DEF 14A of Build-A-Bear Workshop Inc
Filed Apr 28, 2023 · FY20220001437749-23-011486
PROPOSAL NO. 1. ELECTION OF DIRECTORS
PROPOSAL NO. 1. ELECTION OF DIRECTORS The Company's Board of Directors presently has seven members, divided into three classes which as nearly as possible are equal in number. The classes have staggered three-year terms. As a result, only one class of Directors is elected at each Annual Meeting of our stockholders. Maxine Clark, Narayan Iyengar and Lesli Rotenberg are Class I Directors and their terms will expire at the 2023 Annual Meeting. George Carrara and Sharon John are Class II Directors and their terms will expire at the 2024 Annual Meeting. Robert L. Dixon, Jr. and Craig Leavitt are Class III Directors and their terms will expire at the 2025 Annual Meeting. Currently, all of our Directors hold office until the Annual Meeting of stockholders at which their terms expire or until their successors are duly elected and qualified. Under our Corporate Governance Guidelines, a Director may not stand for election or re-election after reaching the age of 73. Accordingly, our founder, Ms. Clark, will not stand for re-election when her current term expires at the Annual Meeting, and both the size of the Board and the number of directors will be reduced to six. Ms. Clark agreed to the Board of Directors’ request for her to become Director Emeritus upon the expiration of her current term. A Director Emeritus will be not permitted to vote on matters brought before the Board of Directors or any Board committee and will not be counted for the purposes of determining whether a quorum of the Board or a Board committee is present. A Director Emeritus will not be compensated for his or her services. The Nominating and Corporate Governance Committee nominated the remaining Class I Directors, Ms. Rotenberg and Mr. Iyengar, to be re-elected to serve until the 2026 Annual Meeting of stockholders or until their successors are duly elected and qualified. Ms. Rotenberg was referred to us by a non-management member of our Board of Directors and Mr. Iyengar was identified by our Nominating and Corporate Governance Committee during a comprehensive search for director candidates. Both were appointed to the Board of Directors in November 2021.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE NAMED NOMINEES
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE NAMED NOMINEES Proxies cannot be voted for a greater number of persons than the number of nominees named herein. Unless otherwise specified, all proxies will be voted in favor of the two nominees listed herein for election as Directors. The Board has no reason to expect that any of the nominees will be unable to stand for election on the date of the meeting or for good cause will not serve. If a vacancy occurs among the original nominees prior to the meeting, the proxies will be voted for a substitute nominee named by the Board of Directors and for the remaining nominees. Directors are elected by the affirmative vote of the majority of votes cast in person or by proxy with respect to a Director nominee’s election, provided, however, that, in accordance with the Company’s amended and restated bylaws, if the number of nominees exceeds the number of Directors to be elected at the meeting, then Directors shall be elected by the affirmative vote of a plurality of the votes present in person or by proxy and entitled to vote at the meeting.
DIRECTORS
DIRECTORS Set forth below are the names, ages, positions and brief accounts of the business experience for each of our Directors as of April 12, 2023. The biographies of each of the nominees and continuing Directors below contains information each Director has given us about his or her age, all positions he or she holds, his or her principal occupation and business experience for the past five years, and the names of other publicly held companies of which he or she currently serves as a Director or has served as a Director during the past five years. In addition to the information presented below regarding each nominee’s specific experience, qualifications, attributes and skills that led our Board to the conclusion that he or she should serve as a Director, we also believe that all of our Director nominees and continuing Directors have a reputation for integrity, honesty and adherence to high ethical standards. They each have demonstrated business acumen and an ability to exercise sound judgment, as well as a commitment of service to the Company and our Board.
DIRECTORS
| Class I Directors — Terms Expiring in 2023 and Standing for Re-Election | | | | Narayan Iyengar, 48, was appointed to our Board of Directors on November 30, 2021. Since March 2022, Mr. Iyengar has served as the Executive Vice President and Chief Operating Officer of DISH Network Corporation, a publicly traded provider of television entertainment and technology through satellite and streaming services, where he oversees key business operations including customer experience, in-home services, billing and credit, and manufacturing and distribution. His areas of focus include digital transformation, omnichannel customer journeys and accelerating strategic initiatives. Earlier in his career, he served as the Senior Vice President, Digital and E-Commerce of Albertsons Companies, a leading food and drug retailer, from 2017 to 2020, where he led the digital transformation and launched various e-commerce and omnichannel offerings, expanded the loyalty program and enhanced the digital experience. Prior to that, from 2013 to 2017, he served as Vice President, E‑Commerce and Digital Analytics of The Walt Disney Company, a multinational entertainment, and media conglomerate, where he led the growth of e-commerce channel for Walt Disney’s theme parks, resorts, cruise lines and guided family adventures. From 2005 to 2013, Mr. Iyengar was a consultant at McKinsey & Company, a global management consulting firm, and served global clients on topics related to business technology and digital transformation. Mr. Iyengar has also served as on the board, as an advisor and as interim executive at a number of venture-backed firms. He holds a Master of Business Administration, Management from Columbia University Business School and a Bachelor’s Degree in Electronics & Communication Engineering from University of Mysore, India. Mr. Iyengar has extensive operational and e-commerce experience, and he has helped numerous companies in a variety of industries formulate and implement innovative the digital transformation strategies. Mr. Iyengar brings to the Build-A-Bear Workshop Board of Directors valuable and relevant insights regarding digital, sales, marketing and other strategic and operational matters. | | | Lesli Rotenberg, 61, was appointed to our Board of Directors on November 30, 2021. Ms. Rotenberg is the former Chief Programming Executive & General Manager, Children’s Media & Education of the Public Broadcasting Service (“PBS”), an American public media organization and distributor of television and digital content, serving in that role from February 2016 to June 2021. She was responsible for the strategic direction of an innovative, dynamic media service to meet the needs of America’s children, parents, and teachers. While at PBS, she also served as General Manager, Children’s Programming from 2005 to 2016 and as Senior Vice President, Marketing & Communications from 2000 to 2016. Prior to that, Ms. Rotenberg served for ten years at Discovery Communications, Inc. in a variety of senior level management positions with strategic responsibilities for positioning The Discovery Channel, TLC and Animal Planet media brands to consumers, advertisers, cable affiliates and promotion partners. She holds a Bachelor of Science in Journalism from Boston University School of Public Communication. Throughout her career, Ms. Rotenberg developed extensive experience regarding entertainment content creation and distribution, business development, brand management, marketing, digital content, media and strategic planning. With this experience, she provides our Board of Directors with valuable insights and perspectives regarding entertainment, marketing, brand management and other strategic and operational matters. |
DIRECTORS
| Class I Director — Term Expiring in 2023, Not Standing for Re-Election and Becoming Director Emeritus | | | | Maxine Clark, 74, founded the Company in 1997 and served as our Chief Executive Bear until June 2013. She was our President from our inception in 1997 to April 2004 and served as Chairman of our Board of Directors from April 2000 until November 2011. She currently serves as Chief Executive Officer of the Clark-Fox Family Foundation. Prior to founding Build-A-Bear Workshop, Ms. Clark was the President of Payless ShoeSource, Inc. (“Payless”) from 1992 until 1996. Before joining Payless, Ms. Clark spent over 19 years in various divisions of The May Department Stores Company in areas including merchandise development, merchandise planning, merchandise research, marketing and product development. Until recently, Ms. Clark served on the Board of Directors of Foot Locker, Inc., a publicly traded retail company, and she formerly served on the Board of Directors of J. C. Penney Company, Inc., during a time when it was a publicly traded apparel and home retail company. She formerly served on the Board of Directors of The Gymboree Corporation, a formerly publicly reporting retail company, and she currently serves on the Board of Advisors of Lewis & Clark Ventures, a St. Louis-based private equity firm. Ms. Clark is a member of the Board of Trustees and the Executive Committee of Washington University in St. Louis, serves on the national Board of Directors of the Public Broadcasting Service (PBS), and serves on the Boards of Directors of Barnes-Jewish Hospital in St. Louis and the Goldfarb School of Nursing at Barnes-Jewish College. Ms. Clark is an Emeritus Director of the St. Louis Regional Educational and Public Television Commission (KETC/Channel 9 Public Television). She is also a Managing Partner of Prosper Women’s Capital, a fund created to invest in women-owned businesses in the St. Louis area. Ms. Clark is Past Chair of Teach for America-St. Louis and a past member of its national Board of Trustees. She is a past trustee of the International Council of Shopping Centers and a member of the Committee of 200, an organization for women entrepreneurs around the world. Ms. Clark has a bachelor’s degree from the University of Georgia, an Honorary Doctor of Laws from Saint Louis University and an Honorary Doctor of Humane Letters—Education from the University of Missouri, St. Louis. Ms. Clark has extensive leadership and executive experience in the retail industry, which includes founding and leading Build-A-Bear Workshop. She has more than 45 years of experience in the areas of marketing, merchandising, store operations, digital technology, entertainment, strategic planning, and real estate. With this experience, along with her service on the Boards of Directors of other publicly traded retail companies, she brings to the Build-A-Bear Workshop Board of Directors highly relevant and valuable insights and perspectives on all aspects of the Company’s retail and entertainment business. |
