All officers serve at the discretion of the Board of Directors.
EXECUTIVE AND DIRECTOR COMPENSATION
Compensation Discussion and Analysis
Compensation PhilosophyExecutive Summary
The following discussion provides an overview and analysis of the Company’s compensation program and policies, the material compensation decisions it has made under those programs and policies with respect to its top executive officers in relation to the Company’s performance results and the material factors that it considered in making those decisions. This discussion focuses on the compensation awarded to, earned by, and paid to the following individuals who are referred to as the “named executive officers” throughout this Proxy Statement:
Rick L. Wessel, Chief Executive Officer and President (“CEO”)
R. Douglas Orr, EVP and Chief Financial Officer (“CFO”)
Raul R. Ramos, SVP Latin American Operations
Sean D. Moore, SVP Store Development and Facilities
Peter H. Watson, SVP Compliance and Government Relations
The goal for the executive compensation program is to attract, motivate and retain the highest quality executives who will provide leadership for the Company’s growth and success in a dynamic and competitive market. The Company’s overriding compensation philosophy is to promote a “culture of ownership” among its executives by aligning their interests with those of its stockholders. This is best accomplished by:The Company’s compensation program’s specific objectives include:
payingLinking pay to individual and Company performance, while not encouraging excessive risk-taking;
Balancing short- and long-term Company performance with a weighting towards long-term performance; and
Aligning executives’ interests with those of stockholders through long-term ownership of Company stock.
The Company continually reviews and improves its pay practices and related disclosures to ensure that it drives superior performance and is aligned with stockholders’ interests. Based on a review of feedback obtained from management’s stockholder outreach efforts, as further described in the “Results of 2015 Stockholder Say on Pay Vote” section below, the Compensation Committee made several changes to the Company’s compensation programs and practices to better align them with stockholder interests, including the adoption of stock ownership guidelines for executive officers and a compensation clawback policy, the elimination of automatic single-trigger acceleration for equity awards and increased transparency in the proxy reporting of performance goals for annual incentive awards, all of which are described in greater detail below.
Performance Measurement
In assessing its performance for internal and external reporting purposes, the Company looks at certain key performance measures which include:
Net income and diluted earnings per share from continuing operations;
EBITDA (Earnings before net interest expense, tax expense, depreciation expense and amortization expense);
Revenue growth;
Store count additions from de-novo store openings and acquisitions; and
Total shareholder return
The Company’s long-term strategy and business plans are focused on growing revenues and operating profits by opening new retail pawn locations, acquiring existing pawn stores in strategic markets and increasing operating profits in its existing stores.
Over 50% of the Company’s revenues and 73% of its stores are in Latin America, and the Company expects that a significant portion of its future growth will be derived from operations in Latin America. With a majority of its revenues coming from outside the U.S. and conducted in foreign currencies, the Company’s financial performance may be significantly impacted by the changes in the exchange rates between local currencies and the reporting currency, the U.S. dollar, which are outside of the Company’s control. Other macro factors which may impact operating results include changes in commodity prices, especially precious metals, as jewelry comprises a significant portion of pawn collateral and inventories.
As the Company continues to focus on core pawn operations, its strategy also includes reducing the percentage of revenues from non-core unsecured consumer lending products such as payday loans. Related to the strategic reductions in payday lending activities, the Company has reduced non-core revenues, including closing payday lending stores, that caused the Company to incur certain non-recurring and primarily non-cash charges related to these store closings and divestitures.
Operating Results
Revenue Growth:
The following revenue highlights of the Company’s performance are on a constant currency basis, which excludes the effects of foreign currency translation and are calculated by translating current year results at prior year average exchange rates. Constant currency results may be considered a non-GAAP measurement of financial performance. See Appendix A for further details.
Core pawn revenue, which is composed of retail merchandise sales and pawn service fees, increased 14% for fiscal 2015 compared to the prior-year. Total revenue for fiscal 2015 increased 8%, despite a 29% decline in total non-core revenues which include payday lending operations.
Consolidated core same-store pawn revenue increased 3% for fiscal 2015, highlighted by 8% growth in Mexico.
Consolidated core pawn revenues have grown at a compound annual growth rate of 21% and 23% over the past three and five year periods, respectively.
Store Growth:
A total of 103 pawn stores were added in fiscal 2015, composed of 70 new and acquired stores in Latin America and 33 stores acquired in the U.S., which represents a 10% and 11% increase in the number of pawn stores, respectively.
The Company made its largest and most significant acquisition in Latin America to date with a multi-step purchase of 211 pawn stores in three countries.
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◦ | The acquisition of 32 stores in Guatemala was completed in December of 2015. |
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◦ | The acquisitions of 166 stores in Mexico and 13 stores in El Salvador were completed in January 2016 and February of 2016, respectively. |
Net store additions have grown at a compound annual growth rate of 10% over the past three years and 13% over the past five years.
Earnings Results:
Diluted earnings per share for the fiscal year ended December 31, 2015 totaled $2.14, which includes the impact of non-recurring and primarily non-cash restructuring expenses related to U.S. consumer loan operations of $0.21 per share and non-recurring store acquisition expenses of $0.07 per share. Excluding these expenses, adjusted diluted earnings per share totaled $2.42 for fiscal 2015 compared to prior year adjusted earnings per share of $2.75.
On a comparative basis with the prior fiscal year, fiscal 2015 adjusted earnings were reduced by $0.34 per share due to the strong U.S. dollar and the resulting 19% decline in the average value of the Mexican peso, approximately $0.24 per share due to decreases in earnings from non-core jewelry scrapping and payday lending operations and $0.04 per share due to incremental interest expense related to the Company’s senior note offering in March 2014.
Adjusted EBITDA (earnings before interest, taxes, depreciation, amortization and certain non-recurring charges) for fiscal 2015 totaled $132.2 million, which equaled the prior year adjusted EBITDA on a constant currency basis. Net income was $60.7 million for fiscal 2015. A reconciliation of adjusted EBITDA to net income is provided in Appendix A.
Total Shareholder Return:
Total shareholder returns for the five, three and one-year periods ended December 31, 2015 were as follows:
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◦ | Five year total shareholder return: 21% |
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◦ | Three year total shareholder return: (25)% |
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◦ | One year total shareholder return: (33)% |
The Company believes that recent shareholder returns have been negatively impacted primarily by the significant decline in the translated value of the currency in Mexico, where the Company has the majority of it store locations and revenues. The average value of the Mexican peso relative to the U.S. dollar has decreased by 25%, 20% and 19% over the most recent five, three and one-year respective fiscal annual periods.
Decreases in non-core portions of the business have also had a significant negative impact on earnings. Gross profit from non-core consumer loan and credit services and wholesale scrap jewelry have declined by 59%, 60% and 28% over the most recent five, three and one-year respective fiscal annual periods.
Impact of Performance on Executive Compensation
As highlighted herein, the Company saw significant growth in key performance measures related to revenue and store additions. The Company exceeded store addition targets, which is a key driver of future earnings growth and shareholder returns. However, despite revenue growth, earnings measures and total shareholder return were significantly impacted by offsetting factors, most notably the decline in the value of the currency in Mexico. The performance-related payouts under the compensation plans for the two most senior executives, the CEO and CFO, directly reflected these performance results. While payouts related to store addition measures were fully earned, payout goals in both short- and long-term incentive plans related to growth in earnings per share and EBITDA were not achieved. The Company believes that the compensation plan payouts in 2015 reflected a strong alignment between pay and performance.
Key Features of the Executive Compensation Program
What the executive compensation program does:
Compensation for the two most senior executive officers, the CEO and the CFO, emphasizes performance-based annual incentives and long-term equity awards;
Pays senior executives reasonable base salarysalaries commensurate with their backgrounds, special skill sets, responsibilities and competitive practice;
offeringOffers incentive compensation conditioned not only on the executive’s individual performance, but also on his or her contribution to the Company’s consolidated financial results; and
makingProvides periodic grants of long-term, performance-based equity awards in order to induce executives to remain in the Company’s employment as well as align their interests with those of the Company’s stockholders.stockholders;
Effective for 2016, subjects all incentive-based compensation to a “clawback” policy that allows the Company, in the event of a restatement of its financial results, to recover excess amounts erroneously paid to named executive officers under certain circumstances;
Effective for 2016, provides that executive officers are subject to stock ownership guidelines; and
Holds annual advisory votes on executive compensation.
The Compensation Committee retains broad flexibility
What the executive compensation program does not do:
Effective for 2016, provide for automatic single-trigger vesting of equity awards in the administrationconnection with a change in control;
Allow repricing of underwater stock options;
Allow hedging of Company stock;
Provide excessive executive perquisites;
Encourage unnecessary or excessive risk taking as a result of the Company’s compensation packages. This flexibility is critical to retaining senior executives, including allpolicies;
Provide guaranteed minimum payouts; and
Base incentive compensation on a single performance metric.
Role of the named executive officers.Compensation Committee
The Compensation Committee reviews and administers the compensation program for eachthe Company’s executive officers, including recommending to the Board of Directors for approval the specific compensation of all of the named executive officers. Compensation is typically set at the first Compensation Committee meeting each calendar year after reviewing performance for the past year and prospects for the year ahead. The Compensation Committee regularly meets with the chief executive officerCEO and chief financial officer,CFO, both of whom provide insight into how individual executives are performing. The Compensation Committee retains broad flexibility in the administration of the Company’s compensation packages.
In addition, theThe Compensation Committee has the authority to engage outside advisors to assist the Compensation Committee in the performance of its duties. In particular, the Compensation Committee has sole authority to retain and terminate any compensation consultant to assist in the evaluation of director, chief executive officerCEO or senior executive compensation, including sole authority to approve such consultant’s reasonable fees and other retention terms, all at the Company’s expense. The Compensation Committee may not, however, delegate its authority to others.
The Board of Directors sets non-management and non-consultantnon-employee directors’ compensation at the recommendation of the Compensation Committee. See the “Compensation of Directors.”Directors” section below.
Benchmarking and Use of Consultant
Peer Group: The Compensation Committee analyzes the compensation practices of a group of peer companies, consisting of other publicly-traded companies primarily in the specialty consumer finance/retail industry within a range of market cap and revenue size similar to the Company. In determining compensation for its named executive officers, each element of its compensation program is compared against published compensation data of its peer group. The Compensation Committee, while mindful of the compiledthis peer group data, from the peers, has not established a certainspecific range of compensation for any element of pay from the peer group, but used itrather uses the data as a general guideline for discussion.discussion and consideration. The overall goal of this process is to enable the Company to provide total compensation packages that are competitive with prevailing practices in the Company’s industry and within the Company’s peer group.
In determining compensation for its named executive officers, each element of its compensation program is compared against published data. TheFor 2015, the Compensation Committee updates the peer groupreviewed compensation data annually by utilizingfor the servicesfollowing group of Equilar, a company that provides a comprehensive compensation database relating to executive compensation practices at publicly-tradedpeer companies including the peer group.(“2015 Peer Group”):
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Industry Peers | |
Aaron Rents, Inc.2015 Peer Group |
America's Car-Mart, Inc.Industry | Geographic Focus |
Cash America International, Inc. |
Dollar Financial Corp.Pawnshop operator | United States |
EZCORP, Inc. | Pawnshop operator | United States, Mexico |
QC Holdings, | | |
Aaron’s, Inc. | Specialty consumer finance/retail | United States, Canada |
America’s Car-Mart, Inc. | Buy-Here-Pay-Here auto sales | United States |
Rent-A-Center, Inc. | Specialty consumer finance/retail | United States, Canada, Mexico, Puerto Rico |
World Acceptance Corp.Corporation | Specialty consumer finance/retail | United States, Mexico |
The Compensation Committee reviewsexpanded the compositionpeer group used as a tool for reviewing and determining the compensation levels and incentive plans of the named executive officer compensation for fiscal 2016. The Compensation Committee concluded that the Company has only two public pawn specific competitors which the Company competes directly with for customers, employees, and investors. The Compensation Committee therefore updated and expanded its peer group to include additional other consumer finance and specialty retail companies focusing primarily on an annual basis. similar size companies offering lending and retail products to similar customer demographic profiles (primarily the underbanked, cash-constrained and value-conscious consumer).
