HILL-ROM HOLDINGS, INC.
PROXY
STATEMENT
Annual Meeting of Shareholders
February 25, 2020
1:15 p.m. (Eastern Time)
Cary, North Carolina
HILL-ROM HOLDINGS, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held March 6, 2018
The Annual Meeting of Shareholders of Hill-Rom Holdings, Inc., an Indiana corporation (“Hill-Rom”Hillrom”), will be held at the following time and location, and for the following purposes:
 | Tuesday, |
 |
 | (1) (2) | To elect |
To consider and vote on a non-binding proposal to approve, on an advisory basis, the compensation of |
| (3) | To ratify the appointment of PricewaterhouseCoopers LLP as the independent registered public accounting firm of |
| (4) | To approve an amendment to the Company’s Employee Stock Purchase Plan to increase the number of shares reserved for issuance thereunder by an additional 1,000,000 shares; and |
| To transact any other items of business that may properly be brought before the meeting and any postponement or adjournment thereof. |
 | Only |
| By Order of the Board of Directors | ||
 | ||
 | ||
| Deborah M. Rasin | ||
| Secretary |
January 15, 2020
TABLE OF CONTENTS
| EXECUTIVE SUMMARY | 1 |
| GENERAL INFORMATION ABOUT THE MEETING AND VOTING | 5 |
| PROPOSALS REQUIRING YOUR VOTE | 9 |
| Proposal No. 1 – Election of Directors | 9 |
| Proposal No. 2 – Non-Binding Vote on Executive Compensation | |
| Proposal No. 3 – Ratification of the Appointment of the Independent Registered Public Accounting Firm | |
| Proposal No. 4 – Approval of Amendment to the Hill-Rom Holdings, Inc. Employee Stock Purchase Plan | 16 |
| CORPORATE GOVERNANCE | |
| AUDIT COMMITTEE REPORT | |
| SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT | |
| COMPENSATION DISCUSSION AND ANALYSIS | |
Compensation and Management Development Committee Report | |
| Detailed Table of Contents for CD&A | |
| SUMMARY COMPENSATION TABLE | |
| PAY RATIO DISCLOSURE | 56 |
| DIRECTOR COMPENSATION | |
| EQUITY COMPENSATION PLAN INFORMATION | |
| DELINQUENT SECTION 16(a) | |
| APPENDIX A – RECONCILIATION OF NON-GAAP AND GAAP FINANCIAL MEASURES |
| Proxy Statement |
This proxy statement relates to the solicitation by the Board of Directors (the “Board”) of Hill-
| Executive Summary |
This summary highlights selected information in this proxy statement. Please review thethis entire proxy statement and the Hill-Rom 2017 Annual ReportHillrom 2019 Letter to Shareholders before voting.
Key Fiscal Year 2017 Achievemen2019 Achievementsts
In fiscal year 2017, Hill-Rom:
| · | Increased reported revenue by |
| · | Increased reported operating margin by |
| · |
| · | Generated operating cash flow for the year of $401 million, an increase of 2%, and increased free cash flow by 7% to |
| · | Achieved a total |
| · | Delivered significant value to shareholders through increased dividends and share repurchases. |
| · |
| · |
| · | Introduced |
| · | Invested in innovation, connectivity and data to bring advanced, actionable point-of-care data and solutions to |
| · | Completed the sale of the Company’s surgical consumable products, including Bard-Parker® conventional and safety scalpels and blades, and a variety of other operating room accessories. The sale underscores the Company’s strategic focus on advancing connected care in high-growth, high-margin categories where Hillrom can demonstrate leadership. |
| · | Promoted excellence in the workplace and was recognized in 2019 with multiple designations, including gold status by the American Heart Association’s Workplace Index, Ecovadis Gold Award for |
|
| Proposal | Recommendation of the Board | Page References |
To elect Directors, each for one-year terms | FOR all nominees | 9 |
To approve, on an advisory basis, the compensation of executive officers | FOR the proposal | |
To ratify the appointment of 2020PricewaterhouseCoopers LLP as Hillrom’s independent registered public accounting firm for fiscal year | FOR ratification of the appointment | |
| To approve an amendment to the Company’s Employee Stock Purchase Plan to increase the number of shares reserved for issuance thereunder by an additional 1,000,000 shares | FOR the proposal | 16 |
Additional important information about the meeting and voting can be found in the section entitled “General Information About the Annual Meeting and Voting” beginning on page 5.
2
Our Board believes that good corporate governance enhances shareholder value. Our governance practices include:
| Governance Practice | Description | For More Information |
| Director Independence | All of our directors, except our CEO, are independent | |
| Non-Executive | We have a non-executive, independent Board chair | |
| Director Attendance | During the fiscal year ended September 30, | 22 |
Annual Director Election/ Resignation Policy | Our directors are elected annually, and we have a resignation policy if a director fails to garner a majority of votes cast | 7-9 |
| Executive Session | Our independent directors meet regularly in executive session without management and non-independent directors present | |
Independent Compensation Consultant | We have a fully independent compensation consultant |
Executive Compensation Highlights
Hillrom’s compensation program is designed to align the compensation of each named executive officer (“NEOs” or “Named Executive Officers”) with Hill-Rom’sHillrom’s performance and the interests of our shareholders, and to provide the proper incentives to attract, retain and motivate key personnel in a clear, transparent manner. In order to do this, we:
| · | consider, as an initial market check, the 50th percentile of compensation opportunity provided by companies with which we compete for executive talent; |
| · | provide an annual cash incentive award based on meaningful company performance metrics such as revenue, free cash flow and adjusted earnings per share (as defined under the Company’s |
| · | align long-term equity compensation with our shareholders’ interests by linking realizable pay with stock performance through a combination of performance stock units (50% of the award), restricted stock units (25% of the award), and stock options (25% of the award). |
Last year’s Non-Binding Vote on Executive Compensation received support of approximately 97%98% of our shareholders (excluding abstentions and broker non-votes). Based on the results of the shareholder vote, and the changes to thewe believe our overall executive compensation program that were implementedis aligned with the interests of our shareholders.
In fiscal 2019, we rebranded our annual short-term incentive program as Business Incentive for fiscal year 2016, which addressed shareholder and proxy advisory firm feedback, no significant changesGrowth (the “BIG Plan”). As part of our ongoing efforts to align our overall executive compensation program took place in fiscal year 2017.
In summary, we compensate our NEOs as follows:
| Component of Compensation | Form of Compensation | For More Information |
| Base Salary | Annual Cash Salary | |
| Annual Cash Incentives | ||
Long-Term Equity Incentives | Stock Options (25% of annual grant value) Restricted Stock Units (25% of annual grant value) Performance Stock Units (50% of annual grant value) |
We also adhere to several additional principles regarding executive compensation for our NEOs, which we believe highlight the strength of both our governance practices and our overall executive compensation program:
Executive Compensation Principle | Description | For More Information |
| Stock Ownership | We require significant stock ownership by all of our senior executive officers, including 6X base salary for our CEO | |
Clawback, Anti-Hedging and | We have clawback, anti-hedging and anti-pledging policies | |
No Single-Trigger Change in Control | We have no single-trigger change in control agreements | |
| At-Will Employment Agreements | Our executives all have at-will employment agreements | |
No Re-Pricing of Stock Options; No Buy-Back of Equity Grants | We do not re-price stock options or buy-back equity grants | |
No Gross-Ups for 280G Excise Taxes | We do not provide gross-ups for 280G excise taxes related to change in control agreements |
| General Information About the Meeting and Voting |
| 1. | Who may vote? |
Shareholders holding shares of Hill-RomHillrom common stock as of the close of business on January 2, 20182020 (the “record date”) are entitled to vote at the meeting. At the close of business on the record date, there were 66,139,82366,956,366 shares of common stock outstanding and entitled to vote at the meeting. Common stock is the only class of stock outstanding and entitled to vote. You have one vote for each share of common stock held as of the record date, which may be voted on each proposal presented at the meeting.
| 2. | How can I elect to receive my proxy materials electronically? |
If you would like to reduce the costs incurred by us in mailing proxy materials, you can elect to receive all future proxy statements, proxy cards and annual reports electronically. To sign up for electronic delivery, follow the instructions provided with your proxy materials and on your proxy card or voting instruction card, or go to https://enroll.icsdelivery.com/hrc.hrc. When prompted, indicate that you agree to receive or access shareholder communications electronically in the future.
| 3. | Can I vote my shares by filling out and returning the Notice Regarding the Availability of Proxy Materials? |
No. See Question 6 “How do I vote?” for more information on how to vote.
| 4. | How can I access the proxy materials over the internet? |
You can view the proxy materials for the meeting on the internet at
| 5. | How does the Board recommend that I vote? |
The Board recommends that you vote:
| · | FOReach of the nominees for director; |
| · | FOR the non-binding approval of the compensation of |
| · | FOR the ratification of the appointment of PricewaterhouseCoopers LLP as firm; and |
| · | FOR the approval of an amendment to the Company’s Employee Stock Purchase Plan to increase the number of shares reserved for issuance thereunder by an additional 1,000,000 shares. |
| 6. | How do I vote? |
You may vote by any of the following methods:
| · | By Telephone or Internet— You may submit your proxy vote by following the instructions provided in the Notice Regarding the Availability of Proxy Materials, or by following the instructions provided with your proxy materials and on your proxy card or voting instruction form. |
| · | By Mail— You may submit your proxy vote by mail by signing a proxy card and mailing it in the enclosed envelope if your shares are registered directly in your name or, for shares held beneficially in street name, by following the voting instructions provided by your broker, trustee or nominee. |
| · | In Person at the Meeting— You may vote in person at the meeting or may be represented by another person at the meeting by executing a proxy designating that person. |
| 7. | If I voted by telephone or internet and received a proxy card in the mail, do I need to return my proxy card? |
No.
| 8. | Can I change my vote? |
If you are a shareholder of record, you may revoke your proxy at any time before the voting polls are closed at the meeting by the following methods:
| · | voting at a later time by telephone or internet (up to 11:59 p.m. Eastern time on the day before the meeting), |
| · | writing our Corporate Secretary at: Hill-Rom Holdings, Inc., 130 East Randolph, Suite 1000, Chicago, Illinois 60601, or |
| · | giving notice of revocation to the Inspector of Election at the meeting. |
If you are a street name shareholder and you voted by proxy, you may later revoke your proxy by informing the holder of record in accordance with that entity’s procedures.
| 9. | What happens if I do not specify a choice for a proposal when returning a proxy? |
If you are a shareholder of record and your proxy card is signed and returned without voting instructions, it will be voted according to the recommendation of the Board.
If you are a street name shareholder and fail to provide voting instructions, your broker, bank or other holder of record is permitted to vote your shares on the proposal to ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm. However, they may not vote on the election of directors or the other proposals listed herein absent instructions from you. Without your voting instructions, a “broker non-vote” will occur with respect to those other proposals.
| 10. | How are votes, including broker non-votes and abstentions, counted? |
Votes are counted in accordance with both our Amended and Restated Code of By-laws (our “By-laws”) and Indiana law. A broker non-vote or abstention will be counted towards a quorum, butquorum. Broker non-votes will not be counted in the election of directors or the votes on any of the other proposals (except for the proposal to ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm, as described in Question 9).
| 11. | What constitutes a quorum? |
A majority of the outstanding shares of common stock entitled to vote, represented at the meeting in person or by proxy, constitutes a quorum. Broker non-votes and abstentions will be counted as represented at the meeting for purposes of determining whether a quorum is present.
| 12. | What happens if other matters come up at the meeting? |
The matters described in the Notice of Annual Meeting of the Shareholders are the only matters we know of that will be voted on at the meeting. If other matters are properly presented at the meeting, the persons named on the proxy card or voting instruction form will vote your shares according to their best judgment.
| 13. | Who will count the votes? |
A representative of Broadridge Financial Solutions, Inc., an independent tabulator appointed by the Board, will count the votes and act as the Inspector of Election. The Inspector of Election will have the authority to receive, inspect, electronically tally and determine the validity of the proxies received.
| 14. | Who can attend the meeting? |
Admission to the meeting is limited to shareholders of Hill-RomHillrom as of the record date, persons holding validly executed proxies from shareholders who held Hill-RomHillrom common stock as of the record date, and invited guests of Hill-Rom.
In order to be admitted to the meeting in person, you should pre-register by contacting Hill-Rom’sHillrom’s Investor Relations department at investors@hill-rom.com,investors@Hillrom.com, or in writing atto Investor Relations, Hill-Rom Holdings, Inc., 130 East Randolph, Suite 1000, Chicago, Illinois 60601, no later than February 26, 2018.18, 2020. Additionally, proof of ownership of Hill-RomHillrom stock must be shown at the door. Failure to pre-register or to provide adequate proof that you were a shareholder as of the record date may prevent you from being admitted to the meeting. Please read the following rules carefully because they specify the documents that you must bring with you to the meeting in order to be admitted.
If you were a record holder of Hill-RomHillrom common stock as of the record date,
If a broker, bank, trustee or other nominee was the record holder of your shares of Hill-RomHillrom common stock as of the record date,
| · | Valid government-issued personal identification (such as a driver’s license or passport), and |
| · | Proof that you owned shares of |
If you are a proxy holder for a shareholder of Hill-Rom,
| · | The validly executed proxy naming you as the proxy holder, signed by a shareholder of |
| · | Valid government-issued personal identification (such as a driver’s license or passport), and |
| · | Proof of the shareholder’s ownership of shares of |
| 15. | How many votes must each proposal receive to be adopted? |
Directors are elected by a plurality of the votes cast by shareholders entitled to vote, which means that nominees who receive the greatest number of votes will be elected even if such amount is less than a majority of the votes cast. However, our Corporate Governance Standards provide that, prior to the meeting, director nominees shall submit a letter of resignation that is effective in the event such director receives a greater number of votes “withheld” from his or her election than votes “for” such election. The Board is required to accept the resignation unless the Board determines that accepting such resignation would not be in the best interests of Hill-RomHillrom and its shareholders.
The non-binding proposal to approve the compensation of our NEOs and the proposal to ratify the appointment of the independent registered public accounting firm will be approved if the votes cast favoring the action exceed the votes cast opposing the action.
Approval of the proposal to amend the Company’s Employee Stock Purchase Plan requires the affirmative vote of holders of a majority of the shares of common stock represented in person or by proxy at the meeting.
| 16. | Who pays for the proxy solicitation related to the meeting? |
We do. In addition to sending you or making available to you these materials, some of our directors and officers, as well as management and non-management employees, may contact you by telephone, mail, e-mail or in person. You may also be solicited by means of press releases issued by Hill-Rom,Hillrom, postings on our website, and advertisements in periodicals. None of our officers or employees will receive any extra compensation for soliciting you. We have retained Innisfree M&A Incorporated to assist us in soliciting your proxy for an estimated fee of $10,000 plus reasonable out-of-pocket expenses. We will also reimburse banks, nominees, fiduciaries, brokers and other custodians for their costs of sending the Notice Regarding the Availability of Proxy Materials or proxy materials to the beneficial owners of Hill-RomHillrom common stock.
| 17. | If I want to submit a shareholder proposal for the |
In order for shareholder proposals submitted pursuant to Rule 14a-8 under the Securities Exchange Act of 1934 to be presented at our 20192021 annual meeting of shareholders and included in our proxy statement and form of proxy relating to that meeting, such proposals must be submitted to the Corporate Secretary of Hill-RomHillrom at our registered offices in Chicago, Illinois no later than September 21, 2018,17, 2020, which is 120 days prior to the calendar anniversary of the mailing date of this proxy statement.
In addition, our By-laws provide that for business to be brought before a shareholders’ meeting by a shareholder or for nominations to the Board of Directors to be made by a shareholder for consideration at a shareholders’ meeting, notice thereof must be received by the Corporate Secretary of Hill-RomHillrom at our registered offices not later than 100 days prior to the anniversary of the immediately preceding annual meeting, or not later than November 26, 201827, 2020 for the 20192021 annual meeting of shareholders. The notice must also provide certain information set forth in our By-laws.
| 18. | How can I obtain a copy of the Annual Report on Form 10-K? |
You may receive a hard copy of proxy materials, including the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2017,2019, by following the directions set forth on the Notice Regarding the Availability of Proxy Materials. The Annual Report on Form 10-K for the fiscal year ended September 30, 2019 is also available on our website at http://ir.hill-rom.com.
| 19. | Where can I find the voting results of the meeting? |
We will announce preliminary voting results at the conclusion of the meeting and publish the final voting results in a Form 8-K to be filed with the U.S. Securities and Exchange Commission (“SEC”) within four business days after the conclusion of the meeting.
Proposals Requiring Your Vote |
Proposal No. 1 – Election of Directors
The Board currently consists of eleventen (10) members, and the terms of all the directors expire at the meeting. Rolf Classon informed the Board of his decision not to stand for re-election to the Board and thus he is not nominated for re-election. The shareholders will therefore elect teneleven (11) members of the Board to serve one-year terms expiring at the 20192021 annual meeting of shareholders. Unless authority is withheld, all shares represented by proxies submitted pursuant to this solicitation (other than broker non-votes) will be voted in favor of electing as directors the nominees listed below for the terms indicated. If any of these nominees should be unable to serve, shares represented by proxies may be voted for a substitute nominee selected by the Board, or the position may become vacant.
The Board of Directors recommends that shareholders vote “FOR” the election to the Board of Directors of each of the nominees named below.
NOMINEES
| Name | Age | Principal Occupation | Director Since |
| William G. Dempsey | 66 | Member of the Board Hill-Rom* | 2014 |
| John J. Greisch | 62 | President and Chief Executive Officer Hill-Rom | 2010 |
| Gary L. Ellis | 61 | Retired Chief Financial Officer Medtronic plc | 2017 |
| Stacy Enxing Seng | 53 | Retired President Vascular Therapies Covidien | 2015 |
| Mary Garrett | 59 | Retired Vice President of Global Marketing IBM | 2017 |
| James R. Giertz | 60 | Retired Senior Vice President and Chief Financial Officer H.B. Fuller Company | 2009 |
| Charles E. Golden | 71 | Retired Executive Vice President and Chief Financial Officer Eli Lilly and Company | 2002 |
William H. Kucheman | 68 | Retired Interim Chief Executive Officer Boston Scientific Corp. | 2013 |
| Ronald A. Malone | 63 | Retired Chairman Gentiva Health Services, Inc. | 2007 |
| Nancy M. Schlichting | 63 | Retired Chief Executive Officer Henry Ford Health System | 2017 |
| Name | Age | Principal Occupation/Professional Background | Director Since |
| William G. Dempsey | 68 | Chair of the Board Hillrom | 2014 |
| John P. Groetelaars | 54 | President and Chief Executive Officer Hillrom | 2018 |
| Gary L. Ellis | 63 | Retired Chief Financial Officer Medtronic plc | 2017 |
| Stacy Enxing Seng | 55 | Venture Partner, Lightstone Venture Capital | 2015 |
| Mary Garrett | 61 | Retired Vice President of Global Marketing IBM | 2017 |
| James R. Giertz | 62 | Retired Senior Vice President and Chief Financial Officer H.B. Fuller Company | 2009 |
William H. Kucheman
| 70 | Retired Interim Chief Executive Officer Boston Scientific Corp. | 2013
|
| Ronald A. Malone | 65 | Retired Chairman Gentiva Health Services, Inc. | 2007 |
Gregory J. Moore
| 55 | Corporate Vice President, Health Technology and Alliances at Microsoft Corporation | 2019 |
| Felicia F. Norwood | 60 | Executive Vice President and President of the Government | N/A |
| Nancy M. Schlichting | 65 | Retired Chief Executive Officer Henry Ford Health System | 2017 |
* Assuming Mr. Dempsey is re-electedMs. Norwood was recommended to the Board at the meeting, the Board plans to elect Mr. Dempsey as the Chairman of the Board at the recommendation of the Nominating/Corporate Governance Committee.
 | WILLIAM G. DEMPSEY |
Mr. Dempsey has served as a director of Hill-RomHillrom since 2014. Mr. Dempsey served as Executive Chair of the Board from March 6, 2018 through July 16, 2018, at which time he returned to his position as non-executive Chair of the Board. Mr. Dempsey previously held various executive positions with Abbott Laboratories from 1982 until 2007, including Executive Vice President of Global Pharmaceuticals from 2006, Senior Vice President of Pharmaceutical Operations from 2003 and Senior Vice President of International Operations from 1999. He currently serves as a director of Ashland, Inc. (where he serves on the audit, and governance and nominating environmental, health and safety, and quality committees), and was previously on the boards of MDS, Inc. through 2011, Nordion, Inc. through 2014, Hospira, Inc., through 2015 and Landauer Inc., through 2017. He has previously served as a member of the Salvation Army Advisory Board in Chicago, as Chairman of the International Section of the Pharmaceutical Research and Manufacturers of America (PhRMA) and as Chairman of the Accelerating Access Initiative (a cooperative public-private partnership of UNAIDS, the World Bank, and six research-based pharmaceutical companies). He is a member of the Board of Trustees for the Guadalupe Center in Immokalee, Florida.
 | JOHN P. GROETELAARS |
Mr. Greisch,Groetelaars was elected President & Chief Executive Officer of Hill-RomHillrom and appointed to serve as a director effective January 8, 2010.May 14, 2018. Mr. GreischGroetelaars most recentlyserved as executive vice president and president of the Interventional Segment at Becton, Dickinson and Company, which he joined in December 2017 following its acquisition of C.R. Bard Inc. He previously served in a variety of progressive roles at C.R. Bard during his 10-year career there, including as a group president from 2015 to 2017. Mr. Groetelaars joined C.R. Bard in 2008 as vice president and general manager, Davol Inc., and was most recently President International Operations for Baxter International, Inc.,appointed president of Davol in 2009. In 2013, Mr. Groetelaars was promoted to group vice president and in 2015 he was promoted to group president, a position he held since 2006. During his seven-year tenure with Baxter, he also served as Baxter's Chief Financial Officeruntil C.R. Bard was acquired by Becton, Dickinson and as President of Baxter's BioScience division. Before his time with Baxter, he was President & CEO for FleetPride CorporationCompany in Deerfield, Illinois, an independent after-market distribution company serving the transportation industry.December 2017. Prior to his tenure at FleetPride, hejoining C.R. Bard, Mr. Groetelaars held various international leadership positions in Canada, Denmark and the United Kingdom at The InterlakeBoston Scientific Corporation from 2001 until 2008. Prior to joining Boston Scientific, Mr. Groetelaars held positions in Lisle, Illinois, a leading global engineered materialsgeneral management, marketing, business development and industrial equipment supplier,sales with Guidant Corporation and with Eli Lilly. Mr. Groetelaars’ extensive experience in the medical device industry, including serving as President of the company's Materials Handling Group. Mr. Greisch currently serves on the Board of Directors of Idorsia Pharmaceuticals Ltd. and AdvaMed, and previously served on the Board of Directors of Actelion Ltd. Additionally, he is on the Board of Directors for Ann & Robert H. Lurie Children's Hospital of Chicago. Through January 2010, Mr. Greisch served as a director of TomoTherapy, Inc.
