UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
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Filed by the Registrant ý |
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Filed by a Party other than the Registrant o |
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| o | Preliminary Proxy Statement |
| o | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
| ý | Definitive Proxy Statement |
| o | Definitive Additional Materials |
| o | Soliciting Material Pursuant to Section 240.14a-12Under Rule 14a-12 |
First Cash Financial Services,FirstCash, Inc.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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| Payment of Filing Fee (Check the appropriate box): |
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| o | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
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First Cash Financial Services,To the Stockholders of FirstCash, Inc.:
You are cordially invited to attend the Annual Meeting of Stockholders to be held at the Company’s corporate offices located at 1600 West 7th Street, Fort Worth, Texas 76102 at 10:00 a.m. CDT on Thursday, June 4, 2020.
The purpose of the meeting is (i) to elect a class of directors to serve a three-year term beginning in 2020, (ii) to vote on the ratification of the selection of RSM US LLP as the independent registered public accounting firm of the Company for the year ending December 31, 2020, and (iii) to vote on a non-binding resolution to approve the compensation of the Company’s named executive officers.
We are pleased to take advantage of the Securities and Exchange Commission rules that allow the Company to furnish proxy materials to stockholders on the internet. These rules allow us to provide our stockholders with the information they need, while reducing the environmental impact of our Annual Meeting and lowering costs. Unless you previously requested a paper copy of our proxy materials, you will receive a Notice Regarding the Availability of Proxy Materials which tells you how to access the materials on the internet.
Whether or not you plan to attend the Annual Meeting, please vote by internet or telephone at your earliest convenience or complete and return your proxy card if you requested a paper copy of our materials. You may choose to attend the meeting and personally cast your votes even if you fill out and return a proxy card.
We hope that you will be able to join us at the FirstCash Annual Meeting on June 4.
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| Fort Worth, Texas | Rick L. Wessel |
| April 24, 2020 | Vice-Chairman of the Board and Chief Executive Officer |
FirstCash, Inc.
690 East Lamar Boulevard, Suite 4001600 West 7th Street
Arlington,Fort Worth, Texas 7601176102
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held June 7, 20164, 2020
To Our Stockholders:
We cordially invite you to attend theThe Annual Meeting of Stockholders of First Cash Financial Services,FirstCash, Inc. (the “Company”). Our 2016 Annual Meeting will be held at the Company’s corporate offices located at 690 East Lamar Boulevard, Suite 400, Arlington,1600 West 7th Street, Fort Worth, Texas 7601176102 at 10:00 a.m. CDT on TuesdayThursday, June 7, 20164, 2020.*,
The Annual Meeting is called for the following purposes:
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| | 1. | To elect Amb. Jorge MontañoMessrs. Daniel E. Berce, Mikel D. Faulkner and Randel G. Owen as a directordirectors of the Company;Company for a three-year term beginning in 2020; |
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| | 2. | To ratify the selection of Hein & AssociatesRSM US LLP as the independent registered public accounting firm of the Company for the year ending December 31, 2016;2020; |
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| | 3. | To consider an advisory vote on a non-binding resolution to approve the compensation of the Company’s named executive officers; and |
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| | 4. | To transact such other business as may properly come before the meeting. |
You should read with care the attached Proxy Statement, which contains detailed information about these proposals. As in previous years, the Company will furnish proxy materials to its stockholders primarily through the Internet. The Company will mail a Notice of Internet Availability of Proxy Materials (“Notice”) to most of its stockholders, which will contain instructions on how to access proxy materials on the Internet and vote. The Notice will also describe how to request a paper copy of proxy materials or electronic delivery of materials via e-mail, free of charge. Stockholders who have previously elected delivery of the Company’s proxy materials electronically will receive an e-mail with instructions on how to access these materials electronically. Stockholders who have previously elected to receive a paper copy of the Company’s proxy materials will receive a full paper set of these materials by mail.
Common stockholders of record at the close of business on April 11, 201613, 2020 will be entitled to notice of and to vote at the meeting.Annual Meeting.
Your voteImportant Notice Regarding the Availability of Proxy Materials for the Stockholders’ Meeting to be held on June 4, 2020:
The Proxy Statement and the 2019 Annual Report to Stockholders are available
at the Company’s website and can be accessed at www.firstcash.com, where a link to the Annual Report on Form 10-K is important, and accordingly, we urge you to complete the on-line voting procedures as described
available on the proxy cardInvestor Relations page of the website (investors.firstcash.com).
PLEASE USE INTERNET OR TELEPHONE VOTING OR COMPLETE AND RETURN A PROXY CARD SO THAT YOUR SHARES WILL BE REPRESENTED AT THE ANNUAL MEETING. IF YOU CHOOSE TO ATTEND THE ANNUAL MEETING, YOU MAY REVOKE YOUR PROXY AND PERSONALLY CAST YOUR VOTES AT THE ANNUAL MEETING.
* As part of the Company’s precautions regarding the coronavirus or you can sign, date and returnCOVID-19, the proxy card inCompany is planning for the enclosed postage-paid envelope. The factpossibility that you have voted on-line or returned your proxy in advance will in no way affect your right to vote in person should you attend the meeting. However, by signing and returning the proxy, you have assured representation of your shares at the Annual Meeting may be held by means of Stockholders.remote communication only (i.e., a virtual meeting). If the Company takes this step, or if the time, date or place of the Annual Meeting will be changing, the Company will announce the decision to do so in advance, and details on how to participate will be available on the Investor Relations page of the Company’s website (investors.firstcash.com).
We hope that you will be able to join us on June 7.
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| | Very truly yours,By Order of the Board of Directors, |
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Arlington,Fort Worth, Texas | Rick L. WesselR. Douglas Orr |
April 28, 201624, 2020 | Chairman of the Board,Executive Vice President, Chief ExecutiveFinancial Officer, Treasurer and PresidentSecretary |
TABLE OF CONTENTS
First Cash Financial Services,FirstCash, Inc.
690 East Lamar Boulevard, Suite 4001600 West 7th Street
Arlington,Fort Worth, Texas 7601176102
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PROXY STATEMENT
for
Annual Meeting of Stockholders
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GENERAL INFORMATION
This Proxy Statement is being furnished to stockholders in connection with the solicitation of proxies by the Board of Directors (“Board of Directors”) of First Cash Financial Services,FirstCash, Inc., a Delaware corporation (the(“FirstCash” or the “Company”), for use at the 20162020 Annual Meeting of Stockholders of the Company (the “Annual Meeting”) to be held at the Company’s corporate offices located at 690 East Lamar Boulevard, Suite 400, Arlington,1600 West 7th Street, Fort Worth, Texas 7601176102* at 10:00 a.m. CDT, on TuesdayThursday, June 7, 2016,4, 2020, and at any adjournments thereof, for the purpose of considering and voting upon the matters set forth in the accompanying Notice of Annual Meeting of Stockholders.Stockholders (the “Notice”). The Company is mailing a printed copy of this Proxy Statement, a proxy card and the 20152019 Annual Report of the Company to certain of its registered stockholders who have not consented to electronic delivery of their proxy materials on or about April 28, 201624, 2020, and a Notice of Internet Availability to all other stockholders beginning May 2, 2016.on or about April 24, 2020.
The close of business on April 11, 201613, 2020 has been fixed as the record date for the determination of stockholders entitled to notice of and to vote at the Annual Meeting and any adjournment thereof. As of the record date, there were 28,243,22941,440,498 shares of the Company’s common stock, par value $.01 per share (“Common Stock”), issued and outstanding. The presence, in person or by proxy, of a majority of the outstanding shares of Common Stock on the record date is necessary to constitute a quorum at the Annual Meeting. Abstentions and broker non-votes (described below) will be counted as present for the purposes of determining the presence of a quorum. A
If your shares are held in the name of a broker, non-vote occurs when abank or other nominee, you are considered the “beneficial holder” of the shares held for you in what is known as “street name.” You are not the “record holder” of such shares. If this is the case, this Proxy Statement has been forwarded to you by your broker, bank or other nominee. As the beneficial holder, you generally have the right to direct your broker, bank or other nominee as to how to vote your shares by providing them with voting instructions.
If you do not provide voting instructions to your broker, bank or other nominee, the voting of your shares by the bank, broker or other nominee who holdsis governed by the rules of the Nasdaq Global Select Market (“Nasdaq”). These rules allow banks, brokers and other nominees to vote shares in their discretion on “routine” matters for another person returns a proxy butwhich the “beneficial holder” does not provide voting instructions. On matters considered “non-routine,” banks, brokers and other nominees may not vote on a particular item, usually becauseshares without your instruction. Shares that banks and brokers are not authorized to vote are referred to as “broker non-votes.”
If you do not instruct your bank, brokerage firm or other nominee in accordance with their directions how to vote your shares prior to the nominee does not have discretionary voting authority for that item and has not received instructions from the ownerdate of the shares.Annual Meeting, your bank, brokerage firm or other nominee cannot vote your shares on the following proposals: “Proposal 1 - Election of Directors” and “Proposal 3 - Advisory Vote to Approve the Compensation of the Company’s Named Executive Officers,” and such shares will be considered “broker non-votes” and will not affect the outcome of these votes. However, your bank or brokerage firm may vote your shares in its discretion on “Proposal 2 - Ratification of Independent Registered Public Accounting Firm.”
* As part of the Company’s precautions regarding the coronavirus or COVID-19, the Company is planning for the possibility that the Annual Meeting may be held by means of remote communication only (i.e., a virtual meeting). If the Company takes this step, or if the time, date or place of the Annual Meeting will be changing, the Company will announce the decision to do so in advance, and details on how to participate will be available on the Investor Relations page of the Company’s website (investors.firstcash.com).
Each share of Common Stock is entitled to one vote on all questions requiring a stockholder vote at the Annual Meeting. The votes required to act on each proposal at the Annual Meeting are summarized below.
ItemProposal 1 — Election of DirectorDirectors.. A plurality of the votes of the shares of Common Stock present in person or represented by proxy at the Annual Meeting and entitled to vote at the Annual Meeting is required for the approval of the election of directors under ItemProposal 1 as set forth in the accompanying Notice of Annual Meeting of Stockholders. Stockholders may not cumulate their votes in the election of directors. Abstentions and broker non-votes will not be counted as having been voted on Item 1 and will have no effect onin determining whether the outcomeproposal has been approved. The election of directors is also subject to the vote.Company’s Director Election (Majority Voting) Policy, which is described below in the “Corporate Governance and Board Matters” section of this Proxy Statement.
ItemProposal 2 — Ratification of Independent Registered Public Accounting FirmFirm.. The affirmative vote of a majority of the shares of Common Stock present in person or represented by proxy at the Annual Meeting and entitled to vote at the Annual Meeting is required for the ratification of the selection of the Company’s independent public accountants under ItemProposal 2 as set forth in the accompanying Notice of Annual Meeting of Stockholders. The ratification of the selection of Hein & Associates LLP as the Company’s independent public accountants for the year ending December 31, 2016Since this proposal is considered a discretionaryroutine matter, and brokers will be permitted to vote uninstructed shares without instruction as to such matter. Broker non-votes are not considered entitled to vote on this proposal, and therefore, havethere will be no effect on the outcome of the vote on thebroker non-votes with respect to this proposal. Abstentions will have the same effect as votes against ItemProposal 2.
ItemProposal 3 — Advisory Vote onto Approve the Compensation of the Company’s Named Executive CompensationOfficers.. The non-binding resolution to approve the compensation of the Company’s named executive officers will be approved if a majority of the shares of Common Stock present in person or represented by proxy at the Annual Meeting and entitled to vote at the Annual Meeting voteis voted in favor of the proposal. Broker non-votes are not considered entitled to vote on this proposal and, therefore,will have no effect onin determining whether the outcome of the vote on the proposal.proposal has been approved. Abstentions will have the same effect as votes against ItemProposal 3.
Stockholder Proposals. If any stockholder proposal is properly presented at the Annual Meeting, the stockholder proposal will be approved if it receives the affirmative vote of a majority of the shares of Common Stock present in person or represented by proxy and entitled to vote at the Annual Meeting. Broker non-votes will not be counted as having been votedentitled to vote on such a proposal, and will have no effect on the outcome of the vote on the proposal. Abstentions will have the same effect as votes against any stockholder proposal.
If you are a stockholder of record, you may vote in person at the Annual Meeting or by proxy without attending the Annual Meeting. You may vote by mail by signing, dating and returning your proxy card in the enclosed prepaid envelope. You may also vote over the Internetinternet or by telephone. The proxy card the Company mails you will instruct you on how to vote over the Internetinternet or by telephone. If you hold your shares in an account through a broker, bank or other nominee in “street name,” you should complete, sign and date the voting instruction card that your broker, bank or nominee provides to you or as your broker or nominee otherwise instructs.
Attendance at the Annual Meeting will be limited to stockholders of the Company as of the record date (or their authorized representatives). If you wish to attend the Annual Meeting in person, you will need to present a valid government-issued photo identification, such as a driver’s license or passport. Beneficial stockholders holding their shares through a broker, bank or other nominee in “street name” will need to bring proof of beneficial ownership as of the record date, such as a recent brokerage account statement, the voting instruction card provided by their broker, bank or other nominee or similar evidence of ownership. Stockholders of record will be verified against an official list available at the registration area. The Company reserves the right to deny admission to anyone who cannot show sufficient proof of stock ownership as of the record date.
All shares represented by properly executed proxies, unless such proxies previously have been revoked, will be voted at the Annual Meeting in accordance with the directions on the proxies. If no direction is indicated, the shares will be voted to:in accordance with the recommendation of the Board of Directors as follows: (i) TO ELECT AMB. JORGE MONTAÑOMESSRS. DANIEL E. BERCE, MIKEL D. FAULKNER AND RANDEL G. OWEN AS DIRECTOR;DIRECTORS; (ii) TO RATIFY THE SELECTION OF HEIN & ASSOCIATESRSM US LLP AS THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM OF THE COMPANY FOR THE YEAR ENDING DECEMBER 31, 2016;2020; AND (iii) TO APPROVE THE ADVISORY PROPOSAL ON THE COMPENSATION OF THE COMPANY’S NAMED EXECUTIVE OFFICERS; AND (iv) TRANSACT SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.OFFICERS. The designated proxies will vote in their discretion on any other matter that may properly come before the Annual Meeting. At this time, the Company is unaware of any matters, other than as set forth above, that may properly come before the Annual Meeting. The enclosed proxy, even though executed and returned, may be revoked at any time prior to the voting of the proxy (a)(i) by the execution and submission of a revised proxy, (b)(ii) by written notice to the Corporate Secretary of the Company or (c)(iii) by voting in person at the Annual Meeting.
COMPANY OVERVIEW AND ANNUAL REPORT
Company Overview
FirstCash is a leading operator of pawn stores in the United States and Latin America. As of March 31, 2020, the Company had 2,740 retail locations, consisting of 1,052 stores in the U.S., 1,608 stores in Mexico, 55 stores in Guatemala, 13 stores in El Salvador and 12 stores in Colombia. The Company has approximately 20,000 employees, including approximately 8,000 employees located in the U.S. and 12,000 located in Latin America.
The Company’s primary business is the operation of full-service pawn stores, also known as “pawnshops,” which make small cash advances, known as pawn loans, which are secured by personal property such as jewelry, electronics, tools, appliances, sporting goods and musical instruments. Pawn loans can be quickly and easily accessed by customers who often have limited access to traditional credit products. Pawn stores also retail value-priced consumer products acquired from forfeited pawn collateral and direct purchases of such merchandise from the general public. For the year ended December 31, 2019, 99% of the Company’s revenues were derived from pawn operations. The Company’s long-term business plan is to grow revenues and income by opening new (“de novo”) retail pawn locations, acquiring existing pawn stores in strategic markets and increasing revenue and operating profits in existing stores.
Annual Report
The Annual Report on Form 10-K, covering the Company’s fiscal year ended December 31, 20152019, including audited financial statements, is enclosed herewith. The Annual Report on Form 10-K does not form any part of the material for solicitation of proxies.
The Company’s primary website can be accessed atis www.firstcash.com, where a link to the Annual Report on Form 10-K is available on the Investor Relations page of the website (www.firstcash.com/investorsinvestors.firstcash.com). The Company will provide, without charge, a printed copy of its Annual Report on Form 10-K upon written request to R. Douglas Orr, Chief Financial Officer,the Corporate Secretary, at 690 East Lamar Boulevard, Suite 400, Arlington,1600 West 7th Street, Fort Worth, Texas 76011.76102. The Company will provide exhibits to its Annual Report on Form 10-K, upon payment of the reasonable expenses incurred by the Company in furnishing such exhibits.
ITEMPROPOSAL 1
TO ELECT ONE DIRECTORELECTION OF DIRECTORS
The Bylaws of the Company provide that the Board of Directors will determine the number of directors but shall consist of at least one director and no more than 15 directors, however, the NASDAQ stock exchange requires at least three independent directors make up the Board of Directors.directors. The stockholders of the Company elect the directors. At each annual meeting of the stockholders of the Company, successors of the class of directors whose term expires at the annual meeting will be elected for a three-year term. Any director elected to fill a vacancy or newly created directorship resulting from an increase in the authorized number of directors shall hold office for a term that shall coincide with the remaining term of that class. In no case will a decrease in the number of directors shorten the term of any incumbent director. Any vacancy on the Board of Directors, howsoeverhowever resulting, may be filled by a majority of the directors then in office, even if less than a quorum, or by a sole remaining director.
The stockholders will elect oneBoard of Directors currently consists of six directors following the retirement of Amb. Jorge Montaño from the Board on June 11, 2019. The Board recognizes that it could benefit from the addition of another well-qualified, independent director, forand specifically, a female director. As a result, the coming year;Board is in the nominee, who does not presentlyprocess of identifying a well-qualified, independent female director to serve ason the Board and is committed to appointing a female director ofto the Company, will be appointed for a term of three years.Board no later than the 2021 Annual Meeting.
Unless otherwise instructed or unless authority to vote is withheld, the enclosed proxy will be voted for the election of the nomineenominees listed herein. Although the Board of Directors does not contemplate that the nomineenominees will be unable to serve, if such a situation arises prior to the Annual Meeting, the person named in the enclosed proxy will vote for the election of such other person as may be nominated by the Board of Directors.
The Company currently has six directors, of which four are independent. The current directors are as follows:
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| Name | | Age | | Principal Occupation | | Independence Status* |
| Daniel R. Feehan | | 69 | | Chairman of the Board, FirstCash, Inc. | | Employee |
| Rick L. Wessel | | 61 | | Vice-Chairman of the Board and CEO, FirstCash, Inc. | | Employee |
| Daniel E. Berce | | 66 | | President and CEO, General Motors Financial Company, Inc. | | Independent Director |
| Mikel D. Faulkner | | 70 | | Former Executive Chairman, Nautilus Marine Services PLC | | Lead Independent Director |
| James H. Graves | | 71 | | Managing Director and Partner, Erwin, Graves & Associates, LP | | Independent Director |
| Randel G. Owen | | 61 | | President and CEO, Global Medical Response | | Independent Director |
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| * | The Board of Directors has determined that, with the exception of Mr. Wessel and Mr. Feehan, all of its directors, including all of the members of the Audit, Compensation, and Nominating and Corporate Governance Committees, are “independent” as defined by Nasdaq, the Securities and Exchange Commission (“SEC”) and the Company’s Corporate Governance Guidelines. |
Biographical information for the directors is as follows:
Daniel R. Feehan has served as chairman of the Board of Directors of FirstCash since the 2016 merger of equals (the “Merger”) with Cash America International, Inc. (“Cash America”) and previously served as a Cash America director since 1984. Mr. Feehan was Cash America’s executive chairman since November 1, 2015 until the completion of the Merger. Prior to that, Mr. Feehan served as Cash America’s chief executive officer and president from February 2000 through May 2015 and as Cash America’s chief executive officer from May 2015 through October 2015, when he retired from that position. Mr. Feehan served as Cash America’s president and chief operating officer from January 1990 until February 2000, except that he served as chairman and co-chief executive officer of one of Cash America’s subsidiaries from February 1998 to February 1999 before returning to the position of Cash America’s president and chief operating officer. Mr. Feehan became a Cash America director in 1984 and joined Cash America full-time in 1988, serving as its chief financial officer before becoming president and chief operating officer in 1990. Mr. Feehan currently serves as the chairman at AZZ Inc., a NYSE listed equipment manufacturing company, and Enova International, Inc., an online lending company that was spun off from Cash America in 2014 and is listed on the NYSE, where he has served since 2000 and 2011, respectively.
Rick L. Wessel has served as vice-chairman of the Board of Directors of the Company currently consists of four directors divided into three classes. At each annual meeting of stockholders, one class is elected to hold office for a term of three years. Directors serving until the earlier of (i) resignation or (ii) expiration of their terms at the annual meeting of stockholders in the years indicated as follows:since September 2016, - Mr. Gabriel Guerra Castellanos; 2017 - Messrs. Mikel D. Faulkner and Randel G. Owen; and 2018 - Mr. Rick L. Wessel.
Mr. Guerra, whose term expires on the date of the Annual Meeting on June 7, 2016, is not standing for re-election and will leave the Board effective with the expiration of his current term. The Nominating and Corporate Governance Committee has nominated the following individual to stand for election as a director at the Annual Meeting of Stockholders:
Ambassador Jorge Montaño, age 70, is a native and resident of Mexico, where he has served in a variety of senior diplomatic positions and business consulting roles. In his diplomatic career, he most recently served as the Permanent Representative of Mexico to the United Nations from July 2013 until January 2016. Mr. Montaño was Ambassador to the United States from 1993 to 1995, and had a previous posting as Permanent Representative of Mexico to the United Nations from 1989 to 1992. Between 1982 and 1988, he was Senior Director of Multilateral Affairs in the Ministry of Foreign Affairs. He previously served as Director General for United Nations Specialized Organizations from 1979, the year in which he joined the Foreign Service, until 1982. Amb. Montaño currently serves as partner in a Mexico-based public relations and communications firm, Guerra Castellanos y Asociados. From 1996 to 2013, he was President of Asesoria y Analisis, a Mexico-based consulting and lobbying firm. In addition, he has served as a professor of International Organizations at the Instituto Tecnológico Autónoma de México from 1996 to 2013. A founder of the Spanish-language edition of Foreign Affairs and of the Mexican Council on International Affairs, Mr. Montaño is an author and regular contributor to Mexican newspapers, such as La Jornada, Reforma, El Universal and El Pais. He earned a bachelor’s degree in law and political science from the National Autonomous University of Mexico, as well as a master’s degree and a doctorate in political science from the London School of Economics. Amb. Montaño previously served as a director of the Company from June 2010 to July 2013. The Company believes that Amb. Montaño is qualified to serve as a director of the Company based on his educational background and experience regarding business, political and governmental affairs in the country of Mexico, his prior service as a director of the Company and his extensive knowledge and experience of the Company’s business.
Directors Not Standing For Election
Rick L. Wessel, age 57,has served as chairman of the board of directors of the Company since October 2010, as chief executive officer (“CEO”) since November 2006 as president since May 1998 and has been a director since November 1992. HeMr. Wessel previously served as vicepresident from May 1998 to September 2016, chairman of the board from October 2010 to September 2016, vice-chairman of the board from November 2004 to October 2010 and secretary and treasurer of the Company from May 1992 to November 2006 and the Company’s chief financial officer (“CFO”) from May 1992 to December 2002. Prior to February 1992, Mr. Wessel was employed by Price Waterhouse LLP for approximately nine years. The Company believes that Mr. Wessel is qualified to serve
Daniel E. Berce has served as a director of FirstCash since the Merger in 2016 and previously served as a Cash America director since 2006. Mr. Berce has been president and chief executive officer of General Motors Financial Company, based on his experienceInc. (formerly AmeriCredit Corp.) since its acquisition by General Motors Company in October 2010. Mr. Berce served as the CEO of the Company, his prior serviceAmeriCredit Corp.’s chief executive officer from August 2005 to October 2010, president from April 2003 to October 2010 and vice-chairman and chief financial officer from November 1996 until April 2003. He served as CFO of the Companya director at AmeriCredit Corp. from November 1990 to October 2010. Mr. Berce currently serves as a director at AZZ Inc., a NYSE listed equipment manufacturing company, and his extensive knowledge and experience of the Company’s business.chairman at Arlington Asset Investment Corp., a NYSE listed investment company.
Mikel D. Faulkner, age 66, was appointed to the Board of Directors in 2009. He2009 and has served as chief executive officer of HKN, Inc. (OTCQB: HKNI)the lead independent director since 1982 and president of HKN since 2003. HKN, Inc., formerly Harken Energy Corporation, is an independent energy company. Since 2002,October 2017. From February 2017 to February 2019, Mr. Faulkner has also served as executive chairman of the board of directors of Nautilus Marine Services PLC, an investment company focused on the global offshore services industry and quoted on the London Stock Exchange (AIM). From 2002 to February 2017, Mr. Faulkner served as executive chairman of the board of directors of Global Energy Development PLC, aan international oil and gas exploration company, quoted company on the London Stock Exchange (AIM). The Company believes that Mr. Faulkner is qualifiedserved as chief executive officer of HKN, Inc. (OTCQB: HKNI) from 1982 to serve2017, chairman from 1991 to 2003 and president and chief executive officer of HKN, Inc. from 2003 to 2017. HKN, Inc., formerly Harken Energy Corporation, was an independent energy company.
James H. Graves has served as a director of FirstCash since the Company based on his experienceMerger in 2016 and previously served as a Cash America director since 1996. Mr. Graves has served as managing director and partner of Erwin, Graves & Associates, LP, a management consulting firm located in Dallas, Texas, since January 2001. Mr. Graves also served as executive vice president of financial strategy for DeviceFidelity, Inc., a financial services technology company, from March 2008 through September 2012. Mr. Graves served as a director, vice-chairman of the board of directors and chief executiveoperating officer of Detwiler, Mitchell & Co., a Boston-based securities research firm, from June 2002 until June 2006. Prior to that, Mr. Graves held various positions, including chief operating officer, with J.C. Bradford & Company, a Nashville-based securities firm. He also worked for Dean Witter Reynolds, Inc. as the head of the energy group and board member for publicly-held, multi-national corporations.later as head of the industry investment banking groups in New York. Mr. Graves currently serves as a director at Hallmark Financial Services, Inc., a publicly traded insurance company, serving since 1995, Atlantic Capital Bancshares, Inc., a publicly traded bank holding company, serving since 2017 and he previously served as a director of Tristate Capital Holdings, Inc., a publicly traded bank holding company, from 2011 through July 2015. Mr. Graves also serves as a director of various privately-held companies, including a private equity fund and a healthcare technology company.
Randel G. Owen, age 57, was appointed to the Board of Directors in 2009. In March 2018, Mr. Owen has servedwas named president and chief executive officer of Global Medical Response. From July 1999 to March 2018, he previously held roles as thepresident of ambulatory services, chief financial officer and executive vice president of Envision Healthcare Holdings, Inc. (NYSE: EVHC) since May 2011Corporation (and its predecessor companies including AMR and the chief operating officer since September 2012.EmCare). He served aswas appointed executive vice president and chief financial officer since February 2005of AMR in March 2003. He joined EmCare in July 1999 and served as executive vice president since December 2005 of EVHC and held other senior executive andchief financial positions with its predecessor companies since 2001. The Company believes thatofficer from June 2001 to March 2003. Before joining EmCare, Mr. Owen is qualifiedwas vice president of Group Financial Operations for PhyCor, Inc. from 1995 to serve as a director1999. Mr. Owen has more than 30 years of financial experience in the Company based on his experience as the principal financial and accounting officer for a publicly-held corporation.health care industry.
There are no family relationships between any director or executive officers, officers.
Director Terms
The six directors are divided into three classes. At each annual meeting of stockholders, one class is elected to hold office for a term of three years. Directors serve until the earlier of (i) their death, resignation, retirement, removal or between any directordisqualification, or (ii) until their successor is elected and executive officer.qualified. The directors standing for election at the Annual Meeting are Messrs. Daniel E. Berce, Mikel D. Faulkner and Randel G. Owen. Messrs. Rick L. Wessel and James H. Graves will next stand for election in 2021. Mr. Daniel R. Feehan will next stand for election in 2022.
Required Vote
Proxies will be voted for the election of Amb. MontañoMessrs. Daniel E. Berce, Mikel D. Faulkner and Randel G. Owen as directordirectors of the Company unless otherwise specified in the proxy. A plurality of the votes cast by the holders of shares of Common Stock present in person or represented by proxy at the Annual Meeting will be necessary to elect the nomineenominees as a director.directors. If, for any reason, any nominee is unable or unwilling to serve, the proxies will be voted for a substitute nominee who will be designated by the Board of Directors at the Annual Meeting. Stockholders may abstain from voting by marking the appropriate boxes on the accompanying proxy. Abstentions will be counted separately and used for purposes of calculating whether a quorum is present at the Annual Meeting. The Company has adopted a voting policy for non-contested director elections, which is described below in the “Corporate Governance and Board Matters” section.
Recommendation of the Board of Directors
TheBased on the respective nominees’ experience, the Nominating and Corporate Governance Committee of the Board of Directors and the entire Board of Directors unanimously recommendrecommends a vote “FOR” the election of Amb. Jorge MontañoMessrs. Daniel E. Berce, Mikel D. Faulkner and Randel G. Owen as a directordirectors of the Company.