For 2016, the Compensation Committee reviewed compensation data for the following group of peer companies (“2016 Peer Group”):
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2016 Peer Group | Industry | Geographic Focus |
Cash America International, Inc. | Pawnshop operator | United States |
EZCORP, Inc. | Pawnshop operator | United States, Mexico |
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Aaron’s, Inc. | Specialty consumer finance/retail | United States, Canada |
Conn’s, Inc. | Specialty consumer finance/retail | United States |
Credit Acceptance Corporation | Specialty consumer finance | United States |
Encore Capital Group, Inc. | Specialty consumer finance | Worldwide (including Latin America) |
Five Below, Inc. | Specialty consumer retail | United States |
Green Dot Corporation | Specialty consumer finance | United States |
Pier 1 Imports, Inc. | Specialty consumer retail | United States, Canada, Mexico, El Salvador |
PRA Group, Inc. | Specialty consumer finance | United States, Canada, Europe |
Rent-A-Center, Inc. | Specialty consumer finance/retail | United States, Canada, Mexico, Puerto Rico |
World Acceptance Corporation | Specialty consumer finance | United States, Mexico |
The Compensation Committee may electbelieves the lack of public pawn specific competitors creates difficulty in constructing a direct peer group, which is also evident in peer groups some outside analysts have used to modifybenchmark the Company’s named executive officer compensation. The Compensation Committee recognizes that the premier U.S. proxy advisory organizations, ISS and Glass Lewis, each determine their own peer groups based on their respective methodologies. The Compensation Committee believes the Company’s peer group is more indicative of the underbanked, cash-constrained and value-conscious consumer the Company targets compared to the peer groups established by ISS and Glass Lewis for future periodsthe following reasons:
Each of the U.S. proxy advisory organizations respective peer groups include companies from very different industries including investment banks and various retailers focused on the mainstream and more affluent consumer (as opposed to reflect best practicesthe underbanked, cash-constrained and value-conscious consumer);
The companies included in the U.S. proxy advisory organizations respective peer groups tend to be smaller based on market capitalization than the Company, causing the Company’s executive compensation or changesto look high in its business orcomparison to the businessrespective peer group; and
One of otherthe proxy advisory organizations excluded Cash America International, Inc., one of two similar sized direct competitors, from their peer group listing but included companies insuch as Destination Maternity, Haverty Furniture Companies, Inc. and outsideWest Marine, Inc. which cater to a much different and more affluent demographic than the peer group.
In addition, the president and chief executive officer and the chief financial officer present industry compensation data based on reports prepared from information provided by Equilar Inc., a company that accumulates data from public filings, which the officers then sortdemographic serviced by the peer group.Company.
Role of the Chief Executive OfficerCEO in Executive Compensation Decisions: The Company’s chief executive officerCEO works closely with the Compensation Committee providing his assessment and recommendations on the competitiveness of the programs and the performance issues and challengesof the other executive officers, and makes recommendations for consideration pertaining to the compensation of his subordinate team.the executive officers. The Compensation Committee takes these recommendations into consideration and either approves or works with the chief executive officerCEO to develop suitable proposals. The chief executive officerCEO does not, however, make, participate in, provide input for or make recommendations about his own compensation.
Use of Independent Advisors: The Compensation Committee has, in the past, retained an independent advisor to evaluate industry compensation practices, including base salary, bonus and long-term incentive values, including annual grant levels. In 2012,2015, the Compensation Committee did not retain the services of any outside consultants or advisors. Rather, the Compensation Committee relied on previous studies and current market data, prepared by Equilar, which the Compensation Committee determined to be sufficient for the purposes of making comparisons necessary to evaluate the Company’s executives’ compensation for 20122015 and 2013.2016.
ConsiderationResults of 20122015 Stockholder Say on Pay Vote.Vote
The Company received overwhelming stockholder support in the 2013 and 2014 “Say-on-Pay” votes with approval rates of 92% and 91%, respectively. At the Company’s 20122015 Annual Meeting of Stockholders, the stockholders again approved on an advisory basis, the compensation of the named executive officers (83%with 63% of the votes cast). The Compensation Committee believes this level of stockholder support reflects a strong endorsementcast in favor of the Company’s compensation policiesprograms.
As a result of the lower approval percentage for the 2015 “Say-on-Pay” vote as compared to prior years, management reached out to 27 of the Company’s largest stockholders, representing approximately 71% of the outstanding shares to engage, or attempt to engage, in discussions around executive compensation and decisions. corporate governance. From these conversations management made the following observations:
Stockholders generally wanted expanded disclosures around the performance targets and measurement metrics associated with the Company’s incentive compensation plans;
Stockholders felt that it was important to have both long-term and short-term performance incentives; and
Stockholders were generally in agreement that the assigned peer groups determined by the proxy advisory firms were not representative of the underbanked, cash-constrained and value-conscious consumer or specialty finance sector.
The Compensation Committee has considered the results of thisthe 2015 advisory vote on executive compensation in determiningas well as feedback obtained from management’s shareholder outreach, and made the following changes with respect to the Company’s executive compensation programs:
For equity awards granted in 2016 and going forward, eliminated automatic single-trigger acceleration in connection with a change in control;
Enhanced certain compensation policies and decisions for 2013,practices, including adoption of a compensation clawback policy and has determined that these policiesstock ownership guidelines;
Increased transparency in reporting of incentive compensation performance targets and decisions are appropriateachieved results; and in
Expanded the best interests of the Company and its stockholders at this time. Company’s peer group.
In addition, the Company’s Board of Directors has considered the stockholder vote and management’s recommendation regarding the frequency of future stockholder advisory votes on the compensation of the Company’s named executive officers and has adopted the stockholders’ recommendation of an annual advisory vote on the compensation of the Company’s named executive officers until the next required vote on this matter, or until the Board of Directors otherwise determines that a different frequency for such advisory votes is in the best interests of the stockholders of the Company.
Anti-Hedging Policy
The Company’s insider trading policy prohibits all of its directors, officers and employees from engaging in “short sales” or “sales against the box” or trading in puts, calls, warrants or other derivative instruments on the Company’s securities. The Board of Directors believes this prohibition further aligns the interests of directors and executives with those of stockholders, facilitates compliance with insider-trading and other applicable laws, and aids in preventing directors and executives from subjecting themselves to an actual or potential conflict of interest with the Company or creating the appearance of such a conflict.
Executive Stock Ownership and Retention Guidelines
The Company’s Board of Directors has adopted stock ownership guidelines pursuant to which all executive officers are expected to own shares of Company stock equal in value to a multiple of the executive officer’s base salary, as follows:
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Participant | | Multiple |
CEO | | 5x Salary |
COO and CFO | | 3x Salary |
Other executive officers | | 1x Salary |
Until an executive has satisfied the stock ownership guidelines, he or she is required to retain 75% of the after-tax shares received upon the exercise or vesting of equity incentive awards. Furthermore, any sales of Company stock by an executive will be permitted only to the extent that the executive will continue to meet the guidelines immediately following such sale.
Clawback Policy
The Company’s Board of Directors has adopted an executive compensation recovery, or “clawback,” policy that applies to all executive officers in the event the Company is required to restate its financial statements. The Compensation Committee may seek recovery of any short- or long-term incentive payment or award granted to executive officers during the three years preceding such restatement where (1) the payment or award grant was calculated based on achievement of the misstated financial results; (2) the Board of Directors determines the executive engaged in intentional misconduct that materially contributed to the need for the restatement; and (3) a lower payment or award grant would have been made to the executive based upon the restated financial results.
In addition, if the Company is required, as a result of misconduct, to restate its financial results due to its material noncompliance with any financial reporting requirements under the federal securities laws, our CEO and CFO may be legally required to reimburse the Company for any bonus or other incentive-based compensation they received pursuant to the provisions of Section 304 of the Sarbanes-Oxley Act of 2002.
Elements of Compensation
The Company’s principal focus is on total direct compensation, including a portion that is assured and a portion that is at risk. To achieve these objectives, the types of compensation paid to the named executive officers currently consists of base salary, annual discretionary cash bonuses, annual performance incentive compensation (primarily in the form of cash payments), annual cash bonuses and long-term incentive compensation (primarily in the form of restricted stock awards).
“At-Risk” Pay Mix
A significant portion of the compensation for our named executive officers is in the form of at-risk variable compensation. We believe this pay best aligns the interests of our named executive officers with those of our stockholders. The following table details the at-risk and not at-risk direct compensation to our named executive officers for fiscal 2015:
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| | Direct Compensation Pay Mix | | % of Direct Compen- sation "At-Risk" |
| | Fixed Pay: | | Variable Pay: | |
| | Base Salary | | Bonus | | APIP (1) | | RSIP (1) (2) | |
Participant | | $ | | % | | $ | | % | | $ | | % | | $ | | % | |
CEO | | 1,021,760 |
| | 30 | % | | — |
| | — | % | | 1,021,760 |
| | 30 | % | | 1,404,300 |
| | 40 | % | | 70 | % |
CFO | | 487,190 |
| | 34 | % | | — |
| | — | % | | 487,190 |
| | 34 | % | | 468,100 |
| | 32 | % | | 66 | % |
Other Named Executive Officers (averaged) | | 356,667 |
| | 55 | % | | 295,000 |
| | 45 | % | | — |
| | — | % | | — |
| | — | % | | 45 | % |
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(1) | Two of the named executive officers were included as participants in the APIP and RSIP for fiscal 2015: the CEO and the CFO. |
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(2) | The fair value of the restricted stock awards is based on the Company’s Common Stock average high and low market price ($46.81) on the day of grant (March 11, 2015) and the maximum number of shares that can potentially be earned (30,000 shares and 10,000 shares for the CEO and CFO, respectively). |
Base Salary
The Company offers what it believes to be competitive base salaries to its named executive officers. The base salary must be sufficient to attract and retain talented executives and provide a secure base of cash compensation. In addition, base salary levels for the Company’s executive officers are set at levels the Compensation Committee believes to be, based on its general business experience and review of peer company data, competitive in relation to the salary levels of executive officers in other companies within the specialty consumer finance industry and other companies of comparable size, growth, performance and complexity,Company’s peer group, taking into consideration the executive officer’s position, tenure, responsibility and need for special expertise. Annual salary increases, typically determined in January of each year, are not assured and adjustments to base salary compensationsalaries take into account subjective factors such as the executive’s performance against job expectations, and changes in the market and increased job responsibilities and experience. In 2012,
For 2015, the averageCEO’s base salary increase for thewas increased by 3% from $992,000 to $1,021,760, primarily as a cost of living adjustment. The weighted-average base salaries of all named executive officers as a group increased 3% in 2015 as compared to 2014. Over the past five years, the compound annual growth rate in the CEO’s base salary was 4%.
Short-Term Incentive Compensation
The Company’s short-term incentive plans for the named executive officers are intended to drive short-term (typically one year) operating and financial results deemed crucial to the Company’s success.
Annual Performance Incentive Plan - Certain named executive officers may receive annual incentive compensation through the Annual Performance Incentive Plan (“APIP”), which is provided under the termterms of the stockholder-approved Executive Performance Incentive Plan (the “Incentive Plan)Plan”). The APIP provides for the payment of annual cash incentive compensation based upon the achievement of performance goals established annually by the Compensation Committee based on one or more specified performance criteria. The APIP provides for the grant of awards that are intended to qualify as performance-based under Code Section 162(m).
