DEF 14A of Five Below, Inc
Filed May 5, 2022 · FY20210001193125-22-141473
BOARD NOMINEES
BOARD NOMINEES The following table provides summary information about each director nominee. At the Annual Meeting, directors will be elected by a majority of votes cast for each director nominee.
BOARD NOMINEES
| Name, Age | Director Since | Class | | Committee Membership* | | | | | | | Principal Occupation | AC | CC | NCGC | | Catherine E. Buggeln, 61 | 2015 | I | Consultant | | | | | Michael F. Devine, III, 63 | 2013 | I | Former Executive Vice President and Chief Financial Officer of Coach, Inc. | | | | | Bernard Kim, 45 | n/a | I | President of Publishing of Zynga Inc.; Chief Executive Officer of Match Group, Inc., effective May 31, 2022 | | | | | Ronald L. Sargent, 66 | 2004 | I | Former Chief Executive Officer of Staples, Inc. | | | |
BOARD NOMINEES
| * AC Audit Committee | CC | Compensation Committee | | NCGC Nominating and Corporate Governance Committee | | Chair of the Committee |
Are all of the Class I directors standing for election to the board of directors at the Annual Meeting?
Are all of the Class I directors standing for election to the board of directors at the Annual Meeting? Yes, all of our Class I directors are standing for re-election. In addition, our board has expanded Class I by one seat, upon the recommendation of the nominating and corporate governance committee of the board, and is nominating Bernard Kim to fill that seat.
BOARD OF DIRECTORS
BOARD OF DIRECTORS Our bylaws provide that the number of members of our board of directors shall be determined by our board from time to time. The number of members of our board is currently ten and is divided into three classes with staggered three-year terms. Our board of directors has expanded its size to 11 and to nominate Bernard Kim for election to the newly created board seat. Unless otherwise specified in the proxy, the shares voted pursuant thereto will be cast for each of Messrs. Devine, Kim and Sargent, and Mrs. Buggeln. If, for any reason, at the time of election any of the nominees named should decline or be unable to accept his or her nomination or election, it is intended that such proxy will be voted for a substitute nominee, who would be recommended by our board of directors. Our board of directors, however, has no reason to believe that any of the nominees will be unable to serve as a director. The following biographical information is furnished as to each nominee for election as a director and each of the current directors.
Nominees for Election to the Board of Directors for a Term Expiring at the 2025 Annual Meeting
Nominees for Election to the Board of Directors for a Term Expiring at the 2025 Annual Meeting Catherine E. Buggeln. Ms. Buggeln, 61, has served as a director since March 2015. Ms. Buggeln has been a consultant to various retailers since 2004. From 2012 to 2018, Ms. Buggeln provided advisory services to Irving Place Capital Management, L.P., a private equity firm focused on making equity investments in middle-market companies. Ms. Buggeln formerly served as the Senior Vice President of Strategic Planning and New Business Development at Coach, Inc., a leading marketer of modern classic American accessories, from 2001 to 2005. She currently serves as a director on the boards of two private equity owned companies, Noble Biomaterials, Inc. and Scoop Holdings (cabi). She also previously served as a director of The Timberland Company in 2011, the Vitamin Shoppe from 2009 to 2017, and Ascena Retail Group from 2004 to 2021. Ms. Buggeln’s extensive experience in the retail industry, in both managerial and director roles, led to the conclusion that she should serve as a director of Five Below. Michael F. Devine, III. Mr. Devine, 63, has served as a director since March 2013. Mr. Devine is the former Executive Vice President and Chief Financial Officer of Coach, Inc. Mr. Devine served as Chief Financial Officer at Coach, Inc. since December 2001 and Executive Vice President and Chief Financial Officer since August 2007 until his retirement in August 2011. Mr. Devine currently serves as the Chairman of the Board of Deckers Outdoor Corporation, and also serves as a director of Express, Inc., where he serves on the audit committee. Mr. Devine previously served as a director and member of the audit committee of Nutrisystem, Inc. and as a director of Talbots and Sur La Table. Mr. Devine’s extensive experience in the retail industry, as both an executive officer and director, led to the conclusion that he should serve as a director of Five Below. Bernard Kim. Mr. Kim, 45, is nominated to serve as a director. Mr. Kim has been named the next Chief Executive Officer of Match Group, Inc., a leading provider of digital technologies designed to help people make meaningful connections, effective May 31, 2022. He currently serves as the President of Publishing for Zynga Inc., a global leader in interactive entertainment with a mission to connect the world through games. He has held this position since June 2016. Prior to joining Zynga, Mr. Kim spent nearly ten years at Electronic Arts Inc., as the company’s Senior Vice President of Mobile Publishing. In that role, he oversaw EA’s mobile distribution, strategy, product management, analytics, network engagement, marketing, revenue demand planning, business development, third-party publishing, and mergers & acquisitions. Before joining EA, Mr. Kim served as Director of Sales and Channel Strategy at The Walt Disney Company, where he led sales and retail for Disney Mobile. He holds Bachelor of Arts degrees in both Economics and Communications from Boston College. Mr. Kim’s senior leadership experience with large-scale, growing technology companies led to the conclusion that he should serve as a director of Five Below. Ronald L. Sargent. Mr. Sargent, 66, has served as a director since 2004. Mr. Sargent served as the Chief Executive Officer of Staples, Inc., an office supply company, from 2002 to June 2016 and as Chairman of its board of directors from 2005 to January 2017. Mr. Sargent currently serves as a director of Wells Fargo & Co., where he serves as the Chairman of the human resources committee and as a member of the governance and nominating committee and the audit committee, and The Kroger Co., where he serves as Lead Director, Chairman of the governance committee and as a member of the audit and public responsibilities committees. Mr. Sargent previously served as a director of The Home Depot, Inc. and Mattel, Inc. Mr. Sargent’s experience as an executive officer and director of Staples, Inc. as well as his extensive experience in the retail industry led to the conclusion that he should serve as a director of Five Below.
Members of the Board of Directors Continuing in Office for a Term Expiring at the 2023 Annual Meeting
Members of the Board of Directors Continuing in Office for a Term Expiring at the 2023 Annual Meeting Joel D. Anderson. Mr. Anderson, 57, has served as a director since February 2015, when he was appointed to serve as our President and Chief Executive Officer. Prior to becoming our President and Chief Executive Officer, Mr. Anderson was our President and Chief Operating Officer from July 2014 through January 2015. Prior to joining Five Below, Mr. Anderson served as President and Chief Executive Officer of Walmart.com from 2011 until 2014 and as the divisional Senior Vice President of the Northern Plains division of Walmart, Inc., a global retailer, from 2010 to 2011. Prior to joining Walmart, Mr. Anderson was President of the retail and direct business units for Lenox Group, Inc. and served in various executive positions at Toys “R” Us Inc. over a 14-year period. Mr. Anderson currently serves as a director of Sprouts Farmers Market where he serves on the audit and compensation committees. Mr. Anderson’s experience in the retail industry as well as his position as our President and Chief Executive Officer led to the conclusion that he should serve as a director of Five Below. Kathleen S. Barclay. Ms. Barclay, 66, has served as a director since March 2015. Ms. Barclay served as the Senior Vice President of Human Resources for The Kroger Co., a $100 billion grocery supermarket company, from 2009 until her retirement in 2016. Prior to joining The Kroger Co., Ms. Barclay served in many leadership roles at General Motors Corporation, a multinational automotive corporation, from 1985 to 2010, including Vice President of Global Human Resources from 1998 to 2009. Ms. Barclay currently serves as a director of Kontoor Brands where she serves on the talent & compensation and governance committees. Ms. Barclay’s senior leadership experience with a large-scale, growing retailer led to the conclusion that she should serve as a director of Five Below. Thomas M. Ryan. Mr. Ryan, 69, has served as a director since 2011. In 2011, Mr. Ryan became an operating partner of Advent International Corporation as a part of its Operating Partner Program. Prior to joining our board of directors, Mr. Ryan served as the Chairman of the board of directors, President and Chief Executive Officer of CVS Caremark Corporation, now CVS Health, a retail pharmacy and healthcare corporation, until he retired in 2011. Mr. Ryan became the Chief Executive Officer of CVS Corporation in 1998 and he also served as the Chairman of the board of directors of CVS Corporation from 1999 to 2007. Mr. Ryan also served as the Chairman of CVS Health’s board of directors from 2007 to 2011. Mr. Ryan currently serves as a director of PJT Partners and previously served as a director of Bank of America Corporation, Yum! Brands, Inc. and Vantiv, Inc. Mr. Ryan’s experience in the retail industry, as both an executive officer and director of a large retail company, led to the conclusion that he should serve as a director of Five Below.
