The following table sets forth information regarding beneficial ownership of our Common Stock as of February 27, 2019,26, 2020, except as otherwise stated, by (1) each person who is known by us to beneficially own more than five percent of the outstanding shares of our Common Stock, (2) each of our directors, (3) each of our named executive officers in the Summary Compensation Table, and (4) all directors and executive officers of the Company as a group. As of February 27, 2019,26, 2020, there were 19,273,27519,455,994 shares of Common Stock issued and outstanding. To our knowledge and except as otherwise indicated, the persons named in the table have sole voting and investment power with respect to all shares shown as beneficially owned by them, subject to community property laws where applicable. Unless we indicate otherwise, each holder’s address is c/o Nature’s Sunshine Products, Inc., 2901 West Bluegrass Blvd., Suite 100, Lehi, Utah 84043.
| |
(21) | Includes exercisable options for 882,000 shares and vested awards for 39,349 shares of Common Stock within 60 days of February 27, 2019 and 2,985,194 shares that the directors and executive officers either hold directly or may be deemed to beneficially own. |
EXECUTIVE OFFICERS
The Company’s executive officers, as of the date of this report, are as follows:
| | | | | | | | | | | | | | | | | | | | |
Name | | Age | | Position | | Served in Position Since |
Terrence O. Moorehead | | 57 | | | President, Chief Executive Officer | | 2018 |
Joseph W. Baty | | 63 | | | Executive Vice President, Chief Financial Officer and Treasurer | | 2016 |
Nathan G. Brower | | 40 | | | Executive Vice President, General Counsel and Secretary | | 2017 |
Tracee Comstock | | 54 | | | Vice President, Human Resources | | 2018 |
Daniel C. Norman | | 46 | | | Executive Vice President, President, Asia | | 2019 |
Eddie Silcock | | 49 | | | Executive Vice President, President, North America | | 2019 |
Bryant J. Yates | | 46 | | | Executive Vice President, President, Europe | | 2019 |
|
| | | | | | |
Name | | Age | | Position | | Served in Position Since |
Terrence O. Moorehead | | 56 | | Chief Executive Officer | | 2018 |
Susan M. Armstrong | | 54 | | Chief Operations Officer | | 2014 |
Joseph W. Baty | | 62 | | Executive Vice President, Chief Financial Officer and Treasurer | | 2016 |
Nathan G. Brower | | 39 | | Executive Vice President, General Counsel and Secretary | | 2017 |
Tracee Comstock | | 53 | | Vice President - Human Resources | | 2018 |
Adriana Mendizábal | | 55 | | President NSP Americas and Chief Marketing Officer | | 2012 |
Daniel C. Norman | | 45 | | President, Synergy Worldwide | | 2007 |
Bryant J. Yates | | 45 | | President-RCEE & Wholesale | | 2013 |
Terrence O. Moorehead. Mr. Moorehead was appointed as the Company’s President, Chief Executive Officer effective October 1, 2018. Mr. Moorehead brings more than 25 years of experience in the retail consumer products industry, most recently as Chief Executive Officer of Carlisle Etcetera LLC, a subsidiary of Royal Spirit Group, from 2015 through July 2018. From 2013 through 2015, he served as Chief Executive Officer of Dana Beauty, Inc. From 1991 to 2013 he served in various capacities at Avon Products, Inc., including, among other positions, as VP, Strategy and Digital, for North America, President and Chairman of Avon Japan, and President of Avon Canada. Mr. Moorehead received his Masters of Business Administration in Marketing and Finance from Columbia University and a Bachelor of Arts in Economics and Marketing from Boston College.
Susan M. Armstrong. Ms. Armstrong has served as the Company’s Executive Vice President, Chief Operations Officer since December 2014. Prior to her appointment as the Company's Chief Operations Officer, Ms. Armstrong served as Executive Vice President, Operations since joining the Company in March 2013. From June 2011 to March 2013, Ms. Armstrong served as Senior Vice President, Value Chain at Metagenics, a leading manufacturer and distributor of high quality dietary supplements and medical foods sold through health care practitioners in the U.S. and pharmacies abroad. From 2006 until 2011, Ms. Armstrong was Vice President, Global Supply Chain at Carl Zeiss Vision, a leader in ophthalmic lenses and eye care solutions. Ms. Armstrong received a Bachelor of Science degree in Chemistry from the University of Sheffield in the United Kingdom.
Joseph W. Baty. Mr. Baty was appointed as the Company's Executive Vice President, Chief Financial Officer and Treasurer on October 31, 2016. Before joining the Company, Mr. Baty served as Executive Vice President and Chief Financial Officer at Schiff Nutrition International Inc. ("Schiff"), a publicly tradedpublicly-traded vitamins and nutritional supplements company, from 1999, until Schiff was acquired by Reckitt Benckiser Group PLC in December 2012. From 1997 until 1999, Mr. Baty was Senior Vice President, Finance at Schiff. Prior to 1997, Mr. Baty was a Certified Public Accountant and partner at KPMG, LLP. Mr. Baty received his B.S. in Accounting from the University of Utah in 1981.
Nathan G. Brower. Mr. Brower was appointed the Company’s Executive Vice President, General Counsel and Secretary in December 2017. Prior to his appointment as the Company’s Executive Vice President, General Counsel and Secretary, Mr. Brower served as the Company’s Senior Director, Legal Counsel from May 2015 to December 2017. He was previously Associate General Counsel at LifeVantage, Inc., a publicly tradedpublicly-traded network marketing company, from July 2011 until May 2015. Prior to his time at LifeVantage, Mr. Brower was a securities and corporate attorney in private practice at a large multinational law firm. Mr. Brower received a Bachelor of Science degree in Economics from Weber State University and a Juris Doctor degree from the University of Idaho.
Tracee Comstock. Ms. Comstock has served as the Company's Vice President, Human Resources since January 2018. From September 2016 to November 2017, Ms. Comstock was Vice President of Human Resources at Younique, LLC, a leading online peer-to-peer social selling platform in makeup and skin careskincare products. From May 2013 to September 2016, Ms. Comstock held senior human resources positions at Young Living Essential Oils, Weave and Sun Edison. She has also served as the President and as a member of the Board of Directors of Salt Lake SHRM, a human resources organization in Utah. Ms. Comstock received a Bachelor of Arts degree from Brigham Young University.
Adriana Mendizábal. Ms. Mendizábal serves as President NSP Americas and Chief Marketing Officer. She was appointed President of NSP Americas in December, 2014 and Chief Marketing Officer in August 2017. Ms. Mendizábal joined the Company in 2012 as Executive Vice President of NSP Worldwide. Prior to this, she served as Senior Vice President Global
Marketing at Visa, Senior Vice President and General Manager for Mexico and Central America at Herbalife, Inc. She started her career at Procter and Gamble where she held multiple marketing leadership positions with impact at local, regional and global levels. Ms. Mendizábal earned a degree in Business & Marketing from the Instituto Tecnologico y de Estudios Superiores de Monterrey.
Daniel C. Norman. Mr. Norman serves as Executive Vice President, President Asia. Prior to this role, he served as President of Synergy Worldwide since September 2007. Prior to serving as President at Synergy his roles included Vice President of Operations and Vice President of Information Systems. Prior to joining Synergy, Mr. Norman served as a Senior Manager of European Operations at Tahitian Noni International from 1998 through September 2004.
Eddie Silcock. Mr. Silcock has served as Executive Vice President, President North America since April 2019. Prior to joining the company, he had served Chief Sales Officer for Perfectly Posh from March 2018 to March 2019 and Vice President, Global Sales at Young Living Essential Oils from April 2015 to October 2017. Eddie also held various positions with Avon Products Inc. from 1992 to April 2015, including Vice President, North American Sales.
Bryant J. Yates. Mr. Yates currently serves as President-RCEE & Wholesale.Executive Vice President, President-Europe. Prior to this Mr. Yates has served as President-RCEE & Wholesale, Executive Director-International of Nature’s Sunshine, Director-International-Europe/Middle East and General Manager of Nature’s Sunshine Products of Russia, an affiliate of the Company. Mr. Yates has been employed by the Company since 1999.
DELINQUENT SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCEREPORTS
Section 16(a) of the Exchange Act requires the Company’s directors, officers and persons who beneficially own more than 10 percent of a registered class of the Company’s equity securities, to file initial reports of ownership on Form 3 and changes in ownership on Forms 4 or 5 with the SEC. Such directors, officers and 10 percent shareholders also are required by SEC rules to furnish the Company with copies of all Section 16(a) reports they file. Based solely on its review of the copies of such forms furnished or available to the Company, the Company believes that its directors, officers and 10 percent shareholders complied with all Section 16(a) filing requirements for the year ended December 31, 2018,2019, except that one late report wasreports were filed for each of Kristine Hughes, Joseph W. BatyTerrence Moorehead and Nathan G. BrowerLily Zou with respect to: one reporttwo reports triggered by the sale of shares by Ms. Hughes; two reports triggered by withholdings of shares to pay the tax liability associated with the vesting of a prior grant of shares to Mr. Baty pursuant to his employment agreement; and one report triggered by withholding of shares to pay the tax liability associated with the vesting of a prior grant of shares to Mr. BrowerMoorehead pursuant to his employment agreement.agreement; and one report triggered by granting of shares to Ms. Zou pursuant to her appointment as a director of the Company.