CORPORATE GOVERNANCE, AND BOARD MATTERS AND DIRECTOR COMPENSATION
Board of Directors, Committees and Meetings
The Board of Directors held four meetings during the year ended December 31, 2015. Messrs. Wessel, Faulkner, Owen and Guerra each2019. Each director attended, either telephonically or in person, allat least 75% of the meetings of the Board of Directors during their respective terms, with the year ended December 31, 2015.exception of Amb. Montaño who did not attend one of the meetings. Members of the Board of Directors are encouraged to attend the Company’s annual meeting;Annual Meeting; however, attendance is not mandatory. Mr.Messrs. Wessel and Feehan attended last year’s Annual Meeting. In addition, the independent directors of the Company meet separately in executive sessions after regularly scheduled meetings of the Board of Directors and more frequently as deemed appropriate by the independent directors.
During 2015,the period from January 1, 2019 to April 22, 2019, the committees were composed as follows:
|
| | | | | | |
| Independent Director | | Audit | | Compensation | | Nominating and Corporate Governance |
| Mikel D. Faulkner (Lead Independent Director) | | | | l | | Chair |
| Daniel E. Berce | | Chair | | | | l |
| James H. Graves | | l | | l | | |
| Jorge Montaño | | | | | | l |
| Randel G. Owen | | l | | Chair | | |
| | | | | | | |
| Meetings held January 1, 2019 to April 22, 2019 | | 1 | | 2 | | None |
Effective April 23, 2019, in connection with Amb. Montaño’s retirement from the Board of Directors, Messrs. Berce, Faulkner, Graves and Owen were appointed as members of the Audit Committee, Compensation Committee and Nominating and Corporate Governance CommitteesCommittee. The chair of each consistedcommittee remained the same.
During the period from April 23, 2019 to December 31, 2019, the committees were composed as follows:
|
| | | | | | |
| Independent Director | | Audit | | Compensation | | Nominating and Corporate Governance |
| Mikel D. Faulkner (Lead Independent Director) | | l | | l | | Chair |
| Daniel E. Berce | | Chair | | l | | l |
| James H. Graves | | l | | l | | l |
| Randel G. Owen | | l | | Chair | | l |
| | | | | | | |
| Meetings held April 23, 2019 to December 31, 2019 | | 3 | | 2 | | 1 |
Each committee member attended, either telephonically or in person, at least 75% of the meetings of their respective committees during 2019, with the exception of Mr. Faulkner, Mr. Owen and Mr. Guerra. Thewho did not attend one of the Audit Committee meetings held four meetings duringin 2019.
Effective January 1, 2020, Mr. Graves became the year ended December 31, 2015, the Compensation Committee held three meetings during the year ended December 31, 2015, andchair of the Nominating and Corporate Governance Committee held one meeting during the year ended December 31, 2015.Committee.
Board Committees
Audit Committee. The Audit Committee is responsible for the oversight of the Company’s accounting and financial reporting processes. This includes the selection and engagement of the Company’s independent registered public accounting firm and review of the scope of the annual audit, audit fees and results of the audit. The Audit Committee reviews and discusses with management and the Board of Directors such matters as accounting policies, internal accounting controls, procedures for preparation of financial statements and other financial disclosures, scope of the audit, the audit plan and the independence of such accountants. In addition, the Audit Committee has oversight over the Company’s internal audit function.and regulatory compliance functions. The Board of Directors has determined that Messrs. Faulkner and Owen areall members of the Audit Committee qualify as an audit committee financial expertsexpert as defined by Item 401(h) of Regulation S-K promulgated under the Securities Act of 1933, as amended (“Securities Act”), and the Securities Exchange Act of 1934, as amended (“Exchange Act”), and each member of the Audit Committee is independent under the listing standards of the NASDAQ stock exchange.. The Board of Directors has adopted a charter for the Audit Committee which is available to stockholders as described below.
Compensation Committee. The Compensation Committee is responsible for reviewing and approving corporate goals and objectives relevant to the compensation of the Company’s CEO, evaluating the CEO’s performance in light of those goals and objectives, and recommending to the Board of Directors for approval of the CEO’s compensation. The Compensation Committee is also responsible for recommending to the Board of Directors for approval the compensation of all other executive officers of the Company. In addition, the Compensation Committee oversees and approves grants and awards under the Company’s equity-based plans, incentive compensation plans and tax-qualified employee benefit plans, and approves severance and other termination payments to executive officers.
The Board of Directors has adopted a charter for the Compensation Committee which is available to stockholders as described below. Pursuant to its charter, the Compensation Committee may delegate all or a portion of its duties and responsibilities to one or more subcommittees consisting of one or more of its members. For more information regarding the Compensation Committee’s process and procedures for consideration of executive compensation, see “Compensation Discussion and Analysis.”
Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee is responsible for making recommendations to the Board of Directors concerning the governance structure and practices of the Company, including the size of the Board of Directors and the size and composition of various committees of the Board of Directors. In addition, the Nominating and Corporate Governance Committee is responsible for identifying individuals believed to be qualified to become directors, and to recommend to the Board of Directors the nominees to stand for election as directors at the Annual Meeting of Stockholders. The Board of Directors has adopted a charter for the Nominating and Corporate Governance Committee, which was revised in April 2020. The charter is available to stockholders as described below.
The Board of Directors has determined that each member of the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee is independent under the listing standards of Nasdaq, the SEC rules and the Company’s Corporate Governance Guidelines. Each of the Company’s committee charters is publicly available and can be accessed on the Investor Relations page of the Company’s website at www.firstcash.cominvestors.firstcash.com. Copies of the Company’s committee charters are also available, free of charge, by submitting a written request to First Cash Financial Services, Inc., Investor Relations, 690 East Lamar Boulevard, Suite 400, Arlington,the Corporate Secretary, at 1600 West 7th Street, Fort Worth, Texas 76011.76102.
Directors’ FeesCompensation
2019 Director Compensation
The Board of Directors reviews director compensation on a periodic basis. Such reviews include collecting and analyzing benchmarking information from compensation advisory firms regarding the amount and structure of the Company’s director compensation as compared to its peers. In conjunction with such review in early 2019, the Board of Directors determined the compensation for independent directors for 2019 would be structured as follows:
Annual cash compensation of $100,000, paid in quarterly installments of $25,000
A grant of 1,272 restricted stock units, valued at $110,486 on the date of grant, February 19, 2019, which fully vested on December 31, 2019
Supplemental annual cash payments of $20,000 to the Audit Committee chairman, $15,000 to the Compensation Committee chairman and $10,000 to the Nominating and Corporate Governance Committee chairman. All amounts are paid in quarterly installments.
The Board of Directors believes the mix of cash and equity compensation provides a balance between short-term cash compensation and long-term compensation tied to the Company’s stock price performance and serves to match the interests of the Company’s independent directors with those of stockholders. Based upon benchmark data of the Company’s 2019 Peer Group (as discussed in the “Compensation Discussions and Analysis”), the Board also believes the total director compensation and the mix of compensation is within the competitive range of such compensation for the companies in the 2019 Peer Group.
For the year ended December 31, 2015,2019, the independent directors received compensation for service as a director andas described above. There are no supplemental payments for attending the meetings of the Board of Directors and committee meetings. In addition, the directors were reimbursed for their reasonable expenses incurred for each Board of Directors and committee meetings attended. SeeThe Company only compensates independent non-employee directors for their services as directors. The compensation paid to Mr. Wessel is described in the “Compensation of DirectorsDiscussion and Analysis” for a summarysection of this Proxy Statement. The following table presents information regarding the feescompensation paid to the independent directors.non-employee members of the Company’s Board of Directors, and to Mr. Feehan, for the year ended December 31, 2019:
|
| | | | | | | | | | | | |
| Name | | Fees Earned or Paid in Cash $ | | Stock Awards $ | | All Other Compensation $ | | Total $ |
| Daniel E. Berce | | 120,000 |
| | 110,486 |
| | — |
| | 230,486 |
|
| Mikel D. Faulkner | | 110,000 |
| | 110,486 |
| | — |
| | 220,486 |
|
Daniel R. Feehan (1) | | — |
| | — |
| | 250,000 |
| | 250,000 |
|
| James H. Graves | | 100,000 |
| | 110,486 |
| | — |
| | 210,486 |
|
| Jorge Montaño | | 45,000 |
| | — |
| | — |
| | 45,000 |
|
| Randel G. Owen | | 115,000 |
| | 110,486 |
| | — |
| | 225,486 |
|
| |
(1) | Mr. Feehan currently serves as the chairman of the Board of Directors of the Company. Mr. Feehan also served in 2019 as a non-executive employee of the Company pursuant to an employment agreement dated April 3, 2015, which the Company assumed in connection with the Merger. For a description of Mr. Feehan’s employment agreement, see Cash America’s proxy statement on Schedule 14A filed with the SEC on April 7, 2016. Mr. Feehan’s employment agreement is filed as Exhibit 10.1 to Cash America’s Current Report on Form 8-K filed with the SEC on April 6, 2015. The compensation reported represents his salary during the year ended December 31, 2019. In addition, the Company paid for certain standard employee benefit programs for Mr. Feehan, including participation in group health, welfare and retirement benefit plans, which are generally available to all employees. Mr. Feehan and the Company entered into a new employment agreement dated January 28, 2020, which is filed as Exhibit 10.16 to the Company’s Annual Report on Form 10-K filed with the SEC on February 3, 2020. For a description of Mr. Feehan’s current employment agreement, see “Feehan Employment Agreement” below. |
Feehan Employment Agreement
On January 28, 2020, the Company’s chairman of the Board of Directors, Mr. Feehan, entered into a new employment agreement with the Company (the “Feehan Agreement”). Mr. Feehan’s previous employment agreement with the Company was set to expire in April 2020. The Feehan Agreement became effective as of January 1, 2020 and ends on December 31, 2023. The Company will pay to Mr. Feehan an annual salary of $300,000, paid biweekly, and provides him the right to participate in all of the Company’s savings, retirement and welfare benefit plans available to other employees of the Company. Mr. Feehan is not entitled to bonuses, equity grants or other director compensation under this agreement.
The agreement provides that if Mr. Feehan’s employment with the Company is terminated during the term by the Company without “cause” or by the executive for “good reason” (as such terms are defined in the employment agreement), Mr. Feehan would be entitled to a lump sum cash severance payment equal to one times (or two times, if such termination occurs within twelve months following a change in control of the Company) his salary in effect as of the termination. He would also be entitled to continue to participate in the Company’s health and welfare benefit plans at active employee rates for a period of eighteen months (the “COBRA subsidy”). Furthermore, if such termination occurs within twelve months following a change in control of the Company, the Company will pay to the executive, in lieu of the COBRA subsidy described above, a lump sum in cash in an amount equal to the full monthly cost of health and welfare benefit coverage multiplied by 24.
The Feehan Agreement prohibits Mr. Feehan from competing with the Company during the employment term and for a period of 24 months following termination of employment. Mr. Feehan would also be prohibited from soliciting Company customers and recruiting Company employees during this period.
Code of Business Conduct and Ethics
The Company has adopted a Code of Ethics that applies to all of its directors, officers,Business Conduct and key employees. The Company intends to disclose future amendments to, or waivers from, provisions of its Code of Ethics on its website in accordance with applicable NASDAQ and the Securities and Exchange Commission (“SEC”) requirements. The Code of Ethics is publicly available and can be accessed on the Company’s website at www.firstcash.comwww.firstcash.com..The Company intends to disclose future amendments to, or waivers from, certain provisions of its Code of Business Conduct and Ethics on its website in accordance with applicable Nasdaq and SEC requirements. Copies of the Company’s Code of Business Conduct and Ethics are also available, free of charge, by submitting a written request to First Cash Financial Services,FirstCash, Inc., Investor Relations, 690 East Lamar Boulevard, Suite 400, Arlington,1600 West 7th Street, Fort Worth, Texas 76011.76102.
Stock Ownership Guidelines for Directors
In an effort to further align the interests of the directors with the interests of stockholders, the Company adopted a stock ownership guideline for non-employee directors which became effective beginning in 2017. The guidelines call for stock ownership (including the value of non-vested RSU’s) having a value equal to five times each director’s annual cash retainer with a five-year accumulation period to fully comply with the guideline once a director becomes subject to the guideline. As of April 13, 2020, two of the four independent directors met the new ownership guideline, while the other two continued to have until 2021 to meet the guidelines. Directors who have not met the guideline must retain their vested stock awards until they meet the guideline. While the guidelines do not apply to employee directors, the current stock ownership of the two employee directors would meet the guidelines if calculated at five times their annual salary as an employee of the Company.
Director Election (Majority Voting) Policy
The Company has adopted a Director Election (Majority Voting) Policy. Pursuant to this policy, in an uncontested election of directors (that is, an election where the number of nominees is equal to the number of seats open) any nominee for director who receives a greater number of “WITHHOLD” votes than “FOR” votes for his election must promptly submit an offer of resignation to the Nominating and Corporate Governance Committee following the certification of the stockholder vote for consideration in accordance with the following procedures.
The Nominating and Corporate Governance Committee will consider any tendered resignation and, promptly following the date of the stockholders’ meeting at which the election occurred, will make a recommendation to the Board of Directors concerning the acceptance or rejection of such resignation. In determining its recommendation to the Board of Directors, the Nominating and Corporate Governance Committee will consider all factors deemed relevant by the members of the Nominating and Corporate Governance Committee including, without limitation, the stated reason or reasons why stockholders who cast “withhold” votes for the director did so, the qualifications of the director (including, for example, the impact the director’s resignation would have on the Company’s compliance with the requirements of the SEC and the rules of the NASDAQ)Nasdaq), and whether the director’s resignation from the Board of Directors would be in the best interests of the Company and its stockholders.
The Nominating and Corporate Governance Committee also will consider a range of possible alternatives concerning the director’s tendered resignation as members of the committee deem appropriate, including, without limitation, acceptance of the resignation, rejection of the resignation, or rejection of the resignation coupled with a commitment to seek to address and cure the underlying reasons reasonably believed by the Nominating and Corporate Governance Committee to have substantially resulted in the “withheld” votes.
The Board of Directors will publicly disclose its decision regarding whether to accept or reject such resignation within 90 days following certification of the stockholder vote and shall disclose the reasons therefore. The Director Election (Majority Voting) Policy is publicly available and can be accessed on the Investor Relations page of the Company’s website at investors.firstcash.com
Director Independence
The Board of Directors has determined that, with the exception of Mr.Messrs. Wessel CEO and president of the Company,Feehan, all of its directors, including all of the members of the Audit, Compensation, and Nominating and Corporate Governance Committees, are “independent” as defined by NASDAQ andNasdaq, the SEC and for purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”).Company’s Corporate Governance Guidelines. No director is deemed independent unless the Board of Directors affirmatively determines that the director has no material relationship which would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.Company. In making its determination, the Board of Directors observes all criteria for independence established by the rules of the SEC and NASDAQ.Nasdaq.
Oversight of Risk Management
The Board of Directors is responsible for overseeing and monitoring the material risks facing the Company. In its oversight role, the Board of Directors regularly reviews the Company’s strategic initiatives, which address, among other things, the risks and opportunities facing the Company. The Board of Directors also has overall responsibility for executive officer succession planning and reviews succession plans from time to time. The Board of Directors has delegated certain risk management oversight responsibility to its committees. As part of its responsibilities set forth in its charter, the Audit Committee is responsible for discussing with management the Company’s major financial risk exposures, including financial risks and cybersecurity, and the steps management has taken to monitor and control those exposures, including the Company’s risk assessment and risk management policies.
The Compensation Committee reviews the risks and rewards associated with the Company’s compensation programs. TheWith the assistance of an independent compensation consulting firm, the Compensation Committee designs compensation programs with features that mitigate risk without diminishing the incentive nature of the compensation. While these performance-based compensation and equity programs have been designed and administered in a manner that discourages undue risk-taking by employees, the Compensation Committee believes these programs create appropriate incentives to increase long-term stockholder value. The Compensation Committee has discussed the concept of risk as it relates to the compensation programs and the Compensation Committee does not believe the compensation programs encourage excessive or inappropriate risk taking for the following reasons:
The Company structures its pay to consist of both fixed and variable compensation. The fixed portion of compensation (salary) is designed to provide a steady income independent of the Company’s stock price performance so that executives do not feel pressured to focus exclusively on short-term stock price performance to the long-term detriment of other important business decisions and metrics and are not encouraged to take unnecessary or excessive risks to achieve corporate objectives. The variable portions of compensation (incentive-based cash awards and equity awards) are designed to reward both short- and long-term corporate performance. For short-term performance, the Company utilizes annual incentive-based cash awards that are based primarily on achieving a combination of earnings per share, EBITDAmetrics and annual store addition targetsstrategic directives. The metrics and directives are set annually by the Compensation Committee and approved by the Board of Directors. The Company defines EBITDA from continuing operations as net income (loss) before income (loss) from discontinued operations net of tax, income taxes, depreciation and amortization, interest expense and interest income. For long-term performance, the Company grants restricted stock awards with annual,a multi-year vesting periodsperiod tied to the achievement of long-term earnings, revenue and store growth targets. The growth targets are set against a base measure at the grant date and are cumulative targets, rather than stand-alone year over year growth targets, making them truly long-term in nature. The Company believes that these variable elements of compensation are a sufficient percentage of overall compensation to motivate executives to produce both superior short- and long-term corporate results.
Because earnings targets, such as adjusted EBITDA, from continuing operationsadjusted net income and adjusted diluted earnings per share, are the primary performance measureselements used for determining incentive payments, the Company believes its executives are encouraged to take a balanced approach that focuses on corporate profitability, rather than other measures which may incite management to drive sales or growth targets without regard to cost structure.or profitability.
The Company typically caps cash payments for mostthe goals under its annual incentive plan and caps the number of restricted stock units granted under its long-term incentive plan, which the Company believes also mitigates excessive risk taking. Even if the Company dramatically exceeds its targets, bonusannual incentive payouts and stock grants are generally limited by such caps. Conversely, the Company has a floor on earnings and growth targets so that performance below a certain level (as approved by the Compensation Committee) does not permit bonus payouts.result in annual incentive payouts or vesting of stock grants.
The Company’s incentive compensation programs have been structured primarily around the attainment of earnings and growth targets for many years and the Company has seen no evidence that itthis encourages unnecessary or excessive risk taking.
The Company believes thatthe use of distinct long-term incentive plans, primarily restricted stock unit awards, with performance-based vesting over a number ofthree years, provides a strong incentive for sustained operational and financial performance and aligns the interests of our namedthe Company’s executive officers with those of ourits stockholders.
The Compensation Committee has discretion to adjust payouts under both the annual and long-term performance plans to reflect the core operating performance of the business, but prohibits discretion for payouts above stated maximum awards.
Board Leadership Structure
Mr. Feehan serves as chairman of the Board of Directors, while Mr. Wessel serves in the role of CEO and is also the vice-chairman of the Board of Directors. In addition, Mr. Faulkner serves as the lead independent director, serving as a liaison between the independent directors and management, chairing executive sessions of the non-management and independent directors and consulting with the chairman and CEO on board agendas and meeting materials.
The Board of Directors recognizes that the leadership structure and combination or separation of the CEOchairman, lead independent director and chairmanCEO roles is driven by the needs of the Company at any point in time. The Board of Directors does not believe there should be a fixed rule as to whether the offices of chairman and CEO should be vested in the same person or two different people, or whether the chairman should be an employee of the Company or should be elected from among the non-employee directors. The needs of the Company and
the individuals available to fulfill these roles may dictate different outcomes at different times, and the Board of Directors believes that retaining flexibility in these decisions is in the best interest of the Company and its stockholders.
The Board of Directors has determined that the Company and its stockholders are currently best served by having one person serve as both chairman and CEO, as it allows for a bridge between the Board of Directors and management and provides critical leadership for carrying out the Company’s strategic initiatives and confronting its challenges. Mr. Wessel’s service as chairman facilitates the Board of Directors’ decision-making process because Mr. Wessel has first-hand knowledge of the Company’s operations and the major issues facing the Company, and he chairs the Board meetings where the Board of Directors discusses strategic and business issues. Mr. Wessel is the only member of executive management who is also a director. The Board of Directors does not have a lead independent director.
Director Qualifications
In discharging its responsibilities to nominateAt a minimum, candidates for election or appointment to the Board of Directors must have integrity, be committed to act in the Nominatingbest interest of all the Company’s stockholders and Corporate Governance Committee has not specified any minimum qualifications for serving onbe able and willing to devote the Boardrequired amount of Directors. However,time to the Nominating and Corporate Governance Committee endeavors to evaluate, propose and approve candidates,Company’s affairs, including those recommended by stockholders, with business experience and personal skills in finance, marketing, financial reporting and other areas that may be expected to contribute to an effectiveattendance at meetings of the Board of Directors. The Nominating and Corporate Governance Committee seeks to assure that the Board of Directors is composed of individuals who have experience relevant to the needs of the Company and who have the highest professional and personal ethics, consistent with the Company’s values and standards. Candidates should be committed to enhancing stockholder value and should
have sufficient time to carry out their duties and to provide insight and practical wisdom based on experience. Each director must represent the interests of all stockholders.
In recommending candidates, the Nominating and Corporate Governance Committee takes into consideration any criteria approved by the Board of Directors and such other factors as it deems appropriate, including:
The extent of the director’s/potential director’s educational, business, non-profit or professional acumen and experience;
Whether the director/potential director assists in achieving a mix of board members that represents a diversity of background, perspective and experience, including with respect to age, gender, race, place of residence and specialized experience;
Whether the director/potential director meets the independence requirements established by Nasdaq, the SEC and the Company’s Corporate Governance Guidelines;
Whether the director/potential director has the financial acumen or other professional, educational or business experience relevant to an understanding of the Company’s business;
Whether the director/potential director would be considered a “financial expert” or “financially sophisticated” as defined by Nasdaq or applicable law;
Whether the director/potential director, by virtue of particular technical expertise, experience or specialized skill relevant to the Company’s current or future business, will add specific value as a board member; and
Whether the director/potential director possesses a willingness to challenge and stimulate management and the ability to work as part of a team in an environment of trust.
The Nominating and Corporate Governance Committee does not assign specific weights to particular criteria and no particular criterion is necessarily applicable to all prospective nominees. In addition to the criteria set forth above, the Nominating and Corporate Governance Committee considers how the skills and attributes of each individual candidate or incumbent director work together to create a board that is collegial, engaged and effective in performing its duties.
The Company’s Board of Directors is currently composed of well qualified directors, and each director has the requisite experience, skills and characteristics to serve on the board. Among, or in addition to, the backgrounds and experiences described in “Proposal 1 - Election of Directors” of this Proxy Statement:
Mr. Feehan, the Company’s chairman, brings over 35 years of experience as a director, chief executive officer and chief financial officer with Cash America and a deep understanding of the pawn industry and the legacy Cash America business.
Mr. Wessel, the Company’s vice-chairman and chief executive officer, brings over 25 years of management and executive experience in the pawn industry gained from his roles as chief financial officer, chief executive officer and director of the Company. His deep understanding of the Company’s business and his success in expanding its business has been invaluable to the Board of Directors.
Mr. Berce brings broad senior executive leadership with significant experience in the consumer finance industry, and functional expertise in corporate finance and accounting, together with service on other public company boards of directors, including Cash America.
Mr. Faulkner brings broad senior executive leadership and financial experience, including with domestic and multi-national public and private companies in various industries. Mr. Faulkner’s qualifications include direct executive experience in Latin America, our primary growth market.
Mr. Graves brings significant experience in corporate strategy and finance gained from his experience as the managing partner of a management consulting firm and a financial strategy executive, together with meaningful service on the boards of other public companies, including Cash America.
Mr. Owen brings broad senior executive leadership and financial experience with private and public companies, and functional expertise in corporate finance and accounting.
Although there is no specific policy on considering diversity, the Board of Directors and the Nominating and Corporate Governance Committee take various diversity-related considerations into account in the selection criteria for new directors. The Nominating and Corporate Governance Committee seeks members from diverse professional and personal backgrounds to combine a broad spectrum of experience and expertise with a reputation for integrity. Some additional considerations may include national origin,The Board considers gender, race, functional backgroundnationality, language skills and other personal characteristics in this process and the diversity of perspectives thatextent to which the candidate would bring toprospective nominee helps the Board of Directors.Directors reflect the gender, racial, ethnic and global diversity of the Company’s stockholders, employees and customers. In this regard, the Board and the Nominating and Corporate Governance Committee are committed to including highly qualified women and individuals from minority groups in the pool of new candidates for membership.
Identifying and Evaluating Nominees for Directors
The Nominating and Corporate Governance Committee will utilize a variety of methods for identifying and evaluating nominees for director. Candidates may come to the attention of the Nominating and Corporate Governance Committee through current members of the Board of Directors, professional search firms, stockholders or other persons. These candidates will be evaluated at regular or special meetings of the Nominating and Corporate Governance Committee, and may be considered at any point during the year. The Nominating and Corporate Governance Committee will also consider properly submitted stockholder nominations for candidates for the Board of Directors. The procedures to be followed by stockholders in submitting such nominations are set forth in the “Stockholder Proposals” section. Following verification of the stockholder status of persons proposing candidates, recommendations will be aggregated and considered by the Nominating and Corporate Governance Committee. If any materials are provided by a stockholder in connection with the nomination of a director candidate, such materials will be forwarded to the Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee may also review materials provided by professional search firms or other parties in connection with a nominee who is not proposed by a stockholder.
Procedure for StockholderStockholders and Interested Parties Communications with Directors
The Board of Directors has established a procedure for stockholders and other interested parties to send communications to the Board of Directors. Stockholders and other interested parties may communicate with the Board of Directors generally or with a specific director or the independent directors at any time by writing to the Company’s Corporate Secretarycorporate secretary at the Company’s address, 690 East Lamar Boulevard, Suite 400, Arlington,1600 West 7th Street, Fort Worth, Texas 76011.76102. The Secretarycorporate secretary will review all messages received and will forward any message that reasonably appears to be a communication from a stockholder about a matterthat deals with the functions of stockholder interest that is intended for communication to the Board of Directors.Directors or the standing committees of the Board of Directors, or that otherwise requires the attention of the Board of Directors and the Nominating and Corporate Governance Committee. Communications will be sent as soon as practicable to the director, or group of directors, including the independent directors, to whom they are addressed, or if addressed to the Board of Directors generally, to the chairman of the Nominating and Corporate Governance Committee. Because other appropriate avenues of communication exist for matters that are notunrelated to the duties and responsibilities of stockholder interest,the Board of Directors, such as general business complaints or employee grievances, communications that do not relate toof such matters of stockholder interest will not be forwarded to the Board of Directors. The Corporate Secretarycorporate secretary has the option, but not the obligation, to forward these other communications to appropriate channels within the Company.
Corporate Governance Guidelines
The Company’s Corporate Governance Guidelines, originally adopted in 2016 and most recently revised in April 2020, meet or exceed the listing standards adopted by Nasdaq and are posted on the Investor Relations page of the Company’s website, investors.firstcash.com, and are also available in print upon request to the Company’s corporate secretary.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Beneficial Ownership of Management and Directors
The following table setstables set forth, as of April 11, 201613, 2020, the number and percentage of outstanding shares of Common Stock owned by: (a) each person who is known by the Company to be the beneficial owner of more than 5% of the outstanding shares of Common Stock; (b)(i) each of the Company’s directors or director nominees; (c)(ii) the named executive officers as defined in Item 402 of Regulation S-K; and (d)(iii) all directors and executive officers, as a group. As of April 11, 2016, there were 28,243,229 shares of Common Stock issued and outstanding.
Beneficial ownership has been determined in accordance with Rule 13d-3 under the Exchange Act. Under this rule, certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire shares (for example, upon exercise of an option or warrant) within 60 days of the date as of which the information is provided. In computing the percentage ownership of any person, the amount of shares is deemed to include the amount of shares beneficially owned by such person by reason of such acquisition rights. As a result, the percentage of outstanding shares of any person as shown in the following table does not necessarily reflect the person’s actual voting power at any particular date.