Members of the Board of Directors Continuing in Office for a Term Expiring at the 2024 Annual Meeting
Members of the Board of Directors Continuing in Office for a Term Expiring at the 2024 Annual Meeting Dinesh S. Lathi. Mr. Lathi, 51, has served as a director since March 2018. Mr. Lathi is currently the Chief Executive Officer of RugsUSA, a leading e-commerce provider of area rugs and home décor products. He has held this position since January 2022. Mr. Lathi previously served as President and Chief Executive Officer of Tailored Brands, Inc., a leading specialty retailer of men’s suits and formalwear, from March 2019 to March 2021. He joined Tailored Brands’ board of directors in March 2016, and served as its Non-Executive Chairman from April 2017 to August 2018, and its Executive Chairman from August 2018 to March 2019. In August 2020 Tailored Brands, Inc. filed for Chapter 11 bankruptcy protection and, under Mr. Lathi’s leadership, emerged from such protection in December 2020. Previously, he was the Chief Executive Officer of One Kings Lane, a digital home decor shopping platform, from 2014 to 2016, where he also served as the Chief Operating Officer and Chief Financial Officer from 2011 to 2014. Prior to One Kings Lane, Mr. Lathi was a Vice President at eBay, a global online marketplace, where he managed several key areas, including Buyer & Seller Experience. Mr. Lathi’s 20 plus years of leadership experience in the technology and consumer space led to the conclusion that he should serve as a director of Five Below. Richard L. Markee. Mr. Markee, 68, has served as a director since May 2016. Previously, Mr. Markee served in various leadership positions at Vitamin Shoppe, Inc., including as Non-Executive Chairman from January 2016 to June 2016 and from April 2007 to September 2009, Executive Chairman from April 2011 to January 2016 and Chief Executive Officer and Chairman of the Board from September 2009 to April 2011. He held senior management positions at Toys “R” Us, Inc. from 1998 through November 2006, including Vice Chair of Toys “R” Us, Inc. and President of the Babies “R” Us and the Toys “R” Us U.S. and international operation divisions from August 2004 through November 2006. Mr. Markee previously served as a director of Collective Brands, Inc., The Sports Authority, Inc., Dorel Industries and Toys “R” Us. Mr. Markee’s extensive experience in the retail industry led to the conclusion that he should serve as a director of Five Below. Thomas G. Vellios. Mr. Vellios, 67, is the co-founder of Five Below and has served as our Chairman since June 2018, our Executive Chairman from February 2015 until June 2018, and as one of our directors since our incorporation in 2002. Mr. Vellios previously served as our Chief Executive Officer from 2002 until January 31, 2015. Mr. Vellios also served as our President from 2005 until June 2014. Previously, Mr. Vellios served as President, Chief Executive Officer and a director of Zany Brainy, Inc. Prior to joining Zany Brainy, Mr. Vellios served as Senior Vice President, General Merchandise Manager at Caldor, a regional discount chain and a division of the May Company. Mr. Vellios’ 25 plus years of experience in the specialty, department store and discount retail industry, his experience with the management, operations and finance of a retail business, and his knowledge of the Company as a founder led to the conclusion that he should serve as a director of Five Below. Zuhairah S. Washington. Ms. Washington, 44, has served as a director since September 2020. Ms. Washington is currently the President of Otrium, a purpose-driven online marketplace for designer outlet fashion brands. She has held this position since July 2021. Prior to Otrium, Ms. Washington was SVP and Global Head of Strategic Partners, Lodging and Vacation Rentals at Expedia Group, whose brands include Expedia, Hotels.com, Orbitz and VRBO, from January 2019 to August 2021. Prior to joining Expedia, Ms. Washington was at Egon Zehnder, a global management consulting and executive search firm, from 2018 to 2019, and Uber, where she grew businesses from startup to scale and ran one of the top five U.S. markets, from 2013 to 2018. She also founded Kahnoodle, which was named to Entrepreneur Magazine’s 100 Brilliant Companies of 2012. Ms. Washington currently serves as a director of Olo, the leading on-demand e-commerce platform for the restaurant industry. Ms. Washington earned a joint graduate degree: a JD from Harvard Law School and an MBA from Harvard Business School, and graduated magna cum laude from UCLA with a BA in political science and public policy. In March of 2020, she was named as one of the 100 Most Influential Black Executives in Corporate America by Savoy Magazine. Ms. Washington’s senior leadership experience with large-scale, growing technology companies led to the conclusion that she should serve as a director of Five Below. In addition to the information presented above regarding each director’s or nominee’s specific experiences, qualifications, attributes and skills, we believe that all of our directors and nominees have a reputation for integrity and adherence to high ethical standards. Each of our directors and nominees has demonstrated business acumen and an ability to exercise sound judgment, as well as a commitment of service to us and our board. Finally, we value our directors’ and nominee’s experience on other company boards and board committees. There are no family relationships among any of our directors, nominees or executive officers.
Summary of Qualifications and Demographics of Directors and Director Nominees
Summary of Qualifications and Demographics of Directors and Director Nominees The table below summarizes the specific qualifications, attributes, skills, experience and demographics of each director and nominee. In the case of nominees, these are what led our board of directors to conclude that the nominee is qualified to serve on our board of directors. As to the knowledge, skills and experience section, while each director and nominee is generally knowledgeable in each of these areas, an “X” in the chart below indicates that the item is a specific qualification, attribute, skill or experience that each director or nominee brings to our board of directors. The lack of an “X” for a particular item does not mean that the nominee does not possess that qualification, attribute, skill or experience.
Summary of Qualifications and Demographics of Directors and Director Nominees
| | Anderson | Barclay | Buggeln | Devine | Kim | Lathi | Markee | Ryan | Sargent | Vellios | Washington | | Knowledge, Skills and Experience | | | | | | | | | | | | | Branding Experience | X | | X | X | X | | X | X | X | X | X | | Entrepreneurial | X | | X | X | | X | X | X | X | X | X | | Distribution/Logistics Experience | X | | X | X | | | | | X | X | | | Retail Experience | X | X | X | X | X | X | X | X | X | X | X | | Sales and Marketing Experience | X | | X | | X | X | X | X | X | X | X | | Financial Literacy and Experience | X | X | | X | X | X | X | X | X | X | X | | Public Company Management Experience | X | X | X | X | X | X | X | X | X | X | X | | Risk Oversight Experience | X | X | X | X | | X | X | X | X | X | | | Technology (Consumer, Cybersecurity, Big Data, Social) | X | | | X | X | X | | | | X | X | | Demographics | | | | | | | | | | | | | Race / Ethnicity | | | | | | | | | | | | | African American or Black | | | | | | | | | | | X | | Alaskan Native or Native American | | | | | | | | | | | | | Asian | | | | | X | X | | | | | | | Hispanic or Latinx | | | | | | | | | | | | | Native Hawaiian or Pacific Islander | | | | | | | | | | | | | White | X | X | X | X | | | X | X | X | X | | | Two or More Races or Ethnicities | | | | | | | | | | | | | LGBTQ+ | | | | | | | | | | | | | Did Not Disclose Demographic Background | | | | | | | | | | | | | Gender Identity | | | | | | | | | | | | | Female | | X | X | | | | | | | | X | | Male | X | | | X | X | X | X | X | X | X | | | Non-Binary | | | | | | | | | | | | | Did Not Disclose Gender | | | | | | | | | | | | | Board Tenure | | | | | | | | | | | | | Years | 7 | 7 | 7 | 9 | — | 4 | 6 | 11 | 18 | 20 | 1 |
Summary of Qualifications and Demographics of Directors and Director Nominees
The table below summarizes the aggregate diversity characteristics of our directors and nominees:
Summary of Qualifications and Demographics of Directors and Director Nominees
| Board Diversity Matrix (As of May 5, 2022) | | | Total Number of Director Nominees | 11 |
Summary of Qualifications and Demographics of Directors and Director Nominees
| | Female | Male | Non-Binary | Did Not Disclose Gender | | Part I: Gender Identity | | | | | | Directors | 3 | 8 | — | — | | Part II: Demographic Background | | | | | | African American or Black | 1 | — | — | — | | Alaskan Native or Native American | — | — | — | — | | Asian | — | 2 | — | — | | Hispanic or Latinx | — | — | — | — | | Native Hawaiian or Pacific Islander | — | — | — | — | | White | 2 | 6 | — | — | | Two or More Races or Ethnicities | — | — | — | — | | LGBTQ+ | — | | | | | Did Not Disclose Demographic Background | — | | | |
Director Compensation
Director Compensation In fiscal 2020, we engaged Meridian Compensation Partners, LLC (“Meridian”) , the compensation committee’s independent advisor, to review the competitiveness of compensation provided to the board. Following this review, the compensation committee determined that no changes were required to then-current non-employee director pay levels. Accordingly, in fiscal 2021, each of our non-employee directors was entitled to the following pursuant to our Compensation Policy for Non-Employee Directors:
Director Compensation
| • | an annual cash retainer of $70,000, paid quarterly, appropriately pro-rated for partial quarters served; |
Director Compensation
| • | an additional annual cash retainer of $80,000 for the non-executive Chairman of the board, paid quarterly, appropriately pro-rated for partial quarters served; |
Director Compensation
