Item 11. Executive Compensation
Compensation Discussion and Analysis
Overview
This Compensation Discussion and Analysis (CD&A) provides discussion and analysis of the components of our executive compensation program for our Named Executive Officers (NEOs), whose compensation
is described in this Amendment. Our Board’s Compensation Committee reviews and approves our compensation policies, compensation arrangements for senior management, and compensation and benefit plans in which officers and directors are eligible to
participate. Following the completion of the Merger, the Compensation Committee designed a new executive compensation framework to serve the needs of the combined company.
We have a history of active shareholder engagement and value the relationships we have developed over time. The feedback our shareholders have provided has greatly informed our compensation and
governance programs. Following our 2017 “Say-On-Pay” vote, which received 52% favorable support from our shareholders, our executive leadership and independent members of our Board actively engaged with our major shareholders to solicit
feedback on a range of corporate governance matters, including our executive compensation practices and philosophy. Our outreach team included members of executive management and independent members of our Board. The focus of these meetings was to
provide an update on our strategic vision, operational priorities, the strength of our leadership team, as well as discuss our governance and executive compensation programs.
|
WHAT WE HEARD
|
»
|
|
|
WHAT WE DID
|
|
|
|
|
|
|
|
■
Mixed reaction to the one-time RSU award granted to
our CEO in early 2016 prior to the Merger. Certain of our shareholders viewed this award as insufficiently performance-based.
|
|
|
|
■
Do not anticipate issuing similar, one-time CEO
grants and have increased the performance-based component of the CEO’s long-term incentive award, tied to rigorous, pre-established financial metrics.
|
|
■
Our 2016 performance-based equity incentive awards
and short-term cash incentive plan both measured performance based on Adjusted EPS growth.
|
|
|
|
■
Utilized different performance measures for our
short-and long-term incentive programs. For 2017, long-term incentive plan awards will vest based on three-year TSR and Adjusted EPS performance and short-term cash incentive plan financial metric is based on one-year Adjusted EBITDA
results.
|
|
■
Favorable response to pay-for-performance elements
of 2017 executive compensation program design.
|
|
|
|
■
Kept the core design intact for our incentive plans
for 2018, while eliminating corporate development performance goals for our short-term incentive plan and company contributions to our supplemental employee retirement plan.
|
Our Named Executive Officers
The following named executive officers include the Company’s Principal Executive Officer, Principal Financial Officer and the three other most highly compensated executive officers based on 2017
compensation they received. In addition, our NEOs for 2017 include our former Executive Chairman, William A. Sanger, who began serving as our non-executive Chairman commencing December 1, 2017, our former Chief Financial Officer, Claire M. Gulmi, who
retired from her executive position effective October 2, 2017, our former President-Physician Services Group, Robert J. Coward, who resigned from the Company as of October 2, 2017, and Randel G. Owen, our former Executive Vice President and
President-Ambulatory Services, who left the Company in connection with the divestiture of American Medical Response on March 14, 2018.
Our NEOs for 2017 are listed below:
Christopher A. Holden
|
|
President and Chief Executive Officer
|
Kevin D. Eastridge
|
|
Executive Vice President and Chief Financial Officer
|
Randel G. Owen
|
|
Former Executive Vice President and President - Ambulatory Services Group
|
Craig A. Wilson
|
|
Senior Vice President, General Counsel and Secretary
|
Patrick B. Solomon
|
|
Senior Vice President and Chief Strategy Officer
|
William A. Sanger
|
|
Former Executive Chairman
|
Claire M. Gulmi
|
|
Former Executive Vice President and Chief Financial Officer
|
Robert J. Coward
|
|
Former Executive Vice President and President - Physician Services Group
|
8
Table of Contents
Part III
Executive Summary
On December 1, 2016, AmSurg and EHH completed the Merger, combining two leading healthcare companies to create a premier healthcare services provider organization offering clinical solutions on a
national scale, well positioned to create value for its stockholders, health systems, payors, providers and patients. Our senior management team was instrumental in driving our integration efforts and executing our strategic plan following the completion
of the Merger, including the following achievements.
PORTFOLIO
MANAGEMENT
|
|
MARKET DEVELOPMENT
|
|
OPERATIONAL
ENHANCEMENTS
|
|
2017 EXECUTIVE
COMPENSATION DECISION
|
■
Completed divestiture of AMR, with approximately
$2.1 billion in net proceeds.
■
Terminated an unprofitable population health
services contract.
■
Invested over $630 million in selective physician
services and ambulatory services acquisitions during 2017.
|
|
■
120+ new physician services contracts
– significantly ahead of full-year organic growth targets.
■
Effective cross-selling in 2017 with more than 70%
of new contracts from expansions of existing health system relationships.
|
|
■
Converted approximately 40% of previously
out-of-network revenue to in-network status during 2017, which is expected to improve cash flows over time.
■
Achieved $50 million in run-rate synergies from the
Merger by year-end 2017.
■
Initiated operational improvements designed to
realize $50 million of incremental cost savings in 2018.
|
|
■
After careful consideration of our 2017 financial
and operating performance, and based on a recommendation from our CEO, the Compensation Committee determined that our performance did not warrant a short-term incentive payment to our NEOs for 2017.
|
Our Executive Compensation Philosophy
The primary objectives of our executive compensation policies are:
■
|
to attract and retain talented executives by providing compensation that is, overall, highly competitive with the compensation provided to executives at companies of comparable position in the healthcare services industry,
and consistent with our annual budget, financial objectives and operating performance;
|
■
|
to provide appropriate performance-based short-term incentives for executives to meet or exceed the achievement of our annual financial performance and business goals; and
|
■
|
to closely align the interests of our executives with those of our stockholders and the long-term interests of the Company by providing the majority of our long-term incentive compensation in the form of equity-based
compensation.
|
The Compensation Committee is committed to a strong and direct link between our financial and strategic performance and our executive compensation practices. In making executive compensation decisions,
the Compensation Committee also exercises discretion to look beyond short-term financial performance measures to the executives’ achievement of specific strategic goals.
Our Executive Compensation Framework
The Compensation Committee has established the following executive compensation framework to closely align the interests of our leadership with those of our stockholders and create a strong link between
our performance and our executive pay:
■
|
Long-term equity incentive program comprised of 60% performance share units linked to key performance metrics and 40% time-based restricted share units;
|
■
|
Performance share units linked to value-creating long-term performance goals based on adjusted earnings per share and three-year total shareholder return relative to the S&P Composite 1500 healthcare index;
and
|
■
|
Short-term cash incentives designed to reward exceptional performance based on achievement of key performance indicators, including Adjusted EBITDA, and key individual performance indicators.
|
9
Table of Contents
Part III
Our Compensation Governance Practices
As part of our Compensation Committee’s ongoing efforts to embrace compensation governance best practices, we have adopted the following approaches to compensation governance:
|
|
|
■
Fully Independent Compensation Committee
■
Robust Equity Ownership Guidelines for Executives and
Directors
■
Equity Awards with “Double Trigger” Vesting on Change
of Control
■
Restrictions on Hedging and Pledging of EVHC stock
■
Pay for Performance Philosophy
■
Short-Term Incentives Tied to Financial and Operating
Performance
■
Performance-Based Equity Awards
■
Incentive Compensation Clawback Policy
■
Minimum Vesting Requirements for Equity Awards
■
No Excise Tax Gross-Ups
■
CEO Self-Assessment and Performance Review
■
Limited Executive Perquisites and Benefits
■
Conduct Annual Risk Assessment of Executive Compensation
Programs
■
Use an Independent Compensation
Consultant
|
|
|
Our Target Executive Pay Mix
Our Compensation Committee designed our 2017 executive compensation program so that performance-based pay elements comprise a significant portion of the executive compensation awarded to our NEOs. We
believe this emphasis on pay-for-performance closely aligns our executive team’s interests with those of our shareholders and creates compelling incentives for value creation. The charts below show the target 2017 executive pay mix and at-risk
compensation for our named executive officers.
CEO
|
|
OTHER NEOs
|
|
|
|
Role of the Compensation Committee in the Compensation Process
Our Compensation Committee approves the compensation arrangements for our senior management, including our executive officers, and reviews and makes recommendations to the Board regarding non-employee
director compensation. The Compensation Committee also administers our equity incentive plans and other compensation plans in which our employees participate. It is the responsibility of the Compensation Committee to
determine whether, in its judgment, our executive compensation policies are reasonable and appropriate, meet the stated objectives of those policies and effectively serve the best interests of the Company and our stockholders. Each member of the
Compensation Committee is an “independent director” as defined under the applicable rules of the NYSE.
The Compensation Committee reviews our compensation policies on an annual basis based upon our financial performance, our annual budget, our position within the health care services industry, our peer
group, and the compensation policies of similar companies in the health care services industry. The Compensation Committee seeks to ensure that our executive officers are paid appropriately for their contributions to the Company and that our overall
compensation strategy supports our objective of creating shareholder value. The level and mix of compensation of individual executives is reviewed annually.
