DEF 14A of National Healthcare Corp
Filed Apr 5, 2024 · FY20230001140361-24-018333
“FOR” the re-election of each of the nominees for director named in this Proxy Statement (Proposal I); and
“FOR” the re-election of each of the nominees for director named in this Proxy Statement (Proposal I); and “FOR” the approval of the Company’s compensation of the Named Executive Officers as disclosed in the Compensation Discussion and Analysis section and accompanying compensation tables contained in this Proxy Statement (Proposal II).
DIRECTORS OF THE COMPANY
DIRECTORS OF THE COMPANY NHC currently has an eight-person Board. On January 25, 2022, the Board increased the Board size from seven people to eight people and added Sandra Y. Trail as a Board member effective February 1, 2022. Directors each serve a three-year term (except that directors appointed or elected to fill a vacancy may serve a shorter initial term) and may be removed from office for cause only. The following table gives information about our directors:
DIRECTORS OF THE COMPANY
| Name and Address of Directors | Age | Position | Expiration of Term | | J. Paul Abernathy, M.D. 1523 Mirabella Way Murfreesboro, TN 37130 | 88 | Director | 2024 | | Robert G. Adams 2217 Battleground Drive Murfreesboro, TN 37129 | 77 | Chairman of the Board | 2024 | | W. Andrew Adams 801 Mooreland Lane Murfreesboro, TN 37128 | 78 | Director | 2026 | | Ernest G. Burgess III 7097 Franklin Road Murfreesboro, TN 37128 | 84 | Director | 2026 | | Stephen F. Flatt 100 Vine St. Ste 1400 Murfreesboro, TN 37130 | 68 | Director & CEO | 2025 | | Emil E. Hassan 8400 Heirloom Blvd College Grove, TN 37046 | 77 | Director | 2026 | | Richard F. LaRoche 2103 Shannon Dr. Murfreesboro, TN 37129 | 78 | Director | 2025 | | Sandra Y. Trail 1011 Houston Dr. Murfreesboro, TN 37130 | 76 | Director | 2025 |
DIRECTORS OF THE COMPANY
J. Paul Abernathy, M.D. (Independent Director) joined the Board in 2003 and is a retired board-certified general surgeon. He was in private practice at Murfreesboro Medical Clinic from 1971 until retirement in 1995. Previously, he served as a general practice physician for Hazard Memorial Hospital in Hazard, Kentucky. Lt. Col. Abernathy additionally served as a flight surgeon for the Homestead Air Force Base in Florida and Chief of Surgery for the United States Air Force at Keesler Air Force Base in Mississippi. Dr. Abernathy twice served as President of the Rutherford County Stones River Academy of Medicine and is a member of the American College of Surgeons. Dr. Abernathy has a B.S. degree from Middle Tennessee State University and an M.D. degree from the University of Tennessee. From his many years as a practicing physician, Dr. Abernathy brings a unique perspective to the Board on physician matters and the business of health care. He serves on the Company’s Audit Committee, Compensation Committee and is chairman of the Nominating and Corporate Governance Committee. Robert G. Adams (Chairman & Independent Director) has served NHC for 50 years - 20 years as Senior Vice President, 11 years as Chief Operating Officer, 5 years as President, 12 years as CEO and 31 years on the Board. He became Chairman of the Board on January 1, 2009 and served as Chief Executive Officer from November 1, 2004 until December 31, 2016. Mr. Adams retired from his position as CEO effective December 31, 2016 but remains non-executive Chairman of the Board. He has extensive long-term health care experience, including serving NHC as a healthcare center administrator and Regional Vice President. Mr. Adams joined the Board of National Health Investors, Inc. (“NHI”) in May 2020. As the former CEO, Mr. Adams provides a valuable perspective regarding the business and strategic direction of the Company and brings his experience in all aspects of the Company’s business to the Board’s deliberations. Mr. Adams has a B.S. degree from Middle Tennessee State University. He also served on the board of National Health Realty, Inc. from December 1997 through October 2007. He is the brother of W. Andrew Adams. W. Andrew Adams (Independent Director) served NHC as a full-time employee and director for 32 years and served as its President and CEO until he resigned those positions in 2004, remaining as Chairman of the Board through 2008. At its inception in December 1997, he served National Health Realty, Inc. as President and Chairman of the Board, resigning his position as President in November 2004. Mr. Adams has been President (through February 25, 2009) and CEO (through February 28, 2011) and Director of NHI since its inception in 1991; he continues as Chairman of the NHI Board. Mr. Adams previously served on the boards of American Health Care Association, National Council of Health Centers, Assisted Living Concepts, SunTrust Bank, Lipscomb University, Middle Tennessee State University, and the Boy Scouts of America. Mr. Adams’ years of experience in the health care industry are invaluable to the Board along with his thorough financial acumen and leadership skills. He received his B.S. and M.B.A. from Middle Tennessee State University. He is the brother of Robert G. Adams. Ernest G. Burgess, III (Independent Director) served as NHC’s Senior Vice President of Operations for 20 years before retiring in 1994. In his past role as Senior Vice President of Operations, he gained significant operational experience in the long-term care business as well as experience with financial and accounting matters. He has an M.S. degree from the University of Tennessee and is currently retired after 12 years as the Mayor of Rutherford County, Tennessee. He brings to the Board unique leadership skills as well as the current government relations experience he has acquired as Mayor. Mr. Burgess also served on the board of National Health Realty, Inc. from December 1997 through October 2007. He has been an NHC director since 1997, and, before that, a director of its predecessor company beginning in 1992. Mr. Burgess serves on NHC’s Audit Committee, Compensation Committee, and Nominating and Corporate Governance Committee. Stephen F. Flatt (CEO & Inside Director) was appointed to the Board and named Chief Executive Officer effective January 1, 2017. He joined NHC in June 2005 as Senior Vice President-Development. On January 1, 2009, Mr. Flatt became NHC’s President. He served as the President of Lipscomb