DEF 14A of Lifeway Foods, Inc.
Filed Apr 29, 2024 · FY20230001683168-24-002769
PROPOSAL ONE: ELECTION OF DIRECTORS
PROPOSAL ONE: ELECTION OF DIRECTORS The Board currently consists of seven (7) directors, all of whom have been nominated for re-election. Each nominee has consented to being named as a nominee for election as a director and has agreed to serve if elected. At the Annual Meeting, directors will be elected to serve a term of office expiring at the 2025 Annual Meeting or until their successors are elected and qualified. Shareholders and their proxies are being asked to vote on these seven (7) persons nominated for the Board:
PROPOSAL ONE: ELECTION OF DIRECTORS
| Name | Age | Director since | Occupation | ACG Committee Membership | Compensation Committee Membership | | Julie Smolyansky | 48 | 2002 | Chairperson, President, CEO and Secretary, Lifeway Foods | | | | Juan Carlos (“JC”) Dalto | 59 | 2022 | President of Dole Sunshine Company, Americas | | | | Jody Levy | 44 | 2020 | Creative Director and Chief Executive Officer, World Waters, LLC | M | M | | Dorri McWhorter | 49 | 2020 | Chief Executive Officer and President of YMCA of Metropolitan Chicago | M, F | M | | Perfecto Sanchez | 38 | 2022 | Founder and Chief Executive Officer of Keep The Change Consulting, LLC | M | | | Jason Scher | 48 | 2012 | Principal, JAMP,LLP | C, F | C | | Pol Sikar | 75 | 1986 | President, Montrose Glass & Mirror | M | | | ACG: | Audit and Corporate Governance | | | | | | C: Chair | M: Member | | F: Financial Expert | | |
PROPOSAL ONE: ELECTION OF DIRECTORS
| The Board of Directors recommends that you vote “FOR” the election of each of the nominees. |
Information About Our Nominees
Information About Our Nominees
Information About Our Nominees
| Julie Smolyansky, Chief Executive Officer, President, Secretary and Director |
Information About Our Nominees
| Age: 48 Director Since: 2002 | Board Leadership Roles: • Chairperson |
Information About Our Nominees
JULIE SMOLYANSKY was appointed as a Director and elected President and Chief Executive Officer of Lifeway by the Board to fill the vacancies in those positions created by the death of her father, Michael Smolyansky, in June 2002. She was appointed as Secretary effective as of January 1, 2020. She is a graduate with a bachelor’s degree from the University of Illinois at Chicago. Prior to her appointment, Ms. Smolyansky spent six years as Lifeway’s Director of Sales and Marketing. Ms. Smolyansky also served as Lifeway’s Chief Financial Officer and Treasurer from 2002 to 2004. Under her leadership, Lifeway has brought its products into the mainstream, boosted annual revenues tenfold, and expanded distribution throughout the United States, Mexico, the United Kingdom, and Ireland, as well as portions of Central and South America and the Caribbean. She has been named to Fortune Business’s ‘40 under 40,’ Fortune’s 55 Most Influential Women on Twitter and Fast Company’s Most Creative People in Business 1000. She holds no other directorships in any other reporting company. Ms. Smolyansky is the daughter of Ludmila Smolyansky (Former Director), and sister of Edward Smolyansky (Former Chief Operating Officer of the Company). The Smolyansky family maintains a controlling interest in the Company, and the Board believes it is appropriate to provide for continuity of the representation of the Smolyansky family on the Board as a component of Lifeway’s succession planning strategy. Ms. Smolyansky has served as Chairperson of the Board since August 2022. Ms. Smolyansky brings to the Board over twenty years of extensive experience in the dairy and consumer packaged goods industries including advertising; marketing and communications; public relations; digital, social, and event marketing; and consumer insights. Ms. Smolyansky provides the Board with unique perspectives and invaluable, in-depth knowledge of Lifeway, including strategic growth opportunities; personnel; relationships with key customers and suppliers; competitive product positioning; history; Company culture; and all other aspects of Lifeway’s operations. As the Chief Executive Officer of a publicly traded company, Ms. Smolyansky brings experience working with the investor community and financial institutions. In addition, as a member of our founding family, Ms. Smolyansky is a recognized and prominent visionary and leader in the dairy and probiotic products industry with an in-depth knowledge of manufacturers, distributors, and retailers across all of our channels of distribution.