The Company’s Compensation Committee determines the participants in the Incentive Plan.APIP. Participation is limited to named executive officers thatwho are deemed to have direct, overall responsibility for directing the strategy and operations of the Company. Three ofFor 2015, the namedCEO and CFO were the only executive officers positions were included asofficer participants in the APIP for fiscal APIP.
2012: the chief executive officer, the chief operating officer and the chief financial officer. The Compensation Committee also administers the calculation of amounts earned under the APIP. The Compensation Committee measures the performance of the Company against an annual business plan prepared by management and reviewed and approved by the Board of Directors at the beginning of the fiscal year. AchievementThe Company’s level of achievement of the target awardsperformance goals set forth in the annual business plan will result in the payment of a cash incentive award equal to a percentage of the base salary of the participating executive officer. The primary criterion for achieving the target awards is earnings per share from continuing operations. Additional criteria include growth in revenue, gross profit and net income and attainment of store addition goals. The targetsperformance goals are approved by the Compensation Committee and designed to reinforce the Company’s focus on profitability and enhancement of long-term stockholder value. The target incentive awards (“Target Awards”) areparticipants may earn annual cash incentives between 0% and a stated maximum percentage of their respective base salary (which for fiscal 2015 was set at a predetermined percentage350% for the CEO and 250% for the CFO). The range of the executives’ annual base salary. These target award levels are reviewed periodically by the Compensation Committee. The target percentages for each participating executive officer are based on the scope of the named executive officer’s responsibilities, internal pay equity among participating executive officers with similar responsibilities and competitive considerations.considerations and are reviewed annually by the Compensation Committee. The range of target percentage payouts forIncentive Plan provides the chief executive officer for fiscal 2012 was 0% to 350% of the participant’s base salary for 2012. The range of target percentage payouts for the chief operating officer and chief financial officer for fiscal 2012 was 0% to 200% of the participants’ base salary.The Compensation Committee retains certainwith discretion, as provided into the Incentive Plan,extent permitted under Code Section 162(m), to adjust incentive awards to reflect the impact of certain corporate transaction and other extraordinary or nonrecurring events. The Compensation Committee exercised its discretion to reduce the calculated individual incentive awards in light2014; however, in 2015 and 2013, the Compensation Committee did not exercise its discretion to adjust any individual awards.
The following table sets forth each participant’s threshold and maximum payout opportunities, as a percentage of unusual or unforeseen developmentstheir base salary, for each of the 2015 APIP performance measures:
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| | Diluted | | EBITDA From | | | | | | | | |
| | Earnings Per Share | | Continuing Operations | | Store Additions | | Total |
Participant | | Threshold | | Maximum | | Threshold | | Maximum | | Threshold | | Maximum | | Threshold | | Maximum |
CEO | | 9 | % | | 175 | % | | 4 | % | | 75 | % | | 4 | % | | 100 | % | | 4 | % | | 350 | % |
CFO | | 5 | % | | 100 | % | | 3 | % | | 50 | % | | 4 | % | | 100 | % | | 3 | % | | 250 | % |
For fiscal 2015, the Compensation Committee established achievement goals that includes diluted earnings per share targets, EBITDA from continuing operations targets and store additions targets as the performance measures for the APIP (excluding certain non-GAAP adjustments detailed in Appendix A). The Committee believes the nature and mix of these targets is designed to incent an appropriate mix of short-term measures that are earnings and performance oriented while also incenting activity to drive the future growth of the Company. The earnings per share target represents the performance metric which most impacts shareholder returns over a one-year period. The EBITDA target is also focused on the achievement of earnings metrics, but excludes the impact of share repurchases, financing activities and tax strategies, resulting in more favorable measure of core profitability. For this reason, EBITDA is also the measurement used by the Committee to incent long-term compensation awards. The Committee also believes that an appropriate level of store additions is an important short-term strategic target necessary for the Company orto achieve its long-term growth objectives.
The following table sets forth the industryperformance goals for each of the 2015 APIP performance measures, the actual performance achieved and the related percentage of each participant’s base salary earned:
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| | Performance Goals | | 2015 Actual | | Percent of Base Salary Earned |
Performance Measure | | Threshold | | Maximum | | Performance | | CEO | | CFO |
Diluted earnings per share (1) | | $ | 2.70 |
| | $ | 2.90 |
| | $ | 2.42 |
| | — | % | | — | % |
EBITDA from continuing operations ($ thousands) (2) | | $ | 147,163 |
| | $ | 155,727 |
| | $ | 132,201 |
| | — | % | | — | % |
Store additions (3) | | 65 |
| | 90 |
| | 103 |
| | 100 | % | | 100 | % |
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(1) | Diluted Earnings Per Share - the range of 2015 threshold performance to maximum performance represented approximately a 1% decrease to 7% increase (on a constant currency basis) from 2014 actual diluted earnings per share (excluding certain non-GAAP adjustments). The performance range reflected significantly lowered expectations for non-core scrap jewelry and payday lending operations and increased interest expense. |
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(2) | EBITDA from continuing operations ($ thousands) - the range of 2015 threshold performance to maximum performance represented approximately a 6% to 13% increase (on a constant currency basis) from 2014 actual EBITDA from continuing operations (excluding certain non-GAAP adjustments). The performance range reflected significantly lowered expectations for non-core scrap jewelry and payday lending operations. |
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(3) | Store Additions - the range of 2015 threshold performance to maximum performance represented a 5% to 45% increase in store additions compared to the historical five-year average for annual new store openings for the period from 2010 through 2014. |
The Committee believes that the historical payout levels under the APIP demonstrate an appropriate level of rigor in whichsetting the Company operates.annual performance goals. The following table details each participant’s threshold and maximum payout opportunities and the actual percentage of each participant’s base salary earned for the performance measures established by the Compensation Committee over the past five years:
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| 2015 | | 2014 | | 2013 | | 2012 | | 2011 |
| CEO | CFO | | CEO | | CFO | | CEO | CFO | | CEO | CFO | | CEO | CFO |
Threshold | 4 | % | 3 | % | | 3 | % | | 3 | % | | 25 | % | 25 | % | | 25 | % | 25 | % | | 25 | % | 25 | % |
Maximum | 350 | % | 250 | % | | 350 | % | | 250 | % | | 350 | % | 200 | % | | 350 | % | 200 | % | | 300 | % | 175 | % |
Actual | 100 | % | 100 | % | | 179 | % | (1) | 142 | % | (1) | 50 | % | 25 | % | | 350 | % | 200 | % | | 300 | % | 175 | % |
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(1) | Based on the Company’s overall financial performance in 2014, the Compensation Committee elected to apply a discretionary 20% reduction in the dollar value of the amounts awarded under the APIP in 2014. This adjustment reduced the APIP award from 223% of base salary to 179% for the CEO and from 178% of base salary to 142% for the CFO. |
Annual Discretionary Cash Bonuses - The Company’s executive compensation program also includes granting of discretionary annual cash bonuses reflecting the Company’s and the individual executive’s performance. Annual cash bonuses may be paid to certain named executive officers and other officers and executives to reflect the breadth of their expertise and responsibility, achievement of certain financial or strategic results and to make the cash component of compensation competitive with that of their peers at competing firms.the Company’s peers. The Company maintains broad discretion to vary overall cash compensation for a given year by varying the amount, if any, of such cash bonuses. These cash bonuses may reflect a material part of the named executive officers’ overall compensation, with payments commensurate with the executive’s position, responsibilities and individual and overall Company performance. No discretionary cash bonuses were awarded to the CEO or CFO for 2015. Annual cash bonuses, if any, paid to the chief executive officerCEO and CFO are determined and approved by the Compensation Committee.
Annual cash bonuses paid to other named executive officers are calculated based on the chief executive officer’s recommendation and approved by the Compensation Committee.Committee based on the CEO’s recommendation. These discretionary cash bonuses reflected both the achievement of certain operational and financial objectives and the targeted compensation levels necessary to provide total compensation packages necessary to attract and retain executives in senior management roles. Annual cash bonuses are subject to the Compensation Committee’s discretion to award bonuses greater or lower than the recommended amount if they deem it appropriate. In fiscal 2012, the Compensation Committee awardedFiscal 2015 discretionary cash bonuses for achievementbonus awards consisted of certain operational$425,000 to Mr. Ramos, $400,000 to Mr. Moore and financial objectives of $45,000$60,000 to the general counsel and $95,000 to the vice president of finance.Mr. Watson.
Long-Term Incentive Compensation
The compensation objective of retaining the best people for the job leads the Company to make periodic equity award grants.awards to its executive officers. These awards provide incentive for the named executive officers to stay with the Company over the long term.term and align the interests of the executive officers with those of the Company’s stockholders. These equity awards also provide additional flexibility to the Compensation Committee to reward superior or reflect subpar, performance by named executive officers.
Restricted Stock Awards - The Compensation Committee has established a Restricted Stock Incentive Plan (“RSIP”), which is a component of the Company’s Executive Performance2011 Long-Term Incentive Plan, for certain named executive officers. Vesting of thePerformance-based restricted stock awards granted under the RSIP istypically vest over four years, contingent upon the Company attaining defined measures of net incomeearnings growth for future reporting periods. The Compensation Committee will certifycertifies the attainment of performance goals annually upon completion of each fiscal year, and any earned shares are distributed to participants following the end of the applicable performance period. The grants have specific rules related to the treatment of the awards in the event of termination for cause, voluntary resignation, retirement, involuntary termination and change in control.control, which are described later under Potential Payments Upon Termination or Change in Control. The Compensation Committee retains certain discretion,RSIP provides for the grant of awards that are intended to qualify as provided in the RSIP, to adjust incentive awards in light of unusual or unforeseen developments that impact the Company or the industry in which the Company operates. The Company believes that such equity grants align the executives’ interests with those of the Company’s stockholders.performance-based under Code Section 162(m).
The Company granted atA total of 50,000 restricted stock awards under the RSIP in 2012 related to the fiscal 2012 compensation program to the following named executive officers: chief executive officer (30,000 award shares), chief operating officer (10,000 award shares) and chief financial officer (10,000 award shares). Vesting of these 2012 restricted stock awards under the RSIP is contingent upon the Company attaining defined measures of net income growth for reporting periods from 2012 through 2015.
The Company granted an additional 50,000 restricted stock awards under the RSIP in December 2012 related to the fiscal 2013 compensation program to the following named executive officers: chief executive officer (30,000 award shares), chief operating officer (10,000 award shares) and chief financial officer (10,000 award shares). Vesting of these restricted stock awards under the RSIP is contingent upon the Company attaining defined measures of earnings per share growth for reporting periods from 2013 through 2016. The Company does not anticipate granting additional award shares under the RSIP related to the fiscal 2013 compensation program. No other40,000 restricted stock awards were madegranted under the RSIPRISP in fiscal 2015, of which the CEO was granted 30,000 shares and the CFO was granted 10,000 shares. The shares vest in four annual installments based on the attainment of an annual performance target. The defined performance measure for the four year vesting period beginning in 2015 was EBITDA from continuing operations excluding the tax-effected gross earnings contribution from the sale of scrap jewelry. The Compensation Committee believes that EBITDA is a preferred metric to any other employeesuse for long-term performance evaluation because the EBITDA target is focused on the achievement of earnings metrics, but excludes the impact of share repurchases, financing activities and tax strategies, and therefore represents a better measure of core profitability. The cumulative annual EBITDA growth targets over the 2014 base period measure were: 2% growth in 2012.2015, 12% growth in 2016, 22% growth in 2017 and 32% growth in 2018. The growth targets are cumulative in nature meaning that under-performance in a given year does not lower the target amounts for future vesting periods.