DIRECTORS
| Class II Directors — Terms Expiring in 2024 | | | | George Carrara, 54, was appointed to our Board of Directors on July 26, 2019. He is the former President and Chief Operating Officer of Kate Spade & Company, a formerly publicly traded operator of global, multichannel lifestyle brands (“Kate Spade”) (formerly Liz Claiborne Inc. and Fifth & Pacific Companies, Inc.), serving in this role from February 2014 to December 2017 when the company was sold to Coach, Inc. Mr. Carrara oversaw strategy and business development, investor relations, supply chain, e-commerce, finance, global operations and information technology. He served as Chief Financial Officer and Chief Operating Officer of Kate Spade from April 2012 to February 2014. He worked for Tommy Hilfiger North America from 1999 through the sale of the company in 2011 and served in various senior positions, including as Chief Operating Officer from 2006 to 2011; Executive Vice President of U.S. Operations - Wholesale and Retail from 2004 to 2005; Chief Operating Officer and Chief Financial Officer of wholesale operations from 2003 to 2004; and Chief Financial Officer for various wholesale divisions from 1999 to 2003. Prior to that, Mr. Carrara served as Chief Financial and Operating Officer for Mirage Apparel Group. He began his career in the Entrepreneurial Services & Consumer Product Groups at Price Waterhouse, is a Certified Public Accountant and received a Bachelor of Science Degree in Economics from the Wharton School. Since departing Kate Spade, Mr. Carrara has served in various advisory roles in the retail, fashion and e-commerce sectors. He currently serves on the advisory board of Zliide Technologies ApS, a privately owned provider of retail self-checkout systems. Throughout his career, Mr. Carrara has obtained extensive operational as well as commercial, financial and accounting expertise and leveraged these skills to manage transformations and create shareholder value. During his tenure as President and Chief Operating Officer of Kate Spade, he gained expertise in store operations, digital, supply chain, investor relations, international expansion, business development and strategic planning. In various senior finance and operations roles prior to that, Mr. Carrara obtained extensive financial planning, treasury, technology, logistics and accounting experience. Mr. Carrara qualifies as an “audit committee financial expert” as such term is defined under applicable SEC rules. In addition, given his experience with other consumer-focused businesses, Mr. Carrara provides valuable insights and perspectives regarding the financing and operation of the Company’s business. | | | Sharon John, 59, was appointed to the Board of Directors on June 3, 2013 in connection with her employment as Chief Executive Officer and Chief President Bear of the Company. From January 2010 through May 2013, Ms. John served as President of Stride Rite Children’s Group LLC, a division of Wolverine World Wide, Inc., which designs and markets footwear for children. From 2002 through 2009, she held positions of broadened portfolio and increased responsibility at Hasbro, Inc., a multinational toy and board game company, including as General Manager & Senior Vice President of its U.S. Toy Division from 2006 to 2008 and General Manager & Senior Vice President of its Global Preschool unit from June 2008 through 2009. Ms. John also founded and served as Chief Executive Officer of Checkerboard Toys, served as Vice President, U.S. Toy Division with VTech Industries, Inc., and served in a range of roles at Mattel, Inc. She started her career in advertising, overseeing accounts such as Hershey’s and the Snickers/M&M Mars business. Ms. John serves on the Board of Directors of Jack in the Box Inc., a publicly traded restaurant company. Ms. John holds a Bachelor of Science Degree in Communications from the University of Tennessee at Knoxville and a Master of Business Administration from Columbia University. She is married with three children and resides in St. Louis, Missouri. In her various executive management positions, Ms. John gained extensive experience in all aspects of retail branding, including children's brands, marketing to moms and kids, and licensing, product development and innovation expertise. With this background, Ms. John provides Build-A-Bear Workshop with highly relevant and valuable insights and perspectives in leading businesses, strategic planning, brand building, marketing, licensing, merchandising, and retail operations. |
DIRECTORS
| Class III Directors — Terms Expiring in 2025 | | | | Robert L. Dixon, Jr., 67, was appointed to our Board of Directors on February 12, 2018. Mr. Dixon has been the owner of The RD Factor, Inc., a digital and information technology consulting business, since December 2016. Mr. Dixon served as Global Chief Information Officer and Senior Vice President of PepsiCo, Inc. (“PepsiCo”), a publicly traded global food and beverage company, from November 2007 until April 2016 and as Senior Vice President until December 2016. Prior to joining PepsiCo, Mr. Dixon held various positions with The Procter & Gamble Company, a publicly traded consumer household products company, since 1977, including Vice President of Global Business Services from 2005 until 2007. Mr. Dixon serves on the Board of Directors of Elevance Health, Inc., a publicly traded health benefits and services company, and Okta, Inc., a publicly traded software services company. He also serves on the Georgia Institute of Technology Board of Trustees, College of Computing Advisory Board, and the President’s Advisory Board. He previously served on the CIO Advisory Board for International Business Machines Corporation. Mr. Dixon holds a Bachelor of Science Degree in Electrical Engineering from The Georgia Institute of Technology. He and his wife reside in Atlanta, Georgia. Having served as Global Chief Information Officer of a large public company and through his service on the CIO Advisory Board for another large public company, Mr. Dixon has extensive technology experience, including in the area of cybersecurity. He also has significant marketing experiences through his senior positions at two large public companies, both of which have global retail consumer product focus. As a member of the Board of Directors of other publicly traded and private companies, he has gained highly relevant corporate governance experience. | | | Craig Leavitt, 62, was appointed to the Board of Directors on January 4, 2018 and serves as our Non-Executive Chairman. He served as Chief Executive Officer and Director of Kate Spade & Company, a formerly publicly traded operator of global, multichannel lifestyle brands (“Kate Spade”), from February 2014 until August 2017 when the company was sold to Coach, Inc. From October 2010 until February 2014, he was Chief Executive Officer of Kate Spade New York, a division of Fifth & Pacific Companies, Inc. Mr. Leavitt also served as Co-President and Chief Operating Officer of Kate Spade, LLC from April 2008 through October 2010. Prior to joining Kate Spade, LLC, Mr. Leavitt was President of Global Retail at Link Theory Holdings, where he had total responsibility for merchandising, operations, planning, allocation and real estate for the Theory and Helmut Lang retail businesses. Previously, Mr. Leavitt spent several years at Diesel, S.p.A., an Italian retail clothing company, having most recently served as Executive Vice President of Sales and Retail. Mr. Leavitt also spent 16 years at Polo Ralph Lauren, where he held positions of increasing responsibility, the last being Executive Vice President of Retail Concepts. Since leaving Kate Spade, Mr. Leavitt devotes his time to service on Boards of Directors. Mr. Leavitt serves on the Board of Directors of Gildan Activewear, Inc., a publicly traded manufacturer of apparel; Mattress Firm, Inc., an omni-channel mattress specialty retailer; and HDS Global, a grocery and general merchandise e-commerce delivery service. Until recently, Mr. Leavitt served on the Board of Directors of Crate & Barrel Holdings, Inc., a company that owns and operates housewares, furniture and home accessories stores in North America and through franchisees internationally; and NEST Fragrances, LLC, a distributor of home scents, eau de parfums, and fragranced body care products. He also serves on the Board of Directors of The Roundabout Theater Company, one of the largest nonprofit theatre companies in the United States. Mr. Leavitt holds a Bachelor of Arts from Franklin & Marshall College. Mr. Leavitt resides in New York. During his career in the retail industry, Mr. Leavitt has gained extensive experience in the areas of strategic planning, product development and innovation, marketing, store operations, and real estate. His background, including his service as Chief Executive Officer and Director of a publicly traded company, allows him to provide to our Board of Directors insights and perspectives regarding strategic planning, leadership, stockholder relations, business operations, brand management, marketing, and business development. |
BOARD OF DIRECTORS COMPENSATION
BOARD OF DIRECTORS COMPENSATION The table below discloses compensation information of members of the Company’s Board of Directors for serving as members of the Company’s Board for the fiscal year ended January 28, 2023. As a member of management, Sharon John, the Company’s President and Chief Executive Officer, did not receive compensation for her services as Director in fiscal 2022.
