UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(Amendment No. 1)
(Mark One)
/ X / ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2006
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________ to _______________
Commission file number 1-09848
ALMOST FAMILY, INC.
(Exact name of registrant as specified in its charter)
Delaware 06-1153720
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
9510 Ormsby Station Road, Suite 300 40223
Louisville, KY (Zip Code)
(Address of principal executive offices)
(502) 891-1000 (Registrant's
telephone number, including area code)
None.
(Former name, former address and former fiscal year, if changed since last
report)
Securities registered pursuant to Section 12(b) of the Act
Title of Each Class
-------------------
Common Stock, par value $.10 per share, with
Preferred Stock Purchase Rights
Name of Each Exchange on Which Registered:
Nasdaq Global Market
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act. Yes____ No__X__
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes____ No__X__
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. ___X___
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act.
Large accelerated filer _____ Accelerated filer _____
Non-accelerated filer __X___
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
Yes_____ No__X___
As of June 30, 2006, the aggregate market value of the registrant's common stock
held by non-affiliates of the registrant was $25,936,973 based on the last sale
price of a share of the common stock as of June 30, 2006 ($12.01), as reported
by the NASDAQ SmallCap System.
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at March 27, 2007
- -------------------------------------- --------------------------------------
Common Stock, $.10 par value per share 5,415,636 Shares
DOCUMENTS INCORPORATED BY REFERENCE
None.
TABLE OF CONTENTS
PART III............................................................................................................4
- --------
Item 10. Directors, Executive Officers and Corporate Governance.................................................4
Item 11 Executive Compensation.................................................................................7
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters........17
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.............................20
Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES................................................................20
Item 15. EXHIBITS AND FINANCIAL STATEMENTS SCHEDULES...........................................................20
EXPLANATORY NOTE
This Amendment No. 1 on Form 10-K/A (this "Amendment") amends Almost Family,
Inc.'s (the "Company") Annual Report on Form 10-K for the fiscal year ended
December 31, 2006, originally filed on March 30, 2007 (the "Original Filing").
We are filing this Amendment to include the information required by Part III and
not included in the Original Filing as we will not file our definitive proxy
statement within 120 days of the end of the Company's fiscal year ended December
31, 2006. Solely for this reason, we are filing certifications required under
Section 302 of the Sarbanes-Oxley Act of 2002. Except as set forth above, this
Amendment does not alter or restate any of the information set forth in the
Original Filing.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Executive Officers
The following table sets forth certain information with respect to the Company's
executive officers.
Name Age Position with the Company
- -----------------------------------------------------------------------------------------------------
William B. Yarmuth (1) 55 Chairman of the Board President
and Chief Executive Officer
C. Steven Guenthner (2) 46 Senior Vice President and
Chief Financial Officer
P. Todd Lyles (3) 45 Senior Vice President - Administration
Anne T. Liechty (4) 54 Senior Vice President - Operations
Mark Hunt (5) 47 Senior Vice President - Sales & Marketing
Phyllis Montville (6) 58 Vice President - Operations
David Pruitt (7) 43 Vice President - Operations
Executive officers of the Company are elected by the Board of Directors for one
year and serve at the pleasure of the Board of Directors with the exception of
William B. Yarmuth who has an employment agreement with the Company. There are
no family relationships between any director or executive officer.
(1) William B. Yarmuth has been a director of the Company since 1991, when
the Company acquired National Health Industries ("National"), where Mr.
Yarmuth was Chairman, President and Chief Executive Officer. After the
acquisition, Mr. Yarmuth became the President and Chief Operating
Officer of the Company. Mr. Yarmuth became Chairman and CEO in 1992. He
was Chairman of the Board, President and Chief Executive Officer of
National from 1981 to 1991.
(2) C. Steven Guenthner has been Senior Vice President and Chief Financial
Officer of the Company since 1992. From 1983 through 1992 Mr. Guenthner
was employed as a C.P.A. with Arthur Andersen LLP. Prior to joining the
Company he served as a Senior Manager in the firm's Accounting and
Audit division specializing in mergers and acquisitions, public
companies and the healthcare industry.
(3) P. Todd Lyles joined the Company as Senior Vice President Planning and
Development in October 1997 and now serves as Senior Vice President -
Administration. Prior to joining the Company Mr. Lyles was Vice
President Development for the Kentucky Division of Columbia/HCA, a
position he had held since 1993. Mr. Lyles experience also includes 8
years with Humana Inc. in various financial and hospital management
positions.
(4) Anne T. Liechty became Senior Vice President - VN Operations in 2001.
Ms. Liechty has been employed by the Company since 1986 in various
capacities including Vice President of Operations for the Company's VN
segment and its Product segment.
(5) Mark Hunt became Senior Vice President - Sales & Marketing in 2007. Mr.
Hunt came to Almost Family in February of 2007. Mr. Hunt had previously
worked for VistaCare, a national hospice provider, since 2004 as Vice
President of Sales and Vice President General Manager. Prior to that,
he spent 22 years in the healthcare supplier industry holding senior
positions in Sales, Corporate Accounts and General Management with
Baxter Healthcare, Span America and SSL Americas.
(6) Phyllis Montville became Vice President - Operations in 2006. Ms.
Montville came to the company in 2006 as Vice President of VN
Operations in Florida. She has 23 years experience in home care
management, most of which is in the Florida market. Ms. Montville owned
and operated her own franchise for 10 years. She started in the home
care field as a branch manager and home care nurse.
(7) David Pruitt became Vice President - Operations in 2002. Mr. Pruitt has
been employed by the company since 1996 in various roles in the
company's service divisions. Prior to 1996, he was employed by the
Medicare Intermediary in Columbia, South Carolina.
