otherwise included in the Total Compensation for the Covered Fiscal Year | $9,485 | $13,374 | $3,188 | | Compensation Actually Paid | $1,292,435 | $1,625,725 | $813,504 |
Pay Versus Performance
Non-PEO NEO Average SCT Total to Average CAP Reconciliation
Pay Versus Performance
| Fiscal Year | 2022 | 2023 | 2024 | | Average SCT Total | $1,012,470 | $968,767 | $832,589 | | - Grant Date Fair Value of Stock Awards Granted in Covered Fiscal Year | $(462,467) | $(462,455) | $(474,963) | | + Fair Value at Covered Fiscal Year-End of Outstanding and Unvested Stock Awards Granted in Covered Fiscal Year | $317,561 | $337,724 | $278,073 | | ± Change in Fair Value from End of Prior Fiscal Year to End of Covered Fiscal Year of Outstanding and Unvested Stock Awards Granted in Prior Fiscal Years | $(266,610) | $(189,375) | $(243,685) | | ± Fair Value at Vesting Date of Stock Awards Granted in Covered Fiscal Year That Vested During Covered Fiscal Year | $0 | $0 | $0 | | ± Change in Fair Value from End of Prior Fiscal Year to Vesting Date of Stock Awards Granted in Prior Fiscal Years For Which Applicable Vesting Conditions Were Satisfied During Covered Fiscal Year | $(8,932) | $20,495 | $13,597 | | - Fair Value as of Prior Fiscal Year-End of Stock Awards Granted in Prior Fiscal Years That Failed to Meet Applicable Vesting Conditions During Covered Fiscal Year | $0 | $0 | $0 | | + Dividends or Other Earnings Paid on Stock Awards in the Covered Fiscal Year Prior to the Vesting Date that are not otherwise included in the Total Compensation for the Covered Fiscal Year | $4,848 | $5,615 | $1,309 | | Average Compensation Actually Paid | $596,870 | $680,771 | $406,920 |
Pay Versus Performance
Charts of CAP Versus Performance Metrics The chart below illustrates the relationship between the PEO and the average Non-PEO NEO CAP amounts and the Company’s cumulative TSR for fiscal years 2022, 2023 and 2024. The chart below illustrates the relationship between the PEO and the Non-PEO NEO CAP amounts and the Company’s net income (loss) for fiscal years 2022, 2023 and 2024. Notably, several of the NEOs received significant market-based increases to their respective fiscal 2022, 2023, and 2024 compensation arrangements to bring their overall target and actual paid compensation more in line with market competitive ranges for their respective roles and responsibilities, some of which were still transitory pursuant to promotions effective in 2021. In other words, a portion of the NEOs’ increase in CAP reflected in the charts above was intended to be effective regardless of Company performance to address market competitiveness (or lack thereof) of target NEO compensation in certain cases. The charts above describing the NEOs’ CAP reflect, and are inclusive of, such market-based increases. The Compensation Committee continues to believe that the executive compensation actually paid by the Company is strongly aligned with Company performance.