During 2012,
The Committee believes that the Company alsohistorical payout levels under the RISP demonstrate an appropriate level of rigor in setting the long-term performance goals. The following table details the number of award shares granted, a total of 8,000 shares of restricted stockvested and forfeited for all performance based share awards granted to other executives (including one of thecurrent participating named executive officers) ofofficers over the Company. These were discretionary awards which vest ratably over time beginning in January 2013, and become fully vested in January 2019. The grants have specific rules related to the treatment of the awards in the event of termination for cause, voluntary resignation, retirement, involuntary termination and change in control.past five years:
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| | | | | | | | | | | | | | | | | |
Grant Year | | Granted | | Measure | | Average Annual Increase (1) | | | Total Vested | | Total Forfeited | | Remaining Unvested |
2015 | | 40,000 |
| | EBITDA | | 7.2% | | | — |
| | 10,000 |
| | 30,000 |
|
2014 | | 40,000 |
| | EBITDA | | 8.8% | | | — |
| | 20,000 |
| | 20,000 |
|
2013 | | 40,000 |
| | EPS | | 9.9% | (2) | | 10,000 |
| | 20,000 |
| | 10,000 |
|
2012 | | 40,000 |
| | Net Income | | 12.5% | (2) | | 20,000 |
| | 20,000 |
| | — |
|
2011 | | 40,000 |
| | Net Income | | 17.1% | (2) | | 24,000 |
| | 16,000 |
| | — |
|
Total | | 200,000 |
| | | | | | | 54,000 |
| | 86,000 |
| | 60,000 |
|
Percent of shares vested and forfeited based on attainment of performance measures | | | | | 39 | % | | 61 | % | | |
| |
(1) | Amount represents the compound annual growth rate of the performance measure based on the respective grant year’s base period. |
From time
(2) The 2013, 2012 and 2011 awards were modified in 2014 to time, qualified stock options are granted byremove gross profit contribution from wholesale scrap jewelry sales (net of tax) from the Company to key executivesperformance measure. Average annual increase is based on the modified base period and employees. Such option grants have always had exercise prices equal to or greater than the fair market value of the underlying stock at the time of grant. No stock options were granted in 2012.actual performance measure.
The date of grant for all equity awards granted to executives and employees is the date of Compensation Committee approval. The Company does not have a program, plan or practice of timing the grant of equity awards in coordination with the release of material non-public information. The Company believes that all such equity grants as described herein align the executives’ interests with those of the Company’s stockholders.
Perquisites and Personal Benefits
Certain named executive officers received additional remuneration consistent with the Company’s approach to hiring and retaining key personnel. Such perquisites include matching contributions to 401(k) accounts, health insurance, life insurance, disability insurance, automobile allowances, club memberships and certain opportunities to travel using the Company’s aircraft and matching contributions to 401(k) accounts.aircraft. The aggregate incremental cost to the Company during fiscal 20122015 of such benefits is reflected in the Summary Compensation Table below.
Chief Executive Officer Compensation
Mr. Wessel was elected to the position of chief executive officer in November 2006. Mr. Wessel’s base salary was $926,000 in 2012, and subsequently increased to $963,000 effective January 2013. Based on the Company’s performance in fiscal 2012, Mr. Wessel received a cash award of $3,241,000 under the APIP (a non-equity incentive plan) and a restricted stock award of 30,000 shares under the RSIP. During 2012, Mr. Wessel also received a restricted stock award of 30,000 shares under the RSIP related to the Company's fiscal 2013 compensation program. Mr. Wessel’s base salary was $890,000 in 2011. Based on the Company’s performance in fiscal 2011, Mr. Wessel received a cash award of $2,670,000 under the APIP (a non-equity incentive plan) and a restricted stock award of 30,000 shares under the RSIP.
Employment Agreements and Change in Control Provisions
The Company and the Compensation Committee believe that the employment agreements are necessary in order to attract and retain the executives and, accordingly, the Company has entered into employment agreements with Messrs. Wessel, Orr, Ramos and Watson,Moore, which are more fully described in “Employment Agreements” set forth below. Executive officers who do not have an employment agreement serve at the will of the Board of Directors, thus enabling the Board of Directors to remove an executive officer whenever it is in the Company’s best interest, with full discretion on any severance package (excluding vested benefits). The Compensation Committee believes that the employment agreements and(and the change-of-control provisions included therein) that have been entered into were merited in light of all relevant circumstances, including each individual’s past employment experience, desired terms and conditions of employment and the strategic importance of their respective positions, including stability and retention. The Compensation Committee believes thatreviews the employment agreements at the time they are necessaryentered into in order to attractdetermine current market terms for the particular executive and retain the executives. agreement.
The Compensation Committee believes that the change-of-control provisions are necessary in order to retain and maintain stability among the executive group and that the terms of the change-of-control provisions are reasonable based on its review of the change-of-control provisions for similarly situated peer group companies. The Committee reviewschange in control provisions in the employment agreements at the time they are entered into in order to determine current market terms for the particularCEO and CFO provide for severance benefits only in the event of an involuntary termination of employment by the Company without “cause” or by the executive and agreement.for “good reason,” as such terms are defined in the employment agreements.
The overall goal of the Compensation Committee is to insure that compensation policies are established that are consistent with the Company’s strategic business objectives and that provide incentives for the attainment of those objectives. This is affected in the context of a compensation program that includes base pay, annual incentive compensation and stock ownership.
Other ItemsTax and Accounting Considerations
None noted.
Compliance withThe Company considers accounting and tax implications when designing its executive compensation and incentive programs. For example, the Compensation Committee has carefully considered the implications of Section 162(m) of the Internal Revenue Code, Section 162(m)
Deductibilityand believes tax deductibility of compensation expense under IRC Section 162 (m) has not been a material consideration foris an important consideration. Accordingly, the Compensation Committee, where possible and considered appropriate, strives to date duepreserve corporate tax deductions, including the deductibility of compensation to named executive officers. The Compensation Committee also reserves flexibility, however, where it is deemed necessary and in the best interests of the
Company and its stockholders to continue to attract and retain the best possible executive talent, to approve compensation arrangements that are not necessarily fully tax deductible to the levels and types of compensation paid. The Company recorded stock-based compensation expense of $1,300,000 in 2012. The expense related to equity compensation has been and will continue to be a material consideration in the overall compensation program design.Company.
Compensation Committee Report
The Compensation Committee of the Company has reviewed and discussed the Compensation“Compensation Discussion and AnalysisAnalysis” set forth above with management and, based on such review and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation“Compensation Discussion and AnalysisAnalysis” be included in this Proxy Statement and incorporated by reference into the Company’s Annual Report on Form 10-K.
Members of the Compensation Committee:
Mikel D. Faulkner
Randel G. Owen
Jorge MontañoGabriel Guerra Castellanos
The Compensation Committee report above does not constitute “soliciting material” and will not be deemed “filed” or incorporated by reference into any of the Company’s filings under the Securities Act of 1933, as amended (“Securities Act”), or the Exchange Act, except to the extent that the Company specifically incorporates it by reference herein.
Summary Compensation Table
The table below summarizes the total compensation paid or earned by Messrs. Rick L. Wessel, R. Douglas Orr, Raul R. Ramos, Sean D. Moore and Peter H. Watson, Jim A. Motley and Stephen O. Coffman, the 20122015 named executive officers, for the fiscal years ended December 31, 20122015, 20112014 and 2010.2013.
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| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | Non- | | | | |
| | | | | | | | | | Equity | | | | |
| | | | | | | | | | Incentive | | | | |
| | | | | | | | | | Plan | | All Other | | |
Name and | | | | | | | | Stock | | Compen- | | Compen- | | |
Principal | | | | Salary | | Bonus | | Awards | | sation | | sation | | Total |
Position | | Year | | $ | | $ | | $ | | $ (3) | | $ (4) | | $ |
Rick L. Wessel, | | 2012 | | 926,000 |
| | — |
| | 2,593,800 |
| (1) | 3,241,000 |
| | 98,789 |
| | 6,859,589 |
|
Chief Executive | | 2011 | | 890,000 |
| | — |
| | 892,200 |
| (1) | 2,670,000 |
| | 69,217 |
| | 4,521,417 |
|
Officer and | | 2010 | | 850,000 |
| | — |
| | 855,000 |
| (1) | 1,487,500 |
| | 70,354 |
| | 3,262,854 |
|
President | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
R. Douglas Orr, | | 2012 | | 437,000 |
| | — |
| | 864,600 |
| (1) | 874,000 |
| | — |
| | 2,175,600 |
|
Executive VP, | | 2011 | | 420,000 |
| | — |
| | 297,400 |
| (1) | 735,000 |
| | — |
| | 1,452,400 |
|
Chief Financial | | 2010 | | 400,000 |
| | — |
| | 285,000 |
| (1) | 500,000 |
| | — |
| | 1,185,000 |
|
Officer | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
Peter H. Watson, | | 2012 | | 375,000 |
| | 45,000 |
| | — |
| | — |
| | — |
| | 420,000 |
|
General Counsel | | 2011 | | 364,000 |
| | 37,000 |
| | 29,740 |
| (2) | — |
| | — |
| | 430,740 |
|
| | 2010 | | 216,000 |
| | 15,000 |
| | — |
| | — |
| | 116,750 |
| | 347,750 |
|
| | | | | | | | | | | | | | |
Jim A. Motley, | | 2012 | | 241,020 |
| | 95,000 |
| | 48,870 |
| (2) | — |
| | — |
| | 384,890 |
|
Vice President of | | 2011 | | 234,000 |
| | 90,000 |
| | 43,360 |
| (2) | — |
| | — |
| | 367,360 |
|
Finance | | 2010 | | 225,000 |
| | 70,000 |
| | 28,500 |
| (2) | — |
| | — |
| | 323,500 |
|
| | | | | | | | | | | | | | |
Stephen O. | | 2012 | | 458,000 |
| | — |
| | 864,600 |
| (1) | 916,000 |
| | — |
| | 2,238,600 |
|
Coffman, Chief | | 2011 | | 440,000 |
| | — |
| | 297,400 |
| (1) | 770,000 |
| | — |
| | 1,507,400 |
|
Operating | | 2010 | | 420,000 |
| | — |
| | 285,000 |
| (1) | 525,000 |
| | — |
| | 1,230,000 |
|
Officer (5) | | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | Non- | | | | |
| | | | | | | | | | Equity | | | | |
| | | | | | | | | | Incentive | | | | |
| | | | | | | | | | Plan | | All Other | | |
Name and | | | | | | | | Stock | | Compen- | | Compen- | | |
Principal | | | | Salary | | Bonus | | Awards | | sation | | sation | | Total |
Position | | Year | | $ | | $ | | $ (1) | | $ (2) | | (3) | | $ |
Rick L. Wessel, | | 2015 | | 1,021,760 |
| | — |
| | 1,404,300 |
| | 1,021,760 |
| | 79,594 |
| | 3,527,414 |
|
Chief Executive Officer | | 2014 | | 992,000 |
| | — |
| | 1,497,000 |
| | 1,771,917 |
| | 99,035 |
| | 4,359,952 |
|
and President | | 2013 | | 963,040 |
| | — |
| | — |
| | 481,520 |
| | 103,617 |
| | 1,548,177 |
|
| | | | | | | | | | | | | | |
R. Douglas Orr, | | 2015 | | 487,190 |
| | — |
| | 468,100 |
| | 487,190 |
| | — |
| | 1,442,480 |
|
EVP, Chief Financial | | 2014 | | 473,000 |
| | — |
| | 499,000 |
| | 671,986 |
| | — |
| | 1,643,986 |
|
Officer | | 2013 | | 454,480 |
| | 100,000 |
| | — |
| | 113,620 |
| | — |
| | 668,100 |
|
| | | | | | | | | | | | | | |
Raul R. Ramos, | | 2015 | | 345,000 |
| | 425,000 |
| | — |
| | — |
| | — |
| | 770,000 |
|
SVP Latin American | | 2014 | | 335,000 |
| | 400,000 |
| | — |
| | — |
| | — |
| | 735,000 |
|
Operations | | 2013 | | 322,537 |
| | 375,000 |
| | | | | | | | 697,537 |
|
| | | | | | | | | | | | | | |
Sean D. Moore, | | 2015 | | 320,000 |
| | 400,000 |
| | — |
| | — |
| | — |
| | 720,000 |
|
SVP Store Development | | 2014 | | 310,000 |
| | 375,000 |
| | — |
| | — |
| | — |
| | 685,000 |
|
and Facilities | | 2013 | | 286,038 |
| | 350,000 |
| | | | | | | | 636,038 |
|
| | | | | | | | | | | | | | |
Peter H. Watson, | | 2015 | | 405,000 |
| | 60,000 |
| | — |
| | — |
| | — |
| | 465,000 |
|
SVP Compliance and | | 2014 | | 397,838 |
| | 60,000 |
| | — |
| | — |
| | 11,100 |
| | 468,938 |
|
Government Relations | | 2013 | | 386,250 |
| | 55,000 |
| | — |
| | — |
| | — |
| | 441,250 |
|
| |
(1) | Amounts represent the aggregate grant date fair value determined in accordance with FASB ASC Topic 718 of restricted stock awards granted under the terms of the Company’s RSIP, which are described in the Long“Long Term Incentive CompensationCompensation” section of the Compensation“Compensation Discussion and Analysis included herein.Analysis” above. Grant date fair values were determined by multiplying the number of shares granted times the closingaverage of the high and low market price, of the Company’s Common Stock on the date of grant. Approximately $910,000, $440,000 and $855,000 was recognized as compensation expense in fiscal 2012, 2011 and 2010, respectively, as a result of the performance-based vesting of all RSIP awards. |
The 2012 restricted stock awards granted under the RSIP consisted of 30,000 shares to the chief executive officer and 10,000 shares each to the chief operating officer and chief financial officer; 25% of the awards were eligible for performance-based vesting based upon the 2012 performance measure, while 75% of performance-based vesting will be based on the performance measures in 2013, 2014 and 2015 (25% per year). The performance measure is defined as the percentage of net income growth over the comparative base period in fiscal 2011. For 2012, the Company achieved the targeted growth in net income compared to the base year. The Compensation Committee certified the achievement of the measure and the participants in RSIP were each awarded the maximum number of shares eligible for vesting (25%) of the total Target Award, based on actual performance results in 2012.