 | GARY L. ELLIS |
Mr. Ellis has served as director of Hill-RomHillrom since 2017. He was previously Chief Financial Officer and Senior Vice President of Medtronic plc. Mr. Ellis also serves as an independent director of The Toro Company.Company (where he serves as lead director, serves as the chair of the finance committee and serves on the audit committee) and Inspire Medical Systems, Inc. (where he serves as the chair of the nominating committee). He is a Certified Public Accountant.
 | STACY ENXING SENG |
Ms. Enxing Seng has served as director of Hill-RomHillrom since 2015. She is the former President, Vascular Therapies of Covidien from 2011 to 2014 and prior to that was President of Peripheral Vascular of Covidien from 2010 to 2011. Ms. Enxing Seng joined Covidien in 2010 through the $2.6B acquisition of ev3 Incorporated, where she was a founding member and executive officer responsible for leading their Peripheral Vascular division from 2001 to 2010. Prior to that, she held positions of increasing responsibility with SCIMED, Boston Scientific, American Hospital Supply and Baxter. Ms. Enxing Seng currently is a Venture Partner with Lightstone Venture Capital and serves as chairwoman of Cala Health and serves on the boards of LivaNova PLC, PreCardia Inc., Sonova Holding AG, and Solace Therapeutics and Fogarty Institute for Innovation, and was formerly on the boards of Claret Medical, Inc., Spirox, Inc., FIRE 1 Medical Incubator and CV Ingenuity.
 | MARY GARRETT |
Ms. Garrett has served as director of Hill-RomHillrom since 2017. Ms. Garrett most recently ledserved as CMO of Global MarketingMarkets for IBM Corporation, a leading global provider of technology products and services, from 2008 until her retirement in December 2015.services. She joined IBM in 1981 as an electrical engineer and went on to serve in a number of senior roles including: Partnership Executive for Memorial Sloan Kettering, Vice President, Small and Medium Business for Global Technology Services, Vice President of Marketing for Global Technology Services, and Vice President of Marketing for eBusiness Hosting. Ms. Garrett currently serves as a board member and on the audit committee for Ethan Allen Interiors, Inc. She is a member of the strategic planning committee of the Nuvance Health Network and is on the board of Danbury Hospital. She is an active mentor in W.O.M.E.N. in America, a professional development group aimed at advancing promising professional women, and serves as an Advisor for the World 50 Organization. She is alsoPresident, M.Power Coaching and Consulting, focused on the board of the American Marketing Association, serving as Chair. Ms. Garrett serves on the technologydeveloping leaders and strategy committees of the Western Connecticut Health Network.
 | JAMES R. GIERTZ |
Mr. Giertz has served as a director of Hill-RomHillrom since 2009. He served as the Senior Vice President and Chief Financial Officer of H.B. Fuller Company, St. Paul, Minnesota from March 2008 until his retirement.retirement in February 2017. Prior to joining H.B. Fuller, he served as Senior Managing Director, Chief Financial Officer and, for several months in 2007 a director, of Residential Capital, LLC, one of the largest originators, servicers and securitizers of home loans in the United States. Prior to that, he was Senior Vice President of the Industrial Products division, and Chief Financial Officer of Donaldson Company, Inc., a worldwide provider of filtration systems and replacement parts. In addition, Mr. Giertz served as assistant treasurer of the parent company at General Motors, and also held several international treasury positions in Canada and Europe. Mr. Giertz currently serves as a director of Schneider National, Inc. and Junior Achievement ofChairs the Upper Midwest and is also a member of the Board of Regents of Concordia University of St. Paul.
 | WILLIAM H. KUCHEMAN |
Mr. Kucheman has served as a director of Hill-RomHillrom since 2013
 | RONALD A. MALONE |
Mr. Malone has served as a director of Hill-RomHillrom since 2007. He served as Chairman of the Board of Gentiva Health Services from 2002 to 2011, as Chief Executive Officer from 2002 through 2008, and as a director through 2012. He joined Gentiva in 2000 as Executive Vice President and President of Gentiva’s Home Health Division. Prior to joining Gentiva, he served in various positions with Olsten Corporation including Executive Vice President of Olsten Corporation and President, Olsten Staffing Services, United States and Canada. He is a director of Capital Senior Living, Inc., a former director of the National Association for Home Care & Hospice and a former director and chairman of the Alliance for Home Health Quality and Innovation.
 | GREGORY J. MOORE, MD, PhD |
Mr. Moore has served as a director of Hillrom since 2019. He is Corporate Vice President, Health Technology and Alliances at Microsoft Corporation. Mr. Moore is an engineer (Massachusetts Institute of Technology PhD), practicing neuroradiologist, clinical informaticist, and innovator experienced in assembling and inspiring highly talented teams to positively transform healthcare and life sciences for the benefit of humankind leveraging technology, AI and machine learning. Mr. Moore is a former Vice President Google Inc., Google Cloud Healthcare & Life Sciences. As Google’s senior healthcare leader globally, Mr. Moore lead the healthcare vertical for Google Cloud and also partnered closely with various Google teams and the Alphabet companies in the life sciences domains to guide and develop innovative healthcare and life sciences products and solutions leveraging AI, machine learning and advanced analytics at scale to positively impact healthcare quality, value, access and delivery globally. Mr. Moore is board certified in Diagnostic Radiology, Neuroradiology and Clinical Informatics and is also an Adjunct Clinical Professor of Radiology at Stanford University School of Medicine. Prior to his leadership appointment at Google, Mr. Moore was Chief Emerging Technology and Informatics Officer at Geisinger Health System where he was also Director of the Institute for Advanced Application. Mr. Moore’s experience in life sciences and in the digital space provides the Board with valuable experience and leadership.
 | FELICIA F. NORWOOD |
Ms. Norwood is currently the Executive Vice President and President of the Government Business Division at Anthem, Inc. (“Anthem”), and has served in this role since she joined Anthem in June, 2018. Prior to joining Anthem, Ms. Norwood served as Director of the Illinois Department of Healthcare and Family Services and prior to that, she spent over 19 years at Aetna serving in a number of senior leadership roles including: President of the Mid-America Region and President & CEO of Active Health Management. Ms. Norwood's combined private and public sector experience and her senior leadership experiences in the healthcare sector provides the Board with a unique perspective across multiple dimensions, including providers, payers, consumers and regulators.
 | NANCY M. SCHLICHTING |
Ms. Schlichting has served as director of Hill-RomHillrom since 2017. Ms. Schlichting is the retired President and Chief Executive officer of Henry Ford Health System (“HFHS”) in Detroit, Michigan, serving in this role from June, 2003 to January, 2017. She joined HFHS in 1998 as Senior Vice President and Chief Administrative Officer, and was promoted to Executive Vice President and Chief Operating Officer from 1999 to 2003, and President and Chief Executive Officer of Henry Ford Hospital from 2001 to 2003. She currently serves as a director of Walgreens Boots Alliance (12(13 years of Board service, chair of Compensation Committee and member of Audit Committee), a director on the board of directors of HealthSouth Corporation (memberEncompass Health (2 years of Board service, member of Compliance and Quality of Care Committee), aCommittee and member of the Board of Managers of Ardent Health Services,Audit Committee), and a trustee of Kresge Foundation (chair of Compensation Committee and member of Audit Committee), the Detroit Symphony Orchestra, Duke University and vice-chair of the Duke University Health System and the Detroit Symphony Orchestra.
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We hold an annual non-binding vote on Executive Compensation each year. Accordingly, wewe are presenting to our shareholders the following resolution for their annual vote (on a non-binding basis):
“RESOLVED, that the shareholders of Hill-Rom Holdings, Inc. approve, on an advisory basis, the compensation of the Company’s NEOs and the overall compensation policies and procedures employed by Hill-Rom,Hillrom, disclosed pursuant to Item 402 of the SEC’s Regulation S-K, and described in the Compensation Discussion and Analysis and the tabular disclosure regarding NEO compensation (together with the accompanying narrative disclosure) in this proxy statement.”
As described under “Compensation Discussion and Analysis” beginning on page 24,29, our philosophy in setting executive compensation is to provide a total compensation package that allows us to continue to attract, retain and motivate talented executives who drive our Company’s success, while aligning compensation with the interests of our shareholders and ensuring accountability and transparency. Consistent with the philosophy, a significant majority of the total compensation opportunity for each of our NEOs is based on measurable corporate, business area and individual performance, both financial and non-financial, and on the performance of our shares on a long-term basis.
Because your vote is advisory, it will not be binding on the Board. However, the Compensation and Management Development Committee will take into account the outcome of the vote when considering future executive compensation arrangements.
The Board of Directors recommends that you vote “FOR” the approval of this resolution.
| 14 |
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Subject to shareholder ratification, the Audit Committee of our Board has appointed PricewaterhouseCoopers LLP (“PwC”) as our independent registered public accounting firm for the fiscal year ending September 30, 2018.2020. Representatives from PwC will be present at the meeting with an opportunity to make a statement, if they so desire, and will be available to respond to appropriate questions.
The Audit Committee has adopted a policy requiring that all services from the outside independent registered public accounting firm must be pre-approved by the Audit Committee or its delegate and has adopted guidelines that non-audit related services should not exceed the total of audit and audit related fees. During fiscal year 2017,2019, PwC’s fees for non-audit related services fell within these guidelines.
The following table presents fees for professional services rendered by PwC for the audit of our annual consolidated financial statements for the fiscal years ended September 30, 20162018 and 2017,2019, and fees billed for other services rendered by PwC during those periods.
| 2016 | 2017 | |||
| Audit Fees (1) | $4,138,800 | $3,814,000 | ||
| Audit-Related Fees | $ 0 | $ 0 | ||
| Tax Fees (2) | $639,000 | $111,700 | ||
| All Other Fees (3) | $32,000 | $2,000 | ||
| Total | $4,809,800 | $3,927,700 |
| 2018 | 2019 | |||||||
| Audit Fees (1) | $ | 3,867,700 | $ | 4,441,000 | ||||
| Audit-Related Fees | $ | 0 | $ | 0 | ||||
| Tax Fees (2) | $ | 62,000 | $ | 1,659,800 | ||||
| All Other Fees (3) | $ | 273,000 | $ | 3,000 | ||||
| Total | $ | 4,202,700 | $ | 6,103,800 | ||||
| (1) | Audit Fees were billed by PwC for professional services rendered for the integrated audit of our consolidated financial statements and our internal control over financial reporting, along with the review and audit of the application of new accounting pronouncements, |
| (2) | Tax Fees were billed by PwC for professional services rendered for tax compliance, tax advice and tax planning. |
| (3) | All Other Fees were fees billed by PwC for all other products and services provided to us. |
The Board recommends that you vote “FOR” the ratification of the appointment of PricewaterhouseCoopers LLP as Hill-Rom’sHillrom’s independent registered public accounting firm.
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14Proposal No. 4 – Approval of Amendment to the Hill-Rom Holdings, Inc. Employee Stock Purchase Plan
Overview
On February 13, 2009, the shareholders of Hillrom approved the Hillrom Employee Stock Purchase Plan (the “ESPP”), under which an aggregate of 1,000,000 shares of our common stock were reserved for issuance.
The purpose of the ESPP is to provide eligible employees with an opportunity to increase their proprietary interest in the success of Hillrom by purchasing shares of common stock on favorable terms and to pay for such purchases through payroll deductions.
The Board believes that the ESPP promotes the interests of Hillrom and our shareholders by encouraging employees of Hillrom to become shareholders, therefore aligning employee interest with our growth and success. The Board also believes that the opportunity to acquire a proprietary interest in the success of Hillrom through the acquisition of shares of common stock pursuant to the ESPP is an important aspect of our ability to attract and retain highly qualified and motivated employees.
As of January 2, 2020, of the 1,000,000 shares of the Company’s common stock originally reserved for issuance under the ESPP, only 73,170 remained. The Board proposes that the ESPP be amended to increase the number of shares authorized thereunder by an additional 1,000,000 shares of common stock to allow for the ESPP to continue to be a significant part of our overall compensation strategy.
We are seeking approval of the amendment of the ESPP by our shareholders. The affirmative vote of a majority of the outstanding shares of common stock represented in person or by proxy at the meeting and entitled to vote is required to approve the amendment. An abstention will have the effect of a vote against this proposal. A broker non-vote will have no effect on the outcome of this proposal.
Summary of the ESPP
| · | Purchase Periods. The ESPP operates by offering eligible employees the right to purchase stock through a series of successive quarterly purchase periods (each a “Purchase Period”). The initial Purchase Period commenced on April 1, 2009. Each Purchase Period thereafter ends on the last trading day of each calendar quarter, and the next Purchase Period commences on the first day of the next calendar quarter. The purchase date for each Purchase Period occurs on the last day of the Purchase Period, at which time all accrued payroll deductions of each participant are applied to the purchase of shares on the purchase terms described below. |
| · | Eligibility and Participation. Employees (including officers and employee directors) of Hillrom and its subsidiaries designated from time to time by the Compensation and Management Development Committee of the Board (the “Committee”) who are employed for more than twenty hours per week and more than five months in any calendar year are eligible to participate in the ESPP, subject to certain limitations imposed by Section 423(b) of the Internal Revenue Code of 1986 (the “Code”), applicable local law for locations outside of the United States and the plan itself. For example, an employee who owns directly or indirectly 5% or more of the total voting power or value of all classes of stock of Hillrom or our subsidiaries may not participate in the ESPP. As of January 2, 2020, approximately 7,553 employees (including officers and employee directors) would have been eligible to participate in the ESPP. As a result of such eligibility, each executive officer of Hillrom has an interest in the proposal to approve the ESPP. |
Eligible employees may become participants in the ESPP by submitting an enrollment form authorizing payroll deductions prior to the beginning of a Purchase Period (unless payroll deductions are not permitted under local law, in which case payments will be made by such other payment methods as we may approve). Once a participant enrolls in a Purchase Period under the ESPP, he or she is automatically enrolled in subsequent Purchase Periods unless he or she withdraws from or becomes ineligible to participate in the ESPP. Once an employee has enrolled in the ESPP, amounts are withheld from his or her compensation during each payroll period as described below. An employee may elect to have not less than 1% nor more than 10% of his or her compensation during a Purchase Period withheld to be used to purchase shares under the ESPP and can change the level of withholding at any time. Eligible compensation is defined in the ESPP to include regular salary and wages, commissions, overtime and shift differentials but excludes bonus payments, incentive compensation, reimbursement payments, severance payments or any other form of additional earnings.
| · | Grant and Exercise of Option; Purchase Price. By enrolling in the ESPP for a Purchase Period, each participant is granted an option to purchase up to that number of shares determined by dividing his or her payroll deductions accumulated during the Purchase Period as of the last trading day of the Purchase Period by the purchase price applicable for that Purchase Period. The purchase price for each Purchase Period will be 90% of the fair market value of a share of our common stock on the last day of the Purchase Period (the “Date of Purchase”). For purposes of the ESPP, “fair market value” means the value determined in good faith by the Committee, by formula or otherwise; provided that, unless the Committee determines to use a different measure, “fair market value” shall be the average of the high and low sales prices for the common stock on the primary market for the common stock on the date in question. The Board or Committee, without shareholder approval, may amend the ESPP to, among other things, change the discount to fair market value at which shares are purchased or include a look-back provision pursuant to which the purchase price will be based on the fair market value of a share of common stock on the first day of the Purchase Period or the last day of the Purchase Period, whichever is lower. |
Under the ESPP, there are certain limitations on the number of shares that a participant may purchase. The option granted to an employee may not permit him or her to purchase stock under the ESPP at a rate which exceeds $25,000 in fair market value of such stock (determined as of the first day of the Purchase Period in which the stock was purchased) for each calendar year. For each Purchase Period, the maximum number of shares that a participant may purchase is determined by subtracting the aggregate fair market value of shares purchased by the participant in previous Purchase Periods during the same calendar year (determined as of the first day of the Purchase Period in which each share was purchased) from $25,000, and dividing the result by the fair market value of a share of our common stock on the first day of the Purchase Period. In addition, if the total number of shares that would otherwise be purchased on a Purchase Date by all participants exceeds the number of shares remaining available under the ESPP, the Committee may allocate the available shares among participants in a manner it deems fair and equitable.
Provided the employee continues participating in the ESPP through the end of a Purchase Period, his or her option to purchase shares will be exercised automatically at the end of the Purchase Period, and the maximum number of shares that may be purchased with accumulated payroll amounts at the applicable purchase price, including fractional shares, will be issued to the employee.
| · | Not Transferable.Rights to purchase stock under the ESPP are not transferable by the employee. |
| · | Termination of Employment; Cessation of Participation. Termination of a participant’s employment for any reason, including death, voluntary resignation, retirement or involuntary termination, with or without cause, cancels his or her option to purchase and terminates his or her participation in the ESPP immediately. In such event, the payroll deductions credited to the participant’s account will be returned to him or her or, in the case of death, to his or her estate or beneficiary. |
If a participant discontinues his or her payroll deduction or ceases to be eligible to participate in the ESPP (but remains an employee), all payroll deductions during the pending Purchase Period will be applied to purchase shares at the end of the Purchase Period, and the employee must re-enroll in the ESPP to participate in future Purchase Periods.
| · | Adjustments upon Changes in Capitalization; Change of Control. In the event of any merger, reorganization, consolidation, sale of substantially all assets, recapitalization, stock dividend, stock split, spin-off, split-up, split-off, distribution of assets or other change in corporate structure affecting the common stock such that an adjustment is determined by the Committee in its discretion to be appropriate, after considering any accounting impact to the Company, in order to prevent dilution or enlargement of benefits under the ESPP, then the Committee shall, in such a manner as it may in its discretion deem equitable, adjust any or all of (i) the aggregate number and kind of shares of common stock reserved for issuance under the ESPP, and (ii) the number and kind of shares which may be purchased by any individual in any calendar year. In the event of any merger, reorganization, consolidation, sale of substantially all assets, recapitalization, stock dividend, stock split, spin-off, split-up, split-off, distribution of assets or other change in corporate structure affecting the common stock subject to the ESPP, the number and kind of shares of common stock or other securities subject to the ESPP or subject to any outstanding offering under the ESPP, the number of shares of common stock to be purchased, and the purchase price, shall be appropriately and equitably adjusted by the Committee so as to maintain the proportionate number of shares of common stock or other securities without changing the aggregate Purchase Price. |
In the event of a Change in Control of the Company (as defined in the ESPP), the Committee shall provide for the assumption or substitution of each option to purchase common stock under the ESPP by the successor or surviving corporation, or a parent or subsidiary thereof, unless the Committee decides to take such other action as it deems appropriate, including, without limitation, providing for the termination of the ESPP and either refunding accrued payroll deductions or providing for a Date of Purchase to occur on the date determined by the Committee.
| · | Amendment and Termination of the ESPP. The Board or the Committee may at any time amend or terminate the ESPP without the approval of shareholders or employees; provided, that we will seek shareholder approval of any plan amendment where shareholder approval is required under applicable law or stock exchange rules, including if we seek to increase the number of shares of common stock reserved for issuance under the ESPP. |
| · | Plan Benefits. Because benefits under the ESPP depend on the fair market value of our common stock at various future dates, it is not possible to determine the benefits received by employees if the ESPP amendment is approved by our shareholders. |
| · | U.S. Federal Income Tax Consequences. The following is a brief summary of the general U.S. federal income tax consequences to U.S. taxpayers and Hillrom of shares purchased under the ESPP. This summary is not complete and does not discuss the tax consequences of a participant’s death or the income tax laws of any state or foreign country in which the participant may reside. Tax consequences for any particular individual participating in the ESPP may be different. |
The ESPP and the options granted under the ESPP are intended to qualify for favorable federal income tax treatment associated with rights granted under an “employee stock purchase plan” that qualifies under provisions of Section 423 of the Code.
Amounts of a participant’s compensation withheld for the purchase of shares of our common stock under the ESPP will be subject to regular income and employment tax withholding as if such amounts were actually received by the employee. Other than this, no income will be taxable to a participant until sale or other disposition of the acquired shares. Under current law, no other withholding obligation applies to the events under the ESPP.
Tax treatment upon transfer of the purchased shares depends on how long the participant holds the shares from the Date of Purchase to the transfer date. If the stock is disposed of more than two years after the offering date (the first day of the applicable Purchase Period), and more than one year after the Date of Purchase for the stock being transferred, then the lesser of (i) the excess of the fair market value of the stock at the time of such disposition over the purchase price or (ii) the excess of the fair market value of the stock as of the offering date over the purchase price (determined as if the stock were purchased on the offering date) will be treated as ordinary income. Any further gain will be taxed as a long-term capital gain. Under current law, long-term capital gains are generally subject to lower tax rates than ordinary income. If the fair market value of the stock on the date of the disposition is less than the purchase price paid for the shares, there will be no ordinary income, and any loss recognized will be a capital loss.
If the stock is sold or disposed of before the expiration of either of the holding periods described above, then the excess of the fair market value of the stock on the Date of Purchase for the shares over the purchase price will be treated as ordinary income at the time of the sale or disposition. The balance of any gain will be treated as capital gain. Even if the stock is disposed of for less than its Date of Purchase fair market value, the same amount of ordinary income is attributed to the participant, and a capital loss is recognized equal to the difference between the sales price and the fair market value of the stock on such Date of Purchase. Any capital gain or loss will be short-term or long-term, depending on how long the stock has been held.
There are no U.S. federal income tax consequences to Hillrom by reason of the grant or exercise of options under the ESPP. Hillrom is entitled to a deduction to the extent amounts are taxed as ordinary income to a participant in the event of disposition before the satisfaction of the required holding periods.
Hillrom may also grant options under sub-plans that do not qualify under Section 423 of the Code (“Non-Statutory Plans”). The Non-Statutory Plans will be sub-plans of the ESPP that are generally not intended to qualify under the provisions of Sections 421 and 423 of the Code. Therefore, it is likely that at the time of the exercise of an option under a Non-Statutory Plan, an employee subject to tax under the Code would recognize ordinary income equal to the excess of the fair market value of the stock on the date of exercise and the purchase price, Hillrom would be able to claim a tax deduction equal to this difference, and Hillrom would be required to withhold employment taxes and income tax at the time of the purchase.
| · | Accounting Treatment. Based on ASC Topic 718, Hillrom recognizes compensation expense in connection with options outstanding under the ESPP. So long as Hillrom continues issuing shares under the ESPP with a purchase price at a discount to the fair market value of its stock, we will recognize compensation expense which will be determined by the level of participation of our eligible employees in the ESPP. |
The Board of Directors recommends that shareholders vote “FOR” the amendment to the Hill-Rom Holdings, Inc. Employee Stock Purchase Plan.
| Corporate Governance |
Board Leadership
The Board is currently led by our non-executive, independent Chair, Mr. Dempsey is re-elected to the Board at the meeting, the Board plans to elect Mr. Dempsey as the Chairman of the Board at the recommendation of the Nominating/Corporate Governance Committee. Mr. Dempsey is a non-executive and independent member of the Board.