10
Table of Contents
Part III
In setting and reviewing executive compensation, in addition to corporate performance, the Compensation Committee believes it is appropriate to consider the level of experience and responsibilities of
each executive, as well as the personal contributions a particular individual may make to the success of the corporate enterprise, including the effective leadership of others who contribute to our success. Such qualitative factors as leadership skills,
analytical initiative, potential for growth in overall abilities, contribution to the Company, and organizational development are deemed to be important qualitative factors to take into account in considering levels of compensation. No relative weight is
assigned to these qualitative factors, which are applied subjectively by the Compensation Committee.
Review of Peer Companies
The Compensation Committee relies on several factors in its review of total direct compensation opportunities for our executives, including a review of peer group data and available market data from
industry surveys, including from the Willis-Towers-Watson Executive Compensation Database. On an annual basis, the Compensation Committee identifies a peer group for purposes of its annual review of executive compensation. In selecting our peer group for
2017, the Compensation Committee focused on publicly traded healthcare companies of comparable scale and business characteristics that we compete with for executive talent, with an emphasis on healthcare services providers. Generally, our Compensation
Committee targets total direct compensation for our executives within a competitive range of the median for our peer group and available market data. Our peer group includes the following companies:
Company
|
|
Ticker
|
|
2017 Net Revenue
(Millions)*
|
|
Enterprise
Value (Millions)*
|
DaVita Inc.
|
|
DVA
|
|
10,876.6
|
|
23,231.9
|
Encompass Health Corporation
|
|
EHC
|
|
3,919.0
|
|
7,782.7
|
Kindred Healthcare, Inc.
|
|
KND
|
|
6,034.1
|
|
4,046.5
|
Laboratory Corp. of America
|
|
LH
|
|
10,205.9
|
|
22,706.2
|
Lifepoint Health Inc.
|
|
LPNT
|
|
6,291.4
|
|
4,919.0
|
Magellan Health Inc.
|
|
MGLN
|
|
4,597.4
|
|
2,342.2
|
Mednax Inc.
|
|
MD
|
|
3,458.3
|
|
5,676.8
|
Molina Healthcare, Inc.
|
|
MOH
|
|
19,883.0
|
|
639.0
|
Quest Diagnostics Inc.
|
|
DGX
|
|
7,709.0
|
|
17,181.0
|
Select Medical Holdings Corp.
|
|
SEM
|
|
4,443.6
|
|
6,600.4
|
Tenet Healthcare Corp.
|
|
THC
|
|
19,179.0
|
|
18,408.0
|
Universal Health Services, Inc.
|
|
UHS
|
|
10,409.9
|
|
14,794.2
|
Wellcare Health Plans, Inc.
|
|
WCG
|
|
17,007.2
|
|
5,468.3
|
Envision Healthcare Corporation
|
|
EVHC
|
|
7,819.3
|
|
9,136.9
|
Role of Chief Executive Officer in Compensation Decisions
The Compensation Committee is responsible for all decisions regarding the compensation of our executive officers. The Compensation Committee annually evaluates the performance of our executive officers,
and our Chief Executive Officer provides the Compensation Committee with his assessment of the performance of our executive officers, including himself, and makes recommendations regarding appropriate levels of compensation. Our Chief Executive Officer
does not participate in the Compensation Committee’s deliberations regarding his own compensation.
Role of the Compensation Consultant
The Compensation Committee engages an independent compensation consulting firm to review the compensation program for our senior management, including the executive officers, and provide the
Compensation Committee with relevant market and other data and alternatives to consider when making compensation decisions, including the mix of cash and non-cash compensation, and the form and value of equity-based awards. The Compensation Committee
uses information provided by its compensation consultant and recommendations from our Chief Executive Officer to determine the appropriate level and mix of total compensation, including incentive compensation. The Compensation Committee’s
consultant also advises the Compensation Committee with respect to the compensation arrangements for our non-employee directors. For 2017, the Compensation Committee retained F.W. Cook as its independent compensation consultant. The Compensation
Committee assessed the independence of its compensation consultant and concluded that no conflict of interest existed that would prevent F.W. Cook from serving as an independent compensation consultant.
11
Table of Contents
Part III
Advisory Say-on-Pay Frequency
At our 2017 Annual Meeting of Stockholders (the “2017 Annual Meeting”), our shareholders approved, on an advisory basis, holding future advisory votes on the executive compensation of our NEOs, or Say-on-Pay, on an annual basis. In response, our Board subsequently determined that the Company will hold an advisory Say-on-Pay vote annually.
Advisory Say-on-Pay Vote
At our 2017 Annual Meeting, our shareholders approved our Say-on-Pay proposal with approximately 52% of the votes cast in favor of the proposal. As discussed more fully under “Overview”, members of senior management and the Compensation Committee engaged extensively with our shareholders following our 2017 Say-on-Pay vote regarding our executive compensation practices and philosophy, and our Compensation Committee carefully considered shareholder perspectives to inform the Company’s executive compensation framework and pay-for-performance philosophy.
Elements of Executive Compensation
The following discussion describes the principal components of compensation for our NEOs for the year ended December 31, 2017, as well as the Compensation Committee’s decision making process.
Pay Element
|
|
|
|
Key Components
|
|
Why We Pay This to
our NEOs
|
|
How We Determine this
Pay Element
|
|
2017 Pay Decision
|
|
|
Base Salary
|
|
Regular, fixed cash payment reviewed annually and adjusted based on merit and competitive analysis.
|
|
To establish competitive pay levels to attract and retain exceptional executive talent.
|
|
We consider Company performance, the executive’s performance, internal pay equity, market compensation data, and changes in core responsibilities of the executive.
|
|
2017 base salary determinations are described below.
|
|
|
Short-Term Cash Incentives
|
|
Performance-based, variable cash compensation measured against short-term performance objectives.
|
|
To closely link executive pay with short-term value creation, rewarding exceptional performance against rigorous financial and strategic objectives.
|
|
Executives are eligible to receive cash incentives based on achievement of performance goals, including Adjusted EBITDA, corporate development goals, and key performance indicators.
|
|
Our Adjusted EBITDA financial goal for 2017 was not attained. While a portion of the bonus was payable based on achievement of organic development goals and key performance indicators, after consultation with our CEO, our Compensation Committee exercised its discretion to determine that short-term incentives would not be paid to NEOs for 2017.
|
|
|
PSUs
|
|
Performance-based equity awards vesting based on Total Shareholder Return and Adjusted Earnings per Share growth over a three-year period.
|
|
Align long-term interests of executives with those of our shareholders by incenting value creation over a three-year performance period.
|
|
The number of PSUs that ultimately vest is based on achievement of TSR Goals and Adjusted EPS Goals across a range of 0% to 150% of target.
|
|
PSUs represent 60% of long-term incentive awards granted to our NEOs for 2017.
|
|
|
RSUs
|
|
Time-based equity awards vesting over a three-year period.
|
|
Full-value awards reward longer-term value creation.
Multi-year vesting promotes executive retention and continuity.
|
|
Internal pay equity, peer group analysis and individual performance.
|
|
RSUs represent 40% of long-term incentive awards granted to our NEOs for 2017.
|
12
Table of Contents
Part III
The Compensation Committee’s Approach to Base Salary
We provide executive officers with base salaries to compensate them for services provided during the year. The Compensation Committee generally establishes base salaries for our executive officers on an annual basis at a meeting of the Compensation Committee held in the first quarter of the year. In determining whether an increase in base compensation for the executive officers is appropriate, the Compensation Committee considers the performance of the Company and the executive officer during the prior year, the executive officer’s level of base salary relative to other executive officers of the Company and executive officers at comparable companies, changes to the position and responsibilities of the executive officers, and the recommendations of the Chief Executive Officer. The weighting of these and other relevant factors is determined on a case-by-case basis for each executive officer.
Base Salary Determinations for 2017
For 2017, the Compensation Committee weighed these factors and approved increases in base salaries for Messrs. Holden, Wilson, Solomon, Coward, Owen, and Ms. Gulmi. Following the completion of the Merger, the Compensation Committee reviewed the total direct compensation, the performance of each executive officer, and the significant scale and scope of the combined company in making its determinations. The Compensation Committee increased Mr. Eastridge’s base salary following his appointment as Executive Vice President and Chief Financial Officer on October 2, 2017 based on his increased responsibilities, its consideration of relevant market data and internal pay equity. The following chart summarizes the 2017 base salary determinations for our named executive officers.