PROPOSAL THREE:
ADVISORY RESOLUTION TO APPROVE EXECUTIVE COMPENSATION
In accordance with Section 14A of the Exchange Act, we are asking our shareholders to approve the following non-binding, advisory resolution on our named executive officer compensation as disclosed in this proxy statement:
RESOLVED, the compensation of the Company’s named executive officers as disclosed in this proxy statement pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, the various compensation tables and the accompanying narrative discussion, is hereby APPROVED.
Shareholders are urged to read the “Compensation Discussion and Analysis” section of this proxy statement, as well as the Summary Compensation Table and related compensation tables and narrative in this proxy statement, which provide detailed information on the Company's compensation policies and practices and the compensation of our named executive officers.
Although the vote is an advisory, non-binding vote, the Board and the Compensation Committee value the opinions of the shareholders and will take into account the outcome of the vote when considering future compensation decisions affecting the Company’s named executive officers. We currently intend to include a shareholder advisory vote on our executive compensation program each year at our annual meeting of shareholders.
In May 2017, shareholders voted to hold a "say on pay" vote annually. The next time a vote on the frequency of the say on pay vote will be at the 2023 Annual Meeting.
Recommendation of the Board of Directors
The Board of Directors unanimously recommends a vote FOR the approval, on an advisory, non-binding basis, of the compensation of our named executive officers as disclosed in this proxy statement pursuant to the SEC’s compensation disclosure rules.
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
ThisThe Compensation Discussion and Analysis provides disclosure aboutdiscloses the policiesprograms and objectives underlyingdecisions surrounding the compensation of our executive officers in 2018, specifically the following named executive officers in2019 ("NEOs"):
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| | | | | | | |
Named Executive OfficerName | | Position |
Terrence O. Moorehead | | Chief Executive Officer (1) |
Joseph W. Baty | | Executive Vice President, Chief Financial Officer and Treasurer |
Adriana MendizábalBryant J. Yates | | Chief Marketing Officer andExecutive Vice President, NSP Americas |
Gregory L. Probert | | Former Chairman and Chief Executive Officer (2)President Europe |
(1) Mr. Moorehead was appointed the Company’s Chief Executive Officer effective October 1, 2018.
| |
(2) | Mr. Probert’s employment with the Company terminated effective September 30, 2018. Mr. Probert provided the Company with transition related services pursuant to a Consulting Agreement until December 31, 2018. Mr. Probert also resigned as a member of the Company’s Board of Directors effective December 31, 2018. |
In this section, we explain how our Compensation Committee made decisions related to the compensation of our named executive officersNEOs during 2018,2019, and we provide an overview of the information set forth in the Summary Compensation Table and other compensation tables contained in this proxy statement. We also address any actions taken regarding executive compensation after the end of 20182019 that could affect a fair understanding of the named executive officers'our NEOs' compensation during 2018.2019.
Executive Summary
The Company'sOur compensation program is designed to reward our executives in a manner that supports a pay-for-performance philosophy, that aligns with shareholder value creation, and that maintains a level of compensation that allows us to attract and retain the best available executive team.
Our 20182019 Performance
In 2018, the Company improved upon the previous year’s results2019, we implemented a new global strategy, which focuses on strengthening our brand, improving field fundamentals, expanding digital capabilities, extending our manufacturing leadership, and met or exceeded its financial objectives for the year led byimproving organizational capabilities. Each of our strategic efforts is focused on accelerating growth, in key international marketsdriving profitability and effective cash flow management. The Company’senhancing long-term shareholder value. Our 2019 performance during 2018 may be summarized as follows.follows:
The Company’s•Our consolidated net sales increaseddecreased by 6.7%0.7% compared to 2017,2018, to $365.0$362.2 million in 2018. Revenue improvement was driven by double-digit growth2019. The decrease related to declines in China (41%our Asia (-0.4%), NSP RussiaNorth America (-4.2%), and Central/Eastern Europe (20%)Latin America and Synergy (11%, including 35% growth in South Korea)Other markets (-8.8%). This net sales growth wasDeclines were partially offset by a declinesales growth in NSP Americas (-5.9%our Europe market (11.0%). Measured in local currency, net sales were $367.5$368.8 million, rather than $365.0$362.2 million. The Company measures incentiveWe measure results using local currency and excludesexclude the impact of foreign exchange rates when assessing itsour financial results for incentive compensation purposes because foreign exchange rates are viewed as outside the control of the executive team. For a description of how we translate foreign currency into local currency, please see our Annual Report on Form 10-K for the year ended December 31, 2018.2019.
•Adjusted EBITDA improved to $23.8$31.2 million in 20182019 from $12.2$17.6 million the prior year, an increase of 98%78%. The Company definesWe define adjusted EBITDA, which is a non-GAAP financial measure, as net income/loss from continuing operations before taxes, depreciation, amortization and other income/loss adjusted to exclude share-based compensation expense and other adjustmentscertain unusual (noted) adjustments.
Key 2019 Compensation Decisions
•In 2019, the Compensation Committee deemed appropriate.
The Company also exited 2018 with $0 outstanding on its credit facility.
Key 2018 Compensation Decisions
The Company provides compensation in a manner that is aligned with long-term performance and improving governance and risk mitigation elements withinengaged the compensation structure.
The Company hired Mr. Moorehead as Chief Executive Officer on October 1, 2018, with total compensation set near the middleservices of the market and with the majority of his new hire equity award being a performance-contingent RSU grant that requires significant price appreciation to be earned. In determining the compensation of the new CEO, F.W. Cook a leadingto conduct an independent comprehensive benchmark study of executive compensation consulting firm, was consultedpractices at the Company against other comparable public companies in our industry. In August 2019, F.W. Cook provided an Executive Compensation Report to help structure the offer to be competitive and aligned with shareholder interests.Compensation Committee (the “2019 Executive Compensation Report”).
•We continue to structure a substantial portion of the total direct compensation of our named executive officersNEOs in the form of annual performance-based cash incentive awards and performance-based long-term stock-based compensation, including performance-contingent, stock-based compensation. This allows us to create a positive relationship between our operating performance and shareholder returns. OurThe annual cash incentive plan is designed to ensure that afocus on achieving near-term financial and operating goals, while the performance-based equity awards only reward fairly significant portion of total cash compensation of our named executive officers is performance-based.increases in stock price to align executives with growth in shareholder returns.
•The 20182019 annual cash incentive award program was primarily based on the attainment of corporate revenue and adjusted EBITDA financial performance goals. A portion of Mr. Yates' annual cash incentive was based on the financial performance of our Europe segment, instead of being solely dependent on our corporate financial performance, in order to provide a direct link between his segment's operating results and his award.
•As a result of our financial and overall business performance against the pre-established goals, theour NEO bonus plan funded at an averagebonuses averaged 82.3% of 103% of target. Mr. Moorehead’s 2018 cash incentive award was $167,375 for the period of October 1, 2018 through December 31, 2018. This reflected a pro-rata target cash incentive award, which was agreed upon in Mr. Moorehead’s employment agreement. There are no other contractually guaranteed bonus awards going forward.
2018•2019 PRSU Grants. Mr. Moorehead’s employment agreement provided for a majority of hisIn 2019, each NEO was granted equity to be in price-contingent equity awards that require strong performance to be earned. The initial new hire grant of $2,350,000 included an award of performance-based restricted stock units (PRSU) with grant value of $1,350,000 that requires achievement of six escalating 45-day volume weighted stock price goals from $11.77 up to $25.34 within three years after the grant and that vest 50% upon achievement and 50% on the one-year anniversary of stock price goal achievement. The six stock price goals reflect substantial improvement over the stock price on the date of Mr. Moorehead’s hire. Mr. Moorehead was also provided a time-vesting RSU award with value of $1,000,000 that vests in equal installments over a three-year period.
In connection with attracting Mr. Moorehead and assisting with his relocation from New York to our Utah headquarters, the Company provided Mr. Moorehead a pre-tax $425,000 relocation signing bonus in October 2018, which was subject to repayment if Mr. Moorehead did not relocate to Utah within nine months of beginning employment. Mr. Moorehead satisfied the permanent relocation requirement. The relocation payment was a one-time payment and is not part of Mr. Moorehead’s ongoing future compensation.
