We do not believe that arbitrary limits on the number of consecutive terms a director may serve are appropriate in light of the substantial benefits that result from a continued focus on the Company’s business, strategy and industry over a significant period of time. We do value fresh perspectives and ideas which enhance and benefit our brand's competitive performance, and therefore we seek to have a mix of director short-term, mid-term and long-term tenures on our Board, as demonstrated in the pie chart below which reflects the Board's projected composition following the election of directors at the Annual Meeting. Within these parameters, each individual’s performance and continued contribution is assessed by the Corporate Governance and Nominating Committee in connection with the annual renomination determination.
Under the Company’s Corporate Governance Policy, the standard retirement age for the Company's directors is 75. It is the general policy of the Corporate Governance and Nominating Committee not to nominate candidates for re-election at any annual stockholder meeting to be held after he or she has attained the applicable retirement age. The Board, however, may waive the mandatory retirement age for a specific director in its sole discretion.
Corporate Governance
The Board has determined that, except as noted immediately below, each current member of the Board is independent under the NASDAQNasdaq listing standards and the rules and regulations promulgated by the SEC. Messrs. Miller and Wolfinger, as executive officers of the Company, are not deemed to be independent.
There are three standing committees of the Board: the Audit and Finance Committee, the Compensation and Incentives Committee, and the Corporate Governance and Nominating Committee. Each committee consists solely of independent directors as defined by NASDAQNasdaq listing standards applicable to each committee. The Audit and Finance Committee currently consists of Messrs. Dedrick, Gutiérrez, Haywood, Marks and Mss.Robinson and Ms. Lauderback, and Smithart-Oglesby, with Mr. MarksGutiérrez serving as chair. The Compensation and Incentives Committee is currently comprised of Mss. Lauderback and Ward and Messrs. Dedrick and Gutiérrez, and Robinson, with Mr. Dedrick serving as chair. Mss. Aulestia, Lauderback and Ward and Messrs. Dedrick, Marks andMr. Robinson currently make up the Corporate Governance and Nominating Committee, with Mr. Robinson serving as chair. In conjunction with the election of directors at the Annual Meeting, the Board will make committee assignments for the upcoming year. For a description of our code of ethics, see the “Code of Ethics” section elsewhere in this Proxy Statement.
Set forth below is information regarding each committee of the Board.
Audit and Finance Committee
Summary of Responsibilities. The Audit and Finance Committee (the “Audit Committee”), which held nine meetings in 2017,2019, has been established by the Board to assist the Board in fulfilling its responsibilities toward stockholders, potential stockholders and the investment community to oversee the Company’s accounting and financial reporting processes and audits of the Company’s financial statements. The Audit Committee’s primary responsibilities include overseeing (i) the adequacy of the Company’s internal controls and the integrity of the Company’s accounting and financial information reported to the public, (ii) the qualification, independence and performance of the Company’s independent registered public accounting firm and its internal auditors, (iii) the appropriateness of the Company’s accounting policies, (iv) the Company’s compliance with legal and regulatory requirements, (v) the Company’s risk assessment and management practices including, but not limited to, the Company’s fraud risk assessment practices, cybersecurity and other information technology risks, and (vi) the Company’s finance activities, including but not limited the Company's financial structure and strategy, hedging transactions, share repurchase policies and financing arrangements, while providing and maintaining an avenue of communication among the Audit Committee, the independent auditors, internal auditors, the Company’s compliance officer, management and the Board. The Audit Committee has a written charter, which it reviews and assesses the adequacy of at least annually and amends and updates as needed. For a complete
description of the Audit Committee’s powers, duties and responsibilities, see the charter of the Audit Committee available to stockholders on the Company’s website at www.dennys.com.
The Audit Committee was established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Each member of the Audit Committee meets the definition of independence for audit committee members set forth under NASDAQNasdaq listing standards and the rules and regulations promulgated by the SEC.
Audit Committee Financial Experts. The Board has determined that fourthree Board members currently serving on the Audit Committee, José M. Gutiérrez, George W. Haywood, Robert E. Marks and Debra Smithart-Oglesby,Donald C. Robinson, are Audit Committee Financial Experts, as that term is defined by the SEC, based upon their respective business experience and educational backgrounds. Mr. Gutiérrez has more than 20 years of accounting, business and financial experience in investor relations, audit, mergers and acquisitions which required the analysis of financial statements that present a breadth and level of complexity of the same or greater complexity as that of the Company. Mr. Marks has experience analyzing and evaluating financial statements (of the same or greater complexity as the Company’s) during his more than 30 years of work in private equity investments, serving more than 15 different industries. Mr. Haywood has over 35Robinson during his 40-plus years of operational leadership experience analyzinghas had responsibility for the preparation and evaluating public companyoversight of financial statements (of the same or greater complexity as the Company’s) particularly in connection with his private investment and portfolio management experience. Ms. Smithart-Oglesby has over 30 years of experience and education as a principal financial officer, controller, public accountant and public company director preparing, auditing, analyzing, evaluating and overseeing preparation of public company financial statements that present a breadth and level of complexity of the same or greater complexity as that of the Company.role with Disney operations in Hong Kong.
Audit Committee Report. The Audit Committee fulfilled its responsibilities under and remained in compliance with its charter during the fiscal year ended December 27, 2017.25, 2019.
The Audit Committee has reviewed and discussed the audited financial statements with management of the Company and with KPMG LLP (“KPMG”), the Company’s independent registered public accounting firm.
The Audit Committee has discussed with KPMG the matters required to be discussed by Auditing Standard No. 1301, Communications with Audit Committeesthe applicable requirements of the Public Company Accounting Oversight Board (“PCAOB”).
, including Auditing Standard No. 1301, Communications with Audit Committees, and the SEC.The Audit Committee has received the written disclosure and the letter from KPMG, required by applicable requirements of the PCAOB regarding KPMG’s communications with the Audit Committee concerning independence, and has discussed with KPMG its independence from the Company.
The Audit Committee reviewed and discussed with management progress on the Company’s enterprise risk management processes including the evaluation of identified risks and alignment of Company processes to manage the risks within the Company’s approved strategies.
Based on the review and discussions described above, the Audit Committee has recommended to the Board that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 27, 201725, 2019 for filing with the SEC.
Audit and Finance Committee
Robert E. Marks, Chair
José M. Gutiérrez, Chair
George W. HaywoodGregg R. Dedrick
Brenda J. Lauderback
Debra Smithart-OglesbyRobert E. Marks
Donald C. Robinson
Compensation and Incentives Committee
Summary of Responsibilities. The Compensation and Incentives Committee (the “Compensation Committee”), which held six meetings in 2017, is responsible for (i) overseeing the Company’s overall compensation program and philosophy, (ii) reviewing and approving the compensation of the Chief Executive Officer and senior management of the Company, (iii) administering the Company’s short- and long-term incentive plans and other stock or stock-based plans, (iv) overseeing the Company’s executive compensation disclosure and issuing the Compensation Committee’s report as required by the applicable rules and regulations governing the Company’s annual proxy statement, (v) reviewing and making recommendations to the Board regarding director compensation, (vi) overseeing the Company’s stock ownership guidelines, and (vii) overseeing the Company’s various benefit plans. The Compensation Committee has a written charter, which it reviews and assesses the adequacy of at least annually and amends and updates as needed. For a complete description of the Compensation Committee’s power, duties and responsibilities, see the charter of the Compensation Committee which may be found on the Company’s website at www.dennys.com.
Process for Determination of Executive and Director Compensation. Executive compensation is determined by the Compensation Committee pursuant to the authority granted to it by the Board. Director compensation is determined by the Board upon recommendation by the Compensation Committee. The Compensation Committee has engaged independent consultants Pearl Meyer (from September 2014 to present) and considered data and analysis prepared by these consultants regarding competitive pay practices among the Company’s peer group and the restaurant industry as a guide in determining the appropriate level of director and executive officer compensation. The Compensation Committee assessed the independence of Pearl Meyer in its capacity as the compensation consultant to the Compensation Committee pursuant to SEC and NASDAQ rules and concluded that no conflict of interest exists that would prevent Pearl Meyer from serving as an independent consultant to the Compensation Committee.
The Compensation Committee considered the recommendation of the Company’s Chief Executive Officer (the “CEO”) with respect to compensation levels of executive officers other than the CEO. When making compensation decisions, the Compensation Committee annually analyzes tally sheets prepared for each of the named executive officers. These tally sheets were prepared by our human resources department and Pearl Meyer. Each of these tally sheets presents the dollar amount of each component of the named executive officers’ compensation, including current cash compensation (base salary and bonus), accumulated deferred compensation balances, outstanding equity awards, retirement benefits, perquisites and any other compensation. These tally sheets reflect the annual compensation for the named executive officers (both target and actual), as well as the potential payments under selected performance, termination, and change-in-control scenarios.
The overall purpose of these tally sheets is to bring together, in one place, all of the elements of actual and potential future compensation of our named executive officers, as well as information about wealth accumulation, so that the Compensation Committee may analyze both the individual elements of compensation (including the compensation mix) as well as the aggregate total amount of actual and projected compensation. For additional information regarding the process and procedures for determining executive and director compensation, see the “Executive Compensation – Compensation Discussion and Analysis” section elsewhere in this Proxy Statement.
Compensation Risk Assessment. For 2017, a group of senior management from various departments of the Company completed a process by which an assessment was made of the level and materiality of identified risks associated with the Company’s compensation practices and policies for its employees. This assessment was under the direction of the Compensation Committee and the findings were reviewed and discussed with the committee. Specifically, the Company’s incentive plans and compensation practices were evaluated in order to specifically identify incentive factors utilized and the potential risks, applicable controls, and the risk mitigation practices in place with respect to such factors. Based on this assessment, the Compensation Committee determined that the risks arising from the Company’s compensation practices and policies are not reasonably likely to have a material adverse impact on the Company.
Compensation Committee Interlocks and Insider Participation. The following persons served as members of the Compensation Committee during the fiscal year ended December 27, 2017: Gregg R. Dedrick, José M. Gutiérrez, Brenda J. Lauderback, Donald C. Robinson (from May 10, 2017), Debra Smithart-Oglesby (through May 10, 2017) and Laysha Ward. No member of the Compensation Committee was an employee or officer of the Company during 2017 or anytime prior thereto. Ms. Smithart-Oglesby served as a consultant with the title of Interim Chief Executive Officer from June 8, 2010 until January 31, 2011. During 2017, none of the members of the Compensation Committee had any relationship, directly or indirectly, with the Company requiring disclosure under Item 404 of Regulation S-K, and none of our executive officers served on the compensation committee (or equivalent) or the board of directors of another entity whose executive officers served on our Board or Compensation Committee.
Compensation Committee Report. The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis section of this Proxy Statement and based on this review and discussion, the Compensation Committee has recommended to the Board that the “Executive Compensation – Compensation Discussion and Analysis” section be included in this Proxy Statement and incorporated by reference into the Company’s Annual Report on Form 10-K for the year ended December 27, 2017.
Compensation and Incentives Committee
Summary of Responsibilities. The Compensation and Incentives Committee (the “Compensation Committee”), which held five meetings in 2019, is responsible for (i) overseeing the Company’s overall compensation program and philosophy, (ii) reviewing and approving the compensation of the Chief Executive Officer and senior management of the Company, (iii) administering the Company’s short- and long-term incentive plans and other stock or stock-based plans, (iv) overseeing the Company’s executive compensation disclosure and issuing the Compensation Committee’s report as required by the applicable rules and regulations governing the Company’s annual proxy statement, (v) reviewing and making recommendations to the Board regarding director compensation, (vi) overseeing the Company’s stock ownership guidelines, and (vii) overseeing the Company’s various benefit plans. The Compensation Committee has a written charter, which it reviews and assesses the adequacy of at least annually and amends and updates as needed. For a complete description of the Compensation Committee’s power, duties and responsibilities, see the charter of the Compensation Committee which may be found on the Company’s website at www.dennys.com.
Process for Determination of Executive and Director Compensation. Executive compensation is determined by the Compensation Committee pursuant to the authority granted to it by the Board. Director compensation is determined by the Board upon recommendation by the Compensation Committee. The Compensation Committee has engaged independent consultants Pearl Meyer (from September 2014 to present) and considered data and analysis prepared by these consultants regarding competitive pay practices among the Company’s peer group and the restaurant industry as a guide in determining the appropriate level of director and executive officer compensation. The Compensation Committee assessed the independence of Pearl Meyer in its capacity as the compensation consultant to the Compensation Committee pursuant to SEC and Nasdaq rules and concluded that no conflict of interest exists that would prevent Pearl Meyer from serving as an independent consultant to the Compensation Committee.
The Compensation Committee considered the recommendation of the Company’s Chief Executive Officer (the “CEO”) with respect to compensation levels of executive officers other than the CEO. When making compensation decisions, the Compensation Committee annually analyzes tally sheets prepared for each of the named executive officers ("NEOs"). These tally sheets were prepared by our human resources department and Pearl Meyer. Each of these tally sheets presents the dollar amount of each component of the NEOs’ compensation, including current cash compensation (base salary and bonus), accumulated deferred compensation balances, outstanding equity awards, retirement benefits, perquisites and any other compensation. These tally sheets reflect the annual compensation for the NEOs (both target and actual), as well as the potential payments under selected performance, termination, and change-in-control scenarios.