Information About Our Nominees
| Juan Carlos (“JC”) Dalto, Director |
Information About Our Nominees
| Age: 59 Director Since: 2022 | Board Leadership Roles: • Independent Director |
Information About Our Nominees
JC DALTO was elected as a Director of the Company in August 2022. He has over 30 years of experience in the agriculture and food and beverage industries. In 2000, Mr. Dalto became the CEO of Danone in Portugal, in 2002 the President and CEO of Danone in Italy, and in 2004 the Chairman, President and CEO of Danone North America - The Dannon Company, Inc. He has gone on to hold Director, Country/Regional President and CEO positions at numerous international corporations, such as Danone, The Pillsbury Company, Kraft Foods and Stonyfield Farm. From 2012 to 2015, Mr. Dalto served as Chief Executive Officer of JDE Brazil (formerly, D.E. Master Blenders 1753). From 2017 to 2020, Mr. Dalto served as Chief Executive Officer of Savencia Fromage & Dairy Latin America. Mr. Dalto served as the President of Dole Sunshine Company - Dole Packaged Foods LLC, Americas from January 2021 through September 2022, where he worked on a movement toward zero fruit loss and zero fossil-based plastic packaging by 2025, and net zero carbon emissions by 2030. From October 2022 through present Mr. Dalto has served as the Chief Executive Officer of Savencia Fromage & Dairy, Americas. Mr. Dalto serves on the boards of directors of Milkaut S.A., Argentina. Mr. Dalto has extensive experience in de-commoditizing agri-business derived foods and drinks into added-value, functional, nutritional, health and wellness products, and has executed on sustainable and profitable growth business models in his previous roles. Mr. Dalto previously attended the Buenos Aires Institute of Technology and has post-graduate degrees from the University of Michigan and the London Business School. Mr. Dalto is also a certified Professional Coach from Integral Coaching Canada and has organized and led campaigns leading to Global Environmental Change in Latin America. Mr. Dalto’s has deep industry, brand management and growth experience in the consumer-packaged goods sector. His business insights as a Board member will provide significant value to the Lifeway brand and support the Lifeway mission to grow profitably, sustainably and consciously and make Mr. Dalto well qualified for service on our Board.
Information About Our Nominees
| Jody Levy, Director |
Information About Our Nominees
| Age: 44 Director Since: 2020 | Board Leadership Roles: • Independent Director • Member, Audit and Corporate Governance Committee • Member, Compensation Committee |
Information About Our Nominees
JODY LEVY was elected as a director of Lifeway to fill a vacancy on the Board on February 11, 2020. Ms. Levy is an entrepreneur, having founded many different types of companies. She has also acted as chief executive officer of companies at all stages of development from inception to operating with $200mm in annual revenue. In 2013, Ms. Levy founded World Waters, LLC, the parent company of WTRMLN WTR and served as its Creative Director and Chief Executive Officer from founding until the company’s sale in 2020. Ms. Levy is currently the chief executive officer and a director of Summit Group Endeavors LLC (since January 2021) and Summit Series LLC (since September 2020), related companies that produce annual ideas conference for the thought leaders of our time. Since January 2021, Ms. Levy has also been a director of Summit Junto LLC, an entity related to Summit Group Endeavors LLC and Summit Series LLC, which produces global events. In 2020, Ms. Levy founded, and has since served as chief executive officer of LabElymental, a company that helps people get healthy and happy, and NeroPraxis, a mind repatterning meditation app. As chief executive officer of companies at all stages of development, Ms. Levy has lead all departments within a company and understands the department functions and the intersection among them and how to optimize, manage and scale corporate efficiency and production. Ms. Levy has been a partner in, and advisor to, GEM&BOLT Mezcal since 2014. She also served as a director of Pinata, a company that offers a system for data driven task management for work, from 2017 to 2019. Ms. Levy has a Bachelor of Arts from School of the Art Institute of Chicago. Ms. Levy devotes as much time as necessary to Lifeway business and currently holds no other directorships in any other reporting company. Ms. Levy’s breadth of experience in manufacturing, marketing and sale of consumer packaged goods, specifically health foods, as well as her financial expertise, depth of knowledge about all aspects of manufacturing companies and her leadership experience make her well qualified to be a member of our Board.
Information About Our Nominees
| Dorri McWhorter, Director |
Information About Our Nominees
| Age: 49 Director Since: 2020 | Board Leadership Roles: • Independent Director • Audit Committee Financial Expert • Audit Committee Member • Compensation Committee Member |
Information About Our Nominees
DORRI MCWHORTER was elected as a Director of the Company in August 2020. Ms. McWhorter became CEO of YMCA Chicago in 2021. From 2013 until 2021, Ms. McWhorter was the CEO of YWCA Metropolitan Chicago transforming the organization from a traditional social service organization to 21st Century social enterprise. Increasing impact and organizational sustainability, YWCA Metropolitan Chicago’s operating budget quadrupled. The organization has been an active contributor to many critical initiatives across the region, and under Ms. McWhorter’s leadership, YWCA Metropolitan Chicago expanded its service footprint to 10 new locations, completed seven mergers and acquisitions, implemented paid family leave and developed a retirement plan to include retirement options for thousands of childcare providers and small business owners. Ms. McWhorter led the effort to develop an exchange-traded fund (ETF) for women’s empowerment (NYSE: WOMN) in partnership with Impact Shares, which is the first non-profit investment advisor to develop an ETF product. Ms. McWhorter is a 2019 Inductee in the Chicago Innovation Hall of Fame. Ms. McWhorter is also a Certified Public Accountant (CPA). Prior to joining the YWCA, she was a partner at Crowe Horwath, LLP, one of the largest accounting firms in the U.S. She also held senior positions with Snap-on Incorporated and Booz Allen Hamilton. Ms. McWhorter serves on the boards of directors of William Blair Funds and Skyway Concession Company (Chicago Skyway), NexPoint Capital, and LanzaTech Global Inc. (NASDAQ: LNZA). She is also active in the accounting profession and serves on the Financial Accounting Standards Advisory Council and having served as a member of the Board of Directors of the American Institute of Certified Public Accountants (AICPA) and a past Chairperson of the Board of Directors for the Illinois CPA Society. Ms. McWhorter also serves as Co-Chair of the Advisory Board of the First Women’s Bank. Ms. McWhorter received a BBA from the University of Wisconsin-Madison, an MBA from Northwestern University’s Kellogg School of Management, and an honorary Doctor of Humane Letters from Lake Forest College. Ms. McWhorter’s breadth of experience in health platforms, and her financial and accounting expertise and business experience as Chief Executive Officer make her a valuable addition to our Board. In addition, Ms. McWhorter has been an operational, team, and project leader; and served as a senior executive, board member and community leader for over twenty years. Her experience has provided her with a broad understanding of the financial, and strategic issues facing health related companies like ours. Her industry and financial experience make her well qualified for service on our Board.