Board of Directors
Set forth below is a list of members of the Board of Directors, together
with their ages, all Company positions and offices each person currently holds
and the year in which each person joined the Board. Each of the current members
of the Board of Directors is expected to stand for re-election of the 2007
Annual Meeting of Shareholders.
Position Director
Name Age or Office Since
William B. Yarmuth 55 Chairman of the Board, 1991
President and Chief
Executive Officer
Steven B. Bing 60 Director 1992
Donald G. McClinton 73 Director 1994
Tyree G. Wilburn 54 Director 1996
Jonathan D. Goldberg 55 Director 1997
W. Earl Reed, III 55 Director 2000
Henry M. Altman, Jr. 70 Director 2004
William B. Yarmuth. Mr. Yarmuth has been a director of the Company since 1991,
when the Company acquired National Health Industries ("National"), where Mr.
Yarmuth was Chairman, President and Chief Executive Officer. After the
acquisition, Mr. Yarmuth became the President and Chief Operating Officer of the
Company. Mr. Yarmuth became Chairman and CEO in 1992. He was Chairman of the
Board, President and Chief Executive Officer of National from 1981 to 1991.
Steven B. Bing. Mr. Bing was elected a director in January 1992. From 1999 to
2007, Mr. Bing served with Prosperitas Investment Partners, L.P., a private
investment company located in Louisville, Kentucky, most recently as its Chief
Operating Officer. He is also a director of various closely-held business
entities. Since 2005, Mr. Bing has served as Senior Vice President Sales &
Marketing, New Business and Video Services for National Rural Telecommunications
Cooperative, a large member owned cooperative in Herndon, Virginia serving in
excess of 1,200 telephone and electric cooperatives across the country.
Donald G. McClinton. Mr. McClinton was elected a director in October 1994. Mr.
McClinton was President and part owner of Skylight Thoroughbred Training Center,
Inc., a thoroughbred training center, until July 2002, when it was sold. From
1986 to 1994, Mr. McClinton was co-chairman of Interlock Industries, a privately
held conglomerate in the metals and transportation industries.
Tyree G. Wilburn. Mr. Wilburn was elected a director in January 1996. Since
2003, Mr. Wilburn has served as Chairman of the Board, President and Chief
Executive Officer of Merit Health Systems, LLC, a private hospital management
company. He was a private investor from 1996 to 2002. From 1992 to 1996, Mr.
Wilburn was Chief Development Officer of Community Health Systems, Inc., and,
most recently, Executive Vice President and Chief Financial and Development
Officer. From 1974 to 1992, Mr. Wilburn was with Humana Inc. where he held
senior and executive positions in mergers and acquisitions, finance, planning,
hospital operations, audit and investor relations. He is also a director of
several private companies.
Jonathan D. Goldberg. Mr. Goldberg was elected a director in February 1997. Mr.
Goldberg is the managing partner of the law firm of Goldberg and Simpson in
Louisville, Kentucky and has served in that capacity since 1991.
W. Earl Reed, III. Mr. Reed was elected a director in November 2000. Since
August 2005, Mr. Reed has served as Chief Executive Officer and and Chairman of
the Board of LifeCare Holdings, Inc., a privately owned operator of 18 long-term
hospitals. Before joining LifeCare, Mr. Reed served as Chief Executive Officer
of The Allegro Group, a healthcare financial advisory firm that advises public
and private healthcare organizations from 1998 to 2005. From May 2000 to
December 2001, Mr. Reed served as Chairman, President and Chief Executive
Officer of Rehab Designs of America Corporation, a private venture capital
backed orthotics and prosthetics healthcare company, as part of a turnaround
project. From 1987 to 1998, Mr. Reed was Chief Financial Officer and member of
the board of directors of Vencor, Inc.
Henry M. Altman, Jr. Mr. Altman was elected a director in 2004. Mr. Altman
retired in 2002 following over 40 years of experience in public accounting, most
recently serving as the president and managing director of the Deming, Malone,
Livesay & Ostroff CPA firm. He is currently the owner of Altman Consulting LLC,
an independent business consulting firm. Mr. Altman currently serves on the
boards of Jewish Hospital & St. Mary's HealthCare and University Medical Center
in Louisville, Kentucky, and the American Hospital Association's Leadership
Development Committee. He also serves on the boards of Louisville Medical Center
Development Corporation and the Institute for Bioethics, Health Policy and Law.
In 2001, Mr. Altman was presented with the inaugural Kentucky Hospital
Association Health Care Governance Award.
Audit Committee of the Board of Directors
The Board has three standing committees: the Audit Committee, the Compensation
Committee and the Nominating and Corporate Governance Committee. As described in
its charter, the principal duties of the Audit Committee include appointing the
Company's independent auditors, reviewing the scope of the audit, reviewing the
corporate accounting practices and policies with the independent auditors,
reviewing with the independent auditors their final report, reviewing with
independent auditors overall accounting and financial controls and consulting
with the independent auditors. A copy of the Audit Committee charter is attached
to the 2005 proxy statement as an appendix. All of the members of the Audit
Committee are "independent," as that term is defined under Rule 4200(a)(15) of
the National Association of Securities Dealers' listing standards and meet the
criteria for independence under the Sarbanes-Oxley Act of 2002 and the rules
adopted by the Securities and Exchange Commission. The members of the Audit
Committee are Messrs. Goldberg, Reed (Chair), and Wilburn. The Board has
designated Reed as the "audit committee financial expert" within the meaning of
the SEC rules.
