BOARD OF DIRECTORS AND COMMITTEES
BOARD OF DIRECTORS. The businessSection 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Company is managed underExchange Act requires the directionCompany’s Directors, executive officers and 10% shareholders to file with the SEC and NASDAQ initial reports of ownership and reports of changes in ownership of the Board. The Board meetsCompany’s Common Stock. Directors and executive officers are required to furnish the Company with copies of all Section 16(a) reports which they file.
To the Company’s knowledge, based solely on a regularly scheduled basis duringreview of the Company's fiscal yearcopies of these reports furnished to review significant developments affecting the Company and written representations that no other reports were required, during 2018 all Section 16(a) filing requirements applicable to act on matters requiring Board approval. It also holds special meetings when an important matter requires Board action between scheduled meetingsits directors and also actsexecutive officers were complied with, other than a filing by unanimous written consent when necessaryMr. Wahl which was two days late.
Sarbanes-Oxley Act Compliance
Sarbanes-Oxley sets forth various requirements for public companies and appropriate.directs the SEC to adopt additional rules and regulations.
Currently, the Company believes it is in compliance with all applicable laws, rules and regulations arising from Sarbanes-Oxley. The BoardCompany intends to comply with any additional rules and regulations adopted by the SEC pursuant to Sarbanes-Oxley no later than the time they become applicable to the Company.
13 | | | | | | | | |
| | Directors, Executive Officers and Corporate Governance
|
Audit Committee Report
The members of the Audit Committee from January 1, 2018 to December 31, 2018 were Messrs. Briggs, Moss and Ottaviano. The Audit Committee met five times during the fiscal year ended December 31, 2015. During 2015, each member2018. The Audit Committee is responsible for the appointment of the Board participated in at least 75%Independent Auditors for each fiscal year, recommending the discharge of allthe Independent Auditors to the Board and applicable committee meetings held duringconfirming the period for which he or she was a director or committee member. Directors are expected to attend all Board meetings and meetings of committees on which they serve, and each Annual Meeting of Shareholders. In 2015, allindependence of the directors attendedIndependent Auditors. It is also responsible for: reviewing and approving the scope of the planned audit, the results of the audit and the Independent Auditors’ compensation for performing such audit; reviewing the Company’s audited financial statements; and reviewing and approving the Company’s internal accounting controls and disclosure procedures, and discussing such controls and procedures with the Independent Auditors.
A copy of the Company's Annual Meeting of Shareholders.Amended and Restated Audit Committee Charter is available on the Company’s website at www.hcsg.com.
The Company’s Independent Registered Public Accounting Firm are responsible for auditing the financial statements, as well as auditing the Company’s internal controls over financial reporting. The activities of the Audit Committee are in no way designed to supersede or alter those traditional responsibilities. The Audit Committee’s role does not provide any special assurances with regard to the Company’s financial statements, nor does it involve a professional evaluation of the quality of the audits performed by the Independent Auditors.
In connection with the audit of the Company’s financial statements for the year ended December 31, 2018, the Audit Committee met with representatives from Grant Thornton LLP, the Company’s Independent Auditors, and the Company’s internal auditor. The Audit Committee reviewed and discussed with Grant Thornton LLP and the Company’s internal auditor, the Company’s financial management and financial structure, as well as the matters relating to the audit required by the Public Company Accounting Oversight Board has established anAuditing Standard.
The Audit Committee and a Grant Thornton LLP also discussed Grant Thornton LLP’s independence. In November 2018, the Audit Committee received from Grant Thornton LLP the written disclosures and the letter regarding Grant Thornton LLP’s independence required by Public Company Accounting Oversight Board Rule 3526.
In addition, the Audit Committee reviewed and discussed with management the Company’s audited financial statements for the fiscal year ended December 31, 2018, as well as management’s assessment of internal controls over financial reporting.
Based upon the review and discussions described above, the Audit Committee recommended to the Board of Directors, and the Board of Directors approved, that the Company’s financial statements audited by Grant Thornton LLP, as well as the audit of the Company’s internal controls over financial reporting be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018.
AUDIT COMMITTEE
John M. Briggs, Chairman
Robert J. Moss
Dino D. Ottaviano
Nominating, Compensation and Stock Option Committee to devote attention to specific subjectsReport
The compensation of the President and to assist it inChief Executive Officer of the discharge of its responsibilities. The functions of those committees, their current membersCompany is determined by the Nominating, Compensation and theStock Option Committee. Such Committee’s determinations regarding such compensation are based on a number of meetings held during 2015 with respectfactors including, in order of importance:
•Consideration of the operating and financial performance of the Company, primarily its income before income taxes.;
•Attainment of a level of compensation designed to retain a superior executive in a highly competitive environment; and
•Consideration of the individual’s overall contribution to the Audit Committee,Company.
In consultation with the President and Chief Executive Officer of the Company, the Nominating, Compensation and Stock Option Committee are described below:
AUDIT COMMITTEE. The Audit Committee's primary responsibilities, as described indevelops guidelines and reviews the Amended and Restated Audit Committee Charter (a copy of which is available on the Company’s website, www.hcsg.com) include:
(a) appointment, compensation and oversightperformance of the Company's Independent Auditors, who report directly to the Audit Committee, including (i) prior reviewother executive officers of the Independent Auditors' plan forCompany, and sets the annual audit, (ii) pre-approval of both audit and non-audit services to be provided by the Independent Auditors and (iii) annual assessmentcompensation of the qualifications, performance and independenceexecutive officers of the Independent Auditors;
(b) overseeing and monitoring the Company's accounting and financial reporting processes and internal control system, audits of the Company's financial statements and the quality and integrity of the financial reports and other financial information issued by the Company;
(c) providing an open avenue of communication among the Independent Auditors and financial and other seniorCompany and/or any management and the Board;
(d) reviewing with management and, where applicable, the Independent Auditors, prior to release, required annual, quarterly and interim filingsfees paid by the Company withfor executives services when needed. In addition, the SecuritiesNominating, Compensation and Exchange Commission and the type and presentation of information to be included in earnings press releases;
(e) reviewing material issues, and any analysis by management or the Independent Auditors, concerning accounting principles, financial statement presentation, certain risk management issues, such as the adequacy of the Company's internal controls and significant financial reporting issues and judgments and the effect of regulatory and accounting initiatives on the Company's financial statements;
(f) reviewing with the Company's legal counsel any legal matters that could have a significant effect on the Company's financial statements, compliance with applicable laws and regulations and inquiries from regulators or other governmental agencies;
(g) reviewing and approving all related party transactions between the Company and any director, executive officer, other employee or family member;
(h) reviewing and overseeing compliance with the Company's Code of Ethics and Business Conduct;
(i) establishing procedures regarding the receipt, retention and treatment of, and the anonymous submission by employees of the Company of, complaints regarding the Company's accounting, internal controls or auditing matters; and
(j) reporting AuditStock Option Committee activitiesmakes recommendations to the full Board with respect to incentive-compensation plans and issuing annual reports to be included in the Company's proxy statement. Each of Messrs. Moss, Ottavianoequity-based plans, and Briggs are independent Directors as such term is defined by Rule 5605(a)(2) of the NASDAQ listing standards and Rule 10A-3 of the Securities Exchange Act of 1934, as amended (the "Exchange Act").
Mr. Briggs has been designated the "audit committee financial expert" and he satisfies the attributes required of audit committee financial experts pursuant to Section 407 of Sarbanes-Oxley. The Audit Committee met five times during fiscal year 2015. The report of the Audit Committeeestablishes criteria for the fiscal year ended December 31, 2015 is included herein under “Audit Committee Report” below.
NOMINATING, COMPENSATION AND STOCK OPTION COMMITTEE.granting of options in accordance with such criteria; and administers such plans. The Nominating, Compensation and Stock Option Committee (currently composedreviews major organizational and staffing matters. In consultation with the President and Chief Executive Officer of Messrs. Ottavianothe Company, the Nominating, Compensation and McFaddenStock Option Committee oversees the development and Ms. Casey) assistsgrowth of executive management personnel. With respect to director compensation, the Board by:
(a) developingNominating, Compensation and recommendingStock Option Committee designs a director compensation package of a reasonable total value based on comparisons with similar firms and aligned with long-term shareholder interests. Finally, the Nominating, Compensation and Stock Option Committee reviews director compensation levels and practices, and may recommend, from time to time, changes in such compensation levels and practices to the Board, a set of effective corporate governance policies and procedures applicable towith equity ownership in the Company;
(b) identifying, reviewing and evaluating individuals qualified to become Board members and recommending that the Board select director nominees for each annual meeting of the Company’s shareholders;
(c) discharging the Board’s responsibilities relating to the compensation of Company executives; and
(d) administering the Company’s stock option plan or other equity-based compensation plans.
Each of Messrs. Ottaviano and McFadden and Ms. Casey are Independent Directors as such term is defined by Rule 5605(a)(2) of the NASDAQ listing standards.encouraged. The Nominating, Compensation and Stock Option Committee’s charter provides that the Nominating, Compensation and Stock Option Committee met once during fiscal year 2015shall have the authority to obtain advice and also acts by unanimous written consent when necessaryseek assistance from internal and appropriate.external legal, accounting and other advisors.
The Nominating, Compensation and Stock Option Committee has not adopted a policy or processreviewed and discussed the Compensation Discussion and Analysis required by which shareholders may make recommendations to the Nominating, CompensationItem 402(b) of Regulation S-K with management and, Stock Option Committee of candidates to be considered by this Nominating, Compensationbased on such review and Stock Option Committee for nomination for election as Directors. The Nominating, Compensation and Stock Option Committee has determined that it is not appropriate to have such a policy because such recommendations may be informally submitted to and considered by the Nominating, Compensation and Stock Option Committee under its Charter. Shareholders may make such recommendations by giving written notice to Healthcare Services Group, Inc., 3220 Tillman Drive, Suite 300, Bensalem, PA 19020, Attention: Corporate Secretary either by personal delivery or by United States mail, postage prepaid. The Charter of the Nominating, Compensation and Stock Option Committee is provided on the Company's website, www.hcsg.com. The Nominating, Compensation and Stock Option Committee has not established a formal process for identifying and evaluating nominees for Director, although generally the Nominating, Compensation and Stock Option Committee may use multiple sources for identifying and evaluating nominees for Director, including referrals from current Directors and shareholders. The Nominating, Compensation and Stock Option Committee has identified certain qualifications it believes an individual should possess before it recommends such person as a nominee for electiondiscussions, recommended to the Board of Directors.
The Nominating, Compensation and Stock Option Committee believes that nominees for Director should possess the highest personal and professional ethics, integrity, values and judgment and be committed to representing the long-term interests of the Company’s shareholders. The Nominating, Compensation and Stock Option Committee does not have a formal policy with respect to considering diversity in identifying nominees for directors. The Nominating, Compensation and Stock Option Committee believes that racial and gender diversity are important factors in assessing potential board members, but not at the expense of particular qualifications and experience required to meet the needs of the Board. Furthermore, as part of the Nominating, Compensation and Stock Option Committee's review of board composition, the board considers diversity of experience and background in an effort to ensureDirectors that the composition of directors ensures a strongCompensation Discussion and effective board. The Nominating, Compensation and Stock Option Committee seeks to ensure that the composition of the Board at all times adheres to the independence requirements of the NASDAQ and reflects a range of talents, skills, and expertise, particularlyAnalysis be included in the areas of management, leadership, and experience in the Company’s and related industries, sufficient to provide sound and prudent guidance with respect to the operations and interests of the Company.
See below for the Report of the Nominating, Compensation and Stock Option Committee regarding executive compensation.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
this Proxy Statement.
The following table sets forth information as of April 1, 2016, regarding the beneficial ownership of Common Stock by each person or group known by the Company to own: (i) 5% or more of the outstanding shares of Common Stock, (ii) each director and director nominee of the Company, (iii) the Named Executive Officers as defined in Item 402(a)(3) of Regulation S-K and (iv) all current directors and executive officers of the Company as a group. The persons named in the table have sole voting and investment power with respect to all shares of Common Stock owned by them, unless otherwise noted.
NOMINATING, COMPENSATION AND STOCK OPTION COMMITTEE
Diane S. Casey, Chairwoman
John J. McFadden
|
| | | | | | | | |
Name and Beneficial Owner or Group (1) | | Amount and Nature of Beneficial Ownership | | Percent of Class (3) |
BlackRock, Inc. (2) | | 6,904,547 |
| (4) | | 9.5 | % | |
The Vanguard Group, Inc. (2) | | 5,805,647 |
| (5) | | 8.0 | % | |
Neuberger Berman Group LLC (2) | | 4,789,996 |
| (6) | | 6.6 | % | |
Daniel P. McCartney | | 2,604,273 |
| (7) | | 3.6 | % | |
Theodore Wahl | | 289,203 |
| (8) | | — |
| (19) |
Bryan D. McCartney | | 239,719 |
| (9) | | — |
| (19) |
Michael E. McBryan | | 146,481 |
| (10) | | — |
| (19) |
Robert L. Frome | | 63,858 |
| (11) | | — |
| (19) |
John M. Briggs | | 44,301 |
| (12) | | — |
| (19) |
Robert J. Moss | | 29,992 |
| (13) | | — |
| (19) |
John C. Shea | | 23,449 |
| (14) | | — |
| (19) |
Dino D. Ottaviano | | 13,588 |
| (15) | | — |
| (19) |
Jason J. Bundick | | 7,506 |
| (16) | | — |
| (19) |
John J. McFadden | | 6,003 |
| (17) | | — |
| (19) |
Diane S. Casey | | — |
|
| | — |
|
|
Jude Visconto | | — |
| | | — |
|
|
Directors and Executive Officers as a group (13 persons) | | 3,468,373 |
| (18) | | 4.8 | % |
|
| | | | | | |
15 | | | | | | | | |
(1)
| Unless otherwise indicated, the address of all persons is c/o Healthcare Services Group, Inc., 3220 Tillman Drive, Suite 300, Bensalem, PA 19020. | Nominating, Compensation and Stock Option Committee Report
|
| |
(2)
| The address of Neuberger Berman Group LLC is 605 Third Avenue, New York, NY 10158. |
The address of Blackrock, Inc. is 55 East 52nd Street, New York, NY 10055.