Information About Our Nominees
| Perfecto Sanchez, Director |
Information About Our Nominees
| Age: 38 Director Since: 2022 | Board Leadership Roles: • Independent Director • Member, Audit and Corporate Governance Committee |
Information About Our Nominees
PERFECTO SANCHEZ was elected as a Director of the Company in August 2022. He is a West Point graduate and decorated U.S Army Veteran with two combat tours to Iraq. He started his corporate career at Kraft Heinz, where he launched MiO Liquid Water Enhancer, which grossed over $100 million in its first year and is regarded as one of Kraft’s most successful innovations to date. In 2013, Mr. Sanchez joined Danone where he led portfolio strategy and trade finance for over half of the dairy portfolio and then ultimately went on to lead the Danone Waters Customer Marketing Team for North America. In 2014, Mr. Sanchez launched his own marketing consulting firm called Keep The Change, a growth consulting initiative with a purpose. At Keep The Change, Mr. Sanchez serves as the chief executive officer and head of growth. He and his team build social impact initiatives across a myriad of different sectors from working with local governments to billion-dollar startups. Mr. Sanchez currently serves on the board of directors at TechTarget Inc. (Nasdaq: TTGT), a publicly traded company, and as an Advisor at International Crisis Group and Build in Tulsa. He is also an Ambassador of Mission Blue, a global coalition aimed at protecting marine life. Mr. Sanchez’s has deep industry, brand management and growth experience in the consumer-packaged goods sector. His business insights as a Board member will provide significant value to the Lifeway brand and support the Lifeway mission to grow profitably, sustainably and consciously and make Mr. Sanchez well qualified for service on our Board.
Information About Our Nominees
| Jason Scher, Director |
Information About Our Nominees
| Age: 48 Director Since: 2012 | Board Leadership Roles: • Lead Independent Director • Chairperson, Audit and Corporate Governance Committee • Audit Committee Financial Expert • Chairperson, Compensation Committee |
Information About Our Nominees
JASON SCHER was elected as a Director of the Company in July 2012. Mr. Scher is a principal at JAMP, LLP, an angel investment fund. From 2016 to present Mr. Scher has been a principal investor and advisor focused on early-stage companies. From 2004 until 2016, Mr. Scher was the Chief Operating Officer of Vosges Haut-Chocolat, a leading manufacturer of super premium chocolate and confections in the US. From 2000 to 2004, Mr. Scher was a principal in RP3 Development, a New York based construction management and development company that performed work nationwide. Prior to that, Mr. Scher was employed by COSI Sandwich Bar in their real estate and construction group. Mr. Scher devotes as much time as necessary to the business of the Company and currently holds no other directorships in any other reporting company. Mr. Scher brings manufacturing, financial and strategic experience to the Board, including a record of operational excellence in the food industry, and strategic experience across multiple industries from real estate to retail to the Board. In addition, he has advised a private company board; been an operational, team, and project leader; and served as a senior executive for nearly twenty years. His experience has provided him with a broad understanding of the operational, financial, and strategic issues facing public companies like ours. His industry, operational, and financial experience makes him well qualified for service on our Board.
Information About Our Nominees
| Pol Sikar, Director |
Information About Our Nominees
| Age: 75 Director Since: 1986 | Board Leadership Roles: • Independent Director • Member, Audit and Corporate Governance Committee |
Information About Our Nominees
POL SIKAR has served as a Lifeway director since our inception in February 1986. He holds a master’s degree from the Odessa State Institute of Civil Engineering in Russia. For more than 40 years, he has been President and a major shareholder of Montrose Glass & Mirror Co., a company providing glass and mirror products to the wholesale and retail trade in the greater Chicago area. Mr. Sikar devotes as much time as necessary to the business of the Company and currently holds no other directorships in any other reporting company. Mr. Sikar brings a historical perspective to the Board along with executive and entrepreneurial experiences that provide Lifeway with insights into operational and strategic planning, and financial matters. His longtime service and institutional knowledge about Lifeway provide him with a broad understanding of the operational, financial, and strategic issues facing public companies like ours. His executive, operational, and financial experience make him well qualified for service on our Board.