Name
|
|
2017 Base
Salary
|
|
2016 Base
Salary
|
|
Percentage
Change
|
|
Christopher A. Holden
|
|
$
|
1,200,000
|
|
$
|
1,040,000
|
|
15.4
|
%
|
President and Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
Kevin D. Eastridge
|
|
$
|
575,000
|
|
$
|
465,000
|
|
23.7
|
%
|
Executive Vice President and Chief Financial Officer*
|
|
|
|
|
|
|
|
|
|
Randel G. Owen
|
|
$
|
770,000
|
|
$
|
700,000
|
|
10.0
|
%
|
Former Executive Vice President and President-Ambulatory Services
|
|
|
|
|
|
|
|
|
|
Craig A. Wilson
|
|
$
|
480,000
|
|
$
|
415,000
|
|
15.7
|
%
|
Senior Vice President, General Counsel & Secretary
|
|
|
|
|
|
|
|
|
|
Patrick B. Solomon
|
|
$
|
440,000
|
|
$
|
400,000
|
|
10.0
|
%
|
Senior Vice President and Chief Development Officer
|
|
|
|
|
|
|
|
|
|
William A. Sanger
|
|
$
|
1,106,000
|
|
$
|
1,106,000
|
|
—
|
|
Former Executive Chairman
|
|
|
|
|
|
|
|
|
|
Robert J. Coward
|
|
$
|
820,000
|
|
$
|
683,000
|
|
20.1
|
%
|
Former Executive Vice President and President-Physician Services
|
|
|
|
|
|
|
|
|
|
Claire M. Gulmi
|
|
$
|
636,000
|
|
$
|
530,000
|
|
20.0
|
%
|
Former Executive Vice President and Chief Financial Officer
|
|
|
|
|
|
|
|
|
|
*
|
Reflects Mr. Eastridge’s base salary following his appointment as Executive Vice President and Chief Financial Officer in October 2017.
|
The Compensation Committee’s Approach to Cash Incentives
The Compensation Committee believes that a substantial portion of our executive officers’ cash compensation should be performance-based. To link executive compensation and short-term performance, the Compensation Committee relies on annual cash bonuses awarded to our executive officers based upon the extent to which our actual earnings during a fiscal year meet or exceed earnings targets approved by the Compensation Committee for such fiscal year, and other specific performance measures related to each executive officer’s specific area of responsibility. Specific targets relating to an executive officer’s area of responsibility include targets relating to segment earnings, new acquisition and development activity, as well as personal performance goals approved by the Compensation Committee. Executive officers do not receive a bonus pursuant to the plan with respect to a bonus measure if performance was below the minimum target with respect to that measure. In establishing our annual cash bonus plan, the Compensation Committee reviews data prepared by its independent consultant and the recommendations of the Chief Executive Officer in determining the percentage of bonus earned, based upon specific performance targets and the maximum total bonus potential for the executive officers.
13
Table of Contents
Part III
2017 Short-Term Incentive Determinations
For 2017, the Compensation Committee established a cash incentive plan designed to motivate and reward our executives for performance on key financial, strategic and individual performance goals over the year. For 2017, the Compensation Committee determined that Short-Term Incentive Plan Awards for Mr. Holden, Mr. Eastridge, Ms. Gulmi, Mr. Sanger, Mr. Wilson and Mr. Solomon would be based upon the achievement of 2017 Adjusted EBITDA targets, corporate development goals tied to acquisition and organic growth, and, except for Mr. Sanger, key performance indicators specific to their areas of primary responsibility. The Compensation Committee determined that Short-Term Incentive Plan awards for Messrs. Coward and Owen would be based upon the achievement of segment Adjusted EBITDA targets over which the executive had primary responsibility, Adjusted EBITDA targets for the Company, corporate development goals, and key performance indicators specific to the executives area of primary responsibility.
2017 Short-Term Incentive Plan - Bonus Metric Allocation
For the 2017 Short-Term Incentive Plan, the percentage of cash bonus allocated to each performance target for each of the NEOs are set forth in the table below.
Name
|
|
Adjusted
EBITDA
|
|
|
Segment
Adjusted
EBITDA
|
|
|
Development
Goals
|
|
|
Key
Performance
Indicators
|
|
Christopher A. Holden
|
|
50
|
%
|
|
—
|
|
|
30
|
%
|
|
20
|
%
|
Kevin D. Eastridge
|
|
50
|
%
|
|
—
|
|
|
30
|
%
|
|
20
|
%
|
Randel G. Owen
|
|
20
|
%
|
|
40
|
%
|
|
20
|
%
|
|
20
|
%
|
Craig A. Wilson
|
|
50
|
%
|
|
—
|
|
|
30
|
%
|
|
20
|
%
|
Patrick B. Solomon
|
|
50
|
%
|
|
—
|
|
|
30
|
%
|
|
20
|
%
|
William A. Sanger
|
|
70
|
%
|
|
—
|
|
|
30
|
%
|
|
—
|
|
Robert J. Coward
|
|
20
|
%
|
|
40
|
%
|
|
20
|
%
|
|
20
|
%
|
Claire M. Gulmi
|
|
50
|
%
|
|
—
|
|
|
30
|
%
|
|
20
|
%
|
2017 Short-Term Incentive Plan - Target and Maximum Bonus Payments
The cash bonuses paid to each of the NEOs for 2017, and the target and maximum total bonus awards for each of them, as a percentage of their base salaries, is set forth in the table below.
Name
|
|
Target
Cash
Incentive
($)
|
|
Target
Cash
Incentive
(as a % of
Base Salary)
|
|
|
Maximum
Cash
Incentive
($)
|
|
Maximum
Cash
Incentive
(as % of Base
Salary)
|
|
|
Actual 2017
Cash
Incentive
($)
|
|
Actual 2017
Cash
Awarded
(% of Base
Salary)
|
|
Christopher A. Holden
|
|
1,800,000
|
|
150
|
%
|
|
3,240,000
|
|
270
|
%
|
|
—
|
|
0
|
%
|
Kevin D. Eastridge
(3)
|
|
487,480
|
|
100
|
%
|
|
877,464
|
|
180
|
%
|
|
—
|
|
0
|
%
|
Randel G. Owen
|
|
924,000
|
|
120
|
%
|
|
1,663,200
|
|
216
|
%
|
|
—
|
|
0
|
%
|
Craig A. Wilson
|
|
360,000
|
|
75
|
%
|
|
648,000
|
|
135
|
%
|
|
—
|
|
0
|
%
|
Patrick B. Solomon
|
|
440,000
|
|
100
|
%
|
|
792,000
|
|
180
|
%
|
|
—
|
|
0
|
%
|
William A. Sanger
|
|
2,212,000
|
|
200
|
%
|
|
4,424,000
|
|
400
|
%
|
|
—
|
|
0
|
%
|
Robert J. Coward
|
|
984,000
|
|
120
|
%
|
|
1,771,200
|
|
216
|
%
(1)
|
|
—
|
|
0
|
%
|
Claire M. Gulmi
|
|
636,000
|
|
100
|
%
|
|
1,144,800
|
|
180
|
%
(2)
|
|
—
|
|
0
|
%
|
(1)
|
Mr. Coward was ineligible to receive a bonus as a result of his resignation from the Company.
|
(2)
|
Ms. Gulmi was eligible to receive a bonus pursuant to the Company’s retirement policies.
|
(3)
|
Mr. Eastridge’s target cash incentive based on actual base salary earned during 2017.
|
14
Table of Contents
Part III
The bonus payable to each of the NEOs was dependent upon meeting or exceeding the bonus targets previously established by the Compensation Committee for each performance measure. The range of potential bonus achievement for each financial performance measure was 0% to 200%, while the range of potential bonus achievement applicable to individual key performance indicators was 0% to 100%. For 2017, the performance targets and associated results for the financial performance measures established under the Short-Term Incentive Plan were as follows (dollars in millions, except per share amounts):
2017 Targets
(1)
|
|
Low
(Threshold)
($)
|
|
High
(Maximum)
($)
|
|
Actual
Performance
($)
|
|
2017 Result
(% of Target
Cash Incentive)
|
Adjusted EBITDA
|
|
1,067,500
|
|
1,104,700
|
|
909,000
|
|
—
|
Organic Corporate Development Goals
|
|
57,500
|
|
63,500
|
|
60,000
|
|
7.5
|
M&A Corporate Development Goals
|
|
71,000
|
|
99,800
|
|
59,000
|
|
—
|
(1)
|
Refer to Appendix A for the Company’s definition of Adjusted EBITDA.
|
Our Adjusted EBITDA financial goal for 2017 was not attained. A portion of the bonus potential of each NEO was attained based on achievement of organic development goals and individual key performance indicators. After careful consideration of the Company’s financial and operating performance in 2017 and based on a recommendation from the CEO, our Compensation Committee exercised its discretion to determine that the Company’s overall performance did not warrant a short-term incentive payment to our NEOs for 2017.