Assuming Mr. Dempsey is re-elected to the Board at the meeting, the Board plans to re-elect Mr. Dempsey as the Chair of the Boardat the recommendation ofthe Nominating/Corporate Governance Committee.
Executive sessions (meetings of independent directors without management present) are held regularly at the beginning and end of Board meetings, and, depending on directors’ desire, from time to time during Board and committee meetings. The Chair generally presides at executive sessions of non-management directors.
Board’s Role in Strategic Planning and Oversight of Risk Management
The Board is responsible for directing and overseeing the management of Hill-Rom’sHillrom’s business in the best interests of the shareholders and consistent with good corporate citizenship. The Board sets strategic direction and priorities for the Company, approves the selection of the senior management team and oversees and monitors risks and performance. At Board meetings during the year, members of senior management review their organizations and present their long-range strategic plans to the Board, and at the start of each fiscal year, the Board reviews and approves the Company’s operating plan and budget for the next fiscal year.
A fundamental part of setting Hill-Rom’sHillrom’s business strategy is the assessment of the risks Hill-RomHillrom faces and how they are managed. The Board oversees risk management
Communications with Directors
Shareholders of Hill-RomHillrom and other interested persons may communicate with the Chair of the Board, the chairs of the committees of the Board, or the non-management directors of Hill-RomHillrom as a group by sending an email to investors@hill-rom.com.investors@Hillrom.com. The email should specify the intended recipient.
Director Attendance at Annual Meetings
Hillrom does not have a formal policy regarding director attendance at its annual meetings of shareholders, but Hill-Rom’sHillrom’s directors generally do attend the annual meetings. The Chair of the Board presides at the annual meeting of shareholders, and the Board holds one of its regular meetings in conjunction with the annual meeting of shareholders. All continuing members of the Board at the time of our 20172019 annual meeting of shareholders attended that meeting in person.
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The Board has adopted Corporate Governance Standards that provide the framework for the effective functioning of the Board. In addition, the Board has adopted a Global Code of Conduct that applies to everyone who conducts business for and with Hill-RomHillrom including all directors, officers otherand employees of Hill-Rom,Hillrom, as well as agents, vendors, suppliers and other business partners,consultants worldwide, and which constitutes a “code of ethics” within the meaning of Item 406 of the SEC’s Regulation S-K. The Board revieweddid not recommend any changes to the Global Code of Conduct during fiscal year 2017 and did not recommend any changes.2019. Both the Corporate Governance Standards and the Global Code of Conduct are available via the Investor Relations section of the Company’s website at http://ir.hill-rom.com.
Determinations with Respect to Independence of Directors
The Board determines the independence for each member of the Board based on an annual evaluation performed and recommendations made by the Nominating/Corporate Governance Committee, consistent with the applicable rules of the New York Stock Exchange (“NYSE”).
Based on these standards and all relevant facts and circumstances, the Board has determined that each current member of the Board and each nominee for the Board is independent, with the exception of John J. Greisch,P. Groetelaars, who is not independent.
Transactions with Related Persons
The Company has written procedures regarding the review and preapproval of related party transactions involving executive officers or directors. Under these procedures, our Nominating/Corporate Governance Committee is responsible for reviewing and preapproving all related person transactions. When reviewing and/or approving proposed related party transactions, the Nominating/Corporate Governance Committee will consider all of the relevant facts and circumstances, including: the benefits to us; the impact on a director’s independence in the event the related person is a director, an immediate family member of a director or an entity in which a director is a partner, shareholder or executive officer; the availability of other sources for comparable products or services; the terms of the transaction; and the terms available for similar transactions with unrelated third parties.
Meetings, Committees and Board Skills Assessment of the Board of Directors
During the fiscal year ended September 30, 2017,2019, the Board held sevensix meetings. During this period, no incumbent member of the Board attended fewer than 75% of the aggregate number of meetings of the full Board and the meetings of the committees on which he or she served, and our incumbent directors attended an average of 96%100% of the meetings of the Board and committees on which they served.
Per our Corporate Governance Standards, the Nominating/Corporate Governance Committee assessed the Board's effectiveness as a whole as well as the effectiveness of the individual directors and the Board's various Committees, including a review of the mix of skills, core competencies and qualifications (including independence under applicable standards) of members of the Board and its various committees, which reflect expertise in one or more of the following areas: accounting and finance, product and technology development,chief executive officer experience, strong healthcare manufacturing, services businesses,experience, financial acumen, international experience, regulatory experience, sales and market development, international operations, international governance,marketing experience, product development/ design experience, payor and reimbursement experience, science/technology expertise with clinical applications, acute care provider experience, mergers and acquisitions related business development, strategic oversight, government relations, investor relations, executive leadership development, public company governance, and executive compensation designintegration experience, and processes. cybersecurity experience.
In order to make these assessments, the Nominating/Corporate Governance Committee solicited the opinions of each director regarding the foregoing matters and then presented its findings and recommendations to the Board. In addition to the above, the particular skills and talents of any director nominee should positively contribute to the diversity of the various skills and talents of the Board as a whole.
The following table shows the current composition of the committees of the Board, all of which operate pursuant to written charters:
Director | Audit Committee | Nominating/ Corporate Governance Committee | Compensation and Management Development Committee | Mergers and Acquisitions Committee |
| Rolf A. Classon (Board Chair)* (I) | C | C | ||
John J. Greisch | ||||
| William G. Dempsey** (I) | ✓ | |||
| Gary L. Ellis (I) | ✓ | |||
| Stacy Enxing Seng (I) | ✓ | |||
| Mary Garrett (I) | ✓ | |||
| James R. Giertz (I) | ✓ | |||
| Charles E. Golden (I) | C | ✓ | ✓ | |
| William H. Kucheman (I) | ✓ | ✓ | ||
| Ronald A. Malone (I) | ✓ | C | ✓ | |
| Nancy M. Schlichting (I) | ✓ | |||
| Number of Meetings in fiscal year 2017 | 9 | 6 | 6 | 3 |
Director |
Audit Committee |
Nominating/ Corporate Governance Committee | Compensation Committee |
Mergers and |
| William G. Dempsey (Board Chair) (I) |
| ü | C | |
| John P. Groetelaars |
| |||
| Gary L. Ellis (I) | C | ü | ||
| Stacy Enxing Seng (I) | ü | |||
| Mary Garrett (I) | ü | |||
| James R. Giertz (I) | ü | ü | ||
| William H. Kucheman (I) | ü | ü | ||
| Ronald A. Malone (I) | C |
| ü | |
| Gregory J. Moore (I) |
| ü |
| |
| Nancy M. Schlichting (I) | ü | C | ||
| Number of Meetings in fiscal year 2019 | 9 | 5 | 5 | 4 |
I = Independent Director
C = Committee Chair
TheAudit Committee has general oversight responsibilities with respect to Hill-Rom’sHillrom’s financial reporting and controls, andthe Company’s legal, regulatory and ethical compliance.compliance and the Company’s enterprise-wide risk management framework. It regularly reviews Hill-Rom’sHillrom’s financial reporting process, its system of internal control over financial reporting, legal and regulatory compliance and ethics, and internal and external audit processes. Each member of the Audit Committee is independent under Rule 10A-3 of the SEC and NYSE listing standards and meets the financial literacy guidelines established by the Board in the Audit Committee Charter. The Board of Directors has determined that each of Messrs. Golden, Ellis and Giertz is an “audit committee financial expert” as that term is defined in Item 407(d) of the SEC’s Regulation S-K.
TheCompensation and Management Development Committee assists the Board in ensuring that the officers and key management of Hill-RomHillrom are effectively compensated in a way that is internally equitable and externally competitive.competitive and is responsible for approving our CEO compensation. The Compensation and Management Development Committee is also responsible for reviewing and assessing the talent development and succession management actions concerning the officers and key employees of Hill-Rom.
The
Nominating/Corporate Governance Committee assists the Board in ensuring thatThe
Mergers and Acquisitions Committee assists the Board in reviewing and assessing potential mergers, acquisitions,Nomination of Directors for Election by Shareholders
The Nominating/Corporate Governance Committee considers director candidates recommended by shareholders, and any such recommendations should be communicated to the Chair of the Nominating/Corporate Governance Committee in the manner described above in “Communications with Directors” and should be accompanied by the same types of information as are required under our By-laws for shareholder nominees.
Our By-Laws provide that nominations of persons for election to the Board of Directors of Hill-RomHillrom may be made at any meeting of shareholders by or at the direction of the Board or by any shareholder entitled to vote for the election of members of the Board at the meeting. For nominations to be made by a shareholder, the shareholder must have given timely notice thereof in writing to the Corporate Secretary of Hill-RomHillrom and any nominee must satisfy the qualifications established by the Board. To be timely, a shareholder’s nomination must be delivered to or mailed and received by the Corporate Secretary not later than (i) in the case of the annual meeting, 100 days prior to the anniversary of the date of the immediately preceding annual meeting which was specified in the initial formal notice of such meeting (but if the date of the forthcoming annual meeting is more than 30 days after such anniversary date, such written notice will also be timely if received by the Corporate Secretary by the later of 100 days prior to the forthcoming meeting date and the close of business 10 days following the date on which Hill-RomHillrom first makes public disclosure of the meeting date) and (ii) in the case of a special meeting, the close of business on the tenth day following the date on which Hill-RomHillrom first makes public disclosure of the meeting date. The notice given by a shareholder must set forth: (i) the name and address of the shareholder who intends to make the nomination and of the person or persons to be nominated; (ii) a representation that the shareholder is a holder of record, setting forth the shares so held, and intends to appear in person or by proxy as a holder of record at the meeting to nominate the person or persons specified in the notice; (iii) a description of all arrangements or understandings between such shareholder and each nominee proposed by the shareholder and any other person or persons (identifying such person or persons) pursuant to which the nomination or nominations are to be made by the shareholders; (iv) such other information regarding each nominee proposed by such shareholder as would be required to be included in a proxy statement filed pursuant to the proxy rules of the SEC; (v) the consent in writing of each nominee to serve as a director of Hill-RomHillrom if so elected; and (vi) a description of the qualifications of such nominee to serve as a director of Hill-Rom.
Compensation and Management Development Committee Interlocks and Insider Participation
As of the fiscal year ended September 30, 2017,2019, the following directors served on the Compensation and Management Development Committee: Ronald A. Malone,Nancy M. Schlichting, William H. Kucheman, Stacy Enxing Seng and Nancy M. Schlichting.Gregory J. Moore. The Compensation and Management Development Committee had no interlocks or insider participation.
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Copies of Hill-Rom’sHillrom’s Corporate Governance Standards, Global Code of Conduct and Board committee charters are available at http://ir.hill-rom.com or in print to any shareholder who requests copies through Hill-Rom’sHillrom’s Investor Relations department. Also available on Hill-Rom’sHillrom’s website are position specifications adopted by the Board for the positions of Chief Executive Officer and Chair of the Board and its committees, and other members of the Board.
| Audit Committee Report |
Hillrom maintains an independent Audit Committee that operates pursuant to a written charter adopted by the Board. The charter is available on Hill-Rom’sHillrom’s website at www.hill-rom.comhttp://ir.hill-rom.com. under “Our Company–Company Overview–Board of Directors–Corporate Governance–Documents & Charters.” Each member of the Audit Committee is independent as defined in the NYSE listing standards and SEC rules, and the Board has determined that each of Messrs. Golden, Ellis and Giertz is an "audit committee financial expert" as that term is defined in Item 407(d) of the SEC’s Regulation S-K.
Management is responsible for Hill-Rom’sHillrom’s internal controls, financial reporting process (including quarterly earnings press releases), risk assessment policies, compliance with laws and regulations and ethical business standards. The independent registered public accounting firm is responsible for performing an integrated audit of Hill-Rom’sHillrom’s consolidated financial statements and its internal control over financial reporting in accordance with standards of the Public Company Accounting Oversight Board (“PCAOB”) and the issuance of a report thereon. The Audit Committee has the responsibility to monitor and oversee these processes.
As part of its oversight responsibilities, the Audit Committee meets separately at least twice each quarter (once to review the quarterly external financial reporting, and at least once in connection with regularly scheduled Board meetings). At these meetings, the Audit Committee meets with management, the Company’s Chief Compliance Officer and its Vice President of Internal Audit (solely with respect to regularly scheduled Board meetings) and Hill-Rom’sHillrom’s outside independent registered public accounting firm, as necessary (in each case, with and without management present, at the Audit Committee’s discretion) to discuss the adequacy and effectiveness of Hill-Rom’sHillrom’s internal controls and the quality of the financial reporting process. The Audit Committee also pre-approves all audit and non-audit services to be performed by the outside independent registered public accounting firm. The Audit Committee evaluates the performance of the independent registered public accounting firm, including senior audit engagement team members, on an annual basis and determines whether to reengage the current firm or consider other audit firms. In doing so, the Audit Committee considers the quality and efficiency of the services provided, global capabilities and technical expertise, knowledge of the Company’s global operations and industry and the effectiveness of their communications in providing value-added advice, insights and candid feedback on risks, controls and compliance matters. The Audit Committee also considers how effectively the outside independent registered public accounting firm maintains its independence and employs its independent judgment, objectivity and professional skepticism. Based on our evaluation, the Audit Committee believes that it is in the best interests of the shareholders to approve the appointment of PricewaterhouseCoopers LLP (“PwC”) as Hill-Rom’sHillrom’s outside independent registered public accounting firm for fiscal year 2018.2020. PwC has been the independent registered public accounting firm used by Hill-RomHillrom since 1985.
In accordance with SEC rules, audit partners are subject to rotation requirements that limit the number of years an individual partner may provide service to any company. For lead and concurring audit partners, the maximum number of consecutive years of service in that capacity is five years. The process for selection of Hill-Rom’sHillrom’s lead audit partner pursuant to this policy involves meetings between members of the Audit Committee and the candidates, as well as discussion and evaluation by the full Audit Committee and with Hill-RomHillrom management.
The Audit Committee has reviewed and discussed the audited consolidated financial statements with management and PwC. Management represented to the Audit Committee that Hill-Rom’sHillrom’s audited consolidated financial statements were prepared in accordance with generally accepted accounting principles. PwC discussed with the Audit Committee matters required to be discussed by Auditing Standards No. 16.the applicable requirements of the PCAOB. Management and PwC also made presentations to the Audit Committee throughout the year on specific topics of interest, current developments and best practices for audit committees.
PwC also provided to the Audit Committee the written disclosures and the letter required by applicable requirements of the PCAOB regarding the independent accountant’s communications with the Audit Committee regarding independence. PwC informed the Audit Committee that it was independent with respect to Hill-RomHillrom within the meaning of the securities acts administered by the SEC and the requirements of the PCAOB. The Audit Committee discussed this finding, and also considered whether non-audit consulting services provided by PwC could impair the auditors’ independence and concluded that such services have not done so.
Based upon the foregoing, the Audit Committee recommended to the Board that the audited consolidated financial statements be included in Hill-Rom’sHillrom’s Annual Report on Form 10-K for the fiscal year ended September 30, 2017.
Submitted by the Audit Committee
Gary L. Ellis (Chair)
Mary Garrett
James R. Giertz
| Security Ownership of Certain Beneficial Owners and Management |
The following table setstables set forth information with respect to the beneficial ownership of our outstanding common stock as of the record date by:
| · | each of our directors, nominees and our NEOs; |
| · | all of our directors and executive officers as a group; and |
| · | each person or entity that is known by us to be the beneficial owner of more than five percent of our common stock. |
Our common stock is our only class of equity securities outstanding. Except as otherwise noted in the footnotes below, the individual director or executive officer or their family members had sole voting and investment power with respect to such securities. None of the shares beneficially owned by our directors and executive officers are pledged as security. The number of shares beneficially owned includes, as applicable, directly and/or indirectly owned shares of common stock, common stock shares underlying stock options that are currently exercisable or will become exercisable within 60 days from the record date, and deferred stock share awards (otherwise known as restricted stock units or RSUs) that are vested or will vest within 60 days from the record date. Except as specified below, the business address of the persons listed is our headquarters, 130 East Randolph, Suite 1000, Chicago, Illinois 60601.
Name of Beneficial Owner | Shares Owned Directly | Shares Owned Indirectly | Shares Under Options/RSUs Exercisable/ Vesting Within 60 Days | Total Number of Shares Beneficially Owned | Percent of Class | |
| Directors and NEOs: | ||||||
| Rolf A. Classon | - | 15,806 | 79,075 | 94,881 | * | |
| William G. Dempsey | - | - | 13,490 | 13,490 | * | |
| John J. Greisch | 230,851 | - | 479,187 | 710,038 | 1.1% | |
| Gary L. Ellis | - | - | 993 | 993 | * | |
| Stacy Enxing Seng | - | - | 9,361 | 9,361 | * | |
| Mary Garrett | 300 | - | 2,676 | 2,976 | * | |
| James R. Giertz | 2,000 | - | 28,874 | 30,874 | * | |
| Charles E. Golden | 6,466 | - | 57,141 | 63,607 | * | |
| William Kucheman | - | - | 17,914 | 17,914 | * | |
| Ronald A. Malone | - | - | 37,514 | 37,514 | * | |
| Nancy M. Schlichting | - | - | 2,676 | 2,676 | * | |
| Carlos Alonso Marum | 3,411 | - | 12,865 | 16,276 | * | |
| Deborah M. Rasin | - | - | 27,025 | 27,025 | * | |
| Alton E. Shader | 50,910 | - | 58,393 | 109,303 | * | |
| Steven J. Strobel | 13,891 | - | 29,521 | 43,412 | * | |
All directors and executive officers as a group (20) | 341,292 | 15,806 | 909,755 | 1,266,853 | 1.9% | |
Name of Beneficial Owner | Shares Owned Directly | Shares Owned Indirectly | Shares Under Options/RSUs Exercisable/ Vesting Within 60 Days | Total Number of Shares Beneficially Owned |
Percent of Class |
| Directors and NEOs: | |||||
| William G. Dempsey | 5,376 | - | 18,469 | 23,845 | * |
| John P. Groetelaars | 2,944 | - | 38,044 | 40,988 | * |
| Gary L. Ellis | - | - | 4,896 | 4,896 | * |
| Stacy Enxing Seng | - | - | 13,406 | 13,406 | * |
| Mary Garrett | 300 | - | 6,609 | 6,909 | * |
| James R. Giertz | 2,000 | - | 33,251 | 35,251 | * |
| William Kucheman | - | - | 22,105 | 22,105 | * |
| Ronald A. Malone | - | - | 42,037 | 42,037 | * |
| Gregory J. Moore (1) | - | - | 1,498 | 1,498 | * |
| Felicia F. Norwood | - | - | - | - | * |
| Nancy M. Schlichting | - | - | 6,609 | 6,609 | * |
| Barbara W. Bodem (2) | 2,522 | 255 | 2,568 | 5,345 | * |
| Andreas Frank | 32,793 | - | 36,029 | 68,822 | * |
| Paul S. Johnson | 10,344 | - | 9,750 | 20,094 | * |
| Deborah Rasin | 28,302 | - | 9,884 | 38,186 | * |
| Steven J. Strobel (3) | - | - | 25,718 | 25,718 | * |
| All directors and executive officers as a group (total of 20 individuals) | 130,500 | 2,083 | 306,389 | 438,972 | * |
(1) Mr. Moore was appointed a Director of the Company on May 7, 2019.
(2) Ms. Bodem joined the Company on December 3, 2018.
(3)22On November 26, 2018
Name of Beneficial Owner | Total Number of Shares Beneficially Owned | Percent of Class |
| Other 5% Beneficial Owners: | ||
BlackRock, Inc. 55 East 52nd Street New York, NY 10055 | 5,260,217(1) | 7.9% |
The Vanguard Group 100 Vanguard Blvd. Malvern, PA 19355 | 4,884,096(2) | 7.4% |
FMR LLC 245 Summer Street Boston, MA 02210 | 4,506,940(3) | 6.8% |
Name of Beneficial Owner | Total Number of Shares Beneficially Owned | Percent of Class |
Other 5% Beneficial Owners: | ||
BlackRock, Inc. 55 East 52nd Street New York, NY 10055 | 7,043,749 (1) | 10.50% |
The Vanguard Group 100 Vanguard Blvd. Malvern, PA 19355 | 6,179,412 (2) | 9.18% |
Wellington Management Group LLP 280 Congress Street Boston, MA 02210 | 5,476,751 (3) | 8.14% |
———————
* Less than 1% of the total shares outstanding.
| (1) | This information is based solely on the Schedule 13G/A filed by BlackRock, Inc. with the SEC on |
| (2) | This information is based solely on the Schedule 13G/A filed by The Vanguard Group with the SEC on February |
| (3) | This information is based solely on the Schedule 13G filed by |
| 28 |
| Compensation Discussion and Analysis |
Compensation and Management Development Committee Report
The Compensation and Management Development Committee of the Board has reviewed and discussed the Compensation Discussion and Analysis contained in this proxy statement with management and, based upon this review and discussion, recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement and the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2019.
The Compensation and Management Development Committee
| William H. Kucheman | |
| Stacy Enxing Seng | Gregory J. Moore |
Contents of the Compensation Discussion and Analysis
| Goals of Our Compensation Program | |
| Role of the Compensation and Management Development Committee | |
| Compensation Consultant | |
| Peer Group and Survey Data | |
| Links Between Executive Compensation and Company Performance | |
| CEO Compensation | |
| Components of CEO Compensation | |
| Performance-Based Pay | |
| Target CEO Compensation Summary | |
| Key Governance Features Relating to Executive Compensation | |
| Elements of Executive Compensation | |
| Base Salary | |
| Annual Cash Incentives | |
| Long-Term Equity | |
| Retirement and Change in Control Agreements | |
| Other Personal Benefits | |
| Employment Agreements | |
| Risk Assessment of Compensation Policies and Practices |
| 29 |
24
This Compensation Discussion and Analysis (“CD&A”) describes our compensation program and how it applies to our NEOs, comprising:
| John | President and Chief Executive Officer |
| Senior Vice President and Chief Financial Officer | |
| Senior Vice President and President Patient Support Systems | |
| Andreas G. Frank | Senior Vice President and President Front Line Care |
| Deborah M. Rasin | Senior Vice President and Chief Legal Officer and |
| Steven J. Strobel(2) | Retired Senior Vice President and Chief Financial Officer |
| (1) | Ms. Bodem joined the Company on December 3, 2018. | |
| (2) | On November 26, 2018, Mr. Strobel notified the Company of his intention to retire from the Company following a transition period. Effective December 3, 2018, Mr. Strobel took on a new role as senior advisor to the Company’s CEO and he remained in such new role through November 17, 2019, his retirement date. |
Goals of Our Compensation Program
Hillrom’s compensation program is designed to:
| · | align management’s interests with those of shareholders over the short- and long-term; |
| · | motivate and incent employees to achieve superior results; |
| · | provide clear accountability and reward for producing results; |
| · | attract and retain superior talent; and |
| · | ensure simplicity and transparency in compensation policies and programs. |
In aggregate, the compensation of Hill-Rom’sHillrom’s executive officers is assessed against the compensation paid to comparable officers of companies with which Hill-RomHillrom competes for executives, with an initial market check and focus on the 50th percentile of compensation opportunity provided to such executives. However, actual individual pay decisions are subjective and based on multiple factors. Hill-RomHillrom is guided by the belief that the compensation of executive officers should be competitive with the market, be aligned with the performance of the Company on both a short-term and long-term basis, take into consideration individual performance of the executive, be internally equitable among peers, and assist in retaining key executives critical to the Company’s long-term success. Hill-Rom’sHillrom’s use of performance-based compensation means that, in any given year, total compensation can vary when pre-established business and/or personal targets and objectives are exceeded or are not achieved. Accordingly, a significant portion of our executives’ compensation is at risk.