The Board’s Compensation Oversight
The Board’s Compensation Oversight Led by the Compensation Committee, the Board discharges its responsibilities related to compensation of Lifeway’s executive officers and administers our cash and equity incentive compensation plans. The Board also evaluates non-employee director compensation. In addition, the Board is responsible for conducting a periodic risk evaluation of Lifeway’s compensation practices, policies, and programs. In 2023, the Compensation Committee engaged the Aon Consulting, Inc. (“Aon”) as its independent compensation consultant to advise it on executive officer, senior management and director compensation matters. As part of its engagement in 2023, the Compensation Committee directed Aon to work with our human resources department and other members of management to obtain information necessary for Aon to evaluate compensation of executive officers, senior management and directors. The Compensation Committee tasked Aon with developing a compensation strategy for 2023 built on Aon’s and the Compensation Committee’s prior work and reflects the compensation philosophy described in this proxy statement. Aon reviewed our comparative peer group with management and the Compensation Committee and suggested several refinements to it, which the Compensation Committee approved. Additional information about peer group selection can be found in “Compensation Overview.” Using the refined peer group, Aon analyzed the peer group’s comparative total direct compensation practices and mix of pay against Lifeway’s executive officer total direct compensation practices generally and proposed recommendations regarding the amount and mix of base and incentive compensation to be delivered to our executive officers and senior management team for fiscal year 2023. The same peer group was used by Aon to assess the competitiveness of compensation for the non-employee directors. During 2023, Aon performed no other services for Lifeway. The Compensation Committee believed that there was no conflict of interest based on any relationship with Aon. In reaching this conclusion, the Compensation Committee considered the factors set forth in the SEC and Nasdaq rules regarding compensation advisor independence.
Fiscal Year 2023 Director Compensation
Fiscal Year 2023 Director Compensation The table below describes the cash and stock award portions of the annual retainer earned or paid to each non-employee director who served in fiscal year 2023. Julie Smolyansky received no compensation for her service as director. We have excluded her from the table because we fully describe her compensation in the “NEO Summary Compensation for Fiscal Years 2023 and 2022” section.
Fiscal Year 2023 Director Compensation
| Name | Fees Earned in Cash ($)(1) | Stock Awards (2)(3) ($) | All Other Compensation ($) | Total ($) | | J.C. Dalto | 36,250 | 50,000 | – | 86,250 | | Jody Levy | 77,750 | 50,000 | – | 127,750 | | Dorri McWhorter | 77,750 | 50,000 | – | 127,750 | | Perfecto Sanchez | 49,000 | 50,000 | – | 99,000 | | Jason Scher (4) | 114,250 | 50,000 | – | 164,250 | | Pol Sikar | 57,500 | 50,000 | – | 107,500 | | Ludmila Smolyansky (5) | 17,583 | 0 | – | 17,583 |
Non-Employee Director Fee Schedule for the 2023-2024 Term
| Annual Cash Retainer | $45,000 | | Annual Equity Compensation | $50,000 | | Audit Committee Chair Retainer | $12,500 | | Audit Committee Member Retainer | $12,500 | | Compensation Committee Chair Retainer | $10,500 | | Compensation Committee Member Retainer | $10,500 |
Non-Employee Director Fee Schedule for the 2023-2024 Term
| Stock Awards Detail | | | | | Name | Vested Stock Award ($) | Restricted Stock Award ($) | Total ($) | | J.C. Dalto | – | 50,000 | 50,000 | | Jody Levy | – | 50,000 | 50,000 | | Dorri McWhorter | – | 50,000 | 50,000 | | Perfecto Sanchez | – | 50,000 | 50,000 | | Jason Scher | – | 50,000 | 50,000 | | Pol Sikar | – | 50,000 | 50,000 | | Ludmila Smolyansky(5) | – | 0 | 0 |
Information about Current Directors and Executive Officers
Information about Current Directors and Executive Officers Information about Julie Smolyansky, JC Dalto, Jody Levy, Dorri McWhorter, Perfecto Sanchez, Jason Scher and Pol Sikar can be found above in the section “Information about our Nominees.”
Information about Current Directors and Executive Officers
| Eric Hanson, Chief Financial Officer and Treasurer |
Information about Current Directors and Executive Officers
ERIC HANSON is our Chief Financial and Accounting Officer and Treasurer. Mr. Hanson has served as our Chief Accounting Officer since May 2018, and as our Corporate Controller since July 2016. He also served as our interim Chief Financial Officer from May 2018 through August 2018 before we permanently appointed him to that position in November 2018. Prior to joining Lifeway, he served as Director of External Reporting for The Azek Company in Skokie, Illinois from 2014 through July 2016; and as Audit Manager for Deloitte & Touche, LLP in Chicago, Illinois from 2012 through 2014. He also held various senior financial positions with Crowe Horwath from 2003 through 2012 and has over 20 years of financial reporting experience. Mr. Hanson holds a Bachelor of Science in Finance from the University of Illinois and an MBA from Northwestern University’s Kellogg School of Management.