| • | an additional annual cash retainer of $25,000 for each of the audit committee Chair and the compensation committee Chair and $20,000 for the nominating and corporate governance committee Chair, paid quarterly, appropriately pro-rated for partial quarters served; and |
Director Compensation
| • | an annual equity grant with a fair market value of $140,000 in the form of restricted stock units vesting on the date of the next annual meeting, with an additional restricted stock unit grant with fair market value of $150,000 for the non-executive Chairman of the board. |
Director Compensation
| • | If a person becomes a member of the board (including non-executive Chairman of the board) at least 90 days prior to an annual meeting, such person will receive an initial grant of restricted stock units having a Fair Market Value equal to the annual award, appropriately prorated based on the number of days from such person’s commencement of service until the next meeting date over 365. |
Director Compensation
Each non-employee director has the option to receive some or all of his or her cash retainer in the form of shares of our common stock. Directors do not receive a fee for attending meetings, but they are entitled to reimbursement of travel expenses relating to their service. The following table sets forth information on the compensation of all our non-employee directors for fiscal 2021:
Director Compensation
| Name | Fees Earned or Paid in Cash (1) ($) | Stock Awards (2) ($) | Total ($) | | Kathleen S. Barclay | 77,582 | 139,936 | 217,518 | | Catherine E. Buggeln | 70,000 | 139,936 | 209,936 | | Michael F. Devine III | 95,000 | 139,936 | 234,936 | | Dinesh S. Lathi | 70,000 | 139,936 | 209,936 | | Richard L. Markee | 70,000 | 139,936 | 209,936 | | Thomas M. Ryan | 95,000 | 139,936 | 234,936 | | Ronald L. Sargent | 82,418 | 139,936 | 222,354 | | Thomas G. Vellios | 150,000 | 289,960 | 439,960 | | Zuhairah S. Washington | 70,000 | 139,936 | 209,936 |
Director Compensation
| (1) Cash fees include annual director’s retainer and, where applicable, committee Chair fees. Messrs. Lathi, Markee, Ryan and Sargent and Ms. Barclay elected to receive part of their fees in shares of Company stock in the following amounts: $94,247 for Mr. Ryan, $81,796 for Mr. Sargent, $69,570 for each of Messrs. Lathi and Markee, and $17,366 for Ms. Barclay. |
Director Compensation
| (2) The amounts reported in this column reflect the fair value on the grant date of the restricted stock unit awards granted in fiscal 2021 computed in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718, Compensation—Stock Compensation. For a discussion of the assumptions and methodologies used to calculate the amounts referred to above, please see the discussion of restricted stock unit awards contained in Note 1 and Note 8 to the consolidated financial statements included as a part of the 2021 Form 10-K, filed with the SEC on March 30, 2022. The aggregate number of shares subject to restricted stock units outstanding at fiscal year-end for each non-employee director is as follows: 749 units for each of Mses. Barclay, Buggeln and Washington, and Messrs. Devine, Lathi, Markee, Ryan and Sargent, and 2,567 units for Mr. Vellios, each of which will vest on the date of the Annual Meeting. |
Director Compensation
In fiscal 2021, we engaged Meridian once again to review the competitiveness of compensation provided to the board. Following this review, the compensation committee determined to make the following changes effective in fiscal year 2022 and thereafter:
Director Compensation
| • | the annual cash retainer was increased from $70,000 to $85,000; |
Director Compensation
| • | the additional annual cash retainer for the audit committee Chair was increased from $25,000 to $30,000; and |
Director Compensation
| • | the annual equity grant was increased from a fair market value of $140,000 to $165,000. |
Director Compensation
Our non-employee directors are subject to Stock Ownership Guidelines. Pursuant to the guidelines, each non-employee director is required to own shares of our common stock having an aggregate fair market value equal to or greater than five times the highest annual cash retainer payable to a non-employee director in the preceding calendar year pursuant to the Compensation Policy for Non-Employee Directors. For purposes of the guidelines, the highest annual cash retainer will include any cash retainer payable in a given calendar year (even if the payment of which is deferred to a later calendar year) and the value of shares or other property received in lieu of a cash retainer in a given calendar year. Any non-employee director serving at the time the guidelines were adopted in 2014 was given five years from the adoption of the guidelines to attain the specified level of equity ownership. Any non-employee director appointed or elected following the adoption of the guidelines is given five years from the date of such appointment or election to attain the specified level of equity ownership. Compliance with the Stock Ownership Guidelines is measured annually on the first trading day of each calendar year, using the closing price of the Company’s common stock on that day. As of January 3, 2022, all non-employee directors for whom the Stock Ownership Guidelines were effective were in compliance. For purposes of the guidelines, a non-employee director’s holdings include: shares held outright by the non-employee director; vested restricted shares and shares subject to vested but unsettled restricted stock units held by the non-employee director; and, in the discretion of the compensation committee, shares otherwise beneficially owned by the non-employee director. Our board of directors may waive compliance with the guidelines on a case by case basis, but it is anticipated that waivers will be rare and in the event of such a waiver, the board of directors will develop alternative ownership guidelines that reflect the intent of these guidelines and the non-employee director’s personal circumstances.
Fiscal 2021 Compensation Highlights
| • | Annual Incentive Bonuses: |
Fiscal 2021 Compensation Highlights
Target Bonus Opportunities. Fiscal 2021 target bonus opportunities (reflected as a percentage of base salary) were increased from fiscal 2020 levels for Messrs. Bull and Romanko (from 75% to 85% of base salary). Fiscal 2021 Annual Incentive Bonus Payout. The Company achieved beyond the maximum level of performance under the fiscal 2021 annual incentive bonus program for all metrics (which were established in advance by the committee in early fiscal 2021). This resulted in a payout at 220% of each NEO’s target bonus opportunity.
Fiscal 2021 Compensation Highlights
| • | Long-term Equity Incentive Grants: |
Fiscal 2021 Compensation Highlights
| • | In March 2021 the compensation committee granted equity awards to each NEO consisting of time-vesting restricted stock units (“RSUs”) with a 25% weighting and performance-based restricted stock units (“PRSUs”) with a 75% weighting. |
Fiscal 2021 Compensation Highlights
| • | The RSUs vest 50% on the second anniversary of the grant date and 25% on each of the third and fourth anniversaries of the grant date, generally contingent on continued employment with the Company. |
Fiscal 2021 Compensation Highlights
| • | Deferred Compensation Program: In June 2021, our compensation committee approved a nonqualified deferred compensation plan for our Named Executive Officers. Participants in the deferred compensation plan may elect to defer up to eighty-percent (80%) of their annual base salary and annual bonus into the plan. In addition, 100% of amounts refunded from the Five Below 401(k) Retirement Savings Plan as a result of certain tax limits will be automatically deferred into the deferred compensation plan. |
Peer Group
Peer Group The peer group for market compensation analysis we used in fiscal 2021 was developed by the compensation committee with the support of Meridian, its independent advisor, based on a review conducted in fiscal 2019 to ensure the ongoing appropriateness of peers. The group used for fiscal 2021 purposes was comprised of the following similarly-situated companies within the retail industry:
Peer Group
| Aaron’s Burlington Stores Carter’s Columbia Sportswear Deckers Outdoor DSW Floor & Décor Lululemon Athletica | Ollie’s Bargain Outlet Party City RH Sleep Number The Children’s Place Urban Outfitters Williams-Sonoma |
Compensation Consultant
Compensation Consultant In fiscal 2021, the compensation committee engaged Meridian as its independent compensation consultant to conduct market reviews and to provide assistance, guidance, and consideration with respect to, among other things:
Compensation Consultant
| • | Our compensation philosophy and peer group; |
Compensation Consultant
| • | Targeted compensation amounts for Named Executive Officers; |
Compensation Consultant
| • | Ongoing annual and long-term incentive compensation strategy and design; |
Compensation Consultant
| • | Board of directors’ compensation levels and structure; and |
Compensation Consultant
| • | Overall market trends, regulatory developments, and other executive and governance related pay matters |
Compensation Consultant
The compensation committee, in conjunction with its compensation advisor, regularly reviews various elements of our compensation program for both employees and directors. In fiscal 2021, Meridian supported the compensation committee with the mandates listed above and also provided other support, including an update on executive compensation governance and regulatory trends. The compensation committee has examined the independence of Meridian under factors contained in the NASDAQ listing standards and determined that Meridian is independent and concluded that their work for us does not raise any conflict of interest. Because of policies and procedures that Meridian and the compensation committee have in place, the compensation committee is confident that the advice it receives from executive compensation consultants at Meridian is objective and not influenced by Meridian’s or its affiliates’ relationships with the Company or its officers.