Code of Ethics and Business Conduct
The Board has adopted a Code of Ethics and Business Conduct that applies to all
its directors, officers and employees, including the principal executive and
financial officers, the controller and the principal accounting officer of the
Company. The Code of Ethics and Business Conduct is available in its entirety on
the Company's website, www.almostfamily.com. The Company intends to post
amendments to, or waivers from, its Code of Ethics and Business Conduct, if any,
that apply to the principal executive and financial officers, the controller or
the principal accounting officer on its website.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who beneficially own more than ten
percent of a registered class of the Company's equity securities, to file with
the Securities and Exchange Commission initial reports of stock ownership and
reports of changes in stock ownership and to provide the Company with copies of
all such filed forms. Section 16(a) of the Securities Exchange Act of 1934
provides that any profit realized by an insider form any purchase and sale, or
sale and purchase, of the Company's equity securities within less than six
months must be disgorged to the Company. Based solely on its review of such
copies or written representations from reporting persons, the Company believes
that all Section 16(a) reports were filed on a timely basis during fiscal 2006.
ITEM 11. EXECUTIVE COMPENSATION
The following Summary Compensation Table shows the compensation earned for the
time period served as an executive officer during the last fiscal year by: (1)
the President and Chief Executive Officer, (2) the Chief Financial Officer, and
(3) each of the three other highest compensated executive officers of the
Company serving at December 31, 2006 (collectively, the "Named Executive
Officers").
Summary Compensation Table
Change in
Pension Value &
Non-Equity Nonqualified All
Stock Option Incentive Plan Deferred Other
Name and Principal Salary Bonus Awards Awards Compensation Compensation Compensation Total
Position Year ($) ($) ($) ($) ($) Earnings ($) ($) ($)
- ---------------------------------- ------------- -------- ------------ --------- -------------- ---------------- -------------------
William B. Yarmuth
Chairman of the Board,
President & CEO 2006 375,481 0 0 0 390,000 0 938 766,419
C. Steven Guenthner
Sr. Vice President
Secretary/Treasurer
& CFO 2006 219,421 0 0 0 170,000 0 0 389,421
Patrick T. Lyles
Senior Vice President 2006 195,412 0 0 0 138,000 0 0 333,412
Anne T. Liechty
Senior Vice
President-Visiting
Nurse Operations 2006 156,379 0 0 0 150,000 0 1,016 307,395
David Pruitt
Vice President
In-HomePrograms 2006 119,890 0 0 0 9,017 0 0 128,907
The following table provides information about equity and non-equity (MIP)
awards granted to the Named Executive Officers in 2006.
Grants of Plan-Based Awards
- ------------------------------ ------------------------------------------- ----------------------------------------- -----------
Estimated Future Estimated Future All Other All Other
Grant Payouts Under Non- Payouts Under Equity Option Option Exercise Full Grant
Name Date Equity Incentive Plan Incentive Plan Awards Awards: Awards: or Base Date Fair
Awards (1) Number of Number of Price of Value of
Shares or Securities Option Awards
Units (#) Underlying Awards
Options (#) ($/Sh)
Threshold Target Maximum Threshold Target Maximum
($) ($) ($) (#) (#) (#)
William B. Yarmuth 122,031 244,063 366,094
C. Steven Guenthner 54,855 109,711 164,566
Patrick T. Lyles 43,968 87,935 131,903
Anne T. Liechty 62,552 125,103 187,655
David Pruitt 23,978 47,956 71,934
(1) These amounts reflect the possible payouts for 2006 performance under
the Company's annual cash incentive plan as described in the
"Compensation Discussion and Analysis." Actual awards of 2006
performance has been disclosed in the "Summary Compensation Table"
under the column "Non-Equity Incentive plan Compensation."
The following table provides information on the stock option holdings as of
December 31, 2006 for the Named Executive Officers
Outstanding Equity Awards at Fiscal Year-End
Option Awards Stock Awards
- -------------------- --------------------------------------------------------------------------------- -----------------------------
Equity Equity
Name Number of Number of Equity Option Option Number of Market Incentive Incentive
Securities Securities Incentive Plan Exercise Expiration Shares or Value of Plan Plan Awards:
Underlying Underlying Awards: Number Price ($) Date Units of Shares or Awards: Market or
Unexercised Unexercised of Securities Stock That Units of Number of Payout
Options (#) Options (#) Underlying Have Not Stock That Unearned Value of
Exercisable Unexercisable Unexercised Vested (#) Have Not Shares, Unearned
Unearned Vested Units or Shares,
Options (#) ($) Other Rights Units or
That Have Other
Not Vested Rights
($) That Have
Not Vested
($)
William B. Yarmuth 182,516 (1) 1.10 3/4/09
200,000 (2) 2.13 2/3/11
C. Steven Guenthner 7,648 (1) 1.10 3/4/09
6,986 (1) 2.13 2/3/01
33,014 (2) 2.13 2/3/01
Patrick T. Lyles 33,896 (1) 1.32 11/19/07
20,000 (2) 2.13 2/3/01
Anne T. Liechty 0
David Pruitt 0
(1) Options granted pursuant to the Company's 1991 Plan. These options were
exercised after December 31, 2006 and before the January 2007 effective
date of the 2-for-1 stock split. Information is presented as if the
options had been adjusted for the 2-for1 stock split.
(2) Options granted pursuant to the Company's 2000 Plan. On the effective
date of the January 2007 2-for-1 stock split the number of shares were
multiplied by two and the exercise price was divided by two.
Information is presented as adjusted for the 2-for1 stock split.