Information about Current Directors and Executive Officers
| Amy Feldman, Senior Executive Vice President, Sales |
Information about Current Directors and Executive Officers
AMY FELDMAN is our Senior Executive Vice President of Sales. Amy previously held the top sales executive position for Lifeway Foods from 2009 through 2011. She returned to Lifeway effective October 31, 2018. Ms. Feldman has spent over 20 years in the food industry building business, brands, and teams, specifically within the fresh and natural foods arena. From 2017 through 2018, she served as the Senior Executive Vice President of Sales at Next Phase Enterprises, a club and mass channel food sales firm. From 2015 through 2017, Ms. Feldman was Vice President of Sales, Channel Development for Mondelez International’s Enjoy Life Foods subsidiary where she was responsible for developing strategy and introducing the brand through various trade channels such as foodservice, e-commerce, small format, and international. Prior to joining Enjoy Life, she was the Vice President of Sales, Independent Grocery Channel for Chicago-based KeHE Distributors from 2011 through 2015. Amy began her career at Sara Lee and holds a Bachelor in Business Administration in Food Marketing from Western Michigan University, an MBA from Golden Gate University, and a Culinary Certificate from Kendall College.
Compensation Overview
| • | revised and approved the peer group companies; | | • | made changes to the processes of setting and paying compensation, including salaries and bonuses, to our Named Executive Officers; | | • | further adjusted compensation setting processes to ensure it receives objective market data and reviews of performance of our Named Executive Officers from independent sources. |
Compensation Overview
The Compensation Committee reviews our compensation design and philosophy on an annual basis to ensure that our executive compensation program continues to evolve to support our strategy and objectives and aligns with our shareholders’ interests. In 2023, the Compensation Committee reviewed our compensation design and maintained a strong performance orientation through the annual and long-term incentives including both restricted stock units (“RSUs”) and performance share units (“PSUs”). PSUs granted in 2023 will only be paid if the Company meets financial goals over the next three fiscal years and the awardee is employed on the vesting date in 2026. Additional discussion of changes to our compensation setting process, procedures and formats can be found above, under “Proposal 3: Non-Binding Advisory Vote on Executive Compensation.” The Compensation Committee followed the below process and practice as closely as possible when setting executive compensation levels:
Compensation Overview
| • | Separate from the corporate goals which provide performance measures for incentive awards, the Compensation Committee establishes individual performance goals and objectives for each executive officer. Such goals and objectives are tracked by the human resources department, which provides additional information to the Compensation Committee when reviewing individual responsibilities and performance. The Compensation Committee’s compensation consultant typically provides input and recommendations to the Committee as well. The Compensation Committee then determines the performance goals and objectives for the current fiscal year. |
Compensation Overview
The Compensation Committee is authorized to retain and terminate, without Board or management approval, the services of an independent compensation consultant to provide advice and assistance. The Compensation Committee has the sole authority to approve the consultant’s fees and other retention terms. The Chairperson of the Compensation Committee reviews, negotiates, and executes any engagement letters with compensation consultants engaged by the Compensation Committee. All compensation consultants will report directly to the Compensation Committee. Role of our Compensation Consultant The Compensation Committee engaged Aon, an independent compensation consultant, to conduct a comprehensive review and analysis of our executive officer and non-employee director compensation programs and to make recommendations for compensation related to fiscal 2023. Aon does not perform any other work for the Company. The Compensation Committee reviews the independence of Aon in light of SEC rules and Nasdaq listing standards regarding compensation consultants. The Compensation Committee has reviewed the level of services provided to Lifeway by Aon and does not believe the services give rise to a conflict of interest or compromise Aon’s independence in advising the Compensation Committee in 2023. The Compensation Committee tasked Aon with developing a compensation strategy for 2023 built on Aon’s and the Compensation Committee’s prior work and reflects the compensation philosophy described in this proxy statement. Aon reviewed our comparative peer group with management and the Compensation Committee and suggested several refinements to it, which the Compensation Committee approved. Additional information about peer group selection can be found in “Compensation Overview.” Using the refined peer group, Aon analyzed the peer group’s comparative total direct compensation practices and mix of pay against Lifeway’s executive officer total direct compensation practices generally and proposed recommendations regarding the amount and mix of base and incentive compensation to be delivered to our executive officers and senior management team for fiscal year 2023. The same peer group was used by Aon to assess the competitiveness of compensation for the non-employee directors. The 2023 Compensation Program Design Elements of Compensation For the year ended December 31, 2023, the compensation for our named executive officers generally consisted of a base salary, cash bonus opportunities, and equity awards. These elements (and the amounts of compensation opportunity under each element) were selected because we believe they are market prevalent and competitive elements of compensation and necessary to help us retain our executive talent and attract new executive talent when necessary. We believe that our compensation program also incentivizes our employees to achieve challenging goals and a high level of performance despite many external economic factors that may impact total company performance. Specifically, the Company believes that EBITDA is the primary focus for driving growth at the Company’s current stage, both in terms of short-term and long-term growth, with revenue growth and retention of key personnel as additional components of long-term growth. To that end, the Compensation Committee felt the best strategy for incentivizing growth and more closely linking executives’ experiences to those of shareholders was to use Adjusted EBITDA in both programs, and to use net revenue and continued employment as additional components of our long-term incentive program. However, the Compensation Committee continually evaluates which factors are most key for growth and will adjust metric selection when appropriate and with a clear rationale. Below is a more detailed summary of the current executive compensation program as it relates to our NEOs. Base Salaries The NEOs receive a base salary to compensate them for the services they provide to us. The base salary payable to each named executive officer is intended to provide a competitive, fixed component of compensation reflecting the executive’s skill set, experience, role, and responsibilities. The salaries of the NEOs are summarized below.