The address of The Vanguard Group, Inc. is 100 Vanguard Blvd., Malvern, PA 19355.
| |
(3)
| Based on 72,406,694 shares of Common Stock outstanding at April 1, 2016. |
| |
(4)
| According to Schedule 13G filed by BlackRock, Inc. on January 26, 2016, it has total beneficial ownership of 6,904,547 shares. Such beneficial ownership includes sole voting power with respect to 6,747,140 shares, and sole dispositive power with respect to 6,904,547 shares. |
| |
(5)
| According to Schedule 13G filed by The Vanguard Group, Inc. on February 11, 2016, it has total beneficial ownership of 5,805,647 shares. Such beneficial ownership includes sole voting power with respect to 158,026 shares, shared voting power with respect to 3,800 shares, sole dispositive power with respect to 5,648,868 shares and shared dispositive power with respect to 156,779 shares. |
| |
(6)
| According to Schedule 13G filed by Neuberger Berman Group LLC, Neuberger Berman LLC and Neuberger Berman Investment Advisors LLC on February 9, 2016, such entities have, in the aggregate, total beneficial ownership of 4,789,996 shares, which includes shared voting power with respect to 4,737,721 shares. |
| |
(7)
| Includes incentive stock options to purchase 58,754 shares and nonqualified stock options to purchase 116,747 shares all currently exercisable and 71,258 shares credited to Mr. McCartney's account (but unissued) in connection with the Company's Deferred Compensation Plan. |
| |
(8)
| Includes incentive stock options to purchase 37,483 shares, and nonqualified stock options to purchase 26,267 shares, all currently exercisable, and 8,738 shares credited to Mr. Wahl's account (but unissued) in connection with the Company's Deferred Compensation Plan. Additionally, includes 81,901 and 26,168 shares held by Mr. Wahl's wife and minor children, respectively. |
| |
(9)
| Includes incentive stock options to purchase 30,046 shares and nonqualified stock options to purchase 59,954 shares, all currently exercisable, and 20,696 shares credited to Mr. McCartney's account (but unissued) in connection with the Company's Deferred Compensation Plan. Additionally, includes 22,798 shares held by Mr. McCartney's children. |
| |
(10)
| Includes incentive stock options to purchase 30,046 shares and nonqualified stock options to purchase 59,954 shares, all currently exercisable, and 29,811 shares credited to Mr. McBryan's account (but unissued) in connection with the Company's Deferred Compensation Plan. |
| |
(11)
| Includes nonqualified stock options to purchase 33,357 shares, all currently exercisable. |
| |
(12)
| Includes nonqualified stock options to purchase 18,779 shares, all currently exercisable. |
| |
(13)
| Includes nonqualified stock options to purchase 29,992 shares, all currently exercisable. |
| |
(14)
| Includes incentive stock options to purchase 14,580 shares, all currently exercisable and 2,682 shares credited to Mr. Shea's account (but unissued) in connection with the Company's Deferred Compensation Plan. |
| |
(15)
| Includes nonqualified stock options to purchase 13,351 shares, all currently exercisable. |
| |
(16)
| Includes incentive stock options to purchase 5,100 shares, all currently exercisable and 431 shares credited to Mr. Bundick's account (but unissued) in connection with the Company's Deferred Compensation Plan. |
| |
(17)
| Includes nonqualified stock options to purchase 6,003 shares, all currently exercisable. |
| |
(18)
| Includes 551,417 shares underlying stock options granted to this group. All stock options reflected in the security ownership table are currently exercisable; also includes 133,886 shares credited to the accounts of certain executive officers (but unissued) in connection with the Company's Deferred Compensation Plan. |
| |
(19)
| Less than 1% of the outstanding shares. |
MANAGEMENTEXECUTIVE COMPENSATION
Compensation Discussion and Analysis
Compensation Objectives
We refer to our President and Chief Executive Officer, the Chief Financial Officer, our former Chief Executive Officer and each of our other three most highly compensated executive officers as our Named Executive Officers ("NEOs"(“NEOs”). As more fully described below, the base salary of Mr. Daniel McCartney was primarilyIn 2018 our NEOs were as follows:
| | | | | | | | |
Named Executive Officer | | Role |
Theodore Wahl | | President & Chief Executive Officer & Director |
John C. Shea | | Executive Vice President & Chief Financial Officer |
Michael E. McBryan | | Executive Vice President & Chief Revenue Officer & Director |
David Hurlock | | Executive Vice President & Chief Operating Officer |
Andrew W. Kush | | Executive Vice President & Chief Administrative Officer |
Compensation Objectives
NEO compensation is based on a minimum base salary plus an additional amount based on the Company’s income from operations before income taxescombination of company and in 2015, 2014individual contributions to our performance, along with each NEO's level and 2013, the salaries and bonuses, where applicable, of Messrs. Wahl, Shea, Bryan McCartney, McBryan and Bundick were based on their performance and levelscope of responsibility. Our Nominating, Compensation and Stock Option Committee (“NCSO Committee”) believes that the compensation paid is consistent with theour overarching principle that compensation plans of senior operational officers should be closely aligned with our performance on both a short-term and long-term basis to create value for shareholders, and that such compensation should assist us in attracting and retaining key executives critical to our long-term success.
In establishing compensation for executive officers, the following are the objectives of the Company and the Nominating, Compensation and Stock OptionNCSO Committee:
•Attract and retain individuals of superior ability and managerial talent;
Ensure•Aim to ensure officer compensation is aligned with our corporate strategies, business objectives and the long-term interests of our shareholders; and
•Enhance the officers'officers’ incentive to maximize shareholder value, as well as promote retention of key personnel, by providing a portion of total compensation for management in the form of direct ownership in the Company through stock options and other stock-based compensation plans.
To support these objectives, the Company’s executive compensation program has the following characteristics:
| | | | | | | | | | | | | | |
What we do: | | | What we don’t do: | |
þ | Significant share ownership requirements for senior executives | | o | No employment agreements containing special severance payments such as golden parachutes |
þ | Double-trigger requirements for vesting of time-based awards on a change in control | | o | No hedging or engaging in derivative transactions related to Company shares |
þ | A cap on the annual incentive payout for the Chief Executive Officer | | o | No gross-up payments to cover income taxes related to executive compensation |
þ | Majority of NEO compensation is “at-risk” | | o | No repricing or backdating of stock options |
þ | Operate a clawback policy that applies to “at-risk” variable compensation (new for 2019) | | o | No retirement programs that are specific to executive officers |
þ | Balance "at risk" compensation across short-term and long-term time horizons | | | |
þ | Company engages an independent compensation consultant | | | |
Compensation Oversight
Among its duties, the NCSO is accountable for discharging the Board’s responsibilities relating to the compensation of Company executives. Accordingly, the NCSO Committee conducts an annual review of the aggregate level of our executive compensation, as well as the mix of elements used to compensate our executive officers.
To achieve these objectives, our overall compensation program aims to pay our NEOs competitively, consistent with our success and their contribution to that success. To accomplish this we rely on programs that provide compensation in the form of
both cash and equity. Although our Nominating, Compensation and Stock OptionNCSO Committee has not adopted any formal guidelines for allocating total compensation between cash and equity, the Nominating, Compensation and Stock OptionNCSO Committee considers the balance between providing short-term and long-term incentives which are designed to help align the interests of management with the interests of shareholders.
We have not retained a compensation consultant to review our policies and procedures with respect to executive compensation, although the Nominating, Compensation and Stock Option Committee may elect to retain such a consultant in the future if it determines that so doing would be helpful in developing, implementing or maintaining compensation plans.
The Nominating, Compensation and Stock Option Committee conducts an annual review of the aggregate level of our executive compensation, as well as the mix of elements used to compensate our executive officers. In addition, the Nominating, Compensation and Stock Option Committee has historically taken into account input from other independent members of our Board and, to the extent available, publicly available data relating to the compensation practices and policies of other companies within and outside our industry. As part of the review of the Company’s compensation, the compensation policies of the following companies have been examined: AMN Healthcare Services, Inc. (a healthcare staffing company), Crothall Services Group (a provider of hospital housekeeping, hospital facilities management, and hospital environmental services) and ARAMARK Corporation (a food, hospitality and facility service company). The Nominating, Compensation and Stock Option Committee believes that gathering information about the compensation practices of these companies is an important part of our compensation-related decision-making process. However, since none of these companies are specifically engaged in the Company's business and the Company is unaware of any other public company which provides housekeeping and food services solely to the health care industry and primarily to the long term care segment of the industry, the Company believes that compensation comparisons with the aforementioned companies are not apt. Accordingly, while the Nominating, Compensation and Stock Option Committee is aware of the compensation practices of the companies set forth above, the Nominating, Compensation and Stock Option Committee has not necessarily relied on comparisons with such entities for purposes of making compensation decisions for Company executive officers and the Company does not benchmark compensation against the compensation of such other companies.
The overwhelming majority of votes cast at the 2015 Annual Meeting of Shareholders approved, on an advisory basis, the compensation of the Company's NEOs ("say-on-pay"). The Nominating, Compensation and Stock Option Committee considered that support in its efforts to align the Company's executive compensation policies with long-term shareholder interests.
Determination of Compensation Awards
The compensation of the President and Chief Executive Officer of the Company is determined by the Nominating, Compensation and Stock Option Committee. The compensation of the former Chief Executive Officer was also determined by the Nominating, Compensation and Stock OptionNCSO Committee. Such determinations regarding compensation are based on a number of factors including, in order of importance:
•Consideration of the operating and financial performance of the Company, primarily its income before income taxes during the preceding fiscal year, as compared with prior operating periods;;
•Attainment of a level of compensation designed to retain a superior executive in a highly competitive environment; and
•Consideration of the individual’s overall contribution to the Company.
The NCSO Committee has also historically taken into account input from other independent members of our Board in determining the compensation of the President and Chief Executive Officer. Compensation for the other NEOs (referred to in the summary compensation table) other thanis recommended by the President and Chief Executive Officer and the former Chief Executive Officer, is determinedreviewed by the President and Chief Executive Officer in consultation with the Nominating, Compensation and Stock OptionNCSO Committee, taking into account the same factors considereddescribed above.
The Company engages an independent compensation consultant who provides advice as requested in determiningareas such as peer group composition, market benchmarking and executive compensation policy design.
Beyond the President and Chief Executive Officer's compensation as described above. Section 162(m) ofNEOs the U.S. Internal Revenue Code of 1986, as amended (the "Code") limits deductibility of compensation in excess of $1 million paid to the Company's NEOs unless this compensation qualifies as "performance-based." Based on the applicable tax regulations, any taxable compensation derived from the exercise of stock options by senior executives under the Company's stock option plans should qualify as performance-based. The Company's 2012 Equity Incentive Plan (the "2012 Plan") contains limits as to how many stock options may be granted to a recipient in any calendar year and was approved by the Company's shareholders. Therefore, compensation received as a result of stock options granted under the 2012 Plan qualify as "performance-based" for purposes of Section 162(m) of the Code. As described under "Grant of Plan-Based Awards," stock options and restricted stock were granted in fiscal year 2015 to the NEOs.
The Company applies a consistent approach to compensation for all employees, including senior management. This approach is based on the belief that the achievements of the Company result from the coordinated efforts of all employees working toward common objectives.
Review of Compensation
In conducting the annual review of compensation, publicly available data relating to the compensation practices and policies of other companies within and outside our industry is collected to the extent it is available. The NCSO Committee believes that gathering information about the compensation practices of other companies is an important part of our compensation-related decision-making process.
Given the challenge that there are no other U.S. publicly-traded companies specifically engaged in the Company’s business, which provides housekeeping and food services solely to the healthcare industry and primarily to the long-term care segment of the industry, our comparator group has been developed looking at a broader cross-section of service industry companies. The following companies have been selected as reasonable comparators for talent as they operate in similar industries, are of similar size and scope, and/or have similar employee bases. That group consists of the following:
| | | | | | | | | | | |
l | ABM Industries Incorporated | l | J&J Snack Foods Corp. |
l | Amedisys, Inc. | l | ServiceMaster Global Holdings, Inc. |
l | AMN Healthcare Services, Inc. | l | Snyder’s-Lance, Inc. |
l | Chemed Corporation | l | The Brink’s Company |
l | Clean Harbors, Inc. | l | The Providence Service Corporation |
l | CoreCivic, Inc. | l | UniFirst Corporation |
Based on the Company’s size relative to the peer group (58th percentile for both revenue and market cap), the NCSO Committee referenced a range around the peer group 50th percentile when reviewing total compensation levels for the President and Chief Executive Officer.