Option Exercises and Stock Vested
The following table provides information on the stock options exercised by the
Named Executive Officers in 2006
Option Awards Stock Awards
- ------------------------------------------------------------------------------------------------------------------------------------
Name Number of Shares Value Realized on Exercise Number of Shares Value Realized on Vesting
Acquired on Exercise (#) ($) Acquired on Vesting ($)
(#)
William B. Yarmuth 17,484 363,951 0 0
C. Steven Guenthner 32,352 673,447 0 0
Patrick T. Lyles 36,104 750,215 0 0
Anne T. Liechty 35,000 357,419 0 0
David Pruitt 0 0 0 0
The Company has a year-to-year employment agreement with William B. Yarmuth, its
Chairman of the Board, President and Chief Executive Officer. The agreement had
an initial term of two years and provides that it will automatically be renewed
for successive one-year terms. Either the Company or Mr. Yarmuth may terminate
the agreement as of the last day of any renewal term by giving at least 60 days'
prior written notice of termination. In addition, the Company may by decision of
the Board of Directors terminate the agreement at any time by written notice to
Mr. Yarmuth. Mr. Yarmuth is entitled to certain payments upon termination of
employment with the Company. If Mr. Yarmuth's employment is terminated
under either provision stated above, he would be entitled to a payment equal to
two times the base salary earned by him during the preceding twelve months,
payable within 30 days following termination. As of December 31, 2006, this
amount would have been $750,962. If Mr. Yarmuth's employment is terminated by
reason of his death or disability, he would be entitled to an amount equal to
the excess of (i) 200% of his base salary over (ii) the present value of the
disability payments to be received by him under any disability insurance policy
maintained and paid for by the Corporation, if any, during the first two years
in which such payments are to be received This amount is payable within 90 days
following the date of his death or disability.
Following a "change of control," as defined in the employment agreement, if Mr.
Yarmuth's employment with the Company is terminated for any reason (including
cause, as defined) other than death or disability, he would be entitled to 290%
of the base salary and bonus payments paid to him during the one-year period
immediately preceding termination. This payment would be in a lump sum on the
date of termination. As of December 31, 2006, this amount would have been
$1,886,395. For purposes of the agreement, a "change of control" includes (i)
any person's acquisition of 50% or more of the Company's common stock, (ii) 75%
or more of the Company's directors being replaced, unless the current directors
approved of the replacements, and (iii) stockholder approval of a merger or
consolidation of the Company or its complete liquidation. If any of the above
payments would be subject to excise taxes, then Mr. Yarmuth would be entitled to
receive a payment for the purpose of assuring that he receive all compensation
to which the excise tax applies absolutely net of the excise tax.
The agreement includes a covenant not to compete that prohibits Mr. Yarmuth
from competing with the Company within any county of any state in which the
Company was at the time of termination conducting business or had a bona fide
plan to begin conducting business.
No other Named Executive Officer has termination or change in control
arrangements.
Directors' Compensation
The following table summarizes compensation paid to non-employee directors for
2006. Mr. Yarmuth is the only employee director and he does not receive any
additional compensation for his service on the board of directors.
Director Compensation Table
Name Fee Earned or Stock All
Paid in Awards ($) Option Awards Non-Equity Change in Pension Other Total
Cash ($) ($) Incentive Plan Value and Compensation ($)
Compensation ($) Nonqualified Deferred ($)
Compensation Earnings
- ---------------------------------------------------- --------------------------------- ----------------------- --------------------
William B. Yarmuth 0 0 0
Steven B. Bing 8,000 0 0
Donald G. McClinton 0 0 0 11,064
Tyree G. Wilburn 20,000 0 0
Jonathan D. Goldberg 0 0 0 22,124
W. Earl Reed, III 18,000 0 0
Henry M. Altman, Jr. 10,000 0 0
During 2006, Directors who were not also employees of the Company were entitled
to compensation at a rate of $2,000 for each Board meeting attended, $500 for
each independently scheduled committee meeting attended, other than the Audit
Committee, and $2,000 for each independently scheduled Audit Committee meeting
attended. In addition, non-employee directors are eligible to receive stock
options under the Almost Family, Inc. 2000 Stock Option Plan. During 2006, all
directors attended at least 75% of all board and committee meeting meetings.
The Company has a Non-Employee Directors Deferred Compensation Plan which allows
Directors to elect to receive fees for Board services in the form of shares of
the Company's common stock. The Plan authorized 200,000 shares for such use. As
of December 31, 2006, 113,681 shares have been allocated in deferred accounts,
8,622 have been issued to previous Directors and 77,697 remain available for
future allocation. Allocated shares are to be issued to Directors when they
cease to be Directors or upon a change in control. Directors' fees are expensed
as incurred whether paid in cash or deferred into the Plan. Amounts shown in the
column "All Other Compensation" above represent 2006 fees deferred into the
Non-Employee Directors Deferred Compensation Plan by the respective directors.
In February 2007, the Company implemented the recommendations of Mercer
regarding compensation of non-employee directors. As a result, the Company has
targeted cash compensation between the 25th and 50th percentile of the peer
group. For 2007, Directors will be compensated according to the following table:
Annual retainer $15,000
Chairman of audit committee additional retainer $7,500
Chairman of compensation committee additional retainer $5,000
Meeting fee per board meeting attended $1,500
Meeting fee per committee meeting attended $1,000
The Company also reimburses directors for the reasonable expenses they incur to
attend board of directors, board committee and shareholder meetings. In
addition, in 2007, the board approved an annual grant of options to purchase
4,500 shares of common stock to each non-employee director, which have an
exercise price equal to fair market value (as defined below) on date of grant,
the Option shall be exercisable with respect to 25% of the shares on the first
anniversary of the Grant Date, and with respect to an additional 25% on each
subsequent anniversary of the Grant Date until the Option is fully vested on the
fourth anniversary of the Grant Date The 2007 grant to each of the six
non-employee directors was made on February 12, 2007. The options have an
exercise price of $19.40, which was the last reported trade (fair market value)
of our stock on the date of grant.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board is comprised of Messrs. Bing, Goldberg,
McClinton, Reed and Wilburn, each a non-employee director of the Company. None
of our executive officers serve on the Compensation Committee or board of
directors of any other company of which any members of our Compensation
Committee or any of our directors is an executive officer.