The overall purpose of these tally sheets is to bring together, in one place, all of the elements of actual and potential future compensation of our NEOs, as well as information about wealth accumulation, so that the Compensation Committee may analyze both the individual elements of compensation (including the compensation mix) as well as the aggregate total amount of actual and projected compensation. For additional information regarding the process and procedures for determining executive and director compensation, see the “Executive Compensation – Compensation Discussion and Analysis” section elsewhere in this Proxy Statement.
Compensation Risk Assessment. For 2019, a group of senior management from various departments of the Company completed a process by which an assessment was made of the level and materiality of identified risks associated with the Company’s compensation practices and policies for its employees. This assessment was under the direction of the Compensation Committee and the findings were reviewed and discussed with the committee. Specifically, the Company’s incentive plans and compensation practices were evaluated in order to identify incentive factors utilized and the potential risks, applicable controls, and the risk mitigation practices in place with respect to such factors. Based on this assessment, the Compensation Committee determined that the risks arising from the Company’s compensation practices and policies are not reasonably likely to have a material adverse impact on the Company.
Compensation Committee Interlocks and Insider Participation. The following persons served as members of the Compensation Committee during the fiscal year ended December 25, 2019: Gregg R. Dedrick, José M. Gutiérrez, Brenda J. Lauderback, Donald C. Robinson (through May 8, 2019) and Laysha Ward. No member of the Compensation Committee was an employee or officer of the Company during 2019 or anytime prior thereto. During 2019, none of the members of the Compensation Committee had any relationship, directly or indirectly, with the Company requiring disclosure under Item 404 of Regulation S-K, and none of our executive officers served on the compensation committee (or equivalent) or the board of directors of another entity whose executive officers served on our Board or Compensation Committee.
Compensation Committee Report. The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis section of this Proxy Statement and based on this review and discussion, the Compensation Committee has recommended to the Board that the “Executive Compensation – Compensation Discussion and Analysis” section be included in this Proxy Statement and incorporated by reference into the Company’s Annual Report on Form 10-K for the year ended December 25, 2019.
Compensation and Incentives Committee
Gregg R. Dedrick, Chair
José M. Gutiérrez
Brenda J. Lauderback
Donald C. Robinson
Laysha Ward
Corporate Governance and Nominating Committee
Summary of Responsibilities. The primary responsibilities of the Corporate Governance and Nominating Committee (the “Governance Committee”), which held fivefour meetings in 2017,2019, include (i) developing and recommending to the Board a set of corporate governance standards in the form of the Corporate Governance Policy for the Company, (ii) maintaining and monitoring compliance with the Corporate Governance Policy, (iii) monitoring the process of assessing the effectiveness of the Board and its committees, (iv) overseeing the Company's insider trading policy, and (iv)(v) identifying individuals qualified to become Board members and recommending director nominees to the Board for election at the
annual meeting of stockholders or when necessary to fill existing vacancies on the Board. Additionally, the Governance Committee is responsible for monitoring and safeguarding the independence of the Board, monitoring and overseeing senior management succession, overseeing director education, reviewing all related party transactions while monitoring compliance with the Company’s Related Party Transaction Policy and Procedures, monitoring and overseeing the Corporate Social Responsibility ("CSR") program of the Company which includes receiving periodic reports regarding the Company’s CSR efforts and initiatives, and monitoring and receiving periodic reports regarding the Company’s minority hiring and diversity promotional initiatives. All members of the Governance Committee are independent within the meaning of the NASDAQNasdaq listing standards and the rules and regulations promulgated by the SEC. The Governance Committee has a written charter, which it reviews and assesses the adequacy of at least annually and amends and updates as needed. For a description of the Governance Committee’s powers, duties and responsibilities, see the charter of the Governance Committee which may be found on the Company’s website at www.dennys.com.
Corporate Governance Policy and Practice. The Board and management clearly recognize the importance of a firm commitment to key corporate governance standards. Consequently, it is the goal of the Board and management to develop and adhere to a set of standards that not only complies to the letter with all applicable regulatory guidance, but implements “best practices” of corporate governance.
The Company’s Corporate Governance Policy is posted on the Company’s website at www.dennys.com.
Director Nominations Policy and Process. The Governance Committee will consider director-nominees recommended by stockholders. A stockholder who wishes to recommend a person or persons to the Board for consideration as a nominee for election to the Board must send a written notice to the Governance Committee by mail addressed to the attention of the Secretary of Denny’s Corporation at the corporate address set forth above. The written notice must set forth (i) the name of each person whom the stockholder recommends be considered as a nominee, (ii) a business address and telephone number for each nominee (e-mail address is optional), and (iii) biographical information regarding each nominee, including the person’s employment and other relevant experience. To be considered by the Governance Committee, a stockholder director-nominee recommendation must be received no later than the 120th calendar day before the first anniversary date of Denny’s Corporation’s proxy statement prepared in connection with the previous year’s annual meeting. The Governance Committee did not receive any stockholder director-nominee recommendations by December 1, 2017November 30, 2019 (120th day before the first anniversary of the date of release of the 20172019 Proxy Statement).
In addition, in accordance with the By-laws, stockholders may directly nominate persons for election to the Board at an annual meeting. Such nominations must be sent by written notice to the Secretary of Denny’s Corporation at the corporate address set forth above and must comply with the applicable timeliness and information requirements of the By-laws. Please see the “Other Matters – 20192021 Stockholder Proposals” section elsewhere in this Proxy Statement for more information.
The Governance Committee believes that a nominee recommended for a position on the Board must meet the following minimum qualifications:
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— | he or she must be at least 21 years of age; |
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— | he or she must have experience in a position with a high degree of responsibility in a business or other organization; |
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— | he or she must be able to read and understand basic financial statements; |
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— | he or she must possess integrity and have high moral character; |
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— | he or she must be willing to apply sound, independent business judgment; |
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— | he or she must have sufficient time to devote to being a member of the Board; and |
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— | he or she must be fluent in the English language. |
Annually, the Governance Committee will identify the areas of expertise or skill needed on the Board for the upcoming Board term. The Governance Committee will identify potential nominees for director from (i) the slate of current directors, (ii) referrals from professional search firms, typically in those instances when the committee identifies a needed skill or expertise not possessed by the current slate of directors, and (iii) recommendations from stockholders.
The Governance Committee will evaluate a potential nominee by considering whether the potential nominee meets the minimum qualifications identified by the committee, as well as considering the following factors:
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— | whether the potential nominee has leadership, strategic, or policy setting experience in a complex organization, including any scientific, governmental, educational, or other non-profit organization; |
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— | whether the potential nominee has experience and expertise that is relevant to the Company’s business including any specialized business experience, technical expertise, or other specialized skills, and whether the potential nominee has knowledge regarding issues affecting the Company; |
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— | whether the potential nominee is highly accomplished in his or her respective field; |
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— | whether the potential nominee has high ethical character and a reputation for honesty, integrity, and sound business judgment; |
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— | whether the potential nominee is independent, as defined by NASDAQNasdaq or other applicable listing standards and SEC rules, whether he or she is free of any conflict of interest or the appearance of any conflict of interest, and whether he or she is willing and able to represent the interests of all Denny’s Corporation stockholders; |
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— | any factor affecting the ability or willingness of the potential nominee to devote sufficient time to the Board’s activities and to enhance his or her understanding of the Company’s business; and |
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— | how the potential nominee would contribute to diversity, with a view toward the needs of the Board. |
The manner in which the Governance Committee evaluates a potential nominee will not differ based on whether the potential nominee is recommended by a stockholder.
Additionally, with respect to an incumbent director whom the Governance Committee is considering as a potential nominee for re-election, the Governance Committee will review and consider the incumbent director’s service during his or her term, including the number of meetings attended, level of participation, and overall contribution to the Company.
The Company did pay fees to a professional search firm to help identify and evaluate potential nominees for director for 2018.2020.
Board Diversity. The Governance Committee and the Board are committed to a diversified membership, with a particular emphasis on individuals who satisfy the factors outlined above and individuals with a wide variety of management, operating, and restaurant experience and skills, in addition to other attributes such as race, gender and national origin, as demonstrated in the circle charts below. The Governance Committee continually looks for opportunities to develop its diversity initiatives further.
Our Board Composition
Succession Planning. Our Board maintains a critical focus on the Company’s succession plans. The Governance Committee has been charged with monitoring and overseeing the process of planning for CEO, senior management, and Board member succession. Under our succession planning process, the Governance Committee identifies and periodically updates the qualities and characteristics it believes isare necessary for an effective CEO and senior officers. With these principles in mind, the committee periodically reviews the development and progression of potential internal candidates against these standards. Additionally, under the Company’s CEO emergency succession plans, critical advance planning for contingencies, such as the departure, death, or disability of the CEO or other top executives is set forth so that, in the event of an untimely vacancy, the Company has in place an emergency succession plan to facilitate the transition to both interim and long-term leadership. Equally important is planning for director succession. The Governance Committee periodically
reviews the skills, characteristics, attributes and experiences of Board members to assure that the Board possesses the appropriate level of skill, experience and ability necessary to lead and the govern the Company effectively.
Board Leadership Structure and Risk Oversight
Over the past sixteen years, theThe Company has separatedseparates the positions of CEO and Board Chair and has appointed an independent Board Chair. During a seven-month period (June 2010 – January 2011), Ms. Smithart-Oglesby, in addition to her role as Board Chair, also held the position of Interim CEO while the Company conducted the hiring process for a permanent CEO. At the conclusion of that seven-month period, and with the hiring of Mr. Miller as the Company’s CEO, the two positions were again separated. The Company believes having a separate CEO and Board Chair is an important part of its overall commitment to the highest standards of corporate governance and believes that it allows the Board to effectively develop and oversee its business strategy and monitor risk. The separate positions also allow the Board to freely perform its management oversight function. Additionally, each member of the Board, with the exception of Messrs. Miller and Wolfinger, is independent under the applicable standards. It is the Board’s policy to appoint a Lead Director during any time when the Board Chair position is not held by an independent director. The responsibilities of the Lead Director, when applicable, would include (i) regularly meeting (by phone or in person) with the CEO to discuss the financial and operational status of the Company, (ii) staying abreast of Company issues in greater depth than required of other Board members in order to assist, if necessary, during the period of transition of Company leadership, and (iii) leading periodic executive sessions of the independent Board members. Our Board has determined that its current structure, with separate CEO and Board Chair roles and an independent Lead Director, if necessary, is in the best interests of the Company and its stockholders at this time.
The Board has the ultimate responsibility for risk management. However, the Board has delegated the responsibility of risk assessment and risk management to the Audit Committee. Periodically, with the assistance of management, the Audit Committee undertakes an extensive Company-wide risk assessment. This extensive risk assessment identifies the main strategic, operational, compliance and financial risks the Company is facing based on its strategic objectives. The assessment also identifies the steps that management is or should be taking to address and mitigate exposure to such risks, and the Audit Committee will periodically receive reports from management regarding the steps that management is taking to address and mitigate such risks.
Board Meeting Information
During 2017,2019, there were six meetings of the Board. Each director serving on the Board in 20172019 attended at least 75% of the meetings of the Board (and, as applicable, committees thereof) during the year. At each meeting, the Board holds a regularly scheduled executive session at which only independent directors are present.
Communications Between Security Holders and Board of Directors
Security holders may send written communications to the Board or any one or more of the individual members of the Board by directing such communication to Denny’s Corporation by mail in the care of the Secretary, at our principal executive offices set forth above, or by e-mail to smelton@dennys.com. All written communications will be compiled by the Secretary and promptly submitted to the individual director(s) being addressed or to the Chair of the committee whose areas of responsibility includes the specific topic addressed by such communication, or in all other cases, to the Board Chair.
Stockholder Engagement
The Company recognizes the value of the views and input of its stockholders. The Company periodically reaches out to and engages with its stockholders on various topics, including corporate governance, compensation, performance, strategy and other matters. We believe that having regular engagement with our stockholders strengthens our relationships with stockholders and helps us to better understand stockholdersstockholders' views on our policies and practices and other matters of importance to our business.
Board Member Attendance at Annual Meetings of Stockholders
It is the policy of Denny’s Corporation that all of the members of the Board and all nominees for election to the Board at the annual meeting of stockholders attend such meeting except in cases of extraordinary circumstances. All of the directors (with the exception of Mr. Robinson who was unable to attend as a result of a death in his family) attended the 20172019 virtual annual meeting of stockholders.
Director Compensation
For a description of the compensation of directors, please see “Executive Compensation – 2019 Director Compensation Table”Compensation” elsewhere in this Proxy Statement.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” EACH OF THE TENNINE NOMINEES TO THE BOARD OF DIRECTORS OF DENNY’S CORPORATION.
SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
As a result of the adoption of the Sarbanes-Oxley Act of 2002, and related regulations adopted by the SEC and by each national securities exchange, audit committees of public companies are formally charged with the responsibility for the appointment, compensation, retention and oversight of the independent registered public accounting firm that serves as the Company’s independent auditor. The Audit Committee takes this responsibility very seriously and for the fiscal year 2018,2020, the Audit Committee has selected KPMG as the independent registered public accounting firm of the Company. This selection is submitted for ratification of and approval by the stockholders at the Annual Meeting. Representatives of KPMG are expected to attend the Annual Meeting. They will have an opportunity to make a statement, if they so desire, and to respond to appropriate questions. If the stockholders do not ratify this selection, other independent registered public accounting firms will be considered by the Audit Committee.