Compensation Overview
The actual salaries paid to each named executive officer for 2023 are set forth below this Compensation Overview in the Summary Compensation Table in the column entitled “Salary.” 2023 Annual Incentive Plan The incentive awards available to the NEOs were adjusted to more closely align with market rates and provide an increased portion of total compensation tied to annual Company financial performance. For fiscal 2023, our NEOs were eligible to receive annual cash incentive awards under the 2022 Omnibus Plan (as defined below) based on achievement of a targeted Adjusted EBITDA (as defined below) goal and a minimum Net Revenue threshold (the floor), each set by the compensation committee. For purposes of the annual incentive, EBITDA may be adjusted to account for non-recurring or non-operational expenses such as stock-based compensation, gain/loss on sale of equipment, deferred revenue, and gain/loss on investments prior to payment of bonuses to employees (“Adjusted EBITDA”). The Compensation Committee set the minimum threshold Net Revenue goal (floor) that had to be achieved in order for any bonus to be funded for 2023 at $135 million, increased from the $115 million floor established in 2022. The Compensation Committee set the target Net Revenue level for 2023 at $140 million, increased from the $120 million target net revenue target in 2022. Actual Net Revenue in 2023 was $160.1 million, exceeding the 2023 minimum and target thresholds and actual net revenue in 2022 of $ $141.5 million. Once the Net Revenue funding trigger was met, if the targeted level of Adjusted EBITDA was also met as determined by the Compensation Committee, the target cash bonus was paid. Performance above target results in a payout of a higher percentage of salary. Performance below target results in a lower bonus payout, or no payout if the minimum threshold (floor) of Adjusted EBITDA or Net Revenue was not met. 100% of the annual incentive award is based on financial performance of the Company. The table below shows, for each NEO who received an award, the target and maximum annual incentive award, the threshold, target, stretch and maximum expectation with respect to Adjusted EBITDA financial performance and the actual bonus payout for 2023. The minimum, target, stretch and maximum performance thresholds were increased to $9.9 million, $11.0 million, $12.1 million and $16.5 million, respectively, in 2023 from $5.0 million, $7.0 million, $9.5 million and $11.25 million, respectively, in 2022. Actual Adjusted EBITDA in 2023 was $23.4 million in 2023, exceeding the 2023 maximum target thresholds for 2023 and actual Adjusted EBITDA in 2022 of $9.7 million. The financial goals used to determine NEO bonus funding are identical to those used to fund bonuses for other bonus-eligible executives and employees. The award calculation is interpolated on a sliding calculation, not a cliff achievement at each level.
Compensation Overview
Actual Adjusted EBITDA performance was approximately 131% above target, resulting in actual cash incentives above target as well for each NEO. The Compensation Committee determined this level of annual cash incentive was earned based on exceeding the target and stretch levels of financial performance set for the fiscal year. The Compensation Committee believes Adjusted EBITDA is a transparent and accurate way to measure the Company’s performance because it reflects non-recurring or non-operational expenses such as stock-based compensation, gain/loss on sale of equipment, and gain/loss on investments. The use of Net Revenue aligns with expansion through introduction of new products and growth of existing products ensuring our leaders are accountable for driving long term profitability and sustainability of the Company. Long Term Incentive Plan On August 31, 2022, the Company’s shareholders approved and we maintain the Lifeway Foods, Inc. 2022 Omnibus Incentive Plan (the “2022 Omnibus Plan”). The 2022 Omnibus Plan provides eligible participants (including our NEOs) the opportunity to participate in equity programs and incentivize them to work towards the long-term performance goals of Lifeway. We believe that a mix of restricted stock units (“RSUs”) and performance share units (“PSUs”) function as a compelling incentive and retention tool as well as motivation to achieve challenging goals and high performance for a multiple year period. For fiscal 2023, the total long-term incentive opportunity at target is awarded using two vehicles:
Compensation Overview