COMPENSATION DISCUSSION AND ANALYSIS
Overview
The Company's executive compensation program is designed to (1) motivate and
retain executive officers, (2) award the achievement of short-term and long-term
performance goals, (3) establish an appropriate relationship between executive
pay and short-term and long-term performance and (4) align executive officers'
interests with those of the Company's shareholders. The primary elements of the
Company's compensation program are base salary, annual cash incentive awards and
equity-based compensation. The Company believes that each element supports one
or more of the objectives of the Company's compensation program and provides
sufficient flexibility to the Compensation Committee (the "Committee") to
structure future awards to address new issues and challenges facing the Company.
The Company's executive compensation program attempts to target total direct
compensation for the Named Executive Officers (as defined herein) between the
50th and 75th percentiles of the healthcare industry, depending upon the
individual performance of the Named Executive Officer, his level of
responsibility, and the performance of the Company. The Company believes that
this range of compensation allows it to attract and retain qualified and
experienced healthcare executives.
Performance Measures
The primary elements of the Company's executive compensation program are
designed to promote the achievement of financial operating goals established by
the Committee and to increase shareholder value. The Company uses a cash
incentive plan providing annual short-term incentives for achievement of goals.
These plans provide certain of the Named Executive Officers with the opportunity
to earn cash awards for achieving financial operating goals primarily related to
targeted levels of earnings per share. The Company believes that this measure is
generally used by investors to value the Company's Common Stock.
The equity-based component of the Company's executive compensation program is
designed to incentivize the Named Executive Officers to increase the value of
the Company's Common Stock. As such, equity-based compensation directly links
the total direct compensation of the Named Executive Officers to increases in
stock price appreciation and shareholder value.
The Executive Compensation Process
The Committee is comprised of five directors, each of whom is independent as
defined under the NASDAQ listing standards and qualifies as an outside director
within the meaning of Section 162(m) of the Code and a non-employee director
within the meaning of Rule 16b-3 under the Exchange Act. The Committee meets
periodically to review and oversee the Company's executive compensation program.
The Committee makes all compensation decisions regarding the top three Named
Executive Officers but has typically delegated to the CEO subject to the
committee's review, compensation decisions regarding the remaining Named
Executive Officers. On an annual basis, the Committee reviews base salaries and
incentive compensation targets for the Named Executive Officers, for the
upcoming fiscal year. At this time, the Committee also determines whether
performance targets under each of the cash incentive plans were achieved for the
prior fiscal year.
During 2006, the Company engaged Mercer Human Resources Consulting ("Mercer"), a
global human resources consulting firm, to assist management and the Committee
in evaluating the Company's executive compensation program. Mercer assisted the
Company by reviewing the Company's executive compensation strategy and providing
compensation benchmarks to the Committee for each Named Executive Officer,
including comparisons of base salary, cash incentives and equity-based
compensation. Mercer also provided the Committee with other relevant market data
and alternatives to consider when making compensation decisions for the Named
Executive Officers. The Company from time to time uses Mercer for various other
employee benefit matters.
The 2006 base salaries for the Named Executive Officers were increased in
February 2006. The 2006 performance targets under the Company's short-term cash
incentive plan were established in February 2006. As discussed below, the awards
under these plans are formulaic, based upon the achievement of financial
operating goals established by the Committee. Nevertheless, the Committee
retains the discretion to increase or decrease cash incentive awards for
unforeseen events or circumstances, including restatements to the Company's
financial statements.
The Committee made no grants of equity-based awards to the Named Executive
Officers from 2002 through 2006 although the Committee did not make grants of
equity-based awards in 2007. The Committee may grant equity-based awards on a
periodic basis, particularly in connection with promotions, exceptional
performance or changes in a Named Executive Officer's level of responsibility.
The Committee currently plans to consider whether additional grants are
appropriate on an annual basis in conjunction with its review and approval of
annual salaries, short-term cash incentives and financial operating goals.
During 2006, the Committee compared each element of compensation for the Named
Executive Officers against a peer group of companies in the healthcare industry.
For 2006, the Company used the following companies for compensation benchmarking
purposes: 1) its publicly reported industry peer group: Amedisys, Inc., Gentiva
Health Services, Inc., National Home Health Care, LHC Group Inc., and 2) a
health care industry survey group compiled by Mercer so that market conditions
can also be appropriately considered. These peer groups may be periodically
reviewed and updated by the Committee based upon recommendations from Mercer.
The Committee believes these peer companies compete for executives with similar
talents and expertise to those of the Named Executive Officers.
From December 2006 through February 2007, the Committee conducted its annual
executive compensation review process. During this time, the Committee reviewed
and established base salaries for the top three Named Executive Officers for
2007. Messrs. Yarmuth, Guenthner, Lyles and Pruitt each received a base salary
increase of 4% for a standard cost of living increase effective March 1, 2007 to
$411,000. Ms. Liechty received a higher base salary increase of 9% in
recognition of her performance during 2006. In February 2007, the Committee
determined which performance targets were achieved in 2006 by the Named
Executive Officers under the annual cash incentive plan. In addition, in
February 2007, the Committee considered and approved an award of stock options
to the Named Executive Officers. These shares will vest in four equal annual
installments beginning on the first anniversary of the date of grant.