University from 1997 through June 2005 and, prior to that, President of Ezell Harding Christian School in Nashville and Vice President of Financial Affairs and Institutional Planning at Lipscomb. Mr. Flatt currently serves as Co-Chair of the Council for Post Acute Care (CPAC), the Board of Governors of the American Health Care Association (AHCA), the Board of Directors of The Community Foundation of Rutherford County, and is a former member of the Board of Directors of the Nashville Health Care Council. In 2013, he was a member of the Council’s inaugural “Health Care Fellows” Program led by former Senate Majority Leader Bill Frist. Also in 2013 he was named one of Middle Tennessee’s “Health-Care Heroes” by the Nashville Business Journal. Mr. Flatt’s role as Chief Executive Officer and his considerable experience in the health care field provides the Board with valued insight and leadership. He received his B.A. degree from David Lipscomb College and his M.S. degree and Ph.D. from George Peabody College of Vanderbilt University. Emil E. Hassan (Independent Director) joined the Board in April 2004. In 2004, he retired from the position of Senior Vice President of manufacturing, purchasing, quality and logistics for Nissan North America, Inc. while also serving as Chairman and CEO of Distribution and Auto Services (“DAS”), a Nissan affiliate company. Prior to joining Nissan, he was with Ford Motor Co. for twelve years, where he held various management positions in engineering and manufacturing. Mr. Hassan brings to the Board, among other skills and qualifications, years of management and financial experience from his positions with Nissan and Ford Motor Company. He served for 30 years as the chairman of the Business/Education Partnership of Murfreesboro and Rutherford County and sits on the Ascension, St. Thomas Health Board of Directors and serves on its Quality and Safety Committee along with the Finance Committee. He is a member of the Leadership Rutherford Alumni Association and the Leadership Nashville Alumni Association. He is a former board member of the Federal Reserve Bank of Atlanta, Nashville Branch. Mr. Hassan is chairman of NHC’s Compensation Committee and also serves on NHC’s Nominating and Corporate Governance Committee and Audit Committee. Richard F. LaRoche (Independent Director) served NHC for 27 years as Secretary and General Counsel and 14 years as Senior Vice President, retiring from these positions in May 2002. He has served as an NHC Board member since 2002. He has a law degree from Vanderbilt University and an A.B. degree from Dartmouth College. He has previously served on the publicly held boards of National Health Investors, Inc. (1991 through 2008), and National Health Realty, Inc. (1997 through 2007). Mr. LaRoche also served as a director of privately held Lodge Manufacturing Company, was a member of its Compensation and Audit Committees, and was Chair of its Audit Committee (2001-2021). Mr. LaRoche’s long career as former Secretary and General Counsel of the Company, during which time he was responsible for the Company’s finance and development initiatives, provides the Board with invaluable experience in addressing the issues and challenges facing the Company. He serves on NHC’s Nominating and Corporate Governance Committee, Compensation Committee and as Chairman of the Audit Committee.
DIRECTORS OF THE COMPANY
Sandra Y. Trail (Independent Director) joined the Board in 2022. Ms. Trail has been a licensed practicing attorney for over 35 years as a sole proprietor and since 2018 as a principal in the firm of Trail, Coleman and Stearns, PLLC located in Murfreesboro, Tennessee. In her capacity as an attorney, Ms. Trail has represented businesses, governments, and individuals in a wide variety of transactional matters. Ms. Trail is also a certified public accountant and has worked in the tax and audit departments of two public accounting firms. Ms. Trail earned a B.S. degree in accounting from Middle Tennessee State University and a law degree from the Nashville School of Law. She has served on numerous legal, charitable, governmental and health care boards, and currently serves as a board member of the City of Murfreesboro, Tennessee Water Resources Board and also the World Outreach Church. Ms. Trail serves on the Company’s Nominating and Corporate Governance, Audit, and Compensation Committee(s).
BOARD OF DIRECTORS
BOARD OF DIRECTORS
Cash Compensation
| Officer | 2023 Bonus | | | | Cash ($) | Restricted Stock(1) (# of shares) | | Stephen F. Flatt, CEO | 656,000 | 2,783 | | Brian F. Kidd, SVP & Chief Financial Officer | 332,000 | 1,409 | | B. Anderson Flatt, SVP & CIO | 292,000 | 1,239 | | Josh A. McCreary, SVP, General Counsel & Secretary | 324,000 | 1,375 | | R. Michael Ussery, President & COO | 604,000 | 2,563 |
Cash Compensation
| (1) Number of shares of restricted stock issued was based on 20% of the earned bonus amount divided by $58.92, the closing price of the Company’s common stock on February 9, 2023. |
Changes for 2024 Compensation Plan
Changes for 2024 Compensation Plan The Compensation Committee decided to leave the Bonus Plan for 2024 substantially the same as in 2023. In 2024, the Bonus Pool will be calculated as 5% of pre-tax earnings, excluding unrealized gains and/or losses on marketable securities. Each individual’s bonus will be paid 80% in cash, and 20% in restricted stock. The restricted stock will have a three-year vesting period, with one-third of the total shares vesting each year. The number of restricted stock issued in February 2025 will be calculated based upon the stock price at the close of business on February 8, 2024, which was $90.95. One-third of those shares will vest on January 1, 2026, another third on January 1, 2027, and the final third on January 1, 2028. Each Named Executive Officer will continue to have a performance plan unique to that specific officer. At the conclusion of 2024, the CEO will recommend each individual’s bonus amount to the Compensation Committee based upon: (a) the final amount of the collective Bonus Pool, and (b) each officer’s performance in relation to his or her respective performance plan. The Compensation Committee approved a 20% increase in base salary for Mr. Kidd and Mr. McCreary. A 3% increase in base salary was approved for the other Named Executive Officers for 2024.