To the best of the Company’s knowledge, except as indicated in the footnotes to this table and pursuant to applicable community property laws, the persons named in the table have sole voting and investment power with respect to all shares of Common Stock shown as beneficially owned by them.
|
| | | | | | | |
| | | | Shares Beneficially Owned |
| Name | | Number | | Percent |
| Genesis Asset Managers, LLP | (1) | | 2,708,766 |
| | 9.59 | % |
| BlackRock Inc. | (2) | | 2,663,443 |
| | 9.43 |
|
| The Vanguard Group | (3) | | 2,027,879 |
| | 7.18 |
|
| William Blair Investment Management, LLC | (4) | | 1,511,369 |
| | 5.35 |
|
| Vaughn Nelson Investment Management, L.P. | (5) | | 1,476,983 |
| | 5.23 |
|
| GIC Private Limited | (6) | | 1,443,605 |
| | 5.08 |
|
| | | | | | |
| Officers and Directors: | | | | | |
| Rick L. Wessel | | | 884,700 |
| | 3.13 |
|
| R. Douglas Orr | | | 171,000 |
| | 0.61 |
|
| Raul R. Ramos | | | 4,731 |
| | * |
|
| Sean D. Moore | | | 2,430 |
| | * |
|
| Peter H. Watson | | | 650 |
| | * |
|
| Mikel D. Faulkner | | | — |
| | — |
|
| Gabriel Guerra Castellanos | | | — |
| | — |
|
| Randel G. Owen | | | — |
| | — |
|
| | | | | | |
| Executive officers and directors as a group | | | | |
| (8 persons, including the nominee for director) | 1,063,511 |
| | 3.77 | % |
|
| | | | | | | | | | | | |
| Beneficial Owner | | Number of Shares Common Stock | | Number of Shares Underlying Exercisable Options or RSUs Vesting Within 60 Days | | Total Number of Shares Beneficially Owned | | Percent (1) |
| Directors: | | | | | | | | |
| Daniel E. Berce | | 17,072 |
| | 560 |
| (3) | 17,632 |
| | * |
|
| Mikel D. Faulkner | | 6,277 |
| | 560 |
| (3) | 6,837 |
| | * |
|
| Daniel R. Feehan | | 100,816 |
| (2) | — |
| | 100,816 |
| | * |
|
| James H. Graves | | 21,272 |
| | 560 |
| (3) | 21,832 |
| | * |
|
| Randel G. Owen | | 4,577 |
| | 560 |
| (3) | 5,137 |
| | * |
|
| | | | | | | | | |
| Executive officers: | | | | | | | | |
| Rick L. Wessel (also a Director) | | 815,800 |
| | — |
| | 815,800 |
| | 1.97 | % |
| T. Brent Stuart | | 23,692 |
| | — |
| | 23,692 |
| | * |
|
| R. Douglas Orr | | 143,301 |
| (4) | — |
| | 143,301 |
| | * |
|
| Raul R. Ramos | | 5,838 |
| | 20,000 |
| | 25,838 |
| | * |
|
| Anna M. Alvarado | | 3,819 |
| | — |
| | 3,819 |
| | * |
|
| | | | | | | | | |
| Executive officers and directors as a group | | | | | | | | |
| (10 persons, including the nominees for director) | | 1,142,464 |
| | 22,240 |
| | 1,164,704 |
| | 2.81 | % |
* Ownership percentage is less than 0.5%
| |
(1) | According to current publicly available shareholder reporting services obtainedBased on 41,440,498 shares of Common Stock issued and outstanding as of April 18, 2016, Genesis Asset Managers, LLP beneficially owns 2,708,766 shares. Genesis Asset Managers, LLP’s address is Heritage Hall, Le Marchant Street, St. Peter Port, Guernsey, Channel Islands, X0, GY1 4HY, UK13, 2020. |
| |
(2) | According to Schedule 13G filed withIncludes 47,567 shares held in an irrevocable trust of which Mr. Feehan’s wife is the SEC on January 26, 2016, BlackRock Inc. beneficially owns 2,663,443 shares. BlackRock Inc.’s address is 55 East 52nd Street, New York, NY 10055.sole trustee. |
| |
(3) | AccordingReflects a pro rata portion of unvested restricted stock units that would become vested and convert to shares of Common Stock upon termination of service as a director by reason of retirement. |
| |
(4) | Includes 12,500 shares held by a family limited partnership. Mr. Orr is a general partner of the partnership that owns the reported securities. |
| |
| * | Ownership percentage is less than 0.5% |
Beneficial Owners Who Hold More than 5% of the Company’s Common Stock
The table below shows information for persons known by the Company to beneficially own more than 5% of the Company’s Common Stock based on their filings with the SEC through April 13, 2020:
|
| | | | | | | | |
| | | | Shares Beneficially Owned |
| Name and Address of Beneficial Owner | | Number | | Percent (1) |
| BlackRock, Inc. | | 5,725,323 |
| (2) | | 13.82 | % |
| | 55 East 52nd Street New York, NY 10055 | | | | | |
| The Vanguard Group | | 3,874,821 |
| (3) | | 9.35 | % |
| | 100 Vanguard Boulevard Malvern, PA 19355 | | | | | |
| FMR LLC | | 3,181,957 |
| (4) | | 7.68 | % |
| | 245 Summer Street Boston, MA 02210 | | | | | |
| |
(1) | Based on 41,440,498 shares of Common Stock issued and outstanding as of April 13, 2020. |
| |
(2) | This information is based on a Schedule 13G13G/A filed with the SEC on February 10, 2016, The Vanguard Group4, 2020. BlackRock, Inc. reports that it has sole voting power over 5,595,693 shares of Common Stock and sole dispositive power over 5,725,323 shares of Common Stock beneficially owns 2,027,879 shares. The Vanguard Group’s address is 100 Vanguard Blvd., Malvern, PA 19355.owned. |
| |
(4)(3) | According toThis information is based on a Schedule 13G13G/A filed with the SEC on February 9, 2016,12, 2020. The William Blair Investment Management, LLCVanguard Group reports that it has sole dispositive power of 3,782,606 shares of Common Stock, shared dispositive power over 92,215 shares of Common Stock, sole voting power over 88,546 shares of Common Stock and shared voting power over 9,161 shares of Common Stock beneficially owns 1,511,369 shares. The William Blair Investment Management, LLC’s address is 238 W. Adams Street, Chicago, IL 60606.owned. |
| |
(5)(4) | According toThis information is based on a Schedule 13G13G/A filed with the SEC on February 11, 2016, The Vaughan Nelson Investment Management, L.P.7, 2020. FMR LLC reports that it has sole voting power over 552,085 shares of Common Stock and sole dispositive power over 3,181,957 shares of Common Stock beneficially owns 1,476,983 shares. The Vaughan Nelson Investment Management, L.P.’s address is 600 Travis Street, Suite 6300, Houston, TX 77002. |
| |
(6) | According to Schedule 13G filed with the SEC on March 7, 2016, GIC Private Limited beneficially owns 1,433,605 shares. GIC Private Limited’s address is 168, Robinson Road, #37-01, Capital Tower, Singapore 068912.owned. |
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely on the reports furnished pursuant to Section 16a-3(e) of the Exchange Act and representations made to the Company, all reports as required under Section 16(a) of the Exchange Act were filed on a timely basis during the year ending December 31, 2015.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 2015,2019, Messrs. Berce, Faulkner, OwenGraves and GuerraOwen served as members of the Compensation Committee, were not and have never been employed by the Company, and did not have any interlocking relationship with another entity requiring disclosure pursuant to SEC rules.
CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS
During the fiscal year ended December 31, 2015, the Company had an informalThe Company’s Board of Directors has adopted a policy for the review of transactions in which the Company was a participant, and in which any related party of the Company’s directorsCompany (such as an executive officer, director, nominee for election as a director or executive officers,greater than 5% beneficial owner of Company stock, or their immediate family members,members), had a direct or indirect material interest. While the Company does not have a written policy, pursuantPursuant to the Audit Committee Charter, the Audit Committee reviews proposed related party transactions and makes recommendations to the Board of Directors regarding approval or rejection of related party transactions. The Board of Directors reviews the recommendation of the Audit Committee and then approves all related party transactions prior to the Company entering into the transaction. Any such related party transaction is evaluated to determine whether such transaction is for the benefit of the Company and upon terms no less favorable to the Company than if the related party transaction was with an unrelated party. The Company had no transactions, nor are there any currently proposed transactions, in which the Company was or is to be a participant where any director,related party of the Company (such as an executive officer, director, nominee for election as a director or anygreater than 5% beneficial owner of Company stock, or their immediate family membersmembers) had a material direct or indirect interest reportable under applicable SEC rules or that required approval of the Board of Directors under the Company’s informal related party transaction policy.
AUDIT COMMITTEE REPORT
The Audit Committee operates under a written charter adopted by the Board of Directors. All members of the Audit Committee meet the independence standards and other criteria established by NASDAQ.Nasdaq.
The Audit Committee assists the Board of Directors in fulfilling its responsibility to oversee management’s implementation of the Company’s financial reporting process. Management is responsible for the audited financial statements of the Company and for maintaining effective internal control over financial reporting. In discharging its oversight role, the Audit Committee reviewed and discussed with management and Hein & AssociatesRSM US LLP (“RSM”), the Company’s independent registered public accounting firm, the audited financial statements of the Company as of and for the year ended December 31, 20152019. The independent registered public accounting firm is responsible for expressing an opinion on the conformity of those financial statements with accounting principles generally accepted in the United States of America. The Audit Committee has also reviewed management’s report on its assessment of the effectiveness of the Company’s internal control over financial reporting as well as the independent auditor’s report on the effectiveness of the Company’s internal control over financial reporting. Management’s Report on Internal Control over Financial Reporting is included in the Company’s Annual Report on Form 10-K for the year ended December 31, 20152019.
The Audit Committee met privately with Hein & Associates LLP,RSM, and discussed issues deemed significant by the auditor, including those required to be discussed under the applicable requirements of the Public Company Accounting Oversight Board.Board and the SEC. In addition, the Audit Committee received from Hein & Associates LLPRSM the written disclosures and the letter required by the applicable requirements of the Public Company Accounting Oversight Board regarding Hein and Associates, LLP’sRSM’s communications with the Audit Committee concerning independence, and the Audit Committee has discussed with Hein & Associates LLPRSM its independence from the Company and its management. The Audit Committee also considered whether the provision of non-audit services, if any, by Hein & Associates LLPRSM was compatible with maintaining its independence.
Based upon the foregoing review and discussions, the Audit Committee recommended to the Board of Directors that the audited financial statements and Management’s Report on Internal Control over Financial Reporting referred to above be filed with the Company’s Annual Report on Form 10-K for the year ended December 31, 20152019.
By the Audit Committee:
Daniel E. Berce
Mikel D. Faulkner
James H. Graves
Randel G. Owen
Gabriel Guerra Castellanos
The Audit Committee report above does not constitute “soliciting material” and will not be deemed “filed” or incorporated by reference into any of the Company’s filings under the Securities Act or the Exchange Act except to the extent that the Company specifically incorporates it by reference therein.
ITEMPROPOSAL 2
RATIFY THE SELECTIONRATIFICATION OF HEIN & ASSOCIATES LLP AS THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM OF THE COMPANY FOR THE YEAR ENDING DECEMBER 31, 2016
The Audit Committee selected Hein & AssociatesRSM US LLP (“Hein & Associates”RSM”) as independent accountants to audit the books, records and accounts of the Company for the year ending December 31, 2016.2020. The Board of Directors has endorsed this appointment.
Hein & AssociatesRSM was first engaged in March 2004August 2016 as the Company’s principal accountant. The firm has served as the independent accountant to the Company and has audited the Company’s consolidated financial statements for the 12four most recent years ended December 31, 2015.2019.
Principal Accountant Fees and Services
Aggregate fees for professional services rendered for the Company by Hein & Associates for the years ended December 31, 20152019 and 2014December 31, 2018, respectively, were as follows:
| | | | 2015 | | 2014 | 2019 | | 2018 |
| Services Provided: | | | | | | |
| Audit | $ | 292,192 |
| | $ | 283,630 |
| $ | 781,666 |
| | $ | 765,181 |
|
| Audit related | — |
| | 76,640 |
| — |
| | — |
|
| Tax | — |
| | — |
| — |
| | — |
|
| All other | — |
| | — |
| — |
| | — |
|
| Total | $ | 292,192 |
| | $ | 360,270 |
| $ | 781,666 |
| | $ | 765,181 |
|
The audit fees for the years ended December 31, 20152019 and 20142018 were for the audits of the consolidated financial statements of the Company, internal control auditing and reporting as required by Section 404 of the Sarbanes Oxley Act of 2002, issuance of consents, and review of the Company’s SEC filings. The audit related fees for fiscal 2014 relate primarily to the Company’s March 2014 senior notes offering and subsequent SEC registration of the senior notes.
Audit Committee Pre-Approval Policies and Procedures
The 20152019 and 20142018 audit and audit related services provided by Hein & AssociatesRSM were approved in advance by the Audit Committee.
The Audit Committee implemented pre-approval policies and procedures related to the provision of audit and non-audit services. Under these procedures, the Audit Committee pre-approves both the type of services to be provided by the Company’s independent accountants and the estimated fees related to these services. During the approval process, the Audit Committee considers the impact of the types of services and the related fees on the independence of the auditor. The services and fees must be deemed compatible with the maintenance of the auditor’s independence, including compliance with SEC rules and regulations.
Throughout the year, the Audit Committee reviews any revisions to the estimates of audit and non-audit fees initially approved.
Ratification of the Independent Registered Public Accounting Firm
Stockholder ratification of the selection of Hein & AssociatesRSM as the independent registered public accounting firm is not required by the Company’s bylaws or otherwise. However, the Board of Directors is submitting the selection of Hein & AssociatesRSM to the stockholders for ratification. In the event the stockholders do not ratify the appointment of Hein & AssociatesRSM as the independent registered public accounting firm for the year ending December 31, 20162020, the adverse vote will be considered as a direction to the Audit Committee and the Board of Directors to select other auditors for the following year. However, because of the difficulty in making any substitution of auditors so long after the beginning of the fiscal year, it is contemplated that the appointment for the year ending December 31, 20162020 will be permitted to stand unless the Audit Committee and the Board of Directors finds other good reason for making a change.
Representatives of Hein & AssociatesRSM are expected to be present at the meeting, with the opportunity to make a statement if desired to do so. Such representatives are also expected to be available to respond to appropriate questions.
Required Vote
The affirmative vote of the holders of a majority of the outstanding shares of Common Stock present or represented by proxy at the Annual Meeting and entitled to vote at the Annual Meeting is required to ratify the Audit Committee’s selection of Hein & Associates.RSM.
Recommendation of the Board of Directors
The Board of Directors unanimously recommends a vote “FOR” the ratification of the appointment of Hein & AssociatesRSM as the Company’s independent registered public accountants for the fiscal year ending December 31, 20162020. Unless marked to the contrary, proxies received from stockholders will be voted in favor of ratifying the appointment of Hein & AssociatesRSM as the Company’s independent registered public accountants for the fiscal year ending December 31, 20162020.
EQUITY COMPENSATION PLAN INFORMATION
The following table gives information about the Company’s Common Stock that may be issued under stockholder-approved plans as of December 31, 20152019.
| | | | | | | | | Number of securities | | | | | | Number of securities |
| | | | | | | remaining available for | | | | | | remaining available for |
| | Number of securities to be | | | | future issuance under equity | Number of securities to be | | | | future issuance under equity |
| | issued upon exercise of | | Weighted average exercise | | compensation plans | issued upon exercise of | | Weighted-average exercise | | compensation plans |
| | outstanding options, | | price of outstanding | | (excluding securities | outstanding options, | | price of outstanding | | (excluding securities |
| | warrants and rights | | options, warrants and rights | | reflected in column A) | warrants and rights | | options, warrants and rights | | reflected in column A) |
| | (A) | | (B) | | (C) | (A) | | (B) | | (C) |
| Plan Category: | | | | | | | | | | | | | | |
| Equity compensation plans approved by security holders | | 182,000 |
| | $ | 37.34 |
| | 1,088,000 |
| (1) | | 427,000 |
| (1) | | $ | 38.86 |
| (2) | | 3,500,000 |
| (3) |
| | | | | | | | | | | | | | | |
| Equity compensation plans not approved by security holders | | — |
| | — |
| | — |
| | | — |
| | — |
| | — |
| |
| Total | | 182,000 |
| | $ | 37.34 |
| | 1,088,000 |
| | | 427,000 |
| | $ | 38.86 |
| | 3,500,000 |
| |
| |
(1) | Amount reflects the maximum number of shares issuable pursuant to the exercise or conversion of stock options and restricted stock units (assuming the performance goals with respect to performance-based restricted stock units are achieved at maximum levels). |
| |
(2) | Includes the weighted-average exercise price of outstanding options only as outstanding restricted stock unit awards do not have an exercise price. |
| |
(3) | Reflects shares thatavailable for issuance pursuant to the Company’s 2019 Long-Term Incentive Plan, all of which may be issued pursuant to the grant or exercisegrants of full-value stock options and full-value awards. |
EXECUTIVE OFFICERS
The following table lists the named executive officers of the Company as of the date hereof and the capacities in which they serve.
|
| | | | |
| Name | | Age | | Position |
| Rick L. Wessel | | 5761 | | Vice-Chairman of the Board and Chief Executive Officer (“CEO”) |
| T. Brent Stuart | | 50 | | President and PresidentChief Operating Officer (“COO”) |
| R. Douglas Orr | | 5559 | | Executive Vice President, Chief Financial Officer, Secretary and Treasurer (“CFO”) |
| Raul R. Ramos | | 5054 | | Senior Vice President, Latin American Operations |
Sean D. MooreAnna M. Alvarado | | 3941 | | Senior Vice President, Store Development and Facilities |
Peter H. Watson | | 67 | | Senior Vice President, Compliance and Government RelationsGeneral Counsel |
Rick L. Wessel, joined the Company in 1992 and has served as CEOchief executive officer since November 2006 as president since May 1998 and has been a director since November 1992 and the chairmanvice-chairman of the board of directors since October 2010.September 2016. He previously served as vicepresident from May 1998 to September 2016, chairman of the board from October 2010 to September 2016, vice-chairman of the board from November 2004 to October 2010 and secretary and treasurer of the Company from May 1992 to November 2006 and the Company’s CFOchief financial officer from May 1992 to December 2002. Prior to February 1992, Mr. Wessel was employed by Price Waterhouse LLP for approximately nine years.
T. Brent Stuart joined the Company in September 2016 in conjunction with the Merger as the president and chief operating officer. Prior to that, Mr. Stuart served as Cash America’s president and chief executive officer since November 2015, Cash America’s president and chief operating officer from May 2015 through October 2015 and served as Cash America’s executive vice president-chief operating officer from January 2015 through April 2015. Prior to that, Mr. Stuart served as the senior vice president-operations for Cash America’s U.S. retail services storefront lending business from July 2010 to January 2015 and as a regional vice president from November 2008 to July 2010. Prior to joining Cash America, Mr. Stuart held various senior leadership roles in the financial services industry, including the position of vice president with Fremont Investment and Loan from 2006 to 2008, senior vice president with Nationstar Mortgage from 2004 to 2006 and vice president with Novastar Financial, Inc. from 2002 to 2004. He also held various leadership positions with CitiFinancial from 1994 to 2002. Mr. Stuart started his career in financial services with Norwest Finance in May 1992.
R. Douglas Orr joined the Company in July 2002 as the vice president of finance. Since January 2003, Mr. Orr has served as CFO,the chief financial officer, and since January 2005, Mr. Orr has also served as executive vice president. In addition, Mr. Orr has served as secretary and treasurer since November 2006. Prior to joining the Company, Mr. Orr spent 14 years at Ray & Berndtson, a global executive search firm, where he served in senior executive and financial management roles. Prior to his employment at Ray & Berndtson, Mr. Orr worked for four years at Price Waterhouse LLP.
Raul R. Ramos joined the Company in 1992 to be in charge of the jewelry operations center. Mr. Ramos has served in a progression of operational management roles since he joined the Company, including his current position of senior vice president, Latin American operations.operations and his positions as vice president of operations and other management roles prior to his current role. In this current role, which he has held since May 2013, Mr. Ramos directs all store operations in the Company’s Latin America and South Texas markets. Prior to his employment with the Company, he worked in the pawn and retail jewelry industries.
Sean D. MooreAnna M. Alvarado joined the Company in 2003 in the store operations division2011 as an area supervisor. Mr. MooreAssociate General Counsel and was promoted to senior vice president, store developmentGeneral Counsel in January 2015. Ms. Alvarado leads and facilities in May 2013. In this role, Mr. Moore directs all aspects of store development, facilities managementthe Company’s legal matters, including site selection, leasing, construction,government relations in both the U.S. and maintenance and other store support functions. Prior to his employment withLatin America. Before joining the Company, Mr. Moore servedshe had five years of experience as a trial and litigation attorney with two firms based in Texas. Ms. Alvarado is licensed by the State Bar of Texas and holds a doctors of jurisprudence (JD) and a M.B.A. Before a career in law, she was employed as an officer in the U.S. Marine Corps, where he achieved the rank of Captain and is a veteran of Operation Iraqi Freedom. Mr. Moore has a BBA in accounting from Baylor University.
Peter H. Watsonjoined the Company in May 2010 as general counsel and served in that capacity through December 2014. Since January 2015, Mr. Watson has served as senior vice president, compliance and government relations. Previously, he had an established private law practice in Minnesota for more than 30 years, where he specialized in advising clients on business opportunities in Latin America. During this time, he worked on a consulting basis for the Company on matters related to its operations in Mexico. Mr. Watson is a licensed attorney in Minnesota and Texas. He received a BA from Syracuse University in 1971 and a J.D. degree from the University of Missouri at Kansas City in 1976.accountant.
All officers serve at the discretion of the Board of Directors.
The current executive officers of the Company have significant tenure with the Company and pawn or related industries:
|
| | | | | | |
| | | | Years of Experience: |
| Name | | FirstCash | | Industry |
| Rick L. Wessel, CEO | | | 28 | | | 28 |
| T. Brent Stuart, COO | | | 11 | (1) | | 27 |
| R. Douglas Orr, CFO | | | 17 | | | 17 |
| Raul R. Ramos, SVP Latin American Operations | | | 27 | | | 32 |
| Anna M. Alvarado, General Counsel | | | 8 | | | 8 |
| |
(1) | Mr. Stuart joined the Company in September 2016 in conjunction with the Merger as the president and chief operating officer. Prior to that, Mr. Stuart had been employed by Cash America since 2008. |
EXECUTIVE AND DIRECTOR COMPENSATION
Compensation Discussion and Analysis
Executive Summary
The following discussion provides an overview and analysis of the Company’s compensation program and policies, the material compensation decisions it has made under those programs and policies with respect to its top executive officers in relation to the Company’s performance results and the material factors that it considered in making those decisions. This discussion focuses on the compensation awarded to, earned by, and paid to the following individuals who are referred to as the “named executive officers” throughout this Proxy Statement:
Rick L. Wessel, Chief Executive Officer and President (“CEO”)
R. Douglas Orr, EVP and Chief Financial Officer (“CFO”)
Raul R. Ramos, SVP Latin American Operations
Sean D. Moore, SVP Store Development and Facilities
Peter H. Watson, SVP Compliance and Government Relations
The goal for the FirstCash executive compensation program is to attract, motivate and retain the highest quality executives who will provide leadership for the Company’s growth and success in a dynamic and competitive market. The Company’s overriding compensation philosophy of the Company is to promote a “culture of ownership” among its executives by aligning their interests with those of its stockholders. The specific objectives of the Company’s compensation program’s specific objectivesprograms include:
Linking pay to individual and Company performance with executive compensation, while not encouraging excessive risk-taking;
Balancing short- and long-term Company performance with a weighting towards long-term performance; and
Aligning executives’ interests with those of stockholders through long-term ownership of Company stock.
The long-term strategy and business plans of FirstCash are focused on growing revenues and income by opening new (“de novo”) retail pawn locations, acquiring existing pawn stores in strategic markets and increasing revenue and operating profits in existing stores. The Company believes that successfully executing on these strategies will drive long-term growth in stockholder returns.
The Compensation Committee and the Board of Directors continually reviewsreview and improvesimprove its pay practices and related disclosuresfor its executive officers (who are referred to in this Proxy Statement as the “named executive officers,” or “NEOs”) to ensure that it drivesthey reward and drive superior performance and is alignedalign with stockholders’ interests. Based on a review of feedback obtained from management’s stockholder outreach efforts, as further described in the “Results of 2015 Stockholder Say on Pay Vote” section below, the Compensation Committee made several changes to the Company’s compensation programs and practices to better align them with stockholder interests, including the adoption of stock ownership guidelines for executive officers and a compensation clawback policy, the elimination of automatic single-trigger acceleration for equity awards and increased transparency in the proxy reporting of performance goals for annual incentive awards, all of which are described in greater detail below.
Performance Measurement
In assessing its performance for internal and external reporting purposes, the Company looks atreviews certain key performance measures which include:include, but are not limited to:
Total revenue, segment revenue and revenue from pawn operations;
Net income and adjusted net income;
Diluted earnings per share and adjusted diluted earnings per share from continuing operations;share;
Adjusted EBITDA (Earnings(Adjusted earnings before net interest expense, tax expense, depreciation expense and amortization expense);
Revenue growth; and adjusted EBITDA margin;
Store count additions from de-novoboth store openings and acquisitions; and
Total shareholder returnstockholder returns.
The Company’s long-term strategy and business plans are focused on growing revenues and operating profits by opening new retail pawn locations, acquiring existing pawn stores in strategic markets and increasing operating profits in its existing stores.
Over 50% of the Company’s revenues and 73% of its stores are in Latin America, and the Company expects that a significant portion of its future growth will be derived from operations in Latin America. With a majority of its revenues coming from outside the U.S. and conducted in foreign currencies, the Company’s financial performance may be significantly impacted by the changesChanges in the exchange rates between local currencies and the reporting currency, the U.S. dollar, which are outside of the Company’s control. Other macro factors which may impact operating results include changes in commodity prices, especially precious metals, as jewelry comprises a significant portion of pawn collateral and inventories.Compensation Program for 2019
As a result of the continued efforts to improve its pay practices, the Company continues to focusmade certain changes in its compensation programs and practices beginning in 2019. Based on core pawn operations, its strategy also includes reducingrecommendations by Pay Governance and the percentage of revenues from non-core unsecured consumer lending products such as payday loans. Related toCompensation Committee, the strategic reductionsfollowing changes were approved and implemented for the executive compensation plans in payday lending activities, the Company has reduced non-core revenues, including closing payday lending stores, that caused the Company to incur certain non-recurring and primarily non-cash charges related to these store closings and divestitures.2019:
Operating Results
Revenue Growth:
The following revenue highlightsIn an effort to further align the pay mix with the market, the Committee increased the performance-based restricted stock unit component of pay for the Company’s performance are on a constant currency basis, which excludes the effects of foreign currency translationCEO, COO and are calculated by translating current year results at prior year average exchange rates. Constant currency results may be considered a non-GAAP measurement of financial performance. See Appendix A for further details.
Core pawn revenue, which is composed of retail merchandise sales and pawn service fees, increased 14% for fiscal 2015 compared to the prior-year. Total revenue for fiscal 2015 increased 8%, despite a 29% decline in total non-core revenues which include payday lending operations.
Consolidated core same-store pawn revenue increased 3% for fiscal 2015, highlighted by 8% growth in Mexico.
Consolidated core pawn revenues have grown at a compound annual growth rate of 21% and 23% over the past three and five year periods, respectively.
Store Growth:
A total of 103 pawn stores were added in fiscal 2015, composed of 70 new and acquired stores in Latin America and 33 stores acquired in the U.S., which represents a 10% and 11% increase in the number of pawn stores, respectively.
The Company made its largest and most significant acquisition in Latin America to date with a multi-step purchase of 211 pawn stores in three countries.CFO. Specifically,
| |
| ◦ | The acquisition of 32 storesSalaries in Guatemala was completed in December of 2015.2019 remained unchanged from 2018 salary levels for the CEO, COO and CFO; |
| |
| ◦ | Target and maximum payout opportunities under the cash-based short-term incentive plan for 2019 remained unchanged from 2018; and |
| |
| ◦ | The acquisitionsonly increase in target compensation was through long-term, performance-based restricted stock awards. |
Additional changes in the compensation program for 2019 include:
| |
| ◦ | The short-term incentive plan was modified to give heavier weight to earnings-based performance measures with adjusted EPS and adjusted EBITDA weighted at 40% each for a total of 16680%, as compared to 70% in 2018; |
| |
| ◦ | A third performance measure, growth in core pawn revenue, was added to the long-term performance-based restricted stock awards; |
| |
| ◦ | The store addition target in the performance-based restricted stock awards was modified to measure only de novo store openings, rather than total store additions which include acquisitions. |
Impact of Performance on Executive Compensation
The Company significantly grew adjusted earnings per share and adjusted EBITDA in 2019, despite the rapid contraction of non-core consumer lending operations, and exceeded its growth targets for key earnings and profitability metrics. In addition, the Company grew net revenues in Latin America, a key driver for long-term growth, at levels significantly above target. The performance-related payouts under the compensation plans for the CEO, COO and CFO directly reflected these performance results and the Company believes the compensation plan payouts in 2019 reflected a proper alignment between pay and performance.
The following chart summarizes the performance measures driving 2019 annual incentive compensation for the NEOs (dollars in thousands, except per share amounts):
|
| | | | | | | |
| Performance Measure | | 2019 Result | | Increase Over Prior Year |
| Adjusted earnings per share | | $ | 3.89 |
| * | 10 | % |
| Adjusted EBITDA | | $ | 303,782 |
| * | 7 | % |
| Latin America operations segment net revenue (constant currency basis) | | $ | 343,508 |
| * | 19 | % |
| |
| * | See Appendix A for a reconciliation of non-GAAP financial measures. |
2019 Operating Results
Revenue and Store Growth:
Almost all of the Company’s revenues are derived directly from it retail pawn stores. The Company believes long term growth in revenues is dependent upon increasing revenues in existing stores and adding new locations.
The following charts illustrate pawn revenue, which includes pawn fees, retail merchandise sales and wholesale scrap jewelry sales, and non-core consumer lending revenue for each of the last three years, and the number of store locations operated by the Company at the end of each of these years:
Revenue growth highlights for the year ended December 31, 2019:
Total revenue for 2019 increased 5% compared to 2018.
Revenue from pawn operations, which includes pawn fees, retail merchandise sales and wholesale scrap jewelry sales, increased 7% in 2019 compared to 2018.
Pawn revenues in Latin America increased 21% in 2019 compared to 2018, due primarily to store additions and same-store improvements, while pawn revenue in the mature U.S. market increased less than 1%.
Revenue growth from pawn operations was offset by a $36 million, or 64%, decline in non-core consumer loan revenue compared to 2018, as the Company has deemphasized its consumer lending operations in recent years due to regulatory constraints and increased internet-based competition for such products.
The Company added a significant number of additional pawn store locations during the year ended December 31, 2019:
A total of 279 stores were added in 2019 which included:
| |
| ◦ | 163 acquired pawn stores in Mexico and 13Latin America |
| |
| ◦ | 89 de novo pawn stores opened in three countries in Latin America |
| |
| ◦ | 27 acquired pawn stores in El Salvador were completed in January 2016 and February of 2016, respectively.the U.S. |
The year-over-year store count increased 18% in Latin America and 8% overall.