Components of Executive Compensation
The Company's executive compensation program uses the following elements to
structure the total direct compensation for the Named Executive Officers:
o base salary;
o annual cash incentives; and
o equity-based incentive compensation
The Company believes that the combination of these elements enables the
Committee to award competitive total direct compensation between the 50th and
75th percentiles in the healthcare industry.
The Committee does not have a pre-established policy for the allocation between
fixed compensation, such as base salary, and variable or "at risk" compensation,
such as short-term cash incentives and equity. However, the Committee places a
significant portion of total direct compensation for the Named Executive
Officers at risk. At risk compensation under the Company's cash incentive plans
incentivizes the Named Executive Officers to reach or exceed desired financial
operating goals. Moreover, at risk compensation under the Company's equity
incentive plans incentivizes the Named Executive Officers since the full benefit
of equity-based compensation cannot be realized unless the Named Executive
Officers are able to grow the value of the Common Stock over several years.
The Committee generally structures base salaries to be within the range of the
50th percentile to the 75th percentile of the healthcare industry. The Company's
annual short-term plan provides certain of the Named Executive Officers with the
ability to achieve significant additional cash compensation, typically above the
median level of the peer group for such awards. The Named Executive Officers
have been awarded equity-based compensation below the median level of the peer
group.
Base Salary
Base salaries are provided to the Named Executive Officers to compensate them
for their services performed during the year. The base salary for each Named
Executive Officer is determined annually by the Committee following a review of
each individual executive officer's performance, changes in executive officer
responsibility, relevant comparable industry data, an assessment of overall
Company performance, and general market salary increases for all employees. As
noted above, the Committee generally structures base salaries to be in the range
of the 50th to 75th percentile of its peer group. Salary adjustments also may be
considered in connection with promotions or other changes in job responsibility.
As part of its 2006 analysis, the Committee considers salary comparisons
prepared by Mercer to determine if base salaries for the Named Executive
Officers are competitive with similarly situated executives in the peer group
and the healthcare industry generally. The Chief Executive Officer also makes
recommendations on base salaries for the other Named Executive Officers.
For 2006, the base salaries of the Named Executive Officers were increased from
the prior year by the following percentages: Mr. Yarmuth-- 58%; Mr. Guenthner --
27%; Mr. Lyles-- 40%; Ms. Liechty-- 3%; and Mr. Pruitt-- 3%. The increases
provided to Messrs. Yarmuth, Guenthner and Lyles were primarily based on their
2005 performance and the Committee's desire to move their base salary closer to
the 75th percentile of the peer group. Prior to this increase, Mr. Yarmuth's
base salary had been $250,000 in each of the preceding five years. The increases
for Ms. Liechty and Mr. Pruitt were based on standard cost of living adjustment.
While certain aspects of performance of the Named Executive Officers can be
measured in financial operating metrics, the Committee also evaluates the Named
Executive Officers in other performance areas that are more subjective. These
areas include the success of the Named Executive Officer in developing and
executing the Company's strategic objectives, capitalizing on growth
opportunities, addressing significant challenges affecting the Company,
developing key employees and exercising leadership.
Cash Incentives
Under the Company's executive compensation program, a significant portion of
total cash compensation for the Named Executive Officers is subject to the
attainment of measurable financial operating goals. This approach creates a
direct incentive for the Named Executive Officers to achieve pre-established
performance objectives and places a significant percentage of each Named
Executive Officer's total direct compensation at risk.
The Company maintains an annual cash incentive plan under which the Committee
establishes annual financial operating goals for the Company's key employees,
including the Named Executive Officers. For 2006, the financial objectives for
the participating Named Executive Officers were based upon achieving targeted
levels of earnings per share. Annual cash bonuses under the annual cash
incentive plan are based upon a percentage of the participating Named Executive
Officer's base salary. No awards are granted under the annual cash incentive
plan until certain minimum levels of performance are achieved. The minimum
awards available for 2006 for the participating Named Executive Officers varied
based on the position ranging from 20% to 33% of their respective base salaries.
Target awards for the participating Named Executive Officers under the annual
cash incentive plan for 2006 varied based on the position ranging from 40% to
65% of their respective base salaries. The annual cash incentive plan also
provides additional compensation above the target award level for performance
exceeding the target goals. The maximum awards available for 2006 for the
participating Named Executive Officers varied based on the position ranging from
60% to 98% of their respective base salaries.
Based upon the financial operating goals achieved in 2006, the Committee made
annual cash awards to the following Named Executive Officers equal to the
following percentages of their base salaries under the annual cash incentive
plan: Mr. Yarmuth-- 98%; Mr. Guenthner-- 75%; Mr. Lyles-- 68%; Ms. Liechty--
98%, and Mr. Pruitt-- 8%.
Equity-Based Compensation
Although no awards were made in 2006, the Committee granted equity-based awards
in 2007 and plans to use equity-based compensation as a key component of its
overall executive compensation strategy in the future. Such awards provide a
direct and long-term link between the results achieved for the Company's
shareholders and the total direct compensation provided to the Named Executive
Officers. Stock-based compensation is designed to retain the Named Executive
Officers through time-based vesting conditions and to motivate them to enhance
the value of the Common Stock by aligning the financial interests of the Named
Executive Officers with those of the Company's shareholders. Equity-based
compensation also provides an effective incentive for management to create
shareholder value over several years since the full benefit of this element of
compensation is primarily realized as a result of the appreciation in the price
of the Common Stock.
The Company does not currently have a security ownership policy for its Named
Executive Officers or its Directors. The Committee generally does not take into
consideration equity awards granted in previous years when evaluating
awards for the current year.