In order to align the incentives of the other named executive officers with the incentives of Mr. Moorehead, the named executive officers (excluding Mr. Probert) each received an award of PRSUs in 2018 with substantially similar stock price goals as the PRSU Grants provided to Mr. Moorehead.in 2018. The 2019 PRSUs vest in six equal installments upon achievement of six stock price goals that are achieved if within a three-year period after grant the 45-day volume-weighted average stock price of the Company’s common shares is $11.77, $14.48, $17.20, $19.91, $22.63, and $25.34 and must be obtained within a three-year performance period. These PRSU grants were above the normal NEO program, but only dilute shareholders following significantreach such stock price performance.goals.
Regular NEO awards•RSU grants to NEOs are generally made in the first quarter of each year and aregenerally consist of 50% performance contingent. RSUs granted in 2018 to NEOs were subject tocontingent under the Company achieving financial performance goals that tie directly to the execution of the Company’s five-year strategic planPRSU grant described above and will be forfeited if the Company does not meet the financial performance goals.50% time-based RSUs.
The Company’s•Our executive officers are subject to the Company’s stock ownership guidelines, including an ownership guideline of $1.0 million for our Chief Executive Officer, Mr. Moorehead. Mr. Moorehead has four years to satisfy the stock ownership guideline. The Company’sOur stock ownership guidelines require the named executive officers,NEOs, other than the Chief Executive Officer, to maintain ownership of capital stock or an equity position in the Company having an aggregate value equal to one yearone-year base salary. Executive officers may meet the stock ownership guideline through the vesting of grants of stock options and RSUs, in addition to any shares of the Company’s capital stock that each executive officer then currently owns. All named executive officers satisfy the stock ownership guideline.
Company policy prohibits executives from entering into hedging transactions, such as put and call options that would operate to lock-in value of their equity compensation awards at specified levels. Executive officers are also prohibited from pledging the Company’s stock or holding such stock in margin accounts. Accordingly, similar to any other shareholder, the executive officers bear the full risk of economic loss with respect to their equity holdings.
Compensation Policy for Executive Officers.
We have designed the various elements comprising the compensation packages of our executive officers to achieve the following objectives:
•attract and retain qualified executives who will help the Company meets itsus meet our goals;
•reflect individual accomplishments and contributions to the Company, as well as overall Company performance;
•align each executive officer's interests with those of the Company'sour shareholders; and
•support the long-term strategic plan with short- and long-term incentives.
The Compensation Committee seeks to achieve these objectives by:
•Establishing a compensation structure that is market-competitive, internally fair and highly dependent on short-term and long-term performance;
•Linking a substantial portion of compensation to the Company'sour financial performance or stock price performance, with consideration given to individual contributions to that performance;
•Providing long-term equity-based incentives and encouraging direct share ownership by executive officers, as well as ownership guidelines that provide an incentive for officers to consider long-term value maintenance in addition to growth.
For our compensation programs, the Compensation Committee utilizes a combination of cash and equity incentive programs under which the compensation of the executive officers varies with our performance and the market price of our common stock. The general objective is to balance equity compensation with short-term cash compensation, but there is no target compensation level that applies to all officers. The actual levels at which we may set compensation for a particular executive officer may vary based on the Company'sour overall financial performance, a particular segment's performance, and an evaluation of each executive officer's individual performance level, experience and his or her potential contribution to the Company'sour future growth. Also, actual compensation earned at the end of every performance period may be below target if performance is below our annual and multi-year performance goals.
Compensation for theour NEOs at the start of 2018, including our former CEO Mr. Probert,2019 was generally set belowno higher than the middle of the available market data to recognize the Company’s size and investments in future growth. Annual ongoing compensation for our new CEO, Mr. Moorehead, whogrowth and this intended position was hired in October 2018, was set near the middle of market data available. Mr. Moorehead’s new hire grant was set higher than a typical year in orderfound to induce him to begin employment and to provide a material stake in the future performancebe accurate following review of the Company. The award should be viewed in the context of recruiting an outside CEO and the2019 Executive Compensation Committee anticipates that equity awards granted to Mr. Moorehead in 2019 and 2020 will not be as large as his initial new hire equity award.Report.
Setting Executive Compensation
Major compensation decisions for each year, including base salary adjustments, the determination of target annual cash incentive opportunities and the determination of long-term equity incentive awards, are generally made by the Compensation Committee during the first quarter of the current year or the last quarter of the previous year. In 2018, the Compensation Committee included the former CEO, Mr. Probert, in their first quarter decisions, while the decisions related to hiring a new CEO occurred in the third quarter so Mr. Moorehead could begin employment on the first day of October. The principal factors the Compensation Committee considers for ongoing annual decisions when setting the compensation levels for the named executive officersNEOs are as follows:
•Comparison of the Company'sour performance against certain operating and qualitative goals identified in the Company'sour operating and strategic plans;
•Comparative market data (reviewed from time to time);
•Our Chief Executive Officer's recommendations for the other named executive officers;NEOs;
•Individual performance as assessed by the Compensation Committee, with input from the Chief Executive Officer as to the named executive officersNEOs other than himself; and
•Tenure, scope of responsibilities, experience and qualifications, future potential and internal pay equity.
Impact of 20182019 Say-on-Pay Vote: The most recent shareholder advisory vote on executive officer compensation was held on May 2, 2018,8, 2019, after the Compensation Committee had approved the 20182019 compensation of the named executive officers.NEOs. Of the votes cast on such proposal, 95.998.7 percent were in favor of the compensation of the named executive officers,NEOs, as that compensation was disclosed in the Compensation Discussion and Analysis and the various compensation tables and narrative that appeared in the Company'sour proxy statement dated March 23, 2018.22, 2019. Based on that level of shareholder approval, the Compensation Committee decided not to make any material changes to the Company'sour compensation philosophies, policies and practices for the remainder of 20182019 and has not made substantial changechanges in 2019.2020. However, the Compensation Committee will continue to take into account future shareholder advisory votes on executive compensation in order to determine whether any subsequent changes to the Company'sour executive compensation programs and policies would be warranted to reflect any shareholder concerns reflected in those advisory votes.
Role of External Advisor: In 2014,2019, the Compensation Committee engaged the services of F.W. Cook a leading consulting firm in the area of executive compensation, to conduct an independent comprehensive benchmark study of our executive compensation practices at the Company against other comparable public companies in our industry. In November 2014,August 2019, F.W. Cook provided anthe 2019 Executive Compensation Report.
Market Benchmarking: 2019 compensation decisions were made using peer data from F.W. Cook's study conducted in 2014. This data was updated in the 2019 Executive Compensation Report for 2020 compensation decisions and to provide after-the-fact context for 2019 decisions.
The 15 companies in the 2014 peer group are listed below:
| | | | | |
Blyth | Nutraceutical |
Boulder Brands | NutriSystem |
Elizabeth Arden | Omega Protein |
Inter Parfums | Perfumania Holdings |
Inventure Foods | USANA Health Sciences |
LifeVantage | Vitacost.com |
Medifast | Vitamin Shoppe |
Nu Skin Enterprises | |
In 2019, F.W. Cook updated its study with a peer group consisting of 15 publicly traded U.S. based specialty retail and personal product companies to perform new market comparisons of our executive compensation program and to prepare its 2019 Executive Compensation Report. The companies in the peer group were chosen in consultation with the Compensation Committee (the “2014on the basis of objective industry classifications, annual revenue and market capitalization at the time of the 2019 Executive Compensation Report”). A new executive compensation report was not prepared in 2018, butReport. Several of the peer group companies changed from the 2014 to the 2019 study due to, among other things, the duration between studies and acquisitions of some of the 2014 peer group companies. The Compensation Committee considered the 2014 Executive Compensation Report and the recommendations of F.W. Cook as context when making executive compensation decisions in 2018. It is anticipatedbelieves that the Compensation Committee will initiate a new benchmark study in 2019.
F.W. Cook also advised on the structureall of the new CEO’s compensation packagecompanies in the peer group represented reasonable competitors for executive talent and providedshareholder investment at the Compensation Committee with CEO compensation data fromtime of the following companies to provide general background on market compensation levels: Farmer Brothers, Inter Parfums, LifeVantage, Lifeway Foods, Medifast, MGP Ingredients, Nu Skin, Nutrisystem, Usana Health, and Vitamin Shoppe.study.
| | | | | |
Duluth | Medifast |
e.l.f. Beauty | MGP Ingredients |
Farmer Brothers | Nu Skin |
Inter Parfums | NutriSystem |
Landec | PetMed Express |
LifeVantage | USANA Health Sciences |
Lifeway Foods | Vitamin Shoppe |
Mannatech | |
Role of Management: Our Chief Executive Officer presents his recommendations for base salaries, annual cash incentive and equity grants for the named executive officersNEOs to the Compensation Committee (other than for himself). These recommendations are generally based on the named executive officer'san NEO's expected role in the Company'sour strategic plan, the Company'sour performance measured in terms of the sales revenue and adjusted EBITDA levels attained by the divisionsegment for which the executive was primarily responsible, where applicable, or by the Company as a whole, as well as the executive'sNEO's performance against individual performance objectives, and the comparative analysis of the Company'sour compensation practice to market for each such officer. The Compensation Committee discusses these recommendations with the Chief Executive Officer and makes the final determination on the base salaries, annual cash incentive and equity grants.