Equity Based Compensation
Equity Based Compensation Other than the bonus amount paid in restricted stock as described above, our equity compensation has historically been based upon traditional stock option grants. We have maintained shareholder approved stock option plans since 1983. At the 2020 annual meeting of the shareholders, the shareholders of the Company approved the adoption of the National HealthCare Corporation 2020 Omnibus Equity Incentive Plan (the “2020 Equity Incentive Plan”). In accordance with this plan, 2,500,000 shares became available to grant for restricted stock, stock appreciation rights, stock options, and employee stock purchase plan needs. These plans authorize the Board and its Compensation Committee to issue various types of derivative equity, including stock appreciation rights and restricted stock. Every stock option we have issued has been with an exercise price set at the trading price of our stock on the NYSE American on the stock option’s grant date. The objective of our stock equity policy is to reward participating Partners for their efforts by sharing in the Company’s stock value increase. We have historically granted stock options with a five-year vesting period. Stock options were granted to executive officers and key employees in February 2022, March 2023, and again in March 2024. These options vest ratably over three years in one-third increments and expire in February 2027, as to options granted in 2022, March 2028 as to options granted in March 2023, and March 2029 as to options granted in March 2024. Historically there have been some stock option grants which were not exercised because they were not “in the money” at the expiration date. The Company has never re-priced stock options. We have never had written policies for the issuance of stock options but historically the Committee has, among other factors, taken into account management’s recommendations in approving the stock option grants. Also, the Committee, upon approval of the grants, has normally authorized management to grant the stock options at their discretion. The Company has never relied upon either the release of material information or the non-release of material information when issuing the grants.
Retirement and Post Employment Compensation
Retirement and Post Employment Compensation In keeping with our focus on performance compensation, we also believe in the personal responsibility of the Partners to plan for their retirement. To this end, we have long made available a qualified defined contribution plan (the “401(k) Plan”) to all Partners, including our Named Executive Officers. This plan is provided by National Health Corporation. Qualified plans such as the 401(k) Plan carry with them a limit on the amount of compensation that “highly compensated” employees can defer. All of our key employees are considered highly compensated and thus are greatly curtailed in their ability to contribute to the 401(k) Plan. Accordingly, the Company offers its highly compensated employees the opportunity to participate in a non-qualified Key Employee Deferred Compensation Plan (the “Key Employee Plan”) provided by a third party. Both plans offer participants a menu of investment choices. In the 401(k) Plan, the Company matches the partner’s contributions to the plan in an amount equal to 50% of the partner’s contribution up to 2.5% of their total quarterly compensation. The 401(k) Plan has an option of investing in our Common Stock, but the matching contribution is made irrespective of the investment choices by the Partner. In the Key Employee Plan, the Company will match 15% of a partner’s contribution to the plan only to the extent the partner’s contribution is invested in our stock. All Company contributions are vested when the participant has been in the plan for eight years. All the Company’s Named Executive Officers made contributions from 2023 compensation to the third party provided Key Employee Plan, with the amounts of the Company contribution being disclosed in the Summary Compensation Table and their individual deferrals detailed in the narrative. All of the Named Executive Officers except B. Anderson Flatt and Josh A. McCreary are now 100% vested in the Company match. The Key Employee Plan is not provided by the Company; it is provided by National Health Corporation. As the Company does not enter into employment agreements with its Named Executive Officers, there are no agreements that provide for payments or benefits due in the event of a termination or change in control of the Company, except as may be provided in the 2020 Equity Incentive Plan. At December 31, 2023, each of the Named Executive Officers held unvested options and unvested restricted stock. The 2010 Equity Incentive Plan and the 2020 Equity Incentive Plan provide that a change in control of the Company (as defined in the applicable plan) shall cause the vesting date of each outstanding option to accelerate. Thus, if such an event had occurred at December 31, 2023, each of the Named Executive Officers would have received the following value based on the number of unvested options and unvested restricted stock that would have vested upon such event multiplied by (i) the difference between the exercise price of such unvested options and $92.42, the closing market price of the Company’s common stock on December 29, 2023 for options and (ii) $92.42, the closing market price of the Company’s common stock on December 29, 2023 for restricted stock: (i) Mr. S. Flatt $1,608,492; (ii) Mr. Kidd $1,025,701; (iii) Mr. B. Flatt $991,080; (iv) Mr. McCreary $1,020,895; and (v) Mr. Ussery $1,463,166.
