DEF 14A of NRC Health
Filed Apr 11, 2024 · FY20230001437749-24-011731
PROPOSAL NO. 1 – ELECTION OF DIRECTORS
PROPOSAL NO. 1 – ELECTION OF DIRECTORS Our Bylaws provide that the directors shall be divided into three classes, with staggered terms of three years each. At the Annual Meeting, the shareholders will elect two directors to hold office until the 2027 annual meeting of shareholders and until their successors are duly elected and qualified. Unless shareholders otherwise specify, the shares represented by the proxies received will be voted in favor of the election as directors of the two persons named as nominees herein. The Board has no reason to believe that the listed nominees will be unable or unwilling to serve as directors if elected. However, in the event that any nominee should be unable to serve or for good cause will not serve, the shares represented by proxies received will be voted for another nominee selected by the Board. Each director will be elected by a majority of the votes cast at the Annual Meeting (assuming a quorum is present) in an uncontested election. Consequently, any shares not voted at the Annual Meeting, whether due to abstentions, broker non-votes or otherwise, will have no impact on the election of the directors. Votes will be tabulated by an inspector of elections appointed by the Board. The following sets forth certain information about the Board’s nominees for election at the Annual Meeting and each director of the Company whose term will continue after the Annual Meeting.
Nominees for Election at the Annual Meeting
Nominees for Election at the Annual Meeting Term expiring at the 2027 Annual Meeting Michael D. Hays, 69, has served as Chief Executive Officer and a director since he founded the Company in 1981. He also served as President of the Company from 1981 to 2004, from July 2008 to July 2011, and from October 2020 to present. Prior to founding the Company, Mr. Hays served for seven years as a Vice President and a director of SRI Research Center, Inc. (n/k/a the Gallup Organization). Mr. Hays’ background as founder of the Company, and his long and successful tenure as Chief Executive Officer and a director, led to the conclusion that he should serve as a director of the Company. John N. Nunnelly, 71, has served as a director of the Company since December 1997, and lead director since May 2012. Mr. Nunnelly is a retired Group President from McKesson Corporation, a leader in pharmaceutical distribution and healthcare information technology. During his 28-year career at McKesson, Mr. Nunnelly served in a variety of other positions, including Vice President of Strategic Planning and Business Development, Vice President and General Manager of the Amherst Product Group and Vice President of Sales-Decision Support. These responsibilities included leading several business units, including one with over $360 million in annual revenue. In addition, he was involved in managing a number of mergers and acquisitions. Mr. Nunnelly has also served as an adjunct professor at the University of Massachusetts, School of Nursing, advising students and faculty on matters pertaining to healthcare information technology. These experiences and Mr. Nunnelly’s expertise as a professional and educator in the field of healthcare information technology led to the conclusion that he should serve as a director of the Company. THE BOARD UNANIMOUSLY RECOMMENDS THE FOREGOING NOMINEES FOR ELECTION AS DIRECTORS AND URGES EACH SHAREHOLDER TO VOTE “FOR” SUCH NOMINEES. SHARES OF THE COMPANY’S COMMON STOCK REPRESENTED BY EXECUTED BUT UNMARKED PROXIES WILL BE VOTED “FOR” SUCH NOMINEES.
Directors Continuing in Office
Directors Continuing in Office Terms expiring at the 2025 Annual Meeting Donald M. Berwick, 77, has served as a director of the Company since October 2015. Dr. Berwick is the former President and Chief Executive Officer of the Institute for Healthcare Improvement, which he co-founded and led for almost 20 years, and where he now serves as President Emeritus and Senior Fellow. He is currently a Lecturer in the Department of Health Care Policy at Harvard Medical School, serves on the board and the audit committee of LumiraDx, Ltd (OTC: LMDXF), and on the board of Virta Health. From July 2010 to December 2011, Dr. Berwick served as the Administrator of the Centers for Medicare and Medicaid Services as an appointee of President Barack Obama. Dr. Berwick previously served on the faculty of the Harvard Medical School and the Harvard School of Public Health (from 1974 to 2010). He was also vice chair of the U.S. Preventive Services Task Force (from 1990 to 1995), the first “Independent Member” of the Board of Trustees of the American Hospital Association (from 1996 to 1999) and the chair of the National Advisory Council of the Agency for Healthcare Research and Quality (from 1995 to 1999). Dr. Berwick’s expertise as a professional, administrator, lecturer and educator in the field of