The Compensation Committee recommends to our Board of Directors the base salary, andannual cash incentive target and equity for our Chief Executive Officer. The Board considers such recommendations in setting the Chief Executive Officer's compensation.
The Compensation Committee also met several times to determine and negotiate the compensation program offered to Mr. Moorehead upon his external hire as CEO starting in October 2018.
Elements of Compensation
Each named executive officer'sNEO's compensation package consists of three elements: (i) a base salary, (ii) annual cash incentive based upon overall Company or segment financial performance, and (iii) participation in long-term, stock-based incentive awards, in the form of RSUs and performance-contingent RSUs and, in some cases, stock options.(PRSUs). In addition, the named executive officersNEOs are provided with certain benefits and perquisites and are entitled to certain severance benefits in the event their employment terminates under certain specified circumstances, as more fully described below.
Each of the three primary elements comprising the compensation package for named executive officersNEOs (salary, annual cash incentive and equity) is designed to achieve one or more of the Company'sour overall objectives in fashioning a competitive level of compensation, tying compensation to individual and company performance and establishing a meaningful and substantial link between each named executive officer'sNEO's compensation and our long-term financial success.
There is no pre-established policy for the allocation of compensation between cash and non-cash components or between short-term and long-term components, nor are there any pre-established ratios between the Chief Executive Officer's compensation and that of the other named executive officers.NEOs. Instead, the mix of compensation for each named executive officerNEO is based on a review of available data and a subjective analysis of that individual's performance and contribution to the Company'sour financial performance. Our mix of compensation elements is designed to reward results and motivate long-term performance through a combination of cash and equity incentive awards.
Base Salary. Base salary is intended to attract and retain qualified executives and to provide a level of security and stability from year to year and is not dependent to any material extent on the Company's financial performance.year.
The Compensation Committee reviewedAs of January 1, 2019, the base salaries of the Company’s executive officers, including the named executive officers, in December 2017. The CEO and other NEOs were not provided a 2018 salary increase. This was based on the recommendation of the Chief Executive Officer, the competitiveness of their current base salaries and the Company’s performance during 2017. As a result, as of January 1, 2018, the base salaries of the named executive officers were as follows:
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| | | | | | | |
Name | | Base Salary as of January 1, 20182019 ($) |
Gregory L. Probert (1)Terrence O. Moorehead | | 650,000 | | 618,000 |
|
Joseph W. Baty | | 375,000 |
|
Adriana MendizábalBryant J. Yates | | 261,560 | | 350,000 |
|
(1) Mr. Probert’s employment with the Company terminated effective September 30, 2018. Mr. Probert provided the Company with transition related services pursuant to a Consulting Agreement until December 31, 2018. Mr. Probert also resigned from his position as chairman and director of the Company’s Board of Directors effective December 31, 2018.
Pursuant to the employment agreement entered into between the Company and Mr. Moorehead effective September 14, 2018, Mr. Moorehead’s 2018 base salary is $650,000, which is slightly below the middle of the CEO data reviewed prior to his hire.
In June 2018,May 2019, the Compensation Committee approved a 6.7%3.2% increase ofin the base salary of Ms. MendizábalMr. Yates to $375,000.$270,000. The increase was based on the recommendation of the Chief Executive Officer and reflected increases in the scope of her job responsibilities. Upon the retirement of Dr. Matt Tripp (Chief Science Officer) in May 2018, some of his job responsibilities were placedassociated with Ms. Mendizábal.our realignment into geographic-focused operating business segments and competitiveness of his base salary. The CEO and other NEOs were not provided a 20182019 salary increase.
The Compensation Committee reviewed the base salaries of the Company’s named executive officers,our NEOs in December 2018.March 2020. Based on the recommendation of the Chief Executive Officer, the 2019 Executive Compensation Report, the competitiveness of their current base salaries and the Company’sour performance during 2018, the NEOs were not2019, each NEO was provided a salary increase for the beginning of 2019.2020. As a result, the base salaries of the named executive officers who remained employed byNEOs following the Company on January 1, 2019 are as follows:March 2020 decision are:
| | | | | | | | | | | | | | |
Name | | Base Salary ($) | | Percentage Increase (%) |
Terrence O. Moorehead | | 669,500 | | | 3 | % |
Joseph W. Baty | | 382,500 | | | 2 | % |
Bryant J. Yates | | 278,100 | | | 3 | % |
|
| | | | | | |
Name | | Base Salary effective January 1, 2019 ($) | | Percentage Increase (%) |
Terrence Moorehead | | 650,000 |
| | — |
|
Joseph W. Baty | | 375,000 |
| | — |
|
Adriana Mendizábal | | 375,000 |
| | — |
|
Annual Cash Incentive. The annual cash incentive program is designed to reward our named executive officersNEOs for achieving or exceeding our annual goals.
For 2018,2019, the Compensation Committee adopted an annual cash incentive program for the named executive officersNEOs based primarily on the attainment of corporate financial performance goals. Annualgoals with a small percentage based on the Compensation Committee’s evaluation of performance against individual objectives set early in the year. The Compensation Committee tied a portion of the annual cash incentivesincentive for each named executive officer were relatedMr. Yates to the Company'sfinancial performance goals of our Europe segment instead of being solely dependent on our overall financial performance, irrespective of separate business units.performance. In addition, the Compensation Committee retained the discretion to increase or decrease the annual cash incentive amount to be paid to any individual under the cash incentive plan by up to 10% of that person’s aggregate target, based on its subjective evaluation of general corporate and individual performance.
The 20182019 target annual cash incentive award (as a percentage of base salary) for each named executive officerNEO was as follows:
|
| | | | | | | |
Name | | Target Cash Incentive (as % of Base Salary) |
Terrence O. Moorehead (1) | | 100% | | 100% |
Gregory L. Probert (2) | | 100% |
Joseph W. Baty | | 55% | |
Adriana MendizábalBryant J. Yates | | 50% | | 55% |
(1) Mr. Moorehead’s annual cash incentive for 2018 was agreed to in his employment agreement and is prorated based on the portion of 2018 during which he served as the Chief Executive Officer of the Company. There are no further cash incentive guarantees in 2019 or beyond.
(2) Mr. Probert's target annual cash incentive is comprised of 75% target based on his annual base salary by virtue of his employment and 25% target being agreed upon in the consulting agreement wherein Mr. Probert provided transition related services until December 31, 2018.
The portion of the annual cash incentive award based on corporate financial performance goals required attainment of minimum financial performance thresholds and could range from 50% to 200% of the targeted dollar amount of the annual cash incentive award attributable to these financial goals. The maximum annual cash incentive award payable under the annual cash incentive program to any named executive officerNEO is 175% of his or her target cash incentive award amount.
20182019 Individual Performance Goals. For all NEOs, 10% of the annual cash incentive award potential was based on each NEO’s individual performance. In determining the cash incentive for each NEO, the Compensation Committee reviewed the NEO’s individual performance, as well as general corporate performance not otherwise captured in the financial performance goals. The Compensation Committee determined that our overall business performance warranted full bonus payouts on the basis of individual performance objectives for our NEOs.
2019 Corporate Performance Goals for Messrs. Moorehead and Baty. For each named executive officer,Messrs. Moorehead and Baty, the remaining 90% of cash incentive award potential was based on corporate financial performance goals for 2018, were based on the Company’s2019, which
consisted of our corporate revenue and the Company’s adjusted EBITDA, among other adjustments, but excluding foreign currency exchange impact sincebecause the foreign exchange rate is viewed as outside the control of the executive team and the goal of the cash incentive program is to reward controllable operating achievement. Revenue was chosen as a metric to reward growth that is necessary to drive the multi-year performance objectives, while adjusted EBITDA was included to reward both revenue and profit growth, including control of expenses incurred in driving that growth, among other factors. The Company definesWe define adjusted EBITDA, which is a non-GAAP financial measure, as net income/loss from continuing operations before taxes, depreciation, amortization and other income/loss adjusted to exclude share-based compensation expense and other adjustments the Compensation Committee deemed appropriate.certain unusual (noted) adjustments.