Net store additions have grown at a compound annual growth rate of 10%9% over the past three years, and 13% over the past five years.
which is a key driver of long-term revenue growth.
Earnings Results:
DilutedEarnings growth represents the most important driver of long-term stockholder value. The Company believes long-term earnings growth is dependent upon increasing revenues and improving profitability margins.
The following charts illustrate net income (GAAP and adjusted), diluted earnings per share (GAAP and adjusted), EBITDA, adjusted EBITDA, EBITDA margin and adjusted EBITDA margin for each of the fiscal yearthree years ended December 31, 2015 totaled $2.14, which includes the impact of non-recurring and primarily non-cash restructuring expenses related to U.S. consumer loan operations of $0.21 per share and non-recurring store acquisition expenses of $0.07 per share. Excluding these expenses,2019. Adjusted net income, adjusted diluted earnings per share, totaled $2.42 for fiscal 2015 compared to prior yearEBITDA, adjusted earnings per share of $2.75.
On a comparative basis with the prior fiscal year, fiscal 2015EBITDA, EBITDA margin and adjusted earnings were reduced by $0.34 per share due to the strong U.S. dollarEBITDA margin are non-GAAP financial measures and the resulting 19% declineare calculated in the average value of the Mexican peso, approximately $0.24 per share due to decreases in earnings from non-core jewelry scrapping and payday lending operations and $0.04 per share due to incremental interest expense related to the Company’s senior note offering in March 2014.
Adjusted EBITDA (earnings before interest, taxes, depreciation, amortization and certain non-recurring charges) for fiscal 2015 totaled $132.2 million, which equaled the prior year adjusted EBITDA on a constant currency basis. Net income was $60.7 million for fiscal 2015. Adetailed reconciliation of adjusted EBITDA to net income isnon-GAAP financial measures provided in Appendix A.
Total Shareholder Return:
Total shareholder returns
Earnings growth highlights for the five, three and one-year periodsyear ended December 31, 20152019:
Diluted earnings per share increased 12% on a GAAP basis and 10% on an adjusted non-GAAP basis compared to the prior year.
Year-over-year comparative earnings per share growth on both a GAAP and adjusted non-GAAP basis were as follows:negatively impacted by the expected contraction in non-core consumer lending operations and costs associated with the wind-down of consumer lending operations in Ohio during 2019.
| |
| ◦ | FiveGAAP basis and adjusted non-GAAP earnings per share were reduced by approximately $0.25 and $0.19, respectively, compared to the prior year total shareholder return: 21%as a result of non-core consumer lending contraction. |
| |
| ◦ | Three year total shareholder return: (25)%Excluding the earnings impact from consumer lending contraction, adjusted non-GAAP earnings per share would have increased 17% for 2019 compared to 2018. |
Consolidated net income was a record $165 million in 2019.
Adjusted EBITDA surpassed $300 million for the first time, totaling a record $304 million. Growth in adjusted EBITDA during 2019 was 7% compared to the prior year, despite the significant year-over-year decline in the consolidated pre-tax earnings from the planned consumer lending contraction.
EBITDA margin increased 70 basis points to 16.1% and adjusted EBITDA margin increased 30 basis points to 16.3% compared to the prior year.
GAAP net income has grown at a compound annual growth rate of 40% over the past three years and adjusted net income has grown at a compound annual growth rate of 25% over the same three-year period.
Over the past three years, EBITDA and adjusted EBITDA have grown at a compound annual growth rate of 27% and 19%, respectively.
Overall, the income growth results reflect the Company’s ongoing strategy of increasing its store count and increasing the revenue and operating profits in its existing stores.
Financial Return Metrics:
The following charts illustrate asset and equity return metrics for each of the three years ended December 31, 2019. Return on tangible assets and return on tangible equity are non-GAAP financial measures and are calculated in the detailed reconciliation of non-GAAP financial measures provided in Appendix A.
Financial return metric highlights for the year ended December 31, 2019:
Return on assets decreased 40 basis points to 7.0%, while return on tangible assets increased 130 basis points to 15.2% compared to the prior year. The return on assets for 2019 was negatively impacted by the first-time inclusion of the operating lease right of use asset arising from the implementation of the Financial Accounting Standards Board’s new lease accounting standard, which was not included on the balance sheet prior to January 1, 2019.
Return on equity was 12.4% compared to 11.2% in 2018, while return on tangible equity was 53.2% compared to 37.7% in the prior year.
Stockholder Return:
The Company continually tracks its long-term total stockholder returns and compares them against the long-term returns for its peer group and other broad indices of similar sized companies. Total stockholder returns are calculated on a compound annual growth rate basis and include price appreciation value plus dividends paid over the period.
The following chart illustrates total stockholder return for the three and five-year periods ended December 31, 2019 for the Company as compared to the 2019 Peer Group (as defined below), the Russell 2000 index and the S&P MidCap 400 Index.
Stockholder return highlights include:
The Company’s stockholder return significantly outperformed its 2019 peer group for the three and five-year return periods ended December 31, 2019.
While the Company’s returns exceeded peer group and broad indices, we believe FirstCash’s total shareholder returns for the three and five-year return periods ended December 31, 2019 would have been even greater if not for the contraction of the Company’s non-core consumer lending operations and the negative impact of foreign currency exchange rates.
| |
| ◦ | Consumer lending operations have been significantly deemphasized by the Company in recent years due to regulatory constraints and increased internet based competition. The contraction of the Company’s non-core consumer lending operations offset a significant portion of the Company’s growth from its pawn operations and has been a substantial headwind negatively impacting the three and five-year stockholder returns. On a pro forma basis including Cash America prior to the Merger, the Company reduced the number of stores offering consumer loans from 531 locations as of December 31, 2015, which produced pro forma revenue of $118 million in 2015, to just 47 locations as of December 31, 2019, which produced revenue of just $20 million in 2019. |
| |
| ◦ | OneThe Company derives significant revenue, earnings and cash flow from operations in Latin America, where business operations are primarily transacted in Mexican pesos. The average value of the Mexican peso relative to the U.S. dollar decreased by 45% over the five-year period ended December 31, 2019, which significantly reduced U.S. dollar reported earnings over that period and negatively impacted the Company’s five-year stockholder return. Over the three year total shareholder return: (33)%period ended December 31, 2019, the average value of the Mexican peso relative to the U.S. dollar decreased by 3%. |
The Company believes that recent shareholder returns have been negatively impacted primarily by the significant decline in the translated value of the currency in Mexico, where the Company has the majority of it store locations and revenues. The average value of the Mexican peso relative to the U.S. dollar has decreased by 25%, 20% and 19% over the most recent five, three and one-year respective fiscal annual periods.
Decreases in non-core portions of the business have also had a significant negative impact on earnings. Gross profit from non-core consumer loan and credit services and wholesale scrap jewelry have declined by 59%, 60% and 28% over the most recent five, three and one-year respective fiscal annual periods.
Impact of Performance on Executive Compensation
As highlighted herein, the Company saw significant growth in key performance measures related to revenue and store additions. The Company exceeded store addition targets, which is a key driver of future earnings growth and shareholder returns. However, despite revenue growth, earnings measures and total shareholder return were significantly impacted by offsetting factors, most notably the decline in the value of the currency in Mexico. The performance-related payouts under the compensation plans for the two most senior executives, the CEO and CFO, directly reflected these performance results. While payouts related to store addition measures were fully earned, payout goals in both short- and long-term incentive plans related to growth in earnings per share and EBITDA were not achieved. The Company believes that the compensation plan payouts in 2015 reflected a strong alignment between pay and performance.
Key Features of the Executive Compensation Program
What theThe Compensation Committee is mindful of evolving practices in executive compensation program does:
Compensation forand corporate governance. The table below highlights the two most seniorCompany’s current executive officers,compensation practices—both the CEOpractices it believes will drive performance and mitigate risk (left column) and the CFO, emphasizes performance-based annual incentives andpractices it has not implemented or eliminated because it does not believe they would serve stockholders’ long-term equity awards;interests (right column).
Pays senior executives reasonable base salaries commensurate with their backgrounds, special skill sets, responsibilities and competitive practice;Offers incentive compensation conditioned not only on the executive’s individual performance, but also on his or her contribution to the Company’s consolidated financial results;
Provides periodic grants of long-term, performance-based equity awards in order to induce executives to remain in the Company’s employment as well as align their interests with those of the Company’s stockholders;
Effective for 2016, subjects all incentive-based compensation to a “clawback” policy that allows the Company, in the event of a restatement of its financial results, to recover excess amounts erroneously paid to named executive officers under certain circumstances;
Effective for 2016, provides that executive officers are subject to stock ownership guidelines; and
Holds annual advisory votes on executive compensation. |
| |
| What The Executive Compensation Program Does: | What The Executive Compensation Program Does Not Do: |
| Emphasizes an appropriate mix of cash and equity, annual and long-term compensation and fixed and variable pay. All annual and long-term incentive plans for the top three executives are 100% performance-based | Does not provide for annual cash incentive compensation payouts based on a single performance metric |
| Pays senior executives’ salaries commensurate with their backgrounds, years of experience, special skill sets and competitive practice | Does not provide guaranteed salary increases for the top three senior executives |
| Provides annual cash incentive awards which are tied directly to Company performance based primarily on earnings metrics and revenue-based metrics | Does not contemplate discretionary cash awards to the top three senior executives but does recognize there may be situations when discretion can and should be exercised in the context of unusual and unanticipated circumstances |
Provides annual grants of long-term performance-based equity awards based on attainment of cumulative long-term profitability and growth targets
Equity awards are forfeited if the executive leaves the Company voluntarily or is terminated for cause before the vesting date, which is generally three years from the date of grant for the senior executives | Does not provide for automatic, time-based vesting of equity awards for the top three senior executives
Does not allow repricing of underwater stock options without stockholder approval
Has not historically used out of cycle incentive awards or equity grants to senior executives |
| Change in control provisions for the senior executive officers have "double trigger" severance and equity benefits in the event of involuntary termination following a change in control in exchange for a two year non-compete and non-solicitation agreement | Does not provide for “single-trigger” severance upon a change in control or excise tax gross up protection for executives in connection with a change in control |
| Caps the maximum annual incentive award and long-term performance award for the top three executives and provides minimum performance thresholds below which no incentive awards are granted | Does not provide for automatic minimum payout awards for annual or long-term performance awards; all incentives must be earned by the top three executives based on performance criteria |
| Senior executives participate in the same 401(k) retirement plan as all other domestic employees and receive modest perquisites with a sound business rationale | Does not provide supplemental retirement plans, non-qualified deferred compensation plans or other excessive executive perquisites |
| Subjects all incentive-based compensation to a “clawback” policy that allows the Company, in the event of a restatement of its financial results, to recover excess amounts erroneously paid to NEOs under certain circumstances | Does not encourage unnecessary or excessive risk taking as a result of the Company’s compensation policies |
| Provides that NEOs and directors are subject to robust stock ownership guidelines | Does not allow for hedging of Company stock |
What the executive compensation program does not do:
Effective for 2016, provide for automatic single-trigger vesting of equity awards in connection with a change in control;
Allow repricing of underwater stock options;
Allow hedging of Company stock;
Provide excessive executive perquisites;
Encourage unnecessary or excessive risk taking as a result of the Company’s compensation policies;
Provide guaranteed minimum payouts; and
Base incentive compensation on a single performance metric.
Role of the Compensation Committee
The Compensation Committee reviews and administers the compensation program for the Company’s executive officers, including recommending to the Board of Directors for approval of the specific compensation of all of the named executive officers.NEOs. Compensation is typically set at the first Compensation Committee meeting each calendar year after reviewing performance for the past year and prospects for the year ahead. The Compensation Committee regularly meets with the CEO, COO and CFO, both of whomwho provide insight into how individual executives are performing. The Compensation Committee retains broad flexibility in the administration of the Company’s compensation packages.plans.
The Compensation Committee has the authority to engage outside advisors to assist the Compensation Committee in the performance of its duties. In particular, the Compensation Committee has sole authority to retain and terminate any compensation consultant to assist in the evaluation of director, CEO or senior executive compensation, including sole authority to approve such consultant’s reasonable fees and other retention terms, all at the Company’s expense.
The BoardCommittee’s Use of Directors sets non-employee directors’an Independent Consultant
The Compensation Committee retained the services of Pay Governance, an independent compensation atadvisory firm, to advise the recommendationCompensation Committee on various aspects of the Company’s compensation program. The Compensation Committee assessed Pay Governance's independence, as required under Nasdaq listing rules. Based on this review, the Compensation Committee does not believe any conflict of interest existed with the work performed by Pay Governance and considers them to be independent.
Pay Governance worked with the Compensation Committee and management to develop the 2019 peer group (“2019 Peer Group”) discussed below and made recommendations on revising the target amounts and maximum payouts under the proposed 2019 annual cash and equity-based incentive plans and also provided recommendations on the performance metrics included in the 2019 incentive plans. Additionally, Pay Governance presented periodic updates on trends and developments across the executive compensation landscape to management and the Compensation Committee. See the “Compensation of Directors” section below.
Peer Group Benchmarking and Use of Consultant
Peer Group: The Compensation Committee analyzes the compensation practices of a group of peer companies, consisting of other publicly-traded companies primarily in the pawn, specialty consumer finance/finance and specialty retail industryindustries. All of the peer companies are within a range of market cap and revenue size similar to the Company. In determining compensation for its named executive officers,NEOs, each element of its compensation program is compared against the published compensation data of its peer group.2019 Peer Group and other compensation surveys. The Compensation Committee, while mindful of this peer group and survey data, has not established a specific range of compensation for any element of pay from the peer group, but ratherinstead uses the data as a general guideline for discussion and consideration. The overall goal of this process is to enable the Company to provide total compensation packages that are competitive with prevailing practices in the Company’s industry and within the Company’s peer group.
For 2015, the Compensation Committee reviewed compensation data for the following group of peer companies (“2015 Peer Group”):
|
| | |
2015 Peer Group | Industry | Geographic Focus |
Cash America International, Inc. | Pawnshop operator | United States |
EZCORP, Inc. | Pawnshop operator | United States, Mexico |
| | |
Aaron’s, Inc. | Specialty consumer finance/retail | United States, Canada |
America’s Car-Mart, Inc. | Buy-Here-Pay-Here auto sales | United States |
Rent-A-Center, Inc. | Specialty consumer finance/retail | United States, Canada, Mexico, Puerto Rico |
World Acceptance Corporation | Specialty consumer finance/retail | United States, Mexico |
The Compensation Committee expandedengaged Pay Governance to help construct the peer group used as a tool for reviewing and determining2019 Peer Group. The following specific factors, among other things, were considered during the compensation levels and incentive plansconstruction of the named executive officer compensation for fiscal 2016. The Compensation Committee concluded that the Company has only two public2019 Peer Group:
Market capitalization
Revenue
Geographic footprint (specifically with international operations in Latin America)
Customer base (specifically serving value-conscious retail consumers and/or credit-challenged borrowers)
Regulatory environment (specifically in highly regulated pawn, specific competitors which the Company competes directly with for customers, employees, and investors. The Compensation Committee therefore updated and expanded its peer group to include additional other consumer finance and specialty retail companies focusing primarily on similar size companies offering lending and retail products to similar customer demographic profiles (primarily the underbanked, cash-constrained and value-conscious consumer).
For 2016, the Compensation Committee reviewed compensation data for the following group of peer companies (“2016 Peer Group”):
|
| | |
2016 Peer Group | Industry | Geographic Focus |
Cash America International, Inc. | Pawnshop operator | United States |
EZCORP, Inc. | Pawnshop operator | United States, Mexico |
| | |
Aaron’s, Inc. | Specialty consumer finance/retail | United States, Canada |
Conn’s, Inc. | Specialty consumer finance/retail | United States |
Credit Acceptance Corporation | Specialty consumer finance | United States |
Encore Capital Group, Inc. | Specialty consumer finance | Worldwide (including Latin America) |
Five Below, Inc. | Specialty consumer retail | United States |
Green Dot Corporation | Specialty consumer finance | United States |
Pier 1 Imports, Inc. | Specialty consumer retail | United States, Canada, Mexico, El Salvador |
PRA Group, Inc. | Specialty consumer finance | United States, Canada, Europe |
Rent-A-Center, Inc. | Specialty consumer finance/retail | United States, Canada, Mexico, Puerto Rico |
World Acceptance Corporation | Specialty consumer finance | United States, Mexico |
other financial services industries)
The Compensation Committee believes the lack of a significant number of public pawn specificpawnshop competitors creates difficulty in constructing a direct peer group. Accordingly, the 2019 Peer Group is constructed with input from Pay Governance using a broader group of companies which is also evident in peer groups some outside analysts have used to benchmark the Company’s named executive officer compensation. The Compensation Committee recognizes that the premier U.S. proxy advisory organizations, ISS and Glass Lewis, each determine their own peer groups based on their respective methodologies. The Compensation Committee believes the Company’s peer group is moreare generally indicative of the underbanked, cash-constrained and value-conscious retail consumer that make up the Company targets comparedmajority of the Company’s customer base and which are also aligned with the increasing size and complexity of the organization. The Compensation Committee used the 2019 Peer Group to the peer groupsbenchmark executive and director compensation levels and practices.
The Compensation Committee established by ISS and Glass Lewis for the following reasons:group of peer companies for benchmarking compensation for 2019:
|
| | | | |
| 2019 Peer Group | | Industry | | Geographic Focus |
| Pawnshop Companies: | | | | |
| EZCORP, Inc. | | Pawnshop operator | | United States, Latin America, Canada |
| | | | |
| Consumer Finance and Related Service Companies: | | | | |
| Credit Acceptance Corporation | | Specialty consumer finance | | United States |
| Encore Capital Group, Inc. | | Specialty consumer services | | Worldwide (including Latin America) |
| Green Dot Corporation | | Specialty consumer finance | | United States |
| H&R Block, Inc. | | Specialty consumer services | | United States, Canada, Australia |
| OneMain Holdings, Inc. | | Specialty consumer finance | | United States |
| PRA Group, Inc. | | Specialty consumer services | | United States, Canada, Europe |
| | | | |
| Retail Companies: | | | | |
| Aaron’s, Inc. | | Specialty retail/consumer finance | | United States, Canada |
| Big Lots, Inc. | | Specialty retail | | United States |
| Cinemark Holdings, Inc. | | Movies and entertainment | | United States, Latin America |
| Conn’s, Inc. | | Specialty retail/consumer finance | | United States |
| DSW Inc. | | Specialty retail | | United States |
| Five Below, Inc. | | Specialty retail | | United States |
| Sally Beauty Holdings, Inc. | | Specialty retail | | North America, Latin America, Europe |
The Compensation Committee, with the assistance of Pay Governance, reviewed the composition of the 2019 Peer Group in the fall of 2018. As a result of the review, Rent-A-Center, Inc. was removed as it was anticipated that it was going to become privately held. In addition, Santander Consumer USA Holdings Inc. and SLM Corporation were removed, while Credit Acceptance Corporation, Green Dot Corporation and Conn’s, Inc. were added in order to more closely align the Company’s 2019 Peer Group with that of the U.S. proxy advisory organizations respective peer groups include companies from very different industries including investment banksorganizations.
The following table, based on data compiled by Pay Governance as of December 31, 2018, shows a comparison of FirstCash’s market cap, revenues, assets and various retailers focused on the mainstream and more affluent consumer (as opposedrelative percentile rank to the underbanked, cash-constrained and value-conscious consumer);2019 Peer Group (dollars in millions):
The companies included in the U.S. proxy advisory organizations respective peer groups tend to be smaller based on market capitalization than the Company, causing the Company’s executive compensation to look high in comparison to the respective peer group; and
One of the proxy advisory organizations excluded Cash America International, Inc., one of two similar sized direct competitors, from their peer group listing but included companies such as Destination Maternity, Haverty Furniture Companies, Inc. and West Marine, Inc. which cater to a much different and more affluent demographic than the demographic serviced by the Company. |
| | | | | |
| | | 2019 Peer Group Median | FirstCash | | FirstCash Percentile of 2019 Peer Group |
| Market cap | | $2,468 | $3,171 | | 59th |
| Revenues | | $1,917 | $1,781 | | 49th |
| Assets | | $2,557 | $2,108 | | 39th |
In setting the target pay for the 2019 compensation program, the Compensation Committee referenced a benchmarking analysis prepared by Pay Governance, which indicated the CEO’s target compensation was at the 62ndpercentile of the target pay of the 2019 Peer Group.
Role of the CEO in Executive Compensation Decisions:Decisions
The Company’s CEO works closely with the Compensation Committee, providing his assessment and recommendations on the competitiveness of the programs and the performance of the other executive officers,NEOs and makes recommendations for consideration pertaining to the compensation of the executive officers.NEOs. The Compensation Committee takes these recommendations into consideration and either approves or works with the CEO to develop suitable proposals. The CEO does not, however, make, participate in provide input for or make recommendationsdiscussions and decisions about his own compensation.
Use of Independent Advisors: The Compensation Committee has, in the past, retained an independent advisor to evaluate industry compensation practices, including base salary, bonus and long-term incentive values, including annual grant levels. In 2015, the Compensation Committee did not retain the services of any outside consultants or advisors. Rather, the Compensation Committee relied on previous studies and current market data, which the Compensation Committee determined to be sufficient for the purposes of making comparisons necessary to evaluate the Company’s executives’ compensation for 2015 and 2016.
Results of 2015 Stockholder2019 Say on Pay Vote and Shareholder Dialogue
The Company received overwhelming stockholder support in the 2013 and 2014 “Say-on-Pay” votes with approval rates of 92% and 91%, respectively. At the Company’s 20152019 Annual Meeting of Stockholders, the stockholders again approved the compensation of the named executive officersNEOs with 63%96% of the votes cast in favor of the Company’s compensation programs. The Company’s senior executives meet regularly with significant stockholders, and during 2019 did not receive substantive comments or inquiries regarding concerns around the compensation programs. Given the strong stockholder support for the Company’s compensation programs evidenced by the 2019 say on pay vote and the lack of direct comment from stockholders, the Company did not engage in a specific outreach program with stockholders regarding changes to its executive compensation program. Future advisory votes on executive compensation will serve as an additional tool to guide the Board of Directors and the Compensation Committee in evaluating the alignment of the Company’s executive compensation program with the interests of the Company and its stockholders.
Elements of Compensation
The Company’s principal focus is on total direct compensation, which includes a smaller guaranteed portion and a larger at-risk portion. The types of compensation paid to the NEOs currently consists of salary, annual performance-based cash incentives for the CEO, COO and CFO, annual cash bonuses for NEOs other than the CEO, COO and CFO, and long-term incentive compensation (primarily in the form of performance-based restricted stock units as well as time-based restricted stock units for NEOs other than the CEO, COO and CFO).
The following table summarizes the key elements of compensation for the CEO, COO and CFO:
|
| | | | | |
| Base Salary | | Annual Performance Incentive Plan (“APIP”) | | Long-Term Incentive Plan (“LTIP”) |
| Form of compensation | Cash | | Cash | | Equity — Performance-Based Restricted Stock |
| Type | Fixed | | Performance-based | | Performance-based |
| Purpose | Fixed pay | | Drive short-term financial performance and growth | | Drive long-term growth, align management interests with those of stockholders and promote retention |
| Performance period | Ongoing | | 1 year | | 3 years |
| Performance measures | N/A | | • Adjusted earnings per share • Adjusted EBITDA • Latin America net revenue growth (constant currency) | | • Adjusted net income • Pawn revenue • New store openings |
| Payment/grant date | Ongoing | | Paid annually, typically in January, for prior year performance | | Shares vest after completion of the three-year cumulative performance period |
| Performance determination | Based in part on individual performance, experience and expertise | | Formulaic | | Formulaic |
“At-Risk” Pay Mix
A significant portion of the compensation for the Company’s NEOs is in the form of at-risk variable compensation. The Company believes this appropriately aligns the interests of its NEOs with those of its stockholders. For the CEO, COO and CFO, the only significant element of fixed compensation is their salary. All annual cash awards and all equity awards are variable under objective, performance-based plans. The Company does not grant time vested awards to these individuals nor does it provide for other supplemental retirement plans or other non-qualified plans, which are typically not performance-based.
For 2019, the Compensation Committee increased the percentage of the CEO’s target compensation tied to long-term performance incentives, which in turn reduced the percentage of compensation tied to salary and short-term incentives and better aligns CEO and stockholder interests. The mix of compensation elements at target award levels for the CEO used in 2019 is as follows:
Salary
The Company offers what it believes to be competitive salaries to its NEOs. The salary must be sufficient to attract and retain talented executives and provide a secure base of cash compensation. In addition, salary levels for the Company’s NEOs are set at levels the Compensation Committee believes to be, based on its general business experience and review of peer company data, competitive in relation to the salary levels of executive officers in the Company’s peer group, taking into consideration the NEO’s position, tenure, responsibility and need for special expertise. In setting the CEO’s salary in particular, the Compensation Committee believes Mr. Wessel’s long tenure with the Company and the significant complexity of operating over 2,600 pawn locations in five countries warrants a salary above the median for the peer group.
Annual salary increases, typically determined in January of each year, are not guaranteed. Salary increases, if any, take into account changes in the cost of living and subjective factors such as the executive’s performance against job expectations, changes in the market, increased job responsibilities and experience.
The following table details each NEO’s base salary amounts for 2019 and 2018:
|
| | | | | | | | | | | |
| | | Base Salary |
| NEO | | 2019 | | 2018 | | Increase |
| Rick L. Wessel, CEO | | $ | 1,175,000 |
| | $ | 1,175,000 |
| | — | % |
| T. Brent Stuart, COO | | 725,000 |
| | 725,000 |
| | — | % |
| R. Douglas Orr, CFO | | 675,000 |
| | 675,000 |
| | — | % |
| Raul R. Ramos, SVP Latin American Operations | | 441,000 |
| | 420,000 |
| | 5 | % |
| Anna M. Alvarado, General Counsel | | 525,000 |
| | 500,000 |
| | 5 | % |
Short-Term Incentive Compensation
The Company’s short-term incentive plans for the NEOs are intended to drive annual operating and financial results deemed crucial to the Company’s success.
Annual Performance Incentive Plan - For 2019, the CEO, COO and the CFO were granted opportunities to earn annual incentive compensation through the APIP. The APIP provides for the payment of annual cash incentive compensation based upon the achievement of performance goals established annually by the Compensation Committee, based on specified objective performance measures.
As a resultTo determine amounts earned under the APIP, the Compensation Committee measures the performance of the lower approvalCompany against an annual operating plan prepared by management and reviewed and approved by the Board of Directors at the beginning of the year. The Company’s level of achievement of the performance goals set forth in the annual operating plan, which is inclusive of estimated stock repurchases, will result in the payment of a cash incentive award equal to a percentage of the salary of the participating NEO. The performance measures and goals are approved by the Compensation Committee and designed to reinforce the Company’s focus on profitability and enhancement of long-term stockholder value. The participants may earn annual cash incentives between 0% and a stated maximum percentage (which remained consistent with prior year at 300% for the 2015 “Say-on-Pay” voteCEO and 200% for the COO and CFO) of their respective salary. The range of percentages for each participating NEO are based on the scope of the officer’s responsibilities, internal pay equity among participating NEOs with similar responsibilities and competitive considerations, and are reviewed annually by the Compensation Committee.
For 2019, the Compensation Committee established the following performance measures and weightings for the APIP:
|
| | |
| Performance Measure | | Weight |
| Adjusted diluted earnings per share | | 40% |
| Adjusted EBITDA | | 40% |
| Growth in Latin America operations segment net revenue (on a constant currency basis) | | 20% |
The performance measures for the APIP remained consistent with the performance measures used in 2018, except that the growth in Latin America operations segment was tied to net revenue alone, rather than the previously used “greater of” measure tied to either revenue or net revenue. In addition, the weighting of the performance measures was modified in 2019 to give heavier weight to earnings measures with adjusted earnings per share and adjusted EBITDA each weighted at 40%, for a total of 80%, as compared to prior years, management reached out70% in 2018, while Latin America segment operations net revenue growth was weighted at 20% compared to 2730% in 2018.
The Compensation Committee believes the nature and mix of these performance measures provides an appropriate mix of short-term targets directed primarily at earnings growth (adjusted earnings per share and adjusted EBITDA). The adjusted earnings per share performance measure represents the performance metric which the Compensation Committee believes most impacts stockholder returns over a one-year period. The adjusted EBITDA performance measure is also focused on the achievement of earnings growth, but excludes the impact of share repurchases, financing activities and tax strategies, resulting in a pure measure of operating profitability. The growth in Latin America net revenue performance measure is focused on growth in what the Company believes is its most significant and key growth market, and where it has focused much of its store opening and acquisition activity.
In setting the performance goals for the 2019 APIP, the Compensation Committee considered the estimated impacts of the expected decline in earnings from strategic reductions in its non-core consumer lending activities, which the Company continues to de-emphasize because of increasing internet-based competition and regulatory constraints. The expected strategic reductions in its consumer lending operations, which were reflected in the Company’s 2019 operating plan, translated into an expected decline of $0.25 to $0.30 in earnings per share.