20172019 and 20162018 Audit Information
KPMG served as the Company’s independent registered public accounting firm to audit the Company’s financial statements for the fiscal years ended December 28, 201626, 2018 and December 27, 2017.25, 2019. The fees billed in thethose fiscal years ended December 28, 2016 and December 27, 2017 for KPMG’s services to the Company were as follows:
| | | Year ended | | Year ended | | Year ended | | Year ended | |
| December 28, 2016 | | December 27, 2017 | | December 26, 2018 | | December 25, 2019 | |
Audit Fees | $ | 795,000 |
| (1) | $ | 1,080,000 |
| (2) | $ | 930,000 |
| (1) | $ | 1,025,000 |
| (2) |
Audit-Related Fees | 77,000 |
| | 62,000 |
| | 62,000 |
| | 62,000 |
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Tax Fees | 13,892 |
| | 24,062 |
| | 16,413 |
| | — |
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All Other Fees | — |
| | — |
| | — |
| | — |
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Total Fees | $ | 885,892 |
| | $ | 1,166,062 |
| | $ | 1,008,413 |
| | $ | 1,087,000 |
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_____________
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(1) | Includes additional billing of $45,000$80,000 related to the 2016 audit. The billing primarily related to additional audit effort associated with certain transactions and other matters. |
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(2) | Includes additional billing of $270,000 related to the 20172018 audit. The billings primarily related to additional audit effort associated with the implementation of new systems, issuance of consents,transition disclosures related to Topic 606 (Revenue Recognition) and Topic 842 (Leases), certain transactions and other matters. |
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(2) | Includes additional billing of $135,000 related to the 2019 audit. The billings primarily related to additional audit effort associated with refranchising, evaluation of deficiencies, critical audit matters and other matters. |
In the above table, in accordance with applicable SEC rules:
“audit fees” are fees billed by the independent registered public accounting firm for professional services for the audit of the annual Consolidated Financial Statements included in the Company’s Form 10-K and review of the Condensed Consolidated Financial Statements included in the Company’s Form 10-Qs, and for services that are normally provided by the independent registered public accounting firm in connection with statutory and regulatory filings or engagements, including comfort letters, consents, registration statements, statutory audits and reports on internal controls required by the Sarbanes Oxley Act of 2002;
“audit-related fees” are fees billed by the independent registered public accounting firm for assurance and related services that are reasonably related to the performance of the audit or review of the financial statements, and generally include fees for audits of the Company’s employee benefit plans and audit or attest services not required by statute or regulation;
“tax fees” are fees billed by the independent registered public accounting firm for professional services for tax compliance, tax advice, and tax planning; and
“all other fees” are fees billed by the independent registered public accounting firm for any services not included in the first three categories above.
The Audit Committee has considered and determined that the services for which audit-related and tax fees were billed were compatible with KPMG maintaining its independence.
Audit Committee’s Pre-approval Policies and Procedures
It is the policy of the Audit Committee to pre-approve all audit and permitted non-audit services proposed to be performed by the Company’s independent registered public accounting firm. The process for such pre-approval is typically as follows. Audit Committee pre-approval is sought at one of the Audit Committee’s regularly scheduled meetings following the presentation of information at such meeting detailing the particular services proposed to be performed. Additionally, the Chair of the Audit Committee has been delegated the authority by the Audit Committee to pre-approve, where necessary, such services requiring pre-approval in between regularly scheduled Audit Committee meetings. The Chair will report any such decisions at the Audit Committee’s next scheduled meeting. In 2017,2019, the services described above were pre-approved by the Audit Committee pursuant to the policy of the Audit Committee, and none of such services were approved pursuant to the exception provided by Rule 2-01(c)(7)(i)(C) under Regulation S-X.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” RATIFICATION AND APPROVAL OF THE SELECTION OF KPMG AS THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM OF THE COMPANY FOR THE 20182020 FISCAL YEAR.
ADVISORY VOTE ON EXECUTIVE COMPENSATION
As required by Section 14A of the Exchange Act, the Company provides stockholders with the opportunity to vote to approve, on a non-binding advisory basis, the compensation of our named executive officers as disclosed in this Proxy Statement. This proposal, commonly referred to as a “say on pay” proposal, gives our stockholders the opportunity to express their views on the compensation of our named executive officers. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers and our compensation program.
As described in further detail in “Executive Compensation – Compensation Discussion and Analysis,” our compensation program is designed to attract, motivate and retain top-quality leadership talent while ensuring that their interests are aligned with the interests of our stockholders and that their efforts are focused on the Company’s key strategic objectives.
It is our firm belief that our executive compensation program, with its balance of annual cash incentives designed to reward the achievement of key performance goals set for the year and longer-term equity vehicles designed to reward executives for stock price performance over a longer term, compensates our executives for performance directly linked to stockholder value creation.
In addition, the Board has enacted a number of policies – including share ownership requirements, incentive clawbacks, the elimination of employment contracts and the elimination of tax gross-ups (except for certain limited gross-ups available to most salaried employees under the Company’s broad-based relocation policy) – which ensure that the Company’s practices are aligned with market-based best practices.
Stockholders are encouraged to read the “Compensation Discussion and Analysis” section of this Proxy Statement and the accompanying compensation tables and related narrative disclosure included in the “Executive Compensation” section of this Proxy Statement for more information regarding our compensation program.
We are asking stockholders to approve the compensation of our named executive officers as disclosed herein by adopting the following advisory resolution at the Annual Meeting:
“RESOLVED, that the compensation paid to the Company’s named executive officers, as disclosed in this Proxy Statement for the 20182020 Annual Meeting of Stockholders pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion, is hereby APPROVED.”
Although this vote is non-binding, the Board and the Compensation Committee will take into account the outcome of the vote when considering future executive compensation decisions.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE RESOLUTION TO APPROVE THE COMPENSATION PAID TO THE COMPANY’S NAMED EXECUTIVE OFFICERS, AS DISCLOSED IN THIS PROXY STATEMENT PURSUANT TO ITEM 402 OF REGULATION S-K, INCLUDING THE COMPENSATION DISCUSSION AND ANALYSIS, COMPENSATION TABLES AND NARRATIVE DISCUSSION.
STOCKHOLDER PROPOSAL
The stockholder proposal, which follows, is a verbatim submission by The Benedictine Sisters of Mount St. Scholastica, 801 South 8th Street, Atchison, Kansas 66002 (who have notified us that they own 1,185 shares of our Common Stock), for consideration by our stockholders. All statements therein are the sole responsibility of The Benedictine Sisters from Mount St. Scholastica.
End Use of Medically Important Antibiotics in Healthy Animals
2018 - Denny's Corporation
WHEREAS: Antibiotic resistance is one of the leading human health threats of our time.
"A post-antibiotic era - in which common infections and minor injuries can kill - far from being an apocalyptic fantasy, is instead a very real possibility for the 21st Century."
-World Health Organization (WHO), 2014
Antibiotics are losing their effectiveness due in significant part to reckless overuse in farm animal production. The more that antibiotics are used, the faster antibiotic-resistant bacteria (superbugs) evolve. Antibiotic resistance could cause 300 million premature deaths and up to $100 trillion in global economic damage by 2050 (http://amr-review.org).
Over 70% of medically important antibiotics in the U.S. are sold for livestock use (U.S. Food and Drug Administration, December 2016). The vast majority of antibiotic use in livestock production is to prevent disease caused by unhealthy conditions on farms, rather than to treat diagnosed illness.
Recognizing these risks, Farm Animal Investment Risk and Return (FAIRR)'s $2.5 trillion investor network has called on the restaurant industry to minimize the use of medically important antibiotics in global livestock supply chains (www.fairr.org).
In November 2017, WHO released guidelines on the use of medically important antibiotics in animals, "strongly recommend[ing] an overall reduction in the use of all classes of medically important antibiotics in food-producing animals, including complete restriction of these antibiotics for growth promotion and disease prevention without diagnosis."
As consumers grow increasingly concerned, the majority of the top 25 restaurant chains in the U.S. have already enacted policies to reduce unnecessary antibiotic use in healthy livestock. For example:
McDonald's, Wendy's, KFC, Taco Bell, and Burger King prohibit the use of medically important antibiotics in their U.S. chicken supply.
Subway and Chick-Fil-A source only chicken raised without any antibiotic use.
Panera Bread and Chipotle Mexican Grill prohibit routine antibiotic use across their entire livestock supply chain.
In contrast, Denny's provides little information to shareholders on how it is managing the risk of antibiotic use beyond regulatory compliance. Without meaningful action, Denny's may suffer irreparable reputational damage and lose market share to its competitors.
A strong antibiotics policy will safeguard Denny's brand by catching it up to its peers on a critical health and sustainability issue. It will also position the company to comply with a shifting regulatory landscape: California and Maryland have passed legislation to prohibit the routine use of antibiotics in livestock, and other states may follow.
RESOLVED: Shareholders request that Denny's adopt an enterprise-wide policy to phase out the use of medically important antibiotics for disease prevention purposes in its meat and poultry supply chain.
SUPPORTING STATEMENT: Shareholders further request the company to publish timetables and measures for implementing this policy.
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Board of Directors’ Statement Opposing the Shareholder Proposal
The Board recommends that you vote AGAINST this proposal. The Board has carefully considered the matter, and the company has discussed the proposal with the Benedictine Sisters of Mount St. Scholastica and their advisors. The Board believes that this proposal is not in the best interest of our shareholders and opposes it for the following reasons:
Government and industry have devised new guidelines for antibiotics. We encourage shareholders to monitor with us whether the guidelines reduce the use of antibiotics before mandating elimination of this group of antibiotics.
The shareholder proposal would increase costs for Denny's, its franchisees, and ultimately for our guests, and would not provide measurable benefits to shareholders, franchisees or guests.
Regulators and U.S. beef and poultry producers are tackling the appropriate use of antibiotics through the FDA’s Guidance for Industry 213, which became effective January 1, 2017. GFI 213 alters the norms for raising livestock, allowing the antibiotics in concern to be used only under the supervision of veterinarians. This properly balances animal welfare and human health. We expect and hope that GFI 213 will greatly reduce the use of antibiotics, but the data won’t be available until December 2018. We ask shareholders to see whether GFI 213 achieves its objective before mandating a blunt instrument approach.
Denny's would bear an additional cost to comply with the proposal, which we aren’t able to forecast. All our current suppliers comply with GFI 213, but most have not eliminated antibiotics of concern. Therefore, the shareholder proposal would force us to change suppliers for many categories of products.
This shareholder proposal with a very narrow focus is a poor tool either for managing businesses or for achieving public policy goals. Denny's, like other restaurants, considers a broad variety of factors in making decisions on menu, products and vendors, such as price, taste, quality, consumer acceptance, animal welfare, reliability of supply, and food safety. The selection of one factor as a mandate for purchasing decisions oversimplifies a complex task and can have adverse repercussions on other worthy concerns.
Denny's is 90% franchised in the United States and 100% franchised outside the United States. Our domestic purchasing decisions are made with our franchisees. We ask our shareholders to respect our collaboration with franchisees, balancing all the factors listed above, rather than elevating a public policy goal above business concerns.
We will continue to improve our menu. We request that our shareholders allow us and our franchisees first to invest where that most benefits consumers and our businesses, rather than establish artificial rules, and second to invest the prudent time necessary to assess the results of recent regulations and then make an informed decision that will benefit society, shareholders, franchisees and our guests.
Board Recommendation
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE AGAINST THIS PROPOSAL.
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
This is an overview and analysis of the compensation objectives and policies for our named executive officers ("NEOs") and the material compensation decisions we made with respect to these officers for 2017.2019. This information should be read in conjunction with the compensation tables, related narratives, and notes contained later in this Proxy Statement. This discussion focuses on the compensation awarded to, earned by, and paid to the following individuals, who were our named executive officersNEOs for 2017:2019:
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Name | | Position |
John C. Miller | | Chief Executive Officer (Former President and Chief Executive Officer)(1) |
F. Mark Wolfinger | | President (Former Executive Vice President, Chief Administrative Officer and Chief Financial Officer)(2) |
John W. Dillon | | Executive Vice President and Chief Brand Officer(3) |
Christopher D. Bode | | Senior Vice President and Chief Operating Officer |
Stephen C. Dunn | | Senior Vice President and Chief Global Development Officer |
(1) Mr. Miller served as our President and Chief Executive Officer (our principal executive officer) as of the end of our last completed fiscal year. He relinquished the role of President effective February 6, 2020.
F. Mark
(2) Mr. Wolfinger served as our Executive Vice President, Chief Administrative Officer and Chief Financial Officer (our principal financial officer) as of the end of our last completed fiscal year, and was promoted to President effective February 6, 2020.
Christopher D. Bode,(3) Mr. Dillon served as our Senior Vice President and Chief OperatingBrand Officer
Timothy E. Flemming, as of the end of our Senior Vice President, General Counsellast completed fiscal year and Chief Legal Officer
Michael L. Furlow, our Seniorwas promoted to Executive Vice President and Chief InformationBrand Officer effective February 6, 2020.