The funding schedule for the portion of the annual cash incentive award based on the Company'sour corporate financial performance was as follows, with the actual payout calculations based on linear interpolations of the funding slopes, rather than by the sample thresholds below:
| | | | | | | | | | | | | | | | | | | | | | | |
Revenue (40% of target) (excluding foreign currency exchange impact)
| | | | Adjusted EBITDA (60% of target) (excluding foreign currency exchange impact)
| | | |
2019 Revenue ($) (000) | | Payout as % of Target | | 2019 Adjusted EBITDA ($) (000) | | Payout as % of Target | |
≥ 409,395 | | 200 | % | | 41,319 | | 200 | % | | |
406,895 | | | 173 | % | | 40,569 | | 173 | % | | |
404,395 | | | 153 | % | | 39,819 | | 153 | % | | |
401,895 | | | 137 | % | | 39,069 | | 137 | % | | |
399,395 | | | 126 | % | | 38,319 | | 126 | % | | |
396,895 | | | 117 | % | | 37,569 | | 117 | % | | |
394,395 | | | 111 | % | | 36,819 | | 111 | % | | |
391,895 | | | 106 | % | | 36,069 | | 106 | % | | |
389,395 | | | 103 | % | | 35,319 | | 103 | % | | |
387,727 | | | 101 | % | | 34,633 | | 101 | % | | |
386,058 | | | 100 | % | | 33,947 | | 100 | % | | |
376,407 | | | 60 | % | | 30,552 | | 60 | % | | |
366,755 | | | 25 | % | | 27,158 | | 25 | % | | |
< 366,755 | | — | % | | <27,158 | — | % | | |
|
| | | | | | | | | | | |
Revenue (40% of target) (excluding foreign currency exchange impact)
| | Adjusted EBITDA (60% of target) (excluding foreign currency exchange impact)
|
2018 Revenue ($) (000) | | Payout as % of Target | | 2018 Adjusted EBITDA ($) (000) | | Payout as % of Target |
≥ 391,644 |
| | 165 | % | | 38,496 |
| 165 | % | |
384,523 |
| | 152 | % | | 35,609 |
| 152 | % | |
377,402 |
| | 139 | % | | 32,722 |
| 139 | % | |
370,282 |
| | 126 | % | | 29,834 |
| 126 | % | |
363,161 |
| | 113 | % | | 26,947 |
| 113 | % | |
356,040 |
| | 100 | % | | 24,060 |
| 100 | % | |
345,359 |
| | 75 | % | | 22,857 |
| 75 | % | |
334,678 |
| | 50 | % | | 21,654 |
| 50 | % | |
< 334,678 |
| | — | % | | <21,654 |
| — | % | |
20182019 annual cash incentivesincentive awards based on corporate performance were based on the following results:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Revenue (excluding foreign currency exchange impact) | | | | | | Adjusted EBITDA (excluding foreign currency exchange impact)
| | | | |
2019 Revenue ($) (000) | | % Target Achieved | | Payout as % of Target | | 2019 Adjusted EBITDA ($) (000) | | % Target Achieved | | Payout as % of Target |
368,818 | | | 96 | % | | 36 | % | | 35,652 | | | 101 | % | | 105 | % |
|
| | | | | | | | | | | | | | | | |
Revenue (excluding foreign currency exchange impact) | | Adjusted EBITDA (excluding foreign currency exchange impact)
|
2018 Revenue ($) (000) | | % Target Achieved | | Payout as % of Target | | 2018 Adjusted EBITDA ($) (000) | | % Target Achieved | | Payout as % of Target |
367,500 |
| | 121 | % | | 48 | % | | 23,800 |
| | 94 | % | | 55 | % |
The Company'sOur corporate revenue for 2018,2019, based upon budgeted exchange rates and excluding the impact of foreign currency exchange rates, was $367.5$368.8 million, resulting in a payout equal to 48%36% of target for the portion of the cash incentive award that is earned based on the Company’sour corporate revenue. The Company'sOur corporate pre-bonus Adjusted EBITDA for 2018,2019, excluding the impact of foreign currency exchange rate, was $23.8$35.7 million, resulting in a payout equal to 55%105% of target for the portion of the cash incentive award earned based on the Company’sour corporate Adjusted EBITDA.
20182019 Corporate Performance Goals for Mr. Yates. For Mr. Yates, the remaining 90% of cash incentive award potential was based on 30% corporate financial performance goals, and 60% on the financial performance goals related to our Europe segment, and were based on that segment's revenue and adjusted EBITDA, among other adjustments, but excluding foreign currency exchange impact because the foreign exchange rate is viewed as outside the control of the executive team and the goal of the cash incentive program is to reward controllable operating achievement.
The funding schedule for the portion of Mr. Yates' annual cash incentive award based on Europe's financial performance was as follows, with the actual payout calculations based on linear interpolations of the funding slopes, rather than by the sample thresholds below:
| | | | | | | | | | | | | | | | | | | | | | | |
Revenue for Europe (40% of target) (excluding foreign currency exchange impact)
| | | | Adjusted EBITDA for Europe (60% of target) (excluding foreign currency exchange impact)
| | | |
2019 Revenue ($) (000) | | Payout as % of Target | | 2019 Adjusted EBITDA ($) (000) | | Payout as % of Target | |
≥ 67,198 | | 200 | % | | 8,500 | | 200 | % | | |
66,073 | | | 175 | % | | 8,340 | | 175 | % | | |
65,073 | | | 156 | % | | 8,180 | | 156 | % | | |
64,073 | | | 141 | % | | 8,020 | | 141 | % | | |
63,073 | | | 129 | % | | 7,860 | | 129 | % | | |
62,073 | | | 119 | % | | 7,700 | | 119 | % | | |
61,073 | | | 112 | % | | 7,540 | | 112 | % | | |
60,073 | | | 106 | % | | 7,380 | | 106 | % | | |
59,073 | | | 102 | % | | 7,220 | | 102 | % | | |
58,173 | | | 101 | % | | 7,128 | | 101 | % | | |
57,273 | | | 100 | % | | 7,037 | | 100 | % | | |
55,841 | | | 60 | % | | 6,333 | | 60 | % | | |
54,409 | | | 25 | % | | 5,630 | | 25 | % | | |
<54,409 | | — | % | | <5630 | — | % | | |
Mr. Yates' 2019 annual cash incentive awards based on corporate performance were based on the following results:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Revenue for Europe (excluding foreign currency exchange impact) | | | | | | Adjusted EBITDA for Europe (excluding foreign currency exchange impact) | | | | |
2019 Revenue ($) (000) | | % Target Achieved | | Payout as % of Target | | 2019 Adjusted EBITDA ($) (000) | | % Target Achieved | | Payout as % of Target |
63,603 | | | 111 | % | | 135 | % | | 7,722 | | | 110 | % | | 120 | % |
Europe's revenue for 2019, based upon budgeted exchange rates and excluding the impact of foreign currency exchange rates, was $63.6 million, resulting in a payout equal to 135% of target for the portion of the cash incentive award that is earned based on revenue. Europe's pre-bonus Adjusted EBITDA for 2019, excluding the impact of foreign currency exchange rate, was $7.7 million, resulting in a payout equal to 120% of target for the portion of the cash incentive award earned based on Adjusted EBITDA.
2019 Cash Incentive Awards. Applying the factors and methodology described above, the Compensation Committee awarded the following cash incentive awards to our named executive officers, except for Mr. Moorehead whose cash incentive award for 2018 was determined by his employment agreement:NEOs:
| | | | | | | | | | | | | | |
Name | | Percentage of Target | | 2019 Cash Incentive Award ($) |
Terrence O. Moorehead | | 78 | % | | $ | 507,954 | |
Joseph W. Baty | | 78 | % | | $ | 161,178 | |
Bryant J. Yates | | 103 | % | | $ | 146,379 | |
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| | | | | | | |
Named Executive Officer | | Percentage of Target | | 2018 Cash Incentive Award ($) |
Terrence O. Moorehead (1) | | 103 | % | | $ | 167,375 |
|
Gregory L. Probert (2) | | 103 | % | | $ | 636,540 |
|
Joseph W. Baty | | 103 | % | | $ | 212,738 |
|
Adriana Mendizábal | | 103 | % | | $ | 187,183 |
|
(1) Pursuant to the employment agreement entered into between the Company and Mr. Moorehead effective September 14, 2018, Mr. Moorehead’s 2018 cash incentive award will be paid out at 100% of target and prorated based on the portion of 2018 during which he served as the Chief Executive Officer of the Company.
(2) Mr. Probert’s employment with the Company terminated effective September 30, 2018. Mr. Probert also resigned from his position as chairman and director of the Company’s Board of Directors effective December 31, 2018. Mr. Probert's target annual cash incentive is comprised of 75% target based on his annual base salary by virtue of his employment and 25% target being agreed upon in the consulting agreement wherein Mr. Probert provided transition related services until December 31, 2018.
Long-Term Incentive Awards.
We provide long-term, stock-based incentive awards, in the form of RSUs, performance-contingent RSUs (PRSUs) and, in some cases, stock options and RSUs pursuant to the Nature’s Sunshine Products, Inc. 2012 Stock Incentive Plan (the “2012 Incentive Plan”), and the Nature’s Sunshine Products, Inc. 2009 Stock Incentive Plan (the “2009 Incentive Plan”).