Additional restricted stock awards granted under the RSIP in December 2012 related to the Company's 2013 compensation program, which consisted of 30,000 shares to the chief executive officer and 10,000 shares each to the chief operating officer and chief financial officer; 25% of the awards are eligible for performance-based vesting based upon a 2013 performance measure, while 75% of performance-based vesting will be based on the performance measures in 2014, 2015 and 2016 (25% per year). The performance measure is defined as the percentage of earnings per share growth over the comparative base period in fiscal 2012. The Company does not anticipate granting additional award shares under the RSIP related to the fiscal 2013 compensation program.
The 2011 restricted stock awards granted under the RSIP consisted of 30,000 shares to the chief executive officer and 10,000 shares each to the chief operating officer and chief financial officer; 20% of the awards were eligible for performance-based vesting based upon the 2011 performance measure, while 80% of performance-based vesting will be based on the performance measures in 2012, 2013, 2014 and 2015 (20% per year). The performance measure is defined as the percentage of net income growth over the comparative base period in fiscal 2010. For 2011 and 2012, the Company achieved the targeted growth in net income compared to the base year. The Compensation Committee certified the achievement of the measure and the participants in RSIP were each awarded the maximum number of shares eligible for vesting (20%) of the total Target Award, based on actual performance results in 2011.
The 2010 restricted stock awards granted under the RSIP consisted of 30,000 shares to the chief executive officer and 10,000 shares each to the chief operating officer and chief financial officer; 60% of the awards were eligible for performance-based vesting based upon the 2010 performance measure, while 40% of performance-based vesting will be based on the performance measures in 2011, 2012, 2013 and 2014 (10% per year). The performance measure is defined as the percentage of net income growth over the comparative base period in fiscal 2009. For 2010, 2011 and 2012, the Company achieved the targeted growth in net income compared to the base. The Compensation Committee certified the achievement of the measure and the participants in RSIP were each awarded the maximum number of shares eligible for vesting each year based on actual performance results in 2010, 2011 and 2012, respectively.
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(2) | Amounts represent the grant date fair value of restricted stockcash incentive awards granted under the Company’s 2011 Long-Term Incentive Plan. Grant date fair values were determined by multiplying the number of shares granted times the closing market price of the Company’s Common Stock on the date of grant. The grants have specific rules related to the treatment of the awards in the event of termination for cause, voluntary resignation, retirement, involuntary termination and change in control. |
The restricted stock awards granted in 2012 consisted of 1,000 shares to the vice president of finance. These were discretionary awards which vest ratably over time beginning in January 2013, and become fully vested in January 2019.
The restricted stock awards granted in 2011 consisted of 1,000 shares each to the general counsel and to the vice president of finance. These were discretionary awards which vest ratably over time beginning in January 2012, and become fully vested in January 2018.
The restricted stock awards granted in 2010 consisted of 1,000 shares to the vice president of finance. These were discretionary awards which vest ratably over time beginning in January 2011, and become fully vested in January 2017.
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(3) | Amounts represent cash awards grantedearned under the terms of the Company’s APIP which is provided under the terms of the Incentive Plan.APIP. The APIP provides for the payment of annual cash incentive compensation based upon the achievement of performance goals established annually by the Compensation Committee based on one or more specified performance criteria. Overcriteria, as more fully described in the prior three fiscal years, the Compensation Committee has not exercised its discretion to alter any individual awards.“Compensation Discussion and Analysis” above. |
For fiscal 2012, the Compensation Committee established diluted earnings per share from continuing operations as the primary performance measure for the APIP. Additional measures related to growth in revenues, gross profit and net income and achievement of store addition targets were also included as components. For the participating executive officers, the Company had to achieve diluted earnings per share from continuing operations targets in ranges set at the lesser of $2.64 to $2.75 per share or a 17% to 22% increase over the prior year in order to receive awards under the APIP. The range of awards related to the earnings per share target ranged from 25% to 225% of the CEO’s Target Award for 2012 and from 25% to 125% of the other participants’ Target Award for 2012. In addition, the chief executive officer could receive awards totaling from 25% to 125% of the Target Award for attaining goals related to revenue growth, gross profit growth, net income growth and store openings/additions, making the chief executive officer’s maximum achievable award under the APIP equal to 350% of the Target Award. The other participants could receive awards totaling from 25% to 75% of the Target Award for attaining goals related to revenue growth, gross profit growth, and store openings/additions and, making the other participants’ maximum achievable award under the APIP equal to 200% of the Target Award. For 2012, and as provided in the APIP, earnings per share, revenue growth, gross profit and net income growth measures as described above were adjusted retroactively to reflect the impact of the Company’s strategic decision to discontinue operations at certain consumer loan stores in Texas. Actual earnings per share from continuing operations in fiscal 2012 were $2.73 per share, which excluded a $0.03 loss per share from the discontinued operations. In addition, the Company exceeded all store addition targets and growth targets for revenue, gross profit and net income. This resulted in the Compensation Committee awarding the maximum incentive awards being paid to each of the participating executive officers, which was 350% of the Target Award for the chief executive officer and 200% of the Target Award for the other participants.
For fiscal 2011, the Compensation Committee established diluted earnings per share from continuing operations as the primary performance measure for the APIP. Additional measures related to growth in revenues, gross profit and net income and achievement of store addition targets were also included as components. For the participating executive officers, the Company had to achieve threshold diluted earnings per share from continuing operations in a range of $2.08 to $2.20 in order to receive an award under the APIP. The range of awards related to the earnings per share target ranged from 50% to 175% of the CEO’s Target Award for 2011 and from 25% to 100% of the other participants’ Target Award for 2011. In addition, the chief executive officer could receive awards totaling from 25% to 125% of the Target Award for attaining goals related to revenue growth, gross profit growth, net income growth and store openings/additions, making the chief executive officer’s maximum achievable award under the APIP equal to 300% of the Target Award. The other participants could receive awards totaling from 25% to 75% of the Target Award for attaining goals related to revenue growth, gross profit growth, and store openings/additions and, making the other participants’ maximum achievable award under the APIP equal to 175% of the Target Award. For 2011, and as provided in the APIP, earnings per share measures as described above were adjusted retroactively to reflect the impact of the Company’s decision to sell its short-term loan operations in Illinois. Actual earnings per share from continuing operations in fiscal 2011, which excluded the earnings from discontinued Illinois short-term loan operation, were $2.25 per share. In addition, the Company exceeded all store addition targets and growth targets for revenue, gross profit and net income. This resulted in the Compensation Committee awarding the maximum incentive awards being paid to each of the participating executive officers, which was 300% of the Target Award for the chief executive officer and 175% of the Target Award for the other participants.
For fiscal 2010, the Compensation Committee established diluted earnings per share from continuing operations as the primary performance measure for the APIP. For the chief executive officer, additional measures related to store additions and revenue growth from continuing operations were also included as lesser components. For the participating executive officers, the Company had to achieve threshold diluted earnings per share from continuing operations in a range of $1.50 to $1.62 in order to receive an award under the APIP. The range of awards related to the earnings per share target range from 25% to 125% of each participant’s Target Award for 2010. In addition, the chief executive officer could achieve two additional awards equal to 25% of the chief executive officer’s Target Award for attaining goals related to store openings/additions and revenue growth, making the chief executive officer’s maximum achievable award under the APIP equal to 175% of the Target Award. For 2010, and as provided in the APIP, earnings per share measures as described above were adjusted retroactively to reflect the impact of the Company’s decision to discontinue its credit services operations in Maryland due to a change in state law. Actual earnings per share from continuing operations in fiscal 2010, which excluded the earnings from discontinued Maryland credit services operation, were $1.75 per share. In addition, the Company exceeded the store addition targets and revenue growth targets established for the chief executive officer. This resulted in the Compensation Committee awarding the maximum incentive awards being paid to each of the participating executive officers, which was 175% of the Target Award for the chief executive officer and 125% of the Target Award for the other participants.
| |
(4)(3) | The Company provides the named executive officers with certain group life, health, medical, and other noncash benefits generally available to all salaried employees that are not included in this column pursuant to SEC rules. The amounts shown in this column include (i) matching contributions by the Company under the First Cash 401(k) Profit Sharing Plan; (ii) automobile allowances to certain executive officers; (iii) reimbursement for club dues, (iv) reimbursement of health insurance and long-term disability premiums for Mr. Wessel, and (v) personal use of the Company’s aircraft by Mr. Wessel. (The incremental cost of the personal use of the corporate aircraft was determined on a per flight and/or hours used basis based on variable costs associated with personal flight activity. The variable costs used in the calculation included fuel, crew compensation and travel, certain maintenance and repair expenses, related unoccupied positioning, or “deadhead,” flights, landing/parking and supplies.) As permitted by SEC rules, no amounts are shown in this table for perquisites and personal benefits for any individual named executive officers for whom such amounts do not exceed $10,000 in the aggregate. |
Mr. Wessel’s all other compensation for 20122015 includes matching contributions to aunder the First Cash 401(k) accountProfit Sharing Plan of $6,000,$6,360, an automobile allowance of $7,971,$7,396, reimbursement for dues at a country club in the amount of $17,485,$19,810, Company-paid life insurance premiums in the amount of $1,242,$551, Company-paid health insurance premiums in the amount of $5,817,$5,189, allowance for tax preparation fees of $3,000, personal use of the corporate aircraft of $59,914$36,565 and Company-paid long-term disability insurance premiums in the amount of $360.