The Compensation Discussion and Analysis ("CD&A") is organized as follows: |
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| Page |
Executive Summary | |
Consideration of Last Year's Say-On-Pay Vote | |
Compensation Objective and Design | |
Role of Peer Companies and Competitive Market Data | |
Base Salary | |
Annual Cash Incentives | |
Long-Term Equity Incentives | |
Benefits and Perquisites | |
Post-Termination Payments | |
Compensation and Corporate Governance Best Practices | |
Executive Summary
Our Business. We are the franchisor and operator of one of America’s largest franchised full-service restaurant chains. As of December 27, 2017,25, 2019, the Denny’s brand consisted of 1,7351,703 restaurants, of which 1,557 (90%1,635 (96%) were franchised/licensed restaurants and 178 (10%68 (4%) were Company operated.
20172019 Performance Highlights. At the core of our compensation philosophy and strategy are the goals of compensating and rewarding our executives for performance that is aligned with the Company’s strategic objectives while creating value for our stockholders. Our 20172019 Company performance highlights include:
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◦• | Domestic system-wide same-store sales(1) increased 1.1% compared to 2016,2.0%, comprised of a 1.0%1.9% increase at companyCompany restaurants and a 1.1%2.0% increase at domestic franchised restaurants. |
Sold 105 Company restaurants to franchisees to substantially complete our recent refranchising strategy.
Operating Income increased 124.1% to $165.0 million.
Net Income was $117.4 million, or $1.90 per diluted share.
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◦ | Opened 39 system restaurants, including 7 international franchised locations. |
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◦ | Completed 250 remodels, including 247 at franchised restaurants. |
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◦ | Operating Income increased 50.4% to $70.7 million. |
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◦ | Achieved Adjusted EBITDA(1) of $101.7 million, an increase of $2.3 million, or 2.3%, over the prior year.
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◦• | Adjusted Net IncomeEBITDA (1)(2)was $40.7 million, and Adjusted Net Income per Share(1) grew 5.5% to $0.58. |
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◦ | Generated $49.6 million of Adjusted Free Cash Flow(1), our second highest amount in over a decade, after cash capital spending of $31.2$96.8 million.
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◦• | Allocated $82.9Adjusted Net Income(2) was $47.9 million, or $0.77 per diluted share (2). |
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• | Adjusted Free Cash Flow (2)was $29.8 million. |
Allocated $96.2 million toward repurchases of Common Stock.
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(1) | Same-store sales include sales at company restaurants and non-consolidated franchised and licensed restaurants that were open during the same period in the prior year. Total operating revenue is limited to company restaurant sales and royalties, advertising revenue, fees and occupancy revenue from non-consolidated franchised and licensed restaurants. Accordingly, domestic franchise same-store sales and domestic system-wide same-store sales should be considered as a supplement to, not a substitute for, our results as reported under GAAP. |
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(2) | Please refer to the historical reconciliations of Net Income to Adjusted Income Before Taxes, Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization), Adjusted Net Income, Adjusted Net Income Per Share, and Adjusted Free Cash Flow Adjusted Net Income, and Adjusted Net Income per Share which are attachedin Appendix A to this Proxy Statement as Appendix A.Statement. |
Our financial and stockholder return results for 20172019 and 2017-2019 yielded the following corresponding incentive compensation resultsresults:
2019 CIP. The achievement of performance goals under our 2019 Corporate Incentive Plan (“CIP”) in excess of target levels for 2017: two of three plan metrics resulted in awards earned at 100.0% of target.
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◦ | The achievement of performance goals under our 2017 Corporate Incentive Plan (“CIP”) at or above threshold levels for all three plan metrics resulted in awards earned at 57.4% of target. |
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◦ | The Company’s total shareholder return (“TSR”) over the three-year period ended December 27, 2017 was 34.7% and in the 61st percentile compared to our peer group, resulting in TSR performance shares under our long-term incentive program ("LTIP") for 2015 being earned at 113.1% of target. The compound annual growth rate ("CAGR") for the Adjusted EBITDA Growth LTIP metric was 7.20% over the three-year performance period ending December 27, 2017, resulting in a maximum payout under the 2015 LTIP of 150%. Based upon a 50% weighting for each of the TSR and the Adjusted EBITDA Growth metrics, the total payout under the 2015 LTIP was 131.6%. |
2017 Long-Term Incentive Program. The 2017 performance share unit ("PSU") awards granted under our 2017 Long-Term Incentive Program ("LTIP"), with a performance period of December 29, 2016 through December 25, 2019, had two equally-weighted metrics of (i) relative total stockholder return (“TSR”) as measured against a peer group, and (ii) Adjusted EBITDA Growth (as described below). The Company's TSR over the three-year performance
period was 59.1% and in the 94th percentile compared to the peer group, resulting in the TSR portion of the 2017 PSUs being earned at 150.0% of target. The compound annual growth rate ("CAGR") for the Adjusted EBITDA Growth metric was -1.16% over the three-year performance period, resulting in no payout under the Adjusted EBITDA Growth portion of the 2017 PSU award. Accordingly, the resulting total payout under the 2017 LTIP was approximately 75.0%.
The two metrics highlighted in the charts below represent a stock price measure of relative TSR utilized in our 2017 LTIP and a financial measure of Adjusted EBITDA Growth(1) utilized in our LTIP.2019 CIP and in our 2017 LTIP (as Adjusted EBITDA Growth). We believe that these measures demonstrate the positive stock performance of the Company and its financial health, respectively, and that the achievement of these results and the resulting payouts demonstrate a strong link between our pay and performance.
_____________________(1) Please refer to the historical reconciliationsreconciliation of Net Income to Adjusted Income Before Taxes, Adjusted EBITDA Adjusted Free Cash Flow, Adjusted Net Income, and Adjusted Net Income per Share which are attachedin Appendix A to this Proxy Statement as Appendix A.Statement.
Our 20172019 executive pay mix demonstrates a strong alignment between our executive compensation and the long-term interests of our stockholders. A substantial portion of our executive compensation (as demonstrated by the charts below) is in the form of long-term equity compensation. This structure maintains a high correlation between realized pay and stock price performance, thus aligning the interests of our named executive officers ("NEOs")NEOs with those of our stockholders.
20172019 Compensation Structure.
For 2017,2019, based upon management's review of and recommendations regarding our compensation programs, external benchmarking, consultation with its compensation consultants, and consideration of the prior year's "say-on-pay" stockholder vote, which was overwhelmingly in support of our 20162018 executive compensation, the Compensation Committee determined that the overall structure and design of the CIP and the LTIP would remain unchanged from 2016. Accordingly, the 2017 LTIP consisted ofsame for 2019, with the following changes: (i) 100% performance share units, (ii) a maximum payout of 150%, and (iii) two equally-weighted metrics offor the CIP, the Adjusted EBITDA Growthtarget would reflect the actual timing of units refranchised in connection with the Company's refranchising strategy in 2019, with threshold and TSR relativemaximum ranging from 80% to industry peers. The 2017120%; and (ii) for the LTIP, (a) a change in the peer group from a customized peer group used in past years to the S&P 600 Consumer Discretionary Index, and (b) an increase in the economic value of awards (by approximately 33% for
one year only) to recognize the extra efforts required by the Company's leadership team to ensure successful execution of Denny's refranchising strategy in 2019.
Accordingly, for 2019, the CIP utilizedcontinued to utilize (i) three metrics consisting of Franchised Same-Store Sales, Company Same-Store Sales, and Adjusted Income Before Taxes,EBITDA, (ii) metric weightings of 15%, 25%, and 60%, respectively, and (iii) a Guest Traffic Modifier,modifier, which cancould increase or decrease the annual bonus earned under the CIP by 20% if the annual Guest Traffic measurement ismetric, as measured over the year, was at least 3%1% above or below the targetbenchmark performance level.
The 2019 LTIP consisted of (i) 100% PSUs, (ii) a maximum payout of 150%, and (iii) two equally-weighted metrics of Adjusted EPS Growth and TSR relative to industry peers.
Our Compensation Structure Reflects Best Practices. The Company diligently listens to its stockholders and monitors and adopts best practices in its compensation structure and related areas of corporate governance. We believe that the following compensation and governance practices reflect "best practices” and are integral parts of our compensation philosophy:
Our Executive Compensation Practices (What We Do):
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◦Executive Compensation Practices |
What We Do: | What We Don’t Do: |
ü | We pay for performance. |
û | There are no employment agreements with our NEOs or other senior officers. |
◦ü | We benchmark executive compensation against survey data and a peer group. |
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◦ | We have adopted robust stock ownership guidelines for each of our Company’s officers (vice presidents and above) and non-employee directors, which are described further under "Compensation and Corporate Governance Best Practices - Stock Ownership Guidelines."
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◦ | We have a compensation clawback policy applicable to the Company’s named executive officers and other senior officers. |
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◦ | More than half of named executive officer compensation is performance-based. |
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◦ | Our LTIP is solely composed of performance shares units that vest based on achievement of key performance metrics. |
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◦ | The Compensation Committee retained an independent compensation consultant. |
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◦ | Change in control severance benefits for named executive officers are “double-trigger”, which require that both a change in control event and a qualifying termination within a specified period following the change in control occur in order for the benefits to be paid out. |
Executive Compensation Practices Not Implemented (What We Don’t Do):
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◦ | No special retirement benefits are provided to named executive officers, other than their participation in a 401(k) plan (on the same basis as other employees), supplemental pension plan (for which new participation and benefit accruals have been frozen), or nonqualified deferred compensation plan (which is limited to certain salaried employees). |
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◦û | No tax gross-ups are provided, except for certain limited gross-ups available to most salaried employees pursuant to the Company’s broad-based relocation program or as a part of a new hire inducement package. |
ü | We have adopted robust stock ownership guidelines for each of our Company’s officers (vice presidents and above) and non-employee directors, which are described further under "Compensation and Corporate Governance Best Practices - Stock Ownership Guidelines." | û | No special retirement benefits are provided to NEOs, other than their participation in a 401(k) plan (on the same basis as other employees) or nonqualified deferred compensation plan (which is limited to certain salaried employees). |
◦ü | There are no employment agreements with our named executive officers orWe have a compensation clawback policy applicable to the NEOs and other senior officers. |
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◦û | Executive officers, employees and directors are not permitted to engage in hedging transactions such as prepaid variable forward contracts, equity swaps, collars, exchange funds, puts, calls or other derivatives relating to the Company’s securities under our anti-hedging policy. |
ü | More than half of NEO compensation is performance-based. |
◦û | Executive officers and directors, except under limited circumstances, are not permitted to hold Company securities in a margin account or pledge Company securities as collateral for a loan. |
ü | Our LTIP is solely composed of PSUs that vest based on achievement of key performance metrics. |
◦û | No dividend equivalents are paid on awards unless they vest and performance goals are attained. |
ü | The Compensation Committee retains an independent compensation consultant. |
◦û | No repricing of stock options (or cash buyouts)buyouts of stock options) occurs without stockholder approval. |
ü | Change in control severance benefits for NEOs are “double-trigger”, which requires that both a change in control event and a qualifying termination within a specified period following the change in control occur in order for the benefits to be paid out. | | |
Most of Our Named Executive OfficersNEOs and our Directors on average, own(On Average) Own Company Stock in excessExcess of ourOur Stock Ownership Guidelines. Our named executive officers'NEOs and outside directors'directors (on average) have satisfied our stock ownership amounts arerequirements as demonstrated in the chart below:
(1) Actual share multiple as of February 28, 2018, based upon the 50-day average trading price of the Common Stock of $14.78.
(2) Required stock ownership/retention levels for directors and executive officers are based upon the following multiples:_____________________
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◦ | Directors and CEO – 5 X annual cash board retainer/base salary(1)
| Actual share multiple as of February 28, 2020, based upon the 50-day average trading price per share of Denny's Common Stock of $20.37. |
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◦ | Executive Vice Presidents – 3 X base salary(2)
| Required stock ownership/retention levels for directors and executive officers are based upon the following multiples: |
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�� | Multiple |
Directors and CEO | 5 X cash board retainer / base salary |
President and Executive Vice Presidents | 3 X base salary |
Senior Vice Presidents – and Vice Presidents | 1 X base salary |
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◦ | Vice Presidents - 1 X base salary
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(3) Mr. Furlow was hired byFor more information regarding our stock ownership guidelines applicable to the Company on April 17, 2017NEOs and currently does not own shares of Denny's Corporation stock. Based upon his participationdirectors, see "Compensation and Corporate Governance Best Practices - Stock Ownership Guidelines" in the LTIP, he is projected to meet or exceed his ownership guideline within the required five-year ownership period.
this CD&A.
Consideration of Last Year’s Advisory StockholderSay-On-Pay Vote on Executive Compensation
At the 20172019 annual meeting of stockholders, 95.0%98.9% of the votes cast approved the compensation of our named executive officers,NEOs, as discussed and disclosed in the 20172019 Proxy Statement. The Board and the Compensation Committee appreciate and value the views of our stockholders. In considering the results of thisthe 2019 advisory say-on-pay vote, the Compensation Committee concluded that the compensation paid to our named executive officersNEOs and the Company’s overall pay practices have strong stockholder support.