2023 SUMMARY COMPENSATION TABLE*
2023 SUMMARY COMPENSATION TABLE*
2023 SUMMARY COMPENSATION TABLE*
| Name & Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards(1) ($) | Option Awards(2) ($) | Non-Equity Incentive Plan Compensation(3) ($) | All Other Compensation(4) ($) | Total ($) | | (a) | (b) | (c) | (d) | (e) | (f) | (g) | (i) | (j) | | Stephen F. Flatt Chief Executive Officer | 2023 | 528,000 | -0- | 261,880 | 150,390 | 656,000 | 13,425 | 1,609,695 | | | 2022 | 522,175 | -0- | 81,018 | 155,087 | 388,000 | 12,927 | 1,159,207 | | | 2021 | 498,131 | -0- | 319,008 | 119,130 | 1,288,000 | 25,176 | 2,249,445 | | Brian F. Kidd SVP & Chief Financial Officer | 2023 | 228,000 | -0- | 132,587 | 120,528 | 332,000 | 2,362 | 815,477 | | | 2022 | 224,050 | -0- | 39,268 | 122,322 | 188,000 | 1,826 | 575,466 | | | 2021 | 222,345 | -0- | 128,932 | 95,712 | 520,800 | 2,054 | 969,843 | | B. Anderson Flatt SVP & Chief Information Officer | 2023 | 242,000 | -0- | 116,590 | 113,203 | 292,000 | 3,541 | 767,334 | | | 2022 | 235,659 | -0- | 37,569 | 122,322 | 180,000 | 3,534 | 579,111 | | | 2021 | 232,791 | -0- | 141,028 | 67,519 | 569,600 | 3,792 | 1,014,730 | | Josh A. McCreary SVP, General Counsel & Secretary | 2023 | 238,000 | -0- | 129,388 | 120,312 | 324,000 | 2,239 | 813,939 | | | 2022 | 231,750 | -0- | 39,268 | 122,322 | 188,000 | 1,884 | 583,224 | | | 2021 | — | — | — | — | — | — | — | | R. Michael Ussery President & Chief Operating Officer | 2023 | 475,000 | -0- | 241,178 | 135,351 | 604,000 | 32,452 | 1,487,981 | | | 2022 | 465,405 | -0- | 71,848 | 138,704 | 344,000 | 29,704 | 1,049,661 | | | 2021 | 459,026 | -0- | 299,203 | 107,217 | 1,208,000 | 23,578 | 2,097,024 |
2023 SUMMARY COMPENSATION TABLE*
| * Columns that do not apply have been deleted. |
2023 SUMMARY COMPENSATION TABLE*
| (1) The compensation included in this column represents the aggregate grant date fair value of the restricted stock granted as a portion of the performance bonus as described in CD&A starting on page 17. The grant date fair value has been calculated in accordance with ASC Topic 718, Compensation-Stock Compensation. |
2023 SUMMARY COMPENSATION TABLE*
| (2) This column represents stock options granted to Named Executive Officers and have been computed in accordance with ASC Topic 718, Compensation-Stock Compensation in this column. |
2023 SUMMARY COMPENSATION TABLE*
| (3) In 2021, 2022, and 2023, each Named Executive Officer had an individual performance plan based on quality and financial goals of the Company, which amount was paid 80% in cash and 20% in restricted stock as described in CD&A. The cash portion is reflected in this column and the restricted stock portion is reflected in column (e). |
2023 SUMMARY COMPENSATION TABLE*
| (4) The amounts listed in the All Other Compensation column are comprised of the Company match to the Named Executive Officers’ 401(k) Plan, Key Employee Plan, and group term life insurance benefit. In 2023, Mr. B. Anderson Flatt received a match of $3,000 to the 401(k) Plan and $0 to the Key Employee Plan Account. Mr. Stephen F. Flatt received a $4,125 match to his 401(k) Plan and $9,300 to the Key Employee Plan account. Mr. Kidd received a $2,286 match to his 401(k) Plan and $0 to the Key Employee Plan account. Mr. McCreary received a match of $2,105 to the 401(k) Plan and $0 to the Key Employee Plan account. Mr. Ussery received a match of $3,500 to the 401(k) Plan and $26,400 to the Key Employee Plan account. |
2023 SUMMARY COMPENSATION TABLE*
Each of the Named Executive Officers deferred a portion of their 2023 compensation. Mr. B. Anderson Flatt deferred $75,000 of his 2023 compensation under the Key Employee Plan and $6,000 under the 401(k) Plan. Mr. Stephen F. Flatt deferred $82,000 of his 2023 compensation under the Key Employee Plan and $8,250 under the 401(k) Plan. Mr. Kidd deferred $50,000 of his 2023 compensation under the Key Employee Plan and $13,000 under the 401(k) Plan. Mr. McCreary deferred $14,000 of his 2023 compensation under the Key Employee Plan and $13,000 under the 401(k) Plan. Mr. Ussery deferred $176,000 of his 2023 compensation under the Key Employee Plan and $26,000 under the 401(k) Plan. For additional details on Key Employee Plan, please see the details in the table identified as “2023 Nonqualified Deferred Compensation.”