Goal Setting Process: Short-term Incentive Goals Designed to Reward Exceptional Performance
The Compensation Committee considers the earnings and performance bonus targets above the minimum level to be a “reach” and thus, while designed to be attainable, achievement of those bonus targets requires strong performance and execution. For 2017, the Compensation Committee approved multiple performance levels ranging from 0% to 200% for each financial measure and 0% to 100% for key performance indicators. The bonus performance goals established by the Company for 2017 included rigorous financial and operating performance targets relating to corporate earnings, segment earnings, corporate and strategic development goals, and key performance indicators.
The Compensation Committee’s Approach to Long Term Equity Incentives
The Compensation Committee believes that an integral part of our executive compensation program are long-term equity-based compensation plans that align our executive officers’ long-range interests with those of our shareholders, All equity-based awards are granted pursuant to incentive plans approved by our shareholders. The Compensation Committee determines the components and amounts of equity-based awards to the executive officers based upon, among other factors, the recommendations of the Chief Executive Officer, with respect to executives other than the Chief Executive Officer, internal pay equity, prior equity grants, individual and Company performance, our annual budget and retention considerations, and the practices of peer group companies. The weighting of these and other relevant factors is determined on a case-by-case basis for each executive officer. Equity-based awards are granted in part to reward the senior executives for their long-term strategic management of the Company, and to motivate the executives to create long-term shareholder value.
2017 Long-Term Equity Incentive Decisions
During the first quarter of 2017, the Compensation Committee determined that 60% of the 2017 long-term incentive awards would be comprised of performance share units and 40% would be comprised of time-based restricted share units. The 2017 performance shares awarded to the Company’s NEOs will cliff vest after a three-year performance period based on (i) the Company’s Adjusted Earnings per Share performance on an absolute-basis (the “EPS Goals”) and (ii) the Company’s total shareholder return compared to the companies included in the S&P Composite 1500 Health Care Index over the same period (the “TSR Goals”), subject to the employee’s continued employment through the performance period. For the Company’s named executive officers, the vesting of performance share units will be 70% dependent on the Company’s achievement of the EPS Goals and 30% dependent on achievement of the TSR Goals during the performance period.
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Mix of 2017 Annual Long-term Equity Incentive Awards
PERFORMANCE STOCK UNITS (60%)
■
70% based on Adjusted Earnings per Share results over a 3-year period.
■
30% based on Relative TSR Performance over a 3-year period.
|
|
RESTRICTED STOCK UNITS (40%)
■
Time-based vesting over a 3-year period rewards long-term value creation.
|
In addition to the regular annual long-term incentive awards for 2017 described above, the Compensation Committee also approved the issuance of a one-time, time-based restricted stock unit award to Mr. Coward with a grant date value of $400,000 vesting in equal installments over a three-year period, subject to his continued employment. In making its decision, the Compensation Committee recognized Mr. Coward’s contributions in the growth of the Company’s Physician Services business, and the potential retention benefits of the award. Mr. Coward’s unvested equity awards, including this award, were subsequently forfeited by Mr. Coward upon his resignation from the Company on October 2, 2017. Under the terms of Mr. Sanger’s Employment Agreement negotiated in connection with the Merger, Mr. Sanger received a one-time, time-based restricted stock unit award with a value equal to $3,000,000 following the completion of the Merger, to incent Mr. Sanger in the creation of long-term value in his role as Executive Chairman. Accordingly, on January 30, 2017, Mr. Sanger was granted 44,816 restricted stock units, vesting over a three-year period, in satisfaction of this provision. In connection with the relocation of Mr. Wilson's principal office location in 2017, the Compensation Committee approved a one-time, time-based restricted stock unit award with a grant date value of $480,000, resting in equal installments over a three-year period subject to his continued employment, in lieu of certain severance benefits arising from his relocation.
The following table sets forth the mix and value of equity compensation awarded to our named executive officers in 2017.
Name
|
|
Target Value of
Annual Equity Awards
($)
|
|
Target Value of
Special Equity Awards
($)
|
|
Performance
Stock Units
(#)
|
|
Restricted
Stock Units
(#)
|
Christopher A. Holden
|
|
6,000,000
|
|
—
|
|
54,537
|
|
36,358
|
Kevin D. Eastridge
(1)
|
|
625,000
|
|
—
|
|
5,681
|
|
3,787
|
Randel G. Owen
|
|
1,400,000
|
|
—
|
|
12,725
|
|
8,484
|
Craig A. Wilson
|
|
550,000
|
|
480,000
|
|
4,999
|
|
12,780
|
Patrick B. Solomon
|
|
500,000
|
|
—
|
|
4,545
|
|
3,030
|
William A. Sanger
|
|
4,424,000
|
|
3,000,000
|
|
40,212
|
|
71,624
|
Claire M. Gulmi
|
|
1,100,000
|
|
—
|
|
9,998
|
|
6,666
|
Robert J. Coward
(2)
|
|
1,400,000
|
|
400,000
|
|
12,726
|
|
14,544
|
(1)
|
Reflects the mix and value of the 2017 long-term incentive awards received by Mr. Eastridge in February 2017, prior to his appointment as the Company’s Executive Vice President and Chief Financial Officer.
|
(2)
|
Mr. Coward’s equity awards received in 2017 were forfeited as result of his resignation from the Company.
|
2017 Performance of Long-Term Incentive Awards
The performance-based share units granted to our NEOs in 2017 include performance-based vesting terms that provide for the delivery of a number of shares of common stock equal to 0% to 150% of the number of performance units granted, based upon the Company’s achievement of performance targets related to cumulative Company adjusted earnings per share and total shareholder return during over a three year performance period. Based upon the decline in our share price during 2017 and our adjusted earnings per share results since the grant date, our executives are currently tracking at 0% of vesting in all performance awards issued in 2017.
Retirement Plans
The Compensation Committee believes that an important aspect of attracting and retaining qualified individuals to serve as executive officers involves providing methods for those individuals to save for retirement. Some of those methods are available to all of our employees generally, and some are available to a smaller group recognizing the limitations on amounts that may be saved under our qualified plans.
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Supplemental Executive Retirement Plan
During 2017, the Company maintained a non-qualified deferred compensation plan allowing employees at the executive level of vice president or higher to make pre-tax contributions to an investment account established in the executive’s name. Executives were permitted to defer up to 50% of their base compensation and up to 50% of their bonus compensation otherwise payable during the calendar year. The program provided for a minimum contribution to the plan in an amount equal to 6% of the annual base compensation of the executives, with additional contributions to the plan up to a maximum of 18% of the annual base salary of such executives based upon the attainment of the performance goals established to measure performance under our 2017 Short-Term Incentive Plan. See “Short-Term Incentive Plan Target and Maximum Bonus” above.
During 2017, each of Messrs. Holden, Eastridge, Owen, Solomon, Wilson and Ms. Gulmi received plan contributions of 6% of his or her base salary. This reflects the minimum contribution amount under the plan. Participants in the supplemental executive retirement plan are fully vested in their contributions to the plan. Generally, the Company’s contributions to the plan vest in equal, annual installments over five years, subject to automatic vesting if the executive retires, dies or becomes disabled, if the plan terminates or if there is a change in control. Participants in the plan direct the investment of their accounts in investment alternatives that the Company selects. All contributions to the plan are subject to claims of our creditors. In February 2018, the Compensation Committee determined that the Company would no longer make contributions to the plan on behalf of executives. Our executives will continue to be permitted to make pre-tax contributions of earned compensation.
401(k) Plan
Substantially all salaried employees, including the named executive officers, are eligible to participate in our 401(k) savings plans. During 2017, the 401(k) plan for legacy AmSurg employees provided for a matching contribution of 50% of each executive’s voluntary salary contributions, with a maximum Company contribution of 50% of the first 6% of the participant’s salary contributed by the participant, up to a maximum voluntary contribution of $18,000 ($24,000 for employees aged 50 and over) in 2017. The 401(k) plan maintained for legacy Envision Healthcare Holdings, Inc. employees allowed the executives to contribute a maximum of 40% of their compensation up to a maximum of $18,000 ($24,000 for employees aged 50 and over) in 2017. The legacy Envision Healthcare Holdings, Inc. 401(k) plan provides for a company match of employee contributions up to a maximum of 50% of the first 6% of the employee’s salary per year.
Perquisites and Other Benefits
The Company does not generally provide material perquisites that are not, in the Compensation Committee’s view, integrally and directly related to the executive officers’ duties. Our executive officers also participate in other broad-based benefit programs that are generally available to our salaried employees, including health, dental and life insurance programs.