In light of the strong stockholder support of the compensation paid to our named executive officersNEOs as evidenced by the results of thisthe 2019 advisory say-on-pay vote, the Compensation Committee decided to retain our general approach to executive compensation in 2018.2020. Future advisory votes on executive compensation will serve as an additional tool to guide the Compensation Committee in evaluating the alignment of the Company’s executive compensation programs with the interests of the Company and its stockholders.
At the 2017 annual meeting of stockholders, our stockholders expressed a preference that advisory votes on executive compensation occur annually. Consistent with this preference, the Board determined to continue having thean advisory vote on executive compensation every year until the next required advisory vote on the frequency of stockholder votes on the compensation of executive officers, which will occur at the 2023 annual meeting of stockholders.
Compensation Objective and Design
The Compensation Committee has developed compensation programs for the Company’s named executive officersNEOs with guidance and analysis from its independent consultant, Pearl Meyer. The overall design objectives of our compensation programs are to attract, develop, motivate and retain top-quality leadership talent, while ensuring that their interests are aligned with the interests of our stockholders and that their efforts are focused on the Company’s key strategic objectives. When evaluating and designing compensation programs, the Compensation Committee reviews market survey data, proxy statements filed by our restaurant peer group companies, and industry compensation practices.
The Company’s incentive strategy is designed to be integrated across different time frames, performance metrics, and types of payout. The goal is to reward executives for the achievement of performance goals that are directly linked to stockholder value creation. Our annual cash incentives are designed to reward the achievement of key Company performance targets set for the applicable fiscal year. Longer-term equity incentives reward executives for stock price performance relative to the Company’s restaurant peer group and earnings growth over a three-year period.
During 2017,2019, executive officers were provided with a compensation package that included the following elements: (i) base salary, (ii) annual cash incentive opportunities (bonus) through the CIP, (iii) long-term equity incentives through awards granted under the LTIP, and (iv) other benefits that generally are available to other salaried employees, together with limited perquisites. Each of these compensation elements is described and analyzed in further detail in the tables and narrative that follow. Additionally, under limited circumstances, discretionary bonuses and other awards may be utilized to recognize individual performance or for inducement during the hiring process. Such awards are intended to reward extraordinary performance and attract top executive talent while retaining executives through long-term vesting and potential wealth accumulation. The Compensation Committee generally targets market median along with the consideration of other factors when determining the appropriate level and amount of these compensation elements for each of our executive officers.
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Compensation Element | | Description | | Objectives/ Performance Linkage | | Performance Time Horizon |
Base Salary | | | |
Base Salary | Fixed portion of cash compensation | | Provide competitive compensation for day-to-day responsibilities and performance | | Salary levels are based on individual performance sustained over a substantial period of time |
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Annual Cash Incentives (CIP or Bonus) | | Cash payments based on the Company’s achievement of certain financial and operating performance targets | | Provide incentive to achieve key annual performance goals critical to the Company’s overall success | | Payouts are based on annual Company performance |
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Long-Term Equity Incentives | Performance share units | PSUs vest based on the Company’s TSR vs. peer companies’ TSR and the achievement of a key financial performance target related to earnings growth | | Directly align executive interests with the long-term success of the Company (as measured by stock price appreciation and earnings growth) and provide incentive for key leadership talent to remain with the Company | Performance grants | PSUs vest over a 3-year period providing an aligned, long-term link to stock price performance and financial results |
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Benefits and Perquisites | | Retirement, health care, and other benefits designed to provide financial safeguards to executives; relocation benefits designed to assist with moves necessitated by an executive's employment at Denny's; perquisites such as telecomtelecommunication allowances that have a direct business use | | Provide health care and financial security benefits to our executive officers similar to those provided to all of our management employees; allow executives to focus on companyCompany business without incurring significant personal expense; provide market competitive package to recruit and retain executive talent
| | Most benefits are provided to all salaried employees on essentially the same terms, with a retentive purpose/purpose; some benefits vary among levels of salaried employees |
Role of Peer Companies and Competitive Market Data
To assist in evaluating and determining competitive levels of compensation for the various elements of executive pay in 2017,2019, the Compensation Committee reviewed and considered various sources of data which included:
Published compensation surveys from the Chain Restaurant Total Rewards Association (covering the chain restaurant industry) and public and private executive compensation surveys specific to the retail and food services industry, which provide aggregated information on base salary, total cash compensation (base salary and bonus), and total direct compensation (base salary, bonus and long-term incentives) for various executive positions.
Data from proxy statements collected and analyzed from a peer group of 14 restaurant companies operating in the family dining, casual and quick service segments.segments, as further described below under "How Peer Companies are Determined." This restaurant peer group consisted of the following companies:
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BJ’s Restaurants, Inc. | Dine Brands Global, Inc. | Red Robin Gourmet Burgers, Inc. |
Bojangles', Inc. (1) | El Pollo Loco Holdings, Inc. | Sonic Corp.(2) |
Brinker International, Inc. | Fiesta Restaurant Group, Inc.
| Sonic Corp.
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Brinker International, Inc.
| Jack in the Box, Inc.
| Texas Roadhouse, Inc.
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Buffalo Wild Wings, Inc.(4)
| Panera Bread Company(2)
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The Cheesecake Factory Incorporated | Popeye’s Louisiana Kitchen, Inc.(1)
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Cracker Barrel Old Country Store, Inc.
| Red Robin Gourmet Burgers,Jack in the Box, Inc.
| The Cheesecake Factory Incorporated |
Dine Brands Global,Del Taco Restaurants, Inc.
| Ruby Tuesday,Nathan's Famous, Inc.(3)
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(1) | Became privately-held effective January 2019. |
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(2) | Became privately-held effective December 2018. |
(1) Became privately-held effective March 2017.
(2) Became privately-held effective July 2017.
(3) Became privately-held effective December 2017.
(4) Became privately-held effective February 2018.
The Compensation Committee determined for 2019, like 2018, that it would utilize a separate peer group to measure the relative TSR performance in the 2019 LTIP. For more information regarding the 2019 TSR Peer Group, see the "Long-Term Equity Incentives" section in this CD&A.
How Peer Companies are Determined. For 2017, theThe Compensation Committee, in September 2018, reviewed and made changes to the peer group utilized in 20162018 and determined that the only adjustment to eliminatethis peer group for 2019 would be the elimination of companies that were significantly larger than Denny’shad been acquired or had gone "private" prior to such meeting, resulting in termsthe peer sample size of system-wide sales and market capitalization, or operating in a significantly different segment of the restaurant industry.14 companies set forth above.
We have developed athis peer group for compensation purposes according to the following multiple selection criteria:
•GICSGlobal Industry Classification Standard code sub-industry: Restaurant companies
•Franchised organization: Target restaurants with franchised sales representing a large portion of system-wide sales/units
•Annual system-wide sales: Ranging from approximately one-third to three times Denny’s annual system-wide sales
•Market capitalization: Ranging from approximately one-fifth to five times Denny’s market capitalization
•Direct competitors: For business and management talent
Why We Use System-Wide Sales and Not Corporate Revenues When Selecting Peer Companies. We believe system-wide sales is the best measure of company size and complexity for a highly-franchised business model like ours. Although we do not own and operate allmost of the Denny's restaurants, we do own the Denny’s brand, develop and help execute the overall strategy for the entire system of Denny’s restaurants, manage all research and development with respect to menu offerings, pricing and restaurant décor, provide site selection and restaurant development services to our franchise partners, and guide and recommend the adoption of technology, work processes, and staffing models that positively affect the customer experience over our entire system of restaurants. Our corporate revenue alone does not capture the full scope and complexity of effectively managing thisthe Denny's organization. Furthermore, we compete for talent with companies of comparable size, regardless of their business model (company-owned vs. franchised), and therefore, believe system-wide sales is the proper basis for selecting peer companies for compensation benchmarking purposes. However, as mentioned above, we also consider other important measures when selecting our restaurant peer group, including industry focus, business model, and market capitalization.
Use of Competitive Market Data. The Company strives to provide total pay opportunities that are within a competitive range relative to the median of our restaurant peer group and that are aligned with survey-based data. Company incentive plans are designed to have significant differentiation in payouts based on performance. As a result, actual compensation payouts are intended to be market appropriate and performance aligned. Benchmark data is only one of many factors that we consider when making pay determinations. Other important factors include, but are not limited to, companyCompany performance, individual executive performance, internal equity among our leadership team, executive tenure, retention priorities, and succession planning. The Compensation Committee annually analyzes tally sheets for each named executive officerNEO (as further described in the “Compensation and Incentives Committee” section on page 10 of this Proxy Statement). This review helps ensure that (i) executive compensation decisions are aligned with stockholder interests, (ii) termination provisions are appropriate and aligned with market practices, and (iii) the value of executive share holdings and unvested incentives alignaligns with changes in stockholder value.
Base Salary
How Amounts are Determined. In general, the Compensation Committee considers a variety of factors when setting base salaries for executive officers, including market information, experience, tenure with the Company, individual performance, and internal pay equity. The Compensation Committee annually reviews the performance and scope of responsibility of our named executive officersNEOs to determine whether adjustments to base salaries are appropriate in light of individual and Company performance, as well as overall market conditions and peer proxy data.
Salary Adjustments for 2017.2019. The executive compensation and annual performance reviews for our named executive officers in January 2017 resulted in an adjustmentThere were no adjustments to the base salaries of Mr. Miller from $850,000our NEOs in fiscal year 2019 other than an increase to $875,000, of Mr. Bode from $360,000 to $375,000, and of Mr. Flemming from $345,000 to $355,000. These adjustments were based upon strong leadership and performance exhibited by Messrs. Miller, Bode, and Flemming in 2016, and recognition that their base salaries were below the market median for corresponding peer company executive officers. Mr. Wolfinger also had a strong performance during 2016, but his base salary was more competitively aligned with his peers, and therefore was not adjusted. Additionally, in April 2017, Mr. Furlow was hired with a starting base salary of $335,000 (based upon the market median for corresponding peer company executive officers)Mr. Dillon (from $367,000 to $385,000) in additionconnection with his promotion to receiving, upon his hiring, a sign-on cash bonus of $110,000.Senior Vice President, Chief Brand Officer.
Annual Cash Incentives
20172019 Corporate Incentive Plan
For the 2017 fiscal year 2019, the Compensation Committee adopted the Company’s 20172019 CIP, which provided our non-operations management and staff, including each of our named executive officers,NEOs, with an opportunity to earn an annual cash bonus based on the Company’s achievement of specified performance objectives. The 20172019 CIP utilized the samewas comprised of three metrics used in the 2016 CIP, consisting
ofmetrics: (i) Franchised Same-Store Sales, (ii) Company Same-Store Sales, and (iii) Adjusted Income Before Taxes, the latter of which is a performance metric that has been used in our annual incentive bonus programs since 2009.EBITDA. The goals utilized for the Franchised and Company Same StoreSame-Store Sales metrics were based upon percentage increases as compared to the prior year. The 20172019 CIP also continued the use of a modifier that could increase or decrease a participant’s annual earned bonus by 20% if the Guest Traffic metric, as measured over the year, was at least 3%1% above or below the targetbenchmark performance level.
Target Incentive Opportunities. Under the 20172019 CIP, each of our named executive officersNEOs was eligible to earn a target incentive award (“Target Award”) equal to a percentage of his base salary earned during the 2017 fiscal year 2019, with the percentage varying depending on the participant’shis position. Target Awards were determined for participants based upon a review of competitive market practices and internal equity, including published survey data and proxy information from our restaurant peer group. The Target Awards for 20172019 for Messrs. Miller, Wolfinger, Dillon, Bode Flemming and FurlowDunn were 100%, 90%, 70%, 70% and 70% of their respective base salaries earned induring fiscal 2017.year 2019.