Role of the Compensation and Management Development Committee
The Board’s Compensation and Management Development Committee (for purposes of this Compensation Discussion and Analysis, the “Committee”) is charged with ensuring that Hill-Rom’sHillrom’s compensation program meets the objectives outlined above. In that role, the Committee assists the Board in fulfilling its responsibility for assuring that the officers and key management personnel of the Company are effectively compensated in terms of salaries, supplemental compensation and other benefits which are internally equitable, externally competitive, and advance the long-term interests of the Company’s shareholders. The Committee also reviews and assesses the talent development and succession management actions concerning the officers and key employees of the Company,, administers Hill-Rom’sHillrom’s compensation plans and keeps the Board informed regarding executive compensation matters.
The Committee, in consultation with Hill-Rom’sHillrom’s independent compensation consultant and the full Board, determines the compensation of the Chief Executive Officer. Additionally, the Chief Executive Officer makes recommendations to the Committee regarding the compensation of the senior executive team, including Hill-Rom’sHillrom’s other NEOs. From time to time, Hill-Rom’sHillrom’s management also provides recommendations to the Committee regarding changes to the elements and structure of Hill-Rom’sHillrom’s compensation program. In addition to the aforementioned recommendations, the Committee considers peer group data, survey data and other factors when determining the elements and amounts of compensation.
25
The Committee engages nationally recognized outside compensation and benefits consulting firms to evaluate independently and objectively the effectiveness of and assist with implementation of Hill-Rom’sHillrom’s compensation and benefit programs and to provide the Committee with additional expertise in the evaluation of Hill-Rom’sHillrom’s compensation practices. During fiscal year 2017,2019, the Committee engaged Exequity LLP (“Exequity”) as its executive compensation consultant. Exequity LLP has been asked by the Committee to provide guidance on compensation proposals, including changes to compensation levels, the design of incentive plans, as well as relevant information about market practices and trends.
Exequity LLP is an independent compensation consultant that provided no other services to Hill-RomHillrom other than those services provided to the Committee. After considering the six independence factors discussed in Section 303A.05(c)(iv)(A)—-(F) of the NYSE Listed Company Manual, the Committee determined that Exequity LLP had no conflict of interest pursuant to Item 407(e)(3)(iv) of the SEC’s Regulation S-K.
Peer Group and Survey Data
As one of several factors in considering approval of elements of Hill-Rom’sHillrom’s compensation program, the Committee compares Hill-Rom’sHillrom’s compensation program and performance against an approved peer group of companies. The compensation peer group (the “Compensation Peer Group”), which is annually reviewed and updated by the Committee, consists of companies that are similar in revenue (typically 0.5x to 2.5x Hill-Rom’sHillrom’s revenue) and in similar industries as Hill-RomHillrom and with whom Hill-RomHillrom may compete for executive talent. For fiscal year 2017,2019, the Committee reviewed the Compensation Peer Group for appropriateness and made certain changes dueadded ResMed Inc. and West Pharmaceutical Services, Inc. to increase the result of mergersample size and acquisition activity involving certain companies.insulate the peer group from potential M&A activity. The companies that made up the Compensation Peer Group are as follows:
Compensation Peer Group | |
| Agilent Technologies, Inc. | |
| Avanos Medical, Inc. | PerkinElmer, Inc. |
| Bio-Rad Laboratories, Inc. | |
| Bruker Corporation | |
| The Cooper Companies, Inc. | |
| DENTSPLY SIRONA Inc. | |
| Edwards Life Sciences Corporation | |
| Varian Medical Systems, Inc. | |
| Hologic, Inc. | Waters Corporation |
| MEDNAX, Inc. |
26
Overall, the Committee believes the Company’s compensation policies and programs are effective, market-appropriate, and in line with shareholder expectations.
The key components of our compensation program that link compensation and performance are as follows:
| · | Executive compensation is comprised of (1) base salary, (2) variable cash incentive awards and (3) long-term, equity-based incentive awards. |
| · | As an initial starting point and market check, the Committee assesses executive compensation at the 50th percentile of compensation opportunity provided by our Compensation Peer Group but makes individual pay decisions based on multiple factors, including Company and individual performance. |
| · | Our variable incentive awards are based on a wide array of short-term and long-term performance metrics (e.g. revenue, adjusted EPS, free cash flow, relative TSR) which helps create a “portfolio” of incentive opportunities. This design structure motivates behaviors that balance incentive earnings for both short-term and long-term performance. |
| · | As shown |
2019 Advisory Vote
Last year’s Non-Binding Vote on Executive Compensation received support of approximately 97%98% of our shareholders (excluding abstentions and broker non-votes). Based on the results of the shareholder vote, and the changes to thewe believe our overall executive compensation program that were implemented for fiscal year 2016, which addressed shareholder and proxy advisory firm feedback, no significant changes tois aligned with the interests of our compensation program took place in fiscal year 2017.
CEO Compensation
While the Committee works to align the pay of all of our executives with the interests of our shareholders, the Committee believes that such alignment is especially important in the case of our Chief Executive Officer, John Greisch.Groetelaars. Accordingly, the Committee has selected a mix of compensation opportunities for Mr. GreischGroetelaars which is weighted towards annual bonus[es] and long-term equity basedequity-based compensation.
The components of Mr. Greisch’sGroetelaars’ pay are as follows:
| · |
| · | Fiscal year |
| · |
| · | Mr. Groetelaars also received a sign-on award in fiscal year 2018 of nonqualified stock options with a grant date value of $1,200,000, which will vest annually over a 3-year period, as follows: one-third on May 14, 2019, one-third on May 14, 2020, and |
| · |
| · | Based on strong individual and Company performance in fiscal year |
| · | As shown in the section below, the significant majority of our CEO’s compensation is performance-based and therefore |
Performance-Based Pay
The Committee believes it is important to ensure that a meaningful portion of Mr. Greisch’sGroetelaars’ compensation is performance-based. In fiscal year 2017,2019, the majority of Mr. Greisch’sGroetelaars’ target total compensation was in the form of an annual cash incentive and long-term, equity-based incentives. In fiscal year 20172019, Mr. Greisch’s annualGroetelaars’ target annualized cash incentive comprised 15%16% of his target total compensation. Along with 71%68% long-term, equity-based compensation at target, 86%84% of Mr. Greisch’sGroetelaars’ fiscal year 20172019 annualized total compensation target was at risk.
Total Percentage of Fiscal Year 20172019 Target Annualized Compensation that is Performance-Based: 86%84%
| 33 |
29
The Board has instituted a number of corporate governance features related to executive compensation, which are highlighted below and described more fully on pages 3135 through 3845 of this proxy statement.
| What We Do | What We Don’t Do | |
We require significant stock ownership, including 6X base salary for our CEO, ensuring that executives are invested in | We don’t re-price stock options or buy-back equity grants | |
We engage a fully independent compensation consultant | We don’t provide for single-trigger change in control in executive employment agreements | |
We have a 24-month clawback policy in place in the event of executive misconduct resulting in a material restatement in our financial statements | We don’t provide gross-ups for 280G excise taxes related to change in control agreements | |
Our executives have at-will employment agreements | We don’t allow executives to hedge or pledge their | |
Our incentive plans include a cap on payout opportunities. This mitigates against the possibility of excessively high earning potential that could motivate inappropriate behavior. | ||
We annually make awards of long-term incentives that are tied to stock price performance. The overlay of these awards helps mitigate the possibility of behaviors that would enhance incentive earnings in one year at the expense of future performance results. | ||
We grant half of our LTI awards in the form of PSUs which have specific performance goals over a 3-year performance period |
Elements of Executive Compensation
The major components of Hill-Rom’sHillrom’s executive officer compensation program are summarized below:
| Element | Purpose | Key Characteristics | ||
| Base Salary | Reflects each executive’s base level of responsibility, qualifications and contributions to the Company | Fixed compensation that is reviewed and, if appropriate, adjusted annually | ||
| Incentives | Motivates our executives to achieve annual company objectives that the Board believes will drive long-term growth in shareholder value | This annual cash |
Long-term, Equity Incentive – PSU Award | Motivates our executives by directly linking their compensation to the value of our stock relative to our | The ultimate number of units earned at the end of the three-year performance period is based on free-cash flow, as adjusted by our TSR performance relative to | ||
Long-term, Equity Incentive – RSU Award | Motivates our executives by tying compensation to long-term stock appreciation; additionally, the time-vesting nature of the awards helps enable executive retention | Long-term restricted stock units vest | ||
Long-term, Equity Incentive - Stock Options | Motivates our executives by linking their compensation to appreciation in our stock price | Stock options vest |
Base Salary
Hillrom provides senior management a base salary that is competitive at a level consistent with their positions, skill levels, experience, and knowledge. Base salary is intended to aid in the attraction and retention of talent in a competitive market and is targeted at the market median, although actual salaries may be higher or lower as a result of various factors, including those given above as well as individual performance, internal pay equity within Hill-Rom,Hillrom, length of service with Hill-RomHillrom and the degree of difficulty in replacing the individual. The base salaries of senior management are reviewed by the Committee on an annual basis, as well as at the time of promotion or signif
Name | 2016 Base Salary | 2017 Base Salary | 2017 Base Salary Increase | |||
| John J. Greisch | $1,030,000 | $1,050,000 | 1.94% | |||
| Steven J. Strobel | $489,000 | $504,000 | 3.07% | |||
| Alton E. Shader | $464,000 | $478,000 | 3.02% | |||
| Carlos Alonso Marum | $453,000 | $467,000 | 3.09% | |||
| Deborah M. Rasin | $450,000 | $464,000 | 3.11% |
Name | 2018 Base Salary | 2019 Base Salary | 2019 Base Salary Increase |
John P. Groetelaars President and Chief Executive Officer, Member of | $1,000,000 | $1,020,000 | 2.00% |
Barbara W. Bodem (1) Senior Vice President and Chief Financial Officer | N/A | $500,000 | 2.04% |
Paul S. Johnson (2) Senior Vice President and President, Patient Support | $440,000 | $500,000 | 13.64% |
Andreas G. Frank (3) Senior Vice President and President, Front Line | $425,000 | $465,000 | 9.41% |
Deborah M. Rasin Senior Vice President and Chief Legal Officer | $478,000 | $500,000 | 4.06% |
Steven J. Strobel (4) Retired Senior Vice President and Chief Financial | $519,000 | $535,000 | 3.08% |
| (1) | Ms. Bodem joined the Company on December 3, 2018. Ms. Bodem received an adjustment within fiscal year 2019 of 2.04%, effective June 1, 2019 upon assuming responsibility for Hillrom’s Information Technology function. | |
| (2) | Mr. Johnson received a merit increase of 10.00% in November 2018 based on his strong performance over fiscal year 2018 and an additional adjustment of 3.30%, effective June 1, 2019, upon assuming responsibility for commercial operations in Canada and Latin America. | |
| (3) | Mr. Frank received a merit increase of 4.00% in November 2018 and an additional adjustment of 5.20%, effective December 3, 2018, upon his promotion to Senior Vice President and President Front Line Care. | |
| (4) | On November 26, 2018, Mr. Strobel notified the Company of his intention to retire from the Company following a transition period. Effective December 3, 2018, Mr. Strobel took on a new role as senior advisor to the Company’s CEO and remained in such new role through November 17, 2019, his retirement date. |
Fiscal Year 20182020 Changes to Base Salary.
Annual Cash Incentives
Fiscal Year 2019 Changes to Plan Design and Target Opportunity.Prior to the annualbeginning of fiscal year 2019, the Company utilized a cash incentive plan (the “Cash Incentive Plan”), which is designed to comply with the requirements of Section 162(m) of the Internal Revenue Code of 1986 for performance-based compensation.
The Cash Incentive Plan providesprovided for a maximum award equal to 2.0% of our EBITDA (as adjusted pursuant to the terms of the Cash Incentive Plan) for our CEO and 1.0% for each other NEO. However, in determining actual awards made under the Cash Incentive Plan, the Committee hashad the discretion to and has in the past, paid actualpay awards which are lower than the maximum awards.amount. The Committee exercisesexercised this negative discretion by reference to the Company-wide Short-TermCompany’s Short-term Incentive Compensation Plan (the “STIC Plan”), which is discussed herein. Thewith the objective of the STIC Plan is to align the annual cash compensation of an executive to the annual performance of the Company on key financial metrics.
In fiscal year 2019, as a result of changes to the Code, the Company eliminated the Cash Incentive Plan and each NEO now participates in the Short-term Incentive Compensation Plan, which has been rebranded the BIG Plan.
Overview. The structure of the BIG Plan is similar to the Company’s Cash Incentive Plan from fiscal year 2018. Employees eligible to participate in the BIG Plan are placed into differentiated funding pools according to the business unit(s) and geographic region(s) in which such employees work (collectively, the “business unit pools”). Employees who work as part of our corporate function rather than a specific business unit or geographic region participate in a separate Plan funding pool (the “corporate pool”). The design of the corporate pool did not change relative to fiscal year 2018. The BIG Plan differentiates the business unit pools by providing a pool funding percentage of up to 200% of aggregate target opportunities (versus up to 150% for the corporate pool). In order to increase line of sight and accountability for business unit performance and drive growth, NEOs who are Presidents of business units participate equally in the corporate pool and their respective business unit pool; with each pool weighted 50%.
Funding Pools and Measure Weightings
| Funding Pool | Weight | Measure |
| Corporate | 50% | Revenue |
| Pool | 25% | Adjusted EPS |
| 25% | Free Cash Flow | |
| Business Unit | 60% | Revenue |
| Pools | 40% | Operating Income |
Each NEO receives a target award that iscan be adjusted upwards or downwards based on achieving Company-wide financial performance targets under such NEO’s respective funding pool(s) and individual performance targets.
Financial Performance Targets. The STIC Plan paymentFinancial Performance Targets are set with the intention that the relative level of difficulty in achieving the targets is consistent from year to any individual is calculated by multiplying (a) base salary by (b) STIC Plan target opportunity by (c) STIC year. In addition, in order to encourage management to take actions in the best interests of the Company, the Committee has the discretion to exclude nonrecurring special charges and amounts from the calculation of these targets.
Plan Funding Percentage (as defined hereinafter) by (d) the Individual Performance Modifier (the “Individual Performance Modifier”).
Individual Performance Modifier.
Under the terms of thePlan Payment Calculation. The BIG Plan payment to any individual is calculated by multiplying (a) eligible earnings by (b) BIG Plan target opportunity by (c) the applicable Plan Funding Percentage by (d) the Individual Performance Modifier.
For fiscal year 2017,2019, the targets and achievements (in millions, except per share data) were as follows:
Fiscal Year 2017 STIC Plan Targets and Achievement Calculation ($ in Millions except EPS) | ||||||||||||
Threshold | Target | Maximum | Weight | Achieved | Achievement | |||||||
| STIC Revenue(1) | $2,469 | $2,743 | $3,017 | 25% | $2,681 | 24% | ||||||
| STIC Adjusted EPS(2) | $3.23 | $3.80 | $4.37 | 50% | $3.64 | 48% | ||||||
| STIC Free Cash Flow(3) | $184 | $217 | $250 | 25% | $229 | 27% | ||||||
| Percentage Payout | 50% | 100% | 150% | |||||||||
| STIC Plan Funding Percentage | 99% | |||||||||||
| STIC Plan Funding Percentage After Adjustment (4) | 85% | |||||||||||
| Name | Pool Assignment | Pool Weight | Plan Performance | Measure Weight | Threshold | Target | Maximum | Achieved | Achievement Percentage | ||||||||
John P. Groetelaars President and Chief | Revenue | 50% | $ | 2,606 | $ | 2,896 | $ | 3,185 | $ | 2,939 | 101% | ||||||
Executive Officer, Member of the Board | Corporate | 100% | Adjusted EPS | 25% | $ | 4.28 | $ | 5.04 | $ | 5.80 | $ | 5.06 | 100% | ||||
| of Directors | Free Cash Flow | 25% | $ | 281 | $ | 330 | $ | 380 | $ | 332 | 101% | ||||||
| Barbara W. Bodem | Revenue | 50% | $ | 2,606 | $ | 2,896 | $ | 3,185 | $ | 2,939 | 101% | ||||||
| Senior Vice President and Chief Financial | Corporate | 100% | Adjusted EPS | 25% | $ | 4.28 | $ | 5.04 | $ | 5.80 | $ | 5.06 | 100% | ||||
| Officer | Free Cash Flow | 25% | $ | 281 | $ | 330 | $ | 380 | $ | 332 | 101% | ||||||
| Paul S. Johnson | Revenue | 50% | $ | 2,606 | $ | 2,896 | $ | 3,185 | $ | 2,939 | 101% | ||||||
| Senior Vice President | Corporate | 50% | Adjusted EPS | 25% | $ | 4.28 | $ | 5.04 | $ | 5.80 | $ | 5.06 | 100% | ||||
| and President, Patient | Free Cash Flow | 25% | $ | 281 | $ | 330 | $ | 380 | $ | 332 | 101% | ||||||
| Support Systems | Patient Support | 50% | Revenue | 60% | $ | 1,274 | $ | 1,416 | $ | 1,558 | $ | 1,465 | 134% | ||||
| Systems (4) | Operating Income | 40% | $ | 237 | $ | 279 | $ | 321 | $ | 288 | 127% | ||||||
| Andreas G. Frank | Revenue | 50% | $ | 2,606 | $ | 2,896 | $ | 3,185 | $ | 2,939 | 101% | ||||||
| Senior Vice President | Corporate | 50% | Adjusted EPS | 25% | $ | 4.28 | $ | 5.04 | $ | 5.80 | $ | 5.06 | 100% | ||||
| and President, Front | Free Cash Flow | 25% | $ | 281 | $ | 330 | $ | 380 | $ | 332 | 101% | ||||||
| Line Care | Front Line | 50% | Revenue | 60% | $ | 905 | $ | 1,005 | $ | 1,106 | $ | 981 | 98% | ||||
| Care (5) | Operating Income | 40% | $ | 240 | $ | 282 | $ | 325 | $ | 267 | 92% | ||||||
| Deborah M. Rasin | Revenue | 50% | $ | 2,606 | $ | 2,896 | $ | 3,185 | $ | 2,939 | 101% | ||||||
| Senior Vice President and Chief Legal Officer | Corporate | 100% | Adjusted EPS | 25% | $ | 4.28 | $ | 5.04 | $ | 5.80 | $ | 5.06 | 100% | ||||
| and Secretary | Free Cash Flow | 25% | $ | 281 | $ | 330 | $ | 380 | $ | 332 | 101% | ||||||
| Steven J. Strobel (6) | Revenue | 50% | $ | 2,606 | $ | 2,896 | $ | 3,185 | $ | 2,939 | 101% | ||||||
| Retired Senior Vice president and Chief | Corporate | 100% | Adjusted EPS | 25% | $ | 4.28 | $ | 5.04 | $ | 5.80 | $ | 5.06 | 100% | ||||
| Financial Officer | Free Cash Flow | 25% | $ | 281 | $ | 330 | $ | 380 | $ | 332 | 101% | ||||||
| (1) | Revenue as reported to investors was $2,907 million versus a BIG Plan achievement revenue |
| (2) | Adjusted EPS as reported to investors was $5.08 versus a BIG Plan achievement Adjusted EPS of $5.06. Adjusted EPS as reported to investors excludes the impact of strategic developments, acquisition and integration costs, special charges, and other unusual events. The difference between the Adjusted EPS and BIG Plan achievement Adjusted EPS relates to adjustments in calculation of the BIG Plan achievement Adjusted EPS to reflect divesture activities and the Company’s annual performance on key aspects of the business, including product quality metrics. |
| (3) | Free Cash Flow as reported to investors was $328 million versus BIG Plan Free Cash Flow of $332 million. The difference between the reported number and the number used to calculate BIG Plan achievement relates to the cash flow impact of divestiture activities. |
| (4) | Revenue and operating income as reported to investors for Patient Support Systems were $1,491 million and $293 million, respectively, versus BIG Plan revenue achievement and Big Plan operating income achievement of $1,465 million and $288 million, respectively. The differences between the reported numbers and the numbers used to calculate BIG Plan achievement relate to adjustments in the BIG Plan achievement calculation to reflect acquisition and divestiture activity, the impact of fluctuations in foreign exchange rates compared to the assumed foreign exchange rates used in connection with the BIG Plan, and Patient Support System’s annual performance on key aspects of the business, including product quality metrics. |
| (5) | Revenue and operating income as reported to investors for Front Line Care were $978 million and $268 million, respectively, versus BIG Plan revenue achievement and BIG Plan operating income achievement of $981 million and $267 million, respectively. The differences between the reported numbers and the numbers used to calculate BIG Plan achievement relates to adjustments in the BIG Plan achievement calculation to reflect acquisition activity, the impact of fluctuations in foreign exchange rates compared to the assumed foreign exchange rates used in connection with the BIG Plan, and Front Line Care’s annual performance on key aspects of the business. |
| (6) | On November 26, 2018, Mr. Strobel notified the Company of his intention to retire from the Company following a transition period. Effective December 3, 2018, Mr. Strobel took on a new role as senior advisor to the Company’s CEO and remained in such new role through November 17, 2019, his retirement date. |
For fiscal year 2017,2019, the Committee reviewed the adjusted financial performance of Hill-Rom against the predetermined financial targets and determined that based on the Company’s performance in fiscal year 2017, the Committee would exercise its negative discretion and set the aggregate STICBIG Plan Funding Percentage at 85%.
| Name | Fiscal Year 2017 Base Salary | Fiscal Year 2017 STIC Plan Target Opportunity as a % of Base Salary | Fiscal Year 2017 STIC Plan Target Opportunity | Fiscal Year 2017 STIC Plan Payout | ||||
| John J. Greisch | $ 1,050,000 | 110% | $ 1,155,000 | $ 981,750 | ||||
| Steven J. Strobel | $ 504,000 | 75% | $ 378,000 | $ 321,300 | ||||
| Alton E. Shader | $ 478,000 | 70% | $ 334,600 | $ 284,410 | ||||
| Carlos Alonso Marum | $ 467,000 | 70% | $ 326,900 | $ 333,438 | ||||
| Deborah M. Rasin | $ 464,000 | 60% | $ 278,400 | $ 236,640 |
| Name | Fiscal Year-End Eligible Earnings | BIG Plan Target as a % of Salary | Weighted Achievement | Individual Performance Modifier | FY19 BIG Plan Payout | ||||
John P. Groetelaars President and Chief Executive Officer, | $ | 1,020,000 | 100% | 101.0% | 100% | $ | 1,030,200 | ||
Barbara W. Bodem (1) Senior Vice President and Chief Financial | $ | 413,500 | 60% | 101.0% | 120% | $ | 300,697 | ||
Paul Johnson Senior Vice President and President, Patient | $ | 500,000 | 70% | 116.0% | 100% | $ | 406,000 | ||
Andreas Frank Senior Vice President and President, Front | $ | 461,021 | 70% | 98.7% | 100% | $ | 318,405 | ||
Deborah M. Rasin Senior Vice President and Chief Legal Officer | $ | 500,000 | 60% | 101.0% | 110% | $ | 333,300 | ||
Steven J. Strobel (2) Retired Senior Vice President and Chief | $ | 221,490 | 75% | 101.0% | 100% | $ | 167,779 | ||
| (1) | Ms. Bodem joined the Company on December 3, 2018; her base salary is prorated for time in position during the fiscal year. |
| (2) | On November 26, 2018, Mr. Strobel notified the Company of his intention to retire from the Company following a transition period. Effective December 3, 2018, Mr. Strobel took on a new role as senior advisor to the Company’s CEO and remained in such new role through November 17, 2019, his retirement date. |
Long-Term Equity Based Incentive (LTI) Awards
Overview:
The Company’s LTI program provides a portfolio approach to long-term incentives by providing:
| · | Awards targeted to align with competitive market levels; |
| · | Payouts that correlate high performance with increased payouts and low performance with reduced payouts; |
| · | A mix of awards representative of typical market practice; and |
| · | Awards that support internal equity among |
In addition, the Committee considers the Stock Incentive Plan share usage rate, compensation expense, number of plan participants and potential aggregate target awards for participants when determining target award levels and the mix of long-term incentive awards.