20182019 RSU Grants. The table below sets forth the grants of RSUs approved by the Compensation Committee in November 2017, which were granted on February 12, 2018. Fifty percent of the RSUs granted to the named executive officers in 2018 are subject to vesting conditions tied to the Company’s operating metrics. The Compensation Committee believes that performance-based equity rewards long-term decision making and value creation and aligns shareholder and management interests. The Compensation Committee believes revenue and adjusted EBITDA are effective measurements of the Company’s growth since minimum revenue levels to earn any performance RSU were set above prior levels, and adjusted EBITDA considers the cost of revenue and is a direct driver of shareholder value.January 3, 2019.
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| | | | | | |
| | Restricted Stock Units |
| | Subject to Time Based Vesting Conditions | | Subject to Revenue Based Vesting Conditions |
Name | | (1) | | (2) |
Gregory L. Probert | | 30,000 (3) |
| | 30,000 |
|
Joseph W. Baty | | 10,000 |
| | 10,000 |
|
Adriana Mendizábal | | 7,500 |
| | 7,500 |
|
| | | | | | | | | | | |
(1)Restricted Stock Units | The RSUs set forth in the column entitled "
| | |
| | Subject to Time Based Vesting Conditions" vest in three equal annual installments over each year of service measured from the grant date, subject to the executive's continued employment with the Company. |
| |
(2)Name | The RSUs set forth in the column entitled "Subject to Performance Based Vesting Conditions," vest upon achievement of pre-determined revenue targets starting at $400 million and adjusted EBITDA targets starting at $32 million over a rolling one-year period, provided the executive remains in employment with the Company through the end of the last quarter in which the revenue or adjusted EBITDA target is achieved. The revenue and adjusted EBITDA targets must be achieved on or before June 30, 2021.
|
(1) | |
(3)Terrence O. Moorehead | These shares were cancelled before vesting due to Mr. Probert’s employment with the Company being terminated effective September 30, 2018. | 54,705 (2) | | |
Joseph W. Baty | | 13,334 | | |
Bryant J. Yates | | 8,500 | | |
(1) The RSUs set forth in the column entitled "Subject to Time Based Vesting Conditions," vest in three equal annual installments over each year of service measured from the grant date, subject to the executive's continued employment with the Company.
(2) Pursuant to the employment agreement entered into between the Company and Mr. Moorehead effective September 14, 2018, Mr. Moorehead was granted 110,49854,705 time-based vesting RSUs (grant value of roughly $1,000,000)$500,000), which vestbegan vesting in three equal annual installments beginning on September 14, 2019.
March 29, 2020. There are no other contractually guaranteed RSU grants going forward.
2018
2019 PRSU Grants. Mr. Moorehead’s employment agreement included an award of 149,172 performance-based restricted stock units (PRSU) that vest upon achieving certain 45-day volume weighted average stock price goals within a three-year performance period. Vesting occurs in equal installments at the following closing stock price milestones: $11.77; $14.48; $17.20; $19.91; $22.63;In January and $25.34.
After Mr. Moorehead began employment,March 2019, the Compensation Committee approved PRSU awardsgrants of PRSUs to the other NEOs, excludingwhich were granted on January 1, 2019 to Mr. Probert, with substantially the same design asBaty and Mr. Yates and on March 6, 2019 to Mr. Moorehead. The rationale was to align the incentives of the other named executive officers with the incentives of Mr. Moorehead, and tie the new CEO to his management team and vice versa.
The NEO PRSUs vest in six equal installments upon achievement of the same six growth rate milestones under Mr. Moorehead’sthe 2018 PRSU awards, which are related to the 45-day volume-weighted average stock price of the Company’s common shares and must be obtained within a three-year performance period. Vesting in the six equal installments occurs at the following closing stock price milestones: $11.77; $14.48; $17.20; $19.91; $22.63; and $25.34. The table below sets forth the grants of PRSUs to the named executive officersNEOs approved by the Compensation Committee. The Compensation Committee believes that performance-based equity rewards long-term decision making and value creation and aligns shareholder and management interests.
|
| | | | | | | |
Name | | Performance Based Restricted Stock Units | |
Terrence O. Moorehead | | 149,172 | 54,704 (1) |
Joseph W. Baty | | 36,00013,334 |
|
Adriana MendizábalBryant J. Yates | | 8,500 | | 24,000 |
|
(1) Pursuant to the employment agreement entered into between the Company and Mr. Moorehead effective September 14, 2018, Mr. Moorehead was granted 54,704 PRSUs (grant value of roughly $500,000) on March 29, 2019.
Executive Officer Benefits and Perquisites. Perquisites are not a significant component of our executive compensation program. In 2018, we provided each of our named executive officers the opportunity to receive up to $3,000 for tuition assistance; however, none of our executive officers elected to receive tuition assistance.
The Company providesWe provide Mr. Moorehead the following benefits, which are not provided to the other NEOs: (i) a $1,500 per month car allowance; (ii) reimbursement of the cost of an annual executive physical examination; and (iii) $1,000,000 in additional term life insurance coverage above what the Company provideswe provide to similarly situatedsimilarly-situated employees.
CEO Hire Relocation Sign-on Award. In connection with attracting Mr. Moorehead as a new CEO and assisting with his relocation from New York to our Utah headquarters, the Company provided Mr. Moorehead a pre-tax $425,000 relocation signing bonus in October, 2018, which was subject to repayment if Mr. Moorehead did not relocate permanently to Utah within nine months of beginning employment. Mr. Moorehead satisfied the permanent relocation requirement. The relocation payment was a one-time payment and is not part of Mr. Moorehead’s ongoing future compensation.
Other Programs. Our executive officers, including our named executive officers,NEOs, are eligible to participate in our 401(k) employee savings plan, medical plans, non-qualified deferred compensation, and other benefit plans on the same basis as all other regular U.S. employees.
Deferred Compensation Programs. The Company has adopted a non-qualified deferred compensation plan for its executive officers, certain other selected employees and its non-employee directors to enable them to save for retirement by deferring their income and the associated tax to a future date following termination of employment. Under the non-qualified deferred compensation plan, the named executive officers and other participants have the opportunity to defer compensation to future dates specified by the participant with a return based on investment alternatives selected by the participant. The Company believes that the non-qualified deferred compensation plan is comparable to similar plans offered by its competitors. The amounts deferred under the non-qualified deferred compensation plan for the named executive officers are reported below in the Non-qualified Deferred Compensation Table.
Stock Ownership Guideline. Each of the named executive officersNEOs is subject to stock ownership guidelines. OurUnder the stock ownership guidelines, our Chief Executive Officer’s employment agreement contains a stock ownership guideline whereby Mr. Moorehead agreesOfficer is required to maintain ownership of capital stock or an equity position in the Company having an aggregate value in the minimum amount of $1.0 million. The stock ownership guidelines require the other named executive officers,NEOs, other than the Chief Executive Officer, to maintain ownership of capital stock or an equity position in the Company having an aggregate value equal to one yearone-year base salary. Such equity position may be met by accumulating such equity through the vesting of future grants of stock options and RSUs, in addition to shares of the Company’s capital stock currently owned, and the vesting of existing grants of stock options and RSUs. All named executive officersNEOs currently satisfy the stock ownership guidelines.
Clawback Policy. The employment agreement with Mr. Probert, our prior Chief Executive Officer, includes a global incentive “clawback” provision pursuant to which, in the event that during the term of the employment agreement, and for a period of two years after the termination of the employment agreement, the Company is required to restate its financial statements due to material non-compliance with any applicable financial reporting requirement or securities law as determined by the Company's Board of Directors, the Company has the right, exercisable in its sole discretion, to review the amount of cash compensation paid to Mr. Probert and the amount of unvested equity compensation granted to him pursuant to existing grants of stock options and RSUs (collectively, "Compensation"), during the period of time encompassed by the restatement and recalculate Mr. Probert’s Compensation for the look-back period based upon the restated financial statements, provided, however, that this look-back period shall be no longer than two years. If, pursuant to this review and recalculation, the amount of Compensation that the Company would have paid under the restated financial statements for the look-back period is less than the actual amount of Compensation that was paid to Mr. Probert during the look-back period, Mr. Probert shall repay the difference to the Company in a time and manner mutually agreed to between the Company and Mr. Probert.
Hedging. CompanyOur policy prohibits executives from entering into hedging transactions (such as put and call options), that would operate to lock-in value of their equity compensation awards at specified levels. Executive officers are also prohibited from pledging the Company'stheir stock or holding such stock in margin accounts. Accordingly, similar to any other shareholder, the executive officers bear the full risk of economic loss with respect to their equity holdings.
Employment Agreements. We have entered into employment agreements with each of our named executive officers.NEOs. We believe the employment agreements allow our named executive officersNEOs to continue to focus their attention on our business operations and strategic plans without undue concern over their own financial situations during periods when substantial disruptions and distractions might otherwise prevail. Each employment agreement entitles the named executive officerNEO to specific termination benefits if his or her employment is terminated under certain circumstances. A summary of the material terms of the employment agreements with each named executive officer,NEO, together with a quantification of the severance benefits payable under those agreements to each of the named executive officersNEO named in the Summary Compensation Table may be found in the sections below entitled "Employment Agreements” and “Potential Payments upon Termination or Change in Control."