Performance Goals for 20172019 Incentives. As noted above, the payouts under the 20172019 CIP could be earned by our named executive officersNEOs based on the Company’s achievement of pre-established goals under three performance criteria, in addition to a 20% modifier. The amount of actual bonus earned could range from 0% of the Target Award, if theperformance fell below threshold performance goals, were not met, to a maximum of 150%200% of the Target Award, if maximum performance goals were met or exceeded. The performance goals and the levels of associated payouts for 20172019 were as follows:
20172019 CIP Performance Formula(1)
| | | At Threshold | | At Target | | At Maximum | At Threshold | | At Target | | At Maximum |
| Performance Goal | | Payout (2) | | Performance Goal | | Payout (2) | | Performance Goal | | Payout (2) | Performance Goal | | Payout (1) | | Performance Goal | | Payout (1) | | Performance Goal | | Payout (1) |
| | | | | | | | | | | | | | | | | | | | | | |
Franchised Same-Store Sales ......................... | 0.0 | % | | 7.5 | % | | +2.3 | % | | 15 | % | | +6.0 | % | | 22.5 | % | |
Franchised Same-Store Sales (2) | | 0.0 | % | | 7.5 | % | | +1.6 | % | | 15 | % | | +5.0 | % | | 30 | % |
Company Same-Store Sales(2) | +1.0 | % | | 12.5 | % | | +2.9 | % | | 25 | % | | +7.0 | % | | 37.5 | % | 0.0 | % | | 12.5 | % | | +2.3 | % | | 25 | % | | +5.0 | % | | 50 | % |
Adjusted Income Before Taxes (3) | $69.3MM |
| | 30.0 | % | | $71.7MM |
| | 60 | % | | $80.0MM |
| | 90.0 | % | |
Adjusted EBITDA (3) | | $76.8MM |
| | 30.0 | % | | $96.0MM |
| | 60 | % | | $115.2MM |
| | 120 | % |
Total (4) | |
| | 50% |
| | |
| | 100 | % | | |
| | 150 | % | |
| | 50.0 | % | | |
| | 100 | % | | |
| | 200 | % |
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(1) | Before any incentive awards are payable to our named executive officers under the CIP, a performance threshold target of Adjusted EBITDA must be achieved. For 2017, the Adjusted EBITDA performance threshold target of $65 million was achieved with an actual Adjusted EBITDA of $101.7 million, as calculated on Appendix A. |
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(2) | As a percentage of a participant’s Target Award. |
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(3)(2) | Adjusted Income Before Taxes is a non-GAAP financial measure that is calculatedBased upon percentage increases as set forth in Appendix A, adjusted furthercompared to add back 2017 deferred compensation for purposes of the bonus calculation in 2017.prior year. |
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(3) | Please refer to the reconciliation of Adjusted EBITDA in Appendix A to this Proxy Statement. |
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(4) | Actual results that fall between threshold, target, and maximum performance levels are interpolated to compute payout amounts. |
20172019 Performance Results. Based upon actual 20172019 performance results, achievement of the performance goals relating to Franchised Same-Store Sales and Adjusted EBITDA were slightly above target levels and Company Same-Store Sales and Adjusted Income Before Taxes were at orwas slightly below target level but above threshold levels.level. Accordingly, as shown in greater detail in the charttable below, a total payout of 57.4%100.00% of each named executive officer’sNEO’s total Target Award was earned for 2017.2019. For 2017, annual2019, the Guest Traffic decreased 0.8%metric was -0.4% as compared to a targetbenchmark performance level of positive 1.3%-1.0% to +1.0%. As a result, the Guest Traffic modifier was not triggered, and payouts to our named executive officersNEOs were based solely on the performance goals described above.
Considering the actual performance results for 20172019 as shown in the table below, table, the Compensation Committee approved incentive awards for our named executive officersNEOs equal to 57.4%100.0% of their respective Target Awards. The following two tables set forth (i) the actual results and related payout percentage of each 20172019 CIP metric and (ii) the total target opportunity, annual Target Award, and actual payout to each of our named executive officersNEOs under the 20172019 CIP.
| | 2017 CIP Metric | Actual Results | | Payout% (at Target) (1) | | Payout% (Actual Results) (1) | |
2019 CIP Metric | | Actual Results | | Payout% (at Target) (1) | | Payout% (Actual Results) (1) |
Franchised Same-Store Sales | +1.1% | | 15% | | 11.1% | +2.0% | | 15% | | 16.8% |
Company Same-Store Sales | +1.0% | | 25% | | 12.5% | +1.9% | | 25% | | 20.7% |
Adjusted Income Before Taxes (2) | $69.6MM | | 60% | | 33.8% | |
Adjusted EBITDA (2) | | $96.8MM | | 60% | | 62.5% |
Total All Metrics | | 100% | | 57.4% | | 100% | | 100.0% |
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(1) | As a percentage of a participant’s Target Award. |
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(2) | Please refer to the reconciliation of Adjusted Income Before Taxes is a non-GAAP financial measure that is calculated as set forthEBITDA in Appendix A adjusted further to add back 2017 deferred compensation for purposes of the bonus calculation in 2017.this Proxy Statement. |
| | Executive Officer | | Target Opportunity (1) | | Annual Target Award (2) | | Actual Payout (3) | | Target Opportunity (1) | | Annual Target Award (2) | | Actual Payout (3) |
John C. Miller | | 100% | | $871,154 | | $500,042 | | 100% | | $900,000 | | $900,000 |
F. Mark Wolfinger | | 90% | | $472,500 | | $271,215 | | 90% | | $495,000 | | $495,000 |
John W. Dillon | | | 70% | | $269,016 | | $269,016 |
Christopher D. Bode | | 70% | | $260,884 | | $149,748 | | 70% | | $268,100 | | $268,100 |
Timothy E. Flemming | | 70% | | $247,423 | | $142,021 | |
Michael L. Furlow | | 70% | | $156,033 | | $89,563 | |
Stephen C. Dunn | | | 70% | | $253,400 | | $253,400 |
__________
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(1) | As a percentage of a participant’s base salary earned during fiscal year 2017.2019. |
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(2) | The Annual Target Award is based upon the named executive officer'sNEO's base salary earned during the year and reflects changes, in theif any, to their base salaries of Messrs. Miller, Bode and Flemming during fiscal 20172019 pursuant to the terms of the 20172019 CIP. |
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(3) | For Messrs. Miller, Bode and Flemming,Mr. Dillon, the actual payout amounts reflectamount reflects pro-rated adjustments to theirhis individual Target Awards pursuant to the terms of the 20172019 CIP as a result of the changes to theirhis base salariessalary during 2017.fiscal year 2019. |
Long-Term Equity Incentives
Overview. A key component of the total compensation package of our executive officers is a long-term equity incentive program designed to meet the following objectives:
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◦ | Reward long-term Company profitability and growth |
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◦ | Promote increased stockholder value and align our executives’ interests with the interests of our stockholders |
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◦ | Offer competitive awards aligned with market practice |
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◦ | Promote stock ownership among executives |
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◦ | Encourage a long-term perspective among executive officers |
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◦ | Provide an incentive for executives to remain with the Company |
Long-Term Incentive Design for 2017.2019. For 2017, theThe Compensation Committee approved an LTIP structure for 2019 that supports the Company’s strategic business goals, aligns participants' interests with those of our stockholders, and improves the competitiveness of the Company’s total executive compensation package. The 2017In the process, it determined that the 2019 LTIP design would remain very similar to the 2018 design with the exception of changing the peer group from a customized peer group utilized in past years to the S&P 600 Consumer Discretionary Index. Accordingly, for 2019, the LTIP features remained unchanged from 2016 and included:continue to include: (i) two equally weightedequally-weighted performance metrics (Adjusted EBITDAEPS Growth and TSR compared to a peer group TSR)group); (ii) a maximum payout available under the program of 150%; and (iii) an LTIP award granted in performance share unitsPSUs that settle 100% in shares of Common Stock.
Fiscal Year 20172019 Long-Term Incentive Grants. The Compensation Committee approved LTIP grants to selected employees, including our named executive officers,NEOs, in the first quarter of 2017,2019, consistent with past practice. When considering the 20172019 LTIP grants, the Compensation Committee started with an intended target value for each executive officer, which was based on a percentage of his or her base salary. For 2017,2019, to recognize the extra efforts required by the Company's leadership team to ensure successful execution of Denny's refranchising strategy in 2019, the economic values of awards were increased by approximately 33% for one year only. Consequently, the target values for 2019 LTIP grants to the named executive officers,NEOs, as a percentage of their respective base salaries, were as follows: Mr. Miller, 275% (increased from 250% in 2016)317%; Mr. Wolfinger, 125%175%; and Messrs. Dillon, Bode Flemming and Furlow,Dunn, each 100%135%.
The target value of each 2017 LTIP2019 PSU award was granted with (i) fifty percent (50%) in the form of performance share units that may be earned based on the results of the Company’s TSR as compared to its peer group (the "TSR PSUs"),set forth below and (ii) fifty percent (50%) in the form of performance share units that may be earned based on the results of the Adjusted EBITDAEPS Growth metric versus plan (the “Adjusted EBITDA PSUs”), with the actual number of target TSR PSUs determined by dividing the target value by the Monte Carlo valuation of one performance share unit and the actual number of target Adjusted EBITDA PSUs determined by dividing the target value by the grant date fair value of one performance share.plan.
As more fully described below, the target number of performance share unitsPSUs may be earned from 0% to 150% of target based on the results of the two metrics over a three-year performance period. Once earned, the performance share unitsPSUs convert to and are settled in shares of Denny’s Corporation stockCommon Stock on a one-for-one basis.basis, net of shares withheld for tax withholding. The LTIP grants provide our named executive officersNEOs with incentives to achieve earnings targets and create stockholder value, and also encourage executive retention and promote stock ownership.
For more information regarding 2019 LTIP grants to our named executive officers in 2017,NEOs, please see the “2017“2019 Grants of Plan-Based Awards Table.”Awards” in this Proxy Statement. As indicated above, each 20172019 LTIP award was granted with two equally weightedequally-weighted metrics of relative TSR and Adjusted EBITDAEPS Growth, which we call "TSR PSUs" and "Adjusted EBITDAEPS PSUs" for purposes of clarity with the description of the metrics of each 2019 PSU Award below.
TSR Performance Share Units. TSR PSUs are earned based on the Company’s TSR over a three-year period relative to peer companies’ TSR performance, with no payout if relative TSR performance is below a threshold amount.
Payouts of the TSR PSUs will be between 0% and 150% of the target awardsand will be earned based on the Company’s TSR ranking relative to the Company’s peer groupTSR Peer Group (listed previously)below) over the three-year performance period beginning on December 29, 201627, 2018 and ending on December 25, 201929, 2021 (the Company’s fiscal years 2017, 2018,2019, 2020, and 2019)2021). The TSR PSUs will be earned and vested at the end of the performance period based on TSR performance. TSR, which combines share price appreciation and dividends paid to show a total return to the stockholder, will be calculated as follows:
TSR = (ending stock price – beginning stock price + reinvested dividends) / beginning stock price*
*A 20-day trading average closing price per share will be used to determine the beginning and ending stock prices for the Company and its peer groupgroup.
The Company’s TSR performance ranking compared to its peer groupTSR Peer Group (described below) at the end of the three-year performance period determines the payout level as shown below:
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Degree of Performance | | Denny’s TSR Performance Ranking vs. Peers | | Payout as a % of Target (1) |
Below Threshold | | <25th %ile | | 0% |
Threshold | | 25th %ile | | 50% |
Target | | 50th %ile | | 100% |
Maximum | | 90th %ile | | 150% |
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(1) | Payouts are interpolated between payout levels. |
TSR Peer Group. Denny's TSR performance will be measured against the TSR of the S&P 600 Consumer Discretionary Index at the end of the three-year performance period to determine the payout level.
The TSR Peer Group is a "closed group" (includes only companies that were members of the index at the beginning of fiscal year 2019) and no new companies will be added to the peer group during the performance period (and any companies leaving the index after the beginning of fiscal year 2019 will continue to be included as part of the TSR peer group except as described in the following sentence). Pursuant to the terms of the 2019 LTIP, in order to be counted in the TSR calculation, a company must be a publicly-traded company at the beginning and at the end of the performance period.
Adjusted EBITDAEPS Performance Share Units. Adjusted EBITDAEPS PSUs are earned based on the results of the Adjusted EBITDAEPS Growth metric during the same three-year performance period.period used for the TSR PSUs. The Adjusted EBITDAEPS Growth metric compares the Company’s performance of Adjusted EBITDA at the beginning and endaverage year-over-year growth rate of the Company’s Adjusted EPS over the three-year performance period.period and will be calculated as described below. The number of Adjusted EBITDAEPS PSUs earned will be an amount between 0% and 150% of the target awards based on the Company's Adjusted EBITDAEPS Growth performance at threshold (50%), target (100%), or maximum (150%) payout levels over the performance period. Linear interpolation is used to determine payouts for performance that falls between the designated levels of targeted performance. For purposes of the 2019 LTIP, Adjusted EPS is defined as the Company's earnings (Net Income) adjusted to exclude losses on sales of assets and other items, net of taxes, divided by the fully diluted shares of the Company's common stock outstanding as defined by the Compensation Committee.
We believe the specific performance goals relating to Adjusted EBITDAEPS Growth are confidential, and that their disclosure would result in competitive harm to the Company. When the Adjusted EBITDAEPS Growth goals were established, the Compensation Committee believed that they were challenging but achievable based upon a review of the Company's performance and its business goals and objectives for the performance period. The actual Adjusted EBITDAEPS Growth rate targets utilized in the Company's 20172019 LTIP (including performance against such goals) will be disclosed in the Company's proxy statement in the year following the year in whichend of the 2017 LTIP performance period ends.period.
20152017 LTIP Performance Results, Payout and Deferral. The three-year performance period under the 20152017 LTIP concluded on December 27, 2017. The LTIP features for 2015 were the same as those previously described for the 2017 LTIP.25, 2019. The Company’s TSR for this period was 34.7%59.1% and in the 61st94th percentile compared to ourthe peer group (described on page 22 of the 2018 Proxy Statement), resulting in TSR performance shares underachieved at 150.0% of target (based on the same scale as used for the 2019 PSU awards). Under the terms of the 2015 LTIP being earned at 113.1% of target. As set forth under the terms of 20152017 LTIP, the CAGR for the Adjusted EBITDA Growth metric was calculated by comparing the ending Adjusted EBITDA for 20142016 with the ending Adjusted EBITDA for 2017 (Adjusted2019 (please refer to the reconciliation of Adjusted EBITDA is a non-GAAP financial measure that is calculated as set forth in Appendix A) . A to this Proxy Statement) with payout levels determined as shown in the following table:
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Degree of Performance | | Denny’s Adjusted EBITDA CAGR | | Payout as a % of Target Award of Adjusted EBITDA PSUs (1) |
Below Threshold | | <3.00% growth | | 0% |
Threshold | | 3.00% growth | | 50% |
Target | | 5.00% growth | | 100% |
Maximum | | 7.00% growth | | 150% |
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(1) Linear interpolation utilized to determine payouts which fall between given points on this scale.