Target LTI Opportunity for Fiscal Year 20172019 Awards
| Name | Fiscal Year 2017 Base Salary | Fiscal Year 2017 Target LTI Opportunity (as a % of Base Salary) | Fiscal Year 2017 Target LTI Award | 2017 Actual LTI Award* | PSUs Granted (50%) | RSUs Granted (25%) | Stock Options Granted (25%) | |||||||
| John J. Greisch | $ 1,050,000 | 500% | $ 5,250,000 | $ 5,250,000 | 46,085 | 23,043 | 83,334 | |||||||
| Steven J. Strobel | $ 504,000 | 250% | $ 1,260,000 | $ 1,260,000 | 11,061 | 5,531 | 20,000 | |||||||
| Alton E. Shader | $ 478,000 | 175% | $ 836,500 | $ 1,003,800 | 8,812 | 4,406 | 15,934 | |||||||
| Carlos Alonso Marum | $ 467,000 | 175% | $ 817,250 | $ 898,975 | 7,892 | 3,946 | 14,270 | |||||||
| Deborah M. Rasin | $ 464,000 | 175% | $ 812,000 | $ 812,000 | 7,128 | 3,564 | 12,889 | |||||||
| * Dollar values shown under this column differ from the expense-based values shown in the Summary Compensation Table and Grants of Plan Based Awards Table. See “Calculation of shares” within the narrative below. | ||||||||||||||
| Name | Fiscal Year 2019 Base Salary | Fiscal Year 2019 Target | Fiscal Year 2019 Target LTI Award | 2019 Actual LTI Award* | Stock (25%) | RSUs Granted (25%) | PSUs (50%) | ||||||
John P. Groetelaars President and Chief Executive | $ | 1,020,000 | 417% | $ | 4,250,000 | $ | 4,250,000 | 42,314 | 12,152 | 24,303 | |||
Barbara W. Bodem (1) Senior Vice President and Chief | $ | 490,000 | 225% | $ | 1,102,500 | $ | 1,102,500 | 10,272 | 2,924 | 5,847 | |||
Paul Johnson Senior Vice President and | $ | 484,000 | 200% | $ | 968,000 | $ | 968,000 | 9,638 | 2,768 | 5,536 | |||
Andreas Frank (2) Senior Vice President and | $ | 442,000 | 150% | $ | 663,000 | $ | 663,000 | 6,601 | 1,896 | 3,792 | |||
Deborah M. Rasin Senior Vice President and Chief | $ | 492,000 | 175% | $ | 861,000 | $ | 861,000 | 8,573 | 2,462 | 4,924 | |||
Steven J. Strobel (3) Retired Senior Vice President and | $ | 535,000 | 250% | $ | 1,337,500 | $ | 1,471,250 | 14,649 | 4,207 | 8,413 | |||
| (1) | Ms. Bodem joined the Company on December 3, 2018. In addition to the LTI award shown above, she received a one-time sign-on award of $725,000 in the form of time-vested RSUs which is included in the Summary Compensation and Grants of Plan Based Awards Tables. |
| (2) | In addition to the LTI award shown above, Mr. Frank received a promotional award of $100,000 in the form of time-vested RSUs which is included in the Summary Compensation and Grants of Plan Based Awards Tables. |
| (3) | On November 26, 2018, Mr. Strobel notified the Company of his intention to retire from the Company following a transition period. Effective December 3, 2018, Mr. Strobel took on a new role as senior advisor to the Company’s CEO and remained in such new role through November 17, 2019, his retirement date. |
| * | Dollar values shown under this column differ from the expense-based values shown in the Summary Compensation Table and Grants of Plan Based Awards Table. See “Calculation of shares” within the narrative below. |
Stock Options. In fiscal year 2017,2019, a stock option grant was made to each of the NEOs equal to 25% of the target long-term equity award opportunity. Stock options vest in four equal annual installments.
RSUs.
In fiscal yearPSUs.
In fiscal yearCalculation of shares.
The dollar value of an LTI award at grant is converted to RSUs and PSUs based on the average closing price ofPrior performance unit plan payouts. Vesting is based on a one-year Adjustedthree-year cumulative Free Cash Flow measure modified by relative TSR over a three-year period, in each case, subject to a minimum percentage payout of 0% of target for below threshold performance, and a maximum percentage payout of 150% of target for maximum performance (or a total of 225% of target for maximum performance of both Adjustedcumulative Free Cash Flow and relative TSR).
| · | From October 1, |
| · | From October 1, |
| · | The |
*The cumulative Free Cash Flow reported to investors for fiscal year 2017 – 2019 was $847 million versus the cumulative Free Cash Flow achievement of $814 million for the PSU Program. The difference between the reported amount and the amount used to calculate PSU Program cumulative Free Cash Flow achievement primarily relates to the Tax Cuts and Jobs Act enacted in the United States in December 2017, as well as other unplanned strategic developments, acquisition and integration costs, special charges and unusual events.
Fiscal Year 20152017 – 20172019 Performance Share Unit Program
| Measure | Threshold | Target | Maximum | Achieved | % of Measure Target | % of Target Payout | ||||||
| Free Cash Flow* | $112M | $132M | $152M | $135M | 101.3% | 132.9% | ||||||
| Relative TSR | 0 - 25% | 50% | 75% | 65.6% | 131.2% | |||||||
| Percentage Payout | 50% | 100% | 150% |
| Measure | Threshold | Target | Maximum | Achieved | % of Measure Target | % of Target Payout |
| Free Cash Flow* | $615M | $723M | $831M | $814M | 139.0% | 153.5% |
| Relative TSR | 25% | 50% | 75% | 55.2% | 110.4% | |
| Percentage Payout | 50% | 100% | 150% |
* The fiscal year 20152017 – 20172019 cumulative Free Cash Flow measure’smeasure performance was determined on November 5, 2019 and relative TSR measure performance was determined on September 30, 2015 and Relative TSR was determined on September 30, 2017. Free Cash Flow as reported to investors was $93 million versus PSU Free Cash Flow of $135 million. The differences between the reported numbers and the numbers used to calculate the PSU Free Cash Flow relates to the impact of acquisition and integration costs, special charges, legislative changes and other unusual events.
Under the fiscal year 20152017 – fiscal year 20172019 PSU program, Mr. GreischJohnson earned 67,9466,199 shares of stock, Mr. StrobelFrank earned 16,1398,672 shares of stock, Mr. ShaderMs. Rasin earned 13,06710,942 shares of stock and Mr. AlonsoStrobel earned 3,71616,979 shares of stock. Ms. Rasin was not employed byAt the Company at the time the fiscal year 2015 PSU award was granted.
The TSR Peer Group used for the PSUs granted in fiscal year 20172019 includes the companies in the Compensation Peer Group as well as the companies that comprised the former
Companies in Compensation Peer Group | Additional Companies |
| Agilent Technologies, Inc. | Abbott Laboratories |
| Baxter International Inc. | |
| Becton, Dickinson and Company | |
| Boston Scientific Corporation | |
| The Cooper Companies, Inc. | Danaher Corp. |
| DENTSPLY SIRONA Inc. | |
| Edwards Life Sciences Corporation | |
| Hologic, Inc. | Haemonetics Corporation |
| Intuitive Surgical, Inc. | |
| Integra LifeSciences Holdings Corporation | |
| Johnson & Johnson | |
| Massimo Corporation | |
| Medtronic plc | |
| Quest Diagnostics Incorporated | Merit Medical Systems, Inc. |
| ResMed Inc. | NuVasive, Inc. |
| STERIS plc | |
| Teleflex Incorporated | |
| Varian Medical Systems, Inc. | |
| Waters Corporation | |
| West Pharmaceutical Services, Inc. | |
Fiscal Year 20182020 Changes to LTI Target Opportunity:
Share Ownership Guidelines
. In order to align the interests of executives to the long-term performance of the Company, executive officers are required to own a certain amount ofStock Ownership Guidelines | |
| Executive Officer | Multiple of Annual Salary |
| CEO | 6x |
| CFO | 3x |
| Senior Vice President | 2x |
Vice President who (1) reports to the CEO, or (2) is a Section 16 reporting officer | 1x |
Shares owned outright and unvested RSUs count toward the required ownership level. This requirement, like the Executive Compensation Recoupment Policy discussed below, helps ensure long-term focus and appropriate levels of risk-taking by executive officers. Messrs. GreischJohnson, Frank and ShaderStrobel and Ms. Rasin have achieved their required ownership levels, and Messrs. StrobelMr. Groetelaars and AlonsoMs. Bodem (who are both on track to meet the required ownership level) have not been with the Company for more than five years, and therefore are not required to meet these guidelines until such NEOs’each of their respective five-year anniversaries with the Company.
Hillrom’s Executive Compensation Recoupment Policy.
Under our Executive Compensation Recoupment Policy, the Committee can recoup from executive officers all performance-based compensation and any trading profits on trades inTiming of Equity Grants
. We generally make all equity grants to our executives on an annual basis (except in the case of a new hire or promotion), and these grants have historically been made at our November Board meeting.Anti-Hedging/Anti-Pledging Policy
.Re-pricing and Buybacks.
With respect to each of our NEOs,Retirement and Change in Control Agreements
Overview
.Retirement Guidelines for Executives
. With respect to executives hired before August 1, 2016, those who are at least 55 years of age and with 5 years’ length of service are eligible to receive certain benefits under| · | accelerated vesting of outstanding time-based RSUs and stock options which have been held for at least one year prior to retirement; |
| · | accelerated vesting on a pro-rata basis of outstanding time-based RSUs and stock options which have been granted during the year of retirement; |
| · | vesting of outstanding PSUs which have been held for at least one year prior to retirement, based on achievement of performance objectives during the full performance period; |
| · | pro-rata vesting of outstanding PSUs which have been granted during the year of retirement, based on achievement of performance objectives during the full performance period; and |
| · | an extension of three years of the time to exercise eligible outstanding stock options. |
Supplemental Executive Retirement Plan
. The Supplemental Executive Retirement Plan (the “SERP”) provides additional retirement benefits to certain employees selected by the Committee whose retirement benefits under our pension plan or 401(k) plan are reduced, curtailed or otherwise limited as a result of certain limitations under theChange in Control Agreements
.Other Personal Benefits
In addition to the elements of compensation discussed above, we also provide senior level management with various other benefits in order to remain competitive with the market, in attracting and retaining qualified executives. Hill-RomHillrom believes that these benefits are in-line with the market, are reasonable in nature, are not excessive and are in the best interest of Hill-RomHillrom and its shareholders. None of our NEOs receive any excise tax or perquisite tax gross-ups, other than for reasonable relocation costs and housing allowance, as applicable.
Employment Agreements
We have entered into an employment agreement with each of our NEOs. We believe that it is appropriate for our senior executive officers to have employment agreements because they provide certain contractual protections to us that we might not otherwise have, including provisions relating to non-competition with us, non-solicitation of our employees and confidentiality of our proprietary information. Additionally, we believe that employment agreements are a useful tool in recruiting and retention of senior level employees. The current employment agreements set forth the basic duties of the senior executive officers and provide that each senior executive officer is entitled to receive, in addition to base salary, incentive compensation payable at our discretion and such additional compensation, benefits and perquisites as we may deem appropriate. The employment agreements are terminable by either us or the executive officer “without cause” on sixty (60)180 days’ written notice, or if terminated by us, pay in lieu of notice, and are terminable at any time by us for cause, as defined in each employment agreement. See “Potential Payments Upon Termination or Change in Control” on page 45pages 52 and 53 for further information regarding payments due upon termination. The employment agreements also containFurther, the non-competition and non-solicitation agreements of the senior executive officers whichwill continue generally for a period of eighteen to twenty-four18 months for the CEO and 12 months for other officers after the termination of the senior executive officer’s employment.
Risk Assessment of Compensation Policies and Practices
Assisted by its independent compensation consultant, the Committee reviewed our material compensation policies and practices applicable to our employees and executive officers. TheFollowing the independent consultant’s review and recommendation, the Committee concluded that these policies and practices do not create risks that are reasonably likely to have a material adverse effect on the Company. Key features of the compensation program supporting this conclusion include:
| · | appropriate pay philosophy, peer group and market positioning, |
| · | effective balance in cash and equity mix, short and long-term focus, corporate, business unit and individual performance focus and financial and non-financial performance measurement and discretion, |
| · | elements of the compensation program designed to avoid excessive risk-taking, and |
| · | meaningful risk mitigants, such as the stock ownership guidelines and executive compensation recoupment policies. |
Summary Compensation Table |
The following tables and notes set forth compensation information for the fiscal years ended September 30, 2017, 2016,2019, 2018, and 20152017 for our NEOs.
| Non-Equity | |||||||||||||||||||||||||||||
| Name and | Stock | Option | Incentive Plan | All Other | |||||||||||||||||||||||||
| Principal Position | Year | Salary (1) | Bonus | Awards (2) | Awards (3) | Comp. (4) | Comp. (5) | Total | |||||||||||||||||||||
| JOHN J. GREISCH | 2017 | $ | 1,047,692 | None | $ | 3,816,095 | $ | 1,251,677 | $ | 981,750 | $ | 238,363 | $ | 7,335,577 | |||||||||||||||
| President and Chief Executive Officer, | 2016 | $ | 1,065,000 | None | $ | 3,550,162 | $ | 1,197,776 | $ | 1,156,793 | $ | 228,353 | $ | 7,198,084 | |||||||||||||||
| Member of the Board of Directors | 2015 | $ | 994,615 | None | $ | 5,778,430 | $ | 1,148,314 | $ | 1,123,100 | $ | 207,236 | $ | 9,251,695 | |||||||||||||||
| STEVEN J. STROBEL | 2017 | $ | 502,269 | None | $ | 915,933 | $ | 300,400 | $ | 321,300 | $ | 80,185 | $ | 2,120,087 | |||||||||||||||
| Senior Vice President and | 2016 | $ | 505,654 | None | $ | 718,584 | $ | 242,435 | $ | 449,342 | $ | 80,337 | $ | 1,966,352 | |||||||||||||||
| Chief Financial Officer | 2015 | $ | 420,192 | None | $ | 853,493 | $ | 272,725 | $ | 263,880 | $ | 75,912 | $ | 1,886,202 | |||||||||||||||
| ALTON E. SHADER | 2017 | $ | 476,385 | None | $ | 729,678 | $ | 239,329 | $ | 284,410 | $ | 222,463 | $ | 1,952,265 | |||||||||||||||
| Senior Vice President and | 2016 | $ | 479,692 | None | $ | 648,199 | $ | 218,671 | $ | 464,269 | $ | 229,088 | $ | 2,039,920 | |||||||||||||||
| President, Front Line Care | 2015 | $ | 431,191 | None | $ | 1,203,848 | $ | 220,832 | $ | 402,019 | $ | 84,276 | $ | 2,342,166 | |||||||||||||||
| CARLOS ALONSO MARUM (6) | 2017 | $ | 465,385 | None | $ | 653,497 | $ | 214,335 | $ | 333,438 | $ | 86,005 | $ | 1,752,660 | |||||||||||||||
| Senior Vice President and | 2016 | $ | 468,423 | None | $ | 575,274 | $ | 194,086 | $ | 323,759 | $ | 119,158 | $ | 1,680,700 | |||||||||||||||
| President, International | 2015 | $ | 194,615 | $ | 100,000 | $ | 206,708 | $ | 71,261 | $ | 146,465 | $ | 33,703 | $ | 752,752 | ||||||||||||||
| DEBORAH M. RASIN (7)(8) | 2017 | $ | 462,385 | $None | $ | 590,234 | $ | 193,593 | $ | 236,640 | $ | 70,673 | $ | 1,553,524 | |||||||||||||||
| Senior Vice President, | 2016 | $ | 337,500 | $ | 750,000 | $ | 1,367,532 | $ | 196,885 | $ | 217,090 | $ | 142,995 | $ | 3,012,002 | ||||||||||||||
| Chief Legal Officer and Secretary | |||||||||||||||||||||||||||||
| Name and Principal Position | Year | Salary (1) | Bonus | Stock Awards (2) | Option Awards (3) | Non-Equity Incentive Plan Compensation (4) | All Other Compensation (5) | Total ($) | ||||||||||||||
| John P. Groetelaars (6)(7) | 2019 | $ | 1,018,000 | None | $ | 3,915,748 | $ | 1,177,599 | $ | 1,030,200 | $ | 184,613 | $ | 7,326,160 | ||||||||
| President and Chief Executive Officer, | ||||||||||||||||||||||
| Member of the Board of Directors | 2018 | $ | 384,615 | None | $ | 2,981,176 | $ | 2,200,039 | $ | 424,231 | $ | 110,261 | $ | 6,100,322 | ||||||||
| Barbara Bodem Senior Vice President and Chief Financial Officer (8) | 2019 | $ | 408,462 | $ | 300,000 | $ | 1,730,644 | $ | 288,746 | $ | 300,697 | $ | 116,103 | $ | 3,144,652 | |||||||
| Paul S. Johnson | 2019 | $ | 484,831 | None | $ | 891,960 | $ | 268,226 | $ | 406,000 | $ | 90,803 | $ | 2,141,819 | ||||||||
| Senior Vice President and President, Patient | 2018 | $ | 436,154 | None | $ | 661,776 | $ | 208,383 | $ | 424,655 | $ | 73,057 | $ | 1,804,025 | ||||||||
| Support Systems | 2017 | $ | 391,801 | None | $ | 334,367 | $ | 109,676 | $ | 238,000 | $ | 67,861 | $ | 1,141,704 | ||||||||
| Andreas G. Frank | 2019 | $ | 459,319 | None | $ | 715,751 | $ | 183,706 | $ | 318,405 | $ | 345,946 | $ | 2,023,127 | ||||||||
| Senior Vice President and President, Front | 2018 | $ | 415,423 | None | $ | 827,905 | $ | 164,821 | $ | 281,265 | $ | 75,007 | $ | 1,764,420 | ||||||||
| Line Care (9) | 2017 | $ | 388,269 | None | $ | 467,792 | $ | 153,429 | $ | 218,790 | $ | 48,486 | $ | 1,681,559 | ||||||||
| Deborah M. Rasin | 2019 | $ | 493,215 | None | $ | 793,355 | $ | 238,587 | $ | 333,300 | $ | 80,044 | $ | 1,938,500 | ||||||||
| Senior Vice President and Chief Legal Officer | 2018 | $ | 476,654 | None | $ | 620,898 | $ | 195,514 | $ | 316,340 | $ | 72,153 | $ | 1,681,559 | ||||||||
| and Secretary | 2017 | $ | 462,385 | None | $ | 590,234 | $ | 193,593 | $ | 236,640 | $ | 70,673 | $ | 1,553,524 | ||||||||
| Steven J. Strobel | 2019 | $ | 533,400 | None | $ | 1,355,551 | $ | 407,682 | $ | 167,779 | $ | 95,639 | $ | 2,560,050 | ||||||||
| Retired Senior Vice President Chief Financial | 2018 | $ | 517,558 | None | $ | 1,013,646 | $ | 319,216 | $ | 429,343 | $ | 81,830 | $ | 2,361,592 | ||||||||
| Officer (10) | 2017 | $ | 502,269 | None | $ | 915,933 | $ | 300,400 | $ | 321,300 | $ | 80,185 | $ | 2,120,087 | ||||||||
| (1) | Reflects salary paid within each of the three fiscal years. |
| (2) | The amounts in this column represent the grant date fair value of time-based RSUs granted during the applicable fiscal year, excluding a reduction for risk of forfeiture. Also included is the grant date fair value of PSUs granted during each of fiscal years |
| (3) | The amounts in this column represent the grant date fair value of time-based stock options granted during the applicable fiscal years, excluding the reduction for risk of forfeiture. These grant date fair values were based on the methodology set forth in Notes 1 and 7 to our Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended September 30, |
| (4) | The amounts in this column represent cash awards earned for the applicable fiscal year and paid in the subsequent fiscal year, under our |
| (5) | Please refer to the “All Other Compensation” table below for further information. |
| (6) | In 2018, Mr. |
| (7) | Mr. Groetelaars was elected President and Chief Executive Officer effective May 14, 2018 and his salary and non-equity incentive plan compensation are pro-rated as of such date. |
| (8) | Ms. Bodem joined the Company on December 3, 2018. Her salary and non-equity incentive plan compensation are pro-rated as of such date. Ms. Bodem received a one-time sign-on cash award of $300,000 and |
| (9) | Mr. Frank received a one-time RSU award upon |
| (10) | On November 26, 2018, Mr. Strobel notified the Company of his intention to retire from the Company following a transition period. Effective December 3, 2018, Mr. Strobel took on a new role as senior advisor to the Company’s CEO and he remained in such new role through November 17, 2019, his retirement date. |
All Other Compensation for Fiscal Year 2017
| Company Contributions | ||||||||||||
| Name | 401(k) (a) | Supplemental 401(k) (a) | Relocation and Housing Costs (b) | Gross-up on Relocation and Housing (b) | Health & Welfare Benefits | Total All Other Compensation | ||||||
| Mr. Greisch | $ 18,900 | $ 200,641 | $ 0 | $ 0 | $ 18,822 | $ 238,363 | ||||||
| Mr. Strobel | $ 18,900 | $ 42,469 | $ 0 | $ 0 | $ 18,816 | $ 80,185 | ||||||
| Mr. Shader | $ 18,900 | $ 37,655 | $ 90,000 | $ 56,066 | $ 19,842 | $ 222,463 | ||||||
| Mr. Alonso Marum | $ 18,900 | $ 36,343 | $ 750 | $ 662 | $ 29,350 | $ 86,005 | ||||||
| Ms. Rasin | $ 19,062 | $ 32,764 | $ 0 | $ 0 | $ 18,847 | $ 70,673 | ||||||
| Name and Principal Position | Company Contributions to the 401(k) (1) | Company Contributions to the Supplemental 401(k) (1) | Relocation and Housing Costs (2) | Relocation and Housing Gross Up | Health and Welfare Benefits | Total All Other Compensation | ||||||||||||
| John P. Groetelaars President and Chief Executive Officer, Member of the Board of Directors | $ | 19,600 | $ | 122,588 | None | None | $ | 42,425 | $ | 184,613 | ||||||||
| Barbara Bodem Senior Vice President and Chief Financial Officer | $ | 19,600 | $ | 26,460 | $ | 34,270 | $ | 14,202 | $ | 21,570 | $ | 116,103 | ||||||
| Paul S. Johnson Senior Vice President and President, Patient Support Systems | $ | 19,600 | $ | 38,054 | None | None | $ | 33,149 | $ | 90,803 | ||||||||
| Andreas G. Frank Senior Vice President and President, Front Line Care | $ | 19,401 | $ | 33,890 | $ | 178,654 | $ | 81,749 | $ | 32,252 | $ | 345,946 | ||||||
| Deborah M. Rasin Senior Vice President and Chief Legal Officer and Secretary | $ | 19,600 | $ | 35,200 | None | None | $ | 25,243 | $ | 80,044 | ||||||||
| Steven J. Strobel Retired Senior Vice President and Chief Financial Officer (3) | $ | 19,600 | $ | 45,537 | None | None | $ | 30,502 | $ | 95,639 | ||||||||
| (1) | Amounts represent Company contributions to the NEO’s accounts in the applicable plans: 401(k) Savings Plan and Supplemental Executive Retirement Plan (SERP) excluding the reduction for forfeiture of non-vested contributions. |
| (2) | Represents (i) amounts |
| (3) | On November 26, 2018, Mr. Strobel notified the |
Grants of Plan-Based Awards for Fiscal Year Ended September 30, 2017
The following table summarizes the grants of plan-based awards to each of the NEOs for the fiscal year ended September 30, 2017.2019. All equity awards granted during fiscal year 20172019 were granted under our Stock Incentive Plan.