The Compensation Committee believes that after considering the expected decline in earnings from non-core consumer lending activities, the growth rates for the 2019 performance goals represented a significant degree of rigor. The 2019 APIP performance goals and the resulting growth rates over 2018 actual results, after considering the estimated impacts of the expected decline in earnings from non-core consumer lending activities, are as follows (dollars in thousands except per share amounts):
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Adjusted Earnings Per Share (3) | | Adjusted EBITDA | | Growth in Latin America Operations Segment Net Revenue
(constant currency) |
| | | Thresh- old (4) | | Target | | Maxi- mum | | Thresh- old (4) | | Target | | Maxi- mum | | Thresh-
old (4) | | Target | | Maxi- mum |
| 2019 APIP performance goals | | $ | 3.60 |
| | $ | 3.85 |
| | $ | 4.10 |
| | $ | 284,466 |
| | $ | 299,500 |
| | $ | 314,055 |
| | 11.5 | % | | 14.0 | % | | 16.5 | % |
| | |
| | |
| | |
| | |
| | |
| | |
| | | | | | | |
| Considered adjustments: | | | | | | | | | | | | | | | | | | | | | | | | |
Estimated non-core consumer lending contraction (1) | | | 0.28 |
| | | 0.28 |
| | | 0.28 |
| | | 16,030 |
| | | 16,030 |
| | | 16,030 |
| | | | | | |
| Adjusted 2019 APIP performance goals | | $ | 3.88 |
| | $ | 4.13 |
| | $ | 4.38 |
| | $ | 300,496 |
| | $ | 315,530 |
| | $ | 330,085 |
| |
| |
| |
|
| | | | | | | | | | | | | | | | | | | | | | | | | |
Growth rate of adjusted 2019 goals over 2018 actual (2) | | 10 | % | | 17 | % | | 24 | % | | 6 | % | | 11 | % | | 16 | % | | 11.5 | % | | 14.0 | % | | 16.5 | % |
| |
(1) | Amount represents the mid-point of the estimated range provided in the Company’s press release dated January 31, 2019. |
| |
(2) | Actual 2018 adjusted earnings per share, adjusted EBITDA and Latin America segment net revenue were $3.53, $284.2 million and $288.7 million, respectively. |
| |
(3) | Includes earnings per share accretion from the original Board-approved budget for 2019 share repurchases of approximately 1.4 million shares. |
| |
(4) | No award is earned if actual performance is less than the performance measure threshold amounts. |
Achievement of 2019 APIP Performance Goals - The following table sets forth the performance goals for each of the 2019 APIP performance measures and the actual performance achieved (dollars in thousands except per share amounts):
|
| | | | | | | | | | | | | | | | | | | | |
| | | | | Performance Range | | 2019 Actual Performance | |
| Performance Measure | | Weight | | Threshold | | Target | | Maximum | | |
| Adjusted diluted earnings per share | | 40 | % | | $ | 3.60 |
| | $ | 3.85 |
| | $ | 4.10 |
| | $ | 3.89 |
| (1) |
| Adjusted EBITDA | | 40 | % | | $ | 284,466 |
| | $ | 299,500 |
| | $ | 314,055 |
| | $ | 303,782 |
| |
| Growth in Latin America operations segment net revenue (constant currency) | | 20 | % | | 11.5 | % | | 14.0 | % | | 16.5 | % | | 19 | % | |
| |
(1) | The Company repurchased approximately 1.3 million shares in 2019 compared to approximately 1.4 million shares that were included in the 2019 operating plan used to set the adjusted diluted earnings per share performance goals. |
The following table sets forth the threshold, target and maximum percentages of each eligible NEO’s salary available to be earned, the percentage of each participant’s salary earned based on the actual performance achieved, the target award and the actual award paid (dollars in thousands):
|
| | | | | | | | | | | | | | | | |
| | | | | Award Earned Based on Actual Performance (% of Salary) | | Cash Incentive Award Earned Based on Actual Performance |
| | | Potential Award (% of Salary) | | |
| NEO | | Threshold | | Target | | Maximum | | |
| Rick L. Wessel, CEO | | 25 | % | | 150 | % | | 300 | % | | 208 | % | | $ | 2,443 |
|
| T. Brent Stuart, COO | | 25 | % | | 125 | % | | 200 | % | | 154 | % | | $ | 1,116 |
|
| R. Douglas Orr, CFO | | 25 | % | | 125 | % | | 200 | % | | 154 | % | | $ | 1,047 |
|
The Compensation Committee believes the amounts earned under the 2019 APIP appropriately reflect the Company’s operating results.
The two primary performance measures, adjusted earnings per share and adjusted EBITDA, increased by 10% and 7%, respectively, compared to 2018 and the Company achieved 101% of the target for each performance measure. The increases in adjusted earnings per share and adjusted EBITDA were driven by significant growth in the Company’s pawn operations, partially offset by expected earnings declines from non-core consumer lending operations.
The third performance measure, net revenue growth in the Latin America operations segment (on a constant currency basis) increased 19%, driven primarily by the addition of 252 stores in Latin America through a combination of de novo store openings and acquisitions and same-store revenue growth.
Cash Bonuses - The Company does not pay discretionary bonuses to NEOs participating in the APIP. Annual cash bonuses are paid to the other NEOs and certain other key employees to reflect the breadth of their expertise and responsibility, achievement of certain financial or strategic results and to make the cash component of compensation competitive with that of the Company’s largest stockholders, representing approximately 71%peers. While the Company maintains broad discretion to vary overall cash compensation for a given year by varying the amount, if any, of such cash bonuses, these bonuses are typically determined by evaluating financial and strategic targets such as revenues, operating profits and margins and store additions, among other criteria, in a manner similar to the NEOs participating in the APIP. These cash bonuses may reflect a material part of the outstanding sharesNEOs’ overall compensation, with payments commensurate with the executive’s position, responsibilities and individual and overall Company performance. Annual cash bonuses paid to engage, or attemptother NEOs are reviewed and approved by the Compensation Committee based on the CEO’s recommendation. The 2019 cash bonus awards to engage, in discussions around executive compensationNEOs consisted of $750,000 to Mr. Ramos and corporate governance. From these conversations management made the following observations:$440,000 to Ms. Alvarado.
Stockholders generally wanted expanded disclosures around theLong-Term Incentive Compensation
The Company makes annual equity awards to its NEOs and certain other employees to provide incentive for them to achieve targeted levels of financial performance targets and measurement metrics associatedstay with the Company’s incentive compensation plans;
Stockholders felt that it was important to have both long-term and short-term performance incentives; and
Stockholders were generally in agreement thatCompany over the assigned peer groups determined by the proxy advisory firms were not representativelong term, as well as align their interests with those of the underbanked, cash-constrainedCompany’s stockholders. These equity awards also provide additional flexibility to the Compensation Committee to reward superior performance by NEOs and value-conscious consumer or specialty finance sector.certain other employees.
The Compensation Committee has consideredestablished an LTIP for the resultsCEO, COO and CFO. Performance-based restricted stock units granted under the LTIP vest over multi-year periods, contingent upon the Company attaining defined performance goals. The Compensation Committee certifies the attainment of the 2015 advisory vote on executive compensationperformance goals upon completion of the respective performance periods, and any earned shares are distributed to participants following the end of such performance periods.
The date of grant for all equity awards granted is the date of Compensation Committee approval. The Company does not have a program, plan or practice of timing the grant of equity awards in coordination with the release of material non-public information. The Company believes all such equity grants as well as feedback obtained from management’s shareholder outreach, and madedescribed herein align the following changesexecutives’ interests with respectthose of the Company’s stockholders.
2019 Performance-Based Restricted Stock Units Granted Under the LTIP - In 2019, performance-based restricted stock units were granted under the LTIP to the CEO, COO and CFO, which vest three years from the date of the grant. The performance period for the 2019 grant is a three-year cumulative period beginning on January 1, 2019 and ending on December 31, 2021. To determine the number of restricted stock awards that vest under the LTIP, the Compensation Committee measures the three-year cumulative performance of the Company against three-year cumulative performance goals approved by the Compensation Committee in the first quarter of the year of the initial grant. The Company’s level of achievement of the performance goals set forth in the three-year cumulative performance period will result in the vesting of restricted stock awards between zero and 150% of a stated target number of shares three years after the date of the grant. The performance goals are designed to reinforce the Company’s focus on profitability and enhancement of long-term stockholder value. The range of percentages for each participating executive compensation programs:officer are based on the scope of the officer’s responsibilities, internal pay equity among participating executive officers with similar responsibilities and competitive considerations and are reviewed annually by the Compensation Committee.
For equity awards granted2019, the Compensation Committee established the following performance measures and weightings for the LTIP:
|
| | |
| Performance Measure | | Weight |
| Adjusted net income | | 40% |
| Pawn revenue (on a constant currency basis) | | 40% |
| New store openings | | 20% |
A third performance measure, growth in 2016constant currency pawn revenue (defined as retail merchandise sales, pawn loan fees and going forward, eliminated automatic single-trigger accelerationwholesale scrap jewelry sales), was added in connection with a change2019 and the store addition performance measure was modified in control;2019 to measure only de novo store openings, rather than total store additions.
Enhanced certain compensation policies
The Compensation Committee believes adjusted net income, pawn revenue and practices,new store openings are proper metrics to use for long-term performance evaluation. By definition, the adjusted net income measure includes all normal and recurring operating expenses, including adoption of a compensation clawback policy and stock ownership guidelines;
Increased transparencyfinancing costs, while excluding any potential benefit from share repurchases. Growth in reporting of incentive compensation performance targets and achieved results; and
Expandedpawn revenues reflects the Company’s peer group.
Instrategy to focus on core pawn operations and incentivizes long-term growth through a combination of improving same-store revenues and the addition the Company’s Board of Directors hasnew and acquired locations. The growth in store locations is considered the stockholder vote and management’s recommendation regarding the frequencya key driver of future stockholder advisory votes on the compensationlong-term revenue and profitability growth as most of the Company’s named executive officerscustomers access the Company’s products and has adoptedservices directly from neighborhood-based retail locations. Accordingly, store growth from new store openings is critical for accessing new customers in new and expanding markets.
The Compensation Committee does not utilize relative performance measures in the stockholders’ recommendationLTIP program due to the very limited number of direct peer companies in the pawn industry.
The cumulative three-year performance goals established for adjusted net income and pawn revenue are based on target adjusted net income and pawn revenue for 2019 (consistent with target profitability metrics utilized in the APIP) with increases in 2020 and 2021 based on long-term growth rates established by the Compensation Committee.
The cumulative three-year performance goal established for new store openings is based on the store openings budgeted for 2019 with increases in 2020 and 2021 based on a long-term store growth formula established by the Compensation Committee.
The Compensation Committee established these goals to ensure alignment with the Company’s long-term internal targets for revenue and earnings growth, while also balancing the risk of over-incentivizing growth.
The following table sets forth each participant’s threshold, target and maximum stock grant opportunities and the respective grant date fair value of the awards for each of the 2019 LTIP performance measures:
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | CEO | | | COO/CFO |
| | | Threshold (1) | | Target | | Maximum | | Threshold (1) | | Target | | Maximum |
| Percentage of target award | | 25 | % | | 100 | % | | 150 | % | | 25 | % | | 100 | % | | 150 | % |
| | | | | | | | | | | | | | | | | | | |
Considered Award Value (2): | | | | | | | | | | | | | | | | | | |
| Adjusted net income | | $ | 330,000 |
| | $ | 1,320,000 |
| | $ | 1,980,000 |
| | $ | 120,000 |
| | $ | 480,000 |
| | $ | 720,000 |
|
| Pawn revenues (constant currency) | | | 330,000 |
| | | 1,320,000 |
| | | 1,980,000 |
| | | 120,000 |
| | | 480,000 |
| | | 720,000 |
|
| New store openings | | | 165,000 |
| | | 660,000 |
| | | 990,000 |
| | | 60,000 |
| | | 240,000 |
| | | 360,000 |
|
| Total | | $ | 825,000 |
| | $ | 3,300,000 |
| | $ | 4,950,000 |
| | $ | 300,000 |
| | $ | 1,200,000 |
| | $ | 1,800,000 |
|
| | | | | | | | | | | | | | | | | | | |
Award Shares Granted (3): | | | | | | | | | | | | | | | | | | |
| Adjusted net income | | | 4,199 |
| | | 16,796 |
| | | 25,194 |
| | | 1,527 |
| | | 6,108 |
| | | 9,161 |
|
| Pawn revenues (constant currency) | | | 4,199 |
| | | 16,796 |
| | | 25,194 |
| | | 1,527 |
| | | 6,108 |
| | | 9,161 |
|
| New store openings | | | 2,100 |
| | | 8,398 |
| | | 12,597 |
| | | 763 |
| | | 3,053 |
| | | 4,582 |
|
| Total | | | 10,498 |
| | | 41,990 |
| | | 62,985 |
| | | 3,817 |
| | | 15,269 |
| | | 22,904 |
|
| | | | | | | | | | | | | | | | | | | |
Grant date fair value of award (4) | | $ | 911,856 |
| | $ | 3,647,252 |
| | $ | 5,470,877 |
| | $ | 331,544 |
| | $ | 1,326,266 |
| | $ | 1,989,441 |
|
| |
(1) | No award is earned if actual performance is less than the performance measure threshold amounts. |
| |
(2) | The considered award values are amounts determined by the Compensation Committee in setting target compensation for 2019 and are used to determine the award shares granted. These values do not represent the grant date fair value shown in the “Stock Awards” column of the Summary Compensation Table below. |
| |
(3) | Award shares granted are determined by dividing the considered award values by the average of the closing price of the Company’s stock over the 45 trading days immediately prior to the grant date, which was $78.59 per share. |
| |
(4) | The grant date fair value was determined by multiplying the number of award shares granted by the closing market price of $86.86 per share for the Company’s Common Stock on the date of the grant. |
2019 Other Restricted Stock Unit Awards - During 2019, the Company also granted a total of 7,000 shares of time-based restricted stock units to two of the NEOs of the Company (Mr. Ramos and Ms. Alvarado). While the Company maintains broad discretion over time-based grants, these grants are commensurate with the NEO’s position, responsibilities and individual and overall Company performance. These time-based awards vest in five equal annual installments beginning in February 2020 and become fully vested in February 2024.
Historical LTIP Grants and Performance:
2016 LTIP Grants - In 2016, the CEO and CFO were granted awards of performance-based restricted stock under the LTIP (30,000 shares to the CEO and 10,000 shares to the CFO), which vest in four equal annual installments based on the attainment of an annual advisory voteperformance target of adjusted EBITDA. The adjusted EBITDA target for each of the annual vesting periods was set by the Compensation Committee in early 2016, which was prior to the Merger. Actual 2019 adjusted EBITDA was $304 million compared to the 2019 target of $159 million, and accordingly, 100% of the shares available for vesting in 2019 were earned. The COO did not participate in this grant as it was made prior to when he joined FirstCash. This is the final vesting under this award.
2017 LTIP Grants - In 2017, the CEO, COO and CFO were granted awards of performance-based restricted stock units under the LTIP. The 2017 grant had a three-year cumulative performance period that began on January 1, 2017 and ended on December 31, 2019. The number of shares which will vest on March 30, 2020 is based on the compensationachievement of cumulative three-year performance goals for each performance measure.
The following table sets forth the three-year cumulative performance goals for each of the Company’s named executive officers untilperformance measures of the next required vote2017 grant and the actual three-year cumulative performance achieved (dollars in thousands):
|
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | Cumulative Performance Goals | | Cumulative Actual Performance (2) | | % of Target Obtained |
| 2017 Grant Performance Measure | | Weight | | Threshold | | Target (1) | | Maximum | | |
| Adjusted net income | | 40 | % | | $ | 339,233 |
| | $ | 399,097 |
| | $ | 439,007 |
| | $ | 457,415 |
| | 115 | % |
| Total store additions | | 60 | % | | | 230 |
| | | 270 |
| | | 297 |
| | | 777 |
| | 288 | % |
| |
(1) | The target three-year cumulative performance goal for adjusted net income represented a compound annual growth rate of 19% over the actual 2016 adjusted net income of $85 million. The target three-year cumulative performance goal of adding 270 locations represents a compound annual growth rate of 4% in store count compared to December 31, 2016 store count of 2,085. |
| |
(2) | The actual three-year cumulative performance for adjusted net income and total store additions represented a 25% and 11% three-year compound annual growth rate, respectively. |
The following table sets forth each participant’s threshold, target and maximum stock grant opportunities for the 2017 Grant based on this matter, or until the Boardachievement of Directors otherwise determinesthe three-year cumulative performance goals and the actual number of shares that will vest on March 30, 2020 based on the actual three-year cumulative performance:
|
| | | | | | | | | | | | |
| | | | | Shares Awarded Based on Actual Three-Year Cumulative Performance |
| | | Potential Share Award | |
| NEO | | Threshold | | Target | | Maximum | |
| Rick L. Wessel, CEO | | 4,444 |
| | 44,444 |
| | 66,667 |
| | 66,667 |
|
| T. Brent Stuart, COO | | 2,000 |
| | 20,000 |
| | 25,000 |
| | 25,000 |
|
| R. Douglas Orr, CFO | | 2,000 |
| | 20,000 |
| | 25,000 |
| | 25,000 |
|
2018 LTIP Grants - In 2018, the CEO, COO and CFO were granted awards of performance-based restricted stock units under the LTIP. The 2018 Grant has a different frequency for such advisory votes isthree-year cumulative performance period that began on January 1, 2018 and ends on December 31, 2020. These grants are more fully described in the best intereststable of Outstanding Equity Awards as of December 31, 2019 provided later in this section.
Perquisites and Personal Benefits
Certain NEOs received additional remuneration consistent with the stockholdersCompany’s approach to hiring and retaining key personnel. Such perquisites include matching contributions to 401(k) accounts, health insurance, life insurance, disability insurance, automobile allowances, club memberships and certain opportunities to travel using the Company’s aircraft.
The Company does not provide supplemental non-qualified retirement plans to any of its executives and no executive, other than the Company.CEO, received more than $10,000 in perquisites and personal benefits.
The aggregate incremental cost to the Company during 2019 of such benefits is reflected in the Summary Compensation Table below.
Anti-Hedging Policy
The Company’s insider trading policy prohibits all of its directors, officers and employees from engaging in “short sales” or “sales against the box” or trading in puts, calls, warrants or other derivative instruments on the Company’s securities. The Board of Directors believes this prohibition further aligns the interests of directors and executives with those of stockholders, facilitates compliance with insider-trading and other applicable laws, and aids in preventing directors and executives from subjecting themselves to an actual or potential conflict of interest with the Company or creating the appearance of such a conflict.
Executive Stock Ownership and Retention Guidelines
The Company’s Board of Directors has adopted stock ownership guidelines pursuant to which all executive officersNEOs are expected to own shares of Company stock, or hold unvested time-based restricted stock awards, equal in valuetotal to a multiple of the executive officer’s baseNEO’s salary, as follows:
|
| | |
Participant | | Multiple |
CEO | | 5x Salary |
COO and CFO | | 3x Salary |
Other executive officers | | 1x Salary |
|
| | | | | | | | | | |
| Participant | | Target Multiple | | Current Multiple as of April 13, 2020 |
| Rick L. Wessel, CEO | | | 5 | x | Salary | | | 49.9 | x | Salary |
| T. Brent Stuart, COO | | | 3 | x | Salary | | | 2.3 | x | Salary |
| R. Douglas Orr, CFO | | | 3 | x | Salary | | | 15.3 | x | Salary |
| Raul R. Ramos, SVP Latin American Operations | | | 1 | x | Salary | | | 2.2 | x | Salary |
| Anna M. Alvarado, General Counsel | | | 1 | x | Salary | | | 2.1 | x | Salary |
Until an executive has satisfied the stock ownership guidelines, he or she isthey are required to retain 75% of the after-tax shares received upon the exercise or vesting of equity incentive awards. Furthermore, any sales of Company stock by an executive will be permitted only to the extent that the executive will continue to meet the guidelines immediately following such sale. NEOs have five years after they first become eligible for the executive stock ownership guidelines to achieve the target multiple. Those NEOs above who have not yet achieved their respective target multiples are still within the five-year period.
Clawback Policy
The Company’s Board of Directors has adopted an executive compensation recovery, or “clawback,” policy that applies to all executive officersNEOs in the event the Company is required to restate its financial statements. The Compensation Committee may seek recovery of any short- or long-term incentive payment or award granted to executive officers during the three years preceding such restatement where (1)(i) the payment or award grant was calculated based on achievement of the misstated financial results; (2)(ii) the Board of Directors determines the executive engaged in intentional misconduct that materially contributed to the need for the restatement; and (3)(iii) a lower payment or award grant would have been made to the executive based upon the restated financial results.
In addition, if the Company is required, as a result of misconduct, to restate its financial results due to its material noncompliance with any financial reporting requirements under the federal securities laws, ourits CEO and CFO may be legally required to reimburse the Company for any bonus or other incentive-based compensation they received pursuant to the provisions of Section 304 of the Sarbanes-Oxley Act of 2002.
ElementsTax and Accounting Considerations
Section 162(m) of Compensationthe Internal Revenue Code generally disallows a tax deduction to public corporations for compensation greater than $1 million paid for any year to the chief executive officer or chief financial officer (at any time during the year), and the three other most highly compensated executive officers (as of the end of any year). Prior to the enactment of the Tax Cuts and Jobs Act (“Tax Act”) in December 2017, certain types of performance-based compensation were excluded from the $1 million deduction limit if specific requirements were met. Under the Tax Act, this special exclusion for performance-based compensation was eliminated with respect to taxable years beginning after December 31, 2017 with certain limited grandfathered exceptions. As a result of the enactment of the Tax Act, compensation to certain NEOs in excess of $1 million will generally not be tax deductible beginning with the year ending December 31, 2018.
The Company’s principal focus is on total direct compensation,Compensation Committee, where possible and considered appropriate, strives to preserve corporate tax deductions, including a portion that is assured and a portion that is at risk. To achieve these objectives, the typesdeductibility of compensation paidto NEOs, although tax deductibility is not the primary factor used by the Compensation Committee in setting compensation and will become less of a factor used by the Compensation Committee considering the changes made to Section 162(m) of the Code as provided in the Tax Act. The Compensation Committee also reserves flexibility where it is deemed necessary and in the best interests of the Company and its stockholders to continue to attract and retain the best possible executive talent, to approve compensation arrangements that are not necessarily fully tax deductible to the namedCompany. While the Compensation Committee expects it will provide for compensation that will not be deductible under Section 162(m) of the Code, it will continue to structure the executive officers currently consists of base salary, annual performance incentive compensation (primarily in the form of cash payments), annual cash bonuses and long-term incentive compensation (primarily in the form of restricted stock awards).
“At-Risk” Pay Mix
Aprogram so that a significant portion of total executive compensation is linked to the compensation for our named executive officers isperformance of the Company.
Compensation Committee Report
The Compensation Committee of the Company has reviewed and discussed the “Compensation Discussion and Analysis” set forth above with management and, based on such review and discussions, the Compensation Committee recommended to the Directors that the “Compensation Discussion and Analysis” be included in this Proxy Statement and incorporated by reference into the formCompany’s Annual Report on Form 10-K.
Members of at-risk variable compensation. We believe this pay best aligns the interestsCompensation Committee:
Randel G. Owen
Daniel E. Berce
Mikel D. Faulkner
James H. Graves
The Compensation Committee report above does not constitute “soliciting material” and will not be deemed “filed” or incorporated by reference into any of our named executive officers with those of our stockholders. the Company’s filings under the Securities Act or the Exchange Act, except to the extent that the Company specifically incorporates it by reference herein.
Summary Compensation Table
The following table detailssummarizes the at-risktotal compensation paid or earned by the 2019 NEOs for the years ended December 31, 2019, 2018 and not at-risk direct compensation to our named executive officers for fiscal 2015:2017:
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Direct Compensation Pay Mix | | % of Direct Compen- sation "At-Risk" |
| | | Fixed Pay: | | Variable Pay: | |
| | | Base Salary | | Bonus | | APIP (1) | | RSIP (1) (2) | |
| Participant | | $ | | % | | $ | | % | | $ | | % | | $ | | % | |
| CEO | | 1,021,760 |
| | 30 | % | | — |
| | — | % | | 1,021,760 |
| | 30 | % | | 1,404,300 |
| | 40 | % | | 70 | % |
| CFO | | 487,190 |
| | 34 | % | | — |
| | — | % | | 487,190 |
| | 34 | % | | 468,100 |
| | 32 | % | | 66 | % |
| Other Named Executive Officers (averaged) | | 356,667 |
| | 55 | % | | 295,000 |
| | 45 | % | | — |
| | — | % | | — |
| | — | % | | 45 | % |
|
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | Non- | | | | |
| | | | | | | | | | | Equity | | | | |
| | | | | | | | | | | Incentive | | | | |
| | | | | | | | | | | Plan | | All Other | | |
| Name and | | | | | | | | Stock | | Compen- | | Compen- | | |
| Principal | | | | Salary | | Bonus | | Awards | | sation | | sation | | Total |
| Position | | Year | | $ | | $ | | $ (1) | | $ (2) | | (3) | | $ |
| Rick L. Wessel, | | 2019 | | 1,175,000 |
| | — |
| | 3,647,252 |
| | 2,443,256 |
| | 164,213 |
| | 7,429,721 |
|
| Vice-Chairman, Chief | | 2018 | | 1,175,000 |
| | — |
| | 2,926,000 |
| | 3,525,000 |
| | 178,440 |
| | 7,804,440 |
|
| Executive Officer | | 2017 | | 1,075,000 |
| | — |
| | 2,144,423 |
| | 2,825,945 |
| | 126,631 |
| | 6,171,999 |
|
| | | | | | | | | | | | | | | |
| T. Brent Stuart, | | 2019 | | 725,000 |
| | — |
| | 1,326,266 |
| | 1,116,271 |
| | — |
| | 3,167,537 |
|
| President, Chief Operating | | 2018 | | 725,000 |
| | — |
| | 1,024,100 |
| | 1,450,000 |
| | — |
| | 3,199,100 |
|
| Officer | | 2017 | | 700,000 |
| | — |
| | 965,000 |
| | 1,270,075 |
| | — |
| | 2,935,075 |
|
| | | | | | | | | | | | | | | |
| R. Douglas Orr, | | 2019 | | 675,000 |
| | — |
| | 1,326,266 |
| | 1,047,386 |
| | — |
| | 3,048,652 |
|
| EVP, Chief Financial | | 2018 | | 675,000 |
| | — |
| | 1,024,100 |
| | 1,350,000 |
| | — |
| | 3,049,100 |
|
| Officer, Secretary, Treasurer | | 2017 | | 650,000 |
| | — |
| | 965,000 |
| | 1,179,356 |
| | — |
| | 2,794,356 |
|
| | | | | | | | | | | | | | | |
| Raul R. Ramos, | | 2019 | | 441,000 |
| | 750,000 |
| | 260,580 |
| | — |
| | — |
| | 1,451,580 |
|
| SVP Latin American | | 2018 | | 420,000 |
| | 800,000 |
| | 73,150 |
| | — |
| | — |
| | 1,293,150 |
|
| Operations | | 2017 | | 400,000 |
| | 625,000 |
| | 44,250 |
| | — |
| | — |
| | 1,069,250 |
|
| | | | | | | | | | | | | | | |
| Anna M. Alvarado | | 2019 | | 525,000 |
| | 440,000 |
| | 347,440 |
| | — |
| | — |
| | 1,312,440 |
|
| General Counsel | | 2018 | | 500,000 |
| | 400,000 |
| | 219,450 |
| | — |
| | — |
| | 1,119,450 |
|
| | | 2017 | | 450,000 |
| | 350,000 |
| | 88,500 |
| | — |
| | — |
| | 888,500 |
|
| |
(1) | TwoAmounts represent the grant date fair value determined in accordance with FASB ASC Topic 718 of restricted stock unit awards granted under the terms of the named executive officers were included as participantsCompany’s LTIP, which are described in the APIP“Long-Term Incentive Compensation” section of the “Compensation Discussion and RSIPAnalysis” above. For performance-based awards issued to the CEO, COO and CFO, the grant date fair value was determined by multiplying the number of shares that would be issued based upon achievement of the target award by the closing market price of the Company’s Common Stock on the date of the grant. Assuming the performance measures for fiscal 2015:the 2019 performance grants would be achieved at maximum levels, the grant date fair value of the awards for 2019 would be $5,470,877 for the CEO and $1,989,441 for the COO and CFO. |
| |
(2) | The fair valueAmounts represent cash incentive awards earned under the terms of the restricted stock awards isCompany’s APIP. The APIP provides for the payment of annual cash incentive compensation based upon the achievement of performance goals established annually by the Compensation Committee based on one or more specified performance criteria, as more fully described in the Company’s Common Stock average high“Compensation Discussion and low market price ($46.81) on the day of grant (March 11, 2015) and the maximum number of shares that can potentially be earned (30,000 shares and 10,000 shares for the CEO and CFO, respectively). |
Base Salary
The Company offers what it believes to be competitive base salaries to its named executive officers. The base salary must be sufficient to attract and retain talented executives and provide a secure base of cash compensation. In addition, base salary levels for the Company’s executive officers are set at levels the Compensation Committee believes to be, based on its general business experience and review of peer company data, competitive in relation to the salary levels of executive officers in the Company’s peer group, taking into consideration the executive officer’s position, tenure, responsibility and need for special expertise. Annual salary increases, typically determined in January of each year, are not assured and adjustments to base salaries take into account subjective factors such as the executive’s performance against job expectations, changes in the market and increased job responsibilities and experience.
For 2015, the CEO’s base salary was increased by 3% from $992,000 to $1,021,760, primarily as a cost of living adjustment. The weighted-average base salaries of all named executive officers as a group increased 3% in 2015 as compared to 2014. Over the past five years, the compound annual growth rate in the CEO’s base salary was 4%.