PAY VERSUS PERFORMANCE
PAY VERSUS PERFORMANCE
PAY VERSUS PERFORMANCE
| Year | Summary Compensation Table Total to PEO(1) ($) | Compensation Actually Paid to PEO(3) ($) | Average Summary Compensation Table Total for Non-PEO NEOs(2) ($) | Average Compensation Actually Paid to Non-PEO NEOs (2)(3) ($) | Value of Initial Fixed $100 Investment Based on: | | Net Income ($) | Adjusted Income Before Income Taxes(5) ($) | | | | | | | Total Share- holder Return(4) ($) | S&P Healthcare Index Total Shareholder Return(4) ($) | | | | 2023 | 1,609,695 | 2,416,165 | 971,183 | 1,579,389 | 121.89 | 143.19 | 66,798,000 | 75,304,000 | | 2022 | 1,159,207 | 1,048,455 | 696,866 | 600,179 | 75.58 | 140.30 | 22,445,000 | 45,505,000 | | 2021 | 2,249,445 | 2,132,097 | 1,288,949 | 1,157,347 | 83.43 | 143.09 | 138,590,000 | 163,404,000 | | 2020 | 1,278,366 | 786,671 | 760,448 | 370,710 | 79.20 | 113.45 | 41,871,000 | 76,270,000 |
PAY VERSUS PERFORMANCE
| (1) The principal executive officer (“PEO”) for each of the covered fiscal years is Stephen F. Flatt, who began serving as our Chief Executive Officer (“CEO”) in January 2017. |
PAY VERSUS PERFORMANCE
| (2) The non-PEO Named Executive Officers (“NEO's”) represent the following individuals for each of the years shown: |
PAY VERSUS PERFORMANCE
2023 and 2022 - B. Anderson Flatt, Senior Vice President and Chief Information Officer; Brian F. Kidd, Senior Vice President and Chief Financial Officer; Josh A. McCreary, Senior Vice President, General Counsel, and Secretary; R. Michael Ussery, President and Chief Operating Officer. 2021 and 2020 - B. Anderson Flatt, Senior Vice President and Chief Information Officer; Brian F. Kidd, Senior Vice President, Controller, and Principal Accounting Officer; Jeffrey R. Smith, Senior Vice President and Treasurer; R. Michael Ussery, President and Chief Operating Officer.
PAY VERSUS PERFORMANCE
| (3) To calculate Compensation Actually Paid (“CAP”) to the Chief Executive Officer and the average CAP to the other NEO’s, the following adjustments were made to Summary Compensation Table (“SCT”) total compensation for 2023. The fair value of stock awards includes the value of both restricted stock awards and stock option awards (in $’s): |
PAY VERSUS PERFORMANCE
| | | Additions | | | | | Deductions | | | | Year | Summary Compensation Table ($) | Fair Value of Stock Awards Granted During the Year, Outstanding and Unvested at Year-End ($) | Change in Value of Stock Awards Granted in Any Prior Year, Outstanding and Unvested at Year-End ($) | Change in Value of Stock Awards Granted in Any Prior Year, Vested During the Year ($) | Fair Value of Awards Forfeited in Fiscal Year ($) | Dividends Paid in Fiscal Year on Unvested Awards ($) | Stock Awards Reported in SCT ($) | Option Awards Reported in SCT ($) | Compensation Actually Paid ($) | | Principal Executive Officer | | | | | | | | | | | 2023 | 1,609,695 | 835,305 | 400,577 | (30,055) | — | 12,913 | (261,880) | (150,390) | 2,416,165 | | Average for Other NEO’s | | | | | | | | | | | 2023 | 971,183 | 621,394 | 281,490 | (24,498) | — | 7,104 | (154,936) | (122,349) | 1,579,389 |
PAY VERSUS PERFORMANCE
| (4) The comparison of total shareholder returns (“TSR”) assumes that $100 was invested on December 31, 2019, in NHC and the S&P Healthcare Index, and that dividends were reinvested when and as paid. The selected peer group is the S&P Healthcare Index. |
PAY VERSUS PERFORMANCE
| (5) Our company-selected measure, which is the measure we believe represents the most important financial performance not otherwise presented in the table above that we use to link CAP to our Company's performance is adjusted income before income taxes, a non-GAAP measure. This measure takes income before income taxes and adds or subtracts the unrealized gain or losses on marketable equity securities, plus adds or subtracts the net income or loss attributable to noncontrolling interest. |
COMPENSATION ACTUALLY PAID VERSUS COMPANY PERFORMANCE
COMPENSATION ACTUALLY PAID VERSUS COMPANY PERFORMANCE The graphs below depict the relationship between each of the financial performance measures in the pay versus performance table above and CAP to our CEO and, on average, to our other NEO’s, for each of the four years ended December 31, 2023.