BOARD OF DIRECTORS COMPENSATION
| | Fees | | | | | | Earned or | Stock | All Other | | | | Paid in | Awards | Compensation | | | Name: | Cash($)(1) | ($)(2) | ($) | Total ($) | | Craig Leavitt | $86,250 | $95,003 | $- | $181,253 | | George Carrara | 68,500 | 80,000 | - | 148,500 | | Robert L. Dixon, Jr. | 60,000 | 80,000 | - | 140,000 | | Maxine Clark | 50,000 | 80,000 | - | 130,000 | | Narayan Iyengar | 50,000 | 80,000 | - | 130,000 | | Lesli Rotenberg | 50,000 | 80,000 | - | 130,000 |
BOARD OF DIRECTORS COMPENSATION
| (1) Amount shown reflects annual Board, committee Chair and Non-Executive Chairman annual cash retainers. See the “Director Compensation Policies” section below for an explanation of the annual cash retainers. |
BOARD OF DIRECTORS COMPENSATION
| (2) The amounts appearing in the Stock Awards column represent the aggregate grant date fair value computed in accordance with FASB ASC Topic 718 for restricted stock awards granted in fiscal 2022, each of which vests in full on June 9, 2023 except for forfeited awards. Under the Company's Director compensation policies, Mses. Clark and Rotenberg and Messrs. Carrara, Dixon, Iyengar and Leavitt received annual grants of restricted stock on the date of the Company's Annual Meeting for service during the following year. In June 2022, Mr. Leavitt received a grant of 4,857 shares of the Company’s common stock with a grant date fair value of $95,003 and Mses. Clark and Rotenberg and Messrs. Carrara, Dixon and Iyengar each received a grant of 4,090 shares of the Company’s common stock with a grant date fair value of $80,000. These amounts represent the aggregate number of restricted shares outstanding as of the end of fiscal 2022, January 28, 2023, for each Director serving at that time. See Note 12 to the Company’s Consolidated Financial Statements filed as part of our Annual Report on Form 10-K for the year ended January 28, 2023 for a discussion of the assumptions used in the valuation of awards. |
Director Compensation Policies
Director Compensation Policies The Compensation and Development Committee reviews Board compensation annually based on information provided by the Committee’s independent compensation consultant Meridian Compensation Partners, LLC (“Meridian”). Currently, the Board compensation program provides for an annual cash retainer for Board membership, an annual restricted stock award and additional annual cash retainers for committee Chairs. The Non-Executive Chairman receives an additional annual cash retainer and restricted stock award for his service. Board members do not receive additional fees or compensation for attending meetings or for serving on Board committees. Meridian reviewed the Company’s independent Director compensation program compared to the programs of the peer group discussed in the “Executive Compensation Summary” section of this proxy statement. Based on Meridian’s conclusion that the Company’s independent Director compensation was slightly below the 50th percentile relative to the peer group, the annual Board and committee cash retainers and the value of the annual Board restricted stock award, as well as the Non-Executive Chairman’s annual cash retainer and restricted stock award, were left unchanged for fiscal 2022 and remained at levels that had been in effect since fiscal 2016. These amounts are reflected in the table below.
Director Compensation Policies
| Compensation Element | Amount ($) | | Board Cash Retainer | $50,000 | | Restricted Stock Award Value(1) | 80,000 | | Audit Committee Chair Cash Retainer | 18,500 | | Compensation and Development Committee Chair Cash Retainer | 11,250 | | Nominating and Corporate Governance Committee Chair Cash Retainer | 10,000 | | Additional Non-Executive Chairman Cash Retainer | 25,000 | | Additional Non-Executive Chairman Restricted Stock Award Value(1) | 15,000 |
Director Compensation Policies
| (1) The number of shares of restricted stock awarded is determined on the grant date and is prorated in the case of a Director who joins the Board during the year. Grants are made on the date of each Annual Meeting of stockholders and vest one year later, subject to continued service on the Board. Recipients have the right to vote all unvested shares. Dividends declared with respect to unvested shares become payable only if, and to the extent, such shares vest. |
Director Compensation Policies
Prior to November 2020, our Corporate Governance Guidelines required non-management Directors to own shares of the Company’s common stock having a value equal to three times the annual cash retainer for Board membership. In November 2020, the Board amended the Corporate Governance Guidelines to increase the stock ownership guidelines and require non-management Directors to own shares of the Company’s common stock having a value equal to four times the annual cash retainer for Board membership. In November 2021, the Board again amended the Corporate Governance Guidelines to increase the stock ownership guidelines so that now non-management Directors are required own shares of the Company’s common stock having a value equal to five times the annual cash retainer for Board membership. See “Executive Compensation—Stock Ownership Guidelines” for additional information. Under our Corporate Governance Guidelines, no Director may stand for election or re-election after reaching the age of 73. We reimburse our Directors for reasonable out-of-pocket expenses incurred in connection with attendance and participation in Board and committee meetings. We also reimburse our Directors for expenses incurred in the attendance of director continuing education conferences.
Overview of Compensation Program
| • | Alignment with stockholder interests: Compensation should be tied, in part, to our stock performance through the granting of equity awards to align the interests of executive officers with those of our stockholders. | | • | Recognition for business performance: Compensation should correlate in large part with our overall financial results so that the Company pays for performance. | | • | Accountability for individual performance: Compensation should partially depend on the individual executive’s performance, in order to motivate and acknowledge the key contributors to our success. | | • | Competition: Compensation should generally reflect the competitive marketplace and be consistent with that of other well-managed companies in our peer group and the broader retail industry sector. |
Role of Committee Consultants
Role of Committee Consultants For 2022, the Committee retained Meridian as its independent consultant on executive and Director compensation. Meridian’s engagement is to act as the Committee’s independent advisor on executive and Director compensation and in this role, Meridian assisted the Committee in the determination of the peer group, the compensation benchmarking process, and the review and establishment of compensation policies and programs for NEOs. The Committee did not direct Meridian to perform its services in any particular manner or under any particular method, and all decisions with respect to the NEOs’ compensation are made by the Committee. The Committee has the final authority to retain and terminate the compensation consultant and evaluates the consultant annually. The Company has no relationship with Meridian (other than the relationship undertaken by the Committee) and, after consideration of NYSE listing standards pertaining to the independence of compensation consultants, the Committee determined that Meridian is independent. Meridian does not provide any additional services to the Company.