healthcare led to the conclusion that he should serve as a director of the Company. Stephen H. Lockhart, 65, has served as a director of the Company since May 2021. Dr. Lockhart served as senior vice president and chief medical officer for Sutter Health Network, a not-for-profit system of hospitals, physician organizations, and research institutions in Northern California, from 2015 to 2021. Prior to that role, Dr. Lockhart served as Sutter Health Network’s regional chief medical officer for the East Bay Region from 2010 to 2015. From 2008 to 2010, Dr. Lockhart served as the chief administrative officer at the St. Luke’s campus of Sutter’s California Pacific Medical Center. In 2017, Dr. Lockhart was named to California Governor Brown’s Advisory Committee on Precision Medicine as part of California’s effort to use advanced computing and technology to better understand, treat, and prevent disease. Dr. Lockhart serves on the board of Molina Healthcare, Inc. (NYSE: MOH), a health plan provider under Medicaid and Medicare programs and in state insurance marketplaces, and West Pharmaceutical Services, Inc. (NYSE: WST), manufacturer of integrated containment and delivery systems for injectable drugs and healthcare products. Dr. Lockhart also serves on the boards of the ECRI Institute, Recreational Equipment, Inc., the David and Lucile Packard Foundation, and is chairman of Parks California – a nonprofit dedicated to supporting California's parks and public lands. Dr. Lockhart’s 36 years of experience in the healthcare industry and his background as medical provider and administrator in a large healthcare system led to the conclusion that he should serve as a director of the Company. Term expiring at the 2026 Annual Meeting Parul Bhandari, 48, has served as a director of the Company since May 2022. Ms. Bhandari has more than 20 years of experience driving growth and innovation at the world’s leading technology and business development companies. Since 2012, she has held various leadership roles at Microsoft Corporation (NASDAQ: MSFT). Currently, Ms. Bhandari is the Director, Partner Strategy, Worldwide Media and Communications at Microsoft, where she contributes to global partner recruiting, enablement and engagement. Previously, Ms. Bhandari was focused on leading Data and AI for Microsoft’s Worldwide Public Sector. Prior to joining Microsoft, Ms. Bhandari served as Vice President of Business Development and Alliances for the management consulting firm Acelsior, teaming with large defense contractors. Ms. Bhandari has served as a director of Timberland Bancorp, Inc. (NASDAQ: TSBK) since 2021. Ms. Bhandari also served as a director of Cartica Acquisition Corp (NASDAQ: CITE), a blank check company, from January 2022 to May 2023. Ms. Bhandari’s expertise as an accomplished technology leader, leveraging data and AI, as well as her experience driving industry solutions and engaging in digital transformation initiatives, led to the conclusion that she should serve as a director of the Company. Penny A. Wheeler, 65, has served as a director of the Company since May 2021. From 2015 to 2021, Dr. Wheeler served as the chief executive officer of Allina Health, a not-for-profit healthcare system serving over 1.5 million individuals in Minnesota and western Wisconsin. Prior to that role she served as chief clinical officer since 2006. For 20 years, Dr. Wheeler has also served as a board certified obstetrician/gynecologist where she spent considerable time interacting with, and caring for, patients and the community. In 2015, Minnesota Governor Mark Dayton appointed Dr. Wheeler to the Taskforce for Health Care Financing, and Dr. Wheeler has been named as one of the top 25 women in health care by Modern Healthcare magazine. In 2023 Dr. Wheeler was elected to the University of Minnesota Board of Regents, and she also serves on the board of Portico Healthnet, a not-for-profit organization dedicated to helping uninsured Minnesotans receive affordable health coverage and care, St. Thomas University, and the University of Minnesota Foundation. She is also on the Board of Cedar Cares, an organization that eases the patient billing experience through customized engagement. Dr. Wheeler’s past leadership experiences in the healthcare industry led to the conclusion that she should serve as a director of the Company.
Board Diversity Matrix
Board Diversity Matrix The Company is committed to diversity and inclusion, and the diverse nature of the Board reflects our commitment. The Company believes that a variety of backgrounds, experiences, perspectives, and points of view contribute to a more effective decision-making process and the Board is committed to considering diversity of race, ethnicity, gender, age, cultural background, and professional experiences in evaluating the composition of the Board. The Board Diversity Matrix below reports self-identified diversity statistics of the Board in accordance with NASDAQ rules.