Short-Term Incentive Compensation
The Company’s short-term incentive plans for the named executive officers are intended to drive short-term (typically one year) operating and financial results deemed crucial to the Company’s success.
Annual Performance Incentive Plan - Certain named executive officers may receive annual incentive compensation through the Annual Performance Incentive Plan (“APIP”), which is provided under the terms of the stockholder-approved Executive Performance Incentive Plan (the “Incentive Plan”). The APIP provides for the payment of annual cash incentive compensation based upon the achievement of performance goals established annually by the Compensation Committee based on one or more specified performance criteria. The APIP provides for the grant of awards that are intended to qualify as performance-based under Code Section 162(m).
The Company’s Compensation Committee determines the participants in the APIP. Participation is limited to named executive officers who are deemed to have direct, overall responsibility for directing the strategy and operations of the Company. For 2015, the CEO and CFO were the only executive officer participants in the APIP.
The Compensation Committee also administers the calculation of amounts earned under the APIP. The Compensation Committee measures the performance of the Company against an annual business plan prepared by management and reviewed and approved by the Board of Directors at the beginning of the fiscal year. The Company’s level of achievement of the performance goals set forth in the annual business plan will result in the payment of a cash incentive award equal to a percentage of the base salary of the participating executive officer. The performance goals are approved by the Compensation Committee and designed to reinforce the Company’s focus on profitability and enhancement of long-term stockholder value. The participants may earn annual cash incentives between 0% and a stated maximum percentage of their respective base salary (which for fiscal 2015 was set at 350% for the CEO and 250% for the CFO). The range of percentages for each participating executive officer are based on the scope of the officer’s responsibilities, internal pay equity among participating executive officers with similar responsibilities and competitive considerations and are reviewed annually by the Compensation Committee. The Incentive Plan provides the Compensation Committee with discretion, to the extent permitted under Code Section 162(m), to adjust incentive awards to reflect the impact of certain corporate transaction and other extraordinary or nonrecurring events. The Compensation Committee exercised its discretion to reduce the calculated individual incentive awards in 2014; however, in 2015 and 2013, the Compensation Committee did not exercise its discretion to adjust any individual awards.
The following table sets forth each participant’s threshold and maximum payout opportunities, as a percentage of their base salary, for each of the 2015 APIP performance measures:
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | Diluted | | EBITDA From | | | | | | | | |
| | | Earnings Per Share | | Continuing Operations | | Store Additions | | Total |
| Participant | | Threshold | | Maximum | | Threshold | | Maximum | | Threshold | | Maximum | | Threshold | | Maximum |
| CEO | | 9 | % | | 175 | % | | 4 | % | | 75 | % | | 4 | % | | 100 | % | | 4 | % | | 350 | % |
| CFO | | 5 | % | | 100 | % | | 3 | % | | 50 | % | | 4 | % | | 100 | % | | 3 | % | | 250 | % |
For fiscal 2015, the Compensation Committee established achievement goals that includes diluted earnings per share targets, EBITDA from continuing operations targets and store additions targets as the performance measures for the APIP (excluding certain non-GAAP adjustments detailed in Appendix A). The Committee believes the nature and mix of these targets is designed to incent an appropriate mix of short-term measures that are earnings and performance oriented while also incenting activity to drive the future growth of the Company. The earnings per share target represents the performance metric which most impacts shareholder returns over a one-year period. The EBITDA target is also focused on the achievement of earnings metrics, but excludes the impact of share repurchases, financing activities and tax strategies, resulting in more favorable measure of core profitability. For this reason, EBITDA is also the measurement used by the Committee to incent long-term compensation awards. The Committee also believes that an appropriate level of store additions is an important short-term strategic target necessary for the Company to achieve its long-term growth objectives.
The following table sets forth the performance goals for each of the 2015 APIP performance measures, the actual performance achieved and the related percentage of each participant’s base salary earned:
|
| | | | | | | | | | | | | | | | | | |
| | | Performance Goals | | 2015 Actual | | Percent of Base Salary Earned |
| Performance Measure | | Threshold | | Maximum | | Performance | | CEO | | CFO |
| Diluted earnings per share (1) | | $ | 2.70 |
| | $ | 2.90 |
| | $ | 2.42 |
| | — | % | | — | % |
| EBITDA from continuing operations ($ thousands) (2) | | $ | 147,163 |
| | $ | 155,727 |
| | $ | 132,201 |
| | — | % | | — | % |
| Store additions (3) | | 65 |
| | 90 |
| | 103 |
| | 100 | % | | 100 | % |
| |
(1) | Diluted Earnings Per Share - the range of 2015 threshold performance to maximum performance represented approximately a 1% decrease to 7% increase (on a constant currency basis) from 2014 actual diluted earnings per share (excluding certain non-GAAP adjustments). The performance range reflected significantly lowered expectations for non-core scrap jewelry and payday lending operations and increased interest expense.Analysis” above. |
| |
(2)(3) | EBITDA from continuing operations ($ thousands) -The Company provides the rangeNEOs with certain group life, health, medical, and other noncash benefits generally available to all salaried employees that are not included in this column pursuant to SEC rules. As permitted by SEC rules, no amounts are shown in this table for perquisites and personal benefits for any individual NEOs for whom such amounts do not exceed $10,000 in the aggregate. |
Mr. Wessel’s all other compensation for 2019 includes matching contributions under the First Cash 401(k) Profit Sharing Plan of $7,000, an automobile allowance of $8,752, reimbursement for dues at a country club in the amount of $21,520, Company-paid health insurance premiums in the amount of $7,808, allowance for tax preparation fees of $3,000 and personal use of the corporate aircraft of $116,133. The incremental cost of the personal use of the corporate aircraft was determined on a per flight and/or hours used basis based on variable costs associated with personal flight activity. The variable costs used in the calculation included fuel, crew compensation and travel, certain maintenance and repair expenses, related unoccupied positioning, or “deadhead,” flights, landing/parking and supplies.
Grants of Plan-Based Awards for 2019
The following table provides information regarding individual grants of plan-based awards to the NEOs during 2019. Except as set forth below, there were no other grants of equity or non-equity awards to NEOs during 2019.
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Name | | Grant Date | | Estimated Future Payouts Under Non- Equity Incentive Plan Awards (1) | | Estimated Future Payouts Under Equity Incentive Plan Awards (2) | | All Other Stock Awards: Number of Shares of Stock or Units (4) (#) | | All Other Option Awards: Number of Securities Underlying Options (#) | | Exercise or Base Price of Option Awards ($/Sh) | | Grant Date Fair Value of Stock and Option Awards (5) $ |
| | | Thresh- old (3) ($) | | Target ($) | | Maximum ($) | | Thresh- old (3) (#) | | Target (#) | | Maximum (#) | | | | |
| Wessel | | — | | 59,000 |
| | 1,763,000 |
| | 3,525,000 |
| | — | | — | | — | | — | | — | | — | | — |
| | | Feb. 19, 2019 | | — | | — | | — | | 2,100 |
| | 41,990 |
| | 62,985 |
| | — | | — | | — | | 3,647,252 |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Stuart | | | | 36,000 |
| | 906,000 |
| | 1,450,000 |
| | — | | — | | — | | — | | — | | — | | — |
| | | Feb. 19, 2019 | | — | | — | | — | | 763 |
| | 15,269 |
| | 22,904 |
| | — | | — | | — | | 1,326,266 |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Orr | | — | | 34,000 |
| | 844,000 |
| | 1,350,000 |
| | — | | — | | — | | — | | — | | — | | — |
| | | Feb. 19, 2019 | | — | | — | | — | | 763 |
| | 15,269 |
| | 22,904 |
| | — | | — | | — | | 1,326,266 |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Ramos | | Feb. 19, 2019 | | — | | — | | — | | — | | — | | — | | 3,000 |
| | — | | — | | 260,580 |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Alvarado | | Feb. 19, 2019 | | — | | — | | — | | — | | — | | — | | 4,000 |
| | — | | — | | 347,440 |
|
| |
(1) | Amounts represent threshold, target and maximum potential payouts under the terms of 2015 threshold performancethe APIP, which is described in the “Short-Term Incentive Compensation” section of the “Compensation Discussion and Analysis” above. The actual payouts awarded under the terms of APIP were $2,443,256, $1,116,271 and $1,047,386 to maximum performance represented approximately a 6% to 13% increase (on a constant currency basis) from 2014 actual EBITDA from continuing operations (excluding certain non-GAAP adjustments). The performance rangeMessrs. Wessel, Stuart and Orr, respectively, and such amounts are reflected significantly lowered expectations for non-core scrap jewelry and payday lending operations.in the “Summary Compensation Table” above. |
| |
(3)(2) | Store Additions -Amounts represent the rangenumber of 2015 thresholdshares granted and which may be earned under the LTIP, which is described in the “Long-Term Incentive Compensation” section of the “Compensation Discussion and Analysis” above. The awards for Messrs. Wessel, Stuart and Orr vest three years from the date of the grant and have a three-year cumulative performance to maximum performance represented a 5% to 45% increase in store additions compared toperiod beginning on January 1, 2019 and ending on December 31, 2021 and therefore, none of the historical five-year average for annual new store openings for the period from 2010 through 2014.awards have vested. |
| |
(3) | No award is earned if actual performance is less than this threshold amount. |
The Committee believes that the historical payout levels under the APIP demonstrate an appropriate level of rigor in setting the annual performance goals. The following table details each participant’s threshold and maximum payout opportunities and the actual percentage of each participant’s base salary earned for the performance measures established by the Compensation Committee over the past five years:
|
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2015 | | 2014 | | 2013 | | 2012 | | 2011 |
| | CEO | CFO | | CEO | | CFO | | CEO | CFO | | CEO | CFO | | CEO | CFO |
| Threshold | 4 | % | 3 | % | | 3 | % | | 3 | % | | 25 | % | 25 | % | | 25 | % | 25 | % | | 25 | % | 25 | % |
| Maximum | 350 | % | 250 | % | | 350 | % | | 250 | % | | 350 | % | 200 | % | | 350 | % | 200 | % | | 300 | % | 175 | % |
| Actual | 100 | % | 100 | % | | 179 | % | (1) | 142 | % | (1) | 50 | % | 25 | % | | 350 | % | 200 | % | | 300 | % | 175 | % |
| |
(1)(4) | BasedThe awards for Mr. Ramos and Ms. Alvarado vest in five equal annual installments beginning in February 2020 and become fully vested in February 2024. |
| |
(5) | Amount represents the grant date fair value based on the Company’s overall financial performance in 2014,target share award and the Compensation Committee elected to apply a discretionary 20% reduction inclosing price on the dollar valuedate of the amounts awarded under the APIP in 2014. This adjustment reduced the APIP award from 223% of base salary to 179% for the CEO and from 178% of base salary to 142% for the CFO.grant. |
Outstanding Equity Awards as of December 31, 2019
Annual Discretionary Cash Bonuses - The Company’s executive compensation program also includes discretionary annual cash bonuses reflectingfollowing table provides information on the Company’sholdings of stock options and the individual executive’s performance. Annual cash bonuses may be paid to certain named executive officers and other officers and executives to reflect the breadth of their expertise and responsibility, achievement of certain financial or strategic results and to make the cash component of compensation competitive with that of the Company’s peers. The Company maintains broad discretion to vary overall cash compensation for a given year by varying the amount, if any, of such cash bonuses. These cash bonuses may reflect a material part of the named executive officers’ overall compensation, with payments commensurate with the executive’s position, responsibilities and individual and overall Company performance. No discretionary cash bonuses were awarded to the CEO or CFO for 2015. Annual cash bonuses, if any, paid to the CEO and CFO are determined and approvedstock awards by the Compensation Committee.NEOs as of December 31, 2019. Each outstanding option and stock award is shown separately for each NEO.
Annual cash bonuses paid to other named executive officers are calculated and approved by the Compensation Committee based on the CEO’s recommendation. These discretionary cash bonuses reflected both the achievement of certain operational and financial objectives and the targeted compensation levels necessary to provide total compensation packages necessary to attract and retain executives in senior management roles. Annual cash bonuses are subject to the Compensation Committee’s discretion to award bonuses greater or lower than the recommended amount if they deem it appropriate. Fiscal 2015 discretionary cash bonus awards consisted of $425,000 to Mr. Ramos, $400,000 to Mr. Moore and $60,000 to Mr. Watson.
Long-Term Incentive Compensation
The compensation objective of retaining the best people for the job leads the Company to make periodic equity awards to its executive officers. These awards provide incentive for the executive officers to stay with the Company over the long term and align the interests of the executive officers with those of the Company’s stockholders. These equity awards also provide additional flexibility to the Compensation Committee to reward superior performance by executive officers.
Restricted Stock Awards - The Compensation Committee has established a Restricted Stock Incentive Plan (“RSIP”), which is a component of the Company’s 2011 Long-Term Incentive Plan, for certain named executive officers. Performance-based restricted stock awards granted under the RSIP typically vest over four years, contingent upon the Company attaining defined measures of earnings growth for future reporting periods. The Compensation Committee certifies the attainment of performance goals annually upon completion of each fiscal year, and any earned shares are distributed to participants following the end of the applicable performance period. The grants have specific rules related to the treatment of the awards in the event of termination for cause, voluntary resignation, retirement, involuntary termination and change in control, which are described later under Potential Payments Upon Termination or Change in Control. The RSIP provides for the grant of awards that are intended to qualify as performance-based under Code Section 162(m).
A total of 40,000 restricted stock awards were granted under the RISP in fiscal 2015, of which the CEO was granted 30,000 shares and the CFO was granted 10,000 shares. The shares vest in four annual installments based on the attainment of an annual performance target. The defined performance measure for the four year vesting period beginning in 2015 was EBITDA from continuing operations excluding the tax-effected gross earnings contribution from the sale of scrap jewelry. The Compensation Committee believes that EBITDA is a preferred metric to use for long-term performance evaluation because the EBITDA target is focused on the achievement of earnings metrics, but excludes the impact of share repurchases, financing activities and tax strategies, and therefore represents a better measure of core profitability. The cumulative annual EBITDA growth targets over the 2014 base period measure were: 2% growth in 2015, 12% growth in 2016, 22% growth in 2017 and 32% growth in 2018. The growth targets are cumulative in nature meaning that under-performance in a given year does not lower the target amounts for future vesting periods.
The Committee believes that the historical payout levels under the RISP demonstrate an appropriate level of rigor in setting the long-term performance goals. The following table details the number of award shares granted, vested and forfeited for all performance based share awards granted to current participating named executive officers over the past five years:
|
| | | | | | | | | | | | | | | | | |
| Grant Year | | Granted | | Measure | | Average Annual Increase (1) | | | Total Vested | | Total Forfeited | | Remaining Unvested |
| 2015 | | 40,000 |
| | EBITDA | | 7.2% | | | — |
| | 10,000 |
| | 30,000 |
|
| 2014 | | 40,000 |
| | EBITDA | | 8.8% | | | — |
| | 20,000 |
| | 20,000 |
|
| 2013 | | 40,000 |
| | EPS | | 9.9% | (2) | | 10,000 |
| | 20,000 |
| | 10,000 |
|
| 2012 | | 40,000 |
| | Net Income | | 12.5% | (2) | | 20,000 |
| | 20,000 |
| | — |
|
| 2011 | | 40,000 |
| | Net Income | | 17.1% | (2) | | 24,000 |
| | 16,000 |
| | — |
|
| Total | | 200,000 |
| | | | | | | 54,000 |
| | 86,000 |
| | 60,000 |
|
| Percent of shares vested and forfeited based on attainment of performance measures | | | | | 39 | % | | 61 | % | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Option Awards | | Stock Awards |
| Name | | Number of Securities Underlying Unexercised Options (#) Exercisable | | Number of Securities Underlying Unexercised Options (#) Unexercisable | | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | | Option Exercise Price ($) | | Option Expiration Date | | Number of Shares or Units of Stock That Have Not Vested (#) | | Market Value of Shares or Units of Stock That Have Not Vested (8) ($) | | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested (8) ($) |
| Wessel | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 66,667 |
| (2) | 5,375,360 |
|
| | | | | | | | | | | | | | | | | 60,000 |
| (3) | 4,837,800 |
|
| | | | | | | | | | | | | | | | | 10,498 |
| (4) | 846,454 |
|
| | | | | | | | | | | | | | | | | | | |
| Stuart | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 25,000 |
| (2) | 2,015,750 |
|
| | | | | | | | | | | | | | | | | 21,000 |
| (3) | 1,693,230 |
|
| | | | | | | | | | | | | | | | | 3,817 |
| (4) | 307,765 |
|
| | | | | | | | | | | | | | | | | | | |
| Orr | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 25,000 |
| (2) | 2,015,750 |
|
| | | | | | | | | | | | | | | | | 21,000 |
| (3) | 1,693,230 |
|
| | | | | | | | | | | | | | | | | 3,817 |
| (4) | 307,765 |
|
| | | | | | | | | | | | | | | | | | | |
| Ramos | | 20,000 |
| (1) | 20,000 |
| (1) | | | 38.00 |
| | 11/2021 |
| | 600 |
| (5) | 48,378 |
| | — |
| | — |
|
| | | — |
| | — |
| | | | — |
| | — |
| | 800 |
| (6) | 64,504 |
| | — |
| | — |
|
| | | | | | | | | | | | | 3,000 |
| (7) | 241,890 |
| | | | |
| | | | | | | | | | | | | | | | | | | |
| Alvarado | | — |
| | — |
| | — |
| | — |
| | — |
| | 1,200 |
| (5) | 96,756 |
| | — |
| | — |
|
| | | — |
| | — |
| | — |
| | — |
| | — |
| | 2,400 |
| (6) | 193,512 |
| | — |
| | — |
|
| | | | | | | | | | | | | 4,000 |
| (7) | 322,520 |
| | | | |
| |
(1) | Amount representsOption award granted in 2011. Vesting is time-based with 10,000 shares vesting on July 1, 2018, 2019, 2020 and 2021, respectively. |
| |
(2) | The 2017 restricted stock awards granted under the compound annualLTIP to current NEOs are eligible for performance-based vesting on March 30, 2020 upon the achievement of performance measures based on a three-year cumulative performance period that ended on December 31, 2019. The performance measures are defined as adjusted net income growth rateand total store additions over the three-year cumulative period. The actual performance over the three-year cumulative performance period ended December 31, 2019 resulted in the maximum grant earned, or 66,667 shares for the CEO and 25,000 shares for the COO and CFO each, which will vest on March 30, 2020. See “Historical LTIP Grants and Performance” section above for further information. |
| |
(3) | The 2018 restricted stock awards granted under the LTIP to current NEOs are eligible for performance-based vesting on January 31, 2021 upon the achievement of performance measures based on a three-year cumulative performance period ending on December 31, 2020. The performance measures are defined as adjusted net income growth and total store additions over the three-year cumulative period. Based on the Company’s cumulative achievement of the performance measuremeasures to date (the two-year period ended December 31, 2019), which is above the target but below the maximum, the awards are reflected at maximum payout amounts in accordance with SEC guidance. |
| |
(4) | The 2019 restricted stock awards granted under the LTIP to current NEOs are eligible for performance-based vesting on February 19, 2022 upon the achievement of performance measures based on a three-year cumulative performance period ending December 31, 2021. The performance measures are defined as adjusted net income growth, pawn revenue growth and new store openings over the three-year cumulative period. Based on the Company’s achievement of the performance measures to date (the year ended December 31, 2019), which is below the threshold, the awards are reflected at threshold payout amounts in accordance with SEC guidance. If the performance measures for the 2019 restricted stock awards resulted in a maximum grant upon completion of the vesting period, the CEO would earn 62,985 shares and the COO and CFO would each earn 22,904 shares. |
| |
(5) | Restricted stock awards granted in 2017. Vesting is time-based with 20% scheduled to vest on February 8, 2018, 2019, 2020, 2021 and 2022. |
| |
(6) | Restricted stock awards granted in 2018. Vesting is time-based with 20% scheduled to vest on January 30, 2019, 2020, 2021, 2022 and 2023. |
| |
(7) | Restricted stock awards granted in 2019. Vesting is time-based with 20% scheduled to vest on February 19, 2020, 2021, 2022, 2023 and 2024. |
| |
(8) | The market value of the unvested share awards is based on the respective grant year’s base period.closing price of the Company’s Common Stock as of December 31, 2019, which was $80.63. |
(2) The 2013, 2012Option Exercises and 2011 awards were modifiedStock Vested in 2014 to remove gross profit contribution from wholesale scrap jewelry sales (net of tax) from the performance measure. Average annual increase is based on the modified base period and actual performance measure.2019
The datefollowing table provides information for the NEOs regarding (i) the aggregate stock options exercised during 2019, including the number of grant for all equityshares acquired on exercise and the value realized, and (ii) the aggregate number of shares acquired upon the vesting of restricted stock awards granted to executives and employees is the datevalue realized, each before the payment of Compensation Committee approval. The Company does not have a program, plan or practice of timing the grant of equity awards in coordination with the release of material non-public information. The Company believes that all such equity grants as described herein align the executives’ interests with those of the Company’s stockholders.any applicable withholding tax and broker commissions:
|
| | | | | | | | | | | | |
| | | Option Awards | | Stock Awards |
| Name | | Number of Shares Acquired on Exercise | | Value Realized on Exercise $ | | Number of Shares Acquired on Vesting | | Value Realized on Vesting $ (4) |
| Wessel | | — |
| | — |
| | 7,500 |
| (1) | 604,725 |
|
| | | | | | | | | |
| Stuart | | — |
| | — |
| | — |
| | — |
|
| | | | | | | | | |
| Orr | | — |
| | — |
| | 2,500 |
| (1) | 201,575 |
|
| | | | | | | | | |
| Ramos | | — |
| | — |
| | 200 |
| (2) | 16,450 |
|
| | | — |
| | — |
| | 200 |
| (3) | 16,486 |
|
| | | | | | | | | |
| Alvarado | | — |
| | — |
| | 400 |
| (2) | 32,900 |
|
| | | — |
| | — |
| | 600 |
| (3) | 49,458 |
|
| |
(1) | In 2016, the CEO was granted 30,000 shares and the CFO was granted 10,000 shares under the LTIP, which vest in four annual installments of 7,500 shares for the CEO and 2,500 shares for the CFO based on the attainment of an annual performance target of adjusted EBITDA. The adjusted EBITDA target for each of the annual vesting periods was set by the Compensation Committee in early 2016, which was prior to the Merger. Actual 2019 adjusted EBITDA was $304 million compared to the 2019 target of $159 million and, accordingly, 100% of the shares available for vesting in 2019 were awarded. |
| |
(2) | In 2017, the Company granted 1,000 and 2,000 shares of time-based restricted stock units to Mr. Ramos and Ms. Alvarado, respectively. These time-based awards vest ratably over time beginning in February 2018 and become fully vested in February 2022. |
| |
(3) | In 2018, the Company granted 1,000 and 3,000 shares of time-based restricted stock units to Mr. Ramos and Ms. Alvarado, respectively. These time-based awards vest ratably over time beginning in January 2019 and become fully vested in January 2023. |
| |
(4) | Value realized represents the value as calculated based on the price of the Company’s Common Stock on the vesting date. |
Pension Benefits
Certain named executive officers received additional remuneration consistent withThe Company doesnot have a defined benefit pension plan for its employees. The only retirement plan available to the NEOs is the Company’s approachqualified 401(k) savings plan, which is available to hiringgenerally all full-time U.S.-based employees.
Nonqualified Defined Contribution and retaining key personnel. Such perquisites include matching contributions to 401(k) accounts, health insurance, life insurance, disability insurance, automobile allowances, club memberships and certain opportunities to travel using the Company’s aircraft. Other Nonqualified Deferred Compensation Plans
The aggregate incremental cost to the Company during fiscal does2015 of such benefits is reflected in the Summary Compensation Table below.not have nonqualified defined contribution or other nonqualified deferred compensation plans for its employees or directors.
Employment Agreements and Change in Control Provisions
The Company and the Compensation Committee believe that the employment agreements are necessary in order to attract and retain thekey senior executives and, accordingly, the Company has entered into employment agreements with Messrs. Wessel, Orr, Ramos and Moore, which are more fully described in “Employment Agreements” set forth below.certain current NEOs. The Compensation Committee believes that the employment agreements (and the change-of-controlchange in control provisions included therein) that have been entered into were merited in light of all relevant circumstances, including each individual’s past employment experience, desired terms and conditions of employment and the strategic importance of their respective positions, including stability and retention. The Compensation Committee reviews the agreements at the time they are entered into in order to determine current market terms for the particular executive and agreement.
The Compensation Committee believes that the change-of-controlchange in control provisions are necessary in order to retain and maintain stability among the executive group and that the terms of the change-of-controlchange in control provisions are reasonable based on its review of the change-of-controlchange in control provisions for similarly situated peer group companies. The change in control provisions in the employment agreements for the CEO and CFOcertain NEOs provide for severance benefits only in the event of an involuntary termination of employment by the Company without “cause” or by the executive for “good reason,” as such terms are defined in the employment agreements.
The overall goal of the Compensation Committee is to insure thatensure compensation policies are established that are consistent with the Company’s strategic business objectives and that provide incentives for the attainment of those objectives. This is affected in the context of a compensation program that includes base pay, annual and long-term incentive compensation and stock ownership.
TaxThe Company did not enter into any new or amended employment agreements in 2019.
Summary of Existing Employment Agreements
CEO, COO & CFO Agreements:
In August 2016, the Company entered into new employment agreements with Messrs. Wessel, Stuart and Accounting ConsiderationsOrr, the Company’s CEO, COO and CFO, respectively. The terms of these employment agreements run through December 31, 2021. The Compensation Committee believes the longer term of these contracts are appropriate given the transformational impact of the Merger and the desire by the stockholders for continuity in the senior management team over the next several years. Additionally, the maximum severance payouts under these contracts are capped at one year’s salary and average annual incentive for termination without cause or for good reason or two years of salary and average annual incentive for such termination following a change in control.
The Company considers accountingemployment agreements provided for annual salaries, to be effective as of January 1, 2017, in the following amounts: $1,075,000 for Mr. Wessel, $700,000 for Mr. Stuart and tax implications when designing its executive compensation$650,000 for Mr. Orr, in each case subject to annual review and increases in the discretion of the Compensation Committee. The executives are eligible to earn an annual incentive programs. For example,based on the satisfaction of performance criteria established by the Compensation Committee has carefully consideredfor each year during the implications of Section 162(m)term of the Internal Revenue Code, and believes tax deductibilityagreement, with a target incentive opportunity equal to not less than a specified percentage of compensation is an important consideration. Accordingly, the Compensation Committee, where possible and considered appropriate, strives to preserve corporate tax deductions, including the deductibility of compensation to named executive officers. The Compensation Committee also reserves flexibility, however, where it is deemed necessary andexecutive’s then current salary (150% in the best interestscase of Mr. Wessel; 100% in the
Company case of Messrs. Stuart and its stockholdersOrr). In addition, the executives are eligible for grants of stock-based awards under the Company’s long-term equity compensation plan and will be eligible to continueparticipate in any of the Company’s incentive, savings, retirement and welfare benefit plans available to attract and retain the best possible executive talent, to approve compensation arrangements that are not necessarily fully tax deductible toother senior officers of the Company.
The employment agreements provide that if an executive’s employment with the Company is terminated during the term by the Company without “cause” or by the executive for “good reason” (as such terms are defined in the employment agreements), the executive would be entitled to a lump sum cash severance payment equal to one times (or two times, if such termination occurs within twelve months following a change in control of the Company) the sum of (i) the executive’s salary in effect as of the termination, and (ii) the average of the annual cash incentives earned by the executive for each of the three years immediately preceding the year in which the termination occurs. The executive would also be entitled to continue to participate in the Company’s health and welfare benefit plans at active employee rates for a period of eighteen months (the “COBRA subsidy”). In addition, if such termination occurs within twelve months following a
change in control of the Company, the executive would be entitled to a pro rata annual cash incentive for the year in which the termination occurs and accelerated vesting and full payout under all outstanding time-vesting and performance-based equity incentive awards (based on an assumed achievement of all relevant performance goals at “target” level, or based on a higher actual or deemed level of achievement of performance goals, in the sole discretion of the Compensation Committee ReportCommittee). Furthermore, if such termination occurs within twelve months following a change in control of the Company, the Company will pay to the executive, in lieu of the COBRA subsidy described above, a lump sum in cash in an amount equal to the full monthly cost of the executive’s health and welfare benefit coverage multiplied by 24.
The Compensation Committeeemployment agreements prohibit the executives from competing with the Company during the employment term and for a period of 24 months following termination of employment. The executives would also be prohibited from soliciting Company customers and recruiting Company employees during this period.
Other NEO Agreements:
In July 2018, the Company entered into new employment agreements with Mr. Ramos and Ms. Alvarado, the Company’s Senior Vice President, Latin America Operations and General Counsel, respectively. The terms of these employment agreements run through December 31, 2021. The employment agreements provided for annual salaries, to be effective as of January 1, 2019, in the following amounts: $420,000 for Mr. Ramos and $500,000 for Ms. Alvarado, in each case subject to annual review and increases in the discretion of the Company has reviewed and discussed the “Compensation Discussion and Analysis” set forth above with management and,Compensation Committee. The executives are eligible to earn an annual cash bonus based on such reviewthe breadth of their expertise and discussions,responsibility and the achievement of certain financial or strategic results as determined by the Compensation Committee recommendedfor each year during the term of the agreement, with a target cash bonus opportunity equal to not less than a specified percentage of the Boardexecutive’s then current salary (50% in the case of Directors thatboth Mr. Ramos and Ms. Alvarado). In addition, the “Compensation Discussion and Analysis” be included in this Proxy Statement and incorporated by reference intoexecutives are eligible for grants of stock-based awards under the Company’s Annual Report on Form 10-K.