Fiscal 2021 Shareholder Engagement on Executive Compensation
| What we heard | How we responded | | For shareholders that voted against Say on Pay, their primary concern was the use of time-based shares for a portion of the covid-adjusted awards. | The compensation committee will commit to exploring alternatives to the use of time-based awards when making discretionary adjustments, where possible. The compensation committee understands that discretionary adjustments should only be made in extraordinary circumstances. | | With respect to any future or anticipated adjustments to long-term incentive awards, shareholders requested that the following practices be taken into consideration: • As noted above, avoid or minimize issuance of time-vest awards as replacement or supplemental awards; • Avoid unusual or accelerated vesting of any replacement or supplemental awards (particularly time-vested awards); and • For awards which are entirely or largely market performance based (such as total shareholder return based awards) consider a cap on payout if absolute TSR is negative. | Beginning in FY 2021, the compensation committee has resumed the Company’s regular incentive programs for executive officers. If circumstances arise where the compensation committee believes it would be in the best interests of shareholders to deviate from those programs, the compensation committee will take this shareholder feedback into consideration in its decision-making process. |
Annual Incentive Bonus
Annual Incentive Bonus Named Executive Officers earn cash incentive awards under the Five Below, Inc. 2020 Performance Bonus Plan (“Incentive Bonus Plan”) for achieving and exceeding our annual financial goals. The Incentive Bonus Plan is administered by the compensation committee. Payouts under the plan are calculated based on our performance relative to targets that are approved by the compensation committee each year. In March 2021, the compensation committee approved the Incentive Bonus Plan design and performance targets for the Named Executive Officers for fiscal 2021. The committee adopted a weighted scorecard approach in 2021 to provide a balanced and motivating annual incentive plan that is also aligned with market best practices.
Annual Incentive Bonus
| • | Each Named Executive Officer has a targeted bonus opportunity defined as a percent of base salary. For fiscal 2021, the target bonus opportunity as a percentage of base salary: for Mr. Anderson was 125%, for Messrs. Bull and Romanko was 85%, and for Mr. Specter and Ms. Werthauser was 75%. |
Annual Incentive Bonus
| • | The payout opportunity is based on pre-incentive adjusted operating income (defined below) and total Company sales for all Named Executive Officers. “Adjusted operating income” means the Company’s operating income (determined prior to giving any effect to any bonuses potentially payable under the Incentive Bonus Plan) as reflected in the Company’s audited financial statements, adjusted to exclude the impact of: (a) all expense (net of reimbursement) incurred as part of a public offering of the Company’s securities, whether by the Company or by selling shareholders or both; (b) expenses incurred related to acquisition transaction costs; (c) income/expense incurred due to a change in accounting principles; (d) external expenses incurred during the start-up period for any new business venture; and (e) any other adjustments that may be approved by the compensation committee. |
Annual Incentive Bonus
| • | Payouts for each metric can range from 0% to 200% of target, with payouts interpolated on a linear basis for actual performance that falls between threshold, target and maximum performance goals. |
Annual Incentive Bonus
| • | Each NEO’s bonus opportunity was further subject to an adjustment upward up to an additional 20% of target based on the Company’s achievement of Company strategic goals in fiscal 2021 with respect to expense reduction and ecommerce initiatives. |
Annual Incentive Bonus
| • | No payouts are earned under the Incentive Bonus Plan if pre-incentive operating income does not meet the threshold level. |
Annual Incentive Bonus
In early fiscal 2021, the compensation committee set target goals that were challenging and considered the Company’s growth expectations and strategy. Additionally, the level of performance required to achieve maximum payout under the Incentive Bonus Plan was determined by the compensation committee to be reflective of truly outstanding performance. The table below summarizes performance levels for pre-incentive operating income and net sales under the Incentive Bonus Plan for fiscal 2021:
Annual Incentive Bonus
| Metric | Threshold (50% payout) | Target (100% payout) | Maximum (200% payout) | Actual Achievement | Actual Achievement (% of target) | | Pre-Incentive Operating Income | $301.3 million | $334.8 million | $368.2 million | $412.1 million | 200% | | Net Sales | $2,549.0 million | $2,629.7 million | $2,713.4 million | $2,848.4 million | 200% |
Annual Incentive Bonus
In addition, the compensation committee set goals related to progress on strategic initiatives. If achieved, this feature would allow NEOs to earn an upward adjustment up to an additional 20% of target. The 20% additional bonus opportunity was split into two parts, with 10% tied to expense reduction, and 10% tied to ecommerce initiatives including deployment of a new order management system and enabling a ship-from-store pilot. The committee ultimately determined that the full 20% additional bonus was earned based on achievements in these two areas. The target bonus opportunities, weighting of performance metrics, and bonus achievement for each of our Named Executive Officers for fiscal 2021 were as follows:
Annual Incentive Bonus
| | Fiscal 2021 Bonus Metric Weightings (% of target) | | | | | | Named Executive Officer | Fiscal 2021 Target Bonus (% of base salary) | Pre-Incentive Operating Income | Net Sales | Additional Strategic Initiatives (% of target) | Fiscal 2021 Bonus Achievement (% of Target) | | Joel D. Anderson | 125% | 60% | 40% | 20% | 220% | | Kenneth R. Bull | 85% | 60% | 40% | 20% | 220% | | Eric M. Specter | 75% | 60% | 40% | 20% | 220% | | Michael F. Romanko | 85% | 60% | 40% | 20% | 220% | | Judy Werthauser | 75% | 60% | 40% | 20% | 220% |
Long-term Equity Incentive Compensation
Long-term Equity Incentive Compensation Equity awards under the Five Below, Inc. Amended and Restated Equity Incentive Plan (the “2016 Plan”) are a vital piece of our total compensation package. They are intended to compensate Named Executive Officers for sustained long-term performance, align the interests of our Named Executive Officers and shareholders and encourage retention through multi-year vesting schedules. Long-term equity incentive awards may take a variety of forms, including the PRSU and RSU grants made in fiscal 2021. Levels, mix, and frequency of awards are determined by the compensation committee, and are designed to reflect each recipient’s level of responsibility and performance.
Overview of Fiscal 2021 Long-term Equity Incentive Awards
Overview of Fiscal 2021 Long-term Equity Incentive Awards Our long-term equity incentive program for fiscal 2021 was designed to deliver 25% of long-term equity incentive value in RSUs and 75% in PRSUs for our Named Executive Officers. This apportionment was determined as we believe this balance of equity grants will motivate and reward for long-term, sustainable performance that is aligned with shareholder interests. The value of our annual equity grants is targeted to be at competitive levels, though actual value realized varies based on our long-term performance. For fiscal 2021, the stated values of the annual equity grants approved by our compensation committee were: $5,000,000 for Mr. Anderson, $900,000 for each of Mr. Romanko and Mr. Bull, and $600,000 for each of Ms. Werthauser and Mr. Specter. These stated values were converted into a number of RSUs and PRSUs by dividing the applicable dollar amount by the closing price of our common stock on the date of grant. Note, however, that the value of these equity grants reported in the Summary Compensation Table and the Grant of Plan-Based Awards Table below is required by SEC rules to be reported based on the grant date fair value of each award, as measured for accounting purposes. For technical reasons, the accounting value for the PRSUs differ from the values noted in this paragraph. Restricted Stock Units The retentive element of RSUs that vest solely based on continued service provides a complement to the PRSUs, which, in addition to containing a service-based vesting component, vest based on the achievement of specified performance criteria. Each RSU represents the right to receive one share of our stock, contingent on continued service to the Company. See “Grant of Plan-Based Awards Table” for more information on the awards granted in fiscal year 2021. RSUs generally vest over a four-year period, with 50% vesting on the second anniversary of grant and 25% vesting on each of the third and fourth anniversaries. In addition, RSUs granted in fiscal 2020 or after generally become fully vested upon a Named Executive Officer’s termination due to his or her death or disability. 2021 Performance-based Restricted Stock Units The PRSUs granted in March of 2021 (the “2021 PRSUs”) were designed to reward performance over three performance periods. Key design details include:
Overview of Fiscal 2021 Long-term Equity Incentive Awards
| • | PRSUs represent the right to receive shares of our common stock based on the attainment of applicable performance criteria and, generally, are further subject to continued service through the performance period. |
Overview of Fiscal 2021 Long-term Equity Incentive Awards
| • | Performance for 50% of the award is evaluated based on the Company’s three-year cumulative operating income, subject to adjustments, if any, as determined by the compensation committee (the “AOI Units”). |
Overview of Fiscal 2021 Long-term Equity Incentive Awards
| • | Performance for the remaining 50% of the award is evaluated based on the Company’s relative total shareholder return performance against the Company’s compensation per group (split equally between three performance periods, each commencing on January 31, 2021 and ending on the last day of fiscal 2021, fiscal 2022, and fiscal 2023, respectively), subject to adjustments, if any, as determined by the compensation committee (the “TSR Units”). |
Overview of Fiscal 2021 Long-term Equity Incentive Awards
| • | Vesting of PRSUs generally subject to continued service through the end of fiscal 2023, with accelerated vesting in certain cases, as noted below. |
Overview of Fiscal 2021 Long-term Equity Incentive Awards
| • | The compensation committee chose these metrics because it believes that there is a strong relationship between growth in operating income, growth in total shareholder return and growth in shareholder value. |
Overview of Fiscal 2021 Long-term Equity Incentive Awards
| • | Between 0%-200% of the PRSUs can be earned at the end of the three-year performance period—if at least threshold performance is not achieved, no PRSUs will vest and the grants will expire with no actual compensation being delivered to the executives. |
Overview of Fiscal 2021 Long-term Equity Incentive Awards
The 2021 PRSUs also included the following accelerated vesting terms. Upon a Named Executive Officer’s termination of employment due to death or disability, AOI Units will vest at the target level, any previously earned TSR units for closed performance periods will vest, and TSR Units for uncompleted TSR periods will vest at the target level. Upon a change in control, AOI Units will vest at the target level, any previously earned TSR units for closed performance periods will vest, and TSR Units for uncompleted TSR periods will vest at the greater of the target level or the actual performance level through the change in control, as determined in the compensation committee’s discretion. We believe that achievement of the target level of performance approved by the compensation committee for the PRSUs for each metric granted in fiscal 2021 is challenging, but achievable with significant effort and skill, and that the maximum level of performance would be indicative of truly outstanding performance. The AOI Units are eligible to be earned based the Company’s three-year cumulative operating income over the performance period, as follows, with interpolation for performance between any two levels:
Overview of Fiscal 2021 Long-term Equity Incentive Awards
| | Payout % of Target | | Maximum | 200% | | Above Target | 150% | | Target | 100% | | Threshold | 50% |
Overview of Fiscal 2021 Long-term Equity Incentive Awards
One third of the TSR Units awarded under the 2021 PRSUs are eligible to be earned based on relative TSR performance during each performance period as follows, with interpolation for performance between any two levels:
Overview of Fiscal 2021 Long-term Equity Incentive Awards
| | TSR Performance Percentile | % of Target TSR Units Earned | | Maximum | 90(th) | 200% | | Outperformance | 75(th) | 150% | | Target | 55(th) | 100% | | Underperformance | 35(th) | 50% | | Threshold | 25(th) | 25% |
Overview of Fiscal 2021 Long-term Equity Incentive Awards
The compensation committee determined that, for Period #1 of the relative TSR portion of the 2021 PRSUs, the Company was in the 29.94th percentile of performance of TSR relative to its peers. This performance results in the Period #1 value of the relative TSR portion of the 2021 PRSUs for each NEO being earned at 37.35% of target, although generally no shares will be delivered to an NEO unless the NEO remains employed by the Company through February 23, 2024. 2020 Performance-based Restricted Stock Units As discussed in detail in our proxy statement for the 2021 Annual Meeting of Shareholders, the compensation committee awarded PRSUs to the NEOs in September 2020 (the “2020 PRSUs”). The 2020 PRSUs have three performance periods, each commencing on September 15, 2020 and ending on the last day of the Company’s 2020, 2021 and 2022 fiscal years, respectively. The 2020 PRSUs may be earned based on a relative TSR metric, which compares the Company’s performance to a group of peer companies during each performance period. The 2020 PRSUs are eligible to be earned for each performance period based on relative TSR performance as follows, with interpolation for performance between any two levels, as follows:
Overview of Fiscal 2021 Long-term Equity Incentive Awards
| | TSR Performance Percentile | % of Target PRSUs Earned | | Maximum | 90(th) | 200% | | Outperformance | 80(th) | 150% | | Target | 60(th) | 100% | | Underperformance | 40(th) | 50% | | Threshold | 25(th) | 25% |
Overview of Fiscal 2021 Long-term Equity Incentive Awards
Generally, no shares will be delivered to an NEO in respect of earned PRSUs unless the NEO remains employed by the Company through January 28, 2023. The compensation committee has determined the following performance outcomes for Period #1 and Period #2 of the 2020 PRSU:
Overview of Fiscal 2021 Long-term Equity Incentive Awards
| Period of 2020 PRSUs | Determination by Committee | Percentile TSR Performance | % of Target PRSUs Earned | | Period #1 | March 2021 | 79.70(th) | 148.21% | | Period #2 | March 2022 | 54.10(th) | 85.24% |
Overview of Fiscal 2021 Long-term Equity Incentive Awards
Period #3 is still open. Promptly following the end of our 2022 fiscal year, the performance outcome for Period #3 will be determined and shares will be issued in respect of PRSUs earned during each period.
Severance Arrangements
Severance Arrangements The Company maintains the Five Below, Inc. Executive Severance Plan (the “Severance Plan”). Under the Severance Plan, Mr. Romanko and Ms. Werthauser, as well as other senior executives of the Company, are eligible to receive 12 months of salary and reimbursements of COBRA expenses upon a termination of employment by the Company without “cause” or a resignation by such executive for “good reason,” as discussed more fully below in the section entitled “Executive Compensation—Potential Payments Upon Termination or Change of Control.” Messrs. Anderson and Specter are not eligible to receive benefits under the Severance Plan, but have severance entitlements built into their employment agreements. Mr. Bull has severance entitlements under both his employment agreement and the Severance Plan. The benefits potentially payable to each executive upon a termination pursuant to the Severance Plan and/or individual employment agreements are more fully described below in the section entitled “Executive Compensation—Potential Payments Upon Termination or Change of Control.” As a general matter, the compensation committee believes that severance arrangements, when properly tailored, are appropriate and necessary to retain the Named Executive Officers and to recruit other potential executive candidates. The compensation committee also believes that reasonable severance benefits should generally be:
Severance Arrangements
| • | established with reference to an executive’s position and current cash compensation opportunities, not with reference to his or her tenure; |
Severance Arrangements