Board Diversity Matrix
| Board Diversity Matrix | | | | | | | | | | | As of April 11, 2024 | | | | As of April 6, 2023 | | | | | Total Number of Directors | 6 | | | | 6 | | | | | | Female | Male | Non- Binary | Did Not Disclose Gender | Female | Male | Non- Binary | Did Not Disclose Gender | | Part I: Gender Identity | | | | | | | | | | Directors | 2 | 4 | 0 | 0 | 2 | 4 | 0 | 0 | | Part II: Demographic Background | | | | | | | | | | African American or Black | 0 | 1 | 0 | 0 | 0 | 1 | 0 | 0 | | Alaskan Native or Native American | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | | Asian | 1 | 0 | 0 | 0 | 1 | 0 | 0 | 0 | | Hispanic or Latinx | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | | Native Hawaiian or Pacific Islander | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | | White | 1 | 3 | 0 | 0 | 1 | 3 | 0 | 0 | | Two or More Races or Ethnicities | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | | LGBTQ+ | 1 | | | | 0 | | | | | Did Not Disclose Demographic Background | 0 | | | | 0 | | | |
CORPORATE GOVERNANCE
CORPORATE GOVERNANCE
Independent Directors and Annual Meeting Attendance
Independent Directors and Annual Meeting Attendance Of the six directors currently serving on the Board, the Board has determined that Donald M. Berwick, Parul Bhandari, Stephen H. Lockhart, John N. Nunnelly, and Penny A. Wheeler are “independent directors” as that term is defined in the listing standards of The NASDAQ Stock Market. Directors are typically expected to attend our annual meeting of shareholders each year. However, only Mr. Nunnelly was able to attend our 2023 annual meeting of shareholders. For the 2024 Annual Meeting, such attendance will be through the Internet via live webcast. Currently, we do not have a chairman, and the Board does not have a policy on whether the roles of chief executive officer and chairman should be separate. The Board has, however, designated a lead director since 2007, with Mr. Nunnelly serving as the lead director since May 2012. The Board believes its current leadership structure is appropriate at this time since it establishes our chief executive officer as the primary executive leader with one vision and eliminates ambiguity as to who has primary responsibility for our performance. The lead director is an independent director who is appointed by the independent directors and who works closely with the chief executive officer. In addition to serving as the principal liaison between the independent directors and the chief executive officer in matters relating to the Board as a whole, the primary responsibilities of the lead director are as follows:
2023 DIRECTOR COMPENSATION
2023 DIRECTOR COMPENSATION Directors who are executive officers of the Company receive no compensation for service as members of either the Board or committees thereof. Directors who are not executive officers of the Company receive an annual fixed fee of $75,000 for the lead director and $50,000 for each other director. Directors are also reimbursed for out-of-pocket expenses associated with attending meetings of the Board and committees thereof. Mr. Nunnelly has served as our lead director since May 2012. Pursuant to the National Research Corporation 2004 Non-Employee Director Stock Plan, as amended (the “Director Plan”), each director who is not an associate (i.e., employee) of the Company also receives an annual grant of an option to purchase shares of our Common Stock on the date of each Annual Meeting of Shareholders. For the period from January 1, 2023 to December 31, 2023, each director continuing in office who was not an associate of the Company received a grant of options to purchase shares of our Common Stock with a target grant date fair value of approximately $100,000, rounded to the nearest whole share and computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation-Stock Compensation (“FASB ASC Topic 718”), or successor rule, on the date of our 2023 annual meeting of shareholders (May 11, 2023). The options were granted with an exercise price equal to the fair market value of our common stock on the date of grant, are scheduled to vest the day immediately preceding the Annual Meeting and expire on May 11, 2033. The options granted to our directors during 2023 were granted in accordance with our Board’s standard practice of making annual options grants effective on the date of the annual meeting of shareholders. The timing of the grants was not tied to the timing of any release of material nonpublic information. The following table sets forth information regarding the compensation received by each of our directors during 2023:
2023 DIRECTOR COMPENSATION
| Director | Fees Earned or Paid in Cash | Option Awards(1) | All Other Compensation | Total | | Donald M. Berwick | $50,000 | $100,006 | - | $150,006 | | Parul Bhandari | $50,000 | $100,006 | $31,150(2) | $181,156 | | Stephen H. Lockhart | $50,000 | $100,006 | - | $150,006 | | John N. Nunnelly | $75,000 | $100,006 | - | $175,006 | | Penny A. Wheeler | $50,000 | $100,006 | - | $150,006 |
2023 DIRECTOR COMPENSATION
(1) Represents the aggregate grant date fair value of option awards granted during the year, computed in accordance with FASB ASC Topic 718. See Note 9 to our Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2023, for a discussion of assumptions made in the valuation of share-based compensation. As of December 31, 2023, the outstanding option awards for each director were as follows: Dr. Berwick – 40,753 options; Ms. Bhandari – 31,542 options; Dr. Lockhart – 33,575 options; Mr. Nunnelly – 53,591 options; and Dr. Wheeler – 33,575 options. (2) Represents reimbursement of fees for Ms. Bhandari to attend a continuing education course for directors at Harvard Business School.