2018 Executive Compensation Decisions
Upon consideration of 2017 performance, available market data and internal pay equity, the Compensation Committee established 2018 base salaries, target bonus opportunities and target levels for regular long-term incentive awards for the Company’s NEOs, in the amounts set forth below:
Name
|
|
Base Salary
($)
|
|
Target Bonus
($)
|
|
Target Long-
Term Incentive
Awards ($)
|
|
Target Total Direct
Compensation
($)
|
Christopher A. Holden
|
|
1,200,000
|
|
1,800,000
|
|
6,000,000
|
|
9,000,000
|
Kevin D. Eastridge
|
|
575,000
|
|
575,000
|
|
1,100,000
|
|
2,250,000
|
Craig A. Wilson
|
|
480,000
|
|
360,000
|
|
700,000
|
|
1,540,000
|
Patrick B. Solomon
|
|
440,000
|
|
440,000
|
|
600,000
|
|
1,480,000
|
Benefits of NEOs Upon Termination of Employment
We have employment agreements with each of our NEOs. The agreements provide for severance and the continuation of health and life insurance benefits in the event the executive officer is terminated without cause. The employment agreement with Mr. Holden provides for the acceleration of all time-based equity awards at the time of his termination without cause or for good reason. If Mr. Holden is terminated without cause or resigns for good reason within 12 months following a change in control, he will receive (i) three times his base salary, (ii) three times his target bonus and a pro rata portion of his bonus for the year of termination, (iii) continuation of coverage under the Company’s health and life insurance plans for a period of three years, and (iv) acceleration of all time-based equity awards held at the time of termination. If Mr. Solomon is terminated without cause or for good reason, he will be entitled to receive (i) two times his base salary, (ii) two times his target bonus and a pro rata portion
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of his bonus for the year of termination, (iii) continuation of coverage under the Company’s health and life insurance plans for a period of two years, and (iv) acceleration of all time-based equity awards held at the time of termination. If either of Messrs. Eastridge or Wilson is terminated without cause or for good reason, including following any change in control of the Company, each of them will be entitled to receive (i) two times his base salary, (ii) a pro rata portion of his bonus for the year of termination, and (iii) continuation of coverage under the Company’s health and life insurance plans for a period of six-months. See “Potential Payments Upon Termination or Change in Control” below for information with respect to potential payments and benefits under the employment agreements with the NEOs and our other compensation arrangements upon the termination of the NEOs.
Compensation Risk Assessment
In 2017, the Compensation Committee reviewed the design and operation of our compensation programs, including whether they encourage excessive or inappropriate risk taking by our employees, including our NEOs. Based upon its review, the Compensation Committee determined that the Company’s compensation policies and practices, taken as a whole, are not reasonably likely to have a material adverse effect on the Company. Our compensation arrangements include base salaries at levels that the Compensation Committee believes provides employees with a steady income so that they are not encouraged to focus on short-term performance criteria to the detriment of other important Company measures. The performance measures used in our incentive-based compensation arrangements are primarily enterprise level measures rather than individual measures (which we believe encourages executives and other employees to focus on overall corporate performance rather than individual performance), provide for payments based upon multiple performance measures and at multiple levels of performance, and are capped at a specified percentage of annual salary. For long-term compensation, we grant equity-based awards that have multi-year vesting periods, which we believe aligns employees’ interests with the long-term interests of the Company and its stockholders.
Stock Ownership Guidelines
We have established stock ownership guidelines for our executive officers and non-employee directors. Our stock ownership guidelines require our Chief Executive Officer to maintain stock ownership valued at five times his base salary and require our other executive officers to maintain stock ownership valued at two and a half times their base salaries.
CEO
|
|
|
|
Executive Officers
|
|
|
Executive officers must retain 75% of equity holdings until they meet the guidelines. Executive officers are expected to meet these stock ownership guidelines within five years following their date of hire or promotion, as applicable. As of December 31, 2017, each of our named executive officers had met, or were making satisfactory progress toward meeting, his or her individual stock ownership level under our stock ownership guidelines. Officers who do not comply with the guidelines may not be eligible for future equity awards. Our stock ownership guidelines require our non-employee directors to maintain stock ownership valued at four times his or her annual cash retainer. Non-employee directors are expected to meet these guidelines within five years following their initial appointment to the Board and must retain 75% of equity holdings until they meet the guidelines. As of December 31, 2017, each of our non-employee directors had met, or were making satisfactory progress towards meeting, these guidelines. See “Outstanding Equity Awards at 2017 Year End” for additional information regarding outstanding equity awards held by our NEOs.
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Recoupment Policy
The Company has adopted a recoupment policy that allows the Company to recover any incentive compensation awarded or paid based on (i) achievement of financial results that were subsequently the subject of a restatement due to material noncompliance with any financial reporting requirement under either GAAP or the federal securities laws, other than as a result of changes to accounting rules and regulations, or (ii) a subsequent finding that the financial information or performance metrics used by the Compensation Committee to determine the amount of the incentive compensation were materially inaccurate, in each case regardless of individual fault.
Anti-Hedging, Anti-Short Sale and Anti-Pledging Policies
The Company has established an anti-hedging policy that prohibits the Company’s officers from engaging in hedging or monetization transactions with respect to the Company’s securities, including, without limitation, prepaid variable forward contracts, equity swaps, collars, puts, calls or other derivative securities that are designed to hedge or offset a decrease in market value of the Company’s securities. The Company’s officers are also restricted from engaging in short sales related to the Company’s securities. The Company has established an anti-pledging policy that prohibits the Company’s officers from pledging the Company’s securities as collateral for a non-recourse loan, pledging the Company’s securities as collateral in a margin account, or pledging the Company’s securities that are required to comply with the Company’s stock ownership guidelines.
Tax and Accounting Matters
Section 162(m) of the Internal Revenue Code of 1986, as amended, or the Code, generally disallows a tax deduction to public companies for compensation over $1,000,000 paid to certain of our NEOs. For 2017 and prior years, this limitation did not apply to compensation that qualified under Internal Revenue Service regulations as performance-based. Historically, the Compensation Committee considered the impact of Section 162(m) in the design of compensation arrangements, although it has not necessarily limited executive compensation to amounts deductible under Section 162(m). As part of the 2017 Tax Cuts & Jobs Act (the “Tax Reform Act”), which was signed into law on December 22, 2017, the ability to rely on the performance-based compensation exception was eliminated and the limitation on deductibility generally was expanded to include all NEOs. As a result of the Tax Reform Act, the Company will generally no longer be able to deduct any compensation paid to its NEOs in excess of $1,000,000 (excluding performance-based compensation that meets the requirements of Section 162(m) that was amended pursuant to a binding agreement in effect as of November 2, 2017).
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Table of Contents
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2017 Summary Compensation Table
The following table sets forth information concerning total compensation earned during 2017 for our NEOs. As reflected in the table below, the primary components of the Company’s compensation program are cash compensation, consisting of a mix of base salary and cash bonus compensation, and equity compensation, consisting of restricted stock units and performance stock units.