| • | 2/3 PSUs — Cliff vests at the end of the 3-year measurement period (i.e., 12/31/2025), and do not vest during the 3-year measurement period. The PSU's only vest and become issuable to the employee at the end of the 3-year measurement period based on the achievement of performance goals for 3-year Cumulative Revenue and 3-year Adjusted EBITDA | | • | 1/3 RSUs — Vests 1/3 annually on grant date anniversary (i.e., 6/16/2024, 6/16/2025, 6/16/2026). |
Compensation Overview
| NEO | Threshold PSUs | Target PSUs | Maximum PSUs | Target Value | | Julie Smolyansky | 36,337 | 72,674 | 109,011 | $500,000 | | Eric Hanson | 7,169 | 14,341 | 21,512 | $98,667 | | Amy Feldman | 5,765 | 11,531 | 17,297 | $79,333 |
Compensation Overview
PSUs were calculated by dividing the award value by the fair market value on the date the award was approved. RSUs As described in further detail in the Outstanding Equity Awards at Fiscal Year End Table and related footnotes below this Compensation Overview, the following table sets forth restricted stock unit (“RSU”) awards granted under the 2022 Omnibus Plan to our NEOs in 2023 as part of our long-term incentive plan,
Compensation Overview
| NEO | RSUs | $ Value | | Julie Smolyansky | 36,337 | $250,000 | | Eric Hanson | 7,170 | $49,333 | | Amy Feldman | 5,765 | $39,667 |
Compensation Overview
| Peer group used for fiscal year 2023 compensation planning | | | • Alico, Inc. • Bridgford Foods Corp. • Celsius Holdings, Inc. • Coffee Holding Co., Inc. • Crimson Wine Group, Ltd. • e.l.f. Beauty, Inc. • Farmer Bros Co. • Freshpet, Inc. • Laird Superfood, Inc. • Lifecore Biomedical, Inc. (f/k/a Landec Corp.) • LifeVantage Corp. | • Limoneira Co. • Mama’s Creations, Inc. (f/k/a MamaMancini’s Holdings, Inc.) • MGP Ingredients Inc. • Natural Alternatives International, Inc. • Reed’s, Inc. • Rocky Mountain Chocolate Factory, Inc. • S&W Seed Co. • The Alkaline Water Company, Inc. • Tootsie Roll Industries, Inc. • Village Farms International, Inc. • Willamette Valley Vineyards, Inc. |
Compensation Overview
In consultation with Aon, the Compensation Committee found this peer group representative of an appropriate executive labor market and pay benchmarking perspective. While this analysis informed the decisions of the Compensation Committee and was a reference point on the range of compensation opportunities, the Compensation Committee did not tie executive officer compensation to specific market percentiles. Other Factors In making determinations regarding executive officer compensation, in addition to benchmarking, the Compensation Committee considered several other factors such as our financial performance and financial condition, individual executive performance, tenure, expertise, the importance of the role, potential for future contributions, and comparative pay levels among the members of the senior executive team, as well as input of the compensation consultant and, subject to conformity with independent analyses of all other information by the Compensation Committee, and, other than with respect to Julie Smolyansky, management recommendations. The Compensation Committee typically followed most of these recommendations; however, the Compensation Committee has sole authority for the final compensation determination and may have set total compensation and incentive opportunities below, at, or above median amounts.
NEO Summary Compensation for Fiscal Years 2022 and 2023
| Summary Compensation Table | | | | | | | | Name and Principal Position(s) | Year | Salary ($) | Stock Awards (1)(2) ($) | Nonequity incentive plan compensation ($) | All Other Compensation (3) ($) | Total ($) | | Julie Smolyansky | | | | | | | | Chief Executive Officer, | 2023 | 1,000,000 | 750,000 | 1,600,000 | 22,200 | 3,372,200 | | President and Secretary | 2022 | 1,000,000 | 750,000 | 1,067,032 | 24,561 | 2,841,593 | | Eric Hanson | | | | | | | | Chief Financial and | 2023 | 370,000 | 148,000 | 259,000 | 28,000 | 805,000 | | Accounting Officer, Treasurer | 2022 | 350,000 | 140,000 | 198,365 | 15,800 | 704,166 | | Amy Feldman | | | | | | | | Senior Executive Vice | 2023 | 340,000 | 119,000 | 238,000 | 43,464 | 740,464 | | President - Sales | 2022 | 325,000 | 113,750 | 184,196 | 42,065 | 665,011 |
Pay Versus Performance
Pay Versus Performance The following table sets forth certain information concerning the relationship between compensation actually paid to Lifeway’s Chief Executive Officer (“PEO”) and its other NEOs and the financial performance of the Company during fiscal years 2022 and 2023.