Overview of Executive Compensation Philosophy
| ✔ | Conservative pay policy with total Named Executive Officer and director compensation positioned below the median | | ✔ | Direct link between pay and performance that aligns business strategies with shareholder value creation | | ✔ | Annual say-on-pay votes | | ✔ | No tax gross-ups | | ✔ | No excessive perquisites for executives | | ✔ | No re-pricing or back-dating of stock options or similar awards | | ✔ | Appropriate balance between short- and long-term compensation that discourages short-term risk taking at the expense of long-term results | | ✔ | Clawback Policy |
Overview of Executive Compensation Philosophy
| ● | Competitive Pay for Our Market. We strive to compensate our executive officers at levels to ensure that we continue to attract and retain a highly competent and committed management team. |
Overview of Executive Compensation Philosophy
| ● | Incentivize Performance. We link our executive officers’ compensation to our established financial performance goals. |
Annual Cash Incentive
Annual Cash Incentive During 2023, our executive officers were eligible for annual cash incentive awards under our incentive compensation program. Please note that, while we may refer to annual cash incentive awards as bonuses in this discussion, the award amounts are reported in the Summary Compensation Table under the column titled “Non-Equity Incentive Plan Compensation” pursuant to the Securities and Exchange Commission’s regulations. We intended for our 2023 incentive compensation program to provide an incentive to meet and exceed our financial goals, and to promote a superior level of performance. Within the overall context of our pay philosophy and culture, the 2023 program:
Annual Cash Incentive
| ● | Provided total cash compensation to attract and retain key executive talent; |
Annual Cash Incentive
| ● | Aligned pay with organizational performance; |
Annual Cash Incentive
| ● | Focused executive attention on key business metrics; and |
Annual Cash Incentive
| ● | Provided a significant incentive for achieving and exceeding performance goals. |
Annual Cash Incentive
For 2023, the Compensation and Talent Committee used our overall revenue and net income as performance measures under the incentive compensation program because the Compensation and Talent Committee believes these are key measures of our ability to deliver value to our shareholders for which our Named Executive Officers have primary responsibility. The Compensation and Talent Committee weighted the two performance measures equally in determining bonus payouts. The Compensation and Talent Committee structured the 2023 incentive compensation program so that our Named Executive Officers would receive a bonus based on the percentage of growth or decline in overall revenue and net income in 2023 over 2022. Consistent with past years, the Compensation and Talent Committee structured the 2023 incentive compensation program for our Named Executive Officers to require performance representing growth in revenue or net income for any payout to be received. The Compensation and Talent Committee structured the incentive compensation program to permit payouts to be earned for any growth in revenue and net income because it believed that providing an incentive to achieve growth in these measures would provide an effective incentive to the executive officers in 2023. The Compensation and Talent Committee determined that the bonuses under the 2023 incentive compensation program would be equal to the following (subject to a maximum of 200% of base salary): the product of the executive officer’s base salary (i) multiplied by the sum of the percentage year over year increase (or decrease) in overall revenue plus the percentage year over year increase (or decrease) in overall net income (ii) multiplied by 2.5. If the foregoing calculation results in a negative amount, then no bonus would be paid under the 2023 incentive compensation plan. In determining the potential bonus amounts for our Named Executive Officers described above, the Compensation and Talent Committee concluded that their payouts determined by these formulas were likely to produce results consistent with our past practice of setting annual target payouts at 50% of base salary and would continue to provide competitive compensation consistent with our goals for annual incentive awards. The Compensation and Talent Committee determined that overall revenue declined by 2.0% in 2023 over 2022, while net income declined by 2.6%, therefore no bonuses were earned by or paid to our Named Executive Officers for 2023.
Long-Term Equity Incentive
Long-Term Equity Incentive The general purpose of our current equity-based plans is to promote the achievement of our long-range strategic goals and enhance shareholder value. In accordance with the 2006 Equity Incentive Plan, options to purchase shares of common stock are typically granted with a per-share exercise price equal to the closing price of our common stock on the trading day immediately prior to the date of the grant. The value of the option will be dependent on the future market value of the common stock, which we believe helps to align the economic interests of our key management personnel with the interests of our shareholders. To encourage our key management personnel to continue in employment with us, options granted to our Named Executive Officers during 2023 do not become fully vested and exercisable until the fifth anniversary of the grant date. In determining equity incentive awards for 2023, the Compensation and Talent Committee concluded that setting annual equity awards for our Named Executive Officers at a grant date target fair value of approximately 50% of their respective then-current base salaries would provide competitive compensation consistent with our goals for equity awards. Effective January 4, 2023, the Compensation and Talent Committee granted options to each of our Named Executive Officers. To determine the number of option shares with a grant date target fair value approximately equal to 50% of an executive officer’s base salary, the Compensation and Talent Committee divided 50% of the current base salary by the most recent Common Stock closing price to determine the number of shares that equal 50% of the current base salary. The number of shares were then multiplied by a factor of three to determine the number of option shares to be granted. The number of options granted to our Named Executive Officers is shown in the Grants of Plan-Based Awards Table. For 2023, no performance-based equity awards were granted to our Named Executive Officers. In 2024, the Compensation and Talent Committee granted performance-based options to Mr. Hays and Ms. Hrdy, as described below under the section entitled Compensation Decisions with Respect to 2024. The Compensation and Talent Committee does not grant equity awards in anticipation of the release of material nonpublic information. Similarly, we do not time the release of material nonpublic information about the Company for the purpose of affecting the value of executive compensation.
Agreements with Officers
Agreements with Officers During 2023, we did not have employment, retention, severance, change of control, or similar agreements with any of our executive officers. For awards granted during 2023, the award agreements under our long-term equity award plans did not provide for acceleration of vesting or other benefits upon a change of control or termination. In 2024, Ms. Hrdy is eligible for certain severance payments in the event she is terminated without cause or resigns for good reason and the Compensation and Talent Committee granted performance-based options subject to certain acceleration provisions to Mr. Hays and Ms. Hrdy, as described below under the section entitled Compensation Decisions with Respect to 2024.