Given the challenges noted above in identifying directly comparable companies, if and when collected, market data is just one factor that the NCSO Committee considers in reaching decisions. Such other factors considered include individual performance, the trends in Company performance relative to broader market indices, the industry in which we operate, tax implications, and achievements in the Company’s social and sustainability efforts.
Shareholder Views
During the course of 2017, 2018 and 2019, the NCSO Committee made a number of changes to the Company’s executive compensation programs in response to feedback. These conclusions, and where applicable resulting changes, of the review, are summarized below:
| | | | | | | | | | | | | | |
Compensation Program Review | Highlights | | Rationale | |
Formalization of annual incentive program
(Effective FY 2017) | s | Primary performance metric of income before income taxes for President and CEO, and the other NEOs | s | Desire to increase transparency and demonstrate objectivity in determining annual incentive payments |
| | | | |
| s | Additional quantifiable operational performance metrics used to validate outcomes for other NEOs | s | Feedback suggested consideration of annual incentive arrangements that were not wholly discretionary
|
| | | | |
| s | Individual opportunities defined as percentage of the Company’s income before income taxes | s | Income before income taxes is an important financial metric to the Company and our shareholders |
| | | | |
| s | Maximum payment for the President and CEO of two-times salary | | |
| | | s | The ability for the President and CEO to take bonus in the form of stock, reinforces our ownership culture as we transition away from a founder President and CEO |
| s | President and CEO can elect to receive part of the annual incentive in stock | | |
| | | | |
Assessment of Long-Term Equity Award Approach
(Under ongoing review and discussion) | s | The NCSO Committee believes that the use of stock options continues to provide direct alignment to sustainable shareholder value creation, aligning our NEOs’ interests with those of our shareholders, reinforced by the use of restricted stock units which also helps retain our successful leadership team | s | In light of feedback, the NCSO Committee has reviewed the current practice of awarding long-term equity as a mix of stock options and restricted stock units |
| | | | |
| | | | |
| | | | |
| | | | |
| | | s | Given the Company currently does not provide guidance or set targets externally, the NCSO Committee determined the current approach remains optimal |
| | | | |
| | | | |
| | | | |
| | | | |
| | | s | Furthermore, the NCSO Committee believes a five-year vesting period for all awards further enhances the focus on long-term sustainable performance |
| | | | |
| | | | |
| | | | |
| | | | |
Share Ownership Guidelines
(Effective FY2018) | s | Adopted share ownership guidelines and a retention requirement for executive officers with effect from January 1, 2018 | s | Due to a pre-existing ‘ownership culture’, which meant there were significant levels of stock ownership among the leadership team, the NCSO Committee had not historically seen the need to adopt formal guidelines |
| | | | |
| | | | |
| | | | |
| s | President and CEO required to hold stock worth six-times base salary | | |
| | | | |
| | | s | However, to be responsive to shareholder feedback the NCSO has formalized a guideline from 2018 |
| s | Other NEOs required to hold stock worth two-times base salary | | |
| | | | |
| | | | |
| s | Retention requirements apply if guideline not achieved within five years | s | All NEOs already exceed their respective stock ownership guideline |
| | | | |
Adoption of double trigger requirements on a change in control
(Effective FY2018) | s | On a change in control, stock awards will now be subject to double trigger requirements | s | Review of market practices, investor guidelines and shareholder feedback indicated a shift to double-trigger would be appropriate |
Adoption of a clawback policy
(Effective FY2019) | s | “At-risk” compensation (performance-based compensation and equity awards) will now be subject to clawback at the discretion of the NCSO Committee | s | Review of market practices, investor guidelines and shareholder feedback indicated the adoption of a clawback policy would be appropriate |
| | | | |
| s | A clawback could be affected in the event of a restatement of Company financial statements | s | Desire to provide greater risk mitigation power to the Board of Directors |
| | | | |
The NCSO Committee was pleased to see that the overwhelming majority of votes cast at the 2018 Annual Meeting of Shareholders approved, on an advisory basis, the compensation of the Company’s NEOs (“say-on-pay”). The NCSO Committee considered that support in its efforts to align the Company’s executive compensation policies with long-term shareholder interests.
Since the Annual Meeting of Shareholders the Committee has continued to keep under review our ability to set meaningful long-term performance targets, and accordingly our ability to use long-term performance-based equity. The Committee remains of the view that stock options and restricted stock units best achieve our compensation objectives and successfully align pay with performance. This is evidenced through the fact that over the last three years (the tenure of our current CEO) the outcome under the annual incentive plan and value of equity awarded has generally trended in line with performance.
The chart below shows the value of equity granted to the CEO in each of 2016, 2017, and 2018 versus the change in Total Shareholder Return and Operating Income (indexed to 100%) over the period. When the value of equity is calculated as of the vesting date or as of April 1, 2019, there is a stronger correlation with performance than when Summary Compensation (grant date fair value) totals are used. This demonstrates the alignment of pay and performance as the value of long-term awards decreases as the stock price does.
Note: Equity data collected from applicable proxy filings. Financial data are sourced from the S&P Capital IQ financial database. “SCT” values represent the grant-date fair value of the awards as disclosed in the applicable proxy filing. “Value at vesting” reflects the intrinsic value for award tranches that have vested as of 12/31/2018 using the close price for the estimated day of vesting; for award tranches that are unvested as of 12/31/2018, the closing stock price as of 04/01/2019 is used. “Value (4/1/2019)” reflects the intrinsic value of the entire award using the closing stock price as of 04/01/2019.
This analysis reinforces the Committee’s view that pay and performance remain suitably aligned despite the absence of a long-term plan with formal performance requirements beyond share price appreciation which is an implicit requirement under the stock option plan. The Committee will continue to keep this position and the alignment of pay and performance under review.
Elements of Compensation
Base Salary. Base salaries for our executives are established based on the scope of their responsibilities and individual experience, taking into account competitive market compensation paid by companies in our industry. Base salaries are reviewed annually, and may be adjusted from time to time to realign salaries with market levels. With respect to certaintake account of changes in responsibilities, individual performance, experience, practices in our compensation comparator group, and the state of our executive officers, this adjustment takes into account individual responsibilities, performance and experience.industry more broadly.
In 2015,
For our NEOs, salaries that were paid in 2018 were approved on 12/14/2017. Mr. Daniel McCartney's minimumWahl's base salary was approximately $19,000, with the balance of his base salary derived from the Performance-Based Compensation criteria described in the paragraph below. The annual salary for Mr. Wahl was approximately $1,000,000 and was reflective of his responsibilities as President and Chief OperatingExecutive Officer as determined before his promotion to Presidentwas unchanged from 2017 and Chief Executive Officer. The annualhas not received an increase for the last three years. Mr. Shea's base salary for Mr. John Shea was approximately $450,000 and was reflective of his responsibilities as Chief Financial Officer. The annualOfficer was increased from 2017 to align his compensation with that of other Chief Financial Officers within the Company's peer group. Mr. Shea's base salary previously had been unchanged since 2015. Mr. McBryan's compensation structure, including base salary, as Chief Revenue Officer was adjusted from 2017 to transition his compensation from a majority bonus structure to a base salary and a target performance-based compensation structure that was more aligned with the Company's other executive officers.
Messrs. Hurlock and Kush both received increases in their base salaries to reflect internal promotions to Chief Operating Officer and Chief Administrative Officer during 2017, respectively. Previously Mr. Hurlock was a Senior Vice President of Mr. Michael McBryanOperations, and Mr. Bryan McCartney are approximately $106,000 with Performance-Based Compensation that is based onKush was a Senior Vice President of Human Resources & Risk Management for the criteria noted below and are reflective of their responsibilities as Executive Vice Presidents. The annual salary for Mr. Jason Bundick was approximately $311,000 with Performance-Based Compensation that is based on the criteria noted below and was reflective of his responsibilities as Chief Compliance Officer, General Counsel and Secretary.Company.
Performance-Based Compensation. We structure our annual incentive program to reward certain executive officers based on ourthe Company’s performance and our evaluation of the individual executive'sexecutive’s contribution to that performance. This allows executive officers to receive sucha significant portion of their compensation based on the results that they helped us to achieve in the previous year. The incentive payment, based upon the Company's prior year performance, becomes the major portionachieve. Performance-based compensation for certain NEOs' salaries for the following year. Mr. Daniel P. McCartney's incentive payment for 2015 was based onour executive officers is defined as a rate of 1.58%percentage of the Company’s operating income. This reflects the importance of operating income from operations before income taxesin assessing our overall performance, providing line of sight to both top-line growth and the appropriate management of costs. This aligns with our strategic focus and Company Vision - To Be THE Choice For Our Customers - resulting in accordance with generally accepted accounting principlesretention of and growth in relationships through good customer service, expansion of our services, effective execution in all that we do, and cost management. For NEOs other than the fiscal year immediately preceding the year for which such annual salary is calculated. In the 2014 and 2013 periods, the Company used rates of 1.48% and 1.40%, respectively, for purposes of calculating Mr. Daniel McCartney's incentive payments. The Company used a 3% rate for more than 20 years. Prior to 2006, such rate was deemed to be representative of performance-based compensation for the ChairmanPresident and Chief Executive Officer, as well as providingpercentages can be modified up or down based on other aspects of quantifiable financial and operational performance for a compensation level which reflectsthe executive officers are accountable for. Examples of the performance of the Company. In 2007, the Company reduced the rate to 2.3% as it believed that this reduced rate was a fair and appropriate measure by reason of the continued increase in the Company's income before income taxes. Based on the continued increase in the Company's income before income taxes, the Company believed that further rate reductions including from 1.70% to 1.40% in 2013 after the reduction
from 1.85% to 1.70% in 2012 was appropriate. Moreover, the Nominating, Compensation and Stock Option Committee historically established the rate to more align Daniel McCartney's compensation with the compensation of the Company's other managerial employees. The Nominating, Compensation and Stock Option Committee historically tied the compensation of Mr. Daniel McCartneytaken into the Company's financial performance because he has had responsibility for all key strategic and policy decisions impacting the Company. Mr. Bryan McCartney and Mr. McBryan are also subject to incentive compensation payments which are based on certain financial and non-financial performance measurements includingaccount include facility growth, profitability, client retention and satisfaction. Their incentive compensation is reflectivesatisfaction, and overall management of their functional area. No judgment is applied in determining the total value of performance-based compensation for the Chief Executive Officer given his direct accountability to shareholders for our overall responsibilityfinancial performance.
In 2018 the long-term and post-acute care industry encountered difficult market conditions and unanticipated developments that adversely affected overall industry fundamentals. The provider community struggled to adapt to a rapidly changing environment fueled by declining census, tightening labor markets, Medicare Advantage pressures, and state-level Medicaid rates that frequently did not cover the cost of the managementcare. These industry dynamics directly impacted certain of our operationscustomer's capacity to pay the entirety of amounts owed to us and as a result, unfavorably impacted our 2018 financial results, in particular operating income which decreased 25% to $99.9 million, primarily due to the deliveryincrease in our allowance for doubtful accounts. Notwithstanding the industry challenges, from an overall operational and financial stewardship point of view, the expectedBoard and NCSO believed that in 2018, management performed well in a challenging environment involving high levels of industry stress and difficult market conditions. The leadership team showed proactivity in managing the situation, and innovation in identifying solutions to set the Company up for future success.
Key 2018 accomplishments included the following:
•Increased revenues 7.6%, adding over 400 new service agreements
•Achieved customer retention rate of greater than 90%
•Increased year-over-year housekeeping and dining operating segment income by 13.4% and 31.6%, respectively
•Continued transition of customer payment terms from monthly to semimonthly or weekly, resulting in over 40% of customers on increased payment frequency model
•Increased quality and quantity of management candidates in both segments and across majority of operating divisions
•Reduced workers compensation claim frequency, scope and severity, resulting in favorable loss development trends and decreased expense
•Designed and implemented Workday® Cloud ERP financial management module
•Generated record operating cash flow of over $80 million, including over $52 million in the second half of 2018
•Paid out record cash dividends of over $57 million
•Demonstrated exceptional financial discipline and non-financial performance associatedefficiency with our services. Mr. Bundick ROA of 12.1%, ROE of 18.9% and ROIC of 22.7%
For the President and Chief Executive Officer performance-based compensation is subject to incentivean overall maximum of two-times base salary. The total performance-based compensation earned by Mr. Wahl for 2018 was $749,325. Mr. Wahl elected to receive two-thirds of this ($499,532) in the form of shares of Company stock in early 2019, further demonstrating the strong ownership culture that exists. The balance of $249,793 was paid in cash.