Overview of Key 2022 Compensation Decisions and Results
Overview of Key 2022 Compensation Decisions and Results For 2022, our NEOs’ annual total direct compensation consisted of a mix of base salary, annual cash bonuses, and long-term incentive awards consisting of performance-based restricted stock and time-based restricted stock. In April 2022, the Committee approved adjustments to our NEOs’ compensation programs as highlighted below:
Overview of Key 2022 Compensation Decisions and Results
| • | Approved the Company’s 2022 Bonus Plan, including consolidated earnings before interest, taxes, depreciation and amortization (“EBITDA”) goals, consolidated total revenue (“Revenue”) goals, strategic and operational goals based on loyalty and retail objectives (“Objective Modifiers”), and target bonus levels for NEOs. Fiscal 2022 was the most profitable year in the Company’s history. The Company produced EBITDA of $74.4 million and total revenues of $467.9 million, resulting in a 2022 bonus plan payout of 158.3% of approved base bonus amounts. Both Objective Modifiers were met, but the plan provides that modifiers cannot increase the payout above 100% so neither modifier influenced the bonus plan payout. | | • | The Committee approved a grant of annual long-term incentive awards consisting of three-year performance-based restricted stock and time-based restricted stock for NEOs. The awards for the Chief Executive Officer were split between performance-based restricted stock (70% weighting) and time-based restricted stock (30% weighting). The awards for the other NEOs were split evenly between performance-based restricted stock and time-based restricted stock. Performance metrics for the long-term incentive awards were pre-established profitability growth (75% weighting) and revenue growth (25% weighting) targets for the 2022-2024 performance period. Prior to 2022, the Committee had structured some portion of NEOs’ long-term incentive awards to be based in cash. For 2022, long-term incentive awards for all NEOs were granted in the form of equity in order to further align interests of the NEOs with interests of the stockholders and to reinforce NEO stock ownership. | | • | For our CEO, 59% of her total target compensation was performance-based compensation in the form of target cash bonus and performance-based restricted stock. |
Overview of Key 2022 Compensation Decisions and Results
| ✓ | Payout caps on short- and long-term incentives; |
Overview of Key 2022 Compensation Decisions and Results
| ✓ | No tax gross-up provisions on any compensation or severance events; |
Overview of Key 2022 Compensation Decisions and Results
| ✓ | No cash severance above 2x base salary plus target bonus; |
Overview of Key 2022 Compensation Decisions and Results
| ✓ | No executive perquisite benefits, beyond Company-paid long-term disability insurance; and |
Overview of Key 2022 Compensation Decisions and Results
| ✓ | Use of an independent compensation consultant by the Committee. |
Compensation Market Data and Benchmarking
Compensation Market Data and Benchmarking In September 2021, the Committee’s compensation consultant reviewed the Company’s compensation peer group and developed recommendations for changes for the February 2022 market study. The peer group review considered the following characteristics:
Compensation Market Data and Benchmarking
| • | industry; | | • | revenues; | | • | net income; | | • | market value; | | • | number of employees; and | | • | number of stores. |
Compensation Market Data and Benchmarking
As a result of the review, the Committee approved the use of the following 17 peer companies for the February 2022 market study:
Compensation Market Data and Benchmarking
| American Outdoor Brands, Inc. | iMedia Brands, Inc. | Tilly’s, Inc. | | Blue Apron Holdings, Inc. | J.Jill, Inc. | Vera Bradley Inc. | | Citi Trends Inc. | Kirkland’s, Inc. | Vince Holding Corp. | | Delta Apparel, Inc. | The Marcus Corporation | Weyco Group, Inc. | | Duluth Holdings Inc. | Oxford Industries, Inc. | World Wrestling Entertainment, Inc. | | Funko, Inc. | Shake Shack Inc. | |
Compensation Market Data and Benchmarking
Meridian recommended, and the Committee approved, the removal of the following companies that were included in the peer group that was used for the February 2021 market study: Francesca’s Holdings Corp., because it had been acquired; Kaspien Holdings Inc.,formerly Trans World Entertainment Group, because it had been rebranded as a software company; and Sportman’s Warehouse, Inc., Shoe Carnival, Inc., and Zumiez Inc., because the revenue of each had increased above the peer group target range. Meridian recommended, and the Committee approved, the addition of the following companies:
Compensation Market Data and Benchmarking
| American Outdoor Brands, Inc. | iMedia Brands, Inc. | Oxford Industries, Inc. | | Blue Apron Holdings, Inc. | J.Jill, Inc. | Shake Shack Inc. | | Delta Apparel, Inc. | The Marcus Corporation | World Wrestling Entertainment, Inc. | | Funko, Inc. | | |
Compensation Market Data and Benchmarking
These companies were added because they fit within the peer group criteria discussed above. The Company competes with much larger companies for executive talent, but the Committee believes that the 2022 peer group is appropriate in most instances for compensation benchmarking purposes. In addition to the peer group information, Meridian also summarized market data for the Company’s ISS peer group and provided size-adjusted, retail survey market data from Equilar, Inc. In February 2022, the Committee reviewed a report from Meridian comparing each element of total direct compensation for the Company’s NEOs against market data. The Committee observed that our total target direct compensation levels for 2021 were within a reasonable range of the market 50th percentile for our executive team, which we strive to meet. In addition, the Committee noted that our NEOs’ total compensation was more heavily weighted to long-term incentives than NEOs in the peer group. Furthermore, 70% of our CEO’s target long-term incentive compensation (50% for our other NEOs) is performance-based, subject to the achievement of challenging pre-established performance goals. While market data is an important measuring tool, it is only one of four principal considerations under the Company’s compensation philosophy outlined above. We continue to emphasize performance-based pay.
2022 Bonus Plan
2022 Bonus Plan The Committee approved a cash bonus plan in 2022 (the “2022 Bonus Plan”) for the NEOs, granting potential cash bonuses only if the Company achieved certain financial performance levels and strategic and operating goals. Thus, consistent with all four elements of its compensation philosophy, the Committee aligned the NEOs’ 2022 cash bonuses completely with the interests of our stockholders. On April 12, 2022, the Committee established the fiscal 2022 performance objectives for the range of bonuses to be paid to the Company’s NEOs and the target bonus awards expressed as a percentage of eligible base salary (“Base Bonus Payout”). The 2022 base bonus calculation for each NEO was determined by multiplying the Base Bonus Payout by the officer’s eligible base salary according to the following schedule (“Base Bonus Calculation”):
2022 Bonus Plan
| Name | Base Bonus Payout | | Sharon John | 100% | | Jennifer Kretchmar | 50% | | J. Christopher Hurt | 50% |
2022 Bonus Plan
The Committee established specific revenue and profitability targets. If the Company achieved at least the threshold EBITDA, NEOs would earn between 18.75% and 150% (the “Profitability Percentage of Base Bonus Calculation”) of the Base Bonus Calculation. If the Company achieved at least a specified EBITDA and achieved at least threshold total revenues, the NEOs would earn between 6.25% and 50% (the “Revenue Percentage of Base Bonus Calculation”) of the Base Bonus Calculation. If the Company achieved at least a specified EBITDA and certain specified Objective Modifiers were also attained, the sum of the Profitability Percentage of Base Bonus Calculation and the Revenue Percentage of Base Bonus Calculation would be increased by up to an additional 25%; provided, however, that (i) the Objectives Modifier could not increase the sum of the Profitability Percentage of Base Bonus Calculation and the Revenue Percentage of Base Bonus Calculation to exceed 100%, and (ii) the total amount earned could not exceed 200% of an Executive Officer’s Base Bonus Calculation. Consolidated EBITDA and total revenues results that fell between any of the achievement levels set forth in the 2022 Bonus Plan would have been interpolated between the applicable achievement levels, in the sole discretion of the Committee. This discretion included the ability to increase or reduce the otherwise applicable Percentage of Base Bonus Calculation for each achievement level. The cash bonus, if any, to be paid to each respective NEO was calculated based on the EBITDA goals (75% weighting) is set forth in the table below.