Mr. Wessel’s other compensation for 2011 includes matching contributions to a 401(k) account$723. The incremental cost of $5,880, an automobile allowance of $7,729, reimbursement for dues at a country club in the amount of $21,507, Company-paid health insurance premiums in the amount of $5,278, personal use of the corporate aircraft of $27,542 and Company-paid long-term disability insurance premiumswas determined on a per flight and/or hours used basis based on variable costs associated with personal flight activity. The variable costs used in the amountcalculation included fuel, crew compensation and travel, certain maintenance and repair expenses, related unoccupied positioning, or “deadhead,” flights, landing/parking and supplies.
Employment Agreements
The Company currently has employment agreements with the following named executive officers: Mr. Wessel, Mr. Orr, Mr. Ramos and Mr. Moore. For a summary of $1,282.
Mr. Wessel’s other compensation for 2010 includes matching contributions to a 401(k) account of $5,880, an automobile allowance of $7,466, reimbursement for dues at a health clubthese agreements, see the discussion in the amount“Potential Payments Upon Termination or Changes in Control” section below.
Grants of $2,078, Company-paid life insurance premiums inPlan-Based Awards for Fiscal Year 2015
The following table provides information regarding individual grants of plan-based awards to the amountnamed executive officers during 2015. Except as set forth below, there were no other grants of $5,560, Company-paid health insurance premiumsequity or non-equity awards to named executive officers during 2015.
|
| | | | | | | | | | | | | | | | | | | | | | | |
Name | | Grant Date | | Estimated Future Payouts Under Non- Equity Incentive Plan Awards (1) | | Estimated Future Payouts Under Equity Incentive Plan Awards (2) | | All Other Stock Awards: Number of Shares of Stock or Units (#) | | All Other Option Awards: Number of Securities Underlying Options (#) | | Exercise or Base Price of Option Awards ($/Sh) | | Grant Date Fair Value of Stock and Option Awards $ |
| | Thres- hold ($) | | Target ($) | | Maximum ($) | | Thres- hold (#) | | Target (#) | | Maximum (#) | | | | |
Rick L. | | — | | 38,316 | | 1,021,760 | | 3,576,160 |
| | — | | — | | — | | — | | — | | — | | — |
Wessel | | Mar. 11, 2015 | | — | | — | | — | | 30,000 | | 30,000 | | 30,000 | | — | | — | | — | | 1,404,300 |
| | | | | | | | | | | | | | | | | | | | | | |
R. Douglas | | — | | 18,270 | | 487,190 | | 1,217,975 |
| | — | | — | | — | | — | | — | | — | | — |
Orr | | Mar. 11, 2015 | | — | | — | | — | | 10,000 | | 10,000 | | 10,000 | | — | | — | | — | | 468,100 |
| | | | | | | | | | | | | | | | | | | | | | |
Raul R. | | — | | — | | — | | — | | — | | — | | — | | — | | — | | — | | — |
Ramos | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Sean D. | | — | | — | | — | | — | | — | | — | | — | | — | | — | | — | | — |
Moore | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Peter H. | | — | | — | | — | | — | | — | | — | | — | | — | | — | | — | | — |
Watson | | | | | | | | | | | | | | | | | | | | | | |
| |
(1) | Amounts represent threshold and maximum potential payouts under the terms of the APIP, which is described in the “Short-Term Incentive Compensation” section of the “Compensation Discussion and Analysis” above. The actual payouts awarded under the terms of APIP were $1,021,760 and $487,190 to Mr. Wessel and Mr. Orr, respectively, and such amounts are reflected in the “Summary Compensation Table” above. |
| |
(2) | Amounts represent the number of shares that were granted and may be earned under the RSIP, which is described in the “Long-Term Incentive Compensation” section of the “Compensation Discussion and Analysis” above. 25% of these awards may vest based on the Company’s achievement of performance criteria in each of fiscal 2015, 2016, 2017 and 2018. Based on the Company’s performance in 2015, none of the awards eligible for vesting in 2015 were earned and such awards were forfeited. |
Outstanding Equity Awards at 2015 Fiscal Year-End
The following table provides information on the amountholdings of $5,277, personal usestock options and stock awards by the named executive officers as of the corporate aircraft of $43,255December 31, 2015. Each outstanding option and Company-paid long-term disability insurance premiums in the amount of $837.stock award is shown separately for each named executive officer.
Mr. Watson’s other compensation was for legal and consulting fees earned prior to him becoming an employee and officer of the Company beginning in May 2010. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Option Awards | | Stock Awards |
Name | | Number of Securities Underlying Unexercised Options (#) Exercisable | | Number of Securities Underlying Unexercised Options (#) Unexercisable | | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | | Option Exercise Price ($) | | Option Expiration Date | | Number of Shares or Units of Stock That Have Not Vested (#) | | Market Value of Shares or Units of Stock That Have Not Vested ($) (8) | | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) (8) |
Rick L. | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 7,500 |
| (3) | 280,725 |
|
Wessel | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 15,000 |
| (4) | 561,450 |
|
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 22,500 |
| (5) | 842,175 |
|
| | | | | | | | | | | | | | | | | | |
R. Douglas | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 2,500 |
| (3) | 93,575 |
|
Orr | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 5,000 |
| (4) | 187,150 |
|
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 7,500 |
| (5) | 280,725 |
|
| | | | | | | | | | | | | | | | | | |
Raul R. | | — |
| | 40,000 |
| (1) | | | 38.00 |
| | 11/2021 |
| | — |
| | — |
| | — |
| | — |
|
Ramos | | — |
| | — |
| | — |
| | — |
| | — |
| | 600 |
| (6) | 22,458 |
| | — |
| | — |
|
| | | | | | | | | | | | | | | | | | |
Sean D. | | — |
| | 50,000 |
| (2) | — |
| | 40.00 |
| | 12/2021 |
| | — |
| | — |
| | — |
| | — |
|
Moore | | — |
| | — |
| | — |
| | — |
| | — |
| | 600 |
| (6) | 22,458 |
| | — |
| | — |
|
| | | | | | | | | | | | | | | | | | |
Peter H. | | — |
| | — |
| | — |
| | — |
| | — |
| | 300 |
| (7) | 11,229 |
| | — |
| | — |
|
Watson | | | | | | | | | | | | | | | | | | |
| |
(1) | Option award granted in 2011. Vesting is time-based with 25% of the award vesting on July 1, 2018, 25% of the award vesting on July 1, 2019, 25% of the award vesting on July 1, 2020 and 25% of the award vesting on July 1, 2021. |
| |
(2) | Option award granted in 2011. Vesting is time-based with 20% of the award vesting on July 1, 2016, 20% of the award vesting on July 1, 2017, 20% of the award vesting on July 1, 2018, 20% of the award vesting on July 1, 2019 and 20% of the award vesting on July 1, 2020. |
| |
(3) | Restricted stock awards granted under the RSIP to current named executive officers in December 2012 related to the Company’s 2013 compensation program consisted of 30,000 shares to the CEO and 10,000 shares to the CFO; 25% of the awards were eligible for performance-based vesting based upon achievement of performance measures in 2013, 2014, 2015 and 2016. The performance measure is defined as the percentage of earnings per share from continuing operations growth over the comparative base period. For 2013, the Company did not achieve the target growth in earnings per share from continuing operations compared to the base year and the awards available for vesting in 2013 were forfeited. In 2014, the Compensation Committee modified the performance criteria to exclude earnings per share from non-core scrap jewelry operations for the 2014, 2015 and 2016 performance measures. For 2014, the Compensation Committee certified the achievement of the measure and the participants in RSIP were each awarded the maximum number of shares eligible for vesting (25% of the grant), based on actual performance results in 2014. For 2015, the Company did not achieve the target growth in earnings per share from continuing operations compared to the base year and the awards available for vesting in 2015 were forfeited. |
| |
(4) | The 2014 restricted stock awards granted under the RSIP to current named executive officers consisted of 30,000 shares to the CEO and 10,000 shares to the CFO; 25% of the awards were eligible for performance-based vesting based upon achievement of performance measures in 2014, 2015, 2016 and 2017. The performance measure is defined as the percentage of EBITDA, excluding gross profit from non-core scrap gold jewelry operations, growth over the comparative base period. For 2014 and 2015, the Company did not achieve the target growth in EBITDA compared to the base year and the awards available for vesting in 2014 and 2015 were forfeited. |
| |
(5) | Mr. Coffman resignedThe 2015 restricted stock awards granted under the RSIP to current named executive officers consisted of 30,000 shares to the CEO and 10,000 shares to the CFO; 25% of the awards were eligible for performance-based vesting based upon achievement of performance measures in 2015, 2016, 2017 and 2018. The performance measure is defined as an officerthe percentage of EBITDA, excluding gross profit from non-core scrap gold jewelry operations, growth over the comparative base period. For 2015, the Company did not achieve the target growth in EBITDA compared to the base year and employee effective February 19, 2013,the awards available for vesting in 2015 were forfeited. |
| |
(6) | Restricted stock awards granted in 2010. Vesting is time-based with 300 shares scheduled to vest on January 31 of 2016 and 2017. |
| |
(7) | Restricted stock awards granted in 2011. Vesting is time-based with 150 shares scheduled to vest on January 31 of 2016 and 2017. |
| |
(8) | The market value of the unvested share awards is based on the closing price of the Company’s Common Stock as of December 31, 2015, which was not entitled to any severance payments in connection with the termination of his employment agreement.$37.43. |
Employment AgreementsOption Exercises and Stock Vested In Fiscal 2015
The following table provides information for the named executive officers regarding (1) the aggregate stock options exercised during 2015, including the number of shares acquired on exercise and the value realized, and (2) the aggregate number of shares acquired upon the vesting of restricted stock awards and the value realized, each before the payment of any applicable withholding tax and broker commissions:
|
| | | | | | | | | | | | |
| | Option Awards | | Stock Awards |
Name | | Number of Shares Acquired on Exercise (1) | | Value Realized on Exercise $ (2) | | Number of Shares Acquired on Vesting | | Value Realized on Vesting $ (3) |
Rick L. Wessel | | 340,000 |
| | 7,670,900 |
| | — |
| | — |
|
R. Douglas Orr | | 175,000 |
| | 4,053,537 |
| | — |
| | — |
|
Raul R. Ramos | | 30,000 |
| | 559,671 |
| | 300 |
| | 14,856 |
|
Sean D. Moore | | 10,000 |
| | 207,916 |
| | 300 |
| | 14,856 |
|
Peter H. Watson | | — |
| | — |
| | 150 |
| | 7,428 |
|
| |
(1) | See detail in table below regarding disposition of shares acquired on exercise. |
| |
(2) | Value realized represents the excess of the fair market value of the shares at the time of exercise over the exercise price of the options. |
| |
(3) | Value realized represents the value as calculated based on the price of the Company’s common stock on the vesting date. |
The following table details the number of shares acquired on exercise of option awards during fiscal 2015:
|
| | | | | | | | | | | | |
| | Disposition of Shares Acquired on Exercise of Option Awards | | Total |
Name | | Shares Sold | | Shares Net Settled | | Shares Purchased Held By Executive | |
Rick L. Wessel | | — |
| | 25,000 |
| | 315,000 |
| | 340,000 |
|
R. Douglas Orr | | 15,000 |
| | 40,000 |
| | 120,000 |
| | 175,000 |
|
Raul R. Ramos | | 30,000 |
| | — |
| | — |
| | 30,000 |
|
Sean D. Moore | | 10,000 |
| | — |
| | — |
| | 10,000 |
|
Peter H. Watson | | — |
| | — |
| | — |
| | — |
|
Pension Benefits
The Company doesnot have a defined benefit pension plan for its employees. The only retirement plan available to the named executive officers was the Company’s qualified 401(k) savings plan, which is available to all employees.
Nonqualified Defined Contribution and Other Nonqualified Deferred Compensation Plans
The Company doesnot have nonqualified defined contribution and other nonqualified deferred compensation plans for its employees or directors.