Performance-based compensation outcomes for the other NEOs were validated against the operational performance achievements towards which they contributed towards. The NCSO Committee agreed with the President and Chief Executive Officer's assessment that the outcome was an appropriate reflection of performance in the year, and so no upward or downward modification was applied. Accordingly the following payments which is based on certain financial and non-financial performance measurements including Company and personal performance.were approved for our NEOs in respect of 2018 performance:
| | | | | | | | | | | | | | | | | | | | |
Named Executive Officer | | 2018 Cash Performance-Based Compensation | | 2018 Equity Performance-Based Compensation | | 2018 Performance Based Compensation (% of salary) |
Theodore Wahl | | $ | 249,793 | | $ | 499,532 | | 75% | |
John C. Shea | | $ | 99,911 | | $ | — | | 19% | |
Michael E. McBryan | | $ | 149,867 | | $ | — | | 18% | |
David Hurlock | | $ | 199,822 | | $ | — | | 46% | |
Andrew W. Kush | | $ | 199,822 | | $ | — | | 53% | |
Discretionary Long-Term Equity Incentive Awards. The Nominating, Compensation and Stock OptionNCSO Committee is responsible for determiningapproving the population of individuals who will be granted stock options,equity awards, the number of stock optionsequity awards each individual will receive, the option price per share (if applicable), and the vesting and exercise period (if applicable) of each stock option.award. Guidelines for the number of stock optionsequity awards granted to each executive officer are determined using a procedure approved by the Nominating, Compensation and Stock OptionNCSO Committee based upon several factors, including the executive officer'sofficer’s salary level, individual contributions to the Company’s performance and the value of the stock optionequity award at the time of grant. We grant stock optionsequity awards at the fair market value of the underlying stock on the date of grant. In January 2016, 2015
Long-term equity incentive awards are currently granted as a combination of stock options and 2014, the Nominating, Compensation and Stock Option Committee granted options to purchase an aggregate of approximately 103,000, 92,000 and 96,000 shares of Common Stock, respectively, to our current NEOs and directors. Additionally, in January 2016, 2015 and 2014, the Nominating, Compensation and Stock Option Committee granted restricted stock units. Given the Company does not provide guidance or set targets externally, the NCSO Committee determined that this approach remains appropriate. The NCSO Committee believes that the use of stock options and restricted stock units provides a clear incentive to the NEOs to deliver long-term sustainable and profitable growth which translates into value creation for our shareholders, in a responsible way. The vesting of awards is phased over a period of an aggregate of 39,400, 22,275 and 12,225 shares, respectively,five-years to our current NEOs. Such awards are detailed for the respective NEOs in the table reporting on Grant of Plan-Based Awards included inreinforce this proxy statement. long-term focus.
In making its decision to grant these awards, the Nominating, Compensation and Stock OptionNCSO Committee considered the competitive challenges to our business and the commitments of time, energyresulting focus, efforts and expertise our executive officers have expended to meet these challenges and foster the growth and financial position of the Company. In determining the award values the NCSO takes into account a range of factors including not just competitive market data, but also the performance of the company more generally and the contributions of individuals to our performance accomplishments in the prior year.
The Nominating, Compensationfollowing awards were approved and granted during 2018 to our NEOs:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Named Executive Officer | | Stock Options (#) | | Stock Option Grant Date Fair Value | | Restricted Stock Units (#) | | Restricted Stock Units Grant Date Fair Value | | Total Grant Date Fair Value1 |
Theodore Wahl | | 50,000 | | $ | 524,000 | | 30,000 | | $ | 1,561,800 | | $ | 2,085,800 |
John C. Shea | | 10,000 | | $ | 104,800 | | 6,000 | | $ | 312,360 | | $ | 417,160 |
Michael E. McBryan | | 10,000 | | $ | 104,800 | | 6,000 | | $ | 312,360 | | $ | 417,160 |
David Hurlock | | 10,000 | | $ | 104,800 | | 6,000 | | $ | 312,360 | | $ | 417,160 |
Andrew W. Kush | | 10,000 | | $ | 104,800 | | 6,000 | | $ | 312,360 | | $ | 417,160 |
1.All awards granted vest and are exercisable ratably over a five-year period on each yearly anniversary of the grant date of the award.
In January 2019, 2018 and 2017, the NCSO Committee granted options to purchase an aggregate of approximately 130,000, 125,000 and 95,000 shares of Common Stock, Optionrespectively, to our current NEOs and directors. In January 2019, 2018 and 2017, the NCSO Committee granted restricted stock units of an aggregate of approximately 76,500, 54,000, and 59,000 shares, respectively, to our NEOs. See the table entitled Grant of Plan-Based Awards included in this Proxy Statement for more information on the 2018 grants. The NCSO Committee has also granted stock optionsawards to all other levels of Company management and key employees and believes that the grant of the stock options to the NEOs is aligned with the grants to such management and key employees and also aligns the interest of management with shareholders. As indicated under "Compensation Objectives" above, the Nominating, Compensation and Stock Option Committee has not adopted any formal guidelines for allocating total compensation between cash and equity.providing collective alignment.
Deferred Compensation Plan. We have a Supplemental Executive Retirement Plan (the "SERP"“SERP”) for certain executives and key employees. The SERP is not qualified under Section 401 of the Code. Effective 2010, theInternal Revenue Code of 1986, as amended. The SERP was amended to allow
allows participants to defer up to 25% of their earned income on a pre-tax basis. As of the last day of each plan year, each participant will receive a 25% match of up to 15% of their deferral in the form of our Common Stock based on the then current market value. SERP participants fully vest in our matching contribution three years from the first day of the initial year of participation. The income deferred and our matching contributions are unsecured and subject to the claims of our general creditors.
Under the SERP, we are authorized to issue up to 1,013,000 shares of our Common Stock to our employees. Pursuant to such authorization, 421,000approximately 385,000 shares are available for future grant at December 31, 2015 (after deducting2018. As of December 31, 2018 and since the 2015 funding of 15,000 shares delivered in 2016). In the aggregate, since initiation of the SERP, the Company'sCompany’s 25% match has resulted in 591,000approximately 627,000 shares (including the 2015 funding of shares delivered in 2016) being issued to the trustee. At the time of issuance, such shares wereare accounted for at cost, as treasury stock. At December 31, 2015,2018, approximately 359,000277,000 of such shares are vested and remain in the respective active participants’ accounts.
Employee Stock Purchase Plan. We have an Employee Stock Purchase Plan ("ESPP"(“ESPP”) for all eligible employees. All full-time and certain part-time employees who have completed two years of continuous service with us are eligible to participate. On April 12, 2011,In August 2016, the Board of Directors extended the ESPP for an additional five offerings through 2016.2021. Annual offerings commence and terminate on the respective year'syear’s first and last calendar day. Under the ESPP, we are authorized to issue up to 4,050,000 shares of our Common Stock to our employees. Pursuant to such authorization, we have 2,362,0002,202,000 shares available for future grant at December 31, 2015.2018. Furthermore, under the terms of the ESPP, eligible employees may contribute through payroll deductions up to $21,250 (85% of IRS limitation) of their compensation toward the purchase of the Company'sCompany’s Common Stock. No employee may purchase Common Stock which exceeds $25,000 in fair market value (determined on the date of grant) for each calendar year. The price per share is equal to the lower of 85% of the fair market price on the first day of the offering period, or 85% of the fair market price on the day of purchase.
Other Elements of Compensation and Perquisites.
Medical Insurance. We provide to each NEO and their respective spouses and children such health, dental and optical insurance as we may from time to time make available to our other executives of the same level of employment.management employees. This insurance requires an employee co-payment of the insurance premium.
Life and Disability Insurance.We provide to each NEO such disability and/or life insurance as we in our sole discretion may from time to time make available to our other executive employees of the same level of employment.management employees.
Automobile Allowance. We provide some NEOs with an automobile allowance during the term of their employment with us as we in our sole discretion may from time to time make available to our other executive employees of the same level of employment.management employees.
Sporting Event Tickets. We obtain season tickets for several Philadelphia sports teams. Although these tickets are intended to be used for entertaining clients, unused tickets are made available to employees, including the NEOs, for personal use.
Compensation Risks
We believe that risks arising from our compensation policies and practices for our employees are not reasonably likely to have a material adverse effect on the Company. In addition, the Nominating, Compensation and Stock OptionNCSO Committee believes that the mix and design of the elements of executive compensation do not encourage management to assume excessive risks.
The Company has structured its compensation program so that certain employees are incentivized primarily on their ability to achieve revenue and profit objectives of the customer accounts under their supervision and generate new business. Additionally, incentive compensation is earned on the achievement of certain non-financial objectives at levels across the Company, such as recruiting and developing future management personnel, reviewing subordinate employees, maintaining good client relations and compliance with Company operational reporting requirements. The Company believes that elements of this incentive policy may be subject to abuse. Specifically, the Company recognizes that incentivizing employees for new business generation could result in employees entering into agreements without conducting proper due diligence or an appropriate analysis of the creditworthiness of the prospective client. Similarly, employees may be tempted to hire employees prior to their quarterly review in order to meet their recruitment goals. The Company recognizes that managers may be tempted to give better performance reviews of their subordinates in order to boost the appearance of their own performance. Also, the Company recognizes that in preparing budgets upon which an employee will be reviewed, an employee may seek to be too conservative in his or her estimates in order to more easily achieve performance targets. The Company has carefully designed its compensation policies and practices to diminish the potential abuses inherent in such programs to avoid unnecessary risks to the Company and its shareholders.
One of the ways in which the NCSO Committee believes the chance of inappropriate risk-taking is indirectly mitigated is the high levels of stock ownership among our senior leaders. In response to feedback, the NCSO Committee has adopted a formal stock ownership program, detailed below.
Stock Ownership Guidelines
As of January 1, 2018, the NCSO Committee adopted stock ownership guidelines for the Company’s executive officers. The guidelines provide that for the Company’s executive officers in place as of January 1, 2018, the executive officers should hold an amount of Company stock with a value that is at least equal to a specified multiple of their base salary within five years of the adoption of the guidelines. Future executive officers must attain the guideline ownership within five years of the date that the executive officer becomes an executive officer. In accordance with this policy, the President and Chief Executive Officer is required to hold stock with a value of at least six times his base salary, while the Company’s other executive officers are required to hold stock with a value of at least two times their base salary.
Stock ownership includes shares owned outright, unvested restricted stock and restricted stock units, and stock equivalents held under deferred compensation arrangements. Additionally, one-half of the guidelines may be met by vested, in-the-money stock options held by the executive. If an executive does not meet their ownership requirement on the applicable measurement date, the executive must retain all net shares from the exercise of stock options and the vesting of restricted stock and restricted stock units until compliance is achieved. As of December 31, 2018, all NEOs had stock holdings that were in compliance with the stock ownership guidelines.
| | | | | | | | | | | | | | | | | | | | |
Named Executive Officer | | Ownership Requirement (% of salary) | | Current Ownership (% of salary) | | Current Ownership (% of requirement) |
Theodore Wahl | | 600% | | 1,431% | | | 239% | |
John C. Shea | | 200% | | 253% | | | 127% | |
Michael E. McBryan | | 200% | | 493% | | | 246% | |
David Hurlock | | 200% | | 287% | | | 144% | |
Andrew W. Kush | | 200% | | 355% | | | 178% | |
Change of Control
In April 2018, the Board, through the adoption of the second Amended and Restated 2012 Equity Incentive Plan, amended the terms of the 2012 Equity Incentive Plan to include a “double trigger” approach to vesting of stock awards upon a change in control, rather than providing vesting solely upon such change in control (a “single trigger” approach). Under a double trigger approach, vesting would occur if a change in control occurs and the outstanding equity awards are not fully assumed, or where the outstanding equity awards are fully assumed by the resulting entity and the participant is subsequently terminated or resigns for good reason. We believe a double trigger approach provides adequate employment protections and reduces, for the stockholders’ benefit, potential transaction costs associated with the awards.
Clawback Policy
In April 2019, the Board of Directors approved and implemented a clawback policy that provides the NCSO Committee with the discretion to clawback performance-based and equity compensation in the event of restatement of Company financial statements. The NCSO Committee will review all performance-based and equity compensation awarded to or earned by or officers subject to Section 16(b) to the Securities Exchange Act 1934 during the three-year period prior to any to restatement of the Company’s financial results. If the Committee determines such officer engaged in intentional or unlawful misconduct which materially contributed to the need for such restatement, the Committee may determine that a clawback is appropriate.