| • | conditioned upon execution of a release of claims against the Company and its affiliates; and |
Severance Arrangements
| • | accompanied by the executive’s commitment not to compete with the Company for a reasonable period following any cessation of his or her employment. |
Severance Arrangements
No Named Executive Officer of the Company has a right to receive a tax gross-up related to the impact of the excise tax under Section 280G of the Internal Revenue Code.
2021 Peer Group
2021 Peer Group In 2021, the compensation committee, with the support of Meridian, its independent advisor, conducted a review of our peer group for market compensation analysis to ensure the ongoing appropriateness of peers. In order to best align our peer group to our revenues and growth projections, Aaron’s Company, the Children’s Place, and Party City were removed from our peer group, and Ulta Beauty, American Eagle Outfitters, and Under Armour were added to our peer group. The new peer group is:
2021 Peer Group
| Company | GICs Industry (8 Digit) | Revenue LTM (SM) | 60 Day Avg Market Cap ($M) as of 12/31/2021 | | Burlington Stores, Inc. | Apparel Retail | $8,987 | $18,877 | | Ulta Beauty, Inc. | Specialty Stores | $8,100 | $21,411 | | Williams-Sonoma, Inc. | Homefurnishing Retail | $8,038 | $13,956 | | Lululemon Athletica Inc. | Apparel, Accessories and Luxury Goods | $5,857 | $56,254 | | Under Armour, Inc. | Apparel, Accessories and Luxury Goods | $5,683 | $10,353 | | American Eagle Outfitters, Inc. | Apparel Retail | $4,795 | $4,360 | | Urban Outfitters, Inc. | Apparel Retail | $4,305 | $3,168 | | RH | Homefurnishing Retail | $3,669 | $12,581 | | Carter’s, Inc. | Apparel, Accessories and Luxury Goods | $3,414 | $4,388 | | Floor & Decor Holdings, Inc. | Home Improvement Retail | $3,243 | $13,758 | | Columbia Sportswear Company | Apparel, Accessories and Luxury Goods | $3,126 | $6,549 | | Designer Brands Inc. | Apparel Retail | $2,983 | $1,079 | | Deckers Outdoor Corporation | Footwear | $2,976 | $10,898 | | Sleep Number Corporation | Homefurnishing Retail | $2,261 | $1,817 | | Ollie’s Bargain Outlet Holdings, Inc. | General Merchandise Stores | $1,768 | $3,795 | | Five Below, Inc. | Specialty Stores | $2,711 | $11,316 | | Percentrank | | 12% | 59% |
Summary Compensation Table
Summary Compensation Table The following table shows the annual compensation paid to or earned by the Named Executive Officers for fiscal years 2021, 2020 and 2019:
Summary Compensation Table
| Name & Principal Position | Year | Salary ($) | Bonus ($) | Non-Equity Incentive Plans Compensation ($) (1) | Stock Awards ($) (2) | Option Awards ($) | All Other Compensation ($) (3) | Total ($) | | Joel D. Anderson | 2021 | 1,000,000 | | 2,750,000 | 5,279,695 | | 18,227 | 9,047,922 | | President and Chief Executive Officer | 2020 | 901,923 | 937,500 | | 14,939,068 | | 8,077 | 16,786,568 | | | 2019 | 925,961 | | 522,500 | 4,500,000 | | 21,115 | 5,969,576 | | Kenneth R. Bull | 2021 | 641,082 | | 1,203,814 | 950,264 | | 22,602 | 2,817,762 | | Chief Financial Officer and Treasurer | 2020 | 572,332 | 351,563 | | 2,578,836 | | 16,691 | 3,519,422 | | | 2019 | 532,308 | | 189,000 | 500,000 | | 21,684 | 1,242,992 | | Eric M. Specter | 2021 | 574,409 | | 951,720 | 633,256 | | 24,671 | 2,184,056 | | Chief Administrative Officer | 2020 | 525,759 | 315,000 | | 2,480,886 | | 19,993 | 3,341,638 | | | 2019 | 537,115 | | 189,000 | 500,000 | | 24,377 | 1,250,492 | | Michael F. Romanko | 2021 | 641,082 | | 1,203,814 | 950,264 | | | 2,795,160 | | Chief Merchandising Officer | 2020 | 574,639 | 351,563 | | 3,068,315 | | | 3,994,517 | | | 2019 | 539,526 | | 192,500 | 500,000 | | | 1,232,026 | | Judy Werthauser | 2021 | 574,409 | | 951,720 | 633,256 | | 15,085 | 2,174,470 | | Chief Experience Officer | 2020 | 518,846 | 315,000 | | 1,866,312 | | | 2,700,158 | | | 2019 | 480,577 | | 178,500 | 1,500,000 | | | 2,659,077 |
Summary Compensation Table
| (1) The amounts in this column for 2021 reflect bonus payments as a result of fiscal 2021 performance, as described under “Compensation Discussion and Analysis—Annual Incentive Bonus.” |
Summary Compensation Table
| (2) The amounts in this column, computed in accordance with current Financial Accounting Standard Board guidance for accounting for and reporting of stock-based compensation, represent the aggregate grant-date fair value of each time-based restricted stock unit and performance-based restricted stock unit award. Further detail surrounding the awards, the method of valuation and the assumptions made are set forth in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of the Company’s Annual Report on Form 10-K under “Critical Accounting Policies and Estimates.” For this purpose, the operating income portion of the PRSUs are valued based on the probable outcome of the performance condition, as determined for purposes of applicable accounting rules as of the grant date. The amounts in the “Stock Awards” column that are attributable to the operating income portion of the PRSUs based on this valuation methodology are: $1,874,890 for Mr. Anderson, $337,484 for each of Messrs. Bull and Romanko, and $224,928 for each of Mr. Specter and Ms. Werthauser. The value of the maximum number of shares that could be earned under the operating income portion of the PRSU awards, based on the closing price of our shares on the grant date, is $3,749,780 for Mr. Anderson, $674,968 for each of Messrs. Bull and Mr. Romanko, and $449,857 for each of Mr. Specter and Ms. Werthauser. |
Summary Compensation Table
| (3) The amounts in the “All Other Compensation” column for fiscal 2021 for each of Messrs. Anderson, Bull and Specter and Ms. Werthauser relate solely to Company matching contributions under the Five Below 401(k) Retirement Savings Plan. |
Grants of Plan-Based Awards
Grants of Plan-Based Awards The following table shows all grants of awards in fiscal 2021 to each of the executive officers named in the Summary Compensation Table:
Grants of Plan-Based Awards
| | Grant Date | Estimated Future Payouts Under Non-Equity Incentive Plan Awards (1) | | | Estimated Future Payouts Under Equity Incentive Plan Awards (2) | | | All Other Stock Awards: Number of Shares of Stock or Units (#) | Grant Date Fair Value of Stock and Option Awards ($)(3) | | Name | | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | | | | Joel D. Anderson | 3/9/2021 | 625,000 | 1,250,000 | 2,750,000 | | | | | | | | 3/9/2021 | | | | | | | 6,841 | 1,249,888 | | | 3/9/2021(4) | | | | 5,131 | 10,261 | 20,522 | | 1,874,890 | | | 3/9/2021(5) | | | | 2,566 | 10,262 | 20,524 | | 2,154,917 | | Kenneth R. Bull | 3/9/2021 | 273,594 | 547,188 | 1,203,814 | | | | | | | | 3/9/2021 | | | | | | | 1,231 | 224,928 | | | 3/9/2021(4) | | | | 924 | 1,847 | 3,694 | | 337,484 | | | 3/9/2021(5) | | | | 462 | 1,847 | 3,694 | | 387,852 | | Eric M. Specter | 3/9/2021 | 216,300 | 432,600 | 951,720 | | | | | | | | 3/9/2021 | | | | | | | 820 | 149,830 | | | 3/9/2021(4) | | | | 616 | 1,231 | 2,462 | | 224,928 | | | 3/9/2021(5) | | | | 308 | 1,231 | 2,462 | | 258,498 | | Michael F. Romanko | 3/9/2021 | 273,594 | 547,188 | 1,203,814 | | | | | | | | 3/9/2021 | | | | | | | 1,231 | 224,928 | | | 3/9/2021(4) | | | | 924 | 1,847 | 3,694 | | 337,484 | | | 3/9/2021(5) | | | | 462 | 1,847 | 3,694 | | 387,852 | | Judy Werthauser | 3/9/2021 | 216,300 | 432,600 | 951,720 | | | | | | | | 3/9/2021 | | | | | | | 820 | 149,830 | | | 3/9/2021(4) | | | | 616 | 1,231 | 2,462 | | 224,928 | | | 3/9/2021(5) | | | | 308 | 1,231 | 2,462 | | 258,498 |
Grants of Plan-Based Awards
| (1) Amounts represent cash bonus opportunities provided to Named Executive Officers under the Incentive Bonus Plan in fiscal 2021, including, for the maximum amount, the opportunity to earn an additional 20% of target (for a total bonus opportunity of 220% of target) based on the achievement of certain strategic initiatives. The criteria used to determine the amount of the annual bonus payable to each executive, as well as the amount earned for fiscal 2021 for each executive, is described above under “Compensation Discussion and Analysis—Annual Incentive Bonus.” |
Grants of Plan-Based Awards
| (2) Amounts represent grants of the 2021 PRSUs under the 2016 Plan, which generally vest based upon the Company’s performance over a three year period. The term “Threshold” means the lowest non-zero amount that could be delivered as PRSUs based on the Company’s performance over the applicable performance period. The threshold is not a minimum amount payable or deliverable. If specified performance objectives are not met for the applicable performance period, no PRSUs would be payable or deliverable for that performance period. For more details, see “Compensation Discussion and Analysis—Long-term Equity Incentive Compensation” above. |