Name
|
|
Year
|
|
Salary
(1)
($)
|
|
Bonus
($)
|
|
Stock
Awards
(2)(7)
($)
|
|
Option
Awards
($)
|
|
Non-Equity
Incentive Plan
Compensation
(3)
($)
|
|
All Other
Compensation
(4)
($)
|
|
Total
($)
|
Christopher A. Holden
|
|
2017
|
|
1,200,000
|
|
—
|
|
6,000,000
|
|
—
|
|
—
|
|
123,638
|
|
7,323,638
|
President and Chief
|
|
2016
|
|
1,040,000
|
|
—
|
|
19,000,000
|
|
—
|
|
1,560,000
|
|
126,391
|
|
21,726,391
|
Executive Officer
|
|
2015
|
|
1,000,000
|
|
—
|
|
4,280,980
|
|
—
|
|
1,700,000
|
|
190,800
|
|
7,171,780
|
Kevin D. Eastridge
|
|
2017
|
|
487,480
|
|
—
|
|
625,000
|
|
—
|
|
—
|
|
46,489
|
|
1,158,969
|
Executive Vice President
|
|
2016
|
|
392,000
|
|
—
|
|
646,807
|
|
—
|
|
305,760
|
|
48,596
|
|
1,393,163
|
and Chief Financial Officer
|
|
2015
|
|
370,000
|
|
—
|
|
517,990
|
|
—
|
|
314,500
|
|
71,543
|
|
1,274,033
|
Randel G. Owen
|
|
2017
|
|
770,000
|
|
—
|
|
1,400,000
|
|
—
|
|
—
|
|
65,419
|
|
2,235,419
|
Former Executive Vice President
|
|
2016
|
|
796,923
|
|
—
|
|
1,400,000
|
|
—
|
|
—
|
|
47,508
|
|
2,244,431
|
and President Ambulatory Services
|
|
2015
|
|
673,818
|
|
—
|
|
—
|
|
—
|
|
—
|
|
36,611
|
|
710,429
|
Craig A. Wilson
|
|
2017
|
|
480,000
|
|
—
|
|
1,030,000
|
|
—
|
|
—
|
|
38,475
|
|
1,548,475
|
Senior Vice President,
|
|
2016
|
|
415,000
|
|
—
|
|
—
|
|
—
|
|
—
|
|
13,707
|
|
428,707
|
General Counsel and Secretary
|
|
2015
|
|
395,000
|
|
—
|
|
—
|
|
—
|
|
44,969
|
|
8,569
|
|
448,538
|
Patrick B. Solomon
|
|
2017
|
|
440,000
|
|
—
|
|
500,000
|
|
—
|
|
—
|
|
31,700
|
|
971,700
|
Senior Vice President and
|
|
2016
|
|
400,000
|
|
—
|
|
400,010
|
|
—
|
|
676,000
|
|
40,000
|
|
1,516,010
|
Chief Strategy Officer
|
|
2015
|
|
400,000
|
|
—
|
|
459,987
|
|
—
|
|
320,400
|
|
72,000
|
|
1,252,387
|
William A. Sanger
|
|
2017
|
|
1,014,131
|
|
—
|
|
7,424,000
|
|
—
|
|
—
|
|
261,387
|
|
8,699,518
|
Former Executive Chairman
|
|
2016
|
|
1,670,131
|
|
—
|
|
4,424,000
|
|
—
|
|
—
|
|
837,853
|
|
6,931,984
|
|
|
2015
|
|
1,140,865
|
|
—
|
|
—
|
|
—
|
|
—
|
|
345,495
|
|
1,486,360
|
Claire M. Gulmi
(5)
|
|
2017
|
|
636,000
|
|
—
|
|
1,100,000
|
|
—
|
|
—
|
|
50,160
|
|
1,786,160
|
Former Executive Vice President
|
|
2016
|
|
530,000
|
|
—
|
|
1,060,000
|
|
—
|
|
413,400
|
|
63,694
|
|
2,067,094
|
Chief Financial Officer
|
|
2015
|
|
500,000
|
|
—
|
|
999,970
|
|
—
|
|
510,000
|
|
98,440
|
|
2,108,410
|
and Secretary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert J. Coward
(6)
|
|
2017
|
|
766,911
|
|
—
|
|
1,800,000
|
|
—
|
|
—
|
|
20,892
|
|
2,587,803
|
Former Executive Vice President
|
|
2016
|
|
683,000
|
|
—
|
|
1,366,000
|
|
—
|
|
614,700
|
|
92,300
|
|
2,756,000
|
and President Physician Services
|
|
2015
|
|
657,280
|
|
—
|
|
788,730
|
|
—
|
|
887,328
|
|
118,310
|
|
2,451,648
|
(1)
|
The amounts shown reflect salary earned during the year which may differ from amounts set forth under “Base Salary Determinations for 2017” due in part to timing of annual adjustments, cash payout for accrued vacation, pay periods, and other adjustments.
|
(2)
|
Reflects the aggregate grant date fair value for the awards calculated in accordance with FASB ASC Topic 718. See Note 20(c) to our consolidated financial statements in the Original Filing regarding the assumptions underlying valuation of equity awards.
|
(3)
|
Reflects bonuses earned during the fiscal year pursuant to our cash bonus plan.
|
(4)
|
Reflects, for 2017, (a) Company matching contributions to the 401(k) plan of $12,000 for Mr. Holden and Ms. Gulmi, $7,289 for Mr. Eastridge, $8,100 for Mr. Wilson, Mr. Sanger and Mr. Owen, $5,300 for Mr. Solomon and Mr. Coward, (b) Company contributions to the supplemental executive retirement savings plan of $72,000 for Mr. Holden, $39,200 for Mr. Eastridge, $28,800 for Mr. Wilson, $26,400 for Mr. Solomon, $46,200 for Mr. Owen and $38,160 for Ms. Gulmi, (c) personal use of our plane, including commuting, valued at $37,638 for Mr. Holden, $118,606 for Mr. Sanger and $15,592 for Mr. Coward, (d) supplemental individual life insurance expense of $113,465 for Mr. Sanger, $11,119 for Mr. Owen and $1,575 for Mr. Wilson, (e) and other expenses, including auto allowance and maintenance and fuel expenses of $21,216 for Mr. Sanger.
|
(5)
|
Per the Company’s retirement policy, Ms. Gulmi is entitled to receive base salary through October 2, 2018.
|
(6)
|
Mr. Coward resigned from the Company on October 2, 2017.
|
(7)
|
Includes additional one-time, time-based restricted stock unit award of 9,447 shares to Mr. Wilson, 29,878 shares to Mr. Sanger, and 6,060 shares to Mr. Coward. Mr. Coward’s 2017 stock award was subsequently forfeited upon his resignation. See 2017 “Long-Term Equity Incentive Decisions.”
|
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Table of Contents
Part III
Grants of 2017 Plan-Based Awards
The following table sets forth information regarding the 2017 grants of plan-based awards to our NEOs, which were issued pursuant to the Envision Healthcare Corporation 2014 Equity and Incentive Plan and Envision Healthcare Corporation 2013 Omnibus Incentive Plan for Legacy Envision Employees.
|
|
|
|
Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards
|
|
All Other
Stock Awards
|
|
|
Name
|
|
Grant Date
|
|
Threshold
($)
(1)
|
|
Target
($)
|
|
Maximum
($)
|
|
Number of
Shares of
Stock (#)
(2)
|
|
Grant Date Fair
Value of Stock
and Awards ($)
(3)
|
Christopher A. Holden
|
|
3/2/2017
|
|
120,000
|
|
1,800,000
|
|
3,240,000
|
|
90,895
|
|
6,000,000
|
Kevin D. Eastridge
|
|
3/2/2017
|
|
32,499
|
|
487,480
|
|
877,464
|
|
9,468
|
|
625,000
|
Randel G. Owen
|
|
3/2/2017
|
|
61,600
|
|
924,000
|
|
1,663,200
|
|
21,209
|
|
1,400,000
|
Craig A. Wilson
|
|
3/2/2017
|
|
18,000
|
|
360,000
|
|
648,000
|
|
8,332
|
|
550,000
|
|
|
8/15/2017
|
|
—
|
|
—
|
|
—
|
|
9,447
|
|
480,000
|
Patrick B. Solomon
|
|
3/2/2017
|
|
29,333
|
|
440,000
|
|
792,000
|
|
7,575
|
|
500,000
|
William A. Sanger
|
|
1/30/2017
|
|
—
|
|
2,212,000
|
|
4,424,000
|
|
29,878
|
|
3,000,000
|
|
|
3/2/2017
|
|
—
|
|
—
|
|
—
|
|
81,958
|
|
4,424,000
|
Claire M. Gulmi
|
|
3/2/2017
|
|
38,160
|
|
636,000
|
|
1,144,800
|
|
16,664
|
|
1,100,000
|
Robert J. Coward
|
|
3/2/2017
|
|
54,667
|
|
984,000
|
|
1,771,200
|
|
27,270
|
|
1,800,000
|
(1)
|
The “Threshold” bonus amount is determined based upon the minimum bonus each NEO could earn pursuant to the applicable 2017 bonus plan.
|
(2)
|
Restricted stock units vest in three equal annual installments beginning on the first anniversary of the date of grant and performance units vest on the third anniversary of the grant date.
|
(3)
|
Reflects the aggregate grant date fair value for the awards calculated in accordance with FASB ASC Topic 718.
|
21
Table of Contents
Part III
Outstanding Equity Awards at Year-End 2017
The following table sets forth information regarding outstanding equity awards held by the NEOs at December 31, 2017. Mr. Coward forfeited all unvested equity awards upon his resignation from the Company in October 2017, and has not been included in the following table.