Compliance with Internal Revenue Code Section 162(m). Section 162(m) of the Internal Revenue Code, as in effect prior to the enactment of the Tax Cuts and Jobs Act of 2017 (“TCJA”), generally disallowed a tax deduction to public companies for compensation of more than $1.0 million paid in any taxable year to each “covered employee,” consisting of the CEO and the three other highest paidhighest-paid executive officers employed at the end of the year (other than the CFO). Performance-based compensation was exempt from this deduction limitation if the Company met specified requirements set forth in the Internal Revenue Code and applicable Treasury Regulations. The TCJA retained the $1.0 million deduction limit, but repealed the performance-based compensation exemption from the deduction limit and expanded the definition of “covered employees,” effective for taxable years beginning after December 31, 2017. “Covered employees” now also include any person who served as CEO or CFO at any time during a taxable year, as well as any person who was ever identified as a covered employee in 2017 or any subsequent year. Consequently, compensation paid in 2018 and later years to our named executive officersNEOs in excess of $1.0 million will not be deductible unless it qualifies for transitional relief applicable to certain binding, written performance-based compensation arrangements that were in place as of November 2, 2017. The compensation paid to our named executive officersNEOs for 2018,2019, did not exceed the $1.0 million threshold per officer, except for Mr. Moorehead and Mr. Probert.Moorehead. While the Compensation Committee considers the deductibility of executive compensation under Section 162(m) when evaluating particular compensation programs in the context of the Compensation Committee's broader compensation objectives and overall compensation philosophy, the Compensation Committee understands that, particularly in light of the changes under the TCJA , it is possible that the compensation payable to our named executive officersNEOs will exceed the $1.0 million limit under Section 162(m) in one or more future years. We believe that in establishing the cash and equity incentive compensation programs for our named executive officers,NEOs, the potential deductibility of the compensation payable under those programs should be only one of a number of relevant factors taken into consideration, and not the sole governing factor. For that reason, we may deem it appropriate to provide one or more named executive officersNEOs with the opportunity to earn incentive compensation, whether through annual cash incentive programs tied to our financial performance or through equity awards, which together with base salary in the aggregate may be in excess of the amount deductible by reason of Section 162(m) or other provisions of the Internal Revenue Code. We believe it is important to maintain cash and equity incentive compensation at the levels needed to attract and retain the named executive officersNEOs essential to our success, even if all or part of that compensation may not be deductible by reason of the Section 162(m) limitation. Notwithstanding the foregoing, the Compensation Committee generally intends to continue to comply with the requirements of Section 162(m) as it existed prior to enactment of the TCJA with respect to performance-based compensation in excess of $1.0 million payable under outstanding awards granted before November 2, 2017 (e.g., stock options and performance-based RSUs), in order for them to qualify for the transitional relief. However, no assurance can be given that the compensation associated with these awards will qualify for the transitional relief, due to ambiguities and uncertainties as to the application and interpretation of newly revised Section 162(m) and the requirements for the transitional relief.
Compensation Committee Report
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis disclosure with management. Based on this review and discussion, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.
Submitted by:
Robert D. Straus, Committee Chair
Robert Jia (Hongfei)
J. Christopher Teets
Jeffrey D. Watkins
Lily Zou
Compensation Committee Interlocks and Insider Participation
No memberNone of the directors who served on our Compensation Committee at any time during 2018, was an2019 was:
•A current or former officer or employee of the Company. Noneour company;
•A participant during 2019 in a related-person transaction that is required to be disclosed; or
•An executive officer of another entity at which one of our named executive officers withserved during 2019 on either the exceptionboard of Mr. Probert and Mr. Moorehead,directors or the compensation committee, nor were any of our other directors an executive officer of another entity at any time during 2018,which one of our executive officers served on the Board of Directors or Compensation Committee (or other board committee performing equivalent functions) of any entity that had one or more executive officers serving as a member of our Board of Directors or our Compensation Committee.compensation committee.
Compensation Risk Assessment
The Company'sOur compensation programs are designed to maintain an appropriate balance between incentives for long-term and short-term performances by utilizing a combination of compensation components, including base salary, annual cash incentive awards and long-term equity awards. Although not all employees in the organization have compensation comprised of all three of these components, our compensation programs are generally structured so that any cash incentive awards based on short-term performances are not likely to constitute the predominant element of an employee's total compensation package and that other components will serve to balance the package. For this reason, the Company doeswe do not believe that itsour use of any cash incentive awards based upon short-term performance is reasonably likely to encourage excessive risk-taking by the participants in those compensation programs.
In addition, the Company believeswe believe the stock ownership guidelines to which its named executive officers,our NEOs, including itsour Chief Executive Officer, are subject, moderate the incentive to take excessive risk.
Executive Compensation
The following compensation tables, including the summary compensation table, provide compensation information of our NEOs for the years ended December 31, 2019, 2018 2017 and 2016.2017. Information for the years ended December 31, 2017 and December 31, 2016,2018 is not provided if aan NEO first became an NEO in the year ended December 31, 2018 or December 31, 2019.
Summary Compensation Table
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Name & Principal Position | | Year | | Salary ($)(1) | | Non-Equity Incentive Plan ($)(2) | | Stock Option Awards ($) | | Restricted Stock Unit Awards ($)(3) | | All Other Compensation ($)(4) | | Total ($) | |
Terrence O. Moorehead | | 2019 | | 650,000 | | | 507,954 | | | — | | | 747,813 | | | 35,001 | | | | 1,940,768 | |
Chief Executive Officer | | 2018 | | 162,500 | | | 167,375 | | | — | | | 1,705,591 | | | 473,268 | | | | 2,508,734 | |
| | 2017 | | — | | | — | | | — | | | — | | | — | | | | — | |
Joseph W. Baty | | 2019 | | 375,000 | | | 161,435 | | | — | | | 168,938 | | | 16,094 | | | | 721,467 | |
EVP, CFO & Treasurer | | 2018 | | 375,000 | | | 212,738 | | | — | | | 393,560 | | | 11,990 | | | | 986,800 | |
| | 2017 | | 375,000 | | | — | | | — | | | 474,250 | | | 15,744 | | | | 864,944 | |
Bryant J. Yates | | 2019 | | 266,429 | | | 146,379 | | | — | | | 107,695 | | | 11,419 | | | | 531,922 | |
EVP, President Europe | | 2018 | | — | | | — | | | — | | | — | | | — | | | | — | |
| | 2017 | | 251,500 | | | 119,840 | | | — | | | 81,300 | | | 10,741 | | | | 463,381 | |
(1) Amounts for 2019 include amounts that were deferred from the executive salaries into the 401(k) plan in 2019, as follows: Mr. Moorehead-$25,000; Mr. Baty-$24,921; and Mr. Yates-$19,000.
(2) For a NEOdetailed discussion of payments made under the Company’s annual cash incentive program, see the section above entitled “Compensation Discussion and Analysis-Annual Cash Incentive.”
(3) Amounts reflect the aggregate grant date fair value of the RSU grant made in each applicable year, in each instance calculated in accordance with FASB ASC Topic 718. See Note 12 of the Notes to Consolidated Financial Statements set forth in the 2019 Annual Report on Form 10-K filed with the SEC on March 11, 2020, for a description of the assumptions used in calculating such fair value. For this purpose, the estimate of forfeitures relating to vesting conditions is disregarded. The aggregate grant date fair value of the 2019 Performance-Based RSUs, assuming achievement of the maximum performance level, would be: Mr. Moorehead-$239,604; Mr. Baty-$58,399; and Mr. Yates-$37,230.
(4) “All Other Compensation” includes the following amounts paid by the Company for the year ended December 31, 2018.2019. The amounts disclosed are the actual costs to the Company of providing these benefits.