Grants of Plan-Based Awards
| (3) Amounts with respect to stock awards represent the fair value of the awards on the date of grant, as computed in accordance with applicable accounting standards and the assumptions contained in Note 1 and Note 8 to the consolidated financial statements included as a part of the 2021 Form 10-K, filed with the SEC on March 30, 2022. |
Grants of Plan-Based Awards
| (4) Represents the portion of the 2021 PRSUs that may be earned based on the achievement of the cumulative operating income metric. |
Grants of Plan-Based Awards
| (5) Represents the portion of the 2021 PRSUs that may be earned based on the achievement of the relative total shareholder return metric. |
Outstanding Equity Awards at Year End Fiscal 2021
Outstanding Equity Awards at Year End Fiscal 2021 The following table details information concerning unexercised stock options, stock awards that have not vested, and stock awards that have not been earned for each of the executive officers named in the Summary Compensation Table as of January 29, 2022:
Outstanding Equity Awards at Year End Fiscal 2021
| | Option Awards | | | | | Stock Awards | | | | | | Name | Number of Securities Underlying Unexercised Options (#) (Exercisable) | Number of Securities Underlying Unexercised Options (#) (Unexercisable) | Option Grant Date | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Award Grant Date | 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) | | Joel D. Anderson | — | — | — | — | — | 1,811(2) | 3/26/2018 | 287,659 | — | — | | | — | — | — | — | — | 4,810(2) | 3/16/2019 | 764,020 | — | — | | | — | — | — | — | — | 8,256(2) | 3/9/2020 | 1,311,383 | — | — | | | — | — | — | — | — | 15,211(3) | 9/15/2020 | 2,416,115 | — | — | | | — | — | — | — | — | 46,347(4) | 9/15/2020 | 7,361,757 | 19,854(5) | 3,153,609 | | | — | — | — | — | — | 6,841(2) | 3/9/2021 | 1,086,624 | — | — | | | — | — | — | — | — | 1,278(6) | 3/9/2021 | 202,998 | 3,421(7) | 543,392 | | | | | | | | | 3/9/2021 | | 20,522(8) | 3,259,714 | | Kenneth R. Bull | — | — | — | — | — | 453(2) | 3/26/2018 | 71,955 | — | — | | | — | — | — | — | — | 534(2) | 3/16/2019 | 84,821 | — | — | | | — | — | — | — | — | 2,064(2) | 3/9/2020 | 327,846 | — | — | | | — | — | — | — | — | 1,992(3) | 9/15/2020 | 316,409 | — | — | | | — | — | — | — | — | 7,627(4) | 9/15/2020 | 1,211,473 | 3,267(5) | 518,930 | | | — | — | — | — | — | 1,231(2) | 3/9/2021 | 195,532 | — | — | | | — | — | — | — | — | 230(6) | 3/9/2021 | 36,533 | 616(7) | 97,845 | | | | | | | | | 3/9/2021 | | 3,694(8) | 586,755 | | Eric M. Specter | 7,800 | — | 7/28/2014 | 35.27 | 7/28/2024 | — | — | — | — | — | | | 7,194 | — | 3/10/2015 | 28.58 | 3/10/2025 | — | — | — | — | — | | | 4,632 | — | 3/11/2016 | 39.30 | 3/11/2026 | — | — | — | — | — | | | — | — | — | — | — | 453(2) | 3/26/2018 | 71,955 | — | — | | | — | — | — | — | — | 534(2) | 3/16/2019 | 84,821 | — | — | | | — | — | — | — | — | 1,926(2) | 3/9/2020 | 305,926 | — | — | | | — | — | — | — | — | 1,992(3) | 9/15/2020 | 316,409 | — | — | | | — | — | — | — | — | 7,346(4) | 9/15/2020 | 1,166,839 | 3,147(5) | 499,869 | | | — | — | — | — | — | 820(2) | 3/9/2021 | 130,249 | — | — | | | — | — | — | — | — | 153(6) | 3/9/2021 | 24,303 | 410(7) | 65,124 | | | | | | | | | 3/9/2021 | | 2,462(8) | 391,064 | | Michael F. Romanko | — | — | — | — | — | 453(2) | 3/26/2018 | 71,955 | — | — | | | — | — | — | — | — | 1,811(2) | 3/26/2018 | 287,659 | — | — | | | — | — | — | — | — | 534(2) | 3/16/2019 | 84,821 | — | — | | | — | — | — | — | — | 2,752(2) | 3/9/2020 | 437,128 | — | — | | | — | — | — | — | — | 1,992(3) | 9/15/2020 | 316,409 | — | — | | | — | — | — | — | — | 9,031(5) | 9/15/2020 | 1,434,484 | 3,869(5) | 614,552 | | | — | — | — | — | — | 1,231(2) | 3/9/2021 | 195,532 | — | — | | | — | — | — | — | — | 230(6) | 3/9/2021 | 36,533 | 616(7) | 97,845 | | | | | | | | | 3/9/2021 | | 3,694(8) | 586,755 | | Judy Werthauser | — | — | — | — | — | 2,851(9) | 3/16/2019 | 452,853 | — | — | | | — | — | — | — | — | 1,926(2) | 3/9/2020 | 305,926 | — | — | | | — | — | — | — | — | 6,841(4) | 9/15/2020 | 1,086,624 | 2,930(5) | 465,401 | | | — | — | — | — | — | 820(2) | 3/9/2021 | 130,249 | — | — | | | — | — | — | — | — | 153(6) | 3/9/2021 | 24,303 | 410(7) | 65,124 | | | | | | | | | 3/9/2021 | | 2,462(8) | 391,064 |
Outstanding Equity Awards at Year End Fiscal 2021
| (1) This value was calculated using the closing price of our stock on January 28, 2022, the last trading date before the end of fiscal 2021 ($158.84). |
Outstanding Equity Awards at Year End Fiscal 2021
| (2) These restricted stock units vest upon the following time-based schedule: 50% of the restricted stock units vest on the second anniversary of the grant date and 25% of the restricted stock units vest on each of the third and fourth anniversary dates, subject generally to the continued employment of the grantee on each such date. |
Outstanding Equity Awards at Year End Fiscal 2021
| (3) The September 15, 2020 restricted stock unit awards vest 50% on March 1, 2021 and 50% on March 1, 2022, subject generally to the continued employment of the grantee on each such date. |
Outstanding Equity Awards at Year End Fiscal 2021
| (4) These units represent the portion of PRSUs granted on September 15, 2020 that were earned based on performance through the end of fiscal 2020 at 148.21% (i.e. the 2020 PRSUs Period #1 units), and through the end of fiscal 2021 at 85.24% (i.e. the 2020 PRSUs Period #2 units). These shares remain subject to time-based vesting generally based on continued service through January 28, 2023. |
Outstanding Equity Awards at Year End Fiscal 2021
| (5) These units represent the final tranche of the PRSUs granted on September 15, 2020, which are subject to an open performance period. They are shown here at 100% (target) based on TSR performance through the end of fiscal 2021. |
Outstanding Equity Awards at Year End Fiscal 2021
| (6) These units represent the portion of PRSUs granted on March 9, 2021 that were earned based on relative total shareholder return performance through the end of fiscal 2021 at 37.35% (i.e. the 2021 PRSUs Period #1 units). These shares remain subject to time-based vesting generally based on continued service through February 3, 2024. |
Outstanding Equity Awards at Year End Fiscal 2021
| (7) These units represent the TSR portion of the PRSUs granted on March 9, 2021 that are subject to open performance periods. They are shown here at 50% of target based on TSR performance through the end of fiscal 2021. |
Outstanding Equity Awards at Year End Fiscal 2021
| (8) These units represent the AOI portion of the PRSUs granted on March 9, 2021 that are subject to an open performance period. They are shown here at 200% of target based on performance through the end of fiscal 2021. |
Outstanding Equity Awards at Year End Fiscal 2021
| (9) The March 16, 2019 restricted stock unit award to Ms. Werthauser vests ratably on the first three anniversaries of the grant date, subject generally to her continued employment on each such date. |
Option Exercises and Stock Vested
Option Exercises and Stock Vested The following table details stock option exercises and restricted stock units vesting during fiscal 2021 for each of the Named Executive Officers.
Option Exercises and Stock Vested
| | Option Awards | | Stock Awards | | | Name | Number of Shares Acquired on Exercise | Value Realized on Exercise ($) (1) | Number of Shares Acquired on Vesting | Value Realized on Vesting ($) (2) | | Joel D. Anderson | — | — | 25,113 | 4,846,425 | | Kenneth R. Bull | — | — | 3,674 | 707,905 | | Eric M. Specter | 9,900 | 1,509,396 | 3,674 | 707,905 | | Michael F. Romanko | — | — | 5,485 | 1,070,032 | | Judy Werthauser | — | — | 2,850 | 551,361 |
Option Exercises and Stock Vested
| (1) The value realized is the difference between the fair market value of a share of our common stock at the time of exercise and the exercise price of the applicable option so exercised, multiplied by the number of shares acquired on exercise. |
Option Exercises and Stock Vested
| (2) The value realized on vesting is determined by multiplying the number of vested shares by the closing price of the Company’s common stock on the vesting date. |
Nonqualified Deferred Compensation
Nonqualified Deferred Compensation The following table sets forth information with respect to the Company’s Deferred Compensation Plan, which provides for the deferral of compensation for the Named Executive Officers that is not tax-qualified. The Deferred Compensation Plan is described in further detail on page 42 above.