Members of the Compensation Committee:
Mikel D. Faulkner
Randel G. Owen
Gabriel Guerra Castellanos
The Compensation Committee report above does not constitute “soliciting material”long-term equity compensation plan and will not be deemed “filed” or incorporated by reference intoeligible to participate in any of the Company’s filingsincentive, savings, retirement and welfare benefit plans available to other senior officers of the Company.
The employment agreements provide that if an executive’s employment with the Company is terminated during the term by the Company without “cause” or by the executive for “good reason” (as such terms are defined in the employment agreements), the executive would be entitled to a lump sum cash severance payment equal to 0.75 times (or 1.5 times, if such termination occurs within twelve months following a change in control of the Company) the sum of (i) the executive’s salary in effect as of the termination, and (ii) the average of the annual cash incentives earned by the executive for each of the three years immediately preceding the year in which the termination occurs. The executive would also be entitled to continue to participate in the Company’s health and welfare benefit plans at active employee rates for a period of twelve months (the “COBRA subsidy”). In addition, if such termination occurs within twelve months following a change in control of the Company, the executive would be entitled to a pro rata annual cash incentive for the year in which the termination occurs and accelerated vesting and full payout under all outstanding time-vesting and performance-based equity incentive awards (based on an assumed achievement of all relevant performance goals at “target” level, or based on a higher actual or deemed level of achievement of performance goals, in the Securities Actsole discretion of 1933, as amended (“Securities Act”), or the Exchange Act, exceptCompensation Committee). Furthermore, if such termination occurs within twelve months following a change in control of the Company, the Company will pay to the extent thatexecutive, in lieu of the COBRA subsidy described above, a lump sum in cash in an amount equal to the full monthly cost of the executive’s health and welfare benefit coverage multiplied by 18.
The employment agreements prohibit the executives from competing with the Company specifically incorporates it by reference herein.during the employment term and for a period of 24 months following termination of employment. The executives would also be prohibited from soliciting Company customers and recruiting Company employees during this period.
Summary Compensation Table
The table below summarizes the total compensation paid or earned by Messrs. Rick L. Wessel, R. Douglas Orr, Raul R. Ramos, Sean D. Moore and Peter H. Watson, the 2015 named executive officers, for the fiscal years ended December 31, 2015, 2014 and 2013.
|
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | Non- | | | | |
| | | | | | | | | | | Equity | | | | |
| | | | | | | | | | | Incentive | | | | |
| | | | | | | | | | | Plan | | All Other | | |
| Name and | | | | | | | | Stock | | Compen- | | Compen- | | |
| Principal | | | | Salary | | Bonus | | Awards | | sation | | sation | | Total |
| Position | | Year | | $ | | $ | | $ (1) | | $ (2) | | (3) | | $ |
| Rick L. Wessel, | | 2015 | | 1,021,760 |
| | — |
| | 1,404,300 |
| | 1,021,760 |
| | 79,594 |
| | 3,527,414 |
|
| Chief Executive Officer | | 2014 | | 992,000 |
| | — |
| | 1,497,000 |
| | 1,771,917 |
| | 99,035 |
| | 4,359,952 |
|
| and President | | 2013 | | 963,040 |
| | — |
| | — |
| | 481,520 |
| | 103,617 |
| | 1,548,177 |
|
| | | | | | | | | | | | | | | |
| R. Douglas Orr, | | 2015 | | 487,190 |
| | — |
| | 468,100 |
| | 487,190 |
| | — |
| | 1,442,480 |
|
| EVP, Chief Financial | | 2014 | | 473,000 |
| | — |
| | 499,000 |
| | 671,986 |
| | — |
| | 1,643,986 |
|
| Officer | | 2013 | | 454,480 |
| | 100,000 |
| | — |
| | 113,620 |
| | — |
| | 668,100 |
|
| | | | | | | | | | | | | | | |
| Raul R. Ramos, | | 2015 | | 345,000 |
| | 425,000 |
| | — |
| | — |
| | — |
| | 770,000 |
|
| SVP Latin American | | 2014 | | 335,000 |
| | 400,000 |
| | — |
| | — |
| | — |
| | 735,000 |
|
| Operations | | 2013 | | 322,537 |
| | 375,000 |
| | | | | | | | 697,537 |
|
| | | | | | | | | | | | | | | |
| Sean D. Moore, | | 2015 | | 320,000 |
| | 400,000 |
| | — |
| | — |
| | — |
| | 720,000 |
|
| SVP Store Development | | 2014 | | 310,000 |
| | 375,000 |
| | — |
| | — |
| | — |
| | 685,000 |
|
| and Facilities | | 2013 | | 286,038 |
| | 350,000 |
| | | | | | | | 636,038 |
|
| | | | | | | | | | | | | | | |
| Peter H. Watson, | | 2015 | | 405,000 |
| | 60,000 |
| | — |
| | — |
| | — |
| | 465,000 |
|
| SVP Compliance and | | 2014 | | 397,838 |
| | 60,000 |
| | — |
| | — |
| | 11,100 |
| | 468,938 |
|
| Government Relations | | 2013 | | 386,250 |
| | 55,000 |
| | — |
| | — |
| | — |
| | 441,250 |
|
| |
(1) | Amounts represent the aggregate grant date fair value determined in accordance with FASB ASC Topic 718 of restricted stock awards granted under the terms of the Company’s RSIP, which are described in the “Long Term Incentive Compensation” section of the “Compensation Discussion and Analysis” above. Grant date fair values were determined by multiplying the number of shares granted times the average of the high and low market price, of the Company’s Common Stock on the date of grant. |
| |
(2) | Amounts represent cash incentive awards earned under the terms of the Company’s APIP. The APIP provides for the payment of annual cash incentive compensation based upon the achievement of performance goals established annually by the Compensation Committee based on one or more specified performance criteria, as more fully described in the “Compensation Discussion and Analysis” above. |
| |
(3) | The Company provides the named executive officers with certain group life, health, medical, and other noncash benefits generally available to all salaried employees that are not included in this column pursuant to SEC rules. As permitted by SEC rules, no amounts are shown in this table for perquisites and personal benefits for any individual named executive officers for whom such amounts do not exceed $10,000 in the aggregate. |
Mr. Wessel’s all other compensation for 2015 includes matching contributions under the First Cash 401(k) Profit Sharing Plan of $6,360, an automobile allowance of $7,396, reimbursement for dues at a country club in the amount of $19,810, Company-paid life insurance premiums in the amount of $551, Company-paid health insurance premiums in the amount of $5,189, allowance for tax preparation fees of $3,000, personal use of the corporate aircraft of $36,565 and Company-paid long-term disability insurance premiums in the amount of $723. The incremental cost of the personal use of the corporate aircraft was determined on a per flight and/or hours used basis based on variable costs associated with personal flight activity. The variable costs used in the calculation included fuel, crew compensation and travel, certain maintenance and repair expenses, related unoccupied positioning, or “deadhead,” flights, landing/parking and supplies.
Employment Agreements
The Company currently has employment agreements with the following named executive officers: Mr. Wessel, Mr. Orr, Mr. Ramos and Mr. Moore. For a summary of these agreements, see the discussion in the “Potential Payments Upon Termination or Changes in Control” section below.
Grants of Plan-Based Awards for Fiscal Year 2015
The following table provides information regarding individual grants of plan-based awards to the named executive officers during 2015. Except as set forth below, there were no other grants of equity or non-equity awards to named executive officers during 2015.
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Name | | Grant Date | | Estimated Future Payouts Under Non- Equity Incentive Plan Awards (1) | | Estimated Future Payouts Under Equity Incentive Plan Awards (2) | | All Other Stock Awards: Number of Shares of Stock or Units (#) | | All Other Option Awards: Number of Securities Underlying Options (#) | | Exercise or Base Price of Option Awards ($/Sh) | | Grant Date Fair Value of Stock and Option Awards $ |
| | | Thres- hold ($) | | Target ($) | | Maximum ($) | | Thres- hold (#) | | Target (#) | | Maximum (#) | | | | |
| Rick L. | | — | | 38,316 | | 1,021,760 | | 3,576,160 |
| | — | | — | | — | | — | | — | | — | | — |
| Wessel | | Mar. 11, 2015 | | — | | — | | — | | 30,000 | | 30,000 | | 30,000 | | — | | — | | — | | 1,404,300 |
| | | | | | | | | | | | | | | | | | | | | | | |
| R. Douglas | | — | | 18,270 | | 487,190 | | 1,217,975 |
| | — | | — | | — | | — | | — | | — | | — |
| Orr | | Mar. 11, 2015 | | — | | — | | — | | 10,000 | | 10,000 | | 10,000 | | — | | — | | — | | 468,100 |
| | | | | | | | | | | | | | | | | | | | | | | |
| Raul R. | | — | | — | | — | | — | | — | | — | | — | | — | | — | | — | | — |
| Ramos | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Sean D. | | — | | — | | — | | — | | — | | — | | — | | — | | — | | — | | — |
| Moore | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Peter H. | | — | | — | | — | | — | | — | | — | | — | | — | | — | | — | | — |
| Watson | | | | | | | | | | | | | | | | | | | | | | |
| |
(1) | Amounts represent threshold and maximum potential payouts under the terms of the APIP, which is described in the “Short-Term Incentive Compensation” section of the “Compensation Discussion and Analysis” above. The actual payouts awarded under the terms of APIP were $1,021,760 and $487,190 to Mr. Wessel and Mr. Orr, respectively, and such amounts are reflected in the “Summary Compensation Table” above. |
| |
(2) | Amounts represent the number of shares that were granted and may be earned under the RSIP, which is described in the “Long-Term Incentive Compensation” section of the “Compensation Discussion and Analysis” above. 25% of these awards may vest based on the Company’s achievement of performance criteria in each of fiscal 2015, 2016, 2017 and 2018. Based on the Company’s performance in 2015, none of the awards eligible for vesting in 2015 were earned and such awards were forfeited. |
Outstanding Equity Awards at 2015 Fiscal Year-End
The following table provides information on the holdings of stock options and stock awards by the named executive officers as of December 31, 2015. Each outstanding option and stock award is shown separately for each named executive officer.
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Option Awards | | Stock Awards |
| Name | | Number of Securities Underlying Unexercised Options (#) Exercisable | | Number of Securities Underlying Unexercised Options (#) Unexercisable | | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | | Option Exercise Price ($) | | Option Expiration Date | | Number of Shares or Units of Stock That Have Not Vested (#) | | Market Value of Shares or Units of Stock That Have Not Vested ($) (8) | | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) (8) |
| Rick L. | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 7,500 |
| (3) | 280,725 |
|
| Wessel | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 15,000 |
| (4) | 561,450 |
|
| | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 22,500 |
| (5) | 842,175 |
|
| | | | | | | | | | | | | | | | | | | |
| R. Douglas | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 2,500 |
| (3) | 93,575 |
|
| Orr | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 5,000 |
| (4) | 187,150 |
|
| | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 7,500 |
| (5) | 280,725 |
|
| | | | | | | | | | | | | | | | | | | |
| Raul R. | | — |
| | 40,000 |
| (1) | | | 38.00 |
| | 11/2021 |
| | — |
| | — |
| | — |
| | — |
|
| Ramos | | — |
| | — |
| | — |
| | — |
| | — |
| | 600 |
| (6) | 22,458 |
| | — |
| | — |
|
| | | | | | | | | | | | | | | | | | | |
| Sean D. | | — |
| | 50,000 |
| (2) | — |
| | 40.00 |
| | 12/2021 |
| | — |
| | — |
| | — |
| | — |
|
| Moore | | — |
| | — |
| | — |
| | — |
| | — |
| | 600 |
| (6) | 22,458 |
| | — |
| | — |
|
| | | | | | | | | | | | | | | | | | | |
| Peter H. | | — |
| | — |
| | — |
| | — |
| | — |
| | 300 |
| (7) | 11,229 |
| | — |
| | — |
|
| Watson | | | | | | | | | | | | | | | | | | |
| |
(1) | Option award granted in 2011. Vesting is time-based with 25% of the award vesting on July 1, 2018, 25% of the award vesting on July 1, 2019, 25% of the award vesting on July 1, 2020 and 25% of the award vesting on July 1, 2021. |
| |
(2) | Option award granted in 2011. Vesting is time-based with 20% of the award vesting on July 1, 2016, 20% of the award vesting on July 1, 2017, 20% of the award vesting on July 1, 2018, 20% of the award vesting on July 1, 2019 and 20% of the award vesting on July 1, 2020. |
| |
(3) | Restricted stock awards granted under the RSIP to current named executive officers in December 2012 related to the Company’s 2013 compensation program consisted of 30,000 shares to the CEO and 10,000 shares to the CFO; 25% of the awards were eligible for performance-based vesting based upon achievement of performance measures in 2013, 2014, 2015 and 2016. The performance measure is defined as the percentage of earnings per share from continuing operations growth over the comparative base period. For 2013, the Company did not achieve the target growth in earnings per share from continuing operations compared to the base year and the awards available for vesting in 2013 were forfeited. In 2014, the Compensation Committee modified the performance criteria to exclude earnings per share from non-core scrap jewelry operations for the 2014, 2015 and 2016 performance measures. For 2014, the Compensation Committee certified the achievement of the measure and the participants in RSIP were each awarded the maximum number of shares eligible for vesting (25% of the grant), based on actual performance results in 2014. For 2015, the Company did not achieve the target growth in earnings per share from continuing operations compared to the base year and the awards available for vesting in 2015 were forfeited. |
| |
(4) | The 2014 restricted stock awards granted under the RSIP to current named executive officers consisted of 30,000 shares to the CEO and 10,000 shares to the CFO; 25% of the awards were eligible for performance-based vesting based upon achievement of performance measures in 2014, 2015, 2016 and 2017. The performance measure is defined as the percentage of EBITDA, excluding gross profit from non-core scrap gold jewelry operations, growth over the comparative base period. For 2014 and 2015, the Company did not achieve the target growth in EBITDA compared to the base year and the awards available for vesting in 2014 and 2015 were forfeited. |
| |
(5) | The 2015 restricted stock awards granted under the RSIP to current named executive officers consisted of 30,000 shares to the CEO and 10,000 shares to the CFO; 25% of the awards were eligible for performance-based vesting based upon achievement of performance measures in 2015, 2016, 2017 and 2018. The performance measure is defined as the percentage of EBITDA, excluding gross profit from non-core scrap gold jewelry operations, growth over the comparative base period. For 2015, the Company did not achieve the target growth in EBITDA compared to the base year and the awards available for vesting in 2015 were forfeited. |
| |
(6) | Restricted stock awards granted in 2010. Vesting is time-based with 300 shares scheduled to vest on January 31 of 2016 and 2017. |
| |
(7) | Restricted stock awards granted in 2011. Vesting is time-based with 150 shares scheduled to vest on January 31 of 2016 and 2017. |
| |
(8) | The market value of the unvested share awards is based on the closing price of the Company’s Common Stock as of December 31, 2015, which was $37.43. |
Option Exercises and Stock Vested In Fiscal 2015
The following table provides information for the named executive officers regarding (1) the aggregate stock options exercised during 2015, including the number of shares acquired on exercise and the value realized, and (2) the aggregate number of shares acquired upon the vesting of restricted stock awards and the value realized, each before the payment of any applicable withholding tax and broker commissions:
|
| | | | | | | | | | | | |
| | | Option Awards | | Stock Awards |
| Name | | Number of Shares Acquired on Exercise (1) | | Value Realized on Exercise $ (2) | | Number of Shares Acquired on Vesting | | Value Realized on Vesting $ (3) |
| Rick L. Wessel | | 340,000 |
| | 7,670,900 |
| | — |
| | — |
|
| R. Douglas Orr | | 175,000 |
| | 4,053,537 |
| | — |
| | — |
|
| Raul R. Ramos | | 30,000 |
| | 559,671 |
| | 300 |
| | 14,856 |
|
| Sean D. Moore | | 10,000 |
| | 207,916 |
| | 300 |
| | 14,856 |
|
| Peter H. Watson | | — |
| | — |
| | 150 |
| | 7,428 |
|
| |
(1) | See detail in table below regarding disposition of shares acquired on exercise. |
| |
(2) | Value realized represents the excess of the fair market value of the shares at the time of exercise over the exercise price of the options. |
| |
(3) | Value realized represents the value as calculated based on the price of the Company’s common stock on the vesting date. |
The following table details the number of shares acquired on exercise of option awards during fiscal 2015:
|
| | | | | | | | | | | | |
| | | Disposition of Shares Acquired on Exercise of Option Awards | | Total |
| Name | | Shares Sold | | Shares Net Settled | | Shares Purchased Held By Executive | |
| Rick L. Wessel | | — |
| | 25,000 |
| | 315,000 |
| | 340,000 |
|
| R. Douglas Orr | | 15,000 |
| | 40,000 |
| | 120,000 |
| | 175,000 |
|
| Raul R. Ramos | | 30,000 |
| | — |
| | — |
| | 30,000 |
|
| Sean D. Moore | | 10,000 |
| | — |
| | — |
| | 10,000 |
|
| Peter H. Watson | | — |
| | — |
| | — |
| | — |
|
Pension Benefits
The Company doesnot have a defined benefit pension plan for its employees. The only retirement plan available to the named executive officers was the Company’s qualified 401(k) savings plan, which is available to all employees.
Nonqualified Defined Contribution and Other Nonqualified Deferred Compensation Plans
The Company doesnot have nonqualified defined contribution and other nonqualified deferred compensation plans for its employees or directors.
Potential Payments Upon Termination or a Change in Control
The Company currently has employment agreements with certain of the named executive officers that provide for certain severance payments and other benefits in the event of the executive’s termination of employment or a change in control of the Company. A summary of these agreements, includingThe grants have specific rules related to the potential payments and benefits each named executive officer would be entitled to receive if they had terminated their employment under certain circumstances, or if there had been a change in controltreatment of the Company, in each case as of December 31, 2015, is provided below.
In 2007, Mr. Wessel entered into an amended and restated employment agreement with the Company through December 31, 2012 to serve as the CEO and president of the Company, which at the discretion of the Board of Directors may be extended for additional successive periods of one year on each January 1 anniversary. The agreement has been amended to extend the term through December 31, 2018. The agreement was amended in June 2014 to provide for severance benefits only in the event of an involuntary termination of employment by the Company without “cause” or by the executive for “good reason,” as such terms are defined in the employment agreement. The agreement was amended in June 2014, to narrow the definition of “good reason” by removing a right to severance in the event the executive voluntarily leaves the company following a change in control. The current agreement, as amended, provides for: (i) a base salary of $963,040, with increases at the discretion of the Compensation Committee; (ii) an annual bonus at the discretion of the Compensation Committee; (iii) participation in the Company’s employee benefit and compensation plans; and (iv) certain fringe benefits. Mr. Wessel has agreed not to compete with the Company for a period of one year following his termination and not to solicit employees of the Company and not to solicit customers of the Company for a period of 90 days following his termination. Upon a termination of employment by Mr. Wessel for good reason or termination by the Company without cause or due to death or disability, the Company has agreed to pay Mr. Wessel all accrued compensation and expenses, plus all compensation and benefits provided for in the employment agreement through the term of the agreement, including base salary, annual bonus, participation in all benefit and compensation plans and fringe benefits. If Mr. Wessel’s agreement had been terminated on December 31, 2015 by the Company without cause or as a result of death or disability, or by Mr. Wessel for good cause, Mr. Wessel would have been entitled to receive $4,087,000 in severance payments and benefits. In addition, in the event of a change in control on December 31, 2015, Mr. Wessel would also have vested in 45,000 shares of restricted stock, with a value of $1,684,350 based on the closing price of the Company’s stock on December 31, 2015.
In April 2010, Mr. Orr entered into an employment agreement with the Company effective through December 31, 2013 to serve as the executive vice president and CFO of the Company. In July 2013, the agreement was amended to extend the term through December 31, 2016. The agreement provides for severance benefits only in the event of an involuntary termination of employment by the Company without “cause” or by the executive for “good reason,” as such terms are defined in the employment agreement. The agreement was amended in June 2014, to narrow the definition of “good reason” by removing a right to severance in the event the executive voluntarily leaves the company following a change in control. The current agreement, as amended, provides for: (i) a base salary of $454,480, with increases at the discretion of the Compensation Committee; (ii) an annual cash bonus and/or incentive award at the discretion of the Compensation Committee; and (iii) certain fringe benefits. Mr. Orr has agreed not to compete with the Company for a period of three years following his termination and not to solicit employees of the Company and not to solicit customers of the Company for a period of three years following his termination. In the event of termination of the agreement by the Company, other than for cause, Mr. Orr is entitled to severance payments equal to his then current annual base salary for twelve months. If Mr. Orr’s employment had been terminated by the Company on December 31, 2015, other than for cause, Mr. Orr would have been entitled to severance payments equal to $487,000 (his then current base salary), paid over twelve months. Upon a change in control and termination by Mr. Orr for good reason, the agreement provides for severance payments to Mr. Orr equal to 100% of his then current annual base salary for remaining term of the agreement, or for twelve months, whichever is greater. Upon a change in control followed by a termination of Mr. Orr’s employment on December 31, 2015 by the Company without cause or by Mr. Orr for good reason, Mr. Orr would have been entitled to severance payments equal to $487,000, paid over twenty-four months. In addition to the change in control provisions provided under the employment agreement, in the event of a change in control on December 31, 2015, Mr. Orr would also have vested in 15,000 shares of restricted stock, with a value of $561,450 based on the closing price of the Company’s stock on December 31, 2015.
In November 2011, Mr. Ramos entered into an employment agreement with the Company effective through December 31, 2021. In April 2013, the agreement was amended to extend the term through December 31, 2022. The agreement, as amended, provides for: (i) a base salary of $325,000 for calendar year 2013, with annual increases in base salary of $10,000 through 2022; (ii) a target annual cash bonus of $375,000 for calendar year 2013, with annual increases in the target amount of $25,000 through 2022; and (iii) certain fringe benefits. Mr. Ramos has agreed not to compete with the Company for a period of three years following his termination and not to solicit employees of the Company and not to solicit customers of the Company for a period of three years following his termination. In the event of termination of Mr. Ramos’ employment by the Company without cause, or due to his death or disability, Mr. Ramos (or his estate, in the event of his death) is entitled to severance payments equal to the sum of his then current annual base salary for twelve months and his then current target bonus (prorated based on the date of termination). If Mr. Ramos’ employment with the Company had been terminated under any such circumstances on December 31, 2015, Mr. Ramos would have been entitled to severance payments equal to $770,000, paid over twelve months. In addition,awards in the event of termination of Mr. Ramos’ employment by the Company withoutfor cause, following avoluntary resignation, retirement, involuntary termination and change in controlcontrol. The following table summarizes the value of the Company, orseverance payments and other benefits that each of the NEOs would receive if employment was terminated on December 31, 2019 under the circumstances shown. The amounts shown in the event oftable do not include accrued but unpaid salary, earned annual incentives for 2019, or payments and benefits to the extent they are provided on a voluntarynon-discriminatory basis to salaried employees generally upon termination of employment, by Mr. Ramos within one yearsuch as distributions of a change in control of the Company, the agreement provides for severance payments to Mr. Ramos equal to 100% of his then current annual base
salary for 24 months. If Mr. Ramos’ employment with the Company had been terminated under such circumstances on December 31, 2015, Mr. Ramos would have been entitled to severance payments equal to $690,000, paid over 24 months. In addition to the change in control provisions providedplan balances under the employment agreement, in the event of a change in control on December 31, 2015, Mr. Ramos would also have vested in 600 shares of restricted stock, with a value of $22,458 based on the closing price of the Company’s stock on December 31, 2015.
In June 2011, Mr. Moore entered into an employment agreement with the Company effective through December 31, 2020. In April 2013, the agreement was amended to extend the term through December 31, 2022. The agreement, as amended, provides for: (i) a base salary of $300,000 for calendar year 2013, with annual increases in base salary of $10,000 through 2022; (ii) a target annual cash bonus of $350,000 for calendar year 2013, with annual increases in the target amount of $25,000 through 2022;401(k) plan, and (iii) certain fringe benefits. Mr. Moore has agreed not to compete with the Company for a period of five years following his termination and not to solicit employees of the Company and not to solicit customers of the Company for a period of five years following his termination. In the event of termination of Mr. Moore’s employment by the Company without cause, or due to his death or disability Mr. Moore (or his estate, in the event of his death) is entitled to severance payments equal to the sum of his then current annual base salary for twelve months and his then current target bonus (prorated based on the date of termination). If Mr. Moore’s employment with the Company had been terminated under any such circumstances on December 31, 2015, Mr. Moore would have been entitled to severance payments equal to $720,000, paid over twelve months. In addition, in the event of termination of Mr. Moore’s employment by the Company without cause following a change in control of the Company, or in the event of a voluntary termination of employment by Mr. Moore within one year of a change in control of the Company, the agreement provides for severance payments to Mr. Moore equal to 100% of his then current annual base salary for 24 months. If Mr. Moore’s employment with the Company had been terminated under such circumstances on December 31, 2015, Mr. Moore would have been entitled to severance payments equal to $640,000, paid over 24 months. In addition to the change in control provisions providedbenefits under the employment agreement, in the event of a change in control on December 31, 2015, Mr. Moore would also have vested in 600 shares of restricted stock, with a value of $22,458 based on the closing price of the Company’s stock on December 31, 2015.generally available welfare programs.
Compensation of Directors
The following table presents information regarding the compensation of the non-employee members of the Company’s Board of Directors for the year ended December 31, 2015:
|
| | | | | | |
| Name | | Fees Earned or Paid in Cash $ | | Total $ |
| Mikel D. Faulkner | | 150,000 |
| | 150,000 |
|
| Randel G. Owen | | 150,000 |
| | 150,000 |
|
| Gabriel Guerra Castellanos | | 150,000 |
| | 150,000 |
|
The Company only compensates independent non-employee directors for their services as directors.The compensation paid to Mr. Wessel is shown in the Summary Compensation Table in the “Executive Compensation” section. Directors are reimbursed for travel and lodging expenses in connection with their attendance at Board of Directors and committee meetings. |
| | | | | | | | | | | | | | | | | | |
| Name | | Termination for Cause or Resignation without Good Reason $ | | Termination without Cause or Resignation for Good Reason $ | | Retirement $ | | Death $ | | Long-Term Disability $ | | Termination without Cause or Resignation for Good Reason in Connection with a Change in Control $ |
| Wessel | | | | | | | | | | | | |
| Cash severance | | — |
| | 4,516,982 |
| | — |
| | — |
| | — |
| | $9,033,963 |
| Benefits continuation | | — |
| | 22,463 |
| | — |
| | — |
| | — |
| | — |
|
| Lump sum payment for health benefits | | — |
| | — |
| | — |
| | — |
| | — |
| | 29,951 |
|
| Value of unvested equity awards | | — |
| | — |
| | — |
| | — |
| | — |
| | 10,194,373 |
|
| Total | | — |
| | 4,539,445 |
| | — |
| | — |
| | — |
| | 19,258,287 |
|
| | | | | | | | | | | | | |
| Stuart | | | | | | | | | | | | |
| Cash severance | | — |
| | 2,085,038 |
| | — |
| | — |
| | — |
| | 4,170,075 |
|
| Benefits continuation | | — |
| | 27,052 |
| | — |
| | — |
| | — |
| | — |
|
| Lump sum payment for health benefits | | — |
| | — |
| | — |
| | — |
| | — |
| | 36,070 |
|
| Value of unvested equity awards | | — |
| | — |
| | — |
| | — |
| | — |
| | 3,972,559 |
|
| Total | | — |
| | 2,112,090 |
| | — |
| | — |
| | — |
| | 8,178,704 |
|
| | | | | | | | | | | | | |
| Orr | | | | | | | | | | | | |
| Cash severance | | — |
| | 1,934,785 |
| | — |
| | — |
| | — |
| | 3,869,571 |
|
| Benefits continuation | | — |
| | 19,692 |
| | — |
| | — |
| | — |
| | — |
|
| Lump sum payment for health benefits | | — |
| | — |
| | — |
| | — |
| | — |
| | 26,256 |
|
| Value of unvested equity awards | | — |
| | — |
| | — |
| | — |
| | — |
| | 3,972,559 |
|
| Total | | — |
| | 1,954,477 |
| | — |
| | — |
| | — |
| | 7,868,386 |
|
| | | | | | | | | | | | | |
| Ramos | | | | | | | | | | | | |
| Cash severance | | — |
| | 824,500 |
| | — |
| | — |
| | — |
| | 1,649,000 |
|
| Benefits continuation | | — |
| | 20,453 |
| | — |
| | — |
| | — |
| | — |
|
| Lump sum payment for health benefits | | — |
| | — |
| | — |
| | — |
| | — |
| | 30,679 |
|
| Value of unvested equity awards | | — |
| | — |
| | — |
| | — |
| | — |
| | 1,046,112 |
|
| Total | | — |
| | 844,953 |
| | — |
| | — |
| | — |
| | 2,725,791 |
|
| | | | | | | | | | | | | |
| Alvarado | | | | | | | | | | | | |
| Cash severance | | — |
| | 643,750 |
| | — |
| | — |
| | — |
| | 1,287,500 |
|
| Benefits continuation | | — |
| | 20,535 |
| | — |
| | — |
| | — |
| | — |
|
| Lump sum payment for health benefits | | — |
| | — |
| | — |
| | — |
| | — |
| | 30,803 |
|
| Value of unvested equity awards | | — |
| | — |
| | — |
| | — |
| | — |
| | 612,788 |
|
| Total | | — |
| | 664,285 |
| | — |
| | — |
| | — |
| | 1,931,091 |
|
CEO Pay Ratio
ITEMThe Company seeks to establish fair and competitive employee compensation programs in each local market within its international operations in order to effectively attract, retain and motivate its talented workforce.