2022 Bonus Plan
| Achievement Level | 2022 Consolidated EBITDA | Percentage of Base Bonus Calculation | | Threshold | $63, 500,000 | 25% | | Target | 70,000,000 | 100% | | Maximum | 76,500,000 | 200% |
2022 Bonus Plan
The cash bonus, if any, to be paid to each respective NEO was calculated based on the total revenues goals (25% weighting) is set forth in the table below.
2022 Bonus Plan
| Achievement Level | 2022 Consolidated Total Revenues | Percentage of Base Bonus Calculation | | Threshold | $412,000,000 | 25% | | Target | 453,000,000 | 100% | | Maximum | 494,000,000 | 200% |
2022 Bonus Plan
The 2022 Bonus Plan also included the Objective Modifiers: Loyalty Objective Modifier: If during fiscal 2022 the Company’s revenue from members of its loyalty club was at least $307 million, the Loyalty Objective Modifier Percentage would have been 15%. Retail Evolution Objective Modifier: If during fiscal 2022 the Company opened at least 20 net new non-mall retail stores (inclusive of strip mall and third-party locations but excluding stuffed animal vending machines), the Retail Evolution Objective Modifier Percentage would have been 10%. Any non-mall retail stores that were closed during fiscal 2022 would have been subtracted from the number of new non-mall retail stores that were opened during the fiscal year when calculating the number of net new non-mall retail stores. Fiscal 2022 was the most profitable year in the Company’s history and revenues were higher than in any fiscal year in over a decade. The Company produced EBITDA of $74.4 million and total revenues of $467.9 million, resulting in a 2022 bonus plan payout of 158.3% of the Base Bonus Payout. The plan provides that Objective Modifiers cannot increase the payout above 100% so although both Objective Modifiers were met, neither modifier influenced the bonus plan payout.
2022 Long-Term Incentive Program
2022 Long-Term Incentive Program The objective of the Company’s long-term incentive program is to provide a long-term retention incentive for the NEOs and to align their interests directly with those of our stockholders by way of stock ownership and payouts based on the Company’s financial performance. In February and March 2022, the Committee reviewed a report of updated market data and industry compensation trends developed by Meridian. The Committee also reviewed the Company’s recent financial and share price performance and the availability of shares to grant under our current 2020 Plan. In April 2022, utilizing this market data, the Committee determined the market value of the total long-term incentive program awards (“LTI Market Value”) for each NEO and approved a grant of annual long-term incentive awards consisting of three-year performance-based awards and time-based restricted stock for NEOs. The awards for the Chief Executive Officer were split between performance-based restricted stock (70% weighting) and time-based restricted stock (30% weighting). The awards for the other NEOs were split evenly between performance-based restricted stock and time-based restricted stock. Prior to 2022, the Committee had structured some portion of NEOs’ long-term incentive awards to be based in cash. For 2022, long-term incentive awards for all NEOs were granted in the form of equity in order to further align interests of our NEOs with interests of our stockholders and to reinforce NEO stock ownership. The performance-based restricted stock awards will be earned if pre-established profitability and revenue goals are attained in fiscal 2022-2024. The design and mix were structured to maintain a strong emphasis on performance and to align with peer practices. In April 2022, the Committee approved the following 2022 long-term incentive awards to the NEOs:
2022 Long-Term Incentive Program
| Name | Number of Shares of Time- Based Restricted Stock | Target Number of Shares of Three-Year Performance- Based Restricted Stock | | Sharon John | 20,799 | 48,530 | | Jennifer Kretchmar | 8,319 | 8,319 | | J. Christopher Hurt | 8,319 | 8,319 |
2022 Long-Term Incentive Program
The target number of shares of three-year performance-based restricted stock awarded to the Chief Executive Officer was derived by dividing 70% of the Chief Executive Officer’s LTI Market Value by the closing sale price of the Company’s common stock on the NYSE on April 12, 2022 and rounding the resulting number to the closest whole number. The target number of shares of three-year performance-based restricted stock awarded to the other NEOs was derived by dividing 50% of his or her LTI Market Value by the closing sale price of the Company’s common stock on the NYSE on April 12, 2022 and rounding the resulting number to the closest whole number. The number of three-year performance-based restricted stock shares, if any, that will be earned by the NEOs will be calculated by multiplying the Target Number of Shares of Three-Year Performance-Based Restricted Stock noted in the table above by the Total Earned Percentage (defined below) based on the Company’s achievement of profitability and revenue goals for fiscal 2022, fiscal 2023 and fiscal 2024. The three-year performance-based restricted stock that is earned, if any, will vest on April 30, 2025. The Committee established specific profitability and revenue growth objectives for fiscal 2022, 2023 and 2024 and assigned a weighting to each objective. Profitability will be measured by the Company’s achievement of established consolidated earnings before interest, taxes and depreciation and amortization (“EBITDA”) growth rate goals, by meeting established compound annual growth rate targets (the “Profitability Growth Objective”). Revenue will be measured by the Company’s achievement of revenue growth, by meeting established compound annual growth rate targets, but only if a minimum established profitability growth rate is also attained (the “Revenue Growth Objective”). The Total Earned Percentage (“Total Earned Percentage”) of the performance-based stock awards will be determined by adding the percent of target number of shares for each performance objective based on the Company’s achievement level of each performance objective over the three-year period multiplied by the weighting assigned to each objective. For the three-year performance period, the Profitability Growth Objective will be weighted 75% and the Revenue Growth Objective will be weighted 25%. Consolidated financial results that fall between any of the established achievement levels will be interpolated between the applicable achievement levels, in the sole discretion of the Committee. This discretion includes the ability to increase or reduce the otherwise applicable percentage of target number of shares or payout amount earned, as applicable, for each achievement level.
Fiscal 2022-2024 Percentage of Target Number of Performance-Based Restricted Shares Earned
Fiscal 2022-2024 Percentage of Target Number of Performance-Based Restricted Shares Earned
Fiscal 2022-2024 Percentage of Target Number of Performance-Based Restricted Shares Earned
| Applicable Achievement Level | Percentage of Base Bonus Calculation | | Below Threshold | 0% | | Threshold | 25% | | Target | 100% | | Maximum | 200% |
Fiscal 2022-2024 Percentage of Target Number of Performance-Based Restricted Shares Earned
The number of shares of time-based restricted stock awarded to each NEO was derived by dividing 30% of the Chief Executive Officer’s LTI Market Value or, for the other NEOs, 50% of his or her LTI Market Value by the closing sale price of the Company’s common stock on the NYSE on April 12, 2022 and rounding the resulting number to the closest whole number that is divisible by three. The time-based restricted stock vests as follows: one-third on April 30, 2023, one third on April 30, 2024, and one-third on April 30, 2025.