Estimated Future Payouts Under Non-Equity Incentive Plan Awards (1) | Estimated Future Payouts Under Equity Incentive Plan Awards (2) | |||||||||||||||||||||||||||||||||||||||||
| Name | Grant Date | Actual Amount 2017 | Min. | Target | Max. | Min. | Target | Max. | All Other Stock Awards: Number of Shares or Stock Units (3) | Exercise or Base Price of Option Awards (4) | Grant Date Fair Value of Stock and Option Awards (5) | |||||||||||||||||||||||||||||||
| John J. Greisch | n.a. | $ | 981,750 | - | $ | 1,155,000 | $ | 2,598,750 | ||||||||||||||||||||||||||||||||||
| 11/14/2016 | - | 46,085 | 103,691 | $ | 2,578,456 | |||||||||||||||||||||||||||||||||||||
| 11/14/2016 | 23,043 | $ | 1,237,640 | |||||||||||||||||||||||||||||||||||||||
| 11/14/2016 | 83,334 | $ | 53.70 | $ | 1,251,677 | |||||||||||||||||||||||||||||||||||||
| Steven J. Strobel | n.a. | $ | 321,300 | - | $ | 378,000 | $ | 850,500 | ||||||||||||||||||||||||||||||||||
| 11/14/2016 | - | 11,061 | 24,887 | $ | 618,863 | |||||||||||||||||||||||||||||||||||||
| 11/14/2016 | 5,531 | $ | 297,070 | |||||||||||||||||||||||||||||||||||||||
| 11/14/2016 | 20,000 | $ | 53.70 | $ | 300,400 | |||||||||||||||||||||||||||||||||||||
| Alton E. Shader | n.a. | $ | 284,410 | - | $ | 334,600 | $ | 752,850 | ||||||||||||||||||||||||||||||||||
| 11/14/2016 | - | 8,812 | 19,827 | $ | 493,031 | |||||||||||||||||||||||||||||||||||||
| 11/14/2016 | 4,406 | $ | 236,646 | |||||||||||||||||||||||||||||||||||||||
| 11/14/2016 | 15,934 | $ | 53.70 | $ | 239,329 | |||||||||||||||||||||||||||||||||||||
| Carlos Alonso Marum | n.a. | $ | 333,438 | - | $ | 326,900 | $ | 735,525 | ||||||||||||||||||||||||||||||||||
| 11/14/2016 | - | 7,892 | 17,757 | $ | 441,557 | |||||||||||||||||||||||||||||||||||||
| 11/14/2016 | 3,964 | $ | 211,940 | |||||||||||||||||||||||||||||||||||||||
| 11/14/2016 | 14,270 | $ | 53.70 | $ | 214,335 | |||||||||||||||||||||||||||||||||||||
| Deborah M. Rasin | n.a. | $ | 236,640 | - | $ | 278,400 | $ | 626,400 | ||||||||||||||||||||||||||||||||||
| 11/14/2016 | - | 7,128 | 16,038 | $ | 398,812 | |||||||||||||||||||||||||||||||||||||
| 11/14/2016 | 3,564 | $ | 191,422 | |||||||||||||||||||||||||||||||||||||||
| 11/14/2016 | 12,889 | $ | 53,70 | $ | 193,593 | |||||||||||||||||||||||||||||||||||||
| 2019 | Estimated Future Payouts Under Non-Equity Incentive Plan Awards (1) | Estimated Future Payouts Under Equity Incentive Plan Awards (2) | All Other Stock and Option Awards: Number of Shares of Stock | Exercise or Base Price of Option | Grant Date Fair Value of Stock and | ||||||||||||||||||||||||||||
| Name and Principal | Grant | Award | or Units | Awards | Option Awards | ||||||||||||||||||||||||||||
| Position | Date | Amount | Min. | Target | Max. | Min. | Target | Max. | (3) | (4) | (5) | ||||||||||||||||||||||
| John P. Groetelaars | n.a. | $ | 1,030,200 | $ | - | $ | 1,020,000 | $ | 2,040,000 | ||||||||||||||||||||||||
| President and Chief Executive Officer, | 11/7/2018 | - | 24,303 | 54,682 | $ | 2,737,490 | |||||||||||||||||||||||||||
| Member of the | 11/7/2018 | 12,152 | $ | 1,178,258 | |||||||||||||||||||||||||||||
| Board of Directors | 11/7/2018 | 42,314 | $ | 96.96 | $ | 1,177,599 | |||||||||||||||||||||||||||
| Barbara Bodem | n.a. | $ | 300,697 | $ | - | $ | 248,100 | $ | 496,200 | ||||||||||||||||||||||||
| Senior Vice | 12/3/2018 | - | 5,847 | 13,156 | $ | 671,937 | |||||||||||||||||||||||||||
| President and Chief | 12/3/2018 | 2,924 | $ | 288,774 | |||||||||||||||||||||||||||||
| Financial Officer | 12/3/2018 | 7,796 | $ | 769,933 | |||||||||||||||||||||||||||||
| 12/3/2018 | 10,272 | $ | 98.76 | $ | 288,746 | ||||||||||||||||||||||||||||
| Paul S. Johnson | n.a. | $ | 406,000 | $ | - | $ | 350,000 | $ | 700,000 | ||||||||||||||||||||||||
| Senior Vice President and | 11/7/2018 | - | 5,536 | 12,456 | $ | 623,575 | |||||||||||||||||||||||||||
| President, Patient | 11/7/2018 | 2,768 | $ | 268,385 | |||||||||||||||||||||||||||||
| Support Systems | 11/7/2018 | 9,638 | $ | 96.96 | $ | 268,226 | |||||||||||||||||||||||||||
| Andreas G. Frank | n.a. | $ | 318,405 | $ | - | $ | 322,715 | $ | 645,429 | ||||||||||||||||||||||||
| Senior Vice | 11/7/2018 | - | 3,792 | 8,532 | $ | 427,131 | |||||||||||||||||||||||||||
| President and | 11/7/2018 | 1,896 | $ | 183,836 | |||||||||||||||||||||||||||||
| President, Front | 12/3/2018 | 1,061 | $ | 104,784 | |||||||||||||||||||||||||||||
| Line Care | 11/7/2018 | 6,601 | $ | 96.96 | $ | 183,706 | |||||||||||||||||||||||||||
| Deborah M. Rasin | n.a. | $ | 333,300 | $ | - | $ | 300,000 | $ | 600,000 | ||||||||||||||||||||||||
| Senior Vice President and Chief | 11/7/2018 | - | 4,924 | 11,079 | $ | 554,639 | |||||||||||||||||||||||||||
| Legal Officer and | 11/7/2018 | 2,462 | $ | 238,716 | |||||||||||||||||||||||||||||
| Secretary | 11/7/2018 | 8,573 | $ | 96.96 | $ | 238,587 | |||||||||||||||||||||||||||
| Steven J. Strobel | n.a. | $ | 167,779 | $ | - | $ | 166,118 | $ | 332,235 | ||||||||||||||||||||||||
| Retired Senior Vice | 11/7/2018 | - | 8,413 | 18,929 | $ | 947,640 | |||||||||||||||||||||||||||
| President and Chief | 11/7/2018 | 4,207 | $ | 407,911 | |||||||||||||||||||||||||||||
| Financial Officer (6) | 11/7/2018 | 14,649 | $ | 96.96 | $ | 407,682 | |||||||||||||||||||||||||||
(1) | Amounts represent |
| (2) | The amounts under the “Target” column reflect the number of PSUs granted to the NEOs |
| (3) | Amounts under this column represent stock options and RSU’s granted to our NEOs during fiscal year |
| (4) | The average of the high and low selling prices of our common stock on the NYSE on the grant date. |
| (5) | The grant date fair values of stock and option awards granted to our NEOs are based on the methodology set forth in Notes 1 and 7 to our Consolidated Financial Statements included in our Annual Report on Form 10-K for the |
| (6) | On November 26, 2018, Mr. Strobel notified the Company of his intention to retire from the Company following a transition period. Effective December 3, 2018, Mr. Strobel took on a new role as senior advisor to the Company’s CEO and he remained in such new role through November 17, 2019, his retirement date. |
Outstanding Equity Awards at September 30, 2017
The following table summarizes the number and terms of stock options, deferred stock shares and PSUs outstanding for each of the NEOs as of September 30, 2017.
| Option Awards | Stock Awards | ||||||||||||||||||||||||||||||||
| Name | Number of Securities Underlying Unexercised Options | Number of Securities Underlying Unexercised Options Unexcercisable | Option Grant Date (1) | Option Exercise Price | Option Expiration Date | Grant Date | Number of Shares or Units of Stock That Have Not Vested (2) | Market Value of Shares or Units of Stock That Have Not Vested (3) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (4) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested (3) | |||||||||||||||||||||||
| John J. Greisch | 147,679 | 11/16/2010 | $ | 38.81 | 11/16/2020 | ||||||||||||||||||||||||||||
| 189,162 | 11/29/2011 | $ | 30.63 | 11/29/2021 | |||||||||||||||||||||||||||||
| 120,383 | 11/13/2012 | $ | 26.94 | 11/13/2022 | |||||||||||||||||||||||||||||
| 60,597 | 20,200 | 11/18/2013 | $ | 41.53 | 11/18/2023 | ||||||||||||||||||||||||||||
| 12/12/2013 | 26,305 | $ | 1,946,572 | ||||||||||||||||||||||||||||||
| 44,821 | 44,821 | 11/17/2014 | $ | 44.93 | 11/17/2024 | 11/17/2014 | 26,493 | $ | 1,960,518 | ||||||||||||||||||||||||
| 21,132 | 63,397 | 11/16/2015 | $ | 51.33 | 11/16/2025 | 11/16/2015 | 23,850 | $ | 1,764,870 | 104,861 | $ | 7,759,733 | |||||||||||||||||||||
| 83,334 | 11/14/2016 | $ | 53.70 | 11/14/2026 | 11/14/2016 | 23,281 | $ | 1,722,764 | 103,691 | $ | 7,673,153 | ||||||||||||||||||||||
| Steven J. Strobel | 10,645 | 10,645 | 11/17/2014 | $ | 44.93 | 11/17/2024 | 11/17/2014 | 6,293 | $ | 465,683 | |||||||||||||||||||||||
| 4,277 | 12,832 | 11/16/2015 | $ | 51.33 | 11/16/2025 | 11/16/2015 | 4,828 | $ | 357,245 | 21,224 | $ | 1,570,595 | |||||||||||||||||||||
| 20,000 | 11/14/2016 | $ | 53.70 | 11/14/2026 | 11/14/2016 | 5,588 | $ | 413,514 | 24,887 | $ | 1,841,657 | ||||||||||||||||||||||
| Alton E. Shader | 3,988 | 7/11/2011 | $ | 45.91 | 7/11/2021 | ||||||||||||||||||||||||||||
| 5,085 | 11/29/2011 | $ | 30.63 | 11/29/2021 | |||||||||||||||||||||||||||||
| 7,739 | 11/13/2012 | $ | 26.94 | 11/13/2022 | |||||||||||||||||||||||||||||
| 12,714 | 4,239 | 11/18/2013 | $ | 41.53 | 11/18/2023 | ||||||||||||||||||||||||||||
| 8,619 | 8,620 | 11/17/2014 | $ | 44.93 | 11/17/2024 | 11/17/2014 | 5,095 | $ | 377,026 | ||||||||||||||||||||||||
| 9/1/2015 | 1,998 | $ | 147,835 | ||||||||||||||||||||||||||||||
| 3,858 | 11,574 | 11/16/2015 | $ | 51.33 | 11/16/2025 | 11/16/2015 | 4,355 | $ | 322,255 | 19,145 | $ | 1,416,749 | |||||||||||||||||||||
| 15,934 | 11/14/2016 | $ | 53.70 | 11/14/2026 | 11/14/2016 | 4,451 | $ | 329,406 | 19,827 | $ | 1,467,198 | ||||||||||||||||||||||
| Carlos Alonso Marum | 2,450 | 2,451 | 4/13/2015 | $ | 50.98 | 4/13/2025 | 4/13/2015 | 1,439 | $ | 106,517 | |||||||||||||||||||||||
| 3,424 | 10,273 | 11/16/2015 | $ | 51.33 | 11/16/2025 | 11/16/2015 | 3,865 | $ | 285,978 | 16,992 | $ | 1,257,408 | |||||||||||||||||||||
| 14,270 | 11/14/2016 | $ | 53.70 | 11/14/2026 | 11/14/2016 | 3,987 | $ | 295,015 | 17,757 | $ | 1,314,018 | ||||||||||||||||||||||
| Deborah M. Rasin | 3,795 | 11,385 | 1/4/2016 | $ | 47.29 | 1/4/2026 | 1/4/2016 | 20,426 | $ | 1,511,500 | 18,736 | $ | 1,386,446 | ||||||||||||||||||||
| 12,889 | 11/14/2016 | $ | 53.70 | 11/14/2026 | 11/14/2016 | 3,601 | $ | 266,455 | 16,038 | $ | 1,186,812 | ||||||||||||||||||||||
| Option Awards | Stock Awards | |||||||||||||||||||||||
| Name and Principal Position | Number of Securities Underlying Unexercised Options Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Grant Date (1) | Option Exercise Price | Option Expiration Date | Grant Date (2) | Number of Shares or Units of Stock That Have Not Vested | Market Value of Shares or Units of Stock That Have Not Vested (3) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (4) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested (3) | ||||||||||||||
| John P. Groetelaars President and Chief | 27,466 | 63,896 | 5/14/2018 | $ | 89.08 | 5/14/2028 | 5/14/2018 | 11,651 | $ | 1,226,072 | 51,773 | $ | 5,448,020 | |||||||||||
| Executive Officer, Member of the Board of Directors | 0 | 42,314 | 11/7/2018 | $ | 96.96 | 11/7/2028 | 11/7/2018 | 12,253 | $ | 1,289,331 | 54,682 | $ | 5,754,161 | |||||||||||
| Barbara Bodem Senior Vice President and Chief Financial Officer | 0 | 10,272 | 12/3/2018 | $ | 98.76 | 12/3/2028 | 12/3/2018 | 10,809 | $ | 1,137,396 | 13,156 | $ | 1,384,380 | |||||||||||
| Paul S. Johnson | 0 | 699 | 11/16/2015 | $ | 51.33 | 11/16/2025 | ||||||||||||||||||
| Senior Vice President and | 0 | 3,651 | 11/14/2016 | $ | 53.70 | 11/14/2026 | 11/14/2016 | 8,272 | $ | 870,418 | ||||||||||||||
| President, Patient | 2,408 | 7,226 | 11/8/2017 | $ | 78.16 | 11/8/2027 | 11/8/2017 | 2,712 | $ | 285,384 | 11,995 | $ | 1,262,208 | |||||||||||
| Support Systems | 0 | 9,638 | 11/7/2018 | $ | 96.96 | 11/7/2028 | 11/7/2018 | 2,791 | $ | 293,686 | 12,456 | $ | 1,310,745 | |||||||||||
| 9,149 | 0 | 11/18/2013 | $ | 41.53 | 11/18/2023 | |||||||||||||||||||
| Andreas G. Frank | 10,040 | 0 | 11/17/2014 | $ | 44.93 | 11/17/2024 | ||||||||||||||||||
| Senior Vice | 7,289 | 2,430 | 11/16/2015 | $ | 51.33 | 11/16/2025 | ||||||||||||||||||
| President and | 5,107 | 5,108 | 11/14/2016 | $ | 53.70 | 11/14/2026 | 11/14/2016 | 11,572 | $ | 1,217,733 | ||||||||||||||
| President, Front Line | 1,905 | 5,715 | 11/8/2017 | $ | 78.16 | 11/8/2027 | 11/8/2017 | 2,144 | $ | 225,653 | 9,486 | $ | 998,212 | |||||||||||
| Care | 3/5/2018 | 1,874 | $ | 197,150 | ||||||||||||||||||||
| 0 | 6,601 | 11/7/2018 | $ | 96.96 | 11/7/2028 | 11/7/2018 | 1,912 | $ | 201,166 | 8,532 | $ | 897,822 | ||||||||||||
| 12/3/2018 | 1,070 | $ | 112,572 | |||||||||||||||||||||
| Deborah M. Rasin | 0 | 3,795 | 1/4/2016 | $ | 47.29 | 1/4/2026 | ||||||||||||||||||
| Senior Vice President and Chief | 4,739 | 6,445 | 11/14/2016 | $ | 53.70 | 11/14/2026 | 11/14/2016 | 14,601 | $ | 1,536,487 | ||||||||||||||
| Legal Officer and | 2,259 | 6,780 | 11/8/2017 | $ | 78.16 | 11/8/2027 | 11/8/2017 | 2,544 | $ | 267,722 | 11,255 | $ | 1,184,311 | |||||||||||
| Secretary | 0 | 8,573 | 11/7/2018 | $ | 96.96 | 11/7/2028 | 11/7/2018 | 2,482 | $ | 261,219 | 11,079 | $ | 1,165,843 | |||||||||||
| Steven J. Strobel | 0 | 4,278 | 11/16/2015 | $ | 51.33 | 11/16/2025 | ||||||||||||||||||
| Retired Senior Vice | 0 | 10,000 | 11/14/2016 | $ | 53.70 | 11/14/2026 | 11/14/2016 | 22,658 | $ | 2,384,325 | ||||||||||||||
| President and Chief | 0 | 11,069 | 11/8/2017 | $ | 78.16 | 11/8/2027 | 11/8/2017 | 4,153 | $ | 437,068 | 18,374 | $ | 1,933,443 | |||||||||||
| Financial Officer | 0 | 14,649 | 11/7/2018 | $ | 96.96 | 11/7/2028 | 11/7/2018 | 4,242 | $ | 446,364 | 18,929 | $ | 1,991,925 | |||||||||||
| (1) | Unvested stock options based solely on continued employment become exercisable in four equal annual installments beginning on the first anniversary of the date of grant. |
| (2) | Except for |
| (3) | Market value is determined by multiplying the number of unvested RSUs and/or PSUs by |
| (4) | PSUs pursuant to the fiscal year |
Option Exercises and Stock Vested in Fiscal Year Ended September 30, 2017
The following table summarizes the number of stock option awards exercised and the value realized upon exercise during the fiscal year ended September 30, 20172019 for the NEOs, as well as the number of stock awards vested and the value realized upon vesting.