Nonqualified Deferred Compensation
| Name | Executive Contributions in Last Fiscal Year ($)(1) | Registrant Contributions in Last Fiscal Year ($) | Aggregate Earnings in Last Fiscal Year ($) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last Fiscal Year End ($) | | Joel D. Anderson | 142,315 | — | (5,126) | — | 137,189 | | Kenneth R. Bull | 84,175 | — | (4,113) | — | 80,062 | | Eric M. Specter | 13,320 | — | (688) | — | 12,632 | | Michael F. Romanko | — | — | — | — | — | | Judy Werthauser | — | — | — | — | — |
Nonqualified Deferred Compensation
| (1) The amounts listed in this column are reported as compensation in the “Salary” Column of the Summary Compensation Table. |
Potential Payments Upon Termination or Change of Control
Potential Payments Upon Termination or Change of Control We have entered into employment agreements with our Named Executive Officers which generally set forth their entitlements to salary, annual bonus opportunities, eligibility for health and welfare benefits, and severance entitlements, as applicable. The Named Executive Officers are generally subject to standard restrictive covenants under the terms of their employment agreements and/or non-disclosure agreements, including non-competition, non-solicitation and non-disclosure of confidential information. Messrs. Anderson, Bull and Specter have contractual severance entitlements pursuant to their applicable employment agreements (as narratively described below). In addition, Messrs. Bull and Romanko and Ms. Werthauser have entitlements to severance under the Severance Plan. Any severance benefits payable to a Named Executive Officer, whether under an employment agreement or the Severance Plan, are subject to execution of a release. Our Named Executive Officers are also entitled to accelerated vesting of certain equity grants upon the occurrence of a change in control (as defined in our 2016 Plan) and upon certain termination events, as indicated in the table entitled “Potential Payments” below. Under the 2016 Plan, a “Change of Control” is generally deemed to have occurred if:
Potential Payments Upon Termination or Change of Control
| • | any person or group acquires (in one or more transactions) beneficial ownership of our stock possessing 50% or more of the total power to vote for the election of our board of directors; |
Potential Payments Upon Termination or Change of Control
| • | a majority of the members of our board of directors is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of our board of directors prior to the date of the appointment or election; |
Potential Payments Upon Termination or Change of Control
| • | a merger or consolidation with another corporation where our shareholders immediately prior to such transaction will not beneficially own stock possessing 50% or more of the total power to vote for the election of the surviving corporation’s board of directors (without consideration of the rights of any class of stock to elect directors by a separate class vote) immediately after such transaction; |
Potential Payments Upon Termination or Change of Control
| • | any person or group acquires all or substantially all of our assets; |
Potential Payments Upon Termination or Change of Control
| • | we complete a liquidation or dissolution; or |
Potential Payments Upon Termination or Change of Control
| • | our shareholders accept a share exchange, whereby shareholders immediately before such exchange do not (or will not) directly or indirectly own more than 50% of the combined voting power of the surviving entity immediately following such exchange in substantially the same proportion as their ownership immediately before such exchange. |
Potential Payments
Potential Payments The table below summarizes the payments and benefits that each of Messrs. Anderson, Bull, Specter and Romanko and Ms. Werthauser would have been entitled to receive if the executive’s last day of employment with us had been January 29, 2022. For the purpose of calculating amounts in this table, we used a stock price of $158.84, which was the closing price of our stock on January 28, 2022, the last trading date before the end of fiscal 2021.
Potential Payments
| Name | Cash Severance Payment ($) | Accelerated Restricted Stock Unit Vesting ($) | Health Insurance Coverage ($) | Paid Life Insurance Benefit ($) | Total ($) | | Joel D. Anderson | | | | | | | Voluntary termination for good reason or involuntary termination without cause | 1,000,000(1) | — | 12,061(2) | — | 1,012,061 | | No termination following a change in control | — | 13,382,217(3) | — | — | 13,382,217 | | Voluntary termination for good reason or involuntary termination without cause following a change in control | 1,000,000(1) | 13,382,217(3) | 12,061(2) | — | 14,394,278 | | Death | — | 18,960,360(4) | — | 500,000(5) | 19,460,360 | | Disability | — | 18,960,360(4) | — | — | 18,960,360 | | Kenneth R. Bull | | | | | | | Voluntary termination for good reason or involuntary termination without cause | 643,750(6) | — | 12,061(2) | — | 655,811 | | No termination following a change in control | — | 2,255,861(3) | — | — | 2,255,861 | | Voluntary termination for good reason or involuntary termination without cause following a change in control | 643,750(6) | 2,255,861(3) | 12,061(2) | — | 2,911,672 | | Death | — | 3,180,469(4) | — | 500,000(5) | 3,680,469 | | Disability | — | 3,180,469(4) | — | — | 3,180,469 | | Eric M. Specter | | | | | | | Voluntary termination for good reason or involuntary termination without cause | 576,800(1) | — | 14,051(2) | — | 590,851 | | No termination following a change in control | — | 2,009,807(3) | — | — | 2,009,807 | | Voluntary termination for good reason or involuntary termination without cause following a change in control | 576,800(1) | 2,009,807(3) | 14,051(2) | — | 2,600,658 | | Death | — | 2,847,211(4) | — | 500,000(5) | 3,347,211 | | Disability | — | 2,847,211(4) | — | — | 2,847,211 | | Michael F. Romanko | | | | | | | Voluntary termination for good reason or involuntary termination without cause | 643,750(7) | — | 9,406(2) | — | 653,156 | | No termination following a change in control | — | 2,574,535(3) | — | — | 2,574,535 | | Voluntary termination for good reason or involuntary termination without cause following a change in control | 643,750(7) | 2,574,535(3) | 9,406(2) | — | 3,227,691 | | Death | — | 3,608,424(4) | — | 500,000(5) | 4,108,424 | | Disability | — | 3,608,424(4) | — | — | 3,608,424 | | Judy Werthauser | | | | | | | Voluntary termination for good reason or involuntary termination without cause | 576,800(7) | — | 11,981(2) | — | 588,781 | | No termination following a change in control | — | 1,902,287(3) | — | — | 1,902,287 | | Voluntary termination for good reason or involuntary termination without cause following a change in control | 576,800(7) | 1,902,287(3) | 11,981(2) | — | 2,491,068 | | Death | — | 2,791,315(4) | — | 500,000(5) | 3,291,315 | | Disability | — | 2,791,315(4) | — | — | 2,791,315 |
Potential Payments
| (1) Cash severance payments are made over 12 months. |
Potential Payments
| (2) Each executive is entitled to a continuation of their health and dental benefits for up to 12 months. |
Potential Payments
| (3) These amounts reflect 2020 PRSUs and 2021 PRSUs that will become vested upon a change in control. With respect to closed relative TSR performance periods under the 2020 PRSUs and 2021 PRSUs, the amount reflects the number of units earned based on actual performance. With respect to incomplete performance periods (including, without limitation, the operating income portion of the 2021 PRSUs), the amount reflects assumed performance at the target level (although the relative TSR portion of the awards could vest at a higher level based on actual performance). |
Potential Payments
| (4) These amounts reflect RSUs and PRSUs with accelerated vesting in the event of death or disability. RSUs granted in fiscal 2019 and thereafter will become fully vested upon the executive’s death or disability. With respect to closed relative TSR performance periods under the 2020 PRSUs and 2021 PRSUs, the amount reflects the number of units earned based on actual performance. With respect to incomplete performance periods under the PRSUs (including, without limitation, the operating income portion of the 2021 PRSUs), the amount reflects vesting of units at the target level. |
Potential Payments
| (5) This represents a lump sum death benefit under our life insurance program. |
Potential Payments
| (6) Upon a resignation for good reason, Mr. Bull receives all of the cash severance payments in a lump sum. Upon a termination without cause, Mr. Bull receives half of the cash severance payments over a 6-month period and the remainder in a lump sum. |
Potential Payments
| (7) Cash severance payments are made to Mr. Romanko and Ms. Werthauser in a lump sum. |
CEO Pay Ratio
CEO Pay Ratio Under rules adopted pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”), we are required to calculate and disclose the ratio of the total annual compensation of our median employee as compared to the total annual compensation of our CEO. We began by determining that we had 17,676 employees as of November 1, 2021. To determine our median employee, we used the consistently applied compensation measure of “gross pay” (which we define as base salary (or base wages, if an hourly employee) paid in the applicable period, incentives paid in the applicable period (even if earned in a prior period) and equity incentive value realized (due to option exercise or RSU settlement) during the applicable period). We annualized pay for full-time regular employees commencing work in Fiscal Year 2021 and used a valid statistical sampling methodology to provide a reasonable estimate of the median gross pay for the employee population considered. Then we identified employees who we expected were paid within a +/- 5% range of that value, based on our assumptions that the median employee was likely to be within that group and that those within that group had substantially similar probabilities of being the median employee. Next, we determined that our median employee was a part-time support lead. Finally, we determined that median employee’s total compensation, using the same methodology used for our Named Executive Officers, to be $11,454, as compared to our CEO’s total compensation of $9,047,922. Based upon this methodology, we estimate that the ratio of CEO pay to median employee pay for fiscal 2021 is 790:1.
ELECTION OF DIRECTORS
ELECTION OF DIRECTORS At our Annual Meeting, shareholders will elect four Class I directors to hold office until our 2025 annual meeting of shareholders. Nominees were recommended and approved for nomination by our nominating and corporate governance committee. The directors shall serve until their successors have been duly elected and qualified or until any such director’s earlier resignation or removal. Proxies cannot be voted for a greater number of persons than the number of nominees named. If you sign and return the accompanying proxy, your shares will be voted FOR the election of the four nominees recommended by our board of directors, unless you mark the proxy in such a manner as to vote AGAINST or ABSTAIN with respect to one or more nominees. If any nominee for any reason is unable to serve or will not serve, the proxies may be voted for such substitute nominee as the proxy holder may determine. We are not aware of any nominee who will be unable to or will not serve as a director. The following directors are being nominated for election to our board of directors: Catherine E. Buggeln, Michael F. Devine, III, Bernard Kim and Ronald L. Sargent. Please see the discussion under “Board of Directors” in this Proxy Statement for information concerning each of our nominees for director.
ADOPTION OF THE FIVE BELOW, INC. 2022 EQUITY INCENTIVE PLAN
| • | Director Compensation Limits. The 2022 Plan contains annual limits on the compensation payable to our non-employee directors. |