This calculation resulted in a below-threshold CAGR growth rate of 7.20%-1.16% for the performance period exceeding the maximumand a resulting payout level of 6.00% and resulting0% as to this metric.
Accordingly, aggregate 2017 LTIP performance resulted in a maximum payout of 150%. Accordingly, the composite payout for the 2015 LTIP was 131.6%approximately 75.0% of target. TheseThe payouts under the 2015 LTIP to our named executive officersNEOs were as follows:
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Executive Officer | | Target Performance Shares (1) | | Earned Performance Shares | | Earned Performance Shares Paid Out (2) | | Earned Performance Shares Deferred (3) |
John C. Miller | | 178,260 | | 235,694 | | - | | 235,694 |
F. Mark Wolfinger | | 50,526 | | 66,806 | | 66,806 | | - |
Christopher D. Bode | | 28,873 | | 38,176 | | 38,176 | | - |
Timothy E. Flemming | | 29,310 | | 38,754 | | 38,754 | | - |
Michael L. Furlow | | - | | - | | - | | - |
Total | | 286,969 | | 379,430 | | 143,736 | | 235,694 |
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Executive Officer | Target Adjusted EBITDA Growth Metric | | Target TSR Metric | | Earned PSUs(1) | | Earned PSUs Paid Out (2) | | Earned PSUs Deferred (3) |
John C. Miller | 98,860 | | 92,193 | | 138,290 | | 138,290 | | - |
F. Mark Wolfinger | 26,962 | | 25,144 | | 37,716 | | 37,716 | | - |
John W. Dillon | 13,969 | | 13,027 | | 19,541 | | 19,541 | | - |
Christopher D. Bode | 15,407 | | 14,368 | | 21,552 | | 21,552 | | - |
Stephen C. Dunn | 14,585 | | 13,602 | | 20,403 | | 16,323 | | 4,080 |
(1) Includes TSR PSUs and Adjusted EBITDA PSUs._____________________
(2) Performance shares units are payable on a "1-for-1" basis in shares of Common Stock.
(3) Performance shares units which were deferred pursuant to the Denny's, Inc. Deferred Compensation Plan and are payable on a "1-for-1" basis in Common Stock upon the executive officer's termination of service. | |
(1) | Reflects 150% achievement of the Target TSR metric of the 2017 PSUs. |
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(2) | PSUs are payable on a one-for-one basis in shares of Common Stock, net of shares withheld for tax withholding. |
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(3) | Reflects PSUs that were deferred pursuant to the Deferred Compensation Plan and are payable on a one-for-one basis in Denny's Common Stock upon the NEO's termination of service. |
For a further description of the calculation2017 LTIP, see pages 25-26 of the Company's TSR performance, a description of the Company peer group, and other elements of the 2015 LTIP, see pages 22 and 23 of the Company's 20152018 Proxy Statement.
Benefits and Perquisites
In General. The Company’s executives are eligible to participate on the same basis as other salaried employees in health and welfare plans, qualified retirement and savings plans, and other benefit plans intended to provide a financial safety net of coverage for various significant life events, such as death, disability and retirement. Along with other members of the management team, our named executive officersNEOs also participate in a non-qualified savings plan intended to allow them to contribute to a deferred compensation plan without regard to IRS limits on the amount of earned compensation that can be voluntarily deferred into a 401(k) retirement plan. Our named executive officersNEOs also receive certain perquisites, including telecommunication allowances, car allowances and reimbursement for executive physicals. These perquisites serve a business purpose, are limited in value, and are consistent with those of restaurant companies and other companies of similar size.
Retirement and Savings Plans
Pension Benefits. The Company provides pension benefits through a tax qualified pension plan (the "Advantica Pension Plan") and, due to the limits on benefits and compensation under the Internal Revenue Code of 1986, as amended (the “Code”), an ancillary non-qualified plan. Each of these plans was frozen to new participants on January 1, 2000 and for benefit accrual purposes on December 31, 2004.
Only one named executive officer (Mr. Flemming) had accrued pension benefits under these plans, with the majority of benefits being held under the ancillary non-qualified plan. There were no new benefit accruals to any of our named executive officers in 2017. During 2014, the Board approved the termination of the Advantica Pension Plan as of December 31, 2014. The liquidation of the Advantica Pension Plan was completed in 2016.
401(k) Plan/Deferred Compensation PlanPlan. .Generally, all employees are eligible to participate in the Company’s 401(k) Plan, withplan, to which participants are able to elect to contribute up to 25% of their compensation. For 2016, the plan was amended and restated to incorporate a "safe harbor" plan design, which included changes to participant eligibility, companyCompany contribution amounts and vesting. As a result, beginning in 2016, the Company matchesbegan matching up to a maximum of 4% of compensation deferred by the participant.participants. Prior to 2016, we made matching contributions of up to 3% of compensation deferred by the participant.
Additionally, aDeferred Compensation Plan. A non-qualified deferred compensation plan is offered to certain employees. This plan allows participants to defer up to 50% of their annual salary and up to 100%75% of their bonus, on a pre-tax basis. Also, beginning in 2017, we began to permit certain officers are permitted to defer under this plan all or a portion of their awarded performance share unitsPSUs that vest under the Company's LTIP.
Prior to 2016, we made matching contributions of up to 3% of compensation deferred by the participant under the non-qualified deferred compensation plan due to the fact that our executives, in accordance with IRS limits, were unable to receive the Company's matching contribution under the 401(k) plan. Beginning inAs of the beginning of 2016, matching contributions are no longer available under the deferred compensation plan since executive officers are permitted to receive matching contributions under the 401(k) plan with the "safe harbor" plan design. For more information regarding the deferral of compensation under the Company's deferred compensation plan for our named executive officers,NEOs, please see the "Nonqualified"2019 Nonqualified Deferred Compensation Table"Compensation" in this Proxy Statement.
Post-Termination Payments
In General. All of our executive officers participate in the Denny’s Corporation Amended and Restated Executive and Key Employee Severance Pay Plan (the “Severance Plan”). The Severance Plan was originally adopted in January 2008 and was last amended and restated on May 9, 2017. The Severance Plan provides severance payments and benefits to our named executive officersNEOs in a consistent manner. In the event of a participant’s employment termination without cause or for good reason (as such terms are defined in the Severance Plan), the Severance Plan provides for, among other items, salary continuation and health benefits for 12 months. Under the Severance Plan’s change in control provisionsprovisions: (i) the Company's chief executive officer, president and any executive vice presidents are entitled to an enhanced lump sum severance payment equal to two times base salary and CIP target bonus plus health benefits for 24 months, and (ii) the Company's senior vice presidents receive a lump sum payment equal to one times base salary and CIP target bonus. Two events (i.e., a "double trigger") must take place – a change in control of the Company and a qualifying associated termination of the employee – before a participant is entitled to these enhanced benefits. Under the Severance Plan, no benefits are payable following a termination for cause or voluntary termination (resignation without good reason).
We provide involuntary termination severance benefits to protect individuals from events outside their control and to offer compensation packages similar to those commonly found in the market in which we compete for executive talent. Furthermore, we provide enhanced benefits in the event of a change in control to protect against disruption during change in control activities. Potential benefits under the Severance Plan for our named executive officersNEOs are discussed further under the section entitled “Summary of Termination Payments and Benefits” later in this Proxy Statement.
Tax Considerations
Our Compensation Committee considers the tax and accounting treatment associated with the cash and equity awards it makes, although these considerations are not the overriding factor that the Compensation Committee uses in making its decisions. Section 162(m) of the Code places a limit of $1 million on the amount of compensation that we may deduct in any year with respect to our named executive officers, other than our Chief Financial Officer, Mark Wolfinger. This limitation does not apply to compensation that meets the requirements under Section 162(m) for the “qualified performance-based” compensation exemption. The 2017 CIP and the 2017 LTI program were designed to meet the exemption from the $1 million limitation under Section 162(m) and be fully deductible by the Company. The Compensation Committee intends to maximize the deductibility of executive compensation while retaining some discretion to compensate executives in a manner commensurate with performance and the competitive landscape for executive talent. To maintain flexibility in this competitive landscape, our Compensation Committee has not adopted a policy requiring all compensation to be deductible.
Section 162(m) of the Code was changed substantially in connection with the adoption of the Tax Cuts and Jobs Act that was signed into law on December 22, 2017 (the “Act”). Under the Act, the “qualified performance-based” compensation exemption was repealed for tax years beginning in 2018, unless such compensation qualifies for transition relief applicable for compensation paid pursuant to a written binding contract that was in effect as of November 2, 2017. The application and interpretation of the transition relief under the legislation is ambiguous and although we expect that certain incentive compensation will satisfy this transition relief, no assurances can be given that compensation intended to satisfy the requirements for exemption from Section 162(m) of the Code as “qualified performance-based” compensation will, in fact, be fully deductible.
Compensation and Corporate Governance Best Practices
Stock Ownership Guidelines. The Company has stock ownership guidelines for its directors and executive officers. The guidelines were originally effective January 25, 2011, later amended and restated as of January 1, 2014 and January 1, 2015, and most recently amended effective January 31, 2017 to (i) increase the ownership multiples of our CEO (to five times base salary), non-employee directors (to five times their annual cash retainer), and executive vice presidents (to three times base salary); and (ii) to add an ownership requirement for all vice presidents of the Company.
Required stock ownership levels are the lesser of (1) a number of shares with an aggregate fair market value (based upon the current 50-day average Company stock price)closing price per share of Denny's Common Stock) equal to or greater than the value of an individual’s current base salary or annual cash Board retainer times his or her designated multiple set forth below or (2) a fixed number of shares fixed asdetermined (as of the later of January 1, 2015, (thethe effective date of the January 1, 2015 stock ownership guidelines amendment and restatement)restatement, or the date on which an individual becomes subject to the guidelines, as determined inguidelines) by multiplying an individual’s current base salary or annual cash Board retainer times his or her designated multiple and dividing the manner set forth below.product by the 200-day average closing price per share of Denny's Common Stock.
Required stock ownership/retention levels for directors and officers is based upon the following multiples(1):
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◦ | Directors and CEO – 5 X annual cash board retainer/base salary
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◦ | Executive Vice Presidents – 3 X base salary
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◦ | Senior Vice Presidents – 1 X base salary
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◦ | Vice Presidents - 1 X base salary
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_________
(1) Any executive officer who is also a member of the Company’s Board of Directors will be required to maintain the ownership level set for his or her executive officer position.
The fixed number of shares referenced above is calculated for each officer and director as of the later of January 1, 2015 or the date on which an individual becomes subject to these guidelines, in the following manner:
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| |
| Multiple |
Directors and CEO | 5 X cash board retainer / base salary |
President and Executive Vice Presidents | 3 X base salary |
Senior Vice Presidents and Vice Presidents | 1 X base salary |
_____________________
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Base Salary / Cash
Board Retainer(1)
| X | Appropriate
Multiple | / | 200-Day Average Stock Price
(based on the last 200 trading days prior to the laterAny executive officer who is also a member of the effective date ofBoard will be required to maintain the guidelinesownership level set for his or date an individual becomes subject to the guidelines) | = | Fixed Share Amount
(number of shares)her executive officer position. |
Each officer and director will beis expected to attain and thereafter maintain his or her required stock ownership level within five years from the later of January 1, 2015 or the date on which such officer or director becomes subject to the guidelines. Once a required ownership level is attained, an individual is expected to maintain such level. Any executiveofficer or director who has not attained and maintained his or her stock ownership level within the five-year compliance period will not be permitted to sell Company stock received from the Company until the required level is attained and maintained.
Compensation Clawback Policy. The Company has a compensation clawback policy for named executive officersNEOs and certain other key employees that provides for the recoupment by the Company under certain circumstances of annual cash bonuses, stock-based awards, performance-based compensation, and any other forms of cash or equity compensation other than base salary. In the event of a restatement of the Company’s previously issuedpreviously-issued financial statements as a result of an error, omission, fraud or non-compliance with financial reporting requirements (but not including any restatement or adjustment due to a change in applicable accounting principles, rules or interpretations), or a determination by the Compensation Committee that a material error was made in computing the amount of any incentive compensation, the Compensation Committee has discretion to direct the Company to recover from one or more current or former NEOs and certain
other key employees the incremental incentive compensation in excess of the incentive compensation that would have been earned, paid or vested based on the related or adjusted financial results.
Anti-Hedging Policy. The Company has a policy that prohibitsDirectors, executive officers and directorsother employees are prohibited from engaging in transactions in puts, calls or other derivatives relating to Company securities on an exchange or any other organized market. The policy also prohibits executive officers and directors from engaging in certain forms of hedging or monetization transactions with respect to Company stock,our securities. “Hedging transactions” can be accomplished through a number of possible mechanisms, including through the use of financial instruments such as prepaid variable forward contracts,forwards, equity swaps, collars forward sale contracts, and exchange funds.funds or through other transactions that hedge or offset, or are designed to hedge or offset, any decrease in the market value of our securities. Because hedging transactions might permit a director, executive officer or other employee to continue to own our securities, whether obtained through our equity compensation plans or otherwise, without the full rewards and risks of ownership, such hedging transactions are prohibited.