GRANTS OF PLAN-BASED AWARDS*
GRANTS OF PLAN-BASED AWARDS*
GRANTS OF PLAN-BASED AWARDS*
| Name | Grant Date | Estimated Payouts Under Non-Equity Incentive Plan Awards Target ($) | Estimated Future Payouts Under Equity Incentive Plan Awards Target (#) | All Other Option Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Options Awards ($) | | (a) | (b) | (d) | (g) | (j) | (k) | (l) | | Stephen F. Flatt | 2/9/23 | 656,000(1) | 2,783(1) | — | — | 164,000(2) | | | 3/8/23 | | | 15,000 | 53.94 | 150,390(3) | | Brian F. Kidd | 2/9/23 | 332,000(1) | 1,409(1) | — | — | 83,000(2) | | | 3/8/23 | | | 12,000 | 53.94 | 120,312(3) | | B. Anderson Flatt | 2/9/23 | 292,000(1) | 1,239(1) | — | — | 73,000(2) | | | 3/8/23 | | | 11,200 | 53.94 | 112,291(3) | | Josh A. McCreary | 2/9/23 | 324,000(1) | 1,375(1) | — | — | 81,000(2) | | | 3/8/23 | | | 12,000 | 53.94 | 120,312(3) | | R. Michael Ussery | 2/9/23 | 604,000(1) | 2,563(1) | — | — | 151,000(2) | | | 3/8/23 | | | 13,500 | 53.94 | 135,351(3) |
GRANTS OF PLAN-BASED AWARDS*
| * Columns that do not apply have been deleted. |
GRANTS OF PLAN-BASED AWARDS*
| (1) Each performance plan provides that 80% of the total bonus will be paid in cash and 20% will be paid in restricted stock based on the closing price on February 9, 2023, which was $58.92. The restricted stock will vest 1/3 on January 1, 2025, 1/3 on January 1, 2026, and 1/3 on January 1, 2027. |
GRANTS OF PLAN-BASED AWARDS*
| (2) The grant date fair value of restricted stock has been calculated in accordance with ASC Topic 718, Compensation-Stock Compensation, based on the closing price on February 9, 2023, which was $58.92. |
GRANTS OF PLAN-BASED AWARDS*
| (3) The grant date fair value of stock options has been calculated in accordance with ASC Topic 718, Compensation-Stock Compensation. |
2023 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
2023 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
2023 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
| Name | Option Awards | | | | | Stock Awards | | | | | | Number of Securities Underlying Unexercised Options Exercisable(1) (#) | Number of Securities Underlying Unexercised Options Un-exercisable(1) (#) | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock that Have Not Vested (#) | Market Value of Shares or Units of Stock that Have Not Vested ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights that Have Not Vested(2) (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights that Have Not Vested(8) (#) | | (a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | (j) | | Stephen F. Flatt | — | 15,000 | — | 53.94 | 3/8/28 | — | — | 5,252(4) | 485,390 | | | — | 9,467 | — | 63.96 | 2/18/27 | — | — | | | | Brian F. Kidd | — | 12,000 | — | 53.94 | 3/8/28 | — | — | 2,229(5) | 206,004 | | | — | 7,467 | — | 63.96 | 2/18/27 | — | — | | | | B. Anderson Flatt | — | 11,200 | — | 53.94 | 3/8/28 | | | 2,358(3) | 217,926 | | | — | 7,467 | — | 63.96 | 2/18/27 | — | — | | | | Josh A. McCreary | — | 12,000 | — | 53.94 | 3/8/28 | — | — | 2,211(6) | 204,341 | | | — | 7,467 | — | 63.96 | 2/18/27 | — | — | | | | R. Michael Ussery | — | 13,500 | — | 53.94 | 3/8/28 | — | — | 4,854(7) | 448,607 | | | — | 8,467 | — | 63.96 | 2/18/27 | — | — | | |
2023 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
| (1) Includes options granted in February 2022 and March 2023 which become exercisable ratably over three (3) years. |
2023 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
| (2) Grants of restricted shares are subject to a three-year vesting schedule with 33 1/3% vesting annually on January 1 of each successive year. |
2023 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
| (3) Includes 247 shares from the 2/24/2021 grant, 1,414 shares from the 2/25/22 grant and 697 shares from the 3/8/23 grant. |
2023 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
| (4) Includes 550 shares from the 2/24/2021 grant, 3,200 shares from the 2/25/22 grant and 1,502 shares from the 3/8/23 grant. |
2023 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
| (5) Includes 208 shares from the 2/24/2021 grant, 1,293 shares from the 2/25/22 grant and 728 shares from the 3/8/23 grant. |
2023 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
| (6) Includes 211 shares from the 2/24/2021 grant, 1,272 shares from the 2/25/22 grant and 728 shares from the 3/8/23 grant. |
2023 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
| (7) Includes 521 shares from the 2/24/2021 grant, 3,001 shares from the 2/25/22 grant and 1,332 shares from the 3/8/23 grant. |
2023 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
| (8) Calculation based upon 12/31/23 stock price of $92.42. |
2023 OPTION EXERCISES AND STOCK VESTED
2023 OPTION EXERCISES AND STOCK VESTED
2023 OPTION EXERCISES AND STOCK VESTED
| Name | Option Awards | | Stock Awards | | | | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting(1) (#) | Value Realized on Vesting ($) | | (a) | (b) | (c) | (d) | (e) | | Stephen F. Flatt | 472 | 63,280 | 2,780 | 165,410 | | Brian F. Kidd | 437 | 49,910 | 1,074 | 63,903 | | B. Anderson Flatt | 437 | 49,910 | 1,221 | 72,650 | | Josh A. McCreary | 437 | 49,910 | 1,002 | 59,619 | | R. Michael Ussery | 732 | 56,595 | 2,617 | 155,712 |
2023 OPTION EXERCISES AND STOCK VESTED
| (1) The restricted shares are subject to a three-year vesting schedule with 33 1/3% vesting annually on January 1 of each successive year. This column reflects all restricted stock vested in 2023. |