Payout of Fiscal 2020-2022 Performance-Based Restricted Stock/Cash
Payout of Fiscal 2020-2022 Performance-Based Restricted Stock/Cash Typically, the Committee approves long-term incentive awards during the first quarter of each fiscal year. Due to the impact of the COVID-19 pandemic in 2020 and the resulting uncertainty in the external environment in general and the Company’s own operating and financial situation, the Committee delayed the approval of the 2020 long-term incentive grants to October 2020. In October 2020, the Committee approved the following 2020 long-term incentive awards to the NEOs:
Payout of Fiscal 2020-2022 Performance-Based Restricted Stock/Cash
| Name | Target Number of Shares of Three-Year Performance- Based Restricted Stock | Target Payout Amount of Three-Year Performance- Based Cash | | Sharon John | 157,374 | $437,500 | | Jennifer Kretchmar | ─ | $150,000 | | J. Christopher Hurt | ─ | $150,000 |
Payout of Fiscal 2020-2022 Performance-Based Restricted Stock/Cash
The number of 2020 Three-Year Performance-Based Restricted Stock shares that would have been earned by the Chief Executive Officer, if any, and the amount of Three-Year Performance-Based Cash that would have been earned by the NEOs, if any, was calculated by multiplying the target shares and target payout amount awarded as set forth above by the total earned percentage of the target shares or target cash, as applicable. The total earned percentage was determined by adding the percent of the target number of shares or target amount of cash earned for each of the five performance objectives in the table below (based on the Company’s achievement level of each performance-objective over the three-year period), multiplied by the weighting assigned to each objective. In April 2023, the Committee determined that the NEOs earned 136.7% of the Target Number of Shares of Three-Year Performance-Based Restricted Stock/Three-Year Performance-Based Cash as set forth below based on the following performance outcomes:
Payout of Fiscal 2020-2022 Performance-Based Restricted Stock/Cash
| Measure | Weighting | Target Objective | Outcome | | 2020 Liquidity Target | 16.67% | Liquidity as of the last day of Fiscal Year 2020 is $25 million or more | Liquidity on the last day of Fiscal Year 2020 exceeded $25 million so 100% of the 2020 Liquidity performance metric was achieved. | | 2020 Innovation Target | 16.67% | Established four objectives related to virtual shopping experience and online in-store streaming events | All four objectives were obtained so 200% of the 2020 innovation performance metric was achieved. | | 2021 Consolidated Earnings Before Interest and Taxes (“EBIT”) | 21.67% | $5 million | Fiscal 2021 EBIT was more than $50 million and, therefore, 200% of the 2021 EBIT Percentage was achieved. | | 2022 Consolidated EBIT | 21.67% | $12.5 million | Fiscal 2022 EBIT was $61.9 million and, therefore, 200% of the 2022 EBIT Percentage was achieved. | | 2021-2022 E-Commerce Growth | 23.32% | 30% | The CAGR of fiscal 2021-2022 Web Demand Sales was less than 20%. As a result, payout was 0%. |
Payout of Fiscal 2020-2022 Performance-Based Restricted Stock/Cash
Accordingly, Ms. John earned 215,130 shares of 2020-2022 Three-Year Performance-Based Restricted Stock that will vest on April 30, 2023, and Three-Year Performance-Based Cash of $598,063 that will be paid in April 2023. Ms. Kretchmar and Mr. Hurt each earned Three-Year Performance-Based Cash of $205,050 that will be paid in April 2023.
Recoupment Provisions Applicable to Performance-Based Awards
Recoupment Provisions Applicable to Performance-Based Awards Cash and performance-based equity earned by or paid or issued to the Company’s executive officers, including the NEOs, under the Company’s annual cash bonus and long-term incentive program are subject to forfeiture and/or recovery in the event the Company is required to restate its financial statements due to the Company’s material noncompliance with any financial reporting requirement under the securities laws. With respect to awards of cash, the Company shall recover the amount of the cash bonus which should not have been paid based on a restatement that impacts applicable performance objectives. In addition, the Committee has discretion to recover interest on the amount recovered from Chief-level officer if the financial restatement results from fraud or similar malfeasance determined to have been committed by such Chief-level officer. In the event of a restatement impacting performance-based restricted stock awards, the Committee will require reimbursement or forfeiture of awards that have been earned and/or which have vested during the three completed fiscal years immediately preceding the date on which the Company is required to prepare an accounting restatement and any transition period within such time period. The amount to be recovered will be the excess of the number of shares of performance-based earned and/or vested based on the erroneous data over the shares of performance-based restricted stock that would have been earned and vested had it been based on the restated results. Methods for recouping the stock may include: (i) seeking recovery of any gain realized on the vesting, sale, transfer or other disposition of the shares; (ii) offsetting the recouped amount from any compensation otherwise owed to the employee; (iii) cancelling outstanding vested or unvested shares of the stock; or (iv) taking any other remedial and recovery action permitted by law. In each case, the recoupment of performance-based awards shall be made in accordance with any incentive compensation recoupment or recovery policy adopted in the future by the Company pursuant to applicable rules and regulations of the SEC and NYSE, or any national securities exchange on which the Company’s common stock is then-listed. We expect to adopt a recoupment policy and/or modify existing recoupment arrangements to reflect the applicability of the NYSE listing standards implementing the final rule promulgated by the SEC for recovery of erroneously awarded compensation once applicable to the Company.
2022 SUMMARY COMPENSATION TABLE
2022 SUMMARY COMPENSATION TABLE The following table sets forth information concerning the annual and long-term compensation for all services rendered in all capacities to the Company for the fiscal years ended January 28, 2023 and January 29, 2022.
2022 SUMMARY COMPENSATION TABLE
| | | | | Non-Equity | | | | | | | Stock | Incentive Plan | All Other | | | Name and Principal | | Salary | Awards | Compensation | Compensation | Total | | Position | Year | ($) | ($)(1) | ($)(2) | ($)(3) | ($) | | Sharon John | 2022 | 756,885 | 1,250,002 | 1,808,697 | 5,494 | 3,821,078 | | President and Chief Executive Officer | 2021 | 730,472 | 812,505 | 1,470,800 | 214,762 | 3,228,539 | | Jennifer Kretchmar | 2022 | 448,015 | 299,983 | 563,347 | 5,208 | 1,316,553 | | Chief Digital and Merchandising Officer | 2021 | 432,370 | 150,001 | 574,350 | 84,093 | 1,240,814 | | J. Christopher Hurt | 2022 | 443,069 | 299,983 | 559,390 | 5,205 | 1,307,647 | | Chief Operations and Experience Officer | 2021 | 427,615 | 150,001 | 569,550 | 84,090 | 1,231,256 |
2022 SUMMARY COMPENSATION TABLE
| (1) The amounts appearing in the Stock Awards column represent the aggregate grant date fair value computed in accordance with FASB ASC Topic 718 for restricted stock awards granted in fiscal 2022 and fiscal 2021. In fiscal 2022, the grants consisted of both time-based restricted stock and performance-based restricted stock. In fiscal 2021, the grants to Ms. John consisted of both time-based restricted stock and performance-based restricted stock, and the grants to Ms. Kretchmar and Mr. Hurt consisted solely of time-based restricted stock. Recipients of time-based restricted stock have the right to vote all unvested shares and accrue dividends with respect to such shares from the date of grant, provided that the dividends are paid upon vesting. Time-based restricted stock granted in fiscal 2022 and fiscal 2021 vests at the rate of one-third per year over three years, beginning on April 30 of the year following the year of grant. With respect to the performance-based restricted stock, Mses. John and Kretchmar and Mr. Hurt do not have dividend or voting rights unless and until applicable performance criteria is satisfied and the awards vest. The fiscal 2022 performance-based restricted stock award will be earned based on profitability and revenue growth objectives for fiscal 2022, 2023 and 2024 as discussed in the “Executive Compensation Summary,” and if earned, will vest on April 30, 2025. The reported grant date fair value of all performance-based awards is based on assumed results at the target achievement level per the instructions to Item 402(c) of Regulation S-K. See Note 12 to the Company’s Consolidated Financial Statements filed as part of our Annual Report on Form 10-K for the year ended January 28, 2023 for a discussion of the assumptions used in the valuation of awards. The grant date fair value of the performance-based restricted stock awards granted in 2022 assuming that the maximum level of performance conditions is achieved were as follows: Ms. John—$1,750,000; Ms. Kretchmar—$300,000; and Mr. Hurt—$300,000. |
2022 SUMMARY COMPENSATION TABLE
| (2) The amounts appearing in the Non-Equity Incentive Plan Compensation column for 2022 for each NEO represent the 2022 Bonus Plan payout and amounts earned under the 2020 long-term Three-Year Performance-Based Cash program based on the Company’s achievement of pre-established performance targets as discussed in the “Executive Compensation Summary.” |
2022 SUMMARY COMPENSATION TABLE
| (3) “All Other Compensation” includes the Company’s contribution to the 401(k) plan and payment by the Company of long-term disability and life insurance premiums for the benefit of the NEOs. For fiscal 2022, Company contributions to our 401(k) plan were as follows: Ms. John—$4,200; Ms. Kretchmar—$4,200; and Mr. Hurt—$4,200. For fiscal 2022, Company-paid premiums for long-term disability insurance were as follows: Ms. John—$816; Ms. Kretchmar—$720; and Mr. Hurt—$720. For fiscal 2022, Company-paid premiums for life insurance were as follows: Ms. John—$478; Ms. Kretchmar—$288; and Mr. Hurt—$285. For fiscal 2021, dividends credited with respect to restricted stock were as follows: Ms. John—$209,219; Ms. Kretchmar—$78,861; and Mr. Hurt—$78,861. A portion of these dividends were paid when some of the underlying restricted stock vested in fiscal 2022 and the remainder will be paid when additional shares of the underlying restricted stock vests in fiscal 2023 and fiscal 2024. |
OUTSTANDING EQUITY AWARDS AT 2022 FISCAL YEAR-END
OUTSTANDING EQUITY AWARDS AT 2022 FISCAL YEAR-END The following table discloses information regarding outstanding awards issued under the Company’s 2004 Incentive Plan, as it has been amended and restated, its 2017 Omnibus Incentive Plan and its 2020 Omnibus Incentive Plan as of the fiscal year ended January 28, 2023.