Compensation Decisions with Respect to 2024
| ● | Under a short-term cash incentive plan, Mr. Hays is eligible to earn a cash bonus of up to $63,700 and Ms. Hrdy is eligible to earn a cash bonus of up to $200,000 upon attainment of certain TRCV goals measured as of December 31, 2024. The amount of the bonus may be reduced by the Compensation and Talent Committee if a certain adjusted EBITDA margin goal is not met; and |
Compensation Decisions with Respect to 2024
| ● | Under a long-term cash incentive plan, Ms. Hrdy is eligible to earn a cash bonus based on TRCV measured as of December 31, 2026, subject to reduction by the Compensation and Talent Committee if an adjusted EBITDA margin goal is not met. The plan payout is zero if TRCV is below $170 million, and $2.0 million plus approximately $.105 per dollar of TRCV in excess of $170 million, with a maximum payout of approximately $8.9 million at TRCV of $233 million. Mr. Hays does not participate in the long-term cash incentive plan. |
Compensation Decisions with Respect to 2024
The stock option grants and long-term cash incentives under the Compensation Packages are intended to cover the entire three-year period – no additional equity awards or long-term cash incentives are anticipated to be awarded to any individual who is party to a Compensation Package for periods prior to 2027. As part of the Compensation Packages, if Ms. Hrdy is terminated without cause or resigns for good reason prior to December 31, 2026, she will receive (i) salary continuation payments for one-year and (ii) a lump sum payment equal to the actual annual cash bonus earned for the year in which the termination of employment occurred, prorated for the number of days during the year served prior to termination as a percentage of the entire calendar year. Receipt of such severance payments is conditioned upon execution of a release of claims and adherence to customary restrictive covenants, including a one-year non-compete and non-solicitation period. Mr. Hays’ Compensation Package does not include a severance provision. In connection with Mr. Karas’ retirement from the Company on March 31, 2024, Mr. Karas and the Company entered into a Retirement Transition Agreement, which provides that he will receive one year of base salary continuation payments from April 1, 2024 through March 31, 2025.
2023 SUMMARY COMPENSATION TABLE
2023 SUMMARY COMPENSATION TABLE Set forth below is information regarding compensation earned by or paid or awarded to the Named Executive Officers. The identification of such Named Executive Officers is determined based on the individual’s total compensation for 2023, as reported below in the Summary Compensation Table, other than amounts reported as above-market earnings on deferred compensation and the actuarial increase in pension benefit accruals. The following table sets forth information concerning the total compensation of each of our Named Executive Officers with respect to 2023, 2022, and 2021.
2023 SUMMARY COMPENSATION TABLE
| Name and Principal Position | Year | Salary ($) | Option Awards ($)(2) | Non-Equity Incentive Plan Compensation ($) | All Other Compensation ($)(3) | Total ($) | | Michael D. Hays | 2023 | $127,400 | $64,455 | -- | $3,711 | $195,566 | | Chief Executive Officer | 2022 | $127,400 | $49,527 | -- | $4,246 | $181,173 | | President | 2021 | $127,400 | $49,595 | $35,672 | $4,427 | $217,094 | | Kevin R. Karas | 2023 | $285,000 | $144,181 | -- | $7,417 | $436,598 | | Former Senior Vice President- | 2022 | $285,000 | $110,792 | -- | $7,814 | $403,606 | | Finance, Chief Financial | 2021 | $285,000 | $110,954 | $79,800 | $6,798 | $482,552 | | Officer, Treasurer, and | | | | | | | | Secretary(1) | | | | | | | | Helen L. Hrdy | 2023 | $285,000 | $144,181 | -- | $6,507 | $435,688 | | Chief Customer | 2022 | $285,000 | $110,792 | -- | $6,305 | $402,097 | | Officer(1) | 2021 | $285,000 | $110,954 | $79,800 | $6,943 | $482,697 | | Jona S. Raasch | 2023 | $253,846 | $151,770 | -- | $6,570 | $412,186 | | Former Chief | 2022 | $300,000 | $116,628 | -- | $8,008 | $424,636 | | Operating Officer(1) | 2021 | $300,000 | $116,803 | $84,000 | $5,351 | $506,154 |
2023 SUMMARY COMPENSATION TABLE
| (1) During 2023, Mr. Karas served as our Senior Vice President– Finance, Chief Financial Officer, Treasurer and Secretary, Ms. Hrdy served as our Chief Growth Officer, and Ms. Raasch served as our Chief Operating Officer. Mr. Karas retired from the Company on March 31, 2024. Ms. Hrdy was promoted to Chief Customer Officer on January 16, 2024. Effective December 31, 2023, Ms. Raasch stepped down as Chief Operating Officer, but remains a non-executive employee of the Company. |
2023 SUMMARY COMPENSATION TABLE
| (2) Represents the aggregate grant date fair value of the option awards granted during the year, computed in accordance with FASB ASC Topic 718. See Note 9 to our Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2023 for a discussion of assumptions made in the valuation of share-based compensation. |
2023 SUMMARY COMPENSATION TABLE
| (3) Includes, for each of our Named Executive Officers, the amount of our 401(k) matching contributions and our health saving account matching contributions including AEB benefits, and a lifestyle spending AEB benefit for Ms. Raasch. |
GRANTS OF PLAN-BASED AWARDS IN 2023
GRANTS OF PLAN-BASED AWARDS IN 2023 We maintain the 2006 Equity Incentive Plan pursuant to which grants may be made to our executive officers. The following table sets forth information regarding all such incentive plan awards that were made to the Named Executive Officers in 2023.