Summary Compensation Table
The following table sets forth certain information regarding compensation paid or accrued during the Company’s prior three fiscal years, as applicable, for the Company’s President and Chief Executive Officer, Chief Financial Officer, former Chief Executive Officer and the three highest paid executive officersNEOs serving at the end of 2015 (the NEOs).2018.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Salary | | Stock Awards1 | | Option Awards1 | | Non-Equity Incentive Plan Compensation2 | | Nonqualified Deferred Compensation Earnings | | All Other Compensation3 | | Total |
Name and Principal Position | | Year | | ($) | | ($) | | ($) | | ($) | | ($) | | ($) | | ($) |
Theodore Wahl | | 2018 | | 1,005,108 | | 2,073,709 | | 524,000 | | 249,793 | | 37,692 | | 10,796 | | 3,901,098 |
President & Chief Executive Officer & Director | | 2017 | | 1,005,108 | | 1,799,983 | | 255,600 | | 333,084 | | 37,692 | | 10,095 | | 3,441,562 |
| | 2016 | | 1,005,108 | | 512,100 | | 111,900 | | — | | 37,692 | | 10,900 | | 1,677,700 |
John C. Shea | | 2018 | | 523,558 | | 312,360 | | 104,800 | | 99,911 | | 22,798 | | 12,340 | | 1,075,767 |
Executive Vice President & Chief Financial Officer | | 2017 | | 450,000 | | 380,017 | | 14,058 | | 66,483 | | 18,718 | | 5,822 | | 935,098 |
| | 2016 | | 450,000 | | 73,401 | | 12,309 | | — | | 16,875 | | 5,832 | | 558,417 |
Michael E. McBryan | | 2018 | | 811,413 | | 320,443 | | 104,800 | | 149,867 | | 36,975 | | 20,312 | | 1,443,810 |
Executive Vice President & Chief Revenue Officer & Director | | 2017 | | 102,492 | | 123,063 | | 127,800 | | 888,000 | | 37,143 | | 12,150 | | 1,290,648 |
| | 2016 | | 102,492 | | 106,688 | | 111,900 | | 888,000 | | 37,143 | | 12,100 | | 1,258,323 |
David Hurlock4 | | 2018 | | 434,135 | | 316,149 | | 104,800 | | 199,822 | | 22,585 | | 9,900 | | 1,087,391 |
Executive Vice President & Chief Operating Officer | | 2017 | | 286,058 | | 380,011 | | 63,900 | | 189,644 | | 17,302 | | 12,700 | | 949,615 |
| | | | | | | | | | | | | | | | |
Andrew W. Kush5 | | 2018 | | 374,038 | | 312,360 | | 104,800 | | 199,822 | | 21,007 | | 10,112 | | 1,022,139 |
Executive Vice President & Chief Administrative Officer | | 2017 | | 324,518 | | 334,730 | | 51,120 | | 199,448 | | 12,562 | | — | | 922,378 |
| | | | | | | | | | | | | | | | |
1.The total amounts in these columns do not reflect compensation actually received by the NEO, nor do they reflect the actual value that will be recognized by the NEO. Instead, the amounts reflect the aggregate grant date fair value of restricted stock and restricted stock unit awards, incentive awards received in stock, ESPP awards and stock option awards computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718. A more detailed discussion of the assumptions used in calculating these values may be found in Note 10 of the Notes to the Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2018. Refer also to the Compensation Discussion and Analysis for further information.
2.Amounts shown in this column represent annual performance-based cash payments under the annual incentive program, as described in the Compensation Discussion and Analysis.
3.Includes automobile allowance, contributions paid by the Company towards employee’s health insurance premiums and personal use of tickets for sporting events.
4.Mr. Hurlock became an executive officer in 2017. Prior thereto, he was a Senior Vice President of Operations.
5.Mr. Kush became an executive officer in 2017. Prior thereto, he was the Senior Vice President of Human Resources & Risk Management.
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | Salary | | Bonus | | Stock Awards (5) | | Option Awards (5) | | Nonqualified Deferred Compensation Earnings | | All Other Compensation (6) | | Total |
Name and Principal Position | | Year | | ($) | | ($) | | ($) | | ($) | | ($) | | ($) | | ($) |
Theodore Wahl | | 2015 | | 1,005,376 |
| | — |
| | 227,250 |
| | 99,600 |
| | 37,702 |
| | 8,616 |
| | 1,378,544 |
|
President & Chief | | 2014 | | 998,142 |
| | — |
| | 105,075 |
| | 123,600 |
| | 38,150 |
| | 8,616 |
| | 1,273,583 |
|
Executive Officer & Director | | 2013 | | 996,255 |
| | — |
| | 23,500 |
| | 102,150 |
| | 37,360 |
| | 8,616 |
| | 1,167,881 |
|
John C. Shea | | 2015 | | 450,000 |
| | — |
| | 49,995 |
| | 10,956 |
| | 16,875 |
| | 3,776 |
| | 531,602 |
|
Chief Financial Officer | | 2014 | | 447,736 |
| | — |
| | 17,513 |
| | 51,500 |
| | 17,113 |
| | 3,776 |
| | 537,638 |
|
| | 2013 | | 389,039 |
| | — |
| | 8,225 |
| | 34,050 |
| | 14,589 |
| | 976 |
| | 446,879 |
|
Bryan D. McCartney | | 2015 | | 106,434 |
| | 868,406 |
| | 75,750 |
| | 99,600 |
| | 36,557 |
| | 13,000 |
| | 1,199,747 |
|
Executive Vice President | | 2014 | | 102,492 |
| | 705,766 |
| | 58,546 |
| | 123,600 |
| | 30,310 |
| | 13,000 |
| | 1,033,714 |
|
| | 2013 | | 102,492 |
| | 723,267 |
| | 32,767 |
| | 102,150 |
| | 30,966 |
| | 13,000 |
| | 1,004,642 |
|
Michael E. McBryan | | 2015 | | 106,434 |
| | 868,406 |
| | 75,750 |
| | 99,600 |
| | 36,553 |
| | 13,000 |
| | 1,199,743 |
|
Executive Vice President & | | 2014 | | 102,492 |
| | 708,766 |
| | 58,171 |
| | 123,600 |
| | 30,422 |
| | 13,000 |
| | 1,036,451 |
|
Director | | 2013 | | 102,492 |
| | 723,267 |
| | 30,043 |
| | 102,150 |
| | 30,966 |
| | 13,000 |
| | 1,001,918 |
|
Daniel P. McCartney | | 2015 | | 520,526 |
| (1) | — |
| | 227,250 |
| | 99,600 |
| | 19,520 |
| | 17,804 |
| | 884,700 |
|
Chairman of the Board & | | 2014 | | 1,005,108 |
| (2) | — |
| | 105,075 |
| | 123,600 |
| | 38,416 |
| | 18,705 |
| | 1,290,904 |
|
former Chief Executive Officer | | 2013 | | 1,005,108 |
| (3) | — |
| | 23,500 |
| | 102,150 |
| | 37,692 |
| | 17,805 |
| | 1,186,255 |
|
Jason J. Bundick | | 2015 | | 311,250 |
| (6) | 99,671 |
| | 18,938 |
| | 33,200 |
| | 10,273 |
| | 2,800 |
| | 476,132 |
|
General Counsel & Secretary | | 2014 | | 262,205 |
| | 69,089 |
| | 9,807 |
| | 41,200 |
| | 4,204 |
| | 2,800 |
| | 389,305 |
|
| | 2013 | | 249,423 |
| | — |
| | — |
| | 23,835 |
| | — |
| | — |
| | 273,258 |
|
| | | | | | | | | | | | | | | | |
| |
(1)
| Represents a base salary of $19,000 and 1.58% of 2014 reported income before income taxes ($31,708,000), all of which was paid in 2015. |
| |
(2)
| Represents a base salary of $19,000 and 1.48% of 2013 reported income before income taxes ($66,489,000), all of which was paid in 2014. |
| |
(3)
| Represents a base salary of $19,000 and 1.40% of 2012 reported income before income taxes ($70,264,000), all of which was paid in 2013. |
| |
(4)
| The amounts in these columns do not reflect compensation actually received by the NEO, nor do they reflect the actual value that will be recognized by the NEO. Instead, the amounts reflect the aggregate grant date fair value of stock and option awards granted under either our ESPP or stock option plan computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718. ESPP awards are valued at the difference between the fair market value of the Company's common stock at the award date and the respective ESPP purchase price. Restricted stock awards are valued utilizing the grant date fair value. Stock options are valued utilizing the Black-Scholes option valuation model on the date of grant. A more detailed discussion of the assumptions of our ESPP and stock option plan may be found in Note 9 of the Notes to the Financial Statements in our Form 10-K for the year ended December 31, 2015. |
| |
(5)
| Includes automobile allowance, contributions paid by the Company towards employee's health insurance premiums and personal use of tickets for sporting events. |
| |
(6)
| Mr. Bundick became a NEO in 2015. Prior thereto, he was an executive officer of the Company. |
Grant of Plan-Based Awards
The following table sets forth information concerning grants of plan-based awards made by us during the year ended December 31, 2015,2018, to each of the NEOs.
| | | | Grant Date | | Date Award Approved | | All Other Stock Awards: Number of Shares of Stock or Units | | All Other Option Awards: Number of Securities Underlying Options | | Exercise or Base Price of Options Awards | | Grant Date Fair Value of Stock and Option Awards | | Grant Date | | Date Award Approved | | Estimated Future Payouts Under Equity Incentive Plan Awards1 | | All Other Stock Awards: Number of Shares of Stock or Units | | All Other Option Awards: Number of Securities Underlying Options | | Exercise or Base Price of Options Awards | | Grant Date Fair Value of Stock and Option Awards |
Name | | (#) | | (#) | | ($/sh) | | ($) | Name | | | | | | Target (#) | | (#) | | (#) | | ($/sh) | | ($) |
Theodore Wahl | | 1/5/2015 | | 12/16/2014 | | 7,500 |
| | 15,000 |
| | $ | 30.30 |
| | 326,850 |
| Theodore Wahl | | 1/4/2018 | | 12/12/2017 | | — | | 30,000 | | 50,000 | | $ | 52.06 | | $ | 2,085,800 |
| | | 12/31/2018 | | 12/12/2017 | | 16,088 | | — | | — | | $ | 31.05 | | $ | 499,532 |
John C. Shea | | 1/5/2015 | | 12/16/2014 | | 1,650 |
| | 1,650 |
| | $ | 30.30 |
| | 60,951 |
| John C. Shea | | 1/4/2018 | | 12/12/2017 | | — | | 6,000 | | 10,000 | | $ | 52.06 | | $ | 417,160 |
Bryan D. McCartney | | 1/5/2015 | | 12/16/2014 | | 2,500 |
| | 15,000 |
| | $ | 30.30 |
| | 175,350 |
| |
Michael E. McBryan | | 1/5/2015 | | 12/16/2014 | | 2,500 |
| | 15,000 |
| | $ | 30.30 |
| | 175,350 |
| Michael E. McBryan | | 1/4/2018 | | 12/12/2017 | | — | | 6,000 | | 10,000 | | $ | 52.06 | | $ | 417,160 |
Daniel P. McCartney | | 1/5/2015 | | 12/16/2014 | | 7,500 |
| | 15,000 |
| | $ | 30.30 |
| | 326,850 |
| |
Jason Bundick | | 1/5/2015 | | 12/16/2014 | | 625 |
| | 5,000 |
| | 30.30 |
| | 52,138 |
| |
| | | | | | | | | |
David Hurlock | | David Hurlock | | 1/4/2018 | | 12/12/2017 | | — | | 6,000 | | 10,000 | | $ | 52.06 | | $ | 417,160 |
Andrew W. Kush | | Andrew W. Kush | | 1/4/2018 | | 12/12/2017 | | — | | 6,000 | | 10,000 | | $ | 52.06 | | $ | 417,160 |
1.Represents the shares received during 2019 as a result of Mr. Wahl's election to receive a portion of his 2018 performance based compensation in Company stock. The grant date of such shares is reflected as the date in which the total amount of such performance based compensation is earned by Mr. Wahl.
Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table
The Company has not entered into employment contracts with any of the NEOs. No previously granted options or other equity-based awards were re-priced or otherwise materially modified during the fiscal year ended December 31, 2015.2018. As set forth above in the "Compensation“Compensation Discussion and Analysis,"” the Company believes that part of the compensation for the NEOs should be in the form of long-term equity grants so as to align the interests of the Named Executive OfficersNEOs with the Company'sCompany’s shareholders. In accordance with these objectives, Messrs.Mr. Wahl Shea, Bryan McCartney, McBryan, Daniel McCartney, and Bundick received stock options to purchase 50,000 shares of 15,000, 1,650, 15,000, 15,000, 15,000 and 5,000 shares, respectively,Common Stock and restricted stock awardsunits of 7,500, 1,650, 2,500, 2,500, 7,50030,000. Messrs. Shea, McBryan, Hurlock, and 625Kush each received stock options to purchase 10,000 shares respectively.of Common Stock, and restricted stock units of 6,000. These stock options and restricted stock awardsunits vest over five years, as an incentive to the NEOs to increase the long-term value of the Company and thereby increase the value of its Common Stock.