|
|
|
|
|
Restricted Stock Units
|
|
Performance Share Units
|
|
Stock Options
|
Name
|
|
Grant
Date
|
|
|
Number of
Shares of
Stock that
Have Not
Vested (#)
|
|
Market
Value of
Shares of
Stock that
Have Not
Vested ($)
(1)
|
|
Number of
Units
that
Have Not
Vested (#)
|
|
Market
Value of
Shares of
Stock that
Have Not
Vested ($)
|
|
Number of
Securities
Underlying
Unexercised
Options
Exercisable (#)
|
|
Number of
Securities
Underlying
Unexercised
Options
Unexercisable (#)
|
|
Option
Exercise
Price ($)
|
|
Option
Expiration
Date
|
Christopher A. Holden
|
|
1/30/2014
|
(2)
|
|
14,759
|
|
510,071
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
2/3/2015
|
(2)
|
|
45,077
|
|
1,557,861
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
2/2/2016
|
(3)
|
|
195,322
|
|
6,750,328
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
3/2/2017
|
(4)
|
|
36,358
|
|
1,256,532
|
|
54,537
|
|
1,884,799
|
|
—
|
|
—
|
|
—
|
|
—
|
Kevin D. Eastridge
|
|
1/30/2014
|
(2)
|
|
2,699
|
|
93,277
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
2/3/2015
|
(2)
|
|
5,766
|
|
199,273
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
2/2/2016
|
(2)
|
|
7,577
|
|
261,861
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
3/2/2017
|
(4)
|
|
3,787
|
|
130,879
|
|
5,681
|
|
196,335
|
|
—
|
|
—
|
|
—
|
|
—
|
Randel G. Owen
|
|
5/25/2011
|
(5)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
401,919
|
|
—
|
|
11.05
|
|
5/25/2021
|
|
|
2/24/2016
|
(6)
|
|
—
|
|
—
|
|
8,505
|
|
293,933
|
|
11,159
|
|
22,320
|
|
65.84
|
|
2/24/2026
|
|
|
3/2/2017
|
(4)
|
|
8,484
|
|
293,207
|
|
12,725
|
|
439,776
|
|
—
|
|
—
|
|
—
|
|
—
|
Craig A. Wilson
|
|
5/25/2011
|
(5)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
16,293
|
|
—
|
|
11.05
|
|
5/25/2021
|
|
|
8/14/2013
|
(5)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
1,742
|
|
436
|
|
68.87
|
|
8/14/2023
|
|
|
3/20/2015
|
(5)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
523
|
|
—
|
|
115.57
|
|
3/20/2025
|
|
|
2/24/2016
|
(6)
|
|
—
|
|
—
|
|
2,521
|
|
87,126
|
|
3,308
|
|
6,616
|
|
65.84
|
|
2/24/2026
|
|
|
3/2/2017
|
(4)
|
|
3,333
|
|
115,188
|
|
4,999
|
|
172,765
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
8/15/2017
|
(4)
|
|
9,447
|
|
326,488
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
Patrick B. Solomon
|
|
7/16/2014
|
(2)
|
|
1,750
|
|
60,480
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
2/3/2015
|
(2)
|
|
4,452
|
|
153,861
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
2/2/2016
|
(2)
|
|
4,866
|
|
168,169
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
3/2/2017
|
(4)
|
|
3,030
|
|
104,717
|
|
4,545
|
|
157,075
|
|
—
|
|
—
|
|
—
|
|
—
|
William A. Sanger
|
|
5/25/2011
|
(5)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
1,563,534
|
|
—
|
|
11.05
|
|
5/25/2021
|
|
|
2/24/2016
|
(6)
|
|
—
|
|
—
|
|
26,880
|
|
928,973
|
|
35,269
|
|
70,537
|
|
65.84
|
|
2/24/2026
|
|
|
1/30/2017
|
(7)
|
|
29,878
|
|
1,032,584
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
3/2/2017
|
(4)
|
|
26,808
|
|
926,484
|
|
40,212
|
|
1,389,727
|
|
—
|
|
—
|
|
—
|
|
—
|
Claire M. Gulmi
|
|
1/30/2014
|
(2)
|
|
4,338
|
|
149,921
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
2/3/2015
|
(2)
|
|
10,829
|
|
374,250
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
2/2/2016
|
(2)
|
|
12,417
|
|
429,132
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
3/2/2017
|
(4)
|
|
6,666
|
|
230,377
|
|
9,998
|
|
345,531
|
|
—
|
|
—
|
|
—
|
|
—
|
(1)
|
Market value is determined based on the market price of our common stock on December 31, 2017 ($34.56 per share).
|
(2)
|
Time based equity awards vest, or the restrictions applicable to the awards lapse, in three equal installments beginning on the second anniversary of the date of grant.
|
(3)
|
Time based equity awards of 21,627 and 202,758 vest, or the restrictions applicable to the awards lapse, in three and four equal installments, respectively, beginning on the second anniversary and first anniversary of the of the date of grant, respectively.
|
(4)
|
Time based equity awards vest, or the restrictions applicable to the awards lapse, in three equal installments beginning on the first anniversary of the date of grant and performance units lapse three years from the date of grant.
|
(5)
|
Non-qualified stock options vest in five equal installments beginning on the first anniversary of the date of grant.
|
(6)
|
Non-qualified stock options vest in three equal installments beginning on the first anniversary of the date of grant. Time based equity awards vest, or the restrictions applicable to the awards lapse, three years from the date of grant and performance units lapse three years from the date of grant.
|
(7)
|
Time based equity awards vest, or the restrictions applicable to the awards lapse, in three equal installments beginning on the date of grant.
|
22
Table of Contents
Part III
Option Exercises and Stock Vested During 2017
The following table shows the amounts received by our NEOs upon the vesting of restricted shares and restricted stock unit awards during 2017. None of the NEOs exercised any stock options in 2017.
|
|
Stock Awards
|
Name
|
|
Number of Shares
Acquired on
Vesting (#)
(1)
|
|
Value Realized
on Vesting
($)
(2)
|
Christopher A. Holden
|
|
124,978
|
|
8,591,657
|
Kevin D. Eastridge
|
|
11,070
|
|
757,178
|
Randel G. Owen
|
|
—
|
|
—
|
Patrick B. Solomon
|
|
5,059
|
|
338,074
|
Craig A. Wilson
|
|
97
|
|
6,126
|
William A. Sanger
|
|
14,938
|
|
459,194
|
Claire M. Gulmi
|
|
20,457
|
|
1,400,266
|
Robert J. Coward
|
|
15,774
|
|
1,043,228
|
(1)
|
Pursuant to the terms of the applicable award agreement, certain of these shares were withheld to satisfy the Company’s tax withholding obligations.
|
(2)
|
The value realized upon the vesting of restricted shares is calculated based upon the closing price of our common stock on the applicable vesting date.
|
2017 Non-qualified Deferred Compensation
During 2017, the Company maintained a supplemental executive retirement plan for certain of its executive level employees. Executives could elect to defer a portion of their compensation otherwise payable to such executives during the calendar year, and the Company agreed to make annual contributions to the plan based on the Company’s Adjusted EBITDA achievement, with a minimum employer contribution of 6%, subject to a two-year vesting schedule. See “Retirement Plans-Supplemental Executive Retirement Plan” for additional information. The following table summarizes the activity during 2017 and the aggregate balances held by each of the NEOs at December 31, 2017 under the supplemental executive retirement plan.
Name
|
|
Executive
Contributions In
Last Fiscal Year
(1)
($)
|
|
Company
Contributions In
Last Fiscal Year
(2)
($)
|
|
Aggregate
Earnings (Loss) in
Last Fiscal Year
($)
|
|
Aggregate
Balance at
Last Fiscal
Year-end
(3)
($)
|
Christopher A. Holden
|
|
—
|
|
72,000
|
|
116,964
|
|
1,090,192
|
Kevin D. Eastridge
|
|
22,916
|
|
39,200
|
|
95,773
|
|
672,659
|
Randel G. Owen
|
|
—
|
|
46,200
|
|
—
|
|
46,200
|
Craig A. Wilson
|
|
—
|
|
28,800
|
|
—
|
|
28,800
|
Patrick B. Solomon
|
|
61,379
|
|
26,400
|
|
57,954
|
|
399,009
|
William A. Sanger
|
|
—
|
|
—
|
|
—
|
|
—
|
Robert J. Coward
|
|
—
|
|
—
|
|
25,237
|
|
192,314
|
Claire M. Gulmi
|
|
612
|
|
38,160
|
|
138,031
|
|
1,201,159
|
(1)
|
Reported as “Salary” in the 2017 Summary Compensation Table on page 20.
|
(2)
|
Reported as “All Other Compensation” in the 2017 Summary Compensation Table on page 20. Registrant contributions with respect to 2017 were funded in the second quarter of 2018 and, therefore, are not reflected under “Aggregate Balance at Last Fiscal Year End” above.
|
(3)
|
Includes vested and unvested contributions.
|
23
Table of Contents
Part III
Potential Payments Upon Termination or a Change in Control
The following table shows the estimated amount of potential payments, comprised of cash and the estimated value of (a) continuing benefits under any existing employment agreements, (b) acceleration of unvested equity awards under equity grant agreements, plans or arrangements, and (c) acceleration of unvested supplemental executive retirement plan contributions, in the event of termination for specified reasons and/or a change-in-control of the Company assuming the NEO’s employment terminated effective December 31, 2017 and based on compensation and benefit levels in effect on December 31, 2017. Due to the numerous factors involved in estimating these amounts, the actual benefits and amounts payable can only be determined at the time of an executive’s termination from the Company. The price of our common stock on December 31, 2017 was $34.56.