Potential Payments Upon Termination or Change in Control
The Company currently has existing employment agreements with threecertain of the named executive officers that will require it to makeprovide for certain severance payments to these individualsand other benefits in the event of the executive’s termination of their employment or change in control of the Company. In addition, the Company’s executive compensation and benefit plans provide such named executive officers with certain rights or the right to receive payments in the event of the termination of their employment or upon a change in control of the Company. The amounts payable toA summary of these agreements, including the potential payments and benefits each of the named executive officers in each situation is described below, assuming that each individual’s employmentofficer would be entitled to receive if they had terminated their employment under certain circumstances, or if there had been a change in control of the Company, had occurred onin each case as of December 31, 20122015., is provided below.
In 2007, Mr. Wessel entered into an amended and restated employment agreement with the Company through December 31, 20152012 to serve as the chief executive officerCEO and president of the Company, which at the discretion of the Board of Directors may be extended for additional successive periods of one year on each January 1 anniversary. The agreement has been amended to extend the term through December 31, 2018. The agreement was amended in June 2014 to provide for severance benefits only in the event of an involuntary termination of employment by the Company without “cause” or by the executive for “good reason,” as such terms are defined in the employment agreement. The agreement was amended in June 2014, to narrow the definition of “good reason” by removing a right to severance in the event the executive voluntarily leaves the company following a change in control. The current agreement, as amended, provides for: (i) a base salary of $963,040, with increases at the discretion of the Compensation Committee; (ii) an annual bonus at the discretion of the Compensation Committee; (iii) participation in the Company’s employee benefit and compensation plans at the discretion of the Compensation Committee;plans; and (iv) certain fringe benefits including club membership, use of the Company airplane, car, vacation, a term life insurance policy with a beneficiary designated by Mr. Wessel in the amount of $4 million; and (v) reimbursement of business related expenses.benefits. Mr. Wessel has agreed not to compete with the Company for a period of one year following his termination and not to solicit employees of the Company and not to solicit customers of the Company for a period of 90 days following his termination. Upon a changetermination of control, Mr. Wessel may terminate the employment agreement with 90 days’ notice. Upon a change in control or other termination by Mr. Wessel for good causereason or termination by the Company without cause or due to death or disability, the Company has agreed to pay Mr. Wessel all accrued compensation and expenses, plus all compensation and benefits provided for in the employment agreement through the term of the agreement.agreement, including base salary, annual bonus, participation in all benefit and compensation plans and fringe benefits. If Mr. Wessel’s agreement had been terminated on December 31, 20122015 by the Company without cause or as a result of death or disability, or by Mr. Wessel for good cause, or following a change in control, Mr. Wessel would have been entitled to receive $2,778,000$4,087,000 in severance payments. All payments made in connection
with the termination of Mr. Wessel’s agreement must be paid by the Company in a single lump sum thirty days following the termination date of the agreement. Mr. Wessel’s current base salary for 2013 is $963,000 per year.and benefits. In addition, to the change in control provisions provided under the employment agreement, in the event of a change in control on December 31, 20122015, Mr. Wessel would also have vested in 76,50045,000 shares of restricted stock, underwith a value of $1,684,350 based on the termsclosing price of the Company’s Restricted Stock Incentive Plans.stock on December 31, 2015.
In April 2010, Mr. Orr entered into an employment agreement with the Company effective through December 31, 2013 to serve as the executive vice president and chief financial officerCFO of the Company. In July 2013, the agreement was amended to extend the term through December 31, 2016. The agreement provides for severance benefits only in the event of an involuntary termination of employment by the Company without “cause” or by the executive for “good reason,” as such terms are defined in the employment agreement. The agreement was amended in June 2014, to narrow the definition of “good reason” by removing a right to severance in the event the executive voluntarily leaves the company following a change in control. The current agreement, as amended, provides for: (i) a base salary of $454,480, with increases at the discretion of the Compensation Committee; (ii) an annual cash bonus and/or incentive award at the discretion of the Compensation Committee; and (iii) certain fringe benefits and vacation; and (iv) reimbursement of business related expenses.benefits. Mr. Orr has agreed not to compete with the Company for a period of three years following his termination and not to solicit employees of the Company and not to solicit customers of the Company for a period of three years following his termination. In the event of termination of the agreement by the Company, other than for cause, Mr. Orr is entitled to severance payments equal to his then current annual base salary for twelve months. If this agreementMr. Orr’s employment had been terminated by the Company on December 31, 2012,2015, other than for cause, Mr. Orr would have been entitled to severance payments equal to $437,000,$487,000 (his then current base salary), paid over twelve months. In addition, shouldUpon a future change in control of Company occur,and termination by Mr. Orr for good reason, the agreement provides for severance payments to Mr. Orr equal to 100% of his then current annual base salary for remaining term of the agreement, or for twelve months, whichever is greater. Upon a change in control followed by a termination of Mr. Orr’s current base salaryemployment on December 31, 2015 by the Company without cause or by Mr. Orr for 2013 is $454,000 per year.good reason, Mr. Orr would have been entitled to severance payments equal to $487,000, paid over twenty-four months. In addition to the change in control provisions provided under the employment agreement, in the event of a change in control on December 31, 2012,2015, Mr. Orr would also have vested in 25,50015,000 shares of restricted stock, underwith a value of $561,450 based on the termsclosing price of the Company’s Restricted Stock Incentive Plans.stock on December 31, 2015.
In April 2010,November 2011, Mr. WatsonRamos entered into an employment agreement with the Company effective through December 31, 2021. In April 2013, the agreement was amended to serve as general counsel ofextend the Company.term through December 31, 2022. The agreement, as amended, provides for: (i) a base salary of $325,000 for calendar year 2013, with annual increases at the discretionin base salary of the Compensation Committee;$10,000 through 2022; (ii) ana target annual cash bonus and/or incentive award atof $375,000 for calendar year 2013, with annual increases in the discretiontarget amount of the Compensation Committee;$25,000 through 2022; and (iii) certain fringe benefitsbenefits. Mr. Ramos has agreed not to compete with the Company for a period of three years following his termination and vacation;not to solicit employees of the Company and (iv) reimbursementnot to solicit customers of business related expenses.the Company for a period of three years following his termination. In the event of termination of Mr. WatsonRamos’ employment by the Company without cause, or due to his death or disability, Mr. Ramos (or his estate, in the event of his death) is entitled to severance payments equal to the sum of his then current annual base salary for twelve months and his then current target bonus (prorated based on the date of termination). If Mr. Ramos’ employment with the Company had been terminated under any such circumstances on December 31, 2015, Mr. Ramos would have been entitled to severance payments equal to $770,000, paid over twelve months. In addition, in the event of termination of Mr. Ramos’ employment by the Company without cause following a change in control of the Company, or in the event of a voluntary termination of employment by Mr. Ramos within one year of a change in control of the Company, the agreement provides for severance payments to Mr. Ramos equal to 100% of his then current annual base
salary for 24 months. If Mr. Ramos’ employment with the Company had been terminated under such circumstances on December 31, 2015, Mr. Ramos would have been entitled to severance payments equal to $690,000, paid over 24 months. In addition to the change in control provisions provided under the employment agreement, in the event of a change in control on December 31, 2015, Mr. Ramos would also have vested in 600 shares of restricted stock, with a value of $22,458 based on the closing price of the Company’s stock on December 31, 2015.
In June 2011, Mr. Moore entered into an employment agreement with the Company effective through December 31, 2020. In April 2013, the agreement was amended to extend the term through December 31, 2022. The agreement, as amended, provides for: (i) a base salary of $300,000 for calendar year 2013, with annual increases in base salary of $10,000 through 2022; (ii) a target annual cash bonus of $350,000 for calendar year 2013, with annual increases in the target amount of $25,000 through 2022; and (iii) certain fringe benefits. Mr. Moore has agreed not to compete with the Company for a period of five years following his termination and not to solicit employees of the Company and not to solicit customers of the Company for a period of five years following his termination. In the event of termination of the agreementMr. Moore’s employment by the Company other than forwithout cause, or due to his death or disability, Mr. WatsonMoore (or his estate, in the event of his death) is entitled to severance payments equal to the sum of his then current annual base salary for twelve months.months and his then current target bonus (prorated based on the date of termination). If this agreementMr. Moore’s employment with the Company had been terminated by the Companyunder any such circumstances on December 31, 2012, other than for cause,2015, Mr. WatsonMoore would have been entitled to severance payments equal to $375,000,$720,000, paid over twelve months. In addition, shouldin the event of termination of Mr. Moore’s employment by the Company without cause following a future change in control of the Company, occur,or in the event of a voluntary termination of employment by Mr. Moore within one year of a change in control of the Company, the agreement provides for severance payments to Mr. WatsonMoore equal to 100% of his then current annual base salary for remaining term of24 months. If Mr. Moore’s employment with the agreement, or for twelve months, whichever is greater.Company had been terminated under such circumstances on December 31, 2015, Mr. Watson’s current base salary for 2013 is $386,000 per year.Moore would have been entitled to severance payments equal to $640,000, paid over 24 months. In addition to the change in control provisions provided under the employment agreement, in the event of a change in control on December 31, 2012,2015, Mr. WatsonMoore would also have vested in 750600 shares of restricted stock.stock, with a value of $22,458 based on the closing price of the Company’s stock on December 31, 2015.
Consulting Agreement
In 2005, Mr. Phillip E. Powell, a former director and chief executive officer of the Company, entered into a consulting agreement with the Company to perform such services as may be requested by the Board of Directors. The agreement was amended in April 2010 to extend the term through December 31, 2016. The amended agreement provides for: (i) annual payments of $700,000; (ii) certain other benefits including club membership, car, health insurance; and (iii) reimbursement of business-related expenses. Mr. Powell has agreed not to compete with the Company, not to solicit employees of the Company, and not to solicit customers of the Company while serving as a consultant and for a period of one year following termination of the consulting agreement. Upon a change of control, Mr. Powell may terminate the consulting agreement with 90 days notice. Upon a change in control or other termination by Mr. Powell for good cause or termination by the Company without cause or due to death or disability, the Company has agreed to pay Mr. Powell all accrued compensation and expenses, plus all compensation and benefits provided for in the consulting agreement through the term of the agreement. If Mr. Powell’s agreement had been terminated on December 31, 2012 by the Company without cause or as a result of death or disability, or by Mr. Powell for good cause or following a change in control, Mr. Powell would have been entitled to receive $2,800,000 paid by the Company in a single lump sum thirty days following the termination date of the agreement.
Stock Options and Warrants
Grants of Plan-Based Awardsfor Fiscal Year 2012
The following table provides information regarding the estimated possible payouts to participants under the Company’s Executive Incentive Performance Plan. Except as set forth below, there were no other grants of equity or non-equity awards to named executive officers during 2012.