OUTSTANDING EQUITY AWARDS AT 2022 FISCAL YEAR-END
| | Option Awards | | | | Stock Awards | | | | | | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Number of Shares of Stock That Have Not Vested (#) | Market Value of Shares of Stock That Vested ($) | Equity Incentive Plan Awards: Number of Unearned Have Shares That Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares of Stock That Have Not Vested ($) | | Name | | | | | | | | | | Sharon John | 22,029(1) | - | 20.80 | 3/17/2025 | | | | | | | 92,982(1) | - | 13.69 | 3/7/2026 | | | | | | | 29,673(2) | - | 8.85 | 3/14/2027 | | | | | | | | | | | 215,130(3) | 5,197,541(3) | | | | | | | | | | | 106,190(6) | 2,565,550(6) | | | | | | | | | 97,060(7) | 2,344,970(7) | | | | | | | 96,103(4) | 2,321,848(5) | | | | Jennifer Kretchmar | - | - | | | | | 16,638(7) | 401,974(7) | | | | | | | 38,441(4) | 928,735(5) | | | | J. Christopher Hurt | 5,922 | - | 20.47 | 3/15/2025 | | | | | | | | | | | | | 16,638(7) | 401,974(7) | | | | | | | 38,441(4) | 928,735(5) | | |
OUTSTANDING EQUITY AWARDS AT 2022 FISCAL YEAR-END
| (1) These stock options vested at the rate of one-third per year over three years from March 15 of the year following the grant year. | | (2) These stock options vested at the rate of one-third per year over three years from March 31 of the year following the grant year. | | (3) The amounts reflect the actual number and payout value of performance-based restricted shares earned based on the achievement of pre-established performance targets for 2020, 2021 and 2022. The payout value is based on the closing price of $24.16 for the shares of common stock on January 27, 2023, the last trading day of fiscal 2022. Based on the Company’s achievement of liquidity, profitability and strategic performance objectives for the 2020-2022 performance period, 136.7% of the target shares were earned and will vest on April 30, 2023. The remaining shares were forfeited. | | (4) The amounts represent the total number of time-based restricted shares that have not vested as of January 28, 2023. Time-based restricted stock granted on October 6, 2020 vests as follows: one-third on the first anniversary of the grant date, one-third on April 30, 2022, and one-third on April 30, 2023. The amounts of unvested time-based restricted stock held under the October 2020 awards by our NEOs as of January 28, 2023 are as follows: Ms. John—44,964; Ms. Kretchmar—17,986; Mr. Hurt—17,986. Time-based restricted stock granted on April 13, 2021 vests at the rate of one-third per year over three years from the date of grant beginning on April 30, 2022. The amounts of unvested time-based restricted stock held under the April 2021 award by our NEOs at January 28, 2023 are as follows: Ms. John—30,340; Ms. Kretchmar—12,136; and Mr. Hurt—12,136. Time-based restricted stock granted on April 12, 2022 vests at the rate of one-third per year over three years from the date of grant beginning on April 30, 2023. The amounts of unvested time-based restricted stock held under the April 2022 award by our NEOs at January 28, 2023 are as follows: Ms. John—20,799; Ms. Kretchmar—8,319; and Mr. Hurt—8,319. | | (5) The amounts represent the aggregate market value of time-based restricted shares that have not vested as of January 28, 2023. The amounts reported are based on the closing price of $24.16 for the shares of common stock on January 27, 2023, the last trading day of fiscal 2022. | | (6) The amounts reflect the number and payout value of unearned performance-based restricted shares based on the assumed achievement of maximum profitability and revenue performance objectives for 2021, 2022 and 2023. The payout value is based on the closing price of $24.16 for the shares of common stock on January 27, 2023. If earned, the performance-based shares will vest on April 30, 2024. | | (7) The amounts reflect the number and payout value of unearned performance-based restricted shares based on the assumed achievement of the maximum profitability and revenue growth objectives for 2022, 2023 and 2024 as discussed in the “2022 Long-Term Incentive Program” section of the “Executive Compensation Summary”. The payout value is based on the closing price of $24.16 for the shares of common stock on January 27, 2023. If earned, the performance-based shares will vest on April 30, 2025. |
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL Our NEOs are eligible to receive certain benefits in the event of termination of such officer’s employment, including following a change-in-control. The following table presents potential payments to each of Mses. John and Kretchmar and Mr. Hurt as if his or her employment had been terminated as of January 28, 2023, the last day of fiscal 2022. The termination benefits provided to our NEOs upon their voluntary termination of employment or retirement do not discriminate in scope, terms or operation in favor of our executive officers compared to the benefits offered to all salaried employees, so those benefits are not included in the table below. The amounts presented in the table are in addition to amounts each NEO earned or accrued prior to termination, such as the officer’s balances, if any, in our Nonqualified Deferred Compensation Plan, previously vested options and restricted stock, and accrued vacation.