GRANTS OF PLAN-BASED AWARDS IN 2023
| | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | | | | | | | | Name | Grant Date | Threshold ($)(2) | Target ($) | Maximum ($) | All Other Option Awards: No. of Securities Underlying Options (#)(3) | Exercise or Base Price of Option Awards ($)(2) | Closing Price on Date of Grant ($) | Grant Date Fair Value of Stock and Option Awards ($) | | Michael D. Hays | 1/4/2023 | | | | 4,909 | $38.93 | $38.36 | $64,455 | | | | -- | $63,700 | $254,800 | | | | | | Kevin R. Karas | 1/4/2023 | | | | 10,981 | $38.93 | $38.36 | $144,181 | | | | -- | $142,500 | $570,000 | | | | | | Helen L. Hrdy | 1/4/2023 | | | | 10,981 | $38.93 | $38.36 | $144,181 | | | | -- | $142,500 | $570,000 | | | | | | Jona S. Raasch | 1/4/2023 | | | | 11,559 | $38.93 | $38.36 | $151,770 | | | | -- | $150,000 | $600,000 | | | | |
GRANTS OF PLAN-BASED AWARDS IN 2023
| (1) These amounts represent only potential payments under the 2023 incentive plan awards; the actual amounts received (if any) are shown in the Summary Compensation Table above. |
GRANTS OF PLAN-BASED AWARDS IN 2023
| (2) There were no thresholds for payments under these 2023 incentive plan awards; payments below target would be made for any year-over-year increase in any of the applicable performance measures. |
GRANTS OF PLAN-BASED AWARDS IN 2023
| (3) The stock option awards were granted under the 2006 Equity Incentive Plan. The exercise price of the stock option awards was equal to the closing stock price on January 3, 2023, the day immediately prior to the grant date. |
OUTSTANDING EQUITY AWARDS AT DECEMBER 31, 2023
OUTSTANDING EQUITY AWARDS AT DECEMBER 31, 2023 The following table sets forth information on outstanding option awards held by the Named Executive Officers on December 31, 2023, including the number of shares underlying both exercisable and unexercisable portions of each stock option, the exercise price and expiration date of each outstanding option.
OUTSTANDING EQUITY AWARDS AT DECEMBER 31, 2023
| | Option Awards | | | | | Name | No. of Securities Underlying Unexercised Options (Exercisable) (#) | No. of Securities Underlying Unexercised Options (Unexercisable) (#) | Option Exercise Price ($) | Option Expiration Date | | Michael D. Hays | 2,904(1)(2) | - | $18.80 | 01/07/24 | | | 10,014(1)(3) | - | $13.17 | 01/06/25 | | | 9,145(1)(4) | - | $15.23 | 01/05/26 | | | 7,478(1)(5) | - | $18.80 | 01/04/27 | | | 5,193(1)(6) | - | $36.80 | 01/03/28 | | | - | 4,990(1)(7) | $38.30 | 01/03/29 | | | - | 2,904(1)(8) | $65.80 | 01/03/30 | | | - | 4,452(1)(9) | $42.92 | 01/05/31 | | | - | 4,523(1)(10) | $42.25 | 01/04/32 | | | - | 4,909(1)(11) | $38.93 | 01/04/33 | | Kevin R. Karas | 20,458(1)(4) | - | $15.23 | 01/05/26 | | | 16,728(1)(5) | - | $18.80 | 01/04/27 | | | 11,617(1)(6) | - | $36.80 | 01/03/28 | | | - | 11,162(1)(7) | $38.30 | 01/03/29 | | | - | 6,497(1)(8) | $65.80 | 01/03/30 | | | - | 9,960(1)(9) | $42.92 | 01/05/31 | | | - | 10,118(1)(10) | $42.25 | 01/04/32 | | | - | 10,981(1)(11) | $38.93 | 01/04/33 | | Helen L. Hrdy | 12,346(1)(4) | - | $15.23 | 01/05/26 | | | 12,619(1)(5) | - | $18.80 | 01/04/27 | | | 8,764(1)(6) | - | $36.80 | 01/03/28 | | | - | 8,420(1)(7) | $38.30 | 01/03/29 | | | - | 5,699(1)(8) | $65.80 | 01/03/30 | | | - | 9,960(1)(9) | $42.92 | 01/05/31 | | | - | 10,118(1)(10) | $42.25 | 01/04/32 | | | - | 10,981(1)(11) | $38.93 | 01/04/33 | | Jona S. Raasch | 21,535(1)(4) | - | $15.23 | 01/05/26 | | | 17,608(1)(5) | - | $18.80 | 01/04/27 | | | 12,228(1)(6) | - | $36.80 | 01/03/28 | | | - | 11,749(1)(7) | $38.30 | 01/03/29 | | | - | 6,839(1)(8) | $65.80 | 01/03/30 | | | - | 10,485(1)(9) | $42.92 | 01/05/31 | | | - | 10,651(1)(10) | $42.25 | 01/04/32 | | | - | 11,559(1)(11) | $38.93 | 01/04/33 |
OUTSTANDING EQUITY AWARDS AT DECEMBER 31, 2023
| (1) Option to purchase shares of common stock. |
OUTSTANDING EQUITY AWARDS AT DECEMBER 31, 2023
| (2) Options vest in full on the fifth anniversary of the grant date. These options vested on January 7, 2019. |
OUTSTANDING EQUITY AWARDS AT DECEMBER 31, 2023
| (3) Options vest in full on the fifth anniversary of the grant date. These options vested on January 6, 2020. |
OUTSTANDING EQUITY AWARDS AT DECEMBER 31, 2023
| (4) Options vest in full on the fifth anniversary of the grant date. These options vested on January 5, 2021. |
OUTSTANDING EQUITY AWARDS AT DECEMBER 31, 2023
| (5) Options vest in full on the fifth anniversary of the grant date. These options vested on January 4, 2022. |