Pay Versus Performance
| Year | Summary Compensation Table Total for PEO (1) | Compensation Actually Paid to PEO (3) | Average Summary Compensation Table Total for Non-PEO NEOs (2) | Average Compensation Actually Paid to Non-PEO NEOs (3) | Value of Initial Fixed $100 Investment Based on Total Shareholder Return | Net Income (in 000’s) | | 2023 | 3,372,200 | 5,119,250 | 772,732 | 990,756 | $241.62 | 11,367 | | 2022 | 2,841,593 | 3,059,976 | 684,588 | 687,675 | $120.65 | 924 | | 2021 | 2,766,167 | 2,485,253 | 576,643 | 579,141 | $75.03 | 3,311 |
Pay Versus Performance
| (1) Julie Smolyansky was our principal executive officer ("PEO") for each of the years shown. |
Pay Versus Performance
| (2) The non-PEO NEOs for each applicable year are as follows: |
Pay Versus Performance
| – | 2023: Eric Hanson and Amy Feldman | | – | 2022: Eric Hanson and Amy Feldman | | – | 2021: Edward Smolyansky and Eric Hanson |
Pay Versus Performance
| (3) The table below details amounts deducted and added to calculate Average Compensation Actually Paid to the PEO and non-PEO NEOs.: |
Pay Versus Performance
| | 2023 | | | | PEO $ | Average of NEOs $ | | Total Compensation per Summary Compensation Table (SCT) | 3,372,200 | 772,732 | | Less: Value of Stock Award Reported in SCT | (750,000) | (133,500) | | Plus: Year-End Fair Value of Outstanding and Unvested Equity Awards Granted in Covered Year | 1,461,838(A) | 260,201(A) | | Plus: Fair Value for Equity Awards Granted and Vested During the Covered Year | – | – | | Plus: Change in Fair Value of Outstanding and Unvested Equity Awards Granted in Prior Years | 920,131 | 76,659 | | Plus: Change in Fair Value of Prior Year Equity Awards that Vested this Year | 115,082 | 14,665 | | "Compensation Actually Paid" for Year Shown | 5,119,250(B) | 990,756 |
Pay Versus Performance
| (A) Includes an estimate of PSUs that may be earned under the Company’s 2022 long term incentive program. Such PSUs may be earned at the end of a three-year performance period based on the achievement of performance goals over such three-year performance period. Actual PSUs earned cannot be determined until the completion of the performance period. | | (B) Awards that are unissued solely because Danone has not consented to the issuance as set forth below in the section “Consent by Danone to Equity Issuances,” are reflected as ‘vested’ in order to differentiate between awards that have met their vesting criteria and awards in which service of performance vesting criteria are yet to be met. |
Compensation Actually Paid and Cumulative TSR
Compensation Actually Paid and Cumulative TSR As demonstrated by the following graph, the amount of compensation actually paid to the Company’s NEOs as a group is aligned with the Company’s cumulative total shareholder return (“TSR”) over the three years presented in the table. In 2023, awards that are unissued solely because Danone has not consented to the issuance as set forth below in the section “Consent by Danone to Equity Issuances,” are reflected as ‘vested’ in order to differentiate between awards that have met their vesting criteria and awards in which service of performance vesting criteria are yet to be met.
Compensation Actually Paid and Net Income
Compensation Actually Paid and Net Income The following graph depicts the relationship between the average amount of compensation actually paid to the Company’s NEOs as a group and the Company’s net income over the three years presented in the table. In 2023, awards that are unissued solely because Danone has not consented to the issuance as set forth below in the section “Consent by Danone to Equity Issuances,” are reflected as ‘vested’ in order to differentiate between awards that have met their vesting criteria and awards in which service of performance vesting criteria are yet to be met.
Outstanding Equity Awards at Fiscal Year End
Outstanding Equity Awards at Fiscal Year End The following table provides information regarding each unexercised stock option and unvested restricted stock award held by our NEOs as of December 31, 2023.
Outstanding Equity Awards at Fiscal Year End
| | Stock awards | | | | | Name | Number of shares or units of stock that have not vested (#)(1)(7) | Market value of shares of units of stock that have not vested ($)(2)(7) | Equity incentive plan awards: Number of unearned shares, units or other rights that have not vested (#)(3)(7) | Equity incentive plan awards: Market or payout value of unearned shares, units or other rights that have not vested ($)(2)(7) | | Julie Smolyansky | 153,402(4) | $2,057,121 | 229,011 | $3,071,038 | | Eric Hanson | 18,466(5) | $247,629 | 43,912 | $588,860 | | Amy Feldman | 13,975(6) | $187,405 | 35,497 | $476,015 |
Outstanding Equity Awards at Fiscal Year End
| (1) Represents time-based restricted stock awards pursuant to Lifeway’s 2015 Omnibus Plan and 2022 Omnibus Plan. As discussed above in the section “Consent by Danone to Equity Issuances,” unvested stock awards (Performance Shares) are subject to Danone’s consent to issuances of performance-based, short term or long-term incentive stock awards to our CEO. | | (2) The market values of these stock awards are calculated by multiplying the number of unvested/unearned shares held by the applicable NEO by the closing price of our common stock on December 29, 2023, the last trading day of our fiscal year, which was $13.41. | | (3) Performance share units will vest three years after grant if certain performance metrics are met. Numbers presented represent number of maximum units. For further discussion of performance metrics, see “Long Term Incentive Plan” above. | | (4) Of such shares, 41,666 will vest on April 20, 2024; 48,732 will vest on April 29, 2024; 12,113 will vest on June 16, 2024; 13,333 will vest on August 31, 2024; 12,113 will vest on June 16, 2025; 13,334 will vest on August 31, 2025; 12,111 will vest on June 16, 2026. | | (5) Of such shares, 6,319 will vest on April 20, 2024; 2,390 will vest on June 16, 2024; 2,489 will vest on August 31, 2024; 2,390 will vest on June 16, 2025; 2,488 will vest on August 31, 2025; and 2,390 will vest on June 16, 2026. | | (6) Of such shares, 4,166 will vest on April 20, 2024; 1,922 will vest on June 16, 2024; 2,022 will vest on August 31, 2024; 1,922 shares will vest on June 16, 2025; 2,022 will vest on August 31, 2025 and 1,921 will vest on June 16, 2026. | | (7) Awards that are unissued solely because Danone has not consented to the issuance as set forth above in the section “Consent by Danone to Equity Issuances,” are reflected as ‘vested’ in order to differentiate between awards that have met their vesting criteria and awards in which service of performance vesting criteria are yet to be met. |