2023 PENSION BENEFITS
2023 PENSION BENEFITS The Company does not offer any pension benefit plans; thus, this table is not utilized.
2023 NONQUALIFIED DEFERRED COMPENSATION
2023 NONQUALIFIED DEFERRED COMPENSATION
2023 NONQUALIFIED DEFERRED COMPENSATION
| Name | Executive Contributions in Last FY ($) | Registrant Contributions in Last FY ($) | Aggregate Earnings in Last FY(1) ($) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last FYE(1) ($) | | (a) | (b) | (c) | (d) | (e) | (f) | | Stephen F. Flatt | 82,000 | 9,300 | — | — | — | | Brian F. Kidd | 50,000 | -0- | — | — | — | | B. Anderson Flatt | 75,000 | -0- | — | — | — | | Josh A. McCreary | 14,000 | -0- | — | — | — | | R. Michael Ussery | 176,000 | 26,400 | — | — | — |
2023 NONQUALIFIED DEFERRED COMPENSATION
| (1) The Key Employee Plan is not provided by the Company and as such the Company has no responsibility for Aggregate Earnings or the Aggregate Balance. While the Company funds and expenses the contributions to the Plan, the Company is not obligated to pay the executive the Aggregate Balance of the nonqualified deferred compensation account and the Aggregate Balance is not a claim on the Company’s assets. Therefore, no amounts are reported under these columns. See the second paragraph under “Retirement and Post Employment Compensation” of the CD&A, on page 17. |
2023 NONQUALIFIED DEFERRED COMPENSATION
The Company’s only non-qualified deferred compensation plan has been previously described under the heading “Retirement and Post Employment Compensation” beginning on page 20. The above table indicates the Named Executive Officers that contributed a portion of their 2023 compensation to the plan. The amounts set forth in column (b) in the 2023 Nonqualified Deferred Compensation Table above are included in the Summary Compensation Table in columns (c), (d) or (g) and the amounts set forth in column (c) in the 2023 Nonqualified Deferred Compensation Table above are included in the Summary Compensation Table in column (i). All of the Named Executive Officers deferred a portion of their 2023 bonus or Non-Equity Incentive Plan, which was paid in 2024 but considered 2023 compensation. The Company’s match to deferrals in column (c) reflects matches made in 2023 on sums contributed to the plan during 2023 and for the deferral made in 2024 but considered 2023 compensation.
Pay Ratio Disclosure
Pay Ratio Disclosure On August 5, 2015, the SEC adopted new rules implementing the pay ratio disclosure requirement of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act). These rules require reporting companies to disclose the ratio of the annual compensation of the company’s median employee to the annual compensation of its principal executive officer. We determined our median employee based on the bi-weekly payroll ended November 26, 2023. The gross pay for all employees paid on the selected payroll, other than the CEO, were ranked highest to lowest because there has been no change in our employee population or employee compensation arrangements that we believe would significantly impact the pay ratio disclosure. The 2023 annualized gross compensation for the median employee selected in this analysis was $31,410, and our CEO’s annual compensation for 2023 was $1,609,695. The ratio of these amounts is 51.2 to one. There is a great deal of flexibility in how the median employee is identified. Companies are using different approaches that are appropriate for their employee population and compensation programs and are using estimates and assumptions. As a result, the ratios that other companies have calculated may not be comparable to the ratio that we have presented not only because of different businesses or different compensation programs, but because of using different methodologies and assumptions.
DIRECTOR COMPENSATION
DIRECTOR COMPENSATION Our principles of directors’ compensation are aligned with the overall goals and objectives of overall partner compensation. That is, the directors (as the policy makers for the Company) should be compensated primarily by the quality and financial performance of the Company and only secondarily by cash compensation. Accordingly, director compensation is divided into two components:
DIRECTOR COMPENSATION
| A. | Cash Compensation. Directors receive cash compensation based on meetings attended. The current compensation is $3,000 per scheduled meeting attended and is an amount which was recommended to the Board by the Chief Executive Officer, but which may be set at the Board’s discretion. Since 2002, the Company also chartered and created three Board committees: The Nominating and Corporate Governance Committee, the Compensation Committee and the Audit Committee. Beginning in 2008, the Chairman of the Audit Committee received an additional fee of $8,000 per year and the Chairmen of the Compensation and the Nominating and Corporate Governance Committees each received an additional fee of $4,000 per year. In addition, Mr. LaRoche serves on the Certification Committee as described above and he received $4,000 for serving on that committee. Mr. LaRoche and Mr. Robert Adams also serve on the Premier Plus Insurance Company Board for which they received an additional fee of $2,000. |
DIRECTOR COMPENSATION
| B. | Equity Awards. The 2010 Plan provided that directors who are not executive officers will receive a five-year stock option grant to purchase 7,500 shares of the Common Stock to be granted and issued on the day of the annual meeting of the shareholders each year with an exercise price set at the closing price of NHC’s Common Stock on that day. Such options will expire at the end of five years and be fully vested on the date of the grant. The 2020 Equity Incentive Plan, as approved at the 2020 Annual Meeting of the Shareholders, continues this automatic grant, but provides that such options vest one year after the date of grant. Pursuant to the 2020 Equity Incentive Plan, on the date of the 2023 annual meeting of shareholders, the directors who were not executive officers were each granted a five-year stock option to purchase 7,500 shares of the Common stock of the Company with an exercise price set at the closing price of NHC’s Common Stock on that day and that vested one year after the date of the grant. This same grant will continue for 2024 with all options vesting one year after the date of the grant. |
DIRECTOR COMPENSATION
For 2023, the Compensation Committee granted to each non-employee director a discretionary cash bonus of $125,000. These bonuses are used by Board members to exercise outstanding options or to purchase Company stock on the open market and thus increase their ownership in the Company. The Company believes that it helps align the directors’ interest with that of the shareholders by encouraging increased stock ownership. The Board annually reviews its total compensation package in light of compensation paid to directors of comparable health care companies and has found its compensation comparable with similar companies. The Board, in its reviews of its total compensation, took the bonuses described above into account when comparing its compensation to the compensation paid to directors of comparable health care companies.