OUTSTANDING EQUITY AWARDS AT DECEMBER 31, 2023
| (6) Options vest in full on the fifth anniversary of the grant date. These options vested on January 3, 2023. |
OUTSTANDING EQUITY AWARDS AT DECEMBER 31, 2023
| (7) Options vest in full on the fifth anniversary of the grant date. These options vested on January 3, 2024. |
OUTSTANDING EQUITY AWARDS AT DECEMBER 31, 2023
| (8) Options vest in full on the fifth anniversary of the grant date. These options will vest on January 3, 2025. |
OUTSTANDING EQUITY AWARDS AT DECEMBER 31, 2023
| (9) Options vest in full on the fifth anniversary of the grant date. These options will vest on January 5, 2026. |
OUTSTANDING EQUITY AWARDS AT DECEMBER 31, 2023
| (10) Options vest in full on the fifth anniversary of the grant date. These options will vest on January 4, 2027. |
OUTSTANDING EQUITY AWARDS AT DECEMBER 31, 2023
| (11) Options vest in full on the fifth anniversary of the grant date. These options will vest on January 4, 2028. |
OPTION EXERCISES AND STOCK VESTED IN 2023
OPTION EXERCISES AND STOCK VESTED IN 2023
OPTION EXERCISES AND STOCK VESTED IN 2023
| | Option Awards | | | Name | Number of Shares Acquired on Exercise (#)(1) | Value Realized on Exercise ($)(2) | | Michael D. Hays | 10,938 | $249,386 | | Kevin R. Karas | - | - | | Helen L. Hrdy | - | - | | Jona S. Raasch | - | - |
OPTION EXERCISES AND STOCK VESTED IN 2023
| (1) Shares of common stock. | | (2) Amounts represent the product of the number of shares acquired on exercise multiplied by the excess of market price at exercise over the exercise price per share. |
PAY VERSUS PERFORMANCE
PAY VERSUS PERFORMANCE
PAY VERSUS PERFORMANCE
| | | | | | Value of initial fixed $100 investment based on: | | | | | Year | Summary Compensation Table Total for PEO | Compensation Actually Paid to PEO (1) | Average Summary Compensation Table Total for Non-PEO NEOs | Average Compensation Actually Paid to Non-PEO NEOs (2) | Total Shareholder Return | Peer group Total Shareholder Return(3) | Net Income | Revenue | | | | | | | | | (in thousands) | | | 2023 | $195,566 | $202,165 | $428,157 | $443,660 | 64.34 | 128.14 | $30,971 | $148,580 | | 2022 | $181,173 | $184,526 | $410,113 | $418,936 | 59.60 | 109.59 | $31,800 | $151,568 | | 2021 | $217,094 | $207,809 | $490,467 | $469,883 | 64.98 | 137.74 | $37,466 | $147,954 | | 2020 | $254,504 | $(329,929) | $524,435 | $(1,183,288) | 65.91 | 119.96 | $37,260 | $133,277 |
PAY VERSUS PERFORMANCE
| (1) Mr. Hays was the Principal Executive Officer (“PEO”) for 2023, 2022, 2021, and 2020. The following amounts were deducted and added to determine the compensation actually paid to the PEO: |
PAY VERSUS PERFORMANCE
| Year | Summary Compensation Table Total for PEO | Deduct Stock and Option Awards Reported in the Summary Compensation Table | Add Awards Granted During the Covered FY that are Outstanding and Unvested as of the End of the Covered FY | Add Change in Fair Value as of the End of the Covered FY for Awards Granted in a Prior FY that are Outstanding and Unvested as of the End of the Covered FY | Add Change in Fair Value as of the Vesting Date for Awards Granted in a Prior FY that Vested During the Covered FY | Compensation Actually Paid to PEO | | 2023 | $195,566 | $(64,455) | $70,289 | $(4,749) | $5,514 | $202,165 | | 2022 | $181,173 | $(49,527) | $54,018 | $(2,257) | $1,119 | $184,526 | | 2021 | $217,094 | $(49,595) | $45,549 | $(7,756) | $2,517 | $207,809 | | 2020 | $254,504 | $(60,258) | $18,190 | $(564,781) | $22,416 | $(329,929) |
PAY VERSUS PERFORMANCE
| (2) Mr. Karas and Mses. Hrdy and Raasch were Non-PEO Named Executive Officers (“NEOs”) during 2023, 2022, 2021, and 2020. Steven D. Jackson, our former President, was a non-PEO NEO during 2020. The following average amounts were deducted and added to determine the average compensation actually paid to the non-PEO NEOs: |
PAY VERSUS PERFORMANCE
| Year | Average Summary Compensation Table Total for Non-PEO NEOs | Deduct Stock and Option Awards Reported in the Summary Compensation Table | Add Awards Granted During the Covered FY that are Outstanding and Unvested as of the End of the Covered FY | Add Change in Fair Value as of the End of the Covered FY for Awards Granted in a Prior FY that are Outstanding and Unvested as of the End of the Covered FY | Add Change in Fair Value as of the Vesting Date for Awards Granted in a Prior FY that Vested During the Covered FY | Subtract Awards Granted in a Prior FY that Failed to Meet the Applicable Vesting Conditions During the Covered FY | | Add Dividends Paid on Awards in the Covered FY Prior to the Vesting Date that are Not Otherwise Included in Total Compensation for the Covered FY | Average Compensation Actually Paid to Non-PEO NEOs | | 2023 | $428,157 | $(146,711) | $159,990 | $(9,317) | $11,541 | - | | - | $443,660 | | 2022 | $410,113 | $(112,737) | $122,960 | $(3,742) | $2,342 | - | | - | $418,936 | | 2021 | $490,467 | $(112,904) | $103,693 | $(16,358) | $4,985 | - | | - | $469,883 | | 2020 | $524,435 | $(134,221) | $29,808 | $(869,318) | $(98,275) | $(637,647 | ) (4) | $1,930 | $(1,183,288) |