Outstanding Equity Awards at December 31, 20152018
The following tables set forth information concerningtable summarizes the outstanding equity awards of each of the NEOs as of December 31, 2015:2018:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Option Awards | | | | | | | | Stock Awards | | |
Name | | Grant Date1 | | Vested, Exercisable | | Unvested | | Option Exercise Price | | Option Expiration Date | | Unvested2 | | Market Value of Unvested3 |
Theodore Wahl | | 1/4/2010 | | 11,250 | | — | | $ | 14.3067 | | 1/4/2020 | | — | | $ | — |
| | 1/6/2011 | | 15,000 | | — | | $ | 16.1100 | | 1/6/2021 | | — | | $ | — |
| | 1/5/2012 | | 15,000 | | — | | $ | 17.5000 | | 1/5/2022 | | — | | $ | — |
| | 1/4/2013 | | 15,000 | | — | | $ | 23.5000 | | 1/4/2023 | | — | | $ | — |
| | 1/3/2014 | | 12,000 | | 3,000 | | $ | 28.0200 | | 1/3/2024 | | 750 | | $ | 30,135 |
| | 1/5/2015 | | 9,000 | | 6,000 | | $ | 30.3000 | | 1/5/2025 | | 3,000 | | $ | 120,540 |
| | 1/4/2016 | | 6,000 | | 9,000 | | $ | 34.1400 | | 1/4/2026 | | 9,000 | | $ | 361,620 |
| | 1/4/2017 | | 6,000 | | 24,000 | | $ | 39.3800 | | 1/4/2027 | | 24,000 | | $ | 964,320 |
| | 1/4/2018 | | — | | 50,000 | | $ | 52.0600 | | 1/4/2028 | | 30,000 | | $ | 1,205,400 |
| | | | | | | | | | | | | | |
John C. Shea | | 1/5/2012 | | 5,000 | | — | | $ | 17.5000 | | 1/5/2022 | | — | | $ | — |
| | 1/4/2013 | | 5,000 | | — | | $ | 23.5000 | | 1/4/2023 | | — | | $ | — |
| | 1/3/2014 | | 5,000 | | 1,250 | | $ | 28.0200 | | 1/3/2024 | | 125 | | $ | 5,023 |
| | 1/5/2015 | | 990 | | 660 | | $ | 30.3000 | | 1/5/2025 | | 660 | | $ | 26,519 |
| | 1/4/2016 | | 660 | | 990 | | $ | 34.1400 | | 1/4/2026 | | 1,290 | | $ | 51,832 |
| | 1/4/2017 | | 330 | | 1,320 | | $ | 39.3800 | | 1/4/2027 | | 7,720 | | $ | 310,190 |
| | 1/4/2018 | | — | | 10,000 | | $ | 52.0600 | | 1/4/2028 | | 6,000 | | $ | 241,080 |
| | | | | | | | | | | | | | |
Michael E. McBryan | | 1/6/2011 | | 15,000 | | — | | $ | 16.1100 | | 1/6/2021 | | — | | $ | — |
| | 1/5/2012 | | 15,000 | | — | | $ | 17.5000 | | 1/5/2022 | | — | | $ | — |
| | 1/4/2013 | | 15,000 | | — | | $ | 23.5000 | | 1/4/2023 | | — | | $ | — |
| | 1/3/2014 | | 12,000 | | 3,000 | | $ | 28.0200 | | 1/3/2024 | | 375 | | $ | 15,068 |
| | 1/5/2015 | | 9,000 | | 6,000 | | $ | 30.3000 | | 1/5/2025 | | 1,000 | | $ | 40,180 |
| | 1/4/2016 | | 6,000 | | 9,000 | | $ | 34.1400 | | 1/4/2026 | | 1,875 | | $ | 75,338 |
| | 1/4/2017 | | 3,000 | | 12,000 | | $ | 39.3800 | | 1/4/2027 | | 2,500 | | $ | 100,450 |
| | 1/4/2018 | | — | | 10,000 | | $ | 52.0600 | | 1/4/2028 | | 6,000 | | $ | 241,080 |
| | | | | | | | | | | | | | |
David Hurlock | | 1/4/2013 | | 5,000 | | — | | $ | 23.5000 | | 1/4/2023 | | — | | $ | — |
| | 1/3/2014 | | 5,000 | | 1,250 | | $ | 28.0200 | | 1/3/2024 | | 125 | | $ | 5,023 |
| | 1/5/2015 | | 4,500 | | 3,000 | | $ | 30.3000 | | 1/5/2025 | | 450 | | $ | 18,081 |
| | 1/4/2016 | | 3,000 | | 4,500 | | $ | 34.1400 | | 1/4/2026 | | 900 | | $ | 36,162 |
| | 1/4/2017 | | 1,500 | | 6,000 | | $ | 39.3800 | | 1/4/2027 | | 1,200 | | $ | 48,216 |
| | 9/7/2017 | | — | | — | | $ | 50.1000 | | — | | 5,124 | | $ | 205,882 |
| | 1/4/2018 | | — | | 10,000 | | $ | 52.0600 | | 1/4/2028 | | 6,000 | | $ | 241,080 |
| | | | | | | | | | | | | | |
Andrew W. Kush | | 1/6/2011 | | 2,000 | | — | | $ | 16.1100 | | 1/6/2021 | | — | | $ | — |
| | 1/5/2012 | | 5,000 | | — | | $ | 17.5000 | | 1/5/2022 | | — | | $ | — |
| | 1/4/2013 | | 5,000 | | — | | $ | 23.5000 | | 1/4/2023 | | — | | $ | — |
| | 1/3/2014 | | 4,000 | | 1,000 | | $ | 28.0200 | | 1/3/2024 | | 70 | | $ | 2,813 |
| | 1/5/2015 | | 3,000 | | 2,000 | | $ | 30.3000 | | 1/5/2025 | | 250 | | $ | 10,045 |
| | 1/4/2016 | | 2,400 | | 3,600 | | $ | 34.1400 | | 1/4/2026 | | 600 | | $ | 24,108 |
| | 1/4/2017 | | 1,200 | | 4,800 | | $ | 39.3800 | | 1/4/2027 | | 6,800 | | $ | 273,224 |
| | 1/4/2018 | | — | | 10,000 | | $ | 52.0600 | | 1/4/2028 | | 6,000 | | $ | 241,080 |
1.Options and stock awards vest 20% per year on the anniversary of the grant date for each of the five years subsequent to the grant date.
2.Unless otherwise noted herein, restricted stock awards and restricted stock units vest at the rate of 20% annually, commencing on the first anniversary from the grant date, subject to accelerated vesting upon certain terminations of employment following certain corporate transactions involving the Company. The shares of common stock underlying the restricted stock awards and restricted stock units will be issued upon vesting.
3.Valued based on the closing price of a share of the Company’s common stock on December 31, 2018 as reported on the NASDAQ Global Select Market ($40.18).
|
| | | | | | | | | | | | | | | | | | | |
| | Option Awards | | Stock Awards |
| | Number of Securities Underlying Unexercised Options Exercisable | | Number of Securities Underlying Unexercised Options Unexercisable | | Option Exercise Price | | Option Expiration Date | | Number of Shares or Units of Stock That Have Not Vested (1) | | Market Value of Shares or Units of Stock That Have Not Vested (2) |
Name | | (#) | | (#) | | ($) | | | (#) | | ($) |
Theodore Wahl | | 7,500 |
| | — |
| | $ | 10.3867 |
| | 1/5/2019 |
| | — |
| | — |
|
| | 11,250 |
| | — |
| | $ | 14.3067 |
| | 1/4/2020 |
| | — |
| | — |
|
| | 15,000 |
| | — |
| | $ | 16.1100 |
| | 1/6/2021 |
| | — |
| | — |
|
| | 12,000 |
| | 3,000 |
| | $ | 17.5000 |
| | 1/5/2022 |
| | — |
| | — |
|
| | 9,000 |
| | 6,000 |
| | $ | 23.5000 |
| | 1/4/2023 |
| | — |
| | — |
|
| | 6,000 |
| | 9,000 |
| | $ | 28.0200 |
| | 1/3/2024 |
| | — |
| | — |
|
| | 3,000 |
| | 12,000 |
| | $ | 30.3000 |
| | 1/5/2025 |
| | — |
| | — |
|
| | — |
| | 15,000 |
| | $ | 34.1400 |
| | 1/4/2026 |
| | — |
| | — |
|
| | — |
| | — |
| | — |
| | — |
| | 600 |
| | 20,922 |
|
| | — |
| | — |
| | — |
| | — |
| | 3,000 |
| | 104,610 |
|
| | — |
| | — |
| | — |
| | — |
| | 7,500 |
| | 261,525 |
|
John C. Shea | | 750 |
| | — |
| | $ | 14.3067 |
| | 1/4/2020 |
| | — |
| | — |
|
| | 4,000 |
| | — |
| | $ | 16.1100 |
| | 1/6/2021 |
| | — |
| | — |
|
| | 4,000 |
| | 1,000 |
| | $ | 17.5000 |
| | 1/5/2022 |
| | — |
| | — |
|
| | 3,000 |
| | 2,000 |
| | $ | 23.5000 |
| | 1/4/2023 |
| | — |
| | — |
|
| | 2,500 |
| | 3,750 |
| | $ | 28.0200 |
| | 1/3/2024 |
| | — |
| | — |
|
| | 330 |
| | 1,320 |
| | $ | 30.3000 |
| | 1/5/2025 |
| | — |
| | — |
|
| | — |
| | 1,650 |
| | $ | 34.1400 |
| | 1/4/2026 |
| | — |
| | — |
|
| | — |
| | — |
| | — |
| | — |
| | 210 |
| | 7,323 |
|
| | — |
| | — |
| | — |
| | — |
| | 500 |
| | 17,435 |
|
| | — |
| | — |
| | — |
| | — |
| | 1,650 |
| | 57,536 |
|
Bryan D. McCartney | | 22,500 |
| | — |
| | $ | 13.9267 |
| | 1/3/2018 |
| | — |
| | — |
|
| | 22,500 |
| | — |
| | $ | 14.3067 |
| | 1/4/2020 |
| | — |
| | — |
|
| | 15,000 |
| | — |
| | $ | 16.1100 |
| | 1/6/2021 |
| | — |
| | — |
|
| | 12,000 |
| | 3,000 |
| | $ | 17.5000 |
| | 1/5/2022 |
| | — |
| | — |
|
| | 9,000 |
| | 6,000 |
| | $ | 23.5000 |
| | 1/4/2023 |
| | — |
| | — |
|
| | 6,000 |
| | 9,000 |
| | $ | 28.0200 |
| | 1/3/2024 |
| | — |
| | — |
|
| | 3,000 |
| | 12,000 |
| | $ | 30.3000 |
| | 1/5/2025 |
| | — |
| | — |
|
| | — |
| | 15,000 |
| | $ | 34.1400 |
| | 1/4/2026 |
| | — |
| | — |
|
| | — |
| | — |
| | — |
| | — |
| | 600 |
| | 20,922 |
|
| | — |
| | — |
| | — |
| | — |
| | 1,500 |
| | 52,305 |
|
| | — |
| | — |
| | — |
| | — |
| | 2,500 |
| | 87,135 |
|
Michael E. McBryan | | 22,500 |
| | — |
| | $ | 13.9267 |
| | 1/3/2018 |
| | — |
| | — |
|
| | 22,500 |
| | — |
| | $ | 14.3067 |
| | 1/4/2020 |
| | — |
| | — |
|
| | 15,000 |
| | — |
| | $ | 16.1100 |
| | 1/6/2021 |
| | — |
| | — |
|
| | 12,000 |
| | 3,000 |
| | $ | 17.5000 |
| | 1/5/2022 |
| | — |
| | — |
|
| | 9,000 |
| | 6,000 |
| | $ | 23.5000 |
| | 1/4/2023 |
| | — |
| | — |
|
| | 6,000 |
| | 9,000 |
| | $ | 28.0200 |
| | 1/3/2024 |
| | — |
| | — |
|
| | 3,000 |
| | 12,000 |
| | $ | 30.3000 |
| | 1/5/2025 |
| | — |
| | — |
|
| | — |
| | 15,000 |
| | $ | 34.1400 |
| | 1/4/2026 |
| | — |
| | — |
|
| | — |
| | — |
| | — |
| | — |
| | 600 |
| | 20,922 |
|
| | — |
| | — |
| | — |
| | — |
| | 1,500 |
| | 52,305 |
|
| | — |
| | — |
| | — |
| | — |
| | 2,500 |
| | 87,135 |
|
| | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | |
| | 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 or Units of Stock That Have Not Vested (1) | | Market Value of Shares or Units of Stock That Have Not Vested (2) |
Name | | (#) | | (#) | | ($) | | | (#) | | ($) |
Daniel P. McCartney | | 37,500 |
| | — |
| | $ | 13.9267 |
| | 1/3/2018 |
| | — |
| | — |
|
| | 37,500 |
| | — |
| | $ | 10.3867 |
| | 1/5/2019 |
| | — |
| | — |
|
| | 37,501 |
| | — |
| | $ | 14.3067 |
| | 1/4/2020 |
| | — |
| | — |
|
| | 25,000 |
| | — |
| | $ | 16.1100 |
| | 1/6/2021 |
| | — |
| | — |
|
| | 20,000 |
| | 5,000 |
| | $ | 17.5000 |
| | 1/5/2022 |
| | — |
| | — |
|
| | 9,600 |
| | 6,000 |
| | $ | 23.5000 |
| | 1/4/2023 |
| | — |
| | — |
|
| | 6,000 |
| | 9,000 |
| | $ | 28.0200 |
| | 1/3/2024 |
| | — |
| | — |
|
| | 3,000 |
| | 12,000 |
| | $ | 30.3000 |
| | 1/5/2025 |
| | — |
| | — |
|
| | — |
| | 15,000 |
| | $ | 34.1400 |
| | 1/4/2026 |
| | — |
| | — |
|
| | — |
| | — |
| | — |
| | — |
| | 600 |
| | 20,922 |
|
| | — |
| | — |
| | — |
| | — |
| | 3,000 |
| | 104,610 |
|
| | — |
| | — |
| | — |
| | — |
| | 7,500 |
| | 261,525 |
|
Jason Bundick | | 2,100 |
| | 1,400 |
| | $ | 23.5000 |
| | 1/4/2023 |
| | — |
| | — |
|
| | 2,000 |
| | 3,000 |
| | $ | 28.0200 |
| | 1/3/2024 |
| | — |
| | — |
|
| | 1,000 |
| | 4,000 |
| | $ | 30.3000 |
| | 1/5/2025 |
| | — |
| | — |
|
| | — |
| | 6,000 |
| | $ | 34.1400 |
| | 1/4/2026 |
| | — |
| | — |
|
| | — |
| | — |
| | — |
| | — |
| | 280 |
| | 9,764 |
|
| | — |
| | — |
| | — |
| | — |
| | 625 |
| | 21,794 |
|
| | | | | | | | | | | | |
| |
(1)
| Unless otherwise noted herein, restricted stock awards vest at the rate of 20% annually, commencing on the first anniversary from the grant date, subject to accelerated vesting upon certain terminations of employment following certain corporate transactions involving the Company. The shares of common stock underlying the restricted stock awards will be issued upon vesting. |
| |
(2)
| Valued based on the closing price of a share of the Company's Common Stock on December 31, 2015 as reported on the NASDAQ Global Select Market ($34.87). |
Option Exercises and Stock Vested during 2015During 2018
The following table sets forth information concerning the option exercises and stock awards vested of each of the NEOs during the year ended December 31, 2015:2018:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Stock Option Awards | | | | Restricted Stock and Restricted Stock Units | | |
| | Number of Shares Acquired On Exercise | | Value Realized on Exercise | | Number of Shares Acquired On Vesting | | Value Realized on Vesting |
Name | | (#) | | ($) | | (#) | | ($) |
Theodore Wahl | | 7,500 | | 282,400 | | 11,450 | | 597,992 |
John C. Shea | | — | | — | | 2,885 | | 150,619 |
Michael E. McBryan | | — | | — | | 2,325 | | 121,655 |
David Hurlock | | — | | — | | 2,302 | | 106,549 |
Andrew W. Kush | | — | | — | | 2,095 | | 109,223 |
|
| | | | | | | | | | | | |
| | Option Awards | | Stock Awards |
| | Number of Shares Acquired On Exercise | | Value Realized on Exercise | | Number of Shares Acquired On Vesting | | Value Realized on Vesting |
Name | | (#) | | ($) | | (#) | | ($) |
Theodore Wahl | | — |
| | — |
| | 950 |
| | 29,289 |
|
John C. Shea | | — |
| | — |
| | 195 |
| | 6,012 |
|
Bryan D. McCartney | | 22,500 |
| | 836,325 |
| | 575 |
| | 17,727 |
|
Michael E. McBryan | | 22,500 |
| | 836,325 |
| | 575 |
| | 17,727 |
|
Daniel P. McCartney | | — |
| | — |
| | 950 |
| | 29,289 |
|
Jason Bundick | | — |
| | — |
| | 70 |
| | 2,158 |
|
| | | | | | | | |
Nonqualified Deferred Compensation
The following table sets forth information concerning the non-qualified deferred compensation of each of the NEOs during the year ended December 31, 2015,2018, as well as the aggregate balance of non-qualified deferred compensation as of December 31, 2015.2018.