Summary Compensation Table
|
| | | | | | | | | | | | | | | | | | | | | |
Name & Principal Position | | Year | | Salary ($)(1) | | Non-Equity Incentive Plan ($)(2) | | Stock Option Awards ($) | | Restricted Stock Unit Awards ($)(3) | | All Other Compensation ($)(4) | | Total ($) |
Terrence O. Moorehead * | | 2018 | | 162,500 |
| | 167,375 |
| | — |
| | 1,705,591 |
| | 473,268 |
| | 2,508,734 |
|
Chief Executive Officer | | 2017 | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| | 2016 | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Gregory L. Probert ** | | 2018 | | 463,500 |
| | 477,405 |
| | — |
| | 672,000 |
| | 329,375 |
| | 1,942,280 |
|
Former Chief Executive Officer | | 2017 | | 618,000 |
| | — |
| | — |
| | 745,250 |
| | 19,594 |
| | 1,382,094 |
|
| | 2016 | | 618,000 |
| | 309,309 |
| | — |
| | 447,000 |
| | 19,519 |
| | 1,393,828 |
|
Joseph W. Baty | | 2018 | | 375,000 |
| | 212,738 |
| | — |
| | 393,560 |
| | 11,990 |
| | 986,800 |
|
EVP, CFO & Treasurer | | 2017 | | 375,000 |
| | — |
| | — |
| | 474,250 |
| | 15,744 |
| | 864,944 |
|
| | 2016 | | 64,904 |
| | 17,810 |
| | — |
| | 456,049 |
| | 13,622 |
| | 552,385 |
|
Adriana Mendizábal | | 2018 | | 363,462 |
| | 187,183 |
| | — |
| | 281,040 |
| | 13,868 |
| | 845,553 |
|
Chief Marketing Officer & President | | 2017 | | 311,139 |
| | 31,281 |
| | — |
| | 173,975 |
| | 11,879 |
| | 528,724 |
|
NSP Americas | | 2016 | | 293,868 |
| | 133,181 |
| | — |
| | 58,310 |
| | 11,509 |
| | 496,868 |
|
* Mr. Moorehead was appointed the Company’s Chief Executive Officer effective October 1, 2018.
| |
** | Mr. Probert’s employment with the Company terminated effective September 30, 2018. Mr. Probert also resigned from his position as chairman and director of the Company’s Board of Directors effective December 31, 2018. |
| |
(1) | Amounts for 2018 include amounts that were deferred from the executive salaries into the 401(k) plan in 2018, as follows: Mr. Moorehead-$7,500; Mr. Probert-$18,500; Mr. Baty-$18,500; and Ms. Mendizábal-$18,500. |
| |
(2) | For a detailed discussion of payments made under the Company’s annual cash incentive program, see the section above entitled “Compensation Discussion and Analysis-Annual Cash Incentive.”
|
| |
(3) | Amounts reflect the aggregate grant date fair value of the RSU grant made in each applicable year, in each instance calculated in accordance with FASB ASC Topic 718. See Note 12 of the Notes to Consolidated Financial Statements set forth in the 2018 Annual Report on Form 10-K filed with the SEC on March 8, 2019, for a description of the assumptions used in calculating such fair value. For this purpose, the estimate of forfeitures relating to vesting conditions is disregarded. The aggregate grant date fair value of the 2018 Performance-Based RSUs, assuming achievement of the maximum performance level, would be: Mr. Moorehead-$705,584; Mr. Probert-$336,000; Mr. Baty-$281,560; and Ms. Mendizábal-$197,040. |
| |
(4) | “All Other Compensation” includes the following amounts paid by the Company for the year ended December 31, 2018. The amounts disclosed are the actual costs to the Company of providing these benefits. |
| | Name | | 401(k) Plan Company Contribution ($) | | Life Insurance Premium($) | | Miscellaneous Other ($) | | Total ($) | Name | | 401(k) Plan Company Contribution ($) | | Life Insurance Premium($) | | Miscellaneous Other ($) | | Total ($) |
Terrence O. Moorehead | | 5,250 |
| | 1,489 |
| | 466,529 (A) | | 473,268 |
| Terrence O. Moorehead | | 9,800 | | | 6,451 | | | 18,750 (A) | | 35,001 | |
Gregory L. Probert | | 9,625 |
| | 6,865 |
| | 312,885 (B) | | 329,375 |
| |
Joseph W. Baty | | 9,625 |
| | 1,615 |
| | 750 (C) | | 11,990 |
| Joseph W. Baty | | 9,800 | | | 5,544 | | | 750 (B) | | 16,094 | |
Adriana Mendizábal | | 9,625 |
| | 3,493 |
| | 750 (C) | | 13,868 |
| |
Bryant J. Yates | | Bryant J. Yates | | 9,800 | | | 869 | | | 750 (B) | | 11,419 | |
(A) Includes $462,029 of relocation related expenses and $4,500$18,000 automobile allowance.
(B) Includes $312,135 of consulting costs during the period of transition to a new Chief Executive Officer from September 30, 2018 to December 31, 2018allowance and $750 of product credit.
(C)(B) Includes $750 of product credit.
Grants of Plan-Based Awards in 20182019
The following table provides certain summary information concerning each grant of an award made to the named executive officersan NEO in 2018,2019, under a compensation plan.
| | | | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards | Estimated Future Payouts Under Equity Incentive Plan Awards | All Other Stock Awards: Number of Shares of Stock or Units | Grant Date Fair Value of Stock Awards ($) | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards | | Estimated Future Payouts Under Equity Incentive Plan Awards | | All Other Stock Awards: Number of Shares of Stock or Units | Grant Date Fair Value of Stock Awards ($) |
Name | Grant Date | Incentive Award Type (1) | Threshold ($)(2) | Target ($)(2) | Maximum ($)(2) | Threshold (#) | Target (#) | Maximum (#) | Name | Grant Date | Incentive Award Type (1) | Threshold ($)(2) | Target ($)(2) | Maximum ($)(2) | Threshold (#) | Target (#) | Maximum (#) | | All Other Stock Awards: Number of Shares of Stock or Units | Grant Date Fair Value of Stock Awards ($) |
Terrence O. Moorehead | — |
| ACI | — |
| 162,500 |
| 268,125 |
| — |
| — |
| — |
| — |
| — |
| Terrence O. Moorehead | — | | ACI | | 149,500 | | 650,000 | | 1,137,500 | | — | | — | | — | | — | | — | |
Terrence O. Moorehead | 9/25/2018 |
| PRSU (3) | — |
| — |
| — |
| 24,832 |
| 149,172 |
| — |
| — |
| 705,584 |
| Terrence O. Moorehead | 3/29/2019 | PRSU (3) | | — | | — | | — | | 9,117 | | 54,704 | | — | | — | | 239,604 | |
Terrence O. Moorehead | 9/25/2018 |
| RSU (4) | — |
| — |
| — |
| — |
| — |
| — |
| 110,498 |
| 1,000,007 |
| Terrence O. Moorehead | 3/29/2019 | RSU (4) | | — | | — | | — | | — | | — | | — | | 54,705 | | 508,209 | |
Gregory L. Probert | — |
| ACI | 123,600 |
| 618,000 |
| 1,019,700 |
| — |
| — |
| — |
| — |
| — |
| |
Gregory L. Probert | 2/12/2018 |
| PRSU (5) | — |
| — |
| — |
| 7,500 |
| 30,000 |
| — |
| — |
| 336,000 |
| |
Gregory L. Probert | 2/12/2018 |
| RSU (6) | — |
| — |
| — |
| — |
| — |
| — |
| 30,000 |
| 336,000 |
| |
Joseph W. Baty | — |
| ACI | 41,250 |
| 206,250 |
| 340,313 |
| — |
| — |
| — |
| — |
| — |
| Joseph W. Baty | 0 | ACI | | 47,438 | | 206,250 | | 340,313 | | — | | — | | — | | — | | — | |
Joseph W. Baty | 2/12/2018 |
| PRSU (5) | — |
| — |
| — |
| 2,500 |
| 10,000 |
| — |
| — |
| 112,000 |
| Joseph W. Baty | 1/2/2019 | PRSU (5) | | — | | — | | — | | 2,222 | | 13,333 | | — | | — | | 58,399 | |
Joseph W. Baty | 2/12/2018 |
| RSU (6) | — |
| — |
| — |
| — |
| — |
| — |
| 10,000 |
| 112,000 |
| Joseph W. Baty | 1/2/2019 | RSU (6) | | — | | — | | — | | — | | — | | — | | 13,334 | | 110,539 | |
Joseph W. Baty | 12/5/2018 |
| PRSU (7) | — |
| — |
| — |
| 6,000 |
| 36,000 |
| — |
| — |
| 169,560 |
| |
Adriana Mendizábal | — |
| ACI | 36,346 |
| 181,731 |
| 299,856 |
| — |
| — |
| — |
| — |
| — |
| |
Adriana Mendizábal | 2/12/2018 |
| PRSU (5) | — |
| — |
| — |
| 1,875 |
| 7,500 |
| — |
| — |
| 84,000 |
| |
Adriana Mendizábal | 2/12/2018 |
| RSU (6) | — |
| — |
| — |
| — |
| — |
| — |
| 7,500 |
| 84,000 |
| |
Adriana Mendizábal | 12/5/2018 |
| PRSU (7) | — |
| — |
| — |
| 4,000 |
| 24,000 |
| — |
| — |
| 113,040 |
| |
Bryant J. Yates | | Bryant J. Yates | — | | ACI | | 33,703 | | 146,536 | | 241,784 | | — | | — | | — | | — | | — | |
Bryant J. Yates | | Bryant J. Yates | 1/2/2019 | PRSU (5) | | — | | — | | — | | 1,417 | | 8,500 | | — | | — | | 37,230 | |
Bryant J. Yates | | Bryant J. Yates | 1/2/2019 | RSU (6) | | — | | — | | — | | — | | — | | — | | 8,500 | | 70,465 | |
The following table provides certain summary information concerning outstanding equity awards held by the named executive officersNEOs as of December 31, 2018.2019.