PAY VERSUS PERFORMANCE
| (3) Utilizes the Russell 2000 Index, which we also utilize in the stock performance graph required by Item 201(e) of Regulation S-K included in our Form 10-K for the year ended December 31, 2023. Because of the uniqueness of our markets and products and lack of publicly traded peers, we do not believe that a combination of peer issuers can be selected on an industry or line-of-business basis to provide a meaningful basis for comparing shareholder return. Accordingly, the Russell 2000 Index, which is comprised of issuers with generally similar market capitalizations to that of the Company, is included in the table as permitted by applicable regulations. The comparison assumes $100 was invested for the period starting December 31, 2019, through the end of the listed year in the Company and in the Russel 2000 Index, respectively. Historical stock performance is not necessarily indicative of future stock performance. |
PAY VERSUS PERFORMANCE
| (4) Represents options held by Mr. Jackson that were forfeited upon his resignation in October 2020. |
PAY VERSUS PERFORMANCE
The relationship between the compensation actually paid to the PEO and the average compensation actually paid to the non-PEO NEOs and the cumulative total shareholder return of the Company and the Russell 2000 Index for 2023, 2022, 2021, and 2020 is represented by the graph below: The relationship between the compensation actually paid to the PEO and the average compensation actually paid to the non-PEO NEOs and the Company’s net income for 2023, 2022, 2021, and 2020 is represented by the graph below: The relationship between the compensation actually paid to the PEO and the average compensation actually paid to the non-PEO NEOs and the Company’s revenue for 2023, 2022, 2021, and 2020 is represented by the graph below: The following tabular list includes the financial performance measures which in the Company’s assessment represent the most important financial performance measures used by the Company to link compensation actually paid to the Company’s NEO’s for 2023 to Company performance.
PAY VERSUS PERFORMANCE
| Important Financial Measures | | Net Income | | Revenue Company Stock Price |
CEO PAY RATIO
CEO PAY RATIO As required by Item 402(u) of Regulation S-K promulgated under the Securities Exchange Act of 1934, as amended, we are providing the following information about the ratio of the median annual total compensation of our associates (i.e., employees) and the annual total compensation of Michael D. Hays, our Chief Executive Officer. For the year ended December 31, 2023:
CEO PAY RATIO
| ● | the median of the annual total compensation of all associates of the Company was reasonably estimated to be $82,144; and |
CEO PAY RATIO
| ● | the annual total compensation of Mr. Hays was $195,566. |
CEO PAY RATIO
| ● | Based on this information, the ratio of the annual total compensation of our Chief Executive Officer to the median of the annual total compensation of all other associates is estimated to be 2.38 to 1. |
CEO PAY RATIO
Our median associate was originally determined for 2021. For 2023, we used the same median associate, as there has been no change in our associate population or associate compensation arrangements that we believe would significantly impact the pay ratio disclosure. To calculate the 2023 annual total compensation of our median associate for purposes of this disclosure, we added together all of the elements of our median associate’s compensation for 2023 in the same way that we calculate the annual total compensation of our Named Executive Officers in the Summary Compensation Table. To calculate Mr. Hays’ annual total compensation, we used the amount reported in the “Total” column of our 2023 Summary Compensation Table. To calculate our ratio, we divided Mr. Hays’ annual total compensation by the annual total compensation of our median associate.