|
| | | | | | | | | | | | |
| | Executive Contributions in Last FY | | Registrant Contributions in Last FY | | Aggregate Earnings in Last FY | | Aggregate Balance at Last FYE |
Name | | ($) | | ($) | | ($) | | ($) |
Theodore Wahl | | 150,807 |
| | 37,702 |
| | (1,198 | ) | | 1,196,242 |
|
John C. Shea | | 67,500 |
| | 16,875 |
| | 7,871 |
| | 394,571 |
|
Bryan D. McCartney | | 243,710 |
| | 36,557 |
| | 132,778 |
| | 3,316,851 |
|
Michael E. McBryan | | 243,684 |
| | 36,553 |
| | 135,877 |
| | 3,592,301 |
|
Daniel P. McCartney | | 78,079 |
| | 19,520 |
| | 316,014 |
| | 6,055,029 |
|
Jason Bundick | | 41,092 |
| | 10,273 |
| | (4,223 | ) | | 64,643 |
|
| | | | | | | | |
Directors' Compensation
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Name | | Executive Contributions in Last FY | | Registrant Contributions in Last FY | | Aggregate Loss in Last FY | | Aggregate Balance at Last FYE |
Theodore Wahl | | $ | 150,766 | | $ | 37,692 | | $ | (246,453) | | $ | 2,081,443 |
John C. Shea | | $ | 91,193 | | $ | 22,798 | | $ | (88,098) | | $ | 775,870 |
Michael E. McBryan | | $ | 246,501 | | $ | 36,975 | | $ | (608,905) | | $ | 5,236,204 |
David Hurlock | | $ | 90,341 | | $ | 22,585 | | $ | (129,229) | | $ | 1,074,958 |
Andrew W. Kush | | $ | 84,026 | | $ | 21,007 | | $ | (57,515) | | $ | 423,943 |
Directors who are also
Pay Ratio Disclosure
At December 31, 2018, we had over 53,000 employees, all located in the United States. Our diverse employee population varies significantly in experience, education, specialized training and status (full-time, part-time or temporary). Regardless of the employee’s role in the organization or their location, the process for setting employee compensation is the same: local market competitive data is reviewed to set base pay rates. Individual compensation is then adjusted from these base pay rates to reflect the individual’s role and responsibilities, as well as his or her experience, education, specialized training and overall performance.
We determined the total annual compensation for our employees are not separately compensated for their service as directors. Our non-employee directors received the following aggregate amounts of compensation for the year ended December 31, 2015:
|
| | | | | | | | | |
| | Fees Earned or Paid in Cash | | Option Awards (8)(9) | | Total |
Name | | ($) | | ($) | | ($) |
John Briggs (1) | | 51,000 |
| | 33,207 |
| | 84,207 |
|
Robert L. Frome (2) | | 5,000 |
| | 33,207 |
| | 38,207 |
|
Robert J. Moss (3) | | 11,000 |
| | 33,207 |
| | 44,207 |
|
Dino D. Ottaviano (4) | | 14,000 |
| | 33,207 |
| | 47,207 |
|
Diane S. Casey (5) | | 8,000 |
| | 33,207 |
| | 41,207 |
|
John J. McFadden (6) | | 8,000 |
| | 33,207 |
| | 41,207 |
|
Jude Visconto (7) | | 2,000 |
| | — |
| | 2,000 |
|
| | | | | | |
| |
(1)
| Mr. Briggs had vested options to purchase 13,778 shares of Common Stock outstanding as of December 31, 2015. |
| |
(2)
| Mr. Frome had vested options to purchase 28,356 shares of Common Stock outstanding as of December 31, 2015. |
| |
(3)
| Mr. Moss had vested options to purchase 24,991 shares of Common Stock outstanding as of December 31, 2015. |
| |
(4)
| Mr. Ottaviano had vested options to purchase 9,350 shares of Common Stock as of December 31, 2015. |
| |
(5)
| Ms. Casey had vested options to purchase 6,003 shares of Common Stock as of December 31, 2015. |
| |
(6)
| Mr. McFadden had vested options to purchase 3,002 shares of Common Stock as of December 31, 2015. |
| |
(7)
| Mr. Visconto was elected2018 using data from our payroll records for the month of December 2018, which we then extrapolated for the full year of 2018. The components of total annual compensation for our employees are the same as those used to determine the total compensation of our NEOs for the Board in May 2015. |
| |
(8)
| Represents the dollar amount recognized for financial statement reporting purposes with respect to the grant date fair value of option grants made to each director during the 2015 fiscal year. The fair value was estimated using the Black-Scholes option valuation model in accordance with FASB ASC Topic 718. |
| |
(9)
| All stock option awards granted in 2015 become vested and exercisable ratably over a five year period on each yearly anniversary date of the option grant. |
Directors’ Fees
The Company pays each director who is not an employee of the Company $1,000Summary Compensation table. We did not annualize the compensation for each regularemployees in temporary positions or committee meetingmake any full-time equivalent adjustments. The results were then ranked, excluding the President and Chief Executive Officer, from lowest to highest, and the median employee was identified. We then compared the total annual compensation of the Board of Directors attended. In addition, Mr. Briggs receives a quarterly retainer of $10,000 with respectmedian employee to his chairmanshipthat of the Audit CommitteePresident and service as the Audit Committee Financial Expert.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a)Chief Executive Officer. The total annual compensation of the Exchange Act requires the Company’s Directors, executive officers and 10% shareholders to file with the SEC and NASDAQ initial reports of ownership and reports of changes in ownership of the Company’s Common Stock. Directors and executive officers are required to furnish the Company with copies of all Section 16(a) reports which they file.
To the Company’s knowledge, based solely on review of the copies of these reports furnished to the Company and written representations that no other reports were required, during 2015 all Section 16(a) filing requirements applicable to its directors and executive officers were complied with.
Sarbanes-Oxley Act Compliance
Sarbanes-Oxley sets forth various requirements for public companies and directs the SEC to adopt additional rules and regulations.
Currently, the Company believes it is in compliance with all applicable laws, rules and regulations arising from Sarbanes-Oxley. The Company intends to comply with any additional rules and regulations adopted by the SEC pursuant to Sarbanes-Oxley no later than the time they become applicable to the Company.
AUDIT COMMITTEE REPORT
The members of the Audit Committee from January 1, 2015 to December 31, 2015 were Messrs. John M. Briggs, Robert J. Moss and Dino Ottaviano. The Audit Committee met five times during the fiscal year ended December 31, 2015. The Audit Committee is responsible for the appointment of the Independent Auditors for each fiscal year, recommending the discharge of the Independent Auditors to the Board and confirming the independence of the Independent Auditors. It is also responsible for: reviewing and approving the scope of the planned audit, the results of the audit and the Independent Auditors' compensation for performing such audit; reviewing the Company's audited financial statements; and reviewing and approving the Company's internal accounting controls and disclosure procedures, and discussing such controls and procedures with the Independent Auditors.
The Audit Committee adopted an Amended and Restated Audit Committee Charter on February 12, 2004, a copy of which is available on the Company's website at www.hcsg.com.
The Company’s Independent Auditors are responsible for auditing the financial statements, as well as auditing the Company’s internal controls over financial reporting. The activities of the Audit Committee are in no way designed to supersede or alter those traditional responsibilities. The Audit Committee’s role does not provide any special assurances with regard to the Company’s financial statements, nor does it involve a professional evaluation of the quality of the audits performed by the Independent Auditors.
In connection with the audit of the Company’s financial statementsmedian employee for the year ended December 31, 2015,2018 was $22,338. For the Audit Committee met with representatives from Grant Thornton LLP, the Company’s Independent Auditors, and the Company’s internal auditor. The Audit Committee reviewed and discussed with Grant Thornton LLP and the Company’s internal auditor, the Company’s financial management and financial structure, as well as the matters relating to the audit required by the Public Company Accounting Oversight Board Auditing Standard.
The Audit Committee and Grant Thornton LLP also discussed Grant Thornton LLP’s independence. In November 2015, the Audit Committee received from Grant Thornton LLP the written disclosures and the letter regarding Grant Thornton LLP’s independence required by Public Company Accounting Oversight Board Rule 3526.
In addition, the Audit Committee reviewed and discussed with management the Company’s audited financial statements for the fiscal year ended December 31, 2015, as well as management’s assessment2018, the ratio of internal controls over financial reporting.
Based upon the review and discussions described above, the Audit Committee recommended to the Board of Directors, and the Board of Directors approved, that the Company’s financial statements audited by Grant Thornton LLP, as well as the audit of the Company’s internal controls over financial reporting be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015.
AUDIT COMMITTEE
John M. Briggs, Chairman
Robert J. Moss
Dino D. Ottaviano
NOMINATING, COMPENSATION AND STOCK OPTION COMMITTEE REPORT
The compensation of theour President and Chief Executive OfficerOfficer’s total annual compensation to that of our median employee was approximately 175:1.
The SEC rules for identifying the median employee and calculating the pay ratio based on that employee’s total annual compensation allow companies to adopt a variety of methodologies, to apply certain exclusions and to make reasonable estimates and assumptions that reflect their compensation practices. As such, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies may have different employment and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of April 1, 2019, regarding the beneficial ownership of Common Stock by each person or group known by the Company to own: (i) 5% or more of the outstanding shares of Common Stock, (ii) each director and director nominee of the Company, is determined by(iii) the Nominating, CompensationNamed Executive Officers as defined in Item 402(a)(3) of Regulation S-K and Stock Option Committee. The compensation of the former Chief Executive Officer was also determined by the Nominating, Compensation(iv) all current directors and Stock Option Committee, Such Committee’s determinations regarding such compensation are based on a number of factors including, in order of importance:
Consideration of the operating and financial performance of the Company, primarily its income before income taxes during the preceding fiscal year, as compared with prior operating periods;
Attainment of a level of compensation designed to retain a superior executive in a highly competitive environment; and
Consideration of the individual’s overall contribution to the Company.
