Schedule 14A


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The peer group used in 2016 is the same as the peer group used in 2015, with the exception that Petsmart Inc. was removed as a result of the company being acquired.

Management and the Compensation Committee, with Cook & Co.’s assistance, regularly evaluate the marketplace to ensure that our compensation programs remain competitive. In addition to its review of data from the peer group, the Compensation Committee also from time to time consults data from published compensation surveys to assess more generally the competitiveness and the reasonableness of our compensation programs. To the extent that the Compensation Committee “benchmarks” compensation, it relies only on comparisons to the enumerated peer group and survey data. The Compensation Committee, however, does not believe that compensation levels and design should be based exclusively on benchmarking and, therefore, considers various business factors and each executive’s individual circumstances and role within our organization.

Overview of Compensation Elements 

We strive to achieve an appropriate mix between cash payments and equity incentive awards in order to meet our objectives by rewarding recent results, motivating long-term performance and strengthening alignment with shareholders. The Compensation Committee evaluates the overall total direct compensation package relative to market conditions, but does not specifically target any percentile for each element of total direct compensation. In conducting this evaluation, the Compensation Committee’s goal is to ensure that a significant majority of each executive officer’s total direct compensation opportunity is contingent upon Company performance and shareholder value creation. The Compensation Committee reviews the compensation mix of each executive on a comprehensive basis to determine if we have provided the appropriate incentives to accomplish our compensation objectives.

In general, our compensation policies have provided for a more significant emphasis on long-term equity compensation than on annual cash compensation for our executive officers. Our long-term equity compensation consists of (i) a long-term performance plan (“LTPP”) that provides for awards of performance shares tied to successful achievement of pre-determined ROIC goals over a two-year period, and (ii) market stock units (“MSU Grants”) which are restricted stock units with three-year vesting, with the actual number of shares delivered modified by the change in our cumulative TSR over a three-year period (up or down). The Compensation Committee believes that the Company’s 2016 pay mix supports the Company’s strong pay for performance culture, as demonstrated by approximately 83% of our Chief Executive Officer’s target total direct compensation and approximately 64% of our other Named Executive Officers’ target total direct compensation in 2016 were variable or at risk, tied to the Company’s measurable performance and/or change in shareholder value.

 

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The following table summarizes the basic elements of our compensation programs and describes the behavior and/or qualities exhibited by our executive officers that each element is designed to encourage as well as the underlying purpose for that element of our compensation program:

 

 

 

 

 

 

 

 

 

 

Pay Element

  

What the Pay Element Rewards

  

Purpose of the Pay Element

 

 

 

 

 

Base Salary

  



  

Skills, experience, competence, performance, responsibility, leadership and contribution to the Company

  



  

Provide fixed compensation for daily responsibilities

 

 

 

 

 

Annual Bonus Plan

  



  

Rewards annual achievement of profitability (operating income) targets

  



  

Focus attention on meeting annual performance targets and our near-term success, provide additional cash compensation and incentives based on our annual performance

 

 

 

 

 

Long-Term Incentives

  



  

Achieving multi-year: (i) ROIC targets and (ii) change in cumulative TSR

  



  

Focus attention on meeting longer-term performance targets and our long-term success, create alignment with shareholders by focusing efforts on longer-term financial and shareholder returns, and retain management in competitive marketplace

 

 

 

 

 

Health and welfare benefits

  



  

Provides medical coverage as well as death/disability benefits

  



  

Designed to provide a level of safety and security for executives and their families (as applicable) that allows executives to focus their efforts on running the business effectively

 

 

 

 

 

Severance and change-in-control provisions/agreements

  



  

Provides payments and other benefits upon termination of employment

  



  

Designed to ensure that executive officers remain focused on maximizing shareholder value even during transitions or potential transactions

We believe our compensation programs are consistent with best practices for sound corporate governance.

We DO:

 

 



 

Maintain robust stock ownership guidelines for executives and non-executive directors;

 

 



 

Only accelerate equity upon change-in-control AND termination (i.e., “double trigger”); and

 

 



 

Maintain anti-hedging, anti-pledging and recoupment (or “clawback”) policies.

We do NOT:

 

 



 

Execute employment agreements containing multi-year guaranties for salary increases, non-performance bonuses or automatic renewals (i.e., evergreen agreements) for those executive officers that have employment agreements—currently only our Chief Executive Officer;

 

 



 

Provide material perquisites for executives;

 

 



 

Offer gross-up payments to cover personal income taxes or excise taxes that pertain to executive or severance benefits; or

 

 



 

Provide special executive retirement programs.

 

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Base Salary

The Compensation Committee reviews our executive officers’ base salaries annually at the end of the fiscal year and establishes the base salaries for the upcoming fiscal year. Base salary for our executive officers is determined after consideration of numerous factors, including, but not limited to: scope of work, skills, experience, responsibilities, performance and seniority of the executive, peer group salaries for similarly-situated positions and the recommendation of the Chief Executive Officer (except in the case of her own compensation). Ms. Cochran’s salary is set per her employment agreement, subject to increases at the discretion of the Compensation Committee. The Company views base salary as a fixed component of executive compensation that compensates the executive officer for the daily responsibilities assumed in operating the Company throughout the year.

Base salaries for 2015 and 2016 for the Named Executive Officers were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NAMED EXECUTIVE OFFICER

  

2015 BASE SALARY

 

  

2016 BASE SALARY

 

 

PERCENT CHANGE

 

Sandra B. Cochran

  

$

985,000

  

  

$

1,025,000

  

 

 

4.06



Jill Golder

  

 

 

 

  

$

128,646

(1) 

 

 

N/A

  

Lawrence E. Hyatt

  

$

520,000

  

  

$

495,300

(2) 

 

 

N/A

(3) 

Nicholas V. Flanagan

  

$

426,000

  

  

$

445,000

  

 

 

4.46



Beverly K. Carmichael

  

$

300,000

  

  

$

345,000

  

 

 

15.00



Laura A. Daily

  

$

304,000

  

  

$

320,000

  

 

 

5.26



 

(1)

Reflects Ms. Golder’s base salary during fiscal 2016 based upon her hire date of April 25, 2016. Ms. Golder’s annualized base salary in 2016 was $475,000.

(2)

Reflects a prorated amount based on Mr. Hyatt’s service during fiscal 2016 as both our SVP & CFO (through July 1, 2016) and as an employee pursuant to his retirement agreement with the Company, dated September 25, 2015 (four weeks).

(3)

Mr. Hyatt’s annual base salary was increased from $520,000 to $535,600 (3.0%) effective August 1, 2015.

 

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Annual Bonus Plan

The annual bonus plan generally provides our executive officers with the opportunity to receive additional cash compensation based on a targeted percentage of base salary, but only if the Company successfully meets established performance targets. For 2016, executive officers were eligible to receive a bonus, depending upon the Company’s operating income performance relative to a target set at the beginning of the fiscal year. The following graph reflects the various potential payout levels at different levels of performance:
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