Anti-Pledging Policy. The Company has a policy that prohibits executive officers and directors (except under limited circumstances) from holding Company securities in a margin account or pledging Company securities as collateral for a loan.
2019 Summary Compensation Table
The following Summary Compensation Tabletable sets forth the compensation paid to, or earned by, the Company’s named executive officersNEOs for the fiscal years shown below.
| | Name and Principal Position | Name and Principal Position | | Year | | Salary ($) | | Bonus ($) | | Stock Awards ($) | | Non-Equity Incentive Plan Compensation ($) | | Change in Pension Value and NQDC Earnings ($) | | All Other Compensation ($) | | Total ($) | Name and Principal Position | | Year | | Salary ($) | | Stock Awards ($) | | Non-Equity Incentive Plan Compensation ($) | | All Other Compensation ($) | | Total ($) |
John C. Miller | John C. Miller | | 2017 | | 871,154 |
| | — |
| | 2,406,245 |
| (1) | 500,042 |
| (2) | — |
| | 32,394 |
| (4) | 3,809,835 |
| John C. Miller | | 2019 | | 900,000 |
| | 3,313,698 |
| (1) | 900,000 |
| (2) | 30,180 |
| (3) | 5,143,878 |
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| President and | | 2016 | | 844,615 |
| | — |
| | 2,125,015 |
| | 2,194,543 |
| | — |
| | 29,994 |
| | 5,194,167 |
| Chief Executive Officer (Former President | | 2018 | | 896,154 |
| | 2,474,976 |
| | 606,719 |
| | 24,400 |
| | 4,002,249 |
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| Chief Executive Officer | | 2015 | | 805,000 |
| | — |
| | 2,037,503 |
| | 1,991,080 |
| | — |
| | 77,216 |
| | 4,910,799 |
| and Chief Executive Officer) | | 2017 | | 871,154 |
| | 2,406,245 |
| | 500,042 |
| | 32,394 |
| | 3,809,835 |
|
| | | | | | | | | | | | | | | |
F. Mark Wolfinger | F. Mark Wolfinger | | 2017 | | 525,000 |
| | — |
| | 656,257 |
| (1) | 271,215 |
| (2) | — |
| | 30,040 |
| (4) | 1,482,512 |
| F. Mark Wolfinger | | 2019 | | 550,000 |
| | 1,117,947 |
| (1) | 495,000 |
| (2) | 30,180 |
| (3) | 2,193,127 |
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| Executive Vice President, | | 2016 | | 525,000 |
| | — |
| | 656,252 |
| | 919,249 |
| | — |
| | 29,840 |
| | 2,130,341 |
| President (Former Executive Vice President, | | 2018 | | 546,154 |
| | 687,478 |
| | 332,784 |
| | 29,946 |
| | 1,596,362 |
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| Chief Administrative Officer and | | 2015 | | 525,000 |
| | — |
| | 577,510 |
| | 954,769 |
| | — |
| | 52,564 |
| | 2,109,843 |
| Chief Administration Officer and Chief | | 2017 | | 525,000 |
| | 656,257 |
| | 271,215 |
| | 30,040 |
| | 1,482,512 |
|
| | Financial Officer) | | | | | | | | | | |
John W. Dillon | | John W. Dillon | | 2019 | | 385,000 |
| | 603,700 |
| (1) | 269,016 |
| (2) | 24,412 |
| (3) | 1,282,128 |
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| Chief Financial Officer | | | | | | | | | | | | | | | Executive Vice President and | | 2018 | | 365,154 |
| | 366,997 |
| | 173,053 |
| | 23,374 |
| | 928,578 |
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| | | | | | | | | | | | | | | | Chief Brand Officer | | 2017 | | 336,154 |
| | 340,005 |
| | 135,067 |
| | 19,052 |
| | 830,278 |
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Christopher D. Bode | Christopher D. Bode | | 2017 | | 372,692 |
| | — |
| | 375,006 |
| (1) | 149,748 |
| (2) | — |
| | 22,100 |
| (4) | 919,546 |
| Christopher D. Bode | | 2019 | | 383,000 |
| | 600,543 |
| (1) | 268,100 |
| (2) | 23,786 |
| (3) | 1,275,429 |
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| Senior Vice President and | | 2016 | | 353,077 |
| | — |
| | 350,008 |
| | 378,110 |
| | — |
| | 21,777 |
| | 1,102,972 |
| Senior Vice President and | | 2018 | | 381,769 |
| | 382,988 |
| | 180,927 |
| | 29,257 |
| | 974,941 |
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| Chief Operating Officer | | 2015 | | 330,000 |
| | — |
| | 330,017 |
| | 401,300 |
| | — |
| | 11,300 |
| | 1,072,617 |
| Chief Operating Officer | | 2017 | | 372,692 |
| | 375,006 |
| | 149,748 |
| | 22,100 |
| | 919,546 |
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| | | | | | | | | | | | | | | |
Timothy E. Flemming | | 2017 | | 353,462 |
| | — |
| | 355,006 |
| (1) | 142,021 |
| (2) | 41,775 |
| (3) | 23,260 |
| (4) | 915,524 |
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Stephen C. Dunn | | Stephen C. Dunn | | 2019 | | 362,000 |
| | 567,629 |
| (1) | 253,400 |
| (2) | 24,384 |
| (3) | 1,207,413 |
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| Senior Vice President, | | 2016 | | 341,154 |
| | — |
| | 335,009 |
| | 383,080 |
| | 19,236 |
| | 11,040 |
| | 1,089,519 |
| Senior Vice President and Chief | | 2018 | | 360,923 |
| | 361,988 |
| | 171,048 |
| | 23,714 |
| | 917,673 |
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| General Counsel and | | 2015 | | 335,000 |
| | — |
| | 335,012 |
| | 425,041 |
| | — |
| | 31,924 |
| | 1,126,977 |
| Global Development Officer | | 2017 | | 351,154 |
| | 355,006 |
| | 141,094 |
| | 21,854 |
| | 869,108 |
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| Chief Legal Officer | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Michael L. Furlow | | 2017 | | 222,904 |
| | 110,000 |
| | 334,725 |
| (1) | 89,563 |
| (2) | — |
| | 273,344 |
| (4) | 1,030,536 |
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| Senior Vice President and | | | | | | | | | | | | | | | |
| Chief Information Officer | | | | | | | | | | | | | | | |
____________
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(1) | The amounts reflect the grant date fair value of performance share unitsPSUs granted pursuant to our 20172019 LTIP determined in accordance with FASB Accounting Standards Codification 718, "Compensation-Stock Compensation" ("FASB ASC 718"). Each 20172019 LTIP award was granted with two equally weighted metrics of relative TSR and Adjusted EBITDAEPS Growth. The $13.05 grant date fair value of the performance share units relating to the relative TSR metric was determined using the Monte Carlo Valuation method. The target number of performance share units relating to the relative TSR metricPSUs granted to Messrs. Miller, Wolfinger, Dillon, Bode Flemming and FurlowDunn was 92,193, 25,144, 14,368, 13,602174,176, 58,762, 31,732, 31,566 and 12,835,29,836, respectively. The $12.17 grant date fair valuevalues of the performance share units relating to the Adjusted EBITDA Growth metric was based on the closing stock price per share of our stock on the grant date. The target number of performance share units relating to the Adjusted EBITDA Growth metric granted to Messrs. Miller, Wolfinger, Bode, Flemming and Furlow was 98,860, 26,962, 15,407, 14,585 and 13,741, respectively. The value of the awardawards at the grant date, assuming that the highest level of performance conditions will be achieved, is $3,609,367, $984,385, $562,508, $532,508$4,970,548, $1,676,921, $905,552, $900,815 and $502,087$851,445 for Messrs. Miller, Wolfinger, Dillon, Bode Flemming and Furlow,Dunn, respectively. Additional information regarding the 20172019 LTIP can be found in the CD&A. Details on the valuation and terms of this awardthese awards can be found in Note 1214 to the Consolidated Financial Statements in our Form 10-K filed with the SEC on February 26, 2018.24, 2020. |
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(2) | The amounts include performance-based bonuses earned under the 20172019 CIP. Refer to the CD&A for more information regarding the 20172019 CIP. |
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(3) | The amount represents the change in actuarial present value of the accumulated benefits accrued by Mr. Flemming as a participant in the Supplemental Pension Plan. Additional information regarding these benefits may be found in the Pension Benefits Table and the Summary of Termination Payments and Benefit section elsewhere in this Proxy Statement. |
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(4) | The amounts for Messrs. Miller, Wolfinger, Dillon, Bode Flemming and FurlowDunn include Company contributions to their 401(k) accounts of $13,354 $11,000, $10,800, $12,220$11,400, $11,400, $13,632, $13,006 and $2,062,$13,604, respectively. The amounts also include the following perquisites: a car allowance of $18,000, $18,000, $10,000, $10,000 and $6,654$10,000 for Messrs. Miller, Wolfinger, Dillon, Bode Flemming and Furlow,Dunn, respectively, and a telecomtelecommunications allowance of $1,040, $1,040, $1,300, $1,040 and $692$780 for each of Messrs. Miller, Wolfinger, Dillon, Bode Flemming and Furlow, respectively. The amount for Mr. Furlow also includes relocation of $139,956, including a tax gross-up of $22,878 and $123,980, including a tax gross-up of $42,110, to satisfy Mr. Furlow’s repayment obligation to a previous employer.Dunn. |
20172019 Grants of Plan-Based Awards Table
The following table sets forth information concerning each grant of awards made to named executive officersNEOs in the last completed fiscal year under any of the Company’s plans.
| | Name | | Grant Date | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards (1) | | Estimated Future Payouts Under Equity Incentive Plan Awards (2) | | Grant Date Fair Value of Stock and Option Awards ($) (3) | | Grant Date | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards (1) | | Estimated Future Payouts Under Equity Incentive Plan Awards (2) | | Grant Date Fair Value of Stock and Option Awards ($) (3) |
| Threshold ($) | | Target ($) | | Maximum ($) | | Threshold (#) | | Target (#) | | Maximum (#) | | | Threshold ($) | | Target ($) | | Maximum ($) | | Threshold (#) | | Target (#) | | Maximum (#) | |
John C. Miller | | | | 435,577 |
| | 871,154 |
| | 1,306,731 |
| |
|
| |
|
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|
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|
| | | | 450,000 |
| | 900,000 |
| | 1,800,000 |
| |
|
| |
|
| |
|
| |
|
|
| | 1/31/17 | |
|
| |
|
| |
|
| | 95,527 |
| | 191,053 |
| | 286,580 |
| | 2,406,245 |
| | 1/29/19 | |
|
| |
|
| |
|
| | 87,088 |
| | 174,176 |
| | 261,264 |
| | 3,313,698 |
|
F. Mark Wolfinger | | | | 236,250 |
| | 472,500 |
| | 708,750 |
| |
|
| |
|
| |
|
| |
|
| | | | 247,500 |
| | 495,000 |
| | 990,000 |
| |
|
| |
|
| |
|
| |
|
|
| | 1/31/17 | |
|
| |
|
| |
|
| | 26,053 |
| | 52,106 |
| | 78,159 |
| | 656,257 |
| | 1/29/19 | |
|
| |
|
| |
|
| | 29,381 |
| | 58,762 |
| | 88,143 |
| | 1,117,947 |
|
John W. Dillon | | | | | 134,508 |
| | 269,016 |
| | 538,032 |
| |
|
| |
|
| |
|
| |
|
|
| | | 1/29/19 | |
|
| |
|
| |
|
| | 15,866 |
| | 31,732 |
| | 47,598 |
| | 603,700 |
|
Christopher D. Bode | | | | 130,442 |
| | 260,884 |
| | 391,326 |
| |
|
| |
|
| |
|
| |
|
| | 134,050 |
| | 268,100 |
| | 536,200 |
| | | | | | | | |
| | 1/31/17 | |
|
| |
|
| |
|
| | 14,888 |
| | 29,775 |
| | 44,663 |
| | 375,005 |
| | 1/29/19 | | | | | | | | 15,783 |
| | 31,566 |
| | 47,349 |
| | 600,543 |
|
Timothy E. Flemming | | | | 123,712 |
| | 247,423 |
| | 371,135 |
| | | | | | | | | |
Stephen C. Dunn | | | | | 126,700 |
| | 253,400 |
| | 506,800 |
| | | | | | | | |
| | 1/31/17 | | | | | | | | 14,094 |
| | 28,187 |
| | 42,281 |
| | 355,005 |
| | 1/29/19 | | | | | | | | 14,918 |
| | 29,836 |
| | 44,754 |
| | 567,629 |
|
Michael L. Furlow | | 78,017 |
| | 156,033 |
| | 234,050 |
| | | | | | | | | |
| | 4/17/17 | | | | | | | | 13,289 |
| | 26,576 |
|
| 39,865 |
| | 334,725 |
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The following table sets forth information concerning unexercised options, stock awards that have not vested and equity incentive plan awards for each named executive officerNEO outstanding as of the end of the Company’s last completed fiscal year.