Name
(1)
|
|
Voluntary
Termination
|
|
Retirement
($)
|
|
Involuntary
Termination
Without Cause
or Termination
for Good Reason
($)
|
|
For cause
Termination
|
|
Termination
upon a Change
in Control
($)
|
Christopher A. Holden
|
|
—
|
|
12,086,489
|
|
18,008,406
|
|
—
|
|
21,159,710
|
Kevin D. Eastridge
|
|
—
|
|
939,457
|
|
2,873,934
|
|
—
|
|
2,931,765
|
Craig A. Wilson
|
|
—
|
|
637,482
|
|
2,343,200
|
|
—
|
|
1,969,672
|
Patrick B. Solomon
|
|
—
|
|
694,603
|
|
1,535,049
|
|
—
|
|
2,470,723
|
Randel G. Owen
(2)
|
|
—
|
|
769,943
|
|
3,251,755
|
|
—
|
|
3,288,715
|
Claire M. Gulmi
(3)
|
|
—
|
|
1,594,034
|
|
4,116,699
|
|
—
|
|
4,181,522
|
(1)
|
Messrs. Coward and Sanger were not employed as of December 31, 2017, and therefore have not been included in this table.
|
(2)
|
Mr. Owen left the Company on March 14, 2018 upon the divestiture of American Medical Response.
|
(3)
|
Ms. Gulmi, who retired from her executive position effective October 2, 2017, will continue to be employed by the Company until the first anniversary of her resignation.
|
Pay Ratio Disclosure
Pursuant to SEC rules, the Company is required to provide the ratio of the annual total compensation of Mr. Holden, our Chief Executive Officer, to the median annual total compensation of all of our employees (excluding Mr. Holden). For 2017, the median annual total compensation of all employees of the Company and its consolidated subsidiaries (other than the Chief Executive Officer) was $52,228. Mr. Holden’s annual total compensation for 2017 was $7,323,638. Based on this information, for 2017, the ratio of the compensation of the Chief Executive Officer to the median annual total compensation of all other employees was estimated to be 140 to 1. This pay ratio is a reasonable estimate calculated in accordance with SEC rules based on our payroll and employment records and the methodology described below.
In identifying the median of the annual total compensation of all of our employees, we collected the payroll data of all employees, whether employed on a full-time, part-time, temporary or seasonal basis as of December 31, 2017. We also included all independent contractors whose compensation is determined by the Company. To identify the “median employee” for purposes of this disclosure, we used a determination date of December 31, 2017 and analyzed the wages reportable on Form W-2, in the case of employees, or income reportable on Form 1099, in the case of independent contractors. Salaries were annualized for employees starting employment in 2017 who did not work for the entire year. As of December 31, 2017, the Company’s employee population consisted of approximately 41,000 persons.
After identifying the median employee, we added together all of the elements of such employee’s compensation for 2017 in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K, resulting in annual total compensation of $52,228. With respect to our CEO, we used the amount reported in the “Total” column of our 2017 Summary Compensation Table appearing on page 20 of this Amendment, which is also in accordance with the requirements of Item 402(c)(2)(x).
Because the SEC rules for identifying the median employee and calculating the pay ratio allow companies to use different methodologies, exemptions, estimates and assumptions, the Company’s pay ratio disclosure may or may not be consistent with other employer calculations.
Compensation Committee Interlocks and Insider Participation
During 2017, Messrs. Lavender, Geringer, Smith and Williams served on our Compensation Committee. Mr. Williams resigned from the Board and our Compensation Committee in October 2017. None of the directors who served on our Compensation Committee during 2017 are an officer or employee of the Company or its subsidiaries. In addition, there are no relationships among our executive officers, members of the Compensation Committee or entities whose executives serve on the Board of Directors or the Compensation Committee that require disclosure under applicable SEC regulations.
24
Table of Contents
Part III
Director Compensation Program.
Each of our non-employee directors is entitled to receive an annual retainer of $90,000 for his or her services as a director and his or her attendance at meetings of the Board and its committees. The Chairs of the Audit, Compensation, Nominating and Corporate Governance, and Compliance and Quality Committees receive annual retainers of $35,000, $35,000, $25,000 and $25,000, respectively. Non-chair members of the Audit, Compensation, Nominating and Corporate Governance, and Compliance and Quality Committees receive an annual retainer of $25,000, $20,000, $20,000 and $20,000, respectively. Additionally, non-employee directors are entitled to receive an annual restricted stock unit award with a value of $175,000 on the grant date. Non-employee directors may also elect to (i) convert all or a portion of their cash retainers into deferred stock units to be paid at a later date or upon termination of Board service pursuant to the deferral terms of a deferred stock unit agreement or (ii) receive contributions to the Company’s Supplemental Retirement Plan in lieu of receiving their cash retainers. The Company also reimburses each non-employee director for regular expenses incurred in attending Board meetings and committee meetings. In addition to the standard compensation payable to non-employee directors, the Board's non-executive Chairman is entitled
to receive an annual retainer of $150,000, and the Board's lead independent director is entitled to receive an annual retainer of $50,000. The following table sets forth the compensation paid to each of the persons who served as non-employee directors of the Company during fiscal 2017.
Name
|
|
Fees Paid
in Cash
($)
|
|
Other
($)
(1)
|
|
Stock
Awards
($)
(2)
|
|
Total
($)
|
William A. Sanger
(3)
|
|
20,000
|
|
—
|
|
—
|
|
20,000
|
James A. Deal
|
|
125,000
|
|
—
|
|
175,000
|
|
300,000
|
Steven I. Geringer
|
|
130,000
|
|
—
|
|
175,000
|
|
305,000
|
Kevin P. Lavender
|
|
82,500
|
|
27,500
|
|
175,000
|
|
285,000
|
Cynthia S. Miller
|
|
140,000
|
|
—
|
|
175,000
|
|
315,000
|
Joey A. Jacobs
|
|
110,000
|
|
—
|
|
175,000
|
|
285,000
|
John T. Gawaluck
|
|
135,000
|
|
—
|
|
175,000
|
|
310,000
|
Carol J. Burt
|
|
140,000
|
|
—
|
|
175,000
|
|
315,000
|
Leonard M. Riggs
|
|
110,000
|
|
—
|
|
175,000
|
|
285,000
|
Richard J. Schnall
(4)
|
|
14,375
|
|
—
|
|
—
|
|
14,375
|
James D. Shelton
(5)
|
|
55,000
|
|
—
|
|
230,000
|
|
285,000
|
Michael L. Smith
|
|
150,000
|
|
—
|
|
175,000
|
|
325,000
|
Ronald A. Williams
(6)
|
|
130,000
|
|
—
|
|
—
|
|
130,000
|
(1)
|
Represents contributions to the Company’s Supplemental Retirement Plan in lieu of cash fees.
|
(2)
|
Reflects the aggregate grant date fair value for awards calculated in accordance with FASB ASC Topic 718.
|
(3)
|
Mr. Sanger was entitled to receive prorated cash retainers for board service upon his resignation as an executive officer of the Company on December 1, 2017.
|
(4)
|
Mr. Schnall resigned from the Board in March 2017.
|
(5)
|
Mr. Shelton elected to receive deferred stock units in lieu of director cash retainers.
|
(6)
|
Mr. Williams resigned from the Board in October 2017.
|
25
Table of Contents
Part III
APPENDIX A
DEFINITION OF NON-GAAP FINANCIAL MEASURE
This Amendment contains references to Adjusted EBITDA, a non-GAAP financial measure that excludes items from the most directly comparable financial measure calculated in accordance with GAAP. The following is a discussion of the Company’s use of Adjusted EBITDA.
Adjusted EBITDA. We define Adjusted EBITDA as earnings before interest expense, net, income taxes, depreciation, amortization, transaction and integration costs, share-based compensation, impairment charges, debt extinguishment costs, gain or loss on deconsolidations, net of noncontrolling interests, changes in contingent purchase price consideration, purchase accounting adjustments related to mergers and acquisitions, the impact of the Tax Cuts and Jobs Act of 2017 and discontinued operations. Adjusted EBITDA should not be considered a measure of financial performance under generally accepted accounting principles. Items excluded from Adjusted EBITDA are significant components in understanding and assessing financial performance. Adjusted EBITDA is an analytical indicator used by management and the health care industry to evaluate company performance, allocate resources and measure leverage. Adjusted EBITDA should not be considered in isolation or as an alternative to net earnings, cash flows from operations, investing or financing activities, or other financial statement data presented in the consolidated financial statements as indicators of financial performance. Because Adjusted EBITDA is not a measurement determined in accordance with generally accepted accounting principles and is thus susceptible to varying calculations, Adjusted EBITDA as presented may not be comparable to other similarly titled measures of other companies. Net earnings from continuing operations attributable to common stockholders is the financial measure calculated and presented in accordance with generally accepted accounting principles that is most comparable to Adjusted EBITDA, as defined. We have not provided a reconciliation of Adjusted EBITDA, as Adjusted EBITDA is being presented solely to describe targets under the Company’s non-equity incentive plan.
26
Table of Contents
Part III