2023 DIRECTOR COMPENSATION
2023 DIRECTOR COMPENSATION
2023 DIRECTOR COMPENSATION
| Name | Fees Earned or Paid in Cash ($) | Option Awards(1)(2) ($) | All Other Compensation(3) ($) | Total ($) | | (a) | (b) | (d) | (g) | (h) | | J. Paul Abernathy, M.D. | 16,000 | 55,876 | 125,000 | 196,876 | | Robert Adams | 12,000 | 55,876 | 125,000 | 192,876 | | W. Andrew Adams | 9,000 | 55,876 | 125,000 | 189,876 | | Ernest G. Burgess III | 12,000 | 55,876 | 125,000 | 192,876 | | Emil E. Hassan | 16,000 | 55,876 | 125,000 | 196,876 | | Richard F. LaRoche | 24,000 | 55,876 | 125,000 | 204,876 | | Sandra Y. Trail | 12,000 | 55,876 | 125,000 | 192,876 |
2023 DIRECTOR COMPENSATION
| (1) The directors were granted stock options to purchase 7,500 shares of Common stock on the date of the annual shareholders meeting – May 4, 2023. These stock option grants have been computed in accordance with ASC Topic 718, Compensation-Stock Compensation. These options were granted under the 2020 Plan and vest one (1) year from the grant date. |
2023 DIRECTOR COMPENSATION
| (2) As of December 31, 2023, the outside directors then serving as directors held stock options to purchase the following aggregate number of shares of common stock: Dr. Abernathy, 35,895; Mr. R. Adams, 22,500; Mr. W.A. Adams, 37,500; Mr. Burgess, 37,500; Mr. Hassan, 35,500; Mr. LaRoche, 35,000; and Ms. Trail, 11,386. |
2023 DIRECTOR COMPENSATION
| (3) Outside directors were each awarded a $125,000 bonus to exercise stock options or to purchase Company stock in 2023. |
2023 DIRECTOR COMPENSATION
From time to time the Board may form independent committees. These committees are empowered to retain outside advisors and pay themselves additional compensation for their work. Mr. Stephen F. Flatt, as CEO of the Company, receives no compensation for service on the Board. Directors Abernathy, R. Adams, Burgess, Hassan, Trail, and LaRoche each attended four Board meetings in 2023, receiving $3,000 per meeting. W.A. Adams attended three Board meetings in 2023, receiving $3,000 per meeting. Mr. Robert Adams declined any additional payment for acting as non-executive Chairman during 2023. The Company’s directors do not participate in any other compensation plans or programs of the Company.
ELECTION OF DIRECTORS
ELECTION OF DIRECTORS Pursuant to our Charter, the directors are divided into three groups. Each group is elected for a three-year term and only one group is up for election each year. At its February 8, 2024 meeting, the Nominating and Corporate Governance Committee voted to nominate two directors from the current class of directors for re-election to the Board, each to serve a term of three years or until their successors are duly elected and qualified. These currently serving directors are J. Paul Abernathy, M.D., and Robert G. Adams. In February 2013, the Board amended the Company Bylaws to provide that directors in uncontested elections will be elected by a majority of votes cast. A majority of the votes cast means that the number of votes cast “for” a director nominee must exceed the number of votes cast “against” that director nominee. If a proxy does not specifically vote against the election of J. Paul Abernathy, M.D., and/or Robert G. Adams, your proxy holder intends to vote for the election of each to hold office as a director for a term of three years for J. Paul Abernathy, M.D., and Robert G. Adams, in each case until his successor has been duly elected and qualified. If the nominees become unavailable for any reason (which event is not anticipated), the shares represented by the enclosed proxy may (unless such proxy contains instructions to the contrary) be voted for such other person(s) as may be determined by the proxy holder, to the extent permitted under the U.S. Securities Laws. In accordance with the Bylaws, the Board will nominate for election or re-election as a director only candidates who agree to tender, promptly following their failure to receive the required vote for election or re-election at the next meeting at which they would face election or re-election, an irrevocable resignation that will be effective upon acceptance by the Board. In addition, the Board will fill director vacancies and new directorships only with candidates who agree to tender the same form of resignation, promptly following their appointment to the Board. If an incumbent director fails to receive the required vote for re-election, then, within 90 days following certification of the shareholder vote, the Nominating Committee will act to determine whether to accept the director’s resignation and will submit the recommendation for prompt consideration by the Board, and the Board will act on the Nominating Committee’s recommendation. Thereafter, the Board will promptly disclose its decision-making process and decision regarding whether to accept the director’s resignation offer (or the reason(s) for rejecting the resignation offer, if applicable) in a Current Report on Form 8-K furnished to the SEC. Any director who tenders his or her resignation pursuant to this provision of our Bylaws may not participate in the Nominating and Corporate Governance Committee’s recommendation or Board action regarding whether to accept the resignation offer.