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
| | | | | Continued | | | | | | Equity With | Perquisites | | | Name/Circumstance | Salary Continuation | Bonus(1) | Accelerated Vesting(2) | and Benefits(3) | Total | | Sharon John | | | | | | | Death | $- | $1,210,678 | $9,974,267 | $- | $11,185,328 | | Disability | - | 1,210,678 | 9,974,267 | - | 11,185,328 | | Severance Termination(4) | 756,885 | 1,210,678 | - | 19,634 | 1,987,197 | | Termination for Cause | - | - | - | - | - | | Involuntary Termination if Change in Control (5) | 1,513,770 | 1,210,678 | 9,974,267 | 19,634 | 12,718,731 | | Change in Control (no termination) | - | - | 9,974,267 | - | 9,974,649 | | Jennifer Kretchmar | | | | | | | Death | - | 358,312 | 1,129,722 | - | 1,488,034 | | Disability | - | 358,312 | 1,129,722 | - | 1,488,034 | | Severance Termination(4) | 448,015 | 358,312 | - | 19,634 | 825,962 | | Termination for Cause | - | - | - | - | - | | Involuntary Termination if Change in Control (5) | 672,023 | 358,312 | 1,129,722 | 19,634 | 2,179,119 | | Change in Control (no termination) | - | - | 1,129,722 | - | 1,129,722 | | J. Christopher Hurt(6) | | | | | | | Death | - | 354,355 | 1,129,722 | - | 1,484,076 | | Disability | - | 354,355 | 1,129,722 | - | 1,484,076 | | Severance Termination(4) | 443,069 | 354,355 | - | 20,581 | 818,005 | | Termination for Cause | - | - | - | - | - | | Involuntary Termination if Change in Control (5) | 664,604 | 354,355 | 1,129,722 | 20,581 | 2,169,261 | | Change in Control (no termination) | - | - | 1,129,722 | - | 1,129,722 |
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
| (1) Where indicated, the Named Executive Officer is entitled to a prorated bonus based on the number of full calendar weeks during the applicable fiscal year during which the executive was employed. Amount shown is the actual bonus approved in April 2023 based on the Company’s 2022 performance. |
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
| (2) The amounts appearing in this column represent the aggregate market value of time-based restricted shares and performance-based restricted shares, the vesting of which would have been accelerated, each based on the closing price of $24.16 for the shares of common stock on January 27, 2023, the last trading date of fiscal 2022. | | (3) The Company will pay each Named Executive Officer a lump sum payment equivalent to 18 months of the Company-paid portion of health, dental and vision coverage. |
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
| (4) Severance Termination would occur if the Company terminated the executive without cause or if the executive terminated his or her employment for good reason prior to a change in control or following a date which is 24 months after a change in control, as each term is defined in the applicable employment agreement. Upon a termination in this case, each Named Executive Officer is entitled to salary continuation for 12 months. | | (5) If a Named Executive Officer’s employment is terminated during the 24-month period following a change in control, we are obligated to (i) in the case of Ms. John, continue her base salary for 24 months and pay her target bonus amount for the fiscal year in which the termination occurs, and (ii) in the case of the non-CEO Named Executive Officers, continue his or her base salary for 18 months and pay an amount equal to the non-CEO Named Executive Officer’s target bonus prorated for the year of termination. | | (6) Mr. Hurt also participates in the Build-A-Bear Workshop, Inc. Nonqualified Deferred Compensation Plan (the “Nonqualified Plan”). The vested balance credited to his notional account under the Nonqualified Plan as of the last day of the fiscal year was $118,595. His vested account balance will be distributed upon his termination of employment or, if elected and earlier, his attainment of age 65 or a designated date. Payment may be accelerated due to Mr. Hurt’s disability or the consummation of a change in control (as defined in the Nonqualified Plan). As elected by Mr. Hurt in accordance with the Nonqualified Plan terms, payment will be made in a single lump sum. |
PAY VERSUS PERFORMANCE
PAY VERSUS PERFORMANCE As required by Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(v) of Regulation S-K, we are providing the following information about the relationship between “compensation actually paid” to our CEO and to our Non-CEO NEOs and certain financial performance of the Company. Compensation actually paid, as determined under SEC requirements, does not reflect the actual amount of compensation earned by or paid to our executive officers during a covered year. For further information concerning the Company’s pay-for-performance philosophy and how the Company aligns executive compensation with the Company’s performance, refer to the “Executive Compensation Summary” section of this proxy statement.
PAY VERSUS PERFORMANCE
| Year | Summary Compensation Table Total For CEO(1) ($) | Compensation Actually Paid to CEO(2) ($) | Average Summary Compensation Table Total for Non-CEO NEOs(3) ($) | Average Compensation Actually Paid To Non-CEO NEOs(2) ($) | Value of Fixed $100 Investment Based on Total Shareholder Return(4) ($) | Net Income (Loss) ($ millions) | | 2022 | 3,821,078 | 7,866,045 | 1,312,100 | 1,677,718 | 601 | 48.0 | | 2021 | 3,228,539 | 11,377,602 | 1,236,035 | 2,267,001 | 439 | 47.3 | | 2020 | 1,946,150 | 2,043,151 | 897,349 | 1,169,323 | 133 | (23.0) |
PAY VERSUS PERFORMANCE
| (1) Ms. John served as the Company’s President and Chief Executive Officer for each year shown. |
PAY VERSUS PERFORMANCE
| (2) Amounts reported in this column are based on total compensation reported for our CEO and average total compensation reported for our other NEOs in the Summary Compensation Table (“SCT”) for the indicated fiscal years and adjusted as shown in the table below to determine the compensation actually paid as calculated in accordance with the requirements of Item 402(v) of Regulation S-K. The fair value of equity awards was computed in accordance with the Company’s methodology used for financial reporting purposes. |
PAY VERSUS PERFORMANCE
| Year | Year | SCT Total Compensation (i) ($) | Minus SCT Equity Awards Total (ii) ($) | Plus Fair Value of Current Year Equity Awards Unvested at Year End (iii) (iv) ($) | Plus Change in Fair Value of Unvested Prior Year Equity Awards (iv) (v) ($) | Plus Change in Fair Value of Equity Awards Vested in Current Year (vi) ($) | Equals Compensation Actually Paid ($) | | | 2022 | 3,821,078 | 1,250,002 | 1,703,128 | 3,300,766 | 291,075 | 7,866,045 | | CEO | 2021 | 3,228,539 | 812,505 | 2,628,961 | 5,455,036 | 877,571 | 11,377,602 | | | 2020 | 1,946,150 | 955,299 | 1,796,586 | (509,303) | (234,982) | 2,043,151 | | | 2022 | 1,312,100 | 299,983 | 406,798 | 205,726 | 53,077 | 1,677,718 | | Other | 2021 | 1,236,035 | 150,001 | 315,475 | 526,052 | 339,439 | 2,267,001 | | NEOs | 2020 | 897,349 | 234,057 | 532,602 | 33,805 | (60,376) | 1,169,323 |
PAY VERSUS PERFORMANCE
| (i) | Includes dividends accrued on unvested time-based restricted stock awards. | | (ii) | For the CEO, represents the total of the amounts reported in the “Stock Awards” column of the SCT and for the Non-CEO NEOs, represents the average total of the amounts reported in the “Stock Awards” column of the SCT, as the grant date fair value of equity awards granted in the applicable year. | | (iii) | For the CEO, represents the total fair value and for the Non-CEO NEOs, represents the average total fair value as of the end of the applicable year of awards granted during the applicable year that remain unvested as of the end of the fiscal year. | | (iv) | Fair value of performance-based restricted stock with unsatisfied performance conditions as of the applicable measurement date also reflects the probable outcome of the applicable performance conditions as of that date. | | (v) | Changes in fair value are measured by comparing fair value as of the end of the applicable year to the fair value as of the end of the prior year. | | (vi) | Changes in fair value are measured by comparing fair value at vesting to the fair value as of the end of the prior year. |
PAY VERSUS PERFORMANCE
| (3) The non-CEO NEOs for the applicable periods were Ms. Kretchmar and Mr. Hurt. | | (4) Total Stockholder Return (“TSR”) represents the cumulative TSR for the Company’s common stock over a three-year period beginning on February 1, 2020 and ending on January 28, 2023. |
PAY VERSUS PERFORMANCE
The charts below describe the relationship between compensation actually paid (“CAP”) to our CEO and to our Non-CEO NEOs (as calculated above) and our TSR and financial performance as measured by our reported Net Income for the indicated years.