For 2019, the ratio of the CEO’s total compensation to the Company’s median employee’s total compensation was 600 to 1. To calculate this ratio, the Company identified its median employee as of December 31, 2017 based on employees’ gross earnings, which generally included salary and wages (regular, hourly and overtime), commissions and bonuses, and applied an average exchange rate as of December 31, 2017 to convert all Latin American compensation into U.S. dollars. Compensation was annualized for full-time and part-time employees who worked less than a full year, but compensation for part-time employees was not converted into a full-time equivalent. The Company used the same median employee in 2019 as in 2018 and 2017, based on its determination that there were no material changes to its employee population or compensation arrangements reasonably likely to result in a significant impact to the pay ratio. The median employee identified was a full-time store employee located in Latin America, where employee wages are significantly lower than in the U.S., and the employee’s total compensation for 2019 was determined in accordance with Item 402(c)(2)(x) of Regulation S-K to be $12,391, as compared to total compensation of $7,429,721 for the Company’s CEO.
The Company’s estimated pay ratio is influenced by a number of factors, including the geographic distribution of its employees, the mix of hourly vs. salaried employees included in its employee population, and compensation trends within its specific industry. As a result of these and other variables, the Company does not believe comparisons to the pay ratios of other companies are likely to be meaningful.
PROPOSAL 3
TOADVISORY VOTE ON A NON-BINDING RESOLUTION TO APPROVE THE COMPENSATION OF THE COMPANY’S NAMED EXECUTIVE OFFICERS
Under Section 14A of the Exchange Act, the Company’s stockholders are entitled to vote to approve, on an advisory basis, the compensation of the CEO, CFO, and the three other most highly compensated executive officers (collectively, the “named executive officers”)NEOs, as disclosed in this proxy statementProxy Statement in accordance with SEC rules.rules (commonly known as a “say-on-pay” proposal).
The Board of Directors has determined to hold an advisory vote on the compensation of named executive officers each year. At the 20152019 Annual Meeting, the Company held its non-binding stockholder advisory vote on executive compensation and approximately 63%96% of the shares present and entitled to vote were cast to support the compensation of the Company’s named executive officers.NEOs.
Accordingly, theThe Board is seeking the advisory vote of stockholders on the compensation of the named executive officersNEOs as disclosed in this proxy statement.Proxy Statement. This proposal, commonly known as a “say-on-pay”say-on-pay proposal gives the Company’s stockholders the opportunity to express their views on the Company’s named executive officers’NEOs’ compensation. This vote is not intended to address any specific item of compensation, but rather the overall compensation of the named executive officers.NEOs.
As discussed in “Compensation Discussion and Analysis,” the Company has designed its executive compensation program to attract and retain the highest quality executive officers, directly link pay to performance, and build value for stockholders. The program provides total compensation opportunities at levels that are competitive in the industry, tiestie a significant portion of each executive’s compensation to his or her individual performance and contribution to achieving business objectives, and closely alignsalign the interests of the executives with the interests of the Company’s stockholders. Accordingly, the Board of Directors invites you to review carefully the Compensation Discussion and Analysis and the tabular and other disclosures on compensation under executive compensation, and cast a vote to approve the compensation of the Company’s named executive officersNEOs through the following resolution:
“RESOLVED, that the Company’s stockholders approve, on an advisory basis, the compensation of the named executive officers,NEOs, as disclosed in the Company’s proxy statementProxy Statement for the 20162020 Annual Meeting pursuant to the compensation disclosure rules of the SEC, including the Compensation Discussion and Analysis, the 20152019 Summary Compensation Table and the other related tables and disclosure.”
The say-on-pay vote is advisory, and therefore not binding on the Company, the Compensation Committee or the Board of Directors. The Board of Directors and Compensation Committee value the opinions of the Company’s stockholders and to the extent there is any significant vote against the named executive officerNEO compensation as disclosed in this proxy statement,Proxy Statement, the Compensation Committee or the Board of Directors will consider the Company’s stockholders’ concerns and will evaluate whether any actions are necessary to address those concerns.
Required Vote
Approval of this resolution requires the affirmative vote of a majority of the shares of Common Stock present or represented by proxy at the Annual Meeting and entitled to vote at the Annual Meeting.vote.
Recommendation of the Board of Directors
The Board of Directors unanimously recommends a vote “FOR” the resolution approving the overall compensation of the named executive officersNEOs for the 2015 fiscal year.2019.
OTHER MATTERS
Management is not aware of any other matters to be presented for action at the Annual Meeting. However, if any other matter is properly presented, it is the intention of the persons named in the enclosed form of proxy to vote in accordance with their best judgment on such matter. Neither Delaware law nor the Company’s certificate of incorporation or bylaws provides stockholders with dissenters’ rights in connection with any of the proposals to be voted on at the Annual Meeting.
COST OF SOLICITATION
The Company will bear the costs of the solicitation of proxies from its stockholders. In addition to the use of mail, directors, officers and regular employees of the Company may solicit proxies in person or by telephone or other means of communication. The directors, officers and employees of the Company will not be compensated additionally for the solicitation but may be reimbursed for out-of-pocket expenses in connection with the solicitation. Arrangements are also being made with brokerage houses and any other custodians, nominees and fiduciaries of the forwarding of solicitation material to the beneficial owners of the Company’s Common Stock, and the Company will reimburse the brokers, custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses.
HOUSEHOLDING OF PROXY MATERIALS
The Company has adopted a practice approved by the SEC called “householding.” Under this practice, stockholders who have the same address and last name will receive only one copy of the Company’s proxy materials, unless one or more of these stockholders notifies the Company that he or she wishes to receive individual copies. Stockholders who participate in householding will continue to receive separate proxy cards. You may revoke your consent to householding at any time by contacting your broker or bank, if you hold your shares in a “street name,” or by writing to Broadridge Financial Solutions, Inc., Householding Department, 51 Mercedes Way, Edgewood, New York 11717 or calling (866) 540-7095 if you are a stockholder of record. If you share an address with another stockholder and received only one set of proxy materials and would like to request a separate paper copy of these materials, please direct your written request to R. Douglas Orr, Chief Financial Officer,the Corporate Secretary, at 690 East Lamar Boulevard, Suite 400, Arlington,1600 West 7th Street, Fort Worth, Texas 76011,76102, and the Company will promptly deliver a separate copy.
STOCKHOLDER PROPOSALS
The Company has not received any stockholder proposals for this Annual Meeting. Proposals by stockholders intended to be presented at next year’s Annual Meeting of Stockholders and to be considered must be received by the Company for inclusion in the Company’s proxy statementProxy Statement and form of proxy relating to that meeting no later than December 29, 201625, 2020 and the proposal must otherwise comply with Rule 14a-8 promulgated by the SEC pursuant to the Exchange Act. Separate and apart from the requirements of Rule 14a-8 relating to inclusion of a stockholders’ proposal in the Company’s proxy statement,Proxy Statement, the Company’s bylaws require advance notice for a stockholder to bring nominations of directors or any other action before any annual meeting of stockholders. Specifically, Section 3.5 of the Company’s bylaws requires notice of nominations of directors or any other action to be received by the Company not less than sixty (60)ninety (90) days (January 24, 2021) nor more than ninety (90)one hundred twenty (120) days (December 25, 2020) prior to the anniversary date of such annual meeting;the filing of this year’s proxy statement with the SEC; provided, however, that in the event less than 75 days’ notice ofthat the date of the annual meeting is givenadvanced by more than thirty (30) days or madedelayed (other than as a result of adjournment) by more than sixty (60) days from the anniversary of the previous year’s annual meeting, a notice of nominations of directors or any other action to stockholders, noticebe received by the stockholder to be timelyCompany must be so received notno later than the close of business on the 15thlater of the ninetieth (90th) day prior to such annual meeting or the tenth (10th) day following the dateday on which such noticepublic announcement of the date of the annualsuch meeting was mailed.is first made. Further, the notice must contain the information set forth in Section 3.5 of the Company’s bylaws.
|
| |
| | By Order of the Board of Directors, |
| |
| |
| /s/ R. Douglas Orr |
Arlington,Fort Worth, Texas | R. Douglas Orr |
April 28, 201624, 2020 | Executive Vice President, Chief Financial Officer, Treasurer and Secretary and Treasurer |
VOTE BY INTERNET - www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.
ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS
If you would like to reduce the costs incurred by First Cash Financial Services,FirstCash, Inc. in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access stockholder communications electronically in future years.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
As part of the Company’s precautions regarding the coronavirus or COVID-19, the Company is planning for the possibility that the Annual Meeting may be held by means of remote communication only (i.e., a virtual meeting). If the Company takes this step, or if the time, date or place of the Annual Meeting will be changing, the Company will announce the decision to do so in advance, and details on how to participate will be available on the Investor Relations page of the Company’s website (investors.firstcash.com).
REVOCABLE PROXY
FIRST CASH FINANCIAL SERVICES,FIRSTCASH, INC.
ANNUAL MEETING OF STOCKHOLDERS
June 7, 20164, 2020
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF FIRST CASH FINANCIAL SERVICES,FIRSTCASH, INC. THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE CHOICES SPECIFIED BELOW. IF NO SUCH DIRECTIONS ARE MADE, THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE BOARD OF DIRECTORS’ RECOMMENDATIONS BELOW. IN THEIR DISCRETION, MESSRS. WESSEL AND ORR ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENTS THEREOF.
The undersigned hereby appoints Rick L. Wessel and R. Douglas Orr the true and lawful attorneys, agents and proxies of the undersigned with full power of substitution for and in the name of the undersigned, to vote all the shares of Common Stock of First Cash Financial Services,FirstCash, Inc. which the undersigned may be entitled to vote at the Annual Meeting of Stockholders of First Cash Financial Services,FirstCash, Inc. to be held at 690 East Lamar Boulevard, Suite 400, Arlington,1600 West 7th Street, Fort Worth, Texas 76102 on TuesdayThursday, June 7, 20164, 2020 at 10:00 a.m., and any and all adjournments thereof, with all of the powers which the undersigned would possess if personally present, for the following purposes. This proxy will be voted for the choice specified; however you need not mark any boxes if you wish to vote in accordance with the Board of Directors’ recommendations.
|
| | | | | | | | | | | | | |
| | | | | For
All
| Withhold
All
| For All
Except
| | To withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the line below. | | |
The Board of Directors recommends you vote FOR FOR the following:following proposals:
| | | |
| | | | | | | | | | | |
| 1. | Election of Directors | [ ] | [ ] | [ ] | | | | |
| | Nominees: | For | Against | Abstain |
| 1a. | Mr. Daniel E. Berce | | | | o | o | o |
| 1b. | Mr. Mikel D. Faulkner | | | | o | o | o |
| 1c. | Mr. Randel G. Owen | | | | o | o | o |
| | | | | | | | |
| | | | | | | | | | | | | |
01 | Amb. Jorge Montaño | | | | | | |
| | | | | | | | | | | | | |
The Board of Directors recommends you vote FOR proposals 2 and 3. | | | |
| | | | | | | | | | | For | Against | Abstain |
| 2. | Ratification of the selection of Hein & AssociatesRSM US LLP as the independent registered public accounting firm of the Company for the year ending December 31, 2016.2020. | [ ]o | [ ]o | [ ]o |
| | | | | | | | | | | | | |
| 3. | Approve, by non-binding vote, the compensation of named executive officers as described in the proxy statement. | [ ]o | [ ]o | [ ]o |
| | | | | | | | |
| | NOTE: Such other business as may properly come before the meeting or any adjournment thereof. | | | |
| | | | | | |
(Date) | | | (Signature) | | (Signature if jointly held) |
| | | | | | | | | | | | | |
| | | | Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name, by authorized officer. | | | |
| | | | | |
| | | | |
| Signature [PLEASE SIGN WITHIN BOX] | Date | | Signature (Joint Owners) | | Date |
APPENDIX A
Non-GAAP Financial Information
The Company uses certain financial calculations such as adjusted net income, adjusted net incomediluted earnings per share, EBITDA, adjusted EBITDA, free cash flowEBITDA margin, adjusted EBITDA margin, return on tangible assets, return on tangible equity and constant currency results (as defined or explained below) as factors in the measurement and evaluation of the Company’s operating performance and period-over-period growth. The Company derives these financial calculations on the basis of methodologies other than GAAP, primarily by excluding from a comparable GAAP measure certain items that the Company does not consider to be representative of its actual operating performance. These financial calculations are “non-GAAP financial measures” as defined under the SEC rules. The Company uses these non-GAAP financial measures to measure and evaluatein operating its business because management believes they are less susceptible to variances in actual operating performance that can result from the excluded items, and other infrequent charges.charges and currency fluctuations. The Company presents these financial measures to investors because management believes they are useful to investors in evaluating the primary factors that drive the Company’s core operating performance and because management believes they provide greater transparency into the Company’s results of operations. However, items that are excluded and other adjustments and assumptions that are made in calculating adjusted net income, adjusted net income per share, adjusted EBITDA, free cash flow and constant currency resultsthese non-GAAP financial measures are significant components in understanding and assessing the Company’s financial performance. These non-GAAP financial measures should be evaluated in conjunction with, and are not a substitute for, the Company’s GAAP financial measures. Further, because these non-GAAP financial measures are not determined in accordance with GAAP and are thus susceptible to varying calculations, adjusted net income, adjusted net income per share, adjusted EBITDA, free cash flow and constant currency results,the non-GAAP financial measures, as presented, may not be comparable to other similarly titled measures of other companies.
While acquisitions are an important part of the Company’s overall strategy, the Company has adjusted the applicable financial calculations to exclude merger and other acquisition expenses to allow more accurate comparisons of the financial results to prior periods and because the Company does not consider these merger and other acquisition expenses to be related to the organic operations of the acquired businesses or its continuing operations and such expenses are generally not relevant to assessing or estimating the long-term performance of the acquired businesses. The Company believes that providing adjusted non-GAAP measures, which exclude these and other items, allows management and investors to consider the ongoing operations of the business both with, and without, such expenses. Merger and other acquisition expenses include incremental costs directly associated with merger and acquisition activities, including professional fees, legal expenses, severance, retention and other employee-related costs, contract breakage costs and costs related to the consolidation of technology systems and corporate facilities, among others.
The Company has certain leases in Mexico which are denominated in U.S. dollars. The lease liability of these U.S. dollar denominated leases, which is considered a monetary liability, is remeasured into Mexican pesos using current period exchange rates which results in the recognition of foreign currency exchange gains or losses. The Company has adjusted the applicable financial measures to exclude these remeasurement gains or losses because they are non-cash, non-operating items that could create volatility in the Company’s consolidated results of operations due to the magnitude of the end of period lease liability being remeasured and to improve comparability of current periods presented with prior periods due to the adoption of new accounting guidance on January 1, 2019.
Adjusted Net Income, and Adjusted Net IncomeDiluted Earnings Per Share, Return on Tangible Assets and Return on Tangible Equity
Management believes the presentation of adjusted net income, and adjusted net incomediluted earnings per share, (“Adjusted Income Measures”)return on tangible assets and return on tangible equity provides investors with greater transparency and provides a more complete understanding of the Company’s financial performance and prospects for the future.future by excluding items that management believes are non-operating in nature and not representative of the Company’s core operating performance of its continuing operations. In addition, management believes the adjustments shown below are useful to investors in order to allow them to compare the Company’s financial results for the current periods presented with the prior periods presented.
The following table provides a reconciliation between the net income and diluted earnings per share calculated in accordance with GAAP to the Adjusted Income Measures,adjusted net income and adjusted diluted earnings per share, which are shown net of tax (unaudited, in thousands, except per share data)amounts):
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, |
| | 2015 | | 2014 | | 2013 |
| | In Thousands | | Per Share | | In Thousands | | Per Share | | In Thousands | | Per Share |
| Net income, as reported | $ | 60,710 |
| | $ | 2.14 |
| | $ | 85,166 |
| | $ | 2.93 |
| | $ | 83,846 |
| | $ | 2.84 |
|
| Adjustments, net of tax: | | | | | | | | | | | |
| Non-recurring restructuring expenses related to U.S. consumer loan operations | 5,784 |
| | 0.21 |
| | — |
| | — |
| | — |
| | — |
|
| Non-recurring store acquisition expenses | 1,989 |
| | 0.07 |
| | 679 |
| | 0.02 |
| | 1,645 |
| | 0.06 |
|
| Non-recurring tax benefit | — |
| | — |
| | (5,841 | ) | | (0.20 | ) | | (3,979 | ) | | (0.14 | ) |
| Adjusted net income | $ | 68,483 |
| | $ | 2.42 |
| | $ | 80,004 |
| | $ | 2.75 |
| | $ | 81,512 |
| | $ | 2.76 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, |
| | 2019 | | 2018 | | 2017 |
| | In Thousands | | Per Share | | In Thousands | | Per Share | | In Thousands | | Per Share |
| Net income and diluted earnings per share, as reported | $ | 164,618 |
| | $ | 3.81 |
| | $ | 153,206 |
| | $ | 3.41 |
| | $ | 143,892 |
| | $ | 3.00 |
|
| Adjustments, net of tax: | | | | | | | | | | | |
| Merger and other acquisition expenses | 1,276 |
| | 0.03 |
| | 5,412 |
| | 0.12 |
| | 5,710 |
| | 0.12 |
|
| Non-cash foreign currency gain related to lease liability | (653 | ) | | (0.01 | ) | | — |
| | — |
| | — |
| | — |
|
| Ohio consumer lending wind-down costs and asset impairments | 2,659 |
| | 0.06 |
| | 1,166 |
| | 0.03 |
| | — |
| | — |
|
| Net tax benefit from Tax Act | — |
| | — |
| | (1,494 | ) | | (0.03 | ) | | (27,269 | ) | | (0.57 | ) |
| Loss on extinguishment of debt | — |
| | — |
| | — |
| | — |
| | 8,892 |
| | 0.19 |
|
| Adjusted net income and diluted earnings per share | $ | 167,900 |
| | $ | 3.89 |
| | $ | 158,290 |
| | $ | 3.53 |
| | $ | 131,225 |
| | $ | 2.74 |
|
Adjusted
The following table provides a calculation of return on tangible assets and return on tangible equity (unaudited, dollars in thousands):
|
| | | | | | | | | | | |
| | December 31, |
| | 2019 | | 2018 | | 2017 |
| Return on tangible assets calculation: | | | | | | | | |
| Average total assets | $ | 2,342,095 |
| | $ | 2,060,115 |
| | $ | 2,097,517 |
|
| Adjustments: | | | | | | | | |
| Average goodwill | | (935,210 | ) | | | (871,294 | ) | | | (834,171 | ) |
| Average intangible assets, net | | (87,099 | ) | | | (90,517 | ) | | | (98,908 | ) |
| Average operating lease right of use asset | | (236,907 | ) | | | — |
| | | — |
|
| Average tangible assets | $ | 1,082,879 |
| | $ | 1,098,304 |
| | $ | 1,164,438 |
|
| Net income | $ | 164,618 |
| | $ | 153,206 |
| | $ | 143,892 |
|
| Return on tangible assets | 15 | % | | 14 | % | | 12 | % |
| | | | | | | | | |
| Return on tangible equity calculation: | | | | | | | | |
| Average stockholders’ equity | $ | 1,331,935 |
| | $ | 1,367,899 |
| | $ | 1,474,333 |
|
| Adjustments: | | | | | | | | |
| Average goodwill | | (935,210 | ) | | | (871,294 | ) | | | (834,171 | ) |
| Average intangible assets, net | | (87,099 | ) | | | (90,517 | ) | | | (98,908 | ) |
| Average tangible equity | $ | 309,626 |
| | $ | 406,088 |
| | $ | 541,254 |
|
| Net income | $ | 164,618 |
| | $ | 153,206 |
| | $ | 143,892 |
|
| Return on tangible equity | 53 | % | | 38 | % | | 27 | % |
Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA), Adjusted EBITDA, EBITDA Margin and Adjusted EBITDA Margin
The Company defines adjusted EBITDA as net income before income taxes, depreciation and amortization, interest expense and interest income and non-recurring chargesadjusted EBITDA as EBITDA adjusted for certain items as listed below.below that management considers to be non-operating in nature and not representative of its actual operating performance. The Company believes EBITDA and adjusted EBITDA isare commonly used by investors to assess a company’s leverage capacity, liquidityfinancial performance, and financial performance. However, adjusted EBITDA has limitationsis used in the calculation of the Net Debt Ratio as an analytical tool and should not be considereddefined in isolation or as a substitute for net income or other statement of income data prepared in accordance with GAAP.the Company’s senior unsecured notes covenants. The following table provides a reconciliation of net income to EBITDA and adjusted EBITDA (unaudited, dollars in thousands):
| | | | Year Ended December 31, | Year Ended December 31, |
| | 2015 | | 2014 | | 2013 | 2019 | | 2018 | | 2017 |
| Net income | $ | 60,710 |
| | $ | 85,166 |
| | $ | 83,846 |
| $ | 164,618 |
| | $ | 153,206 |
| | $ | 143,892 |
|
| Income taxes | 26,971 |
| | 31,542 |
| | 35,713 |
| | 59,993 |
| | 52,103 |
| | 28,420 |
|
Depreciation and amortization (1) | 17,446 |
| | 17,476 |
| | 15,361 |
| | 41,904 |
| | 42,961 |
| | 55,233 |
|
| Interest expense | 16,887 |
| | 13,527 |
| | 3,492 |
| | 34,035 |
| | 29,173 |
| | 24,035 |
|
| Interest income | (1,566 | ) | | (682 | ) | | (322 | ) | | (1,055 | ) | | | (2,444 | ) | | | (1,597 | ) |
| EBITDA | 120,448 |
| | 147,029 |
| | 138,090 |
| | 299,495 |
| | 274,999 |
| | 249,983 |
|
| Adjustments: | | | | | | | | | | | |
| Non-recurring restructuring expenses related to U.S. consumer loan operations | 8,878 |
| | — |
| | — |
| |
| Non-recurring store acquisition expenses | 2,875 |
| | 998 |
| | 2,350 |
| |
| Merger and other acquisition expenses | | | 1,766 |
| | 7,643 |
| | 9,062 |
|
| Non-cash foreign currency gain related to lease liability | | | (933 | ) | | — |
| | — |
|
| Ohio consumer lending wind-down costs and asset impairments | | | 3,454 |
| | 1,514 |
| | — |
|
| Loss on extinguishment of debt | | | — |
| | — |
| | 14,114 |
|
| Adjusted EBITDA | $ | 132,201 |
| | $ | 148,027 |
| | $ | 140,440 |
| $ | 303,782 |
| | $ | 284,156 |
| | $ | 273,159 |
|
| | | | | | | | | | | | |
| Adjusted EBITDA margin calculated as follows: | | | | | | |
| EBITDA margin calculation: | | | | | | | |
| EBITDA | | $ | 299,495 |
| | $ | 274,999 |
| | $ | 249,983 |
|
| Total revenue | $ | 704,602 |
| | $ | 712,877 |
| | $ | 660,848 |
| $ | 1,864,439 |
| | $ | 1,780,858 |
| | $ | 1,779,822 |
|
| EBITDA margin | | 16.1 | % | | 15.4 | % | | 14.0 | % |
| | | | | | | | |
| Adjusted EBITDA margin calculation: | | | | | | | |
| Adjusted EBITDA | $ | 132,201 |
| | $ | 148,027 |
| | $ | 140,440 |
| $ | 303,782 |
| | $ | 284,156 |
| | $ | 273,179 |
|
| Adjusted EBITDA as a percentage of revenue | 19 | % | | 21 | % | | 21 | % | |
| | | | | | | |
| Leverage ratio (indebtedness divided by adjusted EBITDA): | | | | | | |
| Indebtedness | $ | 258,000 |
| | $ | 222,400 |
| | $ | 190,352 |
| |
| Adjusted EBITDA | $ | 132,201 |
| | $ | 148,027 |
| | $ | 140,440 |
| |
| Leverage ratio | 2.0:1 |
| | 1.5:1 |
| | 1.4:1 |
| |
| Total revenue | | $ | 1,864,439 |
| | $ | 1,780,858 |
| | $ | 1,779,822 |
|
| Adjusted EBITDA margin | | 16.3 | % | | 16.0 | % | | 15.3 | % |
| |
(1) | For fiscal 2015, excludes $493,000 of depreciation and amortization, which is included in the non-recurring restructuring expenses related to U.S. consumer loan operations. |
Constant Currency Results
The Company’s reporting currency is the U.S. dollar. However, certain performance metrics discussed in this reportProxy Statement are presented on a “constant currency” basis, which may beis considered a non-GAAP measurement of financial performance.measure. The Company’s management uses constant currency results to evaluate operating results of business operations in Latin America, which are primarily transacted in local currencies.
The Company believes constant currency results provide investors with valuable supplemental information regarding the underlying performance of its business operations in Latin America, consistent with how the Company’s management evaluates such performance and operating results. Constant currency results reported herein are calculated by translating certain balance sheet and income statement items denominated in local currencies using the exchange rate from the prior-year comparable period, as opposed to the current comparable period, in order to exclude the effects of foreign currency rate fluctuations for purposes of evaluating period-over-period comparisons. Business operations in Mexico, Guatemala and GuatemalaColombia are transacted in Mexican pesos, and Guatemalan quetzales and Colombian pesos, respectively. AsThe Company also has operations in El Salvador where the Company acquired its first stores in Guatemala onreporting and functional currency is the U.S. dollar.
The following table provides exchange rates for the Mexican peso, Guatemalan quetzal and Colombian peso for the current and prior-year periods:
|
| | | | | | | | | | | | | | | | |
| | | 2019 | | 2018 | | 2017 |
| | | Rate | | % Change Over Prior- Year Period Favorable / (Unfavorable) | | Rate | | % Change Over Prior- Year Period Favorable / (Unfavorable) | | Rate |
| Mexican peso / U.S. dollar exchange rate: | | | | | | | | | | | | | | |
| End-of-period | | 18.8 | | | 5 | % | | | 19.7 | | | — | % | | | 19.7 |
| Twelve months ended | | 19.3 | | | (1 | )% | | | 19.2 | | | (2 | )% | | | 18.9 |
| | | | | | | | | | | | | | | |
| Guatemalan quetzal / U.S. dollar exchange rate: | | | | | | | | | | | | | | |
| End-of-period | | 7.7 | | | — | % | | | 7.7 | | | (5 | )% | | | 7.3 |
| Twelve months ended | | 7.7 | | | (3 | )% | | | 7.5 | | | (1 | )% | | | 7.4 |
| | | | | | | | | | | | | | | |
| Colombian peso / U.S. dollar exchange rate: | | | | | | | | | | | | | | |
| End-of-period | | 3,277 | | | (1 | )% | | | 3,250 | | | (9 | )% | | | 2,984 |
| Twelve months ended | | 3,280 | | | (11 | )% | | | 2,956 | | | — | % | | | 2,951 |
The following table presents segment revenues of the Latin America operations segment for the year ended December 31, 2015, there are no prior2019 as compared to the year comparisonsended December 31, 2018 on both a GAAP and the assets and liabilities acquired were translated at an exchange rate of 7.6 Guatemalan quetzales / U.S. dollar.non-GAAP constant currency basis (unaudited, dollars in thousands):
|
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | Constant Currency Basis |
| | | | | | | | | Year Ended | | |
| | | | | | | | | December 31, | | Increase / |
| | | Year Ended December 31, | | Increase / | | 2019 | | (Decrease) |
| | | 2019 | | 2018 | | (Decrease) | | (Non-GAAP) | | (Non-GAAP) |
| Latin America Operations Segment | | | | | | | | | | | | | | |
| Revenue: | | | | | | | | | | | | | | |
| Retail merchandise sales | | $ | 453,434 |
| | $ | 382,020 |
| | | 19 | % | | | $ | 454,431 |
| | | 19 | % | |
| Pawn loan fees | | 185,429 |
| | 151,740 |
| | | 22 | % | | | 185,826 |
| | | 22 | % | |
| Wholesale scrap jewelry sales | | 32,063 |
| | 22,103 |
| | | 45 | % | | | 32,063 |
| | | 45 | % | |
Consumer loan fees (1) | | — |
| | 860 |
| | | (100 | )% | | | — |
| | | (100 | )% | |
| Total revenue | | 670,926 |
| | 556,723 |
| | | 21 | % | | | 672,320 |
| | | 21 | % | |
| | | | | | | | | | | | | | | |
| Cost of revenue: | | | | | | | | | | | | | | |
| Cost of retail merchandise sold | | 297,950 |
| | 246,150 |
| | | 21 | % | | | 298,621 |
| | | 21 | % | |
| Cost of wholesale scrap jewelry sold | | 30,131 |
| | 21,656 |
| | | 39 | % | | | 30,191 |
| | | 39 | % | |
Consumer loan loss provision (1) | | — |
| | 238 |
| | | (100 | )% | | | — |
| | | (100 | )% | |
| Total cost of revenue | | 328,081 |
| | 268,044 |
| | | 22 | % | | | 328,812 |
| | | 23 | % | |
| | | | | | | | | | | | | | | |
| Net revenue | | 342,845 |
| | 288,679 |
| | | 19 | % | | | 343,508 |
| | | 19 | % | |
| |
(1) | The Company discontinued offering an unsecured consumer loan product in Latin America, effective June 30, 2018. |