| Option Awards | Stock Awards | |||
| Name | Number of Shares Acquired on Exercise | Value Realized on Exercise | Number of Shares Acquired on Vesting | Value Realized on Vesting |
| John J. Greisch | 207,987 | $ 8,722,786 | 116,169 | $ 7,829,103 |
| Steven J. Strobel | - | - | 16,139 | $ 1,190,251 |
| Alton E. Shader | 15,000 | 635,963 | 27,569 | $ 1,804,745 |
| Carlos Alonso Marum | - | - | 3,716 | $ 274,055 |
| Deborah M. Rasin | - | - | - | - |
| Option Awards | Stock Awards | |||||||
Name and Principal Position | Number of Shares Acquired on Exercise | Value Realized on Exercise | Number of Shares Acquired on Vesting | Value Realized on Vesting | ||||
| John P. Groetelaars President and Chief Executive Officer, Member of the Board of Directors | - | $ | - | - | $ | - | ||
| Barbara Bodem Senior Vice President and Chief Financial Officer | - | $ | - | - | $ | - | ||
| Paul S. Johnson Senior Vice President and President Patient Support Systems | 6,470 | $ | 338,428 | 2,857 | $ | 290,741 | ||
| Andreas G. Frank Senior Vice President and President, Front Line Care | 7,454 | $ | 505,515 | 4,525 | $ | 452,546 | ||
| Deborah M. Rasin Senior Vice President and Chief Legal Officer and Secretary | 5,500 | $ | 295,476 | 4,164 | $ | 382,902 | ||
| Steven J. Strobel Retired Senior Vice President and Chief Financial Officer (1) | 47,810 | $ | 2,608,393 | 4,717 | $ | 453,880 | ||
| (1) | On November 26, 2018, Mr. Strobel notified the Company of his intention to retire from the Company following a transition period. Effective December 3, 2018, Mr. Strobel took on a new role as senior advisor to the Company’s CEO and he remained in such new role through November 17, 2019, his retirement date. |
Nonqualified Deferred Compensation for Fiscal Year Ended September 30, 2017
| Name | Plan (1) | Executive Contributions in Fiscal Year 2017 | Registrant Contributions in Fiscal Year 2017 | Aggregate Earnings in Fiscal Year 2017 (2) | Aggregate Withdrawals/ Distributions in Fiscal Year 2017 | Aggregate Balance at September 30, 2017 (3) |
| John J. Greisch | SERP | - | $ 200,641 | $ 148,138 | None | $ 1,734,517 |
| Steven J. Strobel | SERP | - | $ 42,469 | $ 9,969 | None | $ 131,392 |
| Alton E. Shader | SERP | - | $ 37,655 | $ 26,960 | None | $ 223,126 |
| Carlos Alonso Marum | SERP | - | $ 36,343 | $ 8,282 | None | $ 97,052 |
| Deborah M. Rasin | SERP | - | $ 32,764 | $ 5,938 | None | $ 63,374 |
| Name and Principal Position | Plan (1) | Beginning Balance | Executive Contributions in Fiscal Year 2019 | Registrant Contributions in Fiscal Year 2019 | Aggregate Earnings in Fiscal Year 2019 (2) | Aggregate Withdrawals / Distributions in Fiscal Year 2019 | Aggregate Balance on Sept 30, 2019 (3) | ||||||||||||
| John P. Groetelaars President and Chief Executive Officer, Member of the Board of Directors | SERP | $ | 44,225 | $ | - | $ | 122,588 | $ | 7,120 | $ | - | $ | 173,933 | ||||||
| Barbara Bodem Senior Vice President and Chief Financial Officer | SERP | $ | - | $ | - | $ | 26,460 | $ | 521 | $ | - | $ | 26,981 | ||||||
| Paul S. Johnson Senior Vice President and President, Patient Support Systems | SERP | $ | 69,346 | $ | - | $ | 38,054 | $ | 985 | $ | - | $ | 108,385 | ||||||
| Andreas G. Frank Senior Vice President and President, Front Line Care | SERP | $ | 166,908 | $ | - | $ | 33,890 | $ | 5,211 | $ | - | $ | 206,009 | ||||||
| Deborah M. Rasin Senior Vice President and Chief Legal Officer and Secretary | SERP | $ | 109,380 | $ | - | $ | 35,200 | $ | 2,432 | $ | - | $ | 147,013 | ||||||
| Steven J. Strobel Retired Senior Vice President and Chief Financial Officer (4) | SERP | $ | 181,435 | $ | - | $ | 45,537 | $ | 11,132 | $ | - | $ | 238,104 | ||||||
| (1) | We maintain a 401(k) Savings Plan SERP to provide additional retirement benefits to certain employees whose retirement benefits under the 401(k) Savings Plan are limited under the Internal Revenue Code of 1986. The additional retirement benefits provided by the SERP are for certain participants chosen by the Compensation and Management Development Committee, |
| (2) | Amounts represent earnings on the Registrant’s SERP balances for the fiscal year. The SERP Plan’s investment approach provides for investments mirroring the employee’s investment allocation under the 401(k). |
| (3) | Of the amounts shown in this column related to the SERP, all of the following amounts represent Company contributions reported in the Summary Compensation Table of this proxy statement and previous proxy statements: Mr. Groetelaars $44,225, Ms. Bodem $0, Mr. Johnson $69,346, Mr. Frank $166,908, Ms. Rasin $109,380 and Mr. Strobel $181,435. |
| (4) | ||||
Potential Payments Upon Termination or Change in Control
Benefits Payable Upon Termination Under Employment Agreements
The following tables set forth estimates of the amounts payable to each of our NEOs upon specified termination events, based upon a hypothetical termination date of September 30, 2017.
| Event | Salary & Other Cash Payments | Accelerated Vesting of Retirement Savings Plan(2) | Accelerated Vesting of Equity Based Awards(3) | Continuance of Health & Welfare Benefits(4) | Limited Outplacement Assistance | Total | ||||||||||||||||||
| John J. Greisch | ||||||||||||||||||||||||
| Permanent Disability(1) | $ | 1,703,858 | $ | - | $ | 19,341,514 | $ | - | $ | - | $ | 21,045,373 | ||||||||||||
| Death | $ | 2,566,558 | $ | - | $ | 19,341,514 | $ | - | $ | - | $ | 21,908,072 | ||||||||||||
| Termination Without Cause | $ | 3,166,558 | $ | - | $ | 13,033,542 | $ | 5,031 | $ | 10,000 | $ | 16,215,131 | ||||||||||||
| Resignation With Good Reason | $ | 3,166,558 | $ | - | $ | 13,033,542 | $ | 5,031 | $ | 10,000 | $ | 16,215,131 | ||||||||||||
| Termination for Cause | $ | 84,808 | $ | - | $ | - | $ | - | $ | - | $ | 84,808 | ||||||||||||
| Resignation Without Good Reason | $ | 1,066,558 | $ | - | $ | 13,033,542 | $ | - | $ | - | $ | 14,100,100 | ||||||||||||
| Retirement | $ | 1,066,558 | $ | - | $ | 13,033,542 | $ | - | $ | - | $ | 14,100,100 | ||||||||||||
| Steven J. Strobel | - | |||||||||||||||||||||||
| Permanent Disability(1) | $ | 1,377,407 | $ | 56,310 | $ | 3,759,351 | $ | - | $ | - | $ | 5,193,068 | ||||||||||||
| Death | $ | 1,379,700 | $ | 56,310 | $ | 3,759,351 | $ | - | $ | - | $ | 5,195,361 | ||||||||||||
| Termination Without Cause | $ | 875,700 | $ | 56,310 | $ | - | $ | 14,982 | $ | 10,000 | $ | 956,992 | ||||||||||||
| Resignation With Good Reason | $ | 875,700 | $ | 56,310 | $ | - | $ | 14,982 | $ | 10,000 | $ | 956,992 | ||||||||||||
| Termination for Cause | $ | 50,400 | $ | - | $ | - | $ | - | $ | - | $ | 50,400 | ||||||||||||
| Resignation Without Good Reason | $ | 371,700 | $ | - | $ | - | $ | - | $ | - | $ | 371,700 | ||||||||||||
| Retirement | $ | 371,700 | $ | - | $ | - | $ | - | $ | - | $ | 371,700 | ||||||||||||
| Alton E. Shader | ||||||||||||||||||||||||
| Permanent Disability(1) | $ | 2,993,323 | $ | - | $ | 3,432,343 | $ | - | $ | - | $ | 6,425,666 | ||||||||||||
| Death | $ | 1,288,210 | $ | - | $ | 3,432,343 | $ | - | $ | - | $ | 4,720,553 | ||||||||||||
| Termination Without Cause | $ | 810,210 | $ | - | $ | - | $ | 15,028 | $ | 10,000 | $ | 835,238 | ||||||||||||
| Resignation With Good Reason | $ | 810,210 | $ | - | $ | - | $ | 15,028 | $ | 10,000 | $ | 835,238 | ||||||||||||
| Termination for Cause | $ | 47,800 | $ | - | $ | - | $ | - | $ | - | $ | 47,800 | ||||||||||||
| Resignation Without Good Reason | $ | 332,210 | $ | - | $ | - | $ | - | $ | - | $ | 332,210 | ||||||||||||
| Retirement | $ | 332,210 | $ | - | $ | - | $ | - | $ | - | $ | 332,210 | ||||||||||||
| Carlos Alonso Marum | ||||||||||||||||||||||||
| Permanent Disability(1) | $ | 1,619,755 | $ | 41,594 | $ | 2,409,358 | $ | - | $ | - | $ | 4,070,706 | ||||||||||||
| Death | $ | 1,305,157 | $ | 41,594 | $ | 2,409,358 | $ | - | $ | - | $ | 3,756,109 | ||||||||||||
| Termination Without Cause | $ | 838,157 | $ | 41,594 | $ | - | $ | 15,016 | $ | 10,000 | $ | 904,766 | ||||||||||||
| Resignation With Good Reason | $ | 838,157 | $ | 41,594 | $ | - | $ | 15,016 | $ | 10,000 | $ | 904,766 | ||||||||||||
| Termination for Cause | $ | 37,719 | $ | - | $ | - | $ | - | $ | - | $ | 37,719 | ||||||||||||
| Resignation Without Good Reason | $ | 371,157 | $ | - | $ | - | $ | - | $ | - | $ | 371,157 | ||||||||||||
| Retirement | $ | 371,157 | $ | - | $ | - | $ | - | $ | - | $ | 371,157 | ||||||||||||
| Deborah M. Rasin | �� | |||||||||||||||||||||||
| Permanent Disability(1) | $ | 2,327,023 | $ | 27,162 | $ | 3,487,365 | $ | - | $ | - | $ | 5,841,550 | ||||||||||||
| Death | $ | 1,202,117 | $ | 27,162 | $ | 3,487,365 | $ | - | $ | - | $ | 4,716,644 | ||||||||||||
| Termination Without Cause | $ | 738,117 | $ | 27,162 | $ | - | $ | 15,012 | $ | 10,000 | $ | 790,291 | ||||||||||||
| Resignation With Good Reason | $ | 738,117 | $ | 27,162 | $ | - | $ | 15,012 | $ | 10,000 | $ | 790,291 | ||||||||||||
| Termination for Cause | $ | 37,477 | $ | - | $ | - | $ | - | $ | - | $ | 37,477 | ||||||||||||
| Resignation Without Good Reason | $ | 274,117 | $ | - | $ | - | $ | - | $ | - | $ | 274,117 | ||||||||||||
| Retirement | $ | 274,117 | $ | - | $ | - | $ | - | $ | - | $ | 274,117 | ||||||||||||
| Event | Salary & Other Cash Payments | Accelerated Vesting of Retirement Savings Plan (1) | Accelerated Vesting of Equity Based Awards (2) | Continuance of Health & Welfare Benefits (3) | Limited Outplacement Assistance | Total | ||||||||||||
| John P. Groetelaars President and Chief Executive Officer, Member of the Board of Directors | ||||||||||||||||||
| Death (4) | $ | 2,530,200 | $ | 74,544 | $ | 8,876,127 | $ | - | $ | - | $ | 11,480,871 | ||||||
| Disability (5) | $ | 12,081,967 | $ | 74,544 | $ | 8,876,127 | $ | - | $ | - | $ | 21,032,637 | ||||||
| Retirement | $ | 1,030,200 | $ | - | $ | 6,256,262 | $ | - | $ | - | $ | 7,286,462 | ||||||
| Termination Without Cause | $ | 4,090,200 | $ | 74,544 | $ | - | $ | 15,911 | $ | 10,000 | $ | 4,190,654 | ||||||
| Resignation With Good Reason | $ | 4,090,200 | $ | 74,544 | $ | - | $ | 15,911 | $ | 10,000 | $ | 4,190,654 | ||||||
| Resignation Without Good Reason | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||
| Termination for Cause | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||
| Barbara Bodem Senior Vice President and Chief Financial Officer | ||||||||||||||||||
| Death (4) | $ | 1,300,697 | $ | 11,563 | $ | 1,819,171 | $ | - | $ | - | $ | 3,131,431 | ||||||
| Disability (5) | $ | 5,284,864 | $ | 11,563 | $ | 1,819,171 | $ | - | $ | - | $ | 7,115,598 | ||||||
| Retirement | $ | 300,697 | $ | - | $ | 513,546 | $ | - | $ | - | $ | 814,243 | ||||||
| Termination Without Cause | $ | 1,100,697 | $ | 11,563 | $ | - | $ | 15,611 | $ | 10,000 | $ | 1,137,872 | ||||||
| Resignation With Good Reason | $ | 1,100,697 | $ | 11,563 | $ | - | $ | 15,611 | $ | 10,000 | $ | 1,137,872 | ||||||
| Resignation Without Good Reason | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||
| Termination for Cause | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||
| Paul S. Johnson Senior Vice President and President, Patient Support Systems | ||||||||||||||||||
| Death (4) | $ | 1,406,000 | $ | - | $ | 2,442,304 | $ | - | $ | - | $ | 3,848,304 | ||||||
| Disability (5) | $ | 4,712,220 | $ | - | $ | 2,442,304 | $ | - | $ | - | $ | 7,154,524 | ||||||
| Retirement | $ | 406,000 | $ | - | $ | 1,846,610 | $ | - | $ | - | $ | 2,252,610 | ||||||
| Termination Without Cause (6) | $ | 1,256,000 | $ | - | $ | 535,173 | $ | 15,604 | $ | 10,000 | $ | 1,816,777 | ||||||
| Resignation With Good Reason | $ | 1,256,000 | $ | - | $ | - | $ | 15,604 | $ | 10,000 | $ | 1,281,604 | ||||||
| Resignation Without Good Reason | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||
| Termination for Cause | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||
| Andreas G. Frank Senior Vice President and President, Front Line Care | ||||||||||||||||||
| Death (4) | $ | 1,248,405 | $ | - | $ | 2,488,473 | $ | - | $ | - | $ | 3,736,877 | ||||||
| Disability (5) | $ | 7,279,218 | $ | - | $ | 2,488,473 | $ | - | $ | - | $ | 9,767,691 | ||||||
| Retirement | $ | 318,405 | $ | - | $ | 2,005,267 | $ | - | $ | - | $ | 2,323,672 | ||||||
| Termination Without Cause (6) | $ | 1,108,905 | $ | - | $ | 701,786 | $ | 15,556 | $ | 10,000 | $ | 1,836,247 | ||||||
| Resignation With Good Reason | $ | 1,108,905 | $ | - | $ | - | $ | 15,556 | $ | 10,000 | $ | 1,134,460 | ||||||
| Resignation Without Good Reason | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||
| Termination for Cause | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||
| Deborah M. Rasin Senior Vice President and Chief Legal Officer and Secretary | ||||||||||||||||||
| Death (4) | $ | 1,333,300 | $ | - | $ | 2,765,493 | $ | - | $ | - | $ | 4,098,793 | ||||||
| Disability (5) | $ | 4,983,822 | $ | - | $ | 2,765,493 | $ | - | $ | - | $ | 7,749,315 | ||||||
| Retirement | $ | 333,300 | $ | - | $ | 2,238,660 | $ | - | $ | - | $ | 2,571,960 | ||||||
| Termination Without Cause (6) | $ | 1,133,300 | $ | - | $ | 719,202 | $ | 15,597 | $ | 10,000 | $ | 1,878,099 | ||||||
| Resignation With Good Reason | $ | 1,133,300 | $ | - | $ | - | $ | 15,597 | $ | 10,000 | $ | 1,158,897 | ||||||
| Resignation Without Good Reason | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||
| Termination for Cause | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||
| Steven J. Strobel Retired Senior Vice President and Chief Financial Officer | ||||||||||||||||||
| Retirement (7) | $ | 167,779 | $ | - | $ | 3,488,443 | $ | - | $ | - | $ | 3,656,222 | ||||||
| (1) | Represents the cash payment of an amount equal to the unvested portion of company contributions in the SERP that would immediately become vested upon death, disability, termination without cause or termination with good reason. Messrs. Strobel, Johnson, Frank and Ms. Rasin are vested in the SERP so no additional benefits would be received upon termination. |
| (2) | The amounts indicated represent the intrinsic value of all unvested non-qualified stock options that would have become vested and exercisable upon death, disability or retirement and the market value of all unvested RSUs and unearned PSUs that would have vested upon death, disability or retirement. The amounts were calculated based on the closing price of our common stock of $105.23 on September 30, 2019. |
| (3) | Amounts represent the dollar value of the incremental cost to Hillrom by providing continuing health and life insurance coverage based on the individual’s selected coverage in effect immediately before the hypothetical termination. |
| (4) | The death benefit provides for two times base salary (up to a maximum benefit of $1,500,000). |
| (5) | Benefits provided under our disability plans are based on various circumstances including the NEO meeting certain eligibility requirements. Our disability plans are fully insured; therefore, claim payments are reviewed and processed by our third-party insurance carrier. The following assumptions were used to determine the salary and other cash payment amount for permanent disability: normal retirement age is based on the Social Security Normal Retirement Age Table and long-term disability benefits are based on 60% of the |
| (6) | Messrs. Johnson and Frank and Ms. Rasin entered into agreements dated April 24, 2018, providing that if employment is terminated by the Company without cause on or before November 16, 2019, they would be entitled to receive cash payments for all outstanding unvested equity awards forfeited as a result of termination of employment that otherwise would have vested on or before November 16, 2019. The amounts |
| Mr. Strobel retired from the |
Termination Due to Death or Permanent Disability
In the event an NEO dies or suffers a permanent disability during the term of employment, the NEO will receive a Hillrom death or disability benefit, as applicable; will be eligible to receive a prorated bonus for the year in which employment is terminated; and will be immediately vested in the SERP.
Retirement
Upon retirement, each NEO will be eligible to receive a prorated bonus for the year in which employment is terminated. Current NEOs who are at least 55 years old and who have at least five years of service (or ten years of service for those NEOs with effective hire dates on or after August 1, 2016) are eligible for certain retirement benefits, including the full vesting of outstanding RSUs, PSUs and stock options which have been held for at least one year and partial vesting of outstanding RSUs, PSUs and stock options which have been granted within one year of retirement. Vested stock options can be exercised until the earlier of either the original expiration date or the three-year anniversary of the retirement date. PSUs vest after the completion of the performance period and are based on the Company’s achievement of the performance goals during that period.
Termination Without Cause or Resignation with Good Reason
Upon a termination by the Company without cause or a resignation for good reason, each NEO other than the CEO is eligible to receive severance pay in an amount equal to one times the sum of then-current base salary for twelve months and the target bonus for the year in which employment is terminated, and the CEO is eligible to receive severance pay in an amount equal to two times the sum of then-current base salary for twenty-four months.twelve months and the target bonus for the year in which employment is terminated. Each NEO will be immediately vested in the SERP.SERP and receive a prorated portion of the current-year annual incentive based on the performance level and the number of days employed during the fiscal year. Health and similar welfare benefits will continue on substantially the same terms and conditions as at the time of the termination until the earlier of (i) the end of twelve months or (ii) such time as the NEO is eligible to be covered by comparable benefits of a subsequent employer.
Termination For Cause or Resignation Without Good Reason
Upon a termination by the Company for cause or a resignation without good reason, an NEO will not receive a severance payment.
| 54 |
Benefits Payable Under Change in Control Agreements
Based upon a hypothetical change in control date of September 30, 2017,2019, the change in control benefits with a termination of employment would be as follows:
| Name | Salary | Incentive Comp. | Continuation of Health and Welfare Benefits(1) | Vacation Benefits | Retirement Savings Plan(2) | Limited Outplacement Assistance | Acceleration of Equity Based Awards(3) | Effect of Modified Economic Cut-Back | Total | |||||||||||||||||||||||||||
| John J. Greisch | $ | 3,150,000 | $ | 1,155,000 | $ | 15,094 | $ | 84,808 | $ | 1,046,338 | $ | 10,000 | $ | 21,597,904 | $ | - | $ | 27,059,145 | ||||||||||||||||||
| Steven J. Strobel | $ | 1,008,000 | $ | 378,000 | $ | 29,963 | $ | 50,400 | $ | 56,310 | $ | 10,000 | $ | 4,236,060 | $ | - | $ | 5,768,733 | ||||||||||||||||||
| Alton E. Shader | $ | 956,000 | $ | 334,600 | $ | 30,056 | $ | 47,800 | $ | - | $ | 10,000 | $ | 3,848,901 | $ | - | $ | 5,227,358 | ||||||||||||||||||
| Carlos Alonso Marum | $ | 934,000 | $ | 333,438 | $ | 30,031 | $ | 37,719 | $ | 41,594 | $ | 10,000 | $ | 2,779,887 | $ | (94,005 | ) | $ | 4,072,664 | |||||||||||||||||
| Deborah M. Rasin | $ | 928,000 | $ | 278,400 | $ | 30,024 | $ | 37,477 | $ | 27,162 | $ | 10,000 | $ | 3,877,750 | $ | - | $ | 5,188,813 | ||||||||||||||||||
| Event | Salary & Other Cash Payments | Accelerated Vesting of Retirement Savings Plan (1) | Accelerated Vesting of Equity Based Awards (2) | Continuance of Health & Welfare Benefits (3) | Limited Outplacement Assistance | Effect of Modified Economic Cut-Back | Total | ||||||||||||||
| John P. Groetelaars President and Chief Executive Officer, Member of the Board of Directors | $ | 7,150,200 | $ | 74,544 | $ | 9,423,955 | $ | 47,732 | $ | 10,000 | $ | - | $ | 16,706,430 | |||||||
| Barbara Bodem Senior Vice President and Chief Financial Officer | $ | 1,900,697 | $ | 11,563 | $ | 1,886,939 | $ | 31,222 | $ | 10,000 | $ | - | $ | 3,840,422 | |||||||
| Paul S. Johnson Senior Vice President and President, Patient Support Systems | $ | 2,106,000 | $ | - | $ | 2,568,159 | $ | 31,208 | $ | 10,000 | $ | (684,883 | ) | $ | 4,030,484 | ||||||
| Andreas G. Frank Senior Vice President and President, Front Line Care | $ | 1,899,405 | $ | - | $ | 2,581,285 | $ | 31,112 | $ | 10,000 | $ | - | $ | 4,521,802 | |||||||
| Deborah M. Rasin Senior Vice President and Chief Legal Officer and Secretary | $ | 1,933,300 | $ | - | $ | 2,880,510 | $ | 31,195 | $ | 10,000 | $ | - | $ | 4,855,004 | |||||||
| Steven J. Strobel (4) Retired Senior Vice President and Chief Financial Officer | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | |||||||
| (1) |
| (2) | The amounts indicated represent the intrinsic value of all unvested non-qualified stock options |
| (3) | Amounts represent the dollar value of the incremental cost to Hillrom by providing continuing health and |
| (4) | Mr. Strobel retired from the Company effective November 17, 2019. |
Change in Control
In the event that a NEO other than the CEO is terminated in connection with a change in control, the NEO will receive a cash payment of two times the then-current annual base salary and target bonus plus a sum equal to the amount of all accrued and unpaid vacation and business expenses; the CEO will receive a cash payment of three times the then-current annual base salary.salary and target bonus plus a sum equal to the amount of all accrued and unpaid vacation and business expenses. Each NEO, including the CEO will receive a prorated portion of the current-year annual incentive based on the performance level and the number of days employed during the fiscal year. Health and similar welfare benefits for NEOs other than the CEO will continue on substantially the same terms and conditions for twenty-four months (thirty-six months for the CEO). Life insurance benefits for NEOs other than the CEO will continue for a period of two years following the termination (three years for the CEO).