Stock options are awarded at the closing price of the Company's Common Stock on
the NASDAQ on the date of grant. The Committee does not grant options with an
exercise price that is less than the closing price of the Common Stock on the
NASDAQ on the grant date (fair market value) and it does not grant stock options
that are priced on a date other than the grant date.
The amount of equity awarded to the Named Executive Officers is based upon a
number of factors. First, the Committee considers an overall assessment of the
Company's performance and the equity granting practices of other companies in
the healthcare industry and its peer group. In addition, the Committee considers
information prepared by Mercer with respect to the equity awards and considers
the relative costs. Based on this assessment, the Committee then establishes an
aggregate pool of potential equity awards for all participants in the
equity-based incentive plan, including the Named Executive Officers.
The Committee considers the overall performance of the Named Executive Officer
and his or her actual and potential contribution to the Company's growth and
long-term performance in determining individual awards. In addition, the
Committee considers benchmarks from the peer group in evaluating potential
awards to the Named Executive Officers. The Chief Executive Officer also
provides an assessment of the overall level of performance for the other Named
Executive Officers. The assessment of actual and potential contribution is based
upon the Committee's subjective evaluation of each Named Executive Officer.
Based on these assessments, the Committee determines the actual award for each
Named Executive Officer.
Section 401(k) Plan and Other Perquisites and Benefits
The Company maintains a Section 401(k) plan (the "401(k) Plan") that is a
tax-qualified defined contribution retirement savings plan under which all
eligible employees may contribute up to the limit prescribed by the IRS, on a
pre-tax basis. The Named Executive Officers are eligible to contribute on a
pre-tax basis at a discretionary level, which varies annually based upon results
of the Plan's prior year non-discrimination testing. After one year of service,
the Company matches 25% of the first 5% of pay that a participant contributes to
the 401(k) Plan and may also provide additional profit sharing contributions
based upon the Company's achievement of financial goals established by the
Committee. All employee contributions to the 401(k) Plan are fully vested upon
contribution and the Company's matching contribution vests in full immediately
once the employee has three years of service. Contributions to the 401(k) Plan
by the Named Executive Officers are usually limited by IRS rules.
Employment and Other Agreements
The Company has a year-to-year employment agreement with William B. Yarmuth, its
Chairman of the Board, President and Chief Executive Officer. The agreement
includes a covenant not to compete for a period of two years following Mr.
Yarmuth's termination as an employee of the Company and potential termination
payments to Mr. Yarmuth of two times his then current annual salary. The Company
has no other employment agreements.
Executive Compensation Tax Deductibility
Section 162(m) of the Code generally provides that the compensation paid by
publicly held corporations to the chief executive officer and the four most
highly paid senior executive officers in excess of $1,000,000 per executive will
be deductible by the Company only if paid pursuant to qualifying
performance-based compensation plans approved by shareholders of the Company.
Compensation as defined by the Code includes, among other things, base salary,
incentive compensation and gains on stock options and restricted Common Stock.
Although the Company currently attempts to structure all incentive compensation
to be deductible for federal income tax purposes, the Company's primary policy
is to maximize the effectiveness of the Company's executive compensation
program. In that regard, the Committee intends to remain flexible to take
actions which are deemed to be in the best interests of the Company and its
shareholders. Such actions have not always qualified for tax deductibility under
the Code and may not do so in the future.
Beginning on January 1, 2006, the Company began accounting for equity-based
incentive compensation in accordance with the requirements of Statement of
Financial Accounting Standards No. 123 (revised 2004) ("SFAS 123R").
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Board is composed entirely of independent
directors satisfying the requirements of the NASDAQ listing standards. The
Committee is composed of Messrs. Jonathan D. Goldberg (Chairman), Steven B.
Bing, Donald G. McClinton, W. Earl Reed, III & Tyree G. Wilburn. The
Compensation Committee is responsible for establishing and administering the
policies and programs that govern both annual cash compensation and stock-based
incentive compensation plans for the executive officers of the Company.
The Compensation Committee has reviewed and discussed the "Compensation
Discussion and Analysis" section with management. Based upon the foregoing
review and discussion with management, the Compensation Committee recommended to
the Board that the "Compensation Discussion and Analysis" section be included in
this Form 10-K/A.
All members of the Compensation Committee of the Company listed below submit the
foregoing report.
COMPENSATION COMMITTEE
Jonathan D. Goldberg, Chairman
Steven B. Bing
Donald G. McClinton
W. Earl Reed, III
Tyree G. Wilburn
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Shares of Common Stock Beneficially Owned as of March 31, 2007 (1)
--------------------------------------------------------------
Amount and Nature of Percent of
Directors and Executive Officers Beneficial Ownership Class
William B. Yarmuth 598,294 (2) 11.0%
9510 Ormsby Station Road, Suite 300
Louisville, KY 40223
C. Steven Guenthner 176,570 (3) 3.2%
Steven B. Bing 680 *
Donald G. McClinton 94,182 (4) 1.7%
Tyree G. Wilburn 51,000 (5) 0.9%
Jonathan D. Goldberg 81,970 (6) 1.5%
W. Earl Reed, III 144,554 (7) 2.6%
Henry M. Altman, Jr. 15,000 (8) *
Patrick T. Lyles 76,712 (9) 1.4%
Anne T. Liechty 23,305 0.4%
David Pruitt 0 *
Directors and Named Executive Officers as a Group 1,189,831 (10) 25.1%
as a Group (12 persons)
Other Five Percent Beneficial Owners
Banque Carnegie Luxembourg S.A. 441,540 (11) 8.2%
Carnegie Fund Management Company, S.A.