In consultation with the President and Chief Executive Officer of the Company, the Nominating, Compensation and Stock Option Committee develops guidelines and reviews the compensation and performance of the other executive officers of the Company as well as any management fees paida group. The persons named in the table have sole voting and investment power with respect to all shares of Common Stock owned by them, unless otherwise noted.
| | | | | | | | | | | | | | | | | | | | |
Name and Beneficial Owner or Group1 | | Amount and Nature of Beneficial Ownership | | | Percent of Class2 | |
BlackRock, Inc.3 | | 8,497,753 | 4 | | 11.5 | % | |
The Vanguard Group, Inc.3 | | 7,393,187 | 5 | | 10.0 | % | |
Janus Henderson Group, plc.3 | | 4,255,811 | 6 | | 5.7 | % | |
William Blair Investment Management, LLC.3 | | 4,176,253 | 7 | | 5.6 | % | |
T. Rowe Price Associates, Inc.3 | | 3,697,909 | 8 | | 5.0 | % | |
Theodore Wahl | | 382,520 | 9 | | - | | 22 |
Michael E. McBryan | | 144,854 | 10 | | - | | 22 |
Robert L. Frome | | 58,011 | 11 | | - | | 22 |
John M. Briggs | | 47,418 | 12 | | - | | 22 |
David Hurlock | | 41,813 | 13 | | - | | 22 |
Andrew W. Kush | | 36,092 | 14 | | - | | 22 |
John C. Shea | | 33,838 | 15 | | - | | 22 |
Robert J. Moss | | 13,005 | 16 | | - | | 22 |
Dino D. Ottaviano | | 21,501 | 17 | | - | | 22 |
John J. McFadden | | 20,006 | 18 | | - | | 22 |
Diane S. Casey | | 10,002 | 19 | | - | | 22 |
Jude Visconto | | 6,003 | 20 | | - | | 22 |
Daniela Castagnino | | - | | | - | | 22 |
Directors and Executive Officers as a group (14 persons) | | 836,357 | 21 | | 1.1 | % | |
| | | | | | |
1.Unless otherwise indicated, the Company for executive services,address of all persons is c/o Healthcare Services Group, Inc., 3220 Tillman Drive, Suite 300, Bensalem, PA 19020.
2.Based on 74,058,000 shares of Common Stock outstanding at April 1, 2019.
3.The address of Blackrock, Inc. is 55 East 52nd Street, New York, NY 10055.
The address of The Vanguard Group, Inc. is 100 Vanguard Blvd., Malvern, PA 19355.
The address of Janus Henderson Group, plc. is 201 Bishopsgate EC2M 3AE, United Kingdom.
The address of William Blair Investment Management, LLC. is 150 North Riverside Plaza, Chicago, IL 60606.
The address of T. Rowe Price Associates, Inc. is 100 E. Pratt Street, Baltimore, MD 21202.
4.According to a Schedule 13G filed by BlackRock, Inc. on January 28, 2019, it has total beneficial ownership of 8,497,753 shares. Such beneficial ownership includes sole voting power with respect to 8,163,477 shares, and setssole dispositive power with respect to 8,497,753 shares.
5.According to a Schedule 13G filed by The Vanguard Group, Inc. on January 10, 2019, it has total beneficial ownership of 7,393,187 shares. Such beneficial ownership includes sole voting power with respect to 153,124 shares, shared voting power with respect to 15,255 shares, sole dispositive power with respect to 7,231,908 shares and shared dispositive power with respect to 161,279 shares.
28 | | | | | | | | |
| | Security Ownership of Certain Beneficial Owners and Management |
6.According to a Schedule 13G filed by Janus Henderson Group, plc. on February 12, 2019, it has total beneficial ownership of 4,255,811 shares. Such beneficial ownership includes shared voting and dispositive power with respect to 4,255,811 shares.
7.According to a Schedule 13G filed by William Blair Investment Management, LLC. on February 13, 2019, it has total beneficial ownership of 4,176,253 shares. Such beneficial ownership includes sole voting power with respect to 3,814,247 shares, and sole dispositive power with respect to 4,176,253 shares.
8.According to a Schedule 13G filed by T. Rowe Price Associates, Inc. on February 14, 2019, it has total beneficial ownership of 3,697,909 shares. Such beneficial ownership includes sole voting power with respect to 679,556 shares, and sole dispositive power with respect to 3,697,909 shares.
9.Theodore Wahl’s beneficial ownership includes incentive stock options to purchase 54,056 shares, and nonqualified stock options to purchase 60,194 shares, all currently exercisable, and 12,391 shares credited to Mr. Wahl’s account (but unissued) in connection with the compensationCompany’s SERP. Additionally, it includes 83,725 and 32,045 shares held by Mr. Wahl’s wife and minor children, respectively.
10.Michael E. McBryan’s beneficial ownership includes incentive stock options to purchase 23,846 shares and nonqualified stock options to purchase 65,154 shares, all currently exercisable, and 36,397 shares credited to Mr. McBryan’s account (but unissued) in connection with the Company’s SERP.
11.Robert L. Frome’s beneficial ownership includes nonqualified stock options to purchase 37,510 shares, all currently exercisable.
12.John M. Briggs’ beneficial ownership includes nonqualified stock options to purchase 28,782 shares, all currently exercisable.
13.David Hurlock’s beneficial ownership includes incentive stock options to purchase 15,253 shares and nonqualified stock options to purchase 11,497 shares, all currently exercisable and 6,900 shares credited to Mr. Hurlock’s account (but unissued) in connection with the Company’s SERP.
14.Andrew W. Kush’s beneficial ownership includes incentive stock options to purchase 22,419 shares and nonqualified stock options to purchase 6,581 shares, all currently exercisable and 2,642 shares credited to Mr. Kush’s account (but unissued) in connection with the Company’s SERP.
15.John C. Shea’s beneficial ownership includes incentive stock options to purchase 19,809 shares, all currently exercisable and 4,334 shares credited to Mr. Shea’s account (but unissued) in connection with the Company’s SERP.
16.Robert J. Moss’ beneficial ownership includes nonqualified stock options to purchase 13,005 shares, all currently exercisable.
17.Dino D. Ottaviano’s beneficial ownership includes nonqualified stock options to purchase 20,957 shares, all currently exercisable.
18.John J. McFadden’s beneficial ownership includes nonqualified stock options to purchase 20,006 shares, all currently exercisable.
19.Diane S. Casey’s beneficial ownership includes nonqualified stock options to purchase 10,002 shares, all currently exercisable.
20.Jude Visconto’s beneficial ownership includes nonqualified stock options to purchase 6,003 shares, all currently exercisable.
21.Includes 432,185 shares underlying stock options granted to this group. All stock options reflected in the security ownership table are currently exercisable; also includes 63,701 shares credited to the accounts of the executive officers (but unissued) in connection with the Company’s SERP.
22.Less than 1% of the outstanding shares.
29 | | | | | | | | |
| | Security Ownership of Certain Beneficial Owners and Management |
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The Company’s Audit Committee is responsible for reviewing and approving all related party transactions involving the Company and/and any director, executive officer, other employee or family member thereof. The Audit Committee does not have a formal written policy which sets forth its policies and procedures with respect to reviewing a related party transaction. The Audit Committee, however, will not approve any management fees paidtransaction unless the transaction is on terms comparable to those available to unaffiliated third parties and have terms reasonably expected to benefit the Company.
Matthew J. McKee, MBA, the brother-in-law of Theodore Wahl, joined the Company in 2004 and is currently employed by the Company as Chief Communications Officer. During 2018, Mr. McKee earned total compensation for executives services. such service of approximately $677,000, consisting of $296,000 in base salary, $93,000 of incentive compensation, $182,000 of stock awards, $79,000 in option awards, $15,000 in nonqualified deferred compensation earnings and $12,000 of other compensation. Management believes that the compensation earned by Mr. McKee is comparable to the compensation the Company would pay to a non-relative employee in a similar position.
Director Independence
In addition,accordance with the Nominating, Compensationlisting requirements of NASDAQ, a majority of the current members of the Company’s Board of Directors are independent, namely: John M. Briggs, Diane S. Casey, Robert L. Frome, John J. McFadden, Robert J. Moss, Dino D. Ottaviano, Daniela Castagnino and Stock Option Committee makes recommendations toJude Visconto. Accordingly, if Messrs. Briggs, Frome, McFadden, Moss, Ottaviano, and Visconto and Mmes. Casey and Castagnino are re-elected as members of the Board of Directors, with respect to incentive-compensation plans and equity-based plans, and establishes criteria for the granting of options in accordance with such criteria; and administers such plans. The Nominating, Compensation and Stock Option Committee reviews major organizational and staffing matters. In consultation with the President and Chief Executive Officera majority of the Company,members of the Nominating, Compensation and Stock Option Committee oversees the development and growth of executive management personnel. With respect to director compensation, the Nominating, Compensation and Stock Option Committee designs a director compensation package of a reasonable total value based on comparisons with similar firms and aligned with long-term shareholder interests. Finally, the Nominating, Compensation and Stock Option Committee reviews director compensation levels and practices, and may recommend, from time to time, changes in such compensation levels and practices to theCompany’s Board of Directors with equity ownership in the Company encouraged. The Nominating, Compensation and Stock Option Committee’s charter provides that the Nominating, Compensation and Stock Option Committee shall have the authoritywill continue to obtain advice and seek assistance from internal and external legal, accounting and other advisors.be independent.
The Nominating, Compensation and Stock Option Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.
NOMINATING, COMPENSATION AND STOCK OPTION COMMITTEE
Dino D. Ottaviano, Chairman
Diane S. Casey
John J. McFadden
Compensation Committee Interlocks and Insider Participation
No member of the Nominating, Compensation and Stock Option Committee was an officer or employee of the Company or any subsidiary of the Company during the fiscal year ended December 31, 2015.2018. No member of the Nominating, Compensation and Stock Option Committee was a member of the compensation committeescommittee of another entity during the fiscal year ended December 31, 2015.2018. None of our executive officers was a director or a member of suchthe Nominating, Compensation and Stock Option Committee or a director, of another entity during the fiscal year ended December 31, 2015.2018. There were no transactions between any member of the Nominating, Compensation and Stock Option Committee and the Company during the fiscal year ended December 31, 20152018 requiring disclosure pursuant to Item 404 of Regulation S-K promulgated under the Exchange Act.
Certain Relationships and Related Party Transactions
The Company's Audit Committee is responsible for reviewing and approving all related party transactions involving the Company and any director, executive officer, other employee or family member thereof. The Audit Committee does not have a formal written policy which sets forth its policies and procedures with respect to reviewing a related party transaction. The Audit Committee, however, will not approve any transaction unless the transaction is on terms comparable to those available to unaffiliated third parties and have terms reasonably expected to benefit the Company.
Kevin P. McCartney, the brother of Daniel McCartney and Bryan McCartney, joined the Company in 1998 and is currently employed by the Company as a Divisional Vice President. Kevin McCartney's compensation earned from the Company during fiscal year 2015 consisted of approximately $136,000 in base salary, $95,000 of incentive compensation and $10,000 in automobile allowance. Additionally, Kevin McCartney earned compensation of approximately $6,000 and $1,000, respectively, from the value realized on Deferred Compensation Plan contributions made on his behalf by the Company and his participation in the Company's Employee Stock Purchase Plan. All of such compensation earned by Kevin McCartney is in accordance with the Company's compensation plan for all management personnel in similar positions.
Stephen Newns, the brother-in-law of Daniel McCartney and Bryan McCartney, joined the Company in 1995 and is currently employed by the Company as a Divisional Vice President. Mr. Newns' compensation earned from the Company during fiscal year 2015 consisted of approximately $104,000 in base salary, $59,000 of incentive compensation and $10,000 in automobile allowance. All of such compensation earned by Mr. Newns is in accordance with the Company's compensation plan for all management personnel in similar positions.
Matthew J. McKee, MBA, the son-in-law of Daniel McCartney and the brother-in-law of Theodore Wahl joined the Company in 2004 and is currently employed by the Company as Vice President of Strategy. Mr. McKee's compensation earned from the Company during fiscal year 2015 consisted of approximately $180,000 in base salary, $50,000 of incentive compensation and $9,000 in automobile allowance. Additionally, Mr. McKee earned compensation of approximately $5,000 from the value realized on Deferred Compensation Plan contributions made on his behalf by the Company. Management believes that the compensation earned by Mr. McKee is comparable to the compensation the Company would pay to a non-relative employee in a similar position.
James R. Bleming, the brother-in-law of Bryan McCartney, joined the Company in 1992 and is currently employed by the Company as a Divisional Vice President. Mr. Bleming's compensation earned from the Company during fiscal year 2015 consisted of approximately $121,000 in base salary, $24,000 of incentive compensation and $10,000 in automobile allowance. Additionally, Mr. Bleming earned compensation of approximately $5,000 and $2,000, respectively, from the value realized on Deferred Compensation Plan contributions made on his behalf by the Company and his participation in the Company's Employee Stock Purchase Plan. All of such compensation earned by Mr. Bleming is in accordance with the Company's compensation plan for all management personnel in similar positions.
Procedures for Contacting Directors
The Board has established a process for shareholders to send communications to the Board. Shareholders may communicate with the Board generally or a specific director at any time by writing to: Healthcare Services Group, Inc., 3220 Tillman Drive, Suite 300, Bensalem, PA 19020, Attention: Investor Relations. The Company reviews all messages received, and forwards any message that reasonably appears to be a communication from a shareholder about a matter of shareholder interest that is intended for communication to the Board of Directors. Communications are sent as soon as practicable to the director to whom they are addressed, or if addressed to the Board generally, to the chairman of the Nominating, Compensation and Stock Option Committee. Because other appropriate avenues of communication exist for matters that are not of shareholder interest, such as general business complaints or employee grievances, communications that do not relate to matters of shareholder interest are not forwarded to the Board.
2430 | | | | | | | | |
| | Certain Relationships and Related Transactions, and Director Independence |