The NEO will receive a cash payment equal to the amount of short termshort-term incentive compensation which would be payable if the Company had achieved performance targets (at 100%) in effect for the year in which the termination occurred, and the NEO will receive accelerated vesting of certain equity awards. In additionIf not already vested, the NEO would become immediately vested in the SERP.
Pay Ratio Disclosure |
As required by Section 953(b) of the Dodd-Frank Wall Street Reform Act and Consumer Protection Act of 2010, and Item 402(u) of Regulation S-K, we are providing the following disclosure about the ratio of the annual total compensation of Mr. Groetelaars, our CEO, to the benefits listed above,annual total compensation of our median employee.
For 2019, the annual total compensation of our median employee (excluding our CEO) was $68,973. The 2019 total compensation of our CEO was $7,326,160. Based on this information, for 2019 the ratio of our CEO's annual total compensation to the annual total compensation of our median employee was 106:1. We believe this ratio is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K.
There have been no changes to the Company’s employee population or compensation arrangements that we believe significantly affect our pay ratio disclosure and thus have elected to use the same median employee in this disclosure as we did in our last fiscal year disclosure.
For purposes of reporting annual total compensation and the ratio of annual total compensation of the CEO will also receive ato the median employee, both the CEO and median employee's annual total compensation were calculated consistent with the disclosure requirements of executive compensation under the Summary Compensation Table.
To identify the median employee, we examined the 2018 total cash payment for amounts accruedcompensation, including base salaries, overtime payments, allowances, incentives and commissions paid, to all individuals, excluding our CEO, who were employed by us as of July 15, 2018, as reflected in our payroll records. In accordance with Item 402(u) and instructions thereto, we included all full-time, part-time, temporary and seasonal employees. We selected total cash compensation for all employees as a consistently applied compensation measure because we do not widely distribute annual equity awards to employees and because we believe that this measure reasonably reflects the datetotal annual compensation of our employees. For purposes of calculating the total cash compensation of our non-U.S. employees, we converted local currencies to U.S. dollars based on our fiscal year 2018 operating plan exchange rates.
Once we identified our median employee based on that analysis, we then determined that employee's annual total compensation for fiscal year 2019 in the same manner that we determine the total compensation of our NEOs for purposes of the termination under the SERP and an additional amount equal to three times the amounts accrued for the twelve months immediately prior to the termination under the SERP.
Director Compensation |
In setting non-employee director compensation, the Board considers the significant amount of time that directors expend in fulfilling their duties to Hill-RomHillrom as well as the skill-level required for members of the Board. Our director pay package is designed to attract and retain highly-qualified, independent professionals to monitor the effectiveness of policy and decision-making both at the Board and management level, with a view to enhancing shareholder value over the long term. Our Nominating/Corporate Governance Committee generally reviews our non-employee director compensation program on an annual basis, with the assistance of the compensation consulting firm used by the Compensation and Management Development Committee. Directors who are also employees of Hill-RomHillrom receive no additional remuneration for services as a director.
Non-Employee Director Compensation for Fiscal Year 20172019
For fiscal year 2017,2019, our non-employee directors (other than the Chair of the Board) received a quarterly cash retainer of $18,750; the Chair of the Board’s quarterly retainer was $38,750. Committee members of the Audit Committee, Compensation and Management and Development Committee and Nominating/Corporate Governance Committee received a quarterly retainer in the amount of $3,125, $1,875 and $1,250, respectively. Chairs of the Audit Committee, Compensation and Management and Development Committee and Nominating/Corporate Governance Committee received a quarterly retainer in the amount of $6,250, $5,000 and $3,750, respectively. Committee members also received a fee in the amount of $1,500 for each special committee meeting attended, in person or by telephone. In addition, each non-employee director is, on the first trading day following the close of each annual meeting of the Company’s shareholders, awarded vested deferred RSUs valued at $180,000 ($220,000 in the case of the Chair of the Board). Delivery of shares of common stock underlying these RSUs occurs on the later of one year and one day from the date of the grant or the six-month anniversary of the date that the applicable director ceases to be a member of the Board. In fiscal year 20172019 the annual grant consisted of 3,2402,104 vested deferred RSUs for the Chair of the Board and 2,6511,722 for each other non-employee director. A new director may receive a pro-rata portion of the annual award representing time served during the fiscal year of during which the new director joined the Board.
Non-Employee Director Compensation for Fiscal Year 20182020
Upon consultation, analysis and recommendation of the Company’s independent compensation consultant, Exequity, LLP, the Nominating/Corporate Governance Committee has recommended, and the Board has agreed, that no changes are to be madean increase to the annual cash retainer for each of our non-employee directors and Chair by $5,000, and that no changes are to be madean increase to the annual equity retainer by $10,000 for each of our non-employee directors and Chair.Chair, with such increases to be effective as of April 1, 2020. These increases are to ensure the Board is able to continue to attract and retain appropriately qualified candidates. Exequity LLP provides the Nominating/Corporate Governance Committee with benchmarking to the Company’s peer groups.
Director Compensation Table For Fiscal Year Ended September 30, 2017
| Name | Fees Earned or Paid in Cash (1) | Stock Awards (2) | Option Awards | All Other Compensation (3) | Total | |||||||||||||||
| Rolf A. Classon | $ | 166,000 | $ | 220,061 | $ | - | $ | 144 | $ | 386,205 | ||||||||||
| William G. Dempsey | $ | 83,000 | $ | 180,056 | $ | - | $ | 144 | $ | 263,200 | ||||||||||
| Gary L. Ellis* | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||
| Stacy Enxing Seng | $ | 77,500 | $ | 180,056 | $ | - | $ | 144 | $ | 257,700 | ||||||||||
| Mary Garrett* | $ | 42,250 | $ | 180,056 | $ | - | $ | 60 | $ | 225,366 | ||||||||||
| James R. Giertz | $ | 83,000 | $ | 180,056 | $ | - | $ | 144 | $ | 263,200 | ||||||||||
| Charles E. Golden | $ | 79,000 | $ | 180,056 | $ | - | $ | 144 | $ | 259,200 | ||||||||||
| William H. Kucheman | $ | 87,500 | $ | 180,056 | $ | - | $ | 144 | $ | 267,700 | ||||||||||
| Ronald A. Malone | $ | 101,000 | $ | 180,056 | $ | - | $ | 144 | $ | 281,200 | ||||||||||
| Nancy M. Schlichting* | $ | 41,250 | $ | 180,056 | $ | - | $ | 60 | $ | 221,366 | ||||||||||
| Name | Fees Earned or Paid in Cash (1) | Stock Awards (2) | Option Awards | All Other Comp (3) | Total | ||||||||||
| William G. Dempsey | $ | 162,000 | $ | 220,036 | $ | - | $ | 112 | $ | 382,148 | |||||
| Gary L. Ellis | $ | 96,250 | $ | 180,087 | $ | - | $ | 112 | $ | 276,449 | |||||
| Stacy Enxing Seng | $ | 84,000 | $ | 180,087 | $ | - | $ | 112 | $ | 264,199 | |||||
| Mary Garrett | $ | 87,500 | $ | 180,087 | $ | - | $ | 112 | $ | 267,699 | |||||
| James R. Giertz | $ | 90,500 | $ | 180,087 | $ | - | $ | 112 | $ | 270,699 | |||||
| Charles E. Golden (4) | $ | 55,500 | $ | - | $ | - | $ | 112 | $ | 55,612 | |||||
| William H. Kucheman | $ | 88,500 | $ | 180,087 | $ | - | $ | 112 | $ | 268,699 | |||||
| Ronald A. Malone | $ | 94,500 | $ | 180,087 | $ | - | $ | 112 | $ | 274,699 | |||||
| Gregory J. Moore (5) | $ | 41,250 | $ | 149,436 | $ | - | $ | 28 | $ | 190,714 | |||||
| Nancy Schlichting | $ | 101,500 | $ | 180,087 | $ | - | $ | 112 | $ | 281,699 | |||||
(1) | The amounts in this column include the annual retainer and the amounts earned by each non-employee director for attending special committee meetings in person and/or by teleconference. For the Chair of each of our Audit Committee, Compensation and Management Development Committee, |
| (2) | The amounts indicated represent the grant date fair value of RSUs granted to our non-employee directors during fiscal year |
| (3) | Amounts in this column represent the dollar value of the voluntary director life and accidental death and dismemberment insurance premiums paid by us during fiscal year |
| (4) | Mr. |
| (5) | Mr. Moore was elected to the Board |
Equity Compensation Plan Information |
The following table sets forth information concerning Hill-Rom'sHillrom's equity compensation plans as of September 30, 2017:
| Plan Category | Number of Securities to be issued upon exercise of outstanding options, warrants and rights (a) | Weighted Average exercise price of outstanding options, warrants and rights (1) (b) | Number of Securities remaining available for issuance under equity compensation plans (excluding securities reflected in column (a)) ( c) | ||||||||||
Equity compensation plans approved by security holders | 2,815,959 | $ | 41.79 | 3,244,293 | |||||||||
Equity compensation not approved by security holders(2)(3) | 7,438 | - | |||||||||||
| Total | 2,823,397 | $ | 41.79 | 3,244,293 | (4) | ||||||||
| Plan Category | Number of Securities to be issued upon exercise of | Weighted Average exercise price of outstanding options, warrants and rights (1) (b) | Number of Securities remaining available for issuance under equity compensation plans (excluding securities reflected in column (a)) (c) | |||||||||
| Equity compensation plans approved by security holders | 1,671,357 | $ | $71.14 | 1,866,560 | ||||||||
| Equity compensation not approved by security holders(2) | 747 | - | ||||||||||
| Total | 1,672,104 | $ | $71.14 | 1,866,560(3) | ||||||||
| RSUs and PSUs are excluded when determining the weighted-average exercise price of outstanding stock options. |
| Under the Hill-Rom Holdings Stock Award Program, which has not been approved by security holders, shares of common stock have been granted to certain key employees. All shares granted under this program are contingent upon continued employment over specified terms. Dividends, payable in stock equivalents, accrue on the grants and are subject to the same specified terms as the original grants. Under this program, a total of |
| Amount consists of |
Delinquent Section 16(a) |
Under Section 16(a) of the Securities Exchange Act of 1934, our directors, our executive officers and any person holding more than ten percent of our common stock are required to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock. We are required to report in this proxy statement any failure to file or late filing occurring during the fiscal year ended September 30, 2017.2019. Based solely on a review of filings furnished to us and other information from reporting persons, we believe that all of these filing requirements were satisfied by our directors, executive officers and ten percent beneficial owners.
Appendix A – Reconciliation of non-GAAP and GAAP Financial Measures |
The following table reconciles financial results reported in accordance with accounting principles generally accepted in the United States of America (“GAAP”) to non-GAAP financial results. WeIn addition to the results reported in accordance with GAAP, we routinely provide gross margin, operating margin, income tax expense and earnings per diluted share results on an adjusted basis because the Company’s management believes these measures contribute to an understanding of our financial performance, provide additional analytical tools to understand our results from core operations and reveal underlying trends. These measures exclude strategic developments, acquisition and integration costs and related fair value adjustments, gains and losses associated with disposals of businesses or significant product lines, regulatory costs related to updating existing product registrations to comply with the European Medical Device Regulations, special charges, the transitional impacts of the U.S. Tax Cuts and Jobs Act, change in tax accounting methods, and other tax law changes, expenses associated with these items, the impacts of significant litigation matters or other unusual events. The Company also excludes expenses associated with the amortization of intangible assets associated with prior business acquisitions.purchased intangible assets. These adjustments are made to allow investors to evaluate and understand operating trends excluding the non-cash
Management uses these measures internally for planning, forecasting and evaluating the performance of the business. Investors should consider non-GAAP measures in addition to, not as a substitute for, or as superior to, measures of financial performance prepared in accordance with GAAP.
In addition, we present certain results on a constant currency basis. Constant currency informationbasis, which compares results between periods as if foreign currency exchange rates had remained consistent period-over-period. We monitor sales performance on a constant currencyan adjusted basis, thatwhich eliminates the positive or negative effects that result from translating international sales into U.S. dollars. We calculate constant currency by applying the foreign currency exchange rate for the prior period to the local currency results for the current period. We believe that evaluating growth in net revenue on a constant currency basis provides an additional and meaningful assessment to both management and investors.
| Year to Date Ended September 30, 2017 | Year to Date Ended September 30, 2016 | |||||||||||||||||||||||||||||
Operating Margin1 | Income Before Income Taxes | Income Tax Expense | Diluted EPS | Operating Margin | Income Before Income Taxes | Income Tax Expense | Diluted EPS1 | |||||||||||||||||||||||
| GAAP Basis | 10.0% | $ | 183.0 | $ | 50.7 | $ | 1.99 | 8.7% | $ | 138.3 | $ | 15.5 | $ | 1.86 | ||||||||||||||||
| Adjustments: | ||||||||||||||||||||||||||||||
| Acquisition and integration costs | 0.9% | 23.5 | 9.7 | 0.21 | 1.5% | 38.9 | 11.3 | 0.41 | ||||||||||||||||||||||
Acquisition-related intangible asset amortization | 4.0% | 108.4 | 34.2 | 1.10 | 3.6% | 95.9 | 31.7 | 0.96 | ||||||||||||||||||||||
| Field corrective actions | - | - | (0.2 | ) | - | - | 0.2 | (0.1 | ) | - | ||||||||||||||||||||
| Litigation settlements and expenses | -0.3% | (9.4 | ) | (3.4 | ) | (0.09 | ) | - | - | - | - | |||||||||||||||||||
| Special charges | 1.9% | 52.5 | 10.3 | 0.63 | 1.5% | 39.9 | 13.4 | 0.40 | ||||||||||||||||||||||
| Foreign tax law change | - | - | (2.2 | ) | 0.03 | - | - | - | - | |||||||||||||||||||||
| Foreign valuation allowance | - | - | - | - | - | - | 19.5 | (0.29 | ) | |||||||||||||||||||||
| Debt refinancing | - | - | - | - | - | 12.9 | 4.7 | 0.12 | ||||||||||||||||||||||
| Gain on disposition | - | (1.0 | ) | (0.4 | ) | (0.01 | ) | - | (10.1 | ) | (3.7 | ) | (0.10 | ) | ||||||||||||||||
| Adjusted Basis | 16.3% | $ | 357.0 | $ | 98.7 | $ | 3.86 | 15.3% | $ | 316.0 | $ | 92.3 | $ | 3.38 | ||||||||||||||||
| (In millions) | Year Ended September 30, 2019 | Year Ended September 30, 2018 | ||||||||||||||||||||||||||||||
| Operating Margin | Income Before Income Taxes | Income Tax Expense | Diluted EPS | Operating Margin | Income Before Income Taxes | Income Tax Expense | Diluted EPS | |||||||||||||||||||||||||
| GAAP Basis | 10.9 | % | $ | 208.6 | $ | 56.4 | $ | 2.25 | 10.2 | % | $ | 197.2 | $ | (55.2 | ) | $ | 3.73 | |||||||||||||||
| Adjustments: | ||||||||||||||||||||||||||||||||
| Acquisition and integration costs and related fair value adjustments1 | 0.9 | % | 28.1 | 5.3 | 0.34 | 0.3 | % | 8.1 | 2.2 | 0.09 | ||||||||||||||||||||||
| Acquisition-related intangible asset amortization2 | 4.2 | % | 122.4 | 28.6 | 1.38 | 3.8 | % | 106.9 | 28.2 | 1.16 | ||||||||||||||||||||||
| Field corrective actions3 | 0.2 | % | 5.6 | 1.4 | 0.06 | — | % | — | — | — | ||||||||||||||||||||||
| Regulatory compliance costs4 | 0.5 | % | 15.3 | 3.6 | 0.17 | 0.1 | % | 4.5 | 1.2 | 0.04 | ||||||||||||||||||||||
| Litigation settlements and expenses5 | 0.1 | % | 2.0 | 0.5 | 0.02 | 0.2 | % | 5.8 | 1.5 | 0.06 | ||||||||||||||||||||||
| Special charges6 | 1.0 | % | 28.4 | 6.9 | 0.32 | 2.7 | % | 77.6 | 21.1 | 0.84 | ||||||||||||||||||||||
| Tax law and method changes7 | — | % | — | (4.8 | ) | 0.07 | 0.1 | 78.8 | (1.16 | ) | ||||||||||||||||||||||
| Debt refinancing costs8 | — | % | 4.0 | 0.9 | 0.05 | — | % | — | — | — | ||||||||||||||||||||||
| Loss on disposition of businesses9 | — | % | 15.9 | (12.4 | ) | 0.42 | — | % | (1.0 | ) | — | (0.01 | ) | |||||||||||||||||||
| Adjusted Basis | 17.8 | % | $ | 430.3 | $ | 86.4 | $ | 5.08 | 17.3 | % | $ | 399.2 | $ | 77.8 | $ | 4.75 | ||||||||||||||||
| 1 | Acquisition and integration costs and related fair value adjustments include legal and professional fees, temporary labor, consulting and other costs related to the closing and integration of acquired businesses, including purchase accounting adjustments for deferred revenue and other items, and contingent consideration. In fiscal 2019, related fair value adjustments of $8.5 million represent purchase accounting adjustments for deferred revenue and contingent consideration associated with our business combinations. In fiscal 2019, the adjustments to deferred revenue are included in Gross profit and the remaining acquisition and integration costs are included in Selling and administrative expenses. |
| 2 | Acquisition-related intangible asset amortization relates to the amortization of intangible assets acquired associated with our business combinations. These costs are included in Selling and administrative expenses. |
| 3 | Field corrective action costs relate to costs incurred to address broad-based product performance matters outside of normal warranty provisions. These costs are included in Cost of goods sold. |
| 4 | Regulatory compliance costs relate to updating existing product registrations to comply with the European Medical Device Regulations. These costs are included in Selling and administrative expenses. |
| 5 | Litigation settlements and expenses are the aggregate charges, costs or recoveries associated with litigation settlements. These costs are included in Selling and administrative expenses. |
| 6 | Special charges represent a variety of costs associated with restructuring actions, including severance and related benefits, lease termination fees, asset write-downs and temporary labor on shutdown of operations. It also includes costs related to a global information technology transformation, including rationalizing and transforming our enterprise resource planning software solutions and other complementary information technology systems. |
| 7 | Tax law and method changes relate to tax expenses and related unrecognized tax benefits due to the Tax Cuts and Jobs Act enacted in the United States in December 2017. |
| 8 | Debt refinancing costs are expenses related to the refinancing of the senior credit facilities and the costs incurred between the issuance and redemption of our Senior Notes due 2027 and 2023, respectively. In fiscal 2019, debt refinancing costs include $0.7 million related to duplicative interest costs related to the issuance and redemption of our Senior Notes due 2027 and 2023, respectively, and $3.3 million primarily related to the debt issuance costs previously capitalized for the 2021 TLA Facility. |
| 9 | Loss on disposition of businesses relates to losses recorded in Investment income and other, net resulting from business dispositions. A tax expense was incurred from organizational changes executed to facilitate the disposition of our consumable surgical products business in fiscal 2019. |
HILL-ROM HOLDINGS, INC. | VOTE BY INTERNET - www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALSIf you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. |
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| KEEP THIS PORTION FOR YOUR RECORDS | ||
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THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
| For | Withhold | For All | To withhold authority to vote for any | ||||||||
| All | All | Except | individual nominee(s), mark “For All | ||||||||
The Board of Directors recommends you vote FOR | Except” and write the number(s) of the nominee(s) on the line below. | ||||||||||
| o | o | o | |||||||||
| 1. Election of Directors | |||||||||||
Nominees | |||||||||||
01 William G. Dempsey 02 Gary L. Ellis 03 Stacy Enxing Seng 04 Mary Garrett 05 James R. Giertz | ||||||||||||
| 06 | ||||||||||||
| 11 Nancy M. Schlichting | ||||||||||||
| The Board of Directors recommends you vote FOR proposals 2, 3 and | For | Against | Abstain | |||||||||
| o | o | o | ||||||||||
| o | o | o | ||||||||||
4. To approve an amendment to Hill-Rom Holdings, Inc.'s Employee Stock Purchase Plan to increase the number of shares reserved for issuance by an additional 1,000,000 shares. | o | o | o | |||||||||
| NOTE:Such other items of business as may properly be brought before the meeting and any postponement or adjournment thereof. | ||||||||||||
| Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. | ||||||||||||
| Signature [PLEASE SIGN WITHIN BOX] | Date | Signature (Joint Owners) | Date | |||||||||
| Important Notice Regarding the Availability of Proxy Materials for the Annual |
| PROXY | ||
| This proxy is solicited by the Board of Directors | ||
| The undersigned hereby appoints William G. Dempsey and John | ||
| THIS PROXY CARD, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED. IF NO SUCH DIRECTION IS MADE BUT THE CARD IS SIGNED, THIS PROXY CARD WILL BE VOTED FOR THE ELECTION OF ALL NOMINEES UNDER PROPOSAL 1, AND FOR PROPOSALS 2, 3 AND | ||
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Shareholder Meeting to Be Held on March 06, 2018
HILL-ROM HOLDINGS, INC. | Meeting Information Meeting Type: Annual MeetingFor holders as of: January 02,2020 Date: 1:15 PM EST Location: Hilton Raleigh Durham Research Triangle 201 Harrison Oaks Boulevard Cary, North |
HILL-ROM HOLDINGS, INC. |
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| Voting items | |
The Board of Directors recommends you vote FOR the following: |
| 1. | Election of Directors |
Nominees
01 William G. Dempsey | 02 Gary L. Ellis | 03 Stacy Enxing Seng | 04 Mary Garrett | 05 James R. Giertz | |
| 06 | 07 | 09 Gregory J. Moore | 10 Felicia F. Norwood | ||
| 11 Nancy M. Schlichting |
The Board of Directors recommends you vote FOR proposals 2, 3 and 3.
| 2. | To approve, by non-binding advisory vote, compensation of Hill-Rom Holdings, Inc.'s named |
| 3. | Ratify the appointment of PricewaterhouseCoopers LLP as independent registered public accounting firm of Hill-Rom Holdings, Inc. for fiscal year |
| 4. | Toapprove an amendment to Hill-Rom Holdings, Inc.'s Employee Stock Purchase Plan to increase the number of shares reserved for issuance by an additional 1,000,000 shares. |
| NOTE: Such other items of business as may properly be brought before the meeting and any postponement or adjournment thereof. |