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Name | | Grant Date | | Estimated Future Payouts Under Non- Equity Incentive Plan Awards (1) | | Estimated Future Payouts Under Equity Incentive Plan Awards (2) | | All Other Stock Awards: Number of Shares of Stocks or Units (#) | | All Other Option Awards: Number of Securities Underlying Options (#) | | Exercise or Base Price of Option Awards ($/Sh) | | Grant Date Fair Value of Stock and Option Awards $ | |
| | Thres- hold ($) | | Target ($) | | Maximum ($) | | Thres- hold (#) | | Target (#) | | Maximum (#) | | | | | |
Rick L. Wessel | | Jan. 24, 2012 | | 231,500 |
| | 926,000 |
| | 3,241,000 |
| | — | | — | | — | | — | | — | | — | | — | |
| | Jan. 24, 2012 | | — | | — | | — | | — | | 30,000 |
| | 30,000 |
| | — | | — | | — | | 1,127,700 |
| (3) |
| | Dec. 24, 2012 | | — | | — | | — | | — | | 30,000 |
| | 30,000 |
| | — | | — | | | | 1,466,100 |
| (4) |
| | | | | | | | | | | | | | | | | | | | | | | |
R. Douglas Orr | | Jan. 24, 2012 | | 109,250 |
| | 437,000 |
| | 874,000 |
| | — | | — | | — | | — | | — | | — | | — |
| |
| | Jan. 24, 2012 | | — | | — | | — | | — | | 10,000 |
| | 10,000 |
| | — | | — | | — | | 375,900 |
| (3) |
| | Dec. 24, 2012 | | — | | — | | — | | — | | 10,000 |
| | 10,000 |
| | — | | — | | | | 488,700 |
| (4) |
| | | | | | | | | | | | | | | | | | | | | | | |
Jim A. Motley | | Dec. 24, 2012 | | — | | — | | — | | — | | — | | — | | — | | — | | — | | 48,870 |
| (5) |
| | | | | | | | | | | | | | | | | | | | | | | |
Stephen O. Coffman | | Jan. 24, 2012 | | 114,500 |
| | 458,000 |
| | 916,000 |
| | — | | — | | — | | — | | — | | — | | — |
| |
| | Jan. 24, 2012 | | — | | — | | — | | — | | 10,000 |
| | 10,000 |
| | — | | — | | — | | 375,900 |
| (3) |
| | Dec. 24, 2012 | | — | | — | | — | | — | | 10,000 |
| | 10,000 |
| | — | | — | | | | 488,700 |
| (4) |
| |
(1) | The cash awards set forth in these columns are provided under the terms of the APIP, which is described in the Short-Term Incentive Compensation section of the Compensation Discussion and Analysis and in the Summary Compensation Table. |
| |
(2) | These restricted stock awards are provided under the terms of the RSIP, which is described in the Long-Term Incentive Compensation section of the Compensation Discussion and Analysis and in the Summary Compensation Table. |
| |
(3) | Amounts shown represent shares from the 2012 award related to 2012 compensation available for vesting over the measurement periods from 2012 through 2015.
|
| |
(4) | Amounts shown represent shares from the 2012 award related to 2013 compensation available for vesting over the measurement periods from 2013 through 2016.
|
| |
(5) | These are discretionary restricted stock awards granted under the Incentive Plan. |
Outstanding Equity Awards at 2012 Fiscal Year-End
The following table provides information on the holdings of stock options and warrants by the named executive officers as of December 31, 2012. Each outstanding option and warrant grant is shown separately for each named executive officer.
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Option Awards | | Stock Awards |
Name | | Number of Securities Underlying Unexercised Options (#) Exercisable | | Number of Securities Underlying Unexercised Options (#) Unexercisable | | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | | Option Exercise Price ($) | | Option Expiration Date | | Number of Shares or Units of Stock That Have Not Vested (#) | | Market Value of Shares or Units of Stock That Have Not Vested ($) | | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) (10) |
Rick L. | | 70,000 |
| | — |
| | — |
| | 15.00 |
| | 12/2015 |
| | — |
| | — |
| | — |
| | — |
|
Wessel | | 90,000 |
| | — |
| | — |
| | 17.00 |
| | 12/2015 |
| | — |
| | — |
| | — |
| | — |
|
| | 90,000 |
| | — |
| | — |
| | 17.50 |
| | 01/2015 |
| | — |
| | — |
| | — |
| | — |
|
| | 90,000 |
| | — |
| | — |
| | 19.00 |
| | 12/2015 |
| | — |
| | — |
| | — |
| | — |
|
| | 90,000 |
| | — |
| | — |
| | 20.00 |
| | 01/2015 |
| | — |
| | — |
| | — |
| | — |
|
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 6,000 |
| (3) | 297,720 |
|
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 18,000 |
| (4) | 893,160 |
|
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 22,500 |
| (5) | 1,116,450 |
|
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 30,000 |
| (6) | 1,488,600 |
|
| | | | | | | | | | | | | | | | | | |
R. Douglas | | 20,000 |
| | — |
| | — |
| | 15.00 |
| | 12/2015 |
| | — |
| | — |
| | — |
| | — |
|
Orr | | 60,000 |
| | — |
| | — |
| | 17.00 |
| | 12/2015 |
| | — |
| | — |
| | — |
| | — |
|
| | 60,000 |
| | — |
| | — |
| | 17.50 |
| | 01/2015 |
| | — |
| | — |
| | — |
| | — |
|
| | 60,000 |
| | — |
| | — |
| | 19.00 |
| | 12/2015 |
| | — |
| | — |
| | — |
| | — |
|
| | 60,000 |
| | — |
| | — |
| | 20.00 |
| | 01/2015 |
| | — |
| | — |
| | — |
| | — |
|
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 2,000 |
| (3) | 99,240 |
|
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 6,000 |
| (4) | 297,720 |
|
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 7,500 |
| (5) | 372,150 |
|
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 10,000 |
| (6) | 496,200 |
|
| | | | | | | | | | | | | | | | | | |
Peter H. | | — |
| | ��� |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 750 |
| (8) | 37,215 |
|
Watson | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Jim A. | | 12,498 |
| | 12,502 |
| (1) | — |
| | 24.57 |
| | 04/2017 |
| | — |
| | — |
| | — |
| | — |
|
Motley | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 750 |
| (7) | 37,215 |
|
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 900 |
| (8) | 44,658 |
|
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 1,000 |
| (9) | 49,620 |
|
| | | | | | | | | | | | | | | | | | |
Stephen O. | | 70,000 |
| | 20,000 |
| (2) | — |
| | 10.00 |
| | 03/2018 |
| | — |
| | — |
| | — |
| | — |
|
Coffman | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 2,000 |
| (3)(11) | 99,240 |
|
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 6,000 |
| (4)(11) | 297,720 |
|
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 7,500 |
| (5)(11) | 372,150 |
|
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 10,000 |
| (6)(11) | 496,200 |
|
| |
(1) | The option to purchase Common Stock will vest and become exercisable as follows: 4,166 shares on April 24, 2013, 4,166 shares on April 24, 2014, and 4,170 shares on April 24, 2015. |
| |
(2) | Per the terms of the separation agreement between Mr. Coffman and the Company, 10,000 shares will vest and become exercisable on March 18, 2013, and 10,000 shares were forfeited effective February 19, 2013. |
| |
(3) | Restricted stock awards granted in 2010 under the RSIP. Vesting is performance-based, equally divided over measurement periods in fiscal 2012, 2013 and 2014. |
| |
(4) | Restricted stock awards granted in 2011 under the RSIP. Vesting is performance-based, equally divided over measurement periods in fiscal 2012, 2013, 2014 and 2015. |
| |
(5) | Restricted stock awards granted in 2012 under the RSIP. Vesting is performance-based, equally divided over measurement periods in fiscal 2012, 2013, 2014 and 2015. |
| |
(6) | Restricted stock awards granted in December 2012 under the RSIP, which relates to the 2013 compensation program. Vesting is performance-based, equally divided over measurement periods in fiscal 2013, 2014, 2015 and 2016. |
| |
(7) | Restricted stock awards granted in 2010. Vesting is time-based over seven years and will be fully vested in 2017. |
| |
(8) | Restricted stock awards granted in 2011. Vesting is time-based over seven years and will be fully vested in 2018. |
| |
(9) | Restricted stock awards granted in 2012. Vesting is time-based over seven years and will be fully vested in 2019. |
| |
(10) | The market value of the unvested share awards is based on the closing price of the Company’s Common Stock as of December 31, 2012, which was $49.62. |
| |
(11) | These awards were forfeited effective with Mr. Coffman's resignation on February 19, 2013. |
Option Exercises and Stock Vested In Fiscal 2012
The following table provides information, for the named executive officers, as to (1) the aggregate stock options and warrants exercised during 2012, including the number of shares acquired on exercise and the value realized, and (2) the aggregate number of shares acquired upon the vesting of restricted stock awards and the value realized, each before the payment of any applicable withholding tax and broker commissions:
|
| | | | | | | | | | | | |
| | Option Awards | | Stock Awards |
Name | | Number of Shares Acquired on Exercise | | Value Realized on Exercise $ | | Number of Shares Acquired on Vesting | | Value Realized on Vesting $ |
Rick L. Wessel | | 350,000 |
| | 12,804,400 |
| | 16,500 |
| | 818,730 |
|
R. Douglas Orr | | 46,000 |
| | 1,545,560 |
| | 5,500 |
| | 272,910 |
|
Peter H. Watson | | — |
| | — |
| | — |
| | — |
|
Jim A. Motley | | — |
| | — |
| | 250 |
| | 10,063 |
|
Stephen O. Coffman | | — |
| | — |
| | 5,500 |
| | 272,910 |
|
Pension Benefits
The Company doesnot have a defined benefit pension plan for its employees and has not included a table disclosing the actuarial present value of each named executive officer’s accumulated benefits under defined benefit pension plans, the number of years of credited service under each such plan and the amount of pension benefits paid to each named executive officer during the year. The only retirement plans available to the named executive officers was the Company’s qualified 401(k) savings plan, which is available to all employees.
Nonqualified Defined Contribution and Other Nonqualified Deferred Compensation Plans
The Company doesnot have nonqualified defined contribution and other nonqualified deferred compensation plans for its employees or directors.
Compensation of Directors
The following table presents summary information for the year ended December 31, 2012 regarding the compensation of the non-employee and non-consultant members of the Company’s Board of Directors:Directors for the year ended December 31, 2015:
| | | | Fees Earned or Paid in Cash | | Stock Awards | | Option Awards | | Non-Equity Incentive Plan Compensation | | Change in Pension Value and Nonqualified Deferred Compensation Earnings | | All Other Compensation | | Total | |
| | |
| | |
| | | | | | |
Name | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | Fees Earned or Paid in Cash $ | | Total $ |
Mikel D. Faulkner | | 150,000 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 150,000 |
| | 150,000 |
| | 150,000 |
|
Jorge Montaño | | 150,000 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 150,000 |
| |
Randel G. Owen | | 150,000 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 150,000 |
| | 150,000 |
| | 150,000 |
|
Gabriel Guerra Castellanos | | | 150,000 |
| | 150,000 |
|
TO VOTE ON A NON-BINDING RESOLUTION TO APPROVE THE COMPENSATION OF THE COMPANY’S NAMED EXECUTIVE OFFICERS
Accordingly, the Board is seeking the advisory vote of stockholders on the compensation of the named executive officers as disclosed in this proxy statement. This proposal, commonly known as a “say-on-pay” proposal, gives the Company’s stockholders the opportunity to express their views on ourthe Company’s named executive officers’ compensation. This vote is not intended to address any specific item of compensation, but rather the overall compensation of the named executive officers.
As discussed in “Compensation Discussion and Analysis,” the Company has designed its executive compensation program to attract and retain the highest quality executive officers, directly link pay to performance, and build value for stockholders. The program provides total compensation opportunities at levels that are competitive in the industry, ties a significant portion of each executive’s compensation to his or her individual performance and contribution to achieving business objectives, and closely aligns the interests of the executives with the interests of the Company’s stockholders. Accordingly, the Board of Directors invites you to review carefully the Compensation Discussion and Analysis and the tabular and other disclosures on compensation under executive compensation, and cast a vote to approve the compensation of ourthe Company’s named executive officers through the following resolution:
The say-on-pay vote is advisory, and therefore not binding on the Company, the Compensation Committee or the Board of Directors. The Board of Directors and Compensation Committee value the opinions of ourthe Company’s stockholders and to the extent there is any significant vote against the named executive officer compensation as disclosed in this proxy statement, we will consider our stockholders’ concerns and the Compensation Committee or Board will consider the Company’s stockholders’ concerns and will evaluate whether any actions are necessary to address those concerns.
Approval of this resolution requires the affirmative vote of a majority of the shares of Common Stock present or represented by proxy and entitled to vote at the Annual Meeting.