Centre Europe
5, Place de la Gare
L--1616 Luxembourg
Grand-Duchy of Luxemborg
Yarmuth Family Limited Partnership 262,232 (12) 5.8%
9510 Ormsby Station Road, Suite 300
Louisville, KY 40223
David T. Russell 355,244 6.6%
1414 Greenfield Avenue, Apt. 302
Los Angeles, CA 90025
Healthinvest Partners AB 410,552 (13) 7.6%
* Represents less than 1% of class.
(1) Based upon information furnished to the Company by the named persons,
and information contained in filings with the Securities and Exchange
Commission (the "Commission"). Under the rules of the Commission, a
person is deemed to beneficially own shares over which the person has
or shares voting or investment power or has the right to acquire
beneficial ownership within 60 days, and such shares are deemed to be
outstanding for the purpose of computing the percentage beneficially
owned by such person or group. Unless otherwise indicated, the named
person has the sole voting and investment power with respect to the
number of shares of Common Stock set forth opposite such person's name.
(2) Includes 5,924 shares as to which Mr. Yarmuth shares voting and
investment power pursuant to a family trust.
(3) Includes 33,014 shares subject to currently exercisable options.
(4) Includes 16,000 shares subject to currently exercisable options
and 29,182 phantom shares within the Non-Employee Directors Deferred
Compensation Plan.
(5) Includes 16,000 shares subject to currently exercisable options.
(6) Includes 45,970 phantom shares within the Non-Employee Directors
Deferred Compensation Plan.
(7) Includes 32,000 shares subject to currently exercisable options
and 12,554 phantom shares within the Non-Employee Directors Deferred
Compensation Plan.
(8) Includes 15,000 shares subject to currently exercisable options.
(9) Includes 20,000 shares subject to currently exercisable options.
(10) Includes currently exercisable options held by all directors and
executive officers as a group to purchase 363,000 shares of Common
Stock and 56,164 phantom shares held by Non-Employee Directors within
the Non-Employee Directors Deferred Compensation Plan.
(11) Based upon a Schedule 13G filed with the Commission as of December 31,
2006, Banque Carnegie Luxembourg, S.A., Carnegie Fund Management
Company, S.A., Carnegie Investment Bank, AB and D. Carnegie & Co. AB
have shared voting and/or dispositive power with respect to 220,770
shares of Common Stock.
(12) Robert N. Yarmuth is the general partner and is the brother of William
B. Yarmuth.
(13) Based on a Schedule 13G/A filed with the Commission as of December 31,
2006, Healthinvest Partners AB and HealthInvest Global Long/Short Fund
have shared voting and/or dispositive power with respect to 205,276
shares of Common Stock.
Equity Compensation Plans
As of December 31, 2006, shares of common stock authorized for issuance under
our equity compensation plans are summarized in the following table. See note 7
to the consolidated financial statements for a description of the plans. The
table below is furnished pursuant to item 12.
Shares to Be Issued Upon Weighted-Average Shares Available for Future
Plan Category Exercise Option Exercise Price Grants
-------------- -------------------------- ------------------------ ------------------------------
Plans approved by shareholders 614,060 $ 1.83 831,986
Plans not approved by shareholders - - -
-------------------------- ------------------------ ------------------------------
Total 614,060 $ 1.83 831,986
========================== ======================== ==============================
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
None
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Fees Paid to the Independent Auditors
Audit Fees
Ernst & Young LLP charged to the Company an aggregate amount of
$189,000 and $216,000 for professional services rendered for fiscal year 2006
and fiscal year 2005, respectively, for the audit of the Company's annual
financial statements, the reviews of the Company's financial statements included
in the Company's reports on Form 10-Q, and for services that are normally
provided by the accountant in connection with statutory and regulatory filings
or engagements for those fiscal years.
Audit-Related Fees
Ernst & Young LLP charged to the Company an aggregate amount of
$17,000 and $14,000 for assurance and related services rendered for fiscal year
2006 and fiscal year 2005, respectively, that are primarily related to the audit
of the Company's 401k employee benefit plan.
Tax Fees
Ernst & Young LLP charged to the Company an aggregate amount of
$178,000 and $67,000 for professional services rendered for fiscal year 2006 and
fiscal year 2005, respectively, for tax compliance, tax advice, and tax
planning.
All Other Fees
There were no other services or fees provided by Ernst & Young
LLP in 2006 and 2005.
Pre-Approval Policies and Procedures
During fiscal year 2006, the Audit Committee approved all audit,
audit-related and non-audit services provided to the Company by Ernst & Young
LLP before management engaged the auditor for those purposes. The Audit
Committee's current practice is to consider for pre-approval all audit,
audit-related, tax and non-audit services proposed to be provided by our
independent auditors for the fiscal year.
ITEM 15. EXHIBITS AND FINANCIAL STATEMENTS SCHEDULES
a)
1. and 2. No financial statements or schedules are filed with this report
on Form 10-K/A.
3. Exhibits
A list of the exhibits filed or furnished with this report on Form 10-K/A
is provided in the Exhibit Index beginning on page 22 of this report.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
ALMOST FAMILY, INC.
April 30, 2007
/S/ William B. Yarmuth April 30, 2007
-------------------
William B. Yarmuth
Chairman, President and Chief Executive Officer
/S/ C. Steven Guenthner April 30, 2007
-------------------
C. Steven Guenthner
Senior Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
Exhibits required to be filed by Item 601 of Regulation S-K, and
by Item 15 I below:
Number Description of Exhibit Page Number
31.1* Certification of Chief Executive Officer 23
pursuant to Rule 13a-14(a)
and Rule 15d-14(a) of the Securities
Exchange Act, as amended.
31.2* Certification of Chief Financial Officer
pursuant to Rule 13a-14(a) and 24
Rule 15d-14(a) of the Securities Exchange
Act, as